NICARAGUA – MINING REGULATION
Nicaragua, officially the Republic of Nicaragua, is the largest country in Central America, bordering Honduras to the north and Costa Rica to the south. The Pacific Ocean lies to the west, and the Caribbean Sea to the east. The country has a rather similar history to Cuba with dictators, civil war, and American trade embargoes and political intervention playing critical roles in its development. Nevertheless, the country has had four “free and fair” elections since 1990 and has progressively advanced its economy for many years. The World Bank notes that it is the second poorest country in the region (next to Haiti) with a relatively small population of just over six million people.
Over the past decade mining has become a strategic pillar of growth for Nicaragua, which now has the highest recorded gold production in the Central American region. According to its PDAC profile (www.nicaragua-pdac.org), the country has seen its gold production rise from 100,000 ounces per annum in 2007 to over 300,000 ounces in 2014. There are currently three large modern producing gold mines: Bonanza (Colombian owned), El Limón (Canadian controlled) and La Libertad (Canadian controlled). Silver is also produced as a by-product from some of these mines. As well, the country produces aggregates and a variety of cement products in its non-metallic sector.
PRINCIPAL LEGISLATION AND REGULATOR
The Nicaraguan Constitution, the Mining Law No. 387 (ML) and its regulation (Decree 119/2001) (Mining Regulation), and the Foreign Investment Promotion Law No. 334 are the main sources of regulation for Nicaragua’s mining industry. Under Article 102 of the Constitution, natural resources belong to the state, which is responsible for preserving, developing and managing them in a rational and efficient manner (see also Art. 2, ML). The state may grant mining rights by means of public and transparent processes. The Energy and Mining Ministry (MEM) is responsible for granting and monitoring mining concessions. Equal mining rights and duties are guaranteed for both national and foreigners operators (Art. 3, ML).
GRANTS AND MINERAL TITLE
Pursuant to Article 14 of the ML, the principle of first-come / first-served applies, although concessions are not granted as of right and there is a review and process undertaken by MEM prior to each grant. As well, each concession is subject to an agreement (Acuerdo Ministerial) issued by the government of Nicaragua. Once issued, however, concessions offer substantial protection from revocation and security of tenure. The right is granted for a period of 25 years, which may be renewed for another 25 years. The initiation of exploration activities must begin within four years of the date of the concession grant, albeit this period may be extended in the event of force majeure – e.g., the failure to obtain an environmental licence.
The concession confers the right to explore, develop, mine, extract, export and sell all minerals found and produced from the concession. Concessions may be transferred (subject to prior approval by MEM), mortgaged and made the subject of third party contracts. A concession area may not exceed 50,000 hectares. A violation of the law or regulations gives rise to a potential fine or cancellation of the concession (Art. 98, Mining Regulation). The holder of a concession is required to submit annual reports of its activities and production statistics to the government, as well as quarterly reports on its exploration activities.
Concession holders are obliged to pay superficial right fee payments and a royalty (3% of the value of the extracted minerals). The failure of the payment may result in revocation. Additionally, a production report must be submitted annually to the MEM. As stated in the ML, in order to carry out mining activities, the holder of a permit has the right to access surface land via easements or expropriation, procedures for which are subject to the provisions stated in Chapter IX of the General Law of Natural Wealth. These rules indicate that where necessary to conduct work and where unable to reach agreement with a landowner, the Director General (Dirección General de Riquezas Naturales llevara) will report to the Economy Minister and make a recommendation as to whether or not expropriation is essential. If essential, then expropriation is ordered. The fair market value of the property is then paid in compensation. The ML also requires compensation wherever the use of land causes damages to said land (Art. 63, ML).
The law indicates that concessions constitute real property and are mortgageable (Art. 18, ML). Pursuant to Art. 20 of the ML, the concessionaire benefits from articles 80 and 86 of the Law on the Expropriation of Natural Resources, which indicates that no act should be taken to undermine the rights of the concessionaire during its currency. An Environmental Permit must be issued by MARENA (Ministry of Environment and Natural Resources) before starting any exploration or exploitation activities.
See Nicaragua Environmental Regulation.