First Majestic Silver (TSX:FR; NYSE: AG) has initiated an arbitration process against Mexico under the North American Free Trade Agreement (NAFTA) over a dispute over taxes.
The Canadian miner said the notice, served to the Mexican government, kicks off a 90-day process for the López Obrador administration to enter into negotiations with the company.
First Majestic argues the tax authority has “exhibited a total disregard for the applicable provisions of three separate double taxation treaties.” It also said the agency had “unlawfully opted to ignore” an advanced pricing agreement governing the tax on silver sales between 2010-2014 by the miner’s subsidiary, Primero Empresa Minera.
The Vancouver-based miner said efforts to resolve the dispute had been met with “intimidation tactics”. Attempts to challenge such line of action in Mexico’s legal system, in turn, had been thwarted by the coronavirus pandemic, as most courts are unavailable for hearings, it said.
First Majestic’s three producing mines and several projects are all located in Mexico, the world’s top silver producing country.
The response of governments worldwide to the COVID-19 pandemic since mid-March has led to disrupted mining activities across the globe.
First Majestic hasn’t been immune to the effects of lockdowns across Mexico, which has confirmed 40,186 cases as of May 14.
The miner posted a first-quarter loss of US$32.4 million, or US15¢ a share, compared to a profit in the same period last year.
“As the COVID-19 pandemic sparked higher than normal volatility in the metals market near the end of the quarter, we temporarily suspended our silver and gold sales, as paper prices dropped significantly below true physical prices,” president and CEO, Keith Neumeyer, said on Thursday. “These inventoried ounces have been carried over into the second quarter and will be sold as prices improve.”
The company’s shares have dropped 38% since the beginning of the year, as silver production has been the biggest victim of COVID-19. Nearly 66% of the world’s annual output is still on hold, but the situation is expected to change next week.
First Majestic’s stock was down 1.7% to US$7.65 in pre-market trading in New York. In Canada, shares closed at $10.79 on May 13, leaving the company’s market capitalization at $2.26 billion (about US$1.6 billion).
Mexico’s government said on Wednesday that 269 coronavirus-free towns will reopen on Monday, as part of a gradual nationwide return to a “new normal”.
The phased reopening was announced a day after the nation’s social security institute reported 555,247 jobs lost in April, the largest monthly drop in history.
— This article first appeared in our sister publication, MINING.com.