First Majestic Silver (NYSE: AG) (TSX: FR) has scored a small victory in Mexico after a local judge declined to charge the Canadian miner with criminal tax fraud, but said prosecutors can return to court and present additional evidence.
A source familiar to the matter quoted by Bloomberg, said the court had only delayed ruling on the case. The person added the judge is waiting on an audit by Mexico’s tax authority to be finished and that he hadn’t ruled yet on the evidence presented in the case.
The news is the latest development on a running dispute between First Majestic and the López Obrador administration over how the silver producer is taxed in the country.
The government, which has made cracking down on tax breaks a priority, claims that First Majestic subsidiary, Primero Empresa Minera, owes about $209.2 million in back taxes.
The Vancouver-based miner, which refutes those claims, initiated in May an arbitration process against Mexico under the North American Free Trade Agreement (NAFTA).
The move gave the government until August 11th to enter into “good faith and amicable negotiations” with the company. The 90-day process deadline expired without any resolution of the tax dispute.
Mexican tax authorities won a court victory in September when magistrates said that Primero Mining had managed to secure an illegal pricing agreement with tax authorities between 2010-2014.
First Majestic filed an appeal in late November to that ruling, claiming that the federal court did not follow regular procedures and failed to provide the company with an opportunity to present evidence supporting its case.
Shortly after taking office, Mexican President Andrés Manuel López Obrador said his government would order an end to “tax forgiveness” for the country’s largest companies.
He noted at the time his predecessors had granted about $20 billion in exemptions, which he said it was akin to theft by gangsters.
Of the firms that allegedly benefited from tax breaks, 58 are listed on the benchmark S&P/BMV IPC and they include the Mexican unit of US retailer Walmart and Mexican conglomerate Femsa.
Nearly 70% of foreign-owned mining companies operating in Mexico are based in Canada, according to Global Affairs Canada. They hold assets in the country worth C$20.1 billion (about $15.7bn) in 2018, according to Natural Resources Canada.
First Majestic has proposed three settlement offers since 2018 before launching the trade challenge in May. Each of them have been rebuffed.
The company told MINING.COM it would not comment on the issue at this time due to the ongoing legal proceedings.
The company’s stock was soaring in early trading in New York. It was up more than 34% to $18.69 at 9:35 am ET., pushed mainly by WallStreetBets investors targeting a heavily-shorted area.
Mexico is the world’s top silver producer.
(With files from Bloomberg)