First Majestic Silver (NYSE: AG) (TSX: AG) has agreed to pause its NAFTA arbitration against the Government of Mexico. The two sides have agreed in principle on a framework to settle a long running tax dispute involving the subsidiary that owns the San Dimas mine.
The parties jointly asked the tribunal to suspend proceedings while they finalize and implement the settlement. The tribunal has issued an order suspending the case until December 31, 2026.
First Majestic described the negotiations as constructive and cordial, while stating that they remain optimistic that a deal will be completed by the end of the year. Talks have been underway for several years, with the company stating that significant progress has been made in recent months.
Details of the proposed settlement have not been released.
The dispute centres on Primero Empresa Minera (PEM), which First Majestic acquired in 2018. Under its previous owner, PEM signed an advance pricing agreement with Mexican authorities in 2012. The agreement confirmed that PEM would pay tax on the price per ounce it actually received for silver sold under a legacy Wheaton Precious Metals stream, rather than on market prices.
Mexico’s tax authority later disregarded that agreement and reassessed PEM using market prices. Reassessments for 2010 through 2012 totalled roughly US$260 million, of which about US$75 million was additional tax. The rest was penalties, interest and denied deductions. A 2013 reassessment added another US$132.1 million. PEM’s combined pre-tax earnings over 2010 to 2014 were about US$6.7 million.
First Majestic initially served Mexico with a notice of intent under Chapter 11 of NAFTA in May 2020, before filing a formal request for arbitration in March 2021.
First Majestic Silver last traded at $24.64 on the TSX.
