The municipality of the canton of Yantzaza has issued the second amendment to the ordinance for construction aggregates (hereinafter the “Ordinance“), published in the Official Register No. 1589 of 1 June 2021. Below, we analyze the most relevant points of the Ordinance:

False information:  False information in the semiannual production report for a concession will be sanctioned in accordance with the Penal Code and is a cause to declare the expiration of the area.

Payment of royalties:  The payment of royalties for concessions in large-scale operations will be determined in the corresponding exploitation contract, respecting the terms and percentages in the current regulations.

The royalty shall be calculated based on production costs, in accordance with the volumes of exploitation and the percentage per year. The crushing and sorting of aggregate and stone materials pays a royalty equivalent of 3% of the production costs.

Accumulation of mining areas:  The municipality may carry out the accumulation of mining areas for the case of artisanal, small, medium, and large-scale mining, within the limit of the size of the concessions established by Law. It will also be able to modify the permit regime and opt for the small-scale mining regime for those in artisanal mining.

Validity ofauthorization:  Processing plants (crushing and classification), will have an operating authorization of 5 years that can be renewed.Half-yearly production reports:

Processing plants (crushing and classification) must submit audited production reports every six months until 15 January and 15 July of each year and whose royalty must be paid in March and September, respectively. If these reports are not filed on the dates and deadlines established, as well as the non-payment of royalties, will be grounds for expiration of said authorization.

Fee for deposits or stockpiles, installation of sorting and crushing plants and concrete mixers:  The rates are increased, as follows:

1. For deposits of stone material: annual payoff 20 % of a Unified Basic Remuneration (UBI).

2. Crushing and sorting plants will pay annually: a. production up to 200 Ton/day, will pay five UBI. b. production exceeding 200 Ton/days will pay seven UBI.

3. The installation of a fixed and mobile concrete mixer plant will pay four UBI.

Demarcation of milestones and registration of machinery:  The holders of mining concessions and permits have the obligation to place and preserve demarcation milestones, under penalty of a fine, within 30 days from the granting of the mining title. The owners of the machinery operating within large-scale mining concessions are obliged to register each fiscal year the machinery they are going to use within the mining concession, which will have a cost of 4 UBI, for each machine.

Transport of material: Mining concessionaires and transport companies must submit a monthly report of the mobilization guides of the vehicles that transport the construction aggregate materials from the mining areas until the 10th of the following month in which the transport was carried out.

Mining projects or civil works that purchase these materials from concessionaires within the jurisdiction of the canton of Yantzaza, must submit a monthly report with their purchases until the 10th of the month following the month in which the purchase was made. 

Road remediation fee: The owner of the mining area or concession from which the material is extracted, when it has been transported for local construction must pay a road remediation fee of 0.0005 X 1 UBI =$0.197 per m3 transported and the owner of the vehicles that transports the material when sent to the mining projects must pay a road remediation fee of 0.0007 X UBI=0.275 dollars per m3 transported.

Fines: Failure to file or altering the information in the monthly report will be punished with 1 UBI. The person who has stored aggregate materials without the authorization of respective (permission for storage or stock of stone materials) will be punished with 0.50 UBI. Holders who fail to comply with the placement and conservation of milestones will be fined 3 UBI. The owners of vehicles or machinery operating in large-scale mining concessions of aggregate materials that are not registered, will be punished with 5 UBI for each machine, as will the mining concessionaire for allowing entry to the concession of unregistered machinery, with 5 UBI for each machine that is within its concession.

Environmental aspects: No operator may hold more than one environmental permit on the same phase or stage of a work, project, or activity. Environmental compliance reports may include updating the environmental management plan, if required. Operators must pay for administrative fees and attach the

corresponding invoices at the time of filing of the environmental compliance report. The Competent Environmental Authority shall approve, observe, or reject the environmental compliance report within a maximum period of three (3) months. In case there are observations to the environmental compliance report, these must be notified to the operator, who must respond to them within a maximum period of fifteen (15) days from the date of notification, which may be extended for a period of ten (10) more days for justifiable reasons and for a single time. The Competent Environmental Authority shall have a period of ten (10) additional days to rule on the response submitted by the operator.

Transitional provisions: The holders of mining rights who do not have the favorable administrative acts provided for in Article 26 b) of the Mining Law, will have two hundred and forty days from the approval of the Ordinance to obtain them.