Executive answer
In mining, multiplying tonnes by a quotation does not necessarily produce an arm’s-length price. Value may depend on payable content, grade, moisture, impurities, recovery, treatment, refining, transport, insurance, date, volume, credit and rights to by-products. Every difference should connect to the agreement, assay and a quantifiable source.
Mexico’s current Mining Law forms part of the concession and operating context, but sector compliance does not replace the Income Tax Law. Transfer pricing compares the controlled transaction with a reliable independent alternative. Customs, duties and regulation should be coordinated without assuming the same base.
The useful deliverable is not a generic rate but a reproducible bridge from the public reference to the invoice and final settlement.
Define the exact transaction
Identify the mine, plant, product, buyer, trader, smelter, port, destination, currency and agreement. Distinguish ore, concentrate, doré, refined metal, by-products and services.
Map ownership and risk from extraction through delivery. Record who decides production, blending, stockpiling, transport, hedging and sale.
Separate purchase and sale, marketing, logistics, treatment, financing, guarantees and technical services. A net price may contain several components.
Product, grade and payable content
Define dry and wet units, principal mineral, payable by-products, impurities and penalties. Record contractual specifications and tolerances.
The assay needs a sample, chain of custody, laboratory, method, date and dispute procedure. Compare mine, buyer and umpire results.
Do not apply the quotation to gross weight. Reconcile moisture, content, recovery and payable percentage.
Document blending. Combining lots can improve specifications and transfer value; identify who decides and bears cost.
Quotation and market
Identify the publication, metal, unit, market, currency, time, usage rights and version. Preserve dated evidence.
A refined-metal reference may need adjustments for concentrate, but treatment deductions should not be arbitrary residuals. Use comparable agreements, market conditions or technical evidence.
Check internal third-party transactions. They may be more informative where product and route align, although adjustments may still be necessary.
If the reference is unavailable to the parties or does not reflect their market, explain reliability.
Pricing date
Define provisional pricing, quotation period, election, average, shipment, arrival and settlement dates. Document who elects and when.
Retrospective election can transfer value in volatile markets. Establish an ex ante policy and approval controls.
Reconcile provisional invoices, mark-to-market adjustments and final invoices. Separate price effects from volume or assay differences.
At year-end, document estimates and later true-ups. Do not treat later information as known when terms were agreed.
Treatment and refining charges
Define treatment charges, refining charges, escalators, minima, lots, blending and included services. Compare capacity, location, technology and conditions.
A third-party smelter charge may provide an internal comparable. Review volume, term, quality and buyer relationship.
Where the related buyer processes, separate its asset and risk return from marketing.
Reconcile deductions to settlement and accounting. Avoid subtracting a charge from price and invoicing it again as a service.
Penalties, deductions and by-products
Record impurities, moisture, size, recovery, tolerances and penalties. Each deduction needs a formula and laboratory result.
Identify gold, silver or other payable by-products and conditions. Omitting them may understate the sale.
Metallurgical losses follow control over process and risk. Compare the agreement with conduct.
Maintain a lot-level table showing quotation, content, payable amount, charges, penalties, credits and net price.
Zugzwang’s Commodity Pricing Review reconstructs each lot from quotation, assay and pricing period through charges, logistics and final settlement.
Logistics and location
Map mine, plant, warehouse, rail, road, port, vessel and destination. Define delivery and risk-transfer points.
Separate freight, handling, insurance, demurrage, losses and security. Compare routes and terms.
A trader coordinating logistics may earn remuneration; one merely invoicing does not automatically assume that return.
Reconcile transport records, weights, customs documents and invoices. Physical differences affect price and customs.
Volume, term and credit
Compare spot, offtake, take-or-pay, exclusivity, minimum volume and flexibility. A long-term contract may include financing or market access.
Analyze volume and commitment discounts rather than only the daily price. Review realistic sales alternatives.
Record term, prepayment, guarantees and currency. An advance purchase may include financing to separate.
Persistent related-party balances require credit analysis.
Related trader or marketer
Map who finds customers, negotiates, takes title, controls credit, price, logistics and hedging. Document personnel and limits.
A trader margin should reflect functions and risks. Compare third-party commissions, spreads or another appropriate method.
If the trader sells back-to-back without authority, a routine return may be coherent. Portfolio optimization and risk control may support more.
Reconcile spreads and hedges by transaction, not only annual average.
Hedges
Identify exposure, instrument, date, volume, counterparty, approval and beneficiary. Link the hedge with the physical sale.
Separate price, FX and cost hedges. A derivative loss may offset a physical gain.
Document policy and allocation. Do not distribute outcomes by booking location.
Treasury may provide a separate service; test benefit and comparables.
Technical and corporate services
Inventory geology, exploration, engineering, laboratory, maintenance, HSE, procurement, IT and administration. Record provider, recipient, output and cost.
Prove benefit and materiality. An invoice does not establish performance.
Define cost pools, keys and markups. Specialized equipment and liability may need a different analysis.
Avoid duplicating cost within commodity pricing and a service fee.
Machinery, assets and leases
Map mobile equipment, plants, camps, laboratories, concessions and rights. Identify ownership, use, maintenance and risk.
For leases, compare asset, life, capacity, location, insurance and obligations. Unique assets may need valuation.
An asset or project transfer requires analysis of business opportunity and functions, not book value alone.
Reconcile capex with production and agreements.
Mine financing
Distinguish debt, equity, streaming, prepayment, royalties and offtake. Each structure grants different rights and risks.
For debt, analyze capacity, stage, currency, term, collateral and subordination. For streaming, review volume, price and project risk.
Do not use a generic corporate rate without adjustments. Document scenarios and alternatives.
Separate arm’s-length pricing from deduction limits and withholding.
Method and comparability
A CUP is often a candidate where quotes or comparable sales exist, but it requires full delineation. Another method may be more reliable where differences cannot be quantified.
Document adjustment order and sources. Avoid circularity: do not use the controlled price to calculate the adjustment validating it.
Perform sensitivity analysis for quality, periods and charges. Explain materiality.
Year-to-year consistency does not replace review of agreements and market.
Segmentation and reconciliation
Segment by mine, product, lot, buyer and agreement. Reconcile tonnes, assays, invoices, settlements, trial balance and returns.
Maintain bridges for units, FX and content. A unit error can be material.
Track provisional and final amounts by ID. Do not offset different lots without explanation.
Separate raw data, calculations and approvals.
Customs, duties and regulation
Reconcile pricing with customs and export documents. A tax adjustment does not automatically amend customs value.
Identify applicable duties, consideration and sector obligations. Do not treat them as price components without analysis.
Confirm concessions and permits by date. The tax file should reference the current framework.
Coordinate mining, foreign trade, legal and tax before correcting.
Operational TP
Monitor quotations, assays, pricing periods, charges, logistics, provisional and final amounts, spreads, hedges and balances. Configure alerts.
Bring commercial, metallurgy, logistics, treasury, finance and tax together. Every exception needs an owner.
Before close, settle estimates and simulate true-ups. Review indirect tax and counterparty effects.
Measure settlement ageing, assay differences and manual errors.
Environmental, closure and community cost
Identify who decides and funds remediation, waste, water, closure, restoration and community commitments. Obligations may follow the concession holder, operator or internal agreements, while economic allocation still requires control and benefit analysis.
Separate accounting provisions, executed spending, guarantees and services. A closure provision should not be mechanically added to a cost pool or passed to another entity without understanding the obligation.
For centralized environmental services, document scope, output and recipient. In a project transfer, consider obligations and liabilities together with assets and reserves.
Reconcile technical plans, estimates and agreements. The long horizon makes versioned assumptions essential.
Reserves, resources and planning
Geological estimates inform investment, production and financing. Map who prepares, validates, approves and uses the models.
Do not treat a reserve estimate as an automatic tax price. Date, methodology, uncertainty, rights and project stage affect valuation.
Where a related party provides geology or planning, determine whether it executes instructions or controls decisions. Retain referenced models, reports and approvals without disclosing unnecessary sensitive detail.
A material change in mine life may affect agreements, debt, depreciation, charges and the business case; trigger an intercompany review.
Third-party sales as a control
Compare each related sale with contemporaneous independent operations. Build a table covering product, grade, pricing period, volume, destination, credit, treatment and logistics.
Explain why each difference increases or decreases price. Do not select only favorable sales. Consider rejected offers and available alternatives where comparable.
If the third party buys a different bundle or assumes processing, adjust or reject the comparable with reasons. Repetition does not strengthen a weak internal comparable.
Data governance and monthly close
Assign owners for weight, moisture, assay, quotation, pricing period, charges, transport, FX and settlement. Use one lot ID across systems.
Validate units, ranges, dates, duplicates and versions. Manual changes should record before, after, user, reason and approval.
Close provisional lots monthly, investigate differences and confirm trader balances. Recalculate an independent sample quarterly. Before filing, reconcile known later settlements under the applicable treatment.
Defense file and audit
Include the chain, concession, FAR, agreements, quotations, assays, settlements, transport, traders, hedges, services, method and reconciliation.
Sample lots from different dates and grades. Recalculate from source to invoice.
Control data licenses and retain permitted references. Prepare an index.
Record findings, amounts, years, causes and remediation.
Illustrative example
A Mexican mine sells copper concentrate to a related trader using an international quote. The agreement subtracts treatment, refining, moisture, impurities and freight and credits gold. The quote alone does not prove price: each component, pricing period and assay must reconcile to market and settlement.
If a charge lacks a reliable source, reconsider it or evaluate another method.
Conclusion
Mining precision lies in the bridge. Quotations, quality, date, charges, by-products and logistics form one verifiable lot-level narrative.
An integrated review avoids residual discounts, recognizes real services and connects tax pricing with operations without confusing customs or regulation.
Management should review the bridge as a commercial control as well as a tax file, because unresolved settlement differences affect cash and counterparty exposure.
Request a Commodity Pricing Review to reconstruct quotations, assays, charges and settlement and prove the price with lot-level evidence.
Verified official sources
- Mexican Chamber of Deputies, current Mining Law.
- Mexican Chamber of Deputies, current Income Tax Law, Articles 76, 179 and 180.
- OECD, Transfer Pricing Guidelines 2022, Chapters I-III and X.
- OECD, Transfer Pricing Country Profile: Mexico.
Verification closed on August 2, 2026. Confirm the concession, product, agreement, quotation and obligations applicable to each transaction.