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Primero Mining Corp., a Toronto-based precious metals producer, has announced that it intends to challenge a tax ruling by Mexican authorities, using the provisions of the North American free-trade agreement.

Notice of the intent to file the NAFTA challenge comes just weeks before Prime Minister Justin Trudeau is scheduled to host U.S. President Barack Obama and Mexican President Enrique Pena Nieto in a "three amigos" summit in Ottawa on June 29.

The ruling involves Primero's flagship San Dimas gold-silver mine in Durango, Mexico. Primero says it struck an agreement with the Mexican tax authority, the Servicio de Administracion Tributario (SAT), that the agency is now trying to retroactively change.

Primero contends the SAT is discriminating against Primero as a foreign investor. It said in a statement that "the dispute relates to a campaign of intimidation and improper pressure tactics adopted by Mexican authorities" following the election of a new government in that country.

"The tax authorities are essentially trying to repeal the agreement they gave us in 2012," Ernest Mast, Primero CEO, said in an interview.

The agreement has to do with how Primero is taxed on sales of silver under a "streaming" agreement with Silver Wheaton of Vancouver.

As is typical of such streaming deals, Primero receives far less for the metal it sells to Silver Wheaton than the current market price.

SAT issued an advance pricing agreement in 2012 that said Primero would pay income tax based on the silver price it actually realized on the streaming sales, rather than on the market price of the metal, Mr. Mast said.

Primero made further investments in Mexico based on that assumption, he said.

Primero bought the mine in 2010 from Goldcorp Inc., and the streaming deal, which covers about six million ounces of silver a year, was already in place at that time. Primero applied for a tax ruling in 2011 and received it in 2012.

The SAT told Primero on Feb. 2 that it wanted to nullify that agreement, Mr. Mast said. The case is now proceeding through the Mexican tax court system, but Primero has also decided to pursue the matter under NAFTA.

It issued an intent to submit a claim to international arbitration after markets closed on Thursday. It now must wait 90 days before officially filing a claim.

The ruling received in 2012 covered only the five years between 2010 and 2014, but Mr. Mast said the implication was that the Mexican tax authorities would continue to view the situation in the same way in the future.

Mr. Mast said the timing of the NAFTA challenge, just before the North American leaders' summit, is not entirely coincidental. "The 'three amigos' summit is definitely an opportunity to put more spotlight on this case."

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