Mexico

Mexico has two fairly clearly defined seasons, a dry and a rainy one. For the mining industry, it’s been patchy skies for years now. As a result of the recent instability, some companies have left the country. Companies like Almaden Minerals and Silver Bull Resources filed claims together worth close to US$1.5 billion against Mexico, alleging that Mexico expropriated their investments. For those that stayed, Rubén Cano advises to prepare to be compliant in a hyper-regulated environment that is likely to become even more regulated: “It will be more challenging to obtain environmental permits or to keep current water permits. Keeping your mining concessions valid will be crucial. Understanding the legal framework is a basic prerequisite, but I believe investors should be ready to go beyond compliance and exceed expectations, especially in terms of ESG requirements.”

The industry is already adapting. The lack of clarity over the ban on open-pit mines has led current explorers and developers to prioritize underground operations over open-pit ones. Endeavour Silver at Pitarilla, Heliostar at Ana Paula, and Fuerte Metals at Cristina are considering underground developments at previously envisioned open-pit projects, each for different reasons. Prime Mining, which is developing the Los Reyes 3 million oz gold-silver project in Sinaloa, has for the first time defined an underground portion. “About two-thirds of the resource is open-pit and the rest is underground, which leaves us with the option to develop a higher-grade underground operation instead of an open-pit. Given the previous regulatory uncertainty, it was important for us to show that Los Reyes could also be mined from underground. There is still a lot of work we have to do, but we could prove a strictly underground mining operation with excellent returns if needed. However, I believe that open-pit mining is still very much on the cards for Mexico,” said Scott Hicks, the CEO of Prime Mining.

Like most executives in Mexico, Hicks places hope in Claudia Sheinbaum. Her government has announced the review of the controversial bill to ban open-pit mining, drawing attention to the fact that sand mines used in the cement industry, as well as any future lithium mines that the government is hoping to build, are by default open-pit. Though not uttered directly, she intimated that a ban on open-pit mining is not practical. Her pragmatism was also evident when she chose mostly moderate cabinet members and by not including the ban on open-pit mining in her list of 100 pledges – an encouraging omission. Even though Sheinbaum was seated next to AMLO as he passed the 2023 changes and she indicated she would continue his policies, investment sentiment has clearly shifted since she has taken office, which suggests that investors do not see Sheinbaum as a continuation of AMLO.

This shift in the mood can be seen in the acquisitions announced since elections, in better asset valuations, and, clearer than anything else, in the trickle of permits coming through, sending some strong rays of sunshine over the frost: Alamos Gold received the environmental permit at its Mulatos project in Sonora, Avino Silver & Gold Mines received the permit for its La Preciosa, while Industrias Peñoles, Grupo Mexico, Agnico Eagle, and Teck Resources are also said to have obtained permits. Commenting on the award of the permits for La Preciosa, a large primary silver deposit with over 100 million oz of AgEq (indicated), David Wolfin, the CEO of Avino Silver & Gold said the reason why Avino obtained the permits, even if former owners of the project didn’t, is because Avino shifted the approach from a giant open pit mine to a small CapEx underground operation that is easier to be accepted by communities.

Even those waiting on open-pit permits are more optimistic. Sonoro Gold, which has been waiting for over three years for the environmental impact permit (the infamous Manifestación de Impacto Ambiental or MIA as known in Mexico) has noticed a change in SEMARNAT’s engagement, or re-engagement with the industry. “Dialogue has reopened, and we are confident we will soon receive our permit,” said Kenneth MacLeod, the CEO of Sonoro.

This dance in the dark should soon reach a finale. At PDAC, Fernando Aboitiz, the head of the Extractive Activities Coordination Unit within the Ministry of Economy, said a new regulatory framework will come through in mid-2025. He hinted the new framework will be designed in consultation with CAMIMEX and seek to balance the interests of investors and communities, while streamlining administrative procedures and improving engagement between industry and local communities. He also said that the reform of open-pit mining will not go forward at this stage.

Would you still invest in Mexico? When asked whether Mexico is still part of MAG Silver’s inorganic growth strategy, George Paspalas, its CEO, said frankly: “If you had asked me this question in October last year, my answer may have been different, but today, yes, we remain open to investing in Mexico (…) The relationship between the industry and the government has been strained in the past but we see early signs that this may be changing for the better.”

Those who choose to stay and invest in Mexico understand that mining is older than the republic itself. Until the new legal framework is made available in the second part of this year, we can only report on the industry’s anticipations. Coming next is a sample of how the industry views Mexico’s new leader.