Proposals to ban any new open-pit mining operations under question as first woman elected president prepares to take office
Link to article: https://www.jpost.com/business-and-innovation/precious-metals/article-821252
Sweeping mining industry changes passed into law by Mexico in 2023 under President Andrés Manuel López Obrador have yet to cause any significant decreases in production but have caused concern among investors and mining companies.
Obrador, a member of the left-wing Morena party who fellow party member Claudia Sheinbaum will succeed on Oct. 1, also proposed a law in February to ban new open pit mining operations, which passed a committee in Mexico’s lower house of Congress last month.
Sheinbaum promised during her campaign to continue Obrador’s efforts to foster a more environmentally friendly Mexico.
Mexican gold mine production dropped notably after the 2023 Mining Law passed, showing a decrease of about 2.5 metric tons, or 20%, of the gold output following approval in May 2023.
This chart shows a notable decrease in gold production following the May 2023 Mining Law passage in Mexico, however, output numbers appear to have since recovered. (Source: Statista)
However, gold production numbers quickly recovered, and by December 2023, they were mirroring production from 2022, a trend that continued through February 2024, according to data from Statista.
Mexican mining companies react
A report released in March showed some mining operations are downplaying the risks of a potential ban on open-pit mining.
Mexico has abundant metal resources, including a 15.8% share of global silver reserves, 8.3% of zinc, 7.1% of lead and 3.5% of copper, the S&P Global report states.
During an earnings call in February, President and CEO of Agnico Eagle Mines, Ammar Al-Joundi, said, “The whole thing is in flux. In theory, if there’s no open pit mining, that also applies to aggregates. So you can’t mine for gravel, you can’t mine for sand. That means you can’t build roads, you can’t build buildings. So it’s not unusual to sort of see these things just before an election.”
Though the immediate consequences of the laws have yet to be felt, there is some concern for the future, as the 2023 law reduces the term of concessions and forces new mining discoveries to fall under the government’s control. Concessions would then be granted through a public bidding process instead of being awarded to the first applicant.
According to the Mexican mining trade organization Camimex, open-pit mining accounts for less than half of the country’s mining operations but produces 60% of its ore.
Looking to the future
“It’s about new mines, not those in work,” said David Morgan, of The Morgan Report, about the open-pit ban. “(After the regime change) there’s thinking that the courts might rule on some of this stuff and come to a final decision.”
Many aspects of the 2023 law are still being litigated in the Mexican court system.
Morgan, noting AMLO’s push to continue nationalization efforts of lithium, said investors should think broader than just those efforts.
“Look at OPEC, the oil cartel,” he said. “And (look at) how that took place.”
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