Mexican mining sector balks at plan to ban open-pit mines

Fortuna Mining

15/02/2024 18:09

By Daina Beth Solomon and Divya Rajagopal
       MEXICO CITY, Feb 15 (Reuters) - Mexican President Andres
Manuel Lopez Obrador's proposal to ban open-pit mining will
generate uncertainty and curtail investment for the key sector,
mining industry representatives said this week.
    Lopez Obrador announced the proposal to prohibit new
concessions for open-pit projects last week amid a slew of
initiatives as he looks to shape political debate ahead of a
June presidential election that his protégé is expected to win.
    The proposal is unlikely to pass in the short-term, as Lopez
Obrador does not have the two-thirds super majority in Congress
needed to change the constitution.
    But the frontrunner to succeed him, former Mexico City Mayor
Claudia Sheinbaum, has said she will adopt his proposals as part
of her platform.
    The industry says such a move would be disastrous for the
sector, which fuels 2.5% of gross domestic product. Mexico is
the world's top silver producer and a major gold and copper
producer.
    Of the 124 mines affiliated with the Camimex mining chamber,
fewer than half are open-pit yet they represent 60% of Mexico's
output, according to the chamber.
    "Prohibiting open-pit mining would imply the destruction of
a strategic sector," the chamber said in a statement this week. 
        It said open-pit mines represent more than $3.9 billion
in investment and 200,000 direct jobs, and warned that a ban
would eventually affect supply chains, forcing Mexico to import
minerals at a higher cost.
    Since taking office in 2018, Lopez Obrador has not granted
mining concessions of any type, arguing that past governments
gave too many approvals.
    Mining executives have previously raised concerns over that
practice as well as a 2023 law that shortened concessions and
tightened water extraction permits.
    "It's no secret that this administration has been averse to
mining," said Jorge Ganoza, president of Canada's Fortuna Silver
Mines  FVI.TO , which operates an underground silver and gold
mine in southern Mexico. "If it were to continue, we would
certainly see Mexico lose ground compared to other mining
nations."
    Fortuna Silver has cut investment in Mexico from nearly half
of its global spending to around 10% in recent years, he said.
    That trend could continue if the proposal passes, said Riyaz
Dattu, an attorney who advises Canadian companies on
international arbitration. Canada represents 70% of foreign
mining investment in Mexico.
    "Companies cannot operate without an understanding on
whether their investments will hold true in the next 10-20
years," he said. "This will drive investments away."
    Environmentalists say open-pit mining carves out swaths of
earth and uses dangerous chemicals, and Mexican Environment
Minister Luisa Albores has called it "the most polluting" type
of mining. 
    The ministry is also seeking to end fracking and prohibit
concessions in water-scarce areas.

 (Reporting by Daina Beth Solomon in Mexico City and Divya
Rajagopal in Toronto; Editing by Ernest Scheyder and Rosalba
O'Brien)
 ((daina.solomon@thomsonreuters.com))