AMLO's Legacy in the Mining Industry

Given that the presidential elections in Mexico will be in June 2024, the time remaining for the administration of President Andrés Manuel López Obrador (AMLO) is short; however, the administration has left a controversial legacy for the mining industry, littering the road with obstacles. Despite this, the industry is resisting, inspired by demand, and now surprising results are emerging, which still do not reflect the full reality of the changes that have been promoted by the administration. In the pre-electoral period, a news article stated  that AMLO’s political party wanted to give a new impetus to mining (El País, Feb. 20, 2018: Morena intends to give new impetus to mining at the hands of a controversial ex-unionist), but that intention seems to have been left behind.  AMLO's statements and actions have had a negative tone toward mining, and toward the private sector, which he believes incapable of carrying out this activity responsibly. He also does not believe that it contributes to the well-being of Mexicans. On the other hand, his administration believes that the Mexican bureaucracy can carry out lithium mining responsibly and efficiently. Let's look at some of his statements and actions:

At the beginning of his administration, he established that there would not be any more mining concessions granted, on the pretext that previous administrations had granted many concessions, which he declared an act of treason.  The AMLO administration falsely indicates that a mining concession takes away the rights of the landowners, and that it affects the entire area. Normally, a mining concession defines a geographical area that is assigned to a company so that it can explore for a mineral deposit and if after a thorough evaluation it is determined that it is economically, environmentally and socially viable, the construction of a mine is planned, which normally occupies a fraction of the mining concession. Let's say for illustrative purposes that it is one-tenth of the area; the rest of the area is not affected. The mining concession reserves the area for the company that obtained it and prevents another company from entering the same area. In financial terms, the smaller the area affected is, the less money is spent and therefore it is against the interests of the company to affect a larger area than is needed. 

Later, for those who already had mining concessions, the administration did not want to grant permits to carry out open-pit mining, under the justification that the landscape would be altered, which is true. However, he conveniently forgot that they had the authority to condition that the pits resulting from open pit mining be filled back with mining waste, thereby not significantly altering the landscape. This would be an additional cost for the companies, but I do not see this as a concern for the AMLO administration. 

SEMARNAT also denounced the existence of a large number of mining tailings dams (Contralinea, September 2021: In Mexico there are 585 tailings dams), and that they represented a risk; however, it did not go so far as to propose that filtered tailings be used, which, by not storing water, significantly reduce the risk represented by a traditional dam that stores tailings and water. This could have been easily implemented for the new mines, modifying the Mexican standard 141 of 2003 or by any other type of regulation.

The same entity also denied, on more than one occasion, the extension of the operating permits, which also generated uncertainty. SEMARNAT acted erratically by extending the operating permits for a mine in Oaxaca. Had it not been for the timely intervention of the mayor where the mine is located, AMLO would not have instructed SEMARNAT to extend the operating permit.

Last year, the government of President López Obrador approved legislation giving the state exclusive rights in lithium, although Mexico doesn’t have any producing mines yet. There is not yet any evidence that this plan will be good for Mexico.  Even countries like Chile with a good trajectory of running state-owned companies, like the copper mining company (CODELCO), is today facing huge debts that are piling up (la Tercera, July 31, 2023: Codelco reports improvement in surpluses but net debt hits a record of US$17 billion). Can we expect anything different from LitioMx?   

Then in May, the ruling Morena party passed a new Mining Law that shortened concessions to 30 from 50 years, tightened rules for water permits, boosted local community benefits and imposed a public tender system for all concessions instead of claims staking. The change in the law requires  a public consultation in areas with Indigenous communities, social impact studies, closure plans, and some sort of financial surety mechanism for closure, and mine waste management plan.  Not all these changes are bad, some of them are considered a burden, but time will tell if this results in a better framework for the industry and for Mexico.  

The strike by workers at Newmont’s Peñasquito Mine (it is an open pit mine, produces gold and silver in doré and lead and zinc concentrates; it has a camp for 1,900 people, had a production of 129,000 ounces of gold in 2019 and interacts with social programs in 25 communities) in the state of Zacatecas is relevant. The workers have been on strike for two months now, and the strike is sponsored by Sen. Napoleón Gómez Urrutia, of the party that currently governs, who in turn is the general secretary of the national union of mining, metallurgical, steel and similar workers of the Mexican Republic. They  demand that the fraction of the profits that had been agreed in a contract in 2022 be doubled.  The strike at the mine, in addition to harming Newmont, the largest producer of gold in the world, by causing losses estimated at more than US$183 million, mainly harms the more than 5,000 workers who depend on their wages, the suppliers and, of course, the Mexican government, which stops receiving the tax revenue the mine generates (Forbes Mexico, Aug. 14, 2023: Mining Chamber asks to resolve the Peñasquito mine strike). Newmont has 13 mines operating in the world and with that, the ability to wait, and not give in to the union's demands, while this generates a negative perception toward Mexico.

Mexico is the world's leading silver producer, has been the favorite destination for Canadian exploration companies, and has projects that arouse great expectations. The Canadian newspaper “The Northern Miner” reported on Aug. 14 that, despite AMLO's policies, surprisingly, mining investment in exploration and development has grown, jumping to US$122.4 million in the first quarter of 2023, 55% more than the previous three quarters combined, and investment increased in the second quarter even further, to US$137 million. These results still do not reflect the effect that will be generated by the recent changes in the Mining Law and the nationalization of lithium, which has not started yet. Despite the obstacles that the AMLO administration has placed before mining, the demand for metals (precious and those used for the manufacturing of batteries) generates a force that exceeds these hurdles, together with the optimistic expectation of what a change of government can bring.