Anti-Mining, Climate Agendas Among Mining Challenges

Mining globally faces different challenges, geopolitical tensions (NATO expansion, war in Ukraine, and tensions around relations with Taiwan), de-dollarization (led mainly by the BRICS countries (Brazil, Russia, India, China, and South Africa plus the Kingdom of Saudi Arabia and Iran), and the energy transition (led by the current leaders of the West). Added to these external challenges, Mexico has reduced its attractiveness as a mining jurisdiction mainly due to the policies of the administration of President Andrés Manuel López Obrador, which has been carried away by the convergence of an anti-mining agenda and the climate change agenda, the nationalization of lithium, and added to this, a bill to reform the mining law and other related laws. 

The situation in Mexico is not very different from other countries in Latin America, which have also reoriented their policies due to the green agenda promoted by the current political leaders of the West (mainly in the US and Europe), who consider that the main threat to humanity is global warming, while they put humanity at risk of “nuclear warming” with their NATO expansion policy.

Geopolitics: The war in Ukraine, and the sanctions imposed by the West against Russia since 2014 when Russia annexed Crimea, in addition to the tendency to antagonize China for fear that it could attack Taiwan, have made Russia and China move  closer to each other, increasing their commercial ties. The sanctions have put up barriers so that most of the metals (nickel, aluminum, gold, and platinum group metals) that are produced in Russia cannot reach the western market, generating a rise in prices. The ban on importing oil and gas from Russia has generated an increase in fuels in the West, with increased prices on electricity, heating, and transportation. 

Mineral products and fossil fuels that used to flow from Russia to the West now flow mainly to China and India. The consumption and price of mineral coal has risen due to the limitation that the West imposed on itself by cutting off the supply of natural gas from Russia, reflected for example in the profit reported by Glencore for 2022 (Mining Technology; February 17, 2023: Glencore logs record profit in 2022 on coal boom – The firm's adjusted EBITDA stood at US$34.06 billion while revenue was US$255.98 billion), in contradiction to the green agenda. The same has happened with oil. Aramco announced that it had a record net income of US$161 billion in 2022, its highest annual profit. In Mexico, the production of mineral coal by 2021 has decreased by almost 50% compared to the production in 2011 and it has been necessary to import coal to meet internal demand. 

De-dollarization: The fiscal imbalance in the US (spending in excess of fiscal income), which has been accumulating for several decades, covering Republican and Democratic governments, has increased inflation in the US and in the world, and with it the dollar has depreciated. On the other hand, the sanctions imposed by the West against Russia and many other countries that it considers adversaries or hostiles, have generated an interest in carrying out commercial exchange in the currencies of the countries involved, generating fear of loss of value of the dollar, increasing the value of gold, which has recently exceeded US$2,000 per ounce (US$2,017 on April 14, 2023) and silver, which again exceeded US$25 per ounce (US$25.49 on April 14, 2023), which for Mexico, as the world’s main silver producer, is good news.

Energy transition: The change from fossil fuels to renewable energy favored by the West has also made oil and gas-producing countries consider a separation from  the West, which over time will cease to be a relevant customer as  it reduces its consumption of oil and gas. Those countries are moving to look for markets for their products, such as China and India that are in need of energy to promote development. In addition, this commercial exchange would no longer be done in dollars, but in the currency of the countries involved. The energy transition has increased the demand for certain metals, mainly lithium, cobalt, nickel, and copper. There is a boom in new projects in the lithium triangle in South America, trends to nationalize lithium in various countries, and the idea of forming a lithium cartel, à la OPEC. The Mexican government hopes that its strategy of nationalizing lithium will result in higher tax revenues and well-being for Mexicans; however, many qualified opinions (Universidad de Navarra, Sherman & Sterling, among others) have an opposite evaluation of this policy.

Attractive jurisdictions: The geopolitical situation, together with the trend toward energy transition, has generated favorable jurisdictions for mining, especially for so-called “strategic” metals. Jurisdictions that are currently attractive and favorable to mining in general are Western Australia, Saskatchewan, Nevada, Alaska, Arizona, Quebec, Idaho, Morocco, Yukon and South Australia (Fraser Institute annual survey of mining companies, 2021). Mexico is not classified among the most favorable jurisdictions, nor is it considered among the most unfavorable. 

Proposal for Law Changes: The proposal promoted by the current administration is still awaiting passage through the legislative process. This proposal, if approved, would affect the Mining Law, the National Water Law, the Ecological Balance Law, and the Waste Management Law. The possible consequences of the implementation of these modifications have been presented with concern by the US National Mining Association (NMA) and in an analysis carried out by the legal firm Holland & Knight. Among the main aspects, but not the only ones, that have generated concern about this proposal is the reduction of the mining concessions from 50 to 15 years, the new administrative process to grant concessions, and changes to manage mining permits and water concessions. If these changes are implemented, Mexico will lose much of its attractiveness for mining investment, moving closer to the low end in the upcoming Fraser Institute assessment.

In my opinion: As a company that provides services on environmental and social sustainability issues for the mining industry in Mexico and some countries in Latin America, we are interested to see new mining projects and continuity of existing operations because we observe the benefits these bring to the rural communities where they operate and the development of the supply chain.  We have observed in the different countries where we are active, the challenges that the industry faces, due to global conditions, and due to the actions of governments guided by the anti-mining and the green agenda, that, in general, when these two agendas coincide, they have an adverse effect that does not favor the economy of the countries and their people. Rather, they destroy it.