Challenges Herald a Transformational Period in MiningBy Antonio Gozain | Wed, 07/06/2022 - 13:10
In the context of a global energy transition, the world’s industries continue to depend on the mining sector to get the necessary minerals and raw materials. While new business opportunities have appeared in the mining environment with the introduction of new technologies, the challenges Mexico’s mining sector faces remain the same as those of the past years, agreed experts. By focusing on communication, the country can support the industry in emphasizing its global importance, transforming its position in the economy.
“Mexico has a great future in mining. We must change the perception and help the government by fostering dialogue. Mining companies must take care that the places where they work have access to basic services. The country has been little explored and there remains much room for new opportunities,” said Xavier García de Quevedo, Vice President, Grupo México.
Mexico’s mining history has a history of almost 500 years. Today, the country is the leading producer of silver. In addition, Mexico is a top global producer of gold, copper and zinc. Regarding the attraction of mining investment, Mexico ranks fourth in the world and first in Latin America, according to Deloitte.
In 2020, Mexican mining exports amounted to US$18.4 billion, a 1.8 percent decrease when compared to 2019, according to the Ministry of Economy. Sonora, Chihuahua, Zacatecas, Durango and Guerrero are the country’s main mining states, with a contribution of 82 percent to the total national mining production.
While analysts point out that Mexico does not offer a largely favorable operational environment for the industry at the moment, it is still a very competitive country due to its “slightly better” public policies when compared with other countries in Latin America, said Jorge Ramiro Monroy, CEO, Reyna Silver.
As most industries, the mining sector suffered in 2020 because of the pandemic, said García de Quevedo: “However, it recovered in 2021. In 2022, the bad news is that during the first five months, FDI has collapsed 60 percent compared to 2021. This happened due to the absence of viable projects.” Mexico is nevertheless a country where a lot of money is tax collected from mining, he added.
Despite the decrease in both imports and exports during 2020, the mining-metallurgical trade balance registered an increase of 34.3 percent, reporting a value of US$9.2 billion. Tax contributions from mining increased by 1.2 percent in 2020, amounting to MX$30.4 billion (US$1.52 billion), reported the ministry.
The Mexican mining industry faces various challenges, from restrictions on new concessions and delays in permitting to a financial environment weighed down by legal uncertainty. The sector has been “highly demonized, mythologized and barely recognized for the contributions [it brings] to daily life,” said Doris Vega, Institutional Relations Manager, Minera Cuzcatlán. In 2021, the mining industry attracted US$4.24 billion in investment, which was higher than in 2020 but 15.6 percent below the US$5.03 billion expected for the year, as reported by MBN.
“What is more, it is increasingly difficult to encounter deposit for precious metals,” said Ramiro Monroy, adding that lower commodity prices in recent years had further decrease the exploration budget.
Although there are several local challenges to be overcome in Mexico, the global industry faces similar hurdles, said Armando Alatorre, President, the College of Mining Engineers, Metallurgists and Geologists of Mexico (CIMMGM): “There are increasingly more people on the planet and more mining is needed to supply everything the world needs. There are ups and downs. In addition, we are living times of inflation, which will lead to slower economic growth.”
The global demand for metals has changed due to advancements in technology and a deep focus on renewable energy development, said García de Quevedo. “Consumption of copper, aluminum, silicon, rare-earth metals, nickel and lithium has grown exponentially over the past years,” he concurred with Ramiro Monroy.
Despite the challenging environment, the mining sector will continue to advance as the market demands tons of minerals and metals, said Alatorre: “The key to improve the industry’s situation is to change the discourse regarding the sector at a global level. We are not the great environmental enemy of the planet.” People within the mining sector must start to change perspectives of the industry within their own house, letting their families know the positive impact of mining to society, he added.
Additional global challenges for the mining industry include excessive logistics costs and talent shortages, García de Quevedo pointed out. High logistics costs complicate the refining of metals, most of which takes place in China. As copper demand continues to grow, Mexico most take advantage of its natural resources and become better communicators for the mining industry. “Mexico is a mining country by nature. We have to change our communication strategy and convince the public,” concluded García de Quevedo.