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Exploration Reforms to Influence Mining Sector’s Growth

Ramón Luna - SPM
Director General


Fernando Mares By Fernando Mares | Journalist & Industry Analyst - Mon, 08/21/2023 - 17:22

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Q: How has the mining sector changed for SPM over the past four years? 
A: It was a challenging period because we faced three different phenomena. The first was the arrival of the pandemic, which caused uncertainty until the Mexican government labeled the mining industry an essential economic activity. This designation allowed us to continue working. There was still uncertainty as we emerged from the pandemic. Many seemed optimistic, thinking that investors would seek refuge in gold, while others believed it was time to diversify. The conflict between Russia and Ukraine caused further uncertainty. As a result, the metal market has been volatile and full of doubt.

In recent months, the Mexican government has discussed modifying the Mining Law, which has demotivated Mexico’s mining industry. A new Mining Law has been approved and we are eagerly waiting to see what operating regulations will be created under this law. 

Q: What will be the impact of the Mining Law reform on exploration activities? 
A: The uncertainty is leading to minimal exploration. There is a drastic and significant change in how exploration operations will be carried out, as the government wants to centralize its administration on the Mexican Geological Service. This would either force the more than 100 exploration companies in the country to work with the geological service or make the latter the only operator. This is not feasible because it lacks the necessary infrastructure.

The Mexican Geological Service has many talented geologists and manages the most comprehensive database in Mexico. But its infrastructure will never compare to that owned by the many exploration companies in the country. The geological service has an annual budget of about US$50 million, while the exploration mining industry invests around US$800 million annually.

Q: How will the halt in new mining concessions impact SPM’s business? 
A: It will not only impact SPM’s activities, it will impact the entire mining industry, which relies on exploration to generate new projects. All mining projects have a finite lifespan. Therefore, it is necessary to continuously invest in exploration. Only 2% of exploration projects become profitable so, if a mine is in operation, there must be 50 exploration projects underway so one of them can replace that operating mine in a few years.
Exploration is necessary for mines to renew the extraction of minerals. The lack of concessions, environmental permits, autonomy in exploration and control by a single authority cause a significant slowdown. Previously, there were hundreds of exploration projects but now there are only a dozen. In the next 10 years, several mines in Mexico will close after depleting their resources.

Q: How can the mining industry improve its communication channels with lawmakers?
A: The mining industry is deeply committed to communities, the environment, its workers and limiting water stress but there is a significant disconnect in information. Three significant stakeholders are involved: communities, mining companies and the government. The ideal situation would be to come together in working groups where all three parties share information about operations, procedures and community involvement. This way, we can create a mining industry that benefits everyone.

We operate within communities and they benefit from our presence. The government should act as an administrator for all operations and processes. The Mexican mining industry provides the raw materials for 72 industries, making it essential to many sectors, including automotive, communication and healthcare. The key is to work together to create a more profitable industry for all.

Q: How does SPM apply the experience gained in previous projects to new ones? 
A: We have been progressing through area assessments and compiling existing databases. We have significant data compilation and modeling expertise, which enabled us to generate exciting exploration targets. We currently have two projects with our clients ready to enter the construction phase. We also have a project ready to begin the exploration stage.

One of our clients, Silver Tiger, has a promising project in Esqueda, Sonora, called the Tigre Project, that is ready to enter the construction phase. In Jalisco, another of our clients has a project that is also ready to enter the construction phase. We also supported GoGold Resources in Jalisco throughout its exploration process, during which it made a significant discovery of silver and gold in the Los Ricos Project.

Q: How do you ensure that your operations are environmentally and socially responsible? 
A: The most essential aspect of SPM is our workers and we always aim to achieve harmony with all the communities where we operate. We strive to develop our projects with the utmost quality and professionalism, ensuring our clients' satisfaction and creating projects for a sustainable long-term company.

Q: What are the main challenges in the development of a national lithium industry? 
A: Mexico, especially Sonora, has one of the largest lithium potentials in the world. However, it is still at the exploration stage. We need to find the right formula to improve the metallurgical processes to make it economically viable. The lithium mineral deposits in Mexico are different from those in other parts of the world. In Mexico, lithium is extracted as clay, while the better-studied deposits are in brine form and require very different metallurgical processes. Mexico does not have the techniques to develop its clay deposits.

Q: What are SPM’s goals in regard to lithium exploration in Sonora? 
A: We are a service company. If any of our clients wish to venture into lithium exploration, we will move forward. We are also waiting for the government, through its new agency called LitioMex, to define the rules for conducting lithium exploration in Mexico. These rules will help us determine which parties will join this new facet of exploration.

Q: What is SPM’s forecast for the future of exploration in Mexico?
A: The country is seeing a slowdown in exploration. Therefore, it is essential to expedite the regulations of the new mining reform, which will allow companies to understand how exploration will be conducted in Mexico. The country has a strong exploration potential and a robust mineral industry. The mining industry is cyclical and sometimes influenced by metal prices and other times by geopolitics. Hopefully, in the short to medium term, it will take its course and accelerate once again.

Q: What are the company's goals or strategies for the medium and long term?
A: We are focusing on developing our existing clients' projects, training our team to update them on the new techniques that the market will demand with these new regulations. This will ensure that once the new method of exploration is well-defined, we will be prepared and ready to execute it efficiently.

SPM focuses on exploration in Mexico and South America. It has worked with important mining companies in Mexico, including Grupo México, GoGold and Argonaut Gold. 

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