The Future Without Undersecretary of Mining: a Shot in the Dark

Mexican mining, especially metals mining, is undergoing an unprecedented time in 2020. On the one hand, the price of gold reached a record US$2,063 per Troy ounce. Since then, with its normal ups and downs, the price has remained above or close to US$1,900 and it seems that the rest of the year will follow that high-value trend. 

This has also pulled silver prices to historic levels of US$29.14 per troy ounce; even, measured in percentage, the increase in value for silver is much higher than the yellow metal. Moreover, copper has also seen a recovery, climbing to US$3.10 per pound recently. Mexico, an important producer of these three metals, should see significant increases in companies' income.

The mining sector today does its job more and more like a coordinated team, where each actor plays its part mindful of the needs and plays of other members, including the Chamber of Mines (CAMIMEX), the association (AIMMGM), colleges (CIMMGM), several regional mining clusters, the universities and even small producers.

However, several factors have, at the very least, diluted the overall effect of high metals prices and coordinated action.

The pandemic caused by COVID-19 is largely responsible for the price increases but our miners were forced to suspend all their production for almost two months, resulting in a decrease in revenue and an increase in costs. We were possibly the only country in the world that did not consider mining as an essential activity and although the measure was reversed, the damage was already done. 

More recently, we can add the scrapping of the Undersecretariat of Mining, our interlocutor with the different governing bodies and who had been doing very good work in this regard. A month after this happened, there is still no indication as to which area of the Ministry of Economy will take that responsibility. The former deputy minister has already handed over, according to law and procedure, the position and related affairs to the Director of Mines. He did not hand over to another undersecretariat. This has increased the uncertainty related to the relevance that the Economic Ministry will place on our industry. As a matter of fact, the only element that has been eliminated is the person in charge of the Undersecretariat.

In a purely administrative decision, without legal basis and with no regard for the real situation, the current government suspended the issuance of mining concessions when it came to power. Without these concessions, all exploration efforts tend to shrink and, consequently, the eventual opening of new mines will become very difficult. We can't harvest without sowing seeds. Exploration, with its very long and expensive maturation process, is our planting activity. If this situation continues until the end of 2024, the possibility of opening new productive mines will be shaky at best.

Added to all that is the long-standing uncertainty regarding other factors of the equation, like environmental permits. For instance, the process of review and, perhaps, authorization of the environmental permit for a new metals mine was halted for several months on the grounds of a legal procedure (amparo) set forth by an anti-mining group. The interested company must spend months to get a judge to rule that the process should not have to be delayed any longer for any reason. 

Also, the lateral damage to some very important foreign investments in other industries has raised extreme doubts about whether to commit more dollars to exploration and development of new mining projects. In this regard, suddenly, someone “discovered” that Mexico is “rich” in lithium resources and there have been “statements” about nationalizing that “huge richness,” without any regard to the exploration and development process that must be undertaken; if the investment is being restricted in some way or another, who will do it, and when?

There is also a lot of noise about where and how the federal government will keep spending the huge accumulated fund (Fondo Minero) that was born in 2014 to support the communities around mining areas by improving the quality of life of residents by means of infrastructure that the local governments could not afford to do on a regular basis. The decision this year to use that economic resource for “education” without any geographical limitation breaks the spirit of the law and companies will have to face those communities when no more money is allocated to their specific communities.  It is therefore a matter of the highest priority to immediately reassign the Fondo back to the mining regions designated since the beginning of this process. 

To quote Charles Dickens, our beloved mining industry is going through “the best of times, the worst of times, the age of wisdom, the age of foolishness, the epoch of belief, the epoch of incredulity, the season of light, the season of darkness, the spring of hope, the winter of despair.”