Mining in 2022: External Opportunities, Internal Challenges

The mining sector's recovery and high commodity prices are expected to benefit E&P mining companies around the world in 2022. While challenges remain, especially for those still in the process of launching new projects, several companies are planning to ramp up production to reap the benefits projected for this year.

“Early in 2022, Mexico finds itself in a fine position to grasp the opportunity to lead the Americas and the world again,” John-Mark Staude, CEO of Riverside Resources, told MBN. In September 2021, junior and intermediate mining companies surpassed 2020 investment of US$12.1 billion, with a total of US$14.8 billion, amid a high metal-price environment. This is expected to continue in 2022, setting this year's global exploration budget expectation 15 percent above 2021 levels, reports S&P Global.

However, according to experts, only minerals that show promising yields will benefit from this environment. Gold, which reached a new base level of US$1,700/oz in 2021, is expected to remain the main exploration target. Meanwhile, green energy metals, such as copper and nickel, are expected to see an increase in prices, while lithium and cobalt exploration is forecast to grow significantly.

As a result, 2022 will set the stage for prices to remain above the historical average until 2025. This trend will be mainly driven by an increase in demand for metals to fuel the energy transition, according to S&P Global.

Adrián Juárez, Founder and CEO of CTA Consultoría y Tecnología Ambiental, says that as the world moves toward a renewables- and mobility-based economy, demand for some metals will increase, among them lithium, copper, nickel, cobalt and steel. This is an incredible opportunity for the country, according to Staude, as the drive for the decarbonization of the energy chain will make Mexico a key player in the supply of raw materials and mineral products that will drive global growth and the transition to clean energy, air and water.

The COVID-19 pandemic also had an impact on commodity prices as investors searched for safe havens amid uncertainty. Base metals and gold are the commodities that have benefited the most from this uncertainty. The increase in gold prices led companies that focus on this metal to healthy margins of 72 percent for 2020 and 2021. In 2022, margins are expected to climb above 85 percent for gold miners, reaching an all-time high. Meanwhile, for copper companies, experts forecast margins above 100 percent in 2022 as the weakness of the US dollar strengthens the mineral price, reports S&P Global.

Steve Robertson, CEO of Infinitum Copper, says copper companies have tremendous opportunities in Mexico, as it is home to world-class deposits and has many undiscovered exploration deposits.  “It is certainly a good time to have quality copper projects. Companies well positioned with the right people and projects in the industry get a lot of attention when the price of copper rises. We have a fantastic opportunity with our Adelita project in Sonora. Its exploration potential is great and in the current bull copper environment, we believe it has the potential to become a major project in Mexico.”

Many significant projects will also start their production phase in 2022, increasing national production. Altaley Mining has announced that it expects its Tahuehueto project in Durango to begin mineral exploitation in 2022. The company has said that exploitation of the mine was delayed in 2021 as Accendo Banco, one of the project's financers, was unable to grant the loan due to the loss of its operating license.  Altaley obtained a new loan of US$5 million from Sail Natural Resources LP to cover the expenses to finish the project’s construction.  Meanwhile, SilverCrest Metals has announced that it will start production at its Las Chispas project in 2Q22. The company has said that it recently used US$30 million of its US$120 million credit line to advance the construction of its project.

In a nutshell, experts believe that the companies that will benefit the most in 2022 are those that work with trend minerals. As one of the largest producers of 17 minerals and with large deposits, Mexico could greatly benefit. However, the sector’s performance in 2022 will be impacted by national challenges. Certain government initiatives could prevent Mexico from becoming a major supplier of metals for the energy transition, in addition to jeopardizing the development of the copper and lithium industries. Juaréz says that the authorities want Mexico to become an energy and technology leader, which is why the government wants more participation in the mining sector. However, instead of promoting mining, it hinders it and thus reduces the attractiveness of the country. “It seems that Mexico wants metals but does not want mines,” Juaréz says.

Projects that are already established or have concessions and permits granted are not expected to have significant problems in 2022. However, for those still waiting for clearance, their future is uncertain.

Luz Venegas, Business Development Manager at Ausenco, believes Mexico is going through a very interesting time as there are many challenges ahead. “The government needs to realize that the mining industry is at the forefront of multiple other industries in the country. It is the hidden catalyst for Mexico’s recovery and future. However, we remain optimistic. These challenges represent a great opportunity for the industry to grow in terms of its strength and resilience,” says Venegas.