Stricter Environmental Regulation Challenges Mining Companies
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Stricter Environmental Regulation Challenges Mining Companies

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Karin Dilge By Karin Dilge | Journalist and Industry Analyst - Tue, 05/10/2022 - 17:16

Miners appear to be facing increasing challenges because of sterner environmental permitting processes by government authorities. The recent suspension of Vulcan Materials’ operation in Quintana Roo is a further sign of the rising environmentally-related regulatory risks that Mexican mining companies are facing under the presidency of Andrés Manuel López Obrador, show recent reports.

Although the Ministry of the Environment and Natural Resources (SEMARNAT) recognizes the economic value of the mining industry, it urged companies to respect the environment and the communities near mines. At the end of 2021, Mexico had reduced the national territory available for mining concessions from 10.64 percent to 8.59 percent. This figure dropped more than 2 percent during the López Obrador administration.

The environmental ministry has showed a tougher approach to environmental permitting and regulations that along with COVID-19 has led to a slowdown in applications being processed. A timeline by BNamericas highlighted the difficulties that began after López Obrador took power.

In 2018, Odyssey Marine Exploration announced plans to take legal action against SEMARNAT after the ministry rejected a permit for its Don Diego phosphates seabed mining project in Baja California Sur because of concerns about the local wildlife. It filed a notice of intent, a first step toward an arbitration claim, in the following year. In 2018, Vulcan Materials filled a request for arbitration with the World Bank’s International Centre for Settlement of Investment Disputes (ICSID), claiming that the state did not comply with a zoning agreement at its Calica limestone quarrying operation in Quintana Roo.

Moreover, Mexico’s government said it would block Invecture Group’s Los Cardones gold project due to its inherent environmental risks. A couple of months after this announcement. Desarrollos Zapal confirmed it would take legal action to protect its investment in the open pit gold project.

At the end of 2019, SEMARNAT rejected a permit application for Argonaut Gold’s San Antonio gold project in Baja California Sur. Early in 2020, the company said its permit application for the Cerro del Gallo gold-silver project would not be approved and requested revisions. The corporation also considered taking legal action. In Dec. 2021, the revised permit was denied once again.

Almaden Minerals also faced environmental permits rejections at its open pit gold project in Veracruz due to insufficient information regarding the impact of open pit mining in the area. The past year, the corporation planned to submit a revised environmental permit application.

The scores of cases exemplify the rising environmental permit challenges mining corporations are facing. The most recent environmental issue is that of Vulcan Materials, which is now facing a lawsuit for allegedly defying a pact made with López Obrador’s government. The Mexican government said in Feb. 2022 that they were negotiating a deal for the resolution of a US$1 billion law suit coming from Vulcan for the closure of a mine near the touristic city of Playa del Carmen and that it had proposed to turn the area into a tourist attraction. According to President López Obrador, the company had agreed to the proposal but secretly continued its operations.

Past Wednesday, the president warned Vulcan about a potential international lawsuit unless they would stop quarrying like they had promised. According to López Obrador, Vulcan Materials’ activities are destroying the environment. He threatened to record a video to show the impact on the local flora and fauna and to file a lawsuit with the UN. He also claims that his tourism-focused proposal is fair and urged Vulcan Materials to decide, adding that he is not considering canceling the project or expropriating the land.

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