Towards the New Mining

Throughout López Obrador's administration, the mining sector has faced significant challenges. Among these are the 2023 reform of the Mining Law and the recent proposal to ban open-pit mining. Additionally, issues of insecurity and rule of law are critical factors that influence decisions regarding mining investments. The challenges for companies and the industry at large are how to navigate these complexities and how to secure mining’s position as a key industry for Mexico’s future, agree experts.

“The main problem we face is more ideological than political and, unfortunately, this happens just when the expectations for mining are excellent. There is an urgent need for metals to work toward combating climate change. We are in the best moment for mining; we have a mining country with a mining vocation, but this is countered by the politicians we have. Ideology has prevailed, there is a profound lack of understanding of the mining sector, and anti-mining groups have influenced the spread of false, incorrect, and unfounded information, flooding the discourse with misleading messages. A significant challenge is how to better communicate everything we do, find a way to neutralize that ideology, and more effectively convey the economic and social value of the sector,” says Fernando Alanís.

In this context, Karen Flores, Director General, CAMIMEX, explains the importance of communication bridges for any industrial sector, especially mining, as it supplies 70 productive sectors and reaches remote communities. The sector’s potential must be harnessed to turn it into development opportunities for the country, Flores says.

According to the Fraser Institute’s 2023 Mining Survey, Mexico ranked 74th out of 86 mining jurisdictions evaluated on their level of investment attractiveness. The country dropped from the 37th position in 2022, reflecting the negative outlook from foreign investors. Among key concerns cited in Fraser’s survey are infrastructure, uncertainty regarding protected areas, and regulatory duplication. Regarding the survey, Alanís highlights four major areas: rule of law, mining potential, infrastructure, and security as the biggest challenges the mining sector faces today. 

“Rule of law is something that causes significant problems. Mining is a long-term vision, and when the rules change, it creates uncertainty. Strict application of the law is critical, but conditions have changed significantly, generating a lot of doubt. This is one of the main issues that makes people hesitant. Security is also a major concern, especially since we operate in remote, vulnerable areas. With a real tax rate of 52-53%, we also have to factor in the costs of security, finding ways to deter and avoid becoming victims. These issues are heavily impacting investment,” states Alanís.  

Octavio Alvídrez, CEO, Fresnillo, highlights geological potential but says this must be realized through investment that transforms the profile of both the region and the community where we operate. “Economic growth is essential for the country, and we have seen how mining contributes to this growth, especially in regions where it is the only viable option for economic development. We bring health, infrastructure, education, and training to our human talent base, enhancing the business capabilities of the communities around our operations. This alignment is beneficial for both the mining companies and any public administration,” he says. Beyond that, Alvídrez underscores mining’s essential role in electromobility, the energy transition, and maintaining the standard of living for present and future societies.

As the future of the Mining Law reform and the proposal to ban open-pit mining remains uncertain, the mining industry has expressed its intention to build bridges and establish communication channels with society and the incoming administration of Claudia Sheinbaum, who is perceived as more open to dialogue. The sector aims to share technical and science-based knowledge to help formulate public policies that benefit both sustainable mining and the national economy. “Our goal now should be to engage with a leftist government whose priority is not the mining industry. We need to find a way to fit into that leftist narrative,” highlights Faysal Rodríguez, Senior Vice President, Torex Gold.

Luis Chávez, Senior Vice President Mexico, Alamos Gold, considers communication essential to ensure all parties understand that mining operations are regulated fairly and treated equally. “Every mining operation is different, with unique characteristics based on location and surrounding communities. The government must understand that it is not a general mining sector but specific sub-sectors that require different types of support.”  

“We must continue finding ways, being empathetic with the government, to insert the positive narratives and impacts of the mining industry into the broader conversation. This is the challenge for everyone involved in the industry—to transform the economic narrative into a social one to make a connection,” comments Rodríguez.” 

Rodríguez also showcases the importance of the upcoming renegotiation of the USMCA and how it is often viewed from a Mexican perspective, but it is crucial to consider it within the broader framework of the treaty itself. “It is important to work with representatives from the United States and Canada, going beyond borders to seek their support in this matter, for the benefit of shareholders and investors. There are points of alignment—there are things we can accomplish with this government by viewing it from different angles, particularly understanding how a leftist government perceives the mining industry. We need to start reaching agreements,” shared Rodríguez.

Despite the challenges, the mining industry has shown remarkable resilience, with Foreign Direct Investment (FDI) in the sector rising by 329% in 1H24, compared to nearly US$700 million in 1H23. Mining now accounts for 10% of total FDI, with preliminary figures indicating at least US$3 billion in investments. The sector is currently the third biggest contributor to FDI, only behind manufacturing and financial services.

“There is a strong possibility of a more productive mining sector in the coming years. The end of a cycle always sees an upward shift, and both the public and private sectors are aligned. The public sector requires resources and investment for infrastructure projects and social programs, while the private sector is ready to invest. What remains is for us to sit down and negotiate. If both sides want the same thing, we just need to find the right conditions, restoring confidence and creating a new economic engine,” mentions Chávez.