What Mexico’s Mining Players Can Do to Optimize Competitiveness
Mexico has several characteristics that make it an attractive jurisdiction for mining. First, its geology has made it a major producer of silver and gold as well as other key metals such as copper. Second, the country has a well-established mining industry. Third, Mexicans have excellent mining skills due to the country’s long mining history. Considering these advantages, experts outlined what the mining industry can do to optimize competitiveness.
Carlos Silva, CEO, Santacruz Silver Mining, said the challenges to increasing profits in the mining sector are clear and divided into external as well as internal factors. As external factors, Silva identifies global and regional challenges as key: issues such as inflation, supply chain disruptions, skilled labor, security and regulation are the most prominent. Silva underlined that the key to remaining competitive in the mining industry relies on cost reductions.
According to Tomás Iturriaga, COO, Fresnillo, everyone has had to face the effects of the pandemic and a subsequent paradigm shift. “As for external factors, there is not much we can do about them but face them. For example, as mining companies, the prices of the commodities we commercialize do not depend entirely on us. Therefore, the opportunity to increase competitiveness relies on cost reductions. Here, the implementation of new technologies and further developing skilled labor are key,” he commented.
The experts agreed on the importance of skilled workers for the industry and emphasized that a main issue is talent retention. Michael Wood, CEO, Reyna Gold Corp, signaled that although Mexico has many skilled workers, they often decide to work abroad. “Mexico needs to be careful to retain its talent,” he said. Iturriaga underlined the importance of making job offers attractive for new generations to work in mining. “Beyond the competitive salaries, which mining already has, flexibility is also crucial. Offering to work from home and leeway to choose shifts, among other benefits, are also important. New technology enables this,” said Iturriaga.
Furthermore, Mexico’s potential has been overshadowed by the absence of fiscal incentives to invest and the government's refusal to grant new concessions and permits. “Mexico has so much potential [for mining]. We have benefited from subsidies and I am very optimistic about Mexico’s mining landscape,” said Wood. However, said if the country is to reach its full potential, foreign investment is necessary. According to Wood, the government taking control of private assets scares investors. Additionally, regulation and permit processing also play an important role in investment decisions. “These two are the major headaches we have faced over the past months. Hopefully, the issue will be resolved soon,” he added.
According to Silva, the regionalization of supply chains could offer a wealth of benefits. Supply chain disruptions opened the path to a new paradigm, the trend of nearshoring. The experts said producing supplies near the sites where they will be consumed is a necessity, one that offers opportunity, too.
The industry insiders emphasized the importance of cooperation between the private and public sectors. Alberto Orozco, President, the Sonora Mining Cluster, highlighted the issue of security. “Some zones are better than others regarding security, sometimes even within the same state. There are many different security issues, including fuel or equipment theft, supply disruptions and mineral theft. Different strategies to tackle these problems are available. We recently signed an agreement with the Ministry of Security to jointly coordinate security matters. It is paramount to work together so that we are aware of the most important security issues to take better actions together,” said Orozco.
The experts concurred on the importance of addressing security, environmental, social and regulatory concerns to ensure that Mexico remains a top mining jurisdiction in the years to come. To this end, communication is key. Silva argued that to foster more amicable regulation for the mining sector, dissipating misconceptions as well as implementing good practices is vital.