Mexico Can Learn From Canada on Path to Sustainable Mining

Mexico's rich mineral resources have the potential to make it a prominent mining jurisdiction comparable to Canada. However, to achieve this goal, Mexico must address critical gaps and implement necessary changes. By adopting Canadian practices, such as the "Toward Sustainable Mining" (TSM) standard promoted by the Mining Association of Canada (MAC), and implementing impact and benefit agreements with communities, Mexico can partially (another important topic is the need to address insecurity) bridge these gaps and lay the foundation for sustainable mining practices.  This article explores what is required considering the presence of anti-mining sentiment from the administration, the recent nationalization of lithium, and the recent changes to the regulatory framework.

Canada's premier mining jurisdiction status is a result of its rich mineral resources, stable political and legal system, robust regulatory framework, responsible environmental practices, engagement with Indigenous communities, commitment to corporate social responsibility, technological innovation, skilled workforce, and its collaborative approach. Now, more than 70% of Canadians see mining in a positive light, according to polls conducted by MAC over several years. When the companies have implemented the TSM standard in their operations, this approval rises to more than 80% and the majority of people like to see more mining projects being developed in Canada. This high approval of the industry gives the federal government a strong base to support it. Another important reason to follow Canadian practices is that several mining and exploration companies active in Mexico are based in Canada; they must abide by Canadian regulations in their operations and it should be easy for them to follow the same rules in Mexico. 

Adopting Sustainable Mining Practices: One key aspect of Mexico's journey toward becoming a premier mining jurisdiction was the adoption of responsible mining practices. The TSM standard, pioneered by MAC, offers a comprehensive framework to guide mining companies in integrating sustainable practices into their operations. This involves minimizing environmental impact, reducing resource consumption, promoting energy efficiency, and prioritizing land rehabilitation. By adhering to sustainable practices, Mexico can safeguard its natural resources, mitigate ecological damage and gain the trust and support of local communities. The TSM has gained traction internationally, has been adopted by some mining associations in the Americas, like Argentina, Brazil, Colombia, Guatemala and Panama, while Mexico, through CAMIMEX, adopted it in March 2023. The TSM also requires the development of a community of interest advisory panel, where the mining strategy is discussed, allowing the stakeholders to participate. 

Impact and Benefit Agreements: Establishing these agreements with affected communities is crucial to Mexico's transformation into a responsible mining jurisdiction. These agreements, widely implemented in Canada and known as IBAs, ensure that mining projects generate positive impacts and provide tangible benefits to local communities. Through meaningful dialogue and negotiation, mining companies can address concerns, respect Indigenous rights, and contribute to social and economic development in the areas where they operate. These agreements should include provisions for employment opportunities, infrastructure development, environmental protection, cultural heritage preservation, and revenue sharing. By ensuring equitable distribution of mining benefits and involving communities in decision-making processes, Mexico can build trust, foster social cohesion, and promote sustainable development. In Canada, the IBAs are increasingly expected by regulators, and in some cases even mandated by law. But while many mining proponents recognize their importance, reaching what both parties believe to be a “fair deal” can often be a lengthy and challenging process. Understanding whether an Impact Benefit Agreement is “fair” is typically a major consideration for both the Indigenous party and the mining proponent. Indigenous government leadership are accountable to their members/citizens when entering into agreements. Indigenous governments that use a member ratification process will ultimately need to convince their members that the negotiated terms are fair.  And some Indigenous governments view their reputation for resolving fair terms with proponents as a part of a larger economic strategy aimed at attracting and benefiting from resource development.

Similarly, proponents are accountable to their shareholders. For foreign-owned companies, there may be a need to explain to unfamiliar foreign executives how IBA terms under negotiation are fair and reasonable in the local Canadian context. Proponents also often face the challenge of negotiating with several Indigenous communities regarding the same project, and understanding what constitutes “fair” can help when managing competing interests and expectations.

We saw recently that agreements reached with unions don’t always result in positive outcomes. Newmont in Zacatecas reached an agreement with the union a year ago, where they agreed to share profits, and a year later the union went on strike because they wanted to double the profit share, so the company had to suspend operations indefinitely.  This action by the union damages the industry and the surrounding communities because if the strike is not lifted soon, the company may need to start with layoffs. Newmont’s mine had an annual attributable gold production of 686,000 ounces in 2021.  

The recent changes on the Mining Law that consider sharing with communities 5% of the profits is not related to the impact generated by the mine, a formula that may be considered unfair.  The idea of IBAs is to associate the benefits with the expected environmental and social impacts. 

Navigating the Nationalization of Lithium: The recent nationalization of lithium poses a challenge to Mexico's mining sector. While protecting national interests is important, it is equally vital to strike a balance that encourages private investment, technological expertise, and responsible extraction practices. Rather than pursuing complete nationalization, Mexico should focus on establishing clear and transparent regulations that attract private investment while safeguarding national interests. This can be achieved through fair profit-sharing mechanisms, local content requirements, and a commitment to sustainable practices. Collaboration between the government, mining companies, and stakeholders is crucial for developing a regulatory framework that maximizes the benefits of the mining sector for Mexico while ensuring responsible operations. 

Addressing Regulatory Framework Changes: Mexico's recent changes in the regulatory framework present an additional challenge that must be addressed to align with Canada's mining practices. Frequent changes create uncertainty, hinder long-term planning, and deter investor confidence. To bridge this gap, Mexico must prioritize the establishment of a stable and predictable regulatory framework for the mining sector. The government should engage in transparent and inclusive dialogue with industry experts, mining companies, and stakeholders to develop clear and consistent mining laws and regulations. Regular consultations, impact assessments, and industry input should inform regulatory changes to ensure they are well-informed, transparent, and conducive to sustainable industry growth.

Mexico's aspiration to become a mining jurisdiction comparable to Canada requires significant changes and a commitment to sustainable practices. By adopting Canadian practices such as the TSM standard and implementing impact and benefit agreements with communities, which was covered to some degree in the last change in the Mining Law, Mexico can foster responsible mining practices.