Are Mexico miners shifting away from open pits?

Mining companies in Mexico are evaluating re-scoping projects as underground developments, after authorities signaled a tougher approach to open pit mining.

Firms are investigating underground mining scenarios for three gold and silver assets in the country which were previously viewed as open pit projects, with the aim of speeding up permitting, reducing negative environmental and social impacts and improving economics.

Environment ministry Semarnat reaffirmed a pledge to block all applications for open pit mines in May, in a move it said demonstrates the resolve of the leftist Morena party administration to protect communities and ecosystems from environmental damage.

It remains unclear whether Semarnat will be able to halt all open pit projects without new legislation, but companies expect underground assets to have an easier ride through permitting.

PITARRILLA POTENTIAL

Endeavour Silver plans to evaluate an underground development at its recently acquired Pitarrilla project (in picture), one of the world’s biggest undeveloped silver deposits, with a historical measured and indicated resource containing 525Moz silver.

Former owner SSR Mining outlined a US$741mn open pit development in a 2012 feasibility study before shelving the project amid falling silver prices.

“Rather than conceptualizing Pitarrilla as an open pit mine, there is potential to look at it from an underground mine perspective, which is what the previous owners had modeled in the 2009 PFS,” Endeavour CEO Dan Dickson told BNamericas.

“We believe that is more likely to occur based on metals prices and the political climate in Mexico. It’s a great mining jurisdiction but underground mining is more favorably viewed than open-pit mining, not just in Mexico but globally.”

TRADE-OFF STUDIES

GoGold Resources is also investigating a potential underground approach at its Los Ricos South asset, part of the Los Ricos project in Jalisco state.

A 2021 PEA was based around a predominantly open pit operation, with just a third of production coming from bulk underground operations.

The study showed a US$125mn initial capex project producing 69.6Moz silver equivalent over an 11-year mine life.

But the company is now conducting an additional trade-off study to determine whether an underground approach may be better.

“It’s an 8:1 strip ratio open pit. Permitting right now in Mexico is much easier underground,” CEO Brad Languille told the 2022 Precious Metals Summit in Beaver Creek, Colorado, earlier in September.

GoGold plans to conduct a further 15,000m-20,000m of drilling to explore the potential for underground bulk mining.

“We think [bulk underground mining] would accelerate getting the permit and really, from an ESG perspective, if we are quite close in net present value it definitely would be more ESG-friendly to do bulk underground,” Languille added.

REALISTIC SCENARIO

Orla Mining is also considering the possibility of developing its Camino Rojo Sulfides project – near its Camino Rojo oxides mine in Zacatecas state – as an underground operation.

The larger sulfides deposit was previously proposed as an open pit mine producing ore for processing at the nearby Peñasquito mine by former project owner Goldcorp, which was acquired by Newmont in 2019.

But drilling by Orla has encountered a higher-grade component of the deposit which may provide an alternative approach.

“What that means to the development plans is that we can now consider realistically an underground scenario,” CEO Jason Simpson told the Beaver Creek event.

“Obviously that decision is yet to be made as to whether an open pit, larger tonnage, lower grade operation versus an underground, higher grade, lower capital scenario makes sense [but] we hope to announce in Q4 what direction Orla might be going.”

OPEN PIT APPROACH

Many companies with open pit projects in Mexico have not indicated plans to change their approach.

Many of Mexico’s largest mining projects are open pit, including Teck Resources and Agnico Eagle Mines’ US$842mn San Nicolás copper-zinc asset, Chesapeake Gold’s US$359mn Metates gold property and Southern Copper’s US$2.9bn El Arco copper-gold project.

Zacatecas Silver CEO Bryan Slusarchuk told BNamericas earlier this year that he plans to press ahead with environmental permitting at its Esperanza gold project, despite opposition from Semarnat.

“Ultimately, the environmental impact of the project will be determined through the EIA procedure established by Mexican mining law,” he said in May.

Since President Andrés Manuel López Obrador assumed power in December 2018, permits have been granted for Orla Mining’s Camino Rojo open pit mine and Southern Copper’s Pilares open pit copper project.