‘Crazy’ open pit ban seen as threat to Mexico mining industry

A de facto ban on new open pit mines in Mexico threatens to undermine investment and send emerging firms out of business.

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

“The government of Mexico maintains its commitment not to award new authorizations for open pit mines following the high quantity of exploitation permits granted [under previous administrations],” Semarnat said in a release.

The move comes amid an already challenging political environment for miners, with President Andrés Manuel López Obrador (AMLO) imposing a freeze on new concessions, a tougher approach to permitting and nationalizing the country’s nascent lithium industry.

'RIDICULOUS' STEP

A ban on new open pit mines is unnecessary and will result in significant damage to the industry, Ralph Shearing, CEO of Altaley Mining told BNamericas.

“[Banning new open pit mines] is a ridiculous thing to do. There is so much value in a nice open pit mine,” he said.

While Shearing accepted that there is a certain amount of environmental damage to a small area with any open pit, this is not something that threatens communities if it is done responsibly.

“All miners have to mine responsibly these days, so the amount of economic benefit coming from any mine is very good for communities and local areas,” he said.

“It just doesn’t make any sense to say we’re never going to permit any more open pit mines. It’s an environmental aspect gone crazy.”

KEY PROJECTS

While Mexico has many underground mines, many of its biggest assets are primarily open pit, including major gold producers such as Newmont’s Peñasquito, Fresnillo’s Herradura, Torex Gold’s El Limón-Guajes and Agnico Eagle Mines’ Pinos Altos mine.

Many of the largest projects in Mexico’s US$9bn pipeline are also open pit, including Teck Resources’ US$842mn San Nicolás copper-zinc project, Chesapeake Gold’s US$359mn Metates gold project and Southern Copper’s US$2.9bn El Arco copper-gold project, the largest in the pipeline, and for which permits have yet to be secured from Semarnat.

“The company has started the baseline study and is reviewing the basic engineering analysis to request the environmental permit,” US-based Southern Copper said in its Q1 report.

Junior companies with large, open pit projects could be “killed” by the ban, according to Shearing, as they would be unable to advance their assets.

DAMAGING RHETORIC

It remains unclear whether Semarnat will follow through with a full ban on new open pits.

Environment minister María Albores last year said that open pit mining projects had been halted in the country, claiming the ministry had not handed out a single permit for open pit mines since AMLO came to power in December 2018.

But while Semarnat has blocked at least four open pit projects since then, the ministry approved a permit for Orla Mining’s Camino Rojo project in 2020, while Southern Copper confirmed receipt of environmental permits for its US$159mn Pilares project in its 2Q19 financial report.

Semarnat’s announcement was in response to opposition expressed to Zacatecas Silver’s Esperanza gold project in Morelos state by some residents, although others support the project.

And Zacatecas CEO Bryan Slusarchuk told BNamericas this week that he plans to press ahead with environmental permitting at Esperanza despite Semarnat’s release.

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

But while Semarnat may not be able to hold back all open pit projects, its statement threatens to undermine investment.

“It’s only talk now about banning open pit mining, but that talk, that rhetoric, is damaging, because it’s going to scare people away,” Shearing said.