Is mine permitting getting harder in Mexico?

Almaden Minerals is evaluating next steps after environmental authorities blocked its Ixtaca gold project in Mexico, in a sign mining permitting in the country may be getting more difficult.

The Puebla state asset is at least the fifth mining project to be blocked by environment ministry Semarnat in a little over two years, and the fourth since President Andrés López Obrador (AMLO) came to office in December 2018, according to information compiled by BNamericas.

AMLO has backed stricter environmental and social regulations in the mining sector, and has been an outspoken critic of the industry’s track record in these areas.

PERMIT REJECTION

Almaden confirmed that its environmental permit application for Ixtaca, which ranks among Mexico’s larger and higher return gold projects, has not received approval by Semarnat.

No further details about the reasons behind the decision were given in Almaden’s release, but the company said Semarnat appears to have discounted prevention, mitigation and compensation measures included in the application.

The project benefits from a dry stack filtered tailings facility, which means no tailings dam is required, with the limestone waste rock and flotation tailings having low potential for leaching, according to the company.

It also includes construction of a water storage facility serving both the mine and community.

Ixtaca is expected to produce 108,500oz/y gold and generate a post-tax IRR of 42% at US$1,275/oz gold and US$17/oz silver – both substantially lower than current prices.

BACKGROUND

The permit rejection is not the first setback for Ixtaca.

While Almaden says the project has community backing, with more than 800 residents signing a declaration of support, some groups have sought to block it in the courts.

Semarnat suspended its review of the permit application in October 2019 following a lawsuit claiming Mexico’s mineral title system is unconstitutional, which used Almaden’s mineral claims as a basis for their challenges.

The review was only restarted in September after Almaden secured a favorable court ruling.

NEXT STEPS

Almaden is continuing to review Semarnat’s decision and evaluating alternatives including submitting a revised application, continuing dialogue and legal options.

“We believe that since discovery we have outlined a resource and ultimately a mineral project that is highly economic, robust, and reflective of the ideal that successful mining projects can and should make a significant positive difference for local communities over the short, medium and long term,” CEO Morgan Poliquin said in a statement.

CHALLENGING OUTLOOK

The result of previous environmental permit rejections suggests overturning the rejection may be tricky.

Argonaut Gold recorded a US$111mn writedown of the book value of its San Antonio gold project in Baja California Sur state after its environmental permit was thrown out for the third time in November 2019.

Authorities first rejected the project’s environmental permit in 2012, due to a local zoning issue.

Semarnat also refused a permit for Argonaut’s Cerro del Gallo project in Guanajuato state in January.

The company resubmitted the application with minor revisions, and expects to receive a decision from the ministry in late 2020 or 1H21, it said in its Q3 MD&A report.

Odyssey Marine Exploration is advancing an international arbitration claim against Mexico after Semarnat refused a permit for its Don Diego seabed mining project for the second time in October 2018, just weeks before AMLO took office.

The company has secured up to an additional US$10mn from litigation funder Poplar Grove to pursue the pending US$2.36bn Nafta claim against Mexico, it said on December 21.

Invecture Group – whose US$250mn Los Cardones gold project in Baja California Sur state was denied an environmental permit in 2019 – was reported at the time to be pursuing legal options following the decision.

Against this backdrop, Almaden appears to have a tough job ahead if it is to overturn the Ixtaca permit rejection and avoid a lengthy and costly legal battle.