New legislation and Peñasquito strike hit Mexico's mining sector

The difficulties imposed by Mexico’s new mining legislation and the strike at Minera Peñasquito’s gold-silver mine in Zacatecas state that began in June were among the limiting factors for the sector in the second quarter, according to the central bank (Banxico).

The non-oil mining sector grew slightly in January and February but has registered monthly declines since March, with a decrease of 2.8% in June and 2.9% in July, according to statistics bureau Inegi's monthly indicator of industrial activity.

The executives of mining companies surveyed for Banxico’s quarterly regional report cited as limitations “the difficulties imposed by the new mining legislation in Mexico to transfer and obtain concessions, the reduction in their validity and the elimination of the possibility of carrying out exploration by companies, since the Mexican geological service (SGM) will be the only one authorized to carry out that task.

“In addition, they mentioned the difficulty in obtaining new concessions and environmental permits issued by the federal government to undertake exploration by individuals,” added the report.

Last month, Armando Ortega, president of the mining working group of the Canadian Chamber of Commerce in Mexico (CanCham), warned that administrative authorities in certain Mexican regions are applying new mining legislation retroactively, restricting exploration projects under concessions that already have titles.

Ortega, a former president of CanCham in Mexico, said the procedures subject to the new legislation that came into force in May mainly concern approval of the environmental impact statement by the environment ministry and authorization of land use change by the national forestry commission, which is part of the same ministry, Ortega told BNamericas.

Industry sources have told BNamericas that it is increasingly common for companies that already have a concession to go to the ministry to process their EIS’s only to be told they must first go to the economy ministry so it can instruct the SGM to reach a collaboration agreement of up to five years with the company.

Previously, Mexican mining chamber Camimex called for the delay in responses to requests for environmental permits to be resolved and highlighted the need for companies to comply with regulations and operate responsibly.

The executives consulted from all regions of the country also mentioned among the limiting factors for mining that “the value of sales was affected by the falls in international prices of some industrial metals, particularly copper, zinc, lead and iron, to which was added a decrease in the value in pesos due to the appreciation of that currency against the dollar.”

The report also said in the central-northern region of the country, the sources consulted highlighted "labor conflicts in various mines in the region."

“This situation has resulted in the interruption, since June, of operations at one of the most important mines for production of gold, silver, lead and zinc, located in Zacatecas,” the report added, referring to Newmont-owned Peñasquito, without mentioning its name.

On June 7, some 2,000 members of the union of mining, metallurgical and steelworkers voted to go on strike after claiming non-compliance with payments and the collective contract signed in June 2022, which the company has denied. 

According to data from Camimex, Peñasquito produced 566,000oz of gold and 29.7Moz of silver last year, which made it the country’s main producer of both precious metals.

In the north-central region, those consulted by Banxico also highlighted that there is greater complexity in obtaining environmental permits given that they require the approval of ejido land cooperatives and other groups to obtain them.

“In addition, the procedures that were in progress were definitively canceled, generating uncertainty, which led foreign companies to reduce their investments,” the report added.

Minera Peñasquito estimated at the end of August that the accumulated losses from the strike amounted to US$562mn. It added that the strike will reduce the mine's planned annual production by 25% and the company will not report profits this year while Newmont said it will "critically review" its investments in Mexico.

Some of the managers cited in the Banxico report also mentioned as a limiting factor for activity costs generated by crime, particularly in mines in rural areas.