Dark clouds on the Mexican mining horizon

While mining investments in Mexico are set to rebound this year, they are expected to drop sharply in 2023.

The reasons for this decline include a lack of projects due to inadequate fiscal policies and public insecurity, Luis Humberto Vázquez, president of mining engineers, metallurgists and geologists association AIMMGM, tells BNamericas in this interview.

BNamericas: What’s your estimate for mining investments in 2022? The figures of mining chamber Camimex, the economy ministry and related FDI diverge widely.

Vázquez: The data we have suggests 2022 investments will reach US$5bn. What generally happens is that the amounts are updated and we spend more in the last quarter. In the last three months, we have been trying to carry out all investments.

But this year, I think, will be good for investment because we're still coming up with the projects we had in the pipeline. Juanicipio [and] Media Luna are about to be finished. These are investments that were in progress.

A very serious problem I see for next year is that investments will drop by more than 50% because we don't see many projects in the pipeline.

I believe [investments this year] will be close to last year’s [US$4.8bn], since these are projects that were already in the pipeline. By end-December, there will be more, but this includes not only FDI but also total industry investment.

BNamericas: Why will investment drop next year?

Vázquez: Because no other projects are in the pipeline. For me, although it's a general issue, the main objective of this government should be creating employment and to promote employment you have to encourage investment, and we don't have attractive fiscal policies, we don't have legal certainty.

For me, these are the main factors: fiscal policies, legal uncertainty and public insecurity. Organized crime has a significant impact, more so in this industry since 90% of our projects are in mountainous and remote places.

BNamericas: Why the legal uncertainty? Are more changes expected in the mining law?

Vázquez: I think there have been at least three or four attempts to propose changes to the law. Any parliamentarian or senator, without knowing the facts, launches [an initiative] … and this is uncertainty because we don't know which one they will take seriously.

The last one was presented by senator Napoleón Gómez Urrutia – a mixture of things, but very much aimed at more restrictions. None are designed to improve fiscal policy or legal certainty. They always look for a way to have the industry pay more taxes and people to work fewer hours. But for that, the industry has to be more productive and we often don't have that balance. 

A reform to which interested parties have invited us to contribute – well, that hasn’t happened, and that is often a problem. It's not that we don't want reforms to the mining law. We're willing, but we [want] to participate and be heard.

So far, I haven't heard that Gómez Urrutia's proposal has been rejected. I think it's still [in place].

BNamericas: You claimed in the media that 20-25 mining projects are halted because of permit delays. What’s the situation?

Vázquez: The main problems are long processing times. And during the four years [of the current government] not a single concession was granted … and for those that advanced, no land titles have been issued, so we can't advance these concessions. Those are the main problems right now, in addition to the issues of environmental impact statements. Of the concessions that are already in process, 827 haven't received titles.

These 827 were from the previous administration. The title involves the permit, the registration number. As for new concessions … those in the pipeline haven't been given a title by the mining ministry.

And 25 exploration projects are in operation but lack permits. Part of Media Luna is halted due to the lack of a title ... and many other projects are partially halted because we don't have permits. As far as we understand, Media Luna still doesn't have a major permit.

BNamericas: Have you talked to the authorities?

Vázquez: We held constant meetings with the previous mining coordinator, Efraín Alva. But as a result of his departure and the arrival of the new economy minister, who hired Rosa María Gutiérrez, we haven't had any meetings. We haven't been able to contact her.

Yes, it's difficult, because Efraín had time – he's a mining engineer, he knew the sector, and now we've been left unprotected. We will continue knocking on doors, we have no choice. We hope the authorities will receive us next year, and what we're looking for is to be an ally, for them to ask us how we can help.

I'm a miner and I've been in this profession for 42 years. I'm convinced that climate change and water stress are two important issues, and it's not an agenda just for mining, but for the entire national industry. I think we could help with these solutions.

BNamericas: How much water is required for mining?

Vázquez: Any other industry consumes more water than we do. Consumption in mining doesn't reach 1% of national consumption, according to general data and from [water authority] Conagua, according to which 80% of water is used by agriculture, 10% is for human consumption and 8% is for industrial use.

But we can't get out of this situation because in remote places there is water stress and you can't consume water if people don't have water. We came to see how we and the population could have water, and I can assure you that our regulations and standards are very strict. We recirculate 100% of water ... we don't even have permits to discharge water.

All our water is reused and the water we use in bathrooms, services, dining rooms – we have treatment plants for everything and recover the water. And after that percentage of water consumption, where possible, we try to use gray water from nearby towns. We try not to consume fresh water.

BNamericas: How have rising metal prices and inflation impacted the industry?

Vázquez: The rise in metals prices has practically saved us. Even so, with good prices, it's difficult, because of the inflation, all products – not just diesel, gasoline and electricity, which are subsidized in Mexico, have risen, not to mention major inputs such as tires, steel. All of that has seen pretty strong inflation. The mining industry would be in trouble if it weren't for the [metals] price increases.

Metals prices have dropped a little, but have mainly remained flat due to national and international uncertainty, and they're still competitive. Inflation is the biggest thing hitting all exporters heavily. We're selling at an exchange rate of 19.50 [pesos per dollar], which hits us a lot.

BNamericas: How do you see the local lithium scenario, including investments?

Vázquez: So far, we're sure that there is lithium. Studies have been done, but the problem with that much-mentioned lithium from Sonora is the matrix in which that little bit of lithium is found, because 0.3% lithium is a minimal amount ... it's in a clay matrix that is the most difficult to extract.

Yes, there is lithium, the amount of which we still don't know, but what I am sure of is that there's no metallurgical process to extract what little there is.

Another thing is that the government will never have the capacity to go to that extreme, to be able to develop extraction technology. If the government does not join forces with private players, it won't be possible. What do we say? We're going to join forces, but if you don't, there will be no possibility of exploiting it ... and that would produce a very strong economic boon if it's true that a large amount of lithium exists in that area.

Chinese companies already have concessions in Sonora. We don't how the law is going to be when nationalizing it, because [authorities] generally respect what has already been granted, they aren't retroactive.

We don’t know any place in the world where [lithium is extracted from clay]. No lithium production comes from clays ... most is from salt lakes, harvesting the salt, which is easier.

BNamericas: Which factors inhibit mining investment and have you made progress on safety?

Vázquez: I think fiscal policy that encourages exploration would help a lot – if the expenses were deductible the same year [as when they are made]. The streamlining of procedures, legal certainty regarding land possession and mining laws, and if we could … do something to improve security.

At the state level, we communicate closely with authorities and everywhere we seek better conditions. But if there's no defined support from the federal government, states are a little overwhelmed.

Those are the big issues to be resolved. A lot of effort has been made, a mining police force was formed, but it hasn't produced the desired results and in the end, it's armed people at mines. We oppose putting armed people against armed people. We've continued working at all mines because we, as professionals, are with our families in mining areas. Nobody wants people to be armed because we can't match their [criminal gangs'] strength.