Mining in Mexico
The Mining Industry
Mexico has a mining history extending almost 500 years and is among the world's largest metal producers. Mexico is the largest producer of silver in the world and a top global producer of gold, copper, zinc, amongst other minerals.
With its long mining tradition, Mexico has a largely favourable environment for the industry. The geological potential remains strong. The country's terrain is one of the most tectonically active and complex in the world. Orogenesis has pushed up mountain chains all across Mexico, including the Sierra Madre Oriental, Sierra Madre Occidental and Sierra Madre del Sur. These three regions have formed some of the key metallogenic areas. Gold and silver mineralisation is commonly linked to the two belts of hydrothermal veins and gaps that stretch out underneath both sides of the Sierra Madre Occidental.
That potential has attracted more than 250 private exploration companies to Mexico, with operations concentrated in the northern states of Sonora, Zacatecas and Chihuahua.
As mining is an important contributor to the country's economy, the industry benefits from a well-structured and supportive regulatory framework.
The Concession System
Under the Mexican constitution, minerals are part of the national patrimony. Exploration, exploitation and beneficiation of minerals have preference over any other use of land. The law permits up to 100% private ownership in exploration, development and production of mineral substances.
Concessions are required to explore for and exploit mineral potential. Concession holders are required to negotiate with the surface land owner to access the land under which the concession is located.
Exploration concessions are granted for six years and are not renewable. There are no limits for mining concessions. Production concessions are awarded for 50 years and are renewable for a similar period. All concessions may specify required levels of capital expenditure and minimum environmental, health and safety standards.
Regulation for the mining sector is overseen by the Secretaria de Economia, while environmental permitting responsibility resides with the Secretaria de Media Ambiente y Recursos Naturales (SEMARNAT).
Mexican environmental regulations have become increasingly stringent over the last decade as a result of international agreements that Mexico has ratified, including North American Agreement on Environmental Cooperation (parallel to NAFTA), the United Nations Framework Convention on Climate Change and the Convention on Biological Diversity.
Mining companies must obtain environmental impact permits from SEMARNAT prior to any mining and exploration activities, and such activities are subsequently subject to several environmental permits from different offices with SEMARNAT, including water extraction, wastewater discharge and tailings disposal.
The Fiscal Regime
As part of the comprehensive structural reforms passed by the Mexican government, new duties were approved for mining companies: 7.5% of a figure similar to EBITDA and 0.5% of gold and silver sales.
While overall university enrolment has increased and the government has passed new education reforms, there is a deficit of geosciences professionals in Mexico.
Security and Infrastructure
Crime and violence, much of it fuelled by drug cartels, affect many parts of the country. Federal police and armed forces have increased their enforcement activities, as have private citizen groups. While organised criminal networks are now on the defensive, the security situation in Mexico remains an issue. The Group has enhanced security measures at all facilities and is taking additional precautions to safeguard its personnel, who are the top priority.
Other cost pressures
As extraction and production have accelerated to meet demand, mineral deposit grades are declining, requiring a higher volume of ore to be processed in order to meet and exceed production targets. At the same time energy costs, a key component of the cost structure, have risen, as have treatment and refining charges.