Sheinbaum quickens mining permits even as Mexico faces $1.5B in claims  

Mexico’s image as a tough place for mining may show little sign of abating under the Claudia Sheinbaum administration as it increases taxes and faces $1.5 billion (C$2.15 billion) in arbitration claims, but project OKs are proceeding again, industry veteran Peter Megaw says.  

Almaden Minerals (TSX: AMM; NYSE-AM: AAU) filed a legal claim for US$1.06 billion in damages against the government in late March while Silver Bull Resources (TSX: SVB) is seeking $408 million in a separate case. Mexico raised its special mining duty on Jan. 1 to 8.5% from 7.5% and the extraordinary mining duty to 1% from 0.5%.  

The country is important for mining as the world’s largest silver producer and any efforts to rebound from the policies of previous president Andrés Manuel López Obrador’s (Amlo) are notable. The country’s mining chamber, Camimex, says the government could deter more than $6.9 billion in investments over the next two years. But Megaw sees some progress.  

“The biggest change is we’re seeing permits being granted. They were taking a long time under Amlo and now they’re moving ahead,” said Megaw, co-founder of MAG Silver (TSX, NYSE: MAG) and Minaurum Gold (TSXV: MGG; US-OTC: MMRGF). “Sheinbaum is simply quietly doing the things that are supposed to be done instead of noisily doing the things that shouldn’t be done.” 

Megaw pointed to Alamos Gold’s (TSX, NYSE: AGI) receipt in January of an environmental permit at its Mulatos project in Sonora state. The 40-year veteran of exploration in Mexico said Camimexes alarming figures are “logical extensions of declining trends that developed over the last three to four years under Amlo,” adding that it will take six to 10 months to get a feel for Sheinbaum’s trajectory. 

Almaden case 

Part of the government’s path now is to arbitration hearings. Almaden’s action comes after the government canceled the concession rights at its Ixtaca gold-silver project in Mexico’s east-central Puebla state in 2023. Silver Bull seeks damages for the government’s alleged expropriation of its Sierra Mojada project.  

Law firm Boies, Schiller, Flexner (BSF) in New York City filed both cases with the World Bank’s International Centre for Settlement of Investment Disputes in Washington, D.C. Silver Bull’s first hearing is scheduled for October next year. 

“We haven’t observed any differences in approach by Sheinbaum’s administration towards the mining industry or towards Canadian investment in the mining industry,” BSF lawyer Kristen Young told The Northern Miner. “What we have observed thus far is a continuation of Amlo’s prior policies that in essence were anti-mining.” 

Almaden’s case is the latest example of foreign miners running afoul of the Mexican government’s restrictive approach to mining. Amlo, the former populist president whose tenure ran from 2018 until last October, oversaw mining law reforms that blocked new concessions and added tougher regulations. He also proposed an open-pit mining ban, though Sheinbaum has pledged to review it.  

No new concessions 

Camimex already projects that mining investment will decline by US$1.2 billion this year, from last year’s expected investment of $5 billion, according to reporting by El Economista. That drop, marking the sector’s lowest investment level in a decade, is mainly because no new mining concessions have been granted under the Amlo and Sheinbaum governments, chamber president Pedro Rivero said last October.  

However, acquisitions and investments over the past six months are positive developments, Megaw said, “even if not yet at anything approaching desired levels.”  

They include Coeur Mining’s (NYSE: CDE) $1.7-billion deal to buy Silvercrest Metals  and its Las Chispas mine in Mexico, First Majestic Silver’s (TSX: AG) $970-million acquisition of Gatos Silver and Vizsla Silver’s (TSXV, NYSE: VZLA) $65-million investment for exploration at its Panuco project.  

He also noted the optimism expressed by Torex Gold Resources (TSX: TXG) CEO Jody Kuzenko about Sheinbaum in March as the company prepared to start production at its Media Luna project in Guerrero state.  

Ixtaca

Almaden is pursuing its case with Almadex Minerals (TSXV: DEX), which holds a 2% net smelter return royalty at Ixtaca. They claim Mexico unlawfully expropriated their protected investments without compensation, failed to treat the investments fairly and unlawfully discriminated against them.   

At issue is a Mexican Supreme Court ruling in 2022 which found the country’s mining authority Economia improperly issued Almaden’s mineral titles because it hadn’t sufficiently consulted with a local Indigenous Ejido group. The court suspended the titles, first granted in 2003 and 2009, so that Economia could reissue them after consultations took place.   

Almaden started working with Economia on the consultations, but in 2023 the authority sought through the court to deny the title applications retroactively due to alleged technical issues.  

“Amlo at the time had directed his administration to do two things: not to approve any new mining concessions and not to permit any new mining projects,” Young said. “Our position is that the decision of (Economia) was reflective of that political instruction such that when the Supreme Court asked Economia ‘please reassess these concessions before you do Indigenous consultations,’ it was an opportunity for Economia to then cancel and fold those concessions consistent with Amlo’s policy.” 

The Indigenous consultations didn’t happen even though Young said the local community was supportive and Almaden was confident the consultations would succeed.  

“Economia, rather than permitting the local communities a voice, actually denied them a voice and canceled these concessions in full before doing any consultation,” she said.  

No amicable resolution 

Almaden opted to take its case to arbitration after the government indicated in a meeting last May that it wasn’t willing to consider an amicable resolution, Young said. The company decided that arbitration was its last resort.  

Silver Bull claims that a local mining cooperative erected an illegal blockade in 2019 to force the company to pay an undeserved royalty payment. The government failed to take any action against the blockaders, who prevented access to Sierra Mojada, located in Coahuila state, Silver Bull says.   

The Almaden and Silver Bull cases show the Mexican government’s approach to foreign miners will lead to more arbitration claims, Young said.  

“Given the nature of Mexico’s actions I think it will continue to face losses in arbitration,” she said. “That, coupled with its policies could lead to less investment in the extractives sector and in turn lead to economic losses and a lack of growth in this sector in Mexico.”