Mexico is expected to ban open pit mining after voters elected leftist Claudia Sheinbaum as president and delivered her party a substantial majority in Congress.

The country is the world's top silver producer, accounting for 24.5% of the global silver supply in 2023, along with 3.2% of the global gold supply and 3.1% of the global copper supply, and much of it is extracted through open pit mining, according to S&P Global Market Intelligence data. Mexico also hosts globally significant reserves of zinc, lead and molybdenum.

Sheinbaum won the presidency by a wide margin on June 2 and will take office Oct. 1. During her campaign, Sheinbaum promised to pursue the open pit mining ban originally proposed by current President Andrés Manuel López Obrador, commonly known by his initials AMLO, a fellow member of the Morena party.

AMLO's administration opposes open pit mining for what the government sees as the method's outsized environmental impact, according to media reports. The government's environment ministry pledged in 2022 not to approve new open pit permits, citing the high number of open pit mines authorized by prior administrations, BNamericas reported.

The Morena party and its allies secured a two-thirds majority in the lower chamber of Congress but were two seats short of a supermajority in the Senate, according to José Enrique Sevilla-Macip, a senior country risk analyst at S&P Global Market Intelligence.

"[Morena] is highly likely going to be able to garner enough votes to obtain it on a case-by-case basis," Sevilla-Macip said. "Sheinbaum and Morena's victory exceeded that of AMLO six years ago, so she should be able to get most of her legislative agenda through Congress without much hurdles."

Risky changes

Mining companies have faced an increasingly challenging environment in Mexico under the Morena party, and Sheinbaum's government is unlikely to loosen the rules.

One exploration executive who has long worked in Mexico flagged the economic hit of an open pit mining ban, noting that underground operations tend to be smaller, generating less revenue and creating fewer jobs.

"So whatever comes next hopefully will be well considered for the region, reason and viability," said John-Mark Staude, president and CEO of Riverside Resources Inc., which has exploration projects in Mexico.

Staude said he hopes that Steinbaum "will bring an open mind and consider what is best for the country and not make global mandates" without first considering their potential impact on the mining sector.

Under AMLO, Mexico passed mining reforms in May 2023 to shorten mining concessions, restrict them to a single type of mineral, and eliminate the mining industry's preferential status for land use, among other changes.

The reforms brought uncertainty for miners, particularly junior explorers, and could hurt foreign investment in the country, according to Katherine Matthews and Jason Holden, mining analysts with S&P Global Commodity Insights.

"While on the surface the Mining Reform may seem extreme, many of these new and amended regulations are standard practice in many jurisdictions, particularly those with a well-established mining legacy," Matthews and Holden said in a May 31 report on Mexico's mining sector. "Enhancements to environmental oversight and additional rights for Indigenous people are key to bringing Mexico up to the standard of many of the large mining destinations."

Agnico Eagle Mines Ltd. produces gold, silver, molybdenum and copper in Mexico and owns two of the country's largest operating open pit mines, La India and Pinos Altos, according to Market Intelligence data. Agnico Eagle said it was too early to determine if the proposed constitutional changes would be passed into law and how they might affect the miner.

"Agnico Eagle believes that responsible mining plays an important and positive role in supporting sustainable socioeconomic development in communities and countries," Adria Maillet, the company's director of communications, said June 3, echoing a statement by the company when the ban was proposed.

Tight permitting ahead

Mining policy is not at the top of Sheinbaum's agenda, and any ban will be put on hold until she tackles promised administrative reform on the National Guard and an overhaul of the judiciary, Sevilla-Macip said.

"It is likely that she would first try to brand a more favorable policy towards investment and thus defer the discussion and approval of the ban at least until 2025," he said.

Sheinbaum's administration, in the meantime, is expected to keep a tight grip on mining permits.

"A possible exception is lithium mining, as she pledged during the campaign to develop that sector," Sevilla-Macip said.