Mexican President Andrés Manuel López Obrador stated earlier this week that Mexico will not issue new mining concessions, but certain veterans of the country's mineral exploration sector said it remains to be seen if his vow will translate into action.

López Obrador, a leftist politician elected last year, said Aug. 11 that enough mining concessions have been issued and that, while Mexico would not cancel any existing claims, it would not hand out new ones. López Obrador said concessions are not being held for production purposes but rather for "financial speculation."

Two sources involved in Mexico's exploration sector, with connections to Canada's capital markets, told S&P Global Market Intelligence that López Obrador's statements do not always lead to new policy or procedural outcomes.

"Here's the thing," said one source, who did not want to be named. "We have to be very careful with what the president says ... He tends to say many things, but not all gets acted on. Or he doesn't say how or when [a promise will unfold.]" Another source echoed the sentiment, saying the president's comments, in general, need to be taken with a "grain of salt."

The first source, who is directly involved with exploration in Mexico, said he was "not panicking" but that the comments were nonetheless concerning for the sector and that he hoped it would not affect investor sentiment. He said the company he worked for would still submit new claims, and he was unaware of any specific set of policies that would stop the process.

The second source noted, however, that the government would not necessarily have to make specific policies to keep claims from being issued. "They can simply tell the bureaucrats to sit on the applications," he said.

Meanwhile, the first source noted the government might expose itself to challenges from mining and exploration firms if it did not follow more explicit procedures: "If he did it without any legal substance that would leave it open to all sorts of lawsuits."

Paradigm Capital analyst David Davidson said comments by López Obrador were not positive for the sector. "It appears if you [have] established operations and exploration you should be fine, but expect communities and labor to push for the soft issues of wages and the environment," he said in an email.

Mexico is a key metal producing country that also captures a substantial share of global exploration spending. In 2018, exploration budgets in Mexico, including both grassroots exploration and minesite exploration, totaled US$609.4 million, or 6.3% of global budgets, according to S&P Global Market Intelligence data. As of April, there were about 25,358 claims held in Mexico covering about 220,125 square kilometers, or roughly a 10th of the country's surface area, according to Market Intelligence data.

Mexico produces various metals, including silver, zinc, lead, gold and copper. It is a leading silver producer with an output of 194.5 million ounces in 2018, or about 23.2% of global mined production. In 2018, the country also produced about 3.6 million ounces of gold, or 3.4% of global mined production, and 699,019 tonnes of copper, or 3.4% of the world's mined supply, according to Market Intelligence data.

In his Aug. 11 address, López Obrador also commented on mining wages, environmental protection and financial benefits for communities near mining operations. He said Mexican miners should receive as much for wages as miners in Canada and the United States. The president also suggested mining companies from other countries, such as Canada, should treat environmental protection in Mexico the same as they do in their native countries.

Market Intelligence reached out to Francisco Quiroga, Mexico's undersecretary of mining, for clarification on the president's comments but had not heard back as of the publication of this article. Market Intelligence also sought comments from several mining companies with operations in Mexico, most of which had not responded as of press time.

Agnico Eagle Mines Ltd. spokesperson Dale Coffin said it was not clear what the president's declaration means for the industry, but that it did not impact operations, while a Newmont Goldcorp Corp. spokesperson said he had not seen the comments and did not have a response.

David Harquail, CEO of Franco-Nevada Corp., a streaming and royalty company, cast the comments as an example of what happens when metal prices rise, noting that gold has ignited investor interest in some mining equities. "Just watch, higher gold prices are only encouraging governments to take more," he said in an email. "These remarks are just setting the stage."

Harquail said a challenge for gold miners was to protect their after-tax margins. "Investors expect lots of torque from gold operators with higher gold prices," he said. "But history shows that margins per ounce stay relatively constant despite higher gold prices."