A proposed ban on open pit mining in Mexico will create risks to miners even after President Andrés Manuel López Obrador's term ends in September, analysts and miners said.

Mexico's robust mining industry includes a significant share of open pit operations, and the country is a major supplier of silver, gold, copper, zinc and other metals. López Obrador pitched the ban in February in a bid to alleviate environmental damage and conserve water, though the president will need a supermajority in Congress, and observers say the bill is unlikely to pass before he leaves office.

Claudia Sheinbaum, a presidential candidate with a clear lead in polls and a member of López Obrador's Morena party, has already made promises to push for the ban. The remaining two candidates have not taken a stance on the proposal. Any new president will need a strong congressional majority to advance a ban, but just the prospect poses problems for miners.

"What is almost certain is that the awarding of new mining concessions would remain severely restricted, if not entirely halted," said José Sevilla-Macip, a senior country risk analyst at S&P Global Market Intelligence.

Open pit politics

Mexico hosts abundant metal resources including 15.8% of global silver reserves and resources, 8.3% of zinc, 7.1% of lead, 5.9% of molybdenum and 3.5% of the world's copper, according to an analysis of Market Intelligence data. Much of the metal is extracted through open pit mining. US-headquartered Southern Copper Corp. tops the list of most ore mined from currently operating open pits, with 202 million metric tons (MMt) from its Buenavista mine and 36.3 MMt from its La Caridad mine, according to Market Intelligence data.

López Obrador on Feb. 10 proposed banning new open pit mining concessions, flagging concerns about vulnerable communities near mining operations facing environmental damage and competition for scarce water supply.

The president is not likely to be swayed by miners' concerns about investment risks and is "wholly uninterested in economic impact of his policies ... with the exception of the bilateral trade relationship with the US," said Duncan Wood, vice president for strategy and new initiatives at the Wilson Center, a think tank, and an expert on Mexican politics and US-Mexico trade ties.

"Instead, he is obsessed with his legacy and the political goals he has had since before his presidency to reduce the power of what he calls the 'mafia del poder,'" his shorthand for the political establishment, Wood said. López Obrador "has shown time and time again that if he doesn't get what he wants one way, he will try another, and another. So this will not be the end of the story."

The measure would require approval by two-thirds of Mexico's legislature, which watchers see as unlikely before a June 2 election, or during a lame duck session before a successor arrives Oct. 1.

"At this point in the political cycle, I think it is unlikely that he will get the two-thirds he needs," Wood said. "I think this is more about getting the issue on the agenda, and creating a pending item for his successor."

Indeed, the open pit mining ban was among 100 policy pledges made by Sheinbaum during her first presidential campaign speech March 1, Sevilla-Macip said. Sheinbaum, the former mayor of Mexico City and a political ally of López Obrador, has a sizable lead in recent polls, according to Reuters.

"The only likely exception to these restrictions is likely to be lithium mining projects, although under a potential Sheinbaum government, any lithium concessions would likely be awarded to the state-owned firm created in 2022," Sevilla-Macip said.

Market Intelligence does not expect Senator Xóchitl Gálvez, who is running second in polls, to push for a ban on open pit mines. Candidate Jorge Álvarez Máynez proposed a bill in 2022 that included a provision to cancel all open pit mining concessions, "so he would be likely to endorse such a measure," Sevilla-Macip said.

Tougher permitting expected

Miners with Mexican operations have so far downplayed the risks from a potential ban.

The timing of the proposal just before the June election means "the whole thing is in flux," Ammar Al-Joundi, president and CEO of Agnico Eagle Mines Ltd., said during a Feb. 16 earnings call. "In theory, if there's no open pit mining, that also applies to aggregates. So you can't mine for gravel, you can't mine for sand. That means you can't build roads, you can't build buildings. So it's not unusual to sort of see these things just before an election."

Al-Joundi said Agnico Eagle has a "very good" relationship with the government, and noted that the "mining industry is a big industry in Mexico."

Agnico 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 believes it is too early to determine if the measure will pass and what specific impacts it would have on the miner's operations, Natalie Frackleton, the company's director of communications, said in a statement to S&P Global Commodity Insights.

"Agnico Eagle believes that responsible mining plays an important and positive role in supporting sustainable socioeconomic development in communities and countries," Frackleton said. "Agnico Eagle is committed to responsible and sustainable mining practices and community engagement to ensure its operations are developed and operated for the benefit of all stakeholders."

Mexico-based Fresnillo PLC initially saw the ban as a significant risk to its 1.5 million hectares of land concessions, comprising "very good prospecting areas in Mexico," CEO Octavio Alvidrez said on a March 5 earnings call.

"Now I can confirm that we will be able to do the exploration there, at least for those that we had," Alvidrez said. "The new ones, we have more difficulties. But at least that land package is still viable."

Alvidrez expects permitting to become harder, so the company has added more time to its project estimates. "But we will have enough concession to explore," the CEO said.

Fresnillo mines for silver, gold, lead, zinc and copper in Mexico. Its Herradura gold mine ranks as Mexico's third-largest operating open pit mine with 23.4 MMt of mined ore, according to Market Intelligence data.

Alvidrez signaled that he expects the future administration to soften its stance given the sector's importance to the economy, particularly in the states of Sonora, Zacatecas, Durango and Chihuahua.

"We believe that the country and the specific areas are better off with mining," Alvidrez said.

Canada-based diversified miner Teck Resources Ltd. is assessing the potential ban while working with fellow miners and Cámara Minera de México, the national mining chamber, "to really understand what is the pathway forward," Tyler Mitchelson, senior vice president of copper growth, said on a Feb. 22 earnings call.

"You put it in the context of some of the largest mines in Mexico right now and some of the most successful mining companies to use open pit mining," Mitchelson said. "So it's obviously a very significant impact, but we're continuing to monitor through the next months."

Southern Copper, Fresnillo and Teck did not respond to requests for comment.