10 Jun The State of Mining in Latin America

By Chris Hernandez & Amanda Perez

As the world shifts from the utilization of fossil fuel-based energy to renewable, sustainable, low-carbon energy, the demand for critical minerals has skyrocketed. Opportunities exist for countries rich in these natural resources to take advantage of this commodity windfall. Latin America is perfectly positioned to benefit as a crucial player in supplying critical minerals due to its vast reserves and current production of copper, lithium, cobalt, and nickel, among others. Latin America’s mining sector is experiencing dynamic shifts driven by economic imperatives, environmental concerns, and geopolitical influences. Key countries such as Peru, Chile, Brazil, Mexico, and Ecuador are at the forefront of these changes, each navigating unique challenges and opportunities.

Chile

The mining sector serves as a powerful engine for Chile’s economy, accounting for roughly 13.6% of GDP and 58% of exports in 2022. The nation holds the title of top copper producer in the world. It is estimated that in 2023, it produced 5.3 million metric tons, accounting for approximately a fourth of global copper production. It also boasts the largest copper mine in the world, Minera Escondida, a joint mining venture between BHP, Rio Tinto, and JECO Corp. Last year, the mine produced an estimated 882.1 thousand tons of copper, in turn generating US $13.4 billion in profits.

However, while copper maintains its reign as the kingpin, lithium is rapidly emerging as a game-changer. Chile holds the world’s largest proven lithium reserves, estimated at 9.3 million metric tons as of 2023. This positions Chile as a major player in the booming electric vehicle market, where lithium is a critical battery component, and prompts strategic considerations for the government. Chile has announced a Lithium strategy to improve governance and balance economic and environmental concerns. The plan aims to ensure transparency, manage lithium revenues through fiscal rules, and promote stakeholder participation. Rather than nationalizing the industry, Chile seeks state involvement via public-private partnerships to drive sustainable development and technological innovation, addressing governance challenges and ensuring equitable distribution of benefits.

Major Chilean copper miner Codelco and SQM, a leading global lithium producer, agreed to establish a joint venture that will allow SQM to increase lithium production in the Salar de Atacama, a region known for its rich lithium deposits, until 2060. However, Codelco will hold a majority stake in the venture, marking its first foray into lithium production. This move aligns with the government’s plan to have Codelco lead its entry into the lithium industry.

Peru 

Peru’s mining industry remains a vital pillar of the economy, contributing approximately 8.3% to the country’s GDP last year. Peru is currently the second-largest producer of copper and a leading global producer of gold, zinc, silver, and tin. In 2023, Peru produced 2.75 million metric tons of copper to support economic recovery and aims to increase production to 3 million metric tons in 2024.

Major mining companies like Southern Copper and Antamina are investing in expanding their operations in the country. Southern Copper, a subsidiary of Grupo México and one of Peru’s largest copper producers, plans to boost its production by 520,000 tons over the next eight to ten years through a US $8.5 billion project portfolio, including the Tia Maria, Los Chancas, and Michiquillay mines. The Tia Maria project is set to produce 120,000 tons of copper annually and create approximately 9,000 jobs. Antamina, Peru’s second-largest copper mine, aims to maintain its 2024 output at 435,378 metric tons. A US $2 billion project will extend its lifespan to 2036.

Peru also hosts the largest gold mine in Latin America and the fourth largest in the world, the Yanacocha Mine, operated by Newmont Corporation. Last year, the mine produced approximately 5.5 million attributable ounces of gold, generating US $2.8 billion. In 2022, as an effort to extend the life of the Yanacocha gold mine beyond 2040, Newmont Corporation announced the Yanacocha Sulphides. The project involves developing the first phase of sulfide deposits, with an integrated processing circuit including an autoclave to process gold, copper, and silver. It was supposed to commence this year; however, the corporation has decided to delay the project’s full-fund investment, citing global economic uncertainties and high inflation rates. The Peruvian government hoped to see this investment go through to boost the mining sector, but the government still has other plans to accomplish the same goal. Peru is transitioning to mercury-free gold processing technologies to address environmental concerns from locals protesting and disrupting mining activities. In collaboration with international organizations, the government has inaugurated its first mercury-free gold processing plant in Piura this year.

Brazil

Brazil is a mining dynamo, consistently ranking among the top mineral producers worldwide, given its robust geological potential and substantial reserves of strategic materials. The nation currently stands as the leading producer of niobium and the second-largest producer of iron ore in the world. However, the industry is presently in a transitory state. While established resources such as iron ore, copper, gold, tin, and aluminum maintain their importance, the sector is beginning to tap into critical minerals with immense potential needed for renewable energy, such as lithium, or “white gold,” as it is known colloquially.

The Jequitinhonha Valley in the State of Minas Gerais, known as “Lithium Valley,” is home to 85% of Brazil’s lithium reserves and has strong support from the government. According to the state government, the region has already attracted a total of US $1.1 billion in investments from major lithium companies across the globe, including Sigma Lithium (Canada), Atlas Lithium (US), Latin Resources (Australia), and Lightning Minerals (Australia). The largest player, Vancouver-based Sigma Lithium, is dedicated to developing additional lithium resources in the region. Headlined by its Grota do Cirilo project, a state-of-the-art Greentech mining operation built around one of the world’s largest and highest-grade rock lithium deposits, Sigma has been at the forefront of Brazil’s lithium boom. The company recently announced that it will invest an additional US $100 million to build a second Greentech plant. This expansion mirrors the global demand for lithium, a crucial component in electric vehicle batteries, and should inspire excitement in potential investors.

In conjunction with the shift towards renewable energy is the continued emphasis to reduce mining’s carbon footprint. The industry currently contributes to approximately 8% of the global carbon footprint. However, in Brazil, steps are being taken to ensure a path to lower emissions. Vale S.A., Brazil’s fourth largest company and one of the world’s largest miners, announced that it has reached its goal of having 100% renewable electricity consumption in the country and plans to have 100% renewable energy consumption in its global operations by 2030. This signifies a significant step forward for an industry historically on the tail end of sustainability measures.

While traditional resources such as iron ore remain essential, the development of lithium projects signals a strategic shift towards critical minerals for the clean energy revolution.  With continued production from established mines and an anticipated arrival of investment (projected at US $65 billion over the next four years), Brazil’s mining sector appears poised for substantial growth and development.

Mexico 

Mexico’s mining sector presents a complex picture.  With abundant minerals, the industry is poised to contribute significantly to the economy. According to Statista, the country is ranked the world’s largest producer of silver and a significant producer of gold, copper, and zinc. However, recent legislative changes introduced by the government may pose a challenge to the economic potential of the industry.

As Mexico’s government has begun shifting its focus to increasing environmental protections, regulations surrounding the mining industry have tightened, potentially shying away from further investments. As it stands, President Andrés Manuel López Obrador has not granted any new mining concessions since assuming the presidency in 2018, although he has honored those awarded prior to his administration. Additionally, in May of 2023, several amendments to Mexico’s Mining Law (Ley Minera) were signed into effect. These amendments shortened concession periods from 50 to 30 years and transferred the granting of mining concessions to the public bidding process instead of the prior ‘first come, first serve’ basis. They instituted the specification of mining concessions for specific minerals so that in the case of the discovery of additional minerals at a site, the concession title would need to be modified by the Ministry of Economy to include the new mineral(s). The amendments also introduced stricter environmental and social requirements for companies, including conducting more comprehensive impact assessments, submitting restoration, closure, and post-closure programs for mines, preparing waste management programs, and providing a mine closure program and insurance policy to guarantee that the proper resources will be available to cover possible damages caused by mining activities to the surrounding population.

Despite these increased bureaucratic measures, the Mexican mining industry is still witnessing activity with the launch and continuation of several projects. Southern Copper, a subsidiary of Grupo México, began commissioning the zinc concentrator at the Buenavista del Cobre mine in Sonora in 2023. Once operational, this facility will double zinc production capacity and provide over 2,000 jobs at the operation site. It is expected to contribute 55,000 tons of zinc to its mining production in 2024. Vancouver-based Luca Mining is reaching the final commissioning stage of its expansion project at its wholly-owned Tahuehueto Gold Mine in Durango. The project aims to increase gold production to 1,000 tons per day, doubling its output by year-end 2024, with an expected annual production of over 40,000 ounces of gold equivalent. In February of this year, the company announced that testing of the final equipment, a second ban mill, is well advanced and should provide a total installed grinding capacity of 1,250 tons daily. Mexico’s mining sector has the potential to be a powerful economic engine, but only if it can adapt and embrace responsible practices in a changing regulatory landscape.

Ecuador

Despite ongoing social tensions, security challenges, illegal operations, and judicial and regulatory obstacles, mining has become a cornerstone of Ecuador’s economy. The country boasts vast reserves of copper, gold, and other valuable minerals; however, the population is divided over the pros and cons of exploiting these resources for capital gains.

The mining cadastre, a database where investors could request mining concessions, was officially closed in 2018, halting any new exploration for mining sites. Despite this closure, the mining sector has experienced significant developments recently. In 2022, mining exports generated $2.8 billion, a 33% increase over 2021 mining exports, and contributed $590 million in taxes and royalties to the government. In July 2023, the national mining company ENAMI EP issued a regulation for entering into commercial agreements with private companies. This allows potential business partners of ENAMI EP to develop mining projects – given the transfer of rights over mining concessions – even with a closed cadastre, as ENAMI EP can still request mining concessions. Given this development, according to the International Trade Administration, analysts predict that by 2025, mining could become the country’s third-largest export, generating over $4 billion in annual revenue and accounting for 15% of total exports.

Ecuador currently has two large-scale operating mines: Fruta del Norte, a gold mine operated by a Canadian company with U.S. investment, and Mirador, a copper mine managed by a company affiliated with the People’s Republic of China. The country is anticipating the commencement of additional projects, including El Domo-Curipamba, La Plata, and Cascabel. Adventus Mining and Salazar Resources secured the environmental license required for the construction and operation of the El Domo-Curipamba project from the Ministry of Environment, Water, and Energy Transition of the Government of Ecuador (MAATE) early 2024. According to the Adventus Mining Corporation, the project’s after-tax net present (NPV) is estimated at $259 million, with an after-tax internal rate of return (IRR) of 32%. Later in 2024, Atico Mining Corporation signed a deal with the government of Ecuador, securing the underlying licenses and secondary permits necessary for the La Plata project’s construction and operation. This agreement represents over $157 million in investments and lays the foundational groundwork for executing a formal Investment Protection Agreement (IPA). Lastly, SolGold announced a complementary investment protection agreement (IPA) for the Cascabel project, adding a total of US $3.2 billion over the subsequent years in activities related to the project. However, other projects in the works, such as Rio Blanco and Loma Lagra, have been met with extreme backlash, leading to delays in their commencements. Thus, while Ecuador’s mining industry shows promise, it must navigate the challenges of social opposition and regulatory compliance to ensure sustainable and responsible development.