Strike at Newmont’s Peñasquito to further hurt Mexico’s mining sector

Peñasquito mine. (Source: Newmont-Goldcorp)

Mexico’s chamber of mines (Camimex) is warning the halt of Newmont’s (NYSE: NEM) (TSX: NGT) Peñasquito gold-silver operation due to a strike by now on its fourth week, will have a significant impact on an already-weak national mining production.

The US-based miner has had operations suspended since June 8, a day after nearly 2,000 unionized workers downed tools over a dispute regarding profit-sharing and alleged contract breaches.

The temporary halt at what is Mexico’s biggest gold mine in Zacatecas state forced Newmont last week to declare force majeure on deliveries of some metal products from mine.

“The effect on mining production is clearly going to be important because Peñasquito is one of the largest mines in the country,” Camimex president Jaime Gutiérrez said when presenting the body’s annual report. “We hope it will be resolved shortly and in accordance with the law,” he said according to local paper El Financiero.

According to the Chamber, investment in the Mexican mining sector last year reached almost US$5.3 billion, which represents a fall of 34.5% from the historic high of US$8.4 billion in 2012.

Sticking points

Unionized workers at Peñasquito are demanding a larger share of the mine’s profit, from the 10% agreed in 2022 to 20%, Newmont has said. 

The union’s secretary, Jorge Ramon Monsivais, noted in an emailed statement that part of their demands are centred around a clarification on how the plan is calculated rather than a percentage increase. 

The ongoing strike marks the third labour dispute at the asset since Newmont acquired Goldcorp, the mine’s previous owner, in 2019. 

The operation had been the target of protests of landowners, truck drivers and residents of nearby towns in previous years.

Newmont is the world’s largest gold producer and Peñasquito has become its third-largest mine by sales, bringing in US$2.8 billion to the company’s coffers last year.

It is also relevant to Mexico’s economy, contributing US$1.9 billion in economic value in 2022. The figure includes US$643 million in employee wages and benefits, tax and royalty payments to federal, state and local governments, and investments in community infrastructure and water projects.

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