A top Canadian miner in southern Mexico is trying to avoid the unprecedented closure of its ten-year-old silver mine after the expiry of its environmental permit last month left it in limbo.

The possible shutdown of the San Jose mine, operated by a local unit of Fortuna Silver Mines, is part of a prolonged fight over the project that could chill investor appetite in Mexico, the world's biggest silver producer, and a top ten miner of more than a dozen other metals including gold.

While the San Jose mine has been in operation since 2011, its main environmental authorization expired on October 23, despite company efforts since May to petition the environment ministry to approve a ten-year extension. A recent court order allows the mine to keep running, but only on a temporary basis.

The high-stakes standoff highlights what many industry leaders view as the government's resistance to the sector's growth and its ties to anti-mining activists.

Last year, San Jose was Mexico's seventh-biggest silver producer, responsible for 6.2-million ounces, along with nearly 38 000 ounces of gold.

Fortuna has invested some $350-million at the underground mine in Oaxaca state, where it employs 1 200 workers. Fortuna also operates mines in Argentina, Burkina Faso and Peru.

Sources with knowledge of the matter told Reuters that despite ongoing meetings between government officials and company executives, the mine's future remains in doubt.

The environment ministry on Thursday issued a statement saying it would work to organize the consultation of nearby indigenous Zapotec communities as part of the mine's requested environmental authorisation. That would let these communities decide "over their territory," boosting environmental protection by involving all stakeholders, it added.

The ministry pledged to be impartial but did not provide details on the timing of the consultation, or say if the mine could keep operating while it went ahead.

The press office of Fortuna's Minera Cuzcatlan unit did not immediately respond to a request for comment.

But on October 25, Fortuna said in a statement that the permit extension is a "normal and recurrent administrative procedure" for operators that are in compliance with environmental obligations, adding that the process had become "more cumbersome."

In April, Environment Minister Maria Luisa Albores met with activists seeking to shutter the mine, according to a photo posted on her Twitter account, in which she wrote that she met with them at the request of President Andres Manuel Lopez Obrador. The photo shows Albores speaking to a crowd in front of a large banner calling for the denial of San Jose's permit.

Activists have slammed the mine for what they say are dozens of unauthorised constructions there.

A senior environment ministry official told Reuters in September that miners should face "strict" oversight due to the industry's major impacts, but did not single out specific projects.

Lopez Obrador, a leftist resource nationalist who has repeatedly clashed with foreign mining companies, has said his government will not approve any new mining concessions, arguing past governments doled out too many.