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Tuesday October 17 2017
Mexico: an Attractive Destination for Mining Investment
Author:

Negocios ProMexico
sebastian.escalante@promexico.gob.mx


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According to information provided by the Mexican Mining Chamber, between 2007 and 2012 the investment in the Mexican mining sector will have reached a record 21.7 billion usd. There are various factors that make Mexico one of the main destinations for investment in mining on a global scale; among others, the fact that 70% of the country’s territory possesses mineral wealth.


With 500 years of history in the field of mining and a vast untapped mineral wealth, Mexico has become one of the main destinations for foreign investment in this industry.


According to Metals Economics Group (MEG), Mexico holds the sixth place in drawing global investment in mining exploration. In 2009, 15 new mines were either reactivated or opened in the country and in 2010 the mining industry remained the country’s fourth production sector, contributing to 1.6% of Mexico’s Gross Domestic Product (GDP).



The boom in the country’s mining, which began seven years ago with the global upturn in metal prices, has translated into a growing capital investment coming from all five continents but mostly from North America, specifically Canada.


Out of more than 738 exploration projects currently carried out by 279 companies, 70% is undertaken with investment coming from other countries: 75% from Canada, 15% from the US and the rest coming from countries such as the UK, Australia and Japan, among others. In 2009, foreign investment in the sector reached 336 million usd.


“In resource extraction, we believe that the investment coming from Mexican companies must represent around 60% and the rest comes from foreign companies,” specifies Sergio Almazán, General Director of the Mexican Mining Chamber (Camimex, for its acronym in Spanish), who states that this growing injection of capital allows for the mining sector to be considered strategic for the country’s economic boost.

But what is really turning Mexico into an investment paradise for the mining industry? For Almazán, as well as for Camimex Chairman Manuela Luévanos, the main reason lies in the potential that the Mexican subsoil offers. “70% of the national territory is potentially suitable for storing important mineral deposits,” points out Luévanos. As such, “the Mexican Mining Chamber has insisted that our country’s mining calling should be acknowledged.”

The Canadian Experience

For Ramón Dávila, General Director of the First Majestic Silver Corp mining company, stemming from Canadian capital, Mexico offers many attractive features.



“What First Majestic sees in Mexico is stability, politically speaking as well as referring to the great mining tradition that exists in the country. [...] 100% of our personnel is Mexican and that makes us very proud,” explains Dávila.



“We focus on producing silver and Mexico is a great silver producer. Speaking in topographical and geographical terms, we see important growth possibilities and that is what the company was looking for when evaluating several countries and selecting Mexico as the only country to operate in, for the time being.”


With headquarters in Vancouver, Canada, First Majestic Silver Corp operates three different mines in Mexico and plans on running a fourth one. Almazán explains the prominent Canadian participation in Mexico for two fundamental reasons: the high geological mining potential enclosed in Mexican territory, which is likely to be operational, and the progress in exploration technology achieved by Canada, which allows it to evaluate and explore mining areas in a quick and efficient way.



“Of course we have to take into account, and this is very important, that they have developed the financing formula for exploration, based on the stock market,” warns Almazán.

Another attraction point that the Mexican framework for mining operation presents, is the fact that although legislation forbids foreign companies to obtain a concession to carry out mineral exploration and extraction activities –which is, in principle, of public ownership– it is allowed for companies constituted as Mexican to have foreign partners that contribute up to 100% of the capital.


Positive Balance

“In 2010 the balance is positive,” points out Luévanos. Even if the industry has had its share of stumbles due to the global financial crisis and Mexico has dropped from fourth to sixth place in raising foreign investment, it is expected for the miningmetallurgic production, which in 2009 reached 9.6 billion usd, to grow 8-10% and for products to raise their production volumes.


That forecast is based on the sector’s boost in investment in “historical” proportions. “The mining industry will invest 13.8 billion usd in the country, which means that between 2007 and 2012 our industry will have invested 21.75 billion usd, a historical amount for the mining sector,” mentions Luévanos.


“These investments will go to exploration projects, new projects, extensions of mining operations, investments in labor training, equipment with leading-edge technology and, of course, in programs that have to do with developing our communities, protecting the environment and, above all, with safety in working conditions,” explains Luévanos.



The challenge for mining in the 21st century is sustainability, considers Luévanos. In that sense, the companies affiliated to Camimex are working hard to reach the goal of “zero accidents.” Furthermore, 68 mining operations have been certified as clean industry, 18 are in the process of, and for the past six years the sector planted 10 million trees, which makes the mining industry the sector that has planted most trees, after the Mexican Armed Forces and the lumber industry.

Because of all of the above, investment in Mexico turns out to be an excellent opportunity to grow hand in hand with the expansive cycle of mining on a global scale, concludes Luévanos

 

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