REVIEW

The Red Mirror

Long known as a land of riches, silver and gold still dominate the Mexican mining industry. Rising in significance, the sector is now employing record numbers and attracting investment.

With a commercial mining history spanning almost 500 years, Mexico today is the largest silver producer in the world, and a major producer of gold and copper. For the first time in recent years, the sector has overtaken tourism in terms of revenues, generating $12.65 billion in 2011. As mining becomes the third most important sector of the economy after the oil and automotive sectors and a significant employer, over 290,000 direct employees and 1.5 million indirect jobs have been generated.

Following a decline in the economy in 2009, the mining sector bounced back quickly as delayed exploration projects got back on track. By the end of the 2010-2012 period, the sector is anticipated to have invested $13.8 billion in the country. Coupled with some 750 active exploration projects currently ongoing, the sector is expected to continue on a growth curve that saw the industry expand by 13% in August 2010, compared with the previous year, with the gold and silver segments driving the revival. The country also remains fertile ground for new discoveries. In terms of the country’s mineral resources, “around 70% remains to be discovered,” Xavier García de Quevedo, Executive President of Grupo Mexico-Minerva Mexico, told TBY. Foreign interest is also high, and “about 230 Canadian companies [are] performing exploration in Mexico, not to mention US, Australian, and other Mexican companies,” he added.

Mining in Mexico is focused on the states of Zacatecas, Sonora, Chihuahua, Coahuila, and Durango. Silver and gold dominate the metallic category, followed by copper, zinc, and lead. The non-metallic category is defined by materials for cement and bentonite.

As the pioneers of silver mining, the Aztecs focused their attention on the Sierra Madre Mountains. Today, silver and gold mining is spread across the “Silver Belt,” or “La Faja de Plata.” The belt is the world’s most productive silver mining area, with yearly production of over 100 million ounces of silver. In total the region has now produced over 10 billion ounces of silver, as well as between 63 million and 75 million ounces of gold, the majority of which is obtained as a co-product of silver and copper mining or a by-product of polymetallic deposits. Yearly gold production has also grown of late, reaching 2.5 million ounces per year—an approximate increase of 50% over the 2009 figures. This figure is also expected to grow as companies such as Canada’s Goldcorp look to invest in the sector. The company “is currently developing projects and building plants to achieve the objective of 4.2 million ounces in gold production by 2016,” Salvador García, Vice-President of Goldcorp, told TBY. It is also currently developing its Peñasquito mine, with forecasts suggesting it will create 2,000 direct jobs, 12,500 indirect jobs, and produce 500,000 ounces of gold, 28 million ounces of silver, 204 short tons of zinc, and 90,700 short tons of lead annually. The development will make it the second largest producing silver mine in the world, after the Fresnillo Mine, which belongs to the Peñoles mining company, and is the second largest mining firm in the country after Grupo Mexico-Minerva Mexico.

Copper production surged in 2011, reaching an estimated 350,000 tons, as the Cananea copper mine, owned by Grupo Mexico, came back online. The majority of copper production is carried out in the copper belt, which stretches from the state of Baja California through Sonora, Sinaloa, and western Chihuahua toward Chiapas. Grupo Mexico makes 80% of its revenues from copper, and operates three large open-pit mines in the US and four in Peru and Mexico. It also has five underground mines in Mexico. By far its largest open-pit mine is Buenavista del Cobre, in the northern part of Sonora, Mexico. Additional projects are set to take its capacity from 190,000 tons a year to 450,000 tons over the next four years. “Around $3 billion will be invested in the expansion project,” García de Quevedo commented, adding that the Buenavista del Cobre mine alone “holds 25 million tons worth of copper reserves.”

Mexico is also the world’s fifth largest producer of lead and the sixth largest producer of zinc. It produced 185 tons of lead in 2010, with the largest mines located in Zacatecas, Chihuahua, and Sinaloa. Approximately 550 tons of zinc were also produced in the same year, along with around 12 million short tons of coal.

As foreign investment, particularly from Canadian firms, increases in Mexico, regulations have been developed in order to bring the sector in line with international standards and protect investors. “Mexico is open to investments in this industry; the taxation regimen for companies operating in this sector is very competitive, and many foreign companies are interested in the market,” commented García de Quevedo. SEMARNAP, the Secretariat of Environment, has also committed itself to reducing the impact of mining on the environment. Under new regulations, exploration and mining require a number of permits and authorizations in order to conform to the general law of ecological balance and environmental protection (LGEEPA). Such issues covered include water usage, water discharge, land use, explosives, and the handling of hazardous materials. Currently, around 60 operations have been certified to be in compliance with the new regulations, and another two dozen are in the process of certification. The sector has also planted over 10 million trees over the last half-decade. Mexico has also remained popular with investors due to a lack of obstructionist environmental organizations.

Despite security concerns driving up the costs of mining in remote areas, investment looks set to continue apace in years to come. In 2010, Mexico topped the pile when it came to attracting investment to its mining sector in Latin America, and came in fourth worldwide. For 2011, around $4 billion was spent on exploration activities alone, and the prospect of the Toronto Stock Exchange teaming up with the Mexican Bolsa to allow small- to medium-sized Canadian mining firms into the Mexican market through dual listing is adding further impetus to the idea that 2012 could be a bumper year.