CARLOS ESPINOSA

Reactivation of the Mexican Mining Industry | MINING & INDUSTRY | INTERVIEW

With investors turning to precious metals as a hedge against global uncertainty, Mexico's mining sector is being pushed into the limelight yet again.

Carlos Espinosa
BIOGRAPHY

Carlos Espinosa is the Founding Partner of SoftLanding Group Mexico. He has over 25 years of experience in international business development, Canadian capital markets, and commercial banking. In 2008, Espinosa founded SoftLanding Group Mexico, a boutique advisory firm focused on assisting Latin American companies doing business or raising equity in Canada, as well as assisting Canadian companies with interests in Latin America. Espinosa is also the president, CEO, and board member at Monarca Minerals and CFO at Fredonia Management. Espinosa earned an MBA from the Kellogg School of Management at Northwestern University and a bachelor of business administration from UNAM.

What is your perspective on the impact of the COVID-19 pandemic on the mining sector?

The last few years were dry for exploration companies. The problem is that while major companies continue to produce, there are not many new projects in the pipeline. As a result, some large companies have been investing in junior exploration companies. This has happened not only in Mexico but all over the world. For example, companies such as Newmont or Barrick have invested in junior companies and their decision to do so has produced good results. One of the reasons is that it is cheaper to partner with a junior exploration company as compared to setting up a whole exploration team. In recent years, people have invested heavily in large or mid-sized companies. The mining sector has caught the attention of many investors, especially those who had invested in the cannabis industry. For example, after Canada legalized cannabis in 2018, investors from around the world flocked there to cash on new opportunities, but that rush was followed by a correction. Those who were able to hold on to their capital started looking for opportunities in other sectors. Several investors parked their capital in the mining sector because it offers great opportunities as compared to other sectors such as energy and IT. Unfortunately, due to the COVID-19 pandemic, there is a great deal of fear in the market. Mining will be one of the industries that will recover the fastest. For example, investors are buying precious metals as a hedge against all the uncertainty in the market. Moreover, governments will invest in infrastructure projects in an attempt to reactivate the economy. This will also be a big positive for mining companies. There has been a great deal of success when it comes to improving access to financing for junior mining companies with interesting portfolios. At present, large producers in Mexico are eying smaller players. 2020 is turning out to be a difficult year, but we are optimistic for 2021.

Do you think this optimistic view is shared by other mining operators in Mexico?

I believe so. I can say this because I have participated in several online events. In my case, I specialize in Latin America, and from what I have seen, there is a great deal of optimism from investors and mining operators. An increasing number of Mexican investors will invest in mining companies in Canada.

What can be done to motivate more Mexican investors to invest in the mining industry?

It is a challenging task, but the key is to collaborate with other stakeholders to promote the sector. At present, the Mexican stock exchange as well as the new stock exchange are not heavily involved in the mining sector, and that represents a good opportunity. The Canadian Chamber of Commerce could help us to motivate and educate more people. People in Mexico think investing in stocks is exclusively for the wealthy, but that's the wrong view. In Canada, for example, it is common for people to invest in stocks. We need to take several steps to get Mexico to that level. One of the obstacles is that the brokers or the financial advisors are not mining-savvy and do not recommend the mining industry. They have a clear lack of appetite. I hope Mexican companies and people involved in the mining sector will continue to do well in these difficult times.

What is your opinion on the efforts being undertaken by the Mexican government to reactivate the mining industry?

Francisco Quiroga, the Vice Minister of Mines, has done a wonderful job so far. What is unique about him is that he has a solution-oriented approach. He is a very professional person, and I am happy to see he is leading the sector. The mining industry can bring a lot of investment to Mexico, which in turn will help develop remote areas of the country.