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Mexico welcomes new mining rush

ANDY HOFFMAN

Tuesday, March 04, 2008

They are hardly the conquistadors that tapped open gold veins centuries ago, but the world's mining industry has once again descended upon Mexico in search of new sources of precious metals.

Drawn not only by rich gold and silver deposits, but also a stable and easy-to-navigate regulatory regime, the rush to Mexico by foreign mining firms pushed the total value of the country's mining production to a record $7.2-billion (U.S.) last year.

Compare that to just five years ago, when the value of production totalled just $2.3-billion.

“It is the best period in history,” Mexico's economy minister Eduardo Sojo Garza-Aldape, said in an interview at the Prospectors & Developers Association of Canada convention in Toronto.

Mining accounts for roughly 3.6 per cent of Mexico's gross domestic product and roughly 300,000 jobs - key employment, the minister said, because the economic benefits are being felt most in underdeveloped areas.

“We have enjoyed good prices in the last few years and it looks like we will have good prices in the next few years. It means opportunity. For us, the most important thing is this means employment for our people,” Mr. Garza-Aldape said Tuesday.

Gold mining has been going on in Mexico for more than 500 years. But the current run in bullion prices, which are threatening to break $1,000 an ounce, has seen Mexico's mining sector enjoy unprecedented investment.

Roughly $189-million was spent on mining exploration in Mexico last year, a 7.4 per cent increase over 2006. According to Halifax consulting firm Metals Economics Group, Mexico attracted the fourth highest amount of exploration spending last year, trailing only Canada, Australia and the United States.

Total foreign capital investment in Mexico's mining industry last year was $428-million, and Canadian mining firms were responsible for the brunt of the spending. Of the 375 mining projects currently being explored in Mexico, Canadian companies account for 83 per cent of the total.

Vancouver's Goldcorp Inc. is among the largest foreign companies operating in Mexico. Goldcorp has three operating mines in Mexico and two development projects, including the massive $1.5-billion Penasquito project, which the company expects to produce 400,000 ounces of gold per year.

Mr. Garza-Aldape said changes to Mexican legislation in the 1990s that allowed foreign companies to own 100 per cent of mining operations has been an integral part of Mexico's success in attracting mining investment.

The minister recently met with a group of Canadian companies operating in Mexico and found the miners were looking for ways to expedite the permitting and other regulatory processes even further.

“They see the opportunities. They want things done more rapidly in our country. Those were the issues raised at the meeting and we will work on that,” he said.

As for the North American free-trade agreement among Canada, the United States and Mexico, the minister said Mexico does not want it renegotiated.

“We believe we need more integration, not less integration. We have to look forward, not back,” he said.

Democratic presidential candidates Hillary Clinton and Barack Obama have both said they plan to renegotiate the trade deal if they are elected.

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