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What’s the Future for Gold Mining in Mexico?

Mundo Minero con información de Investing News || 8 de mayo de 2017

Gold mining in Mexico has taken place for at least 500 years, and the country has a history of both commercial and artisanal production. Today, gold and silver account for more than 50 percent of the country’s total metals output.

Over the last decade, gold production in Mexico has stayed relatively stable. However, the uncertain gold price environment has meant that very few new mines have opened in recent years. Most mining companies operating in Mexico have been focusing on reducing costs and improving capital management, and in 2016 gold output dropped from 135 MT to 125 MT.

Will that change in the future? As many gather to celebrate Cinco de Mayo, we’ve put together a brief overview of what the future may hold for gold mining in Mexico. Read on to learn more.

Mexico has been a top gold-producing country for many years, but as mentioned its output dropped in 2016. The decline, which was one of the country’s biggest ever, was partly due to mine sequencing at Goldcorp’s (TSX:G,NYSE:GG) Penasquito mine. Penasquito is Mexico’s top gold mine, and now harder and lower-grade ore types are being mined there.

Last year, foreign investment in the Mexican mining sector reached $718 million, according to the Mexican National Chamber of Mines, Camimex (Spanish). That’s an exponential increase from 2015, when investment came to only $3 million.

“Investors see Mexico as a solid market with low production costs, which will continue to help Latin America’s number two economy attract foreign investment into its mining sector,” BMI analysts said in a recent report.

In total, there are 1,158 mines in operation in Mexico, and many are considered world-class deposits. Even so, there are still opportunities for new mining companies to gain traction in the country — only 25 percent of Mexico has been explored in detail.

The problem is that currently relatively little exploration is taking place — last year, spending on exploration and development declined for the fourth year in a row to reach a 10-year low of $483 million. A report from Camimex (Spanish) says that this downtrend could impact the country’s metals production in the near future.

Gold mining in Mexico: What does the future hold?
Despite those concerns about exploration spending, BMI believes that Mexico’s mining industry value is set to increase from $15.7 billion in 2016 to $17.8 billion by 2020, averaging 3.3 percent annual growth. And most of that expansion will be led by gold projects in the country.

“This growth rate will be largely in line with regional peers,” analysts at the firm said.

Investors interested in opportunities in the country may want to keep an eye on the top-producing companies mentioned above, as well as companies with promising exploration projects. According to Camimex, projects with potential include: Chesapeake Gold’s (TSXV:CKG) Metates project, Torex Gold’s (TSX:TXG) Morelos Norte project and Fresnillo’s San Julian and Orisyvo projects.

What the future may hold for gold mining in Mexico remains to be seen, but for now the country continues to be a top producer of gold, as well as many other commodities, including silver, zinc, manganese, graphite, lead and copper.

By: Priscila Barrera

Video-Cápsula: InnovAction
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