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Mexico’s mining industry is expected to stage one the strongest recoveries in Latin America over the coming years, thanks to a strong pipeline of projects across mineral sectors, competitive operating costs, supportive government policies and rising metal prices, a new report says.
Gold and silver sectors will remain relatively fragmented, as larger miners sell assets to lower debt and reduce exposure to operational risk in the country.
According to analysts at BMI Research, the particular composition of the Latin American country’s mining industry will help it reap benefits quicker than other nations, as mineral prices for its key domestic commodities — silver, gold and zinc — are expected to perform well until at least 2020.
Some signs of that speedy recovery are already evident, with mining investments in the country forecast to increase almost 50% this year to $5.5 billion, from the $25.4 billion invested in Mexico’s mining sector in the previous 12-month period, as shown in a government report released in September.
“We forecast Mexico’s mining industry value to average 3% year-on-year growth over 2017-2021 compared to an average 1.6% across the Americas,” BMI said in the report released Thursday.
It means the country’s industry value will increase from $15.7bn in 2016 to $17.8bn by 2020.
Most of the local industry’s expansion in the next five years will be led by gold, a sector that currently accounts for roughly 17% of the country’s mining industry value, followed by silver (16% of Mexico’s MIV) and zinc (9%).
However, the experts warn, the gold and silver sectors will remain relatively fragmented, as larger miners divest from assets in an effort to lower debt and reduce exposure to operational risk in the country. At the same time, they noted, climbing prices and high-grade deposits will encourage juniors to continue developing projects.
An example of that trend is Leagold Mining (TSX:LMC), which began developing in September its Bermejal underground deposit to expand operations at the Los Filos mine, acquired from world’s No.3 gold producer by market value, Goldcorp (TSX:G)(NYSE:GG), in January.
While juniors will dominate, BMI noted, senior miners will also remain present, with top silver miner Fresnillo on track to produce 65moz of silver annually by 2018 and already having achieved the target of 750koz of gold.
Given a more positive outlook for copper prices and competitive operating costs in Mexico, its mining sector is expected to emerge as a regional outperformer.
Projects that are considered key to make that happen include Southern Copper’s $159 million Pilares project, expected to produce 34.5kt of copper starting in 2019, and Industrias Peñoles’ $303 million polymetallic Rey de Plata project, slated to begin production in mid-2019.
As a result, the experts wrote, Mexico’s copper sector is poised to become a larger contributor to the local mining industry value (MIV), accounting for approximately 24% of MIV in 20 17 and increasing to nearly 30% by 2021.
Mexico is already the world’s No.1 silver miner and a top 10 producer of gold, copper, zinc, lead and molybdenum.
