It's official. The big freeze on spending in Mexico's mining sector is over. Investment is rebounding in 2017 following four years of declines, with cash flowing back into key areas such as exploration and project development as the thaw gathers pace. Mexico's miners will spend US$5.53 billion this year - a 48% rise over 2016 and the highest figure since 2013, according to industry chamber Camimex.
The trend is mirrored in rising foreign direct investment in metallic mining, at US$530 million in H1, up from US$491 million in the same period of 2016 and negative US$118 million in 1H15.
This loosening of purse strings among Mexico's miners is a result of renewed confidence in the sector, underpinned by two main factors. Firstly, price improvements. Gold, silver and copper, which make up three-quarters of the country's mining output by value, have clawed back ground since bottoming out around end-2015. The picture is similar for zinc and lead, which make up another 9%.
But higher prices are only part of the story. Mexico's miners have emerged from the downturn fitter and stronger. Loss-making operations have been turned around by aggressive cost-cutting, with efficiency gains at mine sites and corporate HQs. Portfolios have been trimmed, with only the best projects surviving the chop, while asset sales have in turn helped the majors reduce debt. Cost reductions - coupled with a massive helping hand from the peso's devaluation, which reduced costs in US dollar terms - are paying off in spades in today's higher price environment.
Mexico's miners are well positioned to respond to improved metal prices. Cash-flowing operations and healthier share prices are enabling companies to plow cash back into operations and push ahead with development projects, which could deliver production growth over the medium term following a pullback in capex in recent years.
But the rebound remains fragile. The outlook for metal prices and in turn investor sentiment will be critical to the recovery gaining momentum. Companies must also keep a lid on production costs, which are beginning to creep up, while shifting back into growth mode.
Meanwhile there are signs the country's operating environment is deteriorating. Regulatory, tax and security concerns have mounted in recent years, meaning Mexico has more competition for mining investment than in the past.