Is Mexican mining exploration bouncing back?

Is Mexican mining exploration bouncing back?

Exploration spending in Mexico’s mining industry is tipped for a sharp rise following a surge in metals prices, and despite concerns about political risk.

Exploration hit a multi-year low of US$338mn in 2020, when drilling was impacted by COVID-19 lockdowns. That was down from over US$500mn per year in 2017-19 and well below the 2012 peak of US$1.16bn, according to industry chamber Camimex.

While the chamber previously forecast only a modest rebound for 2021, to US$385mn, signs are emerging that this may prove conservative, with full data yet to be released.

“My understanding is that figures for 2021, that haven’t been put out yet, show a significant resurgence of exploration and mining development spending in Mexico,” renowned geologist and MAG Silver chief exploration officer Peter Megaw told BNamericas.


This positive outlook – which contrasts with disappointing overall mining investment in 2021 – appears to be backed up by other sources.

Mexico was the biggest target of exploration budgets in Latin America in 2021, according to a report by Chilean copper commission Cochilco.

Mexico attracted 23% of total planned spending, ahead of second-placed Chile’s 21%, according to the report, which cited figures from S&P Global.

Budgets in Chile were US$548mn. Data for Mexico were not given.

Mexico was also identified as the Latin American nation with the biggest planned rise in exploration spending in an October S&P report, with a year-on-year increase of US$172mn.


While exploration in 2020 was impacted by COVID-19, spending had been subdued for a number of years previously, partly due to metals prices and political concerns in Mexico.

“Investment in exploration in the mining industry in Mexico has dropped by about 40% over the last four years,” Megaw said.

“Some of that was building up during the 2012-16 period when metal prices were flat, so a lot of companies reeled in exploration spending at that point, and a lot of it is about concerns about how AMLO [Mexican President Andrés López Obrador] is treating the mining industry.”

Key political concerns include AMLO’s freeze on new mineral concessions, along with a tougher approach to environmental permitting and proposals to bring Mexico’s emerging lithium mining industry under state control.

Political risk is seen as a major factor behind a slump in overall spending in the country’s mining industry.

Investment for 2021 came in at US$4.25bn, 15.6% below the original estimate, according to Camimex, after firms announced capex cuts running into hundreds of millions of dollars.

The figure is down from US$4.67bn in 2019 and far short of the US$8.42bn peak in 2012.

“One of the factors that has disincentivized investment is the lack of legal certainty. When there are conditions in a legal framework under which investors come and put in their money and halfway through these conditions are changed, this causes investment to flee,” Camimex president Jaime Gutiérrez Núñez told local daily Reforma earlier in January.

But these concerns have been offset by the recent jump in metals prices.

Gold passed the US$2,000/oz mark for the first time in 2H20 and is currently trading at around US$1,800/oz, up from US$1,100-1,500/oz in most of 2013-19, with silver also gaining ground over the last 18 months, although analysts are divided over the outlook for the precious metals.

Copper has also risen above US$4/lb, compared to US$2-3/lb for most of 2017-19, with demand seen rising in the global decarbonization drive.


Against this overall positive price backdrop for Mexico’s main metals, early signs are positive for exploration in 2022.

Mining companies have announced some major exploration programs for the year, with GoGold Resources planning 100,000m of drilling at its Los Ricos silver-gold project and Pan American Silver planning 60,000m at La Colorada Skarn, while S&P expects global exploration spending to rise by 5-15% in 2022.

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