Mexico raked in $718 million in foreign investment in 2016 — up from $3 million in 2015. And no, we didn’t leave out any numbers.
The country raked in $718 million in foreign investment in 2016 — up from $3 million in 2015. And no, we didn’t leave out any numbers.
However, that $718-million figure is small compared to the $5.2 billion in foreign investment that Mexico brought in for 2013. President Enrique Peña Nieto recently announced plans to sharpen Mexico’s competitive edge globally and bring the country back up to 2013 levels. Industry experts estimate that total investment in Mexico’s mining sector will hit $5.5 billion by the end of 2018, and foreign investment is projected to represent nearly half of this total, with the majority coming from Canada.
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Strong investment in Mexico’s mining industry, particularly in gold and silver, is expected to fuel an increase in industry value from $15.7 billion in 2016 to $17.8 billion by 2020. The majority of Mexico’s gold and silver production comes from precious metals-rich polymetallic epithermal deposits.
Epithermal deposits are epic gold and silver producers
Mexico leads the world in silver production and is also a significant producer of gold, as well as a wide range of base metals, such as copper, zinc, manganese and lead. In fact, the majority of the country’s precious metals production comes from deposits containing both precious and base metals, or from polymetallic deposits — a key feature of Mexico’s geological landscape. Goldcorp’s (TSX:G,NYSE:GG) Penasquito, Mexico’s largest gold producer and a significant source of the world’s silver, is a polymetallic mine consisting of two open pits that contain both precious metals plus lead and zinc.
“The geological history of the formation of the Sierra Madre mountain range, or in geo lingo, the ‘Sierra Madre Occidental,’ quite literally created a ‘hotspot’ for the formation of polymetallic deposits rich in precious metals,” Telson Mining (TSXV:TSN,OTCBB:SOHFF) President Ralph Shearing told INN. “These mountains were formed over millions of years from the extensive extrusive volcanic activity of lava flows, ash flows from countless explosive volcanic eruptions plus the intrusion-related activity that provided the heat sources and structural preparation, allowing polymetallic ore deposits to be formed throughout the Sierra Madre’s over 1,200-kilometer extensive regional length.”
Although not all polymetallic deposits are rich in precious metals, many of the country’s most prolific producing gold and silver mines are polymetallic deposits, especially in the northern states of the Sierra Madre region, where the predominate mineralization consists of epithermal veins with associated lead, zinc, silver, gold and copper. Epithermal vein deposits are typically small but high grade and near surface, making them easily mineable.
In fact, epithermal vein deposits are the world’s second-largest producers of gold, responsible for about 12 percent of annual global gold production, and have traditionally been among the most economically important deposit types in Mexico.
Sierra Madre region the richest
Mexico is home to 25,716 mining concessions that together cover 22.1 million hectares representing more than 11 percent of the nation’s total land area. The majority of these concessions are in the northwestern states of Chihuahua, Sonora, Sinaloa, Zacatecas, Durango and San Luis Potosi, which account for nearly three-quarters of Mexico’s mineral production. It is in this region of the country that we find the vast mineral belt associated with the Sierra Madre mountain range, which runs south for more than 1,600 kilometers beginning at the Arizona border.
The Sierra Madre region has been an important enclave for metals mining since the 16th century, when the Spaniards first discovered gold at the foot of the Sierra Madre Occidental. Today, the region hosts most of Mexico’s producing mines as well as exploration and development projects.
“Regionally, the Sierra Madre offers a vast terrain rich in precious and base metal potential that for all intents and purposes is underexplored, even though the region hosts the vast majority of Mexico’s producing gold, silver and base metals mines,” said Shearing. “The state of Durango, approximately midway along the axis of the Sierra Madre Occidental, is one of Mexico’s most productive states for metals production from epithermal polymetallic mines.”
The region surrounding the states of Durango and Zacatecas is known as the Mexico Silver Belt for its world-class silver deposits. Yet, true to their polymetallic nature, these deposits also host large tonnages of gold, copper, zinc and lead.
In the state of Durango, mining has long been considered a traditional economic activity. One of the largest gold-producing regions in Mexico, the state holds many important mining districts, yielding up silver, gold, tin and copper among other minerals.
Great Panther Silver’s (TSX:GPR,NYSE:GPL) Topia mine in Durango is a silver-rich epithermal vein system that also produces gold, lead and zinc. In 2017, total metal at Topia reached a record 1,086,663 ounces of silver equivalent on improved grades and recoveries.
Avino Silver & Gold (TSX:ASM,NYSE:ASM) has two polymetallic mines, both silver-rich epithermal vein systems, in Durango. Its namesake Avino mine produces silver, gold and copper, while the new San Gonzalo mine produces silver, gold and zinc. Combined production from both mines for 2017 included more than 2.7 million ounces of silver equivalent.
Fresnillo’s (LSE:FRES) silver-gold epithermal La Ciénega mine, also in Durango, has been in production since 1995. In 2016, La Ciénega produced 72,851 ounces of gold; more than 5.1 million ounces of silver; 5,883 tons of lead and 7,450 tons of zinc.
Home to Goldorp’s Penasquito mine and Fresnillo’s Zacatecas mine, the Mexican state of Zacatecas is also recognized as a prolific precious metals producer along with lead, zinc and copper. Mining is the dominant sector in this state and its silver output is the main supporter of Mexico’s status as the world’s largest producer of the shiny metal.
First Majestic Silver’s (TSX:FR,NYSE:AG) Del Toro silver mine in the state of Zacatecas contains several hydrothermal polymetallic deposits of high-grade silver in oxides in the upper parts and silver-lead-zinc sulfides at depth. Production guidance for 2018 stands at 2.4 million ounces of silver equivalent.
Advancing toward construction at Tahuehueto
Mexico’s epic metals production spans centuries; however, with an estimated 70 percent of the country’s territory yet to be explored there is still immense potential for further discoveries. The government’s mining-friendly policies and tax structure have attracted a bevy of mostly Canadian mining companies, including Telson Mining.
Tahuehueto, Telson’s advanced development-stage mining project, is located 25 kilometers north of the Topia mine and 40 kilometers northwest of the La Ciénega mine in the state of Durango. Mineralization on the nearly 7,500-hectare property consists of epithermal gold-silver veins and brecciated structures with lead, zinc and copper.
In 2017, Telson completed a positive independent NI 43-101 compliant prefeasibility study (PFS), envisioning a 550-tonne-per-day (tpd) cut-and-fill mining operation, and subsequently prepared an internal PFS aiming to reduce the 21-year mine life of the compliant PFS to a more valuable and robust 12-year mine life with a production rate of 1,000 tpd. Both studies showed very positive economics for an underground operation and management chose to initiate construction of a mine capable of producing at least 1,000 tpd.
The compliant PFS shows probable reserves of 3.3 million tonnes grading 3.4 g/t gold, 41.8 g/t silver, 0.31 percent copper, 1.1 percent lead and 2 percent zinc. Average annual earnings are estimated before interest, taxes, depreciation and amortization at $16.7 million per year and $352 million over the 21-year life of the mine. The compliant PFS also returned an NPV (8 percent) of US$137.8 million and an IRR of 56 percent on a pretax basis.
As part of a pre-production initiative and based upon the successful results of an initial bulk sample, Telson’s management has elected to conduct a program of continuous pre-production that is underway and will continue in parallel to the Tahuehueto mine development and construction phase. Telson’s pre-production toll milling initiative has so far generated approximately US$9.75 million in sales, including the proceeds from the initial industrial-scale bulk sample.
Telson has secured a $15-million loan facility for mine construction and offtake agreements with Trafigura Mexico, a market leader in the global commodities industry. Construction of the mine and mill, which will produce gold and silver in lead and zinc concentrates and a copper concentrate (approximately two years into the mine plan), is slated for completion in late 2018.
Polymetallic mines allow companies to spread their risk across the precious and base metals markets and often by-product credits can significantly impact the economics of a project. Mexico’s underexplored mineral potential and polymetallic-prone geology will continue to offer opportunity for resource investors as Peña Nieto’s government seeks to further strengthen the country’s mining sector.