Latin Finance - October 2008 - 26

mexican mining Mexico Extracts Mining Funds by James Crombie exico’s chief mining coordinator bounds across an expansive corner office with views of the potholed, overcast and partially excavated western hills of Mexico City, rolling up shirt sleeves having swiftly removed jacket and cufflinks. “We are fighting against time – the time for mines is right now,” Norberto Roque, Mexico’s general coordinator of mining, tells LatinFinance in an exclusive interview. “Prices are at a very good level.” Behind Roque, topping a pile of baseball caps on a burdened corner stand is a white hard hat and Roque seems ready to don protective clothing, jump down a mine and start digging. An elegant bright orange tie alludes to the fact, with its miniature miner’s hat, pick, and shovel motifs. Mexico was ranked best in the world in The Fraser Institute’s latest annual survey of mining companies, which polled approximately 372 exploration, development, and other mining-related companies around the world. It came top for mineral potential, assuming current regulations and land use restrictions. “We are the biggest recipient of mining investment in Latin America,” says Roque, who sees the main rivalry coming from Peru, Chile, Brazil and Argentina. “There’s a lot of competition and for that reason, we have to work very fast to maintain our level.” Roque speaks rapidly in English and Spanish about the need to seize the day. “Mexico has a very good tradition in the mining sector,” says the official. “Less than 25% of the territory has been explored – the opportunity is still there.” M Mexico is employing some innovative local financing solutions to maintain competitiveness in the mining sector. A new PE fund is also on the drawing board. also very actively involved in exploration, a phase that typically leads to much bigger investment in mine construction, extraction and processing plants. In the first half of 2008, when many sectors in Mexico were depressed, foreign mining investment rose 38%. “It’s also one of the sectors where employment has grown most,” adds Roque. Roughly 40% of the investment comes from abroad – 77% from Canada – while some 80% of projects are in the exploration phase. “We think that this could be maintained,” says Roque, asked how the mix of local to foreign investment will change. Most of the foreign capital comes from the Toronto Stock Exchange (TSE), while locals are raising cash in London, New York and Mexico. Roque notes that London and Toronto’s equity markets are much better developed for miners than Mexico’s bolsa. However, Heredia says portfolio investors must be cautious about mining, which they can play in Mexico through majors like Peñoles, Fresnillo, Minera Autlán and Grupo Mexico. “There’s been a revision downwards in multiples,” says Heredia. “Apart from this structural change, this is a time of much uncertainty. Some miners and metals have good fundamentals, but you need to be very careful.” Others looking at the region say size matters for investors. “Generally speaking the mining companies in Mexico don’t have the scale that you see in Brazil,” says Jorge Beristain, head of Americas metals and Race against time: Roque than $20 billion overall in the Calderón sexenio, which ends in 2012. It got $2.15 billion last year, and has already exceeded that, with $2.18 billion in January to August 2008. “The industry is going through a good period, above all at the level of investment,” says Rodrigo Heredia, mining analyst at Ixe Casa de Bolsa. “Mexico is very rich in some metals and there’s been a large amount of investment in new projects by local and foreign companies.” Roque predicts $3.31 billion of investment in the full 12 months of this year, rising to $3.55 billion in 2009. He pins this increase on heightened demand for metals and a more attractive level of competitiveness in Mexico. The country is Mushrooming Investment Mexico expects to get $3.3 billion in mining investment this year and forecasts more 26 LATINFINANCE October 2008

Latin Finance - October 2008

Table of Contents for the Digital Edition of Latin Finance - October 2008