EXPLORATION ’92 — Welcome mat out for Canadian miners in

The Mexican government is openly welcoming Canadian mining companies to bring their capital, expertise and technology to Mexico and help develop the country’s mineral resources.

The invitation was extended to about 150 mining executives at a recent seminar in Vancouver where a delegation from Mexico and the state of Sonora provided details of reforms that are making investment in the country more attractive than in the past.

Ernesto Baraud, Sonora’s secretary of economic development, said the North American Free Trade Agreement (NAFTA) should provide even more opportunity for Canadians to participate in Mexico’s economic revival.

“The mining sector will play a significant role in the development of our country,” Baraud said, adding that Canadian companies can count on “firm and decisive support of our state.”

The event was hosted by the British Columbia & Yukon Chamber of Mines, and co-sponsored by the government of Sonora, the British Columbia government, the Vancouver Stock Exchange and more than 40 mining and service companies. Michael Beley, president of the chamber, said members are interested in foreign opportunities because of an increasingly difficult regulatory regime at home, as well as higher taxes and costs and a lack of security in mineral tenure and access to land.

“We haven’t had any complaints about our sponsoring this seminar,” Beley said. “Our members can’t operate in a vacuum.”

John Brock, president of Northern Crown Mines (VSE), said about 100 companies listed on the Vancouver Stock Exchange are now active in Mexico, and about 50 of these have already acquired projects. Brock expects VSE-listed companies to spend about $20 million annually in Mexico, a significant component of the estimated US$50-70 million currently spent on exploration in the country. “Junior companies are structured with plenty of incentives to succeed,” Brock told the Mexican delegation. “Of the 16 mines currently operating in British Columbia, 14 were discovered by juniors.”

In contrast to Canada, mining activity in Mexico was previously dominated by major mining companies. Most exploration activity was also focused on expanding reserves at existing mines, including silver operations. “We are the world’s largest silver producer,” said Mauricio Toussaint, Mexico’s director-general of mining and metallurgical operations. “Unfortunately, you might say, because prices are so low our silver mines are turning into zinc mines.”

Toussaint pointed out, however, that the country has excellent potential for a variety of deposit types, including disseminated gold. More geological information is being compiled and made available, which Toussaint said reverses previous policy when limited information (only 20% of the country has been surveyed) was considered “classified secrets.”

Toussaint also stressed that the legal framework is now in place for small and medium-sized companies to operate in Mexico. “Our mining laws have been simplified, unified, and clarified, and more land has been made available for exploration and mining.”

The NAFTA agreement is expected to continue the reform process, and allow companies to own 100% of a mine, instead of 49% as is currently allowed. Companies can, however, now hold 100% of an exploration property. The Mexican delegation said support for the recent reforms and NAFTA is strong among the general population. After renegotiating its foreign debt, Mexico stabilized its currency and economy and reduced inflation to about 10% currently, from 170% in 1988. Positive rates of growth are now being achieved, the trade balance showed a surplus in 1990 and 1991, and foreign investment reached US$4.3 billion in 1990, a 60% increase over 1989. “Our reforms will continue and have consistency, because that’s what economic reality dictates in a global economy,” Toussaint said.

Delegates were also told that companies looking to work in Mexico should be prepared to operate with the same environmental standards as at home to keep “public opinion on side.”

Mining projects in the country must go through an environmental review process that can take 30-120 days to complete, depending on the size and complexity of the project. Costs typically vary from US$5,000 to US$45,000, again depending on size and complexity.

Canadian mining companies were also told that the Mexican states are interested in promoting joint ventures with local entrepreneurs, and projects that provide good opportunities for job creation and technology transfer. Details of financial support available within Mexico were also provided, as well as a prediction that North American and European banks and lending institutions should be more willing to finance Mexican projects as NAFTA becomes a reality.

Canadian mining companies active in Mexico predict that heap-leach gold projects and copper projects amenable to solvent extraction and electrowinning will be particularly important in Mexico’s economic revival.