From the 16th century Spanish conquest of the Aztec Empire, to Napoleon III’s intervention at Veracruz 300 years later, Mexico has not always had a smooth relationship with foreign powers. However, one particular bilateral partnership seems to be going from strength to strength – Canada. The world’s second largest country participates in a variety of Mexican industrial sectors, but nothing draws investors so magnetically as the country’s mineral potential. Global mining giants, including Goldcorp and Agnico Eagle, flock south to Mexico not only for its vast reserves of precious metals, but also for the exceptionally low operational costs the country offers.
A total of 65% of all foreign investment into the sector comes from Canada, while a whopping 75% of all foreign capital which contributes to Mexican mineral production either comes from Canada or through it via the Toronto Stock Exchange.
What is more, there are few signs to suggest this trend receding in the near future. Vancouver’s First Majestic Silver, one of the world’s best performing stocks in 2016, has recently announced plans to expand production at its La Guitarra silver mine to 100 t/d following the closure of a bought deal financing project. Quebec-based Cyprium Mining Corporation is also getting in on the act, having announced this week a deal with contractor Bergmann Mexico to expand drilling and extraction activity at its Potosi silver mine.
However, entering the Mexican mining industry is not without its challenges. A new royalty tax has piled pressure on mineral production and cut investor returns, while mine operators must appease disapproving neighboring communities and navigate their way through a thick web of local regulation on land-rights and environmental issues.
Export Development Canada (EDC), Canada’s export credit agency, tasks itself with resolving these issues. Present in Mexico since 2000, EDC aims to support and facilitate cross-border flow of capital between the two countries. Predictably, a lot of its efforts are focused around the mining sector.
Sean Emmond, EDC’s regional manager for Mexico, believes the main challenge for Canadian miners lies in understanding the nuances of doing business in Mexico, and explains how his organization can help.
“In order to develop business in Mexico, an important first step is to hire a local agent or representative who knows the market and has a network of contacts in the sector. EDC and the TCS (Trade Commissioner Service) can provide assistance in establishing these relationships,” Emmond told Mexico Mining Review.
One way in which EDC achieves this is through organizing a series of B2B sessions at key trade shows and conferences, including the Convencion International de Mineria, with the goal of connecting the right suppliers with the right buyers.
“To be successful in the Mexican market, Canadian suppliers must add value. We establish business relationships with mining companies, and then introduce Canadian suppliers to the mining company over the life of the loan,” Emmond explained.
A key focus for EDC is providing support for small and medium-sized enterprises (SMEs), who after all represent the future of the industry. Much of the support SMEs need is financial, and EDC has built up a series of relationships with leading banks and other players in the Mexican financial sector, enabling it to provide a wide range of financing solutions to its clients.
These relationships are not limited to the private sector – EDC works extensively with giant state-owned organizations such as Pemex and the Comisión Federal de Electricidad (CFE) as well, helping Canadian enterprises to establish themselves in the Mexican market and enter the supply chain of the big mining companies.
This structure gives Emmond hope that the strong bond that Canada has built with the mining industry in Mexico can continue to flourish.
“We expect to soon hear announcements of new mining projects being developed in Mexico. The opportunity for Canadian suppliers in Mexico’s mining sector remains significant, and there is room to grow.”
With encouraging signs emerging from the precious metals markets so far in 2016, he may well be right.
The 2016 Mexico Mining Review will feature a series of interviews, insights and analyses covering the biggest trends in the industry today. Visit the website now to download your free copy.