Despite upbeat results from companies operating in the country, official data released early this year shows that silver output in Mexico, the world's largest producer of the precious metal, has dropped over the past two years.
Like much of the rest of the world, the country's mining industry saw very few new mines opening up in the period, marked by a sharp drop in commodity prices. Companies that were already operating, in turn, placed emphasis on cost-reduction and improving capital management.
But there are strong signs of wheels turning in Mexico's mining industry thanks to the ongoing price rally experienced by many of the key metals the country mines -silver, gold and zinc.
Analysts such as those at BMI Research suggest the particular composition of Mexico's mining industry will help the country reap quick benefits, as mineral prices for its key domestic commodities are expected to perform well until at least 2020.
Most of the local industry's expansion in the next five years will be led by gold, a sector that currently accounts for roughly 17% of the country's mining industry value, followed by silver and zinc."We forecast Mexico's mining industry value (MIV) to increase from $15.7bn in 2016 to $17.8bn by 2020, averaging 3.3% annual growth. This growth rate will be largely in line with regional peers," BMI says in a report released Friday.
Most of the local industry's expansion in the next five years will be led by gold, a sector that currently accounts for roughly 17% of the country's mining industry value, followed by silver (16% of Mexico's MIV) and zinc (9%).
Some of the country's main producers, such as Fresnillo LLC (LON:FRES), the world's largest primary silver mining company, are forecasting an increase in production. Last week, the miner announced its $515 million San Julian silver-gold project will continue to ramp up production through 20 17, with the firm on track to produce 49 to 51 million ounces of silver and 850,000 to 870,000 ounces of gold this year.
Two days earlier Goldcorp (NYSE:GG, TSX:G), the world's-fourth gold producer by output, announced operations at its Pe??asquito gold mine had resumed following an interruption due to protests in September, without impacting the firm's production and cost guidance for the year.
Although copper prices will not experience such a strong rebound, Mexico's third most valuable mineral will see solid production growth, supported by low operating costs and a robust project pipeline, BMI Research says:
Southern Copper's $3.5bn expansion at the Buenavista mine will drive copper output growth, with additional projects including the firm's El Pilar project and Azure Minerals' advanced-stage Alacran and Promontorio projects. Over the first seven months of 2016, Mexico's copper and zinc output increased by 22.3% and 4.5% y-o-y, respectively.
Investors see Mexico as a solid market with low production costs, which will continue to help Latin America's number two economy attract foreign investment into its mining sector, says BMI.
The experts note that the country's nascent lithium industry will become more prominent and it may be just what Mexico needs to recover its allure and remain among the most attractive countries for mining investments.