Review on Mexico’s Geopolitical Landscape and its Major Mining Projects
16th November 2021
Mexico has a long mining tradition, extending to the present day. Mexico is the largest producer of silver globally, producing some 5,600 metric tons in 2020 (USGS) and a top-ranking producer of gold, copper, and zinc. The potential for discovery within Mexico remains strong, with quite a diverse geologic landscape ideally suited for metal explorers. With a population of 128.9 million people, Mexico is 10th largest country in the world (Worldometer, 2021), and it’s geographic location close to the United States, allows for easy access to foreign markets and international trading routes. A strong national GDP (1.076 trillion USD 2020) coupled with political stability enhances the attractiveness of Mexico as a destination for foreign investment (World Bank, 2020).
The mining industry within Mexico has reliably been strong in the past. According to Mexico’s Ministry of Economy, mining production in Mexico represents 2.4% of Mexico’s GDP and 8.2% of its industrial GDP (Mexican business publishing). In 2020, the government released data stating that the sector employed nearly 350,000 people and contributed $1.5 billion dollars in taxes, with an additional $1.84 billion dollars generated from exports of metals and minerals. This all bodes well for the Mexican mining industry, however, change looms on the horizon.
Reuters, in a recent article outlines how the current Mexican president, Andrés Manuel López Obrador of the Morena party, has taken a firm approach to the mining and exploration sector. In some instances, López Obrador’s government has rejected project permits and prevented the granting of new concessions. The president of the Mexican mining chamber Camimex, Fernando Alanis has stated publicly in an interview that he has “growing doubts on government policies like permitting and concessions will lead to at least a dozen companies shifting new investments to more inviting countries like Peru and Chile”. Alanis stressed this point, adding that “New concessions are needed to revert a decline in exploring for new commercial grade deposits … if new concessions aren’t awarded, there’s no exploration, and if there’s no exploration, the future of mining is simply in doubt”. Strong words from the President of the Mexican mining chamber, but perhaps needed in a time dominated by global change.
This approach taken by the López Obrador led government has seen Mexico slip 4 places down to 42nd position of 77 jurisdictions, on the Fraser Institute’s annual survey of mining companies, which ranks according to geological attractiveness and governmental policies. Similarly, Mexico has slipped to 61st in the Fraser Institute’s Policy Perception Index which access the regulatory frameworks that affects investment, i.e. how government policy effects attitudes towards exploration investment (FraserInstitute.org).
As a final geopolitical note on the political mist surrounding the Mexican mining industry, Reuters carry an article in February 2021 which conveys positive comments from the former mining undersecretary Francisco José Quiroga Fernández. Here, he outlines the rationale that mining companies will enjoy government support if they operate responsibly, in terms of SLO (Social License to Operate), environmental policy and tax. While the future remains foggy, there are tons of reasons to consider Mexico for future investments.
But enough of the political background, here’s a quick fire through the fun stuff, the rocks!
Major Mining Operations
World Class Copper
Grupo Mexico (BMV: GMEXICOB) is a Mexican mining conglomerate, with a whole host of subsidiary companies, operating 9 mines, 4 processing plants and a pipeline of future mining prospects all within the Mexican jurisdiction. In 2020, the Mining Division of Grupo Mexico, totalled sales of US$8.56 billion, a 7.5% increase on sales in 2019. Increase in production rates coupled with a favourable price environment for its commodities are the core reasons behind such an increase. (Grupo Mexico annual report 2020).
Below is a brief run through of a couple of Grupo Mexico’s major projects. Firstly, we look at the Sonora Province home to some famous world class copper porphyries, followed by another mine outside of the Sonora Province.
Sonora Province Mexico
The Sonora province in northern Mexico is known for its copper porphyry’s, of which Grupo Mexico works the largest, the Cananea (Buenavista del Cobre) mine.
Cananea (Buenavista del Cobre) Copper Porphyry – Southern Copper Corporation
The Cananea ore deposits, is considered to be one of the world’s largest copper porphyry deposits. Located in Cananea, Sonora, Mexico, this open pit mine has been worked since 1899 (Southern Copper Corporation, Form 10-k, 2020).
he Cananea copper porphyry is owned and worked by Southern Copper Corporation (NYSE: SCCO), a subsidiary of Grupo Mexico. In 2019, Cananea accounted for 44% of Southern Copper’s total copper production, producing a whopping 965 million pounds (mlbs) of copper (Southern copper annual report 2019).
The deposit itself is 5 km long, 3 km wide and 1 km deep, situated in the southern part of the Northern Cordilleran Orogenic Belt, which stretches from southern Mexico to north-west United States. The geology is prolific for copper porphyry deposits. Cananea is estimated to hold 4.46 billion tonnes of proven and probable sulphide ore, grading at 0.421 % Cu and 0.008 % Mo (NS Energy, 2020). Additional to Southern Copper’s giant porphyry system, a skarn-type deposit lies to the north-west of the giant porphyry. The skarn itself is quite rich, hosting Zn, Cu, Ag, and Pb mineralisation and boasting 100 Mt of ore grading 1.88 % Zn, 0.47 % Cu and 17 g/t Ag.
All seems to be going well for Southern Copper presently, though they have had a bumpy past in recent years, in which a worker’s strike crippled operations from 2007-2010. The mine recommenced operations in 2010, post a court ruling in Grupo Mexico’s favour. Further worker strikes have been threatened as recently as 2019, however nothing as severe as the 2007 event has occurred thus far (Woodhouse, (Fronteras), 2019).
Despite this, in 2019, 70.3 Mt were milled which included 337,960 t of copper concentrate and 5.75 million ounces (Moz) of silver. Additionally, the company has big plans to further develop their subsidiary skarn deposit. Plans are well and truly underway to construct a new concentrator, capable of producing 80,000 t of zinc and 20,000 t of copper per year. This construction is due to be complete in 2022 effectively doubling the zinc production capacity of Southern Copper Corporation (Southern Copper annual report). This couldn’t come at a better time for this project which has an expected mine life/operations through 2070, from a 2009 life of mine study. Exciting news for all those involved!
La Caridad – Industrial Minera Mexico SA de CV
La Caridad mine is a typical copper and molybdenum porphyry deposit, located in north-eastern Senora, Mexico. The orebody has proven reserves in excess of 600 million metric tonnes, averaging 0.8 % copper equivalent (including molybdenum). The deposit was discovered in 1967 by the Mexican Government's Consejo de Recursos Naturales No Renovables (Saegart et al, 1974).
The deposit is mined by open pit method to target the porphyry hosted in diorites and granodiorites, which are intruded by a quartz monzonite porphyry stock and numerous breccia horizons. The porphyry mineralisation itself occurs within the felsic to intermediate, intrusive igneous rocks and associated breccias, which host sulphide rich cavities that are most abundant within the intrusive breccia. The mineralisation occurs as sulphide aggregates which have crystallised in spaces separating the breccia clasts. Such massive aggregates grade to veinlets of mineralisation at the margins of the deposit. Main ore minerals include chalcopyrite, chalcocite and molybdenite. (Southern Copper Corporation, Form 10-k, 2020).
Other Significant Grupo Mexico operations outside of Sonora
Santa Barbara – Industrial Minera Mexico SA de CV
The Santa Barbara mine is located in the Parral mining district, in southern Chihuahua, Mexico. The mining operation works a narrow vein deposit style via underground extraction. The Santa Barbara mine incorporates 3 underground mines (San Diego, Segovedad and Tecolotes), producing zinc, lead and silver.
The geology consists of a thick calcareous shale formation and andesite flows that are crosscut by post-mineralisation dykes and sills of rhyolite and diabase, covered by a thin conglomerate formation, basalt flows and unconsolidated stream sediments (Scott, 1958). The majority of the deposit is hosted in quartz veins within faults and fractures in the lithological sequence. The veins extend for several kilometers, varying in size from 0.5 m - 30 m, and dipping steeply to the west along a north-northwest strike. Metal zoning occurs in some veins with Zn + Pb content decreasing and copper increasing with depth respectively. Eleven main systems of veins exist within the district, with smaller parallel and branching ore bearing veins (Scott, 1958). The main economic minerals are sphalerite, (ZnS), marmatite (ZnFeS), galena (PbS) chalcopyrite (CuFeS2) and tetrahedrite (CuFe12Sb4S13). This mine is a major producer of zinc/lead/copper for the region, contributing significantly to 285,000 tonnes of copper produced in the Santa Barbara region in 2018 (Southern Copper Corporation, Form 10-k, 2020).
Whilst known for its copper porphyries and silver, Mexico does have a hand in the iron ore game - which has been a hot topic for the past couple of years! One of the largest iron ore working deposits in Mexico is the Peña Colorada mine, located in the state of Colima in southwestern Mexico. The deposit is owned equally by Ternium (NYSE: TX) and ArcelorMittal (MT: NA) and worked by open pit. (Ternium Form 10-k, 2020).
Iron Ore Producers
ArcelorMittal and Ternium
Peña Colorada produces 30% of Mexico’s iron ore and employs 1,500 workers both directly and indirectly. This iron oxide-apatite deposit is a complex, polyphase system with iron mineralisation consisting of banded to massive concentrations of magnetite with breccia zones, resulting from several stages of magmatic, metamorphic, and hydrothermal mineralisation. Skarns, dykes and late faults also segment the deposit (ArcelorMittal annual report, 2020). The most abundant mineralisation styles are massive, stratabound and disseminated ore bodies, hosted by volcano-sedimentary rocks of the Tepalcatepec Formation. In 2020, Peña Colorada had a proven resource of 104Mt grading 22.4% Fe, with an additional 150Mt (21.2%) of probable resource (ArcelorMittal annual report, 2020).
Sticking with Iron ore and ArcelorMittal (MT: NA), the Las Truchas mine (open pit) located 27km from Lazaro Cardenas, Michoacán, in southern Mexico is another large domestic iron ore producer. The mine opened in 1976 as a government enterprise (Sicartsa), at the deposits which consists of massive concentrations of magnetite within metamorphic rocks and skarns which formed due to plutonic injections in the local sedimentary rocks. Hydrothermal activity associated with this magmatism created the Las Truchas deposit, estimated to be 7 km long and 2 km wide, with an inferred and indicated resource of 82Mt (30.4% Fe) with an additional 32Mt (31.2%) inferred (ArcelorMittal annual report, 2020).
Finally, on the iron ore trail we look at the Aquila and Palomas mines operated by Las Encinas and owned by Ternium (NYSE: TX). Las Encinas produces iron ore pellets and magnetite concentrate from its operations in southern Mexico, Aquilla and Palomas, based in Michoacán and Jalisco respectively. Aquila is dominantly formed by magnetite, with a hematite cap and a gangue of silicates and sulphides. The mineralisation is both massive and disseminated and hosted along the contact between an intrusive dolerite and a limestone unit.
Palomas is a skarn deposit, it is characterized by massive mineralisation at its core with dissemination at its borders. The deposit is formed along concordant tabular horizons with a NW-SE orientation dipping northeast. Mineralisation is dominated by magnetite with a gangue association of garnet, pyrite and calcite. A suite of dykes of monzonitic and granitic composition intrudes the skarn both altering and displacing sections of the deposit (Ternium, Form 10-k, 2020).
Lastly for the majors, looking back to base metals we look at a couple of polymetallic gold/silver/zinc/lead deposits, Mexico being the number one producer of silver globally after all!
Newmont (NYSE: NEM) lay claim to the polymetallic Peñasquito mine, the largest mine for gold, second for silver and one of the largest for lead and zinc in Mexico (Newmont, 2020 presentation). Located in the northeast corner of the state of Zacatecas in central Mexico Peñasquito is an open pit mine composed of two main deposits: Peñasco and Chile Colorado operated by Minera Peñasquito S.A. de C.V., a subsidiary of Newmont Corporation.
Peñasquito lies within the Mexico Geosyncline, a 2.5km-thick series of marine sediments consisting of a 2,000m-thick sequence of carbonaceous, calcareous, turbiditic siltstones and interbedded sandstones underlain by a 1,200m-thick limestone sequence, deposited during the Jurassic and Cretaceous periods (Newmont Corporation, Form 10-k, 2020). Deposits within the Peñasquito operations are breccia pipe deposits developed as a result of Tertiary intrusion-related hydrothermal activity. The Peñasco deposit is a diatreme at its core, with a diameter of 800m, located just below the alluvial cover. The Diatreme brecciation extends for nearly 1000m below surface. (Newmont Corporation, Form 10-k, 2020).
Total proven and probable reserves at Peñasquito are estimated to be 15.69 Moz of gold, 911.8 Moz of silver, 2.63 Mt of lead (Pb) and 6.3 Mt of zinc (Zn). In 2013 the Peñasquito mine produced 2.67 Moz of gold (Newmont.com). Newmont recently committed to plans to extend the mine life beyond 2040, investing $10 million (USD) in a pipeline of exploration targets near the mine. In 2021, Peñasquito is forecast to produce 660,000 ounces of gold, 30 million ounces of silver, 470 million pounds of zinc and 190 million pounds of lead (Mining.com).
Sticking within the state of Zacatecas, we have a look at Fresnillo’s (LON: FRES) operations at both its Fresnillo and Saucito mines. The company’s name’s sake, Fresnillo mine, hosts a polymetallic deposit consisting of chimneys, disseminated sulphide bodies and vein mineralisation hosted within Cretaceous, sedimentary and volcanic rocks (Fresnillo interim report, 2021). The base metal deposits appear to be zoned around a quartz monzonite stock with silver content typically increasing with distance whilst, conversely, base metal values decrease with distance from the stock. The chimney body contains a wide array of minerals such as pyrite, pyrrhotite, sphalerite, chalcopyrite, galena and silver amongst others. The chimney bodies are thought to predate or be contemporaneous with base metal veins which exhibit a similar morphology. In 2020, a total reserve of 131 Moz (million ounces) of silver was identified for the Fresnillo mine with 716.9 Moz in suggested resources. (Fresnillo interim report 2021).
Just 8 km to the south-west, still within the state of Zacatecas, one finds the Saucito mine. Primarily a gold and silver mine, the deposit here comprises an underground system of epithermal gold, silver and zinc bearing veins with additional values of zinc and copper (Fresnilloplc.com). In 2020, reserves of 139.6 Moz of silver were identified with an additional 565.5 Moz in suggested resources (Fresnillo interim report, 2021).
In total, the Fresnillo District boasts silver resources in excess of 1.3 Boz (billion ounces) at the Fresnillo and Saucito mines. Veins here tend to run between 1-10 km along strike and extend vertically for 500 m-700 m. Exploration in this terrane is challenging since the vein system is blind, covered by post mineral lithologies in the low relief Mexican Central Mesa. Successful exploration methods include mapping, soil and float geochemistry and a variety of geophysical methods aimed at targeting the subtle alteration signature of the mineralised structures into the host rocks. Results are carefully evaluated to determine position with respect to the ore horizon within the veins (Fresnilloplc.com).
So, there we have it, a quick examination of the Mexican mining industry’s geopolitical landscape followed by a brief run through the major mining players and their key projects within the Mexican mining jurisdiction. Whilst there are several other companies in the market presently, those named above caught the eye this time around due to their heightened levels of recent activity coupled with positive results, a combination which never fails to draw the attention of the ever-present spectators.
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