Acquisitions: The New Way for Companies to Become Producers

Although the Mexican government has not granted new concessions and enforces stricter permitting processes, more junior exploration companies are becoming producers through acquisitions of mining projects. While experts say it is unclear whether mining companies can become successful producers this way, it is the most attractive option in the current scenario.

Key mining companies have started buying up active and suspended mining projects in the country with the aim of moving them to advanced-stage and producing projects. Analysts argue that while the success of developing companies through acquisitions is remains unproven, it seems an attractive alternative compared to the traditional approach, which takes about 18 years to bring a project to production.

 “For the past 20 years, the whole game has been let us raise money, drill some holes in the ground, make a big deposit and then sell it to someone else. There are some exceptions, but that has not worked very well for a number of years now. [acquisitions] are now a trend. Whether that continues remains to be seen,” said James Anderson, CEO, Guanajuato Silver.

Guanajuato Silver is one of these companies that tried to become a producer through acquisitions. In 2021, the company, formerly known as Van Gold Mining, acquired Endeavour Silver's El Cubo mine, which restarted processing in October 2021. Guanajuato Silver announced it plans to increase production to 1.8Moz/y of silver equivalent by processing ore from El Cubo and its El Pinguico project. In addition, it is interested in acquiring Great Panther Mining's Mexican mines and plants, which could increase its production to around 6Moz/y of silver equivalent.

Another mining company using the same strategy is Bear Creek Mining, which acquired Equinox Gold's Mercedes mine in April. The mine is expected to have an initial gold production of between 70,000oz and 90,000oz/y. “The potential for expanding at Mercedes and other potential acquisitions is really good in Mexico. The Mexican government is still pro-mining. There have been a couple of delays with people getting various permits, but that is not as much an administrative thing as a political direction, Tony Hawkshaw, CEO, Bear Creek Mining, told BNamericas.

In addition, Magna Gold also became a producing company by acquiring Alio Gold's San Francisco mine in 2020. The project began commercial production in 2021. Zacatecas Silver is also seeking to become a producing company by developing its recently-acquired Esperanza Gold project, previously owned by Alamos Gold.