Within the mining industry, raising funds is an arduous task. The industry has capital-intensive projects with high risks that not all financial institutions are ready to take on. During Mexico Mining Forum, which took place on Feb 6. at the Sheraton Maria Isabel hotel in Mexico City, panelists discussed how the industry could come together to close the gap between capital and mining projects in Mexico.
FIFOMI is Mexico’s mining development bank and is usually the gateway for companies entering the industry. “We want to be the seed of the industry through supporting micro companies in Mexico which is one of the most unattended sectors. It is a sector that requires a great risk and in order to provide them with the necessary support, we must create alliances with government entities to share the risk,” said Alfredo Tijerina, Director of FIFOMI.
Sara Warden, Senior Editorial Manager of Mexico Mining Review led the discussion on how financial institutions are adapting to the unique needs of mining companies and how the industry itself can obtain more funds. Throughout the discussion, the need to better communicate financial options and to provide industry specific solutions were the main points of discussion.
The Mexican financial market continues to develop but some mining companies such as Carrizal Mining have found it easier to raise capital through international stock exchanges. “On TSX there are 130 issuers that have a project in Mexico. The blend between Mexican and Canadian expertise adds great value. We are seeing a great amount of family-owned businesses looking to list on the stock exchange and more and more private equity companies are also looking to share the risk,” said Rob Peterman, Vice President, Global Business Development at Toronto Stock Exchange (TSX).
From the perspective of an operator, Carlos Silva, Director General of Carrizal Mining believes that the country’s lack of financial structure specialized in mining makes it difficult for companies to raise funds. “As a Mexican mining company, it was difficult to receive funds to carry out our projects, but when we became a public company, funds poured in. We were able to invest US$60 million in the span of three years. This was because utilities were reinvested in the company constantly. The type of money the industry needs is only available in the stock exchange,” said Silva.
The complexity of the Mexican market encourages the specialization of financial institutions. Accendo Bank has been in the market for over 20 years and has participated in many mining operations. “We have an expertise that I believe is unique in the industry. We look to banks such as FIFOMI as allies,” said Javier Reyes, Co-CEO of Accendo Banco.
But with institutions such as these, Warden asked if the financial gap was instead a communication gap between the funding sector and the miners. According to Tijerina, there is a communication gap and a lack of information to the industry. “Miners are going to institutions that have the best communication. We must start tearing down communication barriers and allow information to flow freely throughout the industry,” he said.
“The financial gap is not covered and it is the biggest area of opportunity in the industry. There are signals that the cycle is changing, and with it will flow more capital. There are few Mexican companies willing to take the leap to become a public company, and it is not just in the mining sector. As long as companies keep doing the right thing and setting the example, more money will continue to flow,” Reyes concluded.