Financing a Nationwide Mining CultureWed, 10/16/2019 - 17:52
Q: What are FIFOMI’s top success stories in the last year and what factors impact your activities?
A: There are three success stories that have been emblematic for FIFOMI. The first is related to a ceramic floor coatings manufacturer that received a MX$116 million loan in 2015 to build a new plant. The second success story is a cement manufacturer that received a MX$192 million loan in 2017. The third was a company involved in the industrialization, transformation and commercialization of calcium carbonate. This company received two loans from FIFOMI totaling MX$130 million. FIFOMI strives to reactivate the economy through these loans while generating new jobs in the market.
Both internal and external factors impact our activity in Mexico. Regarding internal factors, we need to increase the number of direct projects and credit lines for projects that take place in mining communities. Our goal is to support small and medium projects, although we are including projects that we call micro, whose lines of credit must range between MX$70 million and MX$80 million.
Q: FIFOMI is regulated by the same criteria and regulations as commercial banking. What added value does FIFOMI provide to mining companies?
A: Our added value is our specialization and deep knowledge of the industry. FIFOMI finances projects along the mining value chain and in some projects, we partner with commercial banks and other development banks. These banks partner with us because of our knowledge of the sector and because both commercial banks and development banks rely on FIFOMI’s opinions. Our knowledge provides certainty for our allies.
Our partners include Accendo Bank, Bancomext, Nafin, Bansefi and mineral traders. All of them are interested in helping us finance micro and small mining projects, especially those that have an important social impact in the community. Exploration is risky for a bank like FIFOMI. When it comes to exploration projects, we participate once we have approval from the Mexican Geological Survey, given that the most optimistic scenario is that only one of 10 exploration projects are actually successful. Another of our differentiators are the interest rates we offer, which are lower than those of commercial banking.
Q: How does the Mexican mining industry compare to that of other Latin American countries and what role does insecurity play in that?
A: No other country in Latin America has an institution similar to FIFOMI. All projects are financed through traditional commercial banking, by listing on stock exchanges or other non-traditional methods. The Colombian government has approached us because they want to implement a model similar to ours. In Mexico, certain areas are complicated from a security point of view. However, in areas where mining projects are established, insecurity and crime rates decrease. One of the government’s goals is to generate economic activity in those areas to eliminate violence and insecurity through the creation of employment and wealth. Mining is key in this effort, which FIFOMI supports.
Q: A good way to attract financing is to participate in the stock market. Why is there so much reluctance in the Mexican mining industry to participate in the stock market?
A: Financing is a big concern for the industry. There are several factors as to why companies are reluctant to list. One is that the majority of Mexican SMEs that participate in the mining industry are family-owned businesses that do not necessarily meet the requirements established by stock markets. It also requires setting up a corporate government and to carry out periodical audits, which many companies are reluctant to do. In addition, stock markets require reserves certifications and many Mexican companies do not have them. However, the Mexican Geological Survey is already working on the creation of an international certification to this end.