Heading East with Mining Investment

Mexico’s traditional mining states are clustered in the northwest of the country. The country’s mineral belts sweep down from the north, laying side by side from the disseminated porphyry copper-molybdenum-gold deposits down the west coast to the zinc-silver-lead mantos, stacks and veins down the country’s center. The country is undoubtedly mineral-rich but the east coast has traditionally been oil and gas territory, its commodities found in the deepwaters of the Gulf of Mexico.

Candelaria Mining believes the east has potential beyond oil and gas. The company acquired the development-stage Caballo Blanco property in Veracruz in July 2016. “Although there are not yet many mining projects in Veracruz and certainly no large-scale precious metals mines, we are now starting to see the state open up more to mining,” says Ramon Pérez, the company’s president. Although Veracruz has faced some high-profile political difficulties over the last few years, he says the government has been welcoming and Candelaria’s mine can help them provide much-needed jobs to the communities. “Caballo Blanco can be a way for the state to surmount its previous problems,” he says.

This return of industry has been welcome for Veracruz, given the slowdown in oil and gas activity. “Because the oil and gas sector has slowed down in recent years, there have been few opportunities for employment in the state,” he says. Along with Almadex Minerals, a mining company exploring in Veracruz, Candelaria is looking to develop its projects and bring the benefits of a healthy mining sector to the state. “I believe there is a lot of potential in the state and there are still a lot of areas to be explored,” says Pérez.

Because the government is so eager to attract investment in light of oil-price stagnation, Pérez says Candelaria has not experienced the pushback that mining companies can encounter when entering states like Oaxaca or Chiapas. “The government of Veracruz walked through the levels of investment with us when initiating the Caballo Blanco project. It also acts as a liaison between the operators and the local communities and NGOs so the latter parties can understand the role of a mining company,” he says. “Social and environmental factors are the most important components of any mining investment, so having government support goes a long way.”

Another benefit of the traditional oil and gas sector in Veracruz is that there is already a great deal of infrastructure in place to boost the development of Caballo Blanco. “Veracruz is already a very industrial state,” explains Pérez. “Fortunately, there is a highway that passes less than 1km from our project and we have electricity that runs through the project. Veracruz obviously has some important ports too. For the mining sector, the infrastructure is excellent.”

This allows Candelaria to focus its attention and resources on the development of the project itself. The concession has been explored in one area, La Paila, where the outcropping mineralization was first discovered. La Paila contains close to 1 million ounces of gold as per the compliant resource from 2012. “We are looking to have the permits approved for the mine soon, at which point we will explore further and increase the resource through an exploration program that will be implemented in 2017,” Pérez says. “We plan to invest around US$12 million more into the mine and from there, we will likely begin a prefeasibility study, which could be released by late 2018.” Construction will likely commence in 2019 and production is planned for late 2019, with the goal of producing over 100,000oz/y of gold.

Having entered the country in 2016, reaching production within three years is no mean feat and requires a hefty investment. Surprisingly, Candelaria has no large corporations backing it but its shareholder base, around 70 percent of which is Mexican. “We are trying to follow the Peruvian and Chilean model and get more domestic investors involved in the local mining sector,” says Pérez. “The Mexican majors – Grupo México, Industrias Peñoles, Fresnillo and Minera Frisco – control the majority of the local mining sector so we would like to bring Mexican investors back in.” Pérez expects to have completed an IPO for Candelaria Mining on the BMV by the end of 2017.