High CAPEX and Investment Expected Despite Uncertainty

Despite the worries of mining industry insiders regarding growing regulatory risks and operational uncertainty, a group of leading mining companies are on track to invest significantly in Mexico as their CAPEX remains high.

The López Obrador administration’s policy has caused uncertainty for various industrial sectors of the country, mining among them. Companies are concerned about the political risks and some have already seen make a direct impact, such as in the case of Vulcan Materials, which saw its Quintana Roo operation stopped by government officials.

Nevertheless, many mining corporations will invest US$2.91 billion in the country in 2022, according to forecasts of 14 key producers assembled by BNamericas. Small-scale miners and companies that did not provide forecasts were excluded, suggesting the actual figure could be even higher. The number surpasses the US$2.68 billion published by the same companies at the beginning of 2022, boosted by the approval of Torex Gold’s Media Luna project at the end of March.

Companies therefore appear keen to continue investing, despite the warnings from industry insiders of a drop in mining investment: In 2021, the Mexican Mining Chamber (CAMIMEX) reported that despite an improved market environment, the performance of the Mexican mining sector worsened due to government decisions and legal uncertainty. In 2021, the sector attracted US$4.24 billion, more than what was collected in 2020 but 15.6 percent below the predicted US$5.03 billion. For 2022, CAMIMEX forecasts an investment of US$3 billion, a considerably inferior amount compared to the US$4.24 billion of last year.

In addition, Gutiérrez said that the lack of concessions and permits is impacting the arrival of new investment and even driving away companies. Gutiérrez stressed that only 30 percent of Mexico’s mining territory has been explored, so the country’s mining potential is tremendous. However, these challenges are causing the country to miss out on opportunities valued at around US$25 billion.

Mining majors with Latin American mines are planning to increase their CAPEX by 18 percent up to US$64.2 billion in 2022, according to the CAPEX Mining report of BNamerica. The main contributors would be Southern Copper, Fresnillo, Torex Gold, First Majestic Silver, Pan American Silver, Newmont and Equinox Gold.

The estimated expenditure of Southern Copper in Mexico is US$939 million, which according to the forecast has already been lowered compared to previous plans, having been cut by US$61 million down to US$1.48 billion.

Fresnillo estimated its 2022 spending would reach US$690 million. The Mexican mining giant has not suggested it would lower this amount, suggesting an increase compared to the US$592 million invested last year.

Torex Gold expects to spend US$377 million now that its Media Luna project has been greenlighted.

The remaining companies, First Majestic, Pan American Silver, Newmont and Equinox Gold registered no changes to their original capital expenditure projection. First Majestic maintains its US$208 million planned expenses, Pan American Silver noted a US$136 million average, Newmont retains its US$125 million budget for maintenance at Peñasquito and Equinox Gold reaffirmed its CAPEX estimate of US$100 million, mainly for its Los Filos mine.