Investor Playbook: Opportunities, Investments and M&As

The landscape for mergers and acquisitions (M&A) and new investments within Mexico's mining sector presents a complex but opportunity-rich environment for savvy investors. As the industry, a pillar of the national economy, navigates landmark legal reforms from 2023 and shifting global commodity demands, a fact-based evaluation is required for successful transactions: one that addresses how to structure deals, perform risk-adjusted valuations, and manage the social and regulatory challenges defining the landscape today.

Recent acquisitions have often been driven by the pursuit of valuable mineral deposits that can provide immediate production growth and enhance a company's portfolio. Recent successful M&A transactions in Mexico’s mining sector include the pursuit of high-grade deposits, exemplified by Torex Gold’s acquisition of Reyna Silver, and asset consolidation for operational synergy, as seen in Heliostar Metals' purchase of the Argonaut Gold’s asset portfolio. 

According to the Fraser Institute’s 2024 Mining Investment Attractiveness Index, Mexico rose to the 49th position, a significant recovery from its 74th place ranking in 2023. While policy  remains a concern, the index shows a modest improvement of 4.76 points and a 61st position in this area. Regarding policy challenges, investors expressed increased concern over Mexico’s regulatory duplication and inconsistencies, leading to a hit of 13 points in this index. Uncertainty concerning environmental regulations also grew by 12 points, while apprehension regarding socioeconomic agreements rose by six points.

In response to these policy hurdles, when attracting investment and structuring M&A deals in Mexico's mining sector, key aspects include rigorous due diligence on concession rights and compliance with 2023’s Mining Law. In major acquisitions, for instance, a critical component of due diligence is verifying the status of all mineral and surface rights concessions. Structuring these large-scale deals also requires careful navigation of approvals from regulatory bodies like the Federal Economic Competition Commission (COFECE) and, once established, with the National Antimonopoly Commission (CNA).

Accurately assessing a project's long-term value has become more complex given the regulatory landscape, specifically the 2023 Mining Law reform. The primary challenge stems from the new uncertainty surrounding the duration of mining concessions. Valuations must now carefully account for the risks associated with the new structure: a shorter 30-year initial concession with the possibility of only a single 25-year extension. This, combined with more stringent conditions for renewal, is a significant departure from the more predictable models of the past.

To avoid common pitfalls like community blockades or legal challenges, which have halted major projects in the past, companies must perform due diligence on community relations and land tenure history. Failing to secure a social license to operate remains the most significant, non-geological risk that can derail an otherwise promising investment, agree experts.

Looking ahead, the most promising investment opportunities in Mexico’s mining sector are focused on minerals essential for the energy transition, including copper for electrification and silver for solar panels.

Despite the challenges, CAMIMEX reported Mexico received US$5 billion investment in 2024, a 2.1% increase from 2023. However, the chamber noted most of this investment was focused on expansion and maintenance activities, rather than on new developments. Similarly, the sector's M&A activity, while substantial, saw its prominence slip. According to transactional data, mining fell from fourth to fifth place among all industries in Mexico since 2023, accounting for 13 transactions valued at US$2.693 billion and representing a 7.1% share of the total M&A market. 

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