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.

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. This due diligence must verify the status of all concessions and also assess a project's environmental and social liabilities. Joel González, Partner, ALN Abogados, noted this process increasingly requires interdisciplinary teams, as lawyers alone are no longer sufficient to evaluate the complex web of risks.

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).

Challenges in Project Appraisal

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. González noted this has led to the emergence of a new valuation concept: a project's regulatory and social resilience, or its ability to survive changes in the legal and social landscape over time. 

According to industry experts, investment analysis in the mining sector now extends far beyond the traditional evaluation of reserves and technical potential. The process has become a more complex assessment of a project's liabilities, including its social and environmental legacy, the regulatory stability of its area of influence, and its security situation. High mineral prices are also creating new opportunities within this framework; as noted by Diego Gómez, Director, Mining Development Trust (FIFOMI), the institution has received requests to develop projects that capitalize on historical environmental liabilities, as the current value of minerals now makes processing them profitable.

Mining Requires Stricter Considerations

Alberto Orozco, CEO, Capitan Silver, notes that the key driver is the acquisition of de-risked projects that are already in or near construction, which removes the uncertainty of obtaining initial permits. However, it is still important to avoid common pitfalls like community blockades or legal challenges, which have halted major projects in the past. Experts note that 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, according to experts. "Any materialization of a risk brings with it the materialization of a strong reputational risk, which can impact a project's viability. A risk analysis must also include crisis management and the management of reputational risk,” suggested Ricardo Rázuri, Regional Leader Mining, WTW. 

González noted that a key challenge is convincing both parties of the importance of social and environmental analysis. Sellers, for financial or practical reasons, may rush the process and omit important details, not realizing that strong regulatory and reputational alignment is what adds value to their project. Similarly, buyers can be so eager to ramp up operations that they conduct a less-than-optimal due diligence process.

Looking ahead, the most promising investment opportunities are focused on energy transition minerals, including copper and silver. However, experts note that while Mexico has significant potential in these minerals, access to global capital is affected by geopolitical pressures, while local challenges include stability in regulatory, social, and environmental matters, as noted by Rázuri. 

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. 

With producing assets becoming scarcer, analysts believe the next wave of opportunity will be in early-stage development projects. "We have already exhausted the projects that are in production. I believe the opportunity now lies with those projects that are in development and, especially, those in earlier stages. However, I think we are between five and 10 years away from recovering what we have lost in recent years,” Orozco noted.