Economic and political uncertainty are driving the investor’s decisions about where it should put its money. Latin America, especially Mexico, is increasingly becoming an attractive option because of its key resources for the energy transition in the region. Moreover, the mining sector continues to strengthen its environmental efforts, as it is starting to be affected by extreme weather caused by climate change.
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According to the latest data from the Ministry of Economy, the mining industry received a 16 percent year-over-year increase in investments in 2021, remaining as one of the most attractive productive industries regarding investment in the country. The ministry reported that total investment summed up to US$4.24 billion at the end of the past year.
The spot gold price rose 0.2 percent on Tuesday for the fifth time in a row to US$1,775.29/oz. In addition, US gold futures also gained 0.2 percent, rising to US$1,791.10/oz. Several economic factors, including falling interest rates in the US, are influencing the spot prices by driving demand, experts say.
Copper prices fell on Wednesday due to increasing tensions between the US and China, the main consumer of the metal, and added to the concern of rising interest rates hampering global economic activity.
Worsening climate change, the energy crunch caused by gas shortages in Europe and pressure on companies to meet net-zero goals have fast-tracked the need to accelerate the energy transition. Experts see Latin America as a geopolitically strategic region in this environment, owing to its important reserves of key metals required for the transition such as copper and lithium.
Now that the pandemic no longer poses a high risk to mining operators and investors, t a surge in mining projects around the world has materialized. Although analysts expected that more projects would be created in line with the clean energy transition, coal projects are receiving significant amounts investment. Mexico is not the exception. Recently, the Mexican government announced that coal will continue to be a staple of the country’s power production.
Amid the industry's push toward decarbonization, several mining companies in Mexico are focusing their efforts on moving away from diesel toward greener alternatives to power their operations. Although companies use different strategies, they are making significant progress.
The water scarcity occurring in northern Mexico has severely affected the way of life of inhabitants, as well as the way companies operate. The problem the north now must confront could become a possibility for the rest of the country, so its companies, governments and citizens must be prepared to avoid it. Although the mining sector is not a major water consumer, companies are worried about their water management and began to develop systems toward better usage of the liquid.
Mining operations around the world are severely affected by extreme weather, especially heavy rains, droughts and fires. According to experts, climate change is becoming a bigger issue, so mining companies are experiencing a much more unusual situation in 2022.
The Federal Electricity Commission (CFE) signed 52 contracts with Mexican coal companies to guarantee the supply of the fossil fuel for the period from 2022 to 2024. CFE emphasized that although there were 121 applicants, only companies with a good track record were selected.
Grupo México announced that it will invest significantly in Sonora in the coming years, creating new jobs and generating wealth in the region. In addition, the company is also carrying out infrastructure works to improve access to water in Nacozari and Cananea.
As companies are looking toward nearshoring strategies to make their supply chains more resilient, Mexico is becoming an attractive destination for investment in areas like semiconductor manufacturing or pharmaceuticals. The mining industry is expected to benefit too, owing to the country’s strong connection to the US and Mexico’s abundance of crucial minerals for the US industry, experts said.
Since 2019, Vulcan Material, the US’ largest producer of construction aggregates, has been involved in a rift with the López Obrador administration, which accused the company of damaging the environment in Quintana Roo. The company nevertheless assured it has efficient mitigating measures implemented in its daily operations.
Grupo México, one of the largest copper producers in the world and the leading producer in Mexico, reported a plummeting net profit 2Q22. The company pointed toward cost increases as sales fell, as well as extraordinary circumstances at its business branches.
The Canada-based Sierra Metals published its 2Q22 production results, featuring a 12 percent copper production increase compared to 1Q22. The increase was driven by three of its Latin American assets in Peru and Mexico: the Bolivar and Cusi mines in Chihuahua and the Yauricocha mine in Peru.