Mexico’s Mining Competitiveness

Q: What role will mining projects that are under development or at the advanced exploration stage play in strengthening the mining industry and Mexico’s economy in the coming years?

A: There are 15 mining projects that will begin operating between 2013 and 2015, and 35 are at the advanced exploration stage. However, without dismissing the success of these new projects, it is important to consider that the industry is linked to global market conditions. We are sure that these new mining operations will have a positive impact on the economy, employment opportunities, infrastructure, and quality of life in the communities where the mining sites are located. Furthermore, state of the art technology and keeping up to date with environmental best practices will provide the industry with new vitality.

Q: What strategy will Camimex follow to continue improving the reputation of the Mexican mining industry?

A: We will continue our close collaboration with each community where the mining industry operates. Our strategy is to strengthen the community development and environmental protection programs, and we will also carry on with our communication efforts. It is necessary for Mexicans to know about the importance of the mining industry, the benefits it brings, and the essential role it plays in our country’s development.

Q: What is Camimex’s position regarding the possible reform of the legal framework, and how will you work together with the government to align private and public sector interests while the new law is being designed?

A: We see the Pact for Mexico as a great opportunity to create employment and foster competitiveness, both of which are essential for the country’s future. However, as a sector, we have asked all involved stakeholders to make a comprehensive analysis of the mining industry so that it will not be weakened and investments will not be frozen, which would affect long term employment generation. The latter will have negative repercussions on the quality of life of thousands of families that currently benefit, or will do so in the future, from mining activities in the country.

Q: What is your outlook on the development of the Mexican mining industry in the next year?

A: We estimate that the industry will continue growing in 2013. However, we accept that it might do so at a lower rate than in 2012 due to the global recession, which has had a strong negative impact on metal demand that has been reflected in global market prices. More incentives are required for the sector to continue growing and attracting investment. Investment has a direct positive correlation with being more competitive, and Camimex is promoting all aspects that contribute to raising Mexico’s cempetitiveness for mining investment.

"Declining mineral prices have an impact on the profit margins of mining companies and can cancel out profits altogether. The government’s priority should be to maintain a fair tax regime that encourages further investment in exploration and development, rather than discouraging the industry with royalties that will further squeeze profit margins and lead to mine closures, lost tax revenue, and job losses. The investment environment is currently fragile, and it is likely to remain that way in the near future."  James McDonald, President and CEO of Kootenay Silver

"To develop the mining sector to its full potential Mexico needs a public policy that reduces the cost of doing business in the country. Achieving this goal calls for a challenging recipe: the effective application of the rule of law, the never ending fight against red tape and corruption, the indefatigable defense of private property, and the modernization of the judicial system. On the regulatory front Mexico has a strong mining law, which has been a formidable vehicle for promoting investment and quality jobs over the last 20 years. There have been many rumors that the government believes the mining law needs to be changed dramatically. As the saying goes: if it is not broken, why fix it?" Armando Ortega, Vice President of New Gold and Director General of MSX.

“The possible production royalty tax will not help Mexico. It represents another significant cost for mining companies, on top of income tax and profit sharing, which will take the overall tax burden up to almost 50%. It will definitely slow down new mine developments and it will likely kill some operating mines, too. Companies are in standby mode at the moment." Tawn Albinson, Managing Director of Minera Boleo

"If Mexico wants to continue attracting foreign investment and providing a really good business environment for the mining industry it should forget any additional changes to the law. Specifically, it should avoid any additional tax for the industry, but regretfully it seems that government and many members of congress are very committed to implementing new taxes, disregarding any arguments being made by the experts. They do not see that the Mexican industry is paying taxes, as a whole, just as they are in other mining countries; it does not matter that those taxes are not labeled as “mining taxes.” There is intense competition for foreign investment around the world, and money will go to the places where the best business conditions are." Federico Kunz Bolaños, Partner at Kunz Abogados

"Mexico is very well positioned in the global mining industry, and will remain the number one producer of silver, but it will also become an even more important player in the gold and copper markets. In terms of discoveries Mexico still has a lot to offer, and the SGM believes that it will also challenge other producers in the realm of non-metallic resources. In the last two years the silver resources of the country have been increased to more than 550 million ounces, and gold resources by more than 4.1 million ounces." Raúl Cruz Ríos, Director General of the Mexican Geological Survey (SGM)