Preparing the Mining Industry for the Digital RevolutionMon, 10/22/2018 - 12:09
Q: What were the Undersecretariat’s key accomplishments during this administration?
A: The National Development Plan 2013-2018 included mining as a strategic industrial sector. We emphasized this by also creating a plan specifically designed for the mining industry. The Mining Development Program 2013-2018 has four main objectives: promote higher levels of investment and competitivity in the mining sector, increase the amount of financing for the mining industry and its supply chain, strengthen the development of small and medium mining companies and modernize institutional norms for the sector, improving attention to processes related to mining concessions.
We encouraged a more solid communication channel between the private and public sectors through the establishment of four additional mining clusters to the Zacatecas one, created in 2012. We are also promoting the creation of a new cluster, which we hope will be established before the end of this administration.
Most investors do not usually talk to the Undersecretariat directly but with local authorities first to see what kind of support they can receive from the government before deciding to invest in a project. Unifying efforts is a good way to ensure the future of projects in the country. This will also help ensure that the next government will continue the current work regarding the mining industry. We created committees with municipal and state governments in collaboration with federal authorities to address the industry needs.
Q: How are you shortening and simplifying the permitting process in the industry?
A: The Hydrocarbons Law establishes that mining authorities must consult with the Ministry of Energy if there is oil or other hydrocarbons in the area where the mining concession is required, making permitting processes slower. The Undersecretariat of Mining has been carrying out the Integral Model of Mining Administration (MIAM), which includes the digitalization of 42 related mining concession procedures, updating of the Geographic Information System and the cross-referencing of polygons so they reconcile with the Public Mining Registry. We have also worked on the digitization of files related to mining concessions and the systematization of documents. We want to consolidate and modernize physical spaces for safeguarding documents to streamline the processes of mining regulation. We have also added a temporary increase in the workforce to reduce the backlog in the processing of procedures and correction of data from the Public Mining Registry through conciliation with historical physical records. The CartoMinMex information system is already online and works as a geographical information system for consultation with data from the mining archives, which at this stage includes mining cartography and its public registry.
Q: How is the Undersecretariat creating more international opportunities for the Mexican mining industry?
A: Many Memorandums of Understanding (MoUs) that the previous General Mining Coordination had signed were not being followed up on. We decided to make sure these agreements were put into action. We also increased our outreach by diversifying beyond Canada, even though this country will always be our main mining partner.
The Undersecretariat identified the main mining events and regions in the world that the sector could benefit from and decided to increase its presence in these areas, including Australia and China. In particular, Mexico and China signed MoUs in mining cooperation federally and provincially, as well as between the geological surveys of both countries. Business missions took place with holders of mining projects and throughout the present administration the presence of Chinese companies was gradually increased. Currently, Chinese companies have 20 mining projects in Mexico.
In the case of Australia, we actively participated in promoting investment in important mining events, which was reflected in a gradual increase in investment. Australian companies now have 30 projects in our country.
Q: How are you helping improve the financial opportunities available in the sector?
A: FIFOMI plays an important role as a facilitator of credit to small and medium companies. But in the past, more than 50 percent of the credit was being directed toward housing and transportation, which did not make sense. After many years, we restructured the credit for project financing and have already had several success cases. While FIFOMI used to give only MX$320 million in direct credit, last year it reached MX$1.25 billion.
We have also created a graduate scheme with Bancomext that companies can use as they continue to grow to broaden their financial opportunities. Bancomext has already supported five companies that were recommended by FIFOMI and we expect this number to rise. Our goal is to train companies and teach them how to use more professionalized financial models so they can eventually expand to list on the Toronto Stock Exchange, the most important market for the mining industry.
Q: Why are national banks so resistant to the mining industry?
A: National banks do not want to lend money to the mining industry mostly due to the high risk and the lack of knowledge given the complexity of the industry. The only bank that has shown interest is Scotiabank. It has a rich history in the Canadian mining industry. FIFOMI is helping close these gaps by organizing meetings with investors and banks to find more solutions for the Mexican mining industry. One option is the syndicated loan with the participation of private banks. This strategy has been widely accepted and promises to be effective in promoting the sector. We also collaborate with brokers, such as Trafigura, to offer revolving credit through a select group of banks with 60 days of financing at a favorable rate.
Our direct involvement consists also of providing a fund worth MX$2 million to state authorities so they can promote the development of mines in their states. Zacatecas, Sonora and Chihuahua are involved in this fund, which is designed for small mining companies. There used to be many opportunities and funds available to small mining companies from authorities such as the Ministry of Agriculture, but these have slowly been phased out.
Q: How has the Undersecretary of Mining promoted the restoration of immediate deduction of pre-operational expenses for mining operations?
A: We believe the elimination of immediate deduction of pre-operational expenses for mining operations at the end of 2013 has lowered Mexico’s ability to compete with other mining jurisdictions. We have facilitated meetings between representatives of CAMIMEX and the Ministry of Finance to propose restoration of such a fiscal incentive to Congress. Other actions to encourage mining investment in exploration in Mexico are the freeing up of land from 289 mining lots in the first half of 2018, with an area of more than 157,500ha available for allocation to those requesting it in the form of a mining concession.
The Mexican Geological Survey works on the 1:50,000 scale cartography of the national territory. One of its applications is the evaluation of the potential of existing mineral resources. The information generated by SGM is of public use through an institutional data bank called GeoInfoMex, which allows the information to be easily consulted in different layers, providing a significant saving of time and resources.
Q: What should the next administration prioritize when it comes to the mining industry?
A: The schemes implemented by the current administration have been successful. We strive to leave everything organized for the next administration with a report on our main advances along with suggestions on the main areas of opportunity that we did not get a chance to focus on. One example is updating the legal framework that was mainly approved in 1992. Back then it may have been a leading example in the industry but nowadays it is extremely outdated compared to other laws and regulations related to mining activity, like the environmental law.
A long-term vision and a national policy are also essential to promote the development of mining and the country within a framework of sustainability, economic growth, social benefit and respect for the environment. The field of public policies to support the development conditions of the sector also has great areas of opportunity. Some of these include the creation of a Large Projects Office to accelerate response times and support strategic mining projects in collaboration with other federal agencies, the improvement of the fiscal conditions of the sector through mechanisms such as the immediate deductibility of pre-operational expenses, the development of a secondary market for mining concessions, the expansion of SGM’s activities for the exploration of industrial minerals and the strengthening of the economic, technological and commercial cooperation ties with our strategic partners.