Surge in Metals Demand Benefits Mexican Mining SectorBy Paloma Duran | Thu, 11/12/2020 - 10:35
The COVID-19 pandemic increased demand for metals in the energy, pharmaceutical, automotive and technology sectors. Mexican mining companies have seen higher profits as a result, along with a greater investment influx from Canadian companies.
Douglas Coleman, President of Mexico Mining Center, said last year, Canadian mining companies invested an average of US$30 million a month. However, since September 2020 investments have been close to US$170 million per month. Coleman said requests for gold, copper, zinc and lithium from recovering industries are the main contributing factors that have driven demand, reported El Financiero.
In addition, in 3Q20, the value of gold and silver increased by 29 percent and 44.8 percent, respectively, due to the use of these metals as a hedge against economic instability, which resulted in a 30 percent increase in the value of mining companies.
BMV mining companies reported total revenues of US$3.69 billion in 3Q20, an 8 percent increase compared to last year. Armando Alatorre Campos, President of CIMMGM, said Mexican mining, especially metals mining, is going through an unprecedented time in 2020. The price of gold has remained above or close to US$1,900 and it seems the yellow metal will follow this high-value trend for the rest of the year, reported MBN.
Silver prices have also reached historic levels of US$29.14 per troy ounce. If measured in percentage, the increase in value of silver is much higher than that of gold. Copper has also seen a recovery, climbing to US$3.10/lb. Mexico, an important producer of these three metals, saw significant increases in companies' income, according to a previous MBN article.
Industrias Peñoles, the world’s leading silver producer, was the most benefited company with an increase of 70.4 percent in the price of its shares, followed by Minera Frisco with a 28 percent increase in price and Grupo México with 16.6 percent growth in its stock price.
Fresnillo plc reported strong financial results for 1H20. Octavio Alvídrez, the company’s CEO, said “the combination of higher commodity prices and lower costs has resulted in a significant rise in profitability,” during an interview with MBN.
According to CAMIMEX, the pandemic affected national short-term investment plans but the impact is limited as mining projects are long term. CAMIMEX is expecting a total US$4.98 billion investment this year, which represents an increase of 7 percent compared to 2019.
Fernando Alanis, CAMIMEX’s Director, said that if the country promotes the necessary policies to guarantee a legal, certain and fiscal regime, the mining sector could attract US$24.2 billion in investments over the next six years. This would increase mining’s contribution to the national GDP by 5 percent.