The Value of Asian InvestmentMon, 10/21/2013 - 10:45
The global financial crisis tightened access to capital from traditional financial centers for many junior companies, which has led to the growing presence in Mexico of companies from a number of Asian countries such as Japan, South Korea, and China. “Right now it is becoming easier for companies to come to Mexico. The country has a good investment environment compared to other countries, and the government provides a good deal of support to mining companies,” says Hiroyasu Takagi, General Manager of the Japan Oil, Gas and Metals National Corporation (JOGMEC). “After 2007, when the price of minerals increased, Japanese companies became very interested in concessions outside of Japan. Japanese companies went to Chile and Peru first, but since these countries offer a limited number of projects, they are seriously thinking about Mexico.” The companies and countries of origin of the investor also stand to gain from this investment over and above the financial returns. Participating in mining projects also helps to foster a stronger mining culture and a transfer of skills. “KORES, a company that is administered by the South Korean government, is funding the advancement of the Boleo project,” says Héctor Espino Hernández, Government Affairs General Manager of Minera y Metalúrgica del Boleo, located in Baja California Sur.
The Boleo project has taken some work to bring it forward from the initial drilling stage in the 1990s to today, with production now scheduled to start in 2014. The progress that has been made during that time is the result of the joint venture between KORES and Baja Mining, with the latter conducting most of the drilling groundwork in 2006 and 2007, and construction starting soon after. It has taken some time to bring the mine into production, in large part because of the unique challenges that the property itself poses. “El Boleo is a complex metals mine producing copper, cobalt, and zinc, and we need advanced technology to separate these metals. We applied new DSX technology, which was developed by the Australian research center CSIRO and commercialized for the first time for Minera Boleo,” explains Tawn Albinson, Managing Director of Minera Boleo. “El Boleo requires soft-rock mining, making it a real challenge to maintain optimal conditions and to operate modern mining equipment, such as conveyors or roof bolters, for example,” adds Espino Hernández.
One unforeseen challenge that caused delays on El Boleo was the fact that the most intensive work was required at the time that the 2008 financial crisis hit. “The delays for the most part had to do with Baja Mining’s funding issues. In 2012 construction started slowing down because of investor activity and the fact that two development banks – EXIM and EDC – stopped releasing funds. It took some time for KORES to take over the project and bring in its own financing, but as a result of that speed picked up again. Furthermore, in 2008 there was already a financing package from private bank consortiums and syndicates but it did not proceed, and it took a couple of years to get financing arranged with the development banks,” says Albinson.
In order to overcome those financial problems KORES increased its share in the project, having started out at 30% it is now at 90%, with the South Korean consortium standing to benefit significantly from the project, predominantly because of the copper that is being mined at El Boleo. “KORES is interested in the project as long as it can produce copper at a more competitive price than the copper that is available in the market,” says Espino Henández. “It is likely that this represents the largest significant investment in Mexico by a South Korean company, and the investment is probably one of the top three investments in the mining industry in Mexico. Around US$600 million is expected to be invested this year, with a total of US$1.8 billion anticipated in total.”