Veracruz Operator Wary of Political Changes

It has not been easy being a miner in Veracruz. The embezzlement scandal that brought down Governor Javier Duarte in 2017 followed by a two-year provisional state government has forced many projects to be placed on hold until a new six-year term governor is elected in 2018. Candelaria Mining, the company that operates the Caballo Blanco project in the jurisdiction, was among those affected, curtailing its activities until the picture clears, says Ramon Pérez, the company’s President and Director.
“With state and federal elections taking place in July we are hopeful to see some of the uncertainty from investors subside and a resurgence of interest in the mining industry,” he says, “We would like to see a landscape where the country improves on some of the concerns with respect to security and corruption we see today.” The 2018 elections have prompted Candelaria to tread carefully with its operations in Veracruz. Having filed the environmental permit for Caballo Blanco with SEMARNAT, the company chose to retract it until the election process has settled.
There is a sunny side to the forecast, however, as a benefit of the current political instability is the favorable effect it has had on gold prices. As a gold producer, Pérez says the outlook appears favorable since gold is trending in the right direction. Nevertheless, he says miners inherently must be prepared for fluctuations. “I cannot predict gold prices, which is why we try to work with quality projects that can withstand the price movements,” he says. “When we acquire projects, we factor in the volatility of the metal price for that reason – gold prices are unpredictable.”
The company itself has had little trouble attracting funding, which Pérez sees as a vote of confidence in Candelaria’s projects. In mid-2017, Agnico Eagle invested US$9.7 million in Caballo Blanco, a project the Canadian giant had been familiar with for many years, stretching back to when Goldgroup and Timmins Gold (now Alio Gold) owned the concession. “I do not believe the funding came from actions on our part; I think the project spoke for itself,” he says. “A company like Agnico Eagle does not settle for 600,000-ounce deposits, it looks multi-million-ounce projects. I think that is a real vote of confidence for us.” As far as the project goes, Pérez explains that there are around six zones that have yet to be drilled but have very similar characteristics to that of the zone where the current resource sits.
Candelaria’s advanced exploration-stage Pinos property is located in Zacatecas, a less politically-charged environment. Pérez says the company has finalized the engineering work and recently applied for a permit. Candelaria is now looking at financing options for the project. “We are exploring various financing options and when we finalize that we will consider entering the construction stage,” he says.
Although Pinos is not Candelaria’s flagship mine, it is the way the company envisions itself continuing to generate cashflow while development and exploration work at Caballo Blanco continues. Pérez is also conscious of the importance of maintaining a constant project pipeline, which is why the company intended to drill out the La Paila project in Veracruz. “We carried out a 2,000m infill drill program at the La Paila zone in 2017,” says Pérez. “Right now, we are in cash conservation mode until there is a clear picture of the next president and the new governor of Veracruz, but we will reinitiate operations when the timing is right.”
With the establishment of a new stock exchange in Mexico (BIVA), Pérez says that Mexican investors may be increasingly attracted to mining. “There is a big change going on in Europe and Canada, where there are rumblings of big banks cutting back on their research platforms,” he says. “That will be a shakeup for the market, and potentially the BIVA has arrived at an opportune time.”