Mexico Mining Background
Mining is one of Mexico’s most important economic activities. Mexico is the world’s top producer of silver (nearly 24 percent of global silver production), and has become one of the top ten producers of gold (125 metric tons in 2021). About half of Mexico’s mining production consists of the extraction of precious metals and produces twelve other distinct minerals, including copper, zinc, graphite, lead, and lithium. Mexico holds the world’s fifth largest copper reserves (copper production was 734,000 metric tons in 2021) becoming the second most important metal in the country in terms of production value. The production of zinc and lead has also increased in the last decade, accounting for nearly 10 percent of the mining sector’s production value, combined. The combination of favorable geology, extensive pre-established infrastructure and vast mineral wealth presents promising mining investment opportunities, though not one without risk. Mexico is rich in precious metals due to its geological nature, experiencing both earthquakes and volcanoes. These events expose the earth’s precious metals for beneficiation opportunities.
A part of the country’s culture since pre-Colombian times, Mexican mining saw a new era of development begin during Spanish colonization, with a particular focus on precious metals exploration. Mexico is littered with thousands of old Spanish mine locations, where vast amounts of gold, silver, and copper still remain. Before the arrival of the Spanish, the indigenous inhabitants of the Sierra Madre territory mined metals primarily through harvesting gold nuggets from placer deposits. The New Spanish arrived in the Copper Canyon area and encountered the indigenous locals throughout Chihuahua. Silver was discovered by the Hispanics in the land of the Tarahumara tribe, and the Urique District began to be significantly mined around 1630. The Spaniards high graded the ore and then moved from mine site to mine site, as there was such an abundance of locations with gold and silver. However, in 1906, social unrest began at the Cananea mine, seeding the ground for the Mexican Revolution. The armed conflict lasted the full second decade of the century, paralyzing the work in many mining districts for many decades. The Mexico that emerged established laws to prohibit foreign companies to be majority owners in any mines and investment ground to a halt. That situation lasted until the 1990’s, when new laws allow foreign companies once again to own 100% of a concession. The changes in the law brought a string of discoveries and the resurgence of long abandoned mining camps. Over time, as technology advanced these old, abandoned sites began to be valuable once again. In 2016, the discovery of a new mineralization style in an old known district, created a resurgence of companies moving back into the Sierra Madre. Mexico’s mining market value in 2021 was $1.81 billion, and accounted for over 360,000 direct jobs, and nearly 2 million indirect jobs.
Mexico’s current level of production represents only a fraction of its potential. Mexico is incredibly rich in mineral wealth, and it’s been estimated that roughly 70 percent of the country has significant geological potential for mining. There is also significant pre-existing infrastructure throughout the country, with approximately 1,158 producing mines. Roughly only 25 percent of Mexico has been explored in detail, meaning there is also considerable opportunity for exploration companies. The global push for decarbonization of the energy chain should create a greater demand for mineral products in the transition to clean energy, clean air, and clean water. Our 1027/SPM team strongly believes that there are rare earths clustered with the precious metals deposits we are pursuing.
Technology has evolved to the point where reopening some of these mines and processing the tailings and dumps can be quite profitable. 1027/SPM has centered our explorations on mine locations primarily in the states of Chihuahua and Jalisco along the Sierra Madre Mountain range. Our inventory of mine sites also includes locations in States of Sonora, Sinaloa, Durango, Colima, Michoacan, and Mexico State. Previously, we produced gold-in-hand in our El Grullo Pilot Plant from over 100 of these mines and recovered gold with a pilot-plant from ten mines across 5 of these States. The positive results obtained from pilot studies together with the experience gained over the last 11 years in Mexico prospecting, analyzing, testing, and circuit design of production systems has convinced our team to begin harvest operations.
Our team has chosen Urique, Chihuahua, in the famous Copper Canyon, as our first location to build a laboratory and pilot plant and begin gold harvest operations. Chihuahua is located in the northwestern part of Mexico and is Mexico’s largest state, about the size of Oregon, Chihuahua shares its border with Texas and is one of Mexico’s most prosperous states, because of the influx of foreign capital. The capital city, also named Chihuahua, has a population of around 2 million is 228 miles south of El Paso, Texas and is connected by a divided highway. Chihuahua is the closest international airport to our area of interest in the Copper Canyon. Travel from Chihuahua to Urique is either by highway or by the El Chepe train to Bahuichivo, then a 33-mile drive on a rock road to Urique.
Copper Canyon
Copper Canyon (Barranca del Cobre) is a canyon system in the middle of the Sierra Madre Occidental Mountains on the western side of the Sierra Tarahumara, in the southwestern part of the state. There are actually six separate canyons in the Copper Canyon system, covering 25,000 sq miles, almost a third of the state of Chihuahua. The principal canyon is Urique Canyon, which is traversed by the El Chepe Railroad. Copper Canyon has a limited geologic history of only a few tens of millions of years versus over a billion years of geologic history for the rocks of the Grand Canyon. With the exception of the rocks at the very bottom of the canyons, the rocks of the Copper Canyon area consist primarily of explosive volcanic ash flows, ash falls, and mudflow breccias deposited approximately 20 to 40 million years ago.
Mining History in Copper Canyon
Despite its name and some small-scale copper mining, the Copper Canyon system has predominantly been mined for silver and gold. The Spanish discovered these precious metals in the 17th century and mining has continued ever since. Mining operations in the Copper Canyon help make Mexico the world’s largest producer of silver. Local miners in the towns within the canyons pan for gold and silver in the rivers and process the ore in their yards or have donkey mining operations and sell the ore to processors. Urique is an old mining town established by the Spanish more than 300 years ago.
Foreign Investment
The U.S. has a strong presence in Mexico’s mining industry with thirty-two companies, led by Newmont and Coeur Mining, having operations or significant investments in the country. Mexico’s mining industry is the fourth-largest recipient of foreign direct investment with the majority arriving from companies in the U.S. and Canada. Recent legislative decisions have created some uncertainty for new exploration, at least in the short term. Companies face stricter environmental reviews and tougher regulations. Investment in Mexico’s mining industry has slowed as the current administration has placed a hold on issuing new mining concessions and new permits. Several major operations have already been forced to shut down, and others have been hit with significant permitting delays. Additionally, foreign investors can no longer outsource labor; however, on a positive note, they may retain 100 percent ownership of all invested capital stock. Another positive is that Mexico’s current president has committed to increased security for mining operations throughout the country, while also waiving a proposed tax increase for foreign mining companies.
So, while these recent changes may look like roadblocks to many companies, our 1027/SPM JV is well positioned to move ahead. We are negotiating agreements with several licensed concessions where permitting is already accomplished or is in the works, and where exploration work has been completed, and where we have geologist’s reports. Additionally, we have verified precious metals values in samples we personally collected, we have developed environmentally friendly processes for extraction, and we are committed to hiring local labor.
Operating Mines, Gold Production Examples
The Penasquito mine is located in Zacatecas and is the largest surface mine in the country. It is owned by Newmont and produced an estimated 526,000 ounces of gold in 2020. It is expected to remain operational until 2032.
The El Limón-Guajes is located in Guerrero and is owned by Torex Gold Resources. This surface/underground mine is currently nearing the end of its lifespan, and is expected to close operations in 2024. In 2020, it produced roughly 430,000 ounces of gold.
The Herradura mine is located in Sonora, Mexico’s largest gold-producing state, Herradura is owned by Industrias Penoles. It is expected to operate until 2031. In 2020, it produced an estimated 425,288 ounces of gold.
The Mulatos mine is also located in Sonora and is owned by Alamos Gold. It produced roughly 150,800 ounces of gold in 2020. It will operate until 2030.
The Pinos Altos mine is a surface and underground mine located in Chihuahua and is owned by Agnico-Eagle Mines. The Pinos Altos mine produced an estimated 114,798 ounces of gold in 2020, and is expected to continue operating until 2026.