Today's Mining in Mexico

In December 1990, further legislative changes were made resulting in a new and liberal political framework with more transparent definitions for the scope of power of government authorities and eliminating many of the obligations and procedures required previously for ownership of mining concessions. In addition foreign capital was finally allowed to participate in 100% ownership of mining properties once incorporated within a Mexican corporation. These changes allowed for the country's economic climate to begin improving once again.

In 1993, the extremely significant NAFTA agreement (North American Free Trade Agreement) was signed by Mexico, Canada & the United States resulting in an explosion of investment in Mexico. The mining industry was one of the big recipients of this foreign investment. Since 2002, the improvement in metal prices has also helped to further increase the investment in mining in Mexico.

As a result of the favourable geological environment, supportive mining regulations, and current metal prices, Mexico has received a substantial percentage of the world wide investment in mining.

Mexico's mining output has reached levels never seen before; its gold production in 2010 was 2.7% of world production, while silver was 19%, and copper was 2% of total world production.

The revitalization of Mexico that is currently underway is rebuilding towns and reopening mines that were shut down for a variety of reasons in some cases at the turn of the century. Dozens of mines have been reopened in the past 8 years creating thousands of jobs and hundreds of spin off businesses.

According to the Secretaria de Economia, a total of 204 mining companies with direct foreign investment had 390 ongoing projects in Mexico in 2006. The State of Sonora attracted 95 of the projects; Chihuahua 59; and Durango 51. Subsidiaries of more than 150 Canadian mining companies were active in Mexico, and subsidiaries of companies based in the United States accounted for 31 of the international mining companies. Of the 390 projects, 327 were still in the exploration phase. Gold and silver were the primary targets for 312 of the 390 projects.

CAMIMEX (Mexican National Chamber of Mines) established in 2007 that one of the big challenges for the mineral industry was finding qualified personnel for the development of mineral projects. Since the growth of the mineral industry seemed likely to continue, the mineral industry in Mexico had introduced a series of incentive packages to develop professionals in the field within the country. One of these programs was the creation of scholarships and training programs in Mexican technical schools and universities of which First Majestic is involved with.

In 2008 the Secretaria de Economia (SE) announced that there were a total of 263 mining companies with direct foreign investment working on 677 projects. Of these projects, 578 were in the exploration phase, 56 were producing, and 15 were in development. Of these companies, 198 had their central offices in Canada, 39 in the United States, 7 in the United Kingdom, 5 in Australia, 3 in Japan, and 11 in other countries not specified by the SE.

Growth continues with the latest statistics from the Secretaria de Economia showing that in 2012, a total of 283 mining companies with direct foreign investment were working on 842 projects. Of these companies, 204 had their central offices in Canada, 45 in the United States, 8 in China, 5 in Australia, 4 in the UK, 4 in Japan, 4 in South Korea, 2 in India, and 1 in each of the following countries: Chile, Luxembourg, India, Peru, Italy, Belgium, Spain and Brazil.

Mines are often the key economic engine of many Mexican communities. Today's modern mining companies tend to work closely with their local communities to develop economic programs and projects to bring more than just the direct employment from the mine. By voluntarily participating in a community, mining companies and other local stakeholders (local government, education institutions, other businesses and farmers) can work together to ensure that the local population, including the poorest segments, can benefit from the presence of new investments and share in the growth potential of the local economy.

Some of the spill-over effects that mining brings into the communities are: employment in the construction and service industries, education, housing, electricity, roads, potable clean water, medical services, and overall improvements to better the standard of living within the communities. All these translate into economic development for the small communities creating a snowball effect for the entire country of Mexico.

Mining related activities continue to be an important component of the Mexican job market providing income opportunities for many. The investment in mining has boosted the employment in areas historically plagued by high rates of unemployment. Mining is now the second most important industry in Mexico, after petroleum but surpassing tourism, according to CAMIMEX. In June 2013, the number of people directly employed in the mining industry rose to 338,143 and indirect employment rose to 1.6 million, according to data from the Mexican Social Security Institute.

In June 2013, employment in the mining sector reported a growth of 3.1% compared to the same month last year. Work in the sector also paid 36% better than jobs in other sectors. In 2012, investment in the mining sector reached $8.04 billion USD. Combining this with previous data reported in investment since 2007, the mining industry invested $25.64 billion USD, representing an incredible and historic amount for the sector and for the Mexican economy.

Silver is produced both as primary silver and as a by-product of gold and base metal operations. Both types of mines exist in Mexico. In 2012, Mexican silver production amounted to 158.6 million ounces (4,496 tons) resulting in Mexico becoming the largest producer of silver in the world.

The major mining states are Zacatecas, Sonora, Chihuahua, Coahuila and Durango. In respect to mineral products; in the metallic category, silver and gold are the most prominent minerals, followed by copper, zinc and lead. The non-metallic category is dominated by cement and bentonite, which hold a majority of the total share.

The Mexican Silver Belt, (La Faja de Plata), historically, is the world's most productive silver district with well over 10 billion ounces of silver production and between 63 to 75 million ounces of gold production. Many of the major mines in the belt include Pachuca, Guanajuato, Zacatecas, Fresnillo, Tayoltita, Santa Eulalia, Parral-Santa Barbara-San Francisco del Oro, and Charcas which have been in nearly continuous production since the 16th century and the first four of this list have produced over a billion ounces of silver each. The belt currently produces about 100 million ounces of silver per year from a combination of epithermal vein and carbonate replacement deposits (CRDs).

Canadian companies have been at the forefront of the global expansion of mining activity, especially in Latin America and Mexico. While in the 1990's Canadian companies accounted for only 12% of mineral investment in Latin America, by the 2000's that number had risen to 33%.

With this increase in investment, it has been important for the Mexican authorities to bring in new regulations that are closer to international standards. Of particular importance to mining investors have been the new environmental regulations. In the specific case of Mexico, SEMARNAP, the ministry of environment in Mexico, has aligned its policies to internationally accepted standards so exploration and mining activities would have a reduced impact on the environment.

Under SEMARNAT, mineral exploration and mining require a number of environmental permits and authorizations to conform to the statutes of the Ley General del Equilibio Ecologico y Proteccion Ambiental, (LGEEPA -- general law of ecological balance and environmental protection), starting with a preliminary environmental impact statement for all major activities or projects. Besides all the environmental permits and operating licenses, the other necessary permits for any mine or plant include: water usage, water discharge, land use, explosives, and hazardous materials handling.

In consideration of these regulations, First Majestic has been implementing a Sustainable Development Policy and as a result, First Majestic has been recognized as a 'Socially Responsible Mining Company' in Mexico for five consecutive years. We are proud to say that First Majestic is one of only 17 mining companies awarded this certification by the Centro Mexicano Para la Filantropia (CEMEFI). In addition, First Majestic's La Parrilla Silver Mine and San Martin Silver Mine are certified as 'Clean Industry' by the Mexican Environmental Authority.