Reuters recently reported on significant investment announcements made by two major players in Mexico’s mining industry. Fresnillo,which is the world’s largest silver producer,will spend upwards of $800 million in 2012 alone,while copper mining giant Grupo Mexico will invest more than $7 billion over the next five years.
Although it is the smaller of the two announcements,the Fresnillo investment is a significant 12 percent increase from what the company spent in 2011. The extra money will largely go to fund exploration and new projects,as well as to maintain existing operations. CEO Jaime Lomelin spoke in Mexico’s Monterrey business district in late May,stating that Fresnillo intends to produce an impressive 41 million ounces of silver and 400,000 ounces of gold in 2012.
Grupo Mexico,which is owned by Mexico fourth richest man German Larrea,already holds the world’s largest copper reserves and plans to raise output to a whopping 1.4 million tones annually by the year 2016,according to Reuters.
“Capital expenditures this year alone will reach $2.6 billion,” wrote Mica Rosenberg and Adriana Barrera of Reuters. “Grupo Mexico’s plan is one of the most ambitious in the industry.”
Grupo Mexico is also Grupo Aeroportuario del Pacifico’s (GAP) largest shareholder,and runs Mexico’s largest network of railroads,as well as a construction company that is involved in power plants and oil field operations. A mine located on Mexico real estate near the U.S. border is playing a key role in the company’s planned investment strategy. Named Buenavista,the mine is expected to produce at least 480,000 tonnes of copper annually by 2015 and is already producing 180,000 tonnes after a recent $140 million investment.
According to Reuters,Grupo Mexico enjoys a strong cash position with projected earnings of at least $5.4 billion for 2012. This,combined with previously issues debt will help to finance the company’s planned expansion.
“We already have mining division bonds in place for 1020,2035 and 2045,” stated CFO Daniel Muniz. “We believe copper prices will likely stay at attractive levels because the market has changed,” referring to growing demand from Asia and a lack of other new projects in the works internationally.