Mexico keeps up pressure to boost exploration

Within the next few months, the Mexican government will take another step toward full privatization of its mining sector by selling three million hectares of mineral lands.

Having already sold its vast silver and copper mines to private interests, Mexico is preparing to release 15 properties with known reserves of precious metals, copper, lead and zinc.

First off the block will be the Tizapa polymetallic project in the Mexico State. Bids have already been received from Mexican firm Penoles and its Japanese partner Dowa Mining, and according to officials at the Consejo de Recursos Minerals (Mexico’s geological survey branch), a decision is expected within the next few weeks.

A study based on over 10,000 metres of diamond drilling estimates that reserves within the Manto-type deposit stand at 5.2 million tons grading 2.17 grams gold, 277 grams silver, 1.49% lead, 6.46% zinc and 0.58% copper per tonne.

If metallurgical processes developed by Dowa can successfully recover metals from the complex ore, Mexican mining officials are hoping that other deposits in the region will automatically become economic as well.

Since Mexico changed its mining laws in 1990 to allow foreign companies to control domestic projects for up to 12 years from the date of initial production, 40-50 companies have set up exploration offices in Mexico. Most are still pouring over geological maps and looking at available projects from bases in Hermosillo, Sonora and Mexico City.

In a bid to double the amount of exploration spending in Mexico from just US$50 million last year, the Washington-based World Bank has lent the Mexican government $200 million for various initiatives within its mining sector. But according to observers of the international exploration scene, it will take a discovery containing 1-5 million oz. of minable reserves to spark the kind of spending that the Mexican government is seeking.

“We think the potential is reasonable or we wouldn’t be there,” said Bill Mercer, manager of Latin American exploration at Toronto-based Noranda (TSE). “But the jury is still out.”

With foreign debts of US$107 billion and 20% of its population living on an annual income of less than US$350, Mexico badly needs new mines to create jobs and boost its growing economy. As part of a massive privatization program launched by President Salinas de Gortari, Mexico has taken sweeping steps to attract foreign investment in mineral exploration.

Proceeds of the World Bank loan, for example, are being used to fund various government initiatives, including a 4-year airborne electromagnetic survey program designed to cover all of the major mining districts in Mexico. Although the first charts won’t be published for another couple of months, government officials say geological information will eventually be available in libraries in Mexico City and Pacucha.

“The aim of the program is to make information available to the public at a very low cost,” said Alejandro Trejo Repetto, director of operations at the Consejo de Recursos Minerales.

The government-owned regional bank Nacional Financiera is talking about setting up a special fund to finance exploration projects undertaken by small and medium-sized companies in Mexico. According to Financiera director Rodrigo Sanchez Mujica, loans will probably be administered via commercial banks.

The Mexican Ministry of Mines is also soon to be merged with the Ministry of Industry and Trade.

However, efforts to kick start the exploration business have been hampered by the fact that the owners of Mexico’s huge Real de Angeles and Real de Monte silver mines have been struggling to break even in the face of weak prices. Although Noranda and affiliate Hemlo Gold Mines (TSE) are spending $1.5 million to search for copper and gold in Sonora, Mercer said expenditures in 1993 will depend very much on what is found in 1992.

However, he was prepared to concede that Noranda is looking at some interesting projects. And, when The Northern Miner visited Phelps Dodge’s (NYSE) Santa Gertrudis new heap leach gold mine near Magdalena, Sonora, manager Dave Collins was enthusiastic about the local exploration scene. “There is a lot of talk around here about the next gold boom being in the State of Sonora,” said Collins, who claimed that his opinion was based on the amount of exploration going on in the area.