Industry Trend Analysis - Mexico Mining Well-Positioned For Price Rebound In Key Metals - NOV 2016


BMI View: Mexico ' s mining industry, dominated by precious metals and zinc , will be well-positioned for the expected price outperformance of these minerals over the coming years . The country's mining industry value growth wil l be supported by rising prices and a strong project pipeline.

Mexico's particular composition of the mining industry will benefit as mineral prices for its key domestic commodities continue to outperform over our forecast period to 2020. We forecast Mexico's mining industry value (MIV) to increase from USD15.7bn in 2016 to USD17.8bn by 2020, averaging 3.3% annual growth. This growth rate will be largely in line with regional peers. In particular, the silver sector, which accounted for approximately 16% of the total MIV in 2016, the gold sector, which contributed 17%, and the zinc sector, which accounted for 9%, will drive MIV growth. For instance, leading precious metals miner Fresnillo's USD515mn San Julian silver-gold project will continue to ramp up production through 2017, with the firm on track to produce 850-870 thousand ounces (koz) of gold and 49-51 million ounces (moz) of silver in 2016. On October 8, major miner Goldcorp announced operations at the Penasquito gold mine resumed following an interruption due to protests in September, without impacting the firm's production and cost guidance for the year. In July, junior firm Cyprium Mining restarted production at the Potosi silver mine in Chihuahua, after being mothballed for 4 years, in six months and for less than USD1.0mn.

Although copper prices will not experience such a strong rebound, Mexico's third most valuable mineral will see solid production growth, supported by low operating costs and a robust project pipeline. Southern Copper's USD3.5bn expansion at the Buenavista mine will drive copper output growth, with additional projects including the firm's El Pilar project and Azure Minerals' advanced-stage Alacran and Promontorio projects. Over the first seven months of 2016, Mexico's copper and zinc output increased by 22.3% and 4.5% y-o-y, respectively.

Precious Metals To Dominate Industry
Mexico - Mining Industry Value By Commodity (%), 2016
Source: BMI

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