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Investing in Mining is a Capital Idea

At lunch today a colleague posed the question, would you invest in a Mexican mining enterprise? My answer: I honestly don’t have a clue.

A rational approach could be, you have a country that is a member of the OECD, is experiencing steady post-recession growth which all seems to point to a relatively good place to do business. On the other hand you must accept the other reality, that the drug war still rages on, and the destruction and mayhem with which it is associated would make any investor wary.

I thought I’d have a look first, whether there are many mines in Mexico to start with? Initially I went on to the Company/Properties search on InfoMine, but then I decided to go see a colleague who has a map of all the Central American mines on her wall. If you are jealous, you can go here to get one. What I found was a depiction of a very well developed mining sector, almost 90% of the mines in Central America, located in Mexico. For a more comprehensive look at mining in Mexico, have a look at the country profile.

So at least there is one thing I found out with a little bit of research, it is not uncommon to operate a mine in Mexico, bravo. However, what about setting up a mine in Mexico? There is no wall chart adorning anyone’s wall that can help me there.

Corruption is an obstacle that may have to be overcome. In terms of making as sure as possible that your mine will get the go ahead, there are a number of ways to approach this. On the one hand, an ethical approach could be followed making it beneficial in terms of employment and improved services for the local population. Or the other way, choosing a smaller group of beneficiaries, local politicians etc. which may prove to be quicker. The very recent occurrences at major Canadian Engineering firm show that there is always potential for people in power (even successful people with much to lose) to forget their companies code of ethics in search of prestige and profit.

Canadian mining has the lion’s share of development in Mexico with 210 of the 279 mining corporation operating in the country. The same article also points to bribery in what would appear to be a profitable gold mining sector. It is also worth noting, that paying such a bribe in Mexico is a crime in Canada.

So again, is Mexico a good place to invest in mining? All I have established is that, there exists a developed mining industry, with a large Canadian presence, which seems to be turning a tidy profit irrespective of the current security situation. But is there something my little desk study has missed? Or is investing in a Mexican mining enterprise as valid as in Chile, Peru, or even Canada?

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