Mexican Mining

[McBeanburger]

Mexico to supply $228 mln in local mining credit


Wednesday January 21, 9:15 PM EST

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By Pav Jordan

MEXICO CITY, Jan 21 (Reuters) - Mexico, the world's top silver producer and a major source of base and precious metals, plans to supply some 2.5 billion pesos ($228 million) in financing to spur the domestic mining industry this year.

The funds represent a 20 percent rise over similar loans provided to the industry in 2003 and are about six times the level of mining credits supplied to small miners in 2000, Norberto Roque, director of the state-run Mexican Mining Development Fund (Fifomi), told Reuters in an interview on Wednesday.

The funds should help start or reopen some 70 mostly small gold, silver and zinc mines in 2004, on top of 20 opened last year, Roque said. The mines are small producers, moving between 200 tonnes and 300 tonnes of mineral per month.



Mexico wants to be ready for growth as prices of base and precious metals take an upswing and mines that were abandoned years ago amid a price slump draw the attention of global miners again.

In early January, silver hit a 5-1/2-year high, copper hit 6-1/2 year highs and gold rallied to its highest level since 1990. Mexico accounts for close to 20 percent of the world's total silver output.

"The Fund is promoting actions that can take advantage of this good price cycle," Roque said at his Mexico City office.

"Foreign (mining) companies are coming again to invest in Mexico...A year ago, almost nobody was coming."

Roque said the mining industry credits were open to the entire industry, including, for example, services companies that cater to the needs of the mine and its workers.

As well as the 2.5 billion pesos that goes toward mine development this year, Roque said the government was maintaining a 50-million peso exploration fund for Mexican prospectors.

"If the reserves don't pan out, we absorb the cost, and if they do pan out, then they pay us once the mine is activated," he said.

Roque said the development fund backed loans to 4,675 companies in 2003, compared to 330 companies four years ago.

He said loans range in size from about $3,000 to as much as $13 million in one case, although the average credit given was about $150,000 and the upper end tends not to exceed $2 million. He said loans have been paid back quickly and fully.

While Roque could not say how many foreign companies entered the Mexican mining scene in the last year, their presence has become more and more evident.

He said many of the companies arriving in Mexico these days are the same ones who were active in the early 1990s, when there was massive investment in the local mining sector.

"Now many of these, mostly Canadians, are returning to what they already knew," he said.

In the past three months at least three Canadian mining companies have announced plans for operations in Mexico - including Scorpio Mining Corp. (SPM), Gammon Lake Resources Inc. (GAM) and Metallica Resources Inc. (MR) - all in gold and silver plays. ($1 = 10.988 pesos)


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ADB looks like it might jump, nibbled a bit