Mineral council remains player in Mexican exploration planning

When the Mexican government decided in 1990 to privatize its mining sector and open the gates to foreign investment, it put its own mineral resource branch in an unfamiliar position.

Now that vast tracts of government land are being sold to independent Mexican and foreign companies, the Consejo de Recursos Minerales is responsible for making sure that those holdings are sold at the right price. Consejo officials readily admit that cutting deals with experienced private sector bidders has taken some getting used to. One of them told The Northern Miner that two projects had to be withdrawn from sale last year because they were found to have been underpriced.

We are still learning the bidding process, he said.

But the same officials are clearly relishing the expanded role handed to them by a government that is trying to double exploration spending in Mexico from last years $50-million level.

Backed by a US$200 million loan from the World Bank, it will lay the ground work for exploration by providing financial support to small and mid-sized mining companies, including Canadian firms, who have flocked to Mexico since the ownership rules were changed.

The Consejo will also participate in the evaluation of mineral projects before contracts are handed out to private sector explorers, says Jose Cardenas Vargas, the head of Consejos mineral evaluation branch. Government officials believe the Hidalgo-based organization is well equipped to carry out such a mandate. Since the Consejo was founded in 1946 to assist with the development of strategic minerals, it has played a leading role in the discovery and evaluation of some of Mexicos biggest deposits. With a staff of 300, the Consejo (together with other federal agencies) spent US$30 million on exploration last year, more than any other private sector company. Industrias Penoles, the leader among private Mexican companies, spent $13 million on exploration in 1991.

Reports indicate that only 20% of the countrys potential mineral wealth has been properly surveyed, and the Consejo is now updating its inventory of geological data by putting on computer all available information and gathering research material from the bigger companies for future publication. It also expects to complete airomagnetic surveys for all of Mexicos major mineral areas by 1995. It is spending US$4 million on this program. In an effort to make Mexico more attractive to foreign companies, the government has streamlined the process for application and approval of new permits and concessions.

It used to take five years to get approval for a new mining concesssion, said Alfredo Elias Ayub, Mexicos undersecretary of Mines and Basic Industries. This has been shortened to take six to seven months, which is standard worldwide.

In another change from the past, companies who hold mining concessions are now allowed to sell them without obtaining a permit. The sale has simply to be registered with the National Mining Registry.

In addition, a 7% mining tax, adopted when world silver prices were at their peak, has been eliminated.

A big increase in domestic investment to US$570 million in 1990 from US$200 million in 1989 is hard evidence that these measures are working. The industry also grew by 7.7% in 1990 after stagnating at 1% for the past several years because of the economic recession, fluctuating world prices and restrictive mining regulations.

Almost all of the major mining companies in the U.S. and Canada have opened new exploration offices in Mexico during the past 12 months, and more growth is anticipated in the near future.