 MINING: DIGGING A LITTLE DEEPER |
Compared to the agriculture industry, the mining sector is another story altogether. Although Mexico is one of the largest petroleum producers in the world, the price of gas and diesel-essential resources for the mining industry-are relatively high. It comes as little surprise then that one serious inhibitor of investment in the mining sector has been energy costs, not to mention energy shortages.
The government has promised to open the sector to more private investment in the coming years and already allows many companies to produce their own energy. For example, Minera Autlan, which maintains the only manganese mine in North America, is developing a power plant to produce its own electricity in the state of Puebla. Grupo Mexico, Mexico's largest mining company and the world's third copper producer, has also been thinking to invest in energy production.
"It's no secret that we have been talking about
the idea of building a facility somewhere in Northern
Mexico to provide energy for our own facility,"
says Grupo Mexico Deputy CFO Jesus
Eduardo Gonzalez. "Up to date, we are the
second-largest private consumer of energy in the
country." |
In addition to steep energy costs, the mining industry has also had difficulty recuperating from the peso devaluation in 1995, or for that matter, weathering the ups and downs of the exchange rate over the last two years. Although copper prices have recuperated a bit when comparing the current price of 87 cents/pound with the yearly average of 81 cents/pound, a bottoming out of the market has not helped the Mexican mining industry.
Despite energy costs and copper prices, the sector is alive and kicking. Indeed, some of the bigger players in the market have been able to turn the sector's recent travails to their advantage. When several mining companies went out of business after global copper prices plummeted last year, Grupo Mexico was able to draw on its strength as an industry leader to buy out some of its competitors, such as ASARCO.
If there is potential for investment in the sector, it would be in the form of joint ventures between Mexican mining companies and multinational companies with the technological know-how to build electricity generation plants. Minera Autlan, for example, which was nationalized in 1989 and reprivatized in 1993 when it was about to fail, has a joint venture with Australian BHP.
"Today, our challenge is to find synergies with other producers because there is enough manganese alloys capacity in the world," says Jose Antonio Rivero Larrea, chairman and CEO of Minera Autlan. "We are trying to buy or merge with some of our producers to strengthen our position worldwide."
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