Features of the Program

The Ministry of Economy released the Mining Development Program 2013-2018 (the "Program") at the Official Gazette of the Federation on May 9, 2014. The Program is aligned with the objectives set forth in the National Development Plan 2013-2018, and is aimed to: (i) promote higher levels of investment and competition in the mining sector, (ii) increase financing in the mining sector and its value chain, (iii) promote the development of small, medium and social mining (mining within local communities that have mineral resources), and (iv) overhaul the institutional regulation for the sector and improve the internal processes related to mining concessions, including those related to responding to requests and inquiries from private parties. In addition, the Program specifically contemplates Mexico's need to expand its markets towards participating in the exploration and exploitation of minerals that are used in high technology manufacturing such as titanium, cobalt, antimony and, of course, rare earths, which are deemed to be the mineral of the future[1]. Currently, 70% (seventy percent) of the Mexican territory (1'375,063 km2) has potential for the development of mining projects.

The mining industry in Mexico

The mining sector has been, and currently is, crucial for Mexico's development. The mining industry represents the fourth source of income, only behind the automobile, electric and electronics and oil industries. According to data published in 2012, Mexico is in the top-ten ranking regarding the production of 16 minerals and is the global leader in silver production. In addition, mining represents an important number of permanent employees and the average salary in this industry is 37% higher than the national average. The Mexican mining industry has been distinguished as one of the most competitive globally; during, 2011, 2012 and 2013, Mexico was ranked as the fifth most attractive country for investing in the mining sector, according to reports issued by Behre Dolbear[2], only behind Australia, Canada, Chile and Brazil.

There are certain factors, including, among others, China's "slowdown", that have affected the price of minerals and thus, the Program is aimed to serve as a power tool to revamp Mexico's mining industry considering, among key factors, Mexico's privileged location and its potential regarding natural resources. However, Mexico still has an area of opportunity to work on its own internal issues such as land ownership/occupation, the new tax regime/mining royalties, relationship with communities, institutional strengthening and increased operation costs[3].

Mining clusters, the Mexican Geological Survey and the Mining Development Trust

The Mexican states with the most relevant mining activities are beginning to implement alliances with the local public, private and professional sectors that are directly related to the mining industry; their purpose is to establish synergies within the different participants to result in new business opportunities to be developed at the local or regional level[4].

On the other hand, the Mexican Geological Survey (Servicio Geológico Mexicano in Spanish) holds world-class geological and mining information and infrastructure to support investors in the implementation of their projects. This information is publicly available through the electronic system / data bank called GeoInfomex which provides valuable elements to be assessed for purposes of exploration activities and project development.

Finally, the Mexican Trust for Mining Promotion (Fideicomiso de Fomento Minero, also known as FIFOMI) was created by the Mexican federal government to promote the development of the mining industry[5]. For that purpose, the FIFOMI: (i) provides financial services[6], (ii) offers technical and administrative training, and (iii) provides technical assistance to medium and small size companies[7].

Specific targets set forth in the Program

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The mining authority and 2014 projects

The General Coordination of Mining (Coordinación General de Minería in Spanish) is the authority in charge of the Mexican mining sector and the primary responsible for the success of the Program. Its activities include: (i) promoting Mexico as a mining investment destination by, among other activities, actively participating in international and national mining events and roadshows[9], (ii) generating and facilitating access to the GeoInfomex system, and (iii) promoting mining projects as specific investment options, such as those described below:

Projects to bid during the first half of 2014

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Projects to bid during the second half of 2014

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Conclusion

Based the status of global mining, including the rise of other Latin American economies such as Peru and Colombia as recognized mining countries, Mexico is determined to use its geological wealth to attract mining investment and improve performance of this sector from all key corners, as described above. We are positive that Mexico's new National Infrastructure Program and, very importantly, the Energy Reform, whose secondary legislation is currently being discussed in the Mexican Congress, will also positively impact the mining industry in terms of communications and transport, as well as in the eventual reduction of operation costs, particularly power and natural gas. On the power side, the Energy Reform has opened the sector to allow private companies to generate and sell their output to other third parties and in this regard, the CFE (Mexico's national power company, and a former monopoly) would participate with other generators in a competitive market and that should result in lower tariffs and a more reliable service. Mining companies may be able to produce their own power and sell any excess to third parties. On the other hand, regarding natural gas, the draft secondary legislation to the Energy Reform, as currently proposed, would allow coal mining companies to extract natural gas through the obtainment of the respective permit[10]. In the event you have any questions or comments regarding the Program and/or the 2014 projects, please contact us as indicated below.