D-l.l 6-62 Spore INTER-OFFICE CORRESPONDENCE Date: December 8, 1966 To: A. M. Wilson From: W. Bourret Sub: Mining Investments - Mexico Ref: A few months ago you and I had a discussion about Mexico- particularly with respect to considering if we could find an approach to mining opportunities in that country, along lines acceptable to Utah. The purpose of this memo is to pass on to you pertinent information I picked up at the recent meetings of the Geological Society of America here in San Francisco, from two prominent Mexican geologists, namely George Ordonez and Arturo Jeyne. George Ordonez, aged fifty-three, is an American trained geologist with consulting offices in Mexico City. I worked closely with George for about seven years while with Kennecott Copper. He is extremely capable and certainly rates as one of the top Mexican mining geologists. His father, Ezekial Ordonez, was known as the dean of Mexican geologists. Presently George is doing work for Kennecott and Union Carbide; also he is the consulting geologist for Minera Frisco (formerly San Francisco Mines of Mexico), an affiliate of Union Corporation. Arturo Jeyne, mining geologist, is General Manager and Director of Compania Real del Monte y Pachuca, S.A. Art is about fifty, very personable, and enjoys an excellent reputation; also he did consulting work for U. C. & M. in the old days when we were drilling Pena Colorado and evaluating the numerous occurrences along the Sierra Madre occidental. During about a two hour conference, these gentlemen talked at considerable length about the problems faced by American mining companies interested in going into Mexico, common mistakes and how to take advantage of the Mexicanization regulations. Both spoke encouragingly about doing business in Mexico, providing the American company takes the trouble to learn the pit falls and get started in the right direction. Among their comments and recommendations are the following: (1) Avoid the common mistake made by most companies, of looking around at submittals and/or examining prospects before finding a Mexican partner and setting up a joint venture. To: A. M. Wilson - 2 - December 8, 1966 (2) Come to Mexico City, talk to banking, mining and business people and spend a little time in getting acquainted with the mining fraternity. (3) Look around for a Mexican mining or business group in whom you have confidence and try to get to know them. Then consider setting up a Mexican joint venture; or, alternatively, seek out a going Mexican mining company whose management you have some confidence in and believe you can get along with. (4) Seriously consider entering into a business arrangement with an established Mexican ore buyer. There are hundreds of small leasors and family run high grade producers who work through ore buyers to get their ore to a smelter or market. Rail transportation in Mexico is cheap by our standards. (5) The idea behind Mexicanization is to create a climate of confidence favorable for long-range mineral development. Also to provide certain incentives to attract more Mexican capital. Among these is a provision reducing taxes to an equivalent of 15 - 18% of the gross value of the ore produced. (6) Remember that when the chips are down the Mexicans will insist on control - which they have legally anyway. But if you are smart and play it their way you can make money. Both Ordonez and Jeyne would, I am sure, be glad to help Utah personnel in meeting leading mining people in both government and industry circles. They are both busy men and I am certain are not trying to promote themselves or any special interests. I feel as you do that mining opportunities must exist in Mexico. Also that it would be worth our effort to spend whatever time it takes to get better acquainted and gradually develop factual information on the investment climate and the type of people we would be doing business with, should we eventually decide to set up a mining organization in Mexico.W Bourret W. Bourret WB:ba