Title | 592_Conditions That Affect Mining Exploration and Mining Production in Mexico |
Creator | Utah Construction Company |
Description | In 1928, Utah Construction Company completed its first project outside of the United States with the 110 mile railroad for Southern Pacific of Mexico. Over the next 30 years, UCC continued to work on projects in Mexico including dams, roads, mining, and canals. The collection contains several booklets and correspondence along with approximately 500 photographs. |
Subject | Ferrocarril Sud Pacífico de Mexico--History; Mexico; Dams--Design and construction; Asphalt pavers--Mexico; Canals--Mexico; Sonora (Mexico : State); Chihuahua (Mexico : State); Sinaloa (Mexico : State); La Quemada (Mexico); Tepic (Mexico : Territory); Railroads--Design and construction |
Digital Publisher | Stewart Library, Weber State University, Ogden, Utah, USA |
Date Digital | 2010 |
Temporal Coverage | 1923-1928; 1945-1958 |
Item Size | 8.5 x 11 inch |
Medium | Correspondence |
Item Description | eleven page paper |
Spatial Coverage | Mexico, http://sws.geonames.org/3996063, 23, -102 |
Type | Text |
Conversion Specifications | Archived TIFF images were scanned with an Epson Expression 10000XL scanner. |
Language | eng |
Relation | https://archivesspace.weber.edu/repositories/3/resources/212 |
Rights | Materials may be used for non-profit and educational purposes; please credit Special Collections Department, Stewart Library, Weber State University. |
Source | MS 100 Bx 93, 100, 101 Special Collections, Stewart Library, Weber State University |
OCR Text | Show 96) Return to Harry McNev Mexico- Copper & Exploration ABSTRACT CONDITIONS THAT AFFECT MINING EXPLORATION AND MINING PRODUCTION IN MEXICO Private mining industry is experiencing difficult times in many countries that are or have been large mineral producers. Would Mexico offer opportunities for exploration and production? Mexico is a mineral rich country. For the exploration en-gineer this is the most vital point. If the exploration groups are professionally adept, they will find mineralization. A broad review of metallogenetic provinces and of past and present production in Mexico can be used as a guide to explora-tion. Although Mexico is well endowed with minerals, there are many factors that must be considered before a determination can be made that the mineral discovered is ore; (a) restrictive factors in-cluca governmental policy such as taxes, Mexicanization, commodity prices and certain laws; (b) favorable factors include a stable government, strong and freely-convertible peso, and relatively low direct-production costs. -The Mexican mining industry offers an opportunity to those willing to study the problems, accept the law, and invest in the social -as well as financial- future of Mexico. CONDITIONS THAT AffECT MINING EXPLORATION AND MINING PRODUCTION IN MEXICO I. INTRODUCTION. The potential foreign investor in Mexico's Mining In-dustry must carefully consider many facets of the industry and of the country. On the positive side, a stable govern-ment, a healthy monetary position and. above all, a mineral-iy rich country can be found. However, no investments should be made until the potential investor has investigated the min-ing law with its Mexicanization requirements, the mining taxes, the technical manpower regulations and the power of the ex-ecutive branch to set commodity prices. The official mining policy during the period 1930 to 1954, did not encourage investments in the mining industry. However, the future looks much brighter, for now Mexicanization has been accomplished for over 90% of the industry and the gov-ernment realizes that mine products provide a base for Mexico's currency and bring in foreign exchange, that mining provides an important source of government revenue and is an important con-sumer of power, supplies, and transportation services. Also, and of great future importance, Mexico's expanding industry will be in need of more raw materials to supply its demand and its increasing export of manufactured goods. II. HISTORY. The Spanish conquistadores were obsessed by the riches found in Mexico - particularly gold and silver. Thus began the systematic plundering of the new colony and the beginning of mining as the basis of Mexico's economy, Mexico became known as the "mine and mint of Spain". Major mining districts such as Taxco, Zacatecas, Santa Brbara and Guanajuato were discovered and brought into pro-duction between 1520 and 1550. It is interesting to note that these selected districts are ail still in production. From 1810, which saw the start, of independence from Spain to 1910 when the Mexican Revolution broke out, mining continued to play a leading role in the national economy. It probably would be fair to say that it sustained the economy. From 1875 to 1900, for example, mining accounted for 70% of the value of Mexico's exports. During the period of the 1910-1917 Revolution mineral pro-duction sharply declined. Silver, lead, and zinc, however, hit their peaks in the late 1920's nut then the general depression followed by governmental restrictions and high taxes reduced exploration which then was followed by reduced production and to date the peaks of production of the late 1920's have not been reached. Under the progressive regime of President Diaz Ordaz, which started in 1964, governmental stimulation to the mining industry has led to greater exploration which is now showing up in increased production. Today Mexico ranks as the leading producer of silver and is the fourth largest producer of lead, fifth of zinc and fourteenth of copper. Mexico also produces major amounts of mercury, bismuth, sulphur, antimony and is the leading producer of fluorite. The entire mineral industry accounts for over 20 percent of the country's foreign exchange earnings although this amounts to less than 2% of the Gross National Product. III. CONDITIONS IN THE MINING INDUSTRY OF MEXICO THAT AFFECT IN-VESTMENT. A. Mexicanization. The term Mexicanization has often been misinterpreted as nationalization. Mexicanization only implies the control of a company in Mexican hands. The transfer of control from foreign to Mexican hands proceeds on a private level by negotiations between local and foreign businessman. Although foreign capital is welcomed, the investor should not expect more favorable treatment than that accorded domestic investors. In Mexicanization it is implicit that as a country progres-ses and matures it must create a body of national capital. For if the profit earned leaves the country (although it created jobs, paid taxes, etc.) the servicing of loans and repatriation of capital would likely endanger the balance of payments leading to an unsound economy. Instead, by retaining within the country at least 51% of the profit, a national capital can be created which is so necessary for further economic expansion and industrialization. - 3 - In 1961 a mining law was passed providing that new mining concessions can be granted only to Mexican nationals, and companies in which a minimum of 51 percent of their capital stock (or 66 per-cent in some instances) is owned by Mexican nationals. This same law, however, granted tax privileges to Mexicanized companies. B. Immigration Restrictions. To protect their skilled and unskilled labor, the Mexican Government has regulated the immigration of foreign technicians in-to Mexico. However, if for the good of the country it is felt that a foreign expert is vitally needed, he can be permitted to enter generally with the stipulation that he train his replacement. Mexican universities are training mining engineers, metal lurgists and geologists but their training is principally academic and an industrial training period is necessary to make these en-gineers capable of filling normal production positions, C. The mining law of Mexico was completely redrafted in 1961, This is an extensive law and only a few of the points will be discussed, 1. Only Mexicans or Mexicanized companies have the right to obtain concessions. 2. A concession shall have a maximum surface area of 500 hectares l hr = 10,000 sq. meters). The sides of the con-cession are limited by vertical planes, 3. The total maximum concession area for a company or an individual is limited depending on the substance. However, three times this maximum can be held for a five-year exploration period. As an example for gold, silver, copper, lead and zinc, a maximum of 9000 hectares can be held for the first five years. After this five year period, a maximum of only 3000 hectares can be held. 4. Mining concessions are issued for 25 years but may be extended on proof of effective exploitation. 5. Assessment work is required. D. Taxes. Taxes paid by mining companies include: 4 1. Income Tax. This tax is modarate and has a maximum of 42%. 2. Production and Export Tax. These taxes are based on price set monthly by the Treasury Department. This official value is arbitrary and can change but generally reflects world prices. These taxes are levied whether the Company is making an operating profit or not. 3. Surface Tax. This tax is a rental on mineral concession of $1.20 dollars per hectare per year. 4. Capital Gains. Capital gains are included in gross income but at a reduced percentage depending on the length of time that assets have been held. 5. Depletion. There is no deduction allowed for depletion. 6. Amortization and Depreciation. It can be stated that deductions allowed are those that the tax authorities regard as normal and necessary for conduct of business. 7. Reduction in Taxes for New Mines. A directive calls for a five year reduction of up to 40% income tax and up to 100% of the federal portion of the production and export taxes, and accelerated depreciation and amortization for certain investment in new operations. 8. Other Taxes. Other taxes such as social security payments and distribution of a portion of annual profits to employees are required. E. Metal Prices. Metal prices for sale in Mexico are set by a govern- - 5 - merit agency. These prices are lower than world prices and act to subsidize Mexico's metal-using industries at the expense of the mining industry. F. Favorable Conditions. 1. Stable Government. The Mexican Government is stable and this stability will be entrenched each passing year with the development of a larger middle class and the strong emphasis on education. 2. Financial Stability. Exchange restrictions have never been imposed and funds are freely convertible and transferable to and from Mexico. The exchange rate has remained at 12.50 pesos per U.S. dollar since 1954. An exchange stabilisation agreement exists between Mexico and the International Monetary Fund which permits Mexico to draw on foreign currencies to maintain the parity of the peso. However, Mexico has maintained a favorable balance of payments for numerous years. 3. Low cost labor. Although there is a notable lack of qualified mining and exploration personnel of the highly technical and supervisory calibre, there is plentiful mining labor in the mining regions. In general, the mining labor is efficient and the costs are reason-able. Recent wage raises have been higher than increased productivity and management must work for higher productivity. In recent years strikes of over 15 days duration have been exceptional and peaceful labor relations are the rule. 4. High mineral potential. We can start with the premise that Mexico is a country extremely well endowed with minerals and many ore bodies await to be discovered. The fact that there has not been more than possibly three major metallic mineral discoveries in the last two decades is not that the bodies do not exist but that fiscal conditions have been such that no search has been made - 6 - for them. Now methods and philosophies of exploration have not been tried until very recently but in them lies the great ex-ploration potential of Mexico. There are three general geologic zones in Mexico. The nor-thern zone is separated from the southern zone by the volcanic-rift belt which runs east-west through Mexico City and Guadalaja-ra and has as its most obvious surface feature a belt of Cenozoic volcanics. Most of the mining in Mexico has taken place in the northern zone in which the more acidic intrusive rocks are found. The southern zone contains more basic rocks, and although there are numerous mineral occurrences, the mines are small in size and number. The scarcity of mines in this zone is undoubt-edly due, in great part, to the lack of exploration which is made difficult due to lack of roads and facilities and to the heavy vegetation covering the outcrops. The volcanic-rift belt exhibits difficult exploration con-ditions; the principal ones being the great amount of volcanic cover and the intense faulting. As in the southern zone this area has not received intensive exploration; however, the famous silver deposits of Pachuca, Taxco, El Oro and Guanajuato lie within this region or at its edge. In the northern zone a long, large northwest trending belt of middle Cenozoic volcanics is found, which constitutes the Sierra Madre Occidental. Pew large mines are known within this belt of very thick volcanics; but where the rocks below the volcanics have been exposed, they are abnormally well mineralized. Therefore, here again the scarcity of mines is due to lack of out-crops. In order to investigate the exploration possibilities in greater detail, let us evaluate the situation of various metals. a. Silver. Mexico is and has been for many years (except 1968) the world's leading producer of silver. In the past a majority of the silver came from such bonanza camps as Pachuca, Guanajuato and Tax co where the silver was found in very high-grade deposits with very minor amounts of other metals. Today. most of Mexico's silver is produced as an accessory mineral in the lead and zinc deposits. This means that with lower lead and zinc prices there has been a reduction in the production of silver although silver prices have advanced. Although the bonanza camps have been reported as "worked out", there are definite signs that this may not be the case. Recant high-grade discoveries in Guanajuato and Taxco indicate that if modern techniques and vigorous exploration are carried out, it is quite possible that bonanza deposits will be discovered. Silver is well distributed in many parts of Mexico and it would be difficult to pin-point exact locations favorable for exploration. Slide No.2 shows in general the major distribution of silver. Since the environments vary widely, so also would the exploration techniques. In parts of Mexico numerous silver deposits have been known but left unexploited due to lack of roads and facilities. Large, low-grade deposits probably exist but as yet company philosophies have not been such that they would explore for this type of deposit. b. Copper. Copper, like silver, appears to have a future at favor-able prices. Added to this is the great increase in demand for copper by Mexico to satisfy its rapidly expanding industry. Until this year (1970), there has been only one copper mine in Mexico that could be considered major; the Cananea mine which produces approximately 70% of Mexico's copper. The Santa Rosalia mine in Baja California could be considered a medium sized mine and the rest of the present copper production comes from very small mines or as a minor mineral from other base metal mines. Because of this limited production, Mexico is presently producing just enough copper to supply its internal demand. This picture, however, is changing rapidly. In early 1971, Asarco Mexicana, S.A. will bring into production their Inguarn mine, in the State of Michoacn, which will have a mill capacity of 2000 metric tons per day of 1.8% copper which will more than take care of Mexico's immediate industrial demands for copper. Then in the future lies the immense deposit, La Ca-ridad, of Mexicana de Cobre, which has reserves in excess of 600 million metric tons of 0.75% copper with values in molybdenum. The exact size of this deposit is as yet unknown. Work is now underway to bring this deposit into production in 1974. -8- The reason for not producing more copper in Mexico has been the lack of exploration incentive by the mining companies. The small prospector is not equipped to explore for bulk, low-grade copper deposits and only in the last year or so have major companies made an exerted effort in this field. A very favorable copper mineral province exists in the State of Sonora, Perhaps the most important structural characteristic of this area is its location (Slide #3) along the north-trending Wasatch-Jerome crustal lineament at or near its intersection with the northwest-trending Texas lineament. Correlation between these lineaments and the distribution of the bulk low-grade deposits has been remarkable. Mexico's largest copper producer at Cananea and the previously mentioned La Caridad deposit lie along the Wasatch-Jerome near the intersection with the Texas lineament. Although northern Sonora is a most favorable area in which to explore for copper, this area should not be considered as the only target area since favorable areas exist in other parts of Mexico. Molybdenum can often be expected as an accessory metal with the copper mineralization. If unfavorable conditions for mining investment in Zambia, Peru and Chile -all major copper producing countries- continue or worsen, Mexico will become a major exporter of copper within the next ten years. Even if conditions become better in those countries, Mexico will still play a major role as a copper producing country. c. Lead and Zinc. Although the long term picture for lead and zinc, with silver as an accessory metal, may not be as bright as for copper, established smelter capacity and both local and foreign markets exist and, therefore, exploration for lead and zinc can be con-sidered by both large and small companies. For many years there has been little exploration for new lead and zinc deposits and there has been no exploration with the use of modern tools for locating unexposed bodies. The greatest exploration provinces for lead and zinc are shown on Slide #5. In these areas substantial silver values associated with the lead and zinc could be expected. - 9 d. Other Metals and Minerals. Mexico is a major producer of fluorite, barite, mercury, tungsten and antimony. Exploration will continue for these ma-terials depending primarily on world prices. i IV. SUMMARY OF CONDITIONS. Prom the foregoing, we can quickly summarize the conditions that exist in Mexico that directly affect investment in the mining industry. A. Regulatory. 1. Mexicanization. The requirement of majority investment by Mexican nationals by itself is certainly not unfavorable; however, risk capital is difficult to find. 2. Immigration Restrictions. It is often difficult to obtain highly technical personnel and companies are limited to the number of foreign personnel they can hire. 3. Mining Law. The mining law has been updated and is meant to broaden the mining industry base in Mexico. However restrictions and control are an essential part of the law. 4. Taxes. Income Taxes are moderate but production and ex-port, taxes are a severance tax not based on profit. There is no reduction in taxes for depletion. 5. Metal Prices. Mexico's industry is subsidised at the expense of the mining industry through official prices set slightly lower than world prices -10- B. Favorable. l. Mexico is a mineral-rich country. 2. Mexico has a stable government. 3. Mexico has a strong-convertible currency. 4. Direct production costs for medium to large operations are low. 5. The proximity to the United States assures a large market in addition to the growing market in Mexico. Future. The most striking feature about Mexico today is the tremendous social gains. Education receives, by far, the largest share of the national budget; health facilities are readily available and are ex-panding; electricity and roads are coming to the small villages and wages are being raised in an attempt to make even the poor farmer a consumer. Mexico is expanding industrially to keep in step with the local demands and manufacturing more and more of its necessities in or-der to reduce the need to import, which makes its trade balance more favorable. Mexico yearly increases the export of manufactured goods where previously the country had only been an exporter of raw material and crafts. Politically Mexicans are, and should be, proud of their ancient past and their recant history. They are, therefore, ready and anxious to work with foreign companies if this partership will assist in the development of Mexico as a country and to the advantage of the Mexican people. The exploitation of Mexico to the advantage of other peoples is a thing of the past. Mexico is a developed country and expects to be treated as such. The Mexican mining industry offers an opportunity to those willing to study the problems accept the laws and invest in the social -as well as financial- future of Mexico. D.F. Coolbaugh Mexico, D.F. Mexico, May 1970. DFC/mfb. - 11 - |
Format | application/pdf |
ARK | ark:/87278/s63y8n3n |
Setname | wsu_ucc_mp |
ID | 58619 |
Reference URL | https://digital.weber.edu/ark:/87278/s63y8n3n |