MEXICAN MINING INDUSTRY RECENT DEVELOPMENT Toronto, Canada March, 2016
1. Mexican Mining Industry 2015 2. Mineral Market Outlook 3. Mexican Mining Advantages 4. Mexican Mining Competitiveness 2
MEXICAN MININGMETALLURGICAL PRODUCTION 20,000 18,000 16,000 14,000 12,000 Million dollars 11,412 17,178 17,832 15,628 14,738 13,048 10,000 8,000 6,000 8,261 8,376 6,976 4,000 2,000 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: INEGI. 3
INVESTMENT IN MEXICAN MINING SECTOR Million dollars 9,000 8,000 7,000 8,043 6,000 5,000 4,000 5,612 6,576 4,948 5,203 3,000 2,000 1,000 2,156 3,656 2,858 3,316 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: CAMIMEX. 4
INVESTMENT IN MEXICAN MINING SECTOR Expansion Projects Million dollars New Projects 450.0 400.0 350.0 339.5 409.9 1,500.0 1,250.0 1,360.4 1,496.0 300.0 250.0 200.0 1,000.0 750.0 150.0 100.0 50.0 500.0 250.0 2014 2015* 2014 2015* 660.0 640.0 620.0 600.0 580.0 Machinery and Equipment 635.7 622.7 900.00 800.00 700.00 600.00 500.00 400.00 856.40 Exploration 633.40 560.0 300.00 540.0 200.00 520.0 500.0 Source: CAMIMEX. 2014 2015* 100.00 2014 2015* 5
FOREIGN INVESTMENT IN MEXICAN MINING 1000 900 800 700 692 757 803 853 870 902 927 600 500 400 300 200 262 286 288 285 267 276 267 100 0 2009 2010 2011 2012 2013 2014 2015 Projects Companies Source: DGDM, SE. 6
Equity Capital Raised 2015 TSXTSXV Mexico (US billion dollars) Mexico and Latin American Countries 1.2 1.0 0.8 1.0 1.1 0.7 Mexico 30% 0.6 0.4 0.2 0.1 Latin America 70% 0.0 2012 2013 2014 2015 160 140 120 100 80 60 40 20 0 127 57 Number of TSX/TSXV Mining Companies by Latin American Country 35 33 30 27 14 9 5 4 3 2 2 2 Source: TSX. 7
1. Mexican Mining Industry 2015 2. Mineral Market Outlook 3. Mexican Mining Advantages 4. Mexican Mining Competitiveness 8
WORLD ECONOMICOUTLOOK World GDP (% change) World Trade Volume (% change) 6.0 5.0 4.0 3.0 2.0 5.4 4.2 3.4 3.3 3.4 3.1 14.0 12.0 10.0 8.0 6.0 4.0 12.5 6.7 2.9 3.3 3.3 3.2 1.0 2.0 0.0 2010 2011 2012 2013 2014 2015 2010 2011 2012 2013 2014 2015 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 7.5 Source: IMF. Emerging Markets GDP (% change) 6.3 5.2 2010 2011 2012 2013 2014 2015 5.0 4.6 4.0 250.0 200.0 150.0 100.0 50.0 152.1 Commodity Price Index2005=100 includesboth Fuel and NonFuel Price Indices 191.9 185.7 182.9 171.5 112.3 2010 2011 2012 2013 2014 2015 9
COMMODITIES PRICES 20102015 Commodity Price Index 2005=100 Change 2015/2010 (%) 300.0 250.0 0.0 5.0 Total Crude Oil Coal Cereals Agr.Raw Mat. 2.1 Metals 200.0 10.0 150.0 15.0 12.9 100.0 20.0 50.0 25.0 26.1 2010 2011 2012 2013 2014 2015 30.0 Total Coal Agricultural Raw Materials Crude OIl Cereals Metals 35.0 40.0 34.7 37.8 37.0 Source: IMF. 10
METAL PRICES 140.0 120.0 Real Annual Indices 19702015 (2010=100) 100.0 80.0 60.0 40.0 20.0 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Base Metals Precious Metals Source: World Bank. 11
200.0 400.0 600.0 800.0 1,000.0 1,200.0 1,400.0 1,600.0 1,800.0 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 0 5 10 15 20 25 30 35 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 GOLD SILVER 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 COPPER 0 500 1000 1500 2000 2500 3000 3500 4000 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 ZINC Annual Real Prices (2010 US dollars) Source: World Bank. dl/oz dl/oz dl/t dl/t 12
GDP CHINA VS METAL PRICE INDICES 140.00 16.0 120.00 14.2 14.0 100.00 80.00 60.00 8.4 8.3 9.1 10.0 10.1 11.3 12.7 9.6 9.2 10.6 9.5 7.7 7.7 7.3 12.0 10.0 8.0 6.8 6.0 40.00 4.0 20.00 2.0 0.00 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Base Metals Price Indice Precious Metals Price Indice GDP China (% Change) Source: World Bank. Real price indices 2010=100. 13
CONSUMPTION OF SELECTED METAL BY COUNTRY th. m.t. Copper th. m.t. Lead 12 000.0 10 000.0 8 000.0 6 000.0 4 000.0 2 000.0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Europe China USA Europe China USA th. m.t. Nickel th. m.t. Zinc 1,000.0 900.0 800.0 700.0 600.0 500.0 400.0 300.0 200.0 100.0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 7,000.0 6,000.0 5,000.0 4,000.0 3,000.0 2,000.0 1,000.0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 EUROPA CHINA USA EUROPA CHINA USA Source: World Bureau of Metal Statistics. 14
METAL PRICES INTERNATIONAL PRICES OF SELECTED METALS 20112016 % Change Price FORECAST PRODUCT 2011 2012 2013 2014 2015 2015/2014 March 3 2016 GOLD (London Final, Dlls./oz.) 1,568.6 1,668.8 1,411.0 1,266.0 1,160.1 8.4 1,250.2 1,121.0 SILVER (London Fix, US, Dlls./oz.) 35.11 31.15 23.83 19.08 15.70 17.7 14.97 14.70 LEAD (LME Settle, Ctvs Dlls./lb.) 108.9 93.5 97.7 95.1 81.0 14.8 83.3 77.60 COPPER (LME Settle, Ctvs Dlls./lb.) 400.1 360.6 333.1 311.2 249.6 19.8 220.1 208.60 ZINC (LME Settle, Ctvs Dlls./lb.) 99.5 88.4 87.1 98.1 87.7 10.6 83.3 73.40 IRON ORE (World Bank, Dlls./Ton.) 167.8 128.5 135.4 96.9 55.8 42.4 51.7 35.9 Source: Metals Week, CPM, Wolrd Bank. % change 2015/2014 Gold Silver Copper Lead Zinc Iron ore 8.4 17.7 19.8 14.8 10.6 42.4 Source: Metal Weeks. 15
10.0 20.0 30.0 40.0 50.0 60.0 4/9/2010 7/9/2010 10/9/2010 1/9/2011 4/9/2011 7/9/2011 10/9/2011 1/9/2012 4/9/2012 7/9/2012 10/9/2012 1/9/2013 4/9/2013 7/9/2013 10/9/2013 1/9/2014 4/9/2014 7/9/2014 10/9/2014 1/9/2015 4/9/2015 7/9/2015 10/9/2015 1/9/2016 GOLDCORP 10.0 20.0 30.0 40.0 50.0 60.0 1/12/2010 4/12/2010 7/12/2010 10/12/2010 1/12/2011 4/12/2011 7/12/2011 10/12/2011 1/12/2012 4/12/2012 7/12/2012 10/12/2012 1/12/2013 4/12/2013 7/12/2013 10/12/2013 1/12/2014 4/12/2014 7/12/2014 10/12/2014 1/12/2015 4/12/2015 7/12/2015 10/12/2015 1/12/2016 BARRICK GOLD MINING COMPANIES PRICE QUOTES 20102016 1,000 2,000 3,000 4,000 5,000 6,000 7/22/2010 10/22/2010 1/22/2011 4/22/2011 7/22/2011 10/22/2011 1/22/2012 4/22/2012 7/22/2012 10/22/2012 1/22/2013 4/22/2013 7/22/2013 10/22/2013 1/22/2014 4/22/2014 7/22/2014 10/22/2014 1/22/2015 4/22/2015 7/22/2015 10/22/2015 1/22/2016 BHP BILLITON Source: TSX and LSE. 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000 1/4/2010 4/4/2010 7/4/2010 10/4/2010 1/4/2011 4/4/2011 7/4/2011 10/4/2011 1/4/2012 4/4/2012 7/4/2012 10/4/2012 1/4/2013 4/4/2013 7/4/2013 10/4/2013 1/4/2014 4/4/2014 7/4/2014 10/4/2014 1/4/2015 4/4/2015 7/4/2015 10/4/2015 1/4/2016 RIO TINTO plc CAD CAD GBp GBp 16
GOLD Monthly Prices 20152016* (dl/oz) 100.0 88.9 91.8 Supply 20152016* (Million ounces) 1,300.0 80.0 1,250.0 1,200.0 1,177.9 60.0 1,150.0 1,100.0 1,050.0 1,000.0 950.0 1,068.3 40.0 20.0 31.7 29.0 2.9 3.2 Mine Production Secondary Supply Other 2015 2016 100 80 60 Demand 20152016* (Million ounces) 83.7 84.6 Electronics Stock 8% demand 22% Medical 1% Other 1% 40 20 13 13.1 26.9 26.3 0 Industrial demand Jewelry Stock demand 2015 2016 Source: CPM Group. * Estimated data for 2016. Jewelry 68% 17
SILVER 18.0 17.0 16.0 15.0 14.0 13.0 12.0 Monthly Prices 20152016* (dl/oz) 14.1 14.9 900.0 800.0 700.0 600.0 500.0 400.0 300.0 200.0 100.0 Supply 20152016* (Million ounces) 778.4 770.2 205.0 203.0 Mine Production Secondary Supply 400 350 300 250 200 150 100 50 0 223.8 224.7 Demand 20152016* (Million ounces) 297.4 303.2 354.1 Electronic Jewelry Other 348.2 2015 2016 2015 2016 Net Surplus 20152016* (Million ounces) 97.1 108.1 2015 2016 Source: CPM Group. Estimated data for 2016. 18
Monthly Prices 20152016* (dl/lb) COPPER 30,000 Supply 20152016* (Thou. Metric Tonnes) 300.0 280.0 25,000 22,572 23,392 260.0 20,000 240.0 220.0 200.0 180.0 160.0 210.0 205.9 15,000 10,000 5,000 23,400 23,200 23,000 22,800 Demand 20152016* (Thou. Metric Tonnes) 23,135 2015 2016 Balance 20152016* (Thou. Metric Tonnes) 22,600 22,400 22,200 22,202 2015 370 22,000 21,800 21,600 2015 2016 2016 257 Source: CPM Group. *Estimated data for 2016. 19
LEAD 95.0 90.0 85.0 80.0 Monthly Prices 20152016* (dl/lb) 81.0 14,000 12,000 10,000 8,000 6,000 Supply 20152016* (Thou. Metric Tonnes) 10,852 11,048 75.0 77.2 4,000 70.0 2,000 14,000 Demand 20152016* (Thou. Metric Tonnes) 2015 2016 12,000 10,000 8,000 10,836 11,117 Balance 20152016* (Thou. Metric Tonnes) 80 60 40 20 0 20 40 6,000 4,000 2015 17 2,000 2015 2016 70 2016 Source: CPM Group. *Estimated data for 2016. 20
ZINC Monthly Prices 20152016* (dl/lb) 18,000 Supply 20152016* (Thou. Metric Tonnes) 110.0 100.0 90.0 80.0 70.0 60.0 50.0 69.0 75.3 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 14,008 14,036 16,000 14,000 Demand 20152016* (Thou. Metric Tonnes) 13,882 14,340 2015 2016 Balance 20152016* (Thou. Metric Tonnes) 12,000 10,000 400 300 200 100 0 100 200 8,000 6,000 2015 126 4,000 2,000 2015 2016 304 2016 Source: CPM Group. *Estimated data for 2016. 21
1. Mexican Mining Industry 2015 2. Mineral Market Outlook 3. Mexican Mining Advantages 4. Mexican Mining Competitiveness 22
México: Macroeconmic Indicators GDP 20132020 (%) Inflation 20132020 (%) 4.0 14.0 3.5 3.0 2.5 2.0 2.3 2.5 2.8 3.1 3.2 3.3 3.3 12.0 10.0 8.0 1.5 1.3 6.0 1.0 4.0 4.0 4.1 0.5 2.0 2.6 3.0 3.0 3.0 3.0 3.0 0.5 2013 2014 2015 2016 2017 2018 2019 2020 0.0 2013 2014 2015 2016 2017 2018 2019 2020 Advanced Economies Latin America Mexico Advanced economies Latin America Mexico Source: IMF. 23
México: Macroeconmic Indicators Exchange Rate 2015 (January=100) Government Gross Debt 20132020 (% GDP) 160.0 60.0 150.0 58.0 140.0 56.0 130.0 54.0 120.0 52.0 52.0 110.0 100.0 90.0 50.0 48.0 46.0 44.0 46.4 49.8 50.0 80.0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 42.0 Chile Mexico Brazil China Colombia Russia South Africa 40.0 2013 2014 2015 2016 2017 2018 2019 2020 Mexico Latin America Source: IMF. 24
Mexican Mining Resources Mexico s Share in World Mine Production 1 Silver 2 Bismuth Fluorite 3 Celestite Wollastonite 4 Cadmium 5 Molibdenum Lead 6 Zinc 7 Salt Diatomite 8 Barite Graphite Gold Gypsum 10 Copper Source: USGS. 25
Geological Potential The Mexican territory shows well defined metallogenetic belts of Cu, Au; Cu, Mo, Au; Au, Ag, Cu; Ag, Au, Pb, Zn; Zn, Ag, Pb; F, Sr; C; Fe, Ti; Cu, Zn, Pb, Ag, Au; Fe; Au, Ag. Metallogenetic belts Ag, Au, Pb, Zn C Cu, Mo, Au Zn, Ag, Pb Cu, Zn, Pb, Ag, Au Massive Sulfides MVS (Au, Ag, Zn, Cu, Pb) Iron and titanium (Fe, Ti) Coal (C) Strontium (Sr) Fluor (F) Manganese (Mn) Phosphates (P) Au, Ag (Mesothermal) Au, Cu, Pb, Ag, Zn (Porphyry) Source: Mexican Geological Survey. MVS Au, Cu Ag Ti Fe Source: SGM 26
Mexican Geological Survey GEOLOGICAL AND GEOCHEMICAL MAPPING 1:250,000, 19952005 No SURFACE km² 119 1 960,716 1:50,000, 19952015 YEAR MAP S SURFACE km² 19952015 839 766,194 Source: Mexican Geological Survey. 27
Cash Cost Cash Cost Selected Mines 2015 (dl/ gold oz) 1,600 1,504 1,400 1,275 1,200 1,000 915 800 600 400 200 216 267 378 422 425 481 541 546 581 593 601 610 620 646 696 725 Source: Quarter Reports of Mining Companies (JanuarySeptember 2015). 28
Competitive Costs 125.0 NationalProducer Price Index Mining 180.0 Average prices of electricity Pesos kilowatt/hour 120.0 115.0 119.0 170.0 160.0 165.6 150.0 110.0 105.0 105.0 140.0 130.0 100.0 95.0 96.3 120.0 110.0 121.2 90.0 2013/01 2013/04 2013/07 2013/10 2014/01 2014/04 2014/07 2014/10 2015/01 2015/04 2015/07 2015/10 2016/01 100.0 Source: INEGI. 29
1. Mexican Mining Industry 2015 2. Mineral Market Outlook 3. Mexican Mining Advantages 4. Mexican Mining Competitiveness 30
MEXICAN MINING, A COMPETITIVE INDUSTRY Where to invest in Mining2015. Behre Dolbear. Rank Country 1 Canada 2 Australia 3 USA 4 Chile 5 Mexico 6 Peru 7 Namibia 8 Botswana 9 Colombia 10 Ghana Source: Behre Dolbear, 2015. 31
FRASER INSTITUTE: INVESTMENT ATTRACTIVENESS INDEX Score (maximum 100) Mexico 20122015 Rank Latin America 2015 75.96 2012 25 Chile 79.81 72.96 71.05 2013 31 Peru 69.26 68.93 Mexico 68.93 2014 24 Colombia 62.75 Brasil 61.45 2012 2013 2014 2015 2015 37 Ecuador 45.36 Bolivia 44.56 Source: Fraser Institute, 2016. Uruguay 39.39 32
FRASER INSTITUTE: POLICY PERCEPTION INDEX Mexico 20122015 Score (maximum 100) Rank Latin America 2015 73.7 72.9 2012 38 Chile 83.5 Mexico 71.1 71.5 2013 50 Peru 66.8 71.1 Uruguay 66.3 2014 50 Brasil 56.6 2012 2013 2014 2015 2015 47 Colombia Ecuador 43.4 53.8 Bolivia 36.4 Source: Fraser Institute, 2016. 33
FRASER INSTITUTE: BEST PRACTICES MINERAL POTENTIAL INDEX Mexico 20122015 Score (maximum 100) 78.0 Rank Latin America 2015 2012 18 Chile 77.0 72.0 71.0 68.0 2013 22 Peru Colombia 71.0 69.0 2014 13 Mexico 68.0 Brasil 65.0 2012 2013 2014 2015 2015 34 Bolivia 50.0 Ecuador 47.0 Source: Fraser Institute, 2016. Uruguay 21.0 34
LIST OF FACTORS THAT ENCOURAGE OR AFFECT INVESTMENT Rank 1109 México Brazil Chile Colombia Peru Uruguay Ecuador Bolivia Uncertainty concerning the administration, interpretation, and enforcement of existing regulations 27 74 19 69 39 22 93 96 Environmental regulations 12 68 25 75 52 54 93 62 Regulatory duplication and Inconsistencies 30 75 12 69 54 68 82 81 Legal System 57 74 28 68 50 42 79 101 Taxation Regime 58 75 42 65 55 84 103 97 Uncertainty Concerning Disputed Land Claims 56 81 16 74 64 43 86 109 UncertaintyConcerning ProtectedAreas 44 86 16 77 59 89 82 97 Quality of Infrastructure 43 66 45 65 57 50 62 93 Socioeconomic Agreements/Community Development Conditions 56 61 37 77 76 62 83 103 Trade Barriers 55 80 41 52 48 59 95 88 Political Stability 55 83 33 63 59 24 74 87 Labor Regulations 62 90 51 71 78 56 98 109 Geological database 42 69 26 59 38 90 72 91 Security 95 84 46 102 86 65 75 88 Availability of Labor 42 48 31 63 38 47 89 86 Source: Fraser Institute Annual Survey of Mining Companies 2015. 35
COMPARISON OF DIFFERENT TOPICS ENCOURAGE INVESTMENT (RANK) Uncertainty concerning the administration, interpretation, and enforcement of existing regulations Regulatory duplication and Inconsistencies Chile 19 Chile 12 Uruguay 22 México 30 México 27 Peru 54 Peru 39 Uruguay 68 Colombia 69 Colombia 69 Brazil Ecuador Bolivia 74 93 96 Brazil Bolivia Ecuador 75 81 82 Geological Database Environmental regulations Chile 26 México 12 Peru 38 Chile 25 México 42 Peru 52 Colombia 59 Uruguay 54 Brazil Ecuador Uruguay Bolivia 69 72 90 91 Bolivia Brazil Colombia Ecuador 62 68 75 93 Source: Fraser Institute, 2016. 36
COMPARISON OF DIFFERENT TOPICS ENCOURAGE INVESTMENT Taxation Regime Security Chile Peru México Colombia Brazil Uruguay Bolivia Ecuador 42 55 58 65 75 84 97 103 Chile Uruguay Ecuador Brazil Peru Bolivia México Colombia 46 65 75 84 86 88 95 102 Uncertainty Concerning Disputed Land Claims Quality of Infrastructure Chile Uruguay México Peru Colombia Brazil Ecuador Bolivia 16 43 56 64 74 81 86 109 México Chile Uruguay Peru Ecuador Colombia Brazil Bolivia 43 45 50 57 62 65 66 93 Source: Fraser Institute, 2016. 37
MINING ALLOTMENTS WITH ADVANCED EXPLORATION 38
THANKS