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Mexican M&A about to heat up

It looks like M&A is heating up in the silver space, with a potential bidding war between First Majestic Silver (FR-T, AG-N) and Coeur d'Alene Mines (CDM-T) under way for Mexico-focused Orko Silver (OK-V).


It looks like M&A is heating up in the silver space, with a potential bidding war between First Majestic Silver (FR-T, AG-N) and Coeur d’Alene Mines (CDM-T) under way for Mexico-focused Orko Silver (OK-V).

                                                                                                                                                                                                                                                                    

The ramp up of activity in Mexico comes just ahead of our April issue of Mining Markets magazine. The issue, which is focused solely on Mexico — the world’s number one silver producer — will contain coverage of some of the next potential M&A targets in the country.

 

In case you were wondering, Orko was one of the companies featured in our March 2010  issue, the first time we covered Mexico’s roaring silver scene.

 

Three years later, exploration and mining companies have continued to flock to Mexico, a trend that started about a decade ago.

 

The country’s rich, prospective geology, business-friendly government, low tax rates and the absence of a nationwide mining royalty encouraged the investment of $7.6 billion in the company’s mining sector last year — up $5.6 billion in 2011 and $3.3 billion in 2010.

 

Mining analysts like Nicholas Campbell of Canaccord Genuity say that investment has been well deserved.

 

“(Mexico) has been one of the best jurisdictions in the world to invest in for mining in the last decade,” Campbell said late last month during an interview about his favourite Mexico-focused companies, citing a mining and business friendly government.

 

That said, there are likely going to be new mining taxes and royalties introduced in Mexico in the short term.

 

A new mining bill is expected to reach Congress in the first half of the year with the new measures potentially in place by early 2014, Mining.com recently reported.

 

Importantly, revenue from the proposed taxes would go to local communities — which could go some way to reducing the community conflicts that have started to arise in Mexico in response to its rise as a top mining jurisdiction.

 

To some degree, given the wider move among mining jurisdictions to capture more revenue from the industry, an increase in mining taxes in Mexico is to be expected, says Canaccord’s Campbell. Moreover, he doesn’t see it as a deterrent to further investment in Mexico.

 

“I don’t think that will change the quality of Mexico as a jurisdiction, unless (taxes) go way higher and I don’t see that happening. I see it getting brought more in line with what you see in other low-risk jurisdictions.”

 

For more on Mexico’s rise as a mining jurisdiction, analysts’ top picks in the country, and a profile of Endeavour Silver (EDR-T, EXK-N) CEO Bradford Cooke, stay tuned for the April issue of Mining Markets.