CHICAGO (ResourceInvestor.com) -- With the soaring metals prices of the past few years, prospective mining districts across the world have attracted new investment from juniors and majors alike. After a recent site visit to multiple explorers in the Mexican state of Chihuahua, it’s evident that the Sierra Madre belt of Mexico could be among the most prospective of these.
Beyond its close proximity for North American firms and relative political stability, the Sierra Madres also provide access to relatively stable Mexican peso-based operating costs (it’s one of the few currencies that hasn’t strengthened appreciably against the dollar).
Finally, many parts of the region are historically under-explored thanks to the Mexican government holding many of today’s current targets within their National Mineral Reserve for the last several mining booms.
The attractiveness of the Sierra Madres – and Chihuahua State in particular – is no secret to the major miners of the world. Explorers and producers alike have flocked to the region, with 12 new mines opened in the last 2 years and countless exploration programmes in progress.
Notable development successes in the region include Agnico-Eagle’s [NYSE:AEM; TSX:AEM] Pinos Altos mine, Goldcorp’s [NYSE:GG; TSX:G] El Sauzal mine and Minefinders’ [AMEX:MFN; TSX:MFL] Dolores project.
Future Consolidation Wave
With major mining firms discovering few appreciably-sized assets in the past few years, the impetus behind industry-wide consolidation isn’t that hard to imagine.
Recently two sizeable deals have been undertaken in Chihuahua State, with Coeur D’Alene Mines [NYSE:CDE; TSX:CDM] having recently purchased Palmarejo (and its eponymous deposit) and the Chinese state-owned Jinchuan Group buying Tyler Resources [TSX-V:TYS] and their Bahuerachi project after winning a bidding war with Mercator Minerals [TSX:ML].
During a recent dinner, Ignacio Vega, Director of Mines for the State of Chihuahua, appeared optimistic about the benefits of transactions like Jinchuan’s and Coeur’s, as they’re likely to spur faster mine development and job growth in the region.
Mexico has the benefit of being a reasonably developed country with a strong mining history that encourages foreign investment activity, where neither the ‘NIMBYism’ sometimes seen in North America nor the NGO infiltration common to Central America have particularly strong footholds.
The smartest firms are hiring local workers and geologists to build strong relations with their nearby Mexican ejido (as the local community is called), which holds strong political sway in the mine licensing process.
The ones who do this the best are able to spend more time concentrating on actual exploration work – and are starting to catch the attention of the majors.
Digging Into Profits
During my recent visit, I was able to hear about West Timmins Mining’s [TSX:WTM] Montana de Oro project, which is considerably more advanced than its historically fascinating Lluvia de Oro property.
After landing by helicopter at West Timmins’ office in Zataque, CEO Darin Wagner spoke in detail about the exciting prospects at Montana de Oro (which itself is probably not as well known as the company’s Canadian targets near Timmins, Ontario).
The firm acquired the project from the Mexican National Mineral Reserve after discovering overlooked worked from the 1940s by an Anaconda Mining geologist that found an intercept of 18 metres with 1.5 g/t gold.
The firm may be quite close to turning Montana de Oro into a literal mountain of gold if it continues to find success with its 2008 drill programme.
Most prospective among the Montana property is the La Dura West target, a high value near surface polymetallic that has had an average grade from 7 intercepts to date of 16.78 metres at 4.44% zinc, 0.45% copper, 25.31 g/t silver and 0.40 g/t gold.
The team is most excited about the results that have come out of hole 29 on the property. While assay results aren’t yet back, the core from the hole was on display at West Timmins’ office.
Senior Project Manager Linus Keating declined to go into details given the ongoing assay work and continuing long-term land lease negotiations with the local ejido, butmysteriously noted that “if this plans out like we think it will, it’s going to be a classic case study in porphyry discovery.” Or, as Wagner said of the site, “so far it’s looking attractive from that big tonnage, bulk mining point of view.”
With road and power access nearby, the infrastructure on Montana de Oro is already well developed, making this property one to watch as the drill and assay results continue to come in over the next few weeks.
A visit to Paramount Gold [AMEX:PZG; TSX:PZG] also revealed a project with serious exploration potential.
The firm’s gold-silver San Miguel target is located on a historic mining site, and is surrounded by claims from Mexican mining titan Peñoles and Mexoro Minerals [OTC:MXOM], making consolidation of the claim a potential option down the road.
The site is characterized by a gold-rich vein some 2-kilometre long and open along strike. Drilling has continued as deep at 250 metres on the site, with some 30-plus holes to date, including 9 metres of 2.99 g/t gold and 149 g/t silver.
Conclusion
Mexico’s Sierra Madres are home to dozens of explorers digging into many of the region’s overlooked metal deposits.
With senior miners scrambling to boost reserves and find friendly operating climes, it may only be a matter of time before some of the names start to disappear.