Gold Production in Mexico Rising While in US it Falls

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Precious Metals

As primary gold production has fallen in the US from a peak a decade ago, it has been steadily rising in Mexico due mainly to the mining laws in the two countries. It can take just three years to go from a standing start to pouring the first gold bar in Mexico compared to six years or more in the US according to Bruce Bragagnolo president of Canadian miner Timmins Gold. Timmins is just one of a host of mostly Canadian firms, many of them juniors, actively trying to develop resources south of the border according to a commodityonline.com report.

In fact as US production has declined, some 35% over the last decade according to the USGS, Mexico has doubled production admittedly from a low start but the country is now producing 1.59m ounces a year. Apparently global production reached a peak in 1998 and has been declining ever since but here the article breaks down. The numbers for global production differ significantly from the USGS and South Africa. The US and Australia are stated as the world’s top producers while no mention is made of the largest producer, China. Nevertheless we will take the general point on faith that production is declining and were it not for recycling, the US would be in a deficit situation.

Mining laws in the US, however well intentioned, are holding back access to a range of metals and minerals that the country otherwise has to import. Now we could argue that importing from Canada or Mexico is not like importing from the other side of the world, that these are almost home market sources and from a supply chain and supply risk perspective, that would be very true. But from a balance of payments perspective, it doesn’t make any difference where you are buying from. If you import, the country has to pay a supplier outside the US and the trade balance deteriorates.

Today the US is dependent on imports for a large percentage of chrome, tungsten, cobalt, nickel, copper, and the list goes on. Not because the US is bereft of such minerals but because the cost to mine in the US and the delays in gaining approval make it uneconomical or unattractive. May be a rise in price is what is needed to a) make mining here more attractive and b) hurt the balance of payments so much that efforts are made to fast track mineral exploration projects. It’s not that our position is anti environmental.  We would be the first to support the maintenance of high environmental controls and standards on developers here and overseas. But few in the industry would disagree that the environmental lobby has used legislation to hold up any mineral extraction project they can as a matter of principal rather than a failure in the safeguards developers commit to. Mexico at least shows what can be achieved in a more miner friendly environment.

–Stuart Burns

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