Mexico Mining Review 2019

Page 366

| VIEW FROM THE TOP

IN MEXICO FOR THE LONG HAUL RICK RULE President and CEO of Sprott US Holdings

362

Q: As a brokerage and investment management firm, how

basis. But we have a very extensive project lending portfolio

do you select your investments in Mexico and how do you

and, if the project lender has 65 percent of the capital

evaluate the country as a mining jurisdiction?

deployed, by definition it becomes involved. We have been

A: We have been in Mexico for a very long time, essentially

involved in a variety of projects in Mexico. In addition, we

since the change of the mining law. We are very comfortable

are one of the primary funders of generative exploration

here, understanding there are regional sociological

worldwide, including in Mexico. The nature of generative

challenges. But we have operated in jurisdictions like

exploration, where the expectation is failure, is such that

Guerrero and Sinaloa, so we can take these aspects into

the person writing the check has to be intimately involved,

account prior to investing. Sprott is particularly well-known

at least with the development of the thesis and the process

for precious metals – in particular for silver – and we have

by which the thesis is tested.

relatively deep exposure to Mexico. Our comfort in Mexico is related to the fact there is a long-standing mining culture

Q: The majority of exploration companies in Mexico are

in place but the attraction involves, most importantly,

listed on the TSXV. What are the benefits of sourcing

geological prospects. There is also an increased availability

private funding?

of not only skilled labor but also of national Mexican

A: Private funding is very difficult to access for exploration,

talent, and this is internationally competitive. The Mexican

and the best source of private capital for exploration is

government seems to be on par with other governments

probably from high-net-worth career mining explorers

in that it is mindful of the contribution made by mining to

or from mining operators that are looking to outsource

the national economy, which is very helpful.

exploration. Mexico is fortunate in that it has five or six private individuals who are themselves eager participants

The issues we see in Mexico are common around the world.

in the Mexican exploration industry. This is something

The main issue is that the rents from mining and extractive

even the Mexican industry does not understand about

industries have traditionally been channeled to the center

itself. The fact that national investors are eager to fund

– in Mexico’s case it goes to the federal government in

these projects gives foreign investors like ourselves some

Mexico City – while the localities have been subjected to

confidence.

the costs of mining without the benefits. Despite the fact that it is not our business to insert ourselves into Mexican

Q: How do you mitigate the inherent risk that comes from

politics, we try to now be part of the process whereby we

both exploration and jurisdictions that may not be free of

as investors ensure that the benefits flow more equitably

security issues?

so we ourselves are working in jurisdictions that are largely

A: When operating in dangerous jurisdictions, the best

free of local disputes.

we can do is to know who the main players are, and to let the authorities know the company is not implicit while

Q: To what extent does Sprott get involved in the projects

assuring the local players that it does not pose a threat.

in which it invests?

There are jurisdictions where extortion and drug trafficking

A: We manage a reasonable amount of passive money,

are problems that can make things very difficult. But the

whereby we participate in a company at an arm’s length

truth is that every industry would like to mitigate all risks, but we have to juxtapose the risk with the prospects. The answer to the question is that there is no answer; there

Sprott US Holdings is a holding company made up of three

are challenges in several parts of Mexico – and Mexico is

companies: Sprott Global Resource Investments, Sprott

not alone in this – where there are very real risks. We draw

Asset Management USA and Resource Capital Investment

the line when we believe our people, whether nationals or

Corporation, a SEC-registered investment adviser

expats, are at risk. We will not take that risk.


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A TECHNOLOGY PARTNER, NOT A TECHNOLOGY PROVIDER

1min
page 276

POLICY PRIORITIES

1min
pages 206-207

IN MEXICO FOR THE LONG HAUL

1min
page 366

EXPERTISE OF THE INDUSTRY WITHIN THE EXCHANGE

1min
page 352

DEVELOPMENT BANK STRENGTHENS ROLE AS A FINANCIAL INTERMEDIARY

1min
page 355

CHANGING THE MINING IMAGE IN MEXICO

1min
page 341

ON TRACK TO FINDING A PERMANENT SOLUTION TO BLOCKADES

1min
pages 306-307

HOW ZACATECAS DEVELOPS THE BEST MINING TALENT

1min
page 258

COMMUNITY, LAND TENURE CONSIDERATIONS FOR EFFICIENT DEVELOPMENT

1min
pages 154-155

LOOKING BACK ON A SIX-YEAR ACHIEVEMENT

1min
pages 126-127

POWERING UP TO BECOME WORLD’S NEXT MAJOR LITHIUM PRODUCER

1min
pages 110-111

OPERATOR PROGRESSING WITH EXPANSION AMID SECURITY CONCERNS

1min
pages 78-79

COLLABORATION, AGREEMENTS TO PROMOTE MINING DEVELOPMENT

1min
page 17

CHINA, THE GOLDEN MARKET FOR METAL EXPORTATION

1min
page 364

EDUCATE TO ENCOURAGE GREATER BMV PARTICIPATION AMONG MINERS

1min
page 353

PREPARING THE MINING INDUSTRY FOR THE DIGITAL REVOLUTION

1min
pages 18-19

GROWING THROUGH ADVANCED TECHNOLOGICAL APPLICATIONS IN MINING

1min
page 159

LATAM, A STRATEGIC REGION FOR CHEMOURS’ MINING SOLUTIONS

1min
page 226

PREDICTION OF A GENERATIONAL TALENT GAP CAUSED BY THE DOWNTURN

1min
page 252

ZINC SURPLUS TO FEED US MARKET

1min
pages 100-101
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