Due to rising taxes, royalties, changes to mining codes, and asset nationalizations in the last few years, many big mining projects have been rendered uneconomical. This trend is why investors and miners have become wary of geographic exposure to risky mining jurisdictions.
High geopolitical risk
Tahoe Resources (TAHO) has assets in Mexico, Guatemala, and Peru. The geopolitical risk for Tahoe remains high compared to peers, as its flagship mine is in Guatemala, which is a high-risk mining jurisdiction. There have been talks of resource nationalization and changes to legal regimes, and the project has been facing local opposition and political hurdles. A decision from the Ministry of Energy and Mines (or MEM) is pending regarding the licence of its Escobal mine. The company acquired Lake Shore Gold in 2016. It will diversify Tahoe’s geopolitical risk as Lake Shore is based in Canada.
Manageable geographic risk
First Majestic Silver (AG) is focused on silver production from Mexico. It has six producing mines across Mexico. The company is focusing on a “one metal, one country” theme. Its exploration targets are also based in Mexico. While dependence on one region for all revenues tends to expose a company to mining risks in that particular geography, overall, Mexico is considered a relatively attractive mining jurisdiction.
Hecla Mining (HL) has four producing assets in the United States (QQQ), Canada, and Mexico. These assets are among the world’s best jurisdictions for mining. For 2Q16, 48% of Hecla’s revenues came from the United States, 31% from Canada, and 21% from Mexico.
Pan American Silver (PAAS) has exposure to Mexico, Bolivia, Argentina, and Peru. Its Navidad project in Argentina has been stalled awaiting a mining code in the State of Chubut. With the election of a new president in Argentina, the company is hopeful about reinstating the development of this project in the near future.
Coeur Mining (CDE) has favorable geographic exposure with ~60% of revenues coming from the United States and another 27% from Mexico, while Bolivia contributes ~13% of its revenues.