Metals boom sends investors back to Latin America

Metals boom sends investors back to Latin America
Thu Dec 16, 2004 01:23 PM ET

By Pav Jordan

MEXICO CITY, Dec 16 (Reuters) - With metals prices flying high, Latin America's gold, silver and copper mines from Mexico to Chile are a hot spot for foreign investors and modern-day treasure hunters looking for new mining projects.

"Latin America in its totality has now overtaken, in terms of exploration expenditure, countries like Canada, Australia and so on that used to be the leading countries," Peter van der Veen, mining policy and reform manager at the World Bank, told Reuters at a recent mining forum in Guatemala.

In Mexico, mining production was up 8.4 percent in the first nine months of this year. Gold output jumped 20 percent and silver and copper production also showed hefty double-digit gains.

"In the last couple of months, Mexico has caught fire again and is getting a lot more play," said Brad Aelicks, a spokesman at Vancouver-based Great Panther Resources Ltd.

Great Panther is working on rehabilitating a silver-lead-zinc mine in Mexico's Durango state, which was formerly owned by Industrias Penoles (PENOLES.MX: Quote, Profile, Research) , the world's largest silver miner. Great Panther hopes to bring it on line next year.

Mexico abounds with stories of new, renewed or extended explorations with droves of Canadian junior explorers in search of the next major gold or silver play.

New investments from major miners like Penoles and No. 3 copper producer Grupo Mexico (GMEXICOB.MX: Quote, Profile, Research) also point to growing enthusiasm in an industry that recently emerged from years of depressed prices.

The story grows as the mining pick is cast further south.

OPTIMISM ABOUND

In Chile, total output of copper -- the country's biggest export and the backbone of the economy -- is expected to rise 10 percent this year while overall mining output is up about 6 percent.

"The mood is very positive and optimistic and I think it's going to stay that way and hopefully prices will as well," said Alfredo Ovalle, president of Chile's Sonami group of midsized mining firms.

BHP Billiton Ltd. (BHP.AX: Quote, Profile, Research) , the world's biggest miner, is developing a $990 million Spence copper project in northern Chile. And Antofagasta Plc (ANTO.L: Quote, Profile, Research) , a Chilean-owned company listed in London, is spending $750 million to expand and upgrade its flagship Los Pelambres mine.

In Panama, Canada's Petaquilla Minerals Ltd. and its joint venture partners are aiming to raise around $1 billion to begin mining a large copper deposit.

Petaquilla says the project, given new life by prices near 16-year highs, would be the world's 14th largest copper mine.

Global prices are up for most metals, both in the precious and base metal categories.

Given the dollar's weakness this year, many investors have moved to gold as a safe haven. Meanwhile, prices for industrial use and base metals have been boosted by unexpectedly high demand from China, the resulting scarcity in concentrates and lower metal-treatment quotas.

"People had not truly calculated what was happening in China," said the World Bank's van der Veen. "The mineral intensity of that development and economic growth is taking everybody, not just suppliers but everybody, by surprise."

For Brazil, demand from China and higher prices have been a major driver of iron ore production.

"It has had an impact on mining, especially iron ore for which there is strong Chinese demand," said Marcos Antonio Maron, special advisor to the Energy and Mining Ministry.

Brazil's Companhia Vale do Rio Doce (CVRD) (VALE5.SA: Quote, Profile, Research) (RIO.N: Quote, Profile, Research) , the world's biggest iron ore miner, saw a surge of at least 25 percent in 2004 output and expects it to rise another 50 percent over the next four years. China buys about 20 percent of its iron ore from Brazil. (Additional reporting by Fiona Ortiz in Santiago, Peter Blackburn in Rio de Janeiro and Frank Jack Daniel in Guatemala City)

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