Morgan Stanley Downgrades Mexico Mining Stocks - vTomb

Morgan Stanley Downgrades Mexico Mining Stocks

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Today is Monday 26th November 2018 and we are just alerting you briefly to keep an eye on what is happening in Mexico.

Fears that Incoming President Andres Obrador may oversee the tightening of regulations on the mining industry in Mexico which include:

• empowering the Ministry of Economy to declare certain zones
as not viable for mining

• revoking permits and existing concessions that have a
negative social impact

Last week Morgan Stanley downgraded mining stocks on concerns that Mexico’s new congress is considering as many as 11 bills or resolutions that could materially impact mining companies operating in the country.

The first nine bills tabled in congress could impact Mexican miners’ Ebitda, Fresnillo, Penoles and Grupo Mexico according to the Morgan Stanley report.

These companies each lost between 4 and 12% of their stock-market value and Fresnillo, which is listed in London, saw its biggest decline in five years.

The implications for silver prices are initially difficult to ascertain until more details are known as to the likelihood of these bills passing. However, the implication seems pretty clear - Mexico being the largest silver mine production country producing approximately 5,600 Metric tonnes per annum or practically 20% of global mine production, clearly signifies that any barriers to production will only prove positive for the price longer term.

Much clearly depends on the extent to which these companies are directly affected, but those considering investing in mining stocks should be especially cautious but also mindful that markets do tend to ‘overdo’ bad news and so potential buying opportunities can exist if the run on stocks is overdone.

We must of course balance this with other countries and companies gradually increasing their output, especially if they are able to lower their costs should lower oil prices persist. However if these regulations do come into force and are adopted elsewhere, then that would have quite a positive impact on the Silver price.

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