The mining companies registered widespread falls in their price this Wednesday on the Mexican Stock Exchange (BMV), impacted by the downward adjustment that the international prices of metals, such as copper, silver and gold, have had.
At the close of the day, in which the main S&P/BMV IPC stock index fell 1.47%, Grupo México was the mining company with the greatest loss, falling 4.75%, followed by Minera Frisco (-2.06%) and Minera Autlán (-0.13 %).
For its part, Peñoles fell 1.83% on Wednesday, which added two consecutive declines, equivalent to a contraction of 4.82%, at a price of 240.30 pesos per share.
Analysts explained that the fall in the international prices of metals, mainly gold, silver and copper, has affected the trading of companies on the Stock Exchange, particularly this week.
Even with the setbacks that mining companies have shown this week in the stock market, most of them accumulate profits this year. These are headed by Grupo México that rises 17.43% and Autlán with a yield of 14.48 percent. Single digits have been the return of Minera Frisco (5.56) and Peñoles (2.01%). The only one that falls is Fresnillo (-15.13%).
Jacobo Rodríguez, director of Economic Analysis at Black Wallstreet Capital, explained that the pressures in the stock market for companies like Peñoles continued to spread this Wednesday, which is explained by the drop in metals such as gold and silver.
Peñoles is one of the largest producers of gold and silver; Mexico copper group worldwide.
In the last two days, there has been a 3.38% drop in the price of silver; copper, for its part, has dropped 2.86% and gold 1.43 percent.
But in the accumulated annual, the prices have been moderating their increases. Copper rises 5.32%, while silver gains 8.06% and gold 6.80 percent.
At the end of 2021, gold and silver showed decreases of 4.2 and 4.7% on average, respectively, as a result of lower risk aversion, although they still remained at high levels, especially gold, due to the increase in inflation. .
“As long as the war between Russia and Ukraine continues, the estimate is that the prices of industrial commodities will continue to be under pressure,” commented Jacobo Rodríguez.
rule out relationship
Stock market experts ruled out that the performance of Mexican public mining companies is related to the Mining Law, which seeks to nationalize lithium, since it is a metal that they do not exploit.
“The falls in the price of companies’ shares have nothing to do with the issue of lithium. Peñoles and Grupo México have no business in this segment”, added Jacobo Rodríguez.
He believed that the uncertainty surrounding the Mining Law is a “disincentive” for local mining companies to see opportunities in the exploitation of lithium. In addition, the Mexican government has announced that it will create a company for this purpose.
James Salazar, deputy director of Economic Analysis at CI Banco, considered that Peñoles “had shown a defensive behavior in recent days against the fall of the Stock Market”, for which an adjustment is also seen.
Government will review contracts
Chinese mining company falls on the stock market due to uncertainty due to mining law
The shares of Ganfeng Lithium, the largest producer of lithium compounds in China, fell 4.07% on Wednesday on the Shenzhen Stock Exchange, after the Mexican government announced that it will review the current contracts for the extraction of the mineral. Since Monday, their papers have lost 7.32 percent.
Ganfeng has an 86.88% stake in the London-based company Bacanora Lithium, which has launched one of the largest projects for lithium clay extraction in Sonora, which is scheduled to start operations by the end of 2023.
According to its projections, the initial production will be 17,500 tons of lithium carbonate equivalent (kt LCE) per year, with the potential to expand to 35,000 tons on average per year, according to a presentation by Ganfeng, based in the Chinese city of Xinyu.
Regarding the drop in the shares of the Chinese company on the Stock Exchange, analysts considered that it is related to the revision of the lithium concession contracts that the Mexican government will seek to make, as well as the news related to the Mining Law, with which light metal will be nationalized.
“Ganfeng Lithium has a concession for a 420 million dollar project in Sonora and there is some risk perception. However, so far there has been no talk of withdrawing the concessions that have already been made. We will have to see what happens”, commented Ana Azuara, Raw Materials analyst at Banco Base.
James Salazar, deputy director of Economic Analysis at CIBanco, explained that the drop in the Stock Market “could be attributed to the internal issue of lithium”, since the supposed largest deposit in the country is currently in the hands of Gangfeng. “Although, it seems that this concession would be the only one that would not be canceled after the adjustment to the Mining Law,” he considered.
Jacobo Rodríguez, Director of Economic Analysis at Black Wallstreet Capital commented that “there are still doubts about the future of the concessions, since it is not clear what is going to happen. If there will be an expropriation by the Mexican government and if compensation would have to be paid to Gangfeng for an eventual withdrawal from the contract”.
He added that “the Mining Law would be influencing the price of the shares of the Chinese company, especially due to the uncertainty of what will happen with the project it has for the exploitation of lithium in Mexico.”