Mexico Silver Miners Hit by proposed New Legislation.

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

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.