In Mexico’s murder capital, signs of gold rush are emerging

by Eric Martin, (c) 2016, Bloomberg

In Mexico’s Guerrero state, a lot is hidden in the dirt, secrets both gruesome and wonderful.

The unmarked graves that dot the rolling hillsides give Guerrero its moniker as Mexico’s murder capital. But there’s gold here, too — lots of gold.

Toronto-based Torex Gold Resources opened its first mine earlier this year, representing a rare victory in Mexico’s efforts to fuel economic growth in a state ravaged by drug gangs fighting over the opium crops that feed U.S. heroin habits. Two other Canadian miners, Timmins Gold and Minaurum Gold, have plans to explore and develop their own sites. In a region with very little going for it, local officials and workers hope the trio of investments could be the start of something bigger.

While Guerrero and neighboring states Oaxaca and Chiapas account for a 10th of Mexico’s population, they’ve received less than 3 percent of its foreign direct investment over the past 16 years. Tales of murder and kidnapping have kept investors away. Cocula, the closest town to Torex’s mines, is better known to the world as the home of the trash dump where the bodies of 43 college students were burned in 2014.

The federal government alleges a local mayor aligned with a drug cartel had them nabbed to avoid the blight of planned protests. On Guerrero’s coast, the resort city of Acapulco has gone from a globetrotter’s hot spot (Bill and Hillary Clinton honeymooned there) to the state’s bloodiest town in under a generation.

“We’re very involved with our security folks to keep track of the risks,” says Fred Stanford, 57, the president and chief executive officer of Torex. Plus, the mining projects are a “beautiful asset.”

Prospects are so alluring, the former mine foreman says, that he’s made the 12-hour trek from Toronto every six weeks or so over the past seven years to check on progress at Torex’s first mine, El Limon-Guajes.

You could say Guerrero and Torex need each other. Torex’s only assets are the open-pit mine — inaugurated in April — and an adjacent project. The firm’s $800 million investment to develop El Limon-Guajes is Guerrero’s biggest ever. Torex plans to spend about $500 million more to start up the neighboring Media Luna project within about five years.

The Torex venture signals “to the world is that mining in Mexico is fundamental, because it generates wealth and social equality, above all in the poorest of places,” the economy ministry said in an April 28 statement, adding that the investment will generate 600 jobs.

El Limon-Guajes is expected to produce 275,000 ounces this year and average 360,000 ounces annually over as many as 12 years, which Stanford says probably will make it the second-biggest gold mine in Mexico. Gold futures climbed 19 percent this year in New York to $1,264.90 an ounce as investors searched for safe havens. Of the 10 analysts tracked by Bloomberg that rate Torex, all recommend buying the stock, which has almost doubled in the past year.

That sort of output doesn’t come cheap — especially in a place as dangerous as Guerrero. Of the company’s 1,800 direct employees and contractors in Mexico, 100 are security guards dedicated to keeping the others safe. Torex hauls the gold out by armored car along a 12-mile road with armed checkpoints that it built rather than risk running into bandits along the old winding dirt pass that climbs through the mountains toward Cocula.

The specter of violence is always present in the area. Thirteen people, including seven working at Torex’s project, were kidnapped from the old road in February 2015 by criminals linked to an infamous drug cartel. They were freed days later with the help of federal police. Miners from Goldcorp Inc.’s nearby Los Filos mine weren’t so lucky. Four workers went missing in March 2015; the bodies of three were found in a ravine within days.

Guerrero’s history of slayings and poverty make the Torex project all the more important, says Michael Harvey, chairman of the Canadian Chamber of Commerce’s mining task force in Mexico.

The Torex investment “is going to mean 20 to 30 years of jobs,” Harvey said in an interview in Mexico City. “Mining provides very well-paying jobs in regions where people have few other opportunities.”

Bloomberg’s Ben Bain and Danielle Bochove contributed. Chicago Tribune

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