500 years on Zacatecas re-emerges as precious metals investment destination

With only 30% of the Zacatecas’ territory currently being explored for mining resources and a history of vast silver deposits that goes back to the mid-16th century – when the city became the main supplier of the shiny precious metal to the Spanish crown –  the central-northern Mexican region is re-emerging as a favourite destination for foreign investment.

According to Miguel Alonso Reyes, Zacatecas’ governor, mining companies with operations in the region will invest about $30 million this year. The amount doesn’t include the spending announced by Canada's Goldcorp (TSX:G & NYSE:GG), which will allocate approximately $200 million to develop two new gold/silver mines: Camino Rojo and Noche Buena.

Goldcorp currently operates the Peñasquito mine, expected to become Mexico's largest open pit mine. According to miner’s forecast, Peñasquito will produce an annual average of 500,000 ounces of gold, 28 million ounces of silver, 450 million pounds of zinc and 200 million pounds of lead, over a 22-year life.

In an interview with Outlet Minero last week, Reyes said that Zacatecas’ potential has recently attracted big names, such as First Majestic Silver Corp. (TSX:FR & NYSE:AG), Pan American Silver Corp.(TSX: PAA), Oromex (TSXV:OAG), and Chinese Yunnan Metallurgical Group Co. (CYMCO).

Other companies with operations Zacatecas include Fresnillo, Grupo Mexico and Peñoles.

Zacatecas is the largest silver producer region in Mexico, with about 23% of its gross domestic product (GDP) linked to the mining industry. In addition, it is the second gold producer district in the country after Sonora, and its extractive represents 8% of Mexico's total GDP.

500 years of wealth

Zacatecas mineral wealth is nothing new. Much of its silver ended up in the hands of the Spanish conquerors, in the fifteen hundreds, who took over 25 years of searching to find the first great silver deposits in its Mexican colony.

In 1546, Juan de Tolosa “the Basque”, made a major strike in Zacatecas in the rough, arid mountains deep in Chichimec territory. Soon, five thousand mines–the richest were in the northern most inhospitable areas–sent massive amounts of silver flowing south to Mexico City.

Zacatecas, producing one-fifth of all of the colony's silver, became the third largest city in Mexico. The silver trade brought the promise of great wealth and everything that follows in its wake–urban centres, farming, commerce, craftsmen, and the livestock herds that began the modern-day ranches, which fill northern Mexico.