BMI's Executive Summary

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In BMI's newly released Mexico Mining Report Q107, we expect the nation's mining industry to remain broadly unchanged in size over the next five years. We believe that the value of output will grow moderately in 2006 (thanks predominantly to higher commodity prices) to around US$23.4bn. Going forwards, though, softer mineral prices are expected to moderate growth and the overall size of the industry is expected to track sideways.

Mexico is a major supplier of metals including gold and silver, lead, zinc and iron ore. It also has significant production of iron ore. It is distinguished from other Latin American countries by the scale of its steel industry that has attracted, and continues to attract, significant foreign investment.

A stable political environment and sound regulatory structure, combined with Mexico's location adjacent to the US, have attracted more than 200 foreign companies. Locally, the dominant players are Grupo Mexico and Industrias Peñoles.

BMI anticipates a significant growth in value of the country's iron ore production over the next five years and an increase of steel production from and estimated 16.7mn tonnes in 2006 to 21mn tonnes in 2011. BMI forecasts that silver, lead and zinc production will grow more slowly over this period.

Two factors remain of concern to Mexican mining interests: the highly unionised and increasing restive workforce in the sector and increasing environmental degradation, including an acute lack of potable water. This has led authorities to introduce new more stringent environmental regulations impacting on the industry. These problems appear more onerous when combined with the extremely slow pace of structural reforms.

Contents

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Executive Summary

Chapter 1 - Industry Trends And Developments

Market Overview

Regulatory Structure

General

Chapter 2 - Project And Property Updates

Metals

Coal

Table: Operations In Mexico

Chapter 3 - SWOT Analysis

Mexico Political SWOT

Mexico Economic SWOT

Mexico Business Environment SWOT

Chapter 4 - Business Environment

Table: Business Environment

Legal Framework

Labour Force

Table: Mexico, Annual FDI Inflows

Table: Latin America, Annual FDI Inflows

Industrial Unrest/Strikes

Overview

FDI Regime

Leading Sources And Sectors

Political Environment

Felipe's Feats

Chapter 5 - Industry Forecast Scenario

Correction To Continue

Lower Metal Prices, But Still Historically High

Risks To Outlook

Global Overview

Regional Analysis

Argentina Mining Industry Forecast

Table: Mexico Mining Industry Forecast

Chapter 6 - Competitive Landscape

Table: Mexico Mines

Chapter 7 - Company Monitor

Altos Hornos de México SA de CV

Grupo México SAB de CV

Industrias Peñoles SA de CV.

Appendix A: Mining Ratings: Methodolog

Introduction

Breakdown of Ratings

Breakdown of Components

Appendix B: The World Economy

Outlook and Risks

Table: Global Assumptions

United States

Soft Landing Ahead

Risks To Outlook

Europe

Moderating, But Solid Economic Growth

Medium-Term Growth Outlook

Japan

Japan In 2007 & 2008

Japan's Medium-Term Prospects

China

China In 2007 & 2008

China's Medium-Term Prospects

Commodities

Correction To Continue

Lower Metal Prices, But Still Historically High

Risks To Outlook

Oil

Appendix C: Regional Demographic Data

Table- Manufacturing Wages (ave. per annum), US$

Table - Population

Household Spending Per Capita, US$

Private Consumption Per Capita, US$ PPP

Market Size, GDP, US$bn