Mexican mining companies suffer copper and gold slump; shares plunge

The Mexican Stock Exchange (BMV) marked its second day in the red, registering its lowest level since March 2021, dragging mining companies such as Peñoles and Grupo México to a losing close, as metals plummeted due to the increase in interest rates.

As a result, the BMV’s Mexican Stock Exchange’s Price and Quotations Index (IPC) ended the day with a drop of 1.03%, to 46,657.88 points, marking its lowest level since March 5, 2021, according to Investing.com data.

The companies leading the losses were Peñoles, with a drop of 8.67%, its biggest setback since last March 14; and Grupo México, down 5.71%, its biggest since July 30, 2021.

Inbursa, Qualitas Controladora and Alfa also joined the losing close.

SAT influences the fall of mining companies

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Iván Santín, independent analyst, shared with EL CEO that such fall of Mexican mining companies was also derived after the SAT reported the results of the tax evasion studies carried out in 2021, where the evasion in the mining sector was disclosed.

Through a statement issued by the Ministry of Finance and Public Credit (SHCP) in conjunction with the SAT, it was reported that the Autonomous University of Coahuila (UAC) analyzed the possible evasion of Income Tax (ISR) in the mining sector, which is estimated to be in the amount of 19,000 million pesos, representing 89.6% of the total collection (21,000 million pesos) of the mining sector, excluding gas and oil extraction, in the period from 2016 to 2019.

It was detected that this possible evasion is carried out when mining companies disguise investments in extraction as an expense or reclassification of the same, in order to increase their deductions and thereby pay less taxes

said the press release.

The sub-sectors identified with the highest possible evasion were companies with silver, lead and zinc, and iron extraction, which together represent 70% of the total estimated evasion, detailed the SAT.

Copper closes at its lowest level since February 2021

Meanwhile, copper recorded its lowest price in 16 months due to investors’ concerns about a possible global economic recession.

At the close of the day, the metal fell 5.10% to 3.7428 dollars per pound, its lowest price since February 12, 2021.

The plunge also stemmed as the Fed’s interest rate hike and weak economic data fueled demand concerns.

Elsewhere, gold prices extended losses to a fourth straight session, falling 0.5%, to close at $1,829.80 an ounce, its lowest level in just over a week, FactSet data show.

Gold prices fell on the possibility of higher U.S. benchmark interest rates. This is due to the fact that higher rates reduce the demand for gold, as they increase its opportunity costs

said Banco Base in a note.

Likewise, silver added to the fall of its peers by closing with a loss of 1.8%, at a price of 21,042 dollars per ounce, according to MarketWatch data.

What factors determined the metals’ fall?

One of the main factors that determined the fall of metals are the fears of a possible recession in the United States, since the Federal Reserve (Fed) Chairman, Jerome Powell, mentioned on Wednesday that it is very difficult to achieve a moderate impact on the economy during the process of interest rate increases.

If the U.S. economy were to fall into recession, demand for gold could increase due to its role as a safe haven asset

shared Banco Base.

Jerome Powell testified before Congress on Wednesday, announcing that the central bank plans to keep raising interest rates until it sees clear evidence that inflation is slowing to its 2% target.

“An economic recession is certainly a possibility. We are not trying to cause a recession, but we do believe it is absolutely essential to bring inflation down,” Powell said during the congressional hearing.

Meanwhile, in Mexico, the Board of Governors of the Bank of Mexico (Banxico) raised the interest rate by 75 basis points for the first time in history, to 7.75% in order to contain inflation, which is at its highest level in two decades.