In Mexico, Gold Mines Beckon Once More

The metal's long cycle of high prices, surpassing $1,500 an ounce, has allowed big outfits like Canada's Goldcorp Inc. GG -3.33% to set up operations in areas where, in the past, gold wasn't concentrated enough in the soil for mines to make a profit after sifting it out. This year, Goldcorp's Peñasquito site, a massive, low-concentration mine in the deserts of Zacatecas state, is set to produce 500,000 ounces of gold, making it Mexico's biggest gold mine and Goldcorp's most prolific.

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Silver has long been the cash cow of Mexico's mining industry. But last year the country joined the top 10 gold producers, mining more than 86 metric tons of the yellow metal, three times what it produced 10 years ago and more than other heavyweights in the region like Chile and Argentina.

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Companies say they are drawn to Mexico by its mining laws, which allow foreign firms to reap much of the profits from their investments. Under federal law, companies must apply for a mineral-rights concession through the Mexican government and operate there through a Mexican company. But the local company may be fully owned by foreigners.

The arrangement allows foreign investors full ownership over their operation and the Mexican government the ability to tax them under local law. Taxes include a 34% income tax on profits along with mining duties, which vary by the mine.

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While many firms want to explore countries like Venezuela, where mineral quality may be higher, the risks of nationalization are high, too, he says. "The colors of the Rubik's cube lined up in Mexico," he says.