Mexico has been making headlines for all of the wrong reasons lately. When you're looking at foreign investing, this is something you don't like to see. Yet, some are willing to accept the risk in hopes of windfall profits.
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Bad Press
Vizsla Silver is in the middle of this news. They operate a mining operation located in Sinaloa, Mexico. Does that sound familiar? It should. This is the primary base of operations for the Sinaloa cartel that used to be headed by "El Chapo" and "El Mayo."
Turmoil Amidst A Grab for Power
Since the arrest of "El Chapo," the Sinaloa cartel has splintered into rival organizations. Vizsla Silver was hoping to uncover a large deposit of silver, but one of the Sinaloa factions in the area likely realized the price explosion Silver is having and decided to get in on the action. It's a terrible situation happening right now. Ten miners have been kidnapped, with five of them found dead, while the others remain missing. (Source)
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Complicity
Some former Vizsla employees alleged the on-site management team was aware of the risk and to some extent cooperated with this armed faction. Workers' concerns were downplayed. Company equipment was even stolen and commandeered by this group at one point. (Source)
Red Flags
Before investing in any overseas project, variables such as this have to be considered. This was a large red flag, yet this didn't deter some investors. While I can't blame the company for trying to establish a lucrative mining operation, they chose a very poor location.
This is just one example. There are many other mining projects throughout Mexico.The problem is these are also vulnerable. Even if these other projects are left alone, what is preventing the Mexican government from nationalizing the mines and confiscating everything in the name of national security, then operating the mines themselves? Nothing, except some bad press.
Know The Risks
These are risks you take wherever you invest. It's one reason I got out of foreign mining companies. Most are located in less politically-stable areas of the world. Yes, there's potentially a lot of money to be made, but there's also a lot to lose. Vizsla Silver is somber reminder to do your due diligence when investing in companies whose main source of income is from foreign operations. There's very little recourse if things go bad and the government where they're based decides they're no longer allowed to operate there.
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