The city is located in the Valley of Guadiana and was founded on July 8, 1563, by the Spanish Basque explorer Francisco de Ibarra. During the Spanish colonial era the city was the capital of the Nueva Vizcaya province of New Spain, which consisted mostly of the present day Mexican states of Durango and Chihuahua. The foundation of the city originated due to its proximity to the Cerro del Mercado, located in the northern part of the city, which was believed to contain large amounts of silver. However, with time it was discovered that it was an important iron deposit.