2013
The Mexican mining industry entered a new era in 2013. After a decade-long mining boom, which was only briefly interrupted by the global financial crisis, commodity prices are under pressure and access to financing for exploration activities is tightening. At the national level change is also on the horizon as the Mexican government, under the leadership of President PeĂąa Nieto prepares to introduce a royalty tax for mining companies while the upcoming energy and fiscal reforms, as well as the recently implemented labor reform, looks set to change the Mexican operating environment. Despite growing market uncertainty, investment in the Mexican mining industry is forecasted to increase from US$8.043 billion last year to US$8.145 billion in 2013, setting a new industry investment record.
At this time of change, Mexico Mining Review provides a comprehensive and timely overview of the latest developments, business strategies, technological breakthroughs, and operational challenges in the Mexican mining industry. By connecting key stakeholders across the national and international mining industry, Mexico Mining Review is perfectly positioned to accelerate the exchange of vital industry information and strengthen Mexico’s position as one of the world’s most attractive mining investment destinations. Published annually, Mexico Mining Review features the perspectives of the Mexican and international business and political leaders that are shaping the future development of the Mexican mining industry.
ALL RIGHTS RESERVED Š New Energy Connections LLC, 2013. This annual publication contains material protected under International, United States and Mexican Laws and international Treaties. Any unauthorized reprint or use of this material is prohibited. No part of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage and retrieval system without express written permission from New Energy Connections LLC. Mexico Mining Review is a registered trademark of New Energy Connections LLC. The publisher has made all reasonable efforts to provide accurate information, and the information contained in this publication is derived from sources believed to be true and accurate. However, the information in this publication should not be considered to be complete or definitive, and may contain inaccuracies or typographical errors. The publisher accepts no responsibility regarding the accuracy of information and use of such information is at your own risk. The publisher will not be liable to any party for any direct, indirect, special or other consequential damages arising out of any use of information in this publication. The publisher provides no representations or warranties, express or implied, including any implied warranties of fitness for a particular purpose, merchantability or otherwise in relation to any information provided by the publisher in this publication.
ISBN: 978-0-9855346-2-2
2
TA B L E O F C O N T E N T S 1
STATE OF THE INDUSTRY
8
IRON ORE & INDUSTRIAL MINERALS
2
HISTORY & OPERATING ENVIRONMENT
9
INNOVATION & TECHNOLOGY
3
GEOLOGY & EXPLORATION
4
DEVELOPMENT & ENGINEERING
5
GOLD
12
TRANSPORTATION & LOGISTICS
6
SILVER
13
BUSINESS & FINANCE
7
COPPER & BASE METALS
14
FUTURE OUTLOOK
10 11
SAFETY & RISK MANAGEMENT
SUSTAINABILITY & CSR
1
2
STATE OF THE INDUSTRY
1 Last year was a year of change for the Mexican mining industry. While investment reached a new record and the industry was once again one of the main engines of job creation in the country, the apparent peak of the mining boom and the reforms announced by President Peña Nieto, who was inaugurated in December 2012, started to influence the development strategies of juniors, mine operators, suppliers and service providers alike.
In this chapter we provide an overview of the key trends that defined the industry in 2012, analyze how these developments have altered the Mexican operating environment, offer an insight into how last year’s record investment of US$8.043 billion has been spent, and consider the impact that the labor, energy and fiscal reforms could have on the position of the mining industry in the Mexican economy both as a driver of economic growth and the source of new direct jobs. We also present the perspectives of both the new and old faces that set the industry’s strategic direction and hold the key to its future expansion.
3
4
CHAPTER 1: STATE OF THE INDUSTRY 6
The Year in Review
8
Mexico’s Position in the Global Mining Industry
8
Mexico’s Participation in Global Mining Production (2012)
9
Contribution of Mining to Mexico’s Economy
10
President Peña Nieto’s Push for Substantial Reform
11
New Faces in Charge of the Mining Sector
12
Investment in Mexican Mining
12
Federal Government Organizational Structure for Mining
14
VIEW FROM THE TOP: Key Trends in the Mining Industry
16
EXPERT INSIGHT: Humberto Gutiérrez-Olvera Zubizarreta
17
VIEW FROM THE TOP: Bringing Together the Mexican Mining Industry
18
Impact of the Fiscal Reform
19
Employment in the Mining Industry
20
2012 Labor Reform Impact on the Mining Industry
22
GLOSSARY OF TERMS
5
THE YEAR IN REVIEW Until 2012 the mining industry had mostly resisted the
for exploration investment, and the fourth worldwide.
negative consequences of the recession that began in the
According
US in 2007 and later spread to Europe, becoming a global
investment in exploration activities in Mexico in 2012 was
recession in 2009. The global mining industry remained
twice the amount that it had been in 2008, with US$1.2
strong largely thanks to the continued growth of major
billion invested by 439 companies on 1,172 different
economies in Asia, however as China’s growth has slowed
projects. The majority of funding for exploration activities
and construction works decreased, an environment of
has traditionally come from foreign companies, largely due
uncertainty has crept into the mining industry on an
to the high-risk nature of these types of projects; in 2012
international scale. However, in the face of this uncertainty
foreign investment represented 70% of total investment in
the industry in Mexico continued to grow during 2012,
exploration projects.
to
Camimex
(Mexican
Mining
Chamber),
receiving a record US$8.043 billion in investment (MX$101.4 billion), and creating 18,833 new direct jobs. Following the
DEVELOPMENT
inauguration of President Enrique Peña Nieto in December
The significant increase in exploration activity in Mexico
2012, the new PRI administration has outwardly promoted the
in the last few years has led to a number of projects that
mining industry and its importance as a significant income
now have excellent proved and probable resources. After
generator for the country. A number of reforms, introduced
completing the prefeasibility and feasibility stages, these
both by the previous Calderón administration (2006-2012)
are now in the process of being turned into mines. Camimex-
and in the initial months of the Peña Nieto administration,
affiliated companies, which represent 93% of the value and
have also for the most part tightened regulation.
volume of Mexico’s mining production, spent US$1.8 billion on the development of new mining projects in 2012, over
EXPLORATION
US$711 million on project expansion activities, and US$1.7
Mexico’s profile as an excellent location for mining
billion on the acquisition of equipment and machinery. More
exploration activities is well known internationally, and
than half of the total expenditure of mining companies in
with 70% of the territory unexplored many companies
Mexico in 2012 is therefore estimated to have been spent on
have set up exploration projects in the country. Mexico’s
the development of assets. Camimex estimates that more
attractiveness as an exploration location is also reflected
than 15 new mining operations will begin production in the
in the fact that it is the top destination in Latin America
country between 2013 and 2015, which between them will contribute to an expected hike in Mexico’s total production
MEXICO METAL & MINERAL PRODUCTION (2012)
1.8% 2.0% 2.4%
of a number of different metals and minerals in the coming years. GOLD
6.1%
While Mexico has not traditionally been associated with gold mining, this has changed over the last few years as
3.8%
29.2%
4.3%
its importance as a gold-producing country has steadily grown. Of the total mineral and metallurgical value generated in 2012, gold represented the largest proportion
5.5%
at 29.2%. The country is now the world’s 11th biggest gold
US$17,799 million
producer, according to the US Geological Survey (USGS), with INEGI estimating that 102.8 tonnes of gold were produced in the country in 2012. According to Camimex data, Goldcorp is the country’s biggest gold producer,
19.6%
accounting for 26% of the country’s total gold production.
25.3%
The company also owns the country’s two biggest gold producing mines: Peñasquito in Zacatecas and Los Filos in Guerrero, which produced 411,000oz and 340,000oz of gold respectively. Fresnillo’s La Herradura mine was the gold
iron
silver
lead
copper
coal
zinc
molybdenum
coke
other
third biggest producer at 314,500oz of gold production. SILVER In 2012 Mexico maintained its position as the world’s biggest silver producer, and its silver production has continued to grow in 2013. INEGI estimates that Mexico Source: INEGI
6
MEXICO PRECIOUS METAL PRODUCTION (2012) HIGHLIGHTS OF 2012 • Total mining investment reached US$8.043 billion • US$1.2 billion was invested in exploration by 439 companies in 1,172 projects • Mexico produced 102.8 tonnes of gold • Mexico produced 5,358 tonnes of silver US$9,694 million
46.5%
• Mexico produced 500,275 tonnes of copper 53.5%
• Mexico produced 660,349 tonnes of zinc • The mining industry created 18,833 new direct jobs
Fraser Institute’s annual survey. The survey, which looks at mining investment trends, and rates different jurisdictions across a broad range of criteria, downgraded Mexico along gold
safety and security, fiscal regime, and policy potential Source: INEGI
silver
indicators, compared to the previous year.
produced 5,358 tonnes of silver in 2012, a new record. The
There is broad agreement that the labor reform that was
Fresnillo mine remains the biggest silver producing mine
passed at the end of 2012 has had a predominantly positive
in Mexico, and the biggest primary silver producing mine
impact on the industry, placing greater accountability
in the world, with a total production of 26.4 million ounces
on companies and workers for accidents in mines, and
in 2012. Fresnillo was followed by Goldcorp’s Peñasquito
tightening regulations around outsourcing and contracting.
mine in Zacatecas and Coeur Mining’s Palmarejo mine
Declining metal prices and the steady increase in the
in Chihuahua, which produced 23.7 million ounces and
cost of energy and equipment have also forced mining
8.2 million ounces of silver respectively. The silver price
companies, service providers and suppliers to streamline
has shown greater volatility than gold, with the average
their operations and maximize efficiency across all areas
price coming down over 11% between 2011 and 2012, from
of their activities, in order to remain as competitive as
US$35.12 to US$31.15.
possible.
BASE METALS & IRON ORE As the world’s ninth largest producer of copper, Mexico
MEXICO BASE METAL PRODUCTION (2012)
produced 500,275 tonnes of copper in 2012, a 12.8% increase compared to the previous year. The Buenavista 6.0%
del Cobre mine in Sonora is the country’s biggest producer, 8.3%
accounting for almost two thirds of the country’s total production. In 2012 Mexico was also the world’s seventh largest producer of zinc, with a production of 660,349 tonnes. Peñoles is the biggest zinc producer in Mexico, producing 157,257 tonnes across five different mines, and
18.6%
US$5,251 million
accounting for almost a fifth of the total production in the country. Mexico is currently the 14th biggest producer of iron ore in the world, with a total of 13 million tonnes. 66.5%
OPERATING ENVIRONMENT Mexico’s operating environment is viewed favorably by both national and international mining companies that operate in the country, which generally view its political stability,
financial
certainty,
and
mining
culture
as
welcoming to mining activity. However, in 2012 Mexico’s competitiveness slipped in a few key areas such as fiscal regime, policy potential, and security, according to the
copper
molybdenum
zinc
other (0.6%)
lead Source: INEGI
7
MEXICO’S POSITION IN THE GLOBAL MINING INDUSTRY Mexico is the fourth mining exploration destination in the
in the international economy, the country is among the top
world, and the first in Latin America. As of December 2012,
10 producers of 16 minerals (see table below). The total
285 companies with foreign capital were operating 853
income generated through Mexico’s mineral production
mining projects in the country. The total investment in the
reached US$17.8 billion in 2012. The major part of this
sector grew from US$2.158 billion in 2007 to US$8.043
income came from the export of mining products to the US,
billion in 2012 – an increase of 272%. The country’s geological
which is the Mexican mining industry’s main client. Over 57%
richness and the favorable business environment have
of Mexico’s mining exports had its northern neighbor as a
enabled companies to gain access to attractive concessions
destination. Other main foreign clients are China (10.4% of
and develop mining projects in advantageous timeframes,
total exports), South Korea (4.7%), Switzerland (4.4%), and
thus ensuring attractive return on investment rates.
the UK (4.3%). The most sought after metal in this market is gold, which makes up over one third of Mexico’s mining
According
to
Promexico,
the
Mexican
Government
institution in charge of strengthening Mexico’s participation
exports. The precious metal is followed by silver (21% of all exports), copper (15%), iron (9%), and lead (5.5%).
MEXICO’S PARTICIPATION IN GLOBAL MINING PRODUCTION (2012)
Silver
Fluorite
Bismuth
Celestite
1st place
2nd place
2nd place
3rd place
(17.71%)*
(17.52%)
(13.51%)
(8.29%)
Wollastonite
Sodium Sulfate
Lead
Cadmium
3rd place
3rd place
4th place
5th place
(7.84%)
(5.48%)
(4.71%)
(7.00%)
Molybdenum
Diatomite
Zinc
Gypsum
5th place
5th place
7th place
8th place
(4.36%)
(4.28%)
(4.85%)
(2.57%)
Barite
Graphite
Salt
Copper
8th place
8th place
9th place
10th place
(1.90%)
(0.73%)
(3.14%)
(2.94%)
Gold
Silica Sand
Kaolin
Manganese
11th place
11th place
11th place
11th place
(3.22%)
(2.05%)
(0.36%)
(1.06%)
Sulfur
Feldspar
Phosphorite
Iron
12th place
12th place
12th place
14th place
(2.36%)
(2.00%)
(0.81%)
(0.43%)
* Mexico’s share of global production
8
CONTRIBUTION OF MINING TO MEXICO’S ECONOMY The International Monetary Fund had forecast a growth
4.9% to the country’s total GDP. The investment the
of 3.5% for the Mexican economy in 2013. However, the
industry has triggered in recent years has had a significant
Mexican government announced a year-on-year growth of
effect on employment, infrastructure development, and
only 0.6% during the first quarter of 2013 and a moderate
the general growth of economic output in Mexico. As of
increase of 1.5% during the second. Overall, the Mexican
December 2012, the mining industry was responsible for
economy has underperformed in relation to both domestic
328,555 direct jobs and 1.5 million indirect jobs in Mexico,
and international expectations, averaging a growth rate of
according to data from the Mexican Institute of Social
only 1% during the first half of the year.
Security (IMSS). From 2007 to 2012, over US$25.64 billion was invested in the sector. In spite of the current economic
These negative results can be partly explained by the
context, mining companies are set to increase investments
current downturn in Mexico’s mining industry. Figures
by 1.3% during 2013, thus setting the stage for a better
reported by Mexico’s National Institute of Statistics and
economic performance once metal prices recover.
Geography (INEGI) indicate that the fall in metal prices caused the contraction of the mining industry’s output value by 1.75%. The decreased margins of mining activities also discouraged the industry from pursuing certain projects, and therefore negatively impacted the total
MINING INDUSTRY INVESTMENT 2012-2013 (US$ million) Camimex Members
2012
2013
Exploration
798
867
Project Expansion
711
916
New Projects
1767
2585
Training and Productivity
140
177
Equipment Acquisition
1723
1485
Environment
116
179
Safety and Ocupational Health
80
97
Security (private)
36
41
Community Relations
101
132
Maintenance
634
721
Other
1039
345
Subtotal
7,145
7,545
Exploration
367
200
Assets
531
400
Subtotal
898
600
8,043
8,145
volume of production, which only grew 0.32%. This double effect of negative metal prices was compounded by the loss of industrial activity, both within mining companies and throughout the sector’s network of suppliers. INEGI’s industrial activity index for the mining industry only fell an average of 0.07% during the first semester of 2013, due to the long term nature of investments in mine development. However, this index decreased 2.06% in the case of service providers for the industry. The numbers published by INEGI indicate that a bigger drop in the industry’s activities, production and value creation could be reported in the coming trimester, once the stall in exploration, construction, and production projects start to affect production figures. The importance of the mining industry for Mexico’s economy is clearly reflected in the country’s GDP. This sector’s negative performance influenced an average fall of 1.1% in the value of secondary economic activities during the first six months of 2013, which in turn pushed the growth rate downwards. By contrast, in the previous years
Non-members
of the mining boom positive growth in Mexico’s general economy was supported by the industry’s spectacular expansion, as shown by data from Camimex (the Mexican Mining Chamber). In 2012, for example, the total value output of the mining industry increased 14% in relation to the previous year. The mining sector also generated US$22.5 billion in foreign currency during that year, thus
Mining Total
positioning itself as the fourth largest contributor to Mexico’s economy (after the automotive industry, the
The macroeconomic framework, the prospect of structural
electronics industry, and the hydrocarbons sector).
reforms to promote economic growth, create jobs, and reduce poverty and social inequality, make Mexico an
Between 1994 and 2011, the mining industry’s participation
attractive investment destination despite the challenging
in Mexico’s GDP grew by 1.5%. Today, this sector contributes
financial environment in the mining industry. Source: Camimex
9
PRESIDENT PEÑA NIETO’S PUSH FOR SUBSTANTIAL REFORM In August 2013 political risk expert Ian Bremmer wrote in
Additionally, the government has backed a proposal from
an op-ed column for Reuters that, in his perspective, there
the National Governors’ Confederation (CONAGO), which
are only three world leaders who are actually leading.
aims to reallocate the public resources collected through
Mexican President Enrique Peña Nieto was included among
mining taxes. It is expected that the President will introduce
those three presidents who are managing to “squelch
a second reform initiative in the following months, and
opposition, carve out a more impactful role for themselves,
that the ensuing modification to the Mining and Fiscal
and undertake difficult reforms, all while leveraging their
Coordination Laws will allow mining states to benefit from
popularity and consolidating their strength,” he wrote. Peña
existing taxes collected from this activity. The Pact for
Nieto’s determined approach to reforming several sectors of
Mexico also aims to transform the mining industry into a
the Mexican economy has certainly gained him good reviews,
more efficient and sustainable sector. The effort to further
both in Mexico and abroad. Just one day after his inauguration
benefit the communities where mining operations take
he signed a series of commitments with the country’s main
place will not only be limited to resource allocation policies,
parties. Involving reforms in education, tax policy, social
with the pact also proposing the creation of consultation
welfare, and targeting strategic industries such as oil and gas,
forums with the communities. The government foresees
tourism, and telecommunications. This document, known as
these dialogues as promoting a better understanding of
the Pact for Mexico, marked the beginning of a concerted
communitarian life, and thus achieving greater respect for
effort between Mexico’s political forces.
local traditions and social cohesion in mining regions.
The Pact for Mexico contains a concise but relevant
The President is also interested in fostering the expansion
section dedicated to the mining sector. First and foremost,
of mining operations. On July 18, while attending the
it establishes the objective of introducing a new Mineral
inauguration of AHMSA’s new steel processing complex in
Resources Exploitation Law. According to the document,
Coahuila, he highlighted the industry’s importance in the
this law will modify the granting of mining concessions
generation of further investments and developments across
and the industry’s taxes and duties system. Modifications
a broad range of economic activities. When presenting
to the current Mining Law have already been proposed
his government’s National Development Plan in May 2013,
and approved by the Chamber of Deputies. The most
President Peña Nieto stated that “Mexico has the historic
important provision included in this first initiative concerns
opportunity to embark on a profound transformation in
the imposition of a royalty with which municipalities, states
order to foster its economic development for decades
and the federal power will implement social development
to come.” He is not alone in this perception. International
projects in mining communities. This initiative currently
media has already coined a term for the renewed attention
awaits approval in the Senate.
being payed to Mexico’s economic revival: the MeMo or ‘Mexican Moment’. President Peña Nieto’s ambitious plans regarding infrastructure and energy are destined to create substantial opportunities for the mining sector, even if the industry’s fiscal burden is expected to grow in the near future. Current metal prices provide a cautious canvas for Mexican miners’ optimistic expectations. The Pact for Mexico has proven its role as an effective platform for political consensus and as a stepping-stone for structural reform. Peña Nieto has been able to navigate the country’s security crisis, the social unrest surrounding his accession to power, and the opposition. Now he is putting his political capital on the line to achieve longawaited reforms that might truly transform the country into an international success case and an even more attractive investment hub. As Bremmer concludes, Mexico might just be “on the cusp of becoming the world’s third country (after Taiwan and South Korea) that has gone from being a developing country to becoming a developed country in the last 50 years.”
10
NEW FACES IN CHARGE OF THE MINING SECTOR | PRESIDENT OF MEXICO Enrique Peña Nieto defeated his opponents in the Mexican federal elections in 2012, thus enabling the return of his party to power after a 12-year hiatus. He represents the new face of Mexico’s long-ruling party, the Institutional Revolutionary Party (PRI), which held power in the country for over 70 years in the past century. Born in Atlacomulco, an industrial city in the State of Mexico (which neighbors Mexico City), Peña Nieto is the son of an electrical engineer and a teacher. He has been tied to politics and public service from birth: he is the nephew of a former Enrique Peña Nieto
mayor of Atlacomulco and has blood ties to two former governors of the State of Mexico.
Peña Nieto studied Law at Universidad Panamericana, one of Mexico’s top schools for this profession. During this period he joined the ranks of the PRI party, following in the footsteps of his family members. At the same time, he initiated his professional path as an employee at various legal firms. He later pursued a career as an independent lawyer and studied an MBA at the Monterrey Institute of Technology and Higher Education (ITESM). While he was completing his postgraduate studies, Peña Nieto was awarded his first position as a party representative at the national level. After holding a string of political positions, Peña Nieto collaborated in two successful electoral campaigns and held relevant positions in both resulting governments within the State of Mexico. In 2003 he was elected local deputy for the state legislature, as a representative of Atlacomulco. This position was the stepping stone for his candidacy for the state government, which he won in 2005 thanks to the thorough list of notarized commitments he made to the local population. During his six year term as governor, Peña Nieto followed the observance of each of these commitments, which marked advances in the state’s infrastructure, public services and public finances. At the end of his term as governor, Peña Nieto actively sought the election as the PRI’s candidate for the 2012-2018 presidential period. His opponent’s withdrawal early into the primary elections gave him a valuable opportunity to structure his campaign, action plan, and proposals. Peña Nieto’s presidential campaign followed the same model as his previous bid for government: he toured the country extensively, signing a series of notarized commitments at both the state and federal levels, and meeting with relevant actors of Mexico’s civil society and the private sector in order to listen to their concerns and design public policies in response to their needs. He was declared the winner of the July 2012 elections by a margin of almost 7% of the vote.
| ECONOMY MINISTER An economist born in Nuevo Leon, the country’s industrial hub, Ildefonso Guajardo Villarreal is the person in charge of fostering industrial development and supporting economic growth in Mexico. After receiving his bachelor’s degree in Economics from Nuevo Leon’s Autonomous State University (UANL), he completed a master’s program in Economics at Arizona State University. Guajardo Villarreal did his doctoral studies in Economics and Public Finances at Pennsylvania University, and today has an extensive background in his field. Ildefonso Guajardo Villarreal
Guajardo Villarreal has been involved in the political economic planning and programming of Mexico since 1984, when he was named Director of Public Finances at the Economy Ministry, which was then named Ministry of Budget and Programming. He subsequently held various positions in different areas of federal government, including Director of the North American Free Trade Agreement Affairs Office, based at the Mexican Embassy in Washington, Undersecretary at the Foreign Affairs Ministry, Deputy Ministry of Tourist Development, and Planning, Communication and Liaison Technical Secretary for the Trade and Industrial Development Ministry. Guajardo Villarreal also served as head of the Executive Office of the Governor of Nuevo Leon during 2003-2006, after which he became a Congressman, first at the state level and afterwards at the federal level. As a Federal Congressman, Guajardo Villarreal was Chairman of the Economics Commission and member of the Treasury and Public Credit Commission. After Enrique Peña Nieto was elected President, he called Guajardo Villarreal to his transitional team, naming him Vice Coordinator of Economic Policy, during the inauguration of the new presidential term he was named Economy Minister. He declared shortly afterwards his intention of promoting a series of reforms in the mining sector, namely concerning the industry’s fiscal framework and the de-regulation of foreign direct investment in the sector.
11
INVESTMENT IN MEXICAN MINING Mexico’s ranking as the fourth country in the world for mining
with the signing of NAFTA in 1994. The process of opening
exploration investment is not the result of coincidence.
up Mexico to foreign investment has invariably been viewed
The country has combined a historical mining culture with
by the key players in the mining industry as a positive step
an effective regulatory framework and a stable political
for Mexico. “I think it was a big success for Mexico to have
environment to make mining investment an appealing
signed NAFTA – an instrument that creates legal certainty
prospect for national and international companies. With
and other incentives for investment in Mexico. Without
the 14th highest GDP in the world and the second in
NAFTA the current level of local demand and stability in
Latin America, Mexico is one of the leading high-growth
the investment climate would be very different today, and
economies globally, along with Brazil, Russia, India and
the industry’s growth would certainly not have reached the
China, which together represent one fifth of the global GDP.
levels it has,” says Juan Francisco Torres Landa, Partner at BSTL Abogados. In the years following the signing of
The Competitive Alternatives report, compiled by KPMG
NAFTA, Mexico’s trade with the US and Canada almost
in 2012, compared these countries to a number of more
tripled, and foreign investment has gone from strength to
mature economies based on a number of different
strength since. Even in the face of declining metal prices
business environment criteria. Mexico performed best in
investment is set to continue growing, with Mario Cantú
the ‘Ease of Doing Business Ranking’ out of all five high-
Suárez, Mexico’s General Coordinator of Mining, telling
growth countries. It was also reported that the 81 days it
Reuters in May 2013 that he expects mining investment
takes to finalize permitting for a warehouse in Mexico, is
during President Enrique Peña Nieto’s administration to
significantly lower than the other high-growth countries,
reach, if not exceed, US$25 billion. This has been a natural
with the runner-up being India at 227 days. Of the mature
result of the more favorable environment that has been
economies only the US and Canada performed better at 26
created, and confirms that efforts made over the last 20
days and 73 days respectively, while Mexico was ahead of
years to improve Mexico’s business environment have been
countries such as Germany, the UK and Australia. Finally,
fruitful. “If you look again at the discussions of the best
of the 14 countries included Mexico ranked first on the
places to invest in, despite the challenges that the Mexican
‘Market Access Index’, meaning that its policy framework
mining industry faces, including safety issues, Mexico
was found to be the most welcoming of foreign goods and
is being ranked number one, even ahead of Brazil. It is
enables the greatest access to foreign markets for its own
good to know that bankers in London or in New York are
exporters.
precisely the ones saying that we are doing things right. It is time for a new wave of investment and activity in the
These achievements come as the result of a long period
Mexican mining industry,” says Torres Landa.
of liberalizing the operating framework and strengthening institutions, which began in the 1990s with the 1992 reform
A large proportion of foreign investment in the Mexican
to the mining law that allowed up to 100% of investment to
mining industry comes via companies listed on the Toronto
be foreign (it had previously been capped at 49%), and then
Stock Exchange (TSX), which in 2012 accounted for 70% of
FEDERAL GOVERNMENT ORGANIZATIONAL STRUCTURE FOR MINING
ECONOMY MINISTRY (SE) Ildefonso Guajardo Villarreal
GENERAL COORDINATION OF MINING (CGM) Mario Cantú Suárez
12
GOVERNMENT TRUST FOR MINING DEVELOPMENT (FIFOMI)
GENERAL DIRECTORATE FOR MINING DEVELOPMENT (DGDM)
GENERAL DIRECTORATE FOR MINING REGULATION (DGRM)
MEXICAN GEOLOGICAL SURVEY (SGM)
Armando Pérez Gea
Juan José Camacho López
Luis Raúl Rey Jiménez
Raúl Cruz Ríos
TOTAL INVESTMENT IN MEXICO’S MINING SECTOR (US$ MILLION) 9,000 8,000
8,043
7,000 6,000 5,000
5,612 3,656
4,000
2,858 2,156
3,000
2012
2011
2010
2009
2008
2007
1,257
2006
585
912
2005
348
2004
250
2003
0
380
2002
1,000
2001
2,000
3,316
Source: Camimex
equity capital raised globally for mining companies. “The
industry, as well as accelerating Mexico’s economic growth,
TSX has done a great job of developing business, and by
there is still some way to go. “One interesting development
listing many Canadian mining companies it has developed
in recent years is that the BMV has introduced instruments
specific expertise in mining, as well as an ecosystem that
under which a company makes certain amendments to its
includes investors that today feel very comfortable on that
corporate bylaws, adopting certain accounting practices
exchange,” says Edmundo Gamas, Principal at Ultra Maris
for example, before eventually making an IPO. The spirit
Capital. “Nowadays, being able to meet TSX standards
of these amendments is very good, but there are some
is a validation for mining companies, making them more
difficulties in practice that still need to be worked on,” says
attractive from an investment risk standpoint. The Mexican
Luis Armendariz, Partner at Arzola + Armendariz Abogados.
Stock Exchange (BMV) has traditionally listed the large
In the meantime the steady increase in foreign investment is
Mexican mining companies, and is now starting to focus on
very positive for the industry, which could not have reached
smaller mining entities. Overall, the BMV has done a great
its status as a prime mining destination without it. “Mexico
job in the last few years in developing new capital market
is still a developing country and does not have enough
products, and everything related to mining should be a
capital, and certainly very limited risk capital; it needs
natural fit.” Whilst there is general agreement that making
foreign investment to continue to develop, especially in high
financial instruments more accessible in Mexico would
risk ventures such as mining,” says Mauricio Candiani Galaz,
greatly benefit the development and reputation of the mining
President and CEO of Candiani Mining.
| GENERAL COORDINATOR OF MINING The background of the new General Coordinator of Mining is very similar to his superior in the Ministry of Economy. Like Guajardo Villarreal, Mario Cantú Suárez graduated in Economics from UANL and attended Pennsylvania University, where he received a master´s degree in Economy and doctoral credits in Economics and Public Finance. Cantú Suárez has 24 years of experience in the Federal Government, where he has worked in diverse areas of the Treasury Ministry, the Presidency, the Labor Ministry, the Social Development Mario Cantú Suárez, General Coordinator of Mining at the Economy Ministry
Ministry, the Tax Administration Service, the National Water Commission and the Public Service Ministry. He also lent his expertise in the management of public institutions such
as Conasupo Industrialized Milk (Liconsa), a government-held company that produces and distributes dairy products at affordable prices. Cantú Suárez also has experience in the private sector, for he served as an econometric analysis manager at WEFA-CIEMEX, the leader in economic forecasting in Mexico. As of January 2013, Cantú Suárez was named General Coordinator of Mining, and he was entrusted with the mission of strengthening innovation, investment, and competition in Mexico’s mining industry. Cantú Suárez has since participated actively in various industry forums and meetings with both the private and public sector in order to pursue these objectives.
13
| VIEW FROM THE TOP
KEY TRENDS IN THE MINING INDUSTRY SERGIO ALMAZÁN ESQUEDA Director General of Camimex
Q: How has the pattern of investment within the mining
and only focuses on the problems that relate to the mining
industry evolved over the past decade?
industry as a whole and that can really limit its growth. Under
A: In 2002 total mining investment in Mexico was US$340
this premise, the problems that Camimex tries to solve, as
million, compared to US$8,043 billion in 2012. Total
well as the body’s goals and objectives, are for the benefit of
mining investment includes not just exploration but also
the mining sector. We are in constant communication with
development, expansion, new infrastructure, and training,
the federal, state, and municipal government.
as well as new equipment and environmental and social demonstrate
In order to be able to reach our main objectives, we have
the impressive growth of the mining industry in the past
12 permanent commissions with working groups that any
decade. In the last year 60% of the total investment came
member can turn to. These groups address the main issues
from mining companies with Mexican capital and the
concerning the industry: energy, climate change, water,
remaining 40% from companies with foreign capital.
environment, community development, education, safety,
development
investment.
These
figures
health, taxes, legal framework, customs, and foreign trade. Q: What impact has mining-related investment made on
Camimex’s strength relies on the existence of these groups,
Mexico’s foreign exchange and trade balance, and what
which are led by industry specialists.
are the main destinations for Mexico’s metal exports? A: The Mexican mining industry currently has a trade surplus,
Q: Safety is a very important topic for the mining industry.
with exports outnumbering imports. In 2011 the positive
What is Camimex doing to counterbalance mining’s image
trade balance amounted to US$12.64 billion and in 2012 it
as an unsafe industry, and what best practices are being
reached over US$13 billion. The main geographical region
promoted as a result?
Mexico exports its minerals to is North America, followed
A: I want to emphasize that safety is a priority for
by Asia and Europe. The products we import are metals
Camimex’s member companies. In 2003 the accident rate
and minerals that the country does not produce, such as
was 8.3%, compared to 2011 when it was 3.2%. Although
aluminum, as well as others for which local production is not
this reflects great progress, Camimex’s goal is that all of its
self-sufficient, such as iron and coal, which in some cases
member companies should continue working to improve
have to be imported in order to meet local demand.
safety on their mine sites. We are working towards every company implementing a culture of safety in each of its
Q: What role does Camimex aspire to play in the Mexican
operations on every single level.
mining industry? A: Camimex is the official consultative governing body
The Occupational Health, Hygiene, and Safety Training
regarding all matters relating to the mining industry. In
Commission of Camimex promotes best practices for
recent years Camimex has brought together the 150 main
safety in mines with our members and regularly visits
mining companies in Mexico, and Camimex’s member
mining operations to train workers. For the past five years
companies represent 93% of the value and volume of
we have provided a continuous education course for
mining production. With the exception of small and some
underground mine safety in which mining experts from
medium-sized companies, the country’s most important
Chile and Mexico share their expertise. The Chamber also
mining companies are Camimex members, regardless of
organizes a biannual convention for mine safety with the
whether they are funded by Mexican or foreign capital.
aim of sharing new technologies and new safety practices, as well as organizing a national competition to reward those
14
The Law of Business Chambers provides the official faculty
companies that achieve the best results in safety; each
making Camimex the link between the mining sector and
year the Silver Hard Hat is awarded to the safest mining
the three levels of government (executive, legislative, and
operation in three different categories: underground mine,
judicial). Camimex is concerned about all of its members
open pit mine, and refinery and plant.
Camimex has recently begun a Safe Company and Self-
One of the most important challenges the industry
Management Program together with the Ministry of Labor
faces today is communicating how modern mining
and Social Welfare, in which companies voluntarily commit
practices have revolutionized the sector, and above all
to carrying out safety best practices in their mines. The
transmitting the deep benefits that the industry brings to
companies’ response to this initiative has been very
communities. Mining in Mexico has a more than 500 year
positive and we currently have 85 operations working
history; if we were to weigh up all of the good things the
under the program.
industry has done so far against some of the problems it has encountered, the balance would tip in favor of the
Q: What are the current environmental sustainability
positive legacy the industry leaves behind. Nevertheless,
trends within the Mexican mining industry and what
due to the general lack of awareness, we have to reach
initiatives are being implemented to create a cleaner and
people and communicate clearly and efficiently all of the
more efficient industry?
benefits that mining brings to the country. Mexico is a
A: Much like we have in safety and occupational health,
mining nation, although many Mexicans do not know this.
we have an agreement with the Environment and Natural
We have worked very hard and invested a lot of time and
Resources Ministry (Semarnat) and the National Forestry
money in changing the image of the industry. We know it
Commission (Conafor) to implement best practices in
has not been enough, so we will double our efforts and
these aspects, as well as fostering specific norms that
complement our strategies in order to show the good
apply to the mining industry and that guarantee good
practices that have been implemented, as well as all of the
environmental performance. Currently, 80% of Camimex
social benefits they have brought.
member companies have the Clean Industry Certification, and much of the remaining 20% are working to obtain
Q: What solutions and initiatives could be successful in
it. Mining is one of the industries that holds the largest
getting more people to enroll in mining-related academic
number of Clean Industry Certificates.
programs? A: The positive cycle of the mining industry began in
During 2012 3.5 million trees were planted by the industry,
around 2003, and many companies operating in Mexico
which in the past seven years adds up to a total of 13.5
were taken by surprise. After a 20 year period of low
million planted trees. After the Mexican Army and the
metal prices many of the professional activities related
forestry industry, we are the industry that has planted the
to mining, especially the earth science careers, were not
largest number of trees in the country. Mining companies
attractive to students. Following this positive change in the
are very concerned about preserving the ecosystem; for
industry we then faced the challenge of having a shortage
example, there are 16 natural areas that are protected
of qualified human capital. Once we understood this,
by the mining industry. For the past 10 years we have
Camimex implemented several programs to attract young
developed the annual Experience Seminar, with the
people to the idea of studying geological, metallurgical
participation of Semarnat, Conagua, Profepa and Camimex,
and mining engineering. In 2008 the Chamber created a
with the intention of exchanging experience to strengthen
trust fund to support universities and provide scholarships.
sustainability in the sector.
Through this fund we have been supporting students and professors from 12 universities, and member companies
Q: What is Camimex doing in terms of community
have injected over US$1 million annually to the fund.
relationships and communicating a message to the general
The institution organizes different conferences for all
public that raises awareness of the social responsibility
educational levels, with the aim of attracting the interest
initiatives of your members?
of students towards the industry. Last year several studies
A: Among their main objectives, all Camimex member
indicated that engineers in geology and mining are the
companies have to strengthen the social fabric with local
best paid professionals in Mexico, only after aviation. We
communities to stimulate their development. There are 28
are starting to see the results of the industry’s effort in
important groups that have received the Socially Responsible
this aspect. Through its member companies Camimex has
Company
increasing
always supported academic institutions with professional
involvement of the mining sector with local communities.
placements and laboratory and IT equipment, among
The ways in which the mining industry relates with people
others things. Furthermore, we are also working closely
from the surrounding municipalities is still being criticized,
together with universities to revise their programs so that
which only means that there is still a lack of awareness of the
they can supply the qualified human capital the industry
hundreds of success stories that have been achieved.
requires.
distinction,
which
proves
the
15
| EXPERT INSIGHT
Q: How would you describe the current business environment for Mexico’s mining industry, and what are the factors that have contributed to the country becoming a top destination for mining investment? A: In terms of income generation at the national level, mining continues to be the fourth biggest industrial sector in Mexico, amounting to US$22.5 billion in 2012. It is positioned after the automotive, electronics, and oil and gas industries. The mining industry generates 77% more income than the tourism industry, and slightly more than remittances from the US. According to Behre Dolbear’s 2013 Ranking of Countries for Mining Investment, Mexico is the fifth safest country for mining investment in the world after Australia, Canada, Chile, and Brazil. This annual assessment takes into account political risks in the non-renewable resource exploitation industry, as well as looking at government policies, economic and social issues, and corruption levels in mining countries. The trust of investors enables us to project an investment close to US$8 billion in mining projects for 2013.
Q: What is your perspective on the main trends in global mining and how do they impact Mexico’s competitive position? A: As metal prices drop and global economic uncertainty lingers, predicting demand for metals in the short term becomes complicated. In order to face the upcoming challenges that will result from this situation, companies need to evaluate the feasibility of each of their investment projects in great detail. However, everything indicates that mineral consumption will remain high because of their importance in consumer products, which allows for cautious optimism.
Q: How could the royalty tax affect mining operations and what measures should the private sector take in order to lessen its impact, if it is approved by Congress? A: Mining is a capital intensive industry that involves long maturation periods and irrecoverable investments that are subject to international market volatility, as well as being exposed to other issues such as technical and geological risks. The industry needs to be thoroughly studied by the government, taking into account that it already pays income tax (ISR), Employee Profit Sharing (PTU), and mining rights for each concession hectare; not to mention energy, water, and security costs, as well as investments in social and environmental issues. All of these things must be analyzed before an additional fiscal burden is established that could compromise the industry’s competitiveness and decrease investment in exploration, which is not fundable through traditional financial instruments due to its high risk nature. The royalty tax might also have a serious negative impact in those regions where there are no other economic activities. It is important to emphasize that the Mexican mining industry does not have any fiscal stimulus or tax stability as Argentina, Brazil, Canada, Chile, and Peru do. These countries are our competitors and this has to be taken into account in order to provide balance to the current proposal. From a public policy perspective it is important to increase the hierarchical level of the government agency responsible for the development of the mining industry to undersecretary and establish a long term mining policy that provides fiscal stability, so that the sector can continue growing and generating value for the country.
Q: What are the most important contributions of the mining industry to Mexico’s social and economic development that Camimex would like to highlight to Mexico’s policy makers? A: During 2012 mining investment in Mexico amounted to US$8.043 billion, which was 43% more than in 2011 or a US$2.43 billion increase. In the last six years investment in the industry has amounted to US$25.64 billion. Such significant figures allow the mining industry to continue being an excellent source of direct employment. During 2012 the Mexican Social Security Institute (IMSS) registered 18,833 new direct jobs created by mining. The total figure of direct jobs in the mining sector amounts to 328,555, which together with indirect employment represents more than 2 million jobs. Furthermore, mining employment continues to offer very competitive salaries that are close to 37% higher than the national average. Social and environmental investment on behalf of the mining industry in 2012 amounted to MX$2.84 billion (US$226 million) of which MX$1.52 billion (US$121 million) went towards environmental projects and MX$1.32 billion (US$105 million) went towards social projects. Mining activities bring electricity and water infrastructure to isolated communities and build roads, schools, hospitals, sporting facilities, and community centers in the places where the mine site is located.
Humberto Gutiérrez-Olvera Zubizarreta, President of Camimex
16
| VIEW FROM THE TOP
BRINGING TOGETHER THE MEXICAN MINING INDUSTRY JOSÉ MARTÍNEZ GÓMEZ President of the Mexican Association of Mining Engineers, Metallurgists, and Geologists (AIMMGM) Q: What is the role of the AIMMGM in the Mexican mining
highlight that mining is involved in all of the activities carried
industry?
out by the population. We communicate the way mining
A: Our goal is to bring together all mining professionals
activities are performed, emphasizing the responsibility
from the earth science specialisms, such as miners,
that is taken at every stage of the mining process. We want
metallurgists, and geologists. Within the association there
to avoid a lack of information or misinformation affecting
are mining professionals from government agencies at
the government’s decisions or people’s feelings toward
the federal and state level, as well as those working for
the industry, which is sometimes labeled as polluting or
Mexican and foreign companies operating in the country’s
predatory. In the past the industry has maintained a passive
mining industry. Our goal as an association is to maximize
or defensive position, but I believe that we have to develop
the number of people from the industry participating in the
a proactive attitude. We need to participate in children’s
process of transforming Mexico into a responsible mining
education showing what mining really is, so that tomorrow’s
country. The AIMMGM wants to create the infrastructure
adults are more open to the activity. Due to the fact that
that gives Mexican states the ability to pursue the
mining is cyclical, we cannot wait for a different perception
development of the mining industry with more financial
of mining to come about. This is why we want to go one step
autonomy, so that the industry can develop on its own,
further and also educate the authorities through forums,
without being centralized in Mexico City.
mass media and online content. With these measures we will reduce the unjustified media attacks that happen as a result
Q:
How
does
the
AIMMGM
promote
professional
of a lack of information. We need to give people a basic
development?
understanding about the different kinds of mining. Metal
A: The AIMMGM strives for professional development
mining and coal mining are not the same thing, and neither
and for the quality of our profession to be looked after.
are open pit and underground mining. Understanding those
Through dialogue with the educational authorities we
differences will in turn help people to understand what is
try to strengthen the relationship between universities
really happening in the different branches of the industry.
and the industry, so that the industry can get the talent it requires and, at the same time, universities can produce
Q: What were the conditions that enabled the mining
qualified mining professionals based on the needs of the
industry to flourish in Mexico?
industry. Currently, we function as a promotional entity in
A: We are not the only country with good deposits and we
this regard, and we are working together with universities
are certainly not the only ones that enjoy high international
to achieve this goal. Without Mexico’s qualified personnel
market prices, which are the two basic conditions for the
the mining industry would not have been able to reach its
mining industry to prosper in a country. The differences
current level. The issue that needs to be worked on is that
that distinguish one country from another are natural and
if the boom in international prices continues we need to
market circumstances. Even though a country cannot
see whether we can satisfy Mexican demand in the coming
modify the natural factors, it can create an adequate legal
years, both in terms of quality and quantity of skilled labor.
framework that gives certainty for investment and provide
We have to look to the future and need to generate the
the human resources for the development of the industry.
human resources needed for that industry to develop, from
Currently, Mexico has four positive conditions: international
skilled workers to managers.
prices, which other countries also have; the quantity of mineral deposits that are feasible for exploitation; the legal
Q: What is your strategy for improving the mining
framework, which even though it can be improved provides
industry’s image in Mexico?
sufficient certainty for foreign and domestic investment;
A: We strive to have a proactive rather than a reactive role in
and we have the quantity and quality of required human
our engagement with mass media and society. We are trying
talent for any mining investor – foreign or domestic – to
to promote the benefits that the industry brings and to
develop and exploit the mineral deposits in a timely manner.
17
IMPACT OF THE FISCAL REFORM By José Manuel Velderrain*-Article 39 of Mexico’s Income
the remainder of the tax is settled at the end of a 10 year
Tax Law establishes that taxpayers can deduct up to
period. Additionally, the reform package proposes to
10% of expenses made during pre operative periods of
impose a Value Added Tax of 16% on the wholesale of gold,
their business within a sole fiscal year. As a consequence,
jewelry, goldsmiths, artistic gold pieces, ornaments or gold
companies that exploit mineral reserves can deduct
ingots, the gold content of which exceeds 80%. The retail
investments made before a mine enters its production
commercialization of these products will remain exempt
phase. The current legal framework specifies that this tax-
from taxes, just as is currently established by Article 2 of
deductible preoperative period comprises the exploration,
Mexico’s Value Added Tax Law. The Statement of Purpose
localization, and quantifying processes of new mineral
that comes with the reform proposal for this law explains
deposits susceptible of being exploited. However, in
that, even if the wholesale commercialization of gold does
contrast to the law’s general rule, mining companies may
not engage final consumers, these transactions reflect the
submit these deductions in the same fiscal year during
buyers’ taxpaying capacity. The statement mentions that
which preoperative activities take place. The condition that
the Mexican Supreme Court of Justice has determined by
has to be complied with in order to enjoy this benefit is to
jurisprudence that the objective of zero tax rates is to avoid
perform tax deductions for pre operational expenses on
any harm being caused to the purchasing power of Mexico’s
each and every mineral asset possessed by the company
least favored citizens and to reduce the impact of prices
during a determined tax year. In the reform proposal that
in aggregate public consumption. As a consequence, the
Luis Videgaray, Mexico’s Finance and Public Credit Minister,
government concludes that the wholesale of gold and gold
presented to Congress on September 8, 2013, the Executive
products is a manifestation of wealth that should be taxable.
backs its suggested changes to the Income Tax Law in an
The aforementioned reform proposals have a particularly
extensive Statement of Purpose. This statement mentions
significant effect over the mining industry. However, it is also
that the current legislation offers mining exploration
crucial to analyze other suggested changes to Mexico’s tax-
companies non-equitable treatment with regards to other
collecting framework that affect all sectors. Among them,
taxpayers. While companies that are not dedicated to
mining companies should keep in mind the proposed 10% tax
mining exploration and exploitation have to distribute their
over dividends, the elimination of the “fiscal consolidation”
deductions over a 10 year period, mining companies enjoy
regime (with its inherent tax exemptions), and the removal
the benefit of reducing their taxable income by performing
of the immediate tax deduction concerning investments. The
all pre operative expense deductions in the same tax year.
fiscal reform project contemplates constitutional changes,
The Statement of Purpose argues that this distortion to the
the creation of four new laws, the abrogation of 13 laws and
Income Tax produces inequality among Mexico’s industrial
decrees and the modification of 15 legal ordinances. Some of
sectors and reduces the country’s tax-raising potential.
these changes will undoubtedly impact the mining industry. Therefore, it is strongly advisable to include the proposed
The table below demonstrates how the mining sector can
changes and their potential effects in mining companies’
defer the payment of their income tax by re-investing their
financial plans and investment evaluations for the coming
profit in preoperative investments. The deduction scheme in
years.
force does not imply that the mining industry is currently exempt from the payment of income taxes The current
*Director General and founding associate of Velderrain,
legal framework causes only a temporary difference in tax
Sáenz y Asociados. This firm offers auditing services, fiscal
liabilities – caeteris paribus and without accounting for
consulting, and specialized assistance in corporate finances
adjustment measures and inflationary effects – because
and general estate planning.
Taxable income
Proposed tax regime
$1,000,000
$1,000,000
Pre-operative expense deduction **
$500,000
$50,000
Other authorized deductions
$500,000
$500,000
Fiscal profit
$0
$450,000
Loss from previous tax years
$0
$0
Tax result
$0
$450,000
Income tax (30%) ***
$0
$135,000
** Supposing a pre-operative expense of $500,000 during the fiscal year *** The percentage of Income Tax currently in force within the Income Tax Law
18
Current tax regime
Source: Velderrain, Sáenz y Asociados
EMPLOYMENT IN THE MINING INDUSTRY In 2002, the Mexican mining industry employed 256,000 people, who contributed to the generation of MX$26.1 billion (approximately US$2.1 billion) in total output
EMPLOYMENT IN MINING INDUSTRY (THOUSAND) 350 328
value. One decade later, 328,000 people work in Mexico’s
310
mining industry, supporting a production value of US$23 billion. The accelerated growth in the value of metals and
300
293
minerals over the 2002-2012 period created a need for more qualified personnel to support the expansion of the industry. The mining industry has successfully engaged
279
250
263
256
28% more employees in the last 10 years, and it is now the
248
257
273
264
284 269
direct source of one in every 50 formal jobs in Mexico.
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
the mining industry is the economic sector that has created
200 2001
Sergio Almazán, Director General of Camimex, states that
Source: IMSS
the biggest number of jobs in the country. “Nowadays, more than two million Mexican families live by means of
average daily salary for a formal employee in Mexico was
the mining industry,” he remarks. In fact, in 2012 the mining
MX$270.91 (roughly US$21.52). Within the extractive
industry was the productive sector which generated the
industries, the average salary reaches MX$417.16 (around
highest percentage of new jobs in relation to the number
US$33.13) a day, or 54% more than the national average. The
of employees it had the previous year. According to
Employment Ministry reported that, during January 2013,
the Mexican Institute of Social Security (IMSS) and the
over 600 companies performed salary revisions, negotiating
National Institute for Statistics and Geography (INEGI),
pay rises that averaged 4.4%. However, mining companies
the number of people working in the extractive sector in
agreed on salary increases of an average of 6.9%. In total,
the past year was 15% larger than the number of formal
they complied with 101 collective labor agreements in force
employees during 2011. The mining industry’s spectacular
during 2012, and performed 113 salary revisions during that
growth in terms of employment during 2012 is far ahead
same year, thus raising the income and quality of life of their
of the second and third industries with the biggest growth
employees. Once again, this situation is replicated on a local
rate: the construction sector (6%) and the transport and
level. In Sonora, employees in extractive industries make
communications industries (5%).
36% more than the average salary.
The mining industry is also an important source of
Employment in the mining industry is also moving forward
indirect employment. The contractors, service providers,
in terms of inclusion. In an increasing number of cases, the
consultants, and other people who are indirectly employed
employment of an overwhelming proportion of men in the
by the mining industry add up to over 1.6 million people,
sector is a bygone practice. In the words of Patricia Salinas
according to Camimex. Ramón Dávila, President of the
Alatorre, Economic Development Minister of Zacatecas,
Education Commission of Camimex, explains that every
“Women now have a more relevant profile in the mining
direct job in the mining industry generates an average of
industry. Historically, it was believed that women inhibited a
five indirect jobs, whereas the ratio of direct to indirect jobs
mine’s productivity. Fortunately, this has changed.” This shift
within industries settled in urban areas is only of three to
is particularly important in the development of communities
one. The profound impact that the mining industry has over
surrounding mine sites, for women have been gaining an
the regions where it operates can be best seen through
increasing importance as breadwinners in Mexican families.
local employment figures. For example, the number of people employed in Sonora’s mining industry has increased
In general, the mining industry’s contribution to job
threefold from 2000 to 2012. Nowadays, the sector is one
creation and value generation within Mexico has increased
of the state’s main employers, accounting for 16,000 direct
substantially in recent years. The sector’s beneficial
jobs and 64,000 indirect jobs. Concurrently, the mining
impact in local economies is magnified by the nature of
industry generates 12% of the state’s GDP.
its operations. As Almazán expresses, “the mining industry provides employment and infrastructure in very remote
In addition to the employment it generates, the mining
regions that cannot be easily matched by other industries.
industry has a significant positive impact on the country’s
Mining is an engine for the development of our country, and
economy, because of the salaries it offers. In 2012 the
the employment it generates is inarguably very important.”
19
2012 LABOR REFORM IMPACT ON THE MINING INDUSTRY The mining industry is both one of Mexico’s biggest income generators and one of the largest providers of direct and indirect employment in the country. As such, Mexico’s labor law and the way in which it is administered and regulated are critical in deciding in what ways the sector can function and develop. The recent reform to the labor law is for the most part viewed by legal experts to have been a vital modernization that will lead to economic growth for the whole country, and given the direct impact it has on activity in the mining industry, the sector must
Left: Rafael Cereceres Ronquillo, Partner at C&V Abogados Right: Alfonso Rodríguez Arana, Director General of LegalMex
adapt to this new legal environment. to work if their employer is not fulfilling certain security The 2012 Labor Reform represented the long overdue
obligations, such as providing them with the proper
modernization of an outdated law that had been mostly
training, protective clothing, and equipment. Another
unchanged since 1970, and the new law better reflects the
positive development in this area is that those found to have
reality of Mexico’s current social and labor environment.
breached safety regulations, to the extent of potentially
According to the National Institute of Statistics and
resulting in the loss of life, can now be fined up to 5,000
Geography (INEGI), in the four decades since 1970 life
times the daily minimum salary (almost US$25,719). These
expectancy has increased from 61 to 76 years, and the
are changes that have the aim of, and hopefully will succeed
active working population as a proportion of the overall
in, improving the industry’s security record.
population has increased dramatically from just half to around two thirds. “The 2012 Labor Reform is a good
The general areas of reform, outside of the mining chapter,
opportunity for Mexico because it allows the country
also have an important impact on the way in which mining
to reorganize and improve employment relationships.
companies operate. Not the least of these is the tightening
In general terms it was necessary, given that the last
of regulations around outsourcing, which is common within
important amendment to the labor law took place in the
the Mexican mining industry, for example at the construction
1970s. It may seem like a very aggressive reform, but it
stage or in the provision of catering or cleaning services.
was a long-needed one,” says Rafael Cereceres Ronquillo,
Besides the obvious practical advantages of outsourcing,
Partner at C&V Abogados.
it often has the additional benefit of bringing costs down because Mexican companies are obliged to share their net
The reform proposal was exhaustive, addressing 80% of
profit with their employees, whereas such payments are
the law’s 1,010 articles and integrating all aspects of the
not made to those working for the outsourced company.
labor market, from contracting and discrimination to
Changes made under the 2012 Labor Reform, however, aim
salary payment and dismissal. The Legislative ultimately
to eliminate this practice. For example, companies may
approved modifications to a third of the Law’s original
now only outsource ‘specialist’ labor that is different to that
content. The mining sector is arguably one of the
provided by the company’s regular, contracted employees.
industries that will be more significantly affected by the
The law also states that the outsourced labor may not
labor law reform, principally because the law contains a
account for the entirety of the company’s operations. Placing
new chapter dedicated solely to mining (articles 343-A to
such limits on the conditions under which an organization
343-E). The focus of the legislation laid out in this chapter
may outsource will directly affect the ways in which mining
is to improve health and safety regulations for mining
companies conduct their business. “Most companies in the
operations in Mexico, based on requirements ranging from
industry contract services through external providers,” says
having a proper management system for health and safety
Alfonso Rodríguez Arana, Director General of LegalMex.
issues and informing workers of the risks inherent in this
“In many cases the staff provided through these channels
type of work, to making both concession holders and
play a direct and immediate role in the core business of the
mining operators responsible for ensuring that mines are
company, even though they are subcontracted.” According
managed in compliance with all safety regulations.
to Rodríguez Arana, those companies that hold a mining concession without having a single employee are greatly
20
The mining chapter of the labor law also gives workers
affected by these changes and will need to restructure as a
a more active role in the upkeep of health and safety
result, if they have not already. If they do not do so, mining
standards. Article 343-D gives workers the right to refuse
companies that are found to have created false institutions
with the aim of reducing their labor expenses will now be
This is especially important considering that, in Mexico, such
sanctionable by law.
trials last – at best – three years, during which the employer had to pay the full amount of the plaintiff’s wage as if he
Outsourcing represents one way in which the labor reform
or she were still working for the company.” Mexico’s labor
has served to improve the balance of the employer-
litigations are carried out by a Workers’ Compensation
employee relationship. While it has tightened the law in this
Appeals Board (JFCA), which currently has a severe lag
area, the reform has simultaneously opened up in the area
in case resolution and takes an average of 51 months to
of contracting. Employers can now hire workers through a
resolve a trial. An amendment to the law means that if an
number of different contracting schemes – including trial
ex-employee brings a case of unfair dismissal against its
contracts, temporary contracts, and seasonal contracts –
former employer and wins, the employer will be obligated
and it is now also possible to hire employees at an hourly
to settle unpaid wedges equivalent to the worker’s full
rather than a daily rate. It should be noted that, whatever
salary for 15 months, plus a 2% interest over every month
the length of the contract or number of hours worked, all
that passes until the trial is resolved. In addition, lawyers
employees share the same right to the national minimum
and public officials who deliberately delay trials will be held
salary and to receive social security benefits as specified by
liable and sanctioned. This is welcome news in particular for
law. Employees may also work overtime at double the rate
small- and medium-sized mining companies that previously
of their usual hourly wage. However, overtime hours should
could have had to pay many years’ worth of back payments
not exceed three hours per day and cannot surpass three
whenever faced with an unfavorable sentence in labor trials.
consecutive days. These changes afford employers much
The reform will undoubtedly prevent many companies from
greater flexibility in meeting their companies’ staffing needs,
facing financial difficulties or even closure due to costly
reducing the risk of overcommitting to long contracts that
legal disputes.
may not be required in the long term. It is also now easier for either party to terminate the contract before it expires.
Another key development on the labor front is the country’s ratification
of
the
International
Labor
Organization’s
Despite some reservations about potentially increased
Convention 176 on Safety and Health in Mines, which was
costs for mining companies operating in Mexico - resulting
written in 1995. However, in 1998 Mexico’s Labor and Social
from new outsourcing regulations and having to spend
Welfare Ministry recommended that it not be ratified by
more on increasing security provisions - the 2012 Labor
Mexico because the country did not yet have the legal means
Reform is generally viewed by legal experts as being
to comply with its terms. Nevertheless, in August 2012 the
beneficial for the industry. Indeed, many experts think that
Ministry suggested that the necessary process be begun to
it will even increase productivity across all industries. The
reconsider its ratification. Although this convention is yet
Mexican Institute for Competitiveness (IMCO) predicts
to be ratified, the fact that the Labor and Social Welfare
that, as a result of the reform, Mexico’s GDP will increase
Ministry has recommended that the government now do
by between 1 and 1.5% annually.
so is a clear indication that the labor law and the country’s legal framework in general have become more developed
Cereceres Ronquillo views the Labor Reform as a positive
and internationally competitive. By committing to such
step forward that provides a good opportunity for Mexico’s
conventions, Mexico stands itself in good stead for attracting
mining industry to improve its employment relationships.
further foreign investment into its industrial sectors.
The biggest improvement for Cereceres Ronquillo is that the government has now increased its surveillance, making
While recent reforms and their consequences represent a
sure that the new rules and regulations are being properly
challenge for mining companies operating in Mexico, in the
implemented across industries. “The new government is
long term they will prove to be a positive step forward for
working very closely with the Labor and Social Welfare
the industry. LegalMex has successfully advised its mining
Ministry to ensure that mining companies are complying
clients on the reform’s risks and benefits, and along with
with their labor and safety obligations, as employers. This is
his partners and expert associates at LegalMex, Rodríguez
a positive change, and one that was needed,” he says. In fact,
Arana helps further clients’ business by promoting a
mining companies that apply international best practices
preventative approach to labor conflicts. “This implies
can benefit greatly from the reforms made to Mexico’s
the modification of contracts, the verification of legal
Federal Labor Law. Among them is the opportunity to hire
relationships with suppliers, and many other due diligence
employees under new recruitment schemes, including trial
changes. We have deeply helped our clients in the mining
periods and temporary training programs. The law also
industry and this is why we fortunately have a lot of
protects employers against potential abuses from former
work,” he adds. Despite the speculation around the exact
employees. In the words of Rodríguez Arana, “one of the
potential that the 2012 Labor Reform has to improve the
most transcendent issues addressed by the reform is the
development of Mexico’s mining industry, its full impact
imposition of a limit to wage payment during labor trials.
will only be revealed in the coming years.
21
GLOSSARY OF TERMS
22
AIMMGM: Mexican Association of Mining Engineers,
FIFOMI: Government Trust for Mining Development
Metallurgists and Geologists
GDP: Gross domestic product
CA$: Canadian dollars
ILZSG: International Lead and Zinc Study Group
Camimex: Mexican Mining Chamber
IMSS: Mexican Social Security Institute
Canacero: Mexican Iron and Steel Industry Chamber
INEGI: National Institute of Statistics and Geography
CBA: Technical Training College for Agriculture
IPICYT: San Luis Potosi Institute’s for Scientific and
CEO: Chief Executive Officer
Technological Investigation
CFE: Federal Electricity Commission
ISR: Income Tax
CGM: General Coordination of Mining
LGEEPA: General Law of Ecological Equilibrium and
CIATEQ: Advanced Technology Center
Protection of the Environment
CONAFOR: National Forestry Commission
LNG: Liquefied Natural Gas
Conagua: National Water Commission
MEG: Metals Economics Group
CSR: Corporate Social Responsibility
MIA: Environmental Impact Assessment
DGDM: General Directorate for Mining Development
MX$: Mexican pesos
DGRM: General Directorate for Mining Regulation
NAFTA: North American Free Trade Agreement
ERA: Environmental Risk Assessment
NGO: Nongovernmental Organization
ERP: Enterprise Resource Planning
NOMs: Official Mexican Norms
Q&A: Question and Answer
Metric Terms
Q&T: Quenched and Tempered
Co2: carbon dioxide
RAN: National Agrarian Registry
ha: hectare
ROI: Return on Investment
hp: horsepower
SEDENA: Ministry of National Defense
km: kilometer
SEMARNAT: Ministry of the Environment and Natural
kW: kilowatt
Resources
kWh: kilowatt hour
SGM: Mexican Geological Survey
l: liter
SHCP: Ministry of Finance and Public Credit
m: meter
SLO: Social License to Operate
m2: square meter
STPS: Ministry of Labor and Social Welfare
m3: cubic meter
UASLP: The Autonomous University of San Luis Potosi
MW: megawatt
UAZ: The Autonomous University of Zacatecas
oz: ounce
UNAM: The National Autonomous University of Mexico
pH: measure of acidity or basicity
US$: US dollars
rpm: revolutions per minute
USGS: United States Geological Survey
t/d: tonnes per day
VP: Vice President
t/hr: tonnes per hour
23
24
HISTORY & OPERATING ENVIRONMENT
2 Mexico’s rich mining history has played an important role in shaping the way that the industry functions today. 500 years of mining activity gave way to the construction of some of the country’s main cities, as well as being a leading source of wealth from Spanish colonization up until the present day, with mining now representing the fourth largest sector in Mexico’s economy. The country has maintained a rich mining culture throughout the different regulatory and operating frameworks that have governed the industry, from periods of nationalization and liberalization to different cycles in the global metals market.
This chapter looks at the evolution of mining in Mexico, from the country’s historical mines to the current day operating environment. It provides insight into the perspectives of the country’s leading legal and industry specialists, while analyzing the current reality of conducting mining projects in Mexico, as well as its overall attractiveness as a place to do business. Furthermore, it looks at the permitting processes and land access issues that companies must address in order to begin a project, as well as the legal requirements that guide the operations of mining companies, service providers, and suppliers that operate in the country. This chapter also offers an overview of the essential role that mining has played in the history of Guanajuato, and the main mines that are operating in the state today.
25
*
*
26
CHAPTER 2: HISTORY & OPERATING ENVIRONMENT 28
Hunt for Gold and Silver in New Spain
29
Center of the Silver Mining Industry
31
The Rise and Fall of Mexico’s Mining Towns
32
The Mining Code of 1884
33
Salvador Treviño: Life at the Center of the Mining Industry
34
Evolution of the Mining Law and Industry Governance
36
VIEW FROM THE TOP: Refining Mexico’s Mining Framework
38
The Mining Law Explained
39
VIEW FROM THE TOP: Lobbying Mexican Authorities on Behalf of the Industry
40
VIEW FROM THE TOP: Adapting to a Changing Legal Environment
41
VIEW FROM THE TOP: Envisioning a Better Mining Framework
42
Preventative Approach to Land Ownership Disputes
43
Clear Communication Proves Critical in Legal Processes
44
VIEW FROM THE TOP: Agrarian Law and the Mining Industry
45
Ejidos: Legacy of the Mexican Revolution
46
Community Relationships and Effective Negotiation
47
Local Relationships Crucial for Successful Mines
48
Legal Framework for Obtaining Mining Concessions
49
EXPERT INSIGHT: Federico Kunz Bolaños & Baltazar Solano Rico
50
VIEW FROM THE TOP: Improving the Environmental Framework
50
The Effectiveness of Mexico’s Environmental Laws
51
Local Expertise Facilitates Foreign Mining Investment
52
VIEW FROM THE TOP: Operating within Mexico’s Framework for Foreign Investment
53
Historical Impact of Mining on the Mexican Economy
54
Union Influence in Mexico’s Mining Industry
54
Legacy of the 1906 Cananea Strike
55
Changes on the Labor Front
56
Impact of the 2012 Labor Reform on the Mining Industry
58
STATE PROFILE: Guanajuato
59
MINE PROFILES: Guanajuato
27
HUNT FOR GOLD AND SILVER IN NEW SPAIN Gold and silver mining was not just the main motivation
de Nuestra Señora de Zacatecas was the first large mining
behind the Spanish colonization of the Americas; it sealed
settlement in New Spain. During this period silver production
the fate of many towns and cities in Mexico and Latin
in Mexico was greater than production in the rest of the
America for years afterwards. The Viceroyalty of New
Americas, and almost equaled the total production from all
Spain was established following the Spanish conquest
other parts of the world. According to the law in place at
of the Aztec Empire in the 16th century. One of the main
the time, all of the mineral resources located underground
reasons for the rapid colonization of the newly-discovered
were property of the Crown. Nonetheless, exploitation
territories was the hope of finding precious metals. The
was open to private investors, who could start extracting
lands that were brought under Spanish rule were of
minerals after registering their digging rights by means of
unprecedented mineral wealth, and after the discovery of
a legal procedure. The Crown charged investors a fifth of
a large number of silver and gold mines the Viceroyalty
their proceeds, though as the costs of investment rose the
of New Spain became the principal source of income for
amount was later reduced to a tenth.
Spain, out of all of its colonies. Metals accounted for more than 75% of New Spain’s total exports (increasing to 90%
In New Spain, mining centers were the place where
during the 16th and 17th centuries). The mineral discoveries
the majority of agricultural trade took place and taxes
created a system of forced native labor called encomienda,
derived from mining activities helped to fund the colony’s
and minerals became the core of New Spain’s economy.
bureaucracy. The mining boom that started in the 16th
The hunt for gold and silver in the Americas started after
century went through a difficult period in the first half
the first silver mines were found in Taxco in 1534, and
of the 17th century. Between 1650 and 1750, mining
flourished with the discovery of large mineral ore deposits
production in New Spain became stagnant and was not
in Zacatecas (1546) and Guanajuato (1550) in Central
able to compete with Peru’s production levels. While the
Mexico, and the Potosi silver mine (1545) in the highlands
Taxco mines started to struggle, the mines in Zacatecas,
of Bolivia.
Fresnillo and Catorce maintained good production levels, which resulted in the founding of important mining towns
‘Silver Fever’ led to a rapid rise in the populations of mining
such as Durango and Chihuahua. The second half of the
towns, and by the end of the 16th century the colonial
18th century saw another great boom in the production of
mining industry had entered its golden age. The process
silver, which was a result of the discovery of new deposits,
of dry amalgamation of silver with mercury, introduced
a reduction in taxes, and the reopening of abandoned
by Bartolomé de Medina in 1557, was the most common
mining areas.
method for obtaining silver. The process had revolutionized the way in which silver was extracted in Europe, despite
Metal production in New Spain made an important
its adverse effects on miners’ health. Although mining
contribution to the global trading system of the time, and
workers were free to move to other places, unlike hacienda
silver imports supported the process of monetization in
laborers, in the majority of cases labor conditions at the
Europe. The Real Colonial Español became the standard
mines were uncertain and dangerous. Mining activities
Spanish silver coin in the colonies of the Americas and in
brought unquantifiable benefits and economic prosperity
the Philippines, as well as the world’s leading currency.
to Spain and its colony. Many of the luxurious buildings
Given New Spain’s incredibly large silver production,
and haciendas still standing in some of Mexico’s colonial
the first mint in the Spanish colonies was established in
cities are the perfect illustration of this. However, the
Mexico City and remained one of the most important mints
mining boom also generated negative consequences in the
throughout the course of the colonial period. By the end of
form of reckless adventurism and commercial speculation.
the colonial period there were over 500 Real de Minas. The
The mining industry of the time was characterized by an
most important ones were Guanajuato, Catorce, Zacatecas,
element of luck, and the majority of discoveries came
Real del Monte, Pachuca, Taxco, Fresnillo, Sombrerete,
about by chance. Moreover, mining profits were rarely
Tamos, and Parral. The most productive mine in New Spain
reinvested in the industry.
was La Valenciana in Guanajuato, which for 250 years produced 20% of the world’s silver and over the same
28
Mining activities led to a very particular system of social
period delivered as much silver as the entire Viceroyalty
organization. The system’s core was known as ‘Real de
of Peru. The mining industry declined dramatically in the
Minas’, which was an urban center encompassing the
19th century as a result of Latin America’s independence
settlers and mines within an eight to 24km radius, and which
wars, the Second Industrial Revolution in Europe, and the
also served as an administrative entity. The Real de Minas
depreciation of gold and silver currencies.
CENTER OF THE SILVER MINING INDUSTRY The history of Taxco, the oldest mining center in the
Silver production in Taxco did experience temporary
Western Hemisphere, begins in 1530. Some silver deposits
setbacks. During the 17th century mining activities in Taxco
in Taxco have been exploited since pre-Hispanic times. This
were more exploratory than productive. In those years,
indigenous settlement, known as Tachco, was the place
the Spanish Crown asked silver producers for frequent
where the tin that the Aztecs used as a form of currency was
donations, firstly to subsidize the funeral of King Philip
extracted. When the Spaniards arrived, Cortés discovered
IV and later the ascension to the throne of Charles II of
that many of the metals that Moctezuma received as a
Spain, as well as the wars that took place during that time
tribute came from Taxco, which prompted him to send an
period. In the 18th century new mines were discovered
expedition there. In 1528, a mining camp was established in
and some old mines were restored. As the mines grew
the area, although it was not until 1531 that the Spaniards
deeper, the quality of the mineral diminished, production
subdued the native inhabitants. By 1570 there were already
costs increased, and extracting the mineral stopped being
three Real de Minas in Taxco: Tetelcingo, Cantarranas and
profitable. This caused many mine owners to go bankrupt.
Tenango. In that same year, the Real de Minas of Taxco was
However, the use of new technologies such as explosives,
founded. The large quantity of minerals extracted from its
as well as the access to more financing, contributed to a
mines made Taxco one of the most important mining centers
new stage of prosperity in Taxco. The Bourbon Reforms
in New Spain. Unlike the majority of towns in New Spain’s
that took place at the end of the 18th century encouraged
southern region, Taxco, which is located in a mountain region
mining activities in New Spain, which helped mining
in the north of the current state of Guerrero, was an important
production in Taxco to remain high, and in 1791 the town’s
silver producer throughout the colonial period. Within a few
population was approximately 6,000 people. The majority
years of starting production the number of mines in the
of metals extracted in Taxco were sent to Mexico City,
region had increased significantly. The implementation of
and later the silver was transported to either Veracruz or
the amalgamation method in the production of silver also
Acapulco, where it was shipped out of Mexico in order to
helped to increase the quantity of minerals being extracted.
be traded in Europe or Asia.
Although some of the Spanish mine owners used African
The War of Independence halted production in Taxco, and
slaves, the majority of them thought that native people were
many Spanish mine owners chose to destroy their mines
naturally skilled to conduct mining activities. However, a
rather than lose them to the rebel forces. As a result,
large number of indigenous people died as a consequence
silver mining in Taxco came to a standstill for some time.
of the germs that the Spanish conquistadors brought with
Nevertheless, the 20th century saw the rebirth of Taxco
them. To compensate for the decline in forced labor, the
as Mexico’s silver capital, though this time around Taxco
colonizers established a system called Repartimiento de
was no longer an important site of silver mines as it had
Indios, which consisted of assigning certain indigenous
been for centuries; it instead became the most famous
groups to work in each of New Spain’s different mining
location for silversmithing in Mexico. Nowadays Taxco
centers. As a result, laborers from Cuernavaca, Cuecalan,
is an important tourist hub, with its magnificent colonial
Xochimilco, Malinalco, and other nearby towns, were sent
buildings and narrow streets serving as reminders of its
to work in Taxco.
former glory.
29
30
| THE RISE AND FALL OF MEXICO’S MINING TOWNS
MINERAL DE POZOS
REAL DE CATORCE
The town of Mineral de Pozos is located in the northeast
Located in San Luis Potosi, Real de Catorce became one
of Guanajuato state. First settled in 1565 with the name
of the largest mining centers in Mexico after the first
of Palmar de Vega, it was later renamed Mineral de
vein was discovered in the 18th century. The town was
San Pedro de Pozos and later Ciudad Porfirio Díaz.
founded in 1778 as a result of the discovery of mines
The first mine in Mineral de Pozos – also considered
rich in silver. In 1803 Real de Catorce had become the
the oldest mine in Guanajuato – was Santa Brígida,
world’s second largest silver producer, and experienced
which extracted mercury and small amounts of gold,
a very successful period up until the start of the War of
silver, copper, lead, and zinc. The town became the
Independence. The wealth of its mines was renowned,
most important mining center in Guanajuato during
and many foreign immigrants congregated there. After
the presidency of Porfirio Díaz, and by 1895 Mineral
Mexico became independent from Spain, foreign - mainly
de Pozos counted 306 operating mines and 70,000
British - companies began to take an interest in the mines
to 80,000 residents. The Mexican Revolution marked
of Real de Catorce, and significant investment started
the beginning of the decline of mining activity in
flowing into the town. During the presidency of Porfirio
Mineral de Pozos, and the combination of fighting, the
Díaz, Catorce experienced a second boom, largely due
subsequent flooding of the mines, and the fall in the
to the technological improvements implemented in
global silver price ultimately resulted in the closing
Catorce’s mines. Electricity was first introduced to the
of the last operating mine in 1927. By the 1950s the
Mexican mining industry with the installation of lighting
population of Mineral de Pozos had declined to several
systems, electrical pumps, and winches in Catorce’s
hundreds of people, and it was not until the 1990s that
Santa Anita mine. At the start of the Mexican Revolution
the town experienced a rebirth and became a tourist
work was suspended and the population of the town
destination, as a result of its “ghost town” reputation
began to decline. In 2001 the town was named a Pueblo
and the recently awarded Pueblo Mágico status.
Mágico and became a tourist hub.
ALAMOS
REAL DEL MONTE
Alamos was founded at the end of the 17th century
Located in the state of Hidalgo, Real del Monte was one
following the discovery of silver deposits in the
of the first mining provinces in colonial Mexico. Situated
surrounding Promontorios and La Aduana towns.
over 2,600m above sea level, it is one of Mexico’s highest
Alamos was the first municipality in the state of Sonora
inhabited areas. Although the exact date of the town’s
to become a city and it remained one of the region’s
foundation is unknown, the first mines in the area were
most important settlements until the end of the 19th
registered in 1552. In the 18th century Real del Monte
century. Following Mexican independence, it was the
became one of the most important mining centers in
capital of the state of Occidente for a period of time,
New Spain. Pedro Romero de Terreros, Count of Regla,
a province which was later divided into Sonora and
owned almost every mine in the town, and he became
Sinaloa. Silver wealth was the driving force behind the
the wealthiest man in New Spain as a result of mining
colonial architecture the town proudly displays today,
production. As with the majority of mining dependent
though gold, copper and turquoise were also extracted
communities,
from its mines. At the peak of its prosperity Alamos had
population left after mining activities became stagnant
a population of 36,000, which was made up of Mexican,
during the Mexican War of Independence. In March 1824
Chinese, Japanese, English, and French inhabitants.
a group of British investors arrived in Real del Monte
After the Mexican Revolution the mining boom ended
and bought several mines from the descendants of the
and the population of Alamos dwindled to 7,000. The
Count of Regla. The English legacy remains to this day,
town was granted the status of Pueblo Mágico in 2005
in the buildings and culinary traditions of Real del Monte.
as a result of its historical heritage, cultural wealth, and
Unlike other colonial mining towns, mining activities
natural beauty. Both this recognition and its proximity to
continued in Real del Monte well into the 1930s, at which
the US granted Alamos many international visitors, and
time the town remained one of the world’s largest silver
its current population exceeds 25,000.
producers.
a
large
percentage
of
the
town’s
31
THE MINING CODE OF 1884 After gaining independence from Spain in 1821 Mexico
The Mining Code established that mines and sandbanks
experienced a disastrous economic downturn, amid extreme
had a different legal status to regular land property. This
political instability. The numerous internal wars and foreign
meant that the mines and the land above their surface
military interventions that took place during the course of
were considered to be two different properties. It stated
half a century led the country to financial bankruptcy. In 1877
that ownership over a mine was obtained by means of a
Porfirio Díaz was elected President of Mexico for the first
concession, after a discovery had been reported to the
time. He was a general who had fought against the French
proper authorities. The duration of this concession was
invaders and, afterwards, rebelled against President Benito
unlimited, as long as the mineral resources were being
Juárez. As soon as he took office Díaz embarked on a process
exploited. This represented a radical move away from
of modernization for the country. The ‘economic miracle’
colonial regulations, because it transferred property
that Mexico experienced during the Porfiriato (the historical
rights over underground resources to the owners of the
period during which Porfirio Díaz was in power) cannot
land where the resources were located. Foreign nationals
be understood without appreciating the large amount of
were allowed to purchase a mining property under the
foreign investment that flowed into the country. Mexico’s
guidelines and restrictions stated by law. Regarding water
strongman provided foreign investors the political stability
access, mining exploitation was granted a public utility
they needed to invest in the country. Díaz tried to avoid the
status and, for that reason, concession holders were also
preeminence of US capital to the greatest possible extent,
entitled to use underground waters.
and promoted investment coming from other nations. Within the first four months after the 1884 Mining Code was Mining activities played an important role within Díaz’s
passed 847 applications were made to consolidate property
economic development program. His plan was to increase
titles. At the same time, the federal and state governments
the production of precious metals, which Mexico had
gave out free land to mining companies to incentivize the
been exporting since colonial times. Until 1889 the largest
construction of roads and railways near their concessions.
producing gold and silver mines in Mexico had been located
Foreign investment in Mexico reached unprecedented
in the central states of Guanajuato, Hidalgo, San Luis Potosi,
levels during the Díaz regime. American investors were the
State of Mexico, and Zacatecas. As the consumption of
first ones to enter the country, which was due to the fact
industrial minerals grew, more exploitation works started to
that Mexico had broken diplomatic relations with France,
be carried out in the north of the country. A new Mining
Germany, the Netherlands, and Great Britain in the 1860s. The
Code was enacted in 1884, which replaced the previous
growing presence of American capital alarmed European
one that dated back to colonial times, as part of the
nations and, eventually, those nations decided to normalize
industry’s modernization process. This code came into
their diplomatic relations with Mexico. Within a short time
effect in January 1885 and immediately opened the door
European investors began arriving in Mexico, but the US
to a wave of foreign investment in the Mexican mining
remained Mexico’s most important commercial partner
industry. It eradicated all rules and implications regarding
throughout the duration of the Porfiriato. It is estimated that
state property over the subsoil. The law also granted private
by 1910 American investors owned approximately 75% of all
parties irrevocable ownership rights over mining properties
active mines in Mexico. England and France were the other
in perpetuity.
two main investors.
Strategic advisory with global reach for the mining industry in Mexico . M&A Advisory . Debt & Capital Procurement . Asset Valuations . Early Stage Exploration Services
SALVADOR TREVIÑO: LIFE AT THE CENTER OF THE MINING INDUSTRY Don
Salvador Treviño, Founder of AIMMGM and Former President of Camimex
Treviño
industry, from both an insider and an outsider’s perspective.
was, in many ways, the
Salvador
In the mid-1950s Treviño was appointed General Manager
father
Mexican
of the Commission for the Promotion of Mining, where
mining industry, and his
of
he worked for 15 years. “At that time we were looking
passing away earlier this
to increase competition in mining. I made some difficult
year was a source of grief
decisions in my first year in the role of General Manager,
for
the
the
Mexican
namely in turning the Commission from an organization
mining industry. Through
entire
that owned mines into an entity that provides support
a
powerful
to mining,” recalled Treviño. “We started by becoming
he
held
an important sulfur producer. The Commission for the
number
positions
of that
during his life, such as
Promotion of Mining was an entity that was well known for
General Manager of the Commission for the Promotion
its financial integrity and it supported many mines, such
of Mining, President of Camimex, and the founder of the
as San Francisco del Oro, while at the same time helping
Mexican Association of Mining Engineers, Metallurgists,
to form other Mexican companies. The Commission also
and
helped in the Mexicanization of Minera Fresnillo, which had
Geologists
(AIMMGM),
Treviño
dedicated
his
professional life to bringing the industry to its full potential,
been experiencing financial difficulties.”
for the benefit of Mexico and its people. His passion and dedication led the country’s mining industry to where
Treviño later went on to become President of Camimex, a
it stands today, as one of the most attractive mining
position that he held for three periods. His role at Camimex
territories in the world.
came at a particularly difficult time for the industry, and for him the role of Camimex in protecting, promoting and
Treviño graduated as an Engineer from Texas Western
developing the industry was of utmost importance. During
College towards the end of the economic crisis of the
a time when the industry was facing financial difficulties
1930s that had crippled the US economy. He remained in
Treviño saw the process of ‘Mexicanization’, whereby
the US and gained a year’s practical experience working as
foreign funding of mining projects was limited to a
a mining engineer for Colorado Fuel and Iron Corporation:
maximum of 49%, as a concern for the industry. He was an
six months at its Wagon Wheel Gap property in Colorado,
advocate for the positive impact that foreign investment
and a further six months at its Sunrise property in Wyoming.
could have on Mexico’s mining industry, particularly during periods when the market was in a downward cycle. “I was
Treviño returned to Mexico in the middle of 1942, six
never opposed to foreign exploration. The Mexicanization
months after the Japanese attack on Pearl Harbor. As
process had focused on taking mining activities out of the
the US’s involvement in World War II was escalating,
hands of foreigners, but on the other hand they brought
Mexico’s mining industry was focused on supplying natural
money that was needed to search for new mines, and to
resources to the US in order to meet growing military
me that has generally been positive for the country,” he
demand. With the help of the contacts he had made in
remarked.
the US and his former Texas Western College Professor, Treviño secured his first job in Mexican mining. “The mine
Don Salvador Treviño maintained close links with Camimex
I started to work on in Mexico was an antimony mine. It
throughout his career. He attended the organization’s
was relatively small in comparison to other mines, but
meetings for 50 years, and would attend monthly lunches
nevertheless it was of great strategic importance given
with the Camimex Board, even after he had stopped
that antimony was needed for World War II and neither
holding an official role in the organization. Of the many
the US nor Canada produced a significant amount,” said
different ways in which Treviño shaped and improved
Treviño in an interview with Mexico Mining Review at
Mexico’s mining industry, for him the highlight of his
the end of 2012. “Over time I worked my way up in the
career was setting up the AIMMGM. “For me, my greatest
company, and it was precisely because of the increase in
success was the creation of the AIMMGM during the period
the demand for, and production of, antimony that I was
of Mexicanization in the mining industry. Having lived in
able to become Manager of four of the company’s mines.”
the US for 15 years, I wanted to form an association that would bring together all professionals in earth sciences
His experience in the US mining industry combined with his
and give them the value and respect that they deserve.
experience of managing four different mining operations in
The AIMMGM was born out of this aim, and up until this day
Mexico placed him well to understand the Mexican mining
it has been a great success,” said Treviño.
33
EVOLUTION OF THE MINING LAW AND INDUSTRY GOVERNANCE At various times during its lifespan Mexico’s Mining Law
activities were being carried out, in 1883 Díaz moved it
has been characterized as excessively liberal, nationalistic,
back to become the responsibility of the Mexican State,
and protectionist. Today it is considered to be an efficient
where it has remained ever since.
law with an effective regulatory framework that allows both domestic and international mining companies to
During his rule Díaz placed much emphasis on the
operate safely and with sufficient freedom within the
export market, whilst simultaneously failing to stimulate
industry, though it has taken many years of amendments
domestic production. By 1910 there were severe food
and adaptations to arrive at this stage.
shortages throughout Mexico, and Díaz’s administration was characterized by extreme poverty and expropriation
The mining industry has existed in Mexico for hundreds of
of communal land, and dissatisfaction was beginning to
years and it is natural that there has been so much change
show. The Mexican Revolution followed, lasting 10 years. In
around the question of how the law should protect or
the midst of the Revolution, in 1917, a new Constitution was
exploit the country’s vast mineral wealth. The framework
drawn up. Article 27 did away with the liberalism inherent in
has been largely influenced by the evolution of the
Díaz’s mining law, emphasizing state ownership of all mineral
government agenda over time. “From my point of view,
wealth in Mexican lands and waters. Foreign investment,
the legislation in place should correspond with the realities
however, was still not restricted and remained significant
of the industry that it regulates. I believe that Mexico’s
until 1961, when the mining industry was nationalized.
mining legislation has generally fulfilled this function, since
“Before the 1960s foreign investment in the Mexican
it has historically been linked to the economic and political
mining industry was allowed by the government,” explains
reality of the country, and it has regulated the mining
Abdón Hernández Esparza, President of the Legislative
industry according to that reality,” says Karina Rodríguez
Commission of Camimex. “However, starting in that decade,
Matus, Partner at PS&RM Abogados.
all tax incentives and subsidies were restricted to companies
“The mining law of 1992 was created to better meet the needs of the industry and it eliminated the excessive regulations of the 1975 law” Federico Kunz Bolaños, Partner at Kunz Abogados
History has shown this to be true. After a period of heavy
that were at least 51% owned by a national company.
mining during Spanish colonization that saw much of
Then, in the 1970s, a new, more restrictive mining law was
Mexico’s mineral wealth sent abroad and little regulation
enacted. This encouraged further government intervention
over the industry, the country has taken its time to develop
in mining activities. In order to create a mining company
a legal structure that balances making the most of foreign
the Undersecretary of Mines first had to grant approval,
investment and ensuring material benefit for Mexico.
and transferring a concession from one mining company
Under the rule of Porfirio Díaz (1876-1911) industry and
to another required permits from the Bureau of Mines. In
mining grew exponentially, and in 1884 he created the
general, regulations were tougher.” This period of decreased
Mining Code, considered by Rodríguez Matus to be the first
foreign investment and increased government control in the
Mexican mining law. This code was the most liberal mining
mining industry both reduced investment in the industry
law that the country has ever known. It placed no limits on
and increased bureaucracy. “The foreign exchange controls
foreign investment in and ownership of mining companies,
imposed by the López Portillo administration in particular
and while some of the wealth created from mining finally
led to international companies creating a number of
started to benefit Mexico, that wealth was concentrated
subsidiaries in order to carry out their operations in Mexico.
in the hands of only a few privileged Mexicans. The
As an example, at that time Peñoles had some 65 subsidiary
many foreign mining companies that flooded the market
companies,” adds Hernández Esparza.
also continued to send much of the profits from mining
34
abroad. Though there was a brief period during the mid-
Government regulation and protectionism remained a
19th century when mining regulation was placed under
permanent feature of the Mining Law in Mexico until the start
the responsibility of the individual states where mining
of the 1990s, when the government began to pursue a more
neoliberal agenda. “The Mining Law of 1992 was created to
more to do with the importance the federal government
better meet the needs of the industry and it eliminated the
places on the industry. We are not talking about a different
excessive regulations of the 1975 law,” says Federico Kunz
structure; we are talking about autonomy in decision-
Bolaños, Partner at Kunz Abogados and former head of the
making and in budget management.”
General Coordination of Mining. “There used to be a lot of rules for managing contracts and corporations; the former
While there is significant support for a change in the
law was a regulation-heavy one. Nowadays, the law follows
way that the mining authority is structured, there is
more neoliberal principles.”
no agreement over how the revised structure should look. For example, Rodrigo Sánchez Mejorada Velasco,
The 1992 modifications to the mining law put the wheels
Partner at Sánchez-Mejorada, Velasco y Ribé, agrees
in motion for a real change in the industry, which was
that a regulatory body with more autonomy and control
consolidated by the signing of the North American Free
over its own budget would be positive for the industry.
Trade Agreement (NAFTA) in 1994. NAFTA removed trade
However, his concern is that too much change would be
tariffs and stimulated trade between Canada, the US and
more disruptive than productive, and that whilst having
Mexico. The 1992 Mining Law also states that all mining
the different mining entities together under one umbrella
companies, whether carrying out exploration or exploitation
might seem more practical, it could lead to additional
work, can now be 100% foreign owned. Many companies
bureaucracy within mining processes. “I am not sure that
have taken advantage of this, with international investment
grouping substantially different activities within one entity
in mining in Mexico amounting to more than 40% of the
makes sense. Financing, for example, is a whole different
industry’s overall funding. For the first time, changes to
activity
Article 27 in the same year now permitted the lease or sale
granting concessions, or promoting mining. There will be a
of ejido land, which was a positive move for the mining
conflict of interest between lending money and promoting
industry, making much more land potentially available for
mining, and I fear that the pressure that will build up
exploration and exploitation.
will not allow the lending branch to work properly as a
from
geological
knowledge
acquisition,
or
financing institution,” he says. Where mining lawyers like The mining law has not changed significantly since 1992,
Kunz Bolaños, Sánchez Mejorada and Rodríguez Matus do
despite further changes that were made in 2005. For
agree is that mining would probably fit logically under the
example, exploration and exploitation concessions are no
Ministry of Energy as opposed to the Ministry of Economy.
longer separated, and are valid for 50 years on a renewable basis. Indigenous or farming communities are now also
For all intents and purposes the new administration
permitted to obtain mining concessions, and are given
appears to be conscious that mining should be given higher
preferential rights over other applicants, a significant sign of
priority; Peña Nieto has promoted investment in Mexican
progress for indigenous land rights given that concessions
mining during international trips, and made mining one of
are usually issued on a first come first served basis. While
the key areas for development under the Pact for Mexico.
the 1992 Mining Law marked a positive step for the industry, stimulating growth and renewed opportunity for investment, some criticize that it also marked a reduction in the priority given to mining by the government. It included the dissolution of the Undersecretary for Mining Affairs, and the repositioning of mining as the responsibility of the Ministry of Economy, where it still sits.
ARTICLE 27 OF CONSTITUTION Article 27 of the Mexican Constitution states that all lands and waters within Mexican territory are the property of the Nation, and that it is the Nation’s sole right to transfer ownership of property to private persons or entities. Landowners have property rights over the surface of the ground, but
There is a feeling among some in the industry that this is
all natural resources that lie beneath the surface of
not the right structure. Given that the mining industry is
the ground belong to the Nation.
the fourth most significant contributor to Mexico’s GDP, they believe that it should be given more importance in
In terms of mining, Article 27 states that the
the governmental hierarchy. There is significant support
exploitation,
for the transformation of the General Coordination of
resources belonging to the Nation is permitted only
Mining into a body that has more autonomy and more
by those in possession of a concession granted
control over its budget. Talking about what an improved
by the State. Whilst the article states that only
structure might look like, Kunz Bolaños says: “I do not think
Mexicans are allowed to own a mining concession,
it would be very different from the current structure of
foreign entities may also own a mining concession
mining authorities. The problem does not have to do with
provided that they are registered in Mexico.
use,
or
appropriation
of
such
the actual decision-making centers or organizations, it has
35
| VIEW FROM THE TOP
REFINING MEXICO’S MINING FRAMEWORK RODRIGO SÁNCHEZ MEJORADA VELASCO Partner at Sánchez-Mejorada, Velasco y Ribé
Q: What have been the highlights in the long mining
Q: If you were to have a discussion with other lawyers that
history of Sánchez-Mejorada, Velasco y Ribé?
specialize in the mining industry what would be the main
A: My great-grandfather founded the firm in Pachuca in 1884,
topics that would come up?
doing work for mining companies and individual miners.
A: The main problem we all share is surface rights, and
When he died in 1903 my grandfather continued with the
dealing with land access issues with the local communities.
firm, and was counsel for the Real del Monte y Pachuca
A big issue is the delays in mining authorities recording
Company, which was the biggest company in that area,
agreements and providing information on the compliance
from 1903 until 1952. My father, Carlos Sánchez Mejorada
status of concessions, and in cancelling them and opening the
Rodríguez, had earlier joined the firm and continued
ground for claiming. For this reason the General Directorate
working within the mining sector. Alfredo Elías Ayub, who
for Mining Regulation needs to modernize its system. Firstly,
held several important positions in the Federal Government,
information on the fulfillment of assessment work and
became Undersecretary of Mining during the Presidency of
payment of mining duties should be available online in real
Carlos Salinas de Gortari and, knowing that my firm had a
time; secondly, agreements should be quickly recorded in the
long-standing involvement with the mining industry, asked
Public Registry of Mining, and its online information should
me to draft the Mining Regulations of 1990. The goal was
be accurate; and thirdly, concessions should be quickly
to deregulate the industry as much as possible without
cancelled in the case of a lack of legal compliance, and the
changing the Mining Law and getting the government out
ground should be declared free for claiming in a matter of
of the mining business. Two years later, in 1992, we also
weeks, not months or even years as is currently the case.
prepared the draft of the current Mining Law. The 1990
In theory you can go to the General Directorate for Mining
Regulations and the 1992 Mining Law were drafted together
Regulation and obtain a certification on the legal status of a
with the then Director General of Mines, José Villanueva
concession, but in practice it takes months to obtain.
Lagar, and the then Head of the Public Registry of Mining, Sergio López Rivera. I have devoted most of my time to
Q: What are the main causes of these problems?
mining matters ever since. Sánchez-Mejorada, Velasco y
A: With regards to regulatory efficiency I cannot explain
Ribé has always been a small boutique firm that has had at
the government’s past failure to modernize procedures at
most three or four partners, but it has always maintained
the General Directorate for Mining Regulation. It is easy to
the staff and commitment to handle large clients.
blame everything on budgetary restrictions, but it is not necessarily the case. For example, after some important
Q: To what extent does Sánchez-Mejorada, Velasco y Ribé
amendments to the Mining Law it took the previous
work as a consultancy as opposed to a legal firm?
administration several years, instead of a few months, to
A: Sánchez-Mejorada, Velasco y Ribé is first and foremost a
publish the new mining regulations, which has nothing to
provider of legal services. However, when companies come
do with insufficient funding.
to us we do not only set up their company, propose the
36
most efficient tax structure and carry out the due diligence
With regards to surface access rights, the overriding
review of any concessions they are interested in; we also
problem is the weak rule of law in Mexico. The government
familiarize them with Mexican business customs, put them
has historically been averse to applying the law when
in contact with accountants suitable to the size of their
social conflict erupts. Thus, small pressure groups may
operations and foreign reporting needs, and introduce
block highways, burn buses or destroy property to achieve
them to environmental consultant and local service
their goals, knowing that there will be no real negative
providers. In some cases we also put them in contact with
consequences. There are, of course, cases where bona
the owners of the concessions they are interested in, or
fide dissatisfaction and protest may exist on behalf of
find parties that may be interested in properties that they
the majority of a population, but in most instances the
are seeking to dispose of.
majority is held hostage by a minority of activists and
the government’s unwillingness to respond to their illegal
training, and today these women drive heavy trucks, not
actions. This problem applies to all activities in Mexico, not
only making money to support their families, but also
only to mining, but it is very much an issue when a group
earning self-respect and the respect of their friends
illegally blocks access to a mining site, or refuses to allow
and neighbors. Thirdly, it is important to explain to the
trucking of ore unless it is by a certain haulage group, for
communities what you, as a company, are doing with the
example. There are a lot of cases where communities are
water, and to show them the true environmental impact
in favor of the projects, and only a small percentage of the
of your project. Many companies are doing a great job by
locals are against it. The issue is that this minority is usually
being open about these types of matters.
the activists, and if they are politically motivated no amount of involvement will assuage their opposition.
Q: What factors are critical in order for international companies to succeed in Mexico?
Q: Are many of these issues solved before they reach the
A: The most important critical success factor is for these
stage of becoming social unrest?
companies to be willing to recognize that they are in a
A: Almost all land problems are solved outside the
different cultural, business and legal environment. Even if
courtroom. Court cases may be brought by either
these companies have very good knowledge on technical
landowners or mining companies as a means to exert
matters, there is know-how that relates specifically
pressure, but disputes are usually settled by negotiation.
to Mexico that can be learnt much faster if they rely
Enforcing a court judgment regarding land usually requires
on reputable, good local consultants regarding legal,
the use of police force, and all levels of government are
accounting, tax and land issues, for example. I have seen
generally averse to using such force because they want to
many cases of foreign mining companies relying on the
avoid creating a social problem, especially when the court
advice of attorneys with limited legal skills or no knowledge
may order the occupation of ejido or community land.
of the mining industry, or on self-styled “old Mexico hands”,
The courts are more likely to enforce judgments against
such as foreign geologists who have worked in Mexico for
private owners or mining companies. This is part of what I
a long time and who have very limited legal knowledge but
consider to be one of Mexico’s main problems as a country,
use their English language skills to make the company feel
affecting all walks of life: the disregard for the rule of law
comfortable with their advice. It may sound self-serving, but
by government, which should enforce the law, and by
going to a good mining lawyer from the outset will serve to
citizens who should abide by it.
avoid future pain and problems.
Q: In terms of relations with communities, what advice do
Q: If you were invited by President Peña Nieto to advise
you have regarding best practices to prevent problems?
him on the changes that should be implemented in order
A: It is a complicated question to answer, given that each
to achieve quick results, what would you suggest?
community is different. Some may simply want jobs,
A: The Mexican mining sector is working well, obviously with
others may want services to be provided, and still others
some problems in addition to those I mentioned before, but
may want infrastructure improvements. But there are a
it is not broken. No new Mining Law is needed, nor a National
few others who just do not want the project to ruin their
Mining Commission. We do not need to reinvent the wheel.
agricultural or forest land. Depending on the motives there
The rule of law problem is a national problem, and in my view
are different approaches we can take. The experts on
probably the most important one, especially in view of the
community relations would be able to give a list of dos and
criminality which has affected the country for several years
don’ts. A few pieces of advice I would give would be firstly
now. It is a complex issue that would require a very lengthy
to look at the little details from the outset. For example,
analysis and discussion. However, the question of surface
do not use the name of a local community for your mining
access rights could be alleviated by communities clearly
lots, company or project. When a community member sees
benefitting from mining activity in their area. If mining duties
a mining lot monument with the name of his or her land on
are increased, or a government royalty is placed on mining
it he may assume that you are encroaching on his surface
production, care should be taken to ensure that a good part
land, and you will have started your relations with that
of those funds actually reaches those communities, giving
community on the wrong foot. Seemingly minor issues like
them a clear reason to protect such mining activities rather
this should be avoided in order to avoid angering people.
than to put them in jeopardy. As for the regulatory aspects,
Secondly, my advice would be that people generally want
I would suggest a modernization of all aspects of the mining
jobs, so give them jobs. It is also worth trying to involve
administration, making all administrative processes happen
local women. In several projects we have been involved in,
more quickly, mainly online in real time, and apply the law as
women who came in looking for cleaning jobs were offered
it relates to assessment work.
37
THE MINING LAW EXPLAINED The Mexican Constitution states that all minerals in the
mining law warn that while acquiring a mining concession
national territory belong to the state, and that their use and
and completing the formalities to gain permission to mine
exploitation is permitted only by individuals or corporate
in Mexico is straightforward, companies must be careful
entities that are in possession of a mining concession issued
to respect the country’s labor and environmental laws.
by the Federal Executive, via the Ministry of Economy’s
Following the 2012 Labor Reform, those deemed responsible
General Coordination of Mining. Although a condition of
for environmental damage on an industrial scale can be
owning a concession is that the entity must reside in Mexico,
sentenced to between six months and nine years in prison.
there is no limit placed on the company’s ownership, which
Criminal law can also be applied to companies that begin the
can consist of up to 100% foreign investment. Foreign
process of exploration before being issued with the proper
companies wishing to operate in Mexico have to either set
permits, so it is essential that mining companies complete
up a subsidiary company in Mexico, or register the company
all the necessary stages of registration in Mexico before
in Mexico with a Mexican business address.
they begin their operations. This process will also provide a better understanding of, and a greater ability to comply
According
to
Karina
Rodríguez
Matus,
Partner
at
with, the different areas of the applicable laws. “Companies
PS&RM Abogados, Mexican law is designed to allow the
need to know how the legal framework functions, the type of
mining industry to function both effectively and freely.
environmental impact permitting requirements they have to
“Generally speaking, the current mining law stimulates
meet, and what the land use or zoning regulations are,” says
the development of the mining industry, since it only
Federico Ruanova Guinea, Coordinator of the Environmental
regulates the essential aspects of mining concessions and
Practice Group at Baker & McKenzie. Further incentives for
grants significant freedom to the stakeholders, within the
caution regarding environmental law are also provided by
framework of a regulatory state. It might be necessary to
the legal reform of March 2012, which allows communities
update the law to take into account the current reality, but
to bring class action suits against mining companies where
in general it is a law that functions and serves its purpose
clear evidence of environmental degradation as a result of
well.” She adds that such freedoms are not, however,
mining works exists.
reflective of a negligent industry: “It is important to note that the mining industry, contrary to what people think, is
Article 27 of the Constitution states that the loan or
very regulated, and there is also legislation in other areas
expropriation of land is permissible for mining purposes that
that applies to the industry, such as tax, environment,
are in the public interest. This right is not always exercised;
labor, explosives, and many others.”
provided that the relevant communities are appropriately compensated some argue that there is no reason why this
Mining concessions are issued for land that is considered to
should not be happening. “The current agrarian law allows
be ‘free’, meaning that it is not protected, part of a national
for the development of any given project to be carried out
reserve, or already the subject of a concession belonging to
on social land. There is no need to change the Constitution
another party. In addition to obtaining a mining concession,
or the law, because there are no obstacles to carrying out
mining companies must register with and gain permission
extraction. The issue here is that companies wishing to start
from a number of government authorities before they
an extractive project need to know how to navigate the law,”
may begin mining operations (see box below). Experts in
explains Gabino Fraga Peña, Director General at Grupo GAP.
RELEVANT GOVERNMENT DEPARTMENTS AND THEIR FUNCTIONS Ministry of Foreign Affairs (SRE) – Submission of Corporate Charter and acquisition of legal status Ministry of Finance and Public Credit (SHCP) – Fiscal registration Ministry of Economy (SE) – Responsible for mining and the registration of foreign investment Ministry of Environmental and Natural Resources (Semarnat) – Conducts change of land use process and environmental impact statement (MIA). Additional approval is required if land is in a protected area National Agrarian Registry (RAN) – Land ownership National Water Commission (Conagua) – Authorizes the acquisition of water concessions or the transfer of water rights Mexican Social Security Institute (IMSS) – Medical and social security Ministry of Labor and Social Welfare (STPS) – Workers’ insurance and labor law Ministry of National Defense (SEDENA) – Permission to use explosives in work Source: Guide for Mining Processes, Ministry of Economy
38
| VIEW FROM THE TOP
LOBBYING MEXICAN AUTHORITIES ON BEHALF OF THE INDUSTRY ABDÓN HERNÁNDEZ ESPARZA President of the Legislative Commission of Camimex Q: What changes or improvements could be made to the
company has. This is understandable given the security and
mining law?
violence-related challenges the country is facing. Recently,
A: No specific changes or improvements are required in
explosives have been stolen from mining storage facilities,
the current mining law per se, but governmental action is
which has been a great source of concern.
needed on issues relating to land and water access, since these pose major problems. Most mining operations take
Q: What actions can the Legislative Commission of
place in arid regions like Sonora, Chihuahua, and Durango,
Camimex take to help the industry address these issues?
among other states that suffer from terrible droughts,
A: As the Legislative Commission, we are able to pressure
which often leads to physical, geological and legal
and lobby the government, and to negotiate any
problems. The National Water Law establishes that rivers,
amendments made to the legal framework that regulates
reservoirs, lakes, and some wells belong to the State, which
the industry. The Commission acts more as a reaction
means that water rights must be paid in order to extract
mechanism to laws that can disrupt the balance in the
the resource. A lot of mines have water, which can become
mining industry. For example, given the higher metal prices,
a problem because if the mine is flooded it is expensive
many congressmen and some NGOs believe that mining
to pump the water out to continue the mining operation.
companies are earning extraordinary profits. As a result,
According to the National Water Law mining companies
initiatives to introduce new taxes or royalties on mining
do not have to pay a fee for this water if they use it in their
activities are being pushed forward in Congress. The
processes, however, it also states that the remaining water
problem is that taxes and royalties will remain even when
has to be given to the municipality or to ejidos. A permit
metal prices go down, and might have a negative impact
is nonetheless still required, as established by a transitory
on the mining industry. The Legislative Commission also
article of the law, and our goal is to make this transitory
comments on amendments to the labor law, since there
article a permanent one. Water used in mines should not
is a chapter regarding mining that requires us to prepare
have to be paid for because of the investment and costs
arguments against the adoption of new laws if they affect
that companies incur when building the mine; electricity
the industry negatively.
is not cheap in Mexico and pumping water from below the surface can be very expensive. Mining operators agree to
Q: How have the changes that were made in 2005 to the
give excess water to the local municipality or pump it back
1992 Mining Law affected the industry?
underground; therefore, fees should ideally be waived and
A: The 1992 Mining Law received substantial amendments
water recycling should be incentivized.
in 2005. As a result of the UN’s concern about indigenous people’s rights, the Mexican government modified the
The access to and use of explosives, governed by the
Constitution to grant preferential rights to these groups.
Firearms and Explosives Law and controlled by the Mexican
These modifications are useful for occasions where several
Army and the Ministry of National Defense, is another
simultaneous concession applications are received for
important aspect that comes with several hurdles. Given the
the same area. Mining concessions are obtained on a
increasing security problems resulting from drug-related
first come, first served basis, but the amendment gives
violence caused by cartels, accessing and using explosives
indigenous groups priority over all other applicants for a
has become very challenging for mining companies.
concession. Another situation in which indigenous people
Companies need permits to buy, store and use explosives
have preferential rights is when the government grants the
granted by the Ministry of National Defense, which are
Mexican Geological Survey (SGM) permission to explore. The
very complicated to obtain because of the intricate
SGM has to declare the area to be explored a concession,
process involved and the fact that they have to be renewed
free land or national reserve. After this process, the SGM
annually. A monthly inventory is required, detailing how
can auction the land but the indigenous people have the
many explosive devices have been used, and how many the
preferential right to choose the best offer.
39
| VIEW FROM THE TOP
ADAPTING TO A CHANGING LEGAL ENVIRONMENT KARINA RODRÍGUEZ MATUS Partner at PS&RM Abogados Q: How would you describe the current environment for
The philosophy of PS&RM Abogados is that legal specialists
mining in Mexico, and how have recent legal developments
in this area should really understand everything about mining
impacted mining companies that work in the country?
operations. The perception of the lawyer as a professional
A: Mining has been one of the most significant industries
who must intervene only when there are problems needs
in the geographical and cultural formation of modern day
to change, and lawyers should instead be considered as
Mexico. Despite the fact that in the last 30 years it has
part of the team that plans the negotiations, and helps to
lost relative importance at the national level, we should
prevent problems that could come up during the process. It
not forget that many of the country’s most important
is better to take preventative measures than to fix problems
cities, such as Guadalajara, Zacatecas, Pachuca, Durango,
further down the line. It is our view that the lawyer should
and Chihuahua, were founded as a direct result of mining
be integrated within the business and seen as a constructive
activities, which in some of these cities have continued to
team player rather than an obstacle to a company’s work.
the present day. Mexico’s business environment, from a legal perspective, is positive. Despite the fact that mining
Q: What are PS&RM Abogados’ ambitions regarding the
is a highly regulated activity, the legislation that applies
mining industry in the coming years?
directly to mining does not generally constitute a barrier
A: We are certain of the need to strengthen the current
to entry. It is widely known that mining is cyclical and
mining authorities. Together with other lawyers we have
that it responds to market conditions that go beyond the
proposed the creation of a Federal Mining Commission,
borders of our country. It is possible to carry out mining
which would be an independent body under the authority
work in Mexico because of the great mineral potential,
of the Energy Ministry. This commission would be the
the qualified work force, and the regulatory framework,
regulatory body for the mining industry; it would be
which together contribute to the general development of
independent and responsible for administering its own
mining.
resources, and it would also have greater political weight. Within the commission the structure of the entire General
Q: What role does PS&RM Abogados play in the
Coordination of Mining would remain the same – that is
preparation, negotiation and execution of contracts at
to say that the General Directorate for Mining Regulation,
both the exploration and exploitation level?
and the General Directorate for Mining Development, the
A: The most important asset for a mining company is not
Mexican Geological Survey (SGM) and the Government Trust
its machinery, or its systems, but its mining concession -
for Mining Development (FIFOMI) would remain intact, and
you have to remember that without a concession there is
each one would be run by the commissioner, who would
no mine. The mining company is obliged to comply with
be named either by the academic, industrial or government
all requirements relevant to the concession. During the
sector. Essentially it would be a more democratic body, with
surveying and exploration phase we work on reviewing
more resources and more political power, much like the
the options available for acquiring a concession, gaining
other commissions that exist in our country.
access to the land, and securing environmental permits.
40
During the mine construction phase more permits of
Under the current structure, the mining authority cannot
different types are needed so we work on service contracts,
respond with the efficiency and effectiveness that the
labor contracts, and the acquisition of land. During the
mining industry needs. The mining authority needs to be
production stage a law firm’s involvement becomes a
restructured in a way that allows it to respond to the needs
daily thing, because we work together with the client on
of the growing mining sector, while at the same time having
communal contracts, we work with the service providers,
the necessary political weight that allows the mining sector
and we work on the upkeep and fulfillment of permits,
to be recognized as strategic to national development,
contracts and any other obligations that relate to the
thus stimulating the mining sector that for centuries has
environment, explosives, water or general infrastructure.
contributed to the formation of modern day Mexico.
| VIEW FROM THE TOP
ENVISIONING A BETTER MINING FRAMEWORK FEDERICO KUNZ BOLAÑOS Partner at Kunz Abogados Q: What is your perspective on the development of the
Q: If a Federal Commission for Mining were to be created,
governmental mining structure in recent years, and why
what should be its organizational structure, execution
would you like to see Mexico’s mining industry be given a
capability, and decision making power?
more prominent role within government?
A: One difference would be that the Mexican Geological
A: The adoption of neoliberalism with the introduction of
Survey (SGM) and the financial branch of the mining
the Mining Law of 1992 meant many changes for the mining
industry could be incorporated into the same commission.
industry. It seemed as if those changes were going to be
When I was the Director General of Mines for one and a half
very positive for the mining industry, and they were positive
years, the budget for our office was handled somewhere
from a regulatory perspective, but not from a political or
else and nothing was deposited into our account. Financial
social one. From a political perspective the mining industry
decisions were made elsewhere and based on other
lost support and importance within the government.
departments’ needs.
Given its importance for the Mexican economy the mining
Another organizational issue has to do with the Ministry
industry needs to become more prominent, even at a
of Economy’s State Delegations. In the past, with the
federal level. I believe the industry has been enjoying its
former organizational model, the General Directorate for
best moment in decades, but this is not reflected within
Mining had a Delegate in every mining state, who reported
the political context; sometimes companies have to put
directly to the Director General of Mines. Applications for
a lot of work into gaining support from federal and local
new concessions had to go through a Mining Agent, and
authorities when facing problems regarding water, land
then through another Delegate, and finally through the
access and local political issues, among other things.
Director General of Mines. Nowadays Delegates are not under the supervision of the Director General of Mines -
Nowadays, the General Coordination of Mining still reports
they report directly to the Federal Delegate of the Ministry
to the Ministry of Economy, but not directly; it falls under
of Economy, which shares an office with Profeco and every
the responsibility of the Undersecretary of Industry. The
other division of the Ministry of Economy. Mining is seen as
problem with that structure is that the mining industry
just another division.
needs to be treated separately, not because it needs preferential treatment, but because it is different from
Q: What do you think about the changes proposed by the
other industries. Firstly it involves working with national
new administration and the Pact for Mexico?
wealth as the basis of the production chain; and secondly
A: One problem with the Pact for Mexico is that the
the areas for carrying out mining activities cannot be
changes it proposes will mean more regulations and
chosen randomly - production must be done in the place
restrictions for foreign investors, and I do not agree with
where the minerals are located. Mining concession holders
that. My perspective is that we need to leave the mining
have the right to ask for expropriations or temporary
law unchanged. If we start to absolutely forbid mining
occupations of the land in question, which does not occur
activities in protected natural areas we will be putting a limit
in other industries. For these basic and practical reasons
on mining activities. There are also many environmental,
the mining industry is totally different from any other
political, and social problems and it is very challenging
industry and needs to be treated as such.
to obtain water rights and land access. We need to solve these problems, but not by imposing a general rule. That is
My main proposal would be to create a Federal Mining
why we insist that the mining authorities should have more
Commission, as well as designing a better strategy to
power. The law can be changed again, but if we do not
inform the general public and the media about the role of
have a political entity that has the power to make decisions
the mining industry, and improve the bad reputation it has
and is capable of taking action, the law will not be more
acquired.
than just written words.
41
PREVENTATIVE APPROACH TO LAND OWNERSHIP DISPUTES Land ownership has historically been a big topic in
or lease their land for the first time in Mexico’s history,
Mexico. The lasting memory of Spanish rule is one of the
opening up a significant proportion of Mexican land for
dispossession and exploitation of indigenous groups, which
potential exploration and exploitation. Another example
continued under the rule of Porfirio Díaz (1876-1911). At the
of the country’s mining-friendly legislation is a clause in
end of the Porfiriato, as his rule is known, it is estimated that
the Constitution that states that private property rights
only 2% of the population held titles to land, despite the fact
may be overridden in cases where the extraction of natural
that a great majority depended on the land for their survival.
resources would ‘benefit society’. Where this is the case,
In 1915, in the midst of the Mexican Revolution, President
landowners may be obligated to vacate the land, in the
Venustiano Carranza created the Agrarian Law, which
form of an expropriation, a temporary occupation or
aimed to redress imbalance in land ownership in Mexico.
easement. It should, however, be noted that despite being
This process took a number of years, and between 1915
endorsed by law, the Mexican government in many cases
and 1965 52.2 million hectares of land were redistributed to
has proved reluctant to resort to forced expropriation of
around two and a half million campesinos. The Agrarian Law
land. This reluctance can be attributed to damaging high-
was complemented by the creation of the new Constitution
profile legal cases with indigenous groups in the past, and
in 1917, which reestablished communal rights to land, and
fear of uprisings or reprisals from social organizations
created three categories of land type that are still in use
in response to a case of forced expropriation. Through
today: private, social, and national.
effective negotiation, the final product of which is a social license, most mining companies are able to avoid having to
The categorization of the land covered by any one
resort to legal action in order to access property. “Social
concession will affect the speed at which a mining project
licenses are fundamental in order to start a project,” says
can move to begin operations, because the mining
Gabino Fraga Peña, Director General of Grupo GAP. “They
concession provided by the government only gives the
establish the approval of those people living close to
holder permission to access and exploit the content below
where the project will take place, and even help companies
the surface of the ground, whereas the surface itself
protect themselves against third parties looking to create
remains the property of the landowner. Whether the land
problems. It is important to maintain a good relationship
is privately owned, nationally owned or social, the mining
with the community, but obviously, such a relationship
company must negotiate with the landowners in order
should be based on clear legal agreements.”
to gain permission to access and operate on it. There is much at stake during this process – landowners may refuse
Whether the land in question is privately owned, nationally
access until they feel that they have reached acceptable
owned or social, mining companies are better advised to rely
terms. As landowners do not receive royalties from mining
on a process of effective negotiation with the landowners.
companies, the negotiation process represents their single
Legal experts agree that resorting to expropriation should
opportunity to take advantage of the works that will take
rarely be necessary if the process of negotiation with land
place on their property. According to legal mining experts,
owners and local communities is correctly managed, and
negotiating with private landowners is usually preferable,
there exist many specialist law firms with expertise in this
because the process can be more direct and usually does
area. Securing access to land through negotiations that
not require the involvement of third parties, such as state
benefit all of the involved parties will also likely result in
or federal government. Mining on land that is classified as
a more positive overall reception and a better reputation
national or social will almost always be more complicated,
for the mining company than resorting to legal channels,
because by its very definition it requires the involvement
which can often take years.
of many more stakeholders in the negotiation process.
“Companies must develop great
As more than half of the land in Mexico is social or nationally owned, mining companies hoping to begin operations in Mexico should be aware of the significant - though surmountable - challenge of navigating access to the land they wish to use. Current Mexican legislation is designed to create an environment that is favorable to the exploitation of mineral resources found within the national territory. For example, in 1992 the law was changed in order to give ejido owners permission to sell
42
relationships with the communities. Given that both groups will be located very close to each other, any issues have to be addressed in the most sensitive way” Enrique Rodríguez del Bosque, Partner at RB Abogados
CLEAR COMMUNICATION PROVES CRITICAL IN LEGAL PROCESSES “There are many cases where projects fail due to a lack
Acquiring an explosives permit is another essential step
of legal advice, and where they do not fail it can lead to
in establishing a mining operation. The permission for
many complications,” says Pablo Méndez Alvídrez, Partner
explosives use must be applied for in Mexico City at the
at Bensojo, Chávez y Gutiérrez Consultores Legales, a law
Directorate General of Firearms and Explosives, regardless of
firm established in Chihuahua. “Legal counsel based on
which region of the country the explosives will be used in. If a
knowledge of the industry makes a big impact that could
mining project is located in a politically critical zone it can be
be the deciding factor in accelerating or slowing down
more difficult to get the necessary army and government’s
processes and permits.”
approval. Bensojo Rico considers this matter to be very
“The government has to facilitate the development of mining companies, so that more communities located in remote locations will receive economic benefits” Pablo Méndez Alvídrez, Partner at Bensojo, Chávez y Gutiérrez Consultores Legales
According to Óscar Bensojo Rico, the firm’s Founding
delicate in Mexico, because on the one hand it is considered
Partner, the laws that apply to the mining industry are
almost a taboo, due to their misuse, but at the same time
complex as a result of labor, environmental, land tenure,
they are required in many activities. This contradiction
concession regulations, and other issues related to the
creates a difficult scenario, both for the authorities that
federal government. Mergers and acquisitions is one
release the permits, and for the companies that require them
different legal discipline in which the firm offers counsel.
for their operations. There has, however, been some progress
For example, it worked on the acquisition of AuRico Gold’s
in the last few years, and greater understanding on behalf of
Ocampo property by Minera Frisco, made through a sale
the authorities that mining companies require explosives in
of shares amounting to US$750 million. The firm advised
order to operate. In order to successfully obtain an explosives
AuRico Gold on the transaction, including preparing to
permit for mining operations, they emphasize the importance
present the case to the Federal Competition Commission.
of interacting with the federal authorities as well as with the
As part of its litigation activities, Bensojo, Chávez y
military zone that corresponds to where the mining project is
Gutiérrez Consultores Legales also works on solving
located. “Both are essential contact points. In the case of the
community conflicts and was part of the first mining
army, being able to persuade them is very important, since
expropriation in Mexico, in another operation carried out
they are the first to verify that the requirements for the use
with AuRico Gold and the ejidos of Ocampo, Cerro Pelón,
of explosives are being complied with. The state also needs
and Nombre de Dios. Bensojo Rico considers this to have
to understand the economic impact of the project. The key
been a very complex operation: “The strategy of this project
is to have the state government present in the negotiations
consisted of clearly identifying all of the participants’
with the army. The military zone commander must know the
interests: members of the ejido, local, municipal, and
project and understand its impact,” Bensojo Rico highlights.
federal authorities, as well as the clients themselves.” The firm then mapped all of the parties’ interests in order to
Méndez Alvídrez points out that even though there has been
prepare the strategy, during which stage the aim was to try
a positive change in mentality towards the use of explosives,
to achieve the highest level of satisfaction for each party.
the Federal Law of Firearms and Explosives has not been modified and the Ministry of National Defense has become
“Our firm held multilateral negotiations until we managed
tougher about granting permits. “It is essential to always
to reach a consensus; we created safeguard mechanisms
have all documents up to date and valid. However, the key to
and did preparatory work in order to later begin with the
success lies in informing the army authorities of any problems
expropriation act,” he adds. Méndez Alvídrez believes that
that might occur during the operation, such as robberies,
the project was so complex because the negotiations for
labor strikes or misuse; everything must be communicated.
expropriation have a lasting impact. “The agrarian issue
There is no grace period for obtaining a permit, so everything
is very complicated in Mexico. However, we were able to
must therefore be done according to the law. Once all of the
expropriate 4,200 hectares after a long process that lasted
documentation is ready and the verification has been done,
two and a half years,” he says.
on average approval takes three to six months.”
43
| VIEW FROM THE TOP
AGRARIAN LAW AND THE MINING INDUSTRY GABINO FRAGA PEÑA Director General of Grupo GAP
Q: What are the implications of Mexico’s parallel legal
A: The agrarian law includes a chapter on expropriation
system for agrarian issues in the mining industry?
which grants the holder of a mining concession, by
A: Mining operators that enter into an agreement with an
means of an agreement, the temporary use of land until
ejido or community must fully comply with the agrarian
an expropriation decree has been issued. The problem
law, in particular with regards to temporary occupation
sometimes arises when companies arrive at a mining
agreements or land purchasing processes. An important
location with a resolution of temporary occupation or
change
constitutional
easement over the requested surface area, without realizing
amendment was the creation of the Agrarian Court, the
that sometimes that kind of document is not enough. In
purpose of which was to solve issues between ejidatarios,
order to avoid problems in the future it is important to
comuneros and private parties. If a problem arises
combine that document with a social license. Companies
companies have to go before the Agrarian Court to file
need to take into account that, for the duration of their
a lawsuit and the Court will solve the problem based on
project, the comuneros and the ejidatarios are going to
agrarian law rather than civil law.
be their neighbors and for that reason it is important to
brought
about
by
the
1992
maintain a good relationship with them. Q: A mining concession may be applied for together with a request for expropriation, temporary occupation
Through the social license, when a company offers to
or easement over the land in question. How does this
create jobs or to provide health services or medical
process work when the land in question is communal or
supplies to the community in exchange for their approval
ejido property?
of the project, everything must be clearly specified and
A: In these cases the mining law is applicable as a federal
explained to the communities, and the relevant legal
regulation; however, the agrarian law applies as well.
obligations must be complied with. In the case of leasing,
Agrarian law permits agreements that allow third parties,
payments have to be given to the legal representative
whether corporations or individuals, to use land belonging
of the community. It is important for the communities to
to the ejidos or the communities. But if the communities
understand that the company is not there to replace the
or the ejidatarios do not want to make an agreement, the
municipal or state governments as a provider of basic
federal legislation can then be applied, and this is where
services. Companies will usually end up offering some kind
a request for expropriation, temporary occupation or
of social program, but they have to be very upfront about
easement of the land can be applied.
what those programs will entail, as well as maintaining a permanent relationship with the community.
It is established by Mexican Law that the exploration and exploitation of mineral resources will be prioritized over
Q: Are there any regulations that have been specifically
other uses of land, however at this moment, due to the
designed to govern these kinds of deals?
authorities’ cautious attitude, a process of expropriation
A: Not specifically, but agrarian legislation does introduce
requires the acceptance of the community. There have
the concept of social agreements, known in Spanish as
been cases where land has been expropriated to start
Convenios de Colaboración Social. These agreements
mining projects in the past 10 years, but those expropriation
help the companies to diagnose what some of the most
processes have always involved the explicit approval of the
pressing needs of the communities are, so that the social
comuneros or ejidatarios.
programs that they offer will really help the communities. The way in which these agreements work is as follows: the
44
Q: An alternative to expropriation is to enter into a leasing
community or ejido organizes itself and forms a committee
or social agreement with the community in exchange for
called Comisión Auxiliar, the members of which are elected
the use of the land. What is the role of social licenses in
at an assembly. This committee serves as a contact point
these situations?
between the community or ejido and the company. Its
members meet with the ejidatarios or the comuneros in
Q: What are the main priorities of mining companies when
order to decide what the community wants and needs,
negotiating with ejidos and communities?
and they communicate those needs and priorities back
A: These change depending on the phase the project is
to the company. The company then evaluates whether it
at. For example, during exploration a company’s priority
is technically possible or financially feasible to offer the
when negotiating with ejidos or communities is usually
communities what they need, and if they have the necessary
to obtain the approval to start drilling quickly. During the
permits to do so. These committees also provide the benefit
construction phase, the concerns of the companies are to
of helping to improve social organization in the community.
obtain legal possession of the land, right of way, water and electricity rights, as well as the required environmental
Q: What are the main concerns of ejidos and communities
permits.
in negotiating land access with mining companies? A: The main concern of the communities is setting the right
Q: Does the agrarian law include any chapters addressing
price for their land. Transparent negotiation processes are
environmental or cultural issues?
very important and companies need to be very upfront
A: The agrarian law includes a chapter on the rights of these
about how much they can pay and how they are going to
groups, which the Agrarian Court takes into consideration
pay. The land in question will be used for mining purposes,
when communities and ejidos contest certain issues.
not for agricultural processes, and that is something that
Moreover, the judges study the cases that make it to the
needs to be taken into account. The negotiation processes of
Agrarian Court with certain social criteria in mind, such as
many of the existing mining projects only had the company’s
maintaining the environmental equilibrium, among other
best interests in mind, not the community’s; companies have
things. Companies must fulfill all legal requirements in
been known to pay close to nothing when they could have
order to show that they are not acting in bad faith against
paid more. Access to the land is very important, because
the interests of the comuneros or ejidatarios.
without land their mining project is simply not feasible, since a mining project cannot simply be moved to a different
Q: What are the main opportunities for the Mexican
location. Usually, when companies ask the community how
mining industry to improve its community relationships?
much they want for their land, the answer they get is ‘a fair
A: I think that the mining industry needs to communicate
price’. But what is a fair price? Companies understand that
better with the communities and the general public. It
the value of the project is not proportionately related to
needs to push for a better communication strategy that will
the value of the land, but they need to explain this to the
make the public more aware of the benefits the industry
communities. In the end, the ejidatarios and comuneros own
brings to the country, in order to change the negative
the land; we should not forget that.
perception that people often have of it.
EJIDOS: LEGACY OF THE MEXICAN REVOLUTION The decade-long armed struggle that took place in Mexico between 1910 and 1920 had profound effects that can still be seen in the country’s political, cultural, and economic reality. Perhaps the most evident inheritance from the Mexican Revolution is the country’s agrarian model. Under the principle that “the land belongs to the people who work on it”, an Agrarian Law was promulgated in 1915 with the aim of redistributing the great quantities of private land, known as latifundios, which previously were the land ownership model of Mexico’s countryside. It was not until the 1930s that this reform was effectively carried out, and the latifundios were split into ejidos. These areas of collectively owned land still exist today as a voluntary rural exploitation model run by Mexico’s communities. All rural towns of less than 3,000 inhabitants are known as communities. Not all communities own ejidos, but all ejidos are managed by a community. Communities that own ejidos organize collective assemblies where every member can vote on any matter concerning the use of their land and the resulting proceeds. The assembly also elects representatives for the ejido every three years. Since mining concessions grant the use and exploitation below the surface of the land, if the land above the surface is an ejido, the mining company must enter into a commercial agreement with the community that owns it. An ejido can be leased for renewable periods of up to 30 years through an affirmative vote from two-thirds of the assembly. All of these transactions are overseen by a representative of the Agrarian State Attorney’s Office, a representative of which must be present in all assembly meetings concerning agreements between the ejido and third parties.
45
COMMUNITY RELATIONSHIPS AND EFFECTIVE NEGOTIATION Whilst the process of negotiating land access is equally
and started providing legal support to the company, it took
important whatever the land type, negotiating with the
just six months to get permission to build the mine.”
owners of communal land can often be the biggest hurdle in beginning mining operations in Mexico. Negotiations
Investing the time at the beginning of a project to build
with such communities have to take into account a
a solid relationship with the community, based on mutual
number of different and more unique characteristics:
understanding and transparency, will be of long term benefit
the cultural peculiarities specific to each community; the
for the project. Legal specialists argue that, by getting the
greater significance that displacement or environmental
community on side with the project from the beginning,
degradation might have for such groups; and the need
wider support will follow naturally. Building strong and solid
to satisfy a greater number of people with differing
relationships with the community is a simple choice and a
priorities and interests. These elements can lead to a more
worthwhile investment because “If a company develops a
complicated and protracted negotiation process, though
good relationship with the community, the community will
with an appropriately tailored and informed approach
defend the company’s project against everybody”, says
reaching a fair agreement is almost always possible.
Alberto Vázquez, Partner at VSG Abogados.
Article 23 of the Agrarian Law grants ejido and communal
Legal specialists, however, warn against the common
landowners exclusive rights to the approval of contracts
error of overcommitting during the negotiation stage, and
or agreements with third parties relating to the sale or
rushing into making promises that the company will not
leasing of their communally owned land. Communities
eventually be able to keep. In this sense, transparency is
have the right to refuse entry to mining companies if they
absolutely essential. “Communication with the community
find the terms of their proposal to be inadequate, so from
prior to beginning operations is vital. By being transparent
a practical point of view it is very much in the interests
about every single one of the processes that will be carried
of mining companies to reach an agreement with the
out, the community will clearly see happening what
communities. Agreements between mining companies
was explained to them previously, and as such will gain
and communities are usually accompanied by a social
confidence in the project. It will also make them want to
license, which features some compensation on behalf of
become even more involved in the project,” says Adalberto
the company for environmental degradation or disruption
Terrazas, President of the Community Relations and
to community life. This will usually take the form of social
Development Commission of Camimex.
or community benefits in areas like health, education or employment. Through a thorough understanding of the
The social license is not currently compulsory, but it has
community’s wants and needs, the aim of the social license
become common practice. Through such agreements the
is to bring tangible positive benefits to the community,
industry is considered by legal experts to be more than
whilst often also committing to restore the environment to
fulfilling its corporate social responsibility duties and making
its original state on completion of the work.
genuinely positive impacts on communities that would often otherwise be out of reach of the social benefits that mining
Gabino Fraga Peña, Director General of Grupo GAP,
can bring, such as increased employment and health services.
maintains that, by taking a thoroughly well informed and
46
transparent approach to drawing up the social license,
At the end of 2013 the government will be introducing
mining companies can almost always be successful in
a mining royalty, a percentage of which will go to the
gaining access to land. Referring to an example of best-
municipality and state authorities. Experts fear that this
practice the firm followed in a previous case, he says:
will have the adverse effect of directing money away from
“Before Grupo GAP got involved, the people participating
the community and over time do away with the practice
in the negotiation process had no idea about how the
of the social license. The general feeling among those who
community was organized or about the needs and
have seen the transformative impact of social licenses is
expectations of that community. We analyzed how the
that such royalties are not necessary, given the significant
community or ejido was organized, who the leaders were,
contribution that mining companies are already making
what interests they responded to, as well as if there were
on the local level throughout Mexico. The way that the
any other parties involved in the conflict, such as political
new system will work is due to be confirmed in late 2013.
figures or caciques. The mining company had been trying
Whatever that system may be, it would do well to avoid
to obtain land access to start the project for over 12 years;
moving away from such practices, and should aim to retain
after Grupo GAP got involved in the negotiation process
this very grassroots level of impact.
LOCAL RELATIONSHIPS CRUCIAL FOR SUCCESSFUL MINES The success of a mining project depends heavily on how
that the mine is not permanent and will eventually close
well a company ingratiates itself in its local setting and
- this is always a big concern for communities. But this
builds effective relationships with the state and municipal
does not need to be a drawback, so long as there is a
government, as well as local communities. The structure of
strategy in place to create benefits that are long-lasting.
Mexico’s mining system provides two key moments at which
“All projects have a certain life cycle, and for this reason
the state government can influence the project. “There are
it is important for local people to gain expertise in other
very few state and municipal level requirements that mining
kinds of activities. We try to offer job creation but we also
companies must comply with, but those that do exist are
emphasize the importance of education. We try to support
essential. One is changing the land use status, which is
young people with scholarships because, in most rural
handled at the municipal level. The other requirement is to
areas in Mexico, going to school is a merit,” says Vázquez.
get permission for the use of explosives, which requires the
“One of our clients supported a project for members of
approval of both the municipal and the state government,”
the community to create a company that would provide
says Alberto Vázquez, Partner at VSG Abogados, a
the mining company with catering and laundry services,
boutique law firm with offices in Ciudad Juarez and Mexico
among others. The company was allowed to provide this
City. Without the support of local government departments
service to more clients as well. In this way these companies
in these areas a project cannot go ahead. Vázquez stresses
are creating additional opportunities.”
that this is an area well worth investing in, especially because local government does not always recognize the
Vázquez is pleased to see that establishing good
value that mining projects bring to their state. “The Mexican
community relations has become much more of a priority
mining industry is managed at the federal level, and given
for mining companies. However, the positive impact that
that state governments do not receive mining revenues
VSG Abogados has seen its clients’ programs have on
directly, sometimes they do not perceive tangible benefits
local communities causes him to doubt whether a new
from mining industry activity,” he says.
production tax, expected at the end of this year, is really
“What the government does not see is that companies have been paying ‘royalties’ to the communities for decades in other ways” Alberto Vázquez, Partner at VSG Abogados
Vázquez warns that developing a system whereby local
needed. “What the government does not see is that
authorities are kept informed of the plans, development
companies have been paying ‘royalties’ to the communities
and impact of a project is a must. “The majority of mining
for decades in other ways, through various types of social
projects need to appoint a person to be in charge of
programs. My concern is that, when companies are faced
community and government relations to inform state
with the possibility of having to pay an additional royalty
and municipal authorities about the benefits the mining
or tax, they will try to cut their expenses by reducing their
industry creates,” says Vázquez. This relationship building
social programs,” says Vázquez.
role also extends to other important figures in the community. “Local churches play a very important role in
Vázquez thinks the tax could not just put these tangible
rural areas. In most of the ejidos or agrarian communities
community
local priests have the last word. Though mining companies
macroeconomic benefits that mining brings to Mexico. “As
need to be respectful of the different belief systems
long as companies are investing in the country, they are
present in a community, maintaining good relationships
creating jobs. Imposing mining royalties would cause some
with the local leaders of the religions that have the most
projects to stop being profitable and as a result will reduce
followers is key,” advises Vázquez.
the investment that companies make in social development
benefits
at
risk,
but
also
the
broader
programs. The majority of companies operating in Mexico VSG Abogados has found that absolute transparency is
belong to international corporations and ultimately they
essential in communicating with the local community and its
have to prove to their headquarters that their business in
leaders. First of all, there needs to be an acknowledgement
Mexico is a profitable one,” he warns.
47
LEGAL FRAMEWORK FOR OBTAINING MINING CONCESSIONS According to Article 27 of the Mexican Constitution all
large companies that do not want them, or large potential
natural resources found in or beneath the surface of the
projects held by small companies that do not have the
land belong to the Mexican State, meaning that the use or
resources to develop them, the best way to get concessions
exploitation of any of these resources without the State’s
into the appropriate hands is to let the market operate freely.
permission is explicitly prohibited and considered illegal.
All efforts should be made to allow concessions to circulate
A concession represents the formal permission granted
quickly, and information on their legal compliance status
by the government to an individual, community or private
must be available for this to happen,” says Rodrigo Sánchez
entity to conduct activities that exploit these resources
Mejorada, Partner at Sánchez-Mejorada, Velasco y Ribé.
within a specified geographical location within the nation’s borders. Companies conducting mining operations in
Where concessions are owned not by the landowners or the
Mexico will need to acquire two separate concessions: one
mining company but by a third party, the concession holders
for the mining itself, and another for the use of water. These
serve as a sort of bridge between the mining company and
concessions must be acquired before a mining company
the landowners and can find themselves in a very favorable
may legally begin its operations.
position, financially speaking. “Concession holders can connect with the landowners and prepare very good
THE MINING CONCESSION
projects to sell afterwards to the large companies,” says
Mining concessions allow the concession holder to carry
Enrique Rodríguez del Bosque, Partner at RB Abogados.
out exploration activities with a view to the eventual
“They try to arrange deals with landowners in order to
exploitation, use or appropriation of minerals found within
create an attractive project. The best project is one where
a specified plot of land. The mining concession grants
a mining concession has already been granted and they are
access and rights to what is below the land only, and not
leasing or acquiring property from a private company and
to the land itself, which remains the property of the original
not from an ejido or a community.” Concession holders also
landowners. Therefore, acquiring concessions is only the
benefit significantly from the system as it currently stands,
first stage in the process of beginning mining activities –
which sees royalties from mining activities go to concession
authorization is also required from a number of different
holders rather than to landowners.
government bodies as well as the landowners, without whose permission the concession is worthless.The process of
All concession holders are required to be active on the land
acquiring a mining concession is relatively straightforward.
in question, and the government has the power to revoke
In order to be eligible, the law requires that the mining
mining concessions on land where no activity is being
concession holder either be of Mexican citizenship or a
carried out. There is general support for incentivizing
company that is domiciled in Mexico, and in either case the
activity on mining concessions, though there is a sense that
individual or entity must have been registered before the
more could be done to regulate and incentivize the use of
Public Registry of Mines. The company must apply to the
the land; the idea is that if the rules are being seen to be
General Coordination of Mining for a concession relating
followed, more companies will in turn follow them. “It only
to the land in question. Mining concessions are granted on
takes cancelling a few concessions for lack of performance
a first come first served basis, which means that there is
of assessment work to motivate people to comply with the
no bidding process and thus minimal opportunity for unfair
law, or to drop a concession, thus making it available to
advantage or corruption during the selection process. One
other miners,” says Sánchez Mejorada. He would also like to
exception to this rule is that indigenous groups are given
see a more efficient and modernized system for recording
priority over other entities.
which land is available and which is not, and a centralized, online database through which this information is made
Mining concessions can be freely sold and transferred, and
available. He also thinks that if the government becomes
the productivity of the mining industry depends in large
better at applying the regulations that already exist this
part on the efficiency with which mining concessions can
will improve the likelihood that companies will comply.
be moved into the hands of those that are able to invest
48
in and exploit the land. The more quickly and clearly that
THE WATER CONCESSION
the relevant government bodies are able to identify and
Mining companies do not require a water concession to
administer land that is suitable for mining, the more they
use water that is sourced from inside of the mine; they
will be able to stimulate the market and take full advantage
will, however, almost always require water from additional
of the vast mineral wealth that is present in Mexican soil.
sources. For this they will need a water concession, which
“When there are small potential projects in the hands of
is granted by Conagua, the National Water Commission.
Water concessions are issued in accordance with Article 27 of the Constitution, and the government is particularly
| EXPERT INSIGHT
concerned with ensuring that those holding water concessions will use the water in a sustainable way. This
There is not a specific formula for creating successful
will affect companies when they are applying for water
social licenses with local communities, though there
concessions, particularly in the drier northern states like
are some rules that need to be followed. Firstly
Chihuahua, Coahuila, and Zacatecas, where water shortages
the company needs to identify the leaders of the
have become common in recent years, and where Conagua
communities - not just the formal leaders but the de
has stopped issuing new water concessions. Concessions
facto leaders. This is a very important step. Sometimes
may be valid for anything between five and 30 years, and
companies try to talk to the mayor of the municipality
they permit the holder to use a fixed volume of water
or to the official head of the ejido, but it does not
within that time, which will vary according to the location,
work. You need to look for the real leaders, and the
nature and scale of the mining company’s operations.
people who influence the committee. Secondly the company’s negotiating abilities are very important,
Mining operations tend to require large quantities of water,
and the company needs to choose negotiators that
which in some parts of the country can pose a problem.
will be accepted by the communities. You cannot
Conagua must balance the industry’s water needs with
send in people who only speak English to deal with
limited water supply and its implications for the wider
the ejido leaders. It is preferable that companies hire
population. “Many regions in Mexico have experienced
male negotiators because ejido leaders still have an
very serious water shortages over the years, and in many
old-fashioned mentality and prefer dealing with men
areas it is difficult to secure a water concession from
to women. Even the city-type lawyers may not be the
Conagua,” says Federico Ruanova Guinea, Coordinator of
best people to negotiate with the communities. In one
Baker & McKenzie’s Environmental Practice Group. “One of
of the mining companies I worked for we used to have
the first things that a company must analyze is what types
a lawyer and an engineer as negotiators; the lawyer
of challenges it will face to secure water rights.”
was the son of an ejidatario, so he bonded with the community right away. Another rule is to always tell
Government concerns do not mean that mining operations
the truth when negotiating: do not promise anything
will not be possible in drier states, however, and need not
that you cannot deliver. Another piece of advice I can
put a stop to mining projects. According to Ruanova Guinea
give is to be aware that the time issue in rural areas is
there will usually be preexisting water concessions which,
very important: people there do not like to be pushed
through negotiation with the concession holders, mining
and pressured into making decisions.
companies would likely be able to use. If the mine itself is located close to an urban area they may also be able to enter
Federico Kunz Bolaños, Partner at Kunz Abogados
into an agreement with the local government to access their water supply, at a cost. Alternatively, for mining projects
There has been support from mining companies
that are located close to the sea, developing desalination
to
plants is also an option, though these incur high electricity
mining concessions for many years, though it has
consumption and thus can be a drain on financial resources.
not yet happened. There are some small, irregular
improve
Mexico’s
system
for
administering
concessions that date back a long time and must be Whilst some predict that water shortages on the national
treated separately, in terms of acquiring the rights to
level in the next 20 years will pose a serious challenge for the
them, for example. Putting together information on
government, which has already been illustrated by recent
the location of deposits and making it available to
droughts in Mexico’s northern states, and may have a knock-
the public has been a slow process. Some information
on effect on the cost of water for industrial use, they are also
is available on the General Coordination of Mining
quick to highlight that the importance of the mining industry
website, but while it is sometimes updated most of the
in Mexico is such that the government will do all it can to
time you cannot get hold of the maps you need. The
continue issuing water concessions to mining companies,
General Directorate for Mining will provide you with
and to ensure that the cost of water remains competitive.
a report that tells you the status of the concession in each of its seven or eight different departments, such
“The best way to get concessions
as whether all the paperwork has been submitted and
into the appropriate hands is to
two or three months to produce. .
let the market operate freely.” Rodrigo Sánchez Mejorada, Partner at Sánchez-Mejorada, Velasco y Ribé
whether it is titled. It is a good report but it can take
Baltazar Solano Rico, Director General of Terra Quaestum & Consultant at Behre Dolbear
49
| VIEW FROM THE TOP
IMPROVING THE ENVIRONMENTAL FRAMEWORK HÉCTOR HERRERA ORDÓÑEZ Partner at Herrera Ordóñez Abogados Q: Could you describe the current legal framework
their used water at all. That water floats to rivers, lakes, and
regarding water use and access, and its impact on the
then to the oceans, which generates a lot of problems. Water
mining industry?
treatment plants are expensive, and municipalities complain
A: Mexico has enough water to satisfy the needs of the entire
that they do not have the money to treat the water. The
country, but unfortunately most of the water is located in the
mining industry has been blamed for having polluted some
country’s southern states. The center, north and northwest
communities, and this is why the industry is subjected to
of the country, generators of 70% of the country’s GDP and
heavy regulation.
the regions with the best expectations for growth, suffer water shortages. In the next 20 years Mexico expects to face
Q: How are recent initiatives helping to create a cleaner and
a water crisis, with major impacts in the north of the country.
more efficient mining industry in Mexico?
The Mexican Constitution was amended last year to include
A: Mexico’s environmental legislation is qualified as positive
making access to drinkable water a human right for all
both in terms of encouraging companies to improve
individuals. As a consequence, Congress will enact new
production and practices related to preventing possible
legislation to ensure that every individual in the country has
damage to the environment. During the 1990s, Mexico had
access to clean, drinkable water. This will definitely cause
a very poor environmental framework and the law was
the cost of water to increase. The price will not increase
not enforced for many reasons. The NAFTA treaty had a
drastically; it will do so gradually and constantly.
lot of influence on environmental practices in Mexico; the agreement states that non-compliance with environmental
Many mining companies are treating their used water in order
legislation would imply a breach of the treaty. Since Congress
to reuse it in their own mining processes, but also to supply
enacted legislation and made environmental amendments
local towns. The law states that when the municipalities
that are much more aggressive, Mexico’s standards are
cannot provide water to their own populations, the private
approaching those of countries like the US, Canada or Europe
sector can be in charge of that service, even if it is at a cost.
in some aspects. The concept of criminal responsibility is relatively new, it was only introduced 10 years ago. Some
Q: Are there any other water-related issues you would
entrepreneurs, from both the public and private sector, who
identify as having consequences for the mining industry?
have been responsible for unlawful practices have already
A: Water pollution is an issue: there are more than 2,500
been sent to jail. This is a new and radical change in a country
municipalities in Mexico and about 60% of them do not treat
that never enforced its environmental legislation before.
THE EFFECTIVENESS OF MEXICO’S ENVIRONMENTAL LAWS There is broad consensus among different members of the mining community, from companies to legal professionals, that the legal framework in Mexico is solid. According to Rafael Cereceres Ronquillo, Partner at C&V Abogados, “the environmental laws and regulations that have been applied in recent years are of course extremely good for the mining industry. There have been many changes to the Mexican mining law, particularly with regards to the Official Mexican Standards (Normas Oficiales Mexicanas), and these have focused mainly on safety issues. It seems that every mining activity is well regulated,” he says. Though Cereceres Ronquillo praises these improvements to the country’s legal framework, there remain parts that can be improved. To take the environmental law as an example, Cereceres Ronquillo sees some processes that could be streamlined, bringing benefits to both companies and to the agencies that deal with them: “In the past it has been complicated to gather all of the documents required by the government in order to obtain environmental permits. The government will have to improve environmental laws, processes, and auditing in order to improve environmental standards in Mexico.”
50
LOCAL EXPERTISE FACILITATES FOREIGN MINING INVESTMENT Many foreign companies are not versed either in Mexican
completely different in each country. Mexican law follows
law or in the structure of the country’s mining industry,
a civil law tradition, and Canadian law follows a common
and therefore require expert consultation in setting up and
law tradition. I saw that there was a need for Canadian
running their operations, in order to ensure that they conduct
companies operating in Mexico to have a firm that would
their business legally and effectively. Arzola + Armendariz
clear up legal issues, and help companies to understand the
is one boutique law firm, operating out of Chihuahua, that
cultural dimension,” he adds. Both firms have recognized
meets this demand for local expert knowledge to ensure
the importance of having international experience, and this
the legal compliance of a project. “Arzola + Armendariz
has been one of their guiding principles in establishing a
has clients from China, Canada and the US, among others,”
firm that can effectively bridge two different legal systems.
says Carlos Arzola, the firm’s Partner. “The fact that we are
“All of our lawyers have been trained in Mexico, but also
a small boutique law firm has helped us because we have
have experience of Canadian law,” says Cruz. Arzola and
strong relationships with local government and are aware
Armendariz themselves have both practiced law in the US,
of local issues. Being local brings the advantage of being
and are complementing their services in Mexico with an
aware of programs or initiatives by the state or municipal
office in El Paso, Texas, that helps to bring them closer to
governments that can result in a synergy with our clients
their US clients.
and trigger the materialization of those programs to the benefit of all parties involved.” Many of the areas in which Arzola + Armendariz’s clients need consultancy lend themselves to having good local relationships. “The main areas in which clients seek our help are land access and surface rights; drafting and negotiation of exploration agreements, purchase or co-development agreements with owners of mining claims; incorporation of Mexican subsidiaries; compliance in different areas such as
“Around 210 Canadian companies currently
have
exploration
or
production operations in Mexico, but the legal tradition is completely different in both countries” Luis Guillermo Cruz, Managing Director of Cruz Herrera
water, explosives, land use and mining regulations; drafting and negotiation of general agreements with suppliers and
In the experience of both firms, the most common challenge
contractors; and government and community relations,”
for foreign companies starting operations in Mexico has been
explains Luis Armendariz, also Partner at Arzola +
negotiating access to socially owned land, which is why a
Armendariz. Being well-established in Chihuahua has
firm that has a thorough understanding of Mexican culture
therefore sped up many of these processes for the firm’s
and the country’s legal framework is essential. “60% or 70%
clients - for example, by being able to go directly to a local
of Cruz Herrera’s work is related to land access and land
mayor and tell him about the benefits that a mining project
tenure issues for Canadian companies in Mexico. In Canada,
will bring to the town. “We consider every governmental
companies would be used to dealing with First Nations
entity important, and we are able to connect with them to
people, but it is not simply a question of transferring the
explain the benefits that mining brings. In many cases we
same way of working to Mexico because it is a completely
help them to draw up contracts that respect the rights of
different context and the legal regime is entirely different,”
all of the involved parties,” adds Arzola.
says Cruz. Community relations have also posed the biggest challenge for Arzola + Armendariz’s clients, and for this
Arzola + Armendariz is not the only firm that has identified
reason the firm’s local network has proved invaluable. “Two
the growing number of foreign companies entering
years ago we were at the PDAC Convention and the CEO
Mexico’s mining industry as a serious business opportunity
of a junior mining company mentioned to us that they
and seized upon it. Cruz Herrera is a law firm that is made
were having issues accessing land in the town of Camargo,
up of Mexican lawyers, specializing in Mexican law, based in
Chihuahua. Right there on the spot we talked to the State
Toronto. “The firm provides advice to companies operating
Director of Mines who was attending the event, and it
in mining, manufacturing, and agriculture, as those are the
turned out that he was a close friend of the owner of the
key industries for Canadians in Mexico,” says Luis Guillermo
land. One week later, the CEO of the company flew into
Cruz, the firm’s Managing Director. “Most Canadian
Chihuahua and he was given full access to the land. This sort
involvement in Mexico is in the form of investment. Around
of thing happens often in Chihuahua – questions over land
210 Canadian companies currently have exploration or
access can often be overcome by using the networks that
production operations in Mexico, but the legal tradition is
are available,” says Arzola.
51
| VIEW FROM THE TOP
OPERATING WITHIN MEXICO’S FRAMEWORK FOR FOREIGN INVESTMENT ENRIQUE RODR�GUEZ DEL BOSQUE Partner at RB Abogados Q: How have the objectives and profile of foreign
mining companies who have good properties in hand and
companies entering the Mexican mining industry evolved
understand the needs of foreign mining companies. The
over the past decade?
last and final group is the concession holders, who have
A: The main change has not necessarily been the result
played the role of staking concessions for years. These
of new companies entering Mexico, but more of the fact
concessions usually go to the third group of former general
that large companies have more money available either to
managers. This is the most interesting sector in Mexico
buy smaller companies or to increase their own facilities
because the people who form it have experience running
and infrastructure. In the last four years we have advised
mining companies. These people usually graduated from
on major transactions involving billions of dollars, and
good universities in the US, and they have been hired
on the other hand smaller companies are joining larger
by foreign mining companies in the past. Whenever we
ones through mergers and acquisitions, which is another
need to carry out a transaction for a client, we do not go
area in which our firm specializes. We almost do not see
to the large companies or to the landowners but to this
inexperienced entrepreneurs coming into Mexico anymore.
group of people, because they have been involved in the mining industry their entire lives. If they had three million
A few years ago some companies had the mentality that
dollars they would buy land and start carrying out studies,
they would be able to enter Mexico, put their hand in the
because they know that those properties will eventually
ground and take out the minerals; they also thought that
become valuable and, when that happens, they know that
it would be easy to obtain mining concessions, which they
they will be able to rely on people like us who can connect
could later trade, or that they would only need to invest
them with foreign companies or help them to structure
a million pesos before the mines would start producing
a deal involving foreign public companies. We do these
silver. This is not the case anymore, and newcomers
kinds of transactions at least three to five times a year. I
are much more aware of the current mining business
would say that this is the best mining business model.
environment. There are some Chinese and Australian companies investing and some mining mutual funds have
Q: What do mining companies operating in Mexico need
recently been established. This is interesting because,
to understand about investing in their concessions?
instead of investing in gold or silver, they are investing
A: A typical person who is not involved in the industry and
in mining companies that have proven reserves of those
who inherits a mining concession often thinks that he has
kinds of commodities.
inherited land that is full of gold, and will just try to sell it and receive cash for it in one installment. We need to
52
Q: When a foreign company decides to enter Mexico,
explain to them what a mining concession is, and the time
is it more common for it to choose to create a Mexican
and money that should be invested in order to verify the
company or start a joint venture, and why?
feasibility of conducting a mining project on it. A typical
A: In order to hold a mining concession, foreign investors
agreement involves the investor putting money into the
must have a Mexican company that is established under
ground to develop the exploration phase because to
Mexican law, and which can have up to 100% foreign
assess the value of a project, a bit of cash should be given
investment. Foreign companies usually create a new
to the concession holder, and the concession holder should
Mexican company, since they prefer to buy the assets
receive shares in the listed vehicle (the parent company
rather than the shares of mining companies that hold
of its Mexican subsidiary). It takes three to four years for
mining concessions. There are four main groups within the
Canadians to come, explore, and develop a project. Even if
industry: the first consists of the big mining companies
they end up abandoning the project within the third year,
such as Grupo Mexico and PeĂąoles. The second group
the money they put into the field was well spent, because
is the older family owned mining companies. The third
at least the concession holder now knows the value of the
group is made up of many former employees of the big
project, in case he wants to sell it afterwards.
Q: How does project finance play a role within the mining
that gives the most credit to my clients is Scotiabank - this
industry, and how do the legal and tax frameworks affect
bank has offices here in Mexico, but it gives the money
this part of the process?
through its main office in Canada.
A: Tax implications are not that complicated, as Mexico follows an international tax and financial system with treaties
Many
that avoid double taxation. A foreign bank usually funds a
(Sociedades Financieras de Objeto Múltiple), through which
foreign company, and this company brings the money into
they bring money to start their own credit company and
Mexico, through a loan or capital contribution to its Mexican
facilitate loans to their mining companies. Big firms like
subsidiary. RB Abogados assists with the arrangement of
Caterpillar operate this way in Mexico, to meet their needs
property guarantees, pledging of shares and mortgages
when it comes to buying very expensive equipment.
companies
are
starting
to
create
SOFOMEs
with banks, which is how we secure the return of the money. Most of the financing does not come directly into Mexico, it
Q: What value proposition does RB Abogados offer on
goes to foreign companies.
major transactions before the Antitrust Commission? A: RB Abogados understands the industry’s assets, as well
I have not seen a Mexican bank providing money to mining
as Mexico and its authorities. We have a lot of experience
companies besides the Government Trust for Mining
in mergers and acquisitions, and we also handle issues
Development (FIFOMI), not even Inbursa, despite the fact
related to antitrust; every transaction of around US$80
that it knows the industry very well due to its relationship
million or more needs to go through this process and we
with Minera Frisco. Mexican banks do not understand the
know how best to obtain the permissions to make these
industry, which is unbelievable - they think that giving money
transactions. RB Abogados assisted Minefinders and
to Mexican mining companies is like throwing away money.
Pan American Silver with transactions of about US$300
Investment usually comes from foreign banks, mutual funds
million, and we were able to demonstrate to the Mexican
or from royalty companies, among other sources. The bank
authorities that this merger was not affecting the market.
HISTORICAL IMPACT OF MINING ON THE MEXICAN ECONOMY The development of Mexico’s most industrial regions either originated with, or was propelled by, the mining industry. According to José Enrique Santos Jallath, Head of the Mine Exploitation and Metallurgy Department at UNAM, the Bajío region’s strong and mature industrial diversity was developed thanks to the concentration of mining activity in Guanajuato. In the same way, states like Chihuahua and Zacatecas owe a good part of their economic strength to the mining activities that take place there. “If we closely examine the country’s history from colonial times to the present day, we will see that mining activity has always represented an important part of Mexico’s GDP and, in many regions, has been the motor for economic development,” he says. “Thanks to new technologies, a large part of Mexico’s mineral resources are currently being exploited. It can also be expected that the extraction of those natural resources that cannot be exploited right now might become economically feasible in the future. Mining is, and will continue to be, a key activity for the country’s development, and will provide endless opportunities to all earth science professionals.”
There is no doubt about the considerable financial benefits that the mining industry brings to Mexico today. As the fourth largest generator of GDP, and a huge generator of foreign direct investment, the benefits of a framework that successfully facilitates the process of foreign companies entering and operating in Mexico are self-evident for Rafael Cereceres Ronquillo, Partner at C&V Abogados. The Peña Nieto administration’s Pact for Mexico is viewed by C&V Abogados as a positive step for the mining industry. For the firm, the inclusion of a section on mining activities shows that the government sees mining as an important area to be addressed, and is an indication that the mining law itself is likely to be amended or replaced soon. “The mining industry brings a lot of opportunities for economic growth to Mexico. There have been a lot of positive changes, but there is still a lot to do,” says Cereceres Ronquillo. “In the last two years, Mexico’s mining industry has been affected by changes that have been made to the mining law as well as the agrarian, labor and environmental laws. These changes have improved general standards in the industry, making Mexican law more modern, and bringing it in line with international standards and practices.”
53
UNION INFLUENCE IN MEXICO’S MINING INDUSTRY The Mexican miners’ union is a private sector union that
affiliated either with the SNTMMSSRM or the National
wields significant power and influence in the country.
Mining and Metallurgical Union,” says Alfonso Rodríguez
Known as the National Union of Miners, Metalworkers and
Arana, Director General of LegalMex. “The unions play an
Allied Workers of the Republic of Mexico (SNTMMSSRM),
important role, and the leaders of these two unions work
or the National Mining Union (NMU), a 2011 estimate put
hard for the interests of their members.”
its membership at 260,000 miners and metalworkers throughout the country.
It is perhaps because of the level of power that they hold today that the mining unions are regarded with such
Whilst this represents a significant proportion of the
ambivalence by the industry. The SNTMMSSRM in particular
country’s miners and metalworkers, the number has
is considered to be aggressive and overly demanding,
declined as a proportion of the overall number of employees
often having been a source of conflict between workers
in the industry over three decades. This is attributable
and mining companies. Cases in which the Union has been
to a number of changes in the industry: unionization as
involved have led to mining projects being closed down
a declining tradition throughout Latin America; greater
and operations halted for a number of years, sometimes
infiltration of the market by foreign companies that have a
without resolution. This damages the industry in different
lesser culture of unionization; and the overall increasingly
ways: mining companies experience immediate losses as
negative attitudes towards unions and strikes. However,
a result of closed mines; reserves of mineral resources
even if the culture of unionization in Mexico is on the
remain unexploited; and the reputation of the industry and
decline, the SNTMMSSRM’s sway within the industry
the country more widely as a place to do business can also
cannot be underestimated. There also exist alternative
suffer as a result. The general perspective in the mining
unions to the SNTMMSSRM, such as the National Mining
industry is that the Peña Nieto administration must find a
and Metallurgical Union, and the National Mining Alliance.
way to balance the level of power that the mining unions have, to avoid the negative impact of such actions in the
For many of the industry’s workers, union membership is
future. “This is a delicate topic since mining unions are very
appealing because of the bargaining power that unions still
strong in Mexico. The government will be careful in dealing
hold in Mexico. The labor unions have a strong track record
with unions, and perhaps the new administration will try
making important gains for their members in negotiations
to push them to be clearer in the management of their
with mining companies in areas such as improving
finances, given the different amendments that have been
working conditions, increasing salaries, and raising safety
made to the labor law,” says Rafael Cereceres Ronquillo,
standards in mines. “The majority of mines in Mexico are
Partner at C&V Abogados.
LEGACY OF THE 1906 CANANEA STRIKE The Cananea Consolidated Copper Company (CCCC) was founded in Sonora by American businessman William Cornell Greene on September 30, 1899, to exploit copper deposits in the region. Greene owned the town of Cananea, as well as the mine itself and the surrounding farmland and forest. CCCC was run with over 7,600 employees, of which 5,400 were Mexican and the rest were American. On June 1, 1906, for the first time in Mexico’s history, Mexican miners went on strike after the company announced that it would pay wages based on piecework rather than by the hour. This was only the tip of the iceberg for the Mexican miners, who believed they were already subjected to unjust labor conditions and very low wages. Some of the workers’ pleas included the introduction of a minimum wage of MX$5 and an eight hour working day, as well as employing a larger number of Mexican workers. The strike was greeted with violent repression by the company and the Mexican government. Mexican troops and Arizona Rangers arrived at the scene with orders to crush the strike. In the end, 30 Mexicans and six Americans were killed, and dozens of workers were injured in the conflict. The workers’ leaders were arrested and held in the prisons of the San Juan de Ulúa fortress, in the state of Veracruz. Even though the strike ended with the defeat of those who had instigated it, it is considered to have triggered the Mexican Revolution, and Cananea has been regarded as the birthplace of the Mexican labor movement ever since.
54
CHANGES ON THE LABOR FRONT Between 1998 and 2012 over 500 reform initiatives were
changes can allow the mining industry to reap the reform’s
presented in Congress, aiming to modernize the Mexican
many benefits while minimizing the risks. He cites the
Federal Labor Law. On November 30, 2012, the latest of
example of mining companies that currently outsource the
these initiatives was successful. During his last State of the
vast majority of their employees. “In response to the legal
Union address, former president Felipe Calderón pushed for
reform’s impact on outsourcing and profit sharing, our
labor reform in his first and only attempt to capitalize on
firm has designed a series of solutions,” Rodríguez Arana
the new legal figure of a preferential initiative. After grueling
says. Other potential hazards or obstacles that the reform
discussions within both legislative chambers and a series of
brings for mining companies are the great powers that
modifications, 338 articles of the Federal Labor Law were
have been given to safety inspectors. These government
modified, added or abrogated. This represents over 33%
officials will now be able to suspend operations or close
of the content of the Law, which had remained largely
down a mine if they consider there to be a safety risk to
unchanged since 1970. However, the fast-track nature of this
the workers. Moreover, companies that fail to comply with
legislative change, together with the peculiar timing, took
occupational safety regulations established by the Ministry
many companies by surprise. In fact, President Calderón
of Labor will now be subject to higher sanctions. Fines
signed the Law on his last day in power. The changes
imposed as a result of breaches to the Ministry’s Mexican
came into effect one day later, on President Enrique Peña
Official Norms (NOMs) can now reach up to 5,000 times
Nieto’s inauguration day. Alfonso Rodríguez Arana, Director
the minimum salary, or the equivalent of US$25,719 under
General of LegalMex, states that many of his clients – among
this year’s average exchange rate. In spite of the increasing
them large mining companies operating in Mexico – did not
stringency of safety norms, most mining companies need
have the time to analyze the reform’s impact before it was
not to worry about the possibility of being sanctioned. Due
enacted. “In order to simplify its clients’ understanding of
to the serious consequences of accidents and the damage
the reform, LegalMex has elaborated a very succinct guide
they can cause to company and sector perceptions, the
summarizing the 123 pages of the bill, providing a complete
Mexican mining industry has gone to great lengths to
overview of how the regulatory changes could influence
promote a sustainable, responsible image based on
mining companies and their business in Mexico,” highlights
rigorous performance standards. Many companies have
Rodríguez Arana. He assesses that, even though some
been awarded the Ministry of Labor’s certification as safe
of the changes will invariably affect mining companies,
companies, and some of them are also listed in the Mexican
proper legal advice and preventative administrative
Stock Exchange’s Sustainable Index.
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IMPACT OF THE 2012 LABOR REFORM ON THE MINING INDUSTRY The mining industry is both one of Mexico’s biggest
to refuse to work if their employer is not fulfilling certain
income generators and one of the largest generators of
security obligations, such as providing them with the proper
direct and indirect employment in the country. As such,
training, protective clothing, and equipment. Another
Mexico’s labor law and the way in which it is administered
positive development in this area is that those found to have
and regulated are critical in deciding the ways in which the
breached safety regulations, to the extent of potentially
sector can function and develop. The recent reform to the
resulting in the loss of life, can now be fined up to 5,000
labor law is for the most part viewed by legal experts to
times the daily minimum salary (over US$25,000). These
have been a vital modernization that will lead to economic
are changes that have the aim of, and hopefully will succeed
growth for the whole country, and given the direct impact
in, improving the industry’s security record.
it has on activity in the mining industry, the sector must adapt to this new legal environment.
The general areas of reform, outside of the mining chapter, also have an important impact on the way in which
The 2012 Labor Reform represented the long overdue
mining companies operate. Not the least of these is the
modernization of an outdated law that had been mostly
tightening of regulations around outsourcing, which is
unchanged since 1970, and the new law better reflects the
common within the Mexican mining industry, for example
reality of Mexico’s current social and labor environment.
at the construction stage or in the provision of catering or
According to the National Institute of Statistics and
cleaning services. Besides the obvious practical advantages
Geography (INEGI), in the four decades since 1970 life
of outsourcing, it often has the additional benefit of
expectancy has increased from 61 to 76 years, and the
bringing costs down, because Mexican companies are
active working population as a proportion of the overall
obliged to share their net profit with their employees,
population has increased dramatically from just half to
whereas such payments are not made to those working for
around two thirds. “The 2012 Labor Reform is a good
the outsourced company. Changes made under the 2012
opportunity for Mexico because it allows the country
Labor Reform, however, aim to eliminate this practice. For
to reorganize and improve employment relationships.
example, companies may now only outsource ‘specialist’
In general terms it was necessary, given that the last
labor that is different to that provided by the company’s
important amendment to the labor law took place in the
regular, contracted employees. The law also states that
1970s. It may seem like a very aggressive reform, but it was
the outsourced labor may not account for the entirety
a long-needed one,” says Rafael Cereceres, Partner at C&V
of the company’s operations. Placing such limits on the
Abogados.
conditions under which an organization may outsource will directly affect the ways in which mining companies
The reform proposal was exhaustive, addressing 80% of
conduct their business. “Most companies in the industry
the law’s 1,010 articles and integrating all aspects of the
contract services through external providers,” says Alfonso
labor market, from contracting and discrimination to salary
Rodríguez Arana, Director General of LegalMex. “In many
payment and dismissal. The legislative power ultimately
cases the staff provided through these channels plays a
approved modifications to a third of the Law’s original
direct and immediate role in the core business of the
content. The mining sector is arguably one of the industries
company, even though they are subcontracted.” According
that will be more significantly affected by the recent Labor
to Rodríguez Arana, those companies that hold a mining
Law Reform, principally because the law contains a new
concession without having a single employee are greatly
chapter dedicated solely to mining (articles 343-A to 343-
affected by these changes and will need to restructure as a
E). The focus of the legislation laid out in this chapter is to
result, if they have not already. If they do not do so, mining
improve health and safety regulations for mining operations
companies that are found to have created false institutions
in Mexico based on requirements that range from having
with the aim of reducing their labor expenses will now be
a proper management system for health and safety issues
sanctionable by law.
and informing workers of the risks inherent in this type of work, to making both concession holders and mining
Outsourcing represents one way in which the 2012 Labor
operators responsible for ensuring that mines are managed
Reform has served to improve the balance of the employer-
in compliance with all safety regulations.
employee relationship. While it has tightened the law in this area, the reform has simultaneously opened up in the area
56
The mining chapter of the new Labor Law also gives
of contracting. Employers can now hire workers through a
workers a more active role in the upkeep of health and
number of different contracting schemes – including trial
safety standards. Article 343-D gives workers the right
contracts, temporary contracts, and seasonal contracts –
and it is now also possible to hire employees at an hourly
reform is the imposition of a limit to wage payment during
rather than a daily rate. It should be noted that, whatever
labor trials. This is especially important considering that,
the length of the contract or number of hours worked, all
in Mexico, such trials last – at best – three years, during
employees share the same right to the national minimum
which the employer had to pay the full amount of the
salary and to receive social security benefits as specified by
plaintiff’s wage as if he or she were still working for the
law. Employees may also work overtime at double the rate
company.” Mexico’s labor litigations are carried out by a
of their usual hourly wage. However, overtime hours should
Workers’ Compensation Appeals Board (JFCA), which
not exceed three hours per day and cannot surpass three
currently has a severe lag in case resolution and takes an
consecutive days. These changes afford employers much
average of 51 months to resolve a trial. An amendment
greater flexibility in meeting their companies’ staffing needs,
to the law means that if an ex-employee brings a case
reducing the risk of overcommitting to long contracts that
of unfair dismissal against its former employer and wins,
may not be required in the long-term. It is also now easier
the employer will be obligated to settle unpaid wages
for either party to terminate the contract before it expires.
equivalent to the worker’s full salary for 15 months, as well as a 2% interest for every month that passes until the trial
Despite some reservations about potentially increased
is resolved. In addition, lawyers and public officials that
costs for mining companies operating in Mexico - resulting
deliberately delay trials will be held liable and sanctioned.
from new outsourcing regulations and having to spend
This is welcome news in particular for small- and medium-
more on increasing security provisions - the 2012 Labor
sized mining companies that previously could have had to
Reform is generally viewed by legal experts as being
pay many years’ worth of back payments whenever faced
beneficial for the industry. Indeed, many experts think that
with an unfavorable sentence in labor trials. The reform
it will even increase productivity across all industries. The
will undoubtedly prevent many companies from facing
Mexican Institute for Competitiveness (IMCO) predicts
financial difficulties or even closure due to costly legal
that, as a result of the reform, Mexico’s GDP will increase
disputes.
by between 1 and 1.5% annually. Another key development is the country’s ratification of
“The 2012 Labor Reform is a good opportunity for Mexico because it allows the country to
reorganize
and
improve
employment relationships” Rafael Cereceres, Partner at C&V Abogados
the International Labor Organization’s Convention 176 on Safety and Health in Mines, which was written in 1995. However, in 1998 Mexico’s Ministry of Labor and Social Welfare recommended that it not be ratified by Mexico because the country did not yet have the legal means to comply with its terms. Nevertheless, in August 2012, the Ministry suggested that the necessary process be begun to reconsider its ratification. Although this convention is yet to be ratified, the Ministry of Labor and Social Welfare has recommended that the government now do so. By
Cereceres views the Labor Reform as a positive step
committing to such conventions, Mexico stands itself in
forward that provides a good opportunity for Mexico’s
good stead for attracting further foreign investment into
mining industry to improve its employment relationships.
its industrial sectors.
The biggest improvement for Cereceres is that the government has now increased its surveillance, making
While recent reforms and their consequences represent a
sure that the new rules and regulations are being properly
challenge for mining companies operating in Mexico, in the
implemented across industries. “The new government is
long term they will prove to be a positive step forward for
working very closely with the Ministry of Labor to ensure
the industry. LegalMex has successfully advised its mining
that mining companies are complying with their labor
clients on the reform’s risks and benefits, and along with
and safety obligations, as employers. This is a positive
his partners and expert associates at LegalMex, Rodríguez
change, and one that was needed,” he says. In fact,
Arana helps further his clients’ business by promoting a
mining companies that apply international best practices
preventative approach to labor conflicts. “This implies the
can benefit greatly from the reforms made to Mexico’s
modification of contracts, verification of legal relationships
Federal Labor Law. Among them is the opportunity to hire
with suppliers, and many other due diligence changes. We
employees under new recruitment schemes, including trial
have deeply helped our clients in the mining industry and
periods and temporary training programs.
this is why we fortunately have a lot of work,” he adds. Despite the speculation around the exact potential that
The law also protects employers against potential abuses
the 2012 Labor Reform has to improve the development
from former employees. In the words of Rodríguez Arana,
of Mexico’s mining industry, its full impact will only be
“one of the most transcendent issues addressed by the
revealed in the coming months and years.
57
| STATE PROFILE: GUANAJUATO
ECONOMIC DEVELOPMENT AMBITIONS BASED ON A LONG MINING TRADITION The state of Guanajuato
According
is located in the center
dedicated to large-scale mining have the capital and
of Mexico, inside what
required technology but need support in creating the
is known as the Golden
social and legal environment that protects their long-
Triangle between Mexico
term and high-risk investments. “While the investor is
City,
and
developing infrastructure and exploring, we are generating
Guadalajara,
Monterrey.
Héctor López Santillana, Minister of Sustainable Economic Development of Guanajuato
to
López
Santillana,
foreign
companies
Guanajuato
– with state resources – a favorable environment in the
holds a privileged position
community or ejido, so that the benefits are felt before
on
economic
the exploitation stage begins. Our participation involves
map: 60% of the country’s
Mexico’s
providing services, education and different opportunities
population
located
for local empowerment, which will create a synergy
within 400km, as well as 80% of the Mexican internal
is
from which all parties will gain. If we manage to create
market, 70% of the country’s source of international trade,
favorable conditions, the exploration and exploitation
and 70% of the automotive industry. In 2012, Guanajuato
process will have no social issues,” he explains. On the
received US$497 million in foreign direct investment, with
other hand, small-scale mining is essentially in local hands
the manufacturing industry being the main recipient.
and has the aim of providing supplies to the construction industry. Formerly characterized by painstakingly long,
Gold and silver mining are considered to be synonymous
inefficient, artisanal processes, it is currently passing
with the state of Guanajuato, because of their intrinsic link
through a process of industrialization. Most small-scale
with the state’s history. Mining has played an essential role
mining is led by community members who used to be
in Guanajuato for over 500 years, spanning three centuries
farmers with no previous experience in this field. The
of colonial rule and Mexico’s two centuries of independent
state government is working to help small-scale mining
history. “The state was born because of mining, as was
become a profitable industry by encouraging ejidatarios
Mexico’s independence, since the main conspirators were
to organize and partner up to seek the required funds to
miners,” says Héctor López Santillana, Minister of Sustainable
start the industrial exploitation stage. The objective is to
Economic Development of Guanajuato. Throughout the last
develop industrialization, connectivity, and electrification.
five centuries, Guanajuato’s mining wealth has been based
58
on three systems: the Veta Madre vein, the Sierra veins and
In order to foster both large-scale and small-scale mining,
the La Luz veins. The first mining boom started only two
the government of Guanajuato has an office dedicated to
decades after the Spanish conquest of the Aztec empire,
the promotion and support of the state’s mining industry.
when a vein in the vicinity of San Bernabé was discovered.
It also provides property and agrarian law consultation
The beginning of the 19th century marked the decline of
and sociopolitical expertise, which facilitate the permitting
Guanajuato as a mining district, primarily due to social unrest
processes and provide the confidence and certainty
after Mexico gained independence from Spain. Nevertheless,
that investors require for exploitation. López Santillana
foreign mining companies continued operating mines such
explains that the state government guarantees investors
as La Luz and La Aurora, and by the end of the century
that they can confidently invest in the state. The continuity
production boomed and Guanajuato regained its status as
of government policy has enabled the transformation of
an excellent mining district. The Mexican Revolution halted
Guanajuato’s economy from being mainly agricultural to its
mining operations in the state during the first decade of the
current process of industrialization. “We have not reached
20th century and it affected mining companies for decades.
our goal yet, but we have been working under the same
Today, Guanajuato continues producing gold and silver
policy - no matter who has been in power - for 24 years,”
at El Cubo, Bolañitos, and Guanajuato mines. In addition,
López Santillana explains. He also emphasizes that the
many mid-tier and small producers continue exploring and
state has a favorable business environment and a proud
developing mining projects, while others hope to reactivate
mining identity. “We see a promising future for the mining
old mining sites with the aid of new and improved extraction
industry. We are very proud of this industry and we are
technologies. Guanajuato’s Ministry of Sustainable Economic
excited by the possibility of discovering new deposits,
Development operates parallel strategies for the development
which will continue to encourage the arrival of both
of the state’s large-scale and small-scale mining industries.
Mexican and foreign investors,” López Santillana affirms.
| MINE PROFILES: GUANAJUATO
GUANAJUATO 1
2
3
1
2
3
BOLAÑITOS, ENDEAVOUR SILVER Bolañitos is an underground silver-gold mine located 10km northwest of the city of Guanajuato. It consists of 2,470 hectares encompassing three operating silver and gold mines, located in two areas approximately 5km apart. The mining complex is located at a classic low sulphidation epithermal vein system. Mineralization consists of disseminations and fracture-fillings of pyrite, pyrargygrite, polybasite and, electrum in quartz-calcite veins ranging from 200m deep, and 1 to 10m thick. When Bolañitos was acquired in 2007, the operation was producing 300,000oz of silver a year. After Endeavour Silver’s investments, production costs were reduced and production more than doubled to 800,000oz of silver per year. In 2012 Bolañitos produced 1.7 million ounces of silver, an increase of 59% over the previous year, and produced 25,920oz of gold, an increase of 73%. Bolañitos mine and plant facilities were significantly upgraded in 2012, boosting production from 1,000 to 1,600 t/d. The operation employs around 500 people and engages 630 contractors, most of them from surrounding communities.
GUANAJUATO, GREAT PANTHER SILVER The Guanajuato Mine Complex is Great Panther Silver’s flagship operation, and consists of 32 claims totaling 2,621 hectares. The main claim block covers 4.2km of the Veta Madre vein structure, and extends for a known strike of 25km. The most important phase of mineralization in the Guanajuato district comprises epithermal silver-gold veins contained within northwest-trending, Cenozoic age faults. Economic mineralization is contained within tabular veins, vein stockworks, and breccias. The ore shoots typically range from 1m to 15m wide and from 50 to 400m long strike. The ore is processed to produce high quality, precious metal-rich concentrate, which is transported to smelters in Mexico and Europe. The processing plant consists of a three-stage crushing section, producing a fine ore mill feed, a grinding section consisting of three ball mills operated in parallel, and a conventional flotation circuit with a total capacity of 1,200 t/d.
EL CUBO, ENDEAVOUR SILVER El Cubo is a silver-gold underground mine located 6km southeast from the city of Guanajuato. The property consists of 61 mineral concessions covering 8,146 hectares in the second largest historic silver mining district in Mexico. The processing plant at the mine has existed for at least 150 years, and was the first mill site permitted to use cyanide in Mexico. The complex is based on low-sulphidation epithermal veins which are typically thousands of meters long, 400m deep, and 1 to 3m thick. Following the acquisition of the project in July 2012 Endeavour Silver launched a US$67 million, 18-month capital investment program. El Cubo produced 300,000oz of silver and 4,893oz of gold from July to December of 2012. Three mines feed a flotation plant that produces mineral concentrates, which feed a 400 t/d leach plant to produce doré bars. The mine has 965 employees and 202 contractors, making it one of the most emblematic mines of the state.
59
60
GEOLOGY & EXPLORATION
3 Exploration is the lifeblood of the mining industry, and Mexico is one of the world’s most attractive exploration investment destinations in the world. Technological advances are playing an essential role in finding ore deposits, and it is due to improvements in this area that companies are now able to find reserves with commercially viable concentrations of minerals more easily and cost effectively than they previously could.
This chapter examines the role of exploration in the life cycle of a mine, from the early stages of prospection, laboratory sample analysis, and geophysical modeling, to the later stages of conducting airborne geological surveys, drilling services, and other techniques. Business leaders from junior, drilling, analysis, and mining companies discuss the different factors that have ensured that the US$1.2 billion invested in exploration last year has been allocated optimally to deliver the desired exploration results. It also analyzes the ambitions and strategies of the people that drive Mexico’s exploration success, assesses the impact of the financial crisis on exploration activities, and provides an overview of the main projects currently at the exploration stage in Mexico today.
61
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62
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CHAPTER 3: GEOLOGY & EXPLORATION 64
Global Exploration Trends
65
Exploration in Mexico & EXPERT INSIGHT: Jaime Lomelín
66
VIEW FROM THE TOP: Unlocking Mexico’s Geological Potential
68
Project Generation Focused on Joint Ventures
69
Advantages of the Prospect Generator Business Model
70
Mineralization Meets Management Expertise
71
The Value of Outsourcing Exploration Expertise
72
Geophysical Services for Substance Information & Speed and Accuracy in Sample Analysis
73
Time Saving in Quantifying Mineral Reserves
74
Technologically Advanced Aerial Surveys
76
VIEW FROM THE TOP: Improving Digital Maps for the Mining Industry
77
National Talents for National Projects
78
VIEW FROM THE TOP: Exploration Strategies for a Challenging Market
79
Refining Exploration Programs to Improve Effectiveness
80
VIEW FROM THE TOP: Best Practices for Prefeasibility and Feasibility Studies
81
Refining Properties to Generate Value
82
Delivering Quality and Speed in Mineral Analysis
83
VIEW FROM THE TOP: The Economics of Mining Entrepreneurship
84
VIEW FROM THE TOP: A Modern Approach to Drilling in Mexico
86
EXPERT INSIGHT & Overview of Drilling Techniques
88
TECHNOLOGY SPOTLIGHT: Reverse Circulation Drilling
89
Finding Opportunities During the Exploration Downturn
90
Increased Rig Productivity Key to Energold’s Growth
91
VIEW FROM THE TOP: Applying Technology for Better Quality Drilling
92
Designing Drills to Minimize Cost and Optimize Safety
93
Building Versatile Rigs to Expand Horizons
94
Small and Portable Drill Platform Strategy & Improving Exploration through Exclusive Technology
96
Key Factors in Water Management Services
97
Specialized Drilling Fluids to Optimize Performance
98
Innovative Approach to Geological Sample Analysis
99
Mining Boom Triggers Diversification and Growth
63
GLOBAL EXPLORATION TRENDS Despite the global economic slowdown and political and
GLOBAL EXPLORATION INVESTMENT BY COUNTRY
economic uncertainty in the US as well as the European Union, global investment in exploration for non-ferrous metals in 2012 was not affected, as investment increased by 18% compared to 2011 to reach US$21.5 billion, setting
18%
a historical record for the mining sector. Canada attracted the largest amount of investment with 16% of global
33%
exploration spending, ahead of Australia with 12% and the US with 8%. Mexico was ranked fourth with US$1.23
12%
billion (6%), confirming the country’s position as the first destination for exploration investment in Latin America. In terms of targeted minerals, exploration for gold captured 42.2% of total investments, followed by copper with 22.9%,
3%
uranium with 4.3% and zinc with 4.2%. Silver exploration
8% 3% 6%
3%
received an investment of US$825.5 million (3.8%), though
4%
an important proportion of its exploration is conducted
5%
5%
together with the exploration for gold and base metals. Last year’s record exploration investment figure could represent the peak in the mining industry’s boom, which started in 2002 driven by rising mineral prices, and which came largely as a result of China’s accelerated economic growth. Although the rapid expansion of the industry came to a halt as a result of the financial crisis of 2008, resulting in a steep drop of 42% in global exploration investment the following year, the industry recovered quickly from
Canada
China
Australia
Russia
US
Brazil
Mexico
Argentina
Chile
Other
Peru
Source: Metals Economics Group
this shock and most metal prices started rising within six months after the crisis had started. After the drop
While most juniors succeeded in raising the required
in exploration investment in 2009, the upward trend in
funds for exploration programs in 2012, investors have
metal prices led mining companies to increase exploration
become more selective in the allocation of their funding.
investment by 56% in 2010, 37% in 2011, and 18% in 2012.
While companies with advanced exploration projects or properties in highly prospective areas have managed
Junior companies have played an important role in the rise
to secure financing, other junior exploration companies
in exploration investment, accounting for almost half of the
have struggled to make ends meet. The financial woes of
total investment. Nevertheless, the global macroeconomic
these companies are creating acquisition opportunities for
impact of the financial crisis on market conditions in the
financially healthy juniors while also reducing the future
financial sector have made it more challenging to raise
flow of world class development projects that could be
funds for mining exploration through equity financing,
transformed into producing mines, and which have been
despite relatively high metal prices.
the lifeblood of Mexico’s major mining companies.
GLOBAL EXPLORATION INVESTMENT (US$ BILLION) 25 21.5 20
18.2
15
12.6
5
11.5
9.9
10
7.1
2.2
3.5
7.3
4.9
0 2003
2004
2005
2006
2007
2008
2009
2010
2011
2012 Source: Camimex
64
EXPLORATION IN MEXICO
| EXPERT INSIGHT Jaime Lomelín, one of the Mexican mining industry’s
During the first semester of 2012 the Mexican mining
key leaders and the former CEO of Peñoles and
industry was able to maintain its dynamism. Sound
Fresnillo, views consistent spending on exploration
macroeconomic policies and positive perspectives on
as essential to a company’s survival. During his time
the approval of structural reforms regarding labor, fiscal
as CEO of Peñoles-Fresnillo, Lomelín introduced the
regime, political transparency, and education have given
strategy of making fixed investments in exploration
Mexico an added value that has helped the country
activities each year, regardless of market fluctuations.
continue attracting foreign capital. A good indicator of
According to Lomelín, many companies have made
how Mexico is perceived as a destination for worldwide
the mistake of adjusting exploration investments
mining investment is the Fraser Institute’s annual survey of
depending on commodity prices. “After 25 years of
mining companies. In 2012-2013 the Institute gathered the
spending on exploration, Peñoles-Fresnillo has a
views of 742 companies that between them invested a total
tremendous pipeline of exploration projects that no
of US$6 billion in exploration in 96 jurisdictions worldwide,
other company in Mexico could match, and this has
and measured country investment attractiveness based
allowed the company to grow in a completely organic
on 17 political factors. The results of this survey were
way. Mining companies should never stop investing in
compiled and turned into a Policy Potential Index (PPI), in
exploration efforts. If you stop exploring, sooner or
which the Eurasia zone occupied four of the top 10 spots,
later you are going to die,” he warns. This steady and
with Finland advancing from second position to first. Latin
consistent approach to exploration has played a key
America’s PPI scores reflected certain concerns related to
role in establishing Peñoles-Fresnillo as one of the
‘resource nationalism’, which translates to opposition to
most experienced and successful leaders in Mexican
mining activities in some regions. This caused Chile to fall
mining.
from position 18 to 23 and Peru from 56 to 58, while Mexico dropped from 35 to 42. The survey also created the Mineral
“The strategy of some mining companies is to
Potential Index (MPI), which reflects the perception of
diversify, looking for a wider range of minerals but
respondents regarding geological potential (taking into
within the same macro deposits; they do not tend
account current regulations and restrictions to land use), in
to consider the smaller deposits. Focusing on fewer
which Greenland occupied the first position, Chile moved
metals or minerals, and on smaller deposits, can
down from position 5 to 11, and Mexico fell nine positions,
be more successful,” says Lomelín. Persisting with
now occupying the 30th slot.
exploration on its existing mines has also been an extremely successful strategy for Peñoles-Fresnillo.
Despite being outranked by countries such as Chile and
The company aims for the lifespan of each of its mines
Peru in the abovementioned survey, Mexico received
to surpass 10 years, and in the case of its biggest silver
the largest amount of exploration investment in Latin
mine Fresnillo, which the Group has operated almost
America in 2012, which is arguably the best indicator for
continuously since 1920, it has more than satisfied this
a country’s mining investment attractiveness. Exploration
objective.
investment in Mexico also more than doubled between 2008 and 2012, increasing from US$494 million to over
Jaime Lomelín, COO of Grupo BAL
US$1 billion, according to Camimex statistics. Around 70% of this exploration investment was made by foreign mining companies, with Mexican companies accounting for the remaining 30%. In 2012 the General Directorate for Mining Development registered 439 companies exploring 1,172 projects in Mexico. This means that exploration activities are only carried out on a small proportion of the total 26,071 mining
MEXICO EXPLORATION INVESTMENT (US$ MILLION) 1,200 1,007
1,000
922
800 600
494
concessions that had been awarded by the end of 2012, which altogether cover 30,872,574 hectares and represent just over 15% of Mexican territory. According to data
663
599
561
400 200
provided by the Mexican Geological Survey (SGM), 61.1% 2012
2011
2010
2009
2008
Sonora, Durango, Chihuahua, Zacatecas, and Coahuila.
0 2007
of these concessions are located in the Mexican states
Source: Camimex
65
| VIEW FROM THE TOP
UNLOCKING MEXICO’S GEOLOGICAL POTENTIAL RAFAEL ALEXANDRI RIONDA Former Director General of the Mexican Geological Survey (SGM)
Q: While geological research institutions are becoming
digitalized and sent to our database. There is no other
smaller in many countries, the Mexican Geological Survey
geological survey with such an advanced mobile application.
(SGM) is expanding its operational reach. What is driving
In the past four years 13.6% of the Mexican mineral value
this change?
came from projects generated by SGM.
A: About five years ago we were doing what any other geological survey would do: improving national
Q: How do SGM capabilities for processing and displaying
cartography, conducting geophysical trials, and doing
geographical information compare with those of the
geochemical mappings, even though Mexico was not
private sector?
getting anything truly worthy out of it. What SGM did
A: SGM does not compete with the private sector. SGM
was to transform the work that the country had already
is more efficient at exploration than private companies
spent a lot of money on. Geologists have now been trained
because we have all of the state of the art tools necessary
in such a way that the information they obtain through
to perform in-depth exploration. Normally, companies
cartography can also be of economic interest to Mexico.
need to hire geophysical studies services and will then need to go to a lab to carry out different analyses. Some
This experience has added value to our research work as
people believe SGM is competing with junior exploration
well as serving a double purpose: providing a good basis
companies, but we look at exploration from a different
of scientific knowledge about the country and a database
perspective. SGM is the best partner any junior mining
to be used by the private sector in order to promote
company in Mexico could have, since it has the basic
investment. Today, the Survey is able to transfer projects
geological information for the whole nation.
to the private sector through bidding processes. SGM is doing almost the same as junior companies do, which is
Q: It is often said that Mexico still holds over 70% of
to take a finder’s fee and royalties. The positive thing is
unexplored land. Why has SGM not adopted measures to
that through this type of procedure SGM acquires funds
carry out exploration projects that take advantage of this
to support its programs. As a matter of fact, 68% of SGM’s
untapped potential?
budget is self-generated.
A: SGM has carried out the mapping of 100% of the country on a scale of 1:250,000. Not many countries have done
Q: What are the main changes that SGM has undergone in
this. When it comes to geophysics, even less countries
the last year and how have these changes contributed to
have covered their entire territory using aeromagnetic
its self-improvement?
cartography. We have mapped about 34% of the country’s
A: SGM is not cutting down on the number of cartography or
territory on a scale of 1:50,000, which is one of our main
exploration programs, on the contrary, the Survey generates
focuses. SGM is always looking for potential territories to
more than 50 charts per year. SGM’s data is fully digitalized;
be transformed into mines. It is not only looking for gold,
traditionally,
geological,
silver, and copper but also for any other mineral with an
geophysical, geochemical, and topographic maps, as well
economic value, such as phosphorite, base metals, lithium,
as satellite imagery, which is very hard to transport and use
titanium, and rare earth elements, among many others.
in field. To facilitate access to this material for geoscientists
SGM has to carefully allocate its budget to ensure that it
we created Mapa Móvil, which contains 22 maps or layers
is used in a way that maximizes value creation for Mexico.
geologists
required
printed
of information and is used by all SGM geologists. When a
66
geologist is running a field survey, he or she has a series
Q: What do you consider to be SGM’s most important
of protocols that need to be followed in order to gather
strengths
specific information such as color, texture, mineral content,
organization into what it is today?
rock type, structures, and other classifications. When this
A: Technologically speaking, SGM is ahead of many
information has been collected, the data is immediately
institutions
and
what
working
factors
within
have
mineral
transformed
exploration.
the
SGM
geologists
work
with
epipolar
imagery
and
three-
the Survey have over 30 years of experience, so it was
dimensional entries no other geological service does this.
just a matter of updating the potential of our employees,
It has an airplane with hyperspectral imagery, which is quite
individually and as a team. This group of people transformed
spectacular. Usually, geological surveys use satellite imagery
this institution in a short period of time.
with four bands, but our system uses 320 bands, high resolution airborne magnetic-radiometric methods, TEM,
Q: What is the outlook for the Mexican mining industry in
Hylogger, electron probe microanalyzer, ground portable
the coming years?
spectroradiometers
analyzers,
A: Mexico is very well positioned in the global mining
SURPAC geological modeling, open hole geophysical
and
x-ray
fluorescence
industry. It will remain the number one producer of silver,
probes, mass spectrometers, and nontripulated aerophoto
but will also become an even more important player in the
planes, among others.
gold and copper markets. In terms of discoveries Mexico still has a lot to offer, and SGM believes that it will also
In terms of human resources, SGM has doubled its capacity
challenge other producers in the realm of non-metallic
while employing the same number of people. We needed
resources. In the last two years the silver resources of the
only to enhance the creativity of our staff and to challenge
country have been increased to more than 550 million
them. A good percentage of geoscientists working at
ounces and gold resources by more than 4.1 million ounces.
MEXICO’S GEOLOGY
scattered, porphyrys and breccias of Cu, Mo, Au
phosphorus
scattered, veins and stockworks of Au, Ag, Cu
strontium
mantles, pipes and veins of Zn, Pb, Ag, Cu
iron
massive sulfides of Au, Ag, Zn, Cu, Pb
coal
precious and basic metals
fluorite
injection, deposits and Fe replacement Source: SGM
67
PROJECT GENERATION FOCUSED ON JOINT VENTURES Junior exploration companies looking for big discoveries are
ground, make cash payments and share issuances with Alta
in need a constant flow of cash to finance their operations.
Vista Ventures, and become shareholders in the companies
In the absence of positive cash flow they have to regularly
exploring the properties. In theory, the shares will increase
raise capital in the financial markets through equity
in value as success is achieved. Foreman highlights that this
offerings, which results in share dilution and therefore
way Alta Vista Ventures has not needed financing for three
a lower return on an eventual discovery. To address this
years, and has been able to avoid dilutive financing.
issue, some companies use the project generator business model. This involves obtaining a property, and right after
The combination of having good connections in the industry
making an initial discovery turning it over to a joint venture
and the expertise for finding and generating projects has
partner that makes the investment to investigate the
allowed the junior company to expand its current portfolio. “In
discovery and over time takes increasing ownership of the
the instance where an optionee was to find a good deposit on
property. Although this business model dilutes the eventual
our property our shareholders benefit greatly, because their
ownership property, it does not dilute ownership in the
ownership value will increase as we are also shareholders in
project-generating company. Nevertheless, among junior
the partnership. In this way we are able to create what we
exploration companies the project generator model is less
like to call a ‘war chest’, which is our investment portfolio,”
popular than the prospect generator model.
Foreman explains. According to him, exploration is sometimes more of an art than a science, having the right mixture of
Alta Vista Ventures, an exploration and development
highly qualified staff and a large network of people, not just
company, builds value using the project generator business
in Mexico but also outside maintaining connections. “Mineral
model. The company decided to adopt the model because it
exploration is inherently a very high risk industry, so you have
had a number of good projects and did not want to be forced
to take some chances,” he adds.
to drop any of them because of cash constraints. Any property not being explored is a liability because taxes on the property
Alta Vista Ventures is currently focusing on leveraging itself
must still be paid. The company therefore creates conceptual
to be able to take advantage when the market turns again.
ideas for gold or silver systems and spends its own money to
“It is a cyclical industry and it will come back, we just do
bring the project to the stage where geophysics or drilling
not know when,” Foreman says. “We are always talking to
is needed. “At that stage we find optionees to come in, and
companies about our un-optioned properties, trying to get
by working together we can reduce the risks significantly for
their interest. One thing that is difficult about our business
our investors,” explains Ian Foreman, President and Director
model is that you cannot get too attached to a project. We
of Alta Vista Ventures. Cost will increase as the project moves
are in the business of exploration, so any project we do not
forward and therefore the company needs to find optionees
have any operations or an optionee on therefore represents
that are willing to spend their money on a certain property.
a liability that have to manage, weighing the positives and
This method allows these companies to earn a percentage
the negatives. Furthermore, we are always on the lookout
of interest in the property by spending money on the
for new projects: it is the lifeblood of the company.”
ADVANTAGES OF THE PROSPECT GENERATOR BUSINESS MODEL Evrim Resources is a mineral exploration company operating under the prospect generator business model. “This model works by allowing Evrim to focus on early stage exploration projects and then attract partner companies to explore those projects with us,” explains Stewart Harris, Vice President of Exploration at Evrim Resources. Through this method the company invites those partners to earn a majority interest in the project by conducting the more capital intensive phases of exploration. The goal is to make an economic discovery and create value for the company’s
Left: Stewart Harris, VP Exploration at Evrim Resources Right: Rob Duncan, VP Business Development at Evrim Resources
shareholders, while keeping the company financially healthy and sustainable over the long term.
as a whole is facing a shortage in human talent that results in a lack of capacity to undertake this challenge, and Evrim
Rob Duncan, Vice President of Business Development at
can offer that capacity.”
Evrim Resources, explains that when being involved in exploration projects, the chances of making an economic
Evrim Resources is focused mostly on copper, gold and
discovery are slim. The prospect generator model increases
silver projects. Harris emphasizes that the company’s
the chances of success and lowers the risk of failure, since
business model allows them to pursue any commodity it
more projects can be explored at a lower cost. “If you work
has expertise in, as long as they can find a partner. The most
as an exploration company, trying to do everything on your
advanced project it currently has is Suaqui Verde, located
own increases your risk and expenses, resulting in a lot of
in Sonora, a porphyry copper project that is optioned to
share dilution, as you need new capital to finance your
First Quantum Minerals. “Our exploration program there has
activities,” he details. “We are happier to allow our partner
consisted of geophysics and diamond drilling. It was very
companies to earn a majority interest in each individual
successful finding long areas with copper mineralization;
project and have Evrim retain a minority interest if we
it was sufficiently encouraging to start a second phase
make a discovery.” With this model, the key advantage
program that is already underway testing more targets. The
for partner companies and possible future partners is that
goal there is to find a more than 500 million tonne porphyry
they earn a majority interest in the project in exchange for
copper deposit,” adds Harris. Currently, all of the company’s
taking on larger exploration risk. Another advantage is that
projects are located in Mexico, because Evrim Resources
they can get a chance to test a good quality exploration
originated when it purchased exploration assets in the
target without going through the expenses and time of
country from Kiska Metals Corporation. The company sees
generating their own. Duncan also comments that a key
many opportunities remaining in Mexico, especially because
consideration is the qualified human resources necessary
it is significantly underexplored, but that is not preventing
to achieve those exploration targets: “The mining industry
them from looking for other opportunities globally.
MINERALIZATION MEETS MANAGEMENT EXPERTISE Every company has a core strength: some are top explorers
advancing the project to the feasibility level and working on
and others are great operators. Geologix Explorations is
project financing for the construction. It is our philosophy
a hybrid of both, applying its exploration expertise with
to maximize the in-country expertise as much as possible to
a strong focus on eventual development. According
ensure positive results” Craig comments.
to Dunham Craig, President and CEO of Geologix Explorations, the company’s policy is to “begin with the
Geologix Explorations’ operations in the country are 100%
end goal in mind.” As such, the company systematically
Mexican at this time and the company is planning to continue
identifies the size and production capabilities of its mining
this policy as it builds its construction and operation team.
targets in order to make a realistic design according to
“We find that the local mining capabilities are very high and
the existing deposit. “We have often seen explorers and
maximizing benefits to the country where we operate is very
developers that try to go big, no matter what the deposit
important for us,” Craig remarks. The company has reviewed
is actually capable of. We are a bit different in this sense,
hundreds of projects in Mexico and will continue to do so,
so we try to size the geology first and then trim the best
taking into consideration that the country is its favorite
fit for positive operating economics. Many companies
jurisdiction. “We have learned that you have to be patient
attempt the reverse of this and then fail trying to make
and identify the right geological potential that matches the
their operations work,” highlights Craig.
management team and the company’s philosophy. In 2009
“We have often seen explorers and developers that try to go big, no matter what the deposit is actually capable of” Dunham Craig, President and CEO of Geologix Explorations
Since the acquisition of the Tepal Copper-Gold Porphyry
we identified that the mineralogy in Mexico was very simple
Project in Michoacan, a greenfield exploration target,
for processing and we liked that. In mining, simple things
Geologix
work and we have stuck with it,” he adds.
Explorations
has
carried
out
aggressive
exploration, resource expansion, and infill drilling programs to quickly develop the property to the pre feasibility study
The company is always looking for new places to explore,
stage. The project presents excellent potential operating
although it has found a territory that provides all the
costs and is believed to be able to produce over 100,000oz
opportunities it is searching for in Mexico, ranging from
gold and 50 million pounds of copper per year. When the
the right type of mineralization to the highly qualified
company acquired the project there were few resources
personnel required to perform operations successfully
and it was valued as a greenfield exploration asset. In four
and without major complications. “Exploration companies
years Geologix Explorations has turned the property into a
should always go to where the geology leads them
highly engineered development project with an after tax net
worldwide. Having said this we would prefer to continue
present value (NPV) a 5% discount of US$412 million and
exploring properties in Mexico since they could make a
an internal rate of return (IRR) of 28%. “We are currently
great adition to our existing operations,” Craig emphasizes.
TEPAL COPPER-GOLD PORPHYRY PROJECT The Tepal Project is a copper-gold porphyry with silver and molybdenum property located in the state of Michoacan. Since Geologix acquired a 100% interest in this greenfield exploration project from Arian Silver Corp., the company has carried out aggressive exploration, resource expansion, and infill drilling programs to advance the property to the prefeasibility study stage. Target production is 100,000oz of gold and 50 million pounds of copper per year.
70
THE VALUE OF OUTSOURCING EXPLORATION EXPERTISE Though mining activities
likely to end in finding a successful property because of the
have
conducted
greater expertise of the prospect generating company.”
for
This is particularly important at a time like now in Mexico,
in
been
Mexico
centuries,
Luis Villanueva, Country Manager of Riverside Resources Mexico
70%
many of
the
when the highest potential land has already been taken,
country’s territory remains
and the areas which have not yet been explored have less
unexplored. The outcome
potential. A company like Riverside Resources is able to
of previous drilling and
significantly reduce the risk inherent in this process by
mining projects on the 30%
using its well established network of contacts in order to
of land that has already
find the best potential properties available.
been explored reveal a lot about Mexican geology
Riverside Resources works mostly with international
and can help to create more successful strategies for finding
companies, but it tries to find partners that have some prior
and operating on new deposits. “At Riverside Resources
experience in Mexico, or at least a clear interest in working
technical, geological, and country data for each project is
here. The types of companies that it partners with also
safely secured and accessible for learning. In this way, the
depends on funds; for many companies making a prospect
company’s ‘technical experience’ is saved in our database
generation investment is simply not within their budget. “If
of projects,” says Luis Villanueva, the company’s Country
we find the property that our partner agrees to take on as
Manager for Mexico. Riverside Resources, a Canadian
a project, then either we acquire the property or we take
prospect generator working mostly with international
the property as a designated project. Therefore, they must
companies, counts this database as one of the company’s
commit to a US$5-25 million investment in the first four or
biggest strengths, along with its vast experience in Mexico.
five years. Many mining companies these days are not able
“Our competitive advantage is our Mexican expertise and
to come up with this level of financing. So money is the main
our management and professional team. Although we
restriction,” explains Villanueva. Whilst commissioning this
hire consultants from everywhere in the world, our group
service requires a considerable down payment on behalf of
of geologists is Mexican and has broad experience and a
a mining company the rewards can be very large. Knowing
wide network here. These two advantages, plus our projects
the significance that such an investment represents, offering
database, are what make us stronger,” explains Villanueva.
as high a return on investment as possible is extremely important for companies like Riverside Resources. “We
The company has built up a significant portfolio of
work towards creating the best return on investment for our
projects
northernmost
clients. It is well-known that exploration is the highest risk
to the southernmost states. This decision to diversify
activity in mining, and historically it has been junior mining
geographically is based on its strategy to focus on the
companies that have explored projects for major mining
quality of properties rather than their location. This strategy
companies. But the expectation of investors has started to
has recently taken Riverside Resources into less traditional
move away from junior mining companies, given their lack
mining states such as Chiapas. “The strategy is to find good
of financing,” says Villanueva
throughout
Mexico,
from
the
prospects, so we move according to opportunities. We do not necessarily aim to go everywhere in Mexico. There
One thing that can have a negative effect on the return on
are interesting gold prospects in Chiapas, and we will try
investment is the time taken to complete various pieces of
to exploit those using our expertise and our community
paperwork. “Exploration is getting complicated in Mexico,
relationships programs; these will help the people to
in terms of the time it takes to process documentation. We
understand that we are not there to hurt their land, but to
recently received a drill permit after waiting for six months.
bring opportunities to them,” explains Villanueva.
The longer time you wait for these permits the more money gets spent, which works against any project’s return on
Riverside Resources has partnered with large mining
investment. One of Riverside Resource’s advantages is that
companies such as Hochschild Mining, with whom it is
we get things done in Mexico in a very competitive amount
currently working to find a gold or silver property. “They
of time,” says Villanueva. For Villanueva and Riverside
do not have the people or the resources needed to carry
Resources, there still exists huge potential in Mexico, even if
out intensive exploration in Mexico, therefore we reduce
it is becoming more challenging to find it. “Our ambition is
their risks by exploring on their behalf. We both finance
at least to find a 1 million ounce gold deposit. We will achieve
the project, avoiding the dilution of the company’s
this with a lot of hard work, and obviously with the assistance
stakeholders,” says Villanueva. “This approach is more
of a very good team of people,” concludes Villanueva.
71
GEOPHYSICAL SERVICES FOR SUBSTANCE INFORMATION In
situations
Zonge revisits the information gathered from previous
geological studies can be
certain
geological studies at each stage and recommends
insufficient to accurately
survey methods to its clients that can add value to their
determine
exploration and ultimately identify new zones of interest.
the
of
mineral
to
fully
the
or
The methods employed by Zonge guide mining companies
understand
targets
through interactive processes, integrating the geology
layout
of
underground that
Francisco Romero, Senior Geologist at Zonge International
position
the
and geochemistry with the initial geophysics results,
structures
which are then combined with historical and new data in
contain
Geophysical
them.
order to provide ongoing assessment throughout the life
techniques
of the operations. This process of continuously refining
are becoming increasingly
geological information and geophysical models is integral
used in exploration programs, and are designed to help
to mining success. “If it was not for our services, mining
outline and map areas rich in minerals when traditional
exploitation would face even more challenges that result in
geology is not enough. “Thanks to geophysical studies
operational deficits,” Romero remarks.
mining companies are able to deal with complex geological problems,” says Francisco Romero, Senior Geologist at
The geophysical techniques Zonge employs to directly
Zonge International.
detect minerals and map structural features include: induced polarization (IP) methods using time and frequency
By incorporating advanced geophysical methods at the
domains for detection of disseminated sulfides; controlled
outset and throughout their projects, mining companies
source audio-magnetotelluric (CSAMT) investigations to
can reduce risks and generate more value for their
detect massive sulfides, silicified zones or map subsurface
investments. However, given that geological hypotheses
lithology; transient electromagnetic (TEM) investigations -
have to be proven by geophysical prospecting methods,
surface and borehole - for mapping conducting features;
the best techniques for carrying out the selected study
and integrated ground magnetic/GPS surveys for rapid
need to be chosen. “Customers require advice on which
investigation of local subsurface structure. There are
techniques to use in specific situations. It is almost like
certain types of reservoirs that are not difficult to analyze,
a doctor-patient relationship; geologists point out the
and for this reason it is not always necessary to conduct
structural problems that need to be overcome and we
deeper studies. Nonetheless, some reservoirs have still not
determine if such problems have to do with folds, faults,
surfaced in the valleys and only the sediments deposited
grabens or other geological behaviors that cannot be
there are recognizable. For these kinds of reservoirs it is
easily identified, and we solve them,” Romero stresses.
necessary to use more precise geophysical techniques.
SPEED AND ACCURACY IN SAMPLE ANALYSIS The extended upwards cycle
Development Manager at Skyline Assayers & Laboratories.
of metals prices in recent years
“What we offer to the mining industry is guaranteed
both
laboratory services for the geological exploration process,
and
Nancy Gracia-Gungor, Business Development Manager at Skyline Assayers & Laboratories
increased mining
exploration
activities
and
and we have collaborated with several mining companies
boosted the demand for base
here in Mexico. We have worked with Cobre del Mayo, with
metal, ferrous and non-ferrous
Grupo Mexico right after the end of a three year strike
analysis. Whilst the equipment
at its Cananea copper mine, and Timmins Gold is also an
and processes involved have
important client of ours. We have also carried out laboratory
developed significantly over the
analysis with Canadian junior mining companies,” she adds.
years, making analysis today
72
much quicker and more accurate, the service is age old and
The company started off in Colorado, but expanded into
mining companies may outsource this service to any number
Mexico after identifying the business opportunities that
of different laboratories that draw on decades of experience.
exist here. Based in northern Mexico, the company is
“We have over a 100 years of experience analyzing base
strategically located nearby the majority of the mining
and precious metals,” says Nancy Gracia-Gungor, Business
activity being carried out in the country. “Thanks to all of
TIME SAVING IN QUANTIFYING MINERAL RESERVES Mineral resource and reserve estimation is a continuous
their projects,” Luna Espinoza explains. The company was
process that begins with the exploration and compilation
founded to save time for its clients by providing them with
of information and is followed by geological interpretation.
fully integrated geological services. “We noticed that many
The quantity of reserves an ore deposit holds is the most
companies were providing individual geological services,
important factor for mining companies, since it determines
but none of them were integrating them. SPM wanted to
its economic viability and will directly influence the life
innovate by integrating services ranging from prospection
cycle of the mine and its annual production. It is clear that
to exploration and reserve estimation,” he adds. One of the
resource estimation is of vital importance in the success
most noticeable services SPM provides is reserve estimation
of mining investments, for which the estimations and
and certification. Reserve certification is crucial for public
calculations have to be as reliable and accurate as possible.
mining companies looking to raise funds, since their
“Mineral reserves are the base of any mining company. Our
shareholders need to see validated information to continue
job is to quantify them and guarantee to our customers
investing in the mining projects. A correct estimation is of
that they do count such reserves,” says Ramón Luna
vital importance to both certainty in feasibility studies and
Espinoza, Operations Director of Servicios y Proyectos
for daily mining programs. According to Luna Espinoza
Mineros (SPM) a nationwide geoscience consultancy.
there are only five Mexican companies capable of certifying
“Mining companies are in need of high quality interpretation and estimations that are backed up with high quality data” Ramón Luna Espinoza, Operations Director of Servicios y Proyectos Mineros
reserves under international standards. “The Americans and Canadians have been responsible for performing such tasks, the fact that our staff has this capability has given us a true advantage over our competitors in the market,” he says. Reserve estimations are normally based on a single set of grade and tonnage figures, without taking into account the possible errors that these measurements can have. There are many mistakes that can be made during reserve estimation
SPM provides exploration and geological services, from
that can seriously endanger the success of extraction plans,
basic prospection to advanced exploration, drilling, and
especially during the sampling, assaying and interpretation,
reserve estimation. The company has over 40 geologists
and estimation of mineral ore deposits. “Mining companies
and a drilling team capable of quantifying and certifying
are in need of high quality interpretation and estimations that
their clients’ reserves. “SPM has gathered experts in different
are backed up with high quality data. If a company is planning
geo-scientific areas to provide our customers with integral
on making a sound investment or operational decision they
services that go from exploration to the development of
must base it on accurate and reliable information,” he adds.
the existing Canadian investment in Mexico, as well as to
other laboratories to see if those results are correct. We
the amount of exploration that is currently taking place, we
provide quality work and we try to follow up on each and
have had the opportunity to participate in many projects.
every result, so that the customer can be sure that the data
The Mexican government has worked very hard to make it
he is getting is right. This guarantees that a company does
easier for foreign companies to explore and invest in the
not have to go through the same process twice or even
country, and there are a lot of companies that are ready
a third time, which saves time and money,” says Gracia-
to invest in Mexico and interested in doing the necessary
Gungor.
studies to understand the value of mineral resources,” says Gracia-Gungor. Sample analysis is an essential process for
Skyline believes that investment in this area of the mining
mining companies. This is even truer during difficult times
business will continue and even grow, because it offers a
such as these, when companies cannot risk spending their
valuable return on investment. “Companies will always need
squeezed resources on an incorrectly valued deposit. In
earth studies to know what they will be mining,” says Gracia-
fact, mining companies are more often spending extra
Gungor. “Companies look into their budgets and understand
money on corroborating analysis results with different
that they have received a great service with quality results
laboratories. “Companies must have reliable data in order
at a very low price.” Gracia-Gungor is therefore positive
to prove their hypotheses about the value of the ore
about Skyline’s trajectory in Mexico, which will continue to
deposits they find. Many times, we compare the results of
play a very important role in the company’s overall business.
73
TECHNOLOGICALLY ADVANCED AERIAL SURVEYS Photogrammetry has become an indispensable element for
equipped with the most advanced camera systems, like
all mining companies looking to attain a better and faster
the Zeiss RMK TOP with forward motion compensation
understanding of the topographic conditions surrounding
(FMC) or the Vexcel UltracamD, which has one of the
their operations. For many decades, conventional methods
highest resolutions and shortest intervals between images
such as distance-angle measurements with total stations or
among all existing digital cameras. “International contracts
leveling equipment dominated the scene. These methods
require us to have the latest equipment in the market and
provide valuable and reliable information but when they
to comply with high accuracy requirements. These high
are compared with modern aerial surveys their deficiencies
standards also help our national clients who sometimes
become apparent. Today, aerial photography provides
do not even request the highest precision or the highest
the most efficient and precise geomatic system for
resolution,” says Kost. Another cutting-edge technology
recovering geographical or spatial reference information.
GeoAir applies in its aircraft are modern navigation systems
“Conventional methods take up a lot of time. They can
for aerial surveys, called CCNS4. Their Differential Global
be dangerous and can even pose an obstacle to mining
Positioning Systems (DGPS) increase the accuracy of
operations. The big advantage of aerial surveys is that
block adjustments during the aero-triangulation process.
they move rapidly in the air, making it possible to cover
The DGPS technology was first introduced to Mexico by
a mine with 3D aerial photos in less than an hour,” says
GeoAir.
geographer Wolfgang Kost, the founder and President of GeoAir - one of the most technologically-advanced aerial
Aerial photography is often challenged by weather
survey providers in Latin America.
conditions - such as wind currents - that destabilize the
“The incorporation of LiDAR into GeoAir’s mapping products will give mining companies accurate surveys, executed in a timely manner and at a reasonable price” Wolfgang Kost, founder and President of GeoAir
74
Mining companies need a range of applications and high
aircrafts, provoking image distortion. GeoAir’s fleet is
precision mapping to see and analyze their infrastructure,
equipped with gyro-stabilized mounts to compensate
such as access roads, buildings and dump areas. Other
for such movement. The aircraft is also equipped with
companies may want to know the volumes of the excavated
Inertial Measurement Units (IMUs) which register the
minerals and the exact measurements of their open pits.
exact position of the camera several hundred times per
Accuracy in mining projects can be a deciding factor in the
second, thus saving a lot of time and money during the
success of the operations, and slight mapping errors can
aero-triangulation process. GeoAir has also implemented
translate into a significant loss of time and money. “The
the most advanced LiDAR technology in Mexico, known as
most important advantages GeoAir provides to its mining
Leica ALS60, which is capable of generating a high density
customers are the leading technology we use and our skill
point cloud at high altitudes with impeccable accuracy.
level, based on many years of national and international
During flights over mines, this modern LiDAR is registering
experience in aerial surveys,” Kost mentions. GeoAir’s
millions of points, which are used for the calculation of
experience of working in over 33 countries worldwide
precise DTM, DSM, contour lines, spot heights, break lines
has helped the company to open towards new mapping
or infrastructure like roads, buildings and power lines.
methods and state of the art technologies. Their decades-
When these types of flights are executed periodically, the
long experience has also showed the company how to
airborne lasers can provide mining companies with spectral
manage projects efficiently and how to execute them
information layers that help field engineers calculate the
accurately.
remaining ore volumes.
The company possesses a variety of aircraft models,
Usually, the time frame for aerial surveys and mapping
cameras,
cover
services is tight in the mining industry. There is an ever-
any need mining companies could have in relation to
and
geopositioning
technologies
to
present sense of urgency to collect the necessary
photogrammetry. All of the company’s aircrafts are
information and resume productive activities as soon as
possible. “We are well aware of the urgency of our mining customers to get the job done. We understand that we
LEICA ALS60
are gathering the basic data for very important projects,”
Leica ALS60 is a compact laser-based system
Kost says. One of GeoAir’s advantages is that it has all the
designed for the acquisition of topographic and
equipment installed or ready to be installed in its 1,000m2
return signal intensity data from a variety of airborne
hangar in Mexico, allowing the company to mobilize in
platforms. The data is computed using range and
a short space of time. “GeoAir is the only company in
return signal intensity measurements recorded in
Mexico that is really working internationally with aerial
flight, along with position and attitude data derived
survey flights. This has helped us stay one step ahead of
from airborne GNSS and inertial subsystems.
the competition. We win international tenders due to our
The ALS60 falls into the category of airborne
compliance with the required standards and thanks to our
instrumentation known as LIDAR (Light Detection
competitive edge on a worldwide level,” Kost remarks.
and Ranging). This turn-key airborne mapping
“The investments GeoAir has made in equipment and
system
people stand as a true advantage for mining operators. No
necessary to produce latitude, longitude, elevation,
other aerial survey provider in Mexico has four aircrafts,
and intensity output by measuring the location and
two large-format digital cameras, gyro-stabilized mounts,
attitude (roll, pitch and heading) of the aircraft, the
DGPS and four IMU systems. Moreover, the incorporation
distance to ground and determining the scan angle
of LiDAR into GeoAir’s mapping products will give mining
for the impact point of each laser pulse. An XGA-
companies accurate surveys, executed in a timely manner
resolution digital camera is included in the scanner.
includes
all
post-processing
software
and at a reasonable price.”
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| VIEW FROM THE TOP
IMPROVING DIGITAL MAPS FOR THE MINING INDUSTRY KRASSIMIR IANKOV CEO of Sistemas Avanzados y Proyectos (SAP)
Q: What were the gaps in the aerial survey market that led
calculations. Aerial mapping is very important and has many
to the foundation of the company?
advantages - it gives historical material for comparison and
A: In the past all mapping was done using traditional survey
it is more accurate, helpful and complete.
techniques and equipment, covering the terrain on foot and taking measurements using GPS. That posed certain
Q: What have been the main factors that have led to SAP’s
security problems, due to the vulnerability of geologists
success in the mining industry?
mapping vast terrains in sometimes hostile environments.
A: We paid a lot of attention to the post-flight process and
SAP saw the possibility of avoiding such issues by
to the people we employ, as well as to the flights themselves.
conducting its work from the air. SAP was also the first
Ideally you make each flight in excellent conditions so that
company in Mexico to have a digital photogrammetric
you do not have to repeat it, which is expensive, especially
work station, and offer digital photogrammetric scanning.
if the project is far from where the company is located.
Since 2006 we have had a digital photogrammetric
The flight is the most important part of the process, and
airborne scanner, which allows us to produce digital maps
several things might lead to having to repeat the flight, for
on various scales accurately and efficiently, producing
example if the equipment fails. SAP sends its equipment to
aerial photography, contour lines and survey maps. The
be calibrated by the manufacturer every year. Producing
company rents a helicopter and owns two aircrafts, the
accurate final maps depends on the operator as well; making
Cessna 206. The company’s most advanced equipment
a manual version of the map involves several processes that
consists of a laser scanner mounted on the aircraft to
essentially rely on the capabilities of our workers, so human
which we added a digital image sensor, so that aerial
resources are very important.
photography, contour lines, and volume calculation can be collected simultaneously.
Q: How does SAP ensure the quality of the mapping solutions it provides while maintaining a competitive
76
Q: How does SAP’s work benefit the Mexican mining
cost?
industry?
A: SAP operates at a very competitive cost and has the
A: The work that SAP does provides useful material for all
best aircrafts for what we are doing - the Cessna 206
of the different activities that mining companies may carry
single engine aircraft, which is the most popular aircraft in
out. There are several areas of the mining process that the
the US and Mexico. It is cheaper to operate with a single
digital map serves to improve. Our work helps to analyze
engine aircraft, though the cost of maintaining aircrafts is
environmental impact, to predict disasters and to assist in
high, not only in terms of the fuel cost but also in terms
the mine design process. SAP’s work is most valuable for
of maintenance and spare parts. On board the flights
mining companies working with open mines. On our flights
we have the pilot and an engineer who manages the
we use laser scanners and image sensors to produce very
equipment – the laser scanner, the computer and the state
accurate maps. This is particularly valuable in mining projects
of the art system that allows them to geo-reference the
where the surface of the land is being excavated every day.
image as well as the laser points. The equipment comes
By performing flights at different times, SAP can produce
from different countries - the AIMU is an American product
further maps of the surface and compare them, allowing
but the GPS is Canadian, the laser scanner we use is from
very accurate volume calculations. Most mining companies
Austria and the digital sensor is Russian. With this top class
traditionally use survey engineers to measure the ground on
technology we work with various map scales and altitudes.
foot, but it is impossible to produce a sufficiently accurate
We start with a 1:500 scale, which is extremely accurate
image of the terrain using 20m measuring intervals. We can
and the best scale we can provide. There is also the 1:1,000
produce the same outcome, going down to the smallest
scale, which is accurate up to around 12cm, and 1:2,000
detail. It does not matter if it is complicated terrain with
which is accurate up to around 20cm, all depending on the
big cuts or vegetation, we can still produce exact volume
customer’s needs.
NATIONAL TALENTS FOR NATIONAL PROJECTS Though the ground may be rich in natural resources, those
resources of our customers, as well as our own. Mining
resources are not distributed consistently in the earth’s crust,
companies hold huge parcels of land that they do not
making their discovery a true challenge for any company
really need to fully explore; what they need is a partner to
looking to exploit them. “We have the know-how to help any
show them where it is best to focus their efforts,” he says.
company from the early stages of prospecting and finding a parcel of land that has minerals of economic worth. The
As mining projects grow they require more services to
perfect project for us is one that starts from zero. We can
support the administration and execution of their operations.
proceed with in-depth exploration, to define the ore bodies
The information provided by geological studies is not only
that are deposited there,” says Juan García Dobarganes,
valuable at the initial stages of mining operations, but also in
Consultant at Geotecx, a geoscience consultancy based
each of the different engineering scenarios during the stages
in Guanajuato. The company offers support to mining
of exploitation and remediation. “We offer the opportunity to
operators, offering services such as topography, aerospace
transform our clients’ companies and we can also help them
analysis using GIS software, environmental analysis, and
to maximize their profits, thanks to the cost advantages
other types of specialized engineering services such as
we offer in comparison with Canadian companies,” García
searching for ground water and active faulting.
Dobarganes adds.
“The potential that the historic mining districts hold is enormous, and they should not be left behind” Juan García Dobarganes, Consultant at Geotecx
Many of Mexico’s obvious mineralized outcrops have already
The
been found and exploited in the past, leaving behind only
by Geotecx are invariably carried out using geospatial
deposits that are not evident to the common human eye.
information systems (GIS) called TNTmips Pro®, which
This has required mining companies to keep looking for
enables mining companies to incorporate all of the
more advanced techniques and technologies to find such
information recovered from geological studies into their own
deposits. As scientific knowledge and technologies progress,
platforms. “There are a lot of GIS systems available today,
mineral deposits that in the past were once overlooked
some of which might be more technologically advanced,
or disregarded can now be economically profitable and
but very few of which really understand the true needs
therefore transformed into mines. “The potential that the
of a geological researcher in the way that TNTmips Pro®
historic mining districts hold is enormous, and they should
does,” García Dobarganes asserts. By integrating geospatial
not be left behind. Thanks to the knowledge we have
technology Geotecx can provide complete and integrated
obtained about the ore deposits and geology of Mexico, it is
solutions that may be required by any client; it can generate
possible to explore, with greater success, territories that we
in the field or digitally all of the data and information
would never have previously imagined to contain mineral
that the company might require, such as environmental,
deposits” García Dobarganes comments.
geochemical, sampling, exploration, geophysics, drill holes,
projects,
studies
and
developments
undertaken
agriculture, inventories, and surveying. In order to find mineral ore deposits near ancient mining districts, or anywhere else in Mexico, it is important to have
Geotecx is listed in the Registry of Environmental Service
vast experience in the geoscience arena, and to be familiar
Providers, before the Guanajuato State Ecology Institute,
with the lithology that characterizes Mexico’s main mining
with specializations in environmental impact evaluation,
states. Geotecx, throughout its 20 years of experience, has
ecological management studies, integral management of
adapted its geological understanding and technologies
urban solid residues, and feasibility studies for disposal
to offer mining companies a set of services with the
(SDF) and landfills. “Protecting the environment is the
potential to boost their exploration success. “At Geotecx
focus with which the mining industry is operating today.
we believe that by combining scientific knowledge with
Minimizing their impact in every process, from exploration
advanced technology we are able to innovate how we plan
to the closing of mines, is another area in which Geotecx is
and execute our projects; this allows us to optimize the
prepared to support its clients,” García Dobarganes adds.
77
| VIEW FROM THE TOP
EXPLORATION STRATEGIES FOR A CHALLENGING MARKET CRAIG GIBSON Technical Director at ProDeMin Q: What is the role that ProDeMin’s services have played
José mine is in production close to where we are exploring
in the mining industry since the company was founded in
and they have had a lot of problems with the community,
2009?
but we can go in and say that we are separate from them
A: Companies come to us for our expertise in running
and are doing things differently.
exploration projects, this is our biggest asset. The company is made up of about 20 geologists, most of whom come
Q: What is your approach to determining whether a viable
from San Luis Potosi, Guerrero, Chihuahua and Sonora.
mining project can be developed?
The best way to convince clients that they need to
A: You have to look at the surface characteristics, and all
invest in our services is by showing them results. These
of the data that is available. If you are lucky the land will
companies are usually ready to invest in improving their
have had previous work done on it, so you can access and
work at the exploration stage because they understand
review all of the data that is available relatively quickly to
that it is an essential part of their operations, and therefore
better understand the composition of the land. We tend to
a necessary expenditure. They have to know what they
use older exploration methods, and we still do things on
have if they expect to sell, enter into a joint venture, as
paper. We will probably make an investment in computers
well as decide which of these options is preferable.We
with specialized equipment for data collection in the field
offer services across all areas of geological services,
later this year in order to keep up with the competition.
including infrastructure, logistics, administrative services,
Everybody wants the latest methods, but walking on the
land work, camp management, and environmental work.
ground, collecting data and understanding it, is still the
ProDeMin usually withdraws when the property moves
most important thing. Technology by itself is not what
into the development phase. If the client wants to sell the
is going to find an ore deposit - you need experienced
property, we can also act as a turnkey service provider in
personnel on the ground. Once you have found an ore
that process. In that situation, we can stay on and work for
deposit, or are close to it, that is when to start using
the new owners as long as they want.
technology to find more in the same area. Walking the ground and taking samples is still the most reliable
Q: What are the most promising states in Mexico for
technique for finding deposits.
exploration at the moment? A: Guerrero is one of the best new developing districts
Ideally we start working on a big plot and narrow it down
in Mexico; it has world class deposits and is becoming a
to the best areas. You might drop an area which another
world-class location for mining. Unfortunately, the state is
company later makes a discovery on, but a company has
also a hot bed for some of the country’s security problems.
to make those tough decisions in order to be successful.
It has not really affected us, but one of our neighbors there
You do not want to go broke trying to keep everything
had to shut down a project for two months, though it is
going, when focusing on one part of the land could make
back up and running now.
the company. You need to explain that to clients, and this is where our technical expertise comes in; we tell our clients
Q: What are your experiences in Oaxaca, where there are
when they need to drop something. Dropping land once
fewer mining operations, partly because of problems with
you have staked it is one of the hardest things to do –
land access?
people can feel like they are married to their properties
A: In Oaxaca we have not seen much anti-mining sentiment
sometimes, but there comes a moment when you have to
as such, but negotiating land access is more difficult there
focus on the best areas.
because of the importance that the land holds for indigenous
78
people. In our experience, people have preferred to turn
Q: What is your advice to junior companies, in terms of
down money in order to maintain control over their land.
employing an exploration strategy that allows them to
Negotiation is more sensitive in those situations. The San
survive difficult times?
A: Exploration is the base of everything going forward,
A: We are in a strange situation because metal prices are
and companies have to keep drilling because they will
still relatively high, but there is an adversity to risk-based
not find anything without doing so. We keep our clients’
financing at the moment. There is little money available for
costs down by helping them to drill the best holes possible.
financing juniors, which is mostly a problem of perception.
Our expertise lies in setting up a good drilling program in
The same thing happened in 2008, when many juniors
advance to test the geological concept. It is nerve-wracking
disappeared. This time it will be worse, because it seems
going to a property for the first time and setting up new
to be a larger trend and it is said that as many as 50% of
drill holes because you never know what you are going
juniors will go under if things do not change relatively
to hit, but usually we hit what we are looking for. I do not
quickly. It is actually a good time for companies that have
know how many service companies have had the autonomy
cash flow from operating mines, or do not have to raise
that we have had on some projects; this only comes based
money in the financial markets for other reasons. As a result
on confidence gained through mutual respect. We were
of the market’s recent behavior, there will be a lot more
successful in finding a good deposit for our client Newstrike
consolidation. Many early-stage projects will be acquired
Capital, and that is a good feeling for us.
by other companies, probably at fairly good prices. We are looking for and evaluating projects for clients that may
Q: What are the characteristics of the Mexican mining
want to acquire projects or companies that are struggling
industry that will allow it to survive the challenges it is
to find financing. The bigger companies will increasingly
currently facing?
get involved in currently devalued projects.
REFINING EXPLORATION PROGRAMS TO IMPROVE EFFECTIVENESS Now more than ever, choosing the right exploration and
Garibaldi Resources, with Gibson providing the technical
drilling strategy is vital for juniors that are trying to survive
expertise that informs its exploration strategy. Garibaldi
the financial downturn. Being focused and efficient is vital,
has four projects in Mexico - one in Chihuahua, which is
given the significant cost involved in drilling. “The current
currently dormant, two drillable deposits in Sonora, and
cost of drilling is around US$120 a meter, and once you
another project in Sinaloa. “Garibaldi Resources has some
get into difficult conditions it can be as much as US$250.
good properties, and we want to find a good area to mine
That is just for the drill, but there is also the cost of the
on those. We may want to go on and sell properties further
geologist, as well as analyzing the samples. For a 500
down the line, or enter into a joint venture. It depends on
meter hole, that gets extremely expensive,” explains Craig
the scale of what will be discovered,” says Gibson.
Gibson, a Director of Garibaldi Resources, a Canadian junior company. This impact is even more exaggerated when
As a part of its exploration projects Garibaldi Resources has
the concept is applied to companies that have multiple
conducted a number of imaging flights in the north of Mexico,
drill targets on multiple properties. Reducing a project
using hyperspectral remote sensing equipment. “It is similar
down to carefully selected targets will therefore improve
to geophysics, magnetometry and electrical methods, in that
the company’s chances of long-term survival. “Garibaldi
one is able to cover large areas of ground rapidly. This fixed-
Resources has a good land position on what was originally
wing based technology is similar to satellite methods but
a very large plot, which for the first five or six years was
with much higher resolution and more channels to capture
costing the company a lot of money. ProDeMin came in
more data at the same time,” explains Gibson. The purpose
and reviewed the land, making the recommendation to
of the flights was to inform and advance the company’s own
reduce it down to a manageable size, and focus on the best
projects, but when the 2008 crisis hit Garibaldi Resources
areas,” says Gibson. “Given the limited access to financing,
sold some of the data to other mining companies, in order to
Garibaldi Resources needs to pick the best projects, which
help cover the cost of the survey. “It made sense because we
they are doing now.”
had done the survey already, and we are still able to use the data now; it did not cost anything to provide it to others that
Garibaldi Resources has projects in both Mexico and
had land in adjoining areas, and it kept the company afloat
Canada. For two years, ProDeMin has been consulting
during a difficult time,” concludes Gibson.
79
| VIEW FROM THE TOP
BEST PRACTICES FOR PREFEASIBILITY AND FEASIBILITY STUDIES BALTAZAR SOLANO RICO Director General of Terra Quaestum & Consultant at Behre Dolbear Q: What role do companies such as Terra Quaestum, and
of different sources that may not be acceptable according
the feasibility and prefeasibility reports that they create,
to NI-43101 rules. One common problem is that most
play in the mining industry?
mining companies in Mexico have their own laboratories,
A: If a junior company goes to a bank to get financing
but in order to get a project approved the company has to
for a project the bank will require either a prefeasibility
be using registered laboratories that are commonly based
or feasibility study, or the signature of a recognized
in Canada or the US. Most mining companies will do the
consulting group which tells them that the project is sound
assaying in their own labs, but send a certain proportion
and that the mining company will be able to pay off the
to a separate certified and independent lab, which often
debt. Sometimes financial institutions call directly on our
shows their own analyses to be just as reliable as any.
consultancy services, but more often the mining company
Some of the larger companies will have assay certification
asks us to review its own projects before it goes to the
at several of their labs at different mining units and
financial institutions. Our reviews involve going to the site,
metallurgical plants. A lot of companies in Mexico now
checking the geology and making sure that the geological
have systems in place to follow the NI-43101 rules, making
model is reasonable. We review the reserve estimates and
consistency and reliability more common.
the mine design, we look at the geotechnical site report and the hydrogeology, and we conduct a financial analysis
Over the past 20 years, we have seen a constant increase in
of the whole project. Once all of this data has been audited
the use of dedicated programs for ore reserve calculations,
and validated, the following step is to review or develop a
mine planning and operations. In terms of exploration,
block model from which the reserves are calculated, if one
whether you spot a place through satellite imaging
does not already exist.
technology or through a property offer, there always needs to be someone on the ground who goes to check it out
Q: What are the criteria that potential financiers are
in person. In many cases it is the experienced geologist
looking for in a good feasibility or prefeasibility report?
who makes the site visit in order to ascertain whether the
A: In the end, the report has to show the profitability
property merits spending more money or not. There will
of the project, and reassure investors that the financial
always be the need to have someone doing that.
goals will be met and their debts paid back. They want to be reassured that their investment in the mine is not
Once you have gone through all of the exploration stages,
only reasonable but that the company will not exceed its
the final product will be the development of a resource
projected budget by more than 5-10%. That is where a
block model, which occasionally does not fit the geological
lot of properties fail – you commonly read in the papers
model developed. There has been a tendency during this
about projects that overspent by 50%. That is why a good
20 year period to do a lot more through the computer
feasibility study is essential to minimize the financial risk.
than through fieldwork, and while computers can help to create models, these will not necessarily be in line with the
Q: What are the main challenges that you and your clients
geological reality of the deposit. There is a need for close
face in the process of preparing feasibility or prefeasibility
communication between the geologist doing work in the
reports?
field and the person that is behind the computer doing
A: In some cases the company has done everything
the modeling. Both are essential, but without establishing
perfectly, but there are other cases where the clients put
good contact between the two there is a chance that the
together insufficient information, taking it from a number
eventual model will not be appropriate.
Behre Dolbear Group Inc. is one of the oldest continuously operating mineral industry advisory firms in the world. Since 1911 the firm has provided services to commercial and financial institutions, governments, public agencies, legal firms and other parties with interest in the minerals industry.
80
REFINING PROPERTIES TO GENERATE VALUE Reyna was originally founded in 2001 as a 100% Mexican
and easier to improve, and provides the opportunity to
company with a purely Mexican staff base. “At the beginning
add greater value to the company. You can change things
we were a service company providing consultancy on
around to create the optimum conditions for the mine, but
exploration, and how to acquire a concession and sell a
you need to have a good concept,” adds Berlanga Balderas.
property on after reaching production,” says José Antonio Berlanga Balderas, Director General and CEO of Reyna
Reyna’s first property purchase took place during a
Mining. “We soon learned that the main thing that people
downwards cycle in the industry, when big mining
were coming to Mexico for were assets, so we changed
companies such as Peñoles and Grupo Mexico were closing
our strategy and started looking for assets for our clients.”
down a number of their smaller mines; it was a joint venture
“With a very small investment we really optimized the operations on the La Negra mine, and within a short period of time, in 2006, production started up again at a rate of 1,100 tonnes a day” José Antonio Berlanga Balderas, Director General of Reyna Mining
Initially, the company had focused on consulting mostly
on a small Peñoles mine that had been closed: La Negra,
foreign clients in the areas of geology, exploration and
in Queretaro. “That was an interesting project because
production, especially in resource estimation, mine design,
the mine had been closed for a long time. Reyna was the
processing methods and mill design. Given the experience
driving force behind making an agreement with the local
and expertise that Reyna has in these areas, and the
community, solving environmental problems, and using
demand it was seeing amongst its clients for properties
our expertise to regenerate the equipment and the mine
that showed potential, not extending its business in this
itself. With a very small investment we really optimized the
way would have been a missed opportunity. “Reyna
operations on the La Negra mine, and within a short period
has mostly concentrated on finding medium-sized and
of time, in 2006, production started up again at a rate of
small properties that are easier to explore and put into
1,100 t/d,” says Berlanga Balderas. Reyna then went on to
operation,” explains Berlanga Balderas. The company’s
operate the mine until 2009, when it was sold to Aurcana
objective has been to take these smaller projects, turn
Corp., which still operates the mine today.
them into valuable properties, and sell them on. The focus on smaller properties has in part been the result of the
Because of the current aversion to risk in the market, most
proliferation in the industry of bigger mining companies
of Reyna’s clients are looking for more advanced exploration
that want world class projects. The smaller projects still
projects with known resources. Once the project has been
hold great potential, argues Berlanga Balderas, but there
acquired, Berlanga Balderas and his team tend to stay
is less competition in that part of the industry. “The bigger
on in a consulting role, particularly if the client is foreign.
mines in Mexico perform very well in terms of design, cost,
Reyna usually encourages its foreign clients to employ
and safety. Mexican mines are at the top level internationally
local staff, not just because of the benefits to the local and
in this way – the big companies set the standard for mining
Mexican economy, but also because of the significant and
in Mexico,” says Berlanga Balderas. “But medium or small
unnecessary cost incurred in bringing staff from abroad.
miners do have some deficiencies in their operations, in
This contribution to the country’s economy and human
terms of safety and recovery rates. These mines do not
capital will be key if the industry is to keep receiving support
use standard systems for resource information, resource
from the government, according to Berlanga Balderas. “I am
modeling, planning operations, mine design, equipment
optimistic about the future of the mining industry in Mexico
and processing.”
because I am sure that the government and Congress will understand more about the mining industry: that it goes
For these reasons, the smaller and medium-sized properties
through cycles; that it is a great generator of jobs and
provide Reyna real opportunities to use its expertise to add
infrastructure in isolated areas; and that the mining industry
genuine value. “When you are looking to buy an operation
can be the main generator of foreign investment in Mexico
that is efficient, you cannot do much to improve it. But a
and one of the driving forces for the development of the
small or medium-sized project with a bad concept is cheaper
country,” he says.
81
DELIVERING QUALITY AND SPEED IN MINERAL ANALYSIS Outsourcing geochemical analysis services to laboratories
significantly when Inspectorate’s parent company Bureau
is common practice in the mining industry, on the basis that
Veritas (BV) acquired AcmeLabs in 2012. “That opened
the expertise such laboratories provide allows the task to be
up great opportunities for the group, in terms of services
completed more accurately and efficiently. The promptness
in Mexico. AcmeLabs’s expertise lies in inductively coupled
with which geochemical analysis can be conducted on a
plasma mass spectrometry (ICP-MS) analysis that goes
company’s samples is vital – the sooner results are received,
down to ultra-lower detection limits, down to one part per
the sooner key decisions can be made and a project can
billion (ppb). AcmeLabs therefore brings to the group the
progress. The laboratories that provide this service must
possibility of providing a broader range of services,” says
balance time pressures with their commitment to quality.
Barragán. “We are excited to roll out AcmeLabs’s ultra-trace
“We have very strict quality assurance and quality control
packages across the group - this technology is allowing
standards, which we apply from the samples preparation
us to go to lower detection limits. Going to 1ppb was not
stage to the analysis stage. Our people are very well trained,
possible 10 years ago, but now the industry is moving
and we ensure that our samples are received and treated
towards parts per trillion levels. Several technologies are
with the strictest of controls,” says Marco Barragán, Mexico
important, but the ICP-MS technique is receiving more
Country Manager of Inspectorate’s Minerals department.
development attention. AcmeLabs’s research department
“There is no cross contamination. We have separate areas
led by John Gravel is constantly investigating and investing
for crushing, establishing these areas a distance away from
in new and improved techniques, which will continue to give
pulverization areas, and we have strict controls over the
the group a competitive advantage,” says Barragán.
setup of dust extraction systems.” The partnership has also improved the general reach of both Inspectorate was founded more than 125 years ago, and
companies throughout Mexico, as well as internationally.
has been working in the Mexican market since 1998. “There
Between them, Inspectorate and AcmeLabs offer their
was a big need in this huge market, and Inspectorate was
services through five preparation laboratories based
one of the first to seize the opportunity, which is one
strategically in the country’s biggest mining states: two in
of the reasons why we have been so successful,” says
Sonora and one in Chihuahua, Durango and Guadalajara.
Barragán. As an international company, Inspectorate
Their customers can submit samples in all five laboratories
maintains that consistency across of all of its laboratories
and select which analytical laboratory they would like to
worldwide is of paramount importance. “Our final results
be in charge of the analysis. Inspectorate’s commitment
are validated by a quality control department in our geo-
to transparency is also demonstrated in the company’s
analytical laboratories. In the case of any discrepancy the
‘Laboratory Information Management System’ (LIMS),
process is stopped and samples are re-checked. We also
which provides information on the analysis process from
routinely participate in third-party blind studies, called
start to finish. The information can be checked online by
Round-Robins. This allows our clients to see the accuracy
customers at all times through a secure online platform.
of the laboratory before they decide to work with us. We
The system allows them to see the history of any one job,
participate in this program all year round,” says Barragán.
and they can contact the client service to discuss the
Returning to the subject of speed, Barragán highlights
results if they so wish. By the end of 2013 Inspectorate’s
“We have a strong commitment to delivering results on time, and have very strict quality assurance and quality control standards” Marco Barragán, Mexico Country Manager of Inspectorate’s Minerals department
82
how important this is as a priority for the company. “We
LIMS will be integrated with AcmeLabs’s, which will bring
make a serious commitment to delivering results on time.
further benefits for customers of both companies. “This will
The number of samples does not matter - we have the
mean that we offer one national service, preparing samples
capacity to handle high volumes of samples in all of our
under the same standards and procedures, all under ISO,
laboratories in Mexico,” he says. The company’s ability to
and with the data saved under one single system,” explains
respond quickly to its customers’ requirements improved
Barragán.
| VIEW FROM THE TOP
THE ECONOMICS OF MINING ENTREPRENEURSHIP JESĂšS HERRERA ORTEGA Founder of Detector Exploraciones and Geoprocesos Q: What opportunities exist in Mexico for the discovery of
now occupying important positions within the Mexican
more superclass mineral deposits?
Geological Survey. It is nice to watch them develop
A: Mexico has a lot of untapped potential. Every year we hear
professionally with us and go on to succeed in their
about new mineral deposits that are among the largest in
careers. Something that I really treasure about my work is
the world, and companies like ours have contributed a lot to
that it reaches every single corner of the country. Our work
the discovery of these important ore deposits. Our territory
directly impacts growth in the communities wherever we
still presents a lot of opportunities; the only limits are human
operate. Sometimes we work in places with very precarious
capital capacity and investment budgets. Unfortunately,
conditions, but after a few years of the mineral deposit
when the sector reactivates we tend to lack the capacity to
being found these communities benefit from all types of
feed it. Mining companies, service providers, academia, and
services and an enhanced quality of life.
government have to work together to activate the potential of the Mexican mining industry. The mineral deposits are
Q: What is the most important lesson you have learned as
there, ready to be found, we just need to move adequately
a Mexican entrepreneur?
to capitalize on those opportunities.
A: Over the course of my career the most important thing I have learned is how to make good use of the
Q: What was the idea behind constituting two geological
companies’ funds. Over time I have seen a great number
consultancy companies, and what are the main services
of entrepreneurs fail because they did not manage their
that Detector Exploraciones and Geoprocesos provide?
resources well. A common error among Mexican SMEs
A: I decided to create two different business units in order
is that the owners think that the money the company
to win a greater share of the market and to separate the
generates belongs to them. I understood that the money
services we provide, and it has also helped to simplify the
my companies earn belongs to the organization and to its
administration. We provide our mining customers with
workers. One cannot receive money from the company
all of the information they need to fully understand the
and start spending it on trips and properties. Savings are
different features of the properties they want to explore.
fundamental to any developing company, and for any
When we conduct geological analysis and rock sampling
company looking to consolidate itself. Another common
we are able to predict where in the property the minerals
error, especially within the mining industry, is that a lot of
are more likely to be deposited. Having this information
company owners tend to employ their own relatives and
makes it easier to locate and explore mineralized areas.
friends. Being part of the family does not give you the
This type of analysis will save an enormous amount of time
right set of skills to make a company grow. I have seen
and money, because drilling is neither cheap nor quick.
a lot of companies fail as a result of this. The only way
After drilling we send our samples to laboratories so that
to be successful is to devote yourself to your duties, be
geochemical trials can be performed to determine if the
disciplined, and know how to save money.
projects are profitable or not. Our responsibility is to make sure that sampling is being carried out systematically and
The success of mining companies as well as our own
in the right locations, so that the information provided is
success will depend on how we allocate our resources. All
consistent and usable.
businesses are linked to developments in their country’s economy, as well as in global markets. For this reason, our
Q: What do you consider to have been your greatest
strategy will be to save resources in times of prosperity so
achievements in the running of your two companies?
that we can withstand the difficult moments. One of our
A: I am very proud that Detector Exploraciones and
ambitions is to create a more consolidated team that can
Geoprocesos together are currently employing over 140
continue to support our mining customers by helping them
people. What is also satisfying is seeing that many of
to find more economically viable mineral deposits that will
the young trainees that worked with us in the past are
be profitable in the long term.
83
| VIEW FROM THE TOP
A MODERN APPROACH TO DRILLING IN MEXICO LEFT: Víctor Díaz, Director General of Globexplore Drilling RIGHT: Marc Kieler, Director General of Globexplore Drilling
Q: In light of increasing international competition in the
margin. We could see the potential long term benefits of
drilling market in the country, what is the advantage of
the partnership so we called them up and offered to lower
being a Mexican drilling company operating in Mexico?
our contract price. The client was shocked - it had never
A: As a Mexican company we understand the culture and
had a contractor offer an unsolicited discount. It is this type
the way of working here very well. This allows us to take
of honesty and fairness that helped us earn our customers’
the best approach to training and motivating our team in
respect and build a lasting partnership. To us it says a lot that
ways that create the highest quality of work. Interaction with
every client we have ever worked for would recommend our
Mexico’s local communities is extremely important, since
service and hire us again.
exploration projects tend to be in remote locations. These communities often do not differentiate a drilling company’s
Q: What are the main reasons your clients work with
employees from a mining company’s, so any problems with
Globexplore, and what do they value most about the
our staff would not only risk our drilling contract but more
company?
importantly can risk our client’s reputation as well. All of
A: Our clients appreciate that we do not create profit centers
our employees understand that our actions can actually risk
for every challenge that arises. Drilling deep into the earth
the potential of a future mine. We run a 100% alcohol and
is an unpredictable venture and we take the responsibility
drug free operation, and we maintain this rule even during
of finding technical solutions that deliver the results our
off hours. This is not just for safety reasons but also for the
clients need, without taking advantage of them along the
responsible image it promotes to clients and communities.
way. Most of our clients have similar concerns and we make
To build a positive relationship with the local communities,
sure we meet or exceed their expectations in every possible
we take environmental cleanliness as seriously as being
way. Globexplore is also small enough for the owners to be
courteous at the local gas station, motel or machine shop.
intimately involved in every project, and not in a boardroom
Small details like driving slowly to keep dust to a minimum,
in another country. At the same time, we are large enough to
closing ranchers’ gates or offering to repair a rancher’s
have a first class company supporting our field operations
tractor all help to build a good relationship with the local
at every level.
community. In one case a client asked us to stop the drill while they waited for assay results, so our crews drilled a
Q: What role do technology and innovation play in
water well for the local town. We also try to hire locals
improving efficiency on drilling projects?
whenever possible. This gives us a competitive edge over
A: There is so much more to achieving the desired results
foreign companies that do not always understand how best
than just a new drill and an expert driller. At Globexplore
to work with local people.
we have developed the High Tech infrastructure that is required to properly support that new drill and expert
84
Q: To what would you attribute the company’s success?
driller. The brains behind our new headquarters in
A: We believe the fact that we are still operating at 85%
Hermosillo is our Globexplore Management System (GMS).
during this downturn validates our positive reputation.
Using smartphones, tablets or laptops this elaborate
We have proven with actions, not words, that Globexplore
system captures and shares real-time data on every aspect
offers genuine value that cannot easily be found elsewhere.
of our operations, providing data that answers questions
We have had some contracts where we lost a lot of money
such as: which driller is the most efficient? Are we on
due to unforeseen challenges, but we never walked away
schedule to meet our client’s target completion date? Are
from the commitment we made to that client. We finished
all employees up to date with their safety training or drug
the job as promised and earned that client’s trust. In another
testing? It alerts us when a driver exceeds the speed limit
example, working with one of Mexico’s largest producers
and it generates accurate daily drill logs for the client to
we improved our productivity and cut our operating costs
review. The system helps us run our operations with much
to a point where we were making a higher than normal
greater efficiency by reducing the chance of human error,
and allows us to operate safely and at a more competitive
with low staff turnover. We have developed a large family
cost.
that shares common goals, and our staff are proud to wear our logo on their chest.
Q: What are your technology and performance strategies for selecting rigs, and why does your fleet look the way it
Q: How will you balance Globexplore’s growth ambitions,
does today?
whilst maintaining the quality of your services?
A: We are proud to run the most High Tech and modern fleet
A: We were very aggressive when we first started and grew
available. All of our rigs were built within the last five years,
the company by 100% every year from 2006 to 2012. We
which ensures the latest technology, performance, reliability
could sustain that level of growth then because we were
and safety standards. We purge our fleet as it ages and keep
smaller and the increments were easier to deal with, but
no equipment past six years. We have standardized our
given our current size it is not intelligent to maintain that
fleet, which helps us maintain the rigs and keep a sufficient
pace. In mid-2012 we halted new rig purchases and focused
stock of spare parts. We can move drillers from project to
on upgrading our infrastructure. We built a state of the art
project without the delays and risks associated with a new
headquarters and mechanics shop and polished up our
learning curve. Should there be a time consuming repair we
training programs. We also improved our supply chain
can swap out the entire rig if necessary. Most importantly
and preventative maintenance departments, and created
our drillers get the training and experience needed to
reliable procedures for the most important tasks. We now
maximize the capabilities of the rig.
have the foundations to grow and expand as soon as the market demands it. However, we know that being bigger is
Our diamond rig fleet was designed by drillers for drillers,
not always better and we have a simple rule that we will not
and offers top class power to advance through challenging
add a new rig or take on a new contract unless we are 100%
ground or reach targets as deep as 1,700m, whilst remaining
sure we can maintain our high level of customer service.
small enough to be transported by helicopter and fit in a drill pad as small as 4x8m. Our reverse circulation fleet also offers some of the smallest footprints in the industry, requiring a pad size of as small as 6x8m. This helps us access tighter, more remote areas and lowers the cost, time and environmental impact of constructing larger drill pads. With depths of up to 450m, production is often higher than on rigs twice their size. Engineered with automated rod loaders and breakout systems with remote control operations, we have eliminated the most common causes of injury. Our rigs can be mounted on a variety of options to suit different client needs, with truck, skid, buggy or tracks, and we offer both Diamond and Underground RC rigs. Q: Your staff play a key role in your success; what is your strategy to building and developing your team? A: The talent of drilling is acquired over time; hiring, training and retaining the best team we can is the biggest challenge we face and the part of our business that receives most attention. We have developed a culture that
Q: What should the company look like in five years’ time?
motivates our people to work as if they were the owners of
A: With a solid foundation in place we are now ready to
the company. We compensate our people by paying above
further expand our rig fleet. Our next purchase will be custom
industry averages, with a bonus program that incentivizes
designed Underground RC rigs that a client has requested.
our staff, based on a combination of safety performance,
We have opened a nonprofit charitable company called The
innovation, and high productivity. Employees are rewarded
Globexplore Foundation, which will be running some exciting
if they develop a new procedure that helps us save money
charitable programs. Everything we do drills towards the
or work more efficiently, or if a supervisor operates an
company’s vision statement, which is: ‘Globexplore will be
accident-free project. This strategy helps us to attract the
the most valued and respected drilling company, through
best people in the industry and maintain a consistent team,
industry-leading quality, performance and integrity.’
85
| EXPERT INSIGHT
“
Exploration activity has matured in Mexico, it is no longer a case of simply going to a historic high-grade mine, and looking for immediate extensions. The easy mines have been found. The challenge now is finding blind deposits. Exploration has evolved more into the conceptual and semi-conceptual stage where applying the right geological model to find new deposits is crucial.
“
Tawn Albinson, Managing Director of Minera Boleo
”
Mexico has been a mining country for centuries but its vast territory has still tremendous opportunities to find new ore deposits. Mexico for sure will keep its leadership in silver and will become one of the 5 main gold producers in the coming years. These potential needs
”
to be explored and then drilled, creating a tremendous opportunity for service providers to exploration companies.
Luis Silva, CEO of Ingetrol Group
| OVERVIEW OF DRILLING TECHNIQUES
86
ROTATORY AIR BLAST DRILLING
REVERSE CIRCULATION DRILLING
Rotatory Air Blast drilling (RAB) is the most common
Reverse Circulation drilling (RC) is similar to air core
drilling method used in the exploration industry. The
drilling in that the drill cuttings are returned to surface
tool itself, also known as a down-the-hole drill, uses
inside the rods. This type of drilling utilizes much
a pneumatic reciprocating piston-driven hammer to
larger rigs and machinery and depths of up to 500m
energetically drive a heavy drill bit into the rock. The
are routinely achieved. RC drilling ideally produces dry
machine recovers cuttings to the surface through
rock chips, as large air compressors dry the rock out
pumping compressed air down the center of the drill
ahead of the advancing drill bit. It is slower and costlier
system. The drill bit is hollow, made of solid steel and
but achieves better penetration than RAB or Air Core
has 20mm thick tungsten rods protruding from the steel
drilling. On the other hand, it is cheaper than diamond
matrix as buttons, which are the cutting face of the bit.
coring and therefore is preferred for most mineral
RAB drilling is used primarily for mineral exploration,
exploration work. Reverse circulation is achieved by
water bore drilling, and blast-hole drilling in mines. Large
blowing air down the rods. The differential pressure
diameter core drilling is recommended for bulk sampling
creates air lift of the water and cuttings up the inner
and where core samples are required. If it encounters
tube, which is inside each rod. It reaches the divertor at
water, RAB drilling at extreme depth may rapidly clog the
the top of the hole, and then moves through a sample
outside of the hole with debris precluding removal of drill
hose which is attached to the top of the cyclone. The
cuttings from the hole. However, this can be counteracted
drill cuttings travel around the inside of the cyclone
with the use of stabilizers, also known as reamers, which
until they fall through an opening at the bottom and
are large cylindrical pieces of steel attached to the drill
are collected in a sample bag. Although RC drilling is
string and made to perfectly fit the size of the hole
air-powered, water is also used to reduce dust, keep
being drilled. These have sets of rollers on the side that
the drill bit cool, and assist in pushing cutting back
constantly break down cuttings being pushed upwards.
upwards, as well as when collaring a new hole.
“
In exploration you have to begin with the end in mind in order to be successful.
”
Companies should systematically identify the size and production capabilities of their targets and then realistically design the mine according to the existing deposit.
“
Dunham Craig, President and CEO of Geologix Explorations
Mexico is a very geologically-diverse country with a large land base and a rich tradition in mining and exploration. We see many opportunities remaining in Mexico and we believe that the country is significantly underexplored.
“
Rob Duncan, VP Business Development at Evrim Resources
If you want worldwide investors to come, you have to first show them what you have to offer by exploring the geological wealth of your territory. Rafael Alexandri Rionda, former Director General of the Mexican Geological Survey (SGM)
” ”
DIAMOND CORE DRILLING
PERCUSSION DRILLING
Diamond Core drilling uses an annular diamond-
Direct push technology includes several types of drilling
impregnated drill bit attached to the end of hollow
rigs and drilling equipment that advance a drill string by
drill rods to cut a cylindrical core of solid rock. The
pushing or hammering without rotating the drill string.
diamonds used to make diamond core bits are a variety
While this does not meet the proper definition of drilling,
of sizes, fine to microfine industrial grade diamonds,
it does achieve the same result: a borehole. Direct Push
and the ratio of diamonds to metal used in the matrix
rigs include both Cone Penetration Testing (CPT) rigs
affects the performance of the bits cutting ability in
and direct push sampling rigs. These types of rigs are
different types of rock formations. The diamonds are
typically limited to drilling in unconsolidated soil materials
set within a matrix of varying hardness, from brass to
and very soft rock. CPT rigs advance specialized testing
high-grade steel. Matrix hardness, diamond size, and
equipment and soil samplers using large hydraulic rams.
dosing can vary according to the rock that must be
Most CPT rigs are heavily ballasted (20 tonnes is typical)
cut. The bits made with hard steel with a low diamond
as a counter force against the pushing force of the
count are ideal for softer highly fractured rock, while
hydraulic rams, which go up to 20kN. Alternatively small
others made of softer steels and high diamond ratio
and light CPT rigs and offshore CPT rigs will use anchors
are good for coring in hard solid rock. Holes within the
such as screwed-in ground anchors to create the reactive
bit allow water to be delivered to the cutting face. This
force. In ideal conditions, CPT rigs can achieve production
provides three essential functions: lubrication, cooling,
rates of up to 250–300m per day. A cylindrical steel cone
and removal of drill cuttings from the hole. Diamond
is pushed hydraulically into the soil to identify soil types
drilling is much slower than RC drilling due to the
and groundwater migration pathways. Through the use
hardness of the ground being drilled. Drilling 1,200 to
of electronic strain gauges that measure physical soil
1,800m is common, and at these depths the ground is
properties, the acquired data produces a continuous, real
mainly hard rock.
time stratigraphic record or sounding.
87
| TECHNOLOGY SPOTLIGHT
REVERSE CIRCULATION DRILLING Mining and exploration companies often prefer Reverse Circulation (RC) drilling to Diamond Core, due to the fact that RC drills provide approximately twice the sample size and speed rate at approximately half the cost of core drilling; in most cases RC also delivers 100% of the sample, whereas core drilling sometimes cannot. It is often essential for companies to receive the complete sample. For example, in the cases of coarse, nuggety gold, or very fine grain gold flakes that are loosely held along fractures and which can be washed away with drilling fluids or water, it is often difficult to make an accurate grade evaluation using Core Drilling. In these cases RC is the preferred drilling method, due to the larger sample size and complete sample recovery that it provides.
Because traditional RC drill rigs tend to require a large footprint of up to 20x20m, this often limits the options for mining and exploration companies as well as adding to the cost of expensive road and drill pad construction, along with creating additional issues with the government and property owners relating to the potential negative environmental impact.
Globexplore Drilling has worked with its rig builders in the US and Canada to design a series of RC rigs with footprints as small as 6x8m that solve these problems. This new series of drill rigs offers the same high power capacity as the more traditional truck-mounted rigs, yet they are roughly half their size, as well as being equipped with a host of modern technology features, such as automated rod loaders and remote control operations. Globexplore has two self-propelled Track- and Buggy-Mounted rigs, both of which can turn in a complete circle within their own footprint, allowing quick moves between holes. The rig tows a separate air compressor, which can be run up to 150m from the rig on a separate pad or at a different elevation, for example. The company also recommends running the compressor as a separate, replaceable component to the rig, because mechanical failure on that component is the most common cause of downtime. “If a compressor goes down we can swap it out and have the rig back up and drilling in a couple of hours,” says Armando Lucero, RC Operations Manager at Globexplore.
The small size of the rigs offers a powerful solution for companies looking to capture 100% of their sample from the surface or from underground applications in a safe, quick and economical way, while minimizing the environmental impact of RC drilling.
88
“Reverse
Circulation
drilling
can sometimes find deposits that Core Drilling can miss. With new technologies in size, speed, and safety, the appeal of RC is growing in our industry”
FINDING OPPORTUNITIES DURING THE EXPLORATION DOWNTURN At a time when exploration activities have significantly
targets or poor sample recovery can end up costing the
reduced in Mexico, companies are asking the same question:
client much more in the end,” he says. “Should the program
‘How can we make a more attractive value proposition to
go on longer as a result of low production or poor sample
clients and potential clients than our competitors?’ One
recovery, the client’s overheads will easily outweigh the
company that has continued to have the majority of its drills
initial savings. When there is so much at stake our clients
in operation while drills around the country have stopped
want quality and performance balanced with fair value, and
turning is Globexplore Drilling, based in Hermosillo. Fully
we deliver that,” he says. For this reason, the performance
aware of the need to remain competitive in today’s industry,
of the equipment and having experienced personnel are
Globexplore has focused on strengthening the key areas of
absolutely essential. “Primarily, our goals are to produce
its business in order to make the very best value proposition.
the most accurate samples as safely and quickly as we
A big part of this strategy comes down to customer service,
can, while maintaining our environmental and social
and working hard to exceed clients’ expectations at every
responsibility at an economically competitive value. We
opportunity. “We operate every aspect of our business
achieve each of these goals with the most modern fleet
with good old-fashioned customer service; we apply the
of drill rigs available, operated by the most professional
‘customer comes first’ attitude,” says Marc Kieler, Director
people in the industry,” says Kieler. “Exploration drilling
General of Globexplore Drilling. “Nothing can substitute for
can make or break a project and we take our responsibility
clear communication and planning ahead. We make sure
as an integral part of our clients’ success very seriously.
we meet with the client as much as possible to make sure
Results last forever.”
we clearly understand their goals, and we plan our services accordingly,” he adds. Kieler’s view is that each new client should be approached with the aim of creating a lifetime partnership; you have to help the client succeed even if that means losing money in the near term, but keeping your customer happy in the long-run will eventually reap rewards. “We believe the fact that we are still operating at 85% during this downturn validates our positive reputation. Our entire company operates with a deep understanding that the client is the priority to focus on every hour of every day. We have had some contracts where we lost money over a long period of time, but we never walked away from the commitment we made to that client. We finished the job as promised, and in doing so we earned a client for life, for as long as we continue to perform,” says Kieler. Part of gaining lifelong customers comes down to a drilling company’s willingness to keep working with its client to continually reduce
The final point Kieler makes relates to the importance of
expenditure while improving results. Keenly aware of this
community. This has to do not just with the company’s
fact, Globexplore offers a simplified invoicing system,
relationships with the local communities where they
rather than charging its clients extra for solutions to the
drill, but also with the mining community more generally.
challenges that commonly arise during drilling. This allows
Globexplore has become involved in several state and
the mining company to focus on the geology, rather than
national mining associations and has established strong
be keeping track of consumption.
relationships with all levels of the industry. “This is a huge industry by way of dollars, but a small industry by way of
In Kieler’s experience mining companies are usually aware
people involved, so this has been a great way for us to
that a cheaper initial cost can often come to represent a
network with many important decision makers within the
false economy in the long-run. “The experienced client
private and public sectors. In addition, we have sponsored
knows that the drilling company with the cheapest
several events, such as earth science courses at university
contract price per meter is not always the least expensive
level. These students are the next generation, and they will
option by the time the drilling is finished. Many factors
influence and run important parts of our industry; we want
such as mechanical downtime, low productivity, missing
to help and be a part of their future” says Kieler.
89
INCREASED RIG PRODUCTIVITY KEY TO ENERGOLD’S GROWTH As exploration activities
the versatility of its machinery, meaning that no significant
have increased in Mexico
changes are needed for different drilling processes.
over
Jesús Herrera, Country Manager of Energold Mexico
the
last
decade,
and many international
One of Energold’s main priorities is to create a skilled team
companies have seized
that has the training and experience to approach drilling
the resulting opportunities.
projects efficiently, though finding the right people for the
Energold
over
job has not always been easy. “The challenge is to find the
230 drilling rigs in 22
operates
perfectly trained people for the job. One cannot commit
countries worldwide, and
to a job without having good drillers, because this can
the
received
lead to lost time and money. Behind our drillers we have a
company
significant demand from
team of engineers that are waiting for the samples in order
junior Canadian companies, as well as big operators, for
to begin the process of analysis. We must have qualified
projects in Mexico. “At the end of 2005 we only had two rigs
drillers we can rely on, because otherwise it can affect the
in Mexico, one in the State of Mexico and another in Chiapas,”
whole production chain. This is why it is so crucial for us to
says Jesús Herrera, Country Manager of Energold Mexico.
have a capable team that is able to create value both for
These served as a platform from which to expand throughout
our company and for our clients,” explains Herrera. “For
the region, and the company is now well-established not just
this reason we have created a training center in Mexico,
in Mexico, but also in the Dominican Republic, Haiti, Peru,
where we send all of our workers for training.”
Chile, Argentina, and Nicaragua. Energold’s work in the Latin American region is complemented by its presence in Africa,
Energold’s approach to building its team in Mexico has
Asia, the Middle East, and North America.
clearly paid off, as the company now has 32 rigs in the
“We overcome the challenge posed
country and its operations here represent 30% of its total global operations. It has also developed strategies
by fluctuations in metal prices
to overcome other challenges associated with beginning
by increasing our productivity,
logistical, and administrative matters. “In order to be able
enabling us to reduce our prices” Jesús Herrera, Country Manager of Energold Mexico
operations in a new country, in areas such as transport, to operate we require gas or diesel powered generators to light up the camp during the night shift. Last year an engineer from the Tecnológico de Durango joined our ranks, helping us to design solar plants, which provide
The success of a drilling company such as Energold relies
us with a constant source of pollution-free energy for
on the stream of business coming from junior companies
these sorts of purposes,” says Herrera. “While working we
and mining companies carrying out exploration programs.
take environmental regulations very much into account,
“The advantage of the Mexican market compared to other
whether we are working with a junior, medium or large
markets in Latin America such as Haiti and the Dominican
company. It is not because our clients require us to do so,
Republic, is that Mexico offers more security and legal
but rather it is something that we impose on ourselves.”
certainty for investment,” says Herrera. The added value that
90
Energold has brought to the Mexican market has been the
Another key priority for Energold has been the improvement
technological advancement of its drilling equipment. “We
of its processes. The company is continuously measuring
do not need to construct roads or cut down trees, all we
the productivity of its rigs, with the aim of reducing
need is a 5x5 meter space in which to install our machinery
operational costs and thus the costs for its clients. “The
and begin drilling,” he adds. This is a particular advantage
mining industry changes depending on the price of
given that many other drilling technologies use larger
minerals. We overcome the challenge posed by fluctuations
machinery, requiring a larger space in which to operate and
in metal prices by increasing our productivity, enabling us
thus having a bigger impact on the environment. Given its
to reduce our prices,” says Herrera. “By earning the trust of
size, our machinery can also be transported via even the
companies that have projects at the production stage and
most challenging roads and terrain. “Energold has strived
working together with them we can guarantee a constant
to improve its technology and be innovative. This is why
flow of work for ourselves. Despite suffering a blow as a
we have a specialized facility in Vancouver that works
result of global metal prices these companies never cancel
exclusively on improving our equipment,” explains Herrera.
their exploration programs; they may be exploring less but
As a result of the research it has done Energold has increased
they never stop completely,” he concludes.
| VIEW FROM THE TOP
APPLYING TECHNOLOGY FOR BETTER QUALITY DRILLING ÓSCAR ZAMARRÓN GARZA Director General of OZMAQ
Q: What were the market opportunities identified by
Brokk offers ongoing online training to its distributors and
OZMAQ’s founders that led to the company’s creation?
clients, sharing with them the best international practices.
A: After five years of positive results as Sales Manager for
Thanks to this and to several on-site training programs
Primsa Mexico - manufacturer of the Clark Michigan wheel
given to the operators, many technical issues can be solved
loaders used in the construction and mining industries -
remotely. At one point, a mine in Tamaulipas requested our
Primsa gave me the opportunity to independently manage
technical team to visit because the equipment was losing
its brand distribution for the states of San Luis Potosi,
power. Thanks to the international best practices available
Zacatecas, Queretaro, Aguascalientes, and Guanajuato.
in Brokk’s online database, OZMAQ was able to identify
We decided to start OZMAQ in 1982, equipped with just
the three main causes for the malfunction and found a
one vehicle as capital, a line of credit with Primsa, and
solution over the phone. Brokk’s equipment is equipped
most importantly with extensive commercial knowledge
with 100% digital technology. Its electronics are reliable,
about how the industry works. We started our operations
distortion free, and have solid circuits in which there will
from San Luis Potosi, where we had the opportunity
be no particles, dust or humidity. In the case of an accident
to work with Minera Autlán, which asked us to supply
the electronic board can be replaced easily. In order to
wheel loaders with bigger dimensions. After successfully
perform maintenance analyses all components are scanned
completing the first order, Minera Autlán then entrusted
by trained OZMAQ operators. The operator is responsible
us with its subsequent orders. OZMAQ then took on other
for the analysis and for reporting equipment failure to
projects within the cement industry, starting with Cementos
the report center where we work out the solutions, or
Anáhuac and Cementos Mexicanos, and then moving on to
replacements if necessary.
the Government Trust for Mining Development (FIFOMI), to whom we supplied several parts. In an effort to enter
Two key arguments for choosing OZMAQ over conventional,
the American market Volvo purchased the Clark Michigan
perhaps cheaper equipment, are productivity and safety.
line of products, which made it hard for Primsa to stay
Brokk’s technological strength lies in its high power
competitive, ending in an offer to distribute the Clark forklift
capacity and compact dimensions. These features allow it
trucks in Mexico, and distancing us from the mining industry
to provide high productivity in difficult to access areas. For
for a few years. OZMAQ’s real mining industry comeback
example, the B260 weighs 3 tonnes and has the hydraulic
came in 2011 when my son Oscar, Commercial Director for
power of a 12 tonne excavator that would never be able
OZMAQ, started finding strategic partners for the company.
to access the confined spaces that can be reached using Brokk. In addition, most of Brokk’s models are electrical
Q: OZMAQ is distributing state of the art Swedish robotic
and are connected to a diesel generator with regulated
demolition technology. How is this technology adding
revolutions, which has low emissions in an outside area,
value to the mining industry in Mexico?
resulting in a cleaner and better ventilated working
A: With the Brokk demolition line clients will be quick
environment, releasing less CO2.
to start reaping safety and financial benefits. Instead of spending time cleaning materials after blasting, the
Q: How will OZMAQ continue to grow and take advantage
operator can be sitting in a safe place while the Brokk
of opportunities in the Mexican mining industry?
equipment is in the front line, in the most dangerous places,
A: As we continue to look for equipment that complements
working with accessories such as drum cutters, jumbos,
our current portfolio and offers the best performance and
and hammers. Drawing on enormous hydraulic power, it
productivity levels, Brokk represents OZMAQ’s inspiration
can be controlled remotely to remove any materials. The
for growth. Our strength lies in our ability to understand,
robot does everything: it carves, drills, hammers, handles,
maintain and apply technologically advanced equipment,
and manipulates materials.
and preserve our clients’ profits.
91
DESIGNING DRILLS TO MINIMIZE COST AND OPTIMIZE SAFETY As technology advances, success for a drilling company
Tecmin Servicios’ personnel play an extremely important role
becomes more and more related to being able to do more
in delivering in all of these areas, from safety to productivity.
for the customer with less. “One of the biggest demands in
To improve performance, operators and supervisors take a
today’s market is to obtain bigger samples and drill deeper
two month training course with content delivered through a
holes with more compact technologies,” says Marcos Loya
mixture of online and in-house sessions. “The strategy today
Farfán, Operations Director of Tecmin Servicios. “New,
is people. Through this course we train the best project
more challenging pieces of land are being explored, and
supervisors that are capable of managing the whole job,
companies want to be able to move their equipment more
from the technological side to the human resources side,”
easily and more safely. Our main focus is on productivity: to
says Loya Farfán. Having well trained staff is essential to
do more with less. Tecmin Servicios develops HQ dimension
delivering successful projects, both on an operational and
drills that allow the drilling of deeper holes, while always
a financial level. “Drilling is very complicated and expensive.
continuing to develop reliable, simple to use equipment
Operators must be well trained in order to recover the
“We ultimately want to export the drills that we manufacture all over the world, and it is a very exciting moment for our company. We are ready to seize other markets” Marcos Loya Farfán, Operations Director of Tecmin Servicios
at the best price.” With these objectives in mind Tecmin
minerals, since 50% of the operation comes down to the
Servicios both manufactures its own drills and conducts
handling of the equipment, or the experience of the staff,”
drilling for its customers. “Our engineering team is now
he adds. For Loya Farfán, the other 50% comes down to
working to make the first design for an underground drill
the way in which the assets are managed, and that is where
smaller whilst improving its performance. We want to
the in-house training program is so important. “This is
respond to our clients’ needs with innovative technology
something new, and we want to move it forwards, perhaps
at a competitive price,” explains Loya Farfán. Because the
by contacting local universities to propose internships, or
company constructs its own drills it is not only able to
collaborating with their technological and research services
develop the machines according to general market demand,
in order to figure out the best way, for example, to comply
but also adapt them according to the requirements on each
with any possible stricter environmental regulations.”
drilling project. “We want to provide simplicity in both the use and maintenance of the machinery, so the technology
The investment that Tecmin Servicios is making in its staff
is simple. Therefore, spare parts are available anywhere in
is also a positive step for an industry that has seen heavy
Mexico to avoid having the drills on standby,” says Loya
foreign influence. “All of our staff is Mexican; we brought
Farfán. Avoiding the breakdown of the machines is one of the
in Canadians previously, but not anymore. We are bringing
company’s key objectives, because of the cost implications
in people from Chile and Peru to introduce new practices
for its clients. Tecmin has specific maintenance procedures
if needed, but we intend to continue creating an expert
and a series of checklists that help to identify which parts of
technology base here in Mexico,” says Loya Farfán. He also
the machine are malfunctioning, and subsequently decide
believes that the Mexican workforce has a lot of knowledge
which spare part is required.
and experience that can be shared with its counterparts elsewhere in the Americas. “South American drillers have
92
Tecmin Servicios takes the safety performance of both its
been sharing lots of drilling expertise, but they have actually
machinery and its staff extremely seriously. “In 15 years
also learned a lot from our Mexican drillers, given that the
Tecmin Servicios has not had any fatalities,” says Loya
environmental requirements in Mexico are quite stringent,”
Farfán. An important part of the company’s increasing
he says. Tecmin Servicios has the ambition to expand into
emphasis on safety comes in the form of its “Safe Meters”
Latin America, and to increase the distribution of its own
campaign, through which the company works with its
equipment, both in Mexico and further afield. “We ultimately
clients to improve safety standards, raise awareness about
want to export the drills that we manufacture all over the
safety issues, and eliminate potential accidents during the
world, and it is a very exciting moment for our company. We
diamond drilling process.
are ready to seize other markets,” says Loya Farfán.
BUILDING VERSATILE RIGS TO EXPAND HORIZONS Drilling companies have little freedom to choose the
as we drilled. We are the only company that went deeper
location of their projects; the geologist makes a prediction
than the 80 meters and kept going,” says Carranza.
of where minerals may be found, and based on that selects
Carranza attributes her team’s success on this project to
the locations for drilling. Those drilling targets may be on
the company’s approach to communication: “The key is
flat land next to a highway, or in the middle of nowhere,
for the field to be in contact with the office. The drillers
accessible only by air. Drilling companies therefore need
sometimes get frustrated, naturally, but if they run out of
to have a flexible approach to their projects, and be ready
ideas they can call the office or other branches that have
to tackle the natural challenges that they will no doubt
been in similar situations and get advice from them. Falcon
be presented with. “You need to work according to the
has excellent communication, not just in the field but at the
space you have, so there is a challenge there,” says Brenda
corporate level as well.”
Carranza, General Manager Mexico and Executive Director Global Marketing at Falcon Drilling. As a result of the
One of Falcon Drilling’s key objectives in order to remain
different types of challenges that the company has faced
competitive in a squeezed drilling market is to be
in the field, it has made flexibility one of the key features of
continuously offering its customers bigger samples and
its products. “Because of the adaptability of our drills we
smaller drills. To this end, the company is currently working
can access difficult and remote areas. We can put the drills
on the design of its own version of the commercial drill.
on skids and move them around, or we can put them on a
“A company might have very large drills, but this will be
unit, in a truck, on a crane, or transport them by helicopter,”
no good for a company that does not have a large area
says Carranza. Falcon Drilling was founded by two brothers
in which to set them up. On our current drills the engine
from Canada who are experienced pilots, and the company
alone weighs around 600kg, and the whole drill can weigh
has one helicopter in Mexico. This makes the company
up to 10-12 tonnes, depending on the model, and including
much more adaptable on these types of projects where
the skids and all of the other accessories. The commercial
a lack of infrastructure makes access by road impossible.
drill is portable and can be moved around by the workers.
“Mining and drilling are different types of businesses. The drilling procedure requires specific knowledge, a lot of equipment, accessories, and spare parts, which are expensive” Brenda Carranza, General Manager Mexico & Executive Director Global Marketing at Falcon Drilling
The company manufactures all of its own drills, which
It weighs around 1,000kg, with a tower of 200kg. Whilst
means that it has a thorough understanding of the
it is not going to drill holes that are as deep as the bigger
equipment it provides, and can adapt each drill to the
drills can, it has other features that better meet our clients’
needs of customers, and the drilling location. “The drills
requirements,” Carranza explains.
are manufactured internationally but our staff is trained to change the setup of the drill - to increase its power, change
While drilling companies are in constant competition
the gear or attach any kind of accessory. It is important for
amongst themselves, Carranza has noted that in recent
Falcon to be able to modify our drills in these ways because
times mining companies have started to perform this
in different areas and circumstances the drills need to be
service in-house to save costs. In Falcon Drilling’s
configured differently. Our mechanic will decide whether
experience, where the company does not have sufficient
for example in certain weather a certain modification will
drilling experience this can represent a false economy.
be necessary,” says Carranza.
“Mining and drilling are different types of businesses. The drilling procedure requires specific knowledge, a lot
Falcon Drilling has certainly not shied away from the more
of equipment, accessories, and spare parts, which are
challenging drilling projects. In Tepehuanes, Durango,
expensive. You need to be prepared to spend money at the
the company took on a project that four other drilling
outset and wait some time before you get the return on the
companies had previously tried unsuccessfully to drill.
investment, and you really need to know the business and
“The first 80 meters were extremely difficult. What we did
understand it. In order to do this you need to have a good
was to cement the area, and we went slowly, cementing
team on your side,” warns Carranza.
93
SMALL AND PORTABLE DRILL PLATFORM STRATEGY In the 2013 edition of Worldwide Exploration Trends, the
Ingetrol Group is now present in all of the world’s regions,
Metals Economics Group (MEG) estimated that the mining
and has rigs in 42 countries. Luis Silva, CEO of Ingetrol
industry’s total budget for nonferrous metals exploration
Group, believes that the unique design of the company’s
increased
Exploration
products is the key to its success. “Listening constantly
expenditures rose in all regions of the world during 2012,
to feedback from our customers to innovate our designs
with Latin America receiving 25% of total exploration
and the utilization of the best quality components have
investment and remaining the world’s most popular
been key factors in our success,” he adds. The company
exploration destination. The region’s geological potential
has opened offices in four countries – Mexico, Peru, Chile,
has spurred the development of its exploration drilling
and Colombia - in order to serve its customers better. “The
services sector, including both local companies and global
only way to really support these markets is being close by
players that operate in various Latin American countries.
with trained technicians and with capabilities to overhaul
Ingetrol is a provider of exploration equipment and
our own rigs,” Silva states. Ingetrol also extends its product
services that belongs to the former group. It was created in
and service offering through a distribution network that
1990 after company founders Luis Silva and Marilú Málaga
covers 13 countries.
to
US$21.5
billion
in
2012.
detected that the difficult geography of the Andean mountain range demanded the use of portable diamond
The company detected several opportunities in the Mexican
core drilling machinery with advanced capabilities. The
market. First and foremost, the country’s geological
company has since developed innovative water drilling and
potential and the industry’s boom attracted Ingetrol. Silva
exploration drilling products and has focused on offering
believes that, while Mexico has been a mining country
two crucial solutions for the mining industry: portability,
for centuries, its vast territory still offers tremendous
to avoid having to build access roads in remote areas,
opportunities to find new ore deposits. “Mexico for sure
and having the smallest drill platforms in order to reduce
will keep its leadership in silver and certainly will become
environmental impact. The company has also developed
one of the five main gold producers in the coming years.
rigs dedicated to drilling monitoring wells and portable
This potential needs to be explored and then drilled, and
rigs designed for permeability tests. This latter product
that creates tremendous opportunities for Ingetrol to serve
uses a combination of hydraulic push techniques and
the exploration companies,” he affirms. Furthermore, the
seismic instruments to measure the velocity of soils and
company’s experience in other countries has enabled
thus ensure slope stability.
Ingetrol to better handle its projects in Mexico. “There
IMPROVING EXPLORATION THROUGH EXCLUSIVE TECHNOLOGY When mining companies
success of the industry, since the geological data gathered
rely on other parties to
from the drilling programs will be decisive in corporate
conduct their exploration
decision making. “Our customers rely on us a lot, a great
activities,
their
only
deal of their success depends on our skills and technology,
concern
need
be
so we have to make sure that we are applying best practices
interpreting the recovered
to deliver the expected results,” says Luis Sánchez Murguia,
cores
Administration Manager of Intercore Perforaciones.
them. Luis Sánchez Murguia, Administration Manager at Intercore Perforaciones
94
and
analyzing
Therefore,
mining
companies are looking for
One of the most common challenges that can reduce
drilling
that
competitiveness within the drilling industry are the repair
companies
can guarantee an efficient
and maintenance costs of the drilling rigs. During its first
and continuous exploration process based on technologies
year, Intercore Perforaciones encountered some problems
that ensure better recovery rates of the extracted core and
with its machinery, which let the company to rewrite its
high quality samples to obtain reliable information about
business strategy and search for new and innovative drilling
minerals, precious metals and rock formations found in the
rigs in the market. “We studied the brands and compared
sub-surface. These elements play a fundamental role in the
the characteristics of different drills in the market, according
“Listening constantly to the feedback from our customers to innovate our designs and the utilization of the best quality components have been key factors of our success” Luis Silva, CEO of Ingetrol Group
are a great deal of similarities between the Andes and the
“There are always better ways to do something and special
Sierras of Mexico,” Silva says. “Geologically speaking, the
techniques to resolve a problem, so we never assume that
stratigraphy of Mexico has suffered less compression than
we have all the answers and we are willing to listen to our
the Andes. Therefore, the drillability of the formations is
clients.”
different and you can drill faster. As a consequence, the axial force and the running speed become critical to really
This philosophy has led to the development of state of
improve productivity.”
the art equipment that allows exploration companies to increase productivity and reduce the cost per meter drilled.
Mexico also offered Ingetrol commercial and technical
Ingetrol has a permanent R&D area that is continuously
advantages, which is why the company opened an office
developing and testing new technology. “We invested in
and a manufacturing plant in Torreon. “After visiting several
the development of aluminum engines in the US, and tested
potential locations we found that Mexico was best able to
different materials for frame construction. We are currently
meet all our requirements. It is one of the countries with the
launching a research project to dramatically increase the
highest number of free trade agreements, which gives a big
productivity using an approach that is different to what
advantage in exporting,” Silva remarks. He also highlights
our industry has been doing for the last 100 years,” Silva
that the quality of the country’s professional environment
comments. Ingetrol’s solutions are inspired by reality, and
– with an established base of metal workshops that can
by the everyday problems exploration companies face.
provide high quality frames and mechanized components
“We have several success stories but the most dramatic
– and the availability of good, hard-working technicians,
are when acrobatic drilling has been required in very steep
were critical in Ingetrol’s decision. Today the company has
conditions,” says Silva. “While exploring in the Sierra Madre,
instilled its philosophy in its Mexican employees. “Probably
we brought in special rigs, which we customized in order
one of the most important characteristics that we try to
to get large cores from shallows holes in very confined
enforce in our teams is that we are operating in an industry
underground sites. These are challenges that nobody but
where learning is a continuous process,” Silva explains.
us has coped with and succeeded in.”
to availability, drilling depth, engines, cost of components,
According to Van Kamp people are always very impressed
and value for money; this is how Cortech come out on top,”
with the resilience of its machines. “One day a customer
comments Harmen Van Kamp, Head of Sales at Intercore.
called us to report that his drill was not working at optimal
“With the technology Cortech provides, Intercore has less
performance. We visited the client and went through the
problems and can achieve greater drilling efficiency.”
drill stats and maintenance books. We realized that it had not been serviced for 18 months, while normally every 14
Intercore built a strong reputation and was offered
days oil and filters should be changed. Even after neglecting
Cortech’s official and exclusive distribution of drilling rigs
its maintenance like that, the drill was still running, which for
in the Americas. Intercore’s success in the Mexican mining
us was a remarkable sign,” he remarks. The majority of the
industry has been directly related to the technological
components Intercore uses in its drilling rigs are oversized to
advancements
Cortech’s
reduce the strain on the rig itself and improve performance,
technological innovation center is the driving force behind
the
drilling
rigs
provide.
drill faster, and require less maintenance. This is of special
its enhanced operational performance, and the mechanical
interest to many mining companies, since less maintenance
components used in the rigs are all manufactured by well-
is equal to less downtime in exploration programs and
known international brands such as Rexroth, Sauer-Danfoss,
therefore delivers faster results. Nevertheless, since drilling
Cummins, and Linde. “They are very well-engineered drills,”
rigs are mechanical, no one is expecting them to never fail.
Van Kamp emphasizes. Another important feature that has
Intercore provides its customers with the continuity of the
helped Intercore improve its drilling operations is that rigs
operations. “As a dealership we will always have spare parts
can be modified with diverse technologies, depending on
for everything, and we are able to get drills back up and
the conditions found at the drilling sites.
running within 24 hours,” Sánchez Murguia comments.
95
KEY FACTORS IN WATER MANAGEMENT SERVICES The year 2012 marked a historic record in mining exploration
Farco performs a series of water management services in
investment
the
Mexico, such as hydrogeology, well drilling and supervision,
country attracted over US$1,165 billion in mineral resource
de-watering, well test pumping and development. The
exploration during that year. This positioned Mexico as the
company also supplies industrial pumps, electric motors,
world’s fourth most important exploration destination, after
gear drives and a variety of accessories. These products
Canada, Australia, and the US. This position is the result
and services help mining companies to access and manage
of a steady double digit growth in exploration investment
water resources in every stage of their operation, from de-
since 2002, when the country attracted US$120 million. The
watering while performing exploration drilling to water well
exploration boom in Mexico resulted in international players
abandonment while performing mine remediation. “We use
successfully opening subsidiaries in the country. This was
some of the same equipment in the US and in Mexico, and
the case for Farwest Well Drilling & Pump Company, which
we are providing the same services in both countries,” says
expanded into Mexico in 2011, under the name of Farco
Vaught. “Mexico’s environmental activity seems to be going
Perforaciónes y Bombeo. “The mining community in Mexico
the right way. Quality control is directly tied to efficiency,
has a need for water development and de-watering services,
which in turn is tied to the return on capital investment of
so expanding our operations to the country was a natural fit
mining operations. When the right balance is struck and
for Farco,” states Clark Vaught, founder of both companies.
maintained, there is a much better picture. By combining
With only two years in the country, Farco has established
expertise, knowledge and the youth of many of our
itself as a service provider that is completely independent
employees, we will take advantage of the many opportunities
from its parent company in the US, and is on its way to
that the mining market offers,” he asserts.
in
Mexico.
According
to
Camimex,
becoming the biggest water development contractor in Northern Mexico. “Farco considers itself a Mexican company. Our employees are Mexican, with supervision from both countries. By being an American contractor, we bring with us the safety requirements, training and ability to reduce the risk factor in our operations. To challenge our Mexican workforce, we also employ Mexican nationals who have been trained in America,” states Vaught.
“Quality control is directly tied to efficiency, which in turn is tied to the return on capital investment of mining operations” Clark Vaught, Founder of Farco Perforaciónes y Bombeo
Comprometido siempre con el desarrollo sustentable económico y social de la comunidad donde nos desempeñamos.
96
www.metalmasterindustrial.com
SPECIALIZED DRILLING FLUIDS FOR OPTIMIZED PERFORMANCE Financially speaking, exploration is inherently one of the
are looking for new types of additives like the ones provided
riskiest stages within the mining value chain. Mining operators
by Fluídos Mayan Star and JC Portal Drilling Supplies in
set very high standards for their drilling activities, since the
order to quickly advance exploration. The application of
information recovered from each drilled meter will determine
drilling fluids can be complicated and even challenges the
whether a mining company needs to raise funds to continue
most experienced drillers. “It is very common that drillers do
its activities. In the Mexican drilling market, companies supply
not take advantage of the capacities of their drilling fluids,
different drilling rigs with varying and unique advantages but
if the behavior of polymer is irregular it can considerably
the reality is that the effectiveness of the drilling does not
increase costs, and if the product is not mixed and applied
depend entirely on the machinery, but also on the drilling
properly the driller will end up using an unnecessary amount,
fluids used to enhance operational performance.
but if they know how to use it adequately they will be able to save up to 50% of the costs in their applications, and at
The soil composition in Mexico is varied, and the geological
the same time be able to drill a lot faster,” says Elizarrarás.
diversity forces drilling companies to face a great number of
One of the main challenges during exploration is the lack of
challenges when looking for mineral deposits. “The Mexican
knowledge some drillers might have regarding the use of
lithology is very rich. You can find all types of clays, gravels,
complementary products for drilling rigs such as perforation
sands, and silts, for this reason companies providing drilling
fluids. According to Talamantes Reyes a great deal of the
fluids need to have a very consistent inventory, in order to
responsibility lies with the drilling fluid providers, because
help drilling companies face these challenges,” says José
of their immediate sales strategy. “We have detected a lack
Talamantes Reyes, Director General of Fluídos Mayan Star.
of quality in technical field services and a general ignorance
According to Talamantes Reyes drilling companies have to
regarding drilling fluids. It is our responsibility as providers
pay a lot of attention to the geological conditions found
to make sure that the clients know all about the product if
where they operate and to the drilling products they use
we want them to succeed,” he remarks.
in order to avoid any kind of entrapments or cave-ins. “If drilling companies try to drill deep and fast, it is vital to
As technology develops, it becomes more and more
make sure that they are using the right fluids to guarantee
difficult to keep up with modern exploration techniques.
the drill hole walls are clean and stable, otherwise the holes
Drillers need constant training programs to benefit from
are likely to collapse and they will have to be drilled again.”
the products they are using. Product application will vary
“The Mexican lithology is very rich. You can find all types of clays, gravels, sands, and silts, for this reason companies providing drilling fluids need to have a very consistent inventory in order to help drilling companies face these challenges” José Talamantes Reyes, Director General of Fluídos Mayan Star
Effective drilling fluids provide the advantage of having open
depending on the soil and weather condition where drilling
holes clean and lubricated in order to help the drillers achieve
is taking place, therefore continuous assessment is essential
better core or sample recovery. Many drilling companies
to achieve the best possible results. “In order to help
are used to only using one additive, which is generally the
customers drill faster and achieve a high recovery rate under
combination of water and bentonite, used to create solid
any geological condition, drilling fluid companies need
walls during the drilling process. “Most of the time we go
to show them how to create a special recipe that adapts
to a project where the core recovery rate is between 50
to those conditions,” Elizarrarás explains. For example,
and 60% and we run some tests to try to increase it to 80
if companies have to drill clays they will need to apply a
and 90% by adding drilling fluids. Mining companies need
polymer that is specifically designed to drill this type of
to have recovery at every meter so they can know exactly
soil. If the drilling will take place in solid rock, additive or
what is underground,” stresses Victor Elizarrarás, Operations
lubricant will be needed to reduce the torque and avoid
Manager of JC Portal Drilling Supplies.
causing damage to the drill bits. Exploration is a challenging and complex science; companies rely more than ever on
Every day mining companies require faster drilling and
fluid technologies to enhance their efficiency and to gain a
better recovery rates, and for this reason drilling companies
competitive advantage over their peers.
97
INNOVATIVE APPROACH TO GEOLOGICAL SAMPLE ANALYSIS “Sometimes it is hard to find
being movable to different locations as exploration targets
available and qualified people in
change. The company also offers mobile laboratories,
a country like Mexico, so often
which can be moved around on wheels. At the same time,
it is beneficial for a company
SGS Minerals helps mining companies to improve their
to
subcontract
of
own processes, through on-site process optimization and
Clark,
audits. “Many mining companies face challenges with their
former Business Manager of SGS
own laboratories, and these laboratories play a key role
Minerals in Mexico. The company
in the operations of a mine; every mine has a laboratory.
expertise,” Leslie Clark, former Business Manager at SGS Minerals Mexico
says
this
kind
Leslie
has developed a portfolio of
We have the expertise, so we can help them produce
services ranging from geochemical surveys and analysis,
more accurate and precise results,” says Clark. “Aside from
core drilling, and feasibility studies at the exploration stage
process optimization and audits, we can assist in process
to on-site laboratories, plant services and mill support at the
control, logistics and scheduling expert systems, sampling
pre-production stage, and modular or mobile laboratories
and monitoring, flowsheet development and piloting,
and environmental services at the production stage.
among other things,” she adds.
Mining companies have different options to collect
Despite its already broad service offering, Clark says that
and analyze their geological samples: they may create
SGS Minerals has every intention to continue growing in
their own on-site laboratories, or send them off to
Mexico. Part of this growth will hinge on the company’s new
an outsourced company for external analysis. “A big
laboratory, which is currently being built in Durango. “Today
advantage is that mining companies will use our labs not
we have a very good laboratory providing geochemistry
only for production samples, but at the same time for their
and metallurgy services, but we have decided to build a
exploration samples, since SGS is independent,” explains
new facility that will give us room to expand in the future.
Clark. The company currently has four on-site laboratories,
This new facility will not only be a little larger, it will also
and one commercial laboratory. Three out of the four on-
have more efficient systems, automated processes, and
site laboratories are fixed in a permanent building and one
more technology. It will not only improve efficiency, but
of them is modular, which brings the added advantage of
safety and quality too,” says Clark.
Williams Scotsman Mexico 2013.pdf
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Tú lo imaginas, nosotros lo construimos
98
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MINING BOOM TRIGGERS DIVERSIFICATION AND GROWTH Construcciones Cihuacoatl faced the last mining boom
permits. “It is currently almost impossible to get explosives
with almost three decades of experience under its belt.
permits, given the security issues in the country. The
During that time, Rafael Gutiérrez Badilla, Founder and
government is cautious and restrictive in terms of whom it
Director General of the company, identified opportunities
can give the explosives to. If you are careful in handling the
in the drilling market and started Itzcoatl Drilling &
material there are no problems. But we are being asked not
Services together with his son, Rafael Gutiérrez Medina. “A
to store explosives, and instead to only apply for explosives
lot of people in the area knew Construcciones Cihuacoatl
to be used on a one day basis. That translates to high costs.
as a construction company that provides great service.
We have found other alternatives, but they do not allow us
Therefore, they were convinced that Itzcoatl would do
to operate as quickly as we can with explosives,” he adds.
the same great job that Cihuacoatl had done. We can provide the two services, and our clients just deal with one
“For years we have successfully dealt with environmental
contractor,” Gutiérrez Badilla highlights.
and safety matters, and we can therefore provide reliable services to our clients on these very important matters.
Having survived more than one mining market downturn,
The same happens in drilling, where we are not just the
Construcciones Cihuacoatl has been able to diversify to
company that drills, but we also provide quality samples,”
manage the inherent risk in the market. The company is
Gutiérrez Badilla says. “Personalized service is what makes
focused on the exploration stage of the industry, for which
us different. We are always in touch with our clients
it can do most construction work. “When mining goes
because we believe communication is key to moving a
well, a lot of projects are available and employment is
company forward in this sector. We adapt easily to our
created,” explains Gutiérrez Badilla. It has been thanks to its
clients’ needs,” explains Gutiérrez Medina.
exploration and mining clients that the company has been able to break into the Chihuahua, Sonora, Nayarit and Baja
Even though many juniors have exited the market since
California markets. “We are the first ones to work on a new
they have not been able to raise the necessary capital
project, building access. This is the reason why we were able
for exploration, diversifying their portfolio has enabled
to start Itzcoatl Drilling & Services, which started operating
both companies to work with well-established mining
in February 2011 and now has two teams in Minera Largo, a
companies such as Fresnillo and Peñoles. “For example,
subsidiary of Golden Minerals, in Zacatecas.”
Grupo Mexico was very satisfied with our service on the Nacozari project because of the high production rate we
“The initial growth of Itzcoatl Drilling & Services was the
achieved. We gave them excellent productivity levels, and
result of a combination of our human talent and the mining
what is even more important: quality service,” Gutiérrez
boom, which allowed us to invest in the company. It was a
Medina adds. For both Construcciones Cihuacoatl and
very drilling friendly period and that helped us to position
Itzcoatl Drilling & Services, being small Mexican companies
the company and expand our team to five drills,” says
has proved to be a double-edged sword. On the one hand,
Gutiérrez Medina, Director General of Itzcoatl Drilling &
most exploration capital is foreign and the lack of an
Services. Currently, the company has five active drills and it
international reputation has proved to be a disadvantage.
is in the process of adding its sixth. “We perform diamond
On the other hand, the companies have the clear advantage
drilling and focus on making our equipment more versatile
over foreign companies in terms of project control and
and adaptable to our clients’ needs. We have HQ, MQ and
management. “We are locals, we speak the language, and
PQ equipment by diameter order, and a capacity of 800m
we can supervise the operation at any moment. That has
to 1,300m, depending on the angle and drilling conditions.
a direct impact on operating costs and effectiveness,”
The industry is asking for 600m and 800m up to 1,300m
Gutiérrez Medina observes.
drilling holes; these are dimensions that our equipment covers,” he adds.
As Construcciones Cihuacoatl has survived the cyclical nature of the mining market, Itzcoatl Drilling & Services
One of the biggest challenges Construcciones Cihuacoatl
benefits from its years of experience. “The market is
constantly faces is the harsh terrain it is asked to operate in,
stabilizing slowly. We have clients that are willing to
such as in the Sierra Madre, where it is very difficult to drill.
increase their workload, and when they are ready Itzcoatl
In these cases the company’s ability to use different types
will have the necessary human capital and structure to
of explosives in steep terrain and difficult topography to
provide them with the best service. Currently, our goal is to
access logistically difficult sites is an advantage. Gutiérrez
work on training our people,” Gutiérrez Medina emphasizes.
Badilla notes that the hardest part is getting the required
99
100
DEVELOPMENT & ENGINEERING
4 Significant investment in exploration activity in Mexico over the past few years has created a strong development pipeline, with new projects expected to start production in the coming years that are destined to strengthen the country’s position as the world’s leading silver producer, transform Mexico into a top 10 gold producer, and vastly expand the country’s copper production. Of course, for these ambitions to materialize, current and future development activities at mine sites around the country will have to be executed in an optimal way.
This chapter will focus on some of the 15 mining projects that are currently under development and will begin operating between 2013 and 2015. It also presents the many contributions that Mexican and international suppliers and service providers aspire to make to the cost-competitive development of Mexico’s future mines, and analyzes which products, services, solutions, and technologies are best positioned to capitalize on the opportunities created by the forecasted US$2.585 billion investment in new developments in 2013. At the end of this chapter you will find an overview of the main mines in the state of Durango.
101
102
CHAPTER 4: DEVELOPMENT & ENGINEERING 104
Development Activity in 2012
105
MINE PROFILES: New Gold Projects
107
MINE PROFILES: New Silver Projects
108
MINE PROFILES: New Copper/Zinc Projects
109
VIEW FROM THE TOP: Commitment to Quality in Mine Development
111
Applying International Mining Standards to Mexico
112
MINE SPOTLIGHT: El Cubo
114
TECHNOLOGY SPOTLIGHT: Vulcan 3D Modeling and Mine Planning Software
115
Helping the Mining Industry Step into the Future
116
VIEW FROM THE TOP: Building Access to Deeper Deposits
117
VIEW FROM THE TOP: Leveraging Extensive Experience in Vertical Shaft Construction
119
Return to Industrial Blasting for the Mining Industry
120
VIEW FROM THE TOP: Finnish Philosophy for Underground Mining
121
Energy Supply Must Anticipate Power Requirements
122
Mining Technology that Meets Military Standards
123
Applying Cross-Industry Experience to Mining Projects
124
Productivity Gains through Ground-Engaging Tools
125
Business Leaders Revive Nuevo Leon’s Mining Industry
126
Embracing Quality Mexican Manufactured Spare Parts & Quality Material Handling Solutions
128
The Value of Understanding Industry Needs & Streamlining Mining Projects with Plant Design Software
130
Optimized Grinding Media Use Enhances Productivity
131
Reducing Costs Through Aftermarket Services
132
MINE PROFILES: Durango
133
STATE PROFILE: Durango
103
DEVELOPMENT ACTIVITY IN 2012 Following exploration, the development stage of the mining
investments (an equivalent of US$4.2 billion) towards
industry’s value chain includes assessing the potential of a
the development of their assets. In spite of the metal
mine and, in case of a positive assessment, securing funds
market’s current situation, Camimex expects its members’
to finance the project and continuing with construction.
expenditures to increase by almost 6% throughout 2013.
This crucial stage determines whether or not the mine
Development-oriented investments are projected to go up
will be a financial and operative success. Prefeasibility and
by 19%.
feasibility studies, mine planning, excavation and removal of waste material, dewatering, construction, development
GOLD DEVELOPMENT PROJECTS
of metallurgic extraction facilities, installation of field
Some of the most important gold mines whose development
labs, acquisition of high-quality, efficient equipment and
stages were completed during 2012 were owned by Minera
securing sufficient supply of energy are just some of the
Frisco. The company’s Concheño gold-silver mine, located
factors that need to be tackled during this stage. Moreover,
in Chihuahua, started producing in mid-2013. A dynamic
the aforementioned aspects must align towards a single
leaching plant with a processing capacity of 15,000t/d
goal: enabling metal or mineral production with healthy
was installed in this open-pit mine. Frisco also expanded
financial margins while meeting all environmental, social
operations at its El Coronel and San Felipe assets last year,
and occupational safety requirements that will make the
in order to incorporate a heap leaching process to the
project sustainable and stable in the long term.
former and increase overall production in both mines. The company also completed the development phases of its
As shown by the information contained in the previous
Porvenir and San Francisco del Oro assets – respectively
chapters, Mexico’s abundant mineral deposits and the
located in Aguascalientes and Chihuahua – and built
country’s legislation encourage investment and generate
flotation and leaching plants capable of processing 10,000
significant interest in the development of mines in Mexico.
t/d in each mine.
Additionally, the country has many suppliers and service providers that can help mining companies accurately
US-based company Argonaut Gold started development
assess the feasibility of their projects, plan their mines
works at its La Colorada project during the first trimester
efficiently and develop the entire infrastructure necessary
of 2013. Production at this mine, located in Sonora, was
to reach and extract ore deposits in record time. Mexico’s
reactivated during the same year, yet the company
workforce is not only cost-competitive but also qualified.
expects to increase gold output in 2013 by introducing
The country’s strong mining tradition and the existence
new metallurgical processes and facilities in what was a
of world class engineering programs in its universities
high-grade underground gold mine during the Porfirian
guarantee the availability of capable workers and highly-
era. Another Sonoran mine where development and
specialized technicians. All these factors encouraged
construction works began during 2012 is Agnico Eagle’s La
the mining industry to invest over US$15 billion in the
India unit. The company started its operations at the project
development of new projects in Mexico during the 2007-
during 2013, after completing all necessary permitting. The
2012 period. The return on this investment is already
mine is expected to start commercial production by 2014,
becoming tangible. Data from the General Directorate for
and is expected to generate an output of over 900,000oz
Mining Development shows that, in December 2009 there
per year until 2022. Additionally, two mega projects are
were 262 Mexican companies backed by foreign capital
expected to help Mexico climb on the world ranking of gold
operating 692 mining projects in Mexico. As of December
producers during the coming years. Torex Gold completed
2012 there were 285 mining companies with foreign capital
prefeasibility and feasibility studies at its Morelos Norte
operating more than 853 projects in the country.
project, which is located in the Guerrero Gold Belt on which the current NI 43-101 mineral resource estimate
104
According to the Mexican Mining Chamber (Camimex), the
stands at 4.8 million ounces of gold in the measured and
total investment made by Mexico’s mining sector during
indicated category plus an additional 600,000oz of gold
2012 reached US$8.043 billion. Companies affiliated to
in the inferred category. The company expects to start
Camimex brought in 93% of this total investment. These
construction of two open pits for this project in the last
companies also made expenditures of over US$711 million
months of 2013. In the state of Durango, the Sierra Madre
in project expansion activities, and they also invested
Gold Belt also hosts a promising mega project. Chesapeake
around US$1.8 billion in the development of new mining
Gold’s Metates asset holds reserves of 18.5 million ounces of
projects. The acquisition of equipment and machinery
gold. In 2012 and 2013 the company carried out advanced
almost matched this last figure, with a total sum of US$1.72
exploration activities and full feasibility studies are expected
billion. All of the above investment decisions imply that
to be completed by early 2015. By 2020, this mine could be
mining companies directed at least 59% of their total
producing up to 25% of Mexico’s total gold output.
| MINE PROFILES: NEW GOLD PROJECTS
14 9
2
10
6
5 15 16 13
11 3 7 8 4 1 12
Project
Company
State
Production (thousand ounces)
Start date
1
Angangueo
Grupo Mexico
Michoacan
N.A.
2014
2
Buenavista del Cobre
Grupo Mexico
Sonora
21
2015
3
Camino Rojo
Goldcorp
Zacatecas
N.A.
2016
4
Cerro del Gallo
Primero Mining/Goldcorp
Guanajuato
62
2015
5
Concheño
Minera Frisco
Chihuahua
N.A.
2013
6
El Arco
Grupo Mexico
Baja California
105
N.A.
7
El Coronel (enlargement)
Minera Frisco
Zacatecas
N.A.
2013
8
El Porvenir
Minera Frisco
Aguascalientes
N.A.
2013
9
La Bolsa
Pan American Silver
Sonora
38
2013
10
La India
Agnico Eagle
Sonora
90
2014
11
Metates
Chesapeake Gold
Durango
845
N.A.
12
Morelos
Torex Gold Resources
Guerrero
128
2015
13
San Antonio
Argonaut Gold
B.C.S.
63
2014
14
San Felipe
Minera Frisco
Baja California
N.A.
2013
15
San Fco. del Oro
Minera Frisco
Chihuahua
N.A.
2013
16
San Julián
Fresnillo plc
Durango
1.3
2014 Source: Camimex & SGM
105
SILVER DEVELOPMENT PROJECTS
BASE METAL DEVELOPMENT PROJECTS
First Majestic Silver Corp. completed development of the first
Grupo Mexico led the development of copper projects
section of Del Toro mine in 2012, and has progressed with
during 2012. The construction of concentrator plants, SX-
the second section throughout 2013. The unit is expected to
EW plants, and the expansion of the Buenavista del Cobre
process over 2,000 t/d by the end of the year. This asset is
mine, located in Sonora, are the main projects for Grupo
located in the Silver Belt of Zacatecas and its probable and
Mexico, and US$2.835 billion will be invested with the aim
proven resources surpass 90.3 million silver ounces.
of increasing annual copper production from 202,000 tonnes to 515,000 tonnes. In 2015 production is also set
In October 2012 Fresnillo plc finalized feasibility studies
to begin within the company’s Angangueo project, with an
for its San Julian silver project, which is located in the
output of 10,000 tonnes of copper. Other copper projects
bordering area between Chihuahua and Durango states.
whose construction phases advanced during 2012 are El
Construction at this site is already underway, which will
Boleo, located in Baja California Sur and operated by Baja
enable the company to reach an output of 9.6 million ounces
Mining-KORES, and Tayahua, operated by Minera Frisco,
by the end of 2014. Much like Fresnillo, two other mining
which undertook the expansion of this unit last year and
companies with Mexican capital are developing attractive
expects to begin producing in 2014. Other promising
silver projects in the country. On one hand, Grupo Mexico
copper mines that underwent feasibility studies during the
is reactivating mining activities in Angangueo, Michoacan,
year are Grupo Jinchuan’s Bahuerachi asset and Mercator
by developing an underground gold, silver and zinc mine
Minerals’ El Pilar project. The operators expect to invest
in the area. The Angangueo project has silver reserves of
US$900 million and US$350 million, respectively, to
3 million ounces and production is expected to begin in
develop these mines over the coming years.
2015. The expansion of its biggest mine, Buenavista del Cobre, will also give Grupo Mexico access to silver deposits
Durango’s zinc deposits attracted significant investment
of over 2.3 million ounces during the coming years. On
from Industrias Peñoles, which spent US$203 million during
the other hand, Minera Frisco’s Concheño and Porvenir
2012 to launch zinc production at its Velardeña asset earlier
are expected to produce 2.7 million silver ounces and 9.8
this year. Indicated and measured reserves at the site amount
million silver ounces, respectively.
to 46 million tonnes. Peñoles also completed the feasibility study of its Rey de Plata project, located in Guerrero, and
Besides having the potential to become Mexico’s biggest
expects to invest US$268 million to fully develop the site
gold mine, the Metates project is also one of Mexico’s
before 2015. Zinc and molibdenum production is also
most promising undeveloped silver assets. It has reserves
expected to increase over the coming years thanks to the
of over 526 million ounces of silver. Chesapeake Gold
presence of these metals as by-products in other projects.
expects to produce a yearly volume of 25.1 million ounce
While zinc production at KORES’ and Baja Mining’s El Boleo
of this metal by the second year of this mine’s production
is foreseen at 25,400 tonnes, Grupo Mexico’s Buenavista
phase. Likewise, Torex Gold’s Morelos Norte project is
del Cobre will produce 2,000 tonnes of molybdenum and
also expected to deliver a significant amount of silver
Mercator Minerals’ El Crestón asset will produce 11,000
production by the end of the decade.
annual tonnes of this same metal after 2016.
DEL TORO The Del Toro mine, owned by First Majestic Silver Corp., is located in the Chalchihuites silver mining district in Zacatecas, at the border zone between the physiographic provinces of Sierra Madre Occidental and Mesa Central. Del Toro reached phase one commercial production on April 1, 2013, just nine weeks after the completion of the mill construction, consisting of a 1,000 t/d flotation circuit producing both silver-lead and zinc concentrates. Phase two of mill construction, on schedule to begin early in the third quarter, will include the addition of a 1,000 t/d cyanidation circuit for a total milling capacity of 2,000 t/d. The cyanidation circuit will enable the company to produce its own silver doré bars, which will further reduce third party smelting and refining charges. The third and final phase of construction, consisting of 2,000 t/d flotation and 2,000 t/d cyanidation circuits are scheduled for initial production by the third quarter of 2014. At the combined rate of 4,000 t/d, Del Toro is estimated to produce approximately 6 million ounces of pure silver, plus significant amounts of lead and zinc annually, making it the company’s largest producing silver mine.
| MINE PROFILES: NEW SILVER PROJECTS
3
9 6 2 14 11 10
4
7
13 8 5 1 12
Project
Company
State
Production (million ounces)
Start date
1
Angangueo
Grupo Mexico
Michoacan
3.0
2014
2
Bahuerachi
Jinchuan
Chihuahua
N.A.
N.A.
3
Buenavista del Cobre
Grupo Mexico
Sonora
2.3
2015
4
Camino Rojo
Goldcorp
Zacatecas
N.A.
2016
5
Cerro del Gallo
Primero Mining/Goldcorp
Guanajuato
1.0
2015
6
Concheño
Minera Frisco
Chihuahua
N.A.
2013
7
Del Toro
First Majestic Silver
Zacatecas
N.A.
2013
8
El Porvenir
Minera Frisco
Aguascalientes
N.A.
2013
9
La India
Agnico Eagle
Sonora
N.A.
2014
10
La Joya
SilverCrest Mines
Durango
N.A.
N.A.
11
Metates
Chesapeake Gold
Durango
25.1
N.A.
12
Morelos
Torex Gold Resources
Guerrero
0.11
2015
13
Rosario
Sta. Cruz Silver Mining
San Luis Potosi
N.A.
2013
14
San Julián
Fresnillo plc
Durango
5.7
2014
Source: Camimex & SGM
107
| MINE PROFILES: NEW COPPER / ZINC PROJECTS
6
2
4 5
3
8
10
7
1 9
NEW COPPER PROJECTS Project
Company
State
Thousand tonnes
Start date
1
Angangueo
Grupo Mexico
Michoacan
10
2015
2
Buenavista del Cobre
Grupo Mexico
Sonora
188
2015
3
Bahuerachi
Jinchuan
Chihuahua
N.A.
N.A.
4
El Arco
Grupo Mexico
Baja California
190
N.A.
5
El Boleo
Baja Mining/Kores
B.C.S.
57
2015
6
El Pilar
Mercator Minerals
Sonora
35
2014
7
Tayahua (extension)
Minera Frisco
Zacatecas
43
2014
Company
State
Thousand tonnes
Start date
Grupo Mexico
Michoacan
9.7
2015
NEW ZINC PROJECTS Project
1
Angangueo
5
El Boleo
Baja Mining/Kores
B.C.S.
25.4
2014
8
Metates
Chesapeake Gold
Durango
86.2
N.A.
9
Rey de Plata
Peñoles
Guerrero
N.A.
2015
10
Velardeña
Peñoles
Durango
70
2013
Source: Camimex & SGM
108
| VIEW FROM THE TOP
COMMITMENT TO QUALITY IN MINE DEVELOPMENT RAFAEL VILLAGÓMEZ Director General of Cominvi
Q: Cominvi was founded 10 years ago, what led to your
Q: How do you make sure that your company attracts and
decision to establish the company?
retains the best people?
A: Shortly after my grandfather started managing the El
A: Our company’s slogan is “our strength is our people”.
Cubo mine he asked me to start providing services to the
We have one of the lowest rotation rates in the industry,
mine, and given the business potential we decided to start
and we attribute this to the fact that everyone is treated
a company with just 12 people. In 2005 my grandfather
equally and is respected. People who in the past wanted to
decided to sell the mine to Metales Interamericanos, a
work for the older, larger Mexican companies like Peñoles
subsidiary of Gammon Lake, and the company quickly
or Grupo Mexico are now turning to us. The money is almost
realized the quality of the work we were doing as a mining
an added bonus – more than anything we want to create
construction company, as well as the competitive prices that
a working environment where our team members feel that
we offered. This opened up an opportunity for Cominvi to
they are part of the family. In addition, Cominvi always tries
start working on the Ocampo mine - a project that triggered
to hire people from the areas we work in. Particularly in the
the expansion of the company’s reach, now serving not only
areas of administration and services we hire people locally;
national but also international mining companies.
warehouse workers, secretaries and drivers, for example. Depending on the location of the mine we also try to
Q: What have been the critical success factors in the
acquire lodging or catering services locally.
growth of your company during this time? A: The key to being successful is doing the right thing, and
Q: How do you respond to the industry’s constant risks?
Cominvi stands out for the development work that it does,
A: We have worked with companies such as Goldcorp,
from engineering to construction, that helps our clients to
Yamana Gold and Peñoles that have very high safety
reach their goals in the safest and most economical way.
standards, which have become our own standards. Whether
In Mexico Cominvi is recognized as a young company that
we are talking about maintenance or operations, our
is taking care of its people and acquiring new equipment
health and safety department is operating independently,
for each new project. In the early 1990s companies were
so the safety manager visits all of the projects, applying
not as clever with their investments – they would buy
best practices, and has the right to stop work if any risk is
old equipment and put it to work, and they would be
identified. We have also created the ‘Delta Team’, which is
surprised when it would break after three or four days. This
made up of 30 experienced multi-disciplinary experts who
was clearly an opportunity to do a better job with more
start every project up, taking care of the operations, safety,
reliable equipment. From the beginning we invested in new
and maintenance. The most recent delta project we started
equipment, sometimes buying equipment such as jumbos
up was in Oaxaca for Don David Gold. At the end of last
and scooptrams before we had a project to use them on.
year we also created a quality department. We now have one
Working with companies like Sandvik and Atlas Copco has
industrial engineer on each project who is not involved in the
also helped in our success. In addition to our development
operations but monitors standards and productivity, looking
work, we are also offering production services to Goldcorp,
for ways to enable the team to do more with less.
Peñoles, Endeavour Silver and First Majestic. Q: What are your main ambitions and how will the company Q: Which companies have you worked with and what has
succeed in growing despite the industry slowdown?
been the most challenging project?
A: We know our growth in Mexico is secured with the
A: We worked with Gammon Lake, Trafigura, Vane Minerals,
civil engineering and exploration services we have begun
Coeur d’Alene, Genco Resources, Minera Frisco, First
offering. We also want to move into Central and South
Majestic, Peñoles, Fresnillo, Yamana Gold, Goldcorp, Great
America because many of our clients already have
Panther and Endeavour Silver. All of our clients and projects
operations there. We will grow step by step, without losing
have been relevant for our business.
our identity or stopping paying attention to current projects.
109
www.cominvi.com
R E D CO M
ISO
Y
R EG
TE
N PA
IS
Somos reconocidos como la empresa líder, con más de 10 años de experiencia en el Desarrollo y Explotación de Obras Mineras Subterráneas, que tiene como ejes rectores el Crecimiento de su Capital Humano, Seguridad, Calidad, Productividad, Ecología e Innovación.
9001 2008
Av. Prolongación Campestre No. 2502 Torre San Mateo 1 Piso 3 Col. Refugio del Campestre León, Gto. México C.P. 37156
Teléfonos
T+52(477) 104 35 66 (477) 104 35 64
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110
APPLYING INTERNATIONAL MINING STANDARDS TO MEXICO Many mining providers that have started from scratch have
providing our services based on these high quality and
built successful businesses by focusing their initial efforts
safety standards at Grupo Jomargo, seeing that there was a
on one big client. This strategy offers the opportunity to
great demand for better quality equipment and innovative
work closely with one company, get to know its needs,
solutions,” says Martínez Flores. “This is a strategy that Grupo
and adapt and build the business according to these
Jomargo has taken seriously, and the company now has 20
needs. Once the business has a solid base, it can then be
different programs for safety, ranging from explosives safety
expanded to the wider market. “My father is the founder
and underground safety to environmental safety. In the 25
of Grupo Jomargo, and he was an employee at Peñoles
years during which we have been operating, the company
until he decided to start a contracting company,” says José
has not had a single fatality.” Grupo Jomargo is similarly
Martínez Flores, Operations Director at Grupo Jomargo,
committed to its environmental responsibilities, which is
which provides exploration, design and construction
reflected by its environmental certification from Semarnat
services for underground mines. “Peñoles was our first
and its ISO 14001 system. This positions the company well
client, and the first projects we did for them were small
to respond to the growing demand for mining suppliers that
tunnels, with a size of 2x2m, or 2x2.5m.” The company went
are committed to reducing their environmental impact to
on to work with Luismin, which later became Goldcorp,
the absolute minimum. “Most companies are looking to get
working with the company as it started up the Tayoltita
these kinds of certificates because they need environmental
mine, one of its most important properties in the 1980s.
studies in order to obtain permits for mine exploitation. Our
“Many projects in Mexico lacked good communication, so we installed satellite and database systems. We were the second company in Mexico, after Peñoles, to have this kind of communication technology” José Martínez Flores, Operations Director of Grupo Jomargo
by
people are accustomed to taking care of the environment
broadening its services portfolio and taking on new clients.
and make sure not to discard pollutants in water or on
Having been in business for 25 years, Grupo Jomargo
land. We have also conducted reforestation programs with
now provides exploration services, equipment, people,
kiri trees, which grow quickly and help the environment by
administrative services, and construction services to large
absorbing carbon. We want to grow as a company, while
and small underground mining companies, and has worked
being ecologically friendly. This is the culture we are trying
with some of Canada’s main mining companies, such as
to create in our company,” says Martínez Flores.
Grupo
Jomargo subsequently began to expand
Yamana Gold, Goldcorp, SilverCrest Mines, AuRico Gold, and Agnico Eagle. “We offer the initial services required
When Martínez Flores started working for the family
to start mining operations, which can go from exploring to
business he made technology his priority. “When I
developing, and even exploiting the mine, constructing the
came into this company I focused on introducing new
plants, bringing in machinery and administrating the people
communication technologies. Many projects in Mexico
extracting the ore,” explains Martínez Flores. Grupo Jomargo
lacked good communication, so we installed satellite
prides itself on its dedication to the highest international
and database systems. We were the second company in
environmental standards, and has drawn on its experiences
Mexico, after Peñoles, to have this kind of communication
of working with Canadian companies to create solid safety
technology. It has helped us to integrate information,
and environmental procedures. “For example, while working
complete projects on time, and make us more competitive,”
with Agnico Eagle on its Pinos Altos project the client asked
says Martínez Flores. Grupo Jomargo also uses a special
Grupo Jomargo to send its people to Canada to receive
enterprise resource planning (ERP) administrative system
quality and safety training,” Martínez Flores explains. Safety
and databases in order to manage its maintenance
standards in countries like Canada and the US were much
processes. “The ERP system gives us a complete solution
higher than in Mexico, which has brought both benefits and
for administration; we take the data and interpret it to find
challenges to Mexican service providers since companies
the most adequate solutions. Companies in Mexico are not
from these countries are applying the same standards to
generally used to these kinds of processes, especially in
their operations outside of Canada or the US. “We began
the mining industry,” says Martínez Flores.
111
| MINE SPOTLIGHT
EL CUBO Endeavour Silver acquired El Cubo mine in July 2012 as part of its strategy of buying and rejuvenating struggling old mines in historic mining districts. Unlike Guanaceví and Bolañitos, the other two producing mines in Endeavour Silver’s portfolio, that had low throughputs and no reserves when acquired, El Cubo offered the potential to quickly begin producing at a rete of 1,000 t/d. El Cubo has many mine adits, ramps, and shafts, as well as a 400 t/d leaching plant to produce doré bars. The processing plant at El Cubo goes back at least 150 years, and was the first mill site permitted to use cyanide in Mexico. Recognizing that this is an old facility, ripe with risks and challenges that date back to a time before sustainable mining standards and practices were in place, Endeavour Silver launched a rebuilding program to address any of the facilities’ shortcomings and to modernize the operations. In the third quarter of 2012 Endeavour Silver launched a US$67 million, 18 month capital investment program at El Cubo, to explore and develop the mine and to rebuild and expand the plant, tailings facility, water supply, electrical supply, surface buildings, and surface infrastructure. Located only 6km southeast of the city of Guanajuato, in the southeastern part of the second largest historic silver mining district in Mexico, El Cubo is only 15km from the Bolañitos project, which creates significant operational synergies between El Cubo and Bolañitos. Although El Cubo has until recently been a low grade, high cost mining operation, it is already showing improved throughput, grades, and mineral recoveries as a result of Endeavour Silver’s operational initiatives. The El Cubo property consists of 61 mineral concessions covering 8,146 hectares. Some 38 individual veins have been historically mined, and 16 additional exploration targets outside of the existing mines at El Cubo offer potential for new silver and gold vein discoveries. Endeavour Silver’s exploration review identified 28 prospective target areas in and around the existing mines at El Cubo, that have the near-term potential to delineate new reserves and resources. Since acquiring the property the company has undertaken mapping, sampling, permitting, and drilling to start testing the high priority targets. More than 50,000m of core drilling is planned over the next two years. After producing 300,000oz of silver, 600,000oz of silver equivalent, and 4,893oz of gold in 2013, Endeavour Silver is expecting to produce 900,000oz of silver, 1.7 million ounces of silver equivalent, and 13,000oz of gold in 2013 at cash costs per ounce that are significantly lower than the company achieved in 2012.
113
| TECHNOLOGY SPOTLIGHT
VULCAN 3D MODELING AND MINE PLANNING SOFTWARE 3D modeling technologies have become a common tool in
platform for the creation, visualisation and manipulation of
mining prospects exploration and mine planning designs.
intricate block designs, with the capabilities to accurately
With the knowledge provided by this type of software, mining
model geological contacts and boundaries. With the
companies are able to improve operational performance while
included options for triangulation, grid mesh modeling and
substantially improving the profitability of their operations.
contouring, it is possible to enhance the understanding of engineering setups.
Maptek Vulcan is a 3D mining software solution that allows
114
users to validate and transform raw mining data into
Vulcan Open Pit and Underground Mine Modelers provide
dynamic tridimensional models, accurate mine designs
tools for mine engineers to design, evaluate, and maintain
and operating plans. This software provides users with
daily mine operations. Surfaces and design lines can be
high quality interactive modeling and planning packages.
easily updated with the latest operation data to generate
From haulage profiles to grade controls, the system
daily production reports. Users can design pits phases
delivers functionality, efficiency and improved productivity
and dumps with multiple ramp systems to transform
to mining companies worldwide. Vulcan is an integration
non-operational optimized pit shells into mine designs
platform for all types of spatial geological data. This
that meet engineering and geotechnical criteria. The
geological modeling and mine planning software enhances
use of grade interpolation by inverse distance method
the visual understanding of very complex structural
for resource models and the determination tools for
relationships,
powerful
volumes and tonnages contribute to quickly evaluate
assessments of the conditions found on mining projects.
designs for economic, quantitative or volumetric factors.
The
enabling
users
to
perform
comprehensive
For underground mine construction users it can generate
packages designed to help mining companies address
optimized design for rooms, pillar ramps, blocks for cut
their needs throughout the full mining cycle, ranging from
and fill, and sub-level stoppings for each mining scenario.
exploration, geological modeling, and resource estimation
Another interesting feature integrated in Vulcan is the
to mine design, scheduling, and rehabilitation.
Scheduler application, which is a specialized package for
Vulcan Modules allows geologists to access and view 3D
mine scheduling. Besides all the design tools and modeling
drillhole data, define geological zones and accurately
options of Vulcan, the Chronos Scheduler is at the core
model ore bodies and deposits. These modules contain
of the package. The Chronos Scheduler can be used for
all the geostatistical tools widely used in risk analysis,
short, medium, and long term scheduling as well as for
uncertainty assessment, and bivariate simultaneous grade
equipment scheduling. The visualisation of results from
estimations. The block modeling features create geological,
scheduling decisions through virtual mining animations
structural and grade-quality models for stratigraphic
and the capacity to work with modules in a spreadsheet
and non-stratigraphic applications. They can be used to
environment to store, schedule, manipulate and report mine
perform face mapping in the field, structural modeling or
production information, promotes efficiency and increases
to calculate preliminary resources. These features provide a
operational profitability.
program
incorporates
different
HELPING THE MINING INDUSTRY STEP INTO THE FUTURE Technology plays a key
if required, they can go the mine site. If the client needs to
role in the mining industry.
create a new development or option in the software Maptek
State of the art software
is open to considering these additional changes.
is part of every stage of
Alberto Ramírez, Maptek Branch Manager for Mexico and the Caribbean
the mining activity: from
During the planning stage Chronos, a module of Vulcan
exploration to planning,
that helps in determining the mine schedule, comes in
operation and production.
very handy. It works within an object-oriented spreadsheet
Nevertheless, international
on
an
environment to store, manipulate and report mine
level
the
production information on a daily, weekly, monthly or
Mexican mining industry
annual basis, as well as how much is going to be extracted
is experiencing a lag in
and how it can be optimized with the available resources.
this area. “The sector is mostly behind in technical issues
“The best way to extract the resources depends on what
compared to mining industries in other countries,” says
type of mine it is. Vulcan allows the user to develop tasks,
Alberto Ramírez, Maptek Branch Manager for Mexico and
telling them how much will be produced throughout the
the Caribbean. “Many companies are still working with
life of the mine, depending on the equipment being used.
traditional 2D printed maps. They still have not realized all
The system automatically optimizes, offering immediate
of the benefits that acquiring 3D software brings.”
benefits,” Ramírez says. “Considering different variables such as cost, price, discount rate, and optimization can
With over 30 years of experience, Maptek provides 3D
be simple or complex, depending on each client’s needs.
modeling, spatial analysis and design technology to the
The main objective is to provide information on the
sector. The Australian company decided to venture into the
maximum benefits that will be obtained, according to the
Mexican market in 2005, opening an office in Cancun, which
information available on a certain deposit. If new studies
also served as a gateway to the Caribbean. The first two
are done the quality of the data improves and the system
years were focused on gaining the sector’s trust. “Thanks to
is automatically updated, to provide the maximum benefit.
Maptek’s global recognition, by 2006 the first investments
The financial side of a mine operation always has to be
slowly started coming in. Those first clients were our main
taken into account, as well as the desired profitability when
marketing strategy to encourage other companies to look
a very large investment is made.”
towards our products,” Ramírez recalls. “We used the experience of working in Chile, Peru and Brazil, among other
An
countries, and considered adapting our products to local
improvement can be found in BlastLogic, an accuracy
requirements, always providing high quality tech support.
management system that streamlines processes in open cut
It was not very difficult adapting to the market because we
drill and blasting operations to improve mineral recovery.
already had the experience of entering the Chilean market;
Ramírez explains that Maptek delivers tools for designing
the only variable to consider was the time companies in
and planning open pit and underground mining operations,
Mexico needed in order to acknowledge our work.”
including making drilling design diagrams and determining
example
of
the
company’s
continuous
product
the amount of explosive used to exploit a deposit. Maptek has two signature types of software: Vulcan and I-Site. Vulcan is a general mine planning software package
Given how long the company has been working in
that provides 3D modular software visualizations for
Mexico, Ramírez considers Maptek to be well positioned
geological modeling and mine design and planning. I-Site
in the market. Gaining a greater market share presents
is a complete software and hardware 3D laser survey
challenges: “Our goal is to provide our clients with great
technology. “Vulcan is a product that enables mining
software that allows engineers and geologists to develop
companies to grow and develop. I-Site is a high quality, high
their tasks in an easy and simple way, while offering
resolution product, which means a bigger investment for
high quality technology and customer support, and
companies. This is the reason why it is used as widely, even
other consulting services, and this is a complicated task.
though it also gives great benefits,” Ramírez explains. During
However, as I mentioned, innovation is a crucial element of
the exploration stage Vulcan makes it easier for geologists to
our growth strategy, and Maptek is always developing new
determine the amount of resources the deposit has. As part
technologies. We have research and development teams in
of the technological support the company provides, a team
Denver, Chile and Australia that are constantly searching
of engineers and geologists, located in Denver or Chile, is
for new products and making improvements on existing
available to help the clients. The team is available online or,
ones, based on the feedback we get from our clients.”
115
| VIEW FROM THE TOP
BUILDING ACCESS TO DEEPER DEPOSITS LEFT: Ivan Arriagada, President of EDC Mining Limited RIGHT: Mike Arriagada, Sr. Mechanical Engineer at EDC Mining Limited
Q: How did EDC get started, and which of EDC’s projects
in the Madero mine, is going to be a success. With all the
are you most proud of?
safety concerns in mining, and the present geology of the
IA: One of the reasons the company was started was
most important ore bodies – with rocks and sandstones –
because generally speaking mines are getting deeper and
this new method could contribute a lot. The process is like
deeper. Development by ramp was the traditional way of
constructing a parking lot from the top down. You open the
reaching bigger depths in Mexico, but as the mines got
top layer, pour in a concrete floor, and drill in order to insert
deeper, constructing ramps became more expensive.
posts for the floor that would go underneath. Next, you drill
Peñoles was one of the first companies we developed
the following slice, mine the rock, backfill it with cement,
new shafts for. When they had to put in their first shaft at
and build the floor and posts for the third slice. In this way,
Milpillas, in around 2005, the only companies that could
when you go underneath again, you have a concrete layer
do this type of work were foreign companies, mostly from
over you, which means that there is no need for rock bolting
Canada, the US, South Africa and Australia. At the time, I
or similar processes. Furthermore, when you are drilling the
was working with a Canadian cementation mining company
posts for your next floor, you will know whether you have
and we got the contract. While we were constructing the
ore or waste, so you are assessing the geology right there.
shaft, Armando Sánchez, one of the Directors at Peñoles, had the vision of developing a contractor in Mexico that
MA: Double post mining can be compared to room and
could do this type of work. Ricardo Cárdenas from Minería
pillar mining; instead of leaving 20% of the ore as your
Castellana agreed to do the job as long as we provided the
pillars you use prefabricated concrete posts, which allows
engineering and the expertise. I decided to take the plunge
you to remove 100% of the ore. Also, you are working
and left Wardrop Engineering to set up EDC.
under a reinforced concrete roof, so it eliminates some of the safety hazards involved with underground mining.
On the El Saucito project of Fresnillo we were the first Mexican company to build a shaft in Mexico. The need for
IA: Recovering all of the ore extends the life span of the
shafts had not yet existed, but the ore bodies here started
mine. The cost is also reduced after you get underneath
at 600m below the surface, which would require 11km
the first concrete floor, because you do not have to do
of ramp just to reach them. As a result, it was no longer
any ground support and you can carry all the ventilation
economical to build a ramp. Time was also was a big factor
through the stopes.
since the rate of advancement was about 70m or 80m per month for a ramp while we were advancing 60m per
Q: EDC is also evaluating narrow vein mining, what do you
month sinking a shaft straight down.
see as the main opportunities for this technology in Mexico? IA: We are trying to innovate narrow vein mining, too. We
EDC stands for Engineering, Design and Construction.
are in contact with a friend in British Columbia who has
We are a certified company with professional engineers,
developed a system for narrow vein mining, and we are
but apart from that we do the design and construction as
currently helping him put it into operation. Barrick was
well, and we provide the supervision on the projects we
interested and they were going to try it in Tanzania, but they
undertake. We build circular concrete shafts, and they are
decided to put the project on hold because of the changes
maintenance free. Thus, for a mining company, even if the
in the economic situation. We are hoping to introduce this
initial cost is elevated building a shaft with us entails a long
system soon; most of the silver and gold mines in Mexico
term economic gain.
are narrow veins, so it is an idea worth trying. We have seen the prototype for this new, safer system and we know it
116
Q: EDC specializes in double post mining. How does this
will work. With the proposed system you can turn with the
technique work?
veins and follow them, thus making sure you get minerals
IA: Our double post mining project, which is underway
instead of chunks of waste.
| VIEW FROM THE TOP
LEVERAGING EXTENSIVE EXPERIENCE IN VERTICAL SHAFT CONSTRUCTION OSCAR GAVIÑO General Manager of Grupo Necaxa Q: After a long history of working with Fresnillo, what
continue working with the Robbins raise boring machine
were the key steps that allowed Grupo Necaxa to find new
and reach a depth of 470m. Peñoles and Fresnillo have
business opportunities?
both relied on our experience for years. In 1990 Grupo
A: Grupo Necaxa has worked continuously with Grupo BAL,
Necaxa developed a rail transportation system at Fresnillo’s
starting with the Fresnillo mine in 1984 and later on with
main production line at a depth level of 695m, which just
Peñoles in the Sabinas and Milpillas mines. Throughout
recently First Majestic has used on its La Parrilla project.
these years we have successfully developed three vertical
Generally speaking, one of the most challenging situations
shaft models, with RV-57 being the most recent, before we
that we face is the “blinded vertical shaft”, where we are
decided to seize the opportunity presented by the mining
not sure whether we will find water or caves. In such cases
boom to diversify our client base in 2010. We ventured
development begins at the base of the Galloway, 2m from
into both national and international markets, particularly
the bottom of the shaft. We once encountered an opening
targeting Canadian and American companies. Grupo
of water that was releasing water at a rate of 20 gallons per
Necaxa is a strong engineering and development company,
second, making it impossible to continue and dangerous for
with unique skills in the construction of vertical shafts, and
the workers. The first thing we did was to create a pumping
our commercial team was rapidly able to prove to different
system that pumps water from the bottom of the shaft up
mining companies, such as First Majestic at La Parrilla and
into side deposits until it reaches the surface. Although
Del Toro, that we are the best choice. We are Fresnillo’s oldest
accumulation was no longer an issue, we then had to cover
contractor and we have always had the financial security
the shaft with concrete rings and install hose strips that
and construction expertise to accompany expansions, and
were also interconnected to the pumping system.
assure that production at our clients’ assets can continue uninterrupted. The company has always exceeded its
Q: How is technology helping Grupo Necaxa to outperform
clients’ requirements in terms of quality, service and safety,
its
starting with Fresnillo’s main shaft, and continuing with all
procurement strategy bring for your clients?
clients. We are proud that, since 1983, Grupo Necaxa has not
A: Grupo Necaxa has advanced in the area of technology by
had any fatalities.
creating strategic alliances with Atlas Copco and Fresnillo,
competitors,
and
what
advantages
does
your
for both state of the art technology and technological Q: What enables your company to provide the highest
support and advice. Thanks to our rehabilitation workshops
quality service, and what types of creative solutions do you
we are able to adapt current technology, such as scooptrams,
offer to help the industry address operational challenges?
jumbos, low profile trucks or even pickup trucks, to any type
A: Our people are our core asset, and our development
of working environment. Grupo Necaxa has strategic price
plans and training programs help the company to maintain
agreements with cement and steel suppliers, allowing the
people with over 30 years of experience, which in turn
company to offer its customers stable prices, which allows
attracts mining companies to come to us for advice. In
our clients to project their operating costs with certainty.
Angangueo, for example, the client requested different construction processes, one of them being an emergency
Q: Given the large number of exploration projects in the
staircase in a vertical shaft, with 3m resting points between
mining district of San Luis Potosi, what opportunities do
transportation points. After explaining the risks, we
you expect to present themselves in the coming years?
designed a zigzag structure with resting points every 1.5m,
A: We have worked with the region’s leading mines, such as
which made it easier to see and to keep the space clear.
Minera San Xavier, Mexichem, Charcas, and IMMSA, and we are looking forward to seeing the Real de Catorce project
We did a simple but creative job for First Majestic, which
become a reality for First Majestic. We are also confident
consisted of installing a sliding structure that redirected
that other new projects will start flourishing in the next five
the material as the shaft was deepened, allowing them to
to seven years.
117
www.isdamar.com 118
RETURN TO INDUSTRIAL BLASTING FOR THE MINING INDUSTRY With over 30 years of experience in the business of
in turn are defined by the mining and construction sector,
earthworks for the construction of underground and open
allowing the size of rock that has to be obtained for the
pit mines, quarries and roads, Isdamar started operations
carry equipment and crusher to be determined.
with a small mill, which later became a grinding plant where metals were crushed before being sent abroad to
As Meave Flores highlights, safety is a necessary priority
be smelted. The company later started working on mining
in all of Isdamar’s operations. Defining the perimeter of
projects for different Mexican companies constructing
the area where the blasting will take place plays a central
tunnels and shafts, among other activities. At the beginning
role in the safety procedures. “We put up signs and
of the 1990s, the company identified a new business
posters to let the community know about our activities,
opportunity in the development of Mexican highway
and we have our personnel close the roads that lead to
infrastructure, and Isdamar acquired many drilling and
the area. Afterwards, a siren rings for 10 minutes before
blasting contracts. Though mining work continued, 80% of
the blasting begins. When the siren ends the area is
its activities were focused on road construction because
inspected, and if there are no further complications the
of the depression in the metal market during that decade.
job is allowed to continue,” he explains. Another important
“We participated in construction projects in Mexico and
aspect of blasting activities is environmental preservation.
Central America, including a project for the Panama Canal,”
Isdamar trains its employees to respect and preserve local
recalls Hugo Meave Flores, President at Compañía Isdamar.
vegetation. “In the past no precautions were taken, but
“In 2003, when metal prices started to look promising
most importantly there was no ecological conscience,”
again, we considered going back to our roots. It was in
Meave Flores highlights. However, times have changed and
2004, once metal prices turned around, that we eventually
companies are now obligated to protect the environment.
created a new team and acquired the equipment to
Isdamar has developed solutions to avoid impacting local
perform drilling and blasting work for mining companies.”
flora and fauna, and is proactive about conservation and
Isdamar has worked in some of the main mining sites in
protection, while following the environmental regulation
Mexico, such as Cananea in Sonora, Mezcala in Guerrero,
that is currently in place. The company’s goal is to obtain
Moris, Ocampo, Dolores and Palmarejo in Chihuahua, El
the ISO 14000 certification and be recognized as an
Coronel in Zacatecas, and El Porvenir in Aguascalientes.
environmentally responsible company.
“Our clients are satisfied with our operations and we have been able to position our group as one of the most reliable
Isdamar has received many international awards for its
companies in the sector,” he adds.
commitment to quality, such as the International Star for
“It was in 2004, once metal prices turned around, that we eventually created a new team and acquired the equipment to perform drilling and blasting work for mining companies” Hugo Meave Flores, President of Compañía Isdamar
“The company is completely responsible for blasting,
Leadership in Quality and the International Quality Crown,
taking into consideration all of the elements that form
both from the Business Initiative Direction, and The Bizz
part of the operation, with the goal of reducing cost and
from the World Confederation of Business, as well as
maximizing safety,” says Meave Flores. “Our experience
domestic recognition from the Mexican Association of
and knowledge of different materials are essential in
Mining Engineers Metallurgists and Geologists (AIMMGM),
guaranteeing the proper use of explosives and avoiding the
and the Mexican Company of the Year award from the Latin
loss of human life, which is our ultimate goal.” Blasting is
American Quality Institute. Meave Flores recognizes that a
defined by the use of high explosives and explosive agents.
critical success factor has been the company’s recruitment
The high explosives provide the required power and the
system, which has improved over the years: “Our team is
explosive agent delivers the energy to fragment the rock.
formed by young and experienced, talented people. This
“The success for a good load and carry operation depends
solid and disciplined team, combined with the passion
on both elements,” explains Meave Flores. The selection of
for our vocation, has made us one of the most trusted
explosives is geared towards the drilling templates, which
companies in the market.”
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| VIEW FROM THE TOP
FINNISH PHILOSOPHY FOR UNDERGROUND MINING JAVIER PRADOS GONZÁLEZ General Manager of Normet Mexico Q: How has Normet’s distribution partner in Mexico –
is not only the case for Normet, but also for many other
Túneles y Minas – been able to break into the Mexican
companies that have shared their experiences in getting
mining sector?
full service contracts with us. Mines are independent units;
A: The person running Túneles y Minas is a mining engineer
they operate 24 hours a day, seven days a week, so they
who has worked very hard to become one of our official
must be able to solve any problems. Our main objectives
distributors. The company’s extensive experience working
are to convince our customers that we have the right
on mining projects has helped significantly to effectively
people and workshops to meet their every need.
network in the sector. His experience in underground operations, combined with his knowledge of our products,
Q: What is Normet’s strategy to training its personnel, and
made it easier to open the market for our technologies. The
how does this add value for the company?
quality of our machines, the price of our equipment, and the
A: I have never seen a company that cares more about
delivery times are all very competitive; this has certainly also
training its personnel than Normet. We have developed
contributed to our distributor’s excellent sales record.
a training program that takes place three times a year, in which we gather people from our operations around the
The key element that helped Normet’s consolidation in
world and place them in training programs in different
the mining sector is our experience in processes such as
cities around the world. Every technician we hire is sent
concrete spraying, charging and scaling. All of our workers
for a week to Finland or Chile to receive thorough training.
are experts in these matters, from how the concrete should
Normet has also started an online academy where people
be produced to the different techniques for applying it
working for the organization, or even clients, can study
in underground operations. Normet has also developed
courses to improve their knowledge in specific areas.
other lines of the business, such as additives for concrete
It is our priority to make sure companies that purchase
mixtures and anchors for mine galleries.
our equipment have the knowledge that allows them to perform at their optimal level.
Q: How are Normet’s modular platforms designed to suit a variety of surface challenges?
Q: How are current global trends impacting technology in
A: All of our products are designed to comply with
this industry?
international quality standards, and our machines can be
A: Increasingly stringent safety regulations are one of the
adapted to operate in any environment. We have over
biggest trends right now. In some markets, such as the US
3,000 options for customizing our machines, depending
or Europe, diesel machines are banned. For these types
on the specific needs of the operator, and they can
of countries electric engines are being used, so some
be adapted to any geological conditions, such as the
customers in Mexico are now also requesting this type
machines we recently sold to Endeavour Silver that will be
of technology, and Normet has certain technologies that
used in the company’s Guanajuato operations. We are an
allow our machines to be independent from the mine’s
international machinery provider and we have learned that
energy source.
every country presents different topography challenges; in order to contribute to the global mining sector we need
Normet has an outstanding research institute in Finland,
to develop machinery that can be adapted to different
where our engineers focus all of their efforts on designing
operating conditions.
the safest machines on the market. Security is one of our main priorities; we always look to design equipment that
120
Q: What is Normet’s approach to effective maintenance?
complies with safety regulations around the world, and
A: Many mining companies in Mexico have invested in
we are continuously looking to understand the needs of
workshops, tools and highly qualified personnel, making
our customers, so that we can deliver the best technology
it more difficult to sell a complete range of services. This
possible.
ENERGY SUPPLY MUST ANTICIPATE POWER REQUIREMENTS Mines are big consumers of energy and are usually located
wherever in Mexico the customer may be. “Because we
in isolated areas. Many mines are located off-grid, but even
have integrated systems with an extensive database we are
those that are on-grid tend to rely on a backup power supply
able to locate spare parts in any of our warehouses across
in order to ensure that their operations will be uninterrupted.
the nation, then through our highly qualified distribution
This backup will usually take the form of an engine generator,
force we are able to deliver any requested product to
or ‘genset’, which is a fuel-powered generator of electricity.
where it is needed quickly,” says Robles Hernández.
The main thing that mining companies are looking for in gensets is reliability; each time a mine loses its electricity
Branching out into machinery from being focused solely
supply the machinery stops, meaning that production
on energy supply was a natural move for Megamak, and a
cannot continue. “Reliability is one of the main services
logical business expansion considering the convenience for
that Megamak provides, particularly because in Mexico we
its mining customers of sourcing both types of products
know that there are not enough electrical substations to
from just one company. “The two sides of the business are
deliver energy to meet all of the customers’ needs,” says
very complementary. Nowadays, companies understand the
Pedro Robles Hernández, Mining Manager at Megamak.
value of obtaining both services from the same provider.
“Customers want to make sure that our technologies are
This reduces costs and minimizes planning in terms of
capable of supporting the electrical specifics, such as the
logistics, since we are taking a big share of responsibility
energy conversion rate and the temperatures they are
in the efficiency of the operations,” says Robles Hernández.
working at. Another common worry is the altitude, since it
Megamak works with other companies to innovate and
is very variable in this country and technologies need to be
upgrade the technologies that it has and keep improving
adjusted accordingly in order to perform at their best.”
its performance in this area. “We are always looking for the highest quality equipment that can help us to improve
Upkeep of the generators is important but also precarious;
cost-efficiency. Having the right tools has always been very
these are substantial pieces of equipment that represent
important for Megamak, but we also take into consideration
significant value for a mining company. “Most mines in
how comfortable our customers are with what we are
Mexico do not have access to the grid, so in those cases
supplying them,” says Robles Hernández.
the powerhouses that we provide are the biggest piece of equipment on the mine site, since they deliver all of
In the future, maintaining close relationships with its
the crucial energy for the mining operations,” explains
customers will remain a priority for Megamak. “Our
Robles Hernández. “If our customers do not have a good
efforts have to be centered on keeping and creating good
power source it is certain that they will run into a lot of
relationships with customers, establishing agreements
problems. It is essential to keep track of the mining process
with them, and investing in people with technical skills,
and anticipate the power requirements, so that we can
new technologies and spare parts. This is the strategy we
ensure that we provide the best solutions for keeping the
are following to encourage the growth of the company,”
operations running.”
says Robles Hernández, who is confident about upcoming
“Reliability is one of the main services that Megamak provides, particularly because in Mexico we know that there are not enough electrical substations to deliver energy to meet all of the customers’ needs” Pedro Robles Hernández, Mining Manager at Megamak
Besides solutions for providing energy supplies to mines,
opportunities to continue growing. “We are very well
Megamak also supplies engines and spare parts for
positioned, with several mining groups around Mexico,
cranes, trucks, drills and other types of machinery found
especially in the northwest area and in the Pacific, where
on mine sites. “We have all that is necessary to support
we have been able to consolidate our business. At the
the equipment and we take complete responsibility for
moment our biggest customers are Grupo Mexico and
the correct functioning of it,” says Robles Hernández.
Industrias Peñoles. By working on our relationships with
Part of Megamak’s commitment to its customers is to
those companies on a daily basis, we are able to help to
respond immediately to any problems with the machinery,
make this industry more efficient and rewarding.”
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MINING TECHNOLOGY THAT MEETS MILITARY STANDARDS mining
Oldenburg is involved in several stages of mine engineering
companies to discover and locate mineral deposits far
and development, participating in these areas with a wide
below the ground’s surface, which require advanced
range of rock drills, drill jumbos, and roof bolters, which
technologies in order to be accessed and exploited.
have earned a reputation among mine operators for their
“Companies are keen to find the right innovations that
simplicity of use, rugged reliability, and low cost per
can boost their productivity and reduce operational risks,”
meter drilled. The company also supplies ANFO trucks
says Marcos Rosiles, General Manager at Oldenburg Latin
with maximum boom reach and utility vehicles that serve
America, a global supplier of engineered heavy equipment
as complements for cannon drills and bolters, which
and architectural lighting products.
have been purpose-built and designed to meet rugged
Modern
exploration
methods
have
enabled
environments such as those found in underground mining. The military industry is known to be at the forefront of
“Our mining clients are very pleased with our jumbo drills
technological innovation, and many of the most noticeable
and scalers because of the safety and efficiency they
technological innovations have been motivated by warfare.
provide,” says Rosiles.
Moreover, providing services to this industry is no easy task, since it entails the highest levels of engineering and
The company is very concerned with its personnel safety and
manufacturing quality. Since its inception in 1982, Oldenburg
of those operating the machinery. “Our safety philosophy
has supported the US Department of Defense and the US
goes beyond ISO certifications, this is what makes us a
Navy with its full range of engineering capabilities. After
military contractor and attractive to mining companies,”
several years of working for the military, the company decided
Rosiles highlights. Besides designing comfortable, robust,
to enter into other industries such as mining. Its ability to
and fireproof machines, Oldenburg ensures that all
comply with military standards and requirements helped
personnel count with technical capacities to operate the
Oldenburg to satisfy mining industry norms. “Our positioning
machines under the highest security standards. “We have
in the military industry has propelled our capacity to innovate
learned from the military industry, from the operators, and
in other markets. Every industry has its own challenges, but
even from our competitors how to improve our technology.
thanks to our technological capabilities we have been able to
For us there is nothing more valuable than life, so we work
help our clients overcome them all,” Rosiles remarks.
hard to protect it,” he adds.
Contacto: Ing. Jesús Herrera Ortega y/o Lic. Christian Roa Márquez Tel: (55) 57-54-83-70 (55) 57-54-88-48 www.detectorexploraciones.com.mx
Cartografía Geológica y Exploración Minera • Geología Económica, Evaluación de Lotes y Áreas Mineralizadas • Cálculo de Recursos Minerales • Exploración de Minerales Industriales, Rocas Dimensionables y Materiales para la Construcción • Descripción de Núcleos de Barrenación con Diamante y Ripios de circulación inversa • Interpretación de Imágenes de Satélite • Modelo Digital 3D • Prospección de Yacimientos Minerales • Investigación Cartográfica de áreas mineras de interés • Solicitudes de Concesiones Mineras. • Trabajos Periciales 122
• Asistencia Técnica, Legal y Administrativa • Levantamientos dinámicos en tiempo real con GPS para proyectos • Líneas base ligadas a la Red Geodésica Nacional Activa de INEGI • Localización y Georeferenciación. • Volumetrías • Modelados en 3D • Georeferenciación y cálculo de centroides • Control terrestre para fotogrametría • Obtención de características con atributos para bases de datos para Sistemas de Información Geográfica. • Sistemas de Información Geográficas (GIS) • Ingeniería Aeroportuaria
APPLYING CROSS-INDUSTRY EXPERIENCE TO MINING PROJECTS The experience of supplying products to and working within
The fact that in the industries with which Gates works
a number of different industries brings many advantages.
much of the power is driven by hydraulic systems exerts
New technologies applied in one market will almost
additional pressure to ensure that the company’s products
certainly bring value when applied in other markets, too.
are as reliable as possible, in large part because of the cost
One company that is taking advantage of its established
implications of equipment failure, but also because of the
presence across a number of different industries worldwide
environmental problems that can be caused by leakages
is Gates Corporation. Gates is a leading supplier of power
on hydraulic systems. “We cannot allow failures to occur
transmission products internationally, serving a number
in these industries because any forced shutdown due to
of different industries from oil and gas and mining to
failure on complex equipment in the mining or oil and gas
automotive and aerospace. “In many areas of the industries
industries immediately incurs the loss of millions of dollars.
we cover there is a certain crossover in applications. We
Failures can also lead to leaks and pollution. Our defective
can transfer our solutions from one industry to another,
rates, or the PPMs (parts per million) as they are referred to
which gives us the leverage to expand our solutions into
in the industry, are close to zero,” explains the company’s
different sectors,” says the company’s Director General
Director General for Mexico.
for Mexico and Vice President of the company’s North American Power Transmission Division.
Mining companies also pose similarities to the other industries Gates supplies in the remoteness of their
An example of the company’s innovation and versatility
operations. “Many of our customers in different industries
is the Gates Poly Chain GT Carbon Belt, or Carbon Drive
are in remote locations, and we stand out from the
System. This high tech belt replaces roller chains in power
competition because we have many field engineers working
transmission devices. “These state of the art bands are
in remote places, especially in the mining industry, in order
replacing metal chains in many industries, for example
to ensure that our customers’ operations can continue
Harley Davidson has been so convinced of the added
uninterrupted,” says the Director General for Mexico, for
value of this product that it has replaced all of its metal
whom this team of specialists represents the company’s
chains for Gates belts, in spite of the traditional image of
key asset. “In total we have five business sectors within
the motorcycle with a chain,” says the Director General
the company and we have specialists for each sector we
for Mexico. “The belt has a carbon core and incorporated
are involved in, because we understand that each sector
advanced nanotechnology, making it stronger as well as
has its own specific needs and requirements. As far as I
higher performance. This is a perfect example of how
understand, having a team of highly specialized technical
our technology provides alternatives for existing parts
staff continuously on-hand for our customers makes us
that you would never consider could be replaced.” The
unique in the industry.”
fact that the product was named the most innovative power transmission product of 2007 by Plant Engineering
In Mexico, Gates has leveraged its international success
Magazine is a demonstration of the impact it has had on
and premium quality guarantee to win contracts with the
the different industries it serves.
mining industry’s major companies, such as Grupo Mexico and Peñoles. “Our consumers are getting outstanding
Of the various products Gates supplies to different
performance from our products, in terms of productivity
industries, what ties them together is their focus on
and safety, and a good cost to productivity ratio,” says the
innovation and application. “The Gates philosophy of
company’s Director General for Mexico. “The key factors
achieving change through innovation has remained the
in Gates’s success have been innovation, quality, and high
key driver since the company was started, and many of the
level service. We do not consider ourselves to be selling
products we have launched have become the benchmark
products – we sell services that fulfill our customers’
for the different industries we are involved in. The material,
needs. We try to be one step ahead with innovative, high
design, and engineering invested in our products have
tech products that exceed our customers’ performance
helped us to stay ahead of the competition, by constantly
expectations.”
developing
higher
performance
solutions,”
says
the
Director General for Mexico. “If you look at the bigger
Mexico represents a unique and exciting opportunity for
picture, our products are the least expensive components
Gates, and the country will play an important role for the
of machinery, but they can make the difference between
company in the coming years. “Gates itself now exports
a plant or a mine running smoothly or facing costly
from its Mexican facilities to China, Canada, and Europe, and
downtime due to damages or maintenance.”
the country is a key part of Gates’s global business strategy.”
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PRODUCTIVITY GAINS THROUGH GROUND-ENGAGING TOOLS
Arturo Angulo Kladt, Area Manager Mexico and Central America at MTG
“GETs are fundamental
ESCO Corporation, which
components
is
of
heavy
celebrating
its
100th
machinery that can cost
anniversary
millions of dollars. If these
is
tools are not adequate, the
leading
equipment will not perform
ground-engaging
correctly and subsequently
durable wear parts and
the investment made will
components
not deliver the expected results,” explains Arturo
Luis Castillo Burgos, Country Manager Mexico at ESCO Corporation
one
this
of
the
year, world’s
producers
of
tools,
for
the
mining,
construction,
aerospace,
and
power-
Angulo Kladt, who serves
generation markets. Luis
as Area Manager for Mexico and Central America at MTG,
Castillo Burgos, Country Manager for ESCO Corporation
a Spanish-based multinational with over 50 years of
Mexico, says that the mining industry is one of the primary
experience in the design, manufacturing and distribution of
focuses of the company’s business in the country. “Mexico is
GETs. Today, MTG is the leading provider of GETs in Europe,
an important mining market with significant growth potential,
and its wide service and distribution network extends across
and our top quality products and services serve this market
America, Africa, Oceania, and Asia. “We strive to offer safe
well,” he explains. He also attributes the company’s growth
and easy to use products made with high technology steel
in the Mexican market to ESCO’s good relationships with
that enhance productivity in the mining sector and correctly
clients and its comprehensive understanding of their needs.
support essential machinery,” Angulo Kladt says. MTG can control its own engineering and production processes, as
ESCO’s strong ties with the industry give the company a
well as quality standards, because the company possesses
clear understanding of miners’ constant search for ways to
its own smelters in Spain. “MTG focuses on fabricating its
maximize productivity. This knowledge led the company
own patented products,” highlights Angulo Kladt. “We can
to develop a revolutionary shroud system that integrates
produce highly-specialized solutions for the mining sector.”
teeth, lip and shrouds, all developed simultaneously in
Probably the most notable of these solutions is the StarMet
order to increase the efficiency of dredging machinery. “We
tooth-adapter fitting system, which can greatly increase
usually created the adaptors and points as separate product
both security and productivity in mines. Traditionally, tooth
offerings. This time, we thought about the whole process,
and cutting edge removal has been a dangerous and long
taking an integrated approach to cost reduction and safety.
process. Changing a single tooth usually required the use of
The goal was to ensure that the entire system performed
hammers in a painstaking job that involves several people
as a unit,” Castillo Burgos explains. This painstaking process
and causes the interruption of operations for several hours.
proved its worth once the Nemisys system entered the market.
StarMet’s hammerless quality allows the product to meet
Mining Magazine awarded ESCO in 2012 for its innovative
even the most stringent safety regulations and increases
and efficient design. Nemisys’ three-piece tooth and mining
productivity by reducing the time required to perform the
lip system enables excellent equipment performance with
removal procedure by up to 90%. MTG has created other
an average of 10% less force of penetration. “When you cut
product lines that incorporate the hammerless technology
with this, it is like cutting butter. We try to make it easy for
and offer higher resistance, such as RipMet. This is a
the machine to do the work,” Castillo Burgos explains. The
system for ripper machines, which often cause operative
Nemisys system is efficient not only in terms of productivity
halts in mining because they bend or rupture easily.
but also environmentally. “For starters, it weighs an average
“Because rippers are considered second-tier machines, the
of 7% less than other GET systems, thus allowing machines
industry often overlooks their importance,” Angulo Kladt
to use less fuel and reducing greenhouse gas emissions as
emphasizes. “However, we think that rippers are on the
a result. Additionally, the product is specially designed to fit
critical path of exploitation activity. A good ripper allows
heavy machinery in an optimal way and deliver results with
companies to improve their operating efficiency.”
less energy and force,” says Castillo Burgos. “ESCO’s focus has always been on helping our customers save time and
124
“The mining industry is looking to continuously improve its
money, including making sure their employees are working
productivity, raise its operating performance and reduce
safely. Our engineering team is continuously examining how
the downtime of its machines,” Angulo Kladt explains. “We
to make our ground engaging tools, buckets, lip systems,
offer this by developing new solutions in our engineering
truck bodies, and other products perform in the most safe
department and by providing a personalized service.”
and efficient manner possible.”
BUSINESS LEADERS REVIVE NUEVO LEON’S MINING INDUSTRY Because of its geological profile, the state of Nuevo Leon
is humid. This additive reacts with water and causes the
is not considered among Mexico’s most important mining
liquid to filter down and into the ditches. “We customize
states. However, Monterrey’s location along with the
concrete preparation depending on the degree of humidity
presence of important mining companies, such as precious
in the mine. With the combination of this technique we
metal producer Hochschild Mining and base metal national
prevent water from pushing down on the structure and
champion Minera Autlán, and various suppliers make it a
destabilizing it. We safely and efficiently reroute water into
land of opportunity for companies looking to enter the
the ditches,” Zavala explains. Even when humidity is not a
Mexican mining industry. One such company is Industrial
problem, INMSO’s expert personnel inject an epoxy resin
& Mining Solutions (INMSO), which was founded in 2008
into the rock veins and thus contribute to hardening and
by a group of local businessmen. Norberto Zavala, Director
further containing the mine’s structure. “Thanks to the use
of INMSO, explains that the company was born with the
of this additive we generate a solid structure at the interior
mission of building a trustworthy, efficient and socially
of the rock. This structure might not be visible but it gives
responsible
our miners greater support and safety,” Zavala asserts.
company
providing
quality
construction
services to mining companies all across the country and internationally. The company established a Board of
While INMSO has commercial relations with the main
Directors in order to better streamline decision-making
providers of specialized equipment in the sector, the
and create the basis for INMSO’s growth. “This has given
company is currently developing new solutions in order
INMSO a very important advantage in relation to other
to use equipment at 100% of its capacity. “INMSO is
companies in the sector. Many mining contractors in
now investing in the development of new solutions to
Mexico are family-run businesses where decisions are
take cement inside the mine, which is a problem we
made unilaterally. In contrast to those companies, having a
face constantly, as do our competitors,” Zavala asserts.
Board of Directors supports solid, rational decision-making
Because a mine’s width and height can vary a lot, INMSO
processes within INMSO,” says Zavala.
has equipment of many sizes in order to be able to work
“We wish to consolidate INMSO as a profitable, institutional, innovative, socially responsible, and dynamic company” Norberto Zavala, Director of Industrial & Mining Solutions
INMSO’s
and
in any project. However, efficiency is lost in the process.
concrete spraying of ramps under construction, as well
services
comprise
the
boring,
scaling
Therefore, the company is currently testing the adaptation
as other mining development works. The company offers
of a regulating pot into simpler equipment.
added value throughout these mine construction stages. INMSO believes that the quality of its services stem from
Zavala’s commitment to the development of the mining
the training of its personnel. “Our employees need to
industry has also led him, along with other partners, to
understand why they must spray concrete at certain
reopen the Mexican Association of Mining Engineers,
pressures and with certain amounts of cement. They must
Metallurgists and Geologists (AIMMGM) in Nuevo Leon.
quantify the significance of every activity they perform,”
The institution’s state district in the state is now presided
says Zavala. “We train all our personnel, starting from the
by Zavala, after almost two decades of inactivity. Together
person who prepares the concrete in the cement plant. We
with other mining executives, Zavala seeks to reactivate the
explain them their objective and their importance within the
mining industry in the state and foster the development of
company’s goals,” he continues. “As a company, we look for
the region’s geological cartography, which has not been
stable, tiered growth, based on the constant development
developed by the Mexican Geological Survey because there
of our human capital.” This comprehensive training allows
has been no pressure on the allocation of the Survey’s
INMSO’s personnel to successfully use specialized materials
budget for this end. Thanks to the reactivation of this district,
and additives that improve the safety and quality of the
Monterrey recently held its first Mining Sector Employment
company’s works. INMSO evaluates the quantity of water
Fair in collaboration with the Ministry of Economy and the
in the mine and adds a substance to every vein if the rock
assistance of the industry’s biggest companies.
125
EMBRACING QUALITY MEXICAN MANUFACTURED SPARE PARTS Most of the mining equipment and machinery used in the
maintenance too, which sparked Metal Master Industrial
Mexican mining industry is manufactured abroad. However,
to invest more in new and better equipment to work on
as the sector develops and grows, some local companies
mining sites. As time has passed, our engineering division
are taking this as an opportunity to manufacture spare
has strengthened in such a way that today we are able
parts, and even to make improvements in their designs.
to design and manufacture different types of gears,
Metal Master Industrial, a machinery and design company
herringbone gears, and pipes that adapt to our clients’
based in Nacozari, Sonora, is embracing the challenge of
needs,” says Aguilar Contreras.
servicing and creating its own designs to perform repairs and maintenance on its customers’ mining equipment.
There are few companies developing certain spare parts or machinery for the mining industry. Metal Master Industrial
The company started operations eight years ago, after its
got a big break when Grupo Mexico gave it the opportunity
founder and Director General, Rolando Aguilar Contreras,
to manufacture and improve a type of chain that was
had been in contact with the group that brought the
originally made in Finland, used in dredging processes to
first CNC lathes to Chihuahua: “After I heard about this
transport concentrates to the first stage of smelting. It was
equipment I was very interested. Suddenly, the idea of
a big challenge and the team had to work very hard to carry
starting my own workshop and working with all types of
out the improvements that Grupo Mexico was looking for.
lathe was born.” After a while, Aguilar Contreras realized
“Being able to comply with what was asked of us made our
that the industry was more demanding than he had
business and our reputation stronger,” Aguilar Contreras
originally thought; manufacturing pieces was not enough,
recalls. Another project that had a big impact on the
it was necessary to have installation and maintenance
company was its work at Cananea, where it manufactured
systems, too. At around the same time, the company
mill bins that had to be adapted to the specific needs of
started to do reverse engineering and to analyze pieces
the mine. The company also repaired and modified all of
coming from Finland, Japan and Germany, with the aim of
the installed pumps on the site. “We can say that we were
producing them locally in Mexico. “When manufacturing
in charge of maintaining the heart of the entire operation,
these pieces we identified improvements that gave an
because if the pumping system does not work nothing else
added value to our clients. Also, by producing them locally,
will. Fortunately, everything functioned as it was supposed
we were able to reduce cost and delivery time, without
to
jeopardizing quality. Once our clients felt satisfied with our
Contreras recalls. In order to perform its core activity,
products they asked us to take care of their installation and
which is servicing machinery, Metal Master Industrial has
and
operations
continued
successfully,”
Aguilar
QUALITY MATERIAL HANDLING SOLUTIONS Mining sites are usually
within their mining operations. Metro Precisión has been
located
and
providing quality material handling solutions to the
challenging areas where
in
remote
industry since 1985. Oscar Ayala Soto, Founder and General
hundreds
operations
Manager, has been leveraging his 20 years’ experience in
are performed by different
of
the cement industry to develop people with mechanical,
machinery and equipment
electrical, electronic and commercial skills. For over 20
on a daily basis, in order
years, Ayala Soto has been giving seminars on automated
to
mineral
pneumatic conveying solutions for the cement industry,
machines
and this experience has transformed into solutions for the
that handle the materials
mining industry, with the aim of avoiding downtime and
often
operational
operational risks. Its regional positioning in the heart of the
problems, resulting in regular maintenance and production
mining industry has placed it well to service and equip the
downtimes, which have a direct impact on the company’s
local Sonoran mining industry.
Oscar Ayala Soto, Founder and General Manager of Metro Precisión
exploit
deposits.
the
The
face
profitability. Mining companies want to focus on their core
126
business, so they often outsource specialized companies
Metro Precisión’s experience in Grupo Mexico’s copper and
that encompass experience, design, and technical skills,
gold mines, as well as its close contact with the industry
guaranteeing success and maintaining peak performance
more generally, has allowed it to deliver innovative
had to design and develop its own repair and maintenance
management to allow a better decision making process.”
equipment. “There are mills that have an average weight of
In the current market, Aguilar Contreras considers that it
80 to 100 tonnes, and it is practically impossible to get hold
is very important for his company to understand that its
of the equipment needed to repair this type of infrastructure.
competitors are allies, or business partners, for whom it
We therefore had to design a special rotating machine with
continually performs repairs or manufactures products.
a transmission for its assembly. We also developed a cutter
Technology and quality have also contributed to a steady
that, as it rises, sharpens the steel of the original structure,”
workload over time. In the past few years the company has
explains Aguilar Contreras. One of the projects that defined
performed many jobs for big mining groups such as Minera
the company’s place in the mining industry is the Concheño
Frisco, Goldcorp and Grupo Mexico. Currently, the company
Mine, where it was invited to check each piece of equipment
is focused on opening its Cananea office in order to provide
and, if required, do the necessary repairs. “Minera Frisco
the quality maintenance service the mine requires.
acquired all of its equipment in Canada. We had to separate each piece – there were mills, pumps, herringbone gears, and so on – and from there decide which ones needed maintenance. Complications arose when we realized that many of them had been worn down and needed to be replaced. It was not easy because we had to perform very delicate operations, where one little flaw could jeopardize the whole production and result in financial losses. But all of our company’s expertise was used and we designed a plan to do the job in the safest and most professional way,” says Aguilar Contreras.
“When
manufacturing
these
pieces we identified improvements that gave an added value to our clients. Also, by producing them locally, we were able to reduce cost and delivery time, without jeopardizing quality”
An essential feature in guaranteeing the quality of its products
Rolando Aguilar Contreras, Director General of Metal Master Industrial
is the post-delivery service it provides, through which the installed, manufactured or repaired equipment is monitored,
Aguilar Contreras is aware that the years to come will
allowing the company to guarantee proper operation.
consist of intense work, since Metal Master Industrial’s goal
Aguilar Contreras explains that even when another company
is to grow with its clients. “Our philosophy is that we want
installs its products, Metal Master Industrial asks its client to
to stay at their level, in order to be able to satisfy their
supervise the installation process: “All the herringbone gears
needs. We need to continue developing our equipment
of Cananea and La Caridad are being monitored by Metal
and keep up with state of the art technology, because new
Master Industrial. We have qualified personnel to perform
equipment requires new and better maintenance services,”
vibration studies and create reports that help company
he concludes.
solutions for the Mexican market via a broad range of
seminars in the mines we have been able to identify practical,
products from pneumatics conveying systems to spare
mechanical or operational problems, and subsequently
parts and high pressure laminated presses. Among the
find opportunities for improvements. By being present at
company’s different solutions is an automated 320 tonnes
the mine site we were able to apply solutions from day
per hour pneumatic conveying system and a 1.5 mile long
one that helped our clients to increase productivity by 25%
automated pneumatic conveyor system that transports
in specific processes,” says Ayala Soto. By being present
hazardous material at a rate of 800 grams per minute.
in the mines, companies can then analyze the different
Three years ago the company developed an automated
variables with specific measurement equipment, in order
sensor for secondary and tertiary crushing plants, which
to understand the real problems and provide the right
alerts the operators if any of the crusher’s teeth are
solutions. “Technology and maintenance are the key to
missing. This system allows the process, which goes up to
assuring that the equipment works optimally,” states Ayala
a rate of 1,400 tonnes per hour, to be stopped before other
Soto, who explains that technology on equipment such as
parts of the machinery are damaged. The company works
the Mechanalysis IRD:308 or 350 allows them to measure
with its clients to develop its products and services, which
vibrations, air supply, amperage or temperature of the
it then duplicates for other companies.
equipment, which in turn gives a much more complete diagnostic on the unit. As the industry continues to adopt
In the search for production efficiency, cost reduction
new technologies and working methodologies in order to
and
increase profits, opportunities for companies like Metro
modernization
opportunities,
service
companies
make partnerships with the mining operators. “By holding
Precisión will continue to arise.
127
THE VALUE OF UNDERSTANDING INDUSTRY NEEDS Understanding and meeting the customer’s needs is
making it easy for the clients to find one complete, yet
the point of departure for any good business. “Most of
specific solution. Incorporating new products into our
our resources and efforts are focused on strengthening
portfolio requires complying with the highest industry
our product support, both before and after sales,” says
standards, in terms of both the product itself and the
Enrique Desentis, Director General of Construmac. “We
support behind it,” says Desentis. “Construmac constantly
work together with our suppliers to fully understand the
has people from the brands themselves present in its
customers’ processes and problems. We bring experience
offices, and together with them we go to the mines to train
from similar applications in other parts of the world, adapt
the clients’ operators and service technicians.” For each
existing products to new applications, or even have the
brand that it sells the company has one specialist with an
suppliers design unique systems for the applications.”
in-depth understanding of the products and the industry’s
“Reliability, availability and productivity are in the end the most important concepts for our mining customers” Enrique Desentis, Director General of Construmac
The company started out providing heavy equipment
need for them. “We select, together with our clients, the
for large mines, but today it focuses more on equipment
range of equipment that will provide our clients with the
for specific processes within mining operations, such as
best performance and productivity rate, according to
shotcreting and backfilling high density solids, representing
the technical requirements of their operations. After the
brands such as Putzmeister, Wirtgen, and Terex. The
product is selected we provide advice on its operation
company takes a considered approach to its portfolio, with
and maintenance. We set up each and every piece of
a careful strategy guiding its decisions to stock each of
equipment that we sell, and revisit it until we are sure that
the products that it does. “Our machines have lower fuel
everything is in perfect shape, also making sure that the
consumption and emissions than the competition, and in
operator is ready to use it correctly,” says Desentis.
part that is thanks to computerized system controls that supply only the required power, making it more efficient.
The company has generally found that mining companies
Our different ranges of products complement each other,
prefer
to
conduct
maintenance
on
the
machinery
STREAMLINING MINING PROJECTS WITH PLANT DESIGN SOFTWARE “Mining companies have
“The main challenge in developing mines and plants is
grown a lot in terms of
to have clear and timely information, so that the mining
production, and increased
engineers are able to plan the mine structures and logistics
their
in
well in advance,” says Hernández. López “If mining operators
but
are involved since the beginning of the engineering process
the technology they use
and receive information in a timely manner, they will be able
has not changed much
to make changes along the way that will help optimize the
in
foreign
128
countries,
says
processes, and they will have enough time to train workers
Adrián Hernández López,
in mining-specific processes. We control all the systems
who serves as Director
that monitor the status of the project and manage the
General
Intergraph
information in real time with a master database, which helps
Mexico, a provider of engineering software for the design,
owners make smarter and faster decisions when needed,”
construction, and operation of processing plants.
Hernández López emphasizes.
Adrián Hernández López, Director General of Intergraph Mexico
a
investments
long
of
time”
themselves, but for this to be possible Construmac must
Technology plays an important role in Construmac’s
provide training. “We must make frequent visits in order to
products, and through its brands the company tries
perform this sort of training. We also do a lot of training on
to remain ahead of the constantly developing market.
the use of the machines, so that our salespeople become
“We represent specialized equipment, an area in which
consultants for the client,” says Desentis. “Given the
technology moves very fast, and we rely on our suppliers’
company’s swift growth in the last two years, from 100 to
commitment to innovation. They keep pushing to introduce
200 members of staff, providing training to our own staff
new
has become even more important.”
says Desentis. “We are moving forwards by training
equipment
and
solutions
for
our
customers,”
ourselves, the industry and our clients in the use of new The company has 11 branches throughout Mexico, allowing
technologies.” Construmac is also always on the lookout
it to make client visits as frequently as possible, which
for new ways to improve the service that it provides, and
brings advantages to both parties. Inventory is also kept
thus the productivity of its customers’ operations. “We
at each of the different branches, according to the needs
combine different services, such as finance and logistics,
of local customers, which means that the company can
in order to provide a genuine and complete solution
respond to demand more quickly. “Our strategy is to have
to the customer. For example, we are investigating the
national coverage. We make sure that the really important
possibility of providing a full maintenance service, with
parts are available at all times for our clients. We manage
parts and servicing included,” says Desentis. “We are
special equipment, the parts for which are not easy to
looking to introduce new products into our portfolio, and
get hold of, so we must ensure availability at all times.
we have the human capital needed to understand difficult
Reliability, availability and productivity are in the end
applications and complicated machines. This demonstrates
the most important concepts for our mining customers,”
Construmac’s interest in seizing business opportunities in
explains Desentis.
both the mining industry and elsewhere.”
SmartPlant is Intergraph’s software for 3D design. It is
the company is able to know which engine or electrical
an object and centric-based software where the rules
components are needed to operate the plant. This is mainly
of engineering are defined in the database. In the past,
used for the technical design of plant engineering; however,
companies used to have only a fine base graphic system.
once the plant is engineered and built, the operator can use
Intergraph’s software defines rules that all drawings and
the same tools for plant maintenance. “In the past, when
models must follow, which helps to reduce design errors
mechanics did not talk to electrical technicians or to the
and save time and money. “With the use of this technology,
piping masters, each of these experts would end up having
companies become 30% more productive thanks to
different information, so whenever they faced a maintenance
the time reduction element that the software is able to
problem it would be a nightmare to solve,” Hernández López
provide,” says Hernández. “When reducing interferences
explains. “The same software provides mining companies
created by unexpected errors, owners will save man-hours,
with the construction as-built data and the project data,
allowing them to invest in other things.”
which gives them the possibility of running feasibility tests before making any physical change to the plant structure.
Intergraph is able to coordinate and manage three of its
The main benefit for the mining operators is to run process
clients’ main areas: process, instrumentation, and data. The
simulations to anticipate the impact of any change or
software incorporates a system that publishes process data
adaptation on the mine, without the risk of making mistakes
that is obtained by the instrumentation area. As a result,
that could cost a lot of money,” Hernández López says.
129
OPTIMIZED GRINDING MEDIA USE ENHANCES PRODUCTIVITY The
size,
chemical of
density
and
diameters and components, such as carbon, chrome,
composition
molybdenum, and many other materials, the proportions
grinding
will
effectiveness,
of which we can play around with. It is then important to
its
maintain a consistent flow of steel balls to feed the mills,
the
because if the mills have to be stopped production will also
combination
be stopped, and that is something that mining companies
of these variables will vary
cannot afford to let happen,” Guerrero Elías points out.
according to the type of
Proesmma’s answer to preventing this problem is simple –
product
appropriate
Miguel Guerrero Elías, CEO of Proesmma
media
determine and
ground.
on each order that is placed with the company it acquires
Grinding balls are widely
being
a greater volume and stores the excess. The company also
used for the processing of
has its own transportation system, meaning that it does not
minerals in the mining industry because of their ability to
need to rely on a third party to deliver its product to the
significantly speed up the grinding process, thus reducing
customers. “This increases the speed and efficiency with
the amount of time the equipment must be operating,
which we can deliver our products. A company can call us
saving on operating costs and maintenance. “These kinds
in the morning and the product will have been delivered by
of industrial inputs are essential for the mining process. The
the evening,” says Guerrero Elías.
chemical compositions are the key to the strength of the products - different compositions provide different levels
Proesmma endeavors to maintain this level of service to its
of durability, and can increase the lifetime of the balls. We
customers even beyond delivery. The company provides
can play with the components based on the features of the
technical guidance to operators and managers at the mine,
mineral our customers will be grinding,” explains Miguel
in order to provide them with an understanding of the
Guerrero Elías, CEO of Proesmma, a Chihuahua-based
product and the role that it plays in their operations. “We are
company that supplies forged steel balls to be used as
constantly visiting our customers, training them and giving
grinding media to mining companies in the region.
them a productivity certification, which helps to improve production and productivity in their operations,” says
Proesmma is relatively young, having started out in 2008
Guerrero Elías. This service was started because Proesmma
with a contract for a major mining company. “We began
identified that its customers could use improvements in
by visiting the main mining companies here in Mexico and
certain areas that would boost their productivity. “We work
asking about their grinding needs, and understanding the
very closely with the customer in order to understand how
importance of the product for overall mining operations
their operational departments are managed, and in order to
is what allowed us to really establish ourselves in the area
be able to give recommendations to the leaders on how they
of steel ball supply. Another important factor that helped
can increase productivity,” explains Guerrero Elías. Being
us is that we have a world-class company backing us up,
based in the northwest of the country, at the epicenter of
which provides us with technical support and laboratory
the mining industry, has also positioned the company well
analysis,” says Guerrero Elías. This relationship allowed
to grow. “Chihuahua is the place to be. We are close to the
Proesmma to then go on and find the products that
top three mineral producing states in Mexico, and as such
meet those needs, which in Guerrero Elías’s experience
we are near the most important gold, silver and copper
have been endurance and impact: “If a company uses
projects. Since we are located in the middle, we can easily
less grinding media in order to maintain the same rate of
cover the region from east to west,” says Guerrero Elías.
milling, this will save a lot of money,” he points out. Guerrero Elías was also heavily involved in the founding of
130
The next job for Proesmma was to go out and sell. At the
the state’s Mining Cluster, and through that role is working
time there was a monopolistic market with only one or two
together with the Government of Chihuahua to introduce
forged steel ball suppliers, so Proesmma had to convince
and develop new technologies that maximize the State’s
mining companies of the benefits that its products could
industrial capacity. “Innovation is one of the main priorities
offer. “The way we were able to gain their trust was by
today, since we understand that development goes hand
showing them how our product is made, the durability of
in hand with technology,” he says. “In the end this is a
the balls, and the chemical composition that confirms their
production process, so it is very important to rely on the
quality” says Guerrero Elías. Proesmma has backed up this
most innovative technologies in order to be as efficient as
evidence of quality with a commitment to providing quantity.
possible. There are some techniques in the grinding media
“It is a matter of being prepared and having different
process that need to be constantly innovated,” he says.
REDUCING COSTS THROUGH AFTERMARKET SERVICES It is estimated that maintenance expenditures make up
moves towards a preventative approach to maintenance,
between 20 and 50% of mining companies’ production
the company also provides a series of aftermarket services
costs. At a time when metal and mineral prices are dropping,
that will extend the equipment life and thus lower global
the ability to minimize operating costs determines whether
maintenance costs. “We can prevent downtime and extend
the future of a mine is in jeopardy and mining companies
periods between maintenance work by looking after the
are therefore looking for varied solutions to enhance their
equipment’s parts,” says Cañamar.
maintenance performance. These solutions usually range from long-term maintenance contracts at fixed costs
The company uses its international experience to improve
to
maintenance
the quality of its service and train its personnel using global
software, or the integration of several maintenance
technologically-advanced
predictive
best practices. “We have over 40 years of experience in
services. However, mining companies often overlook the
the mining industry, and our engineering department is
cost-saving potential of aftermarket engineering services.
made up of qualified experts who can detect potential
“We can prevent downtime and extend periods between maintenance work by looking after the equipment’s parts” Porfirio Cañamar, General Manager at L&H Servicios Mineros
Jeff Wandler, Corporate Vicepresident at L&H Industrial,
weaknesses and prevent failures,” states Cañamar. David
an international aftermarket service provider, states that
Reyna, International Sales Manager for Mexico and Peru at
several engineering procedures and services can enhance
L&H Industrial, says that the company’s status as a global
equipment performance and reduce maintenance cost at
player with a presence in every major market in the world
mine sites. “We provide more options to deal with negative
enhances the quality it can offer in any location. “We have
situations that machines can run into,” he says. L&H can
brought in people from Wyoming who are very excited to
modify mechanical processes in order to allow machinery
come and teach our engineers in Mexico. We have hired
to perform additional tasks. It can also expand the life
young local people to participate in training programs and
span of components by introducing enhanced products
join our team. Similarly, we are able to use the labor that
that comply with stringent quality standards. Moreover, its
we have in Mexico for potential opportunities in the US,”
experience and knowledge allow the company to repair
Reyna explains. The company’s international presence has
broken components, thus avoiding costly replacements. “In
also allowed it to start manufacturing its own products,
sum,” says Wandler, “our clients are not held hostage by the
in order to better serve the mining industry with high-
original equipment manufacturers.” According to Porfirio
performance industrial components. “L&H Industrial has
Cañamar, General Manager at L&H Servicios Mineros, L&H’s
sales and support teams throughout the world. We can
Mexican subsidiary, the second largest cost of operating a
manufacture a product in Mexico and our solid business
machine – after the cost of the machine itself – is maintenance.
structure will ensure the product’s quality, as well as its
The sum of preventative and corrective maintenance costs,
economic competitiveness,” states Reyna.
plus the cost of interrupting production due to downtime, can truly represent a major financial setback for mineral
L&H Servicios Mineros is constantly developing in order to
exploitation projects. Therefore, L&H’s Mexican division has
offer the same services its parent company provides in the
gone to great lengths to offer comprehensive aftermarket
US. Thanks to Mexico’s geographical closeness to the US
services with the fastest response time in the market. “Our
and to the size of both countries’ mining industries, L&H
offices are located in strategic regions in Mexico”, Cañamar
has access to the advanced portable equipment it requires
points out. “We can cover all the needs of the industry in the
to do its work in Mexican mine sites. The company’s global
field and we can do so in a very short time, thus preventing
experience and its extensive pool of knowledge are being
prolonged interruptions to operations.”
leveraged to support the company’s expansion in the Mexican market. “Mexico represents around 25% of our
L&H does not only focus on corrective maintenance and
business, and it may grow up to 35% in the near future,”
emergency intervention. As the Mexican mining industry
Wandler adds.
131
| MINE PROFILES: DURANGO
4
5 7 2 6 8
DURANGO 1
1 2
132
3
TAYOLTITA, PRIMERO MINING The Tayoltita gold-silver underground mine is located on the border of Sinaloa and Durango, some 125km northeast of Mazatlán in central western Mexico. This mining complex comprises five underground zones: San Antonio West, Sinaloa Graben, Central Block, Tayoltita, and Arana Hanging Wall block. Its epithermal structures contain variable amounts of mineralization with concentrations of gold and silver. All of the San Dimas mines are underground operations using mechanized cut-and-fill mining methods. Primero Mining carries out all of its milling operations at the Tayoltita mill, which currently has a throughput capacity of 2,100 t/d.
LA CIÉNEGA, FRESNILLO PLC La Ciénega is a gold-silver mine located near the community of Nuestra Señora de la Ciénega in Durango. Fresnillo’s property consists of an underground mine and a flotation and leaching plant. The mine has ore bodies that include gold, silver, lead, and zinc concentrations, and has a current production of 59,644 ounces of gold and 2.188 million ounces of silver, with a workforce of 905 employees, including contractors. The mine has reserves of 830,000 ounces of gold and 54 million ounces of silver, and the estimated mine life is of 16.7 years. In addition, the mine produced 2,676 tonnes of lead and 2,919 tonnes of zinc in 2012. For 2013, a scoping study for the Las Casas project is planned, as well as the continued exploration of the Cebollitas cluster, a new mine satellite for La Ciénega.
3
LA PARRILLA, FIRST MAJESTIC SILVER
4
GUANACEVÍ, ENDEAVOUR SILVER
La Parrilla mining district is located in the physiographic sub-province of Sierras y Llanuras de Durango, and consists of several large vein systems. First Majestic has historically focused its exploration efforts on the Quebradillas, Vacas, San Marcos, and La Blanca mines and the Cerro Santiago, Viboras, San Nicolás, and Sacramento areas. The property began operations in October 2004. It recently underwent a fifth major development project that further expanded the mill to 2,000 t/d. The expansion was deemed commercially effective in March 2012, when the new parallel 1,000 t/d flotation and 1,000 t/d cyanidation circuits became fully operational. At the newly designed run rate of 2,000 t/d, La Parrilla will produce in the range of 3.3 to 3.4 million ounces of silver equivalent annually.
The Guanaceví mine is located 260km northwest of the city of Durango. The 4,100 hectare property operates in low-sulphidation epithermal veins that are typically thousands of meters long, 600m deep, and 1 to 5m thick. Endeavour Silver acquired Guanaceví in 2004 and since then the mine has produced more than 15 million ounces of silver and 38,000 ounces of gold. The operations include three underground silver-gold mines, a cyanidation leach plant, mining camp, and administration and housing facilities. They provide employment for more than 450 people and engage nearly 200 contractors. In 2012 Guanaceví produced 2.5 million ounces of silver and 7,874oz of gold.
| STATE PROFILE: DURANGO
The state of Durango has a long mining tradition that dates
companies operating in the state, totaling 91. That year
back to pre-Hispanic times, reaching its peak during the
the state’s metal mining production value amounted to
time of Spanish Colonization. In 1552 the Cerro de Mercado
US$900 million, representing 6% of Mexico’s total mining
iron deposit was discovered, and shortly afterwards the
production value. Regarding nonmetallic minerals, the
city of Durango was founded. By 1604 the region had 52
state is also an important producer of bentonite, marble,
mines and 23 processing haciendas. By 1897 this number
and perlite.
had grown to 709 mines and 89 processing haciendas. The main mineral deposits discovered throughout Durango’s
In 2010 Peñoles acquired the Velardeña project from
history have been La Ojuela, Topia, Canelas, Velardeña,
Grupo Mexico, and invested US$230 million in modernizing
Tayoltita, Cerro de Mercado, Bacis, Avino, Guanaceví,
the mine operation, which started production in the first
Magistral del Oro, La Ciénega de Nuestra Señora, La
semester of 2013. In 2011 Fresnillo expanded its Santiago
Platosa, Indé and Peñoles.
Papasquiaro processing plant, which operates by flotation at a capacity of 2,200 t/d Chesapeake Gold has invested
According to the Mexican Geological Survey there are at
US$3.5 billion in its Metates project, which is considered to
least 75 mining projects at the exploration and exploitation
be one of the largest undeveloped gold and silver projects
stages in Durango, which has 23 mining regions that
in the world. The prefeasibility study indicated a large
are usually associated with the magmatic formations
120,000 t/d open pit operation with a 20 year mine life
of the Sierra Madre Occidental, and less commonly in
and accumulated gold production of 17.2 million ounces.
the Sierra Madre Oriental. During 2011 Durango ranked
Over the course of the mine life the project is expected to
third in the country for the number of foreign mining
generate US$20.1 billion.
5
6
7
8
TOPIA, GREAT PANTHER SILVER The Topia silver-gold-lead-zinc property is located in the heart of the Topia mining district in Durango. The property consists of four discrete blocks of mineral exploitation concessions covering 6,438 hectares. The concessions are owned by Great Panther’s Mexican subsidiary Minera Mexicana El Rosario. The Topia silver-gold-lead-zinc mines are small narrow-vein underground operations utilizing a modified cut-and-fill mining method known as resuing. The ore is processed to produce separate high quality precious metal-rich lead and zinc concentrates. These concentrates are transported to the Pacific port of Manzanillo where they are sold to commodity traders. Production at this mine reached 555,710oz of silver in 2012.
EL CASTILLO, ARGONAUT GOLD El Castillo is an open-pit gold mine located 100km north of the city of Durango. The El Castillo mine lies in the Altiplano Subprovince of the Sierra Madre Occidental region of Central Mexico. Construction commenced in 2007 with commercial production reported in 2008. The project was acquired by Argonaut Gold in 2009 and within just one year of acquiring ownership of the property the production profile was brought up to a 72,000oz run rate. El Castillo produced 87,712oz of gold in 2012, but for 2013 it is expected that it will reach between 90,000 and 100,000oz per year. The El Castillo mine is a relatively low grade gold deposit that benefits from low strip ratio and disseminated mineralization that is complimentary to bulk mining activities and good heap leach recoveries.
VELARDEÑA, GOLDEN MINERALS The Velardeña mining district is located within the municipality of Cuencamé, in the northeast quadrant of the State of Durango, Mexico. The Velardeña mine is situated on the eastern flank of the Sierra Madre Occidental mineral belt, on the boundary between the Sierra Madre and the Mesa Central metallogenic provinces. The regional geology is characterized by a thick sequence of limestones and minor calcareous clastic sediments of Cretaceous age, intruded by Tertiary plutons of acid to intermediate composition. Golden Minerals installed two mills on this asset: a 300 t/d flotation sulfide mill located near the town of Velardeña and a 550 t/d cyanide leach oxide mill with a Merrill Crowe precipitation circuit and newly-installed flotation circuit. Golden Minerals suspended production on June 21, 2013, when the property was put onto a care and maintenance program to conserve the asset until operating plans and silver and gold prices indicate a sustainable cash margin for operations.
EL HERRERO, GRUPO BACIS El Herrero is an underground gold-silver mine located in the province of Barrancas in the state of Durango. In 2012 El Herrero produced 20,500oz of gold and 1.47 million ounces of silver; the precious metal concentrates are taken to Peñoles’ refinery in the city of Torreon, Coahuila to be processed.
133
134
GOLD
5 Although silver has historically been the protagonist in Mexican mining, over the past five years Mexico’s gold production experienced a dramatic increase and today the country is the world’s 11th largest gold producer. In addition to high gold prices, Mexico benefitted from the combination of good gold deposits, favorable conditions for heap leaching, and a historical and stable mining culture. Sonora, Chihuahua, and Zacatecas are the main gold producing states in the country, and have been key contributors to the 4.1 million ounce increase in gold production over the past two years.
This chapter provides an overview of the country’s main gold mines and presents the strategies, achievements and priorities of the most prominent gold mining companies operating in the country. Special attention is dedicated to the challenge of turning discoveries into operating mines in the current financial context, as well as the increasing industry focus on lowering production costs. We also present an overview of Chihuahua’s mining industry and the ambitions of the state government to attract increased mining investment with the aim of accelerating the state’s economic growth.
135
Delivering Success through Operations and Development
Two 100% owned
open pit heap leach operations (San Francisco/ La Chicharra)
www.timminsgold.com 45,000 hectare
land package with excellent infrastructure
and desirable location
Gold reserve
of 1.33 M ounces (72.3 M tonnes @ 0.572 g/t Au)
Targeted production
of 125,000 ozs Au
in 2013
136
Timmins Gold Suite 1900 - 570 Granville St Vancouver, BC, Canada V6C 3P1 info@timminsgold.com Tel:604-682-4002 Fax:604-682-4003
Mina San Francisco Blvd. Solidaridad #335 A Edificio ‘A’ Primera Planta Local 3 Col. Palmar del Sol Hermosillo,Sonora, Mexico 83270 arturo@timminsgold.com Tel: 011-52-662-218-1067 Fax: 011-52-662-260-3503
CHAPTER 5: GOLD 138
Key Trends in the Global Gold Mining Industry
139
Mexico’s Growing Prominence as a Gold Producer
140
VIEW FROM THE TOP: Momentum for Gold Mining Investment
142
MINE PROFILES: Mexico’s Main Gold Mines
143
Guerrero Gold Belt
144
Gold Production by Mine
145
Goldcorp’s Mexico Focus
146
MINE SPOTLIGHT: Los Filos
148
VIEW FROM THE TOP: Strategic Focus on High Quality, Low Cost Assets
150
Reactivation at Sinaloa’s Most Significant Gold Project
151
Cost Competitiveness Key in Extraction Processes
152
VIEW FROM THE TOP: The Roots of Mining in San Luis Potosi
153
Looking Beyond Cerro San Pedro
154
MINE SPOTLIGHT: Cerro San Pedro
156
Frisco Expects to Duplicate its Precious Metal Production
157
The Importance of Stakeholder Satisfaction
158
VIEW FROM THE TOP: Continuous Growth in Gold Production
159
Building Sound Mining Processes
160
Uncovering Mexico’s Underlying Gold Potential
162
MINE SPOTLIGHT: La Herradura
164
Focus on Mexican Gold
165
Federal Government Support for Mining in Chihuahua
166
VIEW FROM THE TOP: Paving the Road for Chihuahua’s Mining Industry
167
VIEW FROM THE TOP: Mining Investment as a Catalyst for Economic Growth
168
MINE PROFILES: Chihuahua
137
KEY TRENDS IN THE GLOBAL GOLD MINING INDUSTRY For much of 2013 talk in the mining industry has centered
The gold mining companies that will prove successful in
on the price of gold and its subsequent impact on the
surviving these uncertain times are those that recognize
prolonged boom that the industry has been enjoying.
the importance of keeping cash costs as low as possible,
Concerns were first raised in April when the price dropped
while also making a convincing argument to investors of
15% in just two days. Further volatility followed, with the
the healthy return on investment that can still come from
price dropping below US$1,200 in June 2013, for the first
investing in gold projects. The noteworthy performance of
time in almost three years. This represented a more than
a number of gold mining companies operating in Mexico
30% decrease since the 2011 peak price of US$1,895, and it
today demonstrates that the industry is still more than
is the precious metal’s biggest price drop in 30 years.
lucrative. Major gold mining companies such as Goldcorp and Fresnillo remain solid, with a number of gold projects
The decrease in gold demand worldwide and subsequent
at the production and exploration stages. What is perhaps
fall in price are attributed by the World Gold Council to a
more remarkable is the emergence of a number of small to
shift in US investor sentiment. Greater financial stability
medium-sized gold companies that are using their Mexican
in the US, the world’s leading economy, set the stage for
properties to consolidate their position in the market.
a decrease in inflation and improved interest rates in the
Companies such as Argonaut Gold, AuRico Gold, New
country, which in turn have caused investors to turn to
Gold and Timmins Gold have built success by minimizing
different, riskier investment strategies and away from gold.
the cash costs of production on high quality deposits
While speculation over the future trajectory of the gold
in Mexico. Due to the favorable conditions for mining in
price continues, investment in mining on the whole has
Mexico, for the most part these companies have been able
been impacted, on the assumption that lower prices will
to keep their total average cash costs below US$600; New
have a negative impact on miners’ profit margins. While
Gold has been particularly successful in this area, reporting
this speculation is a natural result of the recent volatility
a forecasted total cash cost for 2013 of US$350 on its
we have seen in the market, the current gold price must
Cerro San Pedro property, and after setting a record total
be taken in a broader context, and the vast opportunities
cash cost of US$115 per ounce in 2011. With the gold price
for continued profits on behalf of gold mining companies
still sitting comfortably above US$1,000, these companies
cannot be overlooked. “In spring we saw a big correction
therefore stand in good stead to continue generating
in gold and silver; percentage-wise, that was the biggest
excellent profits in Mexico, and there remains a great deal
the market has seen in a long time,” says James McDonald,
to gain from continued investment in these companies. In
President and CEO of Kootenay Silver. “A lot of people have
the face of continued volatility in the gold price, Mexico
withdrawn from the market, partly because they are afraid
is likely to maintain a prominent role in the portfolios of
of a second correction. But we have to maintain perspective
these gold companies, given the quality of the deposits
because the price of gold is still around US$1,300 and silver
that are still waiting to be mined in the country and the low
is around US$22, and those are good prices.”
cost at which they can be exploited.
GLOBAL GOLD PRODUCTION (METRIC TONNES AND PRICE (US$ PER OUNCE) 2,200
3,000
2,000 2,500
1,800 1,600
2,000
1,400 1,200
1,500
1,000 800
1,000
600 500
400 200
0
2008
2009
2010
2011
2012
2013
0
Source: InfoMine
138
MEXICO’S GROWING PROMINENCE AS A GOLD PRODUCER More and more, the international mining community is
GLOBAL GOLD PRODUCTION BY COUNTRY
starting to pay attention to Mexico as an important gold producer. Though it was gold that originally brought the Spanish colonizers to Latin America in the 15th century, it
13.7%
is silver that has been the protagonist in Mexico’s mining history, with gold being produced in much lower quantities
23.9%
and generally as a by-product of other mining operations.
9.3%
However, times are now changing and Mexico is emerging as a major gold producer in its own right. Between 2008 and 2011 the level of gold production in Mexico increased by
1.7%
55%. The dramatic increase in gold production continued
2.1%
again in 2012, with production 15.96% higher than it had
8.5%
2.2% 3.2%
been in 2011. This represents a faster growth rate than
7.6% 3.3%
overall mining production in Mexico, which grew at a rate of 12% in the same year.
6.3%
3.3% 3.5%
3.8%
6.1%
This increase comes in large part as a result of the sustained upwards trend in metal prices, which saw the price of gold reach US$1,688 at the beginning of 2013 before it declined to US$1,320 by September. It is also the natural result of the favorable conditions for gold mining that exist in Mexico, which combines good gold deposits, favorable conditions for the preferred extraction technique of heap
China
Uzbekistan
Australia
Ghana
US
Mexico
Russia
Papua New Guinea
South Africa
Brazil
Peru
Chile
Canada
other
leaching, and a historical and stable mining culture. The rise of Mexico as a destination for gold mining comes at a time when modern technology is improving the options available to mining companies for the exploitation of lower grade deposits at affordable prices, and this
Indonesia
is something that a number of mining giants are doing
Source: USGS
successfully in Mexico today. One of the great appeals of gold mining in Mexico is the amenability of its gold
Guerrero Gold Belt is also emerging as a major contributor
deposits to heap leaching techniques. In fact, nine of the
to Mexico’s gold production, with over 21 million ounces
top 10 producing gold mines in Mexico use heap leaching
of known gold resources, and only an estimated 0.5% of
techniques in their production processes. Heap leaching is
the state’s land having been explored. Mexico’s first and
a hydrometallurgical process that is used mainly on low-
second gold producing mines, Peñasquito in Zacatecas
grade deposits to separate the ore from the accessory
and Los Filos in Guerrero, both belong to Goldcorp,
minerals. The technique is relatively new, but generally
positioning the company as Mexico’s biggest gold
favored because it is one of the most economical
producer, accounting for 26% of gold production in the
production methods in gold mining operations. “In Canada,
country in 2012. With large gold mines such as Chesapeake
due to the formation of the deposits and the environment
Gold’s Metates in Durango and Goldcorp’s Camino Rojo
there are not too many possibilities for heap leaching. The
in Zacatecas currently in development, which between
deposits in Mexico are much more likely to be oxidized,
them have over 20 million ounces of proven and probable
making heap leaching processes more probable,” says Tom
gold resources, gold production in Mexico is on course
Burkhart, Vice President of Exploration at Argonaut Gold.
to continue growing in the coming years. “In the last two years the production of gold in Mexico has increased by
According to Camimex, 102.8 tonnes of gold were
more than 4.1 million ounces The country will remain the
extracted in Mexico in 2012, with the states that produced
number one producer of silver, but will also become an
the majority of that gold being Sonora (29%), Zacatecas
even more important player in the gold market,” says
(21.1%) and Chihuahua (19.2%). The Sonora Gold Belt is
Rafael Alexandri Rionda, former Director General of the
currently the leading gold producing region, however the
Mexican Geological Survey (SGM).
139
| VIEW FROM THE TOP
MOMENTUM FOR GOLD MINING INVESTMENT MARCUS GRUBB Managing Director, Investment of the World Gold Council
Q: What is the importance of gold in today’s global
following: control costs and implement capital discipline;
economy?
deliver on promises; improve returns; resist new projects
A: Gold plays a vital and diverse role in today’s global
or expensive acquisitions, even when prices rebound;
economy. Gold jewelry demand accounted for more than
and negotiate and manage resource nationalism. These
62% of global jewelry demand in Q1 2013. China and India
challenges apply to the whole extractive sector, but are
are the two major markets for gold, and along with a
certainly highly relevant to gold miners, too.
growing middle class and cultural trends, a more positive economic outlook contributes to positive consumer
Q: What impact do you expect the recent drop in gold
sentiment in these markets, demonstrating how intimately
prices to have on the gold mining industry in the short,
gold and the economy are related.
medium and long term? A: The rising gold price in the last decade has fueled an
Q: What makes gold continue to be a worthwhile
increase in expansion projects and exploration, but major
investment?
new finds have proved highly elusive. Mining stocks are not
A: Gold operates on the basic economic fundamentals of
immune to wider swings in the equities market, and can be
demand and supply. The World Gold Council’s view is that
affected by negative investor sentiment and fluctuations in
demand is strong while supply remains constrained, and
the spot gold price. In the short term, this has been evident
that this dynamic ultimately drives the long-term price and
in the recent price corrections seen in the gold market in
demand for the metal. From an investment perspective,
April and in June 2013. The current price environment
gold has a clear role to play as a strategic asset within
has resulted in many mining companies focusing on cost
a diversified portfolio that contains other riskier assets.
reduction and core assets, with less enthusiasm for riskier
Portfolios that contain even a small allocation of gold are
projects. It has also led to some companies reassessing
proven to be generally more robust and better able to cope
the levels at which ore grades are considered a viable
with market uncertainties than those that do not, showing
resource. Quality, rather than quantity, has become a basic
improved stability of returns. In relation to currency, gold’s
principle for many miners. In the current environment gold
unique foreign exchange-hedging characteristics offer
mining companies are seeking to secure future success by
significant additional benefits in optimizing risk-adjusted
focusing on core expertise and quality resources, cutting
returns during periods of extreme market stress and
costs, reporting in a consistent and transparent fashion, and
heightened currency tail-risk.
engaging with stakeholders to better explain the beneficial impacts of their operations. Despite the short-term impact
Q: What are currently the main priorities and challenges
that this may have on the mining industry, the underlying
for the gold mining industry?
positive case for gold remains robust. The long term
A: While the World Gold Council’s core mission is to
fundamentals of the metal point to a growing gold market
develop markets by stimulating and sustaining demand
across all territories, and if this persists, as we believe it will,
and we have therefore traditionally been less focused on
the industry should be able to reassert itself and continue to
mine production issues, in recent years we have sought
be both industrious and profitable in the long term.
to understand how we might assist in and contribute to
140
creating a more sustainable market on both the demand and
Q: How are you working together with your members
the supply side. With regards to the main challenges facing
to introduce the ‘all-in sustaining cost’ and ‘all-in cost’
gold miners, we note the recent findings published by PwC
metrics to report production costs?
in their annual review of the general mining industry (Mine
A: The World Gold Council has been working closely with its
2013: A Confidence Crisis), which highlighted the lack of
member companies to develop these non-GAAP measures,
confidence in the sector and suggested that to re-engage
which are intended to provide further transparency into the
investors, mining companies must do a combination of the
costs associated with gold mining, while also improving
investor understanding. The World Gold Council’s members
gold producing country in the world. This will undoubtedly
requested help to develop the non-GAAP measure, and as
mean that gold is increasingly significant to the development
a result we have been working closely with our members,
of the local economies in which mining occurs. The rapid
under the supervision of the Council’s Board, to develop
development of large scale mining projects in locations
this new approach. It is expected that these new metrics,
that may not previously have experienced major industrial
the ‘all-in sustaining cost’ and the ‘all-in cost’, will be
enterprise presents unique challenges that must be
helpful to investors, governments, local communities and
mindfully and effectively handled. However, if the impressive
other stakeholders in understanding the economics of
recent growth seen in gold mining in Mexico is coupled with
gold mining. The ‘all-in sustaining cost’ is an extension of
ongoing efforts to drive stability and endurance in the sector
existing ‘cash cost’ metrics, and incorporates costs related
from a global perspective, the outlook for the Mexican gold
to sustaining production. The ‘all-in cost’ includes additional
mining industry is extremely optimistic.
costs that reflect the varying costs of producing gold over the life-cycle of a mine. It is up to individual companies to
Q: What are your perspectives on the development of the
determine how they report to the market and to decide
gold industry in the coming five years, and what are your
whether their stakeholders will find these new metrics of
goals for helping the industry to reach its full potential?
value useful in understanding their business; it is expected
A: The World Gold Council looks at the underlying
that, since many companies report on a calendar year basis,
fundamentals and market sentiment for gold, adopting
they may choose to use these metrics from January 1, 2014.
a longer term view and a more considered approach. Despite recent variances in the price of gold, the World
Q: How does the World Gold Council view the position of
Gold Council believes that the long term outlook for gold
Mexico in the global gold mining industry?
remains positive.
A: Whilst we cannot claim to be experts in the local mining sector, the World Gold Council is certainly aware that gold
We actively engage in joint activities to promote demand
production has increased dramatically in Mexico over the
for gold in all its forms and are constantly reviewing
last decade, rising over 365%, from around 20 tonnes in
opportunities that aim to stimulate and sustain demand for
2003 to over 95 tonnes in 2012. It is now the ninth largest
gold and create enduring value for its stakeholders.
141
| MINE PROFILES: MEXICO’S MAIN GOLD MINES
33
10 3
26
16 18
12
9
36 22 5 20
28
4 17
29
11 15
40 41
35
8
27
14 37
13
1 39 42 24 19 6
23 7
38 25 34
32
31 2
142
1. Peñasquito, Zacatecas
15. El Sauzal, Chihuahua
2. Los Filos, Guerrero
16. El Chanate, Sonora
3. La Herradura, Sonora
17. Ocampo, Chihuahua
4. Pinos Altos, Chihuahua
18. Noche Buena, Sonora
5. Mulatos, Sonora
19. El Saucito, Zacatecas
6. El Coronel, Zacatecas
20. Dolores, Chihuahua
7. Cerro San Pedro, San Luis Potosi
21. El Águila, Oaxaca
8. La Ciénega, Durango
22. Santa Elena, Sonora
9. Mercedes, Sonora
23. NEMISA, San Luis Potosi
10. Soledad-Dipolos, Sonora
24. Fresnillo, Zacatecas
11. Palmarejo, Chihuahua
25. Bolañitos, Guanajuato
12. San Francisco, Sonora
26. Buenavista del Cobre, Sonora
13. Tayoltita, Durango
27. El Herrero, Durango
14. El Castillo, Durango
28. La Colorada, Sonora
| GUERRERO GOLD BELT
The Guerrero Gold Belt (GGB) is a northwest-southeast aligned trend of gold intrusions that span over 55km in the state of Guerrero. This mining district is typified by large and multiple deposits scattered over a broad area, albeit unified by the same geological characteristics. One of the most important features of the GGB – besides its obvious geological potential – is the infrastructure found near the district. The presence of highway infrastructure connecting Mexico City to Acapulco, access to water and electricity, as well as the availability of a qualified workforce, have made this district very attractive to investors. The GGB is described as an intrusion hosted skarn-porphyry style that includes a strong epithermal overprint and is associated with a series of magnetic anomalies along a 55km northwest trending strike length. The mineralization is associated with early Tertiary granodiorite porhyries that were formed in Cretaceous limestones and sandstones. In addition to their common iron or garnet-pyroxene alterations, skarns along the trend are also associated with other products such as quartz, sericite, clays, hypogene iron oxides, and sulfide minerals. Each of the gold deposits within the GGB often occur in clusters within or near the contacts of these intrusions and typically have deposits in excess of 3 million ounces of gold. The history of the GGB goes back to 1924, when Francisco Urias found an important gold deposit in Xochilapa. He operated a small family-owned mine and mill until 1988, producing a reported total of 360,000oz of gold. This discovery attracted the attention of many small mining companies looking for gold and other metals such as silver, lead, and zinc. Once these small
21
scale operations reported success, larger mining companies
30
came to explore the area. The original Nukay mine was a small underground cut-and-fill gold mining operation where about 500,000 tonnes of ore – grading 18 g/t of gold (290,000oz of gold) – were extracted between 1947 and 1964. The Morelos Mineral Reserve was created in 1983 by the Federal Mexican Government and consisted of 47,000 hectares, where many of 29. Alamo Dorado, Sonora
the current projects (such as Nukay, Xochipala, and Bermejal)
30. San José, Oaxaca
are located. After the privatization of the Morelos Mineral
31. Campo Morado, Guerrero
Reserve in 1998, the mining district saw a significant increase in
32. El Cubo, Guanajuato
exploration, leading to several new discoveries that rank today
33. San Felipe, Baja California
among the biggest mineral ore deposits in the country.
34. Guanajuato, Guanajuato 35. Guanaceví, Durango
During the 1990s approximately 250,000oz of gold were
36. Mexicana del Cobre, Sonora
discovered. This has since increased considerably. The discovered
37. Velardeña, Durango
5.4 million ounces at the Morelos project and the 13 million ounces
38. Asientos, Aguascalientes
at Los Filos mine, plus the 2.2 million ounces found at Ana Paula,
39. Tayahua, Zacatecas
push the GGB mining district up to over 21 million ounces of gold.
40. San Fco. del Oro, Chihuahua
These discoveries position Mexico as a prominent new source of
41. Santa Bárbara, Chihuahua
mega mineral deposits and possibly one of the key players in the
42. La Colorada, Zacatecas
gold market within the next five years.
143
Mine
Company
State
Thousand ounces
Peñasquito
Goldcorp
Zacatecas
411.0
Los Filos
Goldcorp
Guerrero
340.0
Fresnillo plc - Newmont
Sonora
314.5
Pinos Altos
Agnico Eagle
Chihuahua
234.8
Mulatos
Alamos Gold
Sonora
200.0
El Coronel
Minera Frisco
Zacatecas
168.2
New Gold
San Luis Potosi
137.6
La Ciénega
Fresnillo plc
Durango
125.3
Mercedes
Yamana Gold
Sonora
116.2
Fresnillo plc - Newmont
Sonora
107.3
Palmarejo
Coeur Mining
Chihuahua
106.0
San Francisco
Timmins Gold
Sonora
94.4
Tayoltita
Primero Mining
Durango
87.9
El Castillo
Argonaut Gold
Durango
87.7
El Sauzal
Goldcorp
Chihuahua
82.0
El Chanate
AuRico Gold
Sonora
71.1
Ocampo
Minera Frisco
Chihuahua
66.4
Fresnillo plc - Newmont
Sonora
63.1
Fresnillo plc
Zacatecas
45.2
Dolores
Pan American Silver
Chihuahua
43.5
El Águila
Gold Resources
Oaxaca
34.4
SilverCrest Mines
Sonora
33.0
NEMISA
Neg. Mra. Sta. Ma. de la Paz
San Luis Potosi
30.3
Fresnillo
Fresnillo plc
Zacatecas
29.6
Bolañitos
Endeavour Silver
Guanajuato
25.9
Grupo Mexico
Sonora
22.4
Grupo Bacis
Durango
20.5
Argonaut Gold
Sonora
20.4
Pan American Silver
Sonora
18.0
Fortuna Silver
Oaxaca
17.9
Nyrstar
Guerrero
17.4
Endeavour Silver
Guanajuato
13.3
San Felipe
Minera Frisco
Baja California
10.8
Guanajuato
Great Panther Silver
Guanajuato
10.3
Guanaceví
Endeavour Silver
Durango
7.9
Grupo Mexico
Sonora
7.8
Golden Minerals
Durango
6.4
Asientos
Minera Frisco
Aguascalientes
6.1
Tayahua
Minera Frisco
Zacatecas
5.5
San Fco. del Oro
Minera Frisco
Chihuahua
5.3
Santa Bárbara
Grupo Mexico
Chihuahua
5.0
Pan American Silver
Zacatecas
3.6
La Herradura
Cerro San Pedro
Soledad-Dipolos
Noche Buena El Saucito
Santa Elena
Buenavista del Cobre El Herrero La Colorada Álamo Dorado San José Campo Morado El Cubo
Mexicana del Cobre Velardeña
La Colorada Other
51.5 TOTAL
144
3,305.5
Source: Camimex
GOLD PRODUCTION BY MINE
GOLDCORP’S MEXICO FOCUS Goldcorp is one of the biggest and fastest growing senior
completed by the end of 2014, and which will overcome
gold producers in the world, with operating assets including
the key obstacle to resuming operation of the sulfide plant
five mines in Canada and the US, three mines in Mexico, and
at its designed capacity. The company is also currently
three in Central and South America. The Canadian company,
expanding the crusher capacity in Los Filos to improve the
which employs over 16,000 people worldwide, ended 2012
rate of recovery from 57% to 72%.
with record revenues of US$5.4 billion and gold production of 2.396 million ounces. Ian Telfer, the company’s Chairman,
In order to mitigate any concerns the local communities
wrote in his 2012 letter to shareholders that although there
may have regarding the mining operations, Goldcorp is
are many risks over which the company has no control,
working with them in order to understand and address
such as market prices, by focusing on achieving the lowest
their needs. The company’s strategy to hire locally when
possible production costs it will be possible to manage that
possible, providing employment opportunities for both
risk. Over the last decade Goldcorp’s strategy has been
local and state residents, has proved to be successful
based on acquiring high quality assets with large, low-cost
at Peñasquito where 72% of the current employees are
ore bodies in politically stable jurisdictions, and putting
originally from the state of Zacatecas. At this mining
qualified human capital in place to operate the mine sites.
location the company provides educational support programs that include scholarships as well as an adult
Currently, Goldcorp has three operating properties and
education program. The company has also funded the
two development projects in Mexico. Its Peñasquito mine
construction of a technical school that provides programs
in Zacatecas is the company’s second most productive
for mechanics and electricians, which accepts 135 students
operation after Red Lake, its flagship property in Ontario.
per year. At present, 50 students carry out professional
After having overcome a land dispute by the end of the first
practices at the mine site each year. The company also
semester of 2013, Peñasquito is considered a world class
runs a microfinance project that boosts small business
asset that is destined to be a key driver of the company’s
creation in the surrounding communities, including textile
cash flow and production growth for years to come. Last
production, mesquite woodcrafts, ecotourism, and small-
year, Peñasquito produced 411,300oz of gold, overtaking the
scale industrial sewing. In September 2013, UNAM and
Los Filos mine in Guerrero that produced 340,400oz, and
Goldcorp signed a collaboration agreement, in which the
staying far ahead of the El Sauzal open pit mine in Chihuahua
mining company donated US$250,000 for scholarships in
that produced 81,800oz. The combined production of these
the Earth Science department.
three properties amounted to 833,500oz of gold in 2012, which represents 26% of Mexico’s total gold production for
Safety plays a big role in the company’s sustainable
the whole year.
growth philosophy. After the 2010 fatality at Peñasquito, it focused on its program “Safe Enough For Our Families”,
Peñasquito began commercial operations in 2010 and has
based on three themes: care, think, act. The program has
since become the largest gold mine in Mexico, but also is the
reaped positive results, such as the incidence rate falling
fifth largest silver mine in the world, and the second largest
by 15% in 2012, and Los Filos becoming the first mine in
in Mexico. This has been possible despite several challenges
Goldcorp history to retain the Best Performance award for
the company has faced in relation to water availability at the
two consecutive years, by maintaining the lowest injury
site, which is expected to limit total production during 2013
rate in the company. Peñasquito also led the way for the
to between 360,000 and 400,000oz of gold. As part of
company’s other mines with several initiatives, such as its
Goldcorp’s production enhancement strategy the company
Safety, Environmental and CSR fare, and the introduction
plans to invest US$150 million in a water well that will be
of health activities into the daily work routine.
145
| MINE SPOTLIGHT
LOS FILOS Goldcorp, one of the world’s fastest growing senior gold producers, started commercial production in January 2008 on Los Filos’s two open pit mines – Los Filos and El Bermejal – and one underground mine. In 2009 Los Filos became Mexico’s largest gold producing mine, a position it maintained until last year when it was overtaken by Peñasquito, which will also be Mexico’s largest open pit mine. Los Filos is located in the Nukay mining district of central Guerrero State, approximately 230km south of Mexico City. In 2012, this mining complex produced 340,400oz of gold, with an average ore grade of 0.69 g/t. Total cash cost per ounce increased by 19% to reach US$551, while the mine reached an average realized gold price of US$1,663 last year. The ore bodies at Los Filos and El Bermejal consist of iron-gold skarn with minor amounts of copper and silver at the intrusivelimestone contact. Ore bodies also occur with endoskarn, and are disseminated within the hydrothermally altered intrusive rocks. At El Bermejal mineralization is distributed around a granodiorite stock, both at the limestone contact and within the intrusion. The Los Filos ore body is associated with a diorite sill. The Los Filos mine contained 7.43 million ounces in proven and probable gold reserves at the end of 2012, compared to 7.75 million ounces the previous year. Its strong potential for the discovery of significant new reserves in the current open pit and underground operations as well as in the new 4P project was confirmed by the 2012 exploration program, which ended successfully with an additional 0.5 million ounces in gold reserves confirming the extension of Los Filos pit to the south towards the 4P area, and El Bermejal pit to the north and south. Further drilling is planned at 4P with the aim of developing an open-pit mine that will be integrated into the existing operations.
GOLD GRADE (G/T) & GOLD PRODUCTION (OUNCES) 0.8
350,000
336,500
0.7
340,400
306,100
0.6 300,000
0.5 0.4 0.3
250,000
0.2 239,300
0.1
2012
2011
2010
200,000 2009
2008
0
213,600
Source: Goldcorp
147
| VIEW FROM THE TOP
STRATEGIC FOCUS ON HIGH QUALITY, LOW COST ASSETS LEFT: Scott Perry, President & CEO of AuRico Gold RIGHT: Luis Chávez Martínez, Sr. Vice President Mexico at AuRico Gold
Q: How do you view the current market conditions for
portfolio in the current market conditions, the company
gold mining companies?
would be in a less favorable position. We would have one
SP: If you look at the majority of gold mining companies
or two assets that would not be producing, and having to
their strategy has been to get bigger purely for the sake
address the resulting challenges would have distracted
of growth, with major managerial decisions being made
our management team from our better properties. This
based on the sole objective of producing more and more
strategic decision has put us in a very good position, and
gold rather than maximizing financial returns for the
we were very fortunate with our timing – if we would be
company’s shareholders. AuRico Gold’s management team
trying to do that in today’s market we would not be getting
started 2012 by adjusting its strategy in this area. We could
the same amount of consideration. In today’s market no
see that shareholders were becoming disenchanted with
one is trying to buy, everyone is trying to sell.
this constant pursuit of growth, so we decided that it was more important to trade up on the quality of the assets in
Q: Aside from the properties of the asset, what are the
our portfolio. Our definition of quality is based on four key
characteristics that AuRico Gold takes into consideration
criteria: location – we want all of our assets to be based
before acquiring an asset?
in North America; the quality and size of the deposit – we
SP: One of the items we would look at is the strength of
are looking for mines with good potential for longevity;
the operating team. We have been fortunate to have high
potential production cost – we are looking for assets that
quality teams at both our mines and this is a key criterion
are in the lower production cost quartile; and the potential
we consider during our evaluation. We look at other things
for internal or organic growth – if you look at the two
as well, such as existing infrastructure, proximity to a trained
assets that we currently have, the production is growing
workforce, access to local suppliers, and existing relations
year after year, so we do not have to acquire that growth.
with local communities, in order to make our assessment.
When we applied this filter to the properties that we had
Q: What role does Mexico play in the portfolio of AuRico
in our possession in 2012, two of them met these criteria
Gold, a Canadian company with mining projects in both
and the other four did not. Two of those four assets
Canada and Mexico?
were located in Australia and therefore did not meet our
SP: Young-Davidson in Ontario, is our biggest mine and
geographical requirements. The other properties, while
represents about two thirds of our production profile. In
located in top jurisdictions, were higher cost, lower margin
Mexico we have El Chanate mine, which represents the
assets with limited potential for increased mine life. We
other third. Mexico is very important from a production
were diligent in our analysis and determined that it was in
point of view: El Chanate is fully built and we expect it to
the best interests of the company and its shareholders to
have up to 10 years of profitable production. El Chanate is
sell those four assets, and in doing so we raised in excess
a simple open pit heap leach operation and it has a very
of US$1 billion. We now have a good asset base that is
low stripping ratio, which means that we do not have to
underpinned by a very good balance sheet. We have
use a large amount of materials in order to draw a good
approximately US$250 million in cash, no corporate debt,
amount of gold out of it. El Chanate has a very good
and are paying dividends to our shareholders. We have
operating cash cost per ounce: we expect to be producing
also bought back a number of our shares, thereby reducing
at an average of just less than US$600 per ounce this year,
our shares outstanding.
which still offers a good profit margin taking into account the current gold price. Based on what we have seen today,
148
Q: How has this change in the company’s portfolio
the mine will still be producing gold in 2024. El Chanate
impacted the way in which AuRico Gold works?
has great exploration potential and we want to grow our
SP: It has really simplified the company and streamlined
operation organically. Our shareholders prefer this type of
our operations. If we still had those four properties in our
growth because, with the great cash balance that we have,
shareholders know that we will be disciplined. Outside
Q: What do you expect to be the role of Mexico in the
of that mine we are focusing seriously on exploration in
global gold mining industry, and in the development
Mexico. There is a lot of potential here, and we have a lot of
strategy of AuRico Gold, in the coming years?
expertise and specialized personnel in Mexico that we can
LC: Despite the current difficulties in the market and the
leverage in order to access that potential.
lower price cycle, we are seeing a lot of companies coming to and investing in Mexico. These are mainly Canadian
Q: What efforts is AuRico Gold making to constantly
companies, but there are more Australian companies
improve its safety performance?
starting to come into Mexico as well. The assumption has
SP: We are constantly rolling out leadership training in
long existed that Mexico is underexplored, and this holds
safety. I would call it courageous leadership training,
true. This is partly because Mexico still lacks infrastructure
because at the heart of the concept is the idea that
– areas of the country are still highly isolated, and mining
everyone who is a part of the organization is a leader
companies will always start with the more accessible
when it comes to safety, and each and every person in
areas and go to the more difficult to reach places last. The
our company is responsible for each and every person’s
information being generated by the Mexican Geological
safety. It does not matter if you are the CEO or you are
Survey (SGM) and other bodies like it will also encourage
the person who takes care of mine site cleanliness, you are
more mining activity in Mexico.
responsible for everyone. Our core value when it comes to safety is ‘Home safe, everyday’, and that is a concept
Mexico remains at the top of our list – there are many
that we are trying to ingrain in everyone who works for us.
opportunities for new discoveries here. Under President Peña
Our staff go through many safety inductions and training;
Nieto there will be greater investment in infrastructure, and
before anyone starts any new activity or project they have
that will open up more and more of the country for mining in
to go through a five point safety system, which identifies
the near future. On the other hand, we still have the very old
the hazards and how they are being mitigated, and ensures
problem of surface land access; the problem is that nobody
that they have discussed the activity with their inspectors
has been willing to put together the Agrarian Law and Mining
or supervisors. The company holds itself to the highest
Law in order to make an integrated set of surface land
international standards, and our aim is to have zero
regulations that work. 60% of land in Mexico is ejido land,
accidents. If we have just one safety incident it affects the
and if companies do not have good negotiating abilities they
compensation of everyone in the company; we have a zero
will have to spend a lot of money in order to access the land.
tolerance approach.
We see a lot of problems emerging from this issue in Mexico.
149
REACTIVATION AT SINALOA’S MOST SIGNIFICANT GOLD PROJECT The Sierra Madre Occidental, a mountain range that
amount to 1.2 million ounces of gold, of which 40% are
covers the main mining regions of Sonora, Chihuahua and
indicated resources and 60% are inferred resources, located
Durango, is a famous destination for mining exploration
on 69,000 hectares of land. “Our plan is to go into production
investment. However, many mining companies fail to
at San José de Gracia by the end of 2013 or the beginning of
include the northeastern region of Sinaloa in their plans,
2014. Our plan is to start production at San José de Gracia
even though it is part of the resource-rich mountainous
by the end of 2013 or the beginning of 2014. Our annual
region. DynaResource, a US-based junior exploration
production goal is 50,000oz for the first two years, and
company, currently runs operations in one of Sinaloa’s
afterwards we are planning to produce 100,000oz per year,”
most important mines. The property is called San José de
states Terán Cruz. Before beginning operating the company
Gracia, which has a historic production of 1 million ounces
has already established good relationships with the people
of gold. Pedro Terán Cruz, the Mexico-based consultant
from the surrounding municipalities. “We have put together
for the company, explains that the business environment
a great exploration team consisting of our personnel and
in Mexico favored the acquisition of this property. “The
of local people, which has turned out to be a great source
support towards the mining industry from one state to
of knowledge on the terrain and on where to find the best
another varies significantly. Sinaloa provides a very fast
opportunities,” he explains.
response when companies try to obtain permits and does not impose any kind of restrictions, which is reflected
“The promising outlook on San José de Gracia has allowed
in almost every aspect of the relationship between our
DynaResource to go public on the TSX. We have been lucky
company and the government,” he mentions.
to find ourselves in a very promising scenario, and we have the
“Our plan is to start production
best project in Sinaloa at the moment. We have been doing great with government relations and, in terms of mining, we
at San José de Gracia by the end
are at an advanced stage of the process and are very close to
of 2013 or the beginning of 2014.
to have an initial productive life of 10 years, which will likely
Our annual production goal is 50,000oz for the first two years, and afterwards we are planning to produce 100,000oz per year” Pedro Terán Cruz, Mexico Consultant for DynaResource
starting production,” Terán Cruz says. The mine is expected increase as the company completes more exploration works at the site and its surrounding areas. DynaResource will also continue generating value through its San Juan project, also located in Sinaloa, and through another asset located in San Luis Potosi, close to the famous Peñasquito mine. “We are a team that delivers results and together we have many years of experience in the mining industry. We have a sound project and the right market opportunities exist for us to succeed and become a very profitable company. As soon as we start
150
DynaResource owns San José de Gracia through its Mexican
producing we are expecting a four-or-fivefold increase in our
subsidiary, DynaResource de Mexico. The projects resources
stock market share price,” he adds.
COST COMPETITIVENESS KEY IN EXTRACTION PROCESSES Barclays reported in August 2013 that the average cash
equipment, and our prices are very competitive. We call
cost of gold mining rose 0.8% in the second quarter of the
our service llave en mano (turnkey service), through which
year, while marginal costs sprung up 5% due to the fall in the
we provide a full solutions package,” García explains.
precious metal’s price. According to the bank’s estimations, the cost of producing an ounce of gold in Mexico averages
The engineering expertise provided by SECL ensures that
US$775 per ounce. A company’s ability to extract the
the company’s services adapt to the needs of each mine.
highest amount of marketable mineral at the lowest cost
Horacio Páez, General Manager of Kappes, Cassiday del
possible is what determines a mine’s profitability and
Norte (KCN), mentions a recent project within a gold mine
viability. Therefore, many mining companies are focusing
in Chihuahua, in which the company provided its EPCM
on “cost per ounce” instead of “cost per tonne”, in a clear
service for leaching, mills and washing processes. “This
sign that the core business is not just the extraction of ore,
was an interesting project from the engineering aspect.
but also the metallurgic extraction processes.
For example, the mine employed backwash instead of selective flotation,” he begins. Páez explains that KCN
Since 1972 Kappes, Cassiday & Associates (KCA) has
and SECL also knocked down rock formations and built
specialized in providing metallurgical processing services
a vertical natural wall in order to set the mine’s primary
to the international mining community. The company is
crusher more efficiently. “Due to the mine’s characteristics,
highly specialized in processes such as cyanide metallurgy
we eliminated the need to use mills in the design of the
for the treatment of gold and silver ores, copper and base
absorption plant, which lowered our client’s investment
metal leaching, solvent extraction, gravity concentration,
capital,” Páez continues. “The company was very pleased
and electrowinning. KCA also provides construction
with our performance, and this has motivated them to ask
management,
(Adsorption-
for our services on two other projects. We are pioneers in
Desorption-Recovery plants), and performs environmental
develops
ADR
plants
what we do. Moreover, our broad experience in leaching
testing and analytical services, supported by its laboratory
processes distinguishes us.”
in Reno, Nevada. As a result of its efforts in research and development, KCA also provides new solutions for the industry, such as an on-site system that converts carbon fines and used carbon to a clean dry ash. This system also captures mercury through a revolutionary absorption system, thus making mining processes more sustainable.
“Due to the mine’s characteristics, we eliminated the need to use mills in the design of the absorption plant, which lowered our client’s
Through its procurement and logistics subsidiary in Mexico, Servicios Especializados de Compras y Logísticas del Norte (SECL del Norte), KCA provides EPCM (Engineering,
investment capital” Horacio Páez, General Manager of Kappes, Cassiday del Norte (KCN)
Procurement and Construction Management) services and supports efficient and environmentally responsible
In order to offer attractive prices to its customers,
metallurgic extraction processes in the Mexican mining
SECL maintains good relationships with its suppliers.
industry. SECL provides integrated support to its clients
“We listen to each other and comply with each other’s
from the earliest stages of mine development, beginning
requirements,” explains García. “The same thing happens
with prefeasibility studies, which are conducted by highly
with our contacts in transportation and customs brokers.
experienced engineers based in Reno. The results of these
Our competitive prices are a result of our team work,” she
studies are sent to clients for approval prior to starting
states. These commitments have allowed the company to
EPCM activities.
grow organically and offer its services to an increasing number of mining companies all over Mexico, regardless of
After only six years of operation SECL has gained the
the remoteness of their location. “We are currently working
trust of important precious metal producers in the
on a project in Sonora, that is expected to conclude by the
country. Carmina García, General Manager of SECL del
last quarter of the year, and we are working as well on an
Norte, mentions that this has been possible thanks to the
ADR expansion project in Guerrero,” mentions García. “We
company’s focus on its clients’ needs. “In every case, I work
are waiting to secure an expansion contract in Sonora, and
with our team of engineers who are based onsite - very
it is almost certain that our services will also be required
close to the clients - in order to perfectly understand their
for an expansion project in Durango. The market is still
needs. We have always selected the right material and
growing, and so is the company,” she states.
151
| VIEW FROM THE TOP
THE ROOTS OF MINING IN SAN LUIS POTOSI ARMANDO ORTEGA Vice President of New Gold and Director General of MSX
Q: New Gold’s Cerro San Pedro mine is the company’s
now New Gold is very proud to have had more than 400
sole project in Mexico, and has been operating almost
days of work without lost time, and is about to reach 2
continuously since the 1600s. Can you tell us about the
million man hours without accidents. I would also say that
history of the mine and your operations today?
a company needs to be resilient, and rigorous in terms of
A: This mine is extremely important to the history of the
applying its protocols and systems. New Gold has an ISO
state of San Luis Potosi, and explains the very erection of
14001 certification, and has also been granted the Socially
the state’s capital city. It was a Spanish captain, Captain
Responsible Company (ESR) award four times in a row; at
Caldera, who found the ore body of gold and silver, and
the corporate level New Gold won the Developer of the
thanks to him the small city of Cerro San Pedro, and later
Year Award in January 2013.
the current capital, were established. Although the capital of San Luis Potosi was founded in Cerro San Pedro in 1590,
Q: What is New Gold’s overall strategy and how does that
following some problems with the water wells it was later
apply to its Cerro San Pedro mine?
decided that the capital should be in a different place,
A: New Gold’s main priority is to build a solid operation,
where water would be more readily available. They moved
based on the company’s high corporate standards, which
southwest of that little town to the site where the city of
are very stringent and go beyond any of the national laws
San Luis Potosi is now located.
in the jurisdictions in which we operate. In terms of the community, New Gold recently won the Viola R. MacMillan
The roots of mining in Cerro San Pedro are very deep and
Award for company or mine development, at the PDAC
go far back in history. The mine has been in operation
conference in Canada. The company is very proud of this
since the late 1500s, with some intermittent breaks due
award, which was given to New Gold in recognition of the
to technical and other problems, in the mid-1900s. It used
company’s very successful negotiations in dealing with
to be an underground mine, until the first years of the
First Nation communities. The company has an ongoing
1990s when a US company called Metallica confirmed that
operation near Kamloops, 300km east of Vancouver,
there were additional reserves and, due to the dispersion
and an exploration project in Blackwater, which is
of the ore grade, proposed that it should be an open pit
around 200km north of Vancouver. On both projects the
mine. Through different mergers and acquisitions New
agreements reached between New Gold and First Nation
Gold became the owner of the project in 2009, when the
communities have prioritized promoting development for
operation had just begun. We are very proud of the work we
the surrounding communities and conducting work related
have done on the mine – it is a very sound and sustainable
to education, for example.
operation, as well as being secure for our workers. New Gold has been able to show that the many tests
152
Q: How has the work New Gold has done as well as the
carried out on the water from different wells in Cerro San
attributes of the mine itself combined to make Cerro San
Pedro are trustworthy by having tests carried out in two
Pedro a successful operation?
different nationally and internationally recognized labs,
A: New Gold has very high standards in the areas of
with an additional Canadian expert overviewing both of
health, safety, environment, operations, and care for its
them. Through their environmental permit companies are
neighboring communities. These policies are applied
obligated to make what is called a ‘geobiological’ closure of
horizontally across all of the company’s mines and projects.
the mine, but this regulation does not extend more widely
As a result we have a very good mine. Since 2009 all of the
than the confines of the mine site itself. The company’s
company’s actions have been aimed at simply applying its
environmental obligations are spelt out in its Environmental
general corporate policies to a mine that is very good – the
Impact Statement, through which companies commit, up to
cash cost is very competitive, it is operationally efficient,
a sum of more than US$18 million, to do whatever needs
and it is an example of a very well designed pit. Right
to be done in order to clean up, mitigate, neutralize, and
remediate, after their mining operations are completed.
You have less weight on your shoulders in terms of your
If fulfilling this commitment is simply about meeting your
decision making process, as well as allowing more direct
obligations then New Gold wants to go beyond that and
communication with management. At New Gold we tend
do something that in the future we can look back upon and
to look at many potential projects, and for us the process
say ‘this is what we left for good in that community’. For
of reaching the main geologist and having his team come
example, there is a tourism project that New Gold is working
and lick the rocks to see whether it is a feasible project or
on with the municipal and state authorities, investing in a
not is probably easier than it would be if we were larger.
number of different areas, and thankfully Cerro San Pedro is now a better town with better facilities, and as a result there
New Gold is a very good company, and is managed by
are people who love to go there each weekend to visit.
experienced miners, and the members of our financial management team have been linked for many years to
Q: What are the benefits of being a smaller company, in
other large mines or to large companies in the mining
terms of fulfilling different responsibilities towards the
world. The company is being managed by people that
community, the environment, and the local government?
are sensitive to the industry. New Gold is very proud of
A: While having the support of a bigger corporation gives
its Cerro San Pedro operation and is working very hard
you certain luxuries, for instance having a bigger budget,
towards the crafting and execution of its sustainability and
I would say that a smaller company in general is able to
responsible closure plan. New Gold is always searching for
respond more quickly, and there is more flexibility to react.
new opportunities in Mexico and elsewhere.
LOOKING BEYOND CERRO SAN PEDRO New Gold’s Cerro San Pedro mine boasts a very
lifespans of the mines, especially at our Peak Gold Mines
competitive cash cost per ounce. This has allowed the
in Australia and also the C-Zone at the New Afton mine in
company to establish favorable profit margins, while also
Canada,” he adds.
strengthening its financial position through the diversity of its deposits. “We are fortunate to have significant by-
New Gold’s strong financial position is a result of the
product revenues from the copper and silver production
company’s
at our Cerro San Pedro and New Afton mines, which keeps
operations across the corporation. Portmann explains
our total cash costs low compared to our competitors,”
that there have been five main factors that have helped
says Hannes Portmann, New Gold’s Vice President of
the company to achieve financial success and its standing
Corporate Development. “This also helps us to offset
as an attractive investment proposition: owning assets in
certain cost pressures that would otherwise negatively
favorable jurisdictions; maintaining low cost production;
impact us. We are also pleased that, in general, our mines
having a peer-leading growth pipeline; controlling two
have maintained consistent grades over their mine lives.”
underexplored districts; and benefiting from a significantly
New Gold’s portfolio is looking strong, with four mines now
invested management team and experienced board
in production and generating revenue that can support the
of directors. Looking to New Gold’s future, Portmann
exploration and development works on the company’s
says that these criteria will continue to be central in the
three projects that are not yet producing. “We now
company’s success. Mexico, too, will maintain an important
have four producing mines, and our total cash costs are
place in the company’s future, even beyond the life of the
declining steadily. New Afton came into full production in
Cerro San Pedro mine. “When the Cerro San Pedro mine
2012 and, with its significant by-product revenues, this had
eventually closes we would like to be able to replace that
a positive impact on our cash costs for 2012, and will have
production, if another compelling opportunity arises. We
an even greater positive impact in 2013, after a full year
like mining in Mexico due to the country’s rich mining
of production,” explains Portmann. New Gold’s portfolio
history, skilled labor, and also the abundance of exciting
is further strengthened thanks to the average lifespan of
projects,” he says. “We believe that New Gold has a strong
more than 10 years of each of its mines, though Portmann
relationship with Mexico, its government, its communities,
is confident that with the exploration and expansion plans
and its people. We demonstrate this with our commitment
the company has that forecast will only improve. “We are
to sustainable production and by giving back to the
currently exploring additional resources to extend the
communities where we operate on a daily basis.”
strategic
approach
to
management
and
153
| MINE SPOTLIGHT
CERRO SAN PEDRO Cerro San Pedro is a gold-silver heap-leach operation located in the state of San Luis Potosi in central Mexico, about 20km east of the state’s capital city. The mine is wholly owned by New Gold, an intermediate gold producer, through its Mexican subsidiary Minera San Xavier. The Cerro San Pedro deposit is characterized by an upper zone of gold and silver mineralization within limonitic iron oxides and a lower zone of zinc and lead sulfide mineralization. Commercial production at Cerro San Pedro began in May 2007 with an estimated mine life of 10 years. The mine’s processing facilities are equipped with a lined heap leach pad that heads to a traditional Merrill-Crowe gold and silver recovery circuit. During 2012 Cerro San Pedro produced 137,555oz of gold at a total cash cost of US$232 per ounce, as well as 1.9 million ounces of silver. Gold production declined from 143,747oz in 2011, as a result of reductions in both ore grades and ore tonnes placed in the leach pad. Cerro San Pedro is forecast to produce 140,000-150,000oz of gold and 1.4-1.6 million ounces of silver in 2013 at a total cash cost of US$375-395 per ounce. The increase in gold production is driven by the higher gold grades more than offsetting an expected decrease in tonnes processed. At the end of last year the mine had 800,000oz of proven and probable gold reserves, and 1.7 million ounces of measured and indicated gold resources. The Cerro San Pedro Mine has a strong record of compliance with Mexican and international environmental, health and security standards. In recognition of the operation’s exemplary safety record, Cerro San Pedro received the prestigious Silver Helmet Award from Camimex, which is granted to the safest mining operation in Mexico in the category of open pit operations with fewer than 500 employees.
GOLD GRADE (G/T) & GOLD PRODUCTION (OUNCES) 0.8
200,000
0.7 0.6 0.5 150,002
0.4
150,000
143,747
0.3
137,555
0.2 118,708
0.1 108,325
2012
2011
2010
0 2009
2008
0
Source: New Gold
155
FRISCO EXPECTS TO DUPLICATE ITS PRECIOUS METAL PRODUCTION In 1984 Grupo Carso, presided by the world’s now
edge technology for locating, producing and processing
richest man Carlos Slim, acquired Frisco S.A., a Mexican
minerals, making the company stand out for its innovative
incorporated mining company that had been officially
techniques in mineralogy characterization, and improving
registered in 1962, though its mining operations in Mexico
the company’s profitability. Frisco cites its use of the latest
date as far back as 1913. Last year, as part of Minera Frisco’s
technology as essential in developing and improving its
growth strategy, the company completed the acquisition
overall operations. Alongside its commitment to technology
of a number of AuRico Gold’s Mexican mining assets for
the company also continues to develop strategies that
US$750 million, which represented the largest deal in gold
will allow it to reduce operational and production costs,
mining involving a Mexican company, and made Frisco one
investing for example in metallurgical research and the
of the biggest domestic mining companies. With a US$11
optimization of processes. The proximity between its Los
billion market value, Frisco is today Slim’s biggest holding,
Jarros, El Concheño, Ocampo and Venus projects will
after the wireless services provider America Movil and the
also allow the company to continue optimizing resources
financial services company Grupo Financiero Inbursa. The
and to lower its operating costs. Frisco has maintained a
company is also one of Mexico’s leaders in the production
solid commitment to social and environmental issues, and
of lead-silver and zinc concentrates, gold and silver doré
besides direct employment its mines also bring other direct
bars, copper cathode, and copper concentrate.
benefits to the areas surrounding the company’s mining operations. Several environmental initiatives have been
Frisco has an impressive list of properties: El Coronel,
carried out, such as greenhouses being installed in every
San Felipe, María, San Francisco del Oro, Tayahua, and
mining unit, in order to restore the native flora and fauna on
Asientos. It has added weight to its portfolio more recently
mining units that are no longer in exploitation. The company
with the acquisition of AuRico Gold’s Ocampo mine, as
works continuously to minimize the generation of residues
well as its Venus and Los Jarros projects, and through an
and optimize water and energy consumption, all the while
acquired 50% stake in the Orion mine in Nayarit State. The
compensating for any adverse environmental impacts.
company today holds eight mining units in the states of Aguascalientes, Baja California, Chihuahua, Sonora, and
Though
Zacatecas, and covers the most relevant mining regions in
projects could be subject to external factors, the size
Mexico with several exploration and development projects.
and strength of the company’s portfolio will ensure
the
successful
implementation
of
Frisco’s
that it continues to make a valuable contribution to the
156
Frisco is one of five major mining companies operating in
development of Mexico’s economy and mining industry
Mexico, and one of the few mining companies to be listed
in the coming years. With the progress the company has
on the Mexican Stock Exchange (BMV). Thanks to it being
made this year by acquiring the Ocampo mine, conducting
part of a bigger group, the company enjoys access to the
expansion projects at El Coronel and San Felipe, and
capital and resources of its sister companies, which presents
moving El Porvenir into production, among many other
an important advantage for Frisco to achieve continued
developments, Frisco expects to duplicate its gold and
growth. The company continues to invest in cutting-
silver doré bar production by the end of 2013.
THE IMPORTANCE OF STAKEHOLDER SATISFACTION By keeping their operating
strategy of adding accretive low cost ounces, in politically
costs
absolute
safe jurisdictions. We believe we demonstrated this with
minimum mining companies
our recently announced friendly agreements to acquire
can maximize their profit
Esperanza Resources and Orsa Ventures for approximately
and improve the return
US$69 million and US$3.5 million, respectively,” he says.
to
an
on investment for their
Jamie Porter, CFO of Alamos Gold
shareholders. Jamie Porter,
Alamos Gold’s financial success has, for Porter, been in large
Chief Financial Officer of
part attributable to the company’s approach to its people.
Alamos Gold, emphasizes
“People are the most important aspect of any operation,
the
and we believe we have assembled one of the strongest
company’s
objective
of
core a
management teams in the industry over the years, with a
leader in low-cost production, financial performance and
being
depth of experience across the board. We have recently
ultimately in delivering shareholder value. “Establishing
bolstered our management team with several key new
the first element will usually cause success to follow in
additions which we plan on leveraging as we embark on our
the others. For this reason, Alamos has focused first and
growth plans in Turkey and Mexico,” he says. The company’s
foremost on keeping production costs as low as possible.
emphasis on people has also extended to its interaction
We are continually exploring opportunities to optimize our
with the communities that surround its operations. “From
operations at Mulatos, whether it be through employee
the outset, we have made it a priority to work in concert
training or employing new equipment or technology,” says
with the local community to ensure there is an accurate
Porter. “We have made numerous operational improvements
understanding of our operations and that we have a
since the start of production in 2005, including increasing
positive impact on the local community and stakeholders,”
crusher throughput while reducing crush size; agglomerating
says Porter. Caring for the environment has its own part to
and then conveying ore on the leach pad to eliminate truck
play in this process, and Alamos has invested significantly
compaction; and more recently the addition of a 500 t/d
in minimizing the environmental impact of its Mulatos
mill to process high grade ore,” he explains.
project. This included the installation of a water treatment plant, which was not a legal requirement according to the
The mine Porter refers to is the company’s sole property
environmental standards in place at the time. “We built the
in Mexico; Mulatos is based in the Sierra Madre Occidental,
water treatment plant believing it to be an environmental
and has been instrumental to the company’s success.
best practice. We apply the same philosophy to our social
Having acquired the project for US$10 million in 2003, it
contributions, and have invested heavily in bettering the
was moved into production in 2005, and since then has
local community, in the form of direct investment into the
generated more than US$260 million in free cash flow.
community, employment and training opportunities, social
This has all been possible despite initial challenges relating
programs, and providing free medical care,” says Porter.
to the remote location of the mine, which Porter says the company was able to overcome through careful planning,
Alamos believes in Mexico as an excellent destination
engineering, training and supply management. Indeed,
for mining, and through these projects is making its own
these are problems that now seem to be a distant memory,
contribution to maintaining good relationships between
as the company has produced its millionth ounce and
mining companies, local communities, and government
generated its billionth dollar of revenue, with additional
authorities. “As a geopolitically stable mining jurisdiction
targets for expansion having been identified in other parts
with a strong government, stable economy, rule of law, and
of the concessioned area.
transparent mining code, we believe Mexico is one of the best countries in the world to build and operate a mine,”
Alamos Gold’s low-cost production success at Mulatos
says Porter. “We have treated all of our key stakeholders
enabled the company to deliver shareholder value. Together
in accordance with our key values of honesty, integrity and
with the company’s dividend policy and an active share
respect. We have created substantial direct and indirect
buyback program, this has made Alamos an attractive
employment and have paid over US$200 million in local,
financial prospect for current and potential investors. In
state and federal taxes since we started operations. In our
order to maintain its strong financial standing Porter stresses
view, the key to our success has been in establishing and
the importance of taking a responsible approach to growth.
maintaining open lines of communication with all levels of
“Despite our strong cash position we remain committed to
government, and we have been fortunate to have enjoyed
smart, disciplined and manageable growth, aligned with our
strong levels of support from the government of Sonora.”
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| VIEW FROM THE TOP
CONTINUOUS GROWTH IN GOLD PRODUCTION ARTURO BONILLAS President & Director of Timmins Gold Corp.
Q: Timmins Gold was founded in 2006, and already has
Our initial aim had been to develop a property and then sell
one mine in production and six in exploration. How has
it on. However, when we optioned the San Francisco Mine,
the company achieved such swift growth?
our flagship property, we realized that we would require a
A: At the beginning the company consisted of two or
large amount of capital to develop the resource, because
three people, who started everything from scratch in the
the type of deposit requires intensive drilling, and to
basement of a house. The company has grown quickly, and
develop the property using public money would have made
today it has 350 direct employees, another 200 indirect
the company weaker. We saw San Francisco as a mine that
employees, and a yearly growth rate of 30%. Now, it
we could begin to operate on, and that is how we started.
generates almost US$200 million in sales per year, and a
The objective was firstly to generate cash, and secondly to
key element is that we have always been able to execute
develop the deposit. Once we had started operating the
decisions quickly. Timmins Gold’s management team stands
mine, the company started growing and we were able to
out for its fast decision-making process, and that gives us an
bring people with different profiles into the company.
advantage over large companies that have many different departments, slowing down that process.
Q: How has Timmins Gold’s funding model adapted to changes in the domestic and international financial
The most important ingredient is our team, which is mostly
market since 2006?
Mexican. Of course, we would not be where we are without
A: In 2008 we had enough money promised from an investor
foreign money. We joined forces with a Canadian securities
in a private placement of US$25 million, which was enough
lawyer, Bruce Bragagnolo, who is also our CEO. The Canadian
for Timmins to finish the construction of the San Francisco
team is responsible for the regulatory, promotional, and
Mine. In a first placement at approximately US$1 per share,
financial aspects of the company. In Mexico we take care
the investors came with US$15 million, and the plan was to
of the company’s development and exploration operations.
exercise warrants for the rest of the money. But then the
One side of the company cannot function without the other.
financial crisis hit and they decided not to exercise the
This has been an important division of responsibilities, and
warrants, leaving the company in danger of not being able
it has worked well for the company.
to complete construction and having to declare bankruptcy. We worked hard and obtained a value added tax return,
Q: As a gold producer, Timmins Gold operates in an
and that is how we were able to survive a difficult time in
inherently volatile and risky market. How do you view the
the financial market. In March 2009, we made a subsequent
current operating environment for companies like yours?
placement for the equivalent of US$10 million at 40 cents
A: We believe that gold prices will increase again, and we are
per share, and one of the groups that participated in the
betting on that. Right now we are not selling gold, we are
previous placements gave us a US$15 million gold loan,
simply storing it. We believe we will see higher gold prices;
which was more than enough for us to secure the project.
therefore, for the moment we will sell only the necessary
The gold loan later became a standard loan, and this money
amount to cover our essential costs. Exploration and mining
has now been converted into production.
are risky businesses, and fundraising at the initial stages of a
158
project is very difficult. Perhaps there will be some changes
The company’s original investors have now moved on,
when the new finance reform is introduced. Currently, only
for the most part, but they all made money. We have not
large companies are able to secure loans easily, usually in
raised money since 2009; we used the same money we
the form of revolving loan funds. Companies usually go to
had originally raised, together with the loan I mentioned, to
big international banks or make IPOs in order to finance
bring the plant up from 10,000 t/d to a current production
their projects. Mining is a very specialized area and we think
rate of 22,000 t/d. The plan is to increase that to 30,000
there will not be enough capital to explore and develop the
t/d in 2014. We are a dynamic company and we have a
country within the next few months.
keen eye on free cash flow; there are not many companies
that have the luxury of a similar level of free cash flow that
leaching, and while there are not many new discoveries
we have achieved. Ours has been a success story, and it
allowing the use of this technique, there are a lot of
taught us a lot; successfully surviving the 2008 financial
distressed companies, so there are opportunities available.
crisis has made the company more dynamic and more
But although we specialize in heap leach operations
audacious as a result.
on open pit low grade gold in Mexico, diversification is an objective for us. We are financially healthy, and if we
Q: What are the company’s aspirations for the coming five
discover the resources that we want now, we can put a
years and what will be its strategy for achieving them?
project directly into production ourselves.
A: The business model for us now is to acquire an operating company, as well as to achieve organic growth. We have
We want to become a 250,000oz producer in the coming
many exploration targets within our claims, and we will
three years, both through organic growth and by acquiring
begin drilling some very interesting targets within our claim
other advanced mining projects, with the aim of becoming
blocks soon, such as the one we have 10km north of our
a company with a production rate of 5 to 10 million ounces.
open pit mine in Durazno. It is likely that we will then look
If we reach a size of 250,000oz in three years, we keep on
to acquire operating projects in other parts of the region,
generating cash and we add 1 or 2 more million ounces, we
using similar processes. We would like to focus on heap
may even become a target for acquisition.
BUILDING SOUND MINING PROCESSES The San Francisco Mine, located 150km north of Hermosillo,
solid operation, in terms of cost management, that helps
is owned and operated by Timmins Gold. The property
us to overcome market downturns.”
comprises two open pit mines, though only the San Francisco pit is currently in commercial production, with a
The mining operation has a high level of automation,
rate of between 90,000 and 100,000 tonnes per year and
with new technologies facilitating the optimization of
an average ore deposit grade of 0.7 g/t. The La Chicharra
the design and planning processes, as well as reserve
pit will begin production at the end of 2013.
calculations. “This technological advantage has helped us to predict how the pit should be developed, and the zones
The production process starts with the unloading of the
from which we will be entering the mineralized areas,”
material from the trucks, which is then taken to the two
Herrera explains. “The network operation center (NOC) for
grinding systems. After being ground, both bulk materials
our grinding processes has highly technological systems
are mixed together and transported to the lixiviation yard
to control different variables on each piece of equipment.
to be processed with cyanide. This process takes around
With these systems we know, for example, each machine’s
90 days, acquiring a recovery rate of between 62% and
amperage, among other measures, and this allows us to
70% of the mineral in question. When the pad has been
maintain optimal control over the whole mining operation.
irrigated it is then percolated, leaving a liquid solution full
All data is deployed smartly to operators and supervisors,
of gold. The gold contained in the liquid is fed into two
who require it to evaluate and optimize operations and to
ADR plants in order to be absorbed through activated
be aware of which machines need preventive maintenance.”
carbon. The gold-loaded carbon is then isolated in a separate cyanide and caustic soda solution and, after the
Protecting the environment is essential in the operations
remnant enters the electrowinning stage, the mineral is
being carried out at the San Francisco Mine. Water use is
refined through electrodeposition. Once the process is
an important issue, and is handled efficiently to reduce
complete the gold is then deposited in the form of powder
consumption. Another relevant matter is the use of cyanide.
in electrolytic cell cathodes. The powder is left to stand and
“We put all of our efforts into ensuring that even the
is later washed, then collected inside an oven, where it is
slightest superficial discharge does not come into contact
smelted. “I believe Timmins Gold decided this was a good
with the soil. Our intention is to acquire certification for
deposit for investment based on production costs,” says
cyanide use, though in reality it is just a formality because
Rául Herrera, General Manager of the San Francisco Mine.
we already comply with all of the standards. Timmins is
“Despite high fluctuations in the price of gold the mine has
very committed to protecting the environment,” explains
great potential, due to the simplicity of its processes. As a
Herrera.
159
UNCOVERING MEXICO’S UNDERLYING GOLD POTENTIAL Both national and international experts are quick to endorse the geological and political potential for exploration projects in Mexico, and their perspectives are supported by the fact that the country is ranked as the fourth most popular destination in the world for exploration activities. “Based on my experience I believe that Mexico is among those countries that represent the greatest opportunities for exploration success,” says Tom Burkhart, Vice President of Exploration of Argonaut Gold. “Mexico is one of the few countries that is friendly to mining, and where you can
LEFT: Tom Burkhart, VP of Exploration at Argonaut Gold RIGHT: Alberto Orozco, Argonaut Gold’s Exploration Manager for Mexico
still find outcropping mineralization that has seen limited sampling and very little, if any, drilling.”
heap leach potential, and they are confident that many of these types of properties still exist in Mexico. “Argonaut
Founded in 2009, the Canadian mining company today
Gold is looking to find robust geological environments that
has two operating mines and two exploration properties in
have the potential to grow. We want to see clear potential
Mexico. In the four years since Argonaut Gold was started
for a minimum of 600,000oz of gold. It is just a matter of
the company has been busy: it has expanded operations at
being in the right place and carrying out the correct style
its two producing mines and increased resources on three
of program to identify them,” says Burkhart.
of its properties. It now has 12.5 million ounces of gold in measured and indicated resources throughout Mexico and
An important part of the assessment process involves
Canada. These achievements put the company on track
making a forecast on the operating cash cost of the mine,
to reach a production target of between 300,000 and
in order to assess what the return on investment will be. “To
500,000oz of gold by 2016-2017, and its goal of becoming
do this we look at the quality of the resources and geology
a mid-tier gold producer.
in a lot of detail. We want to know that even when the price of gold drops substantially a mine will still be profitable.
Burkhart and Alberto Orozco, Argonaut Gold’s Exploration
We do not want to create mines that will only work when
Manager for Mexico, attribute the rapid growth and swift
the gold price is at US$1,500 per ounce – they have be
successes of the company to the vast experience of its
profitable when the price gets as low as US$700-800 per
management team. “The company was created by the
ounce. That is how we can ensure that our investors will be
previous management team of Meridian Gold, which was
protected,” says Orozco.
extremely successful and was eventually bought out by Yamana Gold. Brian Kennedy, Peter Dougherty and Barry
“We are looking for value that exists on projects, but
Dahl were all part of Meridian and they bring years of
that has not yet been identified. Even when we may be
experience and success to Argonaut Gold; that is the first
looking at a project that has a determined number of
thing that should make investors see us as a competitive
ounces of gold, we look beyond that to see whether there
investment prospect,” says Orozco.
are other aspects of the project in which we could unlock extra value,” explains Orozco. At this stage Argonaut
160
Burkhart and Orozco between them have a solid
Gold feels that it is established enough, and has the
background in exploration, both in Mexico and further
necessary cash flow available, in order to fulfill this role.
afield in Latin America. They have developed exploration
“Fortunately, Argonaut Gold has a positive balance sheet
criteria for Mexico that, to judge by the company’s portfolio,
that can support an aggressive exploration program, and
have also been very successful. “There is a big difference
we have the geological expertise required to identify
between how advanced the projects we are looking at
these opportunities and hopefully make good acquisition
are - some have resources, and some have nothing. The
decisions in the current buyer’s market’,” says Burkhart.
common thread is that when we get to the site we want
By buyer’s market Burkhart means the lull in the metals
to see clear exploration potential,” says Orozco. For
market, and specifically the spring 2013 drop in the price
Burkhart and Orozco, ‘clear potential’ translates to obvious
of gold that has resulted in drilling activities slowing down
indications of mineralization. This might be in the form
significantly in Mexico, and some junior companies being
of outcropping mineralization, or previous drill holes on
pushed out of the market entirely. This places companies
mineralized land. Their ideal deposits would be medium
like Argonaut Gold, which have a portfolio of producing
to large oxidized low-grade deposits that have open pit,
mines and capital to spend, in a strong position to buy
exploration projects with good potential that struggling junior
that never reaches the exploitation phase, and that mining
companies are trying to sell off. Burkhart and Orozco do,
companies also improve the economy by bringing work to
however, acknowledge that they are not the only companies
more isolated places,” points out Orozco. “The decrease in
trying to do this. “We do know that the competition from
the gold price has also already impacted us to some extent,
other companies for the acquisition of quality properties is
so we are being more diligent about setting priorities and
increasing, and generally if we are looking at a project there
watching the budget,” adds Burkhart.
are other companies with similar acquisition criteria looking at it too. Clearly we are not the only ones who realize that
Returning to the subject of Argonaut Gold’s plans in Mexico,
Mexico offers good opportunities compared to most other
Burkhart and Orozco are positive about the potential for
countries,” says Burkhart.
new grassroots exploration projects. “Exploration has been conducted mostly around old known mines, where deposits
Argonaut Gold believes that it can continue to build its
and mines have been expanded. But really, in recent years
portfolio in Mexico and continue acquiring new properties
there has not been a great deal of grassroots exploration,
despite this competition. The company is also starting
especially during the junior cycle. The potential for Mexico
to look outside Mexico for further opportunities, as part
is therefore still very large,” says Orozco. As the best place
of a strategy to diversify the company’s portfolio. At the
for grassroots exploration they highlight Sonora, which is
end of 2012 it completed the acquisition of the advanced
also Mexico’s number one producer of gold and copper and
stage Magino exploration project in Canada, which was
has a strong mining culture. Durango also stands out as a
the company’s first property outside of Mexico. “This is
growing, attractive destination for future exploration for
going to diversify the way Argonaut Gold is working – it
Argonaut Gold. “We are fully staffed up in our exploration
lowers the risk and makes the company more stable, given
group, with a good exploration budget and a long term
that Canada is probably the most stable mining country,
view,” says Burkhart. “We will continue with our exploration
which is good for investors. This acquisition also doubled
methodologies and make adjustments to our criteria as
the company’s resources: the deposit has over 6 million
circumstances dictate. It has been my experience that
ounces of gold, and has the capacity to produce around
persistence and determination pay off and Argonaut Gold is
250,000oz of gold per year,” says Orozco.
well positioned in Mexico to stay the course. We have a very strong commitment to Mexico: we think it is the place to be.”
In terms of Mexico’s new mining tax, which is likely to be confirmed in late 2013, Burkhart and Orozco argue that the company’s solid foundations and low operating costs stand it in good stead to remain financially strong. “One thing in our favor is that our costs are low, so we will be protected in that sense. We also want the government to take into consideration the fact that the mining industry is cyclical, and that there has recently been a sharp drop in the gold price. The government needs to take into consideration the fact that a huge amount of money is invested in exploration
“Argonaut Gold is looking to find robust geological environments that have the potential to grow. We want to see a clear potential for a minimum of 600,000oz of gold” Tom Burkhart, VP of Exploration at Argonaut Gold
161
| MINE SPOTLIGHT
LA HERRADURA La Herradura is located in the state of Sonora, 125km northwest of Caborca, and is Mexico’s largest open pit gold mine. Fresnillo holds 56% ownership in the La Herradura mine and is the operator, while Newmont holds the remaining interest of 44%. The Herradura gold deposit occurs within a northwest trending belt of the Proterozoic metamorphic rocks conformed by greenschist, amphibolite, and granitoids. The deposit is hosted by a quartz-feldspathic gneiss bordered by faults and shear zones. Exploration in the Herradura district first began in 1988, and commercial operation began in 1997. The project has two open pit properties of over 18,211 hectares. The ore bodies consist mainly of gold and silver concentrates. In its first full year the mine produced 90,300oz of gold and was expected to reach full capacity at 150,000oz per year, with an expected mine life of 10 years. The original construction site was called Centauro and mineral extraction processes were initially due to stop in 2007. Total annual production reached 314,547oz of gold and 136,000oz of silver in 2012. La Herradura had an expected 6.6 years of remaining mine life at the end of 2012 due to successful exploration campaigns, continuous reserve replenishment, and efficient mining methods. Most of the run-of-mine is sent directly to a heap leach pad, which is insulated by a composite liner of compacted clay and geomembranes. Cyanide solution is dripped on the pile of rock and pregnant solution collected and processed in a Merrill Crowe plant through a process of clarification, deoxygenation, and zinc precipitation. The companies’ main ambitions are maximizing gold production, increasing volumes of ore deposited, increasing recovery rates of high grade ore with the construction of a dynamic leaching plant, conducting ongoing exploration at the Centauro Deep project, and evaluating the expansion of the Merrill-Crowe plant, as well as obtaining OHSAS 18001 certification.
GOLD GRADE (G/T) & GOLD PRODUCTION (OUNCES) 1.0
350,000
327,700
0.8
314,500 259,800
0.6
300,000
291,000 250,000
0.4 219,200
200,000
0.2
150,000 2012
2011
2010
2009
2008
0.0
Source: Fresnillo plc
163
FOCUS ON MEXICAN GOLD According
the
spotted the opportunity to use its resources and manpower
consulting company SNL
to
from Cerro Colorado in a place that is located only 150km
Metals Economics Group
away,” says Piggott. “This means that Goldgroup intends to
(MEG), almost 30% of the
transfer all of its resources from Cerro Colorado to Cerro
total value generated by
Prieto which already has all of its major permits, such as
the global mining industry
those for the environment and change of land use.”
in 2012 pertains to gold
Keith Piggott, Chairman, President, CEO & Director of Goldgroup
mining, while gold mining
Goldgroup considers itself a Mexicanized company, and
exploration projects made
this philosophy is the driving force behind its long term
up 47% of the world’s
growth strategy. Piggott himself has lived in Mexico for 15
total investment in mining
years, and an ever-increasing number of the company’s
exploration during the same year. Keith Piggott, Chairman,
shareholders are Mexican. “All of our projects are in
President, CEO & Director of Goldgroup, saw an opportunity
Mexico. We think that it is better to be Mexicanized so that
for gold mining in Mexico and has since surrounded himself
people feel that we are part of their community. We are
with an expert team in order to grow the company into
very community-orientated, community conscious, and
a large precious metal producer focused on Mexico. “It
committed to the country we work in,” Piggott mentions.
was about 16 years ago when I started focusing on gold in
“The mining industry brings wealth to surrounding
Mexico, after being involved in the gold mining industry in
communities. Given that mines are often located in remote
Australia for many years. My intention was to start a small
areas, they benefit the communities that are traditionally
gold mine in Sonora with technology I had developed and
neglected,” says Piggott. “Goldgroup has already started
patented in Australia,” Piggott explains. From there, the
installing access to water in some of the communities
company developed its Cerro Colorado asset, a heap-leach
near our Caballo Blanco project, and the communities
operation located in Sonora. “Cerro Colorado was a very
are very thankful for it. We introduced a mobile clinic
low capital-cost operation because we started it with little
with a doctor and for a lot of these communities this
money and we are experts in starting mines with very little
was the first time they had received proper medical care.
cash. In 2012, it produced approximately US$30 million of
We also make donations to schools and we carry out
revenue,” Piggott adds.
community development programs,” he says. “Nowadays, as more mines are being developed in Mexico, more local
To offset the output decline at Cerro Colorado, which is
professionals are developing the technical skills necessary
in the final stages of its productive life, the company has
to run those mines. Contractors are now becoming
acquired three other properties in the country: Caballo
Mexicanized, and this trend is gradually filtering back to
Blanco, located in Veracruz; a participation in San José de
equipment as well,” says Piggott. For example, all of the
Gracia, arguably Sinaloa’s most important development
heap-leach tanks that Goldgroup uses in its operations are
project, through a 50% interest in DynaResource de Mexico;
built in Hermosillo, Sonora. “The whole point of employing
and Cerro Prieto, located only 150 kilometers away from
Mexican service providers is that you are supporting the
Cerro Colorado. Goldgroup plans to start production on this
local economy. We have faith in the country, in its people
last project during the last quarter of the year. “Goldgroup
and in its government,” he says.
FEDERAL GOVERNMENT SUPPORT FOR MINING IN CHIHUAHUA The Federal Economy Minister has offices in each Mexican
large scale mining does not. However, the Delegation’s
state, as well as in other countries, to provide information
job is to facilitate the permitting process for both types of
on starting a business and securing funding, as well as to
mining operations, so that both activities thrive, communities
give advice and training to businesses and entrepreneurs
are strengthened, and work is provided to Chihuahuans.
that want to export, import, and invest in Mexico. The goal
One example of how small scale mining is supported is
of each delegation is to promote, guide, encourage and
the Luis Escudero Processing Plant, which was acquired
stimulate the development of micro, small, medium, and
by the state government to support small scale mining in
large businesses.
its mineral processing. In the past, small mining operations that produced small quantities of mineral could not process
David Dajlala is Delegate of the Federal Economy Ministry
it anywhere, but over 200 operations in the region are now
for the state of Chihuahua. “The most important challenge
benefitting from the plant. Through the state’s Economy
for the Delegation is to facilitate the permitting process so
Minister, and together with the Mexican Geological Survey
that big mining companies, whether domestic or foreign,
(SGM), the Delegation provides advice, helps companies with
invest in Chihuahua. We want to open the way for them so
their sampling, and supports laboratory-related activities,
that they do not hesitate to start their mining operations in
because usually they do not have the required equipment
the state. If we are able to facilitate the permitting process
to carry out the necessary analysis. The Government Trust
mining companies will be more efficient, and therefore
for Mining Development (FIMOMI) also provides resources
more productive,” he emphasizes.
so that the small operations have enough cash to continue
“Making permitting processes more efficient will have a positive impact on the mining industry; both large scale and small scale mining will benefit, as will the state and national economies” David Dajlala, Delegate for Chihuahua of the Federal Economy Ministry
Mining activities in the state are divided into two parts: large
working their mines. “The Delegation’s current objective is to
scale mining and small scale mining. Dajlala highlights that
lower permit-processing times. We are in charge of granting
each type of operation has different needs and requirements.
permits and concessions, and our aim is to reduce the time
Since Chihuahua’s mining cluster was created it has brought
that passes between a user placing a request and us giving
members of the large-scale mining group together. Small
them an answer. Making permitting processes more efficient
scale mining is therefore where most of the Delegation’s
will have a positive impact on the mining industry; both large
efforts are focused, since it requires funding, technology,
scale and small scale mining will benefit, as will the state and
advice, and help with permits, and involves hurdles that
national economies,” Dajlala says.
| VIEW FROM THE TOP
PAVING THE ROAD FOR CHIHUAHUA’S MINING INDUSTRY LUIS ALBA SOLÍS Director of Mines, Chihuahua Q: What does Chihuahua have to offer the mining industry,
stability, we have a good relationship with union leaders
and why have its reserves not been exploited to the same
and ejidatarios. We have promoted the continuation
extent that they have in other states of the country?
of operations and reduced strikes by managing the
A: In the past, mining as an industry in Chihuahua did not
relationship between both parties.
receive the attention that it deserved. With the attention that high metal prices brought to the industry, investors
The State Development Plan is very comprehensive in the
from around the world started to look for a mining paradise
area of mining. The government plays a proactive role:
like Chihuahua. The state provides social stability, political
we advise and support the industry in the state, starting
facilities, security, labor force, and world class deposits. The
with small scale mining. We bring them together and fund
current governor has made several modifications to the
them, and we also provide equipment, consulting services,
legal framework, allowing productive activities to be more
and facilitate the permit process. We have a bigger mining
easily performed. It is for this reason that many foreign and
budget than any other state government.
domestic companies are operating in Chihuahua.
Chihuahua has vast mineral wealth. It has mercury, silver, gold, copper, lead, iron, zinc, coal, and uranium, among many other minerals. We have around 4,100 mining claims, which is understandable given the number of deposits that exist in this region of the country. Chihuahua’s Sierra Madre Occidental is endowed with large gold and silver deposits. To the east, there are regions that are rich in zinc, lead, and iron. The geological formations in our state, as well as the veins and scattered deposits, result in the existence of projects of all scales.
Q: What role does the government of Chihuahua play in advancing the position of the state in the Mexican mining industry?
Q: What impact has the mining industry had in economic and labor terms, as well as at the social level? A: Mining in Chihuahua has brought great benefits to our community. The industry has promoted the development of local companies and has activated other productive activities. Mining has brought important economic benefits to regions where no other industry has been before. Very few states welcome mining companies, but in the Sierra Madre Occidental the industry is warmly received because there are few alternatives for economic development in this region. Fortunately, the biggest mining projects in the state are there. For example, we recently witnessed the contribution of over US$300,000 from a mining company to a local community to finance its sewerage system.
A: One of our most important achievements has been
166
government programs for infrastructure, such as the
Q: What are your expectations for the development of
construction of new roads and electric power infrastructure,
mining activities in Chihuahua in the years to come?
which facilitate mining projects. For example, the Piedras
A: We have three years left under this administration.
Verdes Mine currently has a capacity of 1,000 t/d, but
Thanks to the Governor’s support for mining, and because
thanks to new electrical transmission infrastructure it will
the industry is a priority in the State Development Plan, we
be able to increase its capacity to 3,000 t/d. We have
hope to set in motion at least three of the state’s biggest
also been able to simplify the process for the use and
projects. We want to move forward the El Cordero project,
storage of explosives for small and medium miners, which
which is the size of Peñasquito in Zacatecas, and we also
was a challenge in itself but has brought many benefits.
want to boost La Cigarra, which is in Parral. Another
Something else that is being considered is the construction
objective is to activate those claims that are not being
of a foundry, since there are none, forcing small producers
worked on. There are many claims that are not being
to sell their product cheaper. The current government is
explored in any way. Therefore, it is essential to work on
planning to build a foundry where iron balls for mills and
the legal framework so that the title owner is forced to
mineral concentrates will be processed. In terms of social
explore the land or let it go so that someone else can.
| VIEW FROM THE TOP
MINING INVESTMENT AS A CATALYST FOR ECONOMIC GROWTH ÁLVARO NAVARRO GÁRATE Economy Minister of Chihuahua Q: What are your priorities regarding the mining industry?
imported. This is where the cluster comes in, because it
A: The state government’s priority is for the mining industry
allows the government to work together with the industry
to be highly productive, socially responsible, and have
in an organized fashion, with goals and objectives, and
a low environmental impact. We are helping to increase
at the same time measure progress. There is a joint
profitability for investors, but on the other side we want
responsibility between the government, mining companies,
them to leave behind trained people who are able to supply
and academic institutions, which means that we work
services to other mining operations. The state government
together whilst respecting the autonomy of all members.
has brought training courses to the Sierra Madre to enable
We do not get involved in their activities, however we want
local communities to provide services to mining operations.
their operations to be highly profitable, highly socially
Through social responsibility initiatives we have been able
responsible, and to have low environmental impact.
to work with mining companies in order to achieve high productivity in mineral extraction. Through training, local
Q: What are the Ministry of Economy of Chihuahua’s
communities can become providers for the industry.
strategies to position the state as an attractive investment destination?
Mining brings investment, and through investment jobs and
A: We are attracting a lot of investment as Mexico regains
economic development are created. In other words, it brings
market confidence. Manufacturing companies that were
income to Chihuahuan families that are directly or indirectly
established in China are now coming to Chihuahua, and
involved with the industry. Millions of dollars are invested
we are investing in local infrastructure and logistics
in mining operations, but minerals are extracted and then
to attract even more investment. To raise Chihuahua’s
taken out of the country, leaving very little behind. That is
competitiveness, for example, we are opening new railroad
the reality. Through changes in the current legal framework
routes to connect the Asia-Pacific market through Sinaloa
we want to transform this, creating a bigger economic
with the Topolobampo-Mazatlan route. The goal is to
impact in the state’s mining regions. Our objective is to
provide infrastructure that will position Chihuahua as the
generate significant added value for mining operations.
Pacific entrance to the US. We are creating the required
This means that we want more mining processes to stay
infrastructure to stimulate trade and transform Chihuahua
in Chihuahua in order to achieve continued economic
into a highly competitive, efficient, and productive state.
development by creating jobs locally instead of just
These efforts translate to investments of over US$700
exporting raw materials as we currently do. We are creating
million, just in infrastructure.
opportunities for local businesses to become providers to the mining industry and add value to our mineral production
Q: How are you working to improve the perception of the
by having more processes done locally. Around MX$18
security risk in the state?
million (US$ 1.4 million) is spent on supplies for the industry
A: When the current governor César Duarte Jáquez took
daily. By integrating those processes into our local industry
office two and a half years ago, public security was a
Chihuahua will become more competitive, because mining
serious problem in the state. The governor advocated
companies will be able to acquire supplies locally at very
laws against organized crime and worked closely with the
affordable prices. At the same time, a just-in-time program
executive, legislative, and judicial authorities of the state.
will make companies more competitive.
These efforts led to a drastic reduction in the crime rate in the state. Today, Chihuahua has become an example for
Q: Around 90% of the machinery and supplies used in the
public security in Mexico. The improvement of the situation
mining industry is imported. How could the state government
has allowed us to change not only the perception of the
encourage the use of locally manufactured equipment?
state, but also the reality. Investors say that as a result of
A: It is exactly this that is our great challenge. We want
security and education indicators confidence has come
to transform that figure into 90% local content and 10%
back to Chihuahua, and with it investment, too.
167
| MINE PROFILES: CHIHUAHUA
8
CHIHUAHUA
2
4 3
5
1 9
6 7
1
2 3 4
168
PALMAREJO, COEUR MINING Palmarejo is the world’s fifth largest primary silver mine, located 420km southwest of the capital city of Chihuahua. Mining at Palmarejo is conducted both underground and on the surface. Coeur Mining’s wholly owned subsidiary, Coeur Mexicana, employs over 900 people at Palmarejo, while contractor employment totals about 150. The gold and silver deposits at the Palmarejo mine, typical of many of the other silver and gold deposits in the Sierra Madre, are classified as epithermal deposits and are hosted in multiple veins, breccias and fractures. Ore feed to the mill is from a combination of surface and underground sources. Ore is blended and fed through a primary crusher at a rate of approximately 6,000 t/d.
DOLORES, PAN AMERICAN SILVER The Dolores mine is located in the Sierra Madre Occidental mountain range, which comprises a long northwest trending volcanic plateau, approximately 250km west of the city of Chihuahua. The area of the concessions is 27,700 hectares. The mine uses conventional cyanide heap leaching technology to produce gold and silver doré. By the end of 2013, Pan American Silver will have produced at its Dolores unit between 3.25 and 3.45 million ounces of silver and between 63,500 and 68,000oz of gold.
OCAMPO, MINERA FRISCO Ocampo is located in Chihuahua in the Sierra Madre Occidental and it consists of one open pit and two underground mines. The mineralogy of the area includes gold and silver within low sulphidation and quartz systems. Ocampo mine produced 199,478oz of gold and 4.171 million ounces of silver in 2011 and has proven and probable reserves of 2.384 million ounces of gold and 56.63 million ounces of silver for the same year. This indicates a mine life of approximately 14 years. The facilities include a Merrill-Crowe mill and a heap leach pad. In 2012 the property was acquired by Minera Frisco, and it is expected that production will increase to 13,000 t/d by 2014.
PINOS ALTOS, AGNICO EAGLE Pinos Altos is located in the mountainous region of northern Mexico, 220km west of Chihuahua. Agnico Eagle poured its first gold in Pinos Altos in July 2009 and achieved commercial production in November of that year, while underground mining began in the late spring of 2010. The nearby Creston Mascota satellite operation was built in 2010 as a stand-alone pit and heap leach operation. It poured its first gold in December 2010, and achieved commercial production on March 1, 2011. Pinos Altos is expected to produce 159,000 ounces of gold as well as byproduct silver in 2013, and to average 148,000 ounces of gold per year from 2014 to 2015, with a mine life through 2029. In addition, Creston Mascota is expected to pour 32,000oz of gold in 2013 and to average 54,000oz of gold per year from 2014-2015, with an expected mine life to 2018.
5
NAICA, PEÑOLES The first concession in this area dates from 1794, and exploitation by local miners resulted in the founding of Saucillo in 1896. In 1900 Compañia Minera de Naica formally started mining operations on the mine, which were stopped by the Mexican Revolution in 1911. Today, Naica is operated by Peñoles, and has become the second largest lead mine in Mexico. In 2012 it produced 768,483 tonnes of mineral, 17.4% more than in the previous year with each metal growing as follows: lead (18,185 tonnes, +17.4%), zinc (16,963 tonnes, +30.0%) and silver (2.1 million ounces, +15.7%). Naica declared reserves of 337,591 tonnes of lead, 804,913 tonnes of zinc, and 50.054 million ounces of silver. The estimated mine life has grown to 21.8 years since reserves increased 89% between 2010 and 2012. During exploration activities at the Naica mine, the Cueva de los Cristales, filled with giant selenite crystals, was discovered by accident, in limestone rock at approximately 300m below the surface. These extraordinary selenite crystals were formed over thousands of years after the temperature of groundwater saturated with calcium sulfate stabilized at around 136°F, which triggered the conversion of minerals into celestite crystals.
6
7
SAN FRANCISCO DEL ORO, MINERA FRISCO San Francisco del Oro is located in the state of Chihuahua. The mining complex contains ore bodies with important concentrates of silver, copper, lead and zinc with minor concentrations of gold. Minera San Francisco del Oro was first explored from 1555 to 1563. Mining operations continued but it was not until 1961 that the mine became part of Minera Frisco. In 2012 the San Francisco del Oro mine produced 1.89 million ounces of silver and 5,341oz of gold. Additionally, the mine produced 9,030 tonnes of lead, 18,302 tonnes of zinc and 1,982 tonnes of copper. A new plant will increase capacity to over 10,000 t/d, and will enable San Francisco del Oro to produce bars of gold and silver, lead, zinc, and copper.
SANTA BÁRBARA, MINERA FRISCO Santa Bárbara mining complex is located in southern Chihuahua and consists of three underground mines and a flotation plant. The ore bodies are formed mainly by quartz veins, and ore can be found several kilometers in length and at least 900m below the surface. Operations at Santa Bárbara consist of different types of mining, due to varying conditions of the ore bodies, which are: shrinkage stopping, long-hole drilled open stopping, cut-and-fill stopping and horizontal bench stopping. The mine produced 4.5 million ounces of silver, 3,661oz of gold, 57,700 tonnes of zinc, 24,300 tonnes of lead and 14,600 tonnes of copper in 2011.
8
BISMARK, PEÑOLES
9
EL SAUZAL, GOLDCORP
The Bismark zinc-copper mine, located in the northwest of Chihuahua, has been producing for Peñoles since 1992. While the mill has a capacity of 800,000 tonnes per year, Bismark milled and processed 666,595 tonnes of mineral in 2012, 9.7% less than in the previous year. The reduction in the volume of ore processed and lower ore grades resulted in a 16.2% decrease in the production of zinc to a total of 39,504 tonnes, a 20.8% decrease in the production of lead to 1,824 tonnes, and a reduction in silver production to 283,706oz, a decrease of 11.1%. Copper production increased by 7.9% to 1,548 tonnes of copper due to higher ore grades. In 2012 the project to deepen the Felipe Ángeles shaft by 200m was completed in order to provide access to 5.8 million tonnes of mineral with better ore grades of zinc.
El Sauzal, a conventional open-pit mine and mill operation, has been a reliable, low cost gold producer. Production in 2012 was 81,800oz, which was in line with the expected 19% decrease compared to 2011 as a result of 15% lower grades and 4% less tonnage milled. With probable reserves of 220,000oz of gold at the end of 2012, exploration efforts are focused on identifying new gold reserves to extend the life of the mine, which has been an important foundation for Goldcorp’s Mexican operations.
169
170
SILVER
6 Although silver has historically been the protagonist in Mexican mining, over the past five years Mexico’s gold production experienced a dramatic increase and today the country is the world’s 11th largest gold producer. In addition to high gold prices, Mexico benefitted from the combination of good gold deposits, favorable conditions for heap leaching, and a historical and stable mining culture. Sonora, Chihuahua, and Zacatecas are the main gold producing states in the country, and have been key contributors to the 4.1 million ounce increase in gold production over the past two years.
This chapter provides an overview of the country’s main gold mines and presents the strategies, achievements and priorities of the most prominent gold mining companies operating in the country. Special attention is dedicated to the challenge of turning discoveries into operating mines in the current financial context, as well as the increasing industry focus on lowering production costs. We also present an overview of Chihuahua’s mining industry and the ambitions of the state government to attract increased mining investment with the aim of accelerating the state’s economic growth.
171
172
CHAPTER 6: SILVER 174
Global Trends in the Silver Market
175
Building on Mexico’s Silver Mining Legacy
176
MINE PROFILES: Mexico’s Main Silver Mines
177
The Silver Institute
178
Silver Production by Mine
179
VIEW FROM THE TOP: Extracting Value from Mexico’s Historic Silver Assets
180
VIEW FROM THE TOP: Long Term Low Cash Cost Strategy
182
MINE SPOTLIGHT: Fresnillo
184
VIEW FROM THE TOP: First Majestic’s Aggressive Development and Acquisition Plan
184
The Shared Benefits of Silver Mining
186
VIEW FROM THE TOP: Unlocking Mexico’s Potential to Create Long Term Value
188
MINE SPOTLIGHT: La Encantada
190
Pan American Silver Bases Growth Streak in Mexico
192
Diversifying the Portfolio to Minimize Risk
194
Results Keep Exploration Projects Moving Forward
195
VIEW FROM THE TOP: Production Decision for Pitarrilla
196
VIEW FROM THE TOP: The Value of Efficiency in Allocating Resources
197
Vertical Integration Strategy
198
MINE SPOTLIGHT: Palmarejo
200
MINE PROFILES: Zacatecas
202
VIEW FROM THE TOP: Silver Lining for the Economy of Zacatecas
203
VIEW FROM THE TOP: The Transformative Power of Clusters
204
VIEW FROM THE TOP: Developing High Quality Mining Talent
205
Clusmin Zacatecas
173
GLOBAL TRENDS IN THE SILVER MARKET Classified by chemists as both a transitional metal and a
11%. The daily high of US$37.23 for 2012 is also substantially
precious metal, silver has many uses. It is the best electrical
lower than the 2011 high of US$48.70. Furthermore, the
and thermal conductor among all metals, which makes it
London Bullion Market – where silver is predominantly
very effective in electrical applications. Silver’s properties
traded - calculates an average silver price of only US$25.14
are expected to secure long term silver demand, even if
for the first eight months of 2013, with a partial high of
some industries and sectors have decreased their use of this
US$31.11 during January and a partial low of US$19.71 for
metal due to structural or economic reasons. For example,
July. If prices remain at these levels, the industry could be
photographic film manufacturers – which demand very
looking at a 19% decrease in silver prices between 2012 and
high purity silver – have decreased their participation in the
2013. Additionally, while the price of silver has trailed down,
silver market due to the increasing digitalization of video
its volatility has also diminished. Its average fluctuation
and photography. However, silver is being increasingly
ratio stood at 34% in 2012, versus 64% in 2011. Overall
required for the fabrication of photovoltaic cells, an end
volatility during 2012 was 29%, in comparison to 61% the
use that could become an important source of demand for
previous year.
the precious metal in the future. Total silver supply rose by 0.9% in 2012, amounting to As the most plentiful among the precious metals - a group
1,048.3 million ounces. Mine production was the biggest
that also includes platinum, rhodium, palladium, iridium
component of this growth, with a reported 4% increase. This
and gold – silver is also the cheapest. Because of demand
growth countered decreased supply from other sources.
resulting from its industrial uses, the silver price is more
For example, net government sales experienced a dramatic
volatile than that of gold. On average, a 1% change in the
fall of 38% and registered a 15-year low. The secondary
gold price is matched by a 1.75% change in silver, both
production of silver – the recovery and recycling of old
upwards and downwards. Moreover, silver’s low recycling
silver scrap – also fell slightly by 1.6%. World silver mining
rate and the fact that it is often mined as a by product
production has reported sustained growth since 2003, with
make supply of this metal less responsive to market
Latin America as the main driver of this increase. However,
demand, thus giving silver a benchmark value that could
the production of silver as a by-product has increased
become a safety net for investors in the case of a dramatic
as a share of total silver production, thanks to the sharp
fall in metal prices.
increase in all metal prices throughout the past years. Only 28% of the silver mined in 2012 was obtained from primary
The price of silver came close to its historical nominal
silver deposits, while 39% of this metal was mined with
high in 2011, but has since fallen sharply. Then shown early
base metals lead and zinc. Copper and gold mining are also
signs of recovery. The World Silver Survey 2013 places the
significant sources of silver, with a respective participation
average price of silver in 2011 at US$35.12 per ounce, and
of 20% and 13% of total silver mining production.
at US$31.15 in 2012. This is a year-on-year decrease of over
GLOBAL SILVER PRODUCTION AND PRICE (US$/OZ) 50 45 40 35 30 25 20 15 10 0 2009
2010
2011
2012
2013 Source: InfoMine
174
BUILDING ON MEXICO’S SILVER MINING LEGACY Mexico is the world’s leading producer of silver, and the
GLOBAL SILVER PRODUCTION BY COUNTRY
Mexican Silver Belt (La Faja de Plata) is the world’s most productive silver district, with an annual production of over 10 billion ounces of silver and between 63 and 75 million 16.3%
ounces of accompanying gold production. This prolific silver
17.7%
belt extends for roughly 800km alongside the Sierra Madre Occidental mountain range and includes mining districts that have been in almost continuous production since the 16th
2.2% 4.4%
century, such as Pachuca, Hidalgo; Guanajuato, Guanajuato; Zacatecas and Fresnillo, Zacatecas; Tayoltita, Durango;
4.7%
15.8%
Francisco del Oro, Chihuahua; and Charcas, San Luis Potosi. The country is home to some of the world’s oldest and most
4.9%
sought after silver mining jurisdictions. It is believed that
5.4%
about one-third of all silver mined in the history of the world
14.4%
6.2%
has come from Mexico. But even with such a rich history, this
7.9%
country’s silver mineralization is nowhere near depleted. The predominant ore deposit types found in the Faja de Plata are veins, pipes, mantles, and stockworks of silver, gold, copper zinc and lead. The manifestations of mineralization are found almost all over the territory, with higher intensity in areas where metallogenic events were concentrated, forming deposits of great economic value.
Mexico
Poland
China
Chile
Peru
US
Australia
Canada
Russia
other
Production grades range from 5 to 30oz/t of silver with mining rates of a few hundred to 7,500 t/d. In terms of nonmetallic minerals it also produces oil aggregates, clay, sand, kaolin, gravel and dimension stones, among others.
Bolivia Source: USGS
Since the mid-1960s historic silver districts within the belt
is allowed, the region has the funds to use cutting deposits.
have yielded new ore zones. With new and more updated
There is still plenty of potential in this area, as mentioned
geochemical and geophysical techniques, mineral deposits
above; it was not until the 1990s that the region became
that were overlooked in the past are now being discovered
amenable to cutting-edge exploration technology in order
and transformed into mines. The majority of miners in the
to find new silver to unearth. In 2010 Mexico reclaimed the
region extract the resources through underground tunnels.
spotlight as the world’s largest silver producing country.
There are now dozens of junior exploration companies
According to INEGI, silver mining production doubled in
working hard in the region to find the next big silver deposit
Mexico between 2003 and 2012, and production levels rose
to attract foreign investment. Now that foreign investment
at yearly rates of 24% in 2010, 8% in 2011, and 12% in 2012.
Q: WHAT EXPLAINS THE PRESENCE OF SO MANY CANADIAN MINING COMPANIES IN THE MEXICAN SILVER MINING INDUSTRY? A: Canada has one of the best stock exchange systems in the world - the Toronto Stock Exchange - and approximately 80% of all money raised worldwide for mining takes place there. Financial institutions and banks are very comfortable investing through Canada because of the strength, transparency, and tough regulations that protect investors. This has resulted in investors from around the world going through the Toronto Stock Exchange in order to access growing companies that are active in foreign jurisdictions. Simply put, the Canadian financial system has made it easy for the creation of mining companies, in the same way that the Mexican regulation system, NAFTA, and the Mining Law, make it attractive for foreign companies to invest in and create businesses in Mexico. It is a win-win situation for both countries. Keith Neumeyer, President & CEO of First Majestic Silver Corp.
175
| MINE PROFILES: MEXICO’S MAIN SILVER MINES
46
22 40
42
45 25 39
47
14 9
17 15 5
19 3
34
24 16 29
33
41
43
2
11 6
13
27
8 10 1 4 28 36
37
32
31 48
18 21 26 38 35
30
7 44 23
176
1. Fresnillo, Zacatecas
17. Pinos Altos, Chihuahua
2. Peñasquito, Zacatecas
18. NEMISA, San Luis Potosi
3. Palmarejo, Chihuahua
19. Naica, Chihuahua
4. El Saucito, Zacatecas
20. San José, Oaxaca
5. Álamo Dorado, Sonora
21. Cerro San Pedro, San Luis Potosi
6. Tayoltita, Durango
22. Buenavista del Cobre, Sonora
7. Tizapa, State of Mexico
23. Campo Morado, Guerrero
8. La Colorada, Zacatecas
24. San Fco. del Oro, Chihuahua
9. La Encantada, Coahuila
25. Mexicana de Cobre, Sonora
10. Sabinas, Zacatecas
26. Bolañitos, Guanajuato
11. La Ciénega, Durango
27. Tayahua, Zacatecas
12. El Águila, Oaxaca
28. Cozamin, Zacatecas
13. La Parrilla, Durango
29. El Herrero, Durango
14. Dolores, Chihuahua
30. La Negra, Queretaro
15. Ocampo, Chihuahua
31. Charcas, San Luis Potosi
16. Guanaceví, Durango
32. Asientos, Aguascalientes
| THE SILVER INSTITUTE
The value and merits of silver, both as an investment tool and as a commodity, are widely acknowledged. From 2003 to July 2013 the price of silver increased by more than 300%, and despite the recent drops in precious metal prices silver retains its status. The Silver Institute plays an important role in this area; established in 1971, the Institute’s broad objective is to promote silver and silver market development by presenting research, fostering communication, and improving understanding of both the supply and demand for silver globally. For Michael DiRienzo, The Silver Institute’s Executive Director, the qualities and applications of silver are so diverse that the precious metal cannot fail to retain its importance in our lives. “Today, no metal is as indispensable to modern life as silver. It is beautiful, durable, malleable, and valuable. It withstands extreme temperatures, and is an excellent reflector of light and conductor of heat and electricity. It is also a better conductor of electricity than copper, and a natural antimicrobial agent,” he says. In recent years, the Silver Institute worked with a major bank as an advisor on the creation and launch of the iShares Silver Trust (SLV), a very successful exchange traded fund. “We have also created the Silver Promotion Service (SPS), which is designed to raise awareness about the fine work in sterling silver jewelry. That program also has a Mexican component, where prominent Mexican designers are showcased on the web site,” explains DiRienzo. The Silver Institute has conducted extensive research on supply and demand for silver, and holds a positive view of
20
12
what the future will look like for the precious metal. This is not surprising, when one considers that the global supply of silver has increased consistently, year on year, for the past decade. The main source of world silver is the mining industry, though the majority of that does not come from primary silver mining. “Silver is a byproduct of other mining activities. In recent years only about 30% or so of newly mined silver has typically come 33. Nuestra Señora, Sinaloa
from primary silver mines, with the vast majority being a by
34. Santa Bárbara, Chihuahua
product of lead, zinc, gold, and copper operations. Silver is
35. Guanajuato, Guanajuato
also recycled, especially from industrial catalysis processes,
36. Francisco I. Madero, Zacatecas
and comes from other sources such as scrap melt,” explains
37. San Martín, Jalisco
DiRienzo.
38. El Cubo, Guanajuato 39. Santa Elena, Sonora
As the world’s biggest silver producer Mexico has an important
40. San Francisco, Sonora
role to play in The Silver Institute; indeed, many of the most
41. Topia, Durango
prominent companies in Mexico’s silver mining industry
42. Mercedes, Sonora
appear in The Silver Institute’s members list. “Mexico has a
43. Velardeña, Durango
long tradition of silver mining, and its importance to the global
44. La Guitarra, State of Mexico
silver marketplace is unquestioned. Mexico is and will always
45. Bismark, Chihuahua
be a leader in terms of silver mining - I think that will be the
46. San Felipe, Baja California
case for centuries to come,” says DiRienzo.
47. La Colorada, Sonora 48. El Coronel, Zacatecas
177
SILVER PRODUCTION BY MINE Mine Fresnillo Peñasquito Palmarejo El Saucito Álamo Dorado Tayoltita Tizapa
Company
State
Million ounces
Fresnillo plc
Zacatecas
26.38
Goldcorp
Zacatecas
23.70
Coeur Mining
Chihuahua
8.20
Fresnillo plc
Zacatecas
7.05
Pan American Silver
Sonora
5.36
Primero Mining
Durango
5.13
Peñoles
State of Mexico
4.57
La Colorada
Pan American Silver
Zacatecas
4.43
La Encantada
First Majestic Silver
Coahuila
4.04
Peñoles
Zacatecas
4.03
Fresnillo plc
Durango
3.33
Sabinas La Ciénega El Águila
Gold Resources
Oaxaca
3.00
La Parrilla
First Majestic Silver
Durango
2.88
Dolores
Pan American Silver
Chihuahua
2.65
Ocampo
Minera Frisco
Chihuahua
2.56
Endeavour Silver
Durango
2.51
Guanaceví Pinos Altos NEMISA Naica San José Cerro San Pedro Buenavista del Cobre
Agnico Eagle
Chihuahua
2.31
Neg. Mra. Sta. Ma. de la Paz
San Luis Potosi
2.12
Peñoles
Chihuahua
2.06
Fortuna Silver
Oaxaca
1.95
New Gold
San Luis Potosi
1.94
Grupo Mexico
Sonora
1.91
Campo Morado
Nyrstar
Guerrero
1.89
San Fco. del Oro
Minera Frisco
Chihuahua
1.89
Mexicana de Cobre
Grupo Mexico
Sonora
1.83
Endeavour Silver
Guanajuato
1.67
Tayahua
Minera Frisco
Zacatecas
1.63
Cozamin
Capstone Mining
Zacatecas
1.58
Minas de Bacis
Durango
1.47
Bolañitos
El Herrero La Negra
Aurcana
Queretaro
1.37
Charcas
Grupo Mexico
San Luis Potosi
1.35
Asientos
Minera Frisco
Aguascalientes
1.25
Nuestra Señora
Scorpio Mining
Sinaloa
1.18
Santa Bárbara
Grupo Mexico
Chihuahua
1.02
Guanajuato
Great Panther
Guanajuato
1.00
Peñoles
Zacatecas
0.96
First Majestic Silver
Jalisco
0.96
Endeavour Silver
Guanajuato
0.73
SilverCrest
Sonora
0.58
Francisco I. Madero San Martín El Cubo Santa Elena San Francisco
Timmins Gold
Sonora
0.56
Topia
Great Panther
Durango
0.56
Mercedes
Yamana Gold
Sonora
0.49
Velardeña
Golden Minerals
Durango
0.46
La Guitarra
First Majestic Silver
State of Mexico
0.39
Bismark San Felipe La Colorada El Coronel
Peñoles
Chihuahua
0.28
Minera Frisco
Baja California
0.14
Argonaut Gold
Sonora
0.13
Minera Frisco
Zacatecas
Others TOTAL
178
0.02 24.69 172.28
| VIEW FROM THE TOP
EXTRACTING VALUE FROM MEXICO’S HISTORIC SILVER ASSETS BRADFORD COOKE CEO of Endeavour Silver Q: Could you please describe how Endeavour Silver
would generate lower costs and higher profits if they were
achieved eight consecutive years of accretive growth?
leached at Guanaceví, to produce similar doré silver-gold
A: Endeavour Silver’s main focus is on growing our
bars. This vertical integration of the two mines helped to
business in an accretive way: finding, acquiring, building,
keep our operating costs down. Since we acquired El Cubo
and operating quality silver mines that create real value
mine not far from Bolañitos, and the El Cubo plant also has
for our shareholders. Endeavour Silver specializes in
a mineral leach circuit that produces doré silver-gold bars,
acquiring under-performing mines in historic districts that
we now have the opportunity to produce doré bars from
are struggling to survive. We bring the money and expertise
Bolañitos concentrates at El Cubo instead of Guanacevi,
needed to turn the operations around and bring them back
which also helps to reduce trucking costs.
to being profitable, then unlock their full potential by making new high grade discoveries and fast-tracking new mines to
Q: What are Endeavour Silver’s ambitions regarding its
production, in order to drive annual growth. For instance,
social and environmental responsibility?
our first two mines at Guanaceví in the state of Durango
A: Endeavour Silver has been one of the most proactive mining
and Bolañitos in Guanajuato were small, tired old mines
companies in Mexico regarding sustainability programs for
when we bought them but we recognized that they each
community, health, safety, and the environment. We call it
had attractive modernization, exploration, and expansion
corporate social integrity. Our actions are a reflection of
potential. Today they are large and profitable core assets that
who we are and what we do. The path to success anywhere
are still growing. Our model for success has also diversified to
in the mining world goes right through the heart of better
include the discovery of new silver-gold deposits in historic
safety, better health, better community benefits, and higher
mining districts where there are no operating mines, such
environmental standards. In all of our company’s activities
as our Terronera find at San Sebastián in Jalisco. Endeavour
we consider how to maximize potential benefits for our
continues to focus on capturing opportunities that play to
stakeholders and minimize any possible negative impacts
our strengths, and that works to our competitive advantage.
coming out of our operations.
Q: Why did the company choose Mexico as the main pillar
Q: What are the next steps for Endeavour Silver to become
of its growth strategy?
a senior silver producer?
A: When we started the company in 2003 we wanted
A: At each of our non-producing exploration properties in
to get into the silver mining sector, and we had to decide
Mexico – Parral, Arroyo Seco, Pánuco-Labertino and Lourdes
which country offered the best mineral potential, with the
– we see good potential for new silver-gold discoveries, so
fewest issues that could negatively impact mining. We chose
our challenge is to do the exploration work and find new
Mexico for several reasons, and that decision turned out to
ore bodies, and our opportunity will be to turn any new
be a very good one. Mexico clearly has exceptional mineral
discoveries into profitable operating mines. In order to
potential, as evidenced by the growth of its mineral resources
achieve our production targets for 2013 we need to complete
and production in recent years. Even 450 year old historic
a modernization of El Cubo mine and plant and turn the
mining districts have not been fully explored by modern
operation around from losing money to making money;
methods, which is why Endeavour has been able to make
continue expanding mine production at the Bolañitos mine;
new discoveries in some of these districts almost every year.
and improve the production grades at the Guanaceví mine. To become the next senior silver mining company Endeavour
Q: What has been Endeavour Silver’s strategy to keeping
also plans to find or acquire at least two new silver projects
operating costs low at Guanaceví and Bolañitos?
that we can develop into our fourth and fifth mines. In
A: Since the Guanaceví plant has a mineral leach circuit that
fact, our San Sebastián project alone may indeed have the
produces doré silver-gold bars, we recognized in 2008 that
potential to make Endeavour Silver a 10 million ounce per
the mineral concentrates produced at our Bolañitos plant
year senior silver producer.
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| VIEW FROM THE TOP
LONG TERM LOW CASH COST STRATEGY OCTAVIO ALVÍDREZ CEO of Fresnillo plc
Q: What have been the main accomplishments during
cycle, but we maintain this investment, which is the lifeblood
your first year on the job as CEO of Fresnillo?
of our company. When Fresnillo was listed in London five
A: For Fresnillo the transition from Jaime Lomelín Guillén to
years ago, we had approximately 1 billion ounces in silver
myself came naturally, so I did not need to make any drastic
reserves, and today we have reached 2 billion ounces. We
changes because the business was and still is going very
have also grown our gold resources from 11 to 27 million
well. We place great emphasis on efficiency and cost, and
ounces. With this exploration success we have also laid the
what I have done is to really focus on which projects could
groundwork for continuous growth. Sustainability is also
grow better and be productive in the downwards cycle the
very important. We have the objective of attaining five zeros:
industry is currently in. Fresnillo was born on the London
zero new professional illnesses; zero fatal accidents; zero
Stock Exchange, when the Chairman and Board of Peñoles
major environmental impacts; zero community conflicts; and
strategically decided to split the Group into two companies.
zero labor issues. All of this provides the framework for our
Since then there has been a clear strategy for Fresnillo: it is
sustainability approach. In each aspect of our business model
a company focused on precious metals and growth, with
we look out for, identify, and measure the risks in each part
a simple and solid business model and an experienced
of the process.
management team. My first year has been very much oriented towards continuing with this strategy.
Q: What would be your advice for Mexican mining companies to make them more resilient to the market cycles?
Q: In just five years, Fresnillo has become the largest
A: Exploration is key, and chances are that if you
primary silver producer in the world. To what do you
continuously invest in exploration you will succeed. Of
attribute this success?
course, you also have to have a team of good geologists.
A: We are very careful about how we evaluate projects, as
Having spent so long in the country, we have mining
we do not want to dilute the quality of our current mines. We
concessions in the areas that have the best potential. One
are very proud of our operations, and our main criterion is
key aspect of our exploration model is that we first explore
the low production cost potential. So while we are exploring,
around our existing operations, so that every ounce we find
we concentrate on those projects that combine growth
in these areas has more value, because we already have the
potential with cash cost of production in the lowest quartile.
infrastructure and personnel in place. You can see that, as a result of this strategy, we found El Saucito near Fresnillo. In
Q: How has Fresnillo been able to outperform its peers in
the case of La Ciénega we also found San Ramón, and in the
selecting high potential projects that can be developed
case of La Herradura, which was our initial open pit mine, we
into low cost, world class mines?
found Soledad-Dipolos and then we acquired Noche Buena.
A: This comes with the experience and knowledge gained
Investment in exploration is certainly the key.
from being in the business for so long. We extract and
180
optimize efficiencies at all steps in the process. The strategy
Q: By 2018, Fresnillo aims to have produced 65 million
we follow depends on the situation at each one of our mines.
ounces of silver and 500,000oz of gold. What are your
To give you an example, the main pillar of our business model
strategic priorities to reach these targets?
is that we are now compensating for the lower grade at
A: Five years ago the board correctly identified that by
Fresnillo and Ciénega by finding, processing, and producing
splitting Fresnillo, focusing it on precious metals, and
a higher volume. With modern technology, we are going to
subsequently launching it on the London Stock Exchange,
reprocess the low tailings, which will allow the recovery of
we could achieve the right market value for both companies
additional silver from tailings we had previously disposed
correctly. At that time we identified that we could have a
of. Another key pillar for us is to extend the growth pipeline
company that was strongly focused on growth, already
through exploration and across all cycles in the market. Some
possessing the land and the projects that could really drive
mining companies stop exploration during a downward
this growth, since the group maintains the largest land area
of concessions for precious metals exploration and mining in
everything is great, but in bad times everyone has to make
Mexico, and we set a very aggressive growth target. We said
some sacrifices. We all understand this concept and we
we would achieve twice the production we had in 2008, so
keep giving them work through difficult times in the mining
we set that goal of 65 million ounces of silver and 400,00oz
cycle as well. We have long term contracts and a long term
of gold that we later upgraded to 500,000oz. We are on
approach to supplier relations and supplier development.
track, and with San Julián - which comes on line at the end of
We support our contractors, and they grow with us.
2014 - we will add 10 million ounces of silver and 45,000oz of gold. The expansion of El Saucito, due to be completed at the
Q: What do you expect to be the respective roles of
beginning of 2015, will add another 10 million ounces of silver.
gold and silver in the evolution of the group’s corporate
So with those projects and the optimization of metallurgical
identity over the coming decade?
processes at Fresnillo, such as the expansion of production
A: Gold and silver are equally important to us. In terms of
to 10,000 tonnes per day and the pyrites projects, we are
revenue, for example, silver and gold together represent 48%,
confident that we will reach that target.
and the remainder comprises base metals, lead, and zinc. We are identified as a silver company because we are the largest
Q: How do you work together with service providers to
primary silver producer in the world. With the projects we
achieve the lowest cash cost and increase synergies?
have in our portfolio now, by 2018 it is very possible that we
A: We work with our suppliers and contractors at every
will be the largest silver producer in the world full stop – not
stage, from exploration to production. We create strategic
just primary. By then we will again have more revenue coming
alliances with them and consider them an extension of our
from silver than from gold. We do not prefer one to the other.
company. Only with this vision can we work with them on
It is more about the projects we have, and which projects we
a long term basis, and they understand that in good times
feel have better chances of becoming a low cost operation.
WORLD’S LEADING PRIMARY SILVER MINES IN 2012 (MILLION OUNCES) 35
32.23
30 26.38
25 20 15.5
15
7.44
7.05
6.43
6.39
Gümüsköy, Turkey (Eti Gümüş)
Greens Creek, US (Hecla Mining Company)
8.24
El Saucito, Mexico (Fresnillo)
8.62
Pallancata, Peru (Hochschild Mining plc / International Minerals Corp.)
11.26
10 5
Palmarejo, Mexico (Coeur Mining)
Pirquitas, Argentina (Silver Standard)
Uchucchacua, Peru (Buenaventura)
Dukat, Russia (Polymetal International)
Fresnillo, Mexico (Fresnillo)
Cannington, Australia (BHP Billiton)
0
Source: The Silver Institute
MORE ABOUT FRESNILLO Fresnillo plc is the world’s largest primary silver producer and Mexico’s second largest gold producer, and is listed on the London Stock Exchange under the symbol FRES. Fresnillo has seven operating mines: Fresnillo, El Saucito, La Ciénega, San Ramón, La Herradura, Soledad-Dipolos, and Noche Buena. It also holds four advanced exploration projects: San Julián, San Juan, Orysivo, and Juanicipio, as well as a number of other long term exploration prospects. In total, Fresnillo plc has mining concessions covering approximately 1.91 million hectares in Mexico. Fresnillo’s goal is to maintain its position as the world’s largest primary silver company, producing 65 million ounces of silver and over 500,000oz of gold by 2018, and also to become the world’s largest silver producer in general.
181
182
| MINE SPOTLIGHT
FRESNILLO Fresnillo is the largest primary silver mine in the world and one of the world’s oldest continuously operating mines. Last year, Fresnillo plc’s flagship mine produced over 26 million ounces of silver and 29,573oz of gold, and also produced 16,190 tonnes of lead and 14,996 tonnes of zinc. As a result, Fresnillo produced 64.4% of the company’s total attributable silver and generated 37.8% of adjusted revenue. The mining complex began operating in 1554 and has been in near continuous operation for almost five centuries. Since 1921, Fresnillo has produced more than 730 million ounces of silver at an average silver grade of 405 g/t. The asset consists of a vast underground mine that is complemented by a flotation plant, and it has a current milling capacity of 8,000 t/d and 2.6 million tonnes per year. The mine has a current workforce of 903 employees and 705 contractors. The mine has an anticipated operating life of 13.3 years, with a total of 308.5 million ounces of silver and 733,000oz of gold in reserves. The main challenge for the operation today is to compensate for the natural decline in silver ore grades, decreasing from 396 g/t in 2011 to 328 g/t in 2012 and causing last year’s 12.9% decline in silver production. Fresnillo plc expects ore grades to decline to approximately 300 g/t in 2013, then to remain within the range between 300 g/t and 325 g/t for four years, before declining in the following years towards the ore grade in reserves of 281 g/t. The company’s strategic priorities are optimizing production of the remaining resource by operating at full capacity, increasing recovery rates by processing tailings, replacing and expanding the resource base through intensive local and regional exploration, and consolidating its districtwide growth and optimization efforts for the processing of ore and tailings from multiple sites.
SILVER GRADE (G/T) AND PRODUCTION (THOUSAND OUNCES) 40,000
600 500 35,420 400
35,906 35,000
33,776
300 200
30,000 30,295
100
26,383
25,000 2012
2011
2010
2009
2008
0.0
Source: Fresnillo plc
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| VIEW FROM THE TOP
FIRST MAJESTIC’S AGGRESSIVE DEVELOPMENT AND ACQUISITION PLAN KEITH NEUMEYER President & CEO of First Majestic Silver Corp. Q: To what extent is Mexican territory underexplored
of silver mining in Mexico. What is this belief based on?
when it comes to silver?
A: From my point of view there are two metals that are
A: Mexican territory is extremely underexplored, not just
essential for humans in their daily lives: one is silver and the
in silver but also in other natural resources like oil and gas,
other is copper. In my opinion, if silver disappeared from our
uranium, gold, copper, lead, and zinc. The first wave of
lives today, our lives would change for the worse. 80% of
investment in Mexico from Canada came after NAFTA in
mined silver is used commercially, such as in photography,
1993, but unfortunately it only lasted for a short period of
batteries, and cell phones, among many other uses, and
time due to the 1997-1998 crash in the global mining sector,
as the human race becomes more reliant on technology it
after which gold prices hit a low of US$250 per ounce and
becomes more reliant on silver. However, as above-ground
copper dropped below US$0.60 a pound. During this
supply for silver is rapidly depleting production is not
period of time investment in mining reduced significantly
matching the increasing demand. 90% of all of the silver
worldwide, causing mines to shut down and a shortage of
that has ever been mined has gone into waste dumps, and
trained personnel in the industry.
generally has not been recycled because the silver price is not high enough to make the recycling process profitable.
Q: Your founding of First Majestic Silver Corp. in 2002
There will come a point in the future when recycling these
reflects your belief in the silver market and the potential
products makes economic sense, but the price of silver will
THE SHARED BENEFITS OF SILVER MINING Keith Neumeyer first came to Mexico in 1984 when he visited
70% pure silver in order to be considered for acquisition,
Mazatlan as a tourist, and he was immediately impressed
and the company sometimes goes so far as to disregard
by what he saw. “I liked the people, the weather, and the
other minerals in the mine in favor of focusing solely on the
great food, and I always wanted to do business in Mexico,”
production of silver (as the company has done with the lead
says Neumeyer, who almost three decades later is now the
present on the La Encantada property). This commitment
President and CEO of First Majestic Silver Corp., one of the
to high quality assets has led to First Majestic’s aim to
most successful silver mining companies in the country.
increase silver production from 4.2 million ounces in 2011 to
First Majestic was founded in 2002 after Neumeyer left First
approximately 16 million ounces by 2014. The company is
Quantum Minerals, a successful copper producing company
on track to achieve this growth based on production at its
that he had founded in 1992. First Majestic now represents
five core properties: La Encantada, La Parrilla, San Martín,
both his firm belief in Mexico as a land of opportunity and his
La Guitarra, and Del Toro. With six additional properties in
strong conviction that silver is the metal of the future.
the company’s portfolio that have similarly been acquired either at the advanced exploration stage or once already
His adherence to both of these premises is unshakable;
in production, Neumeyer’s goal to continue growing even
when asked why he chose silver over copper he talks at
after the 2014 target has been reached will likely be realized.
length of his vision for the future of this element: “Silver is
184
going through a re-rating right now and, in my opinion, the
Neumeyer says that one of the main success factors has
silver price is going to be much higher in the future. I feel
been the company’s hiring policy: the company’s entire
that as long as we stay as pure as we can, First Majestic will
operations team is local Mexican talent and is based
benefit more than other companies that have less silver in
in Mexico. “I feel that having local people running the
their portfolio.” His certainty is reflected in First Majestic’s
operations gives First Majestic a huge advantage over
acquisition criteria: a deposit has to consist of more than
other foreign companies. Since we started the company
have to be around US$100 to US$150 per ounce for that to
water back into the system to be reused. This is more
happen. These numbers are achievable and in my view we
environmentally friendly, because the end product is a dry
will see prices like that within the next five years.
tailings paste that is free of water or cyanide, and water consumption on that operation is 80% lower following the
Q: What does First Majestic’s portfolio currently look like,
construction of these presses. We have also installed them
and which would you say is your flagship property?
at the La Parrilla mine. Even though this entails a big initial
A: Our strategy has been to acquire good assets that we
investment of around US$5 million, it takes a huge pressure
believe in, and we have proved very successful in buying
off the community. At our San Martín operation in the state
underperforming assets that lacked money. We currently
of Jalisco, the Bolaños River dried up for the first time
have 11 projects in total, with five producing mines, two of
in known history in the summer of 2012. As a result our
which will be expanded dramatically over the next three
production mill had to be shut down, because obviously
years. Del Toro is the biggest investment in our company’s
the town takes priority over the mine for water provision.
history, at US$124 million, and it is also going to be our
As a solution, First Majestic built a 13km pipeline from a
biggest mine, with anticipated annual production of 6
distant water source in the mountains and transported
million ounces of pure silver. That is easily our biggest mine
water from there to the town. A decision was also made to
and our biggest investment in Mexico, and currently the
invest in a sewage treatment facility in the town in order to
most important property in our portfolio.
treat all of the sewage that is currently going into the river. This new facility will not only clean up the environment, but
Q: What is the main challenge that you are facing at your
its wastewater can also be used in the milling operation.
operating mines?
As part of our current Del Toro construction project in the
A: The biggest factor for us has been water; we had some
state of Zacatecas, we are installing the same types of
problems in 2012 with our other operations because of the
water preservation systems. We are very proud of these
drought that hit Mexico. We built very large filter presses
initiatives and believe that all mining companies should
in the La Encantada mine, which filter and recirculate the
adopt similar practices.
we have attracted some of the best miners in Mexico, who
has funded - from paving roads to improving water
want to work for us because of this different strategy.” The
and electricity infrastructure and improving healthcare
operations team is based in Durango and is complemented
facilities. “When I go to that town today, I get excited and
by the company’s head office in Vancouver. “First Majestic’s
feel very proud of what we have done in Mexico. These
COO, Ramón Dávila, and I put the company together in
benefits are a demonstration of what mining can bring
2003 by combining our talents: mine being in banking and
to Mexico. The wealth stemming from mining activities is
the Canadian regulatory system and Ramón’s as one of the
creating wealth in Mexico and reducing poverty, and as this
best operators in Mexico,” says Neumeyer.
process continues over time the influence of drug cartels will decrease,” predicts Neumeyer. “There has been a lot
Neumeyer states the company’s impact on the local
of investment in Mexico, coming from major international
level as its greatest achievement. Many of the company’s
corporations and hundreds of Canadian mining companies,
projects are old mines that have required some work in
and the country will continue to benefit from investment
bringing them back into operation and turning them into
over the next five to 10 years. As long as the government
modern, functioning mines. Hiring only Mexican staff,
allows continued opportunities for foreigners to invest in
the company has relied on local talent in order to do so.
their industries in a way that makes sense for all parties
“The employment we are generating is very important
concerned, Mexico’s growth will continue”.
and exciting. When Dávila and I went through the town of La Parrilla in October 2003, there were only 300 people
If Neumeyer’s conviction that Mexico is an excellent place
in that town and I can guarantee that there was not one
for mining operations is not yet evident, the importance of
person there between the ages of 10 and 60 - the people
its role in the future of First Majestic Silver speaks volumes.
in that age group had left and were working in big cities
“We do not have any ambitions to go beyond Mexico,
elsewhere in Mexico, or in the US,” Neumeyer remembers.
because the potential of our assets here is tremendous
Now with a population of around 2,500 people, the town
and will keep us busy for many decades to come. We have
has also benefitted from various projects that First Majestic
no reason to look outside of Mexico,” he says.
185
| VIEW FROM THE TOP
UNLOCKING MEXICO’S POTENTIAL TO CREATE LONG-TERM VALUE MITCHELL KREBS President & CEO of Coeur Mining Q: What potential do the properties in Coeur Mining’s
Q: What is the philosophy behind the environmental and
portfolio represent, and how will your acquisition of the La
social responsibility achievements of Coeur Mining in
Preciosa property generate future value for the company?
Mexico?
A: Palmarejo is the world’s fifth largest primary silver mine
A: Environmental monitoring, employee, and public safety
and one of the largest operating mines in Mexico, which
measures and community involvement are integral in every
means that the resources and our employees at Palmarejo
stage of the mining life cycle, at all of our operations.
are critical to Coeur Mining’s growth. This flagship operation
Protecting the natural and economic environments where
holds significant potential for Coeur Mining because of
our activities have an impact and developing and maintaining
its large land position – more than 12,140 hectares – and
constructive relationships with the communities affected by
significant exploration opportunities. Our operation at
our ongoing activities are our core missions.
Palmarejo generated metal sales of US$86 million in the second quarter of 2013. Ongoing cost reduction initiatives
We have been honored to receive a number of environmental
at the operation have lowered cash operating costs, and
and social responsibility awards in recognition of the
we expect to make further progress in the second half of
successful community initiatives Coeur Mexicana has
the year.
undertaken. In April 2013 Coeur Mexicana was recognized with the Socially Responsible Business Distinction Award
The April 2013 acquisition of Orko Silver and its key asset
for 2012 for Palmarejo. This is the fifth consecutive year we
La Preciosa, in the state of Durango, further diversifies our
have received this national award in recognition of Coeur
global portfolio and provides the opportunity to create long
Mexicana’s demonstrated leadership in corporate social
term value for our shareholders. La Preciosa is the best of
responsibility, environmental stewardship, and sustainability.
the undeveloped projects in Mexico, and it offers Coeur Mining other benefits such as improving our geographical
Coeur Mexicana contributes to local communities in many
diversification. The Preliminary Economic Assessment (PEA)
ways. One such way is in funding the construction of
that we recently completed on La Preciosa demonstrated
infrastructure projects, such as a classroom and lavatories
the viability of the project and provides a solid foundation
in the Agua Salada community and an agreement with
from which we can enhance the project’s economics over
the Central Board of Water and Sanitation of the state
time, indicating an initial mine life of 17 years, producing an
for a sewage project for the Palmarejo community. We
average of 9.1 million silver ounces and 15,100oz of gold per
are also proud to support education through several
year over the first 14 years, at an average cash operating
different programs, such as the Quality Schools Program,
cost of US$13.86 per silver ounce.
which provided US$1,600 each to 12 institutions to purchase furniture and computer equipment and to fund
Coeur Mining has the development and exploration
scholarship programs. As a company we have also led
expertise, financial ability, and operational foundation to
several medical health campaigns such as “Chihuahua
fully optimize La Preciosa and realize its potential. We are
Vive,” taking care of the logistics for the provision of
currently putting together the feasibility study, which we
medical services, a gynecologist, dentist services, free
expect to complete in mid-2014, to help us to maximize
medication, an optometrist and civil registry, in partnership
returns at the current lower metal prices. We will not
with the Chihuahua State Government. These are just a few
proceed with construction at La Preciosa unless we feel we
examples of the many different types of projects Coeur
have a project that can generate an all-in rate of return that
Mining has carried out in the local communities.
exceeds our capital costs, but we believe that La Preciosa
186
will become another long-life, cornerstone asset for Coeur
Q: What are the company’s ambitions and goals within the
Mining and will generate a return in excess of our capital
Mexican mining industry in the coming 10 years, and what
costs.
will be your strategy to achieving such targets?
A: The pillars of sustainability – safety, environmental stewardship, community partnerships, and profitability
LA PRECIOSA
– are fundamental to our company’s ultimate success.
In April 2013 Coeur Mining completed the
We recognize that our Mexican operations are critical to
acquisition of Orko Silver Corp, for a total of
Coeur Mining’s long term global growth, and a valuable
CA$100 million in cash plus 11.6 million new
complement
shares, to take control of one of the world’s
to
production
expansions
at
our
US
operations. The opportunities at La Preciosa and elsewhere
largest
in Mexico will continue to shape how we grow and change
Mining is now moving forward to develop La
as a company, and we will maintain our commitment to
Preciosa into a world-class silver mine that could
operational consistency across our entire business, and to
produce about 7 to 9 million ounces of silver
building long term value for our shareholders.
annually.
Coeur Mining’s ongoing mission is to produce and protect
The asset, located just 47km northeast of the city
value for employees and shareholders by executing and
of Durango, covers 32,400 hectares and contains
maintaining operational consistency, delivering high-
measured and indicated resources of 146.2 million
return growth through internal operations and external
ounces of silver and 277,700oz of gold according
opportunities, and increasing reserves and resources
to the preliminary economic assessment (PEA)
through an aggressive exploration program. We are able
report, as well as inferred resources of 37.7
to deliver consistent results by doing what we say we
million ounces of silver and 60,300 ounces of
will do and demonstrating discipline. This alone gives
gold. The PEA for La Preciosa indicates an initial
Coeur Mining a competitive advantage, as it creates new
estimated mine life of 17 years, with a recovery of
opportunities and value.
an estimated 134.5 million ounces of silver, with
undeveloped
silver
deposits.
Coeur
the last three years of mill feed being sourced Our goal is to be recognized as a leader in the precious
from stock piles. The proposed project includes
metals industry. However, being a global leader does not
the construction of 9.7km of new unpaved haul
always mean you are the biggest company. In this industry
road, a 41km power line, and water sourced from
many companies have grown in size, but not improved
a well field 15km to the south of the mine.
when it comes to performance. In Coeur Mining’s view being a leader means we make more money for our
The company’s appraised internal rate of return
shareholders than other mining companies do, and we do
is of 17%, assuming price levels of US$25 per
it in a way that is safe, environmentally sound, and with the
silver ounce and US$1,500 per gold ounce. These
support of the local communities where we operate. We
prices are 26.3% higher than current levels for the
are reinvesting and growing in mindful ways because as an
former and 12.8% higher for the latter.
industry we are exhausting our reserves every day and we need to be smart about creating long term value.
We have the core assets, management team, track record, balance sheet & share structure to continue delivering out-performance.
Endeavour Silver Corp. is a premier, mid-tier silver mining company focused on the growth of its silver production, reserves and resources. Endeavour is motivated to make a positive difference in the communities where we work. We care about our people.
Silver Producer Focused on www.edrsilver.com
GROWTH
NYSE: EXK TSX: EDR FSE: EJD
| MINE SPOTLIGHT
LA ENCANTADA The La Encantada property has been in First Majestic’s portfolio of assets since 2006 and has since become the company’s largest operation, currently accounting for nearly half of the company’s annual silver production. Located in the state of Coahuila, the mine site encompasses 4,076 hectares of mining rights and 1,343 hectares of surface rights. The mineralogy of the deposits at La Encantada is predominantly iron oxides, carbonates and lead sulfates with high concentrations of argentite and native silver values, as the result of an oxidation process and enrichment in a known vertical range of more than 400 meters. Beneath the elevation of 1,600m, there is a presence of sulfides of Pb-Ag-Zn in the southwest part of the La Encantada mine. In 2010 and 2011 First Majestic completed a modernization and changeover at La Encantada to producing silver doré bars rather than concentrates. As a result, plant efficiency has improved significantly with dramatically lower smelting and refining costs and higher quality silver doré bars. The cyanidation plant was upgraded in 2011 and re-rated to 4,000 t/d. Running at full capacity, production is approximately 4.2 to 4.5 million ounces of silver annually in the form of silver doré bars. To improve recovery rates, metallurgical studies and pilot tests have been conducted to increase the production of fresh ore and developing areas of the mine with lower manganese content – primarily the San Francisco vein, the Milagros Breccia pipe and the newly discovered 990 chimney. The 990 is a high grade breccia pipe discovered in early 2012 with silver grades in the range of 400 g/t to 500 g/t. This new area was brought into production late in the fourth quarter of 2012 and is expected to improve grades of fresh ore feed to the mill. Silver production in 2012 reached 4.037 million ounces and is forecast to increase to 4.1-4.3 million ounces in 2013. La Encantada operates at a cash cost per ounce of US$8.46.
LA ENCANTADA PRODUCTION RESULTS Ore Processed/Tonnes milled
1,515,795
Average Silver Grade (g/tonne)
176
Recovery (%)
47%
Total Silver Ounces Produced Gold Ounces Produced Tonnes of Iron Ore Produced Total Production-Ounces Silver Equivalent
4,036,502 238 18,329 4,111,018
Underground Development (m)
14,338
Diamond Drilling (m)
19,390
Source: First Majestic Silver Corp.
189
PAN AMERICAN SILVER BASES GROWTH STREAK IN MEXICO Many
Chris Warwick, Country Manager of Pan American Silver and CEO of Plata Panamericana (PASMEX)
best
17 million ounces of silver. Chris Warwick, Country Manager
performing silver mining
of Pan American Silver, and CEO of its Mexican subsidiary
companies are relatively
Plata Panamericana (PASMEX), has a good perspective on
young
that
the opportunities for mining companies that own projects
use new business models
in Mexico. “The Mexican mining industry is in a strong
relying on state of the
position, built on strong prices and attractive mining
art operational practices.
opportunities under the previous government,” Warwick
Perhaps one of the most
mentions. “This may be compromised going forward as
representative
metal prices soften and the new government introduces
of
of
the
companies
this
American
trend
examples is
Silver.
Pan
new forms of taxation for the industry, but it will still leave
This
a robust operating environment,” he affirms.
Canadian-based company has become the third largest primary silver mining company in the world, after only 19
Pan American Silver’s producing mines in Mexico are now
years of operation (as per production figures published
the biggest contributors to the company’s global silver
by The Silver Institute). Pan American Silver produced a
output. Its fully-operating asset in Zacatecas, La Colorada,
company record of 25.1 million ounces of silver and 112,300
has produced 12.4 million ounces of silver over the past
ounces of gold in 2012.
three years. Together, Alamo Dorado and La Colorada produced over 9.8 million ounces of silver during 2012,
Pan American Silver owns seven silver-producing mines
which represented 39% of the company’s global silver
in Mexico, Peru, Bolivia, and Argentina, plus a variety of
production. Additionally, the company added the Dolores
exploration and development projects. Its largest silver-
project, located in Chihuahua, to its portfolio as a result
producing mine, Alamo Dorado, is located in Mexico,
of the acquisition of Minefinders Ltd. By the end of 2012,
and ranks as one of the 15 most important primary silver
the mine had already yielded 2.7 million ounces of silver.
mines in the world. This asset, located in the southwestern
Furthermore, Pan American Silver is developing another
region of Sonora, started producing in 2007 and its total
project resulting from this acquisition, and is exploring
production for the last three years (2010 to 2012) surpasses
Minefinders’ assets in Northern Sonora.
The La Colorada mine is located in the Chalchihuites district in Zacatecas State, and is comprised of three separate underground silver mines covering an area of approximately 2,864 hectares. The La Colorada mine is a typical epithermal silver-gold deposit, with a transition in the lower reaches of the deposit to a more base metal predominant system. In 2013 Pan American Silver anticipates producing between 4.6 million and 4.7 million ounces of silver, between 4,300 and 4,500oz of gold, between 5,000 and 5,800 tonnes of zinc, and between 2,800 and 2,900 tonnes of lead.
190
“We will continue looking for
places great importance on community relations and
further growth in Mexico through
with the National Institute for Forestry, Agriculture and
future
acquisitions
development
of
the
Livestock (INIFAP) to design sustainable agricultural
existing
population that inhabits the arid area surrounding the
and
our
sustainability. For example, the company has teamed up
operations”
projects that could guarantee a means of living for the Alamo Dorado project. “Our commitment to the local communities has shown PASMEX to be a serious player
Chris Warwick, Country Manager of Pan American Silver and CEO of Plata Panamericana (PASMEX)
in the areas of its operations,” Warwick affirms. “This has filtered through to the employees from those areas and
PASMEX expects to increase silver production in Mexico
has resulted in very energetic committed workforces who
to between 12.6 and 13.1 million ounces of silver by the
are proud of their individual operation.”
end of 2013, while at the same time streamlining new projects and increasing Pan American Silver’s global
Warwick believes that water management, both in
reserves. The company’s strategy is to extend mine life
underground and surface mining, is and has always been
through exploration, generate new projects as a result
the most notable environmental challenge in Mexican
of important discoveries and acquisitions, and achieve
mining operations. He notes that even the water that simply
operational stability and reliability by virtue of sound
passes through a mine’s property from a river or as a result
mining methods and community engagement. “Mine life,
of storm water run-off must be respected. “Water is always
coupled with sound capital investments, has been the
linked to the surrounding communities, their farming and
key to making PASMEX the largest contributor to Pan
livestock. The ejidos can turn hostile very quickly if not
American Silver’s worldwide production, as it has been the
given the correct attention in the management of their
platform to build on,” Warwick says. “This has allowed the
water,” he warns.
implementation of strong mining philosophies, which have not been compromised in the buildup of production over
While Warwick admits that the possible approval of a
the previous years.”
royalty tax could be a challenge and a possible cause of the industry’s deflation, he affirms that PASMEX maintains
Pan American Silver’s particular attention to the mining
considerable ambitions in the country. “We will continue
method employed in each individual operation helps
looking for further growth through future acquisitions,” he
the company balance exploration, development, and
mentions. “At the same time, we will also continue to foster
production
the growth of existing operations.”
successfully.
Furthermore,
the
company
191
DIVERSIFYING THE PORTFOLIO TO MINIMIZE RISK Each phase of a mining project brings with it a different
expansion,” says McDonald. Promontorio was previously a
set of challenges. When mineral prices drop there will be
small scale silver producer, and the part that was previously
a squeeze on companies operating at all different phases
mined represents only a small part of the whole mineral
of the mining value chain, though junior companies tend
system. “We went from an initial discovery program of
to have a particularly difficult time, relying as they do on
having no resource ounces, to having today over 92 million
external sources of investment for their exploration projects.
silver-equivalent ounces, and another 24 million ounces of
The companies that will be most resilient during difficult
inferred resources,” adds McDonald. Promontorio is part of
times are those that can generate profits and reinvest
a large diatreme complex, which often host prolific metal
those in their exploration projects; for junior companies
resources – Goldcorp’s Peñasquito mine in Zacatecas is
this is made possible either by having at least one property
the largest diatreme deposit in Mexico. “The Promontorio
at the production phase, or a portfolio of projects that are
diatreme is very permissive for discovering more resources,
either in the advanced exploration stage or are close to
and that is why we are so excited about the Promontorio
reaching the development phase. “Kootenay Silver started
project. We have just released a new resource update that
off with a two-pronged approach. Our goal from the outset
includes the gold component, because although this system
was to acquire an advanced, lower risk property that
is a principally silver deposit, in terms of value it represents
offered real potential to evolve into a commercial precious
roughly 45% silver, close to 30% gold, and the remainder
metals producer,” says James McDonald, Kootenay Silver’s
is lead and zinc. We had not previously included the gold
President and CEO. “Our second target area was project
component because we did not have the metallurgy to
generation. Since there were not many companies doing
show the potential to extract that gold; our studies have
this at the time, the company was very valuable.”
however shown that, after oxidation, the mineral extracts
“Kootenay Silver’s objective has been to leverage the value we built with the grassroots project generation to create a more advanced stage, lower risk project” James McDonald, President & CEO of Kootenay Silver Inc.
Kootenay Silver is a Canadian junior company, made
very well with leaching. This gold component has certainly
up of exploration experts, prospectors, and geologists
boosted the size of the resource,” adds McDonald. The
with a background in finding and developing early stage
presence of both gold and silver reflects Kootenay Silver’s
mining projects in Mexico and Canada. Founded in 2006,
own specialization. The company was previously known as
the company has a diverse portfolio that includes high
Kootenay Gold, but changed its name to Kootenay Silver to
risk, high reward properties and more advanced, lower
account for the fact that the Promontorio property holds
risk projects, with the aim of insuring itself against the
more silver than gold – the new name made more sense
fate that is befalling many other juniors in the market. By
when marketing the company to potential investors. Both
McDonald’s calculations, it takes around 2,000 exploration
precious metals, however, maintain an important place in
projects to find one viable mine, which is why juniors are
Kootenay Silver’s portfolio.
suffering from a lack of investment. “Today, exploration is driven mostly by the junior companies, and there is little
McDonald is confident about the future of silver, and
risk-capital available for them. Kootenay Silver’s objective
thus the company’s specialization. “Silver, like gold, is a
has been to leverage the value we built with the grassroots
precious metal that plays a monetary role in the global
project generation to create a more advanced stage, lower
economy. Unlike gold, it is also widely used in industrial
risk project,” explains McDonald.
processes, particularly in solar and medical applications, which have taken up the slack from the diminished use of
192
For Kootenay Silver this advanced stage, lower risk project
silver in the photographic industry over the last 10 years.
is the company’s flagship project in Sonora, Promontorio.
This double component makes the silver market a very
“For Kootenay Silver, Promontorio perfectly fits its criteria:
interesting and complicated market, and helps to manage
it had potential to immediately establish a resource base
risk,” says McDonald. When asked about his view on the
and had virtually unlimited upside potential for resource
impact of the recent drops in metal prices on the long term
development of the silver price, McDonald emphasizes
what we believe are solid fundamentals supporting the
the need to keep a sense of the bigger picture. “I believe
precious metals market, we feel we are well positioned,”
precious metal prices will continue to be strong, because
says McDonald. “Especially now, companies want to be in
global macroeconomic fundamentals will remain bullish for
politically stable and mining friendly jurisdictions where
precious metals,” he says. “Industrial demand will continue
their assets will not be confiscated. After putting a lot of
to grow, which helps silver. This will be driven by recovering
time and capital into finding deposits, and having pursued
economies throughout the world. Kootenay Silver really
a lot of other projects before reaching the stage of actually
has to look at the macroeconomic indicators, and whether
building a mine, companies do not want to see themselves
gold and silver prices are going to be strong 12, 24 or 36
in a situation where the mine can be taken away from them,
months from now. I think the answer to that question is
or where the government does not support the rule of law,
yes, we believe the prices will be higher, though we do not
resulting in the inability to develop the deposit,” states
know by how much,” he says.
McDonald. “We have more projects here because we see more potential for discovery, but also because Mexico is
Part of Kootenay Silver’s strategy to remaining strong
politically stable, and a very good place to operate. A lot of
in the face of this instability is to generate early stage
large deposits have been discovered in Mexico, including
exploration projects internally, advancing them to a certain
world class deposits. There are going to be many more
point, and then bringing in a partner to help finance the
discoveries made in Mexico in the coming years,” he says.
project, thus spreading the risk. The company is still finding there to be interest for good partnerships in the
Kootenay Silver plans to keep its focus on Mexico. The
industry and recently sold a 10% stake in its Promontorio
strategy that was used on Promontorio will play an
project to Agnico Eagle. For McDonald, Agnico Eagle’s
important role in the company’s exploration strategy
investment has served as an endorsement of the work that
elsewhere in Mexico. “On the generative side, we work in
the company is doing. “As an experienced mining operator
geological terrains that have potential for large deposits,
they can provide us with their complementary technical
and we geologically pick that area apart. It is a geology
background and knowledge, while Agnico Eagle can
driven process that works very well,” says McDonald.
benefit from the expertise of our exploration team in this
In the short-term, the company’s main goal is to keep
area of the country. The Agnico Eagle investment is very
moving Promontorio forward towards production, whilst
strategic for us; it removed doubt from our shareholders’
in the meantime leveraging its previous experience and
minds, and secured the next several months for Kootenay
successes in the region to keep making new discoveries.
Silver, without having to take the risk of going back to
“We are keenly focused on becoming a precious metals
the market to raise capital. With cash in the treasury, and
producer and generating new discoveries,” says McDonald.
193
RESULTS KEEP EXPLORATION PROJECTS MOVING FORWARD
José Velázquez Blanco, Country Manager of El Tigre Silver Corp.
El
Tigre
in
the
mine,
in
Sonora,
Sierra
located El
how the industry works. “The support provided by the
90km
government translates into the granting of concessions,
southeast of Agua Prieta
and time is reduced in the permitting processes. It is
on the US-Mexico border,
relatively easy to claim land, begin negotiating with the
was discovered in 1896
relevant people, and start exploration,” he adds. As the
and consists of three veins:
project moves forward, new infrastructure challenges arise.
El Tigre, the Sooy, and the
For example, as the operations get closer to the veins, the
Seitz-Kelly.
Production
old mine structure will become unreliable. The current
started
1903,
and
access points have to be renovated in order to be able to
the
in
mine
just
people and the state have a mining mindset and know
Tigre
an
reach the areas of interest. Other hurdles are geographical,
estimated 70 to 75 million ounces of silver and 325,000
produced
due to the remote location of the property. “The terrain is
to 350,000 ounces of gold over the following three and a
very abrupt and has many acute slopes. During the rainy
half decades. Even though the area has good geological
season we are completely isolated and it is very hard to
potential, El Tigre remained on standby for the following
get in and out. There are three or four days during each
decades, until Anaconda Minerals Company and Minera
season when we cannot leave the property and the river
Talaman completed the first modern exploration program,
overflows, destroying all roads and paths. These challenges
between 1981 and 1984. It was not until 2006 that El Tigre
have been overcome thanks to our very capable personnel
Silver Corp. acquired the concession from Minera Talaman,
and their devotion to their duties,” Velázquez Blanco says.
and the company has been working there ever since. Even though there are no surrounding communities that “We have gotten excellent results from the little work that
can directly benefit from the company’s operation, people
we have performed so far, and this is why we and our
from slightly farther away are hired. “If everything goes as
shareholders are interested in the property,” highlights José
planned, when we start operating we will need a bigger
Velázquez Blanco, Country Manager of El Tigre Silver Corp.
workforce, and this project will be an even greater source
The company holds nine mining concessions in the same area
of employment for the local communities,” says Velázquez
of 215 square kilometres, but has focused most of its efforts
Blanco. In order to be able to achieve this goal, a key
on a claim called El Tigre Suertudo (Lucky Tiger), where the
element of the company’s business plan is a processing
old mine used to be. “To this day, we have not even explored
facility for recovering silver and gold from a large tailings
30% of the property because we have focused on the most
pile, built up over 35 years of production at the original
promising areas,” says Velázquez Blanco. “In one part of the
mine. The tailings recovery project was granted approval
property over 3 million ounces of silver have been extracted.
from Semarnat, Mexico’s Environment Ministry, in July and
From a mineralogical standpoint it is a very interesting place,
the construction stage will begin shortly. The goal of this
and when we have more financial resources we will evaluate
project is to eventually help to finance further exploration.
other areas so that more mining targets can be defined.”
“We want to explore the north of the concession to evaluate the structures in that area, and then focus on the extreme
During August 2013, El Tigre Silver announced the filing of
south to define its potential,” Velázquez Blanco adds.
the NI 43-101 Prefeasibility Study and Resource Estimate. “The evaluation of this report will show the mineral resources we have, and that will lead us to the prefeasibility studies. The vein system extends to approximately 2km, but we focused our exploration operation on only half of that distance,” Velázquez Blanco explains. Operations performed during the past century have led El Tigre Silver to believe that there are still deposits remaining where the mine used to be, and drilling has confirmed that theory, with even higher mineral grades than were expected at 8 g/t
have a processing plant before we hit production, which we believe could be possible in a year and a half. In the meantime, we will
of silver and 235 g/t of gold.
continue our exploration activities
Being located in Sonora is another advantage for El Tigre
on the property”
Silver since, according to Velázquez Blanco, the local
194
“We want to make sure that we
José Velázquez Blanco, Country Manager of El Tigre Silver Corp.
| VIEW FROM THE TOP
PRODUCTION DECISION FOR PITARRILLA JOHN SMITH President & CEO of Silver Standard
Q: What have been the critical success factors in the
remain part of our long term growth strategy. The cost
company’s growth strategy over the past decades?
reduction program is mainly focused on our operating
A: Silver Standard was founded in 1946, when it operated
mine and is not expected to have a significant effect on
the Silver Standard Mine in northern British Columbia. For
Pitarrilla. While we currently do not have any projects at the
many decades after that, the company’s management
production stage in Mexico, risk management and safety
focused on prospective project acquisitions, with the goal
remain a priority for us. We will continue to apply our safety
of accumulating silver ounces in the ground and directly
standards and philosophy not only at our producing mine,
exposing its investors to silver. This strategy was effective
Pirquitas, but at all of our properties globally.
until the mid-2000s when silver ETFs were created and the company moved into the development and operation stages.
Q: What characterizes Silver Standard’s M&A strategy?
By 2006 the company had accumulated a large portfolio
A: Silver Standard’s M&A strategy is opportunistic in nature.
of silver projects along some of the most important silver
We continually assess the market and look for opportunities
belts in North and South America. As investors migrated
to upgrade our portfolio. For us, a project or mine with a
to silver ETFs, Silver Standard had to change its strategy
long life and a low cost profile would be considered a great
by becoming a silver producer, and began the construction
M&A opportunity, and we have the balance sheet to make
of the Pirquitas Mine in Jujuy, Argentina. Pirquitas achieved
this happen.
commercial production in December 2009, with expected average production of between eight and 10 million ounces
Q: Silver Standard’s Pitarrilla property has the potential to
of silver per year. This strategy has allowed Silver Standard
become one of the largest silver mines in the country. What
to control an extensive portfolio of projects ranging from
are the company’s priorities for this property?
grassroots to production. The company is now equipped
A: As we position Pitarrilla for a production decision our
with a diversified portfolio, a strong balance sheet and an
focus remains on four key areas, which include acquiring
experienced management team, and is well positioned to
the remaining surface rights; obtaining environmental
deliver growth and long term shareholder value.
and operating permits; continuing with engineering and infrastructure work; and implementing a financing plan.
Q: What has made Mexico a good location for exploring
Currently, our main focus in Mexico is to position Pitarrilla
and developing silver mining projects for Silver Standard?
for a construction decision at the end of the year. This will
A: Mexico is a great country for the mining industry. It enjoys
allow us to build and operate one of the largest open pit
good exploration prospects, and it has put in place specific
silver mines in the country and in the world, solidifying and
policies and procedures to allow mining companies to
diversifying our production profile. Concurrently, we have
effectively move from exploration to production. Mexico has
an ongoing exploration program through which we evaluate
vast mining experience that dates back centuries. The current
all of the projects in our portfolio.
market conditions have affected all projects regardless of their jurisdictions, and Mexico still remains one of the
Mexico is a great mining jurisdiction in which for Silver
preferred countries for mining, due to its long mining history,
Standard to build and operate a mine. We have a strong
its legislation and its commitment to the mining industry.
team of mine builders and operators with over 500 years of combined experience. As a company, we have also gained
Q: The company plans to roll out cost reduction plans in
valuable experience by building and operating our Pirquitas
2013. What changes will Silver Standard be making on its
mine, which has not been an easy task given its high
Mexican properties as a result of this strategy?
elevation and its location in a country with a non-mining
A: This is the dichotomy of business: some parts have to be
culture. From that experience, we have taken away many
managed for cost while others have to grow. Our Pitarrilla
lessons that we will apply at Pitarrilla and throughout the
Project in Mexico, as well as our other exploration projects,
rest of our portfolio.
195
| VIEW FROM THE TOP
THE VALUE OF EFFICIENCY IN ALLOCATING RESOURCES BRUCE WINFIELD President & CEO of Defiance Silver Corp. Q: What was the strategy behind signing an option
Q: What are the current priorities for Defiance Silver and
agreement for a 100% interest in the San Acacio silver mine?
its San Acacio mine?
A: Our concept was to follow in the footsteps of other
A: Our plans are to refurbish the mill and bring it into
recently successful mining companies in Mexico, such as
production,
Endeavour Silver, IMPACT Silver and First Majestic. All of
mine in order to feed the mill. The next step would be
these companies worked on a model of finding historic but
to expand production in the mine and mill, as the initial
excellent assets, rehabilitating them, and injecting capital in
production of 200 t/d can be increased. The agreement
order to bring them back into production and turn them
with IMPACT Silver is to acquire 10 concessions as well as
into small to mid-sized producers. The Vetagrande Vein has
the mill. The objective is to start short term production,
historically produced approximately 200 million ounces
using the mill, and feed from mineralized dumps on one
of silver, with the San Acacio mine that we control having
of the concessions that we have obtained with IMPACT
produced around 80-100 million ounces, and we believe
Silver. The resource that we have far exceeds the mill’s 200
while
simultaneously
redeveloping
the
that San Acacio has the potential to produce the same amount again. Our strategy was to reach an agreement with the Mesta family on an option to purchase the mine until September 2015. The big attraction about this property was the fact that the Mesta Family has owned it for a long time, but they had lacked access to the capital that was needed to develop the mine. When we reached an agreement in November 2011 the financial markets were much better than they are now. At that time Defiance Silver was confident that, with its expertise in the markets and the company’s overall experience, plus the support of IMPACT Silver, we would be able to finance the project and work diligently to move it forward. Notwithstanding the market downturn, we have still been able to raise the necessary funding to invest in our priority tasks, which are meeting our agreement commitments and carrying out technical studies to move the project forward. However, we have not yet been able to raise the required money to develop the mine. Q: What are the priorities for Defiance Silver during the current squeeze in the market? A: Our priority has been getting the Environmental Impact Assessment and the Land Use Change permit for the mill. Work on the San Acacio mine has included compilation studies to better define the geology and alteration as well as revising the resource calculation. Whilst we are short on capital following the downward turn in the cyclical mining market, we have the advantage of being a junior company with an advanced mine-mill project on a NI 43-101 compliant resource. Companies with grassroots projects are in a more difficult position to raise capital.
196
The San Acacio Mine has a NI 43-101 indicated resource of 3.55 million ounces of silver contained in 1.15 million tonnes grading 95.8 g/t silver, and an inferred resource of 12.45 million ounces of silver contained in 2.89 million tonnes grading 134.1 g/t silver.
t/d processing capacity, therefore we want to expand the
for us is to raise a small amount of working capital with
processing plant to 500 t/d in the future. With a 500 t/d
which to finance the company and carry on with the
mine and mill operation, Defiance would be producing a
technical evaluation of the project. Ultimately, we want
significant amount of silver.
to expand our operation to 1,000 t/d or more, depending on future exploration success. These are preliminary
The plant we have an option to acquire was developed
estimations, and should be treated as such.
organically by a resident of Zacatecas, over a period of 10 or more years. We have used an external consulting
In the next five years we want to become a mid-sized silver
company in Toronto to evaluate it and, based on their
producer, producing at least 1 million ounces per year
report and recommendations, we estimated that the
with major potential for further expansion. Our projects
cost to refurbish and upgrade it would be US$1.2 million.
are significant enough to have that potential. Our most
In the past concentrates were dried on patios in the sun,
important asset is the mine, which has only been developed
which is not a very sophisticated manner of operating.
along a distance of 1km and to a depth of 200 meters,
We plan to install thickeners and filters, which will allow
while a further 4km has never seen modern exploration.
us to dry the concentrates more efficiently. These types of
The vein is there, and we are very much looking forward
improvements will be applied throughout the mill.
to having the capital to make the most of this tremendous opportunity. It has been only 18 months since we started
Q: What are Defiance Silver’s development milestones for
the project so we are still very much in the early days.
the coming years, and what are your long term ambitions?
This is a long term operation, the potential of which we
A: Our objective is to raise capital. The immediate milestone
wholeheartedly believe in.
VERTICAL INTEGRATION STRATEGY Companies invest millions of dollars in exploration, and
As mentioned by Gustavo Ortega Gómez, President of
though there may be resources that are easier to exploit
the Innovation and Technology Commission of Camimex,
and which thus offer a faster return on that investment,
technology will continue to play an extremely important
companies like Arian Silver that have long term production
role in the mining industry in the coming years, given its
plans complement their cost control strategies by looking
power to help companies to work more efficiently. Arian
to vertically integrate their operations from the exploration
Silver follows this same philosophy, seeking the best
phase to development and production. “Arian Silver is
and newest technologies to incorporate into its vertical
increasing the value of its resource with its current mill
integration strategy. “We are constantly on the lookout
plant project and its aggressive exploration projects,” says
for any technological discoveries that could improve
Miguel Barahona of Arian Silver’s plans to increase the
our operations. If we find equipment that can improve
value of its San José mine.
our recovery rate or benefit our operations then we will incorporate it,” says Barahona.
When limited access to financing complicates a company’s their
With its clearly defined objectives of bringing the San José
investments, in many cases outsourcing operations at a
mine into production, completing its vertical integration
certain stage of development that are not considered to
strategy with the mill plant project, and concluding its
add value to their core operations. Arian Silver, along with
exploration of the 75.5ha Calinto Group plot of mining
many other companies in the mining market, has faced
concessions, Arian Silver is making sure that it achieves its
this operational challenge and decided to externalize
long term goals in the most socially and environmentally
the processing of its minerals; this is an experience that
responsible way possible. “We intend to be big, in terms of
has given the company the know-how and experience
being a low cost producer with high safety, environmental
to now be in the position to set up a mill of its own. “We
and productivity standards. We are growing not only along
are currently investing in our own processing plant and
the lines of production and resources, but also with constant
in metallurgical testing to increase recovery, and we are
advances in innovation and technology, as well as the right
convinced this is the right strategy to ensure both product
people that have the ethics and professionalism to help us
quality and cost efficiency,” comments Barahona.
to reach our goals and growth objectives as a whole.”
operations,
they
must
immediately
prioritize
197
| MINE SPOTLIGHT
PALMAREJO Palmarejo, the world’s 5th largest primary silver mine, is located in the state of Chihuahua and its operations consist of open pit and underground facilities. The deposits at the mine have silver in the upper parts and gold in the deeper parts, along with base metal mineralization, and are classified as epithermal deposits. Valentín Ruiz Corredor, of indigenous origin, discovered the mine in 1818 when he came across pure silver rocks while walking around the Periquera Hill. Tomas Pelayo, an experienced miner, joined forces with him and began the legal procedure to exploit the mine. Ruiz Corredor later sold his stocks to Tomas Pelayo and other shareholders, with Pelayo going on to buy the stocks from each of them until he was the sole owner of the mine. When Pelayo died the mine was passed on to his heirs, who sold the mine in 1823. Palmarejo was a large silver producer between 1878 and 1880, under the ownership of Justina Almada Gonzales de Sayas. When Mexican President Porfirio Díaz increased the opportunities for foreign investment in Mexican mining, the Palmarejo Mining company was created by Eduardo Apelgarth, and mining activities continued under Apelgarth. The mine was exploited in the 1970s by Minas Huruapa, a company from Zacatecas, but the company abandoned operations in the 1980s when it was thought that the deposit was depleted. Palmarejo was taken over by Coeur in 2009, which quickly disproved the depletion theories. Palmarejo produced 8.2 million ounces of silver and 106,038oz of gold in 2012. Total metal sales in 2012 were US$442.1 million, representing about half of the company’s total metal sales. Coeur Mining expects 2013 production at Palmarejo to be 7.7 to 8.3 million ounces of silver and 98,000 to 105,000oz of gold. The company spent $19.9 million in the Palmarejo district in 2012 to discover new silver and gold mineralization and define new ore reserves. Underground and surface drilling was conducted around the Palmarejo mine, and the Guadalupe, La Patria and Independencia deposits within the district. As a result of this exploration investment, Palmarejo’s proven and probable reserves totaled 53.1 million ounces of silver and 665,000oz of gold at year-end. Silver and gold measured and indicated resources grew 169% from 17.0 million to 45.7 million ounces of silver and 370% from 205,000 to 964,000oz of gold compared to year-end 2011. Inferred resources totaled 22.1 million ounces of silver and 457,000 oz of gold. The exploration budget for Palmarejo for 2013 is US $15.8 million.
Source: Coeur Mining
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| MINE PROFILES: ZACATECAS
8 7
6
5
1 4
9 2 3
ZACATECAS 10
1
LA COLORADA, PAN AMERICAN SILVER
2
FRANCISCO I. MADERO, PEÑOLES
3
4
200
La Colorada, Pan American Silver’s purest silver mine, is located in Zacatecas near the border with Durango in the geological belt called “Faja de Plata”, and contains silver, gold, zinc, and lead concentrations as a typical epithermal deposit associated with silicification. Production on La Colorada mine grew to 4.4 million ounces of silver, 5,599 tonnes of zinc, 2,766 tonnes of lead and 3,578oz of gold in 2012. Production processes separate the ore into the flotation devices or cyanide plants. This mining complex contains 48.25 million ounces of proven and probable reserves and 17.02 million ounces of measured and indicated reserves. The estimated mine life is 11 years.
This underground mining complex is located near Ojocaliente and Estancia de Animas in the state of Zacatecas. Francisco I. Madero mine is an underground deposit with concentrates of zinc, lead and copper. Francisco I. Madero started to operate in 2001 under Peñoles ownership. This mine produced 45,460 tonnes of zinc, 1.3 million tonnes of copper and 960,000oz of silver in 2012. Total reserves were 33.482 million ounces of silver, 328,544 tonnes of lead, 1.01 million tonnes of zinc, and 32,449 tonnes of copper as of 2011. Given the quantity of reserves, the estimated mine life is 23 years.
COZAMIN, CAPSTONE MINING The Cozamin mine site is located 3.8 km north-northwest of the city of Zacatecas. It is an underground copper mine with a surface milling facility. The dominant mineralized vein, the Mala Noche, consists of pyrite as the dominant vein sulfide, with chalcopyrite being the dominant copper sulfide. Cozamin produced 46.9 million pounds of copper in 2012 but also produced zinc, lead and silver as byproducts. Capstone Minining extracts the ore using three methods: cut and fill using waste rock fill, longhole open stoping, and Avoca. Each method has been assigned to different mining blocks depending on the physical characteristics of the ore body. The mine has a current workforce of 850 people including contract employees, and the expected mine life is until 2022.
EL SAUCITO, FRESNILLO PLC El Saucito is an underground mine 8km southwest of the Fresnillo mine, that comprises a system of epithermal veins containing silver, gold, lead and zinc. The first stage of development focused on the Saucito, Jarillas and Mezquite veins. The Santa Natalia and Jarillas West veins are being explored and integrated in the second stage of the project. Fresnillo plc currently uses a flotation plant to process the minerals and employs 867 employees, including contractors. The mine operates with a milling capacity of 3,000 t/d. In 2012 El Saucito produced 5,628oz of silver, 22,041oz of gold, 2,581 tonnes of lead, and 2,151 tonnes of zinc. The mine life is expected to be 14 years.
5
6
7
8
9
10
SABINAS, PEÑOLES This underground mining complex is located in Zacatecas, in the Sombrerete Municipality. Sabinas contains silver, copper, lead, and zinc, with sedimentary and volcanic marine geologic formations of limestone. The Sabinas mine has been in operation under Peñoles’s control since 1995. It processed 1,221,334 tonnes of mineral in 2012, which a zinc production of 19,829 tonnes and copper production of 8,000 tonnes, which represented a decline in production of 16.4% and 4.1% respectively. The exploitation of a high grade stope helped increase production of silver by 2.9% to 4.0 million ounces, while lead remained stable at 7,757 tonnes. Total reserves were increased from 14,616 tonnes to 15,640 tonnes in 2012, resulting in an estimated mine life of 12.5 years for silver production.
ARANZAZU, AURA MINERALS The Aranzazu mine is located within the Municipality of Concepción del Oro in the northeastern region of the State of Zacatecas, Mexico, and covers approximately 11,380 hectares, including the historical El Cobre area. At the Aranzazu mine, the mineralized skarns occur adjacent to portions of the intrusive complex, with intense stockwork veining of quartz, orthoclase and sericite in some areas. The Aranzazu mine consists of both open pit and underground mine operations. The process plant at the Aranzazu mine consists of a threestage crushing circuit feeding three ball mills with current capacity of approximately 2,600 t/d, with a sulfide flotation circuit to produce a copper-gold-silver concentrate. Aura Minerals acquired the Aranzazu mine in June 2008.
PEÑASQUITO, GOLDCORP El Peñasquito is located in Mazapil, Zacatecas, and 140km to the south of Saltillo. This mine consists of two open pits, Peñasco and Chile Colorado, containing gold, silver, lead, and zinc in the ore bodies. Goldcorp’s worldclass deposit is centered on two funnel-shaped diatreme breccia pipes, cutting Cretaceous clastic units above a Tertiary felsic intrusive complex. The mine employs flotation-and-grinding processing, in two 50,000 t/d sulfide processing lines and a 30,000 t/d, high pressure grinding roll (HPGR) circuit. 2013 gold production is expected to be between 360,000 and 400,000 ounces; production of silver is expected to total 20-21 million ounces; zinc production is expected to amount to 285-305 million pounds, and lead production is expected to reach 145-160 million pounds.
TAYAHUA, MINERA FRISCO Tayahua is located in the north of the state of Zacatecas. The project consists of an underground mine and the mineralogy of the ore bodies contains silver, lead, zinc, and copper. The mine started operations in 1972 but Minera Frisco acquired 51% of the stocks in 1998 and up to 90.2% in 2011. In 2012 this mining complex produced 1.634 million silver ounces, 5,479 gold ounces, 4,174 tonnes of lead, 22,897 tonnes of zinc and 8,595 tonnes of copper. Proven and probable reserves as of 2010 were 1.597 million tonnes of copper, 266.92 million ounces of silver, 6.605 million ounces of gold, 1.55 million tonnes of zinc and 220,785 tonnes of lead. The materials from this mine are extracted and milled at a plant with a daily nominal capacity of 5,200 tonnes. They are then distributed on a lead-zinc and copper-zinc circuit and undergo a flotation process to produce lead, zinc, and copper concentrates.
FRESNILLO, FRESNILLO PLC The Fresnillo mine, also known as Proaño, is located in Zacatecas, in the Fresnillo municipality. The asset consists of a large underground mine, complemented by a flotation plant and has a current milling capacity of 8,000 t/d and 2.64 million tonnes per year. This mining complex started operations in 1554 during colonial times and has been near continuous operations for almost 500 years. Fresnillo’s ore deposits consist of replacement chimney and manto bodies, disseminated sulfides, and vein deposits hosted mainly in Cretaceous marine sedimentary and volcanic rocks. Fresnillo mine stands today as the flagship mine of Fresnillo plc and the world’s biggest silver producer with 26.383 million ounces produced in 2012 and 29,573oz of gold as a secondary product. The mine also produced 16,190 tonnes of lead and 14,996 tonnes of zinc in the same period. The estimated mine life is of 13.3 years.
EL CORONEL, MINERA FRISCO El Coronel is located in the Ojocaliente municipality of Zacatecas. The project consists of one open pit mine and the mineralogy of the ore bodies are formed mainly by gold, silver, lead, zinc, and copper. Minera Real de Angeles (part of Minera Frisco) started exploration and geological activities at the mine in 1999. Construction was started in 2008 and production began in 2009. El Coronel has a current production of 35,000 t/d including all extracted minerals and, the mine has proven reserves of 300 million tonnes of minerals and has an estimated life of 10 years after expansion. Gold production was 168,000oz and silver production reached 19,466oz in 2012.
201
| VIEW FROM THE TOP
SILVER LINING FOR THE ECONOMY OF ZACATECAS PATRICIA SALINAS ALATORRE Economy Minister of Zacatecas
Q: What role does the mining industry play in the economy
employee scholarships, and training. Four companies have
of Zacatecas?
already set up business in Zacatecas as service providers
A: Zacatecas’s wealth is mostly located underground,
for the mining industry, and we are in talks with 30 other
though our economy has also been highly influenced by
companies. This is part of our plan to make a big impact
agriculture. Mining represents a large part of the state’s
on direct and indirect employment creation in Zacatecas.
economy, and this mineral wealth has been a historical source of economic development for the state. The
During 2013, 48 exploration projects are taking place
first settlers in the region were mining investors that
across 70 assets in the state. We expect that 10% of these
found opportunities not only in Fresnillo but in other
projects can be turned into mines over the next 10 years. It
municipalities of the state, too.
is also important to note that, while it previously took us 10 years to reach mining production, we have halved the time
Q: Zacatecas is the biggest silver producer in the world
necessary to establish a mine in Zacatecas. We have two
and Mexico’s second largest gold producer. What strategy
very notable examples in the state: Harbor Mining and First
is in place to maintain this position?
Majestic’s Del Toro mine. These projects were completed
A: The state’s main advantages are its geographical
in a two year period, and in both cases the collaboration
location in the center of Mexico and the positive business
between the private sector and the government was a
climate that we promote and work on every day. The latter
decisive factor in the efficacy of mine development.
point is confirmed by the results of the Doing Business 2012 Report, conducted recently by the World Bank, in
Q: What are the support programs you have implemented
which Zacatecas was ranked 12th out of the country’s 32
to meet the human talent needs of the mining industry?
states, and first in contract enforcement. This sends an
A: The state’s efforts are currently focused on training
important message about the state’s commitment to the
qualified manpower for the mining industry, in order to
mining companies that are interested in investing here.
address the shortage of specialized human talent. The
Thanks to the state’s natural attractiveness, Zacatecas
goal of our programs is to significantly increase the supply
enjoys a constant flow of investment - the challenge is to
of human capital to the industry in the next three years,
keep it. The Ministry of Economic Development does this
as well as boosting the state’s economy by generating
by generating a pro-mining climate.
employment. The mining industry demands capable engineers
202
with
knowledge
in
geology,
topography,
The state government participates actively in the Zacatecas
mechanics, and civil engineering. Moreover, considering
Mining Cluster (CLUSMIN). The state governor of Zacatecas
the complex machinery that the sector currently uses,
is at present the Cluster’s honorary president, representing
companies require engineers with the ability to manage
the institution along with its president Jaime Lomelín
mining processes while using state of the art technology.
Guillén. I have the honor of serving as the Cluster’s secretary,
The education sector in Zacatecas has taken this need into
as a representative of the Economic Development Ministry.
account and is responding accordingly. On the educational
Our role is following up on the agreements reached by the
front, we have created employment generation programs
Cluster, certifying them, and participating in the resulting
with several of the state’s 27 universities. Some of these
programs. We are also very engaged in the activities of
institutions have also incorporated mining programs into
CLUSMIN’s Provider Development Committee, fostering
their curricula. For example, the Autonomous University of
investment in the supply of products and services to the
Fresnillo (UAF) is already coordinating the implementation
mining industry from local sources. We aim to help promote
of its mining program with the Education Ministry. The
the growth of suppliers and service providers by creating
Polytechnic Institute and other technological universities
an industrial park where they can establish themselves and
are also integrating mining subjects into their engineering
take advantage of incentives such as land price, tax breaks,
programs.
| VIEW FROM THE TOP
THE TRANSFORMATIVE POWER OF CLUSTERS JAIME LOMELÍN GUILLÉN President of Zacatecas Mining Cluster (CLUSMIN)
Q: What led to the creation of CLUSMIN Zacatecas, and to
the state. For these reasons, buying equipment from
what do you attribute its success?
abroad is simply impractical. We believe that the labor
A: CLUSMIN Zacatecas was founded nearly two years ago,
cost in Mexico and the quality of the Mexican labor force
when the state’s new Governor came into power. Since
offer equipment manufacturers an excellent opportunity
then, we have worked together with him to develop it very
to produce efficiently in Mexico and be able to export just
quickly. The cluster is made up of 10 mining companies
as the automotive industry is doing in the country. The
and 10 suppliers, and is divided into committees. The
objective of CLUSMIN Zacatecas is to develop companies
Cluster’s main committees are the suppliers committee,
to produce equipment and also offer services in Zacatecas
the human resources committee, and the health, safety
that are important for the mining industry at this time.
and environment committee. Every cluster has ‘anchor’ companies - bigger companies that can support the cluster
Q: How is CLUSMIN Zacatecas positioned relative to
and provide work for other members – as well as another
clusters in Sonora, Guanajuato, and other parts of the
eight or 10 mining companies operating throughout the
country?
state. CLUSMIN’s anchor companies are Goldcorp, Fresnillo
A: CLUSMIN Zacatecas follows the model of clusters
and Peñoles; other members include companies such as
in other industries such as the Cluster Automotriz and
Grupo Mexico, First Majestic, and Pan American Silver. A
Cluster Aeronáutico in Monterrey. There are several clusters
good cluster has the triple helix: mining companies, suppliers
in Monterrey, and the Director of their exceptionally
and service providers; universities and research institutions;
advanced automotive cluster helped with the development
and the government. In order to gain traction, all of these
of CLUSMIN Zacatecas. The Zacatecas cluster does not
groups need to be working towards the same objective. It
compete with Sonora because the two are involved in
is also important to have an active management team and
different types of mining – in Zacatecas the focus is more on
Board of Directors. Success depends upon the openness of
underground mining, while Sonora is more focused on open
the Cluster’s members. Without complete transparency, the
pit mining, so the equipment that is being used is different.
Cluster will not develop and neither will the industry. Q: What is CLUSMIN doing to contribute to developing Q: What benefits does CLUSMIN membership offer top
technology within Mexico?
mining companies?
A: Much of the technology that the cluster brings into
A: The Cluster is a forum in which mining companies can
Mexico comes from research institutions or from suppliers
discuss their needs with suppliers, allowing for mutual
- suppliers are a very important source of information and
learning opportunities. For example, if certain types of
innovation. Meetings outside Mexico also inform us of
equipment need to be adapted to suit the local landscape,
what is happening elsewhere. In exploration there is a lot
through the cluster a mining company can show the
of technology being developed by companies that want to
supplier what is required to make those changes. In this way
sell to you. They sell a project and the techniques required
the Cluster allows the supplier and the mining company to
to carry out that project.
work together to find the right solutions for the industry. CLUSMIN also puts research institutions in touch with Q: What role can mining clusters such as CLUSMIN play in
schools so that they can help each other. It brings them
strengthening the domestic supply chain?
together and then leaves them to do business. It creates
A: If your equipment comes from a supplier abroad, when
the forums in which to discuss the problems that they
it breaks down you can expect to communicate across
face. The way to solve the industry’s problems is to put
thousands of kilometers for repairs, and wait five to 10
companies and institutions together, so that everyone
days for the equipment to be delivered. It is better for our
understands what those problems are and can work on
mining companies to have these services available within
solving them together.
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| VIEW FROM THE TOP
DEVELOPING HIGH QUALITY MINING TALENT RUBÉN DEL POZO MENDOZA Director of the School of Mines at the Autonomous University of Zacatecas (UAZ) Q: What role has mining played in the state of Zacatecas
in Australia. In those programs we found priority subjects
and how has the School of Mines been involved in
in earth science and discovered a new field of study:
developing human capital for the industry?
environmental science, which brought us back to life. The
A: Mining has always had a presence in our state. The very
School of Mines therefore survived, and when the mining
foundations of the city of Zacatecas are based on mining,
market started to improve again we increased enrollment,
and the economy of the state is directly related to mining,
which went from 250 students in 2008 to 750 in 2012.
regardless of the cyclical ups and downs of metal prices. The mineral wealth of the state is well known in Mexico and
Q: How does the School of Mines find qualified staff
all over the world.
to teach these programs when there is great industry demand for mining professionals?
Mining education has existed since colonial times. The
A: Teachers are essential. The demand for mining
Spanish formed education centers and the School of Mines
professionals is very high, especially for professionals with
formed part of them. In 1968 the first Mining and Metallurgical
postgraduate degrees. Since we cannot compete with
Engineers class graduated from the Autonomous University
the salaries offered by mining companies, the School of
of Zacatecas. Between 1968 and 1985 we only offered the
Mines has decided to employ teachers who are active in
Mining and Metallurgical Engineering course, however in
the industry and at the same time teach. This approach has
1982 this changed: the discipline of mining was separated
been successful because of our excellent relationship with
from the Engineering Faculty, and the School of Mines
the sector and our location in the most important mining
gained independence. The curriculum and courses were
area in Mexico, where we are surrounded by companies
developed, and in 1985 the Engineering Geology program
like Fresnillo, Goldcorp, First Majestic Silver, Grupo Mexico,
began. In 2005 the Environmental Science program was
and Minera Frisco. Being close to these companies gives
presented to the school board. This completed the Earth
us the necessary human capital, and provides a solution to
Sciences Academic Department, which is now able to
the academic salary challenge. Our staff is 100% Mexican,
offer a portfolio covering the study of mining, metallurgy,
and many of our teachers have postgraduate degrees or
geology, and environmental science. We create mining
PhDs from abroad. Fortunately, we are able to mix both
professionals that explore and exploit the earth and, at the
practical and academic experience, which helps students
same time, take care of the environment and transform the
graduate with practical skills.
minerals obtained. Q:
204
Offering
classes
that
are
relevant
to
current
Q: How does UAZ’s School of Mining manage the
developments in the sector is essential for academic
challenges posed by the impact of the cyclical nature of
institutions.
metal prices on student numbers?
curriculum complete the education of your students?
A: It is well known that mining and metallurgical activities
A: We are very conscious of the public confusion that exists
are affected by international mineral prices. When prices
when it comes to mining activities and environmental
were depressed in the previous recession, enrollment fell
impact. We obviously do not share this view, and by
not just in Zacatecas but also in the rest of the country. We
introducing an environmental course focused on mining
had never expected the management to consider shutting
we are trying to challenge it. Even though it is not current
down the academic center, but they did because it seemed
mining practices that harm and pollute the ecosystem, our
more affordable to close the school and award scholarships
intention is to fix the environmental damages that were
to enrolled students and send them to study abroad.
caused by mining activities that took place over the past
However, we searched for options and were inspired by
hundreds of years. On the other hand, it is important to
programs offered by universities like the Colorado School
promote mining as a clean industry. We are one of the few
of Mines, The University of Texas at El Paso and institutions
academic centers to focus on environmental studies for
How
does
the
Environmental
Science
| CLUSMIN ZACATECAS
mining, and having had three graduating classes we are
In
proud that many graduates are now working in the mining
representatives, educational institutions and industry
industry. We are in touch with them to get feedback on
suppliers
their experiences in the workplace, and to allow us to
the Zacatecas Mining Cluster (CLUSMIN). It was
complement what we are teaching in the classroom.
founded with the objective of strengthening the
2011,
mining and
executives,
service
federal
providers
government
jointly
created
development of the mining industry in the state of Q: What adjustments are currently being made to the
Zacatecas by strengthening the regional network of
faculty’s earth science programs, as a result of the mining
suppliers, developing human capital, attracting mining
industry’s human resource requirements?
investment, and fostering technological innovation
A: The School of Mines is producing mining professionals
and occupational safety in the local mining industry.
with two new skills: English language proficiency and mining software knowledge. These basic tools are provided
In order to pursue these goals, CLUSMIN is organized
at other academic centers, but we are nonetheless
in several committees: 1) a committee for the
successfully improving the level of our programs in both
strengthening of providers, which aims to develop
fields. Our graduate profile has changed for the better
the capabilities and infrastructure of suppliers, 2) a
because the industry is every day demanding better
human talent development committee, which seeks
trained professionals. One characteristic of our school and
to standardize training of operators, technicians and
state is that low income students come here with the desire
supervisors, 3) a safety and environment committee,
to improve their situation and here they find the ideal place
which pursues the goal of improving best practices
to transcend. I have been working here for 33 years and
in
seen many examples of graduates acquiring management
specifically in relation to environmental responsibility
positions at Fresnillo, Peñoles and Minera Tayahua, among
and risk management, 4) an investment attraction
others. Mining production in the country is in the hands
committee, which spearheads the cluster’s efforts to
of our graduates, and it is very flattering for us to know
encourage the permanent establishment of providers
that the School of Mines plays an important role both in
in the state, and 5) a technology and innovation
the state and the country’s economy. The School of Mines
development committee, which works in conjunction
enrollment multiplied by three in the last few years, and we
with the Zacatecan Council of Science, Technology
had to limit admissions. We are aware that there are many
and Innovation (COZCYT) to foster the development
aspiring students but we cannot enroll them all. We have to
and application of new technologies.
mining
companies
established
in
Zacatecas,
be very careful in our selection process, because we do not want to lose those students that have a real mining vocation.
CLUSMIN’s two years of work in Zacatecas’s mining
Our current challenge is to limit enrollment, be selective and
industry have already yielded positive results, such
choose the best students.
as enabling mining companies to share project plans, technological developments and best practices. Also,
Q: What opportunities have emerged as a result of the
five companies who serve the Zacatecan mining
Zacatecas mining cluster, CLUSMIN, which brings together
industry from plants in other regions have used the
the state’s private and public sectors?
cluster as a stepping-stone to launch the construction
A: The School of Mines brought together the leading
of plants in Zacatecas. The certification of suppliers
mining companies before the cluster was created, and
has also advanced the growth of companies that wish
the mining cluster is simply the formalization of the
to expand their service offering within Zacatecas’s
preexisting relationship. Our links with the government
mining industry. In general, CLUSMIN has made an
have been good for a long time, and some of our school’s
effective start in the creation of synergies between all
directors and graduates have been Mine Directors for the
actors involved in the sector, thus helping Zacatecas
state of Zacatecas. There has been a lot of communication
maintain its position as an attractive mining and
and collaboration between the state, the school and the
mining investment destination.
industry: the triple helix. We have a lot to thank them for. For example, Grupo Mexico helped us with the auditorium, Grupo BAL rebuilt the School of Mines building, Capstone Mining helped us with buses, and Peñoles gave us vans. We have a lot of examples of state government support, as well.
205
206
COPPER & BASE METALS
7 Mexico has the fifth biggest copper reserves in the world and is today the world’s 10th copper producer after an impressive increase in production that enabled the country to jump up from 15th place in 2008. Copper is now the second target of mining exploration investment in Mexico, and with several world class copper deposits now under development Mexico is destined to climb up on the global production ranking. The country also ranks as the world’s sixth largest zinc producer and fifth largest lead producer.
This chapter looks at the main players that are responsible for the country’s base metal production, which are predominantly Mexican mining companies, though there are a number of foreign companies that are also making substantial investments in Mexican base metals. We dedicate special attention to the development or reactivation of several world class copper deposits in Mexico, with a focus on the energy strategies that are central to the cost competitiveness of the Mexican mining industry. At the end of the chapter you will find an overview of mining activities in Sonora, currently Mexico’s main mining state by production value.
207
Más de
221 millones
de pesos invertimos en programas de desarrollo social en el 2012.
2.7 millones
de árboles es la capacidad de producción anual de nuestros viveros.
“TENEMOS QUE ASEGURARNOS QUE LOS NIÑOS SEPAN QUE CON ESTE PEQUEÑO ACTO ESTAMOS PREPARANDO UN MUNDO MEJOR PARA ELLOS”.
“NOS GUSTA EL NUEVO PARQUE; CORRIMOS TAN RÁPIDO QUE SENTIMOS QUE PODÍAMOS VOLAR”. Nuevo parque Bicentenario construido en lo que fue la planta de cobre de San Luis Potosí.
Olivia Rangel, Técnico Viverista, San Luis Potosí.
“SOMOS MUY POCAS LAS MUJERES QUE HACEMOS EXPLORACIÓN EN MINAS SUBTERRÁNEAS, Y POR ELLO ME SIENTO MUY ORGULLOSA”.
“LAS MONTAÑAS TIENEN VIDA Y EXPLORAR SU RIQUEZA NOS PERMITE CONSTRUIR UN MEJOR FUTURO”. Mario Ramírez Oviedo, Superintendente de Geología Regional / Santa Eulalia, Chihuahua.
Ana Paniagua, Departamento de Geología, Mina Santa Bárbara, Chihuahua.
1.30*
fue la tasa de incidencia de accidentes en 2012. El nivel más bajo de toda la industria minera nacional.
817 millones
de pesos invertimos en trabajos de exploración minera en el 2012.
SOMOS GRANDES PORQUE HACEMOS COSAS GRANDES. 208
CHAPTER 7: COPPER & BASE METALS 210
Development Trends in the Copper Mining Industry
211
MINE PROFILES: Mexico’s Main Copper Mines
212
Development Trends in the Zinc Mining Industry
213
MINE PROFILES: Mexico’s Main Zinc Mines
214
Trends in the Lead and Molybdenum Markets
215
VIEW FROM THE TOP: Building a Global Copper Community
216
MINE SPOTLIGHT: Buenavista del Cobre
218
VIEW FROM THE TOP: Reinforced Focus on Copper and Zinc Production
220
Industrias Peñoles Remains a Key Pillar of Mexican Mining
221
Cozamin Key to Intermediate Copper Producer Ambitions
222
MINE SPOTLIGHT: Cozamin
224
Grupo Mexico Develops World Class Copper Deposit
225
VIEW FROM THE TOP: Strategic Planning to Overcome Production Challenges
226
MINE SPOTLIGHT: El Boleo
228
Peñoles Invests in Renewable Energy for Self-Supply
230
The Role of Energy Prices in the Mexican Mining Industry
230
Advantages of Hydraulic Power in Motor Applications
232
VIEW FROM THE TOP: State of the Art Power Solutions
233
Handling Water and Energy During Mine Construction
234
Quality as an Essential Element in Energy Control
235
VIEW FROM THE TOP: Integrated Solutions for Power Transformation
236
VIEW FROM THE TOP: Sonora at the Forefront of the Mining Industry
237
Women in Mining
238
MINE PROFILES: Sonora
240
VIEW FROM THE TOP: Providing Human Talent for the Mexican Mining Industry
240
Training Students in one of Mexico’s Mining Centers
209
DEVELOPMENT TRENDS IN THE COPPER MINING INDUSTRY Chile is today the world’s biggest copper producer,
GLOBAL COPPER PRODUCTION BY COMPANY (2012)
accounting in 2012 for 31.6% of the global production of this metal. A large proportion of the copper that was produced globally was exported to China, the world’s
11%
largest copper consumer, accounting for 40% of global demand. While demand for copper is growing worldwide,
8%
the market is considerably dependent on Chinese demand.
7%
Copper prices have soared since 2002, jumping from values of aproximately US$2,000 per tonne to historic highs of US$9,000 in 2011. However, China’s economic
53%
5%
growth rate has slid down from the double digits that
4%
international markets had grown to expect, which has 3%
had knock-on effects. Average copper prices dropped
3%
10% in 2012 in spite of the announcement of large scale
3%
infrastructure investments by the Chinese authorities.
3%
During 2013 the copper price has recovered slightly from lows of US$6,600 in mid-June to close to US$7,300 by the end of August. The International Copper Study Group
Codelco
Rio Tinto
expects that copper mining will increase slightly in 2013
FCX
Anglo American
BHP Billiton
KGHM
Grupo Mexico
Antofagasta
Xstrata
other
(5.2%) and in 2014 (5.6%), and if global economic recovery finally gains a constant pace in the coming years, copper prices could surpass their current levels and edge closer to the 2011 peak sooner than expected.
Source: USGS
GLOBAL COPPER PRODUCTION BY COUNTRY (THOUSAND TONNES)
Mexico is the country with the fifth biggest copper reserves in the world. According to the United States Geologic Survey (USGS), Chile leads the list with an estimated 190 million tonnes of copper deposits, followed by Australia (86 million), Peru (76 million), the US (39 million), and Mexico (38 million). This places Mexico above
24%
China - the world’s leading copper refiner and by far the 32%
biggest consumer of this base metal - which only has 30 million tonnes of estimated copper reserves according to the USGS. Mexico’s current reserves represent 5.6% of the
3%
world total, while China’s make up only 4.4%.
3%
The Mexican Mining Chamber (Camimex) reports that
4%
Mexico extracted 500,000 tonnes of copper in 2012,
9%
4%
which places the country as the world’s 10th producer. 6% 7%
8%
The Mexican mining industry’s increased focus on copper exploration has nevertheless led to companies increasing production. While Mexico was the world’s 15th producer in 2008, it finds itself within the top 10 only five years
Chile (5,370)
Russia (720)
China (1,500)
Zambia (675)
Peru (1,240)
Canada (530)
US (1,150)
Mexico (500)
future production and continue its rise as a copper
Australia (970)
other (3,960)
producing country.
later. The increase in total copper production in Mexico during 2012 alone was of 12.8%. Copper is now the second target of mining exploration investment in Mexico, which indicates that the industry is well prepared to increase
Source: USGS
210
| MINE PROFILES: MEXICO’S MAIN COPPER MINES
4 7 1
16 2
3
19 13
15
8 9 18
12 17
5
6
10 14 11
COPPER PRODUCTION BY MINE Mine
Company
State
Thousand tonnes
1
Buenavista del Cobre
Grupo Mexico
Sonora
200.1
2
La Caridad
Grupo Mexico
Sonora
120.7
3
Piedras Verdes
Cobre del Mayo
Sonora
30.7
4
Milpillas
Peñoles
Sonora
23.2
5
Cozamin
Capstone Mining
Zacatecas
21.3
6
NEMISA
Neg. Mra. Sta. Ma. de La Paz
San Luis Potosi
21.1
7
Maria
Minera Frisco
Sonora
12.8
8
Tayahua
Minera Frisco
Zacatecas
8.6
9
Sabinas
Peñoles
Zacatecas
8.0
10
Zimapan
Carrizal Mining
Hidalgo
6.4
11
Campo Morado
Nyrstar
Guerrero
5.6
12
Aranzazu
Aura Minerals Inc.
Zacatecas
5.0
13
Santa Barbara
Grupo Mexico
Chihuahua
4.6
14
Tizapa
Peñoles
State of Mexico
2.1
15
San Fco. del Oro
Minera Frisco
Chihuahua
1.9
16
Bismark
Peñoles
Chihuahua
1.6
17
Charcas
Grupo Mexico
San Luis Potosi
1.3
18
Francisco I. Madero
Peñoles
Zacatecas
1.3
19
Naica
Peñoles
Chihuahua
.09
Other
23.1 TOTAL
500.3 Source: USGS
211
DEVELOPMENT TRENDS IN THE ZINC MINING INDUSTRY Zinc is the 24th most abundant metallic element in the
2014. Barclays predicts that demand will simultaneously
earth’s crust and the fourth most commonly used metal
accelerate, by respectively 4.1% and 5%.
after aluminum, copper, and lead. In 2013 over 12 million tonnes are expected to be produced worldwide, with
Mexico is today the sixth biggest producer of zinc in the
Australia, Asia, Peru, Canada, and Europe being the main
world. The country produced a total of 645,000 tonnes
mining areas. China is currently the biggest producer of
in 2012, which represented a 2% increase over its 2011
zinc, accounting for 29% of total production worldwide.
production. The global zinc industry has experienced
Zinc is most commonly used in galvanization as an
a production increase of just over 5% compared to 2011,
anti-corrosion agent for steel, in the production of zinc-
due to a 14.4% increase in China’s output of the metallic
based alloys, and to produce brass and bronze. These
element, while production in Mexico, Peru, Australia and
alloys
resistance
Canada decreased as a result of the global economic
and are used in communication equipment, hardware,
generally
have
superior
corrosion
slowdown. In terms of exports, half of Mexico’s output is
musical instruments, and water valves. The automotive,
bought by South Korea.
infrastructure, and construction industries are the biggest consumers of zinc, using large amounts of galvanized steel
Mexico’s production in 2012 was evenly split between
sheets in their operations.
Mexican and international companies operating in Mexico; Goldcorp, Grupo Mexico, Grupo BAL (Peñoles and Fresnillo),
Business analysts expect consumption to exceed smelting
Nyrstar, Minera Frisco, Carrizal Mining, Capstone Mining
output by the end of 2013, as well as throughout 2014.
and Scorpio Mining. From the three Mexican companies,
Annually, construction currently accounts for half of
only Grupo BAL (Peñoles and Fresnillo) and Grupo Mexico
consumption, and transport accounts for about a quarter.
increased their output last year. Peñoles increased overall
Because silver accounts for 40% of zinc mining byproducts,
production on its five mining units to reach 157,257 tonnes,
and given the precious metal’s poor performance in recent
and Grupo Mexico reached a production of 89,884 tonnes
months, according to Barclays PLC we are likely to see
with its Charcas mine in San Luis Potosi, Mexico’s second
significant reductions in the production of refined zinc
largest zinc mine in Mexico after Goldcorp’s Peñasquito,
in the near future, declining by 3.9% in 2013 and 2.8% in
increasing production by 13%. Minera Frisco faced union conflicts on three of its eight producing mines, which resulted in a production decrease of 14%. Nyrstar, the
GLOBAL ZINC PRODUCTION BY COUNTRY
Belgian giant and biggest zinc producer in the world produced around 40,000 tonnes in the state of Guerrero at its Campo Morado mine. Zacatecas is the country’s leading zinc producing state, followed by Chihuahua, San Luis Potosi, State of Mexico, Durango, Guerrero, Sinaloa,
23%
Hidalgo and Aguascalientes. 36%
Peñoles has invested US$203 million in the Velardeña project, a zinc unit in the state of Durango that has an
5%
estimated potential of 2.4 million tonnes, and which has so far generated approximately 700 employment
5%
opportunities for the state. Its processing and grinding capacity of 6,000 t/d allows Peñoles to add 75,000
5% 6%
tonnes of zinc per year to its total production. In addition,
11%
Peñoles has recently completed a feasibility study for the
9%
El Rey de Plata project in the state of Guerrero, where a US$268 million investment will complement production with a grinding capacity of 1.3 million tonnes per year by China
US
Australia
Mexico
Peru
Canada
India
other
2015. With a planned new refinery, which will be built in the next five years, Grupo Mexico will double its current refined zinc capacity, allowing the company to add further value to its operations and stand out from the competition even more. Source: ILZSG
212
| MINE PROFILES: MEXICO’S MAIN ZINC MINES
5
18 13 11
7
15 17
10 14
9 1 3 16 8
2
12 6 4
ZINC PRODUCTION BY MINE Mine
Company
State
Thousand tonnes
1
Peñasquito
Goldcorp
Zacatecas
147.03
2
Charcas
Grupo Mexico
San Luis Potosi
50.20
3
Francisco. I. Madero
Peñoles
Zacatecas
45.46
4
Campo Morado
Nyrstar
Guerrero
40.00
5
Bismark
Peñoles
Chihuahua
39.50
6
Tizapa
Peñoles
State of Mexico
35.51
7
Santa Barbara
Grupo Mexico
Chihuahua
32.83
8
Asientos
Minera Frisco
Aguascalientes
29.05
9
Tayahua
Minera Frisco
Zacatecas
22.89
10
Sabinas
Peñoles
Zacatecas
19.83
11
San Fco. del Oro
Minera Frisco
Chihuahua
18.30
12
Zimapán
Carrizal Mining
Hidalgo
17.08
13
Naica
Peñoles
Chihuahua
16.96
14
Fresnillo
Fresnillo plc
Zacatecas
14.97
15
La Ciénega
Fresnillo plc
Durango
8.17
16
Cozamin
Capstone Mining
Zacatecas
7.81
17
Nuestra Señora
Scorpio Mining
Sinaloa
7.47
18
Santa Eulalia
Grupo Mexico
Chihuahua
6.86
Other
100.42 TOTAL
660.34 Source: ILZSG
213
TRENDS IN THE LEAD AND MOLYBDENUM MARKETS According to the International Lead and Zinc Study Group
GLOBAL MOLYBDENUM PRODUCTION BY COUNTRY
(ILZSG), in 2012 the primary global lead output was 5.2 million tonnes, which translated to an increase of 11.5% over 2011. China provided 55% of the primary lead production in the world, and together with Australia, the US, Peru and Mexico
23%
accounted for more than 80% of total global production. Total global consumption increased by 1.3%, reaching 10.6 million tonnes, of which 80% was used in the manufacturing
36%
of lead-acid batteries. Today, secondary sources or recycling provide more than half of the world’s consumption. During
5%
2012 the global lead market was in surplus. London Metal Exchange (LME) prices were volatile, averaging US$2,094
5%
per tonne. The surplus in lead production is likely to continue
5%
in 2013, though the ILZSG anticipates that it will remain at 6%
42,000 tonnes, mainly due to lower forecasts for metal
11% 9%
production. Global lead usage is anticipated to rise by 4.8% to 11.09 million tonnes by the end of the year. Mexico contributed with 4.6% of the total global lead production in 2012. According to INEGI, annual domestic lead production increased by 6% compared to 2011. The total production reached a record 238,000 tonnes. Zacatecas produced 55%, Chihuahua 20.2%, and Durango 8.5% of Mexico’s total production. Goldcorp’s Peñasquito
China
US
Australia
Mexico
Peru
Canada
India
other Source: USGS
property is the main lead producer in Mexico, with a total of 69,705 tonnes in 2012. Molybdenum’s main application is as an alloying element in steels and cast irons, with the purpose of enhancing
GLOBAL LEAD PRODUCTION BY COUNTRY
hardenability, strength, toughness, and wear and corrosion resistance. According to the US Geological Survey (USGS) the total global molybdenum production in 2012 was 250,000 tonnes, which was 5.3% lower than in 2011; China
19%
is the main global producer, accounting for 42% of the total output, followed by the US with 23%, and Chile with 14%. The average cost of molybdenum is US$12.74 per pound, which is significantly lower than the 2011 average of US$15.7.
5%
According to the Global and China Molybdenum Industry Report 2012-2015, demand for molybdenum is expected to
5% 55%
grow in 2013, along with total global production.
7%
During 2012 Mexico was the fifth molybdenum producer in the world, with a total output of 10,968 tonnes, which were
10%
solely produced by Grupo Mexico’s La Caridad Mine in Sonora. Grupo Mexico is working on a molybdenum plant for Buenavista del Cobre, which will produce 2,000 tonnes annually. The group is also working on its Molybdenum China
Mexico
Australia
other
Plant II, which has an expected output of 2,600 tonnes per year and will begin production during 2015. Mercator Minerals is continuing work on its El Creston molybdenum
US
property in Sonora, which has a potential production of Peru
11,000 tonnes and is expected to begin operations in 2016. Source: ILZSG
214
| VIEW FROM THE TOP
BUILDING A GLOBAL COPPER COMMUNITY EFRÉN FRANCO VILLASEÑOR Executive Director of ProCobre
Q: How has ProCobre clarified common misunderstandings
promoting energy efficiency. Fortunately, the production
about the copper industry?
of electricity in the country is now opening up to include
A: Firstly, the global copper industry is unique. It is not
co-generation and renewable energy sources in our homes,
a wholly integrated industry, but rather it has different
such as solar systems. However, this aspect requires further
levels. The first level is made up of the copper producers,
regulation and dissemination.
which is the mining industry; the next level is made up of the manufacturers that purchase copper cathodes, wire
Q: What are the main properties that make copper essential
and rods, and manufacture a semi-product. These semi-
in different applications ranging from energy efficiency
products are then purchased by engine, car, white goods,
and infrastructure to electricity and renewable energy?
and of course electronics manufacturers.
A: There are essentially three main properties that make copper such an attractive metal: it has the highest electrical
ProCobre is working to integrate the next level in the
and thermal conductivity, and is the most durable of the
value chain: the main users of wires, cables and electronic
available elements. It is for these reasons that many mining
appliances, which includes all of us in our homes and offices.
companies started to mine more copper at the beginning
We have to take safety, energy and gas consumption
of the 20th century. The process of the last 11 or 12 decades,
into consideration on a daily basis. We have developed
during which the world has come to depend more and
initiatives to make the end user, as the decision maker,
more on electricity, has relied on the availability of copper.
aware of the benefits that certain copper products offer
Almost all of the equipment that is used for renewable
and which copper products can be purchased in order to
energy or is categorized as high efficiency equipment has
save money or increase the safety of electrical installations.
a large quantity of copper relative to other components.
Some of our initiatives help in decision making processes,
The smaller the gadget and the more functionality it has,
mainly for technical markets. However, in certain cases
the larger the quantity of copper that can be found in the
there are no other materials you can use; copper is the
gadget. A large amount of copper is needed to produce
only option.
all of the many millions of smart phones and tablets that are being produced and used on a daily basis around the
Q: What are the main energy policies that ProCobre would
world. These types of gadgets generate a lot of heat and
like to see implemented in Mexico?
need to be kept at a certain temperature, and this is the
A: In Latin America in general there is a very good set
contribution that copper makes.
of up to date rules, codes and standards. For example, Mexico is one of the countries with the highest standards
Q: What are ProCobre’s main objectives in terms of
for electrical motors in Latin America, and even worldwide.
informing manufacturers and users about the different
Although there is a very comprehensive set of rules, what
ways in which copper can meet their requirements?
we do lack in Latin America is the enforcement of these
A: At ProCobre it is our job to explain and demonstrate how
rules. We have an electrical code in Mexico, but there is no
copper-based solutions work and we do it through case
mechanism for making sure that construction companies
studies. We show that deforestation can be avoided by
build according to that code, thereby preventing risks
installing alternative sources for heating to wood burning,
through fire hazards, for example. Some of our initiatives
such as solar systems. The government is demonstrating
include the government, nonprofit organizations, and
the same thing through other projects, and it is supportive
manufacturers, among others, and aim to define how a
of further legislation. Our main role is to bring the different
functional, economically viable, and bribe-proof system
parties together, and that is what we are working towards
that works can be created. We organize seminars and
each day. Instead investing individually in these areas and
workshops and bring in experts, mainly from Europe,
spending more money than needed, we all work together
who can help us with this issue. We are also working on
on a single initiative, thereby saving costs.
215
216
| MINE SPOTLIGHT
BUENAVISTA DEL COBRE Formerly known as the Cananea mine, Buenavista del Cobre is an open pit copper mine located in Sonora at the site of one of the world’s largest copper ore deposits. Grupo Mexico operates five underground mines that produce zinc, lead, copper, silver and gold, a coal mine, and a zinc refinery. The mine production unit has 46 mining concession titles with a total area of 13,282 hectares. Buenavista del Cobre was restored to its full capacity in 2011, and Grupo Mexico is moving forward with an aggressive US$2.9 billion expansion investment program for this property, which will have an annual production capacity of 512,000 tonnes of copper by 2016. Grupo Mexico produces 55% of the copper in Mexico, representing 80.3% of sales for Grupo Mexico’s mining division, and holds the largest copper reserves in the world with 71.07 million tonnes of copper content. In 2012, 53% of Grupo Mexico’s mining division was allocated to the expansions at the Buenavista mine. After obtaining the necessary environmental permits, the construction of the SX-EW III plant has started. The SX-EW III Plant at the Buenavista mine will produce 120,000 tonnes of copper cathodes per year with a purity of 99.99% and reports 38% completion, increasing from an initial installed capacity of 88,000 tonnes. The new plant is expected to start operations in the first quarter of 2014 and has been constructed with a total budget of US$444 million. Associated with the SX-EW III project, Grupo Mexico completed the construction and testing for the Quebalix III at Buenavista in February, and operations started in March 2013. This US$76 million investment consists of a crushing, conveying, and spreading system with a capacity of up to 15 million tonnes of ore per year that improves copper recovery during the leaching process and reduces the required time and cost of transporting ore. The new Copper Concentrator II at Buenavista, with additional integrated molybdenum circuit will have an annual production of 188,000 tonnes of copper content in concentrates, 2.3 million ounces of silver content, and 21,000oz of gold content, on average. In addition, the plant will have a molybdenum circuit (Molybdenum Plant II) with a capacity to produce 2,600 tonnes of molybdenum content in concentrates per year. The project has a budget of US$1.383 billion and is expected to start operations in the first half of 2015. Construction of Buenavista’s first molybdenum plant was completed in early 2013, and production started in May of this year. This new concentrator, with a milling capacity of 100,000 t/d, will produce 2,000 tonnes of molybdenum content in concentrates annually. Prior to this US$38 million investment, Buenavista did not recover molybdenum as a byproduct and this investment will increase its production of molybdenum at the consolidated level, while also providing significant cash cost reductions.
217
| VIEW FROM THE TOP
REINFORCED FOCUS ON COPPER AND ZINC PRODUCTION XAVIER GARCÍA DE QUEVEDO TOPETE President of Minera Mexico, President & CEO of Southern Copper, COO of Grupo Mexico Q: What have been the critical success factors that have
Q: Grupo Mexico stands out for its productivity and
allowed Grupo Mexico to grow into an important global
efficiency. Which practices have enabled the company to
player in copper mining?
optimize its performance in these areas?
A: Before 1995 Grupo Mexico was not a renowned
A: Our strategy is based on achieving profitability
copper producer, and its output consisted mainly of non-
through cost management rather than price speculation.
refined metals. From that year on, we made the decision
Cost management is a crucial element for ensuring the
to integrate vertically in order to boost the company’s
profitability of our operations, and we constantly seek to
operation. The Group invested its efforts and capital in
become more competitive through cost reduction. We
modernizing its copper and precious metals processing
therefore conduct international benchmarking processes
plants. This strategy led us to start producing copper
to best identify cost saving opportunities. Improvement
rods, an essential primary material in the manufacturing of
opportunities that we have addressed through this
electricity conductors.
strategy have been related to manufacturing processes, logistics, energy and water consumption, and maintenance
Given the cyclical nature of the mining industry we
of our equipment and facilities.
decided to diversify the business by entering into the
218
railway industry, with the acquisition of Ferromex and
Grupo Mexico continuously monitors its productivity and
later Ferrosur. This was an opportunity for us to balance
optimizes the number of employees devoted to each of its
our operations. Along with our ambitions to compete
operations. We are currently implementing an Enterprise
at the international level, this also led us to acquire new
Resource Planning (ERP) system in order to manage
businesses abroad. We bought the mining companies
costs throughout all of our areas and production stages.
Asarco in the US and Southern Peru Copper Corporation
A concrete example is the reduction of downtime due
in Peru. Following this diversification we also shifted our
to maintenance services on our trucks. One of the many
focus towards generating long-term mining plans and
benefits we expect the ERP tool to bring is avoiding the
the expansion of our reserves portfolio. Our reserves are
duplication of our work in administration and transactions,
now certified, and we are currently the copper producing
by reorganizing services into one single entity and system,
company with the largest quantity of reserves in the world.
with the aim of optimizing our resources.
Q: What are Grupo Mexico’s investment priorities, and
Q: How does Grupo Mexico manage its relationships with
which role does the reactivation of Buenavista del Cobre
its staff and the communities surrounding large-scale
play in your development strategy?
projects?
A: The investment program for 2012-2015, which has been
A: Grupo Mexico has an internal competence-building
approved by the Board of Grupo Mexico, totals US$11.5
program, and each of our employees must complete a
billion. For 2013 our planned capital investments are
certification course in his or her working area. In 2012,
US$3.4 billion. The construction of concentrator plants,
Grupo Mexico provided its personnel with over 80,000
SX-EW plants, and the expansion of the Buenavista del
hours of internal and external training. The reactivation of
Cobre mine are the main projects for Grupo Mexico, and
the Buenavista del Cobre mine has greatly benefited the
US$2.8 billion will be invested in these projects with the
surrounding communities, as Cananea’s resurgence has
aim of increasing our annual copper production from
generated employment for over 6,000 people. We place
202,000 tonnes to 515,000 tonnes. The SX-EW plant will
great emphasis on integrating ourselves in the surrounding
begin operating in 2014, with an annual production rate of
communities, by fostering employment and progress.
120,000 tonnes a year. In 2015 the new concentrator will be
Through our relationship with the communities we have also
put into operation, which will produce 190,000 tonnes of
promoted gender equality within our ranks. We have had
copper concentrate a year.
a lot of interest from women who want to join our team,
which led us to develop training and skill-building programs
Finally, the country today needs more jobs, and mining
for them and to integrate them into the company. These
as an industry has been one of the greatest generators of
are responsible and brave women who we have trained and
employment in recent years. We hope that the government
hired upon the completion of their secondary education.
will make a responsible decision. Companies like ours are ready to give our perspective.
The key factor to our success has always been our human capital. Our personnel are capable of conducting respectful,
Q: What are Grupo Mexico’s main exploration strategies
professional relationships with employees and with the
to ensure its long term success, particularly in Mexico?
communities with which we coexist. Evidently, Grupo
A: Our exploration strategy prioritizes quality over quantity.
Mexico’s resources and mineral reserves also provide a
This is something that is evident in the management of our
favorable foundation for the development of opportunities
projects. The process is simple: as the exploration stage
for the local communities. For example, this year we
of an asset advances, the results are measured against
transferred an average of MX$400,000 (US$31,700)
a set of profitability parameters. If a project meets the
to each of our employees, through our profit-sharing
criteria, Grupo Mexico invests in further advancement and
plan. This is a consequence of the results our employees
development. Our exploration activity is conducted in a
delivered, and through these rewards our employees thus
selective, strategic manner, in order to protect our capital.
increase their commitment to the company. Moreover, Grupo Mexico has a very marked focus on sustainability.
This strategy has earned us a series of high-potential projects
Our responsible approach to environmental matters is
in Mexico. We are currently developing an underground mine
widely recognized, for example by our inclusion in the
in Angangueo, Michoacan. After the construction phase is
Mexican Stock Market’s Sustainability Index. We have also
completed in 2015, this mine will produce zinc and copper
received an Ethics and Values Award from the Mexican
aggregates with partial silver content. Our Chalchihuites
Confederation of Industrial Chambers (Concamin). Grupo
project, located in Zacatecas, is currently undergoing
Mexico also complies with the norms established by the
its feasibility study. It will produce zinc aggregates in the
Global Reporting Initiative, in which information across
future. We are also developing a zinc deposit in Buenavista
multiple sustainability indices are gathered and audited by
del Cobre. Thanks to these projects, we expect to double
a renowned international auditing firm.
our zinc production during the coming years.
Q: What is the expected impact of the potential
Q: What are the ambitions for the development of Grupo
introduction of a 5% mining royalty on the country’s
Mexico’s mining activities over the coming decade?
competitiveness as a mining destination?
A: Grupo Mexico sees itself as a solid and trustworthy long-
A: The Senate should take into consideration the fact
term mining producer. In Peru we have important projects
that the mining industry already pays a number of taxes.
to develop, including the expansion of two mines, as well as
Last year the industry paid MX$3.1 billion in taxes on
the Tía María and Los Chancas exploration projects. Grupo
concessioned land. It is important to recognize that in
Mexico is currently exploring in Ecuador, Argentina and
Mexico, besides the 30% income tax, mining companies
Chile, and we are evaluating opportunities in Panama. In
also have many other costs such as 10% Statutory Profit
the US we have been successful in investing and increasing
Sharing, expensive electricity, as well as water rights.
our reserves at Asarco, and we have found some resources
This last one is unique in Mexico, and it amounts to 1.5%
in the surrounding area. We are also expanding our Mission
of income tax for the group. There are various additional
mine in the same way. We have come back to zinc, with
factors that legislators should consider in their analysis,
the reactivation of mines such as El Gangeo, as well as with
such as the application of the Flat Rate Business Tax,
the Buenavista del Cobre mine. We want to be a solid and
which applies to mining but not to agriculture or fishing.
competitive zinc producer.
219
INDUSTRIAS PEÑOLES REMAINS A KEY PILLAR OF MEXICAN MINING Billionaire Alberto Baillères, Mexico’s second richest man,
of solid mining projects. The company invested US$312.9
has become an icon of the Mexican business world based
million in exploration in 2012, which is three times more than
on his leadership of Grupo BAL, the industrial, financial,
it had invested just five years before. Its main exploration
agricultural and retail holding company. The Group’s
projects are in the Mexican states of Guerrero, Sonora,
integrated mining group Industrias Peñoles is an important
Chihuahua and Zacatecas, and internationally in Peru and
player in both the domestic and international mining
Chile. Jaime Lomelín Guillén, one of the Mexican mining
industry, and played an important role in the transformation
industry’s key leaders and the former CEO of Peñoles and
of the Mexican mining industry. 1961 was perhaps one of
Fresnillo and current Corporate Director of Grupo BAL,
the most significant years for the company, as it played
views the Group’s commitment to consistent spending on
a leading role in the governmental effort to ‘mexicanize’
exploration as having been essential to its growth. During
the mining industry, which at the time was dominated
his time as CEO at Peñoles, Lomelín Guillén adhered to
by foreigners. During the period of mexicanization Raúl
the strategy of making fixed investments in exploration
Baillères, father of Alberto, and José García played a big
activities each year, regardless of fluctuations in the market.
part in bringing ownership of Industrias Peñoles back to
For Lomelín Guillén, a good exploration strategy must be
a 51% Mexican share, giving it a majority stake over its
backed up by a strong team, and the company’s success is
American partner and original owner, American Metals
largely attributed to its employees, which in 2012 stood at
Company. In that same year Industrias Peñoles acquired 51%
9,515. “To have a successful mining company you need three
of Minera Fresnillo, located in Zacatecas State. Industrias
things – exploration, maintenance, and people – and people
Peñoles’ 2008 corporate restructure separated its metals
are the most important of those three requirements. If you
divisions into Fresnillo, which focuses on precious metals,
do not have people you do not have anything,” he says.
and Peñoles, which focuses on base metals. Peñoles’s
achievements
over
many
years
represent
Industrias Peñoles’ is today the largest primary silver and
the company’s well established operative efficiency
metallic bismuth producer in the world, and also plays a
and effective cost control, as well as its successful
leading role in the Latin American region, where it is the
development and application of new technologies and
biggest producer of primary gold and lead. Industrias
disciplined execution of growth projects. Among its most
Peñoles is currently Mexico’s second largest mining
recent projects is the startup of the Noche Buena mine in
company, with a turnover of US$7 billion in 2012, 45.3%
Sonora, a unit that has set a new gold production record
of which comes from silver production, and 30.5% from
for the company, and the construction of the zinc mine
gold production. The company holds seven base metal
in Velardeña, Durango, which is a decision that fits the
units, seven precious metal units, two projects under
Company’s vertical integration strategy in metallurgical
development, three chemical plants and three metallurgical
operations. The polymetallic mine Rey de Plata is expected
operations, as well as other energy and transportation
to produce zinc, copper, silver, lead and gold in 2015,
infrastructure units. Exploration has been a defining part of
the year in which the expansion of the Group’s chemical
Peñoles’s strategy, and a means to ensuring a steady stream
operations Química del Rey will also be completed.
PARTICIPANDO EN EL COMERCIO MUNDIAL / PARTICIPATING IN WORLD TRADE 220
Cd. Juárez, Chih. Av. San Lorenzo 1622 Fracc. Puerta del Sol, 32410 Tel: (656) 627-0514 Fax. (656) 627-0528
COZAMIN KEY TO INTERMEDIATE COPPER PRODUCER AMBITIONS At a time when exploration investment is slowing down and
always being accountable; we take ownership of ourselves
grassroots projects pose ever more risk, there are certain
and our work, and we do the right thing for our business and
mining companies that are cushioned by the fact of having
our stakeholders. The second is executing with excellence;
larger properties with as yet unexplored areas that hold
we measure our performance and we strive to excel at every
great potential. “Exploration on our Cozamin property has
level. The third is delivering results; we are responsible for
been successful, and the area promises to provide some very
our outcomes, but we also work in a very decentralized
important discoveries in the coming year. We have so far only
way. Our mine management teams know the country, the
focused on 30% of our property, and that tells you that we
mine and the culture, and are responsible for their operation
still have a lot of potential in the other areas,” says Manuel
and their outcomes, and they make their own decisions.
Estrada, General Manager of Capstone Mining’s Cozamin
The fourth is working responsibly; safety is non-negotiable,
mine in Zacatecas. The Cozamin mine is located 3.8 km north-
and the wellbeing of our people is our business. As a
northwest of Zacatecas and is a copper-silver-zinc-lead
management team you cannot tolerate any unsafe behavior,
underground mine with a surface milling facility. “Cozamin
and that applies across the board,” explains Burnett.
is forecasted to produce 44 million pounds of copper at a cash cost of US$1.00-1.10 per pound in 2013. Expansion of the
The company’s operations in Mexico have been logistically
mine, which has an expected life of nine years, is a key focus
very straightforward, compared for example to the
for Capstone. Having access to those reserves is what we will
company’s Minto mine in Yukon, Canada, which is remotely
be investing in: optimizing our resources,” says Estrada.
located beyond the Yukon river. The site must be accessed
“Cozamin is forecasted to produce 44 million pounds of copper at a cash cost of US$1.00-1.10 per pound in 2013. Expansion of the mine, which has an expected life of nine years, is a key focus for Capstone” Manuel Estrada, General Manager of Cozamin Mine for Capstone Mining Corp.
Cozamin is one of two producing properties in Capstone
by barge in summer, and by ice bridge in winter. “This
Mining’s portfolio, the other being the Minto mine in Yukon,
makes it a higher cost operation than Cozamin, which is
Canada, and the company’s sole property in Mexico.
located right next to the city of Zacatecas, a world-class
The company is in the process of adding the Pinto Valley
mining center with excellent infrastructure,” says Burnett.
mine in Arizona, US to its portfolio, which will increase its annual copper production by 130-150 million pounds. This
According to Estrada, Zacatecas’ ‘world-class’ status is
acquisition in combination with exploration projects in Chile,
in part a result of the productive role that the Ministry
Canada, Australia and Mexico provide the foundation for
of Economic Development has played in making the
the company’s ambition to become a leading intermediate
area an attractive location for mining projects. Capstone
copper producer. Despite being a Canadian company, the
Mining has benefitted from being based in Zacatecas, but
company has focused on keeping the Mexican property
the company is also giving back and working to leave a
as Mexican as possible. “We run the Cozamin mine with
positive legacy in the local industry. The company has
no expats at all – it is managed completely by Mexican
made agreements with a number of different local and
nationals,” says Cindy Burnett, the company’s Vice President
national universities, such as Autonomous University of
of Investor Relations & Communication. “Manuel recruited
Zacatecas and the Autonomous University of Guanajuato,
through partnerships with the Autonomous University of
and between January and August 2013 alone the company
Zacatecas, which has a long history of mining, so there are
had 30 students join the company on work placements.
very well trained people in the Zacatecas region.”
Capstone’s investment in the area is also evident in the role it played in the creation of the Zacatecas mining cluster.
Capstone considers its people to be one of its biggest
“We were one of the founding members of the Zacatecas
assets, and Burnett attributes the company’s success to
mining cluster. We have been actively participating in the
them. In building successful projects that establish good
different initiatives it has been taking forward, and we have
relationships with local communities, the company’s people
been able to attract some really important companies to
operate according to four key values. “The first of those is
come and establish themselves in Zacatecas,” says Estrada.
221
| MINE SPOTLIGHT
COZAMIN In January 2004, Capstone Mining acquired the Cozamin copper mine, which produces silver, zinc, and lead as by-products. Commercial production commenced in September 2006 and Capstone
completed
exploration,
development
and
initial
production at 350,000 tonnes per year on time and under budget with an initial three year mine life in reserves. Production at Cozamin was quickly expanded by 120% in the first 12 months with all capital expenditures funded from cash flow generated by the mine, and a further expansion in 2008 saw production rise to 1 million tonnes per year. Production is primarily from the Mala Noche Main Zone, supplemented by ore from the Mala Noche Footwall Zone, which is higher in grade, but has narrower widths than the Main Zone. The underground mining method at Cozamin is either long hole stoping, or cut and fill. Mined ore is brought to surface via either a shaft or two production ramps. The ore is trucked to the crusher and processed through a three stage crushing plant and stored ahead of the grinding circuit, where it is reduced in size and then sent to flotation. The flotation steps involve flotation of lead and copper first, followed by zinc. All products go through multiple stages of upgrading in the flotation circuit ending with a silver-rich copper concentrate, a silver-rich lead concentrate and a zinc concentrate. The concentrates are trucked daily to the Port of Manzanillo to overseas smelters for treatment or sale. A surface and underground exploration program is underway to target new mineralized zones with a goal to increase the reserves. The deepest holes in the Mala Noche vein indicated that the coppersilver phase of mineralization extends to greater depths than the current mineral resources. In 2013, exploration continues with the Mala Noche Footwall Zone and the Mala Noche Main Vein with a program of approximately 32,000 meters and budget of US$6.5 million.
KEY OPERATIONAL FACTS Estimated Mine Life Mining Type Current operating throughput (t/d) Copper production in 2012 (million pounds)
2022 Underground 3200 46.9
Copper grade (Cu%)
1.42
Contained metal in reserves (million pounds)
262
Source: Capstone Mining
223
GRUPO MEXICO DEVELOPS WORLD CLASS COPPER DEPOSIT EL Arco is one of the most promising projects in Mexico,
is destined to employ 10,000 people directly and indirectly
since it is on course to becoming one of the largest copper
throughout the lifecycle of the mine. The Economy Ministry
mines in the Americas. The project is located in the mining
of Baja California is working together with local government
district of El Arco-Calmalli, very close to the border
agencies to move this megaproject forward, since it will
between Baja California Norte and Baja California Sur. This
bring economic development opportunities to one of the
mining district has been explored and exploited since the
most remote regions of the peninsula, and there will be
1970s, but it was not until Grupo Mexico came in with its
important knock-on effects on the state’s economy. Once
team of geologists and modern exploration methods that
the mine is constructed it is believed that the surrounding
the true dimensions of the property’s value were realized.
municipalities may grow by up to 700%, with all of them
The copper-gold ore deposits were evaluated during Grupo
merging into one big city of at least 30,000 habitants. One of
Mexico’s ambitious drilling program, which lasted from
the main challenges the company will have to overcome will
2005 to 2006. After the feasibility study was concluded
be managing its water supply, since the mine is located in a
in 2010, an investment of US$56.4 million was approved
very dry area where evaporation rates are considerable. The
for land acquisition required for the project, which is still
operation will require over 800 liters of water per second,
ongoing in 2013. In order to be moved into production this
which is more than the 725 liters that the city of Ensenada
world class copper deposit – with ore reserves of over 1.5
currently consumes. In order to satisfy the needs of the
billion tonnes with an ore grade of 0.416% and 0.14 grams
operation Grupo Mexico intends to build a desalination plant
of gold per tonne – will require an investment of US$2.6
near the coast and to use water from El Vizcaíno basin. The
billion in the first three years. Once the project is moved
company has also considered the possibility of installing an
onto production it will generate a turnover of US$2 billion
electrical plant, since the operation will require a supply of
per year, for a period of at least 25 years. The project will
180MW. According to the Energy Ministry the cost of this
consist of an open pit mine and will exploit copper and gold,
electrical plant would be US$150 million and it will have to
with molybdenum as a byproduct. The mine is forecasted
be built by private contractors. The negotiation states that
to produce 190,000 tonnes of copper cathodes, 105,000oz
after 30 years Grupo Mexico would own the rights over the
of gold and 1,500 tonnes of molybdenum per year. El Arco
electrical infrastructure.
ventasmexico@power-electronics.com Telf.: (55) 5390-8818 Telf.: (55) 5390-8363 24HRS. SERVICE
UN COMPLETO RANGO DE PRODUCTO PARA SATISFACER LAS APLICACIONES MÁS EXIGENTES
224
VARIADORES DE VELOCIDAD ARRANCADORES ELECTRÓNICOS baja y media tensión
| VIEW FROM THE TOP
STRATEGIC PLANNING TO OVERCOME PRODUCTION CHALLENGES HÉCTOR ESPINO HERNÁNDEZ Government Affairs General Manager of Minera y Metalúrgica del Boleo Q: El Boleo mine presents a unique set of operational
hydrometallurgical techniques at temperatures below the
challenges. What are the main challenges and how is the
boiling point of water. This means that we will have a lesser
company overcoming them?
environmental footprint than if we were to use other kinds
A: El Boleo is an underground mine that is currently at
of technology. Vat leaching, solid-liquid separation and SX-
the development stage. The mines that form El Boleo are
EW operate as a closed-circuit system. This means firstly
made up of soft rock, which makes it a real challenge to
that we can recycle the water from the plant, and secondly
maintain optimal conditions for operating modern mining
that the tailings, after extracting the base metals, will
equipment, such as continuous miners, conveyor belts,
be neutralized and carried to a tailing store facility. Only
and roof bolters. As a large metallurgical project El Boleo
the cooling water that we use for the equipment will be
needs to be self-sufficient in its energy and water supply;
discharged, in line with Mexican regulations.
it will take a considerable amount of electricity (63.25MW) to run the operation. El Boleo is not connected to the
Q: What is the impact of the partial withdrawal of Baja
local grid that supplies Santa Rosalia town. Instead, we
Mining from the project, now holding only a 10% share,
will produce our own power on the operation using two
given that the company provided a lot of the expertise?
different methods.
A: Some of Baja Mining’s personnel are still at El Boleo, now working for Minera y Metalúrgica del Boleo. As with by
many foreign projects in Mexico, they start out with a
Boleo
lot of expats, but as the projects take hold and stabilize
project’s positioning close to the Sea of Cortés and the
Mexicans tend to take over the management. Today there
Transpeninsular Highway allows us to bring in large
are Mexican technical experts working on the project as
quantities of materials that are required for our operation,
well. There have also been a significant number of Korean
as well as forward our product using both options. This
engineers working on the project. KORES, which owns a
represents a cost advantage for El Boleo.
Normally,
mine
transportation
projects costs.
are
heavily
Fortunately,
impacted
the
El
We will also
90% share in the company, is administered through the
use sea water in most of our processes: for leaching and
South Korean government. The bottom line is that it has
cooling equipment, among other things. The fresh water
been in many ways beneficial for the project to bring
used for the SX-EW process and facilities will be obtained
in Korean investment and involvement. El Boleo is a
through desalinization plants. Because El Boleo is located
technologically challenging project, and KORES was able
in a desert climate, there is always a shortage of fresh water
to provide the required funding for it to continue.
and rain, nevertheless through such techniques we will be able to use modern mining techniques and operate a high
Q: What are the benefits for the project of the partnership
tech processing plant. There will be large desalinization
between Baja Mining and KORES, aside from the latter’s
plants that will produce enough fresh water for some
financial input?
operations and most services on site.
A: KORES is interested in the project as long as it can produce copper at a more competitive price than the
Since the ores and wall rocks on El Boleo are soft,
copper that is available in the market. It is likely that this
there is the opportunity to increase our involvement
represents the most significant investment in Mexico by a
in surface mining to complement the activities on the
South Korean company, and the investment is probably
underground mine. Hydrometallurgical technology is not
one of the top three investments in the mining industry in
cheap compared with traditional flotation technology,
Mexico on the whole. It is anticipated that around US$600
but it is environmentally friendly. For example, if we had
million will be invested this year, with US$1.8 billion due
chosen to use smelting or roasting methods they would
to be invested in total. The technology coming out of the
have produced SO2 gas, which enters the atmosphere
project will also be very important for other projects that
and causes pollution. However, on El Boleo we use
face similar challenges.
225
226
| MINE SPOTLIGHT
EL BOLEO El Boleo is an advanced stage copper-cobalt-zinc-manganese project that is located along the east coast of the Baja peninsula centred on the port town of Santa Rosalía in Baja California Sur. The property covers a series of sediment-hosted stratabound copper deposits. The geological setting is a shallow near-shore marine basin containing Pliocene and Pleistocene terrigenous clastic sedimentary rocks (conglomerates and sandstones) with several extensive relatively thin but continuous tuff layers. Deposits of copper-cobalt-zinc-manganese mineralization in the Boleo District occur within seven widespread, stratiform clay-rich horizons or beds known as manto deposits. Copper and cobalt, with variable amounts of zinc and traces of lead, as well as locally mineable bodies of manganese oxide, are related to the tuff layers interbedded with the coarse clastic sedimentary rocks. The seam formation and low material strength of the manto deposits suggests that conventional “soft rock” mining methods such as those used in underground coal, potash or salt mining would be successful. The
deposit
was
continuously
mined
predominantly
by
underground methods from 1886 to 1972, during which time an estimated 18 million tonnes of ore were treated. After 1972 both underground and open pit mining was carried out sporadically until the copper smelter at Santa Rosalía closed in 1985. Since cessation of mining operations, International Curator carried out exploration between the years 1993 to 1998, and Minera y Metalúrgica del Boleo (MMB) has been carrying out exploration and project development activities from 2001 to the present. In August 2013, Korea Resources Corporation contributed US$74.7 million in construction funding to MMB, which completed the final components of the committed pro rata contributions of the Phase II funding requirement of US$443.4 million to advance the construction of the project and reduced the interest of Baja Mining, the other shareholder in MMB, to 10% The Boleo Project is being developed as a series of underground mines using the room-and-pillar mining method, along with small open pit mines. This method was chosen to deliver the targeted plant feed grade at the required rate because of its flexibility for layout designs, efficient recovery of resources, and lower initial capital cost. The ore will be fed to a processing plant, which will use a two-stage leaching circuit, followed by solid liquid separation, and solvent extraction electro winning to produce copper and cobalt as metal, zinc as zinc sulfate monohydrate, and there is a possibility of producing manganese, as manganese carbonate. The plant is expected to produce 57,000 tonnes for the first 6 years at an average grade above 2% and 38,000 tonnes of copper per year thereafter at an average grade of 1.33%. Based on present reserves and the current mine plan, the scheduled life of mine is 23 years, and the project will begin production in early 2014.
227
PEÑOLES INVESTS IN RENEWABLE ENERGY FOR SELF-SUPPLY Mexico’s largest companies
started looking for hydroelectric projects, since we knew
have seen their electricity
that these projects can generate low cost electricity after
costs more than double
the payback period of the initial investment,” explains Vaca
over
decade.
Durán. At that time electricity in Mexico was not expensive
The combination of rising
in comparison to other markets, since the cost of oil
energy prices and delayed
came down as low as US$8 per barrel (Mexican mix) and
improvements
Mexico’s national currency was undervalued, following the
the
past
in
power
generation capacity has led Arturo Vaca Durán, Energy and Technology Vice President of Peñoles
Mexican peso crisis.
to an increasing reliance on energy self-sufficiency
While the Mexican government tried to attract developers
strategies among Mexico’s
to come to Mexico and build combined cycle plants,
most energy intensive companies. Peñoles, one of the
Peñoles saw the installed power capacity margin, or the
country’s leading mining companies, produced 92.9% of the
difference between installed capacity and maximum
energy it consumed in 2012 and added wind power to its
demand. This becomes a problem when plants are in
energy mix, through its Fuerza Eólica del Istmo subsidiary.
maintenance or being repaired. “In 1996 we were aware that if power generation investment did not come to Mexico we
Peñoles, founded in 1887, is the world’s top producer of
were going to face a period of energy shortages, which
refined silver, the largest in the western hemisphere in
would affect our mines and plants since our operations
metallic bismuth, the leading Latin American producer of
run 24 hours a day, 365 days a year. For example, without
refined gold and lead, and among the main refined zinc and
electricity a mine can flood in just four hours, which
sodium sulfate producers in the world. Arturo Vaca Durán,
may cause losing the mine for six months, and that has
the company’s Energy and Technology Vice President,
happened in the past. Our main motivation for getting into
emphasizes the difference between a pure mining
self-supply then was to avoid electricity shortages in our
company and a mining company that also has electrolytic
mines and plants,” explains Vaca Durán.
and smelting processes, with Peñoles, which has integrated operations in smelting and refining non-ferrous metals and
Peñoles considered combined cycle power plants, but
also produces chemicals. “In a mining company that has
the volatility of the natural gas prices made the company
smelting and refining processes, very frequently the most
reluctant to invest in this technology. However, in 1998 it saw
important part of the operating costs is electricity,” Vaca
another opportunity to use pet coke as an energy source
Durán says. Since the company’s operations depend on a
when Pemex modernized its refineries, resulting in an excess
substantial and continuous supply of electricity, energy
of pet coke that had to be exported at a loss. “We were able
constitutes an important component of production costs for
to enter into a 20 year supply agreement with Pemex, since
Peñoles. Energy efficiency has therefore been a permanent
at that time pet coke was considered to be a residue rather
fixture in the minds of the company’s management team.
than a fuel. The cost savings we made through sourcing
“We have people working continuously on studies at each
pet coke at a competitive cost and burning it in an efficient
of our mines to develop strategies for being as efficient
and environmentally friendly way have been significant,
as possible in the use of electricity,” says Vaca Durán. An
while this agreement provided us with a predictable energy
example of this is the initiative the company took to reduce
source until 2024,” notes Vaca Durán. In the end the feared
electricity demand at peak times by increasing the capacity
energy shortages did not occur, since many combined
of pumping stations that are responsible for pumping water
cycle plants were installed, but the volatility of natural gas
out of its mines, in order to be able to operate them for
prices between 2000 and 2007 created a lot of volatility in
18-20 hours per day and shut them down at peak times
Mexico’s electricity market.
when electricity is more expensive. “We were not saving electricity, we were just reducing demand on peak hours to
Peñoles is following a low-cost producer strategy, meaning
obtain lower electricity cost,” explains Vaca Durán.
that when its revenue decreases as a result of declining commodity prices the company stops investment in order
228
When Mexico’s power generation sector was opened to
to keep a positive cash flow. “Since the mining industry
private participation in 1992, a new range of opportunities
goes through ‘metal prices’ cycles, smaller companies
opened up for Peñoles to pursue its mission of adding
start having problems very early on in a downward cycle.
value to non-renewable natural resources in a sustainable
If Peñoles did not have the low cost strategy (including
manner. “We saw this as an opportunity and immediately
self-supply scheme) we would be in trouble too, since we
could never obtain electricity at the low prices at which the world’s zinc plants can” explains Vaca Durán. Increasing the level of energy self-sufficiency is thus a priority strategy for Peñoles. In 2012, the company’s operations and its subsidiaries required an average of 276MW, with peak demand reaching 316MW, representing an increase of 2.5% over the previous year, despite having improved overall energy efficiency. Of its total electricity requirements 92.9% was provided through self-supply, 86.1% by the company’s pet coke plant in San Luis Potosi, 3.7% through wind power supplied by Fuerza Eólica del Istmo, and 3.1% from internal cogeneration initiatives. The remaining 7.1% was purchased from the CFE. As part of its Vision 2020 growth strategy, Peñoles estimates that electricity demand will grow to 480MW in 2015 and 580MW in 2020. When thinking on a longer time horizon, Vaca Durán would like to recommend Peñoles an energy mixture of 60% natural gas and 40% renewable energy by 2030. “We need to have at least 80% of firm
Photovoltaic has also become impressively competitive,
power for peak times and we should design our mines and
compared to what it cost three years ago, and Peñoles is
plants to rationalize the energy demand at peak times.
exploring the possibility of installing this technology. “A
Should we need to reduce the natural gas price volatility,
photovoltaic power plant currently produces energy at
we may have to decide whether to enter into a strategic
a cost of US$10-11 cents per kWh, which is not yet good
alliance with natural gas companies in USA to secure a
enough for us to develop it on a commercial scale, but
natural gas price below US$6 dollars, for example,” says
we may start with pilot facilities of 1 to 15MW,” says Vaca
Vaca Durán. “However, the cost of wind power would
Durán. “Solar plants are easy to build and maintain, making
be lower if we consider that natural gas prices will be at
this type of energy a good option for mid-sized companies,
US$6. While energy cost is very important, you also have
since they get their energy at higher prices, making solar an
to consider security of supply, taxes on emissions and the
economical option for them. Unfortunately, the best solar
Mexican legal framework certainty.”
resource is not always available where the minerals are located. We have one project where this is the case, at one
Following the completion of Phase I of the Fuerza Eólica del
mine in Sonora. We may construct a pilot plant there, and
Istmo wind farm, with 50MW installed capacity located in
if costs continue improving, we may consider a larger plant
the La Ventosa region of Oaxaca, Peñoles has added another
afterwards. Some open pit mines require large amounts of
30MW in Phase II. This brings the company’s total wind power
diesel fuel for their off-road mobile equipment, which at
investment to US$175 million and enables the company to
today’s natural gas prices may open significative saving
generate up to 15% of its annual consumption. The process
opportunities. If they can replace the use of diesel into LNG
of constructing these wind projects has met with relatively
they could save tenths of millions US dollars per year and
little operational issues or social resistance, since Peñoles
simultaneously reduce their CO2 emmissions. That could be
gave careful attention to these issues, and was able to apply
the best energy efficiency project I have ever seen.”
certain skills that it had developed as a mining company. “Our company has acquired skills in engineering and construction;
The expertise of the mining industry has proven to be an
we do not actually execute the construction of the project
important asset when developing renewable energy projects.
but we closely supervise it,” states Vaca Durán. “Peñoles has
However, given the lack of transmission infrastructure in
also people fully devoted to negotiate land access, since
Mexico not every mining company has the financial strength
this is needed to deal with ejidos and comuneros for the
to participate in these projects, since putting in transmission
mining projects, and these land owners do not always have
lines can represent up to 15% of the cost of the project.
their papers in order and sometimes they inherit or sell their
“The government should actively develop transmission
land through verbal commitment. Our negotiators are very
infrastructure, and private investment will come,” Vaca
gentle and offer these people important benefits with a view
Durán adds. “By reducing the costs of renewable energy
to developing a good relationship with the community, even
projects (no subsidies), an increasing number of companies
though costs are an ongoing concern. The land negotiators
will be able to participate in self-supply schemes, reducing
and the engineering department at Peñoles were the key to
their energy expenses and increasing the competitiveness
the success of this project.”
of the Mexican industrial sector.”
229
THE ROLE OF ENERGY PRICES IN THE MEXICAN MINING INDUSTRY The mining industry is the third largest energy consumer
Global Research’s report affirms that industrial electricity
in Mexico, and energy use reportedly represents 30% of a
tariffs doubled between 2003 and 2013. There is only one
mine’s operating expenses. Like other industries established
hydrocarbon whose price has fallen in recent years: natural
in the country, the Mexican mining sector must pay an
gas. The US shale gas boom pushed gas prices down.
electricity price that is around 8% higher than household
Between 2008 and 2013, natural gas prices fell 70% in
prices. This is not a common situation since most countries
North America. Demand for natural gas in Mexico doubled
have higher electricity prices household than industry,
between 2009 and 2012. However, Mexico’s gas supply
only Costa Rica (where industrial electricity users pay 1%
infrastructure is underdeveloped and it has proven to be
more than households) and Mexico impose the opposite.
increasingly ineffective at meeting demand for natural gas.
According to the International Energy Agency, liquid fuel
During 2012 alone, Pemex issued 109 critical alerts, forcing
prices for Mexico’s industrial sector increased 58% in 2012.
the interruption of productive activities in many industrial
Moreover, the increase in hydrocarbon prices has naturally
complexes across the country. These alerts caused a loss of
impacted electricity bills. Bank of America Merril Lynch
more than US$16.35 billion throughout the year.
ADVANTAGES OF HYDRAULIC POWER IN MOTOR APPLICATIONS Crushers, grinders, screens, conveyor belts, belt feeders
solutions to the mining industry through hydraulic motors.
and apron feeders all need motors and drives to perform
As a result of this acquisition, Bosch Rexroth has now
their task and ensure the proper and timely processing and
expanded its product portfolio and is capable of offering
transportation of minerals. The drivers and motors used in
integrated solutions to the mining sector.
these machines must combine low speed and high torque. Up until a few years ago, the motors used for mineral
Bosch Rexroth’s hydraulic motors provide a level of
transportation and processing equipment presented a
flexibility unseen in powered mechanical equipment. “If
series of problems. For example, when a mine purchases a
the client, for some reason, requires 100hp instead of
crusher with a capacity of 300 t/hr and uses a traditional
30hp, we can attach another powering unit to our modular
mechanically-powered
motor’s
hydraulic equipment. This scalable quality allows us to add
capacity doubles that of the crusher. This difference forces
the number of units that are needed in each application,”
the crusher and also makes the motor highly prone to
Jiménez explains. The physics and operational principles
jamming. In cases like this, the use of reducers or frequency
behind hydraulic powering solutions pose great advantages
inverters is counter-productive, since these components
to mining companies using hydraulic motors. Firstly, even
reduce both speed and torque. The most common solution
if the drive is in a standby mode, it maintains its torque.
is to increase the size of the motor to 60hp. This increase
Secondly, if a problem or risk factor presents itself during
reduces the revolutions per minute (rpm) and delivers
operation – such as a jam in a crusher – the motor’s speed
the torque of a 30hp motor with a lower speed. But when
can be modified without any secondary effects. “With a
there is a problem – such as bulk material jamming – the
hydraulic motor, it is possible to combine a speed of 0
motor must be used to its full power of 60hp, which leads
and a maximum level of torque power. The electric motor
to frequent breakdowns.
can work at 1,800rpm,” Jiménez details. Thirdly, the risk of
motor
of
30hp,
the
permanent failure in a hydraulic motor amounts to zero. Tonatiuh Jiménez, SEL Manager Bulk Material Handling at
Even in case of breakdowns, hydraulic motors can still
Rexroth Mexico, mentions that the solution to torque and
function, albeit with hampered efficiency.
power specification needs in the mining industry is not the
230
acquisition of oversized motors. “What is needed in the
Bosch Rexroth provides motors of all sizes and capacities
mining industry is normal-sized motors with adjustable
to the mining industry. The company has already installed
speed that can be regulated hydraulically, through a pump
a 1,600hp motor in a Zacatecan mine and it provides over
instead of a mechanical frequency controller.” In 2011,
8,000KW for another Mexican mining client. In addition,
Bosch Rexroth fully acquired Swedish drive manufacturer
Bosch Rexroth’s modular hydraulic motors and drives
Hägglunds, the only company that offers adjustable power
reduce energy consumption in mines. “This is something
The combination of high electricity prices and insufficient
development of photovoltaic projects, an opportunity that is
supply of cheaper energy sources has encouraged Mexican
already being addressed by Camimex and its members. The
mining companies to look for alternative sources of energy.
chamber is also actively fostering renewable energy projects
In 2012, mining companies affiliated to the Mexican Mining
in Mexico, such as wind farms in Oaxaca.
Chamber (Camimex) spent over MX$32,578 million (about US$2.59 billion) on energy services. These expenses were
The Mexican government plans to increase the availability
mainly directed at the purchase of diesel fuel (66.9%),
of natural gas by developing the country’s pipeline
electricity (23%), natural and liquid gas (2.4%) and other
infrastructure
petroleum products (1%). But there was another important
stemming from the US. In addition, the proposed reforms
allocation of resources: the self-generation of electricity,
to the energy sector will enable Pemex to produce more
which accounted for 5.6% of total energy expenses in 2012.
hydrocarbons and supply cheap shale gas. However, the
Mining companies have opted to develop their own wind,
elimination of subsidies and the general macroeconomic
hydroelectric, and solar energy generation facilities as well as
environment keep increasing energy costs for the mining
combined cycle power plants. For example, Grupo Mexico is
industry. The sector is also betting on renewable energy
building two combined cycle projects in Sonora, close to its
generation as a viable alleviator for its energy costs, as
Buenavista del Cobre and La Caridad mines. Sonora’s natural
well as a token of the industry’s focus on sustainability and
exposure to sunlight also makes it an ideal location for the
corporate responsibility.
that our clients greatly appreciate,” Jiménez notes. “For
the replacements part and maintenance required. “We
example, if you have three hydraulic machines and you
do not have distributors. We directly manage the sale
need 3,000KW to power a conveyor, it is possible to
of our products and the integrated services we provide,
combine three hydraulic motors and 10 modular units
such as long-term maintenance in mines through PMAs,”
with 300KW in order to obtain the required energy. If at
Jiménez states. Bosch Rexroth also possesses specialized
a later stage you only need 900KW, you can stop seven
monitoring equipment and technology that allows the
units and thus save 2,100KW. This is our concept of energy
company to receive detailed information on product
efficiency: you pay for what you use and not for what you
performance and therefore prevent wear in the machinery.
have.” If one considers the years’ worth of operation in a
The company can determine equipment lifespan and
mine, the resulting energy savings can amount to millions
prevent any breakdowns.
and
increasing
access
to
cheap
gas
of dollars. Another way in which Bosch Rexroth can help miners reduce energy costs is through the installation of
By introducing hydraulic motors to innovative mining
efficiently powered conveyors to recover material from
applications, Bosch Rexroth has enabled mining companies
pits and tunnels. The company has built one such conveyor
to adapt their power supply to their needs in a particular
at a mine in Zacatecas. This belt is 1,600m long, and it
process and production stage. “With our hydraulic motors,
eliminated the need to purchase 70 heavy load trucks at a
our clients will always be able to meet their production goals
mine site in Zacatecas.
by programming and adjusting their motors and drives,”
“What is needed in the mining industry is normal sized motors with adjustable speed that can be regulated hydraulically, through a pump instead of a mechanical frequency controller” Tonatiúh Jiménez, SEL Manager Bulk Material Handling at Bosch Rexroth
Furthermore, Bosch Rexroth abides by an integrated
says Jiménez. “Bosch is a global group that comprises
service philosophy. The company considers the mining
50 companies, and its solutions have been developed for
industry one of its priorities. Its strive for quality begins
more than 50 years,” he states. Bosch Rexroth Mexico, part
in Mellansel, Sweden, where all of Bosch Rexroth’s motors
of Bosch’s industrial division, is focusing on furthering the
are manufactured. Afterwards, Bosch Rexroth visits mines
quality and efficiency of its solutions towards the mining
and demonstrates the performance of the equipment
industry. The company has adapted its business strategy to
in the field. The company assists clients in the selection
the industry’s needs and will continue to foster innovation
process of the best-fitting equipment for each need,
in the sector and support mining operations throughout
installs the product, puts it in operation, and handles all
Mexico with integrated solutions and services.
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| VIEW FROM THE TOP
STATE OF THE ART POWER SOLUTIONS LEOPOLDO CASTILLO Mining VP of Schneider Electric Mexico
Q: What were the opportunities that Schneider Electric
to then be uploaded onto the broader system. There
identified in the Mexican mining industry?
are different types of monitoring systems, such as the
A: Mexico’s mining history and the latest developments in
industrial computer system that offers a real-time graphic
the industry have attracted many foreign investors to the
visualization solution that is easy to operate, design and
country; today, 60% of production is carried out by Mexican
maintain, and makes information available for operators,
companies and 40% by foreign companies. Competition
maintenance personnel, or managers to make the right
levels have increased and companies are looking to
decisions with the aim of process optimization.
bring costs down by introducing solutions to make their operations more efficient. This market is attractive for
The fact that our technology can interact as one unit really
Schneider Electric, given that the energy consumption of
sets us apart from our competitors. Schneider Electric’s
the industry represents a large amount of the country’s
market positioning is strengthened by its complete range
overall consumption. We are looking to supply the most
of field and administrative solutions. Given the challenging
efficient electric solutions by providing our clients with
and remote locations where mines are located, it is mostly
safe, reliable, productive and green energy.
the case that mining companies are obligated to generate their own power, which provides an excellent opportunity
Q: How does Schneider Electric optimize its portfolio of
for us to prove the value of our technology. We are able to
solutions for the mining industry?
bring our technology to the most remote areas, and for the
A: To understand what the industry really needs, dialogue
most extreme access situations we can integrate predictive
with our clients must be taking place at the management,
maintenance and surveillance systems into the technological
operational engineering and design levels. It is important to
platform in order for management teams to have real-time
understand the operational challenges and the technologies
information for decision making. We aim to provide the best
that are currently being used throughout all processes in
and most reliable energy solutions, avoiding interruptions
order to design solutions that will best respond to the
to the flow of electricity. Through our technology we are
specific needs of a project, thus contributing to significant
able to monitor all data on an engine and identify any
savings on energy consumption while also optimizing
abnormal energy consumption, fix any problems and bring
processes. We have a global competencies center where we
the machines back to optimal efficiency.
develop different technological solutions for mines, while in Mexico we have an engineering center managed by our
Q: How is PlantStruxure providing operators with
technical specialists, “The Solution Architects.” They are
information that can make their processes more efficient?
responsible for contacting our clients to understand their
A: PlantStruxure is a process automation system for the
specific needs and making sure that Schneider Electric’s
mining industry that maximizes equipment lifetime. It is
solutions are developed to fulfill them.
incorporated into the design and development of a mine installation from the start. The software allows the designer
Our solutions range from the energy supply itself to the
to set all parameters in the system, making it easier for the
control of it. In the area of energy supply our low-tension
engineering operator – who does not have to calculate any
distribution boards provide our clients with the most reliable
formula – to identify the most productive solution.
and appropriate energy supply for their systems. Once
232
the energy is in place it is then transferred to production
Q: How will the company achieve continued success and
through engine control centers, which receive measured
growth in the coming five years?
and optimized energy flow. All of the information coming
A: Our value proposition relies on our complete and
from the sensors in our equipment is constantly monitored
modular solutions. We provide solutions that can adapt
through easy to use and intelligent terminals. Information is
to a company’s growth, and which are capable of being
collected through the systems and automation processors,
integrated into all areas of the operation.
HANDLING WATER AND ENERGY DURING MINE CONSTRUCTION Dewatering systems are not only necessary to void
flow pumps can dewater great extensions of land, such as
mineralized rock from water. They also play a crucial role in
those occupied by open pit mines. They can also excavate
lowering phreatic levels in order to enable the development
humid rock without sustaining damage and thus avoiding
of both open-pit and underground mines. Dewatering
downtime and the consequent extension of dewatering
systems must be maintained and monitored in order to
during mine excavation stages. “In terms of man-hours,
foresee and control potential inflows that could endanger
field dehydration can take a lot of time without the use of
the mine’s structure and the lives of those working within
systems such as the ones we offer. Time is essential in mining
the pits or tunnels. Furthermore, humid rock poses a
excavations, and so is the correct handling of all resources,”
continuous problem for mining equipment, for it can easily
Nava remarks. “We monitor and control humidity in order to
damage any device and structure, ranging from drills to
prevent breakdowns in excavators and structure collapses.
excavators, loaders, pillars and ledges.
This keeps companies from spending extra resources on gasoline, machinery, wages, and repair works.”
Agua y Energía en Movimiento is a Mexican company that provides integrated water management and energy
The company is also participating in several mining projects
supply services to the country’s mining industry. Created
as a power generation and emergency power provider.
in 2011, the company is backed by a group with nearly
For example, Agua y Energía en Movimiento is providing
90 years of experience in power solutions. Together with
full-time energy supply to the Del Toro mine in Durango,
Energía en Renta, its sister company, Agua y Energía en
in a remote area where the national electricity company
Movimiento now services Grupo Mexico, along with other
has not installed any infrastructure. “In this project, we are
clients, in multiple locations. “We were recently called to
currently operating six synchronized devices, each with
solve a water problem in the mine located in San Antonio,
1250kW. This equipment is installed in a 6m container,
Chihuahua,” Antonio Nava, Director General of Agua y
which is half the size of what older generators would need
Energía en Movimiento, recalls. “This mine flooded two
to produce a comparable capacity,” Nava explains. The
years ago, when the company encountered a huge deposit
company is continuously investing in new technology to
of water while excavating. The resulting inflow flooded at
facilitate the transportation, installation, and performance
least five levels of the mine. We provided the submersible
of power generators for mining companies. Another focus
electrical equipment that could extract the water from a
area is the simplification of this equipment, in order to
depth of over 600m and aid the reactivation of this mine.”
make sure operators are able to efficiently manage it. “Thanks to the advanced and simplified technology we
“By successfully managing all
use, we can generate 500kW with six cylinder motors
challenges
motors. Regarding control boards, transference processes,
regarding
water
when we previously would have had to use twelve cylinder
and energy management, we
synchronization and voltage regulation, all of these tasks
allow our clients to focus on the
we use and the systems we install,” Nava says.
challenges concerning their core
Most importantly, Agua y Energía en Movimiento provides
business: mineral extraction” Antonio Nava, Director General of Agua y Energía en Movimiento
can be performed in an easier way due to the technology
specialized personnel on the field for all its clients, 24 hours a day and seven days a week. The company’s lighting solutions also allow both their staff and the mine’s personnel to work in any shift. “Our experience, both as a separate
Agua y Energía en Movimiento is specialized in the
company and as a group, has led us to understand that
installation and handling of wellpoint systems, which can
there are few things as essential to the services we provide
abate phreatic levels in record time while at the same time
as quality,” Nava stresses. Therefore his company hires and
save electricity and diesel. The company first requests a
continually trains highly specialized staff. In this way, the
soil mechanics survey and a hydrological assessment from
company is prepared to offer both preventative solutions
the client, providing the necessary liaisons between mining
and emergency power system following the collapse of a
companies and academic institutions for the procurement of
mine’s electrical infrastructure. “By successfully managing
these studies. Agua y Energía en Movimiento then performs
all challenges regarding water and energy management, we
thorough evaluations and presents mining companies with
allow our clients to focus on the challenges concerning their
a draft project. The company’s wellpoint systems and high-
core business: mineral extraction,” Nava affirms.
233
QUALITY AS AN ESSENTIAL ELEMENT IN ENERGY CONTROL Because the levels of energy required to locate deposits,
cannot be optimized to save energy. Sometimes operators
construct a mine, and run production are so intense, a
believe that by integrating certain equipment they will be
mining company’s ability to succeed can often hinge on
able to save energy where it cannot really be saved. Mining
its ability to ensuring access to a high quality and reliable
operators have to be very careful about this because it can
energy supply. “Energy saving is equal to growth. Most of
ruin equipment,” warns Berriel.
the time, companies are limited in their ability to supply their own energy. Mines are usually located remotely and
Power Electronics’ emphasis on quality comes in part from
many of them have problems with energy, because the
the fact that the company’s formation took place in the
CFE cannot provide power to some of the mine sites,” says
mining industry, which for Berriel represents one of the
Pedro Berriel, Director General of Power Electronics. “Mining
most demanding sectors for energy quality, availability,
companies that do not have access to the CFE grid have
and performance, because of the consequences and costs
to be very careful about how they use their limited energy
of equipment failure. “Most of Power Electronics’ solutions
supply. They have to use variable speed drives and self-
were developed with the aim of supporting the mining
starters so that they can optimize the energy being used at
industry at its core. Our products are very reliable, designed
each stage of their processes.” Power Electronics’ industrial
to be ‘non-stop’, and very easy to maintain and operate. We
division serves the oil and gas, mining, and water industries
can provide any medium voltage solution that a mine could
internationally, with its main product for the mining industry
require, and if the technology suits the mining industry it
being medium voltage switchgears, including self-starters,
will exceed the expectations of any other industry,” he says.
self-protectors, and medium voltage drives. “The mining
Because of the complexity of the processes that Power
companies that are using our equipment are able to save
Electronics provides solutions for, failure is not an option
important amounts of energy in one process that can then
– the problems that arise as a result of malfunctioning
be used in another process. Self-starters and variable speed
equipment can lead to big complications that are difficult
drives are two elements that can save important amounts of
and costly to fix. “Mining companies have to be prepared
energy,” explains Berriel.
and they need to count on non-stop, reliable technology,”
“Mining companies that do not have access to the CFE grid have to be very careful about how they use their limited energy supply” Pedro Berriel, Director General of Power Electronics
A real focus point for Power Electronics is the quality
says Berriel. A particularly poignant example is the work
of the energy its solutions deliver, since quality energy
that Power Electronics is currently conducting for AHMSA
translates into quality operations. “When a variable speed
in the transportation of large quantities of iron powder from
drive is installed in an engine the quality of the energy
its Fénix project in Chihuahua to Monclova, Coahuila. “This
will decrease, affecting other equipment such as PLCs,
project relies heavily on the drives we have installed for
hard drives, screens, and everything around the variable
AHMSA in their iron pipeline. If any of our systems fail, over
speed drive, because of the electrical noise. With the
300km of transported material would get stuck and then
equipment that we provide it is possible to maintain
flooded, and the company would have to open the pipes
the quality of energy at its best, because the electrical
to remove the condensed iron. It is therefore extremely
noise is easily canceled out in our reactors and filters,”
important that our equipment functions well,” he adds.
says Berriel. “The energy supplied by CFE is of very low
234
quality and its fluctuations can induce electrical failures.
Berriel sees a good deal of room for growth, particularly
We know about these fluctuations in the power supply,
because automation is still relatively underused in Mexico.
so our equipment is prepared to receive and moderate
“There is a huge market for automation in the Mexican
them.” For Berriel the quality equation is simple: the better
mining industry because there are very few companies
the technology that is used the more energy can be saved,
that are taking advantage of it. Our products are designed
thus reducing costs. “It is very important to measure how
so that they can be monitored and controlled, but process
much energy can be saved, and which processes can or
automation in Mexico is still under development,” says Berriel.
| VIEW FROM THE TOP
INTEGRATED SOLUTIONS FOR POWER TRANSFORMATION EDGAR SAINZ Director General of Temisa Q: What is Temisa’s development strategy in the Mexican
importing components to locally assemble asynchronous
market for electro-mechanical machinery?
engines for mills, a niche market where replacements are
A: Temisa is a 100% Mexican company, with lots of business
costly. This is a perfect fit with my father’s original vision
ideas ready to be applied in the Mexican market. Since its
of designing and building equipment, an idea that came
founding the company has adopted quality norms, and
as a result of a service he provided to ArcelorMittal at its
currently has the objective of obtaining an international
Lázaro Cárdenas mine. In terms of service, one of our most
quality certification in 2014. However, institutions such as the
relevant projects has been setting up a workshop in only
Federal Electricity Commission (CFE), and companies such as
four months for Minerales y Minas in the north of Jalisco.
Siemens Power Generation, WEG Group, Teco Westinghouse
Temisa redesigned the engines of the mills on the project
and Alstom, have previously visited our facilities and have
and changed the switches and controls with the objective of
given us high level quality evaluations, specifically for our
saving energy, therefore directly impacting the client’s ROI.
processing plant. We are also looking to acquire certifications in electrical testing and engine reconstruction. This is a
Q: What efforts does Temisa make to attract the human
complex task, given the broad diversity of engines, power
capital to develop a local technology base?
transformers and power generators, for each of which we
A: We have created the Civil Association for the
must formalize processes and create user manuals. Human
Transformation and Innovation of Energy (TIE), through
capital plays a key role in this process. Our commercial
which we intend to attract talent from universities and
strategy is focused on the power transformers market. We are
technological centers such as CIATEQ in Queretaro, which
currently focusing our efforts on Tebian Electric Apparatus
will participate in the development of new technologies.
Stock Co. (TBEA), an international company and leader in
Mexico has a lot of human talent; the challenge is to
the area of power transformers, which we recently started to
provide the right incentives. My father was the second
represent. The contract with TBEA was signed in China and
generation in Temisa, and from the beginning his idea was
we represent them throughout Latin America. Among the
always to hire young people and train them. When I joined
main projects in which they participated is the development
the company 15 years ago, I started to create strategic
of the Three Gorges Dam, a hydroelectric plant in China. We
alliances with different universities, in order to attract staff
believe that with this contract Temisa will be able to close a
with an engineering background. Temisa has long-term
competitive gap in the market. We are also looking forward
development plans for each of its employees.
to capital becoming more accessible through PYMES, which will help us to continue creating business opportunities.
Q: What will be the main drivers of Temisa’s future development?
Q: What are the commercial opportunities in electro-
A: The construction of our own engines will support our
mechanical services that are driving Temisa’s growth?
growth, as well as the TIE initiative. From a more global
A: 70% of our business currently comes from the domestic
perspective, our company will continue to grow thanks to
market, and we just recently opened to new markets such
its strategic partnership with Maqport, with whom we are
as Central America, where an opportunity turned into us
currently developing interesting projects for the marine
having an office there to provide our services to the energy
industry. We believe that the industry will continue to grow,
industry and the sugar market, for which we motorized a
and we will continue to participate in mining clusters in order
sugar mill in 2012. Our commercial strategy is to find and
to continue learning, and to offer our value-added services
seize business opportunities in different markets, and create
to the Mexican mining industry. Temisa’s market penetration
strategic business alliances with European, Asian and South
will be driven by the integral solutions provided at our
American companies. For example, in Brazil we currently
onsite workshops. These will take care of the transportation
work with WEG. We are working on a very interesting
and logistics of material supply, leaving our customers to
project that will push our growth and market presence:
focus their attention on their core business.
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| VIEW FROM THE TOP
SONORA AT THE FOREFRONT OF THE MINING INDUSTRY JOSÉ ARMANDO CÓRDOBA HAGE Director of Mines of Sonora Q: How does the Government of Sonora stimulate mining
federal government. Mining activities take place in regions
investment, and what are the features that make the state
where it is difficult for other industries to develop, thus
so attractive for mining?
supporting the economies of the local communities,
A: The Government of Sonora is focused on providing
which are usually based on ranching and agriculture. The
mining investors with the geographical infrastructure they
government focuses on providing technical consulting,
need, such as charts and physical mineral inventories. This
with the aim of evaluating the small producers’ projects,
infrastructure is of great importance to investors because
which in most cases do not have the resources to conduct
with this information they can visualize the areas they are
these types of evaluations themselves. In Sonora, small-
interested in and save large amounts of money. In this
scale mining activities are concentrated around the
sense, there is very good collaboration between Sonora
extraction of anthracite coal, graphite and silica. Currently,
and the Mexican Geological Survey (SGM). Other important
the state government is developing an integral program
factors that contribute to making Sonora a good location
to support the coal subsector with the aim of regulating it
for mining investment are its geographical location,
and thereby ensure that it operates in line with the current
connectivity through modern highways, five airports, and
safety, health, labor and environmental legal framework.
a maritime port. We also have universities that offer majors
We are conducting a study to analyze the mineral quality,
related to Earth Science, as well as American consulates in
as well as to obtaining information about the working
Hermosillo and Nogales.
characteristics.
Hermosillo is close to 40 main mining units and 60 minor
Q: How do mining activities impact Sonora’s economic,
ones. This facilitates access to the mines and logistics
labor and social environment?
for the people running the project. The state has one of
A: Sonora is the number one mining state in Mexico, with
the biggest copper deposits in the world, in the Cananea
mining generating over 16,000 direct jobs and around
municipality. Sonora produces 78% of Mexico’s copper
80,000 indirect jobs in the state. Companies are taking
production, and it is estimated that Buenavista del Cobre
advantage of the state’s resources and currently more than
will become one of the world’s main copper producing
5,000 mining concessions have been assigned. Mining is
mines by 2015.
the second most important economic activity for the state, accounting for 7% of its GDP, and we are the leading
Q: What is the state government’s role in positioning
national producer of gold, copper, molybdenum, graphite,
Sonora as the country’s leading mining state, and what
anthracite coal and wollastonite. Currently, 25% of Sonora’s
are the characteristics of the business environment that
territory has been explored. The state territory has a high
have enabled its consolidation?
concentration of metallic and non-metallic minerals such
A: Sonora’s business environment is very healthy and safe.
as gold, silver, copper, molybdenum, zinc, anthracite coal,
Besides providing the infrastructure required to attract
graphite, wollastonite and gypsum.
investment, we also provide technical and legal consulting
236
services, mostly to small and medium-sized businesses. In
The mining industry has always been very important for
terms of mining management we have a special office that
the state, nevertheless it has become even more relevant
is dedicated exclusively to dealing with conflicts and other
as a result of the most recent boom. It is important to keep
mining issues. These services are very much in demand
in mind that the sector is cyclical and right now we are
by the companies, because we support them through
experiencing a lot of progress, even though prices have
the permitting process and, if required, we can also work
gone down. The industry faces difficult challenges; the
with companies seeking to resolve community conflicts.
companies that will survive will be those that use state
We are also involved in training programs, which we offer
of the art technology, strengthen their human capital and
to the mining sector through the state’s universities and
remain at the forefront.
| WOMEN IN MINING
Q: What is the state government’s role in the creation
According to Elizabeth Araux Sánchez, Academic
of the mining cluster and what strategies have been
Secretary of Civil Engineering and Mining at the
established together with companies and universities to
University of Sonora, the rise in female enrollment in
strengthen the mining cluster and industry in the state?
earth science programs in the last few years is due
A: The state government initially suggested the creation
to a combination of factors. On the one hand, high
of the cluster project. We have developed many activities
metal prices as well as the mining boom in Sonora
such as supply chain events (focusing particularly on
have drawn students’ attention, because professional
supplier development, which was the main reason for
mining salaries are among the highest. Women’s
creating the cluster) and connecting mining companies
professional capabilities and skills are also becoming
with universities for the development of human capital, as
more recognized in mining. “There is greater gender
well as connecting companies with public safety agencies.
equality in the work place. The perception that mining is solely a man’s job has therefore diminished in social
The goal of grouping together all of the companies that
thinking,” Araux Sánchez adds.
belong to the mining industry in the state is to contribute to the economic development of the regions where they
According to data from the Office of Planning at the
operate,
and
University of Sonora, during the 1980s 476 students
organization of the local suppliers that hold the sector
graduated from Geology, Mining Engineering and
together. The idea is to maintain inner commerce and
Metallurgical Chemical Engineering programs. In total,
boost the economic development of local companies.
40 of them were women (18 geologists, 5 mining
Some of the companies that work with our programs are
engineers and 17 metallurgical chemical engineers),
Yamana Gold, Timmins Gold, Alamos Gold, Agnico Eagle
which is equal to 8.4% of the total student population.
Mines, Minera Mexico, Argonaut Gold and SilverCrest
During the 1990s, due to the cyclical nature of the
Mines, among others.
industry, the numbers went down and there were only
through
communication,
development
363 graduates, of which 27, or 7.4%, were female (8 The Sonora Mining Cluster is formed by a number of mining
geologists and 19 metallurgical chemical engineers).
companies and suppliers. We have around 40 medium
The 2000s saw the percentage of the female student
to large companies and 60 smaller ones. More than 200
population double to 15.2%. During this decade there
registered mining chain suppliers have registered for the
were 678 graduates, of which 103 were women (56
events we have organized.
geologists, 20 mining engineers and 27 metallurgical chemical engineers). Between 2010 and 2013 so
Q: What support and advice does the Directorate for
far, of the 219 graduates 16% have been women: (23
Mining offer mining companies in Sonora to help them to
geologists, 9 mining engineers and 4 metallurgical
withstand market volatility?
chemical engineers). However, the most outstanding
A: The most important thing is to be at the forefront in
figure is this year’s, with 759 students enrolled, females
terms of technology and processes. Another thing that is
make up 100 geologists, 82 mining engineers and 15
crucial is to comply 100% with the current legal framework.
metallurgical chemical engineers: a total of 197 women,
For example, the industry is facing many challenges in
increasing the female population to almost 26%.
terms of environmental protection, and there are many organizations that oppose the industry and try to discredit it. Unfortunately, a lot of people are not aware of the many benefits that the industry brings to local communities, at every level. Additionally, they are not aware of the importance of mining in the industrialized world: without it many of the components required to build houses, technology and even for medical purposes would not exist. My advice to all companies is to never stop their exploration activities. It is the lifeblood of all mining activities. Another important issue that must be addressed as a group is to effectively communicate the industry’s participation in social and economic development.
237
| MINE PROFILES: SONORA
8 13
4
5 10
15 2
9
7
3
11
HERMOSILLO 12
6
14 1
1 2 3 4 5
238
ALAMO DORADO, PAN AMERICAN SILVER The Alamo Dorado open pit silver mine is located 45km southeast of the town of Alamos. The mine is located in the Sierra Madre Occidental mountain range, a late Cretaceous to Tertiary age volcanic plateau. In 2013, Pan American anticipates producing between 4.8 and 5.0 million ounces of silver and between 16,000 and 16,500oz of gold. Given the reserves, the approximate mine’s life is of 6.3 years.
BUENAVISTA DEL COBRE, MINERA MEXICO Buenavista del Cobre is one of the largest open pit copper mines in the world. The expansion of the mine will increase production in the next 4 years from the current 180,000 tons to 512,000 tonnes of copper content in 2016. The expansion of Toquepala and Cuajone, will jointly generate an additional 125,000 tonnes in the next 3 to 4 years. By 2015, Grupo Mexico is planning to produce over 1.4 million metric tonnes of copper.
MEXICANA DE COBRE, MINERA MEXICO Mexicana de Cobre, also known as La Caridad, includes an open-pit mine containing copper, molybdenum, gold, and silver in the ore bodies, concentrator, smelter, copper refinery, precious metals refinery, rod plant, SX-EW plant, lime plant and two sulfuric acid plants. The mine currently employs 1,074 with contractors and in 2012 produced 7,800oz of gold, 1,800,000oz of silver and a 120,000 tonnes of copper.
NOCHE BUENA, FRESNILLO PLC – NEWMOUNT Noche Buena is a new open-pit gold mine located 23km from the Herradura mine. Construction of the Noche Buena gold mine was successfully concluded on time and within the US$63m budget, and commercial production commenced in March 2012 with 2,227 gold ounces produced. The development plan for Noche Buena has the objective of expand processing capacity at the plant from 750 tonnes to 1,600 tonnes per day, and increase average annual gold production to 75,000 attributable ounces in the 2013-2018 period.
MILPILLAS, INDUSTRIAS PEÑOLES Milpillas is located within the municipality de Santa Cruz, and exploits a partially oxidized porphyry copper deposit with a series of alternating copper carbonate-oxide and chalcocite enrichment blanket. In 2012, Milpillas produced 23,200 tonnes of copper, while the estimated reserves of the mine amounted to 388,000 tonnes, which implies a mine life of 15 years. The design of the underground mine and the SX plant make Milpillas Peñoles an extremely sophisticated mining operation.
6
MULATOS, ALAMOS GOLD
7
MERCEDES, YAMANA GOLD
8
SOLEDAD – DIPOLOS, FRESNILLO PLC
9
SAN FRANCISCO, TIMMINS GOLD
10 11 12 13 14 15
The Mulatos mine is located in the Sierra Madre Occidental Mountains in the east range of the state of Sonora. The mineralogy consists of silicified volcanic rocks which contain 80% of the gold in the deposit. Mulatos, mined by open pit method, reached a gold production of 200,000oz in 2012 and holds proven and probable reserves of 2.39 million ounces and measured and indicated resources of 2.76 million ounces.
The Mercedes gold-silver underground mine began production in late 2011, and involves five vein zones. In 2012 Mercedes produced 116,000oz of gold and 490 tonnes of silver. Yamana Gold continues the development of the Barrancas zone, with production starting late in the year from the higher grade Lagunas Norte vein in that zone, which is one of the newest discoveries at the mine and offers significant potential for increasing.
Soledad-Dipolos is an open pit mine located 9km northwest of the Herradura Mine. Soledad-Dipolos relies on the same village as La Herradura for workers. The Merrill-Crowe plant and the warehouse at Soledad-Dipolos were concluded in 2012 by Fresnillo plc. The mine produced in that same year 38,864oz of gold and 21,000oz of silver.
The San Francisco gold mine, which consists of two open pits is situated in the north central portion of Sonora. The gold occurs in granitic gneiss and the deposit mainly contains free gold and occasional electrum. Timmins Gold reported a production of 94,444oz of gold and 56,252oz of silver in 2012.
EL CHANATE, AURICO GOLD El Chanate mine is located 37 km northeast of Caborca, and consists of an open pit mine located on 3,665 hectares covering 19 mineral concessions. El Chanate utilizes conventional three stage crushing and heap leaching, with gold bearing solutions being processed in an ADR plant, followed by electro-winning and refining. Aurico Gold estimates a production of 70,000-80,000oz of gold with cash costs of $550-$600 per gold ounce for 2013.
SANTA ELENA, SILVER CREST The Santa Elena mine is located 150km northeast of Hermosillo, Sonora. The mine is a high grade epithermal vein gold and silver producer, with an estimated 6.5 year life of mine costs of approximately US$8.0 per ounce of silver equivalent. Silver Crest anticipates that the mine will produce 2,500 t/d open pit heap leach facility will produce 33,000oz of gold and 675,000oz of silver in 2013.
LA COLORADA, ARGONAUT GOLD La Colorada is located on the eastern flanks of the Sierra Madre Occidental at the contact between the Lower Volcanic Complex and the Upper Volcanic Supergroup. The property is owned Compañia Minera Pitalla, Argonaut Gold’s Mexican subsidiary. The mining method used is mechanized cut and fills with waste rock being utilized for backfill. Argonaut forecast that production will reach 30-40,000 ounces of gold by the end of 2013.
LA HERRADURA, FRESNILLO PLC- NEWMOUNT La Herradura is located 125km northwest of Caborca, and consists of two open pit properties covering over 18,211 hectares. The ore bodies consist mainly of gold and silver concentrates. The Herradura gold deposit occurs within a northwest trending belt of the Proterozoic metamorphic rocks. In 2012 the mine produced 314,500 ounces of gold and had an expected 6.6 years in remaining mine life.
PIEDRAS VERDES, COBRE DEL MAYO The Piedras Verdes mine includes 28 mineral concessions and is located 21km north-northwest of the town of Alamos. This Cobre del Mayo project utilizes open-pit mining, heap leaching of copper oxides and chalcocite mineralization using selective crushing of higher grade ore, solvent extraction and electrowinning. Current annual copper production is approximately 70 million pounds of copper cathodes.
MARÍA, MINERA FRISCO The María copper mine is located in the vicinity of the municipality of Cananea, Sonora. The open pit mine started copper excavation in 1980 only to close the following year. Activity was reestablished by Minera Frisco in 2004 with a focus on cathode production. In 2012 the mine produced 21,000 tonnes of copper
239
| VIEW FROM THE TOP
PROVIDING HUMAN TALENT FOR THE MEXICAN MINING INDUSTRY HERIBERTO GRIJALVA MONTEVERDE Director of the University of Sonora Q: How is the University of Sonora cooperating with
for opportunities throughout the country to place our
mining companies on professional practice for students,
students in the mining industry. It is a fact that very few
as well as research and development?
universities are producing the human talent that the sector
A: In the case of mining, geology and metallurgy, there has
is demanding.
always been strong collaboration with the companies in the sector. However, the current mining boom in Sonora,
Although the federal government supports our research
and high metal prices, have helped to developed these
activities through Conacyt, there still is a lack of
relationships further. We have many professional practice
commitment in research and development, even though
agreements with companies; these temporary practices
our research has advanced in the geology area. In the
bring benefits to the students in terms of their training,
metallurgical and chemical engineering program we have
to the university to complement its programs, and to
agreements with Grupo Mexico and Peñoles, among
the companies in terms of human capital. This has been
others, but there is still a lot to be done. In terms of
a success. A professional practice agreement with First
research, we have worked on metal leaching with non-
Majestic Silver was made even though the company
polluting methods. As an academic institution, we are
does not have any operations in Sonora, which reflects
very concerned with developing education and research in
the need for human talent on a national level. We look
environmental studies. We have moved forward with work
TRAINING STUDENTS IN ONE OF MEXICO’S MINING CENTERS Mining today represents one of the key sectors in the
number of students started to increase; this increase in
Mexican economy as a result of the income and employment
enrollment reflects the renewed importance of mining in
that it generates. Rogelio Monreal Saavedra, Coordinator of
Mexico,” highlights Monreal Saavedra.
Graduate Programs in Geological Sciences at the University of Sonora, comments about the few universities in Mexico
According to Monreal Saavedra, University of Sonora
offering undergraduate and graduate programs in geology:
Geology graduates have great flexibility because the
“Although the student population has been growing for
university trains its students to be general geologists;
the last few years, there is still not enough human talent
this means that they can work in many different areas,
available to supply the industry demand, despite there
such as mineral exploration, cartography, hydrogeology,
being many well paid job opportunities for geologists and
environmental geology, and education, among many
mining and metallurgical engineers in the mining industry.”
others. “The fact that our university is located in Sonora allows our students to have more training in open pit
240
The undergraduate Geology program at the University
mining,” explains Elizabeth Araux Sánchez, Academic
of Sonora has been offered since the mid-1970s. In the
Secretary of Civil Engineering and Mining at the University
last few years it has been modified from a five year to a
of Sonora. “This gives our students a distinctive signature
four year program, in order to bring it in line with other
because most of the field practice they do is located in
programs offered outside of Mexico. Enrollment has been
mining units near Hermosillo. Porphyry copper deposits –
a key issue over the years. In 1990, due to the cyclical
such as the ones in Nacozari, Cananea and Alamos – are
nature of the mining industry, there were less than 50
frequently visited, as well as disseminated gold deposits
students; last year over 400 enrolled. “After 2007 the
such as the San Francisco, La Herradura, El Chanate, and
and service agreements with the private sector, which is
Our student enrollment is mostly composed of state
a great breakthrough because historically companies did
students, however foreign enrollment is growing. This is at
not consider universities to be research and development
the development stage, and we also have to step up the
centers.
national exchange student programs for the undergraduate programs of geology and metallurgical and chemical
Q: What are the benefits for the earth science department
engineering. We try to send students abroad to get a double
at the University of Sonora of being located in one of
major with Spanish and French institutions, as well as to take
Mexico’s main mining states, and how can companies take
advantage of the Conacyt scholarships, which transform
advantage of this location?
domestic graduate studies into international ones.
A: In Mexico there are a handful of universities that offer mining programs, such as Zacatecas, San Luis Potosi, and
Q: In March you were reelected as President of the
Hidalgo. The University of Sonora creates its programs
University of Sonora. In the next four years what will be
based on the needs of the mining industry that surrounds
the role of the Earth Sciences program in the development
us. First we focused on geology, then we added mining
of the university?
engineering, and afterwards metallurgical and chemical
A: We want a university that is completely linked to the
engineering. The postgraduate course also focuses on
industry. We have many parallel programs that will help us
studying the gold, copper and silver mining in the state.
grow in the areas of sustainability, research and teaching.
Having access to qualified human capital has allowed
When we speak about sustainability we are referring to the
companies to carry out more exploration activities. This
evolution of environmental studies, but also about social
area, which at one stage had very few students and was
and economic issues and the improvement of quality of life.
almost closed, had the right vision and has brought real
We want to grow and have research being done in our own
proficiency to Sonora. We are a source of human talent
certified labs, and we want to boost the internationalization
that is directly linked to the most important groups in
of our students and teachers, in order to be able to bring
mining, which in turn attracts many other companies.
international best practices to the University of Sonora.
La Colorada mines, all of which are exploited via open pit
getting their support for our students,” comments Araux
mining. Professional practices also take place in open pit
Sánchez. These efforts have translated into scholarships
mining, since it is obligatory for students to carry out this
being offered by Camimex, AIMMGM (Mexican Association
type of placement in order to graduate.”
of Mining Engineers, Metallurgists, and Geologists) and Fresnillo. To a large extent, the financial factor allows
Being located in one of the most important mining centers
students to continue their undergraduate studies, because
in Mexico bestows key advantages on the Earth Sciences
many of them come from faraway places both inside and
programs at the University of Sonora. “The work area we are
outside Sonora.
training our students for is located in our backyard. So we can go to a mine for one day, and later go back whenever
On the other hand, companies like Minera María, Meridian
we need to. The programs are very much geared towards
Minerals and First Majestic have also approached the
giving students that exposure to the field, and they graduate
university with the intention of establishing collaboration
with experience as a result,” Monreal Saavedra adds.
agreements.
Fresnillo,
for
example,
requested
to
participate in the geology and mining programs, and has Being surrounded by some of the world’s most important
analyzed class content and supported the university with
mining companies also facilitates the link between
workstation donations, DATAMINE software licenses and by
academia and industry. The University of Sonora has
training teachers to use this tool. “We have agreed to meet
fostered a strong relationship with the sector through
twice a year with companies, such as Peñoles, and with
collaboration agreements, service-providing programs,
the mine and geology program coordinators of the main
and professional and social service practice agreements.
universities in Mexico in order to directly support academic
“Since the academic and program coordination office
needs as well as professional practices and scholarships,
was created we have sought to create a more direct
among other matters that are deemed important for the
relationships with mining companies, with the goal of
Mexican mining industry,” Araux Sánchez adds.
241
242
IRON ORE & INDUSTRIAL MINERALS
8 Production rates are normally the key metric by which oil and gas companies are evaluated: by looking at Pemex’s figures, which show a drop from 3.45 million b/d at the end of 2003 to 2.55 million b/d in 2012, it would be easy to criticize the company for failing to maintain its production year-on-year. However, since the decline of Cantarell started, Pemex has worked hard to diversify its production base, bringing new fields into production and increasing production in existing fields in order to stabilize the production figure and build the basis for a return to production growth.
This chapter examines Pemex’s diversification strategy for production in depth, looking at the fields driving production today, asking what caused Pemex’s production decline over the last decade, looking at technologies that can help Pemex achieve its goals to exploit as much oil as possible from its reservoirs and ultimately return its production to 3 million b/d.
243
´
LOOKING
FOR A SUPPLIER
IN MEXICO
OR SOUTH AMERICA?
OVER
100 YEARS IN THE
LIME INDUSTRY
Mexico Central America Caribbean Colombia Peru
THE LIME SPECIALIST IN LATIN AMERICA
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CHAPTER 8: IRON ORE & INDUSTRIAL MINERALS 246
Global Iron Ore and Steel Markets
247
Iron Ore Production in Mexico
248
MINE PROFILES: Mexico’s Main Iron Ore Mines
250
The Mexican Steel Industry
252
Guaranteeing the Supply of Abrasion Resistant Steel
252
Swedish High Strength Quenched and Tempered Steel Plates
254
Enhancing Composition to Deliver Solid Steel
255
Local Steel Suppliers Service the Industry from Chihuahua
256
The Mexican Industrial Mineral Sector
256
Industrial Minerals Overview
258
VIEW FROM THE TOP: Lime as an Operational and Environmental Necessity
258
Industrial Minerals Overview
260
Dominating the Global Celestite Market
262
VIEW FROM THE TOP: Producing Competitive Industrial Minerals
263
Industrial Minerals Drive Global Economic Growth
264
From High Quality Minerals to High Quality Cement
265
VIEW FROM THE TOP: Innovation Key in Concrete and Cement
266
VIEW FROM THE TOP: Harnessing the Value of SLP’s Mining Sector
267
MINE PROFILES: San Luis Potosi
245
GLOBAL IRON ORE AND STEEL MARKETS The fluctuation in the price, production, and demand for
important part in this. It is also argued that the practice of
iron ore and steel in 2012 and 2013 reflect an increasingly
steel producers delaying the replenishment of their iron
volatile market. Generally both minerals are vulnerable to
supplies, watching the market, and buying when the price
conditions in the global economy, but given that iron ore
is low can cause artificial peaks in iron ore prices. As activity
is a key component in steel alloys, a rise or fall in supply
in the steel industry can affect the iron ore industry, so too
or demand for either has a direct impact on the other;
can the effect be reversed: as the price of iron ore fluctuates,
significant change in steel production in China will have
the steel industry is inevitably affected, often adversely if the
consequences that affect iron ore miners all over the world.
price of iron ore becomes too high.
In 2012 the spot price of iron ore varied significantly. The
Global steel production increased by 1.4% to 1.5 billion
peak price last year reached over US$154, in February,
tonnes in 2012 compared to 2011. China has played the
but in August it dropped to US$86 per tonne, its lowest
defining role in the international increase in steel production,
level in three years. At the close of 2012 the price was at
to the extent that if we set China aside, production in the
US$101 per tonne. In 2012, Goldman Sachs predicted that
rest of the world actually decreased in 2012, by 0.7%. Latin
international iron ore prices would hover around the US$139
America has suffered the biggest production setback,
per tonne mark in 2013, and drop down to US$115 per ton
with a decrease of 3% in the region over the year. China
in 2014. Goldman Sachs’s prediction has not been far off,
on the whole stands comfortably ahead of the rest of the
and though the prices have also been buoyant the price
world in its steel production, with an estimated 720 million
reached US$141.80 per ton in August 2013, the strongest
tonnes in 2012. This places China far ahead of Japan, which
it had been in five months. Despite the drop in price of
produced 108 million tonnes, and the US which produced
iron ore, the increase in production has been more or less
91 million tonnes and is ranked third.
steady worldwide. In 2012 global production of iron ore reached a new record of 3 billion tonnes, compared to 2.9
Although Ernst & Young reported that the use of steel grew
billion tonnes in 2011. China is the world leader in iron ore
2.1% in 2012, this is much less than the 6.2% growth seen
production, producing 1.3 billion tonnes in 2012. The country
in 2011, and production outstripped demand considerably.
is followed by Australia in second place at 525 million tonnes,
With an estimated 56 million tonne surplus of steel produced
and Brazil in third place at 375 million tonnes. Mexico is in
in 2012, Ernst & Young considers excess capacity to be the
14th position, with 13 million tonnes of production in 2012.
most significant issue the steel industry currently faces driven by a slowdown in demand that is attributed mostly
The reasons for volatility in the iron ore market are complex
to lower industrial production and reduced investment in
and are based on various factors. The expansion or contraction
large-scale infrastructure projects. While Ernst & Young
of countries’ GDPs may be considered a predictor of the
forecasts production to exceed demand again in 2013, the
health of the steelmaking and steel manufacturing industries
overall outlook is that demand for both steel and iron ore
worldwide. Peaks and troughs in Chinese demand play an
will continue to grow steadily in the coming years.
GLOBAL IRON ORE PRICE (US$/DRY METRIC TON) 196.54 182.56 168.59 154.61 140.64 126.67 112.69 98.72 84.74 70.77 56.79 2008
2009
2010
2011
2012
2013 Source: InfoMine
246
IRON ORE PRODUCTION IN MEXICO According to the Mexican Iron and Steel Industry Chamber
IRON ORE
(CANACERO), Mexico is a net exporter of iron ore. During 2011 the country exported 4.9 million tonnes of iron ore and 2.2%
imported only 1.5 million tonnes. Production of iron ore in Mexico also grew during 2012, reaching 14.9 million tonnes, an increase of 2.1 million tonnes over 2011, according to
19.5%
INEGI. ArcelorMittal, AHMSA, Ternium, and Peña Colorada (co-owned by Ternium and ArcelorMittal) are Mexico’s main iron ore producers. Last year ArcelorMittal produced 6.3 42.2%
million tonnes of iron ore concentrate, and the company’s total iron ore reserves in Mexico currently amount to 300 million tonnes from its El Volcán, Las Truchas, and Peña Colorada mines. AHMSA’s iron ore production came from its Hércules, La
36.1%
Perla, and Colima assets. In 2012 it reached a production of 3.39 million tonnes, of which 3.08 tonnes were iron ore concentrate and the rest lump ore. These are similar to the company’s 2011 figures. Of its total output the company sold 245,563 tonnes of fine iron ore, with
coke
different characteristics to those required by AHMSA
iron
for its own steel production processes, in the domestic
coal
and international market. Ternium’s iron ore production amounted to 4.3 million tonnes from its Las Encinas
manganese Source: INEGI
Subsidiary, which comprises the Aquila, Cerro Náhuatl, and Peña Colorada mines.
Peña Colorada’s reserves currently stand at 353 million tonnes. ArcelorMittal increased the reserves at its Las
The total iron ore pellet production in Mexico was 14.95
Truchas asset using indirect exploration techniques such
million tonnes in 2012, an increase of 8.3% compared to
as aeromagnetometry, allowing the company to increase
2011. The main iron pellet producer was AHMSA, with a
its reserves total by 98 million tonnes.
production of 4.54 million tonnes, a 10% increase on the previous year. ArcelorMittal recorded the second largest
According to the World Steel Association China, Japan
production, reaching 4.53 million tonnes, a 14% increase
and the US are the world’s three biggest steel producers
on 2011. Peña Colorada (co-owned by ArcelorMittal and
respectively; Mexico is placed 13th, but is the fastest growing
Ternium) was the third largest producer with 4 million
producer in Latin America. Mexico’s steel production has
tonnes, which was around the same amount that it had
grown comparatively quickly, with an average annual
produced the previous year. Ternium came last, having
growth rate of 2.6%, compared to a global average growth
produced 1.87 million tonnes.
rate of 1.4%. Mexico’s steel production also grows faster than that of Brazil (2.2%), Argentina (1.6%), and the remainder of
During 2011 exploration activities for iron ore intensified.
the Latin American countries, which between them have an
AHMSA increased its reserves to 686 million tonnes, while
average annual growth rate of 0.3%.
IRON ORE PRODUCTION (THOUSAND TONNES) 2011
2012
% VAR 12/11
Minera del Norte (AHMSA)
4,133
4,547
10.0
Peña Colorada
4,003
4,003
0.0
Ternium
1,699
1,872
10.2
ArcelorMittal
3,976
4.537
14.1
Total
13,811
14,959
8.3 Source: Camimex
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| MINE PROFILES: MEXICO’S MAIN IRON ORE MINES
2 3
7
1
4
5
6
By Rodolfo Corona Esquivel - Iron is one of the most abundant
According to their age and geographical location, the iron
elements in the earth’s crust conforming approximately 5.6%
ore deposits in Mexico are classified into two main groups.
of its chemical composition. This element can be oxidized or
The first group originated in the Tertiary period associated
reduced in superficial environments, serving as a potential
to felsic igneous rocks, and is located in the north of the
oxidation indicator that can provide important information on
country and includes mines such as La Perla in Chihuahua,
the evolution of the earth’s atmosphere through geochemical
Cerro de Mercado in Durango, and Hércules in Coahuila. The
analysis of its cycles. Iron’s wide use in modern industries
second is located in the southwest of Mexico, situated on a
has given high economic relevance to iron ore deposits,
parallel strip to the Pacific coast that crosses the states of
which are formed by sedimentation, metamorphism,
Jalisco, Colima, Michoacan, Guerrero, and Oaxaca. It is part
magmatic and hydrothermal processes. Over the last nine
of the volcano-sedimentary sequence of the region. One
years prices have fluctuated between US$40 and US$140
of the most prominent characteristics of the ore deposits
per tonne. The economic value of iron deposits depends
in the north is abundance of hematite with high values of
on a series of factors such as volume, purity, associated
phosphorous and low sulfur, while magnetite with high sulfur
economic minerals, cost of production, concentration, and
and low phosphorous prevail in the ore deposits of the south.
the elimination of noxious elements. Some other aspects
There are other iron ore deposits in the country that have
that have to be considered are transportation costs of bulk
limited economic value, such as the banded sedimentary
materials to the processing plants and to the ports for their
deposits related to submarine volcanism like La Prosperidad
export, as well as potential environmental remediation costs
in Baja California Norte and La Hueca in Michoacan.
during the production stage and mine closure. The development potential of Mexico’s iron deposits is For Cerro de Mercado in Durango, the first geological
positively impacted by its average grades, depths, and
genesis theory was elaborated by Federico Weidner
extensions. One of Mexico’s advantages compared to
in 1858, whose thesis was that the ore deposit was the
other countries, is that iron ore deposits are of high quality
result of volcanic eruptions. Later, it was considered that
and relatively easy to exploit and transport since they are
the deposit was formed as dikes, but other geologists
located near steel production centers, and close to the
described it as a formation of metasomatic contact. In
main maritime ports for export.
1995 Jenaro González-Reyna explained the ore deposit as the result of magmatic segregation, while William Foshag
Rodolfo Corona Esquivel, Researcher at the Geological
believed it to be the result of hydrothermal replacements.
Research Institute, UNAM Source: Corona-Esquivel, 2007
248
1
2
3 4 5
CERRO DE MERCADO, DURANGO Considered one of the most important iron ore deposits of Mexico, Cerro de Mercado is located in the center of Durango near the state’s capital, inside the physiographic province of the Sierra Madre Occidental. This iron ore deposit, which has been exploited since 1828, is one of the most extensive volcanic sequences in the country called the Mexican Ignimbrite Belt, which is emplaced in a volcanic share from the Tertiary. The intense exploration of the deposit has clearly shown that the main mineralized zones of Cerro de Mercado were controlled by two big breccia structures associates to faults, in lens-shaped bodies, and massive tabular iron minerals, also with abundant breccias formed by very angular fragments of rhyodacite and cemented by iron oxides. Cerro de Mercado has a current production of approximately 1.1 million tonnes per year with an average grade from 25% to 45% total iron and 38% recovery.
LA PERLA, CHIHUAHUA Located in Chihuahua, La Perla is among the most important deposits in northern Mexico, which has provided enough resources to satisfy the local steel industry’s needs for over 50 years. It is characterized by being associated with felsic rocks of the Eocene-Oligocene, which constitute an important part of the central region of the Sierra de Mesteñas. La Perla currently provides approximately 5% of the iron used in the domestic steel industry. The deposit has been related to the main volcanic activity of the north of Mexico. The ore is mainly constituted by hematite and minor quantities of magnetite and limonite. The volumetric calculus of the extracted mineral has led to the conclusion that the original volume of the deposits was 87 million tonnes. This makes La Perla one of the largest iron ore deposits in Mexico. The average grades found in the drilling analysis for all deposits were: iron 57.18%, phosphorus 0.05%, sulfite 0.37%, and silicon oxide 9.15%.
HÉRCULES, COAHUILA The mining district of Hércules is in the west portion of the state of Coahuila, in the northwest region of Sierra de Cruces, and is included in the physiographic province denominated Cuencas y Sierras. Equally to La Perla and Cerro de Mercado, the host rocks are volcanic with an andesite and trachyandesite composition with ages between 30.7-33.7 ± 1.6 million years. The district includes several mineralized bodies called Prometeo, Teseo, Tiber, Sama, Ulises, and Los Aceros.
PEÑA COLORADA, COLIMA Due to its proximity to the Port of Manzanillo, and the volume and quality of the iron mineral, Peña Colorada is the most important ore deposit of the country. The mine is currently providing 38% of all the iron required by the country’s steel industry. Peña Colorada is located in the northwest region of the state of Colima in the municipality of Minatitlán. The rocks consist of a volcano-sedimentary sequence from the Cretaceous, 360m in thickness. The reserve currently has 200 million tonnes of iron, with average grades found of iron 35%, phosphorus 0.005%, sulfate 0.45%, and silicon oxide 2.3%.
AQUILA, MICHOACAN The Aquila mine is named after the municipality where it is located in the state of Michoacan. The regional geology consists of a volcano-sedimentary sequence, deposited in a basin associated to an insular arch. This sequence presents an intrusion by multiple stocks of intermediate composition, which created a thermal metamorphism that formed diorite and calcareous rocks that later generated the mineralization. The exploration of Aquila started in 1998 and since then 60 million tonnes of reserves have been quantified with average grades of 45-50% of iron. The mine currently has a production of 6,000 t/d.
6
LAS TRUCHAS, MICHOACAN
7
EL VOLCÁN, SONORA
The iron ore deposits in the ferriferous district of Las Truchas are located in the municipality of Lazaro Cardenas, Michoacan. The district is found in the physiographic province of the Sierra Madre del Sur. The iron bodies of the district present discontinuous masses on a surface of 4km in width and 8km in length. The morphology of the ferriferous bodies have a general lenticular shape with strikes to the northeast and dips the southeast with depths between 100-200m. Since the 1990s, the mineralized body El Volcán has been in the exploitation stage. Today production stands at 40,000 t/d from which 12,000 tonnes have a head grade of 34.5% of magnetic iron. In December 2006, the company that operates the mine, Sicartsa, estimated 160 million tonnes of iron reserves.
This mine, located near the cities of Obregon and Guaymas in the state of Sonora, consists of an open pit mine and a pre-concentration plant with magnetic separation facilities. Mining development began in 2007 but production was stopped several times during 2008. Since 2010 operations have continued without interruptions, and the El Volcán mine produced 2 million tonnes of iron concentrate in 2012. Mining activities are performed by contractors but the concentration activities are performed directly by ArcelorMittal. The proven and probable reserves of the mine are of 10 million tonnes of iron and as a result the mine life is of 5 years with current production.
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| THE MEXICAN STEEL INDUSTRY INDUSTRY TRENDS
TERNIUM
In the 2001 to 2012 period annual steel production in
Ternium is Latin America’s leading steel company, with
Mexico increased considerably, from 13.4 to 18.1 million
net sales of US$8.6 million in 2012. Ternium began in
tonnes. Following the 2001 dip in steel production the
2005 as a merger between three Latin American steel
metallurgical industry grew significantly until 2004, then
companies: Hylsa from Mexico, Siderar from Argentina,
fluctuated in size over the next five years, up until 2009
and Sidor from Venezuela. The company produces steel,
when the sector suffered as a result of the international
cast iron, coke (fuel), and slag, and is highly vertically
financial crisis. In 2011 the Mexican industry displayed
integrated. Ternium has a number of strategically
the first signs of stabilization of its steel production,
positioned production centers in Mexico, Argentina,
achieving 18.1 million tonnes, a 7.3% increase over 2010.
and Colombia, and thanks to its acquisition of Grupo
By the end of 2012 the Mexican metallurgical sector
IMSA in 2007 the company now also has a presence in
again produced 18.1 million tonnes, which is equivalent
the US and Guatemala. Its Latin American leadership
to 79.3% of the country’s total installed capacity.
is also strengthened by its majority shareholding in
MEXICAN STEEL PRODUCTION (thousand tonnes)
Usiminas, a leading Brazilian steel producer.
19,000
The consumption of steel is growing in Latin America
18,000
at one of the fastest rates in the world, and Ternium has been well positioned to capitalize on the resulting
17,000
opportunities. According to Ternium, the region’s 5.6%
16,000
increase in steel consumption compared to 2011 is only
15,000
marginally lower than that of India, which had a 5.9%
14,000
growth rate, and reflects a faster growth rate than the
13,000
US and Canada with 2.7%, and China, the biggest steel
12,000
producer in the world, with 3.5%. Though there are many
11,000
opportunities for Ternium in Latin America, given high 2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
10,000
demand in the region for lower quality steel, Ternium is also looking to increase its market share in the highend steel market. Estimates regarding the demand for
Since 2001 the installed steel production capacity
high-end steel in Brazil, Mexico and Argentina between
has gradually increased in Mexico. In 2005 it stood at
2012 and 2017 predict a market growth of 10%, most of
19.5 million tonnes, increasing to 22.2 million tonnes in
which is expected to be absorbed by the automotive
2007. In 2012 an expansion program was put in place
industry (64%), followed by the energy, packaging and
to create more infrastructure and increase capacity
electrical industries (8% each).
to 22.8 million tonnes. There has been increasing
250
concern in Mexico about the global steel surplus, which
Ternium is focusing its efforts on the automotive
according to Ernst & Young reached 56 million tonnes
industry, one of the fastest growing sectors in
in 2012. Steel imports to Mexico increased by over a
Mexico. Just recently in September 2013 Paolo
third in 2012, and much of this trade was considered
Rocca, the President of Technic, one of Ternium’s
to be unfair or involving dumping practices. The
major shareholders, inaugurated the Pesquería steel
country’s steel sector, together with the Mexican Iron
complex, a US$1.1 billion investment in the state of
and Steel Industry Chamber (Canacero), is appealing
Nuevo Leon. With an annual capacity of 1.5 million
to the Mexican government to put regulations in place
tonnes, the Pesquería facility has a cold rolling mill
that will protect Mexico’s steel industry and reduce
specifically
the impact of practices such as dumping and artificial
products, and is capable of producing high-strength,
price hikes. Given that the steel industry employs
micro-alloyed, and advanced high-strength steel for
over 720,000 people in the country, ranging from the
galvanizing. The company is also teaming up with
processes of exploiting coal and iron to the running of
Tenaris, a leading supplier of tubes for the energy
steelworks factories, from Coahuila and Michoacan to
industry, and the energy company Tecpetrol to build
Nuevo Leon and Veracruz, there is much to be gained
an 850MW natural-gas thermo-electrical plant that
from ensuring that the industry can continue to grow.
will supply the energy required.
for
satisfying
demand
for
high-end
AHMSA
ARCELORMITTAL ArcelorMittal is currently the world’s largest steel
AHMSA (Altos Hornos de Mexico), is today the largest
producer. With total revenues of US$84.2 billion in
integrated steel company in Mexico. Founded more
2012, and an employee base of 245,000, ArcelorMittal
than seven decades ago in response to the steel
today accounts for approximately 10% of the world’s
deficit that had come about as a result of World
steel production. Created from a takeover of Western
War II and Mexico’s own growing industrialization,
European
India-based
AHMSA was funded in part by private capital and
multinational steel maker Mittal, ArcelorMittal is
in part by the government. Since its foundation, the
today a global leader in steel markets for automotive,
company has produced more than 120 million tonnes
construction, household appliance and packaging
of steel, contributing to both industry development
purposes.
and employment in Monclova, Coahuila, where the
steel
maker
Arcelor
by
company’s headquarters and its core operations ArcelorMittal’s growth strategy is applied across the
are based. The company drives the entire steel
company’s six business segments, though mining is
making process, from extracting iron and coal and
one of its main expansion areas. In 2012 ArcelorMittal
transporting it to its steel works to producing steel
produced 55.9 million tonnes of iron ore and 8.2 million
and steel products ranging from plates to hot and cold
tonnes of coal, positioning it as one of the top five iron
rolled coils and different structural shapes. Besides
ore and metallurgical coal producers in the world. In
the company’s two steel plants in Coahuila, it also has
2012 ArcelorMittal’s global sales in the mining segment
coal and iron ore mines located both in the state and
accounted for US$5.4 billion. While this is a significant
elsewhere in Mexico, transporting the minerals to its
number, it represents a 14% decrease compared to
steelworks by rail and by iron pipelines. The company
2011, attributed to the lower market prices for iron ore
has an annual production rate of 3.5 million tonnes of
and coal. Today the company has a network of mining
liquid steel and a total workforce of 19,000 people,
operations in 11 countries including Mexico, the US and
including the staff that works in its mining subsidiaries.
Russia. Given its mixture of expansion and grassroots projects, the company is well positioned to fulfill its
Despite years of sustained production and sales
objective of producing 100 million tonnes of iron ore
growth, in 2012 AHMSA’s net sales decreased slightly
by 2015.
from US$3.2 billion to US$3.1 billion (MX$40.8 billion to MX$39.2 billion) compared to 2011. The company
ArcelorMittal has a number of iron ore projects in
attributes this dip to the problems that were faced
Mexico, including 100% ownership of El Volcán and Las
more widely in the global steel industry, which saw a
Truchas mines in the states of Sonora and Michoacan
more than 56 million tonne surplus in steel production
respectively. The company’s iron ore production in
in 2012. The company nevertheless broke its liquid steel
Mexico reached approximately 6 million tonnes in
production record (3,880 million tonnes) and accounted
2012, and its three mines have an estimated mine life
for a fifth of Mexico’s total production in 2012.
of 20 years. ArcelorMittal also has a 50% stake in the Peña Colorada mine in Colima, on which it partners
Owning its own coal and iron ore mines gives the
with Ternium, Latin America’s leading steel producer.
company a competitive advantage as it reduces
Its facility in Lazaro Cardenas, Michoacan is Mexico’s
exposure to fluctuations in coal and iron ore prices.
largest steel producing unit and slab exporter.
The company and its subsidiaries invested US$388
ArcelorMittal’s total proven and probable iron ore
million dollars in steel and mining projects in 2012.
reserves on its three assets were estimated to be 395
The new Fénix complex, the construction of which
million tonnes at the end of 2012.
was completed this year, received US$182.5 million (MX$2.3 billion) of this investment. The advanced
One of the main challenges the company has faced
technology and increased production capacity at
in Mexico is insecurity. The company has operations
Fénix mark the beginning of a new era for AHMSA,
in Michoacan, Sinaloa and Sonora - high risk areas
since the complex brings the company up to a total
where drug-related violence, including executions
annual production capacity of 5 million tonnes of steel,
and kidnappings of non-gang members, has been
which is an increase of almost one third compared to
occurring.
its previous 3.8 million tonne capacity.
251
GUARANTEEING THE SUPPLY OF ABRASION RESISTANT STEEL The introduction of abrasion-resistant steel plates to
in Mexico,” Yescas recalls. “Ford Steel got interested in us
the mining industry was one of the most revolutionary
because of the supply strategies we have built with our
developments of the sector in the past century. The
clients and because of our intention to enter international
composition of these plates allows the material to be ductile
markets, such as the US – where Ford Steel has not yet
and thus enables it to adapt to a broad range of mining
entered the mining sector.”
equipment. Their hardness makes them strong enough to resist the highly abrasive mining processes and give the
Transteel & Metal bases its business strategy in two main
material a considerable resistance to impact. Nowadays, all
differentiators: the quality of the company’s products, and
kinds of machinery – from conveyor belts to crushers and
its personalized supply and cost management services.
truck beds – are protected by steel plates, reducing costly
The company carries specialized products depending on
breakdowns and delivering substantial productivity gains.
their application within the mining industry. Its Wearalloy and Mangalloy super-block, super-clad, super-chrome,
Adolfo Yescas’ wide experience in the steel industry led him
and nickel chrome plates have all been tested and
to create his own company over a decade ago: Transteel
perfected in order to optimize their performance and the
& Metal. This Mexican company is now the nationwide
safety conditions. “Our anti-abrasive plates have a better
supplier of Ford Steel products in the country, such as
performance than other similar products offered by our
the exclusive line of anti-abrasive 400, 450 and 500
competitors. Our clients demand that we perform a series
steel plates, which have many uses in the mining industry.
of tests and comply with international standards. We give
Yescas comments that it was the company’s commitment
them those quality guarantees,” Yescas says. In order to
to the industry that prompted Ford Steel to partner with
optimize the performance of its products, the company
Transteel & Metal. “It took Ford Steel some time to enter
monitors the welding and installation parameters of plates
the Mexican market. They had not found an appropriate
in mine sites, thus ensuring that the electric amperage and
commercial ally, but they saw our commitment to service
heat exposure during this process maximizes the plate’s life
while we were working on a project with Grupo Mexico, and
inside the equipment. Moreover, Transteel & Metal reduces
they decided to offer us the national distribution license
the risk of volatile operative costs by offering fixed prices.
SWEDISH HIGH STRENGTH QUENCHED AND TEMPERED STEEL PLATES SSAB (Swedish Steel AB)
“The company started operations in Mexico 10 years ago
is one of the world’s
and from the beginning it has been mainly focused on the
leading steel producers
Mexican mining industry,” says Federico Forastieri Appel,
that specializes in high
Commercial Director of SSAB Americas. “Hardox wear
strength
a
plates, with hardness ranging from 400 to 600 HB, have
different
become the most popular products for the company within
applications across many
the Mexican mining market.” The main uses for this type of
industries. Headquartered
steel in mining are in mobile equipment, light equipment
in Sweden, the company
and operations machinery. Its unique quenching process
has a North American
and well-balanced alloy chemistry provide the plates with
division,
high uniformity and low levels of impurities, according to
vast
Federico Forastieri Appel, Commercial Director of SSAB Americas
array
steel of
in
for
addition
to two steelworks in the US. In recent years, the mining
Forastieri Appel.
industry has become an attractive market segment for
252
SSAB’s products. Equipment and tools for mining-related
“The main advantage of using SSAB’s steel plates is that
applications mainly use the company’s high strength
they have a longer lifespan. The service life cycle of our steel
quenched and tempered (Q&T) steel plates. SSAB markets
plates is three to five times longer than that of conventional
this type of steel under the trademarks Hardox, an anti-
steels, depending on the activities for which they are used,”
wear capacity plate, and Weldox, a high elastic limit plate,
says Forastieri Appel. “These types of steel plates can be
in order to offer steel with high abrasion resistance.
used either in open pit or underground mining activities.”
“Our comprehensive service attitude and focus on solutions convinced our client that we offer a lot more than steel” Adolfo Yescas, Director General of Transteel & Metal
Even if the price of steel varies, Ford Steel and Transteel
also supports this comprehensive service policy by constantly
guarantee a fixed standard cost, giving clients a long-term
communicating with mine operators. This allows Transteel &
financial advantage. Additionally, Transteel & Metal has an
Metal to plan ahead and anticipate any change in the grades,
operating strategy designed to fit the logistic and financial
volume, and requirements of the steel demanded in a mine.
challenges mine operators face regularly. “In the case of a
“Our employees’ knowledge is very extensive, and enabled
mine we served in Nacozari, we saw that the company had
us to identify areas of opportunity in our clients’ use of steel
serious supply problems. It took them 45 days to receive
products. On one occasion, we observed that a client used
the material, so we took some time to thoroughly analyze
hot rolled steel plates for the fabrication of cylinders welded
the demand, delivery points, and all the variables inherent
from the inside. We customized a capped hot rolled steel
to the mine’s operation. Then we designed a strategy
plate. This material contains carbon sediments that enable
which allowed the company to eliminate its spending on
a better and more efficient welding,” Yescas mentions.
steel stock, while ensuring timely delivery with no risk
Thanks to the company’s business model, Transteel &
of stopping the production line,” Yescas recalls. “Our
Metal is now providing steel products to many mining
comprehensive service attitude and focus on solutions
companies in Mexico. Yescas has noticed that other steel
convinced our client that we offer a lot more than steel.”
product providers have sidelined the industry even though the sector offers great opportunities. “We understand the
The philosophy behind this strategy is captured by its ‘no
mining industry’s requirements, we recognize the vision
downtime policy’. “We offer these services 365 days of
of its executives, and we are consolidating our business
the year. Our stock management, delivery timelines, and
in order to offer them comprehensive services regarding
the ownership of our own transportation fleet back the
the procurement, use, and maintenance of steel in their
availability of our products,” Yescas explains. The company
operations,” he adds.
Another advantage of using Hardox wear plates is that,
SSAB is more than just a high-strength steel manufacturer.
despite their hardness, their low carbon composition and
It is also an integrated service provider offering added-
low levels of micro-alloying facilitates high quality welding,
value services to its clients. The company has developed
cutting and bending and provides the applications in which
a concept for its customers called “Hardox Wearparts”, an
they are used to defend against wear, dents and cracks.
international network of companies producing parts made
SSAB lives up to its motto “For a stronger, lighter and more
with Hardox wear plates. This group of companies receives
sustainable world” not only by producing high-strength
technical training from SSAB staff, which ensures that
steel, but by taking into account environmental concerns
Hardox wear steel is cut, milled, drilled or welled according
while manufacturing its products. “SSAB has developed
to the Swedish company’s high standards. Forastieri Appel
steel plates with low carbon content, which in turn also
points out that five companies operating in Mexico have
reduces carbon emissions,” says Forastieri Appel. “Lighter
already been certified and are active members within this
and stronger equipment not only has a longer lifespan, they
network.
also require less maintenance and involve a smaller outlay of funds to buy fuels and tires for transportation purposes.”
“SSAB plans to keep growing in Mexico and Latin America and replicate the success its products have had throughout
In a market like Mexico, the price issue is always a priority as
Europe and the US,” says Forastieri Appel. He adds that
well as a sensitive topic for the majority of mining companies.
even though the company still does not have any plans to
However, Forastieri Appel explains that “final users are
open a manufacturing facility in Mexico, SSAB is looking
ultimately looking for the same thing: a product that offers a
to take advantage of all the opportunities that the rapidly
longer service life cycle and brings less maintenance-related
growing Mexican mining industry has to offer. “Our company
problems.” He also adds that SSAB’s products offer a higher
is growing at a steady and solid pace. With just 10 years of
cost-benefit ratio, with great quality and high technology at
operation in Mexico, SSAB already has three storage facilities.
very competitive prices.
We expect this growth to continue in the years to come.”
253
ENHANCING COMPOSITION TO DELIVER SOLID STEEL Steel
is
and
operational costs and increasing productivity. “Mining
mining
companies should prioritize investing in quality products
in
processes,
being
as
at all times, and avoid risking their processes by cutting
it is a key component
costs,” warns Ruíz. “When a project is put into operation,
in
equipment
and
the company should not need to reinvest for at least two
across
to four years. By using cheaper products that do not offer
all phases of the mining
a good cost-benefit, the company will not be making
value chain. Though the
as much money as it could be in the long-term – the
properties
production cost per tonne will increase and the company
machinery
Héctor Ruíz, Technical Manager at Astralloy Mexico
essential
ubiquitous
used
required
of
steel vary according to
will lose its competitive edge.”
its application, in general mining companies and manufacturers of mining equipment
While Ruíz acknowledges that Astralloy steel is more
and machinery look for steel that is as resilient and wear
expensive than others on the market, he argues that the
resistant as possible. The way that steel is treated is central
aforementioned durability and its subsequent impact on
in deciding the hardness and durability of the final product.
productivity make its steel a more worthwhile investment
“You may think that all steel is durable, but it depends
than the steel of its competitors. “We have witnessed our
on the hardening process that is used,” explains Héctor
product lasting up to 10,000 hours of operation without
Ruíz, Technical Manager at Astralloy Mexico. “During the
the need for lubricant, compared to an average of around
hardening process, sometimes steel plates can become so
1,000 hours for regular or oxidized steel. If you add up
hard that they can be broken relatively easily. In mining,
the costs a company would incur every time it needs to
you are always looking for a material that will withstand
replace parts, and the value that would be lost in terms of
impact and abrasion – two things that mining machinery is
tonnes of production, this provides a very strong argument
exposed to in practically every process.”
for mining companies to use our steel,” he says.
Astralloy produces quality steel of different strengths
These unique chemical compositions are complemented by
and thicknesses, and has been developing steel patents
the company’s lengthy experience in the Mexican mining
since the 1950s. Having started out with one patent,
industry, which helps it to better understand and tailor its
the company now holds five, used in steel sheeting,
products to the specific needs of its customers: “I started
piping, bushings, arrows and many other products that it
the mining sales division in the 1980s by visiting mines and
manufactures for use in the mining industry. According to
getting to know their operational problems; looking at their
Ruíz, the strength of its steel lies in the hardening process
costs, I could see there was a clear opportunity to use our
that it is put through: it is cooled naturally in air without
product to minimize their operational costs and increase
applying water, oil or salt to it. The result of this slower and
their profits.” Astralloy then turns to the laboratory in order
more natural process is a unique chemical composition
to deliver the patents that will fulfill these requirements,
that makes the company’s products so durable. “Astralloy
putting great emphasis on the importance of testing
steel is malleable, and its particles move in such a way that
processes, firstly in supporting its assertions regarding
the metal can even be folded without breaking; this brings
the durability of its patents and products, and secondly in
a great many advantages in a wide range of different
continuing to develop and improve them. Tests are carried
applications,” he explains. “Its particles are so small that
out in controlled experiments in its clients’ mines as well as
they do not detach from each other at the moment of
in laboratories, in partnership with academic and technical
impact. Our steel is also a chrome-nickel composition,
institutions.
meaning that it is a stainless steel, so nothing sticks to the metal during ground flattening or crushing processes for
The company has long valued maintaining links both with
example, which also helps to avoid accidents.”
its customers and with the academic world, with the aim of incorporating real mining requirements into its operations.
Astralloy emphasizes that, because different applications
“There exists a very close relationship between Astralloy
will require steels of varying hardness and durability,
and the academic world. In the universities they conduct
companies and steel manufacturers should work together
analysis on the hardness of our product. It is through
to find the most appropriate steel for their operations.
them that we support our technical analysis and prove our
The aim should be to find the most durable solution, thus
value.” This link is mutually beneficial – indeed, Ruíz has
maximizing product lifetime and in the process reducing
received the AIMMGM’s 2013 National Prize for Education.
LOCAL STEEL SUPPLIERS SERVICE THE INDUSTRY FROM CHIHUAHUA The extreme conditions to which mining equipment
Both companies have devised special ways to respond to
is subjected during mineral extraction and processing
mine operators’ needs. Cofiasa guarantees availability and
demand the use of impact and wear-resistant steel in many
quality through a good relationship with Mexico’s major
applications. Mexico’s position as a top mining destination
steel producers and the constant monitoring of sales,
and an important steel producer enables local companies
inventory, and delivery in all of its branches through ERP
to offer high quality steel products to the country’s mining
and GPS systems. Cominox works together with clients to
industry. This is the case of Chihuahua, one of Mexico’s
determine the most adequate features of the steel to be
largest states and the source of 12% of Mexico’s total
used in each application. The company designs products
output of metals and minerals. It is the country’s third most
with different properties by customizing the Brinell grades,
important state in terms of mineral production, only after
metallurgical processes, and mechanical engineering to the
Sonora and Zacatecas.
needs detected directly in the field. Moreover, an essential
“We do not only provide prompt delivery guarantees, but also top quality products, and credit or payment plans which make managing costs a lot easier for mining companies” Federico Macyshyn, Director General of Cofiasa
Two companies have emerged in Chihuahua over the past
component that is present in both businesses is a great
decades as the most important providers of finished steel
attention to quality. Cofiasa and Cominox offer products that
products for the mining industry. One of them is Cofiasa,
meet international standards, and comply with a variety of
which has been operating for 42 years and now has over
both product and industry specific certifications. According
300 transport units for the delivery of steel components
to Macyshyn, Cofiasa’s added value is not only restricted to
to mine sites, a sales and support force of 450 employees,
the company’s inventory management and on-time delivery
and presence in six states and 21 cities. Federico Macyshyn,
policy, it also contributes to its clients’ finances by offering
Director General of Cofiasa, explains that the main elements
flexible payment plans and by providing consigned material.
of the strategy behind the company’s growth have been
“We know our clients well, and we have come to know the
reliability and focus on service. “We do not only provide
timeframe for their projects; through experience we can
prompt delivery guarantees, but also top quality products,
therefore estimate the amount of material they will be using
and credit or payment plans which make managing costs
over the course of a project,” he says. “Therefore, it becomes
a lot easier for mining companies. This ability to fulfill
cheaper for the client to buy bigger quantities, as well as
our clients’ needs has allowed the company to be in the
being cheaper for Cofiasa to deliver. Additionally, it keeps
position to open four more branches in Queretaro in only a
our transportation vehicles available for other projects.”
few months,” he explains. Hernández adds that his company goes to great lengths Another notable company is Cominox, which services the
in order to deliver increasingly specialized products and
mining industry through one of its three subsidiaries, Fall
to train the human capital that is needed to do so. “We
Metalmecánica. Daniel Hernández, General Manager of
design and manufacture all of our products, and prepare
Cominox, explains that the subsidiary’s establishment in
all of the equipment for transportation at our workshop.
2010 responded to a greater need in the mining industry for
Our application technicians receive five years of training.
specially tailored, highly resistant products. “Our experience
They are capable of assembling each product, checking its
in other industries has furthered our capacity to provide steel
tolerance and supervising its performance,” he says. Both
components for the mining market. For example, our previous
directors agree on the importance of generating trust
experience in conveyors for the food and beverage industry
through quality in order to become a provider of choice for
has allowed us to supply a large amount of specialized
mining companies. “Clients know of our commitment as a
conveyor belts tailored for mining companies. They can resist
serious company, and once they have purchased from us in
tough working environments, and are equipped with sensors
one city and moved to another location, they immediately
in order to keep track of the amount of ore and minerals that
seek to work with Cofiasa again, thanks to the trust they
pass through them,” says Hernández.
have in us,” Macyshyn concludes.
THE MEXICAN INDUSTRIAL MINERAL SECTOR By Armando Alatorre Campos - According to the Mexican
99.5% SiO2 silica sand cannot be used if the remaining
Geological Survey (SGM), Mexico has a generous supply
0.5% consists of metal or zircon. Another example is acid-
of industrial minerals. The country produces 29 industrial
grade fluorite, which must comply with low limits on silica,
minerals, from aggregates to zeolites, though some of
calcium carbonate, and arsenic contents. On the other side,
these are produced only on a small scale, such as mica,
the logistics behind transporting the industrial minerals
talc, and vermiculite. Camimex studies rank Mexico as
to production centers is another challenge. For instance,
being between the second and 12th largest producer in the
two important barite deposits in Sonora have not been in
world for 13 industrial minerals: second in fluorite; third in
production since 1997 because they are too far from the
celestite, sodium sulfate and wollastonite; fifth in diatomite;
main industrial market in southern Mexico.
eighth in barite, graphite and gypsum; ninth in salt; 11th in kaolin and silica sand; and 12th in feldspar and sulfur.
According to the SGM, the value of Mexican industrial mineral production has been on the rise since 2007 when
One of the most important factors when evaluating the
it was at MX$40.8 billion (US$3.23 billion). By 2011 it had
feasibility of any industrial mineral deposit is the market for
grown to MX$51.8 billion (US$4.1 billion), a 27.35% increase
that specific deposit. As the industrial mineral consultant
in five years. It is important to highlight that this increment is
Peter Harben states: “without a market, a deposit is
not related to the upturn in metal prices, because industrial
merely a geological curiosity.� In this sense there are two
mineral prices are not as volatile. Industrial minerals have to
critical issues for industrial mineral producers; the first is
be considered as the basis for other important industries,
to strictly adhere to the particular industry specifications,
an example of which can be seen in the Mexican automotive
both chemical and physical, and the second is to become
industry, which is becoming one of the largest exporting
a reliable supplier that meets its clients’ requirements and
sectors in the country. Windshields are mainly made of
timeframes. For example, a silica sand deposit might easily
silica sand, limestone, and feldspar, whereas the steel parts
provide products for different industries, such as the glass
use dolomite in their production. Paint has several industrial
and ceramics sectors, where the chemical specifications
minerals in its composition, as well. The agricultural,
are rather similar but the physical specifications are
chemical, construction, electric and electronics, food
completely different. With regards to specifications, it
and beverages, and paper industries all rely on industrial
is critical to comply with the minor elemental criteria: a
minerals, whether domestically produced or imported.
| INDUSTRIAL MINERALS OVERVIEW
1 2 3
PHOSPHORITE Phosphorite is a non-detrital sedimentary rock that contains large quantities of phosphate-bearing minerals. The two main sources of phosphate are guano, or bird feces, and rocks containing concentrations of the calcium phosphate mineral, apatite. Phosphorite most commonly accumulates on the ocean floor. Phosphated rock is mined, beneficiated, and either solubilized to produce wet-process phosphoric acid or smelted to produce elemental phosphorus. It has several industrial applications but is most commonly used in the agricultural and animal husbandry sectors. CELESTITE Celestite is a mineral variety of strontium sulfate and one of the main ores of strontium. It is formed in saline and sulfuric deposit, and in some metalliferous deposits but mainly in sedimentary formations, especially in calcareous. The mineral is used to prepare strontium nitrate for fireworks, tracing bullets, and for other industrial applications. Celestite belongs to the barite group due to its similar properties. Celestite is characterized for presenting fine and shining crystals. It can be colorless, white or smoothly blue or yellow. BARITE Barite is a generally white, pink or colorless non-metallic mineral, and is the main source of barium. It is an inert, non-toxic material characterized by its heaviness. Barite is found in a variety of deposit types and forms in a number of different ways, as the result of biogenic, hydrothermal, and evaporation processes, among others. The mineral is mainly used in the oil and gas industry as a component of drilling fluids but it also has important applications in the paint industry as an acid resistant pigment.
Options are not plentiful for the future of Mexican
NON METALLIC MINERAL PRODUCTION IN MEXICO
industrial minerals, since no adequate deposits of the most marketable industrial minerals, such as rare earths and lithium, have been found. Therefore, production and 19.5%
new projects should focus on the same known minerals,
2.2%
and mainly on value-added products such as micronized
19.5%
industrial minerals, which are not yet widely produced but have a higher market price. Furthermore, the trade balance
36.1%
for industrial minerals has not been favorable for Mexico since 2007; for each exported dollar, a little more than two dollars is imported. This figure increases each year. In order to locate the opportunities in the industrial mineral
36.1%
42.2%
market, a detailed knowledge of what is being imported is required, but most importantly, an understanding of 36.1%
why it is imported. In its annual report, Camimex points
42.2%
out a continuous increase of silica sand production from 1.3 million tonnes in 1992 to 3.6 million tonnes in 2012, which amounts to US$140 million. However, last year silica product imports reached US$98 million, while barite imports accounted for US$93 million. So is there room for new industrial mineral producers in Mexico? No doubt about it, but the producer would have to be prepared for a very long process involving
fluorite
sodium sulfate
salt
phosphorite
sulfur
lime
silica sand
other
market research, exploration activities, feasibility studies,
Source: INEGI
development, and construction, in order to reach the production stage, not to mention gathering the required
mineral market in micronized calcium carbonate, or more
resources to fund each step of the mining process. As
recently in the consolidation of the fluorite market with
global business approaches have demonstrated in all kinds
European investment. A profitable deposit with foreign
of industries, mergers and acquisitions involving foreign
investment that provides market knowledge, experience,
investment are generating better consumer-provider
and client support could be the best business option for
relationships. This is evident in the Mexican industrial
moving forwards in the industrial mineral sector.
4 5 6
FLUORITE Fluorite is formed as a combination of calcium and fluorine, and it can be yellow, blue, pink, or purple. Fluorite may occur as a vein deposit, especially together with metallic minerals, where it often forms part of the gangue. The main application of this mineral is in the production of fluorhydric acid, which is an indispensable material in the fabrication of synthetic cryolite and aluminum fluoride for the aluminum industry, as well as for many other applications in the chemical industry. SODIUM SULFATE Sodium sulfate is mainly used in the production of detergents and in paper pulping. It is a colorless, crystalline substance that is soluble in water, though it is less soluble in the majority of organic dissolvents, excluding glycerin. Around two thirds of the world’s production comes from mirabilite, the natural mineral form of decahydrate, and the remainder from by-products of chemical processes such as hydrochloric acid production. With an annual production of 6 million tonnes, it is a major commodity as a chemical product. WOLLASTONITE Wollastonite is a mineral of natural origin with significant ecological value. It is used in different sectors, such as paints, ceramics, metallurgy, and construction. Wollastonite usually occurs as a common constituent of thermally metamorphosed impure limestone. The mineral has recently become important due to its ecological characteristics, since its use in ceramics enables the incorporation of calcium ion into the modeling clay without the need for carbonates. This process significantly reduces the carbon dioxide emissions that are usually generated by this industry.
| VIEW FROM THE TOP
LIME AS AN OPERATIONAL AND ENVIRONMENTAL NECESSITY ENRIQUE FIERRO Director General of Grupo Calidra Q: What are the vision and strategies that have placed
investment in modern technology, improving the know-
Grupo Calidra as the leader of the lime industry?
how of its employees, enhancing its operational structure
A: Grupo Calidra was founded over a century ago by
and implementing ambitious growth strategies.
a German family that came to Mexico to work on the construction of the city’s sewage systems, during the time
Q: Why is it important to use lime-based products for the
of Porfirio DĂaz. To conduct their operations they needed
treatment of hazardous residues?
lime and eventually became their own lime suppliers. Some
A: Acids are used to extract the metal from the mineral. The
years after Grupo Calidra was established they introduced
use of specific acids will depend entirely on the metal that
industrial lime hydration methods being used in Europe,
is being extracted; it can be used to extract anything from
and patented the technique in Mexico to open a new, niche
precious metals to base metals and common iron. The most
market for hydrated lime in the construction sector. During
common application of lime in mining operations is in heap
the 1950s Grupo Calidra identified the opportunity to
leaching, in which a large amount of the extracted mineral
supply lime for industrial processes. To capitalize on it the
is piled up, and acid solutions are poured on to dilute the
company had to modernize its operations and introduced
material and recover the desired metals. Acids such as
the first rotary kilns to produce lime of a higher quality,
cyanide can have a major impact on the environment, and
initially for the oil and steel industries that were flourishing,
it is also very dangerous for humans, but if you increase the
and later in other growing markets such as the corn, sugar
pH level and keep the cyanide in the alkaline base then it
and paper industries. During the 1980s the decision was
is not dangerous at all. Lime is used to transform an acid
made by the owners to grow the business by creating
solution into a base solution, helping mining companies to
a joint venture with Belgian investors that helped the
maintain control over hazardous residues; in this way Grupo
company to understand the importance of continuous
Calidra contributes to creating cleaner and safer industries.
| INDUSTRIAL MINERALS OVERVIEW
7 8 9 258
DIATOMITE Diatomite or diatomaceous earth is a siliceous sedimentary rock of biogenic origin, composed of the fossilized skeletons of diatom frustules, formed when the microscopic skeletons of aquatic and unicellular algae accumulate. Diatomite is used in many industries, such as paint, plastic, and precious minerals, among many others. It is also used in chemistry as a filtration aid, to filter very fine particles that would otherwise pass through or clog filter paper. It is also used to filter water, as well as in liquids such as beer and wine. GRAPHITE Graphite is one of the allotrope forms in which carbon can manifest itself, along with in diamond and fullerene form. At room temperature and under regular atmospheric pressure graphite is more stable than diamond. The mineral is black and has a metallic luster, and it is a good exfoliater. The properties of the mineral are used in many industries, ranging from metallurgy to the military. In recent years graphite has become a strategic element in the construction of nuclear weaponry, since it acts as a moderator of the activity of uranium neutrons. GYPSUM Gypsum is the most common sulfate mineral and can be found as a massive material, including the alabaster variety; clear crystals as the selenite variety; and parallel fibrous as the satin spar variety. Gypsum is a commonly occurring mineral, with thick and extensive evaporite beds associated with sedimentary rocks. This mineral is most commonly used as finish for walls and ceilings, and is known in construction as drywall or plasterboard. It is also used in the fabrication of fertilizers and soil conditioners.
Q: What other advantages does lime have for reducing
It took many years and a lot of ingenuity to develop the
the negative environmental impacts generated by mining
current Maerz technology, which is capable of giving a
operations?
steady and controlled flow of stone, air and fuel. The type
A: In terms of the environment, lime is the most economical
of technology we use comes down to what the customer
and reliable technology out there. Lime has very significant
is asking for, because the process depends on the needs
advantages for reducing environmental impacts in mining.
of the customer. For instance, if the customer is looking for
For example, lime products have been used to raise the
construction lime, then the purity of the fuels being used
pH of soils that are contaminated with heavy metals. This
to power our technologies is not so important, because for
treatment immobilizes the metals and enables the land to
this purpose the highest purity lime is not a requirement.
be used for growing forage crops and grass. Waste water
However, when the steel and glass markets demand products
from mining operations contains dissolved metals, which
with a small proportion of magnesium it is important to
have to be removed or reduced to acceptable levels before
use the right methods to exploit our dolomitic limestone
being released into the water system, so liquid effluents
deposits, and also to use the right calcination techniques to
are also treated with slaked lime to neutralize acidity.
create the requested product.
Another important application is in soil stabilization. In Mexico it is very common to find very uneven roads; this is
Q: What are Grupo Calidra’s expansion plans for the
because previously there has not been any treatment of the
coming years?
soil, and lime is a very economical and reliable solution for
A: The mining industry is the second biggest user of lime-
stabilizing the clay. For many years we have told miners to
based products, after construction, and Grupo Calidra’s
stabilize their roads, because those who do not will suffer
expectations are to keep growing within the mining sector.
great losses and have to pay over and over again to repair
The company has recently started to establish itself near
their trucks and replace tires. Those who have stabilized
mining sites, since this strategy will favor both parties – the
their roads have been very happy with the results.
company and the client. Since we have now completed the modernization and expansion of our operations in Mexico,
Q: What are Grupo Calidra’s tried and tested technologies
our plans are essentially to continue looking at the trends
for guaranteeing the quality of its products?
and keep on growing steadily here, along with the market.
A: Grupo Calidra has chosen to use Maerz technology,
We have also now started to expand internationally – we
since its ovens can guarantee the purity of the product
will install two plants in Peru soon, and it is very likely that
that comes out. This is possible because the equipment
we will install another in Colombia. From there we would
uses lesser contaminated fuel sources, such as natural gas.
also like to serve the Caribbean regions.
10 11 12
FELDSPAR Feldspars is a rock-forming tectosilicate mineral that makes up as much as 60% of the earth’s crust. Feldspar is a common raw material that is used in glassmaking, ceramics, and to some extent as a filler and extender in paint, plastics, and rubber. In glassmaking, alumina from feldspar improves product hardness, durability, and resistance to chemical corrosion. In earth sciences and archaeology feldspars are used for K-Ar dating, argon-argon dating, thermoluminescence dating, and optical dating. KAOLINITE Kaolinite is a hydrated aluminum silicate that is formed by the decomposition of feldspars and other aluminum silicates. Its formation is the result of disintegration of feldspars and the subsequent action of water and carbon dioxide. Kaolinite clay occurs in abundance in soils that are formed from the chemical weathering of rocks in hot, moist climates - for example in tropical rainforest areas. Kaolinite is most commonly used in the production of paper, including achieving the gloss on some grades of paper. SILICA SAND Silica sand is the compound of silicon and oxygen. Its chemical composition is formed by one atom of silicon and two of oxygen. Its industrial uses derive from the physical and chemical properties it has, specifically its hardness, chemical resistance, high melting point, piezoelectricity, pyroelectricity, and transparency. This is a fundamental product in the fabrication of glass and china, and is used as a filter to purify and sanitize water for human consumption, and it is also very important in the composition of concretes and mortars.
259
DOMINATING THE GLOBAL CELESTITE MARKET As the third largest producer of celestite in the world, the
number of hectares from 50,000 down to 5,000.” Hornedo
importance of Mexico in the global industry is unquestioned.
Andrade says that reducing the size of its land was the main
For Carlos Hornedo Andrade, President and Director
objective of Minas de Celestita’s comprehensive exploration
General of Minas de Celestita, it is not just the quantity of
strategy. “We were able to be so successful at the exploitation
celestite in Mexico that is noteworthy, but the quality, too.
phase thanks to a thorough exploration program. We were
“Mexican celestite is the only celestite in the world that does
very careful and very detailed in quantifying the celestite
not require any processing at all; it can go directly from the
reserves that existed in Mexico; for every tonne of celestite
mine to the end user. This does not happen in Spain, Turkey
that we predicted there would be, we had to mine one tonne
or China, where all celestite must go through beneficiation
of celestite. We were drilling rooms, pillars and tunnels on
processes,” he says. Minas de Celestita was started in the
different concessions in order to quantify the reserves; in the
1980s to capitalize on the favorable conditions for celestite
long term this helped us to turn from a very small producer
mining in Mexico – quality and quantity of reserves, stability,
of celestite in the early 1980s to the single largest producer
good political structure, and social equity – and has become
of this mineral in Mexico by 1995,” says Hornedo Andrade.
the country’s biggest producer. “Celestite is the main mineral used in the production of strontium carbonate, and back in
One of the benefits for celestite mining companies is the fact
the 1970s there was a big demand for strontium compounds,
that the exploration process entails much less drilling, and a
especially for strontium carbonate, which was and still is
significantly smaller investment, than metal mining. “Celestite
used in the television industry for the cathodes ray tube,”
mining starts with surface exploration. It all starts by having
explains Hornedo Andrade. “During the early 1980s I worked
small miners walk the mountains, looking for outcrops. At
with Chemical Products Corp. to start looking at alternative
the second stage drilling is required in order to determine
ways to find celestite. During the period from 1981 to 1986
the depth of the deposit. In comparison with other types of
our exploration operations resulted in the discovery of
minerals it is not that complicated,” states Hornedo Andrade.
a valuable celestite concession in Coahuila, after having looked in Jalisco and San Luis Potosi.”
Minas de Celestita exports 80% of its product to the international market. “For export purposes Minas de Celestita
260
In 1986 Minas de Celestita was born, and to this day the
is basically selling all of its product to companies that
company has produced 1.5 million tonnes of high quality ore.
are related to the oil industry; domestically we are selling
The company acquired a number of concessions in Coahuila
strontium carbonate as a compound. For many years celestite
that covered around 50,000 hectares, on which it carried
was intrinsic in the production of cathode ray tubes, but with
out a vast exploration program. “It took us over 10 years to
the advancements in technology, such as the invention of
fully explore the zone in order to develop the reserves we
plasma and LCD screens; while it is still used for this purpose,
currently have, and also to reduce the surface area so that
it is required in much lower volumes. Nevertheless, the main
we would not have to pay unnecessary taxes,” says Hornedo
market for celestite still mainly lies in the television industry.
Andrade. “At the end of the program we had reduced the
There are some materials in the ferrite magnet industry that
number of concessions from over 100 down to 50, and the
need strontium, and there is a certain need for it in the paint
industry. It has also been used for drilling in the oil and gas industry, together with barite,” explains Hornedo Andrade.
CELESTITE Mexico is the third largest producer of celestite in
Hornedo Andrade points out that another benefit of
the world, and produced 46,190 tonnes of celestite
celestite is the fact that mining it makes almost no impact on
in 2012 according to INEGI, a 13.6% increase over
the environment. “We perform a lot of tunneling so that we
2011. The value of production increased by 34%,
do not damage the surface of the ground. The only impact
reaching US$2.5 million (MX$30.9 million). Minas de
we make is during the blasting process, when we generate a
Celestita, Mexico’s only celestite producer, reported
little bit of smoke and dust. The process is fairly clean and not
a production increase of 13.5% in 2012 compared
at all harmful. Celestite is not a hazardous material, so it has
to 2011, reaching 46,000 tonnes of production.
zero environmental impacts. We have been very careful to
Technological advances are expected to increase
make our operations reliable and environmentally friendly,”
global demand for celestite in the coming years.
he says. Despite the changes in demand for celestite, the mining of the mineral remains a lucrative business. Minas de Celestita reported a 29% increase in production in 2012 compared to 2010, and looks set to have increased its production again in 2013. Hornedo Andrade stresses that the company’s business model is adaptable in the face of
PRODUCTION VOLUME (THOUSAND TONNES) AND VALUE (MILLION MX$) 150
40
100
46.2 40.7
75
change, and capitalizes on the opportunities to grow that present themselves. He also predicts that Mexico, and more specifically Coahuila, will continue to be the base from which the company can respond to those opportunities. “Mexico has the quality and quantity of reserves. We conducted exploration in San Luis Potosi but we found that the celestite
30 50
20 31 10
25
23
there is not as good as that in Coahuila. We will remain exploring in this state in the hope of finding some more
0.0
2011
reserves,” Hornedo Andrade concludes.
2012
0
BARITE
PHOSPHORITE
Mexico is the world’s eighth largest producer of
Global production of phosphorite was 210 million
barite, producing 139,997 tonnes in 2012, which
tonnes in 2012, representing a 6% increase
represented a value of US$14.9 million (MX$188
compared to 2011. According to INEGI, Mexico
million) according to INEGI. Barite represented 1.4%
remains the 12th largest producer internationally,
of the total production of non-metallic minerals in
with total production of 1.72 million tonnes,
the country in 2012. La Huiche mine in Coahuila,
representing a total value of US$98.5 million
property of Baramin, has reported reserves of 5.3
(MX$1.2 billion). Rofomex is the single largest
million tonnes. Production on the mine increased
phosphorite producer in Mexico, with proven
91% in 2012 compared to 2011, reaching 185,000
reserves of 40 million ounces of phosphorite
tonnes, of which only 2% was sold internationally.
concentrate.
PRODUCTION VOLUME (THOUSAND TONNES) AND VALUE (MILLION MX$)
PRODUCTION VOLUME (THOUSAND TONNES) AND VALUE (MILLION MX$)
150
134
189
140
188
200
2 1.69
120
150
1,107
1.72
1,241
1,000
1.5
800
90 100
600
1
60
400 50
30 0.0
1,200
2011
2012
0
0.5
0.0
200
2011
2012
0
Source: INEGI
261
| VIEW FROM THE TOP
PRODUCING COMPETITIVE INDUSTRIAL MINERALS LORENA LOZANO Administration Manager of INDEMEX
Q: INDEMEX has been a key player in the industrial minerals
process on that property, using a bulldozer, and that will
market since 1945. What is your perspective on current
allow us to exploit the mine once the state’s issues are solved.
trends in the industry, and INDEMEX’s role within it? A: There are two factors affecting the industrial minerals
Q: How have changes in the market in recent years shaped
market; the first is return on investment, which ranges from
INDEMEX’s portfolio and business offering?
90 to 120 days to recover operational and processing costs;
A: We provide talc for human consumption to the
the second is low margins compared with precious metals.
alimentary industry, to the fertilizer industry and for
Our company has continued producing and commercializing
hermetic solutions, but it is the fertilizer market that has
such minerals, thanks to our significant experience.
the strongest growth rate. The company has lived through several changes in market. In the 1950s 80% of our sales
Q: As an industry pioneer with extensive experience in this
came from talc and the rest was kaolin. In the past talc
market, what would you consider today to be INDEMEX’s
was used in large quantities to fertilize cotton fields in
biggest competitive advantage?
Tamaulipas and the northeastern region of Mexico, however
A: INDEMEX has three mines, which is our biggest
with the introduction of synthetic fibers for textiles, the
competitive advantage compared with other companies
demand for cotton diminished and so did the demand for
that only process or commercialize material. We also control
talc. At that time we entered the paint industry, which also
our production costs and offer more competitive prices.
required talc, but they found synthetic substitutes for it.
Throughout the years we have optimized our resources
The company readapted commercially one more time,
and have selected the most experienced and productive
and in our search for diversification the calcium mine
people for our team. Our accumulated experience and
was acquired. This expansion and increased market share
knowledge, from extraction to grinding, makes us a high
was possible thanks to the Government Trust for Mining
quality mineral supplier. Our vertical integration, from
Development (FIFOMI), which provided the financing for
our three mineral assets to our mill, makes us a more
the mine and the processing plant. To accompany this
stable company compared with those that depend on
diversification the company also changed its name in
third parties to buy minerals. In the 1980s we purchased a
2002 to Industrias Extractivas de Mexico (INDEMEX), in
Raymond Mill, which allowed us to significantly increase our
order to reflect its integrated structure and strengthen its
production and installed capacity, while also lowering our
global corporate image, in line with the company’s growth
cost per tonne. Today’s processing capacity is 2,500 tonnes
objectives. With these changes we achieved a more
per month, or four tonnes per hour, when previously it was
mining-focused image, leaving behind the specific talc
eight tonnes per shift. INDEMEX also offers a commercial
image that for many years we had been known for.
milling service to mineral producers, which today accounts for 10% of our milling operations.
Q: What are INDEMEX’s ambitions for the coming years? A: INDEMEX is looking to move its integration strategy
262
Q: What is the current rate of production at INDEMEX’s
forwards and strengthen its share of the market, providing
three assets?
finished and processed products. This is something that
A: On its three assets INDEMEX is currently exploiting talc,
we did previously with aromatic talc, and currently we are
calcium carbonate and kaolin. The underground talc mine
analyzing which product we should focus on in order to
is producing 400 tonnes per month, whereas the open
add value. Our talc mine has historically proved to have
pit calcium carbonate mine is producing 1,500 tonnes
high quality resources, and we are looking into applying
per month. The kaolin mine has a production potential of
new technology that has not been used in the past, with
800 tonnes per month but is currently undergoing safety
the aim of deepening the mine in search of mineral. We
inspections, given the problems of insecurity in the state of
know that 100m below our current production level there
Durango. In the meantime, we are in a three month cleaning
is a large talc vein, and that is what we are aiming for.
INDUSTRIAL MINERALS DRIVE GLOBAL ECONOMIC GROWTH In economic terms, the mining of industrial minerals in
more permanent, stable, and less dependent on market
Mexico generates as much wealth as metallic minerals.
fluctuations than metallic minerals. Industrial minerals are
However,
and
mined and processed in order to transform the raw ore
applications are less visible, camouflaged within the
unlike
metallic
minerals,
their
uses
into a product that can be sold in domestic and global
goods we consume on a daily basis. In economic geology
markets. Minerals have to be transported and supplied to
the majority of industrial minerals are classified as non-
direct consumer markets or to other processing plants to
metallic. They do not offer the same immediate returns as
produce intermediate products that are then provided to
metallic minerals do, but industrial minerals are as essential
the final consumers. “Geological knowledge, combined
to our lives, perhaps even more than metallic minerals are.
with an understanding of supply and demand in local, regional, national, and global markets, act as the trigger for
Even though much effort has been made to attract the
the activation of industrial mineral deposits in any country
attention of government entities and private parties to
where there is an opportunity to develop a wide range of
promote the exploration and exploitation of these mineral
industries,” García Gómez explains.
resources, their efforts have been insufficiently successful according to José García Gómez, General Manager of
Minerales Gosa detected opportunities in the industrial
Minerales Gosa, a nationwide provider of industrial minerals
minerals sector and understood customers’ needs to
in Mexico. “Experts involved in the management and
find providers that could satisfy their requirements in
applications of industrial minerals value and understand
terms of quality products and service. In order to satisfy
their contribution to industries in general, and know
the vast demand of industrial minerals, the company
they can be even more important than metallic minerals.
decided to go beyond the exploitation of its mines and
Industrial minerals are present in numerous sectors where
began purchasing minerals from producing ejidatarios
metallic minerals do not compete. Non-metallic minerals
that could supply them with the raw materials they were
generate as much value as metallic minerals do, the
looking for. “Every industry requires different minerals with
difference lies in the volumes produced,” he says.
diverse characteristics, and specifications. For this reason,
“Experts involved in the management and applications of industrial minerals value and understand their contribution to industries in general, and know they can be even more important than metallic minerals” José García Gómez, General Manager of Minerales Gosa
Industrial minerals are used in diverse industries, such as
Minerales Gosa looks every day for new strategies to adapt
the construction, pharmaceutical, and chemical sectors.
to the evolving requirements of its customers and to
The economic importance of industrial minerals lies in
comply with each and every specification they might have,”
their application in the manufacturing of a wide variety
says García Gómez. The company mainly commercializes
of durable goods, such as houses, cars, and electronics,
kaolinite, calcium carbonate, mica, talc, feldspar, bentonite,
and non-durable goods, including glass, plastic, paper,
diatomite, dolomite, zeolite, and phosphates.
and textiles, that are consumed daily. “The true worth of industrial minerals is in their massive use in different
There are a great number of non-metallic deposits that remain
industrial sectors. They are fundamental low-cost supplies
unexplored and those that have been discovered require
for the manufacturing of many products. Among their
more attention and financial support for their exploitation.
many other applications, non-metallic minerals are used
“If we continue creating strategic alliances between the
to increase volume and decrease production costs of
government and the private sector, we will be able to exploit
processed products,” García Gómez remarks. The GDP
Mexico’s immense potential. The country has a great variety
growth of developing countries results in an increasing
of minerals with industrial applications, which gives Mexico
demand for goods and services by their inhabitants,
a great advantage over many countries worldwide. It is
which in turn has a direct impact on the consumption
important to attract the attention of investors in this area
of industrial minerals. However, it is relevant to highlight
so that we can further develop the segment and strengthen
that the economic contributions of industrial minerals are
Mexico’s industrial capacity,” García Gómez comments.
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FROM HIGH QUALITY MINERALS TO HIGH QUALITY CEMENT The current use of cement in mining applications has
modern methods and the company’s focus on industrial
enabled new possibilities to reach targeted ore deposits in
mineral extraction from its quarries have allowed it to
a faster and safer manner. During the past centuries, many
guarantee that all the materials used in its products are
mining sites suffered major catastrophes due to deficiencies
consistent in chemical composition and quality.
in their construction plans and to low quality materials used. Today, the cement industry has revolutionized construction
The continuity of underground mining activities, and even
techniques and the material used offers new alternatives
the employees’ lives, rests on the mechanical resistance,
to achieve operational goals. “The use of cement in the
plasticity, settling time, durability and impermeability of the
mining industry has provided the necessary means to
cement products applied in the mine shafts. Cruz Azul also
construct deeper and safer mines,” says David Cárdenas
dedicates a lot of attention to its research and development
Flores, Corporate Manager of Deposits and Raw Materials
institute where different mixtures of materials are tested so
at Cooperativa la Cruz Azul, one of the most representative
that it can constantly innovate with its cement products.
cement companies in Mexico.
“Our main ambition is to continue developing new products to satisfy all our mining clients’ needs. We are competing
Cement is widely used in several industries, and cementation
in a very strong industry, so we want to make sure that we
has become an essential element for underground mine
are always up to date with state of the art technology and
construction; many subsurface projects would not be
we want to guarantee that all of our products are having
likely to exist without the use of this material because of
the impact we expect them to have,” says Cárdenas Flores.
unstable geological conditions found in underground mines. Nevertheless, not all cement products comply with
Cruz Azul strongly believes in the quality of its products
the standards required by the mining industry. “In order
and its innovation capacity, but it also understands that
to produce high quality cement you have to be sure that
mining clients need consistent proof of how its cement
you are extracting the best materials in a sustainable
products will perform when put to the test. For these
way,” Cárdenas Flores explains. The quality starts with the
reasons, Cruz Azul has complemented its services by
meticulous selection of the quarry where the material used
adding portable field labs which will help operators verify
to produce cement will be exploited from. “The optimization
the quality and specifications of the products on site before
of reserves and the quality of the finished products will
they are installed. “There is little room for mistakes in the
depend on an adequate preparation of the quarries,”
mining industry so it is of great importance to make sure
Cárdenas Flores adds.
that the concrete complies with the client’s specifications,
“There is little room for mistakes in the mining industry so it is of great importance to make sure that the concrete complies with the client’s specifications, because once it is installed there is no turning back” David Cárdenas Flores, Corporate Manager of Deposits and Raw Materials at Cooperativa La Cruz Azul
264
The high quality cements provided by Cruz Azul would
because once it is installed there is no turning back,”
not be possible without the use of modern technologies.
explains Cárdenas Flores. Cruz Azul’s portable labs have
Cruz Azul is currently using geostatistical software
provided a new advantage to mine operators since now
for its mineral block models elaboration, this has also
they are also able to make sure that the products have not
helped it to foresee and improve its annual mining plan
been affected by weathering during the transportation.
and exploit quarries in a sustainable way. Cruz Azul has
According to Cárdenas Flores there is no part in the
invested a considerable amount of its budget in geological
cement production process that can be taken lightly, but
exploration, which has enabled it to use diamond drilling,
he highlights the special importance of the initial stages
topographic 3D modeling and geochemical sampling, as
of cement production: “Just as our mining customers are
well as geophysical methods to explore the subsurface
looking to find the best quality ores to exploit, so are we.
deposits. “Something that really separates us from the
We want to make sure that the raw materials we use in
competition is the attention we put into the first stages
the products we provide have the characteristic that our
of the production chain,” Cárdenas Flores details. These
clients need to move their projects forward,” he adds.
| VIEW FROM THE TOP
INNOVATION KEY IN CONCRETE AND CEMENT SERVANDO VALDEZ JIMÉNEZ Division Manager Mines and New Products at Grupo Cementos de Chihuahua (GCC) Q: How do GCC’s vision and philosophy help the company
helped them to achieve this success and they answered
to stand out from its competitors?
that using our cement and concrete products to stabilize
A: GCC was one of the first cement companies to really
the building site was one of the main factors because
explore the needs of the mining industry and go on to create
they lowered rock fall accidents, a common occurrence in
specialized products based on those needs. We were able
underground mining. The fatal accident rate in the mining
to consolidate our position in the national mining industry
industry is considerably lower now. Previously there were no
as a result of our innovative products, but especially thanks
cement floors and concrete was not sprayed in mines, and
to our direct customer attention. There are currently many
though it is not a requirement this is now a recommendation
providers trying to supply their products to the sector, as
that most mining operations are following. The combination
well as cement companies trying to do things they did not
of state of the art technology and increased quality
do before, such as visiting the operations and searching for
standards are providing safety to the mining industry.
solutions. The difference with us is that GCC has been doing this for 12 years.
Q: How do the mining industry’s needs differ from those of other industries?
Q: What is your strategy to delivering direct customer
A: Cement and concrete application is similar in all different
service efficiently?
industries throughout the world. Due to productivity issues,
A: In 2002 we started providing direct customer service to
mines would rarely apply concrete inside their building
our clients at their operating sites. When mining companies
sites. Floor foundations or shafts with shotcrete meant that
saw the advantages that our visits and direct consulting
operations had to be halted for many days until the cement
could bring, they started to recommend our services to other
was solidified. This created significant complications for
companies in the region. We understood that mines had a
companies because it meant stopping production. However,
need for integral services like the ones we were providing,
mining companies have one quality that is rarely seen in
and developed a specific project to understand all of the
other industries: they are open to testing new products and
cement product requirements that could exist in the mining
technologies. Mine operators invited us to perform tests on
industry. Some of the products that helped us to acquire
Sundays during night shifts, when they were not operating.
a better position in the market were our fast set cements,
When mining companies saw that the product truly met
which few cement companies in the world provide. We had
their expectations most of them implemented it.
to survey mining operations to gain an understanding of all the issues. We designed our logistical plans to cover as
Q: What are the company’s main objectives in the Mexican
many mining operations as possible, and started by defining
mining industry, and what are its plans for expansion?
routes and specifying visiting times. During our visits we
A: One of our main objectives is to continue growing in
would generate proposals, presentations and product tests
Chihuahua’s cement and concrete industry. We recently
for the general managers and users at the mine. Thanks to
increased our production at the Chihuahua plant to almost
our direct customer service and products we were able to
900,000 tonnes, and our aim is to have the capacity to
gain many clients. The company was restructured in 2011 to
provide all of the cement required in the state. We also
launch a new division called Mines and New Products, which
made improvements to the Samalayuca plant, allowing it to
I currently coordinate.
achieve a production of 1 million tonnes.
Q: Which of GCC’s products are most in demand by the
Some of GCC’s most important projects are in the mining
mining industry?
industry. We are focusing on supplying all new projects, and
A: An example is the Palmarejo mine that just completed a
are also aiming to consolidate our brand in the US market;
year with no disabling accidents, which is very unusual. We
once the construction recession has passed, we will be
asked the management team which factors they believed
ready to supply our products and services in the US.
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| VIEW FROM THE TOP
HARNESSING THE VALUE OF SLP’S MINING SECTOR JOSÉ ANTONIO NIETO Director of Mines, San Luis Potosi
Q: Which role has the mining industry played in the
potential it is hard to find unexplored land. Canadian and
historic development of San Luis Potosi, and what have
American companies such as Newmont, Revolution, First
been the most important mining districts?
Majestic, Cordillera, Endeavour, Goldcorp, and the largest
A: In the 1500s cities like San Luis Potosi, Guanajuato,
Mexican companies such as Grupo Mexico, Peñoles and
Zacatecas, Parral and Pachuca developed following the
Minera Frisco already have a presence there.
mining activity that took place during the Colonial period. The conquistadores arrived via the Gulf of Mexico and
Q: What are the incentives offered to the mining industry
made their way to the north of the country crossing the
by the Directorate for Mining in order to encourage
“Silver Route”. In San Luis Potosi evidence has been found
exploration?
of pre-Columbian mining, from the times of the Guachichil
A: We have played an important role in the national
and Chichimeca civilizations in the District of Guadalcázar.
geological and infrastructure programs. In order to
Although the oldest mining district is Charcas, dating from
promote the state’s potential we have worked on its
1584, the state’s most relevant discovery was Cerro San
geological cartography, as well as the mineral resources
Pedro in 1592, located 6km from the closest water source,
inventory by municipality. We are among the states that
the Tangamanga valley, where the city was founded. Other
have conducted mineral cartography most extensively,
relevant historic mining districts are Guadalcazar from
with 62% of the state’s surface having been covered at a
1609, Villa de Ramos from 1630, and the Salinas district,
scale of 1:50,000 – all of this was done with the support of
providing salt to the state’s plants.
the Mexican Geological Survey (SGM).
Q: What relevance does the state’s mining production
Q: How is the Directorate for Mining driving its efforts to
have on the national scale?
continue developing the state’s mining potential?
A: In 2012 the state ranked sixth in the country, with its
A: In order to attract investment we work according to four
mining-metallurgic production valued at US$1.3 billion.
strategic pillars, with promotion being the first. We aim
Mexichem’s Las Cuevas mine is the largest fluorite mine in
to attract investment by promoting our state’s potential.
the world, making us the second biggest fluorite producer
Our second pillar is our technical and legal consultancy
in the country. We rank third in copper production, with
team, which is able to provide knowledge and expertise to
the Santa María de la Paz mine being the main producer,
the small and medium mining industry, while also looking
and third in zinc, with the Charcas mine from Grupo Mexico
after social practices. The third pillar is an updated online
being the biggest producer. We occupy the sixth place for
platform that shows all land availability. Thanks to our Mining
gold production, with New Gold’s Cerro San Pedro mine
Registry, and to the use of tools such as AutoCAD Map and
and Santa María de la Paz’s La Paz mine being the most
other programs offered by MapInfo, we are able to show
relevant. The state ranks seventh in silver production,
INEGI’s images and the current mining concessions in the
mainly produced from the central and the Altiplano
state. Anyone requesting this information will have access
regions. San Luis Potosi is also rich in non-ferrous minerals,
to the SIAM, to the SGM’s online service, and to GeoInfoMex.
such as gypsum, clay, stony materials and aggregates.
The fourth pillar is making sure that all levels of the supply chain have access to technical and legal training programs,
Q:
266
mining
keeping close relationships with scientific and technological
environment in the state, in terms of availability of land
How
would
you
describe
the
current
institutions such as IPICYT (San Luis Potosi’s Institute
for exploration and the concessions market?
for Scientific and Technological Investigation) and with
A: From the 6.2 million hectares in the state 25% are already
Universities such as UASLP (The Autonomous University of
under mining concessions, especially in the Altiplano
San Luis Potosi). We promote socially conscious mining and
region. In the Huasteca region, to the east, we find mostly
respect for the environment, with the objective of securing
non-ferrous mining, and stony terrain. Thanks to the area’s
the state’s sustainable development.
| MINE PROFILES: SAN LUIS POTOSI
1
2
SAN LUIS POTOSI 3
1
2
3
NEMISA, NEGOCIACIÓN MINERA SANTA MARIA DE LA PAZ Nemisa is located in the mining district of La Paz in the Sierra del Fraile, 187km north of the city of San Luis Potosi. Since its exploitation began in 1864, operations in this mining complex have continued uninterrupted for 142 years by the same mining company: Negociación Minera Santa María de la Paz. Its success lies in the large polymetallic ore deposits which consist of silver, lead, zinc, copper, and gold in large veins and replacement deposits. The Del Fraile mountain range is constituted by sedimentary sequences of the Cretaceous crosswise by granodiorite formations of the Eocene brining the mineralized solutions. During these formations two types of ore deposits were emplaced: a mesothermal vein of lead, silver, and zinc, 800m width and 3.5km long, and a copper calciferous skarn mineralized with copper and gold in the periphery of the intrusive body. The beneficiation process consists of a flotation plant with a capacity of 5,000t/d. In 2012 the mine produced 30,300oz of gold and 2.12 million ounces of silver.
CHARCAS, GRUPO MEXICO Charcas is a silver, copper, zinc, and lead underground mine located 110km north of the city of San Luis Potosi and 4km west of the Charcas municipality. The mining complex comprises three massive underground mines and a flotation plant. It is located at 2,140m above sea level and has a depth of 800m. The origin of Charcas dates back to 1574 when massive oxides were exploited until they were exhausted in 1583. The operation was reactivated in 1870 when large metallic sulfide concentrations were discovered. The ore deposit is placed within the Taraisis and Cupido formation which host most of the relevant mineralization of the area. The geology is characterized by elastic sedimentary rocks from the late Triassic and igneous rocks, which cover most of the region. The mine consists of silver-bearing veins and massive sulfides of copper, zinc, and lead. The main ore minerals found are sphalerite, chalcopyrite, and galena.
CERRO SAN PEDRO, NEW GOLD The Cerro San Pedro mining district is located within the Parras Nappe section of the Eastern Sierra Madre fold belt, northeast of the city of San Luis Potosi. The Cerro San Pedro deposit is characterized by an upper zone of gold-silver mineralization associated with secondary limonitic iron oxides and a lower zone of goldsilver-zinc-lead sulfide mineralization hosted by a late Cretaceous to early Tertiary age monzodiorite porphyry. Commercial production at Cerro San Pedro began in May 2007, with production expected to be between 80,000 and 100,000oz of gold and 2.25 million ounces of silver annually over an estimated mine life of 10 years. The company’s Cerro San Pedro Sulfide project, though still in its early stages, offers the potential to extend the life of the Cerro San Pedro mine through the development of a gold-silver-zinc-lead sulfide mineral resource amenable to a combination of open pit and underground mining and sulfide flotation process methods.
267
268
TECHNOLOGY & INNOVATION
9 Innovation and technology are of critical importance in mining, given their capacity to dramatically improve the performance of mining companies in two essential areas: efficiency and productivity. In Mexico technology has been as integral in locating and analyzing new deposits more efficiently as it has in unlocking the value of the country’s older mines, making the extraction of lower grade minerals economically feasible. In today’s market, which is characterized by uncertainty and thus an increased emphasis on minimizing operating costs, advancing in the areas of innovation and technology has become synonymous with success.
This chapter looks at the ways in which technology is transforming Mexico’s mining industry for the better, from increasing the lifetime of machinery and equipment to streamlining the processes and procedures a company follows. It looks at Mexico’s progress in researching, developing, and applying new technologies, as well as the strategies of the companies that are leading the way in innovation and technology in the industry.
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CHAPTER 9: TECHNOLOGY & INNOVATION 272
VIEW FROM THE TOP: Fostering Technology Development in the Mexican Mining Industry
273
Interesting Mexico’s Youth in Science
274
Maintenance and Efficiency Strategies for Productivity
276
Prioritizing Reliability in Heavy Machinery Solutions
277
VIEW FROM THE TOP: Komtrax Plus Instant Performance Data
278
VIEW FROM THE TOP: Aligning Engine Capabilities with Industry Needs
279
Design Strategy Behind the QSK60
280
The Key Attributes of Volvo
280
Focus on Heavy Machinery Investment
281
Changing the Perception of Equipment Made in China
282
VIEW FROM THE TOP: Value of Technology Drives the Success of a Global Portfolio
282
Moving the Mining Industry Forward
284
VIEW FROM THE TOP: Innovative Power Transmission Solutions
285
VIEW FROM THE TOP: Race for Efficiency in the Motor Market
286
VIEW FROM THE TOP: Total Shaft Solutions
288
VIEW FROM THE TOP: Japanese Technology Behind Steel for Mexican Industries
289
VIEW FROM THE TOP: Innovation in Air Filtration Systems
290
VIEW FROM THE TOP: Leading the Market in Weighing Technologies
292
Technology and Engineering at the Company’s Core
293
VIEW FROM THE TOP: Setting Technological and Analytical Trends
294
VIEW FROM THE TOP: Integrated High Precision Analytical Systems
295
TECHNOLOGY SPOTLIGHT: X-Ray Analysis for Mining Processes
296
TECHNOLOGY SPOTLIGHT: Integrated Lubrication Analyzer
297
Analyzing Lubricants to Lengthen Equipment Life
298
Introducing High Quality Hydraulic Hoses and Fittings
299
Information is Power in the Mining Industry
300
Transforming Mines with Satellite Communication
301
VIEW FROM THE TOP: Adding Value Through Automation
302
The Transformative Power of Technology in Mining
303
VIEW FROM THE TOP: Real Time Business Intelligence Solutions
271
| VIEW FROM THE TOP
FOSTERING TECHNOLOGY DEVELOPMENT IN THE MEXICAN MINING INDUSTRY GUSTAVO ORTEGA GÓMEZ President of the Camimex Technology and Innovation Commission Q: What are the main technological requirements in the
A: Conacyt, as the government agency that promotes
global mining industry and how is Mexico positioned to
technological
compete at the international level in this area?
dedicate 1% of their revenues to research and development.
A: Obtaining certain minerals requires more complicated
Investments made by domestic companies do not meet
exploration techniques, and mining companies need
this figure, except in the automotive and pharmaceutical
to use more advanced technology to facilitate the
industries,
exploration and exploitation of mineral deposits. Given the
percentage of their revenues to this area. Unfortunately,
industry’s need to increase the profitability of mining and
the mining industry is not a priority for Conacyt or the
metallurgical processes, secondary recovery measures are
federal government, as the disappearance of the Mining
being applied to larger quantities of minerals that were
Ministry demonstrates. However, Conacyt wants to see
previously neglected. In order to become more efficient
more financing of projects that are linked to research
and sustainable, the use of technology is becoming more
centers, mainly through universities. Camimex is involved
and more frequent in mining. The industry has been widely
in different research activities to provide greater value to
defamed in Mexico, as well as in other countries, in this area.
certain materials that have already been developed. These
This has contributed to more responsible practices to look
efforts have already produced two patents, and some of
after employees and the environment. All of the companies
the companies that are part of Camimex receive Conacyt
that are affiliated with Camimex, which represents 93%, are
grants, which have also generated patents. In the last
focused on increasing the use of technology to improve
three years Camimex put out a tender for 10 projects and
the sustainability and profitability of their operations.
Conacyt backed eight, of which the copper concentrate
investment,
which
suggests
traditionally
that
designate
companies
a
higher
leaching and bioleaching projects particularly stand out. Q: How much of the total investment in the Mexican mining industry in 2012 went towards technology and
Regarding the use of energy, Camimex’s Energy Commission
innovation?
and Innovation and Technology Commission promotes
A: It is difficult to define what percentage of investment
sustainable energy use and production among its members.
went specifically to innovation and technology. The level
For example, Peñoles has an 80MW wind farm, Grupo
of investment in technology is different for every mine
Mexico is constructing one of 75MW, and Minera Autlán has a
because it depends on the particular characteristics of each
mini-hydro power plant. Minera Mexico just finished the first
one. Large mining companies that are established in Mexico
stage of a 500MW state of the art combined cycle power
tend to invest at least 15% of their budget in technology.
plant in Sonora. It is expected that the first 250MW will start
The use of software and other technology during the
being supplied to the Buenavista del Cobre and Nacozari
exploration stage is more common now, as are financial
mines this year. This is a good start, but it is definitely not
feasibility studies for discovered deposits. For example,
enough. This year Buenavista del Cobre produced 200,000
with current geometallurgical techniques companies can
tonnes of copper, and it is predicted that by 2016 it will be
define the recovery process more effectively. Technology
producing 500,000 tonnes annually. With this expansion,
is also applied to minimize safety issues, for example in
the 500MW generated by the combined cycle plant will
rock stabilization in underground mining or slops in open
not meet the demand on the mine. For example, we are
pit, and to preserve the environment. Camimex promotes
contemplating substituting diesel or fuel with solar energy
these practices because technological investment pays for
for the heating of fluids. Regarding more efficient water
itself and offers a very fast ROI.
usage, Conagua has made important progress in optimizing the reuse of water in mines, and by building water treatment
272
Q: What are the roles of the government, research
plants in towns close to mines such as those in San Luis
centers, universities, and the private sector in innovation
Potosi, Torreon, and Guanajuato, to treat the municipality’s
and technology development?
water for use in mining processes.
Q: Most technology is imported into Mexico. What are
perfecting safety conditions by improving transportation
the main barriers for developing technology locally, and
and the use of instruments to detect operator fatigue and
what is Camimex’s strategy for developing domestic
avoid trucks falling into the pit, resulting in the loss of
technological knowledge?
human life as well as financial losses. In terms of safety,
A: There is a lack of specialized human talent in mining
Camimex organizes seminars that help its members’ safety
and as a result of the current boom in the industry we are
managers. Camimex encourages the use of technology
facing a shortage of specialized technicians. For this reason
among its members with the aim of reducing safety
Camimex created the Education Commission, which looks
hazards and environmental damage.
to raise students’ interest in the industry. Camimex offers scholarships to top students who wish to specialize in the
Q: What is your outlook on future technological
sector, so that they can stay in the country and contribute,
development
through their work, to increasing human capital in Mexico’s
are
mining industry. Camimex is also participating in the
development?
creation of mining clusters, such as the ones in Zacatecas,
A: Camimex wishes to lead technological development
Chihuahua, and Coahuila. These clusters are work teams
in the mining industry and guarantee that all member
made up of people from universities, companies and public
companies are at the same level, because the image of the
institutions that, in addition to coordinating technological
whole sector is affected by the practices of any companies
development in the region, also invite suppliers to
that are lagging behind. Our perspective is that the industry
establish operations locally in order to reduce the import
will become more technologized. The timing is ideal, since
of equipment and infrastructure.
the market encourages technological development and
for
Camimex’s
the
mining
ambitions
for
industry,
and
contributing
what
to
this
most companies are investing a lot in new technologies Q: Which of Camimex’s innovation programs are currently
and equipment. It may not have been developed in Mexico,
having the greatest impact on the competitiveness and
but it is being used here. Mexico is a country that stands
safety of the industry in Mexico?
apart as a result of its creativity and inventiveness. The
A: Underground mines pose a higher risk of terrible
mining industry is not an exception. There are examples
accidents. Using new technologies, any movement can be
of equipment being brought from abroad and being
detected and the collapse of the rock can be avoided by
improved by Mexican workers, with the original company’s
conducting the required strengthening work. Technology
technicians then taking those improvements, patenting
also makes it easier to locate workers by improving
them, and selling them. Grupo Mexico has a technology
communication inside a mine, as well as introducing
management program that collects and registers all
automation processes that reduce risk exposures. In open
innovative ideas. We are sure that, in the short term, there
pit mines technology has contributed enormously to
will be more patents made by Mexicans.
INTERESTING MEXICO’S YOUTH IN SCIENCE NAFTA spurred the creation of the United States-Mexico
world we live in. This interest, Lomelín stresses, holds the
Foundation for Science (FUMEC), which in turn established
key to innovation. “You cannot improve something that you
Innovation in Science Education (INNOVEC), a nonprofit
do not understand. Similarly, we cannot move forward as a
aimed at fostering scientific research, innovation, and the
society if we do not comprehend the important relations
improvement of science education in Mexican schools. Over
between science, technology, and innovation. We think
the past decade INNOVEC has trained over 30,000 teachers,
that every citizen has the right to receive high quality
benefiting a yearly average of 425,000 students in many
scientific education, regardless of their occupation or career
regions of Mexico. Its current President, Jaime Lomelín,
choice,” he says. “This is essential for the construction of
proudly represents the mining industry’s contribution in this
a democratic society. We need an informed citizenship: a
honorable educational effort. INNOVEC’s teaching strategies
participative and motivated society, capable of resolving
are put to use in programs that take advantage of children’s
communitarian
curiosity for the learning of natural sciences: Experimental
sciences, we also build our nation’s human capital, making
Education Systems and Investigative Science (SEVIC).
Mexico more competitive in the process and improving
INNOVEC believes that an active, pupil-centered education
the goods and services we produce. An inquisitive, team-
generates an interest in understanding and reasoning the
working, problem-solving society is crucial to this country.”
problems.
By
educating
students
in
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MAINTENANCE AND EFFICIENCY STRATEGIES FOR PRODUCTIVITY Because mining companies lack control over market prices
conducts research internationally in order to enhance and
for the metals and minerals that they produce, they must
improve its systems. “As a part of our PTI division we have
control their profit margins in the only way they can - by
a system which audits the whole mining process, all the
improving the efficiency of their operations to minimize cost.
way from the blasting stage to the production of the final
Inefficient production processes, dilapidated machinery and
product. We can increase production from 5% to as much
outdated technology inevitably put pressure on a company’s
as 30%, just by improving the process, while using the
profits, the strain of which is particularly apparent at a
same equipment,” says Lindholm. This increase in system
time when mineral and metal prices are dropping, whilst
efficiency lowers the energy intensity of production for its
operating costs have increased. Metso Corporation’s main
customers, and since power is one of the biggest costs for
objective is helping its customers to improve efficiency and
mining companies this provides the opportunity to radically
ultimately productivity through a portfolio of products that
reduce energy costs as well as the environmental impact of
improve the grinding, milling, screening, and transportation
mining operations. Metso also helps mining companies to
of minerals in the mining industry. The company has worked
reduce their water consumption through a water filtration
with some of the country’s biggest mining companies, such
system that not only recycles water, but also filters out
as Grupo Mexico, Minera Frisco, and Fresnillo, offering its
chemicals that are hazardous to the environment.
portfolio of integrated solutions to help streamline their systems and processes, thus boosting production. Leif
Gaining an understanding of every process in a customer’s
Lindholm, President of Metso Mexico, says that through its
operations is critical in identifying the areas of the process
‘fixed production cost’ structure, the company creates its
that can be optimized. A good example of Metso’s success
own incentives to deliver the most impactful and efficient
in this area is its collaboration with Grupo Mexico on the
solutions for its clients.
restoration of the Buenavista del Cobre mine in Cananea.
“We can increase production from 5% to as much as 30%, just by improving the process, while using the same equipment” Leif Lindholm, President of Metso Mexico
Metso Mexico installs and, through service contracts,
Metso worked with Grupo Mexico to bring the mine back into
conducts inspections of its customers’ machinery with the
operation after it had been closed for three years, resulting
aim of preventing breakdowns. The concept of preventative
in much of the machinery being destroyed or missing parts
maintenance
mining
or cables. “The first thing we did was to send 150 people to
industry, although mining companies sometimes require
Sonora to look at the machinery, assess what needed to be
convincing in order to see its longer term financial benefits.
done, clean up and help to get the mine started. This step by
“Preventative maintenance is often considered to be a cost,
step process took about 10 months,” explains Lindholm. The
and in order to persuade our customers about the merits of
collaboration proved fruitful, and Metso continued to work
preventative maintenance we need to present the figures,
with Grupo Mexico on the expansion of the mine, supplying
as well as concrete arguments for the outsourcing of this
and servicing its crushing and grinding machinery, mills,
activity to a service contractor. A breakdown in a mine site
pumps, and feeders. Metso is currently in the process of
nowadays represents a cost of many thousands of dollars
opening a new service hub in Cananea, which will serve
an hour; in the end, the cost of replacing a spare part or a
the Buenavista del Cobre mine as well as the many other
machine is nothing compared to the cost of downtime and
mines that operate in the region. The aim of the service
loss of production,” Lindholm states.
hub is to bring Metso Mexico’s services closer to its mining
is
increasingly
adopted
in
the
clients, many of which are based in that northwesternmost
274
Metso Mexico relies on its international expertise to
region of Mexico. This will improve the company’s services
creating the machinery and solutions that can most
to the mining industry, in the same way that the company’s
effectively increase efficiency, as well as its broader
service hub in Chile has for the Antofagasta region. The role
corporate technology and innovation program. Through
of the hub is to service the company’s products through
its Process, Technology and Innovation (PTI) team, Metso
a workshop for the repair and replacement of rubber
coverings, pumps, screens, and smaller equipment, though larger equipment will still be repaired on site, because
METSO AT BUENAVISTA DEL COBRE
of the cost of moving it into the workshop. Lindholm is
Since 2010, Metso has played a key part in the
confident about the opportunities that suppliers like Metso
restarting of the Buenavista del Cobre copper
provide for manufacturers that are based in Mexico. Apart
mine following three years of inactivity. After
from mill linings and some manufacturing that is currently
supplying crushing equipment and services,
done through Mexican sub-suppliers, Metso currently
Metso is now participating in the expansion
sources its products from abroad. However, the company
of the mine and has entered into a life cycle
is looking for opportunities to increase the proportion of its
service agreement for the plant. In order to
products being manufactured inside Mexico. “In the coming
support its activities at Buenavista del Cobre,
years we aim to start manufacturing big steel structures
Metso has opened a service hub in the town of
and components locally. We are not investing in our own
Cananea. This 8,000m2 facility will also enable
plant, but in sub-supplying. As up to 90% of the equipment
Metso to expand its capabilities and provide
used in Mexico’s mining industry is imported, both mining
local support to mining companies across the
companies and suppliers like us face a big challenge. By
northwest, including major copper and gold
manufacturing equipment with sub-suppliers, Metso Mexico
mines in the region, such as Minera Frisco’s San
will hopefully create an interesting opportunity for greater
Felipe, Peñoles’ Milpillas, and Grupo Mexico’s
development throughout the mining industry’s local supply
Mexicana de Cobre.
chain,” says Lindholm.
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275
PRIORITIZING RELIABILITY IN HEAVY MACHINERY SOLUTIONS The
Manuel Félix, Operations Vice President of Road Machinery
any
it is a fully integrated products and services provider
mining company depends
efficiency
of
focusing on the Komatsu brand, a Japanese manufacturer
heavily on the efficiency of
that has been in the business for almost a century. “Being
its suppliers – weak links in
a distributor of Komatsu heavy machinery is already an
the supply chain can put
advantage, since Komatsu’s reputation speaks for itself.
a halt to operations, thus
The brand is very reliable and is subject to many quality
decreasing the company’s
tests, helping it to remain a pioneer in this industry,” says
overall productivity and
Félix. “Road Machinery has successfully leveraged the
profits. “The reason why
quality and reliability of Komatsu machinery to build its
our customers prefer our
own name, and today the company has corporate offices
company is our reliability,”
in Mexico City, a sales office in Hermosillo, and two service
says Manuel Félix, Operations Vice President of Road
centers in the cities of Cananea and Saltillo. The company
Machinery. Part of the company’s strategy to maximizing
also has direct service offices in the mining projects it
the reliability of its equipment comes in the form of the
works on, for example at Goldcorp’s Peñasquito and Grupo
MARC contract it offers. Through the contract the company
Mexico’s Buenavista del Cobre.”
guarantees the availability of specified equipment or machinery and agrees a preventative maintenance plan for
Road Machinery also benefits significantly from the close
each piece of equipment in the mine. The MARC contract
relationship that it has with its parent company, the holding
is the most comprehensive maintenance scheme that the
company Mitsui. Félix compares the role that the Mitsui
company offers, though it provides many different levels of
group has played in Road Machinery’s development to that
post-sale service. “The basis of any contract is to reach an
of a mentor: “The Mitsui group has extensive knowledge
agreement by which both parties benefit. A contract should
in various sectors, and for Road Machinery Mitsui has
always be guided by the win-win idea,” explains Félix.
been like a leader, providing confidence, promoting good character and looking out for our safety. At the same time,
Its commitment to the post-sale service is considered by
Mitsui has given us the freedom to experiment and gain
Félix to be the company’s pillar of success. “Road Machinery’s
knowledge individually. We are now specialists in a very
comprehensive service after sale or within a lease agreement
important and strategic sector, and we know that Mitsui
is remarkable. We focus our efforts on availability and
will support us and help us to become as successful as it
reliability, and cost reduction, and have skilled and specialized
has been.”
labor to attend to any complications with the equipment that we supply. Our two parts and repair service centers,
Looking forward, Félix highlights the importance of
or electromechanical workshops, combine quality and
continuously striving to be a leader in this field, and of
professionalism to provide immediate and accurate solutions
remaining committed to the development of the mining
to our customers. The centers are located strategically in
industry. This concept of continuous improvement is
Mexico, and the service is provided by technically certified
well understood by Road Machinery as something that is
personnel,” says Félix. Through its post-sale service the
essential for the company to continue delivering greater
company also analyzes internal and external processes
efficiency and reliability for its customers. “To achieve this
related to its customers’ machinery, working together to
we need to cover more areas of function and knowledge.
understand their expectations and short and long term goals.
We realize that this cannot happen overnight. It is a process,
The collaborative element of Road Machinery’s approach is
and one that we are certainly working on,” says Félix.
considered by Félix to be essential.
Achieving maximum efficiency remains a key component if this goal is to be reached, and technology has its own
276
Road Machinery’s first contact with Mexico’s mining
role to play here. The company currently uses Payload,
industry was supplying the Cananea mine in 1978. However,
Komtrax
the company’s first real presence in Mexico came much
programs that allow more efficient operations not only in
later in 1991, when it opened an office and a warehouse in
collecting hauling data and monitoring the condition of the
Cananea, with 13 staff members selling equipment, parts,
machinery, but also in controlling equipment via remote
and services to mining companies. The company expanded
control. “These systems have facilitated the quality of our
into the rest of Mexico in 1996, when it established
operations, keeping us informed and synchronized with
administration, sales, service and parts departments for
our clients’ operations, and helping us to be a decision
trucks, loaders, excavators, and other equipment. Today
facilitator,” says Félix.
and
Komtrax
Plus,
sophisticated
software
| VIEW FROM THE TOP
KOMTRAX PLUS INSTANT PERFORMANCE DATA ALEJANDRO NAVARRO TOVAR Mining Service Manager at Makomex-Komatsu
Q: What role does Makomex play in the distribution of
in the construction market, and in mining it is known as
Komatsu products in Mexico?
Komtrax Plus. Thanks to this system we are able to monitor
A: In 2008 Marubeni Corporation, the Japanese company
the performance of every component and system in the
that owns Makomex, bought the Houston-based company
entire unit, allowing for better control, faster maintenance
WPI, acquiring with it the distribution license for Komatsu
diagnoses, and therefore diminishing down time on
in Mexico. Komatsu has three distributors in Mexico;
machinery. Among other features, our clients can access
Makomex distributes small to medium-sized and mostly
technical and operational data relating to the units, such
electric mining machinery of up to 100 tonnes, covering the
as the quantity of material being loaded or the length of
region from Baja California down to Oaxaca and Veracruz;
time it is idle for. Thanks to Komtrax Plus we know how
Road Machinery distributes electrical equipment for
the engine, the convertor, the transmission, the hydraulic
mining starting at 183 tonnes; and Equinova covers mostly
system, and other systems are working. Manually, this
the construction market. Komatsu’s distributors work very
service would take on average 10 hours. The goal is to be
hard to become deeply involved in the different areas of
able to provide maintenance before the unit fails, and in
product support. Today, Makomex has mining clients in
the fastest possible time. Historically, major maintenance
the states of Colima, Michoacan, and Hidalgo, and we also
was programmed to be performed on the units after
have total responsibility for subcontractors in the states
10,000 hours of work, and it was later increased to 15,000.
of Baja California and Sonora. Our role on each contract
Thanks to the precise data that Komtrax Plus provides,
is not only to have 100% product availability, but also to
Makomex now suggests major maintenance services to
provide reliable equipment. Oil leaks, malfunctioning
be carried out after 18,000 hours of work. We no longer
hydraulic systems or bolts wearing down are examples
have to disassemble the whole unit because we have up
of unacceptable product failures. Our success is based
to date information on the performance levels of every
on providing reliable products to our mining clients, and
component in the unit and we are able to treat problems
in order to fulfill that role we take care of key elements
both in advance and in a shorter time frame. In this area
such as regular operational training, maintenance planning
Makomex has a direct impact on its clients’ profitability.
and
programming,
performance
of
all
programmed
maintenance via daily inspections and failure detection,
Q: What are Makomex’s ambitions to strengthen its
creating a good working environment, and providing
position in the Mexican mining industry?
specific tools for diagnostic and predictive maintenance.
A: Marubeni Corporation is already creating an advantage
In Mexican mining the products that are most in demand
in the market and simplifying the service to our clients
are rigid trucks, wheel loaders, hydraulic excavators, and
through its extended service network of 12 offices and
mobile tractors.
five service centers throughout Mexico. Our efforts in training people are key to achieving continued growth,
Q: How does Makomex’s product and service offering help
and we therefore continue to provide operational training
the company’s customers to minimize maintenance costs
programs with the aim of securing the performance of
and improve environmental performance?
our equipment. The company offers a diverse portfolio
A: Makomex is earning its clients’ trust by perfecting its
of services, providing different solutions that respond
service in all of their maintenance matters, allowing the
to whatever the needs of our client may be. Makomex
client to focus on its main business of mineral production.
is working towards establishing a stronger position in
We perform programmed maintenance that includes
the market, based among other elements on a product
preventative actions, machinery inspections and failures
support strategy that reinforces the concept of reliability,
being reported via our satellite system; satellite equipment
and through our team of applications engineers, whose
monitoring is the biggest advantage that Komatsu has
responsibility it is to match our technology with our clients’
over its competitors. The system is known as Komtrax
requirements to find the lowest operational costs.
277
| VIEW FROM THE TOP
ALIGNING ENGINE CAPABILITIES WITH INDUSTRY NEEDS IGNACIO GARCÍA ALBARRÁN Vice President Mexico & Central America and Director General Mexico of Cummins
Q: How is the Latin American division of Cummins
The Cummins business strategy is based on four principles:
contributing to the global objectives of the group?
first, collaboration with equipment providers, with whom we
A: Cummins is divided into four business units: engines,
work as one team so as to guarantee the greatest efficiency
power generation, components such as filtration systems,
in the units; second, ensuring the supply of the required
and distribution. In order to strengthen our service we are
inventory and personnel directly to the mine; third, providing
positioned in strategic regions providing solutions to our
training sessions to the clients that require our equipment
clients. Our service network in Mexico and Central America
but not our services; and fourth, supporting our clients with
is composed of 6,000 employees, five manufacturing plants
three rebuild centers located in Merida, Hermosillo and
and two distribution centers. Our distribution network is
Denver, at which we guarantee immediate repair.
strategically positioned to service the entire Mexican and Central American region. This year’s sales in Mexico will reach
Q: How are you collaborating with your equipment
around US$800 million, and we are also planning to increase
providers to deliver the final product as one reliable unit?
this to US$1.1 billion in the coming three years. Cummins
A: We work with our equipment providers to align Cummins
is currently purchasing US$700 million locally, of which
capabilities with mining needs, building in-house technical
US$400 million is exported to the US, and the remainder is
capacity to deliver customized, mine-specific solutions
used in our national plants. Most of our purchasing growth
and services no matter the hour, weather or location. One
will come from forgings, filtration, raw material, electrical
of Cummins’s strongest commercial allies is Komatsu;
harnesses, castings, and products relating to the treatment
together we created a company called Cummins-Komatsu,
of the engine’s exhaust system.
in which Komatsu uses specific Cummins technology, assembles it, and puts the original Komatsu plate on it, as
Q: What are the main strengths that enabled the company
if it was built by them. Cummins does the same thing. We
to become a national leader in engines and power
have other strategic commercial alliances with companies
equipment?
such as Ingersoll Rand, Atlas Copco, Agrekko, Liebherr,
A: Cummins entered Mexico 50 years ago through a
Belaz, Hitachi, and even Caterpillar, as well as with some
partnership with the Mexican-owned company DINA, and
Terex and Bucyrus equipment, mostly shovels. Most of
was originally established with a view to serving the heavy
these companies use only our engines, and through them
duty truck market. However, our product offering and
we reach the country’s largest mining companies, such as
technology leadership allowed us to serve other markets
Grupo Mexico, Goldcorp, Minera Frisco, and Peñoles.
such as mid-range trucks, buses and off-road vehicles,
278
which are often required in mining. Our ISX and ISM
Q: Cummins’s motto is ‘The right technology for our
products are the most widely used products in the heavy
clients’. How is Cummins satisfying the exact needs of its
duty truck market, and so far in 2013 we have proved to
clients while also contributing to their profitability?
have a strong market share of 88%. The ISC and ISB motors
A: Among many other applications, today Cummins
that Cummins has developed have a 38% share of the mid-
provides solutions on shovels, haul trucks, front loaders,
range market; our engines have a 12% share of the urban
drills, and excavators. The engines provided for mining are
bus market; and our power generators have a 60% market
designed in our design centers in England and in Columbus,
share. Today, we believe our technology will allow us to be a
Indiana. We design our engines according to the work
leader in natural gas engines for buses in the city and power
cycle of our clients. Our people perform on-site analyses
generators in co-generation, providing superior economic
to understand the mine conditions, such as the surface and
alternatives with improved emission controls. Natural gas
terrain to determine the levels of vibration required by the
will be a distinctive strength that will allow us to maintain
unit, and based on this they propose the right equipment,
our leadership in the different segments of the market.
in some cases meaning equipment with lower yet sufficient
horsepower and lower costs. Close collaboration with the
which included around 500 community activities. There
truck constructors is important as we test the equipment at
are three areas of focus for the foundation: education,
our clients’ sites, determining case by case the right torque,
environment, and social justice. According to these criteria,
power or rpm for the equipment. Filter technology is another
and by number of projects, we make an annual investment
area of cost saving, and we design and manufacture the
in these projects. One of the most interesting projects
highest quality filtration systems that prevent any particles
is providing job opportunities to around 200 disabled
from entering the engine, as well as providing a quality
people. Within this group there are six companies making
maintenance service that extends each filter’s life.
products such as uniforms, promotional products and providing cleaning and gardening services, for example.
Q: How is Cummins’ regional structure supporting its
All profits go to the Cummins foundation to support its
reputation as a provider of reliable and dependable
activities. The Foundation is called Cummins Philanthropic
products?
Enterprises (CEFI), and it employs the people that work
A: Having a regional structure allows us to make decisions
for it directly.
about our resources for the whole region. In the case of our Mexican and Central American region, we have been
As for the environment, we have three main projects where
able to provide the best service to mines in the states
we have made the biggest impact. The first is the creation
of Guerrero, Zacatecas and San Luis Potosi, as well as in
of ‘Eco-Clubs’, which are educational groups in schools in
Panama. Our clients know they can depend on Cummins
which we teach children and their parents how to recycle,
whenever their machinery breaks down, or for product
separate organic from inorganic waste, use less energy,
maintenance. Our people are also key to providing such
and so on. Secondly, we have entered into an agreement
a reliable and dependable service, and for that reason
with the University of San Luis Potosi to create a natural
Cummins’ human resources department provides regular
water filter that will clean one of the city’s main lakes, in
professional and technical training sessions for employees.
the process hopefully creating a technology that will be replicable abroad. Finally, Cummins has acquired some
Q: What is the company’s strategy to improving the
land in the Sierra Gorda of Queretaro for preservation
quality of life of its people and community?
purposes, and to measure the effect of carbon dioxide
A: Cummins has a foundation in Mexico that last year carried
emissions. Cummins is financing all three projects as a part
out 28,000 volunteer hours in nonprofit social programs,
of its commitment to the environment.
DESIGN STRATEGY BEHIND THE QSK60 Mexico’s mining companies are focused on the performance
loaders worldwide, with proven reliability and excellent
of their equipment and the capacity of their manufacturers
serviceability. The company also highlights the robust
to provide improvements in the areas of service, quality,
design, large diameter journals that support a stiffened
cost and lead times. Mines also want to maintain stability,
crankshaft with lower torsional stress, and an extra-wide
avoiding the involvement of multiple parties, so as to reduce
design that has high-contact spur gears, allowing the
disruption and inconsistency across their operations.
machinery to handle bigger, heavier loads. Having been designed for multiple rebuild cycles, the QSK60 engine has
Cummins’s strategy to becoming the best power provider
the best warranty in the business, offering full engine coverage
in the market is based on bringing improvements to its
for the first year of operation regardless of the number of
customers’ operations and improving the operational
hours of operation; full engine coverage in the second year
efficiency and technical capacity to diagnose problems,
is also valid for up to 2,000 hours of total operation; and a
and repair and rebuild engines. Cummins has a broad
major components coverage program for three years, up to
and highly capable customer support network, with
a total of 10,000 hours of operation. The company can also
550 distributor locations, 5,000 dealer locations and 13
go further, with flexible extended warranty plans that enable
regional parts distribution centers worldwide, ready to
the customer to choose the best coverage for its operations,
support each engine on a mine site. In order to reinforce
either by extending the first year of unlimited hours and full
these services Cummins has designed the QSK60. Based
coverage to the second or third year, or by specifying the
on quantum technology, over 1,700 QSK60 engines have
number of annual hours the company would like full coverage
been installed on mining haul trucks, excavators and wheel
for in the second or third year.
279
THE KEY ATTRIBUTES OF VOLVO Ascendum, Volvo’s distributor in Mexico, modifies its
also send a notification if the operator is using the equipment
machinery and equipment in order to meet the requirements
in an improper way. This is very important, because it allows
of its mining customers, and works closely with those
owners to identify training needs. The system can also be
customers in order to understand exactly what modifications
programmed to trigger an alarm if the equipment leaves a
will be required given the working conditions. “We need to
certain perimeter. Essentially, it helps to maximize efficiency,
know how many hours they will be operating, and if it is
drive cost savings and identify training needs,” says Liz
going to be a dusty, hot or humid environment,” says Marco
Cifrián. Through its full suspension technology the company
Liz Cifrián, CEO of Ascendum Mexico. “We have articulated
also administers the distribution of hydraulic pressure in the
trucks for open pit mining, but they can be modified by
wheels of articulated trucks. “The computer analyses the
lowering the chassis to comply with the requirements for
features of the terrain, loading or unloading the pressure to
working underground. The customization of equipment
maximize efficiency. This increases the speed with greater
really makes a difference for mining companies.” Ascendum
safety, resulting in cost savings, since the system is adjusting
offers an onsite maintenance service to gain proximity to its
to perform better,” adds Liz Cifrián.
customers and overcome the logistical problems resulting from mines being located far away from the nearest town.
The Ascendum Group is a multinational corporation based
“Because machinery that is being used in mining operations
in Portugal, with 54 years of history in the heavy machinery
is really put to the test, we have to be sure that we can
business and over 25,000 operating machines around the
reach their locations promptly and with all of the equipment
world. In 2012, the company established its presence in
needed to perform repairs. Ascendum has onsite branches
Mexico. The mining industry currently represents close
for customers in Coahuila and Veracruz, which are essentially
to 25% of Ascendum’s total sales, after the construction
a container with spare parts for servicing the machines we
industry which represents 50%. With distribution centers
have working inside the project,” says Liz Cifrián.
in Mexico City, Monterrey, Veracruz, San Luis Potosi and Guadalajara so far, the plan is to open around 20 more
A unique feature of Volvo products is the Care Track
branches in 2014. “Ascendum’s mission is to consolidate the
technology, a monitoring system that works through GPS
Volvo brand in Mexico using our experience, our knowledge
signals, reading and recording everything that the machine
and the know-how that we have accumulated over the years
does. “It is an intelligent system that communicates the
working in several countries,” says Liz Cifrián. “Ascendum
performance of the machine with central control, and will
has defined mining as a critical opportunity.”
FOCUS ON HEAVY MACHINERY INVESTMENT Mining operations incur significant startup costs, and the
brand Shantui in Mexico. “Although this company is Asian
investments that must be made in heavy machinery are
the majority of the parts come from Germany, Brazil,
particularly large. Nevertheless, money saved by buying
and the US, as well as from China,” says Orozco Álvarez.
cheaper equipment will often prove to be more costly further
“Since the components are from internationally renowned
down the line due to repair or maintenance downtime,
brands such as Cummins, Mitsubishi, Isuzu, Bosch Rexroth
and stalled operations. MAQTEC, a heavy equipment
and Kawasaki, our customers can find them in any part of
provider based in Guadalajara, Jalisco, has come up with a
Mexico and do not need to get special parts from China if
number of solutions to help mining companies reduce the
something breaks,” adds Ana Paola Orozco Peña, General
financial burden of starting out in the industry. “Buying the
Manager of MAQTEC’s International Department
necessary heavy equipment can represent an investment
280
of millions of dollars in the first two months,” says Marco
Shantui now has a bulldozer manufacturing plant in
Orozco Álvarez, CEO of MAQTEC. “The idea is to spread
Atlanta, Georgia, and MAQTEC is currently processing the
out the cost and expand the sources of credit.” To this end,
permits required to assemble bulldozers in Guadalajara,
the company offers payment plans for its customers that
which will allow the company to lower its costs and meet
extend over 24 months, or longer if necessary, as well as
increasing market demand, both in Jalisco and further
offering its equipment on a rental basis rather than for
afield. “For MAQTEQ, Jalisco represents an excellent
purchase. The products that MAQTEC distributes that are
opportunity because of its growing status as a center for
most in-demand by the mining industry are bulldozers and
mining. We always work with new mines, and there is an
tractors. The company distributes a number of different
impressive number of mining projects in the region,” says
brands and is the exclusive distributor for the Chinese
Orozco Álvarez.
CHANGING THE PERCEPTION OF EQUIPMENT MADE IN CHINA Chinese products have long suffered from a low quality reputation. As the Asian giant develops into one of the world’s leading economies, the manufacturing sector has gradually improved the quality of its products in order to compete in the international market. Nevertheless, bad perceptions of Chinese equipment still haunt the market. LiuGong Machinery, however, has successfully been able to take a share of the construction and mining market because of the quality of its products and the customer service that it offers. “We have to work hard to improve our
LEFT: Dai Wuping, General Manager of LiuGong Mexico RIGHT: Sergio René Zazueta Alarid, Director General of Ammex LiuGong
brand image and prove to our customers that we have the highest possible standards,” explains Dai Wuping, General
company’s technicians are available 24 hours a day to
Manager of LiuGong Machinery Latin America. “We entered
conduct maintenance on the machines at the customer’s
the Mexican market in 2007 and the hard work of our team
mine site. “This is something that is very important for our
has made our brand very popular in Sonora and Sinaloa.
customers, since we provide fast solutions for unexpected
People are now aware of who we are, and old and new
issues, avoiding downtime in the operations and therefore
customers keep using and buying LiuGong equipment,
saving our clients a lot of money,” he says.
which is proof of our great support service and reliable equipment.” Holding the ISO 9001 certification is also
An important challenge that LiuGong faces in Mexico
a testimony of the company’s good performance. When
is the sale of used machines that are brought in from
customers know that the company has this certification,
the US. After being used for two or three years, some
their confidence in LiuGong’s products immediately grows,
machines are sold within the Mexican market for a very
and potential and existing customers know that they can
low price which, as an alternative and cheaper option for
rely on the quality of its products.
purchasing new equipment represents direct competition for the company. To overcome this challenge, LiuGong
Wheel loaders are LiuGong’s core products, and the
has improved its services and maintenance programs; this
company is the biggest manufacturer of these types of
makes the company more competitive because most used
machines in the world, competing with other brands to
machines are bought from the auction market and thus do
offer different variations and sizes to the market, from 1
not come with additional maintenance or service. “In the
to 6m3. According to Dai, these machines can operate in
end, even though the secondhand machines themselves
the toughest environments, with very competitive fuel
are very cheap, the companies that buy them at auctions
consumption and productivity compared to rival products
pay a lot of money to buy spare parts,” says Dai. “LiuGong
in the market.
follows up with its distributors to make sure that each machine is taken care of, and if spare parts are needed
“Maintenance service is another advantage that LiuGong
we supply them in a very short period of time in order to
offers,” adds René Zazueta Alarid, Director General of
avoid downtime at mines.” In order to fulfill this promise
Ammex, LiuGong’s distribution center in Mexico. “Our
it is essential to have spare parts available. The company
product availability is higher because of the fact that we
requires all of its distributors to have enough stock in their
manufacture different products for specific markets.”
inventories, but it also has the added advantage of being
For example, the wheel loaders available in Mexico are
able to ship spare parts from its main facility in Houston
customized to operate in the Latin American market under
within one day: “We also have a distribution network for
uniform specifications, and as such are developed to
Latin America with facilities in Brazil, Argentina, Chile and
satisfy the local needs. “They may not be as sophisticated
Peru. If any of our customers need spare parts for any of
as our competitors’ machines, but this also means that our
our wheel loaders, we are able to respond from a number
products are sold at a lower price. One example is that
of different centers,” emphasizes Dai.
the diesel produced in Mexico may not be of the same quality as that which is produced in the US, so the engines
“Our mission in the next five years is to become a top brand
distributed in Latin America will be customized according
in this industry, increasing our market share by at least 10%
to the kind of fuel that is used in the region. Since there is
to 15%. We are also planning to build a manufacturing plant
no need for additives, operational costs are thus reduced,”
in Mexico that will supply machines for Mexico as well as
Zazueta Alarid adds. In case anything does go wrong, the
the American market,” says Dai.
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VALUE OF TECHNOLOGY DRIVES THE SUCCESS OF A GLOBAL PORTFOLIO CARLOS CAICEDO General Manager of Atlas Copco Mexicana
Q: What were the main areas of opportunity that existed in
am completely confident when I say that Atlas Copco
Mexico when you became General Manager of Excavation
offers the best state of the art drilling solutions for mining
and Mining for Atlas Copco in 2011?
companies to meet the requirements of any customer. Our
A: Mexico is a traditional mining country and the industry
job is to facilitate the work of the operator and integrate
is vital for its economy. When I first arrived the business
our own systems with theirs. Atlas Copco has been
was already growing swiftly, and my main objective was to
working on its own automated drilling machine for open
find a way to support the vast amount of mining businesses
pit mines, which will allow mining companies to improve
that were starting up in Mexico. I was amazed by the level
the efficiency of their operations. For underground mining
of mining expertise that the company and each of our
we have autonomous drilling technologies, but we also
employees possess. Since then we grew the number of staff
supply everything that is needed to carry out subsurface
working in the workshops from 70 to 240, which shows just
operations. Mining companies that operate underground
how much the company has grown here in Mexico.
mines are very challenged in terms of security because maintaining communications inside the tunnel is not an easy
Q: What are the most successful services and products that
task. Therefore, security is one of their biggest concerns.
Atlas Copco offers to the Mexican mining industry?
Atlas Copco has developed several control systems so that
A: Atlas Copco has 140 years of experience working for
the machines can be operated remotely, without the need
the mining sector. Throughout most of that time the
to expose operators to risk. Something that is also common
company specialized in underground mining, but today
to all of our technology is fuel efficiency. We have recently
we have excellent products for open pit mining as well. I
released our first fully electrical scoop machine, a tool that
MOVING THE MINING INDUSTRY FORWARD More than 60 different industrial sectors rely on rolling and
are very well positioned in the market for bearings, since
plain bearings, making it a highly strategic product that
we do not depend only on the industrial market but also
must be factored into companies’ daily processes in order
have solutions for different kinds of businesses,” Pubanz
to keep operations going, whether they are a cement plant,
explains. The main brand of Schaeffler’s industrial division
a company in the paper industry or in the mining sector.
is FAG, which is well positioned in the market. INA is
Bearings represent the backbone of all mechanized rotary
another company brand that also has some products for
movements powered by engines. “Bearings move the
the industrial market, such as cylindrical rolling bearings
world, and without them neither vehicles nor machinery
without cages, which are used in cement plants and
would be operable,” says Thomas Pubanz, Vice President
other industrial sectors, although INA is the company’s
and General Manager of Schaeffler’s Industrial Division, a
trademark for automotive bearings. The company also has
leading manufacturer of bearings worldwide.
a branch in the US focused on the aviation industry, called Barden, which makes high level products. “With all these
The Schaeffler Group’s objective is to ensure that it has
brands together we are very well positioned, because
the largest portfolio of all of the bearing manufacturers,
if one industry is struggling we will always have other
and its industrial division strives to be the market and
markets in which we can move forward,” adds Pubanz.
technology leader for bearings and related systems by
282
providing optimal solutions for all market segments and
The ability to turn innovative strength into high quality
offering customized products and services worldwide. “We
products is a decisive factor in the success of Schaeffler,
will drive great energy savings for our customers and will
to do this we go to universities and talk to the universities’
help to reduce their emissions. Mexico has adapted easily
directors, sharing our concerns regarding the availability of
to the new wave of technology, and there are few countries
talent.
that have as sophisticated mining sectors as Mexico. Atlas Copco has brought almost its entire international portfolio
We have excellent products, but without the right people to
of services and products to the country. The value of our
support it, this company would never have worked as well
technology is particularly acute here because of the high
as it has. My recommendation to any company is to keep
energy cost.
its talent growing, and to make sure that every person that belongs to the organization is well motivated and trained.
Q: What are the main benefits of investing in automation for the Mexican mining industry?
Q: What are Atlas Copco’s ambitions for its new division in
A: It is not only a question of saving money; safety and
Hermosillo, and what are the priorities in your development
precision are more important. We want to reduce the
strategy?
operators’ exposure to risks as far as possible. The fact that
A: There were two important reasons for opening this
our technology is automated saves a tremendous amount of
division: firstly, we wanted to improve our services and
time, since there is little room for mistakes. Today, efficiency
expertise in open pit mining; and secondly, because one of
is everything for mining companies.
our open pit supply sources is in Dallas, and it will create logistical benefits for the company. All of the open pit drills
Q: What are the core competencies of Atlas Copco
we use are manufactured there, as well as spare parts. The
Mexico’s people, and how do they contribute to delivering
idea is that this will make transportation more efficient.
world class productivity at the exploration and production
Of course, another important reason is that a lot of Atlas
stages?
Copco’s mining customers are located in the area. Another
A: The expertise of our people is what really boosts our
important part of our strategy is to have a national network
competitiveness. Our engineers, operators, managers and
for businesses; we are currently expanding our reach to
service people have brought success to this company and
more territories within Mexico so that we can once again be
to our customers at the international level. The business
close to our customers. There is a chance that we will start
has grown so much that sometimes it is hard to find people
producing in Mexico again as well. This would be a good
with extraordinary talent who are not still in school, and we
idea, due to the great market possibilities found in Mexico,
often recruit our employees directly from university. In order
but I am not sure when this will happen.
which has three research institutes in which it invests
develop a product like this and we have had great success,
between 6% and 8% of its worldwide annual revenue to
not only in Mexico but all over the world,” Pubanz remarks.
come up with new developments and stay on top of the
Another product that has revolutionized the industry
game. For the mining industry, the company developed a
is its split spherical bearings, due to their practicality in
new patent called X-Life bearing, which receives different
maintenance. In the mining industry, longwall shearers,
heat treatments to make it stronger and to give it a longer
shaker screens, haulers, draglines, crushers, screeners, and
lifetime. “This innovation has been very successful because
conveyors use bearings. All this equipment is critical for the
the normal spherical rolling bearings were not lasting
continuity of mining operations and they all depend greatly
as long, causing significant financial losses for mining
on the bearings employed. Companies have to make sure
operations. We are always looking to make our products
they are using technologies that can improve their efficiency,
smarter and tougher, to help our clients to achieve their
reliability, speed of operation, and increased service intervals.
goals and increase profitability. If you go to a big mining
Therefore, they also have to guarantee they have sufficient
company you have to design a plan that will help it reduce
spare parts on site to perform the necessary adjustments.
the total cost of operations. For this, you have to come up
In order to become a trusted resource for both equipment
with better products and better prices,” Pubanz stresses.
manufacturers and mining operators, Schaeffler is working hard to understand its mining clients’ needs and how to
The X-Life bearing has been Schaeffler’s flagship product
enhance their operations in order to reduce their total
for the mining industry because of its performance under
production cost. “To be successful in the mining industry
extreme conditions. This product lasts much longer than
you have to make sure that your strategy is not based on a
regular bearing products because of the steel treatment it
quick sale; we have all the time in the world, and we make
receives and its special coatings. “We worked really hard to
sure we are using it wisely,” Pubanz adds.
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| VIEW FROM THE TOP
INNOVATIVE POWER TRANSMISSION SOLUTIONS GUSTAVO RODRÍGUEZ Operations Director Mexico and Central America of Sumitomo Drive Technologies
Q: What are Sumitomo’s biggest competitive advantages,
Q: How has Sumitomo’s range of products changed since
and how have they allowed the company to obtain 21% of
you joined the company?
the drive technology market?
A: Sumitomo’s products can be used in both underground
A: We have become market leaders because of the
and open pit mining as the engines are used for conveyors,
relationships that we have created with OEMs, engineering
cranes, and pumps, among other types of machinery. Our
firms and our distributors, who are all key players in our
product range has increased tenfold and has changed
distribution channels. Sumitomo handles 70% of the OEMs’
completely since the company started, and as a result we
business in the country, and these relationships are crucial
have a stronger presence in the market. New technologies
for the growth of the company. Paying attention to our
and products are developed every two or three years.
business partners in this way will help us to build healthier relationships and combining good relationships with quality
Q: What are Sumitomo’s ambitions for expanding its
products provides considerable advantages for making any
presence and infrastructure in Mexico, in order to best
business grow. I learned that it is necessary to be proactive
service the industry?
and disciplined, to maintain good communication, good
A: Our plant in Mexico was upgraded in January of this
relationships and confidence. These qualities can help any
year. We are opening a new facility in Hermosillo, in
company to stay ahead of its competitors.
November 2013, and a second one in Guatemala. Thanks to its national distribution network, Sumitomo offers a wide Mexico,
variety of products that cover very specific industry needs,
having started operations in 1990 when there were still
from 0.25hp to 500hp. The idea is to become the main
restrictions on foreign companies entering the country.
supplier and service provider for junior mining companies
Over the past decade, we started to organize the company
from the beginning of their operations, satisfying the
and developed the engineering department, creating
market needs through OEMs and engineering companies.
customer service and production managers. After these
Our main customers in Mexico are, among others, Minera
changes, the company needed to increase the size of its
Frisco, Peñoles, Grupo Mexico, Grupo Acerero del Norte,
facilities by 100%, which was followed by the opening of
Minera Autlán, and ArcelorMittal, and mines such as Peña
a second facility in Mexico City. After that we continued
Colorada and Las Encinas, among others.
Sumitomo
has
23
years
of
experience
in
to grow and we built the Guadalajara plant in order to accommodate our double-digit growth rate. After being
Q: How will the Mexican mining industry continue to
promoted to General Manager, Sumitomo grew by 800%
contribute to the continued growth of the company?
and became the number one supplier in Mexico, which was
A: The mining industry holds great potential for the company
the company’s largest market after Japan. Mining is our
and we expect a 50% increase in our business in the coming
second biggest market after food and beverage.
five years. The opportunities are created by the opening of new mines and the fact that some customers own equipment
284
Sumitomo’s operations in Mexico have contributed to
that has been in use for over 20 or 30 years, performing
increasing
Our
maintenance and repair services on it by themselves. These
people in Japan never expected the Mexican branch of the
are the opportunities that Sumitomo intends to use to drive
company to reach its current size. Nine years ago I told
its growth, offering better and more efficient solutions and
the Japanese representative that my goal was to make the
incorporating the latest technology. The company’s main
company grow to a size comparable to the size and market
business is in Sonora, but given the importance of Sinaloa
share we have achieved today. He was somewhat skeptical,
we are strengthening the northwestern region with more
but nowadays we have proved what can be done in Mexico
people, in addition to the help we get from local distributors
with the right people.
that offer the right products, quality and inventory.
confidence
in
Sumitomo
worldwide.
| VIEW FROM THE TOP
RACE FOR EFFICIENCY IN THE MOTOR MARKET EDUARDO RUÍZ ACEVEDO General Sales Manager Mexico at TECO-Westinghouse Motor Company
Q: What is the vision that has enabled TECO-Westinghouse
US Motors and Baldor/ABB to name a few. We have been in
Motor Company to becoming one of the world’s largest
the industry for a long time and we know what customers
suppliers of motors, drives and controls?
want, and for mining it is reliability. Motors undergo a lot
A: TECO-Westinghouse Motor Company is a corporation
of stress and are exposed to water, dust, vapor, gases, or
with over 160 years of experience in the electric motor and
other extreme conditions, and although this is a price-
generator business, and was created in 1998 by the merging of
driven market, our customers know that our product will
TECO, a large Taiwanese company, and Westinghouse Motor
last. Our customers have been in the business long enough
Company, a recognized American brand. Westinghouse has
to see our equipment running and they recognize us for
been present in Mexico for many years through its strategic
our quality. We are a customer service driven company,
aliance with IEM, providing products to the Mexican motor
and this determines the way we approach customers and
market, but TECO-Westinghouse Motor Company capitalized
the way we work with them along the way. In the case of
on the opportunities to supply motors to the mining industry,
our mining customers, usually OEMs, we try to understand
Pemex, CFE, and Conagua in just eight years. Whereas in
their needs and work hand in hand with the manufacturing
Canada we are the number one motor manufacturer, in
process of their own equipment.
Mexico we aim to be among the top three. We are currently growing at an annual rate of 35%, a rate that is not matched by
The application of our motors in the mining industry ranges
any partner company in the group. Mexico serves as TECO-
from conveyors to pumps, mixers, fans, blowers, crushers
Westinghouse’s headquarters for Latin America, with the
and ball mills. We provide motors that go from 0.25hp to
exception of Brazil. The company began with a small office
100,000hp, making us a company with vast experience
in Puebla. Given the logistical advantages, the competitive
providing large motors. We are proud to have the highest
and talented labor force, the pro-business government, and
installed torque in the world, with the 10,000hp motor in a steel
a strong network of equipment manufacturers, we decided
mill in Monclova for AHMSA. Although mining has changed a
to expand to Leon, Guanajuato, with facilities going from
lot in the last 15 years, TECO-Westinghouse Motor Company
2,500m2 at the beginning, to 14,000m2, out of which 6,300m2
is constantly seeking to improve motor performance and
are occupied by our plant.
reliability. In Latin America we have identified old motors for which we analyze and suggest a customized solution, even
Q: How has your position in the mining industry evolved?
being able to manufacture motors that fit into a specific
A: TECO-Westinghouse has always stood out as a
stage of the mining process, or optimizing production using
solution provider for different industries, and mining is
the similar foundation of the old motor.
no exception. Thanks to our innovations, we have gained clients in mining such as Peñoles, for whom we installed
Q: How are you going to measure your success at the end
equipment ranging from 50hp stock motors, to special
of this year?
custom built motors with more than 4,000hp. Our high
A: We need to have more commercial branches to be
quality engineered products and complete solutions will
able to partner with people operating in the mines, and
continue to help us obtain a 25% to 30% market share in
we stand ready to provide solutions at all times. The key
the mining industry.
factors behind our growth are our human capital and the investment in the largest stock of ready-to-go motors in
Q: Who are your main competitors in the Mexican mining
Mexico. Our success will be measured in accordance with
industry and what sets you apart from them?
the coverage we attain and the service we can provide.
A: We see other companies as partners more than as
For us, it does not matter if we deliver a 1hp motor or a
competitors, as we all search for efficiency; our biggest
10,000hp motor; it is about how many mining customers
partners in the motor business in Mexico are Weg, Siemens,
are happy with our product and with our service.
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| VIEW FROM THE TOP
TOTAL SHAFT SOLUTIONS CARLOS RODRÍGUEZ PALACIOS President Sales Unit Mexico of SKF Mexico
Q: How do SKF’s services and five technology platforms
product portfolio but also because of our ability to
benefit maintenance, monitoring, and optimizing asset
combine and apply various solutions to solve specific
performance throughout a mine’s life?
problems. We believe our main strength is our people’s
A: For many years SKF has been a major supplier of
ability to understand customer needs and translate them
bearings and units to different industries, and has
into practical solutions. This is how we gain our customers’
developed its seals and lubrication businesses at the same
trust. Particularly in Mexico, our sales and engineering
time. As an integrated solutions provider, SKF’s platforms
force is by far the largest and most knowledgeable in the
approach allows us to combine our available technologies
industrial market. We believe that in order to realize our
in order to satisfy or exceed our customers’ requirements.
vision to ‘equip the world with SKF knowledge’ a lot of
The clearest example of this is our ‘SKF Solution Factory’
highly skilled resources are needed, so we spend more
concept, through which we draw on all of our expertise
time with our customers in order to provide them with
and knowledge to design tailor-made solutions for our
better support. We are trying not only to be focused on
customers. We have one SKF Solution Factory in Mexico,
technology but also to add ‘brains’ to the machinery. With
located in Monterrey, Nuevo Leon. We provide complete
new technology and our new approach to optimizing
solutions, as opposed to most of our competitors who only
asset efficiency we can understand our customers’
have one or two of the five platforms that SKF has. There
maintenance strategies and we can help them to improve
is no other brand, globally or locally speaking, that offers
key performance indicators. In addition, we have also
the whole package that we have. SKF continues to expand
developed a map that shows the entire mining process and
its services to help customers to achieve their productivity
the solutions we offer that meet mining companies’ needs
and reliability goals, and provides the mining industry with
within each stage of the process. We are focused not only
a wide range of products and services that contribute to
on the product but on the whole asset life cycle. Our main
improved productivity, reliability, profitability, and safety.
tool for identifying areas for improvement within customer
The company has close relationships with OEMs and
processes is the Client Needs Analysis (CNA) survey, which
end users worldwide and is now increasing its presence
allows us to benchmark our customers’ maintenance
with engineering and procurement and construction
practices and locate the stage they have reached.
consultants, with the aim of getting more SKF solutions specified and installed in new mine developments. We
Q: How is SKF’s emphasis on the innovation and
are looking to focus on total life cycle management of an
development of its technology, together with the
asset, being involved right from the specification, design
experience it has in different industries, increasing its
and development of a new product or technology, up to
worldwide presence?
its manufacture, operation and maintenance, looking to
A: SKF has invested heavily in technology, oriented mostly
increase the efficiency of the asset at every stage. Our
towards monitoring equipment conditions. In addition,
R&D centers on different continents work not just at the
we acquired several companies operating across different
end-user level, but at the initial design level as well.
platforms including sealing solutions, lubrication systems, mechatronics, power transmission, and services. As a result
286
Q: What unique technical and commercial solutions does
we better understand the needs our customers, including
SKF offer to meet the needs of the Mexican mining industry?
monitoring the conditions of their machinery, and we grew
A: SKF has a broad reach through its extensive sales and
from being a specialist in products to being a specialist in
distribution networks. The SKF life cycle management
machinery. With monitoring technologies we developed the
philosophy and approach means that SKF is involved
ability to identify what the real status of the machinery is.
in machinery performance from cradle to grave. Our
We can work out what is happening to the equipment and
technology offering is unique, not only because of our
apply the best steps to increase productivity and reliability.
| TECHNOLOGY SPOTLIGHT In addition to the technology, we have a program called
SKF’s
Total
Shaft
Solutions
combine
different
Documented Solutions Program (DSP), with which we
technologies in order to create the best solution for
collect data on the equipment, the whole unit, and we identify
its customers. The company offers special bearings
potential savings not only in the cost of maintenance and
for industrial fans, conveyors, crushers, and vertical
repair, but also in the total cost of running the equipment.
mills. The design of the bearing itself can be adapted according to its eventual application, with different
Q: What role does human capital play in SKF gaining an
options available for sealing solutions, lubrication
understanding of different mining environments?
systems and condition monitoring systems. In the
A: The key lies in our people and our proximity to our
mining industry these have brought excellent results in
customers. SKF started moving its people to our field
different applications. Any machine that has rotating
workshops, which started as a local strategy. We then
shafts faces an increased risk of different types of
increased SKF’s presence by growing the team, going
problems, such as misalignment, vibration, poor bearing
from 10 sales engineers to more than 25, who have
fitting and ageing technology, among many others.
been strategically located in our offices in Hermosillo,
SKF’s Total Shaft Solutions address these problems
Chihuahua, Monterrey, Monclova, Torreon, Saltillo, and San
with rotating shafts that offer benefits such as improved
Luis Potosi. SKF’s Solution Factories are also providing
machinery performance, reduced maintenance and
strategic know-how, solutions, and innovation to end users.
downtime, and improved plant profitability. Through its
Of the 25 Solution Factories around the world, Mexico has
Total Shaft Solutions, SKF’s engineers gain a thorough
the company’s 16th, in Monterrey, and is planning a second
understanding of the operation of a particular machine,
facility in Hermosillo, Sonora. This is part of our global
as well as the needs and objectives of the plant operator.
strategy of going from five to 15 Solution Factories in North
By sharing the responsibility for devising a solution to
America, as well as the aim of reinforcing our presence in
any rotating shaft problem that has been identified, SKF
the northwestern mining region of Mexico.
takes on a far greater role than merely that of a bearings supplier. The aim is to increase profitability by improving
Q: How are SKF’s strategies geared towards the delivery
the operation of the machine, reducing the cost of
of energy-efficient and innovative solutions that benefit
ownership by reducing expenditure on maintenance and
both mining customers and the environment?
spare parts, and maximizing plant uptime and efficiency.
A: A company like SKF can make an important impact
The company also carries out condition monitoring,
on the environment, ranging from the raw materials it
undertakes root cause failure analysis, studies the
selects and how they are used and processed to the level
lubricants and investigates all aspects of the machine,
of energy the products use in customers’ installations,
from its mechanical design to the materials and surface
and the way in which products are disposed of when they
finishes of the shafts, housings and bearings.
come to the end of their useful life. The steps SKF takes to address environmental risks and opportunities are based on a solid understanding of environmental life cycle
Mexico is important for our global business for two
management. This is something the group has invested in
main reasons: the first is that Mexico has many different
and built up over the last 10 years, through numerous life
industries that SKF can target, such as mining, metal,
cycle assessments and applying focused R&D in this area.
cement, food and beverage, sugar, pulp and paper and oil and gas industries. It is a must for all companies in the SKF
Q: What role does Mexico play in the company’s global
Group to follow the global strategy, and one of the most
strategy today?
important strategic decisions taken by SKF Global was to
A: SKF started as a sales operation in Mexico, and
switch the client approach from being product-oriented
eventually acquired a small manufacturing operation in
to solutions-oriented. Focusing on maintenance practices
Puebla, called IBISA. Although SKF was well known as a
and life cycle management helped us to stand out from
full-range bearing supplier, SKF’s local strategy evolved to
product oriented competitions. However, competitors have
manufacturing products for automotive applications and
since started to follow our lead. SKF solutions can help
globally to the platform approach. For a long time all of
mining operations increase productivity and profitability,
the industrial products used in industries such as mining
improve worker safety, reduce environmental impact, cut
have been imported from several manufacturing facilities
energy consumption, and reduce unplanned downtime.
around the world. As a result, our market offering has
Our combination of industry knowledge, solutions and
always followed global trends, and has been in line with
local presence will allow us to keep increasing our market
SKF’s global solution focused strategy.
share in Mexico.
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| VIEW FROM THE TOP
JAPANESE TECHNOLOGY BEHIND STEEL FOR MEXICAN INDUSTRIES GUILLERMO GONZÁLEZ BENASSINI Vice President of MMC Metal de Mexico
Q: As an international company, what were the main
using tungsten carbide. The most important industries
factors that drove MMC Metal, a subsidiary of Mitsubishi
for MMC Metal in the Mexican market are therefore the
Materials Corporation, to invest in Mexico?
automotive sector, followed by the mining, aerospace and
A: The strength of domestic economic indicators was one
steel industries. In the aerospace and automotive industries
of the main factors for investing in Mexico. International
the most in-demand MMC Metal products tend to be cutting
markets still see this country as a very attractive place for
tools for metal, in the form of interchangeable tungsten
investment. The discipline in the currency policy and fiscal
carbide inserts, and cutters and diamond CBN tools, among
deficit control implemented here over 12 years ago has
others. For the mining industry we make steel drilling parts
won confidence for continued investment; there is also a
such as rotary heads made of carbide, as well as couplings,
real interest in Mexican bonds and equity instruments. The
stilts and rods, which are also used in drilling. Finally, for the
country also offers a qualified workforce at competitive
steel industry, the most popular products are solid carbide
prices, and it is well located geographically, as well as
rolls for lamination and composite rolls for finish.
having free trade agreements with the US, Canada, Central and South America, Europe and Japan, among many
Q: What is the added value that your mining products
others. Today, what makes Mexico even more attractive
offer in the Mexican market?
is the potential signing of the Transpacific Partnership
A: Our value lies in the state of the art technology that we
Agreement.
provide at a lower cost. Our price is lower than or equal to the price you get in the US. We have a good inventory,
Q: What is the importance of smelting within Mexico’s
specialized technical assistance and support from Japan
mining activities, and how well does Mexico perform in its
to teach drilling techniques and optimize resources, in
processing of metals?
order to reduce costs considerably. Mitsubishi Materials
A: The smelting industry plays a dominant role in the mining
Corporation has developed drilling steel for the mining
industry. Even though it is sometimes considered as such,
industry for over 60 years in Japan. The products it
steel is not chemically speaking a metal but an alloy between
manufactures are highly resistant to wear and tear, thanks
a metal (iron) and a metalloid (carbon), which maintains
to the carbide inserts manufactured at our plant. Each
the metallic characteristics of the former and includes
product is also marked, so that we have a record of, and
remarkably improved properties as a result of the latter, as
control over, its manufacturing process. Adding MMC Metal
well as other metallic and non-metallic elements. As a matter
products to new drilling machines results in labor force
of fact the term ‘steel’ applies to a very large set of metal
savings, as well as greater efficiency and safety for our
alloys, depending on the addition of other elements such
clients’ employees.
as nitrogen, hydrogen, boron, oxygen, chromium, nickel, titanium, manganese, vanadium and copper, among others,
Q: What are MMC Metal’s ambitions and goals in the
which develop different levels of resistance and malleability,
Mexican mining industry for the coming years?
depending on their many different uses and applications.
A: The mining industry plays an essential role in the
The smelting industry therefore uses different materials
company’s future plans. We are planning to increase our
from the mining industry to transform the steel and supply
market participation and sales by more than 200% in the
other sectors, such as construction and mining, with finished
next five years. Hiroshi Yao, the President of Mitsubishi
products like rod, wire and steel in different formats.
Materials Corporation, said in this year’s annual message that a careful plan should be implemented to balance
288
Q: What are your priority industries in Mexico?
growth and financial performance, and that growth outside
A: Mitsubishi Materials Corporation is a world leader in
of Japan should be increased, especially in emerging
manufacturing products that prevent wear and tear, mostly
markets. That is good news for the Mexican market.
| VIEW FROM THE TOP
INNOVATION IN AIR FILTRATION SYSTEMS GUILLERMO BRISEÑO Managing Director of Donaldson Latin America
Q: What role does Mexico play in the global strategy of
Q: How does Donaldson Latin America complement its
Donaldson International?
existing state of the art manufacturing facility with the
A: Donaldson International’s technological research and
other services that the company provides to the industry?
development is mostly carried out in the US, with some
A: Donaldson participates in two segments of the
also being carried out in Europe and Asia. The Mexican
filtration industry: the engine side of the business relates
office functions mostly as a manufacturing and commercial
to diesel engine performance, which is a critical part of
unit for Mexico and Latin America. As for the OE projects,
our products. Our access to the market is via distributors.
we work with almost every single mining company that
We train distributors via our Donaldson University
has operations in Mexico. Donaldson Mexico is no longer
program to be experts not only in Donaldson products,
known as Donaldson Mexico but as Donaldson Latin
but in foundational filtration knowledge as well, and we
America, given that we are responsible for developing
complement that with supervision. A significant part of
markets from the Rio Bravo to Patagonia. We manufacture
our business is industrial, servicing all of the equipment
locally because we are able to keep manufacturing costs
used in the production process in different industries. In
low in Mexico, and because from here we have access to
mining this is the stage at which mining companies use
the western and eastern countries in the Americas, thanks
processing plants to produce the minerals. We have the
to the Port of Altamira in the Atlantic Ocean and to the
equipment needed to filter the pollution that is created at
Port of Manzanillo in the Pacific Ocean.
those processing plants, which tend to be dust collection units or systems that compress air or generate electricity.
Our accelerated growth plan was developed locally three
Both areas of the business are developing very well within
and a half years ago, and then duplicated. We decided to
the mining industry; this industry has strong dynamics,
challenge ourselves to think differently, in order to seize the
therefore we need to keep developing new products
opportunities provided by our proximity to the suppliers,
and solutions for the market place. Another service we
the market, and the resources that are available to us. The
provide is the supply of spare parts. Our distribution center
business case was approved by our headquarters and the
in Mexico services Latin America. If an emergency occurs
results have been positive, with 26% growth in 2011, 31% in
in the operations of our end users we are able to provide
2012 and 21% in 2013. In three years we have doubled the
urgently required filters in less than 24 hours. A very basic
size of the company and we have brought a more aggressive
rule for us is to be close to our customers and supply what
way of thinking and approaching to the work that we do.
they need as quickly as possible.
Q: What characteristics make your technological solutions
Q: What is Donaldson’s commitment to the environment
stand out from those of your competitors?
and what is or have been the results of the LEED (Leadership
A: Our company is focused on profitability and return
in Energy and Environmental Design) certification?
on investment: this is how we compete. Since 1915 our
A: Sustainability is at the core of everything we do. We are
engineers and innovation centers have been working to
fully committed to the environment in our manufacturing,
look for new areas in which to reduce costs. We provide
and all of our sites are ISO 14001 certified or in the
filtration solutions for companies, specifically in mining,
process of becoming so. The furniture we use is made
agriculture and construction. These are industries that are
from recycled material and it comes from within 60km,
very demanding in their technical requirements. Our filters
minimizing transportation requirements and therefore
are reliable, efficient, price-competitive and environmentally
meaning less pollution. We make the commitment not only
friendly. In terms of service we always maintain a close
to fulfill environmental regulations but to exceed them,
relationship with our customers so that we can develop
while all the time protecting our customers’ equipment,
specific solutions that best fit their requirements.
the environment and improving people’s lives.
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| VIEW FROM THE TOP
LEADING THE MARKET IN WEIGHING TECHNOLOGIES ARTURO ALCÁNTARA Director General of Mettler Toledo Mexico
Q: How has Mettler Toledo created and tailored its
Q: How is your integrated solutions approach benefitting
products for their intensive applications in mines and
your customers?
mineral sample analysis units?
A: By offering integrated services, from logistics to
A: Mettler Toledo is looking to create high tech equipment
complete laboratory or mine processes, we have made it
with the most simple user interface. Our role as consultants
very easy for our clients to control, perform and grow their
also allows us to offer a tailored set of solutions to each
operations. Having this mixture of services is an advantage
of our clients, regardless of their size or the stage of
for our customers. Mettler Toledo provides a product
operations they are at. Our latest application is a system
service that allows its clients to measure from 1 microgram
that allows our clients to make particle-level measurements
to 320 tonnes of material. We often summarize our unique
without removing the mineral from the production line,
weighing capacity with the phrase: “If your need is there,
thus allowing mining companies to gauge the quality of the
we have it; if your need is not there, no one has it.” The fact
mineral without resorting to the time-consuming process
that the national “Kilo-Standard”, which is in the National
of conducting sample analyses. This equipment brings our
Metrology Center (CENAM) in Mexico, has always been in
customers time and cost savings, given that it can take
Mettler Toledo mass comparators reinforces this point. The
measurements during the grinding process. While our
integrated service we offer means that our clients will only
competitors are still sending samples to a laboratory we
have to deal with one company offering services, from the
are already measuring during the process itself. Thanks to
simple micro-mass measurement scales used in basic and
our One Click© interface it has become very simple for the
startup mining, through large scale weighing of trucks and
operator to perform the job, simply by clicking on a button
loading machinery, to precise analytical measurements
in the measurement scales. We have done with analytical
such as acid-base titration. Mettler Toledo solutions are
instrumentation what cell phone companies have done with
also interconnected with the aim of making it simple for
touchscreen phones and tablets: we have developed a very
users and those performing maintenance it, and we assure
advanced technological product and presented it in a way
you that our equipment is adaptable to the scale of each
that is very easy to understand, and with a very intuitive
of our customers’ growth. As with any technology Mettler
interface. All of our equipment is able to provide accurate
Toledo equipment does require maintenance, and our goal
data, which can be printed or sent to a database platform.
is to continuously extend the life cycle of our equipment.
Q: How does the training of both your technical staff and
Q: How does Mettler Toledo Mexico benefit from being
your customers’ operators contribute to eliminating the
part of an international corporation with experience in
mismanagement of advanced instrumentation?
different markets around the world?
A: Almost everyone in our sales force is an engineer, or
A: Mettler Toledo is a US$2 billion public company listed on
is specialized in a technical area. Mettler Toledo Mexico
the NYSE. Toledo has been present in the Mexican market
currently has around 240 members of staff on its team,
for 65 years, historically specializing in weighing equipment.
of which around 170 are on the mine sites close to our
20 years ago the company merged with a Swiss company
clients, understanding their needs, offering them the most
to become Mettler Toledo, diversifying its products and
suitable equipment, and training their personnel. We learn
service portfolio and splitting into five divisions: laboratory
a lot from the operators, and our job is to then match the
weighing and analytics, weighing as an application for
experience they have in handling minerals with our state
heavy equipment, production line analytics, product
of the art technology, with the aim of delivering tangible
inspection, and retail. Mettler Toledo’s market approach
benefits. We strengthen this approach with product and
consists of sharing international best practices. Our sales
service offices in Monterrey, Mexico City, Ciudad Obregon,
and engineering people spend most of their time in our
Guadalajara, Puebla, Queretaro, and Coatzacoalcos, in
clients’ facilities, laboratories or mines, learning from them
addition to our head office in Mexico City. This gives us a
and understanding what the real market need is.
regional advantage, as each of these regions specializes in different industries such as automotive, oil and gas or
Q: What are the main opportunities that you have identified
mining, allowing us to use our resources more efficiently.
for Mettler Toledo in the Mexican mining industry? A: Thanks to the broad range of products and services
Q: How has Mettler Toledo innovated its products and
that we provide we can support mining companies at
services in order to meet the increasing need for analytical
almost every stage of the mining value chain, participating
instrumentation among mining companies?
in the exploration, sample analysis, extraction, mineral
A: Mettler Toledo invests a lot of money in research and
beneficiation, chemical separation and remediation phases
development with the objective of coming up with new tools.
of a mine’s life cycle, both in laboratories covering the
This strategy has worked well, increasing the gap between us
chemical analysis, and at the mine sites themselves. Mining
and our competitors that are trying to follow our innovations
today is much more competitive than it used to be, and
and best practices. Mettler Toledo has the second largest
companies must invest in better and more specialized
and most important metrology laboratory in Mexico. Not
equipment if they are to stand out from the competition.
only do we serve as a reference for many laboratories that
Mettler Toledo sells every item related to measurement
are being set up now, our publications also provide examples
systems that can improve our clients’ processes, and
of best practices for acid-base titration, weighing, laboratory
we complement this product offering with a team of
design, and management. As an additional service we
consultants that not only offer software or hardware, but
provide the certification for our clients’ equipment, and we
experience too. The Mexican market is full of opportunities
complement this with client-specific seminars in which we
for the implementation of advanced technology that will
establish and assess the company’s evolving needs.
help to improve mining operations.
Laboratory and industrial solutions for the mining sector
www.mt.com
TECHNOLOGY AND ENGINEERING AT THE COMPANY’S CORE Many companies have benefitted from the extended
on for a major original equipment manufacturer, on which
mining industry boom, which came about in large part
the company was able to increase the life of a haul truck
as a result of the increasing demand for commodities in
two and a half-fold by creating wear-resistant coatings for
the world’s developing economies. “When we look at the
bearings. “Instead of using larger bearings we maintained
whole market from a strategic point of view, what is driving
the same sized bearings, using coatings to increase fatigue
Timken’s business is the emergence of a middle class in
life more than twofold without having to make any change
developing markets,” says John Byers, Market Manager
to the customer’s shaft and housing design,” he explains.
at Timken. “As China has brought 500 million people into
This is just one example of Timken’s commitment to finding
its middle class, India has brought 150-200 million and
and applying technological innovations on its equipment.
Indonesia and Brazil have brought them by the tens of
Another example is its Eco-Power™ heater, which has a
millions. They have created a demand for commodities
flexible design that allows significant reductions in the
that has changed the face of our world.”
time it takes to install, remove, and separate bearings and gears from shafts, without damaging the equipment.
Timken is therefore focused on the industries that
“Timken is focused on providing industrial components and
produce these commodities, from coal miners in Australia
engineered solutions that improve customer performance
and oil drillers in the Gulf of Mexico to wheat farmers in
and uptime,” says Byers.
Kansas. With over 70 years in the business of making
292
the components that make the equipment used in these
An important element in fulfilling this commitment is
industries more reliable, Timken has worked with industry
the company’s Online Intelligence System, which allows
leaders from Caterpillar to Hitachi. Having started off with
data collection on the moving components of shovels
two core products – bearings and high performance steel
and draglines, vibrations analysis, and ultimately detects
– the company now has over 20. “Today, Timken engineers,
potential issues before they happen, avoiding machine
manufactures,
components
breakdowns and downtime. “Unexpected bearing or gear
and high performance steel. Our bearings, engineered-
and
markets
mechanical
failures can have a catastrophic effect on the system
steel bars and tubes, as well as transmissions, gearboxes
components. Drive system failures typically require costly
and related products and services, support industrial
replacement, as well as the logistics of doing so. Early
markets worldwide,” says Byers. “Timken products are
detection of pending problems can lead to individual part
installed inside the hardest working industrial machinery,
replacement or component repair, increasing reliability and
the machinery that helps to build infrastructure around
significant savings,” says Byers. “Timken, at its heart, is a
the world. We continue to focus on markets that have
technology and engineering company. The company keeps
high demands – the more extreme and challenging the
industry in motion. In collaboration with our customers,
engineering problem, the more grueling the conditions, the
we continue to develop new ideas, new innovations, and
greater the value we create for our customers.” Byers goes
new technologies, and we think that means a future that is
on to cite the example of a project Timken recently worked
bright for our customers, as well as The Timken Company.”
| VIEW FROM THE TOP
SETTING TECHNOLOGICAL AND ANALYTICAL TRENDS JORGE BARRERAS Sales Manager for Mexico and Puerto Rico at Agilent Technologies
Q: How has Agilent Technologies evolved from being a
the only vendors in the market. As an internal control
leader in chromatography to a diversified player in the
measure, Agilent follows a great number of performance
analytics market?
metrics that make our equipment the most reliable in
A: To broaden our products portfolio, over time the
the market. In addition, every quarter we perform client
company decided to acquire other companies, such as
satisfaction surveys. The company constantly measures
Varian, which brought strong expertise and a new client
its performance by comparing its results to global market
portfolio in atomic analysis. Varian was the pioneer in
results, and on more than one occasion our own data has
the area of atomic spectroscopy in the 1960s, when it
been used as a global reference for the rest of the industry.
developed the process. Varian was a leading vendor in the mining industry, so following the acquisition Agilent gained
Q: How do Agilent’s experience and philosophy help to
a presence in the mining industry. Today, Agilent is a large
strengthen the company’s service offering?
company with a broad analytics product portfolio, not only
A: Agilent has more than 13,000 employees worldwide, and
for mining processes but also for environmental, health and
we are confident that our personnel are the best trained
safety, and machinery applications within the industry.
in the market. The company’s worldwide experience enhances the quality of its services in the Mexican market,
Q: What is Agilent’s strategy for developing and applying
and we have also generated valuable knowledge and best
innovative technologies to create new products?
practices in Mexico. Our philosophy is to do everything in
A: As a world leader, Agilent is responsible for continuing
the best and most correct way. Agilent’s employees have
to produce state of the art technologies and solutions for
very close contact with its clients, making sure that we
the mining industry. In order to innovate and provide the
provide them with the best solution, and understand their
best solutions, we must be in constant and close contact
needs down to the last detail.
with our customers. Agilent’s Innovation and Technology team works towards one goal: making life and work inside
Q: How is the company working together with its clients
a laboratory as simple as possible. We aim to deliver
to continue providing the most reliable solutions to the
the easiest-to-use equipment that delivers the most
industry?
precise results. Our equipment requires a minimum of
A: Agilent is attacking several areas of application in the
calibration and parameter settings, and our technology
mining industry, whether city laboratories or laboratories
team is making sure it provides the most reliable data. Our
on mine sites. In terms of clients, we are looking to create
products have a user-friendly interface, without sacrificing
strong collaboration agreements with some of the biggest
data precision.
companies in the world, with whom we are developing grass roots solutions for the mining industry. Another important
Q: What is the added value that Agilent offers to the
development is the Micro-GC equipment, a portable gas
mining industry, and how does this set the company apart
chromatography product that is capable of measuring
from its competitors?
methane in coal mining. We have several product lines that
A: Agilent is today a leading measurement company
are useful in different areas of the mine, such as our FTIR
because for every new development we set the objective
equipment for the measurement of oil wear in machinery.
of being number one in the world, and this is already
This instrumentation helps to monitor the degradation
the case for several product lines. For those segments
of the oil and thus optimize the performance of mining
in which we are not yet leaders we are on our way to
equipment. Our people and our company values - focus,
becoming so. Agilent stands out as an innovative company,
honesty, and accountability - will allow Agilent to continue
setting technological and analytical trends, and the best
innovating and developing new analysis technologies for
example for this is the MP-AES 4100, for which we are
the mining sector.
293
XXXXXXXXX | VIEW FROM THE TOP INTEGRATED HIGH PRECISION ANALYTICAL SYSTEMS ANDRÉS FERRARA Director General of Analitek
Q: Drawing on over 50 years of experience, how has
Q: How does your company’s collaboration with Agilent
Analitek evolved with the mining industry?
Technologies add value to Analitek’s product and service
A: Mining has been a historical client for companies dedicated
offering?
to selling and servicing analytical instrumentation. Atomic
A: Agilent Technologies is a company that has been
spectroscopy is one of the oldest analytical techniques,
developing technology since its origins in the 1950s,
and has been used since the beginning of the 1950s. Mining
and today Agilent is the market leader in liquid and gas
companies are constantly searching for more sensitive
chromatography and mass spectrometry. Three years ago
and precise information analysis in order to make fast
Agilent acquired Varian Instruments, a leader in atomic
strategic decisions on exploration and mineral resources
and molecular spectrometry, to become the number one
geology. This has brought many new technologies, such
company in analytics technology and instrumentation.
as the ICP (Plasma Spectrometer), ICPs coupled with mass
Thanks to this, and to the developed Japanese technology
spectrometry, and more recently the MP-AES.
of ICPs coupled with mass spectrometry, Agilent today has the most complete range of instrumentation in the industry.
The company started in 1994 in the north of the country, offering reliable analytical instruments that allow informed
Q: What is the scope of products that Analitek currently
decision making. From there, we started developing
offers to the mining industry?
the technical capabilities for mounting and installation,
A: In terms of laboratory equipment, we have the traditional
developing applications, and to really understand the
atomic absorption techniques, and ICP, which are needed
market’s needs. Our company has had a strong technical
to run samples of precious minerals, sand and of any
influence from the beginning, given my partner’s and my
geological material. We also offer laboratory products
professional experience in the industry. Analitek established
that are more focused on research, in which specific mass
a strategic alliance with a renowned analytical instrument
spectrometry analysis is conducted. In mining, it is used
manufacturer, Agilent Technologies, which is a market
for obtaining detailed information on specific geological
leader in chromatography technology. We added value over
materials. For out-of-laboratory analysis we have very
time with services such as quality management programs,
light (5kg), completely portable equipment working with
working with clients to help them obtain national or
X-Ray fluorescence, which provides instant results on
international certification, and programs that offer the client
the composition of geological material. Geologists can
assurance that their results will be measurable and tangible.
instantly know the concentration of different elements and
We offer integrated solutions focused on providing – mostly
estimate the geological potential of the area.
to clients opening a laboratory – products, services and
294
components in tools, design, furniture, sample preparation,
Analitek services all different phases and processes in
and general equipment, together with a design that
the mining industry with portable, field, and laboratory
ensures the right sample flow rate and the best conditions
analytical equipment. Our portable equipment can perform
for reaching the sensitivity or the limits required. With
fast superficial screenings on mineral veins, allowing
our central offices in Monterrey we cover the states of
geologists to decide quickly where to go in difficult access
Coahuila, Chihuahua, Durango, Zacatecas, San Luis Potosi,
areas. Our innovative equipment for field laboratories,
Aguascalientes and Tamaulipas. It is in these territories that
the MP-AES 4,100, performs elemental geological sample
the mining industry experienced its major boom, and we
analysis without the need for gases such as argon or
have been working with all national companies that have a
nitrogen oxide. Analitek builds laboratories and provides
presence in the area. We have also collaborated with many
not only the instrumentation to equip them, but also the
Canadian and American exploration companies that have
design and the furniture itself, in order to protect the
been attracted to the precious metals market.
machinery and samples from aggressive conditions and
the corrosive reagents they are exposed to. We conduct
states, or even to other countries. Analitek has portable
research and test equipment for laboratories in mining
technologies and laboratory equipment that do not require
camps, such as the one set up for Peñoles in Torreon.
gases that are difficult to get hold of, transport, and store, therefore allowing sensitive and precise information to be
Q: How is Analitek making sure that the personnel
available even faster. The laboratory technology for mass
operating each piece of technology is properly equipped
spectrometry is not yet available in the field; however,
to manage and operate the equipment?
most of the analysis obtained by atomic adsorption is now
A: Our job is to secure our clients’ return on investment,
available in remote areas, thanks to our new MP-AES, and
among other things, by training new and experienced
to state of the art portable equipment.
personnel that will be assigned to the equipment, and sometimes by suggesting to our clients the profile to hire.
Q: What are the company’s ambitions for the coming five
For over 15 years the company has held strategic alliances
years?
with the local universities of Coahuila, Durango, Chihuahua,
A: Our goal is to provide higher precision information that
and San Luis Potosi. Through these agreements we provide
will have a positive impact on decision making, as well as
internship opportunities and cooperate with diplomas and
contributing to providing a faster return on investment
training programs for the management of such technology.
for the client. In the coming five years Analitek seeks to duplicate its presence in Mexico, and even expand our
Q: What are the advantages of having an onsite laboratory
current services and technologies to new markets. Analitek
inside the mine camp?
is currently covering the metal-mechanic, environmental,
A: Having an in-house analytical asset provides a
food and beverage, academic, research and oil and gas
competitive advantage to any mining company, thanks to
industries. The idea is to bring our ideas and innovations to
the time that is saved not having to send samples to other
customers throughout the whole of Mexico.
| TECHNOLOGY SPOTLIGHT
X-RAY ANALYSIS FOR MINING PROCESSES Processes of resource definition and scoping studies
The X-ray diffraction systems are configured with ultra high-
are crucial at all stages in the mining process chain, from
speed X-ray detectors, PIXcel3D and X’Celerator, which
exploration and grade control to product quality assurance.
allow the collection of a complete scan in minutes instead
X-ray analysis is currently considered to be one of the most
of hours for a diffraction pattern. The development of new
advanced tools for industrial process control and research
software has transformed the task of a skilled specialist into
for mining operations. X-ray fluorescence (XRF) and X-ray
a robust, workman-like and completely automated tool.
diffraction (XRD) are the key techniques for characterizing
Cluster analysis software for XRD is the perfect statistical
the elements and crystalline phase composition of a material
tool for grade control within an automated environment.
sample. Maximizing the exploration budgets, pre-screening laboratory samples, identifying drill targets quickly, reducing
The X-ray fluorescence solution dedicated to the mining
re-mobilization costs, and getting an accurate report to the
industry includes a complete set of traceable standards
capital markets as quickly as possible can be facilitated using
and application templates for effortless analysis setup.
the right and most precise analytical technique. PANalytical
If in-line real time process control is needed, the CNA
is a world leader in X-ray analysis, and its technology can
cross-belt analyzers can offer a unique solution through
characterize a wide range of materials, covering all steps in
a technology called PFTNA (Pulsed Fast and Thermal
the process chain, from exploration through grade control
Neutron Activation). Pulsed excitation by an ON/OFF
to process control and product quality assurance. The X-ray
electrical neutron source across and through all material
analysis of polycrystalline powder samples has advanced
on the belt instantaneously delivers highly representative,
from its roots in laboratory research and is regarded now as
elemental analysis contributing to the profitability in the
one of the most powerful industrial process control tools for
minerals and power plant industries for measuring copper,
the mining industry.
iron ore, nickel, and coal, for example.
295
| TECHNOLOGY SPOTLIGHT
INTEGRATED LUBRICATION ANALYZER Proactive maintenance is the new watchword for cost-
contamination and component wear, thus enabling them
conscious machinery and equipment operators. Mining
to eliminate unnecessary overhauls or inspections, reduce
companies need greater reliability, enhanced efficiency and
operational failure or field repair, and optimize lubricant
100% uptime for their equipment and machinery. The ability to
service intervals. Moreover, the analyzer allows mine
predict failures and take preventative measures has become
managers to refine cost assessments and controls, to
vital in ensuring the continuity of mining operations. At the
improve record-keeping and to identify faulty operator
same time, there is an ever-increasing pressure to reduce
practices.
maintenance costs, particularly on lubricated equipment. One of the main challenges in equipment maintenance is
Some of the lubricant analyzer’s most remarkable elements
making the right decisions regarding filter and oil changes,
are: comprehensive fluid analysis that uses an integrated
or having to shut down the equipment for an inspection.
software approach; an easy-to-use touchscreen interface
In order to get it right, those maintaining the equipment
that provides step-by-step guidance and minimizes training
require precise and timely information about wear particles,
for busy maintenance personnel; one central repository
lubricant contamination, and lubricant degradation.
for all infrared spectrometer data, with flip-top cell tests for TAN/TBN, water content, soot, oxidation and mixed up
Spectro’s integrated lubrication analyzer bridges the gap
fluids using IR technology; a particle counter that employs a
between the equipment and the laboratory by integrating all
Filtration Particle Quantifier (FPQ) for solvent-free particle
key condition tests into one solvent-free portable unit that
estimation, and which can handle the dirtiest and wettest
can be operated on site. The company’s system analyzer
samples; metal wear analysis for abnormal wear conditions,
combines particle counting, filtration and an elemental and
which uses XRF technology and comes in a solid briefcase
infrared spectrometer and viscometer. The maintenance
that is battery operated, allowing the analyses to be carried
team now has a better way of keeping high value assets
out in any geographical location.
running at peak efficiency by testing machine conditions (wear), and checking for contamination and lubricant
The versatility of the integrated lubricant analyzer allows
condition, using only a small amount of oil and without the
those carrying out maintenance to perform tests for
need for any class of solvents. This solution provides mining
all types of lubricating fluids and asset compartments
companies with a point-of-use analysis tool that can impact
without the need for cleaning fluids, hazardous materials,
operations in several ways. The system enables operators
dilution or special sample preparation. The system’s access
to operate machinery and equipment more efficiently,
to embedded fluid reference libraries provides reliable
resulting in improved safety, reduced downtime, increased
and updated information for faster and more informed
component life, optimized replacement part utilization and
decision making. Machine condition monitoring based on
reduced fuel and oil consumption. In addition, the lubricant
oil analysis has become an important, if not mandatory,
analyzer also enhances equipment upkeep, helping those
maintenance practice at many of the world’s surface and
performing maintenance identify Temisa_mining_fin_cur copy.pdf 1 to 05/09/13
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and measure lubricant 11:47
underground mines.
ANALYZING LUBRICANTS TO LENGTHEN EQUIPMENT LIFE The question of maintaining the equipment used in
the testing on site. Our systems are easily deployed, have very
mining operations is straightforward yet crucial.
From
limited logistics requirements, and are easy to operate. This
using lubricants to avoiding overheating, companies vary
is important when you are in remote areas where employee
widely in their approach to maintenance. One company
turnover is high, and qualified chemists or spectroscopists
that is taking a different approach to the issue of heavy
are difficult to find,” says Mitchell.
equipment
maintenance
and
lubrication
is
Spectro
Incorporated. Rather than monitoring the performance of
Mitchell points out the incongruity in the fact that mining
the machine itself, Spectro Incorporated conducts analyses
companies often spend so much money buying expensive
on the conditions of the oil and lubricants that are used
equipment, without going that extra mile to look after it. “A
on the gears, bearings, and shafts of large mechanical
large haul truck at a typical mine in South Africa transports
systems. The purpose of these analyses is to deduce the
over US$250,000 per day. If you lose an engine or a
chemical condition, contamination, and wear metals in
transmission because the lubricant has stopped working,
the oil and lubricants, thus allowing an accurate diagnosis
and it takes a week to fix that truck, the mining company
of any problems developing within the machinery. “The
would lose more than US$1 million,” he says. According
question you seek to answer is ‘What is the condition of
to Mitchell, mining companies that are properly focused
the system and are the lubricants continuing to do their
on maximizing uptime will reap the rewards: “We have
job?’ This information is critical to allowing maintenance
case studies of mines that have invested US$150,000 in
and reliability personnel to predict and prevent potential
analytical equipment, and over time this has saved them
failures in these valuable systems,” says Brian Mitchell,
over US$10 million in equipment uptime and maintenance
President & CEO of Spectro Incorporated.
costs.” Spectro Incorporated’s approach draws heavily
“Testing
the
oil
and
lubricant
allows
companies
to
preemptively take that system out of operation, service or repair it, and return it to operation. The result is reduced downtime and maximum productive capacity” Brian Mitchell, President & CEO of Spectro Incorporated
Spectro Incorporated provides equipment for the analysis
on the company’s foundations providing oil and lubricant
of molecular and elemental spectroscopy, counting and
analysis solutions to the US Army. Mitchell notes that there
characterizing particles in the oils and lubricants, and
are parallels between the needs of the US Army and the
testing their physical properties. Through these analyses
mining industry: “In the military, if you have a helicopter
the team can diagnose, and go on to prevent, potential
or a jet engine, failure is unacceptable because if the
failures in the machinery. This technology provides a clear
lubricant has not been monitored and the system is failing
example of predictive maintenance in action, which for
the results are absolutely catastrophic. A similar situation
Mitchell is an absolutely essential strategy that all mining
occurs in the mining industry. It is certainly not a life or
companies would benefit from investing in. “Rather than
death situation, but it can be fatal in terms of business, and
running a system down until it fails, which will result in
of maximizing efficiency and profitability,” he says.
expensive repair costs, testing the oil and lubricant on the machine allows companies to preemptively take that
It is due to the parallels between these two markets that
system out of operation, service or repair it, and return it to
Spectro Incorporated is driving up its business in the
operation. The result is reduced downtime and maximum
mining industry, which is one of the company’s three core
productive capacity from these critical assets,” he adds.
focus markets. The company will be using its research and development department in order to better identify the needs
Spectro Incorporated’s oil and lubricant analysis systems are
of the industry and design the products that will serve those
designed with the specific aim of making analysis possible at
needs. Spectro Incorporated is currently spending 18% of its
the mine site itself, which avoids long delays that can greatly
revenue on this endeavor. “We are developing tools specific
reduce the ‘predictive’ value that the process is supposed
to the mining industry’s needs, and again, that goes back to
to add. “Spectro Incorporated is particularly unique in its
being easily deployable, requiring very minimal logistics for
development of portable tools that enable customers to do
support, and also being easy to use,” says Mitchell.
297
INTRODUCING HIGH QUALITY HYDRAULIC HOSES AND FITTINGS Hydraulic hoses and fittings are used across a wide
capacity to handle 3,500psi, RYCO will produce a hose
range of mining activities and applications, such as
that can handle up to 5,000psi. The company will always
heavy off-road mining vehicles, underground mining
try to design products that offer a 20% additional benefit
equipment, lifting buckets of ore, or shifting mountains
over what the norm requires,” he adds.
of overburden. Given that the market for these kinds of products within the Mexican mining industry is rapidly
The company’s strategy for consolidating its brand
expanding, many international companies are trying to
within the Mexican market focuses for the most part on
capture a part of this market. RYCO Hydraulics, a leading
applications for mining activities. Lizardi points out that
Australian manufacturer of quality hydraulic hoses,
many underground connections in Mexican mines are
fittings and accessories, started operations in Mexico
still being secured with a single staple, despite this being
in May 2012. Founded in 1946, RYCO Hydraulics offers
an obsolete technology: “Through simple alterations and
a broad range of hydraulic hoses to suit different types
practical innovation, RYCO can improve safety levels by
of applications, particularly within the mining industry.
increasing the pressure capacity of the hose.” RYCO aspires
“Every mobile equipment application for the mining
to be more than a product supplier and also provides
industry uses hydraulic systems. All the ‘arteries’ of the
integrated services, such as technical support and training,
hydraulic equipment work thanks to hoses and fittings,”
to its customers. “Given that RYCO’s business is just starting
says Fabián Lizardi, Sales Manager for Mexico and Central
in Mexico, providing training and support services not only
America at RYCO Hydraulics. The Australian company
guarantees that the company’s products are used in the
manufactures a wide range of fittings in various sizes and
right way, it also presents added value for its customers,”
thread types that are supported by RYCO manufactured
says Lizardi. RYCO’s plan is to enter the distribution market
hydraulic hoses with high working pressures. All hoses
in order to create a network of specialists that can supply
are manufactured under strict quality controls and meet
spare parts such as belts, pulleys and bearings, as an added
the most popular technical standards. Lizardi points out
service for the final users of the hydraulic hoses and fittings.
that all of the company’s products follow Mining Design Guideline number 41 (MDG41), set up by Australian
Lizardi explains that if a hose breaks the equipment or the
authorities, which is considered to be the latest and most
complete system stops working. Given that some mines
up to date specification for all fluid power applications.
are located in remote areas and are very hard to reach, out of order equipment could result in high cost. Lizardi
“Companies within the extractive industry sector are really
also describes how performance is measured, based on
concerned about purchasing high-quality products that
the productivity of the company’s industrial plants, as well
meet every safety requirement and regulation needed to
as on the safety of the products for their final users: “Our
operate in the mining market,” Lizardi says. However, the
customers have not experienced any accidents related to
company goes beyond complying with safety standards
the quality of our products. The company helps maintenance
and offers added benefits to the final users of its products.
workers to detect parts that need to be replaced with new
“For example, if a safety norm requires a hose to have the
ones, which also helps to prevent accidents.”
The best equipped aerial survey company in Latin America
Aerial Image 298
Cuernavaca, Mexico • http://www.geoair.net • Tel.: +52.777.3650572
LiDAR
INFORMATION IS POWER IN THE MINING INDUSTRY It
is
no
secret
that
“GeoInfoMex is useful for companies that are at the
power.
prospecting stage, since through this software it is
Aware of this, the high tech
possible to access all of the SGM’s geological, geophysics,
solutions company Teknol,
and geochemistry data, as well as information on main
based in Sonora’s capital
deposits, radiometric data analysis, active mining claims,
Hermosillo, took
on the
and agrarian tenures, along with much more information. In
task of gathering data
this application we have included a very useful tool called
and information that was
Density Maps, which allows the user to select an element
previously spread across
of interest and view all of the zones that have geochemical
a number of government
anomalies for that element. However, its main advantage is
information
Margot Molina Elías, CEO of Teknol
is
agencies, with the aim of
the data it provides on all active mining claims and ejidos,
helping companies to find viable mining projects in Mexico.
which allows the user to know with whom each negotiation
“There are many companies that have huge amounts of
will be taking place, as the project continues through the
information and big databases, however if this information
exploration and exploitation stages,” Molina Elías adds.
is not processed, and there is no knowledge of how to use it, it ends up being useless,” says Margot Molina Elías, CEO
Another product that Teknol provides for the mining
of Teknol. Before Teknol developed its technologies, any
industry is the QuickMining Library. Through a subscription
company or mining project that required mine prospecting
the user is provided access to public domain information
information had to go directly to the Mexican Geological
that
Survey (SGM) or to the General Directorate for Mining
government agencies, and which mining companies often
(DGM), which could mean long waiting time incurred fees,
requested. This includes information on rereleased mining
and travel expenses.
concessions,
was
previously
withdrawn
scattered
mining
between
applications,
different
NI-43101
reports, the geodesic mining subnet, geo-referenced The idea for Teknol emerged a few years back, when the
articles from different magazines, digital theses and, most
experience and knowledge of a college professor was
importantly, new applications for mining concessions. One
combined with a student’s vision. A business was born,
of the most relevant features of this service is that Teknol
and it entered into the ‘business incubator’ program at the
has sent employees to the DGMs in different states of the
Tecnológico de Monterrey of Sonora. Molina admits that,
country in order to gather information from files that form
even though from the beginning Teknol combined great
part of the concession application process, with the aim of
capacity for data analysis with great software, the company
geo-referencing them for easy consultation. Molina Elías
did not really know who it should direct its efforts towards.
explains that the subscription includes the QuickAlert tool,
Further down the line it became clear that the area of
which allows the user to define an area of interest for a
greatest opportunity for the company was in the mining
potential project and subsequently sends an alert as soon
industry and the company is now dedicated to processing
as a new mining concession application is processed in the
huge quantities of information and transforming it in the
designated area: “This can give companies the certainty
most user-friendly and clear format possible.
that an area is 100% free to be claimed.” Though the main challenge has been obtaining the information and displaying
Molina Elías explains that the SGM has collected very
it in the most user friendly way, keeping it up to date has
valuable geological information on the Mexican territory
also been crucial, which is why Teknol updates its database
over six decades: “This information, combined with our
once a week.
technology, has resulted in what is known as GeoInfoMex, which allows the user to visualize and analyze information
Mexico’s huge mining potential and increasing foreign
from the SGM, the DGM, and the National Agrarian
investment
Registry (RAN), and to consult 18 data categories in a very
campaign in the US, aimed at communicating the company’s
intuitive and user-friendly way.” Teknol facilitates access
services to foreign companies. “In turn, the country then
to this information with the ultimate aim of attracting
becomes of interest to foreign investment. Our company
foreign investment to the Mexican mining industry. The
wants to continue seeking innovation on every project we
information can be accessed from anywhere in the world
create, and to be leaders in generating technology solutions
through an online platform via the company’s website, as
and anticipating market needs. It is simple: we want to be
well as from any of the regional SGM offices, through one
recognized by the quality of our service, integrity, and our
of the multitouch Edge DisplayStation screens.
excellent team,” Molina Elías adds.
is
driving
Teknol’s
aggressive
marketing
299
TRANSFORMING MINES WITH SATELLITE COMMUNICATION Problems
mine’s
connectivity is fast enough, as well as backed up. The
communications system
bandwidths used by mining companies must be enough
can
a
to also connect mobile devices that are taken to different
negatively
upon
a
impact of
locations out in the field at various stages of the mining
different aspects of the
project. At the exploration stage, for example, GlobalSat
business, from safety and
provides antennas that come in an easy-to-carry suitcase,
security
so that they can function in the field and be moved around
and Pedro Hoyos Salazar, Deputy Director of Commercial Innovation & Marketing at GlobalSat
in
number
to
operations
productivity.
While
to different areas as required. This means that during long
mining companies have
stretches of time being out in the field exploring, they
traditionally used terrestrial
can be connected in real time through equipment that is
services, they are turning
easy to use and can be set up in just an hour and a half.
to satellite solutions for their communications needs as a
“Good exploration companies with innovative software
more reliable and longer term investment, though this can
send the information to the office and laboratory via our
be an easier spend for bigger mining companies than smaller
systems, allowing them to achieve results in a very short
ones. “Large mining operators understand the need to keep
time. This is the easiest way to make decisions and to
up with the latest sophisticated mining equipment, but for
know whether exploration is going in the right direction,
smaller companies the main barrier is the cost, because
all the while optimizing time and costs,” says Hoyos
satellite telecommunication, although useful, is not cheap,”
Salazar. But it is not just at the exploration phase that this
says Pedro Hoyos Salazar, Deputy Director of Commercial
technology is important. Once companies start to ramp up
Innovation & Marketing at GlobalSat. His company, which
their operations in construction and exploitation, keeping
installs and maintains digital satellite systems at its clients’
communication efficient is equally as important.
mines, is expecting more and more smaller mining companies to turn towards these solutions in the long term. “It can take
The satellite bandwidth is one of the most important factors
a while but operators usually realize that continuing without
in pushing up the cost of satellite communications, and the
a digital satellite system is not an option. As they grow they
more information that is being uploaded and downloaded
will need telephone and internet access. They could upload
using the connection the bigger the bandwidth will need to
their information to a hard disk drive, go to the nearest town
be, and thus the greater the cost. For this reason GlobalSat
and send it from any available internet connection, but this is
has been using three different platforms, provided by the
just not viable,” adds Hoyos Salazar.
company’s main technology provider, Gilat. “Every new platform Gilat develops is able to provide more megabits per
GlobalSat
services
megahertz, meaning that our services become more cost
that help mining companies to communicate between
also
installs
videoconferencing
effective for us and for our clients,” explains Hoyos Salazar.
different mines and head offices. “Being connected in real
“GlobalSat is the main client for both Gilat and Intelsat in the
time with the mine is vital for managers in making their
Mexican market, and this has helped us all in getting better
decision making process faster,” explains Hoyos Salazar.
prices and growing rapidly together,” he adds. GlobalSat
Aside from making communication more convenient, he
takes this issue of emergency maintenance seriously, but
also points out that these technologies bring financial
the very isolated nature of some mines and the security
benefits for mining companies, for example by reducing
challenges posed in transporting valuable equipment mean
the need for travel and being able to order spare parts
that getting the right equipment to the mine securely can
more efficiently.The technology for these communications
take a number of hours. For this reason, some companies
systems is designed to make them as simple as possible to
set up a second or third antenna for backup, so that if
install. “The equipment GlobalSat provides is ready to be
one antenna goes, the mining company will be able to
connected to a pre-existing IP address or internet service.
use another in order to contact Globalsat, tell them there
The company only needs a very small modem and a power
has been a problem, and arrange for the company to send
supply – ideally a regulated power supply - in order to
someone to fix the problem immediately. Hoyos Salazar is
extend the life of the equipment,” says Hoyos Salazar.
confident about the reliability of GlobalSat’s equipment. Perhaps it is for this reason that some of Mexico’s biggest
300
Nevertheless, one should not underestimate the difficulties
mining companies, such as Goldcorp and First Majestic
in getting this sort of equipment installed in large, isolated
Silver, have chosen to work with GlobalSat. “Once they
mines. Large mines can require a very large bandwidth
experience the benefits of satellite communications, they
and multiple antennas in order to ensure that the mine’s
will never work without it again,” he says.
| VIEW FROM THE TOP
ADDING VALUE THROUGH AUTOMATION RAFAEL STIFANO Regional Director for Mexico and Central America of Rockwell Automation
Q: What benefits do Rockwell Automation solutions bring
Q: How does Rockwell Automation reduce risk and ensure
to companies working in Mexico’s mining sector?
the highest safety standards in its systems and processes?
A: Mining is probably the industry that reaps the most
A: Safety is one of Rockwell Automation’s main concerns,
benefits from our solutions. This is because mines require
and the concept of safety is very well developed within the
many motors, whether they are used for power crushers,
company. We manufacture quality safety components, but
conveyor belts, separation systems, wheel loaders, or
on top of that we are the only company that complements
concentrator plants. Integration between motors can
this product offering with a safety consultancy service. We
hugely benefit the transportation and processing of
are able to go to a plant, analyze the safety situation, bring
minerals. A diagnosis for all motors can be tied together
in certified consultants, and perform a risk assessment.
through our control system, and any anomalies can
Afterwards, our consultants come up with a series of
be detected from one central screen. Our system lets
mechanisms to reduce risks to a certain level, and they can
managers detect if a particular motor is on the verge of
lead the risk remediation process. Finally, we can show the
overheating and thus react before the motor fails. From
customer that we have reduced risk from point A to point B
an operative standpoint, this reduces downtime. From an
and ensured compliance according to worldwide standards.
engineering standpoint, we have documented testimonials that indicate we are reducing commissioning times by two
Q: What role will Mexico play in Rockwell Automation’s
weeks. In mining, that two week reduction translates into a
international portfolio in the coming years?
lot of money that is being saved.
A: Our value comes from the knowledge we possess, and knowledge comes with hiring the best talent that is available
We need to develop architecture that brings more
in Mexico. We recently conducted a study throughout Latin
intelligence to the field. We have developed controllers that
America, and we were happy to discover that Mexico is the
are interconnected through networks and closely monitor
country that educates the largest number of engineers in
the mining operations, which are complemented by software
the region. The proportion of students that are engineers
solutions. We see a new world of information. The industry
in Mexico is much higher than it is in the US. We typically
is demanding much more data, however data is meaningless
hire engineers for all of Rockwell’s business areas. Our
unless you have a system that can process it and turn it into
sales people, our consultants, and our distributors are all
information. It is information – as opposed to data – that
engineers.
allows miners to decide whether to explore and drill a certain area. We typically help our customers increase their margins
With the wave of investment that is currently coming
by reducing the whole life-cycle cost through our automation
to Mexico we expect that the country will become
products. We help mining companies to drastically lower their
a manufacturing hub for Rockwell Automation. The
maintenance costs, and we are reducing total life-cycle costs
automotive, pharmaceutical, and aerospace industries
by using less parts and further integrating components into
are investing a lot in the country. Similarly, Rockwell is
one single infrastructure. We also have Parts Management
currently investing heavily in emerging countries, and we
Agreements (PMA) through which Rockwell becomes the
believe that 30% of our business will come from emerging
owner of spare parts. The intention is to eliminate the need to
countries in the future. In Latin America our main markets
buy the asset and be able to replace parts that have become
are Mexico and Brazil. Mexico has become one of the
obsolete. We own the asset, we put it in the mine and we
biggest manufacturing centers for Rockwell, and it is now
make sure that all the necessary spare parts are readily
the second most important worldwide, after the US. Our
available at the site. Downtime is significantly lowered under
intention is to double our business in the next five years.
this scheme because through it we efficiently deliver parts to
We will influence more partners, our partners will influence
the mining facility.
more customers, and more customers will benefit.
301
THE TRANSFORMATIVE POWER OF TECHNOLOGY IN MINING Mining
and
as if we were building a city; this includes services like
technology have come to
activities
telephone, internet and video conferencing,” says Álvarez.
be inextricable, and there
Jorge Álvarez, Director General of AdN Consulting
remain very few moments
One particular area in which technology has become
in
mining
indispensable for mining companies is security. As
process where technology
companies have switched from analog to digital systems,
is not somehow involved –
companies like AdN Consulting have been able to encrypt
whether it be in geological
their communications channels and email accounts,
analysis,
making it much more difficult for third parties to intercept
or
the
whole
communication,
milling
“Technology
processes. for
messages, thus leading to more secure and safer
mining
communication. For Álvarez, the ability to communicate
has advanced a lot in the last 10 years, and mining
between the many different people working in the mine
companies are relying more and more on technology,” says
is essential for maintaining safety standards. “We provide
Jorge Álvarez, Director General of AdN Consulting. “Today
the means for communication between everyone inside
mining companies have access to tools which allow them
a mine by creating various channels of communications.”
to virtually design their mines, walk through them, and
One of the company’s challenges has been to deal with
even predict what the challenges will be in making any
the increasing demand for radio channels in mines which,
infrastructural adaptations. At AdN Consulting our objective
with the number of staff working in the mine often
is to provide such tools to our clients and complement them
exceeding 2,000, can become extremely complicated.
with the right consulting and support services so that our
“We have modified the technology that we use in order to
clients can get the best return on their investment.”
increase the capacity of the system and meet the needs of our clients. Voice communication is very important for
The company has built a broad portfolio of products and
operations, and the quality of the radio and visual signals
services that look to satisfy mining companies’ requirements
is very important for the safety of the people,” he argues.
across all stages of a mining project – from prospecting and exploration all the way through to the end of the mine life.
Because AdN Consulting understands that many mining
“I like seeing how small exploration companies grow from
companies do not have the expertise, nor often the
the exploration stage and the discovery of mineral deposits
human resources, to dedicate to managing this type of
to obtaining the resources to build the mine and then put
infrastructure themselves, this is a service that the company
that mine into operation. We have gone through all of these
provides. “We can supervise any security issues, in addition
stages with a number of mines and we enjoy being part of
to administering the servers. We also provide consolidation
their growth,” says Álvarez.
and virtualization services, so for example if a company has 20 servers we can compile the information from the
Regardless of the stage at which AdN Consulting becomes
different servers and make it available online in the cloud,”
involved in a project, its strategy has been to establish a
explains Álvarez. “Every mine is structured differently, and
thorough understanding of its customers’ systems and
we must be able to connect every building or process on
processes, and listen to what they want and need in order
the mine site regardless of that structure and geographical
to function more effectively. The company’s products and
distribution. The power that supplies the wireless network,
solutions, from internet servers to geological mapping
available throughout the mine, can come from solar panels,
software, have been selected with the aim of doing just that.
wind or diesel fuel generators,” explains Álvarez.
“We can provide software that assesses the earth’s mineral
302
content and provides a 3D graph of how the minerals
Álvarez is passionate about establishing partnerships
are distributed underground. This is a must-have tool for
with mining companies that take the same approach
geologists, because it allows them to easily simulate and
to innovation and technology as his company does.
analyze the potential of the mine from the beginning, thus
“We are looking for companies that are willing to invest
informing their decision making. When they are looking
in technology in order to increase their profits and
to raise more capital they can even use this tool to show
productivity. If the company does not believe in doing
investors the potential of the mine. Most of the time, at the
that, then it is hard for us to work with them, because we
very first stage of establishing the data center on a new
are technology-focused. The size does not matter, what
mine site, at the construction stage there will be no power
matters is the company’s awareness of and commitment
or services at all, so we build communication services
to technology,” he says.
| VIEW FROM THE TOP
REAL TIME BUSINESS INTELLIGENCE SOLUTIONS RAMON ÁLVAREZ Director General of SAP Mexico
Q: What drives the company’s innovation strategy after
and logistics, but in order for the CEO to make instant
40 years as a leader in providing ERP solutions?
decisions real time information is necessary. Technology
A: Over the past 40 years SAP has become the world
will continue to be dominated by mobile devices, and
leader in Enterprise Resource Planning (ERP) solutions for
SAP has decided to make its ERP solutions available on
companies looking for efficiency in resource allocation.
portable devices.
With the idea of adding value to the 25 industries that SAP’s ERP solutions already serve, three years ago the
The mining industry was an early adopter of SAP for
company revolutionized its business strategy to become
managing administrative and financial operations, and with
a co-innovation company, changing the perception of the
the latest mining innovations the industry is now moving
company from an ERP provider to a company providing
downstream. Specifically for mining we have created
innovations. SAP analyzes its clients’ processes and either
SYCLO, which is a mobile application that combines HANA
innovates or co-innovates with them in order to transform
and our business intelligence solutions with the objective
and add functionality to the business dramatically. In order
of providing real time information on the company’s
to drive SAP’s co-innovation strategy, the company has
machinery and equipment. Given the cost of equipment,
divided its work into five market segments and acquired
mining companies must monitor and track movement and
expert companies to support the service provided to
metrics, and look for the most efficient ways of using them.
each segment: applications, analysis, cloud computing,
Mining companies no longer need to wait until the end of
database technology and mobility.
the day or the week, as SYCLO provides such monitored information in real time, allowing mine directors to instantly
Q: How is SAP working to make sure that its systems can
correct or reduce inefficiency. Grupo Mexico is one of our
provide immediate information to its customers?
clients and its goal is to reduce its operating costs by 35%. In
A: Ever since database technology was invented 40 years ago
order to reach this ambitious aim, they are investing heavily
there have been continuous improvements in the efficiency
in IT solutions. 15 of its companies are already running on
of the hardware used to run the databases. The technology
SAP, and the next job is to implement solutions in all of
has remained the same, however; the information is stored
their mines in Mexico, the US and Peru. After analyzing their
in a database, and transactions are made to retrieve it.
processes we have identified some areas of opportunity, for
Even if companies put in place ERP systems and databases,
example we plan to improve the company’s procurement
decision makers tend not to have instant, real time
structure by consolidating the three purchasing units it
information. In order to address this SAP created HANA, a
currently has into one. We will do this progressively, by
revolutionary technology that has redesigned the 40 year
adding service providers at different times.
old concept of databases. HANA has taken databases out of hard drives and made them available in the memory of
Q: What are your goals and ambitions for SAP in the
the machines, saving 40% of the time it normally takes to
medium and long term?
extract information, and allowing CEOs, General Directors
A: SAP’s goal is to continue to grow – the company
or Presidents of any company in any industry to function in
grew 74% in 2011 and 50% in 2012, and we have already
real time. The information can be instantly correlated and
grown 30% in the first semester of 2013. SAP is already
cross-referenced, allowing impactful analyses.
present in 25 industries, but we can still transform those industries dramatically, by offering our innovative solutions
Q: What benefits do SAP solutions bring to the business
to our installed client base. Based on experience, we
of its clients, and to the mining sector specifically?
estimate that about 35% of the costs in a mine come from
A: Regardless of the industry, SAP’s ERP solutions serve to
maintenance, and our strategy is now focused on creating
control and connect the different areas of a company, such
or co-innovating solutions that will have a direct positive
as finance, human resources, accounting, manufacturing,
impact on our clients’ ROI.
303
304
SAFETY & RISK MANAGEMENT
10 The international mining industry has for a long time struggled against a negative reputation regarding its safety performance, usually as a result of exceptional cases that have attracted significant media attention. Despite this reputation, Mexico’s mine workers enjoy a much safer working environment than their counterparts in other industries, such as the commercialization of food, beverages, and tobacco. Maintaining the highest safety standards nevertheless remains high on the Mexican mining industry’s agenda this year in particular, due to the new Labor Law introduced in 2012 that increased sanctions for mining companies and their staff that do not comply with their legal obligations in the area of safety. The new law has accelerated Mexico’s progress towards international standards in this area.
This chapter looks at the companies that are leading the industry in the design, development, and incorporation of life-saving procedures and technologies and the ways in which they are making mining in Mexico a risk-averse industry. It also unpacks the risks and regulations surrounding some of the highest risk areas of mining, such as the use of explosives and the importance of dissuasive measures in security on mines.
305
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® Registered trademark, Ashland or its subsidiaries, registered in various countries ™ Trademark, Ashland or its subsidiaries, registered in various countries © 2012, 2013, Ashland AD-11976.1
CHAPTER 10: SAFETY & RISK MANAGEMENT 308
Labor Ministry Focuses on Safety Performance on Mines
308
Risk Exposure to Geological Hazards
311
Official Mexican Safety Norms
312
VIEW FROM THE TOP: Integrated Approach to Minimizing Risk
313
History of the Drägermen
314
The Importance of Traffic Awareness Systems in Mining
314
The Most Talked About Underground Communication Technologies
316
Risk-Mitigating Investment in Communications Technology
317
Improving Gas Detection on Mine Sites
318
VIEW FROM THE TOP: A Customer-Focused Approach to Safety Equipment
318
Increasing Productivity by Improving Safety
320
Comfort Raises Effectiveness of Protective Equipment
321
Changing Demand for Safety and Protective Equipment
322
Using Mining Anchors to Address Safety Concerns
323
VIEW FROM THE TOP: Reducing Fire Hazards and Saving Lives in Mining
324
Dissuasive Strategies in Reducing Security Threats
326
VIEW FROM THE TOP: Exploding Onto the Mining Scene
327
The Army’s Role in Monitoring the Safe Use of Explosives
307
LABOR MINISTRY FOCUSES ON SAFETY PERFORMANCE ON MINES For many years, occupational accidents on mines have
announcing 200 inspections in those states over the
sparked public interest, antagonized private and public
span of two months, he stated that even if the Economy
actors, and called the attention of the local and federal
Ministry is the government entity in charge of granting
Human Rights Commissions. During the past administration,
mining concessions, the recent Labor Law reform has
the National Human Rights Commission (CNDH) emitted
given the Labor Ministry additional power with regards
three recommendations to the Labor and Social Welfare
to safety and health. “This allows us to get involved, and
Ministry (STPS) in relation to safety conditions on mining
this is why we will launch these inspections,” he stated.
projects. The current administration maintains a record of
Through the reforms to the Federal Labor Law (LFT) in
38 accidents on mining projects in the first nine months
November 2012, the Ministry’s inspectors now have an
of its presidential term. Incidents were concentrated in
increased capacity to suspend mining operations if they
the states of Chihuahua, Durango, and Zacatecas (with
believe they pose a significant potential risk to workers’
seven accidents in each), and Coahuila (where 5 accidents
safety. Furthermore, the economic sanctions that result
occurred). Rafael Avante, the Undersecretary of Labor
from failure to follow safety norms were substantially
at STPS, affirmed at a mining union event that “safety in
increased through the reform, and can now reach up to
mines is an absolute priority for the Federal Government,
MX$323,800 (approximately US$25,719). Between 2006
for the Minister of Labor and for the STPS as a whole.
and 2012 the number of inspectors grew 256%, and the
This issue will have our complete attention.” The Ministry
total number of inspections performed increased 368%
is already undertaking several actions to ensure the
during the same period. The increase in Mexico’s inspector
enforcement of safety measures on mines, and to mantain
workforce has brought the country’s ratio of inspectors
decent and stable working conditions for all those working
for every 100,000 inhabitants to 1.77, which means that
in the sector.
the country is not yet in compliance with the International Labor Organzation’s recommendation of 4.1 inspectors to
In his first month at the head of the STPS, Minister
every 100,000 people. During the first five months of 2013,
of Labor Alfonso Navarrete announced an extensive
the STPS inspected 7.3% more companies compared to
inspection program focused on detecting clandestine
the same period in 2012. The Ministry’s inspection budget
coal mines in the states of Coahuila and Durango. While
is programmed to grow by 5% in 2014.
RISK EXPOSURE TO GEOLOGICAL HAZARDS gravity
of geological hazards such as sinkholes, mudslides, debris
and weather are constantly
flows, rockfalls, slope instabilities, and even mine collapse.
shaping and transforming the
Over the centuries these natural threats have destroyed
earth’s crust, bringing with
many mining operations and claimed many lives. Adapting
them
geological
to natural threats and finding solutions for safety hurdles
Natural
forces
numerous
threaten
have become top priorities for the modern mining industry.
the continuity and success
The use of new technology and protection systems have
of mining operations. Natural
had a positive impact on the execution and functioning of
disasters are impossible to
mining operations around the world. “If companies employ
hazards Javier Zúñiga Arriola, Regional Representative of Geobrugg
308
like
that
can
predict, though with the right
these technologies they will not suffer downtime caused
technology and knowledge, preventative measures can
by rockfalls, slope instability or mudslides, which are very
be taken where natural forces pose a significant threat to
common and could all easily affect productivity by blocking
mining operations. “The key tools to prevent natural threats
access roads, damaging equipment, and most importantly,
are common sense, engineering knowledge, and awareness
putting the lives of workers at risk,” Zúñiga Arriola
of the environment surrounding the mining site. Knowing
comments. It is important to know the structural geology of
the above, it is possible to choose from several types of
the area, the hydrology, and the geotechnical parameters,
equipment to evaluate and analyze the natural hazards
as well as analyzing previous natural disasters. Based on
in order to minimize or even eliminate them,” says Javier
this information, companies like Geobrugg can suggest
Zúñiga Arriola, Regional Representative of Geobrugg.
the most adequate protection system for each particular
Mining operations are severely exposed to a wide array
situation. “It is very important to analyze and evaluate every
Inspections have been made more transparent and effective
the number of people employed by the sector, which
through the Support System for Inspection Processes (SAPI).
would ordinarily lead to an increase in the total number
This tool greatly enhances a company’s preparedness and
of accidents reported by mines every year. However, the
its capacity to successfully pass any inspection. In addition,
combined efforts of the STPS and industry participants
the STPS also offers mining companies a compliance guide
have led to a 30% reduction in the number of accidents
through the Self-Management Program in Health and Safety
and a 38% decline in the number of deaths per 10,000
at Work (PASST). Mining companies and industry suppliers
employees in the mining industry during 2007-2012.
and service providers that follow the PASST are awarded a
It is now safer to work on mining projects than in other
“Safe Company” certification. Mining companies that now
activities that have traditionally been considered less
possess this certification enjoy the benefits of complying
dangerous. The STPS reports that, in 2011, the percentage
with national and international safety standards, which
of occupational accidents and illnesses in the mining
are required by stock exchanges and the financial services
industry was lower (4.54 accidents for every 100 workers)
industry. The STPS is also working at the local level to
in self-service stores (5.72 accidents for every 100 workers)
improve occupational safety procedures in all areas and
and in the commercialization of food, beverages and
branches of the mining industry. The Ministry’s efforts
tobacco products (4.70 accidents for every 100 workers).
involve state governments, universities, workers, and
Moreover, the number of fatal accidents in Mexico’s mining
mining companies. Through its delegation in Queretaro,
industry as a proportion of the world total has dropped.
for example, the Ministry organized the state’s first Forum
From 2002 to 2011 the country accounted for 6.5% of the
for Safety and Health in the Mining Sector, which aims to
world’s fatal mining accidents. This number was less than
increase technical skills and managerial abilities among
the proportion for China (24.2%), Colombia (16.7%), Peru
miners, thus enabling the safe and efficient use of their
(11.8%), and the US (11.2%).
equipment. Another notable case is Zacatecas, the world’s silver mining hub, where the STPS has collaborated with
In general, better enforcement and compliance with health
the University of Zacatecas’s Mining Accidents Prevention
and safety norms in the mining industry benefits both
Course, and organized the Occupational Health and Safety
the government and the sector’s employers. Thanks to
Week. This last event was directed towards the training
the efforts of workers, educators, authorities, companies
of workers and the promotion of preventative safety
and industry regulators such as the STPS, the reduced
measures.
occurrence of accidents in mines has contributed to the creation of a better working climate for mining employees
Over the last 10 years (2002-2012) the mining industry
and to the promotion of the country as an attractive
boom has propelled an increase of more than 60% in
investment destination for mining projects.
geological risk because we will tailor a solution depending
the true risks and find a solution to them by using flow
on the geological problem,” he adds. Within the preventative
measurement systems and simulating software such as
measures category the company provides a great variety of
DEBFLOW. With this type of software the company is able
solutions, such as flexible ring net barriers to retain debris
to know the material volume that could be transported,
flow or high-tensile nets to prevent block break-outs from
and the velocity and energy it could reach at every point
rock slopes. In term of rockfalls, Geobrugg has designed
of a certain trajectory. With this type of information an
metal barriers where all elements work together by elastic
adequate protection system can be built, based on the
deformation. The resistance of these barriers is calculated in
energies calculated and the location of the infrastructure.
function with several parameters such as density, velocity,
“The challenge for Geobrugg has always been to offer its
and the volume of the material to stop. These barriers can be
clients the most innovative solutions and products that
from 3 to 9m high and can generally contain energies that
adapt to all the challenges the mining industry faces, in
oscillate at around 100kj (equivalent to stopping a mass of
terms of geological threats,” Zúñiga Arriola comments. “The
350kg at a speed of 90km/h). Geobrugg designed a barrier
opportunity to increase the industry’s performance exists
that can contain a force 8,000kj (equivalent to stopping a
on each mining project. It is only a matter of explaining to
mass of more than 20,000kg at a speed of 100km/h), which
companies the possible dangers their mining sites face,
holds the current world record.
the protection systems that exist, and the use they have been given in other countries with vast mining experience,”
During rainy season other common geological hazards
claims Zúñiga Arriola. “The future of the Mexican mining
that pose a threat to mining operations are discharges and
industry is very promising for companies like Geobrugg.
landslides. The mixture of soil, water and rock traveling
Every year several mining projects start producing, as
rapidly down a slope can create significant damage to
safety standards and performance goals grow, creating
mining infrastructure. Geobrugg is able to dimension
new opportunities for the mining safety market to thrive.”
309
Lo mejor en SISTEMAS ANTI COLISION La funcionalidad incluye: Sistema probado, más de 10000 instalaciones en vehículos Protección en 360 grados, a cualquier velocidad y en cualquier dirección Los vehículos se hacen visibles antes que el peligro de colisión sea inminente Alarmas inteligentes (posición, dirección, velocidad) Tamaño compacto de fácil instalación No se requiere infraestructura de radio Almacenado de toda la información para análisis forenses, responsabilidades Altamente rentable
..
Opcionales Seguimiento geográfico y monitoreo de funciones del vehículo Alarmas por obstáculos geo-referenciadas
310
em@safe-mine.com
www.safe-mine.com/em
| OFFICIAL MEXICAN SAFETY NORMS
The reform of the Federal Labor Law included a chapter dedicated to the observance of occupational health and safety procedures in mines, specifically within coal mines. The whole industry, however, is already liable for the compliance with these measures, for every new article in the new law is based on existing safety norms. The Ministry of Labor and Social Welfare (STPS) is the government entity in charge of the design, promulgation and enforcement of the Mexican Official Norms (NOMs) that deal with labor safety in mines. Through the National Advisory Committee for Workplace Health and Safety (Coconasht) - an autonomous tripartite organ presided over by the STPS - all changes to the existing normative body are discussed and designed while taking the needs of every sector into account. Out of the 41 NOMs regulating health and safety procedures in the workplace that were in force as of 2012, two deal specifically with the mining industry:
NOM-023-STPS-2012: UNDERGROUND AND OPEN PIT MINES - HEALTH AND SAFETY CONDITIONS AT WORK An amplified and restructured version of its 2003 predecessor (NOM-023-STPS-2012: Labor in mines – Workplace health and safety conditions), this norm provides a concrete definition of several safety procedures that must be followed in mines, such as rock scaling. It touches almost every aspect of mining activities, such as fire prevention and control, movement and handling of explosives, excavations, movement of workers, transportation of materials, electrical installations, vehicles, floors and roads, cutting, and welding. Risk analysis procedures are highly detailed in this latest version of the norm. Furthermore, this regulation specifies and complements existing safety conditions at productive open pit and underground mines, with the aim of diminishing workers’ exposure to elements of risk, depending on the specific operative aspects of each mine. It provides obligation for both types of operations, such as a minimum level of safety equipment, authorization processes that must be followed, and training requirements. The subsequent organization of this legal document, with individual chapters depending on mine type, has the objective of furthering the understanding of safety requirements and facilitating their compliance. One of the main dispositions mentioned in this NOM is the obligation to build a shelter inside underground mines, thus providing a safe refuge for employees in the case of fires or cave-ins. Another important requirement for underground mines is the establishment of monitoring systems for the assessment of exposure to sound, temperature, vibration, and chemical pollutants. Additionally, the norm compels underground mines to establish access controls, together with a registry of any person who either enters or exits the mine. In the case of open pit mines, the norm advances Mexico’s adherence to the recommendations of the International Labor Organization (ILO) regarding these types of mining complexes. It establishes certain requirements for exploitation methods, heights, sign-posting and soil stability. This chapter also includes a list of conditions that could result in the suspension of operations at open pit mines. The NOM023-STPS-2012 is in force in mining exploration, exploitation, and beneficiation projects nationwide.
NOM-032-STPS-2008 (MODIFIED IN 2011): SAFETY MEASURES FOR UNDERGROUND COAL MINES This norm includes chapters related to the handling of explosives, ventilation, electrical installations, cutting and welding, fire prevention and protection, instantaneous monitoring of methane gas emissions, excavations, structure fortification, flooding, transportation of personnel, and movement of materials inside underground coal mines. Special dispositions for small scale coal mining units are included in this NOM, such as the existence of an emergency exit through an additional vertical shaft, and the inclusion of ventilation systems. Methane gas monitoring systems and controllers must also be installed in mine galleries, ventilation ducts, and abandoned areas, in addition to the industry requirement of monitoring levels of this gas in other areas of the mine. This norm provides a legal framework for the use of verification units that must prove the compliance with all safety and health requirements. The NOM allows coal mining companies to hire their verification units, or to establish a certified unit themselves. The regulation also specifies that the results of these verifications are valid for a year, after which another evaluation must be performed.
The STPS has announced many more NOMs regarding many aspects of occupational safety, ranging from machinery operation to fire prevention and the storage and transportation of hazardous material. Every mining company must ascertain that these norms are being followed in order to prevent fines or the suspension of operations due to a failure to comply.
311
| VIEW FROM THE TOP
INTEGRATED APPROACH TO MINIMIZING RISK TJERK RASKE Director General of Dräger Mexico
Q: How do Dräger’s products improve the safety of
for rescue chambers. There is a great opportunity for
workers at Mexican mines?
Dräger to expand in this part of the market in the coming
A: The products in our portfolio begin by addressing
years, given that our company integrates many different
preventative measures in occupational health and safety, such
solutions such as gas monitoring and oxygen recycling
as the detection of alcohol and drug use, in order to avoid
machines, among other things, which result in more
operating risks. These are then linked to occupational health
efficient mining shelters. Today the BG4 is our best known
and safety threats, such as hazardous gas and lack of oxygen,
product for mine rescue teams. In addition to that our
depending on the type of mine. For individual gas monitoring
portable gas detector solutions, including the X-Dock and
we offer special software and portable gas detectors through
the X-Zone, offer very important advantages, allowing for
which each employee can keep a record of the level of toxic
interconnection and a database to store information.
gases they are being exposed to, and we offer respiratory protection and filtering solutions with the aim of preventing
There have been significant advances in the past couple of
long term negative effects on the health of the workers. We
years because of the passing of reforms related to labor
also have gas analyzers that detect the combustion gases of
security legislation and the application of new norms.
heavy equipment, such as diesel engines.
There are still informal mining projects on which safety is not a priority, but the Mexican mining sector becomes
In terms of mine rescue, we provide self-rescuers, which
more professional each year, and investment in safety
are respirators for use in emergency situations that give the
solutions grows as a result. Downtime in a mine can cost
individual between 25 and 60 minutes to escape to safety,
a lot of money, but in the case of a fire the financial loss
as well as gas detectors and closed-circuit respiratory
could almost amount to the whole investment, hence the
protection systems that work for four hours. The full-face
importance of security measures and equipment.
masks for breathing allow communication and give miners a wider range of vision, allowing them to act in emergency
Q: What new technologies and solutions resulting from
situations. Dräger also provides emergency ventilation and
Dräger’s R&D processes are you planning to introduce to
resuscitation systems for reanimation which, combined
the Mexican market?
with the hospital equipment that we offer, provide our
A: Dräger works closely with its customers to develop new
clients with a complete solution for emergency and rescue
solutions. We offer integral solutions, including quick-fill
situations. We create integrated solutions for the customers
stations and refillable breathing apparatus, and we also
by developing hermetic refuge and rescue chambers with
recently launched a portable area monitor, the X-Zone,
the same mechanism for recirculating air for 24 to 96 hours,
which is mainly used in coal mining operations, given that
depending on the design. The breathing apparatus can
this is where the risk of fire and toxic gases being released
be complemented with quick-fill stations throughout the
is higher. The equipment consists of a range of fixed and
rescue trail of the mine, creating an integrated concept for
portable gas detectors that are easy to use and allows the
emergency and escape situations. Our quick-fill systems
sending of alarms between different portable gas detectors.
are National Fire Protection Association approved, and are
Another significant feature will be the documentation of all
suitable for firefighting underground.
safety-related topics for workers, so that a company can improve its employee protection measures. We address this
Q: How have Dräger’s products responded to the specific
need through the X-Dock, which serves to complement our
conditions present on mine sites as well as the regulatory
portable gas detection products.
framework that applies to mining projects?
312
A: The Labor Law states that every underground mine
Q: What opportunities are there in Mexico for safety
must have shelter in case of any emergency, and when this
companies such as Dräger to draw on their international
requirement was introduced it triggered greater demand
presence and experience?
A: Dräger has a presence in Canada and the US, and
also great initiative coming from the mining industry and
Canadian companies in particular are aware of the experts
from Camimex, which has a commission focusing on safety
we have working for us in countries such as Mexico.
that organizes regular meetings on the topic. There are
One of the most important things is gaining the trust of
also international experts coming into Mexico with safety
mining companies and miners in general, given that our
initiatives, for example the German Chamber of Commerce
technology is used to protect miners’ lives. It is certainly
has been involved in sending experts to Colombia to
easier for companies in Canada or the US that have used
train people. If there is no regulation on the part of the
Dräger equipment for over 25 years, given that they
government, safety performance inspections will not be
already recognize the quality of our brand. The 100 year
carried out and optimal conditions will not be reached.
old tradition of using Dräger in the US mining sector has
Some companies that avoid accidents in mines are being
led to mine rescue workers being called “Drägermen”; this
recognized as socially responsible and rewarded with tax
helped to position our brand in the market.
exemptions; we need to promote these types of initiatives with the government in order to inspire mining companies
Q: What is the main factor that explains the difference
to improve their performance in this area.
in the approach to safety between Mexico and countries like Canada and the US: regulation or education and
Q: Would you join forces with your competitors to push
awareness?
for the broader application of safety solutions in the
A: Integrated solutions are more common in Australia
mining industry?
and Canada where safety awareness and regulations
A: Nowadays, when we promote certification programs
are more advanced, but Mexico has also started to raise
we communicate with other companies to perform the
awareness about the importance of maintaining safety in
same kinds of tests to verify the quality of the products
mines. Each company takes a different approach to safety
in the market. This is not only driven by regulations and
performance, depending on the country it is working
compliance with governmental requirements, it also
in. We face a big challenge in convincing people of the
has to do with international regulations, where Mexico
value of safety equipment and this is something that the
is orienting itself towards following North American
companies providing this equipment have to get better at;
regulations
we must explain the value proposition in a more effective
companies reach international safety standards, show
way. We provide training and education through the
continuous improvement, and ensure that safety rules are
Dräger Academy; in the case of mine rescue teams this
being followed by all of the individuals working in the mine.
involves how to use the equipment while under physical
The challenge is for individuals to go into the mine every
stress. Safety equipment providers will surely be pushing
day using safety equipment without experiencing any
for improvements in safety performance. There is, however,
incidents.
especially.
Certificates
are
given
when
HISTORY OF THE DRÄGERMEN In the late 19th century the son of the founder of Dräger, Bernhard Dräger, recognized the potential of oxygen and created the company’s guiding principle: Technology for Life. Dräger carried out extensive research and development, and discovered that the principle of pressure reduction has applications as a basic technology that can be used in a variety of products, from soldering and welding equipment to ventilation and respiratory apparatus. In 1904 Bernhard Dräger conducted a series of tests to acquire data on the respiratory requirements of humans, resulting in the first serviceable breathing apparatus, which was then enhanced in close cooperation with mine rescuers. Two years later on March 10, 1906, there was an explosion on a coal mine near Courrières in France. Around 1,600 men were working underground at the time of the accident, and there was an immediate call for aid, with German mine rescue teams among those that responded to the emergency. This was one of the worst mining catastrophes in history: over 1,000 miners died due to fires, poisonous gases, collapsed mine walls, and floods. However, many workers were saved by the rescue teams, which were equipped with Dräger breathing apparatus. Bernhard Dräger also traveled to Courrières himself to experience the underground working conditions of the rescue teams firsthand. In the following years, Dräger equipment proved to be effective in numerous mining disasters in Europe and the US, and the company had such a technological edge in this field that US mine rescue workers became known as “Drägermen”. “Dräger has been in the mining sector for more than 100 years, and it is so closely linked with safety that a group working on proposals to improve safety in the Mexican mining industry named itself ‘Drägerman’,” says Tjerk Raske, Director General of Dräger Mexico.
313
THE IMPORTANCE OF TRAFFIC AWARENESS SYSTEMS IN MINING Due to its hazardous nature, it is not common for safety
It is difficult to measure the impact that SAFEmine
products that have been developed for other industries
technology has had on the mining industry, since companies
to be adapted to mining operations. Vehicle collisions can
are not very open with these statistics. Nevertheless,
cause serious injuries and even fatalities, as well as result in
studies that the company has performed on mines in
serious operational costs as a result of vehicle downtime.
Canada, Australia, and the US show that speeding can be
SAFEmine technology was originally developed for the
reduced by 90%. Data from those surveys also showed a
small aircraft aviation market; however, in 2008 the mining
44% reduction of tailgating events and a 30% reduction
company Anglo American was looking for a reliable collision
in dangerous traffic situations. “Recently, we heard that
avoidance system and asked SAFEmine if its system could be
one mine decreased metal to metal accidents by 53%. In
used in the mining industry. SAFEmine offered the company
another mining operation we were told that an operator
a trial period of its technology and, pleased with the results,
had come on the radio and thanked the management for
Anglo American requested that SAFEmine develop a
installing the collision avoidance system, because thanks
product specifically for its operations. Just five years later
to our technology he had just avoided running over a light
SAFEmine technology is now being used in over 40 mines
vehicle he had not seen,” says Surraco.
worldwide, and has protected over 15,000 vehicles. The current downturn in the industry is a challenge, since The collision avoidance system allows management to
companies are tempted to reduce their investments in
track all light and heavy vehicles in the mine. According
safety to cut costs. However, market conditions are not the
to Guillermo Surraco, Latin America Sales and Support
only hurdle SAFEmine has come across: “It is also more
Manager at SAFEmine Technology, its customers have
difficult to invest in technology when you feel that your
found the solution particularly useful because it allows
safety rules and training are adequate,” Surraco highlights.
them to track excess speeding, idle times, and also to
“Unfortunately, it is commonly the case that management
monitor mileage for maintenance. “The ability to track
only starts paying attention to the issue when a serious
one’s fleet and assets improves productivity and reduces
accident occurs; that is when we get a call to come and
the risk of assets disappearing. Being able to report on
talk to the operators about collision avoidance.” Surraco
speeding and dangerous driving can change behavior and
points out that there are also proactive customers that see
allow fuel consumption to be reduced, meaning that time
collision avoidance as a form of insurance, and who believe
between failures on the vehicles is increased,” he adds.
that it is another useful tool for their operators. For mines
THE MOST TALKED ABOUT UNDERGROUND COMMUNICATION TECHNOLOGIES The ability of management teams to track all activity
time. If there is a problem with a piece of equipment,
taking place in their underground mines has transformed
sensors or electronics, our system will immediately notify
the industry in recent years, and made considerable
the department where the failure is located. If contact is
improvements to the safety performance of mining
lost with one of our location tags the operator of the mines
companies. “Communications and tracking have been two
will know about it within seconds; they can also look at
of the most talked about underground technologies in the
the tag in order to know why communication was lost and
last six years,” says Bob Lavergne, former Product Manager
be able to fix it right away,” says Lavergne. All information
of Four Leaf Solutions. “Our applications are designed to
is stored in a central database meaning that, in the face
enhance the way in which we communicate with the people
of problems, historical data can be accessed in order to
working underground, and to track their exact location to
work out what went wrong. All of this information can be
prevent, or respond to, any accident.”
accessed remotely, at any hour of the day. “We can log onto the network to perform the necessary repairs or
314
Being able to know what is happening in the mine in real
adjustments from anywhere in the world. We can be sitting
time is an invaluable element of the solutions Four Leaf
in our office in Canada and still be able to monitor and
provides. “The way in which our networks are designed
repair a mine that is located in Mexico,” says Lavergne.
and engineered allows us to monitor every aspect in real-
The system can also produce reports that allow the mine’s
“An operator had come on the radio and thanked the management for installing the collision avoidance system, because thanks to our technology he had just avoided running over a light vehicle he had not seen” Guilermo Surraco, Latin America Sales and Support Manager at SAFEmine Technology
that have a hard time assessing their collision avoidance
calculates the trajectory of each vehicle. These trajectories
requirements, Surraco believes that the mining operation
are transmitted via radio frequency to the surrounding
has to analyze the ‘what ifs’, such as: “What if there is an
vehicles; each one receives the trajectory information,
accident and a haul truck runs over a light vehicle?”
compares it to its own, and only if there is a possibility of collision the system sounds an audible alarm.
One of the main design features that distinguish SAFEmine technology from other avoidance collision systems is that
The company believes in providing technologies that
it was originally developed for small aircrafts, and was
its customers can add to their existing SAFEmine
designed to keep the number of alarms the operators
solutions, and seeks to offer technological compatibility
receive to a minimum. “The number of false alarms on
and
other systems is a common complaint; the alarms confuse
SafetyCentre together with one of our main customers in
the operator, who stops paying attention to them, and in
South Africa, in order to integrate some of the technology
many cases the equipment ends up being damaged in
that the company already had for situational awareness,”
order to silence the false alarms,” explains Surraco. “Our
explains Surraco. “Together with our customer we worked
technology also offers the operator visual alarms. The
on integrating all of these technologies into one single
display is very small and simple and it contains a series
platform. This integration translates to big savings for
of LED lights that turn red or green, depending on the
the mines. Instead of having three or four independent
distance and location of surrounding vehicles. By looking
technologies we offer a single, integrated solution that de-
at the display, the operator can quickly assess where other
clutters the cabin significantly.”
integration
wherever
possible.
“We
developed
trucks are located and, by the color of the LED, determine how far away they are. Our system does not require any
Headquartered in Switzerland, SAFEmine is currently
interaction with the operator, and this is one of the features
looking into the Mexican mining market because of the great
that our users like the most.” This lack of interaction
potential that it holds, and Surraco says that Mexico is where
with the operator is possible thanks to an algorithm that
the company will be focusing its efforts in the near future.
management team to check things like how long it takes a
Lavergne sees many business opportunities in Mexico,
truck to go from a drop point to a dump point, to see the
because many mining companies continue to rely on
trucks on a screen and play back their movement across a
outdated technology. “There is definitely a need to refresh
mine, and to improve the processes overall.
the sector, in terms of technological innovation. Mexican mining companies will see huge benefits from using
With 14 years in the business, Four Leaf now offers more
systems like ours, not only for location tracking, but also in
than 350 mining software applications, and counts some
terms of health equipment such as ventilation monitoring,”
of the largest international mining companies among its
he concludes.
clients. What these products have in common is that they provide sophisticated technology in an accessible way. “We believe that nowadays almost everybody knows how to use a cell phone, and our system is as easy to use as a cell phone; operators will not have any problems adapting to how the system works,” says Lavergne. “Another advantage is that installing our technology does not necessarily require all of the existing installations within a mine to be replaced. We are able to go in and retrofit the mine to a new digital system, so we can use some of the components that are already installed and perform the transition from an analog to a digital system easily.”
“Our applications are designed to enhance the way in which we communicate with the people working underground, and to track their exact location to prevent, or respond to, any accident” Bob Lavergne, former Product Manager of Four Leaf Solutions
315
RISK-MITIGATING INVESTMENT IN COMMUNICATIONS TECHNOLOGY In August 2010 the Chilean government took on the
clients in accordance with their budget and objectives.
search for 33 workers trapped inside an underground
Above all, our solutions must be sustainable and durable,
mine. 17 days after the accident, authorities were able
for the stakes of losing communication in a mine are high.
to communicate with the hungry miners through letters
We research and develop new methods to protect the
sent via a probe lowered more than 700m below ground
equipment we install from any damage, thus providing
level. Among the first emergency supplies sent to them
reliability to mining companies,” Guerra explains.
through a small borehole were microphones, and cameras, as well as paper and pens, and a fiber optic lane was later
As a result of decades of experience in servicing mining
installed in the borehole. This example highlights the great
companies, IT Telecom has developed solutions in other
importance of telecommunication infrastructure in mining
areas of the mining industry in order to complement the
operations where there is no fiber or cell coverage. Perhaps
company’s offering in telecommunications. For example,
if the famous Chilean miners had been equipped with the
the company also offers security equipment, such as
advanced communication technologies that are available
surveillance cameras and fencing infrastructure, which
to mining companies nowadays, they would not have had
avoid the damage or loss of both infrastructure and
to survive for 17 days on emergency supplies and leftovers
equipment due to vandalism or theft. IT Telecom also offers
from their lunchboxes, losing an average of 10kg each in the
solar panels and renewable power sources that can be relied
process. Rogelio Guerra, Director General of Chihuahua-
upon on a permanent basis. “Our solutions have evolved
based telecommunication solutions provider IT Telecom,
based on new necessities within the industry, going from
mentions that communications and security systems vary
telecommunications to renewable energy,” Guerra says.
depending on each mine’s needs. This is why IT Telecom offers tailored solutions to each client in the industry
Guerra believes that the Mexican mining industry is moving
by integrating the various technologies with which the
forward in risk management thanks to the introduction
company operates. “We are open to integrating several
of telecommunication technologies. “The integration of
solutions instead of limiting ourselves and our clients by
fiber optics is improving security in mines by benefitting
offering a single product,” Guerra says. “We are a flexible
internal
company. Our motto is to never say ‘no’ to any project. We
technology – which allows for operational efficiency and
always use any method necessary to provide the solution
mobility – and cabled solutions – which connect offices and
that matches our clients’ needs, and this ability has enabled
servers, among other ports – is increasing connectivity,”
us to grow rapidly.”
he explains. IT Telecom has been at the forefront of
communications.
A
combination
of
wireless
“The integration of fiber optics is improving security in mines by benefitting internal communications” Rogelio Guerra, Director General of IT Telecom
316
IT Telecom specializes in telecommunication and security
this evolution by thoroughly analyzing the market and
solutions, and can connect any set of two or more points
providing communication proposals that complement the
within a mine site. “We use various data transmission
solutions mining companies are already looking for. This is
methods, such as OEFDM or micro wave antennas. We
done without losing sight of the main goals and budgetary
erect the necessary infrastructure from a very early stage
constraints of every client. The company develops and
and incorporate the necessary technologies to establish
implements its solutions in a scalable mode, using modules
a reliable and complete communication network,” says
that can be amplified or replicated as operations grow.
Guerra. IT Telecom also maps the region in which the mine is
“Participating in the mining industry, where working
or will be constructed, in order to establish the best way to
conditions are complicated, has greatly contributed to our
connect the different spots. While designing and building
experience and helped us improve our services and develop
infrastructure the company takes into account many other
new solutions. We have made a name in the industry through
factors besides telecommunications technology, such as
our clients’ recommendations, and we have collaborated
climate conditions. “We must integrate a solution for our
with many important mining companies,” Guerra adds.
IMPROVING GAS DETECTION ON MINE SITES Mining operations inevitably entail the use and release
mines. When the workers inhale it, usually unknowingly,
of different types of gases that pose different dangers,
it can have serious health implications. The company also
from posing a health risk to being explosive. Over time,
provides equipment that can detect other dangerous gases
technology has improved the methods that mining
in mines, such as methane and nitrogen. “We not only offer
companies may employ, in the first instance to prevent
gas analyzers, but we also have all of the instrumentation for
harmful gases from escaping into the atmosphere, and
the field. We are the main distributors of Watlow Electric, at
in the second instance to raise the alarm when they do.
first just in Sonora but now also in the states of Chihuahua
“Mining companies are very concerned about potential
and Sinaloa. With the equipment we provide we fix the
leaks of acid liquids and gases, and strive to maintain
problems that can emerge as a result of fluid corrosion or
normal levels of oxygen, as well as an uncontaminated
erosion inside a mine. In the case of an emergency, clients
environment, so that their people can work safely,” says
also call on us to perform a reversal of toxicity in the air,”
Ernesto Limón Escalante, Owner of Lemon Analyzers.
explains Limón Escalante. “We have a range of products for
“Mining companies are very concerned about potential leaks of acid liquids and gases, and strive to maintain normal levels of oxygen, as well as uncontaminated areas, so that their people can work safely” Ernesto Limón Escalante, Owner of Lemon Analyzers
The company was started in 2009 with the aim of providing
the specific problems found in mines. In collaboration with
gas measurement solutions to customers in the mining
Greyline Instruments we are introducing the only flow meter
industry. Limón Escalante, the company’s founder, had
in the world, for measurements in non-full pipes.” Whilst
previously worked in the area of gas measurement in the
the company has typically focused on gas analyzers, flow,
mining industry, which had provided him with a good
and protection systems, it is now increasingly focused on
understanding of the specific conditions under which mines
growth. “We are not only working with mines, but we are
are operated and the dangers that mining companies face.
also doing business in every industry with needs that match
This gave him idea of solutions his future customers would
the services we provide.”
require, which have for the most part consisted of emissions control and environmental monitoring procedures, which
Lemon Analyzers works with its clients to determine the
according to Limón Escalante is a part of the industry that
right solutions for their needs, depending on their size and
still remains a niche market. He expresses surprise that there
the equipment that they use. The company is also careful
are not many companies working in this area yet, particularly
to remain informed about any changes to the law, so that
in Sonora where the mining industry is so developed, and
all of the solutions it provides to its customers contribute
thus the demand for these sorts of safety solutions is much
towards the end goal of complying fully with legal and
bigger. “I think we are one of the few companies in Sonora
safety obligations. For some customers this might mean
that is offering solutions like these. Other companies just do
measurements being taken once a year, but for others
not want to take a three hour flight, then drive even further
it can be as often as once per hour. “Our commitment
to get to the mine site,” says Limón Escalante, who believes
to the satisfaction of our customers includes having a
that his company’s location, ability and readiness to take
portfolio that can fully respond to their requirements. An
on such logistical challenges has been one of the keys to
excellent face to face service plus a quality product is what
its success.
triggers our customers’ satisfaction. I am very strict with our products: each time we are searching for a new type
Because of the severity of the harm that poisonous
of technology, I take a close look at the various options
gases can do to both mining operations and the lives of
available and look for the features and benefits that offer a
miners, taking measures to detect and fix gas leaks is an
maximum advantage to our clients,” says Limón Escalante.
extremely important precaution for mining companies to
For Limón Escalante, introducing new technology is central
take. Limón Escalante says that sulfuric gas, which can be
to the development of the company’s portfolio. “Now is
life threatening, is the most dangerous, though hydrogen
a time of progress, and we are always looking into new
sulfide is the most common cause of accidents inside
technologies to improve the service we provide.”
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| VIEW FROM THE TOP
A CUSTOMER-FOCUSED APPROACH TO SAFETY EQUIPMENT IGNACIO VALENCIA Commercial Director of Grainger Q: What is Mexico’s position in Grainger’s global
also have a lot of solutions and services that are designed
operations?
to help them.
A: At the moment we have 120,000 unique products that we sell in Mexico, with more than 500,000 in the US and
We offer KeepStock and KeepSecure vending machines
more than 1 million in the rest of the world. Grainger has
and on site branches, which allow our customers to
some specific strategic segments; one is mining, but we
control and manage their own inventory and consumption.
also serve oil and gas, hospitality and manufacturing, for
The benefits of the vending machines are that they can
example. These have been the focus segments for Grainger
handle different lines of products, they work 24/7, and the
because they have seen growth over the past 10 years.
customer can also control the consumption. This means
Mexico is the third biggest market for Grainger, after the
that they do not have to buy what they will not use, since
US and Canada.
we provide the inventory and offer a flexible system.
Q: How does your safety equipment protect workers,
We also have SWAT teams, which are cross-functional teams
prevent downtime, and improve your customers’ financial
that go to our customers’ facilities and spend one day, one
performance?
week or one month with the customer, then make a summary
A: We offer thousands of different products, but what we
of what the company needs. Our SWAT team goes directly
really deliver to our customers is service. We are focused
into our customers’ operations in order to understand
first and foremost on service and solutions, and as a
and map the processes, and we then create an integrated
consequence of that we generate revenue. We are very
solution. Grainger’s SWAT teams are cross-functional, but
focused on generating savings for our customers, and we
we also need our customers to have a cross-functional team
INCREASING PRODUCTIVITY BY IMPROVING SAFETY
318
Over the years technological advances have helped to
mine. To deploy it, you just pull it out and the tent actually
greatly reduce the inherent dangers of underground
becomes the structure. We developed a product that
mining. Refuge chambers are one such example: used in
could fit into the coal mines and by doing so we captured
underground mines, they offer a controlled space with a
65% of the market,” says Paton-Ash. The inflatable refuge
safe air supply, providing life-saving shelter to miners in
chamber was Strata’s springboard into the market. The
the case of an emergency. Strata Products Worldwide
company now also sells regular refuge chambers, as
was established when Gregory Paton-Ash, the company’s
well as communications and collision avoidance and
CEO, realized that despite the variety of refuge chambers
proximity
available on the market there did not exist a design that
company’s portfolio has two core objectives; the first is
could be used in coal mines, so he invented the solution.
to improve safety in mines, and the second is to do so
“If you look at the traditional chambers deployed around
while simultaneously improving efficiency. “Our motto is
the world they look like containers, and it is very likely that
that safety is absolutely critical. Our systems have to be
you cannot get them into a coal mine, since they are 2m
completely fail safe and work every single time. There is a
high, whereas most coal mines are around 1.5m high,” he
huge opportunity to improve productivity at the same time
says. “Though I am not an engineer I invented an inflatable
we are improving safety for the miners, in a very simple
refuge chamber, making it easier to move around inside the
way, and that is the way we are doing it,” says Paton-Ash.
detection
technology
internationally.
The
so that we can create a combined team made up 50% by
They then have a CSP contract, and well defined cost for
Grainger and 50% by the customer. Within that team we
SPOT products. This brings our customers more than 30%
decide the reach of the project and how long it will last.
in savings. Once they start buying from Grainger they tend to reduce their spending on security equipment to less
Our SWAT teams have been in place for over five years,
than 70% of what they had originally planned to invest.
and it all started as a result of feedback from one of our
In order to go to different vendors and compare all the
customers. This customer complained that they did not
different prices you need a big procurement structure, and
just need a company to provide products, but to actually
the process requires many approvals. That process costs a
help them define their exact needs in the first place. Based
lot of money, and the time that we save our customers can
on that feedback we decided to form these SWAT teams.
also be converted into money.
We have one specific vendor dedicated to attending each established customer’s needs for commercial equipment.
In terms of inventory, we determine what CSP products
When we have decided on the right products for them it
our customers will require in a given year and we can hold
is then part of our strategic mining plan for all orders in a
that inventory for them, which we can deliver nationwide
specific period of time to go through the Green Channel,
in 24 hours through our distribution centers in Monterrey,
meaning that there is no credit call, price call, delivery or
Mexico City, Guadalajara, and Villahermosa. These are
logistics call. For these customers we have the inventory
more than retail centers, they also have a showroom and
in place and if they need something urgently they do not
handle inventory for local customers.
need to wait even 24 hours for it to be delivered. We set a commercial agreement with our customers and freeze the
Q: What are Grainger’s growth objectives, and what
prices for one year. Our products fall into two categories:
will be the company’s strategy to achieving them in the
Customer Special Price (CSP) and Spot. For CSP, once we
coming years?
agree on the prices of all of the products the customer
A: We are currently duplicating our specific mining sales
needs to sign the contract and those prices will be frozen
force in Mexico and we are duplicating the number of vehicles
for one year. Spot products are the ones that the company
for attending the mining industry. We just opened a branch
did not plan to buy – they are urgent, or outside of their
in Cananea, and we are focusing on the specific regions
daily consumption needs. We also have a special price for
where mining is biggest: Sonora, Chihuahua, Durango, and
those products. For example, we will give a discount of 20%
Zacatecas. We are expanding our sales force, our clients, our
on national products and 15% on international products.
services, and our range of solutions for mining.
Strata’s focus was initially on underground mining, but this
American mining countries, is one of Paton-Ash’s main
is now changing. “I think the total number of vehicles on
objectives. “The market conditions in each country are
the site of Barrick Gold’s operations in Papua New Guinea is
different - what happens in the US is different to what
close to 4,000 and most of those are on the surface, while
happens in other countries, but our systems and the core
some are underground. Our communication and tracking
technologies can be deployed globally. That to me is the
products are world class, very low cost to deploy and very
strength of our organization: we are focused on mining
simple to install, you just have to explain to the miners how
activities and the people we hire are highly experienced,
to use them and it is easy to have a communication system
with a mining background,” says Paton-Ash. “As we have
in place. We do not have to change our technology to
grown our whole business has been to listen to what
offer solutions to surface mining companies. Success will
our customers are doing, listen to what the government
depend on hiring the right people to provide these services
is saying, and provide technology that will allow our
because the different conditions demand people who have
customers to improve their productivity through safety.”
experience in providing these services,” says Paton-Ash. Strata was initially selling its products in Mexico through an agent to companies like Peñoles, which is not the company’s preferred method but was the only option since the company at the same time did not employ any Spanish speakers. After hiring a Mexican representative, expanding the company’s presence in Mexico, as well as other Latin
“Though I am not an engineer I invented an inflatable refuge chamber, making it easier to move around inside the mine” Gregory Paton-Ash, CEO of Strata Products Worldwide
319
COMFORT RAISES EFFECTIVENESS OF PROTECTIVE EQUIPMENT Safety equipment plays a crucial role in protecting mine
more quickly and their productivity will be lower. If the
workers from work-related injury or death. However, these
footwear is comfortable, ergonomic and absorbs impact,
are not the only benefits of using quality safety products:
the worker will no doubt be more productive.”
greater comfort may also enhance employee productivity. In order to provide the best possible options to its clients, the
Other products that are used in the mining industry are
personal protective equipment provider Provesicsa focuses
specialized body wear, such as reflective vests, goggles,
much of its efforts on getting to know its clients. “It is the only
hard hats, ear muffs, shock absorbers, dust masks, mining
way we are able to make product suggestions,” says Pavel
lamps, self-rescuers (in the case of underground mining)
Santillanes Allande, Commercial Manager of Provesicsa.
and gloves. Provesicsa also offers emergency products such
“We know that client satisfaction originates from customer
as eye cleansers and absorbent materials to be used in spill
attention and good product implementation.” Provesicsa is
control. Santillanes Allande explains that the company has
a family business that has over 35 years of experience. One
detected a lack of awareness in the correct use of safety
element of the company’s business philosophy is to go the
equipment. This is where the company’s post-sale division
extra mile in the client-provider relationship. As Santillanes
becomes very important, in helping clients to understand
Allande explains, “We do not like to sell a product without
the best method for using each product and in providing
knowing on what type of project it will be used and under
maintenance. Awareness of the ways in which product
what conditions.” He recalls that when the mining division
misuse can expose workers to higher risk must be increased.
was created he personally visited all mining operations with
“A typical example of improper use is footwear. For some
whom the company had contracts, in order to analyze and
reason, employees believe industrial boots are indestructible.
study the challenges that existed on each one of them.
Protective footwear is made of leather and rubber, and if it
It is still very common for the company to find clients
is left wet or covered in oil or mud product, performance will
that consider protective gear an expense rather than an
be compromised,” Santillanes Allande explains.
investment. In getting to know a client’s needs, Provesicsa is able to offer a wide range of products and services in a
With its sights set on increasing business in the mining sector
number of different areas from simple safety practices to
in the next few years, Provesicsa has created agreements
the generation of integral protective packages that involve
with manufacturing companies to produce its own redesigns.
management, resource supply and control at the mine site.
Rather than wanting to become a manufacturer the
“This way, we are able to recommend certain products that
company’s aim is rather to reinvent certain products and give
are better adjusted to the client’s necessities.”
them added value. Santillanes Allande explains that a good
“Comfort is crucial. If workers use footwear that is too hard, uncomfortable or less ergonomic, they will become tired more quickly and their productivity will be lower” Pavel Santillanes Allande, Commercial Manager of Provesicsa
320
Apart from safety, comfort is another essential part of
example of the company’s goal is reflected in the gloves it
personal protective equipment. If comfort is guaranteed,
currently supplies: “In the past we were consuming a large
the employee will wear it during the entire shift, lowering
number of industrial gloves. It was great business for us but
the risk of accident or injury. One of Provesicsa’s leading
we wanted to give additional benefits to our clients, so we
products is safety footwear. Santillanes Allande comments
redesigned the gloves, looking for better leather to improve
that many companies ask for the cheapest product without
their durability under extreme working conditions. We found
considering the fact that their workers will be wearing the
that buffalo leather was much more resistant, hence we
footwear for 10 to 12 hours daily. “Feet are especially delicate
redesigned and manufactured doubly reinforced buffalo
and essential for physical work. The products we sell are
leather gloves. These gloves last longer and our clients can
designed to be good for the people that use them. They
lower their expenses by purchasing replacement gloves less
help to improve blood circulation and they correct posture.
often. Provesicsa is always looking to expand its product
Comfort is crucial. If workers use footwear that is too hard,
range, with the goal of being specialists in the field. We only
uncomfortable or less ergonomic, they will become tired
sell products for which we have mastered their applications.”
CHANGING DEMAND FOR SAFETY AND PROTECTIVE EQUIPMENT
Xavier Madrazo Bonilla, General Manager of SIBSA
According to the Ministry of
to step up to the challenge, acquiring valuable knowledge
Labor and Social Welfare the
along the way; for example, we learned that we had to plan
average number of workers in
purchases ahead in order to have enough supply,” Madrazo
the mining industry increased
Bonilla underlines. Another important issue was learning
by 59% between 2002 and
about mining equipment. “Selling to the mining industry
2011. However, accidents and
represented a challenge because, for example, we had to
work-related illnesses were also
learn about breathing equipment, how it operated, the
36% lower. The entry of foreign
spare parts it required, and how to perform maintenance on
companies into the Mexican
it. We needed to learn quickly, at least at the same speed at
market has led the industry to
which the industry was growing,” he adds.
adopt best international practices. Safety is now seen as a critical matter, as is the wellbeing of employees. “Things
In order to overcome this challenge, SIBSA teamed up
changed in the Mexican mining industry after 2005 because
with major brands to learn directly from them how to use
most foreign companies that entered our domestic industry
the equipment, ultimately helping the company to sell it.
are Canadian and listed on the stock exchange,” says Xavier
“We test the products at a mine or tunnel so that we know
Madrazo Bonilla, General Manager of SIBSA (Seguridad
how to commercialize it, since there is no better way of
Industrial del Bajío). “Therefore, any accident or incident that
selling something than to be convinced of what you are
occurs has an effect on the stock value; a fatal accident can
selling,” Madrazo Bonilla says. The company does the
make it go down 10-20%, causing companies to make large
same thing when a new product comes out; the brand’s
investments in safety and protective systems.” These best
technical consultant shows it to SIBSA’s sales staff who
practices have spilled over to Mexican companies, too, as
then test it. If the product works as the customer expects it
safety becomes a matter of competitiveness. “Social security
to the company starts commercializing it. “We also have a
fines have also been established, which are added to the
technical division, which visits our clients and detects their
fees if there is an accident. Five years have to pass without
needs before communicating it to the commercial staff,” he
incident in order for these fees to go down. It is cheaper to
adds. In order to maintain its clients’ confidence and trust,
invest in better safety strategies than it is to pay high fees to
SIBSA has created synergy with monitoring companies
the Mexican Social Security Institute (IMSS),” he adds.
that perform studies to identify mining companies’ safety requirements.
As a company that distributes safety and protective equipment, SIBSA has witnessed how the industry has
One of SIBSA’s key advantages is that the company sells all
transformed and has grown alongside with it. Madrazo
different types of safety and protective equipment. “This
Bonilla remembers that after metal prices started to rise,
is a benefit for the purchasing and safety departments of
demand grew very quickly. SIBSA started to receive orders
mining companies, because previously they had to deal
and quote requests on Sundays, and in order to be able to
with several providers for gloves, hard hats, and boots,
supply its customers’ needs it had to establish solutions
among many other types of equipment. SIBSA provides
that responded to the industry’s requests: “10 years ago we
an integral service and becomes a single provider that
had a 100m building and served 25 forestry companies.
covers all of the user’s needs,” Madrazo Bonilla explains. He
Now we have 1,000m2, which is mostly used for storage.
accepts that there are no big differences between SIBSA
We currently have stores in Durango, Torreon, Saltillo,
and its competitors in terms of product brands, which are
Aguascalientes, and two mobile stores that service mine
mostly the same, however he believes that the key thing
sites directly.”
that sets the company apart, is its years of experience.
2
“SIBSA has offered its services to the mining industry for Even though the company has always offered its services
years, and there are companies that started working for
to the mining industry, before the previous mining boom
the sector only five years ago, when metal prices rose.
demand was moderate. SIBSA faced a big challenge as
What you learn in five years is substantially different than
consumption patterns changed. “When Canadian industries
in a company with a culture of over 10 years,” Madrazo
arrived and started operating in the Mexican market, a
Bonilla says. As the global mining market faces a downturn,
sleeping monster was woken up. The new conditions
Madrazo Bonilla believes mining remains a great business
triggered the need for more human resources, as well as
opportunity for the company because of the constant
contractors, which played a very important role in the
improvements being made in safety procedures and the
operations. The situation took us by surprise and we had
effect that accidents can have on mining operations.
321
USING MINING ANCHORS TO ADDRESS SAFETY CONCERNS The most recent mining boom
Another important part of ensuring quality is installation.
in Mexico has brought not
The anchoring must be done properly, otherwise it would
just
to
lose its effectiveness. Training becomes essential to
the country, but international
foreign
investment
achieving the correct installation. Anclas Mineras Encinales
best practices as well. Foreign
plays an active role in promoting a safety culture, through
mining companies that have
sharing the practical and technical knowledge it has
operations
country
acquired in mechanical rock studies, as well as through its
promote a culture of safety
field experience. These two things combined enable the
through their processes and
company to provide quality anchor training. “The goal
procedures, which are starting
is to communicate our knowledge in simple language,
to spread to domestic companies, too. An example of
without technical terms, in a way that allows the worker
this is the increasing use of mining anchors. “Thanks to
to perform his tasks efficiently. Workers are reminded of
growing safety concerns, mining companies are using more
the risks involved in working in a mine, and the importance
anchors as the mine moves forward,” points out Carlos
of following procedures so that we can guarantee that all
Sandoval Cardona, General Manager of Anclas Minerales
personnel return home safely each day,” Sandoval Cardona
Encinales. “This culture has been largely transmitted by
explains. In terms of safety he sees no difference between
Canadian mining companies that use anchors systematically
working with a foreign and a Mexican mining company, as
throughout their work, and make it a requirement.
long as the concept is well defined: “Safety in the working
Fortunately, Mexican companies are starting to realize their
area is crucial and goes beyond cultural paradigms. No
importance and are promoting their use as well. A few years
matter a person’s nationality, the risk is general.”
Carlos Sandoval Cardona, General Manager of Anclas Mineras Encinales
in
the
ago we detected a great business opportunity in this field, as we anticipated the industry trend.”
As the market for anchors grows so does competition. Currently, Anclas Mineras Encinales is in the process of
Anclas Mineras Encinales was born out of a little motor
obtaining the ISO 9001:2008 certification. Selecting the
and muffler workshop in Zacatecas. In 2001 the family-
best materials and the most qualified personnel in order
owned business identified a mining anchor shortage and
to guarantee quality and customer satisfaction to clients is
decided to use its mechanical expertise to get into the
a priority; so, too, is innovation. “We innovate and develop
industry. Anchors prevent collapses of the mine walls
new technologies constantly, and we have a special division
that may occur due to humidity and high temperatures in
dedicated to it, with budget autonomy, with the goal of
underground layers. In the process of creating tunnels and
improving our products and procedures,” emphasizes
underground mines, the earth’s layers become exposed
Sandoval Cardona. “The best examples of innovation in
and release the accumulated heat, thus obstructing the
Anclas Mineras Encinales are our patented machines for
miners’ work. In order to reduce this problem, fresh air
manufacturing, which are an in-house design.”
from the surface is supplied in order to provide better
322
working conditions. The aim is to control the temperature
The efforts and experience of the five generations of
through the flow of cool air. When changes in temperature
Sandovals that have worked in the family business are
occur, the rock layers dehydrate and lose volume, leading
paying off. Anclas Mineras Encinales’ clients include Peñoles,
to a decrease in the resistance between rocks and creating
Fresnillo PLC, Grupo Mexico, AuRico Gold, Pabellón Minera
a risk of landslides. Anchoring consists of introducing a
Mexicana, and many other contractors such as Minería
giant dowel that pressures the layers so that they maintain
Castellana and MGA. The company’s success is also
resistance, thus preventing collapses. “The purpose of
reflected in its growth and ability to continue attracting new
mining anchors is to protect people’s lives inside the mine,
customers: “Three years ago, during a period of low global
quality is therefore an essential issue for us,” says Sandoval
production, the company experienced an average sustained
Cardona. He believes that one of the biggest challenges is
growth of 49%. During 2012 our growth was close to 100%,
the lack of regulations and safety standards for anchors:
which confirms the fact that our work and products have
“The US has the international standard ASTM F 432,
contributed to the company’s market position,” Sandoval
which regulates these types of products. Anclas Mineras
Cardona says. Last year was also a turning point for Anclas
Encinales applies this standard in order to guarantee the
Mineras Encinales, since in June it made its first export to
quality of its anchors. Mexico would greatly benefit from
Peru. “In this aspect, we have moved in a slow but sure way.
having official standards that regulate the manufacturing
We believe that this has been the most convenient strategy
and installation of these systems,” he adds.
for the company,” he adds.
| VIEW FROM THE TOP
REDUCING FIRE HAZARDS AND SAVING LIVES IN MINING JUAN JOSÉ CAMACHO Director General of Grupo Camacho Q: What are the most popular products that Grupo
Q: How do Grupo Camacho’s products and services
Camacho provides to the mining industry?
distinguish the company from its competitors?
A: Grupo Camacho is a diversified fire protection company,
A: We put ourselves in our clients’ shoes. The most expensive
and we work with different products and services. We
and modern product is not always the best choice for
supply fixed and portable products, as well as equipment
everyone. It is crucial to perform a risk and legal framework
maintenance.
provide
analysis of each mining company’s operations, in order to
maintenance for suppression systems with different agents
be able to present the best cost-benefit option for them.
such as powder, foam, chemicals, and water. We also
There are occasions where the most modern technologies
provide smoke, heat, and fire detection systems, and we
do not comply with the authority’s requirements. It is also
use laser and inhalation technology, as well as conventional
essential to comply with insurance requirements so that
systems that work based on photoelectric detection. We
in the case of an incident, mining companies do not lose
are completely convinced that having only the equipment
money by failing to comply with the guidelines.
We
design,
construct,
and
is not enough. It is incontestable that trained staff is essential to maintain and use these technologies. There
Q: What are the main differences between products for
are cases where mining companies do not have the trained
the mining industry and those used by other industries?
personnel to perform maintenance on the equipment,
A: Every industry has different needs because the implicit
and precisely for this reason Grupo Camacho created the
risks are different. A mine is usually located far away from
Firefighter School, to train technicians in how to operate
emergency response teams, so the response team must
our systems and act in the case of an emergency. We teach
work efficiently in order to safeguard the operation and
students to fight fires, manipulate hazardous materials, and
minimize the damage to production, without requiring
perform first aid on people. In addition, we offer training
external help. Mining companies need more specialized
courses in hazardous material leak response, vertical
training and they require different processes to mitigate any
collapsed structures and vehicular rescue operation.
fire hazard. We sometimes apply fire prevention techniques used in other industries such as hotels, warehouses, and
Q:
What
have
been
Grupo
Camacho’s
greatest
industrial kitchens. The mining value chain is broad and fire
achievements in the Mexican mining industry?
hazards exist at every stage. For example, in an underground
A: Our most important accomplishment is understanding
mine most fires start on the machines operating in tunnels,
what the mining industry needs, and being able to respond
or as a result of the products or fuels they use. Fire hazards
within the required response time and work in the most
are generally caused by human error, but occasionally
challenging environments. We are conscious that the
they can be the result of mechanical failure. Our systems
mining operations cannot stop working and that production
have prevented these types of fires. Through its years
must be at the maximum possible level every hour of every
of experience, Grupo Camacho has managed to find fire
day. As a result, we know that danger is always there, so
prevention solutions to minimize risks at each mining stage.
we have to be prepared to respond as quickly as possible. We know that success comes when the client’s satisfaction
Q: What is the company’s vision for the future and what
has been met. For example, there are some products that
are its expansion plans in the mining industry?
take up to six weeks to be delivered, but a mining operation
A: We want to open offices in other parts of Mexico so that
cannot wait that long. For this reason we keep an extensive
our response time can be faster. We also want to certify the
inventory so that we can guarantee delivery when products
Firefighter School with the Ministry of Education in order to
are required. We have opened offices in strategic locations
provide technical careers in firefighting equipment installation
to cover the northwest and center of the country, in Cananea
and maintenance. Through the school, we have trained over
and Guadalajara. This is another factor that has enabled us
50,000 people in 20 years, mostly from Chihuahua, but also
to provide solutions in an efficient and practical way.
from Coahuila, Durango, Sinaloa and Sonora.
323
DISSUASIVE STRATEGIES IN REDUCING SECURITY THREATS It is estimated that most companies in Mexico spend
there are already corporate social responsibility projects in
between 2% and 4% of their operating costs on security,
place. Sometimes this can bring a certain aggressiveness
with this money most commonly being spent on security
towards the mine, though it is usually only individual
guards, alarm systems and surveillance, and armored
people that respond in this way. For instance, we have had
vehicles. “Whilst we do not know the exact figure that
cases where there have been individuals outside the mine
investing in the right security can save a company in the
yelling things, or even drunk people shouting to the air,”
long run, we know that it is a worthwhile investment.
says Seldner Molina.
Security is about prevention and about being dissuasive. If a company demonstrates that it has good security
For Seldner Molina, the way to minimize these different
a potential threat can be completely diminished,” says
types of threats is by increasing control over access to the
Cristina Seldner Molina, CEO of VSH Seguridad, a private
mine. No one should be allowed to enter or leave the mine
security firm based in Sonora.
site without going through security checks that monitor
“Keeping good working conditions is very important to us. Our guards are proud of the work that they do, and we too are proud of that” Cristina Seldner Molina, CEO of VSH Seguridad
The job of providing security to mining companies is of
that anyone leaving the site is not taking anything away
course particularly important: in part because mines
with them that they did not earlier take in with them – such
are usually located in isolated areas that have little
as computers or mining equipment. For VSH Seguridad
infrastructure, but also because of the potential value
these checks are non-negotiable, and are even applied
that can be found inside the mine – from the minerals
to the company’s own staff when they visit the mine. The
themselves to the expensive equipment that is used in
security checks that Seldner Molina’s team conducts are
mining operations. These things combined make mining
also aimed to pick up any other unusual activity, such as
companies more vulnerable to crime. “All mines are
staff entering under the influence of drugs or alcohol.
different and have their own challenges, which can vary, often according to the location of the mine. Security
In early 2013, VSH Seguridad committed a routine sniffer
threats can come from people that live in nearby
dog check at a gold mine that led to the discovery of
communities; people that go on and off the mine site as
gun powder that had been hidden in a contractor’s truck.
contractors or employees; or people that come especially
Another time, they found a group of people that had
to the perimeters of the mine to take dirt or stones that
travelled a considerable distance in order to steal mineral-
are rich in minerals. By changing things like the way the
rich earth. “They had even brought camping equipment
mineral is transported or a company’s internal procedures,
with them, and donkeys to carry what they stole. Situations
these threats can be reduced,” explains Seldner Molina.
like this show us that we have to be completely aware of anything even slightly unusual - that is how we can spot
A misconception among international companies is
such things that are happening on our mine sites,” says
that the main security issues in Mexico are related to
Seldner Molina.
organized crime. In fact, the biggest threat tends to come
324
from smaller-scale theft. Nevertheless, due to the scale
The high level security service provided by companies like
of mining operations in Seldner Molina’s experience this
VSH Seguridad would not be possible without the use of
sort of theft can come to represent a significant financial
technology. Surveillance technology allows the company
loss for mining companies. Relationships with local
and the client to monitor different areas of the mine site in
communities can also often be fraught, which in itself can
real time, and ensure that the correct procedures are being
also bring a separate set of security threats that mining
followed, even if they themselves are not on site. With GPS
companies must contend with. “For local people the mine
it is also possible to monitor security vehicles around the
is often seen as an intruder, and they often think that it
site, to check that they are not entering unauthorized areas
should be giving them something else in return, even if
and that they are not exceeding speed limits.
Whilst this technology has allowed the security industry to
providing good working conditions, knowing the value of
sharpen and greatly improve security provision on mines,
their security staff and really seeing the cost-benefit of
Seldner Molina maintains that the most important thing is
investing in this area,” says Seldner Molina. She and her
the staff that monitors the different equipment that is used.
team at VSH Seguridad have been disappointed to find
“Nowadays, with the internet, we can communicate much
that in some parts of the security industry it is common
better and really make the most of all of those systems.
practice to leave security staff watching a mobile antenna
Technology adds a lot of opportunities. But once we identify
for hours on end without access to food or water, shade,
a problem it is our staff who look into the problem further
or even a toilet. “Security staff prevent accidents from
and solve it,” she says. For this reason, VSH Seguridad holds
happening and they protect the people inside and outside
their staff in high regard, and feels a sense of frustration
of the mine, and that is extremely valuable for our clients. In
that, both in Mexico and further afield, security personnel
return we ask for minimal conditions for our staff,” she says.
do not generally get the credit they deserve for the service
“Keeping good working conditions is very important to us.
that they provide. “We want to change the way that
Our guards are proud of the work that they do, and we too
companies see their security staff. We want to see them
are proud of that.”
Tijuana
Mexicali San Luis Río Colorado
Puerto Peñasco
Agua Prieta Caborca
Cananea Magdalena de Kino Santa Ana
Ponemos a su disposición:
Hermosillo
Guaymas
Empalme Cd. Obregón Navojoa
· Asesores para desarrollar proyectos de seguridad integral, que fortalezcan las áreas vulnerables a través de soluciones efectivas. · Venta e instalación de seguridad electrónica.
Tel: 01 (662) 2106400 www.vsh-seguridad.com
· Oficiales seleccionados con el perfil adecuado. · Capacitaciones y entrenamientos para detectar cualquier situación de riesgo.
Sucursal Matriz en: Paseo Río Sonora Norte 110, Edificio “Centro de Desarrollo de Software Hermosillo” Primer Nivel, Hermosillo Sonora, C.P. 83270. contacto@vsh-seguridad.com Registro Federal: DGSP / 122-10 / 1558 Registro Estatal de Son.: LSP-R2010-M-271 Registro estatal de B.C.: RA-27-1-13-SSP-01PM20120309140
Mining security experts / Expertos en seguridad de minas
En VSH Seguridad conocemos los riesgos y condiciones inseguras en las que se encuentra el sector minero, y buscamos prevenir incidentes que pongan en riesgo el patrimonio e integridad física de nuestros clientes.
325
| VIEW FROM THE TOP
EXPLODING ONTO THE MINING SCENE ALEJANDRO MANTECÓN GONZÁLEZ Director General of PyroSmart
Q: What have been the main developments in the
helped us to overcome obstacles and transform PyroSmart
pyrotechnics industry since Pyrosmart was founded?
from a pyrotechnics manufacturing company to a leader in
A: In the 1960s the perception of the pyrotechnics industry
technological development.
was mostly negative. Since then the industry has constantly been
growing
and
making
technological
advances.
Q: Which role do innovation and technology development
For example, automotive airbags are gas-generating
play in the evolution of your value proposition?
pyrotechnic devices which significantly improve safety
A: We have dedicated ourselves to developing excellent
in motor vehicles. Another example is the Airbus aircraft,
and reliable products, but what sets us apart is that we do
which has more than 170 pyrotechnic components. We
not limit ourselves to just selling products, we also provide
have decided to focus our business on the more reliable
integral solutions for our clients. Today we are perceived
and commercial side of pyrotechnics, such as electric
as providing a global and comprehensive solution to the
igniters, which we manufacture and export to more than
industry’s needs. We have the right software, equipment,
a dozen countries from our manufacturing locations in
products and engineering for developing the best solutions
Zacatecas, Brazil and Panama. Manufacturing and selling
for each specific case. PyroSmart carries out drilling works
electric igniters was an essential part of PyroBlast’s product
along with design and measurement, so that the company
development process, a patented rock-breaking system
not only has a product but a range of solutions, too.
with a series of features that respond to the requirements
Zacatecas is a pro-mining state, and our plants are located
of the global mining and construction industries. Cementos
in an area with high potential for our product. We are also
Mexicanos (Cemex) was the first company to use our
working with government departments such as Fomix
technology, but companies such as Peñoles, Grupo Mexico,
and Conacyt, and we also have ties with the Technological
Goldcorp and Capstone Mining have also benefited from
University of Zacatecas, to continuosly improve our
PyroBlast’s various applications.
products and solutions.
Q: What are the most interesting features of PyroBlast
Q: In which ways does PyroSmart technology contribute
that benefit the mining industry?
to safeguarding the environment?
A: We make products that are mainly used in overflows,
A: Compared to a number of explosives and pyrotechnic
pre-cuts, roads, ditches and slope stabilization and
products, PyroSmart is environmentally friendly. PyroBlast
precision work in mines. Conventional explosives have high
can be broken down by water saturation within 24 hours,
detonation velocities (Dv) ranging from 3,500 to 5,500m/s
and the product residue is environmentally clean. 70% of
for commercial explosives, and from 6,000 to 8,500+m/s
the gas that is generated is oxygen, and all of the gases
for
released during the product’s activation are non-toxic.
military
explosives.
PyroBlast
is
a
pyrotechnic
composition capable of producing a very low detonation
326
order (Dv approximately 1,200 to 1,400m/s) generating
Q: What will be PyroSmart’s strategy to consolidate its
a minor amount of fly rock, minimal vibration and shock
position in the Latin American mining market?
wave expansion. Thanks to the product’s low speed, it does
A: PyroSmart is a Mexican technology-based company with
not rely on the rock’s compression, but rather on the rock’s
partners in other countries, and thanks to its 50 years of
strain (shear effects), making PyroBlast perfect for pre-
experience, as well as its PyroBlast technology, the company
cuts and overflows and ensuring safety and efficiency. In
has won Conacyt’s national science and technology prize for
addition, PyroBlast does not generate toxic nitrogen oxides
two consecutive years. We were selected to participate in a
or carbon monoxide gases, which can be problematic in
business development program for elite technology-based
poorly ventilated areas. To complement our product range
companies, which is designed to accelerate international
we have developed and manufactured a series of high
business developement, and and has enabled us to expand
precision and reliable safety ignition devices, which have
to different Latin American countries.
THE ARMY’S ROLE IN MONITORING THE SAFE USE OF EXPLOSIVES the Ministry of Communications and Transport and by the Ministry of National Defense. They must also guarantee the use of private armed escorts to guard the load until it reaches the mine site. Regarding the use of explosives, companies have to perform their blast at a certain distance from populated areas and civil infrastructure. For this reason, companies also need authorization from local and state governments. Companies also need to guarantee LEFT: Major Francisco Alcaraz, General Directorate of Federal Firearms Registration and Explosives Control RIGHT: Captain Juan de Dios García, General Directorate of Federal Firearms Registration and Explosives Control
they have safe facilities to store explosive material, and
Using explosives is essential in underground and open pit
holders of the mining concession, and justification for the
mining, but following the laws that control their use and
use of the explosive material. Permit formats also have to
applications is just as relevant. “It is extremely important
be validated by the General Coordination of Mining.
high security measures to avoid subtraction. Other basic requirements for companies are proof of identity as title
for mining companies to have an in-depth knowledge of the regulatory framework that governs the industry. If they
The main transgression of the law by mining companies
are not familiar with the legal environment they can commit
comes from inadequate measures taken to store explosive
errors that will endanger the continuity of their operations.”
material. This means that they complied neither with the
says Major Francisco Alcaraz, from the General Directorate
technical nor physical security measures. The warehouses
of Federal Firearms Registration and Explosives Control
must have an alarm, monitoring systems, and vigilance staff
at Mexico’s Ministry of National Defense. The role of the
to avoid any type of theft. When there is an infringement
Ministry of National Defense is to monitor that the mining
of the law, companies will be sanctioned depending on
industry is properly using and storing explosive material
the severity of the infraction. They can receive monetary
in order to guarantee the safety of workers and civilians,
fines, but their operational permits can also be temporarily
as well as to preserve the environment. Another objective
revoked or even canceled. “Article 43 of the Federal
is to ensure that companies take the appropriate security
Explosives and Firearms Law points out that we have the
measures to avoid explosives’ thefts that could translate into
prerogative to suspend or cancel permits whenever people
security risks if the material is then used illegally.
or facilities are endangered. However, our job is to guide companies so that this does not happen,” Major Alcaraz
The Ministry is constantly supervising the use of explosives in
explains. Usually, if a company has not taken the adequate
industrial activities, and deploys biannual vigilance programs
measures to guarantee security, control and vigilance of
that consist of visiting mining sites that use explosives, to
explosives, its activities will be suspended but not revoked.
evaluate their security and technical capacities. In order to
Once the company informs the authority that the safety
operate legally, mining companies must obtain one of two
and security irregularities have been resolved, an inspector
different types of permits, depending on their needs. The
will visit the mining site to reactivate the respective
first one is for the purchase, storage and consumption of
permits. Permit cancelation is something very unusual
explosives, as is the case of companies that store explosives
and only takes place when companies do not comply at
in powder kegs. The other is a purchase and consumption
all with the control and vigilance measures required by the
permit for the direct use of explosives without the need of
Ministry of National Defense or when they consistently fail
storing them. The obtainment of permits is based on various
to revalidate their permits.
applicable laws, including the Federal Explosives and Firearms Law, the Foreign Investment Law, and the General
The control and vigilance of industrial operations will
Law of Mercantile Corporations. “When mining companies
change as innovation introduces new products and blasting
get these permits they are able to operate under a legal
techniques. “In spite of the changes that could be made
regime, and work without any further complications,” says
to the current normativity that controls the mining sector
Captain Juan de Dios García, who also pertains to the
regarding the use and storage of explosives, we consider
General Directorate. In order to become eligible to legally
our industrial competitiveness will not be lowered,” Major
use explosive materials for industrial purposes, mining
Alcaraz comments. “The government is working hard
companies have to comply with a number of standards.
to establish adequate laws that promote the growth of
Regarding transportation, mining companies have to
the industry and attract more foreign investment to the
make sure they are using adequate vehicles, certified by
country every day,” Captain García highlights.
327
SUSTAINABILITY & CSR
11 The question of environmental and social responsibility is extremely important for mining companies, suppliers, and service providers worldwide. While the positive impact of mining has not always been well communicated, there is a proliferation of success stories showing the ways in which mining companies have successfully minimized any negative impact their operations could have on the surrounding ecosystem and communities. Through the different projects mining companies have implemented in different areas such as health, education, and environment, the perception of mining is slowly but surely beginning to change in Mexico.
This chapter provides insight into the environmental legal framework that guides all mining operations in Mexico, from environmental and water laws that must be complied with to the institutions that grant permission for a project to begin. The chapter also focuses on the leading examples of environmental and corporate social responsibility programs that can be found across Mexico’s mining industry today.
329
Sustainable solutions for the Mining and Metals Industry ERM is the leading global provider of environmental, health and safety, risk and social consulting services. We aim to deliver sustainable solutions to enable our clients to maximize revenues, comply with regulations, improve performance and enhance their corporate reputation and public perception MĂŠxico D.F.
+52 (55) 5000 2500 +52 (55) 5211 0090 Monterrey +52 (81) 2881 8300 erm.mexico@erm.com www.erm.com The world’s leading sustainability consultancy
CHAPTER 11: SUSTAINABILITY & CSR 332
VIEW FROM THE TOP: Adapting the Legal Framework to Pursue Sustainability
333
Analyzing Social Perceptions to Optimize Benefits
334
Chemical Solutions Enhance Productivity and Efficiency
336
VIEW FROM THE TOP: Fostering Best Practices in Water Management
336
Water-Based Solvents and Degreasers Enhance Environmental Performance
338
VIEW FROM THE TOP: Meeting Environmental Requirements
338
Mistakes in Environmental Permitting
340
VIEW FROM THE TOP: Industry View on Environmental Responsibility
342
Environmental Requirements in Mexico’s Legal Framework
343
CASE STUDY: Manage the Social License to Operate
344
VIEW FROM THE TOP: Impact of Sustainability Consulting
345
EXPERT INSIGHT: Víctor del Castillo Alarcón, Federico Ruanova Guinea & Lourdes López Moreno
346
VIEW FROM THE TOP: Crucial Advice for Environmental Responsibility
347
Implications of the Introduction of Class Action Lawsuits in Mexico
348
The Impact of Sustainability on a Company’s Bottom Line
349
VIEW FROM THE TOP: Sharing Social Responsibility Best Practices
350
Community Relations Make or Break a Mining Project
351
VIEW FROM THE TOP: Applying Technological Solutions to Improve Community Relations
352
Meeting Energy Demand with Solar Power
353
VIEW FROM THE TOP: Responding to Off-Grid Challenges with Solar Energy
354
Reducing the Environmental Impact of Mining Activity
355
Education: Essential for the Industry’s Future
356
A Sustainable Approach to Community Investment
356
Effectively Engaging with Communities
331
| VIEW FROM THE TOP
ADAPTING THE LEGAL FRAMEWORK TO PURSUE SUSTAINABILITY LOURDES LÓPEZ MORENO President of the Chamber of Deputies’ Environmental and Natural Resources Commission Q: As a Member of Congress and President of its
Q: How would you describe the challenges that the mining
Environmental and Natural Resources Commission, what
industry faces regarding the LGEEPA?
areas are your priorities during this legislative term?
A: The LGEEPA is very superficial regarding the mining
A: Laws can be improved and this has to be done
industry. Article 28 of the LGEEPA deals with the
according to the current situation in Mexico. For example,
Environmental Impact Assesment (MIA), but I believe
there are laws that have been left untouched for years
there are still many holes in the authorization process. For
and are not in line with what is happening in the country
starters, the Economy Ministry is in charge of the whole
today. The General Law of Ecological Equilibrium and
permitting process and not the Ministry of the Environment
Protection of the Environment (LGEEPA) is 25 years old
and Natural Resources (Semarnat). Both ministries have
and may still be considered a young law, but the matter it
different visions and goals, and there has to be better
applies to is very dynamic and constantly evolving, and, is
coordination between these two institutions. Transforming
becoming insufficient for the country’s reality. It requires
any industry into a clean industry requires a lot of
an update that involves the private sector, NGOs, and
investment and implies higher production costs. Not all
the academic sector. LGEEPA needs to be revised and
companies are willing to lower their earnings for the good
updated, especially to reconcile it with the General Law
of the environment. Nevertheless, fiscal incentives and new
of Climate Change and the General Law of Environmental
technology may allow the mining industry to become more
Responsibility. At the same time, we have to work towards
sustainable, without having to rely only on sanctions.
legislative alignment. Q: How will the new Environmental Responsibility Law Q: How does the current legal framework influence
impact the mining industry?
strategic
A: The Environmental Responsibility Law operates according
decision
making
regarding
environmental
impact in the private sector?
to the ‘polluter pays’ principle. Beyond the administrative
A: For a long time, there has been a ‘do not touch
procedure, sanctions, and fines, a company will also be
anything’ policy in place in Mexico. Part of the current
responsible for repairing the ecological damage it has
legal framework is focused on tightening the law for those
caused. In many cases the damage to the environment is the
that do not comply with it. Profepa has implemented
most expensive part. This is a good way to foster restoration
programs such as the Clean Industry Certification, which
activities, which is something that is rarely done in Mexico.
fosters social responsibility in companies. However, efforts
332
are currently focused on tightening sanctions rather
Q: Do you think the 5% royalty tax will bring environmental
than encouraging companies to comply with social and
benefits?
environmental responsibility guidelines. The main issue
A: I consider the 5% royalty to be a “fake door”. I think
is that there are no fiscal incentives for environmentally
the previous scheme, in which each state had the liberty
responsible companies. It is important to devise and
to establish its own mechanism, was more successful.
implement incentive schemes, but even in their absence
Nevertheless, we will be working so that part of the royalty
many companies are improving their environmental
is allocated to environmental restoration, conservation
practices because they believe in the cause. Many Mexican
activities
and foreign companies follow sustainable practices, and
operations cause wildlife displacement, soil erosion in
they can serve as examples for those companies that do
the case of open pit mining, and water pollution. It would
not break the law but do not strive for better environmental
be fruitful if parts of this tax were to be allocated to
practices, either. We need to evaluate the best practices
studies that might provide the industries in Mexico with
of the most sustainable companies, and take the required
environmental solutions. I believe this could be a good
measures to ensure that the rest of the mining industry
way to move environmental restoration onto the agenda of
emulates those practices.
Mexico’s different industries.
and
natural
resources
protection.
Mining
ANALYZING SOCIAL PERCEPTIONS TO OPTIMIZE BENEFITS Vera
&
Carvajal
Ambientales
Luis Vera Morales, Partner at Vera & Carvajal Abogados Ambiental Ambientales
Abogados
(V&C)
making patters. “The use of the APC system allows us to build
has
consensus even where there is a lack of information and high
over 20 years of experience
risk levels. We create routes of acceptability for any project
in
and
because we have a transparent way of presenting scenarios
it has been recognized by
to the communities and we deliver believable solutions to
Chambers
their concerns,” Vera Morales details.
environmental and
law
Partners
as
one of Mexico’s top firms for environmental consulting and
V&C understands that timeframes are extremely important
litigation services. Luis Vera
in the mining industry. The incorporation of their technical
Morales, founding partner of
area into the company’s consensus building services
V&C Abogados Ambientales, recounts the evolution of
provides the firm with a quick and effective decision making
the company. “We started out as a law firm specialized in
system. “Once an investment is set, time flies,” Vera Morales
environmental matters,” he says. “Later on, we incorporated
continues. “There is a lot of pressure to do things quickly.
a technical area which is now bigger than our litigation area.
We do not approach communities just to tell them we want
We now have a social consultancy area as well, because the
to build a mine, but also show details such where the dam
issues we address are socio-environmental.” The driving
will be and how we are going to provide electricity, among
force behind this development is the firm’s awareness of
many other things. Once we get their feedback, we make
the shortcomings of traditional negotiation processes with
the necessary changes for the project to be accepted by the
communities. “Mining companies and their consultants
communities. Our team has mathematicians, biologists, and
usually meet with communities, bringing along a sociologist.
other scientific experts who figure out ways of obtaining
They get acquainted with the area, speak with the people,
information from the communities, turn it into data and
and conduct oral negotiations. Even if the resulting
establish quick decision making systems,” says Vera Morales.
agreement is written, the local people often do not know what has been signed and, by the time the mining works
The end result of V&C’s services is the lowering of risk and
begin, they already have a negative perception towards the
a faster development of mining projects. These factors,
project,” Vera Morales explains. The firm believes that there
along with the diminished probability of facing court action,
is a lack of transparency towards the communities in these
dramatically lower expenses for mining companies. “We have
processes. Vera Morales states that, even if communities do
a very good litigation area, but we use it as a support and not
believe they are gaining from the mining project, the usual
as our core business,” explains Vera Morales. The company
granting of monthly royalties does not leave any permanent
also helps mining companies better allocate their spending
improvements behind once the project ends, which may
in social responsibility programs. While mining companies
cause dissatisfaction as mining operations progress. “We
spend a lot of money in this area, there is sometimes a lack of
realized something was wrong when, despite compliance
focus in the way these resources are spent. “The single most
with all norms and regulations, projects were being stalled by
important thing is people’s perception. Companies must use
drawn out or unsuccessful negotiations,” says Vera Morales.
their resources in very specific ways, and should not think
V&C Abogados Ambientales therefore associated with
that the strategy can be the same for every community.
French partners who developed an innovative community
Companies have to invest in the programs that will create
engagement system based on the analysis of perception.
the most benefits for both parties,” Vera Morales highlights.
When V&C approaches a community, the company does so
The company’s focus on scientific methods and technical
with a fairly developed project and several scenarios of how it
expertise enables the design of sustainable projects that
will positively affect the surrounding communities. Even if the
meet the needs of both clients and communities. “In order to
project involves the relocation of a community, the company
understand reality you need people that have studied reality.
presents a scenario with details of how this will be done and
Unlike lawyers, biologists and engineers know how reality
explains the ways in which the relocation could benefit the
works and that helps us to put strategies on the table that
locals. They design a set of questions to be answered by all
work in reality,” says Vera Morales. “What we do is shielding.
community members and run the resulting information in
We create cases where it is reasonable to say yes to a project.
their Categorical Perception Analysis (APC) system, which
It is very unlikely that a judge will say no because we have
uses algorithms to analyze the dispersion of perception
delivered not only the legal arguments, but also the social
data; then a Boolean filter measures the intensity or quality
and technical arguments. We have not had a single case
of these perceptions and classifies answers into decision-
where a mining project was stopped,” Vera Morales adds.
333
CHEMICAL SOLUTIONS ENHANCE PRODUCTIVITY AND EFFICIENCY Mining companies are increasingly eager to adopt
specialized chemicals that effectively provide dust control
best practices that prioritize safety and environmental
while reducing water consumption. As Robles Osollo
performance,
explains: “The dust control products drastically reduce both
and
improve
while
helping
operational
to
optimize
efficiency.
production
Ashland
Water
the amount of water needed to control the dust and the
Technologies, a commercial unit of Ashland Inc., is a leading
frequency of application, which provides the added benefit
global supplier of specialized chemicals that are used
of being an environmentally friendly solution.”
by customers around the world to optimize production, protect assets and minimize environmental impact.
In other areas such as flotation Ashland offers different chemicals for improving processes, and is also poised
Ashland Water Technologies offers an extensive product
to launch a new product line. “Flocculants are used for
portfolio that includes a broad range of processes and water
both mill water treatment and dewatering processes, and
treatment chemicals for the mining industry. “Historically,
antiscalants are used in the process of treating mill water
the Ashland Water Technologies business model was
and heap leaching, to avoid numerous operational issues
oriented more along product lines and geography;
related to calcium sulfate or calcium carbonate scaling in
however, in the last year we have realigned our organization
piping, pumps, emitter piping, solution ponds, and other
according to markets, so that today we have a global team
areas throughout the mine. We have also introduced
exclusively dedicated to the mining industry,” says Ángel
several new Zalta™ antiscalants this past year, designed for
Pedraza Velazco, Team Leader Ashland Water Technologies
low pH and high temperature operations, both of which
at Ashland Services México.
are issues in the marketplace,” adds Pedraza Velazco.
“We have realigned our organization according to markets, so that today we have a global team exclusively dedicated to the mining industry” Ángel Pedraza Velazco, Team Leader Ashland Water Technologies at Ashland Services México
Thanks to the positive outlook in the Mexican mining
Though Ashland does not usually customize its products
industry, the country is gaining prominence in Ashland’s
for individual Mexican mines, it does support its customers
global mining activities. Given that the majority of Mexico’s
in selecting the best products for specific applications,
mining operations are in desert areas, Ashland is positioning
based on the ore mineralogy and operational practices on
its water treatment products as a premium solution for the
each mining facility. In addition, the company also helps
country’s mine operators. “Ashland has always been known
its clients to identify problems, and provides real-time
for its water treatment products, including its Millsperse™
monitoring and control services once solutions have been
antiscalants, boiler and cooling water treatment programs,
implemented. This highlights the transition Ashland is
and process flocculants and coagulants. We have recently
undergoing, moving from being a provider of specialized
expanded our product offering, placing major emphasis
chemicals to becoming a provider of integrated solutions.
on products that increase mineral recovery and process throughput,” says Andrés Robles Osollo, the company’s
According to Pedraza Velazco, safety has always been a core
former Corporate Accounts and Territory Mining Manager
value for Ashland in all of the products and programs that
for Mexico and Central America.
the company provides: “Every Ashland employee is engaged in safety programs and we are guided by principles of
334
Ashland offers specific chemical solutions for different
responsible care. These principles guide not only our safety
mining operations, which are not only focused on safety
efforts, but also our focus on environmental concerns and
but also on supporting practices that are less damaging
the responsible manner in which we handle and transport
to the environment. Ashland delivers portable monitoring
our products.” As a consequence, adds Robles Osollo, this
units that measure dust levels throughout the crushing
safety culture also transfers to any mining facility with
process. As dust control is becoming increasingly important
which Ashland is involved. The company’s Behavior-Based
for mining companies because of dust-related respiratory
Safety Observations program, which helps to recognize
problems, Ashland has developed a product line of
potentially unsafe situations before they occur, is another
example of Ashland’s commitment to improving safety in all
resources that are still unexplored in the country. “The
of its operational practices.
market in Mexico is growing as a result of three factors: new technologies, foreign investment and the value of
In recent years Ashland has directed its attention towards
metals. Within Mexico, there are a tremendous number of
developing products that increase industrial productivity
new projects,” says Robles Osollo. “For Ashland, we must
and reduce environmental impact. Its research and
work hard to keep up with this growth.” The company plans
development activities relating to specialized chemicals
to continue investing in products that deliver innovation
for mining have focused on three main areas, which
and efficiency while enhancing safety, reducing potential
include: components that can improve mineral recovery
health hazards and improving environmental performance.
and plant throughput; compliance with environmental,
These products will include applications to target the
health and safety standards through the use of more
water management challenges that the Mexican mining
specialized products; and chemicals that are developed by
industry currently faces, such as improving rates of water
means of renewable feedstock. For flotation applications,
recycling and water use optimization.
for example, increased emphasis is being placed on using renewable materials, stepping away from petroleum-
Ashland will also invest in new monitoring and control
based chemicals. In the area of solid liquid separation, the
systems, such as the recently developed OnGuard™
company’s approach is slightly different. “Here, the focus
system, in order to keep providing integrated solutions to
is clearly on plant throughput improvement and our new
the Mexican market. The main concern for Ashland right
products, such as Ashland’s Zalta™ viscosity aids and
now is finding talented and experienced personnel to
filtration aids that allow increased production rates and
support the company’s operations in Mexico. That is one of
maximized water recovery, and conservation and recycling
the reasons why the company is carrying out an ambitious
using existing equipment,” says Pedraza Velazco.
internship program and interacting as much as possible with industry experts and specialists, in order to attract
Ashland is excited about the promising future of the
qualified professionals that can help Ashland to maintain
Mexican mining industry, given the vast amount of
its successful track record.
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| VIEW FROM THE TOP
FOSTERING BEST PRACTICES IN WATER MANAGEMENT RAÚL NOGUEZ RÍOS President of the Camimex Water Commission Q: How would you describe current water availability in
A: Most of the issues that the commission deals with
Mexico for mining activities?
relate not to water access itself but to conflict with the
A: Water availability in the country varies according to
authorities. The commission supports member companies
geographical location and socioeconomic factors, such
by informing them of all changes or intentions to change
as whether the area is highly populated or not. Most
the law, regulations and official norms, as well as analyzing
underground mining operations have access to water
the challenges and opportunity areas that these changes
bodies that are close to the surface and can be easily
present and the effect they will have on the industry. If the
reached. This situation was taken into account within the
issue is expected to have a major impact the Commission
current legal framework, and the use of this water does
gathers evidence and arguments to promote or challenge
not require a concession for that particular mining activity.
the legal initiative, working together with other industrial
However, the National Water Commission (Conagua)
and business chambers, academic institutions, state and
must be informed because extraction, exploitation and
local water management agencies and other users in order
consumption of water are all subject to duties. Under the
to do so.
current framework more than 75% of national water is not paid for, due to fiscal stimuli, since most water is intended
Q: According to Camimex’s Water Commission, what
for farming. Also, municipalities pay 10 times less for
modifications should be made to the current legal
each cubic meter than mining companies and other self-
framework in order to benefit the mining industry?
sufficient industries do. It is important to point out that for
A: An essential objective for Camimex is to make water
other industries water access is more complicated.
available, today and in the future. We need to modify the current legal framework if we are to achieve this objective.
Q: What are the priorities of the Water Commission on
The first and most important step is to stimulate good
matters of water access and use?
water use and reuse. If a first user passes its residual water
WATER-BASED SOLVENTS AND DEGREASERS ENHANCE ENVIRONMENTAL PERFORMANCE Mining companies are becoming increasingly more aware of
from water treatment to oil field services and welding alloys.
the impact their operations can have on the environment.
The company has been able to strengthen its position in
Every day companies are searching for new products that
the mining sector due to its diversified product portfolio.
can help them preserve the ecosystem in the areas where
Its main specialty for the mining industry is the fabrication
their mining operations are located. In order to keep the
of oil-based lubricants, although the company has recently
facilities and equipment running at optimum level, the
introduced a line of solvents and grease dissolvents in
mining industry has to use oil-based chemicals, lubricants,
order to provide high quality maintenance to all mining
and industrial cleaning products which can be detrimental to
equipment. “NCH water-based solvents and degreasers are
the environment. This has compelled the industry to look for
all manufactured under environmental guidelines because
suppliers that can provide high quality and environmentally
we understand the needs of the industry and know how
friendly maintenance and repair products.
these types of products can affect the ecosystem when they are left behind, so we strive to make our products completely
336
NCH manufactures and markets an extensive line of
harmless for the environment,” says Jesús Raigosa Alatorre,
industrial and institutional maintenance solutions ranging
Sales Director at NCH for Mexico and Central America.
down to a second user, the first user should not be required
Q: What advice does Camimex give to its members to
to pay for new extracted water, provided that the volume
help them lower their water consumption?
is equal to the amount it passed on to the second user.
A: Water is needed for all mining processes, and in general
If the second user does the same and passes the water
terms, mining is about reducing rock dimension in order
down to a third user, it should enjoy the same benefits.
to isolate the mineral particles. It is at the final stages of
If a second user invests money in treating residual water
grinding and flotation that the largest quantity of water
from a first user with the aim of making it suitable for
is used. Up until 20 years ago, the water consumption
their own use, that investment should be deducted from
required to process or grind a tonne of mineral was 3-4m3
the rights it has to pay for water extraction. With these
(3,000-4,000l) of water. That consumption is currently
types of measures in place, the aquifer or body of water
between 0.5m3 and 1m3, with the rest coming from water
from which all three users are obtaining water will have
recovery systems; most of the water is recovered and
less water extracted, equal to the sum of the volume that
reused during the process. Mining products, however, are
is being transmitted between the users. In other words,
sold at the same price everywhere in the world, and we do
once water has been extracted it can be used at least two
not have any influence over prices. Reducing operational
or more times. Obviously, with these sorts of measures
costs has a direct impact on utilities, and most mining
there will be more water availability for new users and
companies in Mexico are recovering and reusing water in
greater supply for the population and social and economic
their processes, which lowers operational costs.
activities. This will not only satisfy the current need but also the future need for water. Another important issue
The Camimex Water Commission’s goal is to standardize
that must be taken into account for any legal modifications
best practices. We are focused on two issues: the first is
is to shorten the authorities’ response time. Conagua’s
promoting full knowledge of the law. The difference in how
legal timeframe for resolving a concession request is
mining companies perform can depend on their level of
70 working days, but it usually takes longer. Through
knowledge of the current legal framework. We disseminate
modifications of the legal framework water users in Mexico
information on all aspects of the law (regulations, norms
have become more efficient and competitive. Government
and such) so that every company knows exactly what its
institutions may keep to the above response time, but
rights and duties are, and in order to give the industry
they do not give their final resolution until many weeks
equal knowledge. Secondly, we relay best practice
or months after that period has passed. Such delays have
examples, because the use of technology depends on
financial repercussions, and it is therefore essential for the
each company’s resource availability. Our priority is to
authorities not only to respect deadlines but also to shorten
make knowledge accessible to all, regardless of particular
response times in order to increase competitiveness.
financial conditions.
NCH also provides water treatment systems for effluent
the growth of bacteria in pellets was one of its most recent
and process waters. The company expanded its horizons by
developments. “Thanks to our new biotechnology we are
looking for new technologies that could minimize pollution
capable of injecting 30 trillion bacteria per day, which
levels in such waters. The system it developed is called
gives us an outstanding competitive advantage,” stresses
Bioamp, which is designed to work with life bacteria that
Medardo Pavón Zárate, Vice President of NCH Mexico
destroy all noxious organic residues in the processed water.
and Central America. By using these types of preventative
“Mining companies use water in different ways but at some
measures mining companies can ensure that pollution is at a
point it will percolate through all mine levels, for this reason
minimum level and therefore mines are safe to be operated.
we want to make sure that this water is as harmless as possible,” Raigosa Alatorre comments. The company uses
Two years ago the company launched Bioamp, the enzymes
its automated machines to cultivate the bacteria to directly
bio-generator, and this year it introduced Torrent 400, a
eliminate all the unwanted organic material in sumps,
water based part washer. “Every year NCH is looking to fulfill
treatment plants or any other class of septic tank. NCH can
its potential since the company’s main concern is to become
provide chemical or biological products depending on its
the leading provider of environmentally friendly products,”
customers’ needs. Normally the correction process begins
says Pavón Zárate. NCH will continue innovating with
with chemical products and then the biological ones are
products, equipment systems, and eco-friendly applications
added. NCH has always dealt with wastewater, although
to support the mining industry in this same sense.
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| VIEW FROM THE TOP
MEETING ENVIRONMENTAL REQUIREMENTS BALTAZAR SOLANO-RICO Director General of Terra Quaestum & Consultant at Behre Dolbear
Q: What role does a company’s environmental approach
When we started doing this type of work back in 1991 the
play in determining a project’s success at the pre-
understanding of mining as being related to environmental
feasibility and feasibility stage?
processes was not well developed. Now, more than 20 years
A: In Mexico our environmental law dates back to 1988,
later, there are more specialized people in this area and the
though it has had a couple of revisions since then. For the
MIA will be split up and given to different specialized groups
most part it very closely follows international trends and
that have greater expertise and knowledge as to how to
standards. In general there are three reports that form the
evaluate it. Mining companies are also becoming more and
basis for the approval process of a mining project: one is
more aware of what other companies are doing and the
the Environmental Impact Assesment (MIA); depending
mistakes that have been made, so MIAs are becoming more
on the project a risk analysis may also need to be done,
thorough and more cautious – they have to be, because
if it is expected that hazardous materials will be handled;
otherwise chances are that they will be rejected.
and the land use change. The latter is becoming a more and more important part of the process, as a result of
Q: How do you advise your clients on how to create a MIA
the problems we have seen with communities in Mexico.
that will pass the requirements?
These different processes must be completed satisfactorily
A: There tend to be two approaches that vary from
before permission is granted to begin operations. As a
company to company. Some companies will provide the
part of the MIA a company has to work all the way from
least amount of information possible to the authorities,
the baseline studies through to considering the impact
hoping that it will make the process quicker. My advice is
the mining activities will have on the local environment
that the more information a company provides the better
and the measures that can be taken to minimize it. This
its chances of getting the project approved will be, even
is a huge piece of work, and if a company fails in any of
though it may take a little longer. The quickest approval
those areas then there is a possibility that the MIA will be
tends to take a minimum of around six months, though in
rejected – we have seen that happening more often recently.
some cases it can also take significantly longer.
MISTAKES IN ENVIRONMENTAL PERMITTING Obtaining environmental approval from the Ministry of the Environment and Natural Resources (SEMARNAT) in order to begin a mining project is no small task. Without the correct environmental permits, all of the other permissions are meaningless. The most common mistakes that mining companies make during their permitting process are: •
Not publishing the Project Statement in a high circulation newspaper of the entity or region within the first five working days after handing in the Environmental Impact Statement (MIA), as required by Article 34 Part 1 of the General Law on Ecological Equilibrium and Protection of the Environment (LGEEPA)
•
Not presenting the Environmental Risk Assessment (ERA) in accordance with Article 30 of the LGEEPA when the method of extraction is consideed to be highly risky
•
Providing an incomplete or confusing description of the works and activities the project entitles
•
Lacking or having an incomplete link with the required legal instruments. In some cases, analysis are omitted or just mentioned without providing the details of how the project will keep up with the regulations, criteria, and guidelines
•
Lacking the Environmental Delimitation System, or preparing it incorrectly by doing it independently from the environmental characterization, which provides the geographical framework for the description of the environmental factors
338
Q: What are the main challenges that you help your clients
the reforestation in other areas on the company’s behalf.
overcome in restoration programs?
That is a reforestation program. But once a company has
A: The restoration program starts with the land use change
finished its project it will reclaim the land, as far as possible,
process. A company has to prepare a technical report to
to its original state. The word restore is not used very
define the type and abundance of vegetation on the land
much, because it will not be possible to take a photo and
in question. Based on that, once the mine plan has been
return it to exactly the same state that it was in 10 years
created, the company must define which areas of the land
ago. You can reclaim the land, and you can rehabilitate it
are going to be disturbed, and then put together the mine
for different uses, but to restore it is very difficult.
reclamation program and the reforestation program. Q: What role can Terra Quaestum play in helping the On one project in Baja California we spent a whole year
industry to address the main challenges that the industry
transplanting over 10,000 cacti. The authorities must be
will be facing in the coming years?
provided with all of that information, and it must also be
A: There is a lot of potential for a company like Terra
updated – there is no precise rule around when, but the
Quaestum, which provides very diversified services to
first reclamation report should be done at the beginning,
the mining industry. The level of work for these sort of
and the final reclamation report must be done at the very
companies depends nowadays on the junior companies;
end. The reason for updating it is that what one expects
there are less active companies, so surviving this time
the mine to be when the project starts will be very different
very much depends on how the market develops and the
to what it is like 20 years later. When the reclamation plan
contacts that a company has been able to develop over
has been done, and during the lifetime of the project,
the years. The typical service company will offer design
there are a series of reports that must be provided to the
and development of exploration programs, regional and
authorities regularly, including things like water sampling,
property mapping and sampling, drilling supervision,
soil sampling and air pollution.
geological modeling and mineral resource estimates. Terra Quaestum is quite particular because we have done a lot
There is some discussion around the use of words for
of environmental work, so we have had a lot of clients
environmental projects. The words reclamation, restoration
for many years with whom we started to work at the
and reforestation have different meanings. Under the
exploration stage, then continued on with supervision,
current law, if a company deforests an area it will be
whilst at the same time doing the environmental work
obliged to reforest another area that is two to three times
for them. In some cases we do mine design as well. We
larger than what it has cut down. The company has to pay
are a professional company working in many different
a certain amount of money to CONAFOR, which will do
specialized areas.
•
Providing an oversized Environmental Delimitation System, which does not reflect the true environmental issue within the area of influence of the project or its ecological integrality. Oversizing is common because with it the petitioner justifies the minimal impact of the project on the environmental system
•
Failing to describe potential acid draining and flow of toxic waste contained in the low grade mineral that will not be subjected to beneficiation, and the sterile mineral that needs to be removed in order to access the ore deposit
•
Having an incomplete hydric balance. Not provide the required elements to identify if the existing resource is enough for the project needs without compromising other uses and the environmental cost it may present
•
Misusing the concept of environment impact, which relates to loss of vegetation cover and land degradation, decrease of wildlife habitat, and soil erosion, among many other
•
Lack of detail in the description of the environmental impact, which needs to contain hard data, such as the square meters of forest that will be affected, the amount of trees that will be cut down, and the fauna that will be displaced
•
Supplying evaluation results that do not indicate the methodologies, criteria and a hierarchy used to evaluate the environmental impact
•
Lacking hard facts in the mitigation measures proposal such as size of the surface undergoing renovation, length of post-closure monitoring, and relocation of the rescued resources
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| VIEW FROM THE TOP
INDUSTRY VIEW ON ENVIRONMENTAL RESPONSIBILITY VÍCTOR DEL CASTILLO ALARCÓN President of the Camimex Environmental Commission Q: What global environmental standards have been
additional financial burden for the private sector?
adopted by Mexico’s mining industry and how have they
A: Camimex and mining companies work towards reaching
impacted the country’s competitiveness?
an understanding of Semarnat’s demands and ensuring
A: The Mexican mining industry has adopted many
that its requests are technically and environmentally
environmental norms and guidelines that are similar to
viable. Semarnat is the authority that issues the Mexican
those in more developed countries. Due to the competition
official standards (NOMs) and evaluates the environmental
with other mining countries that Mexico faces, the
impact, risks and land use studies, among others, that must
environmental requirements are practically the same.
be completed for permits and licenses to be granted so that
Mining companies actively work with the authorities to
a mining company can begin to develop a project. It is also
put together environmental conservation and preservation
the body that monitors control systems for the materials
plans, in a joint exercise that ends with the creation of
being used and produced, as well as emissions and waste
regulations that are then further revised by different
that are generated. The Commission has a close ongoing
working groups. After such revisions, the official regulations
relationship with Semarnat, especially with Profepa,
are issued. They must be practical and economically
the inspection and monitoring branch that visits mining
feasible while at the same time bringing benefits to the
companies regularly to ensure that they are complying
industry through clear rules and legal certainty. They must
with the law. Due to the different functions of the mining
also reassure the public that the mining industry is clean
industry and environmental authorities it is impossible to
and actively working to preserve the environment. This is
have perfect information about every development. For
why we believe that Mexico can compete with any other
this reason there are sometimes discrepancies between
country in terms of its regulatory framework, as well as in
the two institutions, though we always manage to find
other aspects of mining.
consensus for the sake of the industry’s improvement. It is important to recognize that the environmental
Q: What are the main environmental challenges that the
authorities in Mexico give Camimex a preferential place
Mexican mining industry is currently facing?
in the regulation committees. For example, the Advisory
A: Something that has been concerning both authorities
Committee on Environmental Regulation recognizes that
and mining companies is greenhouse gas emissions, which
Camimex is qualified to suggest regulations or guidelines
cause global warming and have an impact all over the
that safeguard the environment.
planet. Mining groups are involved in the development of alternative power generation sources to reduce the
Q: What have been the most representative achievements
emissions they generate. For example, some companies
of
are employing solar panels or wind farms to generate a
cooperation with the public and private sectors on the
proportion of the energy their mining operation requires.
development of environmental standards?
Since this will not be enough to power their entire operation,
A: We have achieved consistency in the government
many companies are compensating their greenhouse gas
requirements regarding the issuance and publication
emissions through extensive reforestation programs. Tree
of official standards for mining. I am not sure if there is
planting captures carbon dioxide and compensates for the
another industry that is as heavily regulated as the mining
large amount of pollutants that are being released into the
industry. Our greatest achievement has been the joint work
atmosphere. After the army, the mining industry plants the
we have done with the authorities in order to demonstrate
largest number of trees in Mexico.
the way in which the industry can best be regulated to
the
Camimex
Environmental
Commission
in
its
become increasingly environmentally friendly. Previously,
340
Q: How do Camimex and the Ministry of the Environment
the authorities could send someone without much
and Natural Resources (Semarnat) work together to
knowledge of mining activities to supervise operations.
create an energy efficient industry, without creating an
Misunderstandings arose as a result of the supervisor not
having the required knowledge or training to evaluate
they face the challenge of finding a third party that is
accordingly. Thanks to effective communication, common
prepared to handle and store this material for them. The
ground has been found, which will allow the industry to
authorities have growing concerns about this issue and I
be efficiently regulated. Another great achievement has
believe it will become a relevant subject very soon.
been the national forums through which the benefits of mining are disseminated. We have a good image among
Q: What is your outlook on the development of
the authorities, but not such a great image with society in
environmental assessment procedures for the mining
general. We have a lot of work ahead of us to improve our
industry, and what ambitions does Camimex have to
image with the Mexican public.
contribute to this development? A: We want every Camimex affiliate to have its Clean
Q:
Which environmental regulations could potentially
Industry (Industria Limpia) certification and to be part of
represent a major challenge for mining companies
the environmental leadership program, which means using
working in Mexico?
suppliers that also have eco-friendly policies and comply
A: It is possible that there might be changes to Mexico’s
with environmental requirements. Another measure that
environmental regulation in the future. When this happens,
is currently being encouraged is for mining operations to
it will happen gradually because the authorities are aware
have their own greenhouses, in order to restore vegetation
that it is not easy to adapt technology to new official
in areas that have been altered by mining activities or
standards. Every five years standards are reviewed and,
by the activities of satellite companies that service the
depending on the existing technologies, new measures
industry. All of these measures aim to achieve public
might be established. Another interesting subject is
recognition and improve the industry’s image.
hazardous waste management. Currently, reuse, recycling, and energy recovery from waste are considered to be the
Victor del Castillo AlarcĂłn, a chemical engineer by
appropriate handling of waste. In case waste is not reused,
education, also serves as Director of Environment and
the material should be stored for eventual disposal. There
Ecology at Grupo Mexico and was recently appointed
are cases of companies that do not have an authorized
as President of the Sonora Mining Association.
storage facility for the disposal of hazardous waste, and
Growing Responsibly
At New Gold, we understand that our collective success depends on our ability to earn the welcome of our host communities. We are committed to contributing to sustainable development wherever we operate by acting ethically and with integrity, by working safely, and by taking responsibility for the impacts of our decisions and actions on communities and the environment. We consistently apply this approach through the mine life cycle, from early exploration, development and operation, to decommissioning and mine closure. Our sustainability reports, policies and initiatives can be found at http://2012sustainabilityreport.newgold.com/.
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ENVIRONMENTAL REQUIREMENTS IN MEXICO’S LEGAL FRAMEWORK Legal experts are generally positive about the legal framework
the forestry industry and the army – it has planted more
in Mexico in relation to the environment, and argue that the
than ten million trees in the last five years.
environmental practices followed by the mining industry meet the standards of the world’s most developed countries.
Few legal specialists have complaints about current
Legislation on environmental matters is contained in Mexico’s
legislation relating to the environment. “In regards to
General Law of Ecological Balance and Environmental
environmental law, the Mexican Official Standards for
Protection, which was established in 1988.
exploration are very strict and they are ahead of many countries. Likewise, the majority of mining companies
The government has two principal bodies that are
operating in Mexico are taking their environmental
responsible for promoting and upholding this law: the
responsibilities. They have obtained the required permits
first is Semarnat, the Ministry of Environment and Natural
from Semarnat and have received awards from Profepa
Resources, which was created in 2000 with the objective
certifying them as clean industries. At this point, there is
of protecting, restoring and conserving the country’s
no need for modifications to the environmental law,” says
ecosystems, natural resources and environmental goods
Abdón Hernández Esparza, President of the Legislative
and services. This body also establishes the NOMs, or
Commission at Camimex. But not only is the legislation
Mexican Official Standards, which are the government’s
in place, it is also effectively regulated, which has led to
environmental guidelines on topics such as emissions,
the development of a real environmental conscience
environmental
Essentially,
within Mexico’s mining industry. “From an environmental
Semarnat’s role is to establish the law and foment a culture
standpoint, the idea of Mexico being a dumpsite has been
of good environmental practice within Mexico. It is also one
eliminated, not only in regulations but in practice,” says
of the government bodies that grant permission for mining
Juan Francisco Torres Landa, Partner at BSTL Abogados.
operations to begin, based on a comprehensive assessment
“The notion that mining companies can come and
of the mining company’s expected environmental impact,
devastate the land and destroy our environmental systems
which takes into account things like gas emissions, mining
is not valid.” However, despite significant improvements
waste disposal and water usage, recycling and disposal.
on this level and a much more environmentally sustainable
The other key government body for environment issues is
approach to mining activities on the whole, the industry
Profepa, the Federal Attorney’s Office for Environmental
still tends to be seen as irresponsible and highly damaging
Protection. This body’s responsibility is to regulate the law,
to the environment. “With time, the world has changed,
as well as ultimately to control and prevent environmental
and despite the fact that there is a new and more
degradation in Mexico.
responsible mining industry in Mexico and the rest of the
impact
and
water
usage.
world, people who are not engaged in mining activities still The Mexican Constitution states that every citizen has the
see it as a sector that has high levels of water pollution
right to a healthy environment, and the State guarantees the
and works with ancient processes, which is not true of
fulfillment of this right through the law. Those responsible
large companies anymore,” says Héctor Herrera Ordóñez,
for damage to, or deterioration of, the environment are
Partner at Herrera Ordóñez Abogados.
accountable by law, and where found responsible for
342
industrial contamination of the environment, even if through
Generally speaking, mining companies have been efficient
negligence, can be sentenced to anything between six
in improving their reputation in the locations in which
months and nine years in prison. Such provisions in the law
they work, fostering good professional relationships
provide additional incentive to an industry that is already
with local communities through a notable commitment
performing comparatively well in this area. “This year, only
to cleaner operations and environmental responsibility.
15 companies have been recognized by Semarnat for their
However, the reputation of the industry with the general
good environmental practices, and of those 15 companies
public will not improve until success stories become more
two are mining companies: Industrias Peñoles and Grupo
commonplace in the news than those about destruction
Mexico,” says Víctor del Castillo Alarcón, President of the
of the environment and corporate negligence. Whilst
Environmental Commission at Camimex. Furthermore, 80%
incidences of the latter are thankfully becoming fewer and
of all companies that are currently affiliated with Camimex
farther between, such stories nevertheless tend to have
have the Industria Limpia (clean industry) certification,
greater impact. The improvement of the mining industry’s
and the remaining 20% are in the process of acquiring
reputation in this area will therefore depend largely on
this certification, which is issued by Semarnat. The mining
its own ability to eliminate bad environmental practices
industry is also the biggest planter of trees in Mexico after
altogether and communicate that to the wider public.
| CASE STUDY
MANAGE THE SOCIAL LICENSE TO OPERATE By Roberto Frau* - Obtaining, maintaining, or regaining
to highlight the positive actions that had been taken on
a Social License to Operate (SLO) has become one of
the project but which unfortunately had not been properly
the most fundamental success factors for today’s mining
communicated to key stakeholders. Extensive further
operations in Mexico and around the world. Social
engagement efforts from mine representatives were also
consulting services help the mining sector to achieve
necessary in order to gradually turn the relationship around
their business objectives, providing technical advice that
and ultimately gain an SLO.
results in proper management of community impacts and expectations, constructive engagement with internal and external stakeholders, and the proactive integration of societal concerns into project design and execution. All such efforts have the ultimate goal of improving the SLO which, as the tacit permission given by communities and other key actors for a project to be conducted, is a crucial stage for mining companies. Two recent examples illustrate the different ways in which ERM’s Social Consulting Services can achieve positive results in diverse stages of the project cycle and in very different SLO contexts. Both mining companies involved are reputable players in the sector, interested in performing according to international best practices for sustainability. For a client in Baja California, ERM was brought on board
These two different cases demonstrate the value of the
to conduct an update assessment of the socioeconomic
SLO as a live resource that cannot be taken for granted
and cultural conditions in the project’s area of influence,
and which must be cared for strategically, through robust
in order to provide recommendations for supplementary
social management. The company recommends that this
stakeholder engagement and community investment in
management be based on tailor-made action plans that
the expansion of an existing project. This company’s SLO
take into account the many changing circumstances
was relatively stable, with few communities immediately
of mining projects, but which are also grounded in best
near the mine and a general perception that the company
practice principles, such as proactive engagement, being
acted in a responsible manner. The opportunities identified
culturally appropriate, political sensitivity, transparency,
by ERM could therefore be carefully considered and
systematic and continuous social risk identification, and
forward looking in nature, with the goal being to maintain
long term relationship building.
an pre-existing SLO. The conclusion was that additional stakeholder engagement could be directed towards
On such projects in Mexico and around the world ERM
groups that were becoming more prominent in the area or
works at the strategic level to help identify, characterize,
that had recently appeared.
and oversee its mining clients’ social footprint and societal perceptions. An SLO reflects directly, whether positively
Another example was a project in Veracruz on which ERM
or negatively, on commercial performance. The rule of
was asked to coach the project’s environmental and social
thumb is that it is always better to secure the SLO as early
team, in preparation for a public consultation meeting on the
as possible and to preserve it; this is much easier than
Environmental Impact Statement (MIA) of a new project. The
acquiring it at a later stage or going through the process of
mining site in Veracruz did not have an SLO, and at the time
reclaiming it once it has been lost. However, social contexts
it was involved in a negative media storm, with government
are intrinsically dynamic and there are always ways to
authorities and non-governmental organizations speaking
improve a mining project’s SLO. There is no doubt that, as
out against the project. ERM’s support thus focused on verbal
Mexico’s mining sector continues to develop, the way that
and non-verbal messaging during the public consultation
companies approach their SLO will directly impact how
event with the aim of counteracting, as far as possible, the
successful they are in the long run.
negative sentiment that existed towards the company and
* Social & Sustainability Team Leader at ERM
343
| VIEW FROM THE TOP
IMPACT OF SUSTAINABILITY CONSULTING MANUEL ORTĂ?Z MONASTERIO Director General of ERM Mexico
Q: Why should companies invest in sustainable practices,
to understand the behavior of this complex mixture of
and what are the benefits and return on investment that
components in a dynamic setting, and we design the right
result from hiring an environmental consultancy firm?
social management tools and strategies, not just in terms
A: Hiring an environmental consultancy firm is all about
of social impacts or risks, but also in terms of community
managing risk, and it should be seen as an investment
perceptions and human development needs. Our approach is
rather than an expense. Companies may end up paying less
aligned with international standards, and it calls for building
by not implementing sustainable practices, however they
strong human relationships, based on codependence as
will eventually face greater environmental, health and safety
opposed to dependence, meaning that the community can
problems, meaning that they have to invest more money
benefit from an improved quality of life, and the company
in the future. ERM’s services bring several benefits for our
can obtain the social license it needs to operate.
customers, such as access to social licenses, a reduction in fines, lower accident rates, and lower insurance premiums,
Q: What is the typical profile of the companies that ERM
or social security premiums in the case of Mexico. Though
is working with?
the value of reputation is not easy to quantify it certainly
A: We are working with industry leaders and guiding them
matters, and our practices help companies to improve their
towards establishing successful sustainability practices.
image and position themselves in a more positive light. We
We feel that that there is more risk in associating ourselves
work towards the ideal of being proactive and preventing
with companies that have the mentality of cutting corners
social conflicts before they arise. However, in cases where
than with companies that are deeply invested in the
problems do arise ERM offers services and methodologies
topic. Nonetheless, we provide customized solutions for
to address such problems. We work in a conceptual way,
specific problems, and try to work out the best business
with a social matrix that integrates different variables, and
savvy ideas to help companies become 100% successful
depending on the stage of the project we provide different
in their sustainability solutions, regardless of the stage
considerations that can help to minimize social conflicts.
the business is at. The majority of projects have to deal
When a company is still in a position to be proactive we work
with complex legacy issues, which are related to social
on creating a good impression from the very beginning, at
expectations. We conduct environmental and social due
the exploration phase. When the project has been deemed
diligence to facilitate mining investment. It is always better
viable we design options based on different social criteria,
to be involved in a project from the beginning, but it is
analyzing the potential social, economic or reputational
never too late to start doing things the right way.
impacts of each decision. Q: How does ERM work with its clients to optimize safety Q: How does your approach to solving social and
performance?
environmental matters differ from that of other firms?
A: In modern mining, the clients with whom we work are
A: ERM does not approach these matters from a public
more sustainability conscious, and companies know that
relations or a legal liability perspective, but from an
if they do not address safety performance issues or social
international best practice standpoint. Companies are
conflicts adequately their projects will not be viable. The
forced to stay in an area for as long as there are resources to
Mexican mining industry is progressing in its application of
be explored and profited from, and are therefore interested
safety standards, but authorities that are trying to monitor
in building good relationships with local communities.
mining activities are facing challenges when it comes to
This requires a strong sensitivity for understanding human
accessing the sites, as well as other security-related issues.
needs and aspirations, as well as for understanding how
344
the activities of a large mining company will impact those
Q: Which countries set the best example for Mexico, and
aspirations, create expectations, revise the historic memory
what measures that have not yet been implemented here
of development, or impact legacy issues. At ERM, we try
would you like to see implemented in the future?
A: From my experience on projects in Colombia, Peru,
caused by a complex social phenomenon that had to do
Chile, Panama, Guatemala, the Dominican Republic,
with cultural marginalization, alcoholism, unemployment,
Mexico, and Argentina as ERM’s Social Practice for Hispanic
and several other social variables. We provided our client
America Coordinator, I consider it crucial to emphasize the
with an integrated method to deal with health, safety and
importance of community agreements. Particularly in Chile
social issues, which resulted in a successful reduction of
and Peru, more strategic tools and mechanisms have been
that suicide trend.
developed; for example, their permitting processes include Q: Given the current growth in the mining industry, what
an actual assessment of social impact.
would you like ERM’s position in this industry to be in Q: What do you think are the key factors that have
three years?
contributed to making the Cerrajon Project in La Jualira,
A: There are some Mexican companies that offer the same
Colombia successful?
services as ERM, but we offer the advantage of having
A: Cerrajon is the largest open pit coal mine in the world.
a worldwide network of resources and international
At this project we have built excellent community relations,
experience. Mexican companies could improve over time
combining health and safety with social matters. Coal
and learn to do things the way we do, however ERM is
was transported from the mine to the port via a railway
currently ahead of the other companies that provide
line that crossed areas that were heavily populated by
services in this area. Our broad set of services allows
indigenous groups; it truncated traditional travel routes,
companies to see the implementation of sustainable
and separated communities from their traditional water
practices as an investment and not only an expense.
sources. There were a number of fatal accidents on the
ERM has grown significantly since it started its Mexican
railways involving indigenous community members. Our
operations, and its size is likely to double given Mexico’s
Investigations determined those deaths to be suicides,
very promising future.
| EXPERT INSIGHT
“
Due to ancient mining practices, the industry today still has a negative image throughout the world, both nationally and internationally, which is undeserved. Camimex is working on changing this perception by emphasizing the really great things mining has done in the
”
Mexican environment. We work together with the federal government to identify, analyze, and propose the best international environmental practices.
Víctor del Castillo Alarcón, President of the Environmental Commission of Camimex
“
Clients must properly identify all activities they are going to undertake that may generate an environmental impact. Aside from site clearing or site preparation, they need to have a clear idea of what type of impacts they will cause,
whether in the area of air emissions, mining waste and how to properly dispose of it, or the type of water sources they are going to use and if they plan to recycle or reuse the water. For example, it should be very clear that they may not discharge wastewater in violation with applicable water quality parameters. All of these issues should be taken into consideration, aside from the zoning and land use change permits. Federico Ruanova Guinea, Coordinator of the Environmental Practice Group at Baker & McKenzie
“
”
Part of the current legal framework is focused on tightening the law for those that do not comply with it. Efforts are focused on tightening sanctions rather than encouraging companies that comply with social and environmental responsibility guidelines. The main issue is that there are no fiscal incentives for environmentally responsible companies. It is important to devise and implement incentive schemes, but even in their absence many companies are improving their environmental practices because they believe in the cause. Lourdes López Moreno, President of the Chamber of Deputies Environment and Natural Resources Committee
” 345
BEST PRACTICES FOR SUSTAINABLE MINING
| VIEW FROM THE TOP
CRUCIAL ADVICE FOR ENVIRONMENTAL RESPONSIBILITY FEDERICO RUANOVA GUINEA Environmental Practice Group Coordinator at Baker & McKenzie Q: Which changes are most likely to be implemented by the
activities they are going to undertake that may generate
PeĂąa Nieto administration that will affect the mining industry,
an environmental impact. Aside from site clearing or site
both in general and from an environmental standpoint?
preparation, they need to have a clear idea of what type of
A: We do not expect to see any significant changes coming
impacts they will cause, whether in the area of air emissions,
from the new administration. The basic legal framework,
mining waste and how to properly dispose of it, or the type
which has been in place for some time, will not be
of water sources they are going to use and if they plan to
changed. We do not see an exponential change in terms of
recycle or reuse the water. For example, it should be very
regulations and certainly no changes in our constitutional
clear that they may not discharge wastewater in violation
framework. What could occur is that we start to see more
with applicable water quality parameters. All of these
rules that facilitate the process of securing concessions
issues should be taken into consideration, aside from the
for investors. One of the main challenges that the industry
zoning and land use change permits.
is facing is the fact that the current federal regulations are not coherent in terms of getting specific permits or
Q: What are the legal procedures to follow and
land use change authorization, which has become one of
consequences of failing to comply with environmental
the main problems within our legal framework. From our
requirements?
perspective, there will not be significant changes either
A: There are many consequences. One of the most common
in the way the government is promoting or regulating
ones is administrative liability, which involves fines that may
investment in mining.
range from 20,000-50,000 times the minimum wage in Mexico City, which is between US$103,000 and US$259,000.
Q: What are the main questions regarding environmental
Another consequence can be the implementation of safety
issues that you receive from your international or domestic
measures and remedial requirements, such as shutdowns or
clients as they enter the Mexican mining industry?
the seizure of polluting machinery or equipment. In addition
A: One of the most important questions is how laws
to fines, companies can also face criminal liability given that
and regulations work in regard to securing a mining
the Federal Criminal Code establishes prison terms of six
concession, both for exploration and exploitation, and
months to nine years, depending on the seriousness of the
the related issues a company must deal with. Many of the
violations, if environmental harm is caused as a result of
more important questions investors ask have to do with
unlawful industrial activities. The other big challenge has to
environmental compliance. Companies need to know how
do with potential class action lawsuits. This is a new concept
the legal framework works, the type of environmental
in Mexico that was incorporated into our legal system as of
impact permitting requirements they have to meet, and
March 2012.
what the land use or zoning regulations are. The majority of issues have to do with environmental sustainability in
Q: What are the main challenges that mining companies
general. They are conscious that in many cases they will go
face to obtain water rights, and what impact does this
into regions that are a part of a natural protected area, and
have on the mining industry?
that companies that engage in mineral extraction activities
A: The most significant challenge has to do with the
may potentially enter into conflict with protective local
issue of water availability. Many regions in Mexico have
regulations. Our clients want to get a clear sense of what
experienced very serious water shortages in recent years,
Mexico’s business and legal framework is like.
and in many areas it is difficult to secure a water concession from the National Water Commission (Conagua). One of
346
Q: What are the key factors that must be taken into account
the first things that a company must analyze is what type
by mining companies when dealing with deforestation
of challenges they will face to secure water. In northern
and environmental pollution?
states like Chihuahua, Coahuila, and Zacatecas, a ban on
A: First and foremost, clients must properly identify all
the issuing of new water has been put in place following
very serious water shortages. What companies need
A: We do not expect to see any constitutional amendments
to do in many instances is buy water from an existing
in the short term with respect to the provision stating that
concession holder. If a mine is located close to an urban
the nation holds ultimate proprietary rights over water.
area or city, conceptually they can enter into an agreement
The issue of access to water is not something that will
with the local government agency to get water supplied
be solved by enacting a law or new regulations. It has to
even though the logistics may be difficult. The first issue
do with factual circumstances related to the weather and
to consider it is whether or not they can have access to
climate. Companies that possess the necessary financial
water, and how much that will cost. The impact of water
resources can invest in a desalination plant on the coast,
scarcity can be quite severe since water is a key element
but this would require the construction of a pipeline to
in mining activities and without access to enough water
feed water to a project, which would be a technically
resources the operations of mining companies can even be
difficult and expensive endeavor. Other than that, the only
shut down. Prior to coming into Mexico, companies need
possible thing to do is conducting the proper due diligence
to analyze the feasibility of undertaking a mining project in
to identify where water is located, and negotiate with
Mexico with regard to water availability.
water concession holders that are willing. This is not only possible, but also legal. Companies can contact concession
Q: How could Mexican law be improved in terms of water
holders, enter in an agreement with them, set the price,
access issues?
and then just notify Conagua on the water transfer.
IMPLICATIONS OF THE INTRODUCTION OF CLASS ACTION LAWSUITS IN MEXICO Beginning March 1, 2012, companies doing business in Mexico started to face the risk of class action lawsuits in Mexican federal courts. In accordance with legislative amendments, private parties, government entities and certain NGOs are now able to bring environmental claims as collective lawsuits. “Class Actions allow communities comprised of 30 people or more to bring a collective action against any party that is causing or has caused environmental harm,” says Federico Ruanova Guinea, Environmental Practice Group Coordinator at Baker & McKenzie. “This means that if a community, for example an ejido, has reason to believe that a company is causing harm to the environment, contaminating the water, diminishing air quality or polluting soils, it may bring this type of civil action in order to seek corrective actions, meaning that a judge would be asking to correct the harm caused by restoring the affected area to what existed prior to the harm being caused.” Ruanova Guinea explains that, nowadays, any organization or party can file a class action lawsuit against an entity they believe is harming the environment because, in contrast to what occurred in the past, they do not need to prove that they are being directly affected by the actions of such entity.
“Quisque diam urna, auctor vitae laoreet id, pulvinar a sem. Ut ut ante nisl. Duis “The premise for a collective action lawsuit to be filed is that there has to be evidence of actual harm caused, resulting from
sed arcu turpis, a volutpat sapien. Donec et auctor leo. Suspendisse erat nisl,
an action or an omission on the part of an individual or entity that is generating environmental harm. There are, of course,
consequat ut venenatis in, rutrum vitae nibh. Donec et auctor leo. Suspendisse
other legal recourses that parties can initiate prior to an activity taking place. For example, they can object to or appeal an
erat nisl, consequat ut venenatis in, rutrum vitae nibh. Donec et auctor leo.
environmental permit. It has been established in our legal system for a long time that if a company secures an environmental
Suspendisse erat nisl, consequat ut venenatis in, rutrum vitae nibh”
impact authorization, any third party that believes there is the potential for environmental damage, can in fact file a recourse XXXX,bad XXXXXXX contesting an authorization,” he adds. Given that class actions are usually very expensive, time consuming and entail publicity
for a defendant, Ruanova Guinea advices companies to always be in full compliance with applicable laws and regulations.
347
THE IMPACT OF SUSTAINABILITY ON A COMPANY’S BOTTOM LINE Sustainability has become a common goal for many sectors
company has also established a partnership with Tensar
of society, from governments and companies, to nonprofits
North American Green to offer erosion control solutions
and communities. The concept now includes so many issues
for slopes and hydroseeding. “We offer retaining walls
that its meaning is often lost. A widely accepted approach
for mining operations, with the added value of building
to full cost accounting and measuring sustainability
them with local soil, and putting a green face on the
performance is the triple bottom line concept, which was
walls,” Abaroa explains. “It is a special system, which is
ratified by the United Nations in 2007. The triple bottom
actually cheaper than regular alternatives and gives mines
line consists of three P accounts: profit, people and planet.
an ecological face. We have comprehensive solutions
In concordance with this philosophy, Mexican company
because we do the mechanic soil studies, engineering, risk
Grupo DESUS participates as an advisor, supplier and
assessment calculation, and training. We provide all the
sustainability developer within various industries, among
services that companies will usually have to subcontract
which the mining sector is prominent. DESUS believes that
from third parties.”
sustainability is the way for companies to succeed in the long run. According to Juan Manuel Contreras, Strategy
DESUS manages to offer clients solutions that are both
Leader of Grupo DESUS, “If companies really want to exist
ecologically and economically sound. For example, while
in the long run they have to invest now in sustainability.
building an access road to a mine, the typical solution is to
Companies have to care for the planet because they face
add limestone to the road to control humidity, which deters
potential natural resource depletion. They also must take
the flow of rainwater to the underground phreatic aquifer
into account the communities in which they are operating,
system. DESUS’s solution is to install a geogrid in the access
as well as how they are taking care of their personnel. The
road and then lay a comparably small amount of material,
third pillar is the company’s financial performance. We see
which is not at risk of getting lost in the subsoil. This solution
sustainability as the right balance between these three
allows for the use of less material and less compacting work,
aspects, which have to be intertwined for a business to
which also entails savings in machinery, time, and energy.
really be sustainable.” DESUS origins are cemented on more than four decades of innovation. Architect Enrique Abaroa
In the consulting area, DESUS combines deep expertise in
founded the first company of the Group in the landscaping
sustainability with the global network and knowledge pool
field. A pioneer, he brought the idea of landscaping and
provided by BSR, a corporate responsibility consulting
green construction to Monterrey, and is responsible for two
group present in various industries around the world. “We
of the city’s main icons: Parque Fundidora and Calzada del
combine our practice and theory inside DESUS with BSR’s
Valle. Today, DESUS is comprised of twelve companies and
deep expertise in stakeholder engagement,” says Ricardo
a foundation that support the sustainability from every
Cavazos, Leader of DESUS Consulting. “Stakeholder
aspect: energy efficiency, construction, soil stabilization,
engagement is particularly interesting because of the social
restoration, social responsibility, consulting, and financing.
connection needed with the communities where mines operate. BSR has a lot of experience in understanding
DESUS can service the mining industry in multiple manners.
the needs of the different stakeholders, from government
The main objective of the group is to positively impact the
entities to personnel.”
bottom line of mining companies and ensure their long term success. “In the case of mining, there are growing expectations
DESUS uses mathematical evaluations to determine the
and concerns of investors, because any problems with the
cost saving and the reduction in carbon footprint following
community or employees will have a negative influence on
the implementation of the company’s solutions. The group
the business. When a company is sustainable, these kinds
believes that environmental regulations will only become
of risks are minimal or non-existent, and operations will not
more stringent in Mexico in the years to come, up to the
be affected by stoppages. On the other hand, the stock
point of catching up with American regulations in a 10 year
exchange requires companies to meet transparency and
period. Because of this, Cavazos mentions that the company
reporting standards to go public,” mentions Juan Pablo
does not filter its clients depending on their interest in
Abaroa, Commercial Leader of Grupo DESUS.
environmental matters, but instead tries to explain the importance of sustainability in any organization’s future.
348
Through Ecomex, a company in its development division
“We do not turn any client down; we try to change their
and an official distributor of Tensar products, DESUS offers
mindset instead. There is a lot of communication with
geosynthetic solutions such as geomembranes, geotubes,
potential customers. We sit with them and try to convince
erosion control blankets, geotextiles, among others. The
them of the benefits of sustainability,” he details.
| VIEW FROM THE TOP
SHARING SOCIAL RESPONSIBILITY BEST PRACTICES ADALBERTO TERRAZAS SOTO President of Camimex Community Relations and Development Commission Q: What are the objectives of the Community Relations
began, for example by creating reforestation programs
and Development Commission of Camimex?
or building water canals to supply a larger number of
A: The objective of this Commission is for every company to
people. Improvements may not only be environmental, but
share social responsibility practices and for all of Camimex’s
may also be in the form of improving housing conditions,
members to be certified. We started in 2008 with three
schools, hospitals, and infrastructure in general. Post-mining
companies having achieved the Socially Responsible
remediation plans need to be proposed to the community
Company certification, and today we have 24. We created
at the beginning of the project, in order to be able to reach
a self-completion questionnaire and sent it to all affiliated
agreements with the community members that allow them
companies. In this document there are four items that must
to support and be involved in the mining project.
be complied with in order to be certified: corporate ethics, community relations, quality of life within the company,
Q: What are the main community relations challenges that
and responsible environmental practices. Through these
the Mexican mining industry faces today?
four categories companies were able to identify and
A: One of the main challenges is that companies do not
understand what they needed to do in order to be certified.
always implement programs that suit the needs of the
We were also able to align all community development,
community and try to impose programs that have not
environmental and corporate ethics programs, and the
emerged from social research done in that particular
reaction of the Camimex members has been very positive.
community. In these types of situations communities are not
The Community Relations and Development Commission
receptive to the program and therefore problems can arise
has adopted Global Reporting Initiative practices. We are
that can put the whole operation in danger. Communities are
also working on defining the social baseline to create better
looking to develop programs that better satisfy their needs
social programs. There is a program called Stakeholder
and contribute to their development. Today companies
Mapping, which shows the communities surrounding mining
are contributing to the wellbeing of local communities in
sites and the risks they represent for investors. Camimex is
every aspect through education, health, environmental, and
looking to homogenize the approach of all companies in
infrastructure programs, which are making a positive impact
this sense, so that they can acquire the social license and
on communities with mining operations nearby.
demonstrate to the public the good work they do in the regions in which they operate.
Q: How can a mine guarantee leaving a positive legacy in the local community once its operations come to an end?
Q: What is the link between mining operations and local
A: If community members are trained in different fields or
communities and what is the best strategy for solving
in mining specifically, when the production stage ends, they
problems that can arise in this relationship?
will be able to work in different mining districts with the
A: In order to obtain land rights, companies must ensure
knowledge they acquired, either as specialized technicians,
transparency concerning the mining operations that will
machinery operators or with other skills they have acquired.
take place once they obtain possession of the land. The
Once exploitation activities come to an end, the common
company has to clarify with the community representatives
practice is to continue with restoration, remediation, and
the challenges that will be faced, the methods that will be
preservation programs that can last up to three years after the
followed to overcome them, the water resources it plans to
mine is closed. Another positive legacy is the infrastructure
use, and the energy it will consume, as well as the general
that is left behind. Most temporary occupation contracts
use of the land. The claim owner should also be clear about
establish that all buildings that are used during the mining
the remediation project that will take place in the area
operation must be left at the disposal of the community.
once the mineral deposit is depleted. If the remediation
One such example is the prefabricated structures that
project is good, it might even be possible to leave the area
serve as offices or storage units, which can later be used as
in a better condition than before the mining operation
classrooms or even health clinics.
349
COMMUNITY RELATIONS MAKE OR BREAK A MINING PROJECT “Communities have the ability
always hold true, thus the importance of taking the time to
to accelerate or bring to a halt
carry out social baseline studies that enable companies to
any project, depending on the
make a social impact assessment and accurately grasp the
relationship that the company
social reality of the community, as well as the expectations
establishes with them,” says
and concerns of its members. “Once you have a thorough
Fernanda
understanding of these things, a successful community
Romero,
Director
General of DS Dinámica, a Fernanda Romero, Director General of DS Dinámica
strategy can be designed,” Romero adds.
social consulting firm based in Hermosillo, Sonora. Romero
DS Dinámica uses World Bank and other international
has been working in social
guidelines on social sustainability to offer all services
consulting services since 1994. She emphasizes that the
related to community relations processes and, from
relations between mining companies and communities have
community analysis and planning strategies and programs,
greatly evolved, and this has driven the shift in the way
to
mining activities are perceived. Additionally, community
Monitoring is particularly essential since it is very difficult
members have access to more information – positive and
to measure social issues. “We offer services that, from
negative – triggering more questions about the benefits
the social aspect, are part of the due diligence process,”
and concerns of possible impacts on the communities.
explains Romero. “We visit the projects and evaluate the
The strategy has also changed; nowadays many mining
challenges that could arise during the negotiation stage,
companies have specialists in community relations working
and we evaluate the social impact that could be generated
with them from very early in the projects. Similarly, the
during the mining operations; with that we are able to
social handouts focus has changed to a more sustainable
monitor the social impact indicators.” DS Dinámica favors
approach, and a social responsibility criterion is being
education and the development of local talent, over money.
applied. Now the challenge is to communicate the benefits
The firm believes in the importance of leaving a legacy in
that mining activities bring, not only to the communities
the local communities that goes beyond the economic
surrounding the projects but also to society in general.
factor, since knowledge will guarantee prosperity once the
implementation,
measurement
and
monitoring.
mining operation is gone. It is common that companies “Companies should always arrive to the communities and
that need to obtain the required permits will want to rush
speak truthfully, and each procedure must be explained,”
the process, but it is in those situations that mistakes
Romero
misrepresented,
are made. “Many times these mistakes are difficult and
problems arise. The best strategy for designing a successful
highlights.
“When
reality
is
costly to repair,” Romero says. “It is our job to convince
negotiation is based on giving communities all the necessary
the management team to take the necessary time to
information. It is critical to give people clear messages so
perform the social analysis, negotiation, and come to an
they know what will happen to the place they live in. This
agreement. Getting the social license required to operate
includes the company complying with what was agreed.”
is a process that takes time, while the relationship is built.” Romero acknowledges that the complexity of community
“Often mining companies go to communities offering
relations also depends on the region where the community
things, without really knowing what the community’s
is located. “Sonora is the quintessential mining state,”
priorities are,” says Romero. She remembers one of her
she says. “As a result, most communities accept foreign
earlier experiences in the Sierra Tarahumara: “During the
investment without major complications. But that is not
first 15 days of my stay, five children died of malnutrition;
the case everywhere.”
therefore, I focused the efforts on bringing general medical
350
services to the community. The doctor spent four months
Developing the industry’s positive image continues to be
there and during that time very few people went to get a
a challenge. “In the communities where mining projects
medical consultation. When I realized this was happening,
are located, the perception of the industry is good, mainly
I decided to spend more time with the inhabitants to be
because of the development programs that the companies
able to understand their real issues. I realized that health
have implemented. People trust them. However, the sector is
was not their main concern because such a high mortality
reprimanded, often being associated with pollution, and we
rate in young children was normal for them. Their true
are failing to communicate to broader society the good side
worry was a lack of education and shelter for the children.
of mining. DS Dinámica’s aim is to continue being part of
Nevertheless, common thinking will lead anyone to make
the mechanism of change for communities, and to continue
the same assumption I did.” Logical assumptions do not
playing a part in the sector’s growth,” Romero concludes.
| VIEW FROM THE TOP
APPLYING TECHNOLOGICAL SOLUTIONS TO IMPROVE COMMUNITY RELATIONS JULES PAQUETTE President and CEO of Borealis Q: How did the business idea behind Borealis develop into
A: There are many elements in the system that aim to
a very successful company?
capture issues at an early stage, allowing them to be acted
A: Borealis specializes in services software for the monitoring
upon before they become grievances. You can look at the
of social responsibility and environmental performance,
data and see issues categorized according to low or right
specifically in the mining and oil and gas industries. At the
priority. If nobody does anything about a low priority, it
beginning Borealis was hard to sell because companies
can then become a higher priority, then a grievance, and
did not realize that systems could help them manage their
eventually they turn into a court case. An analysis of the
social or environmental risk, but it is now becoming more
data shows that if you act at the very beginning, when an
mainstream. Our solutions make it easier to initiate projects
issue is mentioned to you, you can avoid issues becoming
and get companies to understand that this is going to help
bigger problems that will cost more and take a bigger effort
them manage their risk and be more proactive in terms of
to manage. We have been working on making the software
complying with legislation, regulation, and international
as intuitive as possible, bringing the data to the user rather
requirements, for example. Once the system is established
than the user having to drill into the system to find the
and being used in the right way, and when communities
required information. We are also trying to facilitate the
realize that the formal grievance process is being followed,
flow of the process. Technology has evolved a lot over the
we have seen many occasions where the system has helped
last few years: we now have iPads, smartphones, and they
to build trust. In some areas we are looking at using SMS
are all compatible with our programs. Over time we will
to send information to communities and receive feedback.
also centralize systems and increase the integration with
Solutions like social media can also feed information back
existing systems within companies.
into the system. There is a lot that technology can do to support the evolution of projects within communities,
Q: What makes your programs a worthwhile investment
beyond just the engineering and the drilling. Technology is
for mining companies from the very beginning of their
developing sustainability on a human scale.
projects? A: Early stage exploration companies do not tend to have
Q: How is Borealis able to establish advanced connectivity
the financial capacity to install systems or build up their
in remote locations?
capacity to deal with communities. Our challenge is to
A: The idea is to bring as much information as possible
provide an entry level solution for junior mining companies
to the field. We have developed offline solutions through
so that they can start collecting information from day
mobile equipment such as iPads and smartphones, on
one. Having that information demonstrates that they have
which subsets of information can be made available. Our
better control in their relations with communities, which
clients can access information as and when they need
will help them to acquire project financing since more and
it in the field, and can also input new information on
more financial institutions are looking for signs that social
subjects related to social responsibility or social impact
and environmental risks are being managed correctly, even
management, and record discussions that are held in
by smaller companies.
the field. The information is then synchronized once an internet connection has been restored. In many cases
We are also working on a ‘software as service’ solution, or
we work with a satellite connection rather than a typical
a pay per use system, where from day one companies will
broadband connection, so we have made the system as
be able to use the software at a low cost, without having
light as possible so that even with very limited connectivity
to pay for the whole package. The idea is that they can
the information can be accessed.
start using it early on and the system can follow the whole life of a specific project, so that we have a record of the
Q: What are the main features of Borealis’s programs and
history with the community, even if the property changes
how do they benefit mining companies?
hands over time.
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MEETING ENERGY DEMAND WITH SOLAR POWER It is widely considered that growing demand for renewable
the company to maintain low costs; a mining company;
energies will lead to a worldwide boom in the renewables
and Dr. Rafael Cabanillas, a solar energy specialist from
industry in the coming years. Given that energy costs
the University of Sonora. ESPS draws on the experience
in Mexico are relatively high, Mexico has a very good
of its own team to design its solar installations. “ESPS
and reliable solar resource in many locations in Mexico’s
provides the customer with an executive plan that shows
northern mining states, and as the cost per kWh of solar
the constructions they already have on their land, and
energy has dropped dramatically over the past years,
how the solar panels will be integrated into their existing
this renewable energy source is becoming increasingly
infrastructure,” says Silva Torres. “ESPS designs the project
attractive for mining companies. Whilst it is unlikely that a
and it goes through Dr. Rafael Cabanillas, who refines the
solar project will ever be able to supply 100% of the energy
details of the project and ensures that the right panels and
required by mining operations – energy consumption on
system configuration have been selected. Afterwards the
mine sites is extremely high and a solar plant that could
installation is supervised directly by ESPS.”
meet these requirements would take up a significant surface area – solar power can become an important
The ESPS solar system works in parallel with the electricity
component of a company’s energy mix. “One thing that we
that the company receives from the CFE, which brings a
show to our clients is how much the cost of electricity has
number of benefits. “If through its solar panels a company
gone up over the past decade. By investing in solar energy,
produces more energy than it uses, it supplies the electricity
a company is essentially guaranteeing a fixed energy cost
to the CFE which deducts the amount from future energy
for decades while Mexican electricity prices are forecasted
consumption during one year. That makes ESPS’s smaller
to continue rising,” says Ricardo Silva Torres, General
projects more efficient. The electricity that is produced
Manager of ESPS. Some mining companies are reluctant
but not consumed during the winter months can be saved
to install solar power because the initial investment is
to power the air conditioning during the summer, when
significant, and it can take companies upwards of three
solar panels do not produce enough electricity to meet
years to start earning a return on investment. However,
demand,” says Silva Torres. Another beneficial feature is
once the initial investment has been paid back, the
the fact that a company can have a large solar project in
savings will be very large because the maintenance cost
Sonora, and consume the energy it generates at its offices
of solar panels is relatively low. In addition, tax incentives
in Mexico City. “So it is possible for a company to install
are available in Mexico. “The government has introduced
a bigger solar project here, taking advantage of the solar
an initiative whereby companies can deduct 100% of
resource, and consume the electricity in other locations,”
their investment in renewable energy from the taxes that
he explains.
they pay in one fiscal year – whatever has been invested. If a company invests MX$1 million in solar energy it can
Since 2012, when ESPS was established, eight or 10 other
therefore deduct this amount from its taxes and create its
solar energy companies have followed suit and started up
own power supply,” explains Silva Torres.
in Hermosillo. The company has acted quickly to corner
“By investing in solar energy, a company is essentially guaranteeing a fixed energy cost for decades while Mexican electricity prices are forecasted to continue rising” Ricardo Silva Torres, General Manager of ESPS (Energía Solar y Proyectos Sustentables)
352
ESPS was born out of the conviction that there is a great
the market, and is confident that it will stay ahead of the
market opportunity for solar power in Mexico. After some
competition based on its partnerships. “The founders have
pilot testing showed the significant cost reductions that
been aggressive in their investments to make sure that
could be made over time just by switching to solar power,
the company is built on strong foundations. ESPS is also
the company took on its first clients in 2012. Silva Torres says
the only company to have Dr. Rafael Cabanillas on the
that the company’s progress since it was founded would
payroll. He is an expert in solar energy and is invited to
not have been possible without the expertise of its team,
every solar event in Mexico to talk about how the industry
which includes an electrical supplier, which has allowed
is developing,” says Silva Torres.
| VIEW FROM THE TOP
RESPONDING TO OFF-GRID CHALLENGES WITH SOLAR ENERGY CARLOS ORTĂ?Z Director General of Greenergy Q: Since 2007, Greenergy has completed over 450 solar
years it is excellent for them, because the solar installation
projects, totaling 3MW of installed capacity across 16
will last 20 years, meaning that they will be saving money
states. What have been the highlights in the company’s
for a long time. This is why it is important to build the first
development?
pilot projects for the mining industry. The mining industry
A: We are experts in off-grid solar solutions. When we
is very big compared to the solar energy industry, and
started, and still now, there was not much grid connected
it offers a very good opportunity for a medium-sized
solar power in Mexico. So we became experts in off-grid,
company like Greenergy to penetrate it.
providing solutions for the Federal Government. They started the One Laptop per Child program to give 2,000
Q: Mines are temporary projects that might be around
laptops to primary schools. In 28 schools they had one PC
for 20 years but they will eventually be deconstructed,
for the classroom, plus a projector and a smartbook, with
possibly after a shorter mine life. How does that affect the
a satellite connection to the internet. While this was very
challenge of designing solar panel solutions for mines?
advanced, these were indigenous communities that had no
A: If the mine will only be there for 10 years the company
electricity supply. The government asked us to design a
can still recoup its investment in three years, and start
system that supplies the energy needed, using 100% solar
saving money after that. They may not know how long the
energy. That is how the company really began. Since then,
mine will be operating for, but any mining project will be
the off-grid projects got bigger and bigger, and the market
operating for at least five years. If the company does not
for on-grid solutions was also starting to grow. The market
have a clear idea of how long the mine will be in operation,
is doubling every year, and so are we. We have worked
it can get involved in a leasing program. The panels can
on almost all of the important off-grid projects in Mexico,
then be taken and moved to a different location, which is
which is a difficult market because you are working in hard
relatively easy. Mine site energy infrastructure can operate
to reach places; we have been using horses and donkeys
completely off-grid, relying only on an independent diesel
to carry equipment. We became a respected company
powered grid that works 24 hours a day. These grids that
because we are socially responsible and we are committed
are run by 2 or 3MW of diesel power are the real focus
to more difficult projects. In 2007 producing solar energy
for Greenergy. We connect photovoltaic power to that
was so expensive that there was not much opportunity to
grid, thus decreasing the diesel consumption. For our
do so, but the price of modules has dropped every year
mining customers we would be building a photovoltaic
since then. Every time the price dropped there were more
solar energy plant on site, of between 500kW and 2MW,
companies getting involved in the industry, from both the
connected directly to their grid. We call that a fuelsave
public and the private sectors. The off-grid market for solar
solution, because the main objective is to save on diesel
energy is growing steadily worldwide.
consumption.
Q: What are the main concerns that mining companies
Q: Mines are often located in very isolated areas, with
have regarding solar energy, and what arguments do you
difficult terrain and no roads by which to access them.
use to address these concerns?
How do you overcome the resulting logistical challenges?
A: Mining companies are already convinced of the benefits
A: We have a solid background in providing off-grid solar
of installing solar power. Electricity accounts for around
power solutions in off-grid locations in the most isolated
20% of their diesel consumption, which is an ongoing
parts of the country, so we have a very well developed
expense that will not decrease, and which they cannot do
logistics strategy. The most expensive part of our service is
much about. It is only a matter of time before they realize
transportation. We have amazing ways of getting around
that solar power can be financially attractive for them.
these transportation issues, because we know what we are
Diesel on mine sites is very expensive, so if companies can
talking about in this area, and this makes us a good match
reduce consumption and recoup their investment in three
for the mining industry.
353
REDUCING THE ENVIRONMENTAL IMPACT OF MINING ACTIVITY
Giovanni Bellei Barbieri, Director General of Maccaferri Mexico
Both open pit and underground
incorporating vegetation to the front. Their practicality
mining can cause extensive
does not sacrifice their effectiveness, for they have been
environmental damage to the
certified by the Highway Innovative Technology Evaluation
surrounding
including
Center as durable for 75 years. Maccaferri’s products and
erosion, loss of biodiversity, and
design software have enabled the construction of vertical
soil and water contamination.
dump walls with a height of 23 meters.
Fortunately,
area,
the
level
of
technological advancement
Maccaferri’s Industry Division combines the company’s
with which mining processes
focus on technology, quality and innovation with a
are applied today can greatly
continuous strive for cost reduction. This aspect is
reduce the environmental impact of a mine. Maccaferri is a
particularly important given the rising cost of production
specialized service provider for the mining industry that has
and
based its environmental and occupational safety solutions
companies are experiencing. Additionally, Bellei Barbieri
on technological innovations. The company has over 130
states that Maccaferri’s customers save in money, material
years of experience in the development of engineering
and maintenance in the long term thanks to the company’s
applications for environmental control. The company is
solutions. “Mining companies in Mexico and globally at
responsible for the invention of gabion and the earliest use
times look at their operations from a profit viewpoint rather
of this product for environmental purposes was in 1893,
than with a long-term perspective, therefore overlooking
when Maccaferri built a gabion to push back the waters
this kind of technology. Now is the time for companies to
of the Reno River, which had flooded the Italian Bologna
be open to new technology, to improve the industry and
region. After more than a century, the company maintains
make it more effective. This is where Maccaferri comes
its relevance by developing new products while maintaining
in by offering an industrial improvement solution rather
its status as the world’s leading provider of gabion.
than a consumer product,” he mentions. “It is vital for
the
vulnerability
to
metal
prices
that
mining
Maccaferri to create guaranteed long-lasting and highly Giovanni Bellei Barbieri, Director General of Maccaferri
durable products that can be installed in places where
Mexico, explains that this focus on innovation has enabled
regular maintenance is impossible. Safety is a fundamental
the company to respond to the mining industry’s needs
matter for our company, we are always looking out for our
with a series of original and customized solutions.
employees’ wellbeing. One of our flagship products is our
“Maccaferri offers technological solutions that make our
innovative shotcrete fibers for primer coating, implemented
customers’ operations safer and more efficient. We do
inside mine tunnels or galleries to prevent problems such
this all by getting young technical specialists to think
as collapses. It is important to be innovative in mining, as
differently and more creatively. We assure our clients that
companies work in different challenging environments,” he
the risks they confront can be mitigated, and we back this
affirms.
up with a range of patents and norms that guarantee the functioning of the equipment while providing the best
Bellei Barbieri expects demand for Maccaferri’s products
cost-benefit ratio. We are proud that our stabilization
to rise. “The Mexican mining industry is evolving quickly
systems have been copied, as it confirms our belief that we
and Mexico continues to stand out as one of the strongest
are providing the mining industry with the top equipment
mineral producers in the world. Safety technologies will
and safety solutions,” he details.
continue to play an important role in mining operations. Maccaferri works in many sectors, but for the mining
354
Maccaferri has built an extensive catalogue of geosynthetics
sector our goal is to provide technology that will help
products, mesh walls and gabions customized for the
mining companies to increase safety in their operations,”
mining industry. The company offers geotextiles designed
he details. In order to respond to Mexican demand, the
to improve the performance and durability of haul roads, soil
company is looking to produce more of its products in the
reinforcement systems for operational areas and retaining
local market, thus enabling a faster delivery of its solutions
walls, rockfall protection nets and wire, dewatering tube
and more control over its supply. “Maccaferri intends to
systems, and erosion control products for tailings dams,
continue increasing local production in Mexico and move
among other solutions. These products are made to be
away from imports. We consider imports to be necessary
resistant and efficient. For example, the company has a
only at the beginning of a business’s life, but with time
modular, permeable and flexible Terramesh System which
products must be locally sourced and developed,” Bellei
can be used to build retaining walls with a green face, by
Barbieri states.
EDUCATION: ESSENTIAL FOR THE INDUSTRY’S FUTURE The upturn in metal prices and the mining boom that came
as well as support from the providers, because it is during
with it has brought great business opportunities for local
these training courses that many ideas are born and
providers in the Mexican mining industry. Many companies
providers can show their commitment. Most importantly, it
that were not previously part of the mining industry
allows the mining operators to realize that methodologies
recognized the opportunities and decided to enter the sector.
being taught can be applied in different areas. “During
“Providers started representing foreign companies without
a training course we gave on activated coal at the
the required knowledge or expertise regarding the products
Monumentales project, mine operators were able to tell us
they were selling,” says Héctor Díaz Galaviz, Director General
how it could be applied, and how it could solve issues that
of Sonora Naturals, a distributor of supplies for different
we had not previously considered,” he details.
mining stages, from mineral extraction to producing the doré bars. “There are currently many products in the market
Sonora Naturals provides a multimedia program for remote
that do not comply with the characteristics our clients are
education to as many mining companies as possible with
searching for. At the same time, these providers are not able
the aim of enriching the learning experience. This has
to give the technical support the industry requires because
become one of the main objectives for the company. “The
they do not have the expertise.” Problems often arise when
true challenge that Sonora Naturals is currently facing
companies focus on the product price and do not see what
is being able to formalize the remote training course to
technical support is included in the areas of monitoring
acquire a certification from a government entity. This will
and logistics, and most importantly in being able to fulfill
definitely provide added value to our clients,” emphasizes
the product guarantees. “There is a problem of companies
Díaz Galaviz. “When we go to the field to provide training
growing without even knowing their product. A provider is
for our clients, we also give mining lectures to high schools
almost a client’s partner, and should always focus on what is
and middle schools. These are basic things but they are
best for the client,” he emphasizes.
part of the company’s commitment to education.”
“There is a problem of companies growing without even knowing their product. A provider is almost a client’s partner, and should always focus on what is best for the client” Héctor Díaz Galaviz, Director General of Sonora Naturals
Sonora Naturals has over 15 years of experience providing
Sonora Naturals is a company with a strong sense of social
supplies to the mining industry and is a distributor for
responsibility. Through a collaboration with ESPS (Energía
Australian, Indian, Canadian and American companies.
Solar y Proyectos Sustentables) the company is now
Díaz Galaviz highlights the importance of technical
generating 80% of its energy consumption thanks to a solar
support and ongoing training courses for its clients as
cell system. Díaz Galaviz explains Sonora Naturals is the third
one of the key things that differentiates Sonora Naturals
company in the state to be producing its own sustainable
from its competition. “We are the only company in Mexico
energy. “It is a project that gives us a lot of satisfaction
that organizes a gold and silver workshop, which is a 100%
because we are able to contribute to the global climate
academic workshop. We are very committed to mining and
change problem by lowering our carbon footprint.” However,
education because we believe that the only way Mexico
Díaz Galaviz recognized there is a lot of work to be done
will overcome its challenges is through education,” he
regarding the social responsibility of mining companies.
says. Next year, the company will be hosting its third event
He stresses the necessity to create agreements so that the
with 90% of the gold and silver producing companies
sector’s suppliers are required at the very least to have some
of Mexico. “People are able to learn about what other
kind of environmental certification. Currently, ISOs and other
companies are doing to solve diverse problems, as well as
certifications do not have enough relevance during decision-
to find out about new techniques and technologies. The
making processes for the purchase of a product. Clients do
event is very dynamic, with 20 minute presentations and
not think it is important for providers to be qualified under
25 minute Q&As, which enable those present to exchange
such schemes. Díaz Galaviz believes that as the mining
experiences,” explains Díaz Galaviz. He believes that every
industry becomes more professional, certification will have
stage of the mining process requires continuous training
a higher relevance for both providers and mining companies.
355
A SUSTAINABLE APPROACH TO COMMUNITY INVESTMENT While most mining companies understand that building good relationships with communities is an essential and invaluable element of their mining projects, not all companies have been successful in establishing them in practice. The corporate social responsibility projects undertaken by AuRico Gold provide an example of the sustainable benefits that mining projects can bring to the surrounding communities. The most noteworthy impact that AuRico projects are
LEFT: Scott Perry, President & CEO of AuRico Gold RIGHT: Luis Chávez Martínez, Sr. Vice President Mexico of AuRico Gold
making is through the Productive Projects Fund, which micro-
a farming cooperative, providing its electricity and water
investments. For Scott Perry, AuRico’s CEO and President,
supply. “This project was started through the Technical
one of the company’s proudest achievements is a sewing
Training College for Agriculture (CBTA), a local institution
cooperative it helped to set up with an ejido near its El
where young people study to become agronomists. They
Chanate operation in Sonora. “We have loaned them the
requested a piece of land from us, as well as some funds to
startup capital to set up a small sewing factory and are
start growing crops on the land. The program has been very
training the ladies working there on how to make clothes for
successful, and they have already shipped watermelons
our mining operations, such as pants, business shirts, and
to Japan in their first season,” says Luis Chávez Martínez,
safety vests, on a large scale,” explains Perry. The cooperative
Senior Vice President Mexico of AuRico Gold. “Through
is by no means restricted to making clothes only for the
these programs we offer loans, rather than handouts. Each
company. The idea is that they build up skills and experience
project is intended to be productive and generate profit.
by making clothing for mine workers at AuRico, and then
The idea is for the beneficiaries of the project to take
start supplying clothing to other mines in the region, with
advantage of this opportunity in order to learn and become
the possibility of branching out into other areas down the
more productive; they know that they have to generate a
line, such as fashion. While this program has clear benefits
profit in order to pay back the money they have borrowed,
for AuRico, its projects also support a number of initiatives
and this pushes them to succeed.” The company can then
that are not connected to the company’s core business or
reinvest these funds in further projects, and ultimately the
the mining industry in general. It has also set up and funded
communities are in a stronger economic position than they
creates
local
business
opportunities
through
EFFECTIVELY ENGAGING WITH COMMUNITIES
356
The Canadian mining company New Gold has one property
very good relationship with its surrounding communities,
in Mexico, the Cerro San Pedro mine in San Luis Potosi.
which for Ortega has been possible thanks to its genuine
While the company is fiercely committed to its corporate
commitment to its corporate responsibility schemes, the
social responsibility strategy on all of its mines across the
good they have brought the communities, and the way the
Americas, it is particularly proud of the relationship it has
company has communicated with them. “This is a question
built with the communities surrounding the Cerro San
of perseverance, resilience, and discipline. If you are simply
Pedro mine, given its location in a relatively populated area.
doing something like reforestation for the sake of a photo
“Unlike other mines that are in the middle of nowhere, this
session, your intentions would be obvious to everyone,”
mine is located not only very close to the colonial town of
he argues. “In terms of the community relationships it is
Cerro San Pedro, but also very close to the capital city of
about having real presence and constant contact, in order
San Luis Potosi. There are around 4,500 inhabitants and 13
to effectively nurture the needs of those communities.” An
communities that are spread out in the region surrounding
integral part of the company’s communication strategy in
the mine, and those are the main stakeholders. “People do
this area has been the 90 video clips that it has produced
not like having an open pit mine 15km from their house,
and aired through the local television network, telling the
which explains why there was originally some resistance
story of the mine through its people. “We use our videos
to the mine,” says Armando Ortega, VP of New Gold and
as a means to ensure a bond of pride and commitment in
Director General of MSX. The company today enjoys a
our workforce, and also in our community,” says Ortega.
were in before AuRico started its operations. AuRico Gold
operator training programs for local women. This latter
is acting on the belief that the greater the effort that is put
project reflects the company’s broader commitment to
into improving education and health in the communities,
equality across. “A lot of women work for us, and we are
the better the quality of its staff and suppliers will be. The
trying to achieve gender equality throughout the company
benefits are mutual: “We are a Canadian company and we
and in all of our operations. This means no discrimination
usually buy our clothing from Canadian companies, which
and equal treatment of everybody regardless of age,
are expensive. We can now source these products from
religion, and gender,” says Chávez Martínez. AuRico Gold
our local CSR initiative paying just a fifth of the price, while
plans to continue strengthening its relationships with staff
helping the cooperative to make a good profit and create a
and the members of the surrounding communities. “We are
sustainable business,” emphasizes Perry.
in the process of being certified as a Great Place to Work, and we should also achieve CSR certification soon, for the
Other CSR programs the company has put in place that are
third year in a row,” says Chávez Martínez. “The process
benefiting the local community include bringing in university
you have to follow to get any of these certifications is in
students on summer placements, and three month truck
itself very useful, it teaches us a lot of things.”
The company has undertaken a number of different
system, through which the company learns about the
projects that address the many different needs of the
queries, concerns, and complaints that the community has
communities surrounding Cerro San Pedro, such as
regarding the mine. “The system was put in place almost
organizing a reforestation day every year, being an equal
three years ago, and it has served not only to learn more
opportunity employer, and investing in environmental and
about the needs and concerns of our people, but in some
infrastructure works. On all of these projects New Gold is
instances it has also been a forum in which people have
very much focused on ensuring that the legacy it leaves
been able to present whistle blower complaints against a
will bring benefits for the community long after the mine
contractor, for example,” explains Ortega. “People know
has closed. “The important question is always: what is it
that if they were to present a complaint, or put forward a
that we can offer to the community, including our workers
question about water or water quality, it would be heard
and other stakeholders, after the mine has closed? We
and the company would be held accountable.”
need to define what the legacy will be together, and ensure that we are not just imposing our vision of what the legacy
These elements have combined to make Cerro San Pedro
should look like on them. The most important legacy for
a very positive addition to the local community, and
the community is a feasible future. Our workers need to
something that both New Gold and the community can be
have transferable skills, so that when there is no mine to
proud of. “We are satisfied because our communities are
work in anymore, other industries that come into the area
proud of the mine,” says Ortega. “It is not only because
and employ them,” says Ortega. In order to get closer to
they are directly or indirectly connected to the mine, but
the community New Gold has also introduced a grievance
because the mine has proven to be a good citizen.”
357
358
TRANSPORTATION & LOGISTICS
12 Mining companies lack control over the location of their projects, instead operating on good deposits in the places where they have the chance of finding them. The Mexican territory is expansive, and much of the land cannot be reached by highway, railway or seaport. The country’s mine sites are therefore often situated in isolated locations that are characterized by a lack of infrastructure. An essential factor guiding the success of mining companies, suppliers, and service providers is therefore their ability to navigate this challenge and work together to build well connected and efficient mining operations.
This chapter looks at the ways that different companies are working to deliver a range of different services to all corners of the country that the mining industry operates in, from managing import processes and ensuring the safe and secure passage of fragile equipment on hazardous terrain, to building temporary offices and the delivery of catering services on mine sites. The chapter demonstrates the many different ways in which companies go the extra mile to deliver services in demanding situations, thus ensuring that mining operations can continue running at all costs.
359
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CHAPTER 12: TRANSPORTATION & LOGISTICS 362
VIEW FROM THE TOP: Facing Ever-Changing Logistics Challenges
364
VIEW FROM THE TOP: Moving the Industry Forward with Rail Transportation
364
Railways to Link NAFTA Countries
366
SUCCESS STORY: Overcoming Logistics Challenges in Accessing Health Services
367
Innovation in Conveyor Belts
368
Growth Market for Conveyor Belt Specialists
368
Chinese Conveyor Belt Technology
369
It Is the Belts that Bear the Brunt of the Operations
370
Innovation in Bulk Material Handling
370
Innovation to Create Tailor-Made Screening Solutions
372
The Added Value of Service-Focused Suppliers in Mexico
374
Evolving Demands for Infrastructure on Mine Sites
374
Main Advantages of Modular and Mobile Offices and Housing
376
Emphasizing Measurement in Fuel Distribution
377
Outsourcing Logistics to Speed Up Customs Processes
378
Family Food Business Shifts to Catering for Mines
378
Catering in Remote Locations
380
Focus on Uninterrupted Flow of Merchandise
382
Reducing Time and Cost in Import and Export Processes
382
Modernization of Mexican Trade
383
The advantages of IMMEX
361
| VIEW FROM THE TOP
FACING EVER-CHANGING LOGISTICS CHALLENGES JAVIER ALTAMIRANO President of the Camimex Transportation and International Trade Commission Q: What impact did NAFTA have on the mining process?
cost effective solutions every time, by using intermodal
How does the free exchange of goods and services benefit
transportation combinations that best suit each company’s
exploration, development, and production activities?
needs. There are no general solutions that apply to everyone.
A: During the preparation for NAFTA negotiations, Camimex
Every purchase or sale transaction requires a customized
provided the authorities with a list of products on which
solution, depending on the product’s origin and destination,
Mexico was ready to negotiate with its counterparts in
and there are also other factors that need to be considered,
NAFTA, as well as tax, duties, and tariff recommendations.
depending on market and production conditions.
Regarding the transportation of goods, we were also interested in bringing Mexico’s transportation costs to a
Q: What are the most significant challenges in transporting
competitive level internationally, and maintaining them
high value products?
there not being competitive could lead to commercial
A: The main challenge always has to do with security. The
failure. Mexican companies had to learn and adopt new
company that is shipping high value products needs to
mechanisms and procedures in order to ensure that costs
develop relationships with reliable service providers in the
were kept at the lowest possible level. The impact of NAFTA
transportation sector, in order to take care of the goods at
was immediately a positive one. Investors knew that imports
all times. But that is not all. As we know, Mexico has faced
and exports would not be a problem anymore if they
big security problems on its highways in recent years,
invested in Mexico. The transition was also easy because
but we are certain that these conditions will improve and
products were allowed to move freely - not just finished
return to normal soon. However, due to security challenges,
products, but heavy machinery and industrial equipment
the companies involved in handling these products have
as well. Almost everything was considered under this
had to increase their security costs and have lost their
trade agreement, allowing for greater growth at different
competitiveness as a result.
stages of mining operations. Not only technology, but all kinds of the highest quality equipment were immediately
Q: Which of the Transport and International Trade
available to Mexican producers, just as they were to the
Commission’s achievements have had the biggest impact
main companies in the mining industry worldwide. Thanks
on the Mexican mining industry?
to NAFTA, when international metal prices increased years
A: Camimex has been successful in helping Mexican
later, Mexico was ready and perfectly positioned to profit
companies
from larger volumes of production that were available for
transportation industry. Nowadays, most of the companies
export, and had a well known list of markets and customers
involved in the mining industry are well aware of the basic
that it knew and could sell its products to.
requirements and they have enough experience to manage
learn
about
new
developments
in
the
transportation processes on their own. The current role of Q: What are the main logistics and transportation
the Commission mostly has to do with regulations. We
challenges for the mining industry?
work alongside the government on both transportation
A: The main challenge is always being up to date with the
and international trade matters.
latest developments in the logistics and transportation
362
sector. The transportation industry is evolving, and as users
Without doubt, the international trend is to use higher
we need to be aware and ready to adapt to those changes.
capacity transportation, including vessels, railroads, trucks,
Higher capacity vessels are continuously coming out and,
and airplanes, with the aim of lowering costs. Mexico
at the same time, railroads, trucks, and even airplanes are
therefore needs to develop the required infrastructure.
offering different possibilities. It is important to be aware
Port terminals, railroad facilities, highways, and airports
of these developments and constantly look for new ways
need to be continuously adapted to take new requirements
to lower costs, while always searching for ways to increase
into account. Users need to be aware and ready to adapt to
competitiveness. It is the industry’s job to create the most
a constantly evolving and changing market.
WHAT IS THE STORY BEHIND THE WOMEN DRIVING THE MINING TRUCKS? New Gold is determined to be as inclusive as possible. We work with handicapped people, with older people, with single mothers, but we are particularly proud to work with women. As part of our overall objective we have given ourselves the aim of promoting their work. For example, the entire workforce in the laboratory of our processing plant is led by women, in the processing plant itself almost all of the staff are women, and they are driving our trucks as well. Why? Because they are diligent, responsible, and exact to the last detail. We are very much committed to ensuring that they are a part of our workforce on equal terms with men. Armando Ortega, Vice President of New Gold and Director General of MSX
363
| VIEW FROM THE TOP
MOVING THE INDUSTRY FORWARD WITH RAIL TRANSPORTATION ROGELIO VÉLEZ Director General of Ferromex Q: What is the strategy behind the acquisition of Ferromex
Salamanca, and Honda in Celaya. The automotive industry
by Grupo Mexico?
needs a solid railroad network like the one we provide.
A: Grupo Mexico entered the transportation sector when railroads in Mexico where privatized in 1998. The
Q: What are the main opportunities in Mexico that could
acquisition of Ferromex represented a key movement
boost the industry’s growth and Ferromex’s positioning?
for Grupo Mexico because it gave it the opportunity to
A: Ferromex has been working hard during the past two
stabilize its business. Mining is a very cyclical industry,
years to spend its capital on the right investments. We need
whereas the railroad sector is very consistent. We do
to make sure that we develop enough capacity to serve the
have cycles in Ferromex and in transportation in general,
companies that are coming to Mexico so that we can help
but they are very controllable. There is always a constant
them develop their segments. We have basically run out of
flow of business during the whole year allowing us to now
capacity due to the growth of several industries, so in order
contribute with 15% of Grupo Mexico revenues. Ferromex
to solve this challenge we need to make sure that we are
plays a fundamental role in the economic development
using our capital funds in locations where new infrastructure
of Mexico. For instance, agriculture is among the most
is needed to expand our capacity, and 2013 has been the
important sectors of the country, without the railroads
year in which we have made the biggest investment in
there would be no way of moving the amount of grain that
infrastructure. In the railroad business speed is everything,
is produced. Another important segment is the automotive
if you are not moving fast you are losing opportunities. Our
industry. All the leading companies have established their
investment is being used to increase our capacity through
manufacturing plants in Mexico. There are three new
new yards, new siding, and double tracks. Through our
assembly facilities that should be active by the end of this
investments we are making sure that our tracks are in good
year; Nissan built its new plant in Aguascalientes, Mazda in
condition, not only to minimize the number of accidents but
RAILWAYS TO LINK NAFTA COUNTRIES 19 years after NAFTA came into effect North America has
load movements by rail in Mexico during the same period
become one of the most dynamic and integrated commercial
reached over 111 billion tonnes, which equaled to 18.3% of all
regions in the world. Railroads have become a key link
land movements in the country.
between the three countries and an effective method of
364
transportation to guarantee efficient commercial operations
Kansas City Southern (KCS) believes that the development
in the region. The US Department of Transportation
of the rail transportation sector is a key driver of industrial
reported that 1.8 million loaded rail containers crossed
and commercial growth. The company visualizes the North
the borders between Canada, Mexico, and the US in 2012,
American railroad environment as one single system.
which represented an 11.2% increase in comparison to 2011.
Therefore, its strategy has been to expand its services
According to these figures, over 19% of all the goods traded
on both sides of the Mexico-US border. KCS follows this
between the three countries were transported by rail.
strategic direction to strengthen the company’s position
Similarly, the Mexican rail system is continuously gaining
as the only seamless NAFTA railway operator. Through its
importance within the country’s distribution system, both
Mexican subsidiary, Kansas City Southern Mexico (KCSM),
internally and in terms of foreign trade. According to the
the US-based rail company strives to further develop
Mexican Ministry of Communications and Transportation
interconnections between Mexico and the North American
(SCT), over 50 billion tonnes of products and materials
region. The company’s International Intermodal Corridor,
crossed the country’s border by railroad in 2012. Total
which begins in the Port of Lazaro Cardenas, in the state of
also to improve our coverage and efficiency so that we can
the company’s market share in the mining industry?
maintain an acceptable speed and guarantee the capacity
A: This line is a shortcut that enables us to avoid going south
required to support Mexico’s industrial growth. US$455
from Guadalajara to Irapuato and then north. It is going
million of Ferromex and US$45 million of Ferrosur are being
to impact the mining industry because it will provide the
invested in capacity and infrastructure that will impact the
opportunity reach Monterrey faster. Mining represents 26%
mining industry greatly. The Port of Guaymas represents a
of the market share of the railroad industry; it has grown from
big opportunity for all companies looking to export their
19% to 26% in the first 15 years, and we think if we continue
products. During the second half of 2012 we invested US$22
playing our cards right we will be able to reach 35%.
million in the corridor Nogales-Port of Guaymas to expand our infrastructure and to optimize its condition, so that it
Q: What is the organizational strategy to achieve safe
can handle heavier loads. This year we are investing part of
operations and solid community relations?
the US$455 million in new sidings for this corridor, which is
A: We have an area within the operation division that
probably the route with the largest growth potential in the
focuses specifically on safety control. They are in charge of
near future.
making sure that trains run in the best and most efficient ways possible. Safety is one of the main problems in Mexico
Q: How has Ferromex responded to the rapid growth of
and we need a lot of support from all types of authorities to
the mining industry in recent years?
secure our railroads. Community relations are an essential
A: We have been challenged by this unprecedented growth.
aspect of our success. Most of the times, the communities
We started performing new routes for mining companies
or towns where the railroads go through are not happy. In
like Southern Minerals, Freeport-McMoRan, and of course
order to improve this, we work very closely with authorities
for Grupo Mexico. This was a key shift in our plans. Our
in a program we call “Urban Railroad Coexistence”,
most important route for mineral ore comes from Ternium,
through which we do all the necessary things to improve
for who we move around 330,000 tonnes of mineral ore
our relationship with the local communities. We normally
per month from the Port of Manzanillo to Monterrey and
build overpasses or underground tunnels so that we do not
Puebla. This is a jewel for us in terms of business and a big
interfere with people’s everyday activities. We work with
challenge because we have to ensure the availability of the
local, state and federal governments to find solutions that
right type of locomotives, cars, equipment, and crews.
reduce or eliminate people’s concerns. This is an ongoing plan that we have had since the beginning of privatization.
Q: How can the short connection between Guadalajara and
So far it has worked well but we believe that there is always
Aguascalientes that Ferromex intends to construct increase
room for improvement.
Michoacan, runs through 15 Mexican states and connects
products that KCSM transports through its network. The
the main industrial areas of the country with the rest of
company has also incorporated green locomotives into
North America. The corridor also allows KCSM’s trains to
its fleet. This new equipment saves 25% of the regular
interconnect with the shipping system on the Pacific Coast,
energy consumption and its greenhouse gases are 70%
the Gulf of Mexico, and the trucking system connecting the
lower. As a result of KCSM’s movement towards greener
country’s most important cities. Railway transportation is
transportation solutions, several of its clients have now
one of the cheapest ways of moving freight, regardless
been able to obtain certifications and improve their
of its size and type. Border crossing is also simpler in
compliance with environmental regulations. Throughout
comparison to other mainland transportation methods.
the 16 years that the company has been operating in
Perhaps the most attractive feature of rail transportation is
Mexico, KCSM has made significant investments in its
that it efficiently fits in intermodal transportation schemes.
concession title. Investments planned for 2013 include
In the case of the mining industry, this allows companies to
maintenance, infrastructure, equipment and technology,
reliably freight equipment or export processed minerals in
and will exceed US$162 million. By strengthening the
an economic and secure manner. Moreover, it allows mining
north-south flow of goods and developing infrastructure
companies to lower logistics costs without compromising
projects across Mexico, the railroad system will be in a
the constant supply of essential equipment and material
better position to receive and move the transcontinental
to their operations. The interconnection between the
flow of goods, strengthening the mining industry’s supply
company’s rail network and global mining markets make
chains and promoting economic growth in the sectors and
the mineral sector an important part of the large range of
regions where it operates.
365
| SUCCESS STORY
OVERCOMING LOGISTICS CHALLENGES IN ACCESSING HEALTH SERVICES Yesenia Muñoz is an extroverted and joyful 22 year old
Camino a la Vida is but one of an extensive collection of
woman. Born and raised in Cananea, Sonora, she suffers
social development programs and community relation
from chronic kidney failure, which means that none of her
projects that Grupo Mexico has established in Cananea.
kidneys function properly. Unfortunately, the hemodialysis
The company launched these projects in 2008, with the
treatment that she needs is not available in her hometown.
purpose of generating tangible improvements in the
Therefore, her family had to take her to another town so
population’s quality of life. To ensure that these programs
she could get treated. The long, early-morning bus rides
would solve the most pressing and heartfelt problems of
took a toll on Yesenia and her family. With the purpose of
the community, Grupo Mexico carried out a participatory
helping Yesenia and her family, Grupo Mexico sponsored a
diagnosis that compiled the population’s concerns and
program called Camino a la Vida (On the Path to Life). The
suggestions. Thereafter, Grupo Mexico designed its social
mission of this initiative is to transport patients to hospitals
responsibility strategy with Cananea’s population in mind.
in nearby cities Hermosillo and Nogales. There, Cananea’s
The establishment of alliances with civil society groups and
population can receive the specialized medical tests,
NGOs ensured that the programs were the most appropriate
treatment and care they need. Some of the procedures
and relevant. Moreover, this collaboration strategy produced
lacking in Cananea that can be made accessible through
a respectful and fruitful relationship of co-responsibility
this service are dialysis, oncological treatments and
between Grupo Mexico and the local groups involved.
preventative mammograms, among others. Grupo Mexico’s concern about the social wellness of Shuttle services are available three days a week, in
mining communities is centered in fostering a stable,
reasonable and convenient schedules. Grupo Mexico has
long-term “development with meaning”. This concept
provided a van which is only used for transporting patients.
stems from the conviction that it is important to satisfy
Because the vehicle is operated by an emergency medical
the present’s needs, while at the same time looking
technician, patients are transported not only comfortably
towards the future. This philosophy led Grupo Mexico to
but safely. Héctor Padilla, the Medical Emergencies
initiate the construction of a regional hospital in Cananea,
Technician who operates the Camino a la Vida van, proudly
in collaboration with Sonora’s local government and
boasts over 400 trips, 2,000 assistances and 165,000km
Health Ministry. The Cananea Regional Medical Specialties
at the service of Cananea’s population. The users of this
Hospital was planned under a modular concept, which will
transportation service are charged with a symbolic fee of
allow services to expand in accordance with the growth
MX$20, though some people are exempted from payment.
of Cananea’s population. Initially, the hospital will offer
The funds raised through this scheme are then destined to
30 beds, in response to current demand. However, all of
finance some of the costs of the San José Daycare Center,
the hospital’s general services – such as boilers, electrical
which is also located in Cananea.
infrastructure, climate control systems and laundry rooms – are designed to support a capacity of 60 beds. Moreover, this hospital will be the first one in Mexico that will provide universal assistance. This means that it will receive beneficiaries of the country’s different social security institutions (Seguro Popular, IMSS, ISSSTE), as well as the inhabitants of Cananea and other adjoining communities. The facilities, which will cover an area of over 6,000m2, will be able to offer second-tier specialized medical services such as gynecology, pediatrics, surgery, orthopedics, anesthesia, internal medicine and cardiology. It will be equipped with an operating room, a delivery ward, X-ray equipment, an emergency room, a lab analysis unit, a CT scanner and an ambulance. Additionally, Grupo Mexico has financed and carried out remodeling and extension works
366
at Cananea’s General Hospital. These improvements include the refurbishment of 1,500m2, as well as the extension of 339m2 at the hospital’s entrance and courtyards. Yesenia was confined to a wheelchair when she entered the Camino a la Vida program. Nowadays she is able to walk again, thanks to the two hemodialysis treatments that she receives on a weekly basis. Like her, hundreds of inhabitants of Cananea can now access medical treatments that were previously unaffordable or too far away from their homes. This has given them renewed strength, as well as the hope to recover and lead a productive, wholesome life.
“My life depends on this service! It is a very humanitarian
After the construction of the Cananea Regional Hospital
program, which supports me both economically and morally.
is completed, Grupo Mexico expects that thousands of
The people cheer me up and treat me as if I was family.”
people will share the same feelings and desires.
Yesenia Muñoz
INNOVATION IN CONVEYOR BELTS In
the
that
same
conveyor
way
it is dry mineral by conveyor belt or wet mineral by pipes
belts
and pumps, for which we provide coating to extend its useful
transformed the industrial
life,” Enriquez explains. In order to develop the company in
revolution, they have also
its early days, the group requested help to train its personnel
transformed
mining
from the German manufacturer Rema Tip Top, one of the
Minerals
have
brands that it represents, and together they developed the
transported
and
first generation of conveyor belt vulcanizing technicians in
industry. to fed
be
the
different
Mexico. Grupo Vysisa understood the importance of keeping
processing equipment at
its staff up-to-date and giving them the best possible training.
different locations in the
“The products we sell are expensive and we cannot take the
mine. “Conveyor belts have
risk of selling such a costly product and implementing it
proved to be cheaper per transported tonne compared to
incorrectly. Neither can we sell a bad product and implement
truck transportation, plus it requires less investment and
it correctly. Our strategy is to always remain up-to-date with
the logistics are easier,” highlights Erasto Enriquez, Director
the best products and technicians, in order to guarantee
General of Grupo Vysisa, a conveyor belt provider with over
performance,” Enriquez says. It is for this reason that Grupo
30 years of experience.
Vysisa concentrates more on preventative maintenance
Erasto Enriquez, Director General of Grupo Vysisa
through
than on corrective maintenance, because it translates to Grupo Vysisa was born when Enriquez and his partners
greater efficiency and lower operation costs for its clients.
started commercializing and selling conveyor belts to the
Among Grupo Vysisa’s success stories in the mining industry
cement plants around Mexico City. “We had the advantage
is the project it worked on with Minera Autlán, on which it
of having the technology and commercial knowledge, as well
implemented what was, at the time, the longest conveyor
as the expertise. The mixture of these elements gave us a
belt in a Mexican mine. The belt was over 4,000m long, had
different vision for improving the business. Little by little we
only one conveyor, and was built in a record time of eight
started acquiring more equipment for our operations, such
days. Another highlight for the company was on the Nacozari
as vulcanization machinery and transportation vehicles, and
copper project in Sonora, where it installed the first steel
hired more personnel,” he recalls. The turning point came
cable ties created in the mine on a 1,900m main conveyor
when the company started doing hot and cold vulcanizing,
belt. Currently it is working on two projects at Peñasquito. For
because it was the only company in the country that managed
Enriquez the mining industry provides stability, opportunities
both types of vulcanization processes. The company focuses
and at the same time growth, though the latter depends on
on transportation for both dry and wet processes. “Our
both political circumstances and what is happening in the
products lower the transportation cost per tonne, whether
global economy.
367
GROWTH MARKET FOR CONVEYOR BELT SPECIALISTS BATRINSA is an example of a company that has used its
our products are the cheapest on the market, they offer our
broader expertise to adapt and respond to the needs of
customers complete reliability, allowing them to focus on
the growing mining industry. Specializing in conveyor belts,
increasing production rather than worrying about failures.”
the company was born 35 years ago in Monterrey, though it was not until recently that the company identified the
Starting to supply to the mining industry turned out to be
opportunities in Mexico’s mining industry and decided
an excellent business decision for BATRINSA. Since 2009
to take them on. “When the company first started it was
the company has increased its sales significantly, in 2012
focused on providing services to aggregates producing
by approximately 50% compared to 2011. “Mining has
companies, such as limestone, gravel and concrete. But in
become our core business,” says Martínez Alanís. “We are
2009 the market for aggregate materials was not doing
very enthusiastic about working within the Mexican mining
very well; the prices were too low and the government, one
market.” This passion for the mining industry has encouraged
of the main buyers, was not paying aggregates producers
BATRINSA to gain an in-depth understanding of the needs
well. This company started as a conveyor components
of its mining customers, and the company is proud of the
dealer, but now we are dedicated to providing complete
holistic service that it provides. “A lot of companies only
solutions for bulk materials handling,” says Adrián Martínez
offer and sell components, but we go further than that.
Alanís, Trading Manager of BATRINSA.
Some of our success stories include optimization projects, in which we increase the production of our customers’ current
Indeed, the main challenge in entering this new market had
belt conveyors by simply changing some of the critical parts
less to do with adapting the products that the company
instead of changing the whole system. Every mine wants
provided, and more to do with adapting to the new
to produce more tonnes per hour, hence we have been
industry’s different approach to procuring conveyor belts.
quite busy,” says Martínez Alanís. Another area that remains
“Moving to servicing the mining industry represented a big
important for the company is its work in transportation at
challenge for us, given that miners have a very different
ports. “We represent a brand of conveyors called Superior
way of thinking compared to aggregate producers. Many
Industries that manufactures radial telescopic stackers,
aggregate producers purchase parts and equipment at the
which work perfectly for loading bulk materials onto vessels.
lowest cost available, while miners tend to consider it to be
These types of conveyor belts are being used in the Port
more important to make a good long-term investment, even
of Guaymas, Topolobambo and Mazatlan to load copper
if it represents a higher acquisition cost. This makes sense
and iron ore, as well as other products such as fertilizers,
because, given the high prices of metals, the highest cost
wheat and corn. We are involved in the ports’ operations,
for a mine is to stop its production, and nobody wants to
participating in the design, selection, and supply of these
stop a whole plant because of a broken part on one piece
systems,” explains Martínez Alanís. “BATRINSA’s intention is
of equipment,” says Martínez Alanís. “That is why we are a
to continue expanding into different industries, according
perfect fit for the mining market: our products include the
to the opportunities that arise and the company’s aptitude
highest quality equipment, conveyor belts, idlers, pulleys
to fulfill them, both to grow and diversify the company’s
and power transmission components. Regardless of whether
portfolio,” he says.
CHINESE CONVEYOR BELT TECHNOLOGY
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With over 40 years of experience in mechanical precision
opportunity the company established a representation
engineering,
bottle
agreement with the Chinese company Liaoning Mineral
handling systems and conveyor belts, and is currently
& Metallurgy Group, which has extensive experience in
planning to expand into the Mexican mining industry. “We
the mining industry. Through this relationship, Excellentia
were collaborating with the TechBA Program, a business
Fervic is opening the Mexican market along with its Chinese
accelerator in Madrid, which helps us to identify industries in
partner. “The LMM Group is big and has worked on many
which we could expand our business. Through Bancomext
important and interesting projects. Excellentia Fervic has
we identified the mining industry as a business opportunity,
the human talent and conveyor belt knowledge, and though
since we have product lines that can be adapted to suit its
we have not yet penetrated the mining market we plan to
needs, such as conveyor belts,” says Fernando Jiménez,
do so together. We have the service, we just require support
Director of Excellentia Fervic.After identifying this business
from China on the technical side,” Jiménez adds.
Excellentia
Fervic
manufactures
IT IS THE BELTS THAT BEAR THE BRUNT OF THE OPERATIONS Interbandas has been supplying conveyor belts to the
Our sales team and field technicians visit the mines and
mining industry for over 25 years. With seven branches
perform durability studies on the conveyor belts, so that
in Baja California, Sonora, and Chihuahua, the company’s
the user is able to program changes to the machinery into
expansion strategy is currently focused on Zacatecas and
their maintenance schedule,” he details.
Sinaloa, where it will begin operating in the last quarter of 2013. “When we open new branches we immediately offer
Interbandas has commercial alliances with Fenner Dunlop,
our full range of services, which differentiates us from our
Sampla Belting, Ibel Service, Martin Engineering, and
competitors, who often open new markets with only one
Flexco, among many others. 100% of its products are
or two salespeople. This is a solid expansion strategy, and
American, and these alliances provided the company with
we believe it strengthens our market position,” explains
access to advanced technical knowledge. “Our commercial
Mauricio Santillán, Commercial Director of Interbandas.
allies have been in the market for a long time, and they have helped us offer quality products to our clients, and
On conveyors it is the belts themselves that bear the
their training of our staff enables us to provide a high
brunt of the operations, therefore they are prone to wear
quality service,” highlights Santillán. He goes on to say
and tear. The direct contact with the product is absolute
that the company does not currently commercialize Indian
and constant; the rock sits directly on the conveyor belt,
or Chinese brands because, though these brands may
unlike a bearing or a motor, which have more protection.
offer good quality, this quality often lacks consistency. In
In order to minimize downtime resulting from conveyor
2012, Interbandas grew 34%, because of the many mining
failure, Interbandas provides preventative and predictive
projects that began operating that year. “We believe that
maintenance. According to Santillán, a belt’s lifespan
we will finish 2013 with similar growth figures. Investments
depends on the material it is made of, the time it has
in technology, human capital, and expansion with our new
been in use, and the maintenance it has received. A good
offices in Sinaloa and Zacatecas, will help us achieve this
material and maintenance combination will guarantee that
goal,” remarks Santillán. Interbandas is putting its efforts
the belt will last as long as it is supposed to. There are belts
into producing its own products, so that it can be less
that can last up to a month in strong applications, others
dependent on foreign brands. “We believe that Mexico
last just a week. “We do not wait for a belt to break or
has the capacity to develop good technicians, and new
stop working. We work with mining companies to analyze
processes and services. The market is still being developed
the lifespan of the equipment and make timely decisions.
and has huge potential,” he adds.
369
INNOVATION IN BULK MATERIAL HANDLING Material spillage and airborne dust are common occurrences
aids. Regarding belt cleaners, Chacón’s opinion is that one
in the process of moving bulk solids from one place
of the most sophisticated products is the SQC2S Secondary
to another via conveyor belt. There are many dangers,
Conveyor Belt Cleaner, which offers low-maintenance and
expenses, inconveniences and inefficiencies associated with
high performance solutions for cleaning conveyor belts.
both phenomena, from health risks to lower productivity.
“When handling bulk solids on conveyor belts the material
Since 1949, Martin Engineering has offered solutions for bulk
often spills, contaminating the floor and creating unsafe
material handling issues. “The company has always had a
working conditions. Our equipment allows conveyor belts
strong presence in the cement and mining industry,” says
to transport the material in the middle of the belt and in a
Álvaro Chacón, the company’s Global Business Development
clean way from entrance to exit,” he explains. The second
Director. “However, the mining boom has increased our sales
range of products the company offers is transfer points for
in the sector in the last three years. Canadian companies
conveyor belts, such as align and support systems, modular
represent a good percentage of our mining clients, but
chute walls, conveyor skirting, wear liner, stringer systems,
we also continue to offer our products and services to
and tail pulley plows, which prevent material spillage and
companies like Grupo Mexico, Peñoles, Minera Frisco, and
dust control. The third range is flow aids. Mineral tends to
Fresnillo, with whom we have worked for many years.”
get stuck in the chute or silos, and this technology promotes
“When handling bulk solids on conveyor belts the material often spills, contaminating the floor and creating unsafe working conditions” Álvaro Chacón, Global Business Development Director at Martin Engineering
Chacón explains that Martin Engineering manufactures
the flow of material through air blasters, vibrators and silo
three product ranges: belt cleaners, transfer points, and flow
cleaners to prevent this from happening.
INNOVATION TO CREATE TAILOR-MADE SCREENING SOLUTIONS The classification of ground, screened and micronized
is currently working with 60% Mexican clients, including
material has always been an important stage in mining. To
big companies like Grupo Mexico, Peñoles, Minera Frisco,
achieve better production results, different sized minerals
Minera Autlán, among others. The other 40% are foreign
must be separated and analyzed. “Screens separate the
mines led by Goldcorp, Ternium, ArcelorMittal, and First
minerals through a netting, which can be made up of
Majestic. But nationality does not really matter, since Haver
different materials and sizes, allowing the classification of
& Boecker’s goal is to contribute to the productivity of
the minerals to proceed in the most efficient way. This also
Mexican mining in general. “Our 125 years in the industry
results in the enrichment of the required materials after the
give us a lot of experience in screening systems. There are
corresponding screening,” explains Jesús Patiño Rossell,
many respectable companies that offer products for the
General Manager at Haver & Boecker Mexicana.
entire integrated mining process. We focus exclusively on screening and that makes us experts, enabling us to
370
Haver & Boecker has been manufacturing screens for 125
efficiently solve problems and create new quality options,”
years, but it was not until 2006 that the company began
highlights Patiño Rossell. There are many different processes
to operate in Mexico, after an important sale to Grupo
in mining, and every day new ones are created. It is for this
Mexico at the dawn of the recent mining boom. The
reason that the company must continue innovating. Patiño
company is focused on both domestic and foreign mining
Rossell stresses that the company’s strategy is to generate
companies operating in the Mexican market. However, it
new technology as a result of observation and feedback
Even though strategies vary from country to country, Martin
that provides total solutions to achieve better efficiency and
Engineering is leveraging its 143 patents and its commitment
productivity for its clients. The package consists of three
to innovation and technology in its internationalization
different levels of service: Product, Product + Installation, or
process. “We are constantly figuring out ways to gain territory
Product + Installation + Maintenance. “We are providing the
with new technology. Since other companies copy our
third level solution for all conveyor belts at ArcelorMittal’s
ideas and innovations, our Center for Innovation constantly
Aquila Mine. We offer daily management of all conveyor belt
works to develop new solutions for our clients,” Chacón
logistics, allowing the client to concentrate on its strategic
comments. The company invests 3% of its global revenue
operations,” he adds.
in R&D. “Innovation is essential for Martin Engineering. We constantly brainstorm with our sales and service divisions
The Martin Plus® services play a central role in the
about our clients’ current and future needs,” he adds. For
company’s ambition to consolidate its presence in the
example, Martin Engineering Environmental is focused on
Mexican mining industry in the next five years, not just
developing environmental control solutions, since they
through direct sales but also by creating solid relationships
create healthier labor environments for employees that
with mining companies and strategic long-term alliances.
usually have to work in areas with more than 10mg per m3
Another plan for the future is to open business units closer
of airborne dust, which poses many health risks. Another
to mining operations. “Mexico’s growth will continue
example of Martin Engineering making an effort to combine
regardless of the current global context, and the country
safety practices and productivity can be seen in its primary
will benefit from its metal diversity. We want to approach
and secondary belt cleaners, on which maintenance tasks
the challenges the future will bring through products, but
can be performed without having to bring the conveyor
also with services that will build long-term commercial
belt to a halt. In this case, the technician’s hands never have
relationships with our clients,” Chacón emphasizes. As
to reach into the chute. “The company has had to adapt
is the case with other companies, one of the biggest
to overcome the challenges we have faced along the way
challenges Martin Engineering faces is the shortage of
as a result of the changes in the mining industry, as well
human talent in Mexico, especially during the mining boom
as modified labor regulations for performing maintenance
when trained personnel became a precious commodity.
on moving conveyor belts. This technology is another
Chacón stresses that the company is ready to invest in a
innovation proposition that adds value to the industry and
market that requires a lot of human capital. “We are aware
helps to differentiate us,” Chacón highlights.
that our value proposition will continue being part of what the industry requires. Regardless of metal prices or
Currently, Martin Engineering’s efforts in Mexico are focused
government modifications, our products and services will
on marketing Martin Plus®, the integral services package
continue to be essential mining solutions,” he adds.
“We focus exclusively on screening and that makes us experts, enabling us to efficiently solve problems and create new quality options” Jesús Patiño Rossell, General Manager at Haver & Boecker Mexicana
from clients, as well as general research in diverse areas.
The current market downturn does not come as a surprise
He points out that one of the company’s great advantages
to the company, which is prepared to overcome the
is that it has teams creating tailor-made solutions for each
challenges that it represents. “The metal prices have gone
project. This is a group of experts that, with the support
down, and this trend may or may not continue. However,
of high tech tools and based on the client’s information,
our development allows us to be prepared for it, with the
defines in a simple way the type and size of equipment
required market strategies,” says Patiño Rossell. Currently,
for each project. “Through our subsidiary Haver-Tyler, we
the company’s most important clients are Grupo Mexico,
have manufactured the biggest screens in the world, which
Peñoles, ArcelorMittal, Minera Frisco, Grupo Calidra, and
were assembled in Brazil and are used in Canada to exploit
First Majestic, among many others. In Grupo Mexico’s
bituminous sand with a feeding capacity of 15,000 tonnes
case, Haver & Boecker supplies screens that have been
per hour, which represents the highest screening capacity
manufactured in Mexico, and among those will be the
in the world,” he adds.
biggest screens in operation in the country.
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THE ADDED VALUE OF SERVICEFOCUSED SUPPLIERS IN MEXICO The issue of logistics poses a constant challenge for
to the mining industry in the Americas and Africa. “We
mining companies, who are obliged to build their mines
are the number one dealer of CertainTeed, which is part
according to the location of quality deposits rather
of Saint-Gobain, and ADS, which makes piping for reach
than their geographical convenience. As a result, mining
conductors. We have suppliers in the US and Austria, and
companies must navigate the trials of isolated locations,
we buy and distribute pipes from companies in Mexico,”
long dirt tracks and network blind spots in transporting
says Gómez Luna. As well as supplying these products to
essential equipment to and from their mine sites. Their
mining companies at various stages of the mining value
cargos tend to be expensive, are often fragile, and are
chain, Citland Mexico also provides training and seminars
almost always vital to their operations; delays caused by
in their installation and application. This is part of the
breakdowns, vehicles that cannot traverse difficult terrain
company’s commitment to providing a service that meets
or articles that become damaged as a result of insufficient
the wider needs of its customers: “If they want something
care being taken in their handling have knock-on effects
more, even if it is something that we do not usually stock, we
on production that can be extremely costly in an industry
can bring it in for them,” explains Gómez Luna. “Our clients
where time is also always money.
are always asking about other products that we might be
“There are over 380 mines currently at the exploration or operation stage. There is a lot of opportunity out there for Citland Mexico, and we expect to achieve significant growth in the next two or three years” Carlos Gómez Luna, Managing Director of Citland Mexico
Carlos Gómez Luna, Managing Director of Citland Mexico
able to source for them, and talking to them about their
emphasizes the importance of fast and efficient delivery
needs has often led to us bringing new products into our
in helping his clients to be fast and efficient in their own
inventory as a result, sometimes from the offices we have in
operations: “We have good truckers and reliable people. It
the US and Ghana.”
is important to partner up with good, professional freight companies. Our customers are often located in places that
It is the concept of client attention and service that the
are difficult to reach by road. Some drivers will just give up
company argues is as important as the quality of the
and take the product off the truck before they get all the
equipment it provides. “Citland Mexico is about the
way to the mine. The roads may be difficult but it is always
personal service – talking to people and looking them in
possible to get to the mine if you have the right people and
the eye. There is less human contact in business these
vehicles. I have partnered with good people for that, and
days because everything is done by email, but it is still
have always been able to find the right logistical support
very important,” emphasizes Gómez Luna. “Citland Mexico
in order to overcome these types of challenges,” he says.
sells because of its service. Our strength is that we go out and see potential customers face to face – that is the most
372
Citland Mexico, a subsidiary of Citland International,
important thing for them. Especially because of the fact
supplies a range of geomembrane and geosynthetic
that most of our customers are located in remote areas;
products, from safety equipment to filters and piping,
being a fresh face offers something different for them.”
Citland Mexico has controlled its own growth in order to maintain the level of service Gómez Luna describes. It has done this by being selective about which products it offers to its clients, usually introducing only one or two new products a year. “Citland Mexico does not want to be big, it wants to be focused. We are focused on what we are already doing and making it grow,” says Gómez Luna. Despite being controlled, growth for Citland Mexico has still been significant, in line with the continual growth in the Mexican mining industry more widely. Apart from a slower year for business in 2011, the company has grown during the last five years, during which time it has worked with some of the country’s biggest mining companies, such as Fresnillo plc, for whom it provided 80% of the piping on its La Herradura mine in Sonora. Gómez Luna foresees more growth for Citland Mexico as a result of recent changes in the country’s regulatory framework, which are ultimately compelling mining companies to invest in the structure of their mines, and which companies like Citland Mexico can take advantage of. “We are starting to grow again,” affirms Gómez Luna. “I see companies being more interested in investing in mines, and there are a lot of regulations coming into place that are making mines invest more money. In particular, more regulations relating to dust control have been introduced, and that will hopefully bring good business for Citland Mexico. There are over 380 mines currently at the exploration or operation stage. There is a lot of opportunity out there for Citland Mexico, and we expect to achieve significant growth in the next two or three years.” Despite some successes, challenges certainly exist for service-focused suppliers like Citland Mexico, which must compete with the cheaper prices available for companies that buy directly from factories or internet suppliers. Purchasing directly in this way incurs inherent risk for mining companies as it can be more costly in the long run,
Servicios Integrales de la más
alta calidad,
con la calidez y trato que nos distingue.
given that these suppliers do not provide any additional maintenance on the equipment once the sale has been completed. When the mining market is squeezed and companies are looking to cut costs further, such challenges are even more pronounced. Remaining competitive will depend upon service-oriented suppliers continuing to make a convincing value proposition during such difficult times. While some companies have recently looked to the cheaper, no frills suppliers, for exactly these reasons, Gómez Luna maintains that they are returning to the service oriented suppliers as they recognize and appreciate the long-term value in doing so. “At the end of the day, if there is no service, sooner or later the company will have problems with its equipment that will be costly for the company: costly in terms of money, in terms of time, and in terms of lost production,” he warns.
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EVOLVING DEMANDS FOR INFRASTRUCTURE ON MINE SITES Mining as an industry in Mexico dates back five centuries,
want to be sure that we will complete their project on time.
but just as the techniques that are employed have
As most of our products do not require foundation works
developed and modernized over time, so have the ways
to be carried out, we are able to drive onto a new site and
that mines operate and the infrastructure that supports
– provided that it is leveled – install and get the project
them. As such, a number of different structures are built
going quickly and easily,” Polit says. Building the mine
to support mining operations throughout the various
site using temporary infrastructure also brings significant
stages of a mine’s life, from living quarters and offices to
benefits due to the inherent flexibility in its design, which
laboratories and production plants. Nicholas Polit, former
allows it to be enlarged or adapted to meet the changing
Director General of Williams Scotsman Mexico, a company
requirements of the project. This is particularly useful in
which provides building solutions for mine sites, highlights
an industry like mining where the original outlook for a
the benefits of using temporary infrastructure to meet
project can change dramatically according to the size and
the very specific challenges of construction on mine sites.
location of the deposits discovered on any one property.
“Making permanent constructions is almost impossible in the mining industry, because of their locations in such
Concerns that, by being temporary, the quality or lifetime
remote areas,” he says. “Temporary structures can be
of these structures might be compromised, should be
built entirely in a factory before being taken to wherever
assuaged by the fact that temporary structures can be
they are needed so that they can be assembled, which is
designed to last anywhere from a matter of months
a very quick process. At Williams Scotsman we provide
to a number of years. What is more, as Polit argues,
two building types: those that are planned to be flexible
over time the needs of mining companies have become
and can be moved around easily, and those that are more
more complex, in part because of wider technological
complex and built on a larger scale.”
developments, and the capacity of temporary infrastructure to meet those needs has evolved along with it: “As time
Installing these temporary structures on a mine site, as
has passed our customers’ needs have evolved. People
opposed to something more permanent, brings financial as
continue to need this product, and they will continue
well as logistical benefits for the mine’s management team,
to demand better quality in the future. 20 years ago we
because the relative speed with which they can be built
would have seen engineers standing outside the mine
prevents delays to the starting or continuation of a project,
with their blueprint lying on a table. But technology has
which in mining can incur very high costs. “Companies
changed, and computers are now needed to carry out
MAIN ADVANTAGES OF MODULAR AND MOBILE OFFICES AND HOUSING
374
From office spaces to living quarters, buildings need to
Espaciomovil’s aim is to construct professional and
be adapted to the specific circumstances in each mining
comfortable
location, as well as to the operational requirements, which
company also offers assembly services to its clients,
many times involve them having to be relocated. One
to avoid further distractions and concerns for the mine
of the main advantages of modular and mobile units is
personnel. However, bringing the product to a remote
the assembly time. “Due to the mobile characteristics,
mining site might prove to be the biggest challenge.
and according to the selected product, the assembly
“Espaciomovil has the capability and infrastructure to
process takes 70% to 80% less time than traditional
transport the required materials and develop spacious
construction,” says Eduardo Zarza Fierro, Mining Manager
working and housing complexes in short periods of time,”
of Espaciomovil, a Mexican company with over 10 years
Zarza Fierro says. Because it manufacturers all of its own
of experience in modular and prefabricated units. “For
products, Espaciomovil is able to innovate on every project.
example, a five office building with two washrooms, which
The mobile office is its flagship product on which most
with traditional construction would take four months
projects are based, but its catalog also includes modular
to build, can be assembled and delivered in one week.”
buildings, mobile washrooms, and prefabricated storage
Reduced assembly time also translates to cost reductions
facilities, among other designs. If a client is interested in
for mining companies and their suppliers.
a certain product but has specific requirements that it
working
and
living
environments.
The
the work. However, computers cannot be set up under a
Temporary constructions can also help mining companies
tent, without the appropriate electrical connections. Today
to keep their costs low in other ways. Mining operations
mines depend on having entire offices set up at the mine
use high levels of energy, and the industry is increasingly
site, with different equipment such as computers, plotters
concerned about how to reduce its energy consumption and
and printers.” According to Polit, mining companies have
improve its environmental impact. In this way, temporary
also radically improved the accommodation facilities they
infrastructure can also complement mining companies in
provide for their staff. This is in part as a result of a more
their broader environmental strategies. The biggest benefit
developed labor culture that better protects workers’
is the fact that such structures are designed specifically so
rights and increases expectations in terms of living and
that they can be dissembled and removed from the mine
working standards. “In the past, workers on mine sites used
site easily when they are no longer needed. This brings a
to sleep in their tents in sleeping bags, and these were the
practical advantage to an industry where mining companies
only things that the company provided them with,” Polit
are required to leave the mine sites they operate on in the
details. “Nowadays the comfort of the workers is one of
same state as, if not better than, when they arrived there.
the main concerns, and we look after that by designing
In terms of environmental impact, companies like Williams
spacious living areas, with air conditioning for example.”
Scotsman also offer structures that have environmental solutions for helping their customers to reduce their general
At the same time as increasing and improving the features
consumption levels, which in turn reduces operating
of its products, Williams Scotsman also sees value in
costs. This is something that Polit has observed the more
maintaining the simplicity of their design, not only so
sophisticated mining companies doing in order to control
that they continue to be quick to assemble, but also so
their energy consumption. For such companies, Williams
that they can easily be maintained by the customers
Scotsman offers insulated roofs, walls and windows, as well
themselves. “We have been working in this industry for
as electrical features such as automatic switches and motion
over 50 years and we adhere to very strict construction
detectors, which help mining companies to reduce energy
practices, called the North American Standard Codes,”
consumption on mining projects. The general objective of
Polit details. “Nevertheless, we are a low tech construction
Williams Scotsman is to build temporary constructions for
business, and most of the material we use to construct
its customers that fulfill their requirements across these
our buildings is available at any home improvement and
different areas, allowing them to focus on what they do
construction store. From that point of view our clients do
best: building and operating mines. “These companies
not have to continue working with us for the duration of
want to focus on building the mine itself, rather than the
their project if they do not wish to. We have a specialized
surrounding infrastructure. In every operation where a
crew that is willing to help, but unless they ask us to do
mining company needs temporary facilities for its workers,
the job specifically they are able to maintain the buildings
even if it is a project that will last many years, we can help
themselves.”
them out,” adds Polit.
does not fulfill, Espaciomovil works to accommodate the
jobs or other more permanent activities,” he adds. “At the
client’s needs. The development and engineering team will
end of the project the structure is removed and the only
redesign it based on the client’s requests, and then it will
thing that remains is the concrete foundation on which it
be manufactured. “We are ready to help with the design,
was assembled,” explains Zarza Fierro. With clients such
fabrication and delivery of our clients’ projects,” he says.
as Goldcorp, Silver Standard, Yamana Gold, Cominvi, Compañía Minera Cuzcatlán, and Atlas Copco, and with
According to Zarza Fierro, Espaciomovil is not strictly
projects in Sonora and Oaxaca, Espaciomovil is focusing
in direct competition with the construction industry,
its commercial and engineering efforts on consolidating its
because the construction sector focuses on infrastructure
position in the mining industry. “We search for continuous
development, such as access roads, mills, and other
development of products that complement each other,
machinery. He even considers them natural allies since
so that we can offer integral solutions. Espaciomovil is
Espaciomovil got into the mining industry thanks to
looking to become a very interesting tool for the mining
companies that provided construction services to the
sector,” Zarza Fierro says. The company is focused on
industry and themselves required offices on the mining
market growth in the mining industry, not only in Mexico
site. “Our company identified the business opportunity
but more widely in Latin America as well. Currently it
and underwent a process of applying and adapting our
has offices in the US, Costa Rica, Panama and Peru. “The
products in order to satisfy the sector’s requirements and
types of projects we develop have naturally led us to these
develop new technologies, all under the prefabrication
markets and our offices in these countries allow us to be
concept. The solutions we came up with make it easy for
more competitive, while at the same time offering new and
mining companies to relocate the units for temporary
better solutions.”
375
EMPHASIZING MEASUREMENT IN FUEL DISTRIBUTION Mining companies tend to be
outsourcing this activity to CORSAN, which now uses its
big consumers of diesel, which
trucks to deliver the company’s diesel requirements. The
they use to fuel their vehicles
trucks have a double storage tank, which means that any
and machinery, as well as their
leakage from the first tank will be caught by the second.
electricity generators. Whilst
CORSAN has also provided Timmins Gold with trucks that
large mining companies such
have pumps on each side, making the refill process quicker
as Grupo Peñoles and Grupo
and more efficient. The aim of this technology and these
Mexico
their
processes, as well as the company’s timetables, safety
diesel directly from Pemex,
procedures, environmental procedures, and fire protection
for the sake of practicality
technology, is to help the company to meet its customers’
they usually choose to outsource the management of
requirements as promptly and efficiently as possible. “By
this process to a third party. “Anybody can buy directly
integrating all this technology we can tailor the service to
from Pemex, but their business is mining, not diesel
the customer’s needs. We adjust our products for their
procurement, so they do not want to be dealing with this
convenience, in terms of the types of tanks, pumps, and
side of things. What mining companies want is to reduce
fuel we use, as well as being able to provide additional
their concerns, and our people are involved in the entire
storage for emergencies,” says Noriega.
Alejandro Noriega, Director General of CORSAN Energéticos
could
source
fuel supply process, 24 hours a day,” explains Alejandro Noriega, Director General of CORSAN Energéticos, a
The different features of CORSAN’s service also allow
distributor of diesel based in Mexico City. The company
the company to be better organized and to navigate the
has more than 80 years of experience working with the
logistical challenges of delivering fuel throughout Mexico.
oil and gas industry, and today has a 250 strong fleet
“Our operators sometimes stumble upon unfinished roads
of distribution trucks. It places great emphasis on the
or inhospitable environments, but fortunately we can
importance of accuracy and controls in the service that
rely on our global positioning systems and our real time
it provides. “We offer the complete control system and
database, all of which provides us with tighter control. For
measure every centiliter that goes into and out of our
instance, if there is a problem at the Hermosillo terminal we
trucks,” says Jorge Basualdo, CORSAN’s former Business
will bring fuel from Guadalajara at our own expense,” says
Development Director. “Our job is to be in charge of the
Noriega. “Every mine is a challenge; the degree depends on
logistics of diesel distribution every day. We also check the
its location and operations. We do not want our customers
levels of the tanks, and as soon as we see that they need to
running low on product, so we always set up an alternative
be refilled we immediately send new cargo.”
storage tank for electricity generation. In short, we provide complete solutions for our clients,” adds Basualdo.
In order to fulfill these duties and maintain precision and
376
accuracy the company relies heavily on the use of new
One area that the company is particularly focused on
technologies. This varies from having a metal ring attached
is improving the security measures in its systems and
to the pump pistols, meaning that the pump only works if
processes, in particular to avoid the common problem of
the ring and the slot match, to allocating a tag number to
fuel theft. “We have developed strategies to stop fuel theft,”
measure exactly how many liters of fuel are being delivered
says Noriega. “One such strategy is to color the diesel so
on each job. The company’s trucks are also monitored via
that if it gets stolen no one will buy it.” For Noriega, one
GPS, so that it knows exactly where its cargo is and when
way of reducing the problem would be for management
delivery can be expected. All of this information is kept in a
teams to be well informed about where they source their
central database. “All of this information is being updated
diesel from. “It is important to show them that if they buy
in real time in our systems; through these processes we
from a company that is offering a discounted price, it is
have complete control over the amount of diesel we
possible that the source of the fuel is not legitimate, and
are storing and transporting, as well as the efficiency
perhaps the quality of the fuel is not as good. There are a
of our distribution,” explains Basualdo. “Our database
lot of stolen products on the market nowadays; in the past
is updated every 10 seconds, and in case anything goes
people were buying in good faith, but today that is not
wrong we have backup strategies and alarms to notify
possible and one needs to be sure of where the product
our technicians and clients,” adds Noriega. An example
is coming from. This is a very common issue in Mexico.
of the company’s technology can be found in the work
The price of diesel includes a distribution fee, so whenever
it has done for the Sonora based gold mining company
one is getting lower rates for the same product something
Timmins Gold. The company had its own tanks before
definitely is not right,” he warns.
OUTSOURCING LOGISTICS TO SPEED UP CUSTOMS PROCESSES The rule of economies of scale is rarely disproven: generally speaking, the larger the scale of a company the cheaper the price it is able to offer. “Because we deal with suppliers from many different companies it is easier for us to get better for whatever they are buying, than it would be for them. If a company is not experienced in this area, and just buys the equipment it needs, dealing with the taxes itself, it will often cost them more,” says Luis Martínez, Co-Founder of TAC, a company that supplies equipment
LEFT: Carlos Lara, Co-Founder of TAC
and logistics solutions for a number of different industries
RIGHT: Luis Martínez, Co-Founder of TAC
ranging from aerospace to mining, and its sister company, LUEMAR, which is based across the border in El Paso,
mines are located, and the size of the projects, made
Texas, providing a similar logistics service. “TAC is one
mining a good business opportunity for TAC.”
company offering many services, which means that we are just one company to deal with and we represent just one
TAC’s local knowledge and logistics experience provides
additional cost, rather than several.”
the company with the necessary skills to overcome the logistical challenges of operating in Mexico, particularly
The deals Martínez refers to are part and parcel of the
on isolated mine sites, which is an area where non-local
border services that TAC offers its customers on both
companies particularly need help. “If a company thinks
sides of the border, which includes customs services for
that two points are 30km apart we often have to interrupt
products both entering and leaving the US, from and to
and tell them that it will take several hours to drive that
Mexico. Helping in these processes is the fact that the
distance, or that the truck they are considering using will
company has its own customs broker, is C-TPAT certified,
not be able to make it the whole way,” says Martínez. “By
and is a member of the Free and Secure Trade Program
knowing the area and the region we can predict costs
(FAST), meaning that customs processes can be fast-
much better. Local expertise means that we know the
tracked. The company is also in the process of getting
realities of whether a truck can cross at a certain point or
NEEC certified, which on the Mexican side will mean
not, and how transportation challenges will affect the cost
entering a specific line that avoids certain inspections, thus
of logistics. Knowing that we can supply things locally, and
serving to speed up the process even more. “The fact that
with good quality, makes our customers realize that they
we integrate everything under one roof is important. We
do not need to bring products all the way from Canada or
do customs brokering, and we have a presence in every
the US.”
port and crossing point, which all differ from each other. I can tell our customers exactly what will happen when they arrive at each border point, because the requirements differ slightly between all of them. Just because one entry point is closer, it might not necessarily be an easier or less costly place to cross,” explains Martínez.
“We develop a website for every customer, so that our clients can track the transportation of their equipment in real time”
The company’s heavy focus on the import/export side
Carlos Lara, Co-Founder of TAC
of logistics services makes it a very good match for the mining industry, given how internationalized it is. “The
Based in Chihuahua, the company has grown 40% each
mining industry’s needs are very different, because
year for the last five years, and now has a team of 200
mining operations require a lot of heavy machinery, which
staff predominantly serving the automotive, aerospace
involves more yard work rather than just plain warehouse
and mining industries. Mining now represents 12% of the
work. We develop a website for every customer so that
company’s sales in logistics, though the mining industry
our clients can track the transportation of their equipment
does also buy TAC’s products through distribution
in real time,” explains Carlos Lara, Co-Founder of TAC.
channels. Martínez emphasizes that the mining industry will
“For the most part the mining industry consists of foreign
play a significant role in the company’s ongoing growth.
companies operating in Mexico, and they are not equipped
“We are becoming global thanks to the mining industry.
to overcome the logistics challenges of supplying the
Whoever supplies the mining industry is not just working
industry,” adds Martínez. “The remote areas in which the
locally; they have to work with the entire world.”
377
FAMILY FOOD BUSINESS SHIFTS TO CATERING FOR MINES Providing catering services to the mining industry is no easy
using the same quality parameters. “We started working
task. Usually located in remote areas, food suppliers have
with Compañía Minera Dolores in a mining location with
to deal with the challenges posed by difficult terrain and
no campsite. At the beginning we slept in tents, but we
weather conditions without neglecting the most essential
grew together with our client.” Nowadays, Grupo Prosesa
part of the operation: food quality. Grupo Prosesa, a family
still supplies most services to Compañía Minera Dolores,
business with over 30 years of experience providing catering
ranging from administration, collection and trash removal
services to the manufacturing industry, started working with
to staff accommodation. The company does laundry, cleans
the Mexican mining industry in 2007. Its move into mining
common areas and rooms, and performs minor preventative
triggered the company’s growth from 300 employees to
maintenance tasks. As Morán Andrew describes them, the
its current 1,300. The foundations of the business, however,
company takes care of all those details that take up the
go back two generations: “Our grandparents provided food
client’s time and keep it from focusing on its main activity:
services to sawmills and mines in the Sierra de Chihuahua,
mining. Grupo Prosesa also works at Los Filos, Guerrero with
where the forest industry operated at the time. They moved
Goldcorp; La Colorada Mine, Zacatecas with Pan American
in search of opportunities, and their expertise was passed
Silver; Milpillas, Sonora with Peñoles; and Creston Mascota,
on to my mother. Thanks to her we were born in the food
Chihuahua with Agnico Eagle, among others.
sector,” recalls Arnoldo Morán Andrew, Commercial Director of Grupo Prosesa. However, it was not until 1985, when the
The
manufacturing industry and maquiladoras started operating
food schemes that range from central dining halls on
in Chihuahua, that the family decided to switch from the
the campsite to peripheral dining where the operation
restaurant business to the industrial catering sector. It was
takes place. It delivers workers hot meals that comply
the combination of expertise, knowledge and service that
with international standards for food handling and its
enabled Grupo Prosesa to break into the mining sector
processes have the ISO 9001-2008 certification, as well as
in 2007. Morán Andrew explains that the new business
the Distinctive H, a recognition from the Mexican health
opportunity posed a huge challenge: the company had
authorities for hygiene. Morán Andrew explains that
to provide catering services to remote locations while
Grupo Prosesa is the only domestic company dedicated
industrial
catering
company
works
with
many
CATERING IN REMOTE LOCATIONS
378
Catering for the mining industry is a much bigger operation
days a week; this translates to preparing 21,000 dishes
than just providing food for the mine workers; it also requires
each week. There is no mine that has the storage capacity
precise logistics. “One of the main challenges is being able
to contain all of the perishable goods that are required to
to maintain the refrigeration cycle of perishable goods
make this quantity of dishes. Therefore, supplies need to be
when transporting them to the mining site, especially when
delivered regularly according to an established schedule,”
it is located in the desert,” points out Rodolfo Loya, Director
Loya explains. For Loya, the services the company provides
General of Grupo, a catering company that began providing
are similar to those provided in hotels in remote locations:
integral food services to Gammon Lake in 2006. The mining
“We are in charge of all of the workers’ nutrition, as well
industry now accounts for 60% of the company’s operations
as living quarter maintenance, cleaning, and laundry. Our
and it is currently working on El Sauzal with Goldcorp, La
service portfolio is very broad, to the point that not all of
India with Agnico Eagle, El Concheño with Minera Frisco,
our services are necessary in all mining operations, because
and Bismark with Peñoles.
every mine is different and has different needs,” he adds.
The logistical challenge includes transporting meat and milk
Alberto Loya, the company’s Operations Director, points
products at the right temperature to avoid them going bad
out that the company operates under a lot of pressure,
on the way to the mining site and becoming a health hazard.
because failing means leaving a mine’s employees
Furthermore, packaging is key for ensuring that the produce
without food, which would affect their health and work
arrives in good condition. “Picture a mine with 1,000
performance. “Driver training is essential to face this
employees, and bear in mind that each employee requires
challenge, as well as performing regular maintenance
three meals a day. This means preparing 3,000 plates a
on all vehicles. We emphasize driver training because if
day. Now, consider that mining operations are active seven
there is a mechanical failure it can affect the operations.
to providing food services to campsites that is certified
circumstances,” Morán Andrew highlights.
as a Socially Responsible Company (ESR), which is one
key to successfully operate in remote conditions lies in
of the core programs in the mining industry. Therefore,
the emphasis and importance that Grupo Prosesa places
it is not unusual for its clients to ask the company to
on hygienic food handling. “Everything has to do with the
develop projects to support local communities where
quality of the product transformation process, from the
the mining project is located. For example, in Dolores
moment the produce is received to the process that makes
the company collaborated with local school teachers to
up the steps required to make a delicious meal”, Morán
develop various festivals during the year, and in Ocampo
Andrew says.
Perhaps the
it worked on projects to develop the local economy. “We are unwaveringly committed to the local communities, and
The company’s success is based on four pillars: quality,
we are strategic partners for our clients in the locations in
flavor, warmth and cost. Quality has to be part of the
which they operate,” he adds.
company’s human resources, products and services. As
“In our commercial relationships we take care of people who are far away from their families, and we have to take that into account” Arnoldo Morán Andrew, Commercial Director of Grupo Prosesa
The main challenge that Grupo Prosesa regularly faces is
Morán Andrew comments, flavor is the soul of the business,
the remote location of mining sites, since the company has
regardless of whether it is a Monday midday snack or the
to overcome the hurdles that arise from weather conditions
third shift of the day on a Sunday. “Warmth is what makes
such as snowstorms during the winter and overflowing
the company so unique. We are very focused on people;
rivers during the rainy season. But by adapting schedules
we work with them and for them. In our commercial
and acquiring adequate transportation the company is
relationships we take care of people who are far away from
able to guarantee its services. “In remote sites it is nature
their families, and we have to take that into account,” he
that establishes the rules of the game. For as long as our
says. “Of course, we also take care of cost by ensuring that
work is in these places we will continue adapting to the
we offer a competitive price.”
Well-trained drivers are able to fix any mechanical failure,
and hygiene, among many others. “We have to take into
avoiding delays that risk the wellbeing of the workers,” he
consideration that mining employees live at the operation.
adds. He also goes on to explain that in other industries the
The dining hall is their only source of nourishment, and the
company delivers the products one shift before each meal
warmth with which they are treated and our cooking have a
is due to be served, however in the mining industry they
direct effect on their performance. We have to be cautious
have to be delivered three days earlier.
about what we prepare in our kitchens because people might become bored,” Alberto Loya states.
Logistics are not the only challenge that Grupo Síncom faces when providing its catering services to the mining industry.
The industry’s development in recent years has caused
“At a mine there are workers from every region of the
Grupo Síncom to double its size, currently employing
country, as well as foreigners. People are also from different
almost 1,000 people. In order to prevent this growth
social classes. It is very thrilling to create a menu or plate that
from challenging the quality of the company’s services
satisfies the tastes of all workers,” says Alberto Loya. To be
it specifically focuses on its personnel and provides
able to guarantee the satisfaction of its clients’ employees
continuous training in customer service and service
the company has developed an integral management
providing. It also has a policy of moving its staff to
system called SAIS, through which the menus for each
different mining sites so they can acquire new experience
week are made. Each day a variety of dishes are offered, in
and knowledge. “Our team is multifunctional and very
order to provide different options for diners. Through the
versatile in every sense of the word. The company’s growth
management system statistics are also recorded: how many
allows the professional growth of our personnel; we are
dishes were consumed or which was the most popular, for
constantly creating supervisors, managers and directors.
example. Grupo Síncom also has a survey system, through
Moving people to different locations also enhances cooking
which diners can evaluate its services according to different
skills and enables people to share their experiences with
criteria such as taste, seasoning, customer attention,
the other cooks,” Rodolfo Loya says.
379
FOCUS ON UNINTERRUPTED FLOW OF MERCHANDISE NAFTA brought many benefits and also many drawbacks
Even though each of us is an independent agent, we work
for those providing customs services. As stressed by
together because if for some reason one of us becomes
Napoléon Romo Medrano, Partner at Agentes Aduanales
unfit, the other agents keep working and the clients are not
Sonora, importers were not used to an open market. Mexico
affected. Companies are encouraged to export, which at the
had previously had a protectionist policy in place, and by
same time means importing the supplies that are needed for
approving this agreement customs barriers ceased to exist.
production. With a modern customs system, merchandise is
An open economy competition is fostered. At the beginning
no longer a customs hostage,” he adds. For urgent imports,
this posed difficulties for customs agencies, though they
once the merchandise has arrived Agentes Aduales Sonora’s
became used to the new system quickly and, thanks to the
personnel are already waiting for it with the appropriate
competition, service quality was enhanced: “We improved
transportation vehicle, and priority is given to it over all
our customs service as a result of deregulation and the
other consignments. Once the motion is complete, it is
elimination of many requirements, which streamlined our
revised and approved and the merchandise can move on to
operations,” Romo Medrano says. For Agentes Aduanales
its final destination. “Of course, the merchandise also has to
Sonora the current average dispatch time is 72 hours. As
go through customs, which delays the delivery. Nevertheless,
soon as the merchandise arrives, an examination of the
the processing is carried out quickly and efficiently,” says
goods is carried out, and the next day the customs requisition
Romo Medrano.
is ready for the client’s approval. Once it is approved the
380
merchandise is released. “In the mining industry there
The main services that Agentes Aduanales Sonora offers its
are many emergencies, and in those cases we can deliver
mining clients are machinery imports for mining activities,
merchandise in 24 hours. This is what makes us different
machinery exports for repairs, and finished products,
from other customs agents. Agentes Aduanales Sonora,
such as processed metals. The main challenge is to
based in Nogales, Sonora, is formed by three partners. This
implement an almost perfect logistics process, preventing
partnership provides us with a secure operating framework.
any problems from the moment the merchandise leaves
“Companies are encouraged to export, which at the same time means importing the supplies that are needed for production. With a modern customs system, merchandise is no longer a customs hostage” Napoléon Romo Medrano, Partner at Agentes Aduanales Sonora
the plant to its delivery across the border. “This includes
eventual delivery. “That is the most serious problem we face,
ensuring that there are no errors on the requisition, in order
because the customs posts frequently lack the authorized
to prevent any issues at the customs post, as otherwise
personnel, so we have to go to another city where the Federal
the merchandise might be detained until the situation is
Highway Police Office that grants the permits has a base.
clarified,” Romo Medrano explains.
This is illogical and only leads to drastic reductions in how competitive we can be. There must be an agency belonging
Romo Medrano views the role of customs agencies in the
to the Ministry of Communications and Transportation that
mining industry as essential, because it is up to them to keep
can grant these permits quickly,” Romo Medrano argues.
productive processes going uninterrupted: “An equipment
For Agentes Aduanales Sonora the growth of the mining
or machine on standby represents a high cost for a mining
industry represents a larger quantity of companies and an
operation. We are the foundation of the sector, from the
opportunity to capture new clients that are opening offices
supply perspective, since most mining companies and the
in Mexico. In order to take advantage of this opportunity the
equipment they are using are of foreign origin. We have
company takes part in all mining exhibitions in Mexico, as
to ensure that machinery and equipment moves quickly
well as events in the US and Canada, in order to be aware
and smoothly.” Even though this is a fairly easy process
of potential customers’ investment intentions. “The current
the company faces the hurdle of dealing with machinery
international metal prices encourage greater foreign and
that often exceeds maximum dimensions. When this type
domestic investment in the sector. There will be more imports
of merchandise arrives to Mexico additional permits are
and exports as the market grows and that will translate into
required for road transit, which may delay or even prevent its
benefits for everyone,” Romo Medrano adds.
381
REDUCING TIME AND COST IN IMPORT AND EXPORT PROCESSES challenges
industry, when it started working with Grupo Mexico and
that mining companies face
opened its Ciudad Juarez office. “In 2007 we analyzed
are
Mexico’s different economic sectors and the mining industry
The
logistics unique
Leopoldo Alvelais, Director General of Alvelais Agencia Aduanal
and
complex. be
came up as an area of great interest for the development of
imported and products need
our business. Some of the sector’s main companies are a
to be exported in the fastest
part of our client portfolio. They have seen improvements
and
Machinery
needs
to
way
in processing times, and we also contribute by improving
possible. “Mining companies
the efficiency of their operational management,” he adds.
require
speed,
service
with
most
efficient
and
“Mining companies ask us for help with cost reduction and
imports.
process optimization and we are able to respond. We are a
Product transfer is a critical issue due to operational costs
company that provides results and we help our clients by
and the often urgent need for machinery,” says Leopoldo
reducing waiting times and therefore reducing costs.”
quality, their
Alvelais, Director General of Alvelais Agencia Aduanal, the customs broker that services four border crossings:
In order to be able to offer the best possible service
Nuevo Laredo, Tamaulipas; Colombia, Nuevo Leon; Piedras
Alvelais Agencia Aduanal offers 3PL – third party logistics
Negras, Coahuila; and Ciudad Juarez, Chihuahua. Alvelais
– integrating different operations and services with
Agencia Aduanal is a family company with over 70 years of
customs brokers in Mexico and the US. Because of this
experience. The company has been taking care of imports
strategy the client does not need to go from place to
and exports for mining companies for over 40 years, but
place to complete the process. “We offer value through
it was not until 15 years ago that it really focused on the
this integrated service. We are in charge of importing the
MODERNIZATION OF MEXICAN TRADE
Oscar Chávez Arvizo, Director General of SEPCE
Backed up by logistics and
and of putting into place a more efficient customs system.
transportation services, storage
“The Ventanilla Única (Single Point of Contact, SPOC) for
facilities, and an American
Mexican foreign trade has been part of the modernization
customs
SEPCE
process that Mexico is going through. It is an international
(Servicios Profesionales de
commitment that we must comply with as a country.
Comercio
agency,
was
The SPOC facilitates information management thanks to
created in 1994, though it has
document digitalization, which is also recorded,” Chávez
over 34 years of experience in
Arvizo says. He ensures that trade agreements allow
trade services. “Our structure
merchandise to be brought in under different logistical
Exterior)
and location beside the border
and financial schemes. SEPCE makes suggestions to its
with the US, through which Chihuahua has access to the
clients so that they can explore different entrance routes,
rest of the world, has allowed us to import merchandise
such as in-bond through the US. “NAFTA is the agreement
in record time for the mining industry,” highlights Oscar
that we use the most, because taxes are not paid on any
Chávez Arvizo, Director General of SEPCE.
of merchandise that is imported. Products coming from Europe and other parts of the world also benefit from
Directly or indirectly SEPCE is responsible for machinery
reduced import rates and taxes,” he adds.
imports, among many other products and supplies.
382
“Thanks to the company’s network and technological tools,
The Mexican mining boom has boosted SEPCE’s growth.
we can react with a quick and safe service to respond to
“We have taken advantage of the sector’s development and
emergency situations, such as flooding in a mine,” Chávez
the process has taken us to remote places, such as Mineral
Arvizo says. In the past 10 years Mexican import control
de Dolores. For that mine we were in charge of its imports
has gone through a digitalization process, the biggest shift
from the beginning. It was a huge challenge in terms of
being adopting the terminology and classification system
coordination and logistics to reach a place that 10 years
for goods used by the World Customs Organization (WCO).
ago had no roads,” Chávez Arvizo says. “Mining is one of
However, before Mexico became part of the WCO, the
the industries with the highest quality standards and that
country had already started its process of modernization
propels us to improve in every way,” says Chavéz Arvizo.
largest volumes, such as machinery and exporting the
system, thanks to the Ventanilla Única (Single Point of
mineral product,” Alvelais says. The company is also able
Contact, SPOC), which is a great advantage for them.
to offer 5PL – fifth party logistics – thanks to a partner
33% of the company’s business is an import and export
distributor it has that helps it with the mining industry.
railway service, and mining companies that choose this
Through this system Alvelais Agencia Aduanal takes on all
transportation system benefit from lower costs. However,
of its clients’ responsibilities as its own; the company has
Alvelais points out that the main disadvantage of railway
to send the agency the merchandise, and the agency takes
is time, since moving from one place to another can take
over. “We are essentially a customs brokerage business,
three times more time than other means of transportation.
but we have also brought on board more services and
However, railway is not used for mineral transportation due
solutions. Through our commercial alliances we have
to the inherent security risk.
transportation and warehouses in Laredo and El Paso. For example, we currently have a 4,200m2 space available in
Alvelais believes that the service the company provides is
the Laredo warehouse,” Alvelais says.
what currently differentiates it from its competitors. The company also provides consulting services to its clients
The company manages all of its logistics through a very
and offers training in imports, the IMMEX program, in-bond,
powerful information system that presents real time
and taxes, depending on each particular client’s needs.
information on merchandise delivery, inventories, and
For the coming years Alvelais Agencia Aduanal has a very
historic value files. Through the system the company’s
ambitious development plan that will enable it to grow to
clients are able to check where their merchandise is at any
four times its current size in the next five years. “We call it
time, as well as historic information, tariff codes, motions,
the 5x4, and it involves developing our commercial division
and bills, among many other things. “The key for us is having
and making a structural shift in order to be able to be closer
innovation in our processes. For this we use management
to our client in terms of service. Beginning this plan means
and information technology,” Alvelais says. He explains that
that we are able to guarantee that our operation offers the
the authorities also have access to a similar information
required level of excellence,” says Alvelais.
THE ADVANTAGES OF IMMEX
Humberto Beltrán Murillo, Director General of HB Agencias Aduanales
HB Agencias Aduanales began
can stay in the country for up to 18 months,” Beltrán Murillo
its operations in early 2000 in
explains. “However, machinery and equipment can stay
response to market demand
until the end of the program. In terms of customs, the main
for
service
challenge for mining companies is managing IMMEX correctly,
that could manage all land, air
because if they do not maintain strict control over their
and maritime importing and
products it may be considered illegal in the country.” Beltrán
exporting
Today,
Murillo adds that import and export control management
13 years later, HB Agencias
for mining companies is fairly simple, whether using IMMEX
Aduanales
14
or not. However, for customs agencies it is essential to have
an
integrated
activities. consists
of
offering
trained staff that are able to give consulting services to their
services at 24 of the 49 main customs posts in the country.
mining clients. Another advantage is that mining companies
The group manages import and export activities for
are not forced to comply with Mexican official standards,
every stage of mining operations. According to Humberto
which is required only for products that are sold directly to
Beltrán Murillo, Director General of HB Agencis Aduanales,
the public. “We recommend to our mining clients that they
in terms of customs processes the mining industry is very
use IMMEX to bring in all of the machinery and equipment
open. If a company needs to import replacement parts
that they require for their operations. The technology used
from the US or Canada, thanks to NAFTA it does not have
in the mining industry is very expensive, and having to pay
to pay taxes. Mexico’s 12 free trade agreements with 44
taxes for a multi-million dollar piece of equipment can affect
countries make it fairly simple for mining service providers
the finances of any company. IMMEX provides many tax
to commercialize their products on an international level.
exemptions,” says Beltrán Murillo. As a foreign trade facilitator
customs
agencies
HB Agencias Aduanales makes its clients’ customs processes IMMEX is another alternative for the mining industry. The
much easier. “We want companies to focus on their business
program has been created for companies that need to
and not be distracted by customs issues. We give our clients
import machinery in order to develop a product for export. It
the certainty that every commercial challenge regarding
is designed in such a way that companies can avoid paying a
their imports and exports will be solved in an effective and
large amount of taxes. “Under IMMEX, imported raw material
financially responsible way,” highlights Beltrán Murillo.
383
384
BUSINESS & FINANCE
13 In recent years Mexico’s reputation as a place to do business has grown exponentially. Over the last two decades the economy has grown and the legal framework has become more solid; combined with the country’s political stability and favorable geographical location the country is now viewed by international companies as an excellent destination for investment. This has been particularly evident in the country’s growing importance in the global mining sector, as it now represents the fourth destination for exploration investment worldwide, and the first in Latin America.
This chapter provides insight into current perspectives on the business environment in Mexico, from leading economists, legal specialists, and consultancy experts.
It will present the key
developments in global investment trends as well as the country’s fiscal regime, and explore how Mexico’s mining industry is likely to be impacted by these changes in the coming months and years.
385
386
CHAPTER 13: BUSINESS & FINANCE 388
VIEW FROM THE TOP: Positioning Mexico in the Global Mining Industry
389
EXPERT INSIGHT: PwC Global
389
Critical Success Factors in the Mexican Mining Industry
390
VIEW FROM THE TOP: Facing Financial Challenges in the Mining Industry
391
VIEW FROM THE TOP: A Legal Perspective on Mexico’s Tax Regime
392
VIEW FROM THE TOP: Facing the Mining Sector’s Legal Challenges
393
Mexico’s Security Issue: Not a Barrier for Investment
394
VIEW FROM THE TOP: Drawing Mining Companies to the Mexican Stock Exchange
395
ALTERNATIVE INSTRUMENTS: Bond Instruments & Certificado de Capital de Desarrollo
396
Contribution of Commercial Banks to Mining Investment
397
VIEW FROM THE TOP: Consolidating Mexico’s Mining Projects
398
VIEW FROM THE TOP: Mexico’s Growing Importance as an Investment Hub
398
Understanding the Commodities Market
400
VIEW FROM THE TOP: Mining Human Capital
401
The Added Value of Outsourcing
402
VIEW FROM THE TOP: Navigating the Legal Framework of M&A
403
EXPERT INSIGHT: Investment Opportunities in Mexico
404
VIEW FROM THE TOP: Canadian Participation in Mexican Mining
406
VIEW FROM THE TOP: Financing Canadian Projects in the Mexican Mining Industry
406
The Value of Asian Investment
387
| VIEW FROM THE TOP
POSITIONING MEXICO IN THE GLOBAL MINING INDUSTRY JOSÉ ALMODÓVAR Mining Leader at PwC Mexico
Q: What is the role of emerging markets and how is the
has been explored, and according to INEGI approximately
position of Latin America evolving in the mining industry?
60% of Mexico’s area has geological conditions that favor
A: Emerging markets play a key role in the global mining
ore deposits. Nevertheless, only 4% of Mexico’s surface
industry. What is happening nowadays represents a unique
has been fully explored for ore deposits. In 2012, the
opportunity for emerging markets, but they need to align
Metals Economics Group found that of the 121 countries
their political systems and regulatory frameworks - this is
that received the largest amount of both domestic and
vital for the development of Latin America. Some countries
foreign investment in mining exploration; Mexico ranked
that have great mining potential are not that appealing
fourth worldwide behind Canada, Australia and the US.
because of the risks they pose for potential investors,
In terms of tax, it also found that Mexico remained one
mostly due to political instability and land ownership
of the most competitive countries for mining investors in
issues. There is nothing wrong with foreign investment as
Latin America. Mexico is undoubtedly very attractive as a
long as fair salaries and fair taxes are paid and measures
destination for foreign investment, which means that PwC
are taken to create sustainable operations. Mexico
needs to be ready to promote and respond to business
understood this very well a few years ago, and as a result
opportunities when appropriate.
we are now very well positioned in the global market; so too are Chile, Brazil and Peru. There is still a long way to
Q: What are the main factors that cause agreements in the
go before some of the other emerging countries in Latin
mining industry to go wrong, and how does PwC avoid
America will reach a good position in the mining market
this from happening?
and be able to significantly contribute to the development
A: The main reason for this issue is that some mining
of their own economies.
companies are not getting the proper advice from financial advisory entities when making acquisitions,
Q: PwC currently audits 32% of mining companies
expanding their operations, or even when they are selling
worldwide. Why do they choose you over other firms?
their companies to other corporations. Sometimes they
A: PwC has been working in the industry for a very long
do not ask for advice at all. The best practice when you
time. Our firm has been paying a lot of attention to the
are buying, selling or expanding is evaluating economic
way the industry has been developing. We have created
feasibility and complying with technical standards, as
a network, including the creation of the Mining Center
well as local and international regulations. The bigger the
of Excellence, located in PwC Toronto, which allows the
investment is, the bigger the consultancy firm or company
company to be aware of and adjust to mining companies’
hired to provide financial advice should be. This becomes
needs around the world. The mining industry is very
more relevant when you consider the fact that in Mexico
complex, and we have invested a lot of time and resources
at the end of 2012 we had more than 600 projects at
in establishing a thorough understanding of how the
the exploration stage and approximately 1,100 expansion
industry works and how we can help to improve it. PwC has
projects. Recent M&A activity has been substantial; the
developed the working knowledge required to anticipate
total number of transactions went up from 340 in 2009 to
outcomes in different areas such as accounting, tax, legal
495 in 2012. At PwC we have the financial, tax, legal and
and operations, which enables us to be proactive and
advisory capabilities to maximize profitability and mitigate
dynamic and find the best solutions possible when we
the risks involved in these sorts of transactions, and when
work together as a team with our clients.
they are carried out by foreign parties we incorporate our international network to make sure all bases are covered.
Q: What is PwC’s perspective on current investment opportunities in the Mexican mining industry?
Q: How does your company deal with the ever changing
A: Mexico has a total geographic area of approximately
regulatory environment, and which solutions do you offer
1,964,375 km . It is claimed that only about 30% of the area
to your clients?
2
388
| EXPERT INSIGHT
A: We help our clients to comply with their regulatory
The mining industry faces a confidence crisis. Low
obligations. When acting as their auditors we follow
confidence in cost controls, return on capital and
procedures to assure our clients’ compliance with their
commodity prices are keeping industry leaders awake
main regulatory obligations. We also act as their advisors
at night. To add to these concerns, the mining industry
when the auditing is being done by another firm, and in
has recently stopped outperforming the broader equity
that role we support our clients with a number of services,
markets. In response, miners are trying to rebuild the
such as tax support on reviewing or preparing their income
market’s confidence. There is a shift from maximizing
tax provisions, or legal advice on how to deal with land
value by increasing production volumes to maximizing
ownership issues. We are very well known worldwide for
returns
the abovementioned support services, most of which we
productivity
have been providing for a considerable number of years. In
confidence depends on how the industry responds to
the last five years we have also been assisting our clients
its rising costs, increasingly volatile commodity prices
worldwide in a number of areas related on the operational
and other challenges such as resource nationalism.
from
existing and
operations
efficiencies.
from
Regaining
improved investor
side of mining, such as cost reduction, operating a cost effective mine, avoiding cost overruns and delays and
PwC Global
driving deal value in hostile and non-hostile environments.
CRITICAL SUCCESS FACTORS IN THE MEXICAN MINING INDUSTRY Díaz, Bouchot y Raya Abogados (DBRA) was founded
needed for permitting processes and purchasing the
13 years ago, though its partners have been working in
necessary exploration equipment and technology. “This is
the mining and energy industries for decades. Most of
a process that, if taken step by step and with the correct
DBRA’s clients are foreign mining companies that wish
legal counsel, will allow companies to start production as
to operate in Mexico and are seeking legal help, due to
quickly as possible,” says Luis Bouchot, Partner at DBRA.
the complexity of the local mining industry. According
Both Díaz and Bouchot emphasize that mining companies
to Laura Díaz, Partner at DBRA, companies must bear in
should follow every single legal requirement carefully from
mind that to understand the industry context one needs
the beginning, to avoid the legal hurdles and problems that
to take into account the economic, social, security, health
arise from taking shortcuts. “For example, many companies
and legal aspects of mining. “Unfortunately, the lack of
that have skipped steps in order to go more quickly have
awareness of these aspects, particularly the social side,
eventually come back to us and had to start the process
can bring a lot of problems for companies,” she highlights.
from scratch, which holds up the whole process, making
In order for a foreign company to be successful in its land
it even longer than it was first expected to be,” Díaz says.
negotiation process Díaz recommends gaining an in-depth
She believes that the first step companies should take is
understanding of the history of the mining industry. “Given
to seek legal counsel to go through every stage of the
that Mexico was a colony of Spain many foreigners came
legal process. The second step is understanding the social
to the country to loot its gold, which resulted in a negative
context of the Mexican mining industry: “The Mexican
stereotype towards foreign mining companies,” she says.
revolution started in the mines more than 100 years ago;
Even though the local industry has evolved dramatically
what better proof is there of how important the social
since its colonial days, many landowners are not familiar
aspect is in the Mexican mining sector?” she points out.
with the importance of the mining industry for the Mexican economy. “This is why the knowledge and social
Regarding new regulation for the mining industry, Díaz
experience of Mexican law firms that specialize in mining
explains that Congress can formulate a proposal at any time.
is essential for the success of foreign companies. Knowing
“A good thing is that any regulation concerning the Mining
how to approach people plays a very important role in the
Law only requires approval from the President. Any new
value proposition we offer to our clients,” Díaz adds.
regulation does not have to go through Congress, which avoids the problem of going through a long restructuring
In DBRA’s experience it takes approximately four years
process. However, we do not foresee further mining
for a mine to start production. This includes the time
regulation, at least in the short-term,” she concludes.
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| VIEW FROM THE TOP
FACING FINANCIAL CHALLENGES IN THE MINING INDUSTRY CÉSAR GARZA Partner at Deloitte Q: How are increasing costs and growing mineral price
decided to focus on specific assets, usually leave behind
uncertainty impacting the mining sector internationally?
projects that can be of great value for smaller companies.
A: In the past 10 years, metal prices have increased five
This will keep the industry very active and creates high
or six times their previous value. This situation activated
expectations for fresh capital entry in the short-term.
many projects in Mexico had been put on hold, because international prices before did not justify extraction and
A: What long-term strategies does Deloitte advise its
exploitation activities. When the mining industry was
clients to implement in order to deal with these challenges?
activated, many providers of a wide range of inputs were
A: Deloitte provides consulting services to the mining sector
not prepared, resulting in market demands not being quite
worldwide. We have come a long way with our practices,
satisfied. The rising operating costs are one of the most
and have positioned ourselves among the new generation
important challenges that mining companies face and not
of miners. In some countries, mining generations were lost
everyone has the technology or resources to overcome this
due to prolonged price volatility, and relatively low mineral
hurdle. For example, the prices for energy and other supplies
prices in general, which in turn led to a significant loss of
required in mining operations and transportation, such as
industry knowledge. This has affected not only operators
heavy machinery, experienced an important increase. On
but also consulting experts who were forced to abandon
the other hand, there have been periodical shortages of
the sector during these periods, creating important blank
chemical products needed in the industry, affecting the
spaces. When conditions in the market improved, the lack
continuity of operations and their profitability. In order to
of specialized talent, such as mining engineers, and financial
mitigate this, margins are sometimes sacrificed to continue
information specialists, among others, became a challenge.
operating. As if this was not enough, as a result of increased
We are looking to be closer to mining companies, studying
demand, the quality of inputs has been lowered significantly,
their challenges, and looking for the best business solutions
with the consequence that companies must also deal with
for them. We have developed specialized services for
early replacement costs.
diagnosing the best way to use each input and resource at each stage of the mining process, in order to create more
Q: What are the particular challenges that the industry is
efficient and cost competitive processes that will generate
facing in Mexico?
value for the company. We actively collaborate in the actual
A: The aforementioned challenges have a direct effect on
operations of our mining clients rather than working from an
the operation. However, from the additional total costs
office; this is what distinguishes us from other firms.
perspective there is also another important issue: taxes. In
390
Mexico we do not have big fiscal stimulus or subsidies for
Q: What is your perspective on the growth potential of
the mining industry, as some other countries do. This affects
the mining industry?
our competitiveness and reduces the size of our operating
A: The industry will continue to grow, without a doubt.
margins. The trends we have seen in investment in Mexico
Every project is exposed to market volatility and, for as
in the past six years reflect that, even though the costs can
long as there continues to be significant uncertainty in
be high, operational margins in the country are still very
international metal prices as well as financial markets,
attractive and manageable. Nevertheless, the operational
companies might not have access to the funding they need
and financial challenges must be kept in mind in order to
to continue operating or investing. Nonetheless, operating
maintain a realistic perspective on the current situation in
margins still exist and metal prices analysts consider that
the industry. Mexico is a privileged country due to its mineral
the foundations have been laid that are likely to prevent
deposits, and relevant investment will continue as a result
gold and other metals from losing more value in the short
of the many deposits and mines that were explored and
term. They believe that conditions exist for prices to resume
exploited in the past and are now ready for a second phase.
their upward trajectory. Personally, I believe the industry
Also, many large Mexican and foreign companies that have
will experience significant growth in the medium term.
| VIEW FROM THE TOP
A LEGAL PERSPECTIVE ON MEXICO’S TAX REGIME LUIS JIMÉNEZ ROBLES Tax Director of Baker & McKenzie
Q: What are the main fiscal services that Baker & Mckenzie
Q: What is the importance of carry back in mining
provides?
activities, after the depletion of the mine?
A: Baker & Mckenzie is a comprehensive law firm with
A: Mines have certain life cycles that tell us how long
an important presence all over the world. We work with
production will last and how the mines will operate. Once a
a lot of clients entering Mexico for the first time and we
mine is no longer profitable and must be closed, significant
help them with all the legal work that they require, as
post-production expenses and environmental control
well as with legal, tax, and environmental due diligence.
activities sometimes generate losses for the company.
90% of our clients are foreign companies. We help them
Mexican law does not allow the deduction of taxes against
to understand the Mexican business environment, which
those losses, which I believe is unfair. If we look at the
can be complicated, and we also offer advice on tax
project as a whole and not only by tax years, the company
projections, capitalization rules, repatriation techniques,
will suffer financial losses in the first and final years, but the
the structuring of agreements, among many other services.
losses of the final years do not count. In other countries it is possible to carry back those losses in order to mitigate
Q: What is your general perspective on the Mexican legal
them, by recovering taxes. This is an example of what
system for the mining industry?
could be done in Mexico and it is already included in the
A: Given that there is not a specific tax regime for the
tax laws of other countries.
mining industry in Mexico the general rules apply. There are three main federal taxes in Mexico: income tax, flat rate tax
Q: What changes do you expect to see regarding fiscal
and value added tax. Those taxes apply to all industries,
policy for the mining industry in the near future?
which is a good thing because they give foreign investors
A: It is very likely that in 2014 a new mining tax will be created
a clear overview of the country’s fiscal framework. The lack
that will have negative effects on Mexico’s attractiveness
of specific regulations for the mining industry can also be
as a destination for investment. The problem is that when
an inconvenience. Mining companies invest a lot of money
metal prices go down the taxes will remain in the law, and
and resources over a long period of time and there is
this will cause problems in the industry. The government
always a possibility that in the end the company will not
needs to create incentives for companies to come to
be profitable. If Mexico really wants to become a more
Mexico – the government should see the mining industry
attractive investment destination, it needs to have a more
as an industry that needs to be supported. Despite the
beneficial tax regime for the mining industry.
complications stemming from high taxes and regulations there is business to be done and investors are still attracted.
Q: What solutions could be implemented in order to
Mexico is going to continue receiving investment to
optimize taxing policies for the mining industry?
develop its mining industry, but if we had a more attractive
A: Mining activities require large investments within the
fiscal framework for the industry, we would receive even
first few years of a project, thus generating a tax loss.
more investment. There are no incentives at all for the
The income tax law has a 10-year carry forward period,
mining industry; for instance, mining companies have to
but that period should be longer for mining companies –
invest in very isolated areas and start from scratch, building
about 20 to 30 years. The law allows companies to deduct
houses for employees, as well as roads. Investment is not
pre-operating expenses over a longer period, but when
limited to mining facilities but to the entire infrastructure of
a mining company has several projects this becomes an
a mining town, and the law should offer tax incentives for
issue because losses are being generated at different
investments that help very poor communities boost their
times. Given the importance of the industry, the law should
economies. The mining industry can be very useful in the
be reviewed very thoroughly and amended in order to
development of local communities, since it creates more
efficiently regulate and satisfy the mining industry, or there
business opportunities and employment in remote areas
should be a separate set of laws for this industry.
where people do not have any other source of income.
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| VIEW FROM THE TOP
FACING THE MINING SECTOR’S LEGAL CHALLENGES JUAN FRANCISCO TORRES LANDA Partner at BSTL Abogados Q: How can international investment in the mining industry
way to start a mining project - social responsibility is key.
benefit both Mexico and the investors?
Another concept related to social responsibility and
A: Being realistic, there is opportunity for a lot of growth
environmental
in the Mexican mining sector. If you ask some far-left
significant problem mining companies used to face when
politicians, they might go so far as to say that international
they shut down mines was that after they vacated the mine
mining
country’s
everything was left in chaos, especially in open pit mines.
wealth, but fortunately that view is not shared by many.
Today, companies are increasingly leaving the mine area
International companies that work in Mexico develop
in a better shape than before they arrived as a result of
projects, generate employment and economic activity, and
reforestation and infrastructure development. Therefore,
pay income, employment and real estate taxes. Stopping
when investors want to open new mines in the region, the
foreign investment would not be the way to create more
local communities will welcome them.
companies
are
taking
away
the
concerns
is
reclamation
work.
One
jobs or enhance the economy. Mines also usually operate in areas where there are very few other options for economic
Q: Are companies starting to make these efforts from the
development, so from a public policy perspective the key
first day of operation?
should be to ensure that the necessary conditions exist
A:
for the industry to grow. In my opinion, the authorities do
reforestation at the same time they are exploring or
now understand that they need to create incentives that
exploiting, which is good because they are changing the
allow the industry to keep growing. Mining activities are a
negative stereotypes associated with mining. This also
perfect fit for states like Zacatecas, Durango, Chihuahua,
means that they are creating jobs even before production
Sonora and Sinaloa, along with other regions that are not
on the mine starts, as well as building a relationship with the
necessarily suitable for other productive activities but
community from the beginning of the project. It is a win-
which have important mineral and metal deposits.
win situation for both the companies and the communities,
I
have
seen
companies
start
working
towards
provided that good lines of communication are established Q: What do you identify as being the main challenges and
and permanent dialogue is fostered.
risks the industry is facing? A: Energy is one of the main priority areas. In 2012 there
By law every municipality needs a water treatment plant
was a severe energy shortage in Chile’s mining industry,
but very few have one. Local governments would be happy
to the point where some projects were halted because of
to allow mining companies to build water treatment plants,
it. We cannot afford that to happen in Mexico; we need
because they provide water without drilling new wells. In
to make sure that electricity is available, given that the
some areas water is so scarce that drilling more wells is
mining industry is a big consumer of electricity. We are not
not permitted, and hence building water treatment plants
yet in the same position as the Chilean industry, but the
provides an obvious opportunity for mining companies not
government must make sure that the CFE keeps increasing
just from an economical point of view, but from a socially
its power generation capacity, which is directly connected
responsible and an environmental perspective as well.
to natural gas availability. Q: What will be the main trends in mining that will define
392
Water is also an issue, since it has become an increasingly
the direction of the industry in the coming years?
scarce
distributed
A: Democracy is here to stay. We are achieving greater
throughout the country. There is a lot of water in the south,
transparency and civil society is holding the government
where there are problems with floods, whilst in the north of
accountable. Mexico moved up two or three places in the
the country the opposite is true, where limited amounts of
world transparency rankings, compared to the downward
water are found in fewer places. A legal battle to take away
trend of previous years. The prospects are positive and the
more water from local communities would not be the right
country is experiencing consistent growth.
resource
that
is
very
unevenly
MEXICO’S SECURITY ISSUE: NOT A BARRIER FOR INVESTMENT Perhaps
evident
that the country is a leading emerging market. Often, the
shift of Mexico’s new political
the
most
first thing that comes to mind for an international observer
administration has been in its
regarding Mexico is insecurity, and the fact that the country
communication strategy. The
is a leading emerging market is not generally well known,”
drug-related violence and the
explains Clare. The fact that the media focused its attention
fight against drug trafficking
on the security situation, created a state of alarm for many
that
Calderón’s
years, as Clare highlights. “Until very recently, there was
sexenio are no longer the
no real focus on its economic development, stable market,
central theme - the economy
the diversified economy with huge investments coming in,
is.
Peña
and so forth,” he adds. Figures show that Mexico’s security
Nieto has proposed several reforms that look set to make
situation is not close to that of a failed state; nevertheless,
the country’s economy more competitive and places it
the country still faces security challenges.
Jonathan C. Clare, Regional Director of Genric
defined
President
Enrique
as the main focus of the administration. The country’s image revamp has become evident as more main media
Strengthening law enforcement agencies is just one step
outlets have begun to focus on publishing the business
towards achieving legal certainty in the country. “Some
opportunities available in Mexico. Seemingly, gone are
of the initiatives that have been implemented in recent
the days when the Pentagon could issue a warning that
years by the British Council, with the support of the British
the country risked becoming a failed state. “Mexico faces
Embassy, have demonstrated how effectively different
certain challenges of course, with public security being the
areas of the judicial system can be strengthened. The
most important. The country is facing a security-related
introduction of oral trials and greater transparency is just
problem, and even though the reality is that international
one example we have seen of how Mexico can strengthen
businesses are able to operate effectively without many
its rule of law,” details Clare. There is a positive feeling that
concerns, negative perceptions of the country remain
judicial reform will take effect not only at the federal but
strong,” says Jonathan C. Clare, Regional Director of Genric,
also at the state level, even if the two sometimes operate
a leading private security company with global operations.
independently. “We will see more police forces receiving better training from the beginning of their careers. This is
When Felipe Calderón came into office in 2006, it became
already happening in places such as Nuevo Leon, where a
very clear that the administration’s main focus would be
new Civilian Police Force has been created to improve the
the security issue. His strategy was based on engaging
system from a ‘boots on the ground’ level, in partnership
with the armed forces more closely than the previous
with the local community, the business sector, and through
administration, as well as the publication of a list of the 37
collaborative efforts with federal and local authorities. We
most wanted criminals that his administration identified.
are likely to see more of those types of initiatives in the
The administration was successful in bringing together the
coming years,” he adds. Clare also stresses the importance
different security forces to tackle this particular issue for the
of pushing forward the judicial reform as a priority for
first time. This strategic partnership delivered results; arms,
transforming Mexico’s security issues, without neglecting
weapons, and drugs were seized, criminal groups were
the importance of institutional collaboration. Another
detained, and around two thirds of the most wanted list was
essential priority is training. “The government could
captured or killed. Clare explains that Mexico is currently
approach more international partners that have experience
facing similar challenges to those that Colombia faced in
of tackling security or implementing reforms and would be
the 1980s and 1990s, when very large criminal groups were
willing to share examples of best practices,” he emphasizes.
tackled by the local authorities and atomized into smaller groups as a result. In order to improve this situation, Mexico
Security can become a concern given that some of the
is seeking to strengthen its institutions and authorities at
areas that have the biggest mining potential are located
the municipal, state, and federal level, in order to be more
in very isolated regions, with a limited institutional support
effective in combating crime. “There are many examples of
network that leaves room for potential risk. Nevertheless,
how several countries have done this successfully, both at
Clare highlights that this should not determine investment
a federal and municipal level, but in a country as complex
because these risks can be mitigated without making vast
as Mexico it has become a serious challenge,” Clare says.
investments in security. “There are thousands of examples
“When most people look at Brazil the first things that
of foreign investors in Mexico, whether big mining
come into their mind are not the security issues, but the
companies or small, that have faced and overcome this
upcoming WorldCup and the Olympics Games, or the fact
challenge successfully,” he points out.
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| VIEW FROM THE TOP
DRAWING MINING COMPANIES TO THE MEXICAN STOCK EXCHANGE JOSÉ MANUEL ALLENDE Strategic Planning and Promotions Director of Bolsa Mexicana de Valores Q: How have the equity culture and attitudes towards
Q: The BMV recently made progress towards joining the
the Bolsa Mexicana de Valores (BMV) changed in the last
Integrated Latin American Market (MILA) when it bought
decades?
a stake in the Lima stock exchange. How will this venture
A: The equity culture in Mexico has changed significantly,
impact the competitiveness of the BMV?
particularly in the last decade. The pension funds regime
A: The Exchanges in Chile, Colombia, and Peru have already
was changed in 1997. These pension funds, known as
established the MILA agreement, which facilitates cross
the AFORES, now handle around US$150 billion, while
border trading, and we made a direct investment in the
mutual funds handle around US$150 billion, and insurance
Bolsa de Peru. It is hoped that from 2014 the BMV will be
companies handle around US$40 billion. Altogether the
part of that market, but first we require regulatory changes
BMV is now handling around US$400 billion in savings,
in order to adapt Mexico’s trading model. We are working
which has made a great change to the dynamics of the
on that and hopefully by next year we will be routing orders
market. There is a lot of money in the exchange which 10 or
directly to the local market, so that for example Mexican
20 years ago simply was not there but today provides an
investors will be able to acquire shares in Peruvian mining
important source of long-term funding in the local market.
companies, and vice versa. During the second stage of the
In the last five to 10 years the BMV has also developed a
MILA concept IPOs could be done in other markets.
local institutional investor base which needs to invest in local products in Mexico.
Q: Mining companies were the first to issue financial instruments in Mexico. What role does the mining industry
The BMV has evolved dramatically in the last 10 years.
play in the development of the Bolsa Mexicana de Valores?
It now has a large and resourceful investor base, and its
A: The mining sector was one of the very first sectors to
infrastructure, management procedures and regulatory
come onto Mexico’s stock exchange, many decades ago.
framework have advanced enormously. The securities
There is now a special sector index for mining, but it has
market law in Mexico meets international standards, and
mainly been the bigger mining companies that have been
the BMV has invested heavily in world class technology
listed. These big names that are already listed on the BMV
and trading systems. The brokers’ houses have also grown
account for an important proportion of the mining sector
dramatically in number and size, and in the services that
GDP, so in that sense the mining sector is important for
they provide to customers.
the BMV. Several hundred companies are investing in the mining industry, many of which are foreign owned, and
Q: The Bolsa Mexicana de Valores has recently listed
these companies could eventually be listed on the BMV.
itself on the market. How has this changed its overall
394
operations?
Q: How can a listing on the BMV, as well as the other
A: As part of a restructuring, the BMV was first listed in
instruments that you offer, benefit Mexican mining
2008 in order to raise money to acquire a different set of
companies?
companies that provide a range of services on trading,
A: Rising share prices are a good incentive for mining
clearing, settlement, and provision of information on
companies to list on the BMV; valuations in Mexico are very
the market. By doing so the BMV was able to develop a
good at the moment, making it attractive for companies
comprehensive infrastructure to provide support to the
to raise money through the market. Many mid-sized
financial market, which has helped us to become much more
companies simply do not consider the BMV, disqualifying
proactive and aggressive, and resulted in dramatic growth. It
themselves based on the belief that they are not big
also brought a lot of innovation, which has been important in
enough or that they will not comply with the requirements.
helping the BMV to compete with the US and other markets.
Once production has been going for a couple of years
By being listed we are also sending a message to other
mining companies would do very well to list on the BMV,
companies, promoting that they join the BMV as well.
and the risk element would not be a factor.
| ALTERNATIVE INSTRUMENTS
Mining operations are capital intensive, particularly in the
BOND INSTRUMENTS (CERTIFICADO BURSÁTIL)
initial stages, and they must be funded by equity as opposed
“This is an extremely flexible instrument for mining
to debt, but mid-sized mining companies are often not
companies to make debt placements. They work
quite big enough to have a full listing on the exchange. The
similarly to a bank loan: companies make placements
innovations introduced by the BMV in the last three or four
according to their requirements – deciding the
years, and the new instruments that have been developed,
currency and whether it will be long-, medium- or
provide a valuable source of funding for mid-sized mining
short-term. This is a good incentive for stabilized,
companies. For these companies the instruments can act
income-producing companies.”
as a stepping stone - they give them access to the capital they need in order to develop their projects, to grow, and
CERTIFICADO DE CAPITAL DE DESARROLLO (CKD)
eventually to do a full listing on the BMV.
“CKDs are similar to a private equity fund, except that they are listed on the exchange. In Mexico these
Q: What is BMV’s strategy to motivating international
provide a way for institutional investors – such as
investors and brokers to invest in the BMV, and specifically
pension funds – to gain access to the market. With
in mining companies?
the CKDs the BMV combines all of the benefits of a
A: We are focusing now on attracting a new set of
private equity investment, within a secure environment
investors, such as high frequency traders. It is computers
of disclosure, corporate governance, and supervision.
that send orders to the exchange and provide the liquidity
Through this instrument it is possible to invest capital
these days, and we are making big efforts to ensure that
in six to 10 companies, diversifying the risk and helping
high frequency traders know that the exchange is an easy
to build these companies up in the hope that in a few
access market with fast execution. These investors are
years they will be able to make a full listing on the
important because they provide a lot of liquidity, and the
exchange. This makes the instrument very attractive
most important thing for a market place is to have liquidity.
not only for investors but also for companies looking
Similarly, if mining companies have greater liquidity, by
for investment.”
nature they will attract more investors. With regards to the TSX, Toronto is a prime mining market and over many years has developed an investor base that perfectly understands the mining industry. Toronto has investors that are prepared to accept the inherent risk involved in investing in the early stages of a mining project, such as the initial phases of exploration, reserve certification and pre-feasibility and feasibility studies. For that reason most mining companies want to be listed in Canada. The Mexican stock exchange can complement the offering of the Toronto stock exchange – many mid-sized companies that are already listed in Toronto are heavily invested in Mexican mines, and a listing in Mexico can provide them with local exposure, promoting them as a local company. Many companies that are based in Canada are seen as foreign, even when they are heavily invested in the Mexican industry and have all of their assets in Mexico. From the moment that a company becomes listed in Mexico it starts to have Mexican investors - it has to be more transparent, and the company starts to be seen as more Mexican; these things can add real meaning to a project. The base of investors that we have locally would be willing to invest in these types of companies, and as the Mexican market evolves we will also be able to attract specialized investors.
395
CONTRIBUTION OF COMMERCIAL BANKS TO MINING INVESTMENT The activities of the mining
the risks associated with the mining industry. Mexico is being
industry involve two aspects
explored and offers big opportunities for seed capital but this
that make project financing
process takes time and infrastructure must be created. The
crucial for its development:
main challenge for the mining industry in terms of bankability
high risk and capital intensive
and financing is obtaining financing for exploration in Mexico.
projects.
Complying with very stringent credit standards that some
Mining
the
banks are working with in the industry is another issue. The
combine
NI 43-101, a Canadian guideline to disclose information about
the intensive use of financial
mineral projects, is followed by companies to report proven
resources
risk,
and probable reserves but it is not a common practice in
and banks are reluctant to participate during this phase.
Mexico. “It costs a lot of money to follow this protocol and the
However, they can support companies in an advisory role,
majority of Mexican miners do not want to invest in it. If mining
enabling them to access financing. By being a Canadian-
companies do not disclose their information in this particular
minded bank, Scotiabank has specialized engineers that
way, it is impossible for any Canadian banking institution to
can provide the needed expertise to deal with these kinds
lend them money,” Díaz de la Garza remarks. “This implies
of activities. One of the most common mechanisms to
that companies immediately preclude banks like Scotiabank,
raise funds for mining exploration activities are IPOs on
Bank of Montreal, Toronto Dominion, Export Development
the Toronto Stock Exchange (TSX). “The idea of taking
Canada, and other of our Canadian competitors.”
Carlos Díaz de la Garza, Managing Director Corporate Banking & Head of Loan Syndications Mexico at Scotiabank GBM
especially
activities,
exploration
during stage, with
high
companies public is that they can obtain enough resources to start exploration activities,” says Carlos Díaz de la
The Mexican mining industry needs to understand that
Garza, Managing Director of Corporate Banking and Head
banks require proven and probable reserves to be included
of Global Loan Syndications Mexico at Scotiabank Global
in their financial statements in order to become eligible for
Business and Markets.
financing. In order to verify the existence of the mentioned reserves, Scotiabank has a team of engineers who visit the
Changes to the Mexican legislation resulted in the opening
mines and certify that those reserves are in place. “Their
of the Mexican economy and faster growth of the mining
problem is how to get the capital to jump from having a
industry. “Before this change, the law did not allow
claim, to finding the resource, and to starting production
companies to have more than 40% foreign ownership, nor
activities,” Díaz de la Garza explains. “This step involves
did it allow them to have foreign representatives on their
an investment of at least US$30 million in the best case
boards. Since 1992, changes in the legal framework fostered
scenarios, but the required investment to start production
foreign investment in the mining industry,” explains Díaz de
frequently is between US$50 to US$80 million.”
la Garza. “As a result, Canadians began investing in Mexico due to their experience and expertise in mining activities.
“Potential investors need to understand that there is
There are currently about 240 Canadian companies carrying
an inherent risk in mining activities, but that this risk is
out more than 850 exploration projects in Mexico.”
manageable and can be mitigated,” Díaz de la Garza points out. “It is one of the banks’ responsibilities to promote
396
One of the main challenges in the mining industry is moving
this understanding. If one mining company successfully
from exploration to production given the large investment
completes an IPO in Mexico it would be demonstrated that
involved in building a mine. Canadian companies also
the stock exchange can be a viable option to obtain funding.
often fund these projects by floating companies on the
When comparing the Mexican market to others, it is easier
TSX. “Mexico needs to promote a different mining so that
to find funding in mining-oriented countries such as Canada,
Mexicans are aware of the various options to start investing
Australia, and the US. This may be one of the reasons of why
in mining,” Díaz de la Garza emphasizes. “Banks are ready to
so many exploration sites belong to Canadian companies.”
lend money once a mining company has started production,”
With the development of many mining projects in the
Díaz de la Garza highlights. “In Mexico we lack seed capital
coming years, banks such as Scotiabank want to be industry
to take projects to the next level.” The Mexican mining
leaders in the mining sector by offering their financial
industry can obtain credit from the Government Trust for
products, expertise, and knowledge to clients. “We have
Mining Development (FIFOMI) but this credit institution has
a shared responsibility along with investors, the Federal
a limit of US$5 million. Gaining access to capital is easier in
Government, the banking industry, and other players to
Canada or the US since as a result of their financial culture
promote investments in the sector. We all benefit from a
these countries have developed a better understanding of
stronger mining industry,” he concludes.
| VIEW FROM THE TOP
CONSOLIDATING MEXICO’S MINING PROJECTS MAURICIO CANDIANI GALAZ President & CEO of Candiani Mining
Q: What are the advantages that Mexico’s business
Q: What are the current needs of mining companies in
environment provides to mining companies?
terms of transactional advisory services?
A: First of all, we have a very mature legal framework that
A: When clients approach a firm like ours, the things they
allows private participants to work alongside the public
want to know is the value of their property and how they
sector in mining. In mining, private corporations can have
can find someone who is willing to invest in it. We normally
up to 100% foreign investment and can hold 100% of the
hold a selling mandate or a buying mandate, depending on
concession rights. Those concession rights can be sold
the transaction our client is willing to do. We give an opinion
onwards and can be returned to the government, without
on the transaction for each particular asset, we discuss
any kind of penalties whatsoever. They can alternatively
the value range and then we start approaching potential
be kept for 50 years, as long as the owners comply with
partners all over the world. Depending on the geology of
all of the obligations that come with the concession title.
the project and the stage of development, we know who
Another crucial matter that benefits Mexico is our mature
might be interested in acquiring such a project, and we then
business environment for mining. In Mexico you can find
facilitate the assessment and evaluation of the property, in
drillers, geologists, engineers, and suppliers of all kinds. In
order to try and put an agreement into place. Once we are
certain areas there are some infrastructure constraints, but
successful, in terms of putting the right transaction for the
on the whole Mexico has made a huge effort to improve
right project into place, we provide a guardianship over that
the available infrastructure, not only for mining but for all
transaction. Normally purchase agreements can last from
of the industries. Also, we have very open competition
three to five years depending on the property, so we are
between Mexican private conglomerates and powerful
responsible for keeping those contracts in good shape and
foreign companies. The fact that companies can buy, reduce,
making sure that both parties are honoring their obligations.
increase, exchange, donate or even inherit concessions, allows this sector to be very dynamic and attractive.
Q: What are the unique capabilities of Candiani Mining in assessing opportunities, promoting projects, and
Q: What opportunities did Candiani Mining detect in the
structuring risk-balanced mining transactions?
mining industry?
A: What has given us a very strong competitive advantage
A: Candiani Mining is a brand new initiative in Mexico.
is that we understand the cultural basis of each of the
We decided that we wanted to facilitate mergers and
parties. We understand how Canadian, American, and
acquisitions; we wanted to help corporations release and
Australian companies think and what they are looking for,
transact their non-core assets using our boutique firm. We
but we also understand the Mexican business culture. In
have helped companies to fulfill exploration contracts with
most of the transactions we have closed, half of the battle
the option of purchase, which are quite common these
was to decode the two-part logic and be sure that they
days, and we have been significantly successful in finding
could both be combined and satisfied in one transaction.
counterparts for those projects. We started by simply
This is extremely important because often transactions fail
delivering this type of service to the big conglomerates,
as a result of two ideologies that are not compatible.
but as time passed we saw the opportunity to do the same thing with what we call independent clients. Independent
Q:
What
is
Candiani
Mining’s
committment
to
clients are all those people who for whatever reason are
strengthening the Mexican mining sector?
holding a mining claim, and either want to enter into a
A: We believe that we strengthen the Mexican mining industry
joint venture with a capital partner or sell their concession.
every single time that we put a transaction into place. Where
Either way, we can help our customers to find the best
we make these kinds of agreements, money will flow into the
buyer in the world for their assets. The idea is to promote
projects and therefore into people’s pockets. If you have a
that property on their behalf, and to make a beneficial
project that is receiving investment on the ground then you
transaction with a junior exploration company.
are doing something positive for the country.
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| VIEW FROM THE TOP
MEXICO’S GROWING IMPORTANCE AS AN INVESTMENT HUB EDMUNDO GAMAS Principal of Ultra Maris Capital Q: How would you describe Mexico’s current business and
perspective
economic environment, and how well-positioned is the
standards recommended by the IMF and the Washington
country when it comes to attracting investment?
Consensus were adopted. The judicial system is slow, and
A: In the current global economic environment Mexico has
simple matters like getting an invoice paid usually take a
become a very attractive place for investment for two main
long time. Administrative processes are in general very
reasons. Firstly, the financial crisis has primarily affected
complicated. The third obstacle is the workforce’s lack of
developed economies, leaving growth opportunities for
adequate training. Perhaps the biggest problem Mexico
countries like Mexico, and secondly, the countries with
faces is its low educational level. If that is solved, many
which Mexico has been competing during the last 10 years,
other hurdles will disappear. There are other problems
the BRICs, have fallen out of favor. Mexico has positioned
Mexico shares with many developed countries, such as
itself very well as a result of its sound macroeconomic
an underfunded pension system and a national health
performance and the fact that it has already paid the price
system with insufficient coverage and quality. These
of adopting a free market economic model. Even though
microeconomic matters hold the key to growth.
in
the
early
1980s,
when
international
the country has faced many problems, Mexico is now ready to receive an increasing amount of foreign direct
Q: How would you describe the current availability of local
investment, and the current business climate in the country
financing tools for the Mexican mining industry?
is very favorable.
A: Local funding is still heavily skewed towards banks, due to the relative inexperience of local institutional investors
Q: What are the most important challenges for achieving
in funding mining projects. Local institutional investors
economic development in the country?
must develop the skill set to perform due diligence on
A: There are still many obstacles to economic development.
mining projects, or become comfortable investing through
Security is the first one, as investment could grow even
dedicated mining funds. Ultra Maris Capital facilitates both
faster if there was no violence. The second obstacle has to
mining and infrastructure financing, and we can say that
do with the fact that from a microeconomic perspective
in neither is there a shortage of money. Looking at today’s
the country is still lagging despite the fact that Mexico’s
domestic and international arenas, there are pension
economy became very solid from a macroeconomic
funds, insurance companies and sovereign funds, among
UNDERSTANDING THE COMMODITIES MARKET
398
Commodity trading services are an interesting option for
The mineral commodity market has seen many changes
metallic mineral suppliers looking to place their raw materials
in the past decade, not only when it comes to price
in hands of buyers without further complications. Mining
fluctuations but in terms of how business is conducted.
companies are looking for traders that can maximize their
Everyday buyers are becoming more strict and selective
product value, minimize their risks, and eliminate logistics
on the material they purchase. For example, China – where
challenges. “The commodity market is constantly changing,
most of the commodities end up – has recently implemented
prices fluctuate, and trading policies are constantly redefined.
one of the biggest quality control systems, called the “Green
Mining companies need partners with global networks to
Fence” policy, and suspended the import licenses of many
keep up with the rapidly shifting market conditions and to
international companies. “We have seen how the new
react efficiently,” says Raúl Arias, Director General of Traxys,
Chinese policies are directly influencing the market. During
an international provider of financial and logistical solutions
2013 purchases have decreased considerably, and some
for the ferroalloy, mining and energy industries.
suppliers operating in Mexico have shipped 25% to 50% less
others, that have large amounts of money ready to be
connections with pension funds, insurance companies,
invested. Furthermore, these entities are eager to obtain
sovereign funds and dedicated mining funds. For the mid-
higher returns, given that their traditional investments in
sized companies in our target clientele group the principal
government bonds or in high quality corporate bonds,
financial challenge is finding the equity required to make
currently offer low yields. These financial institutions have
a funding package possible. Ultra Maris Capital’s service
a serious challenge in delivering what they promised to
offers excellent added value in this respect.
their retirees, policyholders or owners. They need to get Q: How can the risks of mining activities be mitigated to
higher returns.
reduce the probability of clients being unable to meet From our point of view banks, especially international
their financial obligations towards investors?
banks, are on course to becoming the least relevant
A: In a mining due diligence process many scenarios are
players when it comes to funding mining projects. They are
considered and risk models are evaluated. At the outset
increasingly supervised by authorities, and they have to
of the project, investors or lenders must decide where
keep high capital and liquidity ratios, so for them investing
their comfort level lies, and to what extent they expect
in long-term projects is not a very attractive prospect at
the project to be resistant to financial stress, especially
the moment. As banks have reduced their participation
given the volatile commodity prices and the increase in
in funding the mining industry and other capital-intensive
input prices over the course of the business cycle, and
industries, long-term institutional investors have stepped
the impossibility of knowing how long each cycle will
in,
and
last. Risk mitigation, beyond a prudent level of equity, can
sovereign wealth funds, to dedicated investment funds.
involve using futures markets or commodity derivatives
These investors are funding projects through private or
to eliminate or reduce price uncertainty, which poses the
public placements of shares or bonds, and we think this is
biggest risk in any mining project.
from
pension
funds,
insurance
companies,
the way that most funding will be done in the future. Q: What is the value proposition of Ultra Maris Capital? Q: What level of involvement does Ultra Maris Capital
A: We offer fully integrated funding services to our clients,
Partners have in the Mexican mining industry?
and our value proposition has four elements, which
A: We are very interested in facilitating institutional capital,
distinguishes us from banks. First, we help the project
given our role as a boutique investment bank. We are
secure a source of equity for a complete funding package.
therefore advising these projects in their development
Second, we provide consulting services for the integration of
and the preparation of the required documentation,
the documentation package required for funding. Third, we
including feasibility studies; we are actually engaged in
provide support in any negotiation that must be done for the
the preparation of several feasibility studies. Our target
project vis-à-vis its sources of funding. Fourth, we have an
clientele are mid-sized companies. These companies
extensive network of service providers to assist the project
benefit most from our counsel, as well as funding
in the business, accounting, legal and technical realms.
products than what they shipped last year,” Arias details.
of our buyers with the type of ore our producing customers
This reduction in exports is a result of the unawareness
are offering,” Arias explains. Traxys serves as an agent of
of mineral producers regarding the new conditions being
mineral producers by representing its clients’ interests from
designed on the Asian continent. “Many companies are
the first customer introduction to the ultimate delivery
missing the fact that Indian and Chinese smelters have very
and execution of the sale. “Dealing with new customers in
high inventories, and have a lot of refined metal available, so
exotic markets can be culturally and financially challenging.
now they are able to establish new limitations regarding the
Our clients greatly benefit from our international industry
quality of the products they buy,” he adds.
knowhow since we are able to minimize the risk and protect them regardless of the unpredictability of the situation,”
“Today everything depends on the specifications of the
says Arias. Traxys coordinates directly with the mineral
materials global clients demand and the restriction they
producing companies to find the most suitable markets for
impose. Some of them do not want to receive base metal
them. The company undertakes all the logistics and fiscal
concentrates with high cadmium values, others do not
matters to provide a competitive service that ensures the
want fluorine. It is a matter of matching the requirements
produced minerals are reaching the international clients.
399
| VIEW FROM THE TOP
MINING HUMAN CAPITAL PABLO GUTIÉRREZ Senior Consultant Latin America at Swann Global
Q: What is the main focus of Swann Global in Mexico?
up skills. Our strategy is to position regional offices in local
A: We selected the mining, metal processing, and energy
mining and resource markets, and this has allowed us to
industries as the first sectors to focus on, and then went on
understand our customers. We collaborate closely with
to expand into construction and engineering. Swann Global
our clients to define the candidate profile they are looking
is the only global company in the market with such in-depth
for. Swann Global guarantees its clients a replacement
and sector-focused human capital expertise. There are
period of three months, committing itself to finding the
numerous major players in Mexico, however over the last
appropriate candidate for the job within 12 weeks. Our
20 years Swann Global has focused on mining and natural
search methodology consists of partnering with clients
resources, giving us an advantage over the competition.
from day one to define and establish the needs for the
In addition, our global management team has more than
role. Afterwards, we internally review the search and begin
80 years of technical expertise within these sectors.
performing the appropriate qualifying and psychometric
The mining industry has unique working conditions, and
testing. With proposals in hand, we advise our clients on
search firms like ours must have the right experience and
the best way to move forward.
knowledge if we are to attract the world’s best talent. These firms must visit the mines and understand the specific
Q: What makes Mexico a good market for Swann Global?
working environment, and also know that the candidates
A: Mexico has a great mining history, and we are proud to
should be physically fit and ready for challenges, as well as
be a part of it. As in any other country, companies face
having communication, management, planning, and follow
the challenge of finding and keeping the right people,
The Miner’s Custom Broker Nuestros servicios: • Especialistas en empresas mineras y proveedores de la industria minera • Importaciones y exportaciones bajo Regímenes Definitivo y/o Temporal, por las aduanas de: Nogales, Sonora (vía terrestre), Nuevo Laredo, Tamaulipas (vía terrestre), Manzanillo, Colima (vía marítima), Veracruz, Veracruz (vía marítima), Aeropuerto Internacional del D.F. (vía aérea) y Pantaco, D.F. (vía Ferrocarril) • Servicio de Comercializadora • Coordinación Logística de Servicios y Transportación • Asesoría en materia de Comercio Exterior y Aduanas • Asesoría para la obtención de permisos especiales de importación, Programas de Importación Temporal para IMMEX y para cumplimiento con la reglamentación y requisitos de diversas dependencias oficiales tales como: Secretaría de Economía, Secretaría de Salud, SEMARNAT, PROFEPA, COFEPRIS, SEDENA, etc.
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Agentes Aduanales de Sonora, S. de R.L. de C.V. A.A. Napoleón Romo Medrano L.P. Gema Verónica Parada Acceso al ITN 22, 2o. piso Ramón Corral 15, Col. Unidad Deportiva. 84060. Country Club. 83010. Nogales, Sonora. México. Hermosillo, Sonora. México. Tel: 631 311 2528 Tels.: 662 210 5681 y 210 1396 Nextel: Radio 92*902802*3, Tel. 662 321 0941
Arizona Forwarding Co. L.C.I. Carlos Morales Warehouse Manager 1590 W. Calle Plata Nogales Arizona 85621. USA Ph.: 520 281 4247
and Swann Global’s international experience has helped
better supervision will allow them to spot opportunities and
companies to do so. Developing in any new market takes
better identify and implement risk prevention measures.
time as we must get to know the market dynamics. Our
We help companies to find the best candidate for the role,
success in Mexico has come in a short period of time,
and once they join it is the company’s responsibility to
and it has led us to opportunities in Peru and Chile. Our
train and follow up with their own development programs.
organization has been servicing the North American market for over 10 years out of our Toronto office. The
Q: What is Swann Global’s perspective on mining
North American mining influence in Mexico is what
companies’ training programs?
brought us to start developing projects and people in
A: Swann Global suggests that training its people should be
Mexico. Swann Global has the opportunity to develop
every company’s priority. Sometimes companies propose
profile research in Mexico, where turnover is high, making
that these sorts of training programs should take place
it difficult to maintain a corporate memory. We not only
outside of working hours, and that is a problem. Working
find and provide technically skilled people, but also people
conditions in mines are really tough; it is hot and tiring.
capable of stimulating the company; people who have
Mining companies need to understand their workers better
clear goals and are capable of making important decisions.
and take a more human approach to management, allowing their workers to do this sort of training during work hours.
Q: What are the main human resource needs of Mexican mining companies?
Q: What are Swann Global’s growth ambitions in the
A: At the plant manager level there is a need for staff that
coming years, both in Mexico and internationally?
can understand not just the processing of minerals but the
A: We believe the Mexican talent pool and market to be
whole process, and at the management level they require
strong. We work hard to attract local talent, however we
staff that have a real understanding of what being in the
also have a wide-reaching network of connections and we
mine really entails. Swann Global conducts field studies
can source candidates from all over the world, making sure
and risk management assessments, and after doing so we
that we bring a real breadth of skills. We are focusing on
make sure that our candidates know the measures that
Latin America as an area for growth, and Swann Global
should be taken in the case of an emergency. Supervision is
also intends to expand its client portfolio in Mexico by
the skill that Mexican companies really need to improve, as
leveraging its international experience and local contacts.
THE ADDED VALUE OF OUTSOURCING The experience and expertise that a company can draw on can make or break a mining project. Gaining all of the necessary permissions required to begin a project, from accessing the land to securing environmental and land use change permits, can take a long time, but the process can be significantly speeded up by understanding the requirements and the negotiation process. “For example, in the negotiation of surface rights it can be complicated to find out who the owner of the land is. When foreign companies come to Mexico and cannot find a database that contains this information, they come to us for our services,” says Antonio Esparza García, Chief of Projects at BMS Group. BMS provides advice to mining companies throughout Mexico and has worked on more than 120 projects since it was established just nine years ago. The company’s mission is to make mining processes easier for its clients by drawing on the extensive industry experience of the company’s founders, Francisco and Antonio Esparza, and the rest of the team. “The mining industry represents a significant proportion of the country to generate income, and we have tried to open the door to those opportunities for our clients. The success that we have had has been a result of the excellent communication between us and our clients,” adds Esparza García. “Investing in services to address challenging water, social and environmental issues is a must for mining companies because of the time and money that they will save in the long run. If companies would only take the time to request consulting services in advance, it would make everything much easier; we are trying to teach them how to optimize the return on their investments, and to be cost effective,” he says. “The vast experience that we have has led to us helping clients facing many different situations, many of which come up again and again, allowing us to share information internally and apply proven best practices with different clients, on different projects, all the while keeping our confidentiality agreements.” The company has worked in 11 of Mexico’s 31 states, and is looking to continue growing, both inside and outside of Mexico. “We can work in any state. We have foreseen opening an office in Canada in order to be present more widely in the industry, and to keep on learning. By working with Canadians in Canada, we will learn a lot about how to work with them here in Mexico, too,” concludes Esparza García.
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| VIEW FROM THE TOP
NAVIGATING THE LEGAL FRAMEWORK OF M&A JORGE RUÍZ Partner and Head of the Firm’s National Corporate Mergers & Acquisitions Group at Baker & McKenzie Q: Mergers, acquisitions, joint ventures, alliances, and
from local sources, we regularly see the involvement of
other corporate strategies pose a continuous challenge
several financial institutions and even some private equity
for mining companies. What is the added value of Baker &
firms in the financing of deals. In a nutshell, financing in all
McKenzie’s advice and support in these processes?
its different forms plays an extremely important role in our
A: Our added value is our in-depth knowledge of both the
jurisdiction. Secure transactions in the industry require solid
legal framework and the mining industry. In Mexico we
legal documentation regarding concessions and lands.
rely heavily on the knowledge the firm has developed in other regional and global jurisdictions. We have trained
Q: What is the value proposition of Baker & McKenzie in
our practitioners in all aspects of M&A and JV transactions.
major transactions before the Antitrust Commission?
Highly specialized training is also provided to our M&A
A: Our Corporate/M&A Practice Group is formed by
attorneys every year through our own M&A Combined
professionals that are experienced and knowledgeable
Institute. Additionally, we train and allow our M&A
in all areas of securities, corporate governance, record
practitioners to temporarily relocate to our other offices
keeping and general corporate advice. We have a team
through our Associate Training Program. Perhaps the
of experienced lawyers that is led by one of our Principal
greatest added value that we give our clients is through the
Partners in charge of this area. We have significant
interaction between our different practice groups, which
experience in dealing with merger control issues, including
allows us to accomplish the best results for our clients. We
all phases of the proceedings. We are knowledgeable about
are fortunate that across our various offices some of the
the thresholds and other legal requirements, as well as the
world’s largest mining corporations are our clients. Our
notice process, if needed. We have in-depth knowledge
network of five Mexican offices and our knowledge of all
of the industry, including its players and the general
of the mining regions also provide us with a significant
environment. We also maintain a close relationship with the
competitive advantage in the industry.
COFECO (Mexico’s Federal Competition Commission) and its officials. In addition to this very strong local presence,
Q: Which economic and fiscal impact do you expect
our team of antitrust attorneys belongs to a global group
potential tax reform to have on the mining industry?
that is in constant communication with all of its members.
A: We doubt whether the bill introducing a change to the
It is quite common for our practitioners in this area to be
Mining Law, which has been approved by the Chamber
trained in jurisdictions such as London and Washington.
of Deputies, will be passed by the Senate any time soon. We feel that such a bill still requires significant changes,
Q: What are the critical success factors in finding the best
considerations and adjustments. In the case where the bill
opportunities in the Mexican mining industry?
may become law, we feel that it will be possible to take
A: It will mostly depend on the demand for minerals across
recourse and contest the adverse effects that such changes
the world and the financial resources that mining companies
may bring to the bottom line of mining companies. The
have access to. At the local level, critical success factors
special mining royalty tax that has been approved by the
include dealing with those individuals and companies that
Chamber of Deputies may have a devastating effect on
indeed are entitled to the concessions and to the land surface
the industry as it will increase the tax burden, which will
rights. Another critical factor is how deals are documented,
translate into an economic downturn.
and how agreements and contracts are prepared, executed and registered. Most successful mining companies doing
402
Q: How does project financing play a role in mergers and
business in this jurisdiction have been careful enough in
acquisitions in the Mexican mining industry?
dealing with entitled and reputable companies and individuals
A: Most resources, including credit facilities and project
in being adequately represented. Another important factor
financing, come from abroad. Although it is not common for
when acquiring mines at the more developed stages is to find
mining companies to secure project financing specifically
junior miners that have meticulously developed the property,
| EXPERT INSIGHT
taking care of all of the aspects involved. Other critical
INVESTMENT OPPORTUNITIES IN MEXICO
aspects include being conscious about the environmental
Mexico offers the huge advantage of offering a friendly
impact that a mining operation may have, as well as about
environment for foreign direct investment as a result
the nearby communities and how a mining exploration,
of the regulatory system in the mining sector. This
development or production process will affect them. This is
has brought a lot of success for Canadians and other
particularly true when dealing with indigenous communities
international companies that have come here to invest.
or ejidos, some of whom consider the land to be an extension
Another opportunity is the fact that local companies
of their bodies and minds.
have been investing in the renovation and improvement of their existing mining operations, while at the same
Q: What are Baker & McKenzie’s ambitions for contributing
time strengthening their environmental practices and
to the development of the Mexican mining industry?
technologies. UK companies could potentially find
A: Based on the expertise and experience of our
ways to seize these opportunities in Mexico.
practitioners in the sector we have become a promoter of the industry within our network of global offices and in
We anticipate an increased flow of trade between
the main jurisdictions where foreign investment originates.
Mexico and the EU. Given the EU’s current economic
We are constantly in contact with federal and local officials
predicament, European countries will also be looking
in charge of regulatory and promotional issues, as well as
more to sustainable emerging markets that can help to
activities related to the industry. We speak up regarding
stimulate growth. Mexico is well positioned in that sense,
those issues that we feel may affect the mining industry or
and so is the mining sector, not only within the Mexican
the communities where mines exist. We feel that Mexico
market, but also at a regional level in emerging markets
should continue working towards achieving greater
such as Brazil, Colombia, and Peru, where we have seen
competitiveness on all fronts, and continue to be mindful
interesting levels of growth in the last few years.
of its legal framework and rule of law. We feel that the main drivers for the mining industry are currently: legal
At this moment in history Mexico’s geographical location
certainty, openness to foreign investors, vast unexplored
brings a great economic advantage. NAFTA has certainly
reserves, political and social stability, a centuries old
helped the flow of trade with Canada and the US, and
mining tradition, geographical location, and competitive
was an initial stepping stone in successfully diversifying
land and maritime infrastructure, among others.
into other international markets. Over the last 15 to 20 years the country’s automotive sector has been an emerging market and is now an important player in the
MERGERS & ACQUISITIONS (US$ BLN & VOLUME) 200
1,200
200
1,000 800
150
600 100 400 50
200
2012
2011
2010
2009
2008
2007
2006
0 2005
0
global supply chain, and the same development is taking place in the aerospace industry. We have seen American and other international OEMs expanding into Mexico and investing not only in assembly operations in the automotive market, but in many different sectors such as steel, manufacturing, cement, glass, and financial services, among others. This diversified industrial base is helping the country to retain its competitiveness. When comparing Mexico to China we do not currently see a big difference in terms of labor rates, but a significantly larger cost is incurred in shipping cargo from China to the US, than simply transporting goods from Mexico to the US, which remains a vast consumer market. The preferential arrangement between Mexico and the
M&As are a common practice in the global mining industry.
largest consumer market in the world tells us that Mexico
In 2012 there was a 7% decrease in M&A transactions
will continue to benefit from its location, as well as from
globally compared to 2011, with 941 transactions amounting
having a diversified industrial base, skilled labor, and
to a total of US$104 billion. In Mexico, only six deals were
relatively low wages compared to its northern neighbor.
concluded by Mexichem, Pan American Silver, First Majestic Silver, Endeavour Silver, Minera Frisco, and Primero Mining. Source: INEGI & Camimex
Jonathan C. Clare Regional Director of the British Embassy Mexico
403
| VIEW FROM THE TOP
CANADIAN PARTICIPATION IN MEXICAN MINING LEFT: Rosalind Wilson Chair / President Mining Task Force of the Canadian Chamber of Commerce RIGHT: Davis Robilard, President of the Canadian Chamber of Commerce
Q: How has the relationship between Canada and Mexico
RW: The Canadian companies started to explore investment
developed over the past decade, and what are the main
opportunities in early 2000, but the real boom came in
sectors that have driven this growth?
2005-2006. It was at that time that we created the Mining
DR: The Canadian Chamber of Commerce has grown
Taskforce within the Canadian Chamber of Commerce to
considerably over the last 31 years. In the last 10 years
support the companies with Canadian capital in Mexico.
mining has experienced the greatest growth, but also
What do Canadians bring to the table? Canada has a
the automotive and aerospace industries have grown
long mining history, and as such the companies have
substantially. We are very proud of the fact that Bombardier
become worldwide industry leaders. Our companies
created the aerospace industry in Mexico, which has been
have developed new technologies, strong safety and
a project that took 10 years. What really interests us now is
environmental practices, as well as superior CSR programs.
to promote the supply chains to our major manufacturers and to support the Mexican government in its efforts to
DR: One other factor in Canada’s success is that we
increase national content. We not only represent major
provide transparency to our investors in the mining sector
Canadian companies, we also represent small and medium-
– investors in the Canadian mining sector operate globally,
sized companies, as well as Mexican companies that want
and the legal structures, financial structures, and the
to be part of those supply chains.
oversight that they have all make it possible for Canadian companies to come to Mexico and invest venture capital.
Q: How is the Canadian Chamber of Commerce currently
This is a really important reason why the Canadian mining
working with the Mexican government, and what are your
sector has been so successful worldwide.
expectations for the Peña Nieto sexenio? DR: We are very encouraged by the initiatives of this
Q: What are the Mining Taskforce’s current priorities?
government and its collaboration with the legislature.
RW: Our key priorities at this time are the upcoming
We have never seen so many reforms announced in such
fiscal reform, as well as any potential amendments to
a short space of time, initiating structural changes to the
the mining law. In order to maintain existing investment
economy that in turn will stimulate foreign investment and
and attract new investors, competitive factors as well
the trade between the two countries. The changes are very
as the global economic situation must be taken into
encouraging for Mexican companies with Canadian capital.
consideration. A new tax on mining companies that does
Canadian companies directly and indirectly employ more
not consider the substantial investments that have been
than 100,000 people across the country. We are here to stay.
made will have a negative impact on the companies that have already invested in Mexico and on the regions where
Q: What role do Canadian companies play the development
those companies have been working. It will also redirect
of Mexican supply chains?
new investment dollars to more fiscally competitive
DR: Our companies look for the best solution for their
destinations. Canadian investment in the Mexican mining
supply chain and the support structure for an extractive
industry accounts for 71% of total foreign investment
industry like mining. There is a considerable amount
in this sector, and as such our concern is that a fair and
of Mexican content and support services involved in
competitive tax system should be established. In addition,
the building and operating of a mine; mining is labor
legal certainty and rule of law are key priorities.
intensive, and while equipment is an important part of the investment, I would suggest that the biggest single cost is
Q: To what extent do you think that the industry can self-
the labor component.
regulate its community relationships, and to what extent should they be allowed to?
404
Q: What triggered the mass entry of Canadian companies
RW: Many of the companies operating in the mining
in the Mexican mining industry?
industry today have superior CSR and environmental
practices, but you are not legislating for those players.
companies – they want to work together with the
The government has to legislate for the not so good
government on this to make a bigger impact. One of the
companies, and of course there are some of those. Many
opportunity areas is using the new tax to support social
of our companies have far superior standards than the
and economic development at the community level.
NOMs require, so in a way they are already self-regulating. Canadian mining companies raise the bar in this area.
DR: Because of the remoteness of mining operations
Rules and regulations do not scare mining companies.
they need not only to complement but also to replace
The problem comes when you start to get conflict, leaving
government infrastructure, due to its absence in those
areas open that could be misconstrued and which might
areas. Our mining companies and executives not only
affect your rule of law. That is the issue. In general my
operate in but also live in those communities.
experience has been that Canadian companies walk the talk. These are companies that have really integrated their
Q: How can Mexican suppliers prepare themselves to build
code of conduct into their everyday operations. They truly
good working relationship with Canadian companies?
believe in community relations; it is a part of their strategy,
DR: Canadians are concerned with meeting anti-corruption
and not just a marketing document. That is a fundamental
legislation (under the Corruption of Foreign Officials Act).
difference between the serious companies and those that
Transparent structures and practices are essential, so
may find themselves having problems.
that Canadian companies can review who they are and effectively vet their suppliers and partners. Bribery and
Q: What are lessons that Canadian mining companies have
corruption are taken very seriously in Canada.
learned in Mexico that can be applied in other countries? DR: In Canada we have 10 provinces, three territories, and
Q: If you had one minute to address all of the members of
there are many different types of communities. In Mexico
Congress of Mexico, what would you like to say to them?
we face a similar situation but there is a better effort to
RW: They really need to look at the impact of any action on
understand community factors and not assume that
the competitiveness of Mexico as a mining country. When
communities are the same in different parts of the country.
mining towns have been abandoned five years down the
Canadian mining companies bring what they have learned
road it will be too late, because it will take another five or
from understanding those conditions and concerns back
10 years to bring those projects back in.
home. Community means a lot of different things, but it is all about being local; Mexico is very good at thinking local.
DR: One of the biggest threats to any major industry is the absence of investment. Our companies are heavily
Q: The government faces a big challenge in reaching
invested and very committed, but in the boardroom
these communities and changing their living standards.
they are constantly evaluating the opportunities that
Is the government interested in engaging with mining
are available in different countries around the world. The
companies to take advantage of their proximity to those
impact of new investment is difficult to measure until you
isolated communities?
see trend lines; suddenly you are five years down the line
RW: This has always been the position of the mining
and it is too late.
405
| VIEW FROM THE TOP
FINANCING CANADIAN PROJECTS IN THE MEXICAN MINING INDUSTRY JOHANE SÉGUIN Chief Representative, Mexico. International Business Development at EDC Q:
What
is
the
mission
and
mandate
of
Export
companies have benefited from our services. EDC also
Development Canada?
supports Canadian companies that want to invest in
A: EDC is the official Export Credit Agency (ECA) for
Mexico. We provide financial services for their investments
Canada, and our job is to provide financial services to
in the country and for their project financing needs. For
support trade transactions involving Canadian companies.
example, EDC provided project financing for Minera Boleo
We are a financial institution of the Government of
in Baja California. We can also take part in syndications
Canada, working closely with our colleagues in the Trade
where there is a Canadian supply or involvement.
Commissioner Service at the embassy to help grow trade between Canada and Mexico. Since 2000, EDC has
Q: What are the criteria that a company has to meet in
provided more than US$23 billion of business in Mexico,
order for EDC to get involved?
which includes services like financing or receivables
A: In essence, the moment a Canadian company is involved
coverage. EDC’s Mexican presence is geared towards
or could be considered for involvement, we can consider
providing financing services to buyers based in Mexico,
participation. Compared to our sister organizations in the
who are usually Mexican companies but also international
market, we are very flexible and proactive in terms of getting
companies active in the Mexican market. We have worked
involved in financing. For example, for US$200 million
with companies like Minera Frisco - which buys products
projects that have only US$100 million in Canadian supply,
from Canada on a regular basis – as well as Peñoles, Grupo
we can analyze the project CAPEX and consider providing
Mexico, and Goldcorp. In 2012, EDC facilitated a total
the full US$200 million where we believe there is great
of CA$2.9 billion (US$2.8 billion) of financial products
potential for Canadian capabilities to win new business. In
in Mexico, including CA$1.3 billion (US$1.25 billion) in
Mexico we have a lot of these pro-active facilities, in either
financing across different sectors. Over 700 Canadian
corporate or project finance, and they are all successful.
THE VALUE OF ASIAN INVESTMENT The global financial crisis tightened access to capital from
over and above the financial returns. Participating in
traditional financial centers for many junior companies,
mining projects also helps to foster a stronger mining
which has led to the growing presence in Mexico of
culture and a transfer of skills. “KORES, a company that is
companies from a number of Asian countries such as Japan,
administered by the South Korean government, is funding
South Korea, and China. “Right now it is becoming easier
the advancement of the Boleo project,” says Héctor Espino
for companies to come to Mexico. The country has a good
Hernández, Government Affairs General Manager of Minera
investment environment compared to other countries,
y Metalúrgica del Boleo, located in Baja California Sur.
and the government provides a good deal of support to
406
mining companies,” says Hiroyasu Takagi, General Manager
The Boleo project has taken some work to bring it forward
of the Japan Oil, Gas and Metals National Corporation
from the initial drilling stage in the 1990s to today, with
(JOGMEC). “After 2007, when the price of minerals
production now scheduled to start in 2014. The progress
increased, Japanese companies became very interested in
that has been made during that time is the result of the
concessions outside of Japan. Japanese companies went
joint venture between KORES and Baja Mining, with the
to Chile and Peru first, but since these countries offer a
latter conducting most of the drilling groundwork in 2006
limited number of projects, they are seriously thinking
and 2007, and construction starting soon after. It has taken
about Mexico.” The companies and countries of origin
some time to bring the mine into production, in large
of the investor also stand to gain from this investment
part because of the unique challenges that the property
Q: What is the total volume of equipment and services
its history of mining is extended, therefore attracting
sourced from Canada in 2012, and in which proportion did
Canadian exporters into the country.
EDC get involved? A: EDC is involved in approximately 25% of the total
Q: Can Canadian equipment manufacturers count on
Canadian exports to Mexico. Over the past few years,
EDC’s support when they export here in the early stage
Canadian and Mexican mining companies have generated
of their expansion, and when start producing locally, and
a lot of cash thanks to commodity prices, metal prices such
ultimately export products back to Canada?
as gold and silver, among others. The mining industry is
A: Yes, EDC calls this integrative trade, and we can look
very healthy financially, and some companies do not need
to provide financial services of all stages of a company’s
financing as much as they did before so EDC’s services
development as long as the mining company has been
were needed less than in previous years. Depending
in the production stage for some years and is financially
on future market trends, we might further increase our
sustainable. EDC participates with the inflow of Canadian
engagement with the mining sector.
services and capabilities to start. When well-established Canadian companies want to create local projects
Q: What have been the key factors that enabled Canadian
with strong sponsors, they usually approach local and
mining companies to be so successful in Mexico?
international banks, and we can work with them. EDC does
A: Several factors make them so successful. The size of the
not participate in the exporting of goods back to Canada.
mining industry in Canada is considerable and therefore the competitiveness level is very high. This pushes
Q: What are your expectations for next year in terms of
Canadian mining equipment and services companies to
the financial services that will be provided in the Mexican
offer broad and interesting value propositions. In addition,
mining industry?
there are over 200 Canadian mining companies active in
A: The impact of commodity prices will continue to be
Mexico. About 45 are in operation, and the rest are juniors.
an influence in the amount of business that we - and
Mexico is an open economy with treaties like NAFTA,
most banks - do in the mining industry. Recently, mining
making it an investment friendly country with relatively
companies have not been so active on the market to
easy fiscal regulations, and an excellent labor force. Mexico
borrow from banks on the medium to long term, using
has a privileged geographical location next to the US
their internally generated cash more often, or opting to
and Canada, and that attracts investors. Moreover, the
fund through local and international bond markets instead,
country’s geology is rich with good mineral quality, and
which precludes our involvement.
itself poses. “El Boleo is a complex metals mine producing
as a result of that speed picked up again. Furthermore, in
copper, cobalt, and zinc, and we need advanced technology
2008 there was already a financing package from private
to separate these metals. We applied new DSX technology,
bank consortiums and syndicates but it did not proceed,
which was developed by the Australian research center
and it took a couple of years to get financing arranged with
CSIRO and commercialized for the first time for Minera
the development banks,” says Albinson.
Boleo,” explains Tawn Albinson, Managing Director of Minera Boleo. “El Boleo requires soft-rock mining, making
In order to overcome those financial problems KORES
it a real challenge to maintain optimal conditions and to
increased its share in the project, having started out at 30% it
operate modern mining equipment, such as conveyors or
is now at 90%, with the South Korean consortium standing to
roof bolters, for example,” adds Espino Hernández.
benefit significantly from the project, predominantly because of the copper that is being mined at El Boleo. “KORES is
One unforeseen challenge that caused delays on El Boleo
interested in the project as long as it can produce copper at
was the fact that the most intensive work was required at
a more competitive price than the copper that is available
the time that the 2008 financial crisis hit. “The delays for
in the market,” says Espino Henández. “It is likely that this
the most part had to do with Baja Mining’s funding issues. In
represents the largest significant investment in Mexico by a
2012 construction started slowing down because of investor
South Korean company, and the investment is probably one
activity and the fact that two development banks – EXIM and
of the top three investments in the mining industry in Mexico.
EDC – stopped releasing funds. It took some time for KORES
Around US$600 million is expected to be invested this year,
to take over the project and bring in its own financing, but
with a total of US$1.8 billion anticipated in total.”
407
FUTURE OUTLOOK
14 This year the industry will have to adapt to lower commodity prices and limited access to financing, which means that minimizing operating costs and concentrating exploration investment on the areas that offer the best opportunities will become strategic priorities. At the same time, the collective impact of last year’s labor reform, the upcoming energy and fiscal reforms, and the expected royalty tax on mining operations are destined to further modify the operating environment for the Mexican mining industry in the coming year. The resulting changes and the accompanying increasing uncertainty will surely shape the industry’s outlook for years to come.
This chapter examines the issues, takes a look at what 2013 and 2014 have in store for the Mexican mining industry, and shares the future outlooks of industry leaders as they prepare to steer their companies through the coming months and years.
409
Mexico MINING
2013
At Baker & McKenzie, we apply sophisticated financial, technology and operational insights to help strategically execute your major projects in Mexico and anywhere in the world. Deep industry knowledge enables us to keenly appreciate your investment objectives and act as a value added extension of your legal and business teams. We deliver integrated advice on all deal aspects throughout your project lifecycle and can help you navigate intricate regulatory schemes, competitive markets and uncertain government policy with fluency and confidence. We are in more commercial and industrial markets than any other firm and have facilitated some of the most significant projects in Mexico and Latin America for more than four decades. Working with a trusted adviser in the industry can make a difference in effectively harmonizing the contract requirements of public concessions with your business goals, or in getting your deals done in time and with reliable local partners. Our offices: Mexico City +1 (55) 5279 2900 | Juarez +1 (66) 6629 1300 Monterrey +1 (81) 8399 1300 | Tijuana +1 (66) 4633 4300 Guadalajara +1 (33) 3848 5300
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CHAPTER 14: FUTURE OUTLOOK 412
EXPERT INSIGHT: Mexico’s Mining Competitiveness
414
Introducing a Mining Royalty
416
VIEW FROM THE TOP: Educating Earth Science Engineers for Tomorrow’s Needs
417
VIEW FROM THE TOP: An Industry Mexicans Can Be Proud of
411
| EXPERT INSIGHT
MEXICO’S MINING COMPETITIVENESS Q: What role will mining projects that are under development or at the advanced exploration stage play in strengthening the mining industry and Mexico’s economy in the coming years? A: There are 15 mining projects that will begin operating between 2013 and 2015, and 35 are at the advanced exploration stage. However, without dismissing the success of these new projects, it is important to consider that the industry is linked to global market conditions. We are sure that these new mining operations will have a positive impact on the economy, employment opportunities, infrastructure, and quality of life in the communities where the mining sites are located. Furthermore, state of the art technology and keeping up to date with environmental best practices will provide the industry with new vitality.
Q: What strategy will Camimex follow to continue improving the reputation of the Mexican mining industry? A: We will continue our close collaboration with each community where the mining industry operates. Our strategy is to strengthen the community development and environmental protection programs, and we will also carry on with our communication efforts. It is necessary for Mexicans to know about the importance of the mining industry, the benefits it brings, and the essential role it plays in our country’s development.
Q: What is Camimex’s position regarding the possible reform of the legal framework, and how will you work together with the government to align private and public sector interests while the new law is being designed? A: We see the Pact for Mexico as a great opportunity to create employment and foster competitiveness, both of which are essential for the country’s future. However, as a sector, we have asked all involved stakeholders to make a comprehensive analysis of the mining industry so that it will not be weakened and investments will not be frozen, which would affect long term employment generation. The latter will have negative repercussions on the quality of life of thousands of families that currently benefit, or will do so in the future, from mining activities in the country.
Q: What is your outlook on the development of the Mexican mining industry in the next year? A: We estimate that the industry will continue growing in 2013. However, we accept that it might do so at a lower rate than in 2012 due to the global recession, which has had a strong negative impact on metal demand that has been reflected in global market prices. More incentives are required for the sector to continue growing and attracting investment. Investment has a direct positive correlation with being more competitive, and Camimex is promoting all aspects that contribute to raising Mexico’s cempetitiveness for mining investment. Humberto Gutiérrez-Olvera Zubizarreta, President of Camimex
412
“
Declining mineral prices have an impact on the profit margins of mining companies and can cancel out profits altogether. The government’s priority should be to maintain a fair tax regime that encourages further investment in exploration and development, rather than discouraging the industry with royalties that will further squeeze profit margins and lead to mine closures, lost tax revenue, and job losses. The investment environment is currently fragile, and it is likely to remain that way in the near future.
”
James McDonald, President and CEO of Kootenay Silver
“
To develop the mining sector to its full potential Mexico needs a public policy that reduces the cost of doing business in the country. Achieving this goal calls for a challenging recipe: the effective application of the rule of law, the never ending fight against red tape and corruption, the indefatigable defense of private property, and the modernization of the judicial system. On the regulatory front Mexico has a strong mining law, which has been a formidable vehicle for promoting investment and quality jobs over the last 20 years. There have been many rumors that the government believes the mining law needs to be changed dramatically. As the saying goes: if it is not broken, why fix it? Armando Ortega, Vice President of New Gold and Director General of MSX
“
”
The possible production royalty tax will not help Mexico. It represents another significant cost for mining companies, on top of income tax and profit sharing, which will take the overall tax burden up to almost 50%. It will definitely slow down new mine developments and it will likely kill some operating mines, too. Companies are in standby mode at the moment. Tawn Albinson, Managing Director of Minera Boleo
“
”
If Mexico wants to continue attracting foreign investment and providing a really good business environment for the mining industry it should forget any additional changes to the law. Specifically, it should avoid any additional tax for the industry, but regretfully it seems that government and many members of congress are very committed to implementing new taxes, disregarding any arguments being made by the experts. They do not see that the Mexican industry is paying taxes, as a whole, just as they are in other mining countries; it does not matter that those taxes are not labeled as “mining taxes.”
”
There is intense competition for foreign investment around the world, and money will go to the places where the best business conditions are.
Federico Kunz Bolaños, Partner at Kunz Abogados
“
Mexico is very well positioned in the global mining industry, and will remain the number one producer of silver, but it will also become an even more important player in the gold and copper markets. In terms of discoveries Mexico still has a lot to offer, and the SGM believes that it will also challenge other producers in the realm of non-metallic resources. In the last two years the silver resources of the country have been increased to more than 550 million ounces, and gold resources by more than 4.1 million ounces. Raúl Cruz Ríos, Director General of the Mexican Geological Survey (SGM)
” 413
INTRODUCING A MINING ROYALTY The Mexican government is currently poised to make a critical
How the royalty tax will work in practice is still unclear. It is not
decision over the proposed new mining royalty, which will
yet known whether the royalty tax will be a flat rate across
be charged to mining companies on top of regular income
all minerals, or whether it will vary according to mineral
tax (ISR) and other duties that apply to all companies that
type, though it has been suggested that a higher rate of 8%
operate in the country. In Mexico mining means big business,
may be applied to gold, silver, and platinum, compared to
with the industry generating US$22.5 billion in 2012. The
the standard rate of 7.5%. It is almost certain that one rate
many opportunities available for mining companies to
will apply throughout the country, unlike in Canada where
be successful in the country, combined with the absence
each state administers its own royalty charge, ranging from
of a royalty or production tax, has made the country an
10 to 17%. One of the reasons for introducing the tax is to
attractive investment destination. Despite some debate both
ensure that mining activities benefit the communities based
within the government and the industry over the potential
near mining locations. 70% of the collected tax revenue is
introduction of such a tax for some time, the Chamber of
expected to go to state and local government, with 30%
Deputies approved the notion in April 2013, with the formal
going to the federal government, though different splits
proposal to amend the law being made to Congress in
have been talked about and little has been revealed about
September 2013. It is now likely that a mining royalty tax
what the final amount will be. While the mining industry
will be introduced in the coming months. According to
mostly appears to be resigned to the royalty being passed,
the Ministry of Finance and Public Credit (SHCP), mining
there is some concern over the many questions that remain
companies will pay around MX$4.2 billion (US$333 million)
unanswered. “If the royalty is implemented there should at
in additional taxes each year as a consequence of the new
least be a clear set of rules regarding how that reduction will
royalty tax. During 2012, the mining industry contributed
be made. There must be a clear pathway for that money to
MX$22.26 billion (US$1.76 billion) in ISR, meaning that the
make it back to the community. We want transparency,” says
additional royalty might represent a 19% increase in the tax
Alberto Orozco, Mexico Exploration Manager of Argonaut
burden for mining companies, according to fiscal experts.
Gold.
“
The royalty could have a negative impact on investment and job creation in regions where no other economic activities are viable. Our mining industry does not have the same fiscal stimulus or tax stability as Argentina, Brazil, Chile and Peru, which are our competitors. This latter point should be taken into account to balance the current reform proposal. Humberto Gutiérrez Olvera, President of Camimex
“
The royalty tax will increase production costs for the mining industry. However, if the metal prices continue to be as high, Mexico’s competitiveness as a destination for exploration investment will not be significantly affected. Pablo Méndez Alvídrez, Partner at Bensojo, Chávez y Gutiérrez
“
royalty tax to local communities through their CSR programs. As a government entity, we have to be very careful to ensure that the collected revenue is used properly. We need to ensure that the royalty is
that the money is coming from them, so that people identify with the industry and support it. José Armando Córdoba Hage, Dirección General de Minas Sonora
”
The problem with potentially approving such a tax or royalty is that it will remain in place even when metal prices go down. This will not be a positive thing for Mexico, given that Peru and Chile are very competitive markets and could succeed in drawing investment away from this country. Abdón Hernández Esparza, President of the Legislative Commission at Camimex
414
”
Most mining companies are already giving a percentage similar to the one being considered for the
invested in the municipalities where the mining companies operate and inform the local communities
“
”
”
Much opposition has been voiced from different areas of
For example, the royalty would have the added benefit of
the mining industry since news of the tax emerged; while
aligning the interests of the municipal and state authorities
original predictions placed the tax at 5%, there was some
many of which do not always see the benefits of mining works
shock in September when it emerged that the amount
being undertaken in their jurisdictions. The overall feeling is
being proposed to Congress was 7.5%. The opposition
that there must be extreme caution around implementing
coming from the mining industry centers around two
any such royalty, and that the funds must be sure to continue
main arguments: firstly, that the industry already makes a
to benefit the local communities in the same way that
significant contribution through CSR programs that address
existing social contracts between mining companies and
health, social, and environmental issues, and secondly, that
communities have done, as well as remain visible and not be
the tax is coming at a bad time given uncertainty in the
swallowed up by other state funding needs.
industry in the face of a global recession and the drop in metal prices. “We also want the government to take into
In the face of these two issues mining companies argue
consideration the fact that the mining industry is cyclical
that this royalty tax could damage the years many of them
and that there has recently been a sharp drop in the gold
have spent building their relations with the communities
price. At some point in the future costs will be much lower
and starting up successful CSR projects. This is where
and the mining market will be depressed,” adds Orozco.
the question of transparency comes into play; mining
“Mining will not disappear but investment will decrease.
companies are looking for confirmation that the solid
The government needs to take into consideration that
relationships they have built with the communities will
a huge amount of money is invested in exploration that
remain strong, and want to know that it will still be clear
never reaches the exploitation phase, and that mining
to them the money is coming from the mining industry.
companies also improve the economy by bringing work to
“We mining companies are ready to continue making
isolated regions.”
contributions to the economy, but with a tax regime that provides certainty for current and future investments,”
Provided that the tax is implemented in the right way,
says Armando Ortega, VP of New Gold and Director
however, there could be certain benefits for the industry.
General of MSX.
“ “
We support the royalty tax not because it will be a bigger financial burden for mining
” ”
companies, but because it is a tax that will be focused on improving local infrastructure and regional development. It is a way of mitigating the industry’s environmental impact.
Álvaro Navarro Garate, Economy Minister of Chihuahua
The royalty tax is an additional cost that mining companies need to take into account. One thing to
take into consideration is that profits do not usually flow to the owners, because a large proportion
of them are reinvested in exploration. Restricting the ability of companies to invest in exploration and development will affect the entire industry today and in the future.
César Garza, Parner at Deloitte
“
There is never a right moment to tax any industry, anywhere. The government is late in introducing this tax. After hearing about the mining boom for years, they inconveniently decided to do it when the prices are declining and exploration companies are struggling to find funds. The real problem with any new tax is that it affects the marginal producers; this is the technical detail we really have to analyze.
Mauricio E. Candiani Galaz, President & CEO of Candiani Mining
“
”
Mexico has to focus on continuing to be an attractive market, not only for foreign investment but for national investment as well, by providing fiscal stimuli and other incentives. The government cannot afford to lose perspective of the fact that if companies do not have enough money to spend the economy will be stalled. Communities located in remote locations thrive when a mining company begins operations, bringing direct and immediate benefits. Brenda Carranza, General Manager and Global Marketing Manager of Falcon Drilling
” 415
| VIEW FROM THE TOP
EDUCATING EARTH SCIENCE ENGINEERS FOR TOMORROW’S NEEDS JOSÉ SANTOS JALLATH Head of the Mine Exploitation and Metallurgy Department at UNAM Q: What is the impact of mining cycles on the education
begins with a solid foundation in mathematics, physics and
of mining engineers?
chemistry. It later continues with geology, mine exploitation,
A: It is important to remember that everywhere in the
and metallurgy, but we also have a very good course in
world mining is cyclical. The cycles in the Mexican mining
economy and finance, mine installation, and civil works.
industry have been affected by social events such as the
Another important part of the curriculum is occupational
Independence War and the Mexican Revolution. History
safety and environmental protection. It is complemented by
has shown that in those depressed times mining activity
courses in the areas of humanities and social sciences. This
was able to continue in the country thanks to Mexican
integrated training allows us to provide the mining industry
investment, which shows that even during depressed market
with graduates that have skills in supervision, planning, and
times mining specialists will always be required. Today,
operations development from the beginning of their careers.
UNAM is training engineers that are able to manage mining operations even when times are not thriving. Currently, the
Q: How does UNAM create links between students and
industry requires a large number of graduates. However,
mining companies operating in Mexico?
the enrollment capacity of universities has been reduced, in
A: UNAM is a higher education institution that performs
some cases due to a lack of infrastructure. There is currently
its duties with a limited budget, and it needs the mining
greater demand for earth science engineers in the industry
industry’s support. After completing their fifth semester our
than the universities can provide, and even though Mexico
students do professional placements in the mining industry,
has seven universities with mining engineering programs,
and we get a lot of support from mining companies. Our
industry demand is not being satisfied at the moment.
students have to complete three residencies during their studies, each of which lasts four to six weeks, which allows
Q: What is the importance of developing engineers
them to become familiar with the way the industry works.
that have both technical and scientific expertise and an
This approach between industry and academic institutions
understanding of the economic and social aspects of the
is critical in making these placements effective. We also
industry?
have links with companies through research. The Economy
A: This is an issue of great importance, and it is central
Ministry of Economy facilitates the entry of our students into
to the education of future engineers. Along with most
the public sector so that they can do their social service.
UNAM academics, I am convinced that future professionals
Another example is our collaboration with Camimex, which
in the area of mining exploitation should not base their
awards scholarships and grants to our students and teachers
performance just on their technical skills, but should be
so they can continue their professional education. In return
able to balance the use of natural resources while also
we perform consulting services and implement projects.
protecting the environment and
providing benefits to
the local communities. In order to perform sustainable
Q: How does UNAM produce engineers that are suitably
operations, communities and the environment must be
trained to work with and pursue technological innovation?
integrated into operational plans. It is therefore necessary
A: To be able to innovate, the most important thing is to be
to invest in the generation of human capital but also
up to date with what is going on in the world, knowing the
in the measures that are required to take care of local
best international practices and being able to take them to
communities and the environment.
the next level. After that comes evaluating the requirements in Mexico and finding the solutions that suit them best. In
416
Q: How does UNAM organize its curriculum to educate
terms of technological innovation, Mexico is lagging behind
graduates that meet the industry demands of tomorrow?
many countries. We consume huge amounts of technology,
A: What distinguishes UNAM graduates is the efficient
but we do not produce it. Mexico has the knowledge and
integration of knowledge in the different areas of mining.
human capital to develop first class technology, but we
The mining and metallurgical engineering curriculum
need to venture more into research and development.
| VIEW FROM THE TOP
AN INDUSTRY MEXICANS CAN BE PROUD OF SERGIO ALMAZÁN ESQUEDA Director General of Camimex
Q: What are the main challenges that the mining industry
can be more profitable and we are able to compete with
will face in the coming years and how can they be overcome?
other mining countries. Finally, we are also seeking to
A: Land access is a crucial issue that the industry is working
continue improving the practices of mining companies in
hard to overcome. Furthermore, we need to maintain
their approach to community relations.
high environmental preservation standards and press the Mexican mining industry to adopt international best
Q: What position will the Mexican mining sector hold in
practices that foster reforestation and the treatment and
the global industry in five years, and what needs to be
reuse of water. The number of mining companies that reuse
done in order for it to reach its objectives?
treated municipal water is growing, and this contributes
A: Establishing international best practices throughout the
to creating an environmentally friendly culture. Another
Mexican mining industry has to be the priority. Camimex
essential matter is promoting Earth Science Programs at
believes that the industry is investing a lot in training
the university level, so that the industry can draw on the
its personnel, technology, and sustainability, which will
qualified human capital it requires. The shortage of human
translate to exponential growth. Mexico’s productivity and
talent has been a challenge and we have been working
international competitiveness will continue increasing,
towards overcoming it by promoting these programs to
and the industry will attract further investment capital
young Mexicans. Another challenge is energy prices. The
for mining exploration. As a country we have to provide
mining and metallurgical industries have very high levels
added value to our products, while being a sustainable and
of energy consumption, and in order for Mexico to remain
environmentally responsible industry. We want Mexicans
competitive we need lower prices, so that our operations
to feel proud of the local industry.
“
Mining development in Mexico is very important for the creation of wealth for the country. Mexico is now one of the cheapest countries in the world in which to manufacture goods, and will benefit from a lot of investment over the next five to 10 years. As long as the
”
government can allow foreigners to invest in Mexican industries in a way that makes sense for all parties concerned, Mexico’s growth will continue.
“
Keith Neumeyer, President & CEO of First Majestic Silver Corp
We are the largest primary silver producer in the world. With the projects we have in our portfolio now, by 2018 it is very possible that we will be the largest silver producer in the world full stop – not just primary. By then we will again have more revenue coming from silver than from gold.
Octavio Alvídrez, CEO of Fresnillo
“
”
We feel that Mexico should continue working towards attaining greater competitiveness on all fronts and continue to be mindful of its legal framework and rule of law. The main drivers for the mining industry are currently legal certainty, openness to foreign investors, vast unexplored reserves, political and social stability, a centuries old mining tradition, geographical location, competitive land, and maritime infrastructure, among others. Jorge Ruíz, Head of National Corporate Mergers & Acquisitions Group at Baker & McKenzie
” 417
INDEX A-E
AdN Consulting: 302
Candiani Mining: 13, 397, 415
Agentes Aduanales Sonora: 380, 381
Capstone Mining Corp.: 178, 200, 205, 211, 212, 213, 221, 223,
Agilent Technologies: 293,294
326
Agnico Eagle: 104, 105, 107, 111, 144, 168, 178, 193, 237, 378
Citland: 372, 373
Agua y Energía en Movimiento: 233
CLUSMIN Zacatecas: 202, 203, 205
Alamos Gold: 144,157,237, 239
Coeur Mining: 7, 144, 168, 178, 181, 186, 187, 199
Alta Vista Ventures: 68
Cofiasa: 255
Altos Hornos de México (AHMSA): 10, 234, 247, 251, 285
Cominox: 255
Alvelais Agencia Aduanal: 382, 383
Cominvi: 109, 375
Analitek: 294, 295
Compañía Isdamar: 119
Anclas Mineras Encinales: 322
Construcciones Cihuacoatl: 99
ArcelorMittal: 235, 247, 247, 249, 251, 284, 370, 371,
Construmac: 128, 129
Argonaut Gold: 104, 105, 133, 138, 139, 144, 160, 161, 178,
Cooperativa La Cruz Azul: 264
237, 239, 414
CORSAN Energéticos: 376
Arian Silver: 70, 197
Cruz Herrera: 51
Arzola + Armendariz Abogados: 13, 51
Cummins: 95, 278, 279, 280
Ascendum: 280
Defiance Silver Corp.: 196, 197
Ashland: 334, 335
Deloitte: 390, 415
Astralloy: 254
Detector Exploraciones: 83
Atlas Copco: 109, 117, 278, 282, 283, 375
Díaz, Bouchot y Raya Abogados: 389
AuRico Gold: 43, 111, 138, 144, 148, 149, 156, 239, 322, 356,
Directorate of Mines of Chihuahua: 166
357
Directorate of Mines of San Luis Potosi: 266
Autonomous University of Zacatecas: 204, 205, 221
Directorate of Mines of Sonora: 236, 237
Baker & McKenzie: 38, 49, 345, 346, 347, 391, 402, 403, 417
Donaldson: 289
BATRINSA: 368
Dräger: 312, 313
BCG Consultores Legales: 43, 415
DS Dinámica: 350
Behre Dolbear: 16, 49, 80, 338
DynaResource: 150, 164
BMS Group: 401
EDC Mining Limited: 116
Bolsa Mexicana de Valores (BMV): 13, 156, 394, 395
El Tigre Silver Corp.: 194
Borealis: 351
Endeavour Silver: 59, 109, 113, 120, 132, 144, 178, 179, 187,
Bosch Rexroth: 230, 231, 280
196, 266, 403
BSTL Abogados: 12, 342, 392
Energía Solar y Proyectos Sustentables (ESPS): 352, 355
C&V Abogados: 20, 21, 49, 50, 53, 54, 56, 57
Energold: 90
Canadian Chamber of Commerce: 404, 405
ERM: 343, 344, 345
INDEX E-I
ESCO Corporation: 124
169, 178, 192, 201, 203, 204, 212, 213, 214, 266, 276, 278, 300,
Espaciomovil: 374, 375
326, 370, 375, 378, 406
Evrim Resources: 69, 87
Goldgroup: 164
Excellentia Fervic: 368
Government Trust for Mining Development (FIFOMI): 12,
Export Development Canada (EDC): 396, 406, 407
40, 53, 91, 165, 262, 396
Falcon Drilling: 93, 415
Grainger: 318, 319,
Farco Perforaciones y Bombeo: 96
Greenergy: 353
Federal Attorney’s Office for Environmental Protection
Grupo Acerero del Norte (GAN): 284
(PROFEPA): 15, 332, 340, 342
Grupo BAL: 65, 117, 205, 212, 220
Ferromex: 218, 364, 365
Grupo Calidra: 258, 259, 371
First Majestic Silver Corp.: 106, 107, 109, 117, 132, 175, 178,
Grupo Camacho: 323
184, 185, 189, 196, 202, 203, 204, 240, 241, 266, 300, 370,
Grupo Cementos de Chihuahua (GCC): 265
371, 403, 417
Grupo DESUS: 348
Fluidos Mayan Star: 97
Grupo GAP: 38, 42, 44, 45, 46
Four Leaf Solutions: 314, 315
Grupo Jomargo: 111
Fresnillo plc: 6, 7, 28, 33, 65, 99, 105, 106, 107, 109, 116, 117,
Grupo Mexico: 52, 72, 81, 99, 105, 106, 107, 108, 109, 121, 123,
132, 133, 138, 142, 144, 163, 178, 180, 181, 183, 200, 201, 203,
126, 127, 133, 144, 178, 203, 204, 205, 210, 211, 212, 213, 214,
204, 205, 212, 213, 219, 238, 239, 241, 274, 322, 370
217, 218, 219, 224, 231, 233, 238, 240, 252, 266, 267, 272, 273,
Garibaldi Resources: 79
274, 275, 276, 278, 284, 303, 322, 326, 341, 342, 364, 365,
Gates: 123
366, 367, 370, 371, 376, 382, 406
General Coordination of Mining (CGM): 12, 13, 35, 38, 40,
Grupo Prosesa: 378, 379
41, 48, 49, 327
Grupo Síncom: 378, 379
General Directorate for Mining Development (DGPM): 12
Grupo Vysisa: 367
General Directorate for Mining Regulation (DGRM): 12, 36,
Haver & Boecker Mexicana: 370, 371
40, 41
HB Agencias Aduanales: 383
Genric: 393
Herrera Ordóñez Abogados: 50, 342
GeoAir: 74, 75
Industrial & Mining Solutions (INMSO): 125
Geobrugg: 308, 309
Industrias Extractivas de México (INDEMEX): 262
Geologix: 70, 87
Ingetrol: 94, 95
Geoprocesos: 83
Innovation in Science Education (INNOVEC): 273
Geotecx: 77
Inspectorate: 82
GlobalSat: 300
Interbandas: 369
Globexplore Drilling: 84, 85, 88, 89
Intercore Perforaciones: 94, 95
Goldcorp: 6, 7, 105, 107, 109, 111, 127, 138, 139, 144, 145, 147,
Intergraph: 128, 129
INDEX I-P
IT Telecom: 316
342, 345, 349, 362, 403, 404, 412, 414, 416, 417
Itzcoatl Drilling & Services: 99
Mexican Social Security Institute (IMSS): 9, 16, 19, 38, 321,
Japan Oil, Gas and Metals National Corporation (JOGMEC):
366
406
Minas de Celestita: 260, 261
JC Portal Drilling Supplies: 97
Minera Frisco: 43, 53, 104, 105, 106, 107, 108, 109, 127, 144,
Kansas City Southern Mexico: 364, 365
156, 168, 169, 178, 201, 204, 211, 212, 213, 239, 266, 274, 275,
Kappes, Cassiday del Norte (KCN): 151
278, 284, 370, 371, 378, 403, 406
Komatsu: 276, 277
Minera y MetalĂşrgica del Boleo: 106, 108, 225, 227, 406, 407
Kootenay Silver Inc.: 138, 192, 193, 413
Minerales Gosa: 263
Kunz Abogados: 34, 35, 41, 49, 413
Ministry of Economy (SE): 11, 12, 13, 35, 38, 41, 125, 165, 167,
L&H Industrial: 131
224, 308, 332, 416
LegalMex: 20, 21, 54, 55, 56, 57
Ministry of Economy of Chihuahua: 167, 415
Lemon Analyzers: 317
Ministry of Economy of Zacatecas: 19, 202
LiuGong Machinery: 281
Ministry
Maccaferri: 354
(Semarnat): 15, 38, 111, 194, 332, 342, 338, 340, 342
Makomex: 277
Ministry of Labor and Social Welfare (STPS): 15, 21, 38, 55,
Maptek: 114, 115
56, 57, 308, 309, 311, 321
Martin Engineering: 369, 370, 371
Ministry of National Defense: 38, 39, 43, 327
MAQTEC: 280
Ministry
Megamak: 121
Guanajuato: 58
Metal Master Industrial: 126, 127
MMC de Metal: 288
Metro PrecisiĂłn: 126, 127
MTG: 124
Metso: 274, 275
National Agrarian Registry (RAN): 38, 299
Mettler Toledo: 290,291
National Institute of Statistics and Geography (INEGI): 6, 7,
Mexican Association of Mining Engineers, Metallurgists and
9, 19, 20, 56, 175, 214, 247, 257, 261, 266, 388, 403
Geologists (AIMMGM): 17, 33, 119, 125, 241, 254, 404
National Water Commission (Conagua): 15, 38, 48, 49, 272,
Mexican Geological Survey (SGM): 12, 39, 40, 41, 65, 66, 67,
285, 336, 337, 346, 347
83, 87, 105, 107, 108, 125, 133, 139, 149, 165, 236, 256, 266,
NCH Mexico: 336, 337
299, 413
New Gold: 138, 144, 152, 153, 155, 178, 266, 267, 356, 357,
Mexican Iron and Steel Industry Chamber (CANACERO):
363, 413, 415
247, 250
Normet: 120
Mexican Mining Chamber (Camimex): 6, 9, 13, 14, 15, 16, 19,
Oldenburg: 122
33, 34, 39, 46, 64, 65, 96, 104, 105, 107, 108, 139, 155, 197,
Ozmaq: 91
210, 231, 241, 247, 256, 257, 272, 273, 313, 336, 337, 340, 341,
Pan American Silver: 53, 105, 144, 168, 173, 178, 190, 191,
of
of
Environmental
Sustainable
and
Natural
Economic
Resources
Development
of
INDEX P-Z
200, 203, 238, 378, 403
SKF: 286, 287
PANalytical: 295
Skyline Assayers & Laboratories: 72, 73
Peñoles: 7, 34, 52, 65, 81, 99, 106, 108, 109, 111, 116, 117, 121,
Sonora Naturals: 355
123, 133, 169, 178, 180, 200, 201, 203, 205, 211, 212, 213, 220,
Spectro Inc.: 296, 297
228, 229, 238, 240, 241, 266, 272, 275, 278, 284, 285, 295,
SSAB Swedish Steel AB: 252, 253
319, 322, 326, 342, 370, 371, 373, 376, 378, 406
Strata: 318, 319
Power Electronics 234, 400
Sumitomo Drive Technologies: 284
ProCobre: 215
Swann Global: 400, 401
ProDeMin: 78, 79
TAC/LUEMAR: 377
PROESMMA: 130
TECO-Westinghouse: 235, 285
Provesicsa: 320
Tecmin Servicios: 92
PS&RM Abogados: 34, 35, 38, 40
Teknol: 299
PwC: 140, 388, 389
Temisa: 235
Pyrosmart: 326
Ternium: 247, 250, 251, 365, 370
RB Abogados: 42, 48, 52, 53
Terra Quaestum: 49, 80, 338, 339
Reyna Mining: 81
The Silver Institute: 177, 181, 190
Riverside Resources: 71
Timken: 292
Road Machinery 276, 277
Timmins Gold Corp.: 72, 138, 144, 158, 159, 178, 237, 239, 376
Rockwell 301
Transteel & Metal: 252, 253
RYCO Hydraulics: 298
Traxys: 398,399
SAFEmine 314, 315
UK Embassy: 403
Sánchez-Mejorada, Velasco y Ribé: 35, 36, 37, 48, 49
Ultra Maris Capital: 13, 398, 399
SAP: 303
UNAM: 53, 145, 248, 416
Schaeffler: 282, 283
University of Sonora: 237, 240, 241, 352
Schneider Electric: 232
US Geological Survey (USGS): 6, 139, 175, 210, 214
Scotiabank GBM: 53, 396
Vera & Carvajal: 333
Servicios Epecializados de Compras y Logísticas del Norte
VSG Abogados: 46, 47
(SECL): 151
VSH Seguridad: 324, 325
Servicios Profesionales de Comercio Exterior (SEPCE): 382
Williams Scotsman: 374, 375
Servicios y Proyectos Mineros (SPM): 73
World Gold Council: 138, 140, 141
SGS Minerals: 98
Zonge: 72
Sibsa: 321 Sistemas Avanzados y Proyectos (SAP): 76 Silver Standard: 181, 195, 375
Illustration: Arno Avilés
ADVERTISER INDEX
25 Secretaria de Economia de Zacatecas
220 Arvelais Agencia Aduanal
32 Candiani Mining
224 Power Electronics
55 VSG Abogados
244 Grupo Calidra
62 GLOBEXPLORE
260 Mexico Mining Center
96 Metal Master Industrial
270 Metso
98 William Scotsman
275 Sistemas Avanzados y Proyectos (SAP)
102 SKF
290 Mettler Toledo
110 COMINVI
296 Temisa
118 CompaĂąia Isdamar
298 GeoAir
122 Detector Exploraciones
306 Ashland
136 Timmins Gold
310 SAFEmine
141 Transteel & Metal
325 VSH Seguridad
150 AuRico Gold
330 ERM
156 Kootenay Silver
341 New Gold
165 Globalsat
360 Cummins
172 Fresnillo plc
373 Grupo Prosesa
187 Endeavour Silver
386 PwC
191 First Majestic Silver Corp.
400 Agentes Aduanales de Sonora
208 Grupo Mexico
410 Baker & McKenzie
CREDITS
EDITORIAL DIRECTOR: Jeroen Posma
COMMERCIAL DIRECTOR: Cindy Muehlbacher
EDITOR: Lucy Fisher
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PHOTO CREDITS
2:
Grupo Mexico
119: NEC
4:
Alamos Gold
120: NEC
10:
Presidencia de la República
121: NEC
11:
Presidencia de la República, Economy Ministry
124: MTG, NEC
13:
Economy Ministry
125: Industrial Mining Solutions
14:
NEC
126: NEC
17:
NEC
128: Construmac, NEC
20:
C&V Abogados Ambientales
129: Peñoles
24: NEC
130: NEC
29:
131: NEC
Visit Mexico
33: NEC
134: New Gold
34: NEC
140: World Gold Council
36: NEC
145: Goldcorp
39: NEC
146: Goldcorp
40: PS&RM Abogados
147: Goldcorp
41:
NEC
148: AuRico Gold
43:
BCG Consultores Legales
149: AuRico Gold
44: NEC
152: New Gold
47: NEC
154: New Gold
50: NEC
155: New Gold
52: NEC
157: Alamos Gold
58: Ministry of Economic Development of Guanajuato
158: NEC
60: ERM
160: NEC
66: NEC
161: Argonaut Gold
68: Grupo Mexico
162: Fresnillo plc
69: Evrim Resources, Grupo Mexico
163: Fresnillo plc
70: Geologix
164: NEC, Goldgroup
71:
NEC
165: NEC
72: NEC
166: NEC
74: NEC
167: NEC
75: GeoAir
169: Peñoles
76: NEC
170: Fresnillo plc
77: Geotecx
179: Endeavour Silver
78: ProDeMin
180: NEC
80: NEC
182: Fresnillo plc
81:
183: Fresnillo plc
NEC
82: NEC
184: First Majestic Silver Corp.
83: NEC
186: Coeur Mining
84: NEC
188: First Majestic Silver Corp.
85: Globexplore Drilling
189: First Majestic Silver Corp.
88: Globexplore Drilling
190: Pan American Silver
89: Globexplore Drilling
192: NEC
90: NEC
193: Kootenay Silver Inc.
91:
194: NEC
OZMAQ
92: NEC
195: Silver Standard
93: NEC
196: Defiance Silver
94: NEC
198: Coeur Mining
95: Ingetrol Group
199: Coeur Mining
97: NEC
202: NEC
98: SGS Minerals
203: NEC
100: Capstone Mining
204: NEC
106: First Majestic Silver Corp.
206: Grupo Mexico
109: COMINVI
215: ProCobre
111:
216: Grupo Mexico
NEC
112: Endeavour Silver
217: Grupo Mexico
113: Endeavour Silver
218: Grupo Mexico
114: Maptek
219: Grupo Mexico
115: Maptek
221: Capstone Mining
116: EDC Mining
222: Capstone Mining
117: Grupo Necaxa
223: Capstone Mining
225: Minera Boleo
325: VSH Seguridad
226: Minera Boleo
326: PyroSmart
227: Minera Boleo
327: Ministry of National Defense
228: Peñoles
328: Grupo Mexico
229: Peñoles
332: NEC
231: Bosch Rexroth
333: Vera & Carvajal Abogados
232: Schneider Electric
334: Ashland
234: NEC
335: Ashland
235: Temisa
336: NEC
236: NEC
338: NEC
237: Grupo Mexico
340: Camimex
240: NEC
343: ERM
242: Grupo Calidra
344: ERM
252: NEC
346: NEC
253: NEC
347: New Gold
254: Astralloy
349: NEC
255: NEC
350: NEC
258: NEC
351: Borealis
262: NEC
352: NEC
263: NEC
353: NEC
264: Cooperativa La Cruz Azul
354: Maccaferri
265: Grupo Cementos de Chihuahua
355: NEC
266: NEC
356: AuRico Gold
268: COMINVI
357: AuRico Gold
272: NEC
358: Kansas City Southern Mexico
274: NEC
362: NEC
275: Metso
363: New Gold
276: Road Machinery
364: NEC
277: Makomex
366: Grupo Mexico
278: Cummins
367: Grupo Mexico, NEC
281: NEC, LiuGong
369: AuRico Gold
282: NEC
370: NEC
284: Sumitomo Drive
371: NEC
285: Teco Westinghouse
372: NEC, Fresnillo plc
286: NEC
376: NEC
288: MMC Metal de Mexico
377: TAC
289: NEC
379: NEC
290: NEC
380: Kansas City Southern Mexico
292: Capstone Mining
381: NEC, Kansas City Southern Mexico
293: Agilent Technologies
382: NEC
294: Analitek
383: NEC
297: Spectro Incorporated
384: Tourism Secretary of Mexico City
299: NEC
388: PwC
300: GlobalSat
390: Deloitte
301: Rockwell Automation
391: Baker & McKenzie
302: NEC
392: BSTL Abogados
303: SAP
393: NEC
304: COMINVI
394: Bolsa Mexicana de Valores
308: NEC
395: Bolsa Mexicana de Valores
310: Capstone Mining
396: NEC
312: Dräger
397: Candiani Mining
315: SAFEmine
398: Ultra Maris Capital Partners
316: IT Telecom
400: Swann Global
317: NEC
402: Baker & McKenzie
318: Grainger
404: NEC
320: NEC
405: Endeavour Silver
321: NEC
406: Export Development Canada
322: Anclas Mineas Encinales
408: Fresnillo plc
323: NEC
412: Peñoles
324: NEC
417: NEC
428