2015
“It is very important for us and for the country to support the mining industry so it continues driving economic development in Mexico. We must make sure that we take advantage of Mexico’s natural endowments in order to create value for our society”
Ildefonso Guajardo Villarreal, Minister of Economy
During the last decade, the prices of gold, silver, and copper soared upward. This led many mining companies to get used to the good times. In 2013, those prices began a descent that would continue throughout the following year, leading to global concerns about the future of the entire industry. Many companies dug deep, ever hoping that these unfortunate times would soon come to an end. Those cost-efficient companies with process optimization, improved social commitment, and a mature and sustained approach towards capital discipline, are now at a natural advantage within the global mining industry’s current environment as they look ahead toward 2015.
In Mexico, companies have not only had to deal with decreasing metal prices, but also with a series of challenging reforms. In 2014, the Mexican government introduced a 7.5% tax on the EBITDA of producing mining companies, and an additional royalty of 0.5% on gold, silver, and platinum based on gross revenues. Nonetheless, Mexico’s resilient mining industry has continued to attract many of the world’s most notable major and junior companies. This led to a total investment in the Mexican mining industry of over US$6 billion in 2014.
Against this varied background, Mexico Mining Review 2015 is an essential read for all who seek to understand the trends that are shaping the mining industry in Mexico, as well as the challenges being faced by key players in the country. This book provides a comprehensive overview of the sector’s intricate operating and business environment, presented through the eyes of key stakeholders who are driving the industry’s development from a political, regulatory, business, and technological perspective. Through interviews with federal and state regulators, lawyers, industry analysts, suppliers, service providers, and the executives who lead the main mining companies operating in the country, Mexico Mining Review 2015 explores the topics that matter, with the people who shape the industry. It is the ultimate reference for companies and investors alike who are seeking business opportunities in Mexico’s mining sector.
ALL RIGHTS RESERVED Š Toguna S.A. de C.V., 2015. 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 Toguna S.A. de C.V. Mexico Mining Review is a registered trademark. 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.
I S B N : 978 - 0 - 9 8 5 53 4 6 -7-7
TA B L E O F C O N T E N T S 1
STATE OF THE INDUSTRY
8
SILVER
2
OPERATING FRAMEWORK
9
COPPER & BASE METALS
3
FINANCE & INVESTMENT
4
PROSPECTING & EXPLORATION
5
PLANNING & CONSTRUCTION
12
ENERGY & SUSTAINABILITY
6
OPERATIONS & PROCESSING
13
LOGISTICS & TRADE
7
GOLD
14
FUTURE OUTLOOK
10 11
EQUIPMENT & SAFETY
TECHNOLOGY & INNOVATION
The mining industry has entered a period of strategic restructuring, optimization of processes, and increased scrutiny over new investments, all in response to the continued downward trend of metal prices. The introduction of specific reforms in Mexico, which have changed the taxes and fees placed on mining concession owners, exploration companies, and mine operators, further slowed down the domestic industry in 2014. Yet, despite the drop in investment during 2013, important operations were initiated or expanded. This was mainly due to the continuous exploration work that has been carried out across Mexico over the last decade. Moreover, the total direct foreign mining investment in Mexico reached US$854 million in the first six months of 2014, more than double of that for the same period in 2013. This level of investment confirms that mining continues to be a profitable business for companies with capital discipline and good operational cost structures.
This chapter provides an overview of the key trends that defined the industry in 2014. It includes an analysis of how these developments have altered the Mexican operating environment, insight into how the investments of 2014 were spent, and considerations about the impact of certain legislative changes on the mining industry. It presents expert insights from private and public entities on a variety of topics, ranging from the general state of the industry, to specific problems encountered throughout the country. The chapter also includes an overview of the most important decisions and actions taken by its leaders in both the public and private sectors.
STATE OF THE INDUSTRY
1
CHAPTER 1: STATE OF THE INDUSTRY 6
Year in Review
9
Investment Will Continue to Flow to Mexican Mining Sector, Minister of Economy
10
Mining Investment and Competitive Focus for Government, General Coordination of Mining
12
Lobbying the Government to Ensure Recognition of Mining Value, Mexican Mining Chamber (CAMIMEX)
12
First Port of Call for Foreign Mining Investors, ProMéxico
14
Rating Industry’s Environmental Record, Federal Attorney for Environmental Protection (PROFEPA)
15
How to Best Ensure Fruitful Relations with Communities, Mexican Mining Chamber (CAMIMEX)
16
Canada Remains Ally and Supporter of Mexican Mining, Canadian Chamber of Commerce
18
Stark Insight into Impact of Tax Reforms, Sánchez-Mejorada, Velasco y Ribé
19
Mining Troubled by Taxes, Prices, and Communities, VSG Abogados y Consultores
20
Changes to Mining Law Decrease Mexico’s Competitiveness, Pizarro-Suárez & Rodríguez Matus Abogados
21
Mining Royalty Body Blow to Industry in Mexico, DBR Abogados
22
Adverse Conditions Affect Exploration Worldwide, Landdrill International
23
Cyclical Market Dynamics Can Be Overcome, Grupo BAL
24
Mexico is Competitive Mining Destination, Baker & McKenzie
5
YEAR IN REVIEW The latest figures representing the performance of Mexico’s
EXPLORATION
mining industry indicate that it has joined the global trend
The exploration market has been among the hardest hit
of decreasing revenues and investments. Internal factors
in many of the world’s mining jurisdictions. According
such as the introduction of a mining tax and royalty,
to SNL Metals & Mining, the total budget for worldwide
and external factors such as the drop in global metal
nonferrous metals exploration decreased from US$21.5
benchmark prices have had a negative impact on the
billion in 2012 to US$15.2 billion in 2013, representing a
principal indicators of the sector. Even so, in the face of
29% decrease. The total ferrous exploration budget also
these adverse circumstances, the industry generated a total
decreased from US$2.89 billion in 2012 to US$1.74 billion.
value of US$15.63 billion in 2013, as stated by CAMIMEX.
While increasing metal prices fuelled an increase in global
Although this represented a 12.4% drop compared to the
exploration between 2002 and 2008, there were also two
US$17.84 billion generated in 2012, it highlights that the
steep declines in exploration budgets in 2008 and 2013.
Mexican mining industry remains a profitable investment
These drops were the result of the global financial crisis, a
opportunity, and marks the importance of this industry in
reluctance to invest in the junior sector, and major mining
the country’s overall economy, making up around 4% of the
companies cutting their strong exploration budgets as a
country’s GDP in 2013. This contribution was affected by a
way to improve their margins. According to CAMIMEX,
decrease in mining investment in 2013, reaching US$6.576
the estimate for 2014’s exploration investment in Mexico
billion invested compared to US$8.043 billion in 2012, which
amounts to US$672 million, down from the US$862 million
followed a global trend of investor wariness with regard to
that was spent in 2013. This being said, in 2013, Mexico
mining investments.
was still positioned as the fourth largest destination for nonferrous exploration investment with 6% of the world
From December 2012 to December 2014, the average gold
exploration budget being allocated to the country.
price showed a decrease of about 30%, from US$1,711 per ounce to US$1,199. Similarly, the silver price decreased
DEVELOPMENT
by about 51%, from US$33.20 per ounce to US$16.40,
95 new mining projects were completed in 2013 worldwide,
while copper dropped by 19%, from US$3.60 per pound
with a total projected cost of US$38 billion. This is a
to US$2.90 during the same period. This drop, however,
decrease of 43% compared to 2010, which saw a record
ran counter to production levels. The production of
high number of 167 new projects, totaling US$115 billion
gold and silver mines worldwide increased by 3.5% and
in value. CAMIMEX has also indicated that a drastic cut
6.8%, respectively, from 2012 to 2013, according to the
in capital expenses has combined with the decrease in
GFMS World Silver Survey 2014 and Gold Survey 2014.
new projects, meaning that fewer projects are expected
Additionally, the total refined production of copper
to become producing mines in the next five to ten years.
increased by 3.5% in 2013, according to the GFMS Copper
Furthermore, 2014 has seen a number of Mexican projects
Survey 2014. Taking all of these factors into consideration,
deferred, including Goldcorp’s Camino Rojo, Primero
CAMIMEX estimates that the annual investment in the
Mining’s Cerro del Gallo, and Coeur Mining’s La Preciosa,
Mexican mining industry for 2014 will total US$6.176 billion,
among at least ten other projects. The reasons behind these
marking a more modest decrease than that seen from 2012
deferrals range from low metal prices to relations with
to 2013.
communities, the allocation of resources to other projects, labor issues, and the need to reduce costs. Nonetheless, investment was up in 2014, with mining companies
MEXICO MINING PRODUCTION VALUE (billion MX$)
associated with CAMIMEX investing an estimated US$2.39 billion in the development of new projects, an increase
250
234.1
from 2013’s US$2.01 billion. Several major mining players launched new projects in 2014, including Agnico Eagle’s
214.5
200
200.9
La India, Goldgroup’s Cierro Prieto, Great Panther’s San Ignacio, Fresnillo’s Saucito II, and SilverCrest’s Santa Elena
150
144.5
100
94.0
78.6 30.1
41.4
GOLD
94.8
90.3 50
mines, among many others.
The gold price reached a historic high of US$1,923 per ounce in late 2011. However, in 2012, it initiated a continuous
53.3
descent. During the first week of November 2014 alone,
25.1
Source: INEGI
6
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
0
the gold price took a hammering fall to a four and a half year low of US$1,143 per ounce. According to analysts, this
low occurred as a result of a strengthening US dollar and a
SILVER
positive attitude in the equity markets that kept investors
Silver demand reached record levels in 2013 as investors
away from the gold market, which is usually seen as a safe
took advantage of lower prices. That same year, the global
haven. Despite these market challenges, Thomson Reuters
demand for silver, mostly for industrial application as well
has stated that in 2013 and 2014, gold mining companies
as in the manufacturing of jewelry, outpaced supply. The
have been producing the metal at record levels. In 2013,
fallout from this was felt in 2014 as the global silver demand
global gold production increased by 6.8% in 2013, reaching
fell by 6.7%. Global mine output showed modest gains in
a total of 3,054 tonnes.
2013, summing up to 819.6 million tonnes of silver but the total supply of silver decreased due to a 24.1% decline in
In Mexico, the main gold production is concentrated in
silver scrap supply. Looking at 2015, HSBC predicts that
Sonora, Chihuahua, Zacatecas, Durango, and Guerrero.
this year will see the first fall in the production of silver
According to INEGI, the average monthly production value
after years of steady increases. Furthermore, both the
for gold in 2014 was US$308 million, slightly lower than
gold and silver markets have been impacted by external
the average value for 2013 of US$356 million. Nevertheless,
factors such as investor fears that the US Federal Reserve
Thomson Reuters reported that gold production in the
would cut its extensive bond-buying, and company-driven
country increased by 2% year-on-year for the first half of
initiatives such as the temporary suspension of silver sales
2014. In 2013, it produced 3.6% of total mine global output
in an attempt to maximize future profits. In light of such
of gold, making Mexico the eighth largest gold producing
uncertainty, a survey carried out by PwC reported that
country in the world, with a total production of 119.8 tonnes.
38% of its market participants expect the price of silver
GOLD MINING PRODUCTION PER COUNTRY (2013)
SILVER MINING PRODUCTION PER COUNTRY (2013)
3.1%
2.8%
3.4% 3.6%
4.2% 4.4%
4.3%
4.6%
16.7%
4.6%
5.2%
34.4%
5.4%
6.5% 20.8%
7.9%
6.5%
8.2% 15.2%
13.5%
9.2%
15.4%
Russia
Canada
Australia
Uzbekistan
US
US
Peru
Mexico
Australia
Poland
China
Canada
China
Chile
Mexico
South Africa
Others
Bolivia
Others
Ghana
Peru
Russia
Source: USGS
7
to increase in 2015, 31% expect it to remain stable, while
OPERATING ENVIRONMENT
31% expect it to fall further. On a positive note, the London
Mexico’s operating environment has seen a number of
Bullion Market released a new electronic, auction-based
changes in the first two years of Enrique Peña Nieto’s
mechanism for setting the silver price benchmark. This
presidency. The Fiscal Reform, implemented in the early
system replaced the silver pricing method which dated
days of 2014, introduced a 7.5% tax on the EBITDA of
back to the reign of Queen Victoria, in which a few traders
mining companies and a 0.5% royalty over the net sales of
agreed on a price between them. The new method makes
gold, silver, and platinum. Moreover, other relevant changes
the silver benchmark price fixing process more transparent
to the operating environment include an increase to the
and allows more direct participation by a wider range of
country’s corporate tax (ISR), an increase of the special
market participants.
tax on production and services (IEPS), the elimination of the immediate deduction of exploration expenses,
In 2013, Mexico remained the number one producer of
and an establishment of three additional fees for mining
silver in the world, with an output of 187.2 million ounces
concession holders. Moreover, concession holders that fail
of silver, representing 20.8% of total global production.
to explore or exploit their concessions for two consecutive
According to INEGI, the average monthly production value
years during the first 11 years will face a 50% increase in
for 2014 stood at US$242 million by Q4, compared to the
their concession fee per hectare. This can lead to a 100%
2013 average of US$297 million. This continued success is
increase if the property is not explored for two consecutive
anchored by four of the world’s top ten silver producing
years after the tenth year of holding the concession.
companies operating in Mexico, including the global While the mining industry has been rattled by the double
leader, Fresnillo plc.
whammy of low metal prices and fiscal changes, there COPPER & BASE METALS
is a measure of optimism for 2015. The passing of the
The price of copper recovered relatively fast from its
Energy Reform should ease the engagement of mining
2009 downfall, reaching historical highs in 2011 due to
companies in the energy generation market and lower the
solid demand. This success resulted in the total refined
currently high cost of energy. Fiscal challenges have also
production of copper reaching a record high of 20.7
led the traditionally conservative mining industry to show
million tonnes in 2013, with a forecasted increase to
an increased enthusiasm for the incorporation of new
21.8 million in 2014, according to Thomson Reuters.
technologies. These innovations are primarily focused on
Copper was mostly used for construction, electrical
improving production, reducing energy consumption, and
and electronic products, transportation equipment,
increasing automation, thus also saving on labor costs. It is
consumer
said that crisis breeds opportunity, and the mining industry
and
general
products,
and
industrial
machinery equipment. However, it is alarming that the
in Mexico seems fully prepared to embrace that ethos.
marginal production cost levels of around US$6,200 per tonne seen in December 2014 are inching closer to the October to December three-month price range of US$6,321-US$7,340 at which copper has traded on the
COPPER MINING PRODUCTION PER COUNTRY (2013) 2.5% 2.7%
London Metal Exchange. The GFMS Copper Survey 2014
3.5% 4.6%
suggests that copper prices have been weighed on by a 15.9%
recent series of weaker economic data, as well as falling
5%
Chinese refined copper imports, and a stronger dollar. There is a positive note for copper producers afraid of
5.2%
these prices digging into their profits: Goldman Sachs believes that marginal production costs could drop to
5.5%
US$5,600 in 2015. 31.8%
6.8%
According to INEGI, Mexico’s national copper production
7.3%
decreased by 4% in 2013 to 480,124 tonnes, or 2.7% of
9.2%
global mine copper production. Of the copper produced in the country, 77% came from the state of Sonora, mainly due to the output of Grupo Mexico’s Buenavista del Cobre and La Caridad mines, as well as Cobre del Mayo’s Piedras Verdes, Peñoles’ Milpillas, and Capstone Mining’s Cozamin mine. INEGI figures show an average monthly production value for 2014 of US$256 million by Q4, an increase compared to the 2013 monthly average of US$239 million.
8
Kasajstan
Australia
Mexico
US
Canada
Peru
Zambia
China
Congo
Chile
Russia
Others
| VIEW FROM THE TOP
INVESTMENT WILL CONTINUE TO FLOW TO MEXICAN MINING SECTOR ILDEFONSO GUAJARDO VILLARREAL Minister of Economy Q: How will Mexico’s numerous reforms affect the
a company was generating from the mining process. It
development of the national economy, and the mining
was thus clear that we needed to redesign the way we
sector in particular?
tax the mining industry. Whether or not this will affect the
A: In 2013, Mexico’s government focused on creating and
competitiveness of Mexico’s mining industry depends on
passing reforms that the country had been in need of for
how the law is applied. The Fiscal Miscellaneous Resolution
the last two decades. We were able to send a very positive
addressed the application of the taxes, and clarified that
signal that the government was able to implement the
only mining production and not the metallurgical processes
required constitutional reforms across many components
will be taxed. This means that the real tax burden for the
of the Mexican economy. 2014 saw us implement these
whole process will be lower than what was being expected
constitutional reforms, publishing the necessary regulatory
in early 2014. We will not know how the royalty will affect
and legal framework, and making sure the reforms work
investments in the Mexican mining industry until we see
when put into practice.
consolidated figures for the entirety of 2014. From 2011 to 2013, the industry was extremely successful and we are
We have very efficiently stabilized the Mexican economy
now monitoring the numbers very closely to assess how the
through fiscal discipline and responsible monetary policy
new tax system is affecting mining. When you look at the
of the Central Bank. But despite all this progress, Mexico
profitability and sustainability of investment in mining, other
is not growing fast enough. Due to low productivity, we
factors apart from taxation are also important, including
have had very poor economic growth over the last two to
legal certainty, economic stability, and political stability. We
three decades. In the natural resources sector, this lack of
want to work on all of those tasks together to achieve a
productivity was caused by the lack of an appropriate legal
balance between them and increase the competitiveness of
framework for investment. However, all of the reforms will
Mexico’s mining sector.
help mining companies access abundant resources. This will occur through the Energy Reform, through the education
Q: What is the government planning to do to encourage
reforms, and by ensuring a flexible labor market. We expect
more foreign investment into the mining sector?
that the main beneficiaries of the Energy Reform will be
A: We are responsible for promoting foreign investment in
companies that currently spend more than they should on
Mexico in general. We work very closely with ProMéxico, the
energy. Furthermore, the task of designing a good legal
Mexican agency for promoting investment and exports, and
framework for the reforms, and set clear rules regarding
with other ministries to coordinate our efforts and secure
property rights and contracts for gas concessions, will
investments in the Mexican mining industry. Other issues
address one of the main challenges in mining: land tenure
need to be addressed to increase mining investments, such
problems in ejidos. The secondary laws of the Energy Reform
as labor issues, security, and tax issues. The reforms are part
will clarify the way that contracts should be made between
of our comprehensive efforts to help the mining industry
ejidatarios and oil and gas and mining companies, which will
solve these issues. The Ministry of Economy has a direct
reduce the degree of uncertainty for long-term contracts and
responsibility for ensuring that Mexico’s reforms jointly
mining investments.
facilitate the increase of the country’s productivity and competitiveness. It will allow foreign investors to receive
Q: What are the objectives of the mining royalty tax, and
fair treatment and take advantage of short and medium-
how will the government ensure that it will not affect the
term investment opportunities in dynamic and profitable
country’s productivity and competitiveness?
business sectors. Though questions are being raised about
A: Before the tax reforms on the Mexican fiscal system,
future investments in the mining industry, we want to send
we had a very soft and outdated tax regime. The country
a very clear signal that we are open for dialogue and are
had set royalties on the amount of land in a concession
willing to work together with companies to ensure that they
but these royalties were not related to the total revenue
have a positive investment experience in Mexico.
9
| VIEW FROM THE TOP
MINING INVESTMENT AND COMPETITIVENESS FOCUS FOR GOVERNMENT MARIO ALFONSO CANTÚ SUÁREZ General Coordinator of Mining at the Ministry of Economy Q: Mining companies feel penalized by the Fiscal Reform
mineral resources in Mexico. Moreover, Mexico is a country
announced in 2014. What is the justification for these new
with a long mining tradition, competitive legal framework,
taxes?
infrastructure, macroeconomic stability, qualified workforce,
A: The Mexican federal government has promoted a series
maritime routes to the main markets in the world, and access
of reforms that affect the country in different areas. These
to the largest consumer centers through commercial treaties.
include not only the fiscal and energy reforms, but also reforms
It also has a strong internal market, and a dynamic growth of
to foment competition in the telecommunications, finance,
the aeronautic and automotive industries, which create value
and education sectors, as well as improvements to the Labor
chains with a high demand for minerals. Mexico possesses
Law. These reforms are part of a general strategy to increase
ample mineral richness, which is why it is within the top ten
growth and development in the country. The Fiscal Reform
producing countries for 16 different minerals. There is also
approved by the legislative power includes a rate of 7.5% over
an ample network of suppliers with the capacity to meet the
the EBITDA of companies in mining production, as well as
needs of the sector, and a process of modernization is taking
an additional 0.5% on precious metal production. Through
place through the consolidation of mining clusters.
this initiative, it is expected that the mining industry will more widely benefit the local populations around the operations.
Q: What opportunities exist to improve the legal
For a long time, there was no special tax for this sector in
framework for mining in Mexico and the efficiency of
Mexico, unlike in other important mining countries in Latin
administrative procedures for this sector?
America and around the world. Nevertheless, companies
A: Mexico has a competitive legal framework, which
should know that the Mexican government is committed
guarantees legal certainty to investors and facilitates access
to supporting the country’s mining sector due to its
to the national market. This is proven by the large number
strategic importance in providing raw materials for industry,
of companies with foreign capital operating in the country.
generating employment and revenue, and attracting foreign
However, this does not mean that improvements could not
investment. In fact, the sector is included in the National Plan
be made to optimize the regulation of mining activities. One
for Development 2013-2018, which is focused on bringing
of the objectives of the Program for Mining Development
in higher levels of investment and competitiveness. In line
2013-2018 is to modernize institutional norms and improve
with this, the Program for Mining Development 2013-2018
administrative processes related to mining concessions. This
was devised to encourage the growth of mining activity in a
latter objective will be achieved through the implementation
sustainable manner.
of technology which will reduce costs, speed up processes, and provide better information for users. In order to
Q: Do you feel that the fiscal reforms have lowered
improve the competitiveness of the mining sector, we need
Mexico’s
a modern and transparent regulatory framework, for which
competitiveness
within
the
global
mining
market?
it is indispensable to support administrative simplification,
A: The competitiveness of the Mexican mining sector does
modernization of processes, and the optimization of norms.
not simply lie in fiscal matters. The country offers important
We will simplify the filing of paperwork and permits at the
advantages for mining investment. For example, Mexico has
Federal Registry of Procedures and Services related to the
great geological potential, there is a wide market for projects
mining industry. Moreover, it will be a priority to keep the
in the exploration stage, and there is modern infrastructure
Public Registry for Mining updated, as well as the cartography
for geological and mining data through the SGM. The SGM is
of mining concessions.
among the best geological survey organizations in the world,
10
and assumes responsibility for exploring the national mineral
Q: How does the General Coordination of Mining collaborate
richness through the use of state-of-the-art technology, which
with the mining clusters in Mexico?
provides the mining industry with indispensable elements
A: One of our main priorities is to support the consolidation of
to facilitate exploration, identification, and quantification of
mining clusters in Mexico; this has become an explicit policy
for driving the development of mining in the country. This
bodies presided by state governments, constituted by the
conjunction of suppliers, mining companies, and institutions
public, private, and professional sectors, and linked directly
creates mechanisms of mutual collaboration and action, and
to the mining industry. Their objective is to institutionalize
allows companies to reduce costs, increase productivity, and
the concept of mining within the state and define politics
improve the competitiveness of the clusters in general. The
and strategies that contribute to the development of the
General Coordination of Mining has decided to help formalize
mining sector and deepen the relationship between the
these mining clusters by offering financing to cluster projects
social, business, academic, and governmental authorities
and proposing models according to the conditions of each
at a municipal, state, and federal level.
mining region in the country. Q: How is the government dealing with issues of insecurity Q: How is the General Coordination of Mining supporting
in the country and improving the rule of law in Mexico?
companies looking to enter the Mexican mining market?
A: The insecurity problems are not present nationwide, but
A: Attracting larger amounts of investment to the Mexican
are rather concentrated in certain regions. This is, however,
mining sector is among the policies that are being pushed
a topic of the highest priority for the present government
forward by the present government administration. This is
administration. The Mexican federal government, through its
why we are working intensely on promoting the industry
responsible entities, is working to strengthen its institutions
among mining investors, communicating the advantages
and has created a security strategy for the country which
of investing in Mexico, and providing information on how
includes a more efficient National System for Public Security
the sector is structured at a public, private, and social level.
and improved intelligence work. This effort has already
Similarly, we inform investors on the permitting that must
delivered important results in terms of improving security
be done to advance a project, the institutions that they
conditions. We are also working on implementing strategies
need to approach for these permits, and the best practices
and acting on them to solve security issues that affect the
to carry out this procedure in a swift and successful manner.
tranquility of our citizens, represent costs for companies, and
A Guide for Mining Procedures is available, which outlines in
inhibit investment. We follow up on problems encountered
a clear and concise manner the obligations that need to be
by mining companies and manage the participation of
met through the range of different authorities that regulate
competent entities at a state and federal level.
the different aspects of a mining project. This includes the application for a concession, the permits for the use of
Q: How do you ensure that structural changes in the
explosives, and the right to the use of water, among others.
Ministry of Economy will benefit the private sector?
The General Coordination of Mining also has a project
A: The Mexican government has very clear objectives and
portfolio which offers specific investment opportunities
strategies to drive the development of the country and
and includes previously evaluated projects, with precise
its mining sector. The Program for Mining Development
information on each. Interested parties may approach us
establishes four main objectives. The first one is to promote
and assess whether a project meets their expectations. If
investment and competitiveness in the mining sector. This
it does, we put them in contact with the respective parties,
objective includes support for the consolidation of clusters,
for example, the concession holder, to facilitate a business
as well as the creation of quality geological information to
agreement.
facilitate the exploitation of a wide range of minerals in the national subsoil, especially those of industrial importance. Our
Q: What initiatives are you promoting so that communities
second objective is to provide more financing to the sector
and ejidos also become aware of the best way to ensure
and its value chain through a refocusing on new financing
their participation in Mexico’s mining sector?
strategies that can facilitate the access to credit for SMEs and
A: There are many examples of successful mining companies
their value chain. The third objective is the promotion of SME
working on ejido lands, in complete harmony with the
mining activities by providing support for exploration and
communities. There is a variety of benefits for the citizens
evaluation of projects, geological, mining, and metallurgical
in regions where mining activities take place, and above
consulting, the evaluation and certification of resources, and
all in areas with historic mining activity. There is of course
increased support for geochemical studies and metallurgical
still work to be done, and we consider that information
tests. Our final objective is the modernization of institutional
and dialogue is fundamental. In this sense, we collaborate
norms for the sector and the improvement of the permitting
closely with the authorities from state governments to
processes related to mining concessions. This is being
promote dialogue between the different stakeholders. In
done through administrative simplification, use of new
some states, a specific State Mining Council is in place to
technologies, and necessary adaptations to efficiently take
facilitate this process. State Mining Councils are collegiate
advantage of the mineral resources in the country.
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| VIEW FROM THE TOP
LOBBYING THE GOVERNMENT TO ENSURE RECOGNITION OF MINING VALUE SERGIO ALMAZÁN ESQUEDA Director General of CAMIMEX (Mexican Mining Chamber) Q: What were the most remarkable events that impacted
about 93% of the entire value and volume of mining and
the Mexican mining industry during 2014?
metallurgical production in Mexico. This certainly provides
A: Last year was difficult for the Mexican mining industry due
solidity to our organization and has made us into a highly
to the cumulated impact of various events. The industry is
relevant consultative body for the Mexican mining industry.
currently in an adverse global economic environment due
Our main objective is now to defend the interests of mining
to falling metal prices. The area of exploration in Mexico
companies incorporated in Mexico to ensure their sustained
was also affected by the Tax Reform since pre-operating
and sustainable development for the benefit of all Mexicans.
expenses are no longer 100% deductible from the first fiscal year as was in the past. Despite this contraction, CAMIMEX
Q: How is CAMIMEX working to make Mexico one of the
continues to work with optimism. We continue to educate
most attractive countries for mining investment and to
regulators and the general public about the importance of
generate synergies between producers, suppliers, and
this industry for social and economic development. These
regulators?
actions promote the country’s competitive mining policy.
A: CAMIMEX faces several challenges in the current operating environment. One aspect we are focusing on is community
Q: What direct role does CAMIMEX play in strengthening
development and social responsibility. Nine years ago, only
the mining industry?
one mining company had received the Socially Responsible
A: CAMIMEX is the country’s oldest industrial chamber as it
Company award in Mexico. Today, this stands at 32. Our
has existed for over 108 years. It is responsible for enacting
goal is for absolutely all of CAMIMEX’s members to gain this
good operating practices to develop a sustainable mining
recognition. Another major challenge is the management
industry nationwide. While membership in the chamber
of social communication. It is important to convey to the
is on a voluntary basis, we enjoy the active participation
authorities, our members, academia, and the general public
of more than 150 mining companies. Our members cover
the vision we share with all the participants in the industry.
FIRST PORT OF CALL FOR FOREIGN MINING INVESTORS
12
Investors looking to inject their funds into a foreign country
General Coordination of Mining to create promotional
need to be confident that their investment destination
materials that present Mexican mining opportunities in
will welcome and support them, especially when their
an alluring way. These materials are then distributed by
investments target capital intensive industries like mining.
ProMéxico’s counselors in the world’s foremost mining
In Mexico, that support has a well-established name:
jurisdictions, such as Canada, the US, Australia, China,
ProMéxico, the country’s investment promotion agency.
and Chile. “They are tasked with approaching companies
In the first six months of 2014, foreign mining companies
and promoting mining opportunities available in Mexico.
doubled their investment in Mexico over the same period
These overtures aim to bring companies to Mexico to
in 2013, reaching US$854 million. This success was hailed
meet with our mining representatives, across chambers of
by President Enrique Peña Nieto as being in large part
commerce, government entities, leading companies, and
due to ProMéxico’s participation in international mining
suppliers,” outlines Díaz de Léon. ProMéxico’s mission does
conventions. “We help investors to make successful
not end once a company has made the decision to invest
investments and reinvest in Mexico,” says Ricardo Díaz de
here. It remains a strategic ally to help foreign investors
Léon, Coordinator of Mining and Infrastructure of ProMéxico.
navigate the seas of Mexican bureaucracy and permitting,
His division of ProMéxico collaborates closely with the
while also alerting them to any opportunities they might
We believe mining can be a focal point of social and
Q: Can you describe the fallout of the Fiscal Reform on
economic transformation. This can be done by creating job
the mining industry?
opportunities that positively transform the lives of Mexican
A: This is an issue that concerns us and on which we are
citizens. CAMIMEX wants its members to create decent
working hard. One of the main concerns is to ensure that
and fair working conditions bringing prolonged prosperity
exploration expenses will again be made deductible in the
in places where the industry operates. We also believe in
same fiscal year as they are carried out. It is critical that this
strategic alliances to achieve sustainable local development.
area is reactivated since the stability of the sector depends
To achieve this, it is essential to create synergies between
on the generation of reserves. If this is not addressed, the
operating companies, suppliers, universities, government,
future continuity of mining operations will be compromised.
and the public. Another of our priorities is to make rules
Investment in exploration has already seen a major
more transparent as this will allow Mexicans to increase
contraction with many projects being made dormant. The
their trust in the mining industry. There are currently mining
fallout will also not be limited to the mining industry, since
operations of different types in virtually every state of the
the raw materials it produces are the first link in the industrial
republic. Those involved in the industry are rightfully proud
chain. If Mexico does not adopt a policy that promotes
of this, but we are looking for all people in Mexico to feel
exploration, many negative indicators will spread from the
proud of having a world-class mining sector.
mining industry to others.
We also need to ensure that the government’s central
Q: What mechanisms will CAMIMEX employ to monitor
mining policy recognizes that this industry is strategic for
the use of funds collected by the mining royalty to ensure
Mexico’s future development. To this end, CAMIMEX works
that communities benefit as stipulated by the law?
closely with authorities to generate a full understanding
A: This is crucial for us. We are in constant contact with
of the important contribution that mining can make to
the authorities to make sure the mining fees and royalties
Mexico’s economic and social development. This is done
are appropriately used. We are also monitoring the
with a mining policy that recognizes that this industry is
development of the rules that dictate the use and allocation
strategic for the future advancement of the nation. One of
of these resources. Within CAMIMEX, we have created
the issues that are currently capturing the attention of the
working groups to analyze the best mechanisms that
industry is Energy Reform. This has opened new business
could be employed to ensure that the right communities
opportunities that will benefit the industry. One of the main
are receiving much needed support. We have a wealth of
benefits is that mining companies can now generate their
experience in managing relationships with the communities
own energy at lower cost through electricity cogeneration
so we are seeking to share our knowledge with the
projects.
government to ensure that this level of success is continued.
have missed. For example, in 2012, a new scheme was
its infrastructure needs, or advising on permits. “For
announced to promote public-private partnerships in
example, if a mining company needs a supplier to create
Mexico, with a budget of MX$7.7 billion (US$520 million)
a road to its mine, we can introduce it to local suppliers
set aside to boost such deals. According to Díaz de Léon,
that can take care of such a project,” says Díaz de Léon.
the mining industry has not fully taken advantage of this
This requires ProMéxico to also keep its ear to the ground
scheme but companies can consult with ProMéxico about
within the country to be able to rapidly identify the right
how best to do so.
local partners. Overall, ProMéxico seeks to be the first port of call for foreign investors in almost any setting. “It
The main way ProMéxico remains front and center of
is easier to access information about permits and get in
Mexico’s investment attraction strategy is by being
contact with the General Coordination of Mining through
ubiquitous at expos and trade shows around the world.
ProMéxico than through an international consulting firm,”
“Participating with pavilions or as speakers is vital for
claims Díaz de Léon. “We have a large network of sector
us to remain close to potential investors and to set up a
specialists as well as connections to a wide range of
direct relationship with their executives. This allows us to
governmental entities in Mexico and abroad.” Considering
not only present Mexico but also to understand how to
that 70% of the country has not yet been explored for
best satisfy the aims of these companies,” states Díaz de
economic mineral deposits, ProMéxico aims to help unlock
Léon. Once this understanding is gained, ProMéxico can
Mexico’s full mining potential. “Though metal prices have
also move to the next step. This can mean linking foreign
decreased, Mexico is still the number one producer of silver
players with Mexican suppliers, helping to take care of
and an important exporter of gold,” Díaz de Léon states.
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| VIEW FROM THE TOP
RATING INDUSTRY’S ENVIRONMENTAL RECORD ARTURO RODRÍGUEZ ABITIA Deputy Attorney for Industrial Inspection of the Federal Attorney for Environmental Protection (PROFEPA) Q: What is the purpose and the main responsibility of the
means that we have closed one out of 24 mining operations
Federal Attorney for Environmental Protection?
that we have visited due to the imminent risks that it poses
A: PROFEPA is an institution that was born 22 years ago
to the environment. During the other 23 inspections, we
and is responsible for the upkeep and monitoring of
either found no irregularities or we found minor irregularities.
environmental compliance in Mexico. Mexican environmental
When an large accident like that at Buenavista del Cobre
legislation has existed for less than 40 years and has had to
happens, it attracts a lot of attention from the media and
evolve to include industrial activities in a more rigorous and
political circles, which then start treating the industry as if all
detailed manner. Today, of all the productive activities in the
mining operations in the country are regularly experiencing
country, the industrial sectors are the most environmentally
accidents. While there are high risk mining operations that
regulated. Stemming from the main environmental law,
do not operate under adequate conditions and can have
the General Law of Ecological Balance and Environmental
a considerable impact on the environment, most mining
Protection (LGEEPA), several official Mexican norms
operations cannot be classified as having a bad performance.
have been created, which help PROFEPA keep watch of increasingly detailed aspects of industrial processes.
Q: What role did PROFEPA play before, during, and after the incident at Buenavista del Cobre?
Q: How does PROFEPA see the current state of
A: PROFEPA was the driving force behind the actions
environmental compliance by mining companies?
taken to make Grupo Mexico responsible for the damages
A: The mining industry is very diverse and includes a range
it caused, and could potentially have caused, through the
of processes such as concentration, flotation, lixiviation, and
incident at Buenavista del Cobre. Through PROFEPA’s
physical separation, all of which present different levels of
administrative process, Grupo Mexico created a fund of MX$2
risk. This is why the environmental legislation has focused on
billion (US$137 million) and created mechanisms to provide
those processes with the highest level of risk. There are many
indemnification for the damage caused to third parties. The
elements that influence the environmental performance of
trust is administered by SEMARNAT, Grupo Mexico, and
the mining industry in Mexico. The environmental legislation
three academic experts from UNAM and the Mario Molina
and the Mexican industries’ concern over the environment
Center. Moreover, until the matter is resolved, PROFEPA
are relatively young. A large part of the environmental
closed the expansion project of the Tinajas lixiviation pads
impact caused by the extractive industries occurred before
at Buenavista del Cobre. This is a very ambitious project
there was any awareness of the impact that these industries
which aims at doubling copper production at the mine site.
had on the environment. This has generated a history
The fact that this expansion was temporarily shut down has
of environmental liabilities or contaminated sites due to
really hurt the company and is the true detonator of the
historic industrial activity. It is thus important to clarify
change in its behavior. The cost of the opportunities lost
that not all environmental damages caused by the mining
due to the closure of Grupo Mexico’s expansion project is in
industry are caused by recent activities.
the hundreds of millions of dollars. This is why the company is nso interested in completing the remediation and paying
14
Even though there is still much to do, the historical tendency
the corresponding indemnization. If progress continues, the
of the Mexican mining industry is one of improvement. We
closure will be lifted in 2015. As part of the investigation, we
currently have a record of 1,250 active mining operations
also looked into all the operations at Buenavista del Cobre
which fall under the federal government’s jurisdiction, which
and opened three administrative processes to be resolved
does not include mines of aggregate minerals. Since 2013,
at the mine site. Furthermore, PROFEPA visited all of Grupo
we have visited more than 800 of the 1,250 operations, and
Mexico’s operations and opened additional administrative
our goal is to visit all mining installations before the end of
processes in some of them. This case has reminded mining
2015. Following the more than 800 inspections that we have
companies that these types of accidents can happen to
completed, we have had to close down 34 operations. This
anyone.
| VIEW FROM THE TOP
HOW TO BEST ENSURE FRUITFUL RELATIONS WITH COMMUNITIES ADALBERTO TERRAZAS President of CAMIMEX Community Relations and Development Commission Q: What is your opinion about the current state of relations
than problems, it seeks to be closer to mining companies.
between mining companies and communities in Mexico?
The most important challenge being faced now is for mining
A: I consider these relations to be good, despite cases in
companies to continue making social investments despite
which projects have been mismanaged. In cases where
the introduction of the mining tax and royalty. The federal
conflicts do break out, these are generally managed quite
government, through SEDATU, will create committees in all
well with communities that have realized that mining
the mining states that will include representatives from state
brings extraordinary benefits such as infrastructure, health
and municipal governments, from the mining companies
services, environmental protection, productive projects,
with activities in those states, and from the communities
and the development of value chains. The fact that the
involved. These committees will define the use of the funds
number of companies having received awards for being
collected from the tax and royalty. Any community or
socially responsible has increased in recent years proves
municipal presidents will be able to present projects to be
that mining companies are taking the interests of the
developed through this fund.
communities to heart. Q: What types of measures are taken to ensure that CSR Q: What initiatives are necessary to maintain a good
projects focus on the real needs of specific communities?
relationship with companies around a mine?
A: Every community has its own requirements that are
A: One important issue is that workers that come from other
identified through careful studies. Certain programs,
parts of Mexico must be trained to respect the local culture
such as the Participative Rural Diagnosis, are carried
of the region they work in. Beyond this, mining companies
out prior to all other research. This study involves social
are able to foment change within communities concerning
workers, anthropologists, and sociologists studying the
problems such as domestic violence, but this takes time.
culture of each community and assessing the impact that
Domestic violence is an important problem in Mexico and
mining activities will have on it. It therefore helps mining
mining companies combat it by giving talks to the women and
companies avoid invading the customs and way of life of a
children of the communities, as well as to their own workers.
community, and allows them to become involved in ways
Every year, we gather many families involved and give them
that will maximize the chance of communities welcoming
a diploma for courses taken to prevent such violence. These
them onto their land. Subsequently, a social baseline study
courses revolve around themes such as respect for women
is carried out to generate a vision of a community, of its
and children, and education. Furthermore, mining companies
leaders, of its precise situation, of the driving forces within
seek to rebuild the self-esteem of its workers to take them
its fold, and of its resources. This study includes matters
out of cultural, mental, and economic poverty.
such as the environment, culture, education, human resources, and the growth potential of children. Another
Many communities still see companies as being substitutes
important study is the Stakeholders Mapping 360° study,
for the government and demand that they help maintain the
which focuses on identifying the leaders, their authority,
town. This is why mining companies will be forced to pay
relationships among them, and the potential for these
double to maintain their social licenses to operate. That being
leaders to impact future operations. Once these studies are
said, many development programs belonging to municipal
made, companies create risk maps and hold talks with the
governments do not always support marginal communities.
stakeholders that present the highest risk in order to create
Since marginal communities are often closer to mines, mining
awareness about the reality of the mining operations. After
companies need to become the promoter of development
these precautions are taken, CSR programs are set in place
for these communities. Companies often have to support
and sustainability reports are written to communicate the
the creation of infrastructure, education, and health services,
good and bad aspects of the operations. This latter part
among other things. When a community begins to see
is done in order for communities to realize that mining
mining as an activity that will create opportunities rather
companies work for the common good.
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| VIEW FROM THE TOP
CANADA REMAINS ALLY AND SUPPORTER OF MEXICAN MINING ROSALIND WILSON President of the Mining Task Force for the Canadian Chamber of Commerce Q: What is your main advice for Canadian companies and
needs a break and has indicated a willingness to find a
your partners in the Mexican mining industry on how to
solution. It was unfortunate that we had to go through
proceed in these challenging times?
some tough times to get to this point as this could have
A: Unfortunately, there is not much we can do about
been prevented with a more competitive tax percentage
metal prices but our key message has been to drive the
from the outset.
competitiveness of the Mexican mining environment to attract investment. We have been working on a few key areas
Q: How do you think Canadian foreign investment into
to do this. The first of these was the Fiscal Reform as we
Mexico will develop in the future?
were very active last year to try and avoid excessive taxes.
A: Access to funds has dropped worldwide but mining is a
We did not seek to avoid a tax altogether but we believe the
cyclical industry. While it is dropping now, it will go back up
tax imposed was higher than it should have been, especially
again at some point and we already saw some improvements
given the poor current conditions of the global mining
through 2014. Funds will continue to be raised on the TSX as
market. We are now working with authorities to develop
it is by far the world leader for raising capital for the mining
practices that will allow companies to prosper within the
industry. Canadian investment will continue to be important
current tax environment. This involves precise strategic
on the global mining stage. As for Mexico, once we obtain
planning, looking at options such as tax deductions, and
more clarity as to how the new laws will be applied and
coming up with a financial setting that will allow companies
once stability returns to the market, the country will start to
to move forward. The real success of the Mining Task Force
recover the levels of participation of Canadian investment it
has been its collaboration with the key players and right
has seen in the past. Through 2013 and the first half of 2014,
authorities in the government across the mining sector. This
Peru and Chile took over some of the market share, but once
has created a stronger voice for Canadian investors within
the secondary application of the Fiscal Reform is clarified, I
the Mexican mining industry.
believe Mexico will return to its leading position for attracting mining investment in Latin America. The Energy Reform will
Q: How have these talks with potential partners and allies
also help to clarify the Mexican legal environment. I am not
been successful?
certain how quickly this will happen though and an adjustment
A: During the Fiscal Reform, we believe that the mining
period will be needed. Despite this downturn, it is important
sector was not heard and the fallout on the industry
to note that we have not seen any Canadian company in
has been worse than expected. We have definitely seen
production pull out of Mexico. Every company has a different
a decrease in investment in Mexico and other Latin
strategy but, in general, the uncertainty has led to a cutback
American countries over the past few years. The statistics
on exploration but not a shut-down of production. Some
have brought awareness within financial and governmental
companies have decided to hold back on investments while
institutions, and we believe that they are now conscious
others are still actively participating; nobody has announced
that we were not simply complaining in order to avoid
any big new projects though. Companies are in a holding
taxes, but the imposed taxes on the industry were the
period and it is unlikely we will see any major movement until
wrong amount at the wrong time. We have received a
legal certainty is attained.
lot of support from federal and state governments. There
16
are strong indications that the secondary laws and the
Q: Besides big mining companies, smaller Canadian
implementation of the Fiscal Reform will bring incentives
suppliers participate in every aspect of the supply chain.
and breaks that will encourage ongoing investment in
Have you seen less activity in Mexico on their part?
the mining sector. This means we are getting closer to a
A: I have not seen less activity. Suppliers are a very
possible solution. Some steps that could be taken include
important part of the value chain and play an important role
deductions of exploration costs and social expenses.
in the competitiveness of mining companies. The Mining
Ultimately, the government realizes the mining sector
Task Force is working closely with the Canadian federal
government and provincial governments to promote
Q: What are your predictions for the state of the Mexican
Canadian technologies and suppliers. We organized a big
mining industry toward the end of President Peña Nieto’s
supplier event in Hermosillo in October 2014, jointly with the
term in office?
Province of Ontario and the Canadian Embassy in Mexico,
A: I would prefer to speak of hopes and desires rather than
and we are planning to continue with this promotion at
predictions. If you were to ask me what I would like to see
major events throughout 2015. Technology can have a
at the end of this presidential mandate, it would be a level
major impact on exploration and production costs and we
of Canadian investment in the mining sector on par with,
believe this is an area we should be focusing on.
or superior to, the investment levels we saw in 2012. These were not only record levels of investment but they marked
Q: Another concern that mining companies have voiced
Mexico as the clearly preferred destination for investment
is insecurity. How has the Mining Task Force been helping
dollars within Latin America. This will obviously depend
Canadian companies to deal with this challenge?
somewhat on metal prices but Mexico’s challenge will be
A: Security remains a big issue, especially given the remote
convincing the investment community that legal certainty
nature of the areas our mining companies are operating
and rule of law are guaranteed here.
in. There are high associated costs of security spending and this obviously impacts the competitiveness of mining
Q: What are the goals you have yet to fulfill as President
companies. Every company’s project is different, due to
of the MTF, and how will you achieve them?
being in different areas of Mexico and having different
A: As President of the MTF, I would like to see a more
levels of access to the sites. So while the plan for each
united mining sector from investors all the way through to
project varies, the Mining Task Force has a security
legislators and local communities. We have made strong
committee which shares a series of best practices and
inroads in adding the perspectives of the international
also communicates the relevant experiences of different
investors to the equation, but I would like to see a better
members. Security is high on the agenda in our discussions
understanding between investors and legislators in terms
with governmental authorities both at the federal and state
of the social and economic impact they have in local
levels. However, it is more important to ensure support
communities. We will continue to work with our member
at the local level and to encourage companies to share
companies, investors, legislators, and relevant government
information and employ best practices.
entities in order to create better understanding.
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| VIEW FROM THE TOP
STARK INSIGHT INTO IMPACT OF TAX REFORMS RODRIGO SÁNCHEZ-MEJORADA VELASCO Partner at Sánchez-Mejorada, Velasco y Ribé
Q: How do you assess the changes in the overall operating
how faulty our communication strategy is. Something that
environment implemented by the current administration?
is also important to understand is that the Cananea incident
A: Some of the most important changes implemented
happened at a time when the state government of Sonora
are related to taxation, namely the 7.5% royalty on what
was having problems with the federal government.
is essentially EBITDA, the 0.5% on the sales of gold, silver, and platinum, and the doubling of the rates for the so-
Q: What effective measures are companies taking in order
called inactive concessions. This reform came at a very bad
to minimize the effect of the royalty tax?
time since it coincided with the downturn of metal prices
A: The legal approach that some companies are taking is
and the Canadian financial crunch. What hurt the industry
to file lawsuits contesting the constitutionality of the tax.
was not the tax as such but the time at which it was
The grand majority of the companies opted to wait until
implemented. If this had been done six years ago, it would
the first application of the tax. In Mexico, you have the
have not had the impact it has today. The changes to the
choice to contest a constitutional law within a certain time
mining law were a negotiation chip to gain terrain in the
of its enactment or within a certain time of its application.
Pact for Mexico. The government’s first priority was clearly
The reason that companies waited was that many of them
the Energy Reform and the new administration wanted
wanted to see how the first lawsuits will be resolved by the
to have broad based support from the left-wing parties,
court. This gives them a good measure of how they should
such as the PRD. If they did not earn their support with this
file their lawsuits so that they are more effective. They
initiative, they would have at least tamed the opposition. In
also want to know what will happen with that tax once the
the Pact for Mexico, the government wanted to implement
Energy Reform has been applied. Now that the Pact for
a new section in the mining law that was going to take the
Mexico has expired, and now that the government realized
interests of the land owner more into account, which is an
how the Fiscal Reform has affected the exploration of
extremely dangerous and negative approach. Fortunately,
mineral resources, there might be some backtracking or
they did not go through with it before the Pact expired.
adjustment to the laws once again. The legal strategy was to file an amparo or wait to see what will happen in early
Q: What is your view on the overall public opinion of the
2015. If nothing changes, I expect mining companies to
mining sector?
continue to file many more amparos.
A: The degradation of the mining industry in the public
18
eye is the result of the continued failure of public relations
Q: If a company wins an amparo, what would that
departments to deliver the message the industry needs to
represent for the rest of the industry?
give. Unfortunately, the spill at the Buenavista del Cobre
A: For many years, the main criticism of the amparo system
mine contributed to worsening the overall image of the
was that it only benefits those who file it. There have been
sector. It was obviously not as bad as the newspaper
some changes now, but these are very limited. Regarding
reports make out, but it was also not as innocuous as
taxes, every party must file its own lawsuit in order to be
the industry would like to portray it. This created a lot
protected; it is not enough for a court to say that the tax
of damage in the population’s perception of the mining
is unconstitutional. In developed countries, this would be
industry. Another example are the water wells in Sonora,
enough, but that is not the case in Mexico. I hope that the
which were declared by the authorities to be fit for human
successful lawsuits will generate a lot more appetite for
consumption, but the communities are still not using them
other companies to file them. It is important to think about
because they are afraid. There is a very simple solution to
the possible repercussions since the government has its
this: gather the CEO of the mining company, the head of the
own strategies to dissuade companies from filing amparos.
mining chamber, and some government representatives,
This complicated quarrel is giving the opportunities to the
then pump some water out and have them drink it in front
tax firms rather than to the mining firms because taxation
of the media and TV cameras. This is just an example of
is a very specialized area.
| VIEW FROM THE TOP
MINING TROUBLED BY TAXES, PRICES, AND COMMUNITIES ALBERTO VĂ ZQUEZ Partner at VSG Abogados y Consultores Q: How are the Fiscal Reform and the drop in metal prices
with the structures in place in other countries. What was
affecting new or ongoing mining operations?
originally being considered was the possibility of a 3%
A: The most important thing is that the legal framework
tax, which is a reasonable amount, but then the legislators
guiding the mining industry has not changed at all so far.
increased it to 7.5%. In fact, the government has stated it
However, uncertainty over the tax situation continues to
still views this as a low tax. It may be low on its own, but
plague the industry in Mexico. The tax and royalty being
one has to take into account all the other costs that mining
imposed on projects in the exploitation phase could gravely
companies face, such as energy cost, theft, extortion, cost
hurt the mining industry. Many companies erroneously
of water, and cost of access.
think that the tax will only have impact them once they start producing. Unfortunately, the Fiscal Reform applies to
Q: What has been the main focus for the services that VSG
the entire mining industry, and will directly affect whoever
Abogados has offered to its clients over the past year?
holds a mining concession, whether at the exploration,
A: On a daily basis, companies are facing a variety of
exploitation, or beneficiation phase. So far, uncertainty over
situations, and all mining projects have a certain lifespan.
the tax has caused some companies to halt their investments.
When a project reaches its end, companies have to leave
Meanwhile, some law firms have been fighting the tax under
their properties in the best possible condition to comply
the argument that the government is imposing a double tax
with their environmental obligations. Right now, our
on mining activity, which affects the constitutional rights
services are mainly focused on helping companies that
of concession holders. Additionally, global metal prices
are well-funded, or which have projects at the production
have been dropping, making it very difficult for mining
stage. We help them to maintain their production and to
companies to raise money to develop exploration projects.
look for alternative forms of financing. Small companies in
Some projects that may have been very attractive in the
Mexico that were not well-funded are going to disappear,
past are no longer viable, which has led to mining projects
but those companies that are in a stronger financial
closing or workers being fired in Mexico.
position will find better opportunities. Some of these companies will be able to acquire projects at a very low
The number of new entities coming to explore in Mexico
cost and hold onto them until the situation improves.
has decreased, at least from what this firm has seen, but those companies already in Mexico are continuing with
Q: How do you view the performance of Mexico’s mining
their operations to try and survive. In some cases, they are
law in terms of securing land access for mining projects?
trying to foster better relationships with the communities,
A: The mining law does not protect concession holders in
since it is probable that the mining tax and royalty will
regards to land access. This is very important to remember.
see companies slash the number of social programs that
It is very clear that the concessions relate only to the ground
they have had in place for decades. This is not because
beneath the surface, and that it only awards permission to
companies are unwilling to continue their efforts, but
access that part of the land. 80% of the time, companies
because the government has claimed it will be providing
have to negotiate with rural or agrarian communities to
economic support to ejidos and municipalities through the
gain access to the land, and less often to gain access to
funds collected from the tax and royalty.
private property. The Agrarian Law protects the interests of the communities and ejidos, and this prevents mining
Q: What process did the legislators follow during the
concession holders from receiving support when dealing
drafting of the Fiscal Reform, and how did it solidify into
with these communities. This is why companies are
its current form?
worried about maintaining the good relationships they
A: The mining royalty has been under discussion for over
have managed to develop at that level. In the world we
12 years. There have been ongoing debate about whether
currently live in, community relationships may even be as
to impose it or not, in which comparisons have been made
important as deposits, per se.
19
| VIEW FROM THE TOP
CHANGES TO MINING LAW DECREASE MEXICO’S COMPETITIVENESS KARINA RODRÍGUEZ MATUS Partner at Pizarro-Suárez & Rodríguez Matus Abogados Q: You once commented that, contrary to pre-conceived
into a mine. Furthermore, mining is an activity that requires
ideas, the Mexican industry is well-regulated by a number
extensive long-term planning. It can take up to 15 years
of laws. What makes you say this?
for a project to develop into a mine and large investments
A: In my opinion, the Mining Law does not need to change.
are needed in order to keep the mine working. Mexico has
The law is in place to provide instructions on how to obtain
very few investors who can meet these requirements with
a mining concession and how to open and operate a mine.
their own capital. This makes it all the more essential for
All the important matters are either addressed in the
Mexico’s mining legislation to attract capital from other
Mining Law or in the laws that apply to all other industries.
countries, or from Mexican companies looking for the best
The entire mining sector is highly regulated by the Mexican
place to invest. As a result of the royalties, Mexico is losing
legal system, including the Environmental Law, Labor
competitiveness with regard to bringing in investment for
Law, Social Security Law, Fiscal Law, Explosives Law, and
mining projects. Additionally, a company that invests in
Chemical Substances Law, among others. There is no
Mexico, particularly in the north, has the added expenditure
reason why the law pertaining to mining activities should
of necessary security enforcement measures. When these
regulate labor or environmental matters, for example,
factors are added to the existing fiscal burden that applies
since we already have specific legislations for those areas.
to any business, Mexico starts to become less and less
Mexico’s challenge is to apply and improve its strong rule
attractive to investors.
of law rather than trying to change it. Q: Apart from the loss of competitiveness, what are you Q: Do you think that the legislators thoroughly assessed
most concerned about regarding the implementation of a
the state of the mining industry before implementing
mining royalty?
changes to the fiscal regime?
A: The major issue is whether or not the funds from the
A: The legislators did not take into account that the
royalties will actually reach the municipalities as intended.
Mexican mining sector has different players that can be
It is not clear how the public funds will be distributed and
categorized into three groups: large mining companies,
what they will be used for. For example, Peru has a similar
the junior companies focused on exploration, and the small
situation to Mexico, but individual cases were reviewed to
miners. The reality of each group is completely different
assess how the municipalities were going to use the funds
but the fiscal changes will affect them all. The fall of metal
they obtained. This study highlighted the fact that some
prices already reduces the economic viability of mining
municipalities did not know how to efficiently apply the
projects, so by adding new royalties, the government may
funds they received. It is therefore important to specify
be forcing mining projects to shut down. It was the wrong
how the funds will reach the municipalities and how they
moment to implement these royalties since the boom in
will be used. Furthermore, if a mine is located in another
metal prices had ended. Many projects will grind to a halt,
municipality from that in which its workers live, an issue
investments will stop coming, and companies will simply
will arise as to the use of the funds collected through
wait for better times. If investments drop, we will see a
the royalty. The new law states that the resources will
reduction in employment rates in many parts of Mexico.
be invested in the municipality where the mine operates, but it does not state what will happen to the municipality
20
Q: What is the importance of attracting foreign investment
where the workers live. In such a scenario, companies
for the development of mining projects in Mexico?
would most likely have to continue supporting that other
A: Mexico must fully exploit its potential, but to do so it
municipality to continue their operations. Nevertheless, if
needs to attract investment on a global scale as all countries
the funds actually reach the municipalities, if the rules on
do and partner with those that are willing to take the risk.
how to use the funds are clarified, and if the municipalities
To put the investment needs of the mining sector into
can successfully apply these rules, then the development
perspective, only one out of 100 exploration projects turns
of the communities will certainly receive a boost.
| VIEW FROM THE TOP
MINING ROYALTY BODY BLOW TO INDUSTRY IN MEXICO LAURA DIAZ NIEVES Partner at DBR Abogados Q: The implementation of the mining royalty has been
mining industry. The government should indeed monitor
lambasted by mining companies but legislators claim it is
companies to ensure that they are following the law, but
a common practice. Do you believe it will achieve the aims
they should also provide incentives for the industry. The
that the government laid out?
government is only thinking about big mining operations,
A: Legally, the government made a mistake. The explanatory
ignoring the consequences this could have on smaller
memorandum of the mining royalty does not explain to us
mining companies. There are small companies out there that
why the government opted to impose an extraordinary 7.5%
have been surviving on their mining engagements for over
fee on the mining industry. For that reason, we consider
a century. The government may come to be more flexible
that the modification of the law was unconstitutional. Each
with the industry once it realizes that mining investment is
company has had to decide whether or not it wanted to
decreasing, and that some companies are even moving their
initiate proceedings to appeal the royalty. Some companies
investment abroad.
were afraid of the government, others thought that they could handle the situation, and the rest decided to wait and
Q: Foreign investment in the energy and automotive
see how the government would react if other companies
industries are being encouraged and incentivized by the
were successful in their appeals. A public company has
government. Why is it different in the mining industry?
to protect the interests of its shareholders, and these
A: I ask myself the same thing. I think the government is
shareholders might well argue that if the company has
trying to collect more taxes after realizing that mining
legal resources in Mexico, then it should take action against
companies grew considerably in 2010 and 2011. We have
the mining tax. I am confident that companies filing an
been engaging in discussions about the mining royalty
appeal could win. However, the appeal has to be filed by
for three years now. The amount discussed for the royalty
an individual company, it cannot be a collective action
was between 3-5%, which is comparable to that of other
and it would not apply to companies that did not take the
countries. This was before the government opted to go
same action. Some people also think that the government
with its final decision. Almost nobody produces platinum in
will come to realize that the royalty was a mistake. Several
Mexico, so where did that extra 0.5% for platinum producers
analyses on the mining royalty, including our own, have
come from? Why did this not apply to copper or iron? INEGI
suggested that the mining royalty is unconstitutional.
did not report any platinum production in its last surveys.
Legislators reason that the mining industry has made plenty of money in the past and should now contribute more.
Q: The money from the mining royalty is supposed to go to
This is one of the reasons presented to Congress for the
municipal governments and to communities surrounding
approval of the mining royalty, which makes me think that
the mines. How do you think this will actually happen?
the government simply does not understand the industry.
A: Part of the funds collected through the royalty will go to
Companies that have already invested US$100 million to
the federal government, part will go to the state governments,
develop and construct a mine will probably not want to
and part will go to the municipal governments. It will
invest any more. Companies looking to start new projects in
probably not go directly to community organizations such
Mexico will most likely go abroad instead. The royalty could
as ejidos. We are not aware of the distribution rules yet since
set the industry back for at least a decade.
companies will only start paying the taxes in March 2015. Companies have to follow the regulations or the government
Q: What have been the main developments in the mining
will not distribute the funds that they have collected. What
industry since the mining royalty was implemented?
DBR Abogados can do as a law firm is help municipalities
A: Mining companies are laying low, they are closing projects
understand the industry and help them understand how to
or lowering their costs as much as they can. This is largely due
manage the money. Even if they only receive 20-30% of the
to the poor price of metals. It seems now that the government
funds collected by the new fiscal laws, a small municipality
is trying to act as a police force, closely supervising the
could get a windfall of millions of dollars.
21
ADVERSE CONDITIONS AFFECT EXPLORATION WORLDWIDE
22
The exploration market has taken a battering in many of
Shortus sees the adverse business conditions as being
the world’s mining jurisdictions. A once strong company,
partially caused by declining gold and silver prices, which
Landdrill International, is now left with one operating
he believes do not reflect the reality of the industry. “I
office in Mexico due to the widespread downturn of the
believe that metal prices are manipulated according to the
exploration business in the mining industry. The company
interests of particular people or institutions. It is a shame
used to have offices in Mongolia, Russia, Canada, Mexico,
that so much of the industry depends on metal prices.”
and Nicaragua, but due to the worldwide reduction in
Unfortunately, Shortus’s claims are supported by several
exploration expenses, and the stricter legislations that
cases of metal price manipulation in recent years. In May
reduce the attractiveness of mining investments, the
2014, the UK’s Financial Conduct Authority fined Barclays
company has had to slowly close down its operations
US$43.8 million after one of its traders sought to influence
around the world. According to SNL Metals & Mining’s
the gold fix two years prior. At the beginning of the same
report World Exploration Trends 2014, the total budget
year, Deutsche Bank resigned its seat in the gold and silver
for worldwide nonferrous metals exploration decreased
benchmark price setting after German regulator BaFin
from US$21.5 billion in 2012 to US$15.2 billion in 2013,
launched an investigation into DB’s potential manipulation
representing a 29% decrease. The total ferrous exploration
of gold and silver prices. Metal price fluctuations have
budget also dropped from US$2.89 billion in 2012 to
caused Landdrill, and many other exploration companies,
US$1.74 billion. Deloitte’s Tracking the Trends 2014 reports
to cut back on expenses, including staff layoffs and
on the cruel realities that mining stocks are facing as
salary cuts. “As soon as the price of metals drop, mining
traditional sources of financing begin to dry up. The report
companies go on to shut down their exploration budgets,”
goes on to mention that obtaining financing for junior
states Shortus. “Although Landdrill has six rigs working
companies has been difficult, even when those companies
in an iron ore project in Guerrero, it has been struggling
present strong exploration projects. These challenging
to find new projects in the past 18 months. Most of the
market conditions have forced Landdrill to sell most of
Canadian juniors have lost their investors. Nobody wants
its assets. Furthermore, the new laws and taxes applied
to invest in mining exploration anymore.” SNL reports
in its operating countries have hindered the company’s
that, after 2010, drilling activities focused on earlier-stage
development of fresh mining projects. “In 2014, the
exploration which led to initial finds, discovery of new
Mongolian government introduced a variety of laws that
zones, and satellite deposits. Now, as in late 2008 and
went against mining activities. Meanwhile, Australia and
early 2009, exploration programs have shifted to more
Mexico introduced mining taxes which caused companies
advanced assets and have focused on expanding known
to stop projects,” shares Peter Shortus, General Manager
resources. “Companies are trying to find higher grade
of Landdrill International Mexico. “There is a downturn in
ore without having to dig too much, so some exploration
the industry worldwide, but when countries introduce laws
work is needed throughout. It is rare that exploration work
that discourage investment, mining companies move their
would take place to define a completely new ore body,”
operations elsewhere.”
adds Shortus.
Exploration is crucial for the discovery of new deposits
As a way to encourage the development of the exploration
and the development of new mines, as Shortus explains.
business, Shortus claims that there needs to be “stability in
“There are existing mines which have years of operations
the laws governing mining and exploration” and a change
in reserves, but by cutting exploration the industry loses
in the metals market dynamics. “The industry needs a
its skilled workforce. It will then be very difficult to find
turnaround in the market before it can pick up again,” he
skilled labor when exploration kicks off again. These
adds. He mentions that there are some private investment
human assets are crucial for successful drilling operations.”
deals happening, but most of them are typically for
According to Shortus, a drop in exploration could lead to
small projects. Shortus also notices that the periods of
severe consequences, such as a tight supply of important
economic wellbeing for mining are becoming shorter,
industrial metals including molybdenum, which is used
while the periods for economic contraction are become
in nuclear medical imaging tests, and iron and chromium,
more frequent and longer. “Going from a cycle of ten years
which are used for stainless steel production. “The pullback
between downturns in the mining industry, we are now in
in exploration budgets only threatens to widen the gulf
a cycle of three years,” he states. The General Manager
between demand and supply and could ultimately tip the
of Landdrill International Mexico expects the exploration
industry back into another heated production cycle, causing
industry to pick up in 2015, making 2014 a year where the
costs to careen even further out of control,” he states.
company simply aimed to survive.
CYCLICAL MARKET DYNAMICS CAN BE OVERCOME An
ongoing
dilemma
The chemicals division has also conducted extensive
mining
research from its base in Torreon, with the aim of
industry is how to build
establishing unique innovative and environmentally friendly
a business model that is
processes in its chemical operations. “Industrias Peñoles
fully protected from the
operates the biggest sodium sulfate and magnesium oxide
damage
during
plant in the world, Química del Rey, and its metallurgical
downward spikes in the
complex is probably the biggest and cleanest in Latin
cyclical
market.
America,” says Lomelín Guillén. As the biggest consumer
Peñoles and Fresnillo, the
of energy in Grupo BAL’s stable, Industrias Peñoles began
mining companies within
self-generating electricity a decade ago, and 90% of
Grupo
faced
Jaime Lomelín Guillén, Corporate Director of Grupo BAL
by
the
caused metals
Industrias
Peñoles and Fresnillo’s energy is now generated within
Peñoles, have benefited from a risk management strategy
BAL’s
the company, bringing huge financial savings. Of the
in two different ways. Firstly, they produce a range of
more than 300MW of power generated by Industrias
different minerals and secondly, they benefit from their links
Peñoles’ various installations, 230MW comes from the
to Grupo BAL’s other companies in the insurance, energy,
Termoeléctrica Peñoles project in Tamuin and 100MW is
and retail sectors. “Industrias Peñoles is stronger because
generated on-site in Oaxaca. Another 250MW of capacity
of the diversification of its operations, from which Peñoles
is due to be installed in 2015.
and Fresnillo produce gold, silver, lead, copper, and zinc,” explains Jaime Lomelín Guillén, the Corporate Director of
While dwelling on matters linked to energy, Lomelín
Grupo BAL. “By being part of Grupo BAL, the companies
Guillén believes the Energy Reform could lead to some
also benefit from having access to the top management
very positive prospects for the mining industry. “The
team in the country, which keeps itself very close to the
Energy Reform is an excellent development for the
operations of its companies, and plays a strong advisory
mining industry,” he says. “It will make Mexico much
role,” he adds. The Group provides financial stability as well
more competitive for all industries, and will attract more
as widely recognized integrity to its companies.” In this way,
companies to the country.” While the US has been able to
Grupo BAL has established a mark of quality across all of
attract business away from Europe and China, in large part
its different companies’ operations, allowing the companies
due to its low cost of natural gas, Lomelín Guillén believes
to draw on each other’s expertise and experience. “Each
that Mexico will in turn be able to attract a large part of
company benefits from the overall quality of each and every
that investment due to cheaper energy and electricity
member of the group,” says Lomelín Guillén. “The trademark
rates. “This will help to make us an even more competitive
of quality at Grupo BAL means that our companies are
country, particularly given our cheaper labor force. More
viewed as solid and stable, and they are highly respected
companies will come and manufacture in Mexico as a result
both inside and outside of Mexico.”
of the Energy Reform,” he states.
Fresnillo and Peñoles also generate significant value for the
Lomelín Guillén also believes that the advantages of
group by way of returns. Fresnillo is the biggest producer
the Energy Reform and other incentives will largely
of silver in the world, and the second gold producer in
compensate for the mining royalty. “I do not think the
Mexico, while Peñoles is the largest producer of zinc and
royalty will cause companies to leave Mexico, but it will
lead in the country, and the second largest producer
have substantial consequences. Mining companies will
of copper behind Grupo Mexico. Furthermore, Peñoles
see lower profits, which will mean less exploration and
is currently looking to expand its copper production
less profits to be shared with their employees. Marginal
through extensive exploration in Mexico, Peru, and Chile,
mines will disappear. The Mexican mining industry pays
in the hopes of finding a macro deposit that would see it
a lot of taxes already, and the new royalty means that it
overtake Grupo Mexico. “Industrias Peñoles is the company
is losing a competitive edge,” he says. While he thinks
that spends the most on exploration, largely because it
it may take time to see what precise impact the mining
is looking up to 100 years ahead,” says Lomelín Guillén.
royalty will have, Grupo BAL’s Corporate Director remains
“Copper is an excellent investment option because of the
confident that when the government realizes how much
tremendous growth in value, which has been spurred by
exploration investment is dropping and how potential new
industrial demand. Copper consumption is also a great
investors are put off, it will bring the tax down or abolish
index for the industrialization of a country. China currently
it. “The mining industry needs foreign investment and the
consumes 40% of the world’s copper.”
government understands that,” he says.
23
| VIEW FROM THE TOP
MEXICO IS COMPETITIVE MINING DESTINATION JORGE RUÍZ Partner and Head of National Corporate Mergers & Acquisitions Group at Baker & McKenzie Q: How have the reforms and the drop in mineral prices
A: The rule of law represents the fact that you can prevail
affected the environment in which you and your clients
in a federal court because a constitutional principle is
operate?
being violated, namely proportionality and tax equality.
A: The main trend we have noticed is a struggle to keep
In certain states, where communities or eijdos have not
costs down. Right now, the price of gold is still above
agreed to accept the help offered by mining companies,
most companies’ breakeven point. A few companies have
those
seen costs exceed this point already and are now in a
operations. When this happens, we nearly always press
bit of trouble, but a lot of the companies that operate in
criminal charges. Sometimes, those investigations are
Mexico are producing at well below US$1,000 an ounce.
not really followed through on as we have learned that
That is really low as a single mine would cost more than
mayors of municipalities are sometimes behind the
that. We have seen M&A activity slow down drastically,
illegal acts. They want the best for their communities
as shown by CAMIMEX indicating saw less than US$50
so they break the law. Another example of rule of law
million in M&A during 2014. The district courts have ruled
is safety, which is not only about procuring justice, but
in favor of two of our cases related to the mining royalty,
also administering justice. The processes of procuring
but the tax authorities will certainly contest this. I do not
justice and investigating these situations are not always
know if they will win or prevail, but it is a step in the right
very sound and differ from place to place around Mexico.
direction.
Most of those investigations or criminal charges do not
communities
will
sometimes
act
to
disrupt
even end up in an indictment, let alone a conviction. Q: What was the main argument that helped your clients
Another aspect of the rule of law is that if a case goes
to win these cases?
to the courts, sometimes the judges do not act as they
A: The main argument is tax disproportionality. Why are
should, which worsens corruption. We have seen cases
these companies being taxed differently to other companies
where a judge is bribed to prolong a charge, among many
operating in Mexico? Why do they have to pay an extra tax
other examples. However, the rule of law is much better in
for gold and silver production if the same is not applied to
the federal courts than in the municipal courts. With the
iron, or zinc, or other metals? These taxes are not paid by
awareness of corruption that has been created in recent
the fisheries or by other natural resource segments. Based on
events, the federal government has to apply the rule of
that argument, we are pretty confident that if constitutional
law in a far stronger manner. Ultimately, when authorities
principles are followed, we will prevail. Even so, if the status
begin looking into these matters in depth, only good
quo remains with no extra mining royalties being paid, the
things can come out of it.
defining factor is always going to be the metal prices. Right now, even though a lot of fuss surrounds the political crisis
Q:
that the federal government is going through, Mexico’s
competitiveness when the mining royalty was introduced.
Some
investors
believe
that
Mexico
lost
its
general environment is good. Mining companies are working
How would you weigh up the country’s competitiveness
out their problems and they are making money. Gold and
with that of other countries?
silver producers may not be making as much as they would
A: When considering the countries that Mexico competes
like to, but they are definitely making money. Even so, the
against, the situation is pretty good here. Chile, Columbia,
cost of metal slows them down because they are very close
and Brazil are all facing similar situations. When I talk to
to their breakeven points.
clients in Canada, I ask them why they get so alarmed about ejidos and communities as Canada has the same
24
Q: Last year, Baker & McKenzie felt that Mexico should
issues with its native peoples. As long as you acknowledge
seek to attain greater competitiveness on all fronts, while
these communities early on and try to understand their
continuing to be mindful of its legal framework and the
needs, concerns, and issues, you can prevent them from
rule of law. How is the rule of law in Mexico today?
taking advantage of you and vice versa.
We would like the government to sit down with us because
but who do not even have any copies of the necessary
we understand that royalties must be paid, especially for
paperwork. These documents are freely available but
the benefit of communities. It would be good for mining
they had no idea how to obtain them. There is also the
companies to pay their fair share on royalties, but before
problem of corrupt, negligent, incompetent attorneys, but
that happens, we should look at the entire framework
I doubt anybody knows how to change that. Transparency,
to make sure that Mexico is as competitive as other
honesty, and streamlined bureaucracy are the only ways to
countries. Chile, for example, has come a long way toward
deal with these problems. Mining companies must live up
implementing a fair framework for the payment of royalties,
to what they offer. We are kept busy at Baker & McKenzie,
and also making sure that those royalties end up with the
but the intensity of legal intervention is so high that it
communities. If mining companies file more amparos, it
is sometimes better for mining companies to hire an in-
may finally persuade the federal government to negotiate.
house counsel.
Q: Would authorities have any option besides negotiate, given that the legal system risks becoming overloaded with amparos? A: There is a second instance in which you can file an amparo, which is the first act of application of the law. When this arrives in 2015, companies would be missing out by not filing amparos, especially those with high production. If the majority of mining companies file an amparo, the government will most likely try to enact another piece of legislation, which will hopefully be more balanced. Input from all facets of the industry should help to establish a fairer framework. Even when looking at examples like Argentina, Chile, and Peru, which are all better off than we are, it is clear that Mexico has room for improvement. In some countries, taxes are a little higher but there is far more transparency in the way that they are collected and spent. The mining industry must deal with federal concessions, the right to access land surface, and all the regulatory issues that require a license or authorization such as water usage. Federal concessions are pretty straightforward, and Mexico’s mining registry is very well kept as well as being among the best in the world for transparency. More complications arise with the contracts that grant land access. These contracts involve dealing with communities, ejidos, and private parties which can be are
Q: What do you hope will be the highlight of 2015 for the
extremely distrustful of big companies, making the process
Mexican mining industry?
quite complicated. Some companies even team up with
A: I see the status quo simply preserving itself, but that
several attorneys to keep track of it all, since this deals not
will depend a lot on the global markets. There are mixed
only with access to the surface, but also easements, rights of
signals coming from different economies around the world,
way, access to power, and many additional factors.
as well as prospects of war that normally bump up the prices of precious metals. There has been a tremendous
Q: This problem is often mentioned because there is no
slowdown in the Chinese economy that is generally hungry
single procedure for carrying out the negotiations. In your
for metals. Both the state and federal authorities will pay
opinion, how could this be fixed?
much more attention to mining companies, so perhaps
A: It would be very difficult to change this aspect of the
the highlight of 2015 will be a marked improvement in
law since it arose as a result of the Mexican revolution.
the rule of law. Furthermore, as long as mineral prices are
Whenever mining companies enter into these contracts,
kept at the same levels, then companies can continue to
they should hire an attorney who can advise them on how
grow. The government is now becoming more aware of
to write them up, or have somebody in-house who can
all the transgressions of local authorities, but this problem
take on the procedures clearly and transparently. I have
concerns all Mexicans. If we can organize ourselves and help
met with some people whose job it is to deal with ejidos
maintain the rule of law, then the country will surely prosper.
25
26
For decades, mining companies have been operating under the established operational, labor, and environmental regulations defined by some of the pillars of the Mexican legal system, such as the Mining Law, the Federal Labor Law, and the General Law on Ecological Equilibrium and Protection of the Environment. Nevertheless, new challenges have arisen as a wave of reforms has swept over the country under President Peña Nieto’s administration. These reforms are changing the way companies operate, and are adding an extra level of complexity to certain processes. While the Mexican Mining Chamber (CAMIMEX) and the Association of Mining Engineers, Metallurgists, and Geologists of Mexico (AIMMGM) work to guide their members through bureaucratic and permitting minefields, their work has become substantially more difficult as they seek to uphold the competitiveness of the industry. On the other hand, the Mexican Geological Survey (SGM) and the Ministry of Economy, through the General Coordination of Mining, have to work through the changes in policy to promote and attract investment to the country’s fifth largest foreign exchange generating industry.
This chapter analyzes the evolving Mexican regulatory framework associated with mining activities and presents the views of those who help to keep it running. The following articles take an in-depth look at the main changes to the mining industry’s operating framework, including the Fiscal, Energy, and Labor Reforms. The chapter also highlights the main operating challenges facing the industry as well as the solutions that could turn things around, from the perspective of analysts, lawyers, regulators, and state officials from Mexico’s most important mining states.
OPERATING FRAMEWORK
2
ConvenciĂłn
Internacional
de MinerĂa
28
CHAPTER 2: OPERATING FRAMEWORK 30
Impact of Mining Royalty Should Be Studied after One Year, Secretary of Economy of Sonora
32
Changes to Mining Laws Harming Competitiveness, Kunz Abogados
32
Breakdown of New Mining Fees
34
Law Firm Ready to Handle Intricacies of Mining Regulation, Asesoría Legal y de Negocios
36
Solutions for Improving Concession Management, Sánchez-Mejorada Velasco y Ribé
37
Sonora’s Mining Industry on the Rise, Director of Mining for Sonora
38
Importance of Legal, Material, and Social Land Evaluation, Grupo de Abogacia Profesional
39
Rapport Essential Element for Land Access, Grupo de Abogacía Profesional
40
High on Minerals, but Low on Young Professionals, Astralloy
41
Labor Reform Targets Bad Mining Employment Habits, Legalmex
42
University Embodies Centuries of Mining Experience, Universidad Autónoma de Zacatecas
43
Awakening of Small Mining in Zacatecas, Secretariat of Economy of Zacatecas
44
Magnetic Zacatecas Cluster Seeks Rapid Growth, Zacatecas Mining Cluster (CLUSMIN)
45
CLUSMIN Drafting Mining Roadmap of Zacatecas, Zacatecas Mining Cluster (CLUSMIN)
46
Chihuahua Targets Self-Sufficient Mining Industry, Director of Mining for Chihuahua
47
Essential Legal Advice for International Mining Investors, Cereceres Estudio Legal
48
Cluster Wants Chihuahua to Meet Expectations, Chihuahua Mining Cluster (CLUMIN)
49
Developing Mining Competitiveness and Growth in Chihuahua, Chihuahua Mining Cluster (CLUMIN)
50
Strict Regulations Govern Use of Explosives, Ministry of Defense (SEDENA)
51
Tracking Mexico’s Legal Environmental Framework, Haynes & Boone
29
| VIEW FROM THE TOP
IMPACT OF MINING ROYALTY SHOULD BE STUDIED AFTER ONE YEAR MOISÉS GÓMEZ REYNA Secretary of Economy of Sonora Q: How does the mining industry affect Sonora’s economy,
communities to help every aspect of Sonora’s economy
and what benefits does it bring to the population and
contribute to the cluster. We are also trying to strengthen
communities in the state?
the cluster through the development of local suppliers. For
A: Mining is a part of Sonora’s origin. The industry has
three years, we have been running an awareness campaign
always held an important presence in our society and has
to sensitize these suppliers as to the criteria and priorities
shown significant growth in the past few years. In 2009,
that major mining companies have when buying locally.
mining represented 6.7% of Sonora’s GDP, but that has now
In 2012, we brought Grupo Mexico and Minera Frisco on
increased to 15% through consistent double digit growth. At
board, which was followed by Timmins Gold, Agnico Eagle,
least 10% of the state’s trade and services sector is related
and Yamana Gold in 2013, while Peñoles joined in 2014.
to mining, which translates to 25% of the economic activities
Jointly, we have worked on developing suppliers, with at
in this state being linked to mining. Additionally, Sonora has
least 40 companies benefiting so far. Most of those have
increased its participation in the national mining turnover
now become private sector providers, eight of which serve
from 20% in 2009 to 29% in 2014. Mining contributes with
mining companies here in Sonora from various locations.
more than 17,000 direct jobs in Sonora and around 85,000
With this initiative, Sonora’s Secretariat of Economy has
indirect jobs, from supply and maintenance services, to
enabled suppliers to establish their hubs in Hermosillo.
cleaning, food and beverage, and various other roles. Q: How do you engage with university students and Q: As Secretary of Economy, what are your priorities to
mining operations to bolster human resources, and what
strengthen the mining industry during your administration?
results have you seen from doing so?
A: Firstly, we will relaunch the mining cluster and strengthen
A: The University of Sonora has been a crucible for such
the topic of coexistence between the sector, communities,
activities. In its Faculty of Earth Sciences we have helped
and
to modify the curricula of courses in geology, mining
sustainability.
Secondly,
we
aim
to
strengthen
specialized human capital training in mining, specifically
engineering,
in the areas of exploration and R&D. The state will also
engineering so that these better reflect the needs of the
metallurgy
engineering,
and
geoscience
intensify the development of the supply chain to increase
industry. We also have cooperation agreements surrounding
the number of mining suppliers in Sonora. Finally, we will
the development of academic links between universities
continue boosting availability of natural gas and productive
and mining companies. With this in mind, the Sonora State
infrastructure from Guaymas in order to strengthen the
Mining Board is developing the Academic Linkage Curricula
metallurgical industry. The existing demand in Asia puts us
through the Academic Linkage Consulting Commission in
in a good position to have a port with the capacity to supply
conjunction with CONALEP. This represents an endeavor
coal, copper, and iron, while also possessing the elements
between both parties where cooperation agreements are
needed to provide added value to these products.
made based on existing opportunities and strengths. This idea is developed for companies to reduce their operational
Q: What level of involvement does the Secretariat of
costs and improve the quality of their workforce so that
Economy of Sonora have with the mining cluster?
graduate salaries can increase.
A: We brought the mining cluster together and we are
30
currently incubating it, but we are also trying to responsibly
Q: How do you think the new royalty tax will affect mining
ensure that this cluster is led by the right players in the
investment in Sonora?
industry. Metaphorically, we have been behind the wheel
A: Exploration investments in Mexico have definitely
from the start, so we are now looking for the cluster to
been reduced; however, we must also look at the matter
reach a level of maturity where other players can take
of communities from different perspectives if we are to
over, allowing the government to withdraw somewhat. The
build up a fair picture. Some mining companies helped
idea is to bring together entrepreneurs, academics, and
communities before the royalty, but not all. Furthermore,
there was no record of these community investments and
A: We seek a level of social responsibility that should
what their impacts were. The companies that did help were
strike a balance between the costs, profitability, benefits
acting based on their own social responsibility initiatives.
for the company, and the level of involvement for the
The royalty tax aims to establish a framework for defining
communities, as well as environmental awareness. 90% of
specific actions at the federal, state, and municipal levels.
Sonora’s population is located in its eight biggest cities,
Certainly, this will directly affect Mexico when trying
where people demand more schools, more hospitals, and
to attract mining investment, but we should perhaps
more infrastructure. Yet, mining projects happen in areas
reassess our situation once we have had at least one year
of the state where there is little infrastructure but where
of experience working in this new environment, allowing
only 4% of the population lives. In those circumstances
to determine whether the royalty has been detrimental
establishing a 7.5% tax is fair. Let us take a look at how
or beneficial. By doing so, we will see how community
much the Sonoran mining business contributes in terms
projects have benefited or increased over that year, while
of federal taxes. In 2011, mining companies in the state
also considering whether its definitions within the law are
contributed MX$51 billion (US$3.4 billion). Against that,
appropriate. We need to be very precise about how we
the state budget for that year was MX$30 billion, of
measure a community project and who it benefits. For
which MX$21 billion came from the federal government.
example, infrastructure projects such as highways can give
Given this differential, the new royalty is fair, however, a
communities better access might also benefit the mining
qualitative assessment should take place after a year. It
company itself. There are also mines in areas without any
should look at whether maintaining the royalty at 7.5% is
farming, commercial, or manufacturing activities, such
the right decision, or whether lowering it to 3-4% would
as Cucurpe in Sonora. When the mining business is the
allow it to meet its purpose while investment is attracted.
only one present, what can be done to help a community
This qualitative assessment must measure whether it
develop in new ways? After all, when a company in that
met the tax collection expectations set by the Treasury,
situation packs up and leaves, there may be no alternative
and to what extent the royalty acted as a disincentive for
economic activities to take over local employment. We
attracting the levels of investment needed for Mexico to
must find a way to listen to communities and apply the
keep growing. Furthermore, the assessment should look at
knowledge gained from this to activities that will have a
the mechanisms established for community development
real, long-term impact on their lives.
and how it responded to the expectations of communities, municipalities, the state, and companies themselves.
Q: Is it the mining companies’ responsibility to take on
Doing so will help to generate a broad circle of good
duties usually assigned to the government, such as
understanding between all participants, which will also
developing new industries or building highways?
help reduce community conflicts.
31
| VIEW FROM THE TOP
CHANGES TO MINING LAWS HARMING COMPETITIVENESS FEDERICO KUNZ Partner at Kunz Abogados Q: To what extent was the private mining sector consulted
A: The mining law now allows a concession to be held for 50
by the government prior to the decision to impose the
years, with a possible extension of another 50 years. Some
mining tax and royalty?
proposals aim to reduce this to 25 years with a possibility
A: The executive branch of the government presented
for extension, while other proposals aim to reduce it to 25
this initiative before Congress but there was practically
years without any chance of extension. The grand majority
no consultation with the private sector. There was an
of initiatives being reviewed in Congress are very negative
attempt at dialogue, mainly through Congress, but the
for mining since they do not understand the nature of the
level of dialogue was not satisfactory. Certain deputies
industry. Many of the proposed changes are based on
understood the industry’s point of view, but others did
ideological content rather than logical reasoning, and many
not. The Treasury granted a few interviews but they were
ignore the reality of the mining business. Some initiatives
carried out with low level employees and led to no practical
state that mining concessions should not be given out
result. The industry’s most important point was that it was
when they are within 25km of a population of more than
the wrong moment to establish such a tax, as profitability
500 people, 25km from an aquifer recharge area, within
was already decreasing due to the dropping metal prices.
naturally protected areas, or within 25km of archeological
The introduction of the tax was absolutely illogical and, in
sites. We have over 38,000 archeological sites in the
general, the consultation process was very poor.
country, and the list is growing. So the question here is, in which part of the territory could a company even obtain a
Q: What is your perspective on the proposals to reduce
concession under these initiatives? Another proposal aims
the time limit on concessions or limit the availability of
to prohibit a mining company from having more than two
concessions?
concessions, which is impossible, especially if the proposal
BREAKDOWN OF NEW MINING FEES In November 2013, the Mexican Senate approved a tax
of said expenses. This means that the deduction of
reform bill passed by the Chamber of Deputies. After being
exploration expenses takes place over a ten-year
signed into law by President Enrique Peña Nieto, this tax
period, instead of being fully deductible from the first
reform became effective as of January 1, 2014. The new
fiscal year, as before.
Federal Rights Law has widely been interpreted as having
• An additional 0.5% now applies for the sale of gold,
brought the most important legal and the fiscal changes
silver, and platinum to be paid annually. Concession
to the Mexican mining sector for decades. Although much
holders must also ensure separate accounting is kept
of the text has similar content to the previous version of
for the sale of these precious metals.
the law, several important changes were enshrined. The
• An incentive has been provided to concession holders
most discussed change was the introduction of a new
with an annual gross income from the sale of minerals
special mining fee, broken down below.
lower than MX$50 million (US$3.3 million). This consists of allowing these companies to credit the new special
SPECIFIC CHANGES TO MINING FEES
32
mining fee against their income tax for that same year.
• The holders of mining concessions now face the annual
• In order to ensure that mining properties do not lie idle,
payment of a 7.5% fee on their EBITDA. This does not
the holders of mining concessions who do not carry
include any fees related to depreciation, interest, or
out any exploration or active production work may face
annual inflation. The deduction of exploration expenses
an additional fee. If no such activities take place at a
is permitted, but only through a 10% amortization
concession for any two consecutive years in the first 11
to limit the hectares per concession passes. Currently, if
operational plans without having explored the land. The
the concessions are not occupied, a company can acquire
reality is that a company can only explore and begin a
the rights to explore the subsurface of all the land it
project once it has a concession. The logical order would
wants. A company could even ask for 100,000 hectares in
be to first obtain the mining concession, then design an
concessions. The problem is that more hectares result in
exploration program, obtain an environmental permit
more fees to pay since the fee to be paid for a concession
to explore, do the reconnaissance of the land, and then
is currently based on the number of hectares. If these
delineate an environmental impact study based on the
fees are not paid then the concession is lost, so having
exploration results. According to the law, environmental
many concessions can require a significant investment.
impact studies require a lot of information regarding the
During these times of crisis, companies are reducing their
project in question, which is impossible to get before
concession volume to lower the tributary charge or the
starting exploration.
obligation to invest in the properties. If the proposal to limit companies to two concessions is passed, then their
Q: What would you change in the mining law and the
exploration capacity will be severely reduced. While in
fiscal laws to improve conditions for the mining industry?
the past exploration was carried out by walking through
A: The only aspect that could be considered beneficial
the land and collecting samples, wide areas are now
is the aspect of tributary policy. The corporate tax in
explored using satellite and aerial photographs, as well as
Mexico should consider two aspects: the amortization, or
geophysical studies. There are now fewer small mines with
the depletion, of deposits and the favorable recognition
high grade ores, so these methods focus on finding large
of exploration investments. The industry does not need
deposits with a lower grade. By limiting concessions, the
these changes urgently, but it would be a way to transfer
country is limiting the possibility of finding an important
resources from the public sector to the development of
deposit.
new business; it would be as if the government made a direct investment in mining. There are other minor topics
Q: Are there any other proposals that might be detrimental
such as the blind deduction of exploration expenses since
for the competitiveness of the Mexican mining industry?
it is difficult to obtain an invoice for renting horses in the
A: Another proposal pretends to force mining companies
mountains or other similar expenditures. Nevertheless,
to obtain an environmental impact study before obtaining
the current Mining Law is a good law that has allowed the
a mining concession, which is totally illogical since it would
development of the industry and, if possible, should not
imply presenting an environmental impact study of the
be changed.
years of the term of the concession, the duties payable
and maintenance of public lighting, the building of waste
per hectare may be raised by 50%. The current duties
disposal sites and water treatment plants, the improvement
were set at MX$124.74 per hectare in 2013.
of public sewers and solid waste management, and the
• Should this inactivity take place for two consecutive
bettering of air quality. It may also be destined toward
years after 12 or more years of the term of the
the improvement of urban transportation, including
concession have passed, the duties payable per hectare
the building of suburban train lines, subways, or other
will be raised by 100%.
equivalent public transportation systems. Finally, part of it will also be used to preserve natural areas, through
FUND FOR THE REGIONAL DEVELOPMENT OF MINING
activities such as reforestation or rehabilitation of rivers
MUNICIPALITIES
and other waterways.
Another aspect that has come under much scrutiny is the fact that the revenue collected from these fees is destined
In response, a number of law firms have been consulted
to be used for the improvement of communities in the
by mining companies about filing an amparo to challenge
vicinity of mine sites. These fees will go toward a fund,
the constitutionality of the fees. Laura Diaz Nieves, Partner
officially named the Fund for the Regional Development
at DBR Abogados, says that “each company must decide
of Mining Municipalities, which shall make investments
whether or not it wants to initiate proceedings to appeal
that help social, environmental, and urban developments
the royalty. I am confident that companies filing an appeal
in these communities. The terms of the fund indicate that
could win, but the appeal has to be filed by an individual
it may be used for the construction and remodeling of
company; it cannot be a collective action and it would not
schools, the maintenance of local roads, the installation
apply to companies that did not take the same action.�
33
| VIEW FROM THE TOP
LAW FIRM READY TO HANDLE INTRICACIES OF MINING REGULATION JOEL ANTONIO GONZÁLEZ LABRADO Director General of Asesoría Legal y de Negocios (ALN) Q: How did Asesoría Legal y de Negocios get involved
Q: Which are the most common legal services that ALN
in the Mexican mining industry, and what have been the
offers in relation to land tenure?
firm’s milestones within this sector?
A:
A: We secured business from a Canadian junior company
negotiations with land owners or ejidos. We help them out
11 years ago, which wanted to start an exploration venture
with the due diligence when reviewing the land titles. The
in Mexico. That was our first customer in the mining
lack of title certainty is something that mining companies
industry. We assisted them in constituting a Mexican
really worry about. The land owners and communities
subsidiary company in order to start their business
could initially react positively, but if the due diligence in
here, and continued supporting them with regulatory
land property does not come out well, there are going to
compliance and litigation. After that, we began to work
be problems. We have found land titles that had not been
with operating companies. One of our most rewarding
updated for 150 years, so you can imagine how complicated
experiences in the mining industry has been with Agnico
it can be to get those titles in good shape. A couple of
Eagle’s mines, assisting them with their operations in
years ago, we performed due diligence for a 4,000 hectare
Mexico. This has been one of our most iconic missions for
piece of land in the mountains of Chihuahua. To get there
the sector due to the complexity of the legal needs that
was a ten-hour drive from the capital. This huge parcel of
major international companies require. Over 11 years, we
land belonged to hacienda owners in the 19th century, and
have served the sector with a distinct intensity, giving us
was broken down into little pieces without following the
a broad knowledge base and skill set, as well as a bounty
proper legal procedures for entitlement. The challenge
of success stories. Our firm has developed expertise, not
was to garner the support of the neighboring communities
only in regulatory matters, but also on the operating side.
and bring them to accept that this surface land was going
Mining requires specific advice that other industries do
to be used for mining purposes. In such situations, we can
not, such as on matters concerning community relations,
assist our clients in the land regularization process and
land access, and environmental requirements. Mining may
audit procedures, providing the certainty that everything
well be the most complex and complete industry around in
is in good legal standing. Law firms tend to forget that
terms of its legal needs, but ALN is more than equipped to
human values are the most important thing to apply to
handle all its intricacies.
their negotiations. In order to become a good lawyer you
Our
customers
request
our
assistance
during
first have to become a good person. If you want something Q: How does ALN’s structure enable the firm to provide
to happen, you should meet people’s expectations of the
reliable assistance in all of the matters you attend?
company. During a land tenure negotiation, it is important
A: We have been growing a group of professionals
to put yourself in the shoes of the other party, find out
with different skills over the past decade, including
their bare necessities, and make sure that your customer
people with experience working in the mining industry.
understands their needs. You always need to ensure a
Regulatory compliance to labor related issues, such as
win-win situation for the both parties, otherwise, potential
unions and official Mexican standards, and inspections
problems could lead to the failure of a mining project.
in safety and health are covered by our legal experts.
34
We have another expert that covers the environmental
Q: What differentiates a sustainable temporary occupation
aspects of the mining industry, which is one of the most
agreement from one which is not?
essential areas of regulatory compliance in Mexico. We
A: The contemplation of what will happen to the community
have also established strategic alliances with law firms
once the mining company leaves is what makes a project
in Mexico City in order to expand the range of services
sustainable. Companies should consider alternatives that
we offer. Some of the capital’s most knowledgeable and
provide communities with a way to strengthen their local
experienced lawyers help with our cases, giving our
economies. I have worked with companies that have
customers a faster resolution.
settled strategies like this since the very beginning, helping
communities to reforest their lands and to promote the
couple of years, mining authorities have been very strict
production of local crafts, to name two examples. Some
when it comes to obligations compliance. They have
companies have been educating small business owners
been conducting inspections to confirm that companies
on how to improve their commerce; others have been
are carrying out the works they claim to have been
contributing to the enhancement of the local agronomical
performing. The idea behind this modification to the
industry supply chain. Clearly, many mining companies
regulatory framework was to motivate mining companies
are investing resources in the long-term sustainability and
to have dynamic concessions and to stop people who were
prosperity of the communities, helping them to become
claiming land based on speculation only to sell it on to
less dependent on mining activities. A lot of people
mining companies. This is something that companies need
think that the mining industry only leaves a bad mark in
to take seriously since the viability of their operations can
the towns and areas where it operates. I sometimes wish
be endangered if they do not comply with these laws.
people could hear and see what I have seen in this sense. It is truly remarkable what a mining company with a
Q: How should Mexico’s legal framework change in order
sustainable project can do for the communities.
to better accommodate industry concerns? A: I have always said that Mexico does not have a problem
Q: How would you describe the current mechanism for
with its legislation, the problem is how that legislation is
the issuing of mining concessions and how important is
enforced. The country is in need of a stronger mechanism
the legal assessment of the management of these titles?
to apply the laws being passed. A company can do great
A: It is very important to have someone to go over
work during the permitting processes and negotiations,
their standing since mining agencies require numerous
but if something goes wrong, it can take years to fix it.
obligations that need to be observed periodically. For
Mexico does not have the proper mechanisms for enforcing
example, based on the number of hectares a mining
the law. We have seen many companies struggling with the
company holds, it has semiannual duties that need to be
law, not because they failed to comply with it, but because
paid in January and July. If companies miss the payment,
of the social and political issues surrounding those cases.
they risk their concession being cancelled. Another yearly
This is difficult for mining companies to understand,
obligation that mining companies have is to carry out
particularly those who have abided by all the laws and
some sort of activity on their concession. Over the past
regulations.
Simplify the operation of a business as complicated as mining,
that is our job. ALN LAW is a full service law firm, oriented to fulfill the legal necessities of junior, mid-cap and major domestic and foreign mining companies: • • • • • • • • • •
Structuring of Mexican subsidiaries for operation of foreign mining companies and projects Incorporation and registry of mining companies Application and proceedings before the Public Mining Registry and General Mining Office Negotiation, review and performing of contracts related to mineral rights and mining concessions Legal audit related to compliance of mining regulations Legal audit related to mining concessions Advise on compliance to requirements pertaining to mining concessions such as work assesments reports, production reports, payment of mining duties, among as set forth in applicable mining regulations Due diligence procedures on privately or ejido owned superficial areas where the mining concessions are located Negotiation of ejido lands, either performing expropriation procedures or temporary occupation or purchase agreements Advise on compliance to environmental and administrative regulations applicable to the mining industry Paseo Bolívar 720, Centro, C.P. 31000. Chihuahua, Chihuahua, Mx. T: (+52)-614-415-2898
www.aln.com.mx
contacto@aln.com.mx
35
SOLUTIONS FOR IMPROVING CONCESSION MANAGEMENT
Rodrigo Sánchez-Mejorada Velasco, Partner at SánchezMejorada Velasco y Ribé
Sánchez-Mejorada Velasco
on the ground. They may not fully realize what the real
y Ribé has long been one of
operating environment looks like and how their work
the prominent law firms in
affects the industry. They should take courses that allow
the country’s mining sector,
them to understand mining economics, the operational
serving as an advisor to
procedures within a mine, and the benefits of mining for
the Mexican government
the Mexico. They need to start seeing mining companies
for the drafting of federal
as clients and treat them as such. This would make them
legislation, including the
understand the relevance that their everyday duties have in
current Mining Law, and in
the development of the sector.” He continues by stressing
the privatization of state-
that the government should be the one educating its mining
owned
This
personnel on the needs of the industry, but that only the
kind of experience makes Sánchez-Mejorada, Velasco y
enterprises.
necessary political will can accomplish this result. “Many
Ribé one of the leading authorities on the management of
of the problems come from erroneous interpretations of
mining concessions. “When it comes to mining concessions,
people with limited knowledge of law,” he adds. “Another
I do not think that the people who are operating in the
thing that impresses me is the level of technological
current industry understand how important it is for them
underdevelopment in which the mining bureau finds itself.
to circulate,” states Rodrigo Sánchez-Mejorada Velasco,
If the bureau was fully computerized, then companies could
one of the firm’s partners. “Our mining law is based on
pay their duties and file their assessments works online.” It
a free enterprise system that allows concessions to be
is clear that this kind of efficient infrastructure could only
freely transferred. One of the requirements for this is that
serve to improve the mining bureau’s internal practices.
certainty over the validity of those concessions is provided where their obligations are easy to meet and to check. Right
In order to enhance the way in which the industry works, it
now, however, if a small miner owns a large concession
is important to understand what can be changed and what
and wants to sell it to a larger mining company, it will face
cannot. “The first thing I would do is pass an administrative
great difficulty in making sure that the concession is in
reform to fix the mining authorities and modernize their
good standing.” According to Sánchez-Mejorada Velasco,
processes through technological advancements,” states
the legal problems surrounding concessions go deeper. A
Sánchez-Mejorada Velasco. “It is very important to enhance
certification that proves the validity of a concession can
the way mining concessions are administered since they
take months to obtain. Furthermore, the free transfer and
are the most valuable assets for mining companies. I
free marketability of mining properties has been severely
would also use the influence of the mining authorities
hampered by the fact that the national mining department
to demonstrate that the royalty was a mistake, and then
is refusing to register royalties in the public registry of mines.
reduce the tax to a more rational rate. This would be
This has impacted the industry in terms of certainty over the
complimented by an easier system to administer the tax;
transferability of mining concessions in good standing.
there is no need to complicate it. Net profit interests are always preferable and are better than net smelter returns.
The government’s intractability on tax issues regularly leaves
If this is done, mining companies will be less able to play
mining companies in limbo in terms of understanding their
around with the profitability of their operations to modify
tax liabilities on new concessions. The difficulty of switching
their tax liabilities.”
tax liabilities from old concessions to new concessions has left companies in arrears, which might eventually lead to
Another concern for concessions is that, under Mexico’s
new concessions being cancelled. “If that risk is evident
national assets law, the government has broad powers
to investors who are considering a new concession, it will
to cancel any concessions in the name of public interest.
be difficult for them to have enough confidence to invest,”
This means that the federal government has the power to
states Sánchez-Mejorada Velasco. “Fortunately, there was a
revoke a mining project without having to change any laws.
recent influx of personnel in the mining bureau that seems
It is also empowered to apply all kinds of sanctions derived
to be keen on changing this state of affairs.”
from the environmental laws. Nevertheless, SánchezMejorada Velasco thinks that this would only happen if
36
Sánchez-Mejorada Velasco believes that the first step that
such faults were recurrent at the same concession. As it
mining agencies must take in order to improve the registry
stands, concession holders naturally have to abide by
of concession ownership is educational. “Many of the
environmental laws, but if they fail to do so, they are more
people working at the mining bureau have little experience
likely to be punished than have their concessions removed.
| VIEW FROM THE TOP
SONORA’S MINING INDUSTRY ON THE RISE JOSÉ ARMANDO CÓRDOBA HAGE Director of Mining for Sonora
Q: Which role does Sonora play in the Mexican mining
Ours consist of coordinating communications between
industry?
mining companies and federal and state authorities to
A: Sonora is the most important destination for mining
discuss matters related to public security. We are currently
activities in Mexico today, specifically for the production
organizing four meetings per year in order to touch upon
of metallic minerals. The state is currently positioned as
these topics, on top of conducting extraordinary reunions in
the number one producer of gold, copper, molybdenum,
the case of unconventional issues.
wollastonite, graphite, and anthracite, and will soon become the main producer of barite. This grand success can be
Q: How is the Mining Directorate helping to ensure the
attributed to the prosperous and competitive business
success of the small mining industry?
environment that has been developing in the state over
A: Small-scale mining in Sonora is mainly related to
the past few decades. During 2013, mineral production
coal and graphite production. Our priority has been to
in the state increased to 4 million tonnes, representing
help these companies comply with the entire regulatory
a total value of US$6 billion. These figures serve as an
framework. This is sometimes difficult because compliance
indicator on how well our industry is positioned in relation
requires investment and these companies do not always
to other mining states in Mexico. Sonora is one of the
have the budgets to abide by every legal parameter. The
most privileged areas of the country as its geographical
state government, with the support of federal authorities,
location and its mineral wealth have transformed the
has worked on ways to make small-scale projects more
state into a land of opportunities. When combining these
affordable by providing them with the means to attain
elements with the state’s quality infrastructure, specifically
all the permits required. It is extremely important to stop
its six international airports, a world class maritime port,
informal operations, not only because of the environmental
200km of railroad tracks, paved highways, five major cities
and security hazards they present, but also to protect the
bordering the US, and a good number of higher education
image of those who established themselves legally. It is
institutions, it is easy to understand why Sonora has
very common to see the mining industry being misjudged
become the most competitive mining state in Mexico.
due to the negligence of unregulated companies.
Q: What have been the most important contributions
The mining directorate is also participating in the
made
reactivation of mining projects, as well as the creation
by
Sonora’s
Mining
Directorate
during
this
administration?
of processing plants, so that the small-scale mining
A: The new administration has focused on turning mining
companies can process their production just by paying a
agencies into true enablers and managers of industrial
small fee. We are consistently working with all the national
activities. Our priority is to strengthen small, medium, and
mining agencies to further develop this segment of the
large mining companies by helping them comply with norms
industry. The technical services provided by the General
and by improving their approach to local communities.
Coordination of Mining are a valuable tool for small
We have created a special department to cooperate with
companies looking to better understand their properties
mining companies in order to optimize the management
from a geological and economic standpoint. With these
of relationships and agreements with communities. The
services, small companies are able to advance their
department will help companies to avoid any kind of conflict,
projects from stage to stage with minimum investment.
guaranteeing long-term prosperity for both them and the
If their concessions prove to contain a valuable mineral
communities. In addition, we have established a security
deposit, we can help them conduct deeper exploration,
program for mining regions to respond to the requests of
and in the case of a discovery, we can fund their project,
the sector. Today, security is a very important matter for
allowing them to become fully operational. So far, we have
the global mining industry; security models are becoming
seen many small companies on the rise thanks to our
more necessary in order to carry out successful operations.
guidance and services.
37
IMPORTANCE OF LEGAL, MATERIAL, AND SOCIAL LAND EVALUATION By Gabino Fraga Peña - It is vital that all extractive projects,
Human rights must also be taken into consideration when
which by their very nature require large surfaces of land to
entering a piece of land for a mining project. As of 2011,
develop, thoroughly evaluate the land where the project will
human rights are enshrined as public rights under the
be based. The evaluation needs to consider the legal, material,
jurisdiction of the Mexican government, obliging private
and social aspects of the land prior to choosing whether
companies to uphold them.
to base a mining project there. Land is an irreplaceable resource, so landowners are understandably attached to
Around the world, there has been an important social
the unique characteristics of their properties, a fact which
movement in favor of local communities located near
emerges when negotiating with a mining company. However,
the development of large infrastructure or extractive
the nature of a project may often substantially modify the
projects. This makes it all the more important to take
expectations of these landowners and complicate the
local communities into consideration and inform them of
negotiations. Moreover, the legal and social conditions of a
the full scope of the project and how it will benefit them.
piece of land do not always correspond with its technical and
Infrastructure and extractive projects generate both
material conditions. This issue is directly linked to the level
positive and negative externalities. This means that local
of acceptance of a mining project among social or political
communities must be made fully aware of the reach of a
actors at the municipal, state, or federal level.
mining project, the positive and negative effects it may have, and the mitigation and compensation measures
Once a company has precisely identified the property rights
that will be implemented, before the project begins. If
of the land on which a project may take place, and once it
a mining project is developed without complying with
has also evaluated the legal and social reality of this land,
those needs, the company could be held accountable
it will be able to estimate timeframe and cost. It is vital
for violating the human rights of the inhabitants of the
to understand when the legal agreements will effectively
local communities, putting at risk the investment and the
guarantee legal certainty, particularly concerning the
viability of the project. However, the evaluation of the
access to the land, after the negotiations are concluded,
land can shed light on certain risks facing the project. This
as well as the approximate cost of such an agreement. The
will allow the company to take immediate measures to
timeframe for the agreement can be calculated based on
attend to these identified weaknesses and guarantee that
legal characteristics including the current conditions of
its project has enough legal, material, and social certainty
the land, any pending legal resolutions, a clear definition
and protection.
of the rights, or lack thereof, the situation on adjacent land parcels, who the titleholders are, and any prevailing political
Gabino Fraga Peña is Partner & CEO of Grupo de Abogacia
interests.
Profesional (GAP)
“Para dar certidumbre jurídica para el acceso a la tierra en el desarrollo de proyectos Mineros y de Infraestructura”
38
t.: 5281 4400 / 5281 4401 www.gapgrupo.com
| VIEW FROM THE TOP
RAPPORT ESSENTIAL ELEMENT FOR LAND ACCESS GABINO FRAGA PEĂ‘A Partner and CEO of Grupo de AbogacĂa Profesional (GAP) Q: How adequate is the Mexican legal framework at
but neither community will receive it until 2015. It first has
preventing
to pass through several committees at the federal, state,
and
resolving
conflicts
between
mining
companies and communities?
and municipal levels. If a company is investing in social
A: The mining law that refers to land access for exploration
projects during 2014, it will not be able to reduce its social
or exploitation is very precise. The lawsuits issued due to
budgets given this delay. This will force mining companies
temporal occupation, or privatization for mining projects,
to pay the royalties whilst continuing to invest in existing
are caused by a lack of compliance with all the articles
social programs, effectively doubling their expenditure.
contemplated in the Agrarian Law. Whenever mining
Mining companies operate in particular areas where very
companies want to invest in a new project in Mexico, they
distinctive communities exist. For this reason, companies
need to maintain a good relationship with the communities
must perform diagnostics for each project to identify
located where they intend to operate, making sure that the
the requirements of every community. Once these are
agreements they draw out are not open to interpretation. If
identified, they need to decide which communities to help,
a company agrees to occupy 500 hectares of ejido land and,
since it is not the responsibility of a mining company to act
in return, to donate scholarships for students, healthcare
as an alternative municipal government. The ejido or the
programs, training, and other services, then everything
community is urged to organize a group of representatives
has to be made very clear so that realistic expectations
that can prioritize its needs, allowing companies to provide
are created. Companies must describe how long they are
genuine social support.
going to reside in the area and how the land will be restored once the operation has concluded. In 2011, the Constitution
Q: What initiatives are in place to help prevent mining
changed to become pro homine, meaning that human
community conflicts?
rights must always come before the interests of the state.
A: In some cases people tried to take advantage of the
It is crucial for mining companies to ensure that human
vulnerability of the communities, but a new trend is now
rights are safeguarded so that nullity or invalidity problems
rapidly emerging. Thanks to modern technology, if a conflict
are avoided. From the very start, mining companies have
occurs in Chihuahua, it can be reported in Chiapas within
to settle the basis for future negotiations. They have to
minutes. This allows companies to respond as quickly as
establish fair, preliminary agreements in case they do find
possible. There are people seeking to stir up mining conflicts
an ore deposit. Communities and mining companies will
nationwide,
be neighbors for as long as operations last, making it all
turning them against the mining industry. To counter this, it
the more important for companies to provide all aspects
is crucial for companies to do everything according to the
that they guaranteed. The Agrarian Law is a legal vehicle
law so that communities become allies of mining operations.
purposefully
disturbing
communities
and
to establish an agreement that grants legal possession or property of the land, taking into consideration the
Q: What can be done to make the negotiations between
relationships with communities. What mining companies
companies and communities simpler and more transparent?
really need are advisors that follow the new amendments
A: The regulations and norms in place are well elaborated.
to the law and help them protect human rights above all.
Even so, it would be interesting if the social communication bodies of the federal government, such as the Agrarian
Q: How do you think the funds raised by the mining royalty
Office, tried to organize social groups to provide clarity of
will be used for community development?
communication between mine developers and community
A: The seat of the municipal government of Nogales is
members. The state has to provide the adequate social and
some distance from a particular mining project it oversees.
juridical conditions so that they can continue locking down
In 2015, it will have to choose whether to allocate the
investment. Negotiations and agreements need a strong
funds to the community surrounding the operation, or to
juridical base so they do not incur misinterpretations that
a village closest to its seat. The money will be paid in 2014
could lead to intricate lawsuits.
39
HIGH ON MINERALS, BUT LOW ON YOUNG PROFESSIONALS
Héctor David Ruíz, Technical Manager for Northern Mexico at Astralloy
At the dawn of the 21st
a university. According to Ruíz, this problem stems from
century, the Mexican mining
poor wages. A profession within the mining industry can
industry was booming as
be among the best-paid jobs in the country, meaning
a result of the elevating
that earth science experts have little incentive to leave
metal
However,
the private sector to take up a teaching position. “Unless
education programs have
prices.
these issues are addressed,” he warns, “a regular feed of
not
the
students with an interest in mining will not emerge from
evolution of the industry,
kept
up
with
Mexican universities. More mine managers must teach in
leading to a knowledge
universities. A student can learn more from one or two
gap between the current
classes with an industry expert than they can from 15 days
industry leaders and the
of classes with an inexperienced professor.”
pretenders to the throne. With over 20 years of experience teaching and working in the industry, Héctor David Ruíz,
Fortunately, some universities in Mexican mining states are
Astralloy’s Technical Manager for Northern Mexico, has first-
looking towards forming a tighter collaboration with the
hand experience with the state of education in the country.
industry. Ruíz explains that the University of Chihuahua
“University administration positions, such as program
is starting to improve laboratories through company
coordinators or department heads, are too often given to
financing. The mining cluster of Zacatecas (CLUSMIN)
people who do not know the industry and do not place
and the National Polytechnic Institute (IPN) of Mexico
enough importance on earth sciences. This has deeply
are together heading up a similar effort in educational
harmed the educational process,” he says. While universities
improvement. These institutions recently announced their
are now taking action in order to secure future generations of
collaboration on a new study program in Zacatecas, aimed
mine engineers, geologists, and metallurgists, the immediate
at giving students an opportunity to train themselves in real-
demand for these experts remains an issue.
life mining situations. “It is necessary for cost reduction, as well as the development and improvement of processes in
40
Alongside his position at Astralloy, Ruíz teaches at the
the mining industry, to have well-prepared individuals that
University of Chihuahua and blames students’ lack of
can research, design, and operate metallurgical processes,”
practical mining experience on their poor curiosity. “Many
explains Jaime Lomelín, president of CLUSMIN. Supported
students never ask questions in class because they have
by all the mining companies affiliated with CLUSMIN, the
never visited a mine. As a student of mine engineering, if
program will allow students to study for three weeks, and
your education is not complimented by practical work, you
then undergo one week of training in a mine, giving them
will not be successful,” he laments. However, this situation
indispensable application experience of the processes
cannot only be blamed on the students. It is only recently
they have learned about. Though the industry faces a
that study programs began combining classroom learning
shortage of well-prepared professionals, these efforts prove
with practical experience. Similarly, it was rare to see
that Mexican authorities and companies are aware of the
experienced mining professionals leave the pit to teach at
dangers, and are taking positive steps forward.
LABOR REFORM TARGETS BAD MINING EMPLOYMENT HABITS For many years, Mexico
issues that had long been a concern. For example, the issue
lagged
other
of back wages tended to reach vast amounts during conflict
pursued
resolution processes between employer and employee, even
behind
countries
that
dynamic
changes
to
pushing certain SMEs to the verge of bankruptcy. Under the
their labor environments.
new model, back wages are limited to a year, after which
Alfonso Rodríguez, Director
only interest is generated. This greatly reduces the problems
General of Legalmex, a law
and expenses a company can face during trials.
firm specialized in labor Alfonso Rodríguez, Director General of Legalmex
issues, explains that the
According to Rodríguez, trade unions did not greet the
Mexican Labor Law had
Labor Reform with much warmth because they now have
not undergone any major
to make their administrative statutes and assembly minutes
modifications since 1970, despite several failed attempts
transparent to members, in addition to precisely accounting
to reform it. However, in December 2012, a number of
for membership fees. “These particular legislative clauses
meaningful changes were announced, particularly in the way
have not had all the desired impacts on the current state
employers enter into and terminate employment contracts.
of affairs, as it would be hard for a union member to
New contract models were introduced for individual hiring
demand the enforcement of these laws without being
schemes, although Rodríguez says these changes have not
kicked out of the union or being fired.” Rodríguez points
yet had a relevant impact due to ambiguity in the concepts
out that the Reform also sought to make individual conflicts
contemplated by the new legislation. For instance, Rodríguez
faster and easier to resolve by promoting conciliation.
considers that some new forms of employment agreements,
However, Rodríguez has not seen any major reduction in
such as those subject to a trial period or temporary training,
litigation times, saying that these are still as slow as they
are not necessarily beneficial for employers as they are
were prior to the Reform. He believes this delay is caused
prone to legal interpretations that could lead to unnecessary
by many authorities not having the budget to increase
conflicts. It is therefore not surprising that Legalmex has
the personnel in charge of enforcing legislation, as well
adopted a conservative approach when advising its clients
as a lack of positive attitude from court employees that
on contracting schemes.
remain highly bureaucratic in nature. Regarding the mining industry, Rodríguez praises the evident importance that the
One good element stemming from this reform, says
authorities, companies, and the two strongest trade unions
Rodríguez, is that it has fostered greater awareness among
in this sector have given to complying with official norms.
mining companies in matters pertaining to legal compliance,
This is especially in matters of safety and hygiene because
leading to reduced conflict with trade unions, the authorities,
an accident of this nature could result in huge penalty fees
and workers. “The Labor Reform has succeeded in making
or penal sanctions for project administrators. Changes in
mining companies and others align their protocols with
the hiring models have also impacted the mining sector,
labor regulations. This is partly because of the changes to
as Rodríguez details, “Previously, mining companies would
the amount they could be fined. Any corporate actions taken
hire staff through outsourcing and insourcing schemes,
that violate labor provisions can result in a fine reaching
sometimes in unlawful and fraudulent ways. These were
up to 5,000 days of minimum wage per worker affected.
occasionally used to decrease employer responsibility.”
This has increased from the previous maximum of 315 days of minimum wage.” Beyond this negative reinforcement,
The Labor Reform has definitely changed the way the mining
the modifications to the Labor Law have enabled better
industry works, thus Rodríguez highlights the importance of
collaboration efforts between employers and employees
preventive counseling for Legalmex’s clients. “It is necessary
in terms of establishing mechanisms aimed at increasing
to carry out audits in order to determine if companies are
productivity, in Rodríguez’s view. This synergy creates
complying with labor norms, individual contracting schemes,
benefits for both parties as increased productivity results
resignations, collective contracts, internal regulations, mixed
in larger revenues and higher salaries. “I believe that the
commission integration, and other documents established
government and the actors involved in drafting the Labor
in the legislation.” Companies that carefully abide by the
Reform are putting a great deal of effort into promoting
statutes covering these areas are in a better position to face
the benefits of this legislative change, particularly in
any conflicts that arise. For this purpose, Rodríguez praises
sending the message that hiring and firing people is now
the Empresa Segura certification for providing certainty to
less cumbersome,” Rodríguez expresses. Many employers,
workers and trade unions, in addition to helping companies
he explains, found the Reform attractive since it addressed
gain a law-abiding image.
41
UNIVERSITY EMBODIES CENTURIES OF MINING EXPERIENCE The effects of the mining
frequently and talk about their own requirements and
industry’s downturn have
needs, finding common ground to work on.”
been widely felt but the
Rubén Del Pozo Mendoza, Director of the Earth Sciences Unit at Universidad Autónoma de Zacatecas (UAZ)
education sector seems
According to Del Pozo Mendoza, the university’s most
to have been spared for
important credential is that silver mines located in
the moment. Rubén Del
Zacatecas are operated by technicians and engineers
Pozo Mendoza, Director
that have graduated from UAZ. The industry’s respect
of the Earth Sciences Unit
for the university’s graduates is coupled with the fact
at Universidad Autónoma
that Zacatecas has the most productive silver mines in
de
(UAZ),
Mexico, which is the world’s largest silver producer. But as
Zacatecas
enrollment
important as silver mines are to Mexico, they are not the
levels at his institution remain high. He believes this is
reports
that
single defining reason for its mining success, according
due to society’s perception of mining as a booming
to Del Pozo Mendoza. “Mineral resources are not the only
industry that offers well-paid positions. But even with
factor that contributed to our country’s position in the
these sustained enrollment figures, UAZ still faces its fair
global mining industry. Human talent has also played a
share of challenges. Del Pozo Mendoza specifically points
crucial role.” Two decades ago, the mining industry was
to increasing competition from other universities across
almost exclusively operated by Mexican mining companies,
Mexico. “The perceived potential of the mining industry
but as international firms began staking their claims, UAZ
led many establishments to offer mining related programs.
realized the gulf between existing mining practices in
In the past, we were one of the few schools offering these
Mexico and their foreign equivalents. “We had to create
choices in the center of the country, but now competition
a curriculum that would suit the new practices of training
has grown, even within Zacatecas itself.” To support
students to work with global companies,” mentions Del
UAZ, mining companies have provided opportunities
Pozo Mendoza. To assess its global position, UAZ began
to its students and professors by setting up residencies
comparing its programs to those in both national and
for them in various mining operations. This benefits
international schools, including the Colorado School of
UAZ financially since many such educational institutions
Mines. UAZ then upgraded its courses to compete with
depend heavily on subsidies and the private sector to fund
foreign universities and created links to sector leaders,
fieldwork opportunities for its graduates. However, these
enabling its graduates to compete at a global level
opportunities have been reduced since mining companies have found it difficult to cater to the plethora of courses
In the last few years, the university has been working with
that now exist. Nevertheless, Del Pozo Mendoza says that
Peñoles to organize forums where schools can talk about
UAZ’s long history of cooperation with the mining sector
the challenges and issues that educational institutions face
has continued to evolve, becoming more symbiotic due to
in Mexico. This has enabled UAZ to share its concerns with
the industry’s need for skilled labor and common interests
the heads of other Mexican universities and work together
in research projects. For example, UAZ recently worked in
with them to find common solutions. One particular issue
the exploration, evaluation, and quantification stage of a
involved the male population of Morelos, Zacatecas. Due to
project in collaboration with Harbor Mining, a company
the community’s focus on agriculture, many of its working
that focuses on manganese.
age men have migrated to the US in search of opportunities in that sector. When Peñoles began mining exploration in the
42
The university’s relationship with the private sector is further
state, it found a dearth of employable men. Instead, Peñoles
exemplified by its involvement with CLUSMIN, the Zacatecas
started hiring women, many of which turned out to be more
Mining Cluster. “We are presenting a postgraduate program
responsible employees. Since then, Peñoles has replicated
to the cluster which is focused on the issues and challenges
the model in other operations. Del Pozo Mendoza says that
faced by the local mining industry,” comments Del Pozo
this strategy has led to far more women enrolling in Earth
Mendoza. He continues by explaining that CLUSMIN’s
science programs, with almost 50% of UAZ students in that
work has helped to foster unity among different parties
area now being female. “Our main purpose is to serve the
in the mining sector with successful results. “In the past,
mining industry, locally and globally, and that will remain
isolated efforts might have rendered some achievements,
our main focus for years to come. Any company, foreign or
but these were not as relevant as the accomplishments we
Mexican, that requires the services of a UAZ graduate has
are producing nowadays. As part of the cluster’s dynamic,
to have the certainty that it is hiring a trained professional,”
the educational, public, and private sectors sit together
concludes Del Pozo Mendoza.
| VIEW FROM THE TOP
AWAKENING OF SMALL MINING IN ZACATECAS CHRISTOPHER ÁVILA MIER Former Undersecretary of Mines and Industrial Parks at the Secretariat of Economy of Zacatecas
Q: Which factors make Zacatecas ideally suited for
in foreigners to work in the mines. Small-scale mining has
suppliers to the mining industry?
to continue the trend of using local resources, which is why
A: In 2013, the mining cluster of Zacatecas (CLUSMIN)
we need to support it. In small-scale mining, the quantity
attracted mining supply companies that made total
and quality of natural resources that companies have is
investments of US$16 million and we expected a similar
rarely known. Such small operations often have marginal
figure for 2014. We believe that this will help everyone to
revenues so we wanted to quickly provide liquidity through
win in Zacatecas. Large anchor companies win because
a revolving fund of up to MX$80 million. With this, small
nearby suppliers enable them to provide better services
mining companies will be able to keep working, hire more
and costs. Suppliers win because they can strengthen
people, and continue to do business. Through CLUSMIN,
their
productivity,
we are also working on the improvement of administrative
and increase sales. The mining cluster has given us a
processes, which will help small mining companies to
competitive advantage since we are the first state with a
streamline their operations and reduce costs.
customer
relationships,
enhance
strategy focused on supplier development while attracting investment, improving safety practices, and developing
Q: What are SEZAC’s objectives for the mining industry in
appropriate human resources.
the rest of the current administration? A: Our objectives are to develop special schemes for
Zacatecas is one of the pioneer states to develop a smelting
mine financing and the construction of infrastructure.
plant that will enable the reactivation of 27 small mines.
We are proposing a joint project to INADEM with
We also attempt to attract investment by attending major
the particular aim to create a revolving fund of up to
events such as the Mining Convention in Acapulco, PDAC
MX$80 million, providing soft loans at 4% to support the
in Toronto, and Latin America Down Under in Australia.
growth of mining industry suppliers. In addition, we will
We try to connect Canadian juniors with companies
strengthen interaction with juniors to help them better
and CEOs that are already in operation here as this will
strategize their actions in Zacatecas. We carry out our
facilitate their operations in the state. We help in ways that
promotion activities at PDAC, or in China and Australia,
no other state can by providing companies with the social
to ensure a continuous flow of potential investors and
license they need to operate. All these efforts explain why,
exploration in the state. CLUSMIN is currently carrying
in the last three years, mining’s share of state GDP grew
out a study to identify business opportunities for major
from 20.1% to 38.3%. There are almost 150,000 workers
suppliers. When that is concluded, we will launch a
directly registered at IMSS in the state, and between 10-
strong campaign in those countries based on those
15% of those workers are direct employees of mining
findings.
companies. Furthermore, we are only 100km from the mines of Aguascalientes on the state border, 270km from
By 2016, we foresee that Zacatecas will have a smelting
the mines of San Luis Potosi and Guanajuato, and 340km
plant and the 27 mines that currently lie dormant will
from Saltillo. In this regional mining center, Zacatecas is
be started up again, each generating at least 20 jobs.
an excellent logistical platform. Our geographic location in
We are also working on an inventory of non-metallic
Mexico also makes us an indispensable export platform to
materials, and on the location of reserves of onyx,
the US and Canada.
marble, barite, antimony and fluorite. These minerals will play an important role in the Energy Reform since
Q: What are the benefits of reviving small-scale mining?
they have applications in the process of oil and gas
A: Small-scale mining gives communities the advantage
extraction. Advanced exploration and exploitation has
of the money going directly to them. The owners are
also begun on other metals, such as manganese. We are
usually people from Zacatecas who employ local workers,
working to add value to those minerals that have begun
compared to the larger companies who can afford to bring
to experience a higher level of extraction.
43
MAGNETIC ZACATECAS CLUSTER SEEKS RAPID GROWTH While the concept of clusters is nothing new in the
foremost industrial sector in the state. It also stands out
mining industry, their growing presence across Mexico’s
among other mining clusters, since it has a bigger focus on
main mining regions shows that they are here to stay.
underground mining, whereas the Sonora cluster is more
However, this was not always the case as once prominent
focused on services for open-pit mines.
clusters in mining districts such as Parral lost importance over time. Modern clusters tend to stand out by being
In essence, the role of CLUSMIN has been to spread the word
statewide and by looking to create a more resilient,
about the elements that have contributed to Zacatecas
embedded mining industry with a long-term development
becoming a major mining state. These include a number of
strategy. “As operating costs in the mining industry are
factors, from geology and geography, to industry and the
on the rise, clusters aim to reduce costs by shortening
business environment. “For example, the state universities
the distance between suppliers and consumers while
have excellent mining programs, ensuring the steady
improving efficiency within the supply chain,” says Jaime
availability of mining engineers who are specialized in the
Lomelín Guillén, President of the Zacatecas Mining Cluster
regional geology of Zacatecas. Government support has
(CLUSMIN), and Corporate Director for Grupo BAL.
also been evident in the government’s plans to construct
Founded in 2011, CLUSMIN’s main objective has been to
several new industrial parks, many of which are focused on
improve cohesion in the industry, given that many of the
mining. One such example is the industrial park that has
companies operating in the state were working in silos and
been constructed close to the airport, with Atlas Copco and
suffered from a lack of information. “For example, some
Lasec already based there,” says the president of the cluster.
of the mining companies operating in Zacatecas did not even know that there was a seal producer in the state, and
According to Lomelín Guillén, the positioning of Zacatecas in
were therefore sourcing for a supplier in Monterrey,” says
the center of Mexico and the state’s advantageous geology
Lomelín Guillén. “These sorts of connections can generate
have been its major advantages. “Zacatecas represents an
real savings for mining companies. It also helps the mining
excellent opportunity to export from Mexico to the US and
industry to operate more seamlessly by giving companies
Canada, as well as to the rest of Latin America,” he points
better access to local suppliers and service providers, who
out. This is crucial for Lomelín Guillén, who laments the
can in turn respond to their needs much more quickly.”
continued lack of advanced manufacturing in Mexico. Those
“Many companies are now setting up operations in Zacatecas as a result of the cluster, ranging from equipment suppliers to repair companies. This has created close links between all parts of the industry” Jaime Lomelín Guillén, President of the Zacatecas Mining Cluster (CLUSMIN)
44
CLUSMIN has grown quickly, now boasting a membership
major international companies that do have facilities in the
count of around 45 companies, some of which have come
country usually only use them for assembly and distribution,
from as far as San Luis Potosi, Durango, and Aguascalientes.
and both Lomelín Guillén and CLUSMIN would like to see this
A major attraction for CLUSMIN membership is the presence
change. For this reason, one of CLUSMIN’s main objectives
and active participation of the major mining companies
is to increase the proportion of major equipment being
operating in Zacatecas, such as Peñoles, Fresnillo, Grupo
manufactured within the state. “The presence in Zacatecas
Mexico, and Goldcorp. Lomelín Guillén states that these
of companies producing scoop trams, mine trucks, drilling
anchor companies have been essential in attracting smaller
equipment, and service equipment would not only benefit
companies to the cluster. The cluster is divided into five
the mining industry, but also other local industries such
committees that focus on different areas of the industry:
as construction,” argues Lomelín Guillén. “The advantage
suppliers, human resources, health and safety, attracting
for them is that they could produce more economically in
investment, and innovation and technology. CLUSMIN is
Mexico than they can in more traditional locations such as
funded by the Council for the Industrial Development of
Finland or Sweden. They would benefit from running their
Zacatecas. However, of all the different industrial clusters
operations at lower cost, while also taking advantage of the
that sit under the Council, CLUSMIN has been developing
exportation facilities. This will help make Mexico much more
the quickest, largely as a result of mining being the
competitive when compared to Canada and the US.”
| VIEW FROM THE TOP
CLUSMIN DRAFTING MINING ROADMAP OF ZACATECAS GEMA MERCADO President of CLUSMIN’s Innovation and Technology Development Committee
Q: What are the main objectives of the Committee for
A: The mining industry requires water and energy, the
Innovation and Technology Development?
two resources that Zacatecas lacks. This poses a great
A: Its main objective is to create a forum for discussion
technological challenge that threatens the life expectancy
and action where companies can talk about technological
of many mines. There are companies that are planning on
challenges, which mining companies deal with every
bringing water from other states to fulfill their requirements,
day. Some of the more pressing issues are related to
but this will obviously increase their operating costs.
high energy consumption, mineral processing, and the
There are even cases in which mining companies end up
water required for mineral extraction. These issues and
competing with local communities for water. Comparatively,
challenges are discussed, along with possible solutions,
there are examples of companies and communities working
within the Committee for Innovation and Technology
together to obtain the precious resource, such as Fresnillo,
Development. We have been working with the National
which pumps water out of its mine, sends it to its water
Polytechnic Institute (IPN) and other higher education
treatment facility, and hands it over to the community.
institutions to define a concrete profile for students, and we
Energy is another pressing issue since Zacatecas is not
have molded Earth science curricula at major colleges to
an energy producer. The energy that mining companies
fit the industry’s needs. We also work closely with research
consume is expensive because it comes from other states.
centers across Mexico to find solutions for the complex
We are starting a pilot program at one of the state’s
operating challenges that occur in mining, including how
mines to identify energy efficiency solutions. Many mining
to deal with high temperatures, water scarcity, and many
operations are also studying renewable energy options.
other factors. The committee also provides a place for Q: How has the formation of CLUSMIN impacted the
companies to share their successes.
competitiveness of Zacatecas within the Mexican mining Q: You are also Director General of the Zacatecas Council
industry?
of Science, Technology, and Innovation (COZCyT). To what
A: CLUSMIN’s influence on the competitiveness of the local
extent are the objectives of these two entities aligned?
mining industry has been huge. It is one of the best clusters
A: Their objectives naturally align. COZCyT aims to foster
in the country and has yielded notable results due to two
the development of science and technology through skill-
factors. The first factor is that the cluster has persuaded
building and human talent, while seeking to promote
international companies to set up subsidiaries in the
a culture of innovation that directly impacts the local
region. These companies see Zacatecas both as a place to
economy. The economic development of the traditional
sell equipment and a place to establish a hub of operations
mining model ends once the company leaves; this is
for the Latin American market incidentally. Zacatecas is
something that we want to avoid, leading us to follow the
now a manufacturing hub for mining equipment through
triple helix model. This involves a link between government,
the cluster. The second factor pertains to the many
companies,
create
requirements mining companies have when establishing
sustainable development models that do not depend
themselves somewhere. It is impossible for them to import
on the sole presence of a mining company. One of the
everything, which is why they need local suppliers. The
Council’s missions is to foment scientific research, which
stepping up of such suppliers in Zacatecas is now bearing
includes innovation and regional development, in order to
a direct influence on local economic growth. For the state
truly integrate every part of science and technology. This is
government, one of CLUSMIN’s mandates is to foster
where COZCyT and CLUSMIN’s objectives truly converge.
economic development, which means supporting all of
and
educational
institutions
to
these new suppliers. This is a big challenge for CLUSMIN Q: What are the areas in which CLUSMIN identifies the
because we have to figure out how to help the cluster-born
greatest opportunity to help mining suppliers find
suppliers to become professional and competitive enough
solutions to common problems?
to respond to global mining market needs.
45
| VIEW FROM THE TOP
CHIHUAHUA TARGETS SELF-SUFFICIENT MINING INDUSTRY LUIS ALBA SOLÍS Director of Mining for Chihuahua Q: How will Chihuahua maintain its prominent mining
so that they benefit everybody. We also provide information
position in the years to come?
on the funds and services provided by the government
A: Chihuahua holds the second place in Mexico for the
and by SGM. Investors with risk capital used to only come
production of gold, silver, lead, and zinc. We are also the
from abroad, but now, Mexican authorities such as FIFOMI
fourth most important copper producing state, and have
are offering loans to companies with the knowledge and
more defined reserves than any other state. The Santa
capacity to do the job well. If a small-scale mining company
Barbara mine, for example, has been operating since 1576
has proven reserves, the government supports it with
and its reserves are far from being depleted. Moreover,
capital so that the operations can be expanded. The SGM’s
Chihuahua has uranium, iron, rare earth, and polymetallic
Support Program for Exploration (PAE) is directed toward
reserves, as well as 16 large operating mines, and 200 small-
small-scale mining and helps companies attain information
to medium-sized mining companies operating in the state.
about their reserves in order to make informed decisions.
We have projects lined up that will be just as important as the Peñasquito project in five to six years. The Waynopita project,
Q: What are the main challenges that you have faced in
a copper project in the Madera municipality in Chihuahua
heading up the Directorate?
near the border with Sonora, is going to be one of the biggest
A: The main challenge has been to acquire enough
projects for the current presidential term. There is still some
resources to support more mining companies. For example,
exploration to do for this project in order to determine the
we support small-scale miners in constructing explosive
exact size of the deposit, but it should prove very important
storage facilities, roads, infrastructure, and even in acquiring
for the state in terms of job creation and investment.
gasoline. We make sure that the companies’ paperwork is in order and that their mines meet all the necessary
Q: How does the Directorate of Mining of Chihuahua
standards. The SGM then supports them with geological,
collaborate with the private sector?
mining, and metallurgical consulting services, as well as
A: We are now supporting the Waynopita project by
sampling. Recently, some investors backed down from
constructing roads to the mine. The first stage of the mine
a project to construct a smelting facility for small-scale
requires a US$28 million investment, and the entire project
miners due to internal problems, but we are now discussing
needs between US$1-2.5 billion for the construction of the
the project with other investors from Mexico and Australia.
mine and the beneficiation plants. The Directorate of Mining is
We decreased the smelting target from 350 t/d to 120 t/d,
also supporting the creation of Levon Resources’ El Cordero
allowing all small mining companies, and even some of the
mine, which will produce more than 100,000 t/d of silver.
medium-sized companies, to benefit from it. We want all
For this project, we mediated the land access negotiations
small-scale miners that exploit high grade deposits to have
so that the three ongoing operations could be unified into
a plant where their material can be adequately processed
one open-pit. Once started, this project will produce more
and sold for a reasonable price.
silver than all the silver produced in the history of mining in
46
Chihuahua. Generally, we help mining companies to acquire
Q: How important is CLUMIN for the development of the
necessary information on the issuing of permits, and we
mining industry in the state?
act as mediators during negotiations with communities or
A: The mining cluster is incredibly important for us, since it
landowners. Large-scale mining also needs government
promotes the purchase of supplies from the local market.
support to move forward, especially when major companies
Currently, 60% of the supplies purchased for mining
have problems with the surrounding communities. During
operations in Chihuahua come from local state suppliers,
the negotiations, we make sure that all the members of
15% come from suppliers in other parts of Mexico, and the
the community board of the ejidos are present when the
remaining 25% come from abroad. Our ultimate goal is for
agreements are signed, and that the hearing is validated by
Chihuahua’s mining industry to be self-sufficient, as we
the community. Above all, we want all agreements to be fair
want mines to buy 100% of their supplies from the state.
ESSENTIAL LEGAL ADVICE FOR INTERNATIONAL MINING INVESTORS The last 18 months have seen the administration of
guide. In the above scenario, CEL might well advise dividing
President Enrique Peña Nieto unveiling reform after reform.
operations up among different companies as a better way
Of these, the Fiscal Reform sent shockwaves through the
to structure the project by entering into service contracts
mining industry because of its direct affect on companies
or lease agreements. This would also impact the income
with mines in production. Cereceres Estudio Legal (CEL) is
structure since a company would need to alter the way it
a leading Mexican law firm that is primed to help mining
plans social security fees, or insurance against various risks
companies navigate the treacherous shoals of these tax
and accidents. “The structure of any mining operation in
reforms, supporting its clients by reviewing their current
Mexico would depend on factors such as the number of
business practices. “The amendments to the existing laws,
employees or the amount of assets,” he continues.
and the introduction of new laws, have given companies a great opportunity to reorganize, assess their operations, and
Cereceres Ronquillo mentions some of the additional advice
improve their working processes,” states Rafael Cereceres
his company gives to foreign mining companies. “Once
Ronquillo, Partner at Cereceres Estudio Legal. “Many of my
a company is complying with the requirements for the
clients are reviewing their internal structures, employment
federal concession, we advise them to incorporate Mexican
policies, working conditions, and agreements they have with
companies into their project. For example, one company
their service companies. This is a great opportunity for them
holds the concession, one is the real estate owner, and
to clean house.” Most, if not all, of CEL’s clients originate
one hires employees. This divisional structure is designed
from outside of Mexico. Due to the stark differences in how
to prevent any problems which could jeopardize the entire
business is conducted in each country, companies from the
operation, and makes it easier for companies to enter into
US and Canada place high importance on understanding
service contracts or lease agreements.” Occasionally, CEL
how to operate in the Mexican market. The law firm is
handles joint ventures between two different companies
thus able to offer extensive advice on this matter and
wanting to invest in Mexico. In order to do this, a Mexican
helps prepare its clients for the transition into Mexico. To
company must be created for the joint venture to operate
exploit a mine in the country, companies require a federal
in the country. CEL’s advice about how to close such deals
concession which grants them the authority to perform
varies depending on whether its client is a majority or
exploration and exploitation activities. Even then, the
minority shareholder in the investment.
“The amendments to the existing laws, and the introduction of new laws, have given companies a great opportunity to reorganize, assess their operations, and improve their working processes” Rafael Cereceres Ronquillo, Partner at Cereceres Estudio Legal
federal concession only allows access to subsurface levels
Ultimately, there is no area of Mexican mining regulation that
and restricts access to the land surface. After successfully
CEL does not feel fully comfortable in navigating. Based in
negotiating with landowners, companies have to check
Chihuahua, CEL is part of the Professional Legal Alliance
that their desired prospecting areas are not protected and
(PLA) which is comprised of six separate companies, all
do not compromise the lands of indigenous communities.
founded by former employees of Baker & McKenzie. After
Only then can they begin setting up their mining projects.
the individual companies were set up, the PLA was created
The subject of concessions alone provides a crystal clear
to combine knowledge, expertise, and working philosophies
example of how tortuous Mexican regulations can be and
across Mexico, establishing a group of associated law firms.
how CEL can help to scythe through the confusion. “One
“Our alliance enables us to provide the same quality of
company could be the holder of the concession, another
service as larger firms, but for a much lower fee,” explains
company could be the owner of the real estate, and another
Cereceres Ronquillo. “To ensure that we speak the same
one could hire the employees. We can advise all involved
language as our clients when participating in multi-national
on how to structure their operations in Mexico depending
projects, we are also connected with law firms in Canada,
on their needs, since different companies need to comply
the US, Europe, and South America. By working with our
with different permits,” explains Cereceres Ronquillo. This
affiliates in these different jurisdictions, we can provide a
is where the firm’s expert knowledge can be a precious
higher level of service for our international clients.”
47
CLUSTER WANTS CHIHUAHUA TO MEET EXPECTATIONS Mining clusters in Mexico have received much attention due
Among the cluster’s initiatives is also its project to
to their promising role in helping to develop local supplier
standardize security protocols in mines in the state. “Each
bases and increase the overall competitiveness of Mexico’s
mine has a different security protocol which it enforces
mining industry. Gerardo Alberto Durán Alarcón, Manager
whenever a new supplier begins working in the mine. This
of Chihuahua’s Mining Cluster (CLUMIN), explains that
protocol actually represents downtime and is an expense for
the cluster was born in February 2013 from the need for
the company since it needs investment in food and lodging
higher quality suppliers in the state’s mining sector. “Above
for the supplier’s employees. We are aiming to create a
all was the belief that developing the supplier base would
certificate that will unify the security protocols of the state’s
bring better opportunities and lower costs for businesses
mining companies, thus endorsing supplier knowledge of
in Chihuahua,” he shares. The cluster aims to incentivize
security protocols in the mines,” shares Durán Alarcón. The
any company that might add value to the mining supply
project has been met with approval by mining companies
chain, from microenterprises to large conglomerates, and
due to the increase of efficiency that it will bring to the
is committed to the development of the state’s mining
security process, which translates into decreased downtime.
industry, while operating responsibly according to the law.
This certificate will also favor members of clusters over other suppliers and, if it proves successful, it could be
To fuel its objectives, the cluster has begun to implement a
expanded towards a nationwide certification program. “It
number of initiatives to maximize the impact of the efforts of
is an ambitious project but we are already seeing that it is
its more than 70 members. One of these initiatives includes
possible,” expresses Durán Alarcón.
the Meeting of Suppliers, organized in collaboration with the Ministry of Economy and the Chihuahua state government.
As for its goal to create synergy among the cluster
This annual event brings together more than 50 suppliers,
members, the “CLUMIN Circle” initiative has already paid
mostly local, and offers them a chance to showcase their
off. This initiative, based on incentivizing mutual discounts
products and services to the most important mining
among members of CLUMIN, has already led to concise
companies in the state. The event serves as a platform for
proposals to offer services at preferential prices to
exchange between suppliers and the acquisition departments
cluster members, ranging from industrial catering to legal
of mining companies. Through such endeavors, CLUMIN
services. However, Durán Alarcón states that it has not
advances toward the integration and larger participation of
been easy to promote collaboration among its members.
all stakeholders in the Chihuahua mining sector and beyond,
“There is an erroneous idea that Mexicans should work
according to Durán Alarcón.
alone. Through projects such as the mining cluster, we are
“The main benefit of the cluster is the link between suppliers and mining companies. Suppliers have greater opportunities to grow their business when they are part of the cluster” Alberto Durán Alarcón, Manager of Chihuahua’s Mining Cluster (CLUMIN)
48
CLUMIN’s second objective is the promotion of its members’
showing that companies in Mexico can work together,”
products and services to the state’s mining companies. The
he adds. The synergy the cluster is trying to create
cluster is thus working on the creation of a state supplier
also reaches out to universities in the state, with which
directory to reach this goal. “The main benefit of the
it is forming alliances to deal with community matters,
cluster is the link between suppliers and mining companies.
social responsibility, innovation, and research. “Through
Suppliers have greater opportunities to grow their business
the universities’ business incubators, we are looking to
when they are part of the cluster,” states Durán Alarcón.
develop productive projects that will create benefits for
“For example, CLUMIN will seek to help its members win
the mining sector and for the surrounding communities,”
private tender offers, as long as the member is competitive
Durán Alarcón states. Through such initiatives, CLUMIN
in terms of price and quality.” That being said, the cluster
aims to advance from a stage of consolidation and
already takes great pride in only selecting members that are
strengthening to a stage of project development, making
able to offer quality products and services that are relevant
the cluster “a highly recognized and transcendental
to the mining sector.
institution,” says Durán Alarcón.
| VIEW FROM THE TOP
DEVELOPING MINING COMPETITIVENESS AND GROWTH IN CHIHUAHUA JAIME ANDRÉS CRUZ RUSSEK President of Chihuahua Mining Cluster (CLUMIN) Q: What are the major challenges that CLUMIN has faced
are cared for and that operations and processes are done
since its creation, and what has the cluster focused on so far?
according to regulations.
A: CLUMIN was created in 2013 as an initiative of mining companies to promote local sourcing of products and
There has always been a deep interest in Chihuahua to
services with initial funding from companies operating in
support companies and entrepreneurs that want to set
Chihuahua. The main challenge was to get started but we
themselves up here. We need to aggressively promote
have been very successful at attracting members across
exploration to provide an interesting inventory of projects
the entire state. At the closing of the first year, we had 52
for investors. Chihuahua has vast mineral wealth that has not
members, of which only nine were mining companies with
fully been harnessed by exploration. There are some regions
the rest being suppliers. Even though we maintain a healthy
in the state such as Batopilas where exploration has found
independence from the government, we work very closely
silver deposits with ore grades of 1kg per tonne of rock.
with federal and state authorities since we are all aware that
This is just an example of how lucrative a mining project in
we need to work together to promote the development of
our state can be. To help mining entrepreneurs, we are now
the mining industry, which is extremely important for the
creating a fund for start-up companies in order to provide
economy of Chihuahua. One of our main aims is to make
them with the training and capital they need to expand the
mining companies and their suppliers feel at home while
reach of their companies. There are many things a mining
attracting new investment and new mining companies.
cluster can do in order to strengthen the mining industry
Only through doing this can we tap into the full mining
nationwide, including cooperation with other clusters. For
potential of the state. Additionally, we aim to work with
instance, we have been talking to the cluster of Coahuila
local governments to develop a strong local supplier base
since we like their approach of integrating the oil and gas
and create incentives for mining operations in Mexico.
sector within the mining cluster. We are now assessing if we could take on such an approach and evaluating the effect
Q: What initiatives are you looking to implement to
of the secondary laws of the Energy Reform. We are also
further develop the cluster?
considering our expansion into a regional cluster together
A: We want to convince more local suppliers to join the
with Durango since working together will make us stronger.
cluster. To do so, we plan to organize training sessions so that suppliers can understand what the mining industry
Q: How does CLUMIN help its member companies to
demands in terms of safety, quality, and services before
develop solid and lasting ties to rural communities?
they meet with the mining companies. Having a strong
A: We can be a valuable tool when troubles arise, acting as a
local base will also improve the ease of doing business
third party that may help to solve issues between operators
in the industry. One of our other goals is to change the
and communities. After all, the cluster creates an interaction
outdated concept that the general population has of
between miners and local communities through suppliers.
mining. The mining industry has not done a good job
We always seek to support the party that has reason on its
in conveying its image worldwide. The general public
side and help ensure justice is served. We want everyone
still believes that mining companies are environmental
involved to understand that their actions will not only affect
menaces that do not care about safety and do little for
the work at the mine but a large part of the population
the local communities. However, we want to inform the
which depends on mining companies for work. From my
public that the reality of the mining industry is different
experience, most companies do what they can to avoid
these days by letting the local press visit the mines and
problems and to be socially responsible. We are also looking
see what mining operations really look like. Furthermore,
to get involved with the state and municipal governments to
doing business in Mexico must be simple and must provide
identify the main needs in each municipality and to ensure
certainty through rule of law. CLUMIN needs to make sure
that relevant funds are used responsibly and efficiently to
that the environment, the communities, and the employees
have an optimal positive impact.
49
| VIEW FROM THE TOP
STRICT REGULATIONS GOVERN USE OF EXPLOSIVES CAPTAIN JUAN DE DIOS GARCĂ?A DE LA ROSA Chief of the Mining Subection of the General Directorate of Federal Firearms Registration and Explosives Control Q: What are the most crucial details for the proper storage
Q: How does SEDENA’s involvement continue once a
of explosives in the mining industry?
permit has been granted?
A: The most important step is to possess a general permit
A: Once the companies have covered all the administrative
for the use and storage of explosives, as this involves many
requirements, we will conduct physical inspections of their
responsibilities. Permit holders must consider physical and
facilities. The objective of these semi-annual inspections
technical security, accounting, and administrative control
is to ensure that companies are meeting the physical and
in their operations. With regards to physical security,
technical security standards we have laid out. For instance,
mining companies or contractors must ensure that the
we make sure that the powder magazines are built with
explosives cannot be stolen or misplaced. For this, they
the right materials and that they comply with the security
need to have many technological aspects in place, such as
specifications which dictate how the explosives must
surveillance cameras, CCTV, alarms, and security personnel.
be stored. These standards are very important since the
As for technical security, permit holders must ensure
safety of the general public depends on them. The state
that they meet the current standards and adhere to the
and municipality involved may also carry out their own
recommendations provided by manufacturers as to the
processes to ensure compliance with permit requirements.
storage and use of explosives. Users must also keep strict records for administrative and accounting control purposes.
Q: What are the penalties mining companies may face if
These reports can be carried through logs, control cards, or
they do not comply with the stipulated regulations?
on specialized software. These three conditions should be
A: The administrative penalties that mining companies can
followed to avoid penalties. In addition, since 1997, SEDENA
face include suspension or termination of their permits. If
has demanded that manufacturers ensure all their products
companies are in breach of the law then financial sanctions
are traceable. This means that all the products manufactured
can be handed down, depending on the seriousness of the
must be labeled so that we are able to precisely know the
legal transgression. It must be noted that any suspension
route the product has followed. The identification code lets
or cancellation relates exclusively to the explosives, which
us know where the product was developed, the production
means that companies can continue to operate. However,
batch it belongs to, how it was transported, and the place
the suspension of such permits has a significant impact
and time at which it was received. These codes provided all
on their business as blasting is virtually essential to the
the information that SEDENA requires to avoid misplaced
productivity of the mining industry. When permits are
or stolen explosives.
suspended, mining companies have a few months to adhere to regulations. Once this compliance with our
Q: What are the most common reasons for denying mining
requirements and the broader legal framework is ensured,
companies a permit to use and store explosives?
the permits will be reinstated.
A: First, companies must meet all the aforementioned
50
requirements. They must also count with the approval of
Q: Does SEDENA somehow collaborate with the private
the governor and the mayor of the state and municipality
sector to increase the safe use and storage of explosives?
in which they plan to carry out their blasting works.
A: The Federal Law on Firearms and Explosives includes
Mining companies must provide plans of the operations
all safety measures that should be followed by permit
where they intend to implement the use of explosives
holders. We do not participate directly in improving
and additional technical information. If companies meet
companies’ facilities but we always suggest that they do
all these requirements, the permits will be granted. If they
not seek to save on surveillance systems, given the impact
fail to comply with any of these established requirements,
that the loss of explosives can have on their operations.
the documentation will be returned and they will be asked
We tell mining companies that they must make use of all
to restart the process according to all the parameters
available technology so as to meet the highest security
established by SEDENA.
and safety standards.
TRACKING MEXICO’S LEGAL ENVIRONMENTAL FRAMEWORK
Héctor Herrera Ordoñez, Partner at Haynes and Boone
Mining projects come with
After decades of political and economic negotiations,
an inherent need to alter
Mexico created the General Law of Ecological Balance
the environment. While a
and Environmental Protection as well as the Law of
certain impact is inevitable,
National Waters. These laws are now the most relevant
environmental
and
federal environmental laws by which mining companies
regulations aim to define
have to abide. The General Law of Ecological Balance
acceptable levels of impact
and
to
allow
revision in 1996 to include increased sanctions, improved
to
operate,
containing damage
laws
the
industry
while
Environmental
Protection
was
submitted
for
also
citizen participation, and dissemination of information
environmental
on governmental initiatives and programs. Now, after
mitigating
more than 25 years, the government upholds the law by
widespread pollution risks. According to the United States-
and
implementing sanctions and obliging mining companies to
Mexico Chamber of Commerce, only since 1993, when Mexico
pay for damages caused by their operations. On par, the
engaged in a dramatic campaign to liberalize trade, has the
Law of National Waters, which was created in 1992 and
country begun to support its environmental laws with the
last modified in 2004, regulates the use and distribution of
implementation and institutional infrastructure needed to
water across the country. Without the necessary permits
make them effective. Moreover, NAFTA has been a primordial
outlined by this law and granted by CONAGUA, companies
driver of improved environmental standards in Mexico.
cannot make use of the water they need for the operation of a mine. While the Mexican government has been
The concerns that arose during the drafting of NAFTA
criticized for a lack of environmental regulation prior to
revolved around the inherent commercial advantage
the late 1980s and for insufficient enforcement of the law,
that Mexico’s poor environmental laws and regulations
Herrera believes that PROFEPA has done an outstanding
gave it. Lenient environmental laws and regulations could
job at upholding the law and that mining companies have
potentially encourage US and Canadian companies to
indeed complied with Mexico’s environmental standards.
establish operations in Mexico while avoiding the strict
“Mexico has not solved all the environmental challenges in
environmental standards in their home countries. “Not
the country, but it did start to tackle them. Companies are
complying with such standards would mean a country could
now at least trying to meet these standards, particularly in
attract more foreign investment due to lower operating
the mining industry,” Herrera states. “Before NAFTA, there
costs; environmental standards were thus imposed on
was no legislation that regulated such issues and since
Mexico to ensure fair competition,” states Héctor Herrera,
mining activity was carried out far away from urban areas,
Partner at Haynes and Boone. After intense negotiations in
there was limited public knowledge as to the impact of
1991 and 1992, the agreement was signed, paving the way
these activities on the environment. This is no longer the
to the creation of a tripartite Commission on Environmental
case, as the internet and social media allows information
Cooperation (CEC), based in Montreal, and the US-Mexico
to be shared within seconds and minutes after something
Border Environment Cooperation Commission (BECC) in
happens.” Recent spills have shown, however, that there
Ciudad Juarez. At that point, the Mexican government was
is still work to be done in order to mitigate environmental
obliged to create decentralized environmental authorities
pollution. Though mining companies claim that not every
such as SEMARNAT, CONAGUA, and PROFEPA to implement
disaster can be prevented, recent environmental disasters
the stringent environmental standards imposed by NAFTA.
show that the risk management structures still have room
“During the first years after NAFTA became effective, the
to improve. Moreover, the lack of water in the northern
inspection programs of SEMARNAT and PROFEPA showed
states, where most mining operations are concentrated,
a series of irregularities nationwide,” Herrera expresses.
is forcing companies to increase their water reuse or
“Nowadays, the results of such inspections show a clear
hindering the construction of new projects altogether.
difference in the environmental practice of companies, with a high level of compliance.” Herrera claims that there is a
While Mexico’s regulatory system is still in the process of
large difference in the levels of air, soil, and water pollution
improvement, recent developments show that the Mexican
during the 1970s, and 1980s, and the levels now seen in
government will not hesitate in punishing environmental
Mexico. This is partly due to the fear that companies have of
non-compliance. The increasing power of communities
being shut down for non-compliance and an improvement
further reaffirms the importance of not only meeting the
to Mexico’s General Law of Ecological Balance and
legislative standards but rather going beyond Mexico’s
Environmental Protection.
legislation to ensure the sustainability of mining operations.
51
Acquiring capital for projects is among the top challenges for mining companies worldwide. Insufficient return on investment and increasing risk has discouraged many from investing in mining projects. Due to its stable business environment and clear operating rules, Mexico remains among the most attractive destinations for investments in mining exploration and operations, and was rated the world’s fifth most attractive mining investment destination in the world in 2014. According to CAMIMEX, the country attracted US$6.576 billion in 2013, and it estimates that at least US$6.176 billion has been invested in Mexico the following year. Although the 2013 investment figures represent an 18% decrease when compared to 2012, the geological potential and the number of projects in pre-feasibility and feasibility stage are bound to assure a continuation of investment in the sector.
The following chapter combines comprehensive analysis with a compilation of mining investment opportunities, as well as expert perspectives on the business environment in Mexico, strategies to mitigate common risks associated with mining investments, key pathways to access capital during times of declining prices, and perspectives on the future of the Mexican mining market. Banks and financing firms offer an enlightening perspective on the financing needs of the mining industry. Finally, exclusive interviews with the directors of FIFOMI, the financing branch of the General Coordination of Mining, and practice leaders of the most important consulting firms in the country, provide expert insight into Mexico’s current financial environment.
FINANCE & INVESTMENT
3
THE MEXICAN MINING INDUSTRY
MEETS IN ONE PLACE MINING
forum CAN YOU AFFORD NOT TO BE THERE? Mexico Mining Forum is the high point of the Mexican mining calendar, where domestic and global actors come together to analyze the country’s mining sector. Taking place in Mexico City, it will provide an invaluable chance for industry experts to discuss topics of mutual interest, alongside an effective and targeted networking platform. The principal topics under discussion have been carefully selected as those that will most help investors understand the best opportunities and main challenges in Mexico’s mining industry as we enter 2015.
Register now at:
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CHAPTER 3: FINANCE & INVESTMENT 56
Global Solutions Pooled for Local Mining Markets, Ernst & Young
58
Trusted Source of Mining Credit Boosts SMEs, FIFOMI
58
Increasing Stock Exchange Relevance for Mining Companies, Mexican Stock Exchange (BMV)
62
Mining M&A Market Purring Back to Life in 2015, PricewaterhouseCoopers
63
Late 2014 Deals Show Mexican M&A Market Potential
64
Financing Canadian Advances in Mexico’s Mining Sector, Export Development Canada
65
Worldwide Banking Services with Mining Core, Scotiabank
67
MINE SPOTLIGHT: Mulatos, Alamos Gold
68
Alternative Financing Ideas for Beleaguered Juniors
68
Stock Exchanges Set High Standards for Mineral Resource Estimates
70
Streaming: an Alternative Source of Financing, Silver Wheaton
72
Trusted Advisors on Risk Management Strategies, Control Risks Mexico
73
Right Information Lessens Security and Corruption Risks, Kroll
74
Evolutions in Sino-Mexican Mining Investment
75
Integrated Investment Services to Access Capital, Ultra Maris Capital
76
Understanding the Reasoning Behind Tax Reforms, PricewaterhouseCoopers
77
Tax and Regulation Challenges Facing Mining Industry, KPMG
55
| VIEW FROM THE TOP
GLOBAL SOLUTIONS POOLED FOR LOCAL MINING MARKETS LEFT: Mario Arregoytia, Lead Partner for Mining and Metals for Mexico and Central America at Ernst & Young RIGHT: Amber Nelson, Markets Enablement Manager at Ernst & Young
Q: How does the Mining and Metals Division of Ernst &
are not negotiated appropriately, the company may
Young (EY) keep its finger on the pulse of the mining
receive cash at first but suffer a significant loss in the long
industry in order to provide the best services?
term. Another viable option is to intensively make use of
MA: EY keeps a global and local vision for all industries,
equipment leasing agreements, although companies need
especially for mining which is, by nature, a global industry
to be very careful of equipment cost trends when entering
with particular local circumstances and necessities. We
into them. The secret is to identify a specific window when
help our clients in the local mining industry to know about
an agreement can be reached at a low price before the
the options that are available and favorable for them at a
equipment costs go up again. For EY, it is very easy to
global level. We always consider the risks and associated
identify benchmarks for these costs and find options in
challenges that they face and help them identify the
Mexico and other countries.
opportunities beyond such problems so that they may come out winning. Our industry experts are located
Q: To what extent are your clients susceptible to the risks
worldwide and are available in a flexible and efficient way.
associated with capital allocation and access to capital,
This approach means that we do not need people in each
and how can they overcome them?
and every mining region. For one recent meeting with a
MA: For major players, the main risk is capital allocation
big client, we brought in a logistics expert from South
while junior companies are suffering more in terms of access
Africa, a tax expert from the US, and a copper expert from
to capital. Majors need to be able to allocate significant
Peru. Alongside this worldwide presence, we also have a
investments and achieve significant short-term yields for
Global Mining & Metals Center in Sydney which acts as a
their investors. If these companies allocate capital to a project
hub for the mining industry.
that does not have a good rate of return, investors will not support the decision. The difficulty is finding a project that
Q: How can mining companies operating at all stages
will offer an adequate short-term yield during a period of
of the value chain balance the demands of short-term
decline in metal prices. In 2015, we expect that a good margin
shareholders with those investing in longer-term returns?
will be more important than capital allocation for big projects
MA: An industry that produces significant yields attracts
due to rising operating costs.
many investors with short-term expectations. However,
56
when this industry starts to decelerate, those investors
AN: The market environment was punishing in 2013,
are left with two options: they can either evaluate the
leading to the change of all the big CEOs who had made
long-term nature of the industry while keeping the shares
large investments. There is now a lot of pressure on
of reliable companies, or they can sell their shares and
companies to start returning cash instead of spending it.
invest their money in another industry. EY offers the
The risks associated with capital allocation and access to
option of exploring alternative financing options to lessen
capital are closely tied to cutting costs. For example, BHP
the dependence on bank loans and direct investment,
Billiton and Rio Tinto projects need to compete internally
reducing the gap between investor expectations and the
for capital and prove that they are the most economically
reality of the industry. We help companies looking for
viable options to maximize returns for shareholders.
alternative financing options to understand the associated
One of the ways in which companies are overcoming
costs of options such as royalties, metal streaming,
the capital allocation dilemma is through creativity. A
and equipment/EPCM leasing agreements. Of these
company such as Grupo Mexico may need to invest in
options, we have noticed that streaming is currently very
specific mining projects, leading them to cut back on
popular. Copper producers in Mexico, Chile, and Peru are
non-essential projects in other industries, therefore
streaming their silver by-products to silver streamers.
offering investors a good short-term yield for their mining
For this option, it is very important that the company
investments. They can do this until the mining industry
negotiates the agreement very well because if the terms
returns to a growth cycle.
Q: What effects will the mining royalty have on the mining
to a community problem is achieved through a set of
industry in Mexico over the next few years?
measures designed to improve the relationship with the
MA: In the short term, I do not believe it will have a negative
community and recover the social license. If a community
effect on mining investments in Mexico because most
does not want a company to use its water, that company
of the major mining countries in the world have similar
must work to provide water distribution solutions. The
royalties or taxes. The problem is that Mexico used to be
addition of water and air pollution treatments, schools,
a tax haven for mining investors since companies only
and hospitals, can also solve a variety of needs that the
needed to pay income taxes and the Statutory Employee
community may have. Problems happen when companies
Profit Sharing Assets (PTU). After the implementation of
refuse to invest in preventing them. EY can help shelter
the royalty, Mexico became an average country in terms
companies from these storms before they appear.
of taxes. Investment in exploration projects with tight margins might also decrease in the short-term, but in
AN: A big part of improving relations with communities
most cases, good projects with good margins will not
relies
be stopped because of the royalty; they will only need
communicate the benefits of mining from the start. Many
to become stricter in terms of spending. In the medium-
times communities do not understand the full benefits
term, up until 2017, medium-sized and large companies
of having a mine in their area. We have benchmarked
will optimize their costs through solid tax strategies. The
strategies for dealing with communities since we have a lot
Mexican government recently made a tax stabilization
of experience in countries like Australia and Canada where
pact, meaning that it will not implement additional tax
these problems first happened. As these problems arise
reforms for the next three years. But the government will
in emerging markets, EY can apply the successful best
probably realize that this tax scheme will not collect the
practices used in other countries to solve these problems.
on
communication.
The
company
needs
to
funds that are expected due to the taxation strategies employed by mining companies.
Q: How is EY helping its clients reduce energy costs at their mining operations?
Q: How competitive is Mexico in attracting new mining
MA: The Energy Reform provides good opportunities for
industry investments?
mining companies to establish their own electricity plant,
MA: Companies looking to invest will typically compare
become self-sufficient, and sell the excess energy to CFE.
regions rather than countries. For example, a company
Two of the most significant players in the mining industry are
might need to decide whether to invest in a project in
already building their own electricity plants and will cut 50%
Africa or in Latin America, considering that the business
of their total energy costs. Another option we provide is to
environment and market situation is very different in these
help companies establish contracts in the shale gas supply
two regions. There is no significant difference among
industry in the north of Mexico or south of the US. Congress
Latin American countries in terms of mining royalties but
is now discussing whether or not mining concession owners
there are other factors that can play a significant role in
will receive gas concessions for exploration. This is a new
determining investment allocations. One of these factors
business opportunity for EY and we are bringing in oil and
is the ease of obtaining a social license. It is now more
gas experts from Houston to work with our mining clients.
difficult to obtain a social license in Peru than it is in Mexico, for example. Additionally, Mexico has the geographical
Q: With regards to the mining industry in Mexico, what are
advantage of being closer to the US and it has more
the aims of EY’s Mining and Metals Division for the next
infrastructure than Peru. Mexico is seeing a growing
three to five years?
trend of problems with social licenses. When a group or a
MA: We are quite strong at the global level but we need to
community is successful at making a mining company pay
be able to bring our resources together more efficiently at
additional charges for the social license, other groups or
a local level in order to become the best regional support
communities then decide to ask for the same benefits. Yet,
for the mining industry. We will look to bring in geologists
this problem is a lot more significant in Peru where some
to aid us in understanding geological parameters of reserves
external environmental organizations have begun to fight
and resources, from their distribution to their abundance.
mining companies in areas such as the Amazon.
We are also looking to increase our expertise in terms of sustainability, both in general and in the mining industry, in
Q: How does EY help its clients to overcome such
order to help the industry overcome challenges regarding
problems with communities?
the environment. It is necessary to possess these kinds of
MA: We offer a complete set of strategies. These strategies
skills in order to obtain broader understanding and provide
are not industry secrets, simply benchmarks. The solution
better support for our clients.
57
| VIEW FROM THE TOP
TRUSTED SOURCE OF MINING CREDIT BOOSTS SMES ARMANDO PÉREZ GEA Director General of FIFOMI Q: How does the Mexican mining industry need support
driven the development of the Zacatecas mining cluster,
from FIFOMI and what are your main objectives?
since we know that clusters help mining suppliers to
A: The national metallurgical mining industry contributes 4%
consolidate themselves in the sector.
of total GDP, making it a strategic industry for the Mexican economy, with a significant impact on job creation. The main
Q: What are FIFOMI’s specific priorities in terms of
objective of the Fideicomiso de Fomento Minero (FIFOMI)
financing, training, and technical assistance?
is to increase the competitiveness of the Mexican mining
A: FIFOMI is a member of the Mexican parastatal financial
industry by providing funding for mining companies and the
sector. As such, our financing, training, and technical
industry’s value chain as well as promoting the development
assistance activities are targeted to individuals and
of small and medium-sized mining operations through both
companies across the mining sector, whether they are
financing and training. With these goals in mind, we are
involved
working on specific actions as part of the Program for Mining
marketing, or providing equipment and services. This leads
Development 2013-2018. These actions follow established
to the overall development of Mexico’s mining industry, helps
themes, which will see FIFOMI financing providers, funding
to create jobs, and brings in investment. While financing
the establishment of clusters, co-financing certain projects
is crucial, loans must be complemented with training and
with other financial institutions, promoting the development
technical assistance. As provided by FIFOMI, these focus on
of suppliers, and offering specialized training and technical
problems faced by mining SMEs, such as meeting operational
assistance. Several of these goals can also be tied together
and safety requirements while abiding by environmental
in specific strategies. For example, one of the objectives of
regulations and being financially above board.
in
exploitation,
processing,
manufacturing,
the Program for Mining Development is to seek increased funding for the mining sector and its value chain through
FIFOMI also pays great attention to the development of
new financing strategies that facilitate access to credit and
high-impact projects that can generate a “domino effect”,
help drive the formation of clusters. Therefore, FIFOMI has
namely whose activities can have a positive effect on
INCREASING STOCK EXCHANGE RELEVANCE FOR MINING COMPANIES Since
its
creation
in
metal prices, which severely affected companies such as
1994, the Mexican Stock
Fresnillo and Minera Frisco. As the mining markets have
Exchange
has
begun to regain a measure of color in their cheeks, this
(BMV)
increased
300%,
drop subsided in 2014 as the Extractive Index saw an 8.1%
investment
rise over the course of the year. Despite this welcome
total of US$520.5 billion at
news, the BMV still does not stand out as a preferred stock
the end of 2013. The BMV
exchange for mining companies to raise their capital, unlike
Extractive Index, based on
the Toronto Stock Exchange (TSX) which consistently
mining
agricultural
succeeds in attracting players in this sector. To combat this
companies listed on the
trend, BMV has launched efforts to make it more attractive
BMV, recorded a 29% drop
and easier for companies to become listed. “We have
in value by the end of January 2014 relative to January
not been competitive enough, we have not created nor
2013. This drop has been largely accredited to the drop in
facilitated the access to the market,” says Pedro Zorrilla
boasting
Pedro Zorrilla Velasco, Associate Director General of Corporate Services and Institutional Relations at the BMV
58
by an
and
other businesses that serve the mining sector. FIFOMI,
new operating mines in Mexico, FIFOMI also extends
as an institution, may focus more on increasing funding
funding for the operation of mining projects that have
for ore producers, service providers, and primary mineral
completed the exploration phase. We may also allocate
processors. This means that, while large companies
resources to exploration projects for mining companies
have access to various financing alternatives, FIFOMI’s
that want to expand their existing operations. The
participation is key to developing and consolidating
particular characteristics of the mining sector, especially
these companies’ supply chains. Alongside this, FIFOMI
for small companies, also mean that private financial
offers financing options in collaboration with NAFINSA
institutions may not provide financing to companies that
that increase the liquidity of companies that have a large
are perceived as being risky. In this context, FIFOMI acts
impact on their supply chains.
as a development bank and leverages its experience and knowledge of the mining sector to provide financing to
Q: You recently announced that FIFOMI is looking to
companies that are not regularly served by traditional
finance shale gas projects. How will doing so benefit the
banking. The impetus given to the operation of these
Mexican mining industry?
projects through public funding helps consolidate mining
A: The Energy Reform is expected to detonate a series
projects and places these companies in a position to then
of investments for the exploitation of hydrocarbons. This
receive financing from private sources.
means the mining sector will face increased demand for those minerals used as inputs in the exploitation of
Q: How has FIFOMI evolved in the help it provides SMEs?
said energy. In this sense, FIFOMI should be prepared to
A: SMEs are a crucial link in the mining value chain as
provide financing for the development of projects related
their production contributes to regional development
to the use of these minerals. This will help ensure a steady
and they are also important generators of employment.
supply that allows the exploitation of natural gas and other
In many cases, mineral producers supply large mining
energy sources to be carried out in Mexico.
and metallurgical companies adding to the national aggregate production. Others process the minerals
Q. What are the key factors FIFOMI takes into account
needed for manufacturing inputs. SMEs contribute to
when considering the financing of a specific project or
the mining sector in a myriad of ways. FIFOMI is fully
company?
devoted to supporting mining SMEs. As of October
A: The most important factors are related to the technical,
2014, we have supported 444 companies through direct
financial, and legal viability of projects. Another relevant
and indirect financing, of which 413 were SMEs. 78%
factor is the level at which the company fits into our
of our portfolio is now dedicated to directly providing
preferred targets of ore producers, service providers, and
credits to companies providing production, processing,
the primary consumers of minerals. In terms of helping
or mining services.
Velasco, Associate Director General of Corporate Services
stock exchange can help a company maintain direction
and Institutional Relations at the BMV.
in order to profit from a well-defined strategic vision and strategic plan,” Zorrilla Velasco expresses. “Once a
Zorrilla Velasco states that not all companies need to be
company is listed on the exchange it is obligated to meet
listed on the exchange, but he believes that the decision
certain commitments. Liquidity and stock price formation
to not commit fully to the Mexican mining market should
become important for the company as well.” Mining
come as a result of strategic analysis as opposed to a
enterprises need to pay attention to market conditions
lack of understanding about how the market works.
when considering an Initial Public Offering (IPO). Due to
This misunderstanding also stretches to how corporate
market conditions, Zorrilla Velasco stresses that 2014 was
governance can and should be implemented within
not a successful year for IPOs, a situation which can affect
the company. To overcome these barriers, the BMV is
the whole market. “IPOs are very important for providing
initiatively promoting the market and the instruments
the market with enough floating shares to assure
that it offers for companies to grow and access capital.
reasonably good market activity,” he states. Taking this
The stock exchange has focused great efforts on the
importance into consideration, the BMV assumes the task
dissemination
corporate
of preparing and structuring IPOs for those companies
governance and institutionalization of companies, both
looking to list on the stock exchange. The future will tell if
of which are prerequisites for listing in the BMV. “The
mining companies take this opportunity.
of
information
regarding
59
FOR 80 YEARS WE HAVE SUPPORTED MINING IN MEXICO
We have improved our financing programs to develop mining projects and its value chain
MINING M&A MARKET PURRING BACK TO LIFE IN 2015 After the mining M&A market underwent a desolate year in
a recovery emerge, funds are proving hard to come by. The
2014, analysts are excited for 2015 as it promises a different
analysis firm states that 59% of juniors it interviewed have
reality. Majors and juniors alike seem to be either looking to
to raise funds in the next year and around 33% accepted
buy or ready to sell, creating a natural M&A market. In the
this might have to come in the form of a merger. But given
last months of 2014, a few choice deals began to indicate
their condition, the valuations reached in such deals might
that changes were nigh for 2015. A number of these deals
not be impressive. Such low valuations would certainly
concerned Mexico directly, especially when Coeur Mining
spur enthusiasm among buyers but companies being
acquired Paramount Gold & Silver, Scorpio Mining merged
approached for a merger will have to assess their long-
with U.S. Silver & Gold, and Timmins Gold acquired Goldgroup
term goals against a sub-par injection of funds.
Mining’s Caballo Blanco project in Veracruz. PwC is also keen to point out that those companies With a high number of firms making encouraging noises
looking at JVs must carefully consider both the risks and
about considering acquisitions, the first quarter of 2015
opportunities in play. JVs can be safer than an all-out
could provide some welcoming news for a mining industry
acquisition, but heighten the risk of negotiations collapsing
in need of a boost. Research by Grant Thornton suggests
due to the quarrels between the two boards, or lead to
that this perfect storm could lead to the value of M&As
significant delays in project planning and execution. “When
throughout in 2015 reaching double the level seen in
a 50/50 JV is formed, there is usually a lot of discussion
2013. The Gathering Momentum report was compiled by
on who retains the ultimate veto on major decisions such
consulting with over 250 senior mining executives from all
as mine plans, CAPEX spend, and capital calls,” says
around the world and turned up some interesting findings.
Stephen Mullowney, PwC Canada’s Mining Deals Leader.
For example, with around 10% of junior companies facing
“As there is usually a dilution mechanism, this can lead to
the imminent risk of bankruptcy and 25% of majors looking
potential problems down road if one party is not able to
like they will struggle with current financial constraints, it
make capital calls.” PwC recommends that such challenges
seems like distressed assets and low valuations will be in
can be reduced by mining operators teaming up in a JV
plentiful supply. This means companies that were able to
with partners whose core business is not mining, such as
weather the 2013-2014 storm and now find themselves
sovereign wealth funds. This is where the long-term aims
with cash on hand will find some wise purchases to make.
of a mining company looking to stay in control can merge
Against the figures of companies that will struggle, Grant
with the investment goals of the private funds mentioned
Thornton finds that 35% of junior mining exploration firms
in EY’s research. These funds will usually not look to claim
and 32% of majors are now on the hunt for acquisitions.
a controlling stake in a project and will remain focused
These numbers are close to those more interested in
on ROI, trusting a mining operator to run the project in
selling, to the tune of 36% of juniors and 27% of majors.
a profitable manner. “While JVs may not have the same
Traces of this situation began to appear in 2014 when
‘star power’ as an outright takeover or a mega-deal, they
Agnico Eagle and Yamana Gold bought Osisko Mining
provide some flexibility and can be an effective alternative
for US$3.49 billion, after a failed hostile takeover bid by
for miners in an increasingly challenging climate,” stated
Goldcorp. These findings are largely backed up by Ernst &
John Gravelle, PwC’s Global Mining Leader and Canadian
Young’s (EY) Capital Confidence Barometer, which found
Mining Leader, back in March 2014.
46% of companies were looking to close an acquisition in 12 months to come. This rate will be welcome to forecasters,
It seems certain that the mining M&A market will provide
as it stands at almost double the rate seen in mid-2014. EY
a challenging environment to navigate for companies
has also spoken out on the potential presented by private
looking to buy, sell, or find the right partner. However,
capital funds that are flush with cash to spend in a mining
after two years of a virtual M&A standstill, any activity is
industry that once again presents good opportunities.
welcome.
In August 2014, EY estimated that these private funds
“JVs provide some flexibility and
had US$10-20 billion to inject into metals and mining transactions.
can be an effective alternative
However, the aforementioned desire to sell may not greatly
for miners in an increasingly
benefit juniors that are in dire financial straits. Grant Thornton seizes on the fact that the financial crisis has battered juniors, with many admitting that even as signs of
62
challenging climate” John Gravelle, Global Mining Leader and Canadian Mining Leader of PwC
LATE 2014 DEALS SHOW MEXICAN M&A MARKET POTENTIAL The M&A mining market has long been stagnant but a number
within Mexico can still make worthwhile acquisitions.
of deals in the second half of 2014 showed there is still some
Timmins Gold paid US$30 million to Goldgroup Mining for
life in the old dog yet. As the global mining community looks
its Caballo Blanco project in Veracruz. This represents a
for good opportunities, the deals detailed below prove that
major expansion of Timmins’ commitment to Mexico as it
Mexico should feature prominently on any M&A shopping list.
aims to rapidly get Caballo Blanco into production, with the earliest estimates pointing to a 2016 start date. Work
COEUR MINING BUYS PARAMOUNT GOLD & SILVER
on Caballo Blanco should be relatively straightforward
In a deal that must have contributed to buoyant
for Timmins since its new acquisition will be an open-pit/
perspectives for 2015, the US silver producer Coeur Mining
heap leach operation much like the company’s existing San
acquired Paramount Gold and Silver for US$146 million.
Francisco mine in northern Sonora. In fact, the evolution
Its stated reason for doing so was to extend its Mexican
of the Veracruz project will go hand-in-hand with the
operations. The choice of Paramount was an obvious
expansion of the San Francisco mine. Combined, these two
one since its San Miguel project borders Coeur Mining’s
projects should produce an output of 231,000oz of gold a
existing Palmarejo operation in Chihuahua. It is hoped that
year while helping the major reduce its cash costs to near
San Miguel’s Don Ese deposit will be producing by 2016,
US$784 an ounce.
adding to the success of Palmarejo which is already one of the top gold and silver producers in the world. Once Don
FRESNILLO BUYS OUT NEWMONT IN PENMONT JV
Ese enters production it will lead to an increase in cash
In October, Fresnillo bought out Newmont Mining’s 44%
flow at Palmarejo through improved grades and recoveries
interest in the two companies’ Penmont JV in a deal
and allowing the Palmarejo mill to run closer to its full
worth US$450 million. The now dissolved JV oversaw a
capacity. Paramount’s non-Mexican assets will be spun
significant portfolio of mines, including the Herradura,
off into a standalone company to be known as Paramount
Noche Buena, and Soledad-Dipolos gold mines, and the
Nevada Gold. Coeur owns a 4.9% stake in this new entity
Mega Centauro and Centauro Deep exploration projects
and gave it US$10 million as part of the agreement.
in Sonora. Fresnillo, already Mexico’s largest silver and second largest gold producer, will now be able to count
MERGER OF SCORPIO MINING AND U.S. SILVER & GOLD
with an additional annual production of at least 183,000
In November 2014, Scorpio Mining and U.S. Silver &
attributable ounces of gold, the same total produced by
Gold announced that they would undergo a complete
Penmont in 2013. Octavio Alvídrez, Fresnillo’s CEO, said
merger, making the new entity the leading junior silver
that “the Penmont acquisition would significantly enhance
producer in the Americas. Valued at US$55 million, the
our gold production. It will enable us, with our current
combined company maintains the name of Scorpio Mining
operations, to increase our target of reaching 500,000oz
Corporation and will run two producing mines, namely the
of attributable gold production by 2018 to 750,000oz.”
Nuestra Señora mine in Sinaloa and the Galena Complex in Idaho for a combined production of 4.5-5 million ounces
AGNICO EAGLE ACQUIRES CAYDEN RESOURCES
of silver equivalent. Overall, this merger is expected to
In September 2014, Canadian major producer Agnico
save US$1.6-2.5 million dollars by eliminating overlapping
Eagle made a significant acquisition by acquiring
general and administrative costs. Furthermore, U.S. Silver
Cayden Resources for US$205 million. This will help to
and Gold has been hailed for reducing its all-in sustaining
significantly boost Agnico Eagle’s Mexican assets, since
cash costs at Galena by close to 50% in two years through
Cayden owns the El Barqueno property in Jalisco, a
strict cost control and productivity enhancement methods.
promising property which hosts an epithermal bonanza-
“This merger creates a stronger, better positioned
type gold vein where high-grade gold was found in June
company that is capable of not only surviving the current
2014. Alongside El Barqueno, Cayden owned Morelos
low silver price environment, but potentially transitioning
Sur, which covers a significant area of the Guerrero gold
from a junior precious metals company to an intermediate
belt and where exploration successfully found 4.46 and
producer over the next couple of years,” stated Darren
4.26 g/t of gold at two of three properties on the site.
Blasutti, the President and CEO of U.S. Silver & Gold, who
Sean Boyd, the President and CEO of Agnico Eagle, was
will take on the same role for the combined company.
quoted as saying that “this acquisition is consistent with our long-term strategy of acquiring promising, early stage
TIMMINS GOLD BUYS CABALLO BLANCO
gold projects where we can add value through focused
While this purchase involved a specific mine rather than a
exploration and mine building. This strategy has served
full M&A transaction, it showed that specific mining assets
us well in Mexico.”
63
| VIEW FROM THE TOP
FINANCING CANADIAN ADVANCES IN MEXICO’S MINING SECTOR TERESA NIZZOLA Mexico Chief Representative of Export Development Canada (EDC) Q: What tendencies has Export Development Canada
these risks. By working alongside international banks, we
noticed in the operations of Canadian mining companies
can help Canadian companies acquire solutions that are
in Mexico?
not available through domestic Canadian banks. Through
A: Export Development Canada (EDC) will continue
the combination of our experience and knowledge of
providing the same financing and risk mitigation solutions
international markets, and our physical presence in
for Canadian companies doing business in Mexico, but the
markets like Mexico, our clients and banking partners can
number of mining companies showing an interest in Mexico
be confident that we know what we are doing. Although
has decreased. This decline can be partially attributed
there are many junior companies out there who could
to the implementation of new tax liabilities, which have
benefit from the services we provide, EDC is not willing to
forced many Canadian mining and supply companies to
risk financing exploration projects.
rethink their investments. During this time of re-evaluation, many companies are deciding whether to continue their
Q: How would you assess the risk of a certain project
business development efforts in Mexico, or look at other
before deciding to offer financing?
markets. However, despite this dip, Mexico continues to be
A: We have specialists in Ottawa who focus specifically on
the most important emerging market for EDC above Chile,
project financing, while another group is solely dedicated
Peru, Brazil, and Colombia.
to
mining.
Their
expert
knowledge
of
structuring
transactions for mining projects enables them to identify Q: Since EDC is dedicated to financing and risk mitigation,
the best ways to mitigate risks. Every financing transaction
how has it provided alternative sources of financing for
has to go through our underwriters in Canada. We first
Canadian mining companies doing business in Mexico?
look for opportunities with large mining groups in Mexico
A: Since EDC is a Canadian Crown corporation, its aim
who want to invest substantial amounts of money. A
is to support Canadian companies and help them grow
financing agreement is then drawn up with the company
abroad. Our standard offering is to provide project finance
on the understanding that they will work with us for the life
for large mining projects. This support allows Canadian
duration of the loan.
companies to expand current projects, or to take on an additional number of projects. We provide political risk
Every year at PDAC, the largest mining conference in
insurance, risk mitigation, and financing solutions for
Canada, we invite Canadian companies involved in the
companies supplying products to these projects around
Mexican mining industry to meet with large Mexican
the world. Canadians are not commonly known for being
mining companies at a matchmaking event. This focused
risk-takers, except in the mining industry. Our miners are
initiative has proven to be very successful. In 2014, Minera
the most audacious Canadians around. For them, it is a
Frisco bought the Ocampo mine, which was previously
natural progression to come to Mexico to explore and
Canadian-owned. This project came equipped with an
set up mining operations. Since our mandate is to obtain
established Canadian supply chain due to its previous
financial self-sustainability, we only process “for profit�
ownership. We have been working to try and introduce
transactions and we do not provide grants.
more Canadian suppliers to companies like Minera Frisco. At the end of each year, they submit to us a report which
64
We provide solutions that allow companies to either
outlines their purchases of Canadian equipment, giving
take the first step into a new market, or expand once
us the power to track the financing we provided them.
established there. The Canadian domestic banking
That way, we know if the money invested in this project
system is very different to the one in Mexico. Some
is having an impact on the supply coming from Canada.
Canadian banks cannot offer the service we provide as
The ultimate objective for our matchmaking events is to
they are not willing to risk investment in international
convince Mexican companies to purchase more Canadian
markets. We, on the other hand, are prepared to take on
products.
| VIEW FROM THE TOP
WORLDWIDE BANKING SERVICES WITH MINING CORE CARLOS DÍAZ DE LA GARZA Managing Director of Corporate Banking and Head of Global Loan Syndications Mexico at Scotiabank Q: How does Scotiabank’s vision for growth in Mexico
immediately. Sometimes, we stock the bars in different
vary from your strategies in other countries?
regions so that we always have access to the metals that
A: Mexico is one of Scotiabank’s most important bases
we are being asked for. ScotiaMocatta is a one-stop shop
as we have over 650 branches and we have purchased
for handing in mining products.
other franchises in the country. We are very focused on growth in Mexico and we want to involve ourselves in all
The bank holds an international conference on mining,
types of investments, including commercial banking and
known as the Scotiabank Mining Conference, every year in
corporate banking, as our strategy fits perfectly with
November. It is a two-day event where we invite the CEOs
emerging markets. It does not matter if investments go to
and CFOs of all the mining companies to give presentations
Turkey, Brazil, China, or India because the flow of global
for investors. Last year, some of the themes discussed were
investment is easy. In other words, it is easy for companies
the uncertainty in commodity prices, the fact that gold and
to go to any part of the world to invest even while regions
silver prices were going down, and the difficulty in making
are competing between themselves to receive these
these businesses as profitable as they were.
investments. Against this backdrop, Mexico needs to be competitive to be an attractive destination. It needs to
Q: How do you think changes to the regulatory
improve its security and it must provide stability in terms
environment are affecting the mining industry?
of taxation. If these areas are not improved, investments
A: I always supported a mining royalty in Mexico. The fact
will go to Colombia, Chile, Poland, or any other country
that the royalty was passed was not a surprise, but the
with mining sites that can more easily be developed.
amount of 7.5% was. My view is that the government is
Structural reforms were passed in Mexico during 2013 and
knowledgeable enough to identify a situation where business
2014. If the country is able to properly implement these
is being damaged and will seek to correct it. Since only 25%
reforms and provide the required certainty that companies
of the Mexican territory has been explored, I am certain that
need, we will see a boom in the amount of investment and
the country still holds many mines of a comparable size to
the amount of companies coming to Mexico.
Peñasquito. Mining has a lot of room to grow, and I think that the government understands that it needs to act as a
Q: How important is mining to Scotiabank’s overall
regulator, promote business, and provide certainty in terms
operations worldwide?
of rule of law and future business practices. They should
A: Mining is one of our most important practices. We have
not change the taxation scheme on an annual basis, and if
a head mining hub located in Toronto, as well as additional
something does not work, the government needs to go back,
teams focused on mining in Vancouver and other parts
modify it, and present it to Congress for approval.
of the world. These hubs contain certified and qualified geological engineers who are very knowledgeable about
Another matter is that companies should receive certain
industry requirements. Our ScotiaMocatta brand is also
special benefits during the exploration process, particularly
used to purchase and monetize gold and silver and handle
in the projects they set up among communities. I have
silver streaming. It is a unique franchise that provides a
seen many Australian, Canadian, and Mexican companies
competitive advantage for purchasing precious metals. We
go to local communities and municipalities and actually
are the largest bullion purchaser around the world and are
change the living standards of the people. They invest in
responsible for transporting 25% of the physical gold and
new hospitals, roads, and schools, all of which are sorely
silver worldwide. We do this by purchasing doré bars from
needed. These expenses are all part of what the tax aims to
international mining companies and providing them with
cover. The government should take this into consideration
liquidity. Local producers sell us the doré bars that they
and reduce the amount of tax that these companies have
produce. They call to inform us of the purity of the bars,
to pay. In essence, companies that have been socially
we establish a line of credit, and then deposit the money
conscious have already been paying these taxes.
65
66
| MINE SPOTLIGHT
MULATOS The Mulatos mine is nestled inside the Sierra Madre Occidental mountain range in the east of Sonora, around 220km from Hermosillo and 300km of the US border. Mulatos is a typical openpit, heap leach operation that uses a carbon-in-column circuit to recover gold. The project was originally designed to operate at a 10,000 t/d capacity but, due to a diligent investment strategy carried out by Alamos Gold in recent years, the Mulatos mine currently has a throughput rate of 17,500 t/d. Besides the heap leach operation at the Mulatos site, Alamos Gold also processes high grade ore through a 500 t/d gravity mill. The ore is currently being extracted from the surface high grade zone at Escondida but the ore will eventually be sourced from the underground deposits of San Carlos and Escondida. The company foresees a mine life time of approximately nine years, taking into consideration current proven and probable reserves and the present throughput rates. Alamos Gold employs conventional drill, blast, load, haul operations with mining in the main pit being performed with 9m bench heights. The mine changed from a 6m to a 9m bench in 2012 in order to enhance productivity at the site, but the use of 3m benches is also expected at the Yaqui and Pelon areas to improve selectivity. Finally, Alamos Gold is planning to eventually use long hole open stoping (LHOS) to recover high grade underground ore at Escondida Deep and San Carlos. This operation will be complemented with a modified drift and fill method wherever the thickness of economic mineralization does not allow LHOS. The ore deposits in this district are within a dacitic to rhyodacitic volcanic dome complex and are attributed to epithermal and high-sulfidation occurrences. Most of the gold mineralization is correlated to advance silicic and argillic alterations that materialize close to an upper a rhyodacite porphyry and over volcaniclastic rocks and diacite flows. The Mulatos Project was acquired by Alamos Gold in February 2001 at a cost of US$10 million. After the completion of feasibilities studies, the company went ahead with the construction of the mine during the third quarter of 2004. The total cost for the mine development was of approximately US$74 million before the company reached commercial production in 2006. The original estimate of 10,000 t/d capacity was increased to 15,000 t/d after Alamos Gold constructed a crusher/conveyor and recovery plant. A series of further expansions and productivity improvements have been performed in the past couple years in order to increase the crusher’s throughput to average an estimated 17,500 t/d which will continue in 2015.
67
ALTERNATIVE FINANCING IDEAS FOR BELEAGUERED JUNIORS No matter how battered the metals market might seem,
One notable case arose in November 2013 when Silver
true worry will not set into a company until panic spreads
Wheaton announced it had sealed an early deposit goldstream
to the boardroom or the investors. Before this happens,
deal with Sandspring Resources, an exploration specialist,
companies are pushed into delivering short-term results
for Toroparu in Guyana. The structure of the deal granted
in an industry which needs a long-term view. This reality
Silver Wheaton the right to buy 10% of the life-of-mine gold
has in no way alleviated the pressure being heaped on
production at Toroparu for US$148.5 million in cash. This sum
operators. As a result, mining companies have taken drastic
also includes an ongoing payment of the lesser of US$400
measures to get the most out of their existing assets while
per ounce or the market price at the time. At the time, Randy
cutting costs by firing staff and halting investments such as
Smallwood, President and CEO of Silver Wheaton, said “that
exploration. While some larger producers like Goldcorp and
this allows us to get our foot in the door on high-quality,
Peñoles have war chests that will see them over the hard
earlier stage projects such as Toroparu for relatively little
times, juniors do not have the same safety net. According to
upfront capital. From Sandspring’s perspective, these funds
PwC, the market capitalization of the top 100 junior miners
will allow them to complete the bankable feasibility study
on the Toronto Stock Exchange fell by 44% to US$6.49
without subjecting their shareholders to excessive dilution
billion in 2013. The same group also saw a staggering drop
that today’s challenging equity markets would deliver.” As
in its short-term investments to $1.2 billion in 2013 from $1.9
Smallwood said, such models are extremely enticing for
billion in 2012. This funding spiral continued through 2014.
juniors that are starved for funding.
Interestingly, this financial torpor has allowed a few riskhappy juniors and innovative financial backers to adopt a
Streaming consists of a backer putting up an upfront
number of “alternative financing” methods. Many of these
payment followed by regular payments in return for a
existed prior to the current price slump but found new
percentage of production rights from a specific asset, often
traction, since conventional financing options were lacking.
involving a mine producing precious metals. According
STOCK EXCHANGES SET HIGH STANDARDS FOR MINERAL RESOURCE ESTIMATES
68
The information provided by technical reports generated
NI 43-101 is a Canadian mineral resource classification
during
delicate
structure employed to divulge information about mining
since major decisions are based upon the results of such
projects. All the mining companies listed on the TSX are
investigations. If mineral estimations are in any way
required to abide by NI 43-101 rules and guidelines in order
corrupted, the resulting misinformation will likely lead to
to present the information gathered during the resource
critical business issues. This is all the more important as the
estimation of a mining property. These reports were created
information delivered by such reports is often used to raise
and standardized after the Bre-X Minerals Ltd. scandal in
funds in the most important stock exchanges of the world.
the 1990s that involved corrupted information in mineral
Mining investors will decide which company to invest in or
resources estimates. The first mineral estimations were
continue financing based on the information of the technical
provided by Michael de Guzman, the geologist responsible
reports and the reliability of such studies. Many resource/
for the management of a project in Busang, Indonesia. The
reserve codes exist worldwide, such as those set by the Joint
first estimates in 1994 indicated 2 million ounces of gold, but
Ore Reserve Committee (JORC Code) for Australasia, the
these soon rose to 30 million ounces and, by 1997, it was said
South African Mineral Committee (SAMREC Code) for South
that 70 million ounces had been found. However, after the
Africa, and the Canadian Institute of Mining, Metallurgy
due diligence evaluation of the assays’ result, the samples
and Petroleum (NI 43-101 Code) for Canada. These major
retrieved from Busang contained substantially more gold
codes are considered acceptable worldwide for economic
than the corresponding 0.1m library core samples. Statistical
investments and market-related reporting, although the
studies and geological correlations proved that fraudulent
National Instruments (NI) for resource estimation is the
activities had taken place in the gold assays. Unfortunately,
most appealing for the Mexican mining industry since most
by the time this was revealed, investors were out billions
of the companies operating in the country are listed on the
of dollars, particularly since Bre-X had landed support
Toronto Stock Exchange (TSX).
from prominent backers, including at the respected TSX.
resource
estimation
is
exceptionally
to Ernst & Young (EY), this allows a junior to retain full
Juniors may also turn to development finance as an option,
operational control while ongoing payments cover the
a model that has already seen success in many industries,
ongoing cost of production. Streaming injected US$2.4
albeit often less capital-intensive ones. The forms of these
billion of upfront capital into the mining industry in 2013,
development finance agreements can vary, although the
but is not the only alternative financial option currently
model most widely employed today is one where finance is
available. EY’s Mergers, acquisitions, and capital raising in
provided in exchange for a percentage of future revenues
mining and metals report lists several alternative financing
or profits, as espoused by the Inter-American Development
options that have allowed juniors to survive in the last
Bank. For those juniors looking to rely less on upfront cash-
couple of years. Standby equity agreements are comprised
in-hand, while also cutting initial outlays in other ways,
of equity and equity-backed loans, and typically include
agreements like equipment leasing can have their uses. These
the option to issue shares to the provider over a number of
can cover operating leases, sale and lease-back, secured term
years. While this allows the issuer to retain control of the
loans, or asset-based inventory financing, but they do come
timing of the financing, EY points out that the delay in the
at a cost. Intensive due diligence is needed on both sides to
financing can adversely impact liquidity and share price.
make this viable. Finally, royalties also present an available option. An upfront payment by a financier is made in return
Earn-in agreements are becoming increasingly popular as a
for a percentage of future revenues or profits, or even a part
form of venture capital investment. These earn-in agreements
of the value of the mineral extracted. While these royalties
essentially allow a junior’s partner to fund exploration for a
provide a long-term investment option, they also lock juniors
fixed time frame in return for a share of project ownership.
into a forced payment level, irrespective of profit margins.
Although this puts junior companies under a deadline to
This can also bite into a junior’s future cashflow, especially in
advance a project, it also means that they can operate fully
the case of a low revenue operation.
during the agreed timeframe. But as always happens in tough times, an earn-in agreement stacks the deck in favor of the
With this variety of options, the market may become
financial backer. If an exploration project strikes gold, then
slightly more enviable for juniors. With even renowned
the backer secures a steady source of income for years or
exploration companies going bankrupt, any inventive
decades to come. If no one is found, or not enough to satisfy
financial edge juniors can give themselves to see off the
their interest, the backers can pull out at any time.
lean times will be seized upon.
This naturally led stock exchanges across the world to
the TSX has proven as a source of financing for Mexican
rule it necessary to implement reporting mechanisms
mining projects. The despicable acts of de Guzman saw
to protect investors. The most basic requirement is a
him embezzle millions before falling out of a helicopter,
“qualified person” that must vouch for the report, although
but while he may have defrauded one batch of investors,
other requirements include standardized feasibility studies
changes made as a result of his actions have likely saved
and sample preparation and analysis. Finally, the technical
many more billions; what a fine legacy for a fraudster.
report itself and any data referenced from it must be used in set ways. According to industry guidelines, a “qualified person” denotes an engineer or geoscientist with at least five years of experience in mineral exploration, relevant experience in the subject matter, and a member in good standing of a professional association. The “qualified person” must sign-off on the report and is ultimately liable for any errors or omissions. Feasibility studies must also be conducted to analyze the viability of a mineral project, particularly those that have advanced to a stage where the mining method or pit configuration has been established, and the effective method of mineral processing has been determined. These studies include a financial analysis, as well as economic, social, and other relevant factors. The TSX has been one of the frontrunners to establish new guidelines for mineral resource estimates and technical reports to be considered valid. This has certainly been a boon for mining investors from Canada and elsewhere, investing in companies operating in Mexico, given how vital
69
| VIEW FROM THE TOP
STREAMING: AN ALTERNATIVE SOURCE OF FINANCING RANDY SMALLWOOD President & CEO of Silver Wheaton Q: Silver Wheaton is currently the world’s largest streaming
and our balance sheet, keep the cash on hand, and wait.
company, having produced over 35 million ounces in 2013.
In the past we have gone two and a half years without
To what would you attribute the company’s success?
making a transaction because we felt that prices were not
A: Silver Wheaton was created out of a company called
sustainable. We are patient and we wait; Silver Wheaton
Wheaton River, which ultimately changed its name to
has a strong enough portfolio that we do not have to rush.
Goldcorp. At Wheaton River, I worked on the creation of Silver Wheaton as a subsidiary in 2004 as a method of
Q: What are the reasons for Silver Wheaton’s decision to
crystalizing the value of our non-core by product silver
move into gold streaming?
production to generate the necessary capital to continue
A: Our last three transactions have been gold-focused. There
growing Goldcorp. Silver Wheaton grew gradually and, as a
was no clear strategy behind this beyond a dedicated focus
consequence, Goldcorp fully divested the last of its shares in
on precious metals; these were simply the best properties
2008. Silver Wheaton has been a standalone company ever
available at that time. We made three transactions in 2013,
since. The company created streaming back in 2004 and the
all of which were pure gold. There was the US$1.9 billion
business model has proved to be very strong. Since mining
transaction that we did with Vale, one of the largest mining
is a capital intensive industry, it is constantly in search of
companies in the world. The following deal was with
different sources of funding. The success of the streaming
Hudbay on Constancia for US$135 million, for 50% of their
model has allowed Silver Wheaton to become as big as it
gold production. And the last deal in November was with a
has. In fact, the traditional royalty companies are now also
company called Sandspring, which has a project in Guyana.
implementing streaming because they have realized how
That consisted of US$13.5 million in investment as an initial
much value can be created through streams as well as how
payment, with an option to expand to US$148.5 million. All
much capital can be raised to help mining companies achieve
of those were gold-focused, but are very similar in structure
sustained growth. Coming up with the business model and
to the silver projects we have streamed for in the past. The
being the first in the streaming business definitely gave Silver
only difference is the commodity.
Wheaton an advantage in terms of growing in size. Q: How can streaming fit into a broader investment
70
Q:How does the company adapt its business model to
portfolio for mining companies?
make the most of changing conditions in the market?
A: Because this model sees the streaming company taking
A: Commodity prices are very cyclical, so there are certain
on project risk, it is generally considered an equity-type
times for buying assets and certain times when it is better
partnership. There is no guarantee that we will get our
not to. When prices are high it is better not to buy assets,
money back; if the mine shuts down tomorrow we will lose
and instead build up cash flow, improve the balance sheet,
our investment. One of the reasons that streaming is very
and wait for commodity prices to go down. Commodity
attractive right now is the depressed share prices of many
prices have always been cyclical, and there are going to
companies. Most banks will require a company to put up a
be highs and lows. As the industry’s good times and bad
minimum of 25% of the capital required for a development
times are directly correlated with commodity prices, when
project financing from equity and a maximum of 75% from
commodity prices are low that is the best time for us to
debt. Companies have to choose how they acquire that 25%:
step in and make acquisitions. That is when we get the best
they can either issue more shares, which are undervalued
value, as there tends to be a lack of interest in the mining
right now, or they can source a stream financing. Financing
space on behalf of investors. We compete as a source of
banks typically treat streaming as equity, so it is attractive
capital against traditional debt and equity solutions, but if
for the operating company, especially if their share price
banks are not lending and the stock markets are not doing
is very low. When it comes to mergers and acquisitions
well, streaming becomes an even more attractive funding
there is usually a clear winner and a clear loser in the stock
option. When prices are high, we build up our cash flow
market as one stock will go down and the other will go up,
but in the case of streaming, the share price goes up on
under the ownership of Primero Mining, which has done
both sides. It is a win-win situation through which Silver
a very good job of advancing the project. It completed
Wheaton creates value. We also work with base metal
an expansion to 2,500 t/d earlier this year, and has now
companies that typically have higher weighted average
decided to undertake another expansion to 3,000 t/d
cost of capital and trade at lower stock market multiples
through 2015. The second largest asset we work with in
than precious metal companies. When these base metal
Mexico is Peñasquito, owned and operated by Goldcorp.
companies have gold or silver in their base metal deposits,
We stepped in when Goldcorp needed capital to build
we can buy these by products and introduce them to the
Peñasquito. They chose to use a stream to help fund the
market, and thus, create more value for them and for us.
project capital. We paid around 40% of the capital cost at
We are not interested in doing a transaction unless both
Peñasquito for 25% of the silver production, which at that
partners win in this way; it is in our best interest to have
time represented around 6.5% of the revenue. It was very
happy and healthy partners.
attractive for Goldcorp’s shareholders because their share base was not diluted, and it was also very beneficial for
Q: At what stage of a mining project does Silver Wheaton
Silver Wheaton because it is a great asset. This year it looks
usually get involved?
like Peñasquito may become the largest silver producing
A: We get involved either at the construction stage, or later
mine in the world, and our 25% of that silver production
at the production stage. Around half of the projects we have
may finally surpass San Dimas as that largest contributor
participated in have been to help fund the construction,
of silver production in our portfolio. We also work with the
and the other half are assets that are already operating,
Cozamin mine, which is owned by Capstone, where we
where the company wants to strengthen its balance sheet
get 100% of the silver that is produced. This is one of the
and needs capital. In fact, some of our mines have been
streams we acquired when we took over our competitor,
operating for well over 150 years. Our largest producer in
Silverstone. The Cozamin mine is an underground copper
Mexico is the San Dimas mine, which has well over 200 years
mine in Zacatecas which produces around 1.5 million ounces
of operating history.
of silver per year. Capstone has done a very good job of getting the project up and running again. Next on the list
At the end of last year we completed our first Early Deposit
is Campo Morado in Guerrero, which originally belonged to
Agreement for funding projects that are at the pre-feasibility
Farallon when we signed the initial agreement but is now
level through the feasibility stage. In exchange we acquire
owned by Nyrstar, which is a zinc smelting company that
the right to stream after the mine has been constructed.
has been making investments into zinc mines, and has done
This agreement model allows us to get our foot in the door
well at Campo Morado. Our smallest producer in Mexico
on higher-quality, earlier stage projects for relatively little
is Goldcorp’s gold heap leach project in Guerrero, Los
upfront capital. These investments are smaller and a little
Filos, where we get 100% of the silver byproduct. Our five
bit riskier than our standard agreements, but they also
different assets in Mexico are good assets.
provide more opportunity in terms of the promising early stage market. The deals always entitle Silver Wheaton to a
Q: What are Silver Wheaton’s objectives for the coming
percentage of silver and/or gold, which is delivered to Silver
three to five years?
Wheaton for a set production payment per ounce as it is
A: While both are valuable, Silver Wheaton still prefers silver
produced. We share the production risk, but also benefit
streams over gold streams, since we believe there is a better
from exploration success, and if the mine expands we also
upside in silver prices. However, we are more than happy
get a percentage of the additional production. The challenge
to take on gold streams on good quality assets. We think
is having good geologists and engineers during the due
that in Mexico there are a lot of very exciting earlier stage
diligence, because with each investment there is some risk.
exploration projects, and we do think that with the early deposit structure that we announced on November 2013,
Q: Silver Wheaton has five properties in Mexico. Can you
these are projects that the company can begin to support
tell us about the company’s history in the country?
more widely. Mexico is a target area for Silver Wheaton,
A: In 2001, the precursor of Goldcorp, Wheaton River,
and there are some big opportunities that we would love
took over Minera Luismin, a company with a long history
to be a part of. When looking at potential acquisitions we
of mining in Mexico which owned the San Dimas mine
always compete against issuing shares, and while the market
in Durango. Because San Dimas produces significant
remains as it is, there are many opportunities for us. Mexico
byproduct silver along with its gold, it made the creation
has always been very important to Silver Wheaton; it is where
of Silver Wheaton possible through the first streaming
we founded the company. In terms of projects and growth,
deal ever made, in October 2004. It continues to improve
Mexico and Peru are the key countries for Silver Wheaton.
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| VIEW FROM THE TOP
TRUSTED ADVISORS ON RISK MANAGEMENT STRATEGIES NICK PANES Senior Managing Director of Control Risks Mexico Q: How does Control Risks internally share best practices
newly created National Guard is a useful addition to
concerning the resolution of common mining-related
those resources, as long as it is part of a well thought-
challenges among the jurisdictions where it operates?
out strategy to improve public security. PRI understands
A: At the core of our operations, we have a team of 50
that in order to stay in power beyond 2018, it will need
analysts stationed in different parts of the world. Our
to address fundamental issues such as economic growth,
analysts communicate on a regular basis to ensure that
unemployment, and public security. Public security is one
the underlying methodology that guides our analysis is
imperative, but any meaningful changes in the medium-
consistently applied across the different countries that we
to long-term will also need to address deficiencies in the
cover. We focus on a series of different factors that can
justice and penitentiary system in Mexico.
impact our clients’ operations such as political stability, expropriation risk, security risk, social issues, community
Q: What are the main challenges that mining companies
activism and the quality of infrastructure, among others.
face when coming into Mexico?
Having such a global reach enables us to work with
A: The main challenge for the extractive sector is operating
our clients in the mining sector wherever they may be
in frontier markets where the necessary infrastructure
operating or exploring.
or operating framework are not always in place. For companies that tend to operate in emerging markets,
At an early stage, we can sit down with the mining
having a robust risk management approach is essential.
company’s business development team to understand
Understanding the broad operating environment is
what their exploration and development plans are. From
fundamental for the long-term success of a company,
there, we can provide an assessment of the countries and
especially since the investment horizon for extractive
regions where they are considering investments from a
companies can extend up to 40 years. Having the right risk
political and security standpoint, and play a part in that
management structure in place is therefore fundamental
initial decision-making process. Our aim is to spend time
for these long-term investment projects. Another evolving
with our clients to understand the environment in which
dynamic in the extractive industry is the increasing
they operate and identify the threats they might be facing.
application of international extraterritorial legislation,
After we identify those threats, we assess what specific
particularly the US Foreign Corrupt Practices Act, but
risks their personnel and their operations may face.
increasingly the Canadian, British, and Australian versions
Subsequently, we design a risk treatment plan to reduce
too. With this, greater focus and scrutiny has been placed
our clients’ exposure to their particular risk environment
on counterparty risk to ensure that companies know who
and
implementation.We
they are doing business with and that any third parties
continue to work with our clients throughout the lifecycle
are operating in an appropriate manner. It is important
of a mine, from exploration to mine closure, recognizing
for companies to do business with parties that adhere to
that the risk dynamic will change and evolve during that
the same ethical values as they do and will not engage
timeframe.
in activities that would represent a legal or reputational
assist
through
that
plan’s
risk to their partners’ operations. In addition, many mining
72
Q: How effective has the current Mexican government
companies are publically listed, which adds another
been at mitigating security risks around mines in Mexico?
layer of scrutiny from relevant regulators. The debate
A: The current administration inherited a fragmented and
around transparency and anti-corruption has evolved
complex security environment, and is still assessing how
significantly over the last five to ten years and the issue of
to address some of the security issues present across the
compliance has become increasingly important. If a crisis
country. There are concerns about the resources that the
does happen, we are there to help our clients manage the
government has at its disposal to manage longstanding
incident, understand how and why it happened, and then
public security issues. For example, on one level, the
prevent it from happening again.
RIGHT INFORMATION LESSENS SECURITY AND CORRUPTION RISKS According to data from Mexico’s National System of
has been able to achieve this. “Kroll develops networks
Public Security (SNSP), kidnapping and extortion have
of local sources, usually for longer-term investments,
been on a steady rise since 2008. Similarly, Transparency
using intelligence from reliable contacts to observe and
International’s Corruption Perception Index (CPI) ranks
comment on the local environment. We corroborate this
corruption as one of the main impediments to doing
information and analyze it carefully to provide a better
business in Mexico. Such risks have already impacted
understanding of our clients’ risk environment and specific
foreign direct investment coming into Mexico, which
threats.” Kroll also suggests collecting information about
experienced a 46% drop in the first nine months of 2014,
suppliers, partners, and agents so that companies can
relative to the same period in 2013. Nevertheless, Mexico
better understand the market supply conditions. This
has managed to maintain a mostly positive GDP growth in
knowledge enables them to avoid doing business with
the last 10 years. Many mining companies, both foreign and
negligible third parties that could harm the reputation of
national, have been willing to take the risk and establish
all involved.
operations in the country. “In Mexico, some mining companies have decided not to invest in specific locations
To identify cases of fraud, Kroll collects information on
due to their dissuasive risk assessments, but these risks
its clients’ suppliers and purchasing managers. After
have not deterred everyone,” shares Brian Weihs, Managing
Kroll has identified these groups, it works with its clients
Director of Kroll, and Head of the company’s Mexico Office.
to put a protective and preventive structure in place.
“For a long time, many companies have been investing in
The company trains its clients to spot these issues and
areas which have significant security issues, delegating a
deal with them, and helps them investigate corruption
large proportion of their costs towards security.”
and fraud issues that come up. Weihs believes that the
“Some mining companies have decided not to invest in specific locations due to their dissuasive risk assessments, but these risks have not deterred everyone” Brian Weihs, Managing Director of Kroll, and Head of Mexico Office
Apart from increasing private security to reduce security
mining industry is less prone to corruption than other
risk, mining companies can utilize information or intelligence
industries, since it deals more with federal entities for
gathering services. Weihs knows that good local intelligence
licensing than it does with local officials. Nonetheless, he
and best practices play an important role in increasing the
suggests never pandering to corruption at any level. “If a
security around mines. These services can help mining
company opens the door to paying bribes or other corrupt
companies better understand the communities around the
activities, then they will continue to face more demand
mines, as well as identify important interest in the region,
for the same. Training people to deal with the day to day
possible threats to company employees and suppliers, and
levels of corruption on the ground is a good step forward.
possibilities of corruption within the operations. Information
Companies can develop a reputation among local officials
gathering services can also be valuable when a company is
and communities for simply not paying up. This can often
looking at a potential acquisition. The service can be used
slow or complicate their business, but it also ensures that
to identify similarly interested third-parties and understand
they will not be continuously bothered with demands,”
the implications of developing the project in the region. “In
he adds. To mitigate the more noticeable risk of extortion
certain areas, the first assumption we make is that organized
and kidnapping, Kroll provides threat assessment and
crime may have already infiltrated the company, and may
management services. In conclusion, Weihs sees three
already be gathering information from within,” Weihs shares.
types of extortion to watch out for. The first type consists of a local group looking to extort the local operator for
Kroll is a leading global provider of risk solutions with
money, making threats at the site until payments are made.
clients that operate in Durango, Chihuahua, Zacatecas,
The second type, which is the most common, is extortion
and Guerrero. These clients have made use of Kroll’s local
directed at the local product and service suppliers. The
intelligence services to better understand the situation
third type consists of a local criminal group making threats
around their mines. Weihs explains how his company
directly to the management team of the company.
73
EVOLUTIONS IN SINO-MEXICAN MINING INVESTMENT Long-term manufacturing rivals China and Mexico are laying aside certain trade grievances to focus on sectors where their interests are mutually compatible, including mining. On the heels of President Enrique Peña Nieto visiting Beijing in November 2014 for the APEC summit, the two countries announced a joint fund, powered by US$2.4 billion in mutual investment, which will go toward financing
“Mexico-China broader,
more
relations stable,
are more
productive, and more beneficial for our people” President Enrique Peña Nieto
mining and energy projects, among other sectors. Should this collaboration prove fruitful, and both countries appear
the port in November 2014 to monitor the steady flow of
committed to ensuring it does, this fund could be increased
iron ore and the governor personally vowed to crack down.
to US$9 billion. This news was accompanied by the launch
It was reported that the mineral was being processed and
of the Sino-Mex Energy Fund, a separate investment fund
stored at 11 facilities in the port, at which a number of
targeting energy and infrastructure to be run between
Chinese nationals were working. The Mexican government
PEMEX and Chinese state-owned enterprises. These joint
announced that these facilities were also used to fudge the
developments mark a complete turning point in Beijing’s
paperwork on the shipments and make them seem legal.
attitude to Mexico. In 2013, Chinese banks lent just US$2.4
The facilities were shut down and the arrested Chinese
billion to projects in Mexico, landing the country in sixth
expelled from the country.
place for Chinese funding across Latin America. Yet 2014 saw the creation of the biggest investment fund China has
Mario Alfonso Cantú Suárez, General Coordinator of Mining
in the region. Similarly, China’s contribution to the Mexican
at the Ministry of Economy, announced that these newly
mining sector had been rather muted until now. This can
implemented restrictions would likely see iron ore exports
seem rather surprising given the attractiveness of Mexico
to China drop to just 2 million tonnes for 2014, an almost
as a leading mining jurisdiction, and particularly as China’s
80% drop on the previous year. Nevertheless, this did not
CIC sovereign wealth fund has spent billions in recent years
mean the Mexican government was willing to lose a wealthy
investing in the US and Canadian mining sectors. However,
potential customer. The Mexican government’s move to
analysts have come up with two reasons behind the new
throttle this illicit trade came almost exactly at the same
decision to invest so heavily in Mexico.
time that Peña Nieto inked the contracts for the mining investment fund in Beijing. Media reports have noted that
The first is that China’s foreign investment goals have moved
this timing seemed to be perfect to ensure Chinese yuan
beyond mirroring its foreign policy aspirations. The Mexican
flow toward Mexican government coffers while iron ore
mining sector is too appetizing a pie to pass up, especially
exports were now guaranteed as coming from legal sources.
since Chinese firms have barely even nibbled it so far.
Although iron ore has dominated Sino-Mexican discussions,
China’s investments in Mexican mining are likely to revolve
China also clamors for gold, silver, and base metals such as
on iron ore, at least early on, given the staggering quantities
copper or zinc. But Chinese investments toward the mining
of the material China needs to support its construction
of these minerals in Mexico is currently even smaller than its
industry. Although Mexico sent 9 million tonnes of iron
iron ore interests. SGM tracks a few exploration projects by
ore to China in 2013, representing 90% of its total iron ore
China Minerals Resources Group in five states for gold and
exports, China still has invested in only one producing mine
silver, and even fewer for base metals.
in the country. SGM shows that the El Ratón iron ore mine in Jalisco is operated by Gan-Bo Investment, although the
A recent kerfuffle wherein China Railway Construction Corp
company also has four exploration projects underway in
won a bid to build a light railway between Mexico City and
Jalisco and Colima searching for iron ore. Alongside this,
Queretaro, only to have that victory cancelled three days
Ningbo Yinyi has two iron ore projects under development.
later, sparked some tension and led Chinese analysts to
These are located in Michoacan, Mexico’s leading iron ore
pronounce Mexico an untrustworthy investment destination.
producer with over 900 dedicated mines.
In response, when meeting with Chinese leaders, Peña Nieto’s delegation went out of its way to remove this impression
74
However, this brings up the thornier problem of Mexican
and listed mining as a sector where the two countries could
organized crime. It transpired last year that much of the
profit. “Now Mexico-China relations are broader, more stable,
iron ore exported to China through the port of Lazaro
more productive, and more beneficial for our people,” stated
Cardenas in Michoacan could be traced back to production
the Mexican president. It appears that the mining industry
in illegal mines run by cartels. The Mexican army entered
may be one of the first sectors to prove him right.
INTEGRATED INVESTMENT SERVICES TO ACCESS CAPITAL In 2012 and 2013, there
are looking for. This can be in terms of geography, metals
was a certain euphoria
and minerals, returns, and risks they are willing to take. An
among
sources
approach such as this provides huge added value, saving
that has since vanished,
capital
our clients months or years of searching,” Gamas explains.
according
Edmundo
However, there is still a challenge to find long-term investors
Gamas, Principal at Ultra
to
for projects which require a committed source of funding for
Maris Capital. “However,
periods longer than ten years.
this does not mean that investors
Edmundo Gamas, Principal at Ultra Maris Capital
financial
Even with potential investors lined up, risks such as
firms will stop investing,”
and
organized crime and a lack of government-provided
he says. “They have instead
infrastructure continue to jeopardize mining investments in
become very conservative in respect of the price and cost
Mexico. “It is clear that organized crime has a foothold in
assumptions in acceptable financial models.” In 2014, the
several states in the country, and this is definitely a factor
Mexican mining industry entered a phase of evaluation, with
that mining companies consider when choosing where in
companies searching for a better return on investments
the world they will allocate their investments,” states Gamas.
to generate more value for their shareholders. This makes
“The government’s capacity to provide the necessary
Ultra Maris Capital useful for small to medium-sized mining
infrastructure for the mining industry is an additional
companies which lack expertise in approaching institutional
concern for mining groups. Unless the government can
investors and capital markets, as it offers customized
improve its credibility on this issue, mining investment
investment banking services to support them during this
will continue to be affected.” When discussing the recent
time of change. “We draw on excellent relationships with
reforms to the Mexican tax and labor laws, Gamas maintains
a broad range of international institutional investors, and
that the lower commodity prices and security issues in
firms making placements in different international capital
Mexico are generating more concern among mining than
markets,” Gamas expresses. “Ultra Maris Capital is focused
the much-maligned reforms. “The environment of lower
on raising capital for its clients.”
commodity prices is definitely reducing the international capital
available
for
smaller
mining
companies,
for
In order to successfully raise capital, Gamas warns, a
exploration, and for marginal mining projects.” It should
mining company needs to integrate geological, technical,
then come as no surprise that larger, well-capitalized mining
operational,
organizational
companies and projects hold an amplified advantage while
information, as well as present its mining project in the best
financial,
legal,
tax,
and
access to capital sources remains constricted. Even mid-
possible light while appropriately assessing its risks. As
size ventures in Mexico may find it much harder to raise
investors become more conservative with the allocation of
the required capital, according to Gamas. With this in mind,
their capital, the ability to address risks and propose solutions
Ultra Maris Capital also offers to establish key governmental
is indispensable for raising the necessary project capital.
and private sector relationships as a key step towards
Ultra Maris Capital thus pays close attention to the viability
developing a project in Mexico.
and reliability of a project’s details before presenting it to institutional investors and capital market firms. “We review
Gamas foresees that companies in Mexico will need to reach
and integrate geological information, technical reports
out to other sources of funding in future. These include
and specifications, critical paths, logistical plans, financial
sovereign funds, participation from state-owned enterprises,
models, business plans, legal opinions, taxation studies, and
national champions, and large commodity trading groups.
organizational capabilities,” he adds. To further reduce the
As the available capital from stock exchanges such as the
uncertainty of a project and provide reassurance to investors,
Toronto Stock Exchange (TSX) dwindles, new potential
mining companies need to follow geological information
investors from Asia have begun to knock at Mexico’s door.
standards, such as those set by Canada and Australia, and
“The Chinese government has aggressive strategies for
provide independent geological studies from at least one
acquiring natural resources which it perceives as being
prestigious international firm. Once Ultra Maris Capital has
important to China, so we will see China’s sovereign funds,
brought a project up to the standards set by institutional
and its companies, move further into this space,” he adds.
investors and capital markets, the company selects the ideal
“Middle Eastern sovereign funds also have vast amounts
candidates for the project from its worldwide database of
of capital that they want to put to work. Because of these
investors and firms. “In our database, investors and firms
countries’ long association with oil projects in Mexico, I
are classified according to the types of mining projects they
believe that mining is a natural fit for them.”
75
UNDERSTANDING THE REASONING BEHIND TAX REFORMS October 29, 2013 may be remembered as one of the most
period will allow companies to plan ahead, re-evaluate their
impactful days for the Mexican mining industry in recent
investment strategies for the Mexican mining sector, and
history. On this fateful day, the Senate approved a number
get projects underway according to the new fiscal regime.
of tax reforms, including the much debated 7.5% mining tax for all operators, as well as a 0.5% royalty on gross revenues
“Most companies would not have a problem paying taxes if
generated from gold, silver, and platinum deposits. The
the rate was lower, such as 4-5%. Another aspect that could
subsequent shockwave of discontent continues to make
be improved is the deductibility of investments,” describes
waves among many private industry players in the sector as
García. “For example, it is no longer possible to deduct
they try to adapt to the changes the Reform has wrought.
investments in exploration and mine development stages
However, one issue is that many companies are asking why
from taxes. There is an area of opportunity for the Mexican
these charges were implemented in the first place.
government to reduce the rate, or allow for the deduction
“The government felt it had played an important role in the growth that was being seen in the mining industry and set out to claim its fair share” Hector García, Tax Partner at PricewaterhouseCoopers (PwC)
Few are more qualified to provide an answer than Hector
of investments in the mining companies, in order for the
García, Tax Partner at PricewaterhouseCoopers (PwC) and an
country to be more competitive.” Media reports in early 2014
expert on mining. “At the beginning of his presidential term,
predicted a catastrophic effect on the mining industry as
the administration of President Enrique Peña Nieto agreed
a result. While certain investments have been delayed and
to work on an initiative to enact the tax reforms with other
some mining projects deferred, the financial reports of many
political parties in Mexico,” he states. “The government’s main
public companies paint a different picture a year on.
reason behind this was to stake a claim to some of the financial benefits that the mining industry has been generating across
Community relations, in particular, have become a major
the country. There had been an increase in the numbers of
point of contention since the reforms were announced.
concessions handed down by the government to companies
According to the new law, The Fund for the Regional
for the right to exploit non-renewable, natural resources. This
Development of Mining Municipalities will be set up to
naturally triggered an increase in production over several
ensure that a significant share of the revenue collected from
years, which in turn directly led to the reforms. Simply put,
the tax and royalty will go to improving infrastructure in
the government felt it had played an important role in the
local communities. While the small print clearly states that
growth that was being seen in the mining industry and so set
funds should be designated to community development,
out to claim its fair share.”
the industry is waiting patiently to see if the funds are actually distributed as they are meant to be. “The only way
76
According to García, prior to the reforms being passed,
to be certain that the government follows through on its
PwC was invited to consult with the government during a
promise to support communities is through pressure from
series of economic discussions, along with other influential
mining companies, state governors, municipal presidents,
organizations such as the Business Coordinating Council.
and the communities themselves,” explains García. “We
Although these discussions do not seem to have had an
will need to wait until some months into 2015 to see if the
effect on changing the authorities’ stance as to the new 7.5%
funds are used wisely or not. Some communities are already
royalty, some concessions were made. “The government
asking the government for advance payments on the funds
has now promised that no further changes will be made to
that should come in March 2015, but the government has
Mexican tax laws until 2018. In fact, it has stated that no
nothing to give at the moment. Mining companies will
discussion on the matter will even take place,” he explains.
continue to pay for community development initiatives if
Despite ongoing concern by the private mining sector, this
the funds do not reach the communities around the mine,
pledge by the government not to make further alterations
but this could potentially double their costs. Even so,
to the Fiscal Law for the three years to come has at least
regardless of what happens in 2015, repealing the law is not
introduced a grace period with respect to taxes. This
a plausible outcome.”
| VIEW FROM THE TOP
TAX AND REGULATION CHALLENGES FACING MINING INDUSTRY LEFT: Eduardo Salgado, Partner & National Industry Leader, Mining at KPMG RIGHT: Mario HernĂĄndez, Partner, Corporate Business Tax at KPMG
Q: What trends have been moving the Mexican mining
organized activities for communities outside of the mining
market over the last 12 months?
world. The introduction of this tax is part of a worldwide
ES: We have heard that some mining companies have
trend. Most companies pay similar taxes in other parts of
been postponing their investments in the country.
the world, and Mexico is now following suit. Revenue will
This is caused by a combination of factors including
most likely be lessened by the tax but companies will still
higher operational costs, lower productivity, lower
continue to play a part in the Mexican mining industry. It is
metal prices, and the new taxes. Companies wanting
simply a matter of how they can bring their shareholders
to perform exploration are facing a problem in terms
positive revenue despite these taxes.
of financing, and many junior companies have stopped their operations all together. They have all taken a step
MH: Most mining companies in Mexico have been
back while they wait for the metal prices to go up and
helping the communities close to where they operate.
for conditions to improve in the industry. However, there
Now that the funds will be collected through a royalty
are still some foreign companies looking to do business
by the federal government, there will be major changes
in Mexico. There is a need for them to understand the
to the relationships between mining companies and the
business climate here. This includes security issues,
communities. In most cases, they are directly linked to
labor conditions, community relations, taxation, market
each other, and the services that the companies provide
conditions, infrastructure, and many other matters that
are seen as a respectful compensation for accessing the
must be evaluated. We assist these companies by giving
land. Within these private agreements, mining companies
them the best advice, determined by how we perceive
create jobs, they create schools, and they offer services.
the current and future situation. Our clients in Mexico
Companies will now have to pay the federal government
provide us with a unique perspective of how the market
which will alter their relationship with the communities.
evolves, and they inform us about the different aspects
Unless the funds continue to flow into the communities,
of their daily operations. With this kind of information,
and they continue to see the benefits of letting the mining
we are better equipped to advise foreign companies
companies work in their lands, this change will cause
about the issues they might face every day. By keeping a
problems for everyone. There are still many points that have
close communication with our clients, we find out about
to be clarified by the government, including whether the
potential problems with energy, infrastructure, security,
expenses that companies are dedicating to infrastructure
labor, unions, strikes, and all the issues that could affect a
or projects in the communities will be deducted from the
new customer’s operations. Our services help to address
royalty.
these issues and find the best approach for mitigating risks in the industry.
Apart from the Fiscal Reform, there are other factors that will impact the industry. For example, starting in
Q: Which specific aspects of the Fiscal Reform have the
2014, companies will only be able to claim deduction
potential to significantly alter the mining environment in
of exploration expenses through amortization, which
Mexico?
means over ten or more years. Tax on dividends is
ES: When we first read the initiatives, one of the concerns
another matter, which, while not exclusively related
that we raised was related to the transparency of the funds
to the mining industry, will still affect it. The mining
that were destined for the communities. It was not clear
companies in Mexico rely heavily on foreign investors
how the funds would be transferred through the federal,
so when they send these investors dividends they will
state, and municipal governments to the communities.
have to take into consideration a 10% tax on these. They
Mining companies expect certainty and clarification
will also have to carry out a financial assessment to see
about how these funds will be managed. Many of them
how these changes will affect their expected return on
have constructed hospitals, cinemas, and schools, and
investments.
77
As growth cannot halt entirely, mining companies will continue to look for projects with the right economics. As with the initial stages of any mining project, understanding the prospecting and exploration priorities of junior, mid-tier, and major mining companies is crucial to understanding the future of the industry. According to SNL Metals & Mining, Mexico is on a par with Chile and is leading Latin American countries in exploration expenditures, representing 6% of the global nonferrous exploration investment. Although exploration is the lifeblood of the mining industry, junior companies have had to battle through the environment of lower metal prices, uncertain access to capital, and poor market conditions worldwide. On the other hand, mid-tier and major mining companies have continued exploration in the vicinity of their existing mines as a way to ensure organic growth. In fact, SNL highlights that the top ten explorers of 2014 include major companies.
Within this chapter we examine the country’s most promising prospects, while exploring technical, financial, and other associated challenges in the initial stages of a mining project. The articles and interviews showcase the latest trends in drilling technology, geophysical exploration solutions, and cutting-edge analytical and detection technologies within the market. The chapter also focuses on service suppliers that are trying to buck the trend by providing innovative products and techniques for prospecting and exploration, as well as offering improvements to established techniques. Finally, the chapter gives an overview of new and advanced exploration projects in the country, as well as outline the main challenges that exploration companies are facing.
PROSPECTING & EXPLORATION
4
El trabajo de explotación minera puede ser duro e implacable. La suciedad y el polvo repercuten en su maquinaria y las temperaturas pueden variar entre calor y frío. Agregue el trabajo pesado, el desplazamiento de cargas y la programación de producción difíciles, usted tiene un negocio con verdaderos desafíos. Bosch Rexroth está dispuesto a enfrentar estos retos. Soluciones de sistemas flexibles y durables de Bosch Rexroth que garantizan el movimiento de su maquinaria. Nuestros sistemas hacen todo esto en un pequeño espacio, al tiempo que añaden mayor eficiencia a sus máquinas. Trabajo compacto y fácil que hace más fácil las pesadas tareas mineras.
Bosch Rexroth, S.A. de C.V. Neptuno 72, Col. Unidad Industrial Vallejo, C.P. 07700, México D.F. T. +52 55 5747 0800 boschrexroth.com.mx|ventas@boschrexroth.com.mx
CHAPTER 4: PROSPECTING & EXPLORATION 82
Well-Financed Juniors Should Look for Acquisitions, Alta Vista Ventures
83
Junior Exploration Firm Casts Out Wide Net, Garibaldi Resources
84
MAP: Mexico’s Main Exploration Projects
86
Challenges Facing Discovery of New Deposits in Mexico, Hochschild Mining
88
Junior’s Projects Hindered by Investor Reticence, Golden Goliath Resources
89
World-Class Geologists Need Dose of Local Expertise, Servicios y Proyectos Mineros
90
Steady Head to Help Juniors with Exploration, Prospección y Desarrollo Minero del Norte
90
Airborne Geophysical Accuracy Down to the Meter, MPX Geophysics
93
MINE SPOTLIGHT: El Chanate, Aurico Gold
94
Hyperspectral Imaging Showing Full Potential, TerraCore International/SpecTIR
95
TECHNOLOGY SPOTLIGHT: Rapid Info with Portable XRF Analyzers, Thermo Scientific
96
One-Source Contact for Ground Geophysical Services, Geofísica TMC
97
Multi-Touch Displays Puts Info at Miners’ Fingertips, Teknol
98
Mexican Excellence for Top Lab Analysis, Agilent Technologies
99
Regular Innovations Needed to Avoid Drilling Pitfalls, GDA Servicios Mineros
100
Drilling Pros Outperform Under Tough Conditions, Globexplore Drilling
102
Canadian Company Vows to Overcome Drilling Woes, G4 Drilling
103
Drilling Firm Looks to Majors Carrying Out Exploration, Energold
104
Nimble Drill Provider Develops Edge in Innovation, Coreboss
105
Diverse Drilling Solutions for Mexican Mining Market, Dando Drilling
106
Versatile Drills Essential to Exploration Activities, VERSA Perforaciones
107
Rubber Track Carriers Take On Steep Slopes and Soft Ground, MOROOKA
81
| VIEW FROM THE TOP
WELL-FINANCED JUNIORS SHOULD LOOK FOR ACQUISITIONS IAN FOREMAN President of Alta Vista Ventures Q: You have stated that the current drop in metal prices is
Q: What can juniors do to reduce investor risk?
the worst the mining industry has seen in 30 years. How
A: Education and knowledge always help companies that
has the industry changed over the past two years?
can show a good history of ROI with proven management
A: At the beginning of 2013, the industry was on the cusp
teams or with a track record of delivering on commitments
of a downturn. Typically, at that point, companies have
will always fare better. Yet, the key aspect is to always show
a sense that they need to support the industry and take
that you are being productive, as no investor will even look
steps to survive, because if the downturn turns out to be
at a company that has keeled over. In this line, Alta Vista
short, they will be able to continue as before. However,
Ventures has kept its staff in Mexico and we have been
when that downward pressure continues, companies
aggressive in finding partners for our projects.
resign themselves to the unfortunate reality that the downturn is official. This dramatically alters people’s
Q: What types of companies are you looking to partner
perspectives. Instead of a collective will to overcome
with given the current operating envirnment?
an obstacle, resignation sets in and is paired with an
A: Before the downturn, Alta Vista Ventures was very
understanding that larger forces are at play and will
successful at optioning projects out with about ten project
ultimately determine when the downturn ends. Generally,
deals in the last few years. One of the reasons for this is that
suppliers such as drilling and geophysics companies are
we made a number of deals with American companies. We
like the canaries in the coal mine - they let you know when
have never focused on Canadian firms or on senior companies
a trouble is coming.
alone, we have always been happy to deal with companies that were of similar size to us. It all comes down to a joint
Q: Has this led to increased competition among junior
commitment to execute on a deal and that commitment is
companies to generate new projects?
not only found in Canada. Above all, our preference is to
A: I would say the exact opposite. Any well-financed junior
find a like-minded company that feels comfortable to let us
should be aggressively looking to acquire projects. The
operate our property. Having spent the most time on the
industry will return as mining is a cyclical sector, so well-
Orofino property, for example, we feel we could spend the
financed juniors can buy projects as others are trying to
money more carefully than any third party could.
sell. There are great deals to be had at the bottom of the market. Any junior that still has confidence in the market
Q: How long do you think the current downturn will last?
has to see that now is the time to be a buyer.
A: Anyone who gives you a confident, definitive answer to that question is not telling the truth. Metal prices are
82
Q: Why do you think it has become so difficult to find
much stronger now than during the previous downturn so,
investors when good projects are available at good
from a straight valuation of the commodities standpoint,
prices?
it does not make sense that the downturn is as deep as it
A: This is because the investors are not buying the
is. This means that larger factors are involved and that we
projects, they are buying into companies. Many investors
are passengers on the bus, not the driver. A company like
have already lost money in the downturn so the average
Alta Vista Ventures does not have the power to change
investor in Vancouver may no longer have the disposable
the fate of the mining industry; no company does. One
income to take a gamble on a junior mining exploration
only has the power to control the fate of his or her own
company. High-risk investments are the first to be
company. In these current economic times, we cannot
removed from an investment portfolio when business
have free-wheeling, open-budget exploration; we have to
goes sour, and they are the last to go back on the table
be careful with our cash. In this way, it is hoped that the
when times are good. This puts many juniors in the mining
general investing public will regain confidence in the junior
industry in a position where they suffer first and benefit
mining market, and just like it always has, this industry will
last. It is a vicious circle.
come back.
JUNIOR EXPLORATION FIRM CASTS OUT WIDE NET With
mining
production a couple of years ago. Additionally, Rodadero
market that is not shining
a
is another project for which we are seeking permitting,
on
companies,
given the high silver grades found there during our first
mainstream advice would
junior
drilling,” he says. Despite this success, the company is
be for them to tighten
also looking to put some of its larger projects through
their
focus
a reduction phase. It will significantly reduce Rodadero
their limited Steve Regoci, CEO of Garibaldi Resources
global
belts
and
exploration areas.
Resources
on
around its most promising drill targets, giving it a silver-
Garibaldi
gold focus, as opposed to gold-silver. “We definitely
(Garibaldi)
wanted something in our portfolio that was more silver-
has rejected this trend,
centric,” explains Regoci. In fulfilling of all of these projects,
focusing its searches on
Garibaldi Resources has been able to count on the support
a 3,500km2 area of the Sierra Madre. Steve Regoci, CEO
of ProDeMin, whose technical director Craig Gibson is also
of Garibaldi Resources, explains why it made sense to do
a company director for Garibaldi.
so, both economically and time-wise. “We are one of the first juniors to do hyperspectral surveys in Mexico. We flew
Since Garibaldi has its own drill rig and employs experienced
over our properties and over all the deposits that had been
staff for drilling, it can proceed directly without the need
discovered nearby, such as the Pinos Altos and Ocampo
for external support, giving it a distinct advantage over
deposits. It was a comparative analysis which allowed us
other junior companies. Regoci states that the company
to look at their gold deposits and see if we had similar
acquired its drill when it first got into Mexico, due to how
signatures in our properties. This proved very helpful in
busy the market was and the difficulties involved in finding
shortening the exploration curve, which would have cost
a drill to use in the country. “Drilling contracts at the time
many millions of dollars over many years. We can now start
were very expensive. Even if you could find an available
work on drill-ready targets much sooner,” he explains.
drill, it could take up to six months to schedule a time for drilling. We managed to secure a very good deal on a drill,
The search was a good move from a business standpoint.
which we now use as a test drill in the process of discovering
Garibaldi flew its searches at below the altitude that
or eliminating targets. It is far more cost-effective to do so
required permission from Mexican authorities. Another
than committing to a 3,000m drill program that we might
benefit was that the company was then able to sell its
end up regretting. We have been able to drill at US$65
proprietary data to Agnico Eagle and other companies,
a meter using our own equipment,” he explains. After all,
enabling it to recoup half the cost of the survey. “Our task
drilling remains the core of the company’s operations.
is to manage the shareholders’ money as cost effectively as
Regoci admits that the potential to become a producer
we can,” says Regoci. “The survey allowed us to focus on
is there but he says that it is not Garibaldi’s focus for the
those areas of our property with a high signature, enabling
time being. Instead, it prefers to find a larger company to
us to prioritize targets and save a lot of exploration dollars.”
take on any economically viable deposit it finds. La Patilla
Despite carrying out searches over a large area, Garibaldi
in Sinaloa, with its near-term potential, has been identified
was naturally anxious to focus on drill-ready targets. It now
as Garibaldi’s best bet for increasing cash flow.
has one test drill in place at Locust, one of its larger targets in Sonora, and is about to begin a sequential process of drilling
The junior exploration company is also keen on finding new
into all its valuable deposits. Regoci says that this drilling
ways to improve its drilling operations. “Globally, the most
activity has had a positive impact on share prices since
obvious deposits have been found, so the techniques for
Garibaldi managed to remain active through the downturn.
unearthing undiscovered deposits will definitely need to be cutting-edge,” Regoci says. Garibaldi is currently looking at
Although stock prices are buoyed by drilling activity, the
various technologies to assess their utility and economic
time has come to move toward results. Regoci outlines
benefits. Pieces of portable analytical equipment, such as
how Garibaldi is performing on that front. “Our drill
portable XRF analyzers, are high on its wish list, with Regoci
program at Locust is a porphyry copper-gold deposit.
disclosing that Garibaldi is looking at the cost-benefits of
While looking for epithermal gold, we occasionally find
the analyzers. “They use the same kind of spectrometers as
traces of porphyry copper, depending on how deep we
those used during our hyperspectral surveys. It is essentially
drill. The Iris project, in the northwest corner of Minera
the same technology.” He is also considering the use of MMI
Frisco’s Ocampo mine, is also interesting, as it is near
(mobile metal ions) for hidden deposits, after this option
Agnico Eagle’s Pinos Altos gold-silver mine that entered
has proven its effectiveness in Australia.
83
| MEXICO’S MAIN EXPLORATION PROJECTS
1 2
3 5
4
8 6
11
7
9 10
12
13
14
16 15 17
19 20 18 22 21 23 24 28
26 27
25
29 30
SONORA 1.
Apache – Sundance Minerals – Sonora – Au
2.
Miranda – Sundance Minerals – Sonora – Au
3.
Centauro Deep – Fresnillo plc – Sonora – Au
4.
Colibri – Colibri Resources – Sonora – Au
5.
Tajitos – Riverside Resources – Sonora – Au
6.
Sierra Salada – Riverside Resources – Sonora – Au
7.
Ramard – Colibri Resources – Sonora - Ag, Cu, Zn, Pb
8.
Ermitaño – Evrim Resources – Sonora Ag, Au
9.
La Fortuna – Argonaut Gold – Sonora Au
10. Promontorio – Kootenay Silver – Sonora Ag, Au CHIHUAHUA 11.
Cinco de Mayo – MAG Silver – Chihuahua – Au, Mo
12. Iris – Garibaldi Resources – Chihuahua Au, Ag 13. Cordero – Levon Resources – Chihuahua – Ag, Au, Zn, Pb 14. Orisyvo – Fresnillo plc – Chihuahua – Au, Ag 15. La Cruz – Golden Goliath – Chihuahua – Ag 16. Chamizal – Golden Goliath – Chihuahua – Pb, Zn, Ag 17. Urique – Alta Vista Ventures – Chihuahua – Au, Ag 18. Guadalupe y Calvo – Endeavour Silver – Chihuahua – Ag, Au 19. Parral – Endeavour Silver – Chihuahua – Ag, Au 20. Veta Colorada – Silver Standard – Chihuahua - Ag
84
31
DURANGO 21. Sandra – Canasil Resources – Durango – Ag, Au, Cu, Zn, Pb 22. La Platosa – Excellon Resources – Durango – Ag, Au, Cu, Zn, Pb 23. Metates – Chesapeake Gold – Durango – Au, Ag, Zn 24. San Diego – GoGold Resources – Durango – Au, Ag 25. Gavilanes – Santacruz Resources – Durango – Ag SINALOA 26. La Patilla – Garibaldi Resources – Sinaloa – Au 27. Los Azules – Canasil Resources – Sinaloa – Au, Ag, Cu ZACATECAS 28. La Esperanza – Canasil Resources – Zacatecas – Ag, Pb, Zn 29. Chalchihuites – Oremex Silver – Zacatecas – Ag, Zn, Pb 30. Miguel Auza – Excellon Resources – Zacatecas – Ag, Au, Pb, Zn 31. Catanavas – Excalibur Resources – Zacatecas – Ag, Au OAXACA 32. Silayacaopan – Argentum Silver – Oaxaca – Ag, Au 33. Tlacolula – Radius Gold – Oaxaca – Ag, Au 34. Las Margaritas – Gold Resources – Oaxaca – Au, Ag
32 33
34
85
| VIEW FROM THE TOP
CHALLENGES FACING DISCOVERY OF NEW DEPOSITS IN MEXICO LEFT: Andreas Rompel, Corporate Business Development and Exploration Manager of Hochschild Mining RIGHT: Antonio Melchor, Mining Prospector of Hochschild Mining
Q: How much potential does Mexico still hold for foreign
afford it. In terms of gold ounces terms, we would target
mining companies?
a ballpark of between 1.5 million-5 million ounces. Before
AM: Mexico still presents a great exploration potential,
we commit to a partnership, we also do a risk assessment
because most of the old mining districts that were mined
to ensure we can manage the risks, and we certainly class
in the past are not yet completely developed. There are
some countries as no-go countries. These are countries
many opportunities to make brownfield and greenfield
that give us problems with legislation or restrictions in
discoveries, but the government has not helped with the
terms of the transfer of funds. Right now, Mexico is not
extra royalty. At a time when the mining industry is reeling
fully a safe country to invest in, but the situation depends
from low gold and silver prices, the government should
more on the state or province than on the entire country.
be helping the industry rather than penalizing it further.
Some states are almost a no-go for mining while others are
Some companies are going to defer, delay, or move their
much more favorable.
investments elsewhere as a consequence. Q: Which are some of the key pathfinder elements that AR: Mining companies will now have to work the fallout
help indicate where a deposit is likely to be contained?
from the Fiscal Reform into their economic models by
AR: The best indicator for gold is gold. Arsenic is usually
adding it to the costs, meaning they will either have to
good too, but if a company finds gold, it should keep
reduce their margins or find higher grade deposits. These
digging. Initially, companies should perform some light
grades are now more critical than ever to exploration as
geochemistry over a big area, and if any anomalies are
something has to help compensate for the 7.5% royalty.
encountered, they should zoom in and intensify their
Whenever Hochschild conducts exploration projects, we
search there. It is important for a company to choose
do not only look for mineralization, we always have to
the right method for the deposit or region it is exploring.
run an economic model to decide if the deposit could be
Portable XRF analyzers are acceptable for exploration
economically viable. On top of that, certain considerations
and production control, but the detection level they
that the government set with the new tax and royalty in
provide is not yet good enough for gold. They can be,
2014 are making us wonder whether more taxes will be
however, used in exploration for silver and copper. A high
piled on.
resolution magnetic survey will provide a good idea on the extent of the structures. If companies understand
Q: Which are the vital elements that Hochschild feels are
which structures control mineralization, the MAG survey
needed to take successful exploration programs to the
can be a tremendous help. Money is the other important
next stage?
element since exploration techniques are often limited by
AR: Hochschild conducts exploration on various levels. We
company budgets. Usually, junior mining companies have
do grassroots exploration ourselves, but we also look for
all the right ideas, but they do not have the funding to use
exploration partners with interesting projects. Furthermore,
every method.
while we look for good areas to explore, we also look for
86
projects which we can buy into. We currently have an
Q: What can exploration geologists do to reduce the cost
exploration joint venture in Sonora, with a company called
of the drilling operations?
Riverside Resources from Vancouver. We are looking for
AR: Companies must choose drill sites wisely so that
open pit gold targets that are similar to El Chanate, la
the optimal information is provided for the fewest
Herradura, or Noche Buena. Traditionally though, we have
drilling meters possible. The indications for choosing the
a background in the Andes and Peru, where we developed
right drill site come down to surface mapping, and the
a legacy of mining expertise surrounding underground
fundamentals of geology. Geologists will first try to build
mining of epithermal veins. Our decision to take on a new
a 3D model of their target, whether it is a vein, a shear
project is based on its potential and whether or not we can
zone, or a much more irregular ore body. Once those
3D models are obtained, drill holes are aimed to get the best possible intersection. While budget is the ultimate constraint, the geologists’ experience and knowledge leads companies to deposits. Q: What is your approach to building a financial model and building risk assessments for ongoing and future projects? AR: After a visit to the field, we return with an idea of the deposit style and the potential of the metal in the ground. Back in the office, we estimate the volumetric size of an ore body. We then multiply that by the specific weight to get an educated guess of the grade. We work out the contained metal and the total tonnage before making a decision on going open-pit or underground before we estimate our mining costs. If it is open-pit, the strip ratio will be crucial since it dictates the amount of dirt we will have to move to get to the metal. Moving that dirt to a waste dump costs money as it has to be blasted, transported, and dumped somewhere. We then get to the extraction
We are a proudly Mexican company that integrates the country’s production chain by offering a wide range of chemical products for different markets.
method. Companies could liberate the gold via heap leach, or use a floatation process if they have sulfides. All these have differing costs, which all enter into the calculation process. The whole process is pretty intense. Q: What do you think the future of mining exploration will look like? AM: The future of exploration lies in the increased use of geophysics, because we have to look deeper below the
We have seven branches to service the entire country. Our portfolio of products includes collectors, promoters, depressants, frothers, acids, lab equipment, etc. We seek to offer unique solutions for specific situations for each of our current and future clients. We have specialized personnel able to offer practical and effective solutions based on experience and knowledge on the area.
surface. In the past, I believe we found most big deposits close to the surface as they are the easiest to find. We will still find some smaller deposits at that depth but for really big finds, we will need geophysics to go deeper. At the moment, geophysics remains expensive, making it a difficult sale to management. Mining executives do not always see the benefit of such large investments, leaving geophysics to not be fully utilized. In the future, when using geophysics, instead of flying an individual specialized MAG survey or EM survey, companies will fly one survey which will provide all the information for MAG, EM, IP, gravity, and radiometrics. Another aspect is that drilling will change as
Contact: Monterrey: (52) 81 8381 0012 (52) 81 8381 0016 amoreno@quimicoglobal.com.mx Durango: (52) 618 8103 521 crodriguez@quimicoglobal.com.mx QuerĂŠtaro: (52) 442 467 8703 eballesteros@quimicoglobal.com.mx www.quimicoglobal.mx
environmental awareness increases. Rather than drilling 100 holes spaced every 50m, a company will be able to drill one mother hole directly into the ore body, before deflecting out of this mother borehole to access all further intersections. Flexible coiled tubes are also being tested in Australia for a technique known as coiled tubing drilling. It does not provide a core, but it carries all the necessary sensors to acquire the relevant information. It reduces the cost of drilling and is much more environmentally friendly as companies only need to bulldoze one drill site, as opposed to 50.
87
JUNIOR’S PROJECTS HINDERED BY INVESTOR RETICENCE When he still worked for Minera Delta, Daniel Nofrietta
cost up to US$200,000.” Additionally, a number of other
Fernández carried out extensive exploration work in
factors may affect the success of an exploration project.
Chihuahua, one of the most important mining states in
Problems such as access to water, or tough negotiations with
Mexico. In 2000, Golden Goliath Resources came to own
communities for access to the land, may lead a project to
99% of Minera Delta’s shares through a private placement.
become economically unviable. “Problems with communities
“We now depend completely on Golden Goliath for our
exist because there is no legislation that precisely lays out
administration and financing, but Minera Delta continues
what earning percentage of a mine site should be given
to be a Mexican company that focuses on the exploration
back to the community,” Nofrietta Fernández expresses. The
of precious metals, and partially on lead, zinc, and copper
most advanced technology will not stop issues relating to
projects in the state of Chihuahua,” shares Nofrietta
communities and capital from derailing the access to precious
Fernández, who now serves as Exploration Manager of
deposits. The risky nature of the exploration market has been
Golden Goliath Resources.
the main reason that many Canadian investors have avoided
“There is a possibility to build at least three mines within our project portfolio. Our claims are directly adjacent to Fresnillo’s Orisyvo project which has between 9-10 million proven ounces of gold” Daniel Nofrietta Fernández, Exploration Manager of Golden Goliath Resources
In line with many other junior companies, Golden Goliath
it, according to Nofrietta Fernández. “Investors have ceased
has
since
to believe in junior companies because their investment
2013 after long relying on the flow of capital from the
been
enduring
harsh
market
conditions
rarely leads to fructuous results,” he exclaims. “This is due
Vancouver Stock Exchange. Despite the difficult access
to geological and natural factors that we cannot control. If
to capital, years of expertise and a persistent focus on
a company does not find an economically viable mineral
this important mining region have given the company
deposit, then the millions it has invested will be lost.” For this
access to promising projects such as La Nopalera, situated
and other reasons, many investors have now opted to invest
in the historic mining district of Uruachi in Chihuahua.
in advanced projects with proven reserves that will allow a
“There is a possibility to build at least three mines within
company to quickly enter the production stage. However,
our project portfolio. Our claims are directly adjacent
these kinds of projects are hard to find. For better or worse,
to Fresnillo’s Orisyvo project which has between 9-10
Golden Goliath has sold all of its advanced projects and now
million proven ounces of gold,” states Omar Rodríguez
holds properties in the early stages of exploration that all
González, auditor of Golden Goliath. Towns in the Sierra
require investment for development. As a way to overcome
Madre Occidental of Chihuahua, such as Batopilas, Urique,
the difficult access to capital, Golden Goliath is opting for
Uruachi, and Ocampo, have a long mining history of high-
alternative solutions such as providing larger companies with
grade gold and silver mining works. As surface deposits
exploration work.
were depleted, the mining works closed and miners moved to other zones. Now, with modern exploration techniques
Despite these sizeable potential obstacles, Golden Goliath
such as satellite mapping and geophysics, geologists such
has continued to develop its projects in the Uruachi district
as Nofrietta Fernández are able to return to these ancient
through geological studies, sampling, and geochemical
treasure troves and explore at greater depths.
analyses. Some of these projects are now ready for drilling, as is the case of La Nopalera. “We are sure that there is a
88
Nevertheless, even with such exciting techniques in
great chance for success in our projects but we have been
contemporary exploration, it is not possible to advance this
waiting for financing for nearly two years now,” Nofrietta
type of mining project without access to capital. After all, the
Fernández exclaims. “An investment in some of our projects
exploration phase is not an earner and requires the injection
would definitely have a decent return on investment, but
of millions of dollars for drilling. “Our La Nopalera project
junior companies are now the last to get new investments
alone demands US$10 million for exploration since it requires
from the Canadian stock exchanges.” For this reason, Golden
very deep drilling,” Nofrietta Fernández explains. “If it costs
Goliath has begun looking to European stock exchanges in
US$150-200 to drill just one meter, 1,000m of drilling could
the hopes of finding new investors willing to share the risk.
WORLD-CLASS GEOLOGISTS NEED DOSE OF LOCAL EXPERTISE
Ramón Hiram Luna Espinoza, Director General of Servicios y Proyectos Mineros (SPM)
Imagine a Canadian mining
to provide geological assessments of exploration projects
company
to
for Peñoles and Argonaut Gold, while it has also done so
enter a new jurisdiction
for Levon Resources in Chihuahua and managed GoGold
such as Mexico. Confident
Resources’ entire exploration program at the San Diego
in the skills of its hand-
project in Durango. AuRico Gold also entrusted SPM with
picked geologists, it feels
the calculation and certification of reserves for both the
certain that this team will
open-pit and underground sections of the Ocampo mine in
be able to swiftly and
Chihuahua while Grupo Mexico hired the firm to carry out
economically identify areas
cartography work at its Coahuila properties.
preparing
of geological interest. After all, geology is geology
Beyond an impressive client list, one fact leaps out from this
and while its experts have not worked in Mexico before,
summary, all these projects have taken place in northern
they have had success back home in Canada. Well, that
Mexico, the country’s traditional heartland. While this is not
confidence may be misplaced, according to Ramón Hiram
surprising given that most exploration takes place there,
Luna Espinoza, Director General of Servicios y Proyectos
SPM believes it would be careless to ignore the mining
Mineros (SPM). “Mining companies usually only have two
potential of Mexico’s other areas. “The entire Pacific coast
to five geologists in their exploration teams. Such a number
of the country is likely to contain mineral wealth, given its
cannot dominate all the areas relevant to the geosciences.
volcanological conditions. Until now, the northern states
A larger team such as ours may cover any scientific or
have had a stranglehold on much of the mining industry
engineering need that could arise,” he explains. Luna
as they have the right facilities to accelerate the sector’s
Espinoza lays out another reason why SPM enjoys a home
development.
field advantage when it comes to exploration services in
communities’ broad acceptance of mining projects, has
Mexico. The company is extremely selective when it comes
made it easier to exploit deposits found there,” says Roberto
to picking the freshly graduated geologists it brings into its
Sánchez García, SPM’s Exploration Manager. He feels that
team. “We aim to only bring the best in and take them to
states like Chiapas, Oaxaca, Guerrero, and Michoacan are
the highest level. Our geologists have the level to compete
particularly likely to contain vast mineral deposits, although
with anyone in the world and this has been demonstrated
their socio-cultural and economic conditions make it more
by the number of mineral discoveries made in our country
difficult to develop mining projects there. Despite this, SPM
by SPM.”
is certain that these states will rise to greater prominence
This
infrastructure,
coupled
with
local
over time as larger mining discoveries are made. Once SPM offers solutions to mining companies for all areas of
that happens, SPM is ready to get involved. “SPM has been
geological exploration, including prospecting, defining
involved in exploration in every Mexican mining state and
areas for drilling, 3D modeling, calculating reserves, and
beyond, operating in Central America and Colombia as well,
exploration logistics. However, Luna Espinoza believes
through its subsidiary Logiminco,” states Sánchez García.
that one of SPM’s main strengths is the range of skills its high number of geologists can offer. “We have very
No matter whether successful exploration is carried out in
experienced people who have been involved in exploring
Coahuila or Colombia, all mining companies must then follow
many types of mineral deposits. That range of expertise
through with highly accurate property reports that are their
allows us to meet the needs of any exploration project as
main weapon to raise more financing from investors and
well as all the geological requirements that come up over
stock markets. The Toronto, New York, and London stock
the duration of a mining project,” he says. He also dwells on
exchanges are all extremely demanding about such reports
the fact that local knowledge is needed to complement the
and expect them to be produced to the highest standards.
skillsets of the most technically sound geologists. “Foreign
“The certification of reserves listed in such reports will
junior exploration companies may have a Vice-President
determine the level of liquidity and support that a mining
of Exploration who, despite being an expert, does not
project receives. Any professional seeking to prepare or
understand the local geology or how to efficiently advance
certify such a report must be recognized by one of these
exploration in Mexico. Our knowledge and experience
institutions as a qualified person. SPM fully understands this
of resource exploration in Mexico allows our customers
and we are able to offer the writing of these reports to our
to achieve their goals in shorter periods of time.” His
clients. We also understand how to modify them based on
arguments have certainly resonated in the corporate offices
the protocols our clients are required to follow by specific
of mining companies. In Sonora, SPM has been contracted
stock exchanges,” concludes Luna Espinoza.
89
| VIEW FROM THE TOP
STEADY HEAD TO HELP JUNIORS WITH EXPLORATION CRAIG GIBSON Technical Director of Prospección y Desarrollo Minero del Norte (ProDeMin) Q: ProDeMin’s services range from prospecting and
Q: From where is the bulk of the capital sourced for the
exploration to environmental impact assessments. What
projects that you are working on?
are the company’s particular strengths?
A: Much of the capital is coming from abroad, including from
A: Our focus on project management cannot be
junior Canadian explorers, but certain mining companies
matched by other Mexican companies due to a lack of
that have already invested in Mexico are generating
personnel or time. It is almost a turnkey operation as we
income here. I know of small investment houses in Mexico
provide nearly any service our mining clients may need,
City who seek funding both inside and outside the country.
ranging from environmental work and land staking, to
To a certain extent, ProDeMin does help its clients to
exploration programs and drilling contracts. Given our
obtain investment, assisting them to better communicate
wide network of partners, we can also provide tailored
what they do through press releases and presentations.
quotes for those few services we do not cover directly.
This is not a major part of our activities but it remains an
In terms of finding clients, our focus has been on smaller
important aspect of our work. Many junior companies are
companies such as Canadian juniors or small Mexican
looking for ways to survive without resorting to direct
private companies. We are now finalizing a contract with
financing since most smaller companies’ stock prices are
a drill rig, for which we hope to plan the drilling program
depressed. It is virtually impossible to raise money in the
itself rather than simply providing the drilling personnel.
current market. We are fortunate that our clients have not
After all, our strength lies in project generation and
had to raise money yet, but they have started to decrease
project management. While our level of business did
their activities while looking for ways to spark new interest
tail off somewhat in 2013, it picked up again through
in their projects. The merger and acquisition market is not
2014 with small contracts. With around 20 geologists,
doing well right now, but it looks like it will pick up.
as well as environmental staff, technical personnel, and database management staff, we remain quite a small
Q: In 2013, you stated that Guerrero was arguably Mexico’s
operation. Our size allows us to focus on a specific niche
most promising mining area. What advancements have
of the mining industry.
you seen in the region since then?
AIRBORNE GEOPHYSICAL ACCURACY DOWN TO THE METER MPX Geophysics (MPX) has been active in Mexico since
and junior mining companies in Mexico. In fact, it is this
2006, and its success here has led it to branch out into
elite client base that led to MPX’s rapid expansion across
other Latin American countries. Despite setting up offices
the continent. “Most of our clients are active in this entire
in Colombia, Ecuador, and Peru, Mexico remains MPX’s
region. This results in repeat business for us in other
largest market in Latin America. The extensiveness of
countries,” explains Currie.
the Mexican mining industry is a major cause for this,
90
with the sector accounting for 80% of its business in
MPX’s panoply of airborne services has encouraged clients
the country. MPX offers airborne geophysical services to
to use it as a one-source supplier for their projects and
mining clients in Mexico, including airborne magnetics,
Currie states how his company gets involved in each new
electro-magnetics, gravity, and radiometrics. John Currie,
project. “Typically, the procedure when a client obtains a
Director of Business Development at MPX Geophysics,
new concession is to first perform the airborne geophysics,
explains that the company has worked with most major
which can cover a large territory quickly and at a relatively
A: The region has essentially been explored by Mexican
manage the funds adequately and oversee the program.
and foreign companies alike since the early 1990s. These
The project was at an intermediate stage, with existing
have been a very successful exploration projects, turning a
drill holes, and looked likely to contain a gold resource.
district without many mines into the largest gold producing
ProDeMin evaluated all the previous work that had been
area in Mexico, and it continues to grow each year.
done and gained access to the surface. We then created
Goldcorp acquired some properties in the district and now
the geological model, continued the drilling program, and
owns the largest mine in the area, Los Filos. Torex, a junior
furthered the exploration to discover yet undocumented
company, did a lot of the exploration work, developed the
aspects of the property. We found a high-grade breccia
deposits on the Morelos reserve, and is now constructing a
zone in the middle of the deposit which was not previously
mine to put into production. Those two mines hold a large
known. It was a discovery that we are all proud of.
inventory of gold deposits and reserves of Mexico. Q: What are the advantages and disadvantages of using ProDeMin is working for Newstrike Capital on the Ana
ground geophysical methods as opposed to conventional
Paula and Aurea Norte exploration projects in Guerrero.
methods?
Newstrike
preliminary
A: A lot of Canadian junior companies use ground
resource study about Ana Paula which shows that it will
geophysical methods for various reasons. Sometimes,
soon result in a mine. It is one of the best gold deposits in
they do not have many available outcrops or they cannot
development in North America. Situated on the Guerrero
see the rocks due to permafrost or other obstacles. We
Gold Belt near Iguala, Ana Paula has become Newstrike
tend to use direct exploration methods such as mapping
Capital’s flagship project. It has a fairly high grade with a
and sampling, although it depends on the type of deposit.
couple of million ounces of gold and a preliminary open pit.
Geophysics is something that we always consider, as it
It includes a 5,000 hectare package and roughly 80,000
can be useful for particular types of deposits. Newstrike
hectares of exploration ground around that. The drilling at
Capital has carried out airborne geophysical surveys at
Ana Paula is now undergoing engineering work to increase
Ana Paula and the surrounding area. These methods can
viability. ProDeMin is focusing on exploring around this
cover extensive ground, allowing ground exploration or
property to look for more gold deposits.
more detailed geophysical analysis to focus on smaller
Capital
recently
published
a
areas. There are several different methods, such as Q: How did ProDeMin become involved with the Ana
magnetometry, that can help to identify targets. The
Paula project?
government has done magnetic surveys all over the
A: Newstrike Capital first acquired this project in 2009.
country and this data is readily available. Some argue that
In 2010, we were hired to do the geological work and
all types of analysis should be carried out for each project,
fix the land situation as a turnkey operation. We took
but that is not necessarily true. It all depends on what the
care of everything from the outset as they trusted us to
goal and the budget of the company is.
low cost. We are then able to interpret the data from the
mining companies often have their own interpretation
airborne survey to find areas with interesting anomalies
department and proprietary methods for using the data
which need further investigation. That is where ground
provided. However, junior companies are not in the
geophysics comes into play.” Given that MPX’s client list
same position, allowing MPX to offer its interpretation
reads like a who’s who of the Mexican mining industry, it
services acquired over years of worldwide exploration
is intriguing to find out how all these companies came to
experience. On top of that, MPX is operating at a level far
realize value airborne geophysical services. “Compared to
beyond what has previously been seen in Mexico. “SGM
other countries, Mexican companies are fairly advanced in
has very coarse data for much of Mexico flown ten or 20
their knowledge of our technologies. I can compare this
years ago. Many clients have asked us to re-fly some of
with Peru, where we have to educate geologists about
the areas that SGM has previously flown. We can fly at
what our geophysical services can offer to them. In Mexico,
higher resolutions and at a more tightly lined spacing,”
we find that most of our clients are highly knowledgeable
says Currie. That elapsed time period is vital as the last
about these services already,” says Currie.
15 years have seen leaps of technology in areas like GPS. The data provided by MPX has a positioning accuracy of
The
latter
part
of
MPX’s
service
offering
varies
according to the client. According to Currie, larger
up to 1m as opposed to the data from that time having error margins of 20m or more.
91
92
| MINE SPOTLIGHT
EL CHANATE Located 37km northeast of Caborca in Sonora, the El Chanate mine is located on a site rich in history that has been explored and mined for gold since the early 19th century. In 2011, the project was acquired by Aurico Gold and has been delivering substantial results since. During 2014, El Chanate reported production and cash cost results that were in line with guidance levels, and is set to deliver another year of solid operational performance in unity with 2015’s expected cash cost and production estimates. The mine contains an open pit heap, leach pads, a crusher, a processing plant, and is located on 3,665 hectares across 19 mineral concessions. El Chanate employs a conventional three stage crushing and heap leaching process where the gold bearing solutions are processed in an ADR plant complemented by electro-winning and refining. The open pit mine plan covers an area approximately 1,700m long, 780m wide, and 280m deep. In 2014, Aurico Gold’s exploration program focused on further defining mineralization within the existing open pit and expanding the known mineralization along the Chanate trend with of goal of increasing resources and potentially extend mine life. The drilling program within the current open pit has intersected a new type of mineralization below the ultimate open pit floor, which is significantly higher in grade than the current reserve grade and is hosted within a strongly silicified siltstone adjacent to a fault structure. El Chanate’s most distinguishable geological feature is the Chanate fault zone, a 7km-long northwest strike that has a variable southwest dipping structure. The area is governed by deformed sedimentary rocks of the late Jurassic to early Cretaceous Bisbee Group and the late Cretaceous Chanate Group, which are locally overlain by andesites that belong to the El Charro volcanic complex. The sedimentary strata are locally intruded by dikes and andesitic sills, as well as a diorite stock and micro-porphyritic latite. These strata comprise mudstone, siltstone, sandstone, conglomerate, shale, and limestone. In surface outcrops the mineralized zone is distinguished by its bleached appearance relative to un-mineralized rock. Subparallel sheeted zones of quartz veinlets form thick, mineralized lenses, within a larger area of sub-economic but anomalous gold concentrations. Drill-hole data indicates that the mineralized lenses are sub-horizontal to gently southwest dipping, and often run parallel to the Chanate fault and the steep normal faults. The Chanate fault zone itself is generally weakly mineralized, while rock units in the adjacent hanging and footwalls are well mineralized.
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| VIEW FROM THE TOP
HYPERSPECTRAL IMAGING SHOWING FULL POTENTIAL LEFT: Conrad Wright, President of TerraCore International RIGHT: Joseph Guzman, International Business Development Director of SpecTIR
Q: How would you rate Mexico in terms of its adoption of
to develop sustained internal capability. This will allow them
hyperspectral inspection?
to do their own database gathering. We can also help them
JG: Mexico has adopted a well-designed hyperspectral
with the daunting processing of this data. Governments also
program at the highest levels, and has truly understood
traditionally own the data as the research is done through
the value of this technological resource. The country
public tenders and using public funds. We are perfectly
now has the leading hyperspectral program in the
happy with that as we understand the rationale behind it. We
world. The government acquired the right technology, a
have different tiers of products at different prices, where the
hyperspectral sensor for airborne and a terrestrial sensor
client can get the data and the products or just get access to
for core scanning. Investing in this technology is helping
the products. We have two clients, one of which is a major
it to understand the minerology nationwide. Conrad and I
producer, to which we lease the hardware on a monthly basis
have travelled all over the world and we are yet to see any
so they can organize and collect the data themselves. They
country that can top the commitment Mexico has made to
then turn over mountains of data to us and we output the
hyperspectral imaging.
products they have requested for the needed applications.
Q: Most such technologies require prior characterization
Q: How challenging is it to convince juniors to spend
of elements to compare analytical results. How vast is
money on hyperspectral imaging?
your current data of mineral hyperspectral signatures?
JG: Introducing technology like this to a group of clients that
CW: Our current database is extremely vast, but there
have rudimentary knowledge of what it can do is difficult.
are other methods that use our technology besides
The learning curve they have to undergo is a lengthy
library matching, which has been a traditional means of
process, and it has taken several years to get traction with
analyzing data against a known library. However, we also
clients, both on the exploration and the production side,
see tremendous applications and value in utilizing the
and introduce airborne hyperspectral surveys. Companies
data as the library, and interpreting the data from there.
are starting to notice that this database can be an asset,
This provides a far more detailed analysis, and allows us
especially to juniors who are looking to sell the property.
to provide a client with their library, versus a library that
Companies are noticing the value because, when buying
is owned by the United States Geological Service. We
a property, a company would traditionally redo every drill
have our own library with an unbelievable amount of
hole on the property, adding huge costs.
spectral for different parts of the world. The problem with a library is that as chemistries change, so will signatures.
CW: We have been doing free pilots and demos for a wealth
This means that a kaolinite signature in Mexico may look
of exploration companies. This helps them understand
slightly different than in another part of the world, so using
what this technology means. On the exploration side, we
the data as its own library is a far more in-depth way of
have a recent client which has a US$500,000 project with
utilizing the full volume of available data.
us. It estimates that hyperspectral imaging will reduce the drilling to be done in the next three years to the tune of
Q: To what extent is SGM looking to TerraCore to help
US$15 million in savings.
map Mexico in a way that has not been done before?
94
CW: Interestingly enough, SGM has a decade-old system
Q: How does TerraCore’s Core Image Spectrometer (CIS)
that, instead of imaging the entire width of the core,
help geologists find pathfinder elements that suggest
images a small section. It is a quality system but, due to
where a nearby deposit may be?
staff turnover, they have lost internal knowledge on how
CW: We have the ability to map many different minerals.
to deal with the system, the data, and the analytics. That
When that is combined with geochemistry and elemental
is normal for governments. We can take data from their
analysis, you start to understand lithology and alterations
system, provide products, and go back and provide training
along with that, which inherently leads you to associate
mineralogy with path finding mineralogy. That is the
has been pretty substantial. This is combined with the fact
impetus behind our partnership with ALS Minerals. We
that they are a trusted lab for providing a traditional data
have created a custom product for ALS which its clients
set of high quality.
can use to view our products against their geochemistry in a single online platform. Our statistical products
Q: What are the key measures that SpecTIR puts in place
immediately import into Vulcan, Leapfrog, and MineSight,
to ensure a flight produces quality data?
creating a 3D visualization. With this, companies can look
JG: Our operators are very experienced in ensuring that
at the bigger picture and fully interpret what is going on.
flights are done correctly line by line as the data is being collected. They take care of the signal to noise ratio in the
Q: What have been the advantages of your collaboration
air in real time. Our operators will fly a line, and as the pilot
with ALS Minerals, specifically in terms of combining
is turning around, they are doing their quality assurance
spectral mineralogy images with geochemical data?
and control to make sure that the line is right. If not, they
CW: Two major advantages are that you get to view it
go back and do it again. Through the partnership that
with geochemistry which is a widely accepted tool that
we have established with SGM, we have trained them on
geologists use. Secondly, the amount of requests that come
how to do the same. It was through our training that they
through with them trying to understand our technology
acquired the knowledge to operate independently of us.
| TECHNOLOGY SPOTLIGHT
RAPID INFO WITH PORTABLE XRF ANALYZERS In today’s mining industry, having access to reliable and
production and mineral processing stages, XRF portable
precise
crucial
tools have also helped mining operators to test samples with
to identifying new areas with promising mineralization.
little or no preparation. These analyzers provide an optimal
Portable x-ray fluorescence (XRF) analyzers provide an
way of verifying the purity and the geochemical properties
innovative solution for elemental analysis technology that
of precious metals while allowing for the accurate chemical
can dramatically change the face of exploration and mining
testing of tramp and trace elements.
geochemical
information
has
become
applications. Sample analysis conducted in a timely manner can be fundamental to determine drilling targets and ore
Portable XRF analyzers equipped with the GOLDD™
boundaries. Mining companies have long-used traditional
technology deliver lower detection limits and faster
lab analysis services but these often involve expensive and
measurement times, better excitation for heavy rare earth
time-consuming processes. On-site mobile laboratories have
element, and an analysis range for 37 elements. In order to
proven themselves hard to maintain or provide an analytical
measure samples with an unknown chemical concentration
range of results that is insufficient. Portable XRF solutions
of light and heavy elements that may vary from parts per
are thus providing a major difference by providing fast and
million (ppm) to high percentage levels, Thermo Scientific’s
reliable geochemical information via an easy-to-use platform.
analyzers include Fundamental Parameters calibration so as to simultaneously compensate for the wide range of
Thermo Scientific’s Niton XRF series was designed to
geometric effects, x-ray absorption, and fluorescent effects.
serve many of the applications found in the exploration
Besides these well-rounded geochemical applications,
and mining stages. The technology has allowed companies
the analyzers are designed to offer various and unique
to rapidly acquire geochemical data for the delineation
geochemical mapping solutions that encompass GPS, GIS,
of ore boundaries and in-depth quantitative analysis of
and data management options for real-time assessment
metal concentrations that are used for mine mapping
of geochemical data in the field. Portable XRF analyzers
purposes. This handheld equipment is particularly useful for
tend to produce large amounts of valuable geochemical
the early stages of exploration. In the course of advanced
information, meaning that this data must be turned into
exploration and drilling campaigns, portable analyzers
logs or maps for visual checks of any anomalies or trends.
identify increasing or decreasing patterns of elements of
As Thermo Scientific understands that time is crucial in
interest, helping geologists decide whether to advance an
the success of mining operations, it has also integrated a
exploration campaign, redirect it, or halt it. Throughout the
function to instantly correlate its findings with GIS maps.
95
ONE-SOURCE CONTACT FOR GROUND GEOPHYSICAL SERVICES
Gabriel McCrory, International Manager of Geofísica TMC
Founded in Quebec as a
step-by-step exploration so they see what we can bring.”
family business in 1998,
For those companies who are unsure of how geophysics
Geofísica
found
can add value to their projects, Geofísica TMC works to
success in Mexico within a
TMC
convince them of the time and money they can save on
few short years. Known for
exploration. To present a good business case, McCrory’s
the wide range of ground
main approach is to highlight financial savings on drilling.
geophysical
it
“We can show them maps that point straight to the target.
offers, Geofísica TMC was
services
We invest heavily on getting the right data sets and
asked by clients to bring
ensuring the quality of our data.”
its instruments to bear on a long-term mining project
In the last two years, Geofísica TMC has also been keen on
in Mexico. For Gabriel McCrory, the company’s International
adding new dimensions to its service portfolio, as guided by
Manager, that move proved fruitful since its business in Mexico
the market or required by its clients. McCrory says there has
is now almost as important as that in Canada. For McCrory,
been more demand for gravity, 3D IP, and magnetotellurics.
one of the reasons for Geofísica TMC’s success is that its
Geofísica TMC has been able to roll out these new
clients know they can turn to the company for a full package
technologies progressively in Mexico by approaching clients
of services, ranging from line cutting and data processing
it had worked with since entering the country. “We offered
to magnetics, electro-magnetics, gravity, magnetotellurics
the project at a very low cost just to show them what we
(CSAMT), and induced polarization (2D and 3D). Furthermore,
were able to do. Those test projects made it easier to sell the
Geofísica TMC has geophysics consultants that can handle
service to new clients,” explains McCrory. “In 2014, we were
all the data interpretation and provide reports and maps,
also asked to do a magnetotellurics survey in Mexico. We sent
as McCrory explains. “We provide a written report with the
a team to California for training and to buy the equipment
interpretation of the geophysical data, processed database
before applying themselves to a large, two-month project.
maps, and 3D models. Our data can be integrated with the
We did the same thing with gravity a couple years ago. This
client’s data such as geochemistry, topography, airborne, and
means it is very easy to sell these services now.”
others. We use this data to complete our interpretation and we can put those layers on our geophysical surveys. We can
3D IP has now become a major growth area for Geofísica
then build a 3D model to give to our clients.”
TMC, particularly targeting companies nearing or already in the production stage. McCrory acknowledges that 3D IP
96
While Geofísica TMC’s range of solutions is a strong plus
is more expensive than regular IP but explains it provides
for clients already convinced about using such services,
far more reading points per square meter and adds great
another struggle altogether is getting mining companies
value for reserve definition on mine sites. Another service
to spend money for external services in a downturn. But
that he is keen on publicizing to the Mexican mining
for McCrory, this has not been a major issue. “Most clients
market is magnetotellurics, which the company brought
believe in geophysics, they have already done common
on board in 2014.
MULTI-TOUCH DISPLAYS PUTS INFO AT MINERS’ FINGERTIPS Although Mexico is not hailed internationally as a model
industry came in 2009 when, during a mining convention
for research and innovation, certain examples of Mexican-
in Veracruz, the company organized demonstrations on a
developed technology are becoming as attractive outliers
prototype multi-touch display and software. Experts from
in industries like mining. Margot Molina Elías, CEO of Teknol,
the SGM were in attendance, seemed impressed, and soon
speaks of her experience as an assessor at ITESM’s business
placed orders for displays. As often happens, this first
incubator. “The first thing these young people recognized
order from a public entity triggered a rise in demand for
was the necessity an idea that would bring added value to
Teknol products from the private sector. “The information
the mining sector. This idea then needed to be backed up
we display through our products is of great value for
by market research to determine whether the industry was
companies interested in making mining investments in
truly interested in what they were offering,” she explains. It
Mexico,” explains Molina Elías. “These companies want
was this time at the business incubator on ITESM’s Sonora
to have access to information relating to the concessions
campus that led Molina Elías to understand the benefits that
which comes from the General Directorate for Mining
multi-touch displays could present for the mining sector.
Regulation (DGRM). This information is available freely on
While these displays could potentially prove lucrative in a
the DGRM website, but by using Teknol’s software, it can
number of industries, her location in Sonora with its easy
be accessed in a far easier and more user-friendly manner.
access to mining projects pushed her in this direction.
Any mining company, engineer, or geologist that needs
“Having information about specific regions, concessions, and studies are all major positives for executives making decisions within the mining companies” Margot Molina Elías, CEO of Teknol
Today, Teknol’s most popular technology is GeoMining
geological or mining information can access it easily
Touch, which displays information specifically designed for
through our software.” Teknol has also kept its products
mining operations. Through the GeoInfoMex subscription,
affordable as many of its customers are smaller companies
companies can have access to a digital library that
who do not want to shell out on huge expenses but simply
contains over 60 years of SGM research. Another of its
seek to access and use crucial information in a better way.
star applications is the QuickMining Library that provides
“Since the information that we gather in our software
regularly
mining
can be accessed for free, many smaller companies prefer
concessions, mining applications, NI-43101 reports, copies
to go that route. Our value proposition is offering that
of the Journal of Geological Sciences, and other relevant
information in a simpler and more user-friendly way,” says
information. Teknol designed the GeoMining Touch to
Molina Elías.
updated
information
on
released
be didactic even for those unfamiliar with computers, with a finger-traced geographical search to zoom in on
As the mining industry is facing challenges in attracting
a specific area of Mexico and for all information to be
new mining investment, a major priority for Mexico is to find
easily accesed from there. Teknol has also expanded
ways to optimize its attractiveness as a mining investment
its products by offering Edge Wall displays for wall-
destination. According to Molina Elías, having access to
mounted applications and the DisplayStation Pro which
the right information in an approachable manner can make
can be rotated to be used as a work table for a whole
a big difference in the investment decisions of mining
team. “These products are 100% designed, produced
companies. “The objective of the government is to bring
and assembled in Mexico. Our engineers are in charge of
mining investment to Mexico, so foreign companies need
designing all hardware components. These designs are
as much information as they can before making a decision
sent to local suppliers that produce them and the final
that favors the country. Having information about specific
assembly takes place in our facilities,” says Molina Elías.
regions, concessions, and studies are all major positives for
Teknol’s latest development involves a line of multi-touch
executives making decisions within the mining companies.
display kiosks, which can be installed within mines as they
The more information these companies have, the more the
can resist temperature changes, water, vibrations, and
investment process is streamlined,” says Molina Elías. This
various forms of physical damage. Teknol’s push in the
is an area where Teknol knows it can play a major role.
97
| VIEW FROM THE TOP
MEXICAN EXCELLENCE FOR TOP LAB ANALYSIS GELASIO PÉREZ VALVERDE Applications Engineering and Center of Excellence Manager of Agilent Technologies Q: Which are the most common element analysis
dissolved solids. Now it is even possible to introduce sea
techniques used by the mining industry?
water without dilution in an ICP-MS without needing to fear
A: Mining companies in the country tend to use atomic absorption
and
plasma
atomic
emission
defective results.
instruments
during the exploration and the production stages. With
Q: How can your equipment reduce the costs of analysis?
these two techniques, it is possible to analyze precious and
A: Analysts all over the world are looking for an analytical
transition metals or heavy metals with concentration levels
instrument that can provide them all the information of
in parts per billion to concentrations by level of percentage.
a sample with the least preparation possible. They want
Another interesting technique to measure precious metals
equipment that is reliable, fast, and inexpensive to operate.
or economic minerals is inductively coupled plasma mass
In order to analyze the different elements in a mineral, it is
spectrometry (ICP-MS), which allows for the analysis of atoms
necessary to first conduct the samplings and then the sample
by their electrical charges and mass relations. The advantage
preparation. These two processes are extremely important
of this technology is its high sensibility that enables the
but they can be quite complex and slow. Our R&D has
measurement of element concentrations in parts per trillion.
enabled us to reduce the cost of operations and to deliverer analytical results in shorter time periods. This means that
Q: Which are the most attractive features of Agilent
analysts can produce more results in the same number of
Technologies’ products?
hours. In addition, since our machines perform the analysis
A: One of the most attractive aspects is their ease of use.
faster, they are capable of generating important savings in
Practically all of our products are automated, so analysts
the use of compressed gases such as argon, acetylene, and
only have to choose the analytical method, place the sample
nitrogen. To create additional savings, Agilent Technologies
and start conducting the study. Other complex techniques
also uses air in its equipment instead of combustible
such as ICP-MS have been optimized through software we
gases like acetylene. It is possible to separate oxygen and
developed to control the analytical parameters. With this,
nitrogen from common air through fractional distillation.
we were able to conduct the analysis faster and therefore
This nitrogen can then be used to produce plasma instead
more cost effectively. In the traditional technique of atomic
of using regular argon. This microwave plasma - atomic
absorption by electrothermal vaporization (AA-ETV), we
emission spectroscopy (MP-AES) was developed by Agilent
managed to create savings in the flow of argon or nitrogen
Technologies to reduce the cost of operations by up to 60%.
gas in every atomization of the analysis. The traditional
98
technique required at least a week to obtain an adequate
Q: What are the objectives of the Center of Excellence?
sample for the analysis, but now we can optimize the method
A: We located the Center of Excellence in Mexico to earn
employing small volumes of the sample. Through this new
the trust of our customers and to show our commitment
generation of instruments, we have revolutionized the way
to the Mexican market. Agilent Technologies has invested
in which the mining industry conducts its geochemical
over US$2.5 million in the country for laboratory equipment
studies. We have also made our technologies more tolerant
and in human resources to create a place where advanced
to dissolved solids which are common in mineral samples.
technology can meet human talent. We have the latest
With our new versions of ICP-MS and microwave plasma-
technologies in atomic or elemental analysis but Agilent
atomic emission spectrometry (MP-AES), we have doubled
Technologies also wants to have the best applications
the tolerance to dissolved solids. This allows users to reduce
engineers to guide our customers. One of the main
sample preparation requirements since less dilution is
activities we perform in our Center of Excellence is the
required while concentrations can be detected that could
demonstration of the capacities of our technologies. If
not be distinguished at higher dilutions. Before, the ICP-MS
our customers have uncertainties regarding the best way
only tolerated 0.2% of dissolved solids but thanks to our
to approach their geochemical studies, our specialists can
upgrades, it can now tolerate samples with up to 25% of
offer recommendations on the method they should employ.
REGULAR INNOVATIONS NEEDED TO AVOID DRILLING PITFALLS Although the mining industry has no future without
additives costs by more than 50%, dropping from US$7 to
exploration and drilling, drilling companies are currently
US$3 spent on additives per meter drilled.
fighting for survival and success. Against this backdrop, GDA Servicios Mineros (GDA) stands out as it has managed
It is apparent that GDA’s survival and success has largely
to overcome adversity and regain its strength in troubled
depended on the leadership’s ongoing desire to never be
times. Juan Barraza Osorio, General Manager of GDA
just another drilling company. Right after obtaining its first
Servicios Mineros, describes how his company sought to
drilling contract with Coeur Mining in the Palmarejo project,
stand out in a crowded marketplace with an innovative
GDA acquired two more drills, allowing it to expand both its
service offering. “Drilling companies commonly charged
ongoing projects and its business practices. The punctilious
their customers additional fees for each additional service,
Osorio collected vital information from each project, such
ranging from water usage, tools, extra materials, and drill
as the reactions drills had to precise formations, and the
relocation. During the mining boom, we took a different
varying standards of drill bit performance. He states that
approach by offering all our services for a pre-established,
this proactive approach gave him more control over his
fixed price,” he explains. This meant that GDA would be
equipment, allowing for improved efficiency. “Back then,
taking on full responsibility for all of its customers’ needs.
Mexico saw a high volume of mining projects, but did not
But despite the extra workload, Osorio said GDA pioneered
have enough drilling companies to cope with the demand.
a business model that has now been applied by almost
The companies which did exist held a monopoly, allowing
every one of its competitors. This success did not, however,
them to dictate the rules of the game, and charge their
completely shield GDA from the problems beleaguering
clients for their own inefficiencies,” says Osorio. He adds
drilling firms. In 2011, GDA had a run of bad business over
that standing up to this monopoly and breaking the norm
a period of six months, resulting in the company having
by offering carefully targeted, meticulously researched
to consider closing its doors. GDA’s owners, a Chilean
drilling proposals allowed GDA to secure its reputation in
consortium named Guiñez Engineering, gave Osorio an
the industry.
ultimatum: turn the situation around in 30 days or be shut down. Under pressure, Osorio visited each team member
Nowadays, it has parlayed this reputation into working
in person, from drill operators to administrative assistants,
with products from recognized brands such as Ingetrol
telling them the reality GDA faced and asking for their
and Coreboss. This reputation may see GDA held in high
commitment. The links to Guiñez Engineering have proved
regard but this does not make up for a lack of clients.
crucial to GDA at key times. Through Guiñez Engineering’s
The mining downturn has seen Osorio cast his net
network, GDA was able to not only offer drilling, but also
further afield as he looks to expand operations outside of
topography and geophysics, greatly expanding its service
Chihuahua and Sonora but this is easier said than done.
portfolio.
“Crisis is an opportunity for creativity,” says Osorio. “But
“Drilling companies commonly charged their customers additional fees for each additional service. We took a different approach by offering all our services for a preestablished fixed price” Juan Barraza Osorio, General Manager of GDA Servicios Mineros
“We purchased topographic equipment that allowed us to
we still run into the traditional problems associated
carry out 3D surveys within mines,” recalls Osorio. “Just
with offering mining services namely, physical isolation
one of these machines allows us to do the same amount
and a limited customer base. Also, in the current global
of work in one day as the previous technology would
market, every company is looking for ways to reduce
have done in seven to ten days.” In 2013, GDA was also
operational costs. GDA will have to continue doing
one of the first companies in Mexico to implement a new
what it does best: provide innovative services to the
system for reusing water during drilling operations. It
mining sector.” GDA’s mission to ensure that its brand
tested the process with a Chilean company and devised
is recognized throughout Mexico has led the company
ways to improve it. Osorio explains that this new water
to defy the typical models of the drilling market and
management system has also helped GDA to reduce its
inspired its competitors to follow suit.
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| VIEW FROM THE TOP
DRILLING PROS OUTPERFORM UNDER TOUGH CONDITIONS LEFT: Víctor Díaz, Director General of Globexplore Drilling RIGHT: Marc Kieler, Principal of Globexplore Drilling
Q: Despite a drop in exploration expenditure, Globexplore
did cut back on marketing and made many small tweaks in
Drilling had up to 95% of its rigs in action in 2014, against
our operations that added up to substantial savings. These
a 35% market average. How was this achieved?
were largely passed onto our clients in the way of more
A: We feel very fortunate to have ranged from having
competitive prices. Nevertheless, due to client demand,
65% of our fleet on contract, at our lowest point, up to
our capital expenditures actually went up in 2014 by
95% during 2014. We spent most of the year at 80% or
over US$1.5 million by purchasing the two new rigs and
better. Our 2014 rig on contract percentages are even
tooling required to hit our clients’ deeper targets. We also
more positive when we account for the fact that, due to
modernized our support truck fleet. Since driving is still
client demand, we purchased two new deep hole core
one of the most dangerous activities around, we want
rigs capable of reaching 2,500m depths. We have over
our team to have the increased safety of newer trucks. In
250,000m on contracts for 2015 so we look forward to
addition, we upgraded the majority of our rigs with new
another strong year. Delivering value and results to our
components that make them safer to operate.
clients has always been our top priority and this year’s increased market share is a nice reward for that.
Q: Since many drilling companies offer diamond core and RC drilling, what is the benefit of acquiring these services
Q: What steps did the company take when faced with
from Globexplore rather than from its competitors?
these adverse market conditions?
A: Earning a positive reputation and solid track record is
A: We reacted quickly and early as the market began to
always our number one goal. We are proud to state that
weaken by reviewing all our systems, procedures and
every client we have worked with would hire us again
overheads. We found many areas that we could improve
and recommend our services. This is the evidence to the
on by becoming leaner and more efficient. We raised our
fact that 85% of our fleet is currently on contract. There
productivity while cutting our costs. We passed these
have been many challenging projects that caused us to
savings onto our clients and remained profitable yet
lose money but we always completed the contract as
competitive. There is always a contractor that is willing to
promised to make sure the client was happy with our work
take the risk of being the lowest price but we find that
and would hire us again. A drill campaign is complicated
most often, unrealistic prices are unsustainable and end up
enough and we work hard to give our clients solutions,
hurting both the contractor and the client. All contractors
not additional problems. This may sounds simple but a
share common costs for genuine quality and safety. If
common complaint is that drilling contractors act as if they
the client wants results provided to them on time with a
are the only contractor around and expect the client to
priority on safety and accuracy, then prices can only go
hold their hand through the process.
so low. Often, the contractor with the lowest price has higher accident rates and decreased sample accuracy and
Another complaint is that such contractors add excessive
production.
additional costs during the campaign. We take ownership of our work and the risks associated so that the client
Q: Prior to the downturn, some companies had been
can stay on budget. We understand that we are here to
careless about their capital expenditure. How have drilling
meet or exceed our clients’ expectations in every way. We
companies compared in terms of capital discipline?
consistently accomplish this with a team of experienced,
A: We cannot speak for other drilling contractors but
professional experts supporting and operating the most
we certainly found some fat to trim. We have always
modern fleet of drills in Mexico.
operated under the default of providing the company with
100
the highest quality equipment available and our salary
Q: How is Globexplore able to reach depths of up to
packages tend to be above the industry average. We will
2,400m, and what are the most geologically challenging
not sacrifice quality in those important areas. However, we
settings where you have worked?
A: We are currently drilling deep holes at a mine in
a better business model to make less over more meters than
northwestern Sonora that has a reputation for having the
to make more over less meters. This represents more work
most difficult ground in Mexico. It is extremely fractured yet
and more risk but it is a smarter way to increase our reach.
we recently completed the straightest and deepest hole of over 1,300m in HQ diameter. We could have continued but the
Q: What has the Globexplore Foundation for charitable
client stopped the hole. We also had the highest production
programs achieved in 2014?
rates compared to two of the largest drilling contractors in
A: In 2014, we remodeled and upgraded two schools in local
the world drilling next to us. We have a boutique rig builder in
communities where we operate. We did our annual posada
Canada that we worked with to build what we believe to be
for a local orphanage among several other initiatives. In
the most modern, high-tech core rig ever built. We have an
2015, we are working on a public service campaign on
agreement of exclusivity on this design and plan to purchase
highway billboards about wearing seatbelts, driving below
additional such rigs in the near future.
the speed limit, not texting at the wheel, and other driving safety reminders. We are also the principal sponsor for an
Q: Which measures has Globexplore taken in order to
NGO named The Mexican Round Up, which was founded by
reduce operating costs?
geologist Jackie Stephens. This organization holds a major
A: Several years ago, we designed and built a custom
annual event in Hermosillo plus other events throughout
software platform named the Globexplore Management
the year that raises money for students aiming to enter
System (GMS). It was a very large investment of both time
the mining industry. The funds go towards scholarships,
and money but it now helps us manage the important
field trips, laboratory equipment, and helping students
aspects of our business in real time, allowing us to react
network with the industry to secure internships and future
immediately and make better decisions. Mistakes cost
employment.
money, so GMS helps reduce human error and standardizes most important processes. Mistakes cost money, so GMS
Q: Many junior and drilling companies are going out of
controls our inventory levels to ensure the proper amount
business in Mexico and around the world. Do you expect
of drilling consumables and spare parts are always available.
the situation to get worse in 2015?
This reduces our downtime and increases our production,
A: Unfortunately we feel it will get worse before it gets
which cuts costs. When a contractor suffers from
better. Thankfully, we were acutely aware of the industry’s
mechanical downtime, when a hole is deviated, or when a
cyclical nature and prepared for this downturn several years
drill gets stuck, costs begin to soar. We lead the industry
ago. We have cash reserves that can maintain our expenses,
when it comes to avoiding all of these pitfalls. Finally, we
including payroll, for several years even without a single drill
are here to build lasting value with our clients by not being
turning. We have not had to tap into this reserve yet and are
greedy and by keeping our profit margins competitive. It is
working hard not to. Fortunately, we have won several major contracts for 2015 and will have 85% of our fleet working for the rest of the year and into 2016. Q: What are Globexplore’s objectives for 2015, and how will it reach them? A: We plan to continue polishing our operational efficiencies by dissecting every detail of our work in search of continuous improvement. We will purchase additional man-portable rigs with deeper hole technologies and continue our policy of replacing any rig that is older than four years. We will upgrade our camps so our people feel as comfortable as they do at home. We will run another company-wide safety audit to search for ways to increase our industry leading safety record. Finally, we will complete our new logistics center in central Mexico which is already underway. When completed, it will have an administrative office, deep inventory, mechanics shop, and other logistical support needed to back up our field operations as quickly as our modern headquarters in Hermosillo currently does for northern Mexico.
101
CANADIAN COMPANY VOWS TO OVERCOME DRILLING WOES The domination of Canadian companies in the Mexican
In order to hold onto its market share and be primed to
mining landscape can be attributed to many factors:
expand it once growth returns, G4 Drilling has sought to
the country’s mining supremacy, its relative proximity to
make its basics above all reproach. In a time where mining
Mexico, the experience of its companies in a number of
companies are closely scrutinized for any environmental
environments, and the financial bearing of the Canadian
fault, G4 Drilling goes beyond the call of duty to minimize
mining industry. While all of these have contributed, not
the impact of its operations. Daigle says that the company
all Canadian executives agree on why their country has
only uses biodegradable additive processes, ensures
attained its leadership role in Mexico. Robert Daigle,
that all working areas are kept clean, and that all waste
Director of G4 Drilling Mexico, believes that Canadian
is disposed of on the spot. Furthermore, it has come up
mining firms have outpaced their competitors in a number
with a strict oversight process for its drilling rigs, whereby
of ways. “The exploration market is highly competitive,”
preventive maintenance is constantly performed and
states Daigle. “To stay ahead of the game, G4 Drilling has
detailed in logs to avoid all emissions of pollutants or leaks
had to develop the ability to provide tailored services to
of oil or fuel. Besides this, Daigle strongly believes in the
its clients and harness leading safety systems to reinforce
fact that reducing costs does not mean withdrawing from
what we offer. Although most of our work is carried out
the public eye. G4 Drilling has made a strong push to stay
in Canada, we have offices in Colombia, Mexico, and
present in the minds of mining players by participating in
Panama as well. Mexico was actually our main source of
national and international conventions.
revenue for several years,” explains Daigle. His argument is a compelling one. Although G4 Drilling has certainly
Although he acknowledges that business slowed down
capitalized on its country of origin’s reputation, this is
from 2013 to 2014, Daigle is determined to see beyond this
hardly enough to remain a market leader. Being a Canadian
adversity and he maintains a positive outlook on the seven
mining company does not confer special protection from
years since G4 Drilling entered Mexico. Over that time,
adverse conditions.
G4 Drilling has been hired for exploration work at such
“All companies use similar equipment and similar techniques for drilling. Such companies do not traditionally have the luxury of choosing the location of their projects” Robert Daigle, Director of G4 Drilling Mexico
102
G4 Drilling also seeks to dismiss another matter, namely
heavyweight projects as Coeur Mining’s Palmarejo mine
that much diversification exists within the exploration
and Agnico Eagle’s Pinos Altos mine in Chihuahua. Overall,
sector. “All companies use similar equipment and
this has led it to drill a yearly average of 350km. However,
similar techniques for drilling. Such companies do not
replicating this success in the future will require exploring
traditionally have the luxury of choosing the location
new paths. “We expect to see many changes in this sector
of their projects. We have to play to our strengths to
over the next few years. There will be an increased focus
be flexible in a range of conditions,” says Daigle. One of
on the environment and on safety,” says Daigle. “But, at the
those strengths is the experience and skill of Canadian
moment, a large majority of the drilling rigs in Mexico are not
mining executives. When Daigle first moved to Mexico
being used since there is simply not enough work coming in.
for G4 Drilling in 2008, many Canadians went with him
We hope that by the beginning of 2015, the market conditions
to set up operations here. However, the company made
for exploration will improve. We are ready for the moment
it an early priority to train up a fully Mexican team. In
when business picks up again, both in terms of staff and
2014, only two Canadian supervisors were left in the
equipment.” This confidence is based on a foundation that
country. Another area that G4 Drilling seeks to focus
again shows how Canada can impact the Mexican mining
on is providing a lower price per meter drilled than the
market. Daigle explains that northern Canada has seen an
competition. Unfortunately, achieving this came at a
increasing interest from Chinese players looking for iron ore.
serious cost as the company has had to lower the wages
Mexico’s reserves provide him with assurance that this trend
of its employees, with Daigle finding no comfort in the
will soon spread here, which, along with activity surrounding
fact that competitors have done so as well.
gold mines, could lift drilling out of the doldrums.
| VIEW FROM THE TOP
DRILLING FIRM LOOKS TO MAJORS CARRYING OUT EXPLORATION FRED DAVIDSON CEO of Energold Drilling (Energold) Q: How has Energold improved its operations in Mexico as
Q: How have Energold’s R&D, manufacturing, and logistics
it secured new funding and incorporated new acquisitions
strategies been evolving in Mexico?
into its fold?
A: We consistently invest in the R&D of our drill rig
A: In 2014, Energold renewed a US$10 million debenture
technology as it is a crucial part of being able to stay ahead
from 2011 used for an acquisition in the energy services
of our competitors. With Dando’s history of developing
space, which has now reached US$13.5 million. Mexico
some of the best rigs in the world for the last 150 years,
holds tremendous promise in the energy space given its
we have been innovating and building Energold’s rigs at
proximity to hotbeds of activity such as Texas. We are
Dando’s facility since our acquisition in 2011. However,
continuing to evaluate possibilities of offering additional
given our significant exposure in Mexico, it certainly makes
energy services such as seismic drilling and shallow
logistical sense to build a plant here. In fact, Energold
production here. Furthermore, given our experience and
already has a small manufacturing facility in Chihuahua
logistical advantage in Mexico, we have begun to offer
that produces specific parts and maintenance parts for our
seismic, water, geotechnical, as well as other products and
rig fleet in Mexico. When we set up an operation anywhere
services that Envirodrill, Dando Drilling, and Bertram have
in the world with our frontier rigs, we always ship the
brought to the Energold group.
rigs with at least six months’ worth of consumables and supplies, as logistics and import processes are generally
Q: How has Energold sustained its business despite the
time-consuming.
worldwide drop in exploration budgets? A: Energold offers a unique value proposition for many of
Q: With many drilling companies shedding personnel, has
our clients where we provide drilling solutions that also
Energold been able to attract any of this talent?
maximize exploration dollars through logistical savings
A: The downturn in mineral drilling activity worldwide has
by removing the need to mobilize helicopters and heavy
certainly provided us a large pool of experienced drillers
trucks to the sites. Furthermore, we are able to generate
and drilling supervisors to choose from when projects
goodwill and local support through our hiring policies. In
come up. We have an HR manager who scours the field
a world where resource nationalism is increasing, being
for talent and matches it up with jobs when they become
known for gaining positive rapport with the locals is a big
available. Human capital is one of the three crucial pillars
plus for many of the midcap and major miners we work
of our operation, besides the rigs and logistics. We learned
with. This social benefit is an edge we provide to majors.
from the brief downturn in 2010 that securing the right
Energold has been successful in continuing to source work
talent when the market is slow means we can grow much
from majors who have a long-term commitment to keep a
faster again when the market rebounds.
pipeline of projects going. On a positive note, some majors are now starting to make acquisitions and investments in
Q: What progress have you made in harnessing renewable
midcaps and select juniors. In several instances, Energold
energies in your operations?
has drilled for the junior companies that simply continued
A: One of Energold’s main operating advantages is minimizing
their drilling programs after being absorbed by the majors.
impacts on the local environment. The incorporation of
With our experience in energy, geotechnical, and water,
renewable energy into our operations is another notable step
Energold has been able to transition more mature projects
to helping commodity exploration become as non-invasive
into brownfield longer term contracts. The trend of more
as possible. The solar panels are working out very well in
majors conducting their own programs instead of relying
providing a necessary source for lighting during evening shifts
on juniors also meant they were more likely to further
and as a small-scale power back-up to diesel generators.
projects closer to production and cash flow. Energold has
With renewable energy and batteries advancing so quickly
been able to capture some of that transition in Mexico and
in recent years, we are excited about the implications these
parts of South America.
technologies will have for the future of commodity drilling.
103
NIMBLE DRILL PROVIDER DEVELOPS EDGE IN INNOVATION Few
segments
mining as
value
the
Moving equipment around different mines requires a
are
comprehensive range of adaptability levels. At the basic
the
end, Coreboss will sometimes get requests to add wheels
industry’s twists and turns
susceptible
to a rig, enabling it to be pushed. At the more advanced
as drilling. With Coreboss
end, rigs need the capability to pass through small cross-
being one of the world’s
sections of adits. Coreboss can build rigs that are small
best
drill
to
designers,
its
enough to navigate such restricted entrances, but still retain
Operations
their full performance. The same logic applies to specific
Director, Malcolm Chappell,
products used inside mines, where improved efficiency
has a refreshingly sanguine
and performance are constantly sought. Another product
view
National Malcolm Chappell, National Operations Director of Coreboss
of
chain
impact
that Coreboss is actively promoting in Mexico is the thin-
of a sluggish mining market on drilling prospects. “Even
about
the
wall drill rod, which provides a larger core for the same drill
though things are improving, with the first signs of life now
series. Instead of an NQ core size, this thin-wall series will
starting to appear, the last couple of years have been long,
provide a larger NTW core with less curve, while using less
burdened by the worst down cycle in a century,” he says,
water and less face torque on the drill. Chappell explains
while giving Mexico a great vote of confidence. “Mexico is a
that the reception of this innovation among operators has
great mining jurisdiction with a strong future and a fast track
been mixed. Operators who are sticking to the status quo are
method for building mines. Furthermore, the country is a
not showing interest, but, due to the possibility of using less
natural extension of our operations as a Canadian company
water and producing a bigger sample, Coreboss innovations
and is well on the way to becoming a top market for us. In
such as these are finding traction among those looking to
fact, we estimate around 25-30% of steady annual growth
get more performance out of their rigs. Similarly, Chappell
coming from here.” Coreboss’ ability to navigate the turbid
admits that newer drilling companies, or those with a younger
waters of the mining industry comes from its history of
executive team, tend to be much more aggressive about
designing and manufacturing drills for all comers. “We have
trying out and adopting fresh technologies. “Our products
supplied some major drilling companies with proprietary
have a self-selecting aspect to them because they are a little
drilling technology. This is thanks to our ability to provide
more technologically advanced than the alternatives. We
portability and an integrated supply chain for drills and drill
seem to attract companies who notice that our machines fit
supplies,” explains Chappell.
their needs, and are interested in trying something different.” Alongside the thin-wall drill rod, Coreboss has developed
Despite an engaging brand name, Coreboss has a long
systems for recovering drilling fluid, which is of particular
history of making drills that do not bear its moniker. The
interest to projects experiencing a deficit of water. A couple
company has instead built up its reputation by providing
of these systems have already been rolled out in Mexico, and
a more refined and diverse drill product portfolio.
while they do cost more and take more skill to run, they allow
Its equipment can be designed to answer specific
operators to significantly reduce their water usage.
size or transportation challenges within mines, or to
104
make operations more environmentally sound. On the
Being smaller than the likes of Atlas Copco or Sandvik,
environmental side, Coreboss uses a track carriage on a
Chappell says the size of Coreboss is what allows it to be so
lot of its rigs, allowing drilling contractors to mitigate the
nimble. “Our customers are always suggesting alternative
use of bulldozers for building access roads, and avoiding
methods for us to operate, and we listen to those ideas. We
remediation costs for repairing said access. Chappell says
also drill with our equipment in actual exploration situations
that many mining companies have been receptive to such
before it is released. Our customers appreciate the fact that
ideas. “Market conditions mean that mining operators are
our designs have been tested in the field.” He adds that
keen on saving money and becoming greener. Our track
Coreboss seeks to maintain a balance between recognizing
carriages have brought down the total holistic cost of
new technologies, incorporating them into new models,
projects by removing the need to build and deconstruct
and finding a successful price point. Chappell returns to his
access roads.” Hand in hand with this, Coreboss also
positive tone about the current state of mining economics.
provides rubber tracker mounted drills, which Chappell
“The operating mines have both the budgets and the cash
says come at a good price point and offer drilling
flow for this situation. New exploration currently suffers
contractors a faster option for mobilization and setup.
from a lack of investment, but we expect contractors to
This speed and efficiency is at the heart of the company’s
do well, especially as Coreboss becomes more and more
flexible product offering.
specialized with its drilling techniques,” he concludes.
| VIEW FROM THE TOP
DIVERSE DRILLING SOLUTIONS FOR MEXICAN MINING MARKET MARTIN FITCH-ROY Managing Director of Dando Drilling Q: How does Dando Drilling expect the global drilling
A: Our heritage in the UK dates back to 1867, so we have
industry to evolve?
had lots of time to perfect our technology. While we are
A: Dando Drilling (Dando) trades in many countries around
not doing much in the UK or Europe for now, we are the
the world, meaning that we know that the depression in
last active drilling rig business in the UK. Comparatively,
the hard-rock metal mining exploration industry is a global
Mexico presents a buoyant economy for mining without
issue. Fortunately, our company does not depend entirely
much competition. The country does not have a big drill
on this market as energy drilling and coal exploration in
manufacturer of its own, so most of the equipment is being
East Asia are both very much on the up. Water well drilling
imported. Dando Drilling will service all of Latin America by
and drilling services to dewater mines are also very active.
manufacturing in Mexico. We will then sell to other countries,
This shows that while some areas of the drilling industry
including Peru and Venezuela. Our success here will be
are facing challenges, other segments provide many
based upon us meeting the expectations of the Mexican
opportunities to those who can detect them. Drilling service
market. Mining operations want companies that can drill a
providers need to diversify because there is business to be
dewatering well and conduct geotechnical drilling as part of
found outside hard-rock mineral exploration.
the same package. Dando can provide all of these services.
Q: What opportunities has Dando detected in the Mexican
Q: How are Dando’s technologies prepared to adjust to
market?
different environments and requirements?
A: We believe there is a demand for water well drilling,
A: We have carried out all the types of drilling that are
not only for providing water supplies but also for mine
required in Mexico. Latin America tends to see mineral
site dewatering. The deeper mining companies go, the
deposits being found at high altitudes, which is an issue
more water they will find, creating a necessity for the
we have already addressed. It is simply a matter of using
type of services we provide. Our conversations with top
more horsepower. The engines we use in the Americas are
hydrogeological experts in Mexico have shown us that
much bigger than the ones we use in Europe. Our Mintec
the country needs heavy-duty machinery to dewater
rigs are a range of exploration drilling rigs that use a reverse
mines. Dando Drilling can provide both the equipment
circulation (RC) system to protect the sample from the bit.
and the drilling for this process. We find Mexico to
These machines can perform up to 100m of RC drilling in an
be a very comfortable country to operate in; it has a
eight-hour shift. So even though it is expensive, pneumatic
significantly large and dynamic mining sector, and we
RC drilling is very fast and lowers the rate per meter. It is also
believe the situation will continue to improve. Energold,
extremely versatile as it can perform core drilling, exploration
the drilling services company that acquired us in 2011,
drilling, or drill a water well, just by changing an attachment.
has 30 mineral exploration rigs in the country across many projects, granting us access to its portfolio of
Q: How does Dando’s range of drilling fluid products help
clients. The main challenge will be the competition we
improve operational performance?
will face from other manufacturers and contractors.
A: We provide drilling fluids for different exploration
However, we are confident that our knowledge and
segments. In water well drilling, bentonite is traditionally
expertise in water well drilling will allow us to succeed in
used to make the drilling easier and keep the hole open.
the market. We are also keen on finding Mexican clients
We do not fully recommend this nowadays as there are
for our multi-purpose drilling rigs, which can be used for
far more efficient products, such as the polymers, that
mineral, water, geotechnical, and GSHP drilling. Mexico
we can now provide. They are biodegradable, non-toxic,
has never seen anything like it.
and highly viscous. Our products considerably simplify the drilling process and do not contaminate the permeable
Q: How will Dando’s successful British manufacturing
rock formations. The polymer we provide is one of the
heritage be of use for its Latin American operations?
most viscous products in existence.
105
VERSATILE DRILLS ESSENTIAL TO EXPLORATION ACTIVITIES When a company takes on the most difficult projects
performance and it contributes to equipment wear. “We
and delivers safe and effective operations, its name gets
opted to invest in competitive products that help improve
around. VERSA Perforaciones (VERSA) has worked with
our performance when it comes to core recovery,” Dumont
big names in the mining industry, such as Endeavour Silver
tells. Although VERSA uses state-of-the-art technology,
and Silvermex. The company has also been working in one
Dumont brings about the question of what makes a good
of Dyna Resources’ projects for some years now, where it
drilling company. “The success and quality of exploration
has drilled a total of 30,000m. Francois Dumont, General
activities does not depend so much on the technology
Manager of VERSA Perforaciones Mexico, attributes his
used, but on the people conducting the operation,” states
company’s success to its technological capabilities, the
Dumont.
quality of its service, and its quick response to customers’ needs. Dumont stresses that the mining industry is in
Mexico has an important mining tradition and, according to
constant motion. For instance, recently approved legislations
Dumont, the mining sector has become a target for many
are changing operational models, and environmental norms
foreign firms. However, he believes that not many companies
are becoming increasingly strict. This became evident to
are ready to overcome the challenges this country presents.
Dumont when he noticed the demand for large drill bits was
“Mexico’s topography is very complex compared to other
dropping. Smaller and more versatile drill bits that minimize
countries where I have worked,” comments Dumont. “This
environmental impact are now being sought instead.
causes operating costs to be higher because more hours are
“Nowadays clients ask for mobile or semi-mobile drills that
required for exploration activities and the equipment wears
can be easily deployed to exploration sites. Suppliers that
out faster. The Mexican earth crust has plenty of fractures that
are able to provide these alternatives will certainly be able
wear out the drill heads and demand heavier polymer use.”
to continue growing,” Dumont explains adding that the
Mexico’s challenging geological conditions cause companies
current popularity of mobile drills is related to the fact that
like VERSA to raise the costs of their services. Dumont notes
around 16 people are needed to assemble and dismount a
that, in the past 18 months, clients have moved away from
piece of equipment, which is rather inconvenient for most
less flexible quoted rates and more toward steady prices that
companies. VERSA’s machines provide great mobility
consider all the costs entailed in an exploration campaign so
because of their size and distribution, and Dumont says
that clients can better plan their budgets. “Companies have
his company does not need large groups of people to drill
become very cautious regarding their budgets because they
efficiently. The synergy between mobile equipment and
do not want to be economically responsible for inconveniences
small teams results in a competitive advantage because
that happen during exploration. Under this approach, the risk
tight performance ultimately reduces costs for clients.
of additional expenses falls on the contractor.”
“It is likely that companies that bought drilling equipment just before the end of the last mining boom went bankrupt because they could not fulfill their financial obligations” Francois Dumont, General Manager of VERSA Perforaciones Mexico
106
The quality of a drilling company’s staff and equipment
Cost control and efficiency are the main strategies VERSA
is ultimately put to the test when cores are delivered.
has adopted in order to survive in the mining industry’s
Dumont is firm to stress that poor cores do not result
current situation. For Dumont, fostering organic growth
from problems associated with drills, but rather from
is equally important because incurring debt can be
a lack of appropriate drilling products. He claims this
dangerous under the latest fiscal regime. The ongoing
tends to happen when the right polymers are not used,
list of struggling junior companies seems to be proving
which is common when operators use the wrong product
him right. “It is likely that companies that bought drilling
or decide to cut expenses by acquiring cheap products.
equipment just before the end of the last mining boom
Dumont claims that many drillers insist on using bentonite
went bankrupt because they could not fulfill their financial
excessively without considering its abrasive effects.
obligations,” explains Dumont. “Growth has to be humble
Conversely, VERSA has decided to use it as little as possible
and well managed, in order to be prepared for the many
because it significantly reduces the drilling procedure’s
contingencies that can occur in this sector.”
RUBBER TRACK CARRIERS TAKE ON STEEP SLOPES AND SOFT GROUND The
of
construction. The underbodies of specialized MOROOKA vehicles
resulting
from
have
also
been
adopted
by
international
work
at
corporations for underground resources and geological
presents
a
surveys, power line maintenance, tunnel construction and
regular bottleneck given
similar activities. “The combination of a rubber track, and
the remote access of such
independent bogie assemblies with a HTS system results
sites, and requires a lot of
in a machine that is virtually unstoppable. As the bogies
human labor. MOROOKA, a
respond to varying ground conditions, contact with the
major distributor of rubber
surface is constantly maintained providing an unmatched
track carriers, feels that
traction that can overcome any operational challenge,”
its vehicles can effectively
adds Valbuena.
mine
Raúl Valbuena, Operations Director for Mexico, Central America, and Brazil of MOROOKA
transportation
earth and various materials sites
solve the lion’s share of these troubles. This is because these carriers can perform efficient transport operations
“We have expanded the range of possibilities for operators
even on weak or severely inclined ground where ordinary
looking to relocate and transport materials within a mining
trucks or other heavy vehicles dare not tread. This is
property and other applications. Our solutions have
because MOROOKA’s rubber crawler invention has proven
become favored in the mining industry for the transport
its power for 60 years on all manner of terrain. “Our clients
of personnel, of mobile workshops, of drilling equipment,
have found a way to work fast and secure without worrying
and of piping systems,” Valbuena highlights. Some mining
about the terrain or environmental conditions. MOROOKA
companies in Mexico have employed MOROOKA vehicles
vehicles, thanks to their special transit system, do not get
to transport the equipment used to weld different types of
stuck, and can overcome steep slopes and unconsolidated
piping and to carry the spare parts needed to repair heavy
soils. Their versatility makes them a very useful vehicle for
machinery on site. “If something can be truck-mounted,
many industries, especially mining,” says Raúl Valbuena,
it can be mounted on a MOROOKA. This is a distinct
MOROOKA’s Operations Director for Mexico, Central
advantage to get heavy machinery or spare parts to hard-
America, and Brazil. According to Valbuena, companies are
to-access sites. The carriers can be adapted for specific
now able to take routes that were previously discarded due
purposes to help contractors become more productive,
to the complexity of the topography.
profitable,
and
environmentally
friendly.”
Another
important application that has been entrusted to the From its home base in Japan, MOROOKA has long focused
rubber crawler carriers is to directly transport drilling rigs.
on developing and perfecting transport vehicles for industry
According to Valbuena, drilling companies are now able to
applications. The company’s carriers enjoy rubber crawlers
far more easily relocate rigs from site to site. Traditionally,
and hydrostatic transmissions (HTS system) that combine
exploration companies had to dismount a drilling rig,
to deal with challenging topographic conditions while
transport it manually or by truck, and then set it up again
maintaining vehicular stability. They are complemented by
at the new exploration site. This resulted in important time
a hydraulic transmission gear which uses its own engine to
losses and endangered the safety of the operators due to
drive the hydraulic pump and motor, helping the system
the weight of the components they needed to carry. By
to be more efficient and economical. This has helped
providing the ability to directly mount drilling rigs on its
products like MOROOKA’s carriers and dumpers become a
crawlers, MOROOKA has given exploration companies
regular sight on mine sites, trundling earth, sand, and other
a
materials. “Our carriers exert minimal pressure on the
operations. “With MOOROKA, exploration campaigns can
ground. That is the secret to getting an enviable dynamic
be performed at a far higher rate in relation to traditional
behavior but also to reduce the negative impacts on the
methods. The use of our machines results in significant
ground,” Valbuena remarks. With an underbody inspired by
time savings while decreasing the dependence on human
ship designs and a bogie system that uses track rollers to
labor,” Valbuena comments.
versatile
method
to
conduct
continuous
drilling
absorb shocks from road beds, these vehicles are capable of achieving high speeds while ensuring safe operations.
He adds that these vehicles not only improve life for
In addition, the rubber rollers have been tested under all
mining companies, but also for their drivers. MOROOKA
sorts of conditions to ensure their ability to navigate steep,
used Caterpillar cabins with safety and comfort in mind,
muddy, or snowy ground. This careful blend of design
ensuring heating and air conditioning are present, while
and efficiency has enabled MOROOKA to see its vehicles
opting for a design that allows for maximum operator
deploy in a wide variety of fields beyond mining, such as
visibility and easy to use controls.
107
New mines are still being inaugurated and expansion projects are still being commissioned, giving construction and engineering companies the ability to continue developing projects in the Mexican mining industry. In light of tightened market conditions, though, mining companies are now planning to make their future projects more cost-effective to generate higher ROI. In order to make mines more economical, the planning of the project requires higher technology, such as advanced mine planning software, which can model risks, finances, and a series of variables that affect the way that a mine operates. With such technology, long-term or day-to-day plans can be mapped out to know where and when to mine. Moreover, progressive companies are now planning the closure of a mine, well before the operations begin, in an attempt to reduce the work and investment needed to be done when the operations cease. After all, modern strategic mine planning is aimed at maximizing the value created from extracting a mineral resource.
Mexico’s development-stage mining projects are a key focus of this chapter as it analyzes new technologies and methods aimed at improving efficiency and reducing operating costs for new or expanding mines. The articles and interviews assess the value propositions of leading construction companies and suppliers, as well as engineering service providers. Suppliers of important components for the building and construction phase share their expert knowledge in this field, detailing the intricacies of products like mobile spaces, formworks, flexible air ducts, specialized cements, boring machines, mine cables, pumps, and pipes.
PLANNING & CONSTRUCTION
5
CHAPTER 5: PLANNING & CONSTRUCTION 112
Construction Planning from Resources to Restoration, M3
113
Mining Construction Experts Set New Safety Records, Kepler Constructora
114
MAP: Mexico’s Main Mines Under Development
116
Construction Success Gives Ideal Segue into Mining, Equiplan
117
Strong Formworks Essential for Mining Infrastructure, Doka
118
Efficient Mining Production Relies on Integrated Services, DMV Consultores
119
Plastic Ventilation Setup Sees Costs Plummet, G+ Industrial Plastics
120
TECHNOLOGY SPOTLIGHT: Taking Boxhole Boring Machines to the Next Level, Herrenknecht
121
Boring Machines Find Home Deep inside Mines, Herrenknecht
122
Concrete Fabric Endures Across Range of Applications, Concrete Canvas
123
Tough Cement Designed for Mine Floors and Walls, Grupo Cementos de Chihuahua
124
Mexican Modular Spaces Dwarfing the US Competition, Commosa
125
TECHNOLOGY SPOTLIGHT: Comfortable Dormitory for Adverse Operational Conditions, Commosa
126
Comfortable Facilities Anywhere and Anytime, Espaciomovil
127
Modular Buildings that Meet Top Construction Standards, Williams Scotsman
128
Targeted Coatings Increase Mining Equipment Durability, Sherwin-Williams
128
Rubber-to-Metal Adhesives Ensure Longer Tank Lifespan, Lord
131
MINE SPOTLIGHT: San Dimas, Primero Mining
132
Fluid Operations Rely on Dependable Pipes, Tubería Laguna
133
Utilizing Extremely Resilient Valves in Mexican Mines, Techflow
134
Rental Set to Allow Pumping Business in Mexico to Prosper, PowerPrime Pumps
134
TECHNOLOGY SPOTLIGHT: Most Popular Modular Bridge in the World, Mabey Bridge
136
Polyethylene Cables Far Tougher than Common Rubber, Tele-Fonika Cable Americas
136
Canadian Cables Built to Withstand Mining Conditions, Mine Cable Services
111
CONSTRUCTION PLANNING FROM RESOURCES TO RESTORATION operation costs a lot of money for the company,” says Jaime Carvajal, a senior General Arranger for M3 Mexicana. “Once an operation has started, it should only stop on planned maintenance days.” This is not an easy task when considering that most mines experience unplanned downtime on a yearly, or even monthly, basis. Carvajal mentions that M3 can help prepare companies to overcome this downtime, even when caused by the design, engineering, and construction of other Rafael Ayala, Process Engineer for M3 Mexicana
Jaime Carvajal, General Arranger for M3 Mexicana
companies. “Many of our structural engineering staff also specialize in forensic engineering, meaning they can find out
have
how and why something failed without having constructed it
specific operating and financial requirements that set
themselves,” shares Carvajal. “Fixing other people’s mess and
them apart from construction projects in other industries.
making sure that these structures will not fail again is one of
Mine construction requires the transportation of materials
the services that we offer.”
Mining
and
metallurgical
construction
projects
and machinery, as well as water, electricity, and housing facilities to remote locations, often through rough terrain
The company has established such a reputable presence in
and over a period of several years, before a mine can be
the industry that, according to Carvajal, when M3’s founders
fully operational. Additionally, the facilities need to be
and executives approve a project’s feasibility study, certain
built to resist harsh operational conditions, including
banks take it as a valid investment endorsement for the
high temperatures, chemical corrosion, and rock impact.
project. “Some projects are too risky to be economically
Naturally, the design and production of these structures and
viable, and that is exactly how M3 presents it to the
operations requires highly skilled architects, engineers, and
banks,” adds Carvajal. “We carry out all the evaluations
construction managers. In North and South America, M3 has
under international norms such as the Canadian NI 43-
become a respected design, engineering, and construction
101.” The US engineering and construction firm also follows
management firm responsible for managing large expansion
the strict standards and norms of its home country in
and construction projects for mining companies.
all international markets, placing it at the forefront of quality, safety, and technological development standards
“M3 was founded in 1986 in Tucson, Arizona, and has
in Mexico. Carvajal makes it clear that the company does
acquired comprehensive experience in the design and
not compromise on quality or safety to reduce the cost
construction of mining-metallurgical processing plants
of its services. “Companies that offer low-cost services
throughout the years,” says Rafael Ayala, a senior Process
tend to deliver the most expensive projects due to the
Engineer for M3 Mexicana. “Since these projects require
increased volume of accidents and failures caused by the
highly
capital
low-quality work,” he states. Along with strict quality and
investment, mining companies have solicited our services
safety standards, M3 employs best practices related to
for the engineering and design of their processing plants.”
environmental consciousness. Carvajal explains that M3
M3’s reputation stems from decades of involvement in
has follows trends in the sustainable development of the
the mining industry and a list of successful projects in the
mining industry as it has become more committed to the
mining-metallurgical sector. The trust that is placed in M3
environment. This evolution can be partially attributed to
is supported by a list of important clients which includes
the growing importance of adequate mine closure and
Grupo Mexico, Freeport-McMoRan, and Goldcorp. The
restoration plans. “For proper mine closure, an operator
company is mostly involved in gold, silver, copper, zinc, and
needs to carry out research on the local fauna and flora.
lead projects, but its areas of expertise run the gamut from
These species must then be kept and maintained, together
power generation, transmission and distribution, control,
with the original soil, so that they may be reinstated after
and automation, to programming, waste management and
the mine has been closed,” he clarifies. Once a mine has
water treatment, metal lixiviation, ionic exchange of gold,
closed, its ramps and slopes must be smoothed in a
silver, and uranium, and even to logistics.
controlled, non-destructive manner to avoid erosion and
technical
expertise
and
considerable
surface run off. After the landscape has been remediated,
112
Given the complexity of any mining and metallurgical
the safely kept soil and species can then be relocated and
operation, any design and construction firm must ensure that
the landscape can be restored. M3’s participation with these
all mining-metallurgical structures will endure while remaining
types of projects helps it maintain its close connection to
open to expansions. “The halting of a mining or metallurgical
the mining industry’s sustainable development.
| VIEW FROM THE TOP
MINING CONSTRUCTION EXPERTS SET NEW SAFETY RECORDS JUAN CASTILLO PAZ Director General of Kepler Constructora Q: How did Kepler Constructora become involved in
Q: Who are Kepler’s direct clients, and what is its
construction projects for the mining industry, and which
relationship with these clients?
specific projects hold the most significance for you?
A: Our direct clients are the project administrators, which
A: Kepler Constructora (Kepler) was created in 1975 in
are hired by the mine owners. For example, we were hired
Monclova, Coahuila, which is known for the mining of
by M3 for Peñasquito, while ICA Fluor hired us for the
coal and iron ore. We have been involved in projects in
Buenavista del Cobre project. The administrators design
the precious and industrial metals sector since 2004. Our
the mine, do the engineering, take care of the procurement,
first prescious metal mining project was at the El Sauzal
and hire construction companies to carry out the project.
mine in Chihuahua, previously owned by Glamis Gold and
On top of that, they are responsible for choosing the
now by Goldcorp. The mine was relatively small; it only
quality and the types of materials to be used. After all
had two mills, one crusher, one conveyor belt, and some
these considerations, they present the project plan to the
lixiviation tanks. After that project, Kepler’s reputation
owners who then make the final revisions and take care of
started spreading to the mining sector in other states. We
the expenses. It is not very common for mining companies
then started working on Goldcorp’s Los Filos mine, who
to directly contract construction firms.
then recommended us for the Peñasquito project and Fresnillo’s San Julian mine in Chihuahua. In total, we spent
Q: Since the design, engineering, and construction of
five years building lixiviation plants for gold, lead, and zinc
mining projects are highly complex, how do you view the
at Peñasquito. This makes Peñasquito the most important
capacity of Mexican companies to manage these aspects?
project we have worked on, alongside Barrick Gold and
A: Mexican companies still need to improve their
Goldcorp’s Pueblo Viejo mine in the Dominican Republic.
capabilities and expertise for managing such projects. I
Our biggest project now is Grupo Mexico’s Buenavista del
have noticed that most of the exploration geologists and
Cobre mine, where we have constructed the building for
technicians for feasibility studies in Mexico are foreigners.
two of the biggest mineral grinding mills in the world. This
Moreover, the administrators in all the mining projects we
required 40,000m3 of concrete since the building was over
have been involved in have been foreign companies. While
40m high. After two years, we are currently finishing the
Mexican mining companies are hired for the construction,
third SX-EW plant at the site, where copper is extracted
companies such as M3 and ICA, with the latter being partly
through solvents and electrolytic procedures.
Mexican, handle the design, the engineering, and the management.
Q: What have been the main challenges for Kepler in entering the mining industry?
Q: What makes Kepler stand out from the competition?
A: Mining projects are often carried out in regions far away
A: When I entered Kepler in the 1990s, we started to focus
from urban areas. For example, it takes 15 hours of travel
on acquiring the ISO 9001:2008 certification, which took us
to reach Coeur Mining’s Palmarejo mine in Chihuahua.
five years. We were the first Mexican construction company
This is the most complex aspect of working in the mining
to acquire this certificate, and we have followed on to obtain
industry for Kepler. We have to provide room and board,
national and international certificates for quality, safety,
transport, and all the basic necessities for our workers, as
and environmental compliance. We have now achieved the
well as televisions and football courts for entertainment.
highest records for safety and quality in Mexico. At Grupo
Transporting machinery is also an important challenge
Mexico’s Buenavista del Cobre and La Caridad projects,
since the roads to a mine are often narrow and rough.
we have worked for over three million man-hours and four
Kepler’s
of
million man-hours, respectively, without accidents. At La
transporting machinery, while our Human Resources
Caridad, alongside Siemens, we have worked on two power
division takes care of managing our staff, camps, and the
generation plants and broke the worldwide record for man-
living conditions that they operate in.
hours worked without accidents in the history of Siemens.
Material
Resources
division
takes
care
113
| MEXICO’S MAIN MINES UNDER DEVELOPMENT
4 5
6
1
7
2
9 8
10 11
13 15
3
12
14 16
17
BAJA CALIFORNIA SUR 1.
El Arco – Grupo Mexico – Baja California Sur – Cu, Pb – 2015
2.
El Boleo – Baja Mining – Baja California Sur – Cu, Zn, Mn, Co - 2015
3.
San Antonio – Argonaut Gold – Baja California Sur – Au – N.A
SONORA 4.
Santa Gertrudis – GoGold Resources – Sonora Au – N.A
5.
El Pilar – Mercator Minerals - Sonora – Cu - N.A
6.
La India – Agnico Eagle – Sonora – AU, Ag – N.A
CHIHUAHUA 7.
Bahuerachi – Jinchuan – Chihuahua – Au, Ag, Zn – N.A
8.
San Julián – Fresnillo plc - Chihuahua– Au, Ag – 2015
9.
Parral Tailings Project – GoGold Resources – Chihuahua - Ag, Au – N.A
SINALOA 10. El Gallo II – McEwen- Sinaloa – Au, Ag, – N.A(D) 11.
El Cajón – Scorpio Mining – Sinaloa – Ag, Cu, Au – 2015
12. Plomosas – First Majestic Silver – Sinaloa – Ag – N.A
114
18
DURANGO 13. La Preciosa – Coeur Mining – Durango – Ag, Cu, Zn – N.A (D) 14. La Joya – Silver Crest – Durango – Au, Ag – N.A ZACATECAS 15. Camino Rojo – Goldcorp – Zacatecas – Au, Ag, Zn, Pb – 2016 16. Juanicipio – MAG Silver – Zacatecas – Ag, Au – N.A GUANAJUATO 17. Cerro del Gallo – Primero Mining – Guanajuato – Au, Ag – 2015 18. San Ignacio – Great Panther Silver – Guanajuato – Ag, Au – N.A MICHOACAN 19. Angangueo – Grupo Mexico – Michoacan – Cu, Zn – 2017 GUERRERO 20. Rey de Plata – Peñoles – Guerrero – Pb, Zn, Cu – 2016
8
19
20
115
CONSTRUCTION SUCCESS GIVES IDEAL SEGUE INTO MINING As
a
contractor
with
companies struggle with the lack of adequate roads. Equiplan
decades
of
can do both the planning and construction of roads so that
three experience
handling
mining companies can speed up their operations.
the supply of materials and
Carlos Arnulfo López, Director General of Equiplan
116
for
The company is confident about its ability to service the
construction sites, it was
transportation,
demanding mining industry, given that it has been put
a
for
through its paces on quality controls by the likes of ICA and
Equiplan to turn to mining.
natural
extension
Grupo Carso. López says both national and foreign mining
Heavily certified for the
companies look for suppliers that are knowledgeable when it
construction of industrial
comes to quality, safety, and environmental security matters.
projects, Equiplan is hailed
“These subjects might not always have been important in the
in the public sector, through clients like SCT and the Ministry
past, but they are now. Equiplan already has the right quality,
of the Interior, and in the private sector where it counts on
safety, and environmental care manuals to comply with. We
customers like Grupo Mexico, ICA, and Grupo Carso. The
are now seeking to bolster our reputation with the right
company’s Director General, Carlos Arnulfo López, says
certifications, which is why we are currently in the assessment
mining companies are keen on the range of services Equiplan
stage for the ISO 9001:2008 certification,” comments López.
provides, including earthworks, working platforms on dirt
One fact that López has noticed is the difference in legislation
roads, tailing dams, or industrial buildings for processes
governing tendering mechanisms between the public and
such as grinding and beyond. “Our participation in the
private sectors. “Tenders in the private sector lack a grade
mining sector is concentrated on our collaborations with
system for submitted proposals. Private companies seldom
Grupo Mexico and M3. Our company continues to look for
give feedback on the competitiveness of each proposal.
new opportunities to carry out earthworks operations in this
They might comment that the costs included in a proposal
sector,” explains López. The contract with Grupo Mexico
were not attractive enough, but they never benchmark the
consists of the construction of a five-story building with four
proposals.” He notes that the system should become far
electrical control quarters in Buenavista del Cobre. Since
clearer by laying out the areas that are most important to
mining sites are often in remote, hard to access locations,
companies putting up a tender.
STRONG FORMWORKS ESSENTIAL FOR MINING INFRASTRUCTURE Formwork systems are far more important than is
Peru, Chile, and in other countries. “It takes around 40 days
commonly known, as they are the molds that create
to bring the material from Austria,” explains Coronado.
structures, from bridges and dams, to offices and
“In order to meet the demands of the mining industry, we
processing plants. These systems are typically temporary
predict the amount of formwork systems we will need for an
and are used to contain poured concrete, to mold it to
entire year based on a list of aligned projects.”
the required dimensions, and support it until it is able to support itself. Among those providing formwork services,
As can be imagined, transporting formwork components is
Doka stands out, boasting a long history of formwork
one of the most important yet challenging aspects of Doka’s
expertise and a commitment to local projects on a
business. “The entire system needs to be delivered to the
global scale. Enrique Coronado, Commercial Director of
mining site at different times, so we first send the formworks
Doka Mexico, believes that “Doka’s formwork structures
that are needed to build the initial structures,” describes
represent our greatest contribution to the mining
Coronado. “If the system does not arrive as a complete set
industry. Although we have only been in Mexico for just
or on time, we run the risk of being penalized by our clients.
over five years, it is already a very important market for
Therefore, it is very important to make sure that the logistics
the company. Our main targets here are infrastructure
are well-planned and properly executed.” To avoid delays,
projects at mining sites, highways and bridges, housing,
Doka’s offices are in daily communication with its clients and
public buildings, and offices; however, mining holds many
constantly review the logistics program to ensure that the
possibilities for us to grow the company in Mexico.”
formworks arrive when needed. In the case of Buenavista del
“Doka’s
formwork
structures
represent
our
greatest
contribution to the mining industry. Although we have only been in Mexico for just over five years, it is already a very important market for the company” Enrique Coronado, Commercial Director of Doka Mexico
As a pathway into the Mexican mining market, Doka is
Cobre, one truckload of formwork components takes up to
supplying construction companies like Dycusa, Kepler
four days to arrive to the mine once loaded up in Mexico City.
Constructora, and Trax Construction with the needed
For this reason, the plan must be carefully executed so that
formwork systems for Grupo Mexico’s Buenavista del Cobre
the systems arrive when expected and in full form, enabling
mine in Sonora. The company focuses primarily on open-
construction to go ahead on time.
pit mining projects and offers an array of systems that can be used to construct walls, tunnels, and even dams.
Since infrastructure for an open-pit mine requires millions
Based on clients’ needs, Doka’s engineering team is able to
of dollars to organize, it is vital that the material can
recommend a flexible solution that enables companies to
also withstand the weight of the concrete and the harsh
create a range of structures, as well as systems that allow for
environmental conditions commonly found on mining sites.
the construction of a specific edifice. “Frami and Framax Xlife
“The quality guarantee that we offer our clients comes from
are our main systems for wall construction; the load-bearing
relevant European certifications and the technical calculations
D2 and Staxo 100 towers can be used for supporting heavy
of our expert engineers,” tells Coronado. “Our engineering
loads such as thick slabs, and the H20 circular formworks can
and calculations must be flawless to avoid accidents or
be used for curved walls,” explains Coronado. The company
improper construction of cement structures. If the project
offers over 60 products with a range of applications for
requires it, we bring in experts from Doka branches in other
mining sites, such as the construction of beneficiation plants
countries, but for the mining sector in Mexico, that has not
and offices. This variety has seen Doka able to supply major
been necessary thus far.”
construction companies such as Ingenieria de Ciudades and ICA Fluor, as well as those aforementioned.
As projects expand and mines are developed, Doka looks to position itself as a reliable partner and formwork expert,
Given its vertical integration, the company produces over
as it has in other Latin American countries such as Peru. “If
90% of the formwork components in its native Austria, then
any construction process allows for the use of formworks,
transports them to its operations in Mexico, the US, Canada,
we want to be involved,” concludes Coronado.
117
EFFICIENT MINING PRODUCTION RELIES ON INTEGRATED SERVICES According
&
most relevant production variables,” underlines Alanís
Young’s Business Risks in
Gutiérrez. Of these variables, the firm focuses heavily on
Mining and Metals 2013-
increasing the Throughput Potential (TP) of the processes
2014 report, apart from
within mining systems.
operational capital
Francisco Alanís Gutiérrez, Director Partner at DMV Consultores
to
Ernst
challenges,
allocation
and
Based on the group’s experience, Alanís Gutiérrez claims
access to capital represent
that the ideal project for them is an underground project
the most important risks
with high grade minerals. Ideally, this needs to be located in
facing the mining industry.
a property with enough geological knowledge for identifying
DMV Group, a Mexican
the sections not yet mined, but this could be difficult to find.
firm involved at virtually
Although projects with thin veins of 300 g/t of silver do
every stage of the mining process, is fully aware of these
exist, the projects that DMV Consultores handles, such as San
challenges and the effect they have on its clients. “The fact
Rafael and Fanny, produce between 200-260 g/t of silver
that we operated our own mines for many years has given us
with gold containing minerals of 4-5 g/t gold grades. In terms
unequalled experience and sophistication. We have multiple
of exploration, DMV Group looks for strategic alliances with
divisions within our group that can cover all the needs of
other consulting firms or independent geologists. However,
a mine throughout its lifetime,” explains Francisco Alanís
from the mine design stage onwards, DMV Consultores
Gutiérrez, Director Partner at DMV Consultores. The group’s
is able to draw on the group’s capacity to fulfill its clients’
experience dates back to the late 1960s when Francisco
needs, be it assistance with prefeasibility, economic feasibility
Alanís Quiñonez obtained the San Rafael and Fanny mines
studies, or metallurgical processes. With regards to mineral
in Durango, subsequently creating what is now the Group’s
processing, DMV Group’s experience was greatly advanced
DMV Minera division. Since then, the Group has worked
by the construction of its flotation plant at the San Rafael
on a number of projects as operators, contractors and
mining site. “When constructing our beneficiation plant,
consultants, and has acquired a wealth of experience in the
the objectives were to support our extractive operations
mining industry that few contracting and consulting firms
and provide a service to the communities that rely on
can lay claim to have. DMV Group is hard at work to acquire
small-scale mining. Our flotation plant is able to process
private capital in order to continue investing in its mining
120 t/d,” explains Alanís Gutiérrez. At the moment, the firm
projects. “The expansion costs of our existing projects
is evaluating the option of adding a mill and a leach pad in
currently exceed the company’s available capital. In order
order to further increase production. Due to the lower grade
to take advantage of projects in Mexico and the rest of the
ore produced at some of the company’s mining sites, Alanís
continent, we are trying to attract additional investors,” he
Gutiérrez mentions that they require beneficiation processes
adds. Since the group specializes in building projects from
better suited for low grade mineralization. “In fact, we are
the ground up, it is actively looking to advance available
considering lixiviation with thiosulfate as an aim to innovate
projects from the prefeasibility stage into production.
our chemical processes. Cyanation is the most common method but we are confident that there are other more cost
Following the disincorporation of the assets of the Mining
effective methods with a lower environmental impact.”
Development Trust (FIFOMI) in 1991, the group decided to
118
acquire one of FIFOMI’s beneficiation plants as a way to
Providing this wide range of services naturally requires
increase its mineral processing capabilities and production.
a talented and skilled workforce. However, with large,
Despite having had to sell part of its mining operations
multinational companies coming into Mexico, it has become
to Endeavour Silver in light of the low prices of metals,
harder for DMV Group to attract the right professionals.
DMV Group’s continuing involvement in the project as
“It is very tough to compete with Canadian companies
external consultants gave rise to DMV Consultores. Now,
that have great purchasing power, are able to provide an
over 40 years after the purchase of the San Rafael and
attractive salary, and offer friendly working hours,” says
Fanny mines, DMV Group has continued to grow inside
Alanís Gutiérrez. However, with the recent crisis in the
and outside of Durango. It has been involved in several
global metals markets, mining companies are reducing their
important mining projects such as Silver Standard’s La
work force and laying off hundreds of employees. This is
Pitarrilla mine and First Majestic’s La Parilla. It also employs
something that DMV Group would never do, according to
over 200 contractors and consultants, and owns a range of
Alanís Gutiérrez. “Our commitment to our employees and
advanced mining equipment. “The services that we provide
the close ties formed throughout the years has allowed the
help our customers to identify, control, and optimize the
Group to maintain a loyal and highly dedicated workforce.”
| VIEW FROM THE TOP
PLASTIC VENTILATION SETUP SEES COSTS PLUMMET NINA DION Director General of G+ Industrial Plastics Q: Which products have most helped you position G+
we were struck by the beauty of Zacatecas and by the
Industrial Plastics in the mining industry?
similarities between the people here and those in Quebec.
A: Our most successful product is the G+ Speed Air Duct,
We chose Zacatecas as the site for our first manufacturing
which has been sold to mining companies around the
expansion base to be close to our Mexican customers.
world. Ventilation accounts for 50% of an underground mine’s energy costs, or 10% of its total costs. The purpose
A lot of our clients have specific requirements, to which
of the Speed Air Duct is therefore to cater to the industry’s
our products need to adapt before being installed on-
need to improve ventilation and reduce energy costs. Every
site. Our entire product portfolio was developed through
material has a friction factor, no matter whether it is marble,
constant communication with customers, and their good
stone, or plastic. The lower the friction factor, the faster the
ideas help us create better products. Being on the ground
air will travel through and the less energy is needed to push
in Mexico allows us to keep abreast of the Mexican mining
it. The Speed Air Duct has a friction factor of 3.5, which is
industry’s requirements. We are now looking to set up a
the lowest in the world, so it offers the cheapest and most
manufacturing plant for the Speed Air Duct in Fresnillo.
energy efficient way to circulate air through a mine. We are
Once we have trained people further and gained a certain
the only company that owns this product and the reception
foothold in Mexico, we can rapidly start manufacturing a
has been fantastic. We do not need to convince companies
broader range of products in the country.
to buy it as they specifically call us to request it. Q: Does the manufacturing process of the Speed Air Duct Throughout the years, we have developed many plastic
itself vary from mine to mine or are the changes applied
products but we have never seen growth comparable to
at a later stage?
that of the Speed Air Duct. It has become a major point of
A: We have different standards, according to various
interest for all mines as its energy cost saving potential is
ventilation requirements. The size of the Speed Air Duct
huge. The use of traditional steel ventilation methods will
ranges from 24 inches to 72 inches in diameter. One big
require more fans and cause energy costs to spike. It is
project in Canada saw us install 6.2km of the 72-inch
true that our plastics technologies are more expensive to
duct. The 39kg weight of our standard 8-foot long ducts
purchase than traditional options, but when all the costs
makes them very easy to install without the need for big
are taken into account, the payback is obtained in less than
machinery. Steel remains our biggest competitor but the
a month. Within a year, the savings are massive. The Speed
differences are evident, given how heavy steel is and how
Air Duct represents a major advance in helping mining
easily it dents. Our plastic ducts are very resistant; they can
projects become more financially viable.
even be compressed to save space when being transported without losing their final structure, shape, and integrity.
Q: Since your technologies are developed in Canada, what first attracted the company to Mexico?
Q: How difficult has it been to convince companies, which
A: We were growing very fast in Canada, and it seemed
traditionally use metal, to switch to plastic?
logical to share our technology in the international mining
A: Every time an innovative product comes along, there is a
market. Our goal was to be a problem solver for mining
level of pushback from companies that are set in their ways.
operations with high energy costs. We carried out market
It took a little while at first but after one company first tried
research in several countries and noticed the high energy
our product, they replaced their entire fiberglass set-up with
prices being paid in Mexico. We chose this country to be
our Speed Air Duct. They saw it was easy to install, easy
our first market over South Africa. While South Africa also
to move around, and it reduced energy costs. Today, many
faces punishing power costs, the distance involved, the time
prospective clients go to visit that original mining customer
difference, and the lack of a free trade agreement such as
to see the results. Thankfully, the mining industry is a small
NAFTA made it more difficult. Upon first visiting Mexico,
world, and word about positive new innovations spreads fast.
119
| TECHNOLOGY SPOTLIGHT TAKING BOXHOLE BORING MACHINES TO THE NEXT
the haulage level. So far, the BBM has proven itself to be
LEVEL
one of the most valuable tunneling technologies when it
A large number of underground mines around the world
comes to consistent and high production rates as well as
need to a variety of slot holes and vertical or inclined
high mobility and flexibility. The first model to enter the
shafts
to be drilled in order to access the ores. To
mining market was the BBM1100, a tailor-made product
achieve this, Herrenknecht engineered and developed a
designed to construct safe and fast slot holes that could
revolutionary device, known as the Boxhole Boring Machine
drill shafts of 30° with diameters ranging from 1.1 to 30m
(BBM). The design behind this BBM is based on micro-
in hard rock formations. During the engineering process,
tunneling pipe-jacking that has been tried and tested in
the company focused on creating a product that could be
underground operations in several mining jurisdictions.
remotely operated in order to avoid exposing workers to
While Herrenknecht has over 25 years of experience in
risks and to optimize the machine’s mobility. Herrenknecht
underground tunneling, its BBM has set new standards for
was also seeking to create a borer that could be quickly
safety and minimal drift dimension. With this technology,
relocated in reduced spaces. To facilitate transportation,
mining operators can now achieve higher production
the product is equipped with a compact crawler that
rates while gaining significant time savings in the creation
allows it to be moved quickly from one point to another
of slot holes. The BBM provides operational advantages
in confined underground environments. All of the central
that cannot be matched by the traditional drill and blast
components, such as the cable drum, power pack, and
method or by blind-hole techniques.
jacking frame, can also be positioned separately due to a modular design that facilitates operations in tight spaces.
120
Since its creation, the BBM has been primarily used for
A further competitive advantage of Herrenknecht’s BBM
gold and copper mines, where it has proven its advantages
is that it can be fully remote controlled. These advantages
during the block caving process since it contributes to
have made Herrenknecht’s BBM the ideal product in mining
outlining and preparing the drown point needed during
situations where the flexibility to operate in confined
the excavation process. Other common applications
spaces is required. Although these machines have not yet
mining companies have found for the BBM are the drilling
entered the Mexican market, Herrenknecht is planning to
of ventilation shafts and the tunneling that is needed to
release them here soon as it is certain this technology will
transport extracted materials from the production level to
have a similar impact on mining operations in the country.
BORING MACHINES FIND HOME DEEP INSIDE MINES from one industry to the other by understanding the true need of this industry,” explains Weinhold. As it made this transition, Herrenknecht also benefited from two highprofile projects which put it on the map. It was contracted by the Mexico City government to provide TBMs for an expansion to its sewage system, as well as for the construction of the Canal de Chalco project. “The fact that our technology was used on these projects was a big step David Juárez, Project Manager for Mining at Herrenknecht
Michael Weinhold, General Manager for Mining in Latin America at Herrenknecht
Herrenknecht’s claim to fame can be traced back to its founder, the eponymous Martin Herrenknecht, who began designing small tunnel boring machines (TBMs) by himself in the 1970s. His skill at the craft soon caused
for us since it helped us gain recognition in the Mexican market,” admits Weinhold. “The success of these projects helped us provide several more TBMs to the construction industry in Mexico. We apply the same quality standards to our projects in the mining industry, supporting our clients through aftermarket services that make us stand out.”
purchase orders to pile up, and forcing him to expand his
manufacturing
and
capacity
eventually
leading
Herrenknecht to become the global firm it is today. From the outset, Herrenknecht saw the potential its machines could have in the mining sector. The company soon aimed to develop mining equipment that could facilitate extractive
operations
in
underground
mines,
while
focusing on safety and performance improvement. Michael Weinhold, Herrenknecht’s General Manager for Mining in Latin America, says that the company’s specialization is equipment for large-scale raise boring. “We have actually designed and built the biggest raise borer in the world for a company in Australia. It can drill a hole of 8m in diameter
Herrenknecht found little trouble in adapting its equipment from construction to mining, as the differences are not major. The main variation is that tunnels for construction have small inclinations whereas the mining industry requires drilling at steeper inclinations of up to 15-18%. Mining also presents one major new challenge, the drilling of vertical shafts, for which Herrenknecht pioneered the development of the box hole boring machine. “In principle, it is the same technology as the pipe jacking technology, we only made some changes to adapt it to mining requirements,” says Weinhold. As for its projects in the construction industry, Herrenknecht sought to deliver top results to its clients in mining. “Safety, speed, and reliability are the top benefits that our machinery provides, including
and can drill up to 2,000m deep,” he explains.
at the bore drilling stage. We need to show our customers Alongside this behemoth, Herrenknecht also works closely with borehole contractors to design equipment that meets the specific needs of underground mining companies. “Customers
guide
us
through
their
knowledge
of
underground operations so that we can deliver a machine to satisfy their drilling requirements. Most of our TBMs are unique since each is manufactured to meet a client’s personal requirements.” However, this tailoring is done with the knowledge that these machines are not to be used just once. Herrenknecht’s design philosophy is that once the machines have been used for a project, they can be redesigned and used for other projects. David Juárez, Herrenknecht’s Project Manager for Mining, says that this experience means that the company can design and sell its equipment directly to mining companies or contractors. Despite mining being an obvious market for TBMs and raise borers, Herrenknecht entered the Mexican market through the construction industry. “We saw the potential of the Mexican mining market for mechanized excavation applications that we were using in the local construction market. We thought that we could adapt our machines
how our mechanized process brings these advantages. Our technology can carry out drilling targets in one-third of the time compared to conventional methods. The opportunity to reach the production stage in a shorter time makes this investment incredibly appealing to mining operators,” states Weinhold. One issue, however, is convincing the notoriously traditional Mexican mining industry to buy new equipment. “It is a long process to convince such a well-entrenched industry, but we are working hard to show mining companies the value of our products,” says Juárez. “The Mexican mining market is full of opportunities, but machinery suppliers have to settle on the right strategies to get customers to change from their current providers. Our approach has been to sell customized solutions that are perfectly adapted to the needs of every mine operator.” For 2015, Herrenknecht aims to raise the profile of both its raise borers and its box-hole borers in the region. Currently, its success extends beyond Mexico, and with three machines operating in Chile and one in Bolivia, the rumble of Herrenknecht’s borers could soon be heard beneath the surface of many Latin American countries.
121
CONCRETE FABRIC ENDURES ACROSS RANGE OF APPLICATIONS
Mauricio Silva, Director General in Mexico of Concrete Canvas
Back in 2005, an innovation
were surprised at how versatile our product is.” Based on
was made in the UK that
the initial interest, Concrete Canvas started to visit mines
soon
drawing
to provide concrete solutions for ditch linings and erosion
attention. Concrete Canvas
began
control during road construction. While conventional
is a flexible concrete fabric
concrete requires a large workforce and equipment to be
that becomes rock hard
applied, Concrete Canvas can be applied quickly using
when exposed to water
a single crane and two extra pairs of hands, according to
to form a thin layer of
Silva, giving it a major advantage. One of the company’s
canvas built to withstand
biggest successes in the Mexican mining industry has been
extreme
temperatures,
implementing erosion control solutions for the pithead mine
fire, and water. One of
entrance at Goldcorp’s Los Filos mine in Guerrero. Concrete
Concrete Canvas’ key selling points is that it offers the
Canvas was placed over a 200m2 area stretching downhill
resistance of concrete construction without the usual
to control water flow and soil erosion. The installation was
accompanying infrastructure. With a specially formulated
done in 36 hours and allows Goldcorp to keep the entrance
dry concrete mix and a PVC support across one side, it is
to the mine accessible even during periods of heavy rains.
fully waterproof even when fully immersed. Furthermore,
Silva even quips that the 36-hour installation time was
once hydrated and set, Concrete Canvas’ fiber matrix helps
actually lengthened by safety regulations and verifications.
to prevent the creation of cracks. Mauricio Silva, Concrete
According to Silva, Goldcorp tested the resistance of
Canvas’ Director General in Mexico, says that this product
Concrete Canvas and was surprised that it offered higher
is rapidly becoming a chosen option for ditch lining, slope
resistance than conventional concrete. Concrete Canvas is
protection, and other applications in the mining, oil and gas,
able to resist a maximum pressure of 407 kg/cm2 two hours
and infrastructure industries. Beyond its natural rapidity
after it becomes solid.
and cost competitiveness, compared to other concrete solutions, Concrete Canvas is available in three thicknesses
This is not the only application that Concrete Canvas aims
of 5, 8, and 13mm. Moreover it reduces the environmental
to have in the Mexican mining industry, as explained by
impact of concrete projects by as much as 95%.
Silva. “In the mining industry, water management is crucial. Mine water should not be allowed to percolate down
One of Concrete Canvas’ inventors and the company’s
the soil due to its toxicity. Our product is a geosynthetic
Director, Peter Brewin, explains the flexibility available
cementious composite mat that has a PVC underlayer,
to companies when allowing Concrete Canvas to set.
making it practically impermeable while having a high
“Ordinarily, Concrete Canvas takes between one and two
tolerance for exposure to acid and alkaline solutions. It can
hours to dry out. However, in hot environments such as the
also be used to cover roofs where workers live, as Peñoles
desert, this can drop to as little as 20 minutes.” To counter
is planning to do at the Tizapa mine in the State of Mexico.”
this, retardants can be added to the mix to delay the drying
Additionally, Concrete Canvas can be used to cover
time. Brewin adds that a “conventional Portland cement
culverts and pipes transporting water, with a resistance
based concrete reaches 80% of its strength in 20 days.
so high the company feels comfortable offering a 50-year
Concrete Canvas can do so in 24 hours.” With its applications
warranty. Although the mining industry is a prime business
and flexibility firmly established, Concrete Canvas turned its
driver in Mexico, Concrete Canvas has begun looking at
attention to international expansion. Latin America quickly
other applications.
became a hub, with the product deployed in projects across
122
Chile, Peru, and Panama, while the Chilean mining industry
Silva points out one challenge that does hinder Concrete
became a particularly steady source of business. This led
Canvas’ expansion in Mexico, namely the country’s
the company to enter the Mexican market in 2013, where
famously
the mining sector was given prime focus. “We approached
with the government here can take up a lot of time. We
the likes of Goldcorp, Peñoles, and Minera Frisco across
are currently looking to get our products certified by
Mexico, while also seeking to supply small companies in
the government so that it may be used by CAPUFE and
the north of the country,” says Silva. “To supply the mining
CONAGUA for erosion control and emergencies. The
industry requires going through many small steps to finally
product has already been approved by CFE, which could
land a project. We started by attending mining expos as
help us to get deals in the other governmental entities. The
visitors to talk to mining companies about the benefits of
mining industry does not need this certification, which is
our products. The initial feedback was positive as people
why it was so attractive for us from the onset.”
tortuous
bureaucratic
processes.
“Working
TOUGH CEMENT DESIGNED FOR MINE FLOORS AND WALLS Supplying a mine is never as simple as putting forth
Whether building retaining walls, anchoring systems, or
one standardized product and selling it to every mining
formwork routes, the main challenge is always the stability of
customer around. From health and safety to tooling and
the ground or the walls, which are naturally the cause of most
construction, the specifics of each mine differ, as do the
accidents in mines. GCC has designed its products to directly
requirements of each operator. This led Grupo Cementos
mitigate such risks. Product lines like Lanzamix or Dinamix
de Chihuahua (GCC) to visit each mine to fully understand
can coat areas of mines that require fast setting cement.
and provide for its cement needs. Such a strategy may
Dry mixes are based on the company’s Fraguamax setting,
seem obvious but Servando Valdez, GCC’s Mining and New
while high quality aggregates can be used to stabilize almost
Products Manager, explains that GCC broke new ground in
any area inside a mine. This speed of application melded
doing this. “We were one of the first cement companies to
with resistance has been a major advantage, enabling GCC
implement this model of directly visiting mines. Thanks to
to make inroads in the mining industry. “Once applied, our
its favorable results, many companies have followed suit,
products only take 30-90 minutes to harden and stabilize.
but being the first to implement it gave us many years
Many customers have told us that through our products
to perfect the way we serve mining companies and to
they are able to increase safety in mines and minimize the
understand their needs,” he explains.
accident rate by rockfall,” explains Valdez.
“All mining companies that have properly paved their roads have managed to increase their hauling productivity and reduced their maintenance costs” Servando Valdez, Mining and New Products Manager of Grupo Cementos de Chihuahua
After 22 years working in mining operations, Valdez knows
One of the R&D challenges that GCC has had to face is
how diverse those cement needs can be. “Having stable
achieving high compressive strength for its cement in all
and resilient floors is essential for a mining project’s
conditions found in mines. “When we refer to large slabs of
continuity. GCC’s cements allow for pavements and floors
rock, it is obvious that companies need to install systems
to be built very quickly. We make it possible to repair or
other than cement. They still need to drill and install
cement a new path during off hours, which is invaluable to
anchor systems and cables to contain rocky bodies, but,
mining companies as we do not interrupt their production
within tunnel work, our products provide the necessary
activities,” he says. GCC uses its visits to suggest products
stability,” says Valdez. “After installing Lanzamix in the
tailored to conditions in both underground and open-
areas they are developing, companies can immediately
pit mines. In the case of underground operations, the
proceed with blasting programs without having to worry
company is able to propose cement thicknesses that can
about the concrete’s adhesion, its resistance, or about
support the regular passing of heavy machinery. In open-
rockfalls.” GCC states that the use of common cements
pit mining, it is vital that the soil be made sufficiently
would mean that companies would need to wait 8-20
consistent to withstand the weight of operations through
hours for it to set before continuing to work. Lanzamix can
retaining walls or that roads be able to take the stress
provide a resistance of 150kg/cm2 two hours after being
load of a lot of traffic. Furthermore, the repeated stress of
applied, and can achieve a resistance of up to 300kg/cm2
such traffic can cause a lot of lesser cements to actually
if allowed to set longer. This is highly relevant to mining
damage the vehicles, but according to Valdez, this is
companies, given the significant economic losses that any
another reassurance GCC can provide. “Paving floors with
stoppages entail. In recent years, the mining industry has
our products protects the heavy equipment that passes
also thrown down the gauntlet to its suppliers. As scrutiny
over them. When floors are unstable or not smooth, tires
has piled up for mines to reduce their ecological footprint,
can be punctured or wear out more easily. Sometimes,
supply chains have had to follow suit. GCC has been no
such irregularities can affect the performance of these
exception and tasked its Technological Innovation Center
machines through their transmissions and axles. However,
with meeting this challenge. As a result, GCC has ensured
all mining companies that have properly paved their roads
its processes do not release noxious dust or gases. It also
have managed to increase their hauling productivity and
benefits from SEMARNAT having passed strict emission
reduced their maintenance costs,” reveals Valdez.
controls for cement manufacturers.
123
MEXICAN MODULAR SPACES DWARFING THE US COMPETITION With human capital at the forefront of many mining
share of challenges in the mining industry. “We would
companies’ considerations, supplying personnel with
like our network of clients to have a better understanding
comfortable and convenient spaces for living, working,
of how to manage a project, as well as of the logistics
and recuperating are essential for maintaining high levels
involved,” explains Reyes. “It is a massive undertaking to set
of health, happiness, and morale. With over 20 years’
up 100 connected modules in an inhospitable place on a
experience in this field, Commosa has become the leading
very tight deadline. Our customers are very demanding, but
manufacturer of mobile and modular spaces in Mexico.
we always provide them with realistic timelines and a solid
Now boasting a total of around 13,000 modules built,
budget, which obliges us to deliver on our promises.”
the company expects its production and services to go from strength to strength in the coming years, as Roberto
Surprisingly, even with such a substantial reach in Mexico,
Reyes, Director General of Commosa explains, “There are
the bulk of the company’s client base comes from the US.
around 15,000 active modules in Mexico today, so we
According to Reyes, the company’s product is fully certified
definitely hold a brand advantage over our competitors.
and complies with US regulations. “Our competitors have
One of our many assets is the ability to produce 200 units
developed their own solutions, but due to the lack of
every month, which is crucial, because if you do not have
regulations, we often see poor quality products in Mexico,”
the production capacity, you cannot grow.”
states Reyes. “By following all the relevant construction
“It is a massive undertaking to set up 100 connected modules in an inhospitable place on a very tight deadline. Our customers are very demanding, but we always provide them with realistic timelines and a solid budget” Roberto Reyes, Director General of Commosa
124
As well as attributing the company’s success to its
specifications laid out by the US, we can focus on our
manufacturing capability, Reyes points out that the quality of
commitment to innovation and cost-saving benefits for
Commosa’s products allows for increased competitiveness
our customers.” The fact that Commosa sells its products
in maintenance costs. The modules themselves are built
to distributors presents an additional advantage for the
with lightweight, durable materials, while the floors are
company. This business practice allows the company to
constructed from maintenance-free, anti-skid surfaces.
focus on its national and international manufacturing, while
Services such as a one-year guarantee for any location in
it delegates the responsibilities of dealing with end users to
Mexico and a quick response time when an accident occurs,
its network of finance companies, leaving its competitors in
add to the attractiveness of Commosa from a customer
the rearview mirror. In Mexico, four Caterpillar distributors
perspective. Even so, the company is not without its fair
also commercialize Commosa’s products, namely Tracsa,
Maqsa, Matco, and Madisa, significantly boosting the reach and market awareness of the company’s brand.
| TECHNOLOGY SPOTLIGHT
Although it is on home turf, Commosa is facing many
COMFORTABLE
competitors coming from outside Mexico, specifically from
OPERATIONAL CONDITIONS
Texas. In this region, as well as local competitors all vying for
Given that mining operations are often located far
a share of its business, a number of international rivals have
away from urban areas, mining companies typically
cropped up. However, Commosa can count on world-class
need to provide living spaces for their workers. While
customers such as General Electric and Williams Scotsman.
there are permanent solutions for mining camps, the
Reyes remains unperturbed, crediting his company’s ability
dynamic nature of a mine may sometimes require living
to inform its clients of potential projects as the reason for
spaces to be relocated. For such conditions, Commosa
customer loyalty. “We always strive to be aware of any
has developed a comfortable mobile living space
major projects that may require our products,” he explains.
with dimensions of 10x38 feet. It has the capacity to
“In many cases, the projects come directly to us, and not
host eight individuals and contains two bedrooms, a
through our network. However, these projects are often very
kitchenette, a dining room, and a bathroom. The 10x38
large, and providing modules to projects on such a scale
dormitory was created as an expansion on Commosa’s
is not something that everyone can manage. Sometimes,
8x38 module, after an audit by ergonomics specialists.
depending on the number of units they have in stock, we
The 10x38 was created after it was detected that this
will divide the project among several companies in order to
added space would allow for a reduction in collisions
provide a faster response for the customer.”
between individuals passing each other inside the
DORMITORY
FOR
ADVERSE
dormitory. This product follows the modular approach To cover its overall demand in Mexico, Commosa has one
of all of Commosa’s products. A modular system adapts
plant in Monterrey to supply the northern region, and one
to architectonic spaces, and all the needs of residents
in Queretaro to cover the Bajio, the Federal District, and the
are compacted and placed on level ground. Another
southeast. Since the Queretaro plant opened four years ago,
advantage is that Commosa’s mobile spaces can be
its focus has been on the oil and gas sector, but the Monterrey
erected without the need for construction permits.
plant has focused on serving the mining states of Zacatecas, Durango, Chihuahua, and Sonora. Reyes offers some insight
Given the variety of climates and conditions present
into the challenging aspect of dealing with some of the more
across Mexico’s significant expanse, Commosa has found
remote and unforgiving areas within these regions. “Mexico
it difficult to design a modular dormitory that fits all
is a big country, where climates are vastly different, and so it
purposes. The humid environment of Mexico’s southeast
is difficult to design a module that works for everyone,” he
and its drier north is but one of these challenges. As
explains. “The highly humid environment of the southeastern
such, Commosa has designed flexible modules, which
region, in contrast to the northern region, where the climate is
require only a slight modification of materials, such as
dry, is just one of the challenges we have faced. We have tried
insulation, to adapt to different conditions. Another
to create a unique product for everyone, requiring only a slight
innovation is the introduction of fiberglass, which is now
modification of materials to adapt it to different conditions,
used for most materials inside the modules due to its low
especially with insulation. Our innovations in fiberglass are
maintenance requirements. The glass fiber fillings in the
now used for most materials inside the module due to its low
walls and ceilings provide thermal and acoustic isolation,
maintenance requirement. Last year, we released 8x38 foot
meeting the US norms that regulate this product. The
modules audited by ergonomics specialists. This led to the
general build-up of the 10x38 foot dormitory consists
creation of an updated 8x38 model and the new 10x38. The
of an IPR steel structure, with a mechanical levelling
larger model was the result of a study, which showed that
system, and a simple axle with an integrated break. The
collisions were more likely in its 8-foot counterpart. In mining
dormitory comes with various included features and a
areas, where land is broader, this wider model is appropriate,
variety of optional ones. The included features are air
but in traditional farming areas where roads are narrow and
conditioning, curtains, 110V electricity plugs, voice and
irregular, our 8-foot wide model still gets the job done.”
data outlets, metallic shelves, a toilet, a sink, a shower, an extractor, a boiler, and bunk beds.
In the modular space market, 80% of the business comes from rentals. Reyes states that the company has managed
The dormitory’s window frames and the frame of the
to manufacture a product that is 15% cheaper than its rival
external door are made of natural aluminum, with
rental units, without compromising on a high level of quality
a double lock on the door, while the inside contains
and low maintenance costs. By complimenting its already
sliding doors. The finishing touches include Canadian
reputable offerings with this option, Reyes hopes to facilitate
kiln dried wood with iron fittings at the ends, compliant
the next stage of Commosa’s success story in Mexico.
with US norms.
125
COMFORTABLE FACILITIES ANYWHERE AND ANYTIME
Eduardo Zarza Fierro, Mining Manager of Espaciomovil
After visiting mining sites
Mining companies also have large storage needs, and
for six years, it becomes
Espaciomovil is seizing on this business opportunity.
easy to recognize workers’
“Mines have to store heavy machinery, tools, and all sorts
needs when it comes to
of goods and supplies. One of the main advantages of
facilities. Eduardo Zarza
our prefabricated warehouses is that they do not require
Fierro, Mining Manager of
welding. Their components are quick and easy to assemble
Espaciomovil, explains that
as long as there is a concrete base on which to mount the
not so long ago workers
structure,” explains Zarza Fierro. The modular warehouses
did not have access to the
can bear corrosive environments because they are made
services
from galvanized steel. “I have witnessed an increase
they
and
have
amenities “Our
in the demand for these warehouses as of late,” says
company has developed modular space solutions over
today.
Zarza Fierro, who claims all of his company’s products
many years so that miners can work and live comfortably.
are necessary across the whole mining value chain. The
We examine the condition of each site in order to deliver a
exploration phase requires a place where samples can
modular solution that adapts to the workers’ needs.”
be stored and cartograms can be made. Modular units that can serve as offices and dorms for workers are
Espaciomovil began working with units mounted on a
needed during the construction and production stages. In
chassis; however, some mining sites are located in hard to
addition, Zarza Fierro says the company’s products can be
access places, making it difficult to transport such units
turned into a medical center to care for the ill and injured
and components by vehicle. These components are now
or laboratories to carry out optical mineralogy studies and
easily transported in boxes, enabling Espaciomovil to set
other determinative tests.
them up in difficult locations. In addition, its products can be assembled and disassembled with ease, allowing the
Since these units are installed outside the areas where
modules to be reused in several locations. Once companies
operations take place, they do not need to be hermetic.
deplete their mines, they can dismount the modular units
However, Espaciomovil’s manufacturing processes ensure
and relocate them elsewhere. If a company is not going to
that its products can withstand any climatic condition
use the units right away, it can pack up the components in
present in Mexico. In fact, geographical and climate
boxes and store them until they are needed again. “Since
conditions are taken into account when making a product
these products are prefabricated, there is no need for a
because these elements determine the design and
specialized assembling team. The units are easy to set up
materials that will be used. “Our products have shown a
in short periods,” emphasizes Zarza Fierro.
great response to rain, dust, and aggressive temperature changes. The structures and linings do need an occasional
Some of Espaciomovil’s most requested products for the
maintenance operation to verify that they still are in the
mining industry include modular dormitories and dining
right conditions,” comments Zarza Fierro. He emphasizes
rooms. Mining sites also require having office spaces on-
the importance of the geographical locations where the
site, making units destined for this purposes a common
units will be used because these determine how thermal
request as well. “Mining companies have understood that
insulation will be done. For instance, if a mining site is in
their staff is the most valuable asset. This sparked a boom
the desert, the units will need heavy insulation so that they
in improving workers’ living conditions. Having comfortable
can withstand intense heat during the day and plummeting
living quarters and facilities has an effect on their mood and
temperatures at night. Standard products can be used in
their overall productivity,” tells Zarza Fierro. He adds that
other climatic zones because these can cover any need
not having a proper resting place can even be dangerous
present in jungles, woodlands, and coastal locations.
since the accumulation of fatigue can lead to accidents.
126
Mining companies have also realized that time and space
Espaciomovil is by no means the only service provider
destined for recreational activities is an important part of
of its kind. In fact, it faces competition from companies
their workers’ wellbeing. Espaciomovil has designed spaces
that are very well positioned in the domestic and foreign
specifically for this purpose, such as gyms, TV rooms, and
markets. “What sets us apart from our competitors is that
game rooms. He mentions that Espaciomovil has a wide
we manufacture all of our products and we commercialize
variety of products that range from austere rooms to very
them directly without any distributors,” tells Zarza Fierro.
complex and sophisticated units, which suit the clients’
Espaciomovil has offices in cities where the types of
different needs and budgets.
services it offers are sought the most.
| VIEW FROM THE TOP
MODULAR BUILDINGS THAT MEET TOP CONSTRUCTION STANDARDS ANDREW AUNS Vice President & General Manager of Williams Scotsman Mexico Q: Considering that the modular construction market
short period of time. We can also provide mobile products
includes many important players, what is Williams
that can offer multiple solutions in hard to reach places such
Scotsman doing to stay ahead of its competitors?
as mining sites. For example, we introduced Moduflex to
A: Our first priority is to invest in our organization and our
Mexico last year, which has been successful in providing new
asset base to ensure we provide the best customer service
options to our clients. It adds flexibility to our portfolio as it
in the industry. There is a short timeframe between when
can be used on mining sites for offices, dorms, or any other
a mining project is awarded and when our products are
kind of modular building needed in such a work environment.
needed on site. This means we must expand our product offering and fleet to ensure these products are available
Q: Which solutions does Williams Scotsman provide to
as needed. This strategy fits seamlessly alongside new
optimize the use of scarce resources such as electricity
products we are launching in the Mexican market such
or water?
as Moduflex. At the same time, we continue to be a full
A: An environmental advantage of modular and temporary
solutions provider. We are not just providers of modular
space solutions is that they provide options that can be
buildings, we also provide additional products, such as
dismantled and removed after use. This means locations
furniture. These products serve as an added value and
can be better restored to their original state without leaving
allow Williams Scotsman to provide a turnkey solution.
residual buildings that can cause environmental damage or violate environmental legislation. Secondly, as we upgrade
Q: How can Williams Scotsman help make mining
and expand our fleet, we continue to source the most efficient
operations more efficient?
materials while working to identify any special needs, such
A: We can best help our mining customers be more efficient
as double tank toilets that can help save on water. There are
by being a full solution provider. We leverage our scale to
certainly opportunities to grow in this aspect of the market
provide solutions for any size of project, whether it requires
in Mexico as such evolutions are very recent here.
five units or hundreds, in a short period of time. This means customers will not fall behind in their project timeline. Finally,
Q: What are the advantages of renting Williams Scotsman
in North America, we can leverage the expertise of our sister
products instead of buying them?
company, Target Logistics, which is an expert in workforce
A: This really depends on what the project is. If our units
accommodations for the oil and gas and mining industries.
are only going to be used for a short period of time, such as
In Mexico, we are particularly looking to grow in the mining
six months to a few years, it makes more sense to rent. For
market by becoming a true turnkey provider. We are already
example, mining companies go through different phases.
experts in space solutions, but we can also become experts
During the exploration phase, a company may only need a
in 360° customer services within that space. If a mining
few small and flexible units for a short period of time. It will
company needs to set up a camp in six weeks, we can come
then switch to larger units as the mining site is constructed,
in and operate it almost like a hotel. We have experience
before transitioning to a semi-permanent solution after
doing so in very large projects in Canada, in Australia, and in
the site is fully established. We can provide various rental
the US, as well as some smaller projects in Mexico.
options to support each phase of development of a mine and help the customer determine the best long-term
Q: What makes Williams Scotsman more efficient than its
solution as their needs become more permanent. There
competitors in terms of logistics and transportation?
are also certain situations in which we provide both rentals
A: We have 13 locations throughout Mexico, which is
and sales. Our core competency is leasing but it all comes
something unique. Our fleet is also bigger than many of
down to how long clients intend to use our units, whether
our close competitors. Our main advantage is our ability
they want to invest the ownership of modular buildings, if
to identify market demands and to transform our units by
further uses for our units will be found, and whether it is
modifying and refurbishing them to fit specific needs in a
worth investing in relocating those units.
127
TARGETED COATINGS INCREASE MINING EQUIPMENT DURABILITY Few companies can boast a heritage that stretches back
In Mexico, Maldonado lists epoxy coatings and polyurethane
to the end of American Civil War. Sherwin-Williams, the
as being the most popular products in Sherwin-Williams’
paints and coatings manufacturer, is one of those that can,
portfolio. This is due to the protective requirements for
and is preparing to celebrate its 150th anniversary in 2016.
machinery operating in dusty environments. The most
Its rich history and success is the ongoing legacy of joint
common product sold is Macropoxy 646, a fast cure
founders and pioneers of their time, Henry Sherwin and
epoxy used to protect the exterior of steel structures,
Edwin Williams. They became forces for change, founding
columns, roofs, tanks, and pipes. Among Sherwin-Williams’
an industry and assisting in the ignition of the industrial age
new products, stands Novolac 325, which can resist both
through discovery, invention, and innovation. The Sherwin-
chemical erosion and temperatures of up to 200oC, further
Williams logo proudly brandishes the phrase “Cover the
expanding its range of solutions. “The new technologies
Earth”, highlighting the company’s goal to continue the
that we provide to the mining industry are designed to
worldwide expansion of its paint empire. This ambition
solve problems related to corrosion caused by temperature,
is well on its way to realization, both geographically and
abrasion, chemicals, and harsh mining environments,” states
industrially speaking, with the company already providing
Maldonado. “Protection against chemicals such as sulfuric
products and services in numerous countries and industries,
acid and cyanide is essential. Many of these chemicals
resulting in USD$10.19 billion total net sales in 2013.
are contained in immersion tanks and can create vapors which are very aggressive toward steel and concrete. Our
Leonardo
Maldonado,
Mining
Business
Development
Manager of Sherwin-Williams, has been at the frontline of
products can make mining equipment last for much longer by reducing these risks.”
the company’s mining efforts in Mexico since 2012. This makes him uniquely positioned to understand the many
Although Sherwin-Williams’ products can all be applied
benefits that the company’s products can provide to the
very quickly, as opposed to rubber coatings that take much
industry, particularly in times of deficit. “During lucrative
longer to implement, rubber still represents the company’s
times, it is common for companies to simply dispose of
biggest competitive threat in the market. The company has
inoperative equipment and replace it with brand new items,”
addressed this threat by developing EnviroLastic AR425,
reveals Maldonado. “Right now, things are different. Mining
a polyurea which can replace rubber inside flotation cells.
companies are constantly looking for ways to prolong the
“Rubber has to be vulcanized, which forms joints when
lifespan of their equipment. Our products can ensure the
the pieces are connected,” explains Maldonado. “Since the
increased endurance of mining equipment, saving both
flotation cells create movement, the momentum can cause
time and money on lengthy, expensive repair procedures.”
a rubber joint to separate, delaying or hindering the mineral
RUBBER-TO-METAL ADHESIVES ENSURE LONGER TANK LIFESPAN With
Edgar Rosas, Sales Manager for Mexico and Central America at Lord
128
85
years
of
process tanks, into which crushed rock and chemicals are
industrial
poured. Tanks, mixers, pipes, and all the metal equipment
experience
in
adhesives,
Lord
knows
that is subjected to corrosion, impact, and abrasion in a
pretty well what will stick
mine are commonly protected by rubber. Without it, the
in any given industry. In
life of the equipment would be incredibly short and the
the Mexican mining sector,
return on investment would be too low,” says Edgar Rosas,
Lord promptly identified
Sales Manager for Mexico and Central America at Lord. The
that its Chemlok adhesive
company is now providing adhesives to cover such tanks
product
be
at the El Boleo copper-cobalt-zinc-manganese mine in
used for attaching rubber
line
Baja California, including two tanks that are fully covered
to
metal
could
equipment,
across their 42m diameter. Aside from directly applying
therefore increasing protection and minimizing wear and
the coating to machinery already inside the mines, Lord
tear. “Our most important mining application concerns
has extensive working relationships with mining suppliers.
the rubber protection that lines the inside of storage and
Chemlok’s ability to bond rubber to metal is what makes
separation process. Polyurea has the advantage of being a
center in Cleveland, Ohio, we have 1,500 chemists working
spray, meaning it can be applied homogeneously and does
on new products and resins for each particular requirement
not create any joints. The drying only takes one minute so
of mining environments,” says Maldonado.
it can also save time, and it is very resistant to the abrasion caused by the movement of minerals and particles.” The
This variety of products is necessary due to how different
only limitation of the polyurea and the advantage of rubber
climatic conditions affect the coatings. For instance, a
lining is the pH levels that these materials can tolerate.
product developed for the Australian market might not fit
Currently, polyurea can only resist pH levels between three
the requirements in Mexico. “Zinc-rich primers need humidity
and ten. If the solutions to be managed have pH levels
to cure, whereas the Macropoxy 100 is designed for very
outside that range, then rubber is the best option. “We are
cold environments,” elaborates Maldonado. “If customers
currently testing an extremely versatile product that will be
in Mexico want these products, we have to convince them
cheaper than rubber and will be able to resist chemicals
that they may not work in Sonora, for example, because it is
that drop into the acid pH range, with an aim to release it
too dry and hot. This can be a struggle, especially when the
soon,” he adds. “To put it into perspective, it can sometimes
desired product is not suitable for a specific situation.” To
take five to six days to cover one flotation cell with rubber.
combat this issue, Maldonado has been tasked with ensuring
With this new product, it will only take a day or two. You
that mines in Mexico are fully assessed before companies
can even apply it when the structures are already built, as
are advised about the best solution to use. Maldonado
opposed to rubber which has to be applied in sections. We
lists Peñoles, Grupo Mexico, and ICA Fluor as customers,
foresee that it will be a future star product for mining.”
while describing the commercial relationship between his
“The new technologies that we can provide to the mining industry are designed to solve problems related to corrosion caused by temperature, abrasion, chemicals, and harsh mining environments” Leonardo Maldonado, Mining Business Development Manager of Sherwin-Williams
The production of coatings and epoxies for mining equipment
company and its clients. “Mining companies usually hire an
comes with its own set of challenges. As mentioned
engineering, procurement, and construction (EPC) company
before, mining involves a broad range of abrasive and
which we then work with to supply the goods. Once the EPC
aggressive chemicals, harsh environmental conditions, and
purchases our products, it will then apply them within the
geographically dependent circumstances. Sherwin-Williams
customers’ mines. Baja Mining was another big client; we
therefore specializes in formulating products specifically
acquired this account during 2012 and worked with them on
designed to operate in these variable settings. “At our R&D
their project El Boleo for about 18 months.”
Lord so confident that its adhesives stand out from rival
Besides adhesives, Lord also produces a range of
products. Rosas states that by counteracting the impact
mechanical parts for the mining industry, covering hubs,
produced by the transfer of minerals and rocks, as well
bearings, and couplings. But the company is most excited
as almost negating the corrosion caused by chemicals in
about its latest line of business: the application of its
metal flotation cells, the combination of these adhesives
adhesives for dampening vibration created by mechanical
and the protective covering can double the lifespan of
components in engines and moving pieces. Alongside
mining equipment. As the solutions used in the froth
this, Lord now manufactures sensors and monitoring
flotation process are usually acidic, they can often erode
systems to detect and control such vibrations. Although
the rubber and adhesives on the equipment. Lord tests
this new revenue stream was first launched to meet the
its adhesives to ensure they can resist such reactions and
demand of automotive clients, it was quickly applied to
withstand high temperatures. “Minerals and rocks are
mining as well. “When a tank is new, the rubber cover
often transported through pipes for kilometers, causing
and walls are thick, meaning that there is practically no
great friction and high temperatures. Our adhesives are
vibration. First launched in 2013, Lord’s new systems and
used to protect the inner walls of these pipes and sustain
sensors allow companies to identify weak spots that
the high temperatures inside,” explains Rosas. However,
develop over time by monitoring vibrations in the tank.
given the vast range of atmospheric and geological
These products are independent of our adhesives range
conditions found in mining sites, Lord’s adhesives need
and we are working to increase their use in the mining
to be adapted to suit.
industry,” concludes Rosas.
129
130
| MINE SPOTLIGHT
SAN DIMAS The San Dimas mining complex is located in western Durango at the border with Sinaloa and has five underground zones: San Antonio West, Sinaloa Graben, Central Bolck, Tayoltita and Arana Hanging Wall. The San Dimas deposit occurs in the central part of the Sierra Madre Occidental volcanic pile which contains rocks reflecting two separate periods of magmatism, which were active between 45-100 million years ago and 32-23 million years ago respectively. Three major stages of veining have been identified in the area, all of them containing variable amounts of mineralization. San Dimas has been mined intermittently since 1757 but modern mining began in 1883 by San Luis Mining which operated the mine until it was acquired by Primero Mining in 2010. Underground gold and silver mining operations are now carried out at all the different ore zones in the district. The mine is operated through underground cut-and-fill and long-hole stoping methods. The main access to the mine follows the topographic relief and allows Primero Mining to intersect the vein at depth through adits driven at river level. The mine is operated through mechanized cut-and-fill on the veins where waste rock is used as backfill, with the width of mineralized veins ranging from 1-3 meters and most of them dipping at 7580 degrees. Most of the production drilling is performed with jackleg drills, although this varies depending on the thickness of the vein. The ore is hauled out of the mine using LHD equipment before being conveyed by rail to the surface using the main access tunnel. This well-structured ore transport system has been carefully crafted by Primero Mining to allow San Dimas to have one of the lowest overall operating costs and cut-off grades in the area. The mill processes ore from throughout the district and has a current throughput capacity of 2,500 t/d and employs cyanidation and zinc precipitation for recovery of gold and silver. The mill has undergone a series of plant expansions over its operating life, and employs fine crushing and single stage ball milling to achieve a fine grind before passing into the leach circuit. In December 2005, crushing capacity was increased to 2,100 t/d, but in the first quarter of 2014, phase 1 of a new expansion was completed, bringing the mill’s throughput to 2,500 t/d. This was followed by Primero Mining announcing in August 2014 that phase 2 was starting with the target of raising throughput to 3,000 t/d by 2016, by which point annual production should have increased to approximately 215,000 ounces of gold equivalent.
131
FLUID OPERATIONS RELY ON DEPENDABLE PIPES Without a mesh of pipes pumping necessary fluids and
(ERW) pipes, coil pipes, and seamless pipes,” lists Aguirre
materials in and out of a mine, and through the different
Rascón. “ERW is one of the best mechanisms available for
stages of a mining project, any operation would be halted
straight seam pipes because no additional materials are
in its tracks. Pipes for mining and metallurgical applications
needed to weld it. Instead, the edges are fused together.
need to be resistant to acidic and corrosive fluids, abrasive
One edge is first smelted and then joined to the other by
mineral sludge, and the impacts of rocks and equipment.
applying pressure. This process results in a bump that is
Moreover, pipe suppliers need to be able to transport
easily smoothed out with razors, resulting in a perfectly
tonnes of their steel products through uncharted territory
rounded and homogenous pipe. Once completed, this seam
in the mountains or jungles of Mexico. As this is no easy
is almost invisible to the naked eye. This method has been
feat, few companies manage to cater to such a demanding
in the market for years and it is used worldwide.” To further
industry. Among those that have taken up the challenge is
guarantee quality, all of Tubería Laguna’s pipes are certified
Tubería Laguna.
by API (The American Petroleum Institute) and are uniquely
“Mines often intersect underground waterways, so water needs to be pumped out to prevent the extraction points from flooding. Our pipes are made to help with such applications” Ignacio Aguirre Rascón, Executive Director of Sales and Administration at Tubería Laguna
Ignacio Aguirre Rascón, Executive Director of Sales
serialized. Serial numbers are commonly applied to a batch
& Administration at Tubería Laguna, goes into further
of pipes, but one of Tubería Laguna’s unique selling points is
detail about the role that pipes play in the development
that each and every single pipe has a unique ID. “We are one
of a mine. “Mineral deployment, water deployment, and
of the few companies in the world that does this,” explains
water extraction are all essential mining processes. Mines
Aguirre Rascón. “Most companies serialize their batches
often intersect underground waterways, so water needs
based on the type of steel used. With our system, it is easy
to be pumped out to prevent the extraction points from
for me to find out which types of steel were used on which
flooding. Additionally, water needs to be transported to
pipes ten years ago, and even who supplied which element.”
different parts of a mine to assist in drilling and excavation.
For this purpose, the company also stores information about
Our pipes are tailor-made to suit the needs of our clients,
the chemical composition of the types of steel used.
helping with such applications.” Some other uses for piping and tubing networks include fire prevention, the
As most companies would admit, customer service is a top
supply of drinking water, and the movement of different
priority. Tubería Laguna’s approach to ensuring this priority
types of gases out of an underground mine.
is met has been to open distribution centers in addition to its manufacturing plants. “We have distribution centers
132
Such a variety of applications requires a diversity of
in Chihuahua, Guadalajara, Guanajuato, Mexico City, and
coating materials to tailor the right product for its intended
Villahermosa,” describes Aguirre Rascón. “We also opened
application. Given the wide use of coated pipes in the
representation offices in Puebla and Hermosillo, among
mining industry, Tubería Laguna has its own coating plant
other cities. The intention was to spread our inventory across
where it can ensure the reliability of its products. Its single
different parts of the country so that our logistics could be
coated pipes possess one layer of tape to protect them from
in line with our clients’ needs. We have met that target.” For
climate and environmental damage, while the company’s
75 years, Tubería Laguna has been involved in agriculture, oil
bi-coating and tri-coating offerings are polythene-based,
and gas, and construction, as well as mining. Looking to the
endowing the pipes with a higher level of protection. Due
future of the company, Aguirre Rascón states that increased
to the fact that all mines are different, coating suggestions
market penetration for all of these segments is a primary
are based upon the location of the clients’ operations and
goal, and is confident of achieving this through a continued
the environment within the mine where the pipes will be
quality and customer-focused approach to business. If the
placed. As well as a variety of coating options, the company
mines themselves are the beating hearts of the industry, then
boasts a diverse range of options for the pipes themselves.
Tubería Laguna’s pipes and tubing products represent the
“The different pipes we offer are electric resistance welding
veins and arteries of the sector’s circulatory system.
UTILIZING EXTREMELY RESILIENT VALVES IN MEXICAN MINES
Eduardo Robles Verdugo, Regional Manager for the Northwest Region of Mexico at Techflow
Eduardo Robles Verdugo,
Crane Energy is another manufacturer that places its trust
Techflow’s
Regional
on Techflow, and is responsible for Sounders diaphragm
Manager for the Northwest
valves. The components of these valves are manufactured
Region of Mexico, finds the
in England, the assembly takes place in the US, and the
mining industry interesting
final product is then exported to Mexico. Crane Energy
for the way a single mine
also produces the Tufline and Flowseal valve of brands,
can yield a large economic
both of which are mining mainstays. Although Tufline
impact on regions or even
valves are manufactured in Chihuahua, Robles Verdugo
countries. This does not
believes Mexico has not yet stood out as a destination
just refer to the fallout of
for the high quality production of valves and related
its minerals once they are
instruments. This is slowly changing with companies like K.
extracted, but also to the complexity of the supply chain that
Valves International now producing ball valves and piston
keeps the mine ticking. For instance, Buenavista del Cobre
valves in Guadalajara.
is in Sonora, but the measurement equipment it uses comes from the US, England, and Germany. For Robles Verdugo,
Techflow first came to life as a distributor in 2005 and
mining processes are particularly dynamic since processing
now has five regional offices with its headquarters in
the amount of minerals produced by contemporary
Piedras Negras, Coahuila. Each office takes care of specific
mining operations requires equipment that can control the
mining clients, all of which rely on Techflow’s valves and
processes and allow operators to make informed decisions.
measurement instruments. The Torreon office focuses on
He points out that Techflow’s robust valves were specifically
mines like Peñoles’ Velardeña and Goldcorp’s Peñasquito.
created for manufacturing processes and are well-adapted
The Sabinas office looks after AHMSA, and the Hermosillo
to mining challenges. For example, the mining industry
office caters to important mines from players such as
faces the problem of using pipes to transport abrasive fluids
Grupo Mexico, Peñoles, Minera Frisco, and Minera Boleo.
with a high content of solid particles. “Some fluids are so
“For ten years we have focused on being a reliable supplier,
abrasive that the valves used to control the flow last only
which has yielded positive results. The fact that Techflow
three months,” details Robles Verdugo. “In order to improve a
currently represents several high-quality, reputable brands
plant’s productivity and extend the equipment’s working life,
has enabled us to secure our presence in the national
Techflow supplies gauging and fluid control solutions. Our
mining industry,” tells Robles Verdugo. The mining industry
company possesses the advantage of being closely linked
accounts for 80% of Techflow’s sales, with the energy
to international manufacturers that make long-lasting valves
sector being responsible for the remaining 20%.
specifically for these purposes.” To
make
its
business
more
flexible,
Techflow
has
One such manufacturer, which Techflow represents, is
engineered several distribution models. If a company
Connecticut-based CiDRA Instruments. This company
requests a product directly from the manufacturer, the
manufactures a fluid-measuring device that uses passive
client is put in touch with Techflow. Certain mining groups,
sonar. The highly precise instrument is installed on the
Robles Verdugo explains, have suppliers in countries such
pipes’ exterior and has come to widely replace the standard
as the US because they find it easier to buy equipment
technique of ultrasonic waves, which did not work properly
directly from there. In these cases, Techflow acts as a
due to problems with incrustations forming inside the pipes
representative and gives clients an estimate issued by the
and the high amount of dissolved solids. CiDRA’s product
manufacturer. To compete for the attention of clients that
overcomes these challenges and is now commonly used in
seek to go straight to the source, Techflow gets discounts
processes such as feeding mineral pulp. It also surpasses
from manufacturers when supplying a mine in Mexico.
any wear and tear objections since these measurement tools
This allows Techflow to offer valves at a more competitive
have a working life of up to ten years. “We usually strive to
price. In these cases, Robles Verdugo’s company also
partner with manufacturers that offer an innovative product
seeks to go the extra mile by handling the logistics,
that is designed for long-term use in order to increase
importation process, and delivery. He also points out that
efficiency in mining and metallurgic processes,” comments
many manufacturers create specific distribution zones
Robles Verdugo. On the measuring side, Techflow also
within Mexico, and Techflow is more usually entrusted with
represents German manufacturer KROHNE, which makes
the northern and central regions. However, as a mark of
magnetic measuring devices for highly corrosive fluids such
confidence, RF Valves gave Techflow representation rights
as lixiviants and electrolytes used in copper extraction.
for its products nationwide.
133
| VIEW FROM THE TOP
RENTAL SET TO ALLOW PUMPING BUSINESS IN MEXICO TO PROSPER J.P. LAKE President of PowerPrime Pumps Q: How does PowerPrime Pumps’ product portfolio allow
within each specific industry, rather than those based on
it to stand out in the Mexican mining industry?
geographical locations.
A: In Mexico, our product line revolves around portable centrifugal
pumps.
The
company
has
an
exclusive
Q: How are you planning to expand in the Mexican mining
partnership with Cornell Pump Company as the exclusive
market?
packager of its pump technology into portable systems.
A: We are already present with Grupo Mexico, Rio Tinto,
Cornell is known for offering more hydraulic efficiency
Goldcorp, and some of the smaller players as well. Our
than its competitors, which translates into fuel and energy
new business development director has been actively
savings for mining companies, specifically those facing
setting up distributors for us in Mexico. In the past, we
significant water challenges at depth. We are known in
sold pumps out of our rental fleet in the US. While this
the US for our rental business that offers very durable
technique did lead to new products being exported to
and robust products that are highly efficient. We are
Mexico, it is exciting to have a member of staff dedicated
currently looking for two types of distributors in Mexico:
to growing our business here. One aspect of our expansion
resale distributors and companies interested in the rental
into Mexico is that we are conducting training sessions
sector. In addition, we are trying to find people who
for our customers, distributors, and end users. The risk
understand pumps and understand their applications in
for our pumps is that they can break if used incorrectly.
various markets and industries. We are approaching this in
Furthermore, their portability increases the opportunities
a different way to other companies by looking for partners
for improper use. We are using our rental experience in
| TECHNOLOGY SPOTLIGHT
134
MOST POPULAR MODULAR BRIDGE IN THE WORLD
in mining, oil and gas, and infrastructure projects. The most
In the 1940s, at the height of the Second World War, the
successful of its solutions is the Mabey Compact 200 Bridge,
Allies’ strategists ran into a roadblock. The invasion of Nazi-
which is the most popular modular bridge in the world. A
occupied Europe was being prepared after the retreat from
proud descendant of the Bailey Bridge due to its flexibility,
Dunkirk and the victory in the Battle of Britain. However,
ease to set up, resistance, and load-bearing ability, the
speed was of the essence. The Nazi forces were so dug in
Compact 200 has anchored Mabey Bridge’s global reach.
that any invasion had to rely on speed and mobility. The Allies
Jonathan Benitez, the company’s Regional Sales Manager for
could not afford to get bogged down trying to ford rivers
Latin America, explains that it has a very simple means of
or rebuild bridges blown up by the enemy. Enter Donald
installation, known as the cantilever launch method, allowing
Bailey. A civil servant with an engineering background,
it to be set up by a team of untrained workers merely by
Bailey invented a modular bridge, built from panels made
mounting and pushing its panels into place. Although cranes
up of light but strong and versatile steel, which could be
can be used to get the Compact 200 in place more rapidly,
deployed without central support. It quickly became the
this is not always possible. This is where the cantilever launch
standard military bridge for the British Army and the famed
method allows for assembly by hand. Mabey Bridge can
Marshal Montgomery declared that the Bailey Bridge made
happily provide the technical training and assistance needed
“an immense contribution towards ending the war.”
to get its bridges up safely and rapidly.
Today, Bailey’s legacy is kept alive by Mabey Bridge, a Welsh
Once ordered, the Compact 200 will be delivered to clients
construction firm, which deploys its modular steel bridges
in the form of ten-foot panels. These are first clasped
the US across ten different industries to deal with these
The pumps we offer are either driven by diesel or electric
potential issues. That knowledge will allow us to transmit
motors. With a diesel-driven pump, the efficiency is
indispensable expertise to our Mexican mining clients.
measured in terms of how the energy from the diesel fuel is converted into moving water. Some of the products can
Q: What makes your company’s and Cornell’s technology
reach efficiencies as high as 80%, which is very good for a
particularly adaptable to mining applications?
high head pump. For instance, our HH125 model, which is
A: Cornell is a very innovative company and is continuing
commonly used in mining, can reach 85% efficiency. Many
to expand its product line. Its equipment is able to
older pumps have efficiencies of 60-70%, so our models
pump higher solid content than some of the older style
can provide significant savings. The same logic applies
pumps, without sacrificing any efficiency. Additionally,
when using an electric motor, since less power is used to
the company also has newer technology for pumping
drive the pump. Electric models tend to be more efficient
slurry, using techniques that no other company has used.
as mines have low electricity costs. On the other hand,
Many offerings from competing companies are older
they are less portable and have to be plugged in when they
designs that have been around for 20 or 30 years. At a
are used. Diesel pumps offer maximum flexibility.
time when mining companies are increasingly looking for more modern technology, Cornell is on hand to offer that
Q: What needs to be done here in Mexico to push the
to them. For our own products, we offer a guarantee of
growth of your rental business?
two years or 2,000 hours of operation. Typically, the main
A: Rental has been growing worldwide in the mining
failures are due to misuse of the pumps, when those using
industry, due to the amount of investment required to
our equipment try to pump something that it was not
obtain the necessary equipment for a mining operation.
designed to handle. A common problem is when they try
There are certain portable pieces of equipment that are
to pump slurry with a too high or too low pH value. It can
needed during a specific phase of a project, making rental
also happen that companies try to pump slurry with too
a far more efficient allocation of capital. However, at the
much sand or grit in it using a regular centrifugal pump
moment, the Mexican market is less developed for rental.
instead of a proper slurry pump. The Cornell pump has a
This is due to remaining challenges in terms of asset
semi-open impeller, allowing it to handle solids from 1.5
ownership and the legal framework surrounding how
inches to three or four inches in diameter.
rental transactions work.
together to form side trusses, and to allow for single or
apply anti-skid surfacing even before the panels ship out.
two-lane crossing options. Transverse steel transom beams
Furthermore, every structural component of the Compact
are then placed between these to form a bolted steel deck
200 is hot-dip galvanized to ensure it will last for years
system that was invented and patented by Mabey Bridge.
with little wear and tear.
Depending on the conditions in which the Compact 200 is deployed, it can come prepared for three standard
Given its modular design, the Compact 200 can easily be
widths. The 3.15m width makes up a single lane, the 4.2
configured in a pedestrian or pipe support format, while its
width is designed to provide an extra wide single lane, and
compatibility with Mabey Bridge’s Uniflote Pontoon system
the 7.35m dimension is for two lanes. Pedestrians are also
can provide a modular floating solution. The Compact 200
accounted for, since cantilevered footwalks are a standard
can be unrolled for single-span bridges of up to 70m, and
design and internal pedestrian refuges provide a shelter, if
while it can be stretched to longer, Mabey Bridge has other
the bridge needs to be rapidly cleared of foot traffic.
systems that might suit these bigger needs. However, the modular design of the Compact 200 means it can be
Aware that the needs of mining clients may vary widely,
configured for various designs, including multiple span
the Compact 200 can be augmented with various
bridges, double-story bridges, and overbridging. Another
solutions. For example, its steel can be covered with a
element that can be attractive to the mining industry is
Durbar chequerplate finish to ensure passing vehicles will
that, in case of an unfortunate mining accident in remote
enjoy better surface grip and skid resistance. A client with
areas, the Compact 200 has been a mainstay for disaster
better prediction ability can also ask Mabey Bridge to
relief, acting as a rapidly deployable emergency bridge.
135
POLYETHYLENE CABLES FAR TOUGHER THAN COMMON RUBBER A number of key industry players are currently vying for
or break. René Molina, Sales Representative of Tele-
narrow market shares within competitive mining segments.
Fonika Cable Americas explains some of the more serious
One such segment is that of mining cables, which sees
cabling issues that mining companies faced in the past.
strong but similar product offerings presented by many
“About 10 years ago, a cable for the mining industry was
viable companies. These rivals may be tussling for market
replaced on average every four months. A cable roll of
share, resulting in a necessity for innovative products that
about 90km costs about US$30,000. Therefore, costs
can gain traction in this competitive environment. Tele-
rapidly add up if a company needs to replace its cables
Fonika Cable Americas’ (TF) strategy when entering the
every three or four months, especially because most
Mexican market was to offer a range of cable products that
mines go through about 20 rolls of cable a year, at best.”
supported safety in mines, something which many of their
Knowing this, TF saw a niche in the market for cables
competitors-to-be seemed to lack in their portfolios.
specially designed to be more resistant. To provide this
“A cable roll of about 90km costs about US$30,000. Costs rapidly add up if a company needs to replace its cables every three or four months” René Molina, Sales Representative of Tele-Fonika Cable Americas
Traditionally, cables that were applied to the mining
in mines, the company abandoned the use of rubber and
industry used PVC or CPE rubber as a protective jacket.
switched to a polyethylene protective jacket.
The problem with such materials is that cables in mines are often twisted, dragged, rolled over sharp rocks, or
Polyethylene is able to withstand three times as much
dragged through water, causing them to quickly corrode
stretching as other cables, it does not form bubbles
CANADIAN CABLES BUILT TO WITHSTAND MINING CONDITIONS Mining conditions are well-known to be harsh on
Stands such as these originated from necessity, thanks to
equipment, contributing to regular wear and tear. This
a Canadian and US law which specifies that connections
reality leaves mining companies hunting for ways to
have to be elevated off the ground. While these countries
increase the longevity of equipment in such testing
are stringent in their pursuit of such safety laws, Mexico
surroundings. Canadian company Mine Cable Services
is still lagging slightly behind, although, according to
(MCS) has designed a resistant and robust range of
Lussier, Grupo Mexico and Goldcorp have shown a similar
cables that can withstand the environment of any
level of care and attention to their workers in Mexico.
mine, offering its customers viable and cost-efficient
136
alternatives to other products in the market. Besides
Even with such innovations, the training and advisory
the cruel confines of the mine itself, Richard Lussier,
services that MCS provides has become an indispensable
Technical Sales Representative of MCS explains that
route for many companies. “Companies like to implement
mining personnel can also have a significant impact on
this service into their budgets. They ask about how to
the resilience of its merchandise. “Cables are always at
manage the cable, how to repair it, and how to protect
the mercy of the workers, so they have to be trained
it in the best possible way. If a company wants to buy
to handle them properly,” he states. “To some extent
one of our products, we would suggest the best way
we can help with that, but we cannot enforce it, so we
to install the product to minimize damage. We are not
also provide products that can minimize damage.” One
there to become a mining advisor, or to implement
such product is a specially designed cable stand, which
any regulations, we just offer advice on the use of our
prevents personnel from crossing over the laid cables.
products,” says Lussier.
caused by the twisting of cables, and it is able to withstand
cables are 15% more expensive than regular rubber cables,
the pressure of falling rocks. The cables protected by this
representing a considerable price increase for mines with
material are resistant to abrasion and collision and are
a high volume of cabling requirements. However, once we
far more resilient than those covered in plastic. However,
demonstrated that our products lasted six months longer
there is one drawback. While plastic covered cables are
than conventional cables, the price was no longer a deal
easily opened with knives, polyethylene cables are much
breaker,” explains Molina. Another strategy that TF adopted
harder and special tools are needed to cut them. Even so,
when entering Mexico was to approach companies that did
when compared to the benefits of the product, this hardly
not have a specific budget set aside for cabling. As a test,
counts as a drawback at all, states Molina. Some of TF’s
TF provided them with 100-120m of cabling for free to test
major competitors, such as Condumex, Southwire, and
out on their operations. When contacted again six months
Nexans, soon followed the company’s example and began
later, Molina says these companies usually ordered around
producing their own polyethylene cables.
1,000m of cable after seeing how strong and durable the product was. “The main thing miners are looking for is a
Strength and resistance are important, but practical
resilient jacket,” Molina continues. “They want the conductive
damage-preventing measures can also increase the life of
material in the cable to withstand harsh conditions, in order
such cables. In this aspect, cable visibility is an important
to increase safety, which is naturally a common concern for
consideration as if it makes miners less likely to damage
mining clients.” Safety and resilience are resonant themes in
them. For this reason, TF started to install fluorescent
the mining industry since they can result in high financial and
reflective strips on the cables to reflect any light that hits
human capital costs when things go awry. This is why Tele-
them, even in total darkness. These same reflective strips
Fonika also pays special attention to its compliance with
are used in the aeronautic industry for emergency lighting
any international regulations that exist for the products they
purposes. They are capable of storing small amounts of
manufacture. The IEEE norms and standards established
light which make the cable visible for a longer period of
by the Occupational Safety and Health Associations in
time. This product has been tested at the Milpillas mine in
the US outline the required characteristics of conductors,
Sonora which is owned by Peñoles. TF is now working on a
all of which must be submitted with a pre-determined
three- to four-year development cycle that will integrate this
diameter and specific caliber. “It is extremely important
polyethylene jackets technology, as well as implementing
to regulate safety on any equipment being used by mine
a LED lighting system for the cables. One of the main
workers. Avoidance and prevention of accidents is one of
challenges that TF found when promoting its products
our principal goals when developing new cabling products,”
was the frugality of its potential clients. “Our polyethylene
concludes Molina.
“Cables are always at the mercy of the workers, so they have to be trained to handle them properly”
Richard Lussier, Technical Sales Representative of Mine Cable Services (MCS)
MCS builds and designs its own mini-voltage couplers,
capacity in Mexico, once its facilities are established in
ranging from 5,000v up to 25,000v, but that is by no
the country.
means the company’s limit. “Even now, we can certify a 25,000v coupler right up to a maximum of 35,000v,”
As far as its operations in Mexico, MCS is looking to grow
explains Lussier. MCS also provides all kinds of different
rapidly. The company will hire a dedicated representative
accessories for the protection and management of cables.
in the country to deal with a few of the problems it has
Its main product line is designed to provide connection
faced, particularly in the transportation and shipping of
and visibility from the sub-station, all the way down to
products to Mexico. Additionally, Lussier mentions the
the equipment, whether that is an electric drill or a shovel.
intention to set up an office and a small warehouse where
A range of crossover mats can also be supplied to help
the company can keep some inventory to ease those
cables survive the weight of light to heavy haulage trucks.
issues. “We are trying to establish a firmer client base
In the case of a damaged cable, MCS can repair it to the
here in Mexico, especially in Sonora. By the start of our
same mechanical and electrical characteristics as the
2015 fiscal year, we should be well on our way to rooting
original. In the long term, MCS will be able to provide that
down in Mexico.”
137
Efficiency at a mine is directly linked to the technology employed during blasting, earth moving, and excavation. Furthermore, the equipment and techniques used to process the extracted mineral ore play a key role in the profitability of mines. New technologies improve the rate at which companies can mine, as well as increasing the amount and rate of metals recovered during processing. Such technology includes improved explosives, better formulated chemical solutions, higher capacity material handling products, and more efficient mineral processing equipment. A mine’s impression on its surroundings is also heavily dependent on the operations and processing performed at the site; the chemicals and equipment used have a direct impact on the safety of its workers and its ecological footprint.
This Operations & Processing chapter includes viewpoints from top explosives suppliers, chemical solutions providers, and mineral processing experts, as well as producers of innovative products that are designed to increase the durability of mining equipment and the productivity at mine sites. It features advances in mine and metallurgical processing, including the creation of environmentally-friendly chemicals, and presents expert insights on state-of-the-art technology now available for mining operations. The interviewees cover technical details on these technologies and detail their strategic approaches to servicing Mexico’s demanding market. The chapter features well-established and upcoming companies that are elevating Mexico’s supplier base to the next level, and presents an overview of the products and services that are helping mining companies to overcome the pressing challenges of the industry.
OPERATIONS & PROCESSING
6
Maximise your flotation performance As the recognised industry leader for flotation cell technology since 1951, FLSmidth has installed and supported over 56,000 flotation cells in mine sites around the globe. We deliver the world’s most efficient designs by offering both WEMCO® naturally aspirated and Dorr-Oliver® forced-air mechanisms which can be utilised together in a Mixed Circuit™ or Mixed Row™ to give you greater control over coarse and fine particle recovery. When searching for a large cell capacity to reduce footprint and operating costs, look no further than FLSmidth. We have successfully installed over 256 of our 250m3 cells and have sold more than 130 of our 300m3 SuperCell™ flotation cells. FLSmidth continues to lead the way with our new 660m3 SuperCell™ flotation machine, the largest in the world. FLSmidth is a full solution provider offering metallurgical, ore characterization, analytical and separation testing with and process optimisation to maximise your performance. Our process experts have the right solution for your application. For more information, visit us at www.flsmidth.com
CHAPTER 6: OPERATIONS & PROCESSING 142
One-Source Supplier for Mineral Processing Systems, FLSmidth
142
TECHNOLOGY SPOTLIGHT: World-Class Tailings Technology Helps Increase Sustainable Water Use
145
How to Maintain Steady Operating Costs, PEAL
146
Family Business Evolves to Design Plants for Mining, FIMSA
146
Applying Agricultural Technology to the Mining Industry, Aquafim
148
Improving the Efficiency of Lixiviation Systems, PROFUMESA
149
Sodium Cyanide Best Option for Gold Extraction, Cyanco
150
Chemical Innovation Predicts Sustainable Mining Future, BASF Group
151
Cyanide Anchors Chemical Provider’s Mining Growth, Corporativo Químico Global
153
MINE SPOTLIGHT: La Colorada, Pan American Silver
154
Waste Management Should Be Focus of All Mining Execs, Kovit Engineering
156
Reborn Chemical Company Eyes up Mining Expansion, Solenis
157
Mineral Processing Provides Consistent Opportunities, Metso
158
Quality Explosives Backed up by Precise Calculations, EYENESA
159
Explosives Manufacturer’s Profits Boom in Mexico, Austin Powder
160
Grinding Productivity Comes from Experimentation, PROESMMA
161
Magnetic Separation Raises the Bar in Metal Production, Eriez
162
TECHNOLOGY SPOTLIGHT: Scissor Bolter Represents Paradigm Shift, MacLean Engineering
163
Rockbolts Provide Security and Peace of Mind, Mansour Mining Technologies
141
ONE-SOURCE SUPPLIER FOR MINERAL PROCESSING SYSTEMS According to Iztok Livik from Australia’s Commonwealth
that FLSmidth’s solutions offer, removing bottlenecks
Scientific and Industrial Research Organization, current
in the production is one of the most important aspects.
challenges in the mineral processing sector include
Fangel argues that purchasing the processing equipment
declining ore grades, increasing mineralogical complexity,
from different providers and subsequently contracting
limited availability of water, and higher community
an engineering, procurement, and construction (EPC)
expectations in terms of the environmental responsibility.
firm to put it together can create bottlenecks and fail to
As such, it is not enough for mining companies to have
streamline the entire processing plant. Moreover, Fangel
an economically attractive deposit. They must also look
explains that FLSmidth is able to provide equipment for
to implement the ideal equipment and metallurgical
the entire operation, “from material handling, mine hoist
techniques to increase the mineral processing yield
and shaft systems, primary and secondary crushing, heap
and thus the profit of their operations. Richardt Fangel,
leaching, and grinding, to flotation, solid/liquid separation,
Director General of FLSmidth Mexico shares his view on
thickening, filtration, pyro technology, automation, and
the matter, “Mining companies are generally looking to
quality control systems.”
update and expand their processing plants to improve their profit. There is a great variety of challenges that
So far, FLSmidth has not had the opportunity to deliver
mining companies can face though. External factors,
an entire project on its own. Fangel mentions that the
such as water and energy supply, can really complicate a
company participated in the commissioning of the plant in
processing operation. This is why mining companies need
Goldcorp’s Peñasquito mine and that 80% of the processing
to consult with experts in order to know what type of
plant is comprised of FLSmidth technology. Moreover, as
equipment they should purchase.”
an added proof that the company is able to handle entire projects, Fangel mentions that it has delivered over 35% of
FLSmidth has over 130 years of experience in delivering
all the cement plants in the world. “We have the expertise
complete processing solutions to mining and cement
to integrate all the equipment and processes and our model
companies all over the world. The company feels
can help customers attain the best flow sheets possible,”
confident in its ability to become a one-source supplier of
he explains. “Our Operation and Maintenance division was
processing systems for its customers in mining. “FLSmidth
created to allow mining companies to let us handle the
has focused on providing complete process flow sheets,
entire mineral processing operation.” In addition to its in-
meaning that it can supply entire beneficiation plants
house resources, FLSmidth partners with EPC firms such
for gold, silver, copper, and other base metals, as well
as M3 so that they may together assemble a complete
as industrial minerals,” adds Fangel. Of the advantages
concentrator plant for precious and base metals.
| TECHNOLOGY SPOTLIGHT WORLD-CLASS
TAILINGS
TECHNOLOGY
HELPS
becoming one of the key aspects for governments to regulate
INCREASE SUSTAINABLE WATER USE
in order to protect communities and the environments
Technological advancements in mineral processing have
where mining companies operate. In order to demonstrate
allowed mining companies across the world to exploit
stewardship in this regard, mining companies will have to
deposits with lower ore grades. However, this has also
partner with equipment providers that can support them in
generated larger volumes of waste that need to be safely
the management of waste to ensure successful operation
handled and stored. Tailings may not generate revenue but
and mine closure with restorations plans.
still need to be managed in a way that reduces reclamation
142
costs and minimizes long-term liability. Today, the mining
The mineral processing and material handling conglomerate
industry is under more scrutiny than ever to comply with
FLSmidth has designed and engineered a dry stack tailings
environmental laws and regulations, which has made it all the
management
more essential for companies to integrate technologies that
companies around the globe to be ideal to maximize water
enable them to decrease the tailings’ ecological footprint
recovery, while improving site rehabilitation potential. This
and ensure they are chemically controlled and neutralized.
dry stack tailings system is considered highly suitable for
The World Bank believes that tailings management is
dry climate mining operations because of the tangible water
system
considered
by
multiple
mining
“FLSmidth has focused on providing complete process flow sheets, meaning that it can supply entire beneficiation plants for gold, silver, copper, and other base metals” Richardt Fangel, Director General of FLSmidth Mexico
Fangel mentions that while mines such as Buenavista
a 500km radius from Zacatecas, Fangel explains that the
del Cobre and Peñasquito are already using top-notch
location of its service center was strategically favorable.
technology for mineral processing, mining SMFs companies
However, an additional service center to attend the north
still struggle with their beneficiation process due to their
of Mexico will be necessary in the future. FLSmidth is also
lack of advanced machinery. “Some companies are aware
able to support its clients through its technical center in
of the benefits provided by modern processing techniques,
Salt Lake City which employs over 900 engineers to work
but others are either not aware or cannot afford to invest
on “possible ways to improve the efficiency of processing
in new technology. In such cases, we can help them
plants.” Through its aftermarket division, FLSmidth is
by optimizing their processes and by improving their
also able to oversee specialized spare parts and stocking
maintenance schemes.” Yet, he mentions that optimization
programs, while offering to operate and maintain the
of plant performance is not an exact science, but depends
finished processing plant through its O&M division.
on how the plant is put together. “First, we have to make sure that we have eradicated bottlenecks so that we can
As the supplier of the largest and most varied flotation
improve the plant’s throughput capacity. Then we can
cells, FLSmidth has been able to keep itself at the forefront
help update grinding systems or change flotation cells to
of processing systems worldwide. Fangel says that the
increase recovery. Many aspects can be arranged in ball
Mexican industry has greatly benefited from FLSmidth’s
mills and flotation cells to truly improve the flow sheet of
ability to help it adapt and modify processes according
an existing processing plant.” In fact, of all the solutions
to variations in the mines and quarries. “The ore deposits
that FLSmidth offers in Mexico, it has seen most success
that mining companies exploit span large geological areas
with its flotation cells and its semi-autogenous (SAG) mills.
where the petrography is constantly changing. Precious minerals are often contained in different rocks along
As a part of its renewed strategy for Mexico, and to allow
with other minerals that require a different processing
for closer contact with its clients, the company has opened
approach,” Fangel explains. “With our knowledge and
a service center in Zacatecas, where it also helped to
equipment, FLSmidth can help its customers adapt their
found the mining cluster known as CLUSMIN. Since many
processes according to the variations that each deposit
of Mexico’s most important mining operations lie within
presents.”
savings it can achieve through process water recycling
truss frames to allow the machine to follow uneven ground
and the virtual elimination of water losses by evaporation
conditions. In terms of environmental protection the belt
or seepage. This system involves an automatic filter press
is free of dust emissions, protecting both the material and
that reduces the retained moisture content of the tailings
the surrounding environment and avoiding spillages during
to around 15% or less, converting the tailings into a friable
transportation.
material. The tailings can then be delivered to the designated storage area via conveyor belts and can be dispersed from
This waste management system ensures the stability of
a mobile stacking conveyor system known as RAHCO®.
the tailings, providing a secure environment for workers
The technology behind this stacking conveyor is proven,
involved in the reclamation and revegetation efforts. Thanks
considering that more than 25 such FLSmidth systems are
to the dry conditions of the tailing, employees will be able
already set up in different mining jurisdictions, operating
to carry out rehab programs in a much more efficient way
at capacities of 12,000 t/h. In addition, the pipe conveyor
when compared with traditional tailings dams. FLSmidth
technology that RAHCO® employs helps to eliminate transfer
also states that the risk of tailings overflow or run-out due
points and can follow any topography contours. These
to catastrophic failures of storage pond walls is virtually
conveyors can be mounted on a chain of crawler tracks and
eliminated.
143
Peal México S.A. de C.V. Enrique García Sanchez 17 Colonia Centro C.P. 83000 Hermosillo, Sonora, México e: auxiliar.hermosillo@peal.es t: 0052 662 216 4500
GRUPO PEAL is a private Spanish company, which has constantly strived to reach the highest level of specialization in the following activities:
CONTRACT MINING OPERATOR: Opencast Mine/Pit, Reclamations. PUBLIC SECTOR WORK: Land movements for road, rail, hydraulic, airport, and seaport infrastructures etc. DEMOLITIONS: Specialized Demolitions, Large Scale Demolitions. TECHNICAL OFFICE: Public Work Projects, Mining Feasibility Projects, Geological Studies, Wind Farms, Aerial Mapping, Cartographic Development and Management. THE ENVIRONMENT: Reclamation Projects, Environmental Impact Studies. SPECIAL TRANSPORT: Haulage of machinery, Haulage of structures. PURCHASE, SALE AND LEASE OF MACHINERY. 144
HOW TO MAINTAIN STEADY OPERATING COSTS Of the top ten issues mining companies are likely to face in
repairs or equipment procurement, when needed. This
2015, mining productivity is at the top of the list, according
ensures that the operations are carried out with minimum
to Deloitte’s Tracking The Trends 2014. Not only have metal
delays. Through local and international financing, and a
prices continuously decreased since 2012, but the average
long history with world-class brands such as Caterpillar and
ore grade of deposits has also decreased for copper, gold,
Komatsu, PEAL is able to guarantee that the equipment
zinc and nickel projects. As companies look to cut costs
needed for the operation will be available throughout the
and develop business cases that make marginal projects
project. In such way, the company is able to combine the
appealing, they may in fact be hurting their productivity
latest drilling, excavating, loading and hauling equipment,
by shrinking their talent pool or limiting their project
with the most up to date techniques in planning and
opportunities. According to Deloitte, one way to overcome
executing open-pit mining projects. Above all, PEAL prides
this is not by cutting costs, but rather by re-evaluating
itself on the satisfaction of its clients in the mining industry
operating models “to ensure they have the management and
in Mexico, guiding its operations by its priority to deliver the
reporting systems necessary to build a cost management
results it promised to deliver. The last 60 years have given
culture.” As companies reassess their projects, outsourcing
PEAL time to reflect on its strengths and limitations. As
the operation of a mine to a contractor may help to increase
such, the company avoids committing to production targets
productivity and maintain stable operating costs. One such
and contract conditions that it cannot meet. Nonetheless,
contractor is PEAL, a family-owned group from Spain with
the group is prepared professionally and financially to take
over 50 years of experience in the operation of mines.
on more mining projects in Mexico and around the world.
The operations of PEAL date back to the 1960s in the coal
While the local mining industry has fared well since PEAL
mining region of Leon in Spain, where it still functions as a
established its base in Hermosillo in 2004, the work of a
contracted open-pit mining operator. Since then, the group
mining contractor is always tied to global investment trends.
has diversified into civil construction work, such as roads,
As PEAL depends on the operation of mining projects in
ports, and airports, yet its reputation as a responsible and
production, it requires that mining companies invest not
honest open-pit mine operator still stands. In Mexico, the
only in the development and expansion of mines, but also
company was first hired to work in Cobre del Mayo’s Piedras
in hiring contractors for open-pit mines. That being said, the
Verdes copper project in Alamos, Sonora, where it worked
PEAL group is currently following opportunities around the
until 2008. Now, the company has its Mexican head office in
world through the civil works sector in Poland, exploration
Hermosillo, Sonora and is currently working as an operator
work in Sierra Leone, and mining projects in Colombia.
at Timmins Gold’s San Francisco mine in Sonora, Goldcorp’s Peñasquito mine in Zacatecas, and Pan American Silver’s
As the mining sector continues to battle through
Dolores mine in Chihuahua. With such important companies
challenges with innovative strategies and technologies,
relying on its mine operating services, PEAL’s aim is to
contractors such as PEAL make themselves available to
operate of all its clients’ mines at a reasonable cost, using
serve as strategic partners in the operations of open-pit
state-of-the-art equipment. Its technical office in Spain offers
mines. Mining companies can opt to outsource demanding
mine feasibility studies, geological studies, cartography,
operations to reduce its exposure to rising operating costs.
and environmental impact studies, while its Mexico office
It is therefore up to each mining company to assess its
takes care of the project management and daily operations,
budget, plan, and production targets and decide whether
including
contracting mine operators is the most economically
mine
planning,
production,
explosions,
and
restoration. When it is hired to work in a mine, the company
viable and sustainable path to take.
takes care of procuring the equipment and technology according to the project’s needs. The contract signed by the mine owner and PEAL commonly specifies terms such as production plan and budget. It is then PEAL’s job to take care of the production, following the established plan and operational budget. This is beneficial for mining companies as they are able to sign off on steady operating costs, which PEAL then works to meet. An important aspect for a contractor such as PEAL is the financial backup that it has in order to respond to urgent
“As the mining sector battles through
challenges
with
innovative strategies, contractors such as PEAL are available to serve as strategic partners in the operations of open-pit mines” 145
FAMILY BUSINESS EVOLVES TO DESIGN PLANTS FOR MINING FIMSA’s Administrative Director, Rogelio Gaitán Salcido,
match the expertise, manufacturing volumes, and levels of
recounts how his father founded the company following a
specialization held by our suppliers. For instance, FIMSA
long family tradition of involvement in the mining sector.
used to manufacture 15 crushing machines within a fruitful
“My father identified a need for equipment manufacturers
year, whereas my suppliers can now manufacture at least
in the industry. He saw an opportunity to become more than
500 per year.” FIMSA therefore left the manufacturing to the
just another player and decided to start a service provider
experts in order to pursue three areas of strength: design,
dedicated to equipment installation and maintenance.”
engineering, and integration. This has paid off since the
Back then, says Gaitán Salcido, the Mexican mining
company can now offer mining companies a wider range of
industry was mainly composed of SMEs. “There were only
services, including the design and installation of crushing,
a few big companies like Peñoles and Grupo Mexico. The
screening, or washing plants.
market was very different from what it is today.” In those days, small companies could acquire all their equipment
Engineering is the key to ensuring a good plant design,
through FIMSA, including an entire grinding or beneficiation
according to Gaitán Salcido. He comments that the design
plant. FIMSA functioned in this way for more than 20
stage is a long process and the company’s staff is free to
years until the market began to open through free trade
focus on it for as long as necessary. The design phase entails
agreements. Competition increased as the borders opened
many meetings with clients involving different departments,
up, and the Gaitán family realized the time had come to
including end-users, developers, and operators “During
evolve. After assessing market conditions, FIMSA became
the design stage, we sit down with our clients in order to
involved in equipment distribution and eventually stopped
understand their needs before pitching ideas and proposals
manufacturing altogether. The company gradually shifted
for their plants. Once clients agree to a proposal, we
to importing and distributing instruments until it could
walk them through the entire design, engineering, and
integrate different technologies into the plants it designs
installation processes for the plants,” tells Gaitán Salcido.
for mining clients. “The company’s transformation can be
The company’s administrative director also points out that
seen as an adaptation to the conditions of the industry,”
turnkey projects are becoming a trend in Mexico’s mining
says Gaitán Salcido. Today, FIMSA imports machines made
industry, as evidenced by the amount of EPC companies
by renowned international companies and integrates
currently involved in the sector. He explains that companies
this equipment in the plants it designs and builds. Gaitán
cannot spare any more time looking for a supplier to cover
Salcido explains the main reason behind the decision to
each part of a project, thus clients are now looking for a
cease manufacturing in favor of importing, “We cannot
single integrated solution.
APPLYING AGRICULTURAL TECHNOLOGY TO THE MINING INDUSTRY
Silvestre Peréz González, Director General of Aquafim
146
Historically, the mining and
supplier of such products, Aquafim has seen many mining
agriculture industries have
companies struggle to find reliable solutions for their
had a fairly antagonistic
hydraulic processes, and so the company has branched
relationship, engaging in
into the industry to offer its solutions. Silvestre Peréz
disputes over access to
González, Director General of Aquafim, explains how his
valuable natural resources
company approaches its business in both sectors. “At the
such as water.
Even so,
heart of Aquafim is a passion for engineering. We have a
many of the products and
large design department which enables us to produce turn-
equipment that are used
key solutions for all of our clients. This sets us apart from
in
also
our competition. Two years ago, after a lot of research and
have useful applications
agriculture
can
investigation, we decided to enter into the mining industry
in mining. Products such as geomembranes, liners for
by supplying filters and then expanded into leaching, or
ponds and reservoirs, and leaching systems, as well as
lixiviation systems. The transition into mining was difficult
improvements in filtration and automation solutions, can
as we had a lot of competitors to contend with, but that has
all be applied to a working mining environment. As a
not really halted our success.”
The company also excels at integrating equipment, which is a
systems have since been met with a warm reception in the
crucial skill when designing plants. “The machines we install
mining industry where dust pollution is a problem. “When
operate as part of a system, not a single machine works on
implementing these machines in mines, we aim to have
its own. Many factors have to be taken into account when
90% visibility during the operations. Reducing the amount
everything is to be part of such a system,” asserts Gaitán
of dust in the air has environmental benefits and it also
Salcido. The company carries out FIT tests to simulate how
creates a healthier working environment.” However, the
its machines will work once they are integrated. Running
main difference between dust suppression systems for the
these tests requires FIMSA to find tall, spacious, industrial
mining industry is that, unlike their urban counterparts,
buildings to fit cranes, conveyor belts, and other material
they do not use any chemical additives, as these can affect
managing equipment.
the metal recovery process.
“We sit down with our clients to understand their needs before pitching ideas and proposals for their grinding or beneficiation plants. We walk them through the entire design, engineering, and installation” Rogelio Gaitán Salcido, Administrative Director of FIMSA
Throughout the 40 years that the company has been
Although the broad services it offers will appeal to
active, it has diversified its client portfolio and the services
many mining companies, in order to service a sector
it offers, mainly because of the cyclical nature of the
with players scattered across the country, FIMSA’s sales
mining sector. For instance, FIMSA became involved in the
team is always on the road. FIMSA also has a distribution
construction sector by providing grinding and crushing
center in Chihuahua with a stock of spare parts which
services when international metal prices dropped, as the
mainly supplies clients in the states of Chihuahua and
equipment needed for both industries was the same.
Sonora. Gaitán Salcido is aware of the current budgetary
“This diversification has helped us stay afloat during
constraints faced by mining companies. In light of this,
times of economic crisis, or when a particular industry
FIMSA has developed a strategy consisting of free
saw its activity levels drop,” says Gaitán Salcido. Dust
assessments and diagnostic checks of client equipment
suppression systems provide another example of FIMSA’s
and processes, enabling it to offer upgrades that require
cross-sectorial services. These systems were initially
minimal investments. Meanwhile, FIMSA is also entering
used in the construction sector because of the proximity
the subcontracting business, in which it supplies mines
of construction operations to urban areas under strict
with the machines and staff necessary to perform grinding
environmental
and crushing operators.
regulations.
Those
dust
suppression
Alongside irrigation and filtration, Aquafim’s leaching
of water and energy, and giving a detailed history of the
systems can now be completely automated. For example,
events which have occurred.”
it is possible to activate a change in a process once the water level reaches a certain level. This kind of automation
One of Aquafim’s priority projects is a hydraulic system
can be complimented by sending the engineers regular
designed for Timmins Gold’s San Francisco mine. The
updates and notifications of any issues that may arise. Due
company is also involved in the leaching processes in some
to the amount of chemicals in the water, many drippers
other important mines in Sonora such as Cobre Del Mayo’s
on the market are prone to clogging, especially when
Piedras Verdes mine and Peñoles’ Milipillas mine. It also
water is recycled into the irrigation process. Aquafim has
has products in the Mulatos mine from Alamos Gold, and
designed its systems to constantly monitor the drippers
in Grupo Mexico’s La Caridad and Buenavista del Cobre.
to check for this common problem. The company even
“One of our clients has offered to buy exclusively from us
guarantees the lifespan of a dripper before it needs to be
if we retain the exceptional quality of our products,” states
replaced, depending on the intensity of the circulation and
Peréz González. “Ultimately though, our main goal in mining
irrigation. “The techniques we use to monitor the filtration,
is to sell projects. There is much less competition in this field
leaching, and hydraulic systems are hugely beneficial
compared to the parts and components market since very
from a safety perspective because nobody needs to
few companies sell complete mining irrigation solutions. By
be present for things to run smoothly,” explains Peréz
providing the design, the engineering of the products, and
González. “Our monitoring systems also help to pinpoint
the installations, we hope that our prospective clients will
where improvements could be applied, reducing the usage
recognize the benefits of investing in a complete solution.”
147
IMPROVING THE EFFICIENCY OF LIXIVIATION SYSTEMS Lixiviation, also commonly
control over the process and humidity of the leach pads,
known as heap leaching, is
allowing for better control over the permeability and
a tried and tested mining
ensuring the uniformity in the velocity of infiltration.
technique
the
Even so, the drip method requires more time to install
different
and tends to be more susceptible to blockage by the
under
solutions managed, which are rarely filtered and usually
viable
contain suspended solids and/or organic compounds. The
enabling
processing
of
kinds
ores
of
economically conditions. Francisco Morales Melendrez, Director General of PROFUMISA
lixiviation
The in
use
of
aspersion method system typically has larger openings at
mining
is
the mouthpieces which reduces the risk of blockage.
widespread due to the minerals
PROFUMISA works to improve the safety and efficiency of
with low gold and copper grades and the current metal
occurrence
of
lixiviation systems through training courses and consulting.
prices. “The price of metals currently allows disseminated
“We offer courses to the mine staff about the management
deposits to be processed to maximize production at a mine
of irrigation systems and leach pads, and the proper use of
site,” states Francisco Morales Melendrez, Director General
leaching solutions,” states Morales Melendrez. The company
of PROFUMISA. “The metals are extracted using cyanide
makes sure to put an emphasis on the behavior and safety
in the case of gold, and sulfuric acid in the case of copper.
protocols that must be followed around the leach pads.
Through these leaching solutions, metal ions are extracted
For example, Morales Melendrez says that pressures within
and transported in a pregnant lixiviation solution (PLS).”
the system must never exceed 60psi and companies must
The PLS is then transported for further processing and
always use pipes that can handle pressures of at least 120psi.
recovery of the metals through electrowinning, in the case
In order to optimize the lixiviation systems, PROFUMISA
of copper, and through Merrill-Crowe or ADR (adsorption,
recommends a series of studies and monitoring of variables.
desorption, recovery) processes in the case of gold.
“Generally, companies carry out rock and mineral studies before installing an irrigation system for lixiviation. This
Morales Melendrez’s PROFUMISA was founded in 2001
is because the velocity of infiltration depends largely on
with the objective of supplying the mining industry with all
the size distribution of grains, the composition of minerals,
the necessary supplies and services for lixiviation systems.
and humidity transport. The ideal situation is to reach a
The company works together with the mines’ operations
uniform level of humidity so that the solution is transported
teams to optimize the efficiency of these systems. A mine’s
horizontally and percolates down to be collected at the
operations team informs PROFUMISA of the flow rate and
base of the leach pad,” Morales Melendrez explains. He adds
quantity of fluids that they need transported through the
that it is necessary to carry out chemical tests to quantify
lixiviation system’s ducts. While the design of the leach pads
the amount and type of valuable minerals, design the ideal
is generally done by the mining company or a contractor,
flow rate, and identify the correct concentration of leaching
PROFUMISA takes care of installing the irrigation systems,
solution. Other important aspects of keeping the efficiency
following the technical and material requirements of the
of an irrigation system are monitoring and maintenance.
mine. The systems themselves can vary according to the
Since the irrigation system runs as a closed system, the
technology employed and the capital that mining company
mine staff must make sure that fresh water is fed into the
is willing to invest. Nevertheless, the system will always be
system to replace the water that evaporates or is lost during
designed according to the flow needs of the mine, and
processing; the cyanide and sulfuric acid can be reutilized
accessories can be added as the operations progress. In
after the recovery of the metal. PROFUMISA imparts courses
recent years, the company has been trying to convince
on how to maintain lixiviation systems to remove suspended
mining companies to install drip irrigation systems instead
solids from the leaching solution and avoid blocking of the
of aspersion systems. “At the moment, companies are using
mouthpieces. The courses also cover the management of the
both methods, but the method they choose to implement
material in the leach pads to allow for an efficient percolation
depends largely on the operation managers. Many managers
of the solutions. These procedures are meant to reduce the
are used to the aspersion method, which is why it is so
risk of accidents around leach pads. To avoid leaks, Morales
common in Mexico,” Morales Melendrez adds.
Melendrez also always suggests lining the canals through which the pipes pass so that any leak may be contained and
148
Drip systems generally lessen the environmental impact,
transported towards the plant. Through these measures,
manage lower pressures, and reduce the consumption of
mining companies can improve the efficiency of lixiviation
electricity. Furthermore, the drip method helps to maintain
systems and obtain better recovery of metals.
SODIUM CYANIDE BEST OPTION FOR GOLD EXTRACTION its global relationships with six of the world’s top ten gold mining companies and a number of successful juniors. Perhaps the company’s biggest advantage is its Applied Technology Laboratory. This fully equipped lab in Reno allows Cyanco to test a variety of processes related to the detoxification of cyanide and offer customers the most cost-effective methods. “Many times, Cyanco advocates the Jeff Davis, President and CEO of Cyanco
Carlos Flores, Vice-President for Latin America of Cyanco
The use of sodium cyanide in the extraction of gold is one of the mining industry’s most commonly used processes, being relied on in more than 90% of mining operations around the world. Cyanide is the most efficient lixiviant for gold and silver extraction for virtually all mining applications, for low or high grade deposits. Cyanco, a Houston, Texasbased firm, is one of the major players seeking to extend the use of this compound in the Mexican market. As the
implementation of cyanide control systems (CCS), as it leads to tighter control of cyanide concentrations and additions. It usually leads to a 5-10% reduction in actual NaCN intensity, requiring less cyanide to be destroyed later on,” says Flores. Other processes tested at the lab include SO2/AIR, Caro’s Acid, and Cyanco’s patented CombinOx®. Once a particular process is chosen, Cyanco can then implement a design engineering package for the specific application, assist with the circuit startup, arrange operator training, and provide continued support for the future.
largest producer of sodium cyanide in the world with a capacity of 165,000 metric tonnes a year, Cyanco has hit on the right combination to do just that, with a solution that reduces labor, increases safety, and improves costefficiency, according to its President and CEO, Jeff Davis. “The advantages of our sodium cyanide solution, at 30%, have been well demonstrated for over 25 years in the US and Canada. The lack of dissolving eliminates labor for unloading and reduces exposure to sodium cyanides dusts. Additionally, the delivery method of our solutions eliminates the need to worry about hazardous waste disposal for bag/box packaging. For mines located in water deficient regions, our aqueous solution minimizes a key driver of water consumption for the mine operators,” says Davis.
A concern for the use of sodium cyanide in mining processes has been its safety, both for people and the environment. Toward this sensitivity, Davis responds that cyanide has been used safely for well over 100 years, without an accidental fatality ever reported in the US due to cyanide poisoning. Despite this, Cyanco is careful to minimize any danger of cyanide being discharged into surface and underground water sources by ensuring that it is properly contained and treated. “By providing the customer with the proper detoxification technology, we can assist in the mitigation of any adverse effects on the environment. We can assist our customers in employing accurate cyanide addition and control methods, reducing excess cyanide in the leach circuit, and reducing the cyanide that will need to
Beyond technological advantages, Cyanco also believes its
be treated,” explains Flores.
market presence makes it the unbeatable choice to provide sodium cyanide to Mexico. “There are no domestic Mexican producers of sodium cyanide. That makes Cyanco’s two plants in the US the closest facilities to the Mexican market. We also have a dedicated terminal in Hermosillo and we are preparing to build another terminal in Zacatecas,” says Carlos Flores, Cyanco’s Vice-President for Latin America. “We are the largest global producer with four production
Cyanco is also a founding signatory of the International Cyanide
Management
Code
(ICMC),
an
international
organization aimed at improving the management of cyanide used in gold mining and assisting in the protection of human health and the reduction of environmental impacts. Regular ICMC audits of registered NaCN producers, transporters and mining consumers help ensure responsible handling.
lines across two world-class plants.” It can also deliver its products in a 30% aqueous solution in van trailers, ISO containers, or in boxes as a solid briquette form. Cyanco’s commitment goes beyond the production of sodium cyanide to cover accompanying services, such as helping to design leach circuits, cyanide control systems, cyanide destruction systems, and other processing solutions. Focused on the gold mining industry, Cyanco’s understanding of the services associated with sodium cyanide use has evolved through
“The advantages of our sodium cyanide solution, at 30%, are well demonstrated over 25 years in the US and Canada” Jeff Davis, President and CEO of Cyanco
149
CHEMICAL INNOVATION PREDICTS SUSTAINABLE MINING FUTURE Mexico
has
average
annual
seen
an
of valuable minerals. We have an extensive portfolio
growth
for solid-liquid separation and flotation agents to make
of 7% in its demand for
operations more economically viable, safer, and, most
chemicals over the last 15
importantly, more environmentally friendly.”
years. Industries such as automotive,
Michael Stumpp, President of BASF Group for Mexico, Central America, and the Caribbean
agriculture,
BASF’s products are used to remove unwanted surface
and mining are consuming
active components from copper and nickel leachates, and
larger quantities of these
also for solvent extraction processes, which are widely
chemicals than ever as the
used in Mexico. One of the biggest product lines that
Mexican market continues
the company offers in Mexico is the Lix product line, also
to grow. This means that
used for the purification of copper and nickel leachates.
the potential for environmental damage from chemicals
Lix is one of the product lines obtained from Cognis, one
presents a distinct challenge for any company looking
of BASF’s recent acquisitions. The company also offers
to improve the reputation of its chemical consumption.
Rheomax DR for enhancing thickener performance and
BASF is the world’s leading chemical company, with
Rheomax ETD, which allows companies to better manage
more than 112,000 employees and 376 production sites
their tailings. “Our products are used throughout the
worldwide. Its corporate purpose of “creating chemistry
entire life cycle of a mine, from exploration, construction,
for a sustainable future” puts BASF in one of the best
and extraction, to processing. The mining industry needs
positions to dissolve the stigma attached to industrial
chemical suppliers to maximize the output of their
chemical usage, and to change the negative perspective
processes,” states Stumpp. A chemical supplier cannot
that entails. Michael Stumpp, President of BASF Group for
provide generic solutions because the mineralization, ore
Mexico, Central America, and the Caribbean, explains some
type, and water availability differs in every mine. Chemical
of the challenges the Mexican mining industry faces and
companies therefore need to adjust their solutions
how using the right chemicals can help overcome them.
according to the needs and conditions of each mine.
“The industry offers extensive employment opportunities,
“BASF is specialized in chemical innovation and technical
it is an important contributor to the country’s GDP, and
services, and we also have additives for the concrete
it involves high capital investments. However, it does
and polyurethane used in construction and tunneling,”
not necessarily have a grip on its public perception,” he
explains Stumpp.
explains. “To improve this impression, mining companies need to become increasingly environmentally friendly,
To reduce the gap in operational efficiency, Stumpp
which can only be achieved by using the right chemicals.”
believes that chemical companies need to work with their clients, universities, and with OEMs to discover the most
150
Twenty years ago, the mining industry demanded a
effective solutions. BASF spends roughly US$2 billion on
different range of chemicals than it does today, but some
R&D every year and has 10,000 employees dedicated to
of the environmental challenges remain the same. Over
this cause worldwide. Unlike other chemical companies,
time, this demanding aspect of mining has changed how
BASF spends 25% of its R&D budget on basic research,
companies approach their use of chemicals. According
which may not initially have operational applications and
to Stumpp, new mines that are being constructed in
is typically carried out by universities. For the mining
Mexico are presenting a good opportunity for BASF to
industry, the company applies innovations that were not
showcase its environmentally friendly products. “New
initially developed for mining, such as surface treatment
mines facilitate the introduction of state-of-the-art
and flotation chemicals. The ability to transfer technology
technology, which has benefited our business in the
from one industry to another is one of the company’s
Mexican mining industry, more so than in other countries
primary advantages. BASF works with other sectors, such
with older mines,” he explains. “Even so, the challenges
as the detergent industry, to provide better solutions
that the industry faces are the same all over the world.
through the use of enzymes and biochemicals. The use of
Profitable deposits are become rarer and are being
such solutions will likely become more widespread in the
increasingly found in remote places with water scarcity.
mining industry as BASF’s efforts increase. In this regard,
In addition, mining companies are being forced to
the company has invested a lot of money in increasing
reduce their environmental impact, which is a challenge
its expertise and presence in the enzymes market, which
that we are capable of alleviating. Our products help to
create more environmentally friendly and sustainable
increase yields by improving separation and flocculation
solutions.
CYANIDE ANCHORS CHEMICAL PROVIDER’S MINING GROWTH Corporativo Químico Global has been a supplier of
applications of collectors are mainly aimed at increasing
chemicals for different industries for 21 years. Seven years
the value of the final product in projects involving gold and
ago, however, the company got involved in the mining
certain other metals. This has been a successful strategy for
industry, where it has followed a path of regular growth,
the chemical supplier as it has also brought in products like
largely thanks to its provision of cyanide. Rolando Robledo
sodium metabisulfite from Italian brand ESSECO as well
Aranda, Director General of Corporativo Químico Global,
as other chemicals such as sodium hydroxide, hydrochloric
says his company is betting on the Mexican mining industry
acid, and ammonium bisulfite. Nevertheless, cyanide has
because of the large investments that are being allocated
been arguably the most important element in Corporativo
to projects in this area.
Químico Global’s Mexican operations. Robledo Aranda
“Our business strategy is not about just delivering chemicals, it is about supplying the ideal chemicals for every type of geological material” Rolando Robledo Aranda, Director General of Corporativo Químico Global
In Robledo Aranda’s view, the Sonora mining industry
says he has witnessed a significant increase in the use of
has seen the most growth over the past three years,
cyanide worldwide over the past seven years. “Despite the
leading Corporativo Químico Global to consider opening
fact that the use of cyanide saw a small decrease in 2013
an office in Hermosillo by the first half of 2015. “This
when the price of gold dropped, its current use is stable
office will be a strategic location that will enable us to
and even increasing every month,” he comments.
perform the deliveries of chemicals in less than one day. It will be strictly devoted to the mining industry,
In 2013, Corporativo Químico Global decided to import
just like our Durango office.” The Sonora office will join
cyanide products to Mexico from a Brazilian company
Durango and Queretaro in serving mining clients across
called UNIGEL. Given the growth of the Mexican
the north and center of Mexico, while other offices in
mining industry and the demand for cyanide in the
Nuevo Leon and Veracruz cater to the electroplating,
country, UNIGEL is planning to build a cyanide plant in
water treatment, and fuel oil industries. “The company
Cosoleacaque, Veracruz. It is estimated that the plant will
slogan “We have chemistry” stems from the fact that we
have the capacity to process 1,500 tonnes of cyanide per
provide a wide variety of chemicals that are needed in
month, which should provide a real boost for Corporativo
several industries. We offer any chemical supply needs in
Químico Global’s sales. “The collaboration with UNIGEL
a single package to avoid them having to turn to several
began two years ago. It was not a difficult partnership,
suppliers,” explains Robledo Aranda. Apart from this all-
as the Brazilian mining industry is similar to the Mexican
incorporating approach, Corporativo Químico Global
one,” explains Robledo Aranda. “Mexico has the same
offers solutions that have a special formula for each
necessary raw matter for producing cyanide products as
type of material that is processed in a mine. “We do not
Brazil does.” This is the reason why the two companies
distribute generic products, but specialty chemicals. Our
were able to join forces and double UNIGEL’s operations
business strategy is not about just delivering chemicals,
in Mexico. “Our product portfolio has enabled us to offer
it is about supplying the ideal chemicals for every type
real solutions to the Mexican mining industry. In addition,
of geological material,” states Robledo Aranda. He adds
all the products we sell are ISO certified to backup our
that mining is a demanding industry to cater to given the
quality policies. As for sodium cyanide, we follow the 98%
variety of production techniques used.
purity international standard. This way, we can guarantee that the cyanide we distribute is of the same quality
In terms of which have been the company’s most popular
as the one used in the German or Korean industries,”
products in the Mexican mining market, Robledo Aranda
says Robledo Aranda. He points out that his company,
says collectors have been most successful. Corporativo
as a part of the cyanide supply chain, advices on the
Químico Global has introduced collectors from Danish
transportation of this material to the mines so that clients
brand
also comply with protocols and avoid accidents with a
Danafloat
to
increase
metal
recovery
while
minimizing the amount of resources being used. The
negative environmental impact.
151
152
| MINE SPOTLIGHT
LA COLORADA La Colorada is one of the purest silver mines in Mexico, located in Zacatecas near the border with Durango. This underground mine is located in the geological belt called “Faja de Plata” and contains silver, gold, zinc and lead concentrations as a typical epithermal deposit. Mineralization is present in the form of epithermal veins, breccia pipes, mantos, and limestone replacements in three main zones known as Candelaria, Estrella, and Recompensa. Mining production in the Chalchihuites district, of which La Colorada is part, began in pre-Hispanic times but was not constant after the Spanish invasion. In the 19th century, the mine was operating full time as an important silver production site but activities were hampered by the Mexican Revolution between 1910 and 1920. After the war, the Dorado family operated mines on the La Colorada property and mining operations were conducted by various mining companies continuously until the property was acquired in 1998 by Pan American Silver. The company anticipated end 2014 with a production level of 4.85-4.95 million ounces of silver at cash costs of US$9-9.50 per ounce of silver, net of by-product credits. The production of by-products was expected to reach 2,600-2,800oz of gold, 6,500-7,000 tonnes of zinc and 3,100-3,500 tonnes of lead. An expansion project for La Colorada began in January 2014 and will increase the mine’s annual silver production by approximately 67% to approximately 7.7 million ounces by 2018. The main components of this expansion include a new 600m deep shaft and hoisting system, the development of new mining zones, the expansion of the mining fleet, the expansion of the sulphide treatment plant to approximately 1,500 t/d, the expansion and upgrade to the mine’s dewatering and ventilation systems, the expansion of the tailings storage facilities, and the construction of a new power line. At La Colorada, oxide and sulfide ore are treated in separate and dedicated oxide and sulphide plants. The oxide plant comprises a conventional cyanide leach plant that consists of crushing, ball mill grinding, leaching, Merrill-Crowe zinc precipitation, and onsite refining to produce silver and gold doré bars. The sulphide plant is a conventional flotation plant comprised of crushing, ball mill grinding, and selective lead and zinc froth flotation circuits to recover silver and gold while separating lead and zinc concentrates. The daily processing capacity of the oxide plant is 650 tonnes as opposed to 750 tonnes for the sulphide plant. Beyond the expansion, 2014 saw Pan American Silver focus on detailed engineering, mine development, and preparations to start constructing a new shaft and carry out a plant expansion in 2015.
153
| VIEW FROM THE TOP
WASTE MANAGEMENT SHOULD BE FOCUS OF ALL MINING EXECS LEFT: Frank Palkovits, Principal of Kovit Engineering RIGHT: Arturo del Olmo, Director of Waste Management of Kovit Engineering
Q: Kovit Engineering provides expertise on tailings,
that the technology we propose has a solid track record
backfills, and waste management. What led you to create
in mining environments, we make them fully aware with
such a specialized firm?
what other mining operations are doing, and we get them
FP: It was a natural evolution. I have worked on mining
comfortable with the facts. I have not encountered a mining
projects for 20 years, spanning exploration, geology, and
CEO that shies away from this step when presented with
mine design, as well as having been a consultant. The
the facts. Furthermore, if mining operations do not give
foundation of Kovit was a natural progression. I started
due consideration to such alternatives, regulators will
this company so that I could have the freedom to innovate
come down on them. European operations are already
in my own way. Part of that innovation can be seen in the
applying the latest environmental and waste management
design of new operations we get involved with and in how
technologies, and there is no excuse for companies not to
we communicate with our clients.
do so here. Regulators may simply deny permits, and ask companies to return once they have reduced the long-term
Q: Which solutions in your mine design portfolio are
environmental risk. In today’s world, nothing can be hidden.
destined to become industry standards?
What is filmed on a cellphone today can go viral tomorrow,
FP: A widely held connotation in the mining industry is
meaning that communication has become all the more
that a project should be planned from cradle to grave,
important. Mining companies have to show they are moving
but we should be thinking about grave to cradle. Mining
forward. Even in the wake of a catastrophe, they have to get
companies have to think about what an operation will look
the right message out.
like after mine closure, and waste management plays a major part in that. A mining project extracts a very small
AO: If a new mining operation is being planned without
part of what is being dug up. Kovit Engineering can assist
incorporating these new technologies, then that operation
in addressing the management of large streams of waste.
will never be competitive. The implementation of these
The metals may drive the profits but waste can have a
technologies for new operations is not up for discussion.
major impact on the cost of a mine. A mining company’s
Existing operations, which have already seen a lot of
balance sheet is measured differently today than before, it
investment, may have to look carefully at the cost-
now includes what a company does to mitigate potential
effectiveness of better water and waste management
risks to human health and the environment, as well as what
solutions, such as processing less water and making better
the local communities think about the license to operate.
use of waste storage space. For existing operations, Kovit
Mining companies rarely think about how their waste
Engineering can very carefully adjust the proposals it tables
impacts these factors.
in order to find the right time and the right amount to be invested. Regulators cannot enforce this alone, and a lot
Q: What solutions can Kovit Engineering offer to
of self-regulation and self-assessment is needed. Mexico’s
companies looking to increase the control they have over
mining industry is not isolated, what happens in Mexico can
their tailings?
impact mining operations and legislation around the world.
FP: We look to provide a continuous improvement model
For example, the failing of the Los Frailes tailings dam in
in all the mines we get involved with. While alternative
Spain in 1998 triggered changes in legislation worldwide. In
waste management strategies might first appear to require
Spain, no new mines opened for the next five years.
a higher investment, there are far larger risks associated
154
with non-monitoring. Tailings dams that fail are largely
Q: How important is the characterization of mine waste and
due to inadequate planning and monitoring systems. The
tailings in the solutions provided by Kovit Engineering?
implemention of strict management for such systems can
FP: Characterization must start even before a mine is
vastly reduce the probability of failure and the resulting
developed, even as the geologists first collect materials.
consequences. When we talk to executives, we demonstrate
This is all part of an environmental awareness that must
| COMPANY PROFILE be applied as early as possible. For example, once a
KOVIT ENGINEERING LTD.
company understands the flora and fauna present on a
See Kovit’s worldwide experience at www.koviteng.com
site, it can better understand what it can or cannot do.
contact us at tailings@koviteng.com or backfill@koviteng.com
Companies should not seek to change the environment
T.: +1.705.523.1040
outside of its existing parameters. Even improving the quality of drinking water can change the environment.
Kovit is one of the premier engineering and consulting companies,
Managing the tailings and exposing this material is done in
specializing in mine productivity and optimization through
days, instead of millennia, as happens through weathering
integrated mining and waste management solutions. Kovit’s
and erosion. As such, understanding the chemical and
senior members have extensive experience in mining and milling
physical changes that take place and the leachate that will
operations, consulting, plant optimisation and plant construction
form shows whether these tailings are benign or not. The
and delivering over 1,500 projects worldwide on four continents.
characterization of these tailings will lead to very different strategies. For example, for dewatering, the nature of
Kovit provides: management consulting and engineering for
the tailings will determine the polymers being used.
tailzings management; project management, environment health
Alternatively, if the tailings are acid-producing or sulfides,
and safety services for integrated mine waste management;
it tells us that a company uses the wrong cementitious
project implementation though procurement, commissioning and
product underground; the company might use material
construction management of backfill plants; and technological
that appears safe, but it will lose strength as the sulfur
research and operational performance review and assessment.
attacks the binders. Water determines whether the plant is positioned above the ore body or near the tailings
KOVIT SERVICES
structure. Kovit Engineering’s solutions provide all this in
Project management, consulting and engineering
one big picture.
Kovit’s global experience covers 200,000 tpd to less than 1,000 tpd open pit and underground projects, for all commodities. We help
Q: How does Kovit Engineering quickly assess the right
clients to: develop strategic for surface tailings management or
criteria to develop an appropriate waste management
mine planning and backfill; address regulatory requirements, land
solution?
acquisition, public relations, environmental regulatory and mine
AO: Not everything is done on the first day. The first step
permitting requirements; minimise capital and operational costs by
is to understand the geology, the ore, and other materials
meeting mine waste and tailings disposal requirements; help decide
to define the right chemical and physical properties. Once
on strategies for waste products and water management needs;
a project advances, you need to understand how the value
plan for closure while optimising rehabilitation solutions in a cost
will be extracted from the ore, since this will determine the
effective manner with minimal post closure liabilities.
technology to be used. Finally, you have to understand how all the waste materials are going to be managed.
Project implementation and construction, operational
Kovit Engineering makes these steps less complicated by
management
bringing in new technologies and solutions. We have the
Kovit offers the following project execution services: mine planning
knowledge of having been through this process in many
auditing and mine backfill implementation options; backfill
different mines around the world and having provided
optimisation, backfill mix design and initial cost comparisons; mine
many different alternatives.
site backfill materials characterization and engineering studies from conceptual to detail engineering; EPCM; turnkey services
FP: Our laboratory tests most types of materials that we come across, but we have not seen them all. Every tailings
Research and performance assessment
and every ore body presents new compositions, and
Our laboratory expertise includes: solid / liquid separation
considerable changes may even take place within the same
technologies
ore body. To understand these changes, we speak with
vacuum and pressure filtration, paste production, cyclone
the geologists, with the metallurgists, and with the mining
optimisation); thickened tailings and paste rheology; backfill
executives. Once we receive ore samples, we set out to
strength, binder optimisation, sulphide self-heating; and bench
understand where large changes are within the ore body.
scale /pilot scale / on-site demonstration/pilot plants.
After that, we can develop an equipment selection plan and come up with redundancy levels to make sure an operation continues to work effectively. We do tests on deposition, on soil mechanics, and even on seismicity to determine how an operation will fare in the event of an 8.0 earthquake.
(tailings
dewatering,
flocculation,
thickening,
REBORN CHEMICAL COMPANY EYES UP MINING EXPANSION On July 31, 2014, Ashland Water Technologies (AWT)
lab was created specifically for the mining industry at our
was officially acquired for about US$1.8 billion through a
research center in Wilmington, Delaware, and additional
fund managed by the private equity firm Clayton, Dubilier
personnel were hired for Solenis’ mining technical support
& Rice (CD&R). As part of CD&R’s rebranding strategy,
team.” The company will also support the Mexican mining
AWT was renamed Solenis, a portmanteau of ‘solutions
industry through its manufacturing plants in Mexico City
genesis’. “CD&R has a history of buying divisions of large
and Houston. While Solenis’ global headquarters will
corporations and then bringing in investments to grow
remain in Wilmington, its Latin American headquarters are
these divisions independently, which is exactly what is
now in São Paulo, Brazil. Furthermore, its Mexico offices
happening with AWT,” explains Wanderley Flosi, Vice
will be incorporated into its Mexico City plant to make
President for Latin America of Solenis. “The firm wants
operations more agile, while it already has staff dedicated
Solenis to invest in a number of areas: in R&D to enhance
to mining deployed in Sonora and Chihuahua.
the quality of its products and services, in new facilities in Latin America, in making operational improvements, and
The overhaul of Solenis’ operations has manifested itself
in securing further acquisitions to accelerate growth.”
in a variety of ways. To complement its customer service,
This move builds upon the company’s 94-year legacy
Solenis has had to implement new software platforms to
as a respected manufacturer of specialty chemicals,
improve its services for the mining sector and beyond.
and is supported by the expertise of companies that
OnGuard Online is one such system that allows Solenis
AWT has acquired throughout the years, including Betz
and its clients to remotely monitor the use of its
Laboratories, Drew, Stockhausen, and Hercules. Another
products. “Using OnGuard Online, a plant manager can
reason why AWT was seen as a prime candidate for
monitor information about chemical dosing, efficiency,
acquisition is its extensive product portfolio stretching
and problems in the process. The system can even send
across 30 manufacturing facilities. As a result of this
a notification to the manager if it detects a problem,”
transaction, Solenis has an opportunity to invest in the
says Flosi. SAP’s GlobalOne has also been brought in to
expansion of its business in its five focus markets: mining,
expand Solenis’ supply chain functions and ensure that
refining and chemical processing, power generation,
no disruptions take place at that level. Flosi explains
industrial water treatment, and pulp and paper.
that Solenis’ willingness to embrace new systems and
“A new lab was created specifically for the mining industry at our research center in Wilmington, Delaware”
Wanderley Flosi, Vice President for Latin America of Solenis
The implementation and redefinition of Solenis’ current
provide higher levels of technical support is very likely
strategy began 18 months prior to the acquisition when AWT
to make it a reference in the Mexican mining industry in
started to identify core markets and invest in innovation
the medium-term.
development. “The changes to the company structure and
156
business strategy were made when we decided that AWT
Complementing such adjustments to improve its services
needed to focus on a faster growth rate, specific markets,
offering, Solenis already has a track record of innovation
and innovation, even before we knew that AWT would be
in the mining industry. Angel Pedraza, Solenis’ Country
sold,” Flosi adds. He then explains that Solenis’ executive
Manager for Mexico, has some key final points to make
management team has remained unchanged since the
on the subject. “About two years ago, one of our clients
acquisition, facilitating a continued focus on defined pillars
had serious problems with calcium sulfate precipitation
of growth that include service and technical support, and
and clogging in the chemical irrigation system used for
technological innovation. Solenis is aiming for a growth
gold cyanidation. To solve this, we developed a scale
rate of more than 3%, and Flosi acknowledges that Solenis’
inhibiting solution and dispatched a research team to the
mining activities in Mexico will be crucial for achieving
mine in Mexico to test it in the field. Since that visit, our
this goal. “Solenis is currently undergoing interesting
client told us that the solution had effectively resolved
developments to support Mexico’s mining division. A new
the problem.”
MINERAL PROCESSING PROVIDES CONSISTENT OPPORTUNITIES The cyclical nature of the
Metso, but they are provided with a good basis to go on
mining
and develop mining careers.
industry
always but
be
some
predicted, areas
remained
Leif Lindholm, Vice-President for Mexico and the Caribbean of Metso
cannot have
Metso owns only one plant in Mexico that manufactures
sustainable
mill linings. This plant has been operating for 32 years,
enough to find success
and is as efficient and modern as the company’s other
even in difficult periods.
11 rubber plants around the world. Metso’s mill linings
Metso operates primarily
represent one of its greatest successes in Mexico, but the
in
company anticipates that its lifecycle service contracts
mineral
which part
is of
processing, an any
essential
will represent the next success story. These contracts
mining
integrate the company’s processing technology with
operation. “Mexico’s mineral processing sector has not
its solutions and its entire equipment portfolio, and are
yet experienced any downturn as all mines in the country
intended to position Metso as a one-source supplier for its
are still active, so business with our existing customers is
customers, both old and new. “Inside plants, I have found
still going strong,” states Leif Lindholm, Vice-President
that operations in Mexico are at the same levels as in most
for Mexico and the Caribbean of Metso. Despite this
countries,” describes Lindholm. “Our direct contribution
fact, Lindholm stresses that the company has felt some
to automation can be seen in the running and monitoring
delays in regards to new projects. Even so, as mines
of the mills, crushers, and flotation. Even so, automation
continue to progress their operations, Metso’s customer
is not just linked to manufacturing, it is also linked to the
base continues to demand more efficient, cost-saving
public perception of mining. Our new monitoring systems
products and services. Mexico is up to date on its mineral
will take away much of the manual oversight of mining
processing techniques, although, like most aspects of
processes, bringing the sector in line with many other
mining, companies are looking for solutions that provide
industries.”
greater cost-efficiency. “This is a big advantage for us as we possess a wealth of knowledge about ways to achieve
Metso maintains a significant local presence in Mexico while
that goal,” states Lindholm. “Our existing equipment is
counting on its global resources, allowing the company to
designed to perform with the utmost efficiency, while
tailor solutions to the specific issues encountered in each
new Metso lines such as process monitoring equipment
market. That local commitment is translated in the number
allow for better control over said processes, resulting in
of people Metso employs in Mexico, as well as their level of
a further increase in efficiency.” The company’s Process
training; something which Lindholm claims no competitors
Technology division regularly carries out site audits on
can match. Beyond that, it boils down to customization.
mines to determine both existing and potential issues.
“Every project is different, so we have to be able to adapt
One factor that can impact process integration is the
to all circumstances,” he states.
conflicts that sometimes arise between the operations and maintenance teams in a mine site. “More often than not,
The Mexican mining sector currently contributes around
these two divisions do not have the same targets, so we
15% of Metso’s overall profit, but this is expected to grow
have to find a way to integrate our solutions in a way that
as the company develops its services division. “Even when
keeps everybody happy,” explains Lindholm.
the industry is in a slump, mining companies are always in need of our most popular services, such as preventive
“One of the main bottlenecks in the processing chain is
maintenance,” explains Lindholm. “For the last seven years,
the discovery of suitable talent,” says Lindholm. “For
we have had contracts with major companies to inspect
many years, Mexican mining schools only taught a handful
all of their equipment. This is the case with Peñoles where
of students, making it difficult to find the right people
we annually inspect all of their mills. Our inspections allow
when the industry started to grow. Now that growth
us to identify problems before they become critical issues,
has slowed down and universities are producing a well-
such as cracks in gears or mill shells, and help to fix them
trained Mexican workforce, it has become much easier to
before the machines break down. Such inspections make
recruit, but not everybody has the necessary experience
sense in times where cost efficiency and productivity are
in the field. Lindholm explains that Metso can train these
high priorities. Demand is also growing for other products
individuals through specific programs, getting them out
like mills and crushers. There are worldwide developments
of a classroom and into the company’s own facilities. He
in mining that are coming to Mexico and contributing to a
mentions that not all of the students end up working at
rise in demand for these types of equipment.”
157
QUALITY EXPLOSIVES BACKED UP BY PRECISE CALCULATIONS Since it was founded in 1989, Equipos y Explosivos del
portfolio,” tells Ayala Guzmán. Electronic initiators are
Noreste (EYENESA) has achieved a sustained level of
particularly useful for companies with controlled blasting
growth. Pursuing a constant improvement of technology,
requirements. This is common when blasting operations
services, human capital, and infrastructure has allowed the
are to take place near urban centers. In these cases,
company to exceed its growth expectations. EYENESA’s
EYENESA performs seismographic studies that enable it to
priority has always been the provision of quality services
evaluate the impact of the vibrations that will result from
as it understands how important explosive supplies
the explosion. EYENESA participates in the manufacturing
are for mining production activities and construction
process of explosives, which allows the company to create
developments in the infrastructure sector.
ANFOs with different compositions and diverse lightening
“Being able to manufacture six ANFO variants enables EYENESA to position itself as a leader in the market”
Miguel Ángel Ayala Guzmán, Director General of EYENESA
158
One of the constant benchmarks for its progress has been its
agents that reduce the presence of toxic gases. “Being able
harnessing of the latest technology for explosives. This allows
to manufacture six ANFO variants enables EYENESA to
EYENESA to offer clients in the mining sector sophisticated
position itself as a leader in the market,” says Ayala Guzmán.
software used for calculating blasting procedures, bulk
Another challenge for any explosives manufacturer is the
emulsions, electronic initiators, and equipment that can
care with which these are transported. To take care of
directly supply drills with agents and emulsions. The
this, EYENESA has a dedicated team in charge of keeping
company has three main explosive items: emulsions, ANFOs,
records on available items and keeping tabs on everything
and accessories or initiators. Miguel Ángel Ayala Guzmán,
that goes in and out of the company’s powder magazines.
Director General of EYENESA, explains that an ANFO is a
“We need to present our records to SEDENA in a complex
mixture of industrial grade ammonium nitrate of different
process that entails the exact quantification of each unit of
densities, fuel oil, as well as lightening and anticaking agents,
measurement for each product,” asserts Ayala Guzmán. “Our
among other elements. “ANFOs are explosive agents that are
legal department also manages all juridical processes, which
used in combination with emulsions based on an estimated
can range from obtaining permits for the use of explosives,
charge factor. The latter is calculated according to a rock’s
to conflict resolution.” In an extension of such practices,
hardness, fragmentation level, and other characteristics.
EYENESA also offers its clients powder magazine inventory
Making these calculations is also part of EYENESA’s service
management and control services.
EXPLOSIVES MANUFACTURER’S PROFITS BOOM IN MEXICO For
centuries,
black
SEDENA has heavily regulated the sale of explosives in
was
only
the country, meaning that Austin Powder must adhere to
for
strict procedures across its range of business practices.
It
“SEDENA has demanded that every single stick and box
was not until the advent
is branded with a serial number, so if stolen explosives
of the Industrial Revolution
are later found by the military, they are able to track them
in the late 19th century
back to the manufacturer to find out which customer was
that a range of explosive
responsible for them,” explains Moreno. If Austin Powder
innovations began entering
did not keep track of this information, then the company
the market. Many modern
would be operating outside of the legal framework and
powder explosive industrial
Ricardo Moreno, Director General of Austin Powder México
the
available applications.
explosives such as nitrate-
be faced with a considerable fine. Considering that the
fuel oil mixtures and ammonium nitrate-base water gels,
explosives manufacturer produces over 9 million sticks per
which now account for a majority of the explosives market
month, the obligation to keep track of each individual one
in developed countries, have only been around for 60 years.
represents a huge responsibility.
With the help of such innovations, the need for human and mechanical strength in mining has greatly decreased, and
While the end result of a controlled mine explosion is fairly
the supply of explosives has become a profitable market
similar, namely the creation of open space through the
in which only the strongest survive. One such contender is
removal of large quantities of solid material, Austin Powder’s
Austin Powder, the only large explosives manufacturer in the
product range bears some variety. Its portfolio contains
world that is still owned by a group of private investors.
different explosives and formulas for specific applications. Moreover, the company’s engineers are able to calculate
For over 175 years, Austin Powder has been serving
the vibrations resulting from a blast by running detonation
various industries that use explosives. The company has
simulations. These also help to determine how the rocks
been operating in Mexico for over 17 years, acquiring
within the mine will behave, as well as the size of debris
DuPont’s assets within the country during that time.
produced by the explosion. This analysis is essential to
These included parcels of land, manufacturing plants,
ensuring damage avoidance in its customers’ facilities and
and some key production formulas. In 1997, Austin
deciding which explosive to supply for each specific set of
Powder formally constituted DuPont under the name
circumstances. It is not just explosives that Austin Powder
Austin Bacís. In the last ten years, it also acquired some
supplies. Initiation devices, which provide comprehensive,
smaller explosives distribution companies in charge of
influential control over the detonations, represent around 25-
distributing explosives by Dyno and Orica, as well as its
30% of the accessories used by the company for explosions
own products. The strategic locations and the established
in mining. Other significant products include water gels,
permits
in
which have almost entirely displaced dynamite in the
simplifying the operations that Austin Powder was keen
held
by
these
companies
were
useful
commercial market, and emulsions, which possess explosive
to conduct in Mexico. The company now services major
characteristics of minimum diameter and detonation rate
players in the mining industry, namely Peñoles, Fresnillo,
when compared to the various grades of dynamite. “Mining
Grupo Mexico, and Minera Frisco, among others. Ricardo
companies are still demanding regular explosives to develop
Moreno, Director General of Austin Powder México
their mines,” Moreno explains. “They need them to create
explains how the company’s clients in the mining industry
underground mine shafts and to expand surface mine pits.
depend on the quality of its products. “We have been
Yet, to make operations more cost-effective, companies
servicing all these major companies for several years and
are looking for powerful and controlled explosives that do
their expectations are all the same. They want explosives
not require many sticks. We recently developed a product
to have the right performance, to come at the right price,
that meets those requirements, it is called Hydromex and is
and they want us to provide the right service in terms of
already available on in the market.” On the emulsions side,
efficiency and safety. The explosives that we manufacture
the company has invested US$18 million in a facility that
have high safety parameters since they are manufactured
will manufacture new products, including Emulex 1, Emulex
with the most up-to-date formulas and equipment in the
2, Emulex C, Hydromite 3, Hydrox S and Hydrox U. Austin
world. We also have one R&D department in the US and
Powder is now looking to expand its market into the bulk
another in Europe, both of which are constantly working
emissions used for large open pit mining. As a company that
on improving the emulsions that are manufactured here
is well acquainted with the mining industry, it is in a strong
in Mexico.”
position to achieve such a goal.
159
GRINDING PRODUCTIVITY COMES FROM EXPERIMENTATION Grinding
the
ore
technical support during the mining and milling operations,
mine
while also training plant personnel to make the best use of
is an essential step prior
the grinding media. “Sometimes, mill operators do not know
to
and
what they are dealing with, and since we provide expensive
processes.
pieces of equipment, we train them to know how and when
extracted
from
the
a
flotation
beneficiation Although
grinding
straightforward based Miguel Guerrero, CEO of PROESMMA
the
a
to use certain grinding media,” Guerrero adds.
process impact
To further complement its business relationship with
of grinding media in a
clients, PROESMMA takes care of tracking inventory and
rotating
is
grinding levels at the grinding plants. The company visits
a
on
is
mill,
the
its clients to assess the use of their mill, of the grinding
production of grinding products. The composition of the
media, and to replenish stocks of steel balls. The company
commonly used steel balls, for example, can substantially
is also able to suggest a mixture of different kinds of
influence
of
balls to increase performance and productivity. However,
the process. Moreover, when operating in demanding
mining companies do not always easily accept changes to
environments, grinding media suppliers need to not only
the milling processes, or to any process for that matter.
guarantee quality and service, but also provide a consistent
“The shareholders are asking for a certain production rate
supply of innovative products that increase the efficiency of
and making a change can affect that,” Guerrero explains.
the supply chain. Miguel Guerrero, CEO of grinding media
Nonetheless, after working for four years to establish
supplier PROESMMA, shares his insight into the company’s
itself, PROESMMA has a list of guaranteed customers
strategy for servicing the mining industry in Mexico: “At
willing to take its advice on board. “Our clients give
PROESMMA, we understand that the name of the game
us good feedback and we can see that our work in the
has changed, and right now it is all about savings and
Mexican mining industry has been very positive, especially
competitiveness. It is not the industry that it used to be.”
considering the industry is going through a downturn. We
the
productivity
and
science
there
behind
cost-effectiveness
understand that companies are focusing on saving money To survive and thrive within the industry, suppliers need
and lowering costs,” says Guerrero.
to pay careful attention to the chemical composition of
160
their steel balls, since the chemical and physical properties
PROESMMA is part of the mining cluster in Chihuahua,
required change according to the needs of a mine. “We try
CLUMIN. While the cluster’s board of directors initially
to find a chemical composition to fit every kind of grinding
started by only including mining companies, key suppliers
process,” Guerrero says. “We can play with the levels of
are being invited to form a part of this promising group,
chromium and carbon in order to supply a built-to-suit
opening up the opportunity to suppliers looking to prove
product. Two different kinds of steel balls are used in Mexico,
their worth in the industry. “We have been having supplier
the forged steel ball and the cast ball. The cast ball can
meetings, which enables us to present our products to
have a wide variety of chromium levels in its composition,
all the mines across the state. CLUMIN is detonating
which in turn increases its resistance to oxidation, corrosion,
wealth and employment in the region,” states Guerrero.
hardenability, and strength. Yet cast balls tend to be
He further explains that the cluster is creating synergies
more expensive and do not necessarily provide a better
with the government of Chihuahua to develop the industry,
performance.” PROESMMA is focused on the production of
which many bemoan has not been favored by the federal
forged steel balls, which Guerrero deems as more efficient
government’s tax reform. “We are creating synergy with
and cost-effective. This manufacturing technique offers
the government so that we can be part of their economic
uniformity of composition and structure, which in turn
development plans and make sure the industry is taken
makes it impact-resistant and increases its shear strength.
into account when developing policies,” he exclaims. With
Through the ability to alter the chemical composition of
a solid business strategy, and a growing customer base,
the grinding media and a deep understanding of its clients’
PROESMMA is looking towards diversifying its products.
specific needs, PROESMMA is able to produce tailored
“PROESMMA specializes in grinding media but since these
products for the range of mining operations in the country.
are basically made out of steel, we could supply other steel
As mining companies struggle to increase efficiency, close
products as well. We started to develop new products in
communication is essential for providing milling plants
2014 but we still have to carry out a lot of research and
with the necessary products. PROESMMA is aware of the
trials before offering those products to the market,”
importance of service and so complements its products with
clarifies Guerrero.
| VIEW FROM THE TOP
MAGNETIC SEPARATION RAISES THE BAR IN METAL PRODUCTION GUILLERMO CARRETO CORDERO Director General of Eriez Mexico Q: What is the main driver of demand for magnetic
Q: What are some of the most utilized magnetic processes
separation in the mining industry?
in the Mexican mining industry?
A: Magnetic separation is a fundamental aspect of both
A: Usually, magnetic separators are used before minerals
the steel and mining sectors, particularly when ore and
enter the crushers. Electromagnets are suspended above
gangue minerals have rich iron content. Our solutions have
the conveyor belts in order for the magnets to attract all the
applications in several industries but the mining and steel
disperse iron. Other types of magnetic separators are also
industries have benefited from our products the most, and
installed before the mills to attract other non-iron metals,
currently 50% of our products are aimed at supporting
as these can also affect processes. These processes can
these industries. The mining sector is so ample and diverse
use vibrators, metal detectors, drums and magnetic flux
that it can make use of all of our magnetic separation, froth
concentrators, suspended electromagnets, or even mill
flotation, separation through vibration, and metal detection
linings. Our products can be integrated into each process,
solutions. Our products are intrinsically linked to these
either dry or wet, to ensure the purity of iron and other
industries because the process that discriminates between
minerals of interest. We have also noticed that mining
metallic and non-metallic elements is essential, and magnetic
companies now collect and concentrate all their unwanted
separation is the most effective method known today. Over
metals for future recycling as part of their environmental
time, the mining industry has grown in relevance for us due
efforts. Eriez can help companies separate all the metals
to its purchasing power and its constant search for new
that adhere to their systems and sort them according to
technologies that can improve production levels. This has
their elements. The goal is helping our clients separate
been a key element, especially when considering that our
metallic residues efficiently in order to facilitate selling
company has always sought new magnetic processes that
these metals to recycling companies. Our solutions not only
can contribute to the operational efficiency of the mining
have applications for metal mining but for industrial mineral
sector. We are currently a supplier for companies such as
mining too. When companies exploit non-metallic minerals,
Grupo Mexico, Goldcorp, First Majestic, ArcelorMittal, and
iron tends to be a contaminant. In particular occasions, iron
AHMSA.
particles stemming from heavy machinery can adhere to the extracted rocky material. These materials can affect the
Q: What are your bestsellers in the Mexican mining
mills or the purity levels required in the production of such
industry?
minerals. Our magnetic separators and metal seeking tools
A: Our products are being used in many of the country’s
are used a lot in industrial mineral mining. Eriez has a broad
most relevant mining projects. Our magnetic drums have
and comprehensive product portfolio that enables us to
seen a wide degree of acceptance as they are used in
cover all of a company’s magnetic separation needs.
both wet and dry separation. We were involved in a very interesting project at PeĂąa Colorada, where we installed
Q: How does Eriez customize its products and technologies
more than 150 magnetic drums. We started out with 24-inch
to solve problems that are specific to the processing of
drums, before moving to 36-inch and finally 48-inch drums.
each mineral?
Another bestseller is our line of magnetic flux concentrators.
A:
When a mine is looking to concentrate very large volumes
not always the best solution since products have to be
of iron, it has to use several pieces of equipment to satisfy
adapted to the mineralogical conditions of the projects. It is
its processing needs. These types of operations are complex
important to gauge the machines in terms of both magnetic
and costly, and few operators can perform these tasks. As
intensity and surface magnetic force. Our labs enable us
a result, magnetic flux concentrators are responsible for a
to conduct tests in order to determine the characteristics
considerable amount of our revenues. Eriez products have
needed for the machines to yield the expected results. Our
become crucial in times of crisis because their efficient
labs can determine the type of magnetic force, intensity,
recovery rates allow our clients to do more with less.
size, and velocity needed to treat a specific mineral deposit.
Standardized
magnetic
separation
processes
are
161
| TECHNOLOGY SPOTLIGHT SCISSOR BOLTER REPRESENTS PARADIGM SHIFT
deliver accuracy, speed, versatility, and, most importantly,
Every once in a while, a manufacturer introduces a product
a safer application environment for operators. The current
that creates, not simply responds to, market demand. The
generation of Series-900 bolters – the 928 model with a
MacLean Scissor Bolter is such an innovation. It was initially
2.4m work platform and the 946 with a 2.1m work platform –
met with skepticism when first developed in the mid-1980s,
achieve their safety and quality control functionality through
but now, 30 years and 400 units later, it has gone on to
the combination of a scissor platform with a forward shifting
become a mining industry mainstay. Not only has it improved
hydraulic deck that offers up 50% more coverage.
operator protection and ergonomics, it has also been able to deliver productivity and quality control. The Scissor Bolter
The bolter is a self-propelled, high-speed, four-wheel drive
responded to the growing need for safety and productivity
articulated carrier with an electric hydraulic control system
performance needed by underground mining engineers. Its
with remote drive capability on deck. The bolter features a
inventor, Don MacLean, saw an impending paradigm shift
transverse feed that enables drilling and bolting of a complete
in the mining industry, driven by regulatory and corporate
ring from a single set up by a single operator, as well as single
policy changes, cost containment necessities, and the
pass drilling that allows for rapid installation of a variety of
growing need to mine deeper, low-grade deposits. MacLean
bolts. The rock drilling and bolting systems function through
sensed that this combination would create market demand
hydraulic positioning, thus preventing exposure to loose rock
for a piece of machinery that did not yet exist. The underlying
hazards. It has a long hole drilling capability with a 900kg
design philosophy that made the MacLean Scissor Bolter
deck payload capacity and storage deck, which allows for
transformational in the hard rock mining industry was and
storage and transportation of all required bolting supplies.
remains quite simple. It allows for the installation of roof bolts
By providing a mobile platform for single-operator bolt
through a less physically grueling and dangerous manner,
and wire mesh installation, always under protected ground,
without sacrificing proximity to the rock face.
the MacLean Bolter is seen as a game-changer. It removes all physical strain and interactions with unsupported rock
The product finds its origins in MacLean’s founding vision
faces that occur with traditional ground support installation
for MacLean Engineering. He was a professional mining
methods, such as handheld pneumatic rock drills.
engineer whose experience in underground Canadian mines
162
in the 1960s propelled his launch of a company that could
The net result is a piece of equipment that meets the
design solutions to overcome the safety and productivity
mining industry’s safety and production requirements,
challenges of the hard rock environment. In this era of
reducing risks to operators while increasing the speed
tandem vigilance on underground safety and production
of development cycles. To this day, it remains the only
cost controls, the MacLean bolter’s back story tells us a lot
mechanized bolter on the market that incorporates a scissor
about where hard rock mining has come from and, more
lift. Now, with continuous product improvement based on
importantly, where it is going. The innovation represented
decades of application experience in Canadian mines, the
by the MacLean Bolter was not based on a single feature,
MacLean Scissor Bolter is being exported to underground
but rather a series of design elements that work together to
mining regions around the globe.
ROCKBOLTS PROVIDE SECURITY AND PEACE OF MIND The use of rockbolts to
it. Mining contractors or employees tend to drill holes into
support
rocks that do not perfectly match the width of the steel rods.
underground
excavations
a
This could lead to an accident since the workers will believe
necessity for the mining
that the area is fully stabilized.” In order to guarantee the
industry in the late 19th
proper functioning of the rockbolts, Mansour Mining offers
century.
its installation services to all companies looking to enhance
this
In
the
technology
advanced David Ruiz Maldonado, General Manager of Mansour Mining Technologies de México
became
to
a
1890s, had
and ensure their hazard prevention systems.
point
where mining companies
In order to provide a tailored service, Mansour Mining’s
could systematically install
engineers and technicians investigate the concerns of
anchor bolts to stabilize
mining geologists. Once the company has detected the main
their excavations. Engineers realized that, by fastening rock
areas that need to be secured, it gathers a study group to
masses together before they slide or move, rockfalls or mine
design and develop the most adequate anchoring solution
collapses could largely be prevented. Mining operators have
for each section. The company evaluates all the factors that
made use of this steel rod technology ever since to reinforce
intervene with the correct installation of their products, such
the stability of the tunnels they build. Today, the installation
as humidity levels, rock type, and ground stresses. To ensure
of rockbolts to secure underground excavation is no longer
a proper installation of its systems, Mansour Mining carries
a mere operational necessity but is enshrined in international
out pull-out tests with hydraulic machinery and manometers
mining best practices. According to the Mexican mining and
to analyze the forces to which their products are submitted.
labor laws, companies must install permanent fortification
This helps the company to guarantee that the rockbolts are
systems to ensure the stability and safety of their mines.
performing at the required levels. “Even if our client already
“Many types of rockbolts have been developed for different
knows what product they need, we conduct a second
mining applications. The evolution of mining methods
assessment to verify if it is the most suitable rockbolt for a
created the need for new and better ground support
specific application. It is our job to support our customers
systems. Our company has years of experience stabilizing
during the entire mine stabilization process, from the
and securing some of the most challenging underground
selection of the best product to the proper installation of
mines in Mexico. The knowledge we have gathered by
it. With our technologies and expertise we can help mining
working in several mining jurisdictions has helped to perfect
companies ensure the continuity of their operations and the
the way rockbolts are manufactured and installed. Our
safety of their personnel,” states Ruiz.
company came to Mexico because we saw the need to upgrade the country’s rock stabilization methods due to the
To maximize the operational benefits rockbolts provide,
number of operational inefficiencies and geological hazards
Mansour Mining has added one of the most effective drilling
that were being encountered,” says David Ruiz Maldonado,
steels on the market to its portfolio of solutions. This drilling
General Manager of Mansour Mining Technologies de México
product is designed to help operators drill holes with
(Mansour Mining).
precise diameters so as to perfectly match the expansion shell bolts that are being inserted. “Our products do not
According to Ruiz, mining companies in Mexico have been
only contribute to enhancing the reliability of rockbolts
using traditional rockbolts because in many cases they
but also contribute to increasing the speed of installation.
are not aware that updated stabilization technologies are
The drilling steel we provide can help any mining company
available. “Mining companies have been using the same
optimize operations, but when combined with our rockbolt
products for decades. This means that our mission is to
products, improvements to safety are certain,” comments
help them improve their safety systems. Every product that
Ruiz. To complement the company’s ground stabilization
we commercialize has been tested in the most aggressive
business line, Mansour Mining also manufactures and
environments and, in every case, our rockbolts were able
distributes ventilation technologies. Even though they
to perform the job correctly,” states Ruiz. “They are reliable
do not produce extractors or ventilators as such, they do
and do not need to be constantly replaced, as in the case
provide all the accessories and components these systems
with conventional anchoring systems. Durable products
require. Despite the fact that this business line is not core
for underground stabilization are crucial, yet it is even
to the company, many mine operators in Mexico who have
more important to verify how these products are installed.
enjoyed the benefits of Mansour’s bolting technologies
We have often seen that mining companies buy the right
have also implemented their ventilation solutions with equal
product for the application but they fail to adequately install
success.
163
Since mid-2011, the gold price has fallen to an average of US$1,200 per ounce. Even so, gold prices remain at twice the average seen in 2006, and it remains the precious metal of choice for long-term value storage. Total gold production in Mexico accounted for 3.85 million ounces in 2013, making the country one of the top ten gold producers in the world. In the first ten months of 2014, the country produced 2.67 million ounces with a total value of US$3.11 billion. As a result, Mexico has risen to become one of the top gold producing countries in Latin America. At the beginning of 2015, the country’s gold projects are still benefitting from a combination of commercially viable gold deposits, favorable conditions for heap leaching, and a historical and stable mining culture.
Within this chapter, you will find an overview of the country’s positioning in the global gold market, its main gold mines, and details on the successful gold exploration prospects within its borders. The chapter includes an array of articles that focus on the most important gold mining companies operating in the country, while analyzing their strategies, achievements, and priorities. It also features a map of the main gold mines in Mexico, enabling readers to locate the most important projects in the country. Finally, interviews with CEOs, directors, and mine managers reveal current and future tendencies of the Mexican gold market.
GOLD
7
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www.dynonobel.com.mx
T.: (33) 36163081 (33) 36163082
CHAPTER 7: GOLD 168
Extraction of Profitable Ounces Remains Possible, Goldcorp
169
Legend of the Goldcorp Challenge, Goldcorp
170
MAP: Mexico’s Main Producing Gold Mines
172
Latin America Strategy Continues to Pay Off, Yamana Gold
173
Strong Cash Flow Allows for Property Expansion, Alamos Gold
176
Small Durango Mine Could Grow to Be World-Class, Chesapeake Gold
177
Cost-Efficient Major Sees El Chanate as Priority, AuRico Gold
179
TECHNOLOGY SPOTLIGHT: Pulling Core Samples from 2,400m below the Surface, Globexplore Drilling
180
Mexican Explosives Pioneer Helps Mines Blast Further, Nitro Group
182
Positive Results Incite Mining Giant to Invest, Minera Frisco
183
Old San Dimas District Shows Modern Profitability, Primero Mining
184
Bold Acquisition Strategy Paying Off for Mid-Tier Producer, Argonaut Gold
186
Careful Progress Sets Up Positive Year Ahead, Goldgroup Mining
187
Timmins Gold to Set Caballo Blanco Back on Right Track, Timmins Gold
188
Mexican Production Drop Does Not Faze New Gold, New Gold
190
Mining Operator Seeks to Put Sinaloa on the Map, McEwen Mining
193
MINE SPOTLIGHT: Peñasquito, Goldcorp
194
Forward Planning Leads to Production Success, Gold Resource
196
Veterans Tap into Formerly Producing Mines, GoGold Resources
197
Fishing for Opportunities in Sinaloa, Marlin Gold
198
Exploration Firm Will Find Right Partner or Go It Alone, Mexus Gold US
199
Guerrero Gold Belt Growing Source of Prosperity, Torex Gold
167
| VIEW FROM THE TOP
EXTRACTION OF PROFITABLE OUNCES REMAINS POSSIBLE TOMÁS ITURRIAGA HIDALGO Vice-President of Goldcorp México Q: What is Goldcorp’s strategy to ensure that its operations
stage in 2015. We hope this mine will allow us to create at
produce not only minerals but also economic value?
least 3,000 new jobs as we see great potential for Camino
A: The market conditions are currently challenging and the
Rojo. The challenge, in the context of dropping metal prices
gold price has been depressed. The new tributary rates for
and high cost structures, is to develop a mineral reservoir
mining companies coupled with rising costs for equipment
with a decent grade that generates enough revenue to
and services mean that we have to improve efficiency. As
justify its development. In this industry, either you find a
a result, we are not merely looking to extract additional
metal-rich deposit, which are scarce, or you find a deposit
ounces, we are looking to extract profitable ounces. This
with enough volume of mineral ore to develop large-scale
means we have been focusing on organic growth in our
mining processes through economies of scale.
mines, seeking a stricter approach that will lead to increased profitability for produced ounces as well as the authorization
Q: One of the limiting factors for large mining projects
of capital investments. We have become more disciplined
in Sonora is the scarcity of water. Will Goldcorp be
in our financial analyses and stricter in our decision-making
improving the water supply at the Peñasquito mine?
processes. In spite of this adversity, we have positively
A: This issue was taken into consideration within our
adapted to these harsh market conditions. We are still
sustainability investment. In Peñasquito, we worked on
delivering value to our shareholders and business associates,
improving our tailings dam, which is where we store waste
adhering to our company vision of “Together, creating
from mining and metallurgical activities, to recover more
sustainable value.” The situation has led Goldcorp to become
water from this process through a closed circuit. Instead
a better company. The safety of our employees and their
of flowing out to the nearby environment, water from
families is our number one goal, leading us to be successful
our mining and metallurgical processes gets treated and
in achieving our safety targets. A solid safety foundation
reused in our operations. There are still some losses due to
allows us to concentrate on increasing our revenues, our
evaporation or absorption in the sludge within the tailings
production, and our margins. This is the approach we are
dam, but we have considerably improved water recovery.
using for all our other operations, and it goes hand-in-hand with our “Operating for Excellence” program.
Q: What lessons did Goldcorp learn after the temporary halt of operations at Los Filos due to issues with the
168
Q: How did Goldcorp allocate the US$480 million it
landowners?
invested in Mexico in 2014?
A: Land use and access are a general issue in all extractive
A: A large portion of this, approximately US$400 million,
industries, not just in the mining industry. Mexico’s
was destined to support our Peñasquito and Los Filos mines.
competitiveness as an investment destination depends on
These investments covered the expansion of secondary
various factors such as political and economic stability and
infrastructure needed to maintain operational levels, such as
fiscal framework. The lack of attention to these factors is
tailings dams, leaching pads, pumping systems, and other
now diminishing the country’s competitiveness. However,
necessary equipment. This shows how capital intensive the
the judicial certainty given to investments in the extractive
mining business is, a company needs millions of dollars just
sectors is the most important factor, and land ownership is
to maintain production levels. Without these investments,
part of that certainty. There are mechanisms in the Agrarian
mines cannot continue operating. We therefore have to
Law that enable companies to reach agreements with
be sure that investments will actually deliver value. The
ejidos. These mechanisms are often challenged legally and
remaining US$80 million is being used for the development
there is a lack of a strong and clear legal framework that
of a new project, the gold-silver Camino Rojo mine in
regulates this contractual relationship between companies
Zacatecas, which is currently at the pre-feasibility stage.
and ejidos. Following all the protocols and formalities
It is a very interesting project which might be as large as
when engaging with an ejido is no guarantee that a proper,
Peñasquito and which will likely move to the feasibility
long-term relationship will be maintained. People find legal
mechanisms to challenge agreements, forcing companies
as the deposit is becoming scarce. Four years ago, it
to restart negotiations with ejidos when they already
had production levels similar to those seen in Los Filos,
have a fully operational mine. This places companies in
Guerrero. El Sauzal was yielding 5 g/t of gold at its peak.
a situation of legal vulnerability and slows down or halts
We only wish it had a longer lifecycle. This is normal,
investment and development in the country. The mining
though, as a deposit of such quality is obviously not going
industry, in collaboration with the government, has to find
to have the volumes found in Peñasquito. As far as daily
mechanisms to guarantee legal agreements regarding land
production volumes go, the key lies in the value that can
use. This is the real challenge.
be created and El Sauzal provided substantial value to Goldcorp’s portfolio. Our goal is to make the closing of
Q: What are the goals for the closing of the El Sauzal
El Sauzal an example of how Goldcorp applies the same
mine in Chihuahua and what is your perspective on its
professionalism during closure as it does during the
performance throughout its mine life?
operation of its mines. We are going to create and carry
A: El Sauzal was a very profitable, well-designed, high-
out world-class restoration and closing plans, through
quality mine, but it is currently entering its closing stage
complete social and environmental commitment.
LEGEND OF THE GOLDCORP CHALLENGE Although Goldcorp now stands as a giant of the global gold
not have access to in Ontario. After breaking the first rule in
industry, it took a healthy dose of chutzpah to reach that
mining of not sharing precious geological data, more than
position. In the early 2000s, Goldcorp was going through
1,400 scientists, engineers, and geologists from 50 countries
a rough patch, troubled by strikes, lingering debts, and
downloaded the company’s data to process it and find a few
unsustainably high production costs. When the deposits
million ounces of gold for Goldcorp. After the results came in,
at the company’s flagship Red Lake mine in Ontario were
the company drilled four of the winners’ top five targets and
running dry, then-CEO Rob McEwen published all the
hit gold on all four, proving that the future of mining relied
geological data on the Red Lake property online and
on data analysis and technology. By 2001, the Red Lake mine
challenged the world’s geologists to find him gold. He
was producing 504,000oz at US$59 per ounce, compared to
made available a total of US$575,000, with a top award of
the 53,000oz it was producing in 1996 at US$360 per ounce.
US$105,000, to participants who submitted the best models,
Moreover, since the Goldcorp Challenge was initiated, more
methods, and estimates. Convinced by the fact that high-
than 8 million ounces of gold have been found at Red Lake.
grade ore still ran through parts of the 55,000 acre Red Lake stake, McEwen risked exposure to a hostile takeover from its
Today, Goldcorp is the largest gold producer in the world
peers in the gold space. Through this tactic, McEwen was
with ten operating mines in Canada, the US, Mexico,
able to tap into the minds of thousands of geologists he did
Guatemala, Argentina, Dominican Republic, and Honduras.
169
| MEXICO’S MAIN PRODUCING GOLD MINES
1 2 3
4 5
6
7
8
9
10 11
13 15
14
16 12
18
17
21
19
22
23
24
25
26
27
20 28 29 SONORA 1.
Soledad-Dipolos – Fresnillo plc – Sonora
2.
La Herradura – Frensillo plc – Sonora
3.
Noche Buena – Fresnillo plc – Sonora
4.
El Chanate – AuRico Gold – Sonora
5.
Cerro Colorado – Goldgroup – Sonora
6.
San Francisco – Timmins Gold – Sonora
7.
Mercedes – Yamana Gold – Sonora
8.
Cerro Prieto – Goldgroup – Sonora
9.
Santa Elena –SilverCrest Mines - Sonora
10. La Colorada – Argonaut Gold - Sonora 11.
Mulatos – Alamos Gold - Sonora
12. Álamo Dorado – Pan American Silver – Sonora CHIHUAHUA 13. Dolores – Pan American Silver - Chihuahua 14. Pinos Altos – Agnico Eagle – Chihuahua 15. Ocampo – Minera Frisco – Chihuahua 16. Palmarejo – Coeur Mining – Chihuahua 17. El Sauzal – Goldcorp – Chihuahua 18. San Francisco del Oro – Minera Frisco -Chihuahua SINALOA 19. El Gallo – McEwen Mining – Sinaloa 20. La Trinidad – Marlin Gold – Sinaloa
170
30
3
31
33 3
DURANGO 21. Guanaceví – Endeavour Silver – Durango 22. Ciénega – Fresnillo plc – Durango 23. San Dimas – Primero Mining – Durango 24. El Castillo – Argonaut Gold – Durango 25. Velardeña – Golden Minerals – Durango ZACATECAS 26. Peñasquito – Goldcorp – Zacatecas 27. Tayahua – Minera Frisco – Zacatecas 28. La Colorada – Pan American Silver – Zacatecas 29. Fresnillo – Fresnillo plc – Zacatecas 30. El Coronel – Minera Frisco – Zacatecas AGUASCALIENTES 31. El Porvenir – Minera Frisco – Aguascalientes SAN LUIS POTOSI 32. Cerro San Pedro – New Gold – San Luis Potosi GUANAJUATO 33. Bolañitos – Endeavour Silver – Guanajuato 34. Guanajuato – Great Panther Silver – Guanajuato GUERRERO 35. Morelos Gold – Torex Gold – Guerrero 36. Los Filos – Goldcorp – Guerrero OAXACA 37. San José – Fortuna Silver – Oaxaca 38. El Águila – Gold Resources – Oaxaca
32
34
35
36 37
38
171
LATIN AMERICA STRATEGY CONTINUES TO PAY OFF Canadian company Yamana Gold (Yamana) opened its
average, with resources at the Mercedes mine increasing
doors in 2003 and has already reached annual sales of
by 26% in the same year. The exploration program in this
US$1.7 billion, positioning it among the ten largest gold
mine was concentrated on upgrading mineral resources,
mining companies in the world. With its importance in the
discovering new deposits, and finding extensions of known
mining industry now set, the company is looking to secure
ore bodies along the Mercedes-Barrancas-Marianas trend.
its presence in Latin America by operating in countries
The company has now made significant advances in its
with a notable mining tradition. Between 2005 and 2007,
objective to complete at least 18,500m of surface and
Yamana acquired several mining properties across the
underground drilling, developing underground drill stations
region through the purchase of other gold companies,
and surface reconnaissance, and carrying out development
such as Viceroy, Desert Sun, RNC Gold, Northern Orion, and
work targeted at the district. The 2014 program at Mercedes
Meridian Gold. At the end of 2014, the company had eight
was focused on the extension of known mineral zones
producing mines, namely Chapada, Jacobina, Fazenda
near the Corona de Oro system. The company tested for
Brasileiro, and Pilar in Brazil, El Peñón and Minera Florida in
new mineral zones along the greater Mercedes Structural
Chile, Gualcamayo in Argentina, and Mercedes in Mexico.
corridor through a surface based and underground station
In addition, Yamana has 12.5% equity interests in the
drilling program. Yamana also invested in drilling in the
Alumbrera mine in Argentina and owns various advanced,
Diluvio deposit in order to gain a better understanding of
near development, and exploration properties in Brazil,
high grade and disseminated domains.
Chile, Argentina, Mexico, and Colombia. 2014 saw a major move by Yamana. Along with Agnico Eagle, it created
Infill drilling of Breccia Hill has intersected high grade
the Canadian Malartic Partnership by buying issued and
intercepts similar to shoots at Corona de Oro. These include
outstanding common shares of Osisko Mining Corporation.
drill cores with as much as 35 g/t of gold equivalent through
The partnership’s operations in Canada’s largest gold mine
an intersect of a meter and 15.9 g/t in 18m. At Diluvio, infill
are expected to produce between 510,000-530,000oz.
holes have intersected broad and attractive zones of low to high grade mineralization. One of the mine’s latest
Having invested US$190 million in Mercedes’ development,
discoveries was at the Lagunas Norte vein, located in the
Yamana had to be certain of the value of this property. An
Barrancas zone. Although this vein was not contemplated
early sense of security was derived from the fact that Sonora
in Mercedes’ original plan, Yamana indicates Lagunas Norte
is a strong mining state, offers many competitive advantages
has a significant potential for increasing production. The
to mining companies, and its state government is committed
positive results from exploration activities at Mercedes
to attracting investment and creating employment. The
also include the discovery of a new mineral zone located
construction of the site began in 2010, employing 1,000
between the Barrancas and Lagunas deposits, known as
workers from Cucupre and other surrounding towns. Once
the GAP deposit. The GAP zone was discovered along the
the prefeasibility studies had demonstrated the technical and
Mercedes-Marianas structure, supporting the exploration
economic viability of Mercedes, exploration and underground
potential in the asset. Drilling at the GAP zone is yielding
production activities started at the site in late 2011. Gold and
positive results, although these need further examination
silver production exceeded expectations in the first year
to fully determine if the structures are linked. Some early
and is destined to continue doing so as the development of
results from drilling at GAP show as much as 10.2m drill
the mine continues at great speed. The plant has a current
cores with 20.8 g/t of gold equivalent. Due to these positive
capacity of 1,500 t/d, and incorporates agitated leaching,
results, additional funding was allocated to support further
counter current decantation, and the Merrill-Crowe process.
drill testing of these zones in 2014.
In 2013, proven gold and silver reserves in the Mercedes mine were estimated at 845,000oz and 8.4 million ounces
In December 2014, the company also announced new
respectively. Probable reserves were estimated at 357,000oz
findings at mines in Chile and Brazil. At its El Peñón mine
of gold and 4.4 million ounces of silver.
in Chile, the new Ventura vein was discovered running parallel to an existing bonanza, and is expected to be
172
In 2013, the company focused on growing its mineral
quickly put into production. Meanwhile, the new Sucupira
resource base, resulting in a 10% increase in measured
discovery at the Chapada mine in Brazil turned up the best
and indicated mineral resources. The success of these
results of any hole ever drilled at the mine, supporting that
exploration activities incited Yamana Mining to continue
the district has far greater mineralization than previously
its exploration program, investing US$70 million in 2014
thought. Overall, whether in Mexico, Brazil, or Chile,
for this purpose. Its Mexican operation surpassed its global
Yamana’s Latin America strategy seems to be paying off.
| VIEW FROM THE TOP
STRONG CASH FLOW ALLOWS FOR PROPERTY EXPANSION JOHN MCCLUSKEY President and CEO of Alamos Gold Q: What led to the creation of Alamos Gold and how has
Q: What are the company’s criteria for identifying strong
it evolved since then?
properties?
A: Alamos Minerals was originally founded to pursue
A: A strong property is one where we can produce for over
properties in Mexico in 1994, shortly after the changes to
ten years at total all-in-costs below US$1,000 per ounce.
the country’s legal framework in 1993. In November 2001, we
The acquisition price has to be right. We have found very
entered into a joint venture with another Canadian company,
few projects that meet these requirements, but when we
National Gold, to pursue the development of the Mulatos
find one, we move aggressively to acquire it. We also seek
project in Sonora. National Gold struck the original deal to
to buy the properties at the right point in the market. We
buy the property but due to terrible market conditions, it
look for market downturns to make acquisitions when
could not carry the terms of the deal alone, so we stepped in
access to financing is difficult and we have the capital for it.
at a very opportune moment. By January 2002, the market
Even after the acquisitions of the Esperanza Gold Project,
had begun to improve. The initial hurdle was raising US$1
the Quartz Mountain property from Orsa Ventures, and the
million by the end of the year to make the first payment. I had
Kirazli and Aği Daği projects in Turkey, Alamos Gold has no
to mortgage my house to put up 10% of the funds, but the
debt, good cash flow, and roughly US$375 million in the
rest of the funds swiftly followed. In 2003, we completed the
bank, which currently represents over a third of our market
purchase of Mulatos, and Alamos Minerals and National Gold
capitalization.
merged to form Alamos Gold. We were initially planning on financing 50% of the construction through equity and 50%
Q: To what extent have acquisitions helped the company’s
through debt, but the loaning banks required us to hedge a
share price to recover?
third of our production under harsh terms, so we decided to
A: The main driver of the share price is the gold price. We
change the direction towards a convertible debenture. We
were trading near our all-time high of US$21 per share
raised approximately US$70 million in initial capital to build
when gold was at US$1,900 an ounce in 2011, but it has
Mulatos and to date, it has generated more than US$350
since dropped with the gold price plummeting to US$1,200
million in free cash flow. With US$375 million in cash and
in 2014. The projects we have acquired are all open-pit
no debt, we have one of the strongest balance sheets in the
mines where we are able to recover gold and silver through
sector, which allows us to consider additional acquisitions.
heap leaching. This means that they will not be technically
Since the founding of the company, we have completed three
challenging or capital intensive to build and will be low-cost
M&A transactions, resulting in the acquisition of projects with
operating mines. All our planned development projects
a total of more than 6 million ounces of gold resources and
make sense even if gold is only at US$1,000 per ounce.
25 million ounces of silver. Q: What are your development priorities within the Q: What led to the acquisition of the Esperanza Gold
Mexican mining industry?
Project and where does it stand now?
A: We continue to operate our Mulatos mine and have
A: The Esperanza Gold Project is in the state of Morelos
approximately eight years of mine life remaining based on
and came to us as part of the acquisition of Esperanza
our reserves at the end of 2013. We depleted the open-pit
Resources, which had spent a considerable amount of
Escondida high-grade mineralization in the first quarter of
time and money developing this exploration project into a
2014 and are transitioning to underground mining at the
significant precious metals asset. Esperanza did not have
San Carlos zone. Based on reserves at the end of 2013, we
enough capital to fund the construction of the project so
expect San Carlos to supply high grade underground mill
we acquired it in August 2013 for net cash of approximately
feed for the next four years. We also reached an agreement
US$45 million. We are currently working on compiling the
to acquire the surface rights for the Cerro Pelón and La Yaqui
environmental impact assessment for the project, which
satellite deposits at Mulatos earlier in 2014, which we expect
we expect to submit in the first half of 2015.
to provide low-cost production growth starting in 2016.
173
Minera Frisco is a Mexican company with more than 50 years of experience in the exploration and exploitation of mineral deposits. We currently have nine mining units operating in the states of Aguascalientes, Baja California, Chihuahua, Sonora, and Zacatecas. Our activities are oriented towards the production of lead, zinc, copper, gold and silver DorÊ bars, copper cathodes, and the subsequent commercialization of these products in Mexico and abroad. Minera Frisco seeks to constantly improve its processes, minimize its costs, and maximize its results. It uses its own resources to research the most modern and profitable techniques for finding and processing minerals, while continuing to carry out exploration work for the development of new projects. The sustainability of our operations and of our daily activities is an essential component in the definition of our business strategies. This situation that allows us to be a profitable company, committed to society, and in constant equilibrium with the environment. Social responsibility is a cornerstone of the company, not a mere corporate tendency. It is a strategic element in the operation of our mining units and in their integration with the surroundings and with our stakeholders. We develop projects that work for the benefit of nearby communities, strengthening their economic and environmental well-being. This ties directly into one of Minera Frisco’s governing objectives, namely the sustainable development of the communities near our centers of operations. To fulfill this objective, we created the General Corporate Management of Social and Community Development in 2012, which generates our socially responsibly activities following our corporate values. This department promotes communication between the organization and stakeholders, as well as the development of responsible business practices.
Minera Frisco’s business model also enshrines sustainable development at its core. In this sense, the company’s strategy and culture favors and strengthens the self-development of the communities within our area of influence. The principles that guide our sustainability activities are: economic growth, harmonic coexistence, the mitigation of risks in our process, the guarantee of return on investment for our shareholders, and the implementation of responsible practices for the care of the environment. The company consistently implements best practices in its care of the environment and invests every year in actions to reduce, prevent, mitigate, and remediate environmental impacts that derive from our productive processes. Our activities include the adequate execution of environmental control plans, which are guided by the responsible management of water and energy resources, of environmental hazards, of compliance with environmental norms, and of the implementation of environmental administration systems.
Across all our operating business units, we invest in the protection, rescue, and relocation of flora and fauna, in reforestation, and in monitoring programs, as outlined in our national norms and international guidelines. At Minera Frisco, we are committed to the efficient and responsible development of the industry, the company, and our stakeholders. Contact: Lago Zurich 245, Edificio Frisco Piso 7, Col. Granada Ampliación, Delegación Miguel Hidalgo C.P. 11529, México, D.F. T.: 21222600
www.minerafrisco.com.mx
| VIEW FROM THE TOP
SMALL DURANGO MINE COULD GROW TO BE WORLD-CLASS RANDY REIFEL President and Director of Chesapeake Gold Q: What strategies is Chesapeake implementing to ensure
to help construct and support a mine like Metates is
the success of its Metates project in Durango?
significant. Another factor is that Metates will benefit from
A: We constantly evaluate the critical path forward and
one of the lowest energy costs in the industry generated by
the capital needed to achieve these objectives. As we
natural gas. After all, for large-scale mines like this, power
start 2015, Chesapeake has approximately US$30 million
can represent over 35% of the project’s operating costs.
in cash with no debt. We are well-funded to complete an updated pre-feasibility study on Metates and undertake
Q: Does Chesapeake see any hindrances coming from
a systematic exploration program that could lead to an
Mexico’s social and political situation?
interesting new discovery in 2015.
A: Chesapeake is a Canadian exploration company but we are fully cognizant and respectful of the fact we are
Q: What were the reasons why Chesapeake opted to
conducting business in another country’s jurisdiction. We
acquire Metates?
believe Mexico is one of the most mining-friendly countries
A: Chesapeake’s management has been operating in Mexico
in the world. With over 20 years working in Mexico, we
since 1993. Along with Francisco Gold, the discovery of
have developed a strong network and good relationships
the El Sauzal gold project in the state of Chihuahua was
with both private and government parties. Given the
a tremendous success story for us. After selling Francisco
increasing challenge facing explorers and miners in other
Gold in 2002, we wanted to remain focused on Mexico. We
countries, there are several advantages to advancing
were aware of Metates as its exploration and development
Metates in Mexico.
occurred at the same time Francisco Gold was advancing El Sauzal to the feasibility stage. There are few world-class gold
Q: What are Chesapeake’s main goals for 2015?
and silver deposits hosting over 15 million ounces of gold
A: Chesapeake’s main focus in 2015 is to complete an
and 500 million ounces of silver out there. The opportunity
updated pre-feasibility study on Metates. This study
to acquire one such as Metates in Mexico was compelling to
should indicate that Metates will initially operate at 30,000
Chesapeake’s management. Metates is also attractive due
t/d, but with the ability to scale up to over 90,000 t/d
to the fact that it hosts three world-class metals, gold, silver
with positive economics at current gold prices. Metates
and zinc. To be precise, Metates has over 18 million ounces
benefits from having its highest ore grade upfront in its
of gold, 526 million ounces of silver, and 4.2 billion pounds
mine life. Together with the existing infrastructure located
of zinc in reserves. Another important feature is the fact
near the processing facilities, Metates is unique in that
the deposit outcrops over 300m vertically leading to lower
it can begin as a small mine before growing to be world
potential mining costs with a life-of-mine strip ratio of 1:1.
class mine funded largely by the company’s cashflow. Besides Metates, the company is focusing on exploration
Q: What other key factors are proving crucial to the
properties near the proposed processing plant that will
development of the project?
provide a strategic organic pipeline. Recent exploration
A: World-class projects are scarce, and the challenges these
efforts have returned interesting results that we believe
projects face are often related to country risk, development
could develop into a district scale opportunity. We are
headwinds and infrastructure support. Metates is located
quite excited about our 2015 exploration program.
in Durango while the mine’s proposed processing facilities
176
are in Sinaloa. At the mine, the natural topography provides
Q: Where do Chesapeake’s other project interests lie?
a cost-effective and environmentally friendly site plan
A: Chesapeake also owns a 75% interest in Gunpoint
together with a water source. The processing site in Sinaloa
Exploration Ltd. (TSX:GUN). Gunpoint owns the Talapoosa
is close to key infrastructure such as a paved highway, the
gold project in Nevada which has mineral resources of
power grid, a natural gas pipeline, and a labor pool. The
nearly 1 million ounces of gold. Talapoosa can be initially
advantages of having such critical infrastructure available
mined as a heap leach operation with excellent grade.
| VIEW FROM THE TOP
COST-EFFICIENT MAJOR SEES EL CHANATE AS PRIORITY SCOTT PERRY President and CEO of AuRico Gold Q: During 2013, AuRico Gold sold off weaker properties
these research reports to get a more balanced view of the
and maintained its most valuable. How have you re-
company, which augments their own valuation work, and
invested the proceeds over the last year?
generally do not rely solely on one analyst’s viewpoint.
A: A portion of the proceeds have been invested in the construction of the Young-Davidson operation in Canada
Q: How has AuRico Gold been affected by the trend of
and the ongoing ramp-up of the underground mine.
mining companies reducing exploration investment to
We have also returned a portion of the capital to our
save money?
shareholders through a US$300 million share buy-back
A: The company has reduced its 2014 exploration budget
and the launch of a quarterly dividend policy.
by 35% over the prior year. However, we have actually increased the exploration budget at El Chanate over the
Q: How has AuRico Gold modified its plans in Mexico in
prior year with the majority of this year’s budget being
response to the country’s new mining tax and royalty?
allocated there. AuRico Gold has also focused on early
A: The new mining tax and royalty contributed to an increase
stage exploration work at our other properties in Mexico.
in operating cash costs at El Chanate from US$592 per ounce in 2013 to US$621 in the first three quarters of 2014.
Q: What are the benefits of having properties in both
This increase was also partially accounted for by changes
Canada and Mexico for AuRico Gold, and how do the
to how we are accounting for cash costs under IFRIC 20.
operations complement each other?
Some of the increase has been offset by our focus on
A: Both Mexico and Canada are top mining jurisdictions
cost reduction and enhanced operational efficiencies. We
that are “mining friendly”, have skilled workforces and
always strive to drive operational efficiencies throughout
high-quality deposits. El Chanate is a smaller, fully built,
the operation and have successfully lowered costs through
open-pit, heap leach operation that has been in operation
renegotiating supplier contracts on more favorable terms
for ten years. It is a solid and consistent producer, and
and optimizing the size of our workforce. Mining taxes
requires significantly less capital investment.
in Canada are determined based on net earnings for tax purposes, and therefore various tax deductions are
By contrast, Young-Davidson is a much larger scale,
permitted prior to applying the applicable mining tax.
underground mine that was recently commissioned and is
The Mexican mining tax of 7.5% is determined based on
still ramping up to its peak productivity levels. As such,
earnings before amortization, depreciation, and interest,
there has been, and will be, more capital investment
and therefore does not permit the taxpayer to deduct
required at Young-Davidson than at El Chanate. However,
these items prior to applying the mining tax. In addition,
the majority of our 2014 exploration budget has been
the 0.5% Mexican tax royalty is applied directly to revenue,
allocated to El Chanate, where we are budgeting US$4.5-
with no deductions permitted.
5 million in exploration. Young-Davidson will not reach its peak productivity until the end of 2016, so they provide
Q: How well do rating agencies reflect the real worth of
a nice compliment of stability and growth. One thing
mining companies, and how do their decisions impact the
they have in common is that both El Chanate and Young-
investor perception of companies like yours?
Davidson have top operations teams that we are fortunate
A: Sell-side analysts evaluate companies under their coverage
in place. Furthermore, North America is considered to
based on their interpretation of publicly available information
be the top mining jurisdiction in the world. It is stable,
using a variety of currency and commodity assumptions as
with established mining laws, a skilled workforce, steady
well as their own view on the company’s current and future
governments, and quality deposits. Companies with assets
operational performance. On the whole, these analysts do
in North America are generally ascribed higher valuation
a fairly good job of valuing the companies they cover. We
as a result of the reduced risk associated with operating in
do find, however, that most investors review a number of
North America.
177
| TECHNOLOGY SPOTLIGHT PULLING CORE SAMPLES FROM 2,400M BELOW THE
of 3.5 inches and 2,400m with a NWL diameter of 2.75
SURFACE
inches. Special attention was given in the design process
When mining began in Mexico around 500 years ago, it
to increase the accuracy and reduce deviation at these
would have been difficult to imagine that, one day, accurate
depths. The Core Master is built with 80,000lb of pull back
core samples would be taken 2,400m below the surface.
force, giving it added power to get through extremely
It seems appropriate to take a moment and visualize the
challenging ground conditions even at great depths. “On
technology and operating expertise needed for a compact
good ground, the Core Master can easily drill upwards of
machine to lift 50,000lb of drill rods and hard rock core
100m per day,” says Lucero. “Meanwhile, the Cummins
samples up to the surface from depths of up to 24 football
QSL9 350hp engine offers an excess of power while
fields below the surface. But with advances in high technology
the built-in computer limits output relative to the force
and modern manufacturing processes, this is now a reality
needed, which reduces fuel consumption and wear and
happening 24 hours a day in the hot Sonoran desert.
tear. We used the highest quality aircraft-grade hydraulic systems from the most respected manufacturers in the at
industry. The drill was built in the extreme cold of northern
Globexplore Drilling, explains how the company melds
Canada yet designed with modern hydraulic coolers to
technology with service. “After several clients came to us
operate in the scorching deserts of Mexico.” Globexplore
with targets deeper than 2,000m, we went to work with
also challenged the design team to make the Core Master as
our preferred rig builder in Canada. We honestly believe
compact and ergonomic as possible. Fitting in a pad size as
that this boutique rig builder is the most prestigious and
small as 5 by 8m, it is close to half the size of other deep hole
exclusive rig manufacturer in the world. We have built
rigs on the market. This allows for a smaller environmental
several RC rigs together, which are at the forefront of
impact and less expensive drill pad and road construction.
innovation in design, reliability, efficiency and performance
To cater to increasingly stringent environmental concerns,
with a priority always on safety. A prime example of this
double-wall hydraulic, fuel, and oil tanks were used to prevent
successful collaboration is the Core Master, which was CAD-
leaks. As an added measure, full drip pans were installed to
engineered from the ground up through five important
catch any leak before it hits the ground. The rig also meets
factors: safety, efficiency, durability, ergonomics, and the
US and Canadian emissions standards.
Armando
Lucero,
the
Director
of
Operations
environment. New technologies allowed us to incorporate safety guards that stop the operation of the rig at the split
Lucero is confident that the Core Master is the most
second the guard is opened.” Inclination sensors were
efficient, modern, innovative, safest deep hole rig in the
added on the carrier to prevent the equipment from being
world. “This is true from the initial request to the conceptual
moved onto slopes with a greater incline than allowed in
stage, from the CAD process to the highest quality laser-cut
safety norms. The Core Master’s automated rod handlers
steel and alloys, from the top quality components to the
can be operated by remote control to eliminate tripping
new hydraulic systems, and from the initial client request to
hazards presented by cables. This operation ensures all the
the conceptual stage. As drill rigs go, it is not bad to look
heavy lifting is done at a distance, which removes the most
at either.” As more of its clients explore deeper targets,
common cause of injuries. Furthermore, instead of just
Globexplore looks forward to building more Core Masters
one emergency stop button, Globexplore added multiple
in 2015 and beyond.
buttons around the rig, so operators can shut the rig down quickly from any position. In addition, the company added radio frequency stops on the rod handler remote control and the driller control panel, as well as one more for the rig supervisor. This adds a layer of security since the rig can now be stopped remotely from five different locations. A number of other improvements all have safety in mind. The engine now has an integrated fire suppression system, the mast has a lightning rod, and the non-slip platform completely encompasses the rig with railing to prevent falls. Finally, all high temperature and dangerous areas of rotation are fully covered for extra protection. The Core Master was engineered with enough strength and power to drill up to 1,600m with a HWL diameter
179
| VIEW FROM THE TOP
MEXICAN EXPLOSIVES PIONEER HELPS MINES BLAST FURTHER ANTONIO S. ALDANA Director General of Nitro Group Q: How did the relationship between Nitro Group and
A: The Mexican mining industry applies some of the most
Dyno Nobel come about?
advanced mining processes, with the help of high-level
A: I was a partner in Dyno Nobel Mexico, one of the top
engineers and technical staff. Considering that safety is
explosives manufacturers in the world, ten years ago. Two years
a priority for Nitro in all its processes, the group offers
later, all of Dyno Nobel’s global operations, with the exception
on-site engineering and technical support for mining
of the Canadian, US, and Australian offices, were sold. At that
companies, to provide a competitive advantage for their
point, I decided to sell all my shares and talked to Dyno Nobel in
operations. Our down the hole service includes not only the
the US about starting a new partnership. Since we entered into
procurement of the right explosive product, but also the
this new partnership with Dyno Nobel in Mexico, it seems as
transportation and the technical support during blasting,
though nothing has changed. We kept the same staff, the same
until the required rock size is attained. Nitro is already one
product portfolio, and even increased our sales. Nitro Group
of the leaders in high-quality explosives in Mexico, which
consists of nine companies that are involved in the producing
is supported by the growing annual sales of the group,
and commercializing of explosives, as well as transportation,
and we are working with Industrias Peñoles, Argonaut
drilling, and security. This allows us to take care of the logistics,
Gold, CEMEX, Calica, and various medium-sized mining
training, commercialization, and product adaptation for the
producers. Calica is one of Mexico’s leading aggregate
Mexican market. Dyno gives us the necessary technology and
producers and presents an interesting operation. It faces
any support that we need. We distribute products from Dyno
a water table that is just 10cm below the ground, which
Nobel’s production plant in Torreon, as well as Dyno Nobel
means the explosives it uses need to be fully water-
ammonium nitrate products imported from the US. We service
resistant for a long period of time.
our clients from the production of blasting products, to their delivery and use. In other words, we deliver turn-key solutions
Q: What innovations has Nitro released to achieve its
and services for breaking rock.
current positioning in the Mexican mining industry? A: Our leading product is the Super Nitro, a high-velocity
180
Q: What have been Nitro Group’s principal contributions
explosive with a high resistance to humidity, far exceeding
to the Mexican mining industry?
the regular ammonium nitrate/fuel oil (ANFO) performance.
This product has been used all over Mexico in open-pit
exactly what the customer needs. For example, if a company
and underground mines and has been very successful
needs a product that explodes and pre-split at the edge of
due to its formula balance and its great resistance to
the blast zone, then we would need to produce a blasting
humidity. Regular ANFO absorbs water from highly humid
product with a specific density and size to deliver that result.
environments, causing the explosive to begin losing its
We have the possibility to be as flexible as the customer
properties, while the Super Nitro lasts much longer in such
needs; we do not only offer generic solutions. Our engineers
circumstances. Additionally, its greater velocity achieves a
fully understand the capability and the performance of
higher rate of rock fragmentation. As far as accessories go,
our explosives, which is why the Nitro on-site engineers
our electronic initiation system is one of the most advanced
blend their knowledge with the knowledge of the mine
on the market. It can be used for special applications,
engineers. The main contribution of our engineers to mining
open-pit or underground mines, for instances of vibration
operations is to increase the amount of meters by which the
control, or when the broken rock needs micro-fractures
mine advances with each blast. We require highly trained
for the leaching process. Our newest product is the Nitro
personnel in the explosives market and all new staff undergo
Special AG, a low-cost cartridge explosive for underground
a year-long training period with our senior engineers.
mines, which was developed by Nitro Group. This product was developed to help mines keep production costs low,
We can also supply the drilling service, produce emulsions
by providing the same performance as high-end explosives
on site, provide advice on the legal requirements related
but at a lower cost. Since the Mexican mining industry is
to explosives, and help our clients overcome their
suffering from decreasing metal prices, the fact that we are
operational challenges. At the end, we give them a better
selling our Nitro Special AG product at a lower cost ensures
price for these integrated services compared to hiring
that its use is rapidly becoming widespread. Although the
different companies to take care of all of these issues. We
Super Nitro and Nitro Special AG have completely different
also provide explosives transportation services through
formulas, they can be used for similar applications. Yet, the
our trucking company, which has the transportation of
Super Nitro’s ideal use is for open-pit mines where high
hazardous materials license from SCT and a military license
volumes are managed, while the Nitro Special AG is best
to transport explosives. When transporting and using
suited to underground mines.
dangerous goods, companies need to comply with the law. We work very close with the military and follow all the rules
Q: How do you ensure that the high quality of your
that they set. Also, we were the first company in Mexico
explosives is maintained in their application?
to implement a tracking system for each of the cartridges
A: For explosives, high quality means that their performance
inside a box, which typically contains 220 cartridges. We
in the field is optimal. The only way to assess performance
did this before the regulation demanded it while it is now
is through blasting. With high quality explosives, the rock
a common industry practice. Nitro Group is thus uniquely
ultimately needs to be of the grain size required by the
positioned to offer a fully integrated service that meets all
customer. Delivering high quality products means delivering
blasting needs of the Mexican mining industry.
181
POSITIVE RESULTS INCITE MINING GIANT TO INVEST Minera Frisco was formally constituted in 1962, but some
of the state, producing silver, lead, zinc, and copper
of its mining sites date back to the 17th century. In 1985,
concentrates. Although it began operations in 1972, Minera
Minera Frisco was acquired by Mexican businessman
Frisco acquired 51% of the mine’s shares in 1998, later
Carlos Slim, integrating it into his Grupo Carso holding
increasing its participation to 90% in 2011. This mine is
company. Minera Frisco is now dedicated to the exploration
being given a lot of attention since 2013 when SEMARNAT
and exploitation of mineral resources for the production
authorized open-pit production at Tayahua, which was
and sale of gold and silver doré bars, but also produces
previously entirely underground. This new phase of
copper cathodes and lead, zinc, and copper concentrates.
production takes place across 300 hectares and includes
Its exploration activities are supported by the might of
an open-pit with a diameter over 40 hectares and a depth
Mexico’s richest man, with the company benefiting from
of 230m. In Aguascalientes, Real de Ángeles Asientos
technological advances researched by Grupo Carso’s
has been exploited since 1548. In 1991 Luismin and Frisco
R&D center. The company has nine mines in Mexico,
signed an exploration agreement but operations intensified
including San Francisco del Oro, Ocampo and Concheño
in 2007, leading to the construction of a processing plant,
in Chihuahua, El Porvenir and Asientos in Aguascalientes,
which entered into full production in 2008.
El Coronel and Tayahua in Zacatecas, San Felipe in Baja California, and María in Sonora.
With Slim behind it, Minera Frisco may be in a better position to survive the tough times than any other Mexican mining firm. For example, in order to reduce costs while improving operational efficiency, adjustments were made at the San Francisco del Oro plant, allowing Minera Frisco to improve the recoveries of different metals. Maintenance operations on San Francisco del Oro’s winch decreased the mine’s tonnage, but this did not affect production. Improvements were made in the crushing circuit of the San Felipe unit, allowing an increase of its crushing capacity, and better ore grades of silver were processed, resulting in a 109% year-on-year production increase in the third quarter of 2014. The crushing unit at El Porvenir was also improved, minimizing the negative effects of heavy rain. In consequence, production at this mine increased 17% from the third quarter of 2013 to the third quarter of 2014. This output compensated the low production rates seen at Ocampo and Asientos. Concheño, San Felipe, and El Coronel were working at full
182
The first exploration efforts in the underground mine
capacity during the third quarter of 2014, increasing their
of San Francisco del Oro were made between 1555 and
milling and heap leaching by 23%, increasing the company’s
1563. Minera Frisco formally acquired this silver, lead, zinc,
total gold production by 103%, and its silver production by 31%
and copper producing mine in 1961. María, on the other
when compared to the third quarter of 2013. San Francisco
hand, began operations in Cananea in 1980, first focusing
del Oro and Tayahua helped increase the production of
on copper before beginning to produce copper cathode
copper concentrates by 18% from the third quarter of 2013
in 1999. Further west, San Felipe began underground
to the same period in 2014. However, some changes are
operations in 1994 under a different name, shutting down
nigh in 2015 as the mine life of María was forecasted to end
production in 2001. Activities were restarted in 2010,
in the last quarter of 2014. On a global scale, gold, silver,
producing gold and silver doré bars. In the southeastern
and copper represent 90% of Minera Frisco’s sales, which
portion of Zacatecas, the open-pit unit of El Coronel
were estimated at MX$2.897 billion (US$197.6 million) in the
also produces silver and gold doré bars. This site began
second quarter of 2014, 22% more than the same period in
exploration and surface geological studies in 1999, but the
the previous year. Due to the positive results obtained in
construction of its plant did not happen until 2008 with
2014, Minera Frisco is preparing for an expansion program
operations starting a year later. Still in Zacatecas, Tayahua
of its mines, for which it plans to invest US$180 million in
is an underground mine located in the northern portion
2015, mainly in machinery and equipment.
OLD SAN DIMAS DISTRICT SHOWS MODERN PROFITABILITY Canadian-based Primero Mining has positioned itself as
expansion program started when Primero Mining first
a reference in technological innovation, safety standards,
acquired San Dimas in 2010. The first phase was completed
social responsibility, and clean energy use in Mexico,
in the first quarter of 2014, increasing its capacity to
particularly in the state of Durango. The company only
the current level of 2,500 t/d, and a second phase will
has operations in Canada and Mexico, where it seeks to
bring capacity up to 3,000 t/d by the second quarter of
become a leading intermediate gold producer. It is well
2016. The company expects that this will increase annual
on the way to achieving this goal as it produced a total
production to around 215,000oz of gold equivalent.
of 185,000-205,000oz of gold in 2014, of which 120,000130,000oz were produced in Mexico. Similarly, Primero
Exploration activities are also an important component of
Mining’s Mexican operations produced 6.1-6.3 million
current operations at the San Dimas district. In its program
ounces of silver for the same period. This success stems
for San Dimas, Primero Mining covers approximately
from Primero Mining’s San Dimas gold and silver deposit,
35,000m of diamond drilling and more than 20km
which is one of Mexico’s most important precious metal
of
deposits. Historical production from the San Dimas
infrastructure, per year. The silver and gold mineralization
district, which measures 15km2, has reached an estimate
of the San Dimas district has a favorable vertical zone
of 11 million ounces of gold and 582 million ounces of
that measures 300-600m and is consistent across veins
silver since the first mining efforts in 1757. The district has
and blocks. So far, exploration activities have focused on
passed through a number of hands before Primero took it
the high grade area of the Central Block and the western
over. San Luis Mining first carried out exploration activities
extension of the veins through the Sinaloa Graben Block.
before the company was acquired by Wheaton River,
In 2010, a tunnel that connects the Central Block and the
which was in turn absorbed by Goldcorp before Primero
Sinaloa Graben was completed, enabling more detailed
Mining finally acquired the San Dimas mines in 2010.
exploration and providing the infrastructure to develop
However, the influence of past owners lingers. In 2004,
more than 20 new high grade veins.
drifting,
including
exploration,
preparation
and
Goldcorp brokered a silver purchase agreement with Silver Wheaton, which would see the latter buy 100% of silver
Even though San Dimas is a resource rich site, Primero
produced there for 25 years. Upon buying San Dimas in
Mining is not placing all its Mexican eggs into one basket.
2010, Primero looked to reshape the agreement. As it
In 2013, Primero Mining acquired 69% of the Cerro del
stands, Primero sold the first 3.5 million ounces of payable
Gallo project in Guanajuato from Cerro Resources NL
silver produced per year plus 50% of the rest to Silver
and 30% from Goldcorp Cerro del Gallo is located within
Wheaton at US$4.04 per ounce. This lasted until August
the San Antón property, which covers 25,269 hectares
2014 when the deal was changed to the sale of the first 6
and consists of 12 granted mining concessions owned
million ounces of silver produced per year plus 50% of the
by San Antón de las Minas. Surrounding urban centers
rest at US$4.20 per ounce.
can provide the services necessary to support a mining exploration program, and while certain permits are still
San Dimas is divided into five mining blocks: San Antonio
being awaited, basic engineering and land acquisition
West, Sinaloa Graben, Central Block, Tayoltita, and Arana
have been completed. Further developments should start
Hanging Wall. All of these mining sites are underground
in early 2015, but construction is being delayed in order
operations that use mechanized cut-and-fill methods. The
to focus on metallurgical testing and exploration drilling
Tayoltita mine is the oldest operating mine in San Dimas,
activities. The Cerro del Gallo metallurgical testing
and all production is processed at the Tayoltita mill, where
program intends to confirm and optimize gold and silver
cyanidation and zinc precipitation is used for the recovery
recoveries, categorize the transition ore with increased
of gold and silver. Fine crushing and single stage ball
detail, and confirm leach pad stability and percolation.
milling are employed before the materials enter the leach
Exploration operations so far have identified high-grade
circuit. After 72 hours of leaching, the pregnant solution is
mineralization with the Carmen Providencia epithermal
recovered in a counter current decantation circuit and the
vein, returning 4.6 g/t of gold equivalent. So far, of its
gold and silver are recovered in a zinc precipitation circuit.
2014 Cerro del Gallo budget of US$12.9 million, US$3.9
The gold and silver precipitate is refined using an induction
million has already been spent and a further US$2.5
furnace, producing 1,000oz gold and silver doré bars that
million has been earmarked for a further 10,000m of
are sent to the US. In order to increase its capacity and
exploration drilling. Should this phase confirm significant
to be up to date with processing technologies, the mill
gold and silver reserves, 2015 is set to be a happy year
has undergone regular expansions. An optimization and
indeed for Primero Mining.
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| VIEW FROM THE TOP
BOLD ACQUISITION STRATEGY PAYING OFF FOR MID-TIER PRODUCER THOMAS BURKHART Vice-President of Exploration of Argonaut Gold Q: You once said that Mexico was one of the only countries
Q: What are the various criteria you look at before
left in the world that was friendly to mining. How did you
deciding to make an acquisition?
come to this conclusion?
A: From an exploration perspective, we look for obvious
A: Mexico holds many benefits for the mining industry.
potential to expand a resource. For example, our first
In this country, you can still find properties with mining
acquisition, El Castillo, was a small gold mine producing
potential that have seen little or no modern exploration.
about 20,000oz of gold a year. We could see that they
When you venture out into the countryside to review these
were mining an outcropping portion of a much larger
mineral properties, the people are generally friendly and
mineral system. The potential to at least double the
welcoming. In the places that Argonaut mainly explores,
resource and substantially increase production was
the logistics are relatively good, translating to important
clear, and now El Castillo is producing at over 90,000oz
cost benefits when moving a project forward. I will say
of gold per year. With the Pediment acquisition, we
that, on occasion, obtaining surface rights can be difficult
significantly increased the resources at San Antonio
in Mexico, but overall there is a good atmosphere for doing
and La Colorada, the latter of which is expected to
business and developing properties here. If you discover
produce over 35,000oz of gold in 2014. The business
or acquire a mineral deposit in Mexico, there is a good
model is based on identifying distressed, or seemingly
chance you can eventually develop it. Additionally, the risk
marginal properties where a deal is not prohibitive, and
of Mexico nationalizing your deposit or mine is pretty low.
where there is a clear upside to increasing the resource.
It is worth making an exploration investment in Mexico
Our latest acquisition, San Agustín, had an announced
because, in my opinion, the chances for discovery and development success in this country are rife. Q: Argonaut Gold is well on the way to becoming a mid-tier gold producer. How has the company’s growth strategy evolved? A: Argonaut was formed in late 2009 when the company bought Castle Gold, which operated the El Castillo mine in Durango. A year later, we bought a company called Pediment, which included the San Antonio gold project in Baja California Sur and the La Colorada gold-silver project in Sonora. In our short history, our growth strategy has always been formed around acquisitions. We initially bought Pediment because we wanted to develop the San Antonio project, but three years later, we are still chasing the necessary permits to push the project into production. This delay is related to municipal politics but, for the most part, we enjoy strong local support and we are making headway in our permitting efforts. Our most recent acquisition was San Agustín in December 2013. During 2014, the company completed nearly 25,000m of resource drilling there, leading to an updated resource of 1.3 million gold equivalent ounces. San Agustín is yet another example of our acquisition-based growth strategy in Mexico. So far, Argonaut Gold has been successful with this strategy.
184
oxide resource of 400,000oz of gold and our drilling
Every year, the exploration department does some re-
allowed us to estimate a new resource of 1.3 million gold
modeling of the resource and any necessary additional
equivalent ounces. This acquisition clearly followed the
drilling, in order to better understand the mineralization.
Argonaut growth plan and is now a success story for
Exploration works closely with operations at both of our
the company. San Agustín is in the engineering and pre-
mines to update the deposit model for more efficient mine
permitting phase right now. We expect to complete a
planning.
PEA by the end of 2014 and hope to commence mine construction in 2015, with actual production coming as
Q: Which strategy is Argonaut Gold following to minimize
soon as possible after that. San Agustín has an average
operating costs?
gold grade under 0.4 g/t, making it a deposit which
A: The San Agustín project is being designed as an open pit
many companies would not even consider. Argonaut,
heap leach operation very similar to our operating mines,
on the other hand, is comfortable with this grade and
El Castillo, and La Colorada. Argonaut has developed
deposit type as it is very similar to that of El Castillo. Our
significant expertise for constructing and operating these
success at El Castillo is expected to be mirrored at San
types of mines; we know what we are doing and how to
Agustín. To be successful, a company must see beyond
keep costs down. As well as being low-capital operations
the risk and be willing to take a chance. Argonaut is an
that produce less than 100,000oz a year, all of our
example of this.
deposits in Mexico share certain things in common; low strip ratios, relatively low capital costs, and decent heap
Q: You moved from 20,000oz to 90,000oz at El Castillo
leach recoveries of gold and silver. With our cash flow
in five years. How did your exploration program keep up
and expertise we are better positioned than many of our
with such an aggressive production expansion?
competitors, and the deposits that we focus on in Mexico
A: Once we acquired El Castillo, our exploration group
are too small to fit the size criteria of the major players.
conducted an aggressive grid drilling program that pretty
We fill a niche for smaller, low grade deposits that can be
much defined the limits of the mineral deposit. This
open-pit mined and heap leached at low cost. Even at the
drilling allowed an updated resource estimate on which a
current low metal prices, we are able to keep a level of
significant mine expansion was designed. We just went in
exploration going that allows us to keep looking for the
there and drilled the deposit out as quickly as we could.
next Argonaut mine.
185
CAREFUL PROGRESS SETS UP POSITIVE YEAR AHEAD Based in Vancouver, Canada, Goldgroup Mining Inc.
Alongside these, San José de Gracia, a Sinaloa mine
(Goldgroup) operates with a dedicated focus on gold
owned by DynaResource de Mexico (DynaMex), is at
production, development, and exploration, and holds
an advanced gold production stage and is host to a
a particular interest in Mexico. The company shows its
number of high-grade gold deposits. The site has a
commitment to the country with a number of projects
low sulphidation, high-grade epithermal system with
situated in the states of Sonora and Sinaloa. Goldgroup
a historical production of more than 1 million ounces
has worked within mining projects such as Caballo Blanco,
of gold, averaging 30-60 g/t. Goldgroup is a 50%
San José de Gracia, Cerro Colorado, and Cerro Prieto, all of
shareholder in DynaMex, giving the company a stake in
which underwent significant changes in 2014.
San José de Gracia. However, the two companies have been working through some legal disputes. Ongoing
In early 2013, Goldgroup entered into a binding agreement
discussions are underway with DynaResource, with the
with Oroco Resource Corp in order to acquire a 100%
government of Sinaloa acting as a facilitating party
interest in the Cerro Prieto project. The acquisition was
between the two companies in an aim to quickly bring
completed in September 2013. Located in the Cucurpe
the conflict to an end. With the process moving forward,
Mining District of Sonora, the Cerro Prieto project is
Goldgroup intends to review its strategic development
an open-pit, heap leach gold project comprised of a
alternatives for San José de Gracia in 2015.
number of mineral concessions totalling 6,879 hectares. It started as one of Goldgroup’s smallest interests since
The biggest development for Goldgroup in 2014 came
the company began small-scale trial mining and leaching
when it agreed to sell its 100% stake of its Caballo Blanco
in late 2013. However, since the initial development phase
mine in Veracruz to Timmins Gold. Caballo Blanco was
ended in December 2013, the project has been producing
once Goldgroup’s flagship project but local hostility toward
gold at a substantial rate, hitting 4,174oz in the first nine
the mine and recurring environmental concerns sparked
months of 2014. That same year, Goldgroup saw its
the divestment. Timmins Gold seems to be the ideal
environmental impact statement approved, as well as
buyer for the mine, given that it has experience running a
receiving authorization for the change of land use and
similar open pit, heap leach operation at its San Francisco
the explosives permit to begin mining operations. While
mine in Sonora. Caballo Blanco is made up of 15 mineral
2014 was a decent year for Cerro Prieto, Goldgroup
concessions which cover over 54,000 hectares of land,
hopes to further increase its mining operations to reach
and is estimated to contain around 1 million ounces of gold.
commercial production rates. This will be made easier
It has the ability to produce 90,000oz annually at a cost
now that the company expects to receive a US$10
of only US$800 per ounce. The settlement amounted to
million from RMB Resources and Credipresto, which will
US$10 million in cash and 16.065 million of Timmins Gold’s
go toward advancing operations at Cerro Prieto and
shares. If Caballo Blanco’s environmental impact statement
the development of the company’s other gold assets in
is approved, or there is a change in beneficial ownership
Mexico, according to its Chairman and CEO, Keith Piggott.
of Timmins Gold greater than 50%, before October 2019, Goldgroup will receive either an additional US$5 million,
Goldgroup also owns a 100% interest in the Cerro Colorado
more shares in Timmins Gold, or a combination of the two.
mine, located in northern Sonora. The property consists of
186
six mineral concessions covering the area of the mine itself
After these deals are tallied up, Goldgroup has a solid
and 44 concessions in the immediate vicinity, totalling a
resource base of approximately 59,000oz of gold in
combined 33,767 hectares combined. Even though the
measured resources, 236,500oz in indicated resources,
mine produced 15,820oz of gold in 2013, Goldgroup ceased
and 602,500oz in inferred resources. Even with such
its mining operations at Cerro Colorado in September 2013
foundations for growth, the company has, according to
and continued to process gold from the leach pad. In July
its financial reports, suffered losses over the past year.
2014, the company further reduced its gold production by
Starting off facing a net loss of US$6.98 million at the end
halting the addition of reagents to the leaching process.
of December 2013, and its ongoing legal, regulatory, and
The leach pads have now been rinsed and negotiations
environmental challenges, 2014 was conclusively difficult
are being held with third parties for the right to perform
for Goldgroup. Even so, with the income received from
a new round of exploration drilling at Cerro Colorado.
the sale of Caballo Blanco and real potential for additional
The company is successfully transitioning equipment and
revenue in the near future, the company has given itself
personnel from Cerro Colorado to its latest acquisition,
greater leverage in order to deal with whatever the coming
Cerro Prieto.
years may bring.
TIMMINS GOLD TO SET CABALLO BLANCO BACK ON RIGHT TRACK It is a rare honor for a company in any industry to be singled
discoveries in at least five locations. However, while most
out for praise by Warren Buffett. Yet the Wizard of Omaha
results suggest further exploration efforts should continue,
named Timmins Gold (Timmins) as one of 20 firms that
this has been marked as a low priority for Timmins.
comply with his criteria for acquisitions due to the high return rate it provides for shareholders. Timmins is a gold
The most significant action taken by Timmins of late was the
mining and exploration company whose primary asset is
acquisition of the Caballo Blanco gold project in Veracruz in
the San Francisco property in Sonora, Mexico. The property
December 2014. Timmins bought the mine from Goldgroup
has two open-pit mines, La Chicharra and San Francisco,
for US$10 million in cash and 16,065 Timmins Gold shares
with the latter of the two already being in commercial
currently worth approximately US$15 million. Additionally, the
production. In 2013, San Francisco produced 85,490oz of
company agreed to pay Goldgroup another US$5 million once
gold and 46,665oz of silver, but 2014 saw fortune smile
Caballo Blanco receives approval for its new environmental
on the gold producer. The first quarter of the year saw it
impact statement or Timmins Gold undergoes a change of
achieve a record-breaking 35,197oz of gold, followed by
control. These elements combine to make the deal potentially
32,932oz during the second quarter. This put the company
worth up to US$30 million. Caballo Blanco’s two zones
well on the way to meet its production target of 115,000-
combine to provide indicated resources of 575,000oz of gold
125,000oz of gold for the year. Proven reserves for the San
and a further 419,000oz of inferred resources. Once Timmins
Francisco mine stand at an estimate 808,000oz of gold,
brings Caballo Blanco into production, it will almost double
while probable reserves stand at 464,000oz. Although San
the company’s annual gold production to over 220,000oz
Francisco is already in production, La Chicharra has been
a year. Nevertheless, the Caballo Blanco project does not
steadily adding to Timmins’ reserve estimates. Drilling
have a wholly smooth history. The mining project was shut
from 2011 to 2013 increased reserves at La Chicharra by
down in 2012 as it did not fulfill environmental requirements.
77%, bringing its proven reserves up to 12.4 million metric
Environmental organizations, public bodies, and even the
tonnes with 0.52 g/t, amounting to 205,000 contained
governor of Veracruz strongly opposed the project for
ounces of gold. Probable reserves were estimated at 7.5
several reasons. First, there was a major concern over using
million metric tonnes at 0.46 g/t, with 111,000 contained
explosives a mere 3km away from the Laguna Verde nuclear
gold ounces. With San Francisco currently in operation,
plant. Other complaints included the concern that waste
Timmins was able to achieve a steady 24,000 t/d
generated from diamond drilling and the use of mercury and
throughput up to October 2014, which is set to continue
cyanide would damage the local ecosystem. The presence of
through 2015. Starting in 2016, the mill should achieve an
a tailings dam in a region prone to hurricanes also distressed
even higher clip with an additional 6,000-8,000 tonnes. La
the local population, who filed a complaint with PROFEPA.
Chicharra should also benefit from a new crushing unit and
Finally, Caballo Blanco’s permits for mining operations were
leach pad around the same time.
revoked on May 2012. To resolve this, Timmins will submit a new environmental impact assessment for the Caballo
In addition to the already producing San Francisco mine,
Blanco project. One of the company’s objectives is to meet
Timmins Gold owns the mineral rights of over 200,000
and surpass legal and regulatory compliance in all exploration
hectares of claims in the northern region of Sonora.
and mineral recovery operations. In addition, environmental
Extensive exploration activities have already been carried
sustainability is a core element in its operations, as it recycles
out at El Durazno, la Pima, Norma, and El Picacho claims.
the water it uses at all sites and has active on-site programs
Mapping and sampling of El Durazno showed gold, silver,
to replace flora displaced in mining operations. Timmins’
and polymetallic minerals, overall drilling in the area returned
environmental programs earned the company a Socially
values of 2.056 g/t of gold and 104 g/t of silver in 2012. A
Responsible Business Distinction award in 2011, and the
further plan to drill 20,000m was begun in 2013 but was
Mexican Center for Philanthropy (CEMEFI) recognized the
stopped after just 2,340m to save on expenses. However,
company for its efforts.
this aborted program still returned results of 2.8 g/t of gold in one hole, meaning that El Durazno will continue to be
Despite these obstacles, the acquisition of Caballo Blanco
a priority for Timmins. Finally, Timmins Gold also has the
is in line with Timmins’ strategic goal of adding a highly
El Capomo property in the southern portion of Nayarit,
prospective gold mining project at an attractive valuation in
near the border with Jalisco, where it holds a surface of
Mexico, which the company views as a well-established and
47,511 hectares in six adjacent claims surrounding the old
low risk mining jurisdiction. Even at current international
mining district of Cebadillas. Prospecting works were done
gold prices, Timmins representatives believe the Caballo
on the property, identifying favorable geology for mineral
Blanco mine to be a highly promising acquisition.
187
MEXICAN PRODUCTION DROP DOES NOT FAZE NEW GOLD Starting out from Canada, New Gold is an intermediate
Beyond its geological structure, its geographical location is
gold mining company that has amassed a portfolio of four
also a distinct advantage as the town of San Pedro is situated
producing assets and three development projects around
20km outside the city of San Luis Potosi in central Mexico.
the world. This international profile is comprised of the
Nevertheless, the operation of Cerro San Pedro hit a major
New Afton gold-copper mine in Canada, the Mesquite gold
road block in 2009 when PROFEPA shut the mine down
mine in the US, the gold-copper Peak Mines in Australia,
after a major land dispute. The operation had faced heated
and the Cerro San Pedro gold-silver mine in San Luis
opposition from local residents as they claimed the mine
Potosi, Mexico. The company also owns 100% of the Rainy
had been functioning illegally since its environmental license
River and Blackwater projects, both located in Canada, as
to operate had been removed in 2005. This dispute lasted
well as 30% of El Morro in Chile.
until 2012 when SEMARNAT reinstated Cerro San Pedro’s environmental impact statement, based on it following the
Cerro San Pedro is the company’s flagship property in
municipal land use plan of the town of San Pedro. Given
Mexico, and the area has a landmark status all of its own.
the semi-arid nature of the San Pedro region, the company
The Spanish first discovered gold and silver there in 1583
ensures the treatment of domestic wastewater and the
after a priest asked the Guachichil locals about how they
collection of rainwater for processing. The wastewater cycles
achieved gold hue in their decorations. Centuries later,
through a closed circuit to avoid any discharges and the
the mines were administered by Metalúrgica Mexicana.
company states the only losses of water are due to leach pile
However, a strike in 1948 convinced the company to
retention and evaporation. Alongside this, to directly benefit
leave; it only did so after collapsing the mine shafts in a
the local ecosystem, New Gold has created a botanical
fit of annoyance. Today, the mine has returned to more
nursery, from which 135,000 indigenous species of flora have
reasonable hands, as it is operated by New Gold through
been used for reclamation efforts. The company also aims to
its Mexican subsidiary, Minera San Xavier (MSX). The full
reforest 44 hectares a year around the site.
potential of Cerro San Pedro emerged in the early 1950s,
188
when approximately 2.5 million ounces of gold and 40
In 2013, Cerro San Pedro produced a total of 103,000oz
million ounces of silver were produced from within the
of gold and 1.3 million ounces of silver. After the first nine
district. During the 1970s, a renewed interest in the region
months of 2014, Cerro San Pedro had produced a total
saw various companies evaluating the district’s potential
of 47,300oz of gold and 783,000oz of silver, significantly
for large tonnage, low-grade, and bulk mineable deposits.
lower than the 80,600oz of gold and 1 million ounces of
The Cerro San Pedro gold-silver deposit is located along the
silver produced in the first three quarters of 2013. The mine
western margin of the Sierra Madre Oriental fold belt. It is
is thought to contain reserves of 1.4 million ounces of gold
characterized by an upper zone of gold-silver mineralization
and 52 million ounces of silver. New Gold’s continued faith
associated with secondary limonitic iron oxides and a lower
was illustrated by the US$28 million it invested at Cerro San
zone of gold-silver-zinc-lead sulfide mineralization hosted by
Pedro over the course of 2014, with US$20 million spent
a late Cretaceous to early Tertiary monzodiorite porphyry.
on capitalized stripping and US$8 million on expanding
the operation’s leach pad. “The third quarter saw our
ores have been proven to be readily amenable to heap leach
company achieve multiple important successes,” stated
processing, as demonstrated by the mine’s past twenty
Randall Oliphant, Executive Chairman of New Gold in the
years of successful mining operations. Peak Gold Mines in
company’s third quarter report. “We increased quarter-
Australia produces gold doré bars and copper concentrate,
over-quarter gold production as planned, advanced our
the former of which is on sale at the Perth mint, while the
growth projects, progressed our exploration initiatives and
latter is sold to markets in Asia.
strengthened our team.” This success is helped by the fact that New Gold’s resources are so well split across different
Looking ahead, New Gold’s board and management
projects. Its newest mine, New Afton in British Columbia,
team intends to pursue an aggressive organic growth
began producing gold and copper in 2012, and contains tens
strategy, encompassing the development of projects and a
of millions of ounces and pounds, respectively. Acquired by
continuous improvement of its existing operations. External
New Gold in June 2009, Mesquite is an open-pit gold mining
opportunities for the company to execute value enhancing
operation located in Imperial County, California. Mesquite’s
mergers and acquisitions should also lead to growth.
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| VIEW FROM THE TOP
MINING OPERATOR SEEKS TO PUT SINALOA ON THE MAP EURIDICE SALOMÉ GONZÁLEZ Country Manager, Mexico of McEwen Mining and General Manager of Minera Pangea Q: How was El Gallo in Sinaloa developed and how did
Q: What had to be done to reopen and improve the
you become involved in the operation?
operations of the former Magistral mine?
A: The Mexican subsidiary of McEwen Mining, Compañia
A: In January 2012, McEwen Mining invested a little under
Minera Pangea, had been created in 1994 as a subsidiary of
US$15 million to re-commission the mine facilities. In
Queenstake Resources and had been operating in Sinaloa
January 2014, we decided to invest a little more to make
since 2000. At that time, Minera Pangea was focused on
adaptations and improvements to process equipment
making contact with the local communities and carrying
such as crushing and to double the capacity of the gold
out exploration around a closed underground mine from
adsorption-desorption-recovery (ADR) plant. The mining
the 1950s, which is now El Gallo 1. Queenstake Resources
plan that we had for the Magistral mine was based on a
began building a new mine, Magistral, there in January
certain gold price, which also had to be modified to fit the
2002, after negotiations had been finalized. At that point,
market conditions of the time. When Magistral first started
the price of gold was around US$340 per ounce, which
operating, only primary and secondary crushing was being
meant that few companies were looking to invest in such
done. Due to the large size of the crushed minerals, we were
projects. In fact, there was no other mining company
not recovering the gold efficiently through our lixiviation
operating in Sinaloa at the time. I joined Minera Pangea
pads. With the new investment, we bought new crushers
in November 2002 as a process assistant. My background
and added a tertiary crushing process which made the
was in teaching English but I decided to seek out a job at
operation much more efficient. Throughout the process,
the mine out of curiosity. I was then moved around within
we focused on maximizing our investment and in the end
the company and served as an administrative assistant,
we completed the expansion under budget. Soon after we
AutoCAD
began with the expansion, the market witnessed a drop
designer,
warehouse
assistant,
warehouse
manager, and exploration coordinator.
in the silver price which made the El Gallo 2 silver project economically unviable. We are now working to improve
McEwen Mining approached Minera Pangea in the end of
the CAPEX, the operational plan, and the metallurgical
2006 when the project was in standby mode after having
process of El Gallo 2 to create an attractive business case.
operated from 2002 to 2006, due to operating challenges in
190
the mine that had made the operation economically unviable.
Q: Considering that McEwen Mining has another operation
The great majority of employees were dismissed, leaving
in Argentina, how important is El Gallo 1 for the company,
only 10 workers that were considered to be the most skillful.
and what can we expect to happen there in the next few
Rob McEwen decided to buy Minera Pangea and invest in
years?
exploration work around the existing mine. In August 2007,
A: El Gallo 1 is 100% owned and operated by McEwen
I was made Interim General Manager of Minera Pangea and
Mining. The San José mine in Argentina, on the other hand,
by January 2008, Rob arrived with a complete exploration
is 49% owned by McEwen Mining while being 51% owned
team, which I helped to guide since I knew the area very well.
and 100% operated by our JV partner, Hochschild Mining.
At the end of 2008, we found the El Gallo silver deposit, 7km
El Gallo 1 is important for the company since it is the only
away from the Magistral deposit, and invested in the tools
project that the company fully operates. In El Gallo 1, we
and analyses required to define its economic value. After
are working on finding the ideal operational capacity of
four years of exploration, I was officially appointed General
our crusher and increasing the capacity of our processing
Manager. Before the gold price peaked at the end of 2010,
plant. One cannot know a crusher’s maximum capacity
Rob decided to reopen the Magistral gold mine, which
and the ideal crushing rate unless the equipment is tried
became known as El Gallo 1, to acquire funds to start building
out. Our 2014 projection was a production of 35,700oz of
the El Gallo 2 silver mine. We were and still are very excited
gold, but by 2015 we want to be at a production level of
about El Gallo 2 since it is an important silver deposit found
70,000oz of gold. This jump in production is in line with
near the surface with no signs of previous mining works.
our production plan which dictates that by 2015 we will be
mining higher grade deposits. This means that we might
ranged from prospecting and drilling to aerial magnetic
be moving and processing the same amount of tonnes but
surveys, geophysics, and geochemical studies. Based on
recovering more metal.
these results, we have identified other areas of interest, which are worthy of further exploration. During this time,
Q: You have lived through most of the stages of Minera
we have also supported small-scale mining projects by
Pangea’s existence. How has the working philosophy
analyzing samples or field studies. In this way, we keep
changed since Rob McEwen bought the company?
ourselves open to new possibilities within the region.
A: Rob McEwen is heavily focused on quality, which extends to the quality of the lives of each of the company’s
Q: What are the short and long-term aims of Minera
employees. Rob is always striving to be better and he
Pangea and McEwen Mining in Mexico?
transmits this goal to all of us in McEwen Mining. This is
A: McEwen Mining is just getting started in Mexico, the
why our main priorities go hand in hand with production,
company still has a long path ahead of it. We are following
safety, the environment, and CSR. As part of this working
Rob’s vision of making our Mexican operations develop
philosophy, we have to constantly assess the impact and
into a world-class mine. Sinaloa has great mineral potential,
implications of our decisions on operations and on the
which is largely unknown to the outside world. To prove
surroundings. We are driven by the principle of continuous
this, we will carry out in-depth analyses on exploration
improvement and innovation, and the company is now
targets which are still at the prospecting stage. We have
genuinely interested in contributing to the development
a good relationship with the state government and we
of the area where we work in. McEwen Mining wants the
recently formed the Mexico Mining Business Council, which
communities around our operations to grow as we grow.
is dedicated to better organizing the mining industry in Sinaloa. This council might eventually turn into a cluster
Q: Given that there are not many mines operating in
once we have organized ourselves adequately. The Council
Sinaloa, what is the general attitude towards mining in
seeks to represent of small-scale mining as well as large
the state?
mining operations, while creating awareness of the reality
A: The people in Sinaloa are not accustomed to mining
of the industry within Sinaloa. We have already built up
operations. For many decades, Sinaloa was predominantly
credibility for the company within the Mexican mining
an agricultural state, becoming known as “the granary of
industry and this has led to people offering to sell their
Mexico”. As a result, the governmental infrastructure was
projects or make them grow together with us.
dedicated to supporting agricultural activities. Most mining companies that have come to the state since 2009, driven by the high metal prices, have focused on exploration. There are now over 70 registered junior companies in Sinaloa. Most of the activity is minimal, however, and is simply being done to meet the concession requirements. Some small mining projects, mostly focused on iron ore and base metals, have been operating in Sinaloa for over 20 years, but without support from the state, the industry has not been able to flourish. This makes Minera Pangea the pioneer of modern mining in Sinaloa. Q: What were the exploration priorities for McEwen Mining prior and during the expansion of El Gallo 1? A: When we began exploring, Ian Ball, our former president, and I decided to revisit the Magistral gold deposit that had been proven using older technologies and techniques. This led to mineral deposit discoveries which increased our reserves by around 30%. As the expansion project of El Gallo 1 took place, we invested funds and time into the exploration of several targets within the property since we knew that the resulting knowledge was crucial for the development of the project. The silver deposit we found was the fruit of the company’s exploration efforts, which
191
192
| MINE SPOTLIGHT
PEÑASQUITO Goldcorp’s Peñasquito mine is located in Mazapil, Zacatecas about 140km to the south of Saltillo. It consists of two open pits, Peñasco and Chile Colorado, which both contain gold, silver, lead and zinc in their ore bodies. The property is encompassed within the eastern Mexican fold-belt which is comprised by carbonate and Mesozoic clastic sedimentary units. This world-class deposit is placed over two funnel-shaped breccia pipes and on top of cutting Cretaceous clastic units that overlay a Tertiary felsic intrusive complex. The deposit manifests veinlets and minimal fractures where minerals such as galena, electrum, sphalerite and various silver sulfosalts are held. The Peñasquito property is currently Mexico’s largest open pit operation and the country’s main gold producer. Exploration works have continued to increase the high grade mantos deposits located underneath the mine’s two pits. Geochemical testing indicated a significant potential for high grade production from the mineralized mantos below the current pits. The elaboration of prefeasibility studies for the concentrate enrichment process project and the pyrite leach project has progressed and will be completed in early 2015. Successful implementation of one or both of these projects has the potential to significantly improve the mine’s overall economics and add to the reserves and resources of Peñasquito. Goldcorp states the mine has an estimated life of 13 years, based on current reserves, which is welcome news for the 3,200 staff and contractors that it employs. The full year production of 2014 was to close at 530,000-560,000oz of gold, while production of silver was to reach a total of 22-25 million ounces, and zinc production was set to reach 135-145 million pounds. The Peñasquito processing plant has a total milling and processing capacity of 130,000 t/d and employs a flotation-and-grinding processing, with two 50,000 t/d sulfide processing lines and a 30,000 t/d high pressure grinding roll (HPGR) circuit. The
Peñasquito
project
is
incorporated
in
the
National
Environmental Audit Program and has carried out a comprehensive waste management plan. Due to its geographic location area, Goldcorp has also obtained an operation certificate and a management plan to assist in the reproduction of the endangered white-tailed deer in areas surrounding the mine. Furthermore, the company has rescued and transplanted over 448,000 plants, including 18,000 endangered cactus species. In addition, the nursery is producing approximately 3 million plants per year that will be used in Peñasquito’s future reclamations work. All of these distinctive actions are proof of the efficient and comprehensive environmental
management
systems
that
Goldcorp
has
successfully implemented in this flagship Mexican mine.
193
FORWARD PLANNING LEADS TO PRODUCTION SUCCESS The
Gold
burns and capital expenditures, often leading to huge
Corporation
numbers of shares outstanding. “We raised almost all of our
evolution
Resource
one
funding without bank assistance to stay in control of our
that many mining juniors
capital structure and further limit shareholder dilution. The
might wish to emulate. Its
flipside of that coin is we have very little analyst coverage
success in Oaxaca saw it
in the financial world as banks rarely cover companies
begin as an exploration
they are not making money from. We have been able to
stage
leverage our margin with our tight capital structure to pay
(NYSE:GORO)
Jason Reid, CEO, President, and Director of Gold Resource Corporation
of
rapidly
company moving
development
is
before to
the
stage
a dividend that stands shoulder to shoulder with many majors in the industry,” he states.
and finally becoming a dividend-paying gold and silver producer. The company’s
In Oaxaca, the company found a mineralized structural
CEO, President, and Director, Jason Reid, analyses the
corridor of 55km. Drilling turned up high-grade gold and
critical factors that allowed this success. “There are a few
silver at each end and near the middle. “This makes GORO
critical factors that increase the odds of success, including
one of the luckiest companies in the mining space. High-
operating in a mining friendly jurisdiction, high-grade
grade epithermal systems are very sought after and we
potential, experienced people, the ability to raise capital,
feel we have just scratched the surface on our Oaxaca
and a bit of luck in exploration drill programs. Furthermore,
mining unit’s potential. We expect to be here a very long
timing is everything and juniors today have the added
time with the goal of having numerous deposits feed
pressure of falling metal prices,” he explains. GORO was
ore to our strategically located mill,” explains Reid. The
very fortunate to have moved through its exploration and
company currently has six properties along the trend, with
development cycles into production in a rising metal price
Arista standing out due to its high-grade gold. While it is
environment. Furthermore, GORO’s business plan revolved
not uncommon in Mexico to see deposits with multiple
around focusing on production as early as possible.
kilos of silver with lead and zinc, it is far rarer to find the
Without that focus, Reid believes the company might be in
same minerals accompanied with a high-grade gold phase
the same tight spot as many juniors that are still trying to
as found at Arista. However, Arista benefits from another
reach production against the market’s current headwinds.
characteristic, making it all the more unique. Arista is
However, this focus on production was no headlong rush.
one of the youngest epithermal systems in Mexico at
After all, the profile investors look for in metal equities has
approximately 10-15 million years old, whereas most such
evolved. Reid remembers a time when companies sought
systems in northern Mexico are above 40 million years old.
growth for its own’s sake while touting the largest number
This was important for GORO as the mineralized deposit at
of ounces, even if that meant lowering the cutoff grade and
Arista lies about 100m below the surface of the earth. Had
without worrying whether those ounces were economic
the system been far older, millions of years of erosion might
or would ever be produced. “Investors nowadays are
have exposed Arista at the surface. This means it would
demanding a more sustainable business plan from miners.
probably have been discovered and mined by Spaniards or
Shareholders want to shift the focus towards profitability,
Mexicans long ago. “The fact that our Arista deposit is just
shareholder value, return on capital, and dividends. We
below the surface also means we have the entire deposit
welcome these new investor demands as GORO has
as it has not been eroded away. We feel our geologic
focused on these very aspects from day one,” says Reid.
knowledge of this area means we stand a good chance of finding other deposits on our properties. Our recent
194
One might expect the market to have hailed GORO’s
discovery of the high-grade Switchback mineralization,
prescience, but ironically the company sustained heavy
northeast of Arista, is an example of that.” This position
criticism when it held its IPO in 2006 for operating outside
sees GORO confident that a substantial number of ounces
the norm. Those critics have been quieted since GORO
can be added at Arista, while a preliminary mine plan is
began production in July 2010, as it has now returned over
being developed for Switchback. In 2013, the El Aguila mill
US$101 million to its shareholders in consecutive monthly
was expanded to handle a nominal 1,500 t/d. However, in
dividends. Such success was also rooted in a measured
the first three quarters of 2014, the mill averaged 1,040
approach to financing. A swift advance to production
t/d but Reid attributes this to the mine itself acting as a
allowed GORO to avoid shareholder dilution by reaching
bottleneck, which will not impair future growth potential.
cashflow sooner. Reid compares this to a typical route to
“Our priority is the expansion of the Arista deposit followed
production, which takes far longer with much larger cash
by the high-grade Switchback discovery. We have also
drilled high-grade mineralization at the Alta Gracia and
rock with only gold and silver, your costs come out of that
Las Margaritas properties, and plan to drill newly defined
revenue. We are fortunate to have copper, lead, and zinc
targets at these properties in the near future. With a 55km
revenues to help offset the production costs of mining the
structural fault corridor surrounded by 684km of land, we
gold and silver.”
2
have a significant amount of exploration to do,” says Reid. Another interesting development for GORO came with
A further challenge was extended to GORO in the shape
the opening of a doré facility, which sees GORO aiming to
of the Fiscal Reform which has led the producer to seek
produce approximately 35-45% of its total gold production
to diversify outside Mexico. “Money flows where it is most
as doré. “Generally speaking, we are subject to treatment
appreciated and the reforms made a big statement saying
charges of 9-10% when we produce concentrates. Doré
exploration risk money is no longer appreciated here. Big
production, on the other hand, is generally subject to
producers have stated they will continue existing operations
treatment charges of approximately 1-2%. In addition, the
but plan to put less money to work in Mexico,” chides Reid.
net smelter return we pay for doré production is just 4%
The same is true for GORO as a junior producer. Since the
as opposed to 5% for concentrate production.” Though
Fiscal Reform was passed, GORO has made three different
GORO has been pleased with its overall flotation gold
investments in exploration plays all of which were outside
recoveries prior to the installation of the doré facility, it
of Mexico, and Reid expects this trend to continue. ”Had
believes the completed addition will help to increase gold
gold and silver been making new highs, the reforms would
recoveries and boost its bottom line.
still be viewed as excessive but manageable. But with precious metal prices under pressure and a finite amount
Despite these successes, GORO has not totally been spared
of capital available for exploration allocations, GORO is
the pains felt by its competitors. It faced a challenging
determined to deploy its capital in the best of the best
third quarter in 2014, with production levels dropping by
mining venues. It is unfortunate that Mexico went from one
24% compared to the quarterly average of the first half
of the friendliest mining jurisdiction to one of the more
of the year. “Our third quarter production was weaker
questionable overnight.”
than anticipated, as underground development advanced at a slower than expected rate. We have retooled a few
GORO’s diversification outside the country does not mean
key members of on-site management and are bringing
it will withdraw from its current operations in Mexico and
our resources to bear on overcoming these challenges to
the exploration of its trend in Oaxaca. This southern state is
return production levels back to those achieved during
far from being among Mexico’s historical mining locales, but
the first and second quarters of 2014,” states Reid. “We
Reid states the company’s concerns there are much like those
are currently finalizing our annual production targets for
one might find elsewhere. “One of our biggest concerns, as
2015, with a strong focus on remaining profitable at the
with any place a mining company operates, is the ability to
current metal prices while closely watching costs. In the
receive necessary permits in a timely manner. Since mining
third quarter, base metal revenue alone was in excess of
is a long lead time endeavor, permit delays are very costly.”
$11 million. Regardless of how you choose to apply that
However, GORO has continued to receive the necessary
revenue, either as a credit applied against precious metal
permits from the proper authorities. “Oaxaca is a great place
costs as the mining industry does, or simply as additional
to operate and with continued cooperation between the
revenue from the deposit, we are fortunate to have a high-
local government and mining companies, I believe we can
grade polymetallic deposit at Arista. If you mine a tonne of
accomplish great things for both,” he concludes.
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VETERANS TAP INTO FORMERLY PRODUCING MINES Originally established and headquartered in Canada,
currently continuing exploration at the site and expects the
GoGold Resources (GoGold) can count on certain strong
resource to grow, while predicting a significant potential
advantages. It is well-financed, it has turned a number of
for high-grade targets to be identified. The company is
properties into profitable mines, it has raised hundreds of
advancing the project with additional confirmation drilling
millions of dollars on capital markets, and its management
and environmental studies, with an aim to restart gold
team is comprised of veterans from successful mine
production during 2015. The project aims to have a 7,500
developments and operations in Mexico. This has led
t/d heap leach facility that will be supplied from a number
it to become a strong development-stage exploration
of pits, while a 12-year mine life is projected with a total
company, with three current projects in Mexico: Parral
estimate production of 671,000oz of gold.
Tailings in Chihuahua, San Diego in Durango, and Santa Gertrudis in Sonora.
GoGold recently announced that it has executed a land agreement to both mine and explore on the ejido property
The company’s Parral Tailings project is located at the
on which Santa Gertrudis stands. The agreement allows
heart of the Mexican silver belt, within the municipality of
GoGold to mine and explore the 2,006 hectares of land for
Hidalgo del Parral in Chihuahua. Sized at approximately
a period of ten years with an option to renew for a further
141 hectares, this property contains a tailings repository
five years. With the company’s intent to re-establish its
left behind from over 300 years of operations at the
mining operations, this agreement will allow GoGold to fast
Mina La Prieta silver and base metal mine. Exploration
track production at Santa Gertrudis. The compensation
and sampling results from the site indicate a mineral
for the agreement stood MX$1.5 million upon signing and
resource of approximately 214,000oz of gold and 26.4
MX$500,000 (US$102,000) to be paid each year. Another
million ounces of silver. Metallurgical work has shown
clause in the agreement is that any old waste material from
that a heap leach recovery process could be a viable
past production at the site will remain with the ejido.
option to further develop the property. The inefficient historic recovery processes carried out at Parral have
The San Diego area contains an epithermal gold-silver
left significant amounts of silver and gold in the tailings
system that extends for more than 35km. This massive
which GoGold is now recovering. In May 2014, the heap
property is part of the Sierra Madre Occidental Gold-
leach project at Parral began the commissioning of
Silver Belt, one of the largest epithermal precious metal
agglomeration and ore stacking on the heap leach pad,
regions in the world, and host to the majority of Mexico’s
representing a major milestone for GoGold. Parral and the
gold and silver deposits. Widespread gold in quartz veins,
surrounding area have a long mining tradition that also
breccias, and stockworks occurs over the entire length of
plays into GoGold’s hands. The company has ample local
the system, gold and silver are exposed at the surface,
access to skilled personnel, equipment suppliers, and
and the hillsides are punctuated with dozens of small
contractors that possess the required capabilities for the
hand dug mines. Although the district has been mined
project. Unlike many more remote mine sites, it can draw
on a small scale since the 1700s, there has been very
its power from the local grid and fresh water is in easy
little modern exploration until now. The property contains
supply. These amenities and advantages provide GoGold
multiple geological exploration targets, each representing
with an advantageous platform for ongoing operations
potentially impressive bulk mineable and/or underground
at the site.
operations. To date, over 10,000 gold, silver, and copper samples have been gathered from just a few exploration
In April 2014, GoGold acquired Animas Resources at a
targets within the property. Numerous unexplored targets
relatively competitive rate. The company also bought
still remain, providing potential opportunities for more
the Santa Gertrudis project, which was a producing gold
long-term exploration.
mine in the past. In September 2014, GoGold published
196
an initial PEA that upgraded Santa Gertrudis’ resource
According to the company’s end of year report, GoGold
estimate to 810,000oz of gold indicated and 255,000oz
experienced a tough 2013-2014 period, incurring a loss
of gold inferred. This project is expected to have low
of CA$7.2 million (US$6.08 million). However, with the
capital costs that GoGold can easily finance given its cash
Parral Mine in the commissioning phase of production
flow from the Parral Tailings project. As a past producer,
and another gold project with planned production in
Santa Gertrudis already has decent infrastructure in place,
mid-2015, GoGold is forming a balanced portfolio of
including a number of pits that have been stripped with
properties that should provide ample cash flow over the
haul roads, making it virtually ready to mine. GoGold is
next few years.
| VIEW FROM THE TOP
FISHING FOR OPPORTUNITIES IN SINALOA LEFT: John Brownlie, Chief Executive Officer of Marlin Gold RIGHT: Marco Galindo, Vice-President Operations of Marlin Gold
Q: How has Marlin Gold benefited from the creation of its
since they represent most of the expenses. We had to
own royalty company?
enter flat rates agreements with our contractors so that
JB: For many years, there were few royalty companies on
we could get a fixed budget for their services.
the market but the number expanded during the mining boom. The idea of royalty companies is to operate as mining
Q: How will you make sure to reach the targeted
companies but without the same risks being involved. In
production rates at La Trinidad Gold?
order to generate revenue, royalty companies provide
MG: The first thing we need to do is prepare ourselves for
capital to mining companies in exchange for production
the next rainy season. The bad weather we encountered in
based payments. These payments are typically life-of-mine
the past really delayed our operations so we now have to
and based on a predetermined price for the metal being
make sure everything is set up and ready to operate ahead
produced by the mine. Such companies inject money into
of time. Another important priority is to redesign the
mining projects at a very early stage and eventually obtain
infrastructure of the mine so that we can operate it in the
dividends once the projects are successfully advanced to
best way possible. The mine’s previous owner left behind
production. Naturally, royalty companies look for the best
infrastructure that was too antiquated for us to use and did
mining projects to get best returns on investment possible.
not match our mining methods. We had to change almost
They look for assets with an important exploration upside,
everything in the mine. We are now planning to process an
low operating costs, and great management teams. Sailfish
approximate of 1.4 million t/m at La Trinidad.
Royalty is our wholly-owned subsidiary that provides Marlin’s shareholders with exposure to a hybrid business
Q: Which strategies will Marlin Gold employ to move the
model. Marlin is now able to unlock shareholder value
El Compas project to the advanced exploration stage?
by capturing the valuation difference between royalty
MG: SEMARNAT just accepted our environmental impact
companies on the one side and operating companies on
assessment to carry out our exploration works, but we
the other. It is our intent to spin out Sailfish Royalty to our
need to provide them with some additional information. In
shareholders once the proper scale is achieved.
terms of permits, everything is advancing as expected and Marlin Gold will soon be able to embark on an aggressive
Q: What are the main challenges Marlin Gold has
exploration campaign. Right now, our focus is on turning La
encountered during the development of its projects in
Trinidad into a fully operational mine.
Sinaloa and how has it overcome them? MG: One of the main challenges was to build the mine
Q: What is the company’s action plan to provide returns
on schedule without exceeding our US$30 million capital
to the community and shareholders in a socially and
costs. In 2014, we encountered intense rainfall that hindered
environmentally responsible manner?
the development of the projects. It is neither easy nor safe
MG: We are now working closely with PROFEPA and
to develop a mine under such meteorological conditions.
SEMARNAT so that we can attain the Clean Industry
Since the beginning, one of our main areas of focus was
certification. This certificate will really helps to appease the
the equipment we needed to purchase for the processing
environmental concerns of the local Maloya community.
facilities since much of the machinery comes from abroad.
In addition, we are currently in the process of obtaining
Some of the technologies required for the crushing of
our Socially Responsible Company certificate. Something
minerals can take up to six months to be delivered.
that also awes us is that despite the fact that Sinaloa is not a mining friendly state, especially when compared
Once we were done conducting processing trials, we
to Sonora, we have not encountered any major problem
immediately purchased the equipment so that we could
with community members. The community surrounding
receive it with enough time to install it and start operations.
La Trinidad has always looked at Marlin’s operating team
We also had to rethink our agreements with contractors
favorably due to our history of operation at Capital Gold.
197
EXPLORATION FIRM WILL FIND RIGHT PARTNER OR GO IT ALONE It is no easy feat to obtain the right financing or find the
Mexus in a dilemma since it still requires a partner to take
right partner to advance a mining project, especially when
on a proper drilling program, yet such partners are hard to
the precious metals markets stubbornly refuse to show
find given that not enough drilling has been done to entice
signs of recovery. According to Deloitte, finding funding
them. In order not to wait idly by, Mexus has decided to
is among the top ten challenges for mining companies
restart its placer operation as a way to generate some extra
worldwide. “The dismal shareholder returns of recent years
cash. “We are now rebuilding the equipment for the placer
pushed mining companies out of favor among investors,”
operation in a way that uses a minimal amount of water and
states a Deloitte mining report. “With internal rates of return
reuses water throughout the operation,” explains Thompson.
no longer sustainable, the industry has recorded a record
This operation is expected to be underway by mid-February
number of write-offs and impairments. As a result, equity
2015. “Based on what happens during negotiations, we will
markets have shut off the tap.” Mexus Gold US, an American-
decide whether to go on with blasting and an underground
based exploration company with holdings in Mexico, has
operation on our own, or carry out the underground and
encountered this challenge and has been patiently waiting
heap leach operations with a partner. We are in the position
for the right opportunity to come up. This has even seen it
to take on this project ourselves if it is on a smaller scale,”
reject certain offers of funding. In June 2014, the company
Thompson clarifies. The operation already has a ball mill and
turned down a seven-figure offer for the funding of its Santa
a gravity recovery plant which is capable of processing up
Elena/Julio project in Sonora. “We feel that the property
to 30 t/d.
has a better potential than what was being offered. We are confident that we have more than a million ounces of gold
One advantage on the company’s side is that it benefits
there and the offer simply did not meet our expectations,”
from an excellent relationship with the land owner at its
shares Paul Thompson, President and Director of Mexus
property and recently re-signed the option on the property
Gold US. The company is now talking to major companies to
and the lease for 25 years. While Thompson admits Mexus
enter into a joint-venture (JV) agreement, which it is hoping
has been lucky in having dealings with a family that is on
to define by February 2015. As for a potential partner, it is
board with the company’s plans, he suggests companies
looking for a major company “with the power, credentials,
should absolutely treat all parties fairly to avoid potentially
and funds necessary to develop the mine.”
critical delays. “In the end, all parties need to be satisfied
“The gold in the ground will stay there and it will likely be worth more money in 2016. If gold goes back to more than US$2,000 per ounce, then taking our time will not hurt us” Paul Thompson, President and Director of Mexus Gold US
198
The Santa Elena/Julio property is located 54km northwest
with what they get. When someone gets greedy, everything
of Caborca, Sonora, Mexico and consists of several mining
falls apart. Companies need to keep the greed factor down
concessions totaling approximately 1,340 hectares. The
by keeping everybody informed and maintaining conditions
project currently has a shaft going down 30m where one
fair and transparent,” he states. So far, Thompson remains
can see visible traces of gold in the numerous underground
confident that Mexus is in the right place. The NASDAQ-
quartz veins that traverse the property. Based on surface
listed company has been fortunate enough to raise the
samples and preliminary drilling on the shear zone,
necessary operational capital within its own ranks so far.
Thompson believes that with additional drilling the company
Though it still requires considerable investment to advance
will be able to find more quartz veins with an average of 1.2
its Santa Elena/Julio project, Thompson highlights that the
g/t of gold. “There is still a lot of risk involved. However. we
company is not willing to take on huge debt. “Our debt is
still do not know what lies below 150m since we have not
minimal right now and we are going to keep it that way. If we
drilled that deep,” Thompson adds. This means the next
do not strike a JV deal, we will then take on the operation
step is to start a drilling program to know what it will take
ourselves. The gold in the ground will stay there and it will
to advance the project into production. “This program could
likely be worth more money in 2016. If gold goes back to
result in the creation of one of the biggest mines in Mexico
more than US$2,000 per ounce, then taking our time will
or it could reveal a smaller deposit,” he states. This places
not hurt us,” concludes Thompson.
GUERRERO GOLD BELT GROWING SOURCE OF PROSPERITY The
concept
Canadian-based
of resources known to lie in the area’s first deposit and then finding a second one. “This area has contributed more new
its
resources than any other in the world in the last few years,”
Mexican property is not a
states Stanford. The government of Guerrero has not been
particularly innovative one.
idle in making the most of this opportunity. Torex states it
However, several aspects
has received excellent support from the authorities, as well
allow Torex Gold to stand
as benefiting from Mexico’s well-established regulatory
out from the crowd. This
regime. According to Stanford, Torex’s operations team
is largely because Torex’s
has always worked closely with regulators, keeping them
asset is the Morelos Gold
informed of all technical, commercial, and social aspects of
company
Fred Stanford, President and CEO of Torex Gold
a
mining
of
exploring
Property in Guerrero in
the projects. “This exchange of information, which started
the southwest of Mexico, as opposed to the vast majority
prior to our permit application, contributed to a well-
of mining which takes place in northern states like Sonora,
managed and timely permitting process,” he says. Given
Durango, and Chihuahua. To date, Torex has two ongoing
the number of mining companies that run into problems
projects on its 29,000 hectare property. El Limón-Guajes
with permitting, this model may seem like an obvious one
has moved beyond the exploration stage and is currently in
to follow. Despite these positives, Stanford does point out
the middle of a construction phase that began in November
the challenges of working within Guerrero, and Mexico
2013. As a high grade, open-pit gold deposit, El Limón-
itself. “Our shareholders have been dismayed by the
Guajes has resources of 4.95 million ounces of gold at
sharp increase in mining royalties in 2014. The violence in
2.79 g/t plus inferred resources of 576,000oz at 1.95 g/t.
Guerrero is also of concern to investors and will lead some
Should such resources be fully tapped up once production
to choose to invest elsewhere,” Stanford says. Nevertheless,
begins, Torex expects it to be one of the largest and lowest
he is confident that those unfortunate realities are being
cost gold mines in existence. Beside it, Media Luna was
managed at all levels of government. “We all look forward
discovered in March 2012, with exploration underway as well
to future production and the associated revenues that will
as a preliminary economic assessment set to be finished in
provide a return to investors and the tax incomes that will
late 2015. As it stands, Media Luna has inferred resources of
help to improve circumstances in the region.”
5.8 million gold equivalent ounces. None of these aspects have dispelled the enthusiasm These discoveries are just the latest to be made in the
present among Torex’s staff and shareholders at the future
Guerrero Gold Belt, which is rapidly becoming one of
wealth to be untapped within El Limón-Guajes. Perhaps
Mexico’s hottest mining commodities. “The Guerrero Gold
none feel this more deeply than Stanford himself, who has
Belt is already considered one of the most important
seen the mine grow step by step. Once Torex acquired the
mining clusters in Mexico,” says Fred Stanford, President
property, he had to put together the management team,
and CEO of Torex Gold. “The Los Filos mine, operated by
build the exploration department, and support a drilling
Goldcorp, is currently one of the largest gold mines in the
program. More recent highlights include obtaining the
country and Nyrstar’s G9 Metals mine is also a large metals
financing to build the mine in spite of depressed investment
producer. A number of exploration companies have made
and metal markets in the last couple of years, as well as
serious investments in the area, while Osisko Royalties and
completing the land lease agreements with the local
Agnico Eagle own mineral rights over significant areas
ejidos. The way Torex has settled in among the neighboring
within the Guerrero Gold Belt. On our part, Torex will
communities has been another strong factor in its favor.
continue to be focused on exploration within our property
“Our mandate is to bring the mine to full production in a
and increasing the resources that will allow us to continue
safe manner, without harm to the communities, and equal
mining here for generations.”
to or better than the constraints within the environmental permits,” says the President and CEO. Torex’s future
Before Torex acquired it, the Morelos Gold property had
may not lie only with El Limón-Guajes and Media Luna.
previously been explored by Teck for ten years, which had
“One of the beauties of the Morelos Gold Property is its
established an initial high grade deposit. This established
exploration upside,” says Stanford. “Approximately 75% of
the Guerrero Gold Belt as one of the most prolific mining
the property still remains unexplored and our exploration
districts in the world, which attracted Torex and saw it
team has been spending a great deal of time in analyzing
buying the mineral rights for the property in 2009. The
data to identify the priority targets that could potentially
company continued Teck’s work by expanding the amount
host the next discovery.”
199
Mexico continues to be the number one producer of silver in the world, with a mine output of 187.2 million ounces of silver in 2013, an increase of 8.6% when compared with 2012. In the first ten months of 2014, the country produced 136.7 billion ounces of silver with a total value of US$2.45 billion. The metal is currently one of the biggest contributors to the country’s overall mineral and metallurgical production value. The revitalization of Mexico’s silver production has led to the rebuilding of towns and the reopening of ancient mines, creating thousands of jobs and hundreds of spin-off businesses. This continued success is anchored by four of the world’s top ten silver producing companies currently operating in Mexico, including the global leader Fresnillo.
This chapter gives an overview of the most important silver mines in Mexico, as well as the operational challenges they face, and the technological solutions required to overcome these challenges. It features interviews with key executives from leading silver producers, thereby presenting the trends that are influencing the production of this precious metal in the country. Mexico’s most promising silver deposits are also highlighted, alongside the most significant development and exploration projects that are focused on silver production. The chapter outlines future plans for major and mid-tier silver companies, providing readers with a comprehensive look into the inner workings of one of the top silver producing country in the world.
SILVER
8
CHAPTER 8: SILVER 204
Global Silver Leader Confident About Expansion Potential, Fresnillo
206
MAP: Mexico’s Main Producing Silver Mines
208
Reconciliation of Mining and Financial Gain, Coeur Mining
210
Mine Lives Extended While Operating Costs Reduced, Endeavour Silver
212
Silver Giant Moving Away From Mexican Commitment, First Majestic Silver
215
MINE SPOTLIGHT: CiĂŠnega, Fresnillo
216
Exciting Times Ahead for La Negra Discovery, Kootenay Silver
218
Establishing Solid Foundations for Next Mining Boom, Pan American Silver
220
Exploration Firm Seeks Opportunities from Crisis, Prospero Silver
221
Oaxaca Mine Sees Producer Surge to Success, Fortuna Silver
222
Partnership with Fresnillo Has Lucrative Potential, MAG Silver
224
Many Treasures Still to Unearth at Guanajuato Mine Complex, Great Panther Silver
226
Funding Slowdown Delays Silver Mine Construction, Silver Standard
227
Searching for the Source of the Highest Grade Silver, Excellon Resources
228
Land around Existing Mine Could Lead to New Projects, SilverCrest Mines
229
Canadian Junior Revives Centuries Old Silver Mine, Defiance Silver
230
Silver Company Moves from Exploration to Production, Arian Silver
231
La Negra is the Gift That Keeps on Giving, Aurcana
203
| VIEW FROM THE TOP
GLOBAL SILVER LEADER CONFIDENT ABOUT EXPANSION POTENTIAL OCTAVIO ALVÍDREZ CEO of Fresnillo Q: How will Fresnillo maintain its position as the world’s
Q: How focused has Fresnillo been on non-core asset
largest primary silver company and produce 65 million
divestment and portfolio simplification?
ounces of silver and 750,000oz of gold by 2018?
A: We invest a lot of attention in evaluating our projects,
A: We base our strategy on the long-term view that we
which is why we have not had any problems such as
have had as a mining group for many years. Fresnillo has
unfeasible projects. On the contrary, we have been
been listed on the London Stock Exchange for almost seven
evaluating new projects that different companies have
years but it has a long history of mining, formerly as part of
brought to our attention. It remains difficult to find good
Peñoles, which extends back to 127 years. We know what
projects since we do not acquire those that will dilute the
it takes to remain profitable. It requires strict processes
quality of the assets that we have in operation. We use
within operations, maintaining control of operational costs,
the analysts’ consensus for price forecasting, we do not try
and the acquisition of projects with competitive production
to outguess the market. With this consensus, we evaluate
and cost levels. The projects that we have in our pipeline
projects based on their ability to withstand the cyclical
are all very viable and can withstand the cyclical nature of
nature of the metals market.
the mining industry. These will help us to reach our goal of doubling our production relative to our production seven
Q: What have been the major recent developments in
years ago. When we first listed the company, most mining
Fresnillo’s operations?
companies were focused on growth and not on returning
A: Through the fourth quarter of 2014, we continued
value to the shareholders via dividends. Fresnillo, on the
with the expansion of the El Saucito project to increase
other hand, has always held a balanced 50-50 approach
our mine production by an additional 10 million ounces
which combines an aggressive growth platform with returns
of silver and 35,000oz of gold. This low-cost operation
to our shareholders. We do not cut corners, we go through
project is located in the Fresnillo district of Zacatecas. We
all the steps to evaluate our projects and take on those that
are also constructing the San Julian mine in Chihuahua,
have the best performance metric. For Fresnillo, the current
which will undergo two distinct phases. The first phase,
market is not depressing. We are living through difficult
involving a leaching process, will start in mid-2015, while
times but we have gone through low cycles before and our
the second phase will enter production in the first quarter
people understand that. In reality, the talent of our people
of 2016 and will aim to produce 10 million ounces of silver
is what allows us to continue through the cycles. Through
and 60,000oz of gold.
cost control measures, companies can find themselves in a better situation when the downturn ends. We see these
We are planning additional growth in the Fresnillo district,
cycles as an opportunity to improve our operations.
including improving Fresnillo mine’s capacity from 8,000 t/d to 10,000 t/d. Once we build a plant in the Fresnillo
Q: What are the benefits of acquiring Newmont’s 44%
district, we will be able to produce silver from the old
interest in the Penmont joint venture?
tailings at a production level of 4.5 million ounces per
A: Newmont has been our joint venture partner since we
year, with double-digit returns. We are also undertaking
started exploring the area around the Herradura mine in
the Herradura expansion called Mega Centauro and we
Sonora 20 years ago. Its new strategy includes divesting
are planning to develop the orogenic deposit through
assets where it is not the majority stakeholder and non-
an underground mine called Deep Centauro. At the end
strategic assets. This is why Newmont was convinced to
of 2017, we will inaugurate two new projects, Orysivo in
sell us its stake of the JV, which includes the Herradura,
Chihuahua and Juanicipio in Zacatecas.
Noche Buena, and Soledad-Dipolos mines, including
204
500,000 hectares of land with good exploration potential.
Q: What are Fresnillo’s exploration priorities to extend its
We already knew the asset well, making the US$450
growth pipeline, and how successful have the company’s
million transaction a natural move for us.
exploration efforts been in recent years?
A: We have a lot of ground to cover. However, due to lower
and use of the equipment. We plan our open pit mines
metal prices, we are adjusting our exploration budget for
with the objective of reducing hauling distances, using
next year and concentrating on the districts in which we
special additives for diesel, looking for new approaches
have a better chance to grow our resources. That is why
to maintenance, and other similar initiatives. We are
we are continuing our exploration efforts in the Fresnillo
also not cutting investments in technology in 2015, but
district, around the Herradura mine, in the San Julian
rather maintaining a healthy investment in the technology
district, where we have only explored 30% of our claim, in
and systems at our mines. We believe that innovative
an old mining district in Guanajuato, and in the El Rodeo
technology can improve the productivity and efficiency
area in Durango. We also continue with our exploration
of our operations, which is why we are monitoring the
efforts in Peru. In 2013, we allocated around US$7 million
productivity of each piece of equipment in underground
to our Peruvian operations. This level continued through
and open-pit operations.
2014 and will stay stable for 2015. In Peru, we have a target named Pilarica that has a potential of turning into a new
Q: Your share price rose sharply in November 2014,
mine with a resources estimate of 55 million ounces, and
with analysts attributing it to a rise in silver prices and a
another target called San Gregorio. We are also exploring
potential run for gold. Is Fresnillo’s rising stock price one
in Chile, which is a region we like due to its mining tradition
of the first pieces of concrete evidence that the mineral
and cultural similarities to Mexico. We are also planning to
price slump may be coming to an end?
start exploring in Colombia.
A: It is very difficult to forecast gold and silver prices due to all the variables associated to global metal prices,
Q: What are Fresnillo’s strategies to counterbalance the
such as geopolitics and the state of important industrial
effects of the new tax regime on the company’s financial
economies. We believe that the market will be under
position?
pressure for the next eight to 12 months and we are
A: The timing of the new taxes was unfortunate due to
prepared to operate under this stress scenario. Our main
decreasing metal prices. Gold has decreased by 15%
focus is on controlling the cost of our operations, rather
compared to 2013, while silver has decreased by 20%. For
than hoping for the metal prices to increase.
this reason, the taxes that the government was planning to get in 2015 will be lower than anticipated. The taxes
Q: What is Fresnillo’s CSR and Sustainability strategy,
had a negative impact on companies that were looking to
and how does it help improve relations with workers and
bring new projects into production. In our case, there is a
communities?
variable that will minimize the impact of the taxes. Fresnillo
A: We have programs in place to attend to all stakeholders.
has a long-term view which is why we are investing heavily
Since our people are our main asset, we focus heavily on
in exploration. In 2013, we invested a little over US$200
improving work conditions. We recently received the Great
million in exploration, while in 2014, we invested a total
Place to Work award, which shows that we appreciate
of US$170 million. A portion of the investment for the 2.2
and take care of our workforce. The communities are
million hectares of mining claims for exploration will be
also a priority for us, which is why we are analyzing our
deductible from these taxes.
community development strategies and adopting a new approach based on the idea that communities should
Q: What is Fresnillo’s strategy to not only increase
develop through the initiatives that we have in place and
production but also increase revenue and return for
feel that they are better off due to mining operations.
shareholders?
This will help us to mitigate conflicts initiated by any third
A: Even though we already produce quality ounces of
parties.
silver and gold, we still aim to reduce operating costs. In terms of silver, our mines are within the lowest quartile
We are developing a new approach because we believe that
of the industry cash cost curve, while in the case of gold
there is always room for improvement and that demands
we are at the middle of the curve. In 2013, we were able
by communities are developing and evolving. A company
to reduce our operating costs by 3.6% compared to
cannot simply continue doing what it has always done. For
the previous year, which amounts to savings of about
example, we used to be very reactive and now we are aiming
US$25 million. This year we are continuing programs to
to be more proactive with regards to community relations;
control and reduce costs, which depend on the mine.
in other words, we will not wait for conflicts to arise, but
For underground mines, we control dilutions, operational
rather try to prevent them. Moreover, we want communities
inputs such as reagents and steel for milling and drilling,
to feel a sense of ownership of the projects we initiate and
explosives, maintenance costs, and increase the life cycle
become more self-sustainable through them.
205
| MEXICO’S MAIN PRODUCING SILVER MINES
1 2
3 5 6
12
7 8 4
9
11
10
13 14 16
18
15
21 17
SONORA 1.
Mercedes – Yamana Gold – Sonora
2.
Santa Elena – SilverCrest Mines – Sonora
3.
La Colorada – Argonaut Gold – Sonora
4.
Alamo Dorado – Pan American Silver – Sonora
CHIHUAHUA 5.
Dolores – Pan American Silver – Chihuahua
6.
Pinos Altos – Agnico Eagle – Chihuahua
7.
Ocampo – Minera Frisco – Chihuahua
8.
Palmarejo – Coeur Mining – Chihuahua
9.
El Sauzal – Goldcorp – Chihuahua
10. San Francisco del Oro – Minera Frisco – Chihuahua SINALOA 11.
Nuestra Señora – Scorpio Mining – Sinaloa
COAHUILA 12. La Encantada – First Majestic Silver – Coahuila DURANGO 13. Guanaceví – Endeavour Silver – Durango 14. Ciénega – Fresnillo plc – Durango 15. San Dimas – Primero Mining – Durango 16. Velardeña – Golden Minerals – Durango 17. La Parrilla – First Majestic Silver – Durango
206
19 20
22 23 24 25 26 27 28 29
3
31
3
3
ZACATECAS 18. Peñasquito – Goldcorp – Zacatecas 19. Tayahua – Minera Frisco – Zacatecas 20. Aranzazu – Aura Minerals – Zacatecas 21. Sabinas – Peñoles – Zacatecas 22. La Colorada – Pan American Silver – Zacatecas 23. Del Toro – First Majestic Silver – Zacatecas 24. Saucito – Fresnillo plc – Zacatecas 25. Fresnillo – Fresnillo plc – Zacatecas 26. Francisco I. Madero – Peñoles – Zacatecas 27. Cozamin – Capstone Mining - Zacatecas 28. San Acacio – Defiance Silver – Zacatecas 29. El Coronel – Minera Frisco – Zacatecas SAN LUIS POTOSI 30. Cerro San Pedro – New Gold – San Luis Potosi GUANAJUATO 31. Bolañitos – Endeavour Silver – Guanajuato 32. Guanajuato – Great Panther Silver – Guanajuato 33. El Cubo – Endeavour Silver - Guanajuato QUERETARO 34. La Negra – Auracana – Queretaro STATE OF MEXICO 31. Tizapa – Peñoles – State of Mexico 32. La Guitarra – First Majestic Silver – State of Mexico GUERRERO 37. Campo Morado – Nyrstar – Guerrero 38. Los Filos – Goldcorp – Guerrero
30
32 34
33
35
36
37 38
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| VIEW FROM THE TOP
RECONCILIATION OF MINING AND FINANCIAL GAIN MITCHELL KREBS President & CEO of Coeur Mining Q: Coeur Mining has undergone a metamorphosis to
project. In this world of capital discipline, the last thing we
survive the low-price environment, including an HQ shift
will do is invest money in a project that does not earn an
to Chicago. What benefits has this change brought?
appropriate rate of return. We continue to closely monitor
A: Our move to Chicago was one part of a bigger plan to
the silver price and how it impacts the economic viability
reposition our company for global growth. We wanted to
of the La Preciosa project. A common challenge of this
better manage Coeur Mining’s business and bring more
industry is looking far ahead while accounting for so much
consistency and standardization across the portfolio of
uncertainty, especially in the silver market. Silver is a very
assets we operate. By implementing better processes, we
volatile metal that makes it very hard to confidently predict
hope to help manage and mitigate the risks inherent in the
what the returns will be made from a new investment. We
mining industry. The industry has not done a good job of
have made some other strategic bets in Mexico beyond La
managing risks while maximizing returns, so we are working
Preciosa. We own shares in some earlier stage companies,
to improve risk identification and mitigation while adding
mostly from Canada, which have interesting projects in
high returns and consistent, sustainable precious metal
Mexico, such as International Northair Mines, Silver Bull
assets to our portfolio. We began this corporate evolution
Resources, and Soltoro. We made a small investment in a
in 2012 to provide a better service to our stockholders. This
junior exploration company called Orex Minerals and have a
was precipitated in 2013 by the decline in metal prices.
royalty on El Gallo from McEwen Mining, among many other
A decade ago, people thought that since precious metal
chips on the table in Mexico. Additionally, on December 17,
prices were increasing, they could buy shares in a precious
2014, we announced our acquisition of Paramount Gold
metals company and hold out for a price increase. Today,
and Silver. Its high-grade Don Ese deposit in Mexico is
the same people are very disappointed. Although prices
expected to provide a low-capital, high-margin, near-term
were going up, the investment in those mining shares
source of future production to supplement production
did not net them anywhere near the same returns they
from our Palmarejo mine. The substantial development
would have obtained on the metal itself. That is what the
and operating synergies with our Palmarejo operation
metamorphosis of Coeur Mining is all about. We had a great
are anticipated to create significant long-term value. As a
run for 80 years in Idaho but we needed to think about
primary silver company, we need a pipeline of opportunities
how to regain relevance in the investment community. The
in Mexico, the silver capital of the world.
change in offices represented much more than a simple relocation.
Q: Given your widespread interests, why was it so important to acquire Orko Silver Corp?
208
Q: How important are Coeur Mining’s assets in Mexico for
A: With the benefit of hindsight, buying Orko at a later date
the company’s current and future growth?
might have been a better decision, but somebody else
A: Our present is in Mexico and our future is in Mexico.
could have beaten us to it. Long-term thinking must be
Presently, our Palmarejo mine in Chihuahua represents the
applied when looking at new acquisitions. Palmarejo is vital
cornerstone asset of our company because half of our silver
for Coeur Mining but it represents a large concentration on
production, half of our gold production, more than half
one asset. In an already risky industry, it is both wise and
of our cash flow, and almost half of the company’s sales
prudent for a company to diversify its portfolio of mines to
come from there. In early 2013, we acquired La Preciosa,
be evenly distributed across those assets. Having Orko’s La
in Durango, through the acquisition of Orko Silver. The
Preciosa project in production would balance the company
average silver price was at US$28 per ounce when we
out, reducing our reliance on Palmarejo. Another reason
made the acquisition. On July 30, 2014, we announced our
for acquiring La Preciosa was linked to a major asset that
decision to defer construction activities on La Preciosa. The
we have in Bolivia called San Bartolomé. This project has
drop in silver prices, along with the changes to the taxes in
been operating successfully since 2008 but Bolivia is not
Mexico, made it harder to maintain an economically viable
atop the most favorable jurisdiction list, unlike Mexico.
Q: Palmarejo is the world’s fifth largest primary silver
underground operation. We intend to reconfigure the
mine. What is Coeur Mining doing to reduce its operating
mine to give it a cost-structure that reflects its operating
costs while achieving a greater cash flow?
profile. This shift will take place in the next three to five
A: The benefit of having a larger platform of mines is that
years. In 2014, around two-thirds of Coeur Mining’s
we can create cost savings in the areas of chemicals and
exploration capital was spent on the immediate area of
consumables. On the metallurgical and processing side, we
Palmarejo near our processing infrastructure. Over half of
commissioned an expanded Merrill-Crowe circuit to boost
our Palmarejo reserves are 6km away at the Guadalupe
recovery rates. To reduce a large component of the costs,
deposit. To the south, further than Guadalupe, there are
we are being more efficient with our use of water, power,
a series of deposits that would become very attractive at
and cement, trying to use waste rock for back-filling rather
higher prices. Here, we want to make sure that we can start
than cement. However, we are slightly limited by nature.
production in the right price environment rather than just
For example, we cannot control the location of the mine
for the sake of producing ounces.
and the grade of the ore body. Q: How will Coeur Mining’s business plan further benefit Palmarejo is a mine that was put into construction very
your investors?
quickly back in 2009 and there were many issues to deal
A: Coeur Mining is very unique in a space full of mining
with after it was commissioned. We continue to work on
companies that are almost indistinguishable from one
areas that should have been addressed before the mine
another. We are in the money-making business and we just
was built. For example, we are struggling to keep the
happen to be in mining, which is an important distinction.
drilling ahead of the shovels and loaders in our surface
A good example of that is the creation of our royalty
operation. We are mining material faster than we can drill
and streaming business in 2013. We already had a small
it and put it into reserve. Our operations at Palmarejo are
portfolio of royalties and streams, so we dropped them
still evolving even though we have been in production for
into Coeur Capital and acquired a privately held royalty
four or five years. Despite these challenges, it provided
company to add cash flow in royalties. We are now actively
7.6 million ounces of silver and 116,536oz of gold in 2013.
pursuing some other royalties and expect to generate
Since we started working on the mine, we have spent
about US$10 million on run-rate EBITDA in 2014. This is
over US$70 million on exploration. The majority of our
less than 10% of the total EBITDA, but is still over twice the
exploration budget will continue to be spent on Palmarejo
margin of our operating assets.
because it has the highest potential for cost-effective additions to our reserves. In July 2014, we released
Q: What made Paramount Silver and Silver Corp
a new mine plan for Palmarejo that reflects the mine’s
interesting acquisitions for Coeur Mining?
transition to a lower tonnage, higher-grade, higher-
A: On December 17, 2014, we announced that we were
margin underground operation, prioritizing cash flow
entering into a merger agreement under which Coeur
over production ounces. The new plan also demonstrates
agreed to acquire all of the outstanding shares of Paramount
the significance of Guadalupe to Palmarejo’s future, which
Gold and Silver in an all-stock transaction valued at $146
is why our decision to place Guadalupe into production
million. Paramount’s Mexican assets strengthen the long-
in 2015 is so important. We expect the Guadalupe
term viability of Palmarejo throughout the price cycle and
underground to become Palmarejo’s primary ore source
enhance Coeur’s growth profile. We expect the transaction
by 2016.
to lower our overall unit costs, improve our free cash flow in the current metal price environment, and provide near-
Q: What are Coeur Mining’s current priorities in terms of
term growth while preserving our liquidity.
exploration? A: We have a handful of near-term exploration targets that
By adding Paramount’s San Miguel Project, particularly the
would immediately impact production. Three of these are
Don Ese deposit, to our ongoing mining activities at our
surface targets and two are underground targets. We are
Guadalupe deposit, Palmarejo will be well-positioned to
also looking at around half a dozen category 2 targets to
remain one of the world’s top producing silver and gold
identify new resources that would become reserves in the
mines with significantly higher grades and lower costs.
mine plan. Our long-term focus will be on underground
We anticipate that the transaction will close in the second
targets as they represent most ore bodies. Although
quarter of 2015. The transaction requires the approval
we have been doing both open-pit and underground
of Coeur and Paramount stockholders and is subject to
mining since the start, surface operations will decline at
Mexican antitrust approval and other customary closing
some point and Palmarejo will become an exclusively
conditions.
209
| VIEW FROM THE TOP
MINE LIVES EXTENDED WHILE OPERATING COSTS REDUCED BRADFORD COOKE CEO of Endeavour Silver Q: How did Endeavour Silver achieve growth over the last
In 2014, we focused on infill drilling to better delineate
year?
the discovery and upgrade the resources from inferred to
A: In 2014, our management’s primary focus was on
measured and indicated. In the fourth quarter of 2014, we
minimizing capital and operating costs and maximizing
received the umbrella mine development permit from the
revenue and cash flow to improve our balance sheet during
government so management is now focused on updating
this time of lower precious metal prices. We succeeded in
the resource estimate, preparing an initial mine plan,
adding US$14.5 million to our balance sheet in the first half
completing an economic scoping study and arranging
of 2014, largely due to operational improvements. At our
project financing in order to make a production decision
Guanaceví mine in Durango, we were able to materially
in 2015. Our mine permit has a 2,000 t/d footprint and
increase both ore grades and metal recoveries to maintain its
we plan to build the Terronera mine in two stages. While
profit margin, putting the mine on track for a record year of
it is premature to provide firm guidance on our plans for
production. The Bolañitos mine in Guanajuato has been our
San Sebastián, conceptually Phase 1 construction could
cash cow in recent years and while unit costs are now rising,
entail a 1,000 t/d mine capable of producing about 2
the mine generated significant free cash flow once again in
million ounces of silver and 13,000oz of gold per year,
2014. Our El Cubo mine also in Guanajuato is now at the tail
with a possible Phase 2 expansion to double the output
end of a two-year capital investment and operational turn-
to 2,000 t/d.
around program, and the results were evident in the fourth quarter. Mine and plant throughput achieved our goal of
Q: What is your outlook for the company in the next year?
almost 1,500 t/d in December, driving unit costs down, and
A: We will provide production and cost guidance for 2015
showing the mine is capable of producing up to 1,800 t/d.
in January, and as usual our focus will be on two areas. The first is to keep reducing costs and enhancing cash-flows
210
Q: Can you give us an update on your exploration results
by optimizing our three mining operations for lower metal
in 2014?
prices, and the second is preparing for our next phase of
Our exploration team once again delivered positive results,
growth by extending current mine lives and making a
drilling brownfields targets at all three mines. At Guanaceví,
production decision at San Sebastián. Our company outlook
the new Santa Cruz Sur discovery is now in planning for
is naturally tied to the metal price outlook, which looks a bit
development in 2015. At Bolañitos, we expanded the new
bleak over the first quarter of 2015 given the recent strength
L-Asuncion discovery and commenced the mine access
of the US dollar, but should improve materially thereafter.
ramp to develop it for production in 2015. At El Cubo, the
We run our business to benefit shareholders over both the
new V-Asuncion discovery was expanded and developed
short and long term so we are actively pursuing merger
into production to drive additional potential expansion
and acquisition opportunities at this time. It is our version
in 2015. But perhaps the most exciting new development
of “buy low, sell high”. Endeavour Silver shares have the
in exploration was our successful delineation of the
highest leverage to silver compared to our peers in the silver
new, shallow, thick, rich Terronera discovery at our San
mining sector, so once the tide turns on metal prices, our
Sebastián property in Jalisco state.
financials should outperform those of our peers.
Q: What are your expectations for the San Sebastián
Q: What has been your traditional business model and
project?
how is it evolving?
A: San Sebastián has emerged as a significant new, high-
A: Our initial business model was based on breathing new
grade, silver-gold discovery for Endeavour Silver that could
life into tired old mines in historic mining districts that were
well become our fourth mine. In 2013, we aggressively
fully permitted, built and staffed but struggling to survive.
expanded the resources and traced the Terronera vein on
When we arrived in Mexico in 2003, we recognized that
the San Sebastián property for another five kilometres.
famous old mining districts with 450 years of production
were well exploited but poorly explored. Both our
costs needed to sustain the mines. For Endeavour Silver,
Guanaceví and Bolañitos mines had very low production
that means all of our expenditures except San Sebastián,
when we bought them and absolutely no reserves.
which is considered a growth asset. Our AISC costs
Through the application of modern science, we were able
declined from above US$20 per ounce down to below $18
to make multiple new discoveries of buried ore bodies to
per ounce during 2014 and they should continue to decline
drive annual organic growth of resources, production and
in future years thanks to the completion of our two-year
capacity at each mine. Mining companies can typically
capital investment program at El Cubo, and the maturing
only grow by two means: through strategic acquisitions
of our Guanaceví and Bolañitos mines.
or exploration discoveries. Endeavour Silver has been very successful at both, and we intend to continue to
Q: What is Endeavour Silver’s perspective on mergers and
grow through both. San Sebastián is a great example of
acquisitions at this time?
an exploration discovery that may represent our fourth
A: The silver sector is a very small space globally. You
mine, and we are actively seeking merger and acquisition
can count the number of senior miners on one hand and
opportunities to own a fifth mine.
the number of mid-tier producers on the other hand. Additionally, there are about ten juniors so overall, there
Q: Given the current low metal prices, can you review your
are only about 20 silver producing companies worldwide,
cash costs and all-in sustaining costs?
all of which are competing for very few quality M&A
A: If you look at the company’s consolidated cash cost
opportunities in the silver space. This has led to a shift
profile over the last ten years, you will see it has been a
in company strategies and a diversification of desirable
bit of a rollercoaster. An old mine struggling to survive
assets. On the M&A front, silver companies are now
is typically a high cost mine. The cash operating cost at
looking to acquire gold projects due to their ability to
Guanaceví was around US$6.50 per ounce (net of the
outperform silver companies in terms of return on capital
gold credits) when we bought Bolañitos in 2007, which
and delivering on promises. Hecla bought Aurizon, a gold
had US$32 per ounce cash costs thereby dragging our
miner in Quebec, in 2013 and Silver Standard bought the
consolidated cash costs up to US$10 per ounce. Over the
Marigold mine in Nevada in 2014. There are not a lot of
course of the following four years as both mines expanded,
attractive, developed silver mines available so companies
consolidated costs fell to US$5 per ounce. When we
have to broaden their horizons and include gold in their
bought El Cubo in 2012, its cash costs were close to $40
formula for success. This is precisely what we have been
per ounce, which meant on a consolidated basis cash costs
doing. Last year, we made 60% of our total revenue
zoomed up to nearly US$8 per ounce. However we should
from silver and 40% from gold. We like gold and have no
soon start heading back down toward our long-term
problem taking on more gold exposure, but silver is still
target of US$5 per oz as our operating turn around and
our primary metal. So we prefer silver but we will consider
expansion at El Cubo gains traction.
gold, we prefer Mexico but will consider Chile and Peru, and we prefer production but will consider exploration
All-in sustaining costs (AISC) include not only operating
and development projects as a means of building a project
costs but also all capital, exploration and administrative
pipeline to fuel our future growth.
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| VIEW FROM THE TOP
SILVER GIANT MOVING AWAY FROM MEXICAN COMMITMENT KEITH NEUMEYER President & CEO of First Majestic Silver Q: First Majestic has been a senior silver producer ever
graduates around the world is quite small, whereas
since 2013 when your silver production equaled 10.64
graduating classes were much larger 20 to 30 years ago.
million ounces. What has this status meant for the
As a result, there is an age gap of several decades between
company?
the young people entering the industry and those in their
A: As First Majestic has become bigger, certain aspects
60s running mining companies, though this gap is now
of our business have become more complicated. From a
slowly closing. The younger generation is coming up with
social perspective, the responsibilities of the company are
ideas on how to automate a mill, for example, but the older
more important now than before. We have influence over
generation is afraid of losing their jobs. However, mining
the lives of 40,000-50,000 people, including our 3,700
needs to modernize, particularly as it is under attack
employees. First Majestic is 50% owned by institutions that
worldwide from NGOs, environmental regulations, and
desire to see stability in our operations. Since there is little
taxation. All of these assaults, combined with the lower
guarantee of stability in metal prices, our owners want to
price of metals, have made our business a lot tougher. We
see stability in our management, production, growth and
have to start developing innovative solutions to improve
responsibilities. These are the benefits of investing in a
the industry both environmentally and financially.
company of our size. Q: First Majestic has managed to keep its cash costs low Q: What steps has First Majestic taken to modernize its
while increasing production by 41% since 2012. What
Mexican mining operations?
made this success possible?
A: The mining industry is seeing a new wave of innovation
A: The cash cost measurement is an old way of
due to the current economic environment. When we
measuring success. Mining companies have often used
were dealing with a silver price of US$35-40 per ounce,
this measurement to prove they are the lowest cash
a lot of waste was created due to a confidence that cash
cost company in the market. In response, banks and
flow would continue steadily. But as prices have come
analysts have come up with new ways of assessing costs,
down and taxes have increased, we have had to focus on
such as all-in-sustaining costs or all-in costs. These new
becoming leaner, this is why we reduced our workforce
measurements are widely followed today. Our all-in-
from a peak of 4,900 people in January 2013 to 3,700 in
sustaining cost is around US$16 per ounce of silver, while
December 2014. Due to the continued efforts to reduce
our cash cost is US$9. Governments all around the world
costs, another decrease of 5% is on the horizon. Mexico
have been misled by the ways mining companies have
is a little behind on innovation and the use of technology,
reported their finances in the past, which is one of the
so modern advancements and new ideas are exciting for
reasons these companies now find themselves under
the Mexican mining industry. Many mines in Canada or the
assault by authorities. Governments assume that mining
US now have automated mills and processes. The entire
companies are huge cash-generating machines and that
milling operation is monitored by a few individuals in a
they are entitled to a piece of that action, when in fact
central computer room. First Majestic still requires a lot of
such companies already give back to the areas in which
people as part of its operation and we need to change that.
they work. First Majestic has 3,700 employees in the five
We need to modernize our business and make ourselves
towns we are active in, but we are the only employer there.
more cash-effective and resilient during downturns.
If we were not there, these towns would either be ghost towns, or be a lot smaller and poorer. We are proud of
Q:
212
Why
are
Mexico’s
mining
operations
not
as
our skilled team of mining professionals that continue to
technologically advanced as those in Canada?
focus on production costs. The alternative would be to
A: The Mexican mining industry is headed by an older
close the mines, which would be very harmful for the local
generation of experts who have been mining for 30 or
communities. We need to do whatever we can to keep the
40 years. The number of geology and mining engineering
mines operating.
Q: Despite being the most productive of First Majestic’s
from exploration and mine development to the construction
mines, La Encantada’s silver recovery was 49% in 2013.
of the mill. Del Toro is likely to become our biggest mine,
What
topping La Encantada within three years. This is exciting as
technical
challenges
are
reducing
recovery
efficiency at La Encantada?
we are adding 3 million ounces to our production, which
A: La Encantada has always posed a metallurgical
represents 30% of our total annual production. In 2013, we
challenge. Since 1974, when it first started producing silver,
increased production from 8.5 million ounces to 10.6 ounces
its recovery rates have fluctuated between 40-60%. This
year on year, and our target was to reach 13 million ounces
is linked to the manganese level associated with the silver.
in 2014. Most of the growth over this two-year period was
The higher the manganese level is, the lower the recovery
thanks to Del Toro.
will be. We try to maintain a 2% or lower manganese level in the ore entering the mill. However, we do not always
Q: How are your community development programs being
have available ore that has a manganese level lower than
affected by the mining royalty in Mexico?
2%, and when that happens, we have to mine what we
A: It is optimistic to think that the royalty will actually
have. This is why we see fluctuations in recovery that reach
fund any such projects. I have yet to see any government
up to 60% some days. Our historic average recovery rate is
in the Western world taking money from companies and
50% and there is not a lot we can do to control it. We have
giving it to communities. Normally, when money ends
tested several technologies and methods in the last couple
up in federal coffers, it stays there until it is invested in
of years, and we have found that for every 1% increase in
whatever programs the government decides to spend it
the recovery rate, we extract 40,000 additional ounces of
on. I personally believe that this initiative is robbing money
silver. Increasing recovery really does pay off.
from local communities, as companies like First Majestic are already the primary investors in these communities.
Q: Do you store the ore that does not meet the cutoff
We consider it our responsibility to supply and improve
grade?
infrastructure, from water and electrical infrastructure
A: In the end, First Majestic needs to produce ounces of
to roads, schools, computers, sports fields, ambulances,
silver. Ore that contains 5-8% manganese would be very
hospital supplies, community centers, or buses for kids to
disruptive for the mill, and we have to be very careful
go to school. Most of this infrastructure development is
about that. We have to process those ores on a highly
paid for by us, and we do it willingly. If the government
diluted basis, so we might only use 100 tonnes of this high
thinks it can do a better job than us, then good luck to
manganese ore and blend it with ore of 1.5% manganese
them. The communities are looking to us as we have
in order to reach the target of 2%. That falls within the
turned the tap off. We have had to tell them that the
geological engineering scope of work being done at the
government has pledged to give them that money, and
mine, and it is up to the mine managers and the geologists
that we can no longer provide all these services since we
to decide how to manage this material on a daily basis.
are paying an extra 8% in taxes. Mexico should focus on increasing its tax base rather than increasing taxation on
Q: The Del Toro mine has been the biggest investment in
those that already pay. Mexico has the lowest per capita
First Majestic’s history. What is the story behind the mine
tax base percentage in the entire OECD, with only 30%
and how has this investment affected First Majestic?
of the Mexican population paying taxes. The Mexican
A: Excluding Del Toro, all the mines we have built in the past
government should be focusing on increasing the tax base
have been old mines. When we bought La Encantada in
to 40% or 50% within the next ten years, not decreasing it
Coahuila, it had a mill, the infrastructure was in place and a
as they have in recent years.
mine had already been developed. All we had to do there was bring in new processes and more investment to expand
Q: How have the reforms affected First Majestic’s strategy
the operation. The same thing happened at San Martin, La
given that the company is fully focused on Mexico?
Guitarra, and La Parrilla. Then came the Del Toro silver mine
A: We are unique as all of our assets are in Mexico, so we
in Zacatecas, which was the first mine that the company
have been significantly more affected than the majority of
built from scratch. This was based on our geological team’s
companies. We are looking outside of Mexico, and we have
feeling that silver could be found on the property based on
to do that because our 38,000 shareholders worldwide are
old Spanish workings that dated back 500 years. We drilled
concerned about the growing instability in Mexico. We are
some interesting holes and found that they were right. We
more likely to start investing elsewhere now because the
developed about 100 million ounces of silver over a five-
Mexican government has made our life a lot tougher than
year drilling program and then decided to build the mill. The
it already was. They should reconsider the changes that
US$150 million spent on Del Toro so far includes everything
have been made.
213
214
| MINE SPOTLIGHT
CIÉNEGA The mine of La Ciénega is located near the community of Nuestra Señora de la Ciénega in the state of Durango, and consists of an underground mine, as well as a flotation and leaching plant. The mine’s ore bodies are rippled with gold, silver, lead, and zinc concentrates with these deposits consisting of a series of subparallel, northeast-trending veins which cut through andesitic and rhyolitic rocks that belong to both upper and lower Tertiary volcanic sequences. The veins are vertical to steeply-dipping structures that mainly consist of quartz bearing gold-silver and have less than 10% lead, zinc and copper sulfide and sulfosalt minerals. The upper parts of known ore shoots also benefit from supergene enrichment. Drilling at La Ciénega started in 1987 but construction only got underway in 1992. After three years of construction, commercial operations began in 1995 under the ownership of Fresnillo plc. The mine’s mill capacity has been continuously increased, with a series of expansions in 1998, 2005, and 2007 bringing it to a capacity of 2,200 t/d. 2011 saw the satellite mine of San Ramon being ready to start operating with the ore extracted from there also passing through La Ciénega, with its milling capacity now standing at 3,600 t/d. As it stands, La Ciénega mine has reserves of 809,000 ounces of gold and 67.4 million ounces of silver with average ore grades of 1.71 g/t of gold and 142 g/t of silver. The estimated mine life is approximately 11.9 years. For the years to come, Fresnillo is planning to continue optimizing and expanding the milling capacity to reach 5,000 t/d. In addition, the company expects to conclude the engineering and initiate the construction of the third tailings dam at Ciénega. It also plans to evaluate opportunities to increase reserves, to extract gold and silver at higher rates from zinc concentrates, and to continue the exploration of the Cebollitas cluster, a new Ciénega satellite, through direct mine development work. Fresnillo has a standardized safety policy that includes ownership of safety risk by management of business units supported with safety guides, manuals, and procedures, training to reinforce employee and contractor instruction, and zero tolerance attitude for safety issues at all levels of operations. This safety policy has seen La Ciénega become one of the safest mines in Mexico. Furthermore, its environmental actions are dictated by the measurement of its impact five key areas: water, energy, greenhouse gas emissions, waste management, and biodiversity.
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| VIEW FROM THE TOP
EXCITING TIMES AHEAD FOR LA NEGRA DISCOVERY JAMES MCDONALD President and CEO of Kootenay Silver Q: How did development on your flagship Promontorio
from our Promontorio resource and is one of several new
silver resource lead to the new La Negra silver discovery?
high priority targets that we have identified along the 25
A: Over the past two years, we have been aggressively
by 15km northwest trending mineralized corridor called the
developing our Promontorio silver project. Our latest
Promontorio Mineral Belt.
NI 43-101 resource now has over 92 million ounces of
216
measured and indicated silver equivalent, with another
Q: You hit high-grade silver on all first seven holes,
24 million ounces inferred. It was not until the recent
followed by 16 additional holes with multiple high-grade
recognition that Promontorio is hosted in a large diatreme
intercepts grading up to 1,337 g/t of silver. Have results
complex that things opened up for us along the entire
so far exceeded expectations and how will this impact La
mineralized trend and took Promontorio to a regional-
Negra’s future?
scale level. Diatreme systems are typically very large in
A: We were crossing our fingers, as you always do when
size and can contain multiple prolific metal resources.
drilling starts. However, we were confident based on the
One of the biggest diatreme deposits in Mexico, and
geology of La Negra and the remarkable consistency of
perhaps in the world, is the PeĂąasquito deposit, while
silver mineralization identified on the surface that the results
the Pitarilla mine in Mexico is also a significant diatreme
would be favorable. Certainly, we were not expecting to
deposit. Supported by the revelation that Promontorio
hit so many substantial intercepts and such high grades of
is a diatreme-hosted system, we immediately began to
silver. The results surpassed our most optimistic projections
pursue additional targets contained within Promontorio’s
thus far and based on results, we have no reason to believe
mineralized trend. After we recognized Promontorio was
that this will not continue as we prepare for our next drill
in a diatreme breccia complex, we recognized La Negra
phase on La Negra. We believe that La Negra possesses
was also a breccia and needed to be followed up on.
all the ingredients to become a substantial, low-cost, open
This led to more prospect sampling, mapping and finally
pit mining operation. Importantly, it is very easy to access.
a hand trenching and chip sampling program. A total of
The silver mineralization is outcropping on a hill top and
50 samples were taken in three meter intervals for 150
drill results show both a consistency of mineralization
meters of trenches across six trenches ranging from 21-
and demonstrated potential for continued high grades,
30m in length. All trenches returned very good grades of
and bonanza style zones as shown in holes such as LN
widespread silver mineralization throughout their length,
21-14 that returned 1,337 g/t silver over 6m. This was
augmenting previous assays from the program. This
within a broader 200m of 156 g/t silver. Combined, these
indicated robust and consistent grades of extensive silver
exciting factors indicate strong potential for developing a
mineralization in the 20-72 g/t range being present within
very significant low cost silver operation. We will collate
the entire 100 by 400m core of the La Negra Breccia.
and interpret the results from our first phase of drilling
Assays from sampling indicated a remarkable consistency
in a 3D model and design a follow-up drilling program
of silver mineralization across the entire exposed area
based on that. Once concluded, we plan to immediately
of the Breccia. Moreover, petrographic work showed the
proceed to a Phase II drill program on La Negra with the
silver mineralization is hosted in a silver chlorargyrite,
objective of producing a NI 43-101 resource there, at the
a mineral that is amenable to low-cost leaching, as well
earliest opportunity. We are confident the end numbers
as a host mineral to other major discoveries in Mexico.
will support our enthusiasm for this discovery. We feel
The breccia provides easy access and forms a prominent
that the potential for this play could be upwards of 50
hill with approximately 120-130m of relief. We knew that
million ounces of silver. We plan on fast-tracking the
if the silver mineralization that was present on surface
development of La Negra and have retained the services
extended to depth, we had potential for a substantial
of Hans Smit to assist in the upcoming development.
silver discovery. We were obviously very motivated to
Smit specializes in guiding advanced exploration projects
begin drilling at that time. La Negra is situated only 6.5km
through resource estimations, economic evaluations and
permitting. As former Vice-President of Exploration for
royalty increases and changes in the depreciation of
Grayd Resources, he played an instrumental role in the
capital expenditure but hopefully those will be softened
discovery and advancement of La India in Sonora, Mexico,
in the near future.
from a grassroots discovery to a project with 1.2 million ounces of gold and a positive preliminary economic
Q: With Agnico Eagle now owning a 9% stake in the
assessment. Grayd was bought in 2011 by Agnico Eagle
company, what are the objectives of this collaboration?
in a US$275 million transaction and La India was brought
A: Agnico Eagle owns 9% of the company which they
into commercial production in 2014. Furthermore, we have
bought in 2012 largely on the basis of the Promontorio
been fortunate that the surrounding infrastructure is very
diatreme hosted resource. This was a big endorsement of
good. The project is about three hours from Hermosillo,
our projects and our company as a whole. Agnico Eagle
and has easy road access, good access to supplies, a skilled
believed in our project generation in Sonora, of which
local labor pool, and moderate topography. We have not
La Negra is a direct result. Agnico Eagle has a big focus
had any problems with water access, we have established
on Mexico with two producing mines in Sonora and we
land surface agreements with local land surface owners,
consider them to be a good shareholder to have.
and we are just 2km from the Yaqui river. Our immediate priority is to quickly advance the La Negra discovery to a maiden resource calculation upon the completion of a second drill program anticipated to begin early in 2015. Going forward, results always lead the way, and there is no doubt at this time that an exciting year lays ahead for Kootenay Silver, Promontorio, and the La Negra discovery. Q: What attracted you to Sonora in the first place and what makes the region such an attractive mining jurisdiction? A: As one of the original founders of National Gold that went on to amalgamate to form Alamos Gold, I was acutely aware of the emergence of Sonora’s Sierra Madre Mining region, which is why we made that district a priority. We were pursuing an advanced project that had potential for early stage production and Promontorio, as a former
Q: Financing a mining entity requires raising substantial
producer, fit that bill to a tee. Over the past decade, Sonora
funds. How do you view the market’s willingness to fund
and its neighbors have seen discoveries in excess of 520
new operations in today’s investment climate?
million ounces of silver and 15 million ounces of gold. That
A: Junior companies are all reliant on equity markets
growth has continued unabated until today. Prior to 2001,
for their operating capital. This makes it important to
the area within 150km of Promontorio had no producers.
understand those markets and spend the time developing
There are now ten producing mines containing millions of
relationships throughout the finance community. It is also
ounces of silver and gold reserves along with base metals
important to have high quality assets and management
in that area. Promontorio and our new La Negra discovery
teams that know how to manage the assets and capital.
make us exceptionally well positioned in the region.
After all, in challenging markets, companies with these characteristics are the ones who can access capital. This
Mexico is also a very attractive jurisdiction in and of itself.
is what enables Kootenay Silver to access capital and
It is a mineral rich country with abundant precious and
make new discoveries even in bad capital markets. We
base metals and industrial minerals, while the level of
have an experienced and well-rounded company, from
discovery here over the past ten years has been one of the
the board of directors down to the management team,
best in the world. Combined with a strong mining culture,
with experienced people on the board and in the areas
available human expertise and trained personnel, clear
of finance, marketing, and technical matters. That all-
mining laws and regulations, and an excellent publically
round combination of skills is what creates a strong junior
available geological database, this makes Mexico one of
exploration company. It makes Kootenay Silver stronger
the best jurisdictions for exploration and development in
and better focused, and it improves our chances of making
the world. This has been dampened somewhat by recent
discoveries and maximizing value for shareholders.
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| VIEW FROM THE TOP
ESTABLISHING SOLID FOUNDATIONS FOR NEXT MINING BOOM GEORGE GREER Senior Vice-President of Project Development of Pan American Silver Q: How competitive are Pan American Silver’s projects in
Q: Given La Colorada’s long mining history, what benefits
Mexico compared to your other projects in the region?
would an expansion bring to the company and its
A: They are very competitive. The grade of our deposit at
investors?
the La Colorada mine in Zacatecas is one of the highest
A: The La Colorada mine was owned by many different
grades at any of our projects. We are dealing with an
families prior to Pan American Silver acquiring it in the late
average grade of 388 g/t of silver, with good levels of
1990s. It was operating at a 200 t/d rate when we acquired
base metals, lead, and zinc grades as well. Additionally, the
it, and we increased that rate over time to the current 1,250
cost of working on projects in Mexico is very attractive.
t/d, reaching an annual production of over 4.5 million ounces
We maximize our resources within Mexico as best we can,
of silver. The expansion project will increase production
which helps make our projects very competitive compared
from 1,250 t/d to 1,800 t/d, which is a big increase for a
to some other countries. Overall, Mexico is probably one
narrow vein, underground mine. The project will include an
of the best countries for us to be investing in right now. I
expansion of the mine to increase the production rate, the
personally believe that the country has a very friendly and
development of new levels in some of the ore bodies, the
progressive environment. The people I have worked with
sinking of a new shaft, and the installation of a new hoist
here have been very easy for us to deal with. 99% of our
and headframe. The existing hoisting system and shaft is
success is down to our people, and the results we have a
old and fragile and can only hoist a maximum of 1,250 t/d.
seen are a direct reflection of their dedication, hard work,
The operators at the site do a great job keeping it running,
and expertise.
but the inherent risk of a breakdown remains. We have already completed some pre-feasibility studies, we have
Currently, our largest investment is the expansion of the La
defined a flow sheet that we like, and we have already
Colorada mine, which has been visited by banks, investor
started procuring some equipment for a plant expansion.
relations staff, and investment analysts over the course
Increased production means that we will need to raise the
of the last 12 months. They are all very supportive of us
tailings dam, increase the capacity of our power line, and
embarking on this expansion project. Even so, lower metal
procure new underground mining equipment. The capital
prices are creating challenges at our other operations. The
cost of the project is planned at US$137 million, spread out
Alamo Dorado mine in Sonora and the Dolores mine in
over four years. In 2014, our budget was set at between
Chihuahua have to be very creative to remain economic
US$28-32 million, but this expected to increase to US$70-
during these difficult times. Nevertheless, we believe that
80 million in 2015. The remainder will be spent in the
continuing with these operations is the best course of
following two years.
action during the lower price cycle. We are working very hard to ensure a good return for our investors.
Q: Which role does new technology play in the capacity expansion from 1,250 t/d to 1,800 t/d?
218
Q: In order to ensure that your investments will create
A: A lot of the technology involved in the expansion will
value for your shareholders, what are your minimum
be standard, but there is certainly an opportunity to
criteria for advancing a project?
utilize technologies that are new to us. For example, the
A: Generally, within the mining industry, the acceptable
traditional way to develop shafts has been through drilling
rate of return is between 10-15%. There are exceptions to
and blasting from top to bottom. Our new shaft is likely to
that range though, particularly in countries that pose a
be developed using large diameter, raise boring technology.
significant political or social risk and where a higher rate
In this manner, a few mines have recently developed lower
would be required. Mexico is a very stable country that has
cost shafts with a higher degree of safety. The technology
always been supportive of mining, has quality resources,
for the La Colorada processing plant expansion will
and offers reasonable labor and material costs, making a
include a standard two-stage crushing and ball mill circuit.
10-15% rate of return more than acceptable.
Obviously, we will also look to install the newest flotation
systems and filter presses, as well as a process control
A: Currently, as with most mining companies, we believe
(PLC) system that will help the plant run more efficiently,
that the best opportunities are in proximity of our
and ultimately secure higher recoveries. There is a very low
existing deposits, and within our existing mineral claims.
turnover rate at La Colorada, and most of the operators
Approximately seven years ago, we had about one year
and miners have been there since Pan American Silver
of reserves left at La Colorada. We now have more than
purchased the mine. With the new expansion, we want to
15 years of reserves, thanks to a successful exploration
provide the team with the opportunity to perform even
program at depth and along strike within the confines
better with newer technology and equipment.
of our existing mineral claims at La Colorada. In light of this, we are looking to focus more on organic growth as
Q: How has Alamo Dorado performed in relation to your
opposed to the higher risk greenfields type of approach.
original forecasts? A: It has performed extremely well. The mineral reserves
Q: What is Pan American Silver’s strategy for accessing
were found to be better than expected once we started
the company’s required capital?
developing the open pit and discovered some higher grade
A: We are fortunate in that we have very little corporate
zones. For example, we even produced 1 million ounces of
debt and we had well over US$350 million available in
silver in a single month during the hiatus of our mining, which
our treasury as of September 2014. We are planning to
was not even close to predicted in our original forecasts.
fund our existing projects, the main one being the La
Overall, on a project return basis, Alamo Dorado has
Colorada expansion, directly from the treasury. We are
probably been one of the best projects that Pan American
not in a position where we have to go out to the capital
has ever developed and mined. It paid back multiple times
marjkets. The best time to be spending money on a new
what we expected it to return due to the higher gold and
project is when metal prices are lower, which allows us
silver grades that we encountered once we began mining.
to then maximize the value and the project return when
Again, our excellent team on site managing that operation
metal prices cycle through to the next high. I expect that
contributed considerably to our success at Alamo Dorado.
our La Colorada project will deliver a very good return on investment, with higher metal prices in 2016, possibly
Q: Dolores has one of the largest reported and probable
providing us with additional long-term value.
silver reserves in the company’s portfolio. What are your expectations for this mine in the near future? A: The Dolores mine will continue to be a large producer for us. We are currently producing approximately 16,000 t/d of ore, crushing it, and placing it on the leach pads. Our latest leach pad expansion has just been completed, the area is now lined, and there is adequate room for stacking of additional ore in the medium term. This has been a challenge in the past as it seemed we were always only months ahead of ourselves with our leach pad installations, but we now have clear sailing ahead of us for the next few years. Given recent lower metal prices, our team on site has been able to look at opportunities to reduce costs and make the operation more economic. We are evaluating the installation of a pulp agglomeration circuit. This new plant would process the highest grade portion of the ore that we mine, grind it finer, mix it with cement and water, and produce agglomerated balls of material up to three inches in diameter. We would then stack this agglomerated product on the leach pad with our existing ore. This will allow us to increase the recovery of gold by a minimum of 10% and the recovery of silver by up to 20% for that higher grade material. Q: Is Pan American Silver looking to grow organically through the exploration of its properties, or through the acquisition of greenfield exploration projects?
219
EXPLORATION FIRM SEEKS OPPORTUNITIES FROM CRISIS Prospero
a
Prospero Silver has had partnerships with companies like
Mexico-based exploration
Silver
Hochschild Mining and Silver Standard. Hochschild Mining
company with over 30
was drilling the Baborigame Project in Chihuahua, under a JV
years
in
agreement, but decided to give the project back to Prospero
of
experience
Mexican
that
Silver since it could not get the environmental permit from
best
SEMARNAT to build the necessary roads for drilling more
to stay in the business.
attractive targets. In the first quarter of 2014, Silver Standard
After
short
also opted to back out from a JV option on Prospero Silver’s
by
San Luis del Cordero property because of low tonnage
of
potential. This was decided after Silver Standard completed
is
Tawn Albinson, President of Prospero Silver
is
now
deposits, doing
the
downturn the
its
sharp, caused
financial
crisis
2008, the market quickly
a 15 hole, 5,135m diamond drill program on the Santa Rosa
recovered, enabling the company to go public in early
vein and the Santa Rosa East skarn zones. The recent
2010. Prospero Silver generated funds which enabled
withdrawals from JV agreements also represent a drastic
it to drill, advancing some properties. However, with the
shift in opinion regarding ideal targets in the exploration
recent sustained downturn, the panorama is looking
market. “Ten years ago, the ideal target was a large bulk
gloomy, and the company has adopted a survival modality
mineable open pit that was heap leachable at a decent
which allows it to do some generative work and seek joint
grade,” recalls Albinson. “As Mexico is particularly endowed
ventures. In doing so, Prospero Silver is ready to seize new
with higher grade underground mines, it is becoming a
opportunities that surface in such a crisis.
more popular target in the current market.” Prospero Silver’s targets also include underground type properties. With the
Currently, the company has five properties in exploration
idea of having small, high-grade underground mines, the
but is keeping the operations to a bare minimum while it
polymetallic San Luis del Cordero project is a good prospect
continues the search for new properties. Tawn Albinson,
for the company. Polymetallic projects have both precious
President of Prospero Silver, explains that the company
metals and industrial base metals potential, making them
currently holds three flagship properties: San Luis del
particularly attractive deposits, as Albinson explains “In the
Cordero in Durango, El Petate in Hidalgo, and Santa María
past, Mexican polymetallic deposits have been resilient to
del Oro in Durango. The latter two are greenfield, drill-ready
downturns. When precious metal prices are depressed they
properties, the first of which, El Petate, comprises a high-
can become base metal mines, and vice versa. San Luis del
level replacement type deposit which is precious metal
Cordero is currently at the resource drilling stage and we are
enhanced. The second, Santa María del Oro, was staked
focusing on additional exploration to expand the resource to
by Prospero Silver in several stages in late 2011 and early
a 50 million ounce silver deposit. San Luis del Cordero is likely
2012, resulting in a land package that almost completely
going to be a mine. It has the opportunity to either become
surrounds the historic Magistral del Oro mines. Based on
a small high-grade operation or a longer term medium-sized,
historic mining records, more than 1 million ounces of gold
lower grade operation, dependent on further drilling and
were recovered at this property with an average grade
who the ultimate operator will be.”
exceeding 15 g/t. Though Prospero Silver started to meet with third parties over the acquisition of these properties
The opportunities for silver dominant deposits, typically
last year, the poor timing of the Mexican tax and royalty
silver-gold-lead-zinc-copper deposits, are significant in
meant that the interest in greenfield exploration was
Mexico. These usually have noble metallurgies amenable
lowered. “As exploration and producing companies both
either to flotation or cyanidation and can sustain operations
began cutting their expenses, the first dispensable activity
of a few thousand tonnes per day, with a CAPEX of less
for both was exploration,” explains Albinson.
than US$100 million. Since mining is a cyclical industry, mineral prices are destined to rise again, as it is unlikely
220
The company has had to adapt its strategy, given the
that the emergence of the middle classes and the global
market conditions of the last few years. Prospero Silver is
growth will come to an end. “There is a strong belief that
now more interested in the joint venture model, preferring
copper is going to lead the comeback, as it is the metal
producers as partners since they can take a project all the
that moves the world. Copper is in everything that has a
way to production. Cost-saving measures have involved
motor and I expect that the growth of the middle class
reducing the sizes of claims, and giving up a number of them
worldwide will increase consumption. Copper is going to
entirely since claim taxes as well as minimum investment
continue to be in demand, and there are no significant new
requirements have dramatically risen in Mexico. Up until now,
copper properties coming online,” explains Albinson.
| VIEW FROM THE TOP
OAXACA MINE SEES PRODUCER SURGE TO SUCCESS JORGE A. GANOZA President, CEO, and Director of Fortuna Silver Mines Q: What aspects of Fortuna Silver’s strategy have been
on the other hand, has recently been the subject of much
crucial for establishing its reputation as an efficient mine
discussion due to changes in its regulatory environment.
builder and a strong operator?
Everybody wants to know how the new royalty and tax will
A: Since very early on, Fortuna Silver has had three strategic
impact investment in the country. Mexico has also typically
focuses. One is to build our business in Peru and Mexico,
lagged behind other jurisdictions with regards to its
stable mining jurisdictions in Latin America and amongst the
dedication to the natural resource sector. But even though
three largest silver producers in the world. This geographic
certain things may have now become more difficult, we still
focus has allowed us to successfully acquire and build two
see the country as a very competitive place to do business.
mines which are now the cornerstones of our business. Peru
Mexico is very welcoming to foreign investment, and the
and Mexico have the necessary industry clusters for effective
state governments are also very keen on fostering it.
exploration and development, as well as a collection of clear mining laws. Our second focus is on precious metals. Today,
Q: San Jose was able to double its milling capabilities
85% of our sales are from precious metals, made up of 70%
in less than three years. How was the company able to
silver and 15% gold, with a combination of lead and zinc
achieve such swift growth?
making up the remainder. The third focus is on identifying,
A: Our commitment to exploration has helped to support
developing, and operating mines. Early on, our business
the success in our programs. We have been able to build
model was to operate mines. Even though exploration was
the resource in a way that has allowed us to expand our
a key component of our business, we have constantly aimed
operation more rapidly than we originally envisioned. San
at establishing ourselves as a producer. In Peru, we acquired
Jose was commissioned at a rate of 1,000 t/d in September
the Caylloma mine, which was on care and maintenance,
2011, and our original plan was to increase throughput to
because we saw significant potential there. We acquired it
1,500 t/d. However, we have been operating at a rate above
for US$7 million dollars and turned an old, abandoned mine
2,000 t/d since April 2014, but we are now expanding the
into a profitable operation. At peak metal prices, we were
San Jose mine from 2,000-3,000 t/d with commissioning
generating approximately US$100 million dollars a year. In
planned by mid-2016.
Mexico, we acquired the San Jose project in Oaxaca back in 2006 through a joint venture. Today, the San Jose Mine
Now that we have enough resources and reserves, we are
is treating ore at a rate of 2,000 t/d. Expansion from 2,000
also moving toward a more long-term management system
to 3,000 t/d is underway with commissioning planned in
for our tailings by filtering and disposing of them correctly;
mid-2016. At this new capacity, San Jose will be producing
this is part of our strategy to reach an environmentally
at an annual rate of between 6.7-8.3 million ounces of silver
friendlier level of operations. This is a capital intensive
and 52,000-56,700oz of gold, which will place it among the
project of around US$32 million dollars that we will be
fifteen largest primary silver producers in the world.
executing in 2015.
Q: What are the main similarities and differences between
Q: What are the company’s goals for the next three years?
the mining environments in Mexico and Peru?
A: I want Fortuna to be recognized as a leader in the
A: The main similarity is that both countries recognize and
primary silver producer space, not only for its production,
value mining as an important part of their culture due to
but also for its social, safety, and environmental records. I
their mining heritage. Even so, in Peru mining represents
want to see our consolidated annual production hovering
a bigger component of the economy than in Mexico. In
around 12-14 million ounces of silver equivalent, and 52,000-
2013, 55% of Peru’s exports were related to mining, which
56,700oz of gold, with an all-inclusive cash cost of less than
accounts for close to 10% of its GDP. Peru is the third largest
US$10 per ounce. We can achieve this growth through the
producer of copper, zinc, tin, and silver, fourth for lead, and
organic expansion of our assets while aggressively building
fifth for gold, so it is clearly a mining economy. Mexico,
a pipeline of new projects in Peru and Mexico.
221
PARTNERSHIP WITH FRESNILLO HAS LUCRATIVE POTENTIAL
George Paspalas, President and CEO of MAG Silver
Many companies in the
that any potential project must meet the specific criteria
silver
business
outlined above. Following this model, MAG has made
boast that they have the
five discoveries since 2003, with each being a high grade
best project available in
deposit. Due to this success, the company has been able
the market. While there
to raise over US$235 million from the equity markets, with
are many good projects
a mere 68 million shares outstanding. Paspalas summarizes
out
mining
many
its appeal by saying that “the interesting thing about MAG
have the characteristics
there,
not
is that its story is not very complex. Our star asset is being
that MAG Silver’s (MAG)
built by the best people in the global silver market and our
project has in Zacatecas.
other property is 100% owned with great potential.” This
The
most
optimistic outlook comes while only holding properties
advanced asset, Juanicipio, might be one of the best
company’s
in Mexico, meaning the company has a real belief in the
developing silver asset on the planet. Whilst it may not
country’s potential. Paspalas has one strong argument that
be one of the highest-grade silver development projects
encapsulates the reasons for MAG’s presence here: Mexico
available, Juanicipio has built its reputation on the back of
is the home of silver. “25% of all silver mining in human
very low mining costs, 90% recovery of metals, and other
history comes from Mexico and 10% of every ounce of
factors that guarantee value creation. At US$10 per silver
silver in the world has come from the Fresnillo district,” he
ounce, it also has a 15% after-tax internal rate of return.
says. “For all who want to be in the silver business, Mexico
What makes Juanicipio particularly unique, though, is
is the place to be. There are over 14 billion silver ounces in
that it is being built in Fresnillo plc’s own backyard. The
deposits around the world, and 8 billion exist in Mexico.”
Mexican giant is also the project operator as it holds 56% of the joint venture that owns Juanicipio. “This makes
At Juanicipio, Fresnillo and MAG are currently advancing
Juanicipio more than just a high value asset,” says George
the underground decline toward the high grade Valdecañas
Paspalas, President and CEO of MAG Silver. “It provides
and Juanicipio silver vein discoveries. For Paspalas, Fresnillo
investors with a very low risk development scenario due
brings another great advantage as it has run three similar
to Fresnillo’s proven expertise in developing and operating
mines plus two processing plants near Juanicipio in the last
similar mines in the Fresnillo district of Zacatecas.” In
ten to 12 years. “There is very little guesswork left in the way
addition, MAG’s investor appeal is rising after it made a
Fresnillo builds its mines. Its expertise in doing these types of
discovery in 2012 at its Cinco de Mayo asset in Chihuahua,
projects is proven.” Furthermore, Fresnillo’s Saucito II will be
which has substantial resources, very high grade ore and
operating on the same vein just over the property boundary
high value potential. “If investors buy now, they are getting
two years before the JV starts to develop it. This means that
a cheap option on a company that will generate more value
the JV will have two years of experience in mining the ore
with Cinco de Mayo. In fact, the model of the Upper Manto
before it even reaches the facility. MAG has learned a lot
Zone at Cinco de Mayo looks very similar to the model of
from Fresnillo in developing Juanicipio, including how to
the Juanicipio vein. It has about the same depth and width
acquire access to surface land through a purchase. However,
and sits at about the same angle,” explains Paspalas.
it should not be believed that contributions to the project have been a one-way street. MAG’s primary contribution
222
On the back of these two successes, MAG’s mission is to
came in the exploration efforts that led to the discovery of
become one of the premier companies in the silver mining
silver on both sides of the property boundaries. The JV is also
industry. Its target has always been to seek high-grade
beginning to look past the development stage at Juanicipio.
silver in projects that present at least ten years of mine
Construction will begin on the processing facility with the
life and will generate high internal rates of return. MAG
first cash flow expected to come from the project in 2018.
maintains a disciplined approach to high-grade deposits
This cash flow timeline is backed up by the fact that the main
though, assures Paspalas. While there are other plenty of
grade reported in the new resource estimate for Juanicipio
high-grade silver deposits around, it can happen that the
has remained largely unchanged. In fact, a number of extra
metal cannot be recovered with current technology. Some
tonnes of low grade ore have been revealed in the bottom
projects might be high grade but without a sufficient rate
of the vein. Paspalas is keen to point out that 850 million
of return or would require expensive mining costs. MAG
ounces of silver have been found in the Fresnillo district since
establishes such matters very early on by evaluating all
Fresnillo became a public company and that MAG played a
these parameters at the early exploration stage. One of the
part in that exploration success. “We are certainly learning a
company’s beliefs is that not all ounces are equal, meaning
lot about developing and operating a mine in Mexico. We will
be able to transport this expertise to the development of the
time in Mexico. The challenges are due to a combination of
Cinco de Mayo project,” he states. This is a valuable learning
social, political, economic, and bureaucratic factors which
curve for MAG as many exploration companies have tripped
take a while to discuss and understand,” he says. “We do
up at this stage.
not want to rush or force people into anything. We want to know that even after the mine is closed, people will look
To MAG’s mind, Juanicipio does not stand alone as the
back and think positively about MAG Silver’s involvement.
company is busy laying out specific exploration targets
We want to leave an impact that is positive for the future.”
for Cinco de Mayo with evidence proving that the project is economically viable. All of the geological information
To fund the development at Juanicipio, MAG issued
currently available backs up MAG’s assertion that Cinco
7,712,000 common shares in mid-2014, bringing in CA$86
de Mayo may hold a large carbonate replacement
million (US$71.8 million). This capital will be used to
deposit. According to the company’s numbers, the
fund MAG’s 44% share of the Juanicipio development
inferred resources of the Upper Manto Zone equal 12.5
over the next two years. For Paspalas, this was the best
million tonnes with good grade. These are also open in
financing option for the company under current market
several directions, setting up a possible expansion in the
conditions. The shares issued to raise this capital were
future. Current plans show that the operation will be an
done at a 52-week-high in MAG’s share price, minimizing
underground mine starting at about 125m below the
shareholder dilution. The initial offering of C$79 million was
surface. Below this lies the Pegaso discovery at a depth
oversubscribed, which meant that the offering could fill up
of 800-900m. “We cannot confirm a deposit there yet
a 15% overallotment. This successful financing is proof of
but we have some very promising indicators. We still have
the market’s belief in MAG having an outstanding asset.
to invest money on drilling to have a proper resource
“Our share price performance since that also shows that
estimate. We will start drafting the economics of the Upper
the market has recognized that it was a good financing
Manto though, to see what kind of mine could be built in
deal. In the early weeks of 2015 we have traded above
this zone,” explains Paspalas. Another challenge that MAG
the share price that the equity was issued at,” proudly
is facing at Cinco de Mayo is the precise delineation of the
proclaims Paspalas. With this capital now available, MAG’s
district, for which it has to negotiate with local ejidos. For
future seems clear. The development of Juanicipio is vital
this, Paspalas retains his usual confidence, saying that the
as, if the target is met, 2018 will mark the first time ever
company has a good, long-term relationship with most of
that MAG starts to receive a large cash flow. Paspalas
the ejido members. Several previous negotiations were
describes the building of Juanicipio like building an ATM
concluded favorably, including that which gave MAG the
which will sit at the center of the company pouring out
surface access to carry out the drilling. “We try to uphold a
cash. With this solid foundation, Cinco de Mayo will then
respectful relationship and understand what they want to
be developed with MAG continuing to eye up exploration
move forward. It is true that these negotiations take some
assets with reasonable acquisition costs.
223
| VIEW FROM THE TOP
MANY TREASURES STILL TO UNEARTH AT GUANAJUATO MINE COMPLEX ROBERT A. ARCHER President & Chief Executive Officer of Great Panther Silver Q: What are the benefits of listing on both the Toronto
investment strategy has allowed you to keep this strong
Stock Exchange and the New York Stock Exchange?
position?
A: The main benefit we have seen is a significant increase
A: It comes down to achieving a balance between your
in the trading of our stocks. We tend to trade about 10
operating costs and the silver grades. We have been highly
times the volume in New York as we do in Toronto. There
flexible on how we utilize our CAPEX while remaining
are a lot more people in the US willing to invest in silver
disciplined. In a lot of cases, companies like ours have
mining stocks. The US is a country that has a long silver
to spend to keep growing, even if these expenditures
mining history while Canada does not have the same
do not bring an immediate return on investment. Mining
historical attachment to silver. Another benefit of being
companies that cut back too severely on their CAPEX run
listed in New York is that it gives us access to potential US
the risk of jeopardizing the long-term sustainability of their
investors as its regulatory environment prohibits brokers
projects. No matter the operating environment, there are
from trading Canadian stocks. So if Canadian companies
always aspects that can be improved, such as safety or
want to attract American investors, they must be listed on
environmental works. These areas must be looked at on
a US-based stock exchange. Before we listed our company
a regular basis to identify costs that can be deferred and
on the NYSE, a lot of investors liked our company but
those that cannot.
could not invest in it for this reason. Once we performed our listing in the US, we opened the doors for all of these
Q: Exploration costs are no longer fully tax deductible in
new potential investors.
Mexico. What impact has this had on your approach to exploration?
Q: What actions have you implemented to reduce costs
A: It has not had an immediate impact mainly because,
while improving grade control and operating efficiencies?
due to low metal prices, the company really cut back on its
A: We took a number of actions across the board. One of
exploration budget anyway. However, we have seen that this
our main strategies was to reduce our costs for contractors
fiscal change has greatly affected developing companies or
and materials. All of the mining at our Guanajuato Mine
companies that have major projects at the development
Complex is carried out by contractors. Contractors thus
stage. The reform has stopped them from recovering their
represent a large percentage of our costs so we are
exploration cost, which would have been a great help during
naturally trying to make them more efficient, which
the development stage. This has really changed the return
involves changing some of them. We are pushing to gain
on investments for such companies and has therefore
some discounts on the services they provide and materials
affected mining shareholders. In order to counterbalance
they use. We also laid off some employees in Guanajuato
the effects of this new tax law, high metal prices will be
and Vancouver. Besides this, we are focusing on working
needed before such companies can truly reach profitability.
on areas with higher grades and on improving our grade
These new changes to the regulations are threatening the
controls to avoid dilution. We always have to contend with
long-term viability of the mining industry in this country and
the fact that our operations in Guanajuato have very high
are hurting the Mexican economy.
grade variability. The grade will vary considerably on a daily, monthly, and quarterly basis so we are always trying
Q: How has mine production changed at Great Panther’s
to average those out. Sometimes, in order to access the
mines in recent years?
high grade ores, we have to excavate areas that are not
A: One of our main achievements of 2014 was the opening
very rich in minerals. There is nothing we can do about that
of our San Ignacio mine. Thanks to its commercial
but we have to account for it in our everyday operations.
production, we saw an increase in the throughput of our plant, taking up some of its excess capacity. By the
224
Q: Great Panther has a strong balance sheet with no debt
end of 2014, San Ignacio was contributing about 20%
and a solid working capital of US$35.3 million. What
of the tonnage going through our plant. Historically, our
Guanajuato mines had a grade ratio of about a 100:1, or
producing for over 400 years, it is estimated that over a
about 100 grams of silver for each gram of gold. In 2013,
billion ounces have been exploited from the district so far.
these ratios changed a little bit, mainly because we had
The challenge lies in the fact that these discoveries will
been mining the Santa Margarita zone, which has very high
have to be made from underground. This is very expensive,
grade gold but very low grade silver. In 2014, they changed
difficult and time-consuming since geophysical studies are
again because we stopped mining as much ore from the
not effective at those depths. We will have to proceed
Santa Margarita deposit. In 2014, we processed a record
with diamond drilling and geological studies to discover
of 267,812 tonnes of ore, which was 21% higher than the
the potential our mine still holds. In order to explore in this
previous year. Metal production reached a 2,193,403oz of
way, we first have to excavate the tunnels so that we can
silver equivalent, also 11% higher year-on-year and another
withdraw samples from new areas. When the mine has a
record. Gratifyingly, the ramp up of San Ignacio was the
depth of 500m, a lot of development work will first have
main engine of this growth.
to be carried out before we know if we should continue exploring. There are many areas that have not been tested,
Our silver-lead-zinc Topia mine in Durango saw the ore
but when we consider the discoveries made in the San
processed rise by 9% to 67,387 over 2013. Topia’s metal
Ignacio deposit, it is almost certain that we will continue
production increased by 16% year-on-year to reach
to make important discoveries. I believe that this mine will
994,429oz of silver equivalent, with a grade of 343 g/t for
continue producing for many years to come.
silver. Q: Great Panther’s first resource estimate for El Horcon in Q: How important will the San Ignacio satellite deposit
Jalisco was completed in 2014. What is the plan to move
prove to be for Great Panther’s future operations?
this project toward production?
A: This mine will become very important for us and for
A: El Horcon is showing great potential to become another
the Guanajuato Mine Complex as a whole. As previously
satellite mine, much like San Ignacio, as it lies 100km by
mentioned, 20% of the tonnage being processed at our plant
road northwest of the Guanajuato Mine Complex. The
comes from San Ignacio and we believe this amount will
synergies that could be accomplished would be very
grow substantially in 2015. We are going to be developing an
similar to the ones we currently enjoy with the San Ignacio
ore pocket that we recently discovered through our diamond
deposit. The project is currently at the permitting stage,
drilling campaigns. This zone is wider and contains better
so we have not yet made a production decision. Should
grades than that we have been mining so far. This will allow
we begin operating El Horcon, it will not be necessary to
us as a company to considerably increase our production.
construct a new processing plant or
tailings pond. We
will just need to truck the ore to our processing plant in Q: What is the exploration upside potential of the
Guanajuato. Currently, we do not see the need to fast
Guanajuato mine?
track El Horcon since it depends on higher metal prices
A: The Guanajuato Mine Complex has a world-class deposit
and the government’s response in issuing the permits. We
where we are positive that important discoveries will
will invest in this project and fast track it once the market
continue to be made in the near future. This mine has been
conditions seem optimal to commence production.
225
FUNDING SLOWDOWN DELAYS SILVER MINE CONSTRUCTION In 2002, Silver Standard, a Vancouver-based precious
lead, at a grade of 0.29%, and 2,722 million pounds of
metal mining company, made a grassroots discovery in
zinc at a grade of 0.79%. The mineral reserves contain
the municipality of Inde in the central part of Durango, on
two ore types, direct leach ore and flotation-leach ore.
the eastern flank of the Sierra Madre Occidental mountain
Though the NSR calculation method varies for the two
range. This marked the beginning of the story of the
ore types, their average process recovery is 69.6% for
Pitarrilla Project. Ten years later, Silver Standard and M3
silver, 57.4% for lead, and 61.3% for zinc. The project is
Engineering and Technology completed a feasibility study
expected to have a 32-year life span with an average of
on Pitarrilla, which showed that it was one of the largest
15 million ounces of silver production per year during the
undeveloped open pit projects in Mexico. This made it
first 18 years of production. The expected mine life is 20
a considerable addition to Silver Standard’s portfolio of
years, after which the plant will continue to mill ore from
two operating mines in the US and Argentina, two other
existing stockpiles for an additional 12 years. The average
development projects in Peru and Argentina, and several
cash costs are expected to be US$10.01 per ounce of
exploration projects.
silver, with a strip ratio of 6:1 and a mill throughput of 16,000 t/d.
According to the company’s NI 43-101 technical report, the Pitarrilla property is formed by 12 contiguous mineral
Pitarrilla has an after-tax net present value of US$737
concessions
Mexican
million at base case metal prices and US$1.7 billion at
subsidiary, Silver Standard Durango, and spans a total
entitled
spot metal prices. The after-tax internal rate of return
of approximately 136,191 hectares. The company controls
is 12.8% at base case metal prices and 21.2% at spot
a majority of the surface rights required for mining,
prices, with a total construction cost of US$741 million,
milling, and surface facilities. In 2002, a series of rock-
including the three year pre-production operating costs
chip sampling programs ultimately led to the outlining
and pre-production revenue. The project presents low
of multiple zones of silver mineralization which became
technical risk since it utilizes standard truck-and-shovel
exploration targets. These targets were eventually drill-
open-pit mining methods and well-established flotation
tested, and resulted in the discovery of five zones of
and leach processing methods. A report by a Mexican
oxide silver mineralization which constitute the upper
hydrogeological consultant concluded “that local aquifers
part of the Pitarrilla project deposit. The Pitarrilla project
could provide the quantities of water required to operate
is located on the erosional remnant of one of the Earth’s
the project.” Sadly, back in 2012, Silver Standard found
most voluminous accumulations of intermediate to felsic
itself without sufficient funds to complete the project,
volcanic rock, known as the Sierra Madre Occidental. This
and was looking at a series of funding options. However,
mountain range is part of a calc-alkaline magmatic arc
no financing has been secured for the project to date. At
formed roughly 52 to 25 million years ago and hosts a
the end of 2013, the company completed the sale of its
large number of medium- to high-level hydrothermal
San Agustin project in Durango to Argonaut Gold for an
systems enriched in silver, gold, lead and zinc. These
aggregate consideration of approximately US$75 million.
systems were generated during the same period of
With regards to the transaction, John Smith, President
volcanism that created the epithermal mineral systems
and CEO of Silver Standard, stated that “this transaction
that formed the famous Mexican silver mining districts
demonstrates the value within our portfolio beyond our
in Guanajuato and Zacatecas. The Pitarrilla project
mine and development projects. Selling San Agustín adds
holds a silver-zinc-lead deposit hosted by deformed
to our balance sheet strength for funding future growth.
Cretaceous marine sediments and younger overlying
We continue to focus on optimizing our business to
volcanic, volcaniclastic, and intrusive formations. The
deliver long-term, sustainable shareholder return.” Silver
mineralization at Pitarrilla occurs as a vertically stacked
Standard retained a 2% NSR royalty on sulphide ore
mineralized system on rhyolitic dykes and sills, while
produced from San Agustín.
sulphide-associated
to
Silver
mineralization
Standard’s
is
rooted
in
the
basement Cretaceous sedimentary strata and extends
Despite these woes, the company maintains an active
into the overlying volcaniclastic rocks.
exploration program across the Americas. At the moment, it is mainly focused at the San Luis project in Peru and
226
The technical report suggests that the Pitarrilla project
on additional mineral properties located in Canada, the
contains 479 million ounces of silver in probable mineral
US, and Mexico, including the San Marcial silver project
reserves, with an average measured grade of 95.4 g/t.
in Sinaloa and the Parral Mining District in southern
Additionally, the project contains 1.014 billion pounds of
Chihuahua.
| VIEW FROM THE TOP
SEARCHING THE SOURCE OF THE HIGHEST GRADE SILVER BRENDAN CAHILL President and CEO of Excellon Resources Q: What were the highlights on Excellon’s path towards
ounces of silver equivalent, with approximately 65,000
acquiring one of Mexico’s highest grade silver properties?
tonnes mined in 2014 for 1.2 million ounces of silver or 2
A: Excellon’s story began in 1996 with Dr. Peter Megaw
million ounces of silver equivalent. We currently have a
who is currently the Vice-President of Exploration of MAG
mine life of about six years, but with significant room to
Silver. He was travelling through the town of Bermejillo in
grow manto resources and extend that mine life.
Durango, near where the La Platosa mine is now located, when he noticed a number of crystal shops. As a geologist,
Exploring for the source of the mantos was our focus until
he recognized that these crystals were primarily formed
early 2013 when the metal prices dropped. In the current
in a carbonate replacement deposit system, which led to
metals market, we have a greater focus on M&A with asset
his decision to stake the ground and bring the project to
prices being increasingly weak. We have had great success
Excellon. From 1997 to 1999, Excellon had a joint venture
historically completing acquisitions in weak markets. Prior
with Apex Silver, which drilled the discovery hole. Back
to 2009, Peñoles was toll milling for Excellon and we were
then, there was only little interest in silver or gold, so Apex
getting silver recoveries of about 70%. We addressed this
Silver withdrew from the joint venture and Excellon got the
situation by acquiring Silver Eagle Mines for US$4 million
property back. Excellon delineated the first resource in 2002
in shares in mid-2009, just after the market bottomed out.
which amounted to 63,400 tonnes at 2,700 g/t of silver and
The company had just built a new, US$15 million flotation
started a bulk tonnage sample in 2005. This was so successful
mill and had entered production in 2008, unfortunately just
that in 2007, the company made US$9.5 million in net income
as silver prices tumbled from US$20 to US$9. Through this
at US$13 per ounce of silver, leading to the development of
acquisition, we picked up a brand new mill on a 400km2
a commercial mining operation at La Platosa. By the end of
property in the epithermal silver belt and US$22 million in
2013, we had defined nearly 500,000 tonnes of silver/lead/
loss carryforwards.
zinc ore in resources. We have been in continuous production since 2005 and we have consistently been the highest grade
Q: What are Excellon’s objectives for the coming years?
silver producer in Mexico. Overall, between what we mined
A: We are naturally fortunate to have such a high-grade
and what is left in the ground, we have about a million tonnes
mine but there are still a number of areas, especially at
of the highest grade silver ore in Mexico. Our resources are
the mine site level, where we can improve costs. One of
made up of high grade massive sulfide bodies, or mantos,
our challenges is that La Platosa is a very wet mine, which
about three to four meters in height at about 130-150m deep.
has limited our production to 200 t/d. The mining is very
The company’s long-term exploration goal is to find the
simple as it consists of a modified room and pillar method,
source of this system, which will likely have a greater gold
but water management is essential. If we can significantly
and copper component and may be as large as 100 million
improve water management, we will save millions of dollars
tonnes. In mid-2012, we drilled a discovery hole of 55m
each year. We do this by using grouting techniques and
with 130 g/t of silver, 3% lead, 2% zinc, and anomalous gold
grout mixtures to prevent the inflow of water. Every ten
throughout.
tonnes we add to daily production represents 75,000oz year. Each tonne of silver is worth US$500 to US$600
Q: To what extent will the mine life at La Platosa balance
at US$20 per ounce of silver, so it is definitely a worthy
out the impact of a broader decrease in exploration?
investment. During 2013 and 2014, we have been mining
A: The La Platosa concession is made up of 400km2, and
at grades of 600-700 g/t of silver, one of the highest
around the mill which is 200km away from the mine, we
grade silver mining operations in the world. This will rise
have another 150km2. We target mining at around 200 t/d,
significantly in the future because of the very high grade
but the source deposit we are looking for would multiply
resources we have ahead of us. If we can increase tonnage
this output many times. In 2013, we mined 70,000 tonnes
into the higher grade ore, we have the ability to be
which produced 1.5 million ounces of silver, or 2.2 million
profitable even in the current low silver price environment.
227
LAND AROUND EXISTING MINE COULD LEAD TO NEW PROJECTS SilverCrest
was
silver were 67% and 35% respectively. With the new mill,
founded back in 2003 at
Mines
we are expecting a 92% recovery for gold and 68% for
a time when the market
silver,” says Fier.
showed a demand for such
Eric Fier, Founder, President, and COO of SilverCrest Mines
investment opportunities.
Beyond the progress at Santa Elena, SilverCrest has an
The company was formed
exploration program through which it is actively exploring
by three founders who
promising properties within a 30-60km radius of the
brought
of
existing mine. The company believes that this radius will
different
a
wealth
experiences
turn up a number of strong opportunities that could be
to the table, laying the
easily enveloped into its growth strategy and, should
groundwork for possible
major potential be found, develop into a mining district in
success. Its initial mission was to acquire projects with low
years to come. Two such properties near Santa Elena are
initial upfront payments, develop them and bring them
Ermitaño and Cumobabi, for which SilverCrest has signed
into production in a phased approach. Once in production,
option agreements with Evrim Resources. According to
the cash flow was to be used to expand operations and
Fier, the company sees good potential for both these
consequently increase shareholder value.
properties, while they have also significantly consolidated SilverCrest’s land position around Santa Elena. “We now
Eric Fier, founder and now President and COO of SilverCrest
control over 300km2 of mineral rights and have certain
Mines, seeks to explain the concept of a phased approach.
obligations to spend a minimum of US$500,000 in
“We usually negotiate multi-year agreements in smaller,
exploration expenditures on each project. At Ermitaño, for
staged payments, whilst conducting quite a bit of work
example, we conducted an extensive sampling program
on the project. As said, with a discovery, we accelerate
and identified three drill targets in combination with
that project to production, and use the cash flow to grow
available data,” said Fier. One of those targets is named
operations using “de-risked” phases. This was the case
Durazno where SilverCrest commenced a drill program in
with our flagship asset, the Santa Elena mine in Sonora,
the third quarter of 2014 and for which initial drill results
Mexico,” he says. For Fier, small operations can be more
are anticipated for early 2015.
profitable than larger ones. “Not all ounces are created equal. That means that existing infrastructure and location
Elsewhere in Mexico, SilverCrest’s La Joya mine in Durango
can play a determinant role when a company is looking for
presents a polymetallic deposit with values of silver,
projects.”
copper and gold. The preliminary economic assessment carried out back in 2013 demonstrated robust economics
Based on this strategy, SilverCrest is now actively
with estimated production costs of US$22 per ounce for
producing from its first underground stope at Santa
silver, US$1,200 per ounce for gold and US$3 per pound for
Elena in Sonora. The company views this as its test stope
copper. However, with silver prices still low, Fier explains
and aims to reach a capacity of 1,300-1,500 t/d, which
that the company is in no hurry to develop La Joya beyond
should give it reliable knowledge about mining costs,
the completion of the assessment. “Since we own 100% of
grade reconciliation, and dilution, allowing for the further
the project, the maintenance costs are immaterial, which
improvement of operations there. Another strategy being
allows us to wait out the market,” says Fier
deployed at Santa Elena is the decision to switch to the
228
Avoca mining method, in which the ore is mined from the
The company’s economic model has left it in a strong
bottom up. Fier states that this will allow SilverCrest to
financial
reach higher grade areas soon and to backfill with waste.
million and market recognition as one of the lowest cost
Mining from the bottom up will also allow the company
producers around. “In recent years, we were fortunate
to take out the sill and rib pillars that were designed for
to raise capital at minimum dilution, and we secured a
additional support in the mine’s pre-feasibility study, while
corporate credit facility with a major Canadian bank with
offering the potential to add more reserves. The mine has
very good terms. In 2014, we then drew down part of the
also undergone developments such as the construction
available credit as a risk aversion strategy.” With this done,
of a new mill and a CCD-Merrill Crowe processing plant.
SilverCrest’s immediate investment priorities are ramping
These improvements are expected to have a major impact
up underground ore production and development, as well
on the recovery side. “When we operated from an open
as focusing on organic growth opportunities around its
pit, heap leach standpoint, our recoveries for gold and
operations.
position,
with
working
capital
of
US$45.1
CANADIAN JUNIOR REVIVES CENTURIES OLD SILVER MINE It is no secret that junior
work on the property, but was lacking the required capital
exploration
to invest in any major drilling programs to expand their
companies
experienced a tumultuous
resource space. This is where Defiance comes in.
year in 2014. But while Defiance
Bruce Winfield, President and CEO of Defiance Silver
one
Mirroring the startup situations of most junior Canadian
such company, it retains
Silver
is
silver producers during the period between 2003 and
high
for
2005, Defiance is entering the historic site with the
the future, thanks to a
expectations
intention to apply capital and modern mining expertise
combination of the right
in order to exploit the resource. “Companies like Great
project, the right location,
Panther, First Majestic, Endeavor Silver, Impact Silver, and
and
support.
Scorpio Mining all followed this strategy, and we certainly
Defiance is engaged in the acquisition of advanced silver
the
right
plan to follow the same route,” states Winfield. “We
exploration projects in Mexico, and lists its principle asset
already have a resource of approximately 16 million ounces
as the San Acacio Mine, located in the historic Zacatecas
of silver indicated and inferred, and we see the ability to
silver district of central Mexico.
grow that resource with reasonable potential to reach the sum of 100 or 150 million ounces, although that is still to
San Acacio is a vein project that has produced over 100
be proven.” To enable Defiance to unlock San Acacio’s true
million ounces of silver during its 500-year production
potential, Winfield estimates that, on top of the 5,000m
history.
modern
drill program the company has already secured, it would
exploration, apart from a brief drilling program in the
It
has
also
undergone
almost
no
need another 15,000-20,000m to achieve that goal. He
mid-nineties, and has never been drilled below 200m in
continues by stressing how advanced the property is, as
any significant way. Essentially, San Acacio is in the same
well as highlighting the interesting facts about the Veta
situation that Capstone Mining’s Cozamin mine found
Grande vein. “Veta Grande is massive, the vein system
itself in during 2004. Cozamin was an older mine and mill
spans to a depth of approximately 335m and extends up
combination that Capstone brought back into production
to 5.6km along the strike on the San Ignacio complex.
as well as performing modern exploration to expand the
The historic operations covered 65% of the Veta Grande
resource space. “Capstone now carries that resource down
veins system which has produced over 200 million ounces
to 600m on the main vein and 1,000m on the footwall vein,”
of silver since it was first discovered in 1546. This is most
explains Bruce Winfield, President and CEO of Defiance
certainly not a grassroots property.”
Silver. “That is what we see in the future of San Acacio; a tremendous upside, both down dip and along straights.”
Of course, Winfield is aware that junior exploration is a tough environment to operate in, and is grateful for the
In 2013, Defiance had set its sights on getting the
financial and professional assistance that Defiance is
environmental impact assessment and land use change
receiving. “Fortunately for Defiance, the Windermere fund
permit for its San Acacio project. However, that December,
recognized that the San Acacio project was a major asset,
it decided to drop the option on a processing plant in
and their cash injection has been of great importance
order to concentrate fully on increasing the size of San
to the company. With that funding, we are now able to
Acacio’s resources. This change was coupled with a US$1
survive and carry out the work, but also to drill on the
million dollar finance deal with the Windermere fund in
property, which is exciting because not many juniors
March 2014. With that money, Defiance was able to acquire
are drilling at the moment.” In the near future, Defiance
surface rights over a good portion of the concession, as
plans to continue aggressively exploring the San Acacio
well as obtain a drilling permit. On the basis of those two
Mine and expand the current mineral resource to support
developments, the company started an initial 2,000m of
development of a large, modern silver mine. “Substantially
a permitted 5,000m drilling program in December 2014.
increasing the resources is the main goal,” states Winfield. “Once we reach a critical level of somewhere between 35-
Currently in an acquisition phase, San Acacio is available for
50 million ounces, we would also look at the possibility of
Defiance to purchase from the current owners, the Mesta
putting a mine into production, and even bringing the San
family. This family re-allocated the claims to San Acacio in
Acacio mine back into production if the mining climate is
the mid-1930s, after the project was shut down during the
appropriate. A resource like that would certainly support
Mexican revolution in 1910. The family successfully treated
a 1,000 t/d operation, which would produce in excess of 1
a series of surface dumps and performed some exceptional
million ounces of silver a year.”
229
SILVER COMPANY MOVES FROM EXPLORATION TO PRODUCTION The story behind Arian Silver’s presence in Mexico is a
that the company has since traversed 90% of it. However,
curious one. Founded by British geologist Jim Williams,
the vein was moved by a fault, so Arian Silver’s challenge
the company is wholly financed from the UK. However,
in the next phase of exploration will be to find the vein on
on the ground in Mexico, both at San José and Calicanto
the other side of the fault. Once discovered, Arian Silver
in Zacatecas, not one expat can be found. “Everything
expects it to potentially increase the vein by a further
is managed by an experienced Mexican team that has
three to 4km. At this point, even with such expansion
considerable background knowledge of different ore
potential, the company feels it has already built up its
bodies and deposits around Mexico,” says Miguel Barahona
resources. “We had to make the choice to either keep
Gutiérrez, Director of Arian Silver Mexico. “Our most
drilling and build up more resources, or start producing.
valuable asset is our HR. Our exceptional Mexican team is
Junior companies only reach the point of building up
well-suited to all the different tasks required to develop
their resources and then sell a project on to somebody
the project.” Although lauding the Mexican staff, Gutiérrez
else,” states Gutiérrez, adding that Arian Silver stands
still calls attention to the help provided by the company’s
out by actually putting resources into production. As the
founders. The British elements provide the capital and
company’s last completed drilling phase was in 2012, it is
the support that Arian Silver needs to operate in Mexico.
now busy extracting these resources.
Gutiérrez adds that his very close relationship with CEO Jim Williams, CFO Dean Friday, and other top executives,
Arian Silver’s mission statement states that it is seeking to
has allowed Arian Silver’s projects to reach the operation
create a silver mining arm that can produce a minimum of
stage, despite the geography gap.
2 million ounces of silver per year, a goal which will require steady growth; although doing so in the current economic
After Williams had spotted the opportunity to mine silver
climate for metals may prove difficult. However, Gutiérrez
in Zacatecas, the search for a worthwhile vein began in
refuses to worry about situations that are beyond his
earnest. The first project to be established was Calicanto,
control. “There are things we can control and others that we
which was made up of seven mining concessions
cannot. Arian Silver cannot control the prices of silver and
known as the Calicanto Group. Even though Arian
base metals, which means we must focus on controlling
Silver possessed another property close to a Capstone
the operational costs and our own efficiency. The only way
project in Zacatecas, the company wanted to avoid being
to stay in business is to be a low-cost producer.” For all
distracted from its current principal focus on its second
this confidence, it will be a real challenge for Arian Silver
property, San José. Systematic exploration of San José
to achieve this goal without knowing if silver prices will
began in 2006, with four phases of drilling performed
continue to drop. “We cannot wait for prices to go back to
one after the other to reach 30,000m. Full-blown mining
previous levels as we might be waiting for a long time only
then began in 2011, and a fifth phase of drilling, covering
for it never to happen.” According to the company director,
an additional 10,000m, is planned to better define
diversification is not an option for Arian Silver, so it will
the property’s resources. “Several aspects influenced
continue to place its efforts into setting up production at
the company’s decision to acquire San José,” explains
San José. Once the project is fully operational, he expects
Gutiérrez. “The first of these was its potential, as it had a
that it will enable the company to instigate more projects
wide vein with a length of 7km which could rise to 10km.
in Zacatecas down the line.
The property had already been explored in certain areas and the potential was clear.” He quips that the old saying ‘the best way to find a mine is to search where there was a previous mine’ was shown to be true at San José. Other advantages included that it is only 55km away from the city of Zacatecas, with an access route only 3km from a major highway. These logistical conveniences helped Arian Silver in its decision to install a plant near the mine. “Previously, we had to freight the mineral all the way back to Zacatecas. Having a plant in San José itself would save on that cost,” Gutiérrez points out. Another challenge has been dealing with the length of the silver vein. Prior to Arian Silver taking over the project, less than 1% of the vein had been explored, although Gutiérrez estimates
230
“We had to make the choice to either keep drilling and build up
more
producing.
resources, Junior
or
start
companies
only reach the point of building up their resources and then sell a project on to somebody else” Miguel Barahona Gutiérrez, Director of Arian Silver Mexico
LA NEGRA IS THE GIFT THAT KEEPS ON GIVING Aurcana Corporation (Aurcana) is a Canadian junior
operations due to a number of factors. Variables such as
mining company listed on the TSX Venture Exchange
equipment maintenance and downtime, the number of
with aspirations of becoming an emerging senior silver
working pit faces, ventilation and safety requirements, as
producer. To accomplish this goal, Aurcana is counting
well as the need to stockpile and blend different types
on two producing silver mines located in welcoming
of mineralization from up to 12 different zones, have all
mining jurisdictions, these being the Shafter silver project
contributed to the diverse range of results. Work at La
in Presidio County, southwest Texas, and La Negra in
Negra has also regularly found mineralization that was not
Queretaro. Aurcana’s Shafter property is made up of
included in resource estimates since 2007. This has seen
the historic Presidio Mine and the newer Shafter Silver
the company’s management team declare its intention to
mine, both of which are located at the eastern end of an
both pursue extensions of known mineralization, as well
11km long and 5km wide trend of lead, zinc, and silver
as explore new zones when mining conditions become
prospects. Gold Fields Mining acquired the Presidio Mine
more profitable. Historically, exploration performed at La
in 1977 and spent around US$20 million on exploration
Negra has resulted in the replacement and increase of
and development, during which time the Shafter deposit
mineral resources being extracted. These types of deposits
was discovered. In 1994, the project was acquired by
require extensive direct exploration by means of core
Rio Grande Mining Company, which was subsequently
drilling, cross-cutting, drifting and development workings,
acquired by Silver Standard in 2001. Aurcana then bought
all techniques that Aurcana is capable of utilizing. The
the Shafter Silver Project from Silver Standard in July
company has its own diamond drill rigs on site, as well as
2008, with a positive feasibility study being announced
an on-site laboratory for rapidly producing assay results.
in September 2010. The company then commenced an
Production at La Negra is achieved through the use of
18-month construction program before eventually placing
mine portals situated at the base of a mountain, but the
the operation on care and maintenance in December 2013.
mineral resources at the mine have been advanced with
This decision was based on a combination of declining
underground drilling.
silver prices and uncertainty surrounding the project’s mineral resources.
At the end of 2014, Aurcana issued an updated resource estimate for the La Negra mine. The estimate was based
The La Negra mine now represents Aurcana’s primary
on 14,578 assays comprised of 4,074 drillhole samples,
project, and is located 180km north of Mexico City in the
8,674 channel samples, and 1,829 longhole samples.
state of Queretaro. The district was discovered during the
These were obtained by Aurcana’s subsidiary, Minera La
colonial period when it was mined by the Spanish and
Negra, during the period of 2006 to 2014, and by Peñoles
Belgians throughout the 1800s. In modern times, La Negra
between 1967 and 2000. In summary, the estimate shows
was brought into commercial production by Peñoles in
12.9 million ounces of silver equivalent measured, and 9.7
1970 and continued to produce until the mine was put on
million ounces of silver equivalent indicated. Alongside
care and maintenance in 2000. During that time span, 6.6
this, a total of 54.2 million pounds of copper were found,
million metric tonnes of ore were processed which yielded
both measured and indicated, as well as 34.9 million
36 million metric ounces of silver, 323 million metric pounds
pounds of lead, and 160.4 million pounds of zinc. This
of zinc, 70 million metric pounds of copper, and 161 million
more complete information has shone more light on the
metric pound of lead. Aurcana bought La Negra in 2006,
potential within La Negra, allowing Aurcana’s management
with operations starting back up the following year. Today,
team to believe even more in the strong opportunities to
La Negra is recovering its former glory, producing silver,
develop new zones of mineralization at the mine. Even
copper, zinc, and lead in the form of a metal concentrate.
with such promising prospects, Aurcana experienced a
Aurcana’s careful management has considerably increased
loss in 2014, listing in its financial reports a total equity
production, reaching a total of 2.9 million ounces of silver
of US$44.4 million at the end of September 2014. This
equivalent in 2013.
is down considerably from the previous year when the company ended up with US$159.7 million in total equity.
Since 2007, the La Negra mill has been through three
The company’s cash and cash equivalents were also down,
consecutive processing capacity expansions. Starting
totaling US$1.69 million at the end of the third quarter of
at 1,000 t/d in 2007, the mill was expanded to 1,500 t/d
2014, as opposed to a previous total of US$41.7 million in
in June 2010, then to 2,500 t/d in April 2012, and finally
the same period of 2013. These differences highlight the
up to 3,000 t/d in April 2013. Production grades and
difficulties that silver producers face in these trying times
tonnages at La Negra have varied during the course of
of low commodity prices.
231
The use of copper, lead, zinc, and molybdenum is intrinsic in the creation of metallic alloys, but is also vital for strengthening the Mexican economy. On the one hand, the electrical conductivity of base metals, as well as their ductility and resistance to corrosion, make them very useful alloys, widely used in construction, transportation, and electro-industrial applications. On the other hand, a decrease in global demand for copper and base metals has led to short-term uncertainty in the base metals market. Despite these challenges, the demand for base metals is expected to increase to over 120 million tonnes by 2018. The production of copper accounts for 20% of the total mining and metallurgical production in Mexico, while base metal production amounts to over 30% of the country’s domestic production. This has allowed Mexico to become a top ten producer of bismuth, lead, molybdenum, zinc, and copper, among other important industrial minerals.
Providing detailed production highlights for copper, lead, zinc, and molybdenum in Mexico, this chapter places Mexico’s base metal industry in a global context. We investigate the country’s most important base metal projects, including recent expansions, and provide first-hand information on the latest developments in Mexican base metal projects. The chapter reveals the true identity of base metal operations in the country, some of which represent the largest in the Americas, and examines the main challenges that these mines are facing, along with their competitive advantages.
COPPER & BASE METALS
9
CHAPTER 9: COPPER & BASE METALS 236
Copper Mining Success Despite Financial Strife, Capstone Mining
238
MAP: Mexico’s Main Producing Copper Mines
240
TECHNOLOGY SPOTLIGHT: Bioleaching Provides Better Alternative to Copper Smelting
241
Economy of Hidalgo Mining Town Brought Back to Life, Carrizal Mining
242
Peñoles’ Diversified Portfolio Leads to Growth, Industrias Peñoles
244
Massive Expansion Plan Underway at Aranzazu, Aura Minerals
245
Australian Junior Finds its Raison D’Etre in Mexico, Azure Minerals
247
MINE SPOTLIGHT: Milpillas, Industrias Peñoles
248
Leaders in Lead Optimizing Guerrero Operations, Nyrstar
249
Merger Sees Canadian Operator Broaden Horizons, Scorpio Mining
250
Generating Molybdenum and Value for Mexico, Molymex
250
World’s Largest Fluorspar Mine has Far-Reaching Impact, Mexichem
251
Leading Manganese Supplier Surpasses Production Plans
253
CONSERVATION SPOTLIGHT: Mexican Grey Wolf, Grupo Mexico
254
Steel Wings to Strengthen National Industry, Altos Hornos de Mexico
255
Mining Involvement to Support Steel Production, Ternium
256
Longer Lasting Steel Products Make Compelling Case, Astralloy
257
Harder Steel Leads to Improved Productivity, SSAB
235
COPPER MINING SUCCESS DESPITE FINANCIAL STRIFE At a time when significant volatility plagues the precious
comments. “We now have another eight years ahead of
metals market, operating as a base metal oriented
us, as Cozamin’s lifespan is expected to run until 2022. We
company
have a new exploration program in place which we expect
has
helped
Capstone
Mining
(Capstone)
overcome these hard times, according to Manuel Estrada,
to be as successful as the previous one.”
the General Manager of its Cozamin Mine in Zacatecas.
236
However, he does not attribute Capstone’s resilience to its
Estrada sees Capstone’s improvement in efficiency as
focus on copper alone. “Obviously, continuously improving
being a particularly important aspect toward anchoring
our operations is a key technique that helps us to resist
Cozamin’s lengthened future. He explains that in order to
the market’s instability, although we still feel the impact of
make the most out of this extended presence in Zacatecas,
rising costs. Right now, this is the correct business for us,
Capstone is focusing on lowering costs and has positioned
and we intend to continue down this path,” he explains. So
itself to implement a long-term strategy with its vendors.
far, Cozamin’s production levels have backed up Estrada’s
Estrada knows that the geography of Cozamin provides
enthusiasm. After extracting 45.5 million pounds of copper
a lot of benefits. For example, Capstone does not need
in from Cozamin in 2013, Capstone decided to spend US$3
to maintain a camp at the location, nor does it need to
million on exploration at the site throughout 2014. Also in
fly people in and out, since the site is close enough to be
2013, an underground infill drilling program was completed
reached by road. Furthermore, Zacatecas’ position as a
to extend the mine’s life, enabling exploration in 2014 to
mining hotspot has peopled the area with plenty of skilled,
be focused on 10,000m of surface drilling. Capstone has
local workers, meaning that Capstone does not need to
seen a significant annual increase in reserves at Cozamin
create excess expenditure by hiring non-local personnel.
since it began commercial production in 2006. “Originally,
“Geography, plenty of local talent, and the efficiency of our
we only planned to be here for six to eight years,” Estrada
production have all played their part in forging Capstone’s
competitiveness. Our logistics infrastructure spreads to
consumption. “We are in the middle of the desert and we
nearby air and sea ports, and our energy supply is important
are competing for water with the Grupo Modelo brewery,
to maintain our low operational costs,” reveals Estrada.
the biggest in Latin America. The water we need is being transformed into Corona and then exported out of the
The principal obstacle lying in Capstone’s path is the
country,” explains Estrada.
introduction of the new mining royalty. Despite being confident about the mine’s continued financial viability,
Dealing with these challenges in Zacatecas has raised
Estrada admits that specific areas will certainly be
Capstone’s reputation within Zacatecas’s mining cluster,
impacted, such as local community development. “This
CLUSMIN, which Capstone helped to found. Estrada says that
new tax is to be applied to the social development of the
Capstone is actively participating within various CLUSMIN
community where the mine is located, so we would be
committees, which can be powerful tools for networking
paying double,” he remarks. Capstone’s existing program
and business. “We have a mill that is similar to one of the
will have to be integrated into this scheme, but Estrada
mills owned by Minera Frisco at the Tayahua mine, so we
laments the lack of clarity concerning what deductions the
are sharing spare parts with them. That relation started very
company can make under these new conditions. “The other
simply: they encountered a problem, we had the spare part
challenge is how to ensure that money reaches the local
they needed, they found out about it through the cluster,
community. The money collected will go to the Treasury,
and we helped them,” he states. While such relationships
but when it comes back, it might not impact the exact
existed prior to CLUSMIN, the body has created a formal
community where our mine is located. This means people
platform to share information, technology, and personnel
from that community will not be happy and will come to
development ideas. Another bonus is CLUSMIN’s ability to
us asking for their money. We are waiting to see how all of
bring new suppliers and commercial partners to Mexico.
this will evolve.” Other costs have also risen, such as fuel,
Capstone encouraged its partners to get in touch with the
water, and other supplies. Part of this rise has been driven
cluster and then open offices in the region. This allowed the
by demand within the mining industry but environmental
company to have access to technical support within a few
factors have also weighed in. For example, Capstone has
kilometers of the mine, instead of having to rely on support
had to learn to operate at a higher tonnage with less water
from bases as far flung as Canada or Germany.
237
| MEXICO’S MAIN PRODUCING COPPER MINES
1
6
2 3 4
5
7
8
10 9
11
12 13
SONORA 1.
Milpillas – Peñoles – Sonora
2.
María – Minera Frisco – Sonora
3.
Buenavista del Cobre – Grupo Mexico – Sonora
4.
La Caridad – Grupo Mexico – Sonora
5.
Piedras Verdes – Cobre de Mayo – Sonora
CHIHUAHUA 6.
Bismark – Peñoles – Chihuahua
7.
San Francisco del Oro – Minera Frisco – Chihuahua
8.
Santa Barbara – Grupo Mexico – Chihuahua
ZACATECAS 9.
Sabinas – Peñoles – Zacatecas
10. Tayahua – Minera Frisco – Zacatecas 11.
Aranzazú – Aura Minerals – Zacatecas
12. Francisco I. Madero – Peñoles – Zacatecas 13. Cozamin – Capstone Mining – Zacatecas SAN LUIS POTOSI 14. Charcas – Grupo Mexico – San Luis Potosi HIDALGO 15. Zimapan – Carrizal Mining – Hidalgo
238
14
15
239
| TECHNOLOGY SPOTLIGHT BIOLEACHING PROVIDES BETTER ALTERNATIVE TO
that facilitate the complex reactions involved. Heaps are
COPPER SMELTING
now widely used in the large-scale bioleaching of copper been
to process low-grade ores or as an alternative to smelting
interacting with minerals for as long as life has existed on
secondary copper minerals such as covellite and chalcosite.
earth. While some microbes dissolve minerals to feed off
More recent installations use tank reactors for copper
the energy released from the dissolution, others directly or
recovery as those designed and constructed by BacTech
indirectly aid in the precipitation of minerals through specific
Environmental Corporation.
By
Eduardo
Márquez
-
Micro-organisms
have
exothermic reactions. Certain strains of bacteria are even able to make insoluble minerals soluble. This latter reaction is
Though the process is relatively straightforward, the
the foundation for a process called bioleaching, which allows
successful
mining companies to treat insoluble sulfides and oxides
series of variables and parameters, including the strain of
via hydrometallurgy, as opposed to the more conventional
microorganisms used for the operation. Since particle ores
methods. Since copper sulfide minerals are almost insoluble
can differ considerably in their composition and component
in acids, metal recovery from such ores requires flotation
distribution, some of these materials may interfere with the
concentration followed by smelting at high temperatures
bioleaching process, thus inhibiting microbial activity or
and refinement by dissolution in acid and electrowinning. In
modifying the acidity of the system. This may in turn affect
smelting, sulfides are oxidized to SO2 and copper ions are
the rate and yield of copper extraction. Moreover, particles
reduced to the elemental metal. While smelting is limited
must be small enough to facilitate bioleaching kinetics but
by the amount of arsenic that base and precious metal
not so small that they decrease bed permeability and impair
concentrates can contain, and by a total tonnage limit
the circulation of the leach liquor. Tank reactors, on the other
that can be produced in a given year, bioleaching provides
hand, require particles to be of a certain size so that they may
solutions to these challenges.
be kept suspended by means of an agitator. Other variables
application
of
bioleaching
depends
on
a
that must be controlled include temperature, pH, Eh, oxygen Bioleaching makes use of naturally occurring bacteria
and CO2 content. Taking this in mind, a dump leach operation
which are harmless to both humans and the environment,
may take four or more years to produce results, while heap
to liberate precious and base metals from ore, concentrates,
leaching may take between five and ten months, and a stirred
and tailings that are otherwise difficult to treat. The bacteria
tank reactor may take less than a month.
are inoculated and allowed to grow within a dump, a heap, or a reactor, and then left to oxidize metal-containing
Bioleaching can also be applied to treat a variety of
sulfides. According to a study by the Pontificia Universidad
environmental problems. It can be used to treat acid mine
Católica de Valparaíso, the advantages of bioleaching
drainage through the contained oxidation of sulfides, which
include the use of simple and low cost equipment, low
are responsible for leaching toxic metals into surrounding
energy requirements, zero atmospheric contamination, and
areas. This method can also extract heavy metals from
the ability to treat low-grade or waste ores. On the other
sewage sludge, making their reuse on land less hazardous,
hand, its disadvantages include low reaction rates and
and to process tailings left behind by mining operations.
productivities, requirement of extensive grounds, and an inadequacy for treating primary sulfides. Bioleaching can be
After decades of research and pilot programs in different
particularly beneficial considering that the grade of copper
countries around the globe, Industrias Peñoles set the stage
ores is diminishing worldwide. Smelting of very low-grade
for the use of bioleaching in Mexico. In 2001, the company
ores, at 0.6% or less, is currently not economically viable.
contributed US$5 million to build a pilot plant in Monterrey
Moreover, arsenic trioxide gases are produced due to the
and test the technology’s ability to treat dirty or complex
heat from this process. Bioleaching, on the other hand, does
base metal concentrates. This test proved that bioleaching
not produce harmful gases and tolerates much higher levels
was able to neutralize tramp elements in the concentrates and
of arsenic, converting arsenic into the environmentally
eliminate costly transportation of concentrates to smelters.
benign ferric arsenate. Though bioleaching of copper has
Furthermore, Grupo Mexico has been funding a group of
always occurred naturally, the deliberate use of bacteria for
researchers from the Instituto Potosino de Investigación
modern extraction of metals dates back to the isolation and
Científica y Tecnológica to identify and isolate bacteria that
characterization of leaching bacteria done between 1947
participate in the leaching of copper. Through such initiatives,
and 1953. Early application of bioleaching of copper focused
bioleaching has the potential to become a trend in the Mexican
on the recovery from dumps, while currently the use of
mining industry as it has in other parts of the world.
heaps proves to be more effective, as heaps are intentionally designed and erected to create ideal operational conditions
240
Eduardo Márquez, Senior Editor of Mexico Mining Review
| VIEW FROM THE TOP
ECONOMY OF HIDALGO MINING TOWN BROUGHT BACK TO LIFE CARLOS SILVA RAMOS Director General of Carrizal Mining Q: What is the story behind the mine in Zimapan, Hidalgo,
with the legislation and maintain a healthy relationship
one of the country’s most important producers of copper,
with the communities. To this end, Carrizal Mining has a
zinc, and lead?
Clean Industry Certificate and we are currently working
A: Peñoles exploited most of Hidalgo’s mines for 35 years,
on obtaining an ESR certificate. Carrizal Mining has
halting in 2002. Subsequently, Grupo Trafugura restarted
always fulfilled its obligations, whether social, fiscal,
operations at Zimapan in 2004, making investments in
environmental, or those related to its employees and
exploration and infrastructure to increase the production
stakeholders.
plant’s capacity to 75,000 t/m. However, this group decided to shut down its operations in 2008 due to the
Q: How have fiscal impositions on mining activities
drop in metal prices. This deprived Zimapan of its main
affected your operations so far?
economic activity, leaving it to face difficult times in the
A: We work with marginal minerals, meaning that
following years. We took on the task of finding a way to
production can stop being profitable due to the company’s
make the exploitation of these mines feasible, in spite of
internal actions, or because of conditions in the external
having a marginal mineral reserve, by keeping production
environment, which are currently unfavorable. For example,
costs as low as possible. This led to the creation of Carrizal
silver accounts for 60% of our revenue, but in the past two
Mining, which was financed though Mexican capital,
years the price of this metal went from US$28 per ounce
and the mine began operations once again in 2010. We
to US$15. I do not need to explain what happens when the
currently produce 53,000 tonnes of minerals per month,
prices of our main source of revenue drop like this. In 2015,
and the best way to increase our revenues will be by
we will have to pay an additional tax of 0.5% of our 2014
growing our production to 60,000 tonnes by using the
silver revenues. This weakens our operational utility before
same resources and becoming more productive.
taxes, which is already impacted by the additional tax of 7.5% that we have to pay on our overall production. Since
Q: How has Carrizal Mining sought to develop Zimapan,
their financial condition is negatively affected, companies
beyond restarting former projects?
will find it difficult to find the necessary capital to reinvest
A: We began exploration activities in 2013 at Toliman,
in their operations. The mining industry requires significant
which is also in the Zimapan municipality. The objective
investment not just to grow but also to keep its operations
was to open a new area to increase production and
afloat. Our company has reinvested most of its revenues
create new jobs. However, following the drop in prices
for expansion purposes. However, investing is becoming
and other external conditions, we could not continue with
increasingly difficult due to a decrease in revenue. Carrizal
the exploration despite some drill holes showing another
Mining will continue relying on its expertise in the hopes
possible mineral body.
that the mining landscape improves.
Q: What impact have the operations at Zimapan had on
Q: How do you plan to allocate the US$2.5 million
the nearby communities?
financing that you requested from FIFOMI?
A: Carrizal Mining has had a very noticeable impact on
A: The decrease in utility resulting from the drop in metal
the municipality, and its activities have become crucial
prices has affected our reinvestment capacity. Many pieces
for the communities. We are responsible for the creation
of equipment in the mine and in the processing plant need
of 550 direct jobs and 1,800 indirect jobs. 10,000 people
to be upgraded because they are worn out or just old.
now depend on the company as around 80% of Zimapan’s
We will invest this capital to reach our production goals
economy come from the mining industry. The population
and increase our revenues. Ideally, we should maintain
is aware of the way the mining industry impacts their
production levels for the next three years, after which
economic activities, so people are very accepting and
we will once again upgrade our equipment to ensure
respectful. Similarly, mining companies must both comply
operational continuity.
241
PEÑOLES’ DIVERSIFIED PORTFOLIO LEADS TO GROWTH When talking about the Mexican mining industry, it is
Peñoles operates the Naica mine, which is famous for
inevitable that Industrias Peñoles (Peñoles) will be one
its wonderful cave filled with selenite crystals as well
of the first companies to be mentioned. The company
as producing lead, zinc, and silver. However, after major
dates back to 1887, when it was founded in Durango, and
flooding at Naica in January 2015, operations were
played an important role when the government increased
suspended, with engineers at the mine estimating it could
its efforts to position local firms in a foreign dominated
take five to six months to clear the water and resume
mining industry in 1961. The company has been listed
production. Brokerage firm Intercam has stated that
on the Mexican Stock Exchange since 1968. Peñoles is
Peñoles stands to lose MX$178 million pesos (US$11.96
currently the world’s largest producer of refined silver
million) for every 15 days the mine stays shut. However, a
and metallic bismuth, an important producer of refined
number of mines show the diversity in Peñoles’ production
zinc and sodium sulfate, and the Latin American leader in
strategy. Francisco I. Madero in Zacatecas is a producer of
the production of refined gold and lead. Peñoles’ mining
zinc, lead, silver and copper, while Milpillas, which began
division is dedicated to the extraction of gold, silver,
operations in 2006 in Sonora, was Peñoles’ first copper
lead, zinc, and copper in order to turn these minerals into
mine. Tizapa is a lead producer in the State of Mexico
concentrates and produce copper cathodes. 2008 was
while Sabinas and Velardeña are exploiting copper, lead,
an important point for Peñoles’ mining activities, as the
and zinc concentrates.
company restructured its mining operations by forming two divisions: precious metals and base metals. As part
In mid-2013, Peñoles resumed operations in its Velardeña
of this strategy, Fresnillo plc, the division in charge of
unit, which had been shut down four years prior. Works to
operating the famous Fresnillo mine in Zacatecas, as well
rebuild the plant started in 2010 and US$230 million were
as other precious metals projects, went public in Mexico
invested in this endeavor, positioning Velardeña as the
and London, while Peñoles retained base metals mining
second most important mine in Durango and one of the
activities. Fresnillo and Peñoles maintain close ties as both
top five mines for Peñoles industrial minerals operations
continue to belong to holding company Grupo BAL.
alongside Francisco I. Madero, Tizapa, Bismark, and Naica. In 2013, Velardeña’s crushing plant worked its way through
In the third quarter of 2014, Peñoles’ exploration division
1.16 million tonnes of materials, leading to a production of
drilled a total of 26,353m in Mexico, Peru, and Chile, reaching
41,197 tonnes of zinc, 1,761 tonnes of lead, 11,391kg of silver,
new zones and confirming the presence of minerals in
and 687 tonnes of copper. The mine has an estimated life
advanced projects. Geologic and geophysical studies
of 15-20 years, but exploration activities have given hope
were also performed in preparation for the drilling stage.
that this number could be surpassed if similar deposits
The group’s project at Ancash, in the Peruvian province of
are found in the Velardeña district. Peñoles also wants
Sihuas, is at the final stage of the exploration phase, making
to seize the opportunity this unit provides to implement
it likely that this country will become the home of Peñoles’
state-of-the-art technology and improve processes. The
first international extraction operations. As for domestic
most visually striking aspect of the Velardeña facility
exploration advancements in 2014, drilling operations in La
is its dome used for grinding and storing. It was built to
Industria, close to the Velardeña mine in Durango, identified
prevent the migration of minerals and fine materials into
a series of veins that could be added to the mining unit. A
the environment and to safeguard the materials from the
preliminary estimate infers resources of 3.3 metric tonnes
rain. This is an innovative structure, as although it has been
of lead, silver, and zinc. Furthermore, after a preliminary
widely deployed in cement factories, such domes are not
study of the Los Humos copper and molybdenum project
common at mining sites. Solar panels can also be found
in Sonora, it was determined that more metallurgic
on the roof of the dressing rooms so that processes like
information was needed. This sees Los Humos currently
water heating can be carried out using renewable energy.
undergoing an extensive sampling campaign. Exploratory
Similarly, several water treatment plants allow recycled
drilling activities are also taking place at Milpillas in Sonora
water to be used for certain industrial processes instead
in hopes of increasing reserves. The results obtained during
of tapping up the local supply. Such environmental
the last trimester of 2014 show an extension of the primary
measures extend to the tailings dam, where a reforestation
Milpa Profundo body. An estimate of the resources will be
program was carried out as a measure to prevent damage
published once this campaign is finished.
to the ecosystem. Such programs led to the company being chosen to be part of the first sustainability IPC at
242
Peñoles currently operates seven mines, excluding those
the Mexican Stock Exchange in 2011, which also granted
that are operated by Fresnillo. In the state of Chihuahua,
Peñoles a Sustainable Enterprise award.
Peñoles’ metallurgy division changed its strategy in
unit in this division is probably Quimica del Rey. In spite
late 2013, when the company merged its Met-Mex and
of the obstacles the mining industry has faced in recent
Aleazin subsidiaries, forming Metalúrica Met-Mex Peñoles
years, Peñoles made a major investment of US$500 million
to integrate its refining and alloying activities. Met-Mex
in Coahuila, of which US$230 million was destined to
Peñoles is a non-ferrous metallurgical complex that
expanding the Química del Rey plant. This facility produces
produces refined silver and metallic bismuth. It consists
sodium sulfate, the base component in detergents,
of two circuits, the first one consisting of a lead-silver
and magnesium oxide used in fire bricks. Its national
refinery where lead and silver concentrates are processed
importance is evident in the fact that 9kg of every 10kg
to produce lead bars, and a silver-lead refinery where
of sodium sulfate used to make detergent in Mexico come
materials rich in precious metals are processed to produce
from this plant. Química del Rey now ranks among the five
gold, silver, lead, and bismuth, among others. The Met-Mex
largest sodium sulfate producing facilities in the world, and
industrial complex processes the majority of the zinc and
might jump two or three positions up the rankings once it
lead ores produced in Mexico and is the largest producer
operates at full capacity. A few months prior to beginning
of silver in the world, the largest producer of zinc in Latin
its expanded operations, the modified plant had an annual
America, and Mexico’s most important producer of gold
production capacity of 630,000 tonnes of sodium sulfate.
and lead. It has an installed capacity for lead smelting
At the end of 2013, with improvements that were already in
of 180,000 t/y, of which only 77% was used in 2013. The
place, production reached 670,000 tonnes and will top out
lead-silver refinery also has a capacity of 180,000 t/y and
at 780,000 t/y once it reaches full capacity.
produces an annual average of 118 million ounces of silver, 1.9 million ounces of gold, and 1,440 tonnes of bismuth.
As for most mining companies, 2014 was a challenging
The Aleazin plant in Ramos Arizpe, Coahuila, produces
year for Peñoles in financial terms. The value of the Mexican
zinc alloys, and Peñoles also runs the Bermejillo facility
peso against the US dollar did make the mining group
in Durango, which processes byproducts obtained from
more cost-competitive, especially considering that 80%
metallurgic operations to produce copper sulfate, zinc
of its sales are made in dollars. However, the company’s
sulfate, and antimony trioxide.
financing is done in US dollars, increasing its debt. On the upside, Peñoles reported an EBITDA of MX$4.16 billion in
Peñoles is also involved in the chemical industry with
the third quarter of 2014, a 10.9% year on year increase due
the production and commercialization of sodium sulfate,
to larger sales volumes in silver, copper, and zinc, as well as
magnesium oxide, magnesium sulfate, and ammonium
lower extraction costs. These factors ultimately mitigated
sulfate. Industrias Magnelec deals with magnesite chemical
the drop in international metal prices since Peñoles’ sales
and Fertirey processes sulfuric acid. The most important
amounted to MX$15.5 billion.
TRUE RELIABILITY & UNPARALLELED ROI
243
www.eriez.mx
| VIEW FROM THE TOP
MASSIVE EXPANSION PLAN UNDERWAY AT ARANZAZU AGNE AHLENIUS General Manager of Aranzazu Mine, Aura Minerals Q: What condition was the Aranzazu mine in when it was
to produce a copper concentrate. We already have
acquired by Aura Minerals in 2008?
sufficient capacity in crushing, so we do not need major
A: When Aura Minerals acquired the Aranzazu copper-gold-
modifications in this area, but we do need an additional
silver mine in Zacatecas in 2008, it was already a producing
ball mill to boost our grinding and flotation capacity.
mine but it had to be put on care and maintenance in 2009.
These areas will mainly be upgraded outside the existing
We found that the ore body had not been well investigated
buildings so they do not impact our current production
in the past so we used this chance to carry out better
and capacity. By remaining at full production while we
exploration. This went on for about a year while some
build the expansion, we will be able to optimize our cash
upgrades were made to the plant, after which, production
flow and operational costs. Part of the expansion will
was restarted to reach the level it is at now. Aranzazu is
also involve an arsenic roasting process, which is not a
located in a very interesting mining area, which has simply
commonly used process in Mexico. This roaster treats the
been badly explored. For example, Minera Tayahua, which
valuable copper concentrate in order to separate it from
is owned by Minera Frisco, operates on the other side of a
the arsenic. Our ore body is peculiar as it has a fairly high
mountain in the same geological zone. Our company sees
arsenic content, which will only increase in the future as we
huge potential in this area as, even by just considering our
go deeper and encounter new ore bodies. Harnessing this
own investigations which have gone to a depth of around
roasting technology will therefore improve our long-term
300m, it is an enormous ore body. This gives us up to 15 years
viability as the arsenic levels increase.
of production at an increased production level of 4,500 t/d. We know that the ore body plunges down even deeper but
Q: What technologies and innovations is Aura Minerals
we have not yet performed full investigation and exploration.
investing in to maximize the efficiency of its operations
This makes it highly feasible for the operation to be viable
at Aranzazu?
for a much longer period of time than currently planned for.
A: At Aranzazu, we plan to use paste backfilling technologies. We will be using 50% of the tailings,
Q: Aranzazu includes plans for both open-pit and
mixing them with cement, and injecting them into the
underground mines. How has this affected the overall
underground mine to backfill the mined out voids. This has
design of the mine site, and what operational challenges
many positive effects, such as reducing the environmental
has this posed?
footprint of the tailings dam on the surface, and allowing
A: When production was restarted in 2010, a decision was
us to backfill the mined out stopes so we can safely extract
made to temporarily run part of the production from an
almost 100% of the resources.
open pit. This is just until the underground mine is ready for increased production in 2014. The open pit will be finished
Q: What will be the priorities for Aranzazu’s development
by the end of 2014 when 100% of the production will
over the coming years?
come from underground mining. This decision was taken
A: Our objectives are straightforward. It is very important
because of the ore body’s geometry. It is extremely deep
for us to complete the expansion from 2,600 to 4,500 t/d,
and cannot be mined in an open pit due to the surrounding
which will generate sufficient cash flow to provide us with
mountains, as well as the village of Concepcion del Oro
a base for steady, long-term strategic growth. Our plan is
where most of our workforce live.
to reach the increased production level of 4,500 t/d by late 2015, which will mean we have fully tapped into the area’s
244
Q: You plan to upgrade the mine’s mill from 2,600 to
huge exploration potential. We will then have the potential
4,500 t/d. When will this stage be completed and how
to increase the extraction of resources in the close vicinity of
will it improve operational processes at Aranzazu?
Concepcion del Oro. Parallel to this, we will continue looking
A: The process plant in Aranzazu is fairly simple as it takes
for other projects, particularly those that are fairly close to
care of crushing, grinding, milling, flotation, and filtering
beginning operations rather than pure greenfield projects.
| VIEW FROM THE TOP
AUSTRALIAN JUNIOR FINDS ITS RAISON D’ETRE IN MEXICO TONY ROVIRA Managing Director and CEO of Azure Minerals Q: How did Azure Minerals become fully Mexico-focused,
mines, while we are very comfortable with going further
given its Australian origins?
away and exploring in areas where no one else has looked.
A: Azure Minerals was formed about ten years ago
We use a lot of geophysics during grassroots exploration
under the name Nickel Australia, as it focused on nickel
such as magnetics, gravity, IP surveys, and other electrical
exploration work in Australia. After about three years
conductivity methods. With these techniques, we can put
of nickel exploration, we decided to expand into other
together a picture of what the subsurface looks like and then
commodities and other regions since it became difficult and
use these findings to start deep drilling in the areas with the
expensive to find new projects. We started looking at Latin
most potential. These technologies are available in Mexico
America, first in Chile and Argentina, and then found several
but are not used as much here as they are in Australia.
viable projects in Mexico which we decided to acquire. We now have six properties in Mexico: four in Sonora, one in
Q: Which of your Mexican projects is closest to becoming
Chihuahua, and one in Baja California. One of the great things
a mine?
about Mexico is that it has 500 years of mining history. The
A: Our flagship project is called Promontorio, located on
local population, the local businesses, and the government
the eastern flank of the Sierra Madre in Chihuahua. We
officials all understand the benefits that the industry brings
have identified significant high-grade copper-gold-silver
to the community. Argentina is not as pro-mining as Mexico
resources in one area and have carried out a prefeasibility
and Chile is already saturated with many other companies.
study there. The study demonstrated that a mine would
Besides, Mexico has just as much prospecting and mining
operate profitably. It is not a large deposit but it is very
potential as Chile does. From our point of view, being
high grade, with a low CAPEX necessary to bring it into
one of the few Australian mining companies in Mexico is
production, a high return on investment, and a small
positive since we approach exploration differently, giving us
environmental footprint. If we can finish the feasibility
significant opportunities ahead of our competitors.
studies within the next 12 months, Promontorio could be in production within the next two to three years. More
Q: What is unique about the Australian approach to
recently, in 2013, we discovered another high-grade copper-
exploration?
gold-silver deposit 300m away from Promontorio called
A: We are very good at exploring in areas which are under
Cascada. Drilling indicates that the resources at Cascada
cover and have no outcropping rocks. In Australia, a large
could be four or five times bigger than at Promontorio. This
part of the country is desert with no visible rock formations
is an area that is very exciting because of its potential for
sticking out of the ground. We are experienced in defining
high grade copper deposits. Additionally, the Promontorio
large ore bodies using remote sensing techniques and deep
property is surrounded by numerous drilling targets in a
drilling. Under my leadership, Jubilee Mines discovered
larger concession which is 100% owned by Azure Minerals.
and developed the Cosmos nickel sulfide mine in Western Australia. Buried under a sandy desert, Cosmos was one of
Q: Azure Minerals entered into a joint venture for La
the highest grade nickel mines in the world. Here in Mexico,
Tortuga with JOGMEC. To what extent are JVs a preferable
we can use similar technologies that we developed in
source of funding for Azure Minerals?
Australia to explore where there are no outcrops, no visible
A: The joint venture at the La Tortuga copper project
surface mineralization, and no evidence of historical mining.
has been operating for six years now. The JOGMEC organization has so far funded about US$6 million of
Q: To what extent is Azure Minerals performing grassroots
exploration expenditure. JVs are good for us since we are a
exploration?
relatively small company with limited funding. We prefer to
A: Grassroots exploration represents some of our work in
spend our funds on the development of small, high-grade
areas of the Sonora desert which is flat with no outcrops.
ore bodies that will be easy to mine and easy to process
Canadian companies tend to explore in the vicinity of existing
with a good return on investment.
245
246
| MINE SPOTLIGHT
MILPILLAS Located in the state of Sonora in the municipality of Santa Cruz, the mine of Milpillas saw the light in 1998. In that year, Industrias Peùoles acquired Rancho Milpillas to start a joint exploration project with CODELCO the following year. More than 100,000m of test drilling established that underground mining would be economically feasible in combination with the on-site operation of a large copper solvent extraction (SX) plant. The Milpillas Copper Project was launched in 2001, but it did not reach commercial production of high-purity copper cathodes until 2006 after an investment of US$242.2 million. 2009 marked a bumper year for Milpillas, as a new overflow pool was built to increase water retention capacity while the expansion of the mine’s leach pads was begun, and a radial stacking conveyor was installed on one of them. Today, the Milpillas mining unit consists of some of the biggest heap leaching pads in Mexico and a specially designed electrolyte plant to produce copper cathodes. The operation has an installed capacity of 45,000 tonnes of copper cathodes per year, although only 51% of its capacity is currently being used. In 2013, Milpillas milled over 22.3 million tonnes of minerals in order to produce 22,814 tonnes of copper cathodes. The mine currently has an expected lifespan of 15 years, while ore reserves are estimated at 388,000 tonnes. The Milpillas deposit, located in an extensional zone called Cuitaca Graben, which is covered mostly by Tertiary gravels and Quaternary alluviums. Only very scarce outcrops, which show altered and oxidized volcanic rocks, give evidence of the deeply buried deposits. The host bodies are volcanoclastic rocks from the Jurassic Henrietta formation as well as from the Laramide Mesa formation. The Milpillas mine exploits a partially oxidized porphyry copper deposit with a series of alternating copper carbonate-oxide and chalcocite enrichment blanket developed on top of low grade primary chalcopyrite-bornite mineralization.
247
LEADERS IN LEAD OPTIMIZING GUERRERO OPERATIONS Originating from a 2007 merger between Australian
amounts of zinc and copper, as well as gold and silver.
mining
materials
The production capacity of Campo Morado is currently at
technology company Umicore, Nyrstar has become one
2,200 t/d, but Nyrstar believes that the mine possesses
of the leading integrated metals and mining companies
significant exploration potential. Since taking control of
worldwide. It possesses prominent market positions in
Campo Morado, the company has focused the majority of
zinc and lead, as well as in the development of other base
its exploration activities on an accelerated in-fill drilling
and precious metals. With smelting, mining, and other
program in order to extend any known mineral deposits.
operations located in Europe, China, Australia, and the
Once these activities are complete, Campo Morado
Americas, Nyrstar has an established global presence and
could increase its production capacity by a considerable
employs over 7,000 people. Notably, Nyrstar is one of the
amount.
company
Zinifex
and
Belgian
largest primary lead smelting and refining companies in the world. The company produces lead concentrate and
Toward the end of 2014, Nyrstar settled an existing silver
refined market lead, over half of which comes from scrap.
streaming agreement with Silver Wheaton. Previously,
In addition to mining and lead production, Nyrstar also
75% of Campo Morado’s Silver production was delivered
recovers sulfur during its processes. This sulfur is used
to Silver Wheaton at approximately one quarter of the
to produce a significant quantity of high-purity sulfuric
market price. This deal was ended on 31 December, 2014.
acid. This chemical has become a vital commodity in any
Nyrstar agreed to make a payment of US$25 million to
modern economy, with its consumption rate representing
Silver Wheaton by 31 January, 2015, as well as granting
a reliable gauge for a nation’s prosperity. The chemical
the company a five year right of first refusal on any silver
is an essential ingredient in the production of many
streaming transaction at any of Nyrstar’s properties.
products,
including
fertilizers,
fibers,
paint,
rubber,
plastics, steel, detergents, and medicines, and can even
While
be found in many beers and soft drinks. One of its more
successful during 2014, the year still offered up its share of
specialized uses is in the production of high-strength
problems for Nyrstar. On November 13, 2014, mining and
fibers for use in bulletproof vests and yacht sails. Nyrstar
milling activities at the mine were suspended for two weeks
produces hundreds of thousands of tonnes of sulfuric
due to a blockade by the CTM Trade Union. Nyrstar declared
acid at its global locations every year.
that the blockage by union activists was illegal as it was
production
at
Campo
Morado
was
relatively
“preventing all mining and milling activities.” As a result of Whilst Nyrstar is a relatively young company, most of
this interruption, Nyrstar evacuated all employees from the
its operations have a rich mining history. The company’s
site for their own safety, although allowing work to continue
current projects are scattered across five continents
on areas such as as site maintenance, environmental
and include nine mining operations and seven metals
safeguards, and site security. Despite this reaction, Nyrstar
processing operations. Located in Guerrero, the Campo
forged ahead with negotiations with both the local and
Morado mine is comprised of approximately 12,000
federal chapters of CTM to bring the matter to a swift close.
hectares across six mining concessions, and lies around
The blockade ended up lasting from November 13 to 28
160km south-southwest of Mexico City in the municipality
before discussions were successful and the union ended
of Arcelia. Discovered in 1885, Campo Morado has
its protest. Nyrstar warned that this shutdown would have
extensive historical significance in Mexico as it was a
an impact on production volumes for the fourth quarter of
key provider of metal for coinage during the Mexican
the year, to the tune of approximately 2,000 tonnes of zinc
revolution. Nowadays, some of the mineral deposits that
concentrate. However, the mine’s production returned to
are being mined at Campo Morado are comprised of high
pre-blockade levels in only a few days.
grade zinc, copper, lead, gold and silver, particularly the G-9 deposit which has been at the commercial production
Besides this example of unrest, Guerrero itself also
stage since April 2009. There are also three additional ore
experienced particular civil strife in 2014, making the
bodies which have since been identified, namely Reforma,
state a unique and challenging place in which to operate.
El Rey, and Naranjo.
While unfortunate local events have not directly affected Campo Morado, the situation highlighted the tension
248
Nyrstar gained ownership of Campo Morado in January
and the potential obstacles that mining companies could
2011, when it acquired then owner Farallon Mining. Nyrstar
face in Guerrero. Nevertheless, given the state’s mining
has recently placed Campo Morado in a process of
background, companies like Nyrstar continue to believe in
operation optimization, helping it to produce significant
its potential.
MERGER SEES CANADIAN OPERATOR BROADEN HORIZONS While the head office for Scorpio Mining Corporation
Frisco’s San Francisco deposit. However, due to its large
(Scorpio) is based in Toronto, this Canadian silver producer
land holdings, and the potential for unearthing more
is focused almost entirely on Mexican mines. The Nuestra
valuable deposits, Scorpio’s main opportunity for growth
Señora Mine, which Scorpio owns 100%, is situated in
lies within the Cosalá District. Toward the end of 2014,
the Cosalá District of Sinaloa and has adopted flexible
Scorpio announced the completion of a purchase option
mining methods in order to diversify its metal production.
agreement for the Cosalá 2 concession. The preliminary
It has a fully mechanized underground operation and a
mapping and sampling of the concession has indicated
processing facility with a capacity of around 1,500 t/d,
several areas of similar geology to the Nuestra Señora
but this facility already has permits in place to expand its
deposit. The Cosalá 2 concession covers 305 hectares
capacity to 4,000 t/d. The plant produces zinc, copper,
and borders on the same land package as Nuestra Señora
and lead concentrates, but silver contributes around 50%
mine and the historical Candelaria mine. Logically, the
of the mine’s revenue. Production from the Nuestra Señora
company expects this area to hold high potential for the
operations totaled 573,224 silver equivalent ounces in the
discovery of additional resources.
third quarter of 2014. Even so, it was the second quarter of 2014 that held the historic record for the company,
2014 saw the merger of Scorpio with U.S. Silver & Gold,
producing around 10.9% more throughput than the third
which is the second largest primary silver producer
quarter Nevertheless, copper and lead production were
in the US, with a current expected annual rate of silver
higher in the third quarter due to higher head grades and
production of 1.65-1.75 million ounces. The company owns
recovery factors. Scorpio intends to maintain the plant’s
and operates the Galena Mine Complex in the heart of
ore production at its current levels by providing it with
the Silver Valley/Coeur d’Alene Mining District, Shoshone
material mined from both the Nuestra Señora Mine and the
County, Idaho, which produces high-grade silver and
La Verde Mine. The El Cajón silver-copper-gold deposit,
is the second most prolific silver mine in the country’s
located approximately 14km from the existing Nuestra
history, delivering over 250 million ounces to date. U.S.
Señora processing facility, is expected to become a new
Silver & Gold also owns the Drumlummon Mine Complex
regular source of plant feed, with its importance increasing
in Lewis and Clark County, Montana. Following a merger
during its ramping up phase in the first two quarters of
estimated at US$55 million, the combined company
2015, eventually displacing Nuestra Señora as the main
maintains the name of Scorpio Mining Corporation and
source. El Cajón is a complex silver-copper-gold skarn
will run the Nuestra Señora mine in Sinaloa and the
deposit hosted in calcareous sedimentary rocks which
Galena Complex in Idaho for a combined production of
are in contact with a granodiorite intrusion. Mineralization
4.5-5 million ounces of silver equivalent. This merger
is primarily chalcopyrite and tetrahedrite with lesser
largely exemplifies how such a deal can be structured to
amounts of sphalerite and galena, but also numerous
create a larger yet more efficient company while avoiding
ruby silver minerals. In order to provide access to the
common issues such as financial waste and disagreements
upper production stopes in El Cajón, Scorpio performed
between the two boards. This merger is expected to save
underground development work at the site during late
US$1.6-2.5 million dollars by eliminating overlapping
2014. After two additional quarters for ramping up mining
general and administrative costs. Furthermore, U.S. Silver
activities, El Cajón is expected to operate at an expected
and Gold has been hailed for reducing its all-in sustaining
1,500 t/d.
cash costs at Galena by close to 50% in two years through strict cost control and productivity enhancement
Scorpio Mining has holdings of approximately 26,819
methods.
hectares in the Cosalá District, which covers numerous advanced deposits, exploration targets, and historic
Overall, the newly formed company will save US$1.6-2.5
producing
mineralization
million dollars a year by doing away with overlapping
are present in the district, including low- and high-
mines.
Multiple
types
of
general and administrative costs. “This merger creates a
sulphide silver, zinc, copper, lead, and gold, as well as
stronger, better positioned company that is capable of not
silver-gold stockworks, porphyry copper, magnetite,
only surviving the current low silver price environment,
and wollastonite. Outside of Cosalá, Scorpio holds two
but potentially transitioning from a junior precious metals
high-grade silver properties in the Parral District called
company to an intermediate producer over the next couple
La Revancha and Tepozan. The Parral district is host to
of years,” stated Darren Blasutti, the former President and
several past and currently producing mines, including
CEO of U.S. Silver & Gold, who now takes on the same role
Grupo Mexico’s Santa Barbara deposit and Minera
in the new version of Scorpio Mining.
249
GENERATING MOLYBDENUM AND VALUE FOR MEXICO It is no small accomplishment to hold more than 30% of
units focuses on buying molybdenum concentrates, such
the world’s processing capacity for molybdenum and 70%
as molybdenite, and using its own technology for treating
for rhenium, yet Chilean corporation Molibdneos y Metales
and processing these concentrates to produce a wide
(Molymet) currently does so. As a corporation, Molymet
variety of products, ranging from molybdenum oxide to
focuses on the treatment and processing of molybdenum
pure products. Tolling focuses on processing molybdenite
and related products. Its Mexican branch, Molymex, operates
from other companies for a fee, while the Byproducts
a molybdenum processing plant in Cumpas, Sonora.
unit focuses on recovering byproducts such as rhenium,
According to the International Molybdenum Association,
copper cathodes, and sulfuric acid, which result from the
59% of the total mined ore of this metal is used for the
roasting and oxidation process to which molybdenum is
creation of molybdenum grade alloy steels and irons, mostly
subjected. The Efficiencies unit is dedicated to applying its
as construction steel. Molybdenum significantly increases the
proprietary technology to reduce metallurgic losses and
hardness and durability of steels, increases high temperature
achieve metallurgic earnings in its processes. Finally, its
and corrosion resistance, and improves machinery efficiency.
Rare Earth operations are channelized through Molycorp.
About 22% of the mined molybdenum is used for creating stainless steel, while the rest is used for cast iron, superalloys,
In 2013, the total production of molybdenum oxide by
fertilizers, catalysts, or for chemicals. Rhenium, on the other
Molymet reached 151.2 million pounds, with 28.3 million
hand, is a transition metal rarely found in nature, mainly used
pounds coming in from its plant in Mexico. During this
as a catalyst and in superalloys. With such a broad range of
year, Molymex saw greater stability in its productive
uses, it is no surprise that Molymet has invested over US$245
processes and an increase in the operating time of its
million to ramp up and diversify production at its Sonora
installations; this led its Mexico plant to finish the year
facilities since it bought them.
with net earnings of US$8 million. Furthermore, in 2013, Molymet completed its fifth and sixth bond issuance in the
Molymex began operations in May 1979 and was wholly
Mexican bond market, amounting to US$158 million. The
acquired by Molymet in June 1994, marking the beginning
capital was raised to refinance the debt of the company
of the latter’s globalization process. Molymex has been in
expiring in mid-2013 and to add to the company’s working
full production and commercial operations since 1995. The
capital. These issuances are in line with the company’s
Sonora office and plant are not only located in the most
policy to maintain available lines of credit and its strategy
important mining state in the country, they also provide
to diversify its sources of financing. Moreover, in 2013,
direct access to the US market. The plant’s installed roasting
Molymet invested in the replacement of its dust collector at
capacity is 30 million pounds of molybdenum a year. The
its homogenization silo, the replacement of its continuous
company’s main business units are Own Sales, Tolling,
emission analyzer, and the acquisition of solar panels,
Byproducts, Efficiencies, and Rare Earths. The Own Sales
among other investments, at its Mexico plant.
WORLD’S LARGEST FLUORSPAR MINE HAS FAR-REACHING IMPACT The name Mexichem is far more associated with the chemical
raw materials it extracts, namely salt and fluorite. Although
and petrochemical industries than with mining. With annual
the company itself is not a core part of Mexico’s mining
sales in excess of US$5.2 billion in 2013, Mexichem is a known
landscape, its business model shows a diversity in the
brand in industries as diverse as construction, infrastructure,
country’s geological resources that is not often explored.
transportation, sanitation, and healthcare. Furthermore, with
With silver, gold, copper, and iron dominating reports,
102 production plants and eight R&D labs around the world,
Mexichem relies on a fluorite and a salt mine to impact
its two mines may seem like a side business. This would
dozens of industries through thousands of products. The
be selling them short as Mexichem’s mining sites are the
raw product, fluorspar, extracted from the Las Cuevas mine
foundation for its raw material supply.
in San Luis Potosi can be used directly to manufacture hydrofluoric acid, while also being a raw material for the
250
The core of Mexichem’s business is to develop advanced
making of glass, steel, cement, and ceramics. Hydrofluoric
technologies in a wide range of industries from the two
acid itself then goes on to be used in a wide range of
LEADING MANGANESE SUPPLIER SURPASSES PRODUCTION PLANS Manganese is a hard, brittle, silvery metal mainly used in
is specialized in the production and commercialization
alloys such as steel. When added to such alloys, manganese
of a variety of manganese minerals and ferroalloys. It
increases their strength while improving their workability and
began operations in the municipality of Autlan in Hidalgo
resistance to wear and tear. Manganese steel, which is used
and sees its core markets as being the iron and steel,
to make railway tracks, safes, rifle barrels, and prison bars,
dry battery, ceramic, animal micronutrients, and fertilizer
usually contains about 13% manganese and displays extreme
markets. Minera Autlan operates three mining divisions,
toughness. Moreover, typical soda cans of are made out of
three ferroalloy-producing plants, and owns a port for
an aluminum alloy, containing 1.5% manganese, to improve
its import and export operations. While the company’s
resistance to corrosion. Manganese (IV) oxide can be used
headquarters are in San Pedro Garza García, Nuevo Leon,
as a catalyst or a rubber additive, while manganese sulfate is
it also supports its clients through its office in Mexico City
used to make a fungicide. Manganese (II) oxide, on the other
and its warehouse in Monterrey.
hand, is used to make fertilizers and ceramics. Many types of enzymes contain this element, making it essential for
Minera Autlan’s current strategy is based on a five
organisms. Without manganese, water molecules could not
year business plan which includes projects related to
be converted into oxygen during photosynthesis and bones
manganese and its derivatives, energy, and other products
would grow spongier and break more easily. This is also why
it currently commercializes. Moreover, Minera Autlan is
it has become an essential food supplement for grazing
the only company in the world that produces manganese
animals and is indispensable in our daily diets. Manganese is
nodules, setting a production record of 464,000 tonnes
the fifth most abundant metal in the earth’s crust. The most
of manganese nodules in 2013 despite the natural gas
concentrated manganese deposits are found in the ocean
deficit in Mexico and the occurrence of Hurricane Ingrid.
floor as manganese nodules, though the element is mined all
Recently, the company has invested in robotic equipment
over the world, mainly in China, Africa, Australia, and Gabon.
and in wet shotcrete transportation technology to increase
In 2013, Mexico occupied 10th place in global manganese
the productivity of its Molango underground mine. In its
production, accounting for 1.18% of the total manganese
Nonoalco and Naopa units, Minera Autlan exceeded its
produced worldwide. In the first ten months of 2014, the
production plans for 2013. Its Naopa unit also surpassed
country produced 192,144 tonnes of manganese, already
expectations in terms of manganese carbonate production
surpassing the total mined in the entirety of 2012. Most of the
and was able to move 10.6 million tonnes of topsoil to
manganese production in Mexico comes from the Molango
expand the production at this unit. At its Tamós plant,
deposits in Hidalgo which were discovered in 1960 and first
Minera Autlan built a new crucible for its tenth oven with
put into production by the leading manganese producing
freeze lining technology to help improve productivity,
company in the country: Minera Autlan. The company was
following on from its Teziutlán and Gómez Palacio plants
formed as part of Grupo FerroMinero (GFM) in 1953 and
both breaking their production records that year.
industrial applications, ranging from refrigerant gases and
to Mexichem operations. In recent years, the pace of
stainless steel to being used in the uranium enrichment
Mexichem’s growth has made it take measures to shore up
process necessary to produce nuclear fuel. Other products
its base and ensure that the pace of mining accelerates.
derived from fluorspar, such as fluorocarbons, are felt in
This modernization process has made Las Cuevas one of
the fluoride present in toothpaste, lithium salt in batteries,
most productive mines in Mexico, with double digit leaps
or in the refrigerants present in air conditioners.
in production annually. It marks a big change in a mine that has been operated since the 1950s but was late to find its
The Las Cuevas mine, located just to the southeast of San
productive footing. Unlike dedicated mining companies
Luis Potosi, is the largest fluorite mine in the world, reaching
that may run one or more projects looking for maximum
a high grade of fluorite ranging between 73-95%. The mine
extraction and profitability, Mexichem runs its mine with
was certainly a glorious find for the needs of Mexichem,
different aims in mind. Mexichem’s vertically integrated
since it is riddled with orebodies, running from 300-800m
fluorite supply chain sees it able to handle the processing
in length, with thicknesses of up to 500m. The company
of all the 350,000 tonnes of metspar and 280,000 tonnes
has so far outlined nine orebodies, named A through H
of acidspar produced annually by Las Cuevas. On top of
and Myke. The first four of these have been mined, with
that, the company also sits on other high-purity fluorspar
the G orebody currently the main contributor of fluorspar
deposits in Coahuila.
251
| CONSERVATION SPOTLIGHT
MEXICAN GREY WOLF Few
people
know
that
Grupo
Mexico
has
undertaken
a
comprehensive conservation program to save the Mexican gray wolf at Cananea, Sonora. While the grey wolf’s territory used to extend from the northeast of Veracruz and Michoacan to the west of Texas and south of Arizona and New Mexico, it is currently classified as extinct in the wild by the International Union for Conservation of Nature. The current situation of the grey wolf is attributed to hunting by ranchers which consider it a threat for livestock. It is now estimated that there are only about 300 of these wolves kept in captivity. Since the early 2000s, Grupo Mexico has provided financial support to the Ecological Center of Hermosillo, Sonora to bread grey wolves within their natural habitat. These efforts have led to the birth of a number of grey wolves, including the latest account in June 2013, which reported the birth of six grey wolves in the ecological reserve in the northwest region of Sonora. According to the director of the Ecological Commission of the state, Óscar Téllez, this event could not have happened with the support from Grupo Mexico. Furthermore, at the end of 2013, Grupo Mexico located the six wolf pups in the ecological reserve via a microchip and then transported them to a sanctuary in Cananea, which the company created for the wolves; the idea being that they will be taken care of to promote the survival of the species. At the sanctuary the wolves are given clinical attention including the monitoring of their life signals and the administration of vaccines. During their last clinical visit the wolves were dismissed as having excellent health. All of these efforts have led the Mexican grey wolf to become the emblem species for Grupo Mexico. Apart from the funds, the company helps maintain the species through its PROFEPA authorized Environmental Management Unit which employs a certified zootechnician to take care of the wolves. These efforts are illustrate Grupo Mexico’s commitment to the environment. This is especially important given the investment that Grupo Mexico is placing on new projects such as the Angangueo mine, which is located within the buffering zone of the natural reserve of the monarch butterfly.
253
STEEL WINGS TO STRENGTHEN NATIONAL INDUSTRY Altos Hornos de México (AHMSA) has been one of the
selling or closing the operations, but it finally decided
pillars of the Mexican steel industry for over 65 years,
to divest the company from the public sector through a
providing quality steel for many of the country’s flagship
bidding process. After presenting the best financial and
projects. Today, AHMSA stands as the largest integrated
investment offer, Grupo Acerero del Norte (GAN) was
steelmaker in Mexico, with its production ranging from
awarded the winning bid. The AHMSA package covered
basic raw materials to finished products with higher
all its steel mills, iron ore and coal deposits, which GAN
added value. AHMSA currently produces about 3.8 million
took over in December 1989. The new administration then
tonnes of liquid steel per year, covering about 50% of the
undertook an aggressive program of modernization of
national demand for steel plates, and has a workforce
its new acquisitions, including all of AHMSA’s mines. A
of 19,000 people, including in its mining subsidiaries.
total of US$1 billion was invested to upgrade equipment,
Headquartered in Monclova, Coahuila, around 250km from
technologies, processes, personnel, and environmental
the US border, it has two steel plants in the same city. The
protection
coal region of Coahuila is also where AHMSA has set up
pronounced a success during the 1990s when AHMSA
its own metallurgical coal mines, from where the coal is
achieved record production in 1994 and finally returned
transported by rail to its smelters in the state. Additionally,
to being the globally competitive company that Mexico
the company operates large thermal coal mines in the
needs it to be.
systems
at
AHMSA
facilities.
This
was
municipality of Nava, near the US border, which produce about 7 million tonnes. The production of these operations
AHMSA adopted a philosophy of commitment to the
is sold to local power plants operated by CFE. Beyond coal,
welfare of its staff, their families, and to the communities
AHMSA also has several iron mines across the country, but
surrounding its operations. The company has been
its main sources of this metal are located in the desert area
participating with local authorities to develop programs
of Coahuila. The mineral concentrate is extracted and sent
for community development, especially in education,
to the smelting facilities in Monclova through a dedicated,
public safety, and urban cleaning. In addition, the
295km steel pipeline.
company implemented several programs to enhance and ensure the caretaking of the environment. The US$300
The company’s origins date back to the Second World
million destined to protect and preserve the environment
War when there was a global scarcity in the supply of
surrounding its steelwork and mining facilities have
steel. In order to ensure Mexico would have the steel
positioned AHMSA as an example of social responsibility.
products it needed for its industrial development, a group of businessmen teamed up with the Mexican government
One of AHMSA’s most important recent achievements
to build an integrated steelwork plant. Along with a
is the opening of the refurbished El Fénix steelworks in
firm from the US, American Rolling Mill, the government
Coahuila. The company has invested over US$2.3 billion
decided to establish the steel plant in Monclova due to
to create vast production capacity to service the mining
its closeness to some of Mexico’s largest coal and iron
and automotive industries, as well as Mexico’s expanding
deposits. AHMSA was constituted in 1942 as a company
port infrastructure. These new facilities include a plate
with mixed state and private capital. The company began
Steckel mill, a blast furnace, one pot furnace, an oxygen
to import equipment from the US, with the first machinery
plant, and an electric arc furnace to produce a fourth slab
arriving in Monclova in April of that year. Later that year,
machine. Their addition to El Fénix will provide AHMSA
the company officially began the construction of the
with the ability to increase its production to 5 million
steel plant. Between 1944 and 1948, production increased
tonnes of steel annually, up from the current rate of 3.8
steadily from 40,000 to 100,000 tonnes of liquid steel
million tonnes. During the construction of the El Fénix
per year. In 1960, the smelter saw its capacity explode
project, over 10,000 jobs were created, and now the
as this was expanded to 2 million tonnes of liquid steel
project is fully operational, it provides 3,000 direct and
per year. This expansion firmly established AHMSA as
16,000 indirect jobs.
the biggest steel company in Latin America. Throughout
254
the 1970s, and after several further expansions, the
According to a press release from AHMSA, President
company achieved production of 3.75 million tonnes
Enrique Peña Nieto himself remarked that the new
per year. Sadly, this boom period was bound to end one
capabilities of the company will trigger significant
day. In 1989, AHMSA found itself in enormous debt while
investments, grow the Mexican industrial chain, provide a
facing operational inefficiencies and high environmental
boost to productivity, and create increased employment
impacts. The federal government was unsure about
opportunities.
MINING INVOLVEMENT TO SUPPORT STEEL PRODUCTION As one of the leading steel companies in the Americas,
part of the company’s commitment to the environment
Ternium has important operations in Mexico, Argentina,
and the communities where it operates. Considering
the US, Guatemala, and Colombia. In 2013, its annual
that mines have a limited life, Ternium has initiatives to
production capacity was estimated at 10.9 million tonnes
mitigate the impact that the closing of a mine has on
of finished steel products, such as pipes, profiles, and
a region’s economy by promoting self-employment.
long steel products that are used in the construction
Such is the case of LANESEK, a company owned by the
industry, appliances, containers, the food industry, and
Aquila community that transports processed minerals,
the automotive sector. One of Ternium’s most outstanding
workshops that lead to the creation of small companies,
features is its highly integrated value chain, as the
and the Peña Colorada Productive Project that helps local
company’s activities encompass ore extraction at its mines,
farmers.
steel manufacturing, the production of finished goods, and their distribution.
Ternium has 11 steel producing and processing units in Mexico. Of the three integrated steel plants, two produce
Naturally, resource-intensive processes such as steel
long steel products and one produces flat steel products
manufacturing require Ternium to have extensive mining
and has two service centers. The four downstream flat
operations consisting of the exploration, extraction, and
steel processing plants combine hot rolling, cold rolling,
production of iron, which is turned into pellets needed
and coating facilities, also including two service centers.
in steel plants. The company’s Las Encinas subsidiary
Finally, the company has four additional steel service
operates two open-pit mines, Aquila in Michoacan
centers. These operations are further aided by eleven
and Cerro Náhuatl in Colima, as well as the El Encino
distribution centers dotted across Mexico, which mainly
underground mine in the Pihuamo municipality in
cater to customers in the construction industry.
Jalisco. Las Encinas also has a pelletizing plant located in Cuauhtemoc, Colima, next to Cerro Náhuatl. In 2009,
Part of Ternium’s growth comes from adding the strength
Ternium invested US$30 million in the crushing plant for
and industrial knowhow of four steel pioneers. The
its Aquila mine in spite of adverse economic conditions at
company was formed in 2005 with the consolidation of
the time. This investment resulted in the creation of 400
three companies: Siderar from Argentina, Sidor from
direct jobs. Overall, Las Encinas created 1,400 direct and
Venezuela, and Hylsa from Mexico. Techint, an Italian-
indirect jobs. This subsidiary produces 400,000 tonnes
Argentinian industrial conglomerate, is the founder of
of fines and 1.9 million tonnes of pellets annually. Other
Siderar and Ternium’s holding company. The firm, which
mining operations include a 50-50 joint ownership of
has approximately 16,600 employees worldwide, was
Peña Colorada with ArcelorMittal, an open-pit mine in
listed on the New York Stock Exchange in 2006. Although
Minatitlan, Colima, and a two-module pelletizing plant
Ternium’s Venezuelan branch, Sidor, was nationalized in
in Manzanillo in the same state. In addition to creating
2008 following a resolution of the National Assembly of
1,850 jobs, this subsidiary’s production amounts to
Venezuela, Ternium was allowed to keep a 10% stake in the
400,000 tonnes of concentrate and 4 million tonnes of
company.
pellets annually. Once the raw material is transformed into pellets, these are shipped to processing plants in
In 2005, the group also acquired Hylsa, a steel company
Monterrey and Puebla to be turned into steel.
form Monterrey that dates back to 1942. When the price of scrap metal went up during the Korean War, Hylsa
As for exploration, Ternium has projects in Piscila-
developed the first direct reduction plant to reduce iron
Cayal in Colima, Sierra del Alo in Jalisco, and Colomera
contents in its production. This is achieved by chemically
in Michoacan. In order to provide its workers with
reducing the amount of oxygen in iron by mixing it with
comfortable
exploration
hydrogen and carbon monoxide at high temperatures. This
activities, Ternium has two camps in Alotitlan, Jalisco, to
living
conditions
during
ultimately leads to the production of a very pure, porous
shelter staff members. There is a 9.7km distance between
iron ore that is easy to handle in the manufacturing of steel.
the two camps. La Esperanza consists of 11 cabins and can
In 2007, Ternium further secured its Mexican steelwork
host approximately 44 people. The oldest camp, La Tuna,
activities with the acquisition of Grupo Imsa, a flat steel
is known for its reforestation efforts to compensate for the
processor. Given Grupo Imsa’s operations, its inclusion in
toll exploration activities have on the environment. From
Ternium also strengthened its position as a leading steel
2000 to 2010, 14,500 pine trees were planted throughout
company in the Americas by enhancing its operations in
an 8.4 hectare area. Reforestation operations are just one
the US and Guatemala.
255
| VIEW FROM THE TOP
LONGER LASTING STEEL PRODUCTS MAKE COMPELLING CASE HÉCTOR DAVID RUÍZ Technical Manager for Northern Mexico at Astralloy Q: Which products have enabled Astralloy to maintain its
transported in a pulp form, which causes a lot of friction on
competitiveness in the Mexican mining industry?
the pipe surface. The pipes that we develop wear out at a
A: Our company has always focused on product innovation
slower pace due to the steel that we use. Typically, only the
above all. We are constantly diversifying our product line
lower half of our pipes wear out, which is why we perform
in order to enter into new markets. However, we began by
thickness analyses. When this happens, we recommend
manufacturing one product called Astralloy-V, which is an
customers turn the pipe around and make use of its upper
excellent steel plate. The Astralloy-V steel is composed
half, which doubles the lifespan of the pipes.
of a special patented alloy which no other company may manufacture, and is up to 3.5 times stronger than the
Q: Which types of mining companies most commonly
commodity steels made by our competitors. In order to
acquire your products?
compete with other steelmakers, we have also started
A: The large-scale mining companies, such as Grupo Mexico,
to manufacture commodity steels, which are a lot more
Fresnillo, Peñoles, and First Majestic, are the companies
affordable due to their type of alloy composition, processing,
that invest most often in our advanced technology since
and cooling methods. Yet, these products do not last as long
they appreciate the benefit of using high-quality products.
as Astralloy-V. We also have magnesium, chrome, and nickel
These companies are constantly looking for ways to reduce
steels, and produce a special plate for deep oil wells used by
their cost per tonne of extracted material. Many of these
PEMEX and other oil companies. Our plates have improved
are only now starting to improve their operating costs since
torque, they do not oxidize, and they do not break easily.
the global prices of metals is forcing their hands. The only
Our steel is also used for special applications such as bolts
thing that companies can do is correct budget errors in
and hubs. The characteristics of Astralloy-V increase the
order to create an efficient, cost-effective operation. There
uptime of equipment, lower haulage time, and allow mining
are processes such as hoisting that are constantly subjected
equipment to operate in relatively high humidity without
to impact and abrasion. If the crusher, the hopper, or the
problem. All of these factors represent considerable cost
cartridges, which are all interlocked for hoisting the material
savings for mining companies. We aim to use our steel to
out of a mine, are not taken care of, they can break in three
create components that are prone to wear and tear, such
months’ time. By using Astralloy products, we guarantee
as pump drives in mines, which are constantly subjected to
that these hoisting components will last nine months.
friction. Q: What is Astralloy’s planning and inventory strategy to
256
Q: What are the applications for chrome steels within the
cater to potential increases in demand for its products?
mining industry?
A: In the beginning of 2014, we prepared our budget for
A: We developed chrome welding for bimetallic plates,
the year, outlining the production capacities of all the mines
which makes steel plates last longer. This process is usually
in the region. Many times, the mines themselves will send
applied to make pipes that need to be buried, since the
us information about the quantity of material that they will
chemical composition of the steel prevents oxidation.
need for the year ahead. In this way, we can project the
These pipes are produced at temperatures of 800-900°C
quantity of steel products that we will need for the next
through induction heating. Simultaneously, we cool the
two years, in order to avoid a shortage of material. We also
pipes from the inside to create a hardness of 600HB
continue to communicate to our clients that there will be
(Brinell hardness). To provide a comparison, stainless
no cost increase for our products. Astralloy is constantly
steel has a hardness of 150HB and construction steel has
aiming to increase productivity at its plants so that it may
a hardness of 250HB. This means that the pipes do not
produce steel plates at a lower cost, and in turn offer clients
have to be constantly replaced. In South America, we
the same price, in spite of raising operational costs for the
created pipes that were used to transport minerals from
mining industry. We used to have 20 clients in the central
the mines in the mountains to the ports. The minerals are
northeast region of Mexico, but this has now risen to 60.
HARDER STEEL LEADS TO IMPROVED PRODUCTIVITY Thanks to the legendary exploits of the Vikings and to the
closely monitor its warehousing and logistics processes in
Norse mythology surrounding Thor, the thunder god, the
order to ensure a rapid response time when supplying its
Nordic states have long been associated with immense
niche steel products to the mining sector. For this purpose,
strength. Hailing from a Nordic land, the Hardox brand
SSAB maintains stock of its products in Mexico.
represents more than just resistant steel: it is the hardest and strongest steel in the global mining market.
For the sale of full plates, SSAB utilizes its own sales presence in Mexico, selling directly to the mines and
According to Kjell Backmann, Sales Director of Swedish
allowing companies to be in touch with SSAB’s local support
steelmaker SSAB Americas, “Hardox is the most advanced
structure. When mines require equipment components or
wear-resistant steel in the world. It can be used for liner
maintenance services outside of SSAB’s purview, it directs
plates to provide much better wear resistance than softer
them to its exclusive partners. Companies such as Aceros
steels. It can also be used in place of ceramics, which are
Fercom, Industrial Vimsa, Metalmex and HESA are a part
commonly at risk of breakage.” SSAB’s line of steel plates
of this partnership and are known as Hardox Wearpart
provides an alternative to the replacement of cheaper,
members. To obtain this title, prospective companies
sintered plates during mining operations. Hardox is by far
need to go through a long process of certification. “We
and away the bestseller of SSAB’s products currently sold
look at what capabilities the companies have with regard
in Mexico, with 80% of its sales going to mining. While
to equipment, their knowledge, how long they have been
Hardox stands out due to its hardness and toughness,
working with our products, and the amount of training they
SSAB explains that another product, the structural steel
have received from our engineers,” Backmann shares. As a
Weldox, provides excellent durability and can be used
way to secure its market in Mexico, the company makes
for frames that carry the Hardox-made liners. Other steel
sure it stays on top of evolutions in customer needs in the
offerings within the SSAB portfolio include Domex, Docol,
Mexican mining industry. “We always ask our customers
Prelaq, Armox, and Toolox, each with its own applications.
about their needs and their expectations for steel solutions in, for example, dumpers or crushers. Based on this input,
SSAB uses standardized techniques for all of its steel
we work with our mills to produce solutions that meet
products, allowing it to measure hardness, strength,
these needs and improve parameters such as flatness,
flatness and even the shape line of its steels through the
weldability, machinability and formability, in addition to
use of lasers. The company’s manufacturing bases are
increasing basic properties like hardness and toughness,”
currently situated in a number of locations, including the
explains Backmann. With its client support structure and
Swedish municipalities of Oxelösund and Borlänge, as well
advanced production capabilities, SSAB seeks to position
as Mobile, Alabama, and Montpelier, Iowa in the US. The
itself as a flexible manufacturer that offers its clients tailor-
company possesses proprietary quenching technology
made plates of every size and thickness in all the major
developed by its own engineers and scientists, but in order
mining countries around the world. To facilitate this, the
to commercialize such innovations, the company has had to
company has formed teams of engineers and experts to
follow internationally recognized material standards such as
provide support through its Knowledge Service Centers
the EN in Europe and ASTM in Americas. This gives clients
where customers may bring up issues and questions
the added benefit of knowing that SSAB products have
and have them thoroughly analyzed. As efficiency and
been quality tested, removing the need to replace the steel
shorter downtimes move up the list of priorities for mining
as often as other conventional steels. “Our steel is up to four
companies, SSAB’s research centers in Sweden and the
times stronger than usual commodity steel, which means
US attempt to keep research and development at the
that for certain applications, we only need to produce 25%
forefront of the company’s direction in order to provide
of the comparative amount of conventional steel,” says
harder steel for the industry.
Backmann. Additionally, SSAB’s steel is 100% recyclable and reduces the weight of equipment, allowing clients to
In January 2014, SSAB announced its acquisition of Finnish
increase payload or reduce operating costs while also
rival Rautaruuki through a combination agreement. “With
decreasing the ecological footprint of its activities. “Almost
our combined volumes and resources, we believe we will
all of the steel from our facilities in the U.S. is made from
be able to better support markets like Mexico,” Backmann
recycled steel scrap,” Backmann adds. This progressive
clarifies. This acquisition is in line with SSAB’s plans to
mindset towards manufacturing steel is in line with SSAB’s
expand its market by adding niche steel solutions to its
vision of creating long-term relationships with clients to
product portfolio, and could very well be another chapter
make their processes more efficient. It also leads SSAB to
of its own legend in the mining industry.
257
Two decades after the Mexican mining industry opened its doors to 100% of foreign direct investment, the country has improved significantly with regard to mine safety and equipment. Now, most junior and major mining companies opt to acquire the latest mining equipment in order to improve the safety and efficiency of their operations. Equipment that was once unheard of in the Mexican mining industry is now available on a commercial scale, while established choices are regularly being improved upon. Declining metal prices are now forcing companies to look for reliable solutions that can enhance productivity, reduce downtime, and decrease operating costs in the short- and medium-term. These needs require specialized equipment and solutions provided by manufacturers that have the expertise and capacity to transform old paradigms into advanced solutions.
This chapter examines popular and emerging technologies and initiatives that are designed to minimize operating risks, avoid disasters, and increase the overall safety and productivity of mine workers. Through interviews, articles, and technology spotlights we introduce the suppliers of the most robust and reliable mining equipment, including dump trucks, scooptrams, haul loaders, and bolters. The chapter covers a broad range of situations that can arise inside a mine, as well as the equipment designed to prevent them. Products such as fire suppression systems, personal safety equipment, ground stabilization solutions, power transmission products, and various accessories are all placed under the spotlight to give the reader more buying power. Finally, we present relevant success stories for the equipment being used in the Mexican mining industry, while also identifying exciting new innovations that have recently been revealed.
EQUIPMENT & SAFETY
10
A broken part is always the most important
Your mining equipment is tailored to meet your exact process requirements. Failure of any of its components can mean lost production time. Only an OEM (Original Equipment Manufacturer) supplier can ensure the proper repair or replacement part you need. You can trust Metso’s engineered-to-order solutions to provide repairs and parts machined to the specifications that will get your business up and running again. Discover more at Metso MÊxico, S.A. de C.V., Salamanca Ote. esq Celaya s/n, Cd. Industrial, Irapuato, Gto. 36541 Tel. + 52 462 622 5190 al 98, www.metso.com QR code for smartphones
CHAPTER 10: EQUIPMENT & SAFETY 262
Creating Mining History through Technology, Atlas Copco
263
Equipment Provider Urges Use of Autonomous Systems, Road Machinery
264
TECHNOLOGY SPOTLIGHT: Radial OTR Tires for Better Performance, Yokohama Tire Corporation
265
Specially Built Tires Ready for Rough and Tumble, Yokohama Tire Corporation
266
Global Expertise Plus Local Dealers Equals Excellence, Caterpillar
268
TECHNOLOGY SPOTLIGHT: Autonomous Haulage Trucks Embody Efficiency, Caterpillar and Komatsu
269
Specific Tire Solutions for Mining Developed with Customers, Goodyear
270
Vehicle Supplier Undeterred by Barriers to Entry, GHH Fahrzeuge
271
Distributor Notices Demand for Simpler Equipment, Topo Machinery
272
Ground-Engaging Products Reduce Machinery Downtime, ESCO Corporation
273
Aiming for Unbreakable Teeth for Loaders and Bulldozers, MTG
275
MINE SPOTLIGHT: Pinos Altos, Agnico Eagle
276
Improved Safety Standards Brings Better Roof Support, Normet
277
Integrated Package for Sale of Heavy Equipment, Construmac
278
Safety First in Giant’s Mining Portfolio, 3M
279
Leaving the Age of Sacrificial Yellow Canaries in the Past, PROVESICSA
280
Firm Culture of Safety Creates Healthier Industry, MSA
280
Proper Fire and Gas Prevention Reliant on Early Detection, Segman
282
Providing Massive Range of Indirect Mining Supplies, Grainger
282
Safety First for Ambitious Mining Products Supplier, Anclas Mineras Encinales
284
Safety Products Prevent Shocking Consequences, Meltric
285
Tension Services in High Demand as New Mines Open, Walden Equipment
286
Flexible Steel Mesh Protection from Rock Falls, Geobrugg
288
TECHNOLOGY SPOTLIGHT: Innovative Belts for Improved Power Transmission, Gates
288
Tooling Supplier Relishes Challenges, Western Industrial Tools and Service
289
Promoting Safety Around High-Pressure Equipment, Gates
261
| VIEW FROM THE TOP
CREATING MINING HISTORY THROUGH TECHNOLOGY CARLOS CAICEDO Director General & General Manager of Mining and Rock Excavation at Atlas Copco Mexicana
Q:
What
have
been
Atlas
Copco’s
proudest
Q: How do you deliver solutions to Mexican mining
accomplishments within the Mexican mining industry?
operations on time if your manufacturing facilities are
A: Atlas Copco has introduced several state-of-the-art
abroad?
technologies for the mining industry. For example, our
A: We have several factories around the world. One of our
drilling systems reduce energy consumption and are
biggest factories for underground equipment is in Sweden
better than other available systems under most types of
and one of the largest factories for surface mining is in
rock hardness and ground conditions. We have invested
Garland, Texas. We make a projection for the year ahead
considerable time and money in the development of these
based on information we receive from our customers, and
systems in response to the evolving needs of the mining
then communicate our equipment needs to the factories.
industry. In 2013, Atlas Copco invested close to 3% of its total
We possess an efficient supply chain for spare parts
worldwide revenue on R&D. Additionally, our facilities in
and have large warehouses here in Mexico. When there
Zacatecas enable us to support our customers in the mining
is a downturn, we are challenged by the same problems
industry with maintenance services, training, spare parts,
facing any other manufacturer in the mining industry
and any other needs they may have. The key component
because we all assemble using equipment from other
of our strategy is our desire to increase the productivity
suppliers. Mining companies know this, so we remain
of our customers’ operations. We have branches and
in communication with them in order to anticipate and
personnel located in different parts of Mexico, as well as
supply equipment when they need it. We are planning to
consignment stores in several mines to reduce machinery
open a service and distribution center in Zacatecas, but
downtime, and many products that support safety for
we have had to delay it in order to redesign the facilities
the mining industry. One of the most popular products is
to be LEED-certified. This center, which will include a
the Boltec rock bolting rig, which is required to support a
workshop, training center, and offices, will be four times
tunnel during development and production. There is also a
as large as the facilities that we have in Zacatecas today
device available for the Boltec which positions meshes for
and is expected to be finished by mid-2015, at a cost of
the construction of tunnels. Another interesting product
more than US$7 million.
is the Scaletec, which helps avoid manual tunnel scaling and prevents the risk of falling rocks. All this equipment is
Q: How has the Green Line, which includes electric loaders
supported by modern facilities containing simulators that
and trucks, been received in the Mexican mining industry?
allow operators and service technicians to learn how to use
A: We are very excited about the Green Line of vehicles as
the equipment in a myriad of settings.
we are leaders in this technology and we are relying on it for growth. We are the first manufacturer to produce fully
262
Q: How are mining safety and efficiency improved by the
electrical loaders and trucks such as these. Atlas Copco
automated functions of Atlas Copco’s equipment?
has begun selling smaller electric models, but we will soon
A: Our automation processes are currently at different
release the larger models which are much better suited to
stages. The most used automation stage is represented
the Mexican market. As there are no CO2 emissions, these
by a remote control room from which one operator can
products cut ventilation costs and even reduce energy
operate several machines without entering the risk area.
consumption by 40-70%. Productivity remains the same
The automatic bolting processes all aim to improve safety
because it is exactly the same machine, but the electric
for mine workers. Even so, automation depends on the
engine makes all the difference. The other major difference
ability to operate a machine remotely, which requires
compared to conventional equipment is mobility. A vehicle
a lot of preparation in terms of communications and
with a diesel engine is easy to move, but electric equipment
infrastructure in the mine. Nowadays, a lot of remote
requires an electrical infrastructure investment in order to
automation processes are used in Mexico, but these
increase its mobility. Therefore, Atlas Copco also provides
operations are still performed close to the machine.
mobile generators to support the use of this equipment.
EQUIPMENT PROVIDER URGES USE OF AUTONOMOUS SYSTEMS The automation of processes and machinery is one of the
Machinery has adopted some of the Japanese business
most promising results of innovative thinking in mining.
philosophies and is applying them to its practices here in
By removing the human element from operations that can
Mexico. “Ethics, discipline, respect, and honor are all values
be performed remotely, mining companies can increase
that are aligned within the politics of the company,” explains
safety, improve efficiency, and reduce costs, three of
Córdova. “It is very important to Mitsui that Road Machinery
the mining industry’s highest priorities. This technology
operates under Japanese principles. Values such as honor
has recently been introduced to the sector with the
and vulnerability help our customers have more trust in
implementation of Komatsu’s autonomous dump trucks,
our company. They know that they are in very good hands
which can safely navigate open-pit mines thanks to vehicle
with Road Machinery.” This Japanese focus also relates to
controllers, precise GPS systems, satellite connectivity,
technology. Córdova explains that Japanese companies
and obstacle detection capabilities. The trucks create a
understand that a strong focus of mining customers is to
proximity ‘bubble’ in which to operate. If anything comes
improve on savings. “In order to do so, an investment in
within range of this bubble, the systems communicate to
technology can pay off, making Road Machinery a logical.
determine an appropriate course of action. Features such
In the specific case of Komatsu products, our Autonomous
as these allow the dump truck to safely navigate though
Haulage Systems and our Remote Monitoring System are
a complex load, haul, and dump cycle as it interacts with
far superior to the competition,” he claims.
dozers, shovels, and loaders, all using the same unmanned system. The cost benefits of these types of inventions
Besides Komatsu’s reputation for producing high-quality
are extremely advantageous, particularly with savings on
technology, the Japanese giant has sufficient resources to
human resources. Mexico could benefit greatly from the
acquire new electrical equipment from GE and Siemens,
technology but, according to Manuel Félix Córdova, Vice-
which can then be applied to electrical loaders, which are,
President of Operations at Road Machinery, big changes
in turn, powered by on-board diesel-powered generators.
would be needed to ready the country for it. “Autonomous
“The
Haulage Systems require that several conditions be met
equipment is that it is easier for the electrical system to
in order to be operative and profitable,” he says. “The
hold more sensors,” states Córdova. “Data is then sent to
initial setup cost, the specialized training, and the delicate
the ECM, which is the brain of the equipment. It holds this
operation and maintenance of this technology, requires
data and sends it to a server via satellite. That server then
several operational, technical, and financial preconditions.
digests the information and reports on everything that has
This technology is one of Komatsu’s flagship products and
happened along every centimeter of the cables or the track.
will not be implemented unless we can be sure that all
The entire process makes it easier for engineers to study
parties will profit from it.”
behavior patterns in the truck.”
difference
between
electronic
and
mechanical
“Autonomous Haulage Systems require several conditions to be operative and profitable, including the creation of a bubble where the trucks will operate and systems to let them communicate with other operated machinery within the bubble” Manuel Félix Córdova, Vice-President of Operations at Road Machinery
Road Machinery sells, services, and rents mining equipment,
Besides being prepared for a boom in autonomous
primarily from Komatsu, but also from a range of other
machinery, and adhering to Japanese values, another of
manufacturers. Komatsu bought the company in 2000,
Road Machinery’s unique selling points is its capability
before selling it to Mitsui & Co in 2005. Today, Road Machinery
for financial support services. Road Machinery can count
has 14 facilities in North America, including two in Mexico.
on receiving financial support from the likes of Komatsu
The company is continuously developing with Komatsu
Financial, Mitsui, and GE Capital, all of which provide
and is investing internally to offer further cost savings to its
Córdova with confidence that his company can meet the
customers. According to Córdova, the support that Road
business needs of the market. Since few distributors offer
Machinery receives from its suppliers helps to achieve this
this level of financial support, Road Machinery stands
goal due to their dedication to investment in innovation.
to prosper in a time where so many have dwindled and
With such close connections to Japanese companies, Road
deteriorated.
263
| TECHNOLOGY SPOTLIGHT RADIAL OTR TIRES FOR BETTER PERFORMANCE
Easter. The new RL45 and RL51 spotlight are the latest
According to Yokohama Tire Corporation, the off-the-road
technology in OTR radial tire tread design. Yokohama’s
(OTR) tire market continues to struggle with supply issues.
innovative culture led it to build two RL45 products for
Two years ago, tire manufacturers could barely keep up
both L-4 and E-4 applications, while also creating the
with demand, and last year the supply was much stronger
RL51 which does not sway, unlike many other radial tires.
than the demand. However, Yokohama’s Tim Easter, director
The RL45 E-4 is made for articulated dump trucks and
of OTR sales, mentions that from an infrastructure and
scrapers and the L-4 version is for front-end loaders. Many
industrial standpoint there is plenty work to do, which is
manufacturers combine the L-4 and E-4 into a single
why Yokohama recently released two new radial OTR tires,
application, but Yokohama built a tire for each, so there
the RL45 and RL51. Unlike a bias tire, a radial tire allows
is no compromise for either. These are available in size
the sidewall and the tread to function as two independent
26.5R25, providing radial tires with enhanced toughness
features. This tire features transverse radial plies that run
for
perpendicular to the direction of travel, which protects
advanced tread composition provides improved wear,
the interior and assures high grip to the road, as well as
low-heat generation, and cut-resistance while the zigzag-
provides longer life, better maneuverability, and higher
shaped groove provides better traction on rock and gravel
durability. Furthermore, the radial tire allows the machine
surfaces. Other features of the RL45 include its non-
to transfer more power to the ground, consumes less
directional block pattern which provides abrasion- and
fuel, has less ground compaction and damage, increases
cut-resistance on stone and gravel surfaces. The RL45’s
productivity, and reduces the rate of tire replacement.
high turn-up carcass construction protects it against
extremely
demanding
applications.
The
RL45’s
exterior damage with greater lateral stiffness for better Yokohama’s radial product releases come as part of the
riding comfort and additional defense against sidewall
company’s strategy to expand its radial product lines
cuts. Its oversized angled lugs allow for less void area than
and be more aggressive in expanding its market share.
the competition, promoting long, even wear and improved
“Yokohama has built a reputation as the technology leader
traction for the life of the tire.
for the best bias products on the market. We want our customers to expect the same with our radial tires,” says
The RL51 L-5 product, on the other hand, is designed for front-end loaders and graders. It is a resilient radial tire for high-cut uses which comes in size 23.5R25. It offers excellent traction and stability and will not sway under load, thanks to the advanced belt package. The RL51 L-5 is a high-tech tread compound that provides better wear- and cut-resistance. Its non-directional block pattern offers traction, and the stability same performance in forward and reverse, as well as abrasion- and cut-resistance on rock and gravel surfaces. Among the many benefits, the new treads are more durable and last longer. Both products have a high turn-up carcass and their buttress side protection provides protection against exterior damage; this means fewer sidewall snags and cuts with thicker rubber on the upper sidewall and shoulder. The products are designed to deliver improved durability because of the advanced, multi-layered crossply steel belt package. Also, the rubber bead filler provides strong twist stiffness for longer life. The company’s complete product line includes tires for high-performance, light truck, passenger car, commercial truck and bus, and off-the-road mining and construction applications. Yokohama understands that the Mexican industrial market is growing, which is why it opened an office in Mexico in 2013. “Mexico as a market will be a growth area for us,” mentions Easter.
264
SPECIALLY BUILT TIRES READY FOR ROUGH AND TUMBLE Since Yokohama Tire Corporation (Yokohama) launched
dump trucks, and underground mining vehicles used
its Mexican subsidiary, the off-road market has spawned
in Mexican mines. In fact, many of Yokohama’s OTR
a series of opportunities for the Japanese giant. The
innovations are now being made with the mining sector in
subsidiary officially began operations in March 2013 and
mind. Advances in bias technology have made Yokohama
soon made its lucrative entry into the mining segment.
the leader for bias OTR products in dump trucks and
Humberto Gomez, Director General of Yokohama Tire
loaders, while this development drive is also being applied
Mexico, explained this business case in depth. “Mexico is
to new radial product development, such as 49-inch, 51-
one of the fastest growing mining markets globally. This
inch, and 57-inch radial tires. Gomez points to the fact that
is true in terms of the increase in large open-pit mining,
Yokohama’s recent development of underground mine
the growing use of giant haulage trucks and loaders, and
radial products offers end-users a wider product portfolio
the demand in specially built tires for severe operations
to pick from in order to meet their mine site requirements.
in underground mining.” After spotting this opportunity,
“All new products are designed and evaluated prior to mass
Yokohama needed to first identify the varying mining
production. This evaluation determines product compound
conditions that its tires would have to contend with in
selection
Mexico, and test their ability to withstand said conditions.
varying degrees of traction, cut resistance, flotation, wear
It dispatched teams to perform a J.C.R. (job condition
resistance and heat resistance depending on the job and
report) in Mexican mines and identify major criteria, such
the conditions,” he adds. The construction of OTR tires
as the operations being carried out, the vehicles being
depends, to a large extent, on the intended use of the tire.
used, the terrain being navigated, the estimated monthly
For example, dump trucks must travel under heavy load at
usage, and the tire specifications needed. The latter is
high speeds over relatively long distances. Therefore, their
particularly important since Yokohama makes use of
tires must have high heat and wear resistance as well as high
custom compounds in its tire manufacturing, which vary
resistance to cuts. Comparatively, front-end loaders operate
according to the usage profile.
on rough ground, making both cut and wear resistance vital
and
tread
patterns
designed
to
produce
“Yokohama OTR products are designed to deliver the lowest cost per hour, which means our tires perform for far longer”
Humberto Gomez, Director General of Yokohama Tire Mexico
A reverse analysis is also needed, as the durability of a tire
while the tires must provide stability for the loader body.
and its impact on the speed of a machine or vehicle will
Finally, vehicles for underground mining operations need
have a direct effect on a mine’s productivity and cost per
tires that are highly durable as well as highly resistant to
ton-hour. Gomez states that Yokohama takes this matter
cuts, punctures, and snags, especially on the sidewalls.
into account from early on. “The durability of all OTR tires has a big impact on proper product selection and
Gomez moves on to another essential point that he feels
we take this into account right through to how we install
should make mining operators choose Yokohama tires: cost.
products based on job conditions. Yokohama products
“Yokohama OTR products are designed to deliver the lowest
are all designed to improve efficiency in hard rock and
cost per hour, which means our tires perform for far longer.
underground mining operations by offering a variety of
Furthermore, the retreadability of the casing that Yokohama
custom compounds, such as cut-protected tires, or those
has designed is superior, granting extra life to our tires and
made from compounds such as RET, RER, and CPC,” he
preventing them from being scrapped too early,” he says.
says. The company’s tires can also be custom-compounded
Adding to this are Yokohama’s efforts to recycle their old
to withstand high speeds, heavy loads, or rugged terrain,
tire material, both decreasing the environmental impact of
all reassuring necessities for a mining operator that needs
the tire business and helping mining companies become
to know if its tires can take the strain.
that little bit greener. “We work with retreaders and support groups that are involved in using scrap tires as a source
Yokohama’s J.C.R. strategy seems to be paying off as it
of energy. Common customers of this source are cement
reports that its specialty tires are in demand for loaders,
factories that are equipped to burn tires as an alternate fuel.”
265
| VIEW FROM THE TOP
GLOBAL EXPERTISE PLUS LOCAL DEALERS EQUALS EXCELLENCE JOSH MEYER Region Manager Northern Latin America, Mining at Caterpillar Q: How does Caterpillar’s wide range of products allow
A: Caterpillar’s R&D investment is consistently well above
its clients to acquire most of their equipment from you?
other mining equipment suppliers. While that is partly
A: While Caterpillar has always been a leader in the mining
driven by the breadth and depth of our product offering,
industry, and we are now able to serve the vast majority
it is also powered by our constant drive to innovate and
of mobile equipment needs of any mine or contractor
develop superior solutions for our customers. Whether
through our expanded product line. When you couple the
that is through technology development like the Cat
broadest product line in the industry together with our
MineStar System, through innovative new technologies
unmatched support and other complementary services,
to eliminate blasting in underground hard rock mines, or
such as financing, technology and service contracts, we
through enhancements in existing products to reduce
believe we offer a superior value proposition for the vast
costs and improve productivity, we never lose focus on the
majority of customers. Furthermore, our unparalleled
customer and what those innovations mean to them.
dealer network, coupled with the strength of our Caterpillar Global Mining team, provides these integrated
Caterpillar employs more than 8,000 engineers and over
solutions to our customers, including equipment, parts
350 PhD-level scientists and technology experts. We hold
and services, financing, technology solutions, and a
more than 4,000 active patents and engineer our products
variety of other unique offerings. The synergies provided
on nearly every continent. For those who have not had the
by these comprehensive packages provide tremendous
chance to tour Caterpillar’s technology center, or see the
productivity increase and cost reduction potential to our
amazing work happening in our design centers around the
customers.
world, I can only encourage you to do so. Reach out to your Caterpillar dealer as there is no way to do justice to
Q: What is the main difference between the products
the fantastic work being carried out by our engineers and
and services Caterpillar offers to the mining industry and
scientists through words or numbers alone.
those of your main competitors? A: Our goal is always to provide the lowest cost per ton to
Our ultimate goal is always achieving the lowest cost per
our customers and our great products are a significant piece
ton. That equation is comprised of both the equipment
of that equation. However, it is the unparalleled support
and services and support that come with it. If we cannot
capabilities of our mining dealers and our local Caterpillar
provide the lowest cost over the long-run, then we believe
teams that ensure that we are consistently delivering on
that we have failed. That superior value is the foundation
that goal. One key distinction also sets our operations in
of who we are.
Mexico apart. Caterpillar and our dealers employ thousands of Mexicans throughout the country. Those thousands of
Q: Many OEMs focus on either surface or underground
employees are involved in the manufacturing, assembly,
mining. How do you ensure the quality of your equipment
parts logistics and warehousing, sales, and technical
for both surface and underground mining operations?
support of our products. It is the strength and capability
A: A major part of the answer lies in the Caterpillar culture
of those great people that set us apart. While the strength
and our focus on quality. However, we also recognize that,
of the Caterpillar brand certainly helps establish credibility,
while there are clearly synergies across the product lines,
we are not satisfied by living in the past. This is why, rather
there are obvious differences as well. This is why we have
than relying on the brand to open doors for us, instead
specific organizations and resources dedicated to each
we challenge ourselves daily to live up to and exceed the
industry. However, the people working on our underground
expectations that come with our brand.
products have deep expertise in underground. The same applies to our surface products. Yet, more importantly, we
266
Q: What have been the most recent improvements you
also have established deep expertise within the individual
have released for mining and metallurgical operations?
product families that make up these industries.
Q: In the third quarter of 2014, Caterpillar beat analyst
Q:
expectations with revenue of US$13.549 billion. How have
equipment sales with post-sale services?
your distributors in Mexico contributed to this success?
A: The many millions of dollars in investments our dealers
A: The network of independent Caterpillar dealers is the
have made and are making are directly related to their
backbone that supports our company. It is nearly impossible
ability to provide post-sale support. All you need to
to talk about Caterpillar without also talking about our
understand the importance we and our dealers place on
dealers and vice versa. Their success is our success and
product support is to look at the balance of technicians to
our success is theirs. We have not only expanded the
other employees. Without exception, employees dedicated
Caterpillar Global Mining presence in Mexico, but our
to product support represent the overwhelming majority
dealer network has invested many millions of dollars in
of dealer payrolls.
How
do
Caterpillar’s
distributors
complement
infrastructure, tooling, and training to better support our customers. This includes new component factories, rebuild
Q: Mining projects are cropping up across Mexico, from
centers, training facilities, service branches and facilities,
Oaxaca to Baja California. How will Caterpillar ensure that
and parts depots to name but a few.
new mines make use of its equipment? A: Caterpillar dealers and our Global Mining team attempt
Q: What type of support do distributors receive from
to work together with customers well in advance of the
Caterpillar’s head offices and manufacturing plants?
actual equipment needs. We have the deep expertise and
A: We have five dealer partners in Mexico: MATCO, Madisa,
experience to help our customers in the early stages of
TRACSA, Maqsa and Empire Rio Colorado. The relationship
mine development, even at the pre-feasibility stage. There
between Caterpillar and its dealers is unlike anything else I
are several recent examples where we have partnered
have seen, regardless of what industry. I am not sure I would
with customers early in the process and identified ways
even use the term support. We have become integral parts
to optimize mine development costs, reduce capital
of each other’s business rather than simply supporting
needs, and drive efficiencies in design well before the first
each other’s efforts. The proof of that alignment is the fact
equipment was expected to arrive on site.
that our Mexican dealers have been a part of the Caterpillar family for many generations and decades. Relationships
When this is paired up with an unmatched presence across
that outlive the people who formed them can only happen
Mexico, we believe we are well positioned to support our
with the sort of alignment I am talking about.
customers’ efforts wherever they may be.
267
| TECHNOLOGY SPOTLIGHT AUTONOMOUS HAULAGE TRUCKS EMBODY
accidents, and a reduction on fuel and maintenance
EFFICIENCY
costs. A study by the university suggests that the use of
Visitors at Codelco’s Radimiro Tomic copper mine, Rio
AHTs can reduce the rate of tire wear by 12% and the rate
Tinto’s Yandicoogina, Nammuldi, and Hope Downs 4 mines,
of fuel consumption by 10%, relative to a manual truck
or BHP’s Jimblebar iron mine, can catch a glimpse of the
operated by an average driver. Moreover, unplanned
future of mining operations. These Australian and Chilean
maintenance can decrease by 14%, while truck life can
operations deploy autonomous haulage trucks (AHTs)
be prolonged by 12%.
that make use of sensors and GPS technology to carry out continuous haulage processes. The trucks are programmed
By removing operators from loading and dumping points,
to navigate around a pre-defined network of passages
mining companies are looking to decrease the number of
connecting loading units to dump locations such as
accidents in their mines. Since continuous load-haul-dump-
waste dumps, stockpiles, and crushers. They are operated
return cycles can last 10 to 12 hours, human drivers are
remotely from control rooms designed to monitor and
prone to fatigue which can lead to mistakes and, in some
record information on the location, speed, and status of
cases, potentially fatal accidents. Moreover, by eliminating
these autonomous units. The benefits of such technology,
the need for shifts and reducing the amount of breaks
including a decrease in human-caused accidents, have led
during haulage, the productivity of a mine can increase.
these three important mining companies to invest in the
For such reasons, Rio Tinto and Codelco are betting on
race for fully automated processes in mining.
Komatsu for the design, engineering, and manufacturing of their autonomous fleet, while BHP is working with
Caterpillar’s own research turned up a number of
Caterpillar to meet its automation demands. As the use
major advantages to the use of AHTs, which it is now
of AHTs steamrolls toward becoming a mining industry
manufacturing to lucrative effect. First of all, the difficulty
mainstay, a further innovation could be developed. Load
of hiring and keeping operators in remote mining sites
sensors placed on the trucks could function as a type of
poses a real problem for mining companies. AHTs solve
telematics, providing detailed information as to how much
both this problem and several others at once. By removing
weight the trucks are hauling compared to their designed
the need to encourage staff to work in such conditions,
capacity. Such precise and constant information could help
AHTs also reduce the amount of human presence around
mining companies and fleet operators severely cut down
moving equipment. Secondly, while AHTs depend on a
on wear and tear, since each unit would provide detailed
control room for instructions, they come prepared with on-
information as to its use.
board intelligence systems that allow them to memorize a predetermined area they will traverse while picking the
Rio Tinto is arguably the biggest backer of AHTs in the
best route to finish their tasks. This means than although
mining sector today. From 2008 to 2013, Rio Tinto rolled
an AHT requires supervision at all times, the operator is
these trucks out in its Australian mining sites, over which
not literally steering as the machine is able pick and follow
period they hauled over 100 million tonnes. In 2014, the
a specific path, even navigating the obstacles within mine
mining giant made an order for 40 more additional trucks
sites. This very technology allows AHTs to perceive and
for three of its mines. Their joint supervision from a center
react to other movement around them, such as machines
in Perth also helps the company centralize its operations
and workers. On-board collision detection technology
and get a bird’s eye view of all activities. Though Mexican
monitors the AHT’s surroundings at all times and can
companies have not yet ventured into the use of such
instantly bring it to a stop in case of danger.
autonomous vehicles, Codelco has shown that there is a promising future for AHTs in Latin-American mining
268
Furthermore, automated trucks could divert employment
operations. Moreover, Australia serves as an example to
from driving to automation and create a new job market
follow in the field of innovation as it spends an average
within the global mining industry. Other automated
of US$3.7 billion on R&D, according to Australia’s Bureau
machines could also replace operators of drilling rigs
of Statistics. While these technologies are mostly used for
and aerial vehicles, and reduce the industry’s burdening
iron ore and copper mines, their use will without a doubt
shortage of skilled workers. Considering these points,
adapt to a wide range of mining operations across the
competing in the industry will increasingly depend on
world in the short- to medium-term. After all, AHTs give
the ability of people and companies to adapt to the use
mining companies a chance to fight the instability of the
of autonomous technologies. According to the University
metals market conditions with technological solutions
of British Columbia, the benefits of these trucks also
that reduce their costs, increase productivity, and limit the
include an decrease in haulage time, a decrease in
uncertainty in their operations.
| VIEW FROM THE TOP
SPECIFIC TIRE SOLUTIONS FOR MINING DEVELOPED WITH CUSTOMERS MARTIN ROSALES President and Director General of Goodyear Mexico
Q: What influenced Goodyear’s decision Goodyear to
Q: What resources does Goodyear allocate to the OTR
enter into the Mexican mining market?
markets?
A: Mexico’s economy is extremely interesting and it is the
A: We allocate many resources to OTR markets around the
second biggest market for tires in Latin America, after
world. In Latin America, we produce OTR tires in Colombia,
Brazil. If its current growth rate remains, then it will likely
while we have other plants in Europe, Japan, and the US. We
become the top market for tire companies in Latin America
have a wide portfolio ranging from smaller tires for earth
in the near future. In terms of off-road (OTR) tires, it is also
movers and large tires for mining equipment. We have a
an important market together with Peru and Chile. Given
technical staff in Mexico and we also bring in specialists from
the importance of this segment to Goodyear and its use
the US and Peru when a project demands it. We invest heavily
in the mining industry, we have a solid market share in the
in R&D to improve our products as the amount of research
Mexican and global OTR mining market. Our strategy is
that goes into a tire might surprise people, yet it is necessary
based on working together with mining companies through
to increase the productivity and safety of our products. After
dedicated teams in order to understand their needs. These
all, a faulty tire can cost the life of a mine operator and a
teams not only advise companies on the products to acquire
good tire can increase the productivity of a mine. The main
but also on the proper application of our products. As a
benefit of our OTR is the performance that it gives.
tire manufacturer, Goodyear understands what its products are being used for; we know that its application is deeply
Q: Considering that operating conditions vary from mine
affected by the type of cargo, the distance that needs to
to mine, how versatile are Goodyear’s products?
be covered, and the climatic and operational conditions. An
A: There is no project in which our products cannot be
adequate application allows the product to perform better,
used. Considering that the mining environment also
last longer, and provide greater stability and safety.
affects the productivity of a tire, we have made products for mining companies operating in all the differing regions
Mexico is at a crucial turning point of becoming the leading
of Mexico and the world. We have a dedicated sales staff
economy in Latin America. It is positioning itself as a leading
that is composed of field experts. Our OTR tires are sold
mining country that is rapidly industrializing. The country is
only after a visit to the mine. This is a necessary step
taking the correct measures to position itself globally, by
that allows us to make careful observations about the
signing FTAs with numerous countries around the world,
road infrastructure, the equipment, and the operational
including major world economies. Mexico has opened its
conditions. The mining industry is interesting because the
economy far more than other countries in Latin America.
price of the product does not come up until after the visit
This has led to an enormous amount of investment that has
of the mine has been completed.
been placed in the different industrial sectors in Mexico. The country has an advantaged geographic location, a border
Despite the size of the large OTR tires segment, there is
with the largest consumer in the world, and privileged
typically a lack of supply on a global scale. Goodyear is
access to the Pacific and Atlantic oceans. That is all creating
able to guarantee a steady supply of products. Our clients
a great future for the Mexican economy. The reforms that
also benefit from our engineers’ extensive expertise, as
have been recently implemented will, in the medium- and
they are able to recommend the ideal tires for specific
long-term, bring real economic benefits to the country due
mining operations. We not only visit a mine when a
to their pro-business nature. Its economic forecasts are
product is being chosen, we also visit it to make sure that
already very good and mining is an important contributor
the use of our product is adequate and monitor the state
to these forecasts. Mining has always been an important
of our products after use. Doing this allows us to ensure
pillar for Mexico and it has always had important domestic
that the optimal performance is achieved. This is a market
and international players participating in the industry. It is
that cannot be serviced from behind a desk, it has to be
natural for Goodyear to be among them.
serviced from out in the field.
269
VEHICLE SUPPLIER UNDETERRED BY BARRIERS TO ENTRY Although there are a number of established suppliers of LHD
machines with a hydrostatic drive coupled with an intelligent
trucks and dump trucks for the Mexican mining industry,
control system. These components guarantee that the trucks
foreign companies are still looking to enter the market due
will not go downhill too fast and will always move at a speed
to the array of opportunities it presents. Establishing sales
at which braking space and time are met. On the other hand,
and service operations in Mexico, however, requires a local
a hydrostatic drive and intelligent control systems pertain to
presence in the country and guaranteed on-time delivery
the direct safety of the mine operators, as they minimize the
of products and spare parts. German mining equipment
risk of the machine being used incorrectly. Furthermore, the
manufacturer GHH Fahrzeuge (GHH) is one such supplier,
central bearing of GHH’s dump trucks is designed so that
confident that it will find success in the Mexican mining
the front wheels and back wheels can turn independently of
market with its innovative products. “The Mexican mining
each other. “This improves the safety of the machine as it
market has large growth potential, though the current
becomes very difficult to tip and guarantees ground contact
state of the industry is already attractive enough for GHH.
by all four wheels all the time,” explains Glinz. “No technical
We believe we have the perfect machines for the Mexican
features can replace proper training though, which is why, to
mining market,” states Mortimer Glinz, the former Managing
reduce the risk of accidents, we offer training for operators
Director of GHH Fahrzeuge. According to Glinz, GHH offers
and service mechanics.”
high-performing machines “that are not too complicated to operate or maintain,” making them especially useful in
This customization ability stretches to GHH’s own design and
remote mines.
manufacturing. Although the company produces standard models suited for most mines, it can also design and produce
270
Although the company is largely unknown in the Mexican
tailored solutions. This alternative does entail added costs for
sector, it has been present in the country for some time as
the vehicles but also creates the opportunity to lower the cost
it was part of the global MAN group until 1999 when it was
per tonne of material extracted. “Larger customers facing
taken over by mining group Schmidt, Kranz, & Co. After
very specific geological conditions may ask for vehicles
this acquisition, GHH turned its focus towards increasing
with a specific height and maximum capacity, for example,”
international sales, one country at a time. Glinz explains
Glinz explains. “We have standard models for all types
that GHH would have liked to commit fully to the Mexican
of machines that come equipped with certain additional
market earlier, but did not have the capacity to service
features. For Mexico, we supply air conditioning equipment
this market. Now, instead of finding a booming industry on
and use materials that can withstand temperatures up to
the rise, GHH is faced with the difficult task of convincing
52°C.” Additionally, the company’s LHD trucks include an
mining companies to use its products at a time of capital
optional drive train that makes use of the hydraulic pumps
discipline and expenditure costs. “We have a local partner
and the engine in order to brake, reducing wear and tear
in Mexico, Topo Machinery, which is imperative for
on mechanical brakes. Through such standard and tailored
supplying the Mexican mining market and communicating
features, the company aims to position itself in Mexico as a
with our clients in the country.”
robust and reliable provider of mining equipment.
“Our engineering efforts focus on creating simple, robust
“Some
vehicles designed for long-term use with decreased
manufactured in the 1980s,” Glinz tells, in order to prove
downtime,” states Glinz. “Even when the vehicles do
his point on the robustness of GHH’s equipment. “We have
experience some failure, they are designed to be easily
already shipped spare parts for the Mexican market so they
repaired with basic training.” These features give GHH a
can be available when our customers need them. Through
measure of flexibility in how it reaches out to customers since
Topo Machinery, we are able to supply spare parts from
it can provide technical training for operators and service
Zacatecas to other mining regions. If a problem requires
mechanics to use the vehicles efficiently and solve technical
it, we can dispatch somebody from GHH working in Chile
problems in-house. Additionally, another feature that makes
or send international service technicians from Germany
its equipment stand out is the ergonomic design of its
who are used to working in remote mining areas.” Thus,
vehicles. “Mining equipment is not known for its ergonomics
GHH’s strategy to enter the Mexican market is based on
due to the limited space in the machines. Through our latest
its versatile vehicles, the robustness of its products, and
innovations, we have substantially improved the ergonomics
the customization of solutions to meet the market’s needs.
of our vehicles, resulting in a better working environment
However, its long-term success may depend on its ability
for the operators, a decrease in mistakes and accidents, and
to outperform expectations and for GHH to cater to the
an increase in safety,” says Glinz. Moreover, GHH produces
constant need for innovation within mining companies.
mines
are
still
using
equipment
that
we
DISTRIBUTOR NOTICES DEMAND FOR SIMPLER EQUIPMENT Thomas Baker originally
Due to the fact that it is designed specifically to serve the
started out as a one-man
mining industry, Topo Machinery feels its equipment is
army,
everything
much safer for miners. The company has lubrication trucks
from sales to services. In
doing
and equipment used to hang cables with scissor lifts, which
the 1980s, his company,
geologists use for sampling. Baker also explains that it is
Topo Machinery, started
not easy to transport drill jumbos back up from the mines.
by
selling
raise
boring
In these cases, the lubrication truck is sent to service the
After
some
vehicles down the shaft itself. Topo Machinery also has
years, the team grew to
personnel carriers, as well as transporters for removing
encompass
mechanics
explosives. The Getman brand has been a large part of Topo
machines. Thomas Baker, President of Topo Machinery
and technicians and in
Machinery’s business for many years as its trucks are very
2007, Baker put up a warehouse to begin selling spare
popular in Mexico. Due to this popularity, Topo Machinery
parts for mining equipment. Since then, Topo Machinery
profits well by providing maintenance, services, and spare
has blossomed and has between 45 and 50 employees
parts to the owners of Getman trucks. “Anything that is
working in the Fresnillo area or travelling to cover the
in the mining industry needs a fair amount of support to
needs of the mining industry around the entire country.
make it successful. That is what we can offer. Once we sell
Today, it stands as the Mexico sales representative for J.H.
a piece of equipment, we deliver it and support it,” says
Fletcher, Getman, and MTI’s M71 raised drill pipe.
Baker. To complement the success that the company has experienced with its established brands, Topo Machinery
Topo Machinery may be an American company but it caters
is introducing two new lines in Mexico: Fletcher and GHH.
exclusively to the Mexican market. Baker explains that his
Fletcher is the leader in rock bolt equipment and holds
customers in the Mexican mining industry usually want to
95% of its US market as well as possessing a strong global
buy directly from the US and then imported the products
presence. Baker says that Fletcher is mainly focused on the
themselves. “Most of the equipment is either purchased
coal mining industry, but is now looking to expand to areas
from the factory or through the company in the US,” Baker
such as metal mining, providing an additional business
states. Bringing equipment to Mexico is not too difficult,
opportunity in Mexico. In order to promote its new lines,
although there are some obstacles when importing
Topo Machinery is visiting several mines where it performs
merchandise, particularly on the US side where Homeland
demonstrations with a ten-tonne LHD from GHH and a
Security scrutinizes everything going out of the country.
Fletcher rock bolter.
“We have more problems getting products out of the US than we do getting them into Mexico.” Another challenge
The technological sophistication of Topo Machinery’s
is that the mining industry’s demand for equipment has
suppliers is undisputed. In this sense, it might seem
been declining of late. Nonetheless, Baker is satisfied with
strange to some that Topo Machinery is so focused on
the continued popularity of the utility equipment that his
selling simpler equipment. “Fletcher has all the modern
company sells. When he started working for Fresnillo,
technology, such as remote bolters. The same goes for
there was no utility equipment in the mines and almost
the GHH line. It has the latest and greatest, but we are
everything was done with rather expensive scooptrams.
trying to promote its less sophisticated equipment,” says
Later on, agricultural tractors were introduced into the
Baker. He explains that his company is not promoting
operations. “The problem with these vehicles is that they
complex equipment because this usually results in
do not really constitute mining equipment, per se. They
downtime. As an example of this, Baker explains how a
do not have spring-implied, hydraulic-lock, release brakes,
company decided to automate every possible process,
and they do not have rollover protection structures or
but eventually returned to simpler equipment. “Most
cabs on them,” explains Baker. This is one of the reasons
engines have a lot of electronics nowadays, but I am
Topo Machinery has been successful in introducing
trying to get away from that as much as possible. This
Getman trucks to serve as production support and utility
way, when there is a problem, my customers’ mechanics
equipment. “The industry started shifting to specialized
can troubleshoot it with basic hydraulic and electric
equipment in 2005. Before that I sold probably four trucks
concepts.” Baker says that a lot of his customers are
per year. Even then, companies would not order utility
asking for less sophisticated equipment because it is
equipment until they were in production. This has changed
easier to maintain and less complicated to use. Topo
now, and companies have started buying utility tools
Machinery can thus add to its success by selling the
because they are seeing their value,” details Baker.
simpler product lines of famous brands.
271
GROUND-ENGAGING PRODUCTS REDUCE MACHINERY DOWNTIME Without the cogs and gears that keep our clocks ticking,
ground-engaging machines become shorter meaning that
time itself would come to a standstill. The same can be
much of the work related impact is absorbed by the bucket,
said for the parts that comprise the outer workings of
which is a very expensive part to replace. For example, a
mining machinery and vehicles. Once these essential
small bucket could cost US$1 million, but the largest models
elements fail, they must be replaced as fast as possible
can reach as high as US$5 million. Nemisys® provides a
in order to limit costly, profit-hemorrhaging downtime
higher quality lip with better teeth that protects both the
during mining operations. The longevity of these parts is
bucket and the machine, improving overall performance.”
largely governed by the science of tribology, which is the
The system was designed with efficiency in mind, vastly
study of interacting surfaces in relative motion. Put simply,
reducing the time taken to replace the worn parts while
when the metal-mechanical parts of ground-engaging
increasing their durability and minimizing downtime. The
tools clash with the hard rock and minerals that they are
level of work that these machines undertake is highly
designed to penetrate, the friction and abrasion of this
extensive, meaning that ESCO’s customers tend to value
action causes them to wear down over extended periods
performance above anything else. However, according
of time. ESCO Corporation (ESCO) is an independent
to Castillo Burgos, cost remains an issue that must be
developer of engineered wear parts, such as buckets
addressed. “Many potential clients are difficult to convince
and truck bodies, with over a century of experience in
as to a specific product’s value if its price is too high. We
its core competencies of metallurgy, design engineering,
maintain that the reason our products are not cheap is that
manufacturing processes, and distribution.
we provide the most advanced technology available.”
“Over time, the teeth on ground-engaging machines become shorter. Nemisys® provides a higher quality lip with better teeth that protects both the bucket and the machine” Luis Castillo Burgos, Former Country Manager Mexico of ESCO Corporation
272
ESCO was founded in 1913 as the Electric Steel Foundry
ESCO is turning part of its business into a service supplier,
Company, but was later re-branded in 1926 under the
which will see it supply third-party products to complement
ESCO trademark. Over a century later, the company is
its own portfolio. “Our business is in replacement parts,” says
still going strong but is once again experiencing change.
Castillo Burgos. “This constitutes a huge market in Mexico,
ESCO recently restructured by splitting into three different
and its competitive nature means that we have to stay one
divisions: mining, construction and industrial, and oil and
step ahead of our rivals.” One of the ways ESCO convinces
gas. “Our primary reason for this overhaul was to get
a customer to buy its products is to agree on a trial period.
closer to our customers than ever before,” states Luis
These trials can potentially cost hundreds of thousands of
Castillo Burgos, Former Country Manager Mexico of ESCO
dollars so, in an attempt to keep costs to a minimum, the
Corporation. “By altering the company structure, we can
company negotiates a diverse range of deals based on the
strategically generate new offers for our customers. We also
needs of each individual customer. “During an initial meeting
intend to make it very clear that mining and construction
with a new client, we will outline the comparisons between
are two very different businesses.” As a newly independent
the price of the product and the time the customer might
entity, ESCO’s mining division will continue to be focused
spend using it, ensuring that they get the maximum amount
on developing wear parts and attachment products while
of productivity from large investments,” Castillo Burgos
maintaining a strong focus on innovation and safety. The
continues. “For example, we would explain that one of our
company’s dedication to developing efficient products for
products would provide 500 hours of usage, as compared
the mining industry can be observed in the Nemisys® Lip,
to only 400 hours of usage promised by our competitors.”
Tooth & Shroud System, which helps reduce maintenance
Usage time for machines is very important to our mining
costs
safer
clients. Maintenance often involves a very time-consuming
replacement, and improved lip coverage when applied
through
improved
reliability,
faster
and
process. On occasion, a machine needs to be switched
to excavating machinery. “The idea behind Nemisys® is
off for a whole week, which can cost millions of dollars
to assemble everything that the customer needs into just
depending on its application. Deciding on the right product
one lip,” Castillo Burgos explains. “Over time, the teeth on
from the outset is vital to keep costs to a minimum.”
| VIEW FROM THE TOP
AIMING FOR UNBREAKABLE TEETH FOR LOADERS AND BULLDOZERS ARTURO ANGULO KLADT Area Manager for Mexico and Central America at MTG
Q: How has MTG fared since recently entering the Mexican
manner. As for protective equipment, we have developed a
mining industry?
product line called ProMet II, which represents a complete
A: Although there is still some way to go, MTG’s objective
range of security products for a scoop.
of developing the Mexican mining market by providing innovative cutting tools is being achieved by focusing on
Q: What are the priorities of your customers regarding
major mining areas. Mexico and its market were unknown
the characteristics of the product they buy?
to us, therefore the company decided to hire someone
A: Companies measure products through their cost-
local to get to know the sector. With this outlook, we
benefit ratio. They do not care if the piece is expensive or
have spotted the same needs as exist in the Canadian or
cheap, they need to see performance. Some customers
the American mining sectors. The difference is that, in
measure performance based on cost savings and others
Mexico, the client demands much more presence from
based on time savings. For example, a Caterpillar 992
the supplier, needs constant contact, and takes more time
loader can load a 777 haul truck in five shovelfuls, but
when deciding to purchase products. Spreading our brand
our product can do it in just four, saving 20% on both
awareness has thus been difficult, given the reluctance of
time and cost. Other companies do not focus on the
companies to establish contact and to try out our products.
machine itself but on the durability of teeth. For this
It has been a very slow process, but the Mexican market is
requirement, we have about 20 different teeth designs in
very big and important, and we consider our products to
each product line, depending on whether they are for a
be essential for mining development.
front loader or a bulldozer. We have products for greater penetration, for more abrasion resistance, and extra teeth
Q: How are you overcoming these market entry difficulties
for universal machines used in different types of terrain.
with your new 2014-2018 strategy?
In the gold and silver mines of Chihuahua and Sonora,
A: MTG’s strategy for 2014-2018 is exclusively based on the
as well as in iron mines, the land typically has high silica
development of innovative new products. Our Whistler 12
content, which is one of the most abrasive materials.
is a bucket for cable machines or dragline excavators that
These mines require durability rather than speed from
can be loaded with 100 tonnes of product. It is widely used
their equipment. Tooth strength is extremely important
in iron, coal, and copper mines worldwide and is already in
to us so we focus on preventing breakage by suggesting
use in mining operations in Sonora, Coahuila, and Durango.
the appropriate tooth based on the characteristics of the
Our TwinMet product is a tooth made up of two identical
tasks. A disaster could potentially arise if a tooth breaks
parts, which has been rolled out in open-pit mines, but
and no-one notices because the tooth’s metal is stronger
also has potential in the underground mining market. The
than the jaws of the crusher. MTG uses a new technology
third product is a protective blade used for scooptrams in
that makes it essentially impossible for a tooth to break if
underground mines, which will be released in 2015. There
used properly. Known as Argon Oxygen Decarburization
are about 7,000 scooptrams in use across Mexico so we
(AOD), this technology involves injecting argon, a noble
see a lot of potential for that product here. We are also
gas, during steel melting in order to remove hydrogen,
working on patented cutting tools. For example, we are
which is the most harmful element for the tooth and
researching the potential of incorporating ceramic in our
often causes breakage. Argon removes the hydrogen
cutting tools. However, this may be at least ten years away
and is then lost in the process, causing the piece to be
from being rolled out because the carbide incrustations we
practically unbreakable. A tooth may still break if used
have tried so far have not worked. Ceramic is very hard but
in a machine of a different size than it was intended for,
very brittle, like glass. We have to find the right percentage
therefore it is important to choose the right tooth and a
between ceramic and steel that holds. We also came up
proper fastening system. MTG teeth only fit an MTG tooth
with a hammerless tooth fixing solution, named MTGtwist,
adapter and the socket is patented by the company,
where the conical pin is removed by one person in a safe
along with the pin.
273
274
| MINE SPOTLIGHT
PINOS ALTOS Tucked away in Chihuahua’s Sierra Madre gold belt, Pinos Altos lies in a mineral-rich area to the northeast margin of the Ocampo Caldera, which hosts many epithermal gold-silver deposits. The property is underlain by volcanic and intrusive rocks disturbed by extended faulting. Its geological focus is a horst structure, made up of an uplifted block of rocks at least 10km long by 3km wide and defined by the Reyna de Plata Fault to the north and the Santo Niño Fault to the south. Pinos Altos was first discovered by Don Juan Hernandez in 1871 and was operated by Compañia Minera de Pinos Altos in the closing decades of the 19th century. The mine suspended operations from 1905 to 1920 due to the Mexican Revolution and was sold to Real del Monte in 1930, but this company only carried out exploration activities. This period ended when an area for potential extraction was discovered in 1958. Industrias Peñoles then worked on the mine in 1973, but failed to succeed in its operation and the mine was declared a National Mineral Reserve in 1975. Next, the mine was exploited in 1991 by CRM before being transferred to Compañía Minera la Parreña in 1997. A final change of hands took place in 2006 when it was acquired by Agnico Eagle, which conducted further exploration and finally extracted gold in July 2009. After this whirlwind progress, Agnico Eagle expected Pinos Altos to produce 145,000oz by the end of 2014, and to average 167,500oz of gold per year in 2015 and 2016, with a mine life set to last through 2025. The project includes a series of open pits, including Santo Niño and Oberon de Weber, as well as an underground mine. Most of the ore is treated at the processing plant on site through heap leaching. The 5,000 t/d processing plant includes a set of crushing and grinding equipment complimented by a gravity concentrator and an agitated leaching system that is followed by a counter current decantation process. Precious minerals such as gold and silver are recovered with a Merrill-Crowe system while a refinery produces gold and silver doré bars on site. The recovery at the plant is estimated at 94% of gold and 44% for silver over the life of the mine. As is the case at most mines in Mexico, the low grade ore is recovered through a heap leaching system engineered to accommodate up to 5 million tonnes of material. The leach pads are currently contributing 5% of the total metal production at Pinos Altos.
275
IMPROVED SAFETY STANDARDS BRINGS BETTER ROOF SUPPORT Safety standards in mining
these acquisitions have increased the company’s ability to
sites have been improving
provide safety solutions for mining companies, the current
since the Mexican mining
state of the industry has forced many companies to opt for
industry opened its doors
cheaper options. “Normet has been focused on quality for
to
increased
foreign
decades,” Prados González adds. “This dedication is one
According
of our strong points, but at the same time, because quality
to CAMIMEX, 78 mining-
technology implies higher prices, it has now become a
metallurgical
operations
weakness. Our customers know that they have to invest to
have been incorporated
meet safety standards, but investments have now become
into
government’s
an issue for them.” Nevertheless, Normet still invests in
investment.
Javier Prados González, Director General of Normet
the
Health and Safety in the
its own service capabilities since it believes them to be
Workplace Self-Regulation Program (PASST), 32 of which
crucial for its customers. While it has been forced to cut its
were also granted the government’s safety certificate.
budget in several areas, it has refrained from compromising
Nevertheless, Javier Prados González, Director General
on after-sales service. “That is why we moved our office
of Normet, states that some mines are still making use
to a bigger facility, enabling us to have a workshop and
of tractors as opposed to specialized mining equipment.
warehouse. We have hired more engineers and allocated
Not only does this equipment improve safety standards at
50% of our resources and manpower in order to fulfill our
mines, it also significantly reduces operating costs as they
commitment,” adds Prados González.
are designed to withstand wear and tear and thus reduce downtime. “When you are dealing with a machine that
“Normet’s dedication to service and the quality of our
is specialized for a certain mining operation, the safety,
machines gives the company a competitive advantage,
technical, and efficiency aspects are significantly better,”
despite the recent concern over the price of mining
says Prados González. “It might be cheaper for a mining
equipment,” says Prados González. The company’s presence
operation to use tractors for particular operations, but the
in 30 countries has helped to increase its overall awareness
overall efficiency of the operation is reduced, meaning the
of the industry and enabled it to tackle the challenge of
company might have increased maintenance costs.”
providing tailored equipment for various mining needs. In this specialization, the company can modify its machines
276
The fact that large mining companies are now improving
to around 4,000 different configurations, depending
their safety standards presents a great opportunity for
on a customer’s exact needs. “It has become easy for us
equipment manufacturers such as Normet. The Finnish
to manufacture equipment in a modular way, and then
company has three factories operating in Finland, Sweden,
assemble it within an efficient delivery time, depending on
and Chile, and specializes in equipment for underground
the particular requirements of the customer,” says Prados
operations. The equipment is used for processes such
González. This value is represented by the 80 Normet
as
scaling,
machines currently operating in Mexico, namely the
transporting, and lifting. It also recently acquired the bolt-
concrete-spraying Alpha 20 and Alpha 30, and the concrete
producing company Dynamic Rock Support, which won the
mixer Tornado from its Semmco product line. With these
prestigious Northern Lights Technology Award in 2013. This
solutions, Normet covers the complete requirements of
particular acquisition gave Normet the rights to the D-bolt,
rock support, with the exception of the mine grid. With a
an innovative bolt which is able to extend its size by 20%
wide network of professionals and ongoing communication
without breaking, thus improving the rock support system.
with its customers, Normet aims to provide the best service
“Through our acquisitions, we have become specialists in the
available to the market. “Our team is very accessible and we
whole process of supporting and sustaining tunnels inside
are able to communicate with each other rather easily. We
the mines,” shares Prados González. “We have changed the
have an internal CRM which allows each local office to upload
company’s strategies in order to show our clients that we
its experiences to our database, enabling other offices
are offering more than just machines and chemicals; we
around the world to draw useful information from them.”
offer operational solutions.” The company also improved
This system is intended to provide an all-encompassing
its product portfolio by acquiring TAM International, a
service for Normet’s customers, whether in Chile, Finland,
producer of admixtures for concrete. This way, Normet
or Mexico. According to Prados González, 2015 will be an
not only manufactures the equipment for transporting and
interesting year for the company in Mexico, as it prepares
spraying the concrete, but also the concrete itself, making
to capitalize on the best investment opportunities it has
Normet a specialized company in tunnel technologies. While
spotted to date.
concrete
spraying
(shotcrete),
charging,
INTEGRATED PACKAGE FOR SALE OF HEAVY EQUIPMENT When
a
heavy
company
sells
equipment
for
lower.
Nevertheless,
personnel
changes
do
happen
crushing,
screening,
periodically in mines, entailing a loss of knowledge. The
and
rocks
for
equipment used in mines is very specific and is not used on
washing
continuous
and
a large scale. Therefore, the number of specialists needed
management,
depends on the amount of equipment in the mine. In cases
it needs to find certain
where companies have few specialists, more training is
technoques to bring all of
necessary,” he says.
sludge
Enrique Desentis Castellanos, Director General of Construmac
industry, as the rotation of personnel in mining is much
mining
these applications together. Construmac, Chihuahua,
based has
in
Desentis Castellanos states that while some mines buy
found
parts in advance and stock them, most operators do not
three: dividing its brands into their different applications
wish to have these parts stored on their sites. “We have
across industries, a united post-sale service, and providing
to stock the parts near the mines so that they may be
resale and financing options to customers. “One of the more
delivered quickly. It is easier to anticipate the demand
recent brands we have decided to distribute, Wirtgen, is from
for certain equipment, such as wear parts, however, the
a German manufacturer which specializes in concrete and
demand for emergency parts is harder to estimate. These
asphalt paving equipment, cold milling machines, pavers,
components are very critical and if they are not replaced
and rolling compactors,” says Construmac’s Director General,
in time, they could stall the entire mining operation,” he
Enrique Desentis Castellanos. He found common ground
adds. Companies like Construmac therefore have to invest
with Wirtgen as he describes its executives as similarly
heavily in devising a watertight warehousing strategy so
forward-looking. “We also distribute the Powerscreen line of
that its logistics do not fail its mining customers, which are
crushing equipment by Terrix, which provides us with track-
often located in remote parts of Mexico. “The provision and
mounted crushing equipment and screens, as well as Terex’
maintenance of such specialized equipment is covered by
materials processing system, which is a wheel-mounted
our company, but the price tag of buying such machinery
crushing machine for aggregates or minerals,” he adds.
can be considerable. Having staff with varied training can
Neither the Wirtgen or Terrix lines include large crushing
also help steer our clients toward a number of favorable
machines so Construmac has successfully focused on
financing options.” Desentis Castellanos adds that these
medium-sized crushing projects, a focus that the executive
options vary depending on the supplier of the equipment
says has allowed it to claim a larger market share. Desentis
being bought. “With German suppliers, we promote the use
Castellanos explains that Construmac also has a complete
of the Hermes financial cover, an export credit guarantee
line of concrete products, bringing together the CON-E-CO
put in place by the German government. These suppliers
concrete plants manufactured in the US, the McNeilus truck-
provide direct financing to the customers through this type
mounted concrete mixers, and the Putzmeister concrete
of insurance, which is quick, easy, and flexible, and has a
and sludge pumps. These latter products actually cross over
low interest rate. We also have financing deals with other
directly into the mining industry, since they can also pump
local and foreign suppliers, but we largely promote these
high solid content fluid such as tailings from mines. However,
services for small mining contractors since most large mines
no matter how well Construmac caters to its market
have their own banks,” he states.
segments, it cannot preventively cover all eventualities. “We cater to such a wide range of potential industrial applications
These three elements are wrapped together in the
that flexibility is paramount. If our customers are looking for
complete product package that Construmac provides to
very specific machines and we do not have them, we get in
its clients, ranging from technical applications and training,
touch with our suppliers or other distributors that may have
to after-sales support and financing. Desentis Castellanos
them in stock,” explains Desentis Castellanos.
explains that the greatest benefits of this approach are lower operating costs, the continuity of operations, and a
The second pillar of Construmac’s operations is focused
resulting increase in profitability for customers, yet he shies
on ensuring that clients receive the appropriate level of
away from labeling Construmac as an overall leader in its
training to operate the machinery, as well as post-sale
sector. “The specialized nature of our products and their
service, repair, and buyback options. The level of training
volume means that Construmac cannot be considered one
required differs from industry to industry, as Desentis
of the largest distributors of mining equipment. However,
Castellanos explains. “Every customer needs training, but
we can proudly say that we are leaders in the majority of
less so in the mining industry than in the construction
the mining niches that we participate in,” he concludes.
277
| VIEW FROM THE TOP
SAFETY FIRST IN GIANT’S MINING PORTFOLIO IGNACIO ORTIZ MARTINEZ Business Manager, Mining, Oil & Gas Solutions Division of 3M Mexico
Q: Although 3M is very well-established, what is your
this, the culture of safety practiced by foreign companies,
strategy to increase your market presence as a supplier of
particularly by Canadian firms who have a great presence
safety products for mining personnel?
in Mexico, has permeated the sector. As a global company
A: Since its founding in 1902, 3M has maintained a strong
that exchanges practices, needs, and solutions with foreign
presence around the world. Our very first venture was with
companies, we see the influence they have had in raising
a mine, and we have kept up our focus on that sector. We
safety standards in Mexican mines.
are aware of all mining needs, including the need for utmost safety at all times. This has led to a focus on several safety
Q: What are the innovative characteristics of 3M’s
perspectives. The first is to ensure the security of workers
respirators?
through personal protective equipment. We possess an
A: We have been leaders in this product range for several
attractive portfolio of products for mining companies,
years, and our success is due to the ability of our respirators
incorporating gear for head and ear protection as well
to meet the right levels of protection against dust, particles,
as breathing apparatus designed specifically for mining
gases, and fumes. The masks are made from non-woven
environments. We also understand that such issues extend
materials for both disposable and reusable respirators,
beyond personal safety, so 3M has developed product lines
and are loaded with interchangeable cartridges that filter
such as environmentally friendly fire prevention systems. We
the ambient environment to provide breathable and clean
ensure that our products for mining solutions avoid all forms
air. The lifespan of the cartridge will depend on the type
of environmental contamination. Overall, 3M’s technology
of operation, as varying conditions can saturate the filter
allows people to work in a secure manner, resulting in less
faster. Part of the service we provide to mines includes
operational interruptions and an increase in productivity.
software that can determine the saturation levels of each individual filter and state its remaining lifespan. We want
3M is helping to spread the culture of safety that is so
the industry to see 3M as a company that contributes
fundamental to the mining sector. Through the training
to lowering costs while maintaining the quality of its
services we provide to mining companies, we contribute
products, particularly as mining companies are focused on
to the efforts of the Ministry of Labor and Social Welfare
reducing costs and increasing productivity.
(STPS) in diffusing a culture of safety to all of Mexico’s
278
mines. Our training courses are validated by the STPS and
Q: 3M has been able to fix the sulfuric acid fume problem
comply with the requirements mandated by the Mexican
in the mines. How were you able to do this?
government for companies working here. 3M’s products
A: We developed a product specifically for this problem
meet international certifications which surpass national
through R&D in the US. Usually, sulfuric acid fumes occur
standards. However, supplying safety products alone will
at copper mines when using electrowinning processes.
not guarantee protection unless we can also teach people
When acid bubbles come into contact with the air and
to work safely in mining environments. This is why 3M
burst, acid fumes are generated. Our product is a fluoride
carries out training courses with the health and safety
chemical which is added to the electrolyte solution to
departments of mining companies every week. We have
prevent the formation of the fumes, as it causes the bubble
a team dedicated entirely to the mining industry, whose
to burst before it is released in to the environment. This
task is to showcase the technology we have and teach
helps to substantially reduce fume levels, which has led to
companies how to use it. While foreign companies have
major health and safety benefits. They can be carcinogenic
raised the bar on safety, the efforts made by Mexican
for people working in that environment, as well as being
companies have also been considerable. This is a result of
highly corrosive to metal structures, so reducing them
the collaboration between companies with STPS, which has
also saves on maintenance costs. International standards
introduced more stringent security measures in coal mines
exist to limit the ppm of acid fumes in our mines, and our
as a result of certain unfortunate incidents. In addition to
product helps to fulfill that requirement.
Q: What product has 3M created to deal with the dust that
customer’s needs, these local subsidiaries work together
is generated during operations?
to develop technology platforms. For example, we worked
A:
Dust
is
generated
in
open-pit
mines
where
with a partner to manufacture cables for mines. This
road conditions change constantly because of the
project led to the development of a reflective wire which is
characteristics of the mine. Water is used to mitigate dust
useful for underground operations. It can also be combined
emission caused by the combination of unpaved roads
with our Scotchlite reflective covering for low visibility
and the movement of trucks loaded with material. We
conditions. We are also heavily focused on maintenance.
developed a water-friendly chemical at our R&D center
The tapes we have developed allow workers to quickly and
in San Luis Potosi, which helps diminish dust emissions
safely repair power cords. We have a complete product
by making particles heavier. This has led to companies
line for welding operations, including electronic welding
reducing their water consumption by up to 40% when
masks, which allow this dangerous work to be done more
working in dust-controlled environments.
efficiently and productively. For post-welding applications, we have a ceramic abrasive called Cubitron II which makes
Q: What are the priorities of your R&D center in San Luis
maintenance more efficient. Through the collaborative
Potosi and what product lines are you focusing on next?
efforts of a mining team from Chile and a plant in the UK,
A: 3M is a global company with R&D teams in Mexico, as
we developed a product to repair the damage on rubber
well as in South Africa, Poland, Australia, Peru, and Canada,
conveyor belts. This is a cold vulcanized product that
all of which are devoted to mining. To understand the
extends the lifespan of the band.
LEAVING THE AGE OF SACRIFICIAL YELLOW CANARIES IN THE PAST The days of caged canaries lying dead in the dark mines,
and the dropping metal prices have not put a dent in health
as poisonous gases such as methane or carbon monoxide
and safety budgets. Yet, Santillanes has detected a shift
crawl into the tunnels, are over. While safety measures
in companies’ mindsets. In the past, many players had no
have advanced by leaps and bounds, images of danger still
problem replacing old equipments but now the emphasis has
color people’s perceptions. Pavel Santillanes, Director of
moved toward maintenance and repair. “As a distributor, this
PROVESICSA, a leading distributor of safety equipment, is
trend could clearly come to affect our sales, but we also offer
quick to rectify that misconception. “The mining industry is
repair services, which helps us gain some leverage over the
considered among the most hazardous industries around.
situation,” he explains.
That is why companies now implement very high safety standards to reduce risks to a minimum.” In fact, such is the
PROVESICSA goes a step further in its quest to achieve
level of security imposed by the mining industry that many
the welfare of mining workers, as it looks beyond the
of the products created for this sector have gone on to
mines and into the surrounding ecosystems. Its product
become standard in other industries, such as construction or
portfolio includes solutions for soil remediation in the event
oil and gas. In terms of health and safety, mining companies
of an oil or gasoline spill. While companies often choose
continue to ensure that their workers are not exposed to
to simply remove contaminated soils, which translate into
contaminants that may affect their welfare, and, as such,
containment and transportation costs, PROVESICSA offers a
employ preventative safety measures. “Workers in hazardous
simple solution that is cheaper compared to other methods.
environments
These
“PROVESICSA sells products to be mixed with the soil. By
prevent operators from being exposed to gases or dusts
making use of bacteria, they manage to decontaminate the
that may severely affect their health,” Santillanes explains.
soils,” Santillanes explains. It also has products designed to
“Mines are now equipped to handle any type of emergency.
protect the wildlife surrounding mining operations, as their
Sites have all kinds of systems to conduct rescues and
installations prevent animals from breaking into dangerous
ensure that workers stay safe in case of a collapse.” This
areas such as tailings dams. Santillanes is confident
has played right into PROVESICSA’s hands, given its wide
that while the industry has lacked impetus as of late, the
range of safety equipment, including emergency breathing
company’s evolving product portfolio reflects an advanced
apparatus, respirators, security harnesses, as well as gloves
state of mind toward safety. “We will continue to bet on the
and hard hats. Evidence that the mining industry takes
mining industry, and we are confident that stable growth
safety seriously is shown by the fact that the Fiscal Reform
will present itself in the future.”
must
use
respiratory
protectors.
279
FIRM CULTURE OF SAFETY CREATES HEALTHIER INDUSTRY Over 100 years ago, a methane gas explosion at the Jed
year. Once MSA had firmly embedded its roots in Mexico, the
Mine in West Virginia claimed the lives of more than 80
structure of the company’s Mexican operations underwent
miners. This tragedy acted as a catalyst, providing mine
significant improvements, particularly in terms of product
engineer John T. Ryan Sr. with enough justification to
availability,
dedicate his life’s work to mine safety. With the help of
domains. Gerardo Aguilar López, Business Director of MSA
famous inventor Thomas Edison, John founded Mine Safety
de México, recalls the situation before these operational
Appliances (MSA) and created the electric cap lamp, an
advancements. “Our commercial and technical staff were
invention which reduced mine explosions by 75% over the
scattered over several locations within the country, but
next 25 years. Since then, MSA has spread its wings. Over
things are a lot more consolidated and organized now.”
customer
service,
and
technical
support
54 years in Mexico, it had mostly focused on commercial activities, with minimal manufacturing being performed
MSA’s original commitment to creating a culture of safety
in the country. However, in 2007, the company decided to
is reflected today in its range of life-saving products. The
increase its Mexican investments in order to reduce costs
company has been heavily focused on head protection
and offer the country more competitive prices. The result
systems since its inception, leading to the recent
was the establishment of its Queretaro plant later that same
development of a groundbreaking ‘green helmet’ which
“I am definitely seeing an impact as unions are now demanding safer conditions from their employers. The culture of safety is growing” Gerardo Aguilar López, Business Director of MSA de México
PROPER FIRE AND GAS PREVENTION RELIANT ON EARLY DETECTION After 25 years of supplying safety equipment to Mexico’s
and the respective area supervisors. This procedure helps
industrial sector, Segman has broadened its product
them to quickly identify possible risks. “We investigate
portfolio with additional offerings that mitigate risks through
the potential risk locations, the presence of hazardous or
accident prevention. The company holds distribution rights
explosive gases, and the respective lower explosive limit
for some of the leading safety equipment brands such as
(LEL). All of these parameters can be measured by Notifier
Notifier, Honeywell Analytics, Kidde Fire Systems, and BW
detectors,” explains Del Bosque Vargas. Based on this
Technologies, and offers a wide range of gas, smoke, and
initial assessment, the technicians recommend detection
flame detectors, as well as respirators and suppression
and alarm systems using the results of the visit and the
technologies. “We manage solutions that increase the safety
product lines managed by Segman. When it comes to
of both open-pit and underground mining sites, including
gas detection, the company’s suggestion depends on the
vehicles, electric sub-stations, and offices,” assures Luis del
characteristics of the gases within the mine. “Our range of
Bosque Vargas, Assistant Director of Segman’s Fire & Gas
gas detectors can cover the entire spectrum of possible
Division. “Since every risk is different, every mine requires a
gases in mining operations; however, we need to know
specific set of solutions.” Through a close collaboration with
which gases are present in order to implement the right
mine operators and supervisors, Segman is able to design
solution,” affirms Del Bosque Vargas. The detectors can be
detection systems that can actually prevent major accidents
linked to suppressors, such as sprinklers or ventilators, so
from ever occurring.
that any possible hazard may be prevented or resolved. Moreover, Segman provides some of the most sensitive
280
In preparation for setting up a safety system, Segman’s
suction type smoke detectors for detecting fires. “The
technicians visit the mine to interview the operations officer
Vesda detector has a one-minute response time. It is able
made its debut in March 2014. Built with a polymer obtained
Queretaro, as well as on mine sites. “In terms of customer
from sugar cane, which in turn makes it 100% recyclable,
support, the training center has been more helpful than
MSA’s ‘green helmet’ addresses two of the mining
the plant in boosting knowledge, because the training
industry’s primary concerns: safety and environmental
we give is heavily focused on the norms and regulations
care. Alongside this helmet, MSA is also well-known for its
that ensure safety in the market. It does not only revolve
products devoted to portable gas detection. “Many recent
around MSA equipment,” describes Aguilar López. “For
accidents in mining sites have been caused by the release
instance, MSA does not supply gloves, boots, and other
or leakage of undetected gas that triggered explosions
safety garments, but these items are still strongly observed
and rockslides,” reveals Aguilar López. “MSA’s supply and
in the training sessions.” Despite the ongoing need for such
calibration of portable gas detectors helps workers escape
training, Aguilar López believes that the mining industry
hazardous situations while providing technological added
has one of the best safety cultures in Mexico. This is partly
value.” Aguilar López also notes that certain regulatory
due to the zero tolerance policies on accident prevention
changes now require all mining personnel to carry a
implemented by large corporations. “If a regulation will
detector. Due to the abundance of dust and gases within
help ensure that mine workers will return home safely every
a mine, similar regulations dictate that miners must use a
day, then it is important that everybody is aware of it,”
respirator which MSA makes under its Auto Rescuer brand
comments Aguilar López. “I am definitely seeing an impact
and that mining companies must store a sufficient quantity
as unions are now demanding safer conditions from their
in underground shelters and chambers. These personal
employers. The culture of safety is growing.” Nonetheless,
respirators do not contain oxygen, but instead create a
he believes that there are still some regulations that are
chemical reaction that produces enough oxygen to breathe
missing, but MSA aims to change that. In 2014, MSA issued
safely for around 30 minutes. For rescue missions, MSA
a proposal detailing a regulation for confined spaces,
has the Air Elite device which uses canisters and enables
which was then submitted to the Ministry of Economy.
the user to breathe for up to four hours. “Obviously, the
“Our proposal was approved, advancing us further into our
use of our equipment is more extensive in underground
norm project. Once it becomes an NMX (Voluntary Mexican
operations as there is no need for an Auto Rescuer in an
Norm), we will push to make it an NOM (Official Mexican
open pit,” explains Aguilar López.
Norm). The Ministry of Labor has also begun working on this process. We will continue to work in coordination with
In order to further contribute to the development of a safety
the relevant organizations to ensure that these regulations
culture, MSA provides training programs in Torreon and
help to develop our ideal culture of safety.”
to detect smoke before it is visible, which means that a
provide maintenance within 48 hours of being contacted.
fire can be extinguished as soon as possible,” Del Bosque
Maintenance is a key factor for upholding the quality of safety
Vargas clarifies.
equipment; if maintenance is not provided, the equipment stops
functioning
properly,”
he
says.
Our
technical
Segman provides a complete range of safety products,
laboratory is able to provide this service, extending the
from fire, gas, and smoke detectors, to complementary
product’s lifespan and ensuring that our clients’ employees
audio-visual and vibrating personal alarms. “Gases in
are kept safe.” Through the close relationship Segman
mines are either toxic or explosive, which is why 30 to
has built with its suppliers and the training it has received
40 years ago, miners would enter a mine with a canary. If
from them, the company is able to adequately respond to
that canary stopped singing, the workers would know that
risks, even when they have not been encountered before.
something was wrong,” says Del Bosque Vargas. “We can
“Everyone who works with Segman is certified by Notifier,
now replace that canary with state-of-the-art detectors
Federal Signal, and all the other technology brands that
linked to vibrating alarms in the workers’ clothing, and
we distribute. That gives our clients the certainty that their
audio-visual alarms in the sites.” Additionally, Segman is
concerns and issues will be expertly addressed by our staff,”
directly supplied by the Kidde Fire Systems manufacturing
del Bosque Vargas explains.
facilities, which allows the company to handle fire suppression risks associated to the mining operations.
Within the mining sector, the Segman’s core business lies in the supply of safety technology to the Fresnillo and
Part of the company’s success in obtaining key players
Peñasquito mines in Zacatecas. “We teach the operators
such as Fresnillo, Goldcorp, and Minera Mexico as clients
in these mines how to use the safety equipment properly,
could be attributed to its stock availability strategy. “We
lessening their fears of making a mistake during an actual
maintain stocks of the detection products and repair parts
emergency,” explains Del Bosque Vargas. “Drills such as
to guarantee immediate delivery,” explains Del Bosque
these are vital to ensure that life-or-death situations are
Vargas. “The company is able to respond to an order and
handled calmly and professionally.”
281
PROVIDING MASSIVE RANGE OF INDIRECT MINING SUPPLIES When visiting mining operations, it does not take a keen
available in Mexico, combining for over 100,000 products.
eye to notice the sheer plethora of supply needs. However,
This makes it tricky to speak of specific products that
while a novice underground might dwell on drill rigs or
Grainger supplies to mining companies. Instead, Lopez dwells
scooptrams, the more discerning observer would see other
on product categories, stating that Safety, Material Handling,
products and equipment that are equally important for a
Tooling, and Motors and Pumps combine to represent over
mine’s safe running. These lines of equipment, known as
70% of the products provided for mining, with cleaning and
indirect materials, can reach thousands of specific pieces,
electrical products making up the remaining 30%.
from motors and pumps, to personal protection equipment like boots, hats, and gloves. An entrepreneurial witness
So how hard does Grainger have to work to bring the
might well spot the wealth of opportunities that exists in
importance of indirect materials to the attention of mining
supplying all these products to mining companies, allowing
purchasing managers? To Lopez’s mind, Grainger can turn
them to focus on their core business. One company has
an attitude that has laid waste to certain mining suppliers
been doing this for over a century: Grainger.
into a competitive advantage. “We know the mining sector
“Grainger has 4,800 suppliers globally, allowing it to pick and choose which products are best suited to the working and environmental conditions to be followed in each mine” Fernando Lopez, Director General of Grainger
Grainger’s activities in Mexico are a natural extension of its
has been looking for more aggressive cost-reduction ideas
operation in the rest of North America. The exploitation of
in 2014. Grainger aims to remove costs from our customers’
natural resources in Canada led Grainger there over a century
minds. Although we provide competitive prices, our cost
ago and to the US 85 years ago. Some time passed before
advantage lies in the fact that we can make operations
the company entered Mexico 18 years ago, but it can count
more efficient. Usually, mining companies can have as many
on its mining expertise from the decades spent in Canada
as several thousand suppliers for different items, and they
and the US. Fernando Lopez, Director General of Grainger
can reduce costs in inventory management. Once that is
Mexico, explains that 28 of the company’s product lines are
consolidated into a supplier like Grainger that can supply
SAFETY FIRST FOR AMBITIOUS MINING PRODUCTS SUPPLIER While many Mexican SMEs
when dealing with large multinational corporations. The
fail in their first year, the
benefits of this are strongly reflected by the confidence that
survivors
to
industry clients have in mining SMEs like Anclas Mineras
become respected brands
can
Encinales,” he states. The company began life as a small,
in their chosen fields. For
family business in the early 1980s. At the time, it was known
Carlos
Cardona
as Taller Encinales, and provided welding tools, winches,
Alberto
Sandoval,
Carlos Alberto Cardona Sandoval, Director General of Anclas Mineras Encinales
282
seek
Director
and general mechanical expertise to federal public service
General of Anclas Mineras
units. Over time, it became influenced by the agricultural
Encinales,
mining
industry and branched out into the manufacturing and
sector is evidence of how
the
maintenance of agricultural tools. However, the company
resilient SMEs can make it
soon spotted the possibilities that lay in mining, opened a
in the long-term. “Family businesses face many obstacles
processing plant, and is now embarking on its own mining
relating to their operations and business structures, but
operations. Anclas Mineras Encinales has faced a slew of
they also have clear values that prove to be advantageous
bureaucratic challenges in obtaining relevant permits such
all the indirect materials they need, operating costs can
Although the range of Grainger products typically needed
really go down,” he says. Grainger maintains this dynamism
in most mines might stay similar, the timing of orders will
by concentrating on requirements that are standard across
not be so easy. This poses a massive inventory challenge
all mines, and stays away from replacement parts for
that Grainger has had to answer. Lopez explains that
machinery or specialized equipment. However, Lopez is
logistics and inventory planning has had to be one of the
keen to point out this does not mean that Grainger does not
company’s strongpoints for it to reach and maintain its
bring innovation to its customers. As these requirements
position. Having the expertise about which products are
are usually similar in many mines, a thorough analysis
right for the mining industry does not preclude the need to
of each operation can turn up better products or brands
understand and track the requirements of each customer.
that particular mines may not be taking advantage of.
As such, agreements are made with each mine, tracking
“Grainger has 4,800 suppliers globally, allowing it to pick
which products are always needed and which are likely
and choose which products are best suited to the working
to be spot buys. After predicting the timeline for such
and environmental conditions to be followed in each mine.
requirements, Grainger invests in having inventory close to
Once it is embedded with a company as a trusted supplier,
the mines. For rarer types of products, inventories in Mexico
Grainger can begin to look for better alternatives for the
City, Monterrey, and in the US can be tapped up.
products currently in use. This is where it can also rely on its own Grainger branded products, manufactured to
“We have done a lot of research on the mining sector to
the highest standard but at a lower price than equivalent
fully understand it and the conclusions were very logical.
commercial brands,” says Lopez.
Mines are in very remote locations, making it difficult to get access to products. Furthermore, when products are
Although Grainger seeks this integration, it also facilitates
needed, production cannot be stopped due to a lack of
interaction between suppliers and customers as well as
availability. This means a mine needs to have access to a
online business and easy vending options. “We bring the
product, even an indirect one, the moment it is required,”
suppliers and introduce them to the mining customers, to
says Lopez. He explains that, oftentimes, a mining company
allow for the provision of training or technical support,”
may have a preferred vendor for a certain type of product,
explains Lopez. “We also provide an e-commerce platform
but this status may simply have been obtained from the
that is compatible with ERP software. We have vending
vendor being near the mine. This plays right into Grainger’s
machines that can be installed on site, which save money
skills, since it has one of the strongest logistics presences
as certain parts are available immediately. These machines
in Mexico. Lopez assures that the company covers 95% of
also get customers to reduce spending because they
the Mexican territory for same-day or next-day delivery.
can measure which people use which tools, making the
For mining customers, specifically, the remoteness of sites
workforce more careful and conscious about how they use
still requires Grainger to go the extra mile. This is why
them. Our vending machines are configured to the products
Grainger has dedicated branches in places like Cananea
needed in each mine or even each workstation. Typically,
and Hermosillo to be able to service its mining customers
companies use them for safety products or tools.”
as quickly as possible.
as the permission to use explosives. “There are cases of
anchor rods, prestressing cables, and cement cartridges. On
large mining operations being halted due to the absence
the mining support products side, the company provides
of an authorized explosives permit,” explains Cardona
sealing caps, strengthening rods, support hooks, and lead
Sandoval. “When big companies struggle to meet these
weight. In terms of additional support and reinforcement
requirements, imagine how difficult it is for the smaller
equipment, it sells such simple yet necessary products as
ones.” To combat these rules, Anclas Mineras Encinales
wire mesh, butterfly plates, and lightweight frames. With
already works with dynamite that has so far managed to
a diverse portfolio of anchors and support systems for
produce good results. With this product, the company
different rock types, Anclas Mineras Encinales is also able
has been able to successfully extract both gold and silver
to confidently promote mine safety. Sandoval Cardona
concentrates: silver with an average of 350g per tonne,
expects the importance of safety to continuously increase
and gold at 2g per tonne.
within the industry, and believes that this trend should be supported by the publication of an official Mexican safety
The depth of its wide portfolio of mining products has
standard. “We want a law and a standard to exist because
seen Anclas Mineras Encinales become a trusted supplier
we know that it will save lives. I cannot bear the idea of a
of industry heavyweights such as Peñoles, Agnico Eagle,
fatal accident occurring because of a failure in any of our
Gammon Lake, and Luismin. The product range that allowed
products.” For 2015, the company intends to build on its
it to grow from an SME startup to a supplier of choice
homegrown success to export its growing line of products
covers three divisions. Its anchor products line includes
to other countries and expand into new markets.
283
SAFETY PRODUCTS PREVENT SHOCKING CONSEQUENCES Industrial accidents are a major concern within any business,
are becoming increasingly synchronized. NOM-001, in
endangering the lives of employees and potentially
particular, represents the national electric code in Mexico,
obliterating a company’s reputation. The mining industry
and matches the National Electric Code (NEC) in the US.
is particularly alert for electrical accidents and failures as
Since 2012, these standards have undergone many changes
they can lead to a severe loss in profit through machinery
and now detail the issues that mining companies face and
downtime. Jorge Muñoz Botello, National Manager of
what they should do to make their installations safer and
Meltric, is keen to explain how his company is leading the
more reliable. Meltric’s decontactors are certified to safely
charge with a range of plugs and receptacles which both
provide 60hp even when a motor is energized, something
increase electrical safety and reduce downtime in the
which no other company has accomplished, positioning its
event of failure. “The best investment that can be made in a
devices on the path of least competitive resistance.
mine is ensuring security for the workers and the company. Most electrical accidents occur when people attempt to
Decontactors are a prime example of the current
de-energize a circuit. This process usually needs someone
equipment that Meltric provides for such circumstances.
to access a dangerous terminal, potentially exposing them
These plugs and sockets either use a pin and sleeve
to electrical energy. Our equipment promotes safety by
connection or butt-contact technology to provide a simple,
removing the need for this procedure.” The company
safe solution for opening and closing circuits. There are
needs little introduction in the mining industry as these
three products within the decontactor family: DB, which
kinds of innovations have already provided ample reason
can handle up to 60hp, DS, which offers the highest
for the Meltric name to resonate throughout the sector.
amperage range, and DSN, which is the most popular
“Most electrical accidents occur when people attempt to de-energize a circuit. This process usually needs someone to access a dangerous terminal. Our equipment promotes safety by removing the need for this procedure” Jorge Muñoz Botello, National Manager of Meltric
284
Meltric’s dedication to mining in Mexico has been apparent
due to its low-cost, compact design and its ideal purpose
since the company began its 35-year representation in the
for connecting motors, welders, and other equipment in
country. In November 2011, Meltric opened an office on
a range of environments. “With our decontactors, our
Mexican soil, and then geographically split the nation into
customers can open and close a circuit that is 6,000 times
seven regions before establishing dedicated, representative
more energized than the baseline,” explains Muñoz Botello.
management teams for each. “The mining market in
Meltric guarantees that if a motor needs to be changed
Mexico is the one in which we have the most insight. We
on any given application, its products can halve the
have participated in almost all mining operations in the
timespan of the procedure, significantly lowering the cost.
country and have communicated with all mining clusters
Decontactors present significant productivity and security
as well,” says Muñoz Botello. He then lists Buenavista del
benefits for mining companies by reducing the length of
Cobre, Los Filos, Madero, and Fresnillo as some examples
downtime and increasing the safety of their personnel. The
of mines which have implemented Meltric’s products, but
company also wants to continue to change the way that
expands on that by stating that its equipment is used
people view safety by increasing its number of training
almost everywhere in the country. “We have found success
sessions for safety standards and electrical standards alike.
in Mexico thanks to a variety of reasons. Our experience in
It aims to pull the plug on inadequate productivity and,
Canada and the US has provided vital information on the
as Muñoz Botello points out, build upon the awareness of
importance of safety awareness, enabling us to apply that
safety issues within the mining industry. “People have to
knowledge to the Mexican market. In doing so, we have met
understand that safety is the best investment,” he says.
the required electrical safety standards and have gained
“Through our safety and reliability training, we show our
the support of many electrical engineers.” To support its
customers the benefits of using a well-designed product
sales in all the NAFTA markets, Meltric complies with the
that does not need to be replaced on a monthly basis.
NFPA 70 from the US, the CSA C22.1 from Canada, and
This focus on high-quality in both our training and our
the Mexican NOM-001 electrical safety standards, which
equipment really helps companies achieve better results.”
| VIEW FROM THE TOP
TENSION SERVICES IN HIGH DEMAND AS NEW MINES OPEN RYAN LOUGHEED General Manager of Walden Equipment
Q: As a leading tension services provider, what are the
experiences drawn from any mining environment in the world
specific requirements that Mexican mining companies
can quickly be shared and built upon in any other region.
expect from your solutions, and which solutions helped you enter the market?
Q: Do you have any new products coming onto the market
A: We have recently started providing tension services in
that cater to evolving demands?
Mexico, such as ropes for the mine hoist. Our tensioning
A: In early 2014, we unveiled our narrow-vein series of
services help Mexican mining companies meet legal
scoops and trucks. Our scoops come in 1.25 yard and
requirements, specific engineering requirements, and the
2.5 yard options and our trucks range from seven tonnes
safety requirements for mine hoists. New mines are being
to 20 tonnes. In terms of evolving mining demands, the
opened in Mexico, which has led to new shafts being dug
needs of each mine are like snowflakes; they can each be
and new headframes and hoists being installed. The new
completely different. The size and dimensions of veins in
regulations that govern the installation of these mine
different mines will require utterly different applications.
shafts have allowed our company to enter Mexico.
As more mines are being discovered and opened up, more demand is being created for our narrow vein line of
Q: Many advances in the Mexican mining mentality took
equipment. To convince customers to buy our equipment in
place once Canadian companies arrived here. How do
Mexico, service has proved itself to be the most important
you view this exchange of information and mining best
variable. Companies need to show mining firms that they
practices?
can provide spare parts with consistent reliability at a
A: There have been natural advantages for Mexico since the
competitive cost. Given this scenario, Walden has thrived
arrival and expansion of the Canadian mining manufacturing
by keeping its equipment simple. A lot of new technology
sector, but the traffic has not all been one way as Canadian
is currently entering the mining industry, but sometimes
companies have also taken home certain advantages from
new-fangled equipment will not cut it. For example, a very
this country. The additional due diligence for equipment
moist mining environment can wreak havoc on computers
procurement which exists in Mexico has influenced the way
and controls. This is why we maintain equipment with
that this is done back in Canada. Certain status quo safety
simple parts that can easily be serviced, without the need
regulations in Canada are now more evolved in Mexico.
to fix an entire computer. The hallmark of our equipment is
Communication has become so much more fluent that
that it is strong, durable, and serviceable.
Rockfall protection in the mining industry: Safe – fast – economical Increased mine plan efficiency with • steeper walls • fewer berms • less removal of waste rock • better access to ore pockets
Geobrugg North America, LLC Geohazard Solutions 22 Centro Algodones Algodones, New Mexico 87001 Phone 505-771-4080 • Fax 505-771-4081 www.geobrugg.com • erik.rorem@geobrugg.com
285
| VIEW FROM THE TOP
FLEXIBLE STEEL MESH PROTECTION FROM ROCK FALLS LEFT: Erik Rorem, Business Development Manager of Geobrugg North America RIGHT: Reinaldo Bareyns, General Manager of Geobrugg Andina
Q: How important can protection systems against
there is always some residual risk. We do not perform
geological hazards prove themselves to be in the mining
regular inspections, and if one of our systems has been
industry?
compromised due to unforeseen conditions, it is the
ER: These protection systems are essential because they
responsibility of the customer to report it so that we can
can mitigate hazards and productivity risks. Most of the
advise on a proper repair as soon as possible. However, we
protection systems that we have deployed in the mining
do provide maintenance and inspection recommendations
sector have been to help ensure the continuity of operations
so that it is possible to increase the lifespan of our products
and to minimize the risks to which mining workers are
beyond the industry standard.
exposed. Our systems, besides helping to keep personnel safe, also contribute to the protection of the valuable
Q: How do you measure the impact of your products in
equipment that miners use to exploit their ore deposits
a mine?
and to process the materials, which are often exposed
RB: Our impact is very hard to measure for us because
to rock falls, landslides, and rock bursts. If these risks are
we do not reside in the mine sites. Mining companies are
not controlled, they can seriously impact the productivity
really the ones who see the impact of our systems by the
of a mine. Our products can help mining companies to
decrease in the number of accidents in a certain period
maintain the smooth flow of their operations without being
of time. One of the most commonly used Geobrugg
disrupted by rockfalls or slope instabilities. Geobrugg has
products is a mesh created for environments with low risk
been installing protection systems for open-pit mining for
of dynamic events. Another product has proven itself to be
years but we are now moving to underground mines as
useful under dynamic conditions, and has been used in the
well. Our products are ideal for dynamic conditions such
El Teniente mine in Chile where over 25,000m2 have been
as the ones found in deep underground tunnels where the
installed for rock burst mitigation.
mechanics of the rock are very active and present a broad range of challenges.
ER: We cannot test our product’s efficacy without actual rock falls, which makes it very hard to analyze something
Q: What are the main products you offer to the Mexican
that never happened. However, the efficacy of our
mining industry, and to what extent can they remove the
products can be measured in cost savings. For example,
risk of rockfalls or landslides from mines?
Codelco in Chile has already understood that our products
ER: All of our products can provide a solution for the
are reliable and that they can strongly contribute to
mining industry, from our rock fall and debris barriers,
productivity and safety. Safety is not an easy parameter
to our meshes and nets for slope stabilization and our
to measure, unlike productivity. Codelco measured how
tunneling ground support equipment. We offer a high
the mesh adapted to the irregularities of the tunnel and
strength and flexible steel mesh that is very good for
how it resisted during blasting operations and realized that
dynamic conditions or rock bursting situations. We also
the saving in the meshing process would be up to 30%.
have a lighter version for general ground support; which
We are now promoting our automated process that was
is a lightweight mesh with the same strength as regular
designed to install the mesh in an even smarter and faster
meshes but at a fraction of the weight. Since we are using
way without endangering the operators. These systems
high tensile steel, we can make use of smaller wires and
will allow companies to create even more savings, due
still have the same strength.
to the speed and efficiency with which the mesh can be installed inside a mine.
Thanks to its light weight, this mesh is easier to transport
286
and to install, while being safer and more cost competitive.
Q: What are the advantages that underground mining
However, we are not in the risk elimination business but
companies in Mexico can get by using Geobrugg’s
rather in the risk reduction business. That means that
meshing systems?
RB: Many mining companies are still using conventional
our engineers to discover the optimal design for the
methods to install the meshes in tunnels, which are very
spacing of anchors and the installation of other products.
inefficient when compared to our new system. First of all
We developed this software working alongside the Swiss
our system does not require a person at the front; this
Federal Research Institute. We are now doing the same
is ideal since that is the place where most rocks tend to
thing for underground conditions to be able to model the
fall. During the blasting operation they need to install a
exact conditions of a mine. This will allow us to know how
mesh that will resist impact from the rocks that fly due to
the bolting should be performed to work perfectly with
the energy released. Of course, after the blasting is done,
our mesh. We also have software called DEBFLOW that
they may need to fix the mesh or replace it with a new
was created to enhance our understanding of how our
mesh. The products that we manufacture are highly blast
debris barriers should be designed using its capabilities
resistant due to the tensile wire being used, meaning the
for rigorous virtual testing.
mesh can be used multiple times before repair is necessary. Q: How do you conduct full tests to verify product Q: How is Geobrugg able to identify any potential
performance?
geological threats that might be raised within a mining
ER: This is critical as there is no way to fully know how
operation?
our products will behave unless they are tested under
ER: This information is normally gathered by our customers.
real conditions. We do use computer modeling but these
They are familiar with the conditions surrounding their
models cannot fully replicate all the factors that intervene
operation, so they come to us to provide them with an
in a geological threat. For this reason, we must conduct
ideal protection system for those specific conditions. In
field tests to truly see how our solutions will stand up once
deep underground mines with high stress or significant
exposed to debris flows, landslides, and even avalanches.
rock bursting conditions, customers are best able to
It helps us with our liability and gives us credibility since
identify those dangers. We do not work as a consultancy
these tests prove our equipment’s performance under real
firm that conducts geotechnical studies to evaluate the
conditions.
behavior of rocks. Nonetheless, we do have experienced engineers that can assist in designing a solution to reduce
RB: This is something that really impressed me three years
the existing geological hazards.
ago when I first joined the company. It was incredible to see how every single product is tested under real
RB: We have a wide range of products that can be adapted
environmental conditions. As a matter of fact, the company
to solve most of the threats identified by our customers.
holds the world record regarding rock containment. Our
Our engineers have the capabilities to interpret the data
systems were able to contain 20 metric tonnes in a free fall
provided by them to find a solution that best addresses
from 43m traveling at a speed of 103 km/h.
the dangers. The solutions that are deployed depend on the geological conditions being faced. Our engineers will
ER:
decide whether to deploy passive or active protection. We
infrastructure sector and we are constantly making use of
can install systems that are able to catch rock falling into
this knowledge in mining projects. The geological threats
the pits or we can deploy systems that prevent that from
to which civilians are exposed are not that different from
happening in the first place. This will also depend on our
the risks that miners encounter. Of course, when it comes
customers’ budgets destined to mitigate geological risks.
to open-pit slope stability or underground mine steadiness,
Our company has vast experience in preventing accidents
we bring specific solutions to the table.
The
company
has
long
worked
for
the
civil
related to geological conditions. Most people working for Geobrugg are either engineers or geologists, so we have
Q: What future innovations can we expect from Geobrugg
the knowledge needed to take on any challenge facing the
in terms of protection systems against geological hazards
mining industry.
inside mines? RB: Our automated systems are already entering the
Q: What type of instrumentation and technological
market. Two years ago, this seemed like the future, but
advances does Geobrugg employ to fully understand the
today, companies like Codelco are starting to rely on it.
behavior of earth materials?
We now have enough technological advances to satisfy
ER: For surface slope applications, we have dimensioning
the needs of tomorrow. Nevertheless, Geobrugg is actively
software, called RUVOLUM, that enables design engineers
working with research institutes to develop new systems
to input different geological variables such as soil
and to look for alternative materials that can enhance the
cohesion, slope angle, and so forth. This software allows
reliability and efficiency of our products.
287
| TECHNOLOGY SPOTLIGHT INNOVATIVE
BELTS
FOR
IMPROVED
POWER
patented fabric construction which guarantees a longer life for
TRANSMISSION
the belt covering, providing extended protection to the belt
Gates has been supplying the Mexican mining industry with
core from oil, dirt, and heat. The Hi-Power II belt also possesses
advanced power transmission and fluid transfer solutions for
concaved lateral walls which provide full contact with the
the last 25 years. Its most standout product is the Hi-Power II
sheave-groove for equal loading and uniform wear. The upper
V-belt. The company’s founder, John Gates, invented the V-belt
arched part of the belt gives higher strength to the cords to
in 1917, helping to both transform the power transmission
prevent loosening and distortion, which contributes to the
industry and position Gates as a global player. “The product
equal loading and increases belt life. Straight walls typically
designed by John Gates remains the highest performing belt
flex and concentrate the wear on a small area of the walls.
in the market today. It is among the most trusted pieces of
These belts are suitable for all industrial applications, including
equipment in a mining operation, since the workers know that
v-flat drives, and meet a series of international norms to ensure
the operation will not shut down due to a belt failure,” claims
the quality of the products and the safety of their application.
Victor Mendoza, Commercial Vice-President of Gates de
“Our industrial belts, couplings, and hydraulic hoses can be
México. The Hi-Power II belt combines modern materials with
used throughout the mining supply chain in all types of mining
a design that makes it resistant to oil, heat, ozone, sunlight,
operations. Whether it is for underground, open-pit, or long-
weather, and aging. “Our belts for the mining industry perform
wall mining, our products can help mining operations work
four times better than the belts of our closest competitor. The
more efficiently,” says Mendoza. Major corporations such
cord that we use, which is the core component of the belt, is
as Industrias Peñoles, Grupo Acerero del Norte, and Grupo
a patented component which undergoes a special treatment
Mexico already make use of the company’s specialized mining
in order to resist and exceed the minimal requirements for
products to overcome challenges in production rate and
mining applications,” continues Mendoza. The belt’s flex-
profitability. “Since the mining industry is important for Mexico,
bonded cords are bound through a thermal process applied
it is crucial for suppliers and service providers to come up with
to the body of the belt resulting in equal load distribution
innovative ways to support the mine workers every day,” he
and absorption of bending stress without cord deterioration.
expresses. “Mining operations are far from urban areas, and
The adhesive rubber between the cords not only unifies
the workers from these sites expect that their equipment
them with other belt components but also provides a layer of
needs will be met when they need it.” The Hi-Power II belt can
static conductivity. Moreover, the Gates Flex-Weave cover is a
be counted to meet precisely those expectations.
TOOLING SUPPLIER RELISHES CHALLENGES Since its creation in 2011, Western Industrial Tools and Service
and drilling customers can turn to WITAS for drill head units
(WITAS) has become a leading service provider focused on
and spare parts, chucks, spare parts for clamps, water swivel
the needs of the mining industry. Strategically headquartered
spare parts, jaw sets and carbide bits, core bits, RC hammers
in Hermosillo, Sonora, it has the objective of providing its
and tooling, or even hydraulic components for drilling
tools to mining clients more quickly and at lower costs than
machinery. While the demand for drilling equipment may
its competitors. In order to achieve this, WITAS has had to
have dropped due to the exploration drop-off, the breadth of
become an expert both in sourcing common consumables
WITAS’ product portfolio ensures it will still be called upon.
and hard to find parts needed in mines from its network
288
of international and domestic partners. Its base in Sonora
Accompanying its integrated portfolio, WITAS believes
places the company near many of Mexico’s largest mines
it brings confidence to each of its customers through a
and close enough to the US border to ensure the quick
superior customized service. WITAS offers on-site training
importation of parts. WITAS also plans to open satellite
and product quality testing, including evaluations and
offices and warehouses in Chihuahua and Zacatecas in 2015
comparisons, to exceed customer expectations and aims to
to serve these mining hubs more directly. The company’s
secure clients for life by offering customized stock levels and
rapid success largely comes from its collaboration with the
developing supply chain solutions that other small vendors
largest mines and exploration drilling contractors in Mexico.
cannot handle. WITAS is always thrilled with the challenge of
Mines in Mexico have come to rely on WITAS for products
sourcing hard to find items and set up a stock program, for
ranging from down-the-hole hammers and hammer bits,
which it is constantly searching for new, innovative products.
top hammers, shank adapters, or lubricants and degreasers.
One of its visions is to make the life of purchasing managers
However, the company aims to become a one-stop shop
easier. If it does so, then WITAS is succeeding in its goal of
for tooling at all stages of the mining process. Exploration
providing superior customer service, integrity, and efficiency.
| VIEW FROM THE TOP
PROMOTING SAFETY AROUND HIGH-PRESSURE EQUIPMENT VICTOR MENDOZA Commercial Vice-President of Gates de México
Q: What advanced power transmission and fluid transfer
Q: How do your hydraulic solutions for low, medium, high,
solutions does Gates offer the Mexican mining industry?
and extremely high pressure applications reduce the risks
A: We have always been close to the Mexican mining
of injury which can stem from using such equipment?
industry, a fact which is reflected in our business
A: If the pressure requirement for a piece of mining
relationships with major mining companies such as
equipment is 2000psi, we are able to provide products
Industrias Peñoles, Grupo Acerero del Norte, and Grupo
that double that requirement. This directly increases the
Mexico. Through these ties, we noticed a necessity to
safety of mine workers. In underground mines, leakage
overcome production rate and service challenges in the
can lead to contamination. The G6K hose is used in
industry. This is why we work closely with our distributors,
many underground and open-pit mines and is capable
as they help us to understand our clients’ equipment and
of withstanding ultra-high pressures of 6000psi, thus
maintenance needs. They also enable us to offer improved
avoiding any type of leaks potentially caused by such
technical recommendations, and help customers to
pressure. We constantly provide training on how to
prevent downtime through the use of our products. Our
properly use and install hydraulic assemblies since the
distributors’ technical staff visit mines in order to assess
turnover of mine workers is often quite high, which means
the conditions of our clients’ equipment. They make
knowledge is lost
recommendations that help reduce costs and provide training to increase mine safety and productivity. Above
Q: How have Gates’ V-belt solutions evolved to better
all though, our product portfolio is primarily responsible
service heavy-duty industries such as mining?
for our success in Mexico. Our industrial belts, couplings,
A: After all these years, the product that John Gates
and hydraulic hoses can improve efficiency throughout
designed is still the highest performing belt in the market,
the mining supply chain in all types of mining operations.
and remains the most trusted product used in a mining
These products can be applied to pressure systems ranging
operation due to its established reliability. The core
from 2,000psi to 6,000 psi, covering the equipment needs
component of the belt is a patented cord which is specially
of our clients in the mining industry. We now have a new
treated to resist and exceed the minimal requirements for
generation of couplings called MegaCrimp® Couplings.
mining applications. The cover of the belt can perform in
These couplings have an extra security system that
high temperatures, and is oil and ozone resistant. There
prevents any leaks from mining equipment. Additionally,
are cheaper products out there that cannot perform
our hydraulic hoses are reinforced with two to six steel
as well as our products, so they end up proving more
wire braids, making them almost as strong as a steel tube.
expensive overall.
Q: Gates has three plants in Mexico. To what extent do
Q: What trends has Gates been able to identify in terms of
they suffice to service the Mexican industrial sector?
the evolution of the Mexican mining industry?
A: We have been expanding our plants in Mexico for
A: From 2010 to 2013, the mining industry showed
many years in order to remain competitive. Less than
consistent growth for Gates. From the second quarter of
half of our production goes to the local market, while the
2013 to the end of the year, mining production went from
remaining portion is exported to several markets, such as
stable to a slight decline. In the first quarter of 2014, our
North America, Asia, and Europe. We have three plants in
sales operations were quite slow, but from the second
Mexico. One plant, located in Toluca, produces V-belts for
quarter onward, mining companies again started to
the automotive and industrial market. The second, located
grow; we expect this trend to continue in 2015. Since the
in Atlacomulco, is where we manufacture hydraulic hoses,
mining industry is important for Mexico, it is important for
couplings, and adaptors. It supplies the mining industry
suppliers and service providers to come up with innovative
with the products it requires. Our third plant, located in
ways of supporting the mine workers every day, wherever
Lerma, focuses exclusively on hoses.
their mining operations are situated.
289
Innovation in technology and engineering is crucial for the development of the mining industry, as cost reduction often depends on the use of more effective technology and more efficient processes. With this in mind, it comes as no surprise that hundreds of local and international service providers are competing to offer the latest technology for mining projects all over Mexico. International consulting firms agree that one of the main challenges for mining companies is achieving the desired productivity at the desired costs; a challenge that is only exacerbated by the current price development in metal markets. This brings about a necessity for innovation that can only be satisfied by changing the way in which companies operate. Technological advancements have provided streamlined techniques for gathering data, using it in mining processes, creating short- and long-term mine plans, managing communication pathways, tracking administrative processes, and training operators, meaning that the adoption and development of these innovations are fast becoming synonymous with success.
The Technology & Innovation chapter delves into the workings of the main service providers and their latest technologies. Highlighted services include automation and control solutions, communication packages for remote locations, simulators, software solutions for modelling and mine planning, innovative construction materials, state-of-the-art tools and accessories, refuge chambers, couplings, off-road tires, and risk mitigation solutions. To highlight trending tendencies in the global mining industry, the chapter also includes articles on UAVs and drones, autonomous haulage trucks, and electrical powered equipment. Essentially, we provide a glimpse at the future of technology in a sector struggling to shrug off its conservative reputation.
TECHNOLOGY & INNOVATION
11
WHERE INNOVATION AND SOLUTIONS ARE JOINED Victaulic , the world leader in grooved and plain-end mechanical pipe joining ®
systems, has crafted unconventional solutions since 1919, allowing it to forge new paths as it tackles the industry’s most unique challenges.
STYLE 177N INSTALLATION-READY™ COUPLING • • • • • •
Installs up to 10 times faster than other joining methods Join pipe without need to disassemble the coupling, eliminating loose parts Allows for expansion, contraction and deflection in the joint One man installation Metal-to-metal contact allows for visual confirmation, no torque required Safe installation, no fire hazards
XL FITTING LINED SYSTEM • • • • •
Last up to 4 times longer than standard rubber linings Reduces scheduled maintenance, saving time and money Uninterrupted full flow capabilities Eliminate maintenance cycles Transitions easily to existing systems
SERIES 725 DIVERTER VALVE • • • • •
Industry’s first grooved end valve design for use on paste backfill and sandfill lines Eliminates need to reposition fill lines, reducing handling by 50% Can be actuated for remote operation 180-degree service, greatly reduces effort to reposition lines Blowout proof stem design and tamper-resistant lockout
victaulic.com 8529 REV A 11/2014 Victaulic and all other Victaulic marks are the trademarks or registered trademarks of Victaulic Company, and/or its affiliated entities, in the U.S. and/or other countries. All other trademarks listed herein are the property of their respective holders, in the U.S. and/or other countries. The terms “Patented” or “Patent Pending” refer to design or utility patents or patent applications for articles and/or methods of use in the United States and/or other countries. © 2014 VICTAULIC COMPANY. ALL RIGHTS RESERVED.
CHAPTER 11: TECHNOLOGY & INNOVATION 294
Engineering Pioneers Seek Hall of Fame Boost in Mexico, MacLean Engineering
295
UAVs Offer Great Potential for Exploration
296
Refuge Chambers Provide Shelter inside Mines, Strata Worldwide
297
A Well-Fed Miner Is a More Productive Miner, Quinasa
298
Flexible Couplings Increase Mine Pipe Longevity, Victaulic
298
TECHNOLOGY SPOTLIGHT: Valves Reduce Need to Manipulate Backfill Lines, Victaulic
300
New Plasma Technologies Changing Cutting Industry, Hypertherm
300
Choosing the Right Polyethylene Pipeline Solution, Innovations
302
3D Software Solutions Driving Force for Change, Dassault Systèmes/AdN Consulting
304
Information Systems Increase Efficiency, MISOM Consulting Services
305
Virtualization Boost to Mining Innovation, Sertei
306
Acceptance of Automation within Mining is Improving, Electro Controles del Noroeste
307
Automation Systems No Enemy to Mining Workers, ABSA Sonora
308
Software Solutions Allow for Optimal Mine Planning, Mintec
308
TECHNOLOGY SPOTLIGHT: Mine Planning Solutions in a Single Software Platform, Mintec
310
Virtual Reality Changing Mining Training Landscape, e-Tech Simulation
310
TECHNOLOGY SPOTLIGHT: Mining Simulators Reach High Level of Versatility, e-Tech Simulation
312
Innovation Investments Help Fight Mining Challenges, ThyssenKrupp Industrial Solutions
313
Composite Membranes Bring New Level of Versatility, Serge Ferrari
293
ENGINEERING PIONEERS SEEK HALL OF FAME BOOST IN MEXICO
Rene Valle, General Manager Mexico of MacLean Engineering
There are far worse calling
although it only opened offices in Mexico in December
cards for a company than
2012, after striking its first major deals with Canadian
to have its founder named
firms like Great Panther and Aura Minerals. According to
as an inaugural member
Valle, Agnico Eagle has also become a trusted customer,
of the International Mining
as it moved away from exclusively using Sandvik drilling
Technology Hall of Fame.
equipment and Getman utility equipment to include
Having created MacLean
11 MacLean Engineering machines in its line-up, from
Engineering
1973,
shotcrete sprayers to bolters. From 2010 until mid-
Don
in
brought
2014, Valle estimates around 70 MacLean Engineering
a visionary approach to
MacLean
machines were sold to Mexican mines. One of the
technological development
reasons that MacLean Engineering has been able to sell
in the mining industry. In the 1970s, MacLean pioneered the
itself so well among mining operators is that it seeks to
creation of blockhole jumbos, which help to clear obstructions
develop equipment, according to the most pressing and
in block cave mines. MacLean Engineering still successfully
underrepresented market needs. Its three main product
markets this advance today as its Blockholer product line. In
lines are Ground Support, Ore Flow Facilitation, and Utility.
the 1990s, he struck gold again by inventing high-reach and
The Ore Flow Facilitation line, which includes secondary
medium-reach rigs which utilize high pressure jets of water to
breakers, is designed to eliminate ore flow blockages in
break draw point boulders. It was this thirst for invention, his
block caving extraction methods. “The Blockholer was
refusal to settle for using established technology, and the way
designed to tackle this very issue. It can be operated
his inventions spread like wildfire across global underground
remotely and can be used to drill and position explosives
mining circles that saw Don MacLean deservedly elevated to
that facilitate the flow of ore from the area of extraction,
the Hall of Fame.
without exposing workers to danger,” explains Valle. The Ground Support product line includes bolters, shotcrete
For Rene Valle, General Manager Mexico of MacLean
sprayers, and concrete transporters, while the Utility side
Engineering, the current company’s philosophy is an extension
of the business covers scissor lifts, personnel carriers, and
of MacLean’s own. “When the company was founded, Don
fuel trucks. However, all three of MacLean Engineering’s
was looking above all to increase personnel safety in mines
product lines are not on an even keel in Mexico. When it
and to make operations simpler and more productive. That
started here, the company sought to position the Scissor
quest for safety continues to be of the highest importance
Bolter as its star product, seeking to emulate its success in
for MacLean Engineering. We would rather lose a client than
Canada. “But the market here is already dominated by other
be involved in an operation that cannot guarantee the safety
suppliers of ore flow facilitation products. Additionally, the
of its workers,” says Valle. MacLean Engineering’s products
mining industry in Mexico has been cheated many times
were designed to help Canadian mining companies meet
by equipment suppliers that have taken advantage of the
the country’s stringent standards, but they are also capable
good faith of Mexican miners,” reveals Valle.
of enabling any mine to attain higher levels of safety. As an example, Valle states that Don MacLean’s proudest
To solve this imbalance, MacLean Engineering feels
contribution to the mining industry was the Scissor Bolter.
there needs to be a change in the culture of operation in
While Mexico has no legislation to regulate bolting, in Canada,
Mexican mines. “Mining companies here need to learn to
bolting is systematic and obligatory; every meter that a mine
be systematic and avoid skipping steps in important safety
expands needs to be supported by bolts. This is where the
procedures such as bolting,” believes Valle. MacLean
Scissor Bolter comes in. “It is a very safe piece of equipment
Engineering has already offered two demonstrations of
since it can be operated from a distance of 1.5m from the
its ore flow facilitation equipment at two mines: Peñoles’
machine,” assures Valle. “It serves not only for bolting, but
Velardeña and Grupo Mexico’s Charcas. It is now busy
also for smoothening surfaces and removing debris that may
setting up two Scissor Bolters at Goldcorp’s Los Filos
be prone to falling. Nonetheless, the successful operation of
and Peñoles’ Tizapa. In these demonstrations, it showed
the Scissor Bolter requires operators to follow careful steps in
the importance of choosing the right kind of bolt and the
order to ensure their safety and that of the mine.”
procedure to install it correctly. “The Scissor Bolter allows the operator to apply any type of bolt. Other equipment
294
MacLean Engineering is now on a mission to bring Mexican
allows you to use only one type of bolt, which can
safety and equipment standards up to the level of Canada.
compromise the safety of the mine. Our equipment is easy
It began selling equipment for Mexican operations in 2010
to use but it still requires operators to follow procedures.”
UAVS OFFER GREAT POTENTIAL FOR EXPLORATION By Matt Kendall - Over the last few decades, Unmanned
to traditional helicopters, drones are helping mining
Aerial Vehicles (UAVs) and drones have risen to prominence
companies to acquire superior results for a fraction of
in the military sector, but their flexibility and efficiency
the cost. These potential benefits spread widely across
also present significant advantages for mining. In their rise
the value chain, from safety and security, to exploration,
to commercial success, unmanned aircraft have already
development, and productivity. However, even with such
attracted the attention of key industry players, who are now
obvious benefits, there are still many barriers preventing
reaping the rewards of this fledgling technology. Certain
drones from becoming routinely used in commercial flight
open-pit mines in the north and northwest of Mexico
missions. The lack of distinct regulatory standards in
are regularly flying drones in order to maintain greater
Mexico has formed a blockade which is halting the ability
control over their ore extraction volumes, and to improve
for UAVs to operate within civilian airspace. Even so, while
the accuracy of their financial viability estimates. UAVs
the Mexican government has not officially condoned the
can help gather useful geological information through
use of UAVs, it has been authorizing their use at defined
geophysical and geomagnetic surveys. These techniques
altitudes, short ranges, and away from densely populated
are used to determine the nature of the underlying rock
centers. As an additional upside, mining exploration is
structure based on the magnetic differences of the Earth.
often performed in remote locations away from restrictive
Geophysicists can then use that knowledge to determine
airspace, which could potentially boost the usefulness
where mineral deposits and precious metals are located.
of UAVs. Nevertheless, the country-wide adoption of
Explorative missions such as this previously required
unmanned aircraft will have to sit tight until the authorities
fixed-wing, manned aircraft to be flown at low altitudes
can come to a safety consensus.
and low air speeds, creating tricky conditions for pilots. In comparison, UAVs are capable of alleviating these risks as
These
they only require an operator to fly them from a ground-
lackadaisical adoption of UAVs in the Mexican mining
various
complications
have
resulted
in
a
based control center. Other benefits include increased
industry. The main issue is a lack of recognized standards
flight time capabilities, reduced maintenance and staffing
and protocols, not only within mining airspace, but across
costs, low environmental impact, and fewer building
all industries that could benefit from the technology.
requirements, making these pilotless aircraft a perfect fit
The non-existent safety regulations, which are normally
for the mining industry. For UAVs to represent a worthwhile
of the utmost importance in the aerospace industry, are
investment for mining companies, they need to possess
resulting in some low-quality drones being produced.
the aforementioned traits, as well as have enough space
Additionally, UAV operators are often untrained in aerial
to carry the information transmitting equipment. The
navigation, presenting serious issues when you consider
category of UAV most suitable for exploration is known as
that manned, passenger aircraft are moving through
Medium Altitude, Long Endurance (MALE). These aircraft
the same airspace. Attempting to rectify this is the
are capable of flying for around 15 hours, up to an altitude of
Civil Aviation Authority of Mexico, which is perhaps the
9,000m, and over a range of 200km. UAVs of this type are
closest thing to a UAV regulatory body in the country.
most often equipped with magnetometers for measuring
The national mapping agency has also expressed a
the variations in ground-based magnetic fields. The data
significant interest in this technology as it could advance
collected from such studies is then either stored on board,
its cartographic cause and knowledge. The support from
or sent directly to a ground control center, where it can be
both of these reputable bodies should help the necessary
processed by geologists. Geometers and magnetometers
bureaucratic requirements to progress. Despite all these
are not the only mining exploration technologies used in
issues, UAV R&D is still growing globally at an exponential
UAVs. Long-wave and mid-wave infrared cameras can be
rate, while the variety and flexibility of models available
fitted to the drones to produce high-quality imagery for
on the market grows and their price points drop. While
topographic mapping. Additional cameras can also be
this seemingly disruptive technology is still in its early
used to take high resolution, time lapse pictures of a site,
stages, drones will cause major changes in terms of
giving mine operators a clear view of any new or potential
productivity, cost, and efficiency in the near future. Once
fractures in the rock faces. This kind of early detection
the first steps in regulatory definition have been taken,
is extremely useful for any company looking to increase
the mining industry is likely to experience a swarm of
safety and reduce risks on site.
UAVs and drones dominating the skies.
One of the biggest benefits of unmanned aircraft is
Matt Kendall,
their relatively low cost. As a far cheaper alternative
Senior Editor at Mexico Business Publishing
295
REFUGE CHAMBERS PROVIDE SHELTER INSIDE MINES
Elmer Bauman, Sales Manager Mexico of Strata Worldwide
Thunderous echoes of a
Other solutions in Strata’s product range further highlight
nearby explosion violently
the company’s focus on mining safety. Strata CommTrac
shake the walls, causing
is a wireless, battery-powered system which provides
them to crack and buckle
two-way mesh communications and location tracking
under their own weight.
for underground mining personnel, enabling mining
The lights flicker one last
companies to view real-time locations of their workers.
time
darkness,
Strata Asset Tracking operates in a similar manner but is
dust, and fear flood the
before
instead used for tracking mining equipment and vehicles.
tunnel.
countless
“The systems we provide are not dependent on external
dangers conspire against
As
power or cables meaning that they will stay online during
their lives, a group of brave
an incident,” states Bauman. “The systems are easy
miners find shelter in the nearest available stronghold – an
to deploy as there is no wiring involved, they are very
Emergency Refuge Chamber.
cost-effective in terms of maintenance, and they are the most accurate, customizable, tracking solutions on the
When visiting a Mexican hard rock mine, it is not unusual
market.” Finally, HazardAvert is a proximity detection and
to find one of Strata’s walk-in Emergency Refuge
collision avoidance solution which prevents accidents by
Chambers. These models have been the company’s most
detecting when a person or vehicle is too close to a piece
popular products during its six-year presence in the
of operating machinery. Operators carry personal sensor
country, and represent 95% of its total Mexican chamber
devices which emit an audible and visual proximity alert
sales. “Strata’s employees include many ex-miners, so it
activated by an electromagnetic field generator installed
is easy for us to understand how the miners react during
on the machines. In some cases, this system can be
an emergency situation,” explains Elmer Bauman, Sales
programmed to automatically slow or stop the machinery
Manager Mexico of Strata Worldwide (Strata). “As it is
when the “danger zone” is breached. Electronic solutions
difficult for a miner to think clearly during such a tense
such as these are designed with accident prevention
predicament, we created a chamber that is as easy as
in mind, preserving the assets and avoiding the risks of
possible to use.” Purpose-built for each customer, the
higher operating costs in underground mines.
chambers can be designed to shelter between eight and 30 people in the event of an emergency. They are
Strata started life as a timber roof supports company, but
designed to withstand harsh underground environments,
has achieved worldwide success by expanding its product
and provide oxygen in the event of outside air quality
and services portfolio over 20 years. Besides the safety
becoming compromised. Additional features such as
solutions already mentioned, the company’s Strata Mine
battery-powered electrical backup systems, atmospheric
Services division has evolved to provide mining tools and
monitors, food and water rations, and private sanitation
equipment, contractual labor, and mining specialists when
facilities are all designed to aid prolonged survival and
resources are needed in a mine. El Boleo mine had recently
provide maximum comfort to its occupants. However, hard
requested Strata’s support due to ground control issues
rock chambers are not suited to coal mining due to the
which prevented its advancement. “Together with Strata
risk of electricity derived gas explosions. For this reason,
Mine Services, we provided a chemical solution to improve
Strata supplies completely power-free, inflatable Fresh
the stability of the roof,” recalls Bauman. “By drilling into
Air Bay Chambers that provide 96 hours of breathable
the ceiling and pumping in our product, the cracks were
air. These chambers are primarily used during a fire, or
sealed and advancement could continue.” He explains
when a high level of carbon monoxide, methane, or toxic
that this solution is primarily intended for coal mines but,
gas has been detected. The chambers are imperative
thanks to El Boleo’s geological similarities to such mines, it
as part of any mine’s safety program, and are relatively
has proved to be a broader success.
inexpensive when compared to the potential insurance
296
and investigation costs associated with employee injuries.
Committed to working deep beneath our feet in some of the
At present, the chambers for the Mexican market are built
world’s harshest environments, the bravery of underground
in Torreon, but Strata hopes to soon expand its offerings
miners is unmatched in the mining sector, or indeed any
within the country. The importance of the Mexican market
other industry. On a daily basis, these dedicated individuals
has led to the company planning to open more offices,
are at risk from hazards such as cave-ins, gas explosions,
once its customers nationwide install equipment which
poisonous fumes, equipment collisions, electrocution, fires,
requires more immediate maintenance.
and floods, to name just a few dangers.
A WELL-FED MINER IS A MORE PRODUCTIVE MINER The
evolution
of
trapped employees. The first trial was performed at the
methods
and
Tizapa Mine, where 50 workers tried Quinasa’s products and
technologies has allowed
rated them according to their taste and consistency. “The
mining
to
most important aspect of these products is that they were
mining
companies
increasingly
ore
designed for mining shelters to have an alimentary reserve
thought
that could deliver a sufficient amount of carbohydrates,
unreachable. Today, mining
proteins, and lipids to the workers,” Jiménez Mendoza
companies are capable of
explains. The different nutrients found in Quinasa’s range
constructing underground
of revolutionary products, such as “Food of the Future”,
facilities at considerable
mango tablets, powdered guacamole, and chocolate, are
pockets
Dimas Jiménez Mendoza, Founder and CEO of Quinasa
access
once
depths, as in the case of
equal to those when consuming a full meal. Together they
the TauTona Mine in South Africa, located 3.9km below the
provide a total of 1,030 calories, which is enough to sustain
Earth’s surface. Underground mining is undoubtedly the
a person in rest conditions. “Another important aspect of
most common extraction method that exists, but it is also
our products is that they were designed to contain high
the most dangerous. While the mining industry has made
doses of Vitamins A, C, and D. It is very common for mine
outstanding accomplishments in terms of hazard control,
workers to sustain injuries during their operations, which is
it has also been accepted that it is impossible to entirely
why it is essential that they attempt to prevent infection and
eliminate all threats due to the nature of underground
boost the immune system,” he adds.
extractive methods. This awareness has prompted mining companies to provide mine workers with everything they
Quinasa is currently providing its products to five
need in the event of mine collapses and entrapments. “If
companies
workers get trapped beneath the surface for many days,
its portfolio of clients from Peñoles and Fresnillo to
they will need nutritional supplies in order to remain healthy
Endeavour Silver, Pan American Silver, and Nyrstar. The
and survive,” says Dimas Jiménez Mendoza, Founder and
company believes that its products can go much further
CEO of Quinasa, a national provider of alimentary solutions.
for its clients, moving past their usage in underground food
Rescue missions are complicated affairs and, due to the
supply. “Nutrition has a direct impact on the productivity
depth and complexity of underground mines, can take
of a workforce. There is no doubt that if a workforce is
several days before they are successful. There have been
properly nourished it will perform better,” stresses Jiménez
cases where miners have been trapped for weeks waiting for
Mendoza. Quinasa recommends its mango tablets for
the rescue squads to save them. “In order to be prepared for
open-pit mine workers, especially for those that operate
these circumstances, mine operators must have a system in
heavy machinery. The product’s high glycogen content
place to ensure their workers have everything they need to
contributes significantly towards keeping the operators
be safe and well-nourished,” says Jiménez Mendoza. “Food
highly alert, which is non-negotiable for workers who are
supplies have a very important impact on how the miners
in charge of dangerous equipment for long periods of
withstand an emergency situation.”
time. “Stable levels of glycogen in the blood contribute
with
producing
mines,
having
extended
to the wellbeing and well-functioning of the employees, Quinasa’s products were designed in 2007 with the original
whereas a lack of glycogen can affect their motor skills
aim of providing NASA astronauts with all the nutrients
and coordination,” he adds. Our products can serve as a
they would need while working in outer space. Over time,
substitute for these foods. They are supplied not only to
the company realized the broader applications that their
improve the health of the operators, but to also prevent
products could have in other industries. “We saw that our
accidents from happening.”
alimentary technology could provide a solution for mining companies looking to keep their employees well-nourished
An ever-increasing intake of junk food and bad eating
under any conditions,” says Jiménez Mendoza. For Quinasa,
habits have resulted in obesity and malnutrition problems
this meant developing “technological food” with high
that have become a serious public health problem. Jiménez
nutritional value, analyzed at a biochemical level. Food such
Mendoza notes that mining companies across Mexico have
as this can ensure that companies, and indeed, society,
begun to understand this better and have started ongoing
can be provided with products that help fight obesity and
prevention and support programs to help establish better
malnutrition problems. Since diversifying its target sectors,
health behaviors among their employees. Recognizing the
the company has been working closely with Peñoles
importance of healthy workers, the industry has made the
to create products that can guarantee the wellbeing of
subject an integral part of its corporate culture.
297
FLEXIBLE COUPLINGS INCREASE MINE PIPE LONGEVITY The horrors of the First World War created a necessity for
to relive the damaging stressors found in conventional pipe
some world-changing innovations. In a time when German
systems. “Our company has in many ways revolutionized
soldiers were utilizing new weapons such as flamethrowers,
the way the mining industry puts together the piping
the French were forced to step up their game. The French
systems they use,” he states. “Without Victaulic, some of
government thus solicited the help of Englishman Ernest
these companies would not have been able to do many of
Tribes, to design a lighter, more mobile flamethrower in
the things they are capable of doing today. Other piping
order to beat back the enemy. This necessity led to both
systems out there are rigid, while we have the only system
Tribes and Henry Selby Hele-Shaw, a renowned engineer,
available that gives flexibility to the pipes.”
filing a patent for the invention of the grooved mechanical coupling. This initial innovation was the catalyst that
The many contours and environmental factors within
sparked life into Victaulic, a company that focuses on safer,
underground mines can be extremely hazardous for rigid pipe
more efficient pipe joining technologies.
systems. For example, shockwaves from blasting operations,
“Some of the mining companies we work for were able to save up to US$1 million by using our products in their air systems”
Marc Carriere, Global Mining Manager of Victaulic
While Victaulic originated in the UK, the company moved
combined with an inability to absorb them, can cause pipes
to the US in 1925 to serve the country’s military industry. It
to break. Victaulic’s flexible couplings mold to stresses such
was here that Victaulic began to spread its wings, branching
as these, contracting and expanding to ease the movement of
out into more commercial markets such as oil and gas and
the pipes, and thus preventing expensive pipe replacements.
mining. It is still possible to find the company’s products
This kind of flexibility enables mining companies to adapt
that were originally installed during the 1940s and 50s
their network of pipes to any topographic condition,
in Canadian underground mines. Marc Carriere, Global
revolutionizing the standard principles of pipe installation.
Mining Manager of Victaulic, attributes this longevity to
Mining operations use multiple types of piping systems, all of
the flexibility of the company’s products, and their ability
which, Carriere claims, are applicable for Victaulic’s products.
| TECHNOLOGY SPOTLIGHT VALVES REDUCE NEED TO MANIPULATE BACKFILL
uncoupled and manually redeployed to another location,
LINES
resulting in many extended hours of labor and maintenance.
Within underground mine operations, certain areas of the
In order to improve this procedure, Victaulic, a world leading
mine are commonly refilled with backfill paste systems,
producer of mechanical pipe joining solutions, has invented
which are used to strengthen the structure of the mine
the Series 725 Diverter Valve, which is the first grooved end
by piping sand fill or waste rock into areas that have been
valve specifically designed for use on paste backfill lines.
mined, replacing the ore that has been removed. This type
This product eliminates the need to re-position backfill lines
of methodology has been around for a long time. Prior to
by as much as 50%, thus reducing handling and increasing
the last 50 years, sand and water was the only solution, but
the efficiency of operations.
nowadays, different rock mixing systems and paste fills are
298
used. Paste fill is a thick, muddy material which performs
Constructed from a highly durable ductile iron, which
much better than the dated sand and water mixture, and can
conforms to ASTM A-536, grade 65-45-12, the body of the
be carried through pipelines to its dumping point. During
Series 725 is extremely rugged and comes in 6in or 150 mm
this backfill process, piping systems would traditionally be
size for systems rated up to 1000psi/6900kPa. Inside the
“Some of the most common piping systems used in mining
truly endure, and we can safely say that Victaulic’s products
are for process water, compressed air, mine dewatering, and
are far faster to install than any other product in the market.”
backfill systems,” he describes. “In surface operations, pipejoining systems are used for all the slurry piping around the
Innovations are inextricably linked to cost savings, another
flotation, while cyclone and tailing systems can make use of
benefit that Carriere believes his company can offer.
Victaulic’s rubber lining systems. The reason why companies
Victaulic has generated important costs savings for mining
use our products in abrasive conditions is because the
companies in terms of air loss. The energy that is consumed
traditional systems normally wear out at the elbow where
when producing compressed air can represent a huge cost
the pipes change directions. Our products prevent mining
due to rising electricity prices. “An opening of 2mm in a
companies from having to replace the fittings too often,
compressed air system can cost a mining company around
negating the process of removing bolts. Our systems are
US$800 a year,” explains Carriere. “This does not sound
easy to maintain and to replace if needed.”
too severe, but when one analyzes the number of leaks that can exist in one system, the costs can soar. Some of
When it comes to high pressure systems, like the ones
the mining companies we work for were able to save up to
used in the dewatering of a mine, Victaulic’s products are
US$1 million by using our products in their air systems. Our
capable of enduring any pressure delivered by the pumping
couplings fit so perfectly that they become 100% hermetic,
machines, far exceeding the needs of mining companies in
meaning there will be absolutely no gas leaks. The fact
terms of abrasion and pressure resistance. Cooling systems
that our gaskets are pre-lubricated avoids pinching or the
are another example, as they need a coupling product that
creation of holes that could lead to leaks.”
can handle major end loads and resist the heating and cooling of the system. According to Carriere, traditional
As well as a broad product portfolio, Victaulic also provides
coupling products cannot be used for this purpose as
aftermarket services such as training and inspection of its
they cannot adapt to the changing conditions, and would
products following the installation. By revisiting the groove
definitely break down as a result. “In the past seven years
of the pipes, the company ensures they are installed within
we have heavily invested in the development of new
the tolerance parameters necessary and can check that the
technologies for mining applications,” he states. “Our Style
couplings conform to specifications. “We can guarantee
177 QuickVic Flexible Coupling is a higher pressure, heavier
that our systems will never leak,” says Carriere. “We pride
duty coupling, designed to withstand the harsh conditions
ourselves on working with some of the best engineers in
found at mining sites. This means the environmental
this matter. We work alongside the contractors during the
conditions and the risk of being run over by scooptrams
design process to ensure that our products match the
or other machines. We have also invented a diverter valve
specifications of the piping systems. This is something that
called the Series 725 Diverter Valve for mine backfill piping
really differentiates us from other companies since we do
systems. This product will be a real winner because it will
more than manufacture and sell our products. We work
help in every underground mine that has complicated
with the contractors and engineers to deliver complete
backfill systems. We overdesign products so that they can
solutions for the needs of our customers.”
valve is a 5D bend profile that provides 180-degree service
transfer stations in order to redirect the flow. Not
to ensure smooth continuous paste flow. Its standard ISO
surprisingly, this process could sometimes take up to a full
5211 mounting flange allows a variety of operators to be
day, making it significantly inefficient and time consuming.
mounted easily onto the valve, including an electric actuator
To improve this process, Goldcorp expressed an interest
or a gear operator, the latter of which also has an optional
in automating its paste backfill operations at its Red Lake
input flange. The valve also features an adjustable stop
mine, and so approached Victaulic to request a solution.
and lockout that ensures proper alignment of the plug and the outlet, improving performance and reducing wear. The
The company then successfully installed two Series 725
addition of a lock-out, tamper resistant component ensures
diverter valves in 2013, followed by another five in 2014.
that the valve is not susceptible to unwanted manipulation.
These subsequent five were also equipped with electric
One of the companies to have already adopted Victaulic’s
actuators to provide PLC operators with fully automated
Series 725 is Goldcorp. The company previously directed
control from a remote control room. The result is that
its paste manually, using two miners to move a heavy
Goldcorp’s backfill operations at Red Lake are now much
schedule 80 5D elbow to multiple underground paste
more efficient and less time consuming.
299
NEW PLASMA TECHNOLOGIES CHANGING CUTTING INDUSTRY “It is difficult to approach a market like mining because it
which allows it to cut through any material that conducts
is one of the oldest industries in the world,” states Takeshi
electricity, meaning it can cut through virtually any metal
Yamamoto, Country Manager of Hypertherm. “For instance,
on the planet. In fact, plasma technology opened the door
mining companies have managed to satisfy their cutting
to stainless steel and aluminum cutting, which was not
necessities for years, so we endeavor to understand the
possible before. Oxy-fuel makes use of gases like propane
challenges that they face on a day-to-day basis. Armed
and oxygen, representing a significant cost element since
with this knowledge, we are able to prove to them that our
the equipment must be refueled constantly. Plasma also
cutting products can surpass the performance of traditional
requires gas to perform the cutting, but in far less volume
technologies.” According to Yamamoto, mining companies
than oxy-fuel. Furthermore, the most attractive element of
are constantly on the lookout for one-source suppliers to
plasma cutters is their cutting velocity, which is six times
supply them with safer and more efficient technologies. Two
greater than oxy-fuel, representing a revolutionary gap
of the main product lines in Hypertherm’s broad portfolio
between both technologies.
“Plasma technology is so potent that it starts piercing the metals as soon as it contacts the material and can cut up to two inches thick materials in very short periods of time” Takeshi Yamamoto, Country Manager of Hypertherm
are oxy-fuel cutters and plasma cutters, both of which
One of the main hazards involved in the process of oxy-
serve the purpose of slicing through metal objects such as
fuel cutting is compressed gas, as these processes can
pipes or beams. Despite possessing similar applications,
require products which hold up to 20,000lb of gas in some
the two products vary wildly in terms of usage rate and
cases. If you remove this huge tank from the equation, then
construction. Oxy-fuel is limited to mild steel or carbon
many of the safety concerns can be mitigated. In order
steel due to a process that can only cut through materials
to manage these technologies, Yamamoto believes that
with the properties to oxidize. Plasma, on the other hand,
mine managers must consider how the products will be
utilizes a thermal cutting principle with an electric arc
refueled, how to train the people who will be using them,
CHOOSING THE RIGHT POLYETHYLENE PIPELINE SOLUTION There are many producers of high density polyethylene
At its Queretaro plant, the company manufactures its
(HDPE) pipeline solutions in Mexico, yet Ricardo Ambros
own fittings, adapters, elbows, branches, and other
Segundo, Marketing Manager of Innovations, claims that
HDPE special parts for the mining, oil and gas, and water
few have focused on professionalism and quality. In this line,
treatment industries. Its products are used in aqueducts
Innovations has partnered up with companies in Germany
and pipelines for the conduction of mineral slurry, water,
and Israel to provide superior quality products and service.
and acidic fluids in mines. Innovations uses polyethylene resins, such as PE100 and PE4710, to increase its products’
300
“Innovations acquires cutting-edge technology from
resistance to abrasion, corrosion, and internal pressure,
Germany which allows us to trace the production process
as well as to improve flexibility and reduce their weight,
and guarantee quality for each piece we manufacture.
Ambros Segundo claims that the polyethylene products
Moreover, we are the representatives of WIDOWS, the
that his company uses can last up to twice as long as
German thermofusion pioneer, while we acquire our
its metal counterparts. He also mentions that for HDPE
couplings and electrofusion equipment from Plasson,
solutions suppliers it is crucial to have a production process
our commercial partner in Israel with 50 years of market
that can be strictly monitored and by which temperature,
experience,” he adds.
pressure, and time can be controlled.
and where to store or confine them. Even though oxy-fuel
that mining operators are already confidently acclimatized
technologies were sufficient for many years, there was
to oxy-fuel technologies. Most repairs are performed on
still a need of a solution that could enable the industry to
mild steel or structural steel, which is why there have been
accelerate the pace of cutting procedures. The preferred
no investigations into more advanced technology.” Oxy-fuel
attributes of this potentially revolutionary product would
is a tried-and-tested technology that has been in use for
need to be that it was easier, safer, and more affordable
years. Although this situation will not change in the short-
to use. This opened the doors for new technologies that
term, Hypertherm is educating its customers about the
did not rely on oxy-fuel, and enabled the use of plasma
operational advantages that plasma products can provide.
applications
After all, Yamamoto believes that if his company does not
and
mechanized
applications
such
as
beveling, pipe fitting, and hard coating removal.
lead the research for new cutting technologies, then its competitors will. “It is our job to improve on existing cutting
Plasma technology is now presenting itself as a benefit-
technologies as well as to find new ones,” he states. “Right
rich alternative to oxy-fuel, negating the need to pre-heat
now, no other company in our segment is dedicating as
the material before cutting it, as Yamamoto explains, “Oxy-
many resources to R&D as Hypertherm. We are confident
fuel technology requires pre-heating the material before
that by staying at the forefront of cutting technology, we
attempting to cut it, which naturally results in important
will obtain the recognition we are striving for. Innovation is
time losses during production.” “Plasma technology is so
a principle to which we are fully committed.”
potent that it starts piercing the metals as soon as it contacts the material and can cut up to two inches thick materials
To expand its water jet product line Hypertherm acquired
in very short periods of time. It is also affordable, easy to
AccuStream, which bolstered its portfolio with a range
manipulate, and profitable for the end user.” During the
of high-precision cutting tools. Since this acquisition,
construction of pipes or conveyor belts, mining companies
Hypertherm now has an in-house business unit developing
must cut the material in order to bevel and weld them.
software for its cutting solutions. This software has
Another benefit of plasma is that the correct mechanized
enabled the company to push its cutting applications into
plasma tool could do the cutting and the beveling in one
new realms, giving it more control over the levels of gas
process. This removes the process of grinding and creates
that are directed to the torch, and an ability to manage
general savings on capital equipment while simultaneously
the movements of the torch with extreme precision. “The
reducing any potential safety hazards.
challenge here is to become recognized for the solutions we provide. By fully understanding the environments
Despite being such a viable alternative, mining companies
where our technologies will be deployed, we will become
are reluctant to make the jump to plasma due to many
a trusted supplier of these types of solutions. I can say
established mining processes being heavily grounded in oxy-
with confidence that our wide array of products can solve
fuel technologies. “Our technology has limited penetration in
pretty much any cutting necessity the mining industry, or
this segment,” states Yamamoto. “I attribute this to the fact
any industry, might have,” concludes Yamamoto.
While product manufacturing and distribution are an
pipelines and may lead to ruptures. This could have severe
important part of Innovations, its true advantage lies in its
consequences if a rupture happens in pipelines conducting
expertise and experience with pipeline joining techniques
mineral slurry or acidic fluids,” Ambros Segundo states.
such as thermofusion and electrofusion. Electrofusion requires HDPE couplings with internal electrical resistance
If he had to choose, Ambros Segundo states that
to be connected to a DC power supply in order to
electrofusion should be the preferred technique when
generate an electrical current. The current generates heat
joints have to be made in confined spaces. This is due to
and causes the internal surface of the coupling and the
the fact that the equipment needed for electrofusion is
external surface of the pipe to fuse, creating the joint.
smaller than that used for thermofusion. However, while
Thermofusion, on the other hand, uses equipment that
it is faster than thermofusion, electrofusion tends to be
fuses the two faces of the pipes without the need for
more expensive due to the need for couplings. “Studies
couplings. It requires precise cutting of the pipe faces and
in Europe show that for pipe diameters smaller than 8in,
subsequent pressure and heating for a specific amount
electrofusion is more competitive than thermofusion,”
of time to fuse the two pipes together. Innovations relies
Ambros Segundo shares. “For bigger pipes, a deeper
on WIDOWS’ and Plasson’s decades of experience in
analysis is necessary to select the most cost-effective
thermofusion and electrofusion, respectively, to guarantee
solution. If a project requires joints of an aqueduct that
that the products it provides the mining industry meet the
is 20km long with 36in diameter pipes, it might be better
highest national and international standards. “If a joint is
to transport the thermofusion equipment needed for the
not of the right quality, it can cause non-alignment in the
operation.”
301
3D SOFTWARE SOLUTIONS DRIVING FORCE FOR CHANGE he explains. “We are also establishing a strong network of support services to expand the use of 3DS software and to expand client knowledge beyond the improvement of productivity.” With the information retrieved from flagship clients such as Goldcorp, Barrick Gold, Coeur Mining, Mineral del Norte, and First Majestic, AdN Consulting and Dassault have found a willingness to change among mining customers, which leads to them embracing 3DS solutions Warren Johnstone, Vice-President of Global Partner Success at Dassault Systèmes
Jorge Enrique Alvarez Alvarez, Director General of AdN Consulting
as a platform to boost innovation and transform their businesses. “This year, the mining industry is facing lower commodity prices, but instead of companies continually
As the world’s top provider of business planning, design,
looking to cut costs in this environment, we have found a
and production solutions, Dassault Systèmes (Dassault) has
universal desire to improve operations. Cutting costs alone
been working successfully in the transportation and mobility
will not solve the challenges faced by the mining industry
industries for many years. It is now trying to expand its
today,” states Alvarez. In the same vein, Johnstone
reach into mining and natural resources. By incorporating
believes that an investment in people is required to attain
technologies that have already been successful in other
this transformation, highlighting Dassault’s dedication to
industries, Dassault aims to drive productivity in this market.
training. “We have the necessary expertise for teaching
“Dassault provides clients with virtual universes, enabling
teams how to automate a scheduling process, or how to
them
describes
introduce mine production management systems such as
Warren Johnstone, Vice-President of Partner Success at
GEOVIA InSite™,” he explains. “People must change their
Dassault. “Our vision is to improve predictability, efficiency,
perceptions of how technology is integrated into their day-
safety, and sustainability of natural resources by providing
to-day functions. Investment in technology is important,
solutions that model and simulate our planet. Mexico has
but investment in the people using the technology is
always been an important country for us because of its
essential for success.”
to
imagine
sustainable
innovations,”
importance in the minerals and mining commodity market. We have a very positive view of the industry, particularly of
In
precious metals, base metals, and bulk commodities, which
metamorphosis of mining professionals, Dassault has
includes industrial minerals and cement.” Dassault provides
established a range of university programs which are
solutions that are applicable for all commodities across
designed to train future mining personnel how to use
all types of mines, spanning their entire life. Johnstone
the tools and solutions that will shape the industry.
sees a prime opportunity for growth by introducing these
According to Johnstone, the new generation of CEOs and
technologies due to their ability to increase efficiency and
executives engage in in-depth discussions regarding the
drive innovation, which he hopes will help transform the
adoption of technology, similar to how some automotive
mining industry.
and manufacturing executives did 30 years ago. “These
order
to
further
jumpstart
the
psychological
dedicated programs enable us to roll out the tools and As one of Dassault’s key partners, AdN Consulting has been
the training to the students, giving them a familiarization
delivering ITC solutions to the Mexican market for over 13
with the solutions before they experience them in the
years. The company represents a multi-disciplinary team
field,” states Johnstone. “We are planting the seeds for
of experienced and technically capable personnel that
the next three to five years to ensure there are enough
complement each other with various specialties. AdN’s
knowledgeable and capable operators in place to deal
primary service is to advise its customers on the best
with the next surge in mining.”
decisions when considering new technologies or solutions.
302
By working closely with Dassault Systèmes, AdN intends
A typical profile of an operator who is responsible for a
to utilize its expertise to bring a plethora of benefits to the
company’s software management, particularly in the
mining industry in Mexico. Jorge Enrique Alvarez Alvarez,
case of GEOVIA Whittle™, is that of a strategic planner
Director General of AdN Consulting, provides some insight
with a background in mine engineering who ideally
into the collaborative efforts his company is making with
holds expertise in the economics of mining. According
Dassault. “Together with Dassault’s natural resources
to Johnstone, Whittle has become a verb in the mining
division, we have been visiting existing GEOVIA customers
industry, one which is associated with long-term financial
in Mexico and receiving a very positive response from them,”
planning during the life of a mine. He explains that a
mining company with an understanding of the benefits
to bolster this portfolio, with a few important ones being
of optimization will typically assign some of their best
closed in the last couple of years. In September 2014,
strategic engineers to the operation of Whittle, but is keen
Dassault acquired Quintiq, a strategic planning solution
to stress that this should be ubiquitous, and that everybody
provider. The company’s solutions have been used to plan
should be running regular optimizations on their operations
some of the most challenging supply chains in the world,
to increase efficiency and ensure they are mining to plan.
such as those of Lafarge, ArcelorMittal, and Novelis. In July
Efficiencies are driven by a better understanding of the
2013, the company also closed a deal to acquire Apriso,
existing processes as well as a detailed view of the entire
an American designer of manufacturing software. Apriso’s
operation. This insight requires infrastructure that can
solutions are already used in manufacturing operations by
capture information in real-time and is then able to utilize
the likes of Alstom, Bombardier, Cummins, and Lockheed
that information. The solutions that Dassault can bring
Martin. At the time, Dassault said this would allow it to “close
to the mining industry are critical to its transformation,
the loop between design, engineering, manufacturing, and
both for changing how operations are performed, and
customer experience. “Such acquisitions have expanded our
for providing reliable information that its customers can
offerings far deeper into mining. As leaders in immersive 3D
stand behind. By providing advanced scheduling tools,
experience environments, we are at the forefront of leading
like GEOVIA MineSched™, and the services and training
change in the mining industry,” says Johnstone.
associated with these types of tools, Dassault hopes to address the need to improve cost management and get the
Particularly through the spread of GEOVIA, Dassault has
most out of a mining operation. “We believe in providing
been a pioneer in the area of collaborative technologies for
localized language and support to our users,” explains
some time. The company’s main mission is to simplify the
Johnstone. “We pride ourselves on having a presence in
complexity of mining by providing a best-in-class platform
every major mining center in the world, and differentiate
that unifies the complicated processes associated with the
ourselves by having localized services and operations that
business. Johnstone believes that Dassault will achieve this
cater to our customer requirements. To achieve that, we
by continuing to offer a collaborative environment that
often leverage local expertise and build partnerships with
improves data integrity across the entire mine operation,
companies who know the market, providing they have
and by ensuring the quality of the data is maintained,
existing relationships with customers, and are able to
regardless of where it originates from. “Often, remote
articulate the 3DS value proposition.”
mine site data needs to be shared with a corporate office,” explains Johnstone. “By providing a secure data agnostic
This very value proposition is also shaped by the large
platform, we are able to maintain data integrity and let the
portfolio of solutions that allows 3DS to address the entire
mine focus on the business at hand while delivering key
life of mine. Dassault has been making strategic acquisitions
information to the stakeholders.”
303
INFORMATION SYSTEMS INCREASE EFFICIENCY Advanced IT solutions for
assess the quality of the data being collected from their
mining operations require
operations.
the
ability
manage The data that MISOM is able to expose and integrate
of
making
comes from processes such as drilling or blasting and
that data easy to analyze.
describes activities at different operating sites within a
Other
mine. With this data, a mining company can restructure
data,
features Sean Dessureault, Founder and President of MISOM Consulting Services
to
large, continuous streams while
indispensible include
data
and reengineer its operations based on the feedback
and
it gets. “We make sure that a company can access all
reporting tools, as well as
relevant information about a specific drilling rig, or the
warehousing
systems maintenance and
details about the performance and status of a certain
regular upgrades. Mining companies can either hire a team
operator,” expresses Dessureault. Nonetheless, it is of no
of IT experts with knowledge of the common challenges in
use to have information about processes if a company is
mining operations, or outsource this service to specialized
not analyzing the data. “I have worked for large companies
IT firms. One such outsourcing provider is the mining
that have commissioned a data warehouse worth US$10-15
information systems consulting company, MISOM. Sean
million. This warehouse could give them any information
Dessureault, founder and president of MISOM Consulting
that they needed, but in some cases, they did not have
Services, shares his company’s vision. “We understand
a clear data extraction strategy.” For this reason, MISOM
the frustrations of mining engineers and mining planners.
focuses on teaching its clients how to create a balanced
We know because we have been there. We are solving
scorecard, which allows the management to receive a
problems that we once faced, and creating a product that
set of data from the safety, maintenance, and production
we wish had been available back then.”
systems. After this is done, MISOM is able to demonstrate the value of data analysis to its clients, before following
The development of MISOM’s solutions started in the mid-
up with more advanced processes that help managers
1990s, when Dessureault identified the need to centralize
narrow down the questions they need this data to answer.
data from mining operations in one location, and make it
The scorecards and dashboards generated by MISOM are
easily accessible for mining engineers. Dessureault worked
also accessible from smartphones, making data analysis
on automating the data entry process, which allowed
even more convenient and accessible. This way, mine
users to focus on data analysis, eliminating the time spent
operators have “the data in their hands,” says Dessureault.
manually transferring data from different sources into
Beyond this, to make the most out of MISOM’s technology,
a spreadsheet. “Traditional methods of data collection
mine personnel must be properly trained to operate
have been proven to be inefficient, an engineer might
such systems. “The main challenge is education. This is
spend up to 80% of his time using these techniques,” he
partly due to the fact that the technologies we use are
shares. “With our Mine-to-Mill (M2M) system all the data
not part of the core curriculum in university programs,”
collection, installation, and entry is automatic.” With such
says Dessureault. Nevertheless, in the age of information,
a system, M2M studies can be performed regularly, instead
data is as valuable as the product itself. “CEOs of mining
of once a month or once a year. Moreover, companies are
companies do not necessarily value the data that is
able to monitor and improve processes along the entire
collected. We have to show them how these products and
supply chain by mining relevant data and restructuring
services absolutely contribute to the cost-effectiveness
processes. Dessureault stresses the point that data mining
and efficiency of mining companies,” he states.
can only be done “on structured data that is controlled,
304
and which can be related to each other.” The data must
Considering IT development in the mining industry, MISOM
thus be collected, refined, and then processed in order to
is naturally turning its eye toward Mexico. The company
obtain useful information. “My original goal in developing
will meet mining companies in Zacatecas in the early
the MISOM license was to help the industry develop a solid
months of 2015 in order to spot opportunities within the
data infrastructure, to make it possible one day to use data
vast Mexican mining industry. “We are now employing
mining,” shares Dessureault. “Once companies have the
Spanish speakers and looking at opportunities near the
integrated data solutions we will be able to move to the
US-Mexico border,” says Dessureault. Having worked with
next step, which involves data mining and using algorithms
soft and hard rock, as well as underground and surface
to find relationships.” In order to move in this direction,
mining companies, MISOM feels fully prepared to face the
companies need to first install a data warehouse and
challenges in the Mexican mining industry.
VIRTUALIZATION BOOST TO MINING INNOVATION It has become somewhat cliché to say that technology has
anytime and anywhere.” Sertei’s solutions also lessen the
changed the world, but for Reynaldo Valenzuela, Director
risk of theft and loss of information. Through the use of
General of Sertei, that past tense is superfluous. He sees that
cloud computing, a company entrusts its information to
technologies like cloud computing and virtualization are
Microsoft or IBM in the same way it would entrust a bank
still changing the world, including the ways that business
with its money. “Information can be stolen from your office
is done in sectors like mining. While the well-known cloud
very easily, but it is difficult to steal information from IBM
computing gives companies the ability to access their data
or Microsoft,” he claims. “The weakest link in the chain for
from remote locations, the less famed virtualization can
this technology is the user.”
safely backup information without the hassle of owning and maintaining large quantities of servers. Sertei has
Despite the benefits of these solutions, Sertei is still
harnessed such technologies to become a key IT solutions
challenged by the lack of reliable energy supplies in
provider for the mining industry. The company has already
the remote mining regions. “Electronic devices are very
secured projects to help mine operators such as Goldcorp,
sensitive to changes in the supply of electricity, which in
Capstone Mining, AuRico Gold, and Alamos Gold, allowing
turn affects the availability of the services we provide. In
it to grow substantially since its founding in 2004. “By
order to overcome this, we provide technology that can
understanding the specific needs and problems of our
work despite interruptions in electricity or communication
mining customers, then meeting and exceeding those
signal,” explains Valenzuela. Solutions such as IBM’s
needs, we have grown into a key provider in the IT market,”
BladeCenter are able to withstand earthquakes, dust,
claims Valenzuela. One example of the company’s “above
and high temperature. Nonetheless, energy output is still
and beyond” approach to its services was when it helped
a major limitation for these solutions in areas with no
Capstone Mining with the virtualization of the servers at
access to the electricity grid. Another challenge for the
the Cozamin mine in Zacatecas. It has also been working
use of these technologies is the lower profit margins that
with Goldcorp since 2004, providing the company with
come with the reduced sale of equipment. To compensate
security solutions, high availability services, and updates
for this, Sertei offers a variety of services in order to
for its older technology. “Virtualization allows companies
ensure that mining companies make the most out of the
to use one device for a number of services. This happens
technologies it has on offer. “Our training services make it
by replacing physical servers with software, which can
easy for people to use our technology. Once they get the
then be copied and used on one server instead of ten,”
knowhow from us, they can operate everything perfectly,
Valenzuela
and even access their data from their smartphones,” says
explains.
“Additionally,
cloud
computing
technology eliminates the need to buy servers as it makes
Valenzuela.
use of existing servers owned by companies around the world.” To service the major mining players, the company
Sertei plans to keep growing by 40% annually, as it has in
works only with the most well-established IT brands such
recent years. It will also be expanding its reach to Torreon
as Microsoft, IBM, HP, and VMware.
and consolidating its branch in Ciudad Juarez. Valenzuela
“By understanding the specific needs and problems of our mining customers, then meeting and exceeding those needs, we have grown into a key provider in the IT market” Reynaldo Valenzuela, Director General of Sertei
IT solutions are not only helping mining companies reduce
believes that as mining companies feel the pressure to
their hardware and energy costs but, more importantly,
be environmentally friendly and reduce operating costs,
they are making information available at all times. “The
the implementation of new IT technologies will provide
main information requirement of the mining industry is
an alternative growth track in this typically slow-moving
availability,” Valenzuela exclaims. “Clients in the mining
industry. “We understand that long-term and short-term
industry operate in isolated areas such as the mountains of
goals start on the same day,” Valenzuela states. In this way,
Chihuahua, Durango, or Zacatecas, so they need IT services
Sertei and the mining industry should find themselves on
that run continuously, making their information available
the same track towards a more efficient future.
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ACCEPTANCE OF AUTOMATION WITHIN MINING IS IMPROVING Automation is as much
is the leading office for mining. “In recent years, Sonora
a part of the future of
has benefited from the investment of Grupo Mexico with
mining
global
whom ECN has been working. At the same time, Peñoles
demand for metals. As
as
the
has been very active and we have been collaborating with
companies
be
them in Coahuila and Zacatecas,” Bernal Freydig explains.
more efficient, automation
aim
to
ECN has also been a loyal partner the design, engineering,
becomes
and construction management firm M3, having been
increasingly
relevant as it allows them Arturo Bernal Freydig, Director General of Electro Controles del Noroeste (ECN)
to
sustain
involved in most of M3’s projects in Mexico.
continuous,
consistent operations, as
ECN’s product range also includes reagent dosing and
well as improve control
water management technologies. “One of the patented
and productivity, and reduce infrastructure requirements.
solutions that we offer is a reagent dosing unit for milling
Automation is becoming so relevant that mining near-Earth
and flotation processes,” exclaims Bernal Freydig. “This
asteroids for raw materials through automated robots is
system has been well-accepted and has positively affected
already being considered as a viable business model. Yet,
reagent consumption, which is a sensitive issue for cost
before this becomes a widespread activity, companies
and for the environment. It has also made improvements
on Earth need to step up their game and adopt control
to plant efficiency and mineral recovery.” Such systems, he
and automation technologies to improve their efficiency.
claims, have already successfully improved the recovery and
“Nobody can imagine an efficient, safe, and reliable mining
efficiency of plants in Mexico. Moreover, ECN has supported
process without automation,” says Arturo Bernal Freydig,
mining companies with the management of wastewater by
Director General of Electro Controles del Noroeste (ECN).
providing products and systems that accurately measure
Since 1991, ECN has completed more than 600 control and
water consumption. By calculating this, mining companies
automation projects, with mining contributing up to 50% of
are able to assess the efficiency of their plant. “The ideal case
its revenue. The first approach, according to Bernal Freydig,
is to obtain a fully producing plant with minimal water use.
is to work during the development of mining projects and
Our systems are used to find out whether specific indicators,
add value through control systems in mines. The other
such as water consumption, are within or outside normal
approach is to work on the optimization of operating
parameters.” While some mining companies in Mexico have
processing plants in order to attain higher recovery
been reluctant to adopt this new technology, large players
efficiencies and standards. “All of these tools can provide
like Rio Tinto have already started to develop and implement
information to facilitate decision-making,” he adds.
fully automated systems for hauling and drilling. Nonetheless, Bernal Freydig has observed that the technology has slowly
Bernal Freydig expresses that ECN is aiming to make new
permeated down from large companies to smaller players
investments that will broaden its control and automation
in the industry. “Conventional miners are people who have
product portfolio. “We seek to have a complete range
an instinctive knowledge that leads them to trust what they
of products, services, and solutions that go hand-in-
know. But, as mining operations grow, they need technology
hand with the mining industry,” says Bernal Freydig. “Our
to replace these instincts and this will only grow further as
offerings range from selecting the meter, instrument, or
solutions are refined over time.”
valve control, to delivering a full control and automation
306
project.” The company is able to provide such complete
Bernal Freydig believes that without a proper online IT
projects through its strategic partnership with acclaimed
system, control and automation technologies in mining
automation pioneer Rockwell Automation. Together with
and metallurgical processes are simply not complete. “By
post-sales support, ECN works on the proliferation of
implementing such systems, processes can be monitored
automation in Mexico and the US through its network of
online to make the necessary adjustments as they happen
offices. “These offices were opened following the “mineral
and move towards full automation. We started to offer
trace” that goes from Mexico up to Arizona, Nevada, and
information management solutions to mining companies
other mining states in the US. We want our knowhow to
after they proved themselves useful in other industries like
be applied in all those places,” explains Bernal Freydig. To
manufacturing and assembly, where every minute counts.
strengthen its market position, ECN also places its system
ECN is now considered a Main Automation Contractor,
design experts on mine sites, which are then supported by
able to provide complete solutions for a project, from
ECN’s specialized mining offices. The company’s Hermosillo
design and engineering, to installation, programming, and
office is its principal facility but ECN’s team in Torreon
maintenance.
AUTOMATION SYSTEMS NO ENEMY TO MINING WORKERS For 20 years, ABSA Sonora has been a trusted vendor
if any of the power or control housing units were tampered
of automation and control solutions within the mining
with or left open. The soft starter also removed problems of
industry and beyond. With lines of equipment from the
wear and tear, thus increasing the life of motors and various
likes of Rockwell Automation, Bosch, and Schneider
mechanical components. This installation also reduced the
Electric in its portfolio, ABSA Sonora rapidly extended its
risk to human health. Garza explains that, prior to ABSA
coverage to 15 branches in the mining states of Chihuahua,
Sonora’s solution, teams roamed the different wells to make
Sonora, Sinaloa, Guanajuato, Zacatecas, and Jalisco. Of
modifications or take measurements. The new telemetric
all the items sold by ABSA Sonora, those that are most
system monitors all wells, feeding the information through a
sought after in mining circles are power control equipment,
centralized system, thus saving on personnel costs. However,
variable frequency drives, soft starters, and motor control
such savings on human capital have led ABSA Sonora to face
centers in low and medium voltage (480V-4160V).
a criticism that is familiar to all the advocates of automation,
However, another aspect of automation and control that
that such an evolution costs jobs in mines. Garza dismisses
has been in rising demand has been the provision of display
this as stemming from a lack of understanding of how
screens as well as software for monitoring and scheduling
automation changes industrial processes. “In our experience,
processes. “Our products reduce costs by installing state-
those jobs that are lost are replaced with higher paying ones.
of-the-art equipment with high energy efficiency and that
Automation eliminates routine tasks that are prone to human
allow decisions to be made faster. For example, Rockwell
error due to their repetitive nature and the fatigue they
Automation’s control systems make processes more
cause. Automation removes tasks that people really do not
efficient by establishing broad communication between
want to do,” he says. “It actually brings a net human capital
all operating systems,” says Arturo Garza, Director of
advantage to companies by motivating employees to get
ABSA Sonora. This transparent information management
better trained with the promise of higher pay. Automation
between production systems and information systems
has boomed in recent years, including in mining, which has
help to streamline metallurgical processes.
created more development opportunities for engineers.” This boom directly feeds into how ABSA Sonora brings
One of ABSA Sonora’s finest hours came when it was called
new technologies into its fold. The company seeks to stay
in to help at Grupo Mexico’s Buenavista del Cobre mine. In
abreast of technological trends and spots products that
2010, it got the contract to rehabilitate 47 wells across several
are being pushed by manufacturers to meet a real need
square kilometers and ensure a supply of freshwater to the
in the mining industry. It also works under the theory that
concentrator. To start with, a smart soft starter was connected
automation and control systems are more efficient when
to a PLC via Ethernet, which would allow for the control and
little training is required, when their operation is simple,
management of the flow, pressure, and water level at each
and when they are easy to integrate. Although little training
pump. Every well was then hooked up to a wireless link, all
may be needed to use such systems, the proximity of the
feeding into a monitoring and measurement control room
company’s branches to big mines like Cananea are vital for
where display screens indicated energy consumption and
its vendors and specialists to understand every facet of the
the hours each well was working, and would flash up alerts
equipment being sold.
Sharing passion. Cooperating as partners. Finding solutions. You are the expert in your field and Pepperl+Fuchs will treat you as one. Working as partners, we share our knowledge and experience with you. The result is an innovative solution that moves you toward the future. www.pepperl-fuchs.com
307
SOFTWARE SOLUTIONS ALLOW FOR OPTIMAL MINE PLANNING Prior to the current age
mine, MineSight significantly expedites the graphing and
of
modelling process, resulting in efficiency improvements
computerization,
geologists and engineers would
document
analyze mining processes
MineSight is a modularized system, so clients can select
by hand. Essential data
a customized solution to meet their requirements, but
was collated through a
another part of MineSight’s flexibility is its ability to work
combination
time-
with data from any computerized source. This could be a
consuming
Manuel Quiroz, Technical Services Supervisor of Mintec
across the entire operation.”
and
of
procedures,
data port from an active SQL instance or simply an imported
which
presented
spreadsheet. Prior to the full-scale integration of MineSight
considerable
risk
for
in a mining operation, a demonstration of the system is
inaccurate information, human error, and, as a result, loss
performed to familiarize the client with the interface. With a
in profits. Nowadays, solutions such as MineSight exist to
demo system, Mintec is able to train its clients’ employees,
alleviate these risks. Manuel Quiroz, Technical Services
either with its own data or with a pre-configured data set
Supervisor of Mintec, explains how MineSight can empower
specifically designed for training. “Adopting a new computer
a mining company to optimize its production, “MineSight
system can be a daunting prospect for any company, so
uses the data obtained from the mine to build a computer-
training is one of the primary elements of our service from
modelled,
the very beginning,” stresses Quiroz.
geological
interpretation
of
the
deposit.
This provides a higher level of control over the grades extracted from the deposits, and allows our customers
To complement its selection of training options, Mintec
to plan ahead accordingly.” Accuracy of information is
provides every customer with an annual courtesy visit, and
essential for maintaining an efficient and cost-effective
is dedicated to maintaining a reliable tech support service.
mine operation, a resonant concern within the mining
By visiting the mine and interacting with its personnel,
industry. Quiroz continues, “Through intelligent analysis
the company is able to maintain close relationships with
of data, and the capability to modify variables within the
its customers. “The visit is designed to inform them of
| TECHNOLOGY SPOTLIGHT MINE PLANNING SOLUTIONS IN A SINGLE SOFTWARE
hand, the Room and Pillar tool allows engineers to quickly
PLATFORM
generate room and pillar designs in regular patterns by
Software solutions have become essential for developing
combining geotechnical considerations with geometric
and monitoring all aspects of a mine’s operational processes.
constraints and produce practical and stable mine layouts.
Developed by Mintec, MineSight is a comprehensive mine
308
planning software platform, offering integrated solutions
The company has also invested time and effort into
for
making significant improvements to its platform’s existing
exploration,
modeling,
design,
scheduling,
and
production. Though the software has been evolving since
applications.
it was created 44 years ago, 2013 and 2014 have been
Optimizer determines the most productive cut mining
For
example,
the
MineSight
Schedule
among its busiest in terms of development, and a range
sequence to achieve the highest project profitability, and
of new modules is a testament to that fact. New features
consecutively generates practical short to medium term
and improvements include the MineSight Decline Design,
project schedules. Recent updates to this module include
Room and Pillar, and Schedule Optimizer, among others.
faster multi-period scheduling and material grouping.
The Decline Design was created to save engineers from
Together with the MineSight Atlas and the improved
hours of work and frustration by designing a near-optimal
Haulage module, Schedule Optimizer represents an
path from a start point to an end point with bearings that
essential and integrated planning tool for clients needing
match the required constraints. It creates declines that are
a standardized approach to scheduling. In the short-term
navigable by underground equipment, thereby satisfying
planning arena, MineSight Atlas offers a resource-based,
both the gradient and turning requirements. On the other
true calendar approach to multiple activity scheduling.
new developments in our software, perform tech support,
main aim of this collaborative partnership is to provide a
listen to their feedback, and update their software to
seamless, integrated link between mine planning and real-
the latest version,” all essential tasks in Quiroz’s opinion.
time fleet management which is configurable to client
“Our yearly presence at the mine assures the customer
needs and requirements. Hexagon has been primarily
of our dedication toward their satisfaction, and provides
active in the operations domain, but by integrating the
us with the information that we need to further improve
planning, scheduling optimization, and daily production
our software.” Now in its fifth decade of business, Mintec
capabilities of MineSight, its mining division will be able
has established a strong customer base, both in Mexico
to close the loop, controlling the data flow between mine
and worldwide. Its offices have been situated close to
design and planning, right through to production. To begin
mining sites to support companies such as Grupo Mexico,
with, the Hexagon Mining group will account for a little
Mexicana del Cobre, Goldcorp, Agnico Eagle, and Pan
less than 5% of Hexagon’s total sales turnover. However,
American Silver, all of which have implemented MineSight.
Hexagons President and CEO, Ola Rollén, sees a bright future, estimating that Hexagon Mining will eventually
Such a client list illustrates that MineSight has built up
grow to between 10-15% of total sales. The combination
a respectable reputation in the industry, which helped
of MineSight’s planning and scheduling features and
pave the way for Mintec’s recent acquisition by the
Hexagon’s experience in the flow of operations should
Swedish multinational, Hexagon AB, one of the world’s
result in numerous benefits for Mintec’s clients.
leading providers of measurement, visualization, and design technologies. Quiroz is eager to reassure that
As mining practices and technologies evolve at a rapid
the company is in good hands. “Since the beginning of
pace, software has to adapt in order to retain its relevance.
the acquisition process, Hexagon assured us that our
Part of this process is dependent on customer feedback,
clients could continue to look forward to the same great
explains Quiroz. “There is always room for improvement.
service and support that we have always provided. It is
Our clients are using MineSight in the field every day, so
an advantageous opportunity for Mintec to provide its
their feedback is a fundamental factor when considering
services to some of Hexagon’s most high-profile clients,
our future stages of development.” Like Mintec, its
and to become one of the leading companies within its
competitors are constantly working hard to produce
mining division. In fact, MineSight’s Chairman and Founder,
better products, but through its continuous development
Fred Banfield, described the acquisition as opening a
of new MineSight features and its profitable synergy with
“whole new world as we jointly develop products and
Hexagon AB, Mintec is confident about sustaining its
services with Hexagon for the mining industry.” The
bright future in the mining industry.
It
time, and in doing so help mines to better understand their
combines
design,
reserves,
scheduling,
haulage
calculations, routing, and reporting in a single application.
data, particularly when it comes to drilling and blasting.
It works with multiple block models and makes open-pit and underground mining easier to manage. Paired with
These MineSight programs are not Mintec’s standalone
Atlas is MineSight’s Sub-Blocking module, which improves
attribute for the mining industry as they can be combined
block model visualization and accounting, it opens up
with its other products through a new initiative named
a world of activity-based scheduling for underground
the MineSIght Planning Spiral. As part of the Planning
operations. For geologists looking to rapidly build
Spiral, the Economic Planner tracks life-of-mine schedules,
accurate, computerized models directly from drill holes,
open-pit feasibility, and helps to create Lerchs-Grossman
the MineSight Implicit Modeler can be a major time-saver.
designs. Finally, MineSight Axis manages grade control,
These procedures used to be performed by hand and took
reconciliation, as well as drill and blast. These developments
weeks to finish, but this is no longer the case. Moreover,
come in hand with the recent acquisition of Mintec by the
the MineSight Stope module provides planners with
Swedish multinational Hexagon AB, one of the world’s
flexibility and control in the design and conceptual level
leading providers of measurement, visualization, and
of scheduling for underground stope mining. It handles
design technologies. The synergy of these two companies
tasks such as block economic value computation, stope
has resulted in positive augmentations within the solutions
slicing, scheduling, and reserve reporting. Additionally,
that each of them have developed, offering companies
the company developed the Performance Manager tool
greater flexibility when deciding how best to manage their
to consolidate reporting and mining analytics in near real-
unique mining operations.
309
VIRTUAL REALITY CHANGING MINING TRAINING LANDSCAPE
Jairo Rivera, Vice-President of e-Tech Simulation
The process of bringing
acquisition of Oculus VR by social media giant Facebook.
new personnel into mining
Even so, the technology has not generally been associated
operations,
training
with professional expertise. e-Tech’s product offering is
existing staff about new
or
capable of changing that dynamic, shifting the way in
machines or equipment,
which mining companies approach their training policies
can
exciting
and techniques. The virtual reality features within e-Tech’s
and daunting prospects
simulators replicate different mine environments, such
for both employer and
as specific terrains or mines. They are also capable of
employee. From a safety
reproducing the experience of equipment operations,
perspective,
mining
enabling personnel to be trained on specifically chosen
present
the
company has to be sure
techniques. “When you are in a simulator, you know you
that its staff is capable of executing the task at hand,
are in a safe environment,” explains Jairo Rivera, Vice-
without any additional risk to its workforce or equipment.
President of e-Tech Simulation. “A simulator is much less
By simulating some of the common processes and
intimidating and less expensive to operate than real pieces
mechanical operations in a safe, secure, and accurate
of equipment. This is why a lot of operators do not get
virtual environment, the potential for mining accidents
the proper training, which can lead to accidents. The
can be significantly reduced. With its encouraging tagline
simulators record a training exercise and report on how
of ‘the training is simulated; the skills are real’, e-Tech
well a subject performed, showing a different perspective
Simulation exclusively offers state-of-the-art, simulated
on what may have been done incorrectly. That is very
environments for both apprentices and experienced
difficult to replicate in real life. Now, from the click of a
personnel to improve staff performance, and provide
button, you can start the same scenario again or move on
peace of mind for employers.
to a more difficult one.” That ability to repeat a scenario is a highly efficient way to improve skills. Performing the
Virtual reality has experienced plenty of coverage in
same processes with the real equipment would take much
popular culture over the years, from classic movies such
longer and present more dangers to everyone involved.
as The Lawnmower Man and TRON, to the more recent
According to Rivera, one hour of training within one of
| TECHNOLOGY SPOTLIGHT MINING
SIMULATORS
REACH
HIGH
LEVEL
OF
Subsystem is a set of scientific applications which
VERSATILITY
calculates the status of the simulated equipment through
Statistics show that training is one of the most consistently
a mathematical model. These algorithms determine the
worthwhile techniques for preventing occupational hazards.
characteristics of the simulation as well as monitor the
According to e-Tech Simulation, a leading simulator
operator’s actions. The Instructional Design module
manufacturer, 87.5% of accidents are caused by human
includes a set of exercises that have been programmed
factors, while the remaining 23.5% are down to machinery
into the simulator’s software, giving the trainees and the
failure. 36% of accidents in the first category were caused
instructors a basis from which to work from. Finally, the
directly by the machine’s operator due to failures in
instructor stations allow trainers to manage the software
understanding, reaction time, perception, and decision-
as well as produce performance reports and monitor the
making. This allows simulators to become highly useful
trainees’ activities during the exercises. From a physical
tools for imparting necessary mining safety skills without
perspective, the control systems and even the seats are
increasing unnecessary risks to the mine site operations.
tailored down to the last detail, to allow the operators to communicate comfortably with the dynamic simulations
310
There are a number of modules and elements within a
and visual subsystems. The chairs meet all international
simulation system, including physical replications of actual
standards, and are designed to be identical to those used in
equipment, and the more back-end aspects of software
real situations, with orthopedic and mechanical suspension
and instructor monitoring stations. The Dynamic Simulation
cushions for adjusting the position. Visual subsystems
e-Tech’s simulators is the equivalent of four to six hours in
professionals with expertise in their relevant fields, the
the real world, depending on the industry, the equipment,
simulators are able to replicate the specifics of relevant
and the experience of the operator.
equipment. By applying specific algorithms, the physics of each piece of equipment are transferred to the simulator,
The company’s services extend even further, to what it
enabling it to mimic the limitations and the capabilities of
calls a Dynamic Instructional and Educational Simulation
the real machinery. “We also incorporate the best practices
e-Lab (DIESeL). This separates e-Tech from its competitors
that manufacturers recommend for the maintenance of
in that the company ships and installs the simulator,
their equipment,” states Rivera. “We have continuously seen
integrates any existing criteria into its own tailored
people learn how to operate real equipment through their
curricula, and trains the operators over the required period
colleagues. Although good values are sometimes passed
of time. “We are a big advocate that all training has to
along through this method, certain incorrect techniques and
end up with the use of physical equipment, but you can
questionable habits are also passed along. Simulators can
do up to 70% with simulation,” states Rivera. “Once we
drastically reduce those bad practices, bolstering personnel
have the curricula methodology, we convert that into a
knowledge and mine safety in one fell swoop.”
flow chart that tells us how many people are needed to handle of the life of the project, how many students will
The safety success rate that e-Tech’s simulators have
take part in the theory aspects, how many will be using
received
the simulations, and what skills need to be improved.
companies, which are particularly keen to see accidents
That flow chart is then converted into an architectural
reduced. Some have even acquired their own simulators
design, which establishes all the immersive simulation
to further study the potential to reduce risks. Rivera is
rooms. We also teach experienced professionals who can
confident in his company and its products, stating that
apply their experience to the simulation training, passing
almost any problem that its customers have can be solved
on their skills to the students. We train everybody to
with simulation solutions. “The virtual aspect is just one
understand that their actions can affect their company,
part of the equation,” he says. “We create curricula that are
the mine conditions, their co-workers, and even the
specifically tailored to the needs of the client, to prevent
macroeconomics of a country. These kinds of specifics all
certain potential accidents, or to increase productivity. We
help to prevent accidents, downtime of equipment, and
can create these curricula from scratch, or integrate them
unwelcome maintenance costs.”
with any current curricula that are in place at any training
has
attracted
the
attention
of
insurance
institution, university, or mine. All of these solutions follow Developed
in
manufacturers,
conjunction subject
matter
with
real
experts,
equipment and
training
international standards, so we can unify the procedures and the reactions to specific accidents or situations.”
generate a visual representation of the work settings.
and off-highway trucks can all be replicated within virtual
These images are produced on LED HDTV monitors that
scenarios of real environments. Each type of equipment
can have their positions adjusted based on the required
has a number of simulation modules and, for each of these
simulation. Motion platforms can be used, giving the
modules, KPIs measure how accurately and quickly the
operator the experience of acceleration and braking, as well
work is completed. Reports are then produced to highlight
as the expansion of vestibular and tactile sensations, which
execution times, accuracy, and any risky maneuvers that
minimize the motion sickness effect, otherwise known as
may have been performed. By replacing a simple pass
Simulator Adaption Syndrome. The Q Motion platform
and fail structure with a diagnostic one, these reports
integrates a range of bi-directional 6o movement at a
give the operators, and the mining companies, essential
radius of approximately 1.8m. Similarly, the cabins provide
feedback and insight into their training progress. As
a realistic environment to increase the feeling of immersion
well as the simulators themselves, e-Tech offers turnkey
in the simulators. These have been manufactured from
solutions for the design and implementation of training
authentic materials and are based on actual cabin models.
centers for its clients. By building the knowledge of the mining industry’s workforce and by offering the potential
Mining equipment comes in various shapes and forms,
to reduce maintenance and labor costs, e-Tech’s simulators
but e-Tech’s simulators are able to cover all bases. Wheel
have proven that innovation in this sector is of paramount
loaders, hydraulic excavators, mobile cranes, electric rope
importance for those companies wishing to stay ahead of
shovels, forklifts, backhoes, drill jumbos, mining trucks,
the curve.
311
INNOVATION INVESTMENTS HELP FIGHT MINING CHALLENGES By Daniele Cardone - More than ever, a sustainable
mines as well as expanding operations. Overland conveyors
minerals industry requires smart capital investments.
help mining operations find efficiencies through the need for
Even Mexico, with its vast mineral reserves, experiences
fewer operators, fewer maintenance facilities and reduced
pressure from investors to reduce operating costs, increase
haul road maintenance costs, while operating 24 hours a
productivity, and improve return on investments. In Mexico,
day, seven days a week, regardless of weather conditions.
ThyssenKrupp, a global diversified industrial company,
Reducing ore grades and increased ore hardness at depth
employs more than 3,000 people. The company’s plant
require increased grinding circuit capacities. The Polysius
engineering specialist, ThyssenKrupp Industrial Solutions,
Polycom® High Pressure Grinding Roll (HPGR) system
is one of the leading suppliers in the minerals and mining
increases the throughput capacity of a SAG and ball mill
industry. Globally, its machinery, equipment and processes
circuit and can provide additional benefits including improved
are used to mine, process, stockpile, and transport
mineral liberation and recovery. Used in cement production,
raw materials. Its Resource Technologies business unit
diamond recovery, and iron ore beneficiation, as well as hard
specializes in developing and providing expert solutions
rock copper, gold, and molybdenum mines, the Polycom
for increasingly complex challenges such as sustainability,
HPGR handles up to 3,000 t/h in current installations. In
productivity, and maintaining cost efficiencies that the
addition to the challenges faced by remote mine locations,
mining and cement industry faces.
large-scale mining operations which commonly exceed 100,000 t/d traditionally have capacity and productivity
SUSTAINABILITY: REDUCING EMISSIONS
levels that approach or exceed available equipment limits.
Innovations in crushing and conveying solutions are helping
The mining industry is familiar with gearless drive technology
mining companies reduce greenhouse gases such as CO2.
as it has been used for many years to power underground
For example, replacing a mine’s traditional truck haulage
mine hoists, as well as SAG and ball mills. ThyssenKrupp
fleet with an in-pit or near-pit crushing and conveying system
Industrial Solutions has incorporated advances in electrical
can reduce a mine’s carbon footprint by eliminating up to
motor and control technology to supply gearless drives
150,000 tonnes in CO2 emissions per year. ThyssenKrupp has
from 3.8MW up to 6MW per drive for overland conveyors
developed a series of semi-mobile crushing plants used to
increasing energy efficiency, and reducing maintenance and
crush limestone, granite, and all types of mine ores as well
inventory support costs.
as overburden. These systems are designed to handle from a few thousand t/h to over 14,000 t/h. When combined
SERVICE: FINDING QUALIFIED SUPPORT
with overland conveying systems, the need for haul trucks is
Across Mexico, mines experience challenges in maintaining
significantly reduced. Similarly, mobile crushing plants – fully
qualified staff to handle the ongoing maintenance
mobile crushers which allow open-pit operators to crush
requirements for the leading-edge equipment used
coal, ore and waste rock at rates up to 9,000 t/h - are also
in today’s mining processes. With locations in Mexico,
reducing the need for heavy haul trucks. When combined
Canada, the US, Peru, Chile, Brazil, and Argentina, the
with an overland conveying system, mobile crushing plants
ThyssenKrupp Industrial Solutions service teams bring
operate right at the mining face with the shovel. The potential
the experience, knowledge, and latest information to
cost and environmental savings when using a semi-mobile or
help keep equipment running productively throughout
fully mobile crushing system in combination with an overland
the Americas. The company maintains a large, multi-
conveying system are substantial.
disciplinary engineering office with EPC capabilities in Mexico City. Staffed with more than 500 specialists
PRODUCTIVITY: DEALING WITH LOWER ORE GRADES
serving cement and mining clients, the office focuses on
In today’s mining environment, many mines face more remote
building relationships with the Mexican mining community
mine locations with increased truck haul distances and lower
and providing equipment, systems, and technical support.
ore grades. So, there is greater demand for more productive and less costly mining methods. ThyssenKrupp Industrial
Innovations and technical progress are key to mastering the
Solutions’ overland conveyors are increasingly found in mines
challenges facing the resource industries, and ThyssenKrupp
throughout North and South America as a method to help
Industrial Solutions’ strength is its engineering expertise
reduce operating costs and provide solutions to ore haulage
to find cost- and resource-efficient solutions that offer
challenges. They are designed to transport from less than
concrete value to the Mexican mining market.
1,000 t/h to more than 14,000 t/h and operate at a fraction
312
of the cost of haul trucks. With operating availabilities
Daniele Cardone, Director Business Development and
exceeding 98%, overland conveyors are a solution for new
Sales of ThyssenKrupp Industrial Solutions (Mexico).
COMPOSITE MEMBRANES BRING NEW LEVEL OF VERSATILITY Composite membranes are staking a claim as one of the
durability is an ideal fit for the mining industry since life of
most versatile innovations of recent decades. These semi-
mine operations can stretch over a similar time frame.”
permeable materials have an extremely broad range of possible applications in architecture, industry, and the
All of Serge Ferrari’s materials are manufactured in France
consumer segment. From bioclimatic and solar protection
and Switzerland where the company has mastered every step
facades, to furniture, design, and acoustic solutions, the
of the supply chain. The yarn, the polymers, and the coatings
invention can match almost any application imaginable,
are all taken care of in-house during innovative quality control
its makers are proud to claim. As a global leader in both
processes, with no reliance on external suppliers. “Most of
the supply and manufacturing of composite membranes,
our patented technologies are made from polyester and
Serge Ferrari is tackling the challenges of sustainable
PVC, providing high quality, long-lasting, and easy to handle
construction, energy control, and the renewal of resources
solutions, particularly for mining,” explains Dreyfus. Born of
around the world. The 40-year-old company has a portfolio
this dedication to excellence is Serge Ferrari’s Précontraint
of membrane solutions that are matched with the needs of
technology, which Dreyfus describes as being “the core
the mining industry, according to Thomas Dreyfus, its Sales
identity of our company.” The technology allows materials
Area Manager for Hispanic America and the Caribbean. As
to be extremely flexible and stable, without stretching,
the sector looks to boost its environmental responsibility
making it ideal for mining camps and water storage ponds.
and its financial growth, mining companies have become
Précontraint can be coupled with Stamoid technology,
collectively attracted to the services and products that
another Swiss-made innovation with some interesting
help to achieve those goals.
advantages over other membranes. Bought by the Serge
“Most of our patented technologies are made from polyester and PVC, providing high quality, long-lasting, and easy to handle solutions, particularly for mining” Thomas Dreyfus, Sales Area Manager for Hispanic America of Serge Ferrari
Dreyfus explains that the company’s mining history in Latin
Ferrari group in 2001, Stamoid is dedicated to the specialized
America spans almost a decade. “The company has been
treatment of composite products, helping to meet the
involved in Chile and Peru’s mining industry for about eight
requirements of low emissivity, low permeability, resistance
years now,” he tells. “Our Latin American operations were
to certain chemicals, and the prevention of microbial growth.
originally based in Chile but we have now expanded into
When combined, Précontraint and Stamoid can be used to
Colombia and Mexico. Today, these three offices report
create solutions such as storage tanks for biogas, which can
to our representative office in Mexico City. We are very
increase the yield for subsequent energy generation in mines.
ambitious in the Latin American markets and although we know they are challenging, we also know that there
In June 2014, Serge Ferrari embarked on an IPO for 30%
are many applications for our products in the region. We
of the company to acquire the necessary funds to further
are now working on getting to know what these markets
develop its international network and technology. One third
need in order to better position our products.” Some of
of this capital will be invested in research and development,
the lightweight materials that Serge Ferrari produces are
one third will go towards network development, and the rest
used to cover large spaces and create shelters, camps,
will be assigned to the improvement of other technologies.
and warehouses. In Chile and Peru, the company has been
“Research and development is a core aspect of our company,
using this material to gain momentum in the mining camp
which is why 7% of our employees are part of the R&D team,”
market, giving it reasonable justification to offer the same
states Dreyfus. “Our entire R&D is performed in France and
products to Mexico. Its additional mining solutions include
Switzerland where we focus on formulations, varnishing,
geomembranes for chemicals, water storage ponds, food
specialty treatments, accelerated weathering tests, and
storage liners, flexible tanks for drinking water, and steel
the improvement of aesthetical and mechanical properties,
cable membranes used on supply trucks for theft prevention.
among other focus areas. Our global reach accounts for a
“Due to the quality of our products, we are able to offer a
presence in 80 countries, but we want to expand that further,
life span of up to 40 years,” states Dreyfus. “This extensive
deeply penetrating the markets in which we operate.”
313
314
As a result of the Energy Reform, mining companies have been offered a chance to produce their own electricity to meet future energy needs, or obtain power from private providers, rather than relying solely on CFE. The unlocking of renewable energy sources in Mexico has also provided them with fresh alternatives to do so. At the same time, the international mining industry has been under increasing pressure to address issues concerning the environmental and sustainable development of its operations, as well as with the relationships between companies, local communities, and other stakeholders. Under Mexican law, mining companies must comply with federal environmental regulations and provide an environmental impact study before operations can begin. Furthermore, a good relationship with the community is essential to ensure smooth operations at the mine. As communities, citizens, and governments become more demanding, mining companies have to learn to manage a range of interests in a systematic and responsible manner.
This chapter looks at sustainable development case studies in the Mexican mining industry, the introduction of energy infrastructure and energy efficiency solutions to mining sites, CSR efforts, and precise strategies to improve community relations. The chapter also surveys the technologies and solutions that have been specifically designed to help mining companies reach their energy and sustainability goals, such as the optimization of water resources, mine closure planning, and reclamation procedures. Finally, it offers in-depth analysis on the impact that the recent reforms are expected to have on community development programs and the environmental compliance of mining companies operating in Mexico.
ENERGY & SUSTAINABILITY
12
ERM has completed more than 4,000 mining and metals projects and draws upon more than 30 years’ experience. These projects span from Canada to North Sumatra and Kazakhstan to the Pilbara region of Australia.
Key services to the Mining Sector:
• • • • • • • • • • •
Biodiversity and Sustainability Planning Environmental, Health and Safety Compliance Auditing Corporate Advisory Services Liability Assessments Contaminated Land Management Environmental Compliance, Permitting and Reporting Mine Decommissioning and Closure Planning, and Post-Closure Monitoring Specialist Groundwater Services Mine Planning and Development Water Use Authorizations Integrated Water and Waste Management Plans
MEXICO CITY t.: +52 55 5000 2500 316The
erm.mexico@erm.com
www.erm.com
world’s leading sustainability consultancy
CHAPTER 12: ENERGY & SUSTAINABILITY 318
Reform Encourages Mining Companies to Generate Own Power, Ministry of Energy (SENER)
318
Understanding Industrial Inspections, PROFEPA
320
Technology Leader Not Resting on Its Laurels, Bosch Rexroth
321
Energy Policy Should Consider Mining Interests, Mexican Mining Chamber (CAMIMEX)
322
Power Electronics Delivering Energy Saving Tendencies, Power Electronics
322
Electric-Powered Equipment Promotes Sustainable Mining, Atlas Copco
325
MINE SPOTLIGHT: La Parrilla, First Majestic Silver
326
Larger Generators Provide More Energy Independence, Cummins Power Generation
326
Remote Mining Sites Must Pick Viable Power Solutions, DnA Mining
328
Electrical Products Optimize Safety and Efficiency, Thomas & Betts
329
Automation Solutions and Software Boost Production, Schneider Electric
330
Eliminating Energy from Mining Companies’ Concerns, Megamak
331
Electric Motors Designed to Meet Specific Mining Power Needs, WEG
332
Energy Efficient Lighting Solution for Mines, Maxilux
333
Dust Collectors Can Save Money and Lives, Camfil Air Pollution Control
334
Getting Ahead Through Waste, Closure, and Water Use Plans, SRK Consulting
336
Mining Companies Begin to See Point of Sustainability, ERM
337
Global CSR Initiatives Find Local Footing, Pan American Silver
338
Sustainability in Mining: The Billion Dollar Question, Penn State University
339
Environmental Regulation Implications for Business, Baker & McKenzie
341
Tailored Software Offers Precise CSR Tracking, Borealis
342
NAFTA’s Impact on Mexico’s Environmental Regulations
343
Environmental Negligence Threatens Mining Operations, Haynes and Boone
344
Removing Power and Water Headaches at Mining Sites, GAMSA
345
Water Treatment Options Are Overflowing for Mines, Veolia
346
Water Management Leader Sees Mexico as Innovation Base, Schlumberger Water Services
317
| VIEW FROM THE TOP
REFORM ENCOURAGES MINING COMPANIES TO GENERATE OWN POWER CÉSAR EMILIANO HERNÁNDEZ Undersecretary of Electricity at the Ministry of Energy (SENER) Q: How will the Energy Reform impact the mining sector,
market to the competition. This will help to bring electricity
and when will these effects reach the industry players?
prices down for all users, whether they continue to use basic
A: The Energy Reform promotes a more sustainable and
services, whether they choose to become a qualified supplier,
rational exploitation of our natural resources. For instance,
or whether they participate directly in the power market.
the Reform provides the correct incentives for mining
Finally, the Energy Reform provides new mechanisms to
companies to take advantage of the natural gas associated
finance the construction of new transmission and distribution
with their mineral beds, either directly or through association
infrastructure that is needed to provide the service. Under
with other players. This rational exploitation will bring more
the new rules, the grid will expand faster, bringing power
gas into the market, resulting in a more stable supply of
supply to concession holders and allowing for the sale of the
electric power. Furthermore, mining companies are major
energy that they choose to generate.
energy users and will benefit from the Energy Reform, both as consumers and, potentially, as generators. The Energy
Q: What are the benefits of relying on CFE’s energy
Reform will open up investment in the generation segment,
supply, obtaining power from private power producers, or
allowing mining companies to use their coalbed methane to
self-generating power on the mining sites?
generate electricity for their own consumption or to sell it
A: With the new power market model, mining companies
directly into the electricity market, opening a range of new
will be able to purchase their energy from either CFE or a
business opportunities. The Energy Reform has created a
private company, or choose to generate it themselves. Large
new market model in which qualified users, such as large
mining companies will be able to choose the supplier that
mining companies, will be able to acquire power supply in
bests suits them. CFE will continue to offer a basic service
the wholesale electricity market or through competitive
at final rates regulated by CRE. The basic service rates will
suppliers. Mining companies will be able to register as
likely have the advantage of stability and predictability. On
qualified users, depending on their consumption level of
the other hand, CFE and other companies will be able to
electricity. In general, one of the Reform’s main objectives
offer a qualified service to large users at rates that are not
is to reduce electricity production costs by opening the
regulated. Providers who offer such a qualified service will
UNDERSTANDING INDUSTRIAL INSPECTIONS
318
To enforce compliance with the country’s environmental
documents to ensure that the operation has the necessary
laws and norms, PROFEPA turns to industrial inspections,
permits given out by SEMARNAT, such as the license to
a process which it carries out for all of Mexico’s industries
operate, the permit to build or expand installations, or the
under federal jurisdiction. PROFEPA bases its inspections
environmental impact statement. If the company does not
on a varied set of laws, by which companies have to abide,
have any of these permits, the visit leads to a closure of
in an integrated and complementary manner to ensure
the operations, until the permits are acquired. After the
that inspections are done adequately and transparently.
documents are reviewed, a physical inspection is carried
The inspection follows the procedures set by the Federal
out through the installations. If the terms and conditions
Law for Administrative Procedure, which obliges PROFEPA
of the permits are not physically met, the inspector makes
to have an inspection warrant establishing the purpose of
note of this in the inspection certificate, where facts or
the inspection and the name of the accredited inspector.
omissions are meant to be recorded. This document is then
PROFEPA’s inspectors have knowledge on the technical
signed by two representatives of the company and by the
and legal aspects needed to assess compliance with the
inspector when the inspection is over. If no irregularities
law and can only inspect what is stipulated in the warrant.
are found, then the inspection process is resolved and a
Once the inspector arrives on site, he reviews all relevant
closing procedure is carried out. Should PROFEPA detect
be able to offer innovative products and pricing schemes
a permit from SENER. Companies can also participate
that may better suit the needs of certain users. With regards
in the bidding process for areas that are not currently
to private producers, large qualified users will be able to sign
being exploited. PEMEX has drilled and explored in the
contracts directly with generators for energy produced on
mining area of Coahuila for years and its operations have
the national electric system, or develop projects themselves.
not interfered with the mining industry. The Mexican
These contracts and projects will have the advantage of
Constitution establishes that the exploration and extraction
allowing the users to lock in customized terms of service for
of oil and natural gas have priority over any other activity
the long term. But in many cases, CFE and other suppliers
involving the use of surface or subsoil. However, it details
that use diversified generation portfolios may be able to
that legislation should include mechanisms to facilitate
provide more attractive offerings.
the coexistence of different activities. The Constitution also specifies that the legal framework should ensure a
Q: How can mining companies take advantage of the
payment for the occupation of the surface for all the parts
emphasis the Energy Reform places on natural gas?
involved. The legal framework provides rules allowing
A: If a mining company is interested in extracting coalbed
the development of different activities in the same area.
gas from its operating mines, it can sign a contract with the
For instance, titleholders of mining concessions could
National Hydrocarbons Commission. In order to transport
subscribe a contract for the exploration and the extraction
and sell it, the mining company must request a permit
of natural gas contained in coal seams without a bidding
from CRE. To carry out the process, the mining companies
process in areas where coal extraction activities are being
need ready access to pipeline transmission infrastructure,
carried out.
which will be developed as per the National Infrastructure Plan 2014–2018, which was issued in April 2014. The
Q: How could the carbon tax affect mining companies and
open access principle included in the Hydrocarbons Law
what role should they play in the green certificates market?
guarantees that transportation pipelines are required to
A: The carbon tax will promote a more rational consumption of
grant access whenever the capacity is available. There is
fossil fuels, and will provide incentives for energy consumers,
no difference in this regard between a private pipeline and
including mining companies, to increase the energy efficiency
one belonging to the national system owned by PEMEX
of their processes. Under the Energy Reform, clean energy
and now operated by CENAGAS.
has been defined to include technologies that use carbon capture and sequestration. As these technologies mature,
Q: How will the preference given to energy generation,
they will provide a clear opportunity for mining companies to
transmission, and hydrocarbon extraction activities over
develop. Clean energy certificates will be awarded to all clean
mining operations be managed?
generators that meet the applicable efficiency standards,
A: In cases where coalbed gas is found in a mine that
providing an additional income that will help support the
is already being exploited, the company must ask for
development of clean generation projects.
any irregularity, it initiates an administrative process in
decisions, the dimension of the environmental impact,
which the company is given a certain amount of time to
and the reiteration of the offense. According to Arturo
prove that the irregularity has been resolved. This happens
Rodríguez Abitia, Deputy Attorney for Industrial Inspection
when, for example, the company only has copies of its
of PROFEPA, negligence is not easy to prove but there are
permits within its installations and needs to present the
certain elements that help to corroborate it. He adds, “It
originals. If there are any irregularities still present after this
is important to note that the process of setting sanctions
time, PROFEPA establishes certain measures to correct the
is not discretional, that there is a system to ensure fair
situation. When the risk is imminent, corrective measures
justification of the sanctions.” The maximum amount per
can be set during the inspection. After a specified time
sanction equals 50,000 minimum salaries, which is a little
frame, an inspector goes back to verify that the changes
over US$200,000. If there are several irregularities, then
have been made.
the amount of the sanction can be raised. If the company fulfills the requirements within the established time
During an administrative process, every irregularity merits
frames, the sanction may be reevaluated and decreased.
a sanction established in light of four factors, taking
If the company does not fulfill them, additional sanctions
into consideration the maximum amounts that the law
will be set and legal action can be taken by PROFEPA.
establishes. These factors include the economic capability
Any disobedience or refusal to comply with PROFEPA’s
of the offender, the negligible character of the offender’s
instructions can be met with criminal proceedings.
319
TECHNOLOGY LEADER NOT RESTING ON ITS LAURELS
Thomas Klein, Director General of Bosch Rexroth Mexico
When the slump, which
conditions, the conveyors can freeze due to the moisture
has been felt by almost
in the ambience. It takes a lot of energy to break the ice
all companies operating
so that the transport belts can start working again. “We
within the mining industry,
take these special conditions into consideration in order
comes to an end, a slew of
to know if we should oversize the motor, or supply an
opportunities will open up
actuator with a peak demand reserve,” explains Klein. “We
for those who are correctly
are able to achieve this by implementing hydraulic pumps
positioned to seize them.
or flow generation units, and by measuring the external
Bosch Rexroth is one such
parameters in all of our electronic devices and controls.
company,
in
Our products provide great benefits since they are a total
its mission to pursue the
life cycle solution for mining companies, and also cover the
unfaltering
interests of the mining industry, and securing some important
peak energy demands that tend to exist.”
projects in the past couple of years. Despite winning various public mining tenders, the company also experienced the
Bosch Rexroth produces its power units, cylinders, and
industry-wide drop in sales. “That reduction in sales was
actuators within the country, providing convenient access
not only within the mining industry, but in other industries
to its product line. “Normally, there are three types of
as well,” explains Thomas Klein, Director General of Bosch
players when it comes to developing a processing plant:
Rexroth Mexico. “Thanks to our diligence and discipline, we
the producers, the suppliers, and the integrators,” explains
were able to rapidly recover from such a downfall. Right now,
Klein. “Sometimes, mining companies ask us to integrate
we are participating in around 25 public tenders in which
our knowledge into their hydraulic applications. They know
we have acceptance rates of 60-80%.” Klein attributes the
that, with our expertise, we will not undersize or oversize the
company’s cross-selling strategy as being one of the factors
application. We try to locate our resources as close to our
that led to its recent success. “With the expertise we have
customers as possible in order to limit the cost of our services.
in different industries, and with our well-rounded teams of
I strongly believe that the future success of certain industries
engineers, there are no technical challenges that we cannot
will not depend so much on the quality or the capabilities of
solve,” assures Klein. “The economic ups and downs of
products, but on how fast they can be delivered to the end
the mining industry have forced us to adapt our business
user. Mining companies in particular need partners that can
model to the current situation. Mexico’s economic and
be there for them anytime, anywhere.”
industrial growth is hugely important for the company. We have witnessed the evolution of the country in terms of its
In 2011, Bosch Rexroth completed the acquisition and
production, so we know how important it will become in the
integration of Hägglunds Drives Ltd., strengthening its
next few years.”
reputation as a reliable mining partner due to Hägglunds’ historical presence in the industry. “Hägglunds definitely
Bosch Rexroth has set up R&D centers in Guadalajara,
opened a door for us; it was a key acquisition for our place
which are mainly focused on tropicalizing the company’s
in the mining market,” says Klein. “We had already been
technology and adapting it to different environmental
providing the mining industry with diesel systems and
settings. Bosch Rexroth still develops its hardware and
standard hydraulic systems, but the addition of Hägglunds’
mechanical devices in Germany, but adapts them for Latin
products gave us a distinct competitive advantage.”
American markets in its Mexico R&D labs. These kinds of
320
adaptations are also extended to the company’s range of
In closing, Klein expresses his confidence that Bosch Rexroth’s
electricity sources and diesel generators, as Klein explains.
tried-and-tested product lines will continue to bring success
“If electric energy is not available due to the remoteness
in the mining industry. “Bosch Rexroth manages a total life
of the operation, we can combine diesel generators
cycle cost concept. We are convinced that, with our drive
with our power units to provide an alternative generator
systems, customers will gain the best life span of a product or
which optimizes the power consumption. Our technology
an application. We are not looking to reinvent the wheel, we
provides the same capacity with less energy and space
are looking to maximize and enhance existing technology.
requirements, representing a huge benefit for mining
Nevertheless, we believe that we can still find better materials
operations with limited space.” The adaptation process
to elaborate our products and their protective coatings. In the
of Bosch Rexroth’s technology depends entirely on the
future, this will help us to expand the lifespan of our products
information provided by its customers, according to Klein.
and to continue adapting them to the harshest conditions
For example, in some mines operating in very extreme
found in global mining operations.”
| VIEW FROM THE TOP
ENERGY POLICY SHOULD CONSIDER MINING INTERESTS ENRIQUE WIECHERS DE LA LAMA President of CAMIMEX Energy and Climate Change Commission and Energy Supply Procurement Subdirector of Minera Mexico Q: Energy and climate change are two of the most
We also believe that fossil fuel imports will be strengthened
important issues for any extractive industry. How did you
considerably, allowing mines to have far easier access to
become an expert in this issue?
diesel at much better prices. The new pipeline network will
A: As Deputy Director for Energy Management at Minera
also improve the availability and lower the costs of gas in
Mexico I am overseeing energy matters such as diesel, fuel
most areas of Mexico, given the volumes of cheaper gas
oil, natural gas, and electricity. Grupo Mexico has its own
to be imported from Texas. We will have to see whether
wind power and combined cycle power generation plants,
opportunities arise for PEMEX, private oil and gas operators,
which are operated by Mexico Generadora de Energia. The
or mining companies, to start extracting shale gas. Mine
rest of our energy is provided by CFE or third parties. I
operators could well be interested in extracting shale gas
also oversee our diesel consumption, which amounts to 15
to supply their own operations. For this to happen, we will
million liters per month, and our own natural gas pipeline,
also have to see what dues, fees, and royalties CRE chooses
through which we consume 90 btu per day.
to impose on this energy.
Q: What are the main challenges facing the Mexican
Q: Why does it make sense for mining companies to turn
mining industry in terms of energy consumption?
to renewable energy?
A: On average, a mining company’s energy consumption
A: At the moment, high voltage electricity in Mexico
accounts for about 30% of its operating costs, and can
costs about US$0.11 per kWh whereas wind energy costs
even exceed labor costs. Grupo Mexico’s operations are
US$0.93 per kWh. However, the ability to portage wind
located in remote areas, so energy supply tends to present
power across Mexico remains limited. If Grupo Mexico
a big challenge. Natural gas is one of our primary energy
was to ask CFE to portage 500MW, we would be told it
sources, but fuel oil has to be used for certain applications
did not have the capacity to do so. However, wind power
in areas where natural gas is not available.
can be a good alternative for companies with medium voltage consumption. This is why companies like Peñoles
Q: Which initiatives has CAMIMEX tabled so far to tackle
and Grupo Mexico are able to sell any surplus power
issues of concern to the mining industry related to energy
generated to other companies. Wind power is definitely
and climate change?
profitable but more must to be done to fully use this
A: We work closely with CONCAMIN and associations such
renewable energy resource, since the transmission lines in
as CCE and CESPEDES to find solutions to the challenges
the southeast of the country are saturated. One of CFE’s
of energy usage and climate change in a mining setting. We
subsidiaries is currently working to improve these lines
keep track of any laws and regulations that arise as well as
and substations. If this is achieved, it is very likely that
tariffs proposed by CRE and any moves made by PEMEX
the mining industry will double its installed renewable
and CFE. We follow legislative changes very carefully to
energy capacity.
ensure that any new regulations or rates do not negatively affect the mining industry. For example, the Energy Reform
Q: What are the Commission’s priorities in the short and
is somewhat discriminatory toward the mining industry.
medium-term?
CFE is still heavily favored over private companies in the
A: We will continue to keep up the energy consumption
awarding of contracts. The suggestions we made for the
statistics we have achieved over the years, by continuing
drafting of the secondary laws were disregarded.
to monitor the progress of energy-related regulations and tariffs, while proposing improvements to Mexico’s
Q: Has the Energy Reform created any positives for the
energy supply and control policies. We also want to see
mining industry?
FIDE and CONUEE pay more attention to the mining
A: With the free trade of energy now being possible, private
industry. Finally, we are seeking to improve funding for the
companies can enter this market with few requirements.
replacement of equipment.
321
| VIEW FROM THE TOP
POWER ELECTRONICS DELIVERING ENERGY SAVING TENDENCIES PEDRO BERRIEL Director General of Power Electronics Q: What are the pillars of Power Electronics’ commitment
can grow more easily. This presents opportunities not only
to providing solutions that reduce energy consumption?
for us, but for the mining industry in general.
A: Our commitment to lessen the industrial impact on the environment means that we aim to reduce the
Q: What differentiates your value proposition during this
consumption of energy at an industrial scale. We want to
time of change in Mexico’s industries?
help our clients focus on their main processes, whether
A: Power Electronics was founded 27 years ago at a
they are mining related or oil and gas related, by taking
time when our largest competitors were already giants.
care of the power electronics for them. The company is
However,
focused on correcting problems that are caused by the
Schneider Electric all differ from us in terms of our level of
industrial operation of drives, which can lead to collateral
service. When the founder of Power Electronics reflected
problems during our customers’ processes.
on the competitiveness of his company, he realized that
ABB,
Siemens,
Rockwell
Automation,
and
it could not compete solely based on the technology or Q: How are the Mexican mining industry’s perspectives on
marketing of its products. He then began to reflect on the
energy generation and consumption evolving?
major problems faced by his competitors, and realized that
A: Following the Energy Reform, companies now have the
service was a common deficiency. In Power Electronics,
freedom to generate their own electricity and increase their
everybody has a mobile phone and we are obliged to keep
production. One of the restricting factors in terms of growth
it on at all times. This way, we are able to offer service 24
for mining companies was the limited availability of capacity.
hours a day, 365 days a year. We do not require a purchase
CFE designated a specific amount of energy for mining
order in advance to give support and we do not even
companies that was dependent on the region where they
charge for the service. This is the main reason why we
operated, taking into consideration its obligation to provide
grew by around 200% in 2014, relative to the previous year.
electricity for housing and other non-industrial purposes.
To support this growth, we are opening a service center in
This limited a company’s ability to increase production.
Magdalena de Kino in Sonora due to the presence of major
Now that companies can produce their own energy, they
mining companies in that region.
ELECTRIC-POWERED EQUIPMENT PROMOTES SUSTAINABLE MINING
322
Sustainability is a hot topic in the mining industry, leading
Atlas Copco is betting on the development of innovative
to the creation of the Sustainable Mining and Innovation for
products such as those of its Green Line. To promote the
the Future project (SMIFU). This ambitious conceptual study
energy reduction goals envisioned by the SMIFU, the Green
will portray a vision for sustainable mining up to 2030 and
Line offers underground trucks and electric powered, load-
beyond. The project has a number of objectives, such as no
haul-dump trucks (LHDs), commonly known as scooptrams.
human exposure at the production face, no harmful emissions,
This represents a step in the right direction since loading and
no accidents, and the conversion of waste into product. The
haulage represents the second highest energy consumption
program aims to reduce ore losses, energy consumption, CO2
in a mine, after ventilation and cooling systems. The Green
emissions, man hours per tonne, and deposit waste creation
Line includes two trucks, the Electric Minetrucks EMT35
by over 30%. The consortium responsible for SMIFU consists
and EMT50, which have capacities of 35 and 50 tonnes
of Swedish mining companies Boliden Mineral AB and LKAB,
respectively. The trucks are powered by an overhead,
the Polish mining company KGHM, two universities, Atlas
electrified trolley rail but they can also be disengaged to
Copco, and other leading global suppliers.
make use of a small, onboard diesel engine, with an output of
Q: How challenging was it to break into the Mexican
and the environment. Power Electronics and its products also
mining industry?
go in line with these developments.
A: It has been a complicated process. We did not wait until we had sold a large number of units to approach big
Q: As mining companies are increasingly interested in
companies, but penetrated the market by allowing clients
alternative sources of energy, what is the potential of
to test our products free of charge. If the equipment
Power Electronics’ solar inverters in Mexico?
performed according to their needs, they would buy it. If
A: Our solar inverters and power stations have the
not, we would take it back at our own expense. None of
potential of being accepted in the Mexican mining market.
the companies that tried out our products returned them
Our photovoltaic panels are destined for utility scale
to us. Companies rely on the quality of our products and,
power generation, but we are not aware of the required
most importantly, on our customer service. Yamana Gold
conditions to develop this solution being present in
was one of the first clients we had in Mexico because
Mexico. The Mexican government is aiming to produce
they were also our clients in Chile. When they opened
25% of the country’s electrical energy through renewable
the Mercedes mine, they sought us out and we provided
sources. Today, over 20% of the country’s energy comes
variable-frequency drives for this operation.
from renewable resources, though most of that comes from
hydroelectric
plants.
Energy
produced
from
Q: Last year, you were very interested in Grupo Mexico’s El
photovoltaic panels amounts to 0.1%, which is practically
Arco project. The project has not yet been fully developed,
nothing. We are expecting that this sector will grow, but
but is the company still betting on it to increase growth?
the government is reluctant to provide incentives for such
A: Everybody is interested in El Arco. This project has the
projects. Countries like Spain or Italy have had to close
potential to make Grupo Mexico the top producer of copper in
some of their solar energy plants, since they are no longer
the world, bigger even than CODELCO. However, the project
economically viable. This could be one of the reasons why
is not developing at the expected speed. Mexico is losing its
the government is being so wary.
competitiveness due to a number of reasons, such as taxes, labor costs, and a lack of mining engineers. Yamana Gold has
Q: How will Power Electronics position itself as a preferred
already cancelled certain investments destined for Mexico,
supplier for the Mexican mining industry?
while other companies, such as Peñoles, are still considering
A: We are trying to do business in sectors where similar
this option. Both Mexico and Chile are losing ground to Peru
companies show little presence. In Mexico, the potential
and Bolivia due to the rapid development of their mining
for new projects and new business is huge. This year we
industries. Mexico now has the opportunity to work on its
are looking to place our products in Goldcorp’s operations,
competitiveness at the state and municipal level to improve
while also looking to supply the water pipelines for
conditions for the communities and for the mining industry.
Peñasquito. We are working to promote our products in
The key is to find a balance between employment, society,
the mining industry even when business is not at its best.
just 80kW, for repositioning. These trucks can also increase
by the electric powered scooptrams and trucks,” says Carlos
productivity since they are twice as fast as any diesel powered
Caicedo, Director General and General Manager of Mining
equivalent travelling up a 15% gradient. Moreover, the empty
and Rock Excavation of Atlas Copco Mexicana. Even when
trucks that are travelling down are able to regenerate the
powered by electricity made from coal, the CO2 emissions
energy using a regenerative braking system.
are reduced by as much as 25% compared to diesel powered vehicles. If this electricity was powered by renewable
The Green Line’s electric scooptrams reduce energy
energies, CO2 emissions would be negligible. Through
consumption by about 70% compared to diesel powered
the creation of the Green Line, Atlas Copco helps to make
LHDs. They share a large number of components with
sustainable mining a possibility and exposes the importance
their diesel counterpart, which makes it easier to provide
of sustainability for the company. “Today, our sustainability
maintenance and replace spare parts. The scooptrams are
KPIs are just as important as our financial KPIs,” states
powered by a mobile trailer-mounted generator, Gentrail
Caicedo. “It is important to implement sustainable practices
GT325, which can power a fleet of LHDs or act as a
in our company since we have more than 40,000 employees
backup emergency power source. Additionally, this electric
worldwide.”
equipment represents an improvement for the working
represent an increased initial investment, Caicedo reassures
conditions of mine operators. “The Green Line increases
that the energy cost savings, which can amount up to a 70%
the wellbeing of workers, as no harmful gases are emitted
reduction, make the investment worthwhile.
While
electric-powered
technology
might
323
324
| MINE SPOTLIGHT
LA PARRILLA The La Parrilla silver mine is located 65km southeast of Durango in the western part of the Mexican Altiplano situated within the municipality of Nombre de Dios. Operations at La Parilla include production from four different underground mines and a small open pit. According to First Majestic Silver’s technical report for La Parrilla, the mine’s regional geologic setting is dominated by a core of igneous rocks of dioritic composition intruding a Cretaceous sedimentary sequence of calcareous rocks. This intrusive stock caused structural conditions favorable for subsequent emplacement of mineralization along faults and breccia zones, as well as replacement and skarn deposits into bed and contact zones. The La Parrilla district is mineralized with concentrations of silver, lead, and zinc, associated with gangue minerals such as quartz, calcite, and other minor elements. La Parrilla consists of underground silver-gold-lead-zinc mines with a processing facility that was originally constructed in 1956. In 1960, the mining claims were acquired by Minera Los Rosarios, which ran the mine until 1999 when operations were shut down due to low silver prices. In 2004, First Majestic Silver acquired the mining rights and the plant from Minera Los Rosarios while in 2006, it successfully negotiated the acquisition of the mineral rights surrounding the original mine, then held by Grupo Mexico. The main underground operations today are Rosario-La Blanca, San Marcos, Quebradillas, and Vacas. The Vacas mine began production in the second semester of 2013 at a rate of 300 t/d, producing sulfide ore with silver grades ranging from 200-240 g/t. The open pit has been developed on oxide ore situated atop the active Quebradillas underground mine. The underground stoping method used for mining the near-vertical veins and orebodies of the operations of La Parrilla is overhand cut and fill. The ore processed from the La Parrilla mining district consists of oxides and sulfides, which both have silver as their principal economic component. The ores also contain significant amounts of lead and zinc, and minor amounts of gold. Oxide ores are processed by cyanide leaching to produce dorÊ metal; sulfide ores are processed by differential flotation to produce a silver rich lead concentrate and a zinc concentrate. The mine underwent a fifth major development project that further expanded the mill to 2,000 t/d from the previous level of 850 t/d. The expansion was deemed commercially effective on March 1, 2012, when the new parallel 1,000 t/d flotation and 1,000 t/d cyanidation circuits also became fully operational. At the new run rate, La Parrilla is expected to produce approximately 3.3-3.4 million ounces of silver equivalent annually.
325
| VIEW FROM THE TOP
LARGER GENERATORS PROVIDE MORE ENERGY INDEPENDENCE JORGE MACHUCA Director Project Business of Cummins Power Generation Q: What are the main opportunities in the Mexican power
up a call for tenders to provide around 600MW of power
generation sector for Cummins?
generation capacity to prevent energy cuts in states such as
A: We keep finding companies in all industries that have
Durango and Zacatecas. Cummins took part in this call and
been waiting for months for their interconnection to CFE’s
won contracts to supply 200MW. We were able to generate
grid to be set up. For mines, the average waiting period
160MW in 41 days, an achievement that was unprecedented.
for the interconnection is four months. Cummins responds to this situation through the temporary generation of
Q: What unique added value do Cummins’ emergency
energy by leasing or selling industrial energy generators.
systems offer?
Given the continuous problems with the energy that is
A: Our emergency systems consist of an integrated motor
supplied by CFE, this market has grown dramatically. CFE’s
generator that acts as an alternator. If there is a power
grid infrastructure does not sufficiently cover the need
outage, our generators automatically produce the energy
for high-voltage transmission lines in remote locations.
that is required. Through advanced control systems, our
These are the locations where interconnection represents a
emergency generators ensure the generation of high
large investment of both time and money. To address this,
quality electricity by minimizing the variation in voltage and
Cummins and similar private companies provide distributed
frequency. This allows advanced apparatuses in different
generation, which takes electricity generation to where the
industries to function without interruption. The company’s
client needs it, when the client needs it. For example, there
generators rely on internal combustion engines that run on
was a critical energy crisis in 2002 that was caused by low
diesel or natural gas, but Cummins also manages hybrid
water levels at Mexican hydropower dams. CFE then opened
systems that incorporate renewable energy sources.
REMOTE MINING SITES MUST PICK VIABLE POWER SOLUTIONS When searching for power solutions in the Mexican mining
to take care of the mechanical side of operations, which
market, a range of companies shows up on the list. While
includes assembly, structural design, and maintenance. “We
some of them specialize in generation, others look to
involve ourselves with our mining customers’ projects from
implement control and automation technology. There are
the point when the mineral is first extracted right up until the
thus few companies that can offer both of these services in
fully processed product. During this process, we can offer
an efficient and integrated manner. Chihuahua-based DnA
services that include the setup of crushing equipment, mills,
Mining is one such supplier. This company represents a JV
and the processing plants which use many common mining
venture between Demek, a leader in the construction of
processes such as flotation or lixiviation,” Rodríguez Mora
electrical and mechanical systems, and Autronic, a company
further explains. When DnA was founded in the early 1990s,
specialized in automation and instrumentation. “The range
it started out with individual projects in different industries
of widely applicable solutions that DnA provides for the
to gauge the interest in its products. The company entered
mining industry and beyond includes products such as high
the mining industry 12 years ago, but it is only just beginning
tension electric systems, which can go as high as 115,000V,
to get involved in joint projects with major engineering
and control systems of up to 20,000V. We also manage
companies. “Once these start up, we will play a more active
high-voltage electrical grids, substations, transformers,
role in the design phase of mines,” affirms Rodríguez Mora.
low, medium and high-level distribution controls, and
326
instrumentation,” says Rigoberto Rodríguez Mora, Director
To overcome the energy generation challenges of distant
of Operations at DnA Mining. The company is also able
mining operations, DnA Mining offers two options to meet a
Q: How do your generators and motors help the mining
better injectors, that improve the efficiency of consumption
industry to overcome its energy challenges?
which, in turn, reduces emissions. A better engine will
A: We understand that our mining clients are not dedicated
provide more efficient fuel consumption and run for longer
to power generation but rather to the extraction of minerals.
without maintenance, which is very important in the mining
Cummins offers a wide range of generators, from 30kW to
and oil and gas sectors. Unfortunately, some mines still use
2,750kW to meet the needs of any mine. We perform civil
turbines that run on fuel oil, which is highly polluting. The
and electrical engineering, as well as the operation and
emission levels of our diesel engines are far below the levels
maintenance of the equipment. In this way, all our clients
of fuel oil turbines. We make sure that our waste is kept
have to do is turn the generators on and we can guarantee
to a minimum by cleaning the oil that is mixed with the
a continuous high-quality supply of energy every day
diesel and then reusing it. We encourage mining companies
at all hours. Once the mine is connected to the CFE grid,
to reduce their environmental impact by improving their
our equipment is then used for emergency purposes. Our
mineral processing techniques and disposing the waste
distributors are able to respond immediately since they
from these processes appropriately.
typically have technicians stationed at or near the mines. Additionally, Cummins holds stock of parts and components
Q: What innovative products will Cummins be introducing
in strategic regional locations, as well as a distribution center
next to the Mexican mining industry?
in San Luis Potosi, and an efficient flow of components from
A: We are developing a motor for energy generation used
the US. Cummins guarantees energy generation 98% of the
for industrial pumps and are planning to launch it in 2015.
time to all clients, making the uptime of our systems among
Now in its final stages of development, this generator is
the highest in the industry.
specifically designed for large mining companies and will be able to generate 4MW. We already have a generator
Q: How do your generation systems help mining
that generates 2,750kW with gas and diesel. Thanks to the
companies achieve their sustainability-driven goals?
reforms that were recently passed in Mexico, gas will play
A: Most of the mining companies that we work with,
a fundamental role in the future of Mexico’s industries by
like Peñoles, Grupo Mexico, and Goldcorp, are very
helping to reduce the cost of electricity and the emissions
environmentally conscious and make sure that their
of toxic gases. We also have engines that are used in
equipment meets national requirements. Thanks to newer
excavators and haul trucks, and we provide solutions called
technologies, we are finding new components, such as
Power Units that can be used for transportation belts.
project’s energy demands. One solution is the construction of
their own electricity, divert their excess energy to CFE. They
photovoltaic energy systems for areas where it is economically
are then able to use energy from the CFE grid in other parts
viable to do so. The other solution that the company offers
of Mexico as part of the Open Season program,” Rodríguez
is the construction of a power line to connect the site to the
Mora clarifies. This scheme also helps to make solar energy
grid, providing the user with continuous energy for at least
more competitive. “As such, solar projects aim to reduce costs
25 years. This latter solution must be implemented according
with the judicious application of technology. Nevertheless, if
to CFE’s standards, which does not leave a lot of space for
the price of solar energy does not continue to decrease, we
innovation, since Mexico’s norms are already well-established.
will not be able to invest in it much further,” he adds. For the
Additionally, the line only belongs to a company while it is
time being, this solution is most suited to projects in remote
within the limits of its own property. Once it is connected to
areas far away from the grid. The Open Season program has
the grid outside the property, it belongs to CFE, regardless
been encouraging companies to invest in wind farms, usually
of who makes the investment for the construction of the line.
in Oaxaca, prior to the implementation of the Energy Reform.
It is because of this large investment that DnA Mining makes
But even with the new legislation in place, the Director of
sure such projects are carried out quickly and efficiently. “Our
Operations of DnA Mining says that the program should
close collaboration with CFE and considerable knowledge of
continue to be active. He adds that being part of programs
the respective norms are indispensable advantages during
like this means that projects can incorporate several energy
process,” states Rodríguez Mora.
solutions into their sites, making energy generation a safer bet for mining companies. The problem with initiating energy
With the passing of the Energy Reform, companies looking
projects at mining sites though is that the lifespan of a mine
to increase their energy self-sufficiency can now build viable
is often limited. Therefore, Rodríguez Mora believes that
and competitive energy generation systems. “Some major
the mining industry is unlikely to be one of the long-term
mining companies like Grupo Mexico, who already generate
beneficiaries of the Energy Reform.
327
ELECTRICAL PRODUCTS OPTIMIZE SAFETY AND EFFICIENCY “Safety
most
indicator for the company. Despite the global downturn in
important consideration of
metal prices, Negrete and Ubbelohde are confident that
mining companies, followed
the industry will recover. “Mining investment in Mexico has
by
of
been growing exponentially over the last few years. The
operations,
mining industry has to keep growing in order to meet an
the
is
the
maintenance
continuous sustainability,
and
the
expansion in demand,” Ubbelohde reasons.
balance between spending
Armando Negrete, Regional Sales Manager in Mexico of Thomas & Betts
and return on investment,”
Being secure in one’s product performance certainly helps to
says
Negrete,
approach distribution in a confident mood. For many years,
Regional Sales Manager in
Armando
Thomas & Betts products were manufactured in Monterrey
Mexico of Thomas & Betts.
but it was not until 2011 that it developed a commercial
His company was founded over a century ago to supply safe
strategy specific to Mexico. “Three years ago, the company
electrical conduits to mines. Over that time, it has evolved into
decided that it was important to increase our reach in
a vast international corporation, supplying over 70% of the
Mexico,” states Ubbelohde. As the company’s distributors
items used in a typical electrical installation. “Thomas & Betts
were reporting increased demand for its products, its
is an umbrella which covers over 30 different commercial
corporative office in Memphis decided to install a dedicated
brands, each with its own unique product lines. These equate
commercial team in Mexico. “We now have under 40
to more than 250,000 commercialized products,” Negrete
distributors in Mexico, and we want to keep it that way. We
states. Mining is one of the company’s 12 core markets, for
prefer a small group of distributors that can receive very
which equipment is divided into four categories: wire and
strong support from us. We want to grow along with them,”
cable management, power connection and control, cable
Negrete explains. Although Thomas & Betts manufactures
protection systems, and safety technologies.
products in Mexico, its worldwide distribution continues to rely on its mega distribution center in Louisiana. The center
Its most successful products in the Mexican market are
is the size of 18 football fields, has over six miles of conveyor
PVC-coated electrical conduits, designed to withstand
belts, and all Thomas & Betts products and components
corrosion caused by extreme temperatures, grinding, and
that enter the US go through its doors. “That covers close
moving liquids. “Given that downtime costs in mining
to 100% of our products, even those that are manufactured
production can run into the millions of dollars, our products
in Mexico,” adds Negrete.
are
328
designed
beyond
simply
fulfilling
international
standards and regulations,” shares Jan Ubbelohde, Sales
Since Thomas & Betts was acquired by ABB in 2012, the
Manager of Thomas & Betts’ Metals and Mining division
company has gained access to a whole new range of
in Mexico. “They have to continue performing over many
products, as well as entry to overseas markets offered by
years in order to keep up with the life of the mine.” Since
the power and automation technologies giant. “ABB is very
mine sites present a variety of environments across open-
well known for its advanced technology and for having a
pit and underground mines, ranging from near-explosion to
good presence in the European market. Complementary
hazardous and humid areas, products need to be designed
to this, Thomas & Betts is heavily oriented towards the
to function under all possible conditions. “Our mission is
American market, with over 6,000 distributors. Both
to help achieve continuous operation of the mines, so we
companies had a lot to gain from this new venture,” Negrete
provide solutions to keep the mine, and the equipment
points out. As Thomas & Betts’ products focus on low
inside, running continuously,” Ubbelohde expresses. “There
voltage applications, it has slotted neatly into ABB’s low
is no Thomas & Betts product that does not fulfill local or
voltage division. This complementarity has led to both sides
international regulations,” Negrete adds. The company
channeling customers to one another. “The added traffic will
executives are confident in their products’ performance
help Thomas & Betts meet its commercial goals in Mexico,
in Mexico, given their prior testing in countries where
which include seeing a 10-20% growth in Mexico’s mining
safety and environmental regulations are stricter than in
sector,” adds Negrete. “In light of this, we are confident that
Mexico. Furthermore, they state that now the country is
we can be the brand and supplier of choice for innovative
improving its regulatory framework, the appeal of Thomas
electrical products in Mexico. We also want to be closer to
& Betts’ electrical components only increases, as they
the market, and closer to the different projects and industry
already meet these heightened requirements. Mining is
trends. We work on the initial idea and design process of a
the second most important industry for Thomas & Betts,
product right up to its manufacturing and distribution, and
after oil and gas, making its worldwide performance a key
that is how we want to continue working.”
| VIEW FROM THE TOP
AUTOMATION SOLUTIONS AND SOFTWARE BOOST PRODUCTION LEOPOLDO CASTILLO Mining Vice-President of Schneider Electric Mexico Q: How can Schneider Electric’s technologies contribute
Q: How do Schneider Electric’s technologies adapt to
to production increases for mining companies?
specific client needs?
A: Automation is specifically designed to make processes
A: Our technology is entirely adaptable and flexible, and
constant.
operational
it is specifically designed so that users can add necessary
parameters in a way that enables users to predict
components. Previously, management software was rather
unfavorable
downtime.
limited, as it could only operate with a certain number of
This downtime and potential loss of materials can lead
variables. Today’s software suites allow users to add a
to considerable economic forfeiture. The equipment’s
virtually unlimited amount of variables. The technological
condition should also be taken into account, since the
needs of mining companies have evolved; their operations
outcome is different when our systems are used in
tend to take place in remote zones with extreme climatic
relatively new machines. Schneider Electric’s automation
conditions, meaning that special facilities are needed
systems can help increase productivity by 25% in modern
to safeguard electrical equipment. Schneider Electric
machines, and by 6% in machines that are over 20 years
supplies E-houses to protect instruments and ensure
old. Our technology can also reduce the operational risks
their optimal performance. The infrastructure of these
that mine workers are usually exposed to because the
E-houses ensures that the control systems work properly,
amount of required personnel is reduced when a procedure
using cabling, conditioning, and resistance to vibrations.
is automated. Consequently, more technical positions are
In addition, these containers can be modular and adapt to
created, which is an undeniably positive outcome. A miner
different production volumes.
It
measures conditions
the that
equipment’s could
cause
has been historically depicted as a strong man covered in dirt and coal. This stereotype is now outdated because
Q: How has the use of Ethernet technologies simplified
of the technologies available to us. Physical strength
communication processes and promoted the necessary
is no longer as important as scientific knowledge and
scalability
engineering abilities.
installation’s life?
and
flexibility
for
extending
a
mining
A: We have pushed this technology because we know its Q: What benefits can mining companies gain by
advantages and, fortunately, this has permeated into the
implementing Schneider Electric’s energy management
mining industry. Ethernet is a universal communication
systems?
system that works through different physical capabilities
A: Due to an increase in energy prices, mining companies
and enables easy identification of the points where the
have begun constructing their own power plants and
information is being sent and received. We decided to
outlining agreements with possible energy suppliers.
integrate Ethernet into our systems so that our instruments
Our integrated energy management system enables
can transmit information to the TCP/IP base in a way that
users to negate all of the energy variables when gauging
allows users to assign an address to each component.
devices in mining sites. This is not limited to electricity,
This makes it easy to access instruments from anywhere
as it includes air, vapor, and water. Energy sources can
in the world and makes the information transparent. For
be monitored with our ‘Energy Advisor’ system, which
example, a company can upload information to its corporate
also enables the management of energy according to
headquarters to monitor operations in real-time. Ethernet
consumption. This system quantifies losses and improves
also allows users to incorporate their technology into existing
energy performance across different processes. The
systems. This was previously very complicated because
Energy Advisor can also help mining companies decide
communication channels had to be bridged in order to
when to use energy from the national utility CFE or from
ensure proper operations. Ethernet technology removes the
other sources, resulting in financial savings and more
need for intermediate points of communication in system
efficient energy consumption. This is something we want
interconnections, reducing potential points of failure and
to promote strongly in the Mexican mining industry.
increasing equipment availability to mitigate downtime.
329
ELIMINATING ENERGY FROM MINING COMPANIES’ CONCERNS The
is
As well as being a center for its highly trained teams of
dependent on a myriad of
technicians, Megamak’s facilities are also used to stock those
energy intensive processes,
products pertaining to the most prominent mining sectors in
ranging from excavation
the regions where they are based. For example, the northwest
and
transfer,
of Mexico sees a lot of underground mining, so Megamak
preparation
stocks a higher quantity of underground mining parts and
to and
Pedro Robles Hernández, Mining Manager of Megamak
mining
industry
material mineral
is
engines in its Torreon warehouse than anywhere else. “Our
imperative that the energy
separation.
customers expect us to have sufficient stock in our facilities
requirements
these
when they urgently require a part,” says Robles Hernández.
processes are consistently
“However, some companies could potentially stock these
met
to
of
It
that
parts themselves. Even so, many customers still prefer the
downtime is kept to a minimum. The equipment required to
ensure
convenience of requesting our stock and specialists from
keep mining operations running smoothly are fuel-powered,
a nearby location on an ad-hoc basis.” If certain products
electricity-generating engines, referred to in the industry as
are located elsewhere, Megamak relies on a combination of
‘gensets’. If a genset responsible for providing energy to a
third-party logistics companies and its own internal stock
critical operation in the mine was to fail, all mining would be
management software to track the part and deliver it fast.
halted and profits would drop as a result. Because of this,
330
downtime is a major concern of the mining sector, requiring
In addition to having obtained the right to represent some
both gensets and their operators to be extremely reliable.
world-class brands, such as Cummins, Megamak became
Catering to just this need, Megamak is a leading supplier
the national Cummins training center for Mexico and the
of generating equipment, spare parts, and energy solutions.
Caribbean for these specific services in 2014. In order to
The maintenance required on brand-new genset engines
obtain this responsibility, its sales people and technicians
is usually quite simple, such as oil changes and filter
had to meet strict training requirements, particularly
replacements. But with use, the units inevitably start to
when dealing with high powered (HP) engines. Cummins
experience more severe issues, which require immediate
has developed a support strategy known as “The
attention. These issues can be aggravated by mine
Four Pillars,” which encompasses technical training,
personnel trying to conduct the repairs themselves
stock management, industry liaisons, and equipment
without being trained to do so. “Attempted engine repairs
diagnostics. Megamak hopes that by reinforcing this
performed by untrained personnel are the most common
strategy, it can increase the revenues received through
causes of downtime at a mining site,” explains Pedro Robles
the mining sector. “Megamak is a company that supports
Hernández, Mining Manager of Megamak. “We need to
all markets,” explains Robles Hernández. “In the Pacific
convince our customers to consider the benefits of having
region, we support the mining, industrial, and automotive
a backup genset on-site should the unthinkable happen.
sectors, but mining alone represents around 40% of
Furthermore, by providing familiarization training to genset
our total revenue in this region, which could increase
operators and ensuring that they stick to a pre-designed
to 50% by next year.” Although the mining industry
maintenance program schedule, we hope to greatly
has produced flat growth for Megamak in recent years,
minimize the risk of genset failure.” Alongside establishing
it is predicting an increase towards the second quarter
dedicated training programs, Megamak has strategically
of 2015. One element which Megamak has noticed is
located its warehousing facilities in Hermosillo, Torreon,
that the underground mining sector continues to show
Guadalajara, and Merida, to enable it to deal with customer
signs of growth. “This could be attributed to production
demands quickly and efficiently. These locations allow its
costs being much lower than in other large projects,”
specialists to arrive at the mines as fast as possible if their
says Robles Hernández. For this reason, Megamak has
customer’s on-site technicians are not capable of dealing
recently opened offices in Zacatecas and intends to open
with a particular issue. Megamak offers a range of support
more in Parral, Chihuahua, to be close to companies
packages which includes ‘around the clock’ availability of its
like Industrias Peñoles and Grupo Mexico, two of the
highly qualified technicians. “Our service packages are very
largest purchasers of underground mining equipment
flexible,” says Robles Hernández. “Some customers receive
in the country. Due to the size of their operations, both
a weekly visit from our specialists to check for issues and
companies have their own team of technicians, negating
run diagnostic tests, but others require support 24 hours
the need for Megamak’s support services. Despite this,
a day, seven days a week, and 365 days a year. It really
Megamak’s presence in this region is designed to provide
depends on the needs of the client.”
backup support, in the event of an emergency request.
| VIEW FROM THE TOP
ELECTRIC MOTORS DESIGNED TO MEET SPECIFIC MINING POWER NEEDS JULIO RAMIRES Director General of WEG Mexico Q: What are WEG’s flagship products for the mining
specific needs of its customers. We do not only adapt to
industry?
legal requirements but also to environmental conditions
A: We have many products created specifically for the
present in each industry, such as variations in altitude
mining industry, such as special motors for the crushing
and humidity.
process and conveyor belts. However, our flagship product is called WMINING. Designed to withstand the
Mexico has become one of the most important countries
harsh conditions that arise in mines, the WMINING motor
for us, so we are planning to invest US$210 million over the
reduces electricity consumption while being robust
next five years to expand our production capacity in the
and durable enough to handle all stages of the process
country. This investment will allow us to manufacture our
from extraction to ore processing. Its design prevents
own components, reduce dependence on suppliers, and
solid or liquid matter from entering and delivers more
create more jobs.
hours of continuous operation, helping mines to improve productivity. We also have equipment such as medium
Q: Which new products in WEG planning to introduce in
voltage drives, soft starters, and generators that can be
Mexico?
used for power cogeneration in mines, but our mining
A: One of our priorities is now to position our electric
champion is WMINING. Our portfolio for the mining
generator for gas turbines as part of an effort to push the
industry was created thanks to the efforts of our specialist
use of cogeneration by mining companies. Cogeneration
engineers that are dedicated entirely to developing mining
would help mines to reduce their energy spending and even
solutions. We receive constant feedback from clients which
sell off the surplus energy. Many mines in Mexico continue
is analyzed through constant technical discussions. Based
to connect to the CFE grid and generate electricity using
on this information, WEG engineers redesign our products
diesel. Thus, WEG has to look at what energy solutions
to meet customer needs and take our technology to a new
it could offer to maximize efficiency, improve power
stage of design.
quality and reduce operating costs. For these energy advances to happen, we make sure that our customers
Q: How much tropicalization of WEG’s products is needed
understand the voltage unbalance that exists in Mexican
to suit the specific challenges facing the mining industry
power lines, and how this will affect the performance of
in Mexico?
each component used in every process. We are presently
A: WEG has assembly plants in Mexico, but we also
entering into alliances with Mexican companies that are
carry out R&D in the country to design and manufacture
devoted to power quality analysis of power quality. This
specialized products for its mining industry. This was
will allow us to deliver very comprehensive and thorough
previously done in our R&D centers in Brazil, but due to
report to our customers about the challenges they face
the variety of environments our products face around
in order to optimize their electricity consumption. When
the world, we have extended this capability to other
we help our clients implement a solution, we consider
countries. This has allowed WEG to cement its place a
all these external factors so they can use our products
leader in the mining industry in Australia, Chile, Mexico,
to maximum efficiency. Another product that we are
and South Africa. One of the most successful examples of
counting on to anchor our mining business is the W50.
our Mexican R&D was Petro Duty, a line of electric motors
This motor was designed to reduce noise and vibration
that was released for the oil and gas industry after we
as much as possible, which leads to prolonged motor life.
analyzed all of PEMEX’s rules and made a product to fit
We are currently bringing the components over so we can
its standards. After Petro Duty found great success in the
start assembling the W50 here in Mexico from 2015. This
oil and gas sector, it was adapted to the Mexican mining
product was originally released in Brazil to great success,
industry in the form of WMINING. This shows how WEG
making us certain that it will help revolutionize the way in
produces standard products that can be adapted to the
which the Mexican mining industry operates.
331
ENERGY EFFICIENT LIGHTING SOLUTION FOR MINES
Jaime Murra, Director General of Maxilux
The benefits of LED lighting
silver from becoming opaque. Conversely, when using
are well-known in sectors
incandescent lights, silver has to be cleaned every week
such as automotive and
to keep its shine,” explains Murra. Given the large variety
food storage. However, this
of setups that are encountered in mines, MaxiLux provides
technology presents great
engineering, design, and 3D blueprints for its solutions based
advantages for the mining
on its customers’ needs. “We are not just a lamp store; we
industry as well, and one
are more of an illumination consultancy firm that provides
company
is
tailor-made solutions,” says Murra. “Our innovative ideas
already
in
Mexico
on
are evidenced by a cart it designed for CEMEX in Torreon
this opportunity. MaxiLux’s
capitalizing
that has become very popular in the mining exploration
Director
Jaime
segment. These carts, which has a wagon with two solar
Murra says that six years ago, he met a Korean company
General
panels, a retractable 9m pole, and remote control operated
that worked with LEDs at a fair. This technology sparked a
LED lamps, are particularly useful for exploration activities
fascination that led Murra to travel to Korea and Japan to
because users do not have to worry about diesel or gasoline
learn more about this lighting solution. “Given the evident
and the lights can work nonstop for up to three days.”
potential of LEDs, we decided to create a firm exclusively dedicated to lighting. Lux is a measurement of illumination,
The company’s product portfolio also extends beyond its
hence the name of the company,” explains Murra.
own proprietary equipment since MaxiLux is an authorized distributor for Solartec, one of the few Mexican solar panel
Since
MaxiLux’s
inception,
Murra
has
found
many
manufacturers. Solartec’s panels are useful for small and
applications for LED lights in mining operations. One of its
medium-sized projects, but for larger operations, MaxiLux
main advantages is low energy consumption, an attractive
turns to Yingli Solar, one of the world’s top three solar panel
feature for the mining industry where energy costs are a
manufacturers. One issue with using Chinese products is
major drain. “Many mines are located in areas without access
that they have a standard voltage ranging from 85V to
to electricity, which means that companies have to generate
265V, whereas Mexico has different voltage requirements.
their power using diesel,” details Murra. “Companies then
Despite this discrepancy, MaxiLux is able to adapt these
have to decide how to distribute their electricity between
products to CFE’s voltage characteristics although Murra
lighting and operating equipment.” MaxiLux can lower its
explains that problems with LEDs largely concern the
clients’ energy consumption level by implementing LED
power source. “LEDs use direct current, but Mexico mainly
lights, which have a working life of up to 50,000 hours,
uses alternating current. Current peaks do not damage the
resulting in companies having more electricity available
lamps but they can damage the converters.” Fortunately,
for other areas of their operations. The proffered savings
MaxiLux has a good relationship with Mean Well, a well-
actually extend beyond energy consumption, since the use
known power source manufacturer, which agreed to make
of LEDs affects the size of needed substations, the size of
converters adapted to Mexico’s specifications, allowing for
cables, and reduces the amount of losses due to conduction.
the installation of Chinese solar panels.
Another advantage of LEDs is that they provide solid-state
332
lighting, which means they do not use electrical filaments.
A combination of all the advantages MaxiLux can provide
This allows them to function amidst loud noise, shockwaves,
to mining companies can be seen in its relationship with
and other disruptive vibrations. LEDs also do not generate
well-known mining giant Peñoles. “The CEO of Industrias
heat, making them especially useful in underground mines
Peñoles, Fernando Alanís Ortega, stated that Peñoles
where maintaining certain temperatures is very important.
should exclusively use LEDs in all of its projects. MaxiLux
MaxiLux has also recently been working with explosion-
has provided lighting solutions for Peñoles’ laboratories,
resistant lamps, which can be particularly useful in mines
offices, and mines, including Velardeña,” tells Murra.
with high levels of gas. “When compared to other brands,
Clients also benefit from the training and capacity building
MaxiLux’s explosion resistant lamps have a price difference
sessions that MaxiLux offers. Murra recalls the time his
of up to 40%,” says Murra. “Moreover, many mines have
company organized a seminar on LED lighting for SAPSA,
safety problems due to theft, so we provide public lighting
Peñoles’ construction arm. To Murra’s surprise, SAPSA’s
solutions with solar panels, battery boxes, and variable
engineers had never worked with the type of equipment
frequency drives.” Beyond these more evident advantages,
that MaxiLux was offering at the time. This helped to install
LEDs also have other, less obvious applications in mining.
MaxiLux as Peñoles’ lighting solution supplier, a major plus
“We accidentally discovered that using LEDs prevents
for the lighting company’s position in the mining sector.
DUST COLLECTORS CAN SAVE MONEY AND LIVES
Luis Sánchez, Mexico Manager of Camfil Air Pollution Control
Dust is a sworn enemy of
Series, is a cartridge dust collector that was designed to
mining companies, getting
improve on previous dust collectors such as electrostatic
inside
precipitators,
equipment
and
wet
scrubbers,
and
sleeve
collectors.
causing it to break down,
Cartridge collectors improve on every one of these three
clogging
machinery,
technologies. Electrostatic precipitators work through
and posing a health risk
up
electric charges and are large, bulky pieces of equipment.
to miners. However, it is
Wet scrubbers require a constant water supply, which can
a by-product of mining
be a problem for mine sites. Sleeve collectors use a textile
that cannot be fully done
filter to remove dust from the air and cartridge collectors
away with, only controlled.
are their evolution,” explains Sánchez. Cartridge dust
As
been
collectors have been successful due to their compact size,
seeking to catch up to global standards for environmental,
Mexico
has
their ability to filter air without the use of water, higher
and health and safety performance, its norms for dust
efficiency and cost benefits. One of those benefits is
suppression have been growing stricter. Every mine must
that the dust which arises from mine processes such as
now comply with strict maximum levels of dust that can
grinding and crushing has high metal content. “Camfil’s
be in the air. If this is not complied with, then mining
dust collectors are thus able to capture valuable material
companies may see permits to expand their operations
and insert it back into the process. If a company does not
denied. This attitude to dust suppressions stems from one
collect that dust, then value is being lost. Our Farr Gold
specific article in a new norm passed in 2012. This norm
Series is able to retain particles with a diameter of 0.3 or
sought to incentivize environmental practices in mines by
more microns, meaning it can collect particles 400 times
ensuring that expenses incurred when making industrial
thinner than a human hair. Moreover, the equipment is
processes more environmentally friendly would be fully
built to withstand the abrasive and corrosive environment
tax deductible.
within a mine.” Camfil’s dust collectors are not just restricted to underground mines. To meet the challenges
The impact of mine dust is not limited only to underground
of air circulation in open-pit mines, hoods are installed
mine shafts. The remoteness of mine sites sees camps
around the collectors along with a system of ducts that
sprout up or nearby communities expand to cater to the
suction air in and transport it to the dust collectors. This
mine. Furthermore, contractors and suppliers are always
system also has an in-built ventilator to withstand any
coming and going on the grounds, potentially being
drop in pressure.
exposed to noxious dust. Thus, if the air is not filtered, these people are prone to health risks such as silicosis, which can
In Mexico, Camfil distributes its products through a
cause severe and long-lasting damage to the lungs. This is
company called ProcEquip. In order to promote the
why Luis Sánchez, Mexico Manager of Camfil Air Pollution
benefits of its dust collectors, Camfil supports ProcEquip
Control, says that investing in his company’s products
by having its Mexican and international staff visit mining
represent an investment with direct operational, economic,
operations up to two or three times a week. These visits also
and health benefits. “If modern mining operations do not
contain courses on how to improve the operational culture
meet air quality standards, they risk being temporarily
of the mining industry in general and the understanding of
shut down. Moreover, if a worker dies due to health-related
dust collection in mining operations. Sánchez reveals that
problems and it ties back to the lack of air filtration, it could
Camfil feels that the time is right to change the working
too shut down operations,” he states.
culture of mine operators in Mexico, especially after the pressure placed by the government norm on dust. “Our
Originally from Sweden, Camfil has specialized in solving
short-term objectives are thus to raise awareness of the
the environmental concerns of different industrial sectors.
economic, environmental, and health benefits of dust
Its main product range concerns air filters but it has
collectors, putting the environmental and health benefits
now expanded to the manufacturing of dust collectors.
at the forefront of the operations’ priorities. Our long-
Sánchez explains that Dave Stock, Camfil’s International
term objective is to be the number one supplier of dust
Mining Director, has allowed the mining industry to
collection solutions in the world,” says Sánchez. With
represent a strong portion of Camfil’s yearly sales, by
the likes of Grupo Mexico, Peñoles, Goldcorp, Endeavour
helping the company realize all the potential applications
Silver, and Scorpio Mining already on Camfil’s books, the
for its products in mines. “Dust collectors have been very
company’s best practices in the field of dust collection are
popular in mines. Our star product line, the Farr Gold
spreading around the country.
333
| VIEW FROM THE TOP
GETTING AHEAD THROUGH WASTE, CLOSURE, AND WATER USE PLANS PATRICK WILLIAMSON Principal Consultant and Manager of SRK Consulting Mexico Q: What are the main areas of focus of SRK Consulting in
Q: What are the most important elements of a proper
Mexico?
mine closure plan?
A: SRK Consulting used to have offices in Hermosillo
A: The first is cover. There are a number of techniques
and Zacatecas, but the company has now consolidated
to provide long-term cover, ranging from plastic covers
its operations in its Queretaro office. Many of our
to engineered soil layers and vegetation, which limit
employees from Hermosillo are still associated with us
the infiltration of oxygen and water into the waste rock.
as on-call subcontractors. They are hired to perform
By doing this, one can greatly decrease the rate of acid
tasks such as resource assessment of new properties.
rock drainage (ARD) generation. The second is drainage
SRK Consulting offers services that cover everything
control. The company should modify the slopes from a
from the earliest phases of exploration to mine closure.
waste rock pile and from tailings dams to prevent erosion
Our people in Queretaro are primarily focused on water
and surface run-off from cutting through the tailings
and geochemistry. This includes surface water run-off,
facilities and transporting metals to the surroundings.
finding water for mines, dewatering mines, maintaining
The third most important consideration in a mine closure
the quality of processed water, and establishing baselines
plan is remediation. All buildings are removed, the tailings
for environmental impact studies. We also specialize
and waste rock are re-graded, and a geochemical model
in waste rock or tailings drainage. To varying degrees,
of the pit water is made. Modelling in this regard requires
almost all mines have sulphide minerals which oxidize
some very sophisticated geochemical and hydrological
in the atmosphere, causing the release of toxic metals
evaluations of the water flowing through the pit, of the rock
which can then be transported by moving water. Contrary
exposed, and of the oxidation rates. The amount of data
to popular belief, some metals are even released under
is going to increase as the mine develops and this data
neutral pH conditions. There is an increasing awareness of
will need to be continuously incorporated into both the
this issue in Mexico, especially within Canadian companies
mine closure plan and into the models. One final important
working here. Canadian companies have to comply
factor is that mine closure can be achieved progressively.
with stricter environmental laws from Canada, even in
While closure has already become a relevant issue for the
their Mexican operations. In Mexico, SEMARNAT norms
mining industry, it will continue to grow in importance.
NOM-157, NOM-155, and NOM-141 oversee waste rock,
334
lixiviation systems for gold and silver, and tailings dams,
Q: How does SRK Consulting contribute to mine closure
respectively. I am anticipating that, in the near future,
planning in Mexico?
the Mexican government will implement mine closure
A: We are working on a mine closure plan with San Anton
regulations as well. Other governments such as Chile and
de las Minas, a subsidiary of Primero Mining. Companies
Peru have already implemented mine closure regulations
such as Goldcorp and Primero Mining understand the
to prevent companies from abandoning a mine. This is
importance of characterizing waste rock and minimizing
already becoming a requirement for any international
the
company in order to avoid conflicts with communities
requires the characterization of waste rock as part of
and NGOs, and to keep their shareholders happy. A
the environmental impact assessment, yet there is no
mine poses substantial environmental risk when it is not
requirement for a complete mine closure plan. There are
regulated by international standards. National laws are
numerous publications about mining drainage such as the
subject to change and may require mining companies to
MEND’s Prediction Manual for Drainage Chemistry from
return to a mine site in order to perform costly clean-
Sulphide Geological Materials. It has become such a big
up operations, as has happened in the US. We therefore
issue that big mining companies have donated money to
encourage companies to plan for mine closure while
the International Network for Acid Prevention (INAP) to
planning mine development. If you leave it until the end,
publish information for free and raise awareness about
it becomes much more expensive.
the topic.
generation
of
ARD.
In
any
case,
SEMARNAT
Q: What are some of the strategies that SRK uses in order
effectively intercepting the water to bring it outside, and
to minimize the generation and impact of ARD?
preventing any contact with exposed mine faces, which
A: Two techniques are most important when treating ARD.
could contaminate the water. If a mine needs 300-500m3
The first is the adequate mineralogical and geochemical
of water a day for 20 years, the company should create a
characterization of the rock waste, which needs to take
model to assess the impact of pumping from the aquifer to
place during the prefeasibility stage of mine planning. The
ensure that the aquifer does not dry up.
second is the segregation of the waste with the highest acid-generating potential, which prevents companies from
Q: What is SRK’s capacity in terms of modelling and
having to treat all the waste as acid-generating. Companies
technical assessments for mining companies?
typically use amendments to add neutralization capacity to
A: We perform resource assessments and block modelling
the waste, but this can be very expensive. By characterizing
using tools such as Gemcom or Vulcan. Our team in Vancouver
the material through static and kinetic testing, and high-
has a tremendous amount of experience turning boring and
grade mineralogy, one can know exactly which portion of the
assay data into block models and resource assessments.
waste needs to be contained and managed. Unfortunately,
We follow best practices for ground water models, using
there are very few environmental geochemists based in
common software such as MODFLOW, which allows us to
Mexico, and there is a great need for them to do such work.
do inflow calculations and assess the sustainability of an aquifer. We use PHREEQC to construct geochemical models
Q: Which water management services do you currently
as well as offering geotechnical models. SRK also generates
offer?
a tremendous amount of N43-101 technical reports, which is
A: All mines need water, but many of the mines in Mexico
a specific style of report required by investors in the Toronto
are in the desert, where water is scarce. Competing with
Venture Stock Exchange. Section 20 of these reports deals
the substantial agriculture interests in these states and
with social and environmental standards, which includes
meeting the great demand for water in a mine site is not
water management and geochemistry. The N43-101 report
an easy task. SRK Consulting locates water, quantifies
style is starting to become an international standard for
it, acquires the necessary permits from CONAGUA to
mineral resource classification due to investors’ familiarity
exploit it, and then designs and drills the water wells.
with it. However, qualified people capable of producing N43-
We come up with a strategy for sealing the fractures,
101 reports are still hard to find in Mexico.
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
VARIADORES DE VELOCIDAD ARRANCADORES ELECTRÓNICOS baja y media tensión
335
| VIEW FROM THE TOP
MINING COMPANIES BEGIN TO SEE POINT OF SUSTAINABILITY LEFT: Manuel Ortiz Monasterio, Managing Partner of ERM México RIGHT: Jaime Martinez, Business Development Director of ERM México
Q: What is the main challenge for the Mexican mining
development or not, is more cost-effective than addressing
industry to catch up to the sustainable standards of other
problems in a reactive mode later on.
countries? MOM: The main challenge is related to the high expectations
Q: Could you give us some details on the international
from stakeholders and the relatively short time companies
standards ERM has helped to introduce in the Mexican
have to meet them. This is particularly challenging since
mining industry?
stakeholders such as community members and governments
JM: ERM works according to the guidelines of the IFC
expect an immediate profit from mining, rather than aiming
Performance Standards, which provide a basis for how
for long-term development opportunities and benefits. This
a company can build its own environmental and social
scenario has become more complicated due to the ascent
management system. This system allows a company to
of Internet and better communications. Stakeholders are
identify and manage internal risks and potential impacts,
now much more aware of what CSR initiatives are followed
as well as to act proactively to external risks. To identify
in other countries, as well as the environmental risks
these risks, the company’s social context and likely impacts
associated with mining. This generates mistrust towards the
are measured by looking at a variety of factors, including
industry and requires further engagement efforts. Another
health and safety, natural resources, indigenous rights,
challenge is the tendency of mining companies to engage
and cultural heritage, among others. Furthermore, ERM
with communities and other stakeholders in a commercial
has assisted companies in incorporating the standards of
or transactional way. This does not allow a company to
the International Council on Mining and Metals (ICMM) in
clearly define a long-term vision of impact management
their practices, specifically those regarding the Voluntary
and community investment that actually promotes local
Principles on Security and Human Rights, consultations
sustainable development. Furthermore, the mining industry
with indigenous peoples, and other forms of social and
is still lacking a formal social impact assessment for the
environmental impact management. In addition to these
permitting of new projects. Although these issues may
social standards, ERM also has lead auditors and technical
be identified and addressed in a limited way through the
experts qualified to perform comprehensive Cyanide Code
environmental impact assessment public consultation
audits in order to promote the responsible management of
process, it is not done so in the formal way seen in other
sodium cyanide used in gold mining.
countries. Q: Why are community agreements not yet an industry-
336
Q: What are the respective roles of government, mining
wide common practice?
companies, and external consultants such as ERM in
MOM: Most mining companies focus on developing a
advancing sustainability in the Mexican mining industry?
transactional relationship with stakeholders, rather than
JM: The impulse comes mainly from mining companies
seeking a long-term, mutually beneficial engagement.
that have specific corporate standards and expectations,
Specifically, regarding communities, the extractive sector
or from companies reacting to pressure from stakeholders,
usually provides short-term solutions, such as payments
such as NGOs or indigenous groups. Consultants can serve
and donations, to long-term, socio-economic needs in
as facilitators to this end and, in some cases, may convince
order to achieve immediate access to natural resources.
some clients to change for the better. However, companies
This approach leads to a mine’s sustainable investments
have learnt more from bad experiences and pressure from
and
stakeholders. Also, being sustainable pays off in the long
negotiations, or worst, part of its social and environmental
term. We understand that, given the financial situation, this
impact management. This reduces a mine’s sense of
is more difficult as sustainability is seen as a cost rather
responsibility and accountability before stakeholders
than an investment. But addressing stakeholder concerns
that grow dependent on the short-term benefits being
from the early stages, even when deciding to pursue a new
provided.
initiatives
becoming
part
of
the
land
access
| VIEW FROM THE TOP
GLOBAL CSR INITIATIVES FIND LOCAL FOOTING CHRIS WARWICK Country Manager, Mexico of Pan American Silver
Q: How do you optimize the impact of CSR initiatives at
Q: How does the communication with communities near
your three Mexican mining operations?
your mines in Mexico differ from that with communities in
A: Each community has different interests, priorities,
Peru and Argentina?
and needs, and these individualities usually set the tone
A: Pan American Silver values the individuality of each
for any CSR program in the area. In 2014, we developed
community surrounding its operations, but the core
a Community Development Initiative (CDI) Toolkit - an
values and policies of our CSR work are the same across
assessment mechanism for our CSR teams to evaluate
all of the countries in which we operate. The details of
the efficiency and success of potential projects. This
specific projects are based on the dialogue with various
CDI toolkit allows us to test the probability of success
stakeholders. Our CSR team spends a great deal of time
and make corrections as needed to the plan based
establishing relationships with all the community members
on the initial assessment. The basis of any potential
and receiving their input on a regular basis. This information
sustainable development project is continuous and close
that strengthens the relationships with communities and
communication with the communities and listening to the
sets the basis for our CSR work. Whether in Peru, Argentina,
ideas and suggestions that come out of these sessions.
or Mexico, we constantly engage and visit the communities
The goal of all our sustainability projects is that they
surrounding our operations, to ensure these mechanisms
achieve real change throughout the community and that
are working properly. This is the only way to build strong
they create lasting economic and social sustainability.
relationships with such stakeholders.
Q: What are the benefits and challenges of employing
Q: What means does the company employ in order to
members of the communities surrounding your mines?
monitor the impact its Mexican operations are having on
A: One of the main benefits of employing workers from the
the environment?
local communities is the connection they have to that land,
We have regular monitoring programs for environmental
and the pride and ownership they take in their work. These
factors like water quality and flow, air quality, soil,
workers feel a more rooted connection to the work that
biodiversity, and noise. This information allows us to keep
they do and are proud to see the positive economic and
check of potential impacts and inform the authorities in
social impacts that are generated throughout the region,
our regular reporting. For example, closure planning is
as it is their home, and the land that they have lived on all
a continually evolving process that starts even before
their lives. Our workers are excited to see the substantial
construction, when we prepare a feasibility study for a
work opportunities created in areas that were previously
new mine. We obviously increase the level of detail of our
economically unproductive. The challenges in some cases
closure plans over time, and we also complete an annual
are based around capacity building and providing training
estimate of our mine closure liability to meet our financial
for workers, since in many cases, mining is a new activity in
reporting obligations in Canada.
the region. This means the local community does not have the expertise or skills required to fill the roles needed. In
Q: What resources does the company allocate to
that respect, Pan American Silver spends a great amount
improving energy efficiency at its operations?
of hours training and developing skills in our local teams.
A: We recognize that energy efficiency not only helps
This training begins with our younger community members
the environment, but that this good business practice
by granting mine-related scholarships that will help to
also improves our cost structures. Several years ago, we
educate potential future workers for our operations. One
embarked on an energy efficiency program coordinated
of the greatest joys is to see how the children of our mine
across our Mexican mines which resulted in significant
workers come back after university, having specialized in
improvements to efficiency. We are now in the process of
geology, engineering, and other professions much needed
connecting the Dolores mine to the national grid, which
by the operations.
will improve overall efficiency when completed.
337
SUSTAINABILITY IN MINING: THE BILLION DOLLAR QUESTION By
Antonio
Nieto
Sustainability defined
be
This can be accomplished by adopting economic-inclusive strategies
among
regional
stakeholders
to
secure
a
as
maintaining
successful mining enterprise. More importantly, these
productivity
practices
strategies can ensure economic growth among the local
by using local resources
communities during and after the life of a typical mining
without
or
operation: geological prospection and exploration, mine
original
development and production, and, finally, mine closure
affecting
degrading
the
condition Antonio Nieto, Associate Professor, Energy and Minerals Engineering of Penn State University
can
of
social
ecological
and
and reclamation. Interestingly, this particular definition of
systems,
sustainable development in mining is gaining momentum not
including the air, water,
just among governmental agencies or NGOs, but from the
and
private minerals industry itself.
land.
Sustainability
is achieved by managing four key development variables: economic
social
In the last five years alone, several major mining investment
responsibility, and applied innovation. Without knowing the
growth,
environmental
control,
initiatives around the world have been compromised, heavily
complexity of the meaning of “sustainability”, humans have
delayed, or canceled. Countries with significant mining
survived and flourished since the dawn of civilization thanks
economies like Peru, Chile, and Colombia saw a mineral-rent
to basic sustainable practices. The supply of minerals, such
index reduction of 24% between 2007 and 2012, according
as tin, copper, lead, iron, and coal was maintained due to
to the World Bank’s 2014 economic indicators. Considering
the development of the mineral extractive method known
that mineral-rent is defined as the difference of value of
as mining. Mining has since then flourished as one of the
mineral production at world prices versus the total cost of
primary activities for human survival. The necessity to secure
production, measured as a percentage of the country’s GDP,
the supply of raw material for manufacturing, as well as for
a 24% decline represents about US$57 billion dollars of
energy generation, drove humans to explore and settle in
revenue that was never realized. From this amount, around
sometimes inhospitable regions of the world, bringing with
40%, or US$23 billion, was mainly attributed to political,
them economic progress to these early human settlements.
social, and environmental factors, as reported by the Fraser
We then developed education, a new sustainable mechanism
Institute. This decrease in successful mining initiatives may
to transfer this knowledge through time from one generation
be attributed to the lack of modern sustainable development
to the next through instruction and training. However, for our
and innovation strategies that will guarantee the preservation
civilization, learning how to supply basic goods, such as food
of local ecosystems and the sustainable economic growth
and raw materials needed for manufacturing, was not enough
of the region well beyond mining activities. Furthermore,
to secure survival. Population growth and constrained
the minerals industry worldwide is now facing a new PR
resources produced the need to advance common methods
challenge. For the first time, previously isolated regional
of agriculture and mining through innovation.
mining communities can now share information almost in real-time. That is why, more than ever, a clear and sound
Innovation is then another form of sustainable development
environmental and socio-economic comprehensive mine
that could be defined as the result of a continuous strategy
plan must be implemented during the early stages of any
to improve current practices, methods, and technologies.
minerals investment initiative and must be properly shared
This continuous improvement has been accomplished for
with regional stakeholders. In order to succeed, the mining
centuries by two simple practices: effective education
industry requires an awareness of the transitional use of local
and applied research. Even though it was not originally
ecological services.
recognized as a formal development strategy, sustainability
338
was heavily practiced in different forms as a logical response
This new strategy must be supported by innovative mining
for survival and the preservation of human civilization. For
legislation as well as by the latest advancements in mineral
millennia, we have learned and mastered how to sustain
extraction and environmental engineering. Today’s mining
the supply of raw material, feeding our economic markets
activities must adapt to a new culture where local ecological
with minerals and maximizing profits based mainly on
systems and services are simply borrowed from the planet.
production-driven strategies. Today, however, successful
Sustainable mining development is no longer about simply
sustainability in the minerals industry needs a new approach
maintaining the supply of minerals. That stage passed
based not just on production-profit goals but on a new and
decades ago and we must now face the new challenge:
augmented production strategy aimed at achieving the
finding best practices that can preserve that supply while
sustainable well-being of local and regional communities.
ensuring the well-being of our communities.
| VIEW FROM THE TOP
ENVIRONMENTAL REGULATION IMPLICATIONS FOR BUSINESS FEDERICO RUANOVA GUINEA Environmental and Natural Resources Practice Group Coordinator at Baker & McKenzie Q: How does Baker & McKenzie’s value proposition differ
for how environmental protection should be enacted at the
from other firms specialized in environmental law?
federal and state level. The evolution of our environmental
A: Baker & McKenzie is very familiar with Mexican law,
protection system will be achieved by focusing on
particularly environmental legislation, which the firm has
complementary laws, not the general law.
practiced for many years. Our value proposition lies in the fact that we are well acquainted with all legal requirements
Q: How has the new Environmental Responsibility Law
and with how the mining industry operates. As corporate
impacted the mining industry thus far?
and commercial lawyers, we know that our clients want
A: The law regarding environmental liability came into
to begin their business activities as promptly as possible.
effect in early 2013 and addresses collective class actions.
We educate them so that they can quickly secure their
Although this law has had very little impact on mining
environmental permits. However, the environmental aspect
operations so far, it remains to be seen how it will affect
is only one of many areas with which they must comply.
communities or individuals. The law is already in place and
Others include fiscal, labor, or real estate obligations.
it is resulting in a shift away from how the laws have been
At the end of the day, our clients come to us so that we
traditionally enforced. Conventionally, these have been
can provide them with the necessary tools to begin their
enforced by regulatory agencies but this responsibility will
operations in an acceptable timeframe.
now fall into the hands of the court system. At this point, we have not seen any significant changes in mining companies’
Q: How can existing legislation be modified to better align
compliance of federal environmental laws. We will have
with Mexico’s industrial development needs?
to wait and see if any of these legal actions will have the
A: There have already been some relevant amendments
desired effect, namely changing behaviors and altering the
since 1992, particularly in the areas of waste management
ways some mining companies operate in Mexico.
and communities’ right to information. Another area that needs to be highlighted is that many other relevant
Q: Which major changes do you anticipate seeing in
environmental laws have also been enacted. The General
environmental regulation as a result of the recently
Law on Waste Management, which addresses how operators
approved Energy Reform?
should properly dispose of their waste streams, has had a
A: I do not think that the Energy Reform is likely to influence
very clear impact on the mining industry. There have also
the way mining companies tackle environmental matters.
been some important changes in environmental impact
We have to remember that mining activities are regulated
permitting. Another recently introduced law addresses
by a different regulatory body. Under the recently
land use and how companies can go about meeting zoning
approved amendments to the Constitution, hydrocarbon
requirements, particularly with regards to mining activities.
extraction and related activities will take precedence over both mining and water concessions. We may see a
At this point, we should be thinking less about changing the
scenario in which one person holds a mining concession
current General Law of Ecological Balance and Protection
but another player finds shale gas or oil reservoirs at the
of the Environment, and focusing more on amending
same location, making the mining concession a lesser
other federal by-laws that have a direct impact on mining
priority than hydrocarbon production. Another possible
activities. The one that really stands out is the law pertaining
impact might be that mining companies start directly
to changes in land use. Under this law, mining companies
hiring private companies for their energy needs. With the
are required to change their land use statement, even if
Constitutional changes, mining companies will have the
they are only at the exploration phase. I believe the focus
advantage of being able to buy directly from wholesale
should be on amending such laws. The general law had a
power producers rather than having to participate in
big impact when it was enacted in 1998, but it is now more
cogeneration schemes. This will have a positive impact on
about establishing a law that provides a general framework
operating costs for mining companies.
339
340
TAILORED SOFTWARE OFFERS PRECISE CSR TRACKING
José González, Commercial Director of Borealis Mexico
According to a joint study
CSR system into their operations. “What we have learned
by Queensland University,
during Borealis’ time in Mexico is that there are large
Harvard Kennedy School,
corporations that release an annual sustainability report
University of Manchester,
but do not necessarily have a sustainability system,” shares
and the Peruvian Center for
González. “One of our challenges is to overcome antiquated
Social Studies, community
paradigms.” With this in mind, it should come as no surprise
conflicts
mining
that there are a total of 32 conflicts between communities,
companies can incur costs
workers, and mining companies in 18 of the 32 Mexican
of up to US$20 million
federal entities. These are mostly concentrated in the states
per
prevent
of Oaxaca, Sonora, San Luis Potosi, Baja California, Chiapas,
week.
with
To
these discordances from
and Guerrero. Conflicts with communities often arise from
escalating, Borealis, a CSR systems developer and solutions
inefficient communication between mining companies and
provider, has developed a tool to store and manage a large
the communities, unsustainable agreements, environmental
database of operative information related to environmental
and social negligence, and breaches of international human
performance and compliance. The Borealis software can
rights. “Convincing mining companies of the benefits of CSR
produce notifications of accidents, changes to the local
is no easy task when budget cuts are programmed across
supply chain, and complaints, among other areas. “This
the entire mining supply chain,” confirms González. “As
is what communities around the mine care about. Our
investments are decreasing in mining operations, companies
system allows companies to follow up on these areas to
are reluctant to invest in CSR. We try to show them that now
avoid conflicts and mitigate risks,” states José González,
is not the time to cut back on CSR, but rather to invest in it, as
Commercial Director of Borealis Mexico.
it will soon be a prerequisite for all those interested in doing business in Mexico.”
The Borealis software synchronizes information instantly, so that it may be accessed by respective executives around the
According to González, the driving force for CSR investment
world. “The software is made for day-to-day applications
needs to come from norms and regulations, as well as from
and is designed to provide daily analytical reports based
the companies themselves. As stricter regulatory frameworks
on the information provided. An executive at the corporate
from other mining countries reach Mexico, and companies
office may then access information about an incident with
and communities continue pressuring miners to go beyond
a community, for example, without having to wait from a
the basic requirements of the law to obtain a social license
report from somebody else,” González explains. Taking into
to operate, CSR is destined to become more important in
consideration that every mining project entails a different
the Mexican mining industry. “Many companies have started
operator, a range of infrastructure, and varying scale, CSR
to realize that spending on preventive community programs
systems must be tailored to the needs of the operation
is not a cost, but rather an investment. If a mine is shut for
and of the community. According to González, “Borealis is
a week due to issues with communities, this could cost the
able to personalize its system to the characteristics of each
company more than to accommodate 2-3% of its budget
project, rather than needing to adapt the project to the
for CSR solutions,” he says. “CSR should be seen as more
system.” Not only can the software help mining operations
than just a budget though; it is a requirement for long-
to avoid conflicts, it can also help companies track their
term, sustainable mining,” says González, who believes
CSR expenditures. This ensures that investments made
that the trend in the mining industry is towards sustainable
in community development programs and environmental
development. This is why Borealis is aiming to grow in the
compliance result in real benefits for the community and
sector in the years to come. “The new operational rules
the surrounding area. Furthermore, Borealis offers software
regarding sustainability are changing, and after five years
operation training for the mine employees, training on CSR in
of being present in Mexico, we are witnessing that this is
general, and it helps companies to identify the needs of the
the best moment to be in the industry. Reforms and new
communities. “We help to create sustainable relationships
regulations are now enabling companies such as Borealis to
with communities. Our work on the field facilitates land
enter into the mining market,” expresses González. While the
access and helps to promote local talent. By working with
company’s CSR solutions have already been implemented
communities we can provide mining sites with the trained
by major players in the mining industry in other parts of the
local work force that they need to ensure the success of
world, the company’s success in Mexico will depend on the
their operations,” says González. In his experience, mining
acceptance of CSR and environmental compliance by the
companies in Mexico have been reluctant to adopt a
country’s resident mining companies.
341
NAFTA’S IMPACT ON MEXICO’S ENVIRONMENTAL REGULATIONS By Eduardo Márquez - Mining projects come with an inherent
Protection and the Law of National Waters. To this day, these
need to alter the environment. While a certain level impact is
laws are the most relevant federal environmental laws by
inevitable, environmental laws and regulations aim to define
which mining companies have to abide. The General Law
acceptable levels of impact to allow the industry to operate,
of Ecological Balance and Environmental Protection was
while also mitigating widespread pollution risks. According
submitted to a revision in 1996 to include increased sanctions,
to the United States-Mexico Chamber of Commerce, it was
improved
only in 1993 that Mexico began to support its environmental
information on governmental initiatives and programs. Now,
laws with the implementation and institutional infrastructure
after more than 25 years since its implementation in 1988, the
needed to make them effective. Moreover, when NAFTA
government upholds the law by implementing sanctions and
was ratified in 1994, it was among the first international
obliging mining companies to pay for damages caused by
trade agreements to address the need to standardize
their operations. On par, the Law of National Waters, which
environmental regulations, and became a primordial driver
was created in 1992 and last modified in 2004, regulates the
of improved environmental standards in Mexico.
use and distribution of water across the country. Without
citizen
participation,
and
dissemination
of
the necessary permits outlined by this law and granted by The concerns that arose during the drafting of NAFTA
CONAGUA, the National Water Commission, companies
revolved around the inherent commercial advantages that
cannot make use of the water they need to operate a mine.
Mexico’s poor environmental laws and regulation gave the southernmost country. It was thought that lenient
While the Mexican government was criticized for a lack of
environmental laws and regulations could potentially
environmental regulation prior to the late 1980s and for
encourage US and Canadian companies to establish
insufficient enforcement of said laws thereafter, Herrera
operations in Mexico and avoid the strict environmental
Ordoñez believes that PROFEPA has done an outstanding
standards in their home countries. “Not complying with such
job at upholding the law and that mining companies are
standards would mean a country could attract more foreign
largely compliant with Mexico’s environmental standards.
investment due to lower operating costs. Environmental
“Mexico has not solved all the environmental challenges in
standards were thus imposed on Mexico to ensure fair
the country, but it did start to tackle them. Companies are
competition,” states Héctor Herrera Ordoñez, Partner at
now at least trying to meet these standards, particularly
Haynes and Boone. After intense negotiations in 1991 and
in the mining industry,” Herrera Ordoñez states. “Before
1992, the agreement was signed and led to the creation of a
NAFTA, there was no legislation that regulated such issues.
tripartite Commission on Environmental Cooperation (CEC),
Since mining activity was carried out far away from urban
based in Montreal, and the US-Mexico Border Environment
areas, there was limited public knowledge as to the impact
Cooperation Commission (BECC) in Ciudad Juarez.
of these activities on the environment. This is no longer the case, given the rise of the Internet and social media.”
At that point, the Mexican government, under the administration create
of
Ernesto
decentralized
Zedillo,
environmental
was
obliged
authorities
to
The advent of recent spills has shown, however, that much
such
still remains to be done in order to mitigate environmental
as SEMARNAT, CONAGUA, and PROFEPA to meet the
pollution. Although companies claim that not every
stringent environmental standards imposed by NAFTA.
disaster can be prevented, response levels after recent
“During the first years after NAFTA became effective,
environmental disasters show that the risk management
the inspection programs of SEMARNAT and PROFEPA
structures of mining companies can still improve. Moreover,
turned up a series of irregularities across the country,”
the current lack of water in Mexico’s northern states, where
Herrera Ordoñez expresses. “Nowadays, the results of such
most mining operations are concentrated, are forcing
inspections show a clear difference in the environmental
companies to increase their water re-use or hindering
practice of companies, with a high level of compliance.”
the construction of new projects altogether. The general
Herrera Ordoñez claims that there is a large difference in the
public has also been subjected to an anti-mining sentiment,
levels of air, soil, and water pollution during the 1970s and
as newspapers and government representatives claim
1980s and the levels now seen in Mexico. This is partly due
that negligence is the main reason for recent mine waste
to the fear companies have of being shut down due to non-
spills. AIMMGM has responded by claiming that the mining
compliance and improvements made to Mexico’s General
industry is a responsible industry which has provided jobs
Law of Ecological Balance and Environmental Protection.
and has helped Mexico developed into the country it is now.
After negotiations that spanned decades, Mexico created the General Law of Ecological Balance and Environmental
342
Eduardo Márquez, Senior Editor at Mexico Mining Review
| VIEW FROM THE TOP
ENVIRONMENTAL NEGLIGENCE THREATENS MINING OPERATIONS HECTOR HERRERA ORDOÑEZ Partner at Haynes and Boone Q: How much pollution does the mining industry actually
planet. For example, all mining projects need to clear the
generate?
area of vegetation and top soil, since there is no other way
A: While mining companies provide benefits such as jobs,
of extracting the minerals. This however requires a permit
infrastructure, and healthcare to nearby communities, they
from SEMARNAT, which is issued after an environmental
are often severely criticized because of the mistakes they
impact assessment is carried out on the property. Mexico’s
make. Accidents in the mining industry happen as they do in
laws give every individual or company the right to file a
the oil industry. Yet, neither of these industries represents the
complaint through PROFEPA against any other individual,
largest source of pollution in Mexico. Contrary to what people
company, or governmental entity which does not comply
believe, the main sources of pollution in Mexico are municipal
with the environmental laws. After a complaint has been
governments. According to the Constitution, municipal
filed, PROFEPA issues a resolution on whether or not
governments are in charge of treating municipal water
there are grounds to carry out an inspection. If there are
discharges, yet most do not comply with their obligations.
reasons to think that a company is not complying, such
The total volume of discharge from municipal governments
as signs of smoke or illness in a community, PROFEPA
and the concentration of pollutants that they introduce
typically proceeds with an inspection visit. When an
to water resources are greater and more harmful than the
environmental liability takes place, the accused will be
pollutants emitted by the private sector. Mining companies
subject to a procedure to resolve if he is guilty or not. Not
control their emissions for fear of being shut down, but there
complying with Mexican environmental legislation can
is little control on the pollution emitted by municipalities.
lead to liabilities and sanctions for companies in the scope
When referring strictly to the pollution generated in Mexico’s
of criminal, civil, administrative, and even international law.
mining sector, the largest threat to the environment is that generated by small-scale mining. Small-scale mining
Q: What types of studies do mining companies have to
operations often do not follow norms or standards, nor
present to SEMARNAT to carry out mining operations?
do they seek to prevent harm to the environment or their
A: Environmental impact assessments are necessary and
workers. Many diseases caused by pollution in small towns
are meant to outline strategies to reduce the environmental
are caused by illegal mining activities. As it is hard for
impact and outline a remediation plan. Companies also have
PROFEPA to regulate pollution from small businesses, it is
to present an environmental risk study in which they list all
hard for it to regulate small-scale mining.
the possible risks of pollution that could be caused by their operations. The way that new mining projects need to be
Q: How effective are Mexico’s laws at regulating the
structured depends on these risks. However, old mines were
environmental risks associated with mining, and what
not designed to mitigate risks and prevent environmental
steps can be taken against those who break these laws?
damage. With the technology available nowadays, almost
A: The General Law of Ecological Balance and Environmental
any risk can be prevented though. Environmental disasters
Protection enacted in 1988 has been subject to many
happen either because a mine is old and not initially designed
amendments and now stands out as the most relevant
to mitigate risks, or due to insufficient risk studies. Yet, there
environmental federal law in Mexico. It covers most of the
is no excuse for not taking the necessary precautions to
relevant environmental issues, follows some of the best
prevent accidents, whether the company owns a new or an
practices set by international standards, and serves as legal
old mine. Unfortunately, many mining leaders in Mexico still
protection against pollution. It is closely linked to Article 4
do not understand the need to take preventive measures.
of the Constitution which sets forth the right for a healthy
This differs in countries like Canada, where companies
environment. There is no country that entirely prohibits
listed on the stock exchange boast about their efforts to
pollution though. Countries instead set forth their own
mitigate risks and reduce environmental impact to attract
permitted concentrations of specific pollutants. If all pollution
more investors. Such companies show that it makes good
was prohibited, there would be no industrial activity on the
business sense to follow environmental best practices.
343
REMOVING POWER AND WATER HEADACHES AT MINING SITES
Sergio Sapién Balderrama, Director General of GAMSA
The reliability of a mine
dedicated software. When a problem arises, GAMSA is
site’s power source can
able to identify the situation online and, if necessary,
make or break the success
move staff to the mine within a maximum time frame
of
From
of six hours. “We monitor electric energy consumption,
the very beginning of a
voltage, amperage, and hours of use. Our systems can
mining project, generators
even remotely switch the equipment on or off. Mine
that can provide the high
supervisors can connect from anywhere in the world
level of power that mining
to view diagrams that monitor how the generators are
processes demand must
functioning,” explains Sapién Balderrama. GAMSA is
be up and running. This
also the exclusive distributor for the English company
necessity
an
operation.
that
Broad Crown, whose generators house similar engines
power generators offer a profitable line of business within
means
to those of Atlas Copco, but feature a user-friendly
the mining sector.
dashboard created by the Deep Sea brand. GAMSA’s catalog also lists water pumps which are used for the
GAMSA is dedicated to the sale and rental of electric
flotation process. The company offers pumps for both
plants, providing equipment that ranges from 20kW to
clean water and liquids with 70% solid material, as well as
full installations reaching 10MW in order to power all
diesel generators that lower head pressure, reducing the
aspects of a mine. GAMSA offers two types of generators,
distance between the pump and the water.
which meet the environmental, noise, and fuel efficiency standards demanded by the mining industry. The first is
One of the most important projects that GAMSA worked
a conventional use generator, and the second is designed
on took place two years ago, involving the installation of
for use in rough or extreme circumstances. The latter is
six water pumps in the Fresnillo mine of Industrias Peñoles.
more regularly used in the mining industry due to the
Disaster struck when the mine flooded. Sapién states that
harsh conditions associated with the practice. Typically,
GAMSA was the only company that could offer a quick
mining companies already know the type of engine,
solution to the problem, providing a water pump, the
fuel, and generator that they need to withstand mining
needed piping, and other parts that were imported from
use. However, companies still review the relevant data
Paris to Mexico. In 15 days, the team was already working
sheets to verify which generators are rigged with longer
to fix the problem and began operating deep inside the
lasting fuel tanks and are reinforced to the specific
mine in scalding waters. “This close relationship and
needs of the industry. For example, to clients running
quick reaction to the problems helped to place GAMSA
mines with little space, GAMSA supplies compact
above its competitors in the mining sector,” says Sapién
generators of 1,250 kW in containers of 20 parts. This
Balderrama. “We do not only provide generators, we are
differs from usual equipment of that capacity, which is
totally committed to the mine and its operations. Our
commonly transported in containers of 30 or 40 parts.
people are constantly operating in mines and monitoring
“These systems are more compact due to the top-
the equipment we have provided. This level of service is
facing location of the vents which replace the ones that
important to the mining sector, companies have to be
traditionally appear on the sides,” explains Sergio Sapién
sure that someone has their backs.”
Balderrama, Director General of GAMSA. “The offering of these generators helped us win a contract to supply First
The company intends to keep its portfolio centered
Majestic’ Del Toro mine. Del Toro operations consume
around a mix of power generation equipment and water
about 8MW per day so the generators installed by
pumps, but will bulk it out by adding other products that
GAMSA have a total capacity of 10MW. These generators
support these main lines. GAMSA also plans to continue
have 1,500l tanks which are fed automatically and run at
its focus on “powerhouse” projects in the future. “These
80% capacity to prevent engine wear.”
projects typically include operation, maintenance and services. We have been investing in such higher demand
344
In addition to the sale and rental of plants, GAMSA
projects for two years and plan to keep developing them
sends its operators to provide 24-hour support at the
in the future,” says Sapién Balderrama. Its participation
sites. GAMSA personnel visits the mines to perform
in these challenging but more rewarding projects, along
maintenance, document energy consumption records,
with its continued supply of reliable power sources in the
and supply fuel to the generators. The Atlas Copco
mining sector, is how GAMSA plans to solidify its mining
generators that GAMSA offers can be monitored through
successes.
| VIEW FROM THE TOP
WATER TREATMENT OPTIONS ARE OVERFLOWING FOR MINES CHRISTOPHER HOWELL Vice-President of Mining & Primary Metals at Veolia Q: What are the solutions that Veolia offers for mining and
surrounding location. In addition to that, we have another
metallurgical processes?
tool called the True Cost of Water, which tries to provide a
A: Veolia’s primary products and solutions for mining have
complete and accurate picture of the costs associated with
been centered on water supply and water treatment, and in
water use. For instance, it seeks to answer precise questions
very isolated cases, processing equipment such as clarification
such as what impact would the contamination of a water
filters for the Merrill-Crowe Process. Historically, we provide
supply as a result of mining activities have on a community,
solutions for desalination, water supply, and any number of
from a cost perspective. It is very difficult to measure this,
water technologies that provide water treatment for re-use,
but understanding the costs associated with water, whether
or for the discharge of water into the environment. We also
direct or indirect, is essential for mining companies. It is
provide a full turnkey solution combining our products with
very easy to put a price on piping and water treatment
operations, maintenance, and occasionally financing. We
systems. But what happens if water runs out and a company
have long history of providing environmental and industrial
cannot mine? What happens if there is a tailings dam
services to the mining industry thanks to a considerable
breach? All of these aspects have precise costs associated
footprint with Rio Tinto in Australia. These industrial services,
to them that mining companies may or may not focus on
which we also offer in Europe, the US, and in Mexico, include
during the development of a project. Most recently, Veolia
the cleaning of heat exchangers and process equipment, and
has combined its True Cost of Water tool with the IFC’s
the managing of both hazardous and non-hazardous waste.
sustainability risk tool to assess, measure, and look at the
In Mexico, we have about a dozen contracts where we help
sustainability risks associated with a mining project. Veolia
mining companies to manage some of the waste generated
has developed all these value added tools to specifically
at mining sites through our group that specifically manages
provide technologies and services for specific mine sites.
hazardous and non-hazardous waste, which is a big part of
These might need a treatment solution to help remove and
our portfolio offering. We also want to provide solutions for
treat arsenic, cyanide, or other heavy metals that may be in
the management of energy infrastructure as it relates to
the water. Other mines might require a water system that
mining industry. In order to ensure long-term sustainability,
not only provides drinkable water to the mine site and the
we help mining companies attain and then maintain their
residential camp, but also provides water and jobs to local
social license to operate. Sustainability is not only about
communities.
being environmentally conscious, it is also being able to continually operate a mine in a responsible manner. Without
Q: What type of solutions would you suggest to optimize
such a social license, the mine will most likely cease to exist
the use of water at mining sites in northern Mexico?
after a period of time. We help our clients to maintain this
A: Optimization is a big part of what we do, a lot of our
license through solutions that are fully developed in order to
resources are geared toward water re-use, and being
ensure environmental compliance, whether that be air, water,
as efficient as possible with every drop of water in the
or solid waste leaving the facility. A big part of helping to
process. These solutions can range from membrane
maintain a social license to operate for mining companies is
solutions to thermal evaporation solutions, while we also
ensuring that environmental compliance is being kept in the
have a specialty chemical treatment product line called
most cost-effective and responsible manner possible.
Hydrex. Mobile resources are of particular use in Mexico. We have mobile solution systems that can be mobilized
Q: How can Veolia help mining companies to keep the
from one location to another to meet emergency or
water resources surrounding the mine clean?
temporary needs. For instance, we have membrane
A: We have developed a tool called the Water Impact Index,
systems in trailers, as well as clarification systems and ion
which helps us to look at a number of different criteria in
exchange systems. We are putting a significant investment
order to help mining companies and local communities
focus on the Americas, and Mexico in particular, for the
fully assess the impact that water would have on the
deployment of even more solutions like these.
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| VIEW FROM THE TOP
WATER MANAGEMENT LEADER SEES MEXICO AS INNOVATION BASE KENT LANG Operations Manager, Southwest US & Mexico of Schlumberger Water Services Q: As one of the leading suppliers of mine hydrogeological
This results in more sustainable production and higher
services, what value does Schlumberger bring to mining
accumulative flow than can be achieved with in-pit wells.
companies operating in Mexico?
To date, we have drilled two directional wells, one in
A: We have been working with PEMEX since 1936,
the US and one in Mexico with a third well in progress,
providing services for wireline, well field development,
and we believe that more companies will begin looking
drilling, and construction. We now want to apply our
at this solution. These accomplishments are significant
oil and gas expertise in water resources management
milestones and reflect the extent of Schlumberger’s mine
to the Mexican mining industry. We have already made
hydrogeology and dewatering services in the Mexican and
significant advances in well design and pumping systems
other mining markets. Another service we provide is our
for dewatering large open-pit mines in Mexico. In doing
PetrelTM E&P software platform, a robust 3D geological
so, we have differentiated ourselves from other service
modeling tool. Although mines have their own 3D models
providers. For example, we have adapted our artificial lift
from various software platforms, Petrel allows users to
systems, an extremely important component for handling
input different types of information, including geology,
fluids in hydrocarbon extraction, to mine water extraction.
lithology, and geologic structures. The Petrel software platform creates a clear picture that allows us to determine
Large open-pit dewatering wells require powerful high-
the best position for directional wells. We know that
efficiency pumps to deliver water to the surface under high
lithology, rock quality data, and mineral alteration have
flow and dynamic head conditions. By using artificial lift
a big influence on the hydrogeology around open-pit
systems, we are now able to drill smaller-diameter wells,
mining. By using Petrel 3D images, we can design each
where pumps can deliver higher flow and head capacity.
well according to an optimal position and trajectory that
This approach has revolutionized the dewatering programs
allows dewatering as efficiently as possible.
for several of the mines that we have serviced. Reducing the diameter of wells used for bedrock dewatering, and thus
Q: Subsurface geological modeling requires a certain
pump size, has also decreased costs for our clients, who
level of optimization to guarantee accurate rendering.
would otherwise have to drill larger-diameter boreholes
With this in mind, how do you go about carrying out your
to fit larger pumps. For example, instead of drilling a 22in
3D modeling?
borehole, we have reduced the size to 16in; and we can use
A: We collaborate with the geology departments of each
10in casings and screens rather than 12in. Consequently,
mining company since they have their own data sets
the savings are significant, reaching a reduction in drilling
from exploration and geotechnical drilling. We add their
costs of about 20%. Similarly, the pumps now used are
data to our Petrel model to create a 3D image. We also
more efficient in terms of their ability to sustain high
use our own data obtained during the hydrogeological
flow rates at high dynamic head with each well typically
characterization of the mine. We do some conventional
pumping 30-60l per second from as deep as 700m, which
drilling and hydraulic testing to determine how much water
is relatively deep for dewatering purposes.
a particular borehole will produce and its relationship to the desired well architecture. For example, we might
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Similarly, we have carried over our oil and gas directional
convert it into a piezometer to monitor groundwater levels
drilling practices to open-pit mines, which previously
that will change as a result of our pumping activities. We
were strictly vertically drilled. Directional drilling enables
typically want to see how we are affecting the drawdown
horizontal wells to be drilled under an open-pit mine,
of groundwater in the pit. Even though we are doing a lot
crossing through the water-bearing formations laterally
of our own characterization, most of the data comes from
at multiple locations. Horizontal drilling also enables the
the mine’s team. We also do groundwater flow modeling,
wellhead to be positioned outside the pit so that it can
usually with the US Geological Survey’s MODFLOW as a
remain undisturbed by mining operations for years.
reference. MODFLOW, a 3D finite-difference groundwater
model, is considered an simulating
and
predicting
international standard for groundwater
monitoring system. In addition, we can use fiber optics
conditions
and electrical resistivity with advanced wireline geophysics
and groundwater and surface-water interactions. This
to do 3D imaging. By making measurements in near real
modeling gives us an idea of the required flow rate, or how
time, an operator can optimize its leaching operation. This
many liters per second we need to pump in order to lower
technology has great potential in Mexico.
the groundwater levels enough to create dry conditions for mining. Some mines have a lot of water and others
The mining industry is advanced in terms of automation,
not as much, but all mines have problems at times with
such as in conveyor belts, excavating, and material
pore pressure. Even though there may not be much flow,
movement, but it has moved more slowly than the oil
a certain amount of water in the formation will affect
and gas industry when it comes to geophysics, such as
the stability of the slopes. By drilling horizontal wells,
logging boreholes to determine technical properties.
we can drain the formation laterally to control the pore
Schlumberger has pushed the envelope of numerous
pressure so that the geotechnical engineers can maintain
applications currently not used in mining but that if
an optimal pit slope, an important factor that impacts
applied could improve processes. We hear people say, “we
the economics of the mine itself. Stability is an important
have been doing it for a long time, why should we start
issue. We dewater or depressurize so that companies
doing it differently?” So we try to push these technologies
can mitigate the possibility of slope failures. We do a lot
by proving their advantages in terms of economic value.
of the consulting for mines on slope stability and work closely with their geotechnical engineering teams. We use
Q: Which role do you foresee geochemistry and other
geotechnical and hydrogeological data to create a pore
environmental sciences to play in your portfolio of
pressure profile so that the teams can design a safe pit
environmental services?
slope, another example of our modeling capabilities. Along
A: When we offer mining hydrogeological services, we
with flow modeling, we conduct studies that focus on the
also offer our environmental services. Water resources
regional impact of dewatering because our clients need to
and environmental services are strongly linked in terms of
know how their actions will affect the permitting process.
ground and surface water, and some of the models that we use for mining can be used to for environmental work.
Q: Which of Schlumberger’s services have still not been
These services are important for obtaining permits and for
fully taken advantage of in the Mexican mining industry?
post-closure modeling – for example, determining what the
A: The work we are doing in Mexico has been truly innovative,
quality of pit lake water and groundwater will be at the end
to the point that some of our other offices are interested
of a mine’s life cycle. We have experienced geochemists who
in applying these experiences elsewhere. In Mexico, we
work with acid rock drainage analyses for mines, especially
are setting standards for technology and innovation to be
important for pit closure models when pit lake chemistry
used around the world. Having already applied oil and gas
must be evaluated. Our philosophy for geochemistry services
technology twice to the mining industry, and now going into
is the same as for our other service lines in general: manage
our third project, we are proving the commercial feasibility
water to prevent problems while a mine is operating and not
of this technology for the mining industry. We know that
waiting until it closes, when the costs will be much higher. We
we can drill these wells in hard rock, complete them, and
are involved in geo-environmental characterization of mine
pump a target amount. Therefore, this technology has
materials and metal leaching studies as well as groundwater
a lot of potential in any mine worldwide that has excess
quality sampling and characterization.
groundwater which needs to be managed. Q: How interested do you feel the Mexican mining Wireline geophysics, developed extensively by Schlumberger,
industry is in adopting innovative operational techniques
can also be applied to mining in Mexico. While the use of
and strategies?
advanced wireline geophysics is a relatively new approach
A: Our work in Mexico is an indication that the mining
to mining, companies are becoming more accustomed to it,
industry is interested in making the step change to have a
which is to our advantage. Regarding heap leach operations,
higher level of confidence in innovation, leading expertise,
for example, we have used numerous new applications to
and collaborative teamwork. While our business is growing
prove that Schlumberger can make measurements that
in Mexico, we are delivering a higher level of fit-for-purpose
were not possible before. We can measure changes in the
mine solutions focused on mine water management and
copper concentration in a heap, and we can collect samples
subsurface characterization. The relationships we are
of a pregnant solution from a heap with our proprietary
building will help both our clients and Schlumberger
WestbayTM multilevel groundwater characterization and
advance operations and minimize uncertainty.
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To keep the mining industry running smoothly, transportation and logistics companies work around the clock to make sure that equipment and raw materials are sent to where they are needed. This starts with the movement of material across deserts, mountains, and oceans, which can prove especially difficult considering that most mines are situated in remote locations with less than ideal infrastructure. For such reasons, logistics and transportation companies create specialized solutions to not only haul minerals and metals, but to also move oversized mining equipment and structures. Comparatively, traders work day and night, strengthening and expanding their networks in order to meet the supply and demand trends that span the globe. The metals trading world has become increasingly complex as metals trading firms secure entire mineral productions, concentrates, and by-products from miners, smelters, and refineries for their use in other countries and continents.
The following chapter aims to provide a complete overview of the challenges met by transportation and logistics providers, as well as material handling technology providers in the Mexican mining sector. It delves into the transportation of minerals and logistics systems at the mine site itself, as well as the different means of transportation on offer, from train and truck transportation to shipping services. The interviews featured herein provide expert insights into the main challenges that mining companies are facing when transporting their equipment, fuels and inputs, and metal concentrates, as well as solutions to the security and logistics problems that are inherent in Mexico. This chapter also assesses the country’s current road, port, and train infrastructure, particularly those avenues most concerned with mineral transportation.
LOGISTICS & TRADE
13
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CHAPTER 13: LOGISTICS & TRADE 352
Assessing Mexico’s Transportation Infrastructure, Mexican Mining Chamber (CAMIMEX)
354
Leading Metals Trader Seeks Mutually Beneficial Deals, Nexxtrade
356
Readily Available Fuel for Miners Everywhere, Petrolíferos
357
Secure Transport and Logistics of Doré, Brink’s Global Services
359
MINE SPOTLIGHT: Piedras Verdes, Frontera Copper Corporation
360
Onshore Services Help Shipping Giant Stand Out, Maersk Line
360
Connecting Hermosillo’s Mining Industry to the World, Connect Logistics
362
Pacific Hub for Mining Logistics Increasing Reach, Terminales Portuarias del Pacifico (TPP)
363
Railway Improvements with Little Environmental Impact, Kansas City Southern
364
Coastal Doors of Sonora’s Commercial Activities, API Guaymas
365
Trusted Logistical Provider of Giants, Puerto Carguero Logistics
366
Second World War Bridge Design Applied to Mining, Mabey Bridge
367
Conveyor Belts Unsung Heroes of Mining Operations, GGD Bandas y Servicios
368
Belt Solutions Help Meet Stringent Production Goals, Interbandas
369
Material Flow Blockage Can Be Tough Enemy to Defeat, Martin Engineering
370
Satellite Telecoms Offer Freedom to Mine Sites, GlobalSat
370
Telecoms Becoming Essential Part of Mining Industry, Elara Comunicaciones
351
| VIEW FROM THE TOP
ASSESSING MEXICO’S TRANSPORTATION INFRASTRUCTURE JAVIER ALTAMIRANO President of CAMIMEX Transportation and International Trade Commission Q: How would you rate Mexico in terms of its logistics and
and the relative economic value of the cargo transported
transportation infrastructure?
along certain sections of highways that are deemed as the
A: Advances have certainly been made. There is now more
most important from an industrial user perspective. We have
interstate infrastructure, but growth is not happening at
identified about 15 important segments and brought them
the rate required to match Mexico’s industrial expansion.
to the government’s attention, asking them to supervise and
There is a discrepancy that lies between what the industry
take better care of those highway sections that are most
in general sees as its imperative logistical needs and
important to the mining industry and to the Mexican industry
what the government is willing to do. For example, many
in general. The main message we wish to send is for the
of us believe that rather than investing in building new
government to be more rational when it comes to the limited
highways, it is more intelligent and productive to examine
resources that are destined for highway infrastructure,
the highway network and identify problematic sections.
especially giving maintenance and improving existing roads
The government could then use a percentage of its
that are crucial for the industrial sector. Unfortunately, this
budget to fix those sections instead of building an entire
has not worked as I would have expected.
new highway that will only solve a specific need, while
.
neglecting the rest of the highway network. The condition
Q: How is Mexico’s security situation impacting logistics
of these problematic sections is directly related to the
and transportation in the mining industry?
type, size, and weight of the trucks that transit along them.
A: It is true that lack of security negatively affects
Imagine a bridge that cannot hold trucks above a certain
transportation and logistical costs, but this is an issue
size and is thus limiting the traffic on that road. The smart
that affects most industries in the country. Mining is no
thing to do would be to invest in improving this bridge so
outstanding exception. Industries have spent copious
that more trucks can continue using the same road.
amounts of money on this, which naturally affects their revenues. Given the fact that mining products are
We are at a critical moment because of the passing of a
commodities with internationally set prices, if companies
new NOM-012, which regulates the weight and dimensions
have to spend additional resources on security, they will
of vehicles for industrial use. The previous norm favored
be negatively affected. As with any other cost factor,
competitiveness, safety, and economic stability, as it
unfortunately there is an inflation rate for security also.
promoted the use of newer, much safer and less polluting
The amount a company spends in security in a given
trucks. Newer vehicles were allowed to run with higher
year, will very likely increase the next year. Most mining
weights than the older trucks along high specification
companies now consider security to be an integral part
highways, which charge a toll. The new norm does not make
of their logistics costs. For example, Mexican railroad
this distinction, so older trucks can carry the same weight
services provider companies have dramatically increased
as the new ones. This does have some short-term benefits
their payrolls with many employees dedicated to security,
for some owners of the cargo, because the cost of freight
which result in considerable expenses that they necessarily
will decrease. However, in the long-term, freight costs will
have to pass on to their customers. Everyone in the mining
be negatively affected, because, among other things, transit
production chain ends up paying for security costs. It is
times will be longer and maintenance costs will increase.
very sad, but this subject will remain for as long as there
Infrastructure condition is closely tied to commercial success,
are no long-term solutions to Mexico’s security situation.
so these limitations put us in a disadvantageous position, as
352
compared to other countries. Ultimately, this norm will have
Q: Which Mexican ports are most in need of expansion?
a negative impact on the mining sector´s productivity and
A: Mexico has not experienced much growth in terms of its
competitiveness as well as that of the entire country. We have
port infrastructure. The expansion of the port of Veracruz has
been part of several studies that using hard data show the
been prepared on paper for years, but nothing has yet really
government the number of trucks, the frequency of transit,
materialized. This is one of the most important ports in the
country, so its expansion is at the top of my priority list. On
outstripped inflation rates. However, although this initiative
the Pacific side, the natural conditions of Lazaro Cardenas,
seeks to establish some kind of control over tariffs, it also
such as its deep draught, allow for the carrying out of large
suggests some changes that I do not agree with at all.
operations, but it must keep growing on, to achieve its full
For instance, it suggests that competitiveness could be
potential. Manzanillo is growing, although the problem of
fostered by allowing new players to use existing railway
urban sprawl is halting its continued expansion and making
infrastructure without paying anything, and this would be
it rather slow. These infrastructure issues are very important
completely unfair at all for those companies that invested
and I think the government is already addressing them, but
heavily in railways 20 years ago.
I do not see this happening rapidly. Short-term solutions cannot be easily found, as these are long-term operations.
Q: What is the Commission of Transportation and
Another problem concerns the tariffs for the use of ports
International Trade at CAMIMEX doing in this regard?
infrastructure and terminals as well. These are imposed
A: We combine efforts with other groups to make our
based on the size and weight of the cargo, while efficiency
perspective clear to the authorities, calling upon evidence
in the moving of the cargo is not well taken into account.
from studies and hard data. For instance, we work
Being ports infrastructure always limited, the key factor is
closely with the National Association of Private Transport
the speed every user has when using it; the faster the better,
(ANTP), a very solid and serious group which has broad
both ways, coming in and out of the port. Some time ago
understanding and experience on industrial transportation,
an experiment was carried out at one of the piers within
not only by railroads but by trucks, vessels and airplanes
the port of Veracruz, where companies who could shift their
as well. We provide the authorities with data from Mexico
cargo in and out of that pier faster benefited from a cheaper
and other countries, as some models generated and used
tariff. The system worked quite well, yet it was neither
in here are being studied and replicated in places like Peru,
continued nor implemented in the other piers in Veracruz. I
Brazil, and Colombia. Mexican experts are being hired
have not heard of a similar intent elsewhere in Mexico.
abroad to advise on logistics and transportation models around the world. Sadly, the political situation is causing
Q: What improvements have you seen to the Mexican
Mexico to slip back and lose its leadership in this area.
railway system? A: Nobody can deny we have had a tremendous quality
Q: Why was it important for CAMIMEX to have a
jump in the railroad providing since the privatization of the
Commission overseeing these areas?
service. However, it is also very clear for me that the starting
A: When creating specific Commissions, CAMIMEX’s board
point was a very low one. When it was a government service,
of directors attempts to reflect the needs of the chamber
the quality level was very poor, mainly during the last couple
itself and its members in the mining industry are looking for.
of years, therefore despite being a very high jump, it is not
Once it spots a niche that needs to be filled, in any area of the
yet at the level it should be. Moreover, if we bear in mind
business, CAMIMEX looks for a group of experts dedicated
that in Mexico we do not have inland waterways, the current
to this subject among its members that can share ideas and
level of cargo being moved by rail should be considerably
problems, while also addressing the issue collectively.
higher and because of this there are a lot of things still pending to be done in this area.
These efforts concentrate on the greater needs, and the result will be a group which turns out to be stronger than
Nowadays there is an initiative to modify the existing law
a single company fighting on its own. The representative
ruling the service. Among other changes, it proposes some
of a company can voice a problem to an authority, but
government participation in the stablishing of railway tariffs.
this will be a single voice that might differ from that of
This project was generated and approved by the Chamber
other mining companies. Conversely, a group dedicated
of Deputies, but is still held up in the Senate. In the original
to transportation or international trade or any other
law, concession holders can determine the tariffs for railway
matter within the chamber will have the strength of all its
use without regulation or supervision from any authority.
members. The issue will be treated more seriously and it
Now, I am not in favor of government-controlled tariffs,
will represent the interests of several actors. This will be
as these should be set by the interacting market forces.
taken before the authorities, who will have to view it as a
However, an official organism should at least oversee tariffs
general concern and not just a single company’s issue. The
for the railway system, as is the case in countries like the US.
idea of the Commission is to concentrate the perspectives,
Neither the Ministry of Communications and Transportation
both positive and negative, of the different associates in
nor any other government entity participate in the process
a single entity. The chamber remains strong as long as its
of tariffs fixation, and as a result the cost increments have
members continue providing information to use in its favor.
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LEADING METALS TRADER SEEKS MUTUALLY BENEFICIAL DEALS Whether the demand for minerals and metals is rising
material from small mining companies and pay 70-80% as
or falling, traders such as Nexxtrade provide a market
a provisional payment. Once the material was exported,
for these products at all times. By purchasing entire
they did not make the last payments and never came
production batches, stocks of minerals and concentrates,
back to Mexico to do business with that mining company,”
and by-products from mines, smelters, and refineries,
explains the CEO. This led to a situation where medium
traders are able to link the supply of one country to the
and large mining companies in Mexico and Peru refused
demand of another. Nexxtrade, also known by its corporate
to sell to Chinese traders. “Companies preferred having
name MK Metal Trading Holding, trades copper, lead, zinc,
the guarantee that the transaction would be properly
silver, and gold concentrates, mainly coming from Latin
executed by doing business with long-term traders, even if
American producers, and uses a global network to find
the terms were not as favorable.”
a market for these products. “Market knowledge is the added value that traders offer to mining companies. We
Nexxtrade taps into the need of mining companies to feel
analyze all the potential markets through our established
like they can trust traders. Having prior business experience
network to identify where the minerals should be sold,”
with the company is the first priority for Nexxtrade, which is
shares Nexxtrade’s CEO.
why it carries out very strict due diligence on a prospective new client. The only companies that Nexxtrade does not
Using its network and database of information, traders are
carry out verification processes with are mining giants
able to buy products from mining companies in advance
such as Industrias Peñoles or Grupo Mexico. All others
and decide whether to go short or long with the resources
must fulfill a list of requirements. The list includes verifying
it holds. “When we see that we will have an oversupply
that the paperwork of the mining concession is in order,
of copper concentrates within the following year, we go
that the company’s registration with the tax authorities
short, which means we sell even when we do not have the
is complete, and that the power of attorney is lawful.
material. This is because we know that eventually we will be
Mining companies also provide Nexxtrade with preliminary
able to buy it and sell it at a more competitive price than
information about the material that they produce and their
the suppliers,” states the CEO. “When we see that there will
capacity. If it is assured that a client’s operations abide by
be a deficit in the market, we go long, which entails buying
the requirements of the law and Nexxtrade believe that the
the metal and sitting tight until we identify that there is not
company can deliver on its promises, then it follows up
enough metal concentrate for the smelters, and then sell
with a visit to the mine. Nexxtrade sends mining engineers
it.” These transactions, however, carry a risk since a trader
to check that the mine can produce the stated capacity.
might sell material that they later cannot supply, or buy metal
Once this process is completed successfully, negotiations
concentrates at a high price only to find that the production
start on the terms and volumes. While large companies
of the metal continues to rise and the price lowers.
easily get at least considered by Nexxtrade, this does not mean that the company is letting SMEs fall by the wayside.
Being successful in this risky area relies on intimate
The CEO says that dealing with Nexxtrade actually gives
knowledge of the markets and the factors that influence
SMEs an advantage, given how expensive it is to run their
them. For example, according to the CEO, the markets are
own marketing team researching all the smelters available
currently very volatile and react particularly strongly to
around the world. “By the virtue of being in the market
activity in China. When China introduces a new policy that
all year long, we can offer smaller mining companies the
favors a certain metal concentrate, it is common for players
best terms possible at whatever time these need to do
to start looking for that concentrate or for a concentrate
business. Furthermore, the ability to blend materials is
with a high content of that metal.
another competitive advantage that we offer. There are complex materials in Mexico and Peru that inexperienced
This link to China has actually worked in reverse, given the
parties will not be able to acquire.”
interest that Chinese traders have shown in Mexico. Back in
354
2010, Nexxtrade had to stave off competition from Chinese
Nexxtrade’s responsibility to its clients does not end once
traders looking to bank on blooming mining sectors in
the trade is agreed upon. The company also handles the
Latin America, such as Mexico and Peru. But the CEO
logistics of the goods, as well their blending and selling.
describes how these trading propositions were not exactly
While warehousing is outsourced to a third party at the
in line with the market expectations. “These traders would
port of Manzanillo, and while another company handles
deal in numbers that were way out of proportion and were
sampling and analyzing, Nexxtrade’s staff supervises all of
unrelated to market conditions. Often, they would buy
these processes. “We are very conservative and try to keep
all parties involved satisfied with our services. If we identify
It is no surprise that Nexxtrade’s broad involvement and
that the grade of the material coming in is lower than what
expertise of the mining industry led to some suitors. In
was agreed, we alert the mining company so that they may
2011, Ocean Partners acquired a controlling interest in
take their own samples and verify the problem. If we blend
the company, with Nexxtrade feeling this was the right
the material before notifying the company, it could cause
move due to the two firms sharing the same values.
problems between Nexxtrade and the mining company.
The description of the acquisition would make many
The fact that we rely on third parties has increased our
entrepreneurs envious, as the CEO explains transition
cost and impacted our profit, but it has increased our
was hardly felt within the company. “Nexxtrade is still
transparency as well,” reveals the executive.
working with the same smelters as we were before. We do coordinate with Ocean Partners and make use of its
Given its ability to supervise aspects such as blending
network to give our suppliers the best terms. If we find
and selling of minerals, while understanding their evolving
a better deal through the Ocean Partners network, then
value, Nexxtrade is also in a strong position to make
we sell the material through it, but if we find a better deal
recommendations to clients as to how they can improve
through our own network, we do an independent deal. We
their processes and deliver higher grade material. Most
are not bound to any exclusivity conditions.”
of its recommendations focus on production strategies, such as avoiding the production of material with high
The deal has actually broadened Nexxtrade’s horizons. In
arsenic content. The application of such recommendations
projects that Ocean Partners has with Canadian companies
benefits both parties since their business will see minerals
such as Goldcorp, it has been called in to take care of
sell at better terms. Furthermore, Nexxtrade also seeks
the local consulting due to its knowledge of logistics,
to be flexible in the material it accepts from its clients. If
warehousing, and taxes in Mexico. Nowadays, about 40-
a contract states that the maximum arsenic concentration
50% of the support that Nexxtrade gives to Canadian
in the material is 0.4% and a client delivers material with
companies is through the business relationships that
0.45-0.5% arsenic, it can charge an extra US$100 per tonne.
Ocean Partners has. “We see a good potential for Mexico
However, it is ready to accept material with a lower grade
as a mining country, and we therefore have people working
or a higher content of arsenic without extra charges if it
close to the mining companies established here. Short-
is able to blend and sell the material without incurring
term players will impact our profits, but we expect to keep
losses. “This is something that almost no trader does and is
the clients that we have now on the medium- and long-
done because Nexxtrade is interested in forming long-term
term and offer them competitive deals. In some cases, we
business relationships. In cases where we simply cannot
seek to make a profit in other mining jurisdictions while the
be flexible due to market conditions, as is the case in the
situation in Mexico improves,” he concludes.
current copper market, we bring some material from abroad to fulfill the market requirements and pass the costs to the client,” says Nexxtrade’s executive. In 2013, Nexxtrade had to bring in “clean” material from Peru because many copper mines in Mexico were producing copper concentrate with increased arsenic content. The costs were then simply passed on to the mining companies in Mexico which had supplied the original material, without Nexxtrade seeking to make more profit than stipulated in the contract.
“Market knowledge is the added value that traders offer to mining companies. We analyze all the potential markets to identify where the minerals should be sold”
Puerto Carguero Logistics is a company providing the design, execution and control of logistics operations to companies, by transportation of products, supplies or raw materials at National and International level.
The experts in transportation to Mining sites! www.puertocarguero.com
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355
READILY AVAILABLE FUEL FOR MINERS EVERYWHERE Heavy investments are intrinsic to the mining industry, so
When PEMEX does face a supply shortage, Petrolíferos’
companies in this sector are very meticulous as to how
business faces a delicate situation as the oil company is its
they finance their operations. It should come as no surprise
only provider. In these cases, Petrolíferos revises its inventory
then that mining companies seek suppliers with attractive
to find a way to timely provide fuel for its clients. The versatility
financial
also
of its terminals gives it the ability to retrieve fuel from
demanding when it comes to the permits their suppliers
Nogales, Hermosillo, Ciudad Obregon, Guaymas, and many
have as they often want to ensure they collaborate with
other locations, to redirect the supply flow where it needs
internationally certified players. As one of the main suppliers
to go. “The company absorbs all the expenses and takes on
of diesel to the Mexican mining industry, Petrolíferos has
the risks as long as we can guarantee our commitment to our
placed a lot of effort in ensuring it matches the quality and
customers. We cannot afford to let a fuel shortage affect a
certification expectations of its clients, given that without
mine’s operations,” tells Gutiérrez. Petrolíferos always seeks
its diesel supply, many mines would judder to a halt. “Diesel
to allow its clients to focus on mining activities. This led it to
is a fundamental supply product for the mining industry.
introduce financial schemes as part of its services, although
All heavy machinery in a mine uses this fuel, and mining
this presented a fresh challenge as PEMEX does not grant
companies often have to rely on diesel-powered electricity
similar schemes to Petrolíferos. “We have to make sure we
generators because they operate in remote places. A diesel
have enough liquidity to continue financing our purchases
shortage would halt a mine’s operations,” explains Marco
while we help the mining industry through credits that can
Antonio Gutiérrez, Manager of Petrolíferos.
last up to 90 days,” says Gutiérrez.
schemes
and
credits.
Companies
are
“Our stations enable clients to know precisely how many liters they are extracting and how many are left in the tanks. The content of the tanks can be monitored remotely through digital systems that we install” Marco Antonio Gutiérrez, Manager of Petrolíferos
The company uses different PEMEX terminals to ensure
Gutiérrez explains that another service provided, the
that clients have fuel available at all times, and has a vast
self-supply scheme, originated from the needs of the
inventory to cover the needs of clients across the country’s
mining industry. Some machines used in this sector, such
entire northern region. “PEMEX deals with its franchises and
as backhoe excavators and draglines, can consume up
distributors like Petrolíferos,” says Gutiérrez. “On certain
to 1,000l in only four hours. It quickly became evident
occasions, PEMEX may deal with large clients such as
that mines needed an independent energy supply at all
Grupo Mexico directly. Nonetheless, PEMEX will still need
times. Gutiérrez claims that Petrolíferos was the first to
transportation services in those circumstances, which we
implement self-supply stations in mines once this necessity
provide. This is the main reason clients ask for our services
was identified. This scheme enables companies to plan
instead of going directly to PEMEX,” explains Gutiérrez.
ahead and fill their tanks on a regular basis without having to wait for a distributor. Another important advantage of
356
Petrolíferos is an important client for PEMEX, as it is
the self-supply stations is that companies can monitor
currently buying approximately 40 million liters of
their fuel consumption. “Our stations enable clients to
diesel a month. “PEMEX awarded our company with the
know precisely how many liters they are extracting and
Distributor Plus recognition. In order to be eligible for
how many are left in the tanks. The content of the tanks
this certification, companies have to comply with certain
can be monitored remotely through digital systems that
safety and efficiency standards,” says Gutiérrez. This
we install. The information is accessible to us in real time
gives Petrolíferos certain benefits and warrantees that are
and allowing us to act quickly in the event of a shortage,”
ultimately passed on to its customers. For instance, fuel
describes Gutiérrez. Many of Petrolíferos’ competitors
quality has a direct impact on performance and efficiency
have since implemented this strategy, but Gutiérrez says
of
Petrolíferos
his company has improved its service as a result of years of
exclusively uses centrifuge fuels, which are cleansed from
experience. “Petrolíferos does not seek to be just another
foreign particles. “Every liter we distribute is of the best
fuel supplier. We want to be a commercial ally that clients
quality available in the Mexican market.”
can rely on.”
mining
equipment.
For
this
reason,
| VIEW FROM THE TOP
SECURE TRANSPORT AND LOGISTICS OF DORÉ JAVIER CARRANCEDO ABAD Country Manager of Brink’s Global Services
Q: What is the current global strategy of Brink’s Global
Our vehicles are connected via GPS to our headquarters so
Services focused on?
that we can keep track of the exact location of the cargos
A: Our core business lines are mining, diamonds and jewelry,
anywhere in the country. Additionally, we use state-of-the-
and bank notes. Our goal is to be the best secure logistics
art communication technology, so that our guards can be in
provider and deliver tailor-made solutions to our global
touch with our headquarters during the entire trajectory, and
clients. We base our success on the fact that we work
have implemented a new system which prevents the vault
closely with our clients, which has helped us to understand
doors from being opened without an authorization code
their needs and to find the best solutions possible for each
from our security central. We also work very closely with the
and every one of them. Brink’s Global Services (Brink’s)
government in order to study the best possible transportation
does not have standardized services as we understand that
routes. Naturally, we are authorized by governmental entities
every client is different and that they all need customized
such as SEDENA to have armored guards. We have built a
solutions. The solutions we deliver adapt to the country
very good relationship with the army so they sometimes
where we operate, to the industry or segment we are
even escort our vehicles during parts of their trajectories.
servicing and, of course, to our clients’ needs. For example, we understand that the mining companies that we service
Fortunately, doré bars are not commonly targeted for theft
invest a lot of money in developing their resources.
in Mexico, but we still do everything we can to guarantee their safety and integrity, and discourage theft.
Q: Which are the most common final destinations for finished mining products?
Q: What are the most common services that Brink’s offers
A: In Mexico, Brink’s is mainly focused on door-to-door
to Mexican mining companies?
service. Our task is to pick up the products from the mines
A: Regarding logistics, we have the full capacity to ship
and deliver them to their final destinations. Brink’s takes full
products wherever they are needed. For example we have
responsibility for the liability involved so mining companies
been shipping goods from Mexico to the United Arab
can be at ease. The economic value of the shipments we
Emirates, Turkey, Switzerland, and China. We take care of
handle is very high since we usually transport gold and silver
all the processes and permits at airports and for custom
in the form of doré bars. Normally, we pick up the bars from
agencies. By acquiring this service, our clients only have to
the mines in very remote areas and deliver them to cities in
deal with one company, instead of having to talk to multiple
Mexico, Canada, and the US. Our door-to-door solutions go
providers. Three years ago, Brink’s bought Pan Americano,
across borders. For example, we are often hired to pick up
Mexico’s largest secure logistics company, and we have
bars from Hermosillo, Sonora, and take them to refineries
been striving to bring new solutions to the Mexican market
in the US. We also tend to deliver our clients’ production
ever since. By 2015, we are planning to introduce a security
to custom agencies, airports, and maritime ports. We are a
service for vaults in mines, which we currently offer with
one-stop shop for all of their delivery needs.
great success in Brazil, Argentina, and Chile. This would mean that as soon mining companies put their doré bars in their
Q: Which measures has Brink’s taken to ensure that it can
vaults, Brink’s would take care of the security of these vaults.
meet all the needs of the Mexican mining industry?
Part of our branding is selling peace of mind. Our clients can
A: We have the capacity in Mexico to cover 100% of our
be sure that their cargos will be protected and delivered
clients’ needs for door-to-door secure logistics. We have
integrally on the day agreed. In the secure logistics industry,
79 branches across the country with a total fleet of 1,300
accountability is the most important matter. You can have
vehicles. We have designed and built special vehicles to
powerful trucks and well-trained personnel, but if a company
serve the Mexican mining industry with a 10-tonne capacity.
does not have a focus on liability, it will not be competitive.
This class of armored truck has been rolled out in major
Brink’s takes full responsibility if anything goes wrong. If the
mining states, Sonora, Coahuila, Durango, and Chihuahua.
cargo is lost, we repay our customer its full value.
357
358
| MINE SPOTLIGHT
PIEDRAS VERDES Located in the south of Sonora in the town of Alamos, Piedras Verdes is Mexico’s third most prolific copper operation. The deposit is comprised over an elongated copper porphyry vein which, according to new exploration results, spans over 5km from east to west and over 1km from north to south. The mineralization of
Piedras
Verdes
is
predominantly
within
Triassic-Jurassic
metasedimentary units and various intrusive phases of Laramide granodiorite porphyry. The minerals that constitute the hypogene copper mineralization are chrysocolla, neotocite, azurite, native copper cuprite, and chalcocite, while the main types of copper ore are chalcocite, chalcopyrite, and bornite. Piedras Verdes is owned and operated by Frontera Copper Corporation through its 100% interest in Cobre del Mayo, a Mexicanconstituted company. Frontera Copper initially purchased Phelps Dodge Corporation’s 70% interest in Cobre del Mayo in 2002. One year later the company acquired the remaining 30% interest to fully own the project. During 2008, operational deficiencies such as deposit modeling, grade control, and contract mining arrangements, combined with the global financial crisis, caused important increases in cash costs and negative cash flows for the company. Later that year, Invecture Group identified the Piedras Verdes unit as an asset that could render significant value if the mine processes were upgraded under the management of a new board of directors. In December of the same year, Invecture Group offered to purchase all the common shares of Frontera Copper. In May 2009, Invecture obtained full control of Frontera Copper’s 100% ownership on Cobre del Mayo. According to Cobre del Mayo’s production reports, Piedras Verdes has mineral reserves of 1.13 million tonnes of copper with a mine life expectancy of 15 years. The process design for the CDM Piedras Verdes Leach SX/EW operation was originally based on a nominal production rate of 34,500 tonnes of LME Grade A copper cathode per year. This production primarily used conventional sulfuric acid/ ferric sulfate heap leaching and ROM ore. In order to efficiently process the ore at Piedras Verdes, the new management team implemented a crushing system that was specially engineered to reduce the extracted minerals to a particle size. This is so that the size of the minerals optimized the percolation of acidic solutions and allowed rocks to be screened, minimizing the clay content to ensure an adequate permeability and continued copper recovery. The new system has enabled Cobre de Mayo to further reduce its crushed particle size while enhancing circuit tolerance in the separation process. The minerals then undergo leaching and crushing with an acidified solution. Once the solution lixiviates through the heap, the copper is dissolved from the oxide and chalcocite ores.
359
| VIEW FROM THE TOP
ONSHORE SERVICES HELP SHIPPING GIANT STAND OUT MICHAEL HANSEN Managing Director of Maersk Line Mexico Q: To what do you attribute Maersk Line’s ability to remain
and more efficiently, and developing various technologies
the biggest container ship enterprise in the world?
to make us more cost-efficient.
A: We have been committed to the container business for many years. We were the first company to make serious
Honestly, we work in a commoditized business. Many
investments in dedicated container ships in the 1970s. This
companies are able to transport a container from
line of business has evolved greatly but we used to have
Shanghai to Lazaro Cardenas, so it is difficult to
our own shipyard in Denmark, where we carried out a lot
differentiate between them. Maersk Line is able to
of R&D on container ships, thinking about how we could
distinguish itself due to its work on land. It is important
build them in the most cost-effective way. This led to us
for us to strengthen our onshore services as the industry
launching the world’s largest container ship in 2013, the
has evolved to a point where container lines share their
Triple-E, standing for energy efficiency, economy of scale,
ships to improve cost-efficiency. In Mexico, we have about
and environmental friendliness. It can carry a full load
100 colleagues serving our customers to ensure that their
of 18,000 containers and emits significantly fewer CO2
cargo arrives on time. Our land-based service gives our
emissions than any existing container ships.
operations the necessary transparency so that clients can keep track of the location of their containers, their arrival
Over the last ten years, we have focused on making the
date, and ensure that they arrive on time with all their
industry more cost-effective and environmentally friendly.
contents. We are also seeking to differentiate ourselves by
It is no secret that our industry pollutes a fair bit and that
doing all our transactions online. The shipping business is
we burn heavy bunker fuel which makes our CO2 emission
very old-school, a lot of documents are handled through
volume quite significant. Yet Maersk Line has invested a lot
manual processes, which is we why we are becoming
on consuming less fuel, building new ships that sail slower
more automated and more standardized, applying one
CONNECTING HERMOSILLO’S MINING INDUSTRY TO THE WORLD Providing logistics services
consider the size of the shipment, the necessary permits,
for
road conditions, precise routes, customs, and the ports
is
Luis Carlos Terán, Director General of Connect Logistics
mining
companies doing
the shipments might go through.” While mining logistics
so for almost any other
different
therefore sounds daunting in comparison to other kinds, it
industry, given the specific
proved crucial in the creation of Connect Logistics in 2011,
challenges
encountered.
as its founders decided to focus on providing services for
Luis Carlos Terán, Director
mining companies in Sonora. “Several companies trusted
General
us from the start, and the mining industry is now our most
Logistics, criteria
than
of
Connect
explains such
as
that
important source of business,” says Terán. This trust has
the
seen Connect Logistics being asked to transport equipment
bulk size of equipment
and even oversized structures from around the world.
transported and the kinds of maneuvers that will be
360
done have to be taken into account. “The manufacturing
Much of Connect Logistics’ business goes through the
industry usually requires routine operations consisting
ports of Altamira, Manzanillo, and Ensenada, given that its
of moving boxes and monitoring deliveries. The mining
clients tend to import more than they export. Terán explains
industry needs previous planning for which we need to
that products from Europe land in Altamira, Manzanillo
booking system to the whole world. This makes it easier
they feel the situation is more favorable. It is definitely true
to do business with us.
that Mexico presents significant obstacles for SMEs looking to come here. A large company can enter the country with
Q: How heavily are you involved in mining?
the right structure and equipment and begin operating. Not
A: Maersk Line handles mining logistics for iron ore,
all companies have those means and this is a challenge that
primarily for the route between Lazaro Cardenas and
Mexico has to address. So far, this has not been a problem
Qingdao in China. Mexico is an import country so it imports
for our group. We are making a fairly big investment in a new
many consumer goods from East Asia but typically sends
terminal at Lazaro Cardenas through our sister company,
nothing back. For us, sending an empty container back
APM Terminals, but we believe in this market so we have
is just bad business, so sending these containers filled
no problem making it. However, if we were a medium-sized
with iron ore is preferred, even if they do not generate
company it would be easier for us to invest in another market.
much profit. In terms of our mining business today, we only handle iron ore. We have no other involvement with
Q: How will the new container terminal at Lazaro Cardenas
other minerals, even in Chile, which is the largest exporter
add value for your customers?
of copper in the world. We do not engage much in that
A: Firstly, it is important to stress that APM Terminals will
market, it is containerized but our competitors have got it
be handling the operations there. It will only be our supplier
covered. We have not gotten involved in it.
if we decide to use it. We currently use another container terminal in Lazaro Cardenas. When the new terminal is up
Q: What are the main challenges for companies looking to
and running, we will make a commercial assessment of
ship to and from Mexico?
whether to keep using the terminal that we are using today,
A: In my experience, major conglomerates and big
or switch to the new one. That is the same business model
international companies are all fine. The likes of Walmart,
we use all over the world; we will only use a terminal if it is
Volkswagen, and Nissan have been here a long time, they can
commercially competitive. Mexico has long been dependent
invest significantly in their companies, and this leads to good
on monopolies but it has now started to break these down, a
business in Mexico. SMEs, however, are scared of coming
development which will improve the competitiveness of the
here. For example, European embassies are focused on
national economy over time. The new terminal will provide
supporting and encouraging SMEs to export their products
an alternative for Mexico, enabling it to increase its imports
to countries where doing business is easy and there is little
and exports to and from East Asia on its Pacific Coast. It will
corruption. As a consequence, Mexico is seen as being too
contribute to Mexico’s infrastructure development, which
much of a hassle and these firms prefer to go somewhere
the country needs for roads, rails and ports.
receives shipments from South America and Asia, while
“What we offer our clients is peace of mind, so we relieve
Ensenada receives exclusively from Asia. Connect Logistics
our clients from the burden of constantly having to monitor
has alliances with companies in the US and Canada, giving
their shipments. Instead, we send our clients updates on
Terán’s firm extra freedom to transport merchandise in
their shipments’ status and locations from two to six times
these two countries, and it can transport dry freights in
per day,” details Terán.
Europe and Asia. The company offers customs services as well, so it takes care of the whole transportation process,
Running a logistics company moving expensive shipments
whether this is a land, maritime, or aerial freight. Every
in notorious areas of the country has made Terán highly
transportation activity requires a permit, for which the
aware of the security situation in Mexico. The company
Ministry of Communications and Transportation imposes
is particularly cautious about its schedule, the times of
the respective restrictions. While its current permit allows
day at which its vehicles travel, the merchandise’s level of
Connect Logistics to transport up to 100 tonnes in Mexico,
exposure, and the types of vehicles it uses in areas deemed
it can move larger shipments provided that it obtains a
to be dangerous. In some cases, mining equipment can also
specialized transportation permit to do so. Under its current
be escorted to and from mines. Of all these measurements,
permitting conditions, explains Terán, Connect Logistics
Terán believes scheduling is the most important, and his
transports mostly production-related goods such as
company only transports oversized cargo during the
engines, crushers, screeners, leaching equipment, and pipes
daytime on business days. While this might seem restrictive
for its Mexican mining clients. Although the company has
in terms of capacity that Connect Logistics can handle, it is
the capacity to move minerals, it has not done so to date.
far better to be safe than sorry.
361
PACIFIC HUB FOR MINING LOGISTICS INCREASING REACH The existence of a reliable supply chain, covering air,
fuels such as thermal and metallurgical coal, as well as
land and sea, is a natural component to any industry
petroleum coke. One of TPP’s shareholders, Transenergy, is
spanning the globe. To an industry as export-reliant as
a subsidiary of Mexican cement giant, CEMEX, and handles
mining, supply chain reliability is almost as important as
all of CEMEX’s trading, including vast amounts of petcoke.
drilling or extraction. Mexico’s geographic position makes
Backed by these important companies, in its first 15 months
it a natural logistics platform but its infrastructure has
of existence, TPP broke the Mexican record for the biggest
often been criticized as lacking. Terminales Portuarias
vessel loaded for export by loading 146,000 tonnes of
del Pacifico (TPP) is determined to break this image.
iron ore destined for China. “We came up with the idea
As the first public bulk terminal on the Mexican Pacific
of a public terminal at the right time, since China is now
Coast at the port of Lazaro Cardenas, TPP specializes
demanding huge amounts of iron ore and base metals,”
in hosting large-draft vessels capable of transporting
explains Arriaga. “Iron ore is our primary market, but the
100,000-150,000 tonnes of net cargo, making its port
terminal also has the potential to transport steel products
one of the few in North America able to berth vessels
from areas like the southeast of the US.” This international
of this magnitude. This makes it an ideal location for
reach is part of TPP’s marketing strategy. By promoting
TPP to provide much needed logistical solutions to the
its services across NAFTA and Latin America, TPP expects
mining industry, particularly when it comes to exporting
to expand its trade with China, which needs around 800
materials on capesize vessels.
million tonnes of iron ore a year. Although Mexico exports less iron ore than Brazil, its proximity to China makes it a
TPP began operations in October 2012, and while its
far easier trading partner.
concession is managed by the Integral Port Administration (API) of Lazaro Cardenas, it has four shareholders: Grupo
Arriaga points out that the terminal has sought to forge
Mexicano de Desarrollo (GMD), Grupo Clisa, Transenergy,
land
and Noble Group. Three of these have no relation to
companies with all-inclusive logistical support. The rail
mining but Noble Group is a major supplier of iron ore and
network of Kansas City Southern de México (KCSM) and
a trader of aluminum, copper, tin, zinc, lead, and nickel.
a highway winding its way to Mexico City and Guadalajara
This supervision by an important industry insider has
are immediately accessible. “Goods coming through our
proven useful as TPP has handled throughput contracts
terminal can reach the Laredo border crossing in just
with mining companies such as ArcelorMittal, providing
eight days,” comments Arriaga. “KCSM is very interested
them with a secure pathway to external markets such
in TPP and in the port of Lazaro Cardenas. It is currently
as China, Japan, and South Korea. Eugenio Arriaga, Port
investing millions of dollars to expand the port’s railway
Manager of TPP, confidently claims that the reliability
infrastructure and ensure faster connections to Mexican
of TPP’s terminals has contributed to the region’s mines
cities for inbound and outbound goods.”
transportation
connections
to
provide
mining
expanding and receiving additional investment. Despite
362
this promising backdrop, TPP remains in the initial stages
This all allows Arriaga to forecast a prosperous future for
of development and is busy growing its on-site facilities
TPP. “By the end of 2015 or early 2016, we are going to
to handle a wide range of mining needs. It has seven
duplicate our terminals’ capacity, enabling us to handle
hectares of open yards available to stockpile products
between 8-9 million tonnes of material a year, and creating
such as zinc, iron ore, or copper, and has implemented
a great opportunity for the mining industry to develop new
measures to prevent cross-material contamination. Arriaga
transportation routes within the region.” Through 2014, the
also explains that the terminal’s yards are equipped
draft at the port of Lazaro Cardenas increased in depth
with front loaders, excavators, conveyor belts, and two
from 16.5m to 18m, marking the beginning of TPP’s second
fourth-generation Liebherr cranes that handle around
phase of operations. However, this continuous expansion
40,000-45,000 t/d. “This capacity has helped TPP set
schedule will also lead the company’s biggest challenge,
the highest standard for specialized bulk terminals in the
as TPP is seeking to expand beyond Lazaro Cardenas in
world,” assures Arriaga. “As well as offering the highest
the medium-term. Arriaga states that TPP is looking to
performance record in the country, TPP allows mining
open additional bulk material terminals in other ports in
companies to transfer their cargo directly into the yard,
Mexico and Latin America. By eventually making these
and then store it for up to 30 days before transporting
specialized terminals trusted links of the supply chain, it
it. Last year, the terminal managed a total of 3.6 million
aims for mining companies to have fully developed supply
tonnes of material.” TPP primarily manages export cargo
routes at their disposal as mining continues to take off in
of iron ore, but also possesses high potential for solid
Mexico’s western states.
RAILWAY IMPROVEMENTS WITH LITTLE ENVIRONMENTAL IMPACT Railways have proven to be responsible for significant energy
In 2013, KCSM’s investments amounted to more than
savings by effectively replacing thousands of road transport
US$137 million, marking a 6% increase in overall investment
units. A train can move a tonne of freight over 700km
over the past five years. In total, it has invested over US$3
with less than 4l of fuel. However, while Mexico’s strategic
billion in the concession, as well as on the maintenance
location gives it access to some of the largest markets in
of its network, the purchase of new technology and
the world, its railway system still leaves much to be desired.
equipment, and its transport infrastructure. Even with
This is why Kansas City Southern (KCS) is spearheading the
such massive growth and development, Zozoya says
environmentally-friendly development of Mexico’s railway
that KCSM operates under a commitment to health,
infrastructure, of benefit to many industries, including mining.
safety, security, and the environment (HSSE). “Our
“Between 2002 and 2011, we decreased our rate of emissions by 30.5%, whilst seeing a revenue-to-miles increase of 51%”
José Zozoya, President of Kansas City Southern de México
Kansas City Southern de México (KCSM) provides a direct
HSSE commitment outlines the guiding principles which
connection between the US and the country’s logistical
make KCS a greener and cleaner company. KCS is also
nerve centers. Its International Intermodal Corridor begins
combining its efforts with other Association of American
in the port of Lazaro Cardenas and runs throughout 15
Railroads members to reduce greenhouse gas emissions
Mexican states, connecting the main industrial areas with
by at least 1% on an annual basis. We have proved our
the rest of North America. It also provides the shortest
capability to be environmentally friendly when, between
route from the Pacific coast to the US border at Nuevo
2002 and 2011, we decreased our rate of emissions by
Laredo. KCSM has poured continuous investment into the
30.5%, whilst seeing a revenue-to-miles increase of
strengthening of its infrastructure as it works to address
51%.” Additional internal changes include a fuel savings
the logistical needs of its customers on both sides of the
program, the replacement of mercury vapor lights with
Mexico-US border. One example of this dedication was the
high output fluorescent lights, the introduction of propane
expansion of its intermodal terminals, providing a greater
powered vehicles, solar powered switches, diesel-electric
capacity for loading and unloading as well as a new control
locomotives, and the retrofitting of old engines with a
system for entering and exiting terminals. The company
system called Auto Engine Start Stop (AESS), which will
is convinced that Mexico has the potential to attract
reduce fuel consumption by an average of 7,000 gallons
public-private investment schemes that will stimulate new
per locomotive a year.
rail projects around the country. This belief instigated a plan to build four new bypasses, specifically for freight
Zozoya is also proud of the way that KCSM instills
trains passing through urban areas, between 2013 and
environmental responsibility within its customer base. It
2018. An additional 371km of railways will also be built
does so by recognizing and rewarding customers which
and upgraded during this period of time. KCSM expects
have avoided the most emissions with an environmental
these improvements to have wide-ranging impacts, such
award. This incentive has helped the railway company’s
as improving security and providing better support for
clients achieve a reduction of approximately 500,000
nearby communities. Outside of its own offerings, the
tonnes of greenhouse gases from being released during
company also cites the transformation of Mexico’s ports
operations. “KCSM invests in and develops programs
as being a major shot in the arm for the railway sector.
that help us, and indeed our customers, to complete the
“Veracruz, Altamira, Manzanillo, and Lazaro Cardenas have
important task of reducing carbon emissions,” explains
all become world-class ports, contributing an additional
Zozoya. “Avoiding the generation of CO2 emissions is a
nine freight terminals with varying specializations. More
goal that businesses, governments, and the public must
terminals mean more potential capacity, something which
embrace on their own. The implementation of small
KCSM intends to capitalize on by increasing its annual
changes in our day-to-day activities, or our big projects,
movement of containers from 5 million to 5.8 million,” says
will allow us to achieve a sustainable future for all of
José Zozoya, President of KCSM.
Mexico.”
363
| VIEW FROM THE TOP
COASTAL DOORS OF SONORA’S COMMERCIAL ACTIVITIES GUILLERMO VON BORSTEL OSUNA Commercialization Manager of API Guaymas Q: What has been the Port of Guaymas’ significance in the
A: The port’s infrastructure has not changed much in
economic development of Mexico and Sonora?
the past 20 years, so we do not have modern systems to
A: The Port of Guaymas is, without a doubt, the most
help us prevent the bottlenecks that are common in the
important port in Sonora and one of the most relevant
reception of bulk minerals. We are aiming at receiving
in the country. This port has greatly contributed to
larger shipments that will increase the port’s revenues.
the region’s economic development by becoming a
However, in order to receive shipments with larger volumes
significant catalyst for importation and exportation
of minerals, we have to update our capacity first. The
activities in Mexico. Unlike other ports in the country,
growth of the mining industry has been such that we were
Guaymas is a port of exit, which means we are mainly
not able to adapt accordingly. In the last year, we exceeded
focused on exports. Since a great deal of our coastal trade
our storage capacity and we have also witnessed certain
and international maritime transit consists of exports,
inefficiencies in the railway reception of bulk minerals. This
Guaymas is offering solid commercial opportunities to
is the reason why process automation is a priority for us
companies in northwestern Mexico and the southern US.
moving forward, as we want to provide more certainty
We have the capacity to handle any type of merchandise,
to our clients. Improving on process automation would
and we have several business units, including grains,
have a direct impact on our clients’ operations as, it would
minerals, cruises, fluids, and general cargo. However,
increase their productivity. To attract new clients, we
mining is one of the main economic drivers in the state,
need to eliminate bottlenecks created by the increase of
which made us specialize in the commercialization of
commercial cargo. We are entering an expansion project
bulk minerals. The port can undertake both operational
to expand the connection bay, which will essentially double
and harbor piloting activities, which means that we
our current capacity. Having 67 hectares for storage will
can receive the minerals, store them temporarily, and
allow us to handle 15 million tonnes of minerals and other
ship them. Currently, the commercialization of minerals
cargo in addition to the 8 million tonnes we can already
represents 75% of our operational cargo.
handle. Fortunately, the federal government has given the port more attention, and we will soon be able to overcome
Q: Which strategies were implemented to transform the
our infrastructure and technology shortcomings because
port from a subsidized entity to a high-performance
of the financial aid we will receive.
business? A: Six years ago, the Port of Guaymas was ranked as the
Q: What are the main pillars of the port’s competitiveness
13th best port in Mexico. However, the drive provided by
today?
the mining industry has enabled the port to climb to fifth
A: The Port of Guaymas has 67 hectares from which ten
place in recent years. It still has the same infrastructure and
terminals serve hundreds of clients, including top tiers like
capacity as before, but our commercialization activities
CEMEX and Grupo Mexico. The port has eight hectares
have become more efficient. The port’s international
fully dedicated to the storage of bulk minerals as well as
promotion forced us to provide services that can compete
six docking positions that enable us to be a multipurpose
with any other port in the world, enabling us to acquire
port. We see ships with capacities ranging from 20,000-
important
Freeport-
80,000 tonnes enter our port, which is possible due to
McMoRan, and BHP Billiton. Having these clients in our
the water being 16m deep. Ferromex and Union Pacific are
portfolio helped us change the port’s image and enabled
two of our closest allies as they are greatly responsible for
us to attract other companies that sell and export minerals.
the port’s connectivity. Because of these two companies,
clients
such
as
ArcelorMittal,
mineral products can be loaded and unloaded right on
364
Q: What challenges has the Port of Guaymas faced,
our doorstep. Our capacities were noticed abroad, thus
considering the rapid expansion of the mining sector in
we went from moving 100,000 tonnes coming from the
Sonora?
southern US to commercializing over 1 million tonnes.
| VIEW FROM THE TOP
TRUSTED LOGISTICAL PROVIDER OF GIANTS LEFT: Ernesto Ramírez Ramírez, General Manager at Puerto Carguero Logistics RIGHT: José Raúl Ramírez Ramírez, Director of Operations, Logistics and Transport at Puerto Carguero Logistics
Q: What are the particular challenges that arise from
to keep inventory on hand as and when they need it.
mining logistics?
The mining industry is different from other industries. It
JR: Logistical services for the mining industry need to be
requires a very specialized service because the customers
very specialized, and our added value lies in providing that
do not want to take risks in their transportation solutions.
specialized service for land, marine, air, and multimodal transportation. We are able to bring machinery from
Q: How steep was the learning curve since you started
any region of the world through sea freight to Mexican
working with large mining companies?
ports, from where we transport it over land. One of our
JR: When we began working with mining companies, our
main customers is Grupo Mexico and we are working with
company was relatively new. When we started handlings
them on the expansion of Buenavista del Cobre. We also
logistical operations for Grupo Mexico, one of the aspects
supported Grupo Mexico when it was having a problem
they most liked about Puerto Carguero was the access
with the delivery of equipment to a mine in Guerrero when
to information we provided regarding their shipments.
they were building the roads. We offered a solution and
We offered them an added value on the service side, and
became the first logistics company to reach the mine.
they have started asking that of other suppliers. We are now their official logistics provider in Hermosillo. We have
We currently have a contract with Grupo Mexico to
learned to react to what such companies need. When the
transport calcium oxide to Buenavista del Cobre, as well
likes of Grupo Mexico asks us to provide a service, we have
as bringing in steel structures for the development of the
to be quick in providing a solution and go beyond what is
mine. We have also worked with Peñoles in their operations.
expected of us. We have to be able to offer them solutions
However, most of our work remains with mining suppliers,
for problems they have not considered yet.
such as Samsung, Electro Controles del Noroeste, Grupo Disosa, and Innova, or construction companies working
Q: What measures does Puerto Carguero take in order to
on mines, such as Kepler Constructora, M3, and ICA Fluor.
ensure the safety of its products?
It can happen that mining companies sign contracts with
JR: The operators are among the most important aspects in
suppliers without knowing how the equipment and supplies
logistics. Most of the security issues are related to operators
will be transported to the mine. One of the advantages
who share information about what they are transporting,
that we offer then is the ability to transport troublesome
leading to theft. We thus have a strict selection process for
components of any size or characteristics. Many of the main
all of our operators. Another important point is the time of
mining suppliers are located in Sonora, from where they are
day at which the transportation takes place. There are certain
supplying nearby states. However, many of these companies
hours during which it is better to stop and continue in the
have no experience in logistics, so their relationship with us
next day. We have identified the routes and hours that are
is paramount. Hermosillo is also an excellent location for us
best for us to be moving goods. However, we always suggest
to be based in due to its proximity to the US border. In three
that our customers take out insurance to cover the products
or four years, we also expect Guaymas to be a fundamental
they are moving, which we are also able to offer.
port for import and export. Grupo Mexico is already planning to use it to export their minerals, which will surely
Q: What are your objectives for 2015?
encourage other companies to look toward Guaymas.
ER: We are planning to create a parcel service for Cananea’s mining operations. However, we are aware of
ER: In 2013, the Buenavista del Cobre mine required a high
the risks facing the mining industry so we want to keep
volume of supplies. We were able to move 100 shipments
growing and diversify our clients in this sector. We also
with excessive dimensions. After that, within a five-month
want to enter the Bajio region since it is a strong mining
period in 2014, this increased to 280 such shipments. We
area that has potential for growth but still needs the right
also offer warehousing services for our mining customers
logistical support.
365
SECOND WORLD WAR BRIDGE DESIGN APPLIED TO MINING Carrying a team of highly
pushing. Its installation does not require a special qualified
trained mining engineers,
work force. We recently worked with B2Gold in Nicaragua,
a car trundles along a
who installed this bridge with personnel that had never
mountain road. Heading
installed bridges before.”
away from a promising exploration
one
While there are many factors involved in the design of
attention
a bridge, such as its length and live load, Benitez puts
to the road itself. Little
the cost of a 30m bridge capable of supporting heavy
more than a dirt track in
loads, such as the CAT 770 dump truck, at US$350,000.
places, it is certainly not
However, for that money, these bridges are made to last.
engineer
Jonathan Benitez, Regional Sales Manager, Latin America of Mabey Bridge
site,
pays
suited to handle the traffic
Mabey Bridge is proud of its British heritage and feels that
associated with a mining site, such as heavy trucks and
it is those roots that contribute to its bridges’ strength
earth-moving equipment. It crosses streams and little rivers
today. The R&D behind its bridges dates back to Sir Donald
and narrows when traversing a deep gorge. One Welsh
Bailey. A British engineer during the Second World War,
company has specialized in helping mining companies ford
Bailey invented a modular bridge that allowed for rapid
these obstacles through its patented modular panel steel
cargo and troop movement, and was credited as one of
bridges. Mabey Bridge already has ten years of experience
the greatest inventions of the war. Mabey Bridge has kept
in Mexico due to its work with the Mexican federal and
the modularity of the original concept and extended the
state governments on the road infrastructure sector. Now,
lengths that these bridges could span. “We created several
the mining sector is becoming one of its most important
models of modular bridges which can span up to 90m
sectors, due to the industry’s need for access roads to mine
without central structures. Our raw material is steel of
sites and the uneven geography of Mexico and Central
the highest strength from European mills. Moreover, the
America. Jonathan Benitez, Regional Sales Manager, Latin
galvanizing process really gives the bridges their strength
America of Mabey Bridge says that “a bridge can be an
and long-term resistance to corrosion, considering that
indispensable logistics asset for any mining company, which
this is the main threat to steel,” says Benitez.
is why the company has invested in our local presence in Monterrey for two years now.”
Benitez points to the examples of emergency deployments during natural disasters or exploration phases of mining
For its bridging solutions to have full effect, Mabey Bridge
projects as typical circumstances of temporary use. “In
looks to get involved since the first stages of a mining
an exploration project, for example, a company needs a
project. It finds its clients in two ways. Occasionally, mining
temporary bridge that can be dismantled, relocated, and
companies approach it directly with their specific bridging
reinstalled as the exploration campaign evolves. We already
needs, while other times, Mabey Bridge uses connections
lease bridges for the US market and we are now working
with mining contractors and EPC firms to find out where its
to develop this business in Mexico as well. We intend to
panel bridges might be needed. Benitez explains that mining
roll out the leasing of bridges, which would include their
companies typically rely on EPC firms for their infrastructure
installation, in 2015,” he explains. “A modular bridge can be
needs, which is why Mabey Bridge maintains close ties
set up ready to work within a week, while a concrete solution
to firms such as M3 who can recommend specific bridge
can take months. In the past, concrete and corbels were
solutions for different mining needs. Through this varied
used to build bridges. However, these could not be reused,
market presence, the company is currently in talks with
unlike our modular bridges. Our bridges also have a lower
Coeur Mining to deploy its bridges at the La Preciosa mine in
environmental impact since they do not require structures
Durango while Grupo Mexico has also expressed an interest.
that interfere with the ecological systems of rivers, for example.” That final point can actually be reversed. Although
366
The flagship product that has largely contributed to Mabey
Mabey Bridge has been chosen by mining companies for
Bridge deploying operations in 140 countries is the Mabey
its temporary solutions, its modular panel design is tough
Compact 200 bridge, which is now the most widely used
enough to withstand years in the same spot without being
modular bridge system in the world. Benitez explains that
removed. Mabey Bridge has installed temporary bridges
it is the flexibility of the Mabey Compact 200 that has
in Central America that still stand today after 25 years.
allowed it to reach this popularity. “It is a modular solution
Although many companies see these bridges as temporary
with a very easy installation procedure called the cantilever
structures, the flexibility of a modular system means they
launch method, which consists mainly of mounting and
can be provisional, semi-permanent, or even permanent.
CONVEYOR BELTS UNSUNG HEROES OF MINING OPERATIONS Without conveyor belts, the
to service its clients with belt replacements as it stocks
transportation of extracted
more than 50,000m of conveyor belts in its warehouses,
minerals from mines to
in addition to a wider array of products. “When Mexico
processing plants would be
had a closed economy, there were few options in terms
an expensive and arduous
of products. Now, there are a wide range of solutions for
process. It may not seem
different applications from suppliers in Europe, Asia, and
that conveyor belts are
the US.”
suited to much innovation Agustin Monzon Garcia, Director General of GGD Bandas y Servicios
but that would be unfair
In order to stay ahead of the game, GGD Bandas is looking
to them. Over the years,
to grow by representing Depreux, a French company
commercial conveyor belt
owned by the COBRA group, which has roots in the
systems were backed up with specific systems designed
textile industry and designs its own textiles for conveyer
to withstand harsh conditions in mining operations. These
belt applications. “70% of the life of a belt depends on
systems can withstand fire, abrasion, impact, and cutting,
the resistance of the textile, which is the material that
and service practically any type of mining operation around
carries the tension and is subjected to impacts and harsh
the world. One of the main distributors of these solutions
environmental conditions,” says Monzon Garcia. We are
in Mexico is GGD Bandas y Servicios (GGD), a product and
currently in the testing phase of Depreux products with
service provider based in Mexico City with presence in the
Grupo Acerero del Norte (GAN), Grupo Mexico, and
main mining regions of Mexico. “Our strategy is to come
Minera Frisco, and we have achieved good results thus
into the market with cutting-edge products. We distribute
far.” Monzon Garcia explains that the Depreux production
the entire system, from pulleys and rollers, to cleaning
facility can provide conveyor belts with very specific
mechanisms, alignment systems, and the belts themselves.
characteristics, a flexibility that could not be attained by a
We deal only with leading brands, because we know that
larger belt producer with strict production standards. For
if the product fails, we fail,” shares Agustin Monzon Garcia,
the application of the Depreux solutions, GGD is working
Director General of GGD Bandas y Servicios
in Mexico’s main coal region of Coahuila to replace rubber belts with PVC belts, which, according to Monzon Garcia,
Although GGD does not produce the major belt systems it
increase the safety of workers in the mines. “Rubber is
offers to its clients, it is certified by its suppliers and benefits
fire retardant, which means it generates combustion and
from meeting the ISO 9001:2008 standard. This has allowed
CO2 when a fire breaks out. This can lead to fatalities in
the company to deliver specialized technical support in
underground mine accidents since oxygen is consumed
the design, installation, and maintenance of conveyor belt
by the combustion,” he says. “Though PVC is not fire-
systems, as well as guarantee quality in all of its processes.
resistant, it does not generate combustion.” Monzon
“Most of our conveyor belts come from abroad, allowing us
Garcia expresses his concern about the lack of regulation
to focus on the design of the system, the installation, and
for conveyor belts in Mexico and mentions that in light of
preventive maintenance. We carry out technical evaluations,
this, GGD follows American and German regulations to
standardize the use of materials, and recommend a
ensure the safety of its products.
maintenance program for the system,” says Monzon Garcia. In fact, many mining companies now opt to outsource their
Monzon Garcia is also confident that, in the near future,
entire conveyor belt needs to the likes of GGD.
companies in Mexico will value the cost-benefit aspect of a product rather than the price. For now, GGD will continue
GGD has been in the conveyor belt business for 15 years and
to focus on the large mining groups that do understand
works directly with the factories of its suppliers as well as
the added value of its products and services. “We are a
providing on-site support from certified personnel. This is
company with a vision for the future, and even though we are
how the company has been able to work with large mining
undergoing hard years in terms of sales, we are generating
corporations such as Grupo Mexico. To ensure that the
market strategies based on location, services, and product
company meets the demands of its clients, it has personnel
quality. All of this is so we may, in the short term, become
constantly on the field doing maintenance and providing
the leading distributor of conveyor belts in Mexico”. In
support to mine operators. One of the company’s strengths
the medium term, the company is seeking to develop the
is its ability to thoroughly analyze conveyer belt systems
necessary engineering facilities for the production of its own
at clients’ facilities in order to identify maintenance needs,
conveyer belt systems and will aim to expand to Central
training programs, and technical support. GGD is also able
America and the Caribbean in the long term.
367
BELT SOLUTIONS HELP MEET STRINGENT PRODUCTION GOALS Several equipment providers in the Mexican mining industry
advanced conveyor belts because this puts the continuity of
saw swift growth during the most recent mining boom.
their operations at risk. They need a provider that can ensure
The metal prices seen prior to 2013 actively incentivized
them top quality backed up with international certifications
mining companies to increase their production rates. This
and that can perform maintenance at any time,” he remarks.
immediately impacted the demand for extractive and
“One of the biggest advantages Interbandas offers to its
processing technologies that were needed to enhance mining
customers is the level of technological innovation of the
productivity. In consequence, national providers expanded
products it distributes.” The company has been settling
their operations as their sales soared. Naturally, as in all boom
commercial alliances with some of the most renowned
periods, certain companies grew too fast for their capacity
international equipment manufacturers, such as Fenner
while others embraced this growth while maintaining a solid
Dunlop and Martin Engineering, to ensure the impact of its
organizational structure and without seeing the quality of
solutions. Interbandas products have left a positive mark in
their products suffer. This tight structure allowed Interbandas,
representative projects such as Piedras Verdes in Sonora, San
a conveyor belt distributor, to achieve 34% growth in 2013 at
Felipe in Baja California and Ocampo in Chihuahua where it
a time when the broader mining industry was struggling. “For
installed over 2km of conveyor belts. “We only partner up
many years, we established specific commercial practices to
with first class companies, and our belts ensure that these
grow our sales of conveyor belts and now we are reaping
mining operators can achieve their production targets
the benefits of those actions. We worked very hard to create
without complications in Mexico,” comments Santillán.
this solid structural base for the company so that we would never have to compromise the quality of our services and
This effort to provide reliable and efficient equipment is but
products,” says Mauricio Santillán, Commercial Director of
one facet of Interbandas’ effort to become a one-source
Interbandas. Further evidence that this strategy has paid off
supplier of conveyor belt solutions for the Mexican mining
for the company is that it saw no drop in the Mexican mining
industry. “It is essential for mining companies to have a
industry’s need for conveyor belts when other areas of the
provider that can deliver a wide array of solutions. This
supply chain were suffering.
results in great benefits for our clients since they do not
“Mining companies cannot go without the most advanced conveyor belts because this puts the continuity of their operations at risk” Mauricio Santillán, Commercial Director of Interbandas
One strong argument for this is that conveyor belts are
have to deal with an infinite number of equipment providers.
an often overlooked but vital part of a mine. Interbandas
The bigger the portfolio of products a company offers,
has helped to reinforce this point by creating dedicated
the easier it is for customers to manage their operational
process engineering and quality enforcement divisions.
logistics. We have long worked on creating a portfolio of
“These two new departments are very innovative for a
solutions that could cover all the needs a mining company
company like us since we are not manufacturers but brand
could have for conveyor belts, but this puts pressure on us
distributors. Interbandas has focused on establishing the
to ensure that we become experts in each product and each
business foundations that can provide us with a competitive
solution in our range,” explains Santillán.
advantage in the mining market. This industry is very
368
competitive, making it all the more important to acquire a
2015 could mark the beginning of a bright new chapter for
commercial vision on how to stay ahead of the competition,”
Interbandas as it is ready to move beyond distribution and
comments Santillán. “The success we currently enjoy as a
start manufacturing its own products. This logic comes from
family-owned company is largely attributable to our capacity
the company having seen areas of the mining market that are
to efficiently respond to the latest demands for mineral
not being well-served with conveyor maintenance. “We have
transportation technologies.” According to Santillán, one of
seen some opportunities in the market that we are ready to
the biggest challenges that mining companies face in their
capitalize on. We believe we have the technical knowledge
conveyor belt systems is the oversupply for this type of
and mining experience to make and deliver a product that
equipment. “Mining companies cannot go without the most
can optimize the ways conveyors are being maintained.”
MATERIAL FLOW BLOCKAGE CAN BE TOUGH ENEMY TO DEFEAT The the
companies greatest
with
ability
to
specify services and solutions for maintaining material flow, preventing blockages, and avoiding material losses.
withstand the tests of time
Javier Schmal, Managing Director in Latin America of Martin Engineering
are those that offer the
When mines increase production, a reliable conveyor belt
best solutions for the worst
system is crucial to avoid the bottlenecking of materials.
problems.
midst
According to Schmal, a clean material transfer system can
of the Great Depression,
increase the component’s wear life by 25% and reduce
Martin
Engineering’s
safety risks during cleaning and controlling material spillage.
founder, Edwin F. Peterson,
Material sticking to a conveyor belt can cause large-sized
was
he
material to fall and damage the rollers, causing companies
In
the
dismayed
as
witnessed foundry workers
to consume more energy when moving material and
clear sand blockages in foundry equipment by hitting the
increasing the damage to the conveyor belt cover. Many
molding machines with hammers. This technique resulted
companies send personnel to clean these points, but this
in damage to equipment and a loss in productivity, two
proves to be very risky and potentially dangerous. Without
problems that Peterson was determined to solve. In the
belt cleaners, Schmal estimates that up to 40 tonnes can
1940s, upon discovering that vibration could be used to
fall and accumulate within one day at certain chokepoints. A
unblock backed up material from industrial equipment, he
primary cleaner will remove larger material while subsequent
developed and released the Vibrolator. Close to 70 years
cleaners will remove finer material that sticks to the conveyor
later, the Vibrolator is still widely used in various industries.
belts. With sufficient conveyor belt cleaners, one can remove even micrometer particles from the belt, reaching up to 98%
“Martin Engineering has long been focused on producing
belt efficiency. However, an efficient cleaning system does
innovations, and has not been resting on its laurels since
not preclude maintenance. That is why Martin Engineering
Peterson’s days,” says Javier Schmal, the company’s
offers different service packages to keep permanent
Managing Director in Latin America. “Many years ago, we
solutions working with the best performance as possible. “In
introduced air cannons, a range of transfer point equipment,
addition to belt cleaner systems, we have a conveyor belt
and belt cleaners. One example is a belt cleaner that reduces
support system that is designed to absorb the impact on
the impact of carryback material, which can impede an
the conveyor belt; these solutions are modular, making them
operation due to the necessary maintenance and safety
easy to install and maintain,” he describes. “We also work on
precautions. This product has been subjected to continuous
transfer point skirts with a stilling zone that reduce and seals
improvements, making it safer and easier to install, to
the internal air volume created at the transfer points. This
operate, and to maintain.” Alongside the belt cleaner, Martin
allows a mining company to avoid fugitive dust.” The behavior
Engineering’s air cannon can be used to improve material
of dust in a mine has been particularly relevant to Martin
flow at transfer points, silos, hoppers, or any space where
Engineering for a long time, through the acquisition of TNJ
material is transported. Additionally, the company’s transfer
in September 2013, it added dust suppression solutions to its
point equipment can be used for points where material
product portfolio. With those solutions now part of Martin
is transferred onto a conveyor belt. These transfer points
Engineering’s package, the company is determined to add to
are prime locations for spillages, dust accumulation, and
its innovations in this area as well. This will be welcome news
other problems that can constrain material flow. With the
to mining companies, given the plethora of ways in which
reliance on conveyor belts to move materials growing
dust can negatively impact their operations. “Dust not only
ever stronger in the mining industry, Martin Engineering
contaminates the surrounding area, it also affects the health
is tailoring many of its services to mining companies.
of the workers,” states Schmal. “Dust reduces the lifespan of
“We work with conveyor belt engineering companies that
equipment and increases the need for maintenance, while
specialize in basic and tailings engineering, and focus
representing a loss of potentially valuable material. Our dry
on OEMs to help them design transfer points,” explains
collection equipment collects dust through the filtering of air,
Schmal. “Unfortunately, some mining companies seek
while the dust suppression solutions use water, chemicals, or
only to save money in the short-term, which is why we
foam to prevent the generation of dust.”
communicate to them the importance of quality products and services. This is achieved through visits to mines,
Since Peterson’s vision during the Great Depression, Martin
our Foundation books, and our relevant success stories.”
Engineering’s determination to continue its material flow
Part of this communication is to show mining firms while
research, and deploy innovative solutions to improve the
they continually rely on conveyor belts to move material,
process, means it will build upon its legacy for years to come.
369
SATELLITE TELECOMS OFFER FREEDOM TO MINE SITES sector
communities with telecommunication services. Two more
witnessed major legislative
large government projects were being carried out in 2013,
changes
The
Pedro Hoyos Salazar, Deputy Director of Commercial, Innovation, and Marketing at GlobalSat
mining
2014,
in which an additional 14,000 terminals were implemented.
which have trickled down
“These types of projects certainly piqued the interest
to be felt in the way mining
of the mining industry, as some of the larger mining
companies are making use
corporations had already been sharing telecommunication
of satellite technology. “We
services with local communities. The services create better
have recently noticed that
opportunities for people who live near isolated mining
the market has not been
operations by ensuring that these communities are no
growing as steadily as it
longer solely dependent on major corporations for their
in
early
did in the last two years,”
telecommunications needs. Furthermore, the services
says Pedro Hoyos Salazar, Deputy Director of Commercial
increase security because, as soon as telecommunication
Innovation and Marketing at GlobalSat. “Some of the
services are installed, communication, awareness raising
projects we were working on have been stalled, mainly
about problems, and rapid response scenarios improve,”
because companies are waiting to see how the new mining
explains Hoyos Salazar. Though the level of security in
royalty will impact their performance.”
these remote regions is improving, there is still more work to be done, as illustrated by the fact that GlobalSat still
GlobalSat
specializes
in
advanced
satellite
telecom
receives military escorts on its way to certain mines.
services for several industries, including mining. In 2013, GlobalSat installed 7,500 very small aperture terminals
GlobalSat’s
biggest
competitors
are
other
satellite
(VSATs) for Mexico’s Ministry of Communication and
operators within the mining sector, while the company does
Transportation. The installation was part of a project called
not face any major competition from terrestrial service
‘Proyecto 10K’ which is intended to provide small rural
providers. However, some mining corporations have set up
TELECOMS BECOMING ESSENTIAL PART OF MINING INDUSTRY Telecommunication service
different industrial sectors, including mining. It will create
providers
an excellent array of benefits for end users,” explains Jorge
are
eagerly
awaiting
the
Mexico’s
telecoms
fallout
of and
Villarreal, CEO of Elara Comunicaciones, a provider of telecoms technology.
broadcasting reform. This
Jorge Villarreal, CEO of Elara Comunicaciones
370
is because the current
The development and deployment of such technologies and
Mexican
administration
their impact on mining has drastically advanced over the
is banking on the idea of
past few years. The sophisticated advances seen in satellites
breaking down some of
have contributed to the improvement of bandwidth,
the monopolies that have
increasing the range of connections that providers can
been
within
deliver to customers in remote areas. Satellites are now
this sector for many years. To curb companies seen as
capable of handling far more traffic than before, enabling
overreaching, the new telecommunications law tries
industrial sectors to improve operational performance and
to facilitate the entrance of SMEs into the market while
profitability. The transmission and reception of data, voice,
providing them with more opportunities to offer broader
and video has become a fundamental aspect in mining
services. This will fulfill the government’s aim of creating
activities. “Without telecoms technology, mining processes
a more competitive market so that the end user can have
would be very complicated to coordinate. Maintaining
access to these services at better prices. Many firms in
communication links between engineers, operators, and
the sector were therefore anxiously awaiting the approval
mine managers is essential for efficient operations,” says
of this proposal. “The Telecommunications Reform has
Villarreal. The synchronization of mining data is a crucial
a direct impact on the services provided by carriers to
factor for achieving optimal performance, as every mining
operating
communication systems using several microwave antennas
technology allows them to solve problems by themselves.”
that connect the mine to the nearest village that possesses
This confidence seems well-deserved, given that the likes
internet access. The costs of equipment, installation, and
of Goldcorp and First Majestic Silver, have elected to trust
maintenance for such a system are significantly higher
in GlobalSat for their communication needs. However,
than a satellite-based solution, allowing GlobalSat to offer
Mexico’s Telecommunications Reform has come to alter this
solutions that are both cheaper, and more technologically
landscape. The telecommunications sector was restricted
advanced. The communications company is defiant about
for some time, but now all companies in the satellite
its ability to maintain a service level as high as 99.95%,
business can be bought, accept foreign investment, or take
even for isolated sites such as oil rigs or remote mining
advantage of the other benefits that the new structure
operations, by providing the clients’ personnel with
brings. While this would naturally be good news for the
technical training. “We also stand out from the competition
likes of GlobalSat, Hoyos Salazar expects that it may take
because of our experience,” says Hoyos Salazar. “We have
up to 18 months before all the legal challenges to the
been providing these types of services longer than most
Telecommunications Reform will be sorted, delaying the
companies in Mexico, and we manage the largest network
arrival of big companies and large investments in the sector.
in the country, comprising of almost 17,000 VSATs, and counting.” Unlike its competitors, GlobalSat offers small
13 years ago, Globalsat started out by selling services with
scale solutions involving as little as one or two VSATs. As
a download capacity of 128 Kb/s and 64 Kb/s for uploads.
such, smaller mining projects that are starting up in the
The aim for this year is to deliver 8 Mb/s download speeds
southern part of Mexico have started to look like promising
and 2 Mb/s upload speeds. Hoyos Salazar points out that
clients.
there is a continuous development of these new solutions. “Today we are doing very well. We are not aiming for large
Even though it does not offer the cheapest option, Hoyos
consumer markets, at least not for the next three years.
Salazar believes that GlobalSat provides the most added
Instead, we will continue to provide high quality services
value for its clients, with an important component of this
to clients in the sectors that we are servicing today like
being
transparency of the company’s services. “If one
mining. Everything I have seen in the global satellite market
of our services is not performing to an optimal level, our
shows that the more specialized a company’s services are,
clients are able to identify the issue, whether it be a virus
the better the opportunities are and the better their service
or a problem with the local network, just as we can. This
becomes. The mining industry is benefiting from this reality.”
company relies on the monitoring capacities of their NOCs
Elara seeks to support Mexico’s main productive sectors,
(Network Operation Centers) which in turn depend on the
including mining, from the very moment exploration begins,
connectivity response. “Some mining operations can hold
according to Villarreal. “Due to the field support that we
up to 3,000 users behind the VSATs (Very Small Aperture
can provide, we can deploy satellite communications from
Terminals), creating a real need for fast and reliable
the early exploration stage to help link exploration crews
communication services. Satellite communications have
with their bases. Once methods of ground communication
proven themselves to be the most reliable solution for a
reach the mine, our services are transformed from main
mining company from a technical standpoint since they
links into backup links. These start operating to substitute
provide broader bandwidth and availability for remote
the primary means if it fails, thus ensuring uninterrupted
mines,” he adds. Another important advantage provided
communication,” he explains.
by telecommunication technologies is the fluency of speed achieved in interconnections between mine operations
In order to further avoid any communications breakdown,
and their headquarters.
Elara has spent recent years certifying its processes and training its personnel to prepare for any contingencies that
“Being connected in real time to a mine has been vital for
might arise. A final advantage Elara offers to the mining
executives to ensure a quick decision-making process.
industry is the ability to help solve a range of security
That instantaneous response has become critical in mining
issues, from setting up rapid communication with security
activities since companies cannot afford delays,” remarks
forces as well as federal and local government agencies to
Villarreal. Satellite connectivity has also enabled the
helping with rapid response and to coordinate emergency
mining industry to reduce traveling costs. “Both the time
teams in case of natural disasters. “Once companies know
gained when ordering spare parts and repair equipment,
that working with increased and improved communications
and the reduction in distance traveled by executives have
from inside mining facilities can bring positive changes,
been very advantageous and are contributing towards
they will never work without them again,” concludes
more cost-efficient mining operations.”
Villarreal.
371
372
Even after a turbulent year in the global metal markets, and with the introduction of a new tax and royalty combo, Mexico remains the top silver producer worldwide and sits proudly within the top ten producers for another 18 minerals. Moreover, the country still attracts 6% of the global nonferrous exploration budget, reflecting its promising future in the global mining space. However, if this position is to be maintained for the long term, the Mexican mining industry must stay ahead of the curve. It needs to make current investments count, while courting the investors of tomorrow, and increasing the efficiency of its mines through technological and operational innovation. Furthermore, the government may soon need to reassess the revenue contributions it expects from the mining sector, as well as take the necessary actions to fill the gaps in the mining regulation, as this will largely determine whether mining investment will flow into Mexico or elsewhere.
This final chapter in this book examines the possibilities of the near future, probing into the potential highlights that can be expected from the mining industry. It provides insights into the future of human capital in Mexico, both on a technical and management level, and presents open questions for industry players to ponder and reflect on.
FUTURE OUTLOOK
14
THE MEXICAN MINING INDUSTRY AT YOUR FINGERTIPS
Mexico Mining Review contains everything you need to know about the Mexican Mining industry. This annual publication, available in print, iPad, and online editions, gets to the heart of the issues and provides a comprehensive and timely overview of the latest developments, business strategies, technological breakthroughs, and operational challenges in the Mexican mining industry. When travelling, the less you can manage to carry with you the better. For this reason, Mexico Mining Review 2015 is available as a free app for your iPad, allowing you the same access to key information on the Mexican mining industry without contributing to your weight limit.
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374
CHAPTER 14: FUTURE OUTLOOK 376
Main Trends Facing Mexican Mining Industry in 2015
378
Looking Ahead to Improved Environmental Compliance, Federal Attorney for Environmental Protection
(PROFEPA) 379
Education Will Unlock the Future of Mining, Mexican Mining Chamber (CAMIMEX)
380
Flexibility Essential for Mexico’s Mining Executives, Spencer Stuart
381
Best Mining Leaders Need Leadership and Adaptability, Korn Ferry
382
Silver Market Can Still Spring a Few Surprises, The Silver Institute
383
Leading Mining Association Through Education and Exposure, Association of Mining Engineers, Metallurgists,
and Geologists of Mexico (AIMMGM)
375
| MAIN TRENDS FACING MEXICAN MINING INDUSTRY IN 2015
ACCESS TO CAPITAL As traditional sources of financing dry up, exploration and junior companies will have to innovate to secure the financing needs of their operations. Many juniors in Mexico and around the world have sold their advanced projects and are now left with highrisk, early-stage exploration programs. The mining market looks to be coming out of its torpor, but major mining groups have become increasingly conservative in their allocation of capital, leaving a sea of unfinanced project opportunities. However, those companies that secure steady financing will be in a prime position to buy projects cheaply.
“
Any well-financed junior should be aggressively looking to acquire projects. The industry will return as
”
mining is a cyclical sector, so well-financed juniors can be buying as others are trying to sell. There are great deals to be had at the bottom of the market
Ian Foreman, President of Alta Vista Ventures
DEALING WITH POLICY CHANGES Mining companies aim to invest in jurisdictions that demonstrate stability in their internal policies and legislations. In recent years, the world has been swept by new policies concerning taxation, or stricter environmental norms. In Mexico, companies faced a new tax and royalty levied on their earnings as well as tightened rules for concession owners. As unpopular as these may be, the Mexican mining industry will have its chance to prove its resilience in 2015, while the government will have to prove Mexico’s continued strength as a trusted mining jurisdiction.
“
”
As long as Mexico can provide legal certainty and rule of law, it will remain a preferred destination for mining investment
Rosalind Wilson, President of Canadian Chamber of Commerce’s Mining Task Force
SLASH, CUT, AND REDUCE TO FOCUS ON VALUE CREATION As commodity prices drop while cash costs rise, mining companies have to redesign their operational strategies. The current business environment is pushing organizations to become low-cost producers by driving operational efficiencies, renegotiating agreements with contractors, or letting people go. 2015 will see investors attracted to mining companies that can prove they will create value. Mexican mine operators are already scrambling to shore up their business plans, strengthen balance sheets, and reshuffle management teams, all to provide more attractive dividends.
“
The biggest challenge any mining company can face is a significant decrease in the price of the
”
underlying commodity, whether it be gold, silver, or any other metal. The best way to address these types of challenges is to optimize productivity and reduce costs
Scott Perry, President and CEO of AuRico Gold
TECHNOLOGICAL INNOVATION SEEN AS SAVIOR The extraction of minerals is presenting an ever greater challenge. Mineral grades are declining and ore bodies are beingexhausted, pushing companies to explore for reserves in more remote locations where the harsh environments drive costs up. To secure profit in such circumstances, the quest for innovation has sent a shockwave through the industry. Suppliers are told to make machines that will run longer, consume less energy and fuel, and pollute less. Mining companies in Mexico are part of this wave, challenging the old operating ways to optimize their long-standing practices and processes and help their overall productivity.
“
The mining industry is seeing a new wave of innovation due to the current economic environment.
”
We need to modernize our business and make ourselves more cash-effective and resilient for when downturns occur
Keith Neumeyer, President and CEO of First Majestic Silver
376
REDUCING THE AGE GAP Mining is a cyclical industry, leading to periods of high demand for human talent and interest in mining careers, and years of decreased demand and the increased development of already existing professionals. While recent years have shown the skill and resourcefulness of experienced and talented professionals, the industry is clearly in need of a younger generation to come up with innovative ideas, design new technologies, ways of operating, and of doing business. In Mexico, as older professionals begin to retire, many mining companies are struggling to find the technical and management expertise needed to fill their shoes.
“
There is a great demand for engineers with specialized knowledge and experience in areas related to the extraction
”
of natural resources but, unfortunately, Mexico is still not producing enough human capital to satisfy this demand
Gabino Fraga Peña, Partner and CEO of Grupo de Abogacía Profesional (GAP)
COMMITMENT TO THE ENVIRONMENT As the public has become more aware of the environmental impacts of industries like mining, the sector is under greater pressure than ever to comply with international practices. Many companies from Canada and the US successfully follow their home standards while in Mexico, but SEMARNAT and PROFEPA are now leading the fight to improve national policies. These authorities are making a sustained change to achieve sustainable mine planning and operations, adequate treatment and management of waste, and the implementation of energy-efficient technologies.
“
”
Mexico has not solved all its environmental challenges, but it has begun to tackle them. Companies are now at least trying to meet these standards, particularly in the mining industry
Héctor Herrera Ordóñez, Partner at Haynes and Boone
LIVING IN HARMONY WITH COMMUNITIES As mining operations evolve, so do the expectations of communities around mine sites. Some communities have long co-existed with nearby operators, but companies around the globe are still searching for the ideal way to deal with rural settlements as their search for profitable deposits expands. In Mexico, no company can function without a social license to operate, leading to increased interest and improvement in the provision of jobs, infrastructure, and services to communities, as well as fair pay for the use of the land.
“
We are developing a new approach because we believe that there is always room for improvement
”
and that demands by communities are developing and evolving. A company cannot simply continue doing what it has always done
Octavio Alvídrez, CEO of Fresnillo
CHANGING THE SECTOR’S IMAGE One of the largest challenges facing the Mexican mining industry is its reputation. Despite the fact that mining in Mexico greatly contributes to national prosperity and welfare, the general Mexican public still views it with doubt. This makes it vital for the industry to find new ways of communicating all the benefits generated by its activities. As the Mexican population is better informed of the positive impacts that mining has on the economy, companies will find other challenges diminishing, including the quest to attract human talent and to gain trust among local communities.
“
It is important to convey to the authorities, academia, and the general public the vision of all the
”
participants in this industry. We believe mining can be a focal point of social and economic transformation, so we need to find new and more efficient ways to communicate the achievements of our industry
Sergio Almazán Esqueda, Director General of CAMIMEX
377
| VIEW FROM THE TOP
LOOKING AHEAD TO IMPROVED ENVIRONMENTAL COMPLIANCE ARTURO RODRÍGUEZ ABITIA Deputy Attorney for Industrial Inspection of the Federal Attorney for Environmental Protection (PROFEPA) Q: What measures does PROFEPA have in place to improve
do not allow us to enter into their property. In these cases,
the state of environmental compliance in Mexico’s mining
we have to seek the support of public security forces in
industry?
order to enter. We may then denounce the company to the
A: Many times, companies do not comply with environmental
federal authorities so that they may start a judicial process
legislation because they do not know what their obligations
against the company. We aspire to have a country where
are. As a preventive measure, we have an agreement with
industrial companies assume their responsibilities for their
some of Mexico’s industrial chambers, which sees them
own good through an effective system without impunity.
helping us to summon companies and educate them on their environmental obligations. We also guide them through the
Q: What lessons did PROFEPA learn from the management
procedures needed to identify and solve irregularities at their
of the incident at Buenavista del Cobre?
operations. Furthermore, we diffuse the consequences of
A: We learned that inter-institutional coordination is
non-compliance after cases such as the Buenavista del Cobre
primordial for attending to these types of problems. It
incident to let companies know what can happen to them
is necessary to work on action protocols for situations
if they break the law; this is what we call dissuasion. There
in which institutions such as CONAGUA, COFEPRIS,
are other emblematic cases such as the lead contamination
state and municipal authorities, SEGOB, and PROFEPA
accident caused by Peñoles in 1992 in Torreon, Coahuila.
cooperate and intervene. The coordination between the
This historic incident lead to the intervention of PROFEPA
governmental institutions could have been better during
and caused the company to almost close. Today, Peñoles has
the Buenavista del Cobre case and can still be improved.
improved its environmental compliance considerably and
We will thus be working on creating a more efficient and
upholds a clear environmental policy. Dissuasion works, but
expedite inter-institutional collaboration system.
we have to make sure to maintain it so that companies do not forget about environmental legislation in this country. While
Q: What steps would you like to see the Mexican mining
the compliance gap is still wide, it does shorten every year.
industry take in the near future? A: We would like to see the number of environmental
378
Q: Given the number of mining companies under federal
accidents caused by the mining industry clearly reduced.
jurisdiction, how will PROFEPA be able to monitor them all?
More mining companies should also participate in the
A: The purpose of our industrial inspection program is
voluntary programs that PROFEPA has in place, such
not to monitor all industrial companies. However, we
as the Clean Industry program and the Program for
will still visit all of the mining operations in the country,
Environmental Leadership and Competitiveness. We want
since this is a priority for PROFEPA. During the 22 years
the mining industry to become an avant-garde industry
that PROFEPA has been operating, we have visited a
that collaborates with the governmental authorities in
great number of installations. This has made us aware
training and delves into greater social responsibility. There
of the general behavior of mining companies, and has
are clear examples of responsible behavior in the mining
helped us identify those that we still need to visit, those
industry such as Fresnillo’s operations in Zacatecas.
that are generally compliant with the law, and those that
Fresnillo has a water treatment plant that treats residual
fail to comply with their obligations. Our priority now is
municipal waters from nearby communities to use in their
to visit all the companies we have not been able to see
processes. Additionally, process waters are treated and
so far. Another priority is to visit companies with a bad
stored in lagoons where migrating birds stop. With this
track record of environmental performance, followed by
in mind, we would like mining companies to attend to
companies which have had severe irregularities but have
historical mining waste dumps and help to transform these
solved them. The next priority is companies with minor
sites into recreational or productive areas. I believe this
irregularities, while the final priority is companies without
would result in the recognition of the mining industry as a
a history of irregularities. On occasion, some companies
truly socially responsible industry.
EDUCATION WILL UNLOCK THE FUTURE OF MEXICAN MINING The education and training of mining engineers and geologists
Mexican universities do offer PhD programs for mining
does not always follow the mining industry’s demand for
professionals, not a single university offers a Master’s
talent. According to Ernst and Young’s Business Risks Facing
program for mining engineering. This is precisely why
Mining and Metals 2014-2015, there is not only a shortage
CAMIMEX is collaborating with five universities to set
of talent for technical and middle to senior management
up an online Master program. “We want the program to
positions, the mining industry is also suffering from being
include courses from different universities. Unfortunately,
perceived as an unattractive and unstable sector among
the geographical location of each of the universities
young graduates and professionals. Ramon Dávila, President
makes collaborations difficult,” Dávila adds. “Similarly, it
of CAMIMEX’s Education Commission and board member
is necessary for mining education to target markets other
of First Majestic, explains how talent entering the Mexican
than the precious metals markets.”
mining industry has evolved as a direct result of tendencies in the metals market. “At the beginning of 2000, we had a
Finally, geological and mining education efforts should not
drop in the prices of metals. This caused employment in the
only focus on university courses, as there is a real potential
Mexican mining industry to drop, which was compounded
to spark an interest in geology earlier in the education
by the fact that the sector was not fully developed at the
system. “Geology teaches you about the richness and
time. Many university graduates were left with little or no job
potential that Mexico has. It is important since it gives
opportunities. This led to a loss of interest in mining-focused
our children and youth a wider perspective of the world,”
education, which in turn led us to lose an entire crop of
Dávila believes. “Additionally, it is important for Mexican
potential mining professionals,” he shares. Dávila states that
children to learn about mining and metallurgical processes
the problem has continued over the last ten years as there
to avoid fact manipulation in the media to distort the
has been an insufficient development of mining engineering
true reality of the Mexican mining industry.” He feels that
and geology graduates in Mexican universities. In most
current textbooks reflect a biased view of the mining
mining jurisdictions, the scarcity of human talent is now
industry, portraying it as predatory and unsafe. For
being seen at all levels of a mining operation. To help curb
this reason, CAMIMEX has created books and CDs with
this worrying trend, CAMIMEX decided to create a program
information on the mining industry for children. Moreover,
through its Education Commission, to support students and
CAMIMEX’s members donated funds for the creation of
professors of Earth Sciences in a range of universities. While
an interactive installation in Mexico City for children to
many companies such as First Majestic already give out
learn about the inner workings of a mine and its processes.
scholarships to universities, CAMIMEX collects funds from its
This has certainly been a success as it has been visited by
members to provide 90 annual scholarships, 30 of which are
30,000-40,000 children a year since it was created.
for professors and 60 for students of mining-related careers. These efforts have already begun to generate encouraging Among the biggest deficiencies, Dávila explains, is the
results. Dávila explains that the “enrollment in Earth Sciences
inability of mining engineers and geologists to understand
programs has increased in recent years, and graduates from
and speak English. Other challenges include a lack
these careers now have a wider range of job possibilities
of knowledge of IT, automation systems, sustainable
now.” Nonetheless, he affirms that industry players need to
management
relations,
make a real commitment to recent graduates, by focusing
and treatment of workers and unions. This inability to
of
operations,
community
on the creation of new jobs and continuing to hire them,
correctly deal with the soft aspects of the industry is
even during the difficult times. “After all, these students will
troublesome, given how easily mismanagement in these
be the executives of the future,” he states. This commitment
critical areas can lead to the suspension or closure of a
is not only a moral commitment, it is an urgent necessity.
mining or metallurgical operation. It is therefore of utmost
Dávila explains that the Mexican mining industry is facing
importance for the mining industry and those entering it
a near crisis, as most of the mining executives today are
not only to make production and revenue a priority, but to
close to retirement. If young professionals are not given the
also focus on the underlying aspects of mineral extraction.
opportunity to acquire industry experience, the Mexican
“Earth science and engineering study programs in Mexico
mining industry will be left in the hands of unexperienced
still lack solid focus on these aspects,” states Dávila.
workers. “Alternatively, people from other industries will start coming into mining and taking up executive positions,”
Aspects of the Mexican mining education system still
he adds. It is thus of the utmost importance to prevent this
baffle many of those who have experienced education
crisis, and remember what is important: the continuity of
in
mining in Mexico.
other
mining
jurisdictions.
For
example,
while
379
| VIEW FROM THE TOP
FLEXIBILITY ESSENTIAL FOR MEXICO’S MINING EXECUTIVES LEFT: Angeles Fernandez Barberena, Industry Consultant at Spencer Stuart RIGHT: José Luis Barroilhet, Leader of Metals & Mining Practice for Latin America at Spencer Stuart
Q: What has been the role of mining executives during
each company and within a country. These changes have
this period of change, and what will be the relevance of
to be addressed to avoid any long-term damage. This can
mining companies for investors in the coming years?
include the loss of a social license, aggressive regulation,
JLB: After years of rapid growth pushed by China’s
new taxes, and much more. Sustainability is the only way
metals appetite, the mining industry is facing a very
mining companies will gain the credibility they need to
different environment characterized by lower metal prices,
attract investment. Another important skill is the adaptability
higher costs, and much more inquisitive and demanding
and the intelligence to quickly read the changes in the
shareholders. As most things, the origin of this moment
environment and move the company accordingly. Clinging
includes the way the business was previously modeled, but
to old paradigms and not listening to what stakeholders are
it also has a strong connection to the pace of the uncertain
saying can be disastrous. New leaders in this volatile world
and volatile world economy. The super cycle, as some
need to be effective at creating flexible organizations that
describe the period between 2004 and 2012, was focused
can safely navigate the changes in the industry.
on volume and mass production. Prices were better than ever, so not exploiting and not producing meant lost flux.
Q: How is Spencer Stuart able to find people that can
In these paradigm expansions, acquisitions and projects
combine long-term planning with adaptability and capital
were the main concerns of many companies and costs and
discipline?
controls were the last. Some mining companies grew too
JLB: We are on top of the market by mapping, tracking,
much, hired too many people, and invested considerably
interviewing, and referencing people in this industry.
on low-grade ore projects with insufficient returns on
This gives us a broad view, the capacity to compare
investment. However, there are others that did not follow this
different options, and a deeper understanding of the best
general trend and have acted very quickly to the changing
practices. Even so, it is still difficult to find people who can
conditions. The competitiveness of such a company is
encompass all the skills needed by the industry. To increase
visible in the way its share price has evolved in the last ten
the possibilities, we leverage our network of people in the
years. Despite the mistakes that some companies have
industries that are strongly connected, such as energy,
made, the returns on their investments have been favorable
mining, engineering, and construction. Today, there is a
in the long-term. The challenge today is to recognize that
good opportunity to hire talent from around the globe, and
change is mandatory. The business model has to shift from
it is common to have candidates from different countries
maximizing production to maximizing profitability, from the
competing for the same role. We leverage our worldwide
short-term to the long-term, as well as toward sustainability.
presence to keep track of this global talent pool.
For big companies, this shift presents a significant challenge because the organization, the processes, and the culture are
Q: What is your perspective on Mexico’s future role in the
built differently, meaning they are very hard to change.
global mining market? AFB: Mexico still has a lot of mining potential. There is good
380
Q: What are the main skills that mining executives in
access to energy at reasonable prices, solid transportation
Latin America need in order to attract the attention of
infrastructure, access to funding, a stable economy, a
investors?
skilled workforce, and a long mining history. Since the
AFB: The first skill that is needed is a long-term and
mining industry’s value is still a small percentage of GDP,
sustainable business perspective. Mining is a long-term
it could be said it is still underdeveloped in comparison to
business and the exploitation of an asset in this industry
other industries in Mexico. This gives the Mexican mining
commonly takes up to 50 years. The fact that you have to
industry the opportunity to start off with a clean slate. This
deliver exceptional results over longer periods makes the
is not possible in Chile, Peru, or Argentina, where a large
business complicated. There are many changes that happen
portion of the population is already set against mining
across the development and life of a mine, as well as within
projects because of past mistakes.
| VIEW FROM THE TOP
BEST MINING LEADERS NEED LEADERSHIP AND ADAPTABILITY PATRICIA HELBIG Client Partner of Korn Ferry Q: What have been the main contributions of Korn Ferry’s
have a broad perspective and be inquisitive, as well as their
Mining, Metals, and Minerals division within the Mexican
people agility, which includes interpersonal skills and the
mining industry?
capacity to deal with different cultures and personalities.
A: We work with large Mexican and international companies
The third component is change agility, meaning how they
that are established here and engage in searches for
adapt, lead change, demonstrate innovation and take risks.
CEOs, C-level and senior executives, and technical experts,
The fourth component is results agility, which does not only
among other positions. We have placed some of the most
regard performance but also regards the resourcefulness of
important executives in mining companies in Mexico. At
a person and their ability to multitask. The fifth component,
the moment, polymetallic companies require our services
which I deem to be the most important, is self-awareness.
the most. In general, Korn Ferry focuses on building a
A person who is highly conscious about themselves will
talent strategy that supports our clients’ business strategy.
develop new skills more easily.
This includes respecting cultural alignment, strategic alignment, building and developing talent within the
Q: What areas of HR will be the most difficult to source for
company, and attracting talent from outside.
mining companies arriving in Mexico? A: There are some positions that are hard to source
Q: What criteria is your Talent Strategy and Organizational
worldwide, not just in Mexico. These include project
Alignment practice using to determine the ideal future
leaders,
leadership profile needed in the mining industry?
engineers, and other highly technical positions in general.
A: The leader profile has changed over the last few years,
We encounter difficulties in terms of language skills, safety
and knowledge of mine operations is no longer enough. The
priorities, CSR, and environmental responsibility. We need
challenges faced by the mining industry make it important
more graduates to go into the mining industry and build
for operational leadership and executive officers in mining
their knowledge up from the inside. The most sought
companies to know how to cost-effectively deal with tighter
out individuals are those that have a record of business
margins. There is too much pressure on executives to
improvement with a direct impact on the bottom line. We
deliver short-term results in an industry where a long-term
know where these people are and we know how to develop
approach is essential to success. The leadership qualities
them within organizations to be more effective. We also
required of a mining executive today involve the ability to
have a cultural alignment program. Mexican culture is quite
assess company risks, politics, environmental impact, social
different from the American and Canadian cultures, for
commitment, and being well-versed in financial matters
example. In Mexico, people like to have constant and direct
such as strategic planning, banking, public credit, and so
communication with their leaders.
highly
technical
metallurgists,
processing
on. Candidates with strong interpersonal skills combined with high business acumen are also highly coveted. The
Q: How will Korn Ferry remain a leader in talent acquisition
importance of strategic agility has never been greater than
within the mining industry in Mexico?
it is today. As a result, senior executives in mining companies
A: Today, we are a single source for leadership and talent
will have to work far more on operational excellence, have
consulting services. Our solutions range from executive
to be quicker to adapt to new environments, have to be
recruitment and leadership development programs, to
much more strategic, and include financial acumen in their
enterprise learning, succession planning, and recruitment
competencies. One of the most important characteristics
process outsourcing. We are in close contact with the key
that we take into consideration is learning agility. This is
talent in the industry and have people dedicated to market
comprised of a candidate’s willingness and capability to
research, who in turn keep the teams updated on the
successfully adapt to a new environment, and has proven
important developments in the industry. Over the past five
to be a predictor of success in an executive. We also assess
years, our global mining practice has placed somebody in
the mental agility of a candidate, which is their capacity to
a life-changing position every five to six days.
381
SILVER MARKET CAN STILL SPRING A FEW SURPRISES
Michael DiRienzo, Executive Director and Secretary of The Silver Institute
The first record of silver
ago. The institute has now evolved into what DiRienzo
mining
to
calls a marketing arm for the silver industry. “We have
3000 BC in Turkey and
been very successful in marketing the use of silver through
silver is still a driving force
the programs that we have initiated and run,” he explains.
for mining and industrial
“This is why our member companies support us through
applications
the
sponsorships. These companies understand that if they
world. “Silver is both a
do not market their services and products through a
precious and an industrial
collective group, there is a danger of a slowdown in
metal,
dates
around
which
unique,” DiRienzo,
back
makes
it
business prospects.” In line with its role as a market
Michael
developer for silver, The Silver Institute today publishes the
Executive
most comprehensive annual summary of the international
shares
Director and Secretary of The Silver Institute. “Throughout
silver industry, entitled The World Silver Survey.
history, silver has changed lives from a health, wealth, and manufacturing standpoint. Some of the great Mexican
As well as promoting traditional uses of silver in jewelry and
cities exist because of the production of silver.” With
silverware, the institute also wants to improve investment
modern techniques and breakthroughs such as steam-
in silver, including the sale of silver coins, bars, ETFs, and
assisted drilling, mine dewatering, and improved haulage
mining equity shares. In 2006, The Silver Institute worked
and mine infrastructure, companies can now mine more
with Barclays Global Investors to launch a silver ETF known
than just exposed surface vein deposits, as was common
as the iShares Silver Trust (SLV). “This trust opened up a
practice prior to the 20th century. This facilitated record
whole new world for silver investment by democratizing
global silver mining production of 819.6 million ounces
the process in which somebody can invest in silver,”
in 2013, making silver one of the most heavily mined
exclaims DiRienzo. Professional individuals who acquire
metals in the world. Furthermore, since the discovery of
silver are often industrial end-users who hedge silver and
the industrial applications of silver, it is no longer mainly
work with banks to get forward rates and forward deals on
mined as a precious metal, but rather for its everyday
silver. “The rise of investment in silver over the last decade
applications. Silver is the ultimate conductor of electricity
has a lot to do with the nature of the silver market. It is far
and heat, acts as a natural antimicrobial agent, it is used
more volatile than the gold market. Professional investors
in the production of ethylene oxide and formaldehyde for
like that volatility since it shows life,” he adds.
the plastics industry, in photovoltaic cells as silver paste, and is now also being used as part of airbags and rear view
Members of The Silver Institute include silver producers
cameras in automobiles. Additionally, photography fans
such as Fresnillo, Coeur Mining, Endeavour Silver, and Pan
will be familiar with the use of miniscule silver crystals to
American Silver, end-user members such Tiffany & Co. and
create negatives. DiRienzo forecasts that silver will also
LeachGarner, and coin dealers such as Valcambi. It is thus
increasingly be incorporated into textiles for health-related
in the interest of the members to promote an increase in
applications such as bandages, into walls and instruments in
silver through the promotion of its value as a precious and
hospitals to prevent the growth of bacteria, and into water
industrial metal. “The current silver price does not reflect its
purification systems. “Other uses that will drive demand
value. A fair price for silver would be between US$35-38 per
for silver include wood preservatives, superconductors,
ounce of silver,” DiRienzo expresses. According to DiRienzo,
supercapacitors, food packaging, and auto-catalysts,”
along with the Chinese market, the silver market in Mexico
DiRienzo adds. However, these widespread industrial
will continue to be a huge focal point for The Silver Institute
applications of silver are not commonly known, leading
in its aim of supporting the increase of silver supply and
The Silver Institute to focus on creating programs that will
demand. The institute continues to target the general public,
stimulate more demand for silver, be it on the industrial
academia, government entities, and market participants,
side or in the exchange traded fund (ETF) side. To this end,
as well as providing all vital information necessary to fully
DiRienzo travels around the globe holding conferences on
understand the varied uses and investment opportunities
the future of industrial silver demand, and presents the
for silver. “We send news releases that we publish to
findings and research of the institute to industry leaders and
networks such as Marketwire and ABM Industries Newswire.
the general public.
We are finding that each press release gets more hits than the one before,” he says. Through these many avenues, The
382
These awareness programs have refocused The Silver
Silver Institute hopes to raise global understanding of silver
Institute, which began as a technical institution 42 years
and encourage its development and uses worldwide.
| VIEW FROM THE TOP
LEADING MINING ASSOCIATION THROUGH EDUCATION AND EXPOSURE MANUEL REYES CORTÉS President of the Association of Mining Engineers, Metallurgists, and Geologists of Mexico (AIMMGM) Q: You became the president of AIMMGM in 2014. What will
mining conference, Expominas México, which takes place in
be the association’s priorities under your administration
Acapulco. This conference represents a great opportunity
until 2016?
to bring together national and international mining leaders
A: One of the pillars of our campaign was the pledge
as well as the leading figures of governmental entities
to strengthen our members’ academic level. This will
that regulate the sector. We will create forums and panel
be achieved through geoscientific and geoengineering
discussions to find innovative ways to energize the sector.
courses as well as capacity building conferences imparted by a staff of highly educated lecturers with many years of
Q: You were involved in the planning of the International
experience in the industry. To increase their reach, we will
Mining Conference of Chihuahua. What was the initial
offer these courses directly on mine sites and mine camps
vision for this conference, and how has it evolved?
where mining professionals reside. These courses will be
A: When we started that conference 20 years ago, it was
certified at an institutional level, which will allow participants
originally named the Chihuahua Mining Conference and was
to receive diplomas upon successfully completing the
part of the activities of the AIMMGM Chihuahua chapter,
assignments. I first implemented this initiative during my
which was made up of only 20 members back then. It now
time as the president of the Chihuahua chapter of AIMMGM.
stands at 250 members, ranging from engineers in charge
I also fought to get a building constructed where the staff
of the mines to managers and landowners. As part of the
of the AIMMGM Chihuahua chapter could meet and work.
CANACO (National Chamber of Commerce), the chapter
Unfortunately, due to the large quantity of districts under
also acquired business partners with which we share
AIMMGM supervision, not all of our members can meet in a
services and production management. 2014 marked the
proper building designated for the association. This is why
tenth International Mining Conference of Chihuahua, which
we are seeking federal funds to finance the construction
saw over 3,000 attendees and 325 companies with 270
of buildings or meeting spaces for our districts. This effort
booths, presenting the latest equipment and machinery
is the second pillar of our campaign. Our third pillar is
for exploration, exploitation and mineral processing.
the strengthening of the operation of our districts and increasing their membership roster. Many of our districts
Q: Other than the efforts of mining associations and
have not received attention, which has led local members
companies, to what would you attribute the progress and
to lose interest in the association. We want to attract more
advancements of the Mexican mining industry?
members to these districts to make them stronger and
A: Mexico began to establish its geology and mining
more energized. For example, the district of Sombrerete
techniques in 1525. We have great traditions that have
in Zacatecas went from having 90 members at its peak
been passed down through generations. Mining states like
to just four. As AIMMGM requires every district office to
Hidalgo, Zacatecas, Guanajuato, and Chihuahua have a
have a minimum of 11 members, the Sombrerete office had
long mining history and have inherited important mining
to be closed. We are now working to get the Sombrerete,
techniques. Our success comes from the combination of a
Magdalena, and Parral AIMMGM districts reactivated, since
long mining history and improved legislation. Additionally,
these are all historically important mining districts.
all mining schools in Mexico are educating young mining engineers and geologists eager to learn about the
Another focus will be on the mining royalty and tax. We
industry, and experienced technicians to teach them. This
believe that lowering taxes for exploration will lead to
has allowed Mexico to advance much faster than other
the discovery of larger reserves and will guarantee the
Latin American countries on the mining front. The mining
future of mining in Mexico. If taxes are raised, exploration
industry is facing difficult challenges due to the decrease
companies will leave Mexico, which will endanger the
in metal prices, but while these might dim the success of
continuity of the mining industry in our country. Our fourth
AIMMGM and the Mexican mining industry, it does not
pillar is thus to maximize the impact of our most important
relieve us of our hopes.
383
INDEX A-D
INDEX D-H
3M 278
Commosa 124, 125
ABSA Sonora 307
Concrete Canvas 122
AdN Consulting 302
Connect Logistics 360
Agilent Technologies 98
Construmac 277
Agnico Eagle 30, 62, 63, 274
Control Risks 72
Alamos Gold 66, 173
Coreboss 104
ALS Minerals 94
Corporativo Químico Global 151
Alta Vista Ventures 82
Cummins Power Generation 326
Altos Hornos de México 254
Cyanco 149
Anclas Mineras Encinales 282
Dando Drilling 105
API Guaymas 30, 364
Dassault Systèmes 302
Aquafim 146
DBR Abogados 21
Argonaut Gold 184
Deloitte 22
Arian Silver 230
Director of Mining for Chihuahua 46
Asesoría Legal y de Negocios (ALN) 34
Director of Mining for Sonora 37
Association
of
Mining
Engineers,
Metallurgists,
and
Defiance Silver 229
Geologists of Mexico (AIMMGM) 383
Deutsche Bank 22
Astralloy 40, 256
DMV Consultores 118
Atlas Copco 262, 322
DnA Mining 326
Aura Minerals 244
Doka 117
Aurcana Corporation 231
E-Tech Simulation 310
AuRico Gold 92, 177
Elara Comunicaciones 370
Austin Powder 159
Electro Controles del Noroeste (ECN) 306
Azure Minerals 245
Endeavour Silver 210
Baker & McKenzie 24, 339
Energold 103
BASF 150
Equiplan 116
Borealis 341
Eriez 161
Bosch Rexroth 320
Ernst & Young 56, 62, 69
Brink’s Global Services 357
ESCO Corporation 272
Camfil Air Pollution Control 333
Espaciomovil 126
CAMIMEX 6, 12, 15, 321, 352
Excellon Resources 227
Canadian Chamber of Commerce 16
Export Development Canada (EDC) 64
Capstone Mining 71, 236
Eyenesa 158
Carrizal Mining 241
Federal Attorney for Environmental Protection (PROFEPA)
Caterpillar 266, 268
14, 318, 378
Cayden Resources 63
Fideicomiso de Fomento Minero (FIFOMI) 58
Cereceres Estudio Legal 47
FIMSA 146
Chesapeake Gold 176
First Majestic Silver 212, 324
Chihuahua Mining Cluster (CLUMIN) 48, 49
FLSmidth 142
Coeur Mining 62, 63, 208
Fortuna Silver 221
INDEX H-N
INDEX N-T
Fresnillo 23, 63, 204, 214
KPMG 77
Frontera Copper 359
Kroll 73
G4 Drilling 102
Kunz Abogados 32
GAMSA 344
Landdrill International 22
Garibaldi Resources 83
Legalmex 41
GDA Servicios Mineros 99
Lord 128
Geofísica TMC 96
M3 112
Geobrugg 286
Mabey Bridge 134, 366
GGD Bandas y Servicios 367
MacLean Engineering 162, 294
GHH Fahrzeuge 270
Maersk Line 360
GlobalSat 370
MAG Silver 222
Globexplore Drilling 100, 179
Mansour Mining Technologies 163
GoGold Resources 196
Marlin Gold 197
Golden Goliath Resources 88
Martin Engineering 369
Goldcorp 168, 169, 192, 199, 299
Maxilux 332
Goldgroup Mining 62, 186
McEwen Mining 190
Gold Resource Corporation 194
Megamak 330
Goodyear 269
Meltric 284
Grainger 282
Metso 157
Grant Thornton 62
Mexican Stock Exchange (BMV) 58
Great Panther Silver 224
Mexichem 250
Grupo BAL 23, 44
Mexus Gold US 198
Grupo Cementos de Chihuahua 123
Mine Cable Services 136
Grupo de Abogacia Profesional (GAP) 38, 39
Mine Safety Appliances (MSA) 280
Grupo Mexico 14, 30, 56, 253, 321
Minera Pangea 190
G+ Industrial Plastics 119
Minera Frisco 30, 181
Haynes and Boone 51, 343
Ministry of Agrarian, Territorial, and Urban Development
Herrenknecht 120, 121
(SEDATU) 15
Hochschild Mining 86
Ministry of Economy 8, 10
Hypertherm 300
Ministry of Energy (SENER) 318
Industrias Peñoles 23, 30, 204, 242, 246
Ministry of National Defense (SEDENA) 50
INEGI 6
Mintec 308
Innovations 300
MISOM Consulting Services 304
Interbandas 368
Molymet 250
Kansas City Southern 363
MOROOKA 107
Kepler Constructora 113
MPX Geophysics 90
Komatsu 263
MTG 273
Kootenay Silver 216
National Polytechnic Institute (IPN) 40, 45
Korn Ferry 381
New Gold 188
Kovit Engineering 154
Newmont Mining 63
INDEX T-Z
Newstrike Capital 91
SilverCrest Mines 228
Nexxtrade 354
Silver Standard 226
Nitro Group 180
Silver Wheaton 68, 70
Normet 276
SNL Metals & Mining 6, 22
Nyrstar 199, 247
Solenis 156
Osisko Mining 62
SpecTIR 94
Pan American Silver 153, 218
Spencer Stuart 380
Paramount Gold & Silver 62, 63
SRK Consulting 336
PEAL 145
SSAB 257
PEMEX 74, 256, 319, 321, 346, 356
Strata Worldwide 296
Penn State University 338
Techflow 133
Petrolíferos 356
Teknol 97
Pizarro-Suárez & Rodriguez Matus Abogados 20
Tele-Fonika Cable Americas 136
Power Electronics 322
Terminales Portuarias del Pacifico 362
PowerPrime Pumps 134
Ternium 255
PricewaterhouseCoopers (PwC) 62, 68, 76
TerraCore International 94
Primero Mining 130, 183
The Silver Institute 382
PROESMMA 160
Thomas & Betts 328
PROFUMISA 148
ThyssenKrupp 312
ProMéxico 12
Timmins Gold 30, 62, 187
Prospección y Desarrollo Minero del Norte (ProDeMin) 90
Topo Machinery 270, 271
Prospero Silver 220
Torex Gold 199
PROVESICSA 279
Toronto Stock Exchange (TSX) 68
Puerto Carguero Logistics 365
Tubería Laguna 132
Quinasa 297
Ultra Maris Capital 75
Road Machinery 263
Universidad Autónoma de Zacatecas (UAZ) 42
Sánchez-Mejorada, Velasco y Ribé 18, 36
US Geological Survey 6
Schlumberger Water Services 346
U.S. Silver & Gold 249
Schneider Electric 329
Veolia 345
Scorpio Mining 62, 63, 249
Versa Perforaciones 106
Scotiabank 65
Victaulic 298
Secretariat of Economy of Sonora 30
VSG Abogados y Consultores 19
Secretariat of Economy of Zacatecas 43
Walden Equipment 285
Segman 280
WEG 331
Serge Ferrari 313
Western Industrial Tools and Services (WITAS) 288
Sertei 305
Williams Scotsman 127
Servicio Geológico Mexicano (SGM) 94
Yamana Gold 30, 62, 172
Servicios y Proyectos Mineros (SPM) 89
Yokohama Tire Corporation 264, 265
Sherwin-Williams 128
Zacatecas Mining Cluster (CLUSMIN) 40, 44, 45
ADVERTISING INDEX
4
Globexplore Drilling
185
17
Coreboss
188-189 Mejora
Yokohama
28
AIMMGM
195
Cyanco
35
Asesoría Legal y de Negocios (ALN)
202
Fresnillo
38
Grupo Abogacía Profesional (GAP)
211
Endeavour Silver
54
Mexico Mining Forum
234
Grupo Mexico
60-61
FIFOMI
243
Eriez
82
Bosch Rexroth
260
Metso
87
Corporativo Químico Global
267
MATCO
97
Energold Drilling
285
Geobrugg
110
Doka
292
Victaulic
116
Williams Scotsman
303
Martin Engineering
124
Commosa
307
Pepperl + Fuchs
140
FLSmidth
316
ERM
144
PEAL
335
Power Electronics
155
Kovit Engineering
340 Teknol
158
Austin Powder
350
Brinks (Servicio Panamericano de Protección)
166
Nitro Group
355
Puerto Carguero
173-174
Minera Frisco
374
Mexico Mining Review
CREDITS
EDITOR-IN-CHIEF: Jeroen Posma
MARKETING DIRECTOR: Neja Brglez
EDITORIAL DIRECTOR: Chris Dalby
DESIGN DIRECTOR: Vanessa Rocha
SENIOR EDITOR & INDUSTRY ANALYST: Eduardo Márquez
WEB DEVELOPMENT: Arturo Madrazo
SENIOR EDITOR & INDUSTRY ANALYST: Michel Cuvillier SENIOR EDITOR: Matt Kendall
CIRCULATION & EVENTS MANAGER: Ana Cristina Garantón
EDITOR: Wallace Porter
PUBLICATION ADMINISTRATION: Alena Lipková
JOURNALIST & INDUSTRY ANALYST: Lucy Fisher COLLABORATOR: Cristina Padrés COLLABORATOR: Montserrat Rodriguez COLLABORATOR: Sofía Niño de Rivera PUBLICATION COORDINATOR: Iwona Knap PUBLICATION COORDINATOR: Juan Carlos Cortés PUBLICATION COORDINATOR: Cindy Muehlbacher
PHOTO CREDITS
2 Fresnillo
88 MBP
7 Fresnillo
89 MBP
9 Ministry of Economy
90 ProDeMin
10 MBP
92 AuRico Gold
12 MBP
94 MBP
14 MBP
96 MBP
15 MBP
97 MBP
16 MBP
98 MBP
18 MBP
99 MBP
19 MBP
100 Globexplore Drilling
20 Pizarro-Suárez & Rodríguez Matus Abogados
101 Globexplore Drilling
21 DBR Abogados
102 MBP
23 MBP
103 Energold Drilling
24 Baker & McKenzie
104 MBP
25 Argonaut Gold
105 Dando Drilling
26 Atlas Copco
106 MBP
30 Secretary of Economy of Sonora
107 MOROOKA
31 Fresnillo
108 Alamos Gold
32 MBP
112 MBP
34 MBP
113 MBP
36 MBP
116 MBP
37 MBP
117 Doka
39 MBP
118 DMV Consultores
40 Astralloy
119 G+ Industrial Plastics
40 Grupo Mexico
120 Herrenknecht
41 MBP
121 MBP
42 MBP
122 Concrete Canvas
43 Secretariat of Economy of Zacatecas
123 Grupo Cementos de Chihuahua (GCC)
44 MBP
124 Commosa
45 MBP
126 MBP
46 MBP
127 Williams Scotsman
47 Cereceres Estudio Legal
128 Lord
48 MBP
129 MBP
49 MBP
130 Primero Mining
50 SEDENA
132 MBP
51 MBP
133 MBP
52 Goldgroup
134 MBP
56 MBP
136 MBP
58 FIFOMI, Bolsa Mexicana de Valores
137 MBP
64 Export Development Canada
138 McEwen Mining
65 Scotiabank
143 MBP
66 Alamos Gold
146 MBP
69 Bolsa Mexicana de Valores
147 MBP
70 Silver Wheaton
148 MBP
72 Control Risks
149 Cyanco
73 MBP
150 MBP
75 Ultra Maris Capital
151 MBP
76 PwC
152 Pan American Silver
77 MBP, KPMG
154 MBP
78 Fresnillo
156 MBP
82 Alta Vista Ventures
157 MBP
83 Garibaldi Resources
158 MBP
86 MBP
159 Austin Powder
PHOTO CREDITS
160 Proesmma
263 Road Machinery
161 Eriez
264 Yokohama
162 MacLean Engineering
265 Yokohama
163 MBP
266 Caterpillar
164 GoldCorp
269 Goodyear
168 GoldCorp
271 MBP
169 GoldCorp
272 MBP
173 Alamos Gold
273 MBP
176 Chesapeake Gold
274 Agnico Eagle
177 AuRico Gold
276 MBP
178 Globexplore Drilling
277 Construmac
179 Globexplore Drilling
278 3M
180 MBP, Argonaut Gold
280 MSA
181 Argonaut Gold
282 Grainger, MBP
182 Minera Frisco
284 MBP
184 MBP, Argonaut Gold
285 MBP
189 New Gold
286 MBP
190 MBP
289 MBP
191 McEwen Mining
290 MAG Silver
192 Goldcorp
294 MacLean Engineering
194 Gold Resources
296 MBP
197 Marlin Gold
297 MBP
198 Mexus Gold US
298 Victaulic
199 Torex Gold
300 Hypertherm
200 Endeavour Silver
302 MBP, AdN Consulting
204 Fresnillo
304 MISOM Consulting Services
208 MBP
305 MBP
210 Endeavour Silver
306 MBP
212 First Majestic Silver
308 MBP
214 Fresnillo
310 e-Tech Simulation
216 Kootenay Silver
313 Serge Ferrari
217 Kootenay Silver
314 Peñoles
218 Pan American Silver
318 SENER
218 Pan American Silver
320 MBP
220 Prospero Silver
321 MBP
221 Fortuna Silver
322 MBP
222 MAG Silver
324 First Majestic Silver
223 MAG Silver
326 Cummins Power Generation
224 Great Panther Silver
328 MBP
227 Excellon Resources
329 Schneider Electric
228 SilverCrest Mines
330 MBP
229 Defiance Silver
331 WEG
232 Grupo Mexico
332 MBP
236 Capstone Mining
333 MBP
237 Capstone Mining
334 SRK Consulting
241 Carrizal Mining
336 ERM
244 MBP
337 Pan American Silver
245 Azure Minerals
338 Penn State University
246 Peñoles
339 Baker & McKenzie
252 Grupo Mexico
341 MBP
256 Astralloy
343 MBP
258 Atlas Copco
344 MBP
262 Atlas Copco
345 Veolia
PHOTO CREDITS
346 MBP 348 Mabey Bridge 352 MBP 356 MBP 357 Brinks 358 Cobre del Mayo 360 MBP 363 Kansas City Southern 364 API Guaymas 365 MBP 366 Mabey Bridge 367 MBP 368 Interbandas 369 Martin Engineering 370 MBP, Elara Comunicaciones 372 Peñoles 378 MBP 380 Spencer Stuart 381 Korn Ferry 382 The Silver Institute 383 MBP
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