2017
“Important reserves of natural resources, like petroleum and precious metals, are the bulwarks for laying the foundations for the future” Enrique Peña Nieto, President of Mexico
Following a testing four-year period of falling prices, stagnant markets, and investor skepticism, the mining industry appears to have turned a long-awaited corner in 2016. As the UK’s decision to leave the European Union and China’s sluggish economic growth fueled financial instability, investors were quick to take shelter in the safe havens of the precious metals markets. Gold and silver both enjoyed a strong rally during the first half of the year, and projects around the world were being taken off the shelf as confidence slowly returned. Of course, the sector has not yet emerged from the woods and for Mexico in particular the turnaround provided much-needed respite after a challenging 2015. Foreign investors, discouraged by the tax on exploration activities, increasingly looked to other Latin American countries for new greenfield projects. Only those companies which took advantage of the downturn to optimize processes and streamline operations will reap the rewards of the upswing, and given the persistent volatility of the past few years there is no guarantee how long the turnaround will last. As the tide turns, the mining community must now come together to ensure it capitalizes on the opportunities approaching on the horizon.
Mexico Mining Review 2017 provides all the information investors and executives need to exploit these opportunities. With expert opinions, in-depth analyses, and technology spotlights, this book highlights the key trends that have shaped the mining industry in Mexico over the past 12 months, and provides insight into which direction it will head in 2017. Mexico Mining Review 2017 allows the decision makers who shape the industry to tell the story. Whether for a mine operator seeking to improve processes, an explorer hunting new projects, or a service provider hungry for new clients, this book will be an essential resource in efforts to ride the wave of impending changes.
ALL RIGHTS RESERVED Š Toguna, S. de R.L. de C.V., 2016. 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.
ISBN: 978-0-9968026-4-2
TABLE OF CONTENTS
1
STATE OF THE INDUSTRY
8
PLANNING & DEVELOPMENT
2
MINING POLICY & REGULATION
9
OPEN PIT MINING
3
FINANCE & INVESTMENT
4
GOLD
11
5
SILVER
12
AUTOMATION & POWER GENERATION
6
BASE METALS & STEEL
13
ENVIRONMENT & CSR
7
EXPLORATION & DRILLING
14
FUTURE OUTLOOK
10
UNDERGROUND MINING
ORE PROCESSING
1
STATE OF THE INDUSTRY
The mining industry is at a turning point and the low price environment of recent years is slowly but steadily moving toward a bonanza. Tight budgets of recent years have begun to pay off, edging out inefficient companies and creating a consolidated industry with an efficient value chain. Players are beginning to accept the virtues of the fiscal reform and are awaiting the distribution of the mining fund. Overall investment in the sector increased to US$5.2 billion in 2015 from US$4.9 billion in 2014. These figures only serve as confirmation that despite uncertainty surrounding commodity prices, Mexico remains an attractive destination for mining investment and continues to compete with its mineral-rich counterparts across the Americas.
This chapter provides an overview of the mining industry in 2015 and 2016. The key trends during this time are disseminated by the most important actors within the public and private sectors to provide a wide panorama of the dialogues from both sides. The chapter places a great deal of focus on the regulatory changes, as well as prevailing mindsets within the industry that are beginning to prioritize different factors. More emphasis on cost reduction and environmental considerations is creating a more optimized and conscientious industry that is sure to remain sustainable for years to come.
5
6
7
| CHAPTER 1: STATE OF THE INDUSTRY 8
ANALYSIS: The Year In Review
14
INSIGHT: Marco Bernal, Mexican Association of Mining Metallurgists, Engineers, and Geologists
(AIMMGM)
15
VIEW FROM THE TOP: Idelfonso Guajardo Villarreal, Ministry of Economy
16
VIEW FROM THE TOP: Mario Alfonso Cantú, Ministry of Economy
18
VIEW FROM THE TOP: Sergio Almazán, The Mexican Mining Chamber (CAMIMEX)
20
VIEW FROM THE TOP: Jaime Lomelín, Grupo BAL
22
EXPERT OPINION: Omar Aguilar, Bowker
Alejandra Hernández, Bowker
24
VIEW FROM THE TOP: Federico Borrego, Zacatecas Ministry of Economy
26
ANALYSIS: FDI Dips but is Expected to Recover
28
INSIGHT: Octavio Alvídrez, Fresnillo
29
VIEW FROM THE TOP: Mitchell Krebs, Coeur Mining
| ANALYSIS
THE YEAR IN REVIEW PRICE INDEX1(2010=100) PRICE INDEX1 (2010=100) 140 120 100 80 8
60 40 20
precious metals precious metals
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
0
metals and minerals metals and minerals
Source: World Bank, 2016 1 Annual indices, 2010=100, 1960 to present, real 2005 US dollars. Source: World Bank, 2016 1 Annual indices, 2010=100, 1960 to present, real 2005 US dollars.
After a few rough years, there is a light at the end of the
over two years. In the same month silver surged to US$20/
tunnel for the global mining industry. Metals prices are on
oz, a 45 percent increase since January 1. The strength of the
the upswing and industrywide investments in reducing
dollar and weakening of certain emerging market currencies
operating costs are paying off, helping companies streamline
also meant that operators and silver streaming companies
and eventually buffer bottom lines. Undoubtedly, there
were able to benefit from the exchange rate discrepancy.
are hurdles to face. The slowdown of economic growth in resource-hungry China and uncertainty in Europe, especially
THE MEXICAN OUTLOOK
the potential fallout from Britain’s decision to leave the
As one of the top players in the industry, Mexico is in a solid
EU, or Brexit, are among the clear and present economic
position to capitalize on this upswing and regain some lost
threats. Nevertheless, recovery is on the cards, even if it is
ground in terms of investment attractiveness. The industry
not quite as quick as hoped. “Admittedly this recovery has
contributed US$17.3 billion in 2014, or 1.5 percent of GDP,
been a little slower than initially hoped,” Mitchell Krebs, President and CEO of Coeur Mining, says. “The industry has certainly slowed, and there are few new discoveries,
MEXICAN MINE PRODUCTION BY MINERAL MEXICAN MINE PRODUCTION BY MINERAL
few operations are being put into production, old mines are being exhausted, and supplies of gold and silver are beginning to decline for the first time in a decade. However, the lack of supply is also positive and will contribute toward a recovery in commodity and precious metals prices. When weighed against some of the recent restructuring of the industry, I believe it is set to become extremely successful.” TURNING THE CORNER The first half of 2016 provided some welcome respite for
23.4% gold 23.4% gold
2.0% coal 2.0% coal
global miners. With gold and silver prices already rallying,
17.2% silver 17.2% silver
1.8% molybdenum 1.8% molybdenum
Britain voted in June to leave the European Union. While
17.2% copper 17.2% copper 7% zinc 7% zinc 4.8% sand 4.8% sand 4.2% gravel 4.2% gravel 4.0% stone aggregates
1.6% lime 1.6% lime 1.0% flourite 1.0% flourite 1.0% calcite 1.0% calcite 0.9% salt 0.9% salt sulphate 0.5% sodium
the economic fallout going forward is uncertain, the initial impact was a positive for precious metals while Brexit caused global stocks to plummet. The markets lost roughly US$2 trillion in value the day after the decision was announced,
4.0% stone 3.6% iron ore aggregates
0.5% sodium sulphate 0.5% kaolin
and as global currencies also suffered investors sought
2.9% d. stones 3.6% iron ore
3.5% other 0.5% kaolin
refuge in the safe havens of gold and silver. By August 4 the
2.6% lead 2.9% d. stones
3.5% other
price of an ounce of gold had risen to US$1,374, its highest in
2.6% lead Source: SGM 2015
Source: SGM
most damaging impacts of the royalty taxes was felt
2858.0
5203.7
6575.8 4947.7
3656.0
3316.0
2015
2014
2013
two new royalty taxes on the mining sector. One of the
2011
0
The federal government’s 2014 fiscal reforms introduced
9
2010
2,000
national investment in the Mexican mining industry.
2009
billion the year before confirming a strong increase in
2156.0
4,000
sector increased last year to US$5.2 billion from US$4.9
2007
the sector’s recovery. Nevertheless, total investment in the
1923.0
6,000
reported that FDI recovered to US$491 million, signaling
2008
months of 2016, however, the Ministry of Economy has
5612.0
8,000
direct investment of US$21 million in 2015. In the first six
2012
inflow of US$2.123 billion in 2014 to an outflow of foreign
8043.0
10,000
2006
US$5.2 billion in 2015. FDI saw a startling drop from an
1168.0
billion. Foreign and national investment continues, reaching
INVESTMENT IN THE MINING SECTOR (US$ million) INVESTMENT IN THE MINING SECTOR (US$ millions)
2005
according to INEGI figures, compared with 2013’s US$15.6
Source: Camimex. Estimated data for 2015 Source: Camimex. Estimated data for 2015
in the exploration segment. Mexico was once ranked fourth in terms of global mining exploration behind powerhouses Australia, Canada, and the US. After
global value of M&As in the last quarter of 2015 dropped
the taxes arrived, Mexico dropped to seventh lagging
70.5 percent to US$3.2 billion over the previous quarter,
regional rivals Chile and Peru, as well as China as
experts expect attractive assets to open up in the
companies are now facing taxes on mineral exploration
medium term. Mining companies are now opting for
in the country for the first time.
new systems like SCADA, PLC, and PDC to collect vast
WORLD INVESTMENT IN EXPLORATION (US$ billions) WORLD INVESTMENT IN EXPLORATION (US$ billion) 25
the GDP of the Internet of Things is expected to reach
15.2
US$1.9 trillion, and mining companies will contribute
13.2 11.4
10 5
unprecedented technologies are emerging. By 2020,
18.2
15
by investing in automated and smart equipment and
11.4
11.2
9.2
8.4
7.5
improve recovery and decision-making processes. The mining sector is venturing into Industry 4.0 where
21.5
20
amounts of information and turn it into smart data to
integrating cloud-based IT solutions.
5.1
INVESTMENT IN THE MINING SECTOR 2015-2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
(MILLIONS OF DOLLARS) 0
CAMIMEX affiliated companies
20151
20162
Exploration
402.3
343.2
Source:Metals MetalsEconomics EconomicsGroup Groupand andSNL SNLMetals Metalsand andMining Mining, Source: several years
Project expansion
719.4
641.
New projects
663.1
946.52
42.2
41.5
Exploration expenditure is expected to drop to a
Equipment acquisition
999.0
901.1
projected US$343 million in 2016 from US$402 million
Environment
202.9
134.1
in 2015. Last year, global exploration investment fell by
Health and safety at work
67.1
86.9
19.3 percent to US$9.2 billion, according to the Mexican
Security
45.2
47.5
Training and productivity
Mining Chamber (CAMIMEX). Still, some industry insiders
Community development
19.7
17.8
see greater opportunities in Mexico since an estimated
Clean energies
10.5
22.5
Community support
70 percent of the country’s territory is yet to be explored. INNOVATION & INVESTMENT OPPORTUNITIES
17.6
19.7
Maintenance
510.7
479.2
Others
472.1
531.2
4,171.7
4,212.6
125.8
140.0
Unresolved challenges lie on the doorstep of all miners
Subtotal
ranging from rising stakeholder pressure, declining
Non member exploration
ore grades, and financing. In an effort to counteract the effects of the stagnant 2015 prices several mining
Mexican players and foreign companies. Although the
332.9
350.0
458.7
490.0
4,630.4
4,702.6
Mining total
players are turning to alternative sources of financing. One trend is the partnerships created between local
Assets Subtotal
Source: CAMIMEX and Ministry of Economy 1 Actual Estimated
2
METAL PRICES
GOLD PRODUCTION PER COUNTRY IN 2015 Gold Production per Country in 2014 Prices for gold, silver, and copper are clear indicators of the market’s cycle. These metals enjoyed an unprecedented climb to peaks in 2011, driven by demand from growing economies in emerging markets like China. But what goes up must come down. From those lofty heights, prices tumbled and the industry fell into a protracted downturn. This year, prices have stabilized and have shown continued strength. From January through to the early part of August, gold jumped 29 percent, silver soared 47 percent, and copper steadied into a near 7 percent rise. South Africa 4.6%5.2% South Africa Uzbekistan 3.6% 3.9% Mexico Mexico 3.2% 3.4% Uzbekistan Ghana 3.2% 2.8% Ghana Others 32.9% 34.8% other
China 16.1% China 15.7% Australia 9.4% 10.0% Australia Gold recovered some of its shine at the start of 2016 spurred Russia 8.6% 8.0% Russia by the slumping Chinese stock market, Brexit concerns and US 7.4% 6.6% US the resulting ripple effects caused in the European and US Canada 5.6% 4.9% Canada markets. There is still some way to go to match the glory Peru 5.2% 4.9% Peru days of 2011 where an ounce was valued at US$1,900 but GOLD
Source: CAMIMEX
HSBC’s precious metals analysts forecast an average price
Source: CAMIMEX
of US$1,205 in early 2016 and encouragingly raised it to US$1,275 by mid-year. Since then, the price climbed above those numbers hitting US$1,374 on August 4. Projections for 2017 are to range between US$1,300 to US$1,310.
MEXICO'S GOLDProduction PRODUCTION Mexico’s Gold 120
100
100
80
80
60
60
with 28 percent of the national market largely thanks to
40
40
its Zacatecas-based Peñasquito mine. Fresnillo followed
20
20
is mainly focused in five states led by Sonora with a market share of 32 percent while Zacatecas contributed 27 percent and Chihuahua 11 percent. These three states constitute 70.5 percent of all gold production in the country. The biggest gold producer last year was Goldcorp
with 19 percent. In 1H16 Fresnillo reported a 23 percent increase in gold production year-on-year after upgrades in ore recovery processes at Noche Buena and Herradura. INEGI reported that Mexico saw a 14.4 percent growth in gold production in 2015 at 4.3 million ounces compared to 2014 levels. With production at 756,000 ounces in 2001,
0
2010
2011
tonnes
2012
2013
2014
2015*
0
billion MX$
thousand tons *January to November
billion MX$
Source: INEGI Source: INEGI *January to November
this represents an increase of five times in 15 years
GOLD GOLDPRICE PRICEHISTORICAL HISTORICAL(US$/troy (US$/troyounce) ounce)
66MONTH MONTHGOLD GOLDPRICE PRICE(US$/troy (US$/troyounce) ounce)
2,200
1,380
2,000
1,340
1,800 1,600
1,300
1,400
1,260
1,200
1,220
1,000 800
1,180
600
1,140
400
1,100
200 1990 Source: InfoMine
1995
2000
2005
2010
2015
Feb 2016
Mar 2016
Apr 2016
Jun 2016
Jul 2016
billion MX$
120
In Mexico, which ranks eighth globally, gold production
tons
10
SILVER SILVERPRICE PRICEHISTORICAL HISTORICAL(US$/troy (US$/troyounce) ounce)
66MONTH MONTHSILVER SILVERPRICE PRICE(US$/troy (US$/troyounce) ounce) 24
55 50
22
45 40
20
35
18
30
16
25
14
20 15
12
10 5 1990
11
10 1995
2000
2005
2010
2015
Feb 2016
Mar 2016
Apr 2016
Jun 2016
Jul 2016
Source: InfoMine
Mexico’s Silver Production MEXICO'S SILVER PRODUCTION
While silver becomes rarer as its ratio to gold in the
5
60
Earth’s crust dwindles, consumption of “the devil’s metal”
and Peru with 15.8 percent and 13.9 percent respectively. The most notable production increases were seen in Peru, Australia, Poland, and Chile, meaning that, as a region, Latin America now accounts for 53 percent of the total
thousand tons
percent participation in global production, ahead of China
50
4
is increasing each year. Mexico reigns supreme with a 19.8
40
3
30 2
20
1
10
global silver production. 0 Zacatecas, home to the country’s largest silver mines, Peñasquito, Fresnillo, and Saucito, continues to lead the way in Mexican production with 42 percent. Fresnillo produced 6.3 percent more silver in 1H16 than 1H15
billion MX$
SILVER
2010
2011
2012
thousand tonnes thousand tons
*January to November Source: INEGI Source: INEGI *January to November
2013
2014
2015*
0
billion MX$ billion MX$
following increased capacity at Saucito and high grades processed at Ciénega. Meanwhile, First Majestic Silver reported that 2Q16 silver production rose by 23 percent
equivalent ounces. Zacatecas was followed by Durango
compared to 2Q15, reaching a total of 4.7 million silver
with a 16.6 percent share.
SILVER PRODUCTION PER COUNTRY IN 2015 Silver Production per Country in 2014
Since 1994, silver production has increased year on year, with the exception of a small decline in 2003-2003, at a rate of around 3 percent per annum. A higher level of production is anticipated for 2016, despite the fact that few projects will be entering the production stage. Fresnillo’s gold and silver San Julian project in Chihuahua is expected to account for the majority of this increase. Annual production is predicted to be 10.3 million ounces of silver and 44,000 ounces of gold once capacity is reached in 2017. According to the USGS, global silver production increased by 1.8 percent in 2015, which is equivalent to 877 million
Mexico 18.0% 19.8% Mexico
Chile
4.6% 4.8% Bolivia
ounces. The Silver Institute released figures confirming
China15.8% China 16.1% Peru 13.9% Peru 14.2%
Poland 4.8% Poland 4.6% US 4.5% 4.0% US
that total silver physical demand reached a record 1.17
Australia 7.3% 6.2% Australia Russia 6.5% 5.9% Chile Bolivia 5.0% 5.5% Russia Source: CAMIMEX Source: CAMIMEX
Canada
2.5% 1.8% Canada Others 16.7% 18.3% other
billion ounces in 2015, up 3 percent from the previous year. Industrial applications accounted for 588 million ounces in 2015 and since 2014 demand for photovoltaic applications have risen 23 percent, suggesting that solar power may become an important ally to the silver sector.
Mexico’s Copper Production MEXICO'S COPPER PRODUCTION 50
400
40
300
30
200
20
100
10
billion MX$
500
tons
COPPERPRODUCTION PRODUCTIONPER PERCOUNTRY COUNTRYIN IN2014 2015 COPPER
12
0 30.4% Chile Chile 9.3%China China
30.4%
4.0% Russia Russia 3.7% Canada Canada
8.5%Peru Peru
8.5%
3.2% Zambia Zambia
3.2%
6.7%US US
6.7%
Mexico 2.9% Mexico
2.9%
5.3%Congo Congo
5.3%
Others 20.8% other
20.8%
5.1% Australia Australia
5.1%
3.2%
2011
tonnes
4%
9.3%
2010
2012
2013
2014 2015*
0
billion MX$
thousand tons *January to November
billion MX$
Source: INEGI Source: INEGI *January to November
Traditionally, copper is seen as a key manufacturing component across a wide array of industries like
Source: CAMIMEX Source: CAMIMEX
infrastructure, technology and automotive, and is often used as a gauge of economic health. While China’s COPPER
exponential growth had been a strong demand driver,
Like other precious metals, copper prices have seen
its weakened condition and robust global production is
an uptick of about 7 percent this year after losing 24.4
weighing on the market. As China’s economy continued
percent in 2015. Chile is still the world’s main producer.
to lag in 1H16, so too did demand for the soft metal. One
Mexico is 10th with 2.9 percent of global production,
cloud on the horizon is the excess in supply with global
providing 20 percent of North America’s extraction.
copper reserves totaling 720 million tons.
Grupo Mexico’s Buenavista del Cobre mine is the biggest extraction project, helped by a total investment of US$4.5
As well as the Buenavista del Cobre expansion, expected
billion as part of the company’s Gran Visión strategy.
to produce 300,000t/y, several new copper projects will be launched in the coming years to bolster the sector. Minero
Mexico increased copper production into 2016, after
Frisco is perservering with its Tayahua Primario project,
producing 594,451 tons in 2015, a 15.4 percent increase over
expected to reach production in 2017 with 10,000t/y.
the previous year. The country’s largest copper producer,
Sonora is sure to maintain its position at the forefront of
Grupo México, registered total production increases of
copper production with two new Grupo Mexico expansions
21 percent in 1H16 versus 1H15. These encouraging results
in addition to that of Buenavista del Cobre. El Pilar, expected
can be attributed to new operations at the company’s
to begin production in 2018, and the Buenavista Zinc project,
Buenavista del Cobre mine in Sonora. The northern state
which has no defined production date, will contribute to the
is Mexico’s primary copper producer capturing the lion’s
state’s output. Industrias Peñoles will inaugurate its Rey de
share of the 2015 market with 483,510 tons.
Plata project in Guerrero in 2018 and will produce 7,000t/y.
COPPER COOPERPRICE PRICEHISTORICAL HISTORICAL(thousand (thousandUS$/t) US$/t)
6 6 MONTH MONTH COPPER COOPERPRICE PRICE(thousand (thousandUS$/t) US$/t)
11
5.2
10
5.1
9
5.0
8
4.9
7
4.8
6 5
4.7
4
4.6
3
4.5
2
4.4
1 1990
1995
Source: InfoMine
2000
2005
2010
2015
Feb 2016
Mar 2016
Apr 2016
Jun 2016
Jul 2016
ENVIRONMENT & CSR Among the challenges facing the mining industry is the environment. The sector suffers from a tarnished public
MEXICO MINING PRODUCTION VALUE (MX$ billion) Mexico Mining Production Value (Billion MX$) 250
image that has been exacerbated by isolated environmental accidents. In 2015, PROFEPA concluded the assessment of 1,130 mining installations operating legally in the country and 71 operating centers were closed and fined a total of US$2.3 million. The agency also imposed corrective measures on 656 mines where minor irregularities were found although those posed no imminent danger to the
13
50
invested in social and environmental concerns including environment, health and safety at work, community
2015
2014
2013
2011
2012
2010
2009
2007
and prevention strategies. In 2015, US$317 million was
0
2008
stricter companies are investing heavily in remediation
2006
become 2005
regulations
2004
environmental
100
2003
As
150
2002
environment.
200
Source: CAMIMEX Source: CAMIMEX
development, clean energies, and community support. Community relations play a pivotal role in the success of
debt burdens are rising and on a global scale, mining
any mining project. The proceeds of the Mining Fund were
ratings were downgraded from an average BAA2 in 2014
finally allocated in 2015 across the 25 states in the country
to BAA3 in 2015. An increase of 62 percent in the net debt
to boast mining activities. SEDATU has played a leading
to EBITDA ratio in the last year caused industry concern.
role in this process and has joined forces with the Regional
Nevertheless, total debt has decreased by 3 percent
Development Committees for Mining Regions across the
and net debt levels have remained steady at US$224
country to evaluate how they can benefit the communities
billion, according to PwC. Lifelines have opened up and
and where the most pressing concerns lie. Zacatecas and
companies can turn to alternative financing vehicles like
Sonora are among the winners with US$23.9 million and
royalty and metal streaming arrangements, as well as
US$32.7 million respectively. Other states like Coahuila,
equipment financing.
San Luis Potosi, Durango, and Chihuahua will also benefit. These investments will be allocated to the construction
In Mexico, foreign and national investment continues,
and refurbishment of schools, road infrastructure, public
albeit at a slower pace after a mining royalty tax came
lighting, urban mobility, and water and waste management.
into force two years ago. However, vast tracts of the country remain untapped and the potential is there. Some
INDUSTRY OUTLOOK
top industry players are now optimistic about growth in
As the turn finally approaches and an upswing becomes
the industry, whçile admitting the challenges that could
clearer, companies that have successfully navigated the
yet hamper the sector. Although the last few years have
rocky road will emerge on the other side stronger, leaner
been challenging for miners globally, Mexico has been
and more innovative. Financing in 2015 was bleak and the
well-positioned to weather the storm and emerge a far
global mining sector was trading at earnings below those
more efficient and streamlined industry. The country
of the healthcare and retail sectors. As a result, industry
is expected to continue its growth in 2016, ramping up production volumes and attracting far greater levels of
MAIN MINING PRODUCER STATES
FDI. Exploration opportunities.
MAIN MINING PRODUCER STATES There can be no doubting Mexico’s mineral potential. 25% Sonora 25% Sonora 19% Zacatecas 19% Zacatecas 10% 10%Chihuahua Chihuahua 8% 8%Durango Durango 4.8%Coahuila Coahuila 4.8% 4.6% San Luis Luis Potosi Potosi 4.6% San
3.5% State of Mexico 3.5% State of Mexico 2.6% Guerrero 2.6% Guerrero 22.5% other 22.5% other Source: SGM 2015 Source: SGM
Vast areas of the country are waiting to be turned into profitable mines, as estimates place unexplored territory at around 70% of the country. With technology continuing to develop at a steady pace and infrastructure improving by the day this process should be easier. Prices are once again on the rise and it is now up to exploration companies and mine operators to identify mineral veins, develop projects and capitalize on the glut of opportunities available in Mexico. All unattributed figures sourced from CAMIMEX
| INSIGHT
A MISINFORMED AND DISCONNECTED LEGISLATION
14
“If mining companies
It is important to work hand in hand with the public
continue to delay exploration
relationship with the promotion and development of
investment, the industry will
sector, he says, as well as with agencies that have a direct resources. Within the administrative areas of the public sector that handles mining activities, the Association tries
no longer have medium to
allocate a certain number of positions to experts in the
long term projects that can
However, Bernal admits that the Association has found
field, as the Mexican Geological Service (SGM) has done. very few opportunities to achieve this.
convert into mines” Marco Bernal, President of the Mexican Association of Mining Metallurgists, Engineers, and Geologists (AIMMGM)
The new fiscal charges for mines that do not have any other productive activity in the country are part of a risky combination of uninformed legislators, low mineral prices, and a heavy drop of investment, according to Bernal. “The
The Presidency of AIMMGM is soon to be in transition. In
implementation of royalties has limited the growth of mining
August 2016, Marco Bernal will begin his two-year period
activity, and thus caused a large number of technicians and
as head of the National Executive Board of AIMMGM.
mine employees to be dismissed,” he claims. “The changes
According to him, his goal is to solidify the actions of previous
diverted external resources that were meant to fund new
administrations and prioritize the granting of direct support
and existing Mexican exploration projects as investors are
to AIMMGM associates. “Education is another concern, and
increasingly finding the destination to be less attractive.
we are analyzing the possibility of creating an institution
Countries such as Chile and Peru are in a more competitive
or training center for officials in the mining industry as we
position to take advantage of these resources.”
used to have one that was quite successful,” he explains. “We plan on taking advantage of installations we already
However, the new fees are not the only issue thanks to the
have in important districts.” AIMMGM participates in all that
fact that players can no longer immediately deduct annual
concerns the sector from environmental science studies
exploration costs, says Bernal. Now, companies receive the
that are being conducted by higher education institutions,
deduction in annual payments divided within a 10 year time
to actively participating in legislative modifications that
frame. “Consequently, the industry found that 75 percent
may affect or benefit the mining sector.
of exploration investment was cut in 2015 in comparison to 2012,” he states. “As a way to survive in the low price
Bernal believes that the country’s legislative body is truly
market, companies are focusing their attention on the
failing to take advantage of the experience AIMMGM’s
most profitable mine sites and causing an accelerated
associates and the industry has to offer. “Often, a lack of
rate of mineral depletion. Even more dangerous, if mining
knowledge and consultancy causes authorities to miss
companies continue to delay exploration investment, the
opportunities, a particular shame for marginalized groups
industry will no longer have medium to long term projects
that do not receive the basic services in their areas,
that can be converted into mines.”
and could benefit from the economic boost of mining activities,” he laments. “The government does not realize
He believes that players must take into consideration
that in order to explore and develop mining projects,
internal factors that can delay progress. “Royalty taxes and
players often invest in infrastructure, strengthen roads
the elimination of immediate cost deductions have had an
and highways, electric power lines, education, health,
additional negative impact on exploration development as
potable water, and many other assets that can allow
there is a lack of capital,” he comments. “The Association
communities near mining operators to prosper. Mining
lends a hand by offering a wide array of events that create
companies provide the opportunity of a well-paid source
opportunities to show the public the importance of mining
of employment paired with adequate training, especially
activities. For instance, our office in Sonora hosts a biannual
in remote areas that depend on illegal activities. Our
international mining seminar, one of our most important
projects can help eliminate criminal groups by offering
events,
communities an alternate window of income.”
Chihuahua and the International Mining Expo in Zacatecas.”
along
with
the
International
Conference
in
| VIEW FROM THE TOP
RISING PRICES ATTRACT MAJORS TO GREENFIELDS ILDEFONSO GUAJARDO VILLARREAL Minister of Economy
15
Q: How has the mining royalty impacted the industry and
and companies are now able to exploit deposits that were
what are the implications overall?
previously not economically viable.
A: Mining investment is usually a long-term project and companies make investment decisions based on multiple
Q: What remains to be done to support investors? How can
factors such as mineral prices, ore deposits, experience
the Ministry of Economy help in this process?
and
stability,
A: The Federal Government is committed to supporting
infrastructure, regulations, and tax policy. The decrease
availability
of
labor,
macroeconomic
small and medium sized mining enterprises. The Mexican
in foreign direct investment was not due to the royalties
Geological
imposed but rather the result of falling commodity prices.
and metallurgical advise to SMEs, while conducting
According to the Mexican Mining Chamber (CAMIMEX),
hydrogeology and environmental geology studies, physical-
investment in the Mexican mining sector increased to
chemical studies, metallurgical testing, and resource
US$8 billion in 2012 from US$1.2 billion in 2005. But global
certification. Meanwhile FIFOMI provides training and
investment has since fallen dramatically to US$9.2 billion
technical assistance to small and medium-sized mining
in 2015 from US$21.5 billion in 2012, and investment in the
projects alongside its main focus, which is making credit
Mexican mining sector dropped to US$4.6 billion from
and other financial instruments available to the sector.
Survey
(SGM)
provides
geological-mining
US$8 billion during the same period. The mining sector is regulated by the Ministry of Economy, Nonetheless, mining companies continue to invest and
the Ministry of Environment and Natural Resources, the
develop projects that exploit Mexico’s geological potential,
Ministry of Energy, and the Ministry of Labor and Social
macroeconomic stability, infrastructure, skilled workforce,
Welfare. This requires close cooperation and constant
and strategic location. According to CAMIMEX, investment
communication. The Ministry of Economy has an office
is forecasted to reach a total of US$4.7 billion in 2016, a 1.6
that is fully and solely devoted to mining and acts as the
percent increase on the previous year. That several mines
contact point for mining companies throughout country.
started operations recently is encouraging. For example,
We are in permanent contact with both the companies
El Limon-Guajes in the state of Guerrero, a gold and silver
and local authorities to ensure we keep abreast of any
mine, was inaugurated on April 2016 with an investment of
problems and act accordingly. We also keep an eye on any
US$800 million. Two years into the Mining Fund more than
conflicts between companies and communities during the
MX$5 billion (US$274 million) has been raised, 80 percent
development and consolidation of a project, working with
of which has been allocated to states and municipalities.
the three levels of government to find alternative solutions.
The funds are used to boost community development and
As a result of this close cooperation, the number of conflicts
promote higher standards of living.
has reduced dramatically in the last few years. The Ministry of Economy has its doors open to listen to and address
Q: What impact has the unwillingness of majors to join
whatever problems may arise in the sector.
greenfield projects had on the industry? A: I do not believe that majors are unwilling to join greenfield projects per se. Investment decisions depend on the profitability of a mining project and are affected by external factors including mineral prices, costs, and quality of ore deposits. In recent years greenfield projects have not offered rapid ROI, so majors have been focusing
“Companies are now able to exploit deposits that were previously not economically
their efforts elsewhere. Given the mineral market situation
viable”
and technological developments, this trend is changing
Ildefonso Guajardo Villarreal, Minister of Economy
| VIEW FROM THE TOP
THE ROYALTY TAX CONUNDRUM MARIO ALFONSO CANTĂš 16
General Coordinator of Mining at the Ministry of Economy
Q: How would you describe the logic behind the creation
Q: What advantages can Mexico offer mining companies
of the royalty tax for mining activities?
under the current downturn?
A: The introduction of the royalty tax is important for
A: A context like the one currently facing the mining
the future health of the industry, primarily because local
industry
communities were in conflict with mining companies
productive and efficient. It is important to note that
over issues regarding land ownership and exploration
Mexico underwent recent changes that have greatly
permits. Therefore, we had to step in and create a
benefited mining companies negotiating the downturn
system that included and emphasized the importance
turmoil. Not only were electricity prices reduced by an
of the municipal and state governments in the mining
average of 26.8 percent per kWh from December 2014 to
industry, and encourage them to resolve conflicts
December 2015, a key input in the cost structure of mining
between the ejidos and the mining companies. Since
companies but the exchange rate differential was also
this tax was implemented it raised a total of US$360
reinforced in Mexico to allow companies to operate with a
million, which will provide a significant boost to local
highly competitive cash cost.
challenges
companies
to
become
more
economies and it has also reduced the number of these issues. In 2013, there were 60 registered conflicts
The General Coordination of Mining continues to work
throughout the country, and now there are just 28. Once
on its set objectives and strategies for the Mining
the local governments begin to consistently invest this
Development Program 2013-2018, among which are the
money into the right projects including infrastructure,
identification of exploration targets, provision of support
transport, health, and education, then the communities
for the development of clusters, and the offer of support
will start to reap the benefits. Of course, nobody likes
to supply companies in the sector. All of this paves the
paying taxes but it is a necessary part of society, and
way towards finding better investment and operational
I firmly believe the royalty is having the desired effect.
conditions.
Q: What kind of mechanism do local and state
Q: What lessons has the Grupo MĂŠxico spill at Buenavista
governments use to distribute the collected tax revenue?
del Cobre taught the public sector?
A: To be clear, 20 percent of all proceeds from the
A: The industry learnt that continuous project monitoring
tax are reinserted into the federal tax system. Of the
can prevent a vast array of problems both financial and
remainder, a total of 62.5 percent goes to the local
environmental. The disaster could have easily been
municipality, and the remaining 37.5 percent is allocated
avoided had supervision been more adequate. As a result,
to the corresponding state. In October 2015, a total
over the last two years, companies have increased their
of 24 committees were created, comprised of one
surveillance funds. As for the government, we learned that
SEDATU representative, and a representative from each
protocol is essential to respond as soon as possible, and
the state, municipality, and community, along with a
so we have focused on reducing our emergency response.
representative of the main mining company operating
Moreover, it has improved its coordination between all
in the state. These committees were set up to disperse
the governmental institutions, including SEMARNAT,
the money throughout the surrounding municipalities,
PROFEPA, and CONAGUA so that joint decisions can
and indeed the vast majority of the money collected
be made in half the time. Synergy ensures that each
in 2014 from the royalty tax has now been distributed
institution is fully aware of what needs to be done in
into community development projects. There is still a
terms of remediation. Finally, the law now establishes that
way to go but we are certainly on the right path. I am
all mining companies have the obligation of informing
confident that mining communities will soon be seeing
authorities of any accident within 72 hours or else be
the improvements first-hand.
subject to fines.
Q: What are the main priorities for the General Mining
the national GDP than agriculture. However, the country
Coordination in the short to medium term?
lacks structural framework that can properly support the
A: Tax compliance will continue to be a main focus for
sector. Mexico vastly differs from other countries when
the Coordination. It can sometimes be challenging for
it comes to administration of the mining industry, which
mining companies to know exactly how much royalty tax
can make it particularly difficult to adequately respond to
to pay because it is referenced by EBITDA, and a holding
all the sector's needs in terms of regulations, compliance,
company has to separate its mining units from its other
and supervision. We are currently working with our
assets, which is a difficult task. Therefore, we are working
administration to be the sole reference point for mining
alongside the Ministry of Finance and Public Credit, and
matters in Mexico.
the Mexican Revenue Service to facilitate the changes for mining enterprises. We will also devote a large chunk of our resources toward permissions. The royalty tax is an essential facet of our policy to further develop local economies, and so it is vital that all companies fulfill their tax obligations. Nonetheless, the Coordination admits there are a number of internal structural issues that need to be fixed. Mexico is the 13th largest mineral producer in the world, and on a domestic level the sector contributes more to
17
Since this tax was implemented, it has raised a total of US$360 million, which will provide a significant boost to local economies , and it has also reduced the number of conflicts
DISTRIBUTION OF THE REGIONAL SUSTAINABLE DEVELOPMENT FUND (MX$ million)1 DISTRIBUTION OF THE REGIONAL SUSTAINABLE DEVELOPMENT FUND (participation in pesos)1 150 140.4 121.8
120
86.8
90
65.0
60
1
With figures to March of 2015
11% Mazapil
2% Eduardo Neri
9% Cananea
2% Aquila
7% Nacozari de Garcia
2% Alamos
5% Fresnillo
1% Chinipas
4% Ocampo
47% other
4% Caborca 2% Sierra Mojada 2% Sahuaripa 2% Morelos
11% Mazapil
Source: CGM, Ministry of Economy 9% Cananea 1 With figures to March 2015
2% Sahuaripa 2% Morelos
7% Nacozari de Garcia
2% Eduardo Neri
5% Fresnillo
2% Aquila
4% Ocampo
2% Alamos
17.7
17.2
17.1
San Ignacio
Villa de la Paz
Cuencame
Minatitlan
Lazaro Cardenas
Zacazonapan
Chinipas
Santiago Papasquiaro
DISTRIBUTION OF THE REGIONAL SUSTAINABLE DEVELOPMENT 2 Source: CGM, MinistryFUND of Economy
Alamos
Aquila
Eduardo Neri
Morelos
24.9 24.9 24.7 22.7 21.9 21.3 20.6 19.9 19.6 18.4 17.8
Sahuaripa
Caborca
Ocampo
Fresnillo
Nacozari de Garcia
Cananea
Mazapil
0
Sierra Mojada
32.3
30
Santa Barbara
49.5 47.5
| VIEW FROM THE TOP
EDUCATION THE KEY TO BEST MINING PRACTICES SERGIO ALMAZĂ N 18
Director General of the Mexican Mining Chamber (CAMIMEX)
Q: Two years on from the introduction of the royalty tax,
2015. Instead of creating more obstacles for international
how would you assess its impact on the mining industry?
investors the federal government should be supporting
A: Unfortunately, the introduction of the royalty tax
and promoting foreign involvement in Mexico. Even
coincided with a marked downturn in global commodity
though CAMIMEX is greatly in favor of reinserting mining
prices. It is causing the Mexican mining industry to lose
proceeds back into the communities that surround mine
part of the competitive edge it once enjoyed over its
sites, the state and municipal authorities must do it in a
regional rivals. Operating in Mexico is now more expensive
consistent and transparent manner. We are not part of
than other countries like Chile, Peru, Argentina, Brazil,
any of the 25 state mining committees that have formed
and Colombia, all of which are working towards lowering
throughout the country.
costs for foreign companies. If there is less exploration there will be fewer discoveries of mineral deposits, and
Q: How can CAMIMEX help promote foreign investment,
limited employment. CAMIMEX is in direct contact with the
and boost the Mexican mining industry?
authorities to inform them of the strong negative impact
A: As the representative body for the mining community
the fiscal reforms have had on the industry. We are working
in Mexico, our principal task is to work alongside the
to convince those responsible in the public sector including
government to ensure that it is doing all it can to promote
the Ministry of Economy and the Ministry of Finance,
and develop our industry. We also work to encourage
not only to reduce taxation levels across the board but
positive mining practices throughout the sector in terms
more importantly to ensure that pre-operating costs for
of exploration, safety, environmental protection, and
exploration projects are tax deductible in the same year.
community development. Furthermore, CAMIMEX has set up a special commission for community development
The fact that companies can no longer deduct more
made up of specialists from the largest mining companies
than 10 percent per year has had a crippling impact on
in the country. The commission meets on a monthly
mining exploration levels in the country. A total of 154
basis to discuss recent actions, and to exchange ideas
mining projects had been suspended until December
regarding the responsibility for community development.
Fortunately, it is having a positive effect upon Mexico’s
many mines. Since the Energy Reform there are a number
mining culture. Since 2002, the Mexican Philanthropy
of new opportunities available to mining companies, who
Center (CEMEFI), and the Alliance for Socially Responsible
can now generate their own energy through cogeneration
Businesses
certificate
plants and other renewable programs. Our role is to
of Socially Responsible Company (ESR) to selected
(AliaRSE)
have
awarded
the
educate the community about these opportunities,
companies that fulfill specific requirements regarding
and to provide them with the tools to maximize their
community development and environmental care. In
potential. Several of the larger market players, including
its first year only one company, Industrias Peñoles, was
Industrias Peñoles, Fresnillo, Grupo México, and Minera
recognized with this honor, and now the number stands
Autlan are beginning to invest in energy generation due
at 42. It is a true reflection of the growing responsibility
to the fact that it raises competition domestically and
that mining companies have towards environmental
internationally. Indeed, there are a total of 35 mining
sustainability. Despite there is still work to be done there
projects in Mexico with valid permits for internal energy
is an undoubtable evolution toward socially responsible
creation. It represents a total installed capacity of
practices in the sector.
1,799MW, and a projected investment of US$2.7 billion, a reflection of a growing consciousness directed towards
Q: What does the fall in mineral production mean for the
energy saving opportunities.
state of the industry? A: The fact that production rates are falling at the
Q: What does CAMIMEX hope to achieve in the next 18
same time tax levels reached an all-time high is not a
months?
coincidence. Although CAMIMEX cannot directly boost
A:
production it can notably influence the mining operations
competitiveness the sector lost following the fiscal
though alternate strategies. A series of debates, meetings,
reforms. In 2010, Mexico was the number one Latin
and training courses on energy savings that we offer
American destination for mining exploration investment,
are an example. The Energy Reform is an increasingly
and fourth globally, behind only Canada, Australia and
pertinent issue for the sector because it opened a number
the US. Both Chile and Peru have now overtaken us, while
of new opportunities to players as they can now generate
other countries including Argentina and Colombia are
their own energy through cogeneration plants and other
taking important steps to attract further investment into
renewable schemes. Our role is to educate the community
their respective mining sectors. To buck this trend we feel
about these possibilities, and provide tools that maximize
the federal government must reduce the royalty tax and
potential.
alter the legislation so that exploration expenses are tax
Our
principal
objective
is
to
regenerate
the
deductible within one year, and not in 10 as it currently Q: How can the sector make the most of the new
stands. Moreover, we hope to soon start offering a diploma
opportunities afforded by the Energy Reform?
course on community development at CAMIMEX, which
A: The vast majority of companies are well aware of the
will serve as a training program to enable Mexican mining
potential benefits the reform brings. Energy consumption
companies to train their staff on socially responsible
can represent up to 30 percent of all operational costs for
practices.
AVERAGE PRICE OF ELECTRICITY FOR INDUSTRY USERS (MX$/kWh) AVERAGE PRICE OF ELECTRICITY FOR THE INDUSTRY (pesos per kilowatt hour) 180 170.4
170 160 150 140 130
119.2
120 110
Source: Ministry of Energy Source: Secretariat of Energy, 2016
Jun 2016
May 2016
Mar 2016
Apr 2016
Jan 2016
Feb 2016
Dec 2015
Nov 2015
Oct 2015
Sep 2015
Jul 2015
Aug 2015
Jun 2015
May 2015
Mar 2015
Apr 2015
Jan 2015
Feb 2015
Dec 2014
Oct 2014
Nov 2014
Sep 2014
Aug 2014
Jul 2014
Jun 2014
Apr 2014
May 2014
Mar 2014
Feb 2014
Jan 2014
100
19
| VIEW FROM THE TOP
BREAKING ECONOMIC AND SOCIAL PARADIGMS JAIME LOMELÍN Corporate Director of Grupo BAL
20
Q: What are the highlights in Mexico’s value proposition
Q: What have been the main changes in the strategic
for mining companies over the past decade?
decision
A: A careful balance in the equation of production and
compared with a decade ago?
demand must be found in the industry and in recent
A: The mining tradition in Mexico goes back 500 years
years there has been an overcapacity of production and
and today the industry has a completely new approach.
a reduction of demand. This combination has created
Technology and processes are constantly evolving to
chaos. The very core of mankind stems from the earth and
suit the new demands and financial climates and miners
its two main pillars: agriculture and mining. The former
have to adapt as well. I entered Peñoles 45 years ago, and
derives from a need for nourishment and the latter is the
the only mining operation that remains from that time is
first link in the long chain of transformation industries.
Fresnillo. This means that all current Industrias Peñoles
All great industries that have flourished in Mexico are
operations are relatively recent, dating from 1987 onwards.
sustained by mining products and in many ways modern
Mexico’s modern mining sector upholds all the norms from
civilization depends on minerals and metals. Mexico is
the OIT and other international treaties, and implements
a historic mining country and even before the Spanish
new technologies with a new business mindset to remain
set foot in the country, mining was already prevalent in
competitive.
making
processes
of
mining
executives
pre-Hispanic times. Fortunately, the dependency of the economy on mining is not as significant in comparison
Since 1987, Industrias Peñoles has been investing in
to other countries. Brazil and Australia depend heavily
exploration and after NAFTA was signed Mexico opened
on mining iron and coal and the same occurs in Pacific
the mining sector to foreign investment and consequently
countries like Peru and Chile that rely on copper. Mexico
experienced a boom in exploration following the entry of
has diversified and opted to support manufacturing
several junior players. The international mining companies
industries, and this is why the drop in commodity
exploring in Mexico are concentrating on gold and
prices has not heavily impacted Mexico’s economic
silver. Another consideration is that during that time the
performance.
workforce costs began to rise and subsidies were removed, which forced players to invest more in mechanization. The
Nevertheless, we cannot detract from the important role
focus today remains on productivity and efficiency so
mining continues to play in Mexico’s development, as it
automation continues to hold sway.
represents 3 percent of GDP. Interestingly, some mining products like cement and aggregates are omitted from
Q: What steps must be taken to ensure Mexico ranks
the official mining statistics while in other countries these
highly among the world leaders in human capital for the
are included in the sector. In Mexico, mining statistics
mining industry?
focus only on minerals under concession but if cement,
A: The mining industry suffered a long period of low
aggregates, and ceramic material were included the
prices between 1960 and 2005, which caused many earth
mining industry would represent over 4 percent of
science schools to close. When the market recovered
GDP. A 100 years ago mining was the beating heart of
there was a shortage of qualified human capital at all
Mexico’s economy and it continued to be so until 75
levels and in all mining regions, including Mexico. As a
years ago. During that time, export and production
result, salaries grew and interest in studying earth sciences
taxes were an important source of the state’s income.
was rekindled. Industrias Peñoles and Fresnillo, which are
Since this dependency has diminished given the country
part of the Grupo BAL, have made an effort to establish
has diversified in a positive way but mining is ranked
close ties with all the local universities where they have
among the top five industries, which include oil and gas,
operations by offering internship for undergraduates
automotive, electronics, and tourism.
during the weekends and summer breaks. The state of
Zacatecas, which is one of the most important mining
Cycles in all commodities are prevalent and the strategy
states in Mexico, has seen mining companies collaborate
companies should adopt to survive is to be a low cost
with governmental authorities, earth science schools, and
producer. If costs are in the first quartile then a company
research centers to form a Mining Cluster. This triple helix
can weather the storm. Mining requires incentives,
bridges the gap between players in order to reduce costs,
especially during the exploration stage when prices are
improve services, and develop human capital for mining
low. There are countries like Canada, Spain, and Australia
operations and their suppliers. Some of the suppliers are
that have interesting incentives in place that could apply
participating in the cluster were family businesses that
to Mexico. For instance, Australia had an incentive to
have transformed themselves into corporations with good
explore for gold, and taxes were eliminated for a 10 year
governance and have gained financial stability.
window. Spain allows for the investment of profits in exploration, and if it is not spent in a certain period of time
Q: What measures must be taken by mining companies,
the company returns it with interests and penalizations.
suppliers, policy makers, regulators, and the financial
The only incentive the mining sector has in Mexico is
community to ensure the industry’s healthy development?
the elimination of tax on diesel (IEPS) used in off-road
A: The mining sector is viewed by serious players as a
equipment. Mining is an economic and social catalyst that
long term investment, and companies that expect a quick
promotes job creation in marginalized communities. We
profit remove themselves from the race. Business plans
have opened mines where there was no mining culture
must be designed for the long term, and the exploration
and we have created important mining communities. For
stage alone can take up to 10 years. In terms of the
example, in Sonora we opened a mine and we noticed that
correlation between production and demand, there is no
in the surrounding communities the men had migrated to
doubt as to where the industry will head in years to come
the US for jobs, so we recruited women instead. This was
for modern civilization cannot thrive without minerals and
a groundbreaking gender equality initiative as it was the
metals. The demand will continue for iron, silver, copper,
first mine in Mexico to employ a female workforce. The
and other materials since developing economies will
company breaks not only economic and social barriers but
strive to reach the industrialized stage and will begin to
opens opportunities for all and removes paradigms that in
increase their consumption.
other countries remain prevalent.
21
| EXPERT OPINION
OBTAINING MEXICAN MINING CONCESSIONS agree before Mexican authorities to be regarded and 22
Omar Aguilar Partner at Bowker
Alejandra Hernández Partner at Bowker
treated as Mexican citizens and they do not request the protection of their governments under penalty of losing their assets related to the dispute (in this case the mining concession) to the benefit of the United Mexican States
Unlike the US and the Canadian legal systems, which are
(Mexico). This provision can be regarded as a waiver of
based in common law, the Mexican legal structure stems
the right to call for diplomatic protection. On top of all
from civil law legislation. Because of the close economic
ancillary legal duties, entities incorporated or used for this
ties between the three countries this is often forgotten
purpose shall comply with a special registration obligation
and can be exaggerated by both Mexican lawyers and
before the Ministry of Economy. This registration and
clients overseas. Structures, agreements, and procedures
its periodical update in the National Registry of Foreign
are often misconstrued as can be witnessed with the
Investment is compulsory and for statistical purposes only.
contrasts between the trust structures in both jurisdictions.
Failure to comply with said responsibility will generate
The differences between these systems usually generate
fines for the company in breach but will not affect the
uncertainty and considerable misapprehensions on the
mining concession itself in any substantial manner.
part of those immersed in one system and doing business in another. These gaps in the understanding of how a
Concessions and assignments are granted by the Mexican
particular legal system operates shape the perception
State through the office of Mexico’s President who in turn
many foreign nationals have of most procedural matters
delegates this duty to the Ministry of Economy. First, the
in Mexico and can contribute to making processes appear
Mexican government assigns mineral allotments to the
cumbersome. Furthermore, the general perception that
Mexican Geological Service (SGM). All of those portions
the Mexican legal system is quite unique and corruption is
of land eligible for mining activity that have not been
rampant in all domains exacerbates the problem. Dissecting
distributed to SGM are subject to a mining concession and
the legal process and offering simple explanations to
could be granted to private parties who apply and fulfil
apparently convoluted Mexican legal issues will always
certain requirements. If the Ministry of Economy, through
work for the benefit of all, whether that be authorities,
SGM, decides that a specific assignment is of no further
clients, or counsel.
interest to the Mexican state for a particular reason, whether it be social, political, strategic, or economic, or
Unlike in almost all of the US and in many cases in Canada,
SGM fails to produce a justification for maintaining said
where concessions are owned by the Crown and held by
allotment, SGM will open that particular assignment to a
the federal and provincial governments, the ownership of
bidding process and the Ministry of Economy will allocate
Mexican natural resources is bestowed in the state and
said lot as a mining concession to the winning individual or
it is rooted in the Constitution. Article 27 sets forward,
entity, according to Article 10 of the Mexican Mining Law.
among other things, that all minerals belong to the state. Their use and/or exploitation may be carried out through
The Mexican Mining Bureau is the Ministry of Economy’s
a mining concession directly by nationals or through
unit whose mandate is to apply all mining regulations. It is
companies duly incorporated in Mexico. Article 10 of the
the Mexican Mining Bureau who will: (i) issue the concession
Mexican Mining Law states that, “The exploration and
titles; (ii) maintain the Public Mining Registry; and, (iii)
mining of minerals or substances referred to in article
handle requests for expropriation, temporary occupancy,
4, […] can only be carried out by individuals who have
or easements filed by the mining concession holders, in
Mexican nationality […] and corporations incorporated
accordance with Article 7 section VI of the Mexican Mining
according to Mexican Law, through mining concessions
Law. Article 46 dictates that mining concessions shall
granted by the Ministry.” Thus, only Mexicans by birth or
be recorded, kept and maintained in the Public Mining
naturalization and Mexican entities are allowed to obtain
Registry. Aside from managing mining activities through
mining concessions. However, the Mexican state grants
the Public Mining Registry, Article 8 states that the Mexican
the same right, in an indirect fashion to foreign nationals,
Mining Bureau is responsible for overseeing and promoting
provided that through their choice of legal vehicle they
the whole of the mining activity in Mexico.
A mining concession allows its holder to explore, exploit,
the three main duties mining concession holders have to
and enjoy all of the minerals that are located in the subsoil
comply with:
of a particular mining concession, according to Article 19. If the mining concession’s surface rights belong to or are
•
Pay the corresponding fees, royalties and taxes
in possession of someone else other than the holder of
•
Produce and file periodical reports
the mining concession, an authorization from the owner or
•
Perform certain works in the mining concession
possessor and an Environmental Impact Study approved by the corresponding ministry are required to begin
The breach of any of the responsibilities listed in the
exploration works. Although the Ministry of Economy is
Mexican Mining Law will give the government sufficient
generally in charge of most mining activities there are other
grounds for the mining concession to be cancelled, as
government ministries or agencies that enforce provisions
recorded in Articles 42 and 55 of the Mexican Mining Law.
or grant permits that relate to mining. The Ministry of Labor, SEMARNAT, CONAGUA, and the Agrarian Registry
Mining concessions are susceptible to being pledged
are examples of authorities involved in the whole of the
or mortgaged as collateral for the financing of mining
mining activity. Authorizations and authorities involved
projects. However, to be valid in benefit of creditors,
vary depending on the mining concession. Permits to store
Articles 46 and 49 hold the requirement that all liens
and use explosives, water concession, and/or permits for
shall be registered in the Public Mining Registry. Some
the discharge of water or a change of land use may or may
creditors request mining concessions pledged to be
not be required for specific mining concession.
registered at the Ministry of Economy’s Registry of Movable Securities.
Mining concessions are initially valid for 50 years provided the holder of the mining concession complies with all
It is our opinion that understanding the general makeup
stipulated mining regulations, according to Article 15. The
and the granting of Mexican mining concessions is not
same Article states that validity of a mining concession
complicated. There are just a few issues that one needs to
may be extended, upon request of the holder, for
know to have a fair awareness of them. The way the access
additional periods of time. Holders of mining concessions
and exploitation of minerals is regulated is quite similar
are ordered to comply with several requirements in
to that in force in other jurisdictions and even more agile
Article 27 of the Mexican Mining Law. The following are
than in many.
PROCESS OF ACQUIRING A MEXICAN MINING CONCESSION Constitution (Article 27) Ministry of Economy
General Coordination of Mines
Mexican
General Direction of
Geological
Mining Regulations
FIFOMI
General Direction of Mining Promotion
Service1
Bidding
Assignments
Concessions
Individuals and
Mining
Mining
companies2
obligations
obligations
Mining
Work reports and
Production
fees
investment
reports
Source: DBR Abogados 1 Decentralized organization attached sectorally to Ministry of Economy 2 Must be Mexican
23
| VIEW FROM THE TOP
CLUSTERS TO ENHANCE THE SUPPLY CHAIN FEDERICO BORREGO 24
Minister of Economy of Zacatecas
Q: How is Zacatecas positioning itself to attract increasing
Q: How can you differentiate Zacatecas from other
levels of mining investment?
mineral-rich states like Sonora?
A: It is extremely difficult to attract mining activities to a
A: We can help in terms of availability of human resources,
certain location because this decision is centered mainly
implementation of the proper infrastructure, and providing
on the location of the ore deposits. We are trying to
access to operative mines. Another big difference between
attract a great deal of mining suppliers and distributors
Zacatecas and Sonora is the fact that Sonora has copper
for the community, and we have the advantage of having
deposits, whereas the mining in Zacatecas is much richer
the mining cluster (CLUSMIN) led by Jaime LomelĂn. He
in terms of precious metals but less voluminous. The
began this initiative and continuously works to attract
government essentially helps ease the mining process and
support and investment to the state, and the government
ensure to the best of its ability that mining operations run
fully supports this effort and helps as much as possible.
smoothly. Zacatecas provides 19 percent of income from the
CLUSMIN provides an association for a great deal of the
new tax, while Sonora pays 26 percent due to the volumes
mining supply chain working in the area. Zacatecas aims
produced. We are about to establish a flotation plant in
to be the core of mining distribution across the Americas,
Zacatecas, so the smaller mining companies are able to use
and we are on the right track to achieve that. Our goal is
this for processing of ore before it is sold to the foundry.
to make Zacatecas a synonym for mining, not only in the
This saves money in transport costs because the load will be
Americas but all over the world.
smaller and more concentrated. This plant is scheduled to begin operations in two months and is specifically designed
Q: How do you interact with CLUSMIN, and what input do
for small mining companies as the large companies have
you have into the running of the cluster?
access to their own flotation plants. We help in any way
A: The initiative is privately held but the government of
we can when a request is made for support. We can help
Zacatecas helped the companies begin the cluster with
operators obtain explosives permits and environmental
some funding. We try to offer assistance when we can
permits, as well as geological maps of the deposits. The
but the cluster is essentially independent and makes its
quantities of metals mined in terms of production levels have
own decisions. The government is invited to the CLUSMIN
reduced significantly over the last few years.
meetings and we are able to contribute to the dialogue but we have no input into the decision making process.
Q: What must operators consider in terms of regulatory
The government also helps the cluster to invite other
issues such as water pollution and water use?
businesses to the state, and we hope that Metso will be the
A: Environmental policies are implemented on a federal
next company to enter. At the end of 2015, the government
level, and all companies operating across the country
visited Scandinavia to seek mining companies that would
must adhere to the same regulations. More than an
come to Zacatecas and invest. Many state representatives
environmental issue, regulations are becoming more
visit Zacatecas in an effort to gather knowledge about the
about community and social impact and mines must now
running of CLUSMIN in order to form the same bodies in
be aware of offering more to people living in these areas
their own regions. Although other states can emulate what
than they are taking from them. One mine requires almost
we do, I believe the primary cluster in the country will
60 federal permits, so companies must consider factors
remain CLUSMIN in Zacatecas for two reasons. Firstly, we
such as water, energy supply, employees, unions, taxes,
initiated the program, and secondly, most of the companies
social security, and roads. Depending on the size of the
operating here are convinced that Zacatecas is the nucleus
mine this process can take from 1-10 years to complete
of mining activity. Jaime LomelĂn has done a great job of
this process. In Zacatecas, however, we were able to open
setting up the cluster and of convincing distributors of the
two different mines in a record time of two years. We are
value of belonging to CLUSMIN.
constantly working to reduce this permitting process to
ensure continued investment in the economy of Zacatecas.
the second part of the funds collected in 2014, and we
In the event of a spill, we must determine whether or not it
still have the remainder of 2014 and all of 2015’s funds to
was an accident. In the case that it was, the operator can
distribute. We believe the money collected in 2015 will
obtain all the support it needs from the government. In
total less than that from 2014 simply because the mineral
terms of cases that involve negligence, we can only help
prices have precluded many operators from producing on
so much, and operators must pay the fines and adhere
the same scale.
to the sanctions imposed by the relevant authorities. Our main priority is ensuring that employees do not suffer.
Q: What are some of the tangible results within the
Conversely, if PROFEPA’s sanctions overreach we can
communities and municipalities that receive the mining
intervene and communicate with the agency on behalf of
fund?
the company.
A: We have certainly seen a great deal of developments,
25
especially in the communities of Fresnillo and Mazapil. Q: How efficient do you expect the collection and
Already, we can see that infrastructure is improving with
allocation of the funds from the mining fund to be?
painted walls, and facilities like football fields installed. One
A: The federal government, which distributes them, has
rule of the royalty stipulates the money must be destined
done well so far. The government also has extremely
to the city’s or municipality’s infrastructure instead of
stringent requirements to qualify for funding, so I believe
spending on technology for instance. This is beneficial
the mechanism will work well. Although the system is
because the funds can be directed toward the entire
new, the mining companies are keeping a close eye on the
municipality not just in the immediate surroundings of the
distribution of the funds. Moreover, it is being overseen
mine. A great deal of the time, the mining companies want
by the municipality as well as the state and federal
the money to be used exclusively by the area affected
government, which creates a complementary system of
by the mine but the mining fund ensures a more even
responsibility and accountability. We recently distributed
distribution.
MEXICO'S MAIN MINING CLUSTERS Chihuahua Mining Cluster Affiliates: 73 Principal extracted metals: Gold, silver, zinc, copper, and lead. Principal mines in operation: Metallic, non-metallic, and material banks.
Coahuila Mining and Oil Cluster Affiliates: more than 46 Principal extracted metals: Gold, silver, antimony, bismuth, cadmium, copper, tin, iron, lead, and zinc. Guerrero Mining Cluster The Guerrero Mining Cluster is in the process of
Principal mines in operation: Charcoal and sodium sulphate.
consolidation in order to position the mining industry in the state as one of the most important sectors, and in generating a communication strategy to spark the sense of pride among the people of the state.
Zacatecas Mining Cluster Affiliates: 103 (Mining companies, suppliers, government agencies and educational institutions.) Principal extracted metals:
Sonora Mining Cluster
Silver, lead, zinc, gold, copper, and other
Affiliates: 27
products.
Principal extracted metals:
Principal mines in operation:
Gold, silver, aluminum, copper, iron, molybdenum, and
Metallic minerals and non-metallic material
selenium.
banks.
Principal mines in operation:
Principal mines in operation:
Metallic, non-metallic, and material banks
Metallic, non-metallic, and material banks.
Source: Data provided by the clusters, and data from SGM
| ANALYSIS
FDI DIPS BUT IS EXPECTED TO RECOVER There is no hiding from the fact that 2015 was a challenging
the changes included in which involved the introduction
year for the mining industry globally. As precious metal
of a tax on mining exploration activities in the country.
prices continued to stagnate, the ropes around exploration
The community is still struggling to adjust to the new
budgets tightened as top executives turned their focus
operational environment.
to restructuring processes and cutting costs. In the first
PROJECTS OF COMPANIES WITH FOREIGN PROJECTS OF COMPANIES WITH FOREIGN CAPITAL CAPITALBY BYSTAGE STAGEOF OFPROJECT PROJECT
half of 2016, volatility returned to the international stock markets as China’s disappointing economic growth rate and Britain’s decision to leave the European Union sparked
67.96% exploration 67.96% exploration 16.61% postponement 16.61% postponement 11.00% production 11.00% production 4.42% development 4.42% development
investor uncertainty. The market’s loss was the mining More than two thirds of the projects operated by companies with foreign capital in Mexico are in the exploration stage
sector’s gain as gold and silver prices spiked providing mineral-producing countries with some much-needed respite. Nevertheless, prices remained significantly lower than 2011’s record levels. The impact of this trend was felt strongly in Mexico. Of the US$28 billion Mexico received in Foreign Direct Investment (FDI) during 2015, a mere US$370 million was allocated to the national mining sector, an alarming drop from 2014’s total of US$2.1 billion. This is in stark contrast to the US$6 billion received by the automotive sector during the same period.
Source: Direction Development, GeneralDirectorate Coordination Source:General Dirección GeneralofdeMining Desarrollo Minero (General of of Economy. ofMines, MiningMinistry Development), Coordinación General de Minería (General Coordination of Mines), Secretaría de Economía (Ministry of Economy).
The exploration segment, one of Mexico’s most alluring
More than two thirds (67.9 percent) of projects funded
features for foreign investors, also suffered in 2015. The
at least partially by foreign capital in 2015 were in the
country attracted 38.5 percent less in mineral exploration
exploration phase, proving that there are still substantial
in 2015 than in 2014. From having occupied the coveted 4th
gains and discoveries to be made. The traditional stronghold
position in terms of foreign exploration investment in 2014
in the north of the country continues to attract the majority
behind Australia, the US, and Canada, Mexico dropped to
of foreign mining companies, whose work is facilitated by
7 place in 2015 after being overtaken by China as well as
strong infrastructure and local support. Sonora, Chihuahua,
regional rivals Chile and Peru. Aside from the struggling
Durango, and Sinaloa lead the way in terms of foreign
markets, this loss of competitiveness and investor appetite
capital-funded projects. Canadian operator Agnico Eagle
toward Mexico can be explained by the 2014 fiscal reforms,
manages two mines in the north of the country that ranked
th
PROJECTS OF COMPANIES WITH FOREIGN CAPITAL BY STATE PROJECTS OF COMPANIES WITH FOREIGN CAPITAL BY STATE 250 221
There are 25 states in Mexico with a presence
200
of companies with foreign capital in the mining industry. The largest number of projects are
150
concentrated in the north of the country.
125 100 99
13
12
11
11
10
7
7
6
6
4
3
2
1
Hidalgo
Veracruz
Morelos
Tamaulipas
Nuevo Leon
20
Queretaro
20
Baja California Sur
22
Chiapas
25
Puebla
34
State of Mexico
37
Colima
61
50
Baja California
70
Coahuila
100
Guanajuato
San Luis Potosi
Nayarit
Michoacan
Oaxaca
Guerrero
Jalisco
Zacatecas
Sinaloa
Durango
Chihuahua
0 Sonora
26
Source:General Dirección Generalofde Desarrollo Minero (General of of Mining Development), Coordinación General de Minería (General Source: Direction Mining Development, GeneralDirectorate Coordination Mines, Ministry of Economy Coordination of Mines), Secretaría de Economía (Ministry of Economy).
BEST POSITIONED COUNTRIES ON THE INVESTMENT ATTRACTION INDEX Global
Latin America
Country/Region
2014
2015
Var.
Country/Region
2014
2015
Var.
Eastern Australia
4
1
+3
Chile
9
11
-2
Saskatchewan
2
2
0
Peru
26
36
-10
Nevada
1
3
-2
Mexico
24
37
-13
Ireland
14
4
+10
Colombia
61
55
+6
Finland
3
5
-2
Panama
62
74
-12
Source: Fraser Institute
27
in the national top 10 in terms of gold production in 2015,
Moreover, the strength of the dollar against the fluctuating
the Pinos Altos mine in Chihuahua with 193,000 ounces, and
peso is often an encouragement to foreign operators in
th
La India in Sonora with 104,400 ounces, placing 4 and 10
the country. Mitchell Krebs of Coeur Mining shared that at
respectively. Meanwhile, Coeur Mining’s Palmarejo project
the company’s Palmarejo property, the budget was run at
and Pan American Silver’s Dolores mine, both in Chihuahua,
an exchange rate of MX$12.5 to the dollar last year, and the
ranked in the top 10 for silver production last year.
savings this generated equated to around US$10 million.
th
“Unlike a lot of companies that have several operations in Canadian operator Endeavour Silver contributes 3.4 million
Mexico we have only one, and even though it is sizeable
ounces of silver, 7,390 ounces of gold, and 4 million ounces
the peso devaluation has constituted a considerable
of silver equivalent to Durango’s production, with its
tailwind for us,” he comments.
Guanceví mine acquired in 2004. Similarly, Great Panther Silver’s Topia silver-lead-zinc property mined 65,000 tons
A total of 16.6 percent of projects funded by foreign
of ore in 2015. Following the northern states in terms of
capital remain postponed, a trend that must be reversed if
foreign presence is Zacatecas, with Goldcorp’s Peñasquito
the sector is to improve on the 3 percent it contributed to
still comfortably the largest gold mine in Mexico after
Mexico’s GDP in 2015. Should stability return to the global
producing 860,000 ounces in 2015. Endeavour Silver is set
markets and the Chinese economy continues to falter,
to begin production at its El Compas property in 2017 after
the mining sector’s recovery may be delayed. However
completing the acquisition in 2Q16, while MAG Silver and
with Mexico’s stable economic growth, low inflation,
Fresnillo have joined forces and plan to begin production
proximity to the US market, and well-developed mining
following the discovery of high-grade veins at Juanicipio.
infrastructure there is plenty of cause for hope that FDI into the sector could surpass the US$5.2 billion received
Oaxaca currently has 34 projects funded by foreign capital, ranking 8
th
on the national list. One of the most
in 2013. The world’s thirst for minerals is not going to disappear,
especially
among
developing
economies,
notable is Fortuna Silver’s San José property, which began
and few countries are better suited to providing these
production in 2016 following a US$62 million investment.
resources than Mexico.
EXCHANGE EXCHANGERATE RATE(MX$/US$) (MX$/US$) 18.1375
18.0 15.0
14.7414 13.3760
17.2487
15.3815
12.8609
12.0 9.0 6.0 3.0
Jul 2016
Jun 2016
Apr 2016
May 2016
Mar 2016
Jan 2016
Feb 2016
Dec 2015
Nov 2015
Oct 2015
Sep 2015
Aug 2015
Jul 2015
Jun 2015
May 2015
Mar 2015
Apr 2015
Jan 2015
Feb 2015
Dec 2014
Nov 2014
Oct 2014
Sep 2014
Aug 2014
Jul 2014
Jun 2014
May 2014
Mar 2014
Source: BANXICO Source: BANXICO
Apr 2014
Jan 2014
Feb 2014
0
| INSIGHT
OVERCOMING DIPS IN THE SECTOR mining, was promoted it would be an extremely positive development for the mining industry,” he clarifies. “We must work closer with the government and make it aware 28
OCTAVIO ALVÍDREZ
of the changes we can implement together to attract
CEO of Fresnillo
increased investment.” The Energy Reform has opened new doors for mining
The fiscal reform, and especially the mining royalties, was
companies that are now able to generate their own
announced at an extremely difficult time for the industry,
electricity supply, and Fresnillo has taken full advantage
says Octavio Alvídrez, CEO of Mexican silver giant,
of this opportunity. “In terms of energy, we are not only
Fresnillo. “We were already working with the communities
examining the sourcing of energy at competitive rates but
on infrastructure that served the surrounding areas, so
also the power source itself, and we are looking into clean
this is part of the reason why the country has experienced
energy sources,” he shares. “By mid-2016, I believe we
a fall in the Fraser Institute investment attractiveness
will be able to commit ourselves to a certain percentage
rankings to number 37,” he comments. He believes that
of clean energy generation.” Additionally, an important
compared to some other countries, Mexico is currently at
component for Fresnillo is diesel that is consumed in open
a disadvantage. “If we were to change certain elements
pit mines. At the moment, Alvídrez shares the company is
of the fiscal reform I am certain it would be beneficial and
testing ways to replace this source with natural gas. The
we would see investment in mining growing,” he claims.
pilot program will involve running two Fresnillo trucks in
From 2012 until last year, Mexico saw a drop in mining
La Herradura with natural gas and will start in the next
exploration, and from 2014 to 2015 exploration levels fell
few months. Depending on the results, Alvídrez plans to
by more than 30 percent from 2012 to 2015. “If Mexico
subsequently change the fuel used by Fresnillo’s entire
implemented a system in which exploration, the future of
fleet to natural gas.
Nuestro portafolio de productos de alta calidad está en constante desarrollo, lo que significa nuevas oportunidades para aumentar la productividad y mantener la competitividad. Dondequiera que esté su negocio y dondequiera que lo lleve, nuestra experiencia estará a su lado. Al elegir las soluciones de Bosch Rexroth, usted selecciona: - Mayor seguridad y tiempo de vida útil - Control superior y alta eficiencia energética con pleno dominio sobre la velocidad y el torque - Instalación fácil y simple a través de un diseño compacto y ligero - Alta flexibilidad, a través de la modularidad en el diseño y amplio rango de trabajo Bosch Rexroth S.A. de C.V. Neptuno 72, Col. Nueva Industrial Vallejo C.P. 07700, México D.F. Tel. +52 (55) 5747 0800
| VIEW FROM THE TOP
INDUSTRY TRENDS FOR OPERATOR MITCHELL KREBS President & CEO of Coeur Mining
29
Q: What part does Mexico play in your portfolio and why
there are ups and downs all along the cost structure, and
is it an attractive destination for Coeur Mining?
although the peso devaluation has certainly helped us, it
A: We have two projects in Mexico, one that is currently
has been offset by some other factors.
operating and one that is not. Palmarejo, the project that is currently operational, is our largest mine on a global scale,
Q: How is Coeur Mining striking a balance between
and this makes Mexico a strategically important location
optimizing costs and retaining high quality employees?
for us. The country is attractive due to a number of factors,
A: Two factors that we have prioritized are increased
including favorable logistics in terms of its proximity to the
focus on grade and on scale, as both will drag the unit
US. The amount of mineral potential that exists in Mexico
cost down and offset some of the price erosion we have
makes it a truly attractive country, and when considering
seen. Approximately 95 percent of the money we spend
the long history of mining it had to develop a well-
on exploration is channeled to the areas around our
established set of laws with reasonable permitting, and
existing mines where we know we already have reserves,
quality human talent. All of these factors as a combination
Meaning the odds of finding more
make the country an extremely attractive jurisdiction but
Moreover, the payback is a lot faster because the staff,
it does have its challenges.
infrastructure, and processes are already in place so we
ore are greater.
extremely focused on programs that find higher grade. We Q: To what extent do you see opportunities for Coeur
have been successful in this endeavor both in our mine
Mining in self-generation?
in Alaska and our Palmarejo mine. At our Nevada mine,
A: We are on the grid at Palmarejo as a customer of CFE.
we have almost doubled mining, crushing, and placement
We have full generator backups that we use intermittently.
rates. With larger trucks, greater crushing capacity, and
In terms of power generation, we have a project called La
more efficient planning the costs per ounce have dropped
Preciosa in Durango that we bought in 2013 at a much
from US$25 to US$11. This can all be attributed to scaling
higher silver price environment. This is on hold at the
up mining rates and volumes, driving down unit costs, and
moment since it is not financially viable to run this project
becoming a more efficiently run company.
at a silver price of US$16. In terms of the effect of our cutbacks on human capital, Q: How have the drop in commodity prices, the
these savings are taken from our corporate office. Our
depreciation of the peso, and the Mexican mining royalty
general and administrative (G&A) costs have gone down
affected Coeur Mining’s operations?
from US$55 million in 2013 to US$34 million in 2015, a
A: We run five operations, and Mexico is the only one in
saving of 45 percent, and that is generated by a reduction
which we see any benefit, especially given the weakening
in head count and a less profound reliance on third parties.
of the peso. Last year, we ran our budget at an exchange
It is a delicate balance between identifying which skills are
rate of MX$12.5 to the dollar, and the savings this
less necessary in a declining price environment that may
generated equated to around US$10 million. Unlike a
have been needed in a different scenario. However, if too
lot of companies that have several operations in Mexico
many cuts are made the company becomes exposed to
we have only one. Even though it is sizeable the peso
certain risks that would have been mitigated with these
devaluation constituted a considerable tailwind for us. We
capabilities. I always warn our investors not to wish for
have also seen our costs per kWh of power reduced due
continuous reductions in G&A because it could reach
to increased competition from US$0.115 down to US$0.08,
the point where we begin cutting down to the bone and
and that had significant impact. Additionally, we burn a
exposing ourselves to the negative consequences. We are
tremendous amount of diesel, and the cost per gallon is
always mindful of ensuring we have just what we need and
now down from over US$3 to less than US$2. In mining,
no more.
2
MINING POLICY & REGULATION
Since the introduction of the mining royalty tax in 2014, the regulatory landscape of the Mexican mining industry has changed significantly. Now, a tax of 7.5 percent applies to all mining production, with a 0.5 percent additional tax on mining activities producing gold, silver and platinum. Any company that fails to carry out exploration or exploitation activities on its concession for a period of two years or more will be required to pay a duty. Although some players have become reluctant to invest as a result of the tax, the environment remains attractive to mining investment. Total investment in the sector increased to US$5.2 billion in 2015 from US$4.9 billion in 2014, according to CAMIMEX. Nevertheless, players now need to learn to negotiate the new environment in light of the considerable changes, meaning that advice from policy makers and legal representation is more important than ever.
This chapter will focus on disseminating the new legislation, with opinions from representatives of top legal and consultancy companies in Mexico. These actors will provide their opinions on the changes, as well as advice and recommendations for getting the most from mining activities and adjusting to the new reality. Other pertinent challenges covered include recruitment, human capital, environmental requirements, and considerations and negotiations with ejido landowners.
31
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32
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www.cominsa.com.mx Tel: 52 (878)783-8215 informes@cominsa.com.mx
33
| CHAPTER 2: MINING POLICY & REGULATION 34
VIEW FROM THE TOP: Héctor García, PwC
36
VIEW FROM THE TOP: Alberto López, Sonora Ministry of Economy
37
VIEW FROM THE TOP: Laura Díaz, Díaz, Bouchot & Raya Abogados
38
VIEW FROM THE TOP: Gabino Fraga, GAP
40
VIEW FROM THE TOP: Jorge Sánchez-Dávila, Haynes & Boone
41
VIEW FROM THE TOP: Héctor Herrera, Haynes & Boone
42
VIEW FROM THE TOP: Ricardo Pons, Hogan Lovells
Juan Torres, Hogan Lovells
42
INSIGHT: Rodrigo Sánchez-Mejorada, Sánchez-Mejorada, Velasco y Ribé
45
VIEW FROM THE TOP: Enrique Rodríguez del Bosque, RB Abogados
46
INSIGHT: Alberto Vázquez, VSG Legal Services
47
VIEW FROM THE TOP: Alfonso Rodríguez, LegalMex
48
EXPERT OPINION: Karina Rodríguez, PS&RM Abogados
48
INSIGHT: Rafael Cereceres, Cereceres Estudio Legal
| VIEW FROM THE TOP
TAX RESTRUCTURING STRATEGIES FOR IMPROVED PROFIT MARGINS HÉCTOR GARCÍA Mining Tax Partner at PwC 34
Q: How does PwC help boost its clients productivity and
human resources procedures using our extensive market
efficiency during downturns such as the one currently
knowledge and contacts to recruit the professionals best
being experienced by the industry?
suited for the position.
A: Companies throughout the mining sector are all collectively seeking to achieve meaningful cost reductions
Q: What are the main challenges Mexican mining
and so our work is focused on shedding light on how to
companies face regarding tax regulations, and how does
boost our clients’ businesses. This includes cost reduction
PwC help its clients overcome them?
assistance
through
A: The most important recent development was tax
operational reviews of Enterprise Asset Management,
while
maintaining
productivity
reform, which introduced taxation on all mining activities
readiness and risk assessment reviews for capital projects,
in the country. We help our clients deal with this added
warehousing and logistics optimization, strategic sourcing,
pressure by advising them on restructuring options, as
and spending analysis. Moreover, we carry out supply
well as the use of tax credits in certain situations. Another
and contract management reviews for Procurement and
problem is related to favorable VAT balances. When
offer Supply Chain strategy governance services. If a
mining companies make significant investments into the
client needs to improve its cash flow one option is to take
sector they pay Mexican VAT, which creates VAT favorable
out loans from banks or other sources like government
balances that should be refunded within 40 days. In the
agencies. A Canadian company recently took out a loan
last two or three years the tax authorities have been slow
from Bancomext with favorable interest rates, which has
to process these refunds, and I have witnessed companies
proven to be a shrewd business decision.
waiting for more than one year for their VAT refund to be authorized and processed. This is far too long a wait,
Q: How can your tax-related services provide benefits for
especially given the current market situation where
clients?
available cash is so hard to find so the government must
A: Many production companies have subsidiary exploration
prioritize reducing waiting time for corporate tax refunds
businesses, and often it can be beneficial to combine both
in order to support the industry’s recovery.
businesses due to certain tax clauses available under Mexican law. We can advise and aid our clients through
Q: What role does PwC Mining Center of Excellence in
this process. In early 2016, a tax incentive was authorized,
Toronto play in the organization’s participation in the
which supports mining companies in the purchase of
mining industry?
diesel. Businesses will now be able to credit 100 percent
A: This is an extremely important facility for PwC because
of tax paid during the acquisition of diesel against
it ensures that all of our clients have access to the skills,
income tax payable and withheld to third parties, which
and abilities of our mining specialists around the world.
can reduce the diesel purchasing by up to 33 percent.
The Mining Center of Excellence allows our Mexican mining
Given the quantity of diesel used throughout the mining
clients to work alongside Canadian specialists, which is an
value chain this is a significant development, and we
effective way of combining industry knowledge between
encourage mining companies to review the process they
them, and create a synergy for our clients. Moreover,
use for purchasing diesel in order to take advantage of this
it has helped build our client base because many
piece of regulation. Another area in which there is often
Canadian companies have Mexican subsidiaries and they
significant room for improvement is mine site logistics,
appreciate the fact that we can act as a bridge between
and our specialists make the effort to visit mines across
the two markets. In fact, PwC is currently in the process
the country to assess whether alterations to supply chain
of integrating its Mexican operations with its business in
management can be made to further streamline mining
the US, and from July 1, 2016 we will be operating as a
operations. Moreover, we often help our clients with their
combined, international firm.
35
| VIEW FROM THE TOP
MITIGATING THE IMPACT OF MINE CLOSURES ALBERTO LÓPEZ Director of Mining at the Ministry of Economy of Sonora 36
Q: How is Sonora positioned to attract investment,
closed their doors to the industry are reconsidering their
and how are you ensuring the business environment
options. I have no doubt collection will be efficient but the
accessible?
issue starts in resource distribution, and according to the
A: According to CAMIMEX, in 2015 Mexico was expected
law these must be used for regional developments. Some
to attract US$5.4 billion of investment and Sonora could
states believe they should receive a percentage even if
be a depository for some of these resources. Sonora in
they no longer have active mining, and some neighboring
many ways has been blessed by nature due to historical
municipalities also feel the same way. Right now, we have
geologic events that occurred in the region. The state
a municipality that has received considerable investment
has been characterized with world class deposits, which
for a complex mining metallurgical plant but the 2,000
is its most attractive feature. A great percentage of the
workers live elsewhere, and will therefore not see the
discovered deposits have already been exploited and
benefits. These situations must be analyzed in depth to
now we see a trend of low ore grade pits. Mexico, along
ensure the fund is distributed proportionally.
with other countries, has reached a production stage where only low grades are being exploited and this has
Q: What were the most and the least successful elements
a significant impact on costs. Many of the current mines
in the government and private sector interaction while
will close due to depletion of resources, and as a result
addressing Grupo México’s toxic spill, and what were the
we must prepare ourselves for the economic shockwave.
major lessons learnt?
Most mines have reached their average lifecycle and
A: The remediation and appropriate reparation investments
at the moment the main concern is to substitute these
have been carried out by Grupo México but this event has
operations with new ones in order to maintain economic
tarnished the image of the sector. As a result, we have to
and production stability in Sonora. At the end of 2015, five
be very careful and increase safety measures to ensure the
mines were closed while others might close due to a drop
strictest safety levels are followed by all mining players.
in prices. We are promoting the industry to the best of our
Alongside PROFEPA and SEMARNAT, we determine points
ability in order for Sonora to continue being a safe haven
of risk and we address them. When the accident occurred,
for mining operations in Mexico.
PROFEPA visited all of the mines and we helped it in this endeavor. Sometimes PROFEPA lacks the resources to
"In 2015, Mexico was expected to attract US$5.4 billion of investment” Alberto López,
Director General of Mining at the Secretariat of Economy of the Government of Sonora
oversee all the mines in Mexico particularly those housing informal mining activities. Q: What are the key priorities fostering the growth of the mining industry in 2016, and ensure the position of Sonora as a top mining investment destination? A: The biggest priority is for Sonora not to lose its place in the industry, and to do so we must generate new mines and promote new projects. Another important priority is to promote the inclusion of SMEs into the mining supply chain
Q: What are the implications of the tax regulation
since in Sonora we see a huge contrast between the major
evolution in Sonora’s mining sector, and what are
mining activities and the small miners. In fact, the latter are
your
and
almost nonexistent in Sonora so one of our initiatives for
adequate resource distribution from the mining fund?
2016 is to generate a series of regional plants in collaboration
A: Local authorities like municipalities have shown a keen
with the private sector. One is located in the San Javier
interest in the mining fund, and even states that once
municipality and is scheduled to start operations.
expectations
in
collection
efficiency
| VIEW FROM THE TOP
COMBATTING THE MINING ROYALTY LAURA DÍAZ Partner at Díaz, Bouchot & Raya (DBR) Abogados 37
Q: What are the most visible implications of the evolution
therefore unconstitutional. We have been fighting this case
of tax regulation in the mining sector and how would you
since October 2015, and since the process normally takes
describe the efficiency of the collection process?
between six and nine months we hope to have the matter
A: Although the government has a strong motivation for
resolved by the end of 2016. However, the new Ministry of
collecting the mining royalties we in the industry are feeling
Agrarian Development is extremely involved in the process
the negative effects of the decision. We have advised our
and engaging in dialogues with the communities because
clients the royalties are unconstitutional, and we have
everyone is anxious about the outcome of the case. The
already won one case to demonstrate this with another
royalty also carries a double load for mining companies as
case currently subject to scrutiny by the Supreme Court
they must oversee tfund allocation, and ensure they are spent
of Justice of the Nation (SCJN). The government has been
in a way that benefits the community. Ultimately, the tax is
extremely efficient in its tax collection, and committees
hindering Mexico’s position as a global mining competitor.
have already been established in many states in order to distribute funds generated to the local communities.
Q: What aftermath do you expect from the limited funds?
This is a premature step as we are under the impression
A: The impact of these funds to the community remains to
the SCJN will review the current case and will ultimately
be seen as I believe this will either be extremely positive
cancel the royalty structure as a result of our arguments.
or extremely negative. On one hand, the money the
We represented two companies while filing their amparos,
communities are receiving is a result of taxes the mining
and Compania Mineria Pangea’s amparo is now at the
companies pay, and the increase in benefits can be directly
SCJN. Another six amparos are also currently under review
related to this. However, the negative aspect is the fact the
by the SCJN. As a result of the case being re-examined,
money received directly correlates with production, which
I am not sure whether the government is continuing to
is continuously decreasing. One of my clients in particular
distribute the money within the communities. I believe this
believes that ending the year successfully will be limiting
process is extremely risky as they are already expecting
losses to US$30 million, which means there will be no profits
funds that if the tax is rescinded will not be available.
to be taxed. This will directly affect communities that are being promised funds for a limited time. Even if the royalty is
Q: How would you describe your experience fighting
not rescinded the companies are not making a profit, which
cases with the SCJN?
means the communities will not receive any money.
A: It was reassuring that we had previously won one case and had reached a resolution. There are two types of
Q: What incentives are being offered by the government
royalties, Derecho Especial and Derecho Extraordinario.
for exploration activities, and do you expect tax
Derecho Especial corresponds with the 7.5 percent rate of
deductions to return?
tax imposed, whereas Derecho Extraordinario refers to the
A: The government must review all fiscal incentives but
0.5 percent surplus on all gold, silver, and platinum. The
states also have to evaluate and harmonize benefits and
SCJN allowed us to file a new amparo against Derecho
taxes that are imposed on an individual level. Fiscal duties
Especial, and this will be studied for a second time. In the
and benefits are largely incoherent, and differ from one
case of Derecho Extraordinario, we are arguing that this
state to the next. I believe that a more aligned and efficient
levy does not fall under fiscal responsibilities but rather
structure across jurisdictions would create a plethora of
rights of way. Moreover, the extra 0.5 percent applies only
benefits. Currently, a mining concession application can
to gold, silver, and platinum production when Mexico is one
take three years since companies must first obtain an
of the top 10 global producers of copper. The constitution
explosives permit and an environmental permit, among
contains a clause determining equality meaning the
other regulatory requirements. Therefore, kicking off
extra tax on these three products is discriminatory and
exploration projects is extremely complicated.
| VIEW FROM THE TOP
UNTANGLING LAND CONCESSIONS GABINO FRAGA Managing Partner of GAP 38
Q: What are the implications of the pro homine principle
party will receive in return, what surface type is involved,
in land concessions for the mining industry?
under which legal concept it falls, and whether or not they
A: Prior to 2011, the Mexican Constitution placed the
will become partners in the future or if the land will be sold.
state above the citizen but this was changed with the
These terms are essential in any exploration agreement
implementation of the pro homine principle, in which
especially if a resource like gold is discovered. If the price
judicial interpretation always seeks the greatest benefit for
is not set from the start the landowner could demand a
human beings. This falls under human rights since it is a
larger sum of money in exchange, which would make the
prerogative of all human beings to develop their lives to the
project unviable. If a company does not establish it is an
fullest. Judges now have to be extremely attentive not to
exploration agreement then it is liable for a human rights
violate the rights of any individual and ensure each issue is
lawsuit. Once potential is uncovered it is important for the
resolved accordingly. If the judge does not follow through
landowner to understand the project is not generating
then the court is subject to sanctions, and the case can
money at this stage and that once production commences
be taken to national and international human rights court.
then there is a possibility of increasing the pay per
While it would solve the conflict the Mexican government
hectare. When developing a mining project a company
would incur penalties for failing to follow protocol.
has to perform a public consultation where it evaluates its social and environmental impacts. In today’s panorama,
Q: How should mining companies prepare for negotiations
individuals whose rights are violated or who fear for their
with landowners and surrounding communities?
wellbeing can now sue mining companies.
A: Whenever a mining company wishes to negotiate with property owners it must pay close attention to the type of
Q: What variables must be included in the initial agreements
proposal it puts on the table. It must be clear what each
to mitigate risk and obtain the required permits?
“Para dar certidumbre jurídica para el acceso a la tierra y licencia social de operación en el desarrollo de proyectos Mineros y de Infraestructura” t.: 5281 4400 / 5281 4401 www.gapgrupo.com
A: A clear initial agreement must take into account all aspects of a project including prices, times, and what would happen in the event of finding a resource. Environmental issues are also closely linked to land use and for SEMARNAT to grant concessions companies must demonstrate they have the legal use or ownership of the land. Mining companies tend to get into disputes with owners over land usage. Therefore, it is essential to establish an agreement in which owners hand over the legal possession of land in exchange for remuneration. Precision is essential as matters may be overlooked in
The pro homine principle will always benefit human rights over the state. Therefore,
negotiating with communities is of primal importance when seeking
land concessions
an agreement’s statute, which ultimately could harm the company in the future. Exact amounts and frequency of
blocking the entryway. GAP diagnosed the predicament
payments have to be defined. In the case of a legal dispute
from a social, technical, and a legal perspective to see
companies must have a backup of all documents.
if there had been any legal violations, and to identify the community leaders. We realized the community was
Q: How has GAP been involved in cases where the
a matriarchy by nature. Therefore, we began speaking
relationship between the community and the mining
with the women and learned about their needs and why
company is distorted, and what have been the most
there was so much resistance. After dialoguing with the
surprising case studies?
community and identifying the points of contention we
A: About 95 percent of the cases we have handled had
were then able to discuss the benefits the mine would
these types of problems. Many companies fall under
bring and begin negotiations with the leaders. Once
the misconception that negotiating with communities
the mining company identified the surface it needed we
and landowners is an easy task when in reality it is a
discussed the use of the land for mining, the entryways,
complicated process due to different languages, customs,
and negotiated the relocation of every family. The
and protocols that secure their legal rights. An ejido is
relocation process had to be carefully documented to
similar to a company. It is divided into an administration
prove that families were resettled into new and safer
council comprised of six leaders, and an assembly of
homes that fit their needs. During the relocation process
ejidatarios who are elected to make decisions.
we were also able to privatize the land in favor of the families and provide them with deeds, which will allow
Torex Gold had a project located in Guerrero that in eight
them to inherit and mortgage the land. It took four years
years could not advance into exploration because the
to relocate the families and finalize the documentation
community had stolen the machines, and people were
processes.
39
| VIEW FROM THE TOP
DOORS OPEN FOR INTERNATIONAL COLLABORATION JORGE SÁNCHEZ-DÁVILA Partner at Haynes and Boone 40
Q: Would you agree there's a lack of financing in light of
A: In the current market conditions, private equity funds are
global conditions?
extremely attractive and they have become an important
A: Whether or not a company gains access to financing
source of financing. In addition, the stock exchange has
depends on its operative and financial structure, and there
been a solid source of financing, and even the Toronto Stock
are companies that have conservative strategies, which
Exchange (TSX) has played a pivotal role despite the far-
enables them to draw attractive financing from foreign and
reaching crisis it has experienced over the past four years.
domestic banks alike. These have been able to withstand
The third most important source of financing are Canadian
the commodity price crisis relatively well. However, we
banks as they remain highly active in financing mining deals
also see companies that have been left exposed. These
worldwide given they have the expertise and sensitivity in
medium and even large players are in danger because
managing and dealing with mining crises.
of their corporate finances and the commodities they produce. Basically, companies in iron ore and coal have
Q: How do you foresee the mining industry will function
been left very much exposed as well as other companies
after the sector stabilizes?
producing base metals.
A: In Mexico, many greenfield projects are being sold and it is mainly senior, multinational, or large Mexican
Q: What are Rio Tinto and Minera Frisco doing well in
conglomerates that acquire them. The main driver
terms of financing?
behind mergers of equals is scaled economies but other
A: Rio Tinto and Minera Frisco were listed among the
alternatives exist such as joint ventures or joint exploration
companies with the strongest financial structures and
agreements. From an economic and financial standpoint
reserves during the crisis, and Industrias Peñoles can also
it can be difficult for foreign companies to seamlessly
be included as one of the most financially stable companies
integrate with local players because both parties have
worldwide. When commodity prices began to decline,
different aims and targets. Mexican companies want to
these companies stopped investing heavily in exploitation
survive the crisis, while foreign players want to make a profit
and instead opted to develop exploration activities in
as quickly as possible. A balance must be found between
order to overcome the approaching crisis. Rather than
the two parties to see where they can complement each
divest their assets and cash in exploitation they looked
other, and a viable business model would see a foreign
to exploration as a safe bet. Companies understood that
company that can contribute technology for exploration
royalty tax in conjunction with commodity prices could
allied with a Mexican company that can provide the
impact their corporate finances so they were conservative
workforce, mining concessions, and assets.
in new investments and cash allocation. On the other hand, giants like Glencore made aggressive bets on sectors like
Q: What are the main objectives Haynes and Boone wants
iron, copper, and zinc in global projects and as a result
to accomplish during 2016?
were left very much exposed to the fluctuating commodity
A: Mexico continues to be an important and attractive
prices. This is one of the reasons why a significant percent
jurisdiction and changes are expected regarding the mining
of the company’s stock value was lost. In times of crisis,
royalty. Amparos have been filed by companies and we see
there are companies that are aggressive and others
the government is reconsidering the structure of the tax
that uphold a more conservative business model when
and contemplating an increased number of tax deductions.
managing their cash and financial assets.
It is important to stress that exploration already has a broader scope of deductions and these new concepts will
Q: What are the most attractive financing alternatives for
be aimed at the exploitation stage. The investment climate
mining projects, and how do you help your clients gain
remains attractive, especially since new projects have been
access to them?
discovered and these will either be acquired or developed.
| VIEW FROM THE TOP
PREPARATION THE KEY TO CRISIS MANAGEMENT HÉCTOR HERRERA Partner at Haynes & Boone 41
Q: What key factors must be considered by the mining
enables us to prepare our clients so they can face those
industry in terms of environmental regulation?
situations in the most informed manner possible. Science
A: There has been a pattern wherein every six years
and technology has pushed the industry forward, and it
environmental
aggressive
helps companies prevent and foresee possible scenarios and
toward all industries related to the use and exploitation of
legislation
becomes
more
extreme situations. The sector has radically changed and
natural resources in Mexico, and mining is not an exception.
the law has been heavily reinforced by authorities. In 2015,
This also implies more expenses given the unfriendly
PROFEPA inspected 1,130 mining units in Mexico, and of
international business environment where metal prices
those, 71 were closed due to lack of compliance. This shows
are down and the drop in oil is impacting all industries.
that a minimal proportion of the sector was failing to fulfill
Despite this negative perspective the mining sector is still
the general environmental requirements. Most of those units
investing and complying, and legal advisors do their best
were small and medium mining companies, and most of the
to help clients comply with the legislation and with article
closures occurred due to hazardous waste management and
four. The sector learned its lesson, and now it is impossible
operations-related spills.
for mining companies to do business without considering the communities that might be affected. Public opinion
Q: How do you foresee the enforcement of the law,
paints the mining industry with unfavorable colors and
and what should be done to improve the fractured
refers constantly to the practices of the past century but
environmental regulations?
the current sector is totally different and opinions must
A:
also evolve to reflect reality.
regulators, do not have enough staff to inspect the whole
PROFEPA
and
CONAGUA,
the
most
relevant
industry in Mexico. In spite of that, PROFEPA has made Q: To what extent do you agree with the contention that
an effort to practically supervise most of the mining
the Federal Environmental Responsibility Act does not go
units in the country because of the well-publicized
far enough?
spills that have caused concern among the population.
A: The problem with that Act is that it cannot be
The big challenge now is to enforce the environmental
enforced by itself since it is a complementary law of the
regulation in respect to the small and medium size
environmental legislation. Its basic principle is that if a
mining companies because together they equal the
company does not comply then sanctions will be imposed.
negative environmental impact of large firms. We are
This sets forth a new right to file a lawsuit for damages
currently providing environmental legal assistance for
to the environment,but limitations are placed on who is
large companies, both Mexican and foreign. Rather than
entitled to bring litigation. In this case, only communities
wait for the regulations to become more aggressive we
that are affected, PROFEPA, NGOs, or State Environmental
urge them to be more proactive in their decision making.
Agencies. The latter in conjunction with PROFEPA. Usually,
We expect improvements in greenhouse gas emissions,
failure to comply entails an administrative process with the
waste, and water management.
environmental authorities, which follow certain procedures that might impose sanctions that can later be challenged. It follows the rules of a civil trial but the damages are solely focused on the environment and not on personal patrimony. Q: What is the process a mining company has to undergo to successfully manage a crisis such as a spill? A: We have to survey the whole operations, pinpoint all possible risks, and develop the worst case scenarios. This
In 2015, PROFEPA inspected 1,130 mining units in Mexico, and of those, 71 were closed due to lack of
compliance
| VIEW FROM THE TOP
MINING ROYALTY ADDS BURDEN ON THE INDUSTRY
Ricardo Pons Partner at Hogan Lovells
Juan Torres Partner at Hogan Lovells
42
Q: What is your main differentiator as a law firm that
Q: How has the mining royalty tax regime affected
provides services to the mining industry?
communities and the mining industry?
JFT: Two elements set us apart from other legal service
RP: Firstly, the charge is more of a tax than a royalty but
providers. First of all, we have a full service team. Other
there is no question that it represents a major issue for the
legal firms tend to have expertise just in mining regulatory
Mexican industry because countries are competing with
aspects, while Hogan Lovells provides a one-stop shop
each other to attract investment. There is also another 0.5
approach due to the complexity of the industry. Rarely do
percent royalty on the sale of precious metals that adds to
clients seek our services purely for inquiries about mining,
the burden. Mining companies are having significant cash
instead requiring legal advice on a range of issues such
flow issues due to these tax levies, and tax authorities are
as regulatory, tax, foreign trade, employment, corporate,
requesting information that can take months to process.
land, and water. The additional differentiator comes from
Proceedings to challenge these taxes are still in the courts
the specialties Hogan Lovells has within certain industries,
and should be resolved soon, so I would not consider it
and we complement this service with resources, talent,
unconstitutional unless it is declared so by the courts.
and connections. We recognize the fact that most of the
Most of our clients do not agree with the royalty but they
mining investment in Mexico comes from Canada and the
also feel that challenging the government would simply
US, and as a multijurisdictional law firm we are particularly
exacerbate the situation. The fee is a burden that causes
able to handle their needs.
certain companies to reduce capital flow or simply move
| INSIGHT
MINING BUREAU IN NEED OF MODERNIZATION RODRIGO SÁNCHEZMEJORADA Partner at Sánchez-Mejorada, Velasco y Ribé
Sánchez-Mejorada does not place the blame squarely on the shoulders of the bureau itself as he acknowledges the institution lacks the necessary manpower, training, and resources to adequately resolve the pressing challenges.
Sánchez-Mejorada, Velasco y Ribé, the oldest Mexican law
Nevertheless,
he
suggests
some
internal
structural
firm still practicing today, has always had a strong focus
changes that would help update the aging concession
on the management of natural resources and acted as an
handling process. According to Sánchez-Mejorada, a
advisor to the federal government during the drafting of
priority for the Mining Bureau should be the transition to
the current Mining Law. Rodrigo Sánchez-Mejorada, one of
an online processing system where interested parties can
the firm’s partners, believes that the bureau has failed to
file everything online, and obtain instant responses. “The
evolve at the same rate as the industry that it represents
Mining Bureau continues to work extremely slowly in
putting a handbrake on the sector’s development in
releasing available territory and awarding concessions,”
Mexico. “While the Mexican mining industry is world class
he explains. “This is a complicated endeavor because
and has grown significantly, the regulatory department
the authorities have to be careful with the cartography.
has remained static with no technological improvements,”
However, if a grid system were to be implemented in which
he comments.
the mining deposits coincided with geographical grids,
to another region altogether. The market is furthermore
royalty tax, an obligation to dedicate a specific percentage
being affected by the global price of gold, and more
of overall production to the community could have been
legislation governing certain areas like environmental
imposed. A few guidelines could have been offered to
impact. Mexico is still very much open to investment
structure these community developments and avoid
but due to the conditions it is a more expensive region
having corporations invest in projects, like amusement
and royalties are punctuating this trend. Ultimately, the
parks, that do little to support this population. This method
revenue of the extra cash is supposed to flow back into
would shift the burden to the companies and force them
mining regions and contribute toward the wellbeing of
to have a more effective interaction with communities.
the population but in reality, we have yet to see any such
Ultimately, it is again up to the courts to decide whether
benefits actually materializing.
or not the referred dual structure is viable. 43
Q: What is the response of the mining industry, and what
Q: What are your expectations for the next couple of
are the arguments against the tax?
years in Mexico?
JFT: Competition centers on multiple factors while
JFT: There is an expectation that production will increase
trying to determine which market provides the greatest
again. Several states depend heavily on mining companies,
advantages. Many businessmen are questioning the
and the downturn is affecting large segments of the country.
decision to impose royalties because at the end of the
However, a connection between the mining industry and
day, the amount of investment is negatively impacted
the Energy Reform may be a ray of hope because for many
by this additional burden. The main purpose was to give
years the exploitation of gas was adequately regulated.
something back to the areas where mining companies
CNH recently released a publication with guidelines
operate because, in theory, all of the mining resources
that finally explain how to exploit resources that may be
are being taken away from these communities while they
found in the context of mining operations. Another hidden
receive nothing. The reasoning is legitimate but people are
benefit for mining companies from the Energy Reform is
wondering whether the royalty tax has actually created
the proximity between operations from other industries
any additional revenue. Economists speculate that the
and mines. Previously, an isolated mine would be forgotten
plan could backfire but it may be too early to tell.
but with more players infrastructure will inevitably improve even in remote areas. Nonetheless, all of this depends on
Sadly, when the government administrates certain projects
the stability of hydrocarbon prices, and those have been
inefficiencies are bound to be seen. Instead of creating the
affected by a sharp downturn in recent years.
a concession could be granted by reference to a specific
“The Mining Bureau continues
square, so there would be no questions as to the size and boundaries of the mining lot covered by such a concession.” This would not only save a great deal of time by allowing the bureau to issue concessions online directly but it would also give companies that own concessions the right to carry out mining operations without the need to go through the laborious process of gaining consent from the authorities.
to work extremely slowly in releasing available territory and awarding concessions” Rodrigo Sánchez-Mejorada,
Partner at Sánchez-Mejorada, Velasco y Ribé As an alternative, Sánchez-Mejorada proposes the Mining Bureau adopt the gradicula system, a state-of-the-art grid
to implement a mining tax based on the companies’ income
concept that takes into consideration the curvature of the
and profit for extracting a natural resource that belongs
earth, thus providing a precise position of the lot. This
to the Mexican nation,” he argues. “The amount of money
system would eliminate a large portion of the bureaucratic
an operator is making out of the concession is irrelevant
processes that mining companies currently have to
because an inefficient producer would not pay, whereas, an
negotiate when acquiring a concession, and could help
efficient one will. The authorities are penalizing efficiency
boost foreign investment into the sector, particularly when
and rewarding mediocrity.” A more pragmatic solution for
it comes to exploration. Of course, the falling investment
Sánchez-Mejorada would be for all mineral production
in exploration is due to a glut of other factors, not least
to be taxed at a rate depending on the current price of
the mining royalty tax, which according to Sánchez-
the commodity, making it adjustable and reflective of the
Mejorada is excessive and impractical. “It makes no sense
market conditions.
44
| VIEW FROM THE TOP
MEXICO REMAINS ATTRACTIVE DESPITE SECTOR DOWNTURN ENRIQUE RODRÍGUEZ DEL BOSQUE Founding Partner of RB Abogados 45
Q: What should the government do to attract more
attractive amount and sign an agreement on royalties. The
investment in the mining sector despite the difficulties it
benefit of royalties is the fact the seller will only begin to
is undergoing?
receive them after the fixed production start date but if
A: Costs in Mexico are relatively low, especially in terms of
the operator does not begin production by that fixed date
human capital, and a great deal of qualified staff can be
then small fixed monthly fees must be paid to the seller
found across the country. Mexico has no regulations for
until the production phase is reached.
foreign investment in the industry and this means foreign companies through a Mexican subsidiary can fully invest with no limit whatsoever. While the royalty tax has had an excessive impact, this is a necessary step to allow Mexico continuous growth. Another aspect that is often overlooked is that all minerals are quoted in dollars so despite the dip in commodity prices Mexican costs are lowered by 30 percent just through the exchange rate. RB Abogados’ main responsibility is to carry out industry transactions while complying with applicable law but satisfying the business structures of the parties to the transactions. Q: How is the landscape looking in terms of the sale and transfer of mining concessions, and what are the rising trends? A: Certain Canadian public companies with mining properties in Mexico are amalgamating to obtain a wider
All minerals are quoted in dollars, so in Mexico costs are lowered by 30 percent just through the exchange rate
portfolio and increase mineral reserves, which makes them more attractive to investors. Mexican mining concessionaires
Q: What are the most important projects you have
and their properties continue to be extremely attractive
worked on?
for foreign publicly traded companies so structures like
A: We have been involved in many M&A and project
reverse takeovers and joint ventures are still working well.
finance transactions for the industry. We participated
Most of the deals are more focused in share considerations
in the acquisition of San Dimas by Primero Mining from
than cash allocations, which encourages shareholders to
Goldcorp, and we facilitated a royalty stream from Coeur
approve these kinds of transactions.
Mining to Franco Nevada for revenues from La Preciosa. Additionally, we provided counsel for the joint venture
Q: How can your law firm help smooth out the transaction
between Pan American Silver and Orco Silver for La
processes to ensure the contentment of both parties?
Preciosa, and the pre-paid forward silver purchase with
A: The transactions structured abroad may represent a
JMETT as a buyer and Santa Cruz Silver Mining as a seller.
challenge and sometimes prove risky for Mexican owners
Other projects in which we were involved were establishing
who may not be aware of how publicly traded companies
the credit facility to Pan American Silver from Scotia Bank,
operate. This is an industry where small players are fervent
and overseeing the acquisition of Goldcorp’s Guanajuato
believers in their projects so it can be complicated at times
mine by Great Panther Silver. We also worked on the
to align their interests with those of major operators. In
acquisition of Peña de Bernal by Starcore from Goldcorp,
these cases, we suggest small mining companies or
and the joint venture between Excellon Resources and
individual concessionaires sell their projects for an
Apex on the La Platosa property.
| INSIGHT
TAXING TIMES FOR OPERATORS IN MEXICO General Coordination of Mines since any new project has to go through the Ministry of Energy in order to obtain
ALBERTO VÁZQUEZ
approval regardless of whether there is a possible energy
Senior Partner at VSG Legal
activity that would be preferential or coexist with the
Services
mining sector. “I think the mining industry should not only
46
be considered at a Coordination level but should have its own Undersecretary, and instead of being aligned with VSG Legal Services is a young firm but its partners have a
the Ministry of Economy should report to the Ministry of
great deal of experience since its founding more than 25
Energy,” he suggests.
years ago. “We have come to consider ourselves as the most proactive firm in the mining industry because we are
Another problem Vázquez has identified is that every
actually concerned about the benefit it creates for Mexico
time the administration changes officers are usually
and the way it has evolved,” shares Alberto Vázquez, Senior
removed or transferred and the new ones sometimes lack
Partner at the firm. “We endeavor to involve third parties
experience in the industry, halting sector growth. “The
in the industry by organizing events that show external
government must understand the pivotal importance of
stakeholders how mining companies are complying with
the industry by not only attracting investors into its fold
environmental regulations.” According to Vázquez, VSG’s
but also by providing the necessary assistance in order
differentiating factor is that its staff personally visits
to correctly develop this sector,” he continues. “Once
the projects and establishes close ties with the agrarian
companies are safely settled in the market they encounter
authorities. “For every project in which we are involved the
an almost insurmountable barrier in obtaining the mining
first step is to approach the Agrarian Attorney’s Office at a
concessions and permits.” Many years ago, he observes
federal and local level to explain what we are planning to do
the main problem for operators were the communities
and involve them to ensure we look after the community’s
but now the problem is the new taxes, which have greatly
interest,” he explains. “In that way, all the companies we
raised costs for the industry. “Formerly, Mexico was one
represent have transparent interaction with the community,
of the friendliest countries in which to set up a mine and
and through this they earn the respect, confidence, and
now it is not. I do not think members of Congress have
trust of the members of the ejidos.”
ever considered the investment and effort that opening a mine requires,” he claims. “It seems they are under the
“For the last two years, the federal authorities have
misconception that mining companies can simply open a
tried to attract investment in the energy sector given
mine and extract the minerals when in fact it can take up
the implementation of the Energy Reform, and the
to 10 years of exploration and negotiation."
mining industry has been pushed aside,” he claims. “The government created a preferential right for the energy
In March 2015, companies started paying the royalty tax, and
sector, and it neglected the mining sector despite the
it was anticipated that in 2016 municipalities would begin to
important role it plays in the development of the country.”
receive the resources. According to Vázquez, this process
Due to amendments made to the Mining Law substantial
has seen little progress. “Companies may not even be in a
delays have been generated in obtaining permits from the
position right now to work jointly with the communities and ejidos to help them receive this benefit,” he explains. "In the
“Through transparent
past, it was simple for mining companies to prepare their
interaction companies earn
direct benefits as they could to impacted communities.
the respect, confidence, and
in these programs to survive and must now realize that the
trust of the members of the
own community relationship programs and provide as many However, some companies now have to reduce investment taxes they have paid have not yet generated any benefits.” However, he says that a positive aspect of the tax is that
communities and ejidos”
states that have had a strong mining presence like Sonora
Alberto Vázquez,
and this will inspire other states that were previously reticent
Senior Partner at VSG Legal Services
and Chihuahua will benefit from a great deal of resources to open their doors to the industry.
| VIEW FROM THE TOP
STRENGTHENING THE BOND BETWEEN EMPLOYER AND EMPLOYEE ALFONSO RODRÍGUEZ Director General of LegalMex 47
Q: What can mining operators do to work in harmony
Q: What are some examples of successful cases that
with the unions?
you have litigated relating to labor laws in the mining
A: During the past year there have been many talks and
industry?
negotiations but there have not been any significant
A: Legalmex successfully litigated a case that lasted over
changes. In June, President Enrique Peña Nieto launched
four years. This was a labor dispute valued at US$4.5
a new proposal in an effort to make unions more
million over profit sharing claims, also known as PTU, which
transparent. However, the legal framework stemming
is basically 10 percent of operating income that is paid out
from this proposal is somewhat difficult to achieve since
annually to employees. This particular case was a dispute
there are members of Congress who actively participate
regarding revenue over a single fiscal year. It is particularly
in unions. Therefore, we do not know if any development
important because in the past, many mines generated
will result from this or how long it would take to have
high income, and these cases could become extremely
any form of resolution. Presently, the mining industry
detrimental to mining companies within the current
is not only under pressure as a result of labor but it
economic environment. Legalmex has also assisted several
is also affected by the decline in commodity prices
Canadian operators in reaching competitive bargaining
worldwide, while additional taxes linked to productivity
agreements with Carlos Pavón.
have also put pressure on overall profitability. Napoleón Gómez was the main operator of the mining unions
Q: What are the main factors that foreign companies need
for many years but he lacked transparency, and a few
to consider when entering the Mexican mining industry?
years ago Carlos Pavón entered the arena. Thankfully,
A:
he has proven to be a lot more business friendly as he
Therefore, it is crucial that proper legal advice is sought,
works closely with the mines and seems to be more
especially when dealing with expatriates, individually
transparent in his operations. The mining industry should
hired employees, or employees hired collectively. In
pursue a stronger relationship with the unions through
addition to these practices, it is also important to seek
government assistance.
legal advice relating to health and safety regulations and
Mexican
law
differs
greatly
from
foreign
laws.
public relations when dealing with local communities. Q: How have recruitment practices within the mining
It is important to implement a turnkey strategy when
industry changed with the Labor Reform?
recruiting, when entering the country, and when choosing
A: Many mine operators are currently trying to utilize
a location in which to operate. Informing the population
outsourcing or subcontracting as a way to mitigate the
of the potential employment advantages creates an
possibilities of exposure when hiring new employees.
environment in which the local communities are friendly
Unfortunately, they are given a false sense of security by
and more welcoming to the mining business.
outsourcing services as a provision to protect them. It is stated in the law that the party that directly benefits from
Q: How do you see the labor environment of the Mexican
the employees’ services is responsible for the cost of the
mining sector evolving?
employee as well as the cost of the termination of the
A: If we do not see an imminent economic rebound, we
worker’s contract. We recommend that they seek proper
will probably see an increase in labor disputes. Therefore,
legal consul to devise a strategy that works both with the
it is important that operators seek preventive legal advice
unions and with the employee to mitigate the possibility
to minimize the impact of such disputes. Operators should
of extraneous expenses when closing mines. Outsourcing
consider devising strategic plans to mitigate these issues
is theoretically attractive but it may be unsuccessful at
prior to a major problem arising because preventive
the end of the day when the court makes a judgement
measures are essential to achieving sustained success in
regarding improper dismissal.
the industry.
| EXPERT OPINION
NEGOTIATING THE MINING ROYALTY 2013 were primary determinants, covering amendments to Federal Law in terms of civil rights and income tax. Secondly, reforms to the mining law that took place in August 2014 because of the Energy Reform contributed
KARINA RODRÍGUEZ
to molding the regulatory framework.
Partner at PS&RM Abogados 48
Changes to the tax regime consisted of eliminating tax deductibility on exploration expenses for locating and The current Mining Law has regulated the mining sector
quantifying the value of new fields in the year these
since 1992, having been revised and edited in 1996, 2005,
operations are carried out, translating to a 10 percent
2006, and 2014. These four reforms aimed to eliminate
annual deduction. Moreover, three new laws were created.
deregulation,
mining
The first legal adjustment in mining was the Derecho
concessionaire from exercising its rights, and to implement
Especial. This annual fee is determined by subtracting
mechanisms that simplified administrative aspects. The
income tax deductions from the revenues obtained from
adaptation to the Energy Reform in Mexico was subject to
the sale of extracted materials, excluding investments
similar processes. Although the Mining Law in force today
that are unrelated to exploratory mining, accrued interest
could be refined, it is a modern law that meets the needs
and default interest, annual inflation adjustment, and
of the sector and international markets. This valuable
contributions for the same activity, and applying a rate
tool is easy to use to promote the mining industry, and
of 7.5 percent to the resulting number. The Miscellaneous
is supported by approximately 50 subordinate laws and
Fiscal Tax Resolution clarified that investments in mining
pieces of legislation. These periphery criteria mainly
production and exploration would be 100 percent
center on environmental and tax concerns but also touch
deductible. The Derecho Extraordinario is a second
upon corporate operations, public health, labor law, oil
component consisting of an annual fee calculated at the
extraction, and energy, to name a few.
rate of 0.5 percent of total revenues derived from gold,
obstacles
that
prevented
the
silver, and platinum sales. Thirdly, an additional duty for Within changes to the mining regulatory framework two
concessions that are not yet producing ranges from 50-
issues stand out as crucial factors in its development.
100 percent of the maximum additional fees established
Changes to the tax regime carried out in December
by the Mining Law. It was decided that these new tax
| INSIGHT
COMMUNICATION THE KEY WHEN DEALING WITH COMMUNITIES RAFAEL CERECERES Administrative Partner at Cereceres Estudio Legal
determine pollution levels,” he explains. “It is fundamental that
companies
secure
the
required
environmental
permits at the correct time because there always seems to be an issue that mining companies do not apply for the
Cereceres Estudio Legal (CEL), a law firm with over 20
adequate permit."
years of experience in the Mexican mining industry, advises both foreign and domestic players on regulatory
In order to avoid non-compliance issues a project must
specifications and variations to ensure that its clients are
display a strong commitment to sustainable practices
as prepared as they can be before jumping headfirst into a
from the outset, in order to convince the authorities of
project. Rafael Cereceres, the firm’s administrative partner,
their dedication to social responsibility. “If a project is
stresses the importance of thorough preparation to all
started with strong environmental practices the results will
prospective mineral explorers in Mexico. “Before a project
be positive,” notes Cereceres. “Regardless of whether this
is begun, an environmental study must be performed to
is done through ignorance or purposefully, it still counts
collections would be used to improve social development,
the Mining Law. It was expressly stated, at a constitutional
and the urban and environmental impact of mining on
level, that mining concessions could not grant preemptive
surrounding communities. The taxes would be distributed
rights for exploration or extraction of hydrocarbons except
at a ratio of 20 percent to the Federation and 80 percent to
in the presence of coal, the regulation of which related to
the Fund for Regional Sustainable Development of States
the Hydrocarbons Law.
and Mining Municipalities. Mexico City would receive 62.5 percent, allocated to the municipalities wherein extraction
The effects of changes to the Mining Act in connection
took place, and the remaining 37.5 percent would be
with the Energy Reform can be divided into two divisions.
reserved for corresponding states.
The granting of mining concessions has been limited as the authorities that preside over the energy sector must
Unfortunately, the fund distribution has not been favorably
determine the feasibility of both activities coexisting.
received by all communities, states, and municipalities
However, the specifications of this technical study have
because of limitations on the deduction of exploration
not yet been officially published, such that each possibility
expenses. The law states that funds raised for mining
should be reviewed on a case-by-case basis. Moreover,
states and municipalities must be measured by the value of
because of the elimination of gas regulations associated
production not by the revenues in place. Therefore, funds
with coal, concessionaires were granted the right to obtain
obtained in a particular municipality may not necessarily
contracts directly for exploration and gas extraction. To
be distributed fairly, which has led to some disagreements.
date, contracts have not been awarded for coal mining,
The decision led to Mexican mining assuming the burden of
for which it is necessary to demonstrate the company’s
new tax stipulations as well as lower sales prices, negatively
financial solvency and technical, administrative, and
affecting the industry. In fact, Mexico, lost competitiveness
financial aptitude.
internationally in terms of attracting new investments in mining, and struggled to retain existing investors.
Mechanisms to promote investment must be redirected toward generating real fiscal stimuli to boost the efficacy
Regarding the amendments to the Mining Law derived
of exploration, which drives all mining activities. The social
from the Energy Reform, oil extraction, and electricity
spending that mining companies conduct within mining
distribution to the public were labeled preferable mining
communities should also be taken into account for tax
activities. The changes included the possibility of refusal
purposes. Our goal, as lawyers that provide services to
to grant mining concessions, or to limit the scope therein
mining and energy companies is to understand the sector
when oil extraction and electricity distribution and
profoundly, as well as the legislative changes that are
transmission were requested by the concessionaire. Gas
occurring. This should facilitate our distribution of effective
regulations relating to coalfields were also removed from
and efficient advice to help them make adequate decisions.
as non-compliance with the requirements of the law, and
been established, a company must then have a local
sanctions will be imposed for this oversight.”
understanding of how to negotiate with ejido authorities, which includes a familiarity with the concept of how ejido
Another area to which CEL devotes much of its efforts is
land is divided and registered. For Cereceres, herein lies
on land rights and other community-related issues. Mining
the key to a project’s success or failure.
is by its very nature a divisive industry, and despite being undeniably essential to Mexico’s economy, many local
Naturally, over the course of its two decades in the
residents, including ejido land owners, react negatively
business CEL has developed the contacts, negotiating
to new projects sprouting up in their communities. For
skills, and deep industry knowledge to advise and
Cereceres, communication is a vital tool in helping mining
assist its customers on such issues. This experience tells
companies overcome such challenges. “I have seen that a
Cereceres that the sector is strong, and he plans to help
lot of mining companies in their haste to begin operations
both current and potential clients make the most of the
negotiate not with the ejido leaders but with individual
imminent recovery he expects to see in Mexico. “It will be
members of the community,” he comments. “When the
a mistake to leave Mexico because I foresee changes for
company begins giving these land proprietors money, it
the country,” he predicts. “We plan to attract and retain
will never end. Instead, it makes more sense to approach
valuable clients, helping foreign and national companies
the ejido authorities directly and come to an agreement
with projects due to our broad experience and contacts in
at this point.” Once the streams of communication have
the government.”
49
3
FINANCE & INVESTMENT
The majors that once dominated the market have become unwilling to enter greenfield projects, instead focusing on smaller brownfield sites. This slack is left for the juniors to pick up but a lack of sufficient funding is causing problems. The changes in exploration deductions that dictate players are only eligible for an annual deduction of 10 percent as opposed to the previous 100 percent has also exacerbated the problem. M&As and joint ventures have become increasingly common as the market tries to consolidate itself while players wait for metals prices to rise. While Mexico is still fostering its strong mining ties with Canada, eyes are beginning to look to alternative sources of FDI such as China and South East Asia due to high silver demand for industrial applications. However, in bear market conditions, new business models inevitably arise.
This chapter concentrates on dialogues with the most important financing arms for Mexican bankers, both from the public and private sector, who will discuss challenges players face in financing and investment and the ways to overcome these. We also discuss the environment as a whole and provide advice on how to navigate ebbs and flows. Public sector officials also discuss ways they are attracting investment to their jurisdictions, and operators share innovative financing strategies.
51
Global Services 52
Some times you take chances, other times you use Brink’s
SERVICIOS
DOOR TO DOOR
ME TA LES PRECIOSOS
DIAMANTES Y JOYERÍA
53
| CHAPTER 3: FINANCE & INVESTMENT 54
VIEW FROM THE TOP: Armando Pérez, Mining Development Trust Fund (FIFOMI)
55
INSIGHT: Carlos Espinosa, Toronto Stock Exchange
57
VIEW FROM THE TOP: Mario Alfonso Cantú, Ministry of Economy
58
VIEW FROM THE TOP: Mario Hernández, KPMG Mexico
Eduardo Salgado, KPMG Mexico
59
VIEW FROM THE TOP: Mario Arregoytia, EY
60
VIEW FROM THE TOP: David Rascón, Baja California Ministry of Economic Development
60
INSIGHT: Mauricio Candiani, Candiani Mining Investment Banking
63
VIEW FROM THE TOP: Bradford Cooke, Endeavour Silver
64
INSIGHT: José Gabino, Corporativo Minero Minas de Mexico
Juan Vera, Corporativo Minero Minas de Mexico 65
INSIGHT: Sean Emmond, Export Development Canada
66
ANALYSIS: M&A Mega-Deals Suggest Metals Bull Run
68
INSIGHT: Ron Tremblay, Levon Resources
68
VIEW FROM THE TOP: Raul Diaz, First Mining Financing Corporation
| VIEW FROM THE TOP
STRENGTHENING MEXICO’S MINING BACKBONE ARMANDO PÉREZ Director General of the Mining Development Trust Fund (FIFOMI) 54
Q: What have been the accomplishments of the past year
and operational practices that lead to good governance.
for FIFOMI, and what ranks highly on the list of priorities?
A company with good management can access not only
A: For the past three years, FIFOMI has effectively
the debt market but the chances for new equity support
and proactively refocused its financing and technical
increases significantly.
assistance activities. In 2013, FIFOMI visited several mining regions and a common complaint from project
Q: What criteria do companies have to meet in order to
sponsors was that we were not supporting mining projects
qualify for a loan from FIFOMI, and how do you determine
through affordable loans. FIFOMI’s Board of Directors
when a company is ready to graduate from your support?
and the General Coordination of Mining at the Ministry
A: FIFOMI’s essence is to find and support promising
of Economy then approved a set of new programs that
projects for we cannot let a viable project die from a
shifted our efforts to support small and medium sized
lack of financing. The main requirement is to be sure
mining projects and their supply chain directly. Prior to
that future cash flows will be enough to repay the debt,
this refocusing there was no institution in Mexico actively
and if so, FIFOMI structures the debt payment profile to
financing mining projects. By the end of 2015, FIFOMI’s
reduce the risk of default. We are implementing structured
loan portfolio reflected a greater share of core activities,
financing through special purpose vehicles and we take
adding up to 65 percent, compared to what the institution
protective measures by setting adequate guarantees in
registered at the end of 2012, which was 30 percent. For
case of losses. If companies do not have enough fixed
the next three years, our goal is to continue with our core
assets, as is the case for some service supplier companies,
responsibility of financing small and medium sized mining
FIFOMI can consider long-term contracts as collaterals.
projects in both the production and processing fields.
For companies that perform contracts on a yearly or very short-term basis, long term financing is more difficult to
Toronto Stock Exchange invests US$2.1 billion in Latin America, of which more than half is allocated to Mexico
provide. We need to be extremely careful on this topic as the new rules issued by the Mexican Banking Commission obliges FIFOMI, as a loan providing institution, to evaluate as accurately as possible the credit risk. Q: What are Mexico’s unique qualities that make it an attractive investment location for foreign mining players? A: Mexico has a strong macroeconomic stability supported by its legislation, the apex of which is the central bank’s constitutional obligation to provide monetary stability in
Q: What companies stand to benefit from FIFOMI’s
the form of low inflation. In my opinion, Mexico is the only
programs and financing schemes?
major country in Latin America that provides financial and
A: FIFOMI supports SMEs that have good corporate
political stability through its institutions. It also has the
governance. Unfortunately, it is not often that we identify
advantage of being geographically close to the world’s
said players, which makes our job very challenging. This is
largest market and being one of the few countries with a
mainly due to firms of this type being family-run, and while
significant number of FTAs. All of the above are essentials
it is great that experience is passed from generation to
for foreign investors. The Toronto Stock Exchange invests
generation, they lack corporate governance practices that
US$2.1 billion in Latin America, of which more than half is
would enable them to compete in today’s global economy.
allocated to Mexico. The country holds the coveted fourth
The credit market, where FIFOMI participates, provides the
position for mining-exploration spending after Canada,
right incentive for the loan recipient to include financial
the US, and Australia.
| INSIGHT
OPPORTUNITIES FOR DUAL LISTING “Toronto can be an attractive capital marketplace for Mexican mining companies
enables companies to obtain greater visibility, liquidity, and performance. “In the case of the Mexican mining industry, we will find five large companies and a multitude of smaller ones,
because they can have world-
and the larger ones that are mainly only listed in Mexico,
class access to institutional
Toronto can be an attractive capital marketplace for
investors and analysts”
world-class access to institutional investors and analysts
Carlos Espinosa, Former Head of Business
Development, Global Mining at the Toronto Stock Exchange (TSX)
New York, or London,” Espinosa clarifies. “However, Mexican mining companies because they can have that specialize in the mining sector, as well as M&A opportunities and broad visibility.” He shares that one of the main challenges that small Mexican companies face when attempting to become listed on TSX or TSXV is the lack of the technical report NI 43-101, which is one of the
Given the turmoil the industry has undergone these past
requirements for companies that want to be listed on
few years, the TSX has had to take action to support
these exchanges.
mining companies and improve their performance. At the end of 2014, 1,492 mining companies listed on the
Now that some Mexican mining players are also aiming
TSX and TSX Venture Exchange (TSXV) raised US$6.4
to become oil producers, Espinosa believes that investors
billion. In 2015, mining companies listed on TSX and TSXV
are viewing this movement positively. “Foreign companies
raised US$4.5 billion between January and September,
are increasingly interested in accessing the Mexican
equivalent to 53 percent of the capital equity raised
energy sector since it is a totally new market,” he explains.
globally by mining companies. “TSXV has faced some
“Established mining companies in Mexico are creating
challenges, namely with companies that are raising
subsidiaries in the energy sector, and this presents a good
equity since they must work harder to attract the interest
opportunity for joint ventures with foreign companies.”
of investors,” shares Carlos Espinosa, Former Head of
Foreign companies can bring their technical expertise to
Business Development, Global Mining at TSX. “We have
the table, while local players have their investment network
been supporting companies and finding ways to assist
in place and know how to do business in Mexico. These
them during this downturn. One of the actions we
large mining companies that are exploring options in the
implemented was the agreement with the Santiago Stock
oil and gas industry are also well known in the investors’
Exchange (SSE) that we launched in May 2015 to support
arena across the world.
the development of a public venture marketplace in Chile, namely the Santiago Stock Exchange Venture (SSEV).”
TSX recently launched a new platform called TSX Private Market that allows companies access to capital and
The BMV is recognized for focusing on mega cap
liquidity in the exempt market. This platform can be used
companies and on debt issues, while in Canada most of the
by both Canadian and foreign companies connecting
issuers are SMEs. “In my opinion, the biggest opportunity
private or public companies with accredited investors,
lies in the energy sector since there is a consolidated
institutional investors, and other exempt investors, and
presence of oil and gas companies in Alberta, Canada
can be used to raise capital equity or for secondary
that possess world-class expertise and are already listed
trading. “Many emerging markets across the world are
on TSX or TSXV,” he explains. “Ultimately, the exchanges
showcasing important opportunities in industries like
aim to help companies in Mexico raise public equity
mining,” Espinoso claims. “Mexico is one of the top
capital in an efficient way.” In Mexico the only mining
priority markets for Canadian mining companies among
company that is dual-listed is First Majestic Silver. At TSX
the emerging markets. During the first half of 2015 mining
and TSXV there are 499 dual-listed companies globally
companies listed on TSX and TSXV with projects in Latin
across all industry sectors, including 18 companies dual-
America raised US$1.3 billion.” Despite the challenges
listed with Peru, 13 with Chile, three with Colombia, and
surrounding security, royalties, and community disputes,
one in Mexico, as well as companies dual-listed in the US,
Mexico
London, or Australia, among other markets. Dual listing
destination.
continues
to
be
an
attractive
investment
55
56
| VIEW FROM THE TOP
DIVING INTO CHINA’S STAKEHOLDER POND MARIO ALFONSO CANTÚ General Coordinator of Mining at the Ministry of Economy 57
Q: What can the Ministry and other agencies do to attract
companies working in the industry in Mexico. However, we
more capital into the mining sector in the country?
are putting massive efforts into diversifying our sources
A: As part of the system we make it easier for foreign
of foreign investment, and China represents a huge
investors to direct their capital into the sector. The Minister
window of opportunity for us. We have already visited the
of Economy has recently approved a proposal to create
country four times to hold talks with some of the largest
a taskforce specifically set up to streamline the process
stakeholders, including two multi-billion-dollar private
of permit approvals, as well as the rental and purchase of
equity funds that see Mexico as a bright star in their Latin
mining concessions. It should be fully operational before
America portfolio. However, before taking the leap into
the end of 2017. We recently improved our geological
Mexico these investors are requesting information about
maps, which are administered by the Mexican Geological
how to do business in our country.
Service (SGM) because this is the most important instrument for exploration geologists. The coordination
We are convinced that by strengthening bilateral ties
invested a significant amount of funds into developing
between China and Mexico we can greatly improve the
the technological side of these maps, which are uploaded
prospects of attracting more investment into the sector.
onto INFOMEX, a free online information network. The
Mexico's President has already met his Chinese counterpart
Ministry has also made a strong effort to clarify the legal
on five occasions, and the Minister of Economy, Ildefonso
requirements that all concession acquisitions and rentals
Guajardo Villarreal, promotes business meetings aimed
must comply with, as it is a frequent stumbling block for
at strengthening bilateral trade relations and investment.
foreign institutions in Mexico.
Chinese investors are generally disinterested in exploration projects, and instead prefer to keep a close eye on
Regarding the need to increase investment into the sector,
brownfield sites that are already deep into the production
SGM and FIFOMI will be in charge of the technical and
phase, in order to make a rapid ROI. Their strategy is the
financial promotion of the respective industry. We need
polar opposite to Canadian investors, who are primarily
SGM to invest primarily in drilling, as that will add value to
greenfield explorers.
the projects and concessions, as well as work alongside INFOMEX to improve public access to geological mapping.
Q: What makes Mexico stand out from its Latin American
FIFOMI, meanwhile, will have two main responsibilities.
competitors in terms of opportunities in the mining
Firstly, it has to consolidate its lending program away from
sector?
the construction and transportation sectors, and shift it
A: In the case of China, their players have already heavily
back to its original duty, which is to support the mining
invested in Brazil, Chile, and Peru, whereas Mexico
industry. It must also provide financial support to mid-sized
remains a relatively untapped market. However, there is
companies, with a special focus on junior drilling enterprises.
no doubt that the strong relationship between President
We want FIFOMI to connect these companies with investors
PeĂąa Nieto and President Xi Jinping is a crucial factor in
and entrepreneurs in order to build up the financial side of
the growing interest. Mexico has a massive trade deficit
their businesses. We will select at least five projects in the
with China, and part of the strategy to reduce it is by
production phase to promote in our next trip to China with a
creating deals with the country and encouraging them
view to garnering further interest from this market.
to capitalize on the opportunities to be found within our local mining industry. The process has already begun as
Q: Apart from Canada, which other countries are potential
the business branch of the Chinese Geological Service
sources of foreign investment?
acquired 19 concessions in Sinaloa, while other Chinese
A: Canada is still number one and will continue to be for
mining companies working in other states are awaiting
some time, as it accounts for 173 out of the 270 foreign
project initiations in the coming months.
| VIEW FROM THE TOP
NECESSARY ADJUSTMENT OF MINING TAX TERMS
Mario HernĂĄndez Head of Industrial Manufacturing, Tax Partner at KPMG Mexico
Eduardo Salgado Head of Mining Industry, Audit Partner at KPMG Mexico
58
Q: How have the Mexican royalty fees affected the
incorporated into their structure. Most mining sites and
industry’s competitiveness?
operations provide schools, training, doctors, and other
MH: An investor deciding between Peru and Mexico might
important services that result in a pseudo city for the
decide that Peru’s ability to negotiate a tax certainty
employees and their families completely paid by the
agreement with the government is extremely attractive.
companies without any pressure from the government.
The contract allows the country to guarantee a fixed tax
The idea behind royalties is to provide additional support
percentage for a period that can be as long as 20 years.
for these communities but its mechanism is exceedingly
Peru offers solid chances for investors because they
complex. Players now have to directly pay the government
know exactly what they will be paying for a substantial
and collections have been relatively low thanks to the
time, which gives them a more accurate perspective of
market. Before the reforms, mining companies were
potential return. Mexico loses competition in this aspect
allocating funds directly to surrounding neighborhoods.
as administration changes can bring different levels of
Now, they have to go through an unnecessarily long
royalties. However, it can offer a tax certainty promise
bureaucratic process for an element of the industry that was
signed by the federal government that assures a quarter
previously working properly. Authorities divide royalties
without increased taxes, reduced benefits, or new taxes.
between the federation, the state, and the communities.
The drawback is that the agreement allows taxes to be
Our clients that are already exploring and exploiting worry
adjusted in case of a worldwide economic phenomenon
they have to pay double. Many continue to pay for benefits
that can force Mexico to establish new ones, a worrisome
and services because authorities are not stepping up to the
detail considering the global instability caused by
plate fast enough to take over the financing.
phenomena like Brexit. Q: What is the idea behind the creation of the royalties, ES: Clients often tell us they do not mind paying taxes as
and how can players struggling to pay taxes be supported?
many other countries impose similar contributions. The
MH: Ultimately, the implementation of royalties is a wise
key issue is its terms and conditions. Other regions offer
decision as Mexico was previously one out of two countries
certainty and smaller percentages, while Mexico enacted
in the mining world that did not have taxes for the sector.
relatively high royalties. Its reform should have been similar
The problem is that the reform was approved at an
to those already established in the world to improve
inconvenient time with unattractive terms. Its negotiation
competitiveness. KPMG believes that the new mining laws
occurred when the precious metal market was at a peak,
should be reviewed, and the implementation should be
and its conditions no longer work for the industry. The
aimed toward benefitting companies and the communities.
government is not collecting as much money as expected
International and local investors are interested in certainty.
in a landscape of suspended mining operations. In our
Unfortunately, the country holds a package of instability
mind, a sustained upsurge in the mineral prices would be
with issues that involve land access, corruption, insecurity,
the most effective way to help investors but it can only be
land sale limits, and agreement uncertainty created by local
controlled by the market. A more realistic solution would
communities. The laws do not need to be more restrictive
be to replace the conditions of the fixed royalty, currently
to give assurance to investors.
set at a rate of 7.5 percent and a further 0.5 percent for gold, silver, and platinum production, for a percentage
Q: How successful has the government been in reinserting
that gradually increases depending on the maturity of a
more of the proceeds from mining into community
company. It would be fairer for younger companies with
development?
lower incomes to pay smaller royalty fees than more
MH: Returning some of the benefits mining companies
established companies. The terms should be adjusted to
receive is an obligation that many players have already
the current reality.
| VIEW FROM THE TOP
THE SIX PILLARS OF CASH OPTIMIZATION MARIO ARREGOYTIA Lead Partner for Mining and Metals for Mexico and Central America of EY 59
Q: How does EY perceive the point of contention
Q: How is the lack of exploration impacting the industry,
between the reform and exploration activities subjected
and what must the government do to attract more foreign
to taxation?
investment and make Mexico more competitive in the
A: The restrictions on exploration deductions have
international market?
exacerbated the crisis within the mining industry. The
A: The financial impact it has upon mining companies is
dilemma mainly derives from a drop in metal prices, and
important. An annual 10 percent deduction of exploration
the fall of the Chinese economy. For the same reason
expenses implies that companies have to wait 10 years
royalty fees have not spawned as much revenue as
to recover their investment, which in turn means there is
expected, and Mexico has fallen behind Chile and Peru
less cash available to continue exploration and extraction
in terms of foreign investment for exploration. Mining
activities. The Mexican government should reinforce public
companies were allowed to deduct 100 percent of the
policies related to the mining sector and listen to actors
exploration expenses incurred in the year before 2014.
within the industry, including the Mining Chamber, that are
Today, such expenses are considered depreciable and only
requesting a change in the tax framework applicable to
10 percent can be deducted annually.
mining companies.
Not only does the reform stipulate conditions that
Q: What can mining companies do to overcome the
demotivate foreign investment in exploration but it
stagnant metals prices?
also creates contradictions since the tax treatment only
A: Cash optimization, through the generation and
applies to “new deposits�, a term that is reasonably
preservation of capital, is indispensable for mining
difficult to define when dealing with mineral resources.
companies that are struggling to stay afloat in the
The fact that the Mexican oil industry is allowed to deduct
stagnant market. Companies should focus on the following
100 percent of its exploration expenses equally highlights
six pillars to assure a solid foundation of effective cost
disparity among industrial conditions. Mexico lags in the
management, cash release, and balance sheets positioned
international race to attract investment because many
for future growth. First on the list is cost reduction, a
other mining countries promote foreign participation by
measure that demands a balance between sustainability
granting tax incentives for exploration expenses. In my
and activities that protect against value erosion. Working
opinion it is a shame that Mexico took a different path in
capital is second as it is the single biggest area for gains
the 2014 fiscal reform.
to be made with the support of processes and systems across the supply chain, particularly spare part inventories.
Q: How is the complex web of regulation and tax
The third pillar involves a systematic and integrated end-
obligations evolving in Mexico, and in what ways can EY
to-end approach to productivity that can drive significant
contribute?
improvements via asset rationalization, labor productivity,
A: The company is witnessing an incoming wave of
material
clients that have a great deal of questions related to
effectiveness is the fourth element as a program built
the application of new royalty fees and deductions for
on the back of efficient asset management can provide
exploration expenses. Fortunately, Mexican tax authorities
solid foundations for productivity and risk management.
are improving their audit processes and will soon be
Moreover, evidence shows that efficient portfolio strategies
optimizing royalty tax audits and the classification of
can be achieved by holding assets within the portfolio
expenses for tax purposes. EY helps clients comply with
that have different levels of risk, return, and correlation,
regulations and obligations through an array of services
which achieve an optimal return with an equal or lower
that include accounting, legal, regulatory, tax, litigation,
level of risk for the same rate. Finally, the financing pillar
advisory, and audit.
incorporates various capital release strategies to pay debt.
consumption,
and
cash
deferrals.
Capital
| VIEW FROM THE TOP
BAJA CALIFORNIA WORKING TO ATTRACT MINERS DAVID RASCÓN Director of Mining at the Ministry of Economic Development of Baja California 60
Q: What is your administration doing to attract investment
We also provide economic support for geological
and support mining operators and explorers in Baja
prospection and research projects, as well as technical
California?
assistance and training programs. These are the three
A: During the State Mining Council general meeting
areas into which we channel the majority of our efforts.
guidelines for a collaboration agreement between the
Support for geological prospection is equally as vital
federal and state governments were established, which
as financial aid because often those who find mineral
will provide credit designed to boost small and medium-
alterations lack the technical expertise to truly understand
sized enterprises working in the mining industry. There
the potential of their discovery. Therefore, we send a team
are still a few legal issues to iron out but we expect the
of geologists to that location to carry out tests and assess
agreement to be signed by August 2016, and it will then
whether or not further exploration is needed. This plays a
offer vital support to small mining producers, enable
big role in boosting development in the state.
them to increase production levels, and eventually help them become large-scale mineral producers. For example,
Q: What are the biggest mining operations in the state
there is a company called La Ciénega in El Rosario that is
today?
producing natural high-quality quartz, which is 98 percent
A: The largest producer of metallic minerals in Baja
purified, and exporting it to the US. However, it is currently
California is Minera Frisco’s San Felipe mine, which has
only producing on a small scale despite the high demand,
a total production of 40,000 tons of gold and silver ore
and so this company is one we plan to offer credit so it can
per day, while there are also a number of small-scale
construct a larger manufacturing plant that could triple or
gold producers throughout the state. Regarding non-
even quadruple production levels.
metallic minerals, there is a mine to the south of San Felipe
| INSIGHT
OPTIMIZATION DRIVING TODAY’S MINING INDUSTRY MAURICIO CANDIANI President & CEO of Candiani Mining Investment Banking
America and has capitalized on the market downturn and recent increase in activity. “It is a noted fact that in 2014 the M&A market was desolate, while research suggested that 2015 offered a comeback,” he explains. “For 2016, we
According to statistics released by EY, M&As within the
see a larger number of mergers between small and mid-
global mining context are becoming increasingly prevalent
tier producers. The main drivers are effort to gain enough
with over US$40 billion of deals completed in 2015. In an
size, cash flow, and a well-established balance between
environment of low prices, companies are trying to keep
productive assets and assets that are in a development or
costs low while also increasing production, meaning
early exploration stage.”
that acquisition of an existing mining asset is often an attractive option, says Mauricio Candiani, President &
He believes the mining industry will continue to wipe out junior
CEO of Candiani Mining Investment Bank. Candiani is
players but that this will be the catalyst for a survival of the
interested in brokering M&A deals in Mexico and South
fittest mentality, with the potential for modest exploration
which is producing Pumicite, a volcanic rock used in the
However, Grupo México also has a large project in the
fabrication of heat-resistant bricks and cement. On the Gulf
Ensenada municipality called El Arco, which has been in
of California side of the peninsula, as well as on the Pacific
the development phase for more than 38 years and has
coast, there are also two salt processing plants, while
the potential to produce several million tons of copper and
toward the southern point of the state there is a barite plant.
gold ore. However, the investment needed to move this
This facility was exporting barite to the west but it has now
project forward is around MX$3 billion so the company
been temporarily shut down due to the current low market
is waiting for the copper price to recover before starting
price for this mineral. Finally there is a company working in
production, and this could take up to three years. Moreover,
the state that is dedicated to producing dimensional rocks,
we are currently promoting an extremely important mining
specifically high-quality onyx for export to China.
district specifically designed for gold bearing in El Alamo, which is located 90km to the east of Ensenada. It is a
Q: What importance do Public Private Partnerships
unique geographic location with high concentrations of
(PPPs) have for the mining industry in Baja California?
high-grade gold deposits, and while the project is still in the
A: In the state government there are currently no
exploration phase it is an interesting potential destination
partnerships in mining but we have the responsibility to
for investment. Regarding exploration, there is a Chinese
provide technical support to all companies that want to
company working near the western town of El Rosario that
start mining operations in Baja California. We can say that
is finding high quantities of high-grade copper reserves,
Minera Frisco received support from us when it began its
and this is something we are keeping a close eye on.
operations at the San Felipe site. The El Arco project is on standby at the moment, which means that as soon as
Q: What are the primary hopes you have for the
Grupo México decides to reinitiate operation of the project
development of the mining sector in Baja California over
we will begin working together closely boost the project’s
the next 12-18 months?
development. The support we provide to the private
A: First and foremost we are focused on promoting and
sector is indirect, meaning that we give it all the backing
developing the El Alamo project, which already has at least
we can without any formal agreement or partnership.
two interested investors from the US. Negotiations with
We have found this to be the most effective method of
these businesses are progressing well. They are extremely
working with the private sector.
impressed with the on-site facilities and the geological potential of the location, and they are currently performing
Q: Which mines are currently in the construction phase in
the necessary financial analyses in order to move on to the
Baja California that will soon be operational?
next step. We expect at least one of these prospects to
A: The majority of developing mines in the state are
come on board during our administration, and that is one
focused on the recuperation of gold-bearing minerals.
of the biggest goals we are working toward.
of flagship projects exclusively. “Conversely in Mexico, the
It is important to divide real acquisitions and strategic
major conglomerates have unexpectedly weathered this
mergers, according to Candiani. “Some companies are
hostile environment," he comments. "Regardless of the low
invested in gaining full control of a company and are
level of their stock price, all have reduced operational costs
ready to pay in full for that control, and that is what we
significantly and kept their balance sheets in strong shape.
consider to be a real acquisition,” he explains. “A strategic
Some have made use of acquisition opportunities, while
merger is where we see two companies that are struggling
mid-tier production companies have struggled enough
and arrange a merger that is presented as an acquisition.
and they have either stopped operations or gained a new
This is due to one of the players being bigger than the
kind of momentum with smaller margins.” For the moment
other or having a stronger balance sheet." He believes the
at least, he believes that early stage exploration is dead
quadrupling of the value of operations in Latin America
and a series of conditions must be met in order to have
from US$2.8 billion in 2013 to US$11.9 billion in 2014 may
these projects reexamined. “Whenever prices rebound and
come as a surprise to some but these large acquisitions
capital markets gain some momentum to enable them to
paid in stock. “These are logical transactions to follow
expose themselves more to high-risk investments, we will
since companies are tight on cash,” he declares. “The
see new money flowing into exploration teams capable of
M&A activity in the last two years has been driven by the
discovering or re-size new deposits,” he states. “This will
fact that small and mid-size companies have interesting
only start happening when the existing inventory of mid to
projects in their pipeline but do not have enough capital
advanced projects runs out.”
to carry them out.”
61
62
| VIEW FROM THE TOP
INSIDE PERSPECTIVE ON INNOVATIVE MINE FINANCING BRADFORD COOKE CEO of Endeavour Silver 63
Q: What have been the main highlights of Endeavour
at Bolañitos or El Cubo until free cash flows and metal
Silver’s operating mines in 2015?
prices improve. Last year’s exploration expenditures
A: For the third year in a row, we met or exceeded our
totaled US$7.2 million, and while only US$2.5 million
production and cost guidance in 2015. Our operations
was budgeted for 2016, we expect to invest substantially
group delivered another solid year of production and we
more than that thanks to the higher metal prices. We will
once again reduced our all-in sustaining costs. Guanaceví
continue our brownfield exploration drilling programs at
and Bolañitos each performed better than planned, and the
existing operations in order to extend their mine lives. Our
completion of the phase two mine expansion at El Cubo to
drilling programs at both Terronera and El Compas are
2,200t/d was a major achievement. For 2016, our priorities
focused on expanding resources this year so that we can
are to maximize after-tax free cash flow and renew our
model larger, lower-cost mines in the pre-feasibility study
focus on growth. The emphasis will be on reducing all-
for Terronera and the preliminary economic assessment
in sustaining costs (AISC) rather than increasing metal
for El Compas. All of these investments will drive the next
output. We will also be advancing Terronera toward pre-
leg of our growth.
feasibility and working to expand the resources and refine the engineering of our newly acquired El Compas mine.
At El Cubo, we expanded the plant in 2015 to 2,000t/d in an effort to drive unit costs down. When we took over El Cubo
Q: What have been Endeavor Silver’s main achievements
in 2012 the operation was losing money, and in spite of our
considering the bear market conditions?
success in driving the AISC down from more than US$40/
A: We improved the strength of our balance sheet recently
oz to less than US$20/oz of silver net of gold credits, El
with two very successful At-the-Market (ATM) financings.
Cubo continued to consume cash. Therefore we made the
Since 4Q15, we raised over US$30 million and our cash
difficult decision earlier this year to transition El Cubo to
position at the end of the 2Q16 was close to US$50 million.
care and maintenance, and we have suspended investments
We intend to use the proceeds to pay off the remainder of
on exploration and mine development until metal prices
our short term debt, fund our growth initiatives including
improve. We will mine the accessible reserves this year
exploration and acquisitions, and increase our working
at El Cubo, which means we will see a steady decline of
capital. We have also worked diligently to reduce our
production through the year until it adapts to care and
costs structure, and in 2016 we are anticipating our fourth
maintenance in 4Q16. In the meantime we are evaluating
consecutive year of reduced costs. This year we guided
new processing technologies and mining methods in order
cash costs to around US$8-9/oz of silver net of by-product
to further reduce the operating costs at El Cubo.
credits and AISC to US$12-13/oz of silver net of by-product credits. This emphasis on cost containment will allow us to generate healthy free cash flows in 2016, even in this low silver price environment. Q: What are the main drivers and trends influencing these investment decisions? A: Last year’s capital expenditures amounted to US$37.6 million, primarily for mine development, and this year we were more conservative, forecasting capital projects
“We have worked diligently to reduce our costs structure, and in 2016, we are anticipating our fourth consecutive year of reduced
totaling US$11.3 million mainly at Guanaceví where we
costs”
continue to invest in mine development in order to access
Bradford Cooke,
and replace reserves. No capital investments are planned
CEO of Endeavour Silver
| INSIGHT
FINANCIAL SUPPORT FOR SMALL SCALE MINERS the production of 500,000 silver ounces, 10,000 gold José Gabino CEO of Corporativo Minero Minas de Mexico 64
Juan Vera Director of Exploration of Corporativo Minero Minas de Mexico
ounces, and 13 million zinc pounds, providing a cash flow of between US$10 million and US$12 million per year,” he boasts. “Luckily for our project, the government imposed a 7.5 percent royalty tax to support the
Corporativo Minero Minas de Mexico began as a group
communities neighboring mining operations, which in
of businessmen focused on different industrial segments,
the future will help the municipalities generate further
until meeting Juan Vera, a geologist who gave them a
development.” Nonetheless, he is concerned that the
complete perspective of the mining sector. “We noticed
government stopped providing exploration financing
the industry is normally focused on discovering large
and even though Corporativo Minero Minas de Mexico
projects but Mexico is a land of opportunities with a
has the support of private banking institutions he
plethora of medium scale projects that are waiting to be
would like to see the authorities more involved in the
exploited,” explains José Gabino, the company’s CEO.
improvement of the sector considering its relevance for
“Hence, our mission has been to integrate ourselves into
the Mexican economy.
small mining operations. After analyzing the projects we promote them to international investors to obtain funds for
Gabino elaborates that officials from the Ministry of
development and job creation in the country.” He shares
Economy have stated that despite Mexico’s growth
that all Corporativo Minero Minas de Mexico’s current
opportunities, the country has a 15-year lag in mining
assets have undergone a thorough reengineering process
development. “We have spotted interesting projects owned
and evaluation in order to measure their true potential.
by people that do not want to deal with these operations anymore, so our approach has been to establish contact
It is important to trace back the developments and
with the land holders to grant legal support so the fields
evolutions the Mexican mining sector has experienced to
can be studied, analyzed, and exploited to the tangible
explain the business value of small projects. During the
benefit of all parties,” he clarifies. “Our job is to look for
mid-1970s Mexico started to push for the development
attractive properties, obtain funds, and start production.
of the mining sector and local companies required
Another differentiator we have is that big companies are
skilled technicians that had to be brought from overseas.
not interested in our projects so we are dealing with a
“During that time, I worked with Industrias Peñoles and I
virgin market where everybody can win.”
noticed the operations were focused on medium to large scale projects like the Reforma mine where 500t/d were
Vera continues to explain the company’s exploration
produced,” explains Juan Vera, Director of Exploration. “At
program, which aligns the group’s mission to focus on
the La Ciénega project in Durango, the necessary resources
junior mining. The strategy the company has followed is
for operations producing 2,000t/d were needed during
to locate old mining districts where previous operations
the drilling stage. At this point I became aware that small
took place but were abandoned. “We evaluate the
mining operations were lagging behind even though these
property, calculate the proven and probable mineral or
properties had deposits that would allow an operation of
metal reserves, and estimate the mine’s lifecycle to decide
150-200t/d with a higher internal rate of return than those
whether we open a plant or continue searching for other
of the major corporations.” While working as a consultant
projects,” he explains. “We believe that half a million tonnes
in the late 1980s, Vera developed a small pit mine in Nayarit
of proven minerals ensure a 10 year productive timeframe.”
in which he invested US$1 million. During its five-year life
Under this venture, Corporativo Minero Minas de Mexico
cycle over US$20 million was generated.
has identified three projects. The first one is located in the Mexican Silver Belt, near Fresnillo’s production plant. The
Vera believes that Corporativo Minero Minas de Mexico
second project, located in Sierra Mojada, has proven lead
has an efficient model focused on an abandoned market
and silver resources and Vera predicts 13 million ounces of
niche, and while large mining corporations bill billions of
zinc. The last project is more conceptual and focused at a
dollars annually his company’s projects offer a 40 percent
grassroots level in which the company has identified lead,
recovery rate for investors. “Our sales are supported by
zinc, molybdenum, and some copper.
| INSIGHT
CANADIAN COMPANIES JOINING SUPPLY CHAIN Mexico is a very important trading partner for Canada, not least due to the significance of the mining industry in both
SEAN EMMOND Regional Manager Mexico,
countries. Since the implementation of NAFTA in 1994,
International Business
trade between both countries has grown significantly each
Development Group of Export
year but Sean Emmond, Regional Manager Mexico of EDC’s
Development Canada (EDC)
International Business Development Group, believes there 65
is room for further expansion. “In my view Canada’s share of exports to Mexico is not as high as it could be but the trend
of ways. EDC maintains open lines of communication
is moving in the right direction," he comments. "Mexico is
with Bancomext, which has a similar mandate to EDC as
among the top five destinations for Canada’s exports. For
Mexico’s export credit agency. EDC also has links with the
logical reasons, the US is Canada’s natural trading partner,
Mexican public sector through other Mexican development
and often the next step for further expansion for exporters
banks and financial institutions like NAFIN, BANOBRAS,
is Mexico, particularly in view of the benefits of NAFTA.
and FIFOMI. “There are occasions when EDC participates
The sectors where Canadian exporters have seen the most
in financing in which the Mexican development banks are
success in Mexico include mining, oil and gas, and the
also lenders,” Emmmond shares. “EDC has longstanding
automotive sector. For those three sectors, Emmond claims
financing relationships with major Mexican state owned
there is a complementary aspect of dynamism in both the
enterprises such as PEMEX and CFE. The remainder of the
Canadian and Mexican economies.
direct interaction that EDC has with the Mexican public sector is indirect through our colleagues at the Canadian
Canadian mining players are active at all of the key points
Embassy.”
along the mining value chain from exploration and project development to production, extraction, and supply. One
For mining supply companies entering Mexico, the first
of the areas that EDC is focused on is increasing the
challenge is to understand where to focus their efforts in
amount of Canadian sourced mining supply in Mexico,
order to secure orders from clients in the country. EDC
where the company works closely with Mexican and
and the Trade Commissioner Service (TCS) can provide
Canadian mining companies. “In order to be successful in
information on market opportunities and discuss market
the Mexican market Canadian suppliers must add value,”
penetration strategies with these suppliers. “In order to
Emmond explains. “EDC tries to assist with bringing the
develop business in Mexico, an important first step is to
right suppliers together with the right buyers. Especially
hire a local agent or representative who knows the market
in a low commodity price environment, mining companies
and has a network of contacts in the sector,” Emmond
are looking for ways to reduce their costs so if we can
expands. “EDC and the TCS can provide assistance in
provide them with suppliers that can do this, EDC adds
establishing these relationships.” Another challenge for
value to these miners’ operations.”
Canadian suppliers lies in gaining access to the right people at the major mining companies. EDC and the TCS
EDC puts significant effort into developing a strong
aim to facilitate this process by organizing B2B sessions
network among banks and other players in the Mexican
with mining companies that are active in Mexico, including
financial sector. “We are able to provide financing in a
as many of the active players in the mining industry in
variety of forms, including bilaterally, through participation
Mexico as possible.
in club transactions, and by involvement in syndications," he adds. "EDC’s preference is to do this alongside a
Much of EDC’s effort in Mexican mining is focused on
commercial lender, an approach we call our “partnership
helping SMEs enter the supply chains of major mining
preferred” philosophy." A component of EDC’s business
companies. “With Mexican miners we aim to open doors for
development efforts in Mexico is focused on building a
Canadian SME suppliers through matchmaking programs,”
network of contacts with local and international banks.
Emmond asserts. “We also aim to establish financing
EDC has a small team on the ground in Mexico, so it
relationships with mining companies, and then introduce
builds bridges with other financial institutions to identify
Canadian suppliers to the mining company over the life of
synergies. In tandem with these efforts EDC develops
the loan. As part of these arrangements we monitor the
relationships directly with mining companies. Interaction
volume of purchases from Canadian suppliers, recognizing
with the Mexican public sector is carried out in a number
the importance of small contracts to SME suppliers.”
| ANALYSIS
M&A MEGA-DEALS SUGGEST METALS BULL RUN For junior mining companies, cash-strapped at the best of
stock markets performing as unpredictably they did in 2015,
times, one excellent way of achieving growth and raising
it should perhaps come as no surprise that the majority of
liquidity can be through arranging mergers or acquisitions
M&A activity was focused around gold. As investors sought
between themselves. An M&A deal between two juniors can
a safe haven for their cash, the yellow metal accounted for
help both companies raise cash, spread their risk, and increase
US $13.9 billion in M&A deals across the globe in 2015, a 64
investor value. Likewise mid-cap enterprises with cash to
percent increase on 2014.
burn may choose to acquire juniors in order to diversify their 66
assets, restructure their debt, or increase production levels,
The most notable of these deals, the US$1.5 billion deal to
while eagle eyed private equity firms are always scouring the
merge Alamos Gold with Aurico gold, will have significant
horizon for opportunities to make speedy ROIs. Regardless
long-term ramifications for the Mexican market. The merger
of the nature of the deal, a healthy M&A market is a sign that
of equals deal added Aurico Gold’s El Chanate mine, which
confidence is returning to the sector.
produced more than 79,000 ounces of gold in 2015, to Alamos’ flagship Mulatos mine. Both projects are located
On a global scale M&A activity in the mining sector remained
in Sonora and will be complemented by Alamos’ advanced
fairly stable in 2015, with total deal value dropping slightly
development stage project at Esperanza, Morelos. One year
from US$44.6 billion in 2014 to US$40 billion the following
on from the merger, which was the second biggest M&A in
year according to accountancy firm EY. With international
the global mining sector behind Wandle Holdings’ takeover
MAIN AGREEMENTS, MERGERS, AND ACQUISITIONS IN 2015 Month
Original company
Project
Mineral
State
Acquiring company
January
Vista Gold
Los Cardones
Au
Baja California Sur
Invecture Group
El Crestón
Mo, Cu, Ag
Sonora
Starcore International Mines
Moly Corp February
March
San José
Ag, Pb, Zn
Zacatecas
Arian Silver
Agave Silver Corporation
Nuevo Milenio
Au, Ag
Nayarit
Cream Minerals de Mexico
Argonaut Gold
Mariana
Au, Ag
Sonora
San Marco Resources
Antofagasta Alliance
Thor
Cu
Sonora
Riverside Resources
N.D.
Margarita
Ag
Chihuahua
Radius Gold
N.D.
La Cachimba
Au
Sonora
Fidelity Holding
Alamos Gold
El Realito
Au
Sonora
Agnico Eagle Mines
Au, Ag
Jalisco
Agnico Eagle Mines
El Gavilán
Au, Ag, Cu, Zn, Pb
Queretaro
El Santuario
Ag, Au
Hidalgo
Chinipas
Au
Chihuahua
El Rayo Tecolote Tortuga Soltoro Ltd
April
Tasis Resources and Estrella Gold
San Pedro Quila
San Pedro Yago
Au, Ag
Jalisco Nayarit
SpinCo
Alianza Minerals
San Miguel Paramount Gold
Palmarejo
Au, Ag
Chihuahua
Coeur Mining
Milenio
Au, Ag
Nayarit
Rokmaster Resources
Guadalupe de los Reyes
Ag, Au
Sinaloa
Plomo
Au
Sonora
Don Ese Cream Minerals de Mexico Cangold May
Ana Paula Newstrike Capital
Source: CAMIMEX
Ejutla
Great Panther Silver
Guerrero Ag, Au
Oaxaca
Timmins Gold Corp
of Polyus Gold International, the Alamos Gold stock price has
Gold announced its intention to sell 100 percent of the
risen more than 8 percent on the New York Stock Exchange.
Mercedes mine to Premier Gold Mines through a share purchase agreement. The total value of the transaction
Another deal to affect the Mexican market was First
was negotiated at US$140 million, with US$122.5 million in
Majestic Silver’s acquisition of SilverCrest in October 2015.
cash, US$6 million in Premier Gold Mines shares, and US$3
The purchase gave First Majestic Silver its sixth producing
million in shares warrants. Perhaps most notably, Goldcorp
mine in Mexico with the Santa Elena mine in Sonora. It is
announced intentions to sell its Los Filos property in
projected to increase total production for the company by
Guerrero due to poor economies of scale, according to the
up to 5 million oz/y of silver equivalent ounces and further
company’s CEO David Garofalo.
cement First Majestic’s role as one of the leading foreign players in the Mexican mining sector. Between completion of
Despite these deals, there is still a sense that more could
the deal on October 1, 2015 to August 2, 2016, First Majestic
be done on the M&A side in the Mexican mining sector.
Silver’s share price had risen from CA$4.13 to CA$24.1 on the
Many observers lament the conservatism of the market,
Toronto Stock Exchange, a rise of 483 percent.
urging players to take a more proactive, less risk-averse approach to counter the effects of the downturn. However
Most recently, Riverside Resources provided the option
should gold and silver prices sustain their steady rally
to acquire a 70 percent stake in its Sonora Glor gold
throughout the second half of 2016, confidence will return
concession to Centerra Gold. As part of the deal, Centerra
to the markets and M&As will as always provide an excellent
Gold will be required to provide US$3.5 million in exploration
opportunity for companies of all sizes to capitalize on the
funding over the next four years. In late July 2016, Yamana
new found bullish sentiment.
Month
State
Acquiring company
Sonora
Santacruz Silver Mining
Cu, Au
Veracruz
Almadex Minerals
Rojo Resources
Au, Ag
Chihuahua
N.D.
Cerro Las Minitas
Ag
Durango
Electrum Global Holdings
Aurico Gold
Chanate
Au
Stingray Copper
El Pilar
Santa Fe Metals Corp
Cuatro Ciénegas
Calissio Resources
San Pedro
August
Cortez Gold Group
Altiplano (plant)
Ag, Au
September
Argonaut Gold
Glor
Au
SilverCrest Mines
Santa Elena
Au, Ag
Bacanora Minerals
Tule
Li
June
July
Original company
Project
Mineral
Minera Hochschild Mexico
San Felipe
Ag
Gachi
Au, Pb, Zn
Almaden Minerals
El Cobre and 21 exploration projects
Camino Minerals Southern Silver Exploration
Cu
Sonora
Alamos Gold Southern Copper
Coahuila
Philippine Metals
Michoacan
Milagros del Cobre Minería
San Luis Potosi
Starcore International Mines Riverside Resources
Sonora
First Majestic Silver Corp Alix Resources
Potosi (53%) October
CYPVAL Mining
Planta San Guillermo
Ag
Chihuahua
Cyprium Mining Corporation
La Chinche
November
December
Oro Silver Resources
El Compas
Ag, Au
Zacatecas
Canarc Resources
Private individual
Valsequillo
Ag, Au, Cu, Zn
Chihuahua
Wealth Minerals
Prospero Silver Corp
Veta Santa Rosa (San Luis del Cordero)
Ag, Cu, Zn
Durango
Golden Minerals
Firzaben
La Plata mineral beneficiation plant
Ag
Minera Contracuña
Veta Grande Minillas
Oro Silver de México Zacatecas
Au, Ag, Zn, Pb
Santacruz Silver Mining
Riverside Resources
Tajitos
Au
Teck Resources
Batamote
Cu
Private individual
Pino de Plata
Au, Ag
Chihuahua
Silver Spruce
Rofomex
Phosphate fertilizers
Baja California Sur
PEMEX Fertilizers
Grupo Fertinal
Sonora
Centerra Gold Millrock Resources
67
| INSIGHT
ROYALTY TAX STUNTS MINE DEVELOPMENT and then investors wanted to increase the financing to US$41 million with no warrants in a bought deal, which was a strong step for the company. Unfortunately, the
RON TREMBLAY
metals market fell and this came with the government’s
President & CEO of Levon
decision to implement the royalty tax. “This combination
Resources
has scared the mining companies out of Mexico and it has certainly forced Levon Resources to reevaluate its business
68
prospects,” Tremblay states. “Today, we have no need for In today’s challenging mining market, Levon Resources
financing as we are in great shape with US$25 million in
has managed to remain debt-free and well-funded. Ron
the bank, and cash in marketable securities.” Currently,
Tremblay, the company’s President and CEO, attributes
he is waiting for the market to turn and for metal prices
this to foresight and a strong strategy. “During the
to improve, and he expresses a desire to see the Mexican
upsurge of metal prices a couple of years ago, bankers
government reconsider the royalty since he believes
suggested that we should go to London and introduce our
this extra cost has encouraged mining players to look at
project to the European investment community,” Tremblay
other mining jurisdictions rather than take advantage of
explains. “When we presented the project, silver reached
Mexico’s potential.
a peak height of over US$40/oz and there was a sense of excitement surrounding the silver market.” As a result,
El Cordero is Levon Resources’ primary project located
investors saw potential in the project and this gave the
in the state of Chihuahua, and is described as one of the
company a strong position to gain access to financing.
largest undeveloped silver deposits in the world. Spread
At first, Levon Resources agreed to a US$25 million deal
across 37,000 hectares, Levon Resources has built Cordero
| VIEW FROM THE TOP
FACILITATING THE NEW MINING OUTLOOK RAUL DIAZ Exploration Manager, Latin America of First Mining Finance Corporation Q: How are companies like First Mining Finance taking
A: This business model is applicable across all mining
advantage of current bear market conditions?
markets but we are looking for mineral assets in stable,
A: In bear market conditions new business models arise
mining-friendly jurisdictions across the Americas. In the
such as the mineral bank model created by First Mining
past, easy access to financing encouraged the creation
Finance. This model encourages companies to acquire
of exploration companies and for years this resulted
assets that would not be attainable or available in normal
in tremendous development of assets across Canada.
market conditions, and hold or bank them until the market
Unfortunately, in the downturn many of these players hit
improves. Then we can sell the properties or tender
a wall and were unable to raise more money. This scenario
them for joint ventures, retaining a royalty or interest in
is less frequent in Mexico. However, we are seeing some
the projects. At the moment, there are many resource
M&A activity such as Timmins Gold acquiring Newstrike
companies that are severely undervalued and this has
and First Majestic Silver’s takeover of SilverCrest. In
allowed us to acquire instead of exploring and developing
general, opportunities abound in Canada and given that
new resources.
the country hosts some of the most productive and unexplored mineral belts in the world where quality assets
Q: In which countries has First Mining Finance’s mineral
have already been developed, we see it as particularly
bank business model been successfully implemented?
attractive.
into an attractive porphyry target for silver, gold, zinc,
acknowledges that mining is an important component
and lead. A Preliminary Economic Assessment has been
of the Mexican economy and believes the government
successfully completed on 30 percent of the resource,
should be more proactive in encouraging its development.
with a new one on the entire resource when the metal
The result of the royalty tax was that a high percentage of
prices improve. Other competitive advantages include the
the exploration companies left Mexico, looking for better
infrastructure close to the project since it is located close
opportunities in the US and Canada.
to power lines and plentiful water resources. “The location is convenient for the development of tailing dams so
“Mexico must be on the cutting edge and encourage
practically all variables are aligned to set up an operating
more mining investment through the implementation
mine,” Tremblay boasts. “The pit is relatively close to the
of alternative incentives like tax breaks due to the levels
main highway and there are already a few kilometers of
of risk now involved.” Foreign players like Levon must
dirt roads established, which gives us the opportunity to
compete with major local corporations like Industrias
easily transport the materials.”
Peñoles and Grupo México, and Tremblay contends that these conglomerates have monopolized a large portion
One negative of Tremblay’s experience in Mexico has
of the rich and easy to develop projects, and it is up to
been the royalty tax, and he shares that it has even
the new companies to invest and find new deposits and
prevented Levon Resources from moving forward with
bring wealth to the country. “Without a doubt Mexico
the El Cordero project. “The combination of the royalty
has strong deposits, but so too does Argentina and Chile
and the depressed metal prices has muted our interest
and these countries are putting incentives in place to
and that of other investors in the country,” he laments.
encourage operations,” he comments. “The fiscal reforms
“Due to this situation, we have decided to hold onto
completely transformed the horizon for us because the 7.5
our property and focus on remaining debt-free. We
percent royalty was not included in our projections, and
also eliminated our cost overheads and now we are
it negatively affected our future value. If that tax had not
stagnant until the market changes with the hope the
been imposed, Levon Resources would now be moving
Mexican government reconsiders its position.” Tremblay
toward the feasibility study.”
Q: How has the company been able to complete a number
ounces in the mineral resource and those that have the
of acquisitions without share dilutions?
potential to be mined considering current metal prices.
A: When the company went public, we raised nearly
The assets must be located in safe jurisdictions free of
US$5.8 million and one of the reasons we have maintained
environmental and social conflicts. Producing companies in
a healthy corporate treasury is that we are using shares
the future will look to replenish their reserves and they will
for acquisitions. We are using cash wisely, and some of
seek companies like us. Our biggest strength is the number
the recent acquisitions we have completed provided cash
of ounces we have and at the moment we are looking for
flow in addition to mineral assets. Our goal was to reach
partners that will help develop these great projects.
10 million ounces in two years and so far it has been eight months and we have already reached 9 million ounces of
Q: What are the qualities you look for in a partner and
gold equivalent. We have maintained a stable stock price
what are the most successful partnerships First Mining
since we went public and the company has appreciated
Finance has carried out?
considerably.
A: Only recently have we begun to seek partners and we have already attracted Industrias Peñoles. This
Q: What have been the most attractive assets First Mining
partnership is in its early stages and given its reputation
Finance has acquired that have left the company in a
we believe it can advance the projects optioned and make
positive standing in the market?
a great success story. In a partner, we look for expertise,
A: With the acquisitions of Coastal Gold, Gold Canyon
technical and financial capacity, and a solid reputation.
Resources, PC Gold, and Clifton Star, First Mining Finance
When making deals we must have the company commit
now holds a portfolio of 21 projects in its mineral bank. In
a certain amount of funds to exploration. At this stage,
Mexico, however, we have a different category of mineral
it is important not to pressure too much for large
properties, most in early stage development, some in the
payments and be very precise in where the investment is
grass root stage, and only a few with resources. In Mexico,
to be allocated. The company must have the freedom to
three of the projects that have been drilled have resources.
concentrate on the areas it wants to explore and be given
When acquiring the assets, we look at the quality of the
the chance to test these targets.
69
GOLD
4
Gold’s lofty 2011 price of US$1,900 is a distant memory but prices have been on a steady upward trajectory. After a drop of around 10 percent in 2015, 1Q16 saw gold rally 16 percent. The Bank of England cut interest rates in early August 2016, nudging prices to a 100-day average high of US$1,280. Global gold production also increased and Mexico retained its position among the world’s top gold producers at number eight. Goldcorp’s Peñasquito maintained its title as Mexico’s premier gold producer and was eighth on a global scale with 26.8 tons in 2015. The beginning of 2016 saw Mexico’s projects stand out on a global scale due to its commercially viable gold deposits, friendly and stable mining environment, and favorable mining conditions.
This chapter will provide an overview of the country’s gold mining capabilities. The key players operating in Mexico will discuss their strategies, achievements, and priorities. Juniors and foreign investors explain how they are traversing the new landscape and finding innovative ways to optimize operations and generate profits. The chapter offers a greater level of analysis, with maps and spotlights of the most relevant gold mining concessions in the country. Interviews with CEOs, Presidents, and Directors General reveal the future of the gold mining industry.
71
Primero Mining Corp. (TSX: P, NYSE: PPP) is a Canadian-based precious 72
metals producer that owns 100% of the San Dimas gold-silver mine and the Cerro del Gallo gold-silver-copper development project in Mexico, and 100% of the Black Fox mine and adjoining properties in Ontario, Canada.
- Awarded “Socially Responsible Company” by CEMEFI for 5th consecutive year
- San Dimas certified “Clean Industry” by PROFEPA
- San Dimas power generated by Primero-owned hydroelectric facility
- ~$1 million investment to the Tayoltita community hospital
- Employs over 1,100 people in Mexico Our core values guide us and Primero is proud of our commitment to Mexico.
- 97% of all goods and services procured in Mexico
Focused on Production. Focused on Growth.
www.primeromining.com
| CHAPTER 4: GOLD 74
VIEW FROM THE TOP: Gustavo Noriega, Agnico Eagle Mexico
76
MAP: Mexico's Main Gold Mines
79
VIEW FROM THE TOP: Martín Aguilar, Primero Mining
80
VIEW FROM THE TOP: Alberto Orozco, Argonaut Gold
80
INSIGHT: Robert Eadie, Starcore International Mines
82
VIEW FROM THE TOP: Euridice Gonzalez, McEwen Mining
83
INSIGHT: Armando Ortega, New Gold
84
INSIGHT: Randy Reifel, Chesapeake Gold
84
INSIGHT: Keith Piggott, Goldgroup Mining
86
MINE SPOTLIGHT: Peñasquito
88
VIEW FROM THE TOP: John McCluskey, Alamos Gold
89
VIEW FROM THE TOP: Akiba Leisman, Marlin Gold Mining
90
VIEW FROM THE TOP: David Wolfin, Avino Silver and Gold Mines
92
VIEW FROM THE TOP: José Berlanga, Reyna Mining
93
VIEW FROM THE TOP: Fred Stanford, Torex Gold Resources
73
| VIEW FROM THE TOP
GOLD GIANT SEEKS NEW GROWTH GUSTAVO NORIEGA Operations Director of Agnico Eagle Mexico
74
Q: How does increasing Agnico Eagle's participation
million ounces of silver. In 2014, we inaugurated the La
in the Mexican market boost its gold production, and
India mine, located 200km east of Hermosillo, Sonora.
how do its strategies enable the company to address
This mine has proven and probable reserves of 0.9 million
operational and production challenges?
ounces of gold. Agnico Eagle has become one of the
A: Agnico Eagle is a company created under Mexican
largest producers of gold in Mexico, reaching 350,000
laws with Canadian capital. With close to 60 years of
ounces annually between the three operations. For our
experience in the mining industry on a global level and
business, Mexico not only represents almost 20 percent
nine in Mexico, our philosophy has been to grow not
of total production, but it is also an important investment
only in terms of operations, but also by developing our
destination in which we work every day to discover new
database of collaborators and promoting progress in the
mineral deposits.
communities surrounding our mines. Our objective is to build a sustainable, high quality, and low risk business,
Q: What is the decision making process in the adoption
which is why we have focused on a sustained growth
of new technologies and processes, and what stepping
that allows us to find quality gold deposits and invest
stones are used to increase efficiency in production?
consistently in exploration activities, even when market
A: We are always seeking to maximize our resources and
conditions represent a challenge for the industry.
we use cutting edge technology in all our operations. Cost per ounce of the three mines is variable and depends a
Our vision has been to grow our presence in Mexico.
great deal on market value, which is one of the challenges
We began operations in the country in 2009 with the
we face nowadays in the industry. However, we have
Pinos Altos mine, our cornerstone operation in the Sierra
competitive operations. We invest in a way that allows us
de Chihuahua, and that we have turned into one of the
to optimize and accelerate our processes, and an example
primary producing gold mines in the country. It contains
of this is in our new mill in Pinos Altos.
proven and probable reserves of 1.5 million ounces of gold and 37.5 million ounces of silver. Later, we developed
Q: What strategies are implemented to maintain good
the Crestรณn Mascota satellite operation, with proven and
relations with key suppliers?
probable reserves of 0.2 million ounces of gold and 1.6
A: For our company relationships with all agents involved in the development of our operations, including suppliers, are extremely important. This forms an integral part of our operative and growth strategy. Our objective is to operate within a work environment with high health and safety standards. We believe that by working together we can succeed and promote the wellbeing of our partners and suppliers. In order to achieve these goals, we implement engineering principles for the design and operation of our installations. We offer adequate training to all employees
Pinos Altos contains
proven and probable reserves of 1.5 million ounces of gold
for the development of their careers at all levels of exploration, construction, development, and operation. We have workplace health and industrial hygiene programs, and we offer the necessary tools to carry out the work in a safe and efficient manner. We also operate under a preventive culture with a high level of preparation in order to overcome potential emergency situations.
Q: What is your assessment of the success of the
the funds are returned to the communities, boosting the
allocation of the mining fund?
development of mining states and communities.
A: For Agnico Eagle, our relationship with the players involved, especially with the communities surrounding our
Q: What are the main priorities for Mexico’s operations
mines, is extremely important. We have a commitment to
that reflect the opportunities and commitments of the
generate prosperity and we firmly believe in promoting a
company to the local mining market?
culture of excellence based on the pillars of trust, respect,
A: We are seeking new properties and we have some internal
equality, family, and responsibility. Proof of this can be
projects in early stages. We have redoubled our efforts
seen by the fact that we have received certifications like
in exploration, and without doubt, adding an advanced
Socially Responsible Company (ESR) from the Mexican
exploration project to our portfolio is a priority. Although it is
Center of Philanthropy, and the Clean Industry award from
true that we have been successful in exploration and we have
PROFEPA. We have also been awarded the Gilberto Rincón
managed to increase reserves in our projects, Pinos Altos,
Gallardo distinction from the Ministry of Labor for being
La India, and now El Barqueño have all been acquisitions.
an Inclusive Company and a Family Friendly Company,
We will continue exploring while simultaneously evaluating
and we have been recognized for having implemented the
properties to acquire in a more advanced stage. In order
Gender Equality Model by the National Women’s Institute.
to achieve this we must have the absolute support of the
As well as obtaining the H Certificate for clean camp
company and have the resources to make an important
services, we have recently been recognized as the most
acquisition and continue with planned exploration. However,
advanced company in Mexico that is working to eliminate
it is true that the Mexico Division has to compete with other
child labor with the “Mexico without Child Labor” award
divisions for projects in Europe and North America. This is
given by the Ministry of Labor.
why it is necessary to work closely with our representative organization, as well as with the federal government, in order
We are also working actively with all three levels
to regain the competitiveness of Mexico as a mining country,
of government in order to achieve progress in the
not only in terms of the quality of deposits or personnel
communities in which we operate. Agnico Eagle Mexico
training, but also in terms of competitiveness as a country.
forms part of the committee charged with defining the
This competitiveness is essential for any activity. In the
allocation of the Regional Sustainable Development
interests of all parties, we must make this sector attractive
Fund for Mining States and Municipalities. We represent
for national investors and for those who are prepared to
companies in Chihuahua with the goal of ensuring that
invest in the mining industry in Mexico.
75
I MEXICO'S MAIN GOLD MINES
3 4 3
4
5
11
5
11
6 6
8
7
8
7
1
9
9
10
10
1
76
12
16
16
12
13
13 14
14
19 17 18 20 19
20
18
17
21 21
15
23 23
15
22 22
24
28 28
24
27 27
30 30
Production
25 25
2
Development
2
29 29
31 31
Closed/Abandoned
Number
33 32 32
26 26
Project
Company
Stage
State
1
San Felipe
Minera Frisco
Production
Baja California
2
San Antonio
Argonaut Gold
Development
Baja California Sur
3
Soledad-Dipolos
Fresnillo
Production
Sonora
4
La Herradura
Fresnillo
Production
Sonora
5
Noche Buena
Fresnillo
Production
Sonora
6
El Chanate
Alamos Gold
Production
Sonora
7
San Francisco
Timmins Gold
Production
Sonora
8
Cierro Prieto
Goldgroup
Production
Sonora
9
Santa Gertrudis
GoGold Resources
Development
Sonora
10
Las Mercedes
Yamana Gold
Production
Sonora
11
La Cecilia
Chesapeake Gold
Development
Sonora
12
La Colorada
Argonaut Gold
Production
Sonora
13
La India
Agnico Eagle
Production
Sonora
14
Mulatos
Alamos Gold
Production
Sonora
15
Alamo Dorado
Pan American Silver
Production
Sonora
16
Dolores
Pan American Silver
Production
Chihuahua
17
Santa Maria de Moris
JV Hochschild (70%) Exmin (30%)
Production
Chihuahua
18
Ocampo
Minera Frisco
Production
Chihuahua
19
Pinos Altos
Agnico Eagle
Production
Chihuahua
33
39 39
Number
35 34
34
Project
Company
Stage
State
20
Concheño
Minera Frisco
Production
Chihuahua
21
Palmarejo
Coeur Mining
Production
Chihuahua
22
San Julián
Fresnillo
Development
Chihuahua
23
San Francisco del Oro
Minera Frisco
Production
Chihuahua
24
El Gallo
McEwen Mining
Production
Sinaloa
25
Nuestra Señora
Americas Silver Corp
Production
Sinaloa
26
La Trinidad
Marlin Gold
Production
Sinaloa
27
Ciénega
Fresnillo
Production
Durango
28
Guanaceví
Endeavour Silver
Production
Durango
29
San Dimas
Primero Mining
Production
Durango
30
El Castillo
Argonaut Gold
Production
Durango
31
Pyrites Plant
Fresnillo
Development
Zacatecas
32
Saucito
Fresnillo
Production
Zacatecas
33
Fresnillo
Fresnillo
Production
Zacatecas
34
Peñasquito
Goldcorp
Production
Zacatecas
35
Tayahua
Minera Frisco
Production
Zacatecas
36
Camino Rojo
Goldcorp
Development
Zacatecas
37
El Coronel
Minera Frisco
Production
Zacatecas
38
Cerro de San Pedro
New Gold
Production
San Luis Potosi
39
El Porvenir
Minera Frisco
Production
Aguascalientes
40
Bolañitos
Endeavour Silver
Production
Guanajuato
41
Guanajuato
Great Panther Silver
Production
Guanajuato
42
El Cubo & Las Torres
Endeavour Silver
Production
Guanajuato
43
San Martin
Starcore International Mines
Production & Advanced Exploration
Queretaro
44
La Guitarra
First Majestic Silver
Production
State of Mexico
45
Esperanza
Alamos Gold
Production
Morelos
46
El Limon-Guajes
Torex Gold
Production
Guerrero
47
Ana Paula
Timmins Group
Development
Guerrero
48
Morelos Gold
Torex Gold
Production
Guerrero
49
Los Filos
Goldcorp
Production
Guerrero
50
San Jose
Fortuna Silver
Production
Oaxaca
51
El Águila
Gold Resources
Production
Oaxaca
35
36 36
37
37
38 38
40 41 42 40 41
42
43 43
44 44
45 45
46 47 48 49 46
47
48
49
51 51
50 50
77
78
| VIEW FROM THE TOP
LONG TERM AMBITIONS OF A CANADIAN OPERATOR MARTĂ?N AGUILAR Mexico Country Manager of Primero Mining
Q: What are the primary advantages and disadvantages
A: In 2014, San Dimas produced 2,460t/d of gold ore, with
you have seen as a foreign operator working within the
that figure rising to 2,720t/d in 2015. Over the course of
local mining industry?
the past two years we have updated and improved the
A: Although Primero Mining is based in Canada, its focus has
processing plant, adding new tanks, an extra mill, and a new
always been in Mexico. The company was formed in August
filter. These developments all contributed to the increase in
2010 with its acquisition of the San Dimas mine on the
production in 2015 to 2,720t/d, and we want to further build
border of Sinaloa and Durango, followed by the purchase
on that success by achieving 3,000t/d in the near future.
of Cerro del Gallo in Guanajuato in 2013. Mining is always
Of course, in order to accomplish this goal we depend on
a risky activity, whatever the country, but I believe that
the results of our exploration projects. One development
Mexico offers a number of opportunities for foreign mining
that should enable the company to increase expansion is
companies despite the challenges. First and foremost,
the acquisition of the Expanded Lechuguilla, to the south of
it has a vast array of mineral reserves, which is always
San Dimas, which was completed in June 2016. We recently
the most important and decisive factor for exploration
came across topography in this previously unexplored area
companies. Our mine at San Dimas is located in an area that
that suggested that there were further mineral veins, so we
is accustomed to mining activities since operations have
decided to buy the mineral concessions and we expect to
been ongoing for over 100 years, so we have experienced
begin more thorough exploration work before the end of
remarkably few challenges from local communities.
2016. Progress will take some time because the geology makes drilling complicated and time consuming but the
Q: What technology is in place at San Dimas to make the
underground infrastructure is already in place, which is
mine more sustainable and environmentally friendly?
a solid start. Exploration will be crucial to continuing the
A: A total of 75 percent of the energy used at San Dimas
momentum we have created at San Dimas, because we
is generated by a hydro-electric plant owned by the
mine our reserves down continuously.
company. We redirect water from a jungle river 45km away from San Dimas into a dam, which is 700m above
Q: What have been the latest developments on the Cerro
the plant, and we then use the difference in elevation
del Gallo project?
to generate vast quantities of clean electrical power.
A: It is now in the advanced development phase, and we are
Between the hydroelectric plant and the mine there are a
currently in the process of obtaining permits to continue
number of indigenous communities with whom we share
work on the project. In addition to permits, we are waiting for
this energy. Indeed, were it not for Primero Mining these
gold prices to increase further before proceeding with drilling
people would not have access to any electricity. Another
work on the 18,000ha we own there. However, Cerro del
important factor of our environmental work is our tailings
Gallo is a well-known mineral deposit with potential for both
handling philosophy. At San Dimas, we have invested
underground and open pit mining development, so we are
approximately US$25 million over the last 10 years to
excited for what the future holds for that particular project.
fund construction of a dry stack tailings storage facility
Our principal focus will continue to be San Dimas, and more
in order to protect the surrounding ecosystems. This is
specifically we will concentrate on developing the 30,000ha
state-of-the-art technology using belt filtration to ensure
we have recently acquired at Expanded Lechuguilla. By
that waste produced from the mine is fully dried when it is
continuing to invest in Mexico, Primero Mining hopes to
deposited, and therefore drastically limiting the impact of
become a mid-sized operator in the medium to long term,
our mining activity on the environment.
and with optimization and expansion of our existing mines and potentially even further acquisitions our goal is to be
Q: What did the company do differently to achieve the
producing 400,000oz/y between our operations in Canada
increase in production at San Dimas?
and Mexico.
79
| VIEW FROM THE TOP
UNWAVERING COMMITMENT OF GOLD PRODUCERS ALBERTO OROZCO Vice President of Exploration Mexico at Argonaut Gold
80
Q: What have been the major changes Argonaut Gold has
projects. These are San Agustín in Durango, San Antonio
implemented in response to the current market situation?
in Baja California Sur, and Magino Gold in Ontario, Canada.
A: We are fully committed to all of our projects, from our operating mines to those in development. Our
Q: How can joint ventures and exploration agreements
ambition remains unchanged, as we want to grow into
help to expand Argonaut’s reach in the market?
an intermediate, mid-tier producer, and to achieve this
A: Argonaut Gold’s historic growth strategy has been
we had to make some changes to our business model,
formed surrounding acquisitions, and during difficult
given the current market conditions. The focus has been
times, we also carry out option agreements to explore
to reduce costs following the drop in gold prices and to
certain sites. While the industry is troubled, there are many
increase efficiency across all of our processes. Naturally,
opportunities that will arise. Projects will become available,
our exploration budget has been reduced and this is
and companies will be more willing to consider favorable
one of the first things to occur during times of hardship.
agreements in order to move forward. We treat JVs on
However, we have not stopped all of our key activities and
a case by case basis using our in-depth evaluations. All
we are sustaining all operations while keeping costs low
companies are struggling since there are fewer resources
and evaluating the possibilities for three key development
and share prices are lower, so it would have to make a lot
| INSIGHT
NEW NEED FOR A MINING REFORM ROBERT EADIE
The second acquisition was the El Altiplano processing
President & CEO of Starcore
plant, which needed financing and did not have the ability
International Mines
to raise funds. “When we acquired it, it had some drums and a couple of buildings,” Eadie boasts. “We built the
In today’s mining industry organic growth seems to be
facility from the ground up in the middle of the desert.”
a thing of the past. Inorganic growth is one of the only
This processing plant will help small and medium sized
ways to generate and sustain the required development
miners convert their production into doré bars. However,
companies need to remain competitive. “In the past two
there will be a steep learning curve for the small operators
years, we have acquired two companies that have allowed
because according to Eadie, they expect more than just
us to continue building internally and organically,” shares
support to produce their product as they are accustomed
Robert Eadie, President and CEO of Starcore International
to financial aid from the government. El Crestón is currently
Mines. The company's first acquisition was the El Crestón
at the pre-feasibility stage, meaning there has been a large
molybdenum project in Sonora that had gone into
amount of engineering work carried out, which entailed
bankruptcy, with the belief that it was an undervalued
approximately 50km of drilling. It is an advanced project
asset, which, once the commodity prices pick up again,
missing only one more outstanding study before it is ready
can be a very lucrative business option. “We might find a
to go into production. “All the information from that project
company that specializes in molybdenum and we would
is digitalized, and as soon as the ejido issue we have there is
focus on the gold by either selling or trading it,” he reveals.
resolved, then we can resume our activities,” Eadie explains.
of sense for us to acquire something. If we were to acquire
A: Argonaut Gold is relatively traditional in its mining
a project it would have to be ready for production and at
methods and we are highly diligent in the hydrological,
the moment the company is not as prepared as it was in
metallurgical, and environmental studies we carry out.
the past to grasp these opportunities. The Magino Gold
We have been lucky to find quality deposits that are well
project is of a larger scale and now we are looking for
tailored to open pit heap leaching, and the same applies to
something smaller.
projects like La Colorada, San Antonio, and El Castillo. Those that have potential to grow in the future are in our hands
Q: What key decisions have you made to optimize costs in
and the remainder we will auction, JV, or divest. Because
El Castillo and La Colorada?
of the difficult times, we will begin to see more land and
A: In general terms, we have been reviewing our purchasing
concessions opening up. This happened in the early 2000s
contracts and, while the industry finds itself in a precarious
during a crisis and a great deal of ground became available.
position we continue to increase our production. Capital
As time progresses we will see attractive projects that have
expenditures are being evaluated in order to keep what is
drilling and studies becoming available.
truly necessary, and through this endeavor we also help our suppliers. The new taxes that were implemented in
Q: What main strategies have enabled the company to
2013 are high, and while I doubt they will be eliminated
maintain its active exploration program?
some fiscal incentives should be implemented in order to
A: Our exploration projects will continue and we will
help companies survive these market conditions. A major
develop our networks in the country even further. Mexico
obstacle is the non-deductibility of exploration expenses,
is a country worth investing in, and it has yet to be fully
as these can only be deducted over a 10-year period. This
explored. Argonaut Gold goes a step beyond the traditional
inhibits exploration, which is a critical concern because if
and brings added value to the communities in which it is
companies do not invest in exploration then it will be difficult
present. For example, our San Antonio project has some
for mining to continue at the same pace as it has in the past.
interesting hydrological benefits, and by relocating the water rights when it begins production it will benefit the
Q: What has been the progress of your other exploration
water basin in the region. Given the proximity to the sea,
stage projects, and what is needed for these to take off
there is a saline intrusion that will be mitigated to help the
and begin the next stage?
area suffering from water scarcity.
Starcore is proud of its dry tailings stack with a relative
are rolling out an initiative to identify each worker with a
moisture level of 20 percent that is installed at its San
tag so we will be able to locate everyone underground,”
Martín mining operations. This is possible because the
he shares. “Finally, we have a trained rescue team that
company extracts between 75-80 percent of the chemicals
recently rescued two miners after the federal government
from waste for recycling. “Our mine is one of two in Mexico
requested our assistance in a mercury mine collapse.”
that recycle all the used chemicals, and people tend not to understand the concept until they see the innovation
Eadie explains that Starcore brought litigation against the
involved in the tailings,” Eadie comments. “Regarding
government after the mining tax was imposed, and he
operations, safety is a priority for us so we make sure
believes that the tax will be revoked. “I believe that the
that all procedures are followed.” Starcore also has a
tax has affected the image of stability in the country, and
greenhouse to grow vegetables that are used in its kitchen
when added to insecurity issues the country currently faces,
daily, and the excess the mine accumulates is sold below
this creates a negative perspective of Mexico,” he laments.
cost to the people working at the mine. Additionally, Eadie
“Mining companies like Starcore International have always
shares that the operator negotiates with local retailers to
aimed to provide sustainable growth for communities.
ensure discounts for mine workers, which allows the mine
Moreover, I do not believe that the government stepping
to work as a family.
into the process will help them.” He claims that compared to the oil and gas industry, mining accidents are insignificant.
Eadie believes that the digital databases used by the
“Nevertheless, I understand the reason behind the imposition
company are not only making it more competitive but
of the mining tax under the Energy Reform because this
that this phenomenon is becoming an industry standard.
was needed to improve the country’s performance,” he
Moreover, Starcore also uses lights with lithium batteries,
concedes. “The Energy Reform is the turning point for
creating greater efficiencies, an extended lifecycle, and
the country in many ways but the authorities should also
very little wasted energy. “From a safety perspective, we
consider a mining reform.”
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| VIEW FROM THE TOP
JUNIOR MINER GOES FROM STRENGTH TO STRENGTH EURIDICE GONZALEZ Mexico Country Manager of McEwen Mining
82
Q: How did the company ensure growth in the midst of
A: The key operational challenges for McEwen were our
a low metal price environment, causing McEwen Mining
growth from an exploration company to an operating
(NYSE:MUX) shares to increase 12 percent?
company
A: One of the most influential reasons for the increase
productive in the shortest time possible. Some of our
in our share price and trading volume was related to the
inherent production and operational challenges include
rebalancing indexes. McEwen Mining was included in the
grade control, managing and achieving recovery rates,
Van Eck Vector Gold Miners ETF (GDX), the Standard &
managing stripping costs, quantities, and sequencing,
Poor’s/Toronto Stock Exchange Composite Index (S&P/
and dealing with weather conditions. Moreover, in Mexico
TSX), and gained an increased position in the Market
specifically, there are security issues, VAT recovery, and
Vectors Junior Gold Miners ETF (GDX-J). McEwen Mining
permitting issues to consider. In terms of taxation, the
has a high beta to gold ratio of 2.7 over a three-year
new tax reforms adversely impact our business so we
average, meaning that when gold moves up MUX moves
have decided to challenge them. We are also dealing with
strongly alongside. The company is working toward
new customs requirements, and this impacts our invoicing
inclusion on the S&P 500. There are very few mining
process. There are some silver linings that make Mexico
companies that can be included in the S&P 500 because
an attractive jurisdiction to work in such as the peso
the company must be incorporated in the US in order to be
devaluation, which has provided some temporary relief to
eligible. McEwen is Colorado incorporated making us one
offset rising costs. Nevertheless, only about 30 percent to
of five companies able to do so. However, we would also
40 percent of vendors are paid in pesos.
and
the
drive
to
become
efficient
and
need a market cap of US$5 billion and three consecutive quarters of retained earnings.
Q: What have been the key investments and decisions the company has made in order to optimize processes and
Q: What have been the main accomplishments and
costs in the El Gallo mine?
highlights of McEwen Mining in Mexico?
A: The main reasons for the extension of the El Gallo mine
A: We had an extremely successful 2015 at the El Gallo
lay in the prospect of a longer life for the El Gallo 1 mine.
mine, which contributed to our free cash flow. Our grade in
The challenge has been in lowering costs to make lower
the open pit last averaged 4.3g/t of gold, which is almost
grade ores profitable and in expanding exploration near
double the reserve grade of 2.2g/t. We also had improved
the operating mine. The major improvements made at El
recoveries at the mine, and this contributed to the overall
Gallo include a major modernization and expansion of the
success of our operations and increased cash flow. The third
process plant and crushing plant to be able to process up to
way we were able to lower our costs involved renegotiating
4,500t/d. Two leach pad expansions have ensured efficient
our agreements with our contract miners. All three of these
leaching of ores. Additionally, the focus on safety, the
items led to improved financials and operations. McEwen
installation of new liners in all process ponds, and increased
has maintained an extremely healthy balance sheet with
physical security has all helped ensure the mine is operated
over US$42 million in liquid assets and cash, no debt, and
in a safe, secure, and environmentally responsible manner.
an anti-royalty policy. Nevertheless, our decision to buy
El Gallo 2 is fully permitted and we are hopeful that with the
Coeur Mining’s NSR tiered royalty on El Gallo was simple
improving silver price we will be able to make a decision to
as it provided us a cost saving of US$40/oz, which makes a
proceed with this project soon. Given the security issues in
significant impact on our balance sheet over the long run.
Sinaloa, and the fact that US$8.5 million of gold was stolen last year, we have fortified the mine and refinery. We have
Q: What are the key production and operational
installed cameras throughout the property, put in additional
challenges the company has encountered in trying to
fencing, and implemented additional security measures and
reach these goals in Mexico?
procedures for personnel.
| INSIGHT
SOCIALLY RESPONSIBLE MINING PRACTICES Miners know that it is easy to be productive in times of high commodity prices but when prices dip, being a low cost
ARMANDO ORTEGA
producer makes a difference among competitors, according
Vice President Latin America
to Armando Ortega, Vice President Latin America of New
of New Gold, and Managing
Gold, and Managing Director of Minera San Xavier. The
Director of Minera San Xavier
message he wants to send to investors and stakeholders is that New Gold is able to produce under extremely competitive conditions. “The most important aspect of
“Even if the cyanide is highly diluted and used in a closed
our operations is focusing on the factors we can control,”
circuit with all sorts of safeguards people tend to feel
Ortega shares. “The price of gold, unfortunately, is not one
uneasy about its implications.” New Gold is among the few
of them.” Minera San Xavier, New Gold’s Mexican mining
Mexican companies that voluntarily applied for and received
subsidiary, contributed to lowering the company’s costs
accreditation from the International Cyanide Management
considerably. New Gold engaged in an extremely ambitious
Code, which certifies that the company employs the proper
project by reevaluating all aspects of operations. Although
management, use, transportation, and disposal of cyanide
the company closed 2014 with high costs due to several
in a scrutinized custody chain. As a result, Ortega believes
factors, among them a dedicated stripping exercise within
that New Gold has proven its commitment to ensuring that
the mine, in 2015 costs have been significantly reduced.
it operates within stringent environmental guidelines.
The company’s Cerro de San Pedro mine was recently
In terms of environmental obligations there are almost 300
awarded the distinction Safe Company Level Three by
biophysical covenants that must be honored by mining
the Ministry of Labor. “Due to misconceptions regarding
companies. New Gold has a commitment to reforest more
lack of safety in the mining industry, it is important for
than 350 hectares, which roughly equates to the size of
our company to be awarded with the accolade in order
the site impacted by operations of the San Xavier mine.
to change that view,” Ortega stresses. However, having
The company has taken a proactive approach since the
produced more than 3 million working hours with no lost
obligation only applies after the mine closure but having
time incidents (LTI), and achieving more than 780 days
begun the program four years ago, New Gold has already
without LTIs, New Gold is proof that mining can be a safe,
met the requirements. “The second stage is to ensure the
sustainable, and regulated business. Ortega indicates that
survival of the trees and cacti we planted, and we have
one of the factors associated with this success is Optalert,
involved the communities, hiring local workers and paying
a system that works with lenses connected to a central
for environmental services,” Ortega points out. New Gold
station and reads the movement of the worker’s eyes, in
will also restore 144,000 tons of old mineral residues left
order to detect worker fatigue. “There are more, similar
behind by ASARCO in a nearby location. “One of our
technologies employed in New Gold mines that contribute
values is integrity, and we believe that this is the right thing
to the overall culture of safety as a primary objective of
to do,” Ortega emphasizes. “This remediation is extremely
operations, helping us maintain our primary, corporate,
complex and costly because we will move the residues to
‘Zero-Harm’ policy,” Ortega boasts.
a special cell with environmental safeguards, and we will seal it to ensure no leakage.”
The San Xavier mine is adjacent to the colonial town of Cerro San Pedro so, according to Ortega, operationally
The social aspect is the toughest regarding the closure plan,
every day is a challenge. The National Institute of
says Ortega, and Cerro San Pedro is a town that is aware of
Anthropology and History (INAH), together with the
the impacts of an inadequate closure as a result of its long
Ministry of Defense (SEDENA), enforced stringent vibration
mining history. Two years ago, New Gold laid the foundations
limits for detonations in order to ensure that tremors do not
for the closure by providing adequate information on its
jeopardize two colonial churches in the town. The mine was
implications before recruiting an independent NGO to act
discovered in 1590 and exploited as a huge underground
as the liaison between the main community stakeholders
mine but since 2007 it has been operated as an open pit
and the company. As a result, the company learnt that many
mine. “The metallurgical processes we perform call for the
would continue working in the mining industry, while others
use of cyanide, which is environmentally challenging due to
requested support for personal enterprises or employment
common misconceptions about its danger,” Ortega shares.
opportunities elsewhere.
83
| INSIGHT
DEVELOPING THE WORLD’S LARGEST GOLD AND SILVER MINE our day to day operations,” he explains. For exploration, weaker metal prices sometimes provide opportunity to generate more prospects that otherwise might not be available since capital markets affected by bearish metal
RANDY REIFEL
prices will impact liquidity and access to financing.
President of Chesapeake Gold Chesapeake has worked in several states in both northern and southern Mexico and Reifel shares details of his most 84
Chesapeake Gold discovered El Sauzal in Chihuahua state,
memorable experiences. “In Oaxaca, we had a very difficult
and the discovery then went on to become the largest
time doing business with the communities in terms of
gold mine in Mexico until about five years ago, attracting
educating them about the mining process especially from a
a stampede of Canadian investment and exploration
grassroots perspective,” he comments. “From our experience,
activity in the country. Although Randy Reifel, Chespeake’s
the cost of doing business and social license is higher in
President, believes that the country has high potential
Oaxaca than our experience in northern Mexico.” As a result,
mineral discoveries, there are also increasing challenges
the company decided to focus its exploration efforts more
compared to 10 years ago. “Security is a growing issue and
in the north, and it currently has projects in Durango and
negotiating with the ejidos has become more engaging and
Sinaloa. In fact, Chesapeake recently completed an updated
costly. Fortunately, over time we have developed a network
pre-feasibility study on its Metates mine in Durango, which
and gained the trust of the communities where we work,”
is the largest undeveloped gold and silver deposit in Mexico.
he shares. This conflict also extends to government policy,
“The pre-feasibility study demonstrated that Metates has the
he says. While in Durango and Sinaloa he has seen a strong
option to be built as a smaller mine producing 30,000t/d,
political will to see projects advanced to construction, the
and internal cash flow can largely fund the operation to full
new tax policy has made Mexico less competitive than other
scale capacity of 90,000t/d,” Reifel boasts. Few world class
nations. “However, Chesapeake is an exploration company,
deposits are scalable due to their remote location, lack of
and as such the low commodity prices don’t directly impact
infrastructure, and other factors.
| INSIGHT
COMPANY BUOYED BY PRODUCING MINE KEITH PIGGOTT
Piggott aims to increase gold production to 1,50oz/m.
Chairman & CEO of Goldgroup
“We are finalizing this optimization process and we
Mining
also underwent a major management analysis to further reduce costs,” he comments. “Our current sustaining
Goldgroup is a publically traded mining operator listed
cost is around US$850/oz and we can maintain that
on both the Toronto Stock Exchange (TSX) and Mexican
production.”
Stock Exchange (BMV), as well as trading shares on the Over-The-Counter (OTC) exchange. However, just a few
Given the limited amount of resources Goldgroup had
years ago, Goldgroup’s Cerro Prieto mine was the only
access to, the company was forced to invest out of cash
asset in operation, and during 2014 it was a high cost, low
flow. Recovery was carefully studied so the operator
recovery property. “In 2015, we invested in a process to
opted for very fine crushing and agglomeration, which
increase our fine crushing capacity and agglomeration,
provides higher recovery. “In 2014, our recovery was
which
he
below 50 percent, in 2015 it reached 60 percent, and
explains. In 2014, Goldgroup’s gold recovery per month
now we expect our recovery to be in the 65-70 percent
was a negligible 400 ounces on average, and the
range,” Piggott clarifies. “I do not believe we will be able
company doubled this figure in 2015 to 800oz/m. In 2016,
to go far beyond that due to the way gold liberates from
improved
our
operations
considerably,”
Reifel shares that, after having de-risked the project and
of major civil infrastructure, process plant, power network,
providing scalable alternatives for its future development,
water facilities, and modern camp facilities. He highlights
Chesapeake’s focus over the next 12-18 months will be to
that the tailings management system Chesapeake uses
explore and advance other projects around Metates. “We
is also important. “The first gold mine in Mexico utilizing
believe developing an organic pipeline will add dimension
dry stack tails was our El Sauzal mine, which was a great
and value to a large industrial complex that will one day
success,” he explains. “Likewise, we have incorporated
be built at Metates,” he explains. This de-risking process
dry stacked filtered tails instead of a wet tailings storage
required several considerations to be made. Large scale
compound at Metates.” Filtered tailings increase the capital
mines like Metates require significant water and power,
and operating costs but the long term benefits include
and the Mexican government’s construction of a natural
water conservation through recycling over 50 percent of
gas pipeline down the west coast has resulted in low
the water, lower environmental risk, and greater stakeholder
cost, clean energy for the project. Regarding water, the
support. “The dry stacking system at Metates is innovative
government raised the tariff rate by 100 percent last year,
in that we will have concurrent reclamation during the mine
and with a life of over 25 years, the mine’s future water
life by covering the waste rock with the filtered tailings,” he
availability and the cost of the resource is uncertain.
comments. “This integrated system will mitigate acid rock
“Fortunately, Metates is relatively close to the Pacific
drainage and allow plants and trees to grow as the mine is
Ocean and uses low cost energy,” Reifel points out. “The
in operation.”
recent pre-feasibility study incorporates desalination as the water source, which ensures long term supply and
The time taken to advance this project to full feasibility
much less stakeholder risk.”
will be approximately two years, Reifel predicts. “Many experts believe that gold mine production has peaked and
“We have been undertaking regional exploration around
will decline in the years ahead," he declares. "Discoveries
Metates seeking new potential bulk tonnage gold and silver
of new significant gold deposits are scarce and some
prospects, and currently we have three,” Reifel divulges.
countries are not miner friendly. We strongly believe gold
One is located 40km north of Metates, one 11 km south of
producers will need to replace reserves, in many cases
Metates, and the third is located near the proposed plant
through M&A activity.” Chesapeake, however, will focus on
facilities. As a mine that is tipped to become one of the
developing an organic pipeline of satellite deposits that
largest gold and silver mines in the world Reifel anticipates
could see the Metates camp become one of the largest
that the development of Metates will entail the construction
gold and silver producers in the world for 30-40 years.
leaching operations. However, with careful metallurgy we
heap leach extraction, making Cierro Prieto heap leaching
are increasing our results.” Goldgroup also studied the
extremely innovative.
mining circuits to ensure optimal rock was sent to the crushers but recovery had to be addressed first. Now,
Piggott shares that the company is currently in the
producing between 350-400oz/w Goldgroup has a
midst of an ongoing dispute with a US enterprise over a
healthy cash flow.
project called San Jose de Gracia in Sinaloa, a property 50 percent owned by Goldgroup. “We spent US$18 million
In order to optimize operations the company recruited
for half ownership of the property, which is inferred to
an
analyze
have 1.1 million ounces of resources, and where we drilled
how the business was run from top to bottom. Areas of
international
management
company
to
299 holes,” Piggott asserts. “Unfortunately, the company
opportunity were identified mainly in communication
with which we are involved is attempting to take the
and now Goldgroup uses superior reporting techniques,
concession through subversive means. We have since been
therefore creating a more accurate analysis. “When metal
working with the Mexican legal system, which is relatively
prices were high a great deal of companies put cost
slow, and in the end we believe we will prevail. When we
control aside,” Piggott comments. “Operation costs were
obtain that property again, which has incredible potential
important but production took center stage during that
if worked properly, Goldgroup will take a significant step
era. Therefore, when prices dropped, we had to react to the
forward.” The company is also looking for other operations
situation by improving our processing techniques.” From a
in Mexico, mainly brownfield assets due to the prevailing
technical point of view, Goldgroup uses fine crushing and
trend of small exploration projects being picked up by
agglomeration, as well as a high pressure grinding roll, and
large companies as small operators lack the necessary
is one of the few companies in the world using this for
financial capacity.
85
| MINE SPOTLIGHT
86
PEÑASQUITO The Peñasquito mine is Mexico’s largest gold producer, and delivered a record production of 860,300 ounces in 2015. Goldcorp estimates that in 2016 gold production will dwindle to between 520,000 and 580,000 ounces due to mining in the lower-grade area of the pit. The operation is also expected to produce 22-24 million ounces of silver, a total of 375-400 million pounds of zinc, and 145-155 million pounds of lead. It consists of two open pits, Peñasco and Chile Colorado, located in Zacatecas, 14km east of Mazapil. Peñasquito boasts accessibility to roads, power, and adept personnel thanks to the area’s lengthy mining record. The mine is nestled along the eastern Mexican fold belt that contains carbonate and Mesozoic clastic sedimentary units. It lies upon two funnel-shaped diatreme breccia pipes that dwell into Cretaceous clastic units and overlay a Tertiary felsic intrusive complex. The property exhibits veinlets, and minimal fractures that encompass minerals such as electrum, sphalerite, galena, and various sulfosalts. As an open pit mine, Peñasquito utilizes a flotation and grinding processing method supported by two 50,000t/d sulphide lines, and a 30,000t/d high pressure grinding roll (HPGR) circuit. It has a milling capacity of 130,000t/d. The operation has also adopted the “Pyrite Leach Project”, which envisions utilizing zinc flotation circuit tails to leach a pyrite concentrate that can save gold and silver from being lost inside the tailings facility. The investment is expected to be approved by mid-2016, and the project should be in production by the end of 2018. When it comes to environmental regulations, Peñasquito not only complies with a Waste Comprehensive Plan, a Single Environmental License, and the Annual Operation Certificate and Management Plan for the Reproduction of the White-Tailed Deer, it also incorporates a National Environmental Audit Program. Furthermore, the company has rescued more than 448,000 plants, of which 18,000 were endangered cactus species. Its nursery additionally harvests an estimated 3 million plants per year that will be used in future reclamation work. Peñasquito is a socially responsible mine as it perpetuates a solid relationship with surrounding communities and local authorities. Its policies ensure employment opportunities for state residents, with 75 percent of Peñasquito’s employees from Zacatecas. Through scholarships, adult education programs, and the construction of a Technical School (CONALEP) that provides mechanical and electrical training with student housing, the mine is extremely socially conscious. Health care is equally supported in coordination with the Youth Integration Center (CIJ) that grants seminars on specific topics.
87
| VIEW FROM THE TOP
ACQUISITION PAYING OFF FOR CANADIAN OPERATOR JOHN MCCLUSKEY President & CEO of Alamos Gold
88
Q: What have been the highlights of the merger between
portions of the operation on an ongoing basis, instead
Alamos Gold and AuRico Gold, and how will this strengthen
of waiting until the end of the mine life. At Mulatos we
your growth portfolio?
have already reclaimed more than 20ha of leach pad and
A: The merger has given us increased scale with diversified
waste dump area. In addition, we invested approximately
production from three operating gold mines, two of which
US$10 million in a water treatment facility well before this
are in Sonora, Mexico, and the third is in Canada. We
became a requirement of mining operations. Our goal is to
expect to produce 370,000–400,000 ounces of gold in
contribute to the local ecosystems around our operations
2016, of which 200,000-220,000 ounces is expected to
so that beyond the closure of our mines, we leave the area
be generated from our Mexican operations, making us
in a more advantageous position.
one of the largest gold producers in the country. This has given us increased buying power at our Mexican mines,
Q: Given the bear market conditions, what are the
which has helped contribute to approximately US$20
company’s objectives for 2016?
million in annual synergies realized through the merger
A: Gold miners in Mexico have been losing money for
thus far. Additionally, our higher rate of production from a
several years so the higher gold prices are extremely
diversified portfolio of assets gives us a stronger platform
welcome. Our focus in 2016 will be increasing production
from which to grow and reduces risk in the eyes of investors.
and lowering costs at our Young-Davidson and Mulatos
With a strong balance sheet and strong cash flow growth
mines, a strategy that includes developing the lower cost
expected from our core operations, we are well positioned
Cerro Pelón and La Yaqui deposits. We expect this to
to fund future growth from our development pipeline.
drive significant free cash flow growth in the years ahead, which will help fund future growth from our development
Q: How do you support your projects such as the Cerro
pipeline. As well as our La Yaqui and Cerro Pelón projects,
Pelón and La Yaqui developments?
we have a third project in Morelos called Esperanza. The
A: These growth initiatives are supported through cash flow.
site contains roughly 1.1 million ounces of gold and we see
Our operating mines are generating sufficient cash flow to
it as a promising low cost operation that could create a
fund their growth capital spending and exploration budgets,
great deal of employment in an area that has suffered
including those at Cerro Pelón and La Yaqui. Despite
economically for a number of years.
lower gold prices over the past few years, we continue to invest in exploration and we have made some important breakthroughs, particularly at Cerro Pelón and La Yaqui where we recently reported substantial reserve and resource growth. We are in the process of obtaining environmental permits for these sites and expect to start construction on La Yaqui, the first of the two projects later this year. We expect initial production from La Yaqui mid-2017. Q: What steps have you taken toward environmental protection in the areas surrounding your sites? A: Reclamation has been a substantial focus from the outset. We were planting trees before we started mining, and we relocated hundreds of trees and shrubs which were considered endemic to the region. We follow a process of progressive reclamation, which means that we reclaim
Esperanza contains roughly 1.1 million ounces of gold
| VIEW FROM THE TOP
FINDING EFFICIENCIES IN DIFFERENT JURISDICTIONS AKIBA LEISMAN Interim Executive Chairman of the Board and Interim CEO of Marlin Gold Mining
Q: What were Marlin’s 2015 highlights, and what did the
Q: What are the steps you are taking to increase the
company do to endure the current hostile situation?
production and cash flow of La Trinidad?
A: Marlin Gold underwent two main changes in 2015. The
A: We are focused on reaching the high grade zone as
first was the changeover in management, where I took
quickly as possible. This means we made the decision to
the role of CEO and Chairman, and the second was the
defer the south-end of the pit and focus on the north end,
incorporation of Sonora Resources’ personnel. The biggest
and when cash flow begins we can return to the south side
change to take place since its integration is that we now
of the pit. We accelerated the access to the high grade, and if
have a more focused mine plan. This plan aims to obtain
gold prices continue to be depressed at U$700/oz, the south
the high grades of the mine in a quicker and more efficient
entrance of the pit should remain part of the property. We
manner than what was previously being done. We laid the
have a new mining contractor that has a much more efficient
groundwork to access those high grade zones in the second
fleet, lower costs, and a higher degree of productivity, which
quarter of 2016. Additionally, Marlin is not only carrying
has reduced Marlin’s monthly run rate from US$3.2 million
out exploration in Mexico to expand its assets but it is
per month to approximately US$2 million.
89
leveraging on the current market downturn to aggressively acquire other mining assets in different jurisdictions. Our
Q:
What
breakthrough
technologies
or
innovative
royalty subsidiary, Sailfish Royalty, has an underlying stream
processes have you implemented to be more competitive?
where it will provide the construction capital to build the
A: Our mine in Mexico and our project in the US are both
mine and in return it will be receiving an initial 40 percent
open pit heap leach mines that use technology that has
of the gold production at US$700/oz until the principal
been proven and tested. We prefer building small assets
interest is returned, after which its share will drop to 20
with proven technology and thinking of ways to efficiently
percent of production. In addition, we sold the El Compas
operate, and then growing from there by applying best
silver-gold development project located in Zacatecas to
practices in terms of our geology. Mexico happens to be
Carnarc Resources and Marlin is the largest stakeholder.
a jurisdiction that embraces medium sized open pits and
In this project Carnarc is advancing at a much faster rate
small scale, and these low capital intensity type of projects
because in the past it was a low priority asset for Marlin.
fit Marlin’s profile.
Equipos sencillos y robustos cuya operación y mantenimiento no es complicado. La más alta relación Beneficio - Costo del Mercado. También contamos con Equipos de barrenación para las diferentes aplicaciones en vetas angostas.
Anclador Bolter 88 www.resemin.com
Equipo de barrenación frontal Muki FF
Equipo de barrenación larga Raptor 55 XP
Vialidad San Simón # 10, Col. Privada la Cañada. Guadalupe, Zacatecas México
+52 (492) 9231722 | +52 (492) 102 2724
| VIEW FROM THE TOP
DURANGO PROJECT BACK ON TRACK DAVID WOLFIN President & CEO of Avino Silver and Gold Mines
90
Q: As a Canadian explorer with an extensive amount of
Q: To what do you attribute the loss of competitiveness in
operations in Mexico, what kind of exploration plans does
the exploration sector in Mexico?
the company have in the country?
A: The price of metals around the world have caused
A: Avino’s exploration projects include the Avino property
earnings to shrink over the last five years, and in effect,
which has an extensive system of veins and a variety of
limited the industry’s ability to explore and develop. The
targets. We also have other standalone claims that are
new Mexican tax regime is an additional factor. Even
not being explored significantly at the moment, such as
though part of its objective is to support surrounding
the Anna Maria, El Hueco, and El Laberinto in Durango.
communities we have noticed little change. Our company
Development of the Avino mine and its surrounding
is disappointed but has continued to play an active role
exploration targets is being prioritized for the coming
in supporting the communities in lieu of the additional
months. Exposed veins on the surface show us a window of
government money that has been allocated for this
dozens of targets, as well as old mines that are centuries old
purpose, which from what we can see has not yet been
that need further exploration and development. Progress in
deployed.
these areas comes down to the amount of capital we have. As we receive more money, we can continue to explore and
Q: What is behind the remarkable rise in the company’s
develop these targets. They are all high priority but progress
stock price since November 2015?
depends completely on funding. As we accumulate capital
A: Several factors have lent a hand, such as our excellent
we can continue to explore and develop these targets with
share structure that limits the overhang of stock.
the goal of expanding the Avino property’s operations.
Higher metal prices and demand are pushing stocks up
We are also considering using private money and IPOs to
throughout the sector. Our stock in particular was able
finance the projects. Over the past five years, many of our
to achieve such substantial gains in part because we
exploration projects have been restrained due to the low
do not have hundreds of millions of shares outstanding.
market conditions but more favorable metal prices and
Additionally, declaring commercial production at the
earnings could help accelerate our near-term exploration
historic Avino during 2Q16 also helped. The company
plans. Our budget for 2016 is about US$1 million, and we are
started to operate the Avino Mine in 1974 but was forced
hoping to double or triple it next year.
to close it after 27 years in 2001 due to low metal prices. At the time, gold was below US$300/oz, and Industrias Peñoles stopped buying our concentrate. Prior to NAFTA, foreign companies were only allowed to own 49 percent of an operation in Mexico. Following the shut down in 2001 and new NAFTA regulations that allowed full ownership by foreign companies, Avino decided to buy the other half of the Avino mine from its Mexican partners. The negotiations took three years and we eventually agreed in 2006 to give shares of the public company in exchange for a 100 percent interest in the Mexican subsidiary company that owns the mine. After the negotiations were made public, the company’s extensive network of followers rushed to contact us. We were able to raise US$10 million, which was enough capital to rehire a team of approximately 480 people and lay the foundation to bring the project back into operation. In 2008, we started drilling and discovered
new exploration targets, so we opted to create a new mine rather than immediately re-open the main Avino Mine. The new mine, which is known as San Gonzalo, is smaller and its ore is higher grade. Revenues from the San Gonzalo mine, where we declared commercial production in 4Q12, were enough to finance the re-opening of the Avino mine. To resume operations at the Avino Mine, the existing underground workings had to be de-watered. The dewatering process lasted 482 days, was completed in May 2014, and successfully removed over 1 million cubic meters of water. Following the dewatering, we brought in new equipment to increase milling capacity and service the mine, then started processing fresh ore from the Avino Mine underground by the beginning of 2015. The company was able to subsidize the mine’s development in 2015 by running the mill and making a profit through
Avino’s exploration budget for 2016 is about US$1 million, and the company is hoping to double or triple it next year
the processing of development material. In April 2016, following the implementation of the efficient long-hole
time they were mined. Subsequently, sulphide tailings
sublevel caving mining method we declared commercial
from our more recent operations have been placed on top.
production. Following the declaration of commercial
The oxide resource cannot be accessed until the company
production, the market is anxious to see Avino’s revenue in
decommissions the existing tailings, and builds a new
2016, as proceeds from the sale of Avino Mine concentrate,
facility. We recently received a construction permit, and
which last year totaled US$21 million, were classified as
plans are being discussed with a contractor to commence
a recovery of exploration and evaluation expenses and
construction in 2016. Following decommissioning of the
were not included in our top line revenue figure of US$19.5
existing TSF, wells are going to be drilled to drain the
million. Overall, the property is expected to produce
bottom and make it safe. Additionally, there are 3.5 million
between 2.5-3 million ounces of silver equivalent in 2016.
tons of copper sulphide tailings sitting on top of the oxide tailings that could potentially be capitalized on if it
Q: How does the long hole sublevel caving method
is determined it will leach. If it does, the PEA economics
increase efficiency?
will increase, and if not the top can be stripped off and
A: Traditional methods require parallel drills and jack
converted it into a separate operation. The operation
hammers that are quite labor intensive and costly. Long
will be a combination of heap leach and Merrill-Crowe
hole sublevel caving is cheaper because it uses a spiral
precipitation, exactly as Goldcorp uses. It can begin
ram that enters beside the main system through levels that
operating once the new facilities are completed, the
are 20-30m apart. Jumbos are then used to drift 450m
current pile is decommissioned, and the wells are drilled at
along in opposite directions when the vein is cut, and 50m
the bottom, which will take a couple of years.
walls are slashed. Once the underground levels are ready, track drills or mining jumbos drill straight down. Gravity
Q: What strategies are in place to continue to expand
causes the broken rocks to naturally drop to the level
and develop Avino Silver and Gold over the next few
underneath, and machines follow by scooping the material
years, and what are the company’s primary goals going
out. This form of mining is ultimately more cost-effective
forward?
than traditional methods.
A: The company plans to expand using our oxide tailings resource. Additionally, the Avino mine, which has a robust
Q: How does Avino plan on using its tailings storage
stockwork system, is currently processing 1,250t/d at the
facility (TSF) to contribute to the production of the mine?
plant but has the potential to expand considerably. We
A: A Preliminary Economic Assessment (PEA) by Tetra
are currently considering an expansion of the mill, tailings,
Tech suggested that our oxide tailings could economically
underground facilities, and the mining fleet. If metal prices
produce over 1 million ounces of silver, and 6,500oz/y of
go up we will be able to manage more drilling to continue
gold over for five years from a heap leach or Merrill Crowe
exploration on the property. There is significant potential
processing operation. The oxide tailings were created
to find other narrow vein higher grade systems that would
during the 1970s from our open pit operation and are
become a priority because margin is everything. A few drill
currently sitting at the bottom of the pile as they did not
holes and installations on exploration targets can increase
recover well under conventional milling methods at the
production rapidly.
91
| VIEW FROM THE TOP
DOWNTURN SPARKS INNOVATIVE FINANCING JOSÉ BERLANGA Director General of Reyna Mining
92
Q: What process has Reyna Mining taken to identify the
project is called Tahuehueto, and the company had been
most attractive assets in the market?
exploring there for the past 18 years with investments
A: We have endeavored to diversify our activities in the
having reached US$30 million to date. It is an interesting
mining sector. We now have anthracite mines in Sonora
project and we are taking a whole new approach in its
and we have ventured into iron as well. In that sector we
development. Its deposits are comprised of 75 percent
see that national players face unfair competition from
gold, 11 percent silver, and the remainder lead and zinc.
Chinese iron dumping and also informal operations. Here we encountered some difficulties stemming from acquiring
Q: What process does Reyna Mining undertake when
the necessary permits, and in response to the informality
acquiring small projects?
in this sector the government imposed restrictions on
A: A perfect example of this transformation is the
exports that ultimately stifled national production.
Tahuehueto project since it had many areas of improvement. We reevaluated the engineering and we decided to begin
Q: How have you attracted financing, and how have your
production with 500t/d, and in two years scale the
projects developed recently?
production increased to 3,000t/d. Within this concept
A: The projects we have developed such as La Negra
we will mine veins that are clearly defined in order to be
and El Barqueño have been made possible through
competitive and make the project bankable. Projects take
national investors. Investing in mining can be a long term
an average of 19.5 years to enter into production from the
commitment but the returns can be very attractive. We
discovery stage, compared to 18 years in the period 2006
increased the share value of Aurcana Corp from US$0.04 in
to 2013. Reyna’s first purchase was La Negra, which was
2005 to US$2 years later. The unfriendly market conditions
acquired during a time of crisis. In addition to Tahuehueto,
have caused junior companies to flounder since it becomes
we are in the midst of buying the San Andrés de la Sierra
far more difficult to find financial resources. We closely
gold-silver project, which has a 300t/d plant and all the
followed the progress of these companies and we created
permits, as well as agreements with the community. We
an agreement with Telson Resources, and through a private
have learned that we are not an exploration company so
placement we gained control of the company. The flagship
we seek projects that have passed this stage.
| VIEW FROM THE TOP
MARKET DESTABILIZATION POSITIVE FOR MINERS FRED STANFORD President & CEO of Torex Gold Resources
Q: How would you assess the last 12 months for the
would be inclined to believe. However, our mine does not
company, and what should investors expect for the rest
release any process water to the environment, since it is all
of 2016?
recycled. This makes the claim easy to refute and after the
A: The last 12 months have been a period of major
state government inspected the mine site it rejected these
transition for Torex as we finished construction and
claims. It then worked with the blockaders to demonstrate
began producing gold, and the market tends to re-rate or
that their actions based on perceptions and not facts were
increase a mining company’s share price if this transition
damaging the economic prospects of a great many local
goes well. The re-rating of our share price has started,
citizens. We appreciate the government’s success in using
and I would expect this to continue through 2016 as we
dialog to resolve the issues.
demonstrate successive quarters of solid operational and cost performance.
Q: What were the main revelations of the preliminary economic assessment (PEA) for the Media Luna project,
Q: What inspired the decision to introduce the 10 for one
and what is the timeframe for this project to initiate metal
share consolidation on Torex Gold’s outstanding shares?
production?
A: There are a number of large institutional investors
A: The PEA was published last July and it shows strong
that cannot invest in companies with share prices as low
potential for an economic underground mine with a capital
as ours currently stands. There are also brokerage rules
investment of approximately US$500 million. Operating
that prevent margin buying of ‘low price’ shares. We
costs would be expected to be close to the operating costs
have approximately 780 million shares outstanding, and
for the ELG mine. The project is now undergoing a permitting
spreading the value of the company across that many
phase as we prepare for underground exploration to further
shares is the reason the share price is where it is. While
define the deposit in preparation for the next level of
consolidating the number of shares by a factor of 10
technical study. The PEA indicated that production could
does not inherently change the value of the company, it
start four years after a construction decision, which could
does spread that value over fewer shares. The resulting
happen after the completion of further technical studies. The
higher share price will make our shares accessible to new
PEA envisioned 7000t/d of production at approximately
large investors, which should increase demand and hence
4.5g/t of gold equivalent, which means that this concession
benefit all shareholders. As noted, global uncertainty is
shows promise of producing gold equivalent ounces at a
negative for society but positive for gold. Torex is now
similar level to the ELG mine. The low costs at our mine are
producing and can take advantage of the increased gold
primarily a function of the high grades of ore that are near
price. The market will recognize this, which should lead to
to the surface. The Guerrero Gold Belt offers the potential
a positive outcome for Torex investors.
for elusive high grades.
Q: Why were operations at El Limon-Guajes (ELG)
“As with any company that
temporarily suspended in April 2016? A: Production was halted because a blockade was set up in an attempt by a small group of families to force us to pay compensation for perceived environmental damage. The state government investigated the claims and found that they were unfounded. A mine is a fairly easy target for such claims but ours is not an ordinary mine. For
produces a commodity, the share price also tends to reflect changes in the commodity price”
example a claim that the mine is polluting the reservoir
Fred Stanford,
and harming the fish is something that some people
President and CEO of Torex Gold Resources
93
SILVER
5
Mexico maintained its position as a silver titan with a 19.8 percent share of global participation. Although prices have fallen since peaks of US$35 in 2011, silver enjoyed a steady rally throughout 1H16, to highs of US$20.36 in July from a low of US$13.75 in January. The bullish outlook was bolstered mid-year by Brexit fears and uncertainty in the European markets that caused investors to seek solace in precious metals. Silver demand is expected to increase in the near to medium term due to high usage levels in industrial applications, in automotive and especially in photovoltaic panels.
This chapter begins with an interview with the world’s largest silver producer, Mexico’s Fresnillo, and continues with insights from global silver giants operating in the country. A variety of companies operating in Mexico at different stages, including discovery, exploration, and production, provide their opinions about the attractiveness of the market and their strategies for investment in the country. Mexico’s mining ties with Canada are explicit in this chapter with the majority of important silver mining projects boasting investment from the country’s northern counterpart. Moreover, silver streamers and analysts help give the chapter a broad overview of the industry.
95
96
| CHAPTER 5: SILVER 98
VIEW FROM THE TOP: Octavio Alvídrez, Fresnillo
100
MAP: Mexico's Main Silver Mines
102
VIEW FROM THE TOP: Mitchell Krebs, Coeur Mining
104
VIEW FROM THE TOP: Fernando Alanís, Industrias Peñoles
104
INSIGHT: Michael DiRienzo, The Silver Institute
106
MINE SPOTLIGHT: Palmarejo
108
VIEW FROM THE TOP: Peter Megaw, MAG Silver
109
VIEW FROM THE TOP: Keith Neumeyer, First Majestic Silver
110
VIEW FROM THE TOP: Bradford Cooke, Endeavour Silver
110
VIEW FROM THE TOP: Bruce Winfield, Defiance Silver
112
MINE SPOTLIGHT: Fresnillo
114
VIEW FROM THE TOP: Christopher Warwick, Pan American Silver México
115
INSIGHT: Frederick Davidson, IMPACT Silver
117
MINE SPOTLIGHT: Juanicipio
118
INSIGHT: Randy Smallwood, Silver Wheaton
97
| VIEW FROM THE TOP
SILVER GIANT GOES FROM STRENGTH TO STRENGTH OCTAVIO ALVÍDREZ CEO of Fresnillo
98
Q: What strategies has Fresnillo implemented to mitigate
cycles. Subsequently, the commodity prices drop and the
the effects of the drop in commodity prices and the fiscal
company will face a number of challenges, impairments,
reform?
write-offs, and may even need to sell the asset. In the
A: Since 2011, every year has been a challenge, with
case of Fresnillo, we have not undergone any write-
consistently lower metal prices. Mining in itself is a
downs despite the difficult period and this not only
challenge, and the prices have only made the environment
shows the strength of our projects, but also that of our
more hostile. We are able to depend on a concerted effort
operations. We then implement cost control strategies.
from our people, which is our most valued asset, and this
The majority of our mines are in the first quartile in terms
is one of the key features in Fresnillo. Our top team has
of production costs, especially the silver mines, including
been working together for the last 20-25 years, which
our newest mine Saucito and our flagship mine Fresnillo.
is an asset in itself. Therefore, we have survived many
In the next few months, we will bring San Julian onstream,
industry cycles and we are well versed in downturns, with
which was injected with a US$515 million investment, and
the knowledge that the importance lies in the long-term
with this mine we will achieve our 10 year objective of
strategy. With this human capital and knowledge, we have
reaching 65 million ounces of silver by 2018. Last year,
based our strategy on our exploration, from early stage
we produced 43 million ounces of silver, making Fresnillo
prospects to the construction phase, and subsequently
the largest silver producer worldwide, as I believe KGHM
mining operations. A strong exploration team is invaluable
produced 41 million ounces during the same period. Our
because we only bring onstream those projects that
competition has traditionally laid with this company, as
make sense in the long term and can withstand the
in the previous years, we have been producing at similar
unpredictability of the industry.
volumes but with San Julian we will intensify our levels of production.
This differs from the strategies of other companies, which normally entails project acquisition or operations in strong
Q: What was the motivation behind the separation of Industrias Peñoles and Fresnillo, and what have been the benefits of this strategic decision? A: Industrias Peñoles was a large conglomerate with interest in base metals, precious metals, smelting and refining, and railroad infrastructure. Therefore, it was difficult for investors to really value the company, so Fresnillo was created as a vehicle to separate all the precious metals assets. This, along with the company’s launch on the London Stock Exchange (LSE), made it easier for analysts to value Fresnillo and indirectly value
This year Fresnillo is aiming for 45-47 million ounces of silver, compared to the 43 million ounces it produced last year
Industrias Peñoles since the latter owns 75 percent of Fresnillo shares. We set clear objectives and we placed the most qualified staff in Fresnillo in order to achieve the portfolio growth and achieve production objectives. We now have a company that is extremely focused on precious metals with well-defined growth objectives. Fresnillo purchased Newmont Mining’s portfolio in 2014, acquiring their 44 percent of Herradura, Noche
Buena, and Soledad Dipolos. As of March this year, we
surrounding communities that will be able to remain
have cash in hand of US$590 million, and with the cash
even when we leave the area.
flow and low level of debt present in our operations, it may be possible to acquire new operations. When we
Q: How satisfied have you been with the allocation of
compare these possibilities against developing our
funds collected from the royalty taxes, and how can
own projects, however, we are always falling short in
operators contribute to community development?
acquisitions. This is why we have not acquired any more
A: We must work closely with the municipalities, in order
operations recently. Nevertheless, we focus on early
to align our beliefs with theirs. In some municipalities we
stage prospects, and with the help of our highly trained
have seen that the money can sometimes be allocated
geologists we are able to identify considerable potential
to those areas outside the mining communities that may
in some of these deposits. In the last year, we have been
represent more votes or higher standing in the region.
able to close some profitable deals on those early stage
We are participating in a group to decide which products
projects.
are valuable for the communities, and that may better 99
serve the communities that neighbor mine sites. Q: Fresnillo recently announced an investment of between US$500 and US$700 million of CAPEX per
One important feature of our strategy is sustainability. I
year. How are you planning to allocate these funds?
cannot understand how any mining company can operate
A: This year, we plan to invest approximately US$560
without a sustainability strategy running in parallel.
million, with next year’s allocation increasing to US$700
For this, we must create and foster extremely strong
million, and this will subsequently decrease to US$650
relationships with communities and different stakeholders,
million. However, with our portfolio of prospects, we
and implement a strategy that is fair and makes sense to all
are also thinking about the next objectives for the
of these parties. We are benchmarking our sustainability
consecutive years. As mentioned before, we aim to
strategy based on various indexes worldwide and we are
produce 65 million ounces of silver and 750,000 ounces
seeing tangible results. This year, we may begin our entry
of gold by 2018. We are currently in the process of
into the FTSE4Good index and the NYSE Sustainability
updating our strategic plan for the next 10 years since
index to benchmark the company against the strategies
we are confident we will reach our goals by 2018. We
that others are implementing. We are confident that we
have 2 million hectares of exploration ground in Mexico
will do well in both of these endeavors.
and 250,000 hectares of exploration concessions in Peru, so we are assured that we will bring onstream
Q: Fresnillo is positioned at number 58 in the FTSE100,
several new projects to contribute to our production
so what do you think accounts for the company’s
goals for the future.
success both in Mexico and internationally? A:
This
highlights
the
fact
that
Mexican
mining
Q: What are you doing differently in San Julian from
companies can place themselves in the international
the other mines, and why is this development unique in
context without a problem. Fresnillo, coming from the
Fresnillo’s portfolio?
Peñoles group, which has been listed in Mexico for 50
A: San Julian is an extremely interesting project, located
years now reflects the strength that we have in terms
in an isolated area. However, this is one of our strengths,
of corporate governance, the solid structure, and the
and we have succeeded in working in these areas before,
potential of the company to compete with our peers
as can be seen with the example of Ciénega. Thirty years
internationally.
ago, when we started to develop this concession, the area was extremely isolated, and it took about 12 years
Ultimately, the experience of our people makes us
to bring that project onstream.
extremely competitive. All of these elements combine to contribute to our success, not just in Mexico, but on
We then started with an operational life of 10 years,
an international scale. One example is our participation
and now 20 years later, we have 12 years remaining in
in the LSE. This year, we will not see a significant
terms of resources and reserves. San Julian is relatively
increase in silver production, and we are aiming for 45-
similar to the way that Ciénega used to be, and this type
47 million ounces of silver, compared to the 43 million
of project is particularly rewarding as we can observe
ounces we produced last year. In terms of gold, we will
the condition of the area upon arrival, and compare
produce between 775,000-790,000 ounces so overall the
this to the positive changes brought about by the
production numbers for the first quarter are extremely
operation of the mine. For the communities, we bring
positive. If demand for precious metals continues to surge
core infrastructure, roads, electricity, and schools, and
as it has done during the first half of 2016, we expect to
our aim is to bring in some sustainable projects for the
the company enjoy another profitable year.
I MEXICO'S MAIN SILVER MINES
1 1
2 2
5
3
5
3
100
6
11 11
6
7
7
8 8
4
9
9
10
10
4
14
18
14
18
12
12
Production
15
17 17
15
16 16
Development
13
20
20
13
Closed/Abandoned
19 19
21 22 23 24 21
22
23
Number
Project
Company
Stage
State
1
Mercedes
Yamana Gold
Production
Sonora
2
Santa Elena
First Majestic Silver
Production
Sonora
3
La Colorada
Argonaut Gold
Production
Sonora
4
Álamo Dorado
Pan American Silver
Production
Sonora
5
Dolores
Pan American Silver
Production
Chihuahua
6
Pinos Altos
Agnico Eagle
Production
Chihuahua
7
Ocampo
Minera Frisco
Production
Chihuahua
8
Palmarejo
Coeur Mining
Production
Chihuahua
9
El Sauzal
Goldcorp
Production
Chihuahua
10
San Francisco del Oro
Minera Frisco
Production
Chihuahua
11
La Encantada
First Majestic Silver
Production
Coahuila
12
Nuestra Señora
Americas Silver Corp
Production
Sinaloa
13
San Rafael
Americas Silver Corp
Development
Sinaloa
14
Guanaceví
Endeavour Silver
Production
Durango
15
Topia
Great Panther Silver
Production
Durango
16
Cienega
Fresnillo
Production
Durango
17
Pitarrilla
Silver Standard
Development
Durango
18
La Platosa
Excellon Resources
Production
Durango
19
San Dimas
Primero Mining
Production
Durango
20
La Preciosa
Coeur Mining
Development*
Durango
21
La Parilla
First Majestic Silver
Production
Durango
*Suspended
24
30 28 29 28 29 30
34 31 32 35 33
31-35
38 38
39 39
25
25
26 27
Number
Project
Company
Stage
State
22
Sabinas
Industrias Peñoles
Production
Zacatecas
23
Del Toro
First Majestic Silver
Production
Zacatecas
24
La Colorada
Pan American Silver
Production
Zacatecas
25
Peñasquito
Goldcorp
Production
Zacatecas
26
Tayahua
Minera Frisco
Production
Zacatecas
27
Aranzazu
Aura Minerals
Development*
Zacatecas
28
Juanicipio
MAG Silver/Fresnillo
Development
Zacatecas
29
Saucito
Fresnillo
Production
Zacatecas
30
Fresnillo
Fresnillo
Production
Zacatecas
31
Francisco Madero
Industrias Peñoles
Production
Zacatecas
32
Cuchara-Oscar
IMPACT Silver
Production
Zacatecas
32
Mirasol
IMPACT Silver
Production
Zacatecas
32
San Ramón
IMPACT Silver
Production
Zacatecas
33
El Compas
Endeavour Silver
Development
Zacatecas
34
Cozamin
Capstone Mining
Production
Zacatecas
35
San Acacio
Defiance Silver
Production
Zacatecas
36
El Coronel
Minera Frisco
Production
Zacatecas
37
Cerro San Pedro
New Gold
Production
San Luis Potosi
26
38
San Martin
First Majestic Silver
Production
Jalisco
27
39
Terronera del Oeste
Endeavour Silver
Development
Jalisco
40
Bolañitos
Endeavour Silver
Production
Guanajuato
41
San Ignacio
Great Panther Silver
Production
Guanajuato
42
Guanajuato
Great Panther Silver
Production
Guanajuato
43
Cerro del Gallo
Primero Mining
Development
Guanajuato
44
El Cubo
Endeavour Silver
Production
Guanajuato
45
Promontorio-La Negra
Kootenay Silver
Development
Queretaro
46
Tizapa
Industrias Peñoles
Production
State of Mexico
47
La Guitarra
First Majestic Silver
Production
State of Mexico
48
Campo Morado
Nyrstar
Production*
Guerrero
49
Rey de Plata
Industrias Peñoles
Development
Guerrero
50
Los Filos
Goldcorp
Production
Guerrero
51
El Águila
Gold Resource
Production
Oaxaca
52
San José
Fortuna Silver
Production
Oaxaca
36
36
37 37
40-44 40 42 41
43
44
45 45
46 47 46 47
48
49 49
48
50
50 51 51
52 52
101
| VIEW FROM THE TOP
GETTING TO THE HEART OF MINING MITCHELL KREBS President & CEO of Coeur Mining
102
Q: What are some of the challenges that you have
of leverage. This means that when precious metal prices are
witnessed during your time operating in Mexico?
incrementing, it is a good idea to buy CDE stocks because
A: Most operators would express generic concerns over
the company is liquid and anchored to the price of silver
security, ejido relations, and infrastructure, but for us, the
and gold. Another factor that contributed to the price surge
most challenging aspect has been on the taxation side.
was the release of our year-end results, which demonstrated
Firstly, the industry was hit by the new EBITDA tax a few
some of our strengths in terms of cost reduction, improved
years ago, which was the wrong move at the wrong time, and
operating performance, and strong liquidity with US$200
has pushed Mexico down the list in terms of competitiveness
million in the bank. Investors were able to obtain tangible
and tax regimes in comparison with other countries. In my
proof of the implementation of intelligent strategies, offering
opinion, the most significant deterrent from considering
greater confidence in our stocks. This has been a reward for
investment in Mexico is the VAT refund. Coeur Mining (CDE)
the solid execution that we have demonstrated over the last
has not received an VAT refund from the Mexican Revenue
few years, and a combination of these factors is the reason
Service (SAT) since 2012. As a result, the tax authority is
for our solid growth during this short period.
withholding US$30 million of VAT that we are unable to reclaim for reasons that are unclear. This casts a long shadow
Q: How is the Paramount project developing, and what
over our operations in Mexico, because apart from this, our
is the role of joint ventures and acquisitions in Coeur’s
experience in the country has been wonderful. We have held
strategy?
a considerable number of meetings with SAT to obtain some
A: With the Paramount deal, we acquired certain deposits
clarity on the reasons why the authorities are refusing our
that were split by a property boundary. In Mexico, this was
refund, and we have found that there is some uncertainty
called Don Ese, and on the US side of the border it was
regarding the handling of VAT that we attach to certain
called Independencia. Now that we own 100 percent of
monthly payments that we make to a Canadian royalty
these deposits, the entirety of the site has been named
holder called Franco Nevada.
Independencia. One of the first things we did when we closed on that acquisition last year was that we drove
Q: What strategies have you implemented to recover so
two declines from our current underground mine called
impressively since the downturn in January?
Guadalupe 800m over to Independencia to start developing
A: Our stock is up by 170 percent, and one of the best
that second new source of higher grade underground ore.
performers on the NYSE and in the mining sector, and there
Our goal was to get there by the end of the year, and this
are a few reasons for this. Firstly, we have seen the prices
was achieved, meaning that we have now begun mining
of silver and gold recover slightly in 1Q2016, with gold up
from Independencia. Meanwhile, we continue to drill and
17 percent and silver prices increasing by 11 percent. That
expand the mine, and one of the benefits of driving those
certainly helped our shares. Additionally, last year, there was
two declines is that we cut through a great deal of structures
such a negative sentiment toward the industry, and with all
along the way that we will now go back and drill, hopefully
the anticipation around the US Federal Reserve and interest
ending up with some additional new sources of ore. That
rates, many companies shorted their stocks, and Coeur
Don Ese piece that we acquired from Paramount has only
was able to develop a considerable short position. Once
around 400m of strike length, in a context of a considerable
the Federal Reserve raised rates and the prices of precious
land position that the company had, meaning that we have
metals started increasing in January, there was then a rush
a lot of work still to do in the area. The focus has been on
to cover those short positions, which only added fuel to
that strip, which is the consolidation of the Independencia
the fire in terms of our share price. We have always been
deposit with high grade deposits, and this is where the real
an extremely liquid investment. We have been trading on
short-term payback is going to come from. This really helps
NYSE for a quarter of a century, and we have a great deal
set this mine up for a strong production and cash flow.
Q: What are your production goals for Palmarejo?
has certainly slowed, and there are few new discoveries,
A: We are on track to produce 4.3 million ounces of
few operations are being put into production, old mines
silver and 67,000 ounces of gold in 2016. Of the four
are being exhausted, and supplies of gold and silver are
quarters this year, the first was the lightest for Palmarejo
beginning to decline for the first time in a decade. However,
because we only recently began mining into the new
the lack of supply is also positive and will contribute toward
Independencia deposit. We anticipate mining rates here
a recovery in commodity and precious metals prices. When
to climb throughout the year, and as that happens, our
weighed against some of the recent restructuring of the
production rates will increase and cash flow will grow. Due
industry, I believe it is set to become extremely successful.
to the fact that Palmarejo is such an important part of the
After a decade of relatively poor performance from the
company, we see the trends of this mine as the benchmark
industry, despite the rise in prices, I am looking forward to a
for our other projects in terms of cost and cash flow. It is a
decade in which operations are optimized to ensure overall
high risk year for the mine given the level of simultaneous
profitability returned to shareholders.
transition and uncertainty, but so far, the plan is being 103
executed extremely well. Q: What do you foresee for the future of the mining sector in Mexico, and what will be Coeur Mining’s role in its development? A: I believe the industry needs to consolidate more because it is an extremely fragmented business, and at conferences there can be up to 150 different precious metals mining companies all carrying out the same activities. This is a capital-intensive industry and in order to access this, companies must always ensure they are relevant. I think Coeur has been a pioneer, but the industry as a whole has begun to optimize itself in anticipation of solid profits in the coming years, although admittedly this recovery has been a little slower than initially hoped. The industry
The Don Ese deposit acquired from Paramount has around 400m of strike length
www.coeur.com
Coeur’s vision is to create the leading, sustainable, innovative and value-driven precious metals company.
| VIEW FROM THE TOP
SOCIAL CONSCIOUSNESS KEY FOR MINING OPERATOR FERNANDO ALANÍS Director General of Industrias Peñoles
104
Q: What have been the highlights in the evolution of
to reposition the mining industry as a strategic sector in the
Mexico as a jurisdiction for mining investment in the past
country, and I am sure that this will happen soon. There is
decade?
no doubt that the sector is being driven by cost efficiency.
A: In general terms, Mexico is an open economy, and the
Decision makers must take advantage of all the different
mining sector is no exception. Mexico has received a
tools available to them that can boost productivity, reduce
tremendous amount of foreign investment throughout
costs, and improve competitiveness. Industrias Peñoles is
the last decade, mainly from Canada. This trend can be
investing substantially in training our workforce and using
explained by three factors. Firstly, Mexico is recognized
state-of-the-art technology such as underground simulators.
within the sector as a mining country and the potential
We want to be sure that our staff are highly trained and fully
for exploration here is enormous. Secondly, the country
capable of extracting the most from our equipment.
enjoys a stable economy and regulations that foster the development of the industry. Thirdly, Mexico benefits from
Q: With the implementation of the Energy Reform, how
its proximity to one of the most important markets in the
are you planning on optimizing your energy consumption?
world, the US, which continues to consume the vast majority
A: We anticipated the Energy Reform and we began
of metals produced in Mexico. All the ingredients are there
preparing for it 15 years ago. We are one of the major
| INSIGHT
KEY TRENDS IN SILVER PURCHASING AND SALES MICHAEL DIRIENZO
when taxes of any kind are levied on individual countries,
Executive Director of The
such as Mexico,” he shares. Nevertheless, over the last
Silver Institute
year, the silver market has seen its share of fluctuations, as DiRienzo explains. “On one hand, primary silver co-product
When the stocks and securities market takes a dip, the
cash costs plus CAPEX fell by 11 percent to US$11.74/oz, a
first instinct of investors is to look for a safe bet, and this
drop driven by weaker local currencies, aggressively lower
usually comes in the form of gold and silver. After the
CAPEX, and lower fuel prices,” he claims. “The producer
UK’s recent vote to leave the European Union, universal
silver hedge book grew by 7.8 million ounces in 2015,
markets floundered, and precious metals prices soared.
as fresh hedging more than offset maturing contracts.”
Mexico, as the number one silver producing country in the
The news was not so positive for silver scrap supply,
world, and its major operators like Fresnillo and Goldcorp
which dropped by 13 percent to 146.1 million ounces, the
reaped the benefits of the market fluctuations. Despite
lowest volume recorded in over 10 years and the fourth
the recent royalty tax imposed on the country’s operators
consecutive year of declines. “Behind the decline were
by the Mexican government, Michael DiRienzo, Executive
fewer active collectors in the market, and some holding
Director of The Silver Institute shares that the company’s
back material awaiting higher prices,” he clarifies.
priorities have not changed at all, and instead that Mexico plays a considerable role in its global activities. “We want
DiRienzo continues by highlighting silver’s use in a variety
a fair silver trade for all countries, although it is difficult
of manufacturing, including in the photovoltaic, ethylene
consumers of electricity in the country, using close to
is by nature a finite business, and we want to be sure
330 MW, and we generate 84 percent of that energy in-
that we will not leave behind an abandoned community
house. We have a 25-year contract with a thermal plant in
when operations end. We also invest substantial funds
San Luis Potosi, as well as two wind power generators in
designed for improving education for the communities,
Oaxaca and a third generator currently in the development
and we believe that the best way to impact the quality
phase in Coahuila. These projects complement our belief
of education is to provide teacher training. Additionally,
in environmental protection and the use of renewable
we are committed to sport, as we believe it is a vital tool
energy where possible, and with the development of new
in fostering a culture of teamwork, responsibility, and a
technology, wind power is now more competitive than gas.
healthy lifestyle, especially in young people. For example, we currently work with the Santos soccer club and we
Q:
What
have
been
the
most
successful
social
development initiatives Industrias Peñoles has carried
sponsor a number of sports clinics for disadvantaged children around the country.
out in the regions in which it operates? A: Firstly, water is a significant concern and so we must be
Q: What practices does Industrias Peñoles adopt to
respectful of this resource and show the local community
maintain a strong investment profile?
that we can add value to both the quality and quantity
A: From the start of the exploration process, a minimum
of their supply. Secondly, it is essential to understand the
of 10 years is needed to develop a project, so a short-
individual needs and beliefs of the community to ensure
term vision is not practical in this business. I would say the
that we can add value to their society. For example, when
company is now more open and flexible than it has been
we began work on the La Ciénega mine in Durango, which
in the past. When the latest version of our strategic plan
is owned by our subsidiary Fresnillo, we found that the
was put together in 2010, we identified 18 key strategic
community suffered from extreme poverty. We therefore
objectives and projects. We have already implemented 11
installed a series of trout farms in the area, recruited
of those projects, and we are currently working on multi-
experienced professionals to teach the locals how to
million dollar projects in Guerrero, Chihuahua, and Torreon.
export trout eggs, and now the business has taken off.
However, Industrias Peñoles has been operating for 129
The community around La Ciénega is now economically
years, and 40 years ago a clear vision for the company
independent of mining and this is vital because mining
objectives was set out.
oxide, and automotive industries. The largest component
industrial demand is projected to grow this year, he predicts
of physical silver demand, industrial applications, which
this will be a slow increase.
accounted for 50 percent of total physical silver demand last year totaled 588.7 million ounces. “This drop was largely due
In addition to physical investment, silver has an active over-
to weaker fabrication demand in developing countries and
the-counter (OTC) market, serving as a mechanism for risk
a stagnant global economy,” he comments. “On a regional
and price management. OTC trade can have a meaningful
basis, modest increases in industrial demand were posted in
impact on silver prices because of the market’s depth. In
the US and Japan, the second and third largest sources of
2015, the volume of silver transferred in the London bullion
industrial demand, respectively.” Electrical and electronics
market, the largest OTC market for silver worldwide,
use, he says, declined by 10 percent last year to 246.7 million
totaled approximately 36.8 billion troy ounces (1.14 million
ounces, as a result of slower economic growth in developing
tons), with a value of $575 billion, according to data
countries and the continued weakness in computer sales.
published by London Bullion Market Association. “Over
However, there were several highlights within the industrial
the last year, there has been a 24 percent growth in silver
segment. “Silver demand for photovoltaic applications
coin and bar investment to reach 292.3 million ounces, the
rose 23 percent in 2015 to 77.6 million ounces, marking the
highest annual demand level in GFMS’ records, overtaking
second consecutive year of increases in this sector, driven
the previous high in 2013,” DiRienzo reveals. “Coin and
by strong growth in Chinese solar panel installations,” he
bar demand accounted for 25 percent of total physical
expounds. “Silver demand for ethylene oxide (EO) grew by
demand in 2015, the highest market share on record and
an impressive 103 percent to 10.2 million ounces. The GFMS
up from just 5 percent a decade earlier.” With lower silver
team at Thomson Reuters estimates residual volumes of
prices and the need for investors to gain access to hard
137.5 million ounces of silver in EO plants around the world
assets, silver coin and medal demand amounted to 134.1
at year end 2015, which is the equivalent to 16 percent of
million ounces of demand last year due to unprecedented
last year’s silver mine production.” Although he admits that
growth in several key markets, notably the US and India.
105
| MINE SPOTLIGHT
106
PALMAREJO Only 15 kilometers east of Temoris, Chihuahua, the Palamarejo mine has been producing gold and silver since 2009, and is wholly owned by Coeur Mining, a company that owns five precious metals mines in the Americas. Palmerajo’s operations are carried out both in open pit and underground mines. The local electricity company supplies enough energy so that its onsite generators only have to be used in the case of emergencies. Feasibility studies have brought to light proven and probable silver reserves of 44.9 million ounces of silver, and 690,000 ounces of gold. In 2015, production totaled 5.1 million silver ounces, and 70,922 ounces of gold, and for the present year the company is expecting to generate 3.9-4.4 million ounces of silver, and 67,000-72,000 ounces of gold. As it is located upon the occidental Sierra Madre, superficial mining is achieved through conventional operations that penetrate with the help of explosives, trucks, and shovels. Three main portals that rely on a ramp system grant access to its underground mining sites. Operations are currently running at full capacity. Palmarejo’s plant is fed by a mixture of underground and superficial sources. The content is churned together through the main shredder at a rate of approximately 6000t/d. Tasks related to milling, flotation, carbon leaching, electrowinning, Merril Crowe processes, and doré are all sent to refining and smelting associates that are found in Europe and the US. The
mine
holds
epithermal
deposits
and
contains
multiple seams, breaches, and fractures. The structure dips between 40° and 70°. The highest grade of silver can be found among the superior part of the mineralized structures, while the highest grade of gold is among the lower portions. Palmarejo encompasses a rich spectrum of areas of interest, of which the most important is in the northern region of the concessions. Palmarejo is continuing the company’s focus on operational excellence and profitability by progressing only toward higher grade, and higher margin underground operations. Underground mining rates at Guadalupe averaged 1,800t/d in 1Q16. Coeur Mining is aiming to reach 4,000t/d in the Guadalupe and Independencia sites by mid-2017. The company has greatly prioritized process optimization, which has increased recoveries, and reduced processing costs. Production rates also improved thanks to the acquisition of additional property in April 2015. A gold streaming agreement between Coeur Mining and Franco Nevada will further improve cash flow by late 3Q16.
107
| VIEW FROM THE TOP
PROMISING FUTURE FOR THE JUANICIPIO JV PETER MEGAW Chief Exploration Officer of MAG Silver
108
Q: How do you plan to invest the capital generated by the
concerned about how we are going to continue to add value
Juanicipio project, and where do you see the company in
to their investment beyond the cash flows we anticipate.
10 years’ time?
We believe the answer is in the geological potential of the
A:
and
Juanicipio JV property below the Bonanza zone, as well
developmental position as the 44 percent junior partner
Right
now,
we
are
in
a
strong
financial
as the other prospective opportunities on the JV property
on the Juanicipio project, and our focus is on bringing the
where potential value can be realized. We therefore have
Juanicipio project into production and cash flow. As we
two drilling programs in progress, one finishing in August
near cash flow, MAG Silver will evaluate the reinvestment
and one anticipated to be complete at the end of the year. In
and shareholder distribution alternatives. In 10 years’
addition, we are focusing on the anticipated cash flows once
time, we will be generating substantial cash flow from the
in production and the shareholder distribution alternatives
Juanicipio project, and MAG will be generating additional
that production will represent.
shareholder value through additional discoveries within Q: How has the company managed to continue growing
the Juanicipio JV, and its other properties.
despite the ongoing industry downturn? Q: What are the main concerns that your investors have
A: MAG Silver has always been built on grade and size. We
at this moment?
put the company together in 2002 with the idea that there
A: Five years ago, one of the main concerns was whether
were sizeable deposits in Mexico with high enough grades
or not the Juanicipio project would shape out enough to
to make a profit even at the US$4/oz silver price at the
support development. Once that was addressed, the next
time. We are able to ride out market downturns primarily
issue was raising the necessary funds to maintain our 44
because we and our shareholders believe the quality of
percent stake in the project, which we were fortunate enough
the ounce is more important than the quantity, and this,
to also accomplish. Currently, our investors are concerned
coupled with our strict financial discipline, gives us a firm
with more general themes regarding Mexico, such as the tax
foundation for sustained growth. We focus on internal
regime in the country, the impact of the royalty tax that was
rate of return because at the end of the day our job is to
put in place, and security issues. Our shareholders are also
increase shareholder value.
Our law firm has over 25 years’ experience in mining.
ATTORNEYS AT LAW “MINING LEGAL ISSUES OUR CHALLENGE”
Our practice is focused in the Mexican mining sector, and we are experts in: Incorporation and registration of Mexican mining companies. Formation of joint ventures.
Obtainment of mining concessions and compliance of mining obligations. Due diligence of mineral properties.
Negotiation and drafting of mining contracts.
Financing and securities for mining projects in Mexico.
Processing and obtainment of expropriation, temporary occupation, easement of
way creation, permits for use of explosives, and other procedures required before the regulatory authorities.
Av. Nuevo León 202 Piso 8, Colonia Hipódromo, 06100 Ciudad de México Tel. (52-55) 5207 2800/06
lauradiaz@dbr-law.com / www.dbr-law.com
| VIEW FROM THE TOP
SANTA ELENA PROJECT BOLSTERING GROWTH KEITH NEUMEYER President & CEO of First Majestic Silver
Q: Which of First Majestic’s achievements over the past
the crushing capacity to 3,000t/d was completed in June
decade are you proudest of, and in which ways have they
2015, reducing AISC by approximately 20 percent.
shaped the company? A: Over the past decade, each year has been unique in
Q: Which measures to reduce operating costs have
terms of the successes they have brought to the company.
been most effective in your efforts to optimize financial
First Majestic Silver is the second largest producer in Mexico
performance?
and it has taken many variables to achieve this leadership
A: Three years ago, we decided to transform the company
position. It has all come down to exceptional human
and treat it like a manufacturing business. We are now able
capital, trained teams, profitable assets, shareholders, and
to identify inefficiencies and deploy technologies within
the strategy the company has put forth to raise capital
it. We have embraced the automation trend and we have
and deploy it, ultimately benefitting the shareholders. As
automated the laboratory processes, meaning the access
a mining company focused on silver production in Mexico,
to the mineral is faster and we can control variables like
the manner in which we could benchmark our performance
temperature, cyanide, chemical, and pH levels in ore
to other silver producers would be determined by how
processing, which positively affect the throughput. There
we save costs. Nevertheless, it is difficult to compare our
are dozens of alternatives we have implemented that have
performance on only that variable because we are the
impacted our operation costs. First Majestic has been
leaders in pure silver production. First Majestic strives to
one of the first to ride the technology wave and we have
develop its existing mineral property assets and presently
seen that it has benefitted the sector both in terms of
it owns and operates six silver producing mines, La Parrilla,
competitiveness and environmental responsibility. Mines in
San Martin, La Encantada, La Guitarra, Del Toro, and the
the US and Canada have been forced, over time, to change
newly acquired Santa Elena.
and in many ways they are decades beyond mines in Mexico.
Q: How have First Majestic’s operational practices
Q: What is First Majestic’s plan for the development of
contributed to the increase in silver equivalent production?
the Santa Elena mine?
A: The combined effort of the six operating mines has
A: The company’s total CAPEX in 2016 is US$64 million,
enabled First Majestic to reach these production levels,
of which US$45 million is earmarked for sustaining and
and 2016 is poised to become an equally promising year.
US$19 million is earmarked for expansion. Production will
The acquisition of the Santa Elena silver mine has certainly
remain in the 5 million ounce range and the main focus will
bolstered our growth, as it is a 5 million ounce producer.
be to extend the lifetime of the mine. Production levels
This acquisition enabled the company to finish the year
in 2015 reached approximately 16 million ounces and this
on a strong note, and the final quarter saw an all-time
will increase to 19 million, with this growth stemming from
production record. The Santa Elena mine is comprised of
the Santa Elena mine. The cost per ounce ranges between
concessions stretching across 51,172 hectares. It combines
US$11-13 and we hope to either sustain it or reduce it
ore processing from the remaining reserves in the open pit
even further but this will depend on the Mexican peso
with updated reserves from the underground development,
and the current commodity prices. There is a sizeable
in addition to the reprocessing of spent ore from the
land package with interesting geology that is now being
existing heap leach pad. Currently, we are mining on three
mapped. The previous owners did little on that front so we
stopes in order to reach underground production levels of
plan to define drilling targets over the coming years. It is
1,500t/d. The weakening peso and the addition of Santa
one of our lowest cost mines because of its gold credits.
Elena in the fourth quarter had a positive impact on our
There are many factors that make it a low cost operation,
all-in sustaining costs (AISC) in 2015. In addition, the US$14
which include a good mill, a well-developed mine, and top
million spent on the expansion at La Encantada to increase
quality planning thanks to a wealth of mapped resources.
109
| VIEW FROM THE TOP
SUCCESSFUL EXPLORATION OF EXISTING PROJECTS BRADFORD COOKE CEO of Endeavour Silver
110
Q: What have been the main highlights in the exploration
targets. We intend to continue aggressively exploring
of existing projects and possibilities of acquiring new
and engineering this project in 2016.
mining projects? A: We succeeded in replacing silver reserves and
In May of this year, we announced the acquisition of the
boosting silver resources last year, and we identified
El Compas mine project in Zacatecas. The El Compas
new mineralized zones at each mine as well as at the
gold-silver mine project has strong exploration potential
emerging new Terronera project in Jalisco, where
to expand resources and solid acquisition potential to
we recently made a new greenfield silver discovery.
consolidate stranded resources and exploration targets
Terronera is an exciting new, high-grade silver-gold
within the Zacatecas mining district. Our short-term goal
find that has the potential to become our largest and
is to invest in exploration to upgrade and expand the
most profitable mine. Late last year, deep drilling at
resource, consolidate properties in the district to extend
Terronera intersected the highest grades yet found on
mine life, refurbish the plant, re-evaluate the economics
the property. The main mineralized zone is still open at
to develop the mine, and complete an updated mineral
depth and along strike, and surface sampling of several
resource estimate by year end. If successful, we would
other veins identified multiple new high-grade drill
commence production at El Compas in 2017.
| VIEW FROM THE TOP
SILVER JUNIOR BANKING ON SAN ACACIO PROJECT BRUCE WINFIELD President & CEO of Defiance Silver Q: What have been the key milestones and achievements
Q: Bearing in mind the positive results, how will this affect
for
your exploration efforts looking ahead?
Defiance
Silver
during
2015,
and
what
new
opportunities have you spotted in the San Acacio project?
A: We are still in the early stages, with a total of 25,000m of
A: We were able to use the funds that were invested
drilling to complete. Our first phase is expected to stretch
into the company in early 2014 in order to complete the
5,000m, the second phase 10,000m, and the third phase
acquisition of surface rights, obtain environmental drilling
10,000m. We are still in the midst of Phase One but we are
permits, and carry out three different drilling campaigns
encouraged by our early successes and this will drive us
on the project, which total approximately 3,000m. We are
into Phases Two and Three. The property has produced
still assessing the results from the aforementioned drilling
100 million ounces of silver over the last 500 years and we
but overall it was extremely positive, with wide, high grade
have always maintained that there is potential for 50-100
intersections. We marketed ourselves on the promise that
million ounces remaining in the mine to be produced. Our
we could drill below the old workings and increase the
aim is to prove this potential, and this is what we have
number of ounces of our resource, offering the least risk
started to do with the first 3,000m. Now, it is a matter of
and highest reward.
increasing our efforts.
Q: What made Guanaceví so successful for you given it
mining operations feeding a central 1,600t/d plant to
had run out of ore and were struggling to survive?
produce bulk silver-gold concentrates. In 2015, Bolañitos
A: At Guanaceví, we have discovered seven high-grade
produced 1.5 million ounces of silver, exceeding guidance,
silver-gold ore bodies along a 6km length of the Santa
and 23,966 ounces of gold, totaling 3.1 million ounces of
Cruz vein since acquiring the property in 2004. Today,
silver equivalent. Cash costs at Bolañitos in 2015 were
three underground mines feed the central, 1,200t/d plant
US$4.31/oz of silver, while AISC were US$11.79/oz of silver,
that produces doré bars. In 2015, Guanaceví outperformed
both net of gold credits. Over the course of last year, we
guidance due to higher than expected ore grades, producing
developed the new La Luz-Asunción (LL-Asunción) mine
3.4 million ounces of silver and 7,390 ounces of gold,
and successfully transitioned our main production to it
totaling 4 million ounces of silver equivalent. Cash costs in
from the Lucero mine. We further explored and delineated
2015 were US$8.66/oz of silver, while all-in sustaining costs
the LL-Asunción ore body, drilling more than 9,500m in 39
(AISC) were US$12.97/oz of silver, both net of gold credits.
holes, and developed another 4.1km of the underground
We drilled 9,550m in 38 holes to successfully expand the
mine. In 2016, Bolañitos will continue to produce 800-
high-grade silver-gold mineralization at Santa Cruz and
900t/d of ore, primarily from the LL-Asunción deposit. In
Porvenir Centro. In 2016, production will continue at the
1H16, the plant will operate close to its 1,600t/d capacity as
plant’s capacity of 1,200t/d, with ore coming primarily
it processes the 75,000 ton ore stockpile.
from the Porvenir Cuatro, Porvenir Norte, and Santa Cruz deposits. The year’s production is forecast at 3.1-3.3 million
Q: How does the company plan to capitalize on
ounces of silver, and 6,000-7,000 ounces of gold, for 3.6-
opportunities
3.8 million ounces of silver equivalent.
potential in each of the regions where it operates?
to
exploit
the
untapped
geological
A: We continue to explore our existing properties to unfold Q: What factors contributed to your similar successes
their full potential for the discovery and development
with Bolañitos, and how has this project developed?
of new mines. We also continue to acquire properties in
A: At Bolañitos, we have discovered seven high-grade
other historic districts where we see strong but untested
silver-gold ore bodies since acquiring the property in
exploration potential. The property of the exciting new
2007, and we have opened one new mine and completed
Terronera discovery covers an entire district of outcropping
three plant expansions. There are now two underground
veins containing high-grade silver-gold mineralization.
Q: What characteristics does the San Acacio project have
we were fortunate to find an investor in Windermere Capital
that makes it a viable and interesting development?
that could see the potential of the project and was willing to
A: San Acacio is one of the last major mines with substantial
invest US$1 million in order to support it. We have applied
production that has experienced little modern exploration.
for another set of concessions with the Minerva Group in
Now we need to increase our success levels in order to
northern Mexico. This is another old mine in which we see
be able to acquire the property for the US$5.5 million full
great potential for modern exploration, and although it is
purchase price within the next three years. Another thing
still only in the application process, we think it is a solid
that makes San Acacio so exciting is that it is a previously
opportunity. However, we are currently concentrating our
producing mine with tremendous future potential. Moreover,
efforts on San Acacio simply because funds are limited and
it is only located 6km north of Zacatecas, which is a fully
we need to dedicate them to the most important project.
developed city, so we are able to benefit from paved roads and power lines throughout the property. There is a well-
Q: What are the key goals you have for 2016, and where
developed history of mining in the town, and we have not
do you see the company in the coming five years?
experienced a great deal of resistance from the locals. For
A: In 2016, we want to continue drilling and developing
instance, we obtained drilling permits within six weeks,
the project. Within five years, we hope to have advanced
which is unheard of in Mexico.
the project to the point where we can start conducting pre-feasibility studies in order to justify building a mine.
Q: What has enabled you to thrive and survive?
In my view, San Acacio certainly has the potential to be
A: The San Acacio mine is a solid project that has allowed us
a substantial modern mine like Capstone Gold’s Cozamin
to attract enough capital even though this has admittedly
mine, which is located just 2.5km south of San Acacio.
been difficult over the last four years. Moreover, investment
Despite the fact that our concession lies on the northern
in high-risk projects is not forthcoming at the moment, so it
structure, the two are very similar, so we believe that our
has helped that ours is at a more advanced stage. In 2014,
project can be just as productive.
111
| MINE SPOTLIGHT
112
FRESNILLO The municipality of Fresnillo consists of valleys and plains, with rising plateaus and deep canyons. Nestled among the Sierra de Chapultepec and Sierra de Fresnillo mountains, the Fresnillo gold and silver mine has been operating since 1554. Mexico is the largest silver producer in the world, generating 192.9 million tons in 2014. It is no surprise then that the largest silver producer in the world is Mexico's Fresnillo, which surpassed its closest rival in 2015 to achieve an output of 45 million ounces. The Fresnillo mine makes a significant contribution to the portfolio of the owner and operator. The Fresnillo concession is currently the eighth largest silver producing mine in the world. In 2015, the mine produced 2.4 million tons of ore, of which 15.6 million ounces were silver with a grade of 220g/t and 34,100 ounces were gold with a grade of 0.57g/t. In 1Q16, Fresnillo celebrated its third consecutive improvement in grade, rising to 236g/t, despite some issues including the veins narrowing faster than expected, a natural decline in grade, and adverse changes in rock quality. Nevertheless, the operator has implemented several strategies to combat these problems, including infill drilling with a closer grid, improved infrastructure planning, and adaptation to new mining concessions. The Fresnillo mine announced cost for this mine at US$48/t, cash cost at US$5.6/oz, and all-in sustaining cost (AISC) at US$11.5/oz. With a remaining lifecycle of eight years, Fresnillo is implementing strategies to increase production levels, and is investing an estimated US$30 million in an optimization project that involves mine development, detailed engineering, and plant adequation. This strategy is designed to facilitate an average annual production rate of 3 million ounces of silver and will be completed by year end 2017. In 2015, the mine experienced lower silver production volumes as well as lower grades, although lead and zinc production rose by 17 percent and 25 percent respectively, with expected higher grades as the mine is deepened. Silver grade has depreciated from 396g/t since 2011 to 220g/t but the operator expects the average for the rest of the mine’s life to raise to 260g/t. Looking forward, Fresnillo is predicting an increase in average development rates and a double-digit increase in ore milled in the year 2016. With the Fresnillo mine in its portfolio, Fresnillo looks set to achieve its aim is to produce 65 million ounces of silver and 750,000 ounces of gold annually by 2018.
113
| VIEW FROM THE TOP
OPTIMIZATION TO PREPARE FOR NEW UPTURN CHRISTOPHER WARWICK Country Manager and Director General of Pan American Silver México
114
Q: What are the main drivers behind your current projects
and although we do not mind mining other metals like
in Mexico and how do you see them strengthening your
gold, zinc, lead, and copper, finding those substances
growth portfolio?
is not our primary goal. The La Virginia and La Bolsa
A: Pan American Silver is fully committed to business in
projects are primarily gold projects, so they do not fit
Mexico. The country is investor friendly, straightforward for
into the Pan American Silver portfolio. Nevertheless,
business and regulatory purposes, and extremely receptive
these projects have already been drilled, and going
to what we are trying to achieve through our investments in
forward consideration will be given to how they fit into
country, which leads to growth for our company and most
the Pan American Silver portfolio, especially when metal
importantly for the shareholders' return value. Growth for
prices rebound.
the company in Mexico also stimulates the development of the surrounding communities and the people that work and
“US$130 million has been
live in the areas in which we operate. Ultimately, investment in Mexico benefits all parties concerned, including the Mexican government and the Mexican people as a whole. Q: Despite the unfavorable market conditions, what have
invested in a new mine shaft and plant at the La Colorada mine in Zacatecas”
been the highlights for Pan American Silver in 2015? A: Of our three operations, two are currently undergoing extensive expansion work. At La Colorada mine in
Christopher Warwick, Country Manager and Director
General of Pan American Silver México
Zacatecas, the company has invested in a new shaft and a new plant with associated underground development infrastructure, which equates to an investment of US$130
Q: What success stories have you had in transferring
million and will increase the mine’s expected minimum
practices from the US or Canada into Mexico or vice
lifespan to at least 15 years. The plant is already 50
versa?
percent complete and the shaft work is 85-90 percent
A: Pan American Silver has seven running operations, and
complete, and both are due to come online in September
each mine is unique so what works in one mine will not
2016. Likewise, the company plans to invest US$200
necessarily work in another. Nonetheless, an accident in
million on expansion work at the Dolores mine over the
one operation will be shared across all sites regardless
next two years. The funds will be invested in a new mine
of the circumstances in order to ensure that repetition of
development by way of an underground ramp to facilitate
such an error or oversight is avoided in the future. Our
the beginnings of an underground mining operation to
mine operations in Mexico have won several Casco de Plata
work in tandem with the existing open pit and a new pulp
awards, which is the highest safety award a mine in Mexico
agglomeration plant at the mine site. The ramp progress
can receive. We are careful not to cut corners on that
is already at the one year advanced stage and the plant
front, and we try to give the workers the most productive
works will soon begin. The Alamo Dorado mine, our
platform to work from. It is essential to be aligned with
third operation in Sonora, is already at steady state of
the communities’ environmental concerns and carry out
production and will continue to operate in this capacity.
our responsibilities as operators. We reforest and replant as we progress, and as far as I know, we have never had
Q: What current activity is there in the La Virginia and La
one incident of non-compliance during any previous
Bolsa projects?
inspection. We will always continue to do the right thing
A: It is important to remember that our main objective in
to minimize the impact on the ecosystems surrounding
terms of metals lies in silver as per our company name,
our operations.
| INSIGHT
MINING FROM THE ROOTS
From a grassroots exploration company to a significant silver producer in the space of just a few years, IMPACT Silver can be seen as a mining success story, especially
FREDERICK DAVIDSON
within the current market. The company’s President and
President & CEO of
CEO, Frederick Davidson, explains that the company’s
IMPACT Silver
trajectory was the result of a daring acquisition. “IMPACT Silver took on a historic mine that was about to expire and only had two months of ore left,” he recalls. “We decided to
gold. “There are a series of epithermal veins running
make a heavy investment in three main areas to revive the
North-West and South-East that have vertical depths that
project, and the first step focused on exploration in order
range between 250-300m,” he reveals. “These are the old
to develop further resources to keep the mine running.”
Taxco veins, and in fact we have several geologists from
In 2015, IMPACT Silver was operating at 140g/t and in
Taxco that can easily identify them. We trace the vein and
2016, it has managed to increase this figure to 200g/t by
identify the highest ore grade that is economically viable,
substantially reducing losses. “This has enhanced the cash
and these are all processed in the central mill.”
flow and in turn IMPACT has expanded ownership through staking and development,” Davidson boasts. “In 2015, we
These veins have been mined for over 500 years, and
finally reached the 1 million ounce figure and all of our
through IMPACT Silver’s exploration the operator has
activity in the past five years has been financed by the
discovered over 4,000 workings and ancient Spanish
cash flow generated in the mines.”
smelters. “It is an exciting prospect that we look forward to exploring with added capital,” he admits. In addition,
Contrary to today’s market, IMPACT Silver’s strategy had
IMPACT Silver has acquired a new tailing dam and has
been one of expansion, having developed the reserves
planted approximately 10,000 trees in order to expand the
of the area and expanding the mill to 500t/d, mostly
site even further. San Ramón is the highest grade deposit
from organic operations cashflows and bootstrapping.
that the company has and it has been actively drilling there,
“Obviously, given current market conditions, we are
with positive results. “In May, we announced wide sections
focused on cost control and profitable ounces and we
of some of the highest grade silver we have encountered in
are determined to keep the cash in the bank, retain our
the last decade on the property at San Ramón. We found
workforce, and continue operations,” Davidson maintains.
14.82m of 481g/t silver and 21.74m of 271g/t silver,” Davidson
IMPACT’s current land package includes a number of veins
discloses. As a result, IMPACT Silver is garnering more
encompassed in the San Ramon Mine, the Noche Buena
attention from investors, yet it continues to monitor the
Mine, and the Cuchara-Oscar Mine. The company currently
market for possible acquisitions and deals to create more
produces concentrates containing silver, lead, zinc, and
value and increase production beyond 1 million ounces.
A reputation for Excellence TSX: PAA | NASDAQ: PAAS
www.panamericansilver.com
115
| MINE SPOTLIGHT
116
JUANICIPIO The Juanicipio mine in Zacatecas is part of a joint venture between Fresnillo, owner of 56 percent, and MAG Silver, which holds the remaining 44 percent, and is overall a standalone project. The silver mine is expected to produce an annual average of 10 million ounces of silver and 30,000 ounces of gold with a lifespan of more than 15 years. It additionally holds an indicated amount of 160 million ounces of silver at a grade of 601g/t, and an inferred amount of 48 million ounces of silver at 626g/t. As of 2015, the indicated mineral resource for the portions of the Valdecañas deposit within the Minera Juanicipio property that belong to Fresnillo, contains 4.7 million tons of minerals at a cutoff grade of US$70.29/t, and a grade of 1.86g/t for gold, and 522g/t for silver. When it comes to the vein’s contained metal, the property holds 285,000 ounces of gold, and 80 million ounces of silver. The presence of lead and zinc are also indicated, at quantities of 103,000 tons and 193,000 tons, respectively. The
Juanicipio
property
currently
circumscribes
three compelling high grade silver veins, Valdecañas, Deprendido, and lastly, Juanicipio. The most significant allocation of indicated and inferred silver, gold, lead, and zinc resources are settled upon the Valdecañas vein, and partly on the Juanicipio vein. After penetrating the land with five deep drill holes on the first vein, a massive amount of extraction potential was detected. Consequently, the mine’s ramp was lengthened to 2,180 meters, and metallurgical studies were conducted. For the remainder of 2016, more exploration drilling, ramp development, and intrinsic engineering studies are to be conducted. To design the exploration and development programs of the property, a Minera Juanicipio Technical Committee has been assigned with the approval of Minera Juanicipio Board of Directors, to be ultimately executed by Fresnillo, the project operator. MAG Silver covers its share of the costs through its 44 percent interest, and grants a small amount of additional expenses to cover related technical studies, and a direct oversight of drilling programs. MAG Silver initially discovered the deposit, ranked as the second biggest silver investment in Mexico, and optioned the controlling shares to Fresnillo due to the company’s vast resources and experience within the area. The joint venture is expected to spend a total of approximately US$305 million on the project. Juanicipio’s projected district production for 2018 is 50-55 million oz/y, divided between 10.3 million ounces in Juanicipio, 20.1 million ounces in Fresnillo, and 22 million ounces in Saucito I & II.
117
| INSIGHT
MARKET VOLATILITY POSITIVE FOR PRECIOUS METALS streaming agreement for the Cotabambas mine, a promising copper asset with good silver and gold credits. “We have structured the agreement in such a way that it is sustainable
RANDY SMALLWOOD
and it gives Panoro an opportunity to further develop the
President & CEO of Silver
project,” he comments. Silver Wheaton will be granted 100
Wheaton
percent of the silver output and 25 percent of the gold until 90 million silver equivalent ounces has been obtained. Afterward, Silver Wheaton’s take will drop to 16.7 percent of
118
Despite the volatility of the commodity markets, 2015
gold and 66.7 percent of silver respectively for the remainder
was Silver Wheaton’s strongest year due to a number of
of the mine’s life. “We like these agreements because it gives
factors. The company made strategic acquisitions and
us long term growth opportunities and these promising
acquired an additional 25 percent of the gold production
projects are exactly what we are looking for,” Smallwood
of a mine in Brazil that is finally coming to fruition in terms
asserts. “The challenge the industry faces is availability of
of production. In addition, it also acquired all of Glencore’s
assets given the fact that there is little investment because
silver production from the Antamina mine in Peru. “These
of the lack of equity support and risk capital.”
two acquisitions have a total value of US$1.8 billion, so naturally 2015 has been the biggest year in terms
The current market volatility surrounding uncertainty in
of acquisitions and metals coming into the company,”
China, the dollar prices, and the UK’s exit from the European
explains Randy Smallwood, the company’s CEO. “Some
Union have all impacted the role of gold as an investor
of our previous investments are also starting to come to
haven, according to Smallwood. “For some time we have
fruition and this means that with every quarter of the year
stated that the US dollar is too strong, and banks continue
we are setting production and growth records.” Silver
to print more money, causing inflation," he warns. "We are
Wheaton’s revenue is divided into 60 percent silver and
now faced with having to stimulate growth in a potentially
40 percent gold, and in 2013 and 2014, Silver Wheaton
negative interest rate situation. We are now seeing a
was operating at around 30 million ounces with a 2015
weakness in the US dollar because people do not believe
target of 44.5 million ounces. Due to the success observed
the Federal Reserve is capable of managing the value
by the company it increased the goal for 2016, expecting
of the US dollar on a consistent basis without resorting
to reach well over 50 million ounces.
to the implementation of negative rates.” Although the implications of these trends are currently unknown, he
Goldcorp’s Peñasquito mine continues to be the largest
believes that market uncertainty will only bring confidence
silver producer in the company’s portfolio, closely followed
and value to tangible silver and gold assets.
by Primero Mining’s San Dimas project. “In many ways this asset was the foundation upon which the company and
The downturn in China is an important trend and Smallwood
the streaming model was created," Smallwood shares. "It
believes the investments are based on governmental
continues to be a flagship project for us and Primero has
support and are not sustainable on a long term basis.
worked tirelessly in investing back into the mine." Primero
China’s growth and consumption levels will drop and this
has successfully conducted further exploration and it
will have a strong impact on base metal prices. “We obtain
has also increased production, reaching 2,500t/d, which
most of our precious metals from base metal mines and
Smallwood believes shows that even in the low commodity
these miners’ need for capital is still strong, which means we
setting, both Goldcorp and Primero are investing in their
will continue to be busy working to acquire new streams,”
assets to improve and optimize them. Moreover, Silver
he claims. “In 2015, the company reaped the rewards of
Wheaton has incorporated other smaller assets into
previous investment, and 2016 is poised to see the same
its production role, like Capstone Gold’s Cozamin mine
growth.” Silver Wheaton’s business model is to reinvest all
and Goldcorp’s Los Filos concession. When focusing on
the money it generates to continue adding ounces, growth,
acquiring a concession, the most important criteria for
and production to its portfolio. “Investments continue to
Silver Wheaton is that the asset lies at the bottom of the
pour into assets located in Mexico and we will see organic
cost curve, which will maximize profits.
growth in this jurisdiction,” he predicts “There have been no new discoveries or projects of a scale we are interested in,
Smallwood reveals that the company has made an agreement
but we will keep our eye on Mexico and the opportunities
with Peru-based Panoro Minerals for an early deposit
that lie in its base metal mines.”
119
6
BASE METALS & STEEL
Copper prices tumbled in 2H15, hitting a low of US$1.94 in January 2016 from US$2.92 in May 2015. The metal looked to be in better shape in 1Q16 until turmoil in Chinese markets threw it for a loop. Despite the unpredictable times, copper recovered some of its glimmer, closing 1H16 around US$2.20. Likewise, iron ore rallied from a low of US$41.25 in January 2016 to US$59.58 in April, only for the market to turn bearish once again with a fall to US$51.36 by the end of 1H16. Similarly, 2015 saw a sharp drop in steel prices from US$480 in February 2015 to US$170 by year end, and the bear market continued into 2016 with a fall to US$50 by March. A significant bounce in early June 2016 put the metal back in the US$300 range by the middle of the month. The base metals market has been a roller coaster of volatility this year but many commodities have started to recover.
This chapter will concentrate on the main operators within Mexico producing copper and base metals, who provide details of strategies they have adopted to mitigate the effects of today’s turbulent market. Metals streamers and leading equipment providers also weigh in to provide a wide panorama of the supply chain as a whole. Finally, mine spotlights and maps provide greater insight to the state of today’s copper and base metals industry in Mexico.
121
122
| CHAPTER 6: BASE METALS & STEEL 124
VIEW FROM THE TOP: Oscar González, Americas Mining Corporation
126
MAP: Mexico's Main Base Metals Mines
128
VIEW FROM THE TOP: Carlos Silva, Carrizal Mining
129
INSIGHT: Hiromitsu Morishima, Marubeni Mexico
130
MINE SPOTLIGHT: Buenavista del Cobre
132
VIEW FROM THE TOP: Uriel García, Mercuria
132
VIEW FROM THE TOP: Anthony Rovira, Azure Minerals
134
TECHNOLOGY SPOTLIGHT: Future Discoveries with Man Portable Drill Rigs
136
INSIGHT: Carlos Rojas, Techflow
138
MINE SPOTLIGHT: Velardeña
140
INSIGHT: Antonio Valdez, Prydisa
140
INSIGHT: Joel Carrasco, Ausenco
123
| VIEW FROM THE TOP
CONSOLIDATING ASSETS UNDER ONE UMBRELLA OSCAR GONZÁLEZ President & CEO of Americas Mining Corporation
124
Q: How optimistic are you that the recovery seen in 2Q16
and we expect this higher productivity to have a positive
will last, and what could this mean for Americas Mining
impact on our 2Q16 results when they are released.
Corporation? A: We predict that copper prices could rise to around
Q: According to the company 1Q16 report, zinc production
US$2.50/lb during 2016. Earlier in the year, prices were
is due to increase by 41 percent and gold by 35 percent in
averaging around US$2.14/lb, before rising to US$2.25
2016. Is this trend representative of a strategy to diversify
following the fallout from the UK’s decision to leave the
the company portfolio?
European Union, and the ongoing weakening of the dollar.
A: The group has a number of underground mines in
As a group, we have made some structural changes to
Mexico producing large quantities of zinc, while there
adapt to the changing economic climate, including the
are also zinc reserves at Buenavista del Cobre. Indeed,
decision to create a new subsidiary company to align
we are in the process of acquiring a permit to begin
our operations in the Americas. This enterprise, Americas
construction of a beneficiation plant onsite specifically
Mining Corporation, will soon be listed on either the
for zinc production. Moreover, we recently acquired the
New York Stock Exchange (NYSE) or on the London
Aznalcollar mine near Sevilla, Spain, which principally
Stock Exchange (LSE), depending on market conditions,
produces zinc, as well as smaller quantities of copper
and is designed to centralize and streamline many of
and lead. This mine was shut down in 1998 due to a
our
operational
tailings dam rupture that polluted a nearby river with
departments. Unfortunately, this meant that we were
toxic waste, and one of the clauses included in the
forced to cut around 200 jobs but it was a necessary step
acquisition is to invest at least US$300 million toward
given the state of the industry, and we are confident that
improving the mine site’s environmental protection
this new structure will allow the business to continue its
facilities. We are happy to fulfill this requirement, and
growth trajectory. Americas Mining Corporation will unite
in the meantime we are also carrying out exploration
ASARCO, Southern Copper, Minera Mexico, and Southern
in order to identify further veins on that property, so
Peru, in order to merge Grupo México’s global mining
therein lies the explanation for our bullish expectations
interests into one entity. Streamlining the administrative
regarding zinc production in 2017.
administrative,
legal,
financial,
and
processes of these subsidiary organizations will allow the group to maximize its cost efficiency, as well as improving
Q: As a company that is well known for its commitment
global sales, which have been hit by the falling metals
to community development, how satisfied have you been
prices. This should have a positive knock-on effect on the
with the effects of the new mining royalty tax?
profitability of the company.
A: We have mixed feelings about the tax and its effects on community development. Firstly, it is important to note
Q: How will the group’s recent completion of an expansion
that in 2015 Grupo México paid a total of US$56 million
project at Buenavista del Cobre affect the mine’s levels of
as a result of this tax, which is a significant number. In
productivity?
Peru, the rate of taxation we pay is around 3.5 percent,
A: We invested close to US$4 billion on both a new leaching
but in Mexico it is 7.5 percent, so there is a noticeable
plant and a beneficiation plant, which will increase the
difference. According to the reforms, 80 percent of these
mine’s production by 120,000t/y of cathodic copper and
proceeds were due to be reinjected into the communities
190,000t/y of fine copper. This comes in addition to an
surrounding mining regions via the corresponding state
ongoing US$1.2 billion investment on the Toquepala mine
and municipal governments, and we have seen some
in Peru. The new produce, which is already being sold on
encouraging
the market both directly and through traders, will bring our
delighted to see that the Cananea municipal and state
total production to 1.2 billion t/y of fine copper by 2018,
governments have started construction work on a new
developments.
For
example,
we
were
road in the Magdalena neighborhood. Unfortunately, however, only around 50 percent of the tax proceeds have been redistributed to the authorities in the regions in which we work, putting strain on the development projects they had put in place. Therefore, we are currently working with CAMIMEX in an attempt to arrange discussions with the Ministry of Economy so they may explain to us why the full percentage has not been awarded. Q: What has Grupo México done to recover the damage caused by the spill at Buenavista del Cobre, and what did the company learn from this incident? A: Since the spill, we have worked tirelessly alongside
Streamlining its subsidiary organizations will allow the group to maximize its cost efficiency
the Sonora state government to repair the damage, and both CONAGUA and SEMARNAT have acknowledged that
A: We will continue to focus on simultaneously reducing
the river is now healthy again and that the surrounding
costs and increasing production, and we are investing heavily
communities have clean water to drink. We have also
in order to achieve this goal. We have issued three long-term
built a series of dams that will prevent similar events from
bonds of US$2 billion each, and we expect to issue a fourth
reoccurring. Of course, there is still work to be done, most
in early 2017 if necessary. We will use this liquidity to invest in
notably on repairing the road that runs along the Sonora
the new plants at Toquepala and Tía María in Peru, in order to
river, and we hope to initiate this project in the immediate
complement our expansion at Buenavista del Cobre. Once in
future. The spill was an isolated accident that unfortunately
operation, the new beneficiation plant will eventually increase
caused significant damage to the surrounding ecosystems,
our copper production in Peru to 520 million t/y, including
and we are doing everything to make sure that such an
production at Tía María. Elsewhere, we will continue with our
event does not repeat itself.
dedication to environmental care by introducing new, green technology into each of our operations, and by working with
Q: Looking forward, what is the group’s main focus for
local authorities to support tree planting, preservation, and
the rest of 2016 and 2017?
renewable energy programs.
125
I MEXICO'S MAIN BASE METALS MINES
1 2 3 1 2
6 6
3
4
4
126
5
5
7
7
8
8
9
9
11 11
10 10
14 14
16 15 18 17 15
16
17
18
20 20
Copper Zinc/Lead Closed/Abandoned
13 12
12
Number
Project
Company
Stage
State
1
Milpillas
Industrias Peñoles
Production
Sonora
2
Maria
Minera Frisco
Production
Sonora
3
Buenavista del Cobre
Grupo México
Production
Sonora
4
La Caridad
Grupo México
Production
Sonora
5
Piedras Verdes
Cobre del Mayo
Production
Sonora
6
Bismark
Industrias Peñoles
Production
Chihuahua
7
Bolivar
Sierra Metals
Production
Chihuahua
8
San Francisco del Oro
Minera Frisco
Production
Chihuahua
9
Santa Barbara
Grupo México
Production
Chihuahua
10
Nuestra Señora
Americas Silver Corp
Production
Sinaloa
11
Velardeña
Indsutrias Peñoles
Production
Durango
12
Peñasquito
Goldcorp
Production
Zacatecas
13
Tayahua
Minera Frisco
Production
Zacatecas
14
Sabinas
Industrias Peñoles
Production
Zacatecas
15
Saucito
Fresnillo
Production
Zacatecas
16
Fresnillo
Fresnillo
Proudction
Zacatecas
17
Francisco I. Madero
Industrias Peñoles
Production
Zacatecas
18
Cozamin (San Roberto)
Capstone Mining
Production
Zacatecas
19
Charcas
Grupo México
Production
San Luis Potosi
20
Asientos
Minera Frisco
Production
Aguascalientes
21
Zimapan
Carrizal Mining
Production
Hidalgo
22
El Baztán
AHMSA
Production
Michoacan
23
Tizapa
Industrias Peñoles (51%) Sumitomo (10%) Dowa Mining Corporation (39%)
Production
State of Mexico
13
19 19
21 21
23 23
22 22
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| VIEW FROM THE TOP
SOCIALLY CONSCIOUS MINER COLLABORATES WITH LOCAL COMMUNITY CARLOS SILVA Director General of Carrizal Mining
128
Q: What strategies has the company implemented to
A: As well as leading the operations for Carrizal Mining, I
manage the effects of the recent regulatory changes?
also serve as president of the Mexican Sustainable Mining
A: Since 2013, when the prices of precious metals began to
Federation, which seeks to provide support for small and
fall, Carrizal Mining began to change its operational structure
medium-sized mining companies. Currently, the federation
in order to continue to grow in spite of the market volatility.
is working in Autlan, Jalisco, where there are vast reserves
Recognizing the growing importance of its workforce, the
of manganese and other metals. Its work is enabling more
company increased its focus on internal training schemes in
limited mining enterprises to manage small-scale mines that
a bid to improve productivity and lower costs. Since 2014,
produce 30-40t/d, with a view to expanding production
we have invested more than 8,000 hours into personnel
when possible. These smaller projects help complement
training, focusing on the theme of security as well as
Carrizal’s main operations in Zimapan, Hidalgo.
other more technical issues. We have also revamped our recruitment process, and we are currently putting a lot of
Q: How can a sustainable mining company ensure that
effort into attracting new, talented individuals to join our
local communities continue to prosper following the
team and move the company forward. This has included
closure of a mine?
working with a number of educational institutions, such as
A: Small mining towns often find themselves abandoned
the University of Guanajuato, the University of Hidalgo, and
once production is completed. I am constantly working
the Zimapan Technological Mining University. On average,
with all levels of the Hidalgo state authorities, including the
Carrizal Mining produces between 2.5 million and 3.5 million
governor, to encourage alternative sources of economic
oz/y of silver equivalent but in 2015 the company’s output
development while production is still ongoing. I believe
totaled 5 million silver equivalent ounces, which represents
educational institutions, such as the Zimapan Technological
encouraging growth given the market situation. This success
Mining University can play a key role in acting as a motor
was achieved with women occupying three of the five top
for economic development both during and following
executive positions within the company.
the completion of mining operations. Previously, the city was dependent on the mining industry but it has now
Q: After exploration projects at Toliman were halted last
developed strong university and tourism infrastructure.
year due to financial constraints, are there any plans to
Although mining is no longer as strong as it once was in
recommence operations?
this region, the city is continuing to thrive thanks to the
A: We are currently receiving support on these projects
alternative financing sources that it developed.
from Industrias PeĂąoles. Of course, we have not stopped exploration entirely; rather we are focusing on those
Q: What level of support does the company receive from
geological regions that can be analyzed at low cost. We are
the local government for such initiatives?
working on reopening a small mine in Durango, and once
A: We can at times be deeply frustrated with the
our negotiations with the ejido that owns the concession
local government because of the short-term vision it
are completed as expected, we should have a mine
adopts regarding economic development. The federal
producing between 300-400t/d of minerals. This project
government directs significant resources into developing
should be open within 12 months and will employ around
tourism in the country but that money does not find its
80 laborers in a very remote area that suffers greatly
way to the smaller communities such as Zimapan, and
from unemployment, so we hope that the mine will have a
that is detrimental to our attempts to foster sustainable
positive socio-economic impact on the area.
economic development. Undoubtedly, we require further support from the authorities but I also believe that the
Q: How committed is Carrizal Mining to developing a
mining community itself has a duty to become more unified
culture of sustainable mining in Mexico?
and work together toward generating development.
| INSIGHT
MEXICO PROMISING MARKET FOR DISTRIBUTOR The Marubeni trading and investment company is focused on four primary fields, the mining, automotive, consumables, and energy industries. The company has been present in Mexico for more than 60 years, and the
HIROMITSU MORISHIMA
country holds great importance for its overall Latin and
President of Marubeni Mexico
North America strategy. The domestic automotive sector is booming, with unit production expected to exceed 5 million by 2020, and Marubeni sees a lot of opportunities
inventory control, checking the mileage of each tire, and
for its business within this industry, according to the
recommending suitable tire specification by analyzing its
company’s Mexico President Hiromitsu Morishima. “In
conditions of use.”
order to combat the stagnant industry, we have the advantage of a diverse investment portfolio, which means
Morishima believes that one of the primary advantages
that the success of the company is not so directly linked
Mexico holds over its regional competitors at the
to the state of the commodity markets,” he shares. “Of
moment is its stability, both in a political and financial
course, mining is a large focus for us but thanks to our
sense. Mexico has a population of 120 million, a GDP per
extensive network of clients across the sectors in which
capita of US$10,000, and an average age of 28 years old.
we work, our risk is spread across a number of fields.”
However, one challenge the company constantly faces is the fluctuating value of the peso. “Of course, this is a direct
Marubeni is always sure to keep abreast of opportunities in
result of Mexico being so closely linked to the US, which has
the mining industry. “Before we join a project, we look for
its benefits but this constant volatility presents difficulties
a partner with local knowledge of the sector in order to
when developing our long-term business strategy for
add value to the project, and move on from there,” explains
Mexico,” he laments. “Nevetheless, we are always on the
Morishima. Marubeni’s main focus in Mexico is selling tires
lookout for new projects in which to invest, which can add
for development machinery in the construction and mining
some value to the company’s portfolio. This can be either
industries, and the company is the official representative for
greenfield or brownfield operations because as long as we
Bridgestone tires for construction and mining machinery
see opportunity for growth we will be prepared to invest
in Mexico. “Our engineers work alongside our clients to
in any viable project.” He shares that Marubeni is hoping
ensure that they receive the most comprehensive service
to join with a valuable partner and build a project in that
possible, and also to enable our customers to maximize
way. In the short term, the company will be focusing on
the potential of the Bridgestone tires,” he comments. “This
expanding its industrial machinery, chemical, and consumer
includes demonstrating the optimum inflation pressure, tire
goods segments, as well as consolidating its presence in
rotation to apply for each vehicle, tire mount and dismount,
the domestic automotive and consumables sectors.
MISSION Being a sustainable company, with a commitment to the environment, safeguarding the safety and health of our human capital. Fullfilling the applicable regulations, the code of ethics and business practices to generate resources for our contributors and society.
A 100% Mexican company, founded on February 5, 2009 with the purpose of exploiting, extracting, and commercializing the nonferrous metal minerals of Lead, Silver, Copper, and Zinc.
VISION Being an industry reference and a case study for contributing to social development, with industry-trained leaders, contributing to the best operation practices, innovation, creativeness, and an all round excellence in business.
129
| MINE SPOTLIGHT
130
BUENAVISTA DEL COBRE The state of Sonora is notorious for its wealth of mining activities
and
mineral
extraction.
Grupo
México’s
Buenavista del Cobre mine is not only one of the biggest in Mexico but is also the second largest copper mine in the world in terms of reserves. The open pit mine is located 250km from the city of Hermosillo and 40km from the US border. At Buenavista del Cobre, copper concentrates and catodes are produced, as well as gold, silver, and molybdenum. The mine has one concentrator plant and two extraction plants named ESDE I and ESDE II for solvents and electrodepositing. In addition, the mine is equipped with two crushing systems and bands, named Quebalix I and Quebalix II, for the transport of leachable minerals. Other features include leaching pads, dams, and a significant vehicle and machinery fleet that comprises heavy trucks, diggers, drills, and tractors. In 2010, Grupo México launched a strategic growth plan for the mine after it was revealed that Buenavista del Cobre is in fact much larger than was first anticipated. With an investment of US$4.5 billion, the program is designed to extend the lifespan of the mine to 80 years and create a continued source of employment and ore for the industrial sectors. As part of the expansion plan, a new concentration plant will be built that will increase annual production of copper by 188,000 tons, as well as silver by 2.3 million ounces and gold by 21,000 ounces. Storage space will increase to 300,000 tons of raw ore and a new molybdenum plant will add 160 million ounces of capacity. A third extraction plant named EDSE III is expected to increase annual production by 120,000 tons of copper cathode, and two more crushing systems, Quebalix III and Quebalix IV, will add 20 million tons and 80 million tons, respectively, of leachable minerals. In terms of transport and machinery, the investment will provide 61 trucks each with a 400 ton capacity and six trucks each with a 360 ton capacity. Seven diggers and eight drills will also complement the new machinery. Not only this, but the infrastructure is due to undergo a considerable overhaul, with a new tailings dam, a service area for the mine, substations, aqueducts, electricity lines, and roads all set to be added or replaced. Grupo México will also construct a housing area for workers, as well as sports and training facilities. This is all part of the company’s global growth plan that aims to increase production across all its subsidiaries to 1.143 million tons of copper.
131
| VIEW FROM THE TOP
LACK OF DEMAND FOR ZINC URIEL GARCĂ?A Director General Mexico of Mercuria
132
Q: With the relative recovery in commodities, what do
on silver exports from China in an effort to incentivize
you think would be the future of precious metal prices?
internal sales. This caused significant losses due to the
A: Since operation costs are in pesos and production is sold
price discrepancies so Chinese refineries did not want silver
in dollars, operators are always able to profit when the US
concentrations. Now the tax has disappeared and China is
currency is high. This also helps to keep mines operating,
demanding silver, copper refineries are transforming into
because if a silver ounce is US$15 and operators gain MX$18
silver ones, and these factors are going to take the silver
per dollar, this generates profit. Precious metals prices are
price to a higher level.
strongly related to conflicts, stock markets, and speculation, as people see a natural financial refuge in them. Both gold
Q: In comparison, how are base metals performing at the
and silver are undervalued at the moment.
moment? A: Base metals, primarily copper, lead, and zinc, are the
There is a particularity with silver as everyone in the
ones that we commercialize. Copper is the most expensive
western world buys on the London Metals Exchange (LME)
even though at the beginning of the year copper operators
while in China the Shanghai Stock Exchange is used to buy
were about to collapse due to cheap prices. Zinc is
this metal. In the past few years, the difference in prices
tremendously undervalued as it is the most commonly
was quite notorious due to the fact that there was a tax
used base metal, with 75 percent going to the galvanization
| VIEW FROM THE TOP
AZURE MINERALS FOCUSING ON EL ALACRAN ANTHONY ROVIRA Managing Director of Azure Minerals Q: How did Rio Tinto’s expertise help you with the first
order to do so, it needs to drill a considerable amount so
exploration phase in the Promontorio project?
this is the start of what we hope is going to be a substantial
A: The joint venture with Rio Tinto has been running for
and ongoing drilling campaign for the next few years.
15 months and during that time we were undertaking a variety of different geophysical and geological testing of
Q: What are the main highlights of La Cascada deposit?
the property, particularly via ground and airborne surveys.
A: La Cascada and Promontorio are both relatively
We have a strong technical team who evaluated all that
small deposits of high grade copper, gold, and silver
information, and they have identified a number of highly
mineralization, and they both occur at surface level. They
attractive targets within the area, and as a result of this
are not economically viable given the current metals
first stage we are now in a position to start drilling some
prices so we are looking to find something bigger and
of those targets. Under the terms of the JV agreement, Rio
better. Two years ago we started drilling beneath both
Tinto can continue with its exploration over the next five
deposits and we found indications of a large copper
years, and in that period it has to spend US$20 million. In
system several hundred meters below the surface, and it
industry. In 2008, zinc was at US$5,000/t and then it went
Q: Since the acquisition of JPMorgan’s commodities
down to US$1,200/t. Several major zinc mines have closed
portfolio, what are the next steps for growth in Mexico?
and major expansions have been delayed in recent years
A: The impact of JPMorgan’s portfolio has been limited due to
as a result of prices. Industrias Peñoles will double its
the fact that it consisted mostly of oil and gas commodities.
zinc production in the near future but other than those
Nevertheless, we now have access to more advanced
owned by Industrias Peñoles and Minera Frisco there
financial instruments such as futures. We opened this office
are no other zinc mines. Lead is extremely important for
in early 2014, and since we have been in the mining sector
battery manufacturing, and now that many car companies
for decades we knew a great deal of the players in the sector.
are building electric cars, we will see the demand for lead
However, when doing business in Mexico it is necessary to
growing. However, this market is cyclical so, when lead
have support and we have our parent company Mercuria on
surpasses US$2,500/t many people will start to recycle
our side. We pay very quickly and offer strong profit ratios to
batteries and saturate the market again.
our clients. We began with small mining operations and the natural course has taken us to become the primary trader for
Q: How has the company protected itself from the
that segment and an important actor for major operators.
downturn in the market?
We doubled our volume in 2015 compared to 2014 levels,
A: For traders, the problem comes when prices are low
and this year we almost doubled 2015’s production in the
and production starts to decrease, since it is harder to find
first quarter. We do want to undergo an acquisition but we
a supplier. Moreover, traders normally have substantial
need to find mines to develop the forward-buying business,
credit lines to cover transactions, especially within oil and
and we are working hard to achieve this.
gas. If we compare this with mid-size traders, they did not have the power to buy ore concentrations with high prices given the size of their credit lines. Since they were used to a certain price, it is very difficult to accumulate the same purchasing power at three times the price. Prices did not grow in conjunction with credit lines. In conclusion, commodity prices do not affect us and any change in the
“Zinc is tremendously undervalued as it is the most commonly used base metal”
market is supported by our investment fund of around
Uriel García,
US$1.2 billion dollars.
Director General Mexico of Mercuria
was the discovery of this large porphyry-related copper
so we will also be undertaking the environmental studies.
mineralization that attracted Rio Tinto’s attention to the
However, there is a lot of existing infrastructure like
project. Cascada and Promontorio are both indications of
railways, roads, and skilled human capital. The major
a bigger system that is present deeper down.
challenge will be to ensure that we can bring the project to production in a responsible way in terms of managing
When we closed the deal with Rio Tinto, we identified the
the community expectations and complying with all the
Alacran project near Cananea. We have worked on that site
environmental requirements.
for over a year now, and in that time, we have discovered what looks to be a very significant silver deposit. Our
Q: Aside from your partnership with Teck, what other
main focus now is on that project, so 2016 will be a year
possibilities do you see in the Mexican mining market?
of drilling at Alacran to determine its size so that we can
A: The possibilities for future collaboration are promising.
move to the feasibility study. As a result of this discovery,
For instance, the Loreto project, which has a great deal
the value of our company has increased fivefold in the last
of potential for copper and gold mineralization within the
six months, from US$10 million market capitalization to
property, has two major copper companies really interested
US$50 million.
in developing the exploration. When the government transfers the ownership to us this venture can be
Q: How much investment do you expect to put into El
constructed. However, as the government has not granted
Alacran?
the title to us after three years, these major companies may
A: We anticipate that in 2016, we will be investing between
walk away and the opportunity will be lost. There are many
US$3-4 million in the project. Most of that will be for
opportunities in Mexico for Azure to acquire projects and
drilling and for the feasibility study. As with any exploration
then attract major international companies into the country
project, we need to carry out a lot of early stage work
for joint ventures.
133
| TECHNOLOGY SPOTLIGHT
134
FUTURE DISCOVERIES WITH MAN PORTABLE DRILL RIGS Mexico’s exploration timeline has reached a point where many of the most accessible targets have already been explored. It is predicted that more of the future discoveries will be found in more remote areas without roads that traditional larger size drill rigs cannot reach. In addition to the challenge of remote, hard to reach targets, SEMARNAT has made a concerted effort to minimize the environmental impact of exploration by increasing the wait time for approval and has reduced the amount of road and drill pad construction permits. If and when road permits are issued, there can be additional challenges stemming from local ranchers, surface right holders, and the high cost of building lengthy roads over extremely challenging terrain to reach targets. The solution to these challenges can be achieved with ultra-light, high powered man portable drill rigs.
“100 percent of Globexplore’s man portable rig fleet is on contract and Globexplore is buying 10 more man portable rigs to meet demand” Armando Lucero, Director of Operations of Globexplore Drilling
Globexplore Drilling’s man portable drill rigs are some of the most powerful drills available, and are custom built in Canada by the highest quality manufacturer. Once in location, Globexplore can operate on a compact drill pad less than 4x4m and drill to depths of 850m in HQ, 1,200m in NQ, and 1,600m in BQ. Even for shallower targets, its clients with experience realize that the high power of its rigs keeps it straight and helps pass through the most difficult ground conditions. When working 100km from the nearest highway, this eliminates the risk of unexpected delays as a result of getting stuck or missing the target. Globexplore Drilling operates its rigs with the most experienced professionals and coupled with its corporate culture of safety and solid infrastructure required to support efficient filed operations, it can provide clients with a competitive price without sacrificing on quality or safety. These virtues, combined with the company’s ability to average 1,800 meters per month per man portable drill rig, have enabled Globexplore to become a frontrunner in the market.
135
| INSIGHT
INCREASING NEEDS FOR ADDED VALUE continues. “In recent years, we have seen that mining companies are increasingly looking for more durable and efficient products, as well as further technical support, and
CARLOS ROJAS
this is precisely what we offer our clients.”
Regional Manager of Techflow One of the major trends within the mining industry lies in safety, and Rojas claims that Techflow is always looking
136
In today’s market, turnkey services, personalization,
to introduce new, innovative products that provide the
and specialization have become essential to ensuring
safety boost the mining sector in Mexico needs. “There are
competitiveness in a saturated market. One of Techflow’s
several manufacturers now who are replicating European
biggest successes in recent years, according to the
valve systems, which are often more advanced in terms
company’s Regional Manager Carlos Alberto Rojas, is
of safety than local designs,” he shares. “In Europe, knife
the fact companies that use sustainable flow control
gate valves with exposed shutters have to be completely
machinery have been actively seeking out Techflow’s
closed, whereas in the US and in Mexico these machines
services as a way to reduce costs and improve efficiency
are often left open, which can be extremely dangerous.
while offering a sustainable solution. “We have been able
Therefore, we have been working with RF Valve, and a
to build strong relationships with many of our clients in
US-Finland based company, on bringing their RF SKG
recent years due to the extensive technical support we
knife gate valve, which is designed based on European
provide, both in person, at the plant, and via telephone
standards, to mines in Mexico.”
and internet,” he shares. “Moreover, our sister company CiDRA Minerals has developed a mineral mud flow control
Innovation can take time and, in the case of the RF SKG
mechanism, called SONARtrac, which is installed outside
valve, Techflow had to promote the product for five years
of the tubing system and measures the mineral content
before it was fully accepted by customers. “The process
of the material. This increases the expected life of the
today is undoubtedly easier than it was five years ago
mechanism from six months to 10 years, and we are proud
due to of all the information that is available through the
to have been part of the development and distribution of
internet and satellites,” he maintains. “This also increases
these machines that are making a positive impact on the
competition because it means companies have many
sustainability of the mining industry in Mexico.”
more options to choose from and are far more informed, but we view this as a positive development as it forces us
Of course, Rojas admits that the current price environment
as the distributors to provide the most advanced possible
has had a somewhat negative effect on the business just
products and service.”
like it has on many companies within the sector. “Many new projects that were planned before the downturn
Techflow tries to remain conscious of the need to protect
began have had to be postponed or even cancelled,
the environment during all stages of its operation, whether
which has been detrimental to our business,” he explains.
that is refraining from printing something that does not
“What is more, many of the projects that were already
need to be printed or using as little water as possible.
in operation are looking for cost reduction methods.”
Moreover, the company provides valves that have minimal
However, he maintains that Techflow’s product and service
effect on the environment and flow control mechanisms
quality is of the highest standard, meaning that most
that are specifically designed to detect and prevent
clients recognize it as an essential part of the success of
leaks. Gradually, the bigger operators are adopting more
their business. Therefore, the company has been able to
sustainable valve solutions, according to Rojas. “Last year,
continue growing despite the market gyrations.
one of the biggest Mexican mining companies made a significant investment in flow control technology for the
The quality of client service is the most important part of
piping between plants and tailings dams, and now all
Techflow’s business, and the company works closely with
of its mines are equipped with a system that detects a
the manufacturers to ensure delivery of the highest quality
burst tube almost immediately,” he boasts. “This allows
products to solve clients’ needs. “This dedication to detail
technicians to repair the issue before too much damage
has been an important part of our success over the years
is done to the environment, and these are the kinds of
and has helped us establish ourselves in the market,” Rojas
products that we support at Techflow.”
137
| MINE SPOTLIGHT
138
VELARDEÑA The Velardeña mine in Cuencame, Durango has state of the art technology and sustainability standards thanks to its use of solar panels, LED illumination, and water treatment plants. The operation consists of an underground mine and a work plant. In 2015, it managed to produce over 2 million tons of total ore, and 80,538 tons of zinc, along with 3,170 tons of lead. The mine also delivered 22,885kg of silver, and 1,862 tons of copper. Furthermore, the mine ended 1Q16 with 520,709 total tons of ore. Industrias
Peñoles
initiated
the
mine’s
commercial
operation in May 2013. It now has an installed capacity of 1.9 million t/y of milled ore and utilizes 100 percent of its capacity. Velardeña recorded an investment of US$206 million for construction and equipment. The project carries a whopping MX$3.7 billion in net fixed assets as of December 2015. As the mine is more than 400m underground, it is one of the country’s most meticulous operations. Both men and women collaborate within the operation to produce the highest standards in terms of techniques, technology, and safety measures with the objective of extracting metal from distinct sublevels. Social harmony and tranquility is a clear priority for Industrias Peñoles, as the mine steps out of the box with its tiny internal zen garden, and its external ecological reserve where American bison, llamas, ostriches, and horses, among other species mingle freely. The territory even has gardens in nearby gas stations with plants, artificial grass, and waterfalls in maintenance areas. Velardeña assures proper access to bathrooms and rest areas within the mine. It redesigns traditional mine layouts as it was completely developed by its own staff. The company hopes to apply the concept to other mining units thanks to its success. To process the metals physically and chemically, rocks are broken into miniature pieces, so that the particles can easily be liberated. The fragments are crushed until they reach a size of 40 microns, before they are sent to processing lots. Reactive chemicals are employed to attain concentrates. The mine obtains mostly zinc from the ore, among a small amount of other minerals. In a normal day, 700-1,000 tons of zinc can be collected. Afterward, the pulp is filtered and separated with water until it obtains a solid form, and the product is then sent to Met Mex Peñoles in Torreon or in Manzanillo. Ultimately, the concentrate is exported by ship in 32 ton containers.
139
| INSIGHT
QUALITY AT THE FOREFRONT OF THE MARKET “The mining industry is highly
so we traveled by car around the country to Mexico City,
demanding, and there is a
grew as the Prydisa name became better known within
lot of competition, but it is
140
Sonora, and San Luis Potosi, and gradually the business the industry,” explains the company’s Director General Antonio Valdez. “We now work with the biggest mining
also essential to remember
operators in the country, including Industrias Peñoles and
that there are numerous
in northern Sonora.” This has been a vastly successful
opportunities for business in
and has been a mutually beneficial arrangement that has
the industry” Antonio Valdez, Director General of Prydisa
Grupo México, with whom we work on the Cananea mine project for both Prydisa and Grupo México over the years, helped both companies continue to grow. Valdez attributes one of the keys to Prydisa’s success over the years to its focus on the quality of the product that it is selling, as quality is the crucial factor in the mining
Prydisa started as a small, family run business with the
industry. “The mining industry is highly demanding, and
goal of distributing ironware equipment to companies
there is a lot of competition, but it is also essential to
throughout the mining and construction sectors. Initially,
remember that there are numerous opportunities for
it focused on electromagnetic cables and struck a deal
business in the industry,” he claims. “Indeed, there are
with Camesa, the world’s leader in this industry, and
more and more foreign companies entering the industry
subsequently expanded its portfolio to include valves,
in Mexico thanks to the Energy Reform, from the US and
screws, hydraulic cylinders, and many more components.
Canada but also from Europe and even Australia, and
“At the time, there was limited domestic air travel, and
this can only benefit the sector as a whole as it forces
| INSIGHT
FILTERED TAILS OFFER IMPROVED SUSTAINABILITY the sustainability of the industry. “Filtered tailings are a
JOEL CARRASCO
perfect example of how operations can reduce fresh water
Mexico Manager of Ausenco
consumption and recycle as much water as possible," he notes. "Not only do filtered tails help reduce fresh water
With events such as the devastating 2014 toxic spill at
use, but they also reduce the environmental imprint
Buenavista del Cobre still fresh in the memory, mine
compared to more conventional facilities." Filtered, or
managers across the country are constantly looking for
“dry stack,” tails are not by any means new technology
innovative ways to reduce the environmental footprint of
but Ausenco is one of the few companies around the
their operations. Recent technological advancements in the
world with focused dry stack expertise, and the group
area of tailings management have provided a crucial boost
has already had success implementing its technology in
to the global industry, although the new practices have so
Latin America. “One example of a filtered tailings project
far been slow to take off in Mexico. Ausenco, an Australian
we are developing is in La Escondida in Chile, the largest
engineering and project management provider with over
copper mine in the world," he adds. "Many companies in
25 years’ experience in the mining industry, is working to
Mexico have been implementing programs focused on
change this. Joel Carrasco, Ausenco’s manager for Mexico,
dry stack facilities for environmental considerations. Key
explains how the company’s filtered tailings solutions,
players that are interested in transitioning their aim toward
which involve the use of vacuum or pressure filters to
these facilities are frequently requesting help from our
dewater tailings, are making an impact on improving
company.”
companies to improve.” During the company’s 45 years,
products that we distribute,” he declares. “Of course,
Valdez shares that Prydisa has experienced the whole
accidents can always happen as mines are dangerous
range of market fluctuations, both good and bad, and has
places in which to work but throughout our entire history
learnt that the most important thing in this business is
there have been no accidents caused by any of our
relationships.
products. This is because we always make sure the client is fully aware of how to operate the equipment in the
“Thanks to the trust we have built up with our most
safest and most efficient manner, which not only reduces
important clients over many years they stick with us
the risk of accident but also increases productivity and
during downturns and we stick with them,” he comments.
efficiency for their business.”
“The low prices of metals are affecting everyone in the industry, and during these difficult times people turn to
For growth in 2016, Prydisa hopes to open a branch in
those they can trust. We help our key clients by continuing
Cananea in order to develop its already substantial
to offer them vital products at competitive prices, and
business in that part of the country. The four most
they help us by putting their faith in the quality of our
important states for mining in Mexico are Sonora, which
service so this is a mutually beneficial platform.” Further
the company will cater to through its new branch in
than that, he says that Prydisa recognizes the benefits
Cananea, Chihuahua, Zacatecas, and Durango.
that new technology can bring in terms of increasing cost efficiency, and so the company is always careful to stay on
“We will then cover all the most important mining hubs in
top of the latest technological developments in order to
the country,” Valdez explains. “This strategy has allowed
offer state of the art technology to its clients.
us to improve our logistical performance, which in turn enables us to provide a more efficient and complete
One of the most important aspects of Prydisa’s business is
service to our clients. We will also focus on continuing
in staff training, because knowledge of how each machine
to strengthen the company from within by providing
operates is vital to the success of its clients’ operations.
further training to our staff and adding new departments
“We always have a technician available, whether it be in
designed to boost the administrative side of the company.
person or on the telephone, to deal with any technical
We believe that this will allow us to achieve harmonious,
or operational issues that might arise with any of the
steady growth in the long term.”
As well as dry stack tails, another focus for Ausenco is
Mexican mining pond are attracted to Ausenco not only
the conversion of waste into energy, in particular via the
for its experience of having worked on over 100 mining
introduction of co-disposal facilities. By combining waste
projects across 34 countries, but also for the “cradle to
rock from mines and tailings into one facility co-disposal
grave” service it offers. “We have been collaborating with
systems significantly improve mine sustainability and
key players such as Fresnillo and Industrias Peñoles for the
greatly simplify the complicated mine closure process.
past 10 years," states Carrasco. "Ausenco provides design
The same is true for heap leach operations, which require
services and supports during construction as needed, as
considerable amounts of space, liners, and infrastructure.
well as assisting in the development of risk management
Carrasco explains how Ausenco tackles this problem
programs. The company prides itself on the complete,
through regeneration of heap leach pads. “Ausenco strives
customized service it provides, from design and engineering
to focus on the spent heap leach piles and analyze whether
to project management and feasibility assessment."
these piles can be further used,” he states. “Two things can happen, the ore can continue to be placed in the leach pile
“Collaboration between the public and private sectors
or re-leach can be initiated by injection wells. Reinjecting
is essential to creating efficient environmental and
the heap leach piles can increase metal extraction as well
sustainability norms,” Carrasco claims. “Ausenco finds that
as recovery rates. These options can be the alternative to
educating the government and universities of the country
constructing additional facilities or creating more waste
reaps plenty of benefits. Oaxaca, for example, is a seismic
dumps.”
zone that is extraordinarily difficult for mining companies to negotiate because permits are not easily obtained and
One company which has recognized the benefits of such
people are resistant to the industry.” In response, Ausenco
solutions is Fresnillo, which sought the assistance of
developed an approach with a mining company to analyze
Ausenco to install tailings facilities on its San Julian silver-
regulatory compliance and exhibit what can be expected
gold project. According to Carrasco, the biggest fish in the
from consultants in these situations.
141
7
EXPLORATION & DRILLING
Exploration is arguably the most important phase of a mining project, the effectiveness of which can dictate the profitability of any project. Although global exploration investment fell by 19.3 percent to US$9.2 billion in 2015, there are increasing opportunities in Mexico since an estimated 70 percent of its territory is yet to be explored. Drilling monopolizes a great deal of operators’ budgets and in a tough environment these are usually the first to be cut. Operators also have continued to seek out the fastest, most high-quality services at the lowest prices, putting pressure on drilling companies to constantly innovate to streamline these processes and stay competitive. A low-price market has weeded out inefficient drillers and left a landscape of qualified service providers able to offer quality services to the Mexican mining industry. The drilling and exploration environment has been irrevocably changed by the latest market downturn.
This chapter contains insights from industry insiders who share their experiences of navigating the new market conditions and their strategies for staying competitive in an era of reduced budgets. Recent, prestigious exploration discoveries are discussed by those responsible for the finds. Drilling companies also talk about the innovative new equipment designed to reduce costs and increase recovery.
143
144
| CHAPTER 7: EXPLORATION & DRILLING 146
148 150 152 Victor Díaz, Globexplore Drilling Jorge Gastelum, Globexplore Drilling Armando Lucero, Globexplore Drilling 154
VIEW FROM THE TOP: Brigette Martini, Corescan
156
VIEW FROM THE TOP: Morgan Poliquin, Almaden Minerals
157
INSIGHT: Margot Molina, Teknol
158
TECHNOLOGY SPOTLIGHT: Core Logging Web Services with Onsite Hyperspectral and X-Ray Fluorescence Analysis
160
VIEW FROM THE TOP: Chris Drielsma, DGI Geoscience
160
VIEW FROM THE TOP: Jesús Herrera, Detector Exploraciones
162
TECHNOLOGY SPOTLIGHT: Drone Technology to Map Mine Sites
164
INSIGHT: William Delano, Chesterton Mexicana
165
VIEW FROM THE TOP: Luis Sánchez, Intercore
167
INSIGHT: Marcelo Mott, PANalytical
168
VIEW FROM THE TOP: María Fernández, Refacciones Neumáticas La Paz
169
INSIGHT: Francois Dumont, Versa Perforaciones
170
VIEW FROM THE TOP: Ramón Luna, Servicios y Proyectos de México
170
INSIGHT: Brenda Carranza, Falcon Drilling
172
VIEW FROM THE TOP: Daniel Venegas, Dimanor
173
VIEW FROM THE TOP: Efraín Becerra, Interlub
145
| VIEW FROM THE TOP
GEOLOGICAL MAPPING THE BLUEPRINT FOR EXPLORATION RAÚL CRUZ Director General of the Mexican Geological Survey (SGM)
146
Q: What industry trends have you witnessed recently in
Terracore and a number of other spectrometry companies
exploration?
to share experiences and increase the accuracy and depth
A: Exploration is the base of all mining activity, and it is
of our findings. We have another center in Oaxaca.
essential not only for the development of a project but also for the sustained success of the mining industry. Currently,
Q:
What
importance
does
cartography
have
for
there is a tendency to reduce costs and risks as much as
exploration, and what process do you follow to ensure
possible and to seek out large, high-grade mineral deposits
the best results?
that can boost production. The geological mapping and
A: Geological mapping is the first step to discovering a
other studies that SGM carries out act as vital tools for the
new mineral deposit, and is the basis for all exploration.
industry because they provide more detailed information
Our maps divulge a great deal of information and are
that helps operators during the planning phase.
free to use via the SGM website. Once uploaded, the
Given the recent mineral price downturn, investment for
platforms. We use our vast database, which we have
information can be taken and transferred to other software exploration has been dropping on a global scale in the
built over 100 years, to choose the regions with greatest
last few years, to US$9.2 billion in 2015 from US$21.5
mineral-geological potential and we then begin mapping.
billion in 2012 according to SNL Metals & Mining. Mexico
This provides private sector mining companies with all
has suffered as a result, with exploration in the country
the necessary information to carry out more detailed
dropping to US$528 million in 2015 from US$1.1billion in
exploration in those areas. Once enough exploration has
2012 according to CAMIMEX, and there is no doubt that
been performed, SGM can then turn the areas into mining
this trend has had a profound effect on the industry’s
concessions. These concessions, which have already
growth rate. Nevertheless this has not deterred the SGM,
been extensively explored and evaluated, are then made
which has continued its own exploration programs and
available for the private sector to acquire.
geological surveys. Our maps, which are 1:50,000 in scale, identify zones that contain potential mineral deposits and in doing so help explorers save both time and money. The geophysical analysis we carry out is also used by investors to determine or predict ROI. Q: How does SGM work alongside the private sector when
“The Sierra Madre Occidental has extensive unexplored epithermal deposits, including vast gold and silver reserves”
carrying out mapping? A: SGM has the technical, scientific, and technological expertise to perform and support any form of exploration,
Raúl Cruz, Director General of the Mexican Geological
Survey (SGM)
including cartography, geophysics, digital geoscience, and hydrology. We can perform both land and aerial projects via satellite imaging to generate 3D epipolar geometric
Q: What technology does SGM use during its exploration
images that complement our geological consultancy
projects, and how does it ensure that each flight is
services. These images provide detailed information
productive?
regarding alterations,
mineral mineral
deposit
locations,
characterization,
hydrothermal and
chemical
A: We only fly in regions that we know have high potential for mineral deposits. It is vital to identify the area and to
analysis. We have an experimentation center in Chihuahua,
explore it with geological data. We only fly when there is
where we have a team working with FLSmidth’s Hylogger
low humidity, cloud-cover, and intense solar light, to help us
technology for drilling analysis. We also work with
obtain the most accurate data. The data collected from the
147
aerial sensor is confirmed by our experimentation centers
auction. These include the La Soledad copper deposit
and cross-referenced with our database to optimize the
in Durango, the Delia ore deposit in Sonora, and the Los
interpretation. SGM uses a hyperspectral camera with
Borregos manganese-silver-lead deposit.
two sensors to obtain 360° band data and five portable Moderate-Resolution
Imaging
Spectroradiometers
Q: In which regions should mineral explorers focus their
(MODIS), which can compare mineral alterations with
attention?
those registered in the spectral library. This library
A: The Sierra Madre Occidental has extensive unexplored
contains digital images, mineral maps, and other drilling
epithermal deposits, including vast gold and silver
and geochemical data. This technology is by no means
reserves. There is great potential for iron deposits at Arco
new but it is extremely useful and practical. Although
Alisitos in Baja California Norte and the Alcalina Province
the majority of mining projects in Mexico have still not
in the west of the country. Meanwhile, there are large
adopted it, this is gradually changing as operators realize
copper reserves in the Panuco deposit in Coahuila and a
its benefits. SGM is a pioneer for the use of hyperspectral
significant amount of lead and zinc in the sea basins of
technology, having used it for regional flight exploration
central Mexico’s Mesozoic region. Many southern states,
programs. We also use Hylogger for nuclear drilling, which
including Oaxaca, Chiapas, and Guerrero, are relatively
scans extracted fragments for mineral alteration.
unexplored and SGM will continue to work in the comping years to develop more detailed cartography for these
Q: How would you assess the recent discoveries SGM has
regions. We hope to eventually have detailed geological
made, and what implications will they have for the mining
maps for the entire country, which in turn we hope will
sector in Mexico?
facilitate and boost investment in exploration. The market
A: SGM has uncovered innumerable mineral reserves
is becoming more dynamic. The wealth of information
throughout Mexico that have since become valuable
that SGM has collected and analyzed over the years
mines. For example, both Fresnillo’s San Julian mine in
will continue to be fundamental for mineral explorers. I
Chihuahua and the El Limon-Guajes project in Guerrero,
believe that Mexico can continue to compete with the US,
now owned by Torex Gold, were initially explored and
Canada, Australia, and Chile because the mining sector
analyzed by SGM geologists. With technological advances
in this country has favorable conditions for investment.
we can conduct more accurate exploration and therefore
SGM plays a pivotal role in this because of the first-class
create more detailed maps, which we have used recently
information and technology we offer both foreign and
to identify a number of targets that will soon be up for
national companies.
| VIEW FROM THE TOP
JUNIOR MAKES WORLD CLASS DISCOVERY PETER MEGAW Chief Exploration Officer of MAG Silver
148
Q: What was the process that led to the development of
experienced partner. The company has built three similar
the Juanicipio project?
mines within sight of our location with almost identical mill
A: Mexico is an obvious and historic destination for silver
structures, and so they were the best possible operators
exploration. A total of 25 percent of all silver mined in
to build the Juanicipio mine. Moreover, a junior company
human history comes from the country and eight of
trying to develop the skillset required to build a mine of
the 14 biggest silver districts worldwide are here. Until
this size is a real challenge, and in most cases a mistake.
1975, Fresnillo was not a major silver district by Mexican
We are explorers before anything else, and we are happy
standards. This is partly because there is heavy cover
to let someone else do the “heavy lifting” as it allows us to
around the area, which makes it challenging to locate
focus our efforts on identifying further exploration targets
deposits but also because the mineralized zones tend to
and projects.
be exposed at much deeper levels than in other districts. Then Industrias Peñoles, which was operating the mine at
Q: What have been the most important technological
the time, made what could be regarded as the first big
breakthroughs that have made it possible to pursue these
“blind” discovery in Mexico when the Santo Niño veins
deeply covered veins in Mexico?
were located. This was a seminal event for exploration in
A: The true breakthroughs have come from a conceptual,
the country because the majority of Mexico is covered,
rather than technological perspective because people now
and it is clear that major deposits exist beneath cover.
understand that it is not necessary to find ore in outcrop in
As the geological understanding of the big vein deposits
order to locate a deposit. The fluids that form ore deposits
has improved over the last 30 years, it has become easier
affect and alter a remarkably large volume of rocks around
to determine where mineralization may be found, and
them, and knowledge of this helps the explorer to judge
today we use technology such as satellite image analysis
where the deposit will be, how big it will be, and therefore
and, in particular, geophysics to see through deep cover
whether or not it is worth spending US$15 million on
to accurately pinpoint where to direct our drill holes. A
exploring the area. The fact that we now understand
combination of these techniques led us to discover the
what deposits look like hundreds of meters above the
deposit at Juanicipio that we are starting to develop.
level of economic actual mineralization helps us make the discoveries that lead to mines. This is the biggest and most
Q: Given that Fresnillo is the operator in the Juanicipio
important development. We started working in Fresnillo in
project, where does MAG Silver’s participation in the
the late 1990s on ground that had been abandoned years
project end, and how much responsibility is now on your
before and restaked as Juanicipio. When I first visited
shoulders?
the site, the alteration that I saw was what I would have
A: Despite the fact that Fresnillo is driving the operation,
expected well above Fresnillo-style veins and I suspected
we remain heavily involved with the project at the
there would be a similar deposit underneath Juanicipio. By
technical committee level, and we also interact with the
that time, Fresnillo had found the San Carlos vein, which
project geologists on a regular basis. Over the years, we
meant its focus was moving westward toward Juanicipio,
have developed a strong understanding of each other’s
which reinforced this interpretation. Subsequent work
strengths and weaknesses, and the project needs both
indicates that post-mineral faulting dropped the Juanicipio
sets of expertise in order to be successful. Fresnillo is in
block down relative to the rest of the district and therefore
charge of executing the development strategy, but the
preserved the alteration.
development of this strategy is very much a joint process. Overall, the relationship with Fresnillo has been extremely
Q: What led to the Cinco de Mayo discovery?
positive, and as a junior company we are pleased to be
A: It was an extremely similar process to the Juanicipio
working with such a professional, knowledgeable, and
development but it began many years ago while I was
149
studying the carbonate replacement deposits of Mexico,
benefit the people without changing their lifestyle too
which form the backbone of underground base metal
much. We feel a duty to be a valuable addition to the
mining in the country. During my research, I saw a trend
community. Although a mine would obviously create a
of the biggest deposits in Mexico and pinpointed a gap in
significant number of jobs and economic growth for the
northern Chihuahua where the space between the deposits
community, at the same time we have to be careful to keep
was so big that there simply had to be one somewhere
expectations realistic because the project still needs 3-5
in the middle. We were helped by Teck Resources and its
years of exploration before a development decision can
subsidization of systematic regional exploration, which
be made.
ultimately led to extensive drilling with MAG and discovery of the deposit.
Q: Turning our focus to the present, what have been the most recent developments at the Juanicipio project?
Q: When do you predict you will be able to gain access
A: We carried out the first drilling on the project in
to Juanicipio, and what considerations must you bear in
2003, and in 2005 we agreed on a JV with Fresnillo in
mind?
order to advance the deposit. The first hole we drilled
A: It is difficult to set a timeline for access to Juanicipio
in 2003 cut a 2m wide vein running 730g silver and 12g
because it is a question of working with an ejido and
gold, which was a positive start. Then, toward the end of
explaining what we hope to do, and then following the
2005 when the JV was drilling its sixth hole we hit the
legal procedures to obtain approval. The location is ideal
ValdecaĂąas vein. The initial discovery intercept on this
for the local community. The deposit lies about 12km out
vein was almost 10m wide, with 1,800g silver, 3g gold,
of town and there is practically nothing in the way of
and about 8 percent combined lead and zinc. We knew
agriculture or housing that needs displacement. In return
immediately that it was a major vein similar to others in
for access to the land, we would work with the community
the district but it took six years to drill sufficiently in order
on a CSR program to improve the town’s health and
to begin development. In late 2013, we started building
educational facilities, as well as stimulating the local
the ramp and in 2017, we will start to develop stopes and
business environment. Of course, introducing a mine into
continue to move the project forward toward anticipated
a small agriculture-based community can be disruptive
production in 2018. We are currently advancing the ramp
so it is very important to demonstrate how a mine can
at over at 100m per month.
I MEXICO'S MAIN EXPLORATION PROJECTS
1
1
3
3
2
2
6 6
4 5 4 5
10 10
7 7
8 8
9 9
11 11
12 12
13
14
14
13
150
18 18
15 15
21 21
24
16 16
24
22 23
17
23 22
17
20 20
19 19
33 33
28 28
29 29
30 30
25 26 27 26
Number
Project
Company
Stage
State
Mineral
1
Apache
First Mining Finance
Exploration
Sonora
Au
2
Miranda
First Mining Finance
Exploration
Sonora
Au
3
Centauro Deep
Fresnillo
Exploration
Sonora
Au
4
Colibri/Pitaya
Agnico Eagle (59%) Colibri Reources (41%)
Exploration
Sonora
Au
5
Tajitos
Riverside Resources
Exploration
Sonora
Au
6
La Bolsa
Pan American Silver
Exploration
Sonora
Ag, Au
7
Sierra Salada
Riverside Resources
Exploration
Sonora
Au
8
Ramard
Colibri Resources
Exploration
Sonora
Ag, Cu, Pb, Zn
9
Cumaral
Stoneshield Capital
Exploration
Sonora
Au
10
Llano del Nogal
Evrim Metals Corp
Exploration
Sonora
Au, Ag
11
San Antonio
Trimetals Mining
Exploration
Sonora
Au
12
La Verde
Americas Silver Corp
Exploration
Sonora
Ag, Cu
13
Santa Maria
Golden Minerals
Exploration
Chihuahua
Au, Ag
14
Iris
Garibaldi Resources
Exploration
Chihuahua
Ag, Au
15
Orisyvo
Fresnillo
Exploration
Chihuahua
Ag, Au
16
Urique
Alta Vista Ventures
Exploration
Chihuahua
Ag, Au, Pb, Zn
17
Morelos
Coeur Mining
Exploration
Chihuahua
Au, Ag
18
La Cruz
Golden Goliath
Exploration
Chihuahua
Ag
34 34
31 32 32
31
25
27
36 36
35 35
Number
37 37
38
Project
Company
Stage
State
Mineral
19
Guadalupe y Calvo
Endeavour Silver
Exploration
Chihuahua
Ag, Au
20
La Cigarra
Kootenay Silver
Exploration
Chihuahua
Ag
21
Chamizal
Golden Goliath
Exploration
Chihuahua
Ag, Pb, Zn
22
Parral
Endeavour Silver
Exploration
Chihuahua
Ag, Au
23
Veta Colorada
Silver Standard
Exploration
Chihuahua
Ag
24
Cordero
Levon Resources
Exploration
Chihuahua
Ag, Au, Pb, Zn
25
Los Azules
Canasil Resources
Exploration
Sinaloa
Ag, Au, Cu
26
La Patilla
Garibaldi Resources
Exploration
Sinaloa
Au
27
San Marcial
Silver Standard
Exploration
Sinaloa
Ag, Au, Zn, Pb
28
Sandra
Canasil Resources
Exploration
Durango
Ag, Au, Cu, Pb, Zn
29
Gavilanes
Santa Cruz Resources
Exploration
Durango
Ag
30
Ventanas
Primero Mining
Exploration
Durango
Ag
31
La Lajita
Oceanus Resources
Exploration
Durango
Au, Ag
32
San Diego
GoGold Resources
Exploration
Durango
Ag, Au
33
La Platosa
Excellon Resources
Exploration & Production
Durango
Ag, Au, Cu, Pb, Zn
34
La Esperanza
Canasil Resources
Exploration
Zacatecas
Ag, Pb, Zn
35
Mercurio
Hochschild Mining
Exploration
Zacatecas
Au, Ag
36
El Barqueño
Agnico Eagle
Exploration
Jalisco
Ag, Pb, Zn, Cu
37
El Horcon
Great Panther Silver
Exploration
Jalisco
Ag, Au
38
Lourdes
Endeavour Silver
Exploration
Guanajuato
Ag, Au
39
El Petate
Prospero Silver
Exploration
Hidalgo
Ag, Pb, Zn
40
Ixtaca
Almaden Minerals
Exploration
Puebla
Au, Ag
41
Las Minas
Source Exploration
Exploration
Veracruz
Au, Ag, Cu
42
Media Luna
Torex Gold
Exploration
Morelos
Au, Ag, Cu
43
Silayacoapan
Argentum Silver
Exploration
Oaxaca
Ag, Au
44
Tlacolula
Radius Gold
Exploration
Oaxaca
Ag, Au
45
Las Margaritas
Gold Resources
Exploration
Oaxaca
Ag, Au
38
39 39
40 40
41 41
42 42
43 43
44 44
45 45
151
| VIEW FROM THE TOP
DRILLING COMPANY THRIVES DURING INDUSTRY DOWNTURN
152
Q: During these times when limited exploration budgets
Q: How will your continued growth and success during
are more carefully spent than ever, why do you think
one of the most severe downturns affect your future in
so many exploration and mining companies chose
the next upturn?
Globexplore?
A: Our current high rate of rig utilization has given our
A: The answer is that we have earned a well-deserved
company the advantage in several important areas.
positive reputation from our solid track record through
Firstly, it allowed us to retain the most qualified of our
delivering the highest quality results for our clients. We
existing team while allowing us to attract qualified staff
are proud to state the fact that every client we have ever
to the company. Secondly, it has allowed us to optimize
worked with would hire us again and recommend our
all company operations from our logistical support for our
services. We back this up with written testimonials from
field operations, human resources, and most importantly
over 30 of the most respected mining and exploration
our safety procedures. There is no better way to make
companies operating in the country. During this severe
constant improvement then when your company is
downturn, 95 percent of our fleet is contracted and we
working at a high level.
must now buy 10 more rigs to meet our clients’ demand, which is evidence that many clients are extremely happy
Q: How is the quality of your equipment and range of
with our performance. While the mining industry is picking
services related with your success?
up again, most would argue that over the last four years
A: We have only expanded into different types of drilling if
we have experienced the most severe downturn in the
we are sure that we can be at the forefront of this particular
last 40 years. Drilling budgets suffered the most as the
market. Over time, we slowly expanded by maintaining
steepest expense for many companies. Currently, the
our high standards of industry leading performance and
drilling industry is still severely struggling with an average
safety. We are proud that we can reassure new clients with
of 25 percent of all drills in the country in operation, yet
positive recommendations from our previous performance
Globexplore is surpassing expectations.
with their respected colleagues on each of the following activities that can take a client from greenfield exploration
Q: How has Globexplore managed to stay competitive
to reserve expansion. We believe we are running the most
enough to win so many contracts? A: Toward the end of 2012, as the market began to contract, we reacted quickly by reviewing all our systems and procedures and we determined several areas where we could reduce costs and become more efficient without cutting our high safety and quality standards. We were subsequently able to pass these savings on to our clients. Most of the experienced, successful, and well respected mining and exploration companies understand that most drilling contractors share common costs for genuine quality and safety. However, the lack of projects opens the sector up to poor practices as a result of restricted budgets and poor quality but inexpensive services. Thankfully, we have found that the most experienced mining and exploration companies are aware that unrealistic prices are rarely sustainable and end up costing them more money with poor performance, production delays, decreased sample recovery, missed targets, and higher accident rates. The reality is that we have two client bases at the moment, one that recruits Globexplore from the outset, and the other that seeks our services in order to reperform or finish a failed contract.
During this severe
downturn, 95 percent of the Globexplore fleet is contracted
Jorge Gastelum, CFO; Armando Lucero, Director of Operations; Víctor Díaz, Director; Marc Kieler, President of Globexplore
modern fleet in Mexico with all of our rigs being no older
and material consumptions as it happens so that we are
than six years. This provides our clients with the highest rates
not dipping below our minimum inventory levels, which
of reliability, accuracy, productivity, and safety. Our Diamond
allows us to maximize accurate production. With our
Core service offers top of class power to advance through
Geosite Analytical Division we offer onsite mineralogy,
challenging ground to reach depths of up to 2,200m, yet the
geochemistry, and core logging. At the drill rig or core
equipment is compact enough to fit in a pad size measuring
shack we can run hyperspectral analysis of core and RC
less than 4x4m. We offer PQ, HQ, NQ, and BQ diameters
rock chip samples that provide statistical values between
with track, truck, skid, underground, Heli- and Man-Portable,
mineralogy and geochemistry in a shareable platform
geotechnical, survey, oriented, and directional drilling with
for 3D mapping, and volumetric and dimensional value
averages of 1,800m per rig per month.
quantifications. We also can include x-ray fluorescence for elemental analysis from Magnesium to Uranium.
Our reverse circulation fleet offers some of the smallest footprints in the industry, requiring a pad size as small as 6x8m which is less than half the 20x20m size more commonly required. This reduces the environmental impact of larger road and drill pad construction. Our newly designed drills offer the same high power production capacity of rigs twice their size with depths of 420m. They are equipped with a host of modern features such as automated rod loaders, break outs, and remote control operations that help increase sample production while reducing the most common causes of injury. Selfpropelled by track or buggy, either rig can turn complete circles within its own footprints and move laterally, aiding in faster movements between holes and greater access to tighter and more remote locations. Our rigs tow their own remote high output air compressors that can be run up to 150m from the rig, which further increases the client’s drill target flexibility. Our RC rigs are ideal for infill, double wall RAB, mine services, and underground drilling. Q: How has innovation and technology complemented your success? A: Technology is a key component to our leading performance in the field and our ability to offer cutting edge services to our clients. For our field operations, the Globexplore Management System monitors all our functions and consumption with real time data. Using tablets and smartphones, we can capture our productivity
153
| VIEW FROM THE TOP
CORE ANALYSIS THAT AUGMENTS GEOLOGICAL WORK BRIGETTE MARTINI Senior Geologist, VP Business Development at Corescan
154
Q: How did Corescan develop, and why did Mexico
A: Although Mexico is conservative, I do not believe
represent an attractive market for the company?
the country is alone in this. When first introduced to
A: Corescan was formed in 2000 in Perth, Australia,
our technology, many geologists are concerned that
as a vertically integrated, hyperspectral core imaging
our system, which carries out automated mineralogical
company. As well as designing and manufacturing the
identification and textural mapping, will remove the
scanner, we also provide a scanning service and core and
need for their human input. However, that is not the case,
sample preparation assistance. Once the data has been
and one of our most important jobs is to explain that
acquired, our analysts in Australia and Canada analyze the
our technology is not replacing geologists but rather
information and upload it to a virtual shared core library
augmenting their work. Corescan’s technology essentially
where it is stored in perpetuity. Our analysts are trained
gives geologists a valuable tool and enables them to carry
geologists, and so we work alongside the client, which
out more consistent and accurate logging. Moreover, our
ranges from geologists, to metallurgists and engineers, in
system creates a rare bridge between geologists and
order to provide a 360-degree consultancy service.
metallurgists, because the increased accuracy provides metallurgists with a consistent data stream in a much
About five years ago we began working with Newcrest
shorter space of time than a human can achieve. This allows
Mining in Australia, which was an important step in
geologists to optimize and shorten the time-consuming
developing and optimizing our mining and exploration
process of logging, and to begin collaborating with the
products. We have then successively moved out into
metallurgists to discuss what the geology truly signifies.
further markets in Southeast Asia, Chile, Peru, Canada,
For example, in a typical timeline, once drilling permits
and the US, and have more than 300km of core in our
have been acquired, it often takes one year of drilling
archives. The technology works on a variety of different
and analysis before pre-feasibility studies can be carried
ore deposits but it is particularly effective in analyzing
out, but our technology reduces that period by at least
copper
Therefore,
six months. This is immensely valuable for an exploration
considering the prevailing trend of ore deposits in Mexico,
company leasing a concession because it can then decide
it was a simple strategic decision to move our operations
whether or not to continue holding the ground.
porphyry
and
epithermal
gold.
into this country. However, we never operate in a country without the support of the local mining community,
Q: How can Corescan technology help clients reduce the
and so we were delighted to receive the support of our
downtime of their operations?
partners at GeoResolution. Through this partnership, we
A: The new data source typically takes between three to
became aware that several leading executives working
four weeks for geologists to get accustomed to, and we
in the top mining companies in Mexico, particularly in
endeavor to make it user friendly. We now offer quasi-
Fresnillo and Grupo MĂŠxico, were eager to try our new
realtime scanning, which can generate full mineral maps
technology and were keen to use it to refresh their
within four hours of extracting the core from the drillhole.
operations, increase profit, and lower margins. Since
The point data that our system produces is then exported
arriving in the country, we have also begun working with
to a mineral percentage log, which can then stream
a number of Canadian and Australian junior exploration
directly into whichever third-party software is in use, such
companies who we assist with small quantities of
as Leapfrop, Vulcan, Gocad, Target, or MineSite.
directed exploration scanning. Q: How does the scanner operate? Q: How far have you seen the mining industry’s traditional
The system is made up of three components. Firstly,
conservatism changing since you began working in
there is a 50-micron spatial resolution camera for
Mexico?
detailed photographic image generation. Secondly, there
is a hyperspectral imager, which has a spectral range
the world on various cloud servers. In order to control access
of 450-2,500 nanometers in 510 bands at an average
to data, each user has a username and password, and this is
of 3.8 nanometers. This provides exceptionally high
generally only given to a senior figure who can then decide
spectral resolution, which allows the user to conduct
who to share it with. We do not store this information, so
fantastically detailed mineral identification as well as
if a password is forgotten, the system generates a new
mineral composition, such as the difference between
one, and this ensures that the only person who can access
magnesium versus iron-rich chlorite. We conduct analyses
information is the client. Furthermore, we have some clients
for thousands of minerals and mineral sub-species across
whose policy dictates that their data cannot be stored on the
the surface of core at 500-micron resolution, which turns
cloud, and in these cases we transfer data to their internal
out to be approximately 200,000 pixels per meter of
database, essentially creating an individual Coreshed for
core. Lastly, there is a laser profiling instrument, which
that client. Of course, we always keep a backup ourselves as
is a standard laser that produces information regarding
we believe that to be vital but we are happy to avoid storing
the core’s topography. This data can be used to extract
data on the cloud if that is what the client prefers.
standard geotechnical variables including rock quality designation (RQD), roughness, breaks-per-meter, fracture
Q: How are Corescan’s partnerships with companies such
spacing, and fracture orientation. All three technological
as GeoResolution mutually beneficial, and how will the
components are perfectly geospatially linked, and the
group’s business in Mexico develop over the next few
scanning process from start to finish takes about 7-12
years?
minutes per box of core. Geologists can then analyze
A: We would not be in Mexico without GeoResolution and
the data after a further five minutes so there is a rapid
Itzcoatl Drilling because they are vital to our operations.
turnaround. Corescan will then upload the results and
Together, we form a perfect network of remote sensing,
the data to the client via Coreshed.com as well as final
resource geologists, and drilling expertise, and the support
delivery of jpeg files so decisions can be made about
we receive from these partnerships is essential in our efforts
the geological model, viability of further drilling, and/or
to introduce new technology into the market. Mexico has
metallurgical domains.
become one of the most important markets for the company going forward, and we are committed to the country for
Q: Given that the data is uploaded onto a cloud, how do
the long term. We are currently assessing the possibility of
you protect your clients from cybercriminal threats?
merging our drilling and core scanning services because we
A: Security is one of the most important services we offer
believe that not only could that be a far more efficient way of
our clients. Corescan can curate core collections and host
operating but it could also drive prices down for our clients.
the data for as long as necessary via Coreshed.com. In Perth,
Moreover, we are planning to develop the consultancy side
we have duplicated servers in constant operation, meaning
of the business in order to truly offer a complete solution to
data is always backed up, while we also mirror data around
our clients.
155
| VIEW FROM THE TOP
KEEPING COSTS LOW TO CONTINUE EXPLORATION MORGAN POLIQUIN President & CEO of Almaden Minerals
156
Q: With a proven track record of over 50 years of
Blanco was our first discovery, and although we have now
entrepreneurship, how would you define your current
sold that project, our sister company owns a royalty on it
record in the Mexican mining sector?
and so we are still involved. It is unique because it is right
A: My father is the founder of the company, and after
beside a highway and a power plant in a very well-known
having started working in Mexico in the 1970s, he saw great
area of Mexico. There are roughly 1 million ounces within
geological potential there. When Almaden went public in
a kilometer of the highway, which is a perfect example of
1986, one of the first things he did was to get involved
Mexico’s potential. Again, Ixtaca is 20km by paved road
in Mexico, and when the legislation change happened in
from an industrial park, and it has solid grades despite the
Mexico in 1992, we were one of the first juniors to begin
fact it is located in a developed part of the country.
operating in the country. We had immediate success, especially with the acquisition of the La Trinidad project
Q: What stage is the Ixtaca project at, and what needs to
in Sinaloa. We then made a new conceptual discovery,
be done to move it into a commercial stage?
Caballo Blanco, in Veracruz. We have been working in
A: Unfortunately, since we made the discovery metal
eastern Mexico ever since, and we believe that we know
prices have fallen by 40 percent but luckily our new
more about this part of Mexico geologically than most.
mine plan shows that even at these prices, the deposit is
Mexico has considerable geological potential, and has
still economically viable. We are always looking for new
always been extremely open for prospectors like us to
opportunities, and in a downturn opportunities can be
explore these regions. We certainly see ourselves as
found that would not otherwise exist. For example, we
pioneers, and we feel we have a great deal of potential
found a used mill in Alaska, the construction of which had
to go further. The interesting thing about Mexico is that
taken an investment of US$250 million. We were able to
there are areas that are misunderstood geologically, and
buy it for US$6.5 million ,and despite the shipping costs to
that represents an opportunity.
Mexico, this will dramatically reduce the capital required to build the mine. The next steps are to produce more
Q: What drove you to explore the Tuligtic Project and the
advanced studies, which will enable us to procure the
Ixtaca Deposit, and how has the project developed?
production financing. Later this year, we expect to finish
A: This project began because we felt the area had
the next step, which is the pre-feasibility study.
potential for epithermal deposits. However, there is no gold on the surface, only clay alteration. If there is clay,
Q: How has the current industry trend of reduced
there is no guarantee of gold but we saw vast arrays of clay
investment impacted your business model and targets?
throughout eastern Mexico. Therefore in 2010, we decided
A: Of course it is a challenging time. Ours was a blind
to take a chance and ultimately had the fortune of hitting
discovery, meaning that it was not exposed at surface level
300m of strong gold and silver mineralization. Caballo
but as a developer that has made a discovery we have had to focus on reducing the project’s risk. This is a change
“Mexico has considerable
to the exploration mentality because unfortunately we
geological potential, and has
exploration as we would like. However, Almaden has
always been extremely open
exploration. We own our own geophysical equipment and
for prospectors like us” Morgan Poliquin,
President & CEO of Almaden Minerals
do not currently have the luxury to focus as heavily on tried to increase innovation through reducing the cost of we have a drilling team that is 100 percent Mexican, so we drill inexpensively, and all of those things combined mean that we are able to do more than what would otherwise be possible.
| INSIGHT
INNOVATION AS THE ULTIMATE EXPLORATION TOOL The narrative of Mexico as a sleeping giant in the world of innovation has been told since times immemorial. In mining, the focus is now on cutting edge research in university and R&D centers, as well as resource estimates
MARGOT MOLINA
and feasibility studies carried out by computer modelling
CEO of Teknol
and geostatistical software. The inextricable link between innovation and exploration is undeniable, since periods of marked acceleration in deposit discovery production
complex for Teknol. “We asked the General Directorate of
correlates with the introduction of new technological
Mines for its support with no success, since it considers
methodologies. This sentiment is also echoed by Margot
this information to be almost classified,” she adds. Hence it
Molina, CEO of software development and technology
sent a liaison to every regional office to gather information
solutions provider, Teknol. “One of the golden rules of the
and it resulted in the creation of Quick Mining, an app
business world is that if a company does not innovate,
that shows all the relevant information and data about
it is sentenced to die,” she states. This not only includes
a specific piece of land. Quick Mining and GeoInfoMex
products, but also processes, internal structures, and
can be integrated to provide a complete vision of the
business approaches. Bearing this in mind, Teknol’s role
country’s mining situation. “An additional advantage is
has been to help mining companies use new solutions to
that our software provides other relevant information such
strengthen their operations. “It is necessary to be open to
as the communities surrounding the area of interest, and
change and innovate in every aspect,” she adds.
if the land is an ejido territory,” she points out. The only requirement is for mining companies and investors to pay
GeoInfoMex has garnered recognition from the sector and it
a monthly or yearly fee to use this platform.
includes the information owned by the Mexican Geological Service (SGM). This in-touch system allows users to see all
Molina stresses the important relationship the company
the information gathered by the SGM for the last seven
has with SGM, which has enabled the development of
decades. “This includes geochemical, geophysical, and
its solutions. “When we first presented our proposal six
geological data, as well as main mineral deposits in Mexico,
years ago to SGM, we agreed on putting a touchscreen
tectonics, historic information and density maps to identify
in every office it had so miners, investors, and other
zones with geochemical anomalies by specific elements,”
stakeholders interested in any terrain could access the
she lists. This surplus of information is incredibly valuable
information freely,” she describes. When SGM wanted
as it speeds up the decision making of mining players.
to go a step further by sharing its data globally, Teknol
Traditionally, the visuals of this information are relegated
was tasked with developing the portable software, and
to maps and Excel, making it difficult to digest. Teknol
it has become the favored distributor of the information
condensed the information into layers so when the user
it generates. “Being a Mexican company certainly was an
selects a place it is researching, it can have the complete
advantage when establishing ties with SGM, and it was
picture of the site. “Another new layer that can be added
an important leverage since the entity would naturally
is the mining permits, which tells the interested party if
not feel comfortable sharing its years of research with
the piece of land of their interest already has an exploiting
a foreign business,” she adds. There is always room for
concession,” she boasts.
improvement, and Molina concedes that Teknol is no exception. In its endeavor to improve its solutions it will
This final layer was a product of innovation from within
lobby with the General Directorate of Mines in order to
Teknol’s own processes, and it developed thanks to the
make the information available to all the mines in the
feedback of the private sector. Molina explains, “Users
country. Teknol aims to strengthen its ties with the private
appreciate the geological information we provide in
sector. “Since Gold Corp was one of our first clients and
our software and they began to ask for more in-depth
we developed some interesting technology for them, we
information, especially regarding the status of the land.”
now have the experience to work with Grupo México on
This is incredibly relevant since companies want to know
their new concessions,” she shares. “Teknol’s greatest
whether the land was being exploited, under concession,
success has been in closing the gap between the mining
or waiting for a resolution. While it might sound simple,
industry and the use of reliable technology to ease their
the process of retrieving this information has been
operations.”
157
| TECHNOLOGY SPOTLIGHT
158
CORE LOGGING WEB SERVICES WITH ONSITE HYPERSPECTRAL AND X-RAY FLUORESCENCE ANALYSIS The information for this spotlight was provided by
in a matter of seconds. XRF results allow us to provide
Globexplore Drilling in conjunction with TerraCore. The
geochemical values. It is a proven and valued method for
companies are currently introducing this technology
rapidly determining the presence of key minerals at mining
within the Mexican mining industry.
sites worldwide. Its speed, flexibility, and ease of use make it the tool of choice for today’s mining professionals and
Hyperspectral Analysis is a technique used to determine
mineral geologists. It is a non-destructive analysis and
mineralogy just after the extraction of the cores or
requires minimal sample preparation.
the RC’s using the Hyperspectral Core Image System (HCIS). This analysis allows the mapping of the minerals
Core Logging Web Service can record analyses performed
distribution by a color-mineral alteration identification of
with the above techniques conducted at the drilling site
the entire scanned core box or chip tray. The analysis is
through a unique web service platform. This allows easy
used for various applications in the core logging and data
integration of all collected data in a single centralized
exploration process with alternative types for different
location. Data can be accessed and scrutinized from
applications such as modelling, geological positioning,
any location with internet access without the need to
and geological characterization.
download significant amounts of data. This is one of a variety of ways in which geologists can view their drill core
This
is
a
non-destructive
analysis
and
spectral
interpretation images provide geological content to the
or chip trays, and different data sets can then be overlaid to acquire specific information.
mapped zones in the core image data. Spectral features or parameters are used to interpret the presence of minerals,
The Core Logging Web Service is a visual and friendly
assemblages, zones, or changing mineral parameters. This
way to show all spectral images, detected minerals, and
technology can be used in correlation with the geological
alterations organized by box, depth, and interpolating
material so that geologists can explore the significance of
additional values like geochemistry. This powerful visual
these occurrences. Spectral feature images provide detail
platform manages all the features required for any core
on the changing spectral signatures in the drill core, and
logging, and with precision generates a comprehensive
these are generated in many different ways.
set of data products specific to the requirements of the individual client. As an online interface, it allows the client
The results are accurate and represent the data result
to view all generated products, from the scale of an
obtained from a mathematical process but are related to
individual pixel in a given core or chip tray, to the scale of
the spectral data and do not carry geological interpretation
the entire drill hole.
information. Moreover, results can be obtained in true color image of the core if the image data covers the visible
Both natural and false color images are available in the
region. False color composites of the core images are
generated data sets. This provides the ability to view
often generated by infrared data. These images provide
multiple sensor products within the same window, and
a base image on which further geological mapping and
also allows products to be overlaid directly on a core or
logging can be undertaken, and provide a direct link from
chip tray or the entire drill hole. The technology has the
the data back to the drill core.
ability to overlay multiple data sets on core tray images, and geologists can obtain mineralogical information
Portable X-Ray Fluorescence Analysis (XRF) works by
about the scanned lithology without directly having to
exposing a sample to be measured to a primary x-ray
sample it. In addition to this, high quality natural color
beam. The atoms of the sample absorb energy from the
images allow the user to characterize mineral textures
x-ray, become temporarily stimulated, and emit secondary
and structural elements without having to go onsite. This
x-rays. Each chemical element emits x-rays at a unique
also makes it possible to relate results directly to the core
energy. By measuring the intensity and characteristic
while exploring the multiple sensor data associated with
energy of the emitted x-rays, an XRF analyzer can provide
it. This is achieved with the use of a number of statistical
qualitative and quantitative analysis regarding the thickness
data plots, which can be customized, and accessed
and composition of the material being tested. Today this
through the dashboard menu. Both the image and digital
process can achieve laboratory grade analysis from raw
data can be exported to a compatible or readable format
materials to refined products, and everything in between
to the client at any stage.
159
| VIEW FROM THE TOP
CANADIAN DATA ANALYZER PLANNING MEXICO OFFICE CHRIS DRIELSMA President & CEO of DGI Geoscience
160
Q: What are the largest projects the company is currently
the operator to understand technical risks and hazards
working on in Mexico?
associated with the activity. Traditional means of acquiring
A: DGI has been working in Mexico for more than a decade,
that information would be through drilling and extracting
and we are in the process of establishing a permanent
data from the core. However, in the corebox, the areas of
office in the country. Mexico has a strong and educated
higher geotechnical interest often contain only rubble and
workforce, and it continues to be an interesting jurisdiction
it is extremely difficult to extract usable information from
for mining investment. As a value added service provider,
those areas. By acquiring in-situ, the information can be
Mexico is a very attractive location for DGI because there is
acquired from the entire length of hole.
great scope for growth throughout the country. In terms of projects, recently we have been working with Goldcorp on
Q: What are the defining features you have to consider
a number of different assignments, including at El Camino
when carrying out operations in underground mines?
Rojo in Zacatecas. For a number of years, we assisted the
A: Goldcorp is producing at Peñasquito, an open-pit mine.
company by providing information for their prefeasibility
Although the existing pit shell is being used, the company
studies, including geotechnical and structural data from
is looking to expand, and if possible to increase the
drill holes. We measured the true strike and dip of faults,
stripping ratios. The high pit shell walls drive down costs by
joints, foliation, and contacts. This is particularly valuable
moving less waste rock, with less environmental impact. In
when carrying out pit shell design work because it allows
Peñasquito, we acquired geotechnical information inside
| VIEW FROM THE TOP
SHOULDERING MINE OPERATORS’ FISCAL BURDEN JESÚS HERRERA Director General of Detector Exploraciones Q: What objectives have you accomplished in the past
to their costs and sometimes make investments that are
two years and what are your next steps?
not necessarily cost-effective. However, in a downturn we
A: The year 2012 was our best-performance period,
must have the vision to maintain and direct our team, our
reaching the highest peak in production in the history of
work, and our clients to a sustainable operational phase. If
our company. We consolidated our Mexican operations
this does not happen and service companies like us are not
by drilling over 250km. In 2013, we all encountered the
consolidated they will disappear.
fall in commodity prices, and from then on we focused on maintaining our personnel and lowering our operational
Q: Does the company conduct exploration on its own or
costs so we would still have projects in the pipeline. We
just provide its services to third parties?
reached this by being more productive with our highly
A: Detector Exploraciones does not have concessions as
competitive prices. During times of abundance and high
this would create a conflict of interest with our customers.
commodity prices, companies often do not pay attention
The companies that employ us gain several advantages,
the pit so Goldcorp could refine its pit shell model and
with Mexican companies to provide our services directly.
therefore reduce costs. In an underground environment, we
We have been taking the proactive approach of co-
routinely assist on brownfield underground explorations by
hosting workshops in Chihuahua and Hermosillo. We
mapping structures and understanding geotechnical risks
want to build up the knowledge base within the eager
but also in instances of underground expansion. Recently
Mexican mining community. By establishing a permanent
we worked on an interesting project for one of our clients.
office with Mexican staff we can serve the market locally
The company is developing a new underground area, and
because we do not want our Mexican clients to have to
prior to our involvement it was drilling a series of three
contact Canada or the US if they are looking for services
holes to triangulate and understand the geotechnical risks
in the region. Therefore, we are looking at options for
prior to allowing workers to enter the mine. This took a
Mexican partnerships because we feel that having local
great deal of time and drilling costs so we worked with
knowledge will be key to achieving growth. Of course
our client to devise a new strategy where it would drill
we could grow organically but we feel that it would be a
just one long, flat drill hole of about 600m in advance of
slower growth, and we believe that we can learn from the
the drift. We then gathered the needed information from
knowledge of Mexican companies, which would add more
the hole with televiewers. This had a number of benefits.
value to our clients.
161
Firstly, by drilling one hole instead of three, the drilling costs were reduced by two thirds. Secondly, we provided the geotechnical information much sooner, and thirdly, it provided the most complete information because now they would get that information throughout the entire hole and not just from areas with competent core. Q: How do you expect the Mexican mining industry to develop over the next few years, and what will be the role of DGI Geoscience? A: We are very excited about Mexico and its future. We have seen increasing investment in the country by our Canadian and US clients that brought us to Mexico to work on their projects. Recently, we have been in extensive discussions
DGI devised a
new strategy
where it would drill just one long, flat drill hole of about 600m in advance of the drift
including our expertise in land use and our preeminent drilling
is more convenient for them to come to us. This is mainly
knowledge. Recently, we acquired a drone that photographs
because they would not have to carry a fiscal burden with
the land and its structures. This tells me we are on the right
the responsibility of security problems, permits, and even the
track, and if the federal government supports the Mexican
investment in drilling equipment falling on our shoulders. In
Geological Service, companies could invest with more
the last few years, all the mine operators used to have their
certainty. The other point is that the General Coordination
exploration and drilling departments but now they know that
of Mines must expedite its processes and make them more
this venture is not profitable for them. When I worked for
efficient so they could have concession resolutions on time.
Autlan, in a year we would drill 8,000m with eight machines,
We have been on hold for the past three years because the
which is extremely inefficient. At Detector Exploraciones we
Coordination cancels inactive or unexplored concessions
can drill the same distance with one machine in six months.
but takes a great amount of time to publish them again. The problem is that there have been many cancellations due to
Q: What are the objectives that Detector Exploraciones
concessions shrinking that have not been published again.
wants to accomplish in the next 12-18 months?
This does not allow companies to make new investments in
A: We made a cartography for the Mexican Geological Service
areas with more probable reserves.
(SGM) many years ago and Colombia is now in the process of replicating it. This not only helps foreign investment to
Q: Why would mine operators acquire your services when
flow in, supported on accurate information to locate possible
most of them have their own geologists?
deposits, but it also helps identify if a certain construction
A: Even when companies have the infrastructure to explore,
is safe or whether the rock could hold any structure. This is
most of the time it is not sufficiently developed. With
why we have also received calls from Paraguay and other
defined exploration programs operators calculate that it
countries to assist them with their cartography.
| TECHNOLOGY SPOTLIGHT
162
DRONE TECHNOLOGY TO MAP MINE SITES Detector Exploraciones’ drone project was designed to create georeferenced aerial photography of any linear or surface project. In order to conduct an aerial photographic survey, the processing and post processing of the information was divided into two activities, a field phase and an interpretation phase. The study area comprised two areas, one a powerline with a length of 40km, and the second with a length of 70km. The 110 control points were defined using sub-meter GPS accuracy, in order to make an adjustment in the post-processing for generating the photomosaic of the land. Each and every one of the points was marked with square shaped references with a dimension of 2m2, and in the center a 0.5in rod was placed. Checkpoints were erected prior to the flight day. During the preparation and calibration stage, air vehicle assembly, calibration, remote control, telemetry link, review, and breakeven load was performed. Based on the reference coordinates (AOI) and points previously recorded, control software defined the flight pattern in the flight plan to cover the area of interest. In this case, it defined a flight path from recorded coordinates. 10 photography sessions were held with an approximate duration of 45 minutes each. In total, more than 202 pictures were taken with a geographic reference (geotag). Subsequently, during the interpretation stage, the processing and initial calibration of photos was carried out to determine flight altitude. Regarding the flying height and positioning data of each of the photos, the initial processing and calculation with an optimal resolution of 7.96cm/pixel was generated. The data processing was performed using the WGS 84 UTM zone 13 coordinates system. From geolocation data, relative terrain heights were calculated, with the goal of using the point cloud to generate the mooring or tie between images. Once the point cloud generated the mooring, both the filtered point cloud and the densified format were created. Based on the structure of the point cloud, the digital surface model (DSM), which corresponds to a continuous numerical model representing the terrain heights and surface objects like buildings and vegetation, is generated. From the set of pictures calibrated, the process of image orthorectification with the help of ground control points was performed. Pairing or matching of images was established from the control points and the number of pictures present on the scenes. Finally, an investigation of the area was carried out in the National Agrarian Registry and the Land Registry in order to obtain all the legal background and to define the land surface layer.
163
| INSIGHT
USING MINING SYNERGIES TO ENTER SEGMENT SpiralTrac® technology to position Chesterton as the leader in sealing technology in abrasive and critical applications in Slurry Market,” Delano shares. “Our latest mechanical
WILLIAM DELANO
seal was a split seal, which is designed to reduce downtime
General Manager of
because it requires no disassembly of the shaft. In the mining
Chesterton Mexicana
industry in particular, the equipment is large and it takes a long time to take it apart, and this is why these solutions are ideal for the segment.” Additionally, Chesterton’s Mechanical
164
As a company that traditionally worked in the oil and gas
Packing R&D department has developed a dual pack with
sector, Chesterton knew immediately when the prices
the advantage of being soft on the internal side so as not
began to slide that it would be necessary to diversify
to damage the shaft, and being tough on the external side.
into a new area of expertise. “Our main products were traditionally sold on an individual basis with one unit
Delano confirms that the Mexican mining industry is
sold at a time,” comments William Delano, the company’s
typically extremely cost-conscious but it seems to
General Manager. “Mines work differently because there is
consider cost in the wrong way. “Personally, I believe that
no time to wait while suppliers visit the mine to evaluate
the key lies in a synergy between purchasing, production,
the needs, due to their isolated locations. We had not
and
previously paid attention to this, meaning that we had
department is given a mandate to reduce costs, meaning
to adapt all our operating conditions and methods to
that the most attractive option is to buy at the cheapest
incorporate a representative that lives in the area, and
cost. The production department's mission is to increase
understands the conditions and the community.”
productivity and minimize downtime. However, the
maintenance,”
he
discloses.
“The
purchasing
maintenance department is the entity that is qualified As of 2015, Chesterton began working within the segment
to see that this cheap product does not work due to the
although there were no significant orders, Delano shares.
increased manpower needed to service the pump, and
“We are exploring our options with the main groups, and we
that it is causing the majority of the downtime between
have been in communication with First Majestic Silver,” he
failures.” When he speaks to maintenance departments
explains. Although Chesterton’s Mexican arm is not strictly
he discovers that the mechanical packing, which is the
involved in innovation, the global company has won a series of
most often-replaced product in the mining industry and
awards for its designs for mechanical seals, pumps, agitators,
should last around three months, is being replaced every
and mixers. “A significant breakthrough in our Mechanical
week due to the fact that cheap products are being
Seal R&D is what we call The Slurry Pump Program, which
bought. In this way, he says, maintenance, production,
utilizes Chesterton's highly differentiated product to give a
and purchasing must work together to develop the most
competitive advantage, particularly with our 170,442 and
effective solutions that are truly cost effective.
| VIEW FROM THE TOP
PROVEN DRILLING TECHNIQUES TO ACCELERATE PROCESS LUIS SĂ NCHEZ Country Manager of Intercore
Q: What strategies has Intercore implemented to maintain
efficient drilling program, as it will be easier to identify the
its pioneering spirit despite the bear market conditions?
areas that must be reached. Once the market recovers,
A: In the past we used to acquire the equipment from a
companies must ensure geological departments have
range of OEMs, and after careful deliberation we decided
detailed information in order to obtain good results.
to exclusively distribute for one brand called Cortech.
Downtimes are dreaded, so we have a quick response time
This is a Chinese brand whose drills are assembled with
if a machine fails, and we have all the spare parts available
top of the line components from around the world with
for urgent maintenance.
Cummins engines and Rexroth pumps. Our two year strategy was to update all of our equipment and ensure it
Q: What are the most complex and challenging drilling
is completely hydraulic and track mounted. We have sold
projects that Intercore has been involved in, and how did
Cortech drills in Peru, Colombia, Chile, Uruguay, and even
it persevere?
to our competitors in Mexico. Drilling continues to be our
A: Our flagship project was the Ana Paula concession
core business and while the market has experienced a dip,
located in Guerrero whose current owner is Timmins
our involvement in top exploration projects continues. We
Gold. We started the project by drilling immediately with
have an equipment occupation rate of approximately 30-
four rigs on site, one of which, the CS-3000, is suited
40 percent, which shows we are still active and we will
for deep holes and can reach depths of 3,000m with a
survive this rough patch the mining sector is undergoing.
weight of approximately 30 tons. The conditions were difficult because of the terrain and various security issues,
Q: How are the needs of your clients evolving, and how
and we had to take additional precautions to ensure we
are you becoming more competitive in the drilling milieu?
did not overstep the cultural and social boundaries with
A: When speaking of competitiveness, the first thing that
the communities. Another challenging project was in
comes to mind is costs. Offering a competitive price may
Chihuahua because access was extremely difficult and the
be tempting for drilling companies and mining operators
environment was harsh for the type of operations we carry
alike but this does not guarantee the service level. If the
out. Logistically, it was very challenging because we had
budget is short, a drilling company will not have access
to repair the roads, set up camps, and navigate the rough
to the most appropriate equipment, drills, and additives
terrain. We had to race against time since the client was
to carry out the job. In a drilling project, we must stick
meeting investors and needed results quickly.
to the drilling program by reaching a certain recovery percentage, and adhering to the required number of holes
Q: What are the added value services Intercore provides
made in accordance to degrees and depth. In operations,
that heighten your stance in the market?
recovery is paramount but a variable that cannot be
A: As a medium sized company, Intercore owns 14 drill rigs
overlooked is community relations. We must convince
and a spare parts warehouse with equipment worth US$1
communities of the work we carry out and by offering
million that is ready for any maintenance eventuality. This
employment, we cement a good standing in those regions.
enables us to respond to any downturn immediately. Each project poses unique challenges, from the ground type
Q: How do you optimize the drilling program and help
to the recovery. One of the newest drilling techniques
reduce the time taken to bring a project to fruition?
is directional drilling, which entails drilling to a certain
A: According to CAMIMEX, it can take up to 19 years for
depth and deviating the hole into others at different
a mining project to reach production stage, so we must
angles. One of the advantages is that it is less disruptive
ensure that we reduce it. The division responsible for
to surface activities but it requires special equipment to
time reduction is the geological department, since an
deviate the holes, which might result in additional costs
accurate mapping of the property will naturally mean an
and time.
165
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| INSIGHT
ROCK ANALYSIS THAT OFFERS GREATER PRECISION When PANalytical decided to expand its presence in Mexico in 2006, one of its primary objectives was to take advantage of the wealth of opportunities in the
MARCELO MOTT
mining sector, and the company’s belief in this potential
Regional Manager for Latin
has not diminished, according to its Regional Manager
America of PANalytical
for Latin America Marcelo Mott. However, since 2013, he has noticed that some foreign companies and investors have been struggling to find the fiscal incentives to enter
because it can improve the precision of chemical analysis
the mining sector in Mexico. “This is due to a number of
and is extremely simple to use and install.
reasons but I believe the main one to be the security issues in the country,” he asserts. “Despite the benefits the mining
“We are currently working on some automatization
industry offers foreign players, such as low operating costs
projects, offering a complete cost-effective solution as
and high ROI, many view other countries such as Australia
consultants to the major mining players,” he continues.
as a safer investment destination because of the security
“This complete solution uses an automatic sample
issues that persist in Mexico, mainly in regions that border
preparation method using robust machines and offering
the US.”
precise results to support the clients’ analytical needs.” The automated process removes the risk of human
In Mexico, he shares that he has experienced a sharp
error, and eliminates the need for harmful chemicals.
growth in demand for PANalytical products since 2011, and
Moreover, PANalytical has been working with Dutch
although that demand has dropped in the past two years
automation giant Philips in developing new products and
due to the challenges facing the global mining industry,
solutions for mining customers. “The company benefits
the company still sees ample room for growth in this sector
not only from the influence of Phillips but also from the
thanks to potential for exploration and production in the
PANalytical R&D laboratory in the Netherlands, which
country. Within this sector, PANalytical provides a variety
is an extremely advanced and well-equipped facility,”
of services including the X-Ray fluorescence technology
he boasts. This, he says, is the component that allows
(XRF) that performs elemental chemical analysis and can
the company to stay at the forefront of technology at
be used throughout the mineral extraction process, from
all times.
exploration to development and production. “For the exploration phase, we recently released a highly compact
The mining community in Mexico is traditionally extremely
X-ray spectrometer, called Epsilon 1 Mining, which is
conservative, and Mott believes this is one of the biggest
designed to accurately quantify a wide variety of ores,
challenges the sector faces today. “In Brazil, where the
rocks, and stream-sediment samples,” he explains. “It uses
mining industry is more or less at the same level of
very little energy and no additional operational chemical,
development as Mexico’s, practically every mining service
setting it apart from wet-chemical techniques, and it is
laboratory is using our XRF technology simply because
easily transportable. These factors make it an extremely
it is the most advanced, safe, and efficient solution
useful tool for mineral exploration projects.”
available,” he explains. PANalytical Is working with a wide client base in Mexico to increase its visibility, and provides
For the production phase, the company has developed
services to notable names like Grupo México, Industrias
the Epsilon 3, which is also an XRF-based analyzer but
Peñoles and Minera Autlan. “Nevertheless, many mining
is more advanced and can analyze larger rock samples.
companies we approach tend to prefer to continue
This machine needs to be installed in a laboratory at a
to use their current analytical techniques despite the
controlled temperature to ensure the most accurate results.
benefits that our systems offer,” he laments. “I believe this
“Finally, if a client requires rapid analysis we have the
conservatism will change gradually as the benefits of the
Zetium Minerals Edition analyzer, which is fitted with more
XRF technique become more well-known in the country.”
robust and more powerful X-Ray tubes than conventional
He shares that, in the future PANalytical will continue to
solutions,” Mott declares. “This machine is designed for
promote the two products that it has recently released,
multi-element chemical composition analysis in seconds,
the Epsilon 1 Mining model and the Zetium Minerals
and can complete up to 250 analyses per day.” This design
Edition model, both of which were specifically developed
is particularly useful for copper and iron analysis, he says,
for the mining industry.
167
| VIEW FROM THE TOP
TRADITIONAL DRILLS WITH ADDED CUSTOMER SERVICE MARÍA FERNÁNDEZ Director General of Refacciones Neumáticas La Paz (RNP)
168
Q: How does RNP maintain low costs while providing high
RNP mostly works with major mining groups in Mexico
quality products?
such as IMMSA, Industrias Peñoles, First Majestic Silver,
A: The company has a program that seeks out continuous
Minera Frisco, Pan American Silver, Endeavour Silver, and
improvement through analysis. The process may have a
Primero Mining. We grant our clients training for their
higher cost but it is more time and cost efficient in the
staff either at the factory or at the mine site. For optimal
long run. Technology is constantly changing and we strive
safety conditions RNP recommends companies take both
to stay one step ahead of the competition with the latest
courses. The first has a theoretical focus that includes a
computer numeric control (CNC) machines and tools,
bench test where customers learn the main functions of
as well as always having well trained labor capable of
the drills, maintenance, and operation. Secondly, the mine
solving the problems that might arise. We are aware of
site provides hands on instruction where staff learn about
the complicated situation that many mining entities are
the parameters of the drills with the opportunity to identify
suffering, and we strive to create win-win situations. The
and solve key problems that tend to arise in operations.
company promotes itself with a sales and technician team that constantly travel around the country, visiting our
Q: What innovative products does RNP offer?
main customers and providing answers to any doubts that
A: Our value proposition dictates that we stress the
potential clients may have.
importance of a slightly higher cost but higher quality product that does not constantly need to be upgraded,
Q: As a consequence of the downturn in the market, how
meaning that costs are saved over the long term. The drills
has the attitude of key players changed in terms of supply
we offer may be traditional but our technical support is
and demand, and how do they react toward the added
greatly appreciated by customers as it assures them
value the company offers?
they are making the most attractive investment. The
A: The fall of prices in the market has caused many
metrics and performance of our products are delivered
important changes. When commodity prices are in
to our clients so they can compare our prices to those
favorable conditions, mining companies do not care
of our competition. The business makes sure to keep its
about the costs and their only focus is production. Now
warehouse well stocked so that shipping is available at any
directors are beginning to worry about capital and they
time. When mines are in particularly difficult areas, RNP
come to us in search of lower cost suppliers. The fall of
sends technicians with the selected parts and drills as a
commodity prices has been beneficial for us because
support mechanism to smooth the process. In the case of
mining companies are scrambling to reduce costs as much
an emergency, some companies expect us to deliver parts
as possible. RNP is an ideal alternative thanks to the fact
the very next day. We are aware of the logistical obstacles
it provides spare parts and drills, which facilitates quality
and we prepare ourselves accordingly.
performance at a low price with the added bonus of technical support.
Q: Where does RNP see room for growth in the next five years globally?
Q: How has the company achieved a global presence, and
A: First and foremost, our market is going to be centered
what have been its key factors for success?
on Latin America, although we are also expecting to open
A: We attend international mining shows to introduce our
offices in the US and Canada. RNP is currently working
products to new markets. Customers feel the confidence to
on expanding our operations. We might possibly enter the
invest in our products when they get to know the company
South African market as well. To achieve its objectives, the
directors that have strong visibility in the industry, along
business has to be aware of new technology that is being
with technicians who are prepared to travel to mines to
released and consumption trends so that it can stay one
install the drills and solve any problems they might have.
step ahead of competition.
| INSIGHT
FRANCOIS DUMONT General Manager of Versa Perforaciones
PORTABLE DRILL DESIGNS
169
The industry is still very slow and difficult, a small but
decisive
rebound
Perforaciones’
General
notwithstanding, Manager
says
Francois
Versa
Dumont.
“Proposal inquiries have been on the rise for us, and companies are being more active,” he shares. “Some corporations have been consolidating their businesses, and some of our clients are asking us for extra support with our services. On the whole, the sector is stronger and clients demand more but there is still an underlying focus on cost reduction throughout the sector, to which we have responded by lowering our revenue margins in order to increase our competitiveness.” Although the company began in Venezuela, Dumont shares that Mexico has been a perfect fit given the volume of mining operations. There are a variety of clients Versa is currently working with including Goldcorp, which has been present in its portfolio for several years. “We have developed a new portable drill that is extremely flexible and can reach extremely challenging destinations while retaining its potency,” he comments. “This product is already in operation on a variety of mines, and it has generated encouraging results. What differentiates us from our competitors is the standardization of our fleet for both open pit and underground mining. The same goes for our spare parts, which are practically the same for every machine.” Another critical factor, he says, is the use of electronic equipment because it is the most difficult to repair, sometimes taking days for a problem to be found and fixed. Difficult projects are normally located in very remote places, and in these cases Versa having its own personnel and transportation systems gives it the advantage of being able to select the right equipment for the right project. “This is essential in order to meet the goals on time for each project,” Dumont claims. “There is also greater demand for portable drilling projects than traditional drilling machines as they offer companies the flexibility to reach remote locations and still fall under the spectrum of viable costs.”
| VIEW FROM THE TOP
DRILLING COMPANIES GIVE NEW BREATH OF LIFE TO PROJECTS RAMÓN LUNA Director General of Servicios y Proyectos Mineros de México (SPM)
170
Q: What opportunities do you discern within the mining
and we explain this is not something we can because we
industry?
always put quality above cost.
A: Companies in the drilling sector are lowering their costs to such an extent that the market is destabilized.
Q: Could you mention a relevant project that reflects the
Certain industry players are reducing their costs by far too
quality of service you offer?
much. Unfortunately, these companies are only interested
A: We are currently proud to be working on the Santa
in obtaining contracts and are neglecting their services’
Gertrudis project, owned by GoGold Resources. When
quality. The first item to be sacrificed is commonly
we came to know and scrutinize the project we noticed
employee payroll, shortly followed by quality, repair parts,
that the company it belonged to did not have the same
and supplies. Employees, in turn, are not motivated to
vision for it as we did. It did not appreciate its quality from
perform adequately, and spare parts are not satisfactory,
the same angle as we did. It is important for each mining
leading to a further decay in quality. At SPM, we believe
company to adapt its exploration and operations to the
this attribute is key and strive for it not to be undermined
market, as specializations may not always be relevant
in any way. Prospective clients have, at times, made it
in certain climates. It seems that in this environment
clear that they are looking for the least expensive option,
our vision was on point. We took the lead in the Santa
| INSIGHT
ENSURING STABILITY IN THE DRILLING MARKET BRENDA CARRANZA Executive Director Global Marketing and General
difficult terrains. They can go deeper without disturbing
Manager Mexico of Falcon
the environment, and there is no need to build extra
Drilling
infrastructure. We can reach a depth of 600m with HQ size drills, and 1,300m with NQ size equipment,” she boasts.
Latin America maintained its position as the most attractive region for exploration investment and Mexico obtained
Every time a project is concluded, the drills return to the
7 percent of the global investment in 2015, according to
workshop for routine maintenance and replacement of key
Falcon Drilling’s Executive Director Global Marketing and
components in order to ensure the equipment maintains
General Manager Mexico Brenda Carranza. “The past few
the highest standards. “As a company, we ensure there are
years have transformed expectations of players and many
no leaks and that all hydraulic components are in perfect
wish to invest in new solutions and technologies, and
shape in order to reduce the likelihood of waste or the
embrace a preventive way of thinking in order to prepare
dispersal of contaminated materials,” Carranza points out.
for what lies ahead in the future,” she claims. Drilling
“If the exploration stage of a project is completed in a
can be a complicated process especially if the region
proper manner and with excellent drilling techniques, then
has blockades or is located in a harsh environment, and
the company can easily present the findings to SEMARNAT
gaining access can equate to a great deal of money and
and other agencies in order to obtain expedited permits in
time. In this respect, Carranza believes that Falcon can be
the future.” Falcon can even offer payroll and transportation
of assistance. “We provide portable drills that can reach
services to clients. “Mining activities are moving to remote
Gertrudis project, raising its potential of 500,000 ounces
rather, it needed low-cost projects that would lead to fast
to 1 million ounces in just one year. In 2016, it will be ready
and abundant production. Rather than search for a project
to start operations, and we expect the first production
with a higher potential, we decided to see what the site
batches to be ready in September. While many companies
already had to offer, and how we could develop it. Looking
are struggling to survive, GoGold Resources is considering
more closely into the mine, we realized a larger potential
opening a second mine in Sonora, adding to its various
could be attained using the experience acquired over
other projects underway.
various previous operations.
SPM raised the potential of the Santa
Q: What is the role of companies such as yours to
Gertrudis project from 500,000 ounces to 1 million ounces in just
one year
strengthen the project pipelines that firms have? A: In light of many mine closures in the near future, we were able to revive a nearly abandoned project. The main pillar we rely on is our experience, which we believe allows a company to appreciate the value of a project differently, and confers it a certain vision. A mining firm may have an excellent team but these may be limited to 3-5 geologists. Our team counts 20, who undertake projects one after the other, and who can also be seen as gaining experience one after the other. Our activities
Q: How did you reach the successful perspective for
are not limited by administrative charges, allowing us
the Santa Gertrudis mine that allowed the potential to
to enter and exit a project at the most convenient time
increase so dramatically?
for our client. While certain mining firms may focus on
A: Each exploration and operating company needs to learn
a single project for 10 years, we strive to diversify and
to adapt to the circumstances in the market. I believe the
undertake various jobs because we want to offer our
previous owner of the Santa Gertrudis project was only
customers the experience provided by years of projects.
focused on exploration, hoping to discover a large deposit.
In our seven years of existence we have engaged in 30
A year and a half ago, the market did not need exploration;
different projects.
and hard to reach locations, and we have been involved in
The F1000 is a hydraulically driven drill powered by a
projects where we have had to transport our drills through
four cylinder diesel engine that provides maximum fuel
walking trails a little over a meter wide,” she states. “In
efficiency. It is equipped with a five foot head stroke
other cases, we have had to deal with extremely steep
for improved productivity and core recovery. The drill is
terrains and this is challenging when considering the
extremely versatile and can be mounted on skids, a truck,
implications of moving 500kg equipment. Nevertheless,
or an all-terrain vehicle. “It can be quickly taken apart and
our modules are built with these difficult treks in mind.”
moved by helicopter from one site to another, minimizing the environmental impact as well as reducing site
Safety is also a priority for Falcon, and the company
reclamation requirements and costs,” Carranza explains.
applies a robust safety program in its local offices and on the field. “We once had to drill on a hill over 1km high ,
Like many companies, Falcon Drilling has been forced
and although no drilling company in the past could reach
to optimize its operational and business practices as a
a depth of 1,300m, we took on the challenge,” Carranza
result of the current economic situation and the state of
comments. This complex procedure was made even
the industry. “Drilling companies are desperate to win
more difficult since the land was fractured and presented
projects in order to survive, and this has destabilized the
some cavities that had to be addressed with the proper
market," warns Carranza. "While competition is always
additives before Falcon was finally able to reach depths of
healthy, many contractors are now drastically lowering
1,300m. “The platform was built flat on an uneven terrain
their prices and offering cheap services, and their flimsy
so we also had to make sure that all drilling practices were
business models mean that they are likely to not reach
in place to make it a safe operation and avoid any safety
targets. These poor practices and unprofessional drilling
incident,” she recalls. Moreover, the F1000 drill rigs fleet
companies upset the market, and often these players
was purposely designed and built by Falcon Drilling for
either enter bankruptcy or are unable to complete their
use at remote drilling sites accessible only by helicopter.
projects.”
171
| VIEW FROM THE TOP
ALTERNATIVE FINANCING OPTIONS FOR EQUIPMENT LEASE DANIEL VENEGAS Commercial Director of Dimanor
172
Q: What role does Dimanor play in the mining industry
product. For this reason, around five years ago we set up
in Mexico?
a plan whereby the client can rent for six months, and
A: As well as providing John Deere agricultural machinery,
upon buying the product can opt for the 24-0 program,
we also distribute drilling equipment from established
giving them a further 24 months of interest free usage.
brands such as Furukawa Drill. Mining is a cyclical industry,
The client therefore receives 30 months of interest free
and the sector is currently experiencing an extended
usage of the technology, and roughly 80 percent of all
downturn, which has had a profound effect on our
equipment we sell to the mining industry is purchased
business like many others. We have around 80 machines
under this plan.
rented throughout the mining industry in Mexico, and with the fall of the metal prices not only did the number
Q: What innovative products does Dimanor plan to
of rentals decrease but more importantly the quantity
introduce into the Mexican mining industry to improve
of rental hours also declined drastically. We usually have
productivity within the sector?
around 600 hours of usage for our rented equipment in
A: One product that is certainly leading the way in terms
the mining sector but at the moment that figure is down
of technology is the John Deere 1050K bulldozer, which
to less than 200 hours.
not only has a dual-path hydrostatic transmission but also has a setting that reduces fuel consumption by up to 25
Q: What financing solutions does Dimanor offer its clients
percent. However, more importantly than the machinery
in order to be more competitive and flexible?
itself, we believe it is essential for users to be able to keep
A: As an official John Deere distributor we have our
track of the machine’s location, fuel usage, and overall
own finance arm, called John Deere Financial, which is
performance. For this reason we developed the JD Link
in charge of the financial side of the business. Our most
system, which falls under the broader WorkSight solution.
popular program is the “24-0”, which enables the client
This is an administrative tool that allows both Dimanor as
to use the product for 24 months with 0 percent interest.
the provider and the user to digitally monitor and analyze
The vast majority of our clients rent our equipment first
usage of the equipment, and therefore helps to prevent
and then after a period of 6-8 months decides to buy the
maintenance issues from arising.
Nuestro servicios: Geología Geomática / Topografía Propiedad Minera Capital Humano www.detectorexploraciones.com.mx
Jesús Herrera Ortega j.herrera@detectorexplraciones.com.mx +52 55 5586 8848
Christian Roa c.roa@detectorexploraciones.com.mx +52 55 5754 8370
| VIEW FROM THE TOP
SMALL EXPENSES MAKE BIG IMPACT EFRAÍN BECERRA Director Industrial Lubricants Division of Interlub
Q: What were the objectives behind the creation of Interlub and how has it evolved since its inception? A: Our main objective is to create biodegradable and highly effective lubricants that reduce the ecological footprint of industrial companies. Our scientists have developed a broad range of smart lubricant solutions that are tailored to the unique requirements of each
Lubrication expenses generally do not surpass 2 percent of the overall
maintenance budget
customer and designed to resist the most challenging
with each of our customers’ needs and unseen issues are
and “out-of-standard” operating conditions. Fortunately,
communicated properly. Our services include assessment,
Interlub has sustained double digit growth rates since its
implementation, documentation of benefits, and follow-up.
inception thanks to its customer centric approach, flexible
We have recently developed a new line of high-performance
technology platform, world class production facilities, and
biodegradable lubricants for one of the leading Mexican
superb logistics capabilities that serves customers in 37
mining companies that supports up to 300 percent higher
countries. Moreover, our company has established itself as
loads, reduces wear by 75 percent, and could therefore
leaders for critical applications in a broad range of heavy
extend the service life of open gears in ball and SAG mills
industry sectors such as mining, steelmaking, cement, and
by up to 30 percent. As a result, our client was able to
sugar production, among others.
increase the productivity of the equipment and expects to reduce capital investment significantly. Our increased
Q: How does the company participate in the mining
innovation capability stems from research partnerships with
sector and what services does it offer to these players?
the Massachusetts Institute of Technology (MIT), UNAM,
A: In general, we offer highly specialized lubricants that are
and other prestigious institutions. Despite Mexico’s lack
combined with diagnostics, installation, and maintenance
of sustainability norms and regulations, we have adapted
services. Our consulting team’s specialty is the detection
our products to international norms that are upheld by the
of issues such as high lubricant consumption, short service
European Union and the OECD in order to guarantee the
life of mechanical components, and high maintenance
quality and sustainability of our products.
complexity that are frequently hidden in plain sight and that can be improved through proper lubrication. Moreover,
Q: Why are the monitoring and installation services
our tribology experts are specialized in creating innovative,
Interlub provides for mining players attractive in a cost
high-performance
constrained market?
footprint.
lubricants
Finally,
our
with
minimal
complementary
ecological monitoring,
A: Our customers are operating in a dynamic environment.
documentation, and maintenance services assure positive
Critical variables such as temperatures, load, contaminants,
returns on investment and the continuous improvement of
and productivity measures are changing constantly and
key performance indicators in the mining operation.
affecting the performance of lubricants. The regular personal assistance and monitoring services of our
Q:
How
would
you
describe
Interlub’s
greatest
consultants assure the on time detection of critical changes
accomplishments?
and enable us to adjust the value proposition accordingly.
A: One of our greatest achievements has been the
Finally, our reporting services assist maintenance managers
development of a robust new product development
in the preventive maintenance of critical equipment and
methodology
the
help them plan and optimize their maintenance budget. It
methodology is a process of co-creation that assures the
is important to highlight that our company does not charge
flow of customer input to the processes of product and
for these types of services as we consider them to be part
solutions design. This ensures the solutions are aligned
of the packaged solution we offer.
called
SmartTouch®.
The
core
of
173
8
PLANNING & DEVELOPMENT
With a constant focus on budgets and fast ROI, construction and planning companies are equally as affected as drilling and exploration companies. Operators are trying to tighten margins to make new projects economically viable. Among considerations that must be taken into account at this stage are mine logistics, safety, and worker accommodation, all the while negotiating the minefield of ejido lands. Other emerging trends involve communications and mine optimization technologies and software, as operators gain greater insight about how their operations will be run on a low cost, high-productivity model.
This chapter begins by examining the strategies of suppliers of basic services vital to the profitable operations of mines. The key players in logistics then provide their opinions about the trials and tribulations of operating in such remote environments, as well as inventive tactics for overcoming these hurdles. Construction companies and component suppliers are interviewed to provide a perspective on the changing mindset within the industry in relation to the importance of strategic mine planning and development. Communications cannot be overlooked as the glue that binds all these components together to create a strong mining operation based on solid and well-planned foundations.
175
176
| CHAPTER 8: PLANNING & DEVELOPMENT 178
VIEW FROM THE TOP: Gustavo Ortega, Mexican Mining Chamber (CAMIMEX)
179
VIEW FROM THE TOP: Juan Castillo, Kepler Constructora
180
MINE SPOTLIGHT: Cerro del Gallo
182
VIEW FROM THE TOP: Servando Valdez, Grupo Cementos de Chihuahua
183
INSIGHT: José Zozoya, Kansas City Southern Mexico
184
VIEW FROM THE TOP: Francisco Alanís, DMV Consultores
186
VIEW FROM THE TOP: Eduardo Zarza, Espaciomovil
187
INSIGHT: Roberto Reyes, Commosa
188
VIEW FROM THE TOP: Victor Gamas, Gamas
188
VIEW FROM THE TOP: Luis Carlos Teran, Connect Logistics
190
TECHNOLOGY SPOTLIGHT: Chihuahua’s Official Exxonmobil Distributor
192
VIEW FROM THE TOP: Alberto Ramírez, Maptek
192
VIEW FROM THE TOP: Hugo Arroyo, Datamine
194
INSIGHT: Jorge Vera, Doka México
195
VIEW FROM THE TOP: Joaquín Patrón, Ankla
196
INSIGHT: Christof Blumer, Georg Fischer
Oscar Puente, Georg Fischer 197
INSIGHT: Marcos Gluyas, Gluyas Construcciones
199
INSIGHT: Rudolf Hess, RH Shipping
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| VIEW FROM THE TOP
TRIPLE HELIX APPROACH GENERATES RESULTS GUSTAVO ORTEGA President of Innovation, Technological Development, and Energy at the Mexican Mining Chamber (CAMIMEX)
178
Q: What are the most prevalent trends you have witnessed
A: The adoption of change automatically provokes a
in terms of innovation of technology and energy?
certain reticence. The most effective tool to promote a
A: I have witnessed the need to maximize the use of assets
favorable environment is the involvement of operative
in the mining industry, and to increase the recovery of
personnel in the planning and execution of innovative
spending on consumables and materials used in industrial
projects, rather than just those responsible for research.
processes, including diversification of product lines. For
Taking ownership of the change substantially increases
example, metals recovery can be performed in rare earth
the potential of making a positive general impact, favoring
through the treatment of commonly processed materials.
the progressively simpler adoption of innovation and
The essential difference in being part of a restrictive
subsequent technological development projects. This
environment is in the fact that the number of measures that
can be seen in terms of the number of projects that are
can be implemented is lessened, but the quality never drops.
executed over time, because if the number increases, the
Operators are choosing only to embark on the projects that
process of adaption to the change is being carried out in
present a clearer positive impact for the company. Investing
the correct manner.
in projects within this framework is a solid affirmation that the company has confidence that they will be profitable
Q: What kind of investment is innovation in mining
in the future. Moreover, the geological diversity of mining
attracting?
sites in Mexico is fertile ground for the development of
A: The country must strengthen its triple helix cooperation
specific projects and technologies to target each variable
mechanism between the private sector, public sector,
of the deposits. Additionally, the country’s Universities
and academia. Finding mechanisms that allow a focused
and Research Centers constitute a solid foundation for the
use of research resources in the academic arena in order
development of technology.
to resolve current problems in industry will be the most promising legacy possible for the consolidation of a
Q: How are digital workforce engagement and enhanced
sustainable innovation system. Innovation in the mining
asset management manifesting themselves in the mining
area has been increasingly considered as a way to
industry?
improve the performance of daily processes. However, it
A: Process automation is a significant area of opportunity.
is important to also allocate resources to applied research,
With the higher level of complexity in the activities
which would allow the diversification of current processes.
carried out, a smaller variability can be obtained in the
The development of innovation hubs in common areas of
processes, generating an increase in efficiency. While the
interest would be an attractive practice to adopt.
use of tools like 3D printers is minimal at the moment, this kind of technology holds an interesting potential. An
Q: How has the Energy Reform sparked innovation in
example is the eventual possibility of being able to create
mining in terms of self-generation of power?
spare parts for heavy machinery and other equipment
A: The new regulation will allow mining companies
with 3D printers, which would reduce the operation and
that are characterized by their extensive use of energy
maintenance costs of the machinery. An alternative that
resources to allocate resources for energy generation in
will allow an increase in profitability without sacrificing
competitive conditions. In this sense, mining companies
results involves achieving an adequate automation of
are consolidating specific areas for development of
processes, obviously without compromising quality on the
energy generation projects, which will serve as catalysts
occasions that human presence is necessary.
for applied R&D projects in this area. We hope that the legislation will serve as a framework to facilitate a greater
Q: How do you evaluate Mexican miners’ changing
interaction between the entities that generate knowledge
mentality to these technologies?
and the consumers of this knowledge.
| VIEW FROM THE TOP
KEEPING PROJECTS ON TRACK JUAN CASTILLO Director General of Kepler Constructora
Q: How does Kepler manage its workforce capacity to
encounter during construction projects is the logistics
overcome the tight timeframes?
process and it is important for companies to have strong
A: Most of the time, clients come to us with contracts in
logistics in order to efficiently transfer materials and
which they tell us that we have 10-15 days to mobilize and
equipment across different locations and on time.
create our teams. By the end of the first week, we have already contacted and selected our teams, so that in the
Q: What is Kepler’s strategy to obtain a larger market
second week we can bring the teams to the job site to
share within the mining industry and which projects have
perform medical exams and identify safety measures. Thus
given the company the most visibility?
by the beginning of the third week, the teams are ready
A: We have worked on a variety of projects with renowned
to begin working. When new supplies are needed, such
companies such as Peñasquito with Goldcorp, Palmarejo
as security equipment, our purchasing department finds
with Coeur Mining, and Pueblo Viejo in the Dominican
the suppliers and begins buying immediately. We have a
Republic. The challenge we encountered in Palmarejo was
large network of suppliers, so we can have access to any
that the project was isolated, which made it extremely
materials across the country. Sometimes the contract
difficult to reach it. Pueblo Viejo is one of the largest gold
stipulates that if the client cannot provide something then
mines in the world, and in this project we learned about
the contractor is obligated to acquire it. In these cases
regulatory compliance and how to adapt to the customs
agreements must be made regarding when and where each
and labor force of another country. We also gained a great
material will be purchased and delivered. This is relevant
deal of experience shipping materials to and from Mexico
since each construction material has a different purchasing
and we discovered that in the Tampico Port, it was crucial
time frame, for example, a cement mixing plant usually
that the arrivals were on time because if they were early or
takes two months from mobilization and installation on site.
delayed, the company would have to pay large fines.
Q: Mining operations take place under harsh climate
Q: Which is Kepler’s strategy to differentiate from its
conditions. How do you prevent downtime and probable
competitors?
losses?
A: From 2010 onwards, mining players have noted that
A: Each mine faces a different challenge and with our
they cannot opt for cheap contractors since in the long
experience we apply the lessons learnt to the new mining
term these do not fulfill their responsibilities. Some of
projects in order to avoid committing the same mistakes.
the companies that were our competition in the past
We have to adapt to the different environments and
have disappeared because of low quality services.
circumstances to each project. In Canada and European
We are focusing on maintaining our standards, which
countries, companies have to provide their workers with
is something that our clients notice. There are many
jackets because of the extremely low temperatures,
elements to consider, from having the expertise and
while we have to give workers cold water to avoid heat
implementing processes on time to keeping costs low.
stroke. One of the most difficult tasks is establishing living
Years ago, it was the operation and construction areas
quarters for the labor force, so we recruit a company to
that made the majority of decisions but nowadays the
construct the living spaces that come with integrated
purchasing departments are playing a more dominant
kitchens, bathrooms, and bedrooms. Our main task
role. The mistake that many of these departments make
within mines focuses on their construction rather than
is that they usually go for materials that are cheaper and
the development or exploration. We carried out internal
as a result low quality constructions are being made. The
meetings with our different departments to plan and
mining industry is going through a rough patch but 2016
determine the resources that must be delivered for mining
looks hopeful since we have started the year negotiating
construction projects. One of the biggest challenges we
projects with Peña Colorada and Peñasquito.
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| MINE SPOTLIGHT
CERRO DEL GALLO Within the San Antón property, with its porphyry coppergold deposits, intrusion-related gold deposits, epithermal silver-gold deposits, and gold-copper skarn deposits, Primero Mining’s Cerro del Gallo development project is underway. Cerro del Gallo is situated in the Mesozoic Sierra Madre Oriental terrane at 80km north of the Trans-Mexico Neovolcanic Belt. Sierra Madre Oriental is characterized by its late Cretacious-early Tertiary belt with its high level felsic intrusions. Before the discovery of Cerro del Gallo’s large low grade gold-copper-silver deposit, the San Antón property’s mining activities centered around epithermal veins. Nevertheless, now attention is shifting to these new, highly viable mineral resources. In May 2012, previous to Primero’s acquisition of the property in December 2012, Cerro del Gallo underwent a Definitive Feasibility Study (DFS) for the stage 1 heap leach. The DFS predicted an initial 7.2 year lifespan for the mine, finding that this could be prolonged by the operator by an additional 6.8 years through use of techniques such as second stage carbon-in-leach and heap leach mill expansion. Measured and indicated resources for the Cerro del Gallo concession amounted to 47.8 million tons, with 923,000 ounces of gold at a grade of 0.6g/t. Maximum gold output of 99,100oz/y is expected to be reached in year three of production. Measured silver resources amount to 20.5 million ounces at a grade of 13.3g/t, and copper production is expected to reach a potential 103 million pounds. The DFS outlines that the Cerro del Gallo project will go ahead as an open pit truck and shovel operation and will incorporate a processing plant with a capacity of 4.5 million tons per year. Removal of copper before gold recovery will be made possible due to the planned SART processing stage, but conventional cyanide heap leach will be used to extract the majority of the minerals. The plant is expected to produce 95,000oz/y of gold equivalent with an estimated cash cost of US$700/oz. The pre-production mining fleet costs outlined in the DFS for the first stage includes primary mining equipment, support equipment, blasting, and mine maintenance totals US$18.7 million. The sustaining capital, to include mining capital, leach pad expansion, and stacking equipment is expected to amount to US$28.9 million. The DFS concludes that the Cerro del Gallo deposit is a viable project for production of gold, silver, and copper through heap leaching and weathered and oxidized material. The feasibility study claims that the project has a positive cash flow and its economic potential is strong based on financial, operating, production, and reserve estimates.
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| VIEW FROM THE TOP
QUICK SETTING CONCRETE TO SPEED UP PROCESSES SERVANDO VALDEZ Mining Coordinator of Grupo Cementos de Chihuahua (GCC)
182
Q: What products does the company have in the pipeline
Q: Which products were developed in CIT that have now
that it is planning to release in the Mexican market in the
been established as a solution for the mining industry in
near future?
Mexico?
A: In order to ensure that we remain leaders in our field,
A: Microsilex is an innovative alternative to silica fume
we opened the Technical Innovation Center (CIT) in
developed in CIT, which is now being manufactured at our
Switzerland, which consists of a group of highly trained
Ciudad Juarez plant. It is used in mining as an additive to
researchers dedicated to developing new solutions and
form high-performance concrete, and its features include
improving on existing ones to serve our clients not only in
high density, low permeability, high adhesion, sulphate
the mining industry but also in the oil and gas, construction,
resistance, mitigation of added alkali reaction, and
and infrastructure sectors. In terms of our products, we will
increased resistance that can lead to 28, 60, and 90 days
continue to promote our range of dry concrete solutions
of shelf life. For mining applications, this is mainly used
such as Dinamix FR and Dinamix FR 40/6, which are highly
in shotcrete as well as in special concrete for machinery
resistant hydraulic compounds designed to set in two
foundations. The Milpillas and Bismark mines belonging
hours or less. This is particularly useful when constructing
to Industrias PeĂąoles are currently employing this
bridges and roads, allowing cars and even large trucks to
technology, as well as a mining company called NEMISA
travel over the cement shortly after the works have been
based in Santa Maria de la Paz.
completed and minimizing travel disruption. In 2016, we plan to introduce a new version of this technology that
Q: What technology does Lanzamix use, and how does it
will significantly improve productivity. These dry concrete
differ to similar shotcrete solutions on the market today?
solutions will be the main focus for the company in terms
A: The Lanzamix technology is a dry product that assumes
of product development over the next 12-18 months.
the characteristics of a combination of Fraguamix and quality aggregates when water is added. In addition to its
Q: Which of your products receives the most demand
high strength, it provides a short setting time of up to 150kg/
from the mining industry in Mexico?
cm2 in the first two hours, which increases to 250kg/cm2
A: Mining is an important part of our business in Mexico,
within six hours. This provides a greater level of continuity to
representing around 10 percent of the company’s total
rapid stabilization works in difficult terrains with rock quality
income. For the most part, mining operators require
issues by providing a higher level of safety, and the number
traditional cement solutions for use in their production
of accidents caused by rock falls in mines using Lanzamix is
processes. This includes cemented rock fill (CRF) products,
significantly lower than in those using traditional shotcrete
which is a mix of crushed and screened waste rock used in
solutions. Moreover, our CRF process is a mining method
mines around the world to fill mining voids with stable mass,
comprised of preparing a mixture containing a small amount
while it can also be used in tailings processes. Moreover,
of cement and pre-crushed waste rock to generate a support
we offer a range of leading shotcrete and bagged cement
mixture for the holes created inside the mine as a result of
solutions, which can be used during mine construction.
mineral production. It simultaneously serves to extract the
The vast majority of our business comes from Chihuahua
adjacent ore blocks, preventing the loosening of large rocks
state, and while we are well established locally, we are
due to vibrations and eliminating the dilution of the mineral.
determined to develop new solutions in order to expand
This CRF method, like filling methods using a cement paste,
our presence in the mining sector not only throughout
allows the extraction of the total ore without any remaining
Mexico but also regionally in South America and the US. In
columns. As long as the value of the mineral is greater than
fact, we already have three cement manufacturing plants
the process cost, GCC provides the cement, production
in the US, and I have no doubt that there is a large market
capacity, logistics, and technical support in the mixing and
for our products in the country.
sampling of the specimen.
| INSIGHT
CARRYING THE LOAD OF THE MINING INDUSTRY Railroads have always been a significant part of Mexican
JOSÉ ZOZAYA
culture but after the Mexican revolution in the 1930s, the
President, General Manager,
network was made public, and subsequently neglected
and Executive Representative
until its privatization in 1996. This was an opportunity
of Kansas City Southern
seized by Kansas City Southern (KCS) and Transportación
Mexico (KCSM)
Marítima Mexicana (TMM), who worked on a joint venture in the northeast of the country. This JV spawned the creation of KCSM, which went on to become Mexico’s
carrying out preventive surveillance,” Zozaya shares. “One
most important railway freight transportation company.
of the biggest challenges is that we have learned that
According to KCSM’s President, General Manager, and
we must act to improve systems, rather than waiting for
Executive Representative José Zozaya, Mexico now
the government to take action.” He believes that there is
accounts for 48 percent of the parent company’s business,
a requirement to work with the government but also to
since both operate not as two separate networks but as
establish independent initiatives and invest in requirements
one unified system as a response to today’s network
like security. When that process is established, incidents
economy and as a way to increase efficiency. “Although,
can be mitigated and prevented. In terms of working with
in the last 18 months, we have been capitalizing on the
the public sector, Zozaya’s responsibilities include a duty
opportunities brought about by the Energy Reform and
to establish strong relationships at various government
the booming automotive market, we have also continued
levels. “I interact with the President, Ministers, Governors,
to foster growth within our traditional sectors of grain,
and Mayors because we have a concession that we must
minerals, metals, steel, and petrochemicals,” maintains
maintain,” he declares. “In order to do so, we must fulfil
Zozaya.
our obligations under this concession, meaning that open lines of communication with the authorities are vital.”
KSCM is currently in the midst of a considerable investment
KCSM also receives as much support as possible from
process. In 2015, the company invested US$324 million in
the Mexican government, and has established a strong
Mexico, US$160 million in railroad rolling stock, US$108
relationship over the years, he adds.
million in infrastructure and tracks, and US$56 million in business development. This provides an idea of the level of investment expected for this year. “We have made an investment commitment of US$154 million to the Mexican Revenue Service (SAT), while also negotiating
In 2015, KCSM invested US$324 million in Mexico
with the government entity about the possibility of KCS constructing the remainder of the Celaya bypass,” he
KCSM places innovation at the forefront of its development,
discloses. “This would mean a further investment to add to
and has even set up an employee forum so its staff can have
this initial figure.” Within KCSM’s concession, it has invested
a platform to share their ideas. “We want to hear about
a great deal of money in updating tracks, infrastructure,
improvements that can be made, not only to equipment
equipment, and systems, among other components.
or machinery but also in working conditions and problem solving,” Zozaya claims. “Regarding technology, we are
For the mining industry specifically, he believes that the
continuously researching in conjunction with machinery
company can offer efficiency, lower costs, and greater
producers to find out about new developments. We have
capacity. “Some of our competitors have an advantage
been extremely successful in building a more efficient
in that they not only own the railroads but also the
operation with the experience of the US railroad as well
mines, whereas we simply render services where they are
as the valuable experience of our Mexican employees who
required,” he states. Security is a polemic issue in mining,
previously worked for Ferrocarriles Nacionales de Mexico.”
and in order to guarantee the security of the goods it
These actors, he says, have provided a great deal of ideas
transports, KCSM has an extremely close relationship
on grid operations that can save time and money, meaning
with all the federal, municipal, and state authorities. “We
that KCSM is able to pass the savings onto clients. Zozaya
also work with intelligence agencies in Mexico and the
aims to become increasingly efficient as this will enable the
US, and we have an internal security team that works 24
company to provide a less expensive service to the mining
hours a day and is constantly monitoring our cargo and
industry, in which transportation is key to competitiveness.
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| VIEW FROM THE TOP
MINING EXPERIENCE APPLIED TO CONSULTING FRANCISCO ALANĂ?S Director Partner of DMV Consultores
184
Q: How do you encourage synergy between different
Q: What other competitive advantages does DMV have to
divisions to create business opportunities?
help their clients become more efficient and competitive?
A: We are currently involved in a project in Coahuila
A: If DMV was a smaller consulting firm and had the same
where we are extracting barite. At first we had entered
platform, it would be much more complicated to make
the project as shareholders to make a profit from the mine
suggestions or comments to the companies. An advantage
but slowly we became more involved by contributing to
we have is that we adhere to internal operation parameters
the startup process and overall development of the mine.
to make the correct recommendations about the current
The company is also participating in another project
company standards. Another advantage is that we can
for the contracting division in which we help document
directly contact engineers that work in different divisions
processes,
operational
of DMV Group as well as other experts that have extensive
improvement, and develop a more strict planning strategy.
identify
opportunities
for
knowledge about the industry and processes to assist us with
Our consulting division has created a partnership with the
creating tailored solutions. Everything in a project can vary
Spanish engineering company Torsa in order to provide
from the amount of infrastructure available and how much
our customers with technological mining solutions. We are
capital is invested to the social and cultural surroundings
beginning to offer personnel localization in mines by using
of the project. We have been involved in some projects in
radio localization (Total Tracking), anti-collision systems
which cost reduction strategies are not implemented in the
(Total Detector), and traffic control equipment over ramps
company. The decisions are generally taken by CFOs who
to increase operational efficiency (Total Traffic). Our goal
base them on financial statements, when COOs should be
is for our clients to recognize our name and request our
the ones to identify where cost reduction strategies could be
services because they are aware of the quality services
used to increase productivity.
that we offer. Q: What innovations has DMV Consultores implemented Q: What was your contribution to mining projects and
in Mexico?
how did you help your clients optimize processes?
A: We have constructed our own plant with an internal
A: We were involved in Silver Standard's La Pitarilla
group, and have also made some in-house adjustments
Mine, and First Majestic Silver’s La Parrilla projects as a
in our own mines. The company wants to bring systems
contractor, which means we arrive with our own work
into the market that prevent machinery from colliding and
team and machinery to develop ramps, entrances, and
crushing miners, and also worker localization systems.
fronts inside the mine. The company is in charge of
These types of systems can help in case of emergencies
creating the cave’s internal infrastructure, and the revenue
like in the case of mine collapses, indicating the exact
depends on the tasks completed by the work team. Once
location of the miners so they can be rescued immediately.
that is completed, the team begins to extract the minerals,
This system also helps evacuate all personnel in drills or
moving them through ramps and the entire infrastructure
when blasting is about to begin. The current system is
the company had previously built. We have an eight
not completely reliable because often the miners forget
year contract with First Majestic Silver, and we also have
to check in and there could be people inside that are not
contracts with a national firm in Durango. All the projects
accounted for. It also reduces productivity because if
in which we are involved are underground mines where we
somebody forgets to check out, the system would indicate
use drill jumbos and other equipment made by Oldenburg
that the individual is still working inside the mine, which
and other main equipment brands. There are many
would delay processes such as blasting. The technology
projects that could be developed at the moment with little
we are bringing into the market is already being used in
investment, and investors can wait for market prices to
mines in Canada, Chile, Peru, and Spain. At the moment,
rise again and sell projects to make a profit or reinvest.
we are introducing the product onto the market.
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| VIEW FROM THE TOP
CREATING SPACE FOR MINING ACTIVITIES EDUARDO ZARZA Mining Manager of Espaciomovil
186
Q: Can you explain how the company was formed, and
speed is a crucial aspect of our business and something that
what gap in the market you were trying to fill?
is vital for our customers. We had a client who was working
A: Espaciomovil is a company that thrives on innovation,
on a significant transport project for a mine, and we installed
so my partner worked on a patented development unit
a camp fitted with dormitories, dining rooms, and office
that allowed the replacement of components onsite, and
spaces for 150 people within three months.
developed a mechanism whereby it was easy to replace the components such as doors and windows. There are a
Q: How can Espaciomovil’s mobile units help its clients to
great deal of options that we offer that a traditional unit
reduce the operational costs of their businesses?
may not. Our modular units allow more people to fit inside
A: One of the main benefits our business model provides
even though it takes up less space simply as a result of
is that, given the rental option we offer, our customers
the design of the furniture, which is customized to the
are not forced to make any long-term investment. The
particular unit. At that point, the virtues of our product
products are not luxury items that require significant
were relatively misunderstood but we have now been
capital
able to become an industry reference in terms of modular
sustainable, and affordable mobile solutions that not
capabilities. The company initially began to rent and sell
only last for several years but also have little or no lasting
on a small scale, and between 1998 and 2002 our regional
effect on the surrounding environment. It should be noted
fleet increased to 40 units.
that this is not a short-term fix that we have devised as a
expenditure,
but
rather
they
are
simple,
result of the current market conditions but rather a longQ: Which products or services see the most demand in
term strategy designed to ease the financial strain felt by
the Mexican mining market?
our clients. One of our most popular patented products,
A: The mining sector is extremely important as not only
the mobile office and camp unit, requires no preparatory
does it represent 15-20 percent of the company’s sales but
excavation work prior to installation. This means that the
it has also allowed us to learn to develop products, grow in
building infrastructure can be put in place and taken away
areas to which we are not accustomed, and to understand
without any drilling, which of course benefits the ground
security, which is an integral part of our business. In the
underneath the structure. We also design our products
last few years, although the sector has not seen the growth
to use as little air conditioning and heating power as
of previous periods we still see it as an important part of
possible.
our business, and it is merely a question of waiting for the market to recover.
Q: What plans does the company have in place to further establish itself in the mining market both in Mexico and
Q: What importance does flexibility have in the mobile
abroad?
accommodation industry?
A: Our principal role in the mining industry is to improve
A: There is a large quantity of insulating materials and
the quality of life for those living and working in and
flooring equipment currently available, which makes it
around the mines so we will continue to design new and
easier to continuously improve our designs through trial
spacious living quarters for mine workers and for those
and error. We recognize and embrace the need to build a
who travel to mines, such as service providers. We are
deep knowledge of the area and its geology before starting
currently working with our R&D team to create six-floor-
a project, and we work together with the client to develop
high mobile hotels that can be easily and quickly installed
a solution that will meet his or her particular needs. For
on the mine site and will provide all the necessary services.
example, usable space often comes at a premium on mine
This is a product that will be on the market before the
sites, and one of the biggest advantages our products have
end of 2016 and is one of the most innovative designs
is that they are easily adapted to fit any location. Moreover,
Espaciomovil has ever produced.
| INSIGHT
FLEXIBLE SOLUTIONS FOR HARSH ENVIRONMENTS A key issue that mining operators must frequently negotiate is that of security, and many of the larger mines around the country are located in regions suffering from insecurity. Therefore, the operators ask the army to install
ROBERTO REYES
soldiers to live on the mine site in order to protect those
Director General of Commosa
working on the project. Commosa built a temporary camp specifically for soldiers at a mine in Chihuahua, which consisted of a series of “Double Wide” mobile units. “These
developed a strong commercial network throughout the
installations are 60m and can provide comfortable living
country, enabling us to foster long-term relationships built
quarters not only for soldiers but also for regular workers,
on trust, and this trust helps us to continually develop and
and this is a trend that we are seeing more and more of
improve the quality of our products.” Commosa also has
from the mining community today,” says Roberto Reyes,
two manufacturing plants, allowing the company to reach
the company’s Director General.
any location nationwide quickly and efficiently, which is
2
something that Reyes believes has not yet been achieved Although the company’s activity in the mining industry
by competitors. “A distributor has two main expenses:
has been fairly limited over the past year, this is something
depreciation of metal prices and maintenance work,” he
Reyes is planning to change in the coming months because
states. “Market volatility is something outside our control
the mining sector is of great importance to the company’s
so we concentrate all of our efforts toward making sure
growth strategy. “Of course, we continue to work on the
that our products require the least possible amount of
biggest projects, including at the Peñasquito mine in
maintenance.”
Zacatecas, which is operated by Goldcorp, a long-standing client of ours,” he reveals. “However, like many companies
When working on a new project with a client, Commosa
working in the energy sector throughout the country, our
always have a third party to take care of the financing side
business has been affected by current restructuring that
of the project. Companies such as Williams Scotsman and
has been taking place at PEMEX, and this explains why our
Caterpillar act as the intermediary between the client and
growth so far in 2016 has not been spectacular.”
the manufacturer. “Indeed, our relationships with financers represent 80 percent of Commosa’s business, and these
As a mobile solutions provider, Reyes reveals that
institutions account for the majority of our sales,” he states.
Commosa’s principal strength is in the quality of its
“For example, we are currently increasing our export
products. “We have worked with global leading brands
business in Central America, and Caterpillar has been crucial
over periods lasting several years, such as GE, Williams
in the financing and sales sides of this project by providing
Scotsman,
us with positive recommendations and vital contacts.”
and
Caterpillar,”
he
explains.
“We
have
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| VIEW FROM THE TOP
TAKING CARE OF SUPPLY CHAIN CONCERNS VICTOR GAMAS Director General of Gamas
188
Q: How has Gamas carved a niche in the mining sector?
Q: Why should mining companies recognize the value of
A: Logistics is an important enabler, and customs
outsourcing their supply chain and logistics solutions?
brokerage and transportation services tackle security
A: When creating a supply chain and logistics solutions,
concerns. In the mining sector, Gamas has become an
it is important to first identify the size of the company
option that provides security, savings, transparency,
and its immediate needs and concerns. Companies
and efficiency across the value chain. Our participation
dedicated to exploration have unique needs that are
in the sector began in the early 1980s and our roots
particular to that niche of the sector and differ from those
can be traced to the iconic mining activities of Sonora.
that operate mines. There are many layers that are tied
Throughout the years we have learnt how the supply chain
to logistics solutions, from the design of a supply chain
of top operators works, along with their needs, and areas
to the outsourcing of supply chains and services to the
of interest. Sonora is a pioneer in the mining sector with
mine pits. In our organization, we specialize in all three of
noted operations like Grupo México’s Cananea mine. This
these levels, and the most complex is the outsourcing of
wealth of history and knowledge has revolutionized the
supply chains. We have to liaise with the various suppliers,
manner in which logistics is carried out by the sector, and
order and structure them, and ensure that the services
we have formed part of this wave. Now, Gamas takes a
and products are delivered on time to the mine. We have
leadership position in logistics and customs brokerage
a string of success stories in the outsourcing of supply
services in the mining sector.
chains, and in Peñasquito we were in charge of preparing
| VIEW FROM THE TOP
CONNECTING THE MINING SUPPLY CHAIN LUIS CARLOS TERAN Director of Connect Logistics Q: How has Connect Logistics’ local expertise benefitted
fact that logistics is an enabler of investment and plays
the logistics of Sonora?
a predominant role in the decision making capabilities of
A: The business strategy Connect Logistics embraced
top mining companies. The rough patch mining companies
since its inception was the creation of strategic alliances.
are going through has forced logistics companies to
These partners are either located in the US or have a
optimize their services so they stand out from ordinary
strong foothold in Mexico, and these alliances enable
transportation companies. Strengthening communication
us to expand our logistics network. The mining industry
with our clients make this efficiency possible since it is
demands freight movements that transcend the borders
much easier to track the merchandise and decide the
of Mexico, and having this international support is a pillar
times and routes.
in our strategy. Our participation in the sector has naturally increased our expertise and knowledge, and we expect to
Q: What are the most complex and unique logistics
grow exponentially in the medium term. It is a well-known
challenges mining companies are facing?
the logistics of 95 percent of all the equipment in the
be present in the minds of all mining companies operating
mine. Likewise, in Sonora we have worked in the most
in Mexico or those wishing to enter the market. We have
emblematic mine by optimizing the supply chains and
seen that foreign companies sometimes struggle to
improving the logistics network. There are many benefits
adapt to the Mexican way of doing business since they
mining companies can gain from outsourcing their supply
are accustomed to other market conditions. Companies
chain logistics, and one of them is that it allows them to
should carry out audits once a year so Gamas provides
be more stringent and demanding with their suppliers.
preventative auditing. As customs brokers and advisors,
By having a controlled supply chain, mining players can
we always advise compliance in all matters, from value of
uphold higher quality criteria and create competitiveness
merchandise, place of origin, and tax returns, to updated
between suppliers.
permitting and concessions.
“By having a controlled
Q: What unique services have you come up with to cater
supply chain, mining players
A: If a mining company does not hire a logistics specialist
can create competitiveness
arrive to the mine on time, but also without any damage,
between suppliers”
of waiting for the spare parts to arrive. In Peñasquito, we
Victor Gamas,
Director General of Gamas
to mining players? then the costs will escalate. The merchandise must not only as this would mean that the mine potentially faces months were in charge of the entire equipment logistics and we were involved from the conclusion of the exploration stage to the construction phase. In the space of a year, Gamas coordinated the transfer of all equipment from trucks and
Q: What are the biggest obstacles Gamas has faced in
bulldozers to conveyor belts. Volatility and fluctuating
providing integrated logistics solutions to its mining
volumes are prevalent in the industry and we must be
clients?
extremely flexible in order to deal with this. We attain this
A: The biggest challenge we face is in the planning stage
flexibility by working closely with our clients in the design
of the supply chain logistics, and often the whole supply
of the supply chain logistics. It is crucial that we are aware
chain must be reworked and the logistics reconditioned
of requirements and volumes so we can provide service
to suit the needs of the mining client. Compliance should
forecasts to ensure that everything is on time and on budget.
A: The most important struggle is downtime and we
merchandise into the mine, rather than the trucks leaving
have seen that many of the products used in mining are
empty, sometimes clients will take advantage of the units
manufactured abroad and imported. As a result, we must
to transport back equipment that requires maintenance,
ensure that these arrive to their final destination on time.
and approximately 50 percent of our units are used for
Multimodal services are ideal when there is a constant large
this purpose. If we decide to subcontract a transportation
volume to be transferred and this is an option when the
company, we have a series of requirements that must be
transfer can be planned ahead of time. Multimodal is ideal
upheld. For example, these companies undergo interviews,
for projects that are about to start since every second is
background checks, client base checks, all with the purpose
precious in those stages of a project. In order to reduce the
of ensuring the safety of our clients’ merchandise. The units
response times, we have a Team Driver service, which entails
must be recent and equipped with the latest safety features,
two drivers being responsible for each unit so if a driver uses
and drivers must be insured and have previous training.
up his driving quota the other one steps in, meaning that the truck never stops. This service has reduced transit time by
Q: What are the priorities of Connect Logistics in 2016 to
40 percent. Volatility and fluctuating volumes are prevalent
ensure its position in the mining sector?
challenges in the industry, and we counteract this through
A: The alliances we have created over the years have
open communication channels with clients.
strongly positioned us in the Sonora region. The plan for 2016 is to expand our presence and establish an office in
Q: What measures have you implemented to ensure the
Mexico City because many corporate offices of top mining
safe transfer of merchandise?
operators are located there. This strategy will strengthen
A: Detailed planning must be carried out in order to trace
our ties with our clients and will enable us to tend to their
the fastest and safest route for a given unit. When we move
needs much more quickly.
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| TECHNOLOGY SPOTLIGHT
190
CHIHUAHUA’S OFFICIAL EXXONMOBIL DISTRIBUTOR Aceites Lubricantes de Chihuahua (ALCHISA) is a company with a variety of environmental certifications, and it has ExxonMobil’s stamp of approval, operating as the lubricant company’s sole distributor in the state of Chihuahua. ALCHISA has supplied lubricants for several notable projects, namely Coeur Mining’s Palmarejo concession. The operator was experiencing a great deal of difficulty as a result of using a standard mineral oil to lubricate its ball mill gearboxes. As a result, temperatures of the equipment reached 90°C, causing the system to go into lockdown to prevent an accident. As a result, the project was experiencing a substantial amount of downtime and recruited services from ALCHISA. Specialized ExxonMobil engineers were then sent by the distributor to assess the situation and make a recommendation, and as a response they replaced the existing lubricant with Mobil SHC 632 synthetic gear oil, which was able to reduce friction and increase efficiency in sliding mechanisms. That eliminated the problems Coeur was facing with high temperatures. In fact, since implementing Mobil SHC 632 and the monitoring system Signum Oil Analysis temperatures in the equipment have decreased by 18°C and the company has estimated annual savings of US$470,000. Downtime and costs were reduced, and efficiency and safety were boosted by the implementation of these recommendations. Another notable project involving the distributor was ALCHISA’s work on Goldcorp’s famous Peñasquito mine. With a record gold production of 860,300 ounces in 2015, the mine’s machinery undergoes rigorous operating conditions and scheduling, and staff were forced to relubricate the gear coupling units in the mill feed pumps every 720 hours to avoid excessive temperatures. This resulted in increased downtime, labor costs, and disposal expenses. ALCHISA engineers recommended a transition to Mobilgrease XTC, which was designed to provide low bleed and high temperature stability through its high viscosity base oil and heavy duty additive package. After 10 months spent monitoring the progress of the change, Goldcorp’s personnel recorded that the substitution resulted in a reduction in staff costs, and an extension of de-greasing intervals by a factor of three from 720 hours to 2,160 hours. Not only has this increased efficiency but as a direct result of ALCHISA engineering, costs associated with the gear coupling units reduced by an estimated US$625,000. Therefore, ALCHISA’s distribution network for ExxonMobil has contributed to the increased efficiency of several significant mining operations across the country.
191
| VIEW FROM THE TOP
CLOSE CLIENT RELATIONSHIPS TO NAVIGATE DOWNTURN ALBERTO RAMÍREZ Branch Manager Mexico and the Caribbean of Maptek
192
Q: What gap in the market was Maptek trying to exploit
provide training, direct technical support, and consultancy
when it was formed?
services. We work with practically all the major mining
A: The company was formed by an Australian geologist
operators in Mexico, including Yamana Gold, Goldcorp,
who sought to provide technical solutions that were not
Endeavour Silver, Industrias Peñoles, Fresnillo, Coeur
available at the time, such as drill visualization software
Mining, Nyrstar, Capstone Gold, Holcim, Minera Frisco,
and mine planning solutions, to mining companies. Maptek
First Majestic Silver, and Alamos Gold. We also have clients
continued to develop new technology based on the
in El Salvador, Costa Rica, the Dominican Republic, and
geological and engineering challenges facing the mining
other countries throughout the Caribbean region.
industry, and this allowed the company to rapidly expand its client base in a short period of time. Today, we focus
Q: What are the main advantages and disadvantages for
on developing and delivering innovative technological
foreign companies in the Mexican mining industry?
solutions for mining operators all over the world. One
A: One of the most significant challenges for foreign
of our main activities is software development, and we
enterprises who expand their businesses into Mexico is the
have various programs that offer digital mine planning,
need to acclimatize to the unique culture of doing business
geology, and topography solutions. However, in order to
in the country, which is different to other countries in the
maximize the potential of our clients’ businesses we also
region. Moreover, the mining sector in Mexico takes a
| VIEW FROM THE TOP
MAPPING STRATEGIES FOR OPERATORS HUGO ARROYO Branch Manager Mexico of Datamine
Q: Why is Mexico is a strategic country for Datamine?
experienced other downturns, and we have learnt that
A: Datamine is a well-recognized leader in specialized
through helping our customers during these periods we
software for the mining industry. We develop software
gain trust, confidence, and develop strong relationships. The
focused on various areas across the lifecycle of a mine.
low price environment is unfortunate, but we have to act
We have therefore developed different solutions to help
accordingly. We focus on improving our clients’ operations
customers globally. Mexico is a strategic market for the
by helping them in optimization, and we have a dedicated
company due to its position in the global mining industry
team of professional consultants in areas like planning and
and in the Americas. Datamine was recently acquired
geology that can help with operations optimization.
by Constellation Software and our parent company has an extremely focused strategy in the mining market. It is
Q: How has the recent acquisition by Constellation
through years of expertise and industry orientation that
improved Datamine’s position within the mining industry?
Datamine is recognized as a leader in software development
A: Constellation, as a global leader in software development,
for the mining industry. We are a strong company that has
is focusing on building strong leaders in the software market
conservative approach when it comes to new technology,
rescue shaft and therefore safely transport the miners
as it is expensive to invest in the development of new
back to the surface. The success of the operation was
products. However, the industry in Mexico benefits from
significant, not just for Maptek but for all the companies
the large presence of foreign investors, primarily from
involved in the rescue and for the industry as a whole. It
Canada, so there is an encouraging amount of capital
reminded everyone of the perils of mining but also of the
flow to complement the vast potential of the country’s
power of technology.
mineral reserves. I think the government should do more to encourage foreign investment because if the mining
Q: How have the market gyrations affected Maptek’s
industry can develop, it will bring a wealth of new jobs
business and the demand for its products, and how will
into the country as well as boost other sectors connected
the company combat this over the next 18 months?
to mining like construction and electronics. Moreover,
A: It has had a profound impact because investment
mining brings a great deal of benefits to communities
budgets have dropped significantly throughout the
who live in the regions surrounding mining operations. In
sector, and we have therefore found more conservatism
Mexico, however, the situation is different and the recent
when it comes to adopting new technologies. However,
restrictions on investment and tax increases, coupled
our software provides cost cutting solutions to its users,
with the low prices for precious metals are making many
which can be beneficial not only now when the market
investors withdraw their investments in favor of other
is depressed but also when the market picks up. When
markets that are more favorable for doing business.
the market is in a downturn, we work closely with our clients on a day-to-day basis in order to demonstrate the
Q: What role did Maptek play in the rescue of the 33
benefits our products can make to their business. We
miners trapped inside the mine in Chile?
are focused on continuing to build and expand our client
A: Maptek participated actively in the rescue process,
base in Mexico, while working closely with our existing
both to determine precisely in which part of the mine the
customers in order to emerge from this difficult period
miners were trapped, and in the process of designing the
together. We also plan to develop new technology to help
rescue shaft. We used our Vulcan product to develop a
mine production plans, and we have recently released
three dimensional mine because there was no accurate
the latest version of Vulcan, called Vulcan 10, which will
representation of the underground topography of the
allow our clients to operate all of our programs from one
mine. This allowed us to plan the target location for the
central base.
through a strong technical commitment. Therefore, our
Q: What successful project has Datamine been involved
clients are able to recognize our solutions, and as leaders
in, and what problems did it solve for the client?
in the industry we can identify the commitment by recent
A: We have developed different solutions for our clients
acquisitions such as Alford Mining Systems (AMS) in February
across a wide range of targets including resources estimation,
this year, which is well known for developing mining-specific
mine planning, and geology solutions. The Core Profiler is a
tools like the AMS Stope Optimizer (MSO).
solution developed by CSIRO, which is one of our business partners. The Core Profiler is a software-based logging
Q: How receptive have Mexican operators been with your
tool that builds a scaled continuous image of drill core
services given the fact the market is largely reluctant to
from handheld core tray or core split photographs, solving
adopt new technology?
issues like inconsistencies in visual observations between
A: Mining contractors are becoming increasingly interested in
observers or photographic records. We have two solutions
acquiring our software because the technology allows them
that are highly demanded in Mexico, and these are oriented
to communicate efficiently with their clients. We prepare
to supporting operations in resource estimation and mine
our clients through short training courses and we are also
planning. Our products covering these areas are our Studio
working with universities. We understand the importance of
5D Planner and the Studio RM suites, which help to facilitate
creating more awareness and interest in academia in regards
these tasks in an easier and more reliable way. We do not
to mining in Mexico. In Zacatecas, we have been providing
keep client data or have access to their information. The
courses to geology and mining engineering students in the
new Datamine Summit technology is a cloud-based tool we
local university and teaching them how to use Datamine.
have developed to create, store, analyze, and share mining
Rather than conducting a lecture, we bring product licenses
technical data. Data is protected by encryption during
and allow the students to interact with the systems to create
transfer, and data centers are physically and electronically
a more comprehensive learning experience.
secured to the highest standards.
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| INSIGHT
FOCUS ON VIRTUAL FORMWORK TECHNOLOGY and scaffolding. The company’s competence center works for all Doka operations around the world from Russia
JORGE VERA
and South Africa to Chile, Peru, Australia, and Mexico.
Director General of Doka
The first step is the consulting stage and this entails the
México
risk evaluation, technical viability analysis, and proposal of formwork solutions. The second and third steps are engineering and safety measures, which includes
194
With over 12 percent of the market share in Mexico,
the planning of cycles, structural analysis, safety and
Doka México is currently the largest formworks system
inspection systems, and list of materials. The fourth step is
provider in the country. The infrastructure market has
the formwork solutions that Doka provides. The remaining
become a pillar in the company’s growth strategy since
two pillars are logistics and on-the-ground services, and
its technology is far better suited to the demands of
these are crucial since they smooth out the implementation
this particular industry. Nevertheless, Doka provides
process on site. “Doka is regulated by strong specifications
innovative, unique solutions for the mining industry, oil
from Europe and this means we cannot be lax in our safety
and gas, and largescale developments. “Our equipment is
standards and policy procedures,” Vera indicates. “At
state of the art and it is not a cheap system to acquire
Doka, we never tropicalize our procedures, especially in
since it can be difficult to import from Europe,” concedes
terms of safety.”
Jorge Vera, Director General of Doka México. However, Doka attributes its added value to the detailed design of the projects and its engineering department that offers integrated services. “Our engineers in Mexico are highly skilled and our hub offers services to all markets in Latin America and Europe as well,” says Vera. “In Austria, we have a competence center and it is a specially made division that focuses solely on the mining sector.” Vera admits that underground mining can be a difficult
“Doka is regulated by strong specifications from Europe and this means we cannot be lax in our safety standards and policy procedures”
area in which to fully integrate because the technology
Jorge Vera,
is expensive. Doka has a tunnel formwork solution that is
Director General of Doka México
hydraulic and automatized, and this means it can move easily in the constricted tunnels of an underground pit.
Doka has developed a solution called Concremote that
For tunnels built with the mining-bored underground
measures in real time the strength of the concrete in an effort
construction method the required cavity is created by
to help improve the implementation of formworks, permitting
conventional
mechanical
more accurate management of the forming and cost in place
work. After ensuring the success of several safeguards
(CIP) concrete operations. The system makes it possible to
in the process such as shotcrete and watertightness, the
measure concrete strength on the site by using the weighted
tunnel’s inner shell is completed using various options.
maturity method to provide reliable and standard-compliant
Mines in Mexico continue to use traditional formworks for
information on the strength development of the concrete.
underground tunneling. However, Vera is beginning to see
Influenced by Big Data and IoT trends, this system also has
a change of mindset across the whole value chain from
a mobile web application that allows users to access data
investors and contractors to subcontractors. “Normally
on the development of their concrete from anywhere, on
these players focus on cash flow but now they are
notebooks, tablets, and even smartphones. The implications
beginning to evaluate the cost/benefit of our products,”
of this solution is that it makes the development process
he shares. “The area where Doka has found its foothold is
much faster, and the sensors on the slabs mean that the
in shoring systems for open pit operations.”
users can remove the scaffolding and molds, and then move
or
continuously
stabilized
on to the next area. With an online platform called myDoka Doka’s 360° Performance Cycle is made up of six main
that controls project data, the client is able to control its
pillars, and the idea behind it is to provide the sector an
inventory and have an encompassing view of the planning
added-value package that goes beyond renting formwork
and construction of the project.
| VIEW FROM THE TOP
HERALDING THE ENTRY OF THE DIGITAL ERA JOAQUÍN PATRÓN Director General of Ankla
Q: What role has satellite communications played in
and we are currently the only Spanish speaking partner
removed site evolution?
servicing Mexico and Latin America. We have approached
A: The mining industry spearheads exploration and
the sector, and it is interested in this technology that
operations in areas so remote that no towns can be seen
serves on a local and global platform and where one
for miles and communication is critical since the world’s
device can communicate and thousands can receive. This
economy now revolves around the flow of information. Data
solution opens a new communication platform where
must be fast and accurate and the sole solution available
transferring information from a remote site to corporate
to create this bridge is satellite technology, in fact not
headquarters located in Canada, Mexico, US, or elsewhere
a lot of hardware is needed, except for the required on-
is made possible on the same channel.
site equipment. Ankla is a company that offers in depth experience in the sector thanks to the strategic alliances it
Q: How do you ensure a strong communication network
has formed in the industry. We have made these strategic
in order to help the smooth running of systems in the
alliances with companies that offer key solutions to mining
mines?
players, and by combining this with our expertise, we can
A: The trend of Big Data is influencing all industries and the
offer solutions that fit a mining operator’s budget. Satellite
mining sector has moved from a macro perspective to tiny
communication is expensive and companies are weary of
increments of information. The thirst for information means
being overrun by the costs, so bearing this in mind we have
more transceivers and bandwidth, and the more devices are
cost efficient solutions. This is an economy of information,
implemented the more complex the process, and human
and the flow has to be fast since minutes and seconds are
error will increase. A company will then reach point of
precious especially during critical situations like accidents.
requiring more bandwidth and communication flows, and
In these situations, we need emergency response notified as
this is where we step in to help streamline communication
soon as possible through secure channels of communication
and define the information it wants to transmit. Industries
that cannot be compromised and will not fail, and satellite is
are aiming to become more efficient in their operations,
one of the solutions.
and Ankla helps them reach the desired level of perfection. It is important to streamline communication in order to
Q: What are the benefits of being a partner to Iridium
transmit the crucial information ranging from production
in Mexico, and how will the solutions you provide to the
to efficiency. Big Data is today and we are the bridge that
mining industry make huge strides in efficiency?
enables the flow of information.
A: As an Iridium partner we are able to offer truly global solutions. It doesn’t matter if the production site is in northern Mexico, the regional office in Mexico City and the worldwide HQ in another country, because everyone can be connected in a highly reliable and private network that ensures quality of communications. We are bringing new technology and new ways of communication, an example would be the Extreme Iridium Push to Talk (PTT), which is a radio based solution that uses satellite technology. Radio is a standard way of communicating in industrial settings and it is normally restricted to a geographic area that does not go beyond 2km, and from that point onwards infrastructure is required, and this is basically non-existent in the mining sector. Our solution goes one step further,
195
I INSIGHT
TURNKEY PLASTIC PIPING SERVICES Goldcorp’s Peñasquito mine, the largest open pit mine in the country that contains gold, silver, lead, and zinc, GF supplied HDPE piping solutions and manifolds. Christof Blumer Managing Director of Georg Fischer (GF)
Oscar Puente National Sales Manager of Georg Fischer (GF)
“We always look to add value during the specification process, including custom fabrication capabilities,” he states. “At GF Piping Systems our focus is on specifying and delivering a complete solution.” With more than 30
196
As a global company working in the safe transport of
R&D centers around the globe, the company is aiming
liquids and gases, GF sees a plethora of opportunities in
to produce standard products that can be used in many
the Mexican mining sector, according to the company’s
different applications across different industries. When
Managing Director Christof Blumer. “GF Plastic Piping
talking to engineering companies,it is important to firstly
Systems have been relied on for decades to convey media,
try to understand what the customers are trying to
whether it is water, slurries, or hazardous chemicals used
accomplish, according to Blumer, and the company can
in mineral processing,” he argues. “Wherever plastic
then help them make the most appropriate choices for
piping systems are a suitable material of construction
the piping material. “A solid example is a mine in Chile,
replacing traditional metal piping, we see opportunities,
where it was necessary to measure the amount of water
making Mexican mining an excellent fit for our company.”
that ran through the pipes,” Blumer explains. “One option
GF is adept at identifying the challenges end users face
would have been to simply sell the instrument but we
and helping them to design non-corrosive fluid handling
went beyond and assembled the sensor, the instrument,
solutions to help increase operator productivity, and to
and the saddle around the pipe in order to simplify and
save long term costs.
accelerate the installation process.”
Blumer identifies the main opportunities existing in
For Blumer, the most significant challenge in assembling
water distribution, specifically in pressure and drainage,
and providing these solutions is usually in logistics and
chemical dosing and distribution, compressed air, safety
pre-assembly of piping systems for remote locations. As
showers and eyewash stations, power stations, and water
a company that works with the end users and organizes
treatment. Corrosion, he says, is no longer a problem
transportation from the manufacturing facility to the
when choosing the appropriate GF piping and fluid
assembly location, and finally to the point of installation,
control system. “We have developed different plastic
there are various factors that must be considered. “Our
materials depending on the chemicals to be conveyed,
production plants, our sales and support centers, and
the pressure, and the temperature,” he comments. “For
our GF distributors all play an important role in the
mining applications, we have eight different plastic
supply chain to satisfy customer needs,” he comments.
piping solutions that cover the different needs and
“There are numerous reputable competitors in our
characteristics of each mine.” GF’s National Sales
industry, and each one of them is specialized in a part of
Manager Oscar Puente discusses a solution the company
the piping system.”
is currently offering in Zacatecas, called Double-See. “This is a double containment system, a pipe within a
“Quality plays an important part in the construction
pipe, designed for cyanide transportation,” he explains.
segment and in the mining industry, so our customers are
“If, during the conveyance of the chemical there is a leak
acutely aware of the risks involved in buying or obtaining
the second pipe will contain it, helping the company
the cheapest product,” Puente maintains. “Selling into
firstly by avoiding extra costs and providing safety
this market is extremely demanding and the process is
to the employees, and secondly by complying with
complicated due to its length.” Ultimately, Blumer believes
environmental protection laws.”
the differentiating factor provided by GF lies in the long term cost and benefit to the end user or operator. “We
During the sales process, GF places a great deal of
distance ourselves from a price driven business model
importance on a significant amount of time spent with
since our focus is quality and added value,” he explains.
the engineering companies. “If specifying engineers are
“Our direct work in many different market segments
knowledgeable about our solutions, they will suggest
gives us the opportunity to sell quality, reliability, safety,
them when a mine is being built,” Blumer clarifies. For
and environmental confidence.”
| INSIGHT
CONSTRUCTION COMPANY CARVES OUT MINING NICHE As one of the top 10 most important construction companies in the state of Sonora, Gluyas Construcciones has carved a niche in the mining sector since this particular
MARCOS GLUYAS
industry demands highly specialized infrastructure. By
Director General of Gluyas
using the expertise it has acquired in the construction
Construcciones
sector, it is able to supply its mining clients with high quality,
efficient,
sustainable
construction
services,
according to the company’s Director General, Marcos
machinery almost every three years as well as carrying
Gluyas. “This would not be possible without the support of
out regular maintenance, and this creates a more complex
financial institutions since we need to invest in specialized
supply chain. “It is important to gain the trust of financial
equipment and the infrastructure that is being erected is
institutions since miners have a clear way of working
highly complex,” he concedes. Gluyas Construcciones has
and there are no significant advanced payments, which
been involved in large infrastructure projects ranging from
makes us rely on these entities to acquire the necessary
roads and bridges to complex urban developments and
machinery,” Gluyas shares. “The contracts have to be well
this has helped the company to offer unique solutions in
defined in terms of the amount of equipment necessary
the mining industry.
for the project and the payments can be dealt with later on.” For Gluyas, a quick response is the most critical
The
company’s
solutions
are
geared
toward
site
component in the mining industry and this ensures any
preparation and often Gluyas Construcciones acts as the
company a place in the mining supply chain. Technology
first contractor that enters the site during the construction
and automation has been embraced in the mining industry
stage. Its mandate is to make way for other contractors
and the construction sector is no exception. “We are
by opening the areas where the large equipment will be
now influenced by new applications and trends like
installed. “We carry out excavations of great lengths and
project management in order to make our construction
depths, and in order to prepare the sites to the best of our
processes more efficient,” Gluyas explains. “While the
ability, we continuously replace our equipment,” Gluyas
equipment advances in leaps and bounds and becomes
comments. In order to deliver large volumes, the company
more sophisticated, it makes the response time more
requires large equipment, and as providers of solutions,
complicated because if there is a failure in the machines
each project is considered on an individual basis. “Last
it can be difficult to obtain the needed technical support.”
year in one project for Buenavista del Cobre alone, we moved 35 million m3 of material,” Gluyas boasts. “We offer
Gluyas Construcciones works according to volume and
excavation of large volumes, road works, site preparation,
sometimes this fluctuates in accordance to the amount of
and rock crushing.” According to him, players in the
resources the miner has. Moreover, the company navigates
construction industry have been able to find a safe haven
two sectors, the public and the private, and with this
in the mining industry because public sector projects and
experience, it has come to see great distinctions between
bids are extremely limited within infrastructure projects.
the two. “The private sector is always under time pressure
“Public developments are scarce and the budgets are even
and demands a fast response time,” Gluyas explains. “On
more limited, but the mining sector is bound to generate
the other hand, the public sector does not put so much
more projects of greater volume,” he predicts. Gluyas
emphasis on time and projects take longer to complete.”
Construcciones relies on other suppliers that specialize in
In the previous administration the public infrastructure
other branches in order to generate a complete solution,
was incredibly restricted to a few players, according to
and as a result, the supply chain is strengthened.
Gluyas, which was the reason for the company’s decision to diversify into the mining sector. “Over the years, we
Gluyas explains that the supply chain of top equipment
have seen that no matter how isolated and remote the
providers is extremely limited in Mexico, and the proximity
mines are located, there is always an economic and
to the US is not enough to bridge this gap. The country
social prosperity,” he comments. “Mines pave the way to
largely relies on large volumes of machinery and he
new infrastructure and the construction industry battles
finds that the aftermarket and service support of some
with obtaining financing and sourcing equipment and
suppliers is negligible. In order to maintain quality and
materials in order to become a trustworthy supplier of
safety standards, Gluyas Construcciones replaces its
top mining players.”
197
198
| INSIGHT
LOCAL KNOWLEDGE BOOSTS SMOOTH LOGISTICS HANDLING Transporting precious minerals across international borders is a costly process that is fraught with challenges. A swathe of logistical issues, customs laws, and even sea piracy
RUDOLF HESS
concerns can all delay freight arrival and have potentially
President & CEO
disastrous impacts on productivity and profit margins. RH
of RH Shipping
Shipping manages to transport cargo over land, air, and sea with minimal fuss thanks to its subjective approach and attention to detail. “We can face risks on every project
are threatened by criminal organizations. Hess explains
so it is important to have a strong and defined project
how the company always works hand in hand with local
management team on each venture,” explains Rudolf Hess,
and international law enforcement agencies to reduce
the company’s President and CEO. “We have a specialized
these risks as much as possible. “Communication is of
project division that analyzes every project individually,
utmost importance when it comes to security threats,”
taking into consideration all the specific customer
he stresses. “These issues are factored into the budget
requirements. Once we have fully assessed the project, we
of every project because the success of our business
put together the project plan and begin searching for the
depends on the trust our clients have in our ability to
necessary equipment, engineers, and vendors.”
transport their cargo.”
With mine sites often found in remote, deserted areas of
“Our surveyors and field supervisors
the country building infrastructure is complicated and essential services like water, transport, and energy are often lacking as a result. In the effort to overcome such challenges, Hess stresses the importance of recruiting local knowledge, which he says can hold the key to ensuring smooth logistical operations. “Mine sites are usually located in areas far removed from urban centers,” he clarifies. “The access roads are complicated, mostly unpaved, and steep, posing a significant risk to heavy
undergo stringent assessments so that we can be sure they understand the local issues pertaining to every project” Rudolf Hess, President & CEO of RH Shipping
loaded trailers carrying goods or equipment. Severe weather conditions frequently add to this risk. Therefore,
In recent years low commodity prices have added to
we recruit vendors from the local area who have complete
the hurdles facing RH Shipping, with mining companies
knowledge of the conditions particular to that region.”
turning their focus away from external expansion and toward the consolidation of internal processes. Thanks
This local touch is invaluable when dealing with
to the company’s extensive global reach, however, it
communities surrounding mine sites, which often add
has managed to mitigate the effects of the downturn.
to logistical complications by opposing the influence
In 20 years RH Shipping has built a presence in over 60
of mining on their towns, villages, and ecosystems.
countries and in a variety of sectors, including oil and gas,
Although RH Shipping and other service providers do
aerospace, and healthcare. According to Hess, this broad
not have to deal with issues regarding land ownership
and diverse portfolio has helped the company achieve
rights unlike many mine operators, it is not infrequent to
sustained long-term growth. “RH Shipping is not focused
run into protestors blocking access roads in and around
on one single sector,” says Hess. “We go where the current
project sites. “When transporting cargo, demonstrations
market situation leads, we grow with our customers, and
can cause delays and protestors even vandalize our
we follow their strengths.” That said, mining has become a
freight on occasion,” notes Hess. “Our surveyors and
crucial facet of the company’s business, and with the rally
field supervisors undergo stringent assessments so
in gold and silver prices in 1H16 Hess is understandably
that we can be sure they understand the local issues
bullish about the sector’s future prospects. “The mining
pertaining to every project.” Organized crime concerns
industry has become a vitally important part of our
are also at the forefront of RH Shipping’s business
business,” he concludes. “We already offer a wide range of
strategy at all times. Pirates can still be found lurking in
logistics services within the sector and we are looking to
international waters, and in mines in Mexico in particular
increase our volume every year.”
199
OPEN PIT MINING
9
Open pit mines are an imposing sight, often hollowed out among vast expanses of desert or woodland, like a formidable crater forged into the sediment to form a subterranean village. Some of the largest projects in Mexico are formed by open pit mines, by far the favorite option for the country’s operators due to low costs and fewer safety risks than underground operations. This type of mining is preferred for extracting gold, silver, and uranium. Although open pit mining has a number of advantages, such as shorter time to production, normally the mines have a shorter lifespan, on average four to five years, after which it becomes necessary to resort to underground methods to extract larger orebodies. Heap leaching has also contributed to the extraction of a large tonnage of low-grade deposits in Mexico.
This chapter will explore the roles of the players across the value chain of open pit mining, from equipment providers, to manufacturers, to logistics companies. A complete overview includes insights into the impact of the market conditions across the supply chain and the strategies to provide the greatest possible ROI. These industry players discuss the ongoing struggle between quality and price and explain their value propositions that enable mining players to get the most out of their services.
201
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STAB
TIGHTEN
| CHAPTER 9: OPEN PIT MINING
204
INSIGHT: Carlos Caicedo, Atlas Copco
204
VIEW FROM THE TOP: Gerardo Angulo, Timken
206
INSIGHT: Jorge Escamilla, RYASA
207
VIEW FROM THE TOP: Jaime Rodríguez, TEMESA
209
INSIGHT: Andrew Auns, Williams Scotsman
210
VIEW FROM THE TOP: Erik Rorem, Geobrugg North America
211
VIEW FROM THE TOP: Agustín Monzón, GGD Bandas
212
TECHNOLOGY SPOTLIGHT: Flexibility and Versatility in Modular Building
214
VIEW FROM THE TOP: Raúl Ortegon, Maquinaria Rivero
214
INSIGHT: Luis Martínez, ACE Drilling Supplies
216
VIEW FROM THE TOP: Mauricio de Silva, Concrete Canvas
217
VIEW FROM THE TOP: Ricardo Román, Grupo Carvel
219
INSIGHT: Eduardo Bennett, Komatsu
203
| INSIGHT
IMPORTANCE OF CONTINUED INNOVATION OF TECHNOLOGIES When customers think of Atlas Copco, the product that immediately springs to mind is air compressors, according to Caicedo. However, in the last few years the mining industry
CARLOS CAICEDO
has come to know the company for its drilling products.
Managing Director of Atlas
“Drills are key to productivity in the mining industry and
Copco
our products, like the COP rock drills, are known for delivering the best results,” he boasts. As part of its new Green Line, Atlas Copco also offers an electric loader, and a
204
With a long history of innovation, Atlas Copco is one of
few mines are already seeing results from this technology.
the leaders in product development in the mining industry.
The product can provide savings in fuel, ventilation, and
After developing the first hydraulic rock drill in the 1970s,
reduce CO2 emissions but the drawback is that mines have
the company pioneered the “Swedish method”, consisting
to adapt or create new infrastructure to be able to power
of a light weight rock drill with a pneumatic pusher leg.
the loaders. Atlas Copco is currently developing battery-
Atlas Copco’s ambitions did not stop there. It has a plan to
operated electrical loaders, which means that modification
create a full line of products for autonomous mines by 2020.
of the mine will no longer be a requirement.
Many customers in Mexico are using remote controllers developed by the company for some of their applications
The challenges that underground mining presents are
in order to increase safety and productivity. Automation,
different to open pit developments. For the latter, it is
autonomous machines, remote monitoring, and continuous
easier to transmit wireless Wi-Fi signals through the air
mining equipment for hard rock are in demand across
and receive satellite positioning information. “Regarding
the industry. “We have rigs working in many places with
underground mining, our Rig Control System (RCS) uses
different degrees of development,” says Carlos Caicedo,
the same technological platform for the equipment so most
Managing Director of Atlas Copco.
of our rigs have automatic functions that can be integrated
| VIEW FROM THE TOP
FINDING EFFICIENCIES FOR MINING OPERATORS GERARDO ANGULO Director General of Timken Q: What new products has Timken introduced into Mexico
12 technology and engineering centers that are located
that enabled them to hold such an important position in
around the world where we work to find solutions that
the industry?
help improve the reliability and performance of equipment
A:
Timken
provides
customers
with
durable,
high
manufacturers.
performance products. We are interested in providing our clients with a variety of products, including all
Q: How do you support m ine operators with maintenance
bearing types, the most complete housed unit line, chain,
and adequate training for your equipment?
couplings, gears, and other power transmission solutions.
A: We spend numerous hours working with the heads of each
Our engineers can create different types of seals that can
department and schedule training sessions with operations,
protect our bearings from a larger variety of contaminants.
maintenance, and any other work group in the mine. We
We also offer different types of coatings for different
also work very closely with our distributors, preparing them
industries. We analyze various markets and working
for any problem that they could come in contact with while
conditions in order to create specialized products that are
working with our equipment. It is crucial to know the product
able to adapt to their duties and environment. We have
inside out so if a problem arises it can be fixed as quickly as
for a fully automated operation,” Caicedo explains. “One of
automatize the systems.” The process of exchanging
the difficulties would be to transmit the information in the
information is highly important to the mining industry and
mine through kilometers of tunnels then to interface our
a compliment to the automatization of products is found
machines to the mine system. To address this issue we have
in Atlas Copco monitoring systems. These monitoring
also developed a project called Mobile Machine Integration
systems will be easy to use, and receiving the information
alongside ABB.”
may be as simple as plugging in a USB drive to transfer the data or receiving real-time information via Wi-Fi. Caicedo
Another example of a recently developed product is the
expects these systems to benefit mining companies by
EASER, a versatile raise boring machine that Caicedo
allowing them to monitor, control, and optimize production,
expects to radically increase productivity in several
and ultimately increase efficiency.
operations, particularly in Mexico. One of the benefits of the EASER is the dramatic time reduction taken for
According to Caicedo, the company’s main differentiator
slot raises in production drilling, and the technology is
is its focus on maintaining a low operational cost when
extremely important for production in deep holes as well
designing its products. “Whenever we develop a new
as in ventilation shafts. “Current raise boring technology is
product its operational costs must be optimized to offer the
oversized, difficult to move inside the mine, and involves a
client the greatest ROI,” he shares. “We analyze costs related
lengthy setup process," shares Caicedo. "With the EASER, it
to maintenance, production, consumables, and capital, along
will be much easier to mobilize inside the mine and quickly
with excellent customer support to ensure the functionality
create slot raises. After analyzing the productivity of the
of the machine.” The company has been servicing the
equipment and witnessing the quick return companies will
market for more than 140 years and it is known as one of
recognize the benefits of this investment.”
the leaders in innovation and sustainability. In Mexico, Atlas Copco has been established since 1952 and has placed an
The company is developing new products based on a
emphasis on working with customers to integrate feedback
control system that can be adapted to work with multiple
into innovation and ultimately increase productivity. “We
products. “For several years, we have used our RCS with
have recently concluded the building of our new facilities in
CAN-Bus technology,” explains Caicedo. “This technology
Zacatecas to support the mining market with some of the
has allowed us to further integrate our products and
most advanced technology we offer,” Caicedo concludes.
possible without impacting the production time of the pit.
Q: What are the opportunities that Timken has spotted in
Nowadays, most mining companies have their suppliers with
the mining industry?
them in the mines, which work with our suppliers to provide
A: Since acquiring Torrington, we offer a diverse portfolio
them with correct solutions.
of bearing and related products and have become even stronger in the market, which increases our presence with
We are always interested in our customers’ areas of
our end users. The challenge is to communicate all of this
opportunity. We like to know in which processes they are
to our clients but we have reached a point where our clients
having problems or where they are having bottlenecks.
are familiar with the Timken brand and the quality of all of
We like to work together to figure out a solution. If a
our products. The biggest challenge that Timken has right
customer looks to us and tells us they are changing
now is the economy. However, this also offers an opportunity
a part too often, we investigate the causes and the
to help our customers save money and increase uptime
problem to come up with a solution. We recently saw
with the products and solutions that we offer. We know the
an opportunity in housed units in the market, and came
importance of maintenance times and our innovations focus
up with the split-housing units called “Revolvo”. Instead
on how we can help our customers save money in low cycles.
of taking hours to replace a housed unit, it now takes only 15-20 minutes. We have been successful with our
Q: What position does Timken aim to hold within the
Solid Block Units and Couplings. In the mining market,
mining industry?
couplings need lubrication and the whole part must
A: We want to be the first choice not only for our distributors
constantly be replaced. We offer a solution that works
but also for our end users. We want our customers to link our
as an insert, and that way it would only be necessary
distributors and us together as one supplier. Our goal is that
to replace one component and not the whole thing. The
whenever our customers have a problem, they will turn to us
savings that a company would have in this product are
for a solution. We strive to solve the problems in each sector
70-80 percent.
to make it easier for everybody and become a one stop shop.
205
| INSIGHT
ACQUISITIONS AND EXPANSIONS FOR EQUIPMENT PROVIDER products because they are aware of the strength of its distribution chain.
JORGE ESCAMILLA Operations Director, North
In Mexico, Meusnier is an ISO 9001:2008 certified
Region of RYASA
manufacturer and rebuilder of large-size gear reducers and components used on steel and sugar mills, as well as mines. “The manufacturer had the state of the art
Although
206
RYASA’s
initials
stand
for
“bearings
and
technology and engineering skills to produce, and
accessories” in Spanish, today its scope goes far beyond
RYASA had the sales force, contacts, and expertise to
bearings to cover all kinds of power transmission
distribute their equipment throughout the country, so the
components, including belts, chains, sprockets, motors,
merger made sense for both parties,” explains Escamilla.
and gear reducers to companies throughout the mining
“RYASA acquired 50 percent of Meusnier, and so far this
industry and other sectors. The company has expanded to
combination has brought success not only to the two
own 50 branches across the country and has evolved into
companies but also to the mining industry in Mexico in
a holding group of power transmission-related companies,
general, which now has access to this vital technology that
boosted by the 2012 merger with gearbox manufacturer
can significantly boost productivity and efficiency.” Pinion
Meusnier and the 2014 merger with Pirco, which specializes
shafts, produced by Meusnier and used in most gear train
in building industrial equipment such as conveyors and
assemblies, have seen increasing demand with RYASA
travelling cranes. The company’s Operations Director,
clients in the mining industry due to the quality levels
North Region, Jorge Escamilla, believes that the key to
and the modern equipment in which they are now used,
RYASA’s success across all the industries in which it works
according to Escamilla.
is diversification and turnkey services. He shares that the company will be expanding into Costa “We work in cement, glass, and steel-making as well as
Rica in the next few months, and it has plans to be present
mining, and the fact that we provide on-site maintenance
in Panama before year end. “These two countries are
and technical support to all our users in the form of
attractive to RYASA because CEMEX, for whom we supply
consignment inventories is one of our main differentiators,”
a variety of products in Mexico, has production plants
he explains. "Another crucial factor to our success is the
in the locations, so we will be supplying there as well,”
diversification of our clients, which helps us minimize our
Escamilla reveals. “We aim to open branches in these two
risk.” The company offers a wide variety of products, and
countries before 2017. In the next few years, it will also be
given its nationwide branch network, Escamilla shares
essential to consolidate and streamline our business, as it
that companies are seeking RYASA out to distribute their
has grown very rapidly in recent years.”
| VIEW FROM THE TOP
DANGEROUS WASTE DISPOSAL AVOIDS ACCIDENTS JAIME RODRÍGUEZ Director General of Técnica Especializada de Mantenimiento Ecológico (TEMESA)
Q: What was the gap in the market the company was
evaluating projects in the mining sector to separate
trying to fill when it was created?
hydraulic oil from used oil with the aim of saving costs
A: In October 1997 the National Institute of Ecology
for the client and for TEMESA. Used black oil mixed with
requested that PEMEX Refining implement cleaner practices
diesel and ammonium nitrate for blasts can generate up to
in its offices and storage areas through its service station
40 percent fuel savings, and operational cost reductions.
maintenance program. In 2000, TEMESA began offering its
To achieve a homogenous concoction our process installs
collection, transport, storage, and final disposal of dangerous
a metering unit in the mixing tank before the installation of
waste service, creating cost-free added value. In 2011 the
the subsequent tanks.
company was certified by Clean Industry, becoming the first storage center in the state to garner this award. We currently
Q:
have a presence across Chihuahua, Coahuila, Sonora,
competitors?
How
does
TEMESA
differentiate
itself
from
Durango, and Sinaloa. The company’s growth strategies in
A: TEMESA is known as a company working toward a
the last 20 years have been modified according to trends
common good and striving for sustainable development
emerging in our market and the Mexican economy but our
in an environment free of pollution. Simultaneously, we
main principles have remained the same. We aim to comply
maintain our quality standards in services and client
with transparency regulations for the handling of dangerous
relationships. The supply of correctly labeled containers
wastes and constantly train personnel in waste management.
and the cleaning of storage areas is carried out with the
TEMESA became a service provider in mining in 2006 and
goal of satisfying and facilitating the best internal control
we now represent 30 percent of total collected dangerous
of client processes. TEMESA has provided support in
wastewater. Within the sector, TEMESA has worked with all
separating solid urban waste generated in the community
of the major mining companies, including Agnico Eagle on
and mines. Moreover, the company offers clients training
the Tajo Mascota project, First Majestic Silver on La Parrilla,
organized by the human resources department with
and Goldcorp on Peñasquito.
several themes, including management of dangerous waste, leak control, and health and safety.
Q: What are the main challenges mine operators face regarding waste disposal, and how does TEMESA help
Q: What environmental progress has been made in recent
them overcome these issues?
years, and what still needs to be done?
A: TEMESA urges its clients to dispose of residue in the most
A: TEMESA is involved in environmental progress through
practical and sensible way. One of the internal problems
the formulation of solid fuel created by mixing plastics,
is soil contamination and the combination of dangerous
textiles, oily muds, and cardboard. The residue, now used
residues with clean residues. TEMESA provides training
as an alternative fuel, is fed into cement ovens where it
in a variety of subjects, including spill management and
is destroyed without causing damage to the environment.
residue management for mine personnel. These courses are
TEMESA
free and the number of participants is unlimited. TEMESA
groups, and has made a commitment to receive solids
supports clients with the supply of storage tanks for used
contaminated with hydrocarbons and to provide low cost
oils and collection trucks equipped with box and ramp
processing and disposal. This allows the generators to
for collections at different generation points in the mine.
share the benefits and reduce costs with a commitment
We also oversee the condition of temporary storage areas
to preserve quality standards and improve services. This
for waste and monitor the state of the help signs, floor
system contributes to conservation of non-renewable
epoxy sealants, and land installations. In administrative
energy resources, the elimination of risk for the generator
and storage terms we implement a personalized collection
by guaranteeing the disposal of all residues, and the
program to improve service logistics. We are currently
conversion of industrial residues into useful byproducts.
has
concluded
negotiations
with
cement
207
CABLE TELE-FONIKA TIPO GGC JUMBOFLEX: CUBIERTA DE POLIURETANO TPU Y CHAQUETA RELUCIENTE El cable eléctrico Tele-Fonika tipo GGC JUMBOFLEX es el más avanzado en la industria minera con la combinación perfecta de resistencia y visibilidad para mayor duración y seguridad en interior mina.
La cubierta amarilla de poliuretano contiene un material RELUCIENTE extruido en el 100% de la chaqueta del cable que permite su visibilidad aun en ambientes totalmente oscuros y que permite al operador del equipo su 208 continua visibilidad para evitar su daño. El cable reluce al contacto con cualquier fuente de luz, además conserva por milisegundos la luz en la chaqueta que permite que sea visible antes y después de su ubicación. El cable Tele-Fonika jumboflex de poliuretano reluciente es visible aún si es cubierto por polvo y lodos ya que la cubierta amarilla de poliuretano contiene el material reluciente en el 100% de la misma.
estiramientos, enrollamientos y por su resistencia no genera cocas. Los cables de goma estándar que si están expuestos a todos esos elementos tienen un plazo de reposición muy rápido generando altos costos de reemplazo en tiempos muy cortos. El Cable de poliuretano reluciente tiene un periodo de reemplazo más largo que cualquier cable de goma. Contrario a los que se piensa el poliuretano es un material flexible y se fabrica en la configuración de cubierta integral tipo grado minero que la otorga más resistencia y durabilidad.
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www.tfcable.com
| INSIGHT
CUTTING TIME THROUGH CONSTRUCTION IN PARALLEL Accommodation in the mining industry has always been problematic but Williams Scotsman is bridging the gap by providing innovative modular full service solutions called
ANDREW AUNS
construction in parallel. The modules are manufactured
Vice President & General
and assembled off-site to allow customers to work on other
Manager of Williams
key priorities, and once they are ready to move onto the
Scotsman
site Williams Scotsman installs the modules, eliminating one third of the time it takes to deliver projects. “We offer a large variety of flexible solutions to our customers
and have expertise in effective establishment of camps,
that cover all of the basic needs of the projects,” boasts
as well as knowledge necessary asset to support a mining
Andrew Auns, Vice President and General Manager of the
operation. With a product portfolio that can solve most
company. “In the future, we hope to evolve into a complete
of the space needs of any mine, Williams Scotsman has
service provider and assume the operational capabilities
worked with major developers and adapted to their
of camps by offering cooking, cleaning, and security
specifications. “The best practice we have developed in
services, which we call workforce accommodation.”
Mexico is being able to adopt the AsFlex product much faster than our counterpart in the US,” Auns boasts. “We
From
a
productivity
standpoint,
Auns
believes
the
have already used the AsFlex product in four large projects,
company’s most attractive asset is the ability to design and
from initial assembly to disassembly for new projects.”
build a personalized solution to cater to individual client
These projects are not always straightforward and several
needs. With its new “360° service”, Williams Scotsman
problems are presented from a technical standpoint but
sources furniture, site services, or other preparatory
Williams Scotsman is able to continue providing solutions
necessities that are not a core competency for mining
in an innovative and effective way.
companies, providing them with all requirements for the beginning of a project. In this way, the companies can focus their attention on areas that are crucial to the productivity and operation of the project. Another asset of the company is the flexibility of the product that it is developing. “In the past when people thought of modules they thought of 8x38ft trailers, which we still offer, and they form effective solutions,” Auns shares. “However, they do not provide the capacity for adaptation and our new offering can be modified to changing needs.” Williams Scotsman’s products can combine a variety of features that will allow workers to live closer to the site, which leads to a greater level of productivity. The company’s products can provide complete work camp solutions that allow better control of workers, create adequate living quarters, and reduce safety and security concerns. “This will ultimately lead to a happier
“We are the largest mobile space supplier in North America and we have the ability to analyze our resources and costs in different economies of scale to ensure we can offer the best deals for our customers”
workforce, less safety incidents, and the completion of
Andrew Auns, Vice President & General Manager
projects on time,” Auns says. As far as controlling costs, he
of Williams Scotsman
notes the company is constantly looking for more efficient ways to source. “We are the largest mobile space supplier
In the mining industry, the company is eager to ensure its
in Mexico and North America, and we have the ability to
market positioning and its provision of added value. The
analyze our resources and costs in different economies
company has ambitions of doubling its market share on
of scale to ensure we control our costs and offer the best
a global scale, and it sees great potential in the modular
deals for our customers.”
and mobile space sector, especially in Mexico, provided the company is able to adapt to the different needs of
Practices used by the company in Mexico have been
the market. “The potential is huge and we are trying to
imported from Canada and Australia, which are both
position ourselves by making sure that our salesforce is
mature markets that already incorporate all business lines
closer to our key customers,” conveys Auns.
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| VIEW FROM THE TOP
SOLUTIONS TAILORED TO THE MINING INDUSTRY ERIK ROREM VP Business Development of Geobrugg North America
Q: How much business does Mexico represent for
This saves money, time, and is a much faster and more
Geobrugg's global operations?
innovative solution.
A: Although our participation is not currently significant,
210
we believe Mexico has promising potential in comparison
Q: What is the most difficult project you have developed
with other markets because we know there are numerous
in Mexico, and how was the process facilitated?
opportunities and significant activity. Our products are
A: Most of the projects we have developed in Mexico are
designed specifically for the mining industry, which is an
civil works along highways. We constructed the safety
important distinction because many of the alternatives
fencing around the Formula 1 race track in Mexico City
used in the mining sector have been adapted from other
using the same technology that we use in the mining
industries. Our solutions were developed to solve specific
industry but with a few modifications to protect the
mining problems whether it is rock bursting, underground
spectators from potential crashes. We are in the business
support, or barriers for catching rocks. Many companies
of stopping moving objects whether it is rocks or high
use chain link fences to catch falling rocks, failing to take
speed cars. This was a high profile project for us but
into account that these were originally designed as entry
there were many challenges in terms of logistics. We also
barriers not for catching heavy rocks. The same thing
developed protection barriers in the Media Luna open pit
occurs when underground mining companies use materials
to protect locals from falling rocks and debris. This was
like shotcrete and weld mesh for ground support, which is
situated in a remote area and since it was part of a nature
not their original intended use. Until now, there were a lack
reserve, the company could potentially have been charged
of alternatives and many people in Mexico are not aware
for every square meter affected by the works. Not only was
that specific technology for the mining industry now exists.
our solution eco-friendly, it also was the most affordable because we used the least amount of land area. It was an
Q: Can you explain the intricacies and processes involved
extremely challenging process because the project was
in underground mining?
difficult to reach.
A: When carrying out ground support in underground mines it is crucial that the support material used is both
Q: How is Geobrugg’s automated underground meshing
strong and flexible. Materials that are flexible absorb
system changing the role in certain areas of the mining
energy while stiff materials do not. Our meshes are
industry?
flexible and extremely strong, serving as an ideal tool
A: Our mesh was first developed for underground wall
for tension loading. The ground support system has
support but what differentiates our product from the
several components that are working together as one,
competition is that we sell our mesh in rolls and it is
and companies often use incompatible components,
incredibly
hampering the performance of the system.
automated process that would allow mining companies to
flexible.
We
subsequently
developed
the
install the product. The automation was proven to improve We have worked with mining companies all over the
productivity and safety in the mines, and miners no longer
world for decades, and we have a team of experts that are
had to expose themselves to danger in tunnels that are
constantly communicating and sharing their experiences.
not properly supported, instead being able to work on the
All of our products are tested in full-scale field tests after
implementation from a safe distance. El Teniente, the largest
applying computer modeling, meaning the conditions of
underground mine in Chile, implemented our technology,
a mine can initially be simulated on the computer and
and it has been highly successful. Now CODELCO has
then innovative techniques can be attempted before the
decided that it wants to adapt our technology as standard
financial outlay of full-scale testing. The field tests are not
practice. This success serves as our primary reference for
carried out until the virtual processes have been perfected.
the market as an example of our work.
| VIEW FROM THE TOP
PUC BANDS BOOST CONVEYOR SAFETY AGUSTÍN MONZÓN Director General of GGD Bandas
Q: What have been the most significant contributions
of origin, and it takes some time to convince them of
GGD Bandas has made for the Mexican mining industry?
alternatives. The advantage of GGD Bandas is that we
A: IThe commercialization of our products used to be
have Asian, American, and European suppliers, and this
carried out by distributors but three years ago we decided
enables us to offer a range of opportunities that uphold
to remove this intermediary and approach the end user
different norms.
directly. Today, we supply 100 percent of conveyor belts and our strongest area is in the mine interior. Safety has been significantly improved due to improved technology. We have replaced rubber with PVC in the bands. This transition has already been embraced by other mining
“Sometimes companies opt for expensive applications
markets in Russia, China, and Australia.
in simple operations and we
Q: How does your technology encourage efficiency
guide them to simple, more
across mining operations? A: There is a type of conveyor system that uses steel cabling as a structural element and as such it requires constant monitoring to identify failures. In the past we had to bring the technology and technical assistance from overseas to address these failures, and obviously
economic alternatives that perform better” Agustín Monzón, Director General of GGD Bandas
this led to longer lead times and higher costs for clients. We decided to purchase this technology and offer the
Mexico is a complicated country in which to do business
services ourselves. Choosing the right supplier of this
since for many years it was battered by low quality
technology was difficult but we found a Russian supplier
products from other markets. To remove this distrust
that has a strong presence in the Chilean mining sector.
from the mining sector we have to rely on testimonies or
The supplier’s ties to the Chilean market enabled us to
success stories in other industries and carry out multiple
create a strong business environment and we were able
testing stages. In these evaluations, companies can analyze
to adapt it to the needs of the Mexican mining sector.
and benchmark our products against their traditional
The first projects we will carry out will be sent to Russia
alternatives. The process of becoming an integrated
for evaluation to ensure a high quality service. The
service supplier is long since we must demonstrate the
main advantage of this product is the safety it ensures
cost benefit of our solutions and our in-depth engineering
since damages in conveyor systems are sometimes not
expertise.
discernable to the eye and the scanner detects them swiftly. The maintenance is faster and there is no need
Q: What advantages has the company spotted by
to import technical expertise and machinery from abroad,
upholding norms from a wide array of markets around
and everything can be dealt with locally.
the globe? A: Our presence in several industries means we are able to
Q: How do you help mining companies embrace new
transfer technology from one sector to another and offer
solutions to allow them to enter this new technological era?
a wide product portfolio. This diversification means we
A: Many industries in Mexico are accustomed to working
are flexible in the solutions we offer and we are able to
with US technology given the strong ties between the two
spot areas of opportunity. The cost of energy is extremely
countries. We have seen that some mining companies are
high so we are improving our conveyor systems to reduce
fully committed to one type of technology and country
energy consumption.
211
| TECHNOLOGY SPOTLIGHT
212
FLEXIBILITY AND VERSATILITY IN MODULAR BUILDING Just as the techniques that are employed in the oil and gas industry have developed and modernized over time, so have the ways that mines operate and the infrastructure that supports them. As such, a number of different structures are built to support mining operations throughout the various stages of a mine’s life, from living quarters and offices to laboratories and plants. Installing these temporary structures, as opposed to more permanent buildings, brings financial and logistical benefits for management teams. To respond to the growing needs of the mining industry, William Scotsman has recently launched a new modular building solution that could transform the way mine operators develop their facilities and camps. Moduflex™ is a modular panel unit designed to offer the flexibility and versatility any mine operator could require. Its design allows multiple configurations so that customers can optimize their temporal modular spaces. The adaptability of Moduflex™ allows it to easily adapt to any type of terrain, even rugged terrain or those difficult to access. Thanks to its modular design, Moduflex™ users can extend or reduce the floor space depending on the needs of their projects. Both the interior panels (walls) and outdoor (facades) can be easily replaced in case users want to make changes in the standard configuration. The unit can also be optionally supplemented with different types of equipment such as custom brick facades, windows, terraces, caps perimeter, raised floors and accessories like air conditioning, climate control, voice and data, and sanitary items among others. As these modular spaces come equipped with different types of insulation, people can also remain comfortable in any weather condition. One of the most attractive features of Moduflex™ is its capacity to help reduce their overall infrastructure costs and to minimize environmental impacts. Mining operations use high levels of energy, and the industry is increasingly concerned about how to reduce its energy consumption and improve its environmental impact. Moduflex™'s temporary infrastructure can also complement mine companies in their broader environmental strategies. The biggest benefit is that Moduflex™ is designed specifically so that it can be dissembled and removed from the field easily when they are no longer needed. This brings a practical advantage to an industry where mining companies are required to leave the mines they operate on in the same state as, if not better than, when they arrived there.
213
| VIEW FROM THE TOP
RELIABLE CHINESE EQUIPMENT DISTRIBUTOR RAÚL ORTEGÓN Director of Maquinaria Rivero
214
Q: What importance does the mining sector have for
in October this year. It is under construction and is using
Maquinaria Rivero’s business compared to other sectors?
a TD-25M bulldozer provided by Dressta Machinery, a
A: As a new company, Maquinaria Rivero has recently
Polish company bought by LiuGong in 2012. This piece
discovered the importance of the mining sector. It highly
of equipment is similar to a Caterpillar D8. We have also
differentiates itself from other sectors we serve as the
provided a LiuGong 856 Wheel Loader and a Case 590
machines need to run day and night unlike other industries
Loader.
that work on specific shifts. Consequently, a main chunk of profit received from sales is entrenched in high demand
Q: How would you describe your relationship with the
for equipment maintenance and service. Serving the
Mining Development Trust Fund (FIFOMI)?
mining sector reaps a great deal of profit. The company
A: The agency helps us sell equipment to mines. We
plans to align its objectives toward mining, and eventually
entered its office and presented our products with the
implement it as one of our branches along with industry
help of Maxmiliano Urbos, who facilitated the alliance.
and construction. One of the mining projects we are
We had to take its introductory mining course, and the
providing machinery for is located in El Realito, Culiacan.
process took time as the initial prices were bounced back
It is a gold mining site that is scheduled to start operating
and forth through revisions and discussions for six months
| INSIGHT
PROVIDING DRILLING COMPONENTS LOCALLY LUIS MARTÍNEZ
of exploration activity. “As a result, when a tender comes
General Manager of ACE
up there is more competition so prices for services had
Drilling Supplies
to be lowered in order to remain competitive,” he shares. “Therefore companies must reduce costs, meaning they
Before ACE Drilling Supplies, the Mexican mining industry
must develop ways to produce the same level with lower
was forced to source its equipment and components from
drilling budgets. This inevitably creates an increase in
abroad in order to guarantee reliability and quality. “ACE
equipment quality.”
Drillling Supplies provides equipment that is manufactured in Mexico but adheres to international standards,” reveals
After a learning curve of improving the company’s
Luis Martínez, the company’s General Manager. “Instead of
results, Martínez is now confident of the performance
having to import the tools, companies working in Mexico
of its products. “The consistency of our products allows
can now purchase supplies that were manufactured in the
us to know precisely how many meters each drill bit
country, saving both time and money.”
will sink," he points out. "The more profound the levels drilled, the less expensive it will be for clients." As well
Like all companies in the current context, ACE Drilling
as price related performance, he is also extremely proud
Supplies has faced its share of challenges and Martínez
of the investment in ACE Drilling Supplies’ staff training.
acknowledges that right now there is less demand for
As a result, the company has been able to make several
drilling services as a result of reduced budgets and a lack
technological advances and is constantly working on
until the operation finally closed in December. The fact that
their country’s evaluation system creates obstacles when
FIFOMI recognized LiuGong’s machinery was helpful. We
it comes to certification. Ultimately, Maquinaria Rivero
continue to work with the agency as it bought a package
is forced to be slightly stricter to give our clients more
of equipment maintenance and services for the next two
assurance and become a locally and internationally
years. FIFOMI has also shown a commitment to buy five
recognized company of quality.
more pieces of equipment in the coming months. Q: What are the greatest challenges the company faces? Q: When it comes to choosing machinery suppliers, what
A: Entering and placing ourselves in the market has
kind of decision making process does Maquinaria Rivero
been our main obstacle. Many changes have occurred
undergo?
in the environment and Grupo Rivero had to learn to
A: Case Construction manages heavy machinery such
adapt. The challenge is enrooted in understanding the
as crawler dozers, compact and standard excavators,
construction and heavy machinery market in Mexico
backhoes, and loaders. Through Terex and LiuGong we
along with equating Rivero to the established LiuGong
can access trucks. Offering our clients a sense of support
brand to gain clients’ trust. The company has been able
is a high priority, and we continuously work toward
to achieve this in less than four years due to a rapid level
improving the services we provide when we choose new
of growth. Services that are supported by Grupo Rivero
suppliers. Even though LiuGong has the bonus of having
are received well in the Mexican market despite the fact
an office in Houston, companies like Case Construction
that the market has a negative perception of China due
that have plants in Mexico can offer a different level of
to other faulty brands that ruined the country’s image.
support. Case Construction is attractive as clients are
Even though our equipment is from China, we have
more receptive to more strategically located companies
proven ourselves to be a trustworthy company and our
with the endorsement of technicians, and it can help
clients have faith in the quality of our services. LiuGong
Maquinaria Rivero be more recognized locally and
is an attractive supplier as a result of the premium heavy
internationally. Mines and major construction companies
machinery it manages and it is also the largest producer
need maintenance services from certified technicians that
of front loaders in the world. The company also has the
assure quality. LiuGong and other Chinese companies
advantage of having a distribution center in Houston,
have the ability to provide these types of services yet
only eight hours from our offices.
developing more products that are able to offer cost
claims. “Besides drill bits, we also distribute some drilling
savings in speed and duration.
lubricants and additives to companies we already have contact with. It is not our core business but given the
As far as product development goes, the company
connections we have we leverage our position to provide
constantly works to adapt to industry changes. “Every
the service if our clients need it.”
time we encounter a new kind of soil, we modify the melting mixture of our product so we obtain optimized
Now that Martínez is safe in the knowledge that ACE
performance for that kind of land,” he boasts. “Our
Drilling Supplies is producing a quality product, he shares
advantage is our geological expertise.” The company
that the company needs to overcome some challenges.
is testing a new drill bit known as Extreme, which is
“First of all, we must develop a network of distributors
continually being produced more and more consistently
around the country since we currently manage every
to the necessary specifications. “Our sister company, BD
transaction from Guadalajara,” he explains. “Recently, we
Drilling, is our main client, and it was the first to test our
signed an agreement with an additive drilling distributer
product,” says Martínez. “Although the company was
that has presence in Colombia, Peru, and Central America.
initially reluctant to use ACE Drilling Supplies’ equipment,
Hopefully this increases our local participation.” Now the
it now exclusively uses our products.”
company has revenue, the next step will be to build rods needed for drilling, meaning ACE Drilling Supplies will be
Although there are now a few dealers and retailers in
able to provide the drill bits and the rod to fit inside. “We
Mexico, Martínez believes that ACE Drilling Supplies’
are evaluating the most prestigious steel market suppliers
unique differentiator is that it is the only producer of
so we can find a high quality tube to start testing new
drill bits in the country. “We cover the whole production
products,” he comments. “Companies seek one provider
value chain in Mexico, making it easier for companies to
to supply most of their consumables so we are creating
acquire our products and reduce transportation costs,” he
this turnkey service."
215
| VIEW FROM THE TOP
CONCRETE ON A ROLL FOR STRUCTURAL REINFORCEMENT MAURICIO DE SILVA Mexico Distributor of Concrete Canvas
216
Q: What are the unique technological qualities of
kilometers in conditions that are dangerous in heavy
Concrete Canvas and what added value has it brought to
trucks. During the wet season, there are landslides that
Mexico’s top industries?
cause downtimes and this can be extremely expensive
A: Concrete Canvas originates from the UK and has launched a
for mining companies. Instead of using cement or other
revolutionary new construction material called Geosynthetic
materials in a restricted area, with the assistance of
Cementitious Composite Mats (GCCM), a flexible, concrete
three or four people a company can install our product
impregnated fabric that hardens when water is poured
to make safe roads and walls. For Goldcorp, we installed
onto it to form a thin, durable, waterproof and fire resistant
our product in the entrance of its mine where landslides
concrete layer. In simple terms, it is concrete on a roll. It can
were common. The product is available in three different
be extended over slopes as a way to prevent landslides or
thicknesses but it is essential to have a civil engineer
create water channels. It is extremely easy to use, and can
present before deciding which product will be used.
be adapted to any terrain. After setting the product on the
In Spain, there have been studies performed to create
land for a couple of hours it dries and is unmovable, and
underground tunnels using the product but it is an ongoing
depending on the project multiple layers can be used or even
investigation. This product would be useful in developing
sealed to prevent leaks. The advantage of this product is that
temporary mine walls but it may not be the best option
it is able to resist up to 407kg/cm and it uses less water than
for tunnels, especially going through mountains and other
traditional methods. While Concrete Canvas may be more
rough terrains. The construction of temporary walls with
expensive than regular concrete products, the benefits are
Concrete Canvas is much faster than traditional methods.
2
greater and can be used in times of emergency. Q: How can this product contribute to the development Q: How have companies reacted to these new construction
of safer infrastructure that can resist natural disasters?
technologies?
A: Companies place anchors and spray concrete wherever
A: The first customer to adopt this technology was
it is needed but it wears rapidly. If the concrete gets soft,
Goldcorp. It was a difficult process due to the high price of
cracks begin to form and vegetation grows. Using our
the dollar and the fact the project we were involved in was
product will not allow these types of effects to occur. The
located in a risky zone in Iguala, Guerrero. Since then, we
difference between spray concrete and our product is that
have created additional installations and it has opened the
our product has a lifetime guarantee of 50 years. This makes
doors to new business ventures in Mexico. During natural
safer and durable infrastructures due to the high quality
disasters, Concrete Canvas can deliver quality solutions in a
of the materials and the installation methods. If there is
short amount of time in a great variety of terrains. It is easy
a correct installation, it is difficult for water to penetrate
to install and it is possible to make emergency shelters or
the concrete or for plants to crack through. In water
spaces within 24 hours. This product may be more expensive
management infrastructure, it can anchor down slopes and
but the results are much greater and it optimizes structures.
prevent water from leaking through to undesired areas. We
In Mexicali, CFE has created a geothermal plant called
have a new product that allows companies to place layers
Cerro Prieto that has kilometers of concrete canals and we
of concrete to create a stronger seal. It has been proven
have conducted several trials with our products, efficiently
to work efficiently in the creation of water management
transporting this water for the development of clean energy.
and tailings infrastructure. We are currently working on a residual water treatment in which we will conduct a study
Q: How is Concrete Canvas applied to unique and complex
of one of the water tanks. As years pass, water tanks
infrastructures like open pit installations?
deteriorate and cracks begin to form on the surface. Placing
A: One of the most complex engineering infrastructures
Concrete Canvas on top would protect and increase the
is the entrance of a mine. Miners have to travel for several
lifetime of these expensive infrastructures.
| INSIGHT
FUELING CHIHUAHUA’S MINING SECTOR Grupo Carvel started out by providing diesel oil to the mining and transport industries in Chihuahua in 2010, originally delivering the product in small containers. As the company grew, it started to use larger containers in order to transport larger quantities at a time, and it now focuses on purchasing fuel from PEMEX, the only manufacturer it
“Carvel System is based on a premise of providing control, administration, and security to
works with, and distributing this fuel to other companies
users’ flotilla”
throughout the state of Chihuahua. “We have two storage
Ricardo Román, Project Engineer at Grupo Carvel
plants, the main one is in Chihuahua city and the second one is located in Dolores and is specifically designed to
of Carvel System. The program is split into two separate
serve the mining sector,” shares Ricardo Román, a Project
systems, one that focuses on the fuel tanks themselves,
Engineer at the company.
and the other that tracks the coming and going of transportation vehicles, and also monitors how much fuel
When transporting diesel to mines throughout the state,
each vehicle is carrying. Both systems can be accessed
Roman believes that security is always the biggest issue
from tablets, smartphones, and computers, allowing the
as the highways in Mexico are not always safe. However,
user to stay up-to-date on their operations 24 hours a
Grupo Carvel has not experienced any problems, and
day, even outside working hours. “This provides security
he attributes this to its dedication to and focus on its
benefits as well, as users are alerted in real time of any
work. “We avoid contact with criminal groups by only
theft taking place,” Roman comments. “Each system also
transporting fuel during the day, and we have GPS
has strict privacy settings and password requirements to
tracker systems and emergency alert buttons fitted onto
further boost user control. Put simply, Carvel System is
each and every one of our vehicles so that we are always
based on a premise of providing control, administration,
in close radio or telephone contact with our staff when
and security to users’ flotilla.”
they are on the road,” he explains. “Moreover, all of our mobile units are regularly checked for tire degradation
Another program that the company is going to continue
and other maintenance concerns, because there is a lot
developing this year will allow clients to track the progress
of stress put on vehicles when travelling long distances
of any fuel orders they place. This means that the client
on a regular basis.”
no longer has to speak to the driver of the truck, or the logistics manager, or the group director, or the plant
Carvel System was developed as the solution to an in-
operator in order to find out when and where their order
house problem. With an ever-growing number of operating
shall be delivered. “The clients will be in complete control
vehicles, the company needed a system to track which
and will have all the necessary information regarding the
vehicles were transporting fuel, how much, from where to
progress of the order, which will in turn help them plan
where, and other logistical issues. This led to the creation
their operations more efficiently,” Roman states.
Stronger. By Design.
217
218
| INSIGHT
SEEING THE MINING INDUSTRY IN A NEW LIGHT Road Machinery had been a strategic partner and distributor of Komatsu’s for many years. The latter decided to purchase the former simply because the time to increase Komatsu’s commercial presence in Mexico had arrived, according to Eduardo Bennett, Mexico President of
EDUARDO BENNETT
Komatsu. This purchase followed the company’s decision
Mexico President of Komatsu
to buy MAKOMEX in April 2015. “The two companies are now working together as one single unit, and this company will be renamed Komatsu Maquinarias de Mexico once the relevant legal paperwork has been completed,” Bennett explains. This investment, which totaled US$200 million, was the largest investment made by the entire Komatsu group in 2015.
219
Bennett shares that Komatsu invests between 3-5 percent of all annual revenue into research and development. This strategy has been in place for more than 40 years and has enabled the company to become known as a technological leader across many sectors. “One solution we have devised is Komtrax, a satellite-operated GPS fleet control system, which allows the user not only to see the physical location of the equipment but also provides in-depth performance indicators, including engine temperature, engine revolutions, vehicle speed, and motor performance,”
Komatsu invests between 3-5 percent of all annual revenue into research and
development
he explains. This allows Komatsu to make improvements regarding the efficiency of its machinery, and of course
offering Komatsu clients flexible financial solutions based
helps the user to reduce downtime and consequently
on their individual circumstances or needs. “The service
maintenance costs. The service, which comes included with
we provide differs from that of conventional financial
the price of all Komatsu equipment, also brings a number
institutions given that we understand the way in which
of security benefits because by keeping constant track of
construction and mining companies can be affected by
the machine, both Komatsu and the client can detect any
unquantifiable factors,” Bennett explains. “For example, we
irregular or illegal activity at an early stage.
know that a mining company cannot operate in the jungle in Peru during the rainy season, which can last up to three
Another Komatsu-designed product is the autonomous
months, and we therefore understand that the company’s
haulage system (AHS), which allows some models of
income or CAPEX during that period will be significantly
Komatsu mining trucks to run completely autonomously
reduced.” Komatsu therefore set up flexible payment
without the need for an operator either on the vehicle
plans to help its clients through such periods, which is
or operating remotely. “These trucks can control their
something traditional lenders such as banks might not be
own movement 24 hours a day, or for however long it
able to do. The service can be particularly useful for small
is necessary to complete the loading process,” Bennett
and medium sized mining companies, Bennett claims.
describes. Komatsu designed this technology around 15
“When a small, family run mining company grows to the
years ago and it is now being used on mine sites around
extent it needs excavators with larger tonnage capacity,
the world, including in Australia and Chile. The technology
traditional financial institutions will not be available to
has not yet been introduced into Mexico but given the
lever this growth,” he states. “However, Komatsu’s financial
typical landscape of Mexican mine sites, Bennett believes
products allow the small miner to complete this purchase
that Mexico is a well-suited market for the AHS technology.
with flexible payment plans, easing the pressure on its CAPEX.” This is vital not only for the client but for the
As well as its innovative products, Komatsu also offers
sector in general as it gives a helping hand to new mining
unique solutions, especially in terms of financing. Komatsu
companies, which Bennett believes represent the future
Financial Solutions was set up 10 years ago with the goal of
of the sector.
UNDERGROUND MINING
10
Underground mining is notoriously risky. Precautions must be taken to ensure the appropriate structures are in place or operators face the ever-present possibility of a collapse. Weather conditions also add to the peril, as heavy rain and landslides can exacerbate the danger of being trapped within the confines of a mine shaft. However, this kind of mining is also the most fruitful. The higher grade and higher concentrations of ore are normally located deep below the earth’s surface. Often equipment must be specially adapted to endure the grueling conditions present in underground mines and as a result, a niche market has emerged for easy to use, sturdy and durable machinery. From tires to LEDs to rock bolters, every eventuality must be covered to ensure the conditions in an underground mine assure the highest level of safety possible for workers.
In this chapter, we hear the opinions of the top equipment manufacturers from this mining subsector regarding the increasing need for durability in this environment. Directors and CEOs discuss the need to predict accidents, meaning that a preventive approach is all the more important. Against this background, key players explain that cost reduction takes a backseat as operators seek ways to predict variables to guarantee worker safety.
221
222
| CHAPTER 10: UNDERGROUND MINING 224
VIEW FROM THE TOP: Gary Nash, Yokohama Tyre Mexico
José Garcia, Yokohama Tyre Mexico
226
INSIGHT: Efraín Martínez, Dräger
226
INSIGHT: Luis Del Bosque, Segman
228
TECHNOLOGY SPOTLIGHT: GE’s Battery-Powered LHDs
230
VIEW FROM THE TOP: Marc Carriere, Victaulic
231
INSIGHT: José Luis Durón, Immersive Technologies
233
VIEW FROM THE TOP: Gregorio Castruita, Resemin
234
VIEW FROM THE TOP: Frederick Davidson, Energold Drilling
234
INSIGHT: Tony Caron, MacLean Engineering
René Valle, MacLean Engineering 236
MINE SPOTLIGHT: La Colorada
239
INSIGHT: Pedro Robles, Megamak
240
VIEW FROM THE TOP: Matt Blattner, TUMI Raise Boring
241
INSIGHT: Wayne Oldenburg, Oldenburg Group
Ryan Oldenburg, Oldenburg Group 242
TECHNOLOGY SPOTLIGHT: The Hidden Benefits of the Mighty Filter
244
INSIGHT: Erick Sanchez, Tensar
245
VIEW FROM THE TOP: José Ferreyros, TDM Group
247
VIEW FROM THE TOP: Sebastian Romero, Walden Group Mexico
248
INSIGHT: Cesar Fimbres, Dumas
249
VIEW FROM THE TOP: René Molina, Tele-Fonica Cable Americas
223
| VIEW FROM THE TOP
INNOVATION DRIVING RADIAL TIRE TECHNOLOGY
Gary Nash President of Yokohama Tyre Mexico
224
José García National OTR Sales Manager Exports of Yokohama Tyre Mexico
Q: Given how Mexico is one of the fastest growing
JG: There is a lot more fluctuation in our other commercial
mining industries, what role does the country hold within
and consumer segments due to the involvement of pesos
Yokohama’s global market share?
in payment but our OTR transactions are all in dollars.
JG: Yokohama’s parent company, The Yokohama Rubber
The mining industry is not performing poorly in Mexico
Co., is headquartered in Tokyo, Japan, and has been a
because expenses are all in pesos and they sell their
global manufacturing and sales company of premium
products in dollars.
tires since 1917. Globally, the US holds the top position in terms of market size and opportunities followed closely by
Q: What steps does Yokohama take to create innovative
Canada. Mexico is not far behind, and it is now becoming
technologies, and how has it helped your clients reach
one of Japan’s top five countries in terms of importance.
desired levels of efficiency?
When it comes to mining, Mexico was included in the
JG: In the LTR industry, we have proven that our niche
business vision for its market potential. We have a strong
market is in underground mine tires and port tires. Our
presence in the US. and Canada and we look forward to
focus has moved towards radial while maintaining our
adding Mexico to that list. It is a priority for Yokohama to
leadership in bias, and we specialize in scenarios where a
explore new markets and customer bases, and we wish to
bias can outrun a radial tire. The Y69U tire works perfectly
expand our product availability.
for underground mining as it features the industry’s first non-ferrous sidewall reinforcement, which protects it from
GN: It is important that companies have the ability to
chipping and cutting without extra risk of sparking. All
expand globally and operate successfully in multiple
mining operations are based on cost per hour so naturally
locations. In a sense, Mexico was the missing piece of
all of our tires are based on cost per hour. Traditionally a
the puzzle to our North America Mining division. Today’s
tire can last 1,000-2,000 hours but the tire we offer has a
mining industry operates on a global scale, and contracts
unique protection that was designed specifically for the
are won in the same manner. With almost 100 years of
mining industry. Our products are proven to save money
experience, Yokohama is building an image of the product
and give a better cost per mile.
that is a reflection of the positive aspects of Japanese technology, and we have chosen Queretaro as the place to develop our market position. Q: The OTR market fluctuates regarding supply issues on a global scale, so in your eyes, what are the major causes of this change, and what did Yokohama do to adapt to these fluctuations? GN: The root of this fluctuation can be traced to the drop in oil prices since it has a significant impact on the tire business. If oil prices are stable then the manufacturing and commercialization of tires is easier and the profit margin can increase. When oil prices dropped, it drove
Traditionally a tire can last 1,000-2,000 hours but the tire Yokohama offers has a unique protection that was designed specifically for the mining industry
down tire prices, and the devaluation of the peso also contributed to currency fluctuations. We offer the mining
GN: Our clients detail the challenges and circumstances of
industry flexibility, ensuring protection regardless of price
their operations, and based on that we tailor our products.
fluctuation. The tires are produced in Japan and sold to
For the Y69U we use a Zeon Super Composite (ZSC) that
the US and Mexico in dollars.
creates a wavy side profile on the sidewall, protecting the
tire from chipping. Innovation is an important driver and
Q: What are the key priorities in your agenda in order
our products are game changers in the industry. When
to become the leader in radial tires for Mexico, and what
doing business in Mexico this alone is not enough, and
new technologies do you wish to deploy in the market?
many of our clients seek integrity in doing business and
JG: Many mines are downsizing because of a lack
product offering.
of availability of large tires. There has been a lack of competition in the development of these products,
Q: What are the root causes of the mistrust of mining
creating a shortage. Other companies downsized to
players in acquiring products like tires, and how has
reduce costs since smaller equipment creates fewer
Yokohama helped erase these misconceptions?
expenses. Here in Mexico, companies are running the
JG: Mexico was for many years a dumping ground for
equipment for much longer but generally the market has
tires and the mining industry suffered since the tires
remained stable. Companies are standardizing equipment
that were used were not well-suited. This experience
across multiple operations since it facilitates technology
has left a bad taste in the mouths of mining players. Our
transfer and lowers costs.
strength is that we always look to adapt to the customer and on the field we give them the authority to make
GN: We plan to introduce five new radial tires per year.
decisions. We have gathered the trust of clients due to
If evidence emerges demontrating that bias tires are
the integrity under which we operate and our stellar
performing better than the new radials we will adjust our
reputation.
strategy to the indications. These indicators will depend on the companies with which we are working and their global
GN: When carrying out tests on site the recommendations
demand. The US market demand is a determinant factor
we give are based on ton miles per hour (TMPH). A tire can
in the global market for large-sized tires. I see Yokohama’s
have a 480TMPH and another around 600TMPH, and this
entry into Mexico as bringing an experienced, professional
is a measurement that allows the company to understand
player into the mining industry, offering technical support
the endurance limits of the products. Yokohama also
and the expertise needed to make decisions. We hope to
creates special order compounds so the products we
provide education to mine managers so they can make
provide companies are tailored to suit their needs.
strategic decisions.
225
| INSIGHT
INTUITIVE SAFETY PRODUCTS FOR HIGH STRESS SITUATIONS Dräger has a new ace up its sleeve with its latest solution developed in collaboration with one of its biggest clients,
EFRAÍN MARTÍNEZ
Goldcorp. Taking all these variables into consideration Dräger
Mining Segment Manager for
presented the MRV 9000, the newest mine rescue truck in
Central and South America of
the industry. “The MRV 9000 was developed to help brigades
Dräger
travel longer distances at a quicker speed, and so they can be as close to the incident as possible," he adds. "This truck also provides respiratory protection and integrates various tools
226
In a mine no emergency is alike and as the Incident
that facilitate the work of brigades and keeps them from
Management Teams and Mines Rescue Services officers
harm’s way.” One of the added values of this is that it creates
scramble for a contingency plan, the key is to ultimately
a pressurized, contaminated free environment atmosphere,
minimize response time. The critical elements are time
which comes in handy not only during fires but also during
and prompt detection, timely warnings, and a proficient
situations where there are oxygen deficiencies.
response by underground miners can have a tremendous impact on the consequences of an underground incident.
The development process of the MRV 9000 was arduous and to make it possible Dräger carried out an alliance
Balancing all these elements is achievable by combining
with German vehicle manufacturer Paus to develop the
technology and trained personnel, and this synergy
passenger cabin that resembles a mobile mining refuge.
has been perfected by safety specialist Dräger. Efraín
Goldcorp is now in possession of two of these trucks and
Martínez, Mining Segment Manager for Central and South
each truck is fully equipped with both exterior and interior
America at Dräger, takes pride in the 14 new products the
gas monitoring systems, an interchangeable compressed
company has developed to improve security. “Mines are
air system, and can be autonomous for up to six hours.
getting bigger each year, miners are exposed to more toxic
According to Martínez, this innovation would not have
substances, and raising awareness with our customers
been possible without the interaction with the customer.
in the use of preventative technologies is a primordial
“We worked with Goldcorp’s Mine Rescue Project Manager,
concern for Dräger,” he explains.
Markus Uchtenhagen, to develop this new vehicle," he says.
| INSIGHT
SPOTTING INVISIBLE SAFETY CONCERNS stringent safety standards and top technologies that will
LUIS DEL BOSQUE
safeguard their workers’ lives.
Sub-Director of Segman “No other industry is as demanding as mining because Good ventilation of the work area is essential to prevent
there have been many accidents due to the fact
pockets of gas forming that can lead to deadly explosions.
that these types of safety controls were not taken,”
Gas levels must be closely monitored at all instances
Del Bosque explains. Industrias Peñoles obliges its
and areas swiftly evacuated if levels exceed standards.
workforce to have a medical certificate from a private
Segman Sub-Director, Luis Del Bosque, points out that in
institution that includes personal medical information so
Mexico unfortunately not many companies know about
that in any eventuality they would know exactly how to
the explosion limits (LIE). “Norms in the country are based
address it. Segman is equally stringent with its workers.
on international standards similar to those in Canada and
Whenever they enter the mine they use portable
the US but the government has not fully implemented
detectors of up to three different types of gases and are
a regulatory framework in regards to mining safety,” he
equipped with the necessary safety gear. The detector
laments. This has led companies to embrace the most
emits three types of alarms, one vibrates, one chimes,
"Our biggest drivers were to increase the security of the mines and develop technologies that improve the safety of the daily tasks.” The truck includes many other applications, from thermal imaging cameras and communication systems to emergency kits and oxygen tanks that can be changed in 40 minutes. “This was a breakthrough project because there was nothing like it in the market, and it compliments all of the existing rescue and safety products,” he boasts. Martínez explains how prevention is the golden term in mining safety measures and the company’s staple
"Dräger has a new ace up its sleeve, with its latest solution developed in collaboration with one of its biggest clients, Goldcorp" Efraín Martínez, Mining Segment Manager for
Central and South America of Dräger
product, the BG4 addresses these issues. The product will be launched shortly as a mask that contains its own
are working correctly.” For Martínez this is just a stepping
communication system and can be connected to any radio
stone since all of Dräger’s equipment is validated by NIOSH
system the mine uses. The company is also working on new
and EN international standards. Dräger has moved from a
developments that work with telemetry and are suited to
product supplier to an integrated solutions provider that
underground mines since these are more complicated to
can offer a variety of solutions that range from rescue
share information given the distance, depth, and thickness
to toxic air monitoring and hazmat. Martínez describes
of tunnels. In the case of full-face masks, communication
a rescue situation scenario and the images it conjures
is often lost when giving instructions due to the noise and
highlight the complexities and preventative measures that
chaos inside a mine. Dräger’s mask has a speakerphone
are put into place in a mining operation. “Miners first see a
and a hearing aid to help miners communicate efficiently.
warning light on their monitors identifying the dangerous situation, and if they cannot evacuate they go to refuges
Safety equipment must undergo a series of tests before
that can keep them safe,” he adds. Knowing a product is
being fully embraced by miners and while the assessments
not enough, and the miner must be able to seamlessly
might seem unsurmountable for some suppliers, but not
use it during high-tense situations. Martínez agrees, “the
for Dräger. “CAMIMEX has a Mine Rescue Competition
products we develop have to be eminently easy to use
every two years," he shares. "We have participated in the
because if the products are difficult to use once stress
air tightness test that consists of 15 different trials where it
kicks in, the solution will not work as efficiently as it should.
verifies that there is no loss of pressure and that the valves
They must be intuitive, easy, and fast.”
and the other is an LED light. It does not matter where
must not conflict with the oxygen and they must be
the detector is on the worker’s body, it will automatically
friendly to both the environment and workers. “Normally
display the percentage of danger. Working in a mine
we create customized equipment for certain types of
can be perilous since rocks naturally secrete gases and
risks and have special detectors that inform the operator
corrosive chemicals that are harmful, and this can be
when a worker is crossing the safety limits,” he adds. Fire
expedited when carving up those rocks since it hastens
damps are particularly dangerous, containing methane
the release of gases. “Almost all mines have extractors
or other flammable gases, and in these circumstances
which are now used to take out the contaminants that
the faster the response rate the less devastation it will
could either explode or endanger the mine workers,"
cause. “The equipment we offer in these circumstances
he explains. "One thing is certain. Mines are becoming
is the FM200 or dry gas that helps extinguish fires," he
better equipped for the safety of the miners."
adds. "We do not know how often these events will occur until we give maintenance to the equipment.” Trends like
Safety is in the details and Segman has spotted that
automation and robotics has certainly influenced safety
communication in underground mining operations can be
suppliers like Segman, and Del Bosque is looking forward
difficult to maintain, so it has developed key counteracting
to introducing robots manufactured by Smiths into the
solutions.
specialized
Mexican market. “Instead of humans entering a dangerous
intercoms so that miners can hear throughout the entire
“We
offer
light
signals
and
setting we now have robots that can do it for us," he
mine and we also have detectors that send signals to the
says. "They have a camera installed to allow operators
main dashboards,” he says. Segman also supplies clean
to visualize and assess the risks so the workforce is not
agents, although Del Bosque points out that these agents
compromised.”
227
| TECHNOLOGY SPOTLIGHT
228
GE’S BATTERY POWERED LHDS Battery powered LHDs are leading the way toward green mining by eliminating emissions created by diesel particulates without sacrificing performance or flexibility. These bring multiple advantages such as cutting ventilation and maintenance costs, improving health conditions, and even outperforming diesel machines on productivity. With ore bodies present deeper under the ground the cost of installing and operating fans to heat and cool will grow significantly. GE has spoken to many customers who want to be greener and reduce their carbon footprint but productivity and cost reduction are a must for these companies to take the leap. The challenge comes not only from a mine’s dependency on diesel but also from the high cost of underground ventilation systems. For most underground mines around the world the typical ventilation rate is between 100 to 125ft3 per minute for every installed horsepower, which is probably mandated by legislature in a lot of instances. GE applies its expertise in battery-powered vehicles for coal mining to the hard rock industry through battery powered LHDs. It currently offers a 7T Battery LHD with a 3.1m3 standard bucket designed to work in underground hard rock mines. This uses batteries coupled with an AC propulsion system. In continuous operation, one battery supplies up to eight hours of power while one or two additional batteries charge. At the end of each shift the battery can be changed in 10-15 minutes using a proprietary swap-out system that does not require a crane or other infrastructure. The LHD is relatively robust for hardrock mining use. Its frame is built out of three-quarter-inch steel plates, machined and welded. The GE motors and inverters used on the LHD require only passive cooling, meaning no fans or cooling pumps are required. Maintenance is simplified since there’s no internal combustion engine to maintain. The 7T battery LHD has a total length of 8,916mm, maximum width of 2,197mm, and maximum height with canopy of 2,229mm. The exterior turning radius is 5,918mm and interior is 3,222mm. The maximum bucket reach at the pin is 3234mm. The tramming capacity is 6,800kg with a lift breakout force of 134kN for both lift and tilt. The maximum vehicle travel speed, both loaded and level, is 17km/h. In addition, its electric propulsion system enables a seamless integration of telemetric data to help customers monitor operating conditions and duty cycles. It allows clients to efficiently monitor their maintenance intervals, reduce operating cost, and improve their availability.
229
| VIEW FROM THE TOP
THE VALUE OF INCREASED SPENDING MARC CARRIERE Global Mining Manager of Victaulic
230
Q: How has the drop in commodity prices influenced your
177N and it has the same features, pressure ratings, and
position within the market, and how have you changed
benefits. A benefit of manufacturing our own casting is
your value proposition?
that we can create sweeping bends, and this extends the
A: The drop in commodity prices has forced a complete
lifecycle of the system and allows the customer to have
shift toward productivity and cost efficiency in the medium
tailor-made designs. Ultimately, the systems are more
term. Nevertheless, in the short term it has been a difficult
practical. They increase lifecycles of equipment, and they
situation to withstand. Mining players are misled by the belief
reduce maintenance costs.
that opting for cheaper products will be more cost-effective but these cheap alternatives do not necessarily mean the
Q: What top innovations have you carried out in the paste
desired levels of productivity will be reached. Victaulic has
backfill piping systems that are being implemented in
stayed ahead of the curve and these market changes have
mines?
not affected its value proposition because it has made
A: Victaulic has two systems, the ES system for 2500
inroads in countries where it previously lacked strength. We
psi/17250 kPa and the double groove system for 4000
have new products to offer potential clients and this can also
psi/27500 kPa services. We designed a valve that can
help minimize the effects of the drop in the mining market.
tolerate the abrasive paste with elbows that are finely bent to reduce wear, allowing for diversion from one area
“The market changes have
to another and reducing labor intensity. It takes a couple of minutes to assemble rather than the traditional six
not affected Victaulic's value
hours. The Series 725 diverter valve is the first grooved
proposition because it has
lines. Providing 180° service, the Series 725 eliminates the
made inroads in countries
to more efficient operations. Constructed from durable
where it previously lacked strength� Marc Carriere,
Global Mining Manager of Victaulic
end valve specifically designed for use on paste backfill need to re-position fill lines, reducing handling and leading ductile iron, Series 725 is available in 6in/150mm size for systems rated up to 1000psi/6900kPa. Designed with a standard ISO 5211 mounting flange the Series 725 diverter valve can be provided with electric actuation or with a gear operator. The gear operator provided with the Series 725 has an optional input flange, and one of the competitive advantages of this system is that it is automated remotely.
Q: What new products are you deploying in the Mexican
Q: How does R&D enable Victaulic to position itself as a
mining industry that will foster productivity and operative
leader in the market?
efficiency?
A: Much of the innovation is driven by visits to the mines in
A: We have made improvements on our standard
order to recognize the areas of opportunities and problems
couplings
affected
that need to be solved. The concept of building something
productivity. Our new couplings are installation ready,
the client needs is rarely realized because firstly, clients
which means they do not have to be taken apart and
tend not to know what they want, and secondly, there can
CY
assembled. This is important for underground activities
be misconceptions regarding the problems they face. We
CMY
since if even a small component such as a nut is lost, the
talk to the engineers, fitters, managers, and field workers
K
operator would rather throw away the entire coupling
to gain an idea of the inside workings of the mine, how
and get a new one. This new coupling is called Style
things are used, and the cost of ownership.
and
these
have
significantly
C
M
Y
CM
MY
| INSIGHT
PREDICTING MINING VARIABLES
It is almost impossible for operators to predict when issues will arise with machinery, and staff training is crucial to
JOSÉ LUIS DURÓN
ensuring minimal downtime and lowering costs. To ensure
Regional Manager for Mexico,
that staff are equipped to deal with the machinery before
Central America & Caribbean
actually operating it, Immersive Technologies designed
of Immersive Technologies
a simulation technology that is able to mock mine conditions in order to streamline the learning process for operators. “We cater to the whole market and because
The IM360 has the flexibility to train on surface mining
mid-tier or small companies always have the biggest gaps
environments even though it was designed specifically for
in terms of efficiency, productivity, or safety, our services
underground mining. It delivers cutting edge technologies
and products are tailor-made to adapt to all budget sizes,”
in a lower cost high fidelity platform. In Mexico he shares
boasts José Luis Durón, the company’s Regional Manager
that more PRO3B than IM360s have been sold, although
for Mexico, Central America and the Caribbean. “Large
Immersive Technologies is projecting considerable growth
mining operators are technology oriented but there is
in the deployment of both platforms.
always room for improvement, especially in expansion projects where they will require more equipment and
Immersive Technologies has relationships with OEMs
personnel.”
across the board and in cases such as Caterpillar, Komatsu, Hitachi, and Liebherr, these come in the form
In terms of popularity in Mexico, Durón shares that the top
of exclusive alliances. This provides the company with
products are the Pro3 and IM360. The former is specifically
unique access to engineering information, which allows it
designed for surface mining and one interesting feature is its
to create a trustworthy simulator. “Of course there have
curved screen that offers a greater depth perception, which
been considerable developments in terms of computer
is very useful for shovels or loaders. The other product,
based programs and screens, for which we have coped by
the IM360, has four visual panels from roof to floor that is
interacting a lot with our customers and OEMs to update
ideal in training for underground equipment. This simulator
and upgrade our software,” Durón concedes. “Other
also enables the operator to simulate walking around a
innovations we have incorporated can change the weather
mine to learn safety procedures in case of fire, fracture,
conditions and scenarios of the simulators and as such,
or landslide. “PRO3-B delivers cutting edge technologies
trainees have a wide variety of options at their disposal.”
that dramatically increase realism to a level not previously
The company also provides a training model that ensures
seen by the mining industry,” explains Durón. “The PRO3-B
high levels of staff readiness and operational improvement
provides a robust, industry proven high fidelity platform for
while taking advantage of a range of technologies to
driving operator optimization and business improvements.”
ensure the most cost effective solution.
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232
| VIEW FROM THE TOP
BENEFITS OF SIMPLE EQUIPMENT GREGORIO CASTRUITA General Manager of Resemin
Q: What is Mexico’s position in your global portfolio?
the simplicity of the products they are as productive as
A: The company entered Mexico six years ago. We sold
any other underground machine.
our first machines to Mexican and Canadian companies, mostly to Negociación Minera Santa María de la Paz
Q: What is needed to improve safety conditions in
(NEMISA) and Endeavour Silver. When Resemin realized
underground mines?
that product demand was increasing it saw a need to open
A: Mines all over the world, whether they are open pit or
a branch in Mexico that could offer technical support and
underground, operate under high safety standards with
retrofit our clients. The country has granted us important
the objective of eliminating the possibility of accidents.
growth considering we started with only six or seven
For this reason, Resemin makes sure that each piece of
machines and we now manage a fleet of over 30. Currently,
equipment complies with safety norms and standards with
the metals prices have not allowed us to operate as we
the most advanced technology available in the market.
would like but we are still managing to position ourselves
We offer our clients specialized equipment that ultimately
well in the market.
creates safer operating environments such as our Bolter 88 and small Bolter 88 roof bolters and our Scalemin
Q: Why are the Raptor and Bolter technologies especially
scaler. These machines carry out dangerous work that was
innovative and what distinguishes them from competing
previously performed by humans and was the root of a
technology?
great deal of accidents. This is eliminated with the use of
A: Resemin manufactures a wide range of equipment for
our equipment.
underground mining operations, including long-hole drills for developing fronts called Raptor, Bolter equipment, and
Q: How has the fall in metal prices affected your business?
the Troidon for production. Within each of these categories
A: Fortunatelly the growth we have experienced in Mexico
we have 2-4 models and with this variety we are able to
is mainly due to selling simple, productive, and economic
cover different sized projects for mines with production
products. A simple machine does not require so many
ranging from 500t/d to 7,000t/d. The main components
electrical components, which reduces acquisition and
we use in our equipment are well-known technological
maintenance prices. Although it is complicated when
processes that are used by other manufacturers of this
clients implement a savings and cost reduction strategy, we
type of equipment. As a result, we are able to achieve a
see it as an area of opportunity. However, while the metal
high level of trust and we ensure the availability of the
prices remain low we will be subject to a moderate growth.
components. Q: What are your most innovative machines that help Q: Why does Resemin manufacture simple machinery in
clients reduce operational costs?
an environment so focused on automation?
A: Resemin implemented a project two years ago called
A: Resemin’s main focus is to build durable and simple
MUKI, one of the most compact units in the underground
machines that are productive. Underground mining
mining industry with a width of only 105cm to exploit 2m2
operators often prefer simpler machines that eliminate
sections of deposits. There are several narrow vein mineral
the possibility of electrical problems. Companies are
deposits, with a potential that ranges from 60 or 70cm
happy to accept this type of equipment as mining
to a few meters. These mineral deposits can be exploited
operations in Mexico demand it. Our experience in Mexico
with high productivity and a reduced dilution and in this
is positive and our clients know and appreciate the
way volume and quality can be obtained at a low cost.
simplicity of our products. Operation and maintenance
This machine has seen great success in Peru and we have
personnel see the equipment as an advantage because
already sold some of these machines in Mexico, so we are
it makes for easier operations and maintenance. Despite
sure we will see the same success.
233
| VIEW FROM THE TOP
JOINTLY FUNDING DRILLING PROGRAMS FREDERICK DAVIDSON President & CEO of Energold Drilling
234
Q: How has Energold helped its mining clients overcome
the area. We can help fund a program, meaning that if we
adverse market conditions and develop successful
are recruited to drill 700m we can fund the other 300m to
projects?
reach 1,000m, making the drilling process more efficient.
A: As one of the largest drilling players in Mexico we
We try to always develop economies of scale whenever
are currently focusing on brownfield work. Energold is
possible since most of our clients are no longer junior
venturing into underground drilling and is developing new
companies but are now seasoned production companies.
capacities for what is commonly known as a diamond driller, and it now has the capacity to carry out RC drilling
Q What key R&D initiatives in core product offerings has
and open-hole drilling.
Energold Drilling implemented? A: We have developed highly portable S3 Rigs that come
We are still able to provide information to the client at
equipped with a kit and air compressor that allows for RC
approximately 60 percent of the cost of diamond drilling.
drilling. We developed this particular rig in Argentina and
Clients are recognizing the advantages as they do not
this equipment allows for remote and low cost drilling.
have enough funds for full scope projects and are opting
When carrying out RC drilling, as the drill perforates
to reduce the size of their programs. When projects are
downward and pumps air the chips of the destroyed rocks
prolonged we can make a large margin as our crew has
are blown up to the surface and collected in a sequence
time to get accustomed to the program and operations in
cyclone. When drilling open holes it can be even cheaper
I INSIGHT
ROBUST DESIGNS TO MEET SAFETY STANDARDS Africa,” says Tony Caron, the company’s General Manager Tony Caron General Manager for Latin America of MacLean Engineering
René Valle General Manager of Mexico & Central America for MacLean Engineering
for Latin America. “We made the investment in international branches so that we could be on the ground in the hard rock mining hubs around the world and deliver local service and support on four continents.” Caron shares that several
MacLean is known for its signature rock bolter but over
variables had to be considered when setting up a company
the years the company has expanded its product suite
in Mexico, especially since MacLean is a relatively small,
to include a full range of ground support, ore flow, and
family company that is new to the process. “We managed
production support units for the mining and construction
to enter Mexico, Peru, Africa, Australia, and the US in one
industries. “The need for underground equipment that
year,” he states. “Mexico is definitely the most challenging
improves safety, productivity, and machine availability is
to enter yet more rewarding as the results have been
universal but MacLean has learned that the introduction
quite positive just three years in.” This is not only due to
of our products and support also needs to be culturally
regulatory areas but also adaption of the equipment. Caron
adapted to places like Australia, Mexico, Chile, and South
continues, “We initially had to adjust to the geological
since the chips are not collected but rather scattered
activities and has been venturing into new sectors like oil
around the area. This can be beneficial for those that
and gas, geothermal, and infrastructure.
are looking for galena. Once this is identified expansive Q: What benefits has Energold identified in diversifying
drilling can be applied.
its activities and service portfolio in the mining sector?
“We are considered one
A: In 2011, 100 percent of our revenue stemmed from mining
of the most sustainable
figure dropped to 30 percent in 2013. The remaining 70
service companies and our
energy and geothermal, to water and infrastructure. If we
drilling and through concentrated efforts to diversify, this percent entails drilling across a wide array of sectors from had not diversified we would not been able to retain our
rigs encompass the most
human capital. We continue to focus on mineral drilling
stringent environmental
but we also provide additional services. By carrying out
practices”
retain the staff and improve their technical experience. We
Frederick Davidson,
clients appreciate this flexibility.
more projects across different sectors we are able to are able to integrate these services into one project and
President & CEO of Energold Drilling
235
Q: How can you protect scarce resources like water and Generally, our R&D initiatives focus on geotechnical
reduce your environmental footprint?
work related to mining, such as dewatering wells and
A: The S-series rigs are modular, which means there is no
geotechnical services for tailing dams. The latter for the
need to create new roads or remove trees to gain access.
most part are well engineered but any prudent mine
The rigs can be taken apart and connected with hydraulic
manager will make sure samples are taken to prevent
hoses, which reduces our environmental footprint. We do
any accidents. Many of our clients are required by their
not use toxic additives and they are all screened prior to
shareholders
We
their implementation. We have also designed a new rig
also carry out dewatering in wells because many mines
to
conduct
geotechnical
surveys.
that can be remotely controlled and it can drive through
may encounter water inflows that could potentially
the landscape and has minimal impact on the flora. This rig
be dangerous. Since 2011, Energold has diversified its
entailed a US$1 million investment in R&D.
variables between Canada and Mexico. Ground conditions
electrification of the mining industry in Canada that could
in Canada are different than in Mexico so we had a learning
be imported to Mexico.” Maclean is therefore establishing
curve when we first entered the market."
a fleet of electrical equipment that eliminates the diesel engine, and Caron sees these products as part of the answer
In the face of such hurdles, René Valle, the company's
to reduced profitability in the mining industry. MacLean uses
General Manager of Mexico and Central America, says
ground support as a way to help mining companies save
constant communication with the customer is essential.
capital through cost reductions, multifunctional machines,
“The company depends on a structure designed for
electrification, and the development of new products like
resilience in the face of market variations and this helps keep
its LR3 High Reach/Heavy Load machine that replaces
up us afloat,” he points out. “The company’s clients were
the telehandler. “The latter equipment is becoming illegal
not easy to convince but they are responsive to machines
in most countries as it is usually not certified for lifting
that provide safety and are adapted to norms.” Over the
workers and does meet these countries’ braking standards
last two years the government has established many fiscal
for underground mining,” Caron clarifies. “MacLean comes
changes, and companies are struggling to adapt to the
to the rescue by developing its own heavy duty equipment
new landscape. To thrive, players have to learn quickly,
that can replace the hazardous forklift.”
understand, and adapt to the taxes and new procedures. Valle does not believe the mining industry will change Caron emphasizes the value of innovation in the company’s
greatly in the near future but it will quickly grow after it
strategy. “MacLean strives to develop cutting edge products
overcomes the downturn. “Clear rules and guidelines need
and is constantly on the lookout for ways to adapt to new
to be established to support long-term growth in recognition
markets,” he explains. “There is a dominant trend toward the
of how important the sector is for the economy,” he adds.
| MINE SPOTLIGHT
236
LA COLORADA La Colorada was officially acquired by Pan American Silver in 1998. The Zacatecan underground mine is nuzzled among epithermal veins, breccia pipes, and quarries, with limestone replacement in Candelaria, Estrella, and Recompensa. Its overall production capacity consists of 1,250t/d. It processes silver and gold doré, and silver rich lead and zinc concentrates through a cut and fill stopping method. The Pan American Silver property utilizes oxide and sulphide plants to treat oxide and sulphide ore. The oxide plant is a traditional cyanide leach plant geared toward crushing, ball mill grinding, leaching, Merril-Crowe zinc precipitation, and even onsite refining. Its purpose is to process silver and gold doré. The sulphide plant similarly uses crushing and ball mill grinding, with the added bonus of having selective lead and zinc froth flotation circuits that collect silver, gold, zinc, and lead in independent lead and zinc concentrates. The first plant boasts a daily processing capacity of 650t/d, while the sulphide plant offers 750t/d. Pan American Silver gave the green light in 2013 for an expansion project. By 2017, the mission is to increase operations to 1,800t/d. The expansion began in 2014, and encompasses the construction of renovated mining infrastructure, including a 600m deep extraction shaft that has the ability to raise 2,300t/d of ore and waste. It will serve as the mining team’s principal access to working areas. As part of the approved expansion plant, the installation of a new 115kV power line will synchronize with the national electricity grid. The plans even include an upgrade of the mine’s dewatering and ventilation system, and a larger tailings storage facility. In 2014, Pan American Silver invested US$ 17.9 million on the La Colorada expansion, mostly to acquire new underground mobile mining devices, push forward underground mine lateral development, engineering work, and community infrastructure, and endow indirect project costs. More recently,
the
Pan
American
Silver
announced
the
commissioning of the new sulphide processing plant. In comparison to the 750t/d capacity of its previous plant, it will now achieve production rates of over 1,400t/d. Between 2014 and 2017, the company estimates that it will spend a total of US$163.8 million, an investment fully funded by internal resources. The expansion will raise productivity by 67 percent, which equates to approximately 7.7 million ounces, by 2018. In Mexico, Pan American Silver plans to not only expand La Colorada, but also its Dolores mine, in an effort to reduce costs, and obtain a higher profit margin.
237
238
| INSIGHT
INDUSTRY CONTINUES TO WAIT FOR RECOVERY It is well known that underground mining operations are much more cost efficient, and that is why these projects have been flourishing over the traditionally popular open pit projects during the downturn in metals prices. Megamak
PEDRO ROBLES
Mining Manager, Pedro Robles, maintains that in Mexico
Mining Manager of Megamak
and around the world underground mining continues to gain popularity and the number of projects have increased recently. “Most of the longstanding mining projects in
proper facilities, and we continue to include the most
Mexico started as underground mining,” he explains. “Given
qualified people,” he reveals. “Of course, since Cummins
the current market situation, underground mining has been
is a global company and we are their distributer, that says
the choice of investors and operators, and we are pleased
a lot about our operations. Cummins has alliances with
as that is the segment we cover.” Last year, Megamak
some OEMs like Atlas Copco and Sandvik, so they can
anticipated that mining’s importance to its portfolio would
build more effective strategies.” Megamak also distributes
increase to constitute 50 percent, and the company has
Hyundai, Sandvik, and other important brands such as
spent the last 12 months working to develop new strategies
Allisson transmissions. With Allisson, Megamak is working
in order to work closer with the final customer. “We also
to implement all the proper training for technicians and
work for the marine, oil and gas, automotive, power
customers alike. “We already have active transmissions in
generation, and every industrial sector that uses engines
several mines in Mexico and we want to make sure they are
but Mexico constitutes the greatest part of our portfolio,”
still working properly regardless of the engine band used,”
Robles comments. “We are now working with companies in
he expresses. “Our corporate offices evaluate the brands
the northeast region especially with natural gas companies.”
that could be economically beneficial for Megamak, and normally the most prestigious brands bring the most profit.”
In past few years, Megamak has had to reduce its workforce and become more efficient across the board. Robles shares that the company has been more aggressive in maintenance processes and results, which gives the customer the sense of confidence. “This is why we have broadened our activities with technicians and we have promoted training sessions,” he explains. “In general we have been looking for new business opportunities to keep our labor force on board. In the case of underground mining we reduced our workforce and our facilities are now being used to cover other industries as well. We need to seek new projects in
“If the operators do not grow enough it is hard for us to maintain our current position” Pedro Robles,
Mining Manager of Megamak
different markets like industry and automotive.” He believes the main consideration for miners today is the reliability of
Cummins has different emissions levels for different
the acquired equipment. “Companies are always trying to
countries,
reduce their operational costs so they invest in high quality
percentile. Robles comments that the company works
equipment that would boost their operations and would not
very closely with the application engineer in Cummins to
experience technical problems,” he maintains. “Cummins
develop a special calibration for the type of engine the
is working hard with several OEMs so we can find a good
company is working on. “We make sure the engine is
match to build equipment and engines.”
meeting environmental and operational requirements,” he
meaning
different
certifications
for
each
continues. “If we are operating in a high altitude and we Megamak is currently present in 90 percent of Industrias
can see a lot of black smog in the air, we need to work with
Peñoles and Fresnillo underground mines, as well as those
the customer to develop a new calibration for this kind of
of Grupo México. Moreover, the supplier has established
engine.” Robles expects the next two and a half years to
a partnership with Cummins that evolved from a mutual
be flat. “For the next five years there will be limited growth
respect for standards, according to Robles. “We started
and as for Megamak, we will continue to improve our
distributing their engines and we try to follow Cummins’
facilities and our personnel in order to be more efficient,”
strategies in order to be sure we have the right technicians,
he concludes.
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| VIEW FROM THE TOP
INNOVATIVE RAISE BORING APPLICATIONS MATT BLATTNER Executive Manager of TUMI Raise Boring
240
Q: What are the company’s plans for expansion, and what
The advantage of the SR model is that it allows the miner
attracted the company to the Mexican mining industry?
to drill a larger diameter hole, which means a greater
A: The company works exclusively in raise boring although
round can be created with fewer explosives. A 13in burn
we have plans to move into other sectors in the future.
hole would allow a 1m2 explosion, while we can drill a 2.1m
Mexico represents about 35 percent of all raise boring
hole, which creates a 6m2 explosion.
machines on an international scale, meaning the country presents an attractive market share for us. Additionally, most of the ground in Mexico tends to be relatively soft, which is extremely cost effective for raise boring due to high cutter cost. We have five machines currently working in Mexico, three of which were sold to a contractor and the other two were sold to mines. We plan to continue our successful partnership with Part Service Supply. Q: What differentiates you from competitors within the same market? A: There are few companies that provide raise boring equipment, and of these TUMI is the only company that provides the complete package from one manufacturer.
Mexico represents about 35 percent of all raise boring machines on an international scale
Our service provides a guarantee that any issues found with any part of the raise boring equipment can be solved
This provides lower costs and faster production rates.
by a single provider. We understand all the small details
Moreover, a standard raise boring machine has a power pack
that come with running a raise boring machine, and we
unit, a control console unit, and an electrical unit in addition
are extremely flexible and never treat our clients as just a
to the machine itself, which is attached to a cement pack.
number. However, raise boring machines can total US$10
On the other hand, the SR model was designed to be mobile
million, which is a substantial investment for any company
so it is self-leveling, self-pinning, and self-secure. Normal
and it is unlikely to be made in such an environment.
production rate on a raise boring machine is between 80m and 100m per month, whereas an SR model drill provides
Q: What innovative technology have you developed, and
between 200m and 250m per month.
what makes it unique in raise boring? A: Our SBM 400SR machine is revolutionary in that it is
Q: What part does safety play in your business strategy?
completely automated and compact. One was sold to
A: In all of our machines we have integrated fail safes so
Molycorp in the US, which is a subsidiary of Chevron.
that if a component breaks down, there is always a backup
Two were sold in Chile, and some will shortly be sent to
option to continue operating. The machine can drive itself
Australia. There is a significant technological gap between
to the location, level itself at the hole, and position the rake
the standard raise boring machine and the SBM 400SR or
at the level the client requires from 35° to 90°. On a typical
the larger version, which is the SBM 700SR. Slot raising
raise boring machine the set-up time is between 5-7 days
mining, which involves inserting a burn hole in the center
just for the cement floor, whereas with this mechanism the
of a mineral pocket, drilling smaller holes around it and
set-up time is 15 minutes. We reduced human interaction
setting off an explosion, allows the minerals to collapse
with the machine as much as possible so by implementing
into a given space. Without the burn hole the mineral
automatic pipe positioners, automatic upper wrenches, and
would be trapped.
automatic bottom wrenches.
| INSIGHT
SAFETY A PRIORITY FOR US SUPPLIER “We have battery drills and small battery trucks that can
When Oldenburg Group owned Stamler, it introduced battery powered equipment that revolutionized that industry. Oldenburg is now looking to incorporate this
run the length of a shift on a
battery technology into its hard rock mining equipment.
battery, the obvious benefit
run the length of a shift on a battery. The obvious benefit
being that there are no
“This is important in underground mining since it allows
emissions”
power loss, and it has added health benefits for the miners.
Wayne Oldenburg, Founder of Oldenburg Group
“We have battery drills and small battery trucks that can is that there are no emissions,” explains Wayne Oldenburg. deeper penetration, operation at high altitudes without While it might be difficult to introduce products like these in the current market, there is a great deal of potential since the regulations are bound to become stricter.” The
When Oldenburg Group first entered the Mexican market
ADS-500 is a new face pattern system with an interface
in 1995 it was through the acquisition of a small company.
that allows operators to program drill patterns into the
“As we piece together our product portfolio we have
system and use advanced hole location and auto depth
incorporated technological innovations that are in tune
technology to drill faces out accurately and consistently.
to the untapped potential of the market,” shares Wayne
This means there are no field measurements required
Oldenburg, the company’s Founder. “We have dedicated
since everything can be programmed from the cab, and
services and sales teams, and we also have the support
the operator only has to carry out the alignment and
of Matco and Caterpillar in our distribution network.
proceed. Mining engineers can follow up and update it
Throughout the years we have created a full product
in order to fine tune the pattern and ensure the operator
line, incorporating basically everything that one needs
drilled correctly. The added benefit of ADS-500 is the ease
for underground mining. We have grown dramatically
of use, since other similar systems used in the industry
in Mexico and Latin America and these are our highest
must be modified and updated continuously by the OEM.
growth areas.” Ryan Oldenburg, Corporate Development
Oldenburg’s platform makes it easy to modify and change
Strategist at Oldenburg continues, “The acquisition of
patterns since the system belongs solely to the client and
the small company in 1995 marked the entry of the group
no subscription is required.
into the Mexican mining industry and during that time we owned Stamler, a global supplier of coal mining equipment.
The Founder has identified a trend in the demand for
We had manufacturing presence in Australia, South Africa,
smaller equipment within the industry. “For a long time
and the US, and this acquisition helped us develop several
one size fits all machines have been pushed on customers
machines that were integrated into our product line.”
with little adjustment for the specific market,” he laments. “In the Mexican market, size plays a key role as machines
The Corporate Development Strategist maintains that safety
need to fit and maneuver in smaller spaces. We are
has always been a priority for Oldenburg equipment. “We
developing brand new equipment, such as the SV11 scaler,
believe our customers and their employees should never be
while simultaneously downsizing our existing products to
put at risk, and we incorporate safety and durability into
better serve our customers’ needs rather than trying to
every design,” he explains. “This will continue to be at the
force an existing product on the market.”
forefront as new technologies like simulator training and remote controlled operation become reality.” The company has worked closely with customers in Mexico like Industrias Peñoles to develop equipment specifically tailored to the Mexican market. “By listening to the challenges and needs of our customers we were able to develop our SV11 Scaler, which offers the size and features that benefit Mexican mines such as a boom that swings independent of the articulated chassis, SAHR brakes, and a compact size
“We believe our customers and their employees should never be put at risk, and we incorporate safety and
that will fit in smaller tunnels without compromising the
durability into every design”
durability and safety that Oldenburg products are known
Ryan Oldenburg, Corporate Development Strategist of
for in the US,” comments the company’s Founder.
Oldenburg Group
241
| TECHNOLOGY SPOTLIGHT
242
THE HIDDEN BENEFITS OF THE MIGHTY FILTER Electrical power systems, such as transformers, motors, and fuses are colliding with the emerging energy efficiency market as it brings to light consequential problems that involve the distortion of harmonic current flows that require specialized filters to obstruct the damage. The issue is that most electrical equipment was designed many years ago to only use practically perfect sinusoidal currents, while nonlinear loads have a strong presence of harmonic currents that greatly damage the equipment’s current and voltage waveforms. On top of these technical issues, the industry must also take into consideration the alarming fact that in Mexico, the manufacturing and mining industries are the only ones that face an annual loss of MX$44.6 million. 243
Fortunately, Técnica Salgar has been developing reactive power technology since 1976, and offers dual filters that can rescue the mining industry from unnecessary capital loss and inefficiency with a single application. The technology includes automatic absorption filters, and a high capacity dual system that can filter harmonic voltage or currents. The company first introduced rejection filters into the market in 1984, and it was not until the 1990s that it finally created a normalized product line for harmonic current absorption filters. Its essential feature, the technical support it gives to clients and supplies, boosts the company’s reputation to equal that of any other prestigious transnational company. Técnica Salgar’s dual filter technology can save the day by being the only one in the market that can repair the flow of harmonic currents in electrical power systems, as well as adjusting the potency factor, which in turn offers an overall superior energy quality. With the use of this technology the industrial sector in Mexico will be preventing over 1 million tons of CO2 in annual emissions levels. More specifically, the dual filter can reduce 50 percent of total harmonic distortion in wave forms, and save an impressive 7 percent of electric energy. Técnica Salgar’s technology can also increase productivity by 10 percent. The filters are part of many solutions the company can grant to boost process optimization, and electric energy savings for the mining and metallurgic sectors across the Americas. The company declares that it has played an important role in Mexico’s journey toward becoming a modern, dynamic, and open nation by being a technological pioneer in the reactive power field through projects. Today, it is a solid, institutionalized company that is committed to its team, distributors, and clients.
| INSIGHT
SUSTAINABLE TAILINGS AND ROAD SOLUTIONS extend dams,” claims Sanchez. “In Mexico, we are working on revegetation and erosion control projects. The Tensar TriAx Geogrid is our star product because it can contribute
ERICK SANCHEZ
a variety of benefits to our clients and their projects,
Regional Engineer Mexico and
including low cost, high performance, and the use of less
Central America of Tensar
base course aggregate for the construction of the roads.” This product can confer a greater load bearing capacity to the soil, and this resistance allows the equal distribution
Mine access routes can be treacherous yet they serve as
of loads. Geogrid can also confine the aggregate, and
a vital artery connecting the organs of the mine to the
the product can be applied to all roads that typically
supply chain. Trucks with loads of up to 300 tons traverse
experience heavy loads. Without Geogrid, more journeys
the routes daily, meaning the engineering needs to be
and more machinery would be needed.
adapted to certain weather conditions, such as rain, and 244
must be sustainable. One of the services offered by Tensar is the reinforcement of the geomembranes through an
“Vegetation and erosion
electrolyte process. “Problems with soil are industry wide,
control is extremely
and this is the area in which we specialize,” comments Erick Sanchez, Regional Engineer Mexico and Central America of Tensar. Tensar can work both in joint ventures and as a distributor but the company is currently interested in the mining industry, and in roads and infrastructure, with highresistance walls. At the moment, about 5 percent or so of Tensar’s sales are focused on the mining sector. “When we entered the market the Mexican mining industry was
important because these dormant projects could be contaminating communities” Erick Sanchez, Regional Engineer Mexico and
Central America of Tensar
experiencing a downturn, whereas now the sector is beginning to recover,” explains Sanchez. “Nevertheless, opportunities come from capital, and with investors from
There are certain projects that have been dormant for
Canada and Australia, we must constantly make our
three years, says Sanchez, and now SEMARNAT is pushing
offering more competitive.”
the owners of the mine concessions to focus their attention on the environment surrounding them. “We work with
The metal prices are recovering, with the exception of
biologists and specialists in local seeds,” he comments.
copper, so mines in Mexico are more focused on silver
“Due to varying climates and ecosystems, we cannot use
and gold, according to Sanchez.
“We not only sell
the same solutions in Sonora as we would in Guerrero.
products but also an engineered and alternative solution
Vegetation and erosion control is extremely important
that can save projects considerable amounts of money,”
because these dormant projects could be contaminating
he boasts. “Our main clients in Mexico are Grupo México,
communities.”
Minera Frisco, Industrias Peñoles, and Goldcorp. There are several projects that are on hold at the moment, and
In Mexico, Tensar is working with two distributors, TDM
the SEMARNAT regulations force operators to adhere
and Ecomex. “We currently have clients in around 25
to environmentally friendly processes.” Tensar provides
mines, and we expect that next year, we will acquire
solutions for revegetating dam slopes and erosion control.
about six new clients or mines, Sanchez explains. "These
In some mines, tailings dams are full and it is difficult to find
mines are gold and silver, so are smaller. We are trying
a new location for the deposits, but Tensar can extend the
to approach the medium market because the total
dams to provide up to 80 percent more capacity.
SME market amounts to more potential profit than the majors.” Having worked on a great deal of projects in the
The products Tensar produces are all polymeric, meaning
Americas, Sanchez believes that Tensar has the relevant
the acids and PH balance poses no adverse environmental
experience from projects in Chile and Peru that it must
effect. Unlike steel, Tensar products do not corrode,
now translate into the Mexican market. Tensar’s aim is to
making this an attractive option for mining companies.”
prioritize mining to become its second most important
Our competitors do not have the same technology to
sector after infrastructure.
| VIEW FROM THE TOP
GEOMEMBRANES EXPORT POSSIBILITIES JOSÉ FERREYROS Executive Vice President of TDM Group
Q: What position does Mexico play in TDM’s global
out of our products. We have found this to be a successful
portfolio, and how has this position developed over the
approach as it ensures the client makes the expected
past few years?
savings, and therefore increases the likelihood of further
A: TDM Group is a Peruvian company that has been
business down the line.
in operation for over 24 years, manufacturing and distributing three main groups of products, asphalt, geosynthetics, and steel goods. We entered the Mexican market in 2012, focusing mainly on the infrastructure sectors, but in 2016 we decided to expand our focus into the local mining industry. We see a vast amount of potential for our products in this sector, and indeed in other industries such as oil and gas and construction because our products can reduce operational costs for
TDM Group has sold more than 1 million m2 of its polypropylene geogrid for use on the new airport project in Mexico City
businesses in a number of ways. We operate in a total of five countries, Peru, Colombia, Brazil, Chile, and Mexico,
Q: To what extent are there any plans to import
and certainly Mexico will be a large focus of ours for the
geomembranes from Peru to Mexico?
next few years.
A: We started exporting geomembranes to Mexico in May 2016, mainly to ponds and reservoirs but we are
Q: How can your products succeed in reducing costs for
expecting to secure our first order for this line of products
your clients?
from the mining industry in Mexico before the end of the
A: Our Tensar polypropylene geogrid systems for haul
year. We are currently considering developing a second
roads allow for more effective soil recycling and use
plant in Mexico due to the low operational costs and its
thinner paving structures than conventional solutions. This
close proximity to the other markets in North America.
enables the user to transport heavier loads without the risk
We see a lot of potential demand for these products from
of damaging the road itself, which of course significantly
our clients in the US. However, we are waiting to gauge
reduces time and funds usually lost on maintenance
the level of return we get from the plant in Peru, which
works. This is a system that uses technology designed in-
we only acquired in full this year, and these results will
house by our supplier Tensar more than 30 years ago, and
determine if and when we build an additional plant.
is used throughout the mining and transport industries in Peru and other parts of South America. However, from our
Q: Where do you see the most potential for the growth of
experience in Mexico, it is a relatively unknown piece of
TDM Group in Mexico?
technology. That said, we have already sold more than 1
A: I believe that our products are most widely applicable for
million m2 for use on the new airport project in Mexico
the infrastructure industry, and particularly the new airport
City, and we hope to soon attract new clients within the
project, which represents a fantastic opportunity for the
mining and oil and gas industries.
group. There are a number of pending bids for this project which include the use of our geogrid system. Depending on
Q: How does TDM differentiate itself from competitors?
how construction at the site progresses, I would anticipate
A: The key is in the quality of service we provide. We do
that this will be the main focus for TDM Group’s Mexican
not simply manufacture the product and then distribute
operations for the next three to four years. Regarding the
it, but rather we develop a relationship with each client
mining industry, we have only recently turned our attention
by helping them through the installation process and
to this market, and we are still in the process of learning and
explaining precisely how to get the most benefit possible
exploring all the opportunities for our products.
245
246
www.fspm.com.mx direccion@fspm.com.mx (55) 6724-1000
(55) 5546-6890
NO COMBATAS EL FUEGO, EXTÍNGUELO ECOLÓGICAMENTE
Tecnología sustentable para la industria
| VIEW FROM THE TOP
ADDED VALUE SERVICES IN DEMAND SEBASTIAN ROMERO Head of Operations at Walden Group Mexico
Q: What position does Mexico hold within the overall
schemes. The client will then see first-hand the increase in
business strategy of Walden Group?
productivity and decide to purchase the product.
A: Mexico is the third most important market for Walden Group’s global strategy, and the company is constantly
Q: Given that your equipment is used mainly for
looking for new investment opportunities to expand the
underground mining operations, what are the main safety
business in this country. Our focus on Mexico comes as
considerations when developing new technology?
part of the overall policy to expand our existing presence
A: Every piece of equipment used in underground mining
into Latin America, Europe, and the Middle East. We work
must be fitted with reflective labels and lights. It is also
with a number of large mines in and around Zacatecas,
important to consider the CO2 emissions created by
which is ideally placed in the center of the country and
each product because underground mines can become
well connected to the mining regions of Durango and
extremely polluted, hot, and humid. Therefore, one of our
Chihuahua, as well as Mexico City.
main concerns is to reduce the environmental footprint of our products from the manufacturing phase through to
Q: How has Walden Group been affected by the new
operation. This is a growing trend for equipment suppliers
royalty tax on mining production and the downturn on
throughout the underground mining industry in Mexico.
precious metal prices?
We are focusing on diversifying our portfolio, so we want
A: It has become more challenging to sell our capital
to expand our business in all the sectors in which we work.
equipment, our main source of income, because many mine
Rather than a specific sector, our focus is on developing
operators are trying to reduce their costs to adjust to the
the equipment side of our business, and more specifically
lower metal prices. This means that executives currently
the rental side. In the current environment, mine operators
favor trying to repair old equipment to purchasing new
lack the capital to purchase new equipment, and their lines
technology. This has been particularly challenging for the
of credit with financial institutions are drying up. Therefore,
group because not only are operators buying less but there
rental is becoming an increasingly attractive option
is more and more competition in the marketplace. However,
because operators do not own the equipment and they are
we differentiate ourselves by offering a more thorough
thus not so tied down by maintenance and labor costs.
customer service. To complement our after-sales support we also provide a full logistical service by distributing the
Q: How do you expect the Mexican mining industry to
equipment directly to the mine itself if required.
change over the next few years? A: Everything is dependent on the performance of
Moreover, we provide financial support to our customers,
commodities on the international markets. I believe
not only through flexible and split-payment schemes but
the industry will gradually start to move away from its
also by connecting them to banks and other financial
traditionally conservative roots and become more open
institutions in both the public and private spheres. These
to new technology, and this is where the Walden Group
contacts can help our clients seek new sources of financing,
can lead the way. Many of our clients have introduced new
which is particularly valuable given the current pressure
designs into their operations but more often than not they
on balance sheets throughout the industry. We try to
eventually revert to their original systems. This is because
demonstrate in what ways our new equipment will improve
the operators are not well trained to use the equipment
on the client’s existing technology, which is often damaged
effectively, which adversely affects productivity. However,
and therefore less productive. Instead of spending
as mining companies adopt long term strategies, they are
significant funds on repairing old technology, which is a
realizing the benefits that new technology can bring to their
risky investment,we suggest they adopt our product on a
businesses, and over the next two years I expect this to
temporary basis either on trial or through one of our rental
become the norm.
247
| INSIGHT
ACCELERATING THE PACE OF MINING PROJECTS “We are finalizing the Pinos
that every safety aspect is covered. For example, a daily
Altos shaft project with
any mine site in Mexico. Many explorers work on a three-
Agnico Eagle and we are working on a development in
alcohol test is obligatory for every worker before entering strike basis, which means that after three failed tests, a worker is banned from the site. However, Dumas has zero tolerance for alcohol. “We are
Oaxaca at a rate of 50m per
also extremely strict on the issue of Personal Protective
month”
Canada, we recently installed a small strobe-light on the
Equipment (PPE), and following a fatal accident in back of our helmets,” Fimbres explains. “We are the only
Cesar Fimbres, Mexico Country Manager of Dumas
contractor to equip its workers with this device. Moreover, we provide constant safety training for all of our miners,
248
Dumas has a wealth of experience as an underground
and in order to encourage a culture of safety awareness
mining contractor, having worked in the industry for over
we stress that the measures we take are primarily for
20 years. The company began operations in Canada as a
their protection.” In recent discussions, Dumas presented
response to the needs of the major operators for a reliable
Fresnillo with two separate figures in its offer for the San
and high quality contractor to develop their tunnels. As well
Carlos shaft contract. The first was the overall budget,
as Canada, the company now has a presence in Guatemala,
and the second was the percentage of that budget that
Peru and Mexico, where it currently has two active projects.
will be spent on safety. “Fresnillo commented that it
“We are finalizing the Pinos Altos shaft project with Agnico
has never encountered this approach before, and was
Eagle and we are working on a development in Oaxaca at
extremely impressed,” Fimbres shares. “I am sure that
a rate of 50m per month,” shares the company’s Mexico
other contractors will soon be more specific in terms of
Country Manager Cesar Fimbres. “We are currently bidding
their safety budgets, as mine safety is an absolutely vital
for several contracts within Mexico, including the San
concern for all mining operators in Mexico.”
Carlos shaft at Fresnillo’s mine in Fresnillo and the El Boleo mine in Santa Rosalia, Baja California.”
Fimbres communicates that Oaxaca is one of the most difficult states to work in as a miner in Mexico, as the
Dumas built Agnico Eagle’s new 634m production shaft at
local authorities have strict and specific regulations, and
the mine, as well as installing the necessary infrastructure
they view mining projects with a great deal of suspicion.
for the project. “We have worked with Agnico Eagle
“However, we have been working there for 18 months now
on a number of projects in the past, and through these
without a single problem with the community,” he boasts.
experiences, our two organizations have developed a strong
“This is because we make efforts to rent houses, eat in
relationship,” Fimbres boasts. “Although we are not the
local restaurants, and rent local vehicles to transport our
cheapest contractor in the industry, Agnico Eagle is aware of
workers at the end of every shift. We also hire a community
our excellent safety record and high quality of performance,
relations officer for each of our projects to ensure that the
and this was a crucial factor in the decision to hire Dumas as
needs and beliefs of each individual group are respected.”
the contractor.” During the project, Dumas was advancing
With a goal to become the first choice contractor for all
at a rate of around 3.5m per day, including drilling, shaft-
of the big Mexican companies, Fimbres hopes to be able
sinking, and the installation of concrete support structures,
to do that by winning the San Carlos contract. “We want
and Pinos Altos will celebrate the inauguration of the shaft
people to understand that Dumas is a Mexican company
with a ribbon-cutting ceremony in the near future. In fact,
with support from Canada, and that is why we offer
news of the company’s performance on the project reached
Mexican prices with international standards,” he reveals.
the executive board at Fresnillo, which led to the invitation
“When we finished the Pinos Altos project, we inevitably
for it to bid on the San Carlos project.
let a number of people go, but the vast majority of our workers said that they would be more than happy to work
Fimbres shares that when Dumas begins working on a
for Dumas again. This is something we feel proud of and
project, it combines the most stringent safety measures
we hope that we can continue to build on this reputation
from its experience with those of the client, to ensure
in the coming years.”
| VIEW FROM THE TOP
CABLES IN MEXICO BECOMING A PRICE MARKET RENÉ MOLINA Commercial Representative Mexico of Tele-Fonica Cable Americas
Q: What is the company’s strategy for capturing such a
additional growth opportunity thanks to the market gap
significant market share?
our cables can satisfy within those industries as well.
A: Our main strategy is to expand and search for new markets, while constantly improving the quality of our
Q: What type of challenges or resistance has Tele-Fonika
products. Tele-Fonika has a strict production process,
experienced and how has it overcome these?
and a prestigious global service network. We prioritize
A: Our biggest challenge lies in facing resistance to change
the development of specialized cables that are innovative
and new technology. The Mexican cable market has
enough to break national benchmarks in each market.
unfortunately become a price market. Many national and
Within the mining industry, an increasing amount of
foreign manufacturers eliminated intermediary distribution
players are convinced of the mechanic properties that
channels in order to directly supply mines, which in turn
polyurethane can offer for electric pulling cables thanks
started a price war. Sometimes it is difficult to convince
to its physical properties that have double the resistance
users that our cables offer long term savings and added
of other traditional rubber bases. In the case of Mexico
value. Electric cables for mobile equipment in mines are
and South America, the company has a primal focus on
regulated by international security agencies for dangerous
manufacturing electric cables for mobile equipment.
environmental work. In Mexico, users commonly request
Our TPU cable not only has mechanical polyurethane
the international certificate MSHA from our machines as it
advantages, but also, a patented shiny material composition
is related with security and occupational health in mines.
that covers 100 percent of the cable. The product is called Jumboflex Reluciente as it is mostly used in jumbos, drills, and anchors in the interior of mines. It has been quite successful as it eliminates damage and grants security to users that are in total darkness, while our competitors limit themselves to strips that only cover 30 percent. Most of our growth in Mexico is enrooted in the mining industry. Q: In what ways can Tele-Fonika provide more productivity, efficiency, and safety in the Mexican mining sector? A: We are constantly developing strategies to offer
“Electric pulling cables that use polyurethane have double the resistance of other traditional rubber bases” René Molina, Sales Representative at Tele-Fonica Cable Americas
competitive prices that reduce logistic and transportation costs for our clients. The company recently finalized the
Q: What are the main business objectives of the company
implementation of a fiscal precinct in its distribution
for Mexico in the short and long term?
center in the US to generate efficiency both in importation
A: Tele-Fonika’s main objective is to widen its participation
and the customs office. In January 2014, Tele-Fonika Cable
in 8kv wires. Nonetheless, our 600v and 5kv cables are
Americas, negotiated a 3-year blanket contract, for USE-2
well known and used in the mining industry. We have the
type cables, for a large public utility, in the south central
advantage that our commonly manufactured 8kv and 15kv
US. This boosts our position, particularly in markets
pulling cables for mines are rare in Mexico. The company is
that do not commercialize these type of cables. Tele-
working on an intense specification campaign for the latter.
Fonika targets the mining cable market, but third parties
Likewise, our short term objectives are in strengthening
frequently invite it to participate in the cable bidding
our promotion and specialization efforts for our electric
rounds that CFE grants for large distribution projects.
high voltage cables, particularly targeting companies in
That large amount of investment that the bidding rounds
the utility sector like CFE and PEMEX to be able to take
for deepwater extraction and exploration attract is an
full advantage of the country’s Energy Reform.
249
ORE PROCESSING
11
Operators are now demanding the constant extraction of higher volumes and higher grades despite declining reserves. In 2015, global gold production increased to a record volume of 3,000 tons compared to 2,280 tons in 2014. Most of the highest grade gold mines in the world are based in the Americas, in the US, Chile and Peru, giving greater urgency to Mexico’s drive to increase grade. Initial cost of equipment is becoming less important as operators are aware that these investments will help on the road to fast ROI and decreased processing costs. The new green mindset within the industry is also penetrating this notoriously toxic subsector of Mexican mining and operators are seeking new extraction methods that mitigate lasting damage to the environment.
In this chapter, we will examine the emerging procedures for processing ore in a more efficient and effective way. CEOs discuss environmental concerns regarding the use of cyanide in these processes and offer advice on reducing or eliminating lasting damage to the surrounding areas. The most up-to-date technologies that can revolutionize the industry are described in depth. As the sector evolves, industry leaders explain that it is necessary for manufacturers and distributors to grow alongside it and offer tailored and turnkey services with a crucial added value.
251
252
Total lifecycle support FLSmidth’s dedication to our customers is evident through our world-class service and aftermarket support, which are customized to each customer’s level of need and expectation. Our global network of support personnel, coupled with our local customer service teams gives assurance that we will be there when you need us with the right expertise, the right tools and the right spare parts. We’ll keep your equipment running safely, smoothly and properly. We are dedicated to ensuring you have the lowest total ownership cost. For more information, visit flsmidth.com/mineralservices
| CHAPTER 11: ORE PROCESSING 254
INSIGHT: Richardt Fangel, FLSmidth
254
INSIGHT: Leif Lindholm, Metso
256
VIEW FROM THE TOP: Jeffrey Davis, Cyanco
Leonardo Martínez, Cyanco
259
VIEW FROM THE TOP: Mario Muñoz, Croda
260
INSIGHT: Richard Booth, MMD Mineral Sizing
260
VIEW FROM THE TOP: Angel Pedraza, Solenis
262
VIEW FROM THE TOP: Armando Santacruz, Pochteca
263
VIEW FROM THE TOP: Carlos Morales, Masaba
264
TECHNOLOGY SPOTLIGHT: Greener Mining from MMD
266
TECHNOLOGY SPOTLIGHT: NextSTEP in Forced-Air Flotation Technology
267
VIEW FROM THE TOP: Alberto Leal, Cribas y Productos Metálicos
268
TECHNOLOGY SPOTLIGHT: Progressive Dosing for Flotation Systems
270
INSIGHT: Tonatiuh Jiménez, Bosch Rexroth
270
VIEW FROM THE TOP: Juan Jiménez, Ayeasa
273
VIEW FROM THE TOP: José Sánchez, Mettler Toledo
César Correa, Mettler Toledo
274
VIEW FROM THE TOP: Rogelio Gaitan, FIMSA
274
INSIGHT: Alberto Treviño, Tododren
276
TECHNOLOGY SPOTLIGHT: Improved Pump Efficiency with Chesterton Superset
277
INSIGHT: Manuel Escobar, Construmac
253
| INSIGHT
DRY STACK TAILINGS SOLUTIONS FOR WATER SHORTAGES substitution of old equipment with newer technology, and combining high uptime with the latest technology ensures our customers can become low-cost producers.”
RICHARDT FANGEL Director General of FLSmidth
FLSmidth has also been involved in Goldcorp’s Peñasquito
Mexico
project. Around 80 percent of the equipment in Peñasquito was sourced from FLSmidth, meaning ¡ the mine’s daily process rate of 130,000 tons is the ¡ company’s most
254
Given the current market conditions, FLSmidth is taking
important reference in Mexico. Nevertheless, for a global
a two-pronged approach. One is focused on reducing
company such as FLSmidth, these success stories are
the unit cost of processed tons and the other is providing
present around the world. “Success only comes after many
adequate services to the local industry. Under the current
different operating challenges like a change in the ore
circumstances, new equipment installation has dropped
grade causing an impact on the process, or operators that
considerably whereas provision of services has maintained
are not adequately trained to use the equipment,” Fangel
its base because production is increasing, according to
explains. “We work hard to provide the correct solution for
Richardt Fangel, the company’s Mexico Director General.
our customers, which might include training, changing the
With a goal to increase its local service offerings to ensure
installation, or modifying the process but our philosophy is
higher uptime of equipment for customers, FLSmidth
never to abandon a problem.” This mentality led FLSmidth
is constantly focusing on the cost of equipment and has
to adjust its local structure, and the service center in
noticed that Mexico has become increasingly attractive for
Zacatecas is part of this local expansion. “The center
manufacturing. “Innovations carried out on new equipment
is able to offer complete service of a processing plant
can provide energy savings and increase recovery rates
from primary crushing to filtration,” comments Fangel.
while helping with the throughput and production,” claims
“Our local service offerings are part of the FLSmidth life
Fangel. “Companies can actually earn money with the
cycle services, where we combine CAPEX and OPEX in
| INSIGHT
INNOVATIVE GRINDING TECHNOLOGIES LOWER COSTS LEIF LINDHOLM Vice President of Mexico,
have been able to avoid breakdowns since our inspection
Central America and the
programs allow them advanced warning of any potential
Caribbean at Metso
issue, and take pre-emptive action before this issue becomes problematic,” says Lindholm.
Even in light of the chronically low mineral prices around the world the majority of mines remain operational, and for
With the services the company offers, it is able to support
the companies that operate within them efficiency is of the
customers by allowing their processes to generate a
utmost importance. “Essentially, we are a global company,
higher tonnage volume without the need to upgrade to
and we capitalize on the knowledge and experience we
more expensive equipment. Metso essentially corrects
have gathered globally in order to optimize services for
the areas in need of improvement in order to enable the
local customers,” boasts Leif Lindholm, Vice President of
customer a higher degree of accuracy. In certain mining
the company’s operations in Mexico, Central America, and
sites, the company has been able to increase capacity and
the Caribbean. “This applies, not only in terms of products
lower costs, but with no new capital investments. In turn,
but also regarding operational practices.” Metso has
this generates savings on expenditure, and subsequently a
been carrying out inspections for Industrias Peñoles for
higher profit margin. “In the current mining climate even a
over seven years, meaning that both companies are long-
marginal cost saving will create increased profits, and this
time affiliates. “With Industrias Peñoles in particular, we
is one of the key areas of focus due to tightening budgets
one source to benefit the local end user, a concept that
and mining companies may have conflicting interest
ensures high ROI for our customers.”
with the agriculture sector for the same source,” Fangel comments. “The consequences of this are that mining
Although the company normally carries out its own R&D
companies are now more interested than ever in investing
at its Technological Mining Center in Salt Lake City, it is
in new technology within this area.” In November 2015,
continuously working on projects with global and Mexican
FLSmidth participated in the Mining Dialogue between
clients. This may include its latest dry stack tailings concept
Mexico and the Nordic Countries conference at UNAM,
or the Next Step rotor, a product that reduces energy
where SEMARNAT, PROFEPA, and various technical
use by 20 percent while improving recovery rates. “From
Nordic suppliers were able to suggest water efficiency
time to time, we may collaborate with niche technology
solutions. “We introduced the dry stack concept at this
providers, and lately we have signed an agreement with
event but there are currently no dry stack guidelines,”
BASF on arsenic-challenged copper deposits,” Fangel
Fangel laments. “Our impression from that dialogue
boasts. “After adequate internal specialist training these
was that all stakeholders in the industry are extremely
solutions are made available to our local customers.” Apart
interested in applying new technologies to contribute to
from technologies, FLSmidth also brings new concepts to
water availability solutions.”
the market, an example of which is the complete turnkey solution concept. “We have the complete flow sheet
Mexico and its mining industry are changing, according to
technical solution, including the process and equipment,
Fangel. Since the mining industry was opened to foreign
and we can integrate these into a complete process plant
investment in 1993, there have been increasing numbers
on turnkey basis,” he declares.
of new players coming into Mexico. “With the suppliers’ change in mentality from single equipment manufacturer
Historically, Fangel says, Mexico was characterized for its
to complete flowsheet process plant we see a trend of
access to relatively inexpensive water compared to other
a new customer mindset,” Fangel observes. “Our One
countries, and for that reason there was no economic
Source concept allows us to challenge the division of
incentive to invest in water saving technologies. Now that
responsibilities along the chain, and those customers
water shortages are increasing due to the vast increases in
that want to set new standards in the industry should
Mexico’s manufacturing processes, the price for industrial
consider the flexiblility that the One Source concept can
fresh water is increasing fast. “Water is a scarce resource,
provide.”
and the lack of innovative technologies,” Lindholm shares.
Metso was involved in the trial of a state-of-the-art pit
“The main challenge we have faced in the global mining
crushing and conveying system in the Olkon Olenegorskiy
market is its traditionally conservative mindset.” The
GOK iron ore mine in Russia. Before Metso provided its
majority of customers are generally very independently-
solution, Olkon operated a traditional crushing process with
minded, meaning that great effort is needed in order to
no in-pit facilities so Metso’s provision of in-pit crushing
convince them that Metso can be of value as an affiliate.
and conveying essentially saved the company money on
According to Lindholm, the mining industry in Mexico is
operational costs related to truck fleets, mitigating on-
relatively advanced and stable, and he has perceived no
site accidents, and creating an environmentally-friendly
real fluctuations that could pose a potential threat.
reduction of CO2 emissions. With Metso’s technology, the ore can be crushed in the pit and transported on, which is
As an affiliate of all the major mining companies in Mexico,
far more efficient than the traditional method of moving
such as Grupo México, Industrias Peñoles, Fresnillo, and
the blasted ore using trucks. Not only does Metso’s
Minera Frisco, Metso seeks partnerships with strong
system carry out primary and secondary crushing but it
industry players in order to allow its products a stronger
also provides conveying facilities to streamline operations,
market platform. “Life cycle service contracts are the
operating at a capacity of 1,200t/h. “Although we have not
future for Mexico, and these companies constitute part of
yet implemented the Russian system in Mexico due to lack
that chain,” Lindholm indicates. “As part of this service, we
of demand we have a high level of advanced technology,”
offer a comprehensive portfolio, not only products such
Lindholm points out. “We employ quantified grinding
as spare parts but we also offer access to our process
techniques in the mines, which is essentially a grinding
technology and service optimization making Metso a
method that is more efficient in its use of energy, using up
remarkable competitor, not only in the Mexican industry but
to 30 percent less energy to produce the results created
in partnerships all over the world.”
by conventional grinding techniques.”
255
| VIEW FROM THE TOP
SODIUM CYANIDE’S INTEGRAL ROLE
Jeffrey Davis President & CEO of Cyanco
Leonardo Martínez Business Development Manager for Mexico of Cyanco
Q: How has the drop in commodity prices impacted the
even when gold production drops. Nevada reached peak
requirement for your essential products and how has
gold in 2008, and despite the fact that gold production
Cyanco reacted to this?
has since declined by over 50 percent, our sales have
JD: It takes significant resources and a considerable
increased each year. This is not a result of new customers;
amount of time to develop precious mineral resources
it can be exclusively attributed to overall ore grade decline.
so, in our experience, once the mine is operational, 256
provided the cash cost is below the market price and
Q: In what ways have you had to adapt your wrap-around
the company is making profit it will continue mining.
services to the market here in Mexico?
This is an almost independent factor from the gold
JD: We place considerable importance in the International
price, and when mapping production versus gold prices
Cyanide Management Code (ICMC). We encourage
over a 30 year period almost no statistical correlation
all of our customers to comply with ICMC, and most of
can be found between both phenomena. Compared
our customers are currently ICMC certified. We also
to many bulk chemicals, sodium cyanide is basically
provide support in this instance, with complementary
a niche chemistry with approximately a 1 million ton
site assessments, periodic operational assessments, and
market. In terms of overall value, the segment represents
feedback regarding the areas in need of improvement.
a small, single digit percentage of mining chemicals
In terms of community involvement, we hold an annual
and we typically constitute around 2-5 percent of
session in Sonora to train the first responders, federal
the developer’s cash cost per ounce on average. We
police, emergency services, ambulance drivers, and clinics.
like to think of our segment as a mission-critical niche
We offer the necessary information regarding the risks
since without our product not a single ounce of gold
of cyanide, proper handling, and incident management.
can be recovered. We are also a diversified company,
This service is provided in every community in which we
serving a wide range of users from the top five global
operate across the globe.
producers to quite a few smaller single-mine juniors. A large part of our segmentation when deciding upon our
In terms of driving cost, we offer a technology that can
ideal customer base is competitiveness of the resource,
optimize costs and efficiency. When sodium cyanide
the mine’s potential cash cost, adaptability to possible
is dissolved it becomes an extremely diluted solution,
market downturns, and profits on upturns. When the
often around 150ppm. Even in multi-billion dollar mines,
metal price decreases pressure builds throughout the
the molecule is handled by one operator turning several
industry, organizations, and value chains, but this does
dials, and then a concentration measurement is taken,
not reduce consumption since our product is an essential
which should remain within a certain target range. If the
component in the mining process. In fact, consumption
concentration is too low the recovery will immediately
increases with the need to produce more ounces in order
drop, meaning lower production. As a result, there
to maintain revenue on lower gold prices.
is a tendency to err on the high side with regards to concentrations but this increases usage of the cyanide.
The other unique phenomenon in the sodium cyanide
As a response, we have developed our Cyanide Control
industry is that the amount of cyanide required for
System (CCS), which is real-time closed loop feedback
producing an ounce of gold increases exponentially as the
technology that has the ability to take measurements
ore grade declines. This relationship has been modeled
every 60 seconds at anywhere from two to six points,
over many years via the statistically proven Gavin Mudd
continuously analyzing and providing feedback to the
formula, so as the grade decreases there is a need for more
distribution valve, meaning that the operating range is
cyanide, and more ore per ounce. Due to this relationship,
tightened, and often reducing cyanide intensity by 8-10
the cyanide industry enjoys an inherent growth in demand
percent. As yet, we have not installed a CCS in Mexico,
as we have found that if the technology seems overly complex, there is a certain amount of hesitance but we are actively marketing this solution in the Mexican market. Q: What are your previous success stories using the technology that Mexican companies can use as a precedent for potential incorporation of the solution in the country? JD: We are unique in that we provide sodium cyanide both in the solid form and in solution form, which is less
Sodium cyanide represents around 2-5 percent of miners’ cash cost
well-known thus far in Mexico. In our plant in Nevada, we produce a 30 percent aqueous solution basically
We also enjoy liaising with the local community, and we
delivering the product in ‘as-used’ form. In most mines
often join the mining companies in creating dialogues with
in Mexico the product is delivered as solid briquettes
local stakeholders regarding the properties and proper
in a one ton bag or box. The box must be lowered over
handling of sodium cyanide. Generally, people outside of
a splitter and the solid material dissolved by a system,
the mining industry tend to have negative connotations
requiring operator input, manual handling, and hazardous
of the word ‘cyanide’, and we provide useful education
waste disposal. For our solutions customers, the process
to the community regarding the potential risks and most
is much safer, simpler, and less time-consuming. The
effective mitigation of those risks.
mine employees have no responsibility for handling the molecule, as our specialized team takes care of the entire
LM: It is important to note that we strictly adhere to the
process within 45 minutes.
ICMC, and we encourage all clients, even those without official certifications, to follow these regulations to
LM: When comparing the costs of solid cyanide versus the
the letter. Typically, we audit our clients regularly to
solution, the savings are in the range of US$300/t. The
ensure safe practices within the mines, and we provide
recoveries are also optimized, and variations are mitigated
recommendations on any aspects in need of improvement.
since there is an accurate record of exactly what has
We also provide a full route assessment before we begin
been fed into the system. Therefore, the benefits of the
to supply a new mine, evaluating the transport and
technology are manifold.
infrastructure in order to ensure the safest transportation of our product and prevent hazards.
JD: Another angle is that in certain regions like Zacatecas, the mines are located in areas that experience chronic
Q: How has your implementation of the vendor managed
water shortages. The fact that miners must use water to
inventory (VMI) provided an added value for your
dissolve the solid cyanide can be problematic, and millions
customers in the mining industry?
of dollars are often spent on systems to pump water to
JD: The way in which we established our company in
the mine’s location. Therefore, we ship 70 percent of
Nevada 25 years ago centered on this local service model
water along with our product at no charge, meaning the
that we refer to as ‘worry-free delivery’. We have sensors
company does not require nearly as much water to dilute
and telemetry that allow us to monitor tank levels in real
the solution.
time and schedule deliveries to keep each customer’s tank levels within their desired levels. Because our facility
Q: In terms of environmental considerations, how do you
is centrally located and the customers are all within a
help clients implement effective waste disposal practices?
300km radius, we are able to dispatch trucks 24 hours a
JD: Environmental concerns are a significant part of our
day, with constant GPS monitoring. Our customer-centric
ethos. Although cyanide poses a danger in terms of human
model basically manages the entire cyanide supply
exposure it is actually a relatively benign chemical. It is
process on the customers’ behalf. The ultimate goal of
biodegradable, it is not a heavy metal, it is not radioactive,
our worry-free delivery concept is that miners do not
and after use, the hazards are neutralized over time. After
have to consider cyanide. Operators have multiple factors
the mine has spent barren solution, we have technologies
to consider when mining and we want to allow them to
and equipment that we install at our customers’ sites
focus on ore extraction and precious metal recoveries.
to dilute the remaining cyanide down to a weak acid
We are trying to replicate this model on a wider scale.
dissociable (WAD) cyanide solution with exceedingly low
We have a terminal in Hermosillo, a terminal in the Abitibi
ppm levels, effectively eliminating its potential to damage
region of Canada, and we are preparing to build another
the environment.
in Zacatecas.
257
Maximizing equipment availability with Metso’s Life Cycle Services packages. When every minute counts. This is how we make the big di erence, the Metso Way.
Downtime is costly, but there is a solution. Metso has the knowledge to optimize the life of your wear parts. With our Shutdown and Wear Parts Optimization package, you’ll change wear parts less often, minimize planned downtime and optimize your production. Along with our proven planning methodologies, custom-designed tools, and specially trained shutdown crews, you’ll be back up and running. Fast. It’s our guarantee to you. Find out how Metso Life Cycle Services can make the big di erence for your shutdowns at metso.com/LifeCycleServices #TheMetsoWay 258
Discover more at: Metso México, 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
| VIEW FROM THE TOP
GREEN CHEMICALS OFFER SUSTAINABLE ORE EXTRACTION MARIO MUÑOZ Country Sales Manager of Croda
Q: Which are the main areas of opportunity identified by
from 100 percent natural raw materials. We manufacture
Croda in the Mexican mining industry?
monomeric and polymeric emulsifiers for bulk and
A: Greater investment is carried out for optimum mining
cartridge systems and the one brand that has proven its
techniques aiming to ensure higher recovery and cost
mettle is Anfomul. This brand offers low volatility, and has
effective mineral extraction. Croda is a UK company
high compatibility with other systems and techniques.
present in many sectors and is a preponderant supplier to the mining industry, which is a key pillar that holds
Q: What novel products have you deployed in the mining
sway in Mexico’s economy. Our green vision is what sets
industry?
us apart from our competitors. There are two main areas
A: Many chemical companies are lowering their prices
of opportunity for the company, namely the emulsifier
drastically, and low margins leave little space to maneuver.
products for explosives and the mining of ore processing.
This is essentially dumping, and Croda abides by different
In the latter, our priority is to supply green chemistry for
business ethics. Our target is a niche market since we offer
mine extraction, flotation, dispersal, among others. It is
specialized chemical solutions. We invest heavily in R&D
important to invest in a sustainable future. Our customers
to create new molecules that are greener and surpass
face growing demand to adopt greener products. These
the performance of traditional, aggressive alternatives.
can improve performance, increase purity, provide safe
One of the novel products for flotation is the Crodamide,
use, and in some cases be readily biodegradable or made
and there are two alternatives. Firstly, there is the MP, a
from renewable sources.
saturated fatty amide that enhances the flotation of nonsulphide and industrial minerals such as potash, phosphate
Q: Which main products have proven their mettle in the
and iron ore when blended with a typical amine collector.
Mexican mining sector?
The second is Crodamide O, an unsaturated fatty amide
A: The extraction of gold and silver uses aggressive
that enhances the flotation of non-sulphide minerals when
and dangerous chemicals that are hazardous to the
blended with an amine collector. The benefits of this
environment. Croda seeks to reduce this by supplying
solution are that it is green and it increases the recovery
products that have green credentials and deviate from
rate, which is a primordial concern for mining players.
this destructive mentality. The extraction, processing, and transportation of minerals is likely to generate significant
Q: What sustainability and green practices have you
amounts of airborne respirable dust. In nonmetal, stone,
incorporated in your products?
metal, and sand mining operations the generation
A: As a European company we uphold strict environmental
of respirable silica dust is a primary concern for our
regulations and transmit this concern to the Mexican
clients, and we have a range of dust control chemicals
authorities, particularly to SEMARNAT. We hope the
and solutions. We supply high performance surfactants
government will implement environmental regulations in
into the mining industry and we manufacture a range of
an efficient manner and reduce bureaucratic processes.
biodegradable wetting and binding agents suitable for use
Croda is part of the everyday lives of people and there is
as dust suppressants in spray techniques. They provide
a synergy among the business divisions. For example, the
an array of benefits from decreased water usage, which
homecare division is concerned with water management
lengthens machinery lifetime, to increasing personnel
in order to reduce contaminants and increase the recovery
safety. Some of Croda’s products benefit water based
of the source. This expertise is transferred to the mining
systems by improving particle wetting rates and reducing
sector, the country’s main water consumer. We also offer
water droplet coalescence. Selected products have
water and soil remediation solutions that are valuable
some additional desirable properties such as inhibiting
when rescuing contaminated sites and in the process of
corrosion, which act as foaming agents and are made
decommissioning mining pits.
259
| INSIGHT
SOLID FOUNDATIONS FOR NEW TECHNOLOGIES Booth maintains that the company’s strength has always been based on its focus on three key areas, mineral sizers
RICHARD BOOTH
to break and process minerals, feeders to efficiently
Senior Vice President for
deliver material for processing, and in-pit sizing and
Latin America of MMD Mineral
conveying (IPSC) Solutions. “Essentially the same basic
Sizing (MMD)
design that was originally developed in 1978 remains at the heart of the patented MMD Twin Shaft Mineral Sizer,” he comments. “We also developed the heavy
260
Alan Potts was working for the British Coal Board when he
duty apron plate feeder. In order to offer our customers
noticed there was a large amount of material shedding from
higher capacity sizer machines we needed to provide
the longwall face in slab form during the traditional mining
a regulated feed of material into the sizing plant. The
process, which was cutting the underground belts. Potts
feeder did this and crucially could handle the undefined
designed a machine that could not only size coal at a rate
impact forces from direct loading.” Cementing its global
of 2,000t/h but could accept infeed pieces of up to 1m in
reputation as a leader in mineral sizing technology, MMD
length, while depositing material in the centre of the belt for
has since worked to develop mobile, semi-mobile, and
efficient transportation out of the mine. The unit was fitted
static solutions. The majority of the company’s Mexican
with a gearbox and a motor, and installed onto the longwall
clients are small aggregate producers using 600-800
panel. “This underground, mobile, 2,000t/h sizer, based
ton machines, he shares, and its mission is to open a
on a concept called “pick and scroll”, was the first MMD
spares and maintenance facility within the next two years,
product,” explains the company’s Senior Vice President for
providing the next level of local and dedicated support to
Latin America, Richard Booth. “Although originally designed
customers.
solely for underground use, Mineral Sizers now handle over 75 different minerals for both surface and underground
The Senior Vice President believes that cost reduction is
applications in more than 60 countries worldwide.”
the most significant contribution that MMD’s products
| VIEW FROM THE TOP
STRIKING A BALANCE BETWEEN COST AND INNOVATION ANGEL PEDRAZA Sales District Manager at Solenis
Q: What position does Solenis hold in the scope of the
Q: How does Solenis transform itself from a product
overall mining chemicals global market?
provider to an integrated solutions supplier?
A: Globally, we support some of the largest precious and
A: With our global manufacturing capacities, in-house
base metal mines in the world and are solving tough
R&D, and local service and applications advisors, our
problems for customers in over 50 countries. Within
approach already ensures higher client productivity and
the global mining chemicals market, we specialize in
competitiveness. A copper mine located in the northern
value-added solutions including antiscalants, grinding
region of Mexico had a problem due to declining ore grade
aids, viscosity modifiers, flocculants and coagulants,
and as a result, its production processes, including dynamic
dust control, flotation and utility water treatment. These
leaching had to be adapted. One of the variables Solenis
solutions are supported by equally strong experts and an
identified was the mine’s use of seawater rather than
equipment portfolio including our OnGuard portfolio of
fresh water, which led to increased gypsum scale. With
analyzers, controllers, and data management services and
the involvement of both regional and global applications
feed equipment.
experts a thorough understanding of the customer’s
offer to customers. “Currently, we are attracting more
altogether or moving toward short-haul truck and shovel
business than ever in Mexico because the installation and
operations only,” he claims. “High throughputs and short
operating costs of our equipment is much lower than most
equipment relocation times combined with reductions in
of our competitors,” he boasts. “Our machines require no
greenhouse emissions, dust and noise pollution, facilitate
civil works because they are fitted onto mobile structures,
Green Mining Solutions.” MMD has developed high-capacity
and this can save several million dollars.” As a result,
systems that work with hard rock rated up to 300MPa, and
many companies are now approaching MMD to request
the company’s sizers are capable of processing 10,000-
replacements for their existing systems. The door has
12,000t/h. “Our flagship fully mobile sizer is currently
opened for the company to begin working in new sectors
located at the Pingshuo coal mine in China, and is fed
in Mexico, such as the limestone industry.
by a P&H 4100XPC shovel,” Booth reveals. “The rig loads material directly onto a conveyor belt system at 9,000t/h,
For Grupo Calidra, MMD removed its old crushing process
eliminating the need for trucks.”
and replaced it with its own technology, increasing the percentage of usable material from 28-36 percent, making a considerable difference to the year-end profit margin, especially when precious metals prices are down. “Nevertheless, a culture of continuous innovation with the ability to provide custom solutions keeps our technology at the forefront,” Booth maintains. “Many of the machines
261
we installed 30 years ago are still in operation and remain highly productive.” Global mining is changing, according to Booth, and
mobile operation, either eliminating the need for trucks
MMD’s sizers are capable of processing 10,000-12,000t/h
process was developed and a robust product selection
processes, and lead to significant increases in gold
process was used to select a new Solenis anti-scaling
recoveries. Mines using our VM and flocculants are seeing
product for low pH conditions. The performance of the
significant increases in thickener solids densities and ore
solution was verified via our OnGuard 3S scale analyzer on
throughput. We optimize product dosage with our real-time
OnGuard Online data management software. Additionally,
OnGuard 3S scale analyzers and OnGuard P-controllers.
companies are recognizing that there are more efficient and sustainable ways to work. As a result, mine operators are also looking to reduce their environmental impact. “MMD’s equipment is ideally suited for mobile or semi-
we noted that the mill recovery rate was decreasing so we investigated through use of our viscosity modifier
Q: How do you persuade clients that your solutions can
(VM) solution to increase the amount of solids in the
help them achieve production efficiency?
throughput. Using a holistic plant view, Solenis carefully
A: We have a dedicated mining R&D laboratory that
assesses how the implementation of our solutions impacts
develops
both downstream and upstream processes in order to
specifically for the mining market, including our patented
ensure the client has the highest ROI across the entire
Zalta chemistries and OnGuard equipment. With decades
production chain.
of expertise, we also possess the global resources to share
exclusive
advanced
products
designed
best practices from mines all over the world. For example, a Q: How is Solenis improving its complex mining chemicals
gold mine must have a high pH in its heap leaching process
to maintain costs and productivity?
in order for the cyanide to be as effective as possible in the
A: Continued investment is critical for the mining industry
extraction of gold. We had a client whose pH was lower
to both increase reserves and lower cost per ounce of
than 11 because its anti-scaling solution could not operate
production. Through our INNOVA R&D process, we have
at that level and this impacted the recovery. Rather than
developed Zalta antiscalants that eliminate the need
lowering the pH and decreasing the overall recovery, we
to spend US$500,000 on cleaning and repairing pipes,
suggested a new anti-scaling solution that could operate
eliminate the need to spend millions of dollars on redesign
at optimum pH levels.
| VIEW FROM THE TOP
REDUCING THE DISTANCE TO MINES ARMANDO SANTACRUZ Director General of Pochteca
262
Q: How is being a macro-distributor of Shell lubricants
solvent processes to reduce the companies’ environmental
supporting your position and presence in other industries?
footprint. Fees are reduced for residues by recovering the
A: Mining has been an important industry for Pochteca but
customer’s dirty solvent and delivering top specification
catering to mines is expensive, due to distance or lack of
solvent. We can redistill these solvents and return them to
existing road infrastructure. Therefore, the more products
the company as fully functional products again, which is
that can be loaded onto one truck, the lower the logistics
cheaper than a virgin product.
overheads are for us. In the same way, if a sales person has to make the trip to a mine, it is more beneficial to offer
Q: What added value in terms of compliance or green
many products simultaneously in order to keep travel
chemicals are you bringing to the market?
costs down. Offering several product types simplifies the
A: We do not yet have any mines in the closed-loop
process for our clients and allows Pochteca to save on
system but we have paint and automotive manufacturers
logistics by offering our range of over 5,000 products at
operating
once. Industrial procurement is complex in itself, and now
investigating how we can extend this to other applications,
many companies require their suppliers to be certified as
and searching for products that are as environmentally
reliable. We do not operate the low-cost hub and spoke
inert as possible, while keeping in line with market trends.
model in terms of location, preferring to be closer to
There will always be certain products that are dangerous,
our clients so that we can guarantee faster delivery than
and will need to be handled with care. There will never
competitors.
be a clean way to use cyanide. However, we can always
in
this
program.
We
are
continuously
work to reduce the risk of a client being involved in Q: How has the drop in commodity prices influenced your
litigation due to an accident during the delivery process.
inventory and the range of products that you offer?
As a member of the National Association of Chemical
A: To compensate for the drop in mineral prices, everyone
Distributors (NACD), we were the first company in Latin
needs to be more efficient and ensure that logistics are
America to be certified as a responsible distribution
extremely well organized. We have invested a great deal
process company. Following NACD auditors visiting and
of time, money, and effort into improving our sales and
analyzing our facilities every year, we became the only
operations planning, as holding inventory in a deflationary
company with this qualification outside of Canada and
environment is relatively expensive. As a result, we have
the US.
reduced our inventory quarter on quarter in order to reduce the impact of price reductions without compromising the
Q: How do you plan to focus your efforts on increasing
breadth of our portfolio offering and its timely availability.
your 34 distribution points across Mexico?
Our proximity to our clients’ facilities means that we can
A: For those especially hard-to-reach locations we position
also reduce lead times, allowing our customers to trim their
containers nearby with supplies that are restocked on a
inventory levels and lessene waste caused by accidents
weekly basis, so as not to allow our clients’ supply to drop
during storage. This minimizes the risk of over purchasing
dramatically. Pochteca has been reinforcing its presence
a product and incurring price erosion costs, and optimizes
in all strategic locations while training a more robust and
the companies’ working capital.
technically proficient sales force. Our clients deal with an account manager on a day-to-day basis, as well as with
Q: How are you helping companies achieve efficiency and
specialists that can provide them with more detailed
optimization in their chemical consumption?
information on each product area. These specializations
A: Pochteca designs and creates customized blends for
include mining processes, water treatment, and sanitation,
solvents that can be adapted to various environments and
among other activities. Nevertheless, we have a long way
applications on demand. We also produce closed-loop
to go in terms of our portfolio.
| VIEW FROM THE TOP
CUSTOMIZED SOLUTIONS TO MEET ANY MARKET NEED CARLOS MORALES Director Latin America of Masaba
Q:
What
specific
characteristics
differentiate
your
their operations. For this reason our equipment is able to
products and make Masaba stand out from other brands?
meet the new needs of the sector. When we sell any unit of
A: Our equipment is characterized by its robustness, and
equipment, our distributors offer training to the end user,
as a guarantee of its quality, we offer the longest warranty
but if we do not yet have a distributor in the territory we
in the market over five years, regardless of whether the
directly train the end user.
equipment is standard or customized. Moreover, we face no shipping or importation problems as our equipment
Q: What products in Masaba’s portfolio are your most
meets NAFTA specifications so there is no need for
popular?
our customers to pay customs tariffs and most of our
A: One of our best sellers is the Magnum Telescopic
equipment has a kingpin for easy haulage by a tractor.
Conveyor, which is equipped with different features and
We have a team of 16 people at our factory capable of
options. It can extend from 130-190ft in length, with
fulfilling an order for any customized requirement we
widths from 36-60in. This is an extremely interesting
receive from our customers. We recently sold three
product as it has a stinger feature that can move without
spreads to the Baffinland iron mine in north Canada.
any cable or winch, and is equipped with the fully
These spreads are equipped with crushers, screeners, and
patented Masaba Tracking System. It is hydraulically
telescopic conveyors with a capacity of up to 2,500t/h.
controlled, more stable, more efficient, and requires
This equipment is operating under harsh conditions of
less maintenance. It also has an extremely user-friendly
-40°, so we fully adapted our equipment to withstand
flexible automatic PLC. This can be used in mining,
the environment.
aggregate, and seaports to load ships and barges. The second most popular product is the Low Profile Truck
Q: What are the main challenges mining operators face in
Unloader, a portable piece of equipment used to unload
conveying, crushing, and screening in Mexico?
trucks with belly dump or rear dump configurations. It is
A: The main challenge lies in becoming more effective and
a perfect match for the Magnum Telescoping Conveyor.
efficient in their business by purchasing more up to date
Both pieces of equipment can reach a rate up to 1,500t/
technologies and using less fuel, maintenance, and labor in
hr at 100lbs/ft3.
grupo-pochteca-mineria-curvas.pdf 1 18/04/2016 04:32:40 p.m.
263
| TECHNOLOGY SPOTLIGHT
264
GREENER MINING FROM MMD MMD is a company that is recognized as a global leader in in-pit sizing and conveying technology (IPSC), and has been providing greener and more cost-effective solutions for operators worldwide for over 35 years. After five years’ development, MMD has designed and built the world’s most advanced fully mobile sizer. The rig is the third generation model in a series of high-capacity mobile units that removes the need for trucks by processing and delivering material onto conveyors. Developed in China, the Fully Mobile Sizer can process 9,000t/h of overburden, and reaches peaks of 14,000t/h. Commencing operations in 2013, the rig has already generated significant waves in the industry. Working closely with a shovel, the rig remains in position to receive material into the hopper for subsequent processing and discharge onto a conveyor. Thereafter, the material is returned to ground to undergo processing or leaching, depending on the application. To match the production capabilities of MMD’s IPSC system, approximately two shovels and 34 trucks would be required to work at maximum efficiency, operated by over 60 workers, according to the company. At the heart of the Fully Mobile Sizer sits the patented Twin Shaft Mineral Sizer™, fed by a short, heavy-duty Apron Plate Feeder capable of processing more than 100 tons of material dumped directly onto its plates. The Mineral Sizer can handle any combination of wet, sticky, or dry material and breaks oversized material through stress, bending, tension, and sheer force before delivering a consistent, three-dimensional product size. Mobility is provided by a single pair of rough terrain crawler tracks, reducing the need for ground preparation and enabling the Fully Mobile Sizer to go wherever the shovel is. Tracks positioned at the front and rear of the structure eliminate any issues with the center of gravity, which is a problem with in-line track units. However, cross-tracks provide increased maneuverability and the Sizer can be turned on the spot. The Low Profile Mobile Sizer has been designed for ease of operation and maintenance. The operator’s cab on the top level forms the nerve center of the rig, acting as a central hub where all operational processes are safely controlled and monitored 24 hours a day. An automated safety startup system via a Programmable Logic Controller (PLC) unit operates the Discharge Conveyor, Transfer Conveyor, Sizer, and the Feeder in sequence, which is the reverse order generated during operation. This ensures safe initialization and eliminates human error, which could result in damage to equipment.
265
| TECHNOLOGY SPOTLIGHT NEXTSTEP IN FORCED-AIR FLOTATION TECHNOLOGY
turbulence eddy dissipation in comparison to those
In an environment of low commodity prices operators
obtained by the traditional non-slotted design. Froth
are increasingly seeking new solutions that will optimize
mobility and coarse particle recovery is also significantly
performance and improve recovery rates. FLSmidth’s
improved with the nextSTEP design due to the preferred
nextSTEP advanced flotation mechanism can dramatically
slurry flow and positive froth movement pattern generated
improve mineral-bubble attachment rates, which leads to
at the top of the tank. Other notable features include the
an increase in recovery of up to 5 percent. The technology
system’s stronger air dispersion near the rotor/stator and
leads the market in terms of low power consumption
stronger pumping effect beneath the rotor, as well as a
with a 10-15 percent reduction compared to FLSmidth’s
higher air hold-up. Testing based on a range of impeller
closest competitor, which in turn leads to a decrease in
speeds also found that the nextSTEP provided excellent
operational costs. Long-term operating costs for greenfield
mixing capabilities.
projects are reduced further as a result of optimized wear distribution and extending the lifespan of the rotor/stator,
In comparison to similar technologies, testing showed that
which was created through extensive studies and in-plant
wear on nextSTEP was distributed more evenly, which
testing. Brownfield projects can also benefit from the
prolongs the technology’s lifespan due to a lack of focused
technology as the new mechanism can substitute existing
wear on certain parts of the technology. As a result, use
FLSmidth forced-air flotation technologies and retrofit is
of FLSmidth’s forced air-flotation system not only means
possible in any forced-air flotation cell.
reduced replacement frequency of the component but also reduces downtime. The rotor can even be operated in
266
The nextSTEP rotor’s innovative design includes patented
reverse, which further increases the technology’s lifespan.
slots in the stator, which increases flotation efficiency due
The nextSTEP was developed after the testing of over
to higher homogenized turbulence dissipation. The results
200 different rotor/stator combinations, demonstrating
of laboratory testing of this slotted design revealed a
FLSmidth’s commitment to taking the next step in forced-
dramatic improvement in the attachment rate and lowered
air flotation technology.
| VIEW FROM THE TOP
HIGH-RESISTANCE SCREENING SOLUTIONS ALBERTO LEAL Market Development Manager of Cribas y Productos MetĂĄlicos (Cribas)
Q: What trends have you noticed in the mechanical
We always try to work directly with each individual
screening industry in recent years?
customer to develop specific solutions to their problems
A: The company was born out of the Mexican mining
so we are constantly innovating hand-in-hand with our
industry with the goal of filling the need for a Mexico-
clients. Word of mouth is vital in this industry, and we
based sieve manufacturer. We have been present in the
gain a lot of new customers because our existing clients
market since the beginning, growing with it, and we have
recommend us to their co-workers and acquaintances
led many of the technological developments. Originally,
throughout the mining community.
the company only manufactured wire and perforated plates but over the years the prevalent material used in the screening process has been switched to more synthetic products like rubber. Lately, we have seen several hybrid options arising with rubber and wire conversions, where the elasticity of the rubber is complemented by wire cloth to achieve more efficiency. We only vulcanize natural rubber, which improves the efficiency of the material and the wear life when used in screening applications.
“Thanks to M&As, the community is becoming more international and forwardthinking� Alberto Leal, Market Development Manager of Cribas
Q: What products is Cribas developing that are breaking
Q: What are the main challenges the company has
new ground in terms of innovation and technology?
overcome during its long existence?
A: We have developed a self-cleaning screen that has been
A: Like many other businesses, the main challenge comes
on the market for some years. This mechanism allows the
from falling metal prices and issues associated with
wires to vibrate independently of one another to help with
economic recessions. I believe this is due to the family-
binding issues. We are the only company in Mexico that
owned structure we have in place, which allows us more
can manufacture this type of screening system, and in fact
flexibility in the face of market gyrations. In the future,
we can manufacture every available screening system at
we will be focused on consolidating our customer base
our plant in Monterrey, making us unique in Mexico. We
both in Mexico and externally. We have distributors in
have also started using different materials in our wire. We
every country throughout Central America and South
have developed a special formulation high-carbon wire,
America, and we want to strengthen our presence in this
which is stronger and more resistant than traditional wire
region specifically. Additionally, we have recently opened
compositions.
a sales office in the US, and over time we want to be able to offer our customers there the same level of service we
Q: How do your clients react to you offering a new
offer our clients in Mexico. Moreover, our products can
product?
be used in a variety of different industries, and although
A: It is true that there is a certain resistance to change
we have traditionally been focused on serving the mining
within the industry but thanks to the wide array of
industry we also want to expand our network into the oil
mergers and acquisitions in recent years, the community is
and gas, architectural, and food industries as they can also
becoming more international and therefore more forward-
benefit from our technology and local service. We invest
thinking. We offer initial trial periods for all our new
the majority of our profit into product development, plant
products, and because we have been working with the
improvements, and customer service in order to provide
majority of our clients for many years, they trust that our
our clients with a higher quality product, faster lead times,
recommendations will provide a solution to their problem.
and superior service.
267
| TECHNOLOGY SPOTLIGHT
268
PROGRESSIVE DOSING FOR FLOTATION SYSTEMS As the technology of separating minerals from gangue has evolved, scientists have learned to adapt the process to a broad range of mineral types, including copper, lead, and coal. To extract the maximum benefit from flotation, operators must control flow rate using a dosing mechanism, which accurately and efficiently facilitates the management of a wide reagent flow range. Electro
Controles
del
Noroeste
(ECN),
a
systems
integrator with more than 25 years in the field, has designed a progressive dosing system that uses precise flow measurement tools integrated into its core to reach a reliably high grade on in-plant experiments. The UDLine system is a robust and accurate reagents dosing solution that concentrates the highest possible number of dosing channels in each unit, while simultaneously providing improved control of reagent distribution. This serves to minimize the quantity of intermediate tanks and containers required for feeding peristaltic or diaphragm pumps, creating a much more compact system than traditional solutions. The system is fitted with process control blocks, allowing it to accurately calculate mass balance inside the flotation and grinding circuits, revealing the results in g/t. Moreover, the process controller, which can be easily integrated into a central distributed control system (DCS) through Profibus DP, Modbus, or Ethernet IP, allows for the UD-Line solution to be installed into an established in-plant process with consummate ease. Once installed, the UD-Line can be fed by the use of magnetic drive centrifugal pumps or even gravity-fed arrangements if the plant design permits. Depending on the requirements of the operator, ECN’s design can also be set to operate autonomously without relying on a central DCS. The versatility of the UD-Line system allows for the construction of reliable experiment designs based on the constant stream of statistical data generated. This enables the operator to find, through a series of tests, the optimal reagent quantity needed in variable chemical processes, all done with a reliable system inside the plant. The technology facilitates the management of a host of reagents, ensuring higher performance, reliability, and precision of the flotation process while also considerably simplifying the dosing process and reducing the risk of reagent handling. ECN’s system has been implemented in two of Mexico’s largest copper concentrator plants, achieving significant increases in the percentage of mineral recovery.
269
| INSIGHT
REMOTE MONITORING SYSTEMS TAKE CENTER STAGE markets,” shares Tonatiuh Jiménez, Sales Manager at Bosch Rexroth.
TONATIUH JIMÉNEZ Sales Manager of
As part of the Bosch family, Rexroth is not limited to
Bosch Rexroth
offering hydraulic control solutions for mine operations. Benefitting from its parent company’s expertise in the automotive, software, and agriculture sectors, Rexroth
Industry 4.0 is gradually taking over industrial sectors
has the ability to develop catered solutions for the entire
across the world, and mining is no exception. Also
value chain. It is in this variety where the company’s true
known as the fourth industrial revolution, Industry 4.0
differentiator lies, according to Jiménez. “The value of
encompasses trends including the Internet of Things and
our service lies in the flexibility and adaptability of our
cloud computing. In the quest for improved reliability and
mining products.”
pinpoint accuracy, mine operators are increasingly open 270
to automation technology and data exchange systems.
One such solution is the Rexroth Remote Monitoring
This plays right into the hands of Bosch Rexroth, whose
System for hydraulic components that drastically improves
hydraulic control systems can be adapted to fit the whole
communication links between user and machine via fiber
range of mineral processing operations.
optic digital signaling programs, says Jiménez. “The system enables the user to monitor product performance
“A variety of extraction processes are in employed in
and temperature in real time through a portal,” he
mines throughout the world, and Rexroth has therefore
explains. “It is connected to the internet, which means
developed a range of products including hydraulic
the client is able to make an instant, more accurate, and
motors and power units which can be adapted to regional
more informed decision from anywhere in the world.”
| VIEW FROM THE TOP
IMPROVED WATER CONTROL FOR REDUCED HUMIDITY JUAN JIMÉNEZ General Manager of Ayeasa
Q: What was the conceptual idea behind the creation of
than 12 hours to process in laboratories. Players had to
Ayeasa?
pause operations to manually collect samples, a risky
A: The design of our equipment started in a laboratory
act considering how significant mining processes are.
and we have found ways to fit traditional laboratory
Then, laboratories underwent a cumbersome process
services into a convenient device that saves not only time
of weighing the concentration, drying it, and evaluating
and money, but lives as well. Ayeasa fills two main gaps
it.
in the mining market, operational measurement, and
time. Our equipment automatically processes data by
equipment durability. Due to the heavy duty demands
the second from all of the material being processed in
of the mining industry, players learned to accept the
belt conveyors, and displays the information instantly.
frequent rotation of equipment like tires and spare parts.
It is a dynamic, precise, and practical way to measure
Our equipment is made to survive the volatility of the
concentrations. Our first client was Pan American Silver
industry, and even our oldest clients still use devices that
in Sonora, the second one was Minera Autlan, a company
we sold them 15 years ago. In the past, important data
whose equipment is still in operation today, followed by
such as the percentage of humidity would take more
Industrias Peñoles, and Grupo México.
Ayeasa’s
methodology
greatly
shortens
waiting
This remote control is particularly vital in underground mines, and as a result the majority of Rexroth’s mining clients are in this segment. “Underground mines require compact, safe, and efficient machinery," he explains. "Rexroth has developed solutions specifically designed
“Underground mines require compact, safe, and efficient machinery. Rexroth
for the Mexican market."
has developed solutions
This attention to detail and focus on technological
specifically designed for the
development is typical of the Bosch group, which reinvests
15
percent
of
sales
on
research
and
development. This work has a specific goal, which is to construct applications designed to solve client-specific
Mexican market” Tonatiuh Jiménez, Sales Manager of Bosch Rexroth
issues rather than saturating the market with generic products. “We want to offer our clients a tangible
developed infrastructure. However, we are determined to
solution to their problems,” Jiménez stresses.
bring this technology to our clients in the sector because it represents the future of the industry.”
In Mexico the process of introducing groundbreaking technology is not always a smooth one, with top executives
Aiming to continue to play a leading role in this future,
known for being risk averse and unwilling to change an
Jiménez explains Rexroth’s ambitious plans to expand its
installed product that is delivering results. However, the
presence in the local mining sector over the coming years.
sentiment is gradually shifting toward a more open-
These plans have been encouraged by the improving
minded approach, and Jiménez believes Rexroth to be
precious metals price environment in 2016. “We will
at the heart of this process in Mexico. “Bosch Rexroth
be opening new offices and a workshop in Mexico City,
has welcomed the growing trend of inter-connectivity
which will perform state of the art hydraulic tests,” he
between machinery and labor force,” he claims. “This
reveals. “We strive to create stronger client relationships
is yet to be fully integrated into the mining industry in
by supporting them in their search for efficiency and
Mexico due the challenging project locations and under-
productivity.”
Q: Why are operational measurements significant for the
ships. Any off-balance percentage must be taken care of,
mining industry and how does Ayeasa intervene?
often by delaying the shipment so the concentration can
A:
humidity
dry. Drastic measures are taken as after a certain percentage
percentages as material that is slightly out of range can
Clients
are
particularly
worried
about
of humidity, the dirt can no longer absorb the moisture, and
be completely ruined, even if it is only by 1 percent. Water
water mirrors start to form. In everyday situations, the risk is
has the ability to transform the property of minerals and
minimal. However, in the case of a giant ship with 100,000
their viscosity. For instance, the copper mining industry
tons of concentrated material and a humidity level over 2
processes extracted material with the copper’s sulfuric
percent, the liquid can move to one side and easily flip the
acid, passes it to an electrolytic system, and creates a
ship. At the Guaymas port in Sonora there is a strict limit
concentration that is completed with acid. Humidity is a
to the amount of material and humidity that is permitted.
huge danger within this cycle as it can destroy its efforts.
Our equipment plays an important role in these types of
Our company adapted to the mining industry upon
situations as operators are more willing to take the time to
entering by implementing a precise humidity control, as
collect data if a ship can be analyzed in less than a minute. Our
a strategy to save money, time, and avoid operational
machines, equipped with infrared lights, scan the material
downtime.
when boarding the container through a conveyor belt. It is settled at 25cm above the belt, allowing the infrared light
Q: What kind of obstacles can the mining industry expect
to bounce off the material at about 600 times per minute.
when it comes to data and accuracy?
The equipment also gives accurate separate measurements,
A: Players have to prioritize the collection of accurate
and as different mine sites have different information, we
information. Ayeasa can help in three areas, the purchase
can identify in half an hour which concentrations from
of concentrated products, the usage of energy, and
which mine sites comply with the humidity and shipping
environmental norms and regulations. Humidity is an
requirements, and double check the measurements of each
especially troublesome task for material that is sent on
mine site that may not be correct.
271
272
| VIEW FROM THE TOP
GROWTH FROM ANALYTICS SOLUTIONS
José Sánchez Commercial Director of the Lab Division at Mettler Toledo
Q:
What
introduced
are
the
into
main the
best
practices
Mexican
mining
you
César Correa Champion Process Analytics at Mettler Toledo
have
losses, focus human resource efficiency, and obtain
industry?
more control. Analytics solutions, simply explained, are
JLS: Our main offering to the mining sector is cost
real-time measurements, and even though the mining
reduction by reduction or elimination of reworks. In this
industry has seen impressive development, operators
industry, mainly in the exploitation stage, analytical
are extremely traditional and fear automation because
measurements are critical and gold yield depends
this means having to make real-time decisions in critical
on several variables. Mettler Toledo, through process
circumstances. In order to solidify our commitment to
automation increases efficiency and operator safety. For
client needs Mettler Toledo invests 10 percent of its
Mexico, we have developed automation solutions and
operative utility in R&D.
leaching measurements, and along with Brazil and Chile the country is a global reference for best practices. The
Q: What have been Mettler Toledo’s main innovations that
key to our success is the way we train our salesforce, who
revolutionized the mining industry?
specialize in understanding our client’s process in order
JLS: One of the main expenses for mining companies
to identify their problems and provide a solution, and this
is equipment and infrastructure maintenance, so we
has been crucial in differentiating us from our competitors.
developed the iSense (ISM) technology, which involves
Also, Mettler Toledo is not in the price-driven market, nor
smart sensors that help analyze the mechanisms in which
in the volume segment, and as leaders we sell value, which
mining processes occur.
is our business model. CC: Maintenance has always come at a cost and a few Q: Which example shows how your solutions optimize
years ago the approach was simply corrective rather than
operations and reduce costs?
preventive. With our technology, the industry can actually
JLS: Mettler Toledo is present at all stages of the productivity
evolve into predictive maintenance. Instead of changing
chain of a mine, from exploration with industrial weighing
all the pieces that broke the sensors analyze the wear
systems to the mills. For instance, the combination of
of the equipment, generating savings, and reducing the
chlorine and caustic soda is one of the most difficult
prevalence of potential downtimes.
processes for us and competitors could not conceive how to install an analytical instrument inside the tanks, so we
Q: What is the relevance of the ultramicrobalance system,
studied the process and established the equipment with
and why does the industry need this?
the material and a design that was able to resist those
JLS: When studying the viability of a gold mining project,
settings. Recent research on gold leaching tanks shows
the grain must be evaluated in order to predict production
that in order to improve extraction, measuring the oxygen
based on the escalation of the sample result. There are some
concentration during the process increases its efficiency.
grains from which only 10-20g/t of gold can be extracted,
Ee developed the necessary equipment to measure and
which means a weight difference of only a milligram
control the concentration in the tanks.
implies a lot of yield. Mettler Toledo has a Good Weighting Practice initiative that teaches our customers the benefits
CC: Improvement in the leaching or bioleaching process
of weighting with a high precision tool. Therefore, for gold
is a new development, so the instrumentation used to
exploitation, the extracted mineral undergoes a treatment
support those processes is measured through further
to obtain a metal filament that is weighted to the amount
measurements and data. Analytics relates to processes.
of metal in the deposit. Mettler Toledo has an 80 percent
Our philosophy is to show operators how to evolve
market share in the precision weighting segment in Mexico
from traditional control to an online based process
and Minera Frisco, Grupo México, and GoldCorp are among
control, which allows mining companies to reduce
our customers.
273
| VIEW FROM THE TOP
DIVERSIFICATION AS PROTECTION FROM INDUSTRY DOWNTURN ROGELIO GAITAN Administrative Director of FIMSA
274
Q: How has FIMSA evolved within the mining sector in
decision helped us survive during the downturn in the
Mexico, and what makes it stand out from its competitors?
mining industry and established our name as a specialist in
A: The company was founded in the 1970s when the Mexican
trituration, and we are now known in both the construction
mining sector was dominated by small businesses. There
and mining industries as experts in this field. As a result
were few foreign companies operating in the country, and
of the current downturn, we searched for commercial
FIMSA made the decision to focus on providing for small
partners and allied with several financial sector leaders
and medium-sized enterprises, leading to significant early
from both the international and domestic spheres, that
success. When it then became less costly to enter the
have an interest in the mining and construction industries.
Mexican mining sector, many foreign companies began
This enables us to offer our clients diverse financing
investing. Faced with this challenge, FIMSA decided to
options.
stop manufacturing equipment for all levels of the mining process, which we had been doing previously, and instead
Q: What innovative technologies has FIMSA released into
focus on the trituration stage specifically. In order to
the market recently?
make ourselves less susceptible to global drops in prices
A: Our entire production team is under our control, which
of precious metals, we diversified our industry focus and
separates us from our competitors. The entire process,
began providing for the construction sector, where there
from design and manufacturing to installation, is overseen
was also demand for our trituration technology. This
by our staff. Due to this unique structure, we have been
| INSIGHT
IMPROVED EFFICIENCY IN PLASTIC PIPING maintenance costs for the user but it also reduces the risks
ALBERTO TREVIÑO
of leaks or spillages, which provides a safer environment
Director General of Tododren
for the ecosystems surrounding the mines,” according to Alberto Treviño, the company’s Director General.
Pipes made from high density polythene (HDPE) have a number of benefits over other materials used in plastic
There are four primary applications that bring Tododren
piping markets, such as PVC. First of all, HDPE has high PH
the most business from its mining costumers, leaching and
resistance, which is particularly important for its operations,
flotation, both of which are mineral extraction technologies,
given the high acidity levels produced by mining waste.
tailings dams, and security jacket pipes. “For all of these
Additionally, the performance of conventional piping
applications our HDPE perforated pipes are attractive,
systems can often be adversely affected by extreme
providing more flexibility and greater ease of transportation
weather conditions, but HDPE, given its high resistance,
and installation than traditional concrete or steel pipe
mitigates this risk for the user. This differentiator is just
solutions,” Treviño asserts. “Our pipe system is used for water
what Tododren was counting on when it launched HDPE
treatment and drainage of chemical and waste materials
products for the mining market. “Not only does the use of
away from the mine sites, as well as for underground
HDPE make the pipes last longer, reducing downtime and
electrical and telecommunication cable installations.”
able to develop a range of new technology, including
worked on. The machine is designed to transport mineral
new engineering software intended to speed up and
underground instead of overland via trucks, which is an
improve the design process. We have become the Mexican
extremely costly method of transportation. We have
representatives and distributors for two world leaders
been working on the project for four years, and despite
in advanced technological equipment that is currently
the inevitable bumps along the way we are now in the
unavailable on the Mexican market. One is an Australian
final completion stage. It is a 5km conveyor which has
company that specializes in metallurgy and manufactures
been completely designed, manufactured and installed
groundbreaking technology for metallurgical recovery and
by FIMSA, and will reduce costs and improve efficiency
gravimetry. The technology increases production levels
for Minera Frisco.
significantly while reducing operating costs. The second is a South African team who specialize in magnets, a tool
Q: What challenges has FIMSA faced when attempting to
that is used extensively throughout the process of iron
introduce new technology into the marketplace?
production. Last year we began introducing the products
A: In certain projects, we have substituted old technologies
to the Mexican market, and we have had encouraging
and equipment for more modern and efficient ones which
results so far. These relationships have helped us to
not only improves productivity but also saves time, space,
establish our position.
and funds. It can be challenging to convince industry leaders of the importance of implementing these technologies
Q: What is the process FIMSA follows when developing
because mining is an inherently traditional business, run
new projects?
by members of the older generation who are accustomed
A: With new projects it is vital to understand what cost
to certain practices and do not immediately see the
and production expectations the client has, and with
benefit of new machinery. We have recently diversified
expansion projects we must cater to the client’s specific
into offering our clients sub-contraction services. Not
needs whilst taking into consideration any restrictions
only do we provide our clients with equipment but we can
to which they are subject. Once the project moves
also provide them with trained personnel to operate that
into the manufacturing stage we maintain close client
equipment if necessary. The client then does not have to
contact. There are always modifications that need to
spend valuable time and resources training staff on how
be addressed so it is crucial that we remain flexible.
to operate the machinery, which in today’s climate with
We are currently developing an underground conveyor
investment budgets under severe pressure, is a welcome
with Minera Frisco, which is the largest project we have
method of improving productivity.
According to Treviño, there are two designs that are
want to use our knowledge of the piping industry, which
particularly
applications:
we have acquired over the course of more than 50 years
TDR Ultra and TDR Perforated. TDR Ultra is an HDPE
of operation, to become a one-stop shop for mining
corrugated double-wall pipe used primarily in drainage
companies’ piping needs,” Treviño shares. In order to
and tailings solutions. This product employs double
achieve this, a new 860,000ft2 plant will be opened
layered cuff technology and double arch structure, which
in Queretaro, for the manufacture of a wide variety of
makes the design tougher and therefore stronger. TDR
new products, mainly for the mining industry, which are
Perforated is a corrugated pipe designed to improve
currently in the development phase.
useful
for
specific
mining
productivity in the leaching process specifically. “Both designs feature examples of market leading technology that is not available in any other pipe designs in Mexico, and this is where the true value of Tododren products lies,” he boasts. “Moreover, our pipe designs are extremely easy to install so our clients require very little technical support during the installation process, which again helps
“Mining companies often require unique pipe specifications, such as fittings
to reduce operational costs.”
and connections that must be
The primary goal for the company in the next 12 months
produced and installed at very
will be to add new products to its inventories in order to complement its existing pipes and be able to provide turnkey solutions for clients’ upcoming projects. “We
specific angles” Alberto Treviño, Director General of Tododren
275
| TECHNOLOGY SPOTLIGHT IMPROVED PUMP EFFICIENCY WITH CHESTERTON
products with the EnviroSeal SpiralTrac Environmental
SUPERSET
Controller, which improves packed stuffing box efficiency.
In a mineral beneficiation plant, slurry pumps in flotation
This combination reduces flush water consumption and
areas can often only maintain optimum performance for
optimizes fluid quality, generating energy savings and
three to five days, while the shaft sleeves themselves
improving ore recovery levels and grade quality.
wear down so rapidly that they must be replaced every fortnight. This can be tiresome for mine managers, forcing
During a recent live test, the Superset was added to the
them to either carry out constant maintenance work or
packing system of a fully functional lead, zinc, and copper
renew their exhausted machinery, a process that is not
mineral processor with impressive results. Thanks to the
only expensive but also time consuming.
new technology, the pump system operated for a total of 35 days, seven times its previous life expectancy, while the
276
This is where the Chesterton Superset solution comes
shaft sleeve lasted twice as long as it would under normal
into play. While it also manufactures high performance
circumstances. Chesterton’s total sealing solution boosts
lubricants and automatic lubrication systems, Chesterton
packing and equipment service life while dramatically
is known throughout the mining community for its sealing
reducing flush rates, and crucially increasing the mean
expertise, and durable design, engineering polymeric
time before failure (MTBF) of its users’ pump systems.
solutions for use in various ore processing operations.
The system generates a positive impact on its clients’
Using its long history of working closely with mining and
systems not only in terms of productivity but also for the
ore processing companies across the globe, the company
safety and operational side of its customers' businesses.
has developed a pump solution that can help mine
The total savings generated by the Superset solution
operators dramatically reduce maintenance costs, and
vary depending on the ore processing system on which
improve efficiency during mineral processing procedures.
it is used. However, results from the live test suggest that
The Chesterton Superset, which includes both a slurry
companies running base metal processing plants can
sealing packer and a solids repeller, combines the superior
recover their initial investment in just five weeks from just
sealing capabilities of Chesterton’s compression packing
one Superset system.
| INSIGHT
INCREASING CAPACITY WITH PROVEN TECHNOLOGIES For the past 40 years, Construmac has borne witness to a great deal of changes in Mexico, and each administration
MANUEL ESCOBAR
has made its mark on the industries, according to
Commercial Director
the company’s Commercial Director of Construction
of Construction and
and
Infrastructure,
Manuel
Escobar.
“The
economic
Infrastructure at Construmac
performance of the country deeply influences our growth strategy, and in the past 14 years the economy has been stable, which has allowed Construmac steady growth,” he
boasts. “This volume is extremely attractive since it is
comments. “Many sectors endure radical seasonality and
higher yield and lower costs.” These products have
as a result we are extremely cautious with our investments
been in the market for over 30 years but the electric
to ensure our growth and presence.” This strategy means
component is new and he has witnessed demand from
the company is well positioned to persevere in the mining
mining operators seeking to lower costs and increase
industry, considering this sector’s natural fluctuations.
production efficiency.
Construmac’s
strategic
vision
has
been
forced
to
277
evolve with its strategy now focusing on bringing new
Construmac also has a joint venture with AMECO, a
technologies and solutions to the market. “We have new
company owned by Fluor Corporation. Together they
solutions for the crushing market, and we have a new
have developed a leasing program, which appeals mainly
German line called Kleemann offering a range of solutions
to mining players that do not need a static machine and
that can improve the performance and offer important
would benefit from portable equipment. “Our relationship
economic savings,” Escobar explains.
with AMECO is longstanding and we have successfully carried out this rental fleet scheme in the past for the
The company is negotiating with the Mexican mining
infrastructure industry,” Escobar explains. “Each machine
market, given the fact that this particular sector is
that is leased will be accompanied by a technician that
notoriously cautious in implementing new solutions. As
will visit the equipment every month or even every 15
a response to the mining sector’s need for specialized
days. The customers will have a service contract and this
technicians and engineers, Construmac has established
means that they do not have to worry about maintenance
several branches across the country. The company has
or service of the machines, and their sole focus can remain
three main business areas, crushing, pumps, and surface
on the smooth running of the mines.”
mining, and for the latter it has recently introduced a wellestablished product line on a global scale into the Mexican
Moreover,
market. “It is critical to have a local presence in the states
machines from Wirtgen that have been present in the
where mining rules supreme, such as Sonora, Chihuahua,
global mining milieu for over 40 years and that the
and Durango,” Escobar comments. “An added value is that
company now wants to introduce into Mexico. “So far,
our local service team and spare parts are readily available
we have two mines that have acquired this product, and
in case of a contingency and combining this with our in-
the benefits include higher performance and savings
depth knowledge of the industry makes us an attractive
in blasting costs and movement of materials,” Escobar
option.” To attend to demand, Construmac is establishing
states. “The mining industry jealously guards its supply
a new branch in Guanajuato. As it stands, the company’s
chain and it is by showing the success stories we have
mining participation is among 5-10 percent and it holds
collected from other industries that we will convince
top positions in certain niche segments.
players of the value of this product.” Moreover, mine
Construmac
is
introducing
new
milling
operators have come to rely on the Wirtgen 2200 SM In the crushing segment, most machines are powered
surface miner in order to exploit seams of valuable
by hydraulics, and according to Escobar this is slightly
minerals in an economically and environmentally friendly
problematic for mining players as they prefer electric
manner. This product includes special cutting drums that
machinery. Constumac’s track mounted impact crushers
are tailored to the job at hand. Construmac used to be a
from Kleemann’s MOBIREX series offer this electric
household name in the mining sector and Escobar shares
component. “Traditional machines have a capacity of
his desire to make this once again a reality by offering
500 tonnes per hour, which is a small volume while
new products that speak to the pressing needs of mining
our products can take on from 600-1,000t/h” Escobar
operators.
278
12
AUTOMATION & POWER GENERATION
The new buzzword in the mining industry is automation. Although Mexico has been slow to climb on the bandwagon, it is undeniably clawing out a niche among forward-looking operators. With many operators focusing on increased production at higher grades as reserves decline, process automation, simulation, and data solutions are undeniably emerging as the elusive key to improved performance. With the passing of the Energy Reform, mining companies were given the capacity to generate their own power, and several majors have already capitalized on these opportunities. Miners can also produce extra revenue by selling surplus electricity, creating an integrated network that eliminates CFE’s market monopoly.
This chapter begins by delving into automation, giving insights into groundbreaking solutions that can provide operators with significant cost savings. Presidents and Directors of automation and communications companies explain how Industry 4.0 is taking over the market and opening possibilities for features such as Big Data and the Internet of Things. Leaders of companies tasked with power saving and innovative use of energy explain the benefits the reform can bring to mining operators willing to embrace the new landscape.
279
LA POTENCIA QUE IMPULSA LA PRODUCTIVIDAD EN MÉXICO Empresa mexicana con 40 años de experiencia
280
En Técnica Salgar nuestros clientes son lo primero y por eso nuestro objetivo es ofrecerles una solución integral que les permita lograr los resultados deseados y la optimización de costos con la mejor relación precio / beneficio.
www.salgar.com ventas@salgar.com
| CHAPTER 12: AUTOMATION & POWER GENERATION 282
VIEW FROM THE TOP: Alejandro Preinfalk, Siemens Mesoamérica
282
VIEW FROM THE TOP: Milind Karkare, Andritz Automation
Luiz Vega, Andritz Automation
284
VIEW FROM THE TOP: Pedro Hoyos, GlobalSat
285
INSIGHT: Jorge Villarreal, Elara Comunicaciones
286
VIEW FROM THE TOP: Gerardo Gardea, DELTA Solutions
286
INSIGHT: Mario Lamas, Grupo ABSA
289
INSIGHT: Alfonso Bonillas, MISOM Technologies Latin America
290
VIEW FROM THE TOP: Adrián Hernández, Intergraph de México
290
VIEW FROM THE TOP: Arturo Freydig, ECN
292
VIEW FROM THE TOP: Pedro Berriel, Power Electronics
293
INSIGHT: Arel Cardenas, Danfoss Drives
294
VIEW FROM THE TOP: Víctor Hernández, IICE
296
VIEW FROM THE TOP: Mauro Mendes, WEG Mexico
297
INSIGHT: Alfonso Caso, ANAF Energy
298
VIEW FROM THE TOP: David Fatzinger, InterGen
299
VIEW FROM THE TOP: Bernardo Salcido, Técnica Salgar
300
VIEW FROM THE TOP: Vernon Murray, Emerson
300
VIEW FROM THE TOP: Mauricio Toache, SEL Mexico
303
TECHNOLOGY SPOTLIGHT: More Mining with Less Fuel
281
| VIEW FROM THE TOP
LIFECYCLE SERVICES FOR MINING OPERATIONS ALEJANDRO PREINFALK Vice President of Digital Factory and Process Industries and Drives Divisions at Siemens Mesoamérica
Q: What role has Siemens played in the development of
engines and instrumentation that enable the extraction
the Mexican mining industry?
processes, while in the production stage we provide
A: Siemens has a long and fruitful history in Mexico that
drives and control systems for use throughout the mine, as
began over 120 years ago when we implemented the
well as mobile substations and onsite power distribution
first public lighting system along Reforma in Mexico City.
equipment. Not only do we provide hardware, but we also
Today Siemens boasts over 6,000 employees in Mexico
have a strong services and consultancy division for mining.
and has nine manufacturing sites in strategic locations like 282
Monterrey, Guadalajara, Queretaro, and Ciudad Juarez.
Q: How has the Totally Integrated Power Solution been
Siemens has played a major role in Mexico by helping the
implemented in Mexico, and what are its benefits?
country with technology in different sectors like industry,
A: Mining operators require safe a power supply since they
infrastructure, healthcare, and power generation. We
must work under challenging circumstances. The stakes
have worked successfully with both private and public
are high since they must meet productivity goals and
companies. In mining, we encompass the entire value chain
guarantee continuous operations of many variables like
and lifecycle of a mine. In the exploration stage we provide
conveyor belts, crushers, mills, and float lines. Siemens’
| VIEW FROM THE TOP
MILLION DOLLAR SAVINGS FOR OPERATORS
Milind Karkare Senior Vice President of Andritz Automation
Luiz Vega Brazil Sales Manager of Andritz Automation
Q: What position does Mexico play in Andritz Automation’s
is often overlooked. We have two kinds of training programs,
global strategy, and what makes the country an attractive
one that takes place in a computer-based system. The other
market?
part of the training we offer is our IDEAS simulator. No
MK: Andritz Automation began in the copper market in Chile
matter how much theoretical training is provided, operation
when we realized this sector was using older technology from
of the mill is a completely different situation. This system has
the 1990s. We began to optimize equipment and arranged
been developed over the course of 15 years for mining, and
training for operators, which was extremely popular. There
we now have advanced models across the lifecycle of the
was an environmental disaster where a pipeline was leaking,
mine. We can find errors in the process design, and we can
and in most cases these types of incidents are caused by
test the DCS logic.
human error. We want to ensure that humans perform in a more efficient way through the use of technology. After all,
Q: What specific technologies have you developed for
a large part of the asset base is human, the training of which
the sector?
Totally Integrated Power (TIP) takes a comprehensive view
our solutions contribute to power efficiency for mills
of mining electrification and examines all aspects from
and grinding processes, and we help reduce power
generation to utility infeed. However, we know this not
consumption as well as costs and CO2 emissions. The
only involves a power element but also automation and
industry is taking a step forward into the digitalization
digitalization across the entire lifecycle. We interconnect
era and in that regard, we can install sensors in key areas
different systems until we achieve an integrated power
of the production process and measure exactly what is
network where all areas communicate. This intricacy
happening with the operation. We measure equipment
enables the user to gauge the energy consumption of one
temperature and energy consumption and then we gather
mill and then balance the consumption throughout the day
all this data in the cloud and convert it into smart data,
to avoid peaks. Another benefit is that the operator will
which enables operators to improve their decision making
have an integrated database on hand so it will be easier
processes. With this smart data, we can carry out analytics
to carry out changes to the setup of operations, identify
and identify trends so operators can proactively schedule
potential downtimes and react immediately.
prescriptive maintenance before equipment failure.
Q: What have been the most innovative solutions that
Q: How will Siemens usher the mining sector to the new
Siemens has brought forth to the mining industry that
Industry 4.0 trend?
ensure higher productivity?
A: The speed with which new productive projects need
A: In terms of power generation we have succeeded in
to start has fostered the adoption of Industry 4.0 and this
projects like La Caridad with Grupo MĂŠxico, which was a
has spread across the whole value chain. In the design
project that set a benchmark for Siemens globally. In the
process, companies need the information quicker and with
distribution business segment, one of the solutions that
feasible solutions to potential problems, which requires
have meant a big change is the mobile substations that
CAD solutions. Through our solution, designers can build
we have designed because these do not tie the operator
a Digital Twin of the production line, and this 3D model
to a single exploration point, therefore eliminating the
can run simulations, which enables the detection of faults.
necessity to build a new substation each time work is
Use of this Digital Twin can reduce time when constructing
carried out in another area of the mine. Together, all
the real product by up to 50 percent.
MK: We are integrating operator actions into our systems
MK: We have brought our IDEAS technology into
to become fully automated and create a system called
universities with one university in Belo Horizonte, Brazil
Andritz Control Expert (ACE). This technology is capable
using the tool for thesis studies. In terms of measuring the
of thinking like an operator but at a much higher and faster
ROI we benchmark this through precedent. For example,
level. Behind that lies our BRAINWAVE technology, which
power generation plants can run for 12-18 months without
was invented using a concept developed in the 1800s by a
a shutdown, meaning that the staff is not well-practiced
French mathematician. This is currently being used in Chile.
in the shutdown and startup processes. Emergency
Typically this technology has been proven to provide a 2-3
situation management is not experienced until it happens,
percent improvement in production rate and a 30 percent
and by constantly retraining these operators on such
reduction in variability, which is a considerable amount of
abnormal situations we can ensure that human safety is
money for mines.
not compromised during emergencies.
LCV: The variability on processes is extremely difficult to
LCV: It is difficult to measure the direct value of the
control but BRAINWAVE is a Model Predictive Control
equipment because we must first measure the number
(MPC). This means that instead of waiting for the process
of mistakes made by operators and the cost implication
to leave the set point the system will automatically make
related with this before we can measure a quantitative
modifications before this happens. BRAINWAVE is the
improvement. When learning to drive a car, practical
software that will reduce this variation, and we will then
lessons always have a degree of trial and error so the
create a layer in ACE that allows the controls to reflect
IDEAS operator training system will allow the same
the changes in set point and increase savings, quality, and
for the operation of multi-million dollar plants or mills.
productivity.
In this way we can pinpoint the mistakes and the consequences of these mistakes in a situation that does
Q: How do you measure the return on investment (ROI)
not place considerable amounts of money and human
from such technology?
safety at stake.
283
| VIEW FROM THE TOP
TELECOMMUNICATIONS UNEARTHS ECONOMIC SAVINGS PEDRO HOYOS Deputy Director of Commercial, Innovation, and Marketing at GlobalSat
“We do not anticipate a
Q: In what ways are the Internet of Things (IoT), SCADA, and Big Data impacting the productivity of key industries in Mexico? A: We connect SCADA technology, which requires a low bandwidth and is a low-cost service, enabling companies to keep efficient records. In terms of IoT, much of the equipment in mining must be monitored and a satellite 284
drop in the need for satellite services in Mexico since this is something that is lacking in rural parts”
link ensures the continuity of information, and it is the only option due to budget restrictions. One of the problems to have emerged from Big Data is the vast
Pedro Hoyos, Deputy Director of Commercial,
amount of information being generated from all sources,
Innovation and Marketing at GlobalSat
which means that a tremendous amount of equipment is being connected to the web. For this scenario we have
Q: The mining sector differs greatly from that of oil and
developed several effective solutions. When we gather
gas, so what is your strategy for negotiating this segment?
data, rather than sending it directly to the client, the
A: One of the main problems of Mexico’s mining industry
client installs equipment on our NOC and we process a
is security, and even though mineral prices have not
proportion of the information. The client is able to isolate
increased we have been making steady progress within
the important information through our systems to send
the sector. There are a number of reasons for these trends,
to the mainframe, unloading significant capacity from
including the fact that our services reduce the need for
their site. The connection is extremely secure, and the
travel and provide access to telecommunication services
equipment is located on a high-availability NOC. This
that translate into a necessity as a service provider. Mine
began as a pilot project around three years ago, and has
directors seldom travel and instead use videoconferencing
since been developed with encouraging initial results.
facilities and data provided by us. This reduces travelling expenses, risk, and provides real-time information. We
Q: In what way has the drop in commodity prices
have a team of sales representatives that visit the mines
impacted the demand for your services?
periodically in order to disseminate the recent trends and
A: Companies realize how essential our solutions are when
evaluate industry needs, and in this we are unique in the
commodities like oil or metal drop. We have also developed
market.
new solutions to address the current issues within these industries. We have a tariff where the client pays only for the
Q: With companies like Facebook now introducing ‘free
amount of bandwidth used, and if the initial purchase limit is
basic’ services, what does this mean for the satellite
exceeded more can be bought. We have also given the client
industry?
the flexibility and power through the cloud to login to their
A: We do not anticipate a drop in the need for satellite
account to monitor usage levels. These kinds of services all
services in Mexico since it is lacking in rural parts. We are
include filtering and bandwidth control so this mitigates costs
beginning to provide more integrated services so we do not
and allows the client tighter controls on consumption levels.
depend on simply delivering a link. Several mining operations
This solution has been easy to implement as most clients
need voice services, and we deliver solutions that include the
already have the required equipment installed and have
voice component, meaning that we provide the equipment,
trained personnel to work with this equipment. Therefore,
the identification, and all the services the company could
the solution can be used to limit costs and transmit only the
need. This is not just a satellite link but also a telephone
required information instead of a steady stream that could
service, a content distribution solution, a back-up network,
not be closely controlled.
and a monitoring system.
| INSIGHT
OVERCOMING LOCATIONAL HURDLES The CEO of Elara Communicaciones, Jorge Villarreal, was nominated Executive of the Year by the World Teleport Association, as well as Visionary Executive of the Year at
JORGE VILLARREAL
the SATCON Conference and Exhibition in 2013. According
CEO of Elara
to him, this is a result of its long-term focus on innovation
Communicaciones
and flexibility, trying to better understand where it can add value for customers and designing solutions according to specific needs. “The award has not only been a recognition
wherein Elara Communicaciones supplied connectivity
of my work but the work of everyone in the company
to the mine, and in conjunction with another provider,
as well as the strategy we have been implementing,”
integrated a Wi-Fi solution to the area surrounding the
he comments. “This success is a combination of a deep
mine. This provided Internet that fulfilled corporate
understanding of customer requirements and the creation
requirements of the mine and also to the residential area
of a value-added service.”
in the surrounding community and those working in the mine. This was achieved through the use of a specialized
Villarreal believes that cutting-edge IT solutions and
integrator.
285
telecommunication systems must be developed in order to be able to operate in remote locations. “In mining, we have
Underground
been implementing satellite solutions in remote areas, as
connections in order to maintain speeds and services,
well as strengthening terrestrial communication systems
and Villarreal confirms that the company’s products
such as fiber optics,” he explains. “We use satellite as a
are specifically designed for these conditions, meaning
backup system in the event that terrestrial communication
the reliability of the service is extremely high, and only
systems fail.”
between
2.5-3
mining
processes
percent
of
Elara
call
for
powerful
Communicaciones
customers experience problems that require a callout. For Villarreal, satellite has been a key component in
“This technology has been evolving year on year, and we
the telecommunication arena for decades, and there
can deliver a seamless integration between the satellite
is a need for this specifically in terms of industries
and the rest of the technology,” he states. “We connect
like mining, in which operations are often carried out
our interoperable systems with a range of technologies
in remote locations where terrestrial communication
such as fiber optic and mobile networks.”
options are inviable. “The product we provide bridges that gap in terms of availability and speed, and satellite communications technology as a whole has been evolving tremendously over the last few years meaning that we have been able to provide greater efficiency and higher bandwidth to the customer at a more competitive price,” he boasts. “Satellite technology is becoming an increasingly attractive solution, especially in light of the
By 2017, the cost per MB will drop by up to 50 percent for satellite
communications
current environment.” Elara Communicaciones has also developed a technology As the telecommunications technology evolves and
evolution map as an indicator and guide for the direction
becomes more competitive different solutions emerge.
of its technology. It is already looking to the future and
“No matter their size we have been able to combine an
is aware of what will be available in the next three to five
integrated and personalized approach to their business,”
years. “By 2017 we anticipate a major change in the satellite
he clarifies. “I believe there are significant opportunities
services that are available, and eventually the goal is to
for the industry to bring turnkey solutions to customers
utilize more powerful satellites that can transmit higher
in the mining sector, and this will be a growing trend
MB to the customer,” Villarreal surmises. “As a result, the
over the next few years. If this is integrated with a
cost per MB will drop dramatically, by up to 50 percent
telecommunications service there is a potentially niche
in some instances, so eventually satellite connectivity
market for providers like us.” One particular success story
will be a much more attractive option in terms of cost of
was the provision of a solution to a mining customer
bandwidth.”
| VIEW FROM THE TOP
SYSTEMS MIGRATION THAT MINIMIZES DOWNTIME GERARDO GARDEA Director General of DELTA Solutions
286
Q: What growth opportunities have you identified for the
operators depending on the length of time a radio remains
company in the mining sector?
at a certain angle. Our solutions are capable of finding the
A: DELTA Solutions has been in the market for 28
exact location of all employees in a mine, and in case of
years and our main product line is focused on radio
emergency, they can send a mass alert and monitor all
communications. Mining has always been extremely
further communications. These needs are covered by a
attractive, the technology has evolved rapidly, and the
wide range of technologies but now innovation carried
industry now represents 18 percent of our total sales.
out by technology providers will allow migration to digital
The sector demands increasingly potent interior and
technology to improve mine operations.
exterior communications equipment. These days there is a great deal of equipment that mines can use to optimize
Q: Which of your products and solutions have helped
processes and as a company we have been able to meet
your clients maintain strong levels of efficiency while
the expectations of the mining exploitation segment. We
maintaining low costs?
are fortunate enough to receive support from technology
A: The legal and fiscal reforms applied to the mining sector
providers like Motorola, which provides diagnostics tools
have transformed the operators’ vision and now providers
for our clients, as well as developing various applications
must be aligned with competitiveness, productivity, and
for integrated radio communication. Instead of only voice
high safety standards. To reach these three objectives
messaging facilities, radios can now detect issues with
it is necessary to convince them that communication
| INSIGHT
COLLABORATION BETWEEN INDUSTRY AND COMMUNICATIONS MARIO LAMAS
the country from one base, giving the company a more
Commercial Director of Grupo
defined, efficient overall business strategy and offering
ABSA
a more accurate service to our clients.” Grupo ABSA has identified several opportunities in the automation
For Grupo ABSA, by far the most significant event in the
and energy control fields. In 2015, the company made a
last 12 months has been the merging of its two companies
significant investment by setting up a specific department
into one consolidated business. Previously, it operated
comprised of 10 strategically selected engineers. Their
as two separate companies one to cater the northern
purpose was to cover energy quality management and
markets of Sonora, Chihuahua, and Sinaloa, and a second
principally to develop new solar LED technology for the
one to provide services in central and southern Mexico.
mining sector.
“This has been a great improvement for ABSA because the mining industry and the automotive industry are the
Given the investment made in developing these solar
most important markets for the company, representing
systems, Lamas strongly believes in the product and
20 percent of the total income of the group,” explains
is working hard to promote it to clients throughout the
Mario Lamas, the company’s Commercial Director. “We
industry. Grupo ABSA’s solar LED designs can monitor
will now be able to serve our mining clients throughout
the performance of every solar panel in any given solar
technology should not be considered as an extra cost but
by an operations center. As a result, it was complicated to
rather as a long term investment. In order to help clients
precisely control the staff across the facilities as well as
overcome the challenges of systems migration, we offer
manage security issues. The company ran our diagnostics,
innovative financial plans that include Motorola’s guarantee
took out the leasing plan, and was able to complete the
of repurchasing analog devices at a decent price, and some
migration in the space of three and a half weeks. To help
leasing alternatives. We have been providers to the mining
control the number of employees in the mine, our radios
sector for more than 24 years, catering to the needs of
include an additional accessory that identifies users and
the major mining groups in the country, and we have been
their locations. In terms of productivity, this new radio
able to migrate systems in some of their mines due to our
communications technology doubles the transmission
innovative processes, quality technology, and constant
capacity, allowing users simultaneous communication
certifications obtained from our many partnerships.
without interference.
Through new lifting technology, we are changing our
Q: What new technologies and solutions can you bring to
focus with mining companies. Previously, our relationship
the Mexican market to help the industry?
with them was based solely on providing quotations,
A: When analog to digital communications migration
acquisition orders, and product supply. However, given the
reached the market, Motorola allowed international
complexity of the technology we offer, we now provide
developers to modify the source software in order to
consulting services and help them realign their focus on
improve results. The applications we use for mining
communication technologies.
operations came from a Russian software company called Turbonet, and we believe this platform is ideal for mining
Q: What process do you use to migrate a mine’s
operations. DELTA Solutions is in constant communication
communication platforms, and what success is generated
with this provider to share and apply client feedback from
from this complexity?
the actual users. Our radios can also detect explosive risks,
A: The first successful migration we carried out was in
monitor the vital signs of the operator, and identify leaks
a mine in Durango, where we facilitated the migration
to avoid gas explosions. As well as radio communications,
of more than 600 pieces of equipment simultaneously,
which represent 65 percent of our sales, we have an
and Motorola considers this a global success story. This
Integral Security department that focuses on CCTV,
underground mine operates 24 hours per day and all the
access control, fire prevention, and alarm systems catering
analog communications were administered and overseen
exclusively to the industrial segment.
field. This system informs the user of any malfunction in
up-to-date decisions on their energy systems. Therefore,
any of the panels in real time via an Ethernet network,
the products that Grupo ABSA offers are designed
and displays the reason behind the malfunction and how
to keep mine managers and other decision makers
to repair the issue. This can lead to substantial savings
constantly informed, wherever they are in the world, as
in time, energy, and maintenance expenses, as well
to how their energy systems are performing on each of
as improving mine safety and efficiency, says Lamas.
their projects.
“However, despite the numerous benefits there are very few mine operators using this system in Mexico at the
“We are working alongside companies such as Cisco and
moment, and this inherent conservatism I believe is one of
Rockwell to develop programs that are designed to bridge
the industry’s biggest challenges as it tries to modernize
the gap between operational and information technology,”
production systems,” he laments.
he boasts. He stresses the importance of working together to ensure that the solutions developed not only work
The company is currently working on three principal
on a technical level but also provide real-time, accurate
mining projects. Two are with Grupo México in Chihuahua
performance indicators. “For us, this is the future of
and Hermosillo, and the third is with Industrias Peñoles at
automation technology, and we are currently travelling
Mina del Toro, Zacatecas. “We have installed adjustable
around the country demonstrating our designs and
speed drives in these mines, which excel not only in
encouraging mine managers to try them,” he declares. “We
energy control mechanisms but more importantly in the
have a prototype already installed in the Peña Colorada
area of communication,” Lamas shares. Recently, the
mine in Colima, and we hope to install many more in the
focus in the automation market has switched toward
coming years because we believe this technology offers
communication to enable executives to make informed,
great value for our customers.”
287
San Luis de la Paz Plant is Officially Inaugurated Natural gas-fired power generation Following years of hard work, planning and effort, InterGen celebrated a milestone in its history when the Energía San Luis de la Paz power plant was officially inaugurated on May 17, 2016. Energía San Luis de la Paz, located in Guanajuato, sells the majority of its power to a mining company under a 20-year power delivery agreement.
INTERGEN BRINGS
CLEAN POWER 288
TO MEXICO
MINING SECTOR
The Secretary of Energy Pedro Joaquin Coldwell, Governor of Guanajuato Miguel Marquez Marquez, InterGen’s CEO Neil Smith, InterGen Mexico’s General Manager David Fatzinger, and Mayor of San Luis de la Paz Guillermo Rodríguez, inaugurated the plant. With this latest addition to the InterGen fleet, the company now has 12 power plants in operation, representing a total generation capacity of 7,220 megawatts (5,562 net equity MW) and including a wind farm. In addition, InterGen operates three compression facilities and a 65-km gas pipeline. These facilities are located in the United Kingdom, The Netherlands, Mexico and Australia. InterGen is a leading energy company generating safe, reliable and sustainable power in the communities in which we operate.
For More Information: www.intergen.com
| INSIGHT
INTEGRATED SOLUTIONS FOR COMPLEX INDUSTRY Given the drop in the prices of commodities over the last few years, mining companies are increasingly seeking ways to optimize operations and develop innovative,
ALFONSO BONILLAS
cost-effective technologies. That is an area in which
Vice President of MISOM
MISOM Technologies excels. “MISOM has always focused
Technologies Latin America
on getting the most out of the data and system you already have, meaning we do not push expensive technology
upgrades,”
says
Alfonso
Bonillas,
Vice
The incorporation of new technologies, Bonillas believes,
President of MISOM Technologies Latin America. Instead,
has impacted the development of the mining industry
the company promotes the recalibration of existing
over the past decade, and MISOM has played a key role in
technology to achieve step-change outcomes such as
fostering these new innovations. The software provided
mine to mill or optimization projects. MISOM provides
by the company has helped speed up the decision making
the tools that companies need to make decisions, and its
process, and as in most industries the most important
software is able to identify and address issues related to a
factor for mining companies is the maintenance of low
decline in productivity, representing an attractive service
overheads. “In the past, it may have taken 10 times as
for mining companies in the current climate. Bonillas
much time to identify the cause of a problem because
believes the main idea behind business intelligence is
of the lack of accurate data,” says Bonillas. “With
to motivate and to help drive improvement. Companies
these advances in technology, we have the ability to
have different approaches to their data and asset
pull data from different sources and integrate them.”
management and this means that MISOM must tailor
Sometimes problems may arise in the presence of too
solutions and provide flexible services in order to stand
much information and no clear analytic strategy, and
out from the competition.
this is where MISOM has found its niche. The company offers the services of its mining and software engineers
However, Bonillas wants to shatter the misconception that
and provides the mine managers with the tools that will
integrating data is a simple process, and highlights its
enable them to make the right decision.
complex nature due to the varying types of data systems and structures. The first step entails understanding these
Currently the most profitable activities, according to
structures and characterizing the data, and the information
Bonillas, are MISOM’s integrated data solutions where
is then cross-referenced with other data to produce the
both mine and plant can be analyzed in the same
desired report. Most of MISOM’s integrations are conducted
environment. “This strategy can deliver more effective
using Microsoft Analysis Services to integrate all the data
and far less expensive solutions, and with simple
sources or systems into a data warehouse containing near
use, set-up, and maintenance, even small mines and
real-time and historical data. On top of this, an Online
contractors can take advantage of the services,” says
Analytical Processing (OLAP) system is built and used to
Bonillas. MISOM sees this as the greatest technological
analyze data, and this technology helps the company to
opportunity of this generation due to the significant
process massive amounts of data at a faster pace.
influence of smart phone technologies. Moreover, the company offers mine to mill studies to help identify any
The business intelligence architecture employs Analysis
leaks or deficiencies in company processes. Each step is
Services but the front-end has a dynamic JQUERY
mapped in the integrated information solution, from rock
interface, allowing users easy access to the information
blasting to delivery of the material to the plant. Reports
on multiple screens. Cloud storage is also offered by the
are then generated with the findings and analyses are
company, and the advantage of this infrastructure, says
provided that measure efficient use of resources. The
Bonillas is its cost-efficiency in terms of storage and
mining process is closely integrated with the milling
support. MISOM’s cloud sites have professionals that set up
process by linking key data in the plant with data from
firewalls and security to keep the data safe. “The bottom
the mine. “Our approach is unique in that we build M2M
line is that there are considerable savings by opting for
into our integrated data solution,” boasts Bonillas. “This
cloud based storage,” Bonillas argues. “As there is no need
constitutes a preemptive, continuous process, rather
to pay for maintenance or exorbitant energy costs to keep
than a retrospective action taken when mill performance
the servers operational.”
has already fallen.”
289
| VIEW FROM THE TOP
THE BATTLE BETWEEN BLUEPRINTS AND ENGINEERING SOFTWARE ADRIÁN HERNÁNDEZ Director General of Intergraph de México
Q: What is Intergraph’s role in the digitalization of the
are dead documents that represent old information that
mining industry and how can you help mines overcome
cannot be used since it is just a report of a specific item at a
mala praxis?
specific moment in the past. Intergraph provides usable data
A: Intergraph is part of Hexagon, a larger holding that offers
and information to be exploited, helping operators make
specific mining solutions through the Hexagon Mining
more appropriate decisions.
division with special focus on planning and other solutions.
290
We focus on automation and engineering data management
Q: How do Intergraph’s solutions help operators increase
for mines with the main objective of achieving operational
efficiency in the planning phase?
efficiency. We complement Hexagon Mining services
A: We offer solutions for the electro mechanic installation
because we operate in different areas but with the same
of a mine along with conceptual engineering, which is
clients, allowing the operator to exploit the information they
when the mine plan is decided. This is complemented with
gather through our services. Operators believe that drawings
instrumentation engineering to control the process and
and blueprints comprise the whole engineering information.
electric structure that will power devices and instruments.
However, there is significant data that is not embodied there,
With 3D modeling, we represent all the details, including
like the components or behavior of an installation. Blueprints
the location of each structure, and the way it is going to be
| VIEW FROM THE TOP
AUTOMATION’S DEVELOPMENT WITH TECHNOLOGY ARTURO FREYDIG Director General of ECN
Q: What are the most recent automation trends in
operational budgets, and this circumstance presents an
the mining sector and how have the requirements of
opportunity for us.
operators evolved? A: The drop in commodity prices has irrevocably changed
Q: How has ECN adapted its business strategy in order
the mining landscape and all suppliers must adapt to the
to deliver the added value that mining operators are
new business environment. Automation and technology
seeking?
providers must always perform to the highest standards
A: We developed the Main Automation Contractor (MAC) in
and most importantly be aligned to the client’s objectives.
the early 2000s, and at that time it was entirely focused on
During times of prosperity our responsibility is to be the
efficiently developing large projects in the US and Mexico.
depository of knowledge and convey all the information
However, today that same product is focusing primarily on
and results in a clear and concise manner. The segment has
process optimization rather than simple efficiency. ECN is
changed and the new focus is to meet process efficiency in
perfecting the business model that will allow customers
the previous investment carried out in automation. Today
higher quality, more control on hazardous residues
mining companies have to produce more with smaller
management, and improved safety. For several years ECN
supported. At this stage, the analytics start to take place
and measures sent by each component are analyzed by
in the development of a project because we can see the
algorithms to predict the possible outcome. If an operator
pipeline routes in order to ensure connectivity and avoid
does not have this data, it is probable that either the
interference. While we do adapt to the client’s requirements,
installation or the tools will fail.
it is important to point out that we are working to change the operator’s mindset since they are used to seeing blueprints
Q: The mining industry takes its time to introduce new
and making decision according to what they see. However
technology, so how are you tackling this situation among
showing drawings does not provide any value and adding
your clients?
information to them is a complete waste of time. With our
A: We usually show success cases and global references
software mine operators can see the functionality of the
of other mining companies that have had related issues,
project they are engaged with, and by offering complete
as well as the way in which Intergraph’s solution helped
reports with useful data and reliable information we ease
them overcome the problem. Preventing accidents and
the decision-making process. Our software helps the mine
downtime brings cost savings, and this is only possible
owner and operator to create and build based on data.
when operators have adequate and reliable information. Another argument for operators is that income might be
Q: How can mining companies benefit from your software?
available sooner, and that quality improvements due to the
A: One of the main benefits operators can get is that they
data provided will make operations much more efficient.
have daily reliable information that will help extend the life of their equipment. The data provides information
Grupo México recently used Intergraph’s solution for a
regarding when and which parts will need replacement,
leaching project in the Buenavista pit with promising
while it also prevents accidents due to the lack of
results, and it is now developing other projects for
knowledge of the state of the equipment. When a project
Southern Copper. Our strategy is to increase market
is starting our solution helps the engineering developers
share in Mexico by collaborating with Hexagon Mining
to buy the right materials, which translates to efficiency.
and Hexagon Ventures to offer a wider portfolio and
The benefits are always transferred to the operator. Some
more attractive solutions. Even though metal prices are
of the equipment sends information directly to a server,
depressed, the investments are flowing so an integrated
not necessarily a SCADA system, and the calibrations
approach is going to be better for operators.
has worked to develop a metallurgical suite, consisting of a
intelligence and presents an opportunity for operators to
five-product portfolio that includes several elements to help
experiment, change, and develop new strategies in their
optimize the milling and flotation process. The data runs
formulas for ore processing. A customer asked us to
over a central software called Balmet, an embedded system
analyze the dosage used in its mining process because the
that automatically analyzes the metallurgical balance within
company was in need of reducing the maintenance costs,
the control systems of the mining operations. To support this
and based on our findings we suggested the use of a low
solution, we have other products to complement efficiency,
maintenance dosage system that lowered the operational
including Judiline, which allows the operator to streamline
expenses and amount of spare parts needed.
the dosage of the reagents used during the mining extraction process, thus removing a substantial operational
Q: In a market rife with competition, what attributes
expense. Dispensing the correct amount of reagent in the
differentiate ECN from its peers?
right phase of the process means a higher mineral recovery
A: ECN provides solutions that range from basic control
rate. An additional benefit is that the correct use of this
management systems to complete automation solutions
product helps meet environmental compliance targets.
for field work and control room converting relevant information into valuable data. Automation has always
Q: How can your solutions provide a more efficient input
been aligned to information. Given the development and
to the mining processes?
growth of the industry, this data provides a complete
A: For many years, the exact chemical dosage for
picture for top executives and improves the decision
production
ore
making process. Our expansion in the mining market will
processing were not of particular concern for operators.
or
the
quantity
dispensed
during
be possible through the development of our products. We
By implementing our products, mining operators gained
have six new products in the pipeline, including a bubble
new insight into which reagent to use and when to apply
speed meter for the floatation process, which will reinforce
it. This information provides relevant statistics for business
our suite.
291
| VIEW FROM THE TOP
DIFFERENTIATION THROUGH CUSTOMER SERVICE PEDRO BERRIEL Director General of Power Electronics
Q: How has Power Electronics cashed in on the increasing
standards that we and the client wanted. We decided to
interest in renewable projects?
seek the expertise of an engineer based in Australia and
A: One of the noted implications of the Energy Reform is the
he surveyed the whole system, spotted the problem, and
drop in electricity prices. This year we have seen a slight drop
solved it. The error did not lie in our system but in the
but not comparable to what was seen in the industrial sector.
incorrect wiring of our client’s installation.
Energy sources like hydropower, geothermal, and even wind have the potential to come to the forefront of the Mexican 292
arena, especially for mining players. However, at Power Electronics we are slightly wary of the true opportunities renewable power may experience after this groundbreaking reform. In my opinion, renewables stand little chance in Mexico, especially the sector where we have a noted expertise, which is PV. The UK is our biggest market for PV and last year we installed 2GW, while in Mexico we expect the solar market to amass only 150MW. Power Electronics has carried out hybrid projects for electricity production that include a wide array of products from its portfolio, while
“We have a longstanding relationship with Industrias Peñoles and we wish to increase our participation with Goldcorp and Grupo México” Pedro Berriel, Director General of Power Electronics
in mining it is known for pumping and ventilation systems. In 2015, we encountered some obstacles mainly due to the
Q: How are you tailoring your value proposition given the
royalties, and mining players are more cautious with their
desire of mining companies to lower energy costs?
investments. We have a longstanding relationship with
A: Reducing energy consumption in Mexico is complicated
Industrias Peñoles and we wish to increase our participation
because mines are located away from the needed
with Goldcorp and Grupo México.
infrastructure. It is almost impossible for CENACE to trace the transmission to these remote locations and for CFE to
Q: Which project reflects the capabilities and competitive
carry it out, so mining players must be inventive in their
advantages of Power Electronics in the mining sector?
energy production. The technology in the mines is growing
A: One of the competitive advantages of Power Electronics
at a slow pace precisely because of these conditions.
is its service, and the foundation for this has always been
For mining companies, the priority is to ensure the flow
its value proposition. When the company was created 27
of production because that is the heart of a mine. Some
years ago, the founder stressed that it would not fight
players even consider avoiding automation processes in
against giants like ABB or Siemens with marketing or
fear that the production rhythm will not be maintained
production volume but rather on service. This strategy
given the quality of the power onsite. The tide is turning
has proven successful and the client list is a testament,
and mining companies are beginning to understand that
with companies like PEMEX, CEMEX, Schlumberger, and
energy efficiency plays an important part in the production
Baker Hughes. These are mostly clients with roots in the
line and the equipment's life cycles.
oil and gas industry, and this is mainly due to the limited opportunities in the mining sector. Nevertheless, we hope
We want to ensure the continuous presence of our
to remedy this situation. We had a client that decided to
products in the mines scattered across Mexico. The oil
buy our product and after we carried out the installation.
and gas sectors will surpass the mining industry, and with
This success enabled us to sell another four products to
the resources we gain from the former we will continue to
the same client. In the fifth installation we encountered
provide quality products and outstanding services to the
difficulties in the startup as it would not perform to the
mining sector, which is pivotal to Mexico’s growth.
| INSIGHT
INCREASING MINING EFFICIENCY
Danfoss has been present in Mexico for a number of years now with a food and beverage manufacturing plant in Monterrey but the company now wants to focus on
AREL CARDENAS
making the mining industry in this country more efficient,
Regional Sales Manager at
according to Arel Cárdenas, Regional Sales Manager of
Danfoss Drives
Danfoss Drives. “Four years ago we developed a clear strategy regarding our participation in the sector in Mexico, which revolves around maximizing the use of electricity
“Our products often significantly reduce carbon dioxide
and environmental care.” he shares. At the start of 2015
emissions, and therefore clients seeking green projects
Danfoss acquired Vacon, a Finnish company specializing
often decide to install our technology,” he declares. “In
in AC drive manufacturing, making the former the second
most cases ROI will be generated in less than one year.”
highest producer of drives globally, and Cardenas expects
The Cobre del Mayo operating company recently decided
to be number one by 2018. “These machines can be used
to install four 350hp water-operated drives in an attempt
in all stages of the mining process, including underground
to save energy, and lengthen the expected lifespan of the
and open pit mines, to control motor speed and improve
machinery in place. Danfoss is always heavily involved in
energy efficiency for pump systems,” he explains. “They
the engineering process from the outset, ensuring the
also help improve mine ventilation by extracting gases
client is fully aware of how to operate the equipment in
through the use of a comprehensive monitoring system.”
order to reduce the safety risks. “In order to ensure that
Danfoss is currently focusing its efforts on improving its
the client is completely satisfied with the product. We
ventilation technology and the team at Vacon are currently
have a “try before you buy” policy, whereby each customer
working on the PBS-3000 drive, which will be a medium-
has 30 days to install the equipment and make a decision
tension drive designed to make mining operators more
as to whether it will suit the business or not without any
compact, reliable, and robust.
obligation to pay,” Cárdenas states.
293
| VIEW FROM THE TOP
TECHNOLOGY TO AVOID CFE FINES VÍCTOR HERNÁNDEZ Director General of IICE
Q: Mining is one of the most energy-intensive industries,
deficient, that it is the maximum utilization rate that this
so how is IICE taking advantage of this situation?
kind of technology can reach. With a capacitor bank we
A: Business opportunities in the mining sector have always
optimize the power rate, helping the facility reach the 90
been present, and even more so with the Energy Reform
percent minimum limit regardless of its equipment. In the
since there is a rising need for clean and energy efficiency
case of harmonics present in the grid, we can install a filter
solutions. In the past, companies were only able to produce
consisting of a capacitor coupled with a reactor.
power and sell it through CFE but now private actors can 294
increase their self-supply capacity, seek more competitive
Q: What benefits can miners obtain from your solutions?
prices, and even sell the surplus to third parties. In the
A: Our equipment comes with a transistor protection
case of industrial electricity consumers, the optimal power
system consisting of peak suppressors. This additional
factor is set at 90 percent as lower utilization rates are
equipment is used in cases where damaged equipment
penalized financially in the electricity tariff. We can help
impacted by harmonics also begins to generate them.
companies reach optimal power factor levels and mining
Harmonics are an increase in the number of frequencies
players stand to benefit.
present in the electrical grid that result from non-linear electric loads. We have two types of filters available to
Q: What new solutions do you have in place to serve the
correct this issue, one that increases the power factor and
energy needs of the mining sector?
other that eradicates harmonics. The first type, known
A: Industrial facilities are obliged to consume at least
as a rejection filter, is utilized when a facility’s power
90 percent of the energy supplied by the utilities, which
factor is below 90 percent and it will correct the factor
previously corresponded solely to CFE. To maintain
rather than eradicate the harmonic. The second product,
a facility’s energy usage above that limit, we provide
known as an active or absorbing filter, will eliminate the
capacitor banks and filters as this eliminates the formation
harmonics present in an electric grid but it will not correct
of harmonics. Companies with energy consumption rates
the power factor. For instance, a rejection filter can lower
below 90 percent received a fine from CFE, which made
the fifth harmonic from 300Hz to 225Hz. This frequency
it financially attractive for companies to invest in solutions
is easier to manage by the capacitor, which increases the
optimizing this factor. Nowadays, all kind of industries
equipment’s power. Nevertheless, the harmonic problem
incorporate the use of electronic and automatized
is not eliminated from the equipment. To eradicate the
equipment in their processes. These types of systems can
harmonics the 300Hz must be addressed in a linear
cause a problem in the electric system known as harmonics,
manner with an active filter.
which brings noise to the grid and can damage sensitive equipment. Our solutions help clean the electrical signals
Q: What are the risks faced by that electronic equipment
in a process known as energy cleaning optimization.
while using capacitor banks? A: It is important to distinguish between a capacitor bank
Q: What are the technologies that represent important
and a filter, since the first consists only of the capacitor
energy savings in the mining sector?
while a filter is formed by a capacitor coupled to a reactor.
A: Capacitor banks have changed the energy efficiency
The capacitor bank compensates the electrical line using
game since industries must contend with a limited amount
the capacitance current to decrease the angle and improve
of energy to create power, and even with new and efficient
the power factor. When a capacitor is coupled to a reactor,
equipment, not all the energy received can be transformed.
the system generates a short circuit. This process misaligns
For instance, engines can usually only transform 80
the system and pushes it further from the fifth harmonic
percent of the electrical energy into mechanical power
waves without eliminating the inductance current that has
and, while this value does not imply that the engine is
to pass through the capacitor. In the case of an active or
295
absorbing filter the system aligns both currents forcing
life and avoiding the occurrence of power outages and
the harmonic current to pass through the capacitor,
system breakdowns.
eliminating them completely and cleaning the grid. We focus on the misaligned systems as we generally look to
Q: How are you planning to position the company in the
improve the power factor of our clients.
mining industry in the short to-medium term? A: Our product portfolio, which mainly includes capacitor
Q: How do you raise awareness among miners about the
banks, is highly relevant for the mining industry because
benefits of using your solutions?
it can bring different economic and technical benefits to a
A: Despite the number of companies that ignore
company. By using our technology, miners avoid problems
the power factor fine there is an increasing interest
with
in acquiring energy efficient equipment due to the
power outages, and electrical noise from harmonics. Our
possibility of saving money by increasing a facility’s
distribution network is already collaborating with miners,
power factor. Besides the economic benefits there are
providing them with the required technical support and
also positive implications of introducing a capacitor bank
knowledge to increase their confidence in our products.
in the electrical system of a plant, such as the reduction
Unfortunately there is an important level of mistrust in the
in maintenance services resulting from the elimination
usage of capacitor banks due to the lack of experience and
of waste heat from the transformers. By lowering the
technical skills among people in the sector. If a technician
kilovolts-amperes, the company decreases the amount
does not have the required skills and does not perform a
of heat released by the system. Additionally, having
network analysis before installing the capacitors, there is a
fewer amperes running through a cable reduces the
risk the installed equipment will create more damage than
deterioration rate of the equipment, increasing its useful
benefits to the system.
overheating,
production
downtimes
caused
by
| VIEW FROM THE TOP
POWER GENERATION OPPORTUNITIES FOR MINERS MAURO MENDES Managing Director of WEG Mexico
296
Q: What importance does Mexico have for the WEG Group?
A: At the moment, many mining operators are combining
A: We are investing US$220 million in Mexico with new
motors with drives in order to control the speed of the
plants and offices. The Mexico plant will be used to service
motor, allowing for a much more efficient system. We are
Canada, the US, Mexico, and Central America. We believe
now manufacturing the W50 three phase motor in Mexico
the mining sector will quickly bounce back from the difficult
and selling to a number of different industries. The W50
times it is experiencing. We have a solid position in Mexico
has seen a great deal of success since it offers the same
and we have developed products that are specifically
horsepower as our older lines but in a smaller motor. Soon
designed for the industry like copper bar rotors motors,
we will launch a line of new products called the W60,
which fit mining requirements. As the years progress, we
which will be manufactured in Mexico. While the W50
see more opportunities to develop new products so we
is a closed motor the W60 is an open motor, which is a
are constantly adding funding. We plan to invest around
different concept for certain applications. For instance, in
US$240 million to increase production capacity in Mexico.
a clean environment the W60 is more suitable, whereas in
As a base to the US and Canada, several exclusive products
a tougher context the W50 would be more suited due to
will be built in Mexico. We have developed a number of
the closed design’s ability to protect the motor.
manufacturing plants in our portfolio, going from just two buildings to eight. We also have a foundry for electric
Q:
motors and even though we are currently buying cast
cogeneration techniques to generate power?
Why
should
companies
be
adopting
energy
iron from Brazil, we expect to be manufacturing all the
A: With an energy source that can be burned, cogeneration
components in Mexico within the next two years. Currently,
is possible. WEG on a global scale has a renewable energies
we buy copper and aluminum in Mexico to build the motor,
division. Although this is not yet present in Mexico, there
and the only component currently missing is cast iron. We
are plans to introduce a wind power division. In Brazil we
have already begun the construction of this plant.
have power quality analysis equipment that was developed over five years ago. We already have hydro generators
Q: How do your motors help boost efficiency and
and now we plan to expand to wind generation, which we
productivity for your clients?
expect to be sold to CFE.
| INSIGHT
ENERGY REFORM’S POSSIBILITIES FOR MINING In the mining industry, energy consumption represents around 35 percent of total cost. Having extensive experience working in the energy sector in Mexico in
ALFONSO CASO
companies such as Luz y Fuerza del Centro and PEMEX,
Director General of ANAF
the founders of ANAF Energy saw an opportunity to act
Energy
as a solution provider for efficient energy consumption. “We believe the Mexican market will become one of the most significant energy buyers," comments Alfonso Caso,
the mandatory consumption of clean energy due to the
ANAF Energy’s Director General. "From our perspective,
new Energy Transition Law, according to Caso.
all new projects regarding energy generation and energy self-supply should consider this new business opportunity
He believes the first wave of suppliers will consist of
due to the competition the market will create,”
energy retailers for qualified users. Most consumption could be acquired via a Power Purchase Agreement (PPA),
ANAF has experience in creating, developing, and
and around 30 to 40 percent could be then quoted on the
executing projects regarding energy savings and efficient
open market, as a way to benchmark prices. An operator
use of energy for petrochemical companies and steel
could ask a supplier for a quote on cost per Kw and
manufacturers. Additionally, it has been implementing
negotiate the conditions. The supplier could then create a
natural gas cogeneration projects for private companies.
package for various cycles as well as managing the Clean
“At the governmental level we have developed projects
Energy Certificates the purchaser needs. The supplier
for Mexico’s City sewage system (SACM) regarding
can also analyze the overall energy consumption in order
the improvement and repair of its electric generation
to create spot offers. The suppliers can also analyze the
equipment, its functionality, and its operation,” Caso
overall energy consumption in order to create spot offers.
comments. For the Mexico City Metro, ANAF prepared
“Companies will be able to create innovative combinations
several
also
that will be attractive to consumers, regardless of the
recruited the firm to design and operate a natural gas
traditional energy consumption structure,” Cano explains.
gathering system in Tamaulipas. “Moreover, we have been
“For mining companies, the possibility to create purchasing
providing technical diagnosis for the operation of fuel
power structures will become a new business area.”
energy
consumption
analyses.
PEMEX
supply and distribution terminals (TARs),” he declares. “After the execution of our projects, our clients have been able to reduce their energy-related expenses by between
“For mining companies, the
5-30 percent.”
possibility to create purchasing
He believes the Energy Reform has created certain
power structures will become a
opportunities in the mining industry. “The new market model allowed large mining companies to be registered as
new business area”
qualified users to acquire power supply in the wholesale
Alfonso Caso,
electricity market or through suppliers,” he explains.
Director General of ANAF Energy
“Additionally, small and medium mining companies can create purchase structures or establish strategic alliances
According to Caso, the mining industry may face hurdles
to buy energy through a non-regulated energy supplier
when generating its own power supply because the new
for long term basis power purchase agreement (PPA)
legal framework needs to be . and properly analyzed
contracts, or alternatively obtain part of their supply in the
to
spot market.” CFE and other suppliers can offer favorable
administrative
rates to large users that are not regulated by new pricing
dictates that the adjustment will take two or three years, but
schemes. “The natural gas network will provide the
this first stage of the market also offers the most interesting
possibility of constructing new power combined cycle
investment possibilities,” he clarifies. “We see opportunities
plants,” he indicates. Geothermal power generation and
more than hurdles for the mining industry, with a wider
the extraction of coal bed gas will both become interesting
scope for power generation due to the construction of gas
areas for investment in order to ensure compliance with
and renewable power generation infrastructure.”
comply
with
the
government’s
procedures.
regulations
“International
and
experience
297
| VIEW FROM THE TOP
THE WHOLESALE ELECTRICITY MARKET DAVID FATZINGER Vice President and General Manager Latin America of InterGen
Q: How is your company adapting to the Mexican
competitors and partners does not compromise business
electricity market evolution?
relationships.
A: We have adjusted our technology to meet new clean
298
energy guidelines considering that in 2018 clean energy
Q: Regarding the Energy Reform, what challenges does
certificates (CELs) will be required for all qualified users.
the mining industry face and how can the business meet
The company speculates that clean energy solutions will
their needs?
become more sophisticated over time, driving project
A: The Energy Reform gives mining companies new
developers to use mixed technologies instead of relying on
electricity purchasing options but most players are
only one. Renewable energies and distributed generation
confused about new market instruments and possibilities.
are two trends we expect to grow in Mexico.
InterGen can intervene and offer players transparency and knowledge about the change. Mining companies are
Q: What potential do you see for developing transborder
facing the same challenge as those in other industries,
energy projects between the US and Mexico, and what
which is the choice between single and multiple sources.
challenges do such initiatives bring?
The Mexican energy market remains relatively volatile, and
A: InterGen has experience in transborder energy projects,
qualified users still suffer under constrained electricity
including La Rosita, a combined cycle natural gas power
supply options. For large energy consumers, transitional
plant that we built in Mexicali, Baja California 17 years ago.
solutions are the best option. Bilateral contracts provide a
It serves customers in Mexico and Southern California,
smoother transition into the wholesale electricity market
and it was the first time we had a project built on Mexican
as they can be migrated to the qualified user scheme at a
land that was regulated under two jurisdictions. Another
pace chosen by the company. We also offer these because
project we developed is the Energía Sierra Juárez wind
they are similar to the self-supply scheme that used to be
farm, which was our first transborder renewable energy
employed by industrial users. Our company has the benefit
project developed between the US and Mexico. Thanks to
of being particularly positioned to meet the special and
our prior experience, handling the regulatory framework
intensive energy requirements of the mining industry.
of two countries does not present a challenge for us. The complexity is similar to building projects across two
Q: What was your flagship project of 2015-2016, and what
states, something InterGen has done for more than 20
made it so special?
years. We expect to see more transborder projects both in
A: Our new power plant in Guanajuato, which will supply
the US and Mexico. At the moment, US gas-based power
energy to Goldcorp, is the most noteworthy project we
plants exporting energy to Mexico are the most common
have developed in Mexico. The company was willing to
projects but we do not discount the possibility of more
sign a contract for most of the power plant’s capacity.
transborder renewable plants in the future.
This is significant considering that finding power purchase agreements large enough to make a customized project
Q: How has your business relationship with CFE changed
profitable for InterGen is not easy. We typically build energy
now that you are its direct competitor?
solutions using different kinds of technologies but the
A: The state-owned utility is no longer a large company
Guanajuato plant was completely tailored to meet the needs
but rather a group of different units gathered under
of the mine. We established a bilateral contract directly
one corporation. Some of the subsidiaries will become
with the plant’s main user but we also built the plant so
partners while others will turn into competitors or clients
we could sell energy to other industrial customers through
due to its focus on different areas of the electricity
the wholesale electricity market. It was our first project
value chain. Ultimately, we expect Mexico to be like any
developed under the new regulatory framework, and our
other market where we operate. A mixed landscape with
entry into the mining industry.
| VIEW FROM THE TOP
REDUCING ENERGY EXPENSES FOR OPERATORS BERNARDO SALCIDO Director General of Técnica Salgar
Q: How has mining’s energy-intensive nature influenced
Q: What kind of solutions does Técnica Salgar offer for
Técnica Salgar's decision to invest in the sector?
avoiding energy losses in the mining industry?
A: In mining activities, the energy expenses represent a
A: Técnica Salgar has different technological solutions
high percentage of the total production cost, reaching
for avoiding heat losses in power generation equipment.
shares as high as 48 percent in some mining facilities.
These also achieve considerable energy savings, and have
Técnica Salgar recognized the potential of energy
been certified by IIE, CFE’s specialty unit of engineering,
efficiency to increase the competitiveness of the mining
and IPN. To award the certification, the institutes
industry, which encouraged the company to invest in the
measured the energy consumption of different devices in
creation of tailored energy management solutions. The
a manufacturing plant in San Juan del Rio before and after
Cananea mine in Sonora became the first customer that
using the energy efficiency solutions. The results showed
we supported by improving its energy practices. The vast
energy savings of 7.8 percent, a rate that would represent
extension of the mines’ infrastructure and operations
considerable savings for a company consuming significant
entails the performance of analyses across many areas in
amounts of energy.
order to identify specific energy needs. Using this strategy, Técnica Salgar has been able to identify the sections in
We have worked on a number of successful projects in
which the implementation of energy efficient solutions
the mining industry including Cananea, Nacozari, Saucito,
might be the most effective such as in the pumping or
and Náica. A flagship project is Industrias Peñoles’ mine La
leaching processes. The opportunities created by the
Herradura, in which Salgar collaborated since the beginning
Energy Reform include the development of renewable
of the project, and delivered one of the most efficient
projects, as in the case of Industrias Peñoles’ wind farm,
facilities of the operator. In this case the success was due to
and the installment of cogeneration systems such as the
the engagement of the company from the planning stage
two 250MW generators in Cananea.
of the project, which allowed Técnica Salgar to assess the mining company in the purchasing and installment of the
Q:
How
has
Técnica
Salgar
entrepreneurial
spirit
equipment. This project was so successful that Industrias
revolutionized the energy efficiency industry?
Peñoles decided to invite Técnica Salgar to participate in a
A: We have stood at the forefront of innovation in the
new mine development in Chihuahua.
sector by being the first company in Mexico to develop an automatic harmonic filter. A few years ago, Técnica
Q: How is Técnica Salgar helping to solve the main
Salgar also developed a filter for mining shovels that was
challenges faced by the mining industry?
extremely successful, and to date it is a flagship product
A: The most popular solution for the mining industry is
for the company. Furthermore, Técnica Salgar remains
the isolation of electricity connections by means of three
the sole manufacturer of high-voltage reactors in Mexico,
high-voltage reactors and harmonized current filters. The
another popular product for the mining industry. The
purpose of this arrangement is to control the energy flux
demand for this kind of reactor has been increasing as
the mine receives from the grid, eliminating distortions
the interest for cogeneration projects rises in the sector.
and avoiding the breakdown of the facility's transformers.
An interesting product that Técnica Salgar offers to the
The reactors work as a wall, blocking the path of high
mines is the winch filter, which utilizes a regenerative brake
currents directly to the transformers while the filters are
to produce power while the winch is being raised. In this
connected to the reactor to allow for the use of cross-flow
case, early communication with the mine is important as
electricity. The aforementioned arrangement diminishes
the equipment used in the winch must comply with certain
the system's energy losses and improves production by
characteristics in order to work properly and must eliminate
allowing the mine's equipment to function at full capacity
the use of internal capacitors or power electronic devices.
and obtain substantial energy savings.
299
| VIEW FROM THE TOP
AUTOMATION FOR WIRELESS FLOW MEASUREMENT VERNON MURRAY Vice President of Emerson
300
Q: What is Emerson’s focus in the mining sector?
Q: What makes Emerson stand out among other process
A: The company is repositioning this year around two
management companies in Mexico?
portfolios,
Commercial
A: One investment that made a significant difference to
and Residential Solutions. The Automation Solutions
Emerson’s value in Mexico was the decision to open a
business contains major product and service solutions,
Mining Center of Excellence in Santiago, Chile around three
which are families related to control systems, regulation,
years ago. At this center we are working in conjunction
measurement and analytical, final control, and specialized
with the Chilean government to develop applications
support
Traditionally
and solutions for the mining industry to be exported to
automation has focused on processes and not safety. In
other locations like Mexico, focusing on areas like control
the future the growth of automation will be significant
and water quality. Our Rosemont magnetic flow meters
for safety and environmental applications. In the mining
monitor the amount and quality of the water returned by
sector we are present throughout the supply chain,
mines to local rivers. In copper mining the monitoring of
with applications covering variable measurement, flow,
leaching pads is an extremely intensive process from a
and pressure systems. Mining is a vital sector for our
human capital and safety standpoint as they can extend
emerging markets portfolio, and therefore Mexico offers
to the size of a soccer field. Emerson utilizes automated
significant growth opportunities for the company for the
monitoring to measure wireless technology flow, pressure,
next 3-5 years.
temperature, and level. Previously operators had to
Automation
and
Solutions
engineering
and
solutions.
| VIEW FROM THE TOP
OPPORTUNITIES IN SELF GENERATION MAURICIO TOACHE Director General of SEL Mexico
Q: How have the recent changes in the regulatory
been steadily increasing our participation in this segment
framework in Mexico created opportunities for SEL?
over the last couple of years.
A: With the Energy Reform, more and more companies are either working in Mexico or are looking to expand their
Q: In what ways can SEL help mining companies make the
businesses into the country from abroad, and that creates
transition to self-generated power?
opportunities for SEL because we now have a much wider
A: Mining processes use many electric motors, and we
potential customer base. Traditionally, we have served
have systems that not only protect people and motors but
mainly utilities and some industrial companies in Mexico
can also integrate the information from those motors into
but now several investors are looking at the opportunities
a single location allowing mine operators to keep track
afforded by the Energy Reform, particularly within the
of performance and understand causes of system faults.
mining sector, which opens new doors for us. A number of
When a company decides to produce its own power we
mining companies have now set out plans to generate their
have applications that can protect its generation station
own energy, and even to participate in the new market by
to ensure the generator keeps running, and that it is
selling the surplus, and we can offer our expertise and
protected against even the most hard-to-detect failures.
experience to help them through this process. We have
We have solutions that integrate all power sources with
recruit personnel to physically take measurement points
Q: How do you face companies that are concerned about
surrounded by extremely dangerous substances, but now all
the lack of human capital in automation?
the variables and levels can be monitored with our systems
A: Emerson chooses to see it more as a complement to
and instruments. The company’s portfolio allows us to
human capital that allows businesses to make more informed
manage complex projects while improving reliability, safety,
decisions. Instead of having people frequently go to the field
and productivity.
to take critical flow control measurements, our instruments allow experts to access variables that can boost day to day
Q: How would you compare the country to other
productivity, reliability, efficiency, and safety. Mines are a
international markets?
tough environment and wireless instrumentation allows
A: One of the benefits of the Mexican mining industry is that
players to monitor more variables than what was possible
it is mostly privately owned and developed, which means
20 years, which is a major advance. The incorporation of
that players frequently adopt best practices. Mexico is on
more instruments in the network provides greater reliability
par to what Emerson has experienced in other international
and automation allows operators a clearer image of their
markets like Australia and Chile. However, the country still
operations to make wiser improvements and decisions.
has obstacles to overcome when it comes to reliability, safety, and the environment. Mexico is one of the largest
Q: What role does Emerson want to play within the mining
countries Emerson serves, and the company has 15,000
sector?
employees and 20 manufacturing facilities locally. The
A: Emerson wants to differentiate itself from other suppliers
country has several benefits, such as the fact that many of our
by transforming into a trusted advisor that not only delivers
instruments, valves, and control systems are manufactured
equipment but entire solutions. We are committed to
locally. We have regional offices and a solid network of local
helping companies improve efficiency, productivity, and
business partners. Our offices allow us to be in any mine
their overall business results. Emerson is a consultant
within minutes, as that is what the market demands. An hour
that mining companies can contact to find solutions
of downtime could imply US$250,000 of lost production at
for their toughest problems. We value a local presence
a gold mine and players will not risk sourcing services from a
in manufacturing. Emerson is planning on building two
company that is not local and fast.
additional manufacturing plants in the next two years.
the loads, and are activated in less than 20 milliseconds
A: We serve several larger players in the sector simply
when an abnormal condition arises. This keeps the system
because these companies consume more power and
stable, the generator safe, and ensures the system is
therefore have a greater need for our services. We have
continuously in operation.
around 1,000 devices installed at a mine in Sonora, which reveals the complexity of that particular system. Companies
Q: How do you explain the benefits of your system to
with more extensive processes tend to need more advanced
mining companies?
and integrated solutions for their operations, whereas
A: Some mining companies are more progressive than
smaller companies often require more simplicity.
others, and so the approach to new technology varies significantly. However, we try to find out how many times a
Q: How do you predict electricity generation within the
certain company has lost power in recent months or years,
mining industry will evolve,?
and to what extent productivity was affected during that
A: There are some companies that see participation in the
period. With those facts we help stakeholders to justify
electricity market as a new revenue stream, while others
the implementation of our solutions. In terms of ROI,
see it as an opportunity to reduce operating costs through
much is dependent on the size and type of system the
in-house energy generation. The more players enter the
mine has. However, with many of our remedial systems,
electric market, the more pressure on prices there will
after just one problem is prevented the client makes a full
naturally be. Players are also turning to new generation
ROI. We have a metering solution that allows for internal
sources like wind, solar, and others in the renewables
analysis of energy consumption to understand costs,
sector. Given the increased competition, I would expect to
properly allocate them, and include this as factors into a
see mining companies and others eventually reevaluating
ROI analysis of new projects.
their power generation initiatives. Generation operations will
require
expertise
mining
companies
may
not
Q: Which companies represent your target demographic
necessarily have today, which is where I believe that SEL
for the mining sector?
can add significant value.
301
302
| TECHNOLOGY SPOTLIGHT
MORE MINING WITH LESS FUEL With exploration budgets tightening and drilling an
In the private sector the system is used by Toyota Motors
increasingly risky expense, many mine operators are
and Del Monte Food, while the New York City Department
focusing their attentions on improving internal processes.
of Environmental Protection and the United States Coast
One avenue in which to hunt for profit is in energy
Guard show the solutions’ public sector use.
efficiency, with new technologies for the segment constantly popping up on the market. RAISE Energy
The catalyst reduces off-road equipment fuel consumption
Solutions is a socially responsible company that works
by 3-8 percent, stationary generators’ consumption by 5-8
to improve clients’ energy conservation, generation,
percent, and truck tractors’ usage by 11 percent. It can
storage, and distribution. It has recently added the RAISE
bring down greenhouse gas emissions by 19.2 percent,
REDUCTION fuel catalyst to its diverse portfolio of energy
black smoke by 44.8 percent, and particulate matter by
saving solutions.
58.2 percent. Crucially it also extends engine life by up to 20 percent, generating substantial savings for mining
The catalyst is proven to reduce fuel consumption, harmful
operations. Moreover, the system has no effect on the
emissions, and engine maintenance costs while extending
engine itself, rather it simply preconditions the fuel to
engine life for mine operations. It works by passing fuel
accept more oxygen to improve combustion efficiency.
over a patented combination of metals and rare earth
Companies make a full ROI within 12 months. To add to
elements, releasing a small amount of hydrogen and pre-
the cost savings, the system is exceptionally easy to install
conditioning the fuel to increase the surface area of the
on mining applications, requires no maintenance, and
fuel molecules during combustion. When fuel is passed
extends time between oil changes. It can also generate
through the catalyst, a series of reactions occur. Firstly, the
carbon credits given that for each 100 gallons of diesel
saturated straight chain aliphatic paraffins are converted
fuel unconsumed, 1 metric ton of CO2 is prevented from
into unsaturated ring compound aromatics, resulting in
being emitted into the atmosphere.
a release of a small amount of hydrogen gas. Secondly, clustered fuel molecules are separated, increasing their
Aside from its industry-leading technology, RAISE Energy
exposure to oxygen at the point of combustion. Finally,
Solutions is also committed to social responsibility and is
further reactions result in lowered vapor density, improved
focused on educating clients about power usage, energy
atomization, and cooler flames.
saving, and other environmental concerns. With each purchase from RAISE Energy, the customer participates
The catalyst, which can facilitate the flow of 1136-1700L
in a donation of energy products and energy savings to
at 55lbs/in2, is available in 17 different models for various
those lacking necessary resources.
applications and industries including mining, transportation, power generation, and furnaces. Applications based on elements including Zirconium, Cerium, Rhodium, Platinum, Palladium, and Iridium can benefit from the system. The catalyst is designed to maintain an internal pressure of up to 350lbs/in2, ensuring minimal flow restriction, while it is also equipped with JIC10 hydraulic fittings, although KIC8 and JIC6 fittings and a whole range of adaptors can also be used effectively. The fittings are installed metal-tometal, making an impenetrable seal.
The catalyst can bring down
greenhouse gas emissions by 19.2 percent, black smoke by 44.8 percent, and particulate matter by 58.2 percent
Each unit undergoes rigorous testing before entering the
The RAISE REDUCTION fuel catalyst is still relatively new
market. Tests have been carried out by institutions including
to the mining sector. However, with the extensive savings
Virginia Tech University, the Italian Ministry of Defense, and
it can make to both underground and open pit operations
the Southwest Research Institute. This extensive testing has
and the increasingly open-minded approach adopted
yielded strong results. In over 20 years of test operation
by top executives throughout the sector regarding
there has never been a report of a problem, and the
technology, it should not be long before the largest players
catalyst has now been installed on over 28,000 projects.
take notice of the solution.
RAISE Energy Solutions is a wholly owned subsidiary of US-based RAISE Global Services. RAISE is an incubator, manufacturer, and integrator of energy efficiency technologies.
303
13
ENVIRONMENT & CSR
For perhaps the first time, issues of environmental and social responsibility are at the forefront of the mining industry’s priorities. Environmental restrictions have been tightened, and regulators like SEMARNAT and PROFEPA are intensifying their sanctions against those companies found to be in breach of the Environmental Responsibility Law. In 2015, PROFEPA inspected 1,130 mining units in Mexico. Of those, 71 were closed due to lack of compliance. Players are becoming increasingly conscious of their accountability in providing for the communities surrounding mines and crafting sustainable closure plans that will not leave the area barren when the mine is closed. The distribution of the mining fund may either help or hinder these new relationships but overall a more balanced development of states and municipalities is projected over the coming years.
In this chapter, we hear from players across the value chain who share the ways in which they are prioritizing environmental and community development. Industry leaders share details of the most innovative technologies that allow the earth surrounding mines to remain free of contaminants. This chapter also shares firsthand considerations that must be taken into account by operators when opening and maintaining a mine, both in terms of environment and community relations.
305
ERM: The business of sustainability www.erm.com
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.
rePlan, an ERM Group company, specializes in managing the community impacts, risks and opportunities associated with resource and infrastructure development projects.
We have worked in more than 85 countries worldwide, providing services related to the following: • • • • • •
Social Assessment & Management. Land Acquisition & Resettlement. Community Development & Livelihoods. Regional & Community Plans. Worker Housing & New Town Plans. Social Closure & Economic Transition Plans.
For more information. Jaime Martínez Partner and Business Development Director jaime.martinez@erm.com
Ivette Catalán Partner ivette.catalan@erm.com
Renato Urresta Project Director renato.urresta@replan.ca
| CHAPTER 13: ENVIRONMENT & CSR 308
VIEW FROM THE TOP: Guillermo Haro, PROFEPA
310
EXPERT OPINION: Environmental Concerns in the Mining Industry
311
EXPERT OPINION: CSR Challenges Facing Miners
312
VIEW FROM THE TOP: Scott Fleming, Amec Foster Wheeler
Humberto Preciado, Amec Foster Wheeler
312
INSIGHT: Gerardo Suárez, Terracon Ingeniería
314
VIEW FROM THE TOP: Ivette Catalan, ERM
Renato Urresta, rePlan
315
VIEW FROM THE TOP: Julio Aravena, Siat Mining
316
VIEW FROM THE TOP: Ricardo Palacios, Hi-Pro
317
INSIGHT: Paula González, Paques
318
VIEW FROM THE TOP: Brian Weihs, Kroll Mexico
319
INSIGHT: Marcos Monroy, Centro de Estudios Servicios y Consultorias Ambientales
320
EXPERT OPINION: Giacomo Bonfanti, Grupo Desarrollo Infraestructura
322
VIEW FROM THE TOP: Luis Medal, Servicios ATS
323
VIEW FROM THE TOP: Carlos Ortíz, Greenergy
325
INSIGHT: Teresa Cornejo, Aceites Lubricantes de Chihuahua
326
VIEW FROM THE TOP: Reynaldo Cárdenas, FIMEX
327
VIEW FROM THE TOP: Luis González, Fire Service Plus Mexico
307
| VIEW FROM THE TOP
THE HIDDEN BENEFITS OF INSTITUTIONAL COOPERATION GUILLERMO HARO Federal Attorney of PROFEPA
308
Q: What are the most common noncompliance issues of
a strong grip on their duties and the consequences of
the industry?
noncompliance, not to mention a clear understanding of
A: The main noncompliance issues that were detected
the benefits that can be reaped from a positive relationship
within the industry revolved around a consistent failure
between environmental and economic performance.
to meet the conditions and requirements set up by the
Many incentives exist with the objective of optimizing the
environmental impact authorization that SEMARNAT
efficiency of productive processes, and the use of natural
grants before operational start-up. As any other agency,
resources. Green practices tend to be associated with cost
the set of conditions demanded by SEMARNAT are a
reduction, and an excellent public image.
requirement for players that wish to avoid any type of possible penalty. Companies must assure that they
Q: What kinds of programs or actions were implemented
understand their obligations, and should verify the steps
as a result of the spill at Buenavista del Cobre?
that need to be taken in each case. Recently, a greater
A: As a result of the accident, a commission was formed
number of norms and obligations have been added to
to address the different environmental areas that were
the list of requirements. The latter implies that industrial
affected in order to allow authorities to pay closer attention
activities, unlike other economic activities, need to have
to the issue, and grant a more coordinated follow up.
Furthermore, both local and national academic institutions
compliance. Players also benefit from having a thorough
were involved in drafting a remediation program. The
understanding of the resulting administrative and legal
Federal Commission for the Protection against Health
procedures. Certifications that can be obtained through
Risks (COFEPRIS) was also involved as it implemented
environmental
health related actions to treat the possible side effects of
commonly used voluntary mechanisms by players, in
the contaminated material in water and soil. The National
which a company’s commitment to comply with all federal,
Water Commission (CONAGUA) also played an important
state, and local regulations are reviewed by PROFEPA. The
role by taking care of the program in charge of monitoring
inspections are a way for the agency to not only oversee,
the quality of water meant for human consumption.
but also create superior relationships with businesses,
An order was made to remove more than 6,500m of
as the certifications and work plans are a nonobligatory
contaminated soil near the origin of the Buenavista
way to obtain recognition for going above and beyond
accident, authorized by the Attorney General. A site was
standardized regulations. Companies can use PROFEPA’s
specially designed to encapsulate the contaminated soil,
certifications as a competitive strategy to stand out in the
and ultimately, avoid further contamination to the zone.
market, both nationally and internationally.
2
performance
revisions
are
the
most
PROFEPA organized an assessment of all the possible issues that could arise from toxic residues such as
Q: What challenges must PROFEPA and the Mexican
atmospheric emissions and environmental impact.
mining industry confront in the short and long term? A: Inspections represent a difficult hurdle for the agency.
Q: How significant is the promotion of cooperation
Even though General Law of Environmental Protection
between institutions, agencies, municipalities and the
(LGEEPA) clearly defines which types of industries are the
private sector?
responsibility of the General Attorney, the country has almost
A: Entities should seek to interact with the federation,
200,000 businesses that are subject to a compliance review
states, and municipalities to consult on several aspects.
under the federal environmental legislation. Fortunately,
All things considered, effective cooperation implies
the renovation, growth, evolution, and the increasing
smaller
and
sophistication of environmental norms and legislations are
regulated sectors as clear and transparent communication
taking industrial compliance to another level, while pushing
regarding industrial obligations are the best way to ensure
authorities to use sharper monitoring tools.
transaction
costs
for
both
authorities
309
| EXPERT OPINION
ENVIRONMENTAL CONCERNS IN THE MINING INDUSTRY Luis Sánchez Country Manager of Intercore
Water
310
is
Alejandro Preinfalk VP of Digital Factory and Process Industries and Drives Divisions at Siemens Mesoamérica
becoming
a
In the industrial segment,
commodity, which means
mining takes first place
we must implement water
in the consumption of
management and remediation technologies. We
energy. Grupo México and Siemens collaborated
recirculate the muds to recover as much water as
in the development of a cogeneration plant in
possible and reuse it in the drilling process. Intercore
Sonora. This project provided many benefits for
has
that
our customers, ranging from a steady and safe
separate solids from water and extract additives
power supply to cost savings. In that respect,
for recycling. Additives are more environmentally
power reliability is crucial in processes of intensive
friendly and we ensure that our drilling techniques
industries like mining since it avoids power
are on point to prevent percolation and loss of
shortages and unforeseen stops of production.
water. The government is increasingly tightening
The need for power continues to rise in the mining
the noose on environmental regulations and we
industry and most companies are wagering on
must uphold all standards and make sure impact is
combined cycle or natural gas due to the fact that
limited. We have man portable rigs that are easy to
it is a high energy intensive industry and these
maneuver and transport, and this means the impact
alternatives fit the bill. It will play a bigger role in
to surroundings is limited when transporting the
the future, especially given the structural changes
machinery.
spurred by the Energy Reform.
We recycle water because we are aware that it
The railroad allows significant energy savings
is a scarce commodity, and we are going one
by substituting thousands of trucking units as
step beyond by redesigining standard pumps
well as by having a more efficient use of fuel.
for water wells to make them self-sustaining.
Transporting freight by train instead of by trucks
Many NGOs operate under the belief that value
can reduce greenhouse gases up to 75 percent
is placed on the number of water wells they drill,
on average. A train can move a ton of freight
and to keep costs down they use cheap pumps.
for 700km with less than four liters of fuel, and
The first thing to fail in a traditional small village
only one intermodal train can carry the freight
well is the pump and while it is not a complex
of 280 trucks. One of Kansas City Southern
part, it can be difficult to obtain. Our clients that
Mexico’s priorities is avoiding the generation of
wish to build water wells in the communities close
carbon dioxide emissions, so our environment
to the mines also go through the same learning
protection strategy includes several elements
curve. Communities found in remote locations
like our fleet transformation and the purchase of
must travel for kilometers for water. By building
12 “green” locomotives, which can save up to 25
water wells we provide a clean water source to
percent of fuel per month. They can also reduce
the communities and we strengthen the trust
use of lubricating oil by up to 50 percent and 70
implemented
centrifuge
machines
and ties between the
percent of greenhouse
mining company and the
gas emissions can be
population.
eliminated.
Frederick Davidson President & CEO of Energold Drilling & Impact Silver
José Zozaya President, General Manager, and Executive Representative of Kansas City Southern
| EXPERT OPINION
CSR CHALLENGES FACING MINERS
Morgan Poliquin President & CEO of Almaden Minerals
Bruce Winfield President & CEO of Defiance Silver
It really comes down to
It
our local stakeholders.
accept
We
and
do
not
think
of
is
essential the
to
structure
legislation,
and
them as pawns in a game, we think of them as
to resist the temptation to cut corners. We
partners. The foundation of our CSR program is
always strive to maintain strong relationships
to be transparent and open, and a key aspect of
with landowners, going out of our way to meet
that is educating the local population about the
them and the ejido representatives. We find
company and the project. Ixtacamaxtitlan is an
that open communication channels are essential
extremely marginalized community, and when
when embarking on any type of mining project.
operating in these communities, it is essential to
We also have an excellent local manager, who
be sure that locals’ needs are being addressed.
is from Zacatecas and therefore has extensive
We want them to grow along with the project. For
local knowledge and experience of mining in
example, there is a mother and child clinic in a
the region. This has been greatly beneficial to us
village near the Ixtaca property, and it did not have
because local expertise and a knowledge of local
an ultrasound machine. One of our shareholders is
communities is invaluable when presenting our
a physician who specializes in childbirth, and he
projects to the authorities. A project cannot be
was able to procure an ultrasound machine which
imposed on the local society, rather it is necessary
we provided training for.
to work together.
Community support is an extremely important
In the case of Guanacevi, we started working
facet of Primero Mining’s business ethos. The
with local municipal and ejido representatives
San Dimas site is essentially a hole in the ground,
to support repainting and refurnishing the
and is only accessible by plane. Primero Mining
local
therefore developed a program to provide
trees, sponsoring town clean-up days, kids
internet and mobile phone networks at the mine
camps, sports teams, and religious and secular
site because today communication technology is
celebrations. We developed a community wants
a basic requirement for all communities. What is
and needs list, sponsored the first doctor,
more, we built recreational parks to encourage
nurse, clinic, ambulance, ATM bank machine,
local children, who represent about 40 percent
and garbage truck for the local community,
of the population at San Dimas, to engage in
and carried out road improvements and creek
sports and other communal activities. Finally, we
widening to reduce flooding during the wet
invested more than US$1 million on a complete
season.
renovation of the local hospital, which was badly
for local children to go to university, training
lacking in facilities and staff. We are constantly
programs for the young and unemployed to learn
seeking new ways to support the economy in
career skills in the mining sector, and agricultural
school
and
meeting
Endeavour
sponsors
order to make it less
activities local mothers
dependent
can do to learn new
on
our
mining activity.
Martin Aguilar Mexico Country Manager of Primero Mining
hall,
skills and earn income.
Bradford Cooke CEO of Endeavour Silver
replanting
scholarships
311
| VIEW FROM THE TOP
RESPONSIBLE CLOSURE PLANS TO CUT COSTS
Scott Fleming Principal and Mexico Mining Area Manager of Amec Foster Wheeler
Humberto Preciado Senior Geotechnical Engineer at Amec Foster Wheeler
as construction support and quality assurance and control. In the operational stage we offer services including process cycle optimization, infrastructure design, tailings management, process water and stormwater quality
Q: In which mining segment is the company most strongly
and control, and embankment stability. According to
positioned in the local market and why?
the Mexican environmental laws a mine must generate
SF: Amec Foster Wheeler is involved in the whole cycle of
a closure plan that is periodically updated. Currently we
a mine from its conception to its closure. We are involved
are involved in closure plan updates for three Mexican
in the early stages by offering scoping, prefeasibility, and
precious metals mines.
feasibility studies, as well as the whole range of mining
312
engineering services within the process plant, including
Q: Which flagship project reflects the value proposition
mine surface and subsurface development and surface
and strengths of Amec in the mining sector?
infrastructure categories. We also support companies
HP: Relatively speaking, there are still few greenfield
in the permitting process within the CONAGUA and
projects because so many mineral rich areas have been
SEMARNAT regulatory system to ensure that mining
developed in the last 400 years of Mexico’s mining
clients understand the Mexico-specific operational and
history. The Spanish developed mines in Mexican states
environmental regulations. In the design and construction
such as Durango, Zacatecas, and Guanajuato where silver
stage of a project, we also have a strong presence through
was relatively accessible at surface outcroppings. Over
both the Amec Foster Wheeler Mining & Metals and
the past 20 years, and facilitated by the NAFTA treaties
Environment & Infrastructure groups.
between Mexico, Canada, and the US, the trend has been to focus the operation of legacy mines with a limited
HP: One of the ways mines are cost efficiently developed
number of greenfield projects when compared to the rest
is through EPC management. Amec Foster Wheeler is able
of the world. Given that many projects are legacy mines
to mobilize at that level in order to offer key services such
there tends to be demand for experience in expanding
| INSIGHT
INNOVATIVE SEISMIC SENSOR APPLICATIONS GERARDO SUÁREZ
mines, and their only function was to measure safety levels
Director General of Terracon
of controlled explosions. Terracon Ingeniería is now working
Ingeniería
to encourage mining companies to utilize the sensors in a systematic way to take care of the mine’s structural
Terracon Ingeniería was founded with safety as its main
integrity and avoid environmental or social contingencies.
focus and offering innovative solutions to guarantee
Suárez explains that mining companies could benefit from
structural safety as a way to protect companies’ assets and
instrumentation services in several ways. For instance, in
communities’ well-being. The company offers two types
an open pit the slip of embankments can be prevented
of services, risk analysis for natural phenomena such as
by monitoring the activity of the mine and detecting the
earthquakes, hurricanes, or flooding, and instrumentation
signals before the event occurs. Preventing this kind of
services to assess and monitor a project’s structural
event allows companies to protect not only their assets but
behavior. In the past, according to the company’s Director
also the well-being of their staff. Instrumentation of tailings
General Gerardo Suárez, it was rare to see seismic sensors in
dams could also have important environmental benefits as
existing mine infrastructure, process plant facilities, and to expand stable tailings storage capacity. SF: An example of this type of legacy mine development can be seen with Endeavour Silver in Guanajuato and Durango. In these operations, Amec Foster Wheeler has carried out a variety of environmental engineering services, from water balance, hydrology and hydraulics, tailings storage stability and expansion, and stormwater management. Additionally, Endeavour Silver managed to increase the production rate over the historic mining rates
“Amec Foster Wheeler can help processing plants become more cost effective and obtain a higher level of metal recovery” Humberto Preciado, Senior Geotechnical Engineer
at Amec Foster Wheeler
at this legacy mine. Naturally, this created the challenge of an increased rate of tailings waste production to be
the milling process, and as a result improves the flotation
managed and disposed of in a stable and environmentally
or leaching process specific to the ore type. With this
responsible manner. Amec Foster Wheeler was tasked
proprietary modelling, we have been able to simulate
with finding a sustainable solution.
different gradations and recovery options to optimize the recovery process and minimize the all-inclusive and final
Q: What optimization services do you have in place in
cost of production.
order to reduce bottlenecks in plants and mines? HP: We have mine processing and engineering specialists
Q: How is Amec Foster Wheeler improving water
that carry out dynamic simulations using modeling to
management strategies and optimizing the consumption
simulate real time and full scale operational conditions.
of this resource?
We have in-house proprietary simulation software that
SF: The downstream waste of the processed ore is a
replicates the operations of a plant and allows us to
mixture of milled ore and water normally discharged as
identify the processing bottlenecks and see where the
a slurry to a final tailing storage facility. The physical and
process circuit needs to be modified. In this manner,
chemical characteristics of tailings and their methods of
Amec Foster Wheeler can help processing plants
handling and storage are a significant mining cost. New
become more cost effective and obtain a higher level
technology has allowed the exploitation of lower average
of metal recovery. Milling costs rank high on the list of
grade ores and thus the generation of higher volumes of
expenditures in a mining operation, and one of the best
tailings storage demand. In addition, there has been an
ways to reduce costs is to reduce the amount of fines in
increased focus in Mexico in recent years on the stability
the grinding phase. We have a simulator that optimizes
of tailings storage facilities and on mine site water quality.
they contain the mine’s residues, which can be a source of
rock deformation sensors. In tailings dams, piezometers
pollution. “Instrumentation products monitoring the dam’s
can also be placed downriver to measure the pressure of
structure prevent environmental damages like those that
the fluids, which detects the presence of polluting flows as
occurred in Brazil in 2015, when a tailings dam belonging
well as structural damages such as cracks.”
to an iron ore mine burst, unleashing 50 million tons of toxic mud and waste, which was the equivalent of 25,000
Although it has only recently entered the Mexican market,
Olympic pools,” Suárez warns. “As a result, the Brazilian
Terracon Ingeniería has already been involved in Fresnillo’s
government has sued the companies responsible for US$7.2
prolific La Herradura mine. In this facility, the company has
billion in damages.”
installed three high-resolution seismographs to evaluate the impact the controlled detonations have on the mine’s
In Mexico, he explains that SEMARNAT is considering
structural integrity. Suárez shares that the company is
adopting the measures used in Canadian norms, which
planning to open new galleries in the mine, which could have
will make instrumentation in tailings dams mandatory.
implications for the mine’s open pit structure. “Therefore,
A combination of seismic and geotechnical sensors are
we are stressing the importance of using instrumentation
currently being used worldwide in mining operations. “To
to monitor the galleries’ activities, as well as their tailings
carry out this process, one needs to evaluate the stress
dams,” he states. “For this purpose, we recommend they
concentrated in the collapse area,” he explains. “For this
utilize piezometers as well as extensometers to monitor the
purpose, miners can rely on both seismic sensors and
dam’s activities and prevent environmental damages.”
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| VIEW FROM THE TOP
BRIDGING THE GAP BETWEEN OPERATOR AND COMMUNITY Renato Urresta Project Director of rePlan, an ERM Group company
Ivette Catalan Partner at ERM
effective way. We help to set up structures, systems, and chains of communication, and we train groups in community relations. We understand our role as a facilitator and also as a bridge between the company and community. We are
314
Q: How did ERM’s acquisition of rePlan come about, and
currently working in a project in Sonora that began with a
what will the partnership bring to the group?
dialogue process and evolved into a voluntary resettlement
IC: ERM had been growing organically on a global scale for
process, requested by the community and agreed by the
many years, to such an extent that, eventually, it decided
company. This is an ongoing process, with a company and
to look for potential strategic acquisitions that could
community that were in constant conflict. As a result, we are
add value to the group’s overall corporate profile. These
helping the parties to reach an agreement, solving a historic
acquisitions tend to involve companies that are focused
problem through dialogue with proper methodologies
on specific sectors, and so the rePlan purchase was a
and a clear path. Finally, the project aims to improve the
direct result of ERM’s desire to expand its social services
community’s quality of life and conditions.
within the mining industry in particular. Q: How can you help to construct sustainable mine closure Q:
How
do
you
help
with
financing
for
social
plans that are mutually beneficial for the communities
considerations?
and operators?
RU: The World Bank and the International Finance
IC: A lot of the mines that are currently operating and
Corporation (IFC) have developed funds dedicated to
have been at this stage for many years still do not have
social concerns, particularly in terms of resettlement.
closure plans crafted. These plans must take into account
We apply these standards in our projects, as well as
environmental considerations as well as the financial
other global best practices, to ensure the client fulfils the
implications that a mine closure will require. The processes
necessary requirements in order to attract funding. The
are complex, especially in terms of environmental issues
private banking sector also follows the IFC standards,
due to the level of restoration required, including water
which include transparency and participatory and well-
sources, surrounding greenery, animal and plant species,
documented practices, among others, ensuring that the
and prevention of leaks from tailings dams.
client has the capability to access funds from private banks. RU: We help to construct a social management closure Q: Focusing on Mexico, what are the main environmental
plan, firstly to identify those people that will be most
and social challenges that mine operators face?
affected by the company’s exit, and secondly help them to
IC: There are whole number of issues that any mining
find new livelihoods. The primary consideration is finding
project must deal with, including risk mitigation, worker
new sources of employment or change of livelihood within
safety, and environmental sustainability, which includes
the same area, although if the mine opens elsewhere, they
tailings and waste management. Unfortunately, Mexico
will have the option to retain their positions and commute.
has fallen behind other countries in Latin America, for
In Colombia, we worked with Prodeco on a plan for a mine
example Chile, in terms of its mining legislation, and we
that had to transport the coal to port, which was upgraded
therefore believe it is important for companies like us to
in a different location and had to be closed. The whole
help mining industry players improve their procedures for
community surrounding the port was lacking employment,
handling environmental concerns.
so we helped them to generate small businesses so that the families could engage in new activities. Some of the
RU: Another trend that we see is influx, and when a project
families decided to move with the port and continue
arrives, it creates a certain amount of activity in the town
working in their old posts. In Mexico, we are involved in a
and if this is not properly managed, it can destabilize the
conceptual project in Morelos for a gold site that has not
community, instead of helping its growth. Moreover, there are
even entered into the permitting stage yet. At a very early
social liabilities from previous projects that have encountered
stage, we are already working on a closure plan for this
problems in the past and failure to manage grievances in an
site as part of the stakeholder engagement strategy.
| VIEW FROM THE TOP
SIGNIFICANT REDUCTIONS IN WATER CONSUMPTION JULIO ARAVENA Founder of Siat Mining
Q: What are the competitive advantages in mud
and we simply adapted and transferred it to the mining
recirculation?
sector. The MC200 is a mud cleaner that can achieve 50
A:
Mining
companies
can
sometimes
face
conflict
percent water savings. It is adaptable to the interior of a
with surrounding communities, and one of the points
mine, it can be easily assembled and mounted, it requires
of contention is the availability of potable water. The
minimal maintenance, and it runs on diesel and has its own
industry's image has been tarnished by environmental
hydraulic system. The Mud Camel MC-6421 is a dewatering
disasters and if companies are committed to improving
system that reduces not only the amount of additives used
their record, they should implement these technologies.
but also decreases the number of tailings that must be
The advantage of recirculating the mud is that it massively
built to store the waste.
315
reduces water consumption and has a positive impact on the environment. Innovation is a pillar in Siat Mining’s
Q: Which companies have begun to embrace your
strategy, and we have witnessed that in many ways the
technologies?
mining industry falls behind on this front. There are very
A: While exploration companies have been relatively
few miners that truly care about the environment and we
reticent
hope that in the future there will be a change of mindset.
Drilling has been open to our suggestions and we have
We know that costs for water are rising and it is becoming
implemented some solutions in a project called Milpillas.
a precious and scarce commodity, and as a result we have
We have worked hand in hand with Minera Frisco in the
seen some companies begin to take an interest in the
Boquillas project, located in Aguascalientes, and now it
technology we develop
is only consuming 10m3 of water per day. We have also
to
explore
our
technology,
Globexplore
worked with other operators and they too have reached The equipment we sell is extremely simple, involving
record consumption levels of only 3-4m3, compared to the
hydraulic mud and hydrocyclone separator filters that
astounding 80m3 of the past. In my eyes, the only mining
permit mud recirculation. There are many hidden costs
operator that has fully embraced this greener vision has
that surface when our technology is implemented. As
been Endeavour Silver because its perspective reaches
an example, traditional drilling operations require the
beyond the business aspect and truly delves into the
excessive use of water trucks, and each truck can cost
environmental repercussions of its operations.
over US$12,000. Our technology reduces their use of water trucks, maintenance, and it improves contractors'
Q: How is your portfolio divided between selling and
operations. In some instances, it can be difficult to envision
leasing equipment, and in which cases can clients benefit
the amount of water that is wasted but in one sector 20
from these modalities?
drills can be found, each of which consumes 160m3 of
A: Equipment leasing has proven to be the more popular
water, meaning that the numbers are astronomical.
of the two and clients benefit from low costs. Mining companies should look beyond the price benefit if they
Q: What is the process of designing and building this
truly wish to make a difference in their environmental
equipment?
management strategies. The most sensible place to start
A: We began developing this technology in 2009, and since
is in the exploration stage but the difficulty lies in the
then we have seen companies that sell additives develop
fact that exploration companies are only concerned with
similar solutions using centrifuges. While this might
complying with their contracts and reaching the desired
intensify the competition, we are glad other companies
depth. Technology providers like Siat Mining could
are embracing this mentality of water reduction and
become the most strategic allies for operators since they
additive consumption. The oil and gas industry served
can significantly reduce the amount of unnecessary costs
as an inspiration since it applies similar technology,
associated to exploration and protect their budgets.
| VIEW FROM THE TOP
A SUSTAINABLE SOLUTION TO WATER CONCERNS RICARDO PALACIOS Mining Technology Manager of Hi-Pro
316
Q: How much of Hi-Pro’s added value comes from the
site in Zimapan, which is the area with the second-highest
consultancy service it offers clients?
arsenic concentration in the world after Bangladesh. Our
A: This is a large part of our client service. We work closely
machinery can recover arsenic, making the water potable
with our customers in order to pinpoint the precise needs
again and safe for use on other applications and processes.
of each project by performing regular maintenance checks,
We estimate that this technology will save the lives of more
and this is part of the package we offer at no extra cost.
than 5,000 people in that community over the course of
In our experience, companies greatly appreciate a helping
the next 20 years, and we are hopeful of building similar
hand to improve the efficiency of their water treatment
plants across the country. Furthermore, we have a close
facilities and reduce their environmental footprint. For 25
relationship with Dutch company Paques, which has
years, our main focus has been regeneration of waste water,
developed two water treatment technologies specifically
pollution reduction, and other environmental issues. To
for the mining industry. One is the SulfateqTM technology,
this end we operate more than 50 water treatment plants
which treats water that has been polluted with sulfates. This
throughout Mexico and Central America. We work with
process generates hydrophilic sulfur that can be reused
mines on controlling the water discharges created by the
and water with sulfate concentrations of under 300mg/l.
mineral extraction process, and treating them before they
Another technology developed by Paques is the ThioteqTM
are released into the environment.
technology. This biological technology produces H2S gas that can be used to precipitate metals. By recovering
Q: What major projects has Hi-Pro been involved in, and
metals from process water in the mine, this technology
how can the company demonstrate its value to the mining
enables water re-use as it does not add any chemical to
industry?
the water, such as sodium. The average time for full ROI
A: There was a toxic spill in Sonora a few years ago that
is three years, which, compared to our competitors is an
shook not only the mining sector but the entire industrial
extremely short period. Moreover, once the technology
community and even the Mexican government. For Hi-
is installed and fully operational, our clients’ revenues
Pro, this represented an opportunity because our systems
will start to increase pointedly, because we can carry out
can treat the water from this spill in order to recover the
expansion works on the plants in order to complement the
copper and other metals within the liquid. Therefore, our
boost in productivity.
designs benefit not only the environment by cleaning the potentially toxic water, but also the operator by recovering
Q: How can your solutions help with water scarcity
precious metals that otherwise would have been lost.
plaguing many mining operations?
The events that took place at this mine could easily
A: One phase of the mineral extraction process that
have happened at any other mine, and our technology
our technology can support significantly is exploration
can significantly reduce the likelihood of this occurring.
because drilling requires a vast amount of water over an
Moreover, we are working with two mines in Hidalgo that
extended period. Many of the water recovery tanks used on
will be closing in 2017. Specifically, we are developing a
exploration projects produce low quality fluids, with very
new tailings system that will reduce the amount of arsenic
high solid content, often of more than 50 percent. Hi-Pro has
and other metals filtered into the soil by diverting it into
developed a compact filter that can be installed in an area
plants capable of handling these substances.
of just 5m2, and can treat the water to make it potable. Of course, this process benefits not only the mine operators but
Q: Which technologies has Hi-Pro developed that are
also the communities surrounding the mine as more water is
leading the way in terms of water treatment in Mexico?
recycled and therefore more water is available for use. In fact,
A: Alongside CONAGUA, we developed a product that
our solid removal technology is by far the most widely used
can remove arsenic from water. We built a plant on a mine
of our products in the mining industry.
| INSIGHT
MAXIMIZING VALUE OF MINERALS AND WATER The prolonged downturn in commodity prices has forced companies to fight to implement measures to improve free cash flow by reducing costs and capital spending. Paula
PAULA GONZÁLEZ
González, New Business Development - Mining at Dutch
New Business Development -
company Paques, believes that Mexico stands out from
Mining at Paques
other emerging countries with a robust GDP growth over the past two years. copper plant in question was designed for the recovery of The operation of a Sulfateq™ pilot installation in the 1990s
12,000t/y of copper requiring around 20t/d of H2S, making
triggered the development of the Thioteq™ technology.
this system the largest biological H2S generator in the
This was developed when Paques employees observed
world,” González boasts. “The copper concentrate obtained
sulfide production from sulfur instead of sulfate after the
here is of extremely high grade, up to 60 percent copper,
unintended feeding of sulfur into the sulfate reduction
and is sold at market price to copper smelters.”
bioreactor. “Onsite tests revealed that sulfur reduction lead to dissolved sulfide concentrations up to 5,000mg/l
She acknowledges the fact the industry is currently
at a pH level of 7.5, resulting in H2S concentrations of up to
under pressure from stakeholders, ranging from changing
25 percent in the gas phase,” she clarifies. “An immediately
consumer demands to the promotion of sustainable use
observed advantage of the new technology was the
of resources by regulatory bodies. “In many cases, the
considerably lower organic substrate consumption per unit
cost of remediation is higher than the cost of prevention
of H2S produced when compared to its parent technology,
through treatment and recovery of metals from waste
Sulfateq , for sulfate removal and metal recovery.”
streams before mine closure,” she clarifies. Paques can
Paques patented the new ideas and started to offer the
help companies develop integrated and tailored solutions
Thioteq™ technology to customers that require sulfide
to treat water and recover valuable metals to minimize
production at low cost for profitable metal recovery.
environmental liabilities, preventing contamination and
Paques went on to pilot several metal recovery plants on
eliminating these substantial costs. “Paques is a global
a small scale of less than 0.5t/d of H2S to demonstrate the
company leading in the development of high quality
TM
biological production of H2S from elemental sulfur. In the
biological wastewater and gas treatment processes,"
following years, three small scale Thioteq™ plants were
González adds. “Paques has historically tailored its
sold, commissioned, and operated in the Czech Republic,
technologies to provide the highest value for its customers
Canada and Austria, and Paques seized the opportunity
by combining their expertise with that of other engineering
to begin working in Latin America in the Pueblo Viejo
or contracting firms.” In the coming years, Paques aims to
project in the Dominican Republic. A Thioteq™ plant was
service the American market in collaboration with its local
commissioned to recover the copper upstream of the
partner Hi-Pro in projects with diverse companies across
neutralization plant from mine ores containing gold, silver,
the entire value chain.
and copper through conventional crushing, grinding, and pressure oxidation in autoclaves, cyanidation, and refining. González reveals, “Thioteq™ technology recovers dissolved metals from liquids by the formation of high purity metal sulfides. The required sulfide in the form of H2S gas is generated onsite and on demand, at ambient temperature and pressure.” The process takes place in a bioreactor fed with elemental sulfur and ethanol. Use of gaseous H2S avoids sodium addition to the closed loop water system, which would hamper the neutralization plant performance. Because the bioreactor is operated offline and bacteria are not in direct contact with the metal-containing stream, the Thioteq™ technology can be applied to other metallurgical streams at different pH and temperature levels. “The
Thioteq can reduce H2S concentrations by up to 25 percent in the gas phase
317
| VIEW FROM THE TOP
GLOBAL RISK ASSESSMENT BEST PRACTICES BRIAN WEIHS Managing Director and Country Head of Kroll Mexico
318
Q: What differentiates Mexico’s security risk profile from
We work with clients at all stages of the mining process
other mining markets around the world?
and when they have a potential new investment we can
A: In Mexico, the region makes a considerable difference to
be a valuable ally. In previous years, a couple of our bigger
the type of risk faced. A mining project in the southwest of
projects have been with clients that had issues with theft
Mexico, like Chiapas or Oaxaca will have community and
of precious metals or threats to their personnel. Mining
indigenous issues, whereas in Guerrero mining takes place
companies tend to be focused on risks concerning the
in remote areas controlled by criminal organizations and
ore and the technical issues around it because that is
the problem arises with potential violence when trying to
their expertise. They often pay less attention to social and
gain access to the location. A similar situation is seen in the
other security issues they are going to face, like social
northwest part of the country, where there are large remote
confrontations or licenses to operate, and the attitude of
areas often controlled by organized crime. Kroll’s main
local communities to the sector.
focus is using intelligence to understand and manage risk. We do not sell any particular product or technology. We are
Q: To what extent is Kroll able to leverage international
extremely objective when approaching the most effective
best practices in the Mexican market?
manner of managing risks, and we are not driven by our
A: We can implement best practices since we work in
desire to sell any kind of system. Our value proposition is
so many markets around the world in other sectors like
in understanding the micro region in which the projects are
infrastructure or oil and gas that have faced similar issues.
located, and studying the specific risks tied to it. We have
There are areas in northwestern Mexico where there is a
worked with companies that are in one dangerous area in
considerable amount of mining activity, and at the same time
Guerrero and another that is not so high risk. Our role is
there is construction of gas pipelines, all of which are facing
to help investors and operators understand exactly what
issues of land access and possession. One problem I think
the risks are. Kroll works on risk assessments of locations in
mining companies in Mexico are going to come across is a
different parts of the country, and on potential mitigation
conflict between oil and gas rights and mining rights. Oil and
plans so clients can understand the potential, initial, and
gas has always been a priority, and now with the tendering of
acceptable risks.
new blocks it is going to overlap with mining areas, and there will be conflict over priority and management.
Q: What is Kroll’s strategy to tailor proposals without harming the company’s finances?
Q: How is the company planning to differentiate itself
A: I think there is a misconception regarding security issues
from its competitors in the security and intelligence
in general, even surrounding mining, where operators
business in the next five years?
think the solution for many of these risks is to invest in
A: The main difference from our competitors is our
armed personnel and protection. In truth, the solution is
approach. Another differentiator is our long experience
much more focused on intelligence and understanding
in Mexico, as we have been here for 18 years conducting
the cause of this risk, and the intelligent solutions. Often
investigations so we use a considerable number of local
this does not require many additional resources, it just
resources, and therefore our established network is
entails taking time to analyze the situation, investing
extensive and reliable. The mining industry is a closed one,
in communication, and understanding the surrounding
so we know that having a solid reputation with a few lead
communities and conditions, rather than building larger
players means we will be known by the whole sector. Mining
fences and having more heavily armed security forces.
will remain an important part of our business and helping
From an economic standpoint, implementing the correct
operators focus on CSR, and solving issues that are often
processes is often less expensive than following those
not considered until too late in their development, such as
extreme measures.
community and environment problems, will be our priority.
| INSIGHT
HELPING OPERATORS NEGOTIATE ENVIRONMENTAL CONCERNS The road to environmental permitting in Mexico can be difficult terrain to navigate, with federal requirements for
MARCOS MONROY General Manager of Centro
separate licenses for air, water, and waste, among other
de Estudios, Servicios y
environmental considerations. The length of time required
Consultorías Ambientales
for one of these permits can stretch to six months, meaning
(CESCA)
failure to adhere to regulations can create significant delays for mining companies. As a result, the demand for CESCA’s services has increased in recent years as
advice and solutions. Monroy finds that players are usually
environmental regulations have tightened, according to the
open to implementing necessary changes.
company’s General Manager Marcos Monroy. “We develop environmental studies to obtain environmental permits
One of the biggest challenges he has encountered is
and authorization mainly for the mining, energy, and
staff retention, since the company requires qualified staff
infrastructure industries,” he explains. “CESCA also develops
with PhDs, Masters, and engineering degrees. “Our staff
and carries out services for remediation of contaminated
comes from universities to finish the studies and train
sites or to promote the conservation of biodiversity.”
with the company, and we now have a permanent staff of 40 professionals,” he shares. CESCA has been involved in
CESCA’s main business is focused greatly on mining, and
several committees that develop these legal requirements
as a result it now represents around 40 percent of the
with Mexico’s federal environment ministry, SEMARNAT,
company’s services, with the other 60 percent now in energy
and the rest of the mining industry, and served as part of
and infrastructure. The company’s main client in the mining
the technical committee that regulates gold and copper
industry is Grupo México, Monroy shares, and CESCA even
leaching. Although the association does not have a specific
carried out all the labor studies that were required to obtain
business strategy, Monroy comments that it seeks to diversify
environmental permits for the company’s mining sites in
its work and collaborate with a wide spectrum of companies.
Sonora. “Cananea, Grupo México’s main investment in
“CESCA welcomes new clients and is open to helping
Mexico, needed to obtain permits for new strategic projects,
players develop their environmental strategies,” he clarifies.
and our company was in charge of all environmental
“The company makes sure to diversify their line of work by
studies,” he boasts. “Our company has carefully designed
signing agreements with companies like Enel Green Power.
the environmental impact studies we offer, with services
The contract grants us the responsibility of developing
aimed toward permit authorization and advising, allowing
environmental studies for all their investments in Mexico and
companies to consequently follow up with the details, such
Central America.” CESCA also supports companies creating
as engineering specifics.” CESCA also provides thorough
new wind and solar plants for companies like Acciona, with
analysis and in the case of oversights, the company offers
an aim to collaborate with new energy players in Mexico.
Centro de Estudios, Servicios y Consultorías Ambientales SA de CV (CESCA) is an interdisciplinary group of professionals with technical and scientific capabilites, and experience in environmental services in the following areas:
• • •
Assessment, Monitoring, and Environmental Characterization of Sites Management, Assessment, and Development of Documents for obtaining environmental licenses Surveillance, Supervision, and Environmental Monitoring to ensure compliance with
• •
regulations and procedures, regarding environmental impact and change of land use. Environmental Restoration and Remediation Environmental Health and Risk Assessment at Contaminated Sites
www.cescaambiental.com | T: (52+444) 8411749 and 8411759 | contacto@cescaambiental.com
319
| EXPERT OPINION
LAND PREPARATION CONSIDERATIONS FOR MINERS with all affected organizations and communities. Although environmental agencies in Mexico have strengthened
GIACOMO BONFANTI
regulations in order to compensate for or mitigate any
Commercial Director of Grupo
alteration within the area under construction there are also
Desarrollo Infraestructura
considerations to be made prior to construction, including
(GDI)
permitting associated with the exchange of lands and follow up during the construction and operational stages of mines. It is important to mention that mines could
320
The mining industry represents approximately 4 percent of
use greenhouses and implement reforestation programs
Mexico’s GDP. From 2001 to 2012, the Mexican government
as a means of rehabilitating the surrounding ecosystem.
granted
encompassing
Dams and leaching pads are considerable challenges
approximately 61.8 million acres. According to the Ministry
for site preparation because correct water management
of Economy, 70 percent of Mexican territory is suitable
and prevention of leaks must be guaranteed. Due to acid
for the development of mining projects, while only 25-
and other chemicals used in this water it is of the utmost
30 percent has been explored. Private investments in
importance that the proper infrastructure is constructed
the mining industry amounted to US$3.3 billion in 2010,
to contain it onsite in order to prevent environmental
US$5.6 billion in 2011, US$7.6 billion in 2012, US$8 billion
damage.
28,807
mining
concessions,
in 2013 and US$6 billion in 2014 and 2015, with significant amounts of investment coming from Mexican companies.
The new fiscal legislation in Mexico dictates that mining
Nevertheless, the sharp drop in commodity prices, oil and
resources for the communities will be distributed by
gas, the introduction of new royalties and taxes in Mexico,
the government. However, complications may arise
and the ongoing security problems in some regions have
since a reduction in support for certain municipalities
resulted in a significant decline in private investment in
may create tensions between the communities and the
the country’s mining sector. It is expected that during
mine. In Mexico, all mining activities are regulated by
2016, total investment in mining in Mexico will amount to
the Mexican Mining Law, originally published in June
approximately US$4 billion. Mining in Mexico has become
1992. This federal law establishes conditions for the use,
one of the top industries in the country. This industry
expiration, and cancelation of mining concessions. Under
continues to thrive with an annual production of US$13.9
the law, all minerals found in Mexican territory are owned
billion, contributing to 1.6 percent of CPI. It generates
by the country, and private parties may exploit these
290,000 direct jobs and 1.5 million indirect jobs, and the
minerals (except oil and nuclear fuel minerals) through a
leading minerals found in Mexico are gold, silver, bismuth,
concession granted by the federal government.
and fluorite. The regulatory framework for the Mexican mining sector The mining sector is one of the most regulated industries
has undergone some major changes over the years. Under
by environmental authorities and adheres to strict
previous mining legislation, mining companies were
standards like ISO 14001, which regulates environmental
subject to a complex web of rules and requirements. In
impact generated by industry and is set by local and
1961, Article 27 of the Constitution, covering exploration
international regulatory agencies such as PROFEPA,
and extraction of mineral resources was enacted. The law
the enforcement arm of Mexican environmental agency SEMARNAT. Most of the mines are outside of cities and lack infrastructure like roadways, water sources, and energy, meaning that right of way or access roads are needed. However, construction of these roads impacts the soil and communities along the way. Environmental
awareness
has
become
increasingly
common in Mexico, especially for this type of project. Mine sites can be huge and operators must establish facilities in
“It is expected that during 2016, total investment in mining in Mexico will amount to approximately US$4 billion”
order to meet their obligations and guarantee the correct
Giacomo Bonfanti, Commercial Director of Grupo
management of resources and a favorable relationship
Desarrollo Infraestructura (GDI)
mandated a minimum of 51 percent of national ownership
reserves. Mexico has balanced environmental policies
for mining companies. This forced foreign investors to
with well-tested mineral tenure laws. The country’s federal
either sell their shares or establish themselves as Mexican
government works toward sustainable development and
companies. The law was further strengthened in 1975,
environmental protection through SEMARNAT, which
when in addition to the mandatory 51 percent of national
works toward the following targets:
ownership, a minimum of 66 percent of national ownership was made mandatory for certain concessions.
•
Conservation of ecosystems and their biodiversity
•
Prevention and control of pollution
However, in the 1980s, Mexico began a wave of significant
•
Management of water resources
economic changes that would continue over the following
•
Actions to combat climatic change
decades. In line with the changing economic landscape the regulatory framework was simplified to attract
In
foreign investment. As a result, private investment has
environmental regulations laid out by the Ministry of
become the driving force of the Mexican economy. For
Labor and SEMARNAT. SEMARNAT has aligned its policies
the mining sector, the restrictions on foreign ownership
to internationally accepted standards so that mining
of Mexican companies have been removed. Current law
operations have a minimal effect on the environment.
merely requires mining companies to be incorporated
The industry is committed to developing sustainable
under Mexican law, to include exploration or exploitation
projects that prioritize the safety of mine workers and the
of minerals under their corporate purpose, and to
protection of the environment.
Mexico,
mining
companies
must
follow
the
establish their corporate domicile within the Mexican Republic.
Under the Mexican Mining Law, concessionaires must adhere to federal environmental regulations, and their
The Ministry of Economy exercises its authority on
activities are subject to an environmental review. GDI is
mining companies through the General Coordination
working with the main mining operators that are required
of Mines, which in turn relies on the General Bureau
to prepare and file an environmental impact statement
of Mines. The Bureau, through its various subordinate
for all extraction operations as well as for non-standard
agencies, administers the country’s mining law with
exploration work, which must subsequently be reviewed
respect to concessions, allotments, and national mining
by regulatory authorities.
321
| VIEW FROM THE TOP
AC SOLUTIONS TO REDUCE FUEL CONSUMPTION LUIS MEDAL Director General of Servicios ATS
Q: Which of your products is best suited to companies
extensive testing and trial periods prior to purchasing
working in the mining sector?
instead of making an immediate change. For a relatively
A: We have recently added a new product to our portfolio,
small company like Servicios ATS, this can be frustrating
which is a fully electric air conditioning system. It is a
because we do not have the sales force to cater to a wide
state of the art technological design having only been
range of clients throughout the country simultaneously,
developed two years ago, and it is a versatile and flexible
so often we end up waiting months for one project to be
product that can be applied to cars and mobile homes
given the green light.
as well as heavy duty trucks, loaders, and excavators. 322
The design works by reducing reliance on engines to
Q: What other challenges has the company faced when
power air conditioning systems. For example, the largest
making the transition into the mining sector?
manufacturers of industrial machinery, such as Caterpillar
A: As a small company that is relatively unknown within the
and Komatsu, have engines that can use up to 100L of
mining community, we have had some problems reaching
diesel per hour, and our product can reduce that number
potential clients and building relationships with the major
to zero. To demonstrate the value of this product, we
operators. From my experience, the mining community
installed a total of 43 machines for the Cobre del Mayo
is extremely closed, meaning that for a new player the
mining group in Sonora, and its operational costs dropped
process of making new contacts can be very complicated
by a total of US$200,000 per month. Moreover, Cobre
and time consuming. However, due to the wealth of
del Mayo made an ROI in less than a month, which shows
opportunities that we see in mining we will continue to
that the system is not only efficient but also economical.
attend conferences and other key trade shows in order to
On average, our solutions can reduce operational costs
spread the knowledge of our product throughout the sector
by around 40 percent for our clients so it is certainly an
because we believe strongly in the value that it can bring
attractive product.
to mining companies. Currently the 43 machines we have installed at Cobre del Mayo is our only active mining project
Q:
What
technology
does
this
design
use
that
but we are talking to a number of the largest producers,
differentiates it from conventional solutions?
including Fresnillo, Coeur Mining, and Agnico Eagle. There
A: The main differentiator is the 72v electric compressor,
is a lot of interest from mine operators around the country
which was the result of years of research in Japan. Our
for our fully electric system, so we are confident that we will
system has a converter that converts 12v or 24v of electricity
soon be working on a number of further projects.
into 72v, giving the compressor enough power to produce the high pressure needed to operate the air conditioning
Q: What does the company hope to achieve in the next
system. The machine is powered by Absorbent Glass Mat
12-18 months?
(AGM) batteries, which are recyclable and rechargeable
A: We expect to begin work on between three to seven new
spill-proof sealed lead acid batteries. They can support
projects in the mining industry in the next 12 months. In
high temperatures as well as high vibrations, which is
order to reach this goal, we are currently in negotiations with
particularly relevant in the mining industry given the
at least 15 companies, giving them quotes and arranging
nature of the mineral extraction process. It is certainly true
trial periods. Moreover, we will be participating in all of the
that there is a strong aversion to change within the sector.
major mining events around the country throughout 2016
When we speak with prospective clients and demonstrate
in order to open talks with further potential clients. We do
the benefits of our solutions, they more often than not
not have the financial capacity or manpower to add new
understand and are excited about the savings they can
products to our portfolio, so we will focus on promoting the
generate. However, we have found that top executives
fully electric air conditioner, which is the most applicable
are slow to make decisions, preferring to go through
solution we have for the mining industry today.
| VIEW FROM THE TOP
SUSTAINABLY FUELING THE MINING INDUSTRY CARLOS ORTĂ?Z Director General of Greenergy
Q: What importance does the mining sector have for
amount produced by the national grid, diesel generators
Greenergy’s business in Mexico?
are four or five times more expensive. The Fuel Save
A: We are interested in mining sites or projects with a
solution is an intelligent controller in a power plant that is
lack of local grid connection, which are using generators
connected to the grid. The diesel generator would be used
in order to satisfy energy needs the most common type
continuously but at times of peak demand the system
being diesel generators. These have capacities that
would automatically drive the generator at a slower rate
range from 300kW to several hundred MW, and diesel
and solar energy would supply the deficit, meaning a
consumption and associated expenses are high. In order
decrease in diesel consumption. If production is low but
to reduce operational costs in a mining site, we believe
the sun is strong, the Fuel Save controller will open the
it would be an attractive alternative for many companies
circuit and solar inverters in order to avoid damage to the
to use solar power instead of diesel generators. Due to
electrical network. If investment is made in solar power
its intermittency solar power cannot be fully relied upon
in an area with electrical networks, with a set price per
but using this power source as a percentage of generation
kWh, ROI would be generated within 10 years. However,
will allow a reduction in diesel consumption, which will
when paying five times more for electricity using a diesel
generate more efficiencies.
generator set, the investment will be recovered in one and a half years.
Q: As a water-intensive industry, what considerations must be made by miners in terms of its availability? A: We have obtained information from mine sites that details their water requirements, and many companies must obtain water from various different sites around the mine rather than extracting the resource from just one point. Each pump also requires trenches to be dug for power lines, meaning that the practice of extracting water from various locations is extremely expensive. This is an off-grid system for water pumping, and it also allows electrification of
If investment is made in solar power in an area with electrical networks, with a set price per kWh, the ROI would be generated within 10 years
mining camps during the exploration phase. In this instance, it takes around 12-18 months to establish a camp, and the
Q: What are the main projects the company is working on?
energy required in these campsites can be provided by
A: In relation to services and large-scale production, we
solar power. This solution is completely mobile, and if at any
are in negotiations with developers for the operation
point it is no longer required we can remove it and install it
and maintenance of large solar plants. These are 15-20
in another site. It will be more of a leasing solution than an
year contracts. In distributed generation, below 500kW,
acquisition solution.
we are currently one of the main distributors for solar installers in the country. We think we will become one
Q: Can you explain the intricacies of your Fuel Save
of the top three players in the distributed generation
solution that you developed with SMA Solar Technology?
market, and it is extremely important that we provide
A: Typically in a mining site that uses diesel generators,
solutions, whether for mining operators or for large scale
they must constantly be running, meaning that they must
developers. For the public sector, we are currently one
always be fed with fuel, and this comes at a high cost to
of the most important suppliers of rural electrification
operators. Diesel generators are also inefficient machines.
in off-grid communities. We have installed more than
When the comparison is made between the value
800 systems in 24 different states, which totals 7.5MW
obtained from 1kWh produced with diesel and the same
of power.
323
324
| INSIGHT
SOCIALLY RESPONSIBLE REGIONAL DISTRIBUTOR When ALCHISA began operating as a distributor in 1991, the country was home to more than 100 ExxonMobil
TERESA CORNEJO
distributors. However, the company’s growth, ethics,
General Manager of Aceites
and performance led the state of Chihuahua to name
Lubricantes de Chihuahua
ALCHISA as the sole distributor in the region, principally
(ALCHISA)
catering to Cuauhtemoc City and the mountainous area of Chihuahua. "ExxonMobil shares our values so when the company began evaluating potential distributors to
“Our greatest achievement is forming a team that makes us
match their world-renowned service quality, they chose
proud," she adds. "Their skills, expertise, and training are
us to begin a partnership," states Teresa Cornejo, the
complemented by their dedication, honesty, and ethical
company’s General Manager. "This alliance is based on
actions. This is evident in the fact that we have been
the agreement that safety, productivity, and sustainability
recognized as a Socially Responsible Company.” In order
would be priorities.”
to maintain such a title, ALCHISA implemented a culture of awareness and environmental protection. The company’s
ALCHISA has a partnership with Goldcorp, which was
quality department implements an activity program, which
launched in Chihuahua in 2004, when the Sauzal mine
led to the creation of ALCHISA Verde program, a campaign
began operating. While the mine's location in the
that promotes recycling. “To date, we have managed
mountainous region made it less accessible, this did not
batteries, plastics, and aluminum collections, as well as
impede the service provided by ALCHISA. “Thanks to
containers for electronics waste aimed at raising awareness
collaboration and hard work we surpassed our client’s
throughout the community all the way down to the children,”
expectations, and Goldcorp invited us to participate in
she clarifies. ALCHISA reaches out to children through art
another project,” Cornejo explains. “The Peñasquito mine
competitions focused on the environment, awarding a tree-
was opened in Mazapil, Zacatecas shortly afterward,
planting program to the school of the winning participant.
which led ExxonMobil to grant us the responsibility for
Moreover, the company’s support has expanded to aid
this mine outside of the state of Chihuahua.” She shares
less fortunate areas, Tarahumara schools, and shelters.
that ALCHISA is involved in a large proportion of the
These social projects are carried out by ALCHISA’s own
open mines in the state because the company possesses
employees, who take the initiative to implement them with
planned engineering services, highly qualified personnel,
their respective teams.
and aims to provide quality services. “The engineers and mining staff control the maintenance of units in
Regarding ALCHISA products, Cornejo is convinced
order to extend their usable life and increase the teams’
that the company’s reputation has been solidified as a
productivity,” she boasts. “This is beneficial for our clients,
synonym for quality. “We have shown our clients how
as they can optimize their equipment and reduce costs
much our products can save them using improvement
and unplanned strikes.”
projects that demonstrate their advantages through the planned engineering service,” she continues. “Within
Cornejo believes that ALCHISA’s main differentiator is its
our extensive range of lubricants, the cleanest for the
consistently high quality service, which led to the company
environment and those that generate the greatest
standing out among the six distributors present in the state.
savings are Mobil’s synthetic products. These units consume less oil and therefore pollute less by protecting
“Our alliance with ExxonMobil
the equipment and requiring less frequent oil changes.” In a changing mining landscape with a need for greener
is based on the agreement
mining technologies, ALCHISA has led the curve. Eleven
that safety, productivity, and
to supply wholesale lubricants. “This eliminated oil
sustainability are priorities”
meaning a much lower environmental impact.” In the next
years ago, the company implemented tank installations residues in empty tanks with the exception of new oil, few years, Cornejo shares that the company’s priorities
Teresa Cornejo, General Manager of Aceites
will be a continued increase in productivity, safety, and
Lubricantes de Chihuahua (ALCHISA)
sustainability.
325
| VIEW FROM THE TOP
ENVIRONMENTALLY CONSCIOUS PIPING SOLUTIONS REYNALDO CÁRDENAS Director General of FIMEX/TKP Auto Sales
326
Q: Can you tell us about the history of the company, and
Q: In terms of environmental impact, what other
the way it has developed in the Mexican mining market?
advantages can these multi-layer pipes offer?
A: Initially we began working in thermoplastics like
A: Right now there is a technology that is used commonly
polyethylene and polypropylene. Over time, we began
in Germany, which is designed using varying combinations
to establish relationships with foreign companies like
of polyethylene. Instead of using a single layer pipe,
Agru, which are extremely specialized in plastic. We
it is possible to use different layers of polyethylene
started as a distributor but in 2015 we decided to move
with different characteristics to provide a solution that
into manufacturing through equipment that was unique
offers more chemical resistance and can withstand
in the Americas like bi-layer and tri-layer piping, which
greater pressure and temperatures depending on the
are particularly useful for mining purposes. In the metal-
combinations used. The advantage of these combinations
mechanics industry, and especially in semi-conductors,
is that the material composing the innermost layer, which
plastics are becoming more and more accepted. Across
will suffer the greatest corrosion, is only 10-15 percent of
the Americas, abrasive resistant polyethylene is already
the entire pipe instead of 100 percent, thus reducing the
manufactured, but we are working with Dow, the resin
need to replace the pipe so frequently. One of the biggest
manufacturer, to develop more efficient and lasting
advantages of polyethylene is its minimal environmental
piping. Right now, our gears for concrete protector liners
impact since the replacement rate is lowered, resulting
(CPLs) are being installed in Mexico City using an Austrian
in less waste materials. Moreover, the reliability of the
technology material that prevents corrosion caused by
piping means the elimination of chemicals leaking into the
drainage gases. As a manufacturer, the mining sector
subsoil.
represents around 50 percent FIMEX’s business, the other 50 percent consisting of infrastructure, for which we also
Q: How cost competitive are your products in relation to
provide various solutions in Mexico. There is a significant
those of your competitors?
problem whereby PVC pipes are widely used, and the
A: Geomembranes are truly cost competitive and when
earth’s movement causes a great deal of water leaks. Our
comparing polyethylene with a rubber pipe there is a
HDPE and RD pipes are developed as an integrated tubing
difference in cost of 40 percent. Compared with PVC, our
system as a solution to the problem.
prices are 10-15 percent more expensive so the preferred option is normally PVC, but this has the shortest lifespan.
Q: How receptive has the mining industry been to your
Moreover, the earth’s movements can compromise PVC,
innovations, and how do you promote the benefits to
which is particularly problematic for large cities like
clients?
Mexico City, especially given the large water body under
A: We are currently in the process of buying thermofusion and
the city and the risk of contamination this entails. The
installation equipment for a new plant, which is scheduled
widest pipes manufactured in the US are 54in, and here
to begin operations at the end of June 2016. We stock some
we manufacture 48in tubes. Our current production rate is
of the most in demand products that are manufactured
1,200t/m, and within the next six months we hope to have
abroad like GCL geomembranes and geotextiles that are
another 1,200 tons of installed capacity. Mexico’s biggest
manufactured in the US. For infrastructure, and especially
manufacturing site produces 2,000 tons and it does not
for water treatment plants, leaching ponds, and sanitary
reach full capacity as its machines are outdated, whereas
landfills, geomembranes are used to protect the subsoil and
ours are brand new. I believe we will expect growth of 100
avoid water and earth contamination. Long-life piping has
percent in sales in about six to eight months. We believe
a lifespan of a year and a half in the mining industry, after
the strongest sectors for growth will be industry and
which it cannot be used again so the idea is to find a longer
infrastructure, which we predict will see 70 percent more
life product at a similar cost.
growth than mining.
| VIEW FROM THE TOP
PREVENTION IS BETTER THAN CURE LUIS GONZÁLEZ Director General of Fire Service Plus Mexico (FSPM)
Q: What technology do your products use, and in what
Q: How would you summarize the fire safety culture
ways is it more efficient than other fire combatting
within the mining community in Mexico?
solutions?
A: Many mines lack essential safety equipment not only
A: For 30 years, FSPM has provided leading technology
in terms of fire prevention but also related to physical
to combat all types of fires, and this is environmentally
safety. One reason for this is the lack of investment
friendly and highly efficient. Our technology has been
from international bodies such as the World Bank, which
approved by governmental institutions such as COFEPRIS,
is reluctant to provide financial support toward the
PROFEPA, SEMARNAT, and the Ministry of Labor. The
development of new safety technology in mining. Indeed,
base of all our products is FireAid, an ecologically-friendly
this is an accusation that could be directed at the federal
foam that has the ability to multiply water content in an
government in Mexico too, as it does not show enough
extinguisher by a factor of 20. Therefore, a standard 9l
desire to implement new products that can improve mine
extinguisher becomes the equivalent of a 180l capacity
safety. Through our work, we hope to not only contribute
extinguisher once Fire Aid has been added. Furthermore,
to an improvement in safety standards on mine sites
it does not contain any aggressive chemical that could
in Mexico but also to change the culture step by step
harm either the user or the surrounding environment. The
throughout the country.
use of perfluorooctanoic acid (PFOA) in fire prevention has been forbidden since 2015, due to the damage it causes to both the environment and people. FSPM has not used it since 2004 but many of our competitors continue to manufacture products containing PFOA, and this is a crucial advantage that we have over other fire security companies. Q: How can these products be applied to the mining industry? A: When dealing with fire outbreaks speed is the most important factor because in a mine a fire becomes uncontrollable after four minutes. Our Enforcer 60
“FireAid is an ecologicallyfriendly foam that has the ability to multiply water content in an extinguisher by a factor of 20” Luis González, Director General of Fire Service Plus
Mexico (FSPM)
technology, which is operated by just one fireman can extinguish a fire burning at more than 1,000°C in less than
Q: What does the company hope to achieve within the
20 seconds, which is the fastest response time available on
mining sector in Mexico in the short to medium term?
the market today. On top of our enforcer trucks, we have
A: Our presence in Mexico is fairly limited, as the only
also developed the Enforcer 3 Backpack, a firefighting
extinguishers we have in operation are the 2,500 that
backpack equipped with a breathing aid. It carries three
are located at Grupo México’s Buenavista del Cobre
gallons, and enables firemen to work hands-free in areas
mine. Regarding technology, we are currently working
where there are toxic fumes. Finally, we have recently
on creating a GPS guided, remote-controlled mobile
completed work on the Enforcer Minero, which is similar
firefighting truck that will be completely fire proof. This
to the Enforcer 60 but it can hold nine extinguishers at
means the unmanned electric vehicle will be able to
once. This provides a great deal of benefits to mine sites
enter any fire situation and eliminate the danger without
because it is highly mobile and can therefore attend to
putting any human being at risk. This is industry-leading
several fires at the same time, even if they are located at
technology that is already being tested on certain sites
different points in all corners of the site.
in the US, and we hope to introduce it into Mexico soon.
327
FUTURE OUTLOOK
14
Mining in Mexico has faced turmoil in the last few years, but the industry is hopeful that a recovery is in the cards in light of a bullish metals price run. Mexico has maintained its position as one of the most attractive countries in which to do business, despite teething problems regarding the introduction of the mining royalty. The name of the game is now innovation and Mexico more than ever needs to adopt best practices from other mining jurisdictions to maintain its global competitiveness. With calls from major players to reassess the mining royalty, the government may soon take a fresh look at the terms so the country can continue to reap the benefits of its rich geology and prime position in the Americas.
This chapter will focus on the future of the Mexican mining industry, with several industry leaders providing their forecasts for prices and regulatory evolution over the next 12 months. Consulting firms provide opinions based on in-depth research and collaboration with both the public and private sector. This outlook is complemented by that of mining industry associations, which serve as the voices of the key players in the mining sector in Mexico.
329
330
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| CHAPTER 14: FUTURE OUTLOOK 332
VIEW FROM THE TOP: Mario Arregoytia, EY
333
VIEW FROM THE TOP: Mario Hernández, KPMG Mexico
Eduardo Salgado, KPMG MEXICO
334
ANALYSIS: The Distribution of the Mining Fund
337
INSIGHT: Andres Robles, Mexican Association of Mining Metallurgists, Engineers, and Geologists
(AIMMGM)
338
INSIGHT: Jorge Álvarez, AdN Consulting
339
VIEW FROM THE TOP: Patrick Smith, AMC Consultants
341
INSIGHT: Demetrio Góngora, Reunión Internacional de Mineríadfg Zacatecas
331
| VIEW FROM THE TOP
THE EVOLUTION OF CSR MARIO ARREGOYTIA Lead Partner for Mining and Metals for Mexico and Central America of EY
332
Q: As a global consultancy working within a variety of
A: It is difficult to evaluate the impact of royalty taxes
sectors, what importance does mining have for EY’s
within social license conflicts. Theoretically, community
business strategy?
conflicts should dwindle as the new royalty taxes start
A: Mining is one of EY’s primary sectors as it is a starting
to direct capital toward local governments near mine
point for economic development, particularly contributing
sites but that is not the case. The revenue is not being
to the GDP of countries like Mexico. We have a team of over
properly, or efficiently, used by these authorities, and thus
3,000 people in 95 countries made up of mine engineers,
surrounding communities are not receiving any benefits.
geologists, and metallurgists. The ready-to-deploy global
The problem is that inefficiency and corruption in public
team of specialists has made EY a capable leader that can
expenditure can seriously jeopardize the lives of individuals
support any player in Mexico. The company invests heavily
within these communities. Most mining companies are
in training our staff to better understand the industry
continuing to provide support and funds to vulnerable
through global publications and events. EY is recognized
groups even though they are additionally paying royalty
as an international thought leader in the mining and metals
taxes. If duplicated expenses cause these programs to be
industry. It strives to be attentive to market trends and to
reduced, and a response from local authorities continues
respond accordingly with creative ideas. For the next 12-18
to lack strength, social conflicts are sure to arise. On
months EY strives to help companies build strong balance
top of this, false expectations may drive communities to
sheets, and prepare businesses for their next growth phase.
anticipate more funds than those actually collected by the government. Nevertheless, it is still too soon to see
Q: How long do you expect the prices of gold and silver
actual results as the first royalty tax payment was barely
to continue their upward curve?
processed in March 2015 for the fiscal year 2014.
A: It is rather unpredictable as there are many factors that can bring uncertainty in the economy like other commodity
Q: How can EY lend a hand to players in the process of
prices, geopolitical events, Brexit, China’s downturn, and
developing stronger environmental protection?
the possible Trump effect. Goods are precisely the most
A: Mining companies are increasingly asked to be more
affected in these kind of unstable environments. It is
transparent about their sustainability performance within
almost impossible for mining and metal companies to plan
rankings, rating agencies, investors, and other stakeholders.
for the future not only in Mexico but worldwide.
In EY, we have identified the four important steps the mining sector is taking towards sustainability. Firstly,
Q: What can the industry expect from the tax reform and
community inclusion is being used to build relationships
social license issues in Mexico?
with groups that are or may be affected by mining operations. Secondly, energy management systems are
“Community conflicts should
being implemented in order to improve energy efficiency,
dwindle as the new royalty
impact, and reduce operational costs in mines. The third
taxes start to direct capital
the most important inputs in operations and sometimes
toward local governments but
reduce greenhouse gas emissions, limit environmental trend is related to water preservation since it is one of sites are located in areas that suffer from scarcity. Lastly, we have seen that operators are increasingly prioritizing
that is not the case”
the health and safety of employees. We help our clients
Mario Arregoytia, Lead Partner for Mining and Metals for
reports, and also by providing third party assurance over
Mexico and Central America at EY
communicate their sustainability performance through non-financial information.
| VIEW FROM THE TOP
POTENTIAL INDUSTRY CONSOLIDATION
Mario Hernรกndez Head of Industrial Manufacturing, Tax Partner at KPMG Mexico
Eduardo Salgado Head of Mining Industry, Audit Partner at KPMG Mexico
Q: How long do you expect the prices of gold and silver
ES: Companies cannot control the price of minerals,
to continue on their upward curve?
and the only way they can provide their shareholders
ES: Brexit has been a main factor as people want to secure
an acceptable return is through cost reduction. As this
their investment in metals like gold and silver, even though
is the main focus of the industry, we have developed
the prices depend on demand. The increased precious
solutions that analyze the supply chain, its processes, and
metal prices are a result of the unpredictable market.
its controls. KPMG similarly offers solutions that can help
Locally, the mining sector is benefitting from the changes
clients fix their financing structure.
as it holds the first step of the gold and silver production cycle. Unfortunately, other minerals like copper and
Q: How does KPMG help industry players with the issue
aluminum are not shining as brightly as their growth
of land ownership, ejidos and state regulation?
depends on country development and Chinese demand.
MH: In several cases, land use agreements are created
The Asian superpower is reviewing its copper and
prior to production. Once mining companies start to
aluminum needs, which may affect Mexican producers.
receive profit, the owners begin to question the initial contracts based on production. Many have started to
MH: There is a possibility that the market will experience
feel that mining companies are paying a small fee in
another dip and return to its pre-Brexit position but it
comparison to their income, and those profits are not
ultimately depends on its impact upon the European
being fairly distributed. KPMG is not directly involved in
community and the rest of the world. The price volatility
litigation between land owners and mining companies as
will bring a deserved break of higher profits for exploiting
it is a contractual issue but it helps clients take care when
companies. The issue is that the period is not expected to
it comes to agreement execution. The environment is
last long enough to increase the appetite of the market.
another issue, as players have to deal with authorities that
Companies must patiently observe the results for a
decide to protect areas that are already being explored.
certain period of time before exploring different avenues.
When mining sites become reservations, companies lose
Companies already selling minerals are the most affected,
the right to enter.
and their next steps depend on measured stability. Q: What are the main goals for KPMG in the mining Q: What are the most common problems of the Mexican
industry in the next 12-18 months?
mining industry?
ES: The market will continue to present difficulties despite
MH: Joint ventures are not common in the Mexican mining
the fact that metal prices are improving. Companies will still
industry. We have seen mergers between big companies
have to deal with cost efficiencies and higher returns. Our
as unions between equals that joined together in an
objective is to help companies reduce costs by increasing
effort to optimize their operations but it is rare to see it
returns and efficiency with a variety of solutions.
in the market. Instead, exploration companies are opting to find cash through property sales. Mature exploration
MH: Companies are equally anticipating the effects of
companies in need of reserves and new concessions are
the Energy Reform as it could affect power generation.
buying property from smaller companies that want cash in
Changes are happening relatively slowly but in the
return. It could result in a consolidation of the market where
long run, allowing players to develop their own energy
exploration projects can continue. Another alternative is
can generate savings. KPMG is preparing for this by
to create an investment returns agreement that includes
advising its clients to review the reform and find areas
a royalty contract. This type of agreement is difficult as
of opportunity. Clients can either become a player or
its conditions are more complex. The amounts received
establish a mechanism whereby suppliers can compete to
upfront are lower, and the execution commitment is longer.
fulfil energy needs.
333
| ANALYSIS
THE DISTRIBUTION OF THE MINING FUND The distribution of the mining fund begins with information
The states to benefit the most from the mining fund were
provided by the Ministry of Economy that helps decide
Guerrero, Michoacan, Sinaloa, and Colima. Both Sinaloa
the proportion of resources each state and municipality
and Colima received a 3.9 percent share after contributing
should receive. Karina Rodríguez, partner at Pizarro-Suárez
US$85 million and US$57 million and receiving US$3.3
& Rodríguez Matus Abogados, is concerned about the
million
effect the taxes could have on the development of the
proportion was slightly higher at 6.1 percent, as it paid
mining industry. “The law states that funds raised for mining
US$90 million and US$5.5 million was returned. The overall
states and municipalities must be measured by the value
winner was southwestern state Guerrero since it received
of production, not by the revenues in place,” she explains.
almost 10 percent, contributing US$46 million and receiving
“Therefore, funds obtained in a particular municipality may
US$4.5 million overall.
and
US$2.2
million
respectively.
Michoacan’s
not necessarily be distributed fairly.” Even though mining
334
contributed US$345 million to Nuevo Leon’s state GDP in
Chihuahua was allocated a US$18 million share despite the
2014, the area only received a total of US$320,300 in return
over US$1 billion it delivers to feed the GDP, totaling just
from the mining fund, a proportion of 0.09 percent. Mining
over a 1.7 percent return. Durango, San Luis Potosi, State
in the states of Puebla and Tamaulipas equally contributed
of Mexico, and Oaxaca also sat in the middle of the table.
US$173 million and US$15 million respectively, but the states
Durango’s US$610 million contribution was rewarded with
and municipalities were only awarded US$54,100 and
US$11.5 million, equaling 1.9 percent, and San Luis Potosi
US$US$4,500, a share of 0.03 percent of their contribution.
paid U$385 million to be rewarded with US$5.5 million, 1.4
The state to benefit the least was Yucatan, since it
percent. The State of Mexico obtained 1.3 percent through
contributed US$176 million and was awarded US$25,600,
contributions of US$216 million and fund allocations of
just 0.01 pecent of its input.
US$2.8 million. Oaxaca earned US$2.3 million through GDP
DISTRIBUTION OF THE MINING FUND 2014 (US$ thousand1) AND MINING GDP BY STATE 2014 (US$ thousand) State
Municipal level
State level
Total
Mining GDP
Sonora
28,381.4
17,028.8
45,410.2
4,574,000
Zacatecas
20,786.2
12,471.7
33,257.9
3,576,000 1,057,000
11,271.1
6,762.6
18,033.7
Coahuila
Chihuahua
5,930.7
3,558.4
9,489.1
971,000
Durango
7,212
4,327.2
11,539.2
610,000
3,453.8
2,072.3
5,526.1
385,000
200.2
120.1
320.3
345,000
1,547.8
928.7
2,476.5
314,000
San Luis Potosi Nuevo Leon Baja California Sur
1,212.2
727.3
1,939.5
308,000
1,033.9
620.4
1,654.3
255,000
710
425.9
1,135.9
251,000
State of Mexico
1,762.3
1,057.4
2,819.7
216,000
Oaxaca
1,484.2
890.5
2,374.7
212,000 176,000
Jalisco Guanajuato Hidalgo
Yucatan
16
9.6
25.6
33.8
20.3
54.1
173,000
Aguascalientes
847.5
508.5
1,356
170,000
Queretaro
579.4
347.67
927
169,000
Baja California
536.1
321.7
857.8
111,000
Puebla
Michoacan Sinaloa Veracruz
3,457
2,074.2
5,531.2
90,000
2,074.9
1,244.9
3,319.8
85,000
360.7
216.4
577.1
77,000
1,395.1
837
2,232.1
57,000
2,848.2
1,708.9
4,557.1
46,000
Nayarit
71.1
42.7
113.8
41,000
Tamaulipas
2.8
1.7
4.5
15,000
Colima Guerrero
Source: SGM and CAMIMEX 1 Using average 2014 exchange rate 13.37
MINING GDP BY STATE 2014 (US$ million)
Mining GDP by state 2014 (US$ million) 0
1,000
2,000
3,000
4,000
5,000
Sonora Zacatecas Chihuahua Coahuila Durango San Luis Potosi Nuevo Leon Baja California Sur Jalisco Guanajuato Hidalgo State of Mexico Oaxaca Yucatan Puebla Aguascalientes Queretaro Baja California Michoacan Sinaloa Veracruz
335
Colima Guerrero Nayarit Tamaulipas 0
10,000
20,000
30,000
40,000
50,000
Distribution of the mining fund thousand)* DISTRIBUTION OF2014 THE(US$ MINING FUND 2014 (US$ thousand)1 Source: SGM and CAMIMEX Municipal level
*Using average 2014 exchange rate 13.37 Mining GDP
State level
Source: SGM and CAMIMEX 1 Using average 2014 exchange rate 13.37
contributions of US$212 million, equating to 1.1 percent. The
name, which took a US$762,000 share, and Cerro de San
remainder of the states on average took a 0.7 percent share.
Pedro, where New Gold’s San Xavier operation is located
Although Sonora and Zacatecas were allocated the single
was given US$628,000. San Dimas, whose main mine was
largest cash figures due to their collective contribution of
acquired by Primero Mining from Goldcorp in 2010, was
over US$8 billion to GDP, their allocations were slightly
allocated US$358,000.
lower than some states proportional to their contributions, at 0.9 percent each.
The Zimapan municipality in Hidalgo benefitted from almost half the state’s allocation, with US$309,000. The
On a municipal level, the area to receive the single greatest
municipality gains particularly from Carrizal Mining’s
contribution from the mining fund was unsurprisingly
considerable CSR efforts on its Zimapan copper mine.
Mazapil in Zacatecas, with US$10.5 million, since Goldcorp’s
Equally,
prolific Peñasquito gold mine is located in the municipality.
contributions to the communities surrounding its mines,
Cananea, the home of Grupo México’s Buenavista del Cobre
independently of the mining royalty tax. Rodriguez suggests
came in second place with US$9.1 million. Third position
that, “The social spending that mining companies invest
went to Fresnillo, the location of the silver producer’s
within communities should also be taken into account for
flagship operation, where US$4.8 million were allocated.
tax purposes.” Alberto Lopéz, Director General of Mining
Ocampo in Chihuahua, the municipality that houses Minera
at the Ministry of Economy of the Government of Sonora,
Frisco’s mine of the same name was given US$3.7 million
believes that the issue with the royalty allocation lies in the
and Cuencame in Durango, home of Industrias Peñoles’
instances wherein a municipality has received considerable
Velardeña mine took US$1.3 million. Other municipalities
investment for a complex mining metallurgical plant but
with important mining operations include Guanacevi,
the 2,000 workers live in another municipality, and will
the location of Endeavour Silver’s operation of the same
therefore not see the benefits.
Fresnillo
is
known
to
make
considerable
336
| INSIGHT
PREDICTED RECOVERY FOR METALS PRICES Although Mexico City is not necessarily a typical mining
ANDRES ROBLES
destination like states such as Sonora and Chihuahua, the
Mexico City President of the
state has the benefit of being home to the headquarters
Mexican Association of Mining
of most of the biggest corporate mining companies
Metallurgists, Engineers, and
in Mexico. The branch has executive members, mainly
Geologists (AIMMGM)
consisting of CEOs and managers, according to the Mexico City charter’s President Andres Robles, so in this location some of the key players from this industry are
in the legislation’s long approval process because it was
present and AIMMGM aims to incorporate all of them. “As
ultimately authorized after the precious metal market
a country, Mexico has been a key location for the mining
collapsed. It did not intend to damage the industry but
sector for over 500 years and will remain so,” he believes.
its delayed implementation was harmful.” Beyond this, he
“Certain cities in the country were built around exploration
believes there is a need to focus and study the options
sites such as Pachuca, Taxco, Guanajuato, and Zacatecas.
to ensure this income arrives to the communities. On this
The problem is that our society is not aware that mining
matter, AIMMGM would like to see greater communication
represents a considerable portion of the country’s income,
between the federal and local authorities.
development and employment. Few understand that in comparison to other industries, miners have some of
The mining companies are not the only victims of the
the highest industrial and safety standards due to the
drop in the market, according to Robles. “When the metal
specialized work it entails and this industry does not
prices were at a peak, the industry was demanding a large
have the same benefits as other sectors in some of the
amount of professionals with mining knowledge related to
Mexican states.” He shares that in some cases, miners have
geology, engineering, and Geoscience,” he comments. “The
to independently develop a great deal of infrastructure to
latter offered attractive salaries, and many young people
access to communities, which differs greatly from other
opted for these kind of degrees. Considering that university
industries like the automotive sector, which has fiscal
lasts five years and the prices dropped two years ago,
incentives for its development.
thousands of specialized college graduates now cannot find employment.” One of Robles’ goals as President of the
Mining clusters are being created by the government and
Mexico City Chapter is to create a link between this group of
the private sector with the purpose of grouping companies
young people eager to work at mine sites, and vendors. He
related to the mining sector into representations in front
believes that vendors can offer excellent job opportunities
of authorities and facilitate discussions. “Most of the
for people that have industry-related knowledge.
companies within the cluster are members of AIMMGM,” Robles claims. “The concept is starting to grow but the most successful are found in Zacatecas and Chihuahua. Nevertheless, there are other states that encourage this type of body such as Sonora. The mining community is extremely supportive and tightly knit but in the Mexico City Chapter there is no need for clusters as there are no nearby mining sites.” Instead, the differentiator for the Mexico City chapter is that it is located in a key city close to all the federal authorities and Robles plans to use this platform to support the clusters’ development.
“Society is not aware that mining represents a large portion of the country’s income, development, and employment” Andres Robles, Mexico City President of AIMMGM
The association is formed by professionals and academics from the mining industry in Mexico, and includes private
For the future, AIMMGM will focus on fostering a variety
companies, universities, suppliers, consultants, and others
of activities that strengthen members’ positions within the
that are directly or indirectly affected by the mining
mining industry. Despite the current crisis, Robles predicts
industry. “The mining royalties and taxes for exploration
that Mexico will remain an important mining destination.
and gold activity were devised when the prices of precious
“Downturns are always an opportunity to improve
metals were high,” Robles comments. “The issue is enrooted
operations and remove unnecessary elements,” he claims.
337
| INSIGHT
TECHNOLOGY AND SERVICES TO BRAVE THE STORM conservative strategies. “Our customers are changing their management style from one of a high priced market
JORGE ÁLVAREZ
that has plenty of capital to one with cash flow constraints
Director General of AdN
and reduced profits,” Álvarez comments. “We found that
Consulting
a lot of companies in our sector were focused on selling to the government in the past few years, and now a lot of players are instead focusing on other specific niches like
AdN Consulting allows clients to spend operational
the mining industry. The economy is quite dynamic but the
expenditure capital instead of its capital expenditure
government’s grip has loosened.”
budget when using its software solutions, and clients
338
benefit from the company’s purchasing and leasing
AdN Consulting provides solutions that can be used to
recommendations. “At the moment, we recommend our
track daily operation activities and provide real-time
customers opt for yearly leasing instead of buying the
reports to corporate management regarding production
software as this eliminates the purchase of assets and
rates, costs, and time. “We also have solutions to track
therefore reduces the amount of taxes the company has
assets in underground mines, and this is highly attractive
to pay,” explains Jorge Álvarez, the company's Director
for companies looking to avoid heavy impact accidents,”
General. “The aftermath of the fiscal reform almost
Álvarez comments. Since 2014, AdN Consulting has been
caused the disappearance of exploration in Mexico,
working with a technology company based in Australia
and was the catalyst for the trend of larger companies
called Optalert, which has a solution that can detect driver
acquiring smaller operators. Hopefully, the Mexican
drowsiness through the analysis of eyelid movement. “The
government will reinstate the benefits it used to offer
impact of drones is similarly being investigated by many
companies in the exploration area, or it will put the future
businesses, and together with 3D scans and surveillance
of the mining industry in Mexico in jeopardy,” he warns.
I think it will change the mining industry dramatically,”
Overall, Álvarez believes the sector is adopting more
Álvarez shares.
| VIEW FROM THE TOP
PROCESS OPTIMIZATION FOR STRONGER INDUSTRY PATRICK SMITH Managing Director of AMC Consultants
Q: What key changes have you made to adapt to low
dump and waste to the processing plant. Additionally, we
commodity prices?
can help mitigate the amount of money a company may
A: When we saw the mining industry’s revenues decrease in
spend on replacing consumables such as tires. Companies
May 2012 we made a number of changes in response. Our
sometimes wish to increase the truckloads, so they will
streamlined approach means we retain the same number
enlarge the truck tray so that they can carry more material,
of offices and services and we become more flexible in
but after overloading them for six months problems may
our internal costs. Our services are diverse, offering a mix
be found in the engines and transmissions. We help our
of studies that can help players improve their businesses.
clients solve simple problems that can be easily managed
We target projects that are in the process of expansion,
by slightly modifying day-to-day operations. 339
or we support operations that wish to minimize costs by changing their organizational structures. Our clients that
Q: How do you envision growing in the Mexican mining
have mines in places like Mexico, Russia, and Kazakhstan
landscape?
are looking to develop or expand their operations and
A: In total we complete more than 400 projects a year.
demand more studies, while in Australia and Canada
Eighty percent of the work we do is for operators and the
operators are mainly focusing on optimizing the ones they
remaining 20 percent is technical reviews, due diligence
already have, improving production, and reducing costs.
related to mergers and acquisitions, banking finance, insurance, and similar assignments. We work for investors
Q: What services do you offer to companies that are
that want to buy assets or owners that are looking to sell,
interested in becoming low-cost operators?
and help them understand the value by offering a technical
A: Juanicipio was our first major project in Mexico and it
review of the resource, reserves, and evaluating the
helped establish AMC as a top consulting firm in the Mexican
business. Some of our clients require regular operational
mining landscape. Most of our business optimization
support and evaluations, especially in geotechnical
services are commonly directed to mid-tier and small
engineering where we visit the mine every few months
companies because we have an international database that
to make recommendations while they carry out the daily
we can use to compare our clients’ operations with other
operations. Other companies have a need for expansion
players in the industry. When we work with major operators
services, and we show them the best alternatives to grow
like Rio Tinto, they can have many mines of the same type,
their business.
such as six iron ore mines that can be cross-examined to help them become more efficient. Our database helps our
Q: How does AMC envision helping its clients become
clients identify their production rate and operating costs
more efficient?
in a more transparent way. Our studies break down these
A: AMC is a mining consultancy and we specialize in
elements into unit rates that can be set side by side and
mining engineering, geology, geotechnical engineering,
compared to similar operations around the world, allowing
and to a lesser extent environmental engineering and
us to benchmark the information. We show our clients
metallurgical processing. Our vision is to be the adviser
how efficient their operations are in processes like drilling,
of choice to the world’s mineral industry and our purpose
blasting, explosive use, and excavating rates to help them
is to work with companies to help them optimize the
find areas of improvement.
value of their mineral assets. We help companies plan and mine efficiently and obtain the most efficient mineral
Q: How can AMC help mining players successfully
production possible. Silver mines or deposits in Mexico
integrate rising trends like Industry 4.0 and Big Data?
are extremely valuable and the Mexican government has
A: Mining operators are often focused on cost control and
an opportunity to leverage on the mining sector to create
key operational errors like sending mined ore to the waste
wealth and employment opportunities for the population.
340
| INSIGHT
METALS RECOVERY FOR ZACATECAS RIM is a biannual event organized by the Mexican Association
of
Mining
Metallurgists,
Engineers,
and
DEMETRIO GÓNGORA Member of the Organizing
Geologists (AIMMGM) in Zacatecas, a state that is leading
Committee of Reunión
the production of gold, silver, lead, and zinc. According
Internacional de Minería (RIM)
to Demetrio Góngora, a Member of the Organizing
Zacatecas
Committee, the objective is to close the gap between mine companies and suppliers and attract those with the purchasing power in the industry. “Our event also
virtual reality of the operation and exploration that can
generates business links and is interesting especially for
help companies plan for the future accordingly. This kind
embassy trade missions,” he claims. “Our most recent
of technology facilitates the process of making estimates
edition focused on improving commercial channels and
about the length of time, money, and supplies that will be
disseminated the future of technology within the silver
needed to complete projects.
mining industry.” Industrias Peñoles, Fresnillo, First Majestic Silver, Pan American Silver, Minera Frisco, Goldcorp, and
For most players environmental issues are an obligatory
Capstone Mining are examples of companies establishing
consideration that need to be addressed due to mandatory
themselves in Zacatecas. Due to growing interest in the
norms. Companies like Goldcorp have botanical gardens
area, Góngora believes that it is more important than ever
and fauna recovery areas for coyotes and prairie dogs.
to set up networking spaces to improve Mexico’s position
Other players take care of wildlife with zoos and
in the global mining market.
reforestation. “In Zacatecas, the industry manages to continuously stay one step ahead of SEMARNAT despite
The event is currently promoting alliances and agreements
the fact that over the last seven years it has been increasing
with universities to improve the quality of degree courses
requirements,” Góngora observes. “The agency has found
and increase their academic level. “Mexico’s mining
that the industry already practices many of the new norms
industry urgently needs to upgrade the university
they have been incorporating into the standards long
programs that are being offered as they are behind on
before they were required. However, mining companies
current trends,” he asserts. “There needs to be more
in Zacatecas are particularly concerned with the Natural
communication among mining companies and academia
Protected Area proposal of 2.55 million hectares that was
so that players can channel the short, medium, and long
presented two years ago. We have been negotiating with
term needs of the industry in terms of skill. It would also be
the government about its size and the ripple effect it could
beneficial for the students to have closer contact with top
cause the industry as it includes mining activity areas that
players. Consequently, we have devised training programs
would affect production.”
that help arm recently graduated scholars with the right tools to enter the market faster and spend less overall time in training.” According to Góngora, RIM provides fewer and more exclusive conferences. “This year, our program included speakers such as the Michael DiRienzo, the Director of The Silver Institute, and Patricia Mohr, the former Vice President of Scotiabank.”
For each 10 pesos in taxes collected by the state, four pesos came from the mining
industry
One emerging trend found within mining companies, according to Góngora, is a recent scramble to increase
In terms of future predictions, Góngora perceives the
metal production. “The low price market is forcing
mining industry will be able to return to its optimal level
increased manufacturing levels, although without demand
of three to five years ago, and that metal prices will
the supply is soon bound to drop,” he predicts. “The
reactivate the sector in Zacatecas. “At the moment in
answer to optimized manufacturing lies in technology,
Mexico, Zacatecas is leading production in gold, silver,
and several companies are innovating products that
lead, and zinc,” he comments. “Two years ago, for each
can revolutionize the industry in terms of production,
10 pesos in taxes collected by the state, four pesos came
control, and safety.” He observes that software programs
from the mining industry. The state could become the
and simulators have grown in popularity as they offer a
main silver and gold producer in Mexico.”
341
| INDEX A-I ACE Drilling Supplies 214-215
Dimanor 172
Aceites Lubricantes de Chihuahua (ALCHISA) 190-191, 325
DMV Consultores 184
AdN Consulting 338
Doka México 194
Agnico Eagle 26-27, 66-67, 74-75, 76-77, 100-101, 150-151
Dräger 226-227
Alamos Gold 66-67, 76-77, 88
Dumas 248
Almaden Minerals 66-67, 150-151, 154, 311
ECN 288-289, 290-291
AMC Consultants 339
Elara Comunicaciones 285
Amec Foster Wheeler 312-313
Emerson 300-301
Americas Mining Corporation 66-67, 124-125, 130-131,
Endeavour Silver 26-27, 63, 76-77, 100-101, 110-111, 150-151,
126-127, 334-335
311, 334-335
ANAF Energy 297
Energold Drilling 115, 234-235, 310
Andritz Automation 282-283
ERM 314
Ankla 195
Espaciomovil 186
Argonaut Gold 66-67, 76-77, 80-81, 100-101
Export Development Canada (EDC) 65
ASARCO 124-125
EY 59, 332
Atlas Copco 204-205
Falcon Drilling 170-171
Aurico Gold 66-67
FIMEX 326
Ausenco 140-141
FIMSA 274-275
Avino Silver and Gold Mines 90-91
Fire Service Plus Mexico (FSPM) 327
Ayeasa 270-271
First Majestic Silver 66-67, 76-77, 100-101, 109
Azure Minerals 132-133
First Mining Finance Corporation 68-69, 150-151
Baja California Ministry of Economic Development 60-61
FLSmidth 254-255, 266
Bosch Rexroth 270-271
Fortuna Silver 26-27
Bowker 22-23
Fresnillo 26-27, 28, 76-77, 98-99, 100-101, 104-105, 108,
Candiani Mining Investment Banking 60-61
112-113, 116-117, 148-149, 150-151, 334-335
Carrizal Mining 128, 126-127, 334-335
Gamas 188-189
Centerra Gold 66-67
GAP 38-39
Centro de Estudios Servicios y Consultorías Ambientales
GE 228-229
(CESCA) 319
Geobrugg North America 210
Cereceres Estudio Legal 48-49
Georg Fischer 196
Chesapeake Gold 76-77, 84-85
GGD Bandas 211
Chesterton Mexicana 164, 276
GlobalSat 284
Coeur Mining 26-27, 29, 76-77, 100-101, 102-103, 106-107,
Globexplore Drilling 134-135, 152-153, 158-159
150-151
Gluyas Construcciones 197
Commosa 187
Goldcorp 26-27, 66-67, 76-77, 86-87, 100-101, 126-127,
Concrete Canvas 216
334-335
Connect Logistics 188-189
Goldgroup Mining 76-77, 84-85
Construmac 277
Great Panther Silver 26-27, 66-67, 76-77, 100-101, 150-151
Corescan 154-155
Greenergy 323
Corporativo Minero Minas de Mexico 64
Grupo ABSA 286-287
Cribas y Productos Metálicos 267
Grupo BAL 20-21
Croda 259
Grupo Carvel 217
Cyanco 256-257
Grupo Cementos de Chihuahua (GCC) 182
Danfoss Drives 293
Grupo Desarrollo Infraestructura (GDI) 320-321
Datamine 192-193
Haynes & Boone 40, 41
DBR Abogados 37
Hi-Pro 316, 317
Defiance Silver 100-101, 110-111, 311
Hogan Lovells 42-43
DELTA Solutions 286-287
IICE 294-295
Detector Exploraciones 160-161, 162-163
Immersive Technologies 231
DGI Geoscience 160-161
IMPACT Silver 100-101, 115, 232-233, 310
| INDEX I-W Industrias Peñoles 100-101, 104-105, 112-113, 126-127, 138-
PwC 34
139, 334-335
RAISE Energy Solutions 303
Intercore 165, 310
RB Abogados 45
InterGen 298
Refacciones Neumáticas La Paz 168
Intergraph de México 290-291
rePlan 314
Interlub 173
Resemin 233
Kansas City Southern Mexico (KCSM) 183, 310
Reyna Mining 92
Kepler Constructora 179
RH Shipping 199
Komatsu 219
Reunión Internacional de Minería Zacatecas 341
KPMG Mexico 58, 333
Riverside Reosurces 66-67, 150-151
Kroll Mexico 318
RYASA 206
LegalMex 47
Sánchez-Mejorada, Velasco y Ribé 42-43
Levon Resources 68-69, 150-151
Segman 226-227
MacLean Engineering 234-235
SEL Mexico 300-301
MAG Silver 26-27, 100-101, 108, 116-117, 148-149
Servicios ATS 322
Maptek 192-193
Servicios y Proyectos Mineros de México (SPM) 170-171
Maquinaria Rivero 214-215
Siat Mining 315
Marlin Gold Mining 76-77, 89
Siemens Mesoamérica 282-283, 310
Marubeni Mexico 129
Silver Wheaton 118
Masaba 263
Solenis 260-261
McEwen Mining 76-77, 82
Sonora Ministry of Economy 36, 334-335
Megamak 239
Southern Copper 66-67, 124-125
Mercuria 132-133
Southern Peru 124-125
Metso 254-255
Starcore International Mines 66-67, 76-77, 80-81
Mettler Toledo 273
TDM Group 244, 245
Mexican Association of Mining Engineers, Metallurgists,
Techflow 136
and Geologists (AIMMGM) 14, 337
Técnica Salgar 242-243, 299
Mexican Geological Service (SGM) 146-147
Teknol 157
Mexican Mining Chamber (CAMIMEX) 18-19, 178
Tele-Fonika (TF Kable) 249
Minera Frisco 76-77, 100-101, 126-127, 336-337
TEMESA 207
Minera Mexico 124-125, 130-131, 337-337
Tensar 244, 245
Mining Development Trust Fund (FIFOMI) 54
Terracon Ingeniería 312-313
Ministry of Economy 15, 16-17, 57
The Silver Institute 104-105
MISOM Technologies Latin America 289
Timken 204-205
MMD Mineral Sizing 260-261, 264-265
Tododren 274-275
New Gold 76-77, 83, 100-101, 334-335
Torex Gold Resources 76-77, 93, 150-151
Oldenburg Group 241
Toronto Stock Exchange 55
Pan American Silver 26-27, 76-77, 100-101, 114, 150-151,
TUMI Raise Boring 240
236-237
Versa Perforaciones 169
PANalytical 167
Victaulic 230
Paques 316, 317
VSG Legal Services 46
Parts Service Supply 228-229
Walden Group Mexico 247
Pochteca 262
WEG Mexico 296
Power Electronics 292
Williams Scotsman 209, 212-213
Premier Gold Mines 66-67
Yamana Gold 66-67, 76-77, 100-101
Primero Mining 76-77, 79, 100-101, 150-151, 180-181, 311,
Yokohama Tyre Mexico 224-225
334-335
Zacatecas Ministry of Economy 24-25
PROFEPA 308-309 Prydisa 140-141 PS&RM Abogados 48-49, 334-335
| ADVERTISING INDEX 6
Globexplore Drilling
198
RH Shipping
16 ECN
202 Victaulic
28
Bosch Rexroth
206
TDM Mexico
32
Parts Service Supply
208
Tele-Fonica Cable Americas
38
Grupo GAP
217 Timken
52 Brinks
222
56
Schweitzer Engineering Laboratories (SEL)
231 GlobalSat
Atlas Copco
72
Primero Mining
246
Fire Service Plus Mexico
89 Resemin
252 FLSmidth
92 Cyanco
258 Metso
96 Fresnillo
263 Pochteca
103
Coeur Mining
280
108
DBR Abogados
288 InterGen
115
Pan American Silver Mexico
293
Power Electronics
122
Grupo México
296
ANAF Energy
129
Carrizal Mining
302 RAISE Energy Solutions
144
Aceites Lubricantes de Chihuahua (Alchisa)
306 ERM
164
Chesterton Mexicana
319 CESCA
166
Mexico Business Publishing
324 Emerson
169
Refacciones Neumáticas La Paz
330
MMD Mineral Sizing
172
Detector Exploraciones
336
Ministry of Economy of Zacatecas
176 Doka 187
Williams Scotsman
Técnica Salgar
338 Yokohama
| TECHNOLOGY SPOTLIGHTS Globexplore: Man-Portable Drill Rigs 134-135 Globexplore & TerraCore: Core Logging Services 158-159 Detector Exploraciones: Drone Technology 162-163 ALCHISA: ExxonMobil Distribution 190-191 Williams Scotsman: Moduflex 212-213 Parts Service Supply: Battery Powered LHDs 228-229 Técnica Salgar: Mighty Filter 242-243 FLSmidth: Forced Air Floatation 266 MMD: Green Mining 264-265 Chesterton: Chesterton Superset 276 ECN: Progressive Dosing 268-269 RAISE Energy: More Mining With Less Fuel 303
| MINE SPOTLIGHTS Coeur Mining: Palmarejo 107 Fresnillo: Fresnillo 113 Fresnillo/MAG Silver: Juanicipio 117 Grupo México: Buenavista del Cobre 131 Industrias Peñoles: Velardeña 139 Pan American Silver: La Colorada 237 Primero Mining: Cerro del Gallo 181
| PHOTO CREDITS Inner front cover
Grupo Mexico
94
Andritz Automation
4
MAG Silver
98 Fresnillo
15
Ministry of Economy
102 MBP
16 MBP
104
Industrias Peñoles, The Silver Institute
18 MBP
106
Coeur Mining
20 MBP
108
MAG Silver
21 Fresnillo
109
First Majestic Silver
22 Bowker
110
Endeavour Silver, MBP
24 MBP
112 Fresnillo
26 MBP
114 MBP
28 Fresnillo
115 MBP
29 MBP
116
30
118 MBP
MAG Silver
MAG Silver
34 MBP
119
Endeavour Silver
35
120
Grupo México
Andritz Automation
36 MBP
124 MBP
37
125 FLSmidth
DBR Abogados
38 MBP
128 MBP
39
Andritz Automation
129 MBP
40
Haynes and Boone
130
Grupo México
41
Haynes and Boone
132
Mercuria, MBP
42
Hogan Lovells, MBP
134 Globexplore
44
McEwen Mining
136 Techflow
45 MBP
137
46 MBP
138 Peñoles
47 MBP
140 Ausenco
48
142
PS&RM Abogados, Cereceres Estudio Legal
Coeur Mining
Endeavour Silver
50 Goldgroup
146 SGM
54 FIFOMI
147
Grupo Mexico
57 MBP
148
MAG Silver
58 MBP
149 Komatsu
59 EY
153
60
Ministry of Economic Development of Baja
154 MBP
Globexplore, Globexplore
California, Candiani Mining
155 Corescan
62
Endeavour Silver
156
63
Endeavour Silver
157 MBP
Almaden Minerals
64 MBP
158
Globexplore, Globexplore
65 MBP
160
DGI Geoscience, MBP
68
Levon Resources, MBP
162
Detector Exploraciones
70
Endeavour Silver
164
Chesterton Mexicana
74
Agnico Eagle Mexico
165 MBP
75
Agnico Eagle Mexico
167 MBP
78
Primero Mining
168
Refacciones Neumáticas La Paz
79 MBP
169 MBP
80 MBP
170
82
172 Dimanor
McEwen Mining, MBP
MBP, Falcon Drilling
84 MBP
173 MBP
86 Komatsu
174 Komatsu
88
178 CAMIMEX
Alamos Gold
89 MBP
179 MBP
90
180
Avino Silver and Gold Mines, Endeavour Silver
Primero Mining
92 MBP
182 MBP
93
183
Torex Gold
Kansas City Southern Mexico
184 MBP
268
Electro Controles del Noroeste (ECN)
185
Coeur Mining
270
Bosch Rexroth, MBP
186 Espaciomovil
272
Grupo México
187 Commosa
273
MBP, MBP
188 MBP
274
MBP, MBP
190 Alchisa
276
Chesterton Mexicana
192
MBP, Maptek
277 MBP
194
Doka Mexico
278
Grupo México
195
MBP, Grupo México
282
MBP, Andritz Automation, Andritz Automation
196 MBP
284 GlobalSat
197 MBP
285 MBP
199 MBP
286
MBP, Grupo ABSA
200
Grupo México
289
MISOM Technologies Latin America
204
Atlas Copco, Timken
290
MBP, MBP
206 MBP
292 MBP
207 Temesa
293
209 MBP
294 MBP
210 MBP
295
Andritz Automation
211 MBP
296
WEG Mexico
212
Williams Scotsman
297 MBP
214
MBP, Ace Drilling Supplies
298 MBP
Danfoss Drives
216 MBP
299 MBP
218 Komatsu
300
MBP, MBP
219 MBP
304
Grupo México
220
Grupo México
308 PROFEPA, CLUSMIN
224
Yokohama Tyre Mexico
310
MBP, MBP, MBP, Kansas City Southern Mexico
225
Endeavour Silver
311
Almaden Minerals, MBP, MBP, Endeavour Silver
312
Amec Foster Wheeler, Amec Foster Wheeler,
226 MBP 228
Parts Service Supply
MBP
230 Victaulic
314
231 MBP
315 MBP
232
316 MBP
Andritz Automation
MBP, MBP
233 MBP
317 Paques
234
MBP, MacLean Engineering
318 MBP
236
Pan American Silver
319
238
Coeur Mining
Centro de Estudios, Servicios y Consultorías Ambientales (CESCA)
239 MBP
320
240
TUMI Raise Boring
321 Hi-Pro
242
Técnica Salgar
322 MBP
Grupo Desarrollo Infraestructura GDI
244 MBP
325 ALCHISA
245 MBP
326 FIMEX
247 MBP
327 MBP
249 MBP
328
250
Endeavour Silver
332 EY
254
MBP, MBP
333
256
Cyanco, Cyanco
337 AIMMGM
Grupo México MBP, MBP
259 MBP
338
260
339 MBP
MMD Mineral Sizing, MBP
AdN Consulting
262 MBP
340
Endeavour Silver
263 MBP
341
Reunión Internacional de Minería (RIM
264
MMD Mineral Sizing
Zacatecas)
266 FLSmidth
344
267
Inner back cover
Cribas y Productos Metálicos
Andritz Automation Komatsu
| CREDITS EDITORIAL MANAGER: Sara Warden
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