2019
2019
Mining is at the core of almost everything that makes the world modern. Yet, the industry is also extremely volatile. After years of hardships, the companies that survived the last downturn did so by becoming experts in cost-reduction, efficiency and productivity strategies. Optimization of resources has become the pillar for those that want to remain standing. From human talent development to embracing the digital revolution, the industry’s horizon is shaped by doing the most with the least.
But just as mining has fueled the modern world, it is the human component that has kept the industry flourishing. This realization means the mining community in Mexico and around the world is growing increasingly aware of the importance of adapting best practices to be socially and environmentally responsible, while bringing wealth and development to the communities where it operates.
Also figuring into the picture is the election of a new president, Andrés Manuel López Obrador, who will guide the country and its economy, and the policies that will shape the mining industry, for the next six years.
Mexico Mining Review 2019 gathers all the expertise of the mining industry’s top leaders in Mexico. Over 200 interviews, in-depth analyses and infographics offer companies the business intelligence they need to seize the industry’s opportunities. Published in a political transition period, it also compiles the sectors’ voices in a Wish List to the incoming administration, with suggestions of what mining needs the most from the new government.
The fifth edition of Mexico Mining Review is written as an essential reference point for the industry, analyzing the main trends over the past year and shedding insight on the direction that mining is likely to follow over the near and mid-term.
ALL RIGHTS RESERVED Š Mexico Business Publications S.A. de C.V., 2018. 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 Mexico Business Publication S.A. de C.V. Mexico Mining Review is a registered trademark.
The publisher has made all reasonable efforts to provide accurate information, and the information contained in this publication is derived from sources believed to be true and accurate. However, the information in this publication should not be considered to be complete or definitive, and may contain inaccuracies or typographical errors. The publisher accepts no responsibility regarding the accuracy of information and use of such information is at your own risk. The publisher will not be liable to any party for any direct, indirect, special or other consequential damages arising out of any use of information in this publication. The publisher provides no representations or warranties, express or implied, including any implied warranties of fitness for a particular purpose, merchantability or otherwise in relation to any information provided by the publisher in this publication.
I S B N : 978 -1 -73 2 8 2 5 6 - 0 - 4
TABLE OF CONTENTS
STATE OF THE INDUSTRY
2
GOLD
3
SILVER
4
COPPER & BASE METALS
5
EXPLORATION & DRILLING
6 7
Supplement
1
8
ORE PROCESSING
9
NATIONAL CHAMPIONS
10
THE DIGITAL REVOLUTION & INNOVATION
CSR & SUSTAINABILITY
12
POLICY & REGULATION
MINE DEVELOPMENT
13
FINANCE & TRADE
MINE OPERATIONS
14
INDUSTRY OUTLOOK
THE NEXT SIX YEARS
11
Grupo MĂŠxico smelting facility
STATE OF THE INDUSTRY
1
Operators are boasting bloated balance sheets and wider profit margins thanks
to cost-reduction strategies that were put into action during the mining slump combined with a recovery in metal prices. Driven by the extra cash flow, companies are preparing to expand and acquire new projects. If Mexico wants to take full advantage of the industry’s opportunities and the upturn, greater strides must be taken to close the gaps in the country’s regulations and international competitivity.
With the end of President Peña Nieto’s term in 2018, this chapter analyzes the main advances of the 2012-2018 administration and areas of opportunities that need to be addressed by incoming authorities, relying on the insights of key policymakers, C-level executives and legal representatives. It also evaluates the impact and trajectory of the Mining Undersecretariat that was created at the end of 2016. The chapter shines a spotlight on the primary mining states in Mexico and highlights the achievements of the Peña Nieto administration for the mining industry.
5
CHAPTER 1: STATE OF THE INDUSTRY 8
YEAR IN REVIEW: Optimism Despite Global Uncertainty, Local Hurdles
12
VIEW FROM THE TOP: Ildefonso Guajardo Villarreal, Ministry of Economy
13
VIEW FROM THE TOP: Salvador García, AIMMGM
14
VIEW FROM THE TOP: Mario Alfonso Cantú, Ministry of Economy
16
VIEW FROM THE TOP: Javier Reyes de la Campa, Accendo Banco
17
VIEW FROM THE TOP: Paulo de Sa, World Bank
18
VIEW FROM THE TOP: Alberto López, Sonora Ministry of Economy
19
STATE PROFILE: Sonora: Mexico's Leading Mining State
20
VIEW FROM THE TOP: Jesús Mesta, Chihuahua Ministry of Economy
21
STATE PROFILE: Mining Brings Employment, Growth to Chihuahua
22
VIEW FROM THE TOP: Carlos Bárcena, Zacatecas Ministry of Economy
23
STATE PROFILE: Zacatecas Still Mexico's Silver Titan
24
VIEW FROM THE TOP: Ramón Dávila, Durango Ministry of Economy
25
STATE PROFILE: Tapping into Durango's World-Class Deposits
26
VIEW FROM THE TOP: Álvaro Burgos, Guerrero Ministry of Economy
27
STATE PROFILE: Guerrero’s Golden Comeback
28
ROUNDTABLE: How is Geopolitics Affecting Miners and How Can They Hedge Against Volatility?
7
| YEAR IN REVIEW
OPTIMISM DESPITE GLOBAL UNCERTAINTY, LOCAL HURDLES After a strong start to the year buoyed by geopolitical uncertainty globally, metals prices have stagnated. US unemployment is low, taxes are favorable and the dollar is strong, making it the preferred investment. But metals such as silver, copper, zinc and lead continue to be required for industrial applications
8
The last year saw considerable change in the rules of the
a good place thanks to the growing popularity of electric
game, proving that anything is possible. Mexico’s closest
vehicles (EV).”
ally, the US now has a president that announces major trade policies through Twitter, long-standing trade agreements
While still far from their 2011 peak, prices are continuing to
are being renegotiated and the threat of trade wars is
improve and operators are finally starting to harvest the
real. At a more local level, companies are getting used to
fruits of their cost-reduction practices sparked by the bear
a recently-elected president who ran on a nationalistic
market of 2015. Mexico continues to be in the Top 10 as
agenda and made history along the way, marking the first
one of the biggest producers of silver, gold and copper but
time the president of Mexico has not belonged to the PRI or
authorities must remain aware of the rising attractiveness
PAN parties. The context, nationally and internationally, has
of mining jurisdictions like Chile and Peru. Added revenues
made geopolitical instability the new norm for the global
have meant more money to be channeled into exploration,
market and while in the past, volatility meant good news
helping operators strengthen their pipelines and offering a
for operators, some fear that investors may hold back as
strong outlook for the industry in the years to come.
they adapt to the persistent instability.
MEXICAN GOLD OUTPUT DECLINES In times of uncertainty, precious metals are the go-to
After falling to nearly US$1,000/oz in 2015, the industry
investment option. According to Morningstar, a Chicago-
welcomed the rise, albeit slowly, of gold prices. In 2017,
based investment research firm, “for as long as many can
the price was on average US$1,257/oz, having traded in a
remember, gold has reacted favorably to geopolitical
range between a low of US$1,151/oz in January and a peak
turbulence – as uncertainty increases, the rush to gold as a
of US$1,346/oz in September, although these prices are
haven has been the counterbalance.” But 2018 has bucked
still a far way off the decade peak of US$1,895/oz in 2011.
the trend and now, low unemployment and lower taxes in
Global gold output in 2017 rose slightly to 104.4 million
the US is underpinning the dollar and limiting the need for
ounces from 99.7 million in 2016 but Mexico fell to ninth
metals hedging. “In recent times the established paradigm
place on the global list of gold producers after being No.
has been challenged,” says Morningstar.
8 for two years in a row thanks to a 4 percent drop in
“
Gold is in fairly stable territory while silver unfortunately is still waiting for its moment to shine” Philip Hopwood, Global Mining Leader at Deloitte
domestic production. The fall was influenced by production drops in world class gold deposits Los Filos and Limón-Guajes in Guerrero, the latter caused by a five-month blockade. Eight other major mines in the country also reported a decline in production in comparison to 2016, including San Dimas, Guanacevi and San Francisco. Peñasquito reclaimed its place as the country’s top gold producer from La Herradura with output of 476,000 ounces in 2017, a 2 percent increase from 2016. Sonora state continues to be the jewel in the gold crown as
But in spite of the speculation, Deloitte sees consistent
the biggest gold producer in Mexico followed by Zacatecas
demand across precious metals, advantages in rising
and Chihuahua, while Guerrero, straddling a prolific gold
global debt levels and few other investment options that
belt, is attracting new attention with hopes its security
can compete against the engrained history of the mining
issues will be resolved.
industry. “Gold is in fairly stable territory while silver unfortunately is still waiting for its moment to shine,” says
New gold projects in the pipeline offer optimism for
Philip Hopwood, Global Mining Leader at the consultancy.
production in 2018. Fresnillo is taking the lead as its Pyrite
“Copper and zinc are enjoying positive momentum mainly
Plant fed by the Saucito and Fresnillo mines in Zacatecas is
because of supply constraints. Many commodities are in
expected to start operating in the second half of 2018. The
dynamic lixiviation plant in development in La Herradura is also expected to increase gold production by 36,000oz/y along with the potential of bringing online Juanicipio in
THIS YEAR'S MAIN DEVELOPMENTS
2017 August
Gold prices soar to US$1,356/oz amid US-North Korea military tensions
2020 to produce 30,000oz/y. September
Mexico announces application for
SILVER ON TOP
Extractive Industries Transparency
In silver production, Mexico maintained a firm grip on its
Initiative (EITI)
position as top producer in the world for the eighth year
October
AMLO announces plan to bring Napoleon Gómez out of exile in Canada
in a row despite the 4 percent fall in global silver output.
and appoint him Senator
The global decline was caused by losses at major mines in South America, Oceania and Europe but was compensated
Mexico and Ecuador sign a cooperation
in large part by greater output in North America. And as
agreement for mining industry
silver is often a byproduct of gold and copper production,
November
Limón-Guajes for Torex Gold
the 2017 spike in global exploration investment after a fouryear retreat could be a positive indicator of even bigger output in the years to come.
Beginning of workers’ strike at El
2018 January
China announces a ban on scrap copper imports causing copper prices to
Mexico was able to come out on top primarily thanks to
bounce back to $7,270/t on the LME
Fresnillo’s eagerly-awaited pipeline of projects that are
First Majestic Silver announces
starting to come online. The company expects to complete
acquisition of Primero Mining and
the expansion of La Ciénega by 2019 and Juanicipio is
flagship San Dimas operation in Durango
projected to start producing 10 million ounces of silver per year by 2020. Another Mexican giant, Industrias Peñoles,
February
expects to start producing 4.7 million ounces of silver in its
March
April
Torex Gold announces official end of El Limón-Guajes blockade
reserves and adjust construction plans. Coeur Mining’s La Preciosa mine, SSR’s Pitarrilla mine and El Gallo II owned
Mexico signs new TPP11 with 10 countries, agreement excludes the US
Rey de Plata mine by mid-2019. Additional development projects were put on hold as companies search for bigger
Silver prices dip back below US$17/oz
May
by McEwen were among those affected.
Miners on the BMV register significant falls, Frisco leads with 23 percent Claudia Pavlovich, Governor of Sonora,
When it comes to the country’s main silver mines,
proposes before CONAGO an initiative
Peñasquito was not only the main gold producer but also
to overturn exploration deductibility law enacted by the fiscal reforms
the main silver producing mine in 2017 with an output of 21.5 million ounces. But Fresnillo is still the global silver king
June
Minera Frisco and Goldcorp announce
as four of its mines were included in the Top 10: Saucito,
tie-up in Mazapil, Zacatecas
Fresnillo, San Julián and La Ciénega. Overall, silver output
Retaining wall collapses at Rio Tinto
in Mexico totaled 187 million ounces in 2017 at an average
mine in Chihuahua, leaves one fatality
global market price of US$17/oz, and ranging between
July
AMLO announced as next President of Mexico with 53 percent of the vote,
a high of US$18.3/oz in February and a low of US$15.2/
congratulations offered by Germán
oz in July.
Larrea, with whom he has a tenuous relationship
THE SWAYS IN COPPER PRICES
New stock exchange, BIVA, begins
While silver and gold were not as drastically shaken by geopolitical events, a possible trade war between China and the US and a strong growth in supply caused
operations in Mexico August
re-open San Martín mine in Sombrerete,
copper prices to sway. The volatile climate impacted the
Zacatecas after 11-year strike
metal more as China is responsible for half of the world’s
AMLO meets with executives including
consumption of copper. Copper in 2017 begun to make a
Carlos Slim to announce his policy
comeback after several years of low prices. In December
priorities, includes mining development
2017, prices reached heights of US$7,215/t for the first time
Napoleon Gómez inaugurated as a
since 2014. But the good news did not last long. The metal peaked at US$7,261/t in June 2018 and dropped below the US$6,000/t benchmark in mid-July. Analysts from Goldman Sachs speculate that this drop was sparked by concerns
Grupo México announces potential to
Senator of the Mexican Republic September
Gold prices begin to drop below US$1,200 amid backdrop of strong US dollar
9
| YEAR IN REVIEW over rising tension between China and the US but that the
300 percent from about 220,000t/y of lithium-carbonate
impact will not last long in the case of raw materials like
equivalent in 2017. It says this will continue to grow until
copper. In July, S&P revised its price predictions for copper,
demand reaches around 2 million t/y by the early 2030s.
lifting them to $6,800/t from $6,600/t for 2019 and to
Prices swelled to US$16,500/t in 2018 from US$3,870/t in
$7,000/t from $6,800/t for 2020.
2011. In the limelight once again, Sonora holds one of the world’s larger lithium resources that benefits from being
Operator Bacanora Lithium plans to start production in 2020 after 10 years of evaluating the project and with several off-takers already signed on even before commercial production. Cobalt has a future that looks just as bright as Global Energy Metals expects demand to rise 30 percent by 2020 in comparison to 2016. Azure Minerals is betting on this growth through its Sara Alicia project, located in Sonora. The company believes that it
Global copper production totaled 19.7 million tons, a 2
could be the highest-grade cobalt project in the world.
percent drop from the previous year. Mexico produced
The price of cobalt rose from US$23,861.4/t in 2016 to
742,246 tons, of which Grupo México’s Buenavista del Cobre
US$80,490.68/t in 2018, an indicator of the expectations
alone churned out 318,900 tons in 2017. Chile continues
for this metal.
to be the leading producer, followed by Peru and China with Mexico in seventh place. Unsurprisingly, Grupo México
A GAP TO CLOSE IN EXPLORATION INVESTMENT
registered the biggest copper output in Mexico and took
Exploration is an important indicator of the well-being of
seventh position on a global scale. Sonora contributed
the industry and miners are eagerly anticipating a growing
84 percent of the total production but the reactivation
pipeline as investment increased for the first time in 2017
of Campo Morado at the end of 2017 and the start of
after four consecutive years of declines. According to
production in Rey de Plata in mid-2019 are expected to
S&P Global Market Intelligence, exploration investment
greatly increase Guerrero’s copper output, placing it as a
rose to US$8.4 billion in 2017 from US$7.3 billion in 2016,
possible contender for the 2019 top spot.
although still far from the US$21.5 billion peak recorded in 2012. The report says the rise was due to improved equity
ALTERNATIVES IN THE LIMELIGHT
market support for explorers that allowed companies to
The battery metal boom hit Mexico as companies like
resume drilling. It expects global exploration budgets to
Azure Minerals and Bacanora Minerals continue to develop
increase a further 15-20 percent year-on-year in 2018.
world-class deposits for lithium and cobalt. Demand for
In Latin America, the most popular destinations for
renewable technologies are motivating companies to
exploration investment were Chile, Peru, Mexico, Brazil,
seek new deposits that can satiate the need for battery
Argentina and Colombia. The metal that attracted the
metals. Benchmark Minerals Intelligence projects a rise in
most capital was gold followed by base metals such as
lithium demand to more than 900,000 in 2025, up over
copper, nickel and zinc.
GLOBAL NONFERROUS EXPLORATION BUDGETS GLOBAL NONFERROUS EXPLORATION BUDGETS 5
21 18
4
15 3
12 9
2
6
1
3 0
93 94 95 96 97 98 99 00
01 02 03 04 05 06 07 08 09
indexed metals price budget total ——Annual Nonferrous exploration Nonferr ous exploration budget total Annual Source: S&P Global Market Intelligence Source: S&P Global Market Intelligence
10
11
12
13
indexed metals pric e
14
15
16
17
0
Indexed metals price (1993=1)
Nonferrous exploration budget (US$B)
10
both high grade and scalable.
Mexico advanced in the Fraser Institute’s attractiveness index from 50th place to 44th
In Mexico, exploration projects focused on expanding current mines and reserves and reactivating the projects put on hold by juniors when the downturn hit. Until now,
MAIN DESTINATIONS FOR EXPLORATION INVESTMENT GRAPH IN LATIN TITLE AMERICA 2017 (percent) 25
there had been a lack of interest in greenfield exploration since 2013 due to the lack of funds available to juniors,
US$2.3
25 22
21
billion total
20
cuts in the exploration budget of major players and strategies to explore areas surrounding existing mines.
15
As exploration is the backbone of the industry, CAMIMEX
10
prospects. Among the most important expansion projects
Source: CAMIMEX Source: CAMIMEX
Bolivia
Colombia
silver and zinc deposit both stand out as promising
Argentina
Minerals’ Sara Alicia and Sunshine Silver’s Los Gatos
5
0
Brazil
an exciting pipeline of projects in exploration. Azure
11
5
Mexico
2017. Despite the context, the country continues to have
5
Peru
received by the segment to finance new discoveries in
7
Chile
highlighted its concern over the low capital allocation
11
in the country is that of La Ciénega owned by Fresnillo in Durango. Hecla is also investing in expanding its San
THE BEST IS YET TO COME
Sebastián mine in Durango to increase production rates
Change is the key word for the industry as volatility permeates
by the end of 2018.
not only the geopolitical realm but also the way business is done within the sector. To stay afloat, a traditionally closed
DEMAND FOR RULE OF LAW
industry must adapt to the ebbs and flows of consumer
Loaded with added revenues in their pockets, operators
and investor demands, including transparency and low-cost
are eager to expand their portfolios. And while Mexico
operations that can start production within shorter time
has important projects in the pipeline, the country has
frames. The rise of new competitors in the financial market
several challenges to overcome to allow it to maintain its
such as cryptocurrencies and fintech that are catching
competitive edge over competing jurisdictions in Latin
ever-more attention from investors are equally motivating
America. One of the most pressing issues is the need
operators to transform. Having learned their lesson from
for an established rule of law in the country as several
the past downturn, miners are much more cautious about
times in 2017 communities caused illegal interruptions to
their use of capital and seek strategic projects to add to
operations, jeopardizing millions of dollars. An example is
their portfolios. Technology is also playing a greater role as
the five-month blockade in Torex Gold’s El Limón-Guajes
companies are on the hunt for innovative methods that can
that caused the company a net loss of US$12.6 million
positively transform their operations.
in 2017 compared to the net income of US$3.2 million it reported in 2016.
National giants, such as Fresnillo and Industrias Peñoles, also continue to grow and succeed both locally and
Argonaut Gold also suffered a community setback when
internationally. The market has adopted to the rapid influx
the explosives permit for its La Colorada project in Sonora
of international companies, mostly Canadian, that are taking
was suspended amid a legal challenge by the municipality
an interest in the Mexican mining industry. The country
in April 2018 that the permit should never have been
advanced in the Fraser Institute’s attractiveness index from
granted. After responding to the challenge, the operation
50th place to 44th. But as other jurisdictions also become
was left in limbo until the end of June, when the permit
more attractive – Chile jumped to eighth from 39 in the
was reinstated. In the meantime, the operations were able
previous years – Mexico must advance at a faster pace.
to continue with Argonaut processing stockpiled ore. Mining is present in every aspect of everyday life, from Companies are also demanding a stronger rule of law to
cars to homes and right down to country’s coin currency.
increase security near mine operations that are often in
To further promote growth, the sector must continue to
isolated and remote areas. Pan American Silver’s Dolores
create societal awareness of the sector’s role in economic
mine was forced to halt production due to high insecurity
development. Communication among the social, public
levels and this is especially prevalent in Pacific coastal
and private sectors can open doors to capital and
states like Guerrero and Sinaloa. Pan American Silver
facilitate permitting. And with a new administration taking
managed to overcome the situation quickly due to the
over the reins of government, the mining industry also
deployment of federal and state resources to secure the
has an opportunity to secure a prominent place on the
access roads to the mine.
federal agenda.
| VIEW FROM THE TOP
CONTINUE WORTHY FEDERAL INITIATIVES ILDEFONSO GUAJARDO VILLARREAL Minister of Economy
12
Q: What have been the Ministry of Economy’s main
Considering the importance of information technologies,
achievements during the 2012-2018 sexennial?
we began to modernize the systems related to mining
A: Mining was included for the first time as a strategic
procedures; we are in the process of streamlining 42
sector in the National Development Plan 2013-2018 because
procedures, making mining data consultation easier.
of its contribution to economic growth. Accordingly, in 2016 the General Coordination for Mining became the
At the international level, Mexico has been a key player
Undersecretariat of Mining, increasing its importance
in mining groups, such as the Pacific Alliance and the
nationally and raising the level of dialogue with similar
Conference of Ministers of Mining of the Americas and the
authorities in other countries.
Asia-Pacific Economic Cooperation (APEC). At the bilateral level, we set up a mining working group with Canada, and
As part of the financial reform put forward by President
memoranda of understanding for mining cooperation were
Peña Nieto, in 2013, Congress approved new duties from
signed with Sweden, Ecuador and China.
mining, which included the 7.5 percent special right on concessionable mining EBITDA and the 0.5 percent
Q: What do you think should be the top priorities for the
extraordinary right on sales of silver, gold and platinum.
next administration regarding the mining industry?
The resulting revenue has been mainly oriented to the
A: I see three primary priorities for the new government
Mining Fund for Regional Sustainable Development of
in terms of mining. The first should be the continuation
Mining States and Municipalities, which are allocated to the
and conclusion of the process of modernization of mining
communities where the mining activity takes place. The
procedures, since it will give greater certainty to investors.
money is allocated to social and infrastructure development
Second, the new government could implement the
projects for the good of the communities affected by the
process of prior consultation in indigenous territories, an
mining activities. The Fund has raised people’s standard of
indispensable measure to consolidate the governance of
living while reducing the incidence of conflict in the sector.
mineral resources. The Mexican state has the obligation to ratify the agreement on indigenous and tribal peoples in
In terms of geological information generation, the Mexican
independent countries set out in ILO Convention 169, and
Geological Service has carried out important work. It has
to carry out indigenous consultation. Third, the collection
2 as of July 2018, mapped an accumulated area of 866,802km
and allocation of funds related to the Mining Fund for
which is equivalent to 63 percent of the surface area of the
Regional Sustainable Development of Mining States and
Mexican territory that is estimated to contain mining potential.
Municipalities could be improved.
Regarding financing, FIFOMI defined new financing
Q: How will the Ministry of Economy collaborate with the
strategies and access to credit for companies in the mining
new administration to promote the continuation of the
sector and its value chain. As of August 2018, there is a
work started by the Undersecretary of Mining in 2016?
credit portfolio balance of MX$3.66 billion, which represents
A: We have already begun the transition, and we are holding
an 8.4 percent increase on the balance registered as of
several meetings with the incoming administration. In such
December 2012.
meetings, we have presented a thorough evaluation of the work done over the course of the last six years and we have made recommendations as to the work we believe can
Ildefonso Guajardo Villarreal is the Minister of Economy for
be continued. Certainly, it is down to the new government
the Peña Nieto administration. Previously, he held a number of
whether or not it will take our recommendations into
public sector positions, including Senior Official in the Ministry
account and continue with the programs begun by this
of Foreign Affairs and Deputy Minister of Tourism Development
administration.
VIEW FROM THE TOP |
COLLABORATION, AGREEMENTS TO PROMOTE MINING DEVELOPMENT SALVADOR GARCÍA President of AIMMGM
Q: How will the newly-elected board of directors bolster
through online courses, interactive live webcasts and face-
the association’s role in promoting the development of the
to-face classes. It is supported by the University of British
Mexican mining industry?
Columbia and the University of Arizona. Its training helps our
A: So far, the association’s role has been to witness and
union members remain up to date on key topics and trends
support the decisions that have been made in relation to
in the industry. The fact it is online provides participants
mining in the country. We want to change that role or at least
with flexibility, while also giving the option of face-to-face
lay the foundations for it to be an association that proposes
interaction.
substantial changes that benefit the mining industry in Mexico. Q: What have been the main ups and downs of the 2012-2018 One example of this is the joint agenda we would like to
administration and in what state will the new government
set up with SEMARNAT, PROFEPA and other government
inherit the mining industry in Mexico?
institutions to make the industry more sustainable and
A: From my point of view, the incumbent government never
socially responsible. This is something that society and some
had mining on its agenda and that is one of the reasons
authorities have not understood, perhaps due to a lack of
behind the implementation of the new 7.5 percent duty plus
information or misinformation in the media. Mining is one of
0.5 percent for precious metals. The new government will
the most sustainable and socially-responsible industries in
inherit a battered industry in addition to an excessive tax
the country but it tends to have a negative image not only in
burden compared to other countries. This is exacerbated by
Mexico but globally. We must change this by informing the
the insecurity that permeates our country and the absence of
public of the virtues of mining with facts and evidence.
the rule of law, especially in rights of way disputes. It seems that in these scenarios, the private interest is set aside and
Q: In your experience, how can AIMMGM build an effective
the ejido or landowner is always right, often due to political
bridge between the private and public sectors in mining?
motivations rather than rule of law.
A: The role of the association is to be an interlocutor between the public and private sectors. To do that, we must approach
I do not predict any substantial change in terms of the new
the public sector to inform it of the industry’s importance
administration. It is impossible to tell what will happen under
and requirements to continue driving economic value for the
AMLO’s government but I feel it is important that each of
country. Good communication in both directions is important
the entities in our association plays its part to collaborate
so we can always stay well-informed and able to deal with any
for the best interests of the mining industry in Mexico.
problems that arise. This also gives us the leverage to identify
I would request that the next administration consider
areas of opportunity to boost the mining industry in Mexico.
the value of the mining industry in the socioeconomic development of our country and take that into account
Our main asset is that we represent the mining sector and our
when making policy decisions. For example, exploration
members are the industry’s main decision-makers. One way
should be encouraged throughout the country, which would
that we are able to work toward our common goal of growth
involve reversing the previous fiscal reform and making pre-
for the mining industry is through the association’s integration,
operational exploration expenses immediately deductible
which empowers us in our actions.
for new projects.
Q: What impact does AIMMGM expect the EDUMINE program to have and why is this important?
AIMMGM is the premier association for mining professionals
A: We believe that education is the best means to achieve
in Mexico. The group works toward the technological and
objectives in any field. EDUMINE is an online platform
economic development of the mining sector and counts the
that provides over 200 courses on mining-related topics
country’s top operators and suppliers among its members
13
| VIEW FROM THE TOP
PREPARING THE MINING INDUSTRY FOR THE DIGITAL REVOLUTION MARIO ALFONSO CANTÚ Undersecretary of Mining at the Ministry of Economy
14
Q: What were the Undersecretariat’s key accomplishments
and the cross-referencing of polygons so they reconcile with
during this administration?
the Public Mining Registry. We have also worked on the
A: The National Development Plan 2013-2018 included
digitization of files related to mining concessions and the
mining as a strategic industrial sector. We emphasized this
systematization of documents. We want to consolidate and
by also creating a plan specifically designed for the mining
modernize physical spaces for safeguarding documents to
industry. The Mining Development Program 2013-2018 has
streamline the processes of mining regulation. We have also
four main objectives: promote higher levels of investment
added a temporary increase in the workforce to reduce the
and competitivity in the mining sector, increase the amount
backlog in the processing of procedures and correction of
of financing for the mining industry and its supply chain,
data from the Public Mining Registry through conciliation
strengthen the development of small and medium mining
with historical physical records. The CartoMinMex information
companies and modernize institutional norms for the
system is already online and works as a geographical
sector, improving attention to processes related to mining
information system for consultation with data from the mining
concessions.
archives, which at this stage includes mining cartography and its public registry.
We encouraged a more solid communication channel between the private and public sectors through the
Q: How is the Undersecretariat creating more international
establishment of four additional mining clusters to the
opportunities for the Mexican mining industry?
Zacatecas one, created in 2012. We are also promoting the
A:
creation of a new cluster, which we hope will be established
(MoUs) that the previous General Mining Coordination had
before the end of this administration.
signed were not being followed up on. We decided to make
Many
Memorandums
of
Understanding
sure these agreements were put into action. We also increased Most investors do not usually talk to the Undersecretariat
our outreach by diversifying beyond Canada, even though this
directly but with local authorities first to see what kind
country will always be our main mining partner.
of support they can receive from the government before deciding to invest in a project. Unifying efforts is a good
The Undersecretariat identified the main mining events and
way to ensure the future of projects in the country. This will
regions in the world that the sector could benefit from and
also help ensure that the next government will continue
decided to increase its presence in these areas, including
the current work regarding the mining industry. We
Australia and China. In particular, Mexico and China signed
created committees with municipal and state governments
MoUs in mining cooperation federally and provincially, as
in collaboration with federal authorities to address the
well as between the geological surveys of both countries.
industry needs.
Business missions took place with holders of mining projects and throughout the present administration the presence
Q: How are you shortening and simplifying the permitting
of Chinese companies was gradually increased. Currently,
process in the industry?
Chinese companies have 20 mining projects in Mexico.
A: The Hydrocarbons Law establishes that mining authorities must consult with the Ministry of Energy if there
In the case of Australia, we actively participated in promoting
is oil or other hydrocarbons in the area where the mining
investment in important mining events, which was reflected in
concession is required, making permitting processes slower.
a gradual increase in investment. Australian companies now
The Undersecretariat of Mining has been carrying out the
have 30 projects in our country.
Integral Model of Mining Administration (MIAM), which includes the digitalization of 42 related mining concession
Q: How are you helping improve the financial opportunities
procedures, updating of the Geographic Information System
available in the sector?
A: FIFOMI plays an important role as a facilitator of credit
157,500ha available for allocation to those requesting it in the
to small and medium companies. But in the past, more than
form of a mining concession.
50 percent of the credit was being directed toward housing and transportation, which did not make sense. After many
The Mexican Geological Survey works on the 1:50,000 scale
years, we restructured the credit for project financing and
cartography of the national territory. One of its applications
have already had several success cases. While FIFOMI used to
is the evaluation of the potential of existing mineral resources.
give only MX$320 million in direct credit, last year it reached
The information generated by SGM is of public use through an
MX$1.25 billion.
institutional data bank called GeoInfoMex, which allows the information to be easily consulted in different layers, providing
We have also created a graduate scheme with Bancomext that
a significant saving of time and resources.
companies can use as they continue to grow to broaden their financial opportunities. Bancomext has already supported
Q: What should the next administration prioritize when it
five companies that were recommended by FIFOMI and we
comes to the mining industry?
expect this number to rise. Our goal is to train companies and
A: The schemes implemented by the current administration
teach them how to use more professionalized financial models
have been successful. We strive to leave everything organized
so they can eventually expand to list on the Toronto Stock
for the next administration with a report on our main advances
Exchange, the most important market for the mining industry.
along with suggestions on the main areas of opportunity that we did not get a chance to focus on. One example is
Q: Why are national banks so resistant to the mining industry?
updating the legal framework that was mainly approved in
A: National banks do not want to lend money to the mining
1992. Back then it may have been a leading example in the
industry mostly due to the high risk and the lack of knowledge
industry but nowadays it is extremely outdated compared to
given the complexity of the industry. The only bank that
other laws and regulations related to mining activity, like the
has shown interest is Scotiabank. It has a rich history in the
environmental law.
Canadian mining industry. FIFOMI is helping close these gaps by organizing meetings with investors and banks to find
Currently, Chinese companies have 20 mining projects in Mexico
more solutions for the Mexican mining industry. One option is the syndicated loan with the participation of private banks. This strategy has been widely accepted and promises to be effective in promoting the sector. We also collaborate with brokers, such as Trafigura, to offer revolving credit through a select group of banks with 60 days of financing at a favorable rate.
A long-term vision and a national policy are also essential Our direct involvement consists also of providing a fund
to promote the development of mining and the country
worth MX$2 million to state authorities so they can promote
within a framework of sustainability, economic growth,
the development of mines in their states. Zacatecas,
social benefit and respect for the environment. The field of
Sonora and Chihuahua are involved in this fund, which is
public policies to support the development conditions of the
designed for small mining companies. There used to be many
sector also has great areas of opportunity. Some of these
opportunities and funds available to small mining companies
include the creation of a Large Projects Office to accelerate
from authorities such as the Ministry of Agriculture, but these
response times and support strategic mining projects in
have slowly been phased out.
collaboration with other federal agencies, the improvement of the fiscal conditions of the sector through mechanisms
Q: How has the Undersecretary of Mining promoted the
such as the immediate deductibility of pre-operational
restoration of immediate deduction of pre-operational
expenses, the development of a secondary market for
expenses for mining operations?
mining concessions, the expansion of SGM’s activities for
A: We believe the elimination of immediate deduction of
the exploration of industrial minerals and the strengthening
pre-operational expenses for mining operations at the
of the economic, technological and commercial cooperation
end of 2013 has lowered Mexico’s ability to compete with
ties with our strategic partners.
other mining jurisdictions. We have facilitated meetings between representatives of CAMIMEX and the Ministry of Finance to propose restoration of such a fiscal incentive to
Mario Alfonso Cantú has extensive experience in the public,
Congress. Other actions to encourage mining investment in
private and academic spheres. Since January 2013 he has
exploration in Mexico are the freeing up of land from 289
served as General Mining Coordinator of the Ministry of
mining lots in the first half of 2018, with an area of more than
Economy
15
| VIEW FROM THE TOP
THE DEEPER THE CRISIS, THE BETTER THE OPPORTUNITY JAVIER REYES DE LA CAMPA Co-CEO of Accendo Banco
16
Q: What is your view of the current state of the
unique opportunity to provide financing throughout the
mining sector?
whole mining spectrum.
A: The last 10 years have been a roller coaster of high and lows. During this time, we have seen the industry
Q: Why do you consider yourself to be the bank for the
bleed and many companies have gone out of business,
mining sector?
particularly small to medium-sized companies as there
A: We are the only Mexican bank that actively serves the
are just a few financing options available to them. But
industry. We serve the mining companies, as well as the
there is an opportunity in every crisis and the deeper
whole supply chain, such as service provides like drillers,
the crisis, the better the opportunity can be. It is simply
contractors and reagent producers. Mining is one of the
a matter of identifying it and profiting from it.
most important industries that Accendo Banco targets with its bespoke products.
As we now stand in the middle of what appears to be another bull run for some commodities, the next 10
Q: What services or programs have you created for the
years will see the continuation of rapid change in the
mining industry?
industry against a backdrop of declining ore grades,
A: We offer trade finance, equipment leasing, financing
decreasing availability of Tier 1 assets and continued
for expansion plans and restructuring of existing loans.
focus on shareholder returns. To thrive amid this volatility,
We have the infrastructure to adjust financing terms to
companies must rethink the traditional way of financing
meet the requirements of our clients. We believe that
their mining operations. That is why the role of financial
each client is different and therefore each one deserves a
institutions that serve the mining industry is more
special product. In contrast to other Mexican institutions,
relevant than ever.
we understand the sector’s needs and are willing to take the risk to provide the sector and the companies within
Q: What are the main financial areas of opportunities
it with the financial services they need.
you have identified in the mining industry? A: Accendo Banco offers a wide range of financing
Q: What is the main added value you can offer the mining
products for the mining sector, including term loans,
industry in comparison to other financial institutions?
revolving credit facilities, bridge and mezzanine loans,
A: We understand what the mining sector needs.
nonconforming project finance facilities, subordinated
The main shareholders in Accendo Banco have been
cost-overrun facilities in select situations, trade finance
conducting these types of investments and financing for
consisting of equipment leases, leasebacks and factoring
at least 20 years. This gives us a broader picture of how
facilities. This 10-year global mining industry crisis
the sector works and what its needs are. Moreover, we
has translated into very limited financing for mining
have diversified our financial services to serve the mining
companies, particularly for small to medium-sized
industry. We offer bespoke products tailored to clients’
companies. Mexico, which is among the world’s most
requests; we will consider smaller ticket sizes that other
natural resource-rich countries, does not have a bank
lenders might not consider and our team is comprised
that supports the sector. This crisis has presented us a
of both technical and financing professionals who come from the mining industry and understand the full spectrum of risks and reward inherent to the industry. The
Accendo Banco’s mission is to accelerate the productive
team and ticket size allow us to leverage our expertise
growth of medium-sized companies that show potential,
to an otherwise underserved segment of the Mexican
through the offer of exchange, fiduciary and credit services,
mining sector while at the same time steering clear of
backed by experts in the industry
competition with the giants.
VIEW FROM THE TOP |
FLEXIBLE ROYALTIES, A SOLUTION TO PUBLIC AND PRIVATE DISCORD PAULO DE SA Former Practice Manager, Extractive Industries Unit at the World Bank
Q: What role can the mining industry play in the sustainable
best conditions, companies have filled most of China’s recent
economic development of a country?
import requirements. This trend is very clear in the steel
A: The mining industry can make a significant contribution
industry, where the iron ore export market is controlled by
to a country’s economic development because it often
the three biggest companies, while the so-called “Big Four”
generates large fiscal payments to the public purse and
are expanding their reach over the seaborne coal trade. After
contributes to the wellbeing of communities. More often
2010, price formation in these two markets shifted from long-
than not, mining projects create economic opportunities
term contracts, where buyers prevailed, to spot prices where
for communities in remote areas. The World Bank Group,
producers are more capable of taking advantage of short-
through the World Bank and the IFC, helps authorities
term changes in the markets.
refine their policies and ensure that mining is contributing to the overall economic development of their country. It can also make suggestions on the social and environmental management of the sector and benchmark policies. The World Bank has completed many economic studies on what mining can do in terms of poverty and inequality, although the image of the industry is not always very
Over the last 15 years, China has had an overwhelming influence on the global mining industry
positive. With the recognition that there is room for improvement in sustainability practices of the industry,
Q: How can countries properly implement revenue-sharing
these studies find that mining can offer countries concrete
mechanisms such as the Mining Fund in Mexico?
possibilities when it comes to reducing poverty. However,
A: Centralized mechanisms for revenue-sharing are very
they also find that in terms of inequality the mining industry
difficult to implement as it is hard to please everyone. We
can increase the differences between the haves and have-
support these initiatives but we have seen that using them
nots, thus creating even wider gaps.
adequately is not an easy task. The funds need to be used in a very transparent manner and authorities need to make sure
Q: What forces in the market are controlling trends in the
that they are investing in projects that support the well-being
mining industry?
of communities. Listening to their priorities and giving them
A: Market forces will be greatly driven by cost-reduction.
a voice in the decision-making process is essential. Peru, for
Hopefully, the mistakes of the previous supercycle will not
instance, transfers 50 percent of its revenues from the mining
be repeated. We are also seeing that companies in the
industry to surrounding communities but the government has
industry have more power. Previously, market prices were
not been capable of properly overseeing the use of these
controlled by consumers, but this is reversing as companies
funds. This means that municipal leaders have invested in
are increasingly able to influence prices.
the wrong types of projects, leading to cases of corruption. Revenue-sharing is meant to eliminate conflict between
For example, over the last 15 years, China has had an
authorities and communities but it can sometimes end up
overwhelming influence on the global mining industry.
causing more problems instead.
As China’s domestic resource base is being progressively depleted or struggles to meet the quality requirements of modern manufacturing, new opportunities are emerging
The World Bank Group is formed of five institutions working
for the large mining companies. Through their superior
for sustainable solutions that reduce poverty in developing
capability to access the best mineral reserves, deploy the
countries. It has 189 member-countries, staff from more than
most competitive technologies and access capital in the
170 countries, and offices in over 130 locations
17
| VIEW FROM THE TOP
SONORA AS MEXICO’S MINING ADVOCATE ALBERTO LÓPEZ Director General of Mining at the Sonora Ministry of Economy
18
Q: How can the Ministry of Economy promote more
strengthen the relationship between federation and state
favorable fiscal and regulatory terms for investment?
and work in a more coordinated way for the good of the
A: The special and extraordinary royalties were established
mining sector.
in 2014 and the state has now experienced four years of this tax burden that feeds the Mining Fund. Despite this
Q: What are the main incentives to invest in mining in
factor, and the 10-year time frame that was established
Sonora, especially for smaller-scale miners?
for the deductibility of exploration expenses, the hard
A: The state government participates enthusiastically with
numbers of Sonoran mining clearly highlight the state
programs that focus on the small-scale miner. We visit their
as the national leader in production. That being said, the
concessions, evaluate them in a very preliminary way and
industry has not experienced a marked growth in the wake
provide recommendations as to the best step forward for
of these expenses being established. Without doubt, the
that particular project. A possible strategy to detonate the
most important task of the public and private sector is
progress of the small miner, and which certainly is not new,
recovering competitiveness, and if this cannot be done by
is to promote the establishment of processing plants, which
reducing the tax burden, it can be done by establishing a
can collectively receive ore from small projects, process it
public policy that involves direct and short-term solutions.
and in this way boost the economy and life quality of certain
The mining agenda has been dragging on for several years
isolated regions.
with problems related to its fragmentation. The industry is intricately linked with many dependencies of several
Q: What is your perspective of the use and distribution
different federal government ministries.
of the Mining Fund and how can it catalyze growth in the state?
The state-level government bodies do what we can to
A: Regarding the Mining Fund, in Sonora, a total of
support the official processing of permits for companies of
MX$2.49 billion was received from the fiscal contributions
different sizes located in the corresponding territories. But at
over the course of 2014, 2015 and 2016, which
the end of the day there is always a process under the strict
substantially benefited the infrastructure of major mining
remit of the federal government. Behind these processes is
municipalities in the state such as Cananea, Caborca,
usually a team of public servants who are doing the best they
Nacozari, Alamos, Sahuaripa and Cucurpe. These were
can under critical staffing shortages and lack of technical
the main recipients of the resources from the Mining Fund
knowledge. We are grateful that, through the establishment
due to their importance for mining operations, not only
of the Directorate of Mines, we have already begun to
in Sonora but nationwide.
overhaul and modernize these processes and should make significant strides before the end of this sexennial term.
The recommendation of both municipalities and mining companies is that it is necessary to expedite the processing
Q: How do you expect the change of administration to
of these resources and have more regional influence in the
affect the continuity of the mining sector?
decision-making process regarding where they will be
A: Every change of government gives rise to the hope
allocated. This would bridge many existing gaps that may
that things can change. In our specific case, we want to
not be considered by those who are not present on the ground. For example, neighboring municipalities that do not have mining activities but do contribute to meeting the
Alberto López oversees mining activities of the state of Sonora.
industry’s needs do not receive any resources. This could
Prior to joining the public sector, he served as Director General
be revised in a fairer and more equitable way to ensure all
of Insetec from 2005-2015. He also founded the Mundo Minero
those involved across the mining supply chain benefit from
industry magazine in 1996
its activities.
STATE PROFILE |
SONORA: MEXICO'S LEADING MINING STATE Sonora is a 72-municipality state that accounts for 9.1
salary of MX$288.1 and the national average of MX$333.2
percent of Mexico's land mass. It contributes 3.5 percent
per day recorded by IMSS in 2017.According to Sonora’s
to national GDP. Approximately 7.3 percent of those in
Ministry of Economy, the state has 40 mines in operation,
Sonora are employed by the extractive and electricity
200 exploration projects and more than 5,000 mining
industries, including mining. In 2016, the mining industry
concessions over a land mass of more than 43km2. Sonora
contributed MX$70.11 billion to Sonora's GDP. The mining
is a leading mining state in the country, as the main copper
industry paid one of the highest estimated salaries of
producer and accounting for 24 percent of the total
MX$543.8 per day, compared to state estimated average
Mexican gold production.
PRODUCTION (2017)
408,842 kg silver
42,290.4
624,265
kg gold
tons copper
SONORA’S GDP STRUCTURE 2016 (MX$ billion) 700
• Land area: 178,292km2 Tertiary MX$301.96
• Population: 3,026,511 inhabitants
10.68% mining
600
• Sector with biggest contribution to state GDP: manufacturing industry (26.8%)
contribution to state GDP (2016)
• Percentage contribution to national GDP: 3.5% • 72 Municipalities
500
TOTAL EMPLOYED POPULATION 400
National
52,865,845
Secondary MX$314.6 4.5%
Manufacturing industries
17.4%
22.3%
MX$70.11 55.9%
EMPLOYMENT BY SECTOR 2017 Unspecified 20,782
Mining
MX$54.7
Extractive and electricity 29,733
Construction
MX$14.06
100
0
1,372,063
MX$175.71
300
200
Primary MX$39.85
Total
MX$656.4 billion
Generation, transmission and distribution of electric energy, water and gas supply by pipeline
Manufacturing 252,137 Social services 108,020 Government and international organizations 50,234 Trade 255,867.9 Construction 112,285 Restaurants and lodging services 97,447
POPULATION Younger than 15 years
767,747
15 years and older
2,258,764
Economically inactive population
835,891
Economically active population
1,422,873
Employed
1,372,063
Unemployed
50,810
Source: INEGI, CAMIMEX
2.6%
Sonora
Professional, financial and corporate services 103,489 Transport, communications, mail and storage 51,307 Various Services 134,484 Agriculture, livestock, forestry, 156,278 hunting and fishing 400 350
300
250
200
150
100
50
0
19
| VIEW FROM THE TOP
MAPPING CHIHUAHUA’S MINING PRIORITIES JESÚS MESTA Deputy Minister at the Ministry of Innovation and Economic Development of Chihuahua
20
Q: What are the ministry’s main priorities when it comes
show that taking away this tax incentive has led Mexico to
to the mining industry?
lose competitiveness against other mining jurisdictions.
A: In relation to the mining industry, the main priority of the Ministry of Innovation and Economic Development of
Q: What is the main impact from mining activities on
Chihuahua is to provide legal certainty to investors and
Chihuahua’s local communities?
to push for the immediate deductibility of exploration
A: It is curious that communities surrounding mine
expenses. It is also our priority to distribute the resources
operations often inherently reject mining projects when
of the Mining Trust Fund in a transparent way. Chihuahua’s
they are first being introduced. But we have found that
goal is to attract more investment to the state, especially
once they experience the benefits of having a mine in
given that it is the second-leading producer of silver, zinc
their community, receive the resources of the Mining Trust
and lead and the third for gold in Mexico.
Fund and have the possibility of finding a well-paid job without having to emigrate to other regions, their opinion
Chihuahua is the second-leading producer of silver, zinc and lead and the third for gold in Mexico.
drastically changes. The main challenge for the mining industry is communication. The industry must learn to efficiently publicize all the benefits it can provide as a legacy to communities and the way in which modern mining works. The industry’s processes in exploration, production and ore processing are mesmerizing in their technicality and
The most important factor for achieving this goal is
sustainability but this means nothing if people are not
legal certainty. Unlike other industries in which investors
aware of it. In fact, people often assume that mining
worry about location and logistics, in mining investment
companies arrive at a community, drill, exploit and leave
is mostly defined by mineral potential. As part of the
the territory and communities worse off. But this is far
local government, it is the ministry’s role to facilitate the
from the reality of how mining is today. We need to
optimum conditions for investment, and this includes
communicate the current reality of the industry to all
legal certainty. It is a priority of Governor Corral’s
and this is its main challenge.
administration to enforce the rule of law and compliance with the law. All mining companies and others across
Q: What is your assessment of the use and distribution
industries should have the confidence to place their
of the Mining Trust Fund?
resources in a state in which the law is respected.
A: In Chihuahua, we believe 100 percent that the fund must be solely distributed among the communities in
Regarding the tax regime, Governor Corral has repeatedly
which mining activities are carried out. That is why it
pushed the federal government to advance the
was created. Governor Corral has addressed this matter
deductibility of exploration expenses from 10 years to one,
several times with the federal government as we do not
restoring the previous legislation in place. Statistics clearly
think that it should be allocated 20 percent of the fund’s resources. We are also convinced that the fund should be allocated to productive projects to grow local economies
Jesús Mesta w orks for Chihuahua's Ministry of Innovation
and develop long-lasting benefits for communities. We
and Economic Development. He was Director and Partner of
also hope the fund will contribute to the modernization of
Distribuidora de Productos Alimenticios de Chihuahua for 12 years
the Undersecretariat of Mining, to make it more efficient
and has an MBA from Thunderbird Global School of Management
and responsive to the industry’s needs.
STATE PROFILE |
MINING BRINGS EMPLOYMENT, GROWTH TO CHIHUAHUA Chihuahua is a desert state with its primary cities spread
and isolated areas. One of the country’s biggest producers,
apart across its 246,865km . For its 3.79 million inhabitants, it
Chihuahua contributed 3.4 percent to national GDP and
presents the ideal blank canvas for mine operations. Mining in
mining accounted for 6.3 percent of the state’s contribution.
Chihuahua presents unique opportunities for those who would
One factor behind the state’s low unemployment rate is its
otherwise struggle to find employment, in rough terrains
mining industry, worth US$17.96 billion.
2
FINAL ASSEMBLY VS AUTO PARTS PRODUCTION (THOUSANDS)
TOTAL EMPLOYED POPULATION
POPULATION Younger than 15 years
1,043,992
15 years and older
2,2751,332
Economically inactive population
1,075,281
Economically active population
1,676,051
Employed
1,632,500
Unemployed
43,551
21
CHIHUAHUA’S GDP STRUCTURE 2016 (MX$ billion)
Total
Tertiary MX$320.67
3.1%
600
National
52,865,845
STATE FACTS
500
Chihuahua
• Land area: 246,865km2 • Population: 3,795,324 inhabitants
700
MX$646.14 billion
% OF PARTICIPATION ON AUTOMOTIVE INDUSTRY IN 2015 1,632,500
• Sector with biggest contribution to state GDP: manufacturing industry (31.1%)
400
Auto parts
DISTRIBUTION OFSecondary THE REGIONAL SUSTAINABLE DEVELOPMENT FUND 2 MX$283.33
terminal production
• Percentage contribution to national GDP: 3.4%
MX$200.68
Manufacturing industries
• 67 Municipalities
MX$18.2 Construction
18.2%
200
MX$17.96 Mining MX$13.2 Generation, transmission and distribution of electric energy, water and gas supply by pipeline
6.3% mining
300
4.7% 6.3%
70.9%
11% Mazapil
2% Sahuaripa
9% Cananea
2% Morelos
7% Nacozari de Garcia
2% Eduardo Neri Primary 2% Aquila MX$42.14
5% Fresnillo 4% Ocampo
2% Alamos
4% Caborca
1% Chinipas
2% Sierra2017 Mojada EMPLOYMENT BY SECTOR
contribution to state GDP (2016)
100
0
47% other
Source: CGM, Ministry of Economy 1 With figures to March of 2015
Unspecified 23,786 Extractive and electricity 25,950 478,772 Manufacturing Social services 124,235 Government and international 61,285 organizations Trade
PRODUCTION IN 2017
20,882.1
100,507
990,091
36,093
kg gold
kg silver
Construction 118,431 Restaurants and lodging services
tons zinc
tons lead
Source: INEGI, ProMéxico, Ministry of Labor, Ministry of Economy, National Association of Universities and Higher Education Institutions
102,280
Professional, financial and corporate services
90,940
Transport, communications, mail and storage 64,603
10,075
tons copper
274,623
Various services
128,705
Agriculture, livestock, forestry, 138,890 hunting and fishing 500
400
300
200
100
0
| VIEW FROM THE TOP
COMMITMENT, SUPPORT FOR SMALL MINERS CARLOS BÁRCENA Minister of Economy of the State of Zacatecas
22
Q: What are Zacatecas’ main priorities when it comes to
sectors. We are incorporating not only commercial banks
the mining industry?
into the scheme but also development banks to offer
A: We have three main priorities in the mining industry,
different financial models for projects. This helps because
including developing talent, supporting small miners and
commercial banks often require highly-detailed reports and
strengthening the local and regional supply chain. We have
specifications that small miners cannot provide when they
a long-term and ambitious vision for the sector but our
are just starting a project or small operation. On the other
first priority will always be to help the local and regional
hand, development banks are more flexible and may just
companies adapt to the changes in the industry.
ask for a deposit.
When it comes to talent, we created a one-of-a-kind
We collaborate with NAFIN, to build different strategies. We
program at the Zacatecas campus of the National
have also created trust funds for a project in collaboration
Polytechnic University to allow metallurgical engineering
with banks where, for example, for every MX$1 we invest,
students to get hands-on experience in both classrooms
a commercial bank invests MX$2. Everyone wants loans
and in mines. We greatly believe in training and preparing
at low rates and small deposits but that is not possible.
the next generation of miners.
We help by providing models either with a low rate and large guarantee or a high rate and a small guarantee to
The state is also prioritizing small mining businesses and
find an optimal middle point. We also offer a Silver Fund
we are collaborating with medium to large companies to
that provides a low rate and requires a deposit that is much
create more bridges and opportunities. We are helping
smaller than what commercial banks require. We have a
small miners identify areas of opportunity and even
technical committee and a validation system that can select
connecting them with financial tools. The state is closing
projects with potential.
agreements with FIFOMI to make sure that small miners have enough capital to develop projects and reactivate the
The state is also helping businesses complete their
state’s traditional mining districts.
paperwork so they have more success with the financial system. We must use collaborative schemes because
Our third focus is to strengthen the local and regional
mining projects are extremely capital intensive. If they only
supply chain to make sure it can meet the needs of medium
required MX$30,000 it would be much easier to give direct
and large miners. We are motivating local companies
loans without so many requirements.
and mining clusters to promote regional unity. We offer consulting and certification to make sure suppliers meet
Q: Why should mining companies invest in Zacatecas over
the industry’s requirements.
other states in Mexico? A: Our main differentiator as a mining state is the
Q: How is the state improving financial opportunities for
support we provide to small miners. Other states, such
the industry?
as Sonora and Chihuahua, have many more projects but
A: We can intervene by creating schemes that work for the
they do not have many small miners. While it is a risky
industry, as has been done for automotive and aviation
focus because many projects will not become a mine, we have had cases of success that have made important discoveries in the state and have been able to develop
Carlos Bárcena has been in the state government of San
them thanks to our support. We are following in the
Luis Potosi throughout his professional career. He promoted
footsteps of Hidalgo, which has been the only state in
the manufacturing industry in the Bajio region alongside GM,
the country to successfully implement a model that works
BBVA Bancomer, USAID and CONACYT
for small miners.
STATE PROFILE |
ZACATECAS STILL MEXICO'S SILVER TITAN Zacatecas mountain ranges hold significant deposits
Minerals, Minera Frisco, Industrias Peñoles, First Majestic
of gold, silver, copper and zinc, making the state’s 58
Silver and Pan American Silver.
municipalities one of the main mining regions in the country. With 2,263 standing mineral concessions in
Zacatecas holds 3.8 percent of Mexico’s land mass, 1.3 percent
2016, Zacatecas is divided into 18 mining districts, the
of its population and contributes 1.0 percent of GDP. The
most prolific being Fresnillo, Mazapil, Concepción del Oro,
mining industry is the biggest contributor to the state’s GDP,
Miguel Auza, Ojocaliente, Sombrerete and Zacatecas. As
accounting for 17.8 percent in 2016. The extractive activities
for exploration, 19 companies dominate the search for new
and electricity industries, including mining, employ 3.2 percent
deposits in the state, including Fresnillo, Goldcorp, Aura
of the economically active population in Zacatecas.
PRODUCTION (2017)
2,449,308
326,915
41,717
22,098.4
tons copper
17.8%
141,349
tons zinc
kg silver
tons lead
mining contribution to state GDP (2016)
kg gold
• Land Area: 74,451km2 • Population: 1,605,821 inhabitants
TOTAL POPULATION Younger than 15 years
460,856
15 years and older
1,143,965
Economically inactive population
490,256
Economically active population
653,709
• Percentage contribution to national GDP: 1.0%
Employed
636,725
• Municipalities: 58
Unemployed
16,984
• Capital: Zacatecas
• Percentage of national population: 1.3%
TOTAL EMPLOYED POPULATION
ZACATECAS GDP STRUCTURE 2016 (MX$ billion)
636,725
5,255 Unspecified 13,015 Extractive and electricity
Total Employed Population
75,747 Manufacturing
200
54,405 Social services
Tertiary MX$95.74t
36,675 Government and international organizations 111,182 57,907
Trade
Construction 150
36,642 Restaurants and lodging services 17,017 Professional, financial and corporate services 12,904 Transport, communications, mail and storage 54,889 Various Services Agriculture, livestock, forestry, hunting and fishing 0
50
100
161,087
150
MX$32.7
194 Agriculture, livestock and fishing
Mining
215.5 Construction
MX$20.1
288.3 Trade 323.3 Services for companies and individuals 383.9 Transport and communications 460.7 Social services 543.8 Extractive industries Electric and water industries 823.7
400
Sources: ProMéxico, INEGI
600
800
Manufacturing Industries
2.0% 23.6%
1,000
Construction
MX$1.4
Generation, transmission and distribution of electric energy, water and gas supply by pipeline
50 46.1%
MX$16.65
346 Transformation industries
200
100
250 Secondary MX$70.84
NATIONAL ESTIMATED AVERAGE SALARY BY SECTOR 2017 (MX$/d)
0
200
28.4% Primary MX$17.03
0
Total
MX$186.61 billion
23
| VIEW FROM THE TOP
DURANGO PIONEERS COLLABORATION BETWEEN PUBLIC, PRIVATE SECTORS RAMÓN DÁVILA Minister of Economy of the State of Durango
24
Q: What are Durango’s priorities when it comes to mining
A: This is an agreement that was signed in 2017 by federal
in the state?
agencies and the Ministry of Economy. It seeks to solve
A: The mining industry represents one of the most important
issues that companies are facing in the industry. If a security
economic activities in the state. Approximately 5 percent
matter exists, for example, we can use the agreement to find
of our GDP relies on the sector and we are developing
a solution. The idea is to promote collaboration between
strategies to ensure the continued growth of operations in
the private and public sectors to find the best solutions to
Durango. The Ministry of Economy acts as a facilitator for
problems. One of the first issues we dealt with through this
conflict resolution in social and environmental matters to
agreement was the delay in permit approvals, including
guarantee the continuation of projects and assure private
mining concessions.
sector companies that they can continue to invest in the state. We believe mining policies in Mexico are consistent
Q: What strategies does Durango use to successfully create
and have more stability than those in Canada, where each
agreements with the federal government?
province has its own policies. We have a national law that
A: It is essential to be direct and not only say what they want
all states follow.
to hear. We can solve many matters through collaboration. For example, Durango has small mining companies that
Q: How is the state taking advantage of the Mining Fund
still use mercury to process gold operations, which can
to advance social projects?
be a danger to the safety of miners, their families and the
A: The reality is that the adequate use of the Mining Fund
environment. We are developing a project to teach them how
lies in the hands of the government. Authorities must
to transition out of this chemical and recover gold in a more
prioritize the appropriate use of the funds. We have been
sustainable manner. The project requires a total investment
receiving capital from the fund since 2014 and have been
of MX$2 million. It is an example of a successful agreement
investing it directly into the communities. Our state has
signed with the Undersecretary of Mining a year ago.
used 100 percent of the funds because we prioritize its fast use to make sure it is being directed to the right areas. The
Q: What should the new administration prioritize when it
use of the fund is clearly indicated by the law and divided
comes to the mining industry?
into several priority segments, such as health, highways and
A: There are various areas the new administration should
education. The trick is to collaborate with mining companies
prioritize in the mining industry and in general when it
and communities to identify the main necessities and avoid
comes to boosting the country’s economic development.
just meeting the needs of the municipal leaders. A leader
Five years ago, the mining industry was in fourth or fifth
may believe a park is the most important project but the
place in revenue generation and now it is much lower. It is
community may be more in need of water infrastructure.
losing relevance but can gain back the importance it once
Constant communication clears up these doubts.
had. We need to revise mining regulations and concessions as well as access to capital.
Q: What results do you expect from the signed Coordination Agreement for Promotion of the Competitivity and
In Durango, we do not have enough resources to help
Productivity of the Mining Sector?
companies financially as the size of loans or capital we can provide is not sufficient to start new projects. Unfortunately, the mining industry is capital intensive and the state cannot
Ramón Dávila has been a leader of different business
provide this. Instead, we are using different strategies
organizations and has held important positions in the mining
to help small miners by offering training and facilitating
sector in companies such as Industrias Peñoles, San Luis
processes. The state has 200 small miners and their biggest
Corporation, Pan American Silver and First Majestic Silver
need is capital.
STATE PROFILE |
TAPPING INTO DURANGO'S WORLD-CLASS DEPOSITS While Durango only represents 1.3 percent of the
largest silver producer. Durango represents 11.7 percent
country’s GDP, it is one of the most important mining
of the national silver production and 9.2 percent of the
states of the country after Sonora and Chihuahua. The
total gold production. The Mining Fund also allocates 75
northern state encompasses over 100 projects with a
percent of its capital to Durango, Chihuahua, Zacatecas
population of only 1.755 million people. It is the fifth most
and Sonora, considering the role these states play in the
important gold producer in the country and the third
mining industry.
25
DURANGO’S GDP STRUCTURE 2016 (MX$ billion)
PRODUCTION IN DURANGO MUNICIPALITIES 2017 Gold (kg)
Municipality Canelas
Silver (kg)
Copper (tons)
Zinc (tons)
-
973
-
-
Cuencame
993.4
43,820
2,865
81,327
Guanacevi
335.2
70,157
139
448
-
5,373
-
802
22.2
53,809
-
1,794
1,673.8
150,593
-
-
217.1
41,940
1,871
150
Mapimi Nombre de Dios Otaez Panuco de Coronado San Dimas
1,394
98,827
-
-
San Juan del Rio
3,955
259
-
-
Santiago Papasquiaro
3,021.7
177,787
343
8,776
Tepehuanes
66.2
13,932
-
276
Topia
34.3
25,152
7
2,842
Total
300
MX$236.1 billion
250 Tertiary MX$139.9 200
150
Secondary MX$72.9
Mapimi
Guanacevi
Tepehuanes
Topia
Santiago Papasquiaro
100
50
Primary MX$23.3
Panuco de Coronado
0
San Juan del Río
4.94% mining contribution to state GDP (2016)
Canelas
Otaez
San Dimas
Cuencame
STATE FACTS • Land area: 124,258.50 km2
Capital: Durango
Nombre de Dios
kg gold
Source: CAMIMEX, ProMéxico
• No.1 in bentonite, marble and calcium carbonate production in Mexico • Percentage contribution to national GDP: 1.3% • 39 municipalities
PRODUCTION IN 2017
11,712.90
• Population: 1,755,000
682,622 kg silver
5,225
tons copper
96,415 tons zinc
| VIEW FROM THE TOP
GOVERNMENT ENHANCING MINING POTENTIAL ÁLVARO BURGOS Minister of Economy of the State of Guerrero
26
Q: What is the state Ministry of Economy’s plan for the
hub will develop highly qualified staff for the management
mining industry in Guerrero?
of mining machinery technology and for technical support.
A: Guerrero’s State Development Plan focuses on five axes:
It is ultimately intended to provide certainty and confidence
the relaunching of tourism, improvement of the physical
and to augment the attractiveness of investing in the state.
infrastructure, the agroindustry, the Special Economic
This would be an Institute of Technology specialized in
Zones (ZEEs) and the mining industry. Regarding mining,
mining and designed to boost the industry in Guerrero. The
Governor Héctor Astudillo is striving to make mining a
fundamentals of the project are already outlined and were
lever for the state’s development and to diversify our
presented to Governor Astudillo and Minister of Economy
economic dependency from tourism to an industry that
Ildefonso Guajardo. The next step is to introduce it to the
is significantly growing. The goal is to develop favorable
president and secure federal support.
conditions for investment in the state and to unlock the mining industry’s potential, given Guerrero’s significant
Our goal is to bridge the gap between local communities
mineral deposits.
and mining companies, which often becomes an issue when projects lack a community socialization approach.
As Guerrero strives to become a logistics hub,
The ministry encourages mining companies to prioritize a
communication with several government agencies is
social and environmentally responsible approach to their
crucial to better channel the resources into this endeavor
operations, working closely with local communities to help
and to create a thriving mining industry. We will knock on
them understand the benefits that these projects imply in
the doors of all the institutions needed to attract more
terms of job creation, wage increases and the development
investment to the state, such as FIFOMI, NAFIN, CONACyT
of productive initiatives within the communities. Regarding
and the Ministry of Education.
the latter, we are supporting the creation of other means of subsistence for miners’ families so they can diversify their
Q: What is the missing ingredient that will help Guerrero
income and have a better quality of life. For example, we
unlock its mining potential?
are promoting the ability to farm and to breed animals,
A: The promotion of Guerrero’s mining potential and
among other professions that can be carried out in often
related advertising is insufficient. We need to enhance
remote communities.
our participation in national and international forums so we can turn investors’ gaze to our state and help them
Q: What is the role of the mining cluster in strengthening
understand that big mining companies, such as Torex
the industry in Guerrero?
Gold and Alio Gold, are succeeding and growing while
A: The Guerrero Cluster was formalized a year ago.
working with us. We also have two key projects by Peñoles
The ministry is closely working on promoting a deeper
and by Alio Gold’s Ana Paula mine that are examples for
association between mining companies, fostering a
investors of the positive investment opportunity Guerrero
permanent and strong communication channel with the
offers. To better broadcast its mining potential, we also
state’s government. We believe it is vital to have optimum
want to build a technological hub for training and research
coordination and to maintain an open dialogue with local
regarding innovation for mine operations. This innovation
and municipal governments. Also, our goal is to have the mining cluster work with SMEs as suppliers, so entrepreneurs from Guerrero can grow and strengthen, consolidating their
Álvaro Burgos has prioritized the mining industry in the state,
position in the value chain and promoting more investment
taking advantage of its great potential and resources during
and the creation of new jobs. This will make the state more
his time as Minister of Economy of Guerrero. Burgos also
attractive for an industry that has huge potential, thus the
serves as Technical Secretary of the Guerrero Mining Cluster
government’s intention to enhance it.
STATE PROFILE |
GUERRERO’S GOLDEN COMEBACK A state that has been hiding in the shadows may turn
Sonora holds the number one position in Mexico’s gold
out to be what Mexico needs to raise its levels of gold
production but Guerrero is slowly starting to catch up
production. But the state has experienced bumps on the
to Sonora as in 2016 it produced 15,215kg of gold, a 70
road as security issues scared away operators in the past
percent rise from the 8,972kg in 2015. Between 2017 and
and halted projects such as Campo Morado, previously
2020, CAMIMEX predicts that companies will invest over
owned by Nyrstar and acquired by Telson Resources.
US$2.5 billion in the state's gold projects.
27
PRODUCTION (2017)
GUERRERO’S GDP STRUCTURE 2016 (MX$ billion)
26,922
15,143.20
300
kg silver
kg gold MAIN PROJECTS
Tertiary MX$203.5
4.12
250
million gold ounces El LimónGuajes Torex Gold
Aurora mine Minera Camargo and Alphamin Resources
200
7.40
150
million silver ounces
Media Luna Torex Gold
100
5.70
3.65%
million gold ounces
mining contribution to state GDP (2016)
Secondary MX$50.1
50
Los filos Leagold Primary MX$15.3
MUNICIPALITIES ON GUERREROS GOLD BELT
Total
Cocula
Teloloapan
0
MX$268.9 billion Capital: Iguala
Arcelia Cuetzala
Tepecoaquilco
Eduardo Neri • Land area: 63,596km2 • Population: 3,533,251 inhabitants • Strategic sectors: Agroindustry, tourism and mining
PRODUCING MUNICIPALITIES IN 2017 (kg) Gold
Silver
Cocula
Municipality
9,027.1
21,421
Eduardo Neri
6,116.1
5,501
• Percentage contribution to national GDP: 1.4% • 81 municipalities
Source: CAMIMEX, Torex Gold
| ROUNDTABLE
28
HOW IS GEOPOLITICS AFFECTING MINERS AND HOW CAN THEY HEDGE AGAINST VOLATILITY?
Late 2016 brought a wave of geopolitical uncertainty with a series of shocks, first with the UK’s decision to leave the EU, then the election of Donald Trump as President of the US. This volatility continued over 2017 through the NAFTA renegotiations and trade wars, and has crept into 2018 with the Mexican presidential elections won by wildcard candidate Andrés Manuel López Obrador. Even though mining thrives on uncertainty, secondary factors such as regulatory and trade clarity are affecting profitability for miners. Mexico Mining Review asked industry leaders what effects have been felt so far and what are they doing to protect themselves against future shocks.
I personally think that the industry is pretty well-positioned. I would say that in 2011, when metals prices were at their peak, the industry got rather lazy. But then as prices for silver and gold declined over the ensuing years, the industry was forced to address some of those areas where it was a little bloated. Costs were reduced, marginal mines were either shut down or sold and balance sheets were really improved. In 2011,
MITCHELL KREBS President and CEO of Coeur Mining
companies were pursuing growth at all costs without financial discipline in terms of capital allocation and ROI. But now I think the industry has a much sharper focus on true profitability and returns to shareholders. I feel the industry now is in a much better position. Silver and gold prices have stabilized and strengthened. US$1,350/ oz is a very attractive price for the industry and underpinning this is exchange rate volatility, debt levels, geopolitics and supply set to further decline.
The new administration should take into consideration how countries like Australia have found a model that works for companies, the environment and the communities that live near the mine operations and production processes. Prices are created by global demand and companies need to make sure their costs are as low as possible and productivity as high as possible to withstand any type of volatility. Technology,
DONALD SMALLWOOD President of ANZMEX
best practices and environmental and community considerations are all necessary elements for a longer term profitable and sustainable industry. Australia and New Zealand are leaders in these areas. We believe that Mexico can learn from the sharing of such programs as the industry moves forward.
Legal certainty is a critical factor. In other mine jurisdictions, Tax Certainty Contracts guarantee miners that the government will maintain a steady tax regime during the time a company is investing in and operating a mine. I think these could be very beneficial to foster investment in Mexico. Also, the closing process and miners’ obligation to restore land to its previous condition need to be reconsidered. Mining companies have
MARIO HERNÁNDEZ Lead Partner IMMEX Segment at KPMG in Mexico
to make this ecological recovery investment after the mine has closed and they are no longer receiving returns from it. This does not make any accounting sense, as this expense is not deductible during the mine operation because it has not been paid, and when it finally is, the company is no longer receiving income from the mine. This payment should follow the model of a pension fund. Companies would pay a certain amount to a trust fund for the closing of the mine, which could be tax-deductible.
I cannot predict gold prices, which is why we try to work with quality projects that can withstand the price movements. When we acquire projects, we factor in the volatility of the metal price for that reason – gold prices are unpredictable. Right now, we are in cash conservation mode until there is a clear picture of the next president's and the new governor of Veracruz's goals for the industry, but we will reinitiate operations when the timing is right. But there is a big change going on in Europe and Canada, where there are rumblings of big banks cutting back on their research platforms. That will be a shakeup for the market, and potentially
RAMON PÉREZ President and Director of Candelaria Mining
the BIVA has arrived at an opportune time.
29
Volatility around the world is benefiting metal prices as well as funds in various stock exchanges. However, the country also needs to take into consideration the possible impacts of the 2018 presidential elections on investment and the exploitation of mineral resources in Mexico. The mining industry faces some of the strictest and highest fiscal requirements at a municipal, state and federal level in comparison to other sectors. This affects the country’s competitivity as mining companies can pay less taxes in other jurisdictions. One challenge is to reduce financial requirements
HÉCTOR HERRERA Partner at Haynes and Boone
for the BMV and reduce the cost of participation. The appearance of a new stock exchange in the market, BIVA, is a good option for the industry.
The first challenge is cost reduction. This remains a priority as volatility in mineral prices continues to push companies to be more efficient with their capital and operational models. The second biggest challenge is the tax regime. Mexico represents about 2-3 percent of the global mining industry, but it has a large amount of potential to grow as the country is rich in minerals. Many regions have still not been explored and this is one of Mexico’s main advantages. The country would be able to better seize this abundance if problems such as insecurity and disrespect for the law were solved. Mexico also needs to improve its logistical infrastructure to enhance exportation and importation.
ADOLFO CALATAYUD Lead Partner in Mexico and Latin America at PwC
I think NAFTA is a very relevant issue to consider. Politically the treaty is useful as it allows us to access the US and Canadian markets but renegotiations need to consider that Mexico does not have the same living conditions as the US or Canada. We must strive to gradually diminish the gap between NAFTA members. It must be gradual because many foreign investors chose to come to Mexico for the low wages, so we cannot suddenly increase them to regional parity as this could impact investment in the country. We cannot risk bringing about more unemployment. Also, the higher the profits we make, the more income tax increases, which can lead to high inflation rates.
CARLOS PAVÓN General Secretary of the National Union of Miners and Metallurgists (SNMM)
I think it is important to see opportunities. We do not know what will happen with NAFTA but from what I am hearing right now, negotiations are going relatively well, and we are optimistic about it. For us, the companies listed on the BMV are so diversified in terms of sectors, sizes and business segments that the impact of geopolitical uncertainty has been much less intense in Mexico. I think that Mexico, just like the other two countries in the agreement, needs to see the renegotiation of NAFTA as an opportunity to turn to other markets. Mexico does not only have NAFTA, but also a great number of free trade agreements with other countries, even though the majority of trade is focused on the North American region.
JOSÉ-ORIOL BOSCH CEO of BMV Group
San Dimas mine, Durango
GOLD
2
Unstable global financial markets and geopolitical events caused investors to seek refuge in gold this year. This is good news for Mexico as it continues to play a leading role in world gold production, contributing 4 percent of the global output, or 104.4 million ounces in 2017. Sonora holds the limelight in terms of national production for the yellow metal while Guerrero is starting to rise thanks to its strong pipeline of projects. But given the lack of deductibility for exploration expenses, the key question remains: How can Mexico’s pipeline for gold projects be further strengthened so the country can remain among the international leaders in the long term?
This chapter offers insights on the continued impact of international events on bullion prices and Mexico’s reaction in this context. It will shine the spotlight on the country’s most important gold mine sites and highlight the key strategies operators are using to maintain their top positions.
31
CHAPTER 2: GOLD 34
ANALYSIS: Gold to Keep Its Shine Despite Fumble
35
TREND SPOTLIGHT: Gold And Cryptocurrencies, Friends Or Foes?
36
MAP: Mexico's Main Gold Mines
41
VIEW FROM THE TOP: Rob McEwen, McEwen Mining
42
VIEW FROM THE TOP: Ian Telfer, Goldcorp
43
VIEW FROM THE TOP: César González, Marlin Gold Mining
44
INFOGRAPHIC: Gold Production: the Bull Stirs in Mexico
46
INSIGHT: John Mccluskey, Alamos Gold
47
VIEW FROM THE TOP: Peter Dougherty, Argonaut Gold
49
VIEW FROM THE TOP: Salvador García, Starcore International Mines
50
PROJECT SPOTLIGHT: A Closer Look at Improving Mine Operations
52
INSIGHT: Ramón Pérez, Candelaria Mining
53
VIEW FROM THE TOP: David Wolfin, Avino Silver & Gold
56
VIEW FROM THE TOP: David Jones, Minaurum Gold
57
INSIGHT: Joanne Freeze, Candente Gold
58
INSIGHT: Rodrigo Barbosa, Aura Minerals
59
VIEW FROM THE TOP: Jason Reid, Gold Resource Corporation
60
ROUNDTABLE: How is the Rise of Blockchain Affecting Gold’s Safe-Haven Status?
33
| ANALYSIS
GOLD TO KEEP ITS SHINE DESPITE FUMBLE Gold sailed into 2018 on the coattails of a 12 percent yearly price increase on the previous year, the strongest gain since 2010. But softer demand and a stronger dollar helped diminish the yellow metal’s appeal, keeping prices in a tight band through the first nine months of the year
34
After moving in a narrow range between US$1,354.95/
expand their portfolios and merge with other players to
oz and 1,307.75/oz in 1Q, the yellow metal launched a
keep shareholders happy.”
downward trend, hitting an 8-month nadir on August 17 at US$1,178.40/oz. By the middle of September, gold had
THE GOLDEN STATES
settled into a tight band between that low and US1,201.90/
Three operators produced 42 percent of the gold in Mexico
oz. The World Gold Council in its midyear outlook for 2018
in 2017: Fresnillo, Goldcorp and Agnico Eagle. The state
cited the strengthening of the US dollar as trade wars
of Sonora was the main gold producer with 33 percent.
spurred flows into the greenback and weak demand as
Production increases were registered in Alamos’ Mulatos
concerns for the metal. Demand of 973.5 tons in Q1 was
mine, First Majestic Silver’s Santa Elena Project, Alio Gold’s
the lowest since 2008, it said. US President Donald Trump’s
San Francisco, Agnico Eagle’s La India, and the La Herradura
nationalistic policies since entering the Oval Office have
and Noche Buena projects, both owned by Fresnillo.
been among the movers of the dollar, and as a result, gold. Yet, many insiders remain optimistic.
Peñasquito was the biggest national producer, although its output dropped compared to 2016 to 476,000 ounces. La
“US President Donald Trump could probably drive the price
Herradura was the second-biggest producer with 473,600
of gold pretty easily in the case of a major international
ounces and Torex’s El Limón-Guajes mine in Guerrero
crisis, and there is a modest to good chance of that. Also,
produced 240,900 ounces to take third place, despite a
Republicans in the US are showing no inclination to curb
blockade that began at the end of the year.
spending, so I expect the price of gold either to remain stable or go high, but it is very unlikely it will go down,”
The biggest challenge for the industry, according to Ian
says David Jones, Director of Minaurum Gold.
Telfer, Chairman of the Board at GoldCorp, is finding more gold. “This is a global issue as production at major gold-
MAINTAINING MEXICO’S SHINE
mining companies is either flat or declining,” he says. “The
In 2017, gold represented 32 percent of the country’s mining
price of gold will have to go a lot higher to catalyze the
production value. Its closest contender was copper with
next big round of gold discoveries.”
22.3 percent. The yellow metal also 44 percent of regional exploration spending.
RAMPING UP FOR 2018 For 2018, higher production is expected due to significant
Globally, M&As related to gold mines decreased in 2017
advances in Fresnillo’s portfolio. One of the most eagerly-
by 34 percent to a value of US$7.3 billion. Among the
anticipated projects is MAG Silver JV Juanicipio in Zacatecas,
biggest gold deals in Mexico was Goldcorp’s sale of Los
which is expected to produce 30,000oz/y of gold. The
Filos in January 2017 to Leagold for US$438 million. Others
prolific project is scheduled for 1H20 with a total investment
included Agnico Eagle’s US$80 million acquisition of Santa
of US$305 million. After a challenging 1H18 marked by a
Gertrudis from GoGold in November and Argonaut Gold’s
blockade at neighboring El Limón-Guajes, the Media Luna
purchase of the Cerro del Gallo project in Guanajuato, once
owned by Torex Gold is scheduled to begin its feasibility
part of Primero Mining’s portfolio.
study for 1H19, with a possible start-up in 2022; it will produce 170,000oz/y of gold and has a price tag of US$482 million.
RB Abogados assisted with the Argonaut-Primero deal, as well as First Majestic Silver’s acquisition of Primero’s
Likewise, other projects continue with advanced exploration
flagship San Dimas property. The law firm’s Founding
works, including McEwen’s El Gallo II in Sinaloa Chesapeake’s
Partner, Enrique Rodriguez del Bosque, sees appetite
Metates project in Durango, First Majestic’s Plomosas in
returning to new acquisitions after three years of cost-
Sinaloa and Corex Gold’s Sonora Santana project. In Durango,
cutting measures. “Thanks to the current financial climate
Telson Resources received the construction permit at the end
and the rise in prices, M&A deals in the industry are starting
of 2017 and started commercial pre-production in May, a
to pick up again,” he says. “Companies are looking to
project that is estimated to reap 16,000oz/y of gold.
TREND SPOTLIGHT |
GOLD AND CRYPTOCURRENCIES, FRIENDS OR FOES? In March 2017, the value of bitcoins surpassed the price of
find unique ways to collaborate through gold-backed
gold by breaking the US$1,200 benchmark. For the first time,
cryptocurrencies. “The growth of the cryptos is a vivid
debate emerged over its potential to replace the precious
illustration of how much speculative money exists around
metal as a safe haven for investors. “Cryptocurrencies are
the world,” says Rob McEwen, Chief Owner of gold operator
attractive because some people worry about currency risks
McEwen Mining. “This is a product of massive monetary
inherent to sovereign currencies,” says Trevor Turnbull,
expansion, low interest rates globally and the disruptive
Director of Gold and Precious Metals Global Equity
nature of the digital world.”
35
Research at Scotia Capital. To take advantage of the appeal of cryptocurrencies, For the mining industry, it is difficult to predict whether
Tradewind Markets, a technology provider supported by
Bitcoin will bolster gold or undermine its value. Several
Sprott, Goldcorp and IEX, launched a digital gold trading
experts have indicated that a negative relationship exists
platform in March 2018. It relies on Vaultchain blockchain
between gold and Bitcoin. “Toward the end of last year,
technology that offers an unbreakable record of transactions
we started to notice that correlation turned at least mildly
and account balances. Is additionally backed by the Royal
negative,” RBC Capital Markets analyst Chris Louney told
Canadian Mint, which is providing storage for physical gold.
CNBC in February 2018. If a negative correlation does exist between gold and Bitcoin, it could be one of the factors
HOW DOES THIS IMPACT MEXICO?
behind gold’s stagnation in the last year, with prices
Mexico is the world’s eighth largest producer of gold.
struggling to break through the US$1,300/oz ceiling.
After a prolonged dip, BMI Research predicts that Mexico’s mining industry will be among the Latin American countries
There have even been suggestions that Bitcoin will
to experience one of the fastest recoveries, with gold
eventually replace gold entirely as a store of value. John
projected to make up 34.1 percent of the country’s total
Pfeffner, Partner at UK-based Pfeffer Capital said at the
production, according to CAMIMEX. Although silver is
Sohn investment conference that if Bitcoin displaced just
king, Mexico is also a gold country, with much unexplored
25 percent of foreign reserves, the total worth of the Bitcoin
territory over the Guerrero gold belt.
network would be around US$6.4 trillion. In comparison, the World Gold Council says the value of all gold ever mined is
Octavio Alvídrez, CEO of Fresnillo says that, while
about $7.8 trillion. “Bitcoin is the first viable candidate to
cryptocurrencies could have several applications, they
replace gold the world has ever seen,” says Pfeffner. “So, if
would never replace gold. “Gold, from ancient times to now,
Bitcoin becomes the dominant nonsovereign store of value,
has been an indisputable store of wealth and also a way
it could be the new gold, or new reserve currency.”
to hedge against geopolitical volatility and inflation. It is a well-regulated and established market,” he says. “Gold has
MINERS ADOPTING BITCOIN
a well-established role in the market while cryptocurrencies
Although this seems like bad news for gold miners, the
still have to be regulated and understood to compete with
mining industry seems positive about the possibility to
precious metals.”
GOLD VS BITCOIN (US$)
——Gold (oz)
1,227.24
8,917.88
900
6,613.56 July
300
Aug
May
1,200
600
June
April
Feb
Jan
March
9,843.65
1,293.3
1,317.18
15,527.8
1,293.52 Dec
Nov
6,778.17
4,401.4 Oct
Sept
Aug
2,583.05 July
June
1,495.62 May
April
1,197.68 March
Feb
985.24 Jan
Dec
710.09
——Bitcoin
Nov
Oct
Sept
Aug
615.24
661.56 July
June
May
0
452.79
10,000
5,000
1,500
2018 1,338.16
1,200.45
1,197.47
1,223.83
1,228.26
2017 1,317.04
1,332.91
1,260.55
15,000
2016
1,219.21
20,000
0
Source: Kitco, Coindesk
| MEXICO'S MAIN GOLD MINES
3
5 6
4
8 7
9
10 12
11
13 14 15
36 18 17
16 19
20 21 24 22 23
25
27
26 28 30 31
34
32 33
36
35
2 1 29
40
39
44
World Class Deposits Production Development Advanced Exploration Under Review Exploration Source: SGM, company websites
37
37
38
41 42
43
51 45 49 47 50 46 48
52 53
| MEXICO'S MAIN GOLD MINES Number
38
Name
Company
Stage
State
1
Los Cardones
Invecture Group
Development
Baja California Sur
2
San Antonio
Argonaut Gold
Development
Baja California Sur
3
La Herradura
Fresnillo
Production
Sonora
4
Noche Buena
Fresnillo
Production
Sonora
5
Soledad-Dipolos
Fresnillo
Production
Sonora
6
Mina de Julio/Santa Elena
Mexus Gold
Development
Sonora
7
San Félix
Mexus Gold/MarMar Holding
Development
Sonora
8
Lluvia de Oro/Columbia
Metallōrum Holding
Production
Sonora
9
Cerro Colorado
Goldgroup
Production
Sonora
10
San Francisco
Alio Gold
Production
Sonora
11
Santa Gertrudis
GoGold
Production
Sonora
12
El Chanate
Alamos Gold
Production
Sonora
13
Cerro Prieto
Goldgroup Mining
Production
Sonora
14
Mercedes
Premier Gold Mines
Production
Sonora
15
Santa Elena
First Majestic Silver
Production
Sonora
16
La Colorada
Argonaut Gold
Production
Sonora
17
La India
Agnico Eagle
Production
Sonora
18
Mulatos
Alamos Gold
Production
Sonora
19
San Francisco
Alio Gold
Production
Sonora
20
Ocampo
Minera Frisco
Production
Chihuahua
21
Concheño
Minera Frisco
Production
Chihuahua
22
Pinos Altos
Agnico Eagle
Production
Chihuahua
23
Monterde
Invecture Group
Development
Chihuahua
24
Orisyvo
Fresnillo
Under Review
Chihuahua
25
Don Román
Firma Holdings
Development
Sinaloa
26
San José de Gracia
Dyna Resource
Production
Sinaloa
27
Charay
Rose Petroleum
Production
Sinaloa
El Gallo mine, Sinaloa
Number
Name
Company
Stage
State
28
El Gallo
McEwen Mining
Production
Sinaloa
29
La Trinidad
Marlin Gold
Production
Sinaloa
30
La Fortuna
Minera Alamos
Advanced Exploration
Durango
31
La Ciénega
Fresnillo
Production
Durango
32
Metates
Chesapeake Gold
Development
Durango
33
San Dimas
First Majestic Silver
Production
Durango
34
El Castillo
Argonaut Gold
Production
Durango
35
Bacis
Minera Bacis
Production
Durango
36
Velardeña
Industrias Peñoles
Production
Durango
37
Camino Rojo
Orla Mining
Development
Zacatecas
38
Pinos District
Candelaria Mining
Development
Zacatecas
39
Mina Real
Rochester Resources
Production
Nayarit
40
El Porvenir
Minera Frisco
Production
Aguascalientes
41
Cerro del Gallo
Argonaut Gold
Development
Guanajuato
42
San Martín
Starcore International
Production
Queretaro
43
Caballo Blanco
Agnico Eagle/Candelaria Mining
Development
Veracruz
44
Tepal
Geologix Exploration
Development
Michoacan
45
Campo Morado
Telson Resources
Pre-Production
Guerrero
46
El Limón-Guajes
Torex Gold
Production
Guerrero
47
Ana Paula
Alio Gold
Development
Guerrero
48
Los Filos
Leagold
Production
Guerrero
49
Rey de Plata
Industrias Peñoles
Development
Guerrero
50
Media Luna
Torex Gold
Development
Guerrero
51
Cerro Jumil (Esperanza)
Alamos Gold
Development
Morelos
52
Altagracia
Gold Resource
Production
Oaxaca
53
El Águila
Gold Resource
Production
Oaxaca
39
40
VIEW FROM THE TOP |
FOUR STEPS TO MITIGATING RISK ROB MCEWEN Chief Owner at McEwen Mining 41
Q: How are companies reacting to the end of the
A: At El Gallo, we are asking the regulators to amend
market downturn?
our permit for a new processing plant to fill the pits we
A: In the last 77 years, there have been eight bear market
have created by mining with mine tailings. This would
cycles in gold equities. The last one was one of the longest
be a much more attractive method of dealing with
and deepest bear markets of the eight and it ended in
tailings. While there are few examples of this method
January of 2016. Since then we have entered a bull market
in Mexico there are about 40 of these in Australia. If we
that will take time to develop. It is important to note
can successfully get this permit approved by regulators
that four of the six preceding bull markets, over the last
and silver prices rise to US$18/oz, we will go forward and
75 years, experienced a gain of over 600 percent from
build this project
bottom to top. Today, we are up 100 percent from the bottom and there exists a 67 percent probability, based
Q: What approach does McEwen use to acquire
on the past bull markets, that prices of gold equities
new projects?
could triple from here. I believe it is an opportune time
A: Our approach is opportunistic. We like to buy assets that
to buy gold equities.
are unloved by the market. While a distress asset purchase will guarantee more work, the low purchase price limits the
The senior gold producers took on too much debt prior to
downside and offers good upside potential. For example,
the downturn in the price of gold and have been trying to
our recently acquired Black Fox complex was originally
reduce their debt by aggressively selling assets. As a result,
purchased by Primero Mining in 2014 for US$300 million
most of these companies now have declining production
along with the assumption of US$140 million in liabilities.
profiles. In an attempt to restore their growth profiles,
Then Primero invested US$120 million bringing its total
a number of the seniors are reaching down market and
investment to US$560 million. We bought it for US$35
buying junior companies with advanced stage exploration
million, which was equivalent to paying 6 cents for every
and development projects. As the bull market continues,
dollar it had invested. It came with over 1 million ounces in
this buying activity is likely to increase. At the same time,
resources, annual production of 40-50,000 ounces of gold
the intermediate and junior companies have positive
however with a short mine life, an operating mill with excess
production profiles and I believe they will deliver superior
capacity, numerous exploration targets and a US$190
share performance relative to the senior producers.
million tax pool, which means we can shelter US$190 million of future profits.
Q: How does McEwen mitigate the risk of an inherently cyclical industry?
Q: Where would you like the company to be positioned
A: Understanding that mining is a cyclical business is the
in the long term?
first step in mitigating risk. The second step is to reduce
A: To earn a place in the S&P 500 index is our goal.
one’s exposure to changes in government behavior. At
We believe there is a clear and important competitive
McEwen Mining, to build a mine we need to see a projected
advantage given to companies in the S&P 500. Such as a
minimum after-tax internal rate of return of 20 percent and
stronger share price, better trading liquidity and greater
a payback period of three years or less. Third, geopolitical
access to the biggest single capital in the world.
considerations factor high in where we want to invest and fourth, we are attracted to distressed assets and those unloved by the market where the entry price is lower.
McEwen Mining is a growing gold and silver producer in the Americas. Its principal assets are located in Argentina, Nevada
Q: How is McEwen mining innovating the operational
and Ontario, and the company owns a 100 percent stake in El
models of its projects?
Gallo I and II in Sinaloa, Mexico
| VIEW FROM THE TOP
GOLD GIANT STREAMLINES GROWTH TRAJECTORY IAN TELFER Chairman of the Board at Goldcorp 42
Q: What is your perception of the global mining industry
issues and land ownership uncertainties and conflicts. These
and what role does Mexico play in this context?
conditions have the ability to slow down Mexico’s growth as a
A: The global mining industry is in pretty good shape,
gold mining country. That being said, companies like Goldcorp
particularly when it comes to costs and finance. Most mining
have found great success in Mexico. In general, the situation
companies are able to make a profit thanks to positive metal
is not bad and miners can continue to search for gold, build
prices. But the biggest challenge for the gold industry is
mines, operate and find human capital in the country.
finding more gold. This is a global issue as production at major gold-mining companies is either flat or declining. The context
Q: What is Goldcorp's growth strategy?
is causing speculation about whether all the gold has already
A: When a company becomes increasingly larger, as Goldcorp
been found or whether insufficient investment has been made
has, the size of the mines required to really make a difference
to find it. It is becoming increasingly harder to find high-grade
to shareholders becomes equally as big. We had five mines
ore mines. The price of gold will have to go a lot higher to
in Mexico, but as we grew, we had to sell the mines that were
catalyze the next big round of gold discoveries.
growing at slower rates. We are focusing on Peñasquito given its scale and the shareholder value it generates for Goldcorp.
Q: As the eighth-largest gold producer in the world, what
We would like to grow by finding two or three additional
does Mexico need to do to strengthen its position and
mines that have characteristics similar to those of Peñasquito.
place itself among the Top 3? A: Many of the problems that Mexico faces are common to
Q: How can the industry take advantage of alternative
gold-rich jurisdictions around the world, including security
sources of energy to increase sustainability? A:The sector is working hard to reduce energy and water use as part of its ongoing improvement, partially to keep costs
Goldcorp is a world-class gold producer that operates and fully
down and for the benefit of the environment. Improvements
owns Peñasquito in Mexico, a large-scale operation that plays a
in these areas can also have significant positive impacts on the
key role in the company’s revenue and growth plans. The project
communities where we operate. For example, some plants in
has a proven and probable gold reserve of 8.95 million ounces
Mexico recycle tires, turning them into diesel fuel.
VIEW FROM THE TOP |
RESTRUCTURING TO CONSOLIDATE IN FRAGMENTED MARKET CÉSAR GONZÁLEZ Vice President of Corporate Development at Marlin Gold Mining 43
Q: What is your view of gold prices and how do you expect
the gold. We have a very large land package so if we spend
the price to trend?
a lot on exploration, I am sure we will find something else.
A: Marlin Gold is a little unique because it is a portfolio
But Nicaragua brings to the table a fully-permitted, high-
company of a hedge fund called Wexford Capital. Wexford
grade project that can be brought online for an investment
invests in many different assets including stocks, bonds,
of roughly US$30 million.
commodities and private businesses. We have a very favorable
uncertainty, like the uncertainty we see coming.
Wexford owns 85 percent of Marlin’s shares. In the merger with Golden Reign, Marlin will own 45 percent, of which 38 percent will belong to Wexford
Gold is the dog and silver is the tail; the tail never wags
In terms of autonomy, Wexford owns 85 percent of
the dog. When gold went up, silver went up more and
Marlin’s shares. When we merge with Golden Reign, Marlin
when gold dropped, silver dropped more. Silver also has
shareholders will own about 45 percent, and of that 45
an industrial component in that it is used in electronics and
percent Wexford will own about 38 percent. That is still a very
solar panels, so it has slightly different properties than gold.
large percentage. Marlin officers will no longer be involved in
We think gold will eventually break out to the upside, but
the day-to-day management but we will represent the largest
until that happens, there most likely will be little action in
shareholder on the board. We are happy to have been given
silver. We are convinced the move will be amplified in silver
this opportunity for sustainability because ultimately the
but we do not read too much into the ratio itself.
market has not yet turned around. This downturn has lasted
view of gold and silver given our view of global monetary policy. We think that central banks around the world have overstepped their boundaries concerning rate policies and quantitative easing. As a result, markets have been distorted and at some point, there will be an unwind of this distortion. Gold tends to do very well in environments where there is
almost seven years and we are lucky that we have the backing Q: You have doubled your investment in equipment and
of Wexford and we will survive this, even if the downturn lasts
mines compared to last year. How will this position you to
another two to three years.
strengthen operations going forward? A: I wish I could say that the investments we have been
Q: How are you planning to capitalize on the mineral wealth
making have been for growth. But in Sinaloa our investment
in La Trinidad and what are the further plans for that deposit?
was largely for the removal of waste to be able to access
A: We have about 120,000ha surrounding our small pit and
the remaining ore. We have, however, been making growth-
there are gold and silver showings everywhere. We need to
oriented acquisitions. From Santacruz Silver we acquired
build some basic infrastructure to access many of these areas.
the Gavilanes exploration project located in Durango, right
When our mine in Nicaragua is in production and we have
next to San Dimas. Apart from Gavilanes, we acquired a
cash flow, we may spend a considerable amount of money
project in Arizona and we are in the process of merging with
looking into exploration in both Nicaragua and Mexico. We are
Golden Reign, which has a project in Nicaragua. We see the
also open to JVs for prospects in these jurisdictions.
Nicaragua market as a window of opportunity right now. Q: How will the merger with Golden Reign impact your
Marlin Gold Mining is a growth-oriented gold and silver mining
business and what value did you see in this transaction?
company focused on the Americas. The company owns three
A: The value is that the company will now have longevity. At
properties located in Mexico and the US and a portfolio of
our Mexico mines particularly, we have mined out most of
royalties. Its priority is to profitably operate its La Trinidad Mine
| INFOGRAPHIC
GOLD PRODUCTION: THE BULL STIRS IN MEXICO 3 MACRO TRENDS THAT WILL INFLUENCE BEHAVIOR OF GOLD IN 2H18 ACCORDING TO THE WORLD GOLD COUNCIL
As gold prices continue to rise, Mexico remains the 9 th biggest producer of the precious metal followed by South Africa, Indonesia and Peru. The drop in production was
1. Rising but unequal global economic growth
influenced by blockades in Guerrero in Los Filos and El Limón-Guajes as well as lower production levels in San Dimas, La Ciénega and Guancevi in Durango and La India and La Herradura in Sonora. But the promising pipeline of projects to start production in the coming years could
2. The impact of trade wars on currency
paint a better picture in the short and medium term for gold producers in the country. There are investments in the new Pyrite Plant for Saucito and Fresnillo and the second
3. Growing inflation and an inverted yield curve
Lixiviation Plant in La Herradura, among others. On a macro level, physical demand for gold increased for the first time in four years thanks to more industrial demand and growth in the fabrication of jewelry.
MAIN GOLD PROJECTS AND MINES PROJECTED TO 2022 IN MEXICO (million ounces)
*2019Terronera Endeavour Silver
(*Expected production date)
9M $6
172 ,30 0o z
Sonora
s
30 M
illion
*2022Centauro Deep Fresnillo
z 0o
0 ,0
%
13
47 6, 00
0o z
US .M
55
$1
11.3
on
illi
$ US
4 US$
n
llio Mi
n
illio
20 m
Source: CAMIMEX, GFMS, Thomson Reuters, World Gold Council
Palmarejo Coeur Mining
*2020Juanicipio FresnilloMAG Silver
Million
Dolores Pan American Silver
oz
Pinos Altos-Crestón Mascota Agnico Eagle Mines
z 0o 50
US
US$1
Za ca te ca s
te aca
11,
M
Z
Holding
65,00 0oz
4% 17. ca
US$305.0
*2022-Orisyvo Fresnillo
50 $3
ue 11.9 rre % ro
San Félix Mexus Gold-MarMar
0 ,00 140
n
o illi
oz 36,000
million ounces of gold produced in Mexico
z 30,000o
oz 00 ,0 6 13
Limón-Guajes Torex Gold
4.08
G
z 00o uahua 240,9 ih h C
*2018La Herradura Dynamic Lixiviation Plant Fresnillo Million $ S U 110
S
11.7
a or on
Los Filos Leagold Mining
z 0o z 0 0o ,0 20 0 , 1 16 10
3%
191,200oz
hers Ot %
o
La India Agnico Eagle
. 33
170,900 oz
0
ihuahua Dur Ch a 16.5% 9.2 ng
ion
100
121, 600 oz Guerr ero
Mill
200 z o 0o 20 alisc 13, J
15 ,0 00 oz 35 ,00 0o z 16,0 00o Duran z go
*2022- US$48 2 Million Media Luna Torex Gold
Mulatos Alamos Gold
300
n
32.2
Noche Buena Fresnillo
illio
*2018-Tahuehueto Telson Resources
US$
400
US
*2019La Ciénega (expansion) Fresnillo U S$ *201855 San Sebastián M (expansion) ill io n Hecla Mining
La Herradura Fresnillo
500
473,6 00oz
Top Producing Gold Mines 2017 • Top New Gold Projects
22 9, 20 0o 10 z 3,0 00 oz
44
Peñasquito Goldcorp
*2018-Piritas Plant Fresnillo
*2018-El Compás Endeavour Silver *2018-Piritas Lixiviation Project Goldcorp
4,422
4,415
4,590
4,442
427
959
3,988
4,598
4,643
4,584
4,340
4,446
-20
3,125
3,497
-151
94
3,630
1,057
-40 3,000
504
-1,094
4,643
3,538
4,000
-59
4,584
4,182
5,000
4,407
• Total physical demand • Physical surplus/deficit • Total supply
3,903
5,500
5,434
WORLD GOLD SUPPLY AND DEMAND IN TONS
45
2,500 Year
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Jewellery
2,355
1,866
2,083
2,099
2,066
2,726
2,559
2,464
1,953
2,214
Industrial fabrication
479
426
480
470
432
428
411
376
366
380
Electronics
334
295
346
342
310
306
297
267
264
277
Dental and medical
56
53
48
43
39
36
34
32
30
29
Other industrial
89
79
86
85
84
85
80
76
71
73
Net official sector
-235
-34
77
457
544
409
466
443
269
366
Retail investment
939
866
1,263
1,617
1,407
1,871
1,162
1,160
1,043
1,028
Bars
667
562
946
1,248
1,057
1,444
886
875
786
780
Coins
272
304
317
369
350
426
276
284
257
248
MAIN GOLD PRODUCERS BY COUNTRY (2017)
104.4
million ounces
13.1% China 9.1% Australia 8.3% Russia 7.1% US 5.4% Canada 5% Peru
Gold Production in Mexico in 2017 fell 4% in comparison to 2016
Mexico is the ninthranked gold producer in the world
4.8% Indonesia 4.3% South Africa
4% Mexico 3.1% Ghana 35.8% Others
NATIONAL AND GLOBAL PRODUCTION VS PRICES (million ounces) 120
National
Global
4.22
110 100 90 80
2.20 1.79 87.02 2008
93.51 2009
2.8 97.74 2010
3.13
3.63
101.17
101.66
2011
2012
108.50
2013
4.15
4.75
4.67
112.17
113.65
114.68
2014
2015
2016
4.47 114.53
2017
AVERAGE GOLD PRICE (US$/oz) 1,700 1,500 1,300 1,100 900
1,668.80 1,224.70 871.70 2008
1,568.60
1,411
1,265.58
972.80 2009
1,249
1,257.60
1,160.10 2010
2011
2012
2013
2014
2015
2016
2017
| INSIGHT
LEADER IN LOW-COST PRODUCTION RAMPS UP ACTIVITIES JOHN MCCLUSKEY President and CEO of Alamos Gold 46
The next presidential administration will have a great deal
well thanks to production ramp-ups in all its assets except
of influence over the mining industry’s future, says John
El Chanate, which is more or less coming to the end of its
McCluskey, President and CEO of Alamos Gold, who also
life cycle. “The Young-Davidson mine has seen a significant
points out that the approach of the authorities toward the
expansion in its underground mining rates, from around
industry can harm the attractiveness of Mexico’s mining
5,000t/d in 2015 to 7,000t/d today,” he says. Alamos Gold’s
industry as well as efficiency and productivity in the
earnings from operations have also been bolstered by higher-
sector. “Flatlining gold reserves and production plus higher
grade ore coming from Young-Davidson’s underground mine.
inflation could make a strong case for the gold market,” he
“As more of this ore goes through the mill, costs go down
says. “But the next administration and its policies will play
and production goes up, which delivers higher sales and
a large role in the health of the industry.”
greater margins,” McCluskey says.
McCluskey underlines that supply and demand
It is easy to look at Alamos as the poster story of efficiency,
fundamentals favor a loftier gold price. “Inflation growth
but McCluskey argues there should be little concern about
provides a strong base for the gold market,” he points out.
companies falling into inefficiencies even when metal prices
“Stronger gold prices will be evident in 2019 and beyond.”
rise again. “This allows for marginal deposits to be brought
While the price of gold fluctuates by around US$100/
into production to harness high prices,” he says. However,
oz, McCluskey says sustained, long-term growth will be
when prices again drop, these deposits sometimes lose
spurred by inflation but also by US debt. “We see the
money and look inefficient. “This does not mean they are
increased growth in US debt is getting to the point that
inefficient as their operational costs are always high,” says
the risk of that debt starts to weigh heavily on investors’
McCluskey. But he adds that a common issue that takes
minds and they will support gold.”
place when metal prices are high is executives paying too much for marginal deposits. Alamos Gold prefers to
Canada-based intermediate gold-producer Alamos Gold
go shopping for new projects when the market bottoms
operates the Mulatos and El Chanate mines in Mexico.
out. “We have taken advantage of cycles and successfully
According to McCluskey, Alamos Gold’s business is doing
became a 500,000oz/y producer in only 15 years,” he says.
VIEW FROM THE TOP |
CONSERVATIVE PRICE PREDICTIONS FOR LONGTERM HEALTH PETER DOUGHERTY President and CEO of Argonaut Gold 47
Q: How do you evaluate Mexico as a mining jurisdiction?
Q: What are the main factors that allow the company to
A: When we evaluate our position as a company in terms
maintain a healthy balance sheet?
of reserves and resources, today we are roughly 50 percent
A: I think strategically we have to craft a roadmap and
in Mexico and 50 percent in Canada. While we have more
define how we will reach our goals in a way that provides
projects in Mexico, and that is where we are producing
accountability. Our expectation is that we live in a
from, they are smaller in nature, whereas we have a very
US$1,250/oz gold price environment. We then look at what
large, undeveloped project in Canada with about 4.2 million
kinds of projects we need, which are essentially those with
ounces of measured and indicated gold resource. Mexico is
an AISC of US$950 or less so we leave ourselves some
good for providing smaller projects for companies looking
margin. This is necessary to generate the cashflow we
to start up. In terms of our portfolio, we always want to
need to build the next mine. Those are the foundational
be diversified to reduce our exposure to the political risk
pieces we use as the building blocks for the company’s
involved in the industry.
future. If a company can stick to those, it should be able to build a business. We have been fortunate enough to do
There are other locations in Latin America where we have
that but others have found themselves growing too fast or
had wonderful experiences, including in Chile and Peru,
shrinking margins too thin, and they end up in real trouble
so we are open to investing in these locations. Central
when prices inevitably change. As miners, we cannot
America is also very attractive. Although Nicaragua is facing
impact the price of gold, so we have to take whatever
some unrest at the moment, it has a strong geological
comes to us. But the one thing we can do is become the
endowment. We have also not ruled out more projects
most efficient at extracting minerals, processing them and
in the US and Canada, so our focus is really all over the
getting the gold to market.
Americas. We are not looking to go to Australia, China or Africa right now as we do not believe we can add as much
Q: What are the next steps to achieve your 2020
value in those countries.
production goals? A: The three projects we are running today will get us to
Q: How much has the concession you acquired in Baja
over 200,000 ounces. We will have to expand the San
California Sur progressed?
Agustín mine slightly by adding a 10,000t/d crushing,
A: We acquired two projects as a result of the acquisition
conveying and stacking line to achieve this target. We are
of another gold company, one in Baja California Sur and
already embarking upon that goal and examining what
one in Sonora. The project in Baja California Sur is one
we need to change to get there. We also have two other
of the highest-returning projects anywhere in the world.
projects we are not even considering. These are both lower
The economics underpinning that project indicate a yield
cost projects and have the potential to be higher producers
greater than a 50 percent rate of return. The project has
than the projects we are operating today. They have very
a higher grade, relatively low strip ratio and a higher
short construction windows of around one year but we still
recovery rate. It holds around 1.7 million ounces of gold, so
need to get past the permitting process. With those two, we
it is a substantial project but it remains underdeveloped.
can see ourselves producing over 300,000 ounces, and we
The project is located around one hour from La Paz, in a
have the large Canadian project on top of that.
relatively rural area. The interesting thing about this is that the local community really welcomes the project. When people become informed about the project, they can see
Argonaut Gold is a Canadian gold company engaged in
the value for local communities. As soon as the permit is
exploration, mine development and production activities. Its
granted, we stand at the ready to move that project forward
primary assets are the production stage El Castillo mine and
because it is a tremendous deposit.
the San Agustín mine
48
VIEW FROM THE TOP |
ORGANIC GROWTH, RESOURCE OPTIMIZATION STEPPING STONES FOR SUCCESS SALVADOR GARCÍA Director General and COO of Starcore International Mines 49
Q: To what extent do you believe gold prices will increase?
continuously scout for economically viable opportunities
A: We believe they are set to go up throughout 2018. The
and have no preference to one state over another. For
problem we have identified with the gold price trend is
instance, we have our Altiplano plant in San Luis Potosi’s
its inherent fluctuation. We are gold and silver producers
Matehuala municipality, where we treat precious metals
and, although both have suffered inconsistency in their
concentrates. It is a strategic location to attract clients or
variations, we maintain a great deal of confidence in both
concentrate suppliers to obtain gold and silver precipitates.
minerals. This price instability is challenging and complex
Queretaro’s mine is 25 years old. Starcore acquired it in
to adapt to. The price levels of base metals such as copper,
2006 and we have worked there ever since. The state is
lead and zinc have remained suitable for our purposes,
magnificent in terms of security and economic development.
with greater stability compared to gold and silver. Our perception is that lead and zinc prices will continue
Q: In these times of low prices and fiscal challenges,
increasing.
what can the mining industry learn from Starcore’s optimization?
Q: How has Starcore modified its business strategy to
A: Careful economic and human resource optimization is at
position itself at the forefront of the industry?
the core of our optimization strategy as any slight change
A: In August 2017, we set in motion an intensive program of
in any variable of our business model equation can have
exploration and development, critical to maintain our San
a snowball effect, whether positive or detrimental. We
Martín mine within the expected production level and more
established a department for operational excellence where
importantly to prolong its lifecycle. To date, we are tripling
principles such as adequate use and cost optimization in
the mine’s original development plans in terms of production
explosives use, blast efficiency and day-to-day operations,
capacity. These measures have brought about new reserves
scoop type or mining fundamentals, are always upheld,
and better results in the short, medium and long terms.
especially in the face of uncertainty.
Q: Could you elaborate on your Letter of Intent to acquire
Q: What is the next stage of Starcore’s growth?
Sinaloa’s Santa Fe property?
A: While Santa Fe is the next project we will be focusing
A: This property is located an hour away from Mazatlan
on to ensure our growth, we are also scouting for viable
in Sinaloa’s Rosario municipality. Global Kompas is
projects nationwide to continue growing. We are fully
undertaking the relevant PEA for this project, set to
aware that a single operation is not sustainable in the
conclude by April 2018. The PEA will be decisive in our
long-term, so we are looking to expand our portfolio to
final decision to enter production. This project is quite
another two or three and diversify. We have a couple
advanced in terms of permitting, with the Environmental
of projects in the US, but we still consider Mexico as
Impact Assessment granted, explosives use authorized
our main market and source for growth, despite the
and it is fully electrified. A third party will oversee the
hurdles. Mexico has great potential and we only lack the
construction phase while we have yet to decide if we will
proper incentives to regain the interest of both local and
cover the mine’s development or if we will use another
international investors of all sizes because our geological
contractor.
potential remains tremendous.
Q: Sinaloa and Queretaro lack a mining track record. Why choose these locations to develop mines?
Starcore International is a gold producer with operations across
A: Attractive projects care little for territorial delimitations.
North America. Its projects in Mexico include the producing San
As gold and silver producers, we are mandated to bring
Martín mine in Queretaro, the Altiplano plant in San Luis Potosi
to life interesting projects, wherever they may be. We
and the El Crestón advanced exploration project in Sonora
| PROJECT SPOTLIGHT
50
A CLOSER LOOK AT IMPROVING MINE OPERATIONS The goal of every operator is to continually improve efficiency and productivity. The complexity of mine operations may make this ambition seem like a titanic endeavor, however Starcore International Mines has accomplished it through a variety of measures. The company turned its San Martin gold mine in Queretaro into a model of operational excellence in just 12 months. Here is how Starcore did it. The first step was to invest in long-term partnerships that extended not only to investors and stakeholders, but to the whole supply chain. This strategy helped Starcore improve its controlled blasting and dynamite use by switching to a dynamite supplier that offered additional support and expertise in blasting. The result? The San Martín gold and silver mine is now using low-density explosives from Austin Powder that reduce the power of the explosion, decreasing the blast area and the need for extended excavation. Miners can access the zone quicker and more safely due to less material that needs to be moved in the area. This aids in productivity and cost efficiency. But operational excellence is not only about making operations faster and safer; staff training and work culture programs are also essential. Starcore focuses on having better-trained workers, such as engineers, to stay on top of work spreadsheets and daily reports. This allowed the operator deeper insights into the shift work underground and added a pinch of responsibility for those working under supervisors, also improving time and movement records. Theory/practice programs for machine operators also proved successful in correcting inefficient trends. The company added a structural engineering expert to help the entire team adopt better practices, reduce shotcrete use and introduce a new mining method for room and pillar mining. Work culture is among the most important factors in any team, so San Martín’s staff runs regular meetings over the course of a day where opinions are valued, with each department providing its view and exchanging ideas. At lunch, workers are encouraged to share their department experiences and how they are improving, while also looking for collaborative solutions to problems. These small changes have translated into a massive uplift in culture and employee satisfaction across the board. Starcore’s San Martin mine has seen improvements across the board and ultimately, a new mine life of 10 years based on proven and probable reserves and inferred and indicated resources. How about that for operational excellence?
51
| INSIGHT
VERACRUZ OPERATOR WARY OF POLITICAL CHANGES RAMÓN PÉREZ President and Director of Candelaria Mining 52
It has not been easy being a miner in Veracruz. The
The company itself has had little trouble attracting funding,
embezzlement scandal that brought down Governor
which Pérez sees as a vote of confidence in Candelaria’s
Javier Duarte in 2017 followed by a two-year provisional
projects. In mid-2017, Agnico Eagle invested US$9.7 million in
state government has forced many projects to be placed
Caballo Blanco, a project the Canadian giant had been familiar
on hold until a new six-year term governor is elected in
with for many years, stretching back to when Goldgroup and
2018. Candelaria Mining, the company that operates the
Timmins Gold (now Alio Gold) owned the concession. “I do
Caballo Blanco project in the jurisdiction, was among those
not believe the funding came from actions on our part; I
affected, curtailing its activities until the picture clears, says
think the project spoke for itself,” he says. “A company like
Ramon Pérez, the company’s President and Director.
Agnico Eagle does not settle for 600,000-ounce deposits, it looks multi-million-ounce projects. I think that is a real
“With state and federal elections taking place in July we
vote of confidence for us.” As far as the project goes, Pérez
are hopeful to see some of the uncertainty from investors
explains that there are around six zones that have yet to be
subside and a resurgence of interest in the mining
drilled but have very similar characteristics to that of the
industry,” he says, “We would like to see a landscape
zone where the current resource sits.
where the country improves on some of the concerns with respect to security and corruption we see today.”
Candelaria’s advanced exploration-stage Pinos property is
The 2018 elections have prompted Candelaria to tread
located in Zacatecas, a less politically-charged environment.
carefully with its operations in Veracruz. Having filed the
Pérez says the company has finalized the engineering work
environmental permit for Caballo Blanco with SEMARNAT,
and recently applied for a permit. Candelaria is now looking
“
the company chose to retract it until the election process
at financing options for the project. “We are exploring
has settled.
various financing options and when we finalize that we will
We would like to see a landscape where the country improves on some of the concerns with respect to security and corruption we see today”
consider entering the construction stage,” he says. Although Pinos is not Candelaria’s flagship mine, it is the way the company envisions itself continuing to generate cashflow while development and exploration work at Caballo Blanco continues. Pérez is also conscious of the importance of maintaining a constant project pipeline, which is why the company intended to drill out the La Paila project in Veracruz. “We carried out a 2,000m infill drill program at the La Paila zone in 2017,” says Pérez. “Right now, we are in cash conservation mode until there is a clear picture of the
There is a sunny side to the forecast, however, as a benefit
next president and the new governor of Veracruz, but we
of the current political instability is the favorable effect it
will reinitiate operations when the timing is right.”
has had on gold prices. As a gold producer, Pérez says the outlook appears favorable since gold is trending in the
With the establishment of a new stock exchange in
right direction. Nevertheless, he says miners inherently must
Mexico (BIVA), Pérez says that Mexican investors may be
be prepared for fluctuations. “I cannot predict gold prices,
increasingly attracted to mining. “There is a big change
which is why we try to work with quality projects that can
going on in Europe and Canada, where there are rumblings
withstand the price movements,” he says. “When we acquire
of big banks cutting back on their research platforms,” he
projects, we factor in the volatility of the metal price for that
says. “That will be a shakeup for the market, and potentially
reason – gold prices are unpredictable.”
the BIVA has arrived at an opportune time.”
VIEW FROM THE TOP |
INTERNAL EXPANSION FOR ORGANIC GROWTH DAVID WOLFIN President and CEO of Avino Silver & Gold 53
Q: What are some of the challenges and successes Avino
a US$22 million budget and produce another 1.5 million
Silver & Gold has faced during its time in Mexico?
silver equivalent ounces. As for the mill expansion, it was
A: Avino Silver & Gold has 50 years of experience in
completed with a US$10 million investment.
the industry. We were working in Mexico before NAFTA although we could only own 49 percent of the subsidiary
At the moment, we are listed on the NYSE and TSX. We want
before the treaty came into force. During the tech bubble in
to attract more institutional investors and mutual funds, which
2001, metal prices dropped, causing the region to undergo
tend to be less erratic or volatile than retail investors. We are
economic hardship. I became president of the company and
striving to build up our institutional shareholder base. We have
strived to re-hire people and re-open the mine.
thought about joining the BMV but we do not yet qualify.
80% of Avino’s labor force comes from the villages near its projects
As we have been working in Mexico and with national partners for such a long time, we have formed strong relationships with local communities, ejidos and surrounding villages. We have helped them with infrastructure development and other matters. They feel that they can come to us for help. It would be ideal if the Mexican government lived up to its promise and put the tax money back into communities but we have not yet seen this materialize. This has been
Q: How did the company achieve an exclusive partnership
disappointing because locals look to us for explanations as
with Samsung?
we are on the ground and they do not understand where
A: They approached us three years ago at the European Gold
the money goes or who is managing it.
Forum after Apple and Intel promoted their use of ethicallysourced raw materials. As ethical funds own part of Samsung’s
In our operations, we find that our people take great pride
stock, they were worried about assuring an ethical source
in their work. They want to live and work close to their
to avoid a boycott. Samsung chose our company because
homes and their families, and we have provided that for
they wanted to partner with a small company that was well-
them. Eighty percent of our labor force comes from the
established with projects in expansion. They did not want to
villages near our projects and the remaining 20 percent is
partner with a big operator such as Barrick or Goldcorp nor
from the rest of the country. But 100 percent of our labor
companies with projects in preproduction. They also liked that
force is Mexican, even our senior-level staff.
we are a family-based company with a good relationship with the locals. Many see Mexico as an ethical country were people
Q: What are your main projects in Mexico and how do you
are treated better than certain places in Africa. Securing raw
expect to continue growing?
materials from the source is the future and we will start to see
A: Rather than acquire other projects, we prefer to
more technological companies and automotive manufacturers
grow our own projects, starting with a mill expansion
reach out to the mining industry. The world population is
and underground pit. The Oxide Tailings project was an
about to explode and people need materials to support the
open-pit mine we opened in the 1970s with poor recovery
infrastructure that will be required in effect.
rates. With new modern technology we have been able to reprocess and produce more metals and this will continue to be among the expansion plans we prioritize over the next
Avino Silver & Gold Mines operates two silver mines in Mexico
three years. We have to build the new tailings facility first.
with a gold project under development in British Columbia.
At the moment, the cost is US$29 million on a standalone
The company’s 50-year history has shaped Avino into one of
basis. We think this is too high so our goal is to build with
the industry’s lowest-cost silver producers
54
55
| VIEW FROM THE TOP
UNDERSTANDING COMMUNITY SENSITIVITIES IN OAXACA DAVID JONES Director of Minaurum Gold 56
Q: Why did Minaurum choose to work in Guerrero and
times I have ever seen anything like that in Mexico, and
Oaxaca, despite these being known as problematic mining
we thank him. We have two properties in Guerrero but
jurisdictions?
because of the recent issues in the state and the bad
A: Our Alamos project in Sonora is our most significant new
publicity, many investors are less interested in investing
find, where we have discovered a previously unknown and
there. As a result, we have put our work there on pause
unmined silver vein. That area does not have any particular
for the moment. I anticipate that with the next upswing
problems regarding the mining industry, as Sonora is
in gold prices we will be seeing a lot more interest in
relatively stable. I have also personally been working in
Guerrero. We need between six months to a year for it
Guerrero and Oaxaca for the last 20 years. Guerrero’s gold
to attract interest again, but this is all part of the cycle.
belt is located in the heart of the state but has managed to do just fine, despite some minor problems. We believe
Q: The company’s share price tripled in early 2018 after the
our work in Oaxaca at our Santa Marta project will proceed
Alamos silver discovery. Where does the project stand now?
well once we have gotten approval from SEMARNAT, which
A: About 8m of 1.7kg/t of silver is a very rare thing to
has been a slow and long process as the local community
find. We are all very excited about that and I hope we
is sensitive. But we have another project in Oaxaca called
will have more good news coming from this project. We
Aurena where we have previously drilled with no problems
are making sure all our property agreements are tied up
and where we hope to drill again in the near future. I
neatly so we can avoid conflicts. Our operating highlights
personally do not see any reason not to work where there
for the year include drilling the Alamos mineral vein and
are good opportunities because miners always have to work
submitting documents for permission to drill at Santa
with the community anywhere we go. Yes, it is more difficult
Marta, our project in Oaxaca.
in Oaxaca, but I think these issues are all solvable. Q: How would you evaluate the exploration landscape
A discovery of 8m of 1.7kg/t of silver was made at the Alamos mine in 2018
in Mexico? A: The mining industry in Mexico is highly communitydependent. While working with one community can foster great relations, this is not always true. Minaurum has had very good relationships and support from the communities. Acapulco Gold has also had full support from all the communities and no conflicts or protests. If companies
From the government we have received a lot of support
are careful to maintain good and strong relationships with
in words, but little in action. The government expresses
local communities, conflicts can always be avoided. It is
support for the industry but more often they do not do
about being a good and respectful neighbor.
quite as much as they promise. Having said that, the new governor of Oaxaca went to the village in which we are
In terms of the regulatory aspects, I think Mexico is
working and personally visited and showed his support.
moving toward being more careful regarding oversight,
We greatly appreciate that effort. It was one of the first
which is good. But some of the processes are still too bureaucratic. I think it would be nice if government agencies could recognize companies’ intentions to
Minaurum Gold is a regional explorer focusing on the
preserve the environment and keep environmental impact
exploration and development of high-grade gold and silver
to a minimum. I would prefer they expedite processing
projects in the southern region of Sonora state, the Oaxaca-
for man portable drilling, which lets companies drill more
Chiapas region and Guerrero gold belt
quickly and with less impact on the surrounding areas.
INSIGHT |
TRACING JUANICIPIO THROUGH STACKED BOILING SYSTEMS JOANNE FREEZE President and CEO of Candente Gold 57
What was old is new again as a shortage of exploration
the municipality to acquire a tailings project that was left
projects has miners re-examining historic mining districts
behind by the previous mine in the middle of the town,” she
and enjoying a high level of success. Take Candente Gold, for
says. “The company found common ground by agreeing to
example. It acquired El Oro because the mine was located
build the tailings facility outside of the municipality if it was
in a district where 8 million equivalent ounces of gold were
economically feasible and to share profits, if there are any.”
produced from only two of its 50 known veins. Even though many believe that small exploration companies At El Oro much of the exploration and development had been
cannot make an impact on surrounding communities due to
completed in the 20th century. A fresh look, however, indicates
their lack of capital, Candente Gold defies these paradigms
that there is excellent potential left both in and below the old
by finding innovative ways to support CSR. “In Peru, we had a
workings as well as surrounding areas. “We own 100 percent
partner that taught us to be flexible in the way we think about
of this project, which covers mines that have already produced 5 million ounces of gold equivalent (4 million ounces of gold and 44 million ounces silver) from a single vein, along with an additional 3 million silver ounces in another vein,” says Joanne Freeze, President and CEO of Candente Gold. “The geological setting is quite similar to what was found in Juanicipio.” Combined with the region’s strong track record, the identification of stacked boiling systems in the district is another factor behind the project’s potential for a discovery. “In Mexico, we often see cases of these systems where a vein is created by hydrothermal fluids that rise then precipitate
“
our work to make an impact,” Freeze says.
Companies say that permitting is quite difficult in Mexico but in our experience, it is quite efficient”
For example, when operating in Peru, the company saw
silica and precious metals before receding,” explains Freeze.
the need to improve employment opportunities in the
“The process repeats itself over and over again, precipitating
area and helped a group of people growing coffee to
minerals at various levels in a stacked boiling system.” This
connect with NGOs to improve their crops. Candente also
means that instead of finding base metals below the gold and
helped them achieve an organic certification to sell their
silver zones in these veins, drilling intersects silver and gold at
product for a higher price. The coffee farmers were not
various levels thanks to these alternating precipitation levels.
the only beneficiaries of Candente’s social projects. “Other
“This is even more evidence that the project is reactive and can
communities located higher in the mountains could not
reap significant results from drilling programs,” Freeze says.
grow coffee so we supported them by expanding their houses, allowing them to harvest cuy, a specialty in the
Candente Gold, which previously worked in Peru, believes
country,” she says. “We also called in agronomists who
Mexico is an attractive mining jurisdiction. “Other companies
assisted with growing quinoa.”
say that permitting is quite difficult in Mexico but in our experience, it is quite efficient,” says Freeze. “Our only issue
In Mexico, the company is applying the same principles to
is the exploration expenditure commitment that is required
the community surrounding El Oro. Candente taught locals
to hold the land package; this can be quite high for a small
to grow different types of crops and even provided the
exploration company.”
seeds. “We introduced new ideas and skills to them so they would not become dependent on us,” explains Freeze. “This
Despite these costs, Freeze says the authorities in the area
is the idea of shared value and what can be accomplished
are open to collaboration. “We completed a negotiation with
in the early days of a project.”
| INSIGHT
EXPLORE AND OPERATE: THE RIGHT PACKAGE RODRIGO BARBOSA CEO of Aura Minerals 58
While exploration companies struggle to fund their activities,
Mexico, the annual expenditure on care and maintenance
operators battle to find new projects. Rodrigo Barbosa, CEO
assets was US$3 million in 2017. As the Aranzazu mine was
of Aura Minerals, believes that mining companies should aspire
draining that amount of money from Aura Minerals’ pockets
to carry out both. “The best business model for a mining
and the copper price has shown a recovery since 2015,
company is to have exploration and operation activities,” he
the company started to carry geological and geotechnical
says. “Operations represent a sustainable cash flow generation
analyses to find the right opportunity to restart the plant.
that can partly be used to fund exploration,” he adds. These finalized with the chance to reopen the Aranzazu on He says part of the income made from selling metals could
very attractive terms. “Instead on consuming US$3 million per
be allocated to costly exploration activities to create a
year, Aranzazu will be able to provide us a significant source
self-regenerating pipeline of projects. “The sustainable
of cash generation in the near future,” he says. The company
financial source allows dedicating funds on a regular basis to
is already hiring people, carrying out the maintenance of the
exploration according to cash flow generation,” he explains.
mine and some underground development. “We are in full
This strategy has proven useful for companies such as Aura
speed to restart the plant in 4Q18,” he says.
Minerals to shield against the risk of exhausting all financial resources without finding any exploitable discoveries.
To fund this ramp up, Aura Minerals made a partnership
“This way companies can calibrate how much to spend
with IXM, formerly Louis Dreyfus. “We have a streaming
on exploration depending on how much is made from the
agreement to sell it our concentrates for three years. In
operations, enabling a more balanced cash flow.”
exchange, it gave us US$20 million in financing that we have
“
Funding exploration through operations allows dedicating funds to exploration according to cash flow generation”
already fully withdrawn to restart operations,” he explains. “We are looking forward to the Aranzazu ramp up. This could be a transformational project for our company and we are very happy with the investment we made in Mexico.” The studies to restart the mine were initially focused on a little over a five-year period to prove reserves and provide enough funding for the ramp up but Barbosa says this plan has advanced since then. “We will be conducting near mine exploration in 2019 hoping to demonstrate more reserves
But undertaking both exploration and operations also implies
and expand the mine life from five to 10-15 years,” he says.
assuming 100 percent the risk. The question becomes one
“We want to grow in Mexico and our priority remains
of how to manage this gamble. Barbosa believes that
exploration in Aranzazu. If we prove more productive life
mining companies can never be fully hedged from the risk
years, we will work consequently to expand the mine’s
of exploration. But he stresses that there must be balance
capacity.”
between incomings and exploration outgoings. “Exploration is a high-risk business and companies may end up spending
Aranzazu is a gold and copper mine, aligned with the
offshore cash on finding the resources and then not having
company’s strategy to shift from only pursuing pure gold.
the necessary cash to fund production,” he says.
“This strategy aims to secure a more stable cash flow in the future as we have two base metals,” he says. “We will
Aura Minerals is an operator with business in Brazil, Honduras,
also consider other base metals if the project makes sense
Mexico and Colombia. It is conducting exploration in several of
to our company in terms of jurisdiction and size of our
its operative mines, such as Sao Francisco in Brazil. Regarding
current operations.”
VIEW FROM THE TOP |
EVERYTHING OF USE IS EITHER GROWN OR MINED JASON REID President and CEO of Gold Resource Corporation 59
Q: What are the latest developments at your operations
and promotes a favorable mining environment, it is far more
in Oaxaca?
likely we will increase our investment in the future.
A: Our Arista mine continues to grow both at the Arista vein system and the Switchback vein system. We have been
Q: What is your assessment of Mexico’s friendliness as a
mining from the Arista vein system for almost eight years
mining jurisdiction?
and it continues to grow. The Switchback vein system has
A: Mexico continues to fall in the Fraser Institute’s rankings
potential to be larger than Arista and should provide our
of mining-friendly jurisdictions. It used to score in the top
next eight to 10 years of production. As for exploration
quarter of many metrics but is now near the middle or
at our Oaxaca mining unit, it is primarily focused on the
lower. This is not a good trend and reflects the increased
Arista and Mirador mines to expand these deposits. But
difficulties that mine operators face regarding security
our exploration budget this year is smaller, around US$4.5
and tax issues in the country. Companies want a stable
million for drilling, given the brutal bear market and the fact
government, business-friendly policies, local support,
that we are building our Nevada mine with cash flow from
reasonable taxes and less bureaucracy rather than more.
operations. We also continue to build Mirador with cash
But the trend in Mexico is not going in a favorable direction.
flow and target an initial 150t/d throughput before moving up from there. We have grown all our operations organically
Q: What are your hopes and expectations for the next
since 2010, merely with cash flow and without raising any
administration ?
private equity. We have remained profitable over the last
A: Everything we use in life is either grown or mined and
seven years and survived the last downturn in the metal
therefore mining should be encouraged and supported.
markets by betting on projects with low operating costs
Oaxaca has seen over US$60 million in tax revenue from our
and high returns on capital.
operations. I hope the incoming administration encourages mining investment. For example, the current tax regime
Q: How are the company’s investment flows likely to
ranks near the bottom of mining friendly jurisdictions.
behave in the future?
If that ranking further falls, Mexico will continue to have
A: Money and investment absolutely flow where most
foreign investment flee the country. So, I hope the new
appreciated. It is no coincidence that our second mining
government will be far more supportive than any prior one.
unit is in Nevada as the jurisdiction was ranked by the
In Oaxaca, one of the five investment pillars established
Fraser Institute’s 2017 survey as the first among mining
by Governor Alejandro Murat is mining. He and his team
friendly jurisdictions in the US and third globally. The mining
have been the most supportive of the mining industry
business is risky with money spent on discovering deposits,
in our history operating in Mexico. I believe the country
funding development, engineering, construction and
needs more like-minded government officials to encourage
execution of a project, all in a volatile metals market. Adding
foreign companies to operate in Mexico and in turn receive
jurisdictional complexities with antibusiness governments,
tax revenue from mining operations. The more mining, the
excessive taxes and bureaucracy to these challenges, it
more tax revenue; the less mining, the less tax revenue.
forces companies to go where they are most appreciated.
The new administration will dictate in which direction the country’s tax revenue from mining will go.
We have been operating in Oaxaca since 2006, producing since 2010 and plan to be in the state for at least another decade. While we look at other opportunities around Mexico,
Gold Resource Corporation is a gold and silver producer
its trends are becoming less mining friendly, decreasing the
targeting projects that feature low operating costs and high
chances for us to open another unit elsewhere in the country.
returns. The company’s primary focus is on cash flow, with a
But if the new government encourages additional investment
priority to return meaningful dividends
| ROUNDTABLE
HOW IS THE RISE OF BLOCKCHAIN AFFECTING GOLD’S SAFEHAVEN STATUS?
Blockchain and bitcoin technologies are stepping further and further into the limelight. After the price of a bitcoin surged ahead of gold for the first time ever in March 2017, talk abounds of whether these new technologies can replace gold as a traditional safe haven. Mexico Mining Review questioned the industry’s leaders to ask about their concerns and predictions for these new tools.
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Gold, from ancient times to now, has been an indisputable store of wealth and also a way to hedge against geopolitical volatility and inflation. It is a well-regulated and established market. In the 1990s, we went through a crisis when central banks started to sell their gold holdings. This caused the price of gold to collapse, but afterward, the geopolitical situation forced central banks to understand the
OCTAVIO ALVÍDREZ CEO of Fresnillo
role of gold in maintaining wealth and therefore their holdings. Gold has a wellestablished role in the market while cryptocurrencies still have to be regulated and understood to compete with precious metals. It can be used to complement gold investments but cannot replace it at the moment as the role of cryptocurrencies in the market is still not fully defined.
The growth of the cryptos is a vivid illustration of how much speculative money exists around the world. This is a product of the massive monetary expansion, low interest rates globally and the disruptive nature of the digital world. These cryptocurrencies have grown in number and value at a remarkable pace. The crypto operate in a non-transparent and unregulated market places that allows money to
ROB MCEWEN Chief Owner of McEwen Mining
flow across borders without disclosure. I expect governments will start to regulate and when that begins the values will correct. Gold is a monetary metal and will exist alongside these new currencies. Once the market appreciates, the limited amount of gold that exists and how slowly that amount grows annually there will be a rush into gold.
The development of gold-backed cryptocurrencies will change the mining industry. Goldcorp will be able to sell gold directly to dealers and banks using the Tradewind platform. This is a platform that uses blockchain technology to create a digitized ledger of precious metals for greater traceability, increased security, more efficient electronic trading and allows access around the globe by
MICHAEL HARVEY Director of Corporate Affairs and Security at Goldcorp
a network of producers, refiners, banks, dealers, vaults and end customers. We are expanding access to a new market structure and a highly efficient, electronic pricing and liquidity venue.
There is really no substitute for gold or silver right now. Cryptocurrencies do not have many barriers to entry at the moment and a rising number of these currencies exist. It makes it hard to invest in this market as there are hundreds if not thousands to choose from. It would be different if only one existed. Cryptocurrencies are here to stay but it will take a while to know which ones to bet on. It will take some time before the market identifies which ones are the most important, similar to Google and Amazon, companies that emerged from the technological boom in the early 2000s. In the meantime, we do not have to worry about a new element substituting gold or silver.
TREVOR TURNBULL Director of Gold and Precious Metals Global Equity Research at Scotia Capital
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Mining companies in Mexico are starting to realize innovation is not the circumstantial answer to specific problems but a long-term, structural solution. Any transaction can be supported by a secure web to ensure it will occur. Supply chains supported by blockchain will replace a substantial amount of infrastructure and human activity. Areas such as procurement, accounts-payable and human resources can already be automated. Mexico’s mining and oil and gas sectors must realize innovation is the only way to exit an adverse situation with unfavorable macroeconomic parameters.
BRUNO JUANES Chief Innovation Officer at Deloitte Consulting Group
The diamond industry is already incorporating blockchain technology but for concentrate it is not the ideal time yet as it is a business that requires face-toface interaction. For this reason, blockchain will not have an immediate impact on the mining industry but who knows how much it will grow in the next five years. It could be used as a complement to our services. Certification companies and brokers can use and benefit from blockchain technology.
JOSÉ ANTONIO BERLANGA General Manager Mexico of Mercuria
Blockchain, an important new development, could allow tokens for underground gold to be created to serve as currency, bypassing the need to mine it at all. And virtual mining and simplified supply chains could derive from this. The pace of technological innovation just continues to pick up. The issue then becomes dealing with the human factor and the consequences of these developments, such as the socioeconomic compact that mining has as an employment source. But while replacing jobs in the mine with data scientists can generate social discontent, it also further develops the Mining Equipment Technology and Services (METS) sector.
PHILLIP HOPWOOD Global Mining Leader at Deloitte
The digital economy requires companies to comply with electronic invoices and incorporate the use of blockchains along with other new legal requirements. This will not only impact mining but also all industries in general. I believe that the use of the digital economy will help authorities have more control over transactions and the movement of electronic capital. But the new requirements and norms will imply a challenge for companies as authorities will become stricter and it will be more difficult to avoid taxes. Adapting to new electronic requirements will be a top challenge, especially for companies that have over 1,000 transactions per day. But the use of technology and fintech will also bring advantages as it will help operators control revenues and cut costs.
ALFONSO CALATAYUD Lead Partner in Mexico and Latin America at PwC
Silver Ore
SILVER
3
There is little doubt that Mexico’s mining industry shines the brightest when it comes to its silver production. The country was the world’s largest silver producer for the eighth successive year in 2017, churning out 21 percent of the global share. Following a global drop in production of 4.1 percent in 2017 compared to 2016, Mexico beat the odds and increased its production by 5 percent, or 10.1 million ounces. Companies operating in Mexico extracted a total of 196.4 million ounces of silver in 2017. But what must Mexico do to ensure that it remains at the top of the world’s silver production list over the long term?
To maintain its global dominance and take advantage of the positive outlook for silver prices, Mexico needs to boost production rates and invest in exploration to replace aging projects. Corporate decision-makers and public figures highlight the primary trends in Mexico’s silver industry, the development of the country’s main projects and the most important factors driving demand and supply.
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CHAPTER 3: SILVER 65
66
ANALYSIS: Weathering the Silver Storm
67
TREND SPOTLIGHT: Antimicrobial Coatings a Blessing for Silver Producers
68
MAP: Mexico's Main Silver Mines
70
VIEW FROM THE TOP: Octavio Alvídrez, Fresnillo
72
VIEW FROM THE TOP: Mitchell Krebs, Coeur Mining
73
VIEW FROM THE TOP: Keith Neumeyer, First Majestic Silver
74
VIEW FROM THE TOP: Bradford Cooke, Endeavour Silver
Godfrey Walton, Endeavour Silver
76
MINE SPOTLIGHT: Saucito
78
VIEW FROM THE TOP: Darren Blasutti, Americas Silver Corporation
79
VIEW FROM THE TOP: Luiz Camargo, Compañía Minera Cuzcatlán
80
INFOGRAPHIC: Silver, the Glowing Beacon of the Mexican Mining Industry
82
INSIGHT: James Bannantine, Great Panther Silver
83
VIEW FROM THE TOP: Michael DiRienzo, The Silver Institute
84
MINE SPOTLIGHT: Palmarejo
86
VIEW FROM THE TOP: Brendan Cahill, Excellon Resources
Ben Pullinger, Excellon Resources
87
INSIGHT: Carlos Aguiar, Minera Hecla
88
ROUNDTABLE: How are you Mitigating the Risk Caused by Stagnating Silver Prices?
| ANALYSIS
WEATHERING THE SILVER STORM Silver prices faltered this year, despite high demand for industrial applications and dwindling supply. According to The Silver Institute, the drop in mine production was offset mainly by Mexico, as Fresnillo retains its crown as the world’s No. 1 producer. How are operators in Mexico responding to this context?
66
In 2017, global silver mine production declined by 4.1
was pipped to the post by Goldcorp’s Peñasquito mine,
percent to a total of 852.1 million ounces. However, silver
also in Zacatecas, which produced 11.5 percent of national
demand for industrial uses did increase 4 percent to 599
production, or 21.5 million ounces. Fresnillo’s San Julian in
million ounces, mainly from PV applications, electronics,
Chihuahua, after its first full year in commercial production,
brazing alloys and solders. The Silver Institute says this was
came in fourth with 10.5 million ounces of silver produced,
offset by a decline in demand from coin and bar investment
while the Top 5 was rounded out by Fortuna Silver’s San
and jewelry fabrication.
José mine in Oaxaca, contributing 7.5 million ounces. These five mines alone contributed almost 40 percent of the total
Average silver prices up to September 2018 took a blow,
silver mined in Mexico.
coming in at US$16.2/oz, down 5 percent from US$17.04/ oz in 2017. In the beginning of February, prices slid below
Of the country’s 196.4 million ounces produced in 2017, 42.1
the US$17/oz mark and have yet to recover, coming in
percent of this was mined in Zacatecas. Chihuahua came
on Sept. 14, 2018, at US$14.21/oz. As a result, operators
second in terms of production with 17 percent, followed
are implementing cost-cutting measures to help them
by Durango with 11.7 percent, Sonora with 7 percent,
mitigate the decline. Endeavour Silver has temporarily
Oaxaca with 5 percent and others making up the remaining
halted operations at the El Compas plant in a cost-cutting
17.2 percent.
measure. “Enhanced cost discipline is the prudent course of action for mining companies during times of lower metal
CONSERVATION MEASURES
prices, especially when investing to develop new mines,”
Several new promising silver projects are slated to come
says CEO Bradford Cooke. “This austerity program is our
online up to 2022, most notably Industrias Peñoles’ Rey de
proactive response to the current low metal prices.”
Plata project in Guerrero, which is expected to produce 4.7 million oz/y by 2019 with an investment of US$303 million.
MEXICO KEEPS ITS CROWN
Further into the future, the Juanicipio project belonging to
Despite overall low prices compared to 2011 highs of
Fresnillo and MAG Silver is one of the most promising, with
US$35.12/oz, it is worth noting that prices at this point
an estimated 10 million oz/y to add to Fresnillo’s portfolio.
were inflated due to the recession caused by the housing market crash in the US. When excluding the effects of this
Durango’s silver production, affected by Primero Mining’s
event, averages have actually risen from pre-crash levels of
problems at San Dimas, looks set to recover in the next
US$14.99/oz in 2008 and US$14.67/oz in 2009.
few years. San Dimas was purchased by silver giant First Majestic Silver in May 2018 and operations have been running
Mexico’s output in 2017 reached 196.4 million ounces, up
smoothly ever since. Added to this are promising projects
5.4 percent from the 186.3 million ounces registered in 2016.
from Telson Resources and Fresnillo. Terronera is expected
After Mexico came Peru with 147.5 million ounces, China
to come online in late 2018 to produce 200,000 ounces and
with 112.6 million ounces, Russia with 42 million ounces and
Fresnillo is expanding La Ciénega for an extra 1.3 million
Chile with 40.5 million ounces. With a global production
oz/y by 2019.
total of 852.1 million ounces, this means the Top 5 countries produced over 63 percent, with three Latin American
Silver prices have been flat but, for certain operators, this
countries notably making it into ranking.
can be an opportunity for diversification. Americas Silver Corporation, for example, has begun to move into its zinc
ZACATECAS ON TOP
and lead reserves, stockpiling its high-grade silver for when
Fresnillo remains the most important silver producer for
prices inevitably pick up. “When looking at some of our
another year, not only nationally but on a global level. Its
competitors, their silver grades are dropping because they
Saucito and Fresnillo mines in Zacatecas contributed to
have been mining their highest-grade silver ores to survive in
the state being the largest producer in Mexico, with 21.2
this price environment,” says Darren Blasutti, the company’s
million ounces and 16.5 million ounces, respectively. But
President and CEO. “Our reserve grades will continue to rise
in terms of the biggest producing mine in 2017, Fresnillo
because we are now mining our lowest-grade silver ores.”
TREND SPOTLIGHT |
ANTIMICROBIAL COATINGS A BLESSING FOR SILVER PRODUCERS With a size range as small as just 0.2 microns, bacteria are
due to few new mines being built during the recent five-year
everywhere, from cellphones to toilet seats. That may be
bear market of low metal prices should help boost higher
off-putting for most people but for miners it could prove
metal prices for the next few years,” he says.
an important source of demand, with silver the big winner. “Silver is likely to be a major beneficiary of growth in the
THE NEXT BIG THING?
antimicrobial market,” said Jason Russ, a value and growth
It seems that every day new and innovative uses are found
investor expert, in an article for Seeking Alpha. “In addition
for silver, from solar panels to automotive components.
to glass surfaces, the use of nanoparticles of the metal is
According to the World Silver Survey, industrial uses
an excellent method for impregnating other surfaces such
accounted for 60 percent of silver use in 2017. Use of trace
as wound dressings, cotton fibers, cutting boards, food
amounts of silver, such as the quantities used in microbial
packaging, and even yoga mats.”
glass, may not seem like a lot, but the organization says this can quickly add up. “Although silver is used in small
Allan Smith, Vice President of Product Marketing for
quantities in some applications, the diversity is large, and
Steelcase, says the new trend of open plan and shared office
the continued rising volumes of applications are expected
space is further increasing the need for bacteria-resistance
to again have a positive impact on silver consumption from
on a larger scale. “As more people move through shared
industrial products this year,” says the report.
work spaces, there is an increased need for antimicrobial surfaces,” says Smith in a company press release. Forbes
Ultimately, experts in metals price analysis do not seem
says more than 11,000 shared working spaces exist in the
overly concerned about the drop in demand, yet there
US, with projections of more than 26,000 spaces hosting
is a great deal of buzz around the new, innovative ways
3.8 million people by 2020.
to use silver and the ways this could impact its price in the coming years. Keith Neumeyer, CEO of operator First
An expected boom in demand for silver ions in antibacterial
Majestic Silver, has been one of the boldest by stating that
products is good news for silver producers, especially
the price of silver could reach US$130/oz in an interview
considering the optimism surrounding silver prices.
with Palisade Research. While his prediction is a far cry
According to the World Silver Survey 2018 produced by
from the average price of US$17/oz the metal recorded in
The Silver Institute, the industry reported a physical deficit
2017, the increase in demand from new applications such
ratio between supply and demand of 1:26 as the global mine
as those related to anti-bacterial surfaces shows there is
production of silver reached a mere 852 million ounces in
room for growth.
comparison to the global physical demand of 1.017 billion ounces in 2017. This creates a favorable scenario for silver
It may be up to more innovative uses of the metal to
operators around the world, and even more so for Mexico
sway the balance in the direction in which operators
as the largest producer of the metal.
need it to move. “While silver has been used for ages as an antimicrobial material, soon the new glass will almost
Bradford Cooke, CEO of Endeavour Silver, says the recent
certainly account for silver’s greatest market penetration
downturn and lack of exploration projects could be a
of an antimicrobial surface,” says Russ. “Many people now
favorable scenario for silver operators, provided they have
consider silver’s antimicrobial properties to be the next big
a large enough pipeline. “Falling new mine supply of silver
thing to boost demand for the metal.”
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MEXICO'S MAIN SILVER MINES
2
1
3 68
5
7 4
10
8
6
9 17
14 15
World Class Deposits 13
Production
16
11
Development
20 23 24
Exploration 12
Name
Company
Stage
State
1
San Felipe
Minera Frisco
Production
Baja California
2
La Bolsa
Pan American Silver
Development
Sonora
3
San Felipe
Americas Silver Corporation
Development
Sonora
4
Promontorio-La Negra
Kootenay Silver (optioned to Pan American Silver)
Advanced Exploration
Sonora
5
Dolores
Pan American Silver
Production
Chihuahua
6
Palmarejo
Coeur Mining
Production
Chihuahua
7
Cusihuiriachi
Sierra Metals
Production
Chihuahua
8
Los Gatos
Sunshine Silver (70), DOWA Metals and Mining (30)
Development
Chihuahua
9
San Julian
Fresnillo
Production
Chihuahua
10
La Encantada
First Majestic Silver
Production
Coahuila
11
Cosala Complex
Americas Silver Corporation
Production
Sinaloa
12
Plomosas
First Majestic Silver
Development
Sinaloa
13
Topia
Great Panther Silver
Production
Durango
14
GuanacevĂ
Endeavour Silver
Production
Durango
15
La Pitarrilla
Silver Standard
Development
Durango
16
La Preciosa
Coeur Mining
Development
Durango
Source: SGM, company websites
21
19
Advanced Exploration
Number
18
34 35
25
22
26 27 28 30 29 31
Number
32 33
36 37 38 39
40
41
42
Name
Company
Stage
State
17
La Platosa
Excellon Resources
Production
Durango
18
San Sebastian
Hecla Mining
Production
Durango
19
La Joya
First Majestic Silver
Development
Durango
20
La Parrilla
First Majestic Silver
Production
Durango
21
Peñasquito
Goldcorp
Production
Zacatecas
22
Juanicipio
MAG Silver (44)/Fresnillo (56)
Development
Zacatecas
23
Del Toro
First Majestic Silver
Production
Zacatecas
24
La Colorada
Pan American Silver
Production
Zacatecas
25
Saucito
Fresnillo
Production
Zacatecas
26
Fresnillo
Fresnillo
Production
Zacatecas
27
San Acacio
Defiance Silver
Production
Zacatecas
28
Veta Grande
Santa Cruz Silver
Production
Zacatecas
29
El Compas
Endeavour Silver
Development
Zacatecas
30
Bilbao
Xtierra
Development
Zacatecas
31
El Coronel
Minera Frisco
Production
Zacatecas
32
La Luz
First Majestic Silver
Development
San Luis Potosi
33
Rosario
Santacruz Silver
Production
San Luis Potosi
34
San Martin-El Pilon
First Majestic Silver
Production
Jalisco
35
Terronera
Endeavour Silver
Development
Jalisco
36
Bolañitos
Endeavour Silver
Production
Guanajuato
37
Guanajuato Complex
Great Panther
Production
Guanajuato
38
El Cubo
Endeavour Silver
Production
Guanajuato
39
Pachuca-Real del Monte
AHMSA
Production
Hidalgo
40
La Guitarra
First Majestic Silver
Production
State of Mexico
41
Zacualpan Properties
IMPACT Silver
Production
State of Mexico
42
San José/ Cuzcatlan
Fortuna Silver
Production
Oaxaca
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| VIEW FROM THE TOP
FRESNILLO’S FORMULA FOR SUCCESS: STRICT CRITERIA, BULLISH INVESTMENT OCTAVIO ALVÍDREZ CEO of Fresnillo
70
Q: What factors helped Fresnillo increase its silver
of which is disseminated and requires a flotation process
production in 2017 despite an overall drop in global
while the other is a vein system that uses a dynamic
production?
leaching process. We had to invest such a large amount
A: Our long-term vision has been key to our ability to
in San Julian because of the two different processes
maintain high production rates no matter the price cycle.
required and the initial lack of infrastructure in the area,
It is our main differentiator. We invest in exploration
but its positive return and the additional potential drove
continuously throughout the cycles and are not
our decision to follow through with the project.
dependent on M&As; 95 percent of our growth is organic. This gives us the possibility of bringing onstream projects
Q: What are the next steps Fresnillo is taking to start
that are strong and able to withstand the cyclicality of
production at Juanicipio?
the mining industry without diluting the quality of our
A: The public information we have released on Juanicipio
portfolio. Our strategy has allowed us to become one of
is from our prefeasibility study in 2012. We are in the
the few companies that still has a strong growth pipeline
process of concluding a full feasibility study as we have
despite the downturn. In 2017, we produced 53.3 million
now a larger volume of resources and we realized that a
ounces of silver and 930,000 ounces of gold, making
larger capacity would require a bigger investment than
Fresnillo the world’s largest silver producer and the No.
what was publicly released.
1 gold producer in Mexico. Juanicipio is the next-largest project in our pipeline and Q: How are rising base metal prices impacting Fresnillo’s
we are discussing with our JV partners the conclusion
operations?
of the feasibility study. The approval process will be
A: All our mines are primary silver producers and we
followed up by the project construction phase. Our goal
produce zinc and lead as a byproduct. As prices improve,
is to start production in mid-2020 and we have identified
base metals can become a more important source of
250 million ounces of indicated silver resources. This may
revenue. Traditionally, our revenues in terms of lead and
be smaller than Saucito but those are high-quality ounces
zinc only accounted for 7-8 percent of our total but last
to add to our portfolio.
year these metals rose to 12 percent of total revenues. This helps increase the competitiveness of our mines and
Q: What criteria does Fresnillo use for new projects before
improve results.
incorporating them into its portfolio? A: We expect all our projects to have a minimum of 150
Q: Why does the company believe that San Julian can
million ounces of silver when it comes to reserves or
become a new mining district in Mexico?
3 million ounces of gold for us to consider it suitable
A: San Julian is our latest operation and it constituted
for our portfolio. Most of our mines are also in the first
the largest investment in the company’s history. We
quartile in terms of production costs so this is a key
invested a total of US$515 million in the areas related to
aspect to consider in our projects before we even think
the feasibility study but we also considered the larger
about developing them. We prioritize a stream of quality
exploration potential of the district. By only exploring
production ounces in our portfolio. The project also must
approximately 30 percent of the area we were able to
be able to provide at least 15 percent IRR that can be
develop a mine and this makes us believe that resources
achieved with higher grades or competitiveness in terms
and reserves will continue to increase for many more
of the investment required to develop it.
years. In the first two years alone, we were able to increase the reserves we had initially identified in our feasibility
Q: How would you describe the M&A market in the industry
studies. We have two different ore bodies in the area, one
considering a decrease in investment?
San Julián mine, Chihuahua
71
A: We have reviewed the options available in the market
to enter as it has the culture and tradition of mining. The
but when we compare the possibilities for M&A to our own
company also found that when comparing the ore bodies
portfolio, those opportunities have always fallen short of our
that have been discovered in Mexico and Peru, there are
metrics. As the majority of our growth has been organic and
larger possibilities of a major discovery in Peru.
up to now we have not needed to acquire additional projects to continue growing, we have the privilege of developing
We used a different strategy by entering Peru four to five
our own exploration projects. We have had to look more
years ago since most mining companies at that time were
internally than externally.
reducing exploration in the country. We now have more than 350,000ha of concessions, which gives us the largest holding
Still, we have acquired prospects at early stages of
for exploration in Peru. But we have not been able to advance
exploration. We tend to look for projects that can help us
because permitting takes longer than in Mexico. Eventually,
consolidate a larger district and expand current mines. Any
we will be able to develop more resources for exploration in
ounce that is located in close proximity to our infrastructure
Peru and we have hopes that Pilarica will become our first
has a larger investment return. Our team of experienced
operation in the country. We are already halfway through
geologists has spotted interesting exploration potential of
the minimum resources needed, with 60 million ounces of
prospects at very early stages that cost less to acquire.
silver in identified resources and further potential to grow. It is a silver and zinc ore body. In Chile, we have reviewed
Q: What will be Fresnillo’s objectives for the next decade
120 different prospects and projects and the next step is to
as it is on the brink of meeting its 10th anniversary goals?
confirm an exploration option and put holes in the ground.
A: We are close to meeting our goal of producing 65 million ounces of silver in 2018 and we already reached our gold
Q: What is the company’s guidance for gold
production target of 750,000 ounces in 2015. Our next step
production in 2018?
is to review all our prospects and projects to solidify and
A: Our guidance for 2018 for gold production is similar to
define our objectives for the coming years. We will continue
what we established in 2017 at 870,000-900,000 ounces. In
to grow in the next four to six years and have new targets
the first five to six years, we were seeing gold production rise
and projects beyond 2020.
at a faster pace than silver but now silver is growing more. In 2017, we saw a slight reduction in gold production due to
Q: How important is it for Fresnillo to diversify its areas of
a longer leaching process at Herradura.
operation? A: In Mexico, we have 1.8 million hectares of exploration concessions and have many targets to explore but we
Fresnillo is the world’s largest silver producer and Mexico’s
believe that it is always healthy to diversify. The company
largest gold producer. It is listed on the London Stock
has identified exploration opportunities in Peru and Chile
Exchange and has seven operating mines across Mexico. In
and is scouting Argentina. We see Peru as a good country
2017, it produced 53.3 million ounces of silver
| VIEW FROM THE TOP
INDEPENDENCIA, GUADALUPE RAMPING UP PRODUCTION AT PALMAREJO MITCHELL KREBS President and CEO of Coeur Mining
72
Q: How will the company expand its portfolio through its
A: Palmarejo has been a tremendous success story for the
planned exploration program in 2018?
company. In 2013, we embarked on a strategy to reposition
A: We have ramped up our exploration considerably
the mine for the long term because at that time it was a
over the last 18 months or so. A certain proportion of our
mainly open-pit, low-grade, high-strip ratio, limited mine
exploration budget (US$22 million) is expensed through
life, and it had a very punitive gold royalty attached to it
our balance sheet but we will also do further capitalized
that was causing us to pay out most of the cash flow we
exploration work. Between expensed and capitalized
were generating. We managed to renegotiate that royalty
drilling, we invested about US$42 million on exploration
to dramatically reduce that outflow, while simultaneously
last year, which was up from US$25 million in 2016. The
transitioning to an underground mine at the Guadalupe
total for 2018 should be around US$45 million, so we will
deposit. We then acquired Paramount, which allowed us
sustain these higher exploration budgets, especially around
to consolidate many additional high-grade underground
our existing operations. In the last 18 months, that higher
deposits that were originally split down the middle between
rate of investment has led to some significant discoveries,
the property boundary. That led to the establishment of a
especially at Palmarejo, where we made at least six new
second underground mine called Independencia and just
discoveries that were previously unknown to us. We can
last year, we started mining there and increasing production
create real value and return to shareholders through drilling,
levels. As a result of those two underground deposits,
so that is what we will continue to do.
Palmarejo saw a 60-percent increase in production and its cash flow went from negative US$30 million in 2016
Q: How do you ensure that increasing these expenses does
to positive US$110 million in 2017. We can sustain this by
not create undue risk for investors?
continuing to mine additional high-grade, underground
A: Firstly, we balance our portfolio between the asset, the
reserves in the coming years. La Preciosa will become an
jurisdiction and the stage of the project. By having a good
interesting project and part of the company’s future growth
balance, we can protect the company and its stockholders.
in Mexico. When and if we see silver rise above the US$20/
Another way we manage that risk is through the
oz range, it will be a viable project for us.
management of our balance sheet. We have put in a great deal of effort over the last two years to reduce our debt and
Q: What were some of the biggest challenges you faced
ensure we have a strong and flexible balance sheet. We have
when you became CEO of Coeur?
dramatically reduced our interest expenses on our debt;
A: There was a lack of operating discipline and understanding
around three years ago, our interest expense was around
of the assets themselves. The company was not good
US$50 million. In 2017, we pared this to approximately
at developing high-quality mine plans based on quality
US$15 million. Those savings are being used to fund drilling
resource models, so there was a big technical push that had
programs where we are having great success.
to be initiated back then to really get a handle on existing operations. A big catalyst for that was bringing in fresh eyes
Q: Given that Palmarejo reached record levels of production
and new perspectives from outside the company and this
in 2017, how does the company hope to sustain this success
really accelerated the process because this made us take a
in the years to come?
critical and candid look at our portfolio. We were also proactive in adding new assets to the company and supplementing our portfolio. We have sold some of our assets just to promote an
Coeur Mining is a diversified, growing precious metals producer
overall improvement in the quality of the company. Our most
with six mines in the Americas employing approximately
recent acquisitions like Wharf and Silvertip are designed to
2,300 people. Coeur’s wholly-owned operations include the
add new, high-quality assets to supplement those that we
Palmarejo silver-gold complex in Mexico
started with when I took this position in 2011.
VIEW FROM THE TOP |
EYES ON DURANGO WITH NEW ACQUISITION KEITH NEUMEYER President and CEO of First Majestic Silver
73
Q: First Majestic produced 3.8 million silver equivalent
the market upon production. We have no hedging strategy
ounces in 1Q18 toward a yearly target of 20 million silver
even though the cyclical nature of the industry dictates that
equivalent ounces. How are you set to meet that target?
silver prices are bound to go low at some point.
A: The acquisition of San Dimas will take us over this number. On an annual basis, we expect to be at approximately 30
San Dimas is the largest gold-silver mine in the state of
million silver equivalent ounces by 2019. The company
Durango and is one of the most important in the entire country.
started to reinvest capital at the end of 2016, with 2017
It is a mine we have had our eyes on for over a decade and,
being the first year in five that we increased investments
when it became available due to Primero’s financial status,
in Mexico. Most of those increases went into development
we were able to evaluate the asset. Because the asset was
and exploration, as well as some property, plants and
already on our radar, we were familiar with its features so it
equipment. We hope this trend will continue over the next
was less of a decision over whether to buy the asset or not –
several years. This investment is being spread out over
for us that was an obvious decision. The question mark was
the company’s seven projects in Mexico and it will impact
over the renegotiation of the stream agreement with Wheaton
production in a very positive way in the next few years.
Precious Metals. Under the prior streaming agreement, the mine was not profitable so the deal needed to be completely
Q: The gold to silver ratio has averaged 1:47 over the 20th
restructured. Luckily, Wheaton was willing to restructure the
century; now, it is at 1:80. When do you expect a correction?
agreement and, when this was finalized, it was a matter of
A: The mining ratio globally is 1:9. This means for every
how to acquire the asset. It took around a year from when
1 ounce of gold mined, we are mining 9 ounces of silver.
we made our first move to when the news was announced.
The ratio at 1:80 is quite exaggerated compared to the mining ratio, and every time we see a ratio climbing up into that range, we always see a correction. Last time it hit 1:80, the ratio subsequently fell very quickly to 1:30 and I would expect to see the ratio collapse again down to similar levels. I am a bull on silver and the company is growing quite nicely. Our production will grow substantially as a result of
First Majestic expects to produce approximately 30 million silver equivalent ounces annually by 2019
our last acquisition, so I think it is a good time for investors to look at owning our stock.
Q: What incentives is the state of Durango providing to continue investing in the state, especially as you are the
Q: Given that your strategy is to bet on one metal and one
state’s largest taxpayer?
country, how does the acquisition of a gold operator’s
A: Our ties with the government of Durango are close. It is a
portfolio change this?
very mining-friendly government and we have noticed that
A: When Primero owned the San Dimas mine, the stream
it is always willing to engage in dialogue. We are in constant
agreement in place meant the majority of the silver went to
discussions with the government over a variety of topics that
Silver Wheaton (now Wheaton Precious Metals), while Primero
arise. Whenever we need government support, it is there to
focused on gold production. Now that the asset has been sold
assist us.
and the stream agreement has been renegotiated, we have incorporated both gold and silver streams into the agreement. Our strategy remains intact, and we are still focusing on one
First Majestic Silver focuses on silver production in Mexico
country and one metal. This will continue to be our strategy
and is aggressively pursuing the development of its existing
going forward. That being said, we do produce byproducts
mineral property assets. The company owns and operates
such as gold, lead and zinc, and these are sold directly into
seven producing silver mines in Mexico
| VIEW FROM THE TOP
OPERATOR PROGRESSING WITH EXPANSION AMID SECURITY CONCERNS Bradford Cooke CEO of Endeavour Silver
74
Godfrey Walton President and COO of Endeavour Silver
Q: What is your perception of the Mexican mining industry?
many problems. We felt safer and more secure but this is
GW: We are optimistic about the mining industry as a
changing again for the worse.
whole because we should soon enter a cycle of higher metal prices. However, we are concerned about rising
BC: We need to see positive actions in each of these
issues in Mexico like security and the political risk of an
areas of concern. The administration should reduce taxes,
election year. Some of our people have been threatened
speed up VAT recovery, improve security and rule of law,
by local gangs but fortunately, we have not experienced
improve land access, speed up permitting and provide more
more serious security issues like some other companies.
government services in the remote communities where
If Mexico wants to take full advantage of the next upturn
most mines are located.
in metal prices and ensure that mining investment from Canada continues, the administration needs to do a better
Q: How are you working to reduce your operational costs
job resolving security issues. Many of our shareholders are
over the next couple of years?
worried about investing in a country where safety is such a
GW: We are going through the process of making our mines
large concern. We are committed to building and operating
more efficient and productive. We started in Guanaceví,
new mines in Mexico if the administration can improve the
which was our highest-cost mine in 2017. Once we achieve
investment climate for foreign investors.
greater efficiency at this mine, we will implement a similar program to enhance productivity at El Cubo and Bolañitos.
BC: Mexico is very fortunate to have an abundance of
We are striving to make our mining processes leaner as quick
natural resource potential and good infrastructure to
as possible. We are simply trying to make better use of our
facilitate the development of the mining industry for the
equipment and people, which are our two biggest assets.
benefit of all. However, we see issues throughout Mexico, such as a high tax rate, slow VAT recovery, high security risk,
BC: We are reducing our operating costs in three ways.
slow government response, difficult land access issues, slow
Historically we have embraced a philosophy of continuous
mine permitting and an increase in community activism.
improvement at each of our operating mines. We are
My perception of the mining industry in Mexico is that it is
focused on improving our metallurgical recoveries by doing
becoming increasingly more difficult to do business.
more research and introducing different equipment and chemicals. We are also conducting programs to improve the
Q: What would you like to see the new administration
productivity at each mine by upgrading our operational and
prioritize to create a healthier mining industry in Mexico?
management systems. But the biggest difference could be
GW: Project permitting and VAT refunds both need to be
the construction of new, higher quality, lower cost mines.
faster, clearer and more transparent. We all know what the rules are but there are some bureaucrats who do not
Q: What have been the company’s biggest advancements
always follow these standards and this makes it hard for
when it comes to its mines in development?
the industry. Better security, as I mentioned, should also
GW: At El Compas, we expect to finish construction of the
be a priority. When President Peña Nieto came into power,
mine and refurbishment of the plant on time and budget
security was a huge issue but he managed to smooth over
in 2Q18 and we will strive for full production by the end of July and an official plant opening in 3Q18. Our largest development project is Terronera near Puerto Vallarta and
Endeavour Silver is a midtier precious metals mining company
we expect to start construction by the end of 2Q18 and
that owns three high-grade, underground, silver-gold mines in
production by the end of the 4Q19, so that 2020 will be
Mexico. The company is forecasting a 20 percent increase in
the first full year of production. The company is investing
production to 10.2-11.2 million silver equivalent ounces in 2018
US$11 million at El Compas and US$90 million at Terronera
over the next two years and US$48 million into its three operating mines in 2018. We are forecasting 20 percent production growth in 2018 and 50 percent production growth once Terronera is up and running. BC: We are building two new mines over the next three years to grow our production by more than 50 percent. Building the new El Compas mine on time and budget will
Endeavour is investing US$11 million at El Compas and US$90 million at Terronera over the next two years and US$48 million into its three operating mines in 2018
be a big advancement this year. We also plan to update our prefeasibility study for Terronera, receive final government
with rising costs and rising risks, new mining projects have
permits, raise debt financing and start construction at
to be higher quality to be economical for development, so
Terronera in 2018.
the M&A market is getting more and more difficult.
Q: What potential do you foresee in the Mexican
Q: What sustainability strategies does the company
M&A market?
use to maintain healthy relationships with surrounding
GW: The M&A market in the Mexican mining industry has
communities?
good potential and even though exploration and mining
GW: We ensure an open dialogue with surrounding
are now very competitive here, there are still many areas
communities to understand what their needs are and to
to explore and mines to acquire. Another challenge is
figure out how we can help them achieve their goals. We
that many surface areas have been thoroughly explored
fund these programs along with the taxes we pay into the
so the next step is to explore for ore deposits and veins
Mining Fund. Through these dialogues, we have realized
hiding below surface. One example is Guanaceví, a mine
there are two main factors that communities want us to
that ran out of ore in 2003, but using modern geological
focus on: training and employment. The company prioritizes
knowledge, we were able to discover seven new ore bodies
these elements along with scholarships and normal
hiding below surface. We also found six new, thick and rich
festivities within these communities.
veins underneath Bolañitos, a mine that has been producing off and on for almost 500 years. Mexico has a tremendous
BC: Our main sustainability strategy is to treat the local
amount of potential but it does take more and more time
communities with respect as stakeholders in our business.
and money to discover underground deposits. Endeavour
That means starting early at each new mining project to
has a portfolio of exploration projects in Mexico on which
meet the people, make friends and build relationships.
we will spend US$11 million in 2018. We acquired our
Developing strong relationships involves communicating
Parral properties in 2016 and discovered significant new
our plans and listening to feedback so that we can work
mineral resources there in 2017. Parral is now our biggest
with each community to help solve local problems and
exploration project in Mexico.
fulfil their desire to build a better living situation. We try to make a positive difference in people’s lives in several
BC: I think the potential to discover new ore bodies and
ways: through health, education, environment, culture
acquire new mining projects is still quite good in Mexico but
and economics.
75
| MINE SPOTLIGHT
76
SAUCITO It is no wonder that Zacatecas is one of the world’s top silver districts. At its core, Saucito is certainly one of the state’s and Fresnillo’s most important assets, with a mining capacity of 2.6 million t/y and an average ore grade of 261g/t of silver and 1.39g/t of gold. Currently under expansion, Fresnillo describes Saucito as a critical operation for achieving its 2018 production target of 65 million ounces of silver. In 2017, Saucito contributed 36 percent of the company’s total silver production and generated 22.6 percent of its total adjusted revenue. Saucito is located at the heart of Zacatecas Silver District, only 8km southwest of the Fresnillo mine. Primarily silver and gold, the asset is composed of an underground mine and a flotation plant. Going back to the history of the operation, Fresnillo started its drilling campaign back in 2004. As results proved enticing, construction began in 2009, with commercial production commencing in 2011. The asset employs 763 people and relies on more than 1,824 contractors.
Saucito contributed 36 percent of Fresnillo’s total silver production in 2017 With an expected mine life of 5.8 years, the performance highlights for 2Q18 find a quarterly and year-to-date 7.7 percent and 7 percent decrease, respectively, in silver production due to lower ore grades and increased dilution. However, Fresnillo pursued a strategy of increasing the volume of ore processed and ramped up production in 2Q18 by 8.3 percent compared to 1Q18. The FY18 ore grade is expected to be 255-265g/t. But while silver suffered a temporary setback, gold is shining, with 2Q18 production jumping 44.1 percent compared to 1Q18 and 35.7 percent from 1H17 to 1H18. The 2018 performance targets focus on further reducing dilution, developing the Huizache veins, ramping up the pyrites plant and initiating the deepening of the Jarillas shaft. In 2017, adjusted revenue from Saucito contributed US$504.2 million to Fresnillo’s overall income, a 4.5 percent increase compared to FY16. CAPEX for FY17 totaled US$133.7 million with US$26.1 million in exploration expenses. The mine’s 2017 production yielded 21.2 million ounces of silver, 69,948 ounces of gold, 17,714 tons of lead and 20,348 tons of zinc.
77
| VIEW FROM THE TOP
PAUSING SILVER PRODUCTION TO REDUCE AISC AND INCREASE REVENUE DARREN BLASUTTI President and CEO of Americas Silver Corporation
78
Q: How does Americas Silver mitigate the risks related to
Some of our competitors have been mining their highest-
fluctuations in silver prices?
grade silver ores to survive in this price environment. Some
A: Silver tends to follow gold and when gold is trading in a
miners in Mexico are producing at an AISC of US$14-$16,
defined range, silver trades a little more aimlessly than other
while ours in 2018 will be around US$0/oz because we
metals. When gold goes down, silver tends to slide even
have all the zinc and lead by-product revenue. Our reserve
further, and when gold rallies, silver rallies much more on a
grades will continue to rise because we are now mining our
relative basis. There is one primary reason for that, which is
lowest-grade silver ores. We are very lucky that we have
that silver tends to be a secondary or tertiary product. There
both high and low-grade base metals, and high and low-
are actually very few mines that exclusively produce silver. This
grade silver deposits, so we can be more flexible in reacting
means that a copper mine, for example, would not be shut
to prevailing market prices. In 2012, we were the highest-
down just because silver prices have dropped, so there is no
cost producer in the silver industry at US$33/oz, while in
real supply response either on the upside or on the downside.
2018 we will come in between -US$1-4/oz, a reduction of
When gold moves, it is certainly a good sign for silver because
over 90 percent.
we have seen that, although silver moves up more slowly, it moves much higher in relation to the baseline price.
Last year, on the fringes of the San Rafael mine, we discovered irregular occurrences of silver and copper, so we
Currently, Americas Silver Corporation is producing 2 million ounces of silver, around 45 million pounds of zinc and 35-40 million pounds of lead
stepped out and drilled it. Through this program, we drilled
Q: How did Americas Silver Corporation use a diversified
Q: With Americas Silver sitting on the Zone 120 resource,
portfolio to reduce AISC and increase revenue?
how are your exploration plans continuing?
A: We have taken a different approach than most of our
A: We love our land position and are convinced there is
competitors over the last few years. In 2012, our assets’
more to be found in the district. While Zone 120 continues
combined production was about 3.5 million ounces of
along the development pipeline, our geologists are taking
silver, a few million pounds of copper, 5 million pounds of
time to reconsider the potential of the district as a whole.
lead and 10 million pounds of zinc. Now, we are producing
They have recently recompiled and reviewed historic data
approximately 2 million ounces of silver, around 45 million
and have come up with some very exciting targets. There
pounds of zinc and 35-40 million pounds of lead. We still
is still a lot of early stage work to be done but we are sure
have all that silver available to be mined but we have chosen
the next discovery is waiting for us.
61.4m of 412g/t silver equivalent, which is about 5g/t in gold equivalent. This high-grade silver deposit is called Zone 120. Our existing resources in the area cover a footprint of 1,100ha and within that area we have discovered 170 million silver equivalent ounces. The question remains whether or not we should build and produce from the mine today given our bullish view of future silver prices.
not to produce it given less-than-optimal silver prices. Right now, I believe there is nothing better than what we are doing here because we do not need to issue any shares Americas Silver Corporation is a leading junior silver producer
to grow our reserve base. Last year, we spent about US$2
with a strong operating platform in the Americas. With the San
million and added 20 million silver equivalent ounces. This
Rafael mine in full production, it is positioned to become one
means our per share value of silver continues to go up and
of the lowest-cost silver producers globally by 2018
we continue to generate free cash flow.
VIEW FROM THE TOP |
INTRODUCING PROGRESS AND EXCEEDING GUIDANCE IN OAXACA LUIZ CAMARGO Country Representative and Director of Finance and Corporate Affairs of Compañía Minera Cuzcatlán
79
Q: How do you ensure responsible and sustainable
mine in Oaxaca, our original forecast was to produce 850t/d
operations and how do you add value to the communities
but we were able to start outright with almost 1,000t/d in
you work with?
2011. By 2014 our production was at 2,000t/d. In 2016 we
A: In Mexico, we work in Oaxaca, which is probably the most
reached the peak of the mine’s operations with 3,000t/d
complex state in which to operate a mine. But Fortuna Silver
while adhering to budget.
Mines, through its subsidiary Compañía Minera Cuzcatlán, was able to change the mentality of the communities of San
Q: You have several exploration projects in joint venture
Jose del Progreso. This area was marginalized with little
with Prospero Silver. How successful has this been?
infrastructure development and scarce public services for
A: I think this JV is working very well. By the end of 2018,
education, health and sanitation. Today, the area around
we will decide whether to increase our participation,
where we built our operations has flourished and developed
which is less than 20 percent currently, or select some
sustainable communities, with schools, local stores and
of the properties Prospero is analyzing and take them to
other amenities that benefit the community. Our company
development ourselves. We expect our property portfolios
always prioritizes security, environmental and social aspects.
in Mexico to increase as a result of this JV.
Our operations in Oaxaca started producing in 2011 and are expected to be exhausted by 2024. From the exploration
As for other exploration activity, we are looking at both
to the forecasted closure phases, our investment in the
brownfield and greenfield projects. Compañía Minera
area totals over US$1 billion, including CAPEX, materials,
Cuzcatlán’s 2018 budget for exploration in Mexico is almost
supplies and services. The company will also contribute
US$10 million, most of which will be spent near our current
over US$340 million in taxes over its life cycle in the area
operations in Oaxaca.
We are committed to the local communities of San Jose del
Q: What is Fortuna Silver Mines’ expectation for its
Progreso and nearby communities. In 2017, we spent US$33
operations in the country?
million in the area on supplies, labor and raw materials. This
A: Fortuna Silver Mines is a relatively young company, having
money included the workers’ share of the profits (PTU) and
started 14 years ago, but our board and staff are experts
expenditures. This is a lot of money for such a small region.
in the mining industry and the opportunities that exist in
Also, our relationship with the local and federal authorities
Latin America. We have operations in Peru and Mexico and
has been very good and they have been supportive of this
will start in Argentina in the third quarter of 2019. We are
project. The company’s policy is to be strictly transparent
focused on strengthening the company’s foundation based
and in full compliance with local requirements.
on a culture of sustainable growth. We are also building a robust platform and organizational structure that can be
Q: How close are you to accomplishing the company’s
replicated in other mining jurisdictions abroad. This implies
FY18 guidance and how much production is coming
analyzing the capabilities we have and harmonizing these
from Mexico?
with our needs. Fortuna’s first mine was in Peru, the second
A: Fortuna’s annual production guidance for 2018 is 8.3
in Mexico, the third will be in Argentina. Our fourth mine
million ounces of silver, 48,300 ounces of gold, 25.8
most likely will be in Mexico.
million pounds of lead and 44.8 million pounds of zinc at an estimated consolidated AISC of US$6.8/oz of silver. Ninety percent of the silver guidance and 100 percent of
Compañía Minera Cuzcatlán is a subsidiary of Fortuna Silver
gold guidance comes from Mexico, while zinc and lead
Mines, a rapidly growing precious metals producer that
are predominantly from Peru. We expect to exceed our
operates two low-cost mines in Peru and Mexico and holds
forecast by at least 10 percent. Regarding our San Jose
commanding land positions in Peru, Mexico and Argentina
| INFOGRAPHIC
SILVER, THE GLOWING BEACON OF THE MEXICAN MINING INDUSTRY
producing countries, Mexico led the pack as one of the seven
17.5
that did not experience a fall. Surprisingly, Peñasquito was the best producing silver mine in the country, followed by Saucito,
15.0
Fresnillo and San Julián. 12.5 200 160 120 80 40 0
TOP 10 SILVER PRODUCING COUNTRIES 2017 (million ounces)
1st
7.5
10th
852.1
25.6
9th
million ounces produced globally in 2017
33.7 35.4
8th
10.0
196.4
39.5
5.0
2.5
7th
40
147.5
40.5 42
6
th
2nd
0.0
US$155 Million
US$11.3 Million
Zacatecas
112.6
Palmarejo | Coeur Mining
from 576.8 million ounces in 2017. Out of the Top 20 silver
Chihuahua
5th
WORLD SILVER DEMAND 60
1,600 1,400 1,200
40
1,000
30
800 600
20
400 10
200 0
Constant 2017 US$/oz
50
2009
2011
Industrial applications Jewelry and silverware
2013
2015
Coins and bars ——Real silver price
2017
0
electronics
500
Other industrial Photography Brazing alloys
400
and solders
Photovoltaic Ethylene oxide
633.8
Electronical and
600
300
200
100 0
190.0
fabrication:
150.3
•• Industrial
700
528.2
bars
800
176.9
••Jewelry ••Coins and
94.9
4.0% US 3.0% Argentina 16.3% Others
641.9
4.8% Chile 4.7% Bolivia 4.6% Poland 4.2% Australia
197.9
23.0% Mexico 17.3% Peru 13.2% China 4.9% Russia
WORLD SILVER SUPPLY AND DEMAND
3rd
177.6
4th
Million ounces
80
20.0
industrial fabrication demand rose to 599 million ounces
San Julián | Fresnillo
and bar demand took the biggest drop with 27 percent. But
*2020 -Juanicipio | Fresnillo-MAG Silver
demand for silver also saw a fall of 2 percent, of which coin
(*Expected production date)
US$305 Million
22.5
*2018 -Planta Piritas | Fresnillo
row with a deficit in the international silver market. Physical
••Top silver mines ▲▲Top new silver projects
*2018 - El Compás | Endeavour Silver
year with a drop-in silver mine supply and the fifth year in a
Fresnillo | Fresnillo
25.0
La Colorada | Pan American Silver
market reported in 2017. This is the second consecutive
Saucito | Fresnillo
production afloat despite the 4-percent drop that the global
TOP SILVER MINES AND PROJECTS IN MEXICO 2017 (million ounces) Peñasquito | Goldcorp
Fresnillo’s thriving portfolio is helping keep Mexico’s silver
2008 2008
2009 2009
2010 2010
Total physical demand
1,075.8
853.1
1,026
Physical surplus/deficit
-168.6
63
48.9
907.2
916.1
1,074.8
Total supply
MAIN SILVER PRODUCERS BY STATE IN 2017
42.1% Zacatecas
17.0% Chihuahua 1.7% Durango
187
7.0% Sonora
5.0% Oaxaca 17.2% Others
million ounces of silver produced in Mexico
US$55 Million
Fresnillo
US$482 Million
*2019 - Terronera | ITorex Gold
*2022 - Media Luna | ITorex Gold
US$303 Million
US$69 Million
1st
KGHM Polska Miedź
2nd
Glencore
3rd
Goldcorp
4th
26.8 Polymetal International
5th
37.7
28.6
26.4
*2019 - Rey de Plata | Industrias Peñoles
Tizapa | Industrias Peñoles
San José | Fortuna Silver
*2018 - Tahuehueto | Telson Resources
*2018 - La Ciénega (Expansion) | Fresnillo
El Herrero | Minas de Bacis
54.2
40.0
Industrial fabrication increased 4% to 599 million ounces, the highest level since 2013
La Ciénega | Fresnillo
TOP PRODUCING COMPANIES' OUTPUT (million ounces)
Compañia de Minas Buenaventura
6th
25.0 Pan American Silver
7th
19.1 Hochschild Mining
8th
17.3 Volcan Compañia Minera
9th 10th
16.9 Hindustan Zinc 16.8 Corporación Nacional del Cobre de Chile
11th
US$32.2 Million
2011 2011
2012 2012
2013 2013
1,113.1
990.9
1,125.6
-69.4
14.9
1,043.8
1,005.8
2014 2014
Jalisco
599.0
576.8
583.2
Guerrero
2015 2015
209.1 151.1
205.0 207.8
292.1 226.7
234.1 226.4
596.3
241.1
604.6
Oaxaca State of Mexico
220.6
600.1 187.4 159.7
191.5
212.7
661.5
Durango
2016 2016
2017 2017
1,041.9
1,017.6
1,118
1,165.3
-138.2
-68
-121.3
-32.5
-26
987.4
1,050
1,044
1,009
4 991.6
The silver market recorded a deficit of 26 million ounces in 2017, a fifth straight annual shortfall
16.4 Coeur Mining
12th
16.2 Sumitomo
13th
15.9 AMC
14th
13.3 Boliden AB
15th
12.5 Hecla Mining
16th
12.2 Industrias Peñoles
17th
12.0
South
18th
9.9 BHP Billiton
19th
9.9 Tahoe Resources
60 50 40 30 20
10
20th
0
Source: The Silver Institute, GFMS, Thomson Reuters, CAMIMEX
81
| INSIGHT
IN SEARCH OF A LATE-STAGE LATIN AMERICAN PROJECT JAMES BANNANTINE President and CEO of Great Panther Silver
82
When deciding where to set up shop, operators look at
is located 15km northeast of Guanajuato. Although the
more than metal availability. Chief among the priorities is
project is at the grassroots stage, Great Panther has
determining whether or not the company will be welcome
reason to be optimistic about its potential since it crosses
by the community, says James Bannantine, President and
known veins on the Sierra Vein system. Its other Mexican
CEO of Great Panther Silver. “The first consideration for a
exploration property is El Horcón, located in Jalisco. “El
mining company should be to go where it is wanted,” he
Horcón is a historic mining operation with gold, silver, lead,
says. “Mining activities have to be invited.”
and zinc mineralization but the extent of past production is unknown,” says Bannantine. It holds nine known veins,
Once the welcome mat is in place, other key considerations
with the Diamantillo Vein traceable on the surface for more
are logistics, infrastructure and human talent, areas in
than 4km. Limited previous drilling and Great Panther
which Mexico has strong advantages. “The country has
having drilled only 2,147m in 24 holes means the property’s
great infrastructure, logistics and it is right next to the US,”
potential is also largely unknown.
Bannantine says. “There are great ports, good construction and engineering firms, a strong supply chain, high-tech
On an international note, the company is looking to
equipment, experienced contractors and a talented
bring back into production the Coricancha Mine in Peru
workforce, all of which are critical to our business.”
that it acquired in 2017. It is also interested in acquiring an additional advanced stage project or mine in Latin
Great Panther Silver owns the Guanajuato Mine Complex,
America. “We have US$60 million in cash and no debt,”
which consists of two underground mines: San Ignacio
says Bannantine. “We have a clean balance sheet that is
and Guanajuato. The operation serves as the company’s
sufficient to fund the restart of Coricancha and also to
administrative and technical base in Mexico. In January
acquire a new project.” To identify the right opportunity,
2018, Great Panther Silver announced that it had doubled
the company has an expert team looking for a late-stage,
its measured and indicated resources estimate at the
brownfield project, with 4 million ounces of silver equivalent
Guanajuato Mine Complex to over 13 million silver equivalent
or more, that is ready for the construction phase. He says
ounces. Estimated measured resources alone at San Ignacio
that Mexico’s reputation as a silver producer places it at
increased by 121 percent to 9.3 million silver equivalent
an advantage over other jurisdictions being examined by
ounces and at Guanajuato by 33 percent to 1.8 million silver
Great Panther. “Silver first, gold second,” he says. “Mexico
equivalent ounces. “This takes the mine’s life from four to
first, Peru second and Brazil third.”
eight years and we are continuing our drilling programs to find new resources and extend mine life,” says Bannantine.
The company expects to acquire its next project through existing liquidity. Bannantine remains open to considering
Investment is also being allocated to the Topia Mine in
other financial mechanisms, such as streaming agreements,
Durango. At the beginning of 2017, the company upgraded
but he believes that the tool should be carefully considered
its plant and is transitioning to a new tailings facility. This
before being employed. “A stream is listed as a liability on
expansion increased Great Panther Silver’s 2017 AISC but
the company balance sheet and on the mine,” he says.
Bannantine says on average, all mines are operating at a steady level, at about 4 million ounces of silver equivalent
The company provided 2018 guidance of 4 million ounces
per year. “We are making money as a company,” he says.
of silver equivalent on a US$12-13 AISC and a corresponding profit of US$68 million. Bannantine expects to pump much
As well as investing in expansion, Great Panther is looking
of the budget into drilling in 2018, with 24,000m planned.
further down the road to advance its exploration pipeline.
“We are going to keep drilling around our mines, rather than
In Mexico, the 20,400ha Santa Rosa silver-gold property
carrying out greenfield exploration,” he says
VIEW FROM THE TOP |
SILVER TO PICK UP IN LONG TERM DESPITE PRICE STAGNATION MICHAEL DIRIENZO Executive Director of The Silver Institute
83
Q: What are the main elements driving the demand
annual data on the silver market. It is comprehensive,
for silver globally and how is Mexico adapting to
extensive and continues to evolve to provide the
these trends?
information that most want to see today. Its insights serve
A: Silver will be mined forever. Typically, silver is a
as a blueprint of data on many key aspects of the industry
byproduct of other mining activities, with only nearly
where all readers, including Mexican silver operators, can
30 percent coming from a primary silver mine. When
draw guidance on past and future trends in the market.
miners are mining for gold, lead, copper, zinc or other
We have installed a World Silver Survey library on our
minerals, often silver is in the ore body. The world needs
website where anyone can download the current and all
silver, especially for industrial activities. As the world
previous editions at no cost.
becomes less reliant on fossil fuels for energy, already we are seeing new opportunities for silver in photovoltaics and hybrid and electric cars. We just released a report titled “The Role of Silver and the Green Revolution,” which outlines the future of silver in these technologies. In terms of Mexico’s role, the country has been at the forefront of mining for centuries. It will continue to
Silver has been considered a precious element for 6,000 years and has had a role as a trading metal in nearly every ancient and modern culture
lead the way in implementing new innovative and safe, clean mining techniques. Mexico has the infrastructure,
Q: What must miners know about the importance of
personnel, experience, and most importantly, the silver
promoting public understanding and how far is there
reserves to maintain its top spot for many years to come.
a focus on changing negative perceptions of mining? A: This is a story that we promote at the institute. The story
Q: Identifiable investment fell by 40 percent in 2017, the
of silver is unique as it is the most used precious metal in
lowest level since 2007. How is this expected to affect
industry, last year consuming nearly 600 million ounces
the silver market?
and posting its first increase since 2013. Everything we
A: This in my opinion, and many others', is the primary
as consumers touch electronically essentially has silver
reason why we are seeing prices at these low levels. The
inside. From our cars, homes, offices, technology and
investment side of the silver equation is not where it once
increasingly in healthcare, all is made better by silver.
was. Using the US as an example, it currently has low unemployment and 4 percent GDP growth coupled with
We have just initiated a Silver Sustainability Program at
a very strong stock market. This means that few people
the Institute. In early 2019, we will roll out an industry
see the need to turn to hard assets as an investment. So,
platform outlining our members’ commitment to
while prices of the metal are not as expensive as they
responsible mining practices, such as good neighbor
once were, we do see a recovery down the road, from
partnerships, and other initiatives. We will augment this
value buyers and especially if and when the economy
with a media campaign and a website solely devoted to
starts to falter.
our program.
Q: How does the World Silver Survey benefit the industry and what is your assessment of its progress almost 30
The Silver Institute is a nonprofit international organization
years after its first edition?
that draws membership from across the breadth of the silver
A: The World Silver Survey is considered by most silver
industry. The institute serves as the sector’s voice in raising
market participants and experts as the best source of
public understanding of the many uses of silver
| MINE SPOTLIGHT
84
PALMAREJO Coeur’s flagship underground Palmarejo mine is located in southwest Chihuahua, between the towns of Temoris and Chinipas. With over 840 employees in 2017, Palmarejo produced 7.6 million ounces of silver at an average grade of 5.62oz/t and 121,269 ounces of gold at an average grade of 0.09oz/t, representing a 60 percent increase over 2016. Mining during the first half of 2018 has continued at a rate of approximately 3,800t/d, producing 4.1 million ounces of silver and 63,598 ounces of gold at similar grades to 2017. The Palmarejo Complex consists of 77 wholly-owned mining concessions covering approximately 40,000ha of land. The complex is located in the western flank of the Sierra Madre Occidental mountain range, which is the home to many of Mexico’s silver-gold mines. Since late 2016, all production from the Palmarejo Complex has come from the Guadalupe and Independencia underground mines, although development has now commenced towards the Nación deposit with production expected to commence in 2019. The Nación deposit was discovered in late 2015 and is strategically located between the Guadalupe and Independencia mines, allowing it to be accessed from existing underground infrastructure. Following the discovery of Nación, the company started an intensive exploration program focused on the discovery of other near-mine targets that could be synergistic with the operating mines. In 2017, a number of new discoveries were made, particularly around the Guadalupe mine, including the Zapata deposit, which is located only 150m from current mine workings. As a result of the aggressive exploration and drilling programs that commenced in 2016, Palmarejo has seen its proven and probable reserves increase from 44.9 million ounces of silver and 690,000 ounces of gold at the end of 2015 to 47.0 million ounces of silver and 706,000 ounces of gold at the end of 2017. During the same time frame, measured and indicated resources have increased from 25.3 million ounces of silver and 330,000 ounces of gold to 27.0 million ounces of silver and 368,000 ounces of gold with inferred resources increasing from 8.2 million ounces of silver and 147,000 ounces of gold to 31.1 million ounces of silver and 369,000 ounces of gold. Exploration during 2018 has continued to test near-mine targets and extensions of deposits discovered in previous years as well as more regional targets with the aim of continuing to increase the mineral inventory and mine life of the complex.
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| VIEW FROM THE TOP
JUNIOR MINER THINKS BIG, TARGETS EXPLORATION Brendan Cahill President and CEO of Excellon Resources 86
Ben Pullinger Senior Vice President Geology of Excellon Resources
Q: How does Excellon Resources’ outlook for silver prices
We also continue to see a trend to own big pieces of ground
affect the company’s business plan?
worldwide, allowing continent-sized geology to be carried
BC: Platosa has the benefit of high grade silver, lead and
out on a regional scale. That is how the next great discoveries
zinc production with 50 percent of our revenues from base
will be made; think big to find big. Our approach to
metals. As a result, we have some protection against weaker
exploration is somewhat unique, as there are few companies
silver prices and volatile fluctuations. We still strongly
in Mexico thinking on the same scale. Both our projects are
believe in silver’s potential. It is a vital metal, and one of
located in the heart of world-famous mineral belts, home to
the most reflective and conductive materials with multiple
some of the largest mining companies. Recently, we entered
uses that permeate every new technology. We are living in
into a toll mining agreement with Hecla Mining to process
the future and as we make more advancements, we must go
ore from the San Sebastian Mine at our Miguel Auza facility,
back to the source to build our dreams. Our main objective
securing additional cash flow once the bulk sample-testing
is to continue to unlock exploration potential and secure
program is complete in the second half of 2018.
future supply. BP: I believe that exploration has to be a focus. Without Q: What part does Mexico play in your portfolio and what
exploration, there is no ore. We think that now is the time to
are your expansion plans in the country?
really start that exploration again because there are many
BC: We have two key projects in Mexico. We have
quality projects that have been underserved in recent years.
been operating the Platosa Mine in Durango for over 12
Considering the geological potential in Mexico, we need
years. The mine sits on just 50ha of 21,000ha of mineral
more exploration to bring those projects into the pipeline.
concessions. We have barely scratched the surface. With production now ramping up, we are focusing our efforts
Q: How do you want to grow in the future?
on uncovering Platosa’s expansion potential, both near the
BC: La Platosa is the highest-grade silver mine in Mexico
mine and regionally. Our exploration efforts for 2018 include
and one of the highest-grade silver mines in the world.
a 30,000m drill program.
It is a fascinating project that has been challenging but with hard work and, sound engineering, we have turned
Our second project is located in Zacatecas at Miguel Auza,
our operation around and started to see the benefits of
14,000ha of mineral concessions with a historical resource
recent mine optimizations. Additionally, we have focused on
and an operating and scalable mill. We have been trucking
continuing with geophysics processing, carrying out more
Platosa ore to Miguel Auza with excellent recoveries for
mapping and enhancing our database during down times.
the last few years. Recently, we reviewed the exploration
We are very well-positioned for the upside of the market.
potential from a regional perspective and found 10 epithermal veins right on the surface that have never been
One of the main issues facing our industry is the reduction
drilled to depth, with historical results at shallow depths
in exploration expenditure in recent years. Development
assaying multi-kilo silver values. We consider this project
spending has recovered from the depths of this bear market
a new frontier to expansion. Anything that we find in that
but without the exploration it is impossible to keep mines
area goes back to our mill.
going or to find new projects. Excellon is working toward four kinds of discovery: continue to expand existing resources, find more high-grade projects like Platosa on the bigger ground
Excellon’s 100-percent-owned Platosa Mine in Durango has
package, discover the large-scale skarn deposit associated
been Mexico’s highest-grade silver mine since production
with Platosa mineralization and make a high-grade discovery
commenced in 2005. It also owns the Miguel Auza property
at Miguel Auza on the northern extension of the richest silver
in Zacatecas
belt in the world.
INSIGHT |
CREATING VALUE THROUGH INNOVATIVE MINING CARLOS AGUIAR Vice President Mexico of Minera Hecla
87
Miners agree that the best place to find a new mine is
In San Sebastian, it leases the plant from Golden Minerals in
around the area of an existing one. This was Hecla’s
a contract up to 2020. “We have been able to extend this
strategy with its San Sebastian mine acquired in 1999 from
agreement three times as we kept finding new ore zones,”
Monarch Resources in the state of Durango. “The mine
he says. Hecla entered into a toll milling agreement in which
operated from 2001 to 2005 until exhausting estimated
sulfide ore will be trucked 26 miles to Excellon’s Miguel
reserves and stopping production,” Carlos Aguiar, Vice
Auza flotation mill facility in Zacatecas. “As Excellon’s plant,
President Mexico of Minera Hecla says. Afterward, Hecla
we expect good results from this partnership and our goal
continued exploring the property and found new reserves
is to start production in 2019 or 2020,” he adds.
to ramp up production in 2015. “Our plan for mining the middle vein goes up to 2020, mainly with silver and gold
Diversification also has the company looking for new
reserves. We have increased our exploration to ensure
projects in the country. “We remain open to acquiring new
growth over the next few years.” Hecla’s goal is to procure
properties in Mexico and we have set a budget for this goal,”
mine properties in the best-known mining districts in
says Aguiar. “We are constantly searching, both here and
the world.
abroad.” Apart from diversification, Aguiar says that another way for operators to mitigate the inherent risks of cycles
Although Aguiar believes silver prices, which have been
is by adopting new technologies. “Mining companies are
stagnant in 2018, will recover in the short term, metal-price
becoming more innovative and investing in new technologies
dynamics have influenced Hecla’s strategy to also focus
to increase productivity while lowering mineral production
on diversifying into several metals. Exploration in San
risks,” he says. But he points out that it is not just about
Sebastian continues to identify new high-grade resources
technology in mining processes as metals demand is driven
to extend the cyanide milling circuit, as well as increase
by global innovations. Aguiar highlights that both are
the amount of polymetallic Hugh Zone-style mineralization.
inextricably linked. For example, the rise of electric vehicles
But different metals imply infrastructure adjustments for
means investors are placing bets on minerals such as lithium
different treatment processes. To avoid this expense, the
and cobalt while automated vehicles can also be remotely
company rents a third-party mill.
used in mines to minimize safety risks and increase efficiency.
| ROUNDTABLE
HOW ARE YOU MITIGATING THE RISK CAUSED BY STAGNATING SILVER PRICES?
After a brief shining moment in 2011 when silver reached almost US$50/oz, prices have been largely flat, hovering around the US$16-17 mark since 2014 and struggling to break through the US$20/oz ceiling. Mexico is a country of silver, ranking first in global silver production and home to the world's largest silver producer. With so much at stake with the global silver prices, Mexico Mining Review asked industry experts about the causes of the price depression, their expectations for the future of silver and the ways they are protecting themselves against the volatility.
88
At Platosa, we have the benefit of high grade silver, lead and zinc production with 50 percent of our revenues from base metals. As a result, we have some protection against weaker silver prices and volatile fluctuations. We still strongly believe in silver’s potential, as a vitally important metal and as one of the most reflective and conductive materials with multiple uses that permeate every new technology. We are living in the future and as we make more advancement, we must go back to the
BRENDAN CAHILL President and CEO of Excellon Resources
source to build our dreams. Our main objective is to continue to unlock exploration potential, and secure future supply.
Silver tends to follow gold and when gold is trading in a defined range, silver trades a little more aimlessly than other metals. When gold goes down, silver seems to slide even further, and when gold rallies, silver rallies much more on a relative basis. We are positive on silver as this is the foundation of our company. Nevertheless, we have taken a different approach than most of our competitors over the last few years. In 2012, our assets’ combined production was about 3.5 million ounces of silver, a few
DARREN BLASUTTI President and CEO of Americas Silver Corporation
million pounds of copper, 5 million pounds of lead and 10 million pounds of zinc. Now, we are producing approximately 2 million ounces of silver, around 45 million pounds of zinc and 35-40 million pounds of lead. We still have all that silver available to be mined but we have chosen not to produce it given the less-than-optimal silver prices.
Our long-term vision has been key to our ability to maintain high production rates no matter the price cycle. It is our main differentiator. We invest in exploration continuously and through the cycles and are not dependent on M&As; 95 percent of our growth is organic. This gives us the possibility of bringing onstream projects that are strong and able to withstand the cyclicality of the mining industry without diluting the quality of our portfolio. Our strategy has allowed us to become one of the few
OCTAVIO ALVÍDREZ CEO of Fresnillo
companies that still has a strong growth pipeline despite the downturn. In 2017, we produced 53.3 million ounces of silver and 930,000 ounces of gold making Fresnillo the world’s largest silver producer and the number one gold producer in Mexico.
Although there is a relationship between the prices of silver and gold, I would not say silver necessarily tracks gold too closely. The mining ratio globally is 1:9. This means for every ounce of gold mined, we are mining 9 ounces of silver. The ratio at 1:80 is quite exaggerated compared to the mining ratio, and every time we see a ratio climbing up into that range, we always see a correction. Last time it hit 1:80, the ratio subsequently fell very quickly to 1:30 and I would expect to see the ratio collapse again down to similar levels. I am a bull on silver and the company is growing quite nicely. Our production will grow substantially as a result of our last acquisition, so I think it is a good time for investors to look at owning our stock.
KEITH NEUMEYER President and CEO of First Majestic Silver
89
Falling new mine supply of silver due to few new mines being built during the recent five-year bear market of low metal prices should help boost higher metal prices for the next few years. Investment demand for silver is still low but we know from experience that when metal prices start to rise due to inflation or other economic factors, investors will jump back into silver and drive silver prices to new highs. We are reducing our operating costs and we are building two new mines over the next three years to grow our production by more than 50 percent. Building the new El Compas mine on time and budget will be a big advancement this year. We also plan
BRADFORD COOKE CEO of Endeavour Silver
to update our pre-feasibility study for Terronera, receive final government permits, raise debt financing and start construction at Terronera in 2018.
The story of silver is unique as it is the most used precious metal in industrial applications, last year consuming nearly 600 million ounces and posting its first increase since 2013. Everything we as consumers touch electronically essentially has silver inside, from our cars, homes, offices, technology and increasingly in healthcare. The fall in identifiable investment, in my opinion, is the primary reason why we are seeing prices at these low levels. The investment side of the silver equation is not where it once was. Using the US as an example, it has low unemployment and 4 percent GDP growth coupled with a very strong stock market. Many people are not turning to hard assets as an investment. So, while prices of the metal are not as
MICHAEL DIRIENZO Executive Director of The Silver Institute
expensive as they once were, we do see a recovery down the road, from value buyers and especially if and when the economy starts to falter.
Silver prices have definitely reached a peak. As 60 percent of silver is produced from base metals mines, if we do not see investment in base metals, the supply of silver will be affected. If supply is cut down, the price of this commodity will go up. I think that in the near and long terms the prices of silver will rise. Gold is a very important part of our company; our revenues consist of 55-60 percent gold income and the rest is from silver. If the silver industry picks up, we will be more than happy to step up our participation in silver streaming. At the moment, about two-thirds of our opportunities are gold-focused. I do not think we will venture in other base metals, as we try to keep our business model as simple as we can. We seek high-quality and long-life assets with high revenue margins to deliver the best exposure to precious metals to our clients. We are sticking to our specialty.
RANDY SMALLWOOD President and CEO of Wheaton Precious Metals
Santa Barbara mine, Chihuahua
COPPER & BASE METALS
4
Copper has proven to be the most stable of the base metals group, given the solid
forecast for Chinese economic growth. Despite expectations, Beijing’s ban on copper scrap imports has had little impact on the brown metal’s market dynamics. But experts predict a bigger effect from the US-China trade war since the Asian country accounts for 45 percent of global demand for the metal. Copper reached its 2018 peak on July 10 with a price of US$6,307/t.
Meanwhile, according to LME’s trading summary, zinc’s price fluctuated between US$2,300/t and US$2,700/t in the first eight months of 2018. Lead remained between the US$2,000/t and US$2,100/t mark. But among all base metals, lithium is expected to perform the best thanks to the rising demand for electric vehicles and energy storage applications. Mexico could be the next hot spot for the metal, with the biggest lithium carbonate deposit of the world right in the heart of Sonora.
Oxidation rates may be the common factor among base metals but as far as markets go, these minerals follow widely different trajectories. This chapter offers an insider’s perspective into the opportunities and challenges that leading basemetal producers and explorers face.
91
93
CHAPTER 4: COPPER & BASE METALS 94
ANALYSIS: Mexico: the World’s Next Lithium Supplier?
96
VIEW FROM THE TOP: Fernando Alanís, Industrias Peñoles
98
MAP: Mexico's Main Base Metals Mines
101
VIEW FROM THE TOP: Darren Blasutti, Americas Silver Corporation
102
INFOGRAPHIC: Copper Supply in Review
105
VIEW FROM THE TOP: José Antonio Berlanga, Telson Mining Corporation
106
VIEW FROM THE TOP: Peter Secker, Bacanora Lithium
108
MINE SPOTLIGHT: Sonora Lithium
110
INSIGHT: Darren Pylot, Capstone Mining
111
VIEW FROM THE TOP: Tony Rovira, Azure Minerals
112
VIEW FROM THE TOP: Philip Pyle, Sunshine Silver Mining & Refining
113
VIEW FROM THE TOP: Mike McAllister, Sierra Metals
114
ROUNDTABLE: What are the Main Factors Shaping Base Metals Demand?
| ANALYSIS
MEXICO: THE WORLD’S NEXT LITHIUM SUPPLIER? Lithium was first discovered as a chemical element in 1817 and has since been put to various uses. Infamously, it was used to treat so-called urate imbalances, which were thought to lead to conditions such as mania and depression. Far from its medicinal properties, lithium is now finding new uses in emerging technologies
94
The lightest metal in the world, appetite for lithium is
Alongside demand, lithium prices have enjoyed consistent
growing as technology demands long-lasting batteries to
growth after recovering from a stagnation toward the end
power tech innovations such as electric vehicles. But its
of the first decade of the century. In 2011 the average price
steady demand may not be enough to keep prices high in
of lithium was US$3,870/t and by 2015 it had climbed to
the midterm with operators now eager to increase supply.
US$6,500/t. Between 2017 and 2018, lithium’s value surged to US$16,500/t in 2018, up 81.3 percent from US$9,100/t in
According to the USGS Mineral Commodity Summaries
2017. According to Reuters, price increases are expected
2018 report, portable electronic devices, electric tools
to continue in 2019.
and grid storage applications are factors that contribute to demand for the metal, not to mention lithium’s broad
China remains the king of demand but the US is on the
scope in medicine and pharmaceutics. “Lithium, mainly
rise. “If Tesla, General Motors, Ford and Chrysler continue
used in batteries, will continue to enjoy steady demand,”
to incorporate electric vehicles, the US could become the
says Alejandra Torijano, Country Manager of Agilent
third-biggest market after China and Germany,” says Peter
Technologies. “Also, the biggest electric car producer in
Secker, CEO of Bacanora Lithium, which will operate the
the world, Tesla, has announced it will focus on Mexico and
upcoming Sonora Lithium project, with feasibility studies
the country’s lithium supply.”
forecasting 17,500t/y lithium carbonate. But while electric cars have been the catalyst for the light metal’s demand,
LITHIUM'S MAIN USES
increasing supply could produce a dramatic price drop in the midterm.
SUPPLY DYNAMICS The fast rise in demand had producers unable to adjust production as quickly, which resulted in a supply shortage that caused a rise in prices. But Rick Rule, President and CEO of Sprott US Holdings, says there is more than enough lithium in the ground to meet demand. “There is no shortage of lithium, rather a shortage of lithium processing capability, and the industry is working very hard to increase productive
46% Batteries 27% Ceramics and glass Other Lubricating greases Air treatment 7%uses production Continuous 5% Polymer casting mold flux powders 4% Continuous casting mold flux powders Lubricating greases treatment Polymer 2% Airproduction uses Ceramics 9% Other Batteries and glass Source: USGS
capacity, which will fix this problem,” he says. Tight supply in Australian spodumene imports to China meant the Chinese spot lithium carbonate prices increased, ranging from US$15,000-24,000/t. Average fixed contracts in the rest of the world experienced lower prices due to a diversified supply. “For large fixed contracts, Industrial Minerals reported an annual average US lithium carbonate price of $13,900 per metric ton in 2017,” says USGS. However, that still represents
An analysis by Statista on the projection of total worldwide
a 61 percent increase from average 2016 prices.
lithium demand from 2017 to 2025 argues that the metal’s demand growth of the last couple of years is expected to
OFF-TAKERS
continue in the medium term. The statistics organization
Continuous exploration has allowed an increase in lithium
reports a total worldwide demand in 2018 of 252,653
deposit findings worldwide by more than 53 million tons.
tons of lithium carbonate equivalent (LCE), a figure
According to USGS 2018, the main lithium powerhouse ranking
forecasted to reach 300,000t/y by the end of 2021 and
has Argentina leading on resources, followed by Bolivia, Chile,
422,600t/y by 2025.
China, the US, Australia and Canada.
LITHIUM RESOURCES BY COUNTRY (million tons)
8.4
0
0.18
0.1
Austria
1
Portugal
Canada 1.9
Mexico, Brazil
2
Australia
4
5
DRC, Russia, Serbia
6.8
US
6
7
China
Chile
9
Bolivia
8
9.8
Argentina
10
0.05
Source: USGS
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Although Mexico did not take one of the top spots for lithium
many trendy metals, like rhodium, rare earth elements,
resources, the state of Sonora is thought to hold one the largest
molybdenum and lithium now, a few times. We do not
lithium clay deposits in the world, which is both scalable and
feel the hype is sustainable over the long term as prior
high-grade. But Bacanora’s project may be a cautionary tale
experience has taught us,” he says.
for operators looking to mine lithium in the short term as the costs are high and the construction time long. “It will cost
THE FUTURE OF LITHIUM
US$420 million to build the plant over 18 months,” says Secker.
Lithium producers, however, believe the demand is there.
“We plan to start production by 2020. We have been working
“Lithium is the fastest-growing commodity in the world
on this project for 10 years and operating our pilot plant over
and demand is increasing 17 percent annually,” says Secker.
the last four years. It has taken us a long time to get to where
“We think that lithium demand will continue to grow 15-20
we are.” It has already signed several off-take agreements with
percent up to 2025 and grow 10 percent thereafter. Solar
Japanese company Hanwa and The Sovereign Wealth Fund
and wind energy will also play a role in demand as their
of The Sultanate of Oman (SRGF).
presence in the market continues to grow.”
The metal cannot come out of the ground fast enough
But Rule says although expectations for the metal are high,
so securing these agreements for lithium has become a
it has its drawbacks just like any other commodity. “Lithium
top priority for technology companies around the world.
is the flavor of the month at the moment for several reasons,
“Strategic alliances and joint ventures among technology
the most important being that people have not yet lost
companies and exploration companies continued to be
money on it in a prior market downcycle,” he says. “This
established to ensure a reliable, diversified supply of lithium
means investors are generally unburdened by caution when
for battery suppliers and vehicle manufacturers,” reports
it comes to this metal and there are no bad expectations.”
the USGS. For example, Sociedad Química y Minera (SQM), Chile’s leading producer, partnered with the Australian
While lithium production is forecasted to keep growing, it is
company Kidman Sources in striving to diversify supply
worth bearing in mind the importance of maintaining a healthy
with the Mt Holland project. This operation will be in the
balance between lithium supply and demand. Otherwise, it
city of Perl and is expected to start producing an estimate
could meet a fate similar to that of cobalt, especially given the
of 40,000t/y lithium carbonate equivalent by 2021.
number of substitutes that exist for lithium. Out of concern for future prices and demand of cobalt, as well as the fact that
A HEALTHY BALANCE
most cobalt is mined in the DRC and linked to human rights
While new lithium projects, such as Sonora Lithium and the
violations, Tesla reduced the content used in its batteries to
Mt Holland project, are helping guarantee a healthy supply;
the minimum and replaced it with nickel.
analysts at Morgan Stanley forecast that the demand boom of the last decade will be insufficient to keep prices steady.
Should the stability of lithium prices be questioned in
This could lead to a severe 45 percent price-drop by 2021
the future, global battery producer giants may choose to
to US$7,332/t, from 2017’s average of US$13,375/t.
diversify away from it as well. However, Ken Brinsden, CEO of Australian lithium miner Pilbara Minerals believes there
Darren Blasutti, President and CEO of Americas Silver
may be many more potential uses for the metal aside from
Corporation, warns about the fictitious promises of trendy
batteries. “I am firmly of the view that everyone, including
minerals, such as lithium is today. “I have been in the
Morgan Stanley, is grossly underestimating how quickly the
mining industry since 1994. In this time, there have been
market is moving on the demand side,” he says.
| VIEW FROM THE TOP
ZINC SURPLUS TO FEED US MARKET FERNANDO ALANÍS CEO of Industrias Peñoles
96
Q: How optimistic is Industrias Peñoles regarding industry
technical support and help our clients make sure that zinc is
growth, considering the volatility of the sector?
up to par with their operational requirements.
A: There are many people within the mining industry who speculate but few who actually understand what
Q: How close is the Rey de Plata project to starting
is happening. Precious metals are highly volatile and
production?
companies cannot change their plans every time there
A: This project has already finished its exploration phase
is an unexpected change. Successful companies need to
and will go into production in 2019. It is located in Guerrero,
have a long-term vision and not let themselves get carried
an area complicated by security issues but we are making
away by the ups and downs of the price cycle. We need to
sure to work hand-in-hand with surrounding communities
focus on the few things we can control such as reducing
to avoid problems and by proving the economic and labor
costs, increasing productivity and being highly efficient
opportunities the mine can bring to the region.
and everything else will fall into place. Companies that follow these rules can obviously still be impacted by a
We prioritize CSR because we understand that all mines will
sudden drop in prices but they will be strong enough to
eventually come to a close as minerals are a finite resource.
survive the volatility.
Our goal is to avoid creating ghost towns after a project is closed and we put into action several strategies to assure
Q: Why is the company taking a bet on zinc by investing in
this. For example, in Durango we helped the community
the expansion of its refining plant in Torreon?
start a trout farm and the project has successfully become
A: We believe that Mexico is in an optimal position to refine
an economic pillar for the area. This community now exports
zinc. The North American market is experiencing a zinc deficit
to South and Central America and we know that when we
but Mexico has a surplus of the metal. The main markets
close the mine in the area, the people will not suffer negative
for zinc are automotive, construction and home appliance
economic consequences. We are developing a similar model
manufacturers because the metal can prevent steel corrosion.
in Guerrero by teaching the community new abilities parallel
The US is one of the biggest consumers in the world for zinc
to the development of the mine. Peñoles is also offering
thanks to its growing infrastructure industry.
young people technical careers and incorporating them into the mine. We just started the advanced construction phase
In response, we are investing US$327 million in our refining
of Rey de Plata and we are building the plant and continuing
plant in Torreon to increase production to 360,000 tons from
civil works. We installed 35km of electricity lines without
240,000 tons. We export the material to various countries
any problems. The mine also has the main equipment it
and regions around the world, such as the US, Europe, Central
will require for production. This project is important to us
and South America. The expansion is almost completed and
as it will produce gold, silver, copper, lead and zinc with a
we are collaborating with Outotec, a company that serves a
milling capacity of 4500t/d. It is not the company’s first
wide variety of sectors, to incorporate new technology into
time working in Guerrero and we are happy to be back in
the plant. The project is expected to be completed in May
the state.
2018. A large portion of the additional product being refined will be sent to the US.
Q: What does the company foresee for its other projects in development?
We are completely self-sufficient and can do everything from
A: Los Humos, a project in Sonora, is in the final stage of
production to processing and refining. The company has a
exploration and we hope that by the end of 2018 or the
commercial office in Connecticut and various warehouses
beginning of 2019 we will have completed its feasibility
around the US. Sixty percent of the zinc we refine is adapted
studies. By this time, we will be able to decide whether it is
to the specific needs of our clients. We can also provide
a viable project. We have invested a lot into exploring this
project and find it to be complicated because it consists of
A: There are four key principles that companies should always
disseminated copper.
invest in no matter the price cycle to assure success: security, technology, training and maintenance. These elements are
We also have an additional series of projects in place to
sacred to us and even in times of dire budget restrictions,
optimize our current mines. Velardeña has been a success
we do not cut costs in these divisions. We understand the
over the last five years and we are investing US$56 million
importance of having trained people who know how to use
into increasing production to 8,000t/d from 6,000t/d. This is
technology safely. There is no other way to do business.
the main supplier of zinc for our refining plant in Torreon and we benefit from its proximity to Torreon and key highways.
We are investing in developing our main training facility in Velardeña where we will have state-of-the-art technology
We are updating the mine technologically and we are proud to
and simulators. We use cabins to educate our operators for
say that 20 percent of the operators in the mine are women.
several weeks and have them simulate a variety of situations
We are pioneers in Mexico when it comes to giving women
that are likely to occur in every day operations. The
opportunities in the sector. Many doors are opening in the
training center will certify operators through governmental
industry for women thanks to the automation of operations
programs that teach them how to properly handle machines
as this reduces the need for physical labor and increases the
and carry out maintenance. This training helps keep our
need for intelligence and expertise. Overall, we are proud to
mines safe and productive. It is part of the secret recipe
say that we have 597 professionals working with us who are
behind our high levels of production, reduced costs and
women plus 200 from unions of a total of 3,000 employees.
employee retention.
Every year we want to incorporate more women but we do not believe in the 50/50 gender equity rule. We simply seek
Q: What does the country need to become a more
talent and women have a lot to offer the industry. It keeps our
competitive mining jurisdiction?
company dynamic and offers a fresh perspective. Thanks to
A: To experience a boost in the industry, Mexico truly
this philosophy our legal department currently consists of 62
needs clearer public policies. The automotive industry
percent women and our finance and audit departments 52
is a good example of this. Many years ago, someone saw
and 54 percent respectively.
the potential Mexico had in the automotive industry and decided to establish a series of public policies to incentivize
Q: How do you achieve long-term goals considering the
the development of this sector. The country now plays an
volatility in the national and international context?
important role in the automotive sector thanks to the vision
A: Our company is over 100 years old and is used to constant
this person established. The mining industry in Mexico needs
change and turbulence. We even had to overcome the
a similar set of actions to take full advantage of the potential
Mexican revolution. Peñoles finds that volatility is a normal
of the mining sector.
part of the industry. The landscape may always be in flux but the country’s mineral deposits will always remain, as will
To see more projects in the country, we need less jurisdictional
demand for this material.
volatility to incentivize investment because mining law plays a crucial role in competitivity. The results of the Frasier Institute
We are strong believers in having a long-term vision and
Report are a clear example of this. In 2011, Mexico’s mining
making sure everything is congruent with our goals. With a
sector experienced US$15 billion in investment, a record
clear vision and consistency in commitments, great things can
high, while in 2017 it dropped to US$3 billion thanks to the
be achieved. From the beginning, we knew that we wanted
changes in the law. Considering that the industry requires
to be an international leader in the industry and this vision is
a long-term investment, public policies should also have a
reflected in everything we do.
long-term vision.
There are four main factors that differentiate us from the rest:
One of the biggest issues is that exploration is no longer
the quality of our products, our processes, the excellence
deductible in a year, which is something common in countries
of our team and the ethical manner in which we manage
like Australia and Canada. Exploration is the core of mining
our business. To achieve excellence, an operator must not
and a drop in investment will negatively impact the industry.
only demand it from its collaborators but also incorporate
These kinds of policies need to be adjusted.
processes that uphold this benchmark from recruitment to training and development. This applies to everything. It sounds simple but congruency is not easy to put into practice.
Industrias Peñoles is a 100 percent-owned subsidiary of Grupo BAL. The group is the largest gold and lead producer in Latin
Q: How would you describe the key factors behind Industrias
America and through its subsidiary, Fresnillo, the largest silver
Peñoles’ success?
producer in the world
97
| MEXICO'S MAIN BASE METALS MINES
3
13
6
4 5
7 8 9 15
98 10
11
14
1 16
World Class Deposits
2
18
17
12
19
Production Development 20
Advanced Exploration
21
Under Review 22
Exploration Number
Name
Company
Commodity
Stage
State
1
El Arco
Americas Mining Corporation
Copper
Development
Baja California
2
El Boleo
Korea Resources-Baja Mining
Copper
Production
Baja California Sur
3
María
Minera Frisco
Copper
Production
Sonora
4
Milpillas
Peñoles
Copper
Production
Sonora
5
Buenavista del Cobre
Americas Mining Corporation
Copper
Production
Sonora
6
El Pilar
Americas Mining Corporation
Copper
Development
Sonora
7
La Caridad
Americas Mining Corporation
Copper
Production
Sonora
8
San Antonio/ Luz de Cobre
Red Tiger Mining
Copper
Development
Sonora
9
Pilares
Americas Mining Corporation
Copper
Development
Sonora
10
Sonora Lithium
Bacanora Lithium
Lithium
Development
Sonora
11
Los Verdes
Minera Alamos
Copper
Under Review
Sonora
12
Piedras Verdes
Invecture Group
Copper
Production
Sonora
13
Bismark
Industrias Peñoles
Copper
Production
Chihuahua
14
Santa Eulalia
Americas Mining Corporation
Zinc, Lead
Production
Chihuahua
15
Las Cristinas
Cyprium Mining
Copper
Production
Chihuahua
Source: SGM, company websites
25 26 27
Number
Name
Company
Commodity
Stage
State
Bahuerachi
Sierra Metals/Jinchuan Group
Copper
Development
Chihuahua
17
Bolivar
Sierra Metals
Copper
Production
Chihuahua
18
San Francisco del Oro
Minera Frisco
Copper
Production
Chihuahua
19
Santa Barbara
Americas Mining Corporation
Copper
Production
Chihuahua
20
Tameapa
Mincore
Copper
Development
Sinaloa
21
Tahuehueto
Telson Resources
Copper
PreProduction
Durango
22
Avino-Zaragoza
Avino Silver & Gold
Copper
Production
Durango
23
Tayahua
Minera Frisco
Zinc
Production
Zacatecas
24
Aranzazu
Aura Minerals
Copper, Gold, Silver
Development
Zacatecas
25
San Martin
Americas Mining Corporation
Zinc, Copper, Lead
Production
Zacatecas
26
Francisco I Madero
Industrias Peñoles
Zinc
Production
Zacatecas
27
Cozamin
Capstone Mining
Copper
Production
Zacatecas
28
San Nicolás
Teck Resources
Copper
Production
Zacatecas
Charcas
Americas Mining Corporation
Copper
Production
San Luis Potosi
16
29 23 24
29 28 30
31
32 34 33
35
99
30
Asientos
Minera Frisco
Copper
Production
Aguascalientes
31
Zimapan
Carrizal Mining
Copper
Development
Hidalgo
32
Angangueo
Americas Mining Corporation
Copper
Development
Michoacan
33
La Balsa
Minera Montoro
Copper
Production
Michoacan
34
Tizapa
Industrias Peñoles
Lead, Zinc, Copper
Production
State of Mexico
35
Taxco
Americas Mining Corporation
Zinc
Production
Guerrero
100
VIEW FROM THE TOP |
BETTING ON BASE METALS WITH SUSTAINABLE GROWTH DARREN BLASUTTI President and CEO of Americas Silver Corporation
Q: With zinc prices rallying, what is your midterm outlook
people, and when including the supply chain and indirect
for the metal and how is Americas Silver positioned to
employment, the community recognizes how much of a
take advantage?
benefit the mine provides.
A: We have been very bullish on zinc. We just built a new zinc-silver-lead mine, San Rafael in Sinaloa, which came
More broadly, the main challenges when investing in Mexico
online in December 2017 and is now ramping up. Our
can be seen as common to almost all jurisdictions. Property
internal estimates envision zinc prices averaging about
rights issues can be a challenge since the system can be
US$1.40/lb over the next three years. Even though those
formalistic and rather cumbersome. Sometimes it is not
prices are not as high as the prices we are seeing today, as
clear who has what interest in a property and the process
an average this number makes us very bullish on the metal.
for a final determination can take a very long time while
We see strong deterrents on the supply side with respect
having significant implications. We have worked through
to environmental regulations and dropping grades in China.
this and feel that things are getting better with both the
These are all factors we believe will continue. We also see
system and our familiarity with it.
dynamism from the offtake side. We signed a four-year contract with Glencore, which would have been unheard of
We have a good workers’ union, which has been
two years ago. We will produce about 45 million pounds of
understanding of the dynamics of our business. For
zinc in 2018 from our Sinaloa mine and rising in 2019. This
example, we had 450 people working here when we took
compares to 9 million pounds in 2017.
over the company and, unfortunately, we had to lay off 220 people in the first few months. We did this with every
Q: In terms of diversification, to what extent have you
intention of re-hiring these people as soon as the company
looked to emerging metals like lithium that are surging
turned around. We stuck to our word and now our staffing
in demand?
levels are up to more than 300. There is a chance that this
A: I have been in the mining industry since 1994. In this time,
will climb further when Zone 120 comes online.
there have been many trendy metals, like rhodium, rare earth elements, molybdenum and now lithium. We do not feel the
Another challenge is finding a balance in our community
hype is sustainable over the long term, as prior experience
activities and investments. For example, if the local
has taught us. Right now, lithium and cobalt are doing well,
government requests resources for a certain activity
but molybdenum is not. We understand the supply-demand
or project, we must consider how our contribution
fundamentals of the metals we are involved in. That being
will be valued by the community. It may be better to
said, we are very bullish on zinc, lead and copper and we
independently take on projects that directly benefit our
will be a very fast follower, increasing our brownfield and
closest stakeholders. We are happy to contribute and
shutting down silver production when prices go up.
ensure that all people in the towns we operate in get value from the mine. But we also want the community
Q: How would you evaluate the operating environment
to see that we are the source of this contribution and
in Sinaloa?
this is not always clear with government-run initiatives,
A: Our CSR strategy is always based on quality employment
including the Mining Fund.
opportunities. In terms of the Sinaloa property, much of the groundwork was already done by Scorpio Mining, the company we acquired, and it did a fantastic job in laying
Americas Silver Corporation is a leading junior silver producer
the company’s foundations in the area. Cosala is a small
with a strong operating platform in the Americas. With the
community and a substantial portion of its GDP comes
recently constructed San Rafael mine in full production, it is
from our activities in the area. We employ around 350
positioned to become one of the lowest-cost silver producers
101
| INFOGRAPHIC
COPPER SUPPLY IN REVIEW After four years of ups and downs, copper prices
refined production in 2019, followed by the Democratic
finally experience a promising forecast with an average
Republic of Congo (DRC). Chile leads worldwide
US$6,166/t in 2017 and an expected of US$6800/t by
production, while Mexico stands in 7th position with a
2H19, according to LME and Kitco. But global production
total production in 2017 of 742,246 tons, a 3.1 percent
suffered a setback, falling 2 percent in 2017 compared to
decrease compared to the 766,129 tons produced in
2016, a total of 19.7 million tons. The International Copper
2016. Grupo México remained the biggest producer in
Study Group (ICSG) predicts a global copper production
the country and the 7th worldwide. Sonora produced 84.1
growth of 3 percent in 2018, which will remain unchanged
percent of the total national production in 2017, mainly
in 2019. China, the biggest end-use copper consumer, is
due to the contribution of the Buenavista del Cobre and
also expected to remain the biggest contributor to world
La Caridad mines.
102
TOP PRODUCING MUNICIPALITIES 2017 (Percentage Share) Cananea
58.3
TOP PRODUCING COPPER MINES AND PRODUCTION PIPELINE(t/y)
1
Nacozari de Garcia 18.2
2
Alamos 3.7
3
Villa de la Paz 3.6
4
Santa Cruz 2.7
5
Morelos 2.6
6
Mulege 2.3
7
Mazapil 2.1
8
San Javier 1.3
9
Sombrerete 0.9
10
513,000t/y
total national production
202,000t/y
total national production of cathode copper
118,400t/y
total production of new project pipeline
▪▪ Concentrated national production of the top 10 mines, 2017
▸▸ National production of cathode copper per mine in 2017
60
50
40
30
20
10
0
• New project pipeline (*Expected production date)
GLOBAL COPPER PRODUCTION VS. PRICE 21
2007
2008
2009
——Avarage price on LME (US$/t)
2010
2011
2012
19,100
19,700
20,100
8
6,166
7
5,494
18,500
16,900
6
5 4,855
16,100
16,000
15
15,600
16
15,500
17
15,900
5,163
18
6,862
7,322
7,949
8,810
18,300
19
6,951
7,125
7,539
20
9
2013
2014
2015
Total copper mine production (thousand tons)
2016
2017
4
▪▪ Buenavista del Cobre | Americas Mining Corporation
20
20,984
24,995
25,796 21,782
24,468
24,570
25
23,758
19.7
million tons total global production in 2017
WORLD REFINED COPPER USAGE AND SUPPLY FORECAST (thousand tons) 30
23,503
27.1% Chile 12.1% Peru 9.4% China 6.4% US 4.7% Australia 4.3% DRC 3.8% Zambia 3.8% Mexico 3.3% Indonesia 3.1% Canada 22% Others
20,028
PRODUCTION SHARE PER COUNTRY 2017
103
| 318,900
▪▪ La Caridad | Americas Mining Corporation | 106,300 • *2019 – Pilares | Americas Mining Corporation | 35,000 • *2020 – Buenavista-Zinc | Americas Mining Corporation | 20,000
• N.D – El Pilar | Americas Minig Corporation | 35,000
▸▸Buenavista del Cobre | Americas Mining Corporation | 111,700
▸▸La Caridad | Americas Mining Corporation | 28,400 ▸▸Cobre de Mayo | Invecture Group | 20,000 ▸▸Milpilas | Industrias Peñoles | 19,900 ▸▸María | Minera Frisco | 2,100 ▸▸El Boleo | Kores-Camrova Resources | 19,900 ▪▪ Bolívar | Sierra Metals | 6,800 • *2018 – Tahuehueto | Telson Resources | 400
15
10
▪▪Cozamin | Capstone Mining | 16,700 ▪▪Tayahua | Minera Frisco | 14,500 ▪▪Sabinas | Industrias Peñoles | 6,600 ▪▪ NEMISA | NM Santa Maria de la Paz | 24,400 ▪▪Charcas | Americas Mining Corporation | 3,100
5
▪▪Zimapán | Carrizal Mining | 10,000 ▪▪ La Negra | Kootenay - Pan American | 5,700
742,246
total production in tons
Potosi
2.3% Baja
California Sur
1.4% Chihuahua 0.7% Durango 1.7% Others
Sources: Statista, Macrotrends,CAMIMEX
2017
2018
Refined usage
Refined production
Mine production
Refined usage
Refined production
Mine production
Refined usage
84.1% Sonora 5.6% Zacatecas 4.2% San Luis
Refined production
PRODUCTION SHARE PER STATE, 2017
0
Mine production
• *2019 – Rey de Plata | Industrias Peñoles | 7,000 • *2022 – Media Luna | Torex Gold | 21,000
2019
Use by regions
Africa North America Latin America
Asean-10/ Oceania
Asia ex Asean/ CIS
Asia-CIS EU Europe Others
104
VIEW FROM THE TOP |
OPTIMIZING PRODUCTION AND CSR AT CAMPO MORADO JOSÉ ANTONIO BERLANGA CEO and Director of Telson Mining Corporation
Q: What were the main factors behind the company’s
surrounding communities, which in my opinion is the best
decision to purchase Campo Morado, a mine that had been
way to mitigate safety risks.
closed for several years? A: Its potential, resources, infrastructure and areas of
Q: What are your projections for the Tahuehueto mine in
opportunity were the main factors behind our decision. We
the short term?
carefully analyzed the reasons behind its closure in January
A: We want to start production by 4Q18 at a rate of 1,000t/d.
2015 and determined that an improved operational strategy
We have already completed exploration and feasibility
and establishing a strong relationship with surrounding
studies, acquired the necessary permits and purchased
communities could make it viable. For instance, the previous
equipment. Pre-production toll milling from Tahuehueto
owner focused on zinc and processing a mix of mineral
processed 9,503 tons of ore at the Atocha Mill during 1Q18
concentrates from various deposits that required more
for an average of 106t/d, and during construction we will
equipment, personnel and costs as each body has unique
continue to produce around 150t/d in this plant. This small
geological characteristics. We decided to instead mine and
volume of production generates approximately U$1.5 million
process mineral from a single deposit and to only exploit
in sales per month. We were also able to close an offtake
areas with profitable grades of gold, silver, lead and copper
agreement with Trafigura for US$15 million that we are
to reduce costs. We do this even if the deposit has less zinc
using to complete the costs of construction, which started
as it could encompass profitable minerals that were ignored
in January 2018. The project has significant geological
by previous owners.
potential that we will continue to explore through mine development projects. We believe it has the potential to
We also optimized by requiring less than 50 percent of the
be one of the biggest mines in the country.
600 collaborators the mine once needed for operations. Our experience and human capital allowed us to start production
Q: What does Mexico need to increase its global position
in less than four months after acquiring the project. We had
as a top gold producer?
to first thoroughly analyze the maintenance needs of the
A: We need to increase our level of exploration investment
mine and plant. In the first phase of production, we expect
to the level we had five years ago. The country needs to be
to produce 1400t/d by processing with an autogenous
more competitive to attract more FDI. One of the biggest
mill that does not require steel balls. In February, we will
limitations is the fact that exploration companies can no
increase production to 2000t/d by adding steel balls. In
longer deduct projects in the first year. This caused many
the first month we will be able to produce 56,000 tons,
players to leave the country due to the clack of capital. The
including 1,037 tons of lead concentrates and 2,453 tons
new mining taxes are equally affecting production along with
of zinc concentrates.
the mining fund. These were created with a good intention but are failing to meet their objectives as communities are not
Q: How did you mitigate the security risks of the area?
receiving any benefits. In response, mining companies are,
A: The company mitigated these risks by reaching out to the
as always, continuing to prioritize surrounding communities
community as soon as a preliminary agreement was signed.
and we are working with authorities to make Mexico a more
All the people we spoke to unanimously said yes and were
attractive place to invest in.
eager to help us reopen the mine as soon as possible. These communities and local authorities recognize the positive impact and development that mines can foment. Before
Telson Mining Corporation is a junior resource company
Campo Morado, Arcelia was a town and it grew to become a
advancing two projects: Tahuehueto in Durango and Campo
dynamic and safe city when the mine arrived. Our outreach
Morado in Guerrero. After three years of inactivity, Telson
helped us start the project on a very good note with the
recommenced operations at Campo Morado in October 2017
105
| VIEW FROM THE TOP
POWERING UP TO BECOME WORLD’S NEXT MAJOR LITHIUM PRODUCER PETER SECKER CEO of Bacanora Lithium
106
Q: Why did Bacanora Lithium choose Mexico to start its
project for almost 10 years and operating our pilot plant
next lithium project?
over the last four years. It has taken us a long time to get
A: We first came to Mexico over 12 years ago, exploring
to where we are.
for borates and other industrial minerals. One of the main indicators of borate is lithium so we sampled a number of
Our pilot plant was created to demonstrate to our off-
outcrops for lithium as well as borates. The lithium project
taker, Hanwa, and to our Japanese manufacturers that the
in Sonora was sampled as part of a regional exploration
quality of the material in Mexico is just as good or better
program about nine years ago and was found to be rich
than anything else in the world. Our goal is to continue
in lithium and so became our priority exploration project
producing high-quality material, at 99.5 percent quality, at
in 2009. Over the past seven years we have continued to
low operating costs. The Sonora project has low operating
sample, drill and evaluate and we now have one of the
costs, which at US$4,000/t makes us as competitive as
biggest lithium deposits in the world.
the best mines in Chile. The company also differentiates itself by having an operating team in Hermosillo and an
Our experience of working in Mexico, especially in Sonora,
off-taker that is also an equity investor. It is one of the
has been extremely positive. The government has been
most advanced lithium projects in the world.
supportive, as have the workforce and landowners. Infrastructure is good and there is a wealth of industrial
The Sonora Lithium project has completed its
support and skilled labor.
Environmental Impact Assessment and received CONAGUA water permits. Our plant design is based on
Global lithium supply is about 250,000t/y and Bacanora’s goal is to produce 17,500t/y, which means it would cover 7 percent of world supply by 2020
the best environmental standards. Q: What financial model is the company using to finance the project? A: We are a public company, listed in London, with a strong shareholder base that includes BlackRock, M&G and our offtake partner Hanwa, each with a 10 percent shareholding. We plan to finance the project with a combination of debt
Q: What steps is the company taking to start production
and equity. The equity will come from our shareholders
on the Sonora project?
and debt from project finance banks. Lithium is quickly
A: We finished the bankable feasibility studies in December
becoming more and more popular thanks to the steady
2017 that outline the construction of the plant that will
growth of Asian demand. Some 95 percent of the world’s
produce 17,500t/y of lithium carbonate. It will cost US$420
lithium batteries are manufactured in Asia.
million to build the plant over 18 months. Processing at the plant is quite standard but we are trying to accelerate
We are the only lithium company listed on the London
the development to be the next producer and we plan to
AIM market. Our shareholder base has always been very
start production by 2020. We have been working on this
London-centric and this is where we see the biggest financial support. In the long term, we might consider joining the BMV but our focus is to start production first
Bacanora Lithium is focused on developing the world’s next
and grow our cashflow.
major lithium project in Mexico. It is commercializing the world-class Sonora Lithium project, which benefits from large,
Q: What other projects does the company have in
scalable and high-grade lithium resources
its pipeline?
107
A: We have another project in Germany that we picked
In terms of world supply, Chile is the largest producer
up a year ago and are conducting a feasibility study. Our
of downstream lithium products, followed by Argentina.
plan is to use our project in Mexico to serve the Asian
Australia is the largest producer of lithium concentrates
market and our project in Germany to supply the German
that are sent to China for downstream processing.
automotive industry in 2023 or 2024. Trends in demand will depend on how the market continues Global lithium supply is about 250,000t/y and our goal
to react to electric vehicles. China is being particularly
is to produce 17,500t/y, which means Bacanora will cover
aggressive and has sold 1 million electric vehicles. It plans
7 percent of world supply by 2020. We plan to maintain
to sell 2 million per year by 2020 and 7 million per year
this production for a couple of years while we build our
by 2025. In parallel, German companies such as BMW and
Germany project that will add 10,000 tons. Meanwhile, we
Volkswagen will be 25 percent electric by 2025 as well.
will strive to double the capacity in Sonora to 35,000 tons
There is a great deal of clarity regarding demand up to
by 2025. This would make us the world’s third-largest
2025. We think that lithium demand will continue to grow
lithium producer.
15-20 percent up to 2025 and grow 10 percent thereafter. Post 2025, renewable energies such as solar and wind
Q: How will demand for lithium change in the long term?
power will start to play a larger role in demand as their
A: Lithium is the fastest-growing battery commodity in
presence in the market continues to grow. The world will
the world and demand is increasing 17 percent annually.
need large grid storage batteries that are lithium-based.
| MINE SPOTLIGHT
108
SONORA LITHIUM The world’s demand for lithium carbonate is expected to grow exponentially in the coming years thanks to the rise of electric vehicles, given that their batteries are estimated to require 25-50kg of the mineral. A mine can take up to 20 years between the first exploration stage, drilling, permitting and construction of the mine. With this in mind, keeping one step ahead of the projected boom, Bacanora Lithium is positioning itself one step ahead of its competitors with its flagship Sonora Lithium project. 109
The project is estimated to be one of the largest deposits of lithium in the world and the London Stock Exchangelisted company is focused on bringing it into production by 2020. Its 2017 feasibility study calculates the project will have 8.8 million tons of lithium carbonate resources. The same study suggests the project can produce battery-grade lithium carbonate at an average operating cost of US$3,910/t, placing it among the lowest-cost producers in the world. But the high expectations for the Sonora Lithium project are rooted in more than its enticing feasibility studies. Bacanora Lithium has already been producing samples at its pilot plant for the last three years. The high-grade products have made it possible for the project to secure capital from the likes of Hanwa and BlackRock. After seeing the quality of the samples, the Japanese trading house signed an offtake agreement with Bacanora Lithium to buy up to 100 percent of the mine’s production, while also becoming a major shareholder in the company. The Sovereign Wealth Fund of The Sultanate of Oman (SGRF) also signed an offtake agreement for 13,000t/y of lithium carbonate, including a conditional commitment to invest US$65 million in the company. Considering that the project has not even started production and it has already caught the attention of such important investors, the Sonora Lithium project is expected to hit the ground running. Considering the deposit’s close proximity to the tech developers in San Francisco’s Silicon Valley, the project’s competitive advantages continue stacking up. And now other fastgrowing sectors are also starting to have an appetite for lithium. As the need for renewable energy grows so does the need for energy-storage applications. Around 500kg of lithium are required to store just one MWh of power. Against this backdrop, the global lithium-ion battery market is expected to soar from US$17.5 billion to US$70 billion by 2020, the same year that the Sonora project is expected to come online.
| INSIGHT
COMBATTING CYCLES THROUGH DIVERSIFICATION DARREN PYLOT President and CEO of Capstone Mining
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Mining models are fundamentally different from any
resources in the Mala Noche Footwall Zone, bringing the
other industry. For example, operators do not see fellow
total measured and indicated for all drilling up to March
operators as their competition but rather partners that
19, 2018, to 217,000 tons of contained copper,” says Pylot.
can add value to projects, says Darren Pylot, President
“Based on the exploration success we have seen at Cozamin,
and CEO of Capstone Mining. “Mining is a very capital-
we increased the brownfield exploration cost guidance an
intensive business and the industry is seeing increasing
additional US$2 million to a total of US$9 million for 2018.”
joint ventures to share infrastructure costs to bring new projects online,” he says.
Due to variations in copper prices, in 2018 Capstone branched out to start mining the previously undeveloped
In Capstone’s case, at its Cozamin mine, it has an agreement
San Rafael zinc zone at Cozamin to take advantage of
with Endeavour Silver to allow both companies access to
the elevated zinc prices and fill some of the mill’s excess
abutting land. Capstone has reaped the benefits of this
capacity. “This additional zinc production has allowed us
partnership by being able to carry out an intensive drilling
to lower our overall costs by increasing our by-product
program at Cozamin with significant exploration success.
credits,” says Pylot. “LME zinc inventories are at historic
“In mid-2018, we updated Cozamin’s Mineral Resource
lows and we continue to believe zinc prices will remain
converting an additional 115,000 tons of indicated copper
strong over the short and medium term.”
VIEW FROM THE TOP |
EXPECTED COBALT GAINS ATTRACT EXPLORATION LEADER TONY ROVIRA Managing Director of Azure Minerals
Q: In 2017, Azure Minerals made two investments. What
sources. For example, there is a mineral belt in Australia
are your expectations for these?
with low-grade cobalt concentrations but it is very difficult
A: We acquired the Alacrán Project from Teck Resources
and expensive to extract. Another major source is in the
in 2014 and we discovered two high-grade silver and gold
Democratic Republic of Congo (DRC) but the jurisdiction
deposits. In 2016, Teck Resources exercised a clause in
raises concerns about the way cobalt is extracted and its
our partnership agreement to buy back into the project
human cost. Having another source of high-grade cobalt is
and be the operator. As a result, we needed to find a
important, so we are really excited about the advantages
new project. In 2017, we bought two new projects that
of mining cobalt in Mexico.
met our criteria of being high-grade, near to surface and hosting advanced-stage deposits. Oposura in Sonora is
Q: What are the main challenges that exploration in Mexico
high-grade zinc and silver, starts at surface and has some
faces and what projects interest Azure Minerals the most?
significant exploration that was carried out in the 1970s
A: We are always looking for new projects, both greenfield and
by Peñoles. We acquired it from local owners and have
brownfield. As we want to stay in the precious and base metals
been busy drilling it since September 2017. We are also
segments, we are convinced that Mexico has great potential.
running a preliminary economic assessment of its viability,
Also, we are very comfortable working in the northern states
which leads to a feasibility study; we hope to start mining
of Mexico and we have based our office in Hermosillo, Sonora.
it by 2019. This will be the catalyst for Azure Minerals’
I do not think we will be exploring in nontraditional mining
transition from an exploration company into a mining
states but that would depend on the project.
company. The Sara Alicia project, also in Sonora, is gold and cobalt. As the latter metal is seeing increased demand
Our experience with canceled mining concessions shows
for technological purposes, we have been looking for such
us that the country lacks fast turnaround times in making
a project in Mexico for a while. Its geological tenure is
more land available for exploration. Once Mexico does that,
very good. We purchased it from a Mexican family in late
more companies will come in, representing more income for
2017 and drilled in November of the same year, achieving
the government and more opportunities for exploration and
outstanding high-grade results. It may be the highest-
mining. There is a big part of Mexico waiting to be explored
grade cobalt exploration project in the world. We have
but companies cannot get access to concessions.
two very exciting projects and we hope to become both an explorer and an operator. We expect to be investing
Q: Is the company considering a listing on other stock
US$6 million in exploration over the next year.
exchanges besides the ASX? A: We have discussed the possibility of listing on other
Q: Given increased battery use, what is your forecast
stock exchanges, especially in Canada. We have not yet
for cobalt?
researched the BMV, but perhaps it can be an option one
A: We are getting a great deal of interest from investors for
day. The company needs representation in the countries in
both Oposura and Sara Alicia, mainly from North America,
which it is listed and to have people to speak on its behalf.
China and Europe. Sara Alicia is especially appealing given
It is more expensive and more time-consuming. But if done
the increased demand for cobalt. A German investment
properly, it can be really beneficial.
bank and an investment fund from New York have invested in Azure because of our cobalt project. We are convinced that cobalt is going to be in demand over the next couple
Azure Minerals is Australia’s leading mineral exploration company
of years. The price has risen from US$30,000/t in early
in Mexico. The company holds 100 percent ownership of several
2017 to more than US$90,000/t in early 2018, an indicator
high-quality, precious and base metals projects in northern Mexico
of the expectations for this metal, which has many different
and is on the pathway to mine development and production
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| VIEW FROM THE TOP
JAPANESE INVESTOR LOOKING TO MEXICO FOR ZINC SUPPLY PHILIP PYLE Vice President Exploration Mexico of Sunshine Silver Mining & Refining
112
Q: What is the schedule for commencing production at
because Sunshine was focused on other projects as well
the Los Gatos project?
as Los Gatos. The companies realized it would need a
A: Production will begin in the latter part of 2018. We will
significant extra investment to take Los Gatos to the next
begin mining the ore at the end of 2018 and will begin
stage. We decided we would take the time to look for the
processing that ore around 2Q19. We should be in full
right association of investors to take the mine forward.
commercial production by July 2019. We have arranged all
The mine is very rich in zinc, producing almost as much
the financing and we are in the process of constructing the
value from the metal as it does from silver. We identified
office buildings, the mine support itself and the workers’
zinc-producing companies to evaluate their interest in
camp. We are also in the process of commencing the
participation. The one that materialized quickest was DOWA.
earthworks for the processing plant. The company is already a 30 percent participant in Peùoles’
The overall pre-production capital costs for Los Gatos, according to the feasibility study, is US$316 million
Tizapa mine in the State of Mexico, and since this project
The overall pre-production capital costs for the project,
it needed to evaluate whether or not the zinc produced at
according to the feasibility study, is US$316 million. We
Los Gatos would be appropriate for its refinery as it requires
believe the actual capital cost will be slightly less than
very clean zinc concentrates. Luckily, the zinc at the mine
that. Seventy percent of the financing is coming from
has very few impurities.
was reaching the end of its lifespan, it was looking for more resources for its Akita zinc refinery in Japan. The refinery is one of the most up-to-date and efficient in the world but DOWA does not operate any mines and must import its ore. The company likes Mexico and sees it as a promising location. Prior to participation, it studied Los Gatos because
debt issuance to a consortium of Japanese banks, one of the lead banks being the Japanese Bank of International
This was still in the early stages, with only inferred resources,
Commerce. The remaining 30 percent of the financing is
so DOWA decided to fund a technical economic study, which
shared between the two operating partners. Since Sunshine
is essentially a PEA. This involves two drill holes to test
Silver owns 70 percent of the project and DOWA owns 30
metallurgy in more detail and the hiring of engineering firms
percent, both parties are supplying a proportional amount
to look at the feasibility of underground mining in the area.
of the remaining financing.
The study was completed in 2014 with a positive outcome and DOWA committed to spending US$50 million to complete
Q: How did the company obtain the trust of these Japanese
a feasibility study and earn its 30 percent interest in the
investors?
project. Normally, a feasibility study does not cost this much
A: The most important factor was the feasibility study. We
but we decided to also carry out a significant drilling program
were exploring at Cerro Los Gatos in 2008 and made the
to improve confidence in the resource, moving them from
discovery in 2009. We carried out a great deal of drilling
inferred to measured and indicated. We also had to buy one
between 2009 and 2012, and then we stopped for a period
of the ranches that was there as the project was located on private land. Additionally, we decided to construct a ramp at this stage for greater efficiency to access the mineralization.
Sunshine Silver Mining & Refining is a privately-held US-based
We took samples and ran several tons of material through a
silver company that is advancing its two main projects: the
pilot plant to demonstrate the viability of the crushing and
Sunshine Mine in Idaho and the Los Gatos Project in Chihuahua,
flotation process. When we took this bulk sample, we actually
as well as owning the Sunshine Precious Metals Refinery
saw higher grades than were predicted for the main mine.
VIEW FROM THE TOP |
CUSI DRILL PROGRAM SET TO DOUBLE PRODUCTION MIKE MCALLISTER Vice President of Corporate Development at Sierra Metals
Q: How has the growth in demand for zinc affected Sierra’s
build ramps and stopes there as we speak, so there is a lot
business strategy for the Cusi mine and what do you
of new opportunity.
predict will happen to zinc prices in the years to come? A: The epithermal zinc vein was found at surface and now
Q: Sierra was the first operator in Latin America to use
we have focused more at depth and we have found higher-
battery power. What spurred your decision to become a
grade silver. We underwent a geological re-interpretation
pioneer in this area?
this year and found a new area that could be mined called
A: The more battery equipment being used underground,
Santa Rosa de Lima. It starts at around 350m below surface
the less pollution there is, so it saves on certain costs such
and we are finding very good, 4m-average widths, with a
as ventilation. The benefits are twofold: one is that the
much higher grade of about 370g/t of equivalent silver.
air quality is better for the workers and the other is that
We have already progressed to this new zone and we are
ventilation costs are reduced. As well as having a social
ramping up our mill just to process the ore from this deposit.
benefit, it benefits the bottom line of the operator.
We are processing about 400t/d and we will be up to the mill capacity of 650t/d by April 2018. This represents a
Q: What cost-cutting strategies did you employ to halve
big step because our original target measured 700m strike
your net losses in the first nine months of 2017 compared
and 400m in depth, and we have already extended that to
to the same period in 2016?
1.7km of strike. We know this is part of a larger system that
A: We went through a period of maintenance in 2016. We
occurs along the Cusi fault, and we have 12km of the Cusi
replaced a lot of outdated equipment, we improved the
fault on our property.
grade and the amount of ore processed through the mill and we have used more modern methodologies. A lot of
We are drilling a lot more this year to extend the zone and
it comes down to the fact we are processing much more
we plan to ramp up production a great deal. We have also
material more efficiently with improved recoveries, which
purchased a used ball mill, which we hope to have installed
lowered operating costs.
by the end of the year, and this will double production to about 1,200t/d at the mine in January 2019. In terms of
Q: What is your view of Mexico’s political climate and the
CAPEX at Cusi, we will be spending about US$9 million in
availability of financing for mining?
total, which includes expenditure on the new mill, work on
A: There is some nervousness about the upcoming political
tailing facilities and on exploration drilling costs.
changes but overall, I think the climate is good. When speaking to the institutions that understand the industry,
Q: What have been the main advancements at the
there should be no trouble getting financing. For us,
Bolivar mine?
FIFOMI’s funding has been sufficient and has helped us
A: We had some equipment issues at Bolivar that we
with our working capital, but there are always complaints
corrected last year and we have also worked to improve
about the level of funding being constrained. I think a big
our recovery at the mill. We brought in 13 pieces of new,
company that is looking for much more financing may feel it
larger-scale equipment and we can now process about
is not enough. That being said, there are always alternative
3,000t/d. Similar to Cusi, we will install a used ball mill,
funding options available.
which will give us greater flexibility in terms of tonnage and grind size. By the end of 2018, Bolivar will be processing 3,500t/d. Bolivar is not only growing in terms of production;
Sierra Metals is a midtier precious and base metals producer in
we are also carrying out exploration work there. A survey
Latin America. It owns and operates three mines in commercial
of the property indicated a higher-grade material at the
production, including the Bolivar and Cusi mines in Mexico. It is
Bolivar West and Northwest zones and we are working to
focused on expanding global reserves and resources
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| ROUNDTABLE
WHAT ARE THE MAIN FACTORS SHAPING BASE METALS DEMAND?
When it comes to the trendiest base metals, lithium is king. But the extensive availability of this mineral opens up questions about continued demand and steady prices. In the meantime, other base metals are on the rising. Cobalt and zinc are rising stars and Mexican producers such as Peñoles and Grupo México are capitalizing on their zinc supplies. The electric vehicle revolution, other technological developments and the increasing awareness for a responsible supply chain are the factors shaping this trend the most. Industry leaders explain some of the supplydemand fundamentals of base metals, forecasting how they might behave in the future.
114
Lithium is the flavor of the month at the moment for several reasons, the most important being that people have not yet lost money on it in a prior market downcycle. This means investors are generally unburdened by caution when it comes to this metal and there are no bad expectations. Another factor is that the world is not short of lithium. The reason for the upsurge is that demand for lithium increased so
RICK RULE President and CEO of Sprott US Holdings
quickly that the producers of the metal could not increase their productive capacity fast enough to meet demand, and the speculators conflated the price increase in lithium with a shortage of lithium. There is no shortage of lithium, rather a shortage of lithium processing capability, and the industry is working very hard to increase productive capacity, which will fix this problem.
Bolivia has the largest lithium deposits in the world but it is also a country with social and political issues that make it difficult to open a new mine. Its permitting process is also slow. Mexico on the other hand has identified deposits that do not compare to those in Bolivia but are still quite large. Other metals such as cobalt are also competing with lithium. Cobalt has a few deposits around the world. Ultimately,
JOSÉ ANTONIO BERLANGA General Manager Mexico of Mercuria
the development of technology needs a more defined course before we can justify speculation on prices in the market. Mexico has some interesting projects in terms of lithium but these are still in the exploration or early development phases. These types of projects are subject to trends in the market and we will have to see how demand grows over the years. It ultimately depends on how the development of technology advances.
The Mexican mining industry is meaningfully growing in gold and copper production, and silver is slowly decreasing. A NASA report on mining revealed that there are rare earth elements to be explored in Sonora and Chihuahua, so we will most likely work there in the near future. Lithium, mainly used in batteries, will continue to enjoy steady demand. Also, the biggest electric car producer in the world, Tesla, has
ALEJANDRA TORIJANO Country Manager of Agilent Technologies
announced it will focus on Mexico and the country’s lithium supply.
Lithium does not compete with metals such as cobalt and nickel as they are complementary components in batteries. As demand for batteries increases, so will demand for all battery metals but lithium and nickel sulphate are the most demanded component in this product. These metals will benefit the most from a rise of consumption in the market. We understand that the government of Sonora has a longer-term strategy to turn the state into a fully integrated lithium hub that carries out lithium production and downstream lithium battery manufacturing for
PETER SECKER CEO of Bacanora Lithium
both the automotive and renewable energy storage industries. Sonora is definitely laying the groundwork for future growth.
I have been in the mining industry since 1994. In this time, there have been many
115
trendy metals, like rhodium, rare earth elements, molybdenum and now lithium. We do not feel the hype is sustainable over the long term as prior experience has taught us. Right now, lithium and cobalt are doing well, but molybdenum is not. We understand the supply-demand fundamentals of the metals we are involved in. That being said, we are very bullish on zinc, lead and copper and we will be a very fast follower, increasing our brownfield and shutdown silver production when prices go up.
DARREN BLASUTTI President and CEO of Americas Silver Corporation
We are convinced that cobalt is going to be in demand over the next couple of years. The price has risen from US$30,000/t in early 2017 to more than US$90,000/t in early 2018, an indicator of the expectations for this metal, which has many different sources. For example, there is a mineral belt in Australia with low-grade cobalt concentrations, but it is very difficult and expensive to extract. Another major source is in the Democratic Republic of Congo (DRC), but the jurisdiction raises concerns about the way cobalt is extracted and its human cost. Having another source of high-grade cobalt is important, so we are really excited about the advantages of
TONY ROVIRA Managing Director of Azure Minerals
mining cobalt in Mexico.
In general, I believe base metals demand will rise significantly. This is based on wellknown optimistic expectations for growth in the global economy. More specifically, there will be an increased demand for many base metals related to the electric vehicle (EV) revolution being forecast in the next few decades. In conjunction with EV technology, which will require huge quantities of base metals, there will also be a boom in electricity storage batteries. Again, that will lead to increased demand for base metals and several minor metals.
MARTIN ROSSER CEO of Alexander Mining
Lithium and cobalt will do well as electric vehicles (EVs) become more common. However, simpler metals such as copper and nickel will remain important for those same technologies. Lithium and cobalt are not as widely produced. This is why they experience a price appreciation. Mexico will fare well in this segment because copper is still the bedrock of EVs.
TREVOR TURNBULL Director of Gold and Precious Metals Global Equity Research at Scotia Capital
EXPLORATION & DRILLING
5
Exploration is an essential element of the mining industry as it allows companies
to replace aging mines with new projects. After years of sitting on the backburner during the mining slump, the industry’s appetite for new projects is starting to increase. Drilling companies are equally blowing away the cobwebs created by halted projects thanks to the industry’s awakening. Exploration investment is on the upswing, Mexico increasing its spending by 18.9 percent to US$477 million in 2017 compared to US$400.9 million in 2016, although this is still a far cry from 2012’s US$1.17 billion.
Assuring a healthy number of exploration projects in the country is particularly important as only one out of 1,000 prospects will ever become a mine. To strengthen the development of exploration projects in the country and ensure a bright future for the industry, Mexico must improve its regulatory landscape and facilitate access to investment and mining concessions. In this chapter, leading exploration and drilling companies provide their perspectives on the main challenges the industry faces and how companies are responding.
117
CHAPTER 5: EXPLORATION & DRILLING 120
ANALYSIS: Hitting the Bullseye Through Data, Information Sharing
122
VIEW FROM THE TOP: Raúl Cruz, SGM
124
VIEW FROM THE TOP: James McDonald, Kootenay Silver
125
VIEW FROM THE TOP: Paddy Nicol, Evrim Resources
126
VIEW FROM THE TOP: Armando Lucero, Globexplore Drilling & Analytics
Jesús Flores, Globexplore Drilling & Analytics
128
INSIGHT: Peter Shortus, Landdrill
129
VIEW FROM THE TOP: Enrique Ortega, Grupo SHB
130
INSIGHT: John-Mark Staude, Riverside Resources
132
INSIGHT: Gregory Beischer, Millrock Resources
133
VIEW FROM THE TOP: Ben Whiting, Orex Minerals
135
VIEW FROM THE TOP: Douglas Coleman, Mexico Mining Center
136
TECHNOLOGY SPOTLIGHT: Innovative Solutions for Accurate Drilling
138
INSIGHT: Carl Hovey, Terrane Geoscience
139
INSIGHT: Ricardo Valls, Valls Geoconsultant
140
INSIGHT: Aaron Cumashot, SpecTIR
141
VIEW FROM THE TOP: Lawrence Page, Manex Resource Group
142
ROUNDTABLE: What are the Main Challenges for Mining Exploration in Mexico?
119
| ANALYSIS
HITTING THE BULLSEYE THROUGH DATA, INFORMATION SHARING Exploration is the backbone of the mining industry, ensuring there are enough mines in development to replenish exhausted projects. But as one of the most capital-intensive phases, it is also the most likely to suffer from budget restrictions. Miners now find that drilling targets can be almost an exact science
120
During prolonged metal price slumps, drilling programs
For example, often new deposits can be found close to
are generally the first cut miners make. For some, the best
existing or historic mines, which slightly narrows down
way to mitigate exploration risk is to adopt the operator-
miners’ area of interest. “The best place to find a mine is
explorer model. “The best business model for a mining
close to where other miners already discovered one,” says
company is to have both exploration and operations
Kenneth McLeod, President and CEO of Sonoro Metals.
activities,” says Rodrigo Barbosa, CEO of Aura Minerals, which holds the Aranzazu concession in Zacatecas.
But the cost of drilling can reach into the millions of
“Operations represent a sustainable cash flow generation
dollars. “Depending on location, rig and logistics,
that can partly be used to fund exploration.”
diamond drilling costs around US$70-120/m and the average program size for juniors can range from 1,500m
But even these operators feel the pinch. According
to 5,000m,” says Cindy Collins, Chief Technical Officer of
to S&P Global Market Intelligence in its report, World
Geosite Technologies and Founder of Mining Technology
Exploration Trends, released in March 2018, deep cuts to
Partners. This would mean the average cost of drilling
exploration investment coincided almost exactly with the
would be over US$300,000 but she adds that exploration
low metals prices from 2012-2015. “Although the mining
programs for midtier miners are much more extensive.
industry widely accepts that exploration is important for
In 2017, First Majestic Silver completed 156,500m of
the sector’s future, the major miners continue to allocate
diamond drilling consisting of 807 holes and Fresnillo
only a small proportion of their revenues to exploration
398,000m. These high costs mean many explorers are
efforts,” it says. “From 2012 to 2016, these (major miners)
looking for new ways to mitigate risk, which brings them
slashed exploration spending at a faster pace than their
to information.
revenues declined, causing a fall in the group’s ratio of exploration spend to revenue, from 3.2 percent in 2012
THE POWER OF DATA
to a 12-year low of 1.8 percent in 2016.”
Data is driving new trends in optimizing mine operations, so why not in exploration too? “Over the last few decades, a
Not only is mining expensive, it is highly risky as the
tremendous amount of data has been collected from mining
probability of finding a deposit worthy of building a mine
and exploration companies alike that goes completely
is low. “Out of 2,000 showings, only one becomes a mine
unused,” says Denis Laviolette CEO and Director of Goldspot
so drilling and testing is absolutely essential to advance
Discoveries in an interview with Mining Technology Partners.
the creation of mines,” says James McDonald, President
“When a company is hired to do remote sensing, it looks
and CEO of exploration company Kootenay Silver. In
at various maps and creates a model out of the assay
the book Designing Optimal Strategies for Mineral
information. In this process it collects all kinds of data that
Exploration, the authors point out that the Probability of
goes to waste if it is not applied to the model.”
commercial success = (Probability P1) x (Probability P2) x (Probability P3). P1 refers to “detection and delineation
Companies spend millions collecting information for
of exploration targets,” P2 to “investigating and testing
new projects but secrecy surrounding geological
of exploration targets” and P3 to “outlining ore targets
data means that the information never reaches its full
within the tested exploration targets.”
potential. “I definitely see a lack of sharing and I see data being lost around me because there is no robust
WHERE TO START?
system to keep it together,” says Carrie Wong, author for
Although this seems to be a simple enough formula
Geology for Investors, a website that evaluates mineral
to follow, this is not necessarily the case. For example,
exploration and projects for resource investors. “Every
Mexico’s concessioned surface area measures over 22
time a junior mining company goes under, information
million hectares, according to figures from the Ministry
is lost.” She believes that there are three main reasons
of Economy. Within this area, there are certain methods
behind the resistance to share information: the high
miners use to increase the probability of finding a target.
costs of obtaining data, the complex approval process
that companies need to make information public and the desire to maintain a competitive edge over others.
EXPLORATION BUDGET IN LATIN AMERICA BY COUNTRY IN 2017
OVERCOMING ADVERSITY Those that dare to pioneer in the use of multidisciplinary knowledge and new tools are benefiting from smoother and faster discoveries. Rob McEwen’s Goldcorp Challenge may have been the first to pave the way by daring to opensource data that was traditionally kept under lock and key.
Mexico
21%
<1% Dominican Republic
Honduras <1%
Guatemala <1% Panama <1%
<1% Nicaragua
Colombia <1%
<1% Guyana <1% Suriname
Ecuador 3% Brazil
In 1989, Goldcorp acquired Red Lake, an underperforming gold mine that McEwen believed had the potential to produce much more. But after seeing his team of geologists struggle to find the main gold deposit, McEwen had an epiphany during a conference on how the Linux software operating system used open-sourced data, according to Don Tapscott in his book Wikinomics. McEwen decided to replicate Linux’s strategy by releasing 400MB of information onto the internet and launching a contest for contestants to submit the best solution
Peru Another 7 countries and jurisidictions represent the remaining 1.3%
22%
11% <1%
Bolivia 121
Chile
305
companies allocated US$2.38 billion to exploration activities
25% 7% Argentina
Source: CAMIMEX
for his mine. The move was highly controversial considering that in
Earth AI’s founder, Roman Teslyuk explains the technology
2000 the internet was still taking its first steps. But the risk
in an interview with Mining Technology. “First of all, we can
proved to pay off as the competition attracted over 1,000
apply unsupervised machine learning to create a data-
contestants that competed for a prize of CA$575,000.
driven geological map,” he says. “Each rock has a unique
“The contestants had identified 110 targets on the Red
signature, so if you identify these you can then put those
Lake property, 50 percent of which had not been previously
signatures into a geological map. We are using our network
identified by the company,” explains Wikinomics. “Over 80
to categorize this data in a new way. There is all this
percent of the new targets yielded substantial quantities of
geological data and the geochemistry, and together they
gold. In fact, since the challenge was initiated, an astounding
make a big difference to exploration.” More information
8 million ounces of gold have been found.”
means a substantial improvement in mining companies’ capabilities to predict where future deposits lie.
The book concludes that the success of the contest validates the benefits of using nontraditional strategies
Mexico is throwing its hat into the ring too as companies
to solve challenges in the industry. “Perhaps the most
operating in the country are incorporating these new
lasting legacy of the Goldcorp Challenge is the validation
trends into their business models. Alejandra Torijano,
of an ingenious approach to exploration in what remains a
Country Manager of Agilent Technologies, says, as the
conservative and highly secretive industry,” says Tapscott.
benefits of data sharing become clearer, Mexican miners
“Rob McEwen bucked an industry trend by sharing
are becoming less secretive with their information. “We feel
the company’s proprietary data and simultaneously
optimistic about the future given the increasing number of
transformed two lumbering exploration processes into a
opportunities to analyze data within the industry,” she says.
modem-distributed gold discovery engine that harnessed some of the most talented minds in the field.”
The efficient use of data may even become a makeor-break situation for mining companies as it turns
OPENING UP
into a standard practice. “Once measured by how well
Data in exploration is not only limited to sharing it with a
a company extracted resources, the industry’s value
broader pool of experts and requesting solutions, but also
proposition may be shifting to how well a company acts
by working collaboratively across projects. Earth AI is an
on information to optimize production, reduce costs,
online mineral exploration platform that was developed
increase efficiency, and improve safety,” says Deloitte’s
through the Sydney University accelerator INCUBATE,
report, Tracking the Trends 2018. “In short, data— and
with the aim of helping exploration companies make more
the ability to organize, manage, and process it—is rapidly
and, bigger discoveries through the use of data inputs
becoming a competitive differentiator and may even spur
and constant learning.
new business models.”
| VIEW FROM THE TOP
LOOKING BACK ON A SIX-YEAR ACHIEVEMENT RAÚL CRUZ Director General of SGM
122
Q: What were SGM’s most important advances during the
natural events that could cause damage to their health
last six years?
and property.
A: Thanks to the hard work of our valuable personnel and the invaluable support of both the Ministry of Economy and the
In terms of exploration for radioactive minerals, anomalous
Undersecretary of Mining, during the current administration,
radiometric responses, hydrothermal alterations, geophysical
significant progress was made in SGM’s institutional activities.
responses and geological conditions to identify and locate
We achieved upward growth in the fulfillment of our goals
uranium minerals were checked and analyzed. This broadened
and objectives. There are a few successes worth mentioning.
existing research by 17 percent compared to November 2012. It expands the exploration to the states of Durango and Oaxaca,
First, through the promotion of strategic sectors outlined in
which has allowed an increase in the reserves of resources by
the National Development Plan 2013-2018, SGM generated
more than 120 percent in the same period.
a cartography specialized in geology, mapping, mining, geochemistry, geophysics and mineral resources of the
The Gas Associated with Coal Deposits project was formally
country. As of June 2018, we have mapped 861,234km ,
concluded and, in compliance with the amendments to the
equivalent to 62.6 percent of the national territory with mining
Hydrocarbons and Mining Laws, information on the geological
potential.
potential of the areas studied in the northern states of the
2
country was given to CNH. Simultaneously, a cooperation Support and advice were provided to 336 primarily small
agreement was confirmed that will allow SGM access to
and medium scale mining projects, as well as large mines
information related to hydrocarbons and to participate in joint
through exploration services. We used latest-generation
geological exploration.
technology, allowing us to identify with greater certainty minerals associated with economically-feasible deposits. In
SGM was rated as one of the top 10 agencies of the Federal
some cases, we applied hyperspectral technology, which
Public Administration. In 2016, it took eighth position among
consists of an overhead technique that measures the energy
270 agencies and in 2017 it ranked second. SGM revenues
from the sun reflected on the surface of the terrain. This
went from a deficit of MX$70 million in 2012 to a surplus of
allows the identification of alteration minerals on the earth’s
MX$254 million in 2017, which exceeds the MX$212 million of
surface that are the product of hydrothermal solutions and
fiscal resources received as support in the budget.
physical-chemical processes, indicative of possible deposits of minerals at depth.
SGM, has broadened the scope of the 1:50,000 scale geological mapping in Mexican states such as Veracruz,
SGM integrated 24 mining investments into its portfolio that
Oaxaca and others in Southeast Mexico. These states so far
included metallic minerals deposits such as gold, silver, copper,
have not attracted a great deal of mining activity but they
lead, zinc, molybdenum and tungsten. Of the assessed Mining
have great potential.
Assignments, SGM withdrew its rights from the Ministry of the Economy and 10 mining investment projects were proposed
Q: What are the areas of opportunity and how does SGM
for competitive bidding through a public process.
plan to face these? A: We consider it necessary to revise the current regulations
As for other activities, SGM developed the Natural Disaster
governing the functions of SGM, and we estimate that some
Risk Atlas for six municipalities in Hidalgo, as well as the
of them need to be updated, others adapted and expanded,
State Atlas of Yucatan, benefiting approximately 4 million
to allow SGM greater flexibility and efficiency in its operations.
inhabitants, whose authorities now have an instrument for
This would improve services and products generated for
consultation and guidance to protect the population from
Mexican society. Fortunately, there are several ideas and
projects that are technologically-supported, such as geo
Q: What should the next administration prioritize in terms of
hydrological issues, energy, geological and environmental
geology and exploration in the country?
risks, geology in applied research and Geoparks studies, to
A: Under the current administration, we have attempted to
name a few.
give direction to the institution. It will be up to a new body to assume the responsibility for technical evaluation of
Q: How can SGM improve the application of geological
our successes and shortcomings. We are sure this will be
knowledge in the mining sector?
assessed from an objective and impartial perspective, with
A: Although mining companies have already expressed that
full understanding of the powers conferred on SGM by the
the information generated by SGM is of tremendous value to
law and bearing in mind the present and future importance
them, the institution will continue to spread the advantages
of the mineral, energy and natural resources that the country
of using geological cartography and aerial and terrestrial
is demanding. For our part, we are confident we have
geophysical methods as a spearhead for exploration of new
accomplished our goals and carried out our responsibilities.
deposits. For this reason, the advances and achievements in important mineral deposits discovered during the current administration, which have an extraordinary value, will be announced. These include the Campanillas and Caña de Oro assignments in Sinaloa, as well as Las Granadas (Natalia) in the State of Mexico, which are just some examples of the application of geological knowledge to generate projects with
In the last six years, SGM revenues went from a deficit of MX$70 million in 2012 to a surplus of MX$254 million in 2017
the expectation of becoming medium term mining operations. For our part, in July this year, SGM was awarded the National Q: How does SGM seek to facilitate investment in exploration
Quality Prize in the Large Organization category by the
in Mexico?
federal government. This comprises the highest distinction
A: We will continue to improve our technological services
attesting to the commitment and dedication of the institution
and products, expanding territorial coverage in prospecting
as a national reference in competitivity and sustainability.
and geological exploration. We will also diversify in terms of minerals and resources facing increasing demand in national
Q: What is SGM’s next step in the mining agenda?
and international markets, such as rare earth elements, lithium,
A: In the current SGM administration, we have many plans and
and non-associated gas. Among the mineral and energy
projects, which we trust will be seriously considered by the new
resources that experience greatest demand today are copper,
administration. Among our aspirations are inclusion of SGM in
gold, silver, aluminum, zinc, antimony, bismuth, cadmium, lead,
Great Place to Work and application for the Ibero-American
chrome, nickel, platinum, gallium, cobalt, nickel, titanium,
Quality Award 2019. We want to ensure SGM’s technological
lithium, iron, coal, molybdenum, tungsten, manganese, rare
infrastructure is kept up to date and strengthened alongside
earths, uranium and natural gas. We expect this trend to
our employees’ skills and knowledge base.
continue in the medium to long terms. Land was donated to SGM by the city of Pachuca in the Additionally, we will continue to offer support for the
state of Hidalgo so we would like to see the continued
management of environmental protection procedures with
development of the research regarding this area. This could
baseline studies and technology to explore with indirect
be one step toward the agency increasing its own income and
methods of exploration such as airborne and terrestrial
eventually achieving budgetary self-sufficiency. I believe the
geophysics, hyperspectral images, regional magnetometry
organizational structure of the agency should be adapted for
and high-resolution helicopter that also incorporates
optimal operation to reflect our commitment to generating
radiometry in the uranium, thorium and potassium channels.
Mexico’s geological database and contribute to the attraction of FDI and the sustainable use of natural resources, thus
We have encouraged dialogue of our technical teams with
contributing to national development. We want to reinforce
community authorities, trying to explain that the geological
the brand positioning SGM nationally and internationally,
knowledge of their territories is not only useful for mining.
perhaps through collaboration with other international
In the case of Chiapas, SGM has been promoting the
organizations.
incorporation of the Tacaná Volcano Region Geopark into the UNESCO World Geoparks Network. The process is in final evaluation with UNESCO at its Paris, France headquarters.
The Mexican Geological Survey (SGM) is a decentralized public
Recently we were pleased to receive two expert evaluators
body of the federal government with its own legal status and
from the organization that were very satisfied with the
assets, governed by the Mining Law and assigned sectorially to
geosites identified and described by SGM.
the Ministry of Economy through the Undersecretariat of Mining
123
| VIEW FROM THE TOP
NEW POTENTIAL AT LA CIGARRA JAMES MCDONALD President and CEO of Kootenay Silver
124
Q: What is your perception of the exploration market in
On top of these discoveries, Kootenay has also identified a
the country?
footprint in the mineral zone that is between 2-4km wide
A: Upcycles are the time for exploration companies to
that stretches over 10km before disappearing to the south
raise and spend capital because this is when investors
and re-emerging into the San Francisco del Oro-Santa
are interested in funding new projects. A big challenge in
Barbara districts. We have numerous targets to drill and
Mexico right now is the time it takes to obtain the title
are focused on finding not only more ounces but high-grade
to new ground. When Mexican authorities address these
ounces. These are the type of ounces that can improve the
problems, I believe that exploration expenditures will
economics of the current deposit and move the project
significantly increase within the country. This translates into
towards a feasibility study.
higher levels of employment especially in remote areas that greatly need it and would also result in more deposits being
Along with these projects the company is continuously
discovered and developed into mines.
searching for new acquisitions. It is during downcycles in the exploration business that the opportunity for high-
At La Cigarra, Kootenay Silver has 51.5 million silver ounces measured and indicated
quality assets arise and we are always on the lookout for these opportunities. It is a give and take process. We are always balancing the assets each project can offer against the capital that is required to develop them and the assets we already own. Q: How much does Kootenay Silver plan to invest in drilling in La Cigarra during 2018?
Q: What milestones has Kootenay Silver achieved in its
A: We will spend up to US$2 million throughout the next
drilling programs in Mexico?
two phases of the project. The first step will channel about
A: Kootenay Silverâ&#x20AC;&#x2122;s drilling programs shift according to
US$1 million into 5,000m of drilling. Kootenay Silver will then
the availability of capital and its budget. The program in
assess the results before deciding to move on to the second
La Cigarra is progressing well and we have started to drill
phase. There are so many targets in the region that we could
this site again. There are several targets in the region that
drill 100,000m if we had the capital. We believe this project
we want to evaluate and we have prioritized these areas
has tremendous potential and one day could be bought by
according to our expertise and knowledge. We believe
a mining operator. For now, we are focusing on drilling and
we are on the extension of the mineralized silver belt that
obtaining a concrete assessment of its resources.
trends northwest coming out of San Francisco Del Oro and Santa Barbara. We cover about 20 km of that trend, which
Q: How would you assess the advancement of La Negra, a
is very exciting as the trend to the south has produced over
project being developed by Pan American Silver?
500 million ounces of silver. At La Cigarra, Kootenay Silver
A: A total of 87 holes have been drilled into the La Negra
has 51.5 million silver ounces measured and indicated and
discovery to date for a total of 17,000m. We are entering
an additional 11.5 million inferred silver ounces.
the third year of the agreement between Kootenay Silver and Pan American Silver and it is on track to complete the investment it is required to make. It has spent over US$4
Kootenay Silve r is a Canadian, Mexico-based silver exploration
million and must spend US$8 million over the course of the
company engaged in the development of three major silver
four years until 2020. If it finds more mineralization similar
projects in Mexico, including La Cigarra in Chihuahua and
to that in La Negra, there is a good chance that the deal
Promontorio and La Negra in Sonora
will continue after the four years.
VIEW FROM THE TOP |
PROSPECT GENERATOR GOING IT ALONE WITH CUALE PROJECT PADDY NICOL President and CEO of Evrim Resources
Q: Why did the company decide to focus on the mineral
high-sulfidation gold target and I think Newmont shares the
belts in the western North American continent?
same outlook that we do in thinking Cuale has a tremendous
A: When Evrim was launched in 2011, we were interested
amount of potential to grow into something very significant.
in a database and a group of projects that were located in Sonora, Durango and Sinaloa. They were high-quality
Cuale is a project that has never been drilled and is creating
projects and this is what initially attracted us to the region.
a lot of excitement in the market. It is not very often that a
We also have a great deal of exploration expertise in the
company comes across a target with the numbers that were
Western Cordillera of North America. Many people working
found in the trenching programs. Those numbers alone have
for Evrim are experienced in the gold belts of Mexico
generated tremendous interest from a number of groups as
and the copper porphyry belts in British Columbia. This
to what our next steps will be. It is still a fairly early-stage
strategy allows us to really focus and understand not only
project but an exciting one.
the geology of the region but also on regulations and community relations.
While most deposits in the Talpa de Allende area of Jalisco are polymetallic in nature, Cuale is a gold target, which is
Q: What are your expectations for the US$7.2 million
pretty unique for the region. The project has near-surface
private placement from Newmont Mining?
potential of high-grade gold, and high-sulfidation deposits
A: The first time we did an alliance with Newmont was in
are considered among the lowest-cost producing mines.
the Trans-Mexican volcanic belt for early-stage generative
The size of successful high-sulfidation deposits in the Sierra
exploration over a broad area. That experience created a
Madres can be in the range of 2-5 million ounces of gold,
strong relationship between both parties. When Newmont
as seen at La India, Mulatos and El Sauzal.
wanted to expand in North America over a larger scale, it made it much easier for us to have that discussion on
Q: What has been your experience working in Jalisco,
what Evrim could provide. When the discovery at Cuale
which is not a traditional mining state in Mexico?
was made, our relationship made it easier for Newmont to
A: Jalisco is a lesser-known area for exploration, especially
invest US$7.2 million into Evrim, and approximately US$5.8
from a junior perspective. But in 2012, we formed an alliance
million of that amount is earmarked for exploration of our
with a company called Callinan Royalties and through this
Cuale high-sulfidation gold project.
we were paid to conduct generative exploration and acquire projects for our own account, in exchange for a royalty. One
Q: How close is Evrim to forming a JV for Cuale?
of the prospective areas we identified through this program
A: With respect to Cuale, it is the one project Evrim has
was the southern Sierra Madres, which is where Jalisco is.
decided to keep in its own portfolio and not JV. For
As previously mentioned, the state is known more for being
every project generator, there comes a project where
a polymetallic belt rather than a gold belt but our team
the opportunity and geology are so compelling that the
was very interested in the region, and Cuale was one of
company will take its own risk capital and stake it on that,
the projects that emerged from that program. The fact that
and that is exactly what we are doing with Cuale. We have
Jalisco is a lesser-explored area is also an opportunity for
been able to use Evrimâ&#x20AC;&#x2122;s share value as leverage to raise
us to enter and acquire ground on a fairly inexpensive basis.
a significant amount of funding for the Cuale project. At least 80 percent of the funds raised by the Newmont private placement will be allocated to exploring Cuale. We
Evrim is a mineral exploration company operating under
generally like to mitigate exploration risk and that was one
the prospect generator/joint venture business model. It is
of our key strategies. But we will assume most of the risk
fiscally conservative and participates in multiple discovery
on Cuale. Having said that, it is an extremely prospective
opportunities
125
| VIEW FROM THE TOP
A SUCCESSFUL DRILL CAMPAIGN REQUIRES FIVE IMPORTANT COMPONENTS Armando Lucero Director of Operations at Globexplore Drilling & Analytics
126
Jesus Flores Director of Business Development at Globexplore Drilling & Analytics
Q: Why does many of the most respected mining and
Q: Why would a mining or exploration company select
exploration companies consistently return to Globexplore
Globexplore for such a large and complicated program?
for their important drill campaigns?
AL: It all comes down to a contractorâ&#x20AC;&#x2122;s track record and
JF: Any successful drill campaign requires five important
reputation. In measuring the amount of decision makers
components. First it requires a team of experts that only
that select a drilling company this is a very small industry
years of experience can provide. Second is a modern
and word of mouth matters. When a job is carried out well
drill fleet with the latest technologies in safety and
or poorly, the information is quick to spread. We are very
performance. Third is the solid infrastructure needed
proud that we have built a very strong reputation through
to support efficient field operations. Fourth is a deep
good old-fashioned hard work combined with strong
corporate culture of safety, environmental and communal
ethics, innovation and technology that has consistently
responsibility. The fifth component is to provide each
given our clients industry-leading results.
of these requirements at an economically-viable and competitive cost. Because Globexplore consistently
The clients that know us contact us first and those who
delivers each of these requirements we are proud to
do not know us can verify our performance by viewing
say that every client we have ever worked for would
over 40 letters of recommendation we have earned
recommend our services and hire us again. It is this strong
from many of the most respected exploration and
track record and solid reputation that sets us apart.
mining companies in the world. We are unaware of any other drilling company that is presenting such a reliable
Q: While interviewing one of your larger clients the
and consistent performance record in writing from
company brought up that it is currently using Globexplore
their clients. We simply do not take on a new contract
with four different types of drilling at the same time in
unless we are 100 percent sure we can complete it with
the same project. Can you tell us more about that?
a satisfied client. We do all that is necessary to safely
AL: We currently have two different clients that have
complete the job on time, on target and within budget.
us drilling reverse circulation, deep-hole core, man
And ultimately that is what earns us a positive reference
portable core and underground core simultaneously on
for new and returning clients. This is simply the only way
each of their properties. These two clients hired us to
to make sure we can maintain the reputation we have
perform these four different types of drilling because
that has led every client we have ever worked with to
they know from our previous performance that we have
state that they would hire us again and recommend our
the experience and expertise to carry out this complex
performance.
activity side by side. Each drill type requires a different crew with the experience and expertise along with all the
Q: What is the future for Globexplore in 2019 and beyond?
mechanical and technical support needed. It is like running
JF: We have some exciting new technologies we are
four different drill projects, and it is further complicated
adding to our Geosite services that is currently being used
by the fact it is being carried out on one single property.
by several of our major clients. This is a combination of
It requires very detailed organization and execution of
Hyperspectral and XRF analysis and core logging with our
well-managed procedures.
partner Terracore. In addition to Geosite we are currently adding new deep-hole core rigs requested by our clients for depths up to 2,000m. While we will continue our focus
Globexplore Drilling & Analytics is an exploration drilling
on Mexico we are very close to establishing operations
company offering traditional diamond core, man portable,
in a second country. With zero debt and 95 percent of
underground and reverse circulation drilling services, as well as
our fleet on solid long-term contracts we will continue to
on-site mineralogy and geochemical analysis with core logging
acquire new rigs to meet our clientsâ&#x20AC;&#x2122; demands.
127
Globexplore currently has two different clients that have it carrying out four types of drilling simultaneously on each of their properties
| INSIGHT
THE FUTURE OF DRILLING PETER SHORTUS General Manager of Landdrill
128
Early explorers used to dig only in areas with visible
Landdrill has more than 40 years of experience in the
mineralization as they did not have the specialized tools
exploration drilling industry in Australia, Chile, Mongolia, Russia
that are available today. Technology has changed that,
and Mexico. Many of those years were spent using different
creating greater prospects for success, says Peter Shortus,
forms of drilling. “This experience leads me to appreciate the
General Manager of Landdrill. “New technologies create
impact that new technologies have on bringing about safer
greater opportunities for exploration companies to identify
production and a better use of equipment to produce quality
drilling targets with a far better likelihood of success while
samples,” Shortus says.
allowing miners to be safer and to work more easily and efficiently,” he says.
Its extensive experience has also taught the company to survive at low prices. “But this is not sustainable in the long
Technological advancements enable the rapid assessment
term as it limits the industry’s R&D opportunities,” Shortus
of a given ore body and the abundance of historical
says. Not all companies have been as resilient as Landdrill and
mines in Mexico makes it a great place to start looking.
mining downturns have forced many good technicians to move
Aiming to help operators reduce the costs of drilling
onto other fields due to lack of employment opportunities.
while optimizing production rates, Landdrill offers
The company too has lost some good employees but because
underground and surface drilling as well as man-portable
it is used to operating internationally, it has also had the
rigs for difficult-to-access areas. “We have rigs capable
flexibility to bring qualified personnel from overseas.
of drilling up to 2,500m NQ,” says Shortus. The company also offers Reverse Circulation (RC) drilling with a face
Shortus, however, does perceive an industry upturn, which
sampling hammer or kit bit, which is similar to RC rotary
is reawakening the appetite for exploration. “The positive
air blasting. “These are relatively cheap, efficient and
outlook is allowing us to expand our activities,” he says.
rapid forms of drilling to assess the potential of an area
To find new projects, the company has a precise strategy.
to become an ore body,” he adds. RC has been a preferred
“We analyze press releases to identify projects that have
form of drilling in Australia for many years as it requires
a strong potential for our services and follow up on these
minimal use of water.
companies,” he adds.
INSIGHT |
MORE STRINGENT STANDARDS FOR DRILLERS
“
Today, any drilling company with a drilling permit can drill but only certain companies are aware of the standards and requirements of these projects” Enrique Ortega, Director General of Grupo SHB with RNG Perforación
To be friendlier to the environment, SHB and RNG are drilling high-tech wells that are made with different materials to increase efficiency in pumping and can be built more quickly, doubling cost savings. “The casings are fabricated with different materials and they are more technical in terms of the screened open area,” he says. “This allows more efficient pumping, optimizing energy consumption.” Ortega says the incorporation of technology in well construction can allow more accurate readings when monitoring the behavior of aquifers. “This enables miners with these kinds of constructed wells to study them and maintain sustainability,” he says. “This is key, as any
All too often, drilling companies adhere only to the bare
operator’s interest is to preserve water resources because
minimum requirements in terms of environmental care and
they cannot produce ore without it.” Ortega adds that
protection, says Enrique Ortega, Director General of Grupo
technology also allows the discovery of deeper sources
SHB with RNG Perforación. For this reason, RNG works
of groundwater, with the addition of SHB’s technical
according to international AWWA standards, which are
capacity making it easier to reach. “Artisanal drillers
superior to Mexican water well standards and regulations.
usually drill short wells due to their lack of technology
“It is important to meet industrial security standards
and capacity,” he says. “RNG Perforacion aims to find
and to have a workforce that understands and shares a
the right solution for our clients regardless of how deep
respectful environmental culture,” he says. “Since 2011, we
we must drill.”
have been working with top Canadian mining companies, partners that have helped us to improve our standards and
RNG Perforación aims to provide its services to AAA
organizational culture.”
mining companies starting from previous studies, design of the water wells to ensure success in all the
Ortega says mining standards are far too general in terms
projects involved. “Our value proposition is based on
of groundwater. “It must be more specific and standards
specialization so we target a very select market,” Ortega
should be applied on a case-by-case basis. It is impossible
explains. “We have already reached this level but we
to apply the same standards in the southeast of the country
believe we must continue learning and incorporating
as those in the northern region regarding aquifers.” He
technological innovations as they come. Our clients need
adds that each project should have a better focus on the
to know that we can carry out projects for them with the
specific requirements they must oversee. For example, to
same efficiency found in developed countries.”
drill a well, a company requires the CONAGUA permit. “I would like CONAGUA to consider certain guidelines that
With the new administration, Ortega requests that
guarantee qualified companies will execute these works.
CONAGUA become a more technical and less bureaucratic
Today, any drilling company with a drilling permit can drill
organization in terms of the drilling of wells. “As the
but only certain companies are aware of the standards and
years go by, Mexican aquifers remain overexploited and
requirements of these projects.”
CONAGUA is failing to take the necessary preventive measures.” He says a certification process would also help
According to Ortega, the oversight is not caused by bad
foster best practices. “I would like to see a requirement
will but rather the ease of bypassing many regulations. “I
established that, before authorizing a company to drill, it
believe the Mexican mining industry is a noble sector, full
should be mandatory for them to be certified drillers first.
of loyal and professional people who are increasingly aware
The government must implement key actions to unify and
and worried about environmental impact,” he says. “But it
improve drilling standards because with more exacting
faces regulatory challenges. The next administration must
requirements, companies such as RNG Perforación will
understand that if it wants the country to progress, it must
have a better opportunity to serve the industry.” He notes
foster the economy instead of controlling it.” He believes
that it is difficult to compete with companies that do the
the government should be an economic facilitator, not the
same thing but with lower standards and often neglecting
industry’s ruler.
environmental concerns.
129
| INSIGHT
EASE EXPLORATION BURDEN TO ENSURE FUTURE OF MEXICAN MINING JOHN-MARK STAUDE President and CEO of Riverside Resources
130
The public and private sectors do not always see eye to eye,
partners do not understand why we need to take this
and that could not be truer than in mining. Since the federal
route, and it is expensive, but ultimately it appears this is
royalty taxes were introduced in 2013, many operators
the best legal way we can secure mineral titles.” He notes
have been upset with the government as operations that
that Riverside spent US$6 million on R&D in 2017, but says
were sustainable have now become sub-economic and
if the company cannot move forward and obtain more
John-Mark Staude, President and CEO of Mexico-focused
concessions, this year the investment in Mexico will be
exploration company Riverside Resources, warns this could
significantly lower.
jeopardize the future of the Mexican mining sector. This US$6 million investment is also a point of contention “The industry is sustained by mining operations, rather
with SAT due to a miscommunication, Staude says. “We
than exploration,” he says. “Exploration will follow and can
brought US$6 million in FDI into Mexico but the government
flourish where there is active mining and if operators are
says that the money is earnings and we must pay tax on
not given the conditions to be successful, there will be no
it,” he says. This misunderstanding has been unresolved for
sustained exploration and investment will dry up.”
seven years and Riverside has an active amparo preventing the government from claiming this money. Many more
For the new administration, which will take office on Dec.
companies have reported issues in trying to obtain VAT
1, Staude adds, there will be an opportunity to prove its
refunds from SAT, and Staude says this has caused many
commitment to the mining industry. “We are a public
companies to leave Mexico. “Riverside even has a division
company and we need to go where the investors want us
dedicated to tax recovery for our partners,” he says. “I am
to and where what we find can be reasonably developed.
sorry we have to do that because we are a mineral company
We are really trying to keep our operations focused on
and it should not be necessary for us to dedicate our time
Mexico and we are hopeful about the new government and
to tax recovery.”
its ability to bring fresh opportunities and shine a spotlight on the sector’s potential.”
He advocates a tax reform as the first step for the new government. “In Mexico, even things like facturas (invoices)
Although he does not expect much change in the
are much more complex than in other countries,” he says.
immediate short term, Staude indicates that 2020-22 would
He believes the current system is harming employment,
be enough time for a new government to make an impact.
since Riverside is now unable to hire so many employees.
Long permitting processes, delays in issuing mineral titles,
“We are conscientious about complying, working to
lack of liberation of cancelled concessions, lack of action
carry out exploration activities effectively and serving all
in canceling non-paid concessions and problems with the
stakeholders well,” he says.
Mexican Tax Authority (SAT) are all factors he references that contribute to a negative image of Mexico. “One of our
Staude adds that these conditions are driving companies
limitations is the inability of mining companies to obtain
to other jurisdictions like Finland, Australia, Peru and
mineral titles and we would really like to see this rectified
Ecuador, which are more workable. “Right now, there is a
by a new government,” he says.
lot of potential for Mexico, especially since zinc prices are increasing and Mexico is a zinc country.”
Staude explains that mining operations depend on a company’s ability to obtain the land for the concession
But even Riverside’s partner, Centerra Gold, has been
and slow processes are forcing Riverside to take a new
looking to other countries for new operations. The company
route. “We have five different amparos filed against the
has bought seven mining and development projects in
government in relation to mining titles,” he says. “Our
Canada over the last three years, and Staude believes this
money could have been directed at Mexico. “It is exciting to see such an increase in mining activity,” he says. “If mining rules in Mexico were adjusted to be more favorable to FDI, investment could flood in.” Investment attractiveness is especially important considering the long-term nature of mining projects. Staude explains that, prior to his time at Riverside Resources, he worked as a translator between the USGS and Mexico’s
“
We are hopeful about the new government and its ability to bring fresh opportunities and shine a spotlight on the sector’s potential”
geological survey. “Centerra has been a very good partner in past years,” says The Cecilia project in Sonora, now part of Riverside’s
Staude. “We were lucky to have such a strong partner during
portfolio, was a site he visited around 30 years ago, and at
the downturn, which has stood us in good stead as we head
that point only four drill holes had been completed. “Now,
into an upturn.”
30 years later, the project is more developed and Riverside has a 100 percent option agreement on it,” he says. “This
Riverside has positioned itself well for a metals price hike,
demonstrates the long-term nature of mining activities; it
not only through its strong JV partners, but with its financial
takes years and for things to line up efficiently.”
health. The company is debt free, and Staude says that, although the company has had to use equity, the strategy
All things considered, he believes Sonora is one of the
of using JV partners contributes greatly to its finances. “We
most favorable mining states in Mexico, and he identifies
were able to carry out the work for partners in Mexico to
the northern state as a focus for Riverside going forward.
remain debt free and hopefully we can do that again in the
“Sonora is very mining friendly, and not only is the
future,” he says. “Maybe if there are regulatory changes,
government welcoming but so too are ejiditarios and
partners will return to Mexico to work with us and others
landowners,” he says. “For the remainder of 2018, we are
and create jobs and prosperity in Mexico.”
looking to expand that activity and we were happy to come to long-term access agreements with landowners.” Riverside
Staude says the key to successful JV partnerships is to have
looks to make a positive impact in these communities and
local Mexican staff and work with them closely. “The vast
Staude says the company installs infrastructure as often as
majority of our employees are Mexican and we have been
possible as part of our community agreements.
bringing capital from other parts of the world,” he says. Now, 42 percent of Riverside’s shareholders are European, rather
Community relations are of the utmost importance when
than Canadian. “We really need those local operational
starting mining operations, he stresses, which is why
partners that are trustworthy and have a long-term view,”
Riverside finds states like Sonora, Chihuahua and Durango in
he explains. “We have to be constantly thinking about the
the north generally more favorable than those in the south.
return on capital we can offer investors in the long term.”
“The southern half of Mexico has great mineral potential but there are often complications in permitting,” Staude says.
This is why he believes the new administration can improve
“That being said, we feel that area could really be served by
the industry to instill much more investment certainty.
mines and the economic benefits they can bring.”
“Mexico is doing things well environmentally, but we need to ensure that permitting becomes less political and more
Riverside’s ideal projects are located in an area of high
efficient,” he says. “The industry can follow regulations but
prospectivity, according to Staude, and are often close to
they must be fair rather than politically motivated.”
historic mines with existing infrastructure. More importantly, the exploration company seeks locations that are favorable,
Staude points out that, if these few issues – permitting,
workable and rational. “We do not enter locations that are
mineral concessions, certainty – are addressed, Mexico
very anti-mining, conflict areas or areas that involve illicit
could become a leader in mining. “The government has
activities,” he says. “This is especially important for partners,
succeeded in pushing capital away from Mexico but there
who trust that we select the project well. If we had an incident,
is still money eager to enter the country if investors can
we could lose the capital and confidence of our partners.”
see a possible return for the risk,” he says. “There is a choice for the new administration on whether it wants
Strategic partner Centerra has funded its Glor gold project
to take advantage of this scenario. We are definitely
in Sonora. The 17.2km Clemente project in the same state
excited about the future of mining in Mexico. We do
is optioned to Silver Viper Minerals and is located just 7km
everything transparently, so we need to be able to expect
to the northwest of Goldgroup’s Cerro Colorado mine.
transparency in return.”
2
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| INSIGHT
A SUSTANABLE FINANCIAL APPROACH TO EXPLORATION GREGORY BEISCHER CEO of Millrock Resources
132
There is no doubt that mineral exploration is a risky
targets that would make a difference to the bottom line of
business. The odds of finding a valuable discovery that
a company in case of a discovery.”
has the potential to be turned into a mine are somewhere between one in 1,000 and one in 5,000, according to
Beischer explains that to make an exploration project
Gregory Beischer, CEO of Millrock Resources. “To make
attractive, exploration companies must begin by gathering
exploration financially sustainable and profitable for
all the previously available information and collect it in a
shareholders, Millrock partners with mine operators to fund
database. “We produce good maps that can clearly explain
it and share its risks,” he says.
why a company should invest several million dollars in a certain project,” he says, adding that this eases the process
While share-selling is usually how exploration companies
of finding a funding partner. For example, Millrock Resources
raise money for their projects, Beischer believes that this
has an agreement with Centerra Gold in which the latter can
is not truly sustainable. “Mining companies raise money by
earn 80 percent interest by funding the exploration work.
operating mines and reinvesting some of their profits, but
“This way we do not risk too much of our shareholders’
exploration companies usually have no income except sales
money and still end up earning 20 percent on the project’s
of shares,” he says. As investors can only buy a certain
profits,” he says.
number of shares, exploration companies can often come up short when collecting the kind of money needed to fund
Centerra Gold decided to participate with Millrock on
their discoveries.
two exploration projects, La Navidad and El Picacho. The
“
Our approach is to identify geological targets that would make a difference to the bottom line”
projects target an orogenic gold deposit located in the state of Sonora, similar to La Herradura, Nochebuena and other comparable mines operating in the region. “We completed the first drilling program in late December 2017. The results were good and reconfirmed what we knew from historic drilling,” says Beischer. While certain developments were disappointing – the gold mineralization did not stretch further to the west, becoming
Millrock Resources addresses this dilemma by seeking
thinner and failing to strongly mineralize, for instance –
a funding partner, so most of the money for exploration
Beischer remains hopeful about the value of the project.
comes from profitable mining companies rather than
“We have had very strong soil geo-chemical anomalies
from investors buying equity. To enhance the chances of
toward the northwest that tell us that there should be more
succeeding in finding a high-value mineral deposit, the
gold below the surface. This will be the focus of the next
company’s model involves operating several simultaneous
drilling program,” he says.
exploration programs on multiple projects. “By doing so, we increase our chances of success, but we give up a portion
Millrock Resources is also looking for a funding partner
of the project. Having said that, the portion we retain can
for the Los Cuarentas project located in northern Sonora,
still be highly valuable.” Beischer says, giving the example of
170km northeast of Hermosillo, close to the Mercedes mine,
the high-grade San Francisco mine in Sonora, operated by
which is operated by Premier Gold Mines. Along with the
Alio Gold. “Even if we owned 20-50 percent of a project like
neighboring Los Chinos project, Los Cuarentas was initially
San Francisco, we would still make a lot of money for our
funded by Centerra Gold. “It concluded that no further work
shareholders,” he says. “Since big companies are looking
should be done,” he says. “But we think that there is still a
for big deposits, our approach is to identify geologic
great deal of potential at Los Cuarentas.”
VIEW FROM THE TOP |
BANDING TOGETHER FOR EXPLORATION BEN WHITING Vice President, Exploration of Orex Minerals
Q: Orex Minerals has three projects in Mexico. How are
avenue to raise and add value through discovery. Orex
these progressing?
Minerals has been successful in many projects, such as the
A: We are about to initiate an exploration program on
Barsele gold deposit in Sweden, which was originally in
the San Luis del Cordero project. Paperwork with the
Orex and later spun-out into a separate company called
government has taken a little longer than we expected and
Barsele Minerals Corp and joint ventured with Agnico Eagle
the process could be smoother. But we are looking forward
Mines. In Mexico, we have JVs with Pan American Silver and
to exploring the project as a polymetallic skarn deposit.
Fresnillo, both very well respected and large operators. So, for the Belcarra Group, Orex serves as a platform in Mexico
Regarding the other two projects that Orex has, there were
to advance projects.
some delays this year with financing and joint venture changes in both. The Sandra Escobar, a JV with Canasil
Q: How can exploration companies overcome the
Resources, will be carried out in conjunction with Pan
inconsistency of revenue streams and decrease the risks
American Silver, as it has claims in the same mining district.
of investment in exploration?
We will explore the property together. The expenditures to
A: As exploration companies do not produce on a
be reached include a US$5 million by Pan American Silver
regular basis, we cannot count on a revenue stream,
and US$1 million by the Orex-Canasil JV. The former will
but on financing to raise money. Usually, equity-based
hold 51 percentage and the latter a 49 percent share. On
financing is the best option. When financing projects,
Sandra Escobar, we discovered a new silver deposit in 2016,
the markets have ups and downs depending on world
but with metallurgical challenges in extracting the silver
affairs and international metal prices. I think that the
from the rock. We expect the expertise of Pan American
best way to ameliorate those fluctuations is to have
Silver in the field of metallurgy to be a key asset for the
solid relationships with financial investment houses and
project moving forward. Once we consolidate the mineral
major mining companies. For example, we have close
concessions we aim to explore the whole mining camp as
relationships with big institutional investors such as US
a single exploration project with more diamond drilling.
Global, Sprott Asset Management and the Contrarian fund, just to mention a few.
Q: If you were to design a successful methodology for discovering high-quality deposits, what would it be?
Q: In your experience, which financial scheme suits Mexican
A: I think it would be to form a good technical and financial
mining exploration best and why?
team to tackle projects. It should include scientists,
A: I think that private placements and equity positions
engineers, financial experts and a very strong local staff
are the best options, while loans are probably the worst
working both on the technical and legal sides of the
as they require a further revenue stream for their support.
explored jurisdiction. As for discovery methodologies, this
A financial involvement directly with the company relies
depends on the mineralogical style. Often a geophysical
on the success of the company as the economic driver of
approach works well for sulfide mineralogy, while in other
decisions. A junior mining company with too many loans
locations structural control is the key to vectoring toward
outstanding is leaving itself at risk, so I would stay away
the heart of an ore deposit.
from these and work more with equity financing.
Q: What is the raison d’etre of the Belcarra Group and what is the role that Orex plays in the organization?
Orex Minerals is a Canadian-based junior mineral exploration
A: The Belcarra Group is a collection of experienced
company with a portfolio of large gold, silver, and copper
technical and financial people who team up to run mining
exploration projects on prominent mineral trends in Mexico
companies. Our objective is to find good projects with an
and Canada. Each project has strong merits of its own
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VIEW FROM THE TOP |
PRIORITIZING EXPLORATION FOR INDUSTRY HEALTH DOUGLAS COLEMAN Director General and Founder of Mexico Mining Center
Q: What needs did you identify in the market that led to
A: The focus has been on high-grade, epithermal vein
the creation of a directory for mining companies and their
deposits of silver and gold as well as high-grade copper
properties through a news portal?
and zinc deposits. Lithium is gaining importance due to
A: MMC was founded from the recognition of the mining
increased demand for battery metals and Bacanora Lithium
industry’s need for freely accessible, accurate and relevant
has been successful in exploring, developing and financing
information on mining developments in Mexico. We posted
the Sonora Lithium project which is one of the largest, most
the online mining directory first and later added the news
economically feasible lithium projects in the world. There
portal and exploration map. Today, with our daily bulletin,
is also excellent potential for discovering large porphyry
MMC News, mining executives stay on top of recent
copper deposits in Mexico, but the bulk of the activity
developments, service providers obtain leads to potential
is from Canadian junior companies seeking high-grade
clients and everyone has quick, easy access to information
deposits that can provide a quick return to investors.
specifically centered on mining in Mexico. MMC News is now received by over 35,000 subscribers and we just recently
Q: What would you like the next administration to prioritize
launched a mobile application that will make it even easier
in the next six years to make sure Mexico’s mining industry
to stay up-to-date on mining in Mexico.
remains competitive? A: Mexico has one of the best mining laws in the world
Q: What does the country’s mining industry need to make
and Mexico has a very positive, favorable environment for
sure there is a healthy flow of large discoveries that can
mining not to mention the enormous potential for new
replenish depleting mines?
discoveries.
A: More investment in exploration and drilling will lead to more discoveries. Mexico has enormous mineral
With that said, Mexico has been slipping in favorability for
potential. Important discoveries are still being made right
mining investment due to its lack of security and the rule of
at the surface. A good example is the Alacrán silver-gold
law and to bureaucratic delays. I believe one of the greatest
deposit near Cananea, Sonora, where high-grade silver
improvements the next administration could make would
was discovered within sight of Grupo Mexico’s world-class
be to reduce the bureaucratic delays in all steps of the
Buenavista copper mine. Dozens of geologists must have
mining concession process. Granting of titles to concessions
walked over this deposit without noticing its silver potential
should be processed in a matter of days; cancellations
until the Australian exploration company, Azure Minerals,
of concessions should be processed more quickly, and
made the initial discovery of nearly 2kg/t silver in outcrop.
thousands of cancelled concessions should be liberated
Mexico continues to reward companies willing to invest
promptly instead of being held in limbo for years as they
in exploration with important discoveries. Brownfields
are today. This will open prime exploration ground and
exploration has shown remarkably positive results,
encourage more mining investment. Also, a big incentive
expanding the reserves of mines currently in production.
for exploration companies would be if the government
There are many excellent known mineral deposits in
could speed up the process for income tax reimbursements.
Mexico that have not yet been explored using modern
Without the income tax reimbursements, the expense for
techniques. Investment in exploration will undoubtedly
exploration companies is increased by 16 percent.
result in major discoveries which are vital to the health of the mining industry. Mexico Mining Center integrates a complete directory of
Q: What trends have you identified when it comes to
mining companies and their properties with a news portal and
the types of projects that are being acquired most often
an interactive map where the geographic relationship between
in Mexico?
current projects and historic mining activity may be appreciated
135
| TECHNOLOGY SPOTLIGHT
136
INNOVATIVE SOLUTIONS FOR ACCURATE DRILLING Hitting drill targets while maintaining productivity is a big challenge in mining. Due to the costs involved in drilling, access to quality survey data in real time is critical to managing the risk of drilling unnecessary holes and even missing the target completely. Accurate and reliable survey data gives mining companies the confidence to make informed drilling decisions, quickly. To tackle this challenge, IMDEX leading brands AMC and REFLEX provide end-to-end solutions to allow the accurate intersection of targets. The IMDEX Downhole Navigation meets complete downhole needs, from surveying the hole and projecting the creation of drilling programs to fast and accurate rig alignment. This innovative solution monitors the directional progress of the individual borehole with a specified directional drilling software. Understanding the need to innovate in the industry, IMDEX’s latest advancement in gyro technology is the REFLEX GYRO SPRINT-IQ, the fastest and most accurate north-seeking gyro in the mineral exploration industry. This gyro provides survey data in record time, surveying three times faster and twice as accurately as regular gyros, covering over 150m per minute. The GYRO SPRINT-IQ also allows surveying at any angle and in single or multi-shot and continuous modes. It integrates with IMDEXHUB-IQ, the company’s awardwinning cloud-based web portal, to ensure instant access to results and data anywhere and at any time. IMDEX also focuses on serving structural geologists through leading instrumentation and software for the effective discovery, planning and production of ore bodies. These integrated end-to-end solutions enable resource companies to benefit from real-time and secure access to verified structural data directly from the field, improving operational efficiencies and reducing risk from manual intervention. Each individual component of IMDEX’s offering also provide sstandalone productivity benefits for clients. A recent case study of a project in Mongolia demonstrated the improvement in the integrity of its structural model while significantly enhancing workflows. The company was encountering variable core quality and data with a significant number of holes that were either not orientated or drilled close to vertical. A large number of these holes were subparallel and had not been adequately classified. Geologist Nick Oliver from HCOV Global began using the REFLEX IQ-LOGGER and the structural measurements were seamlessly integrated with IMDEX ioGAS, which enabled a robust fault classification to be created in real time.
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| INSIGHT
TEACHING LATAM TO INVEST IN EARLY STRUCTURAL GEOLOGY AND DE-RISK CARL HOVEY Vice President of Business Development at Terrane Geoscience
138
Exploration companies are under pressure to find their
operational and exploration costs. It was one of the first to
next big discovery as soon as possible. But attempting to
implement these services into its procedures.
meet short deadlines can push companies to skip steps and make costly mistakes, which is what Terrane Geosciences
Terrane Geoscience can provide services for mines across
strives to teach the mining industry in Latin America. “Early
every phase of the mine life cycle, from grassroots exploration
structural assessment of a project helps our clients identify
to production. It has worked on a wide range of projects,
key target areas and ensure wise investment decisions
both domestic and international. “We had a particularly tricky
versus starting to drill immediately in areas that could be
case where a high-profile client in Canada was struggling to
low potential,” says Carl Hovey, Vice President of Business
understand their ore body,” says Hovey. “The company was
Development at Terrane Geoscience. “It is best to take
asked to be part of the team in charge of unravelling the
the time to identify targets early rather than cleaning up
structural geology characteristics of the deposit. Further, we
mistakes later on.”
were able to identify new exploration targets for expansion and received extremely positive feedback.”
The Canadian company offers expertise on structural geology, rock mechanics engineering and the early adoption
He adds that this is another example of why it is important
of technology. “We use top-of-the-range technology to
for companies to invest in this work upfront and avoid
help identify targets at a low cost and can aid in baseline
situations that can slow down the development of the
environmental assessment down the road,” explains Hovey.
project. “It may seem expensive at first but in the long run
“We come from technical backgrounds and are quite used
it costs significantly more to overlook these studies. Due
to early adoption of technology, which makes Terrane
diligence is a game-changing investment that can make or
quick to utilize new tools that can facilitate the services
break a mine,” he says. “We can de-risk a project from the
we provide in structural geology and rock mechanics
very beginning on the geological side to help companies
engineering.” The company incorporates everything from
avoid wasting energy because they are targeting the wrong
digital imagery and geospatial data processing to drone
areas. Understanding the structure allows for informed
services that improve safety, increase efficiency and reduce
decision-making on projects.”
INSIGHT |
APPLYING NEW METHODOLOGIES TO ENSURE THE NEXT BIG DISCOVERY RICARDO VALLS President at Valls Geoconsultant
To attract more exploration investment into the country,
The company assures that it will not drill a single hole
the Mexican Geological Survey (SGM) strengthened its
until it is sure that the hole will intersect the target. “We
information provision services and released a consultation
do not drill to explore but to verify,” Valls says. “Our
system called Geoinfomex. Thanks to these efforts, Ricardo
method can help companies save up to 50 percent on
Valls, President of Valls Geoconsultant, believes that Mexico
exploration programs.”
has one of the best geological information systems in the world. “It is a pity that local companies are not taking
Valls Geoconsultant calls its methodology “Lineament
better advantage of the rich information that exists in the
Analysis” and is working to introduce it to other countries. “It
country,” he says.
is important to change our mindsets and processes because although it is very easy to extract ore from a mine until the
SGM is in charge of five basic programs that focus on making
end of its lifecycle, the way the industry thinks needs to
metallic and nonmetallic mineral resources profitable through
be realigned to the reality of the sector to guarantee new
geological information infrastructure and research, among
projects,” he says. “We need technology and better thinking
other services. Its goal is to generate the most recent and thorough geological information ever published in Mexico. Geoinfomex displays geological information on a single site with over 80 layers of data and is the first of its kind in Latin America. Along with the advantage of geological information, Valls says that processes in Mexico are not as slow as many companies often say they are. “I have experience working in many countries and I find that Mexico is quite fast in comparison to these,” he says. “In Colombia, we applied
“
to discover the next largest projects.”
We do not drill to explore but to verify. Our method can help companies save up to 50 percent on their exploration programs”
for nine licenses four years ago and have not received a response. It can sometimes be slower than Cuba. This forced
Despite the need for new projects and the effects of the last
us to invest our money elsewhere. We would love to work
downturn, the number of attendees at PDAC 2018 could be
in Mexico if our hands were not tied to a big project in
a good sign for the industry, Valls says. “PDAC is a great way
Colombia.”
to measure the well-being of the industry,” he adds. “Metal prices are improving and even though the industry is still in
Valls Geoconsultant specializes in geological research and
need of capital, people are optimistic. I hope that the public
has innovative solutions to reduce the expenses and time
sector learns how to treat the mining industry to reactivate
frames of drilling and exploration. According to Valls, the
exploration as companies are hungry for new projects.”
traditional method of exploring sites step by step is outdated. “It may work sometimes to test your luck and cut corners
One area hindering exploration worldwide is the lack of new
but this approach will be a lot more expensive and time
projects. “The last downturn caused big companies to focus
consuming in the long run. We have seen companies use this
only on acquiring producing mines,” Valls says. “There was not
strategy to jump start a drilling program based on the results
enough capital for exploration and this means that companies
of a neighboring license without doing any other exploration
in the industry do not have enough exploration projects to
work, and of course the results were catastrophic.” He firmly
turn into producing mines.” Due to the lack of both supply
believes it is much better to incorporate a systematic method
and new discoveries, he estimates that the price of gold could
that thoroughly analyzes the site before drilling.
rise to US$1,800/oz.
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| INSIGHT
TECHNOLOGY CAN HELP CUT EXPLORATION COSTS AARON CUMASHOT Director of Operations of SpecTIR
140
As miners continue to seek ways to reduce costs,
of mine pits to help clients make the best decisions about
digitalization of geological data is an increasingly
production and grade.
attractive option that can provide pin-point accuracy regarding exploration targets, says Aaron Cumashot,
The incorporation of increasingly complex technologies
Director of Operations at hyperspectral and geospatial
in mining processes is a double-edged sword, according
solutions company SpecTIR. “We can help to narrow
to Cumashot. While it can help meet the never-ending
the focus of exploration,” he says. “We save companies
demand for high-grade minerals, some geologists find such
money by helping them understand their claim mineralogy;
technology a threat. But Cumashot believes that instead
enabling them to be more precise about where they
of competing, technology and geologists should have a
devote resources.”
symbiotic relationship. “Technology is not here to replace geologists by any means, but to augment their power and
SpecTIR solutions can be applied across a variety of areas,
knowledge as a tool,” he says.
such as oil and gas, vegetation, the environment, and even emergency response. Within mining and minerals, the
He stresses that, while SpecTIR is at the forefront of
company specializes in analyzing surface mineralogy in
technological advancements helping companies adapt
often large and remote locations. “We are actually working
their techniques for mineral exploration, its systems
in areas that are harder to get to, basically overcoming
remain very dependent on human operations. “There are
access challenges in exploration, as we can pull very detailed
many environmental factors involved in collecting quality
geological information without setting foot on the ground.”
data,” he explains. “Even with some of our semi-automated
says Cumashot. Through its technologies, he says SpecTIR
processes there has to be an intelligent being making the
can accurately map minerals associated with specific types
decision of when, where, and how to operate.”
of alteration systems at a high level of spatial and spectral precision. Hyperspectral data is then combined with other
With the importance SpecTIR places on human capital,
remote sensing and geophysical data from sources such as
it makes sense that the company relies on a unique and
LIDAR, magnetometry, seismic, and core logging to create
diverse multinational network composed of specialized
a highly-accurate picture of the mineralogy.
scientists with a global presence and penetration. “We have the best capacity in the world for completing these
Hyperspectral data has been employed since the 1990’s,
surveys because we have many sensors in the field and
but it has just started to gain traction in Mexico over the
the right team to manage the operations in every region,”
last decade, Cumashot says. “We had an early foothold in
says Cumashot.
the digitalization of geologic data here; taking advantage of this momentum, we span off our sister company
Despite its global reach, the company is careful when
Terracore,” he explains. The latter specializes in spectral
choosing where it works and with what subcontractors. “We
imaging and digitalization of the full core record for a mine
want to work with the best and safest, even if they are not
or exploration area.
the cheapest” he says. “We seek well-established companies with outstanding reputations for our partnerships.” In
In Mexico, SpecTIR’s most in-demand products are final-
Mexico, SpecTIR has worked with SGM, contributing to the
solution mineral analyses, along with full field verifications.
GeoInfoMex platform since 2012. SpecTIR built the SGM
“Clients trust us with their mineral mapping,” says
Hyperspectral program; including training on hyperspectral
Cumashot. In operational mines, SpecTIR is implementing a
operations and basic image processing. They have worked
new mine-wall scanning service that carries out a complete
collaboratively on projects in several States of Mexico,
high-resolution hyperspectral characterization of the inside
including Guererro, Zacatecas, and Guanajuato.
VIEW FROM THE TOP |
TURNING UNDERVALUED ASSETS INTO SUCCESSFUL PROJECTS LAWRENCE PAGE Chairman and CEO of Manex Resource Group
Q: How have you raised the funds for your exploration
Durango. The property acquisition price was US$4 million
projects and what financial schemes have proven to be
and we spent US$11.5 million on exploration.
the most successful? A: In mining and mineral exploration, investors come from
According to our resources estimates, the property has
everywhere. There is a strong European appetite to invest
approximately 20 million tons of silver equivalent with
in exploration companies in the Americas, so we have to
strong zinc and lead components. The current estimated
be listed on their stock exchanges to make it easier for
value of those in situ resources is US$3.9 billion. We plan to
their nationals to participate in financing our projects. Our
spend another US$3 million further exploring the property
companies are listed on the TSX Venture Exchange, as well
to increase its resources by upward of 10 million tons to over
as the OTC-QB and Frankfurt Exchanges. Also, Southern
300 million ounces of silver equivalent. We are presently
Silver Exploration is listed on the Santiago Stock Exchange
carrying out an internal scoping study, which gives us better
(BVS), which provided some ability to invest for Mexican
insight on underground mining methods on the property.
investors. The TSX asked us to co-list on the BVS in Chile to
We expect to move to a PEA in early 2019, which should
benefit Mexican investors. We have not yet pursued a listing
lead to a production decision.
on the BMV, but we would be happy to consider doing so. Valterra Resources is the junior company which recently We also do in-house, non-brokered placement funding’s
acquired a copper-gold property in Chihuahua. We are
ranging in value from CA$1 million to CA$5 million, as we
confident that Los Reyes has substantial opportunities to
have a significant number of investors that are happy to
be developed into more than 10 million tons of high-grade
speculate with us. In the end, we speculate to raise money
copper and gold. We are in the permitting process and
and become a more mature company, and this strategy has
expect to be drilling before the end of 2018. Los Reyes is
proven to have been successful. Of the four companies in the
surrounded by Peñoles projects and has historic value and
Manex Group, only Southern Silver Exploration and Valterra
tremendous infrastructure, which allows us to better take its
Resources have properties in Mexico, the first in Durango
products to market. It is only 2km away from Route 49 and
and the second in Chihuahua. Southern Silver Exploration
there is a rail that runs by the property. When developing
has spent around US $4.65 million in acquisition costs and
a mine, it is key to make sure it has good transportation
US$11.5 million on exploration costs on its significant Cerro
access and electricity, among other infrastructure features.
Las Minitas polymetallic property that it is now developing
It is also important to consider labor availability and to have
into what will be the next mine in that district. We are also
a good relationship with local ejidos. We believe we have
spending US$3million on the current drilling and surface
addressed all those factors in Los Reyes. Valterra Resources
program that will lead to a PEA requiring a further US$5
has been in existence for some time and it is funded by
million investment to completion.
a loyal shareholders’ base. It also has a high-grade gold property in Nevada and a porphyry copper-gold project in
Q: What are the main projects you are pursuing in Mexico?
British Columbia, but we thought that exposure to Mexico
A: Southern Silver Exploration is the most senior company
would be beneficial, which is why the board approved the
in the group by way of market capitalization. It is currently
optioning and further acquisition of Los Reyes.
conducting a US$3 million exploration program which will lead to a preliminary economic assessment on its Mexican property, which will then require additional equity financing.
Manex Resource Group is a Canadian-based company. Since
It operates the property with Electrum Group of New York
its formation in 1997, companies under the Manex management
as a 40/60 joint venture. Electrum provided US$5 million to
umbrella have raised around CA$350 million to fund their
earn its 60 percent working interest in Cerro Las Minitas in
exploration projects
141
| ROUNDTABLE
WHAT ARE THE MAIN CHALLENGES FOR MINING EXPLORATION IN MEXICO?
As a Top 10 producer of several minerals, including silver, gold and copper, Mexico is among the leading mining jurisdictions in the world. Its mineral potential is enormous, given that a significant part of its territory remains unexplored. When seeking an answer to how to better seize the opportunities for mineral exploration in the country, industry leaders mention challenges such as security, speed of procedures and the need for more investment. In this scenario, innovation and new technologies stand as the main potential allies, along with the creation of a strong human resources support group.
142
Security can be an issue in certain isolated areas within the country and even though we have an interesting project in Guerrero we have not been able to deploy exploration in the area due to these issues. We have tried a couple of times to start exploring it but unfortunately, we have experienced safety problems and have removed our people from the area. Thanks to our large project portfolio we can pause our efforts in this area and direct them toward less challenging regions. We hope
OCTAVIO ALVĂ?DREZ CEO of Fresnillo
that the area will be at a more stable stage in the future. The growing presence of the mining industry has the potential to change the reality of the state as it will bring economic growth and quality jobs. This will help lower violence and crime rates and will establish a more efficient context for mining.
We face the obstacle of speed. In this sector, exploration companies must move quickly because we are dependent on investors and they want to see fast, positive results and progress. We are trying to use innovation and technology to address this issue. We are now employing processes in the field that usually would be left until the laboratory stage, which saves a great deal of time. We can carry out assaying, scanning and drone flights in the field so we can greatly speed up the process.
JOHN-MARK STAUDE President and CEO of Riverside Resources
Something that would normally take months can be done in a matter of days. We are also addressing community relations by working with ranch owners and trying to build infrastructure for them in ways where we can help. We want to leave Mexico in a better condition than it was in when we started.
One of the main obstacles for exploration is the deductibility of pre-operating expenses, which is now only possible after 10 years. Also, it is key to clarify the regulations regarding land ownership and mineral concessions so there are binding rules regarding the environment and the impact that mining can have on local communities. The government must have trained and capable people who really know the mining industry placed in the right positions.
JESĂ&#x161;S HERRERA Director General of Detector Exploraciones
Private funding is very difficult to access for exploration, and the best source of private capital for exploration is probably from high-net-worth career mining explorers or from mining operators that are looking to outsource exploration. Mexico is fortunate in that it has five or six private individuals who are themselves eager participants in the Mexican exploration industry. This is something even the Mexican industry does not understand about itself. The fact that national investors are eager to fund these projects gives foreign investors like ourselves some confidence. In addition, we are one of the primary funders of generative exploration worldwide, including in Mexico. The nature of generative exploration, where the expectation is
RICK RULE President and CEO of Sprott US Holdings
failure, is such that the person writing the check has to be intimately involved, at least with the development of the thesis and the process by which the thesis is tested.
143
Mineral exploration is a very speculative business; it is never a sure bet but it yields good rewards when a strong strategy is deployed. For example, 10 years ago we had a junior company called Western Silver Corporation that was developing a silver property in Zacatecas but it was struggling with funding. We persevered and ended up discovering the Peñasquito mine, which is today the most significant property in Goldcorp’s portfolio. In the end, our investors were rewarded to the tune of $1.2 billion. It is important to establish a human resources base in the country. Our last two properties have come to us through references from our geologists, who have a combined 40 years of experience in mineral exploration in Mexico. There is no recipe
LAWRENCE PAGE Chairman and Director of Manex Resource Group
for success when betting on an undervalued asset.
More investment in exploration and drilling will lead to more discoveries. Mexico has enormous mineral potential. Important discoveries are still being made right at the surface. A good example is the Alacrán silver-gold deposit near Cananea, Sonora, where high-grade silver was discovered within sight of Grupo Mexico’s worldclass Buenavista del Cobre copper mine. Dozens of geologists must have walked over this deposit without noticing its silver potential until the Australian exploration company, Azure Minerals, made the initial discovery of nearly 2kg/t silver in the outcropping. Mexico continues to reward companies willing to invest in exploration with important discoveries. Brownfields exploration has shown remarkable positive
DOUGLAS COLEMAN Director General and founder of Mexico Mining Center
results, expanding the reserves of mines currently in production.
Companies remain cautious and are waiting to see if prices will continue to improve. During the downturn, some mines faced great losses all of a sudden and had almost no capital to keep operations going. We also hope that exportation tariffs drop so that more investment opportunities open up in the industry. Three or four years ago there were no exportation fees and the market were lucrative, but costs are now much higher. It also is hard for us to manage high taxes for Japanese products that enter Mexico as we must compete against national companies. There is a big cost difference. Japanese companies are becoming increasingly interested in the Mexican mining industry and see great potential for their technology in the sector.
LARRY DE LA TORRE Vice President International Sales of C&C Tsurumi Pump Mexico
Goldcorp's PeĂąasquito mine
MINE DEVELOPMENT
6
After an ore body has been identified, feasibility studies have ensured the viability of building a mine and shareholder approval has been received, operators begin one of the most expensive and time-consuming phases in the life cycle of a mine: development.
This phase requires companies to contemplate everything, from construction and site conditions to the mine layout and facilities, even down to the closure plan. All due diligence must be carried out to avoid problems in the future. As mining projects tend to be located in extremely remote areas, operators often also must invest in the creation of roads and power plants, among other infrastructure.
But smoothing the complexity of building or rehabilitating a mine and its surroundings is easier said than done. Local communities must be approached cautiously and with optimum communication, relationships with authorities must be carefully nurtured and construction must be well-planned. This chapter gathers the experience and insights of the Mexican mining industryâ&#x20AC;&#x2122;s leaders regarding best practices for a mineâ&#x20AC;&#x2122;s development.
145
CHAPTER 6: MINE DEVELOPMENT 147
148
ANALYSIS: Slow and Steady Wins the Development Race
149
TREND SPOTLIGHT: Water In Mining: A Shared Responsibility and Approach
150
VIEW FROM THE TOP: Peter Megaw, MAG Silver
150
VIEW FROM THE TOP: Miguel Andrés Rozo, TDM
152
MAP: Mapping New Projects
154
INSIGHT: Sergio Bartolomé, Layher Mexico
155
VIEW FROM THE TOP: Héctor Miranda, Orica
156
MINE SPOTLIGHT: Juanicipio
158
INSIGHT: Jorge González, DSI Underground
159
VIEW FROM THE TOP: Christian Bijsterveld, GroundProbe North and Central America
160
TECHNOLOGY SPOTLIGHT: Geosynthetics: the Key to Optimizing Productivity
162
VIEW FROM THE TOP: Sergio Kuroda, KRAH Mexico
163
VIEW FROM THE TOP: David Juárez, Herrenknecht Tunneling Services Mexico
164
ROUNDTABLE: How Can Infrastructure Development Boost the Mining Industry?
| ANALYSIS
SLOW AND STEADY WINS THE DEVELOPMENT RACE The development process for a mine is lengthy and costly, which is why several aspects should be considered prior to a company making a construction decision. These include the types of communities that live in the areas surrounding the mine and the existing infrastructure
148
The cost to build a mine can reach astronomical heights,
by the public sector. “If the private sector wants efficient,
especially if proper due diligence is not carried out. Often,
effective infrastructure, it should not leave the responsibility
operators consider the costs outlined in the PFS, and based
in the hands of the government,” says Sergio Kuroda,
on this information, must decide whether the financing can
Director General of KRAH Mexico. “It is also the private
be obtained and whether this makes the mine worth building.
sector that benefits from mining projects, so it should
But if auxiliary aspects of a mine are overlooked, this can put
balance this by contributing infrastructure and connectivity
the entire project in jeopardy over the long term.
to the communities in which it is working.”
Building a mine is a highly risky process, not least because
Not only does an operator need to consider whether the
of the time taken to carry out this process. “Lead times can
roads, telecommunications, water and energy infrastructure
range from a few years to decades, depending on the type of
are in place, but also has to consider ore processing, which
mineral, size and grade of the deposit, financing conditions,
can add considerable costs to the project. Some operators
country factors and commodity prices,” says the World Bank
are coming up with innovative solutions.
in a study. “One-third of copper discoveries since 1950 have had lead times to eventual production of 30 or more years.”
Minera Hecla, for example, operates the San Sebastian mine in Durango, on a neighboring property to Golden Minerals’
Given the slow ROI involved in mining, operators want to
Velardeña property, where it has an oxide plant. Hecla leases
guarantee that projects will reach production without a
the plant in a contract up to 2020. “We have been able to
hitch. But Mariano Calderón, Partner at law firm Santamarina
extend this agreement three times as we kept finding new
+ Steta, says that, even if these aspects are considered,
ore zones,” says Carlos Aguiar, Vice President Mexico of
intricacies in Mexican law mean companies should always
Minera Hecla. The company also entered into a toll milling
expect the unexpected. “Companies could have performed
agreement in which sulfide ore will be trucked 26 miles to
proper due diligence, acquired all the permits, made all the
Excellon’s Miguel Auza flotation mill facility in Zacatecas.
payments and on the day when operations are expected to start, a community or ejido can file a lawsuit claiming they
MINES IN DEVELOPMENT
are the rightful owners of that piece of land, embroiling the
As metals prices slowly but surely recover from their 2015 dip,
company in lengthy litigation,” he says.
more and more mines are coming into production. Several new projects are entering development as operators see
For this reason, Alfonso Caso, Founding Partner of ANAF
greater potential. Chief among them are Bacanora Lithium’s
Energy Social, says it is important to maintain constant
Sonora Lithium project and Azure Minerals’ Sara Alicia cobalt
contact with the local communities to transmit the benefits.
project. Another sizeable investment from Fresnillo is being
He warns, however, that the fragmentation that exists in the
made in Orisyvo in Sinaloa for US$350 million.
industry can be an issue. “As one company explores, another builds the mine infrastructure and a third carries out the
But by far the greatest investment has been in Chesapeake’s
operations,” he says. “The first company will promise certain
Metates deposit in Durango. The Metates project is one of the
things to the local community to secure the exploration
largest, undeveloped disseminated gold and silver deposits in
concession, which it will most likely not fulfill because it leaves
the world, with proven and probable reserves of 18.5 million
after completing its part. As a result, when operations begin,
ounces of gold. The initial capital cost for a smaller mine
the relationship with the community is already damaged.”
is estimated at US$1.91 billion, including a US$244 million contingency, but ultimately the project is expected to cost
INFRASTRUCTURE
US$3.49 billion. With this kind of money at stake, Chesapeake
Another aspect that can complicate the mine development
is taking its time advancing it into development. Randy Reifel,
process is whether the correct infrastructure exists. Mines
the company’s President says the potential held by the deposit
are often in remote locations with lower population density,
means no mistakes can be made. “One day, Metates will be the
meaning building of infrastructure is largely not prioritized
largest gold and silver mines in Mexico,” he says.
TREND SPOTLIGHT |
WATER IN MINING: A SHARED RESPONSIBILITY AND APPROACH In the past, water was perceived as a mere input for
“Companies need to make sure that they have a clearly-
production but scarcity has turned it into a strategic asset
defined plan of action for social and environmental risk
for industrial operations. This is even more pronounced in
mitigation to avoid undesired surprises,” says Edna
mining as the resource is used in most stages of mineral
Rodríguez, CSO and Partner at Intelligent Social Investment.
processing. According to Deloitte, by 2030 about 25 percent
“The most important step is identifying all the ways a
of mining production will be prone to water shortages and
project will impact the environment and the people who
other climate-related risks.
“
are close to the mine, which implies everything from noise pollution to the use of scarce resources such as water.”
The Columbia Center on Sustainable Investment has found that mining gold and copper requires the highest amount of water, followed by nickel, coal and iron ore. Ore reserve trends could mean even higher use of the resource. “As ore reserves decline, mining companies have to expand operations into increasingly remote and arid regions, which requires new ways of managing water,” says the organization. Industry leaders agree. “Any operator’s interest is to preserve water resources because they cannot produce ore without it,” says Enrique Ortega, Director
We are constantly trying to find ways to reuse water, not only from our dewatering systems but also at sewage and wastewater plants”
General of GRUPO SHB with RNG PERFORACION. Federico Casares, Business Development and Institutional Water scarcity is also starting to create competition over
Affairs Director Mexico at Veolia, believes a shared
resources between communities and the private sector, which
responsibility approach is based on a circular economy.
in turn causes tension and conflict. “As concerns around
“The circular economy demands companies have an
water availability grow, communities and environmental
extended responsibility approach to products,” he says. “I
groups are turning the spotlight to water-intensive industries,
think this is the global development model to pursue, as it
including mining,” says Deloitte’s Tracking the Trends 2018
not only shifts from a linear economy that extracts, uses and
report. Water access and management is even considered
disposes of resources, but it promotes reuse and recycling.”
by the International Finance Corporation (IFC) as one of the biggest challenges of the 21st century in its report
Collaboration in the form of community engagement can
Water in the Mining Sector. In response, operators are
also be complemented by outside-the-box thinking to
seeking solutions and best practices to better manage their
create innovative new technology, according to Deloitte.
consumption as a water-intensive industry and collaboration
“To reduce freshwater needs, mining companies are already
is turning out to be an essential part of their journey.
investing in process innovation,” the report states. “They are collaborating with commercial technology providers
In Mexico, water woes represent a particular hurdle for
to devise solutions for tailings storage and management,
miners. According to SEMARNAT, just four of the country’s
dust suppression techniques and seawater desalination
13 hydrological regions hold 67 percent of renewable water
plants. They are also increasingly collaborating with
resources but represent a mere 23 percent of the national
governments and other industry players to devise a
population. On the other hand, the northern region of
shared water-use approach.”
Mexico, where most mining activity takes place, experiences high degrees of stress on water resources. After the Valley
Larry De La Torre, Vice President of International Sales
of Mexico, which includes Mexico City, the highest strain is
at C&C Tsurumi Pump Mexico, says that more advanced
felt in the Northwest hydrological region, with a stress level
solutions can cut company costs. “Companies spend
of 81.4 percent, followed by the Baja California Peninsula
billions of dollars in water management and there are
with 79.8 percent. The Rio Bravo, which spans most of
additional processes that are starting to be a requirement
Chihuahua, comes fourth with 77.1 percent.
for operations,” he says. “We are constantly trying to find ways to reuse water, not only from our dewatering systems
As a water-dependent industry, mining faces the challenge
but also at sewage and wastewater plants.” He mentions
of improving its systems for water management. When
Industrias Peñoles as a Mexican national champion leading
addressing this issue, strategic planning is the first step.
the way for water recycling processes in mine operations.
149
| VIEW FROM THE TOP
COMMUNITY, LAND TENURE CONSIDERATIONS FOR EFFICIENT DEVELOPMENT PETER MEGAW Chief Exploration Officer at MAG Silver
150
Q: How is the industry likely to evolve during the López
loss and a lot of operations are suffering. We understand
Obrador administration?
what these special mining royalties should be used for,
A: We have yet to determine how the new administration
but it would be nice to see them actually invested that
is going to affect mining operations and the regulatory
way. I think this fiscal structure should be more flexible
environment, but I hope it will have a positive impact on
and there should be more creative ways to deal with these
the industry’s growth. The big industry challenge I perceive
expenditures. To have government deciding how this
is to define what the realities of operating under this
money is deployed locally, as opposed to having the locals
new administration will be like and to foster a feeling of
deciding, may not be the best way. There should also be
ownership in mining workers so they have a sense of having
ways for companies to deduct what they spend directly on
dignified and well-paid jobs in areas where work is often
community development from the royalties so they are not
scarce. We must also make the people more aware of the
essentially paying twice for this work, especially when it is
realities of modern mining, which is an environment that is
done in concert with the local communities.
well-lit, clean, healthy and as safe as we can make it. Q: What is your assessment of the data provided by the The previous administration implemented very stiff royalties
Mexican Geological Service and its utility in supporting
that have had a major impact on the companies operating
exploration?
in the country. These, combined with slightly depressed
A: I think that the Mexican Geological Service has a
metal prices, make the difference between profitability and
tremendous, very-well organized database with easy-
| VIEW FROM THE TOP
REIMAGINING THE DESIGN OF MINES THROUGH GEOSYNTHETICS MIGUEL ANDRÉS ROZO General Manager of TDM Q: As an international company, how is TDM adapting to
by expanding and offering engineering advice on mine
the needs of the Mexican mining industry?
design and planning to complement our commercialization
A: We entered the industry here in 2017 and used to focus
of synthetic products. This change of perspective has
solely on mine closures. Our main intervention in the
been a success so far and we have already signed our first
market was to commercialize geomembranes, lixiviation
contract of integrated services with Metallorum. We are
pads and leaching pads, but we realized that there were
helping it develop its initial expansion phase. This is our
many companies already providing the same services. TDM
first big project in Mexico and we are competing to acquire
additionally found that the market needed more integrated
other projects in mine design with other large mining
and complex services. This is particularly important in
companies in the country.
Mexico as the country is also competing with others in North America due to its geographic positioning. We
Q: What challenges do miners face in different phases of a
decided to take advantage of the market more intelligently
project and how can you help solve these issues?
to-access information. Our focus is to find new, blind ore
on track to start production in 2020 and become one of
deposits because the vast percentage of Mexico’s known
the largest silver producers in the world by 2022. We are
mineral deposits were found in outcrop shortly after the
extremely happy with how the project is unfolding and we
Spanish Conquest. The history of mining has basically
are convinced that the property has tremendous potential
followed these discoveries since then, with updated
to hold additional veins. The Fresnillo district may be the
technologies allowing larger and larger scale mining. When
world’s largest primary silver district, but it has the chance
considering the geological map of Mexico, 60 percent of its
to become even bigger.
surface is cover and in other countries with similar cover, the governing geological surveys have identified areas of high-
As for Cinco de Mayo, we think it is a major discovery
mineral potential and carried out various kinds of airborne
that is ideally situated to become a large, clean and
geophysical surveys to help map what we cannot see. I would
modern operation. It is close enough to the local town
very much like to see the SGM undertake such surveys.
that workers would be able to go home every night but not close enough for any noise or dust problems to affect
Q: What is the main challenge that junior exploring
the community. Unfortunately, we ran into a blockade
companies face when operating in Mexico?
instigated by a few members of the local population
A: The biggest problem anywhere is making the transition
and have not had access to the property for four years.
from being explorers to being developers and operators. These
We just want the opportunity to lay out our side of the
involve a very different skillsets, so, once a major discovery
story to convince the majority of the local population. We
is made, exploration companies have to choose whether to
understand that it is a process that takes time and we
partner with somebody that already has those skills or to try
are committed to taking the time to get there. We are
to bring those skills in-house. The latter is especially difficult
pleased with the relationship we have developed with the
in large projects. We hope that the discoveries we make in the
Corral administration in Chihuahua and they are helping us
future are big enough that joint venturing with an operator is
establish open communication with the community.
the most sensible way for us to go. Q: What are your expectations for the JV for Juanicipio and
MAG Silver is focused on advancing and exploring high-
the mineral concessions of the Cinco de Mayo property?
grade silver projects in Mexico’s Fresnillo district. The much-
A: Juanicipio is moving forward very well. Fresnillo is
anticipated Juanicipio joint venture with Fresnillo is under
doing a great job in building the mine and it seems to be
construction and is expected to start production in 2020
A: We are widening the services we offer the industry to fit the
Q: How are you helping optimize production in Peñasquito?
needs in every stage of a project from beginning to end. For
A: We identified many areas of opportunity to optimize
example, we are helping start a project in Oaxaca with EPSA.
the installation of our solutions. At Peñasquito in 2017, we
We are additionally helping Metallorum develop haul roads
created a customized solution among the operator and
that can withstand the massive heavy-duty machines used in
all the technicians. We also carried out several field visits
the industry. The equipment needs to be used several times a
and invited experts from Peru to help us draft a budget
day and we have engineered solutions that can maximize the
and another from Chile that specializes in leaching plants.
performance of these paths. We also provide steel solutions
By getting to know the project and the client thoroughly
and safety barriers that can keep projects clear from nearby
we can provide a precise solution. We are trying to
debris. Copper can oxidize tubes in underground mines and
partner with Metallorum to be its main supplier. We are
we have a spray that can prevent the deterioration. It has a
proud of our work at Peñasquito as it is owned by one
foam-like texture that helps tubes last longer in mines.
of the biggest mining groups in the world. We consider ourselves to be partners in all of the projects we work
We can provide solutions for the mine closure stage as
in as we have the same goal as our clients, which is to
well, which used to be an overlooked part of the lifecycle
optimize production and reduce costs.
but is now highly prioritized. Operators know they can no longer leave mines in such a dangerous state. Mines leave gaps in the earth that can cause problems after production
TDM Group is a leader in Latin America in engineering
is stopped and jeopardizes the wellbeing of surrounding
solutions, supply and installation of construction products
communities. A proper closure can help avoid accidents if
for infrastructure, mining, energy and hydrocarbon projects,
in the future a mine is reopened in the same area.
sanitation and agriculture
151
| MAPPING NEW PROJECTS
2 1
2 3 5
6
3
4
7 4 8
6 9
152
5 7
10 11
8
1
11
12
9
10 14
15
16
Production
12
14 17
18 15
NEW MINES IN OPERATION Name
Company
Primary metal
17
1
El Boleo
Korea Resources-Baja Mining
Copper
21
2
La Herradura*
Fresnillo
Gold
3
Buenavista del Cobre (ESDE II and Concentradora II)*
Americas Mining Corporation
Copper
4
Santa Elena
First Majestic Silver
Gold
5
La Yaqui
Alamos Gold
Gold
Number
6
Dolores*
Pan American Silver
Silver
7
Cusihuriachi
Sierra Metals
Silver
8
Bolivar
Sierra Metals
Copper
9
Parral Tailings
GoGold Resources
Silver, Gold, Zinc
10
San Julian
Fresnillo
Silver
11
Charay
Rose Petroleum
Gold
12
San Rafael
Americas Silver Corporation
Silver
13
La Trinidad
Marlin Gold Mining
Gold
14
San Agustín
Argonaut Gold
Gold
15
San Sebastian
Hecla Mining
Silver
16
La Colorada*
Pan American Silver
Silver
17
Saucito II
Fresnillo
Silver
18
San Ignacio*
Great Panther Silver
Silver
19
La Guitarra
First Majestic Silver
Silver
20
Marisol
Impact Silver
Silver
21
El Limón-Guajes
Torex Gold
Gold
22
El Águila
Gold Resource
Gold
* World Class Deposits Source: CAMIMEX
13 13
20
16 22
MINES IN ADVANCED EXPLORATION OR DEVELOPMENT Name
Company
Primary metal
Investment (milllion)
1
Centauro
Fresnillo
Gold
US$110
Fresnillo
Number
19
2
Centauro Deep
Gold
US$130
3
Buenavista del Cobre* Americas Mining Corporation
Zinc
US$413
4
El Pilar
Americas Mining Corporation
Copper
US$300
5
Santa Gertrudis
Agnico Eagle
Gold
US$48
6
San Félix
Mexus Gold/MarMar Holding
Gold
ND
7
Santa Elena
Mexus Gold/Mar Mar Holding
Gold
ND
8
Pilares*
Americas Mining Corporation
Copper
US$159
9
Sonora Lithium
Bacanora Lithium
Lithium
US$240
10
Santana
Minera Alamos
Gold, Silver, Copper
US$4.8
11
Orisyvo
Fresnillo
Gold
US$350
12
El Gallo II
McEwen Mining
Gold
ND
13
Plomosas
First Majestic Silver
Silver
ND
14
Tahuehueto
Telson Resources
Gold
US$32.2
15
La Pitarrilla
SSR
Silver
ND
16
La Ciénega*
Fresnillo
Gold
US$55
17
Metates
Chesapeake Gold
Gold
US$3,490
18
San Sebastian
Hecla Mining
Silver
ND
19
Tayahua*
Minera Frisco
Copper
ND
20
Juanicipio
MAG Silver/Fresnillo
Silver
US$305
21
Pyrites Plant
Fresnillo
Gold, Silver
US$155
22
El Compas
Endeavour Silver
Silver
US$ 11.3
23
Angangueo
Americas Mining Corporation
Copper
US$205
24
Ana Paula
Alio Gold
Gold
US$122
25
Rey de Plata
Peñoles
Gold
US$268
26
Media Luna
Torex Gold
Gold
US$482
27
Morelos Norte
Torex Gold
Gold
US$725
28
Esperanza
Alamos Gold
Gold
US$114
Development
18
23 19
20
28
25 24 26 21 27
53
Expansion
Exploration
153
| INSIGHT
PIONEERING THE FOUNDATIONS OF MINING SERGIO BARTOLOMÉ Director of Layher Mexico
154
Contrary to popular opinion, Sergio Bartolomé, Director
system is a modular scaffolding system that offers
of scaffolding company Layher Mexico, says that Mexican
greater versatility than any traditional systems. Originally
miners are not resistant to new technologies. On the contrary,
developed by the company in 1974, it can be constructed
they are very receptive to innovation but it has to be directly
faster than most systems and used in complex layouts. By
linked to production gains. The problem lies with auxiliary
now, Bartolomé says the technology has been replicated
tech that companies like Layher provide. “In terms of auxiliary
multiple times, which is what makes it so important for
technologies that seek to increase safety, although it may be
Layher to continue innovating in order to stay ahead
innovative and incorporate new technologies, there is not a
of the pack.
great acceptance of this equipment,” he says. “We provide auxiliary services in scaffolding, so the innovation and
The company’s newest Allround system is innovative
efficiency this offers does not tend to be taken into account.”
in terms of its materials, according to Bartolomé. The system is called Lightweight because it is lighter yet more
Fortunately, many foreign companies see the value of these
resistant, meaning it can be assembled and disassembled
products, which helps when convincing local players of the
more rapidly and even less effort is required for transport
value of a product. For example, Layher has worked with
than the previous version. This technology was launched
Goldcorp in Chile, Peru and Australia and Bartolomé says
in 2013 but Layher has been consolidating it over the
this helped it secure a contract with the operator at the
last four years to improve the quality of the steel. “The
Peñasquito mine in Zacatecas. “Some local companies have
more resistant and lighter we can make the it, the more
yet to fully accept this concept of increased safety and
time can be saved in assembly and freight,” he says. “As
efficiency through auxiliary services,” he says. “But we have
the pioneer of the Allround system and market leaders,
been able to secure business with companies that prioritize
innovation is permanent and our investment in R&D each
innovation, such as Industrias Peñoles.”
year is significant. We can almost guarantee that any new product we launch will be replicated by competitors within
Layher’s focus on innovation has made it the premier
a few years.” With so many competitors on its heels, Layher
scaffolding company on a global level. The Allround
is always thinking about the next step.
VIEW FROM THE TOP |
GROWING THROUGH ADVANCED TECHNOLOGICAL APPLICATIONS IN MINING HĂ&#x2030;CTOR MIRANDA Mexico Country Manager of Orica
Q: How do your blasting services differ from those offered
rarely do this, so we provide a tailor-made solution to each
by other companies?
operation with each plant design already in mind.
A: We provide innovative solutions that can greatly reduce
155
time and costs. For companies that are not afraid to
Q: How is your business impacted by the development
incorporate new technology, we can help them to increase
of more complex mines that are increasingly going
productivity rates considerably in the same window of time
underground?
as more traditional systems. And for those that are more
A: I believe that Mexico will experience an increase in
conservative and wish to retain their existing mechanical
underground mines over the next 20 years as many
systems, we can help them find ways to improve their
open-pit mines will shift to underground to better extract
process and reduce costs.
mineralized bodies and become more cost effective. Many mines start off underground, turn into open-pit mines, then
We have noticed that initiation systems in the industry
start underground operations once again. Big open-pits
have evolved considerably and this could change the way
more likely will convert to underground when cost requires
blasting systems work. Programmability in detonators now
that shift. That is the case of big pit in copper mine in other
allows companies to adapt blasting systems to the needs of
countries like Chile, where Chuquicamata after 100 years of
the operation on a daily basis and we use these solutions
exploitation is now moving from the largest copper open
in our portfolio. We differentiate ourselves by providing
pit to one of the largest and newest underground mines
products that no one else offers in the market that can
in the world.
greatly improve operations. For example, we are the only suppliers of i-Kon, the top-selling electronic detonator
Q: What strategies will the company deploy to maintain
globally. Just recently we introduced wireless system
its leadership in global explosives?
Webgen into our portfolio. This can be initiated remotely
A: Orica is now focusing on expanding its presence
and helps mines to fully automate blasting processes. In
by acquiring companies that can provide innovative
fact, we just carried out our first tests of these products in
technology solutions to maintain its competitive edge.
Canada with Goldcorp and we are now starting to promote
We have incorporated groundbreaking solutions to our
it in Mexico as well. Fresnillo is quite likely to adopt some of
portfolio through this strategy such as GroundProbe a
these products as it is a company that prioritizes investment
novel technology in radar that can predict movements to
in technology.
avoid surprise motions within rock structures. Orica is also starting to provide services in intelligent blasting to use data
Q: In which phase of the mine production cycle do you
to create a design and improve processes continuously, with
specialize?
a new technology called BlastIQ that includes the latest in
A: We participate in initial unitary process, which is drilling
geological data management. Finally, Orica also is offering
and blasting, and the result of this process impacts
high-level technology in ground support for underground
approximately 90 percent of performance of the following
operations. While Orica is focusing in new development in
downstream processes. Our services are dictated by
technology, we remain open to acquisitions that can help us
what size of fragmented rocks the operation requires. For
to continue growing and securing our position in the market.
example, milling processes require much finer rocks than a leaching system. Ideally, at the planning stage we can collaborate with mining operators in feasibility studies and
Orica is the worldâ&#x20AC;&#x2122;s largest provider of commercial explosives
help them to incorporate the most cost-effective blasting
and innovative blasting systems. It is also a leading supplier of
system possible, thereby challenging output assumptions of
sodium cyanide and a specialist provider of ground support
the mine. This can effectively reduce CAPEX. But companies
services in mining and tunneling
| MINE SPOTLIGHT
156
JUANICIPIO Imagine a property with such mineral potential as to have its own mining company created. At the heart of Zacatecas’ Fresnillo district, the high-grade Juanicipio property has a significant silver, gold, lead and zinc vein system that meant it was worth the effort of creating Minera Juanicipio. After being discovered by a team led by tenured Geologist Peter Megaw, MAG Silver entered a JV with Fresnillo in a 44/56 percent partnership to further explore and develop the asset. But what is so mesmerizing about Juanicipio? Expected to start production 1H20, the annual average anticipated total output reaches 30 million silver ounces and 30,000 gold ounces. The asset also has attributable and inferred resources of 248 million silver ounces and 1.4 million gold ounces over a 19-year total mine life. Based on 2017’s PEA, Juanicipio appears to be an economically robust project with minimum financial or development risks. The report highlights a 4,000t/d production rate on a 100-percent project basis. Also, the initial forecasted capital cost of US$360 million from Jan. 1, 2018 to starting production in 2020 is expected to be returned in less than two years after plant startup. The property still requires a significant amount of infrastructure development, including a new plant and tailings location on flat open ground, an underground crusher, an ore conveyor system and several ramp expansions. While Minera Juanicipio has its own Board of Directors and Technical Committees to design and approve exploration and development programs, both are being carried out by the property’s operator, Fresnillo, with an estimated pre-operative CAPEX of US$305 million. Underground development on the asset began in October 2013 and has been since mainly focused on the ramp decline to the main vein, Valdecañas. So far, the drilling of the property’s deep zone is ongoing, but has already confirmed continuous mineralization extending to the Valdecañas Bonanza zone in East and West veins. The 30,944m drilled reported by Fresnillo yielded results with a 33.7 percent and 9.9 percent increase in gold and silver resources, respectively due to a 38.9 percent increase in tonnage. There was a a 3.8 percent and 20.8 percent reduction in gold and silver grades, respectively compared to those measured in 2016. Fresnillo’s next step for the property considers a 20,000m drilling program.
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| INSIGHT
CEMENTING MARKET SHARE THROUGH SPECIALIZED SERVICES JORGE GONZÁLEZ General Manager of DSI Underground
158
Mine exhaustion is making operators seek higher returns
companies demand complicated pieces and a wider range
underground, and this trend is changing the needs of the
of products as they have to comply with many standards.”
industry, says Jorge González, General Manager of DSI
DSI can also provide training to employees to ensure the
Underground. “We see a lot more underground mines in
best use and installation of the pieces.
development in comparison to what existed in the market five years ago,” he says. “Mexico will most likely have to
The tunnel and underground development specialist also
adapt its norms to foster development of underground
provides products made with materials that help keep
mines as other countries have done.”
operations safe. “Many anchor systems are made from steel but this material is very vulnerable to fire,” says González.
Underground mining tends to be much more demanding,
“This can be dangerous as mining operations involve
given that workers are in confined spaces and safety is
dynamite and explosives. We can provide products made
critical to avoid fatalities. DSI Underground provides
from plastic that may have slightly less resistance but will
pieces for specialized machines more often used by
not make emergency situations worse, therefore cutting
international companies versus national businesses. “Our
the downtime of the operation.”
clients are mostly Canadian, such as Goldcorp, Coeur Mining and Agnico Eagle,” González says. “We do not
While diversification is a strategy that can protect
get as much demand from Mexican companies as their
companies from the ebbs and flows of the mining industry,
projects require a higher volume of less-specialized
González is concerned about Mexico’s mining pipeline
products.”
because changes in regulation have had an impact on investment, especially for those mines under development
Canadian companies often must comply with strict norms
and extending to exploration. “Mexican operators such as
and international standards, meaning they see the value in
Fresnillo have many new projects in their pipelines,” says
investing in high-quality equipment. “All Canadian projects
González. “But on the other hand, we see that Canadian
are anchored while Mexican mines only add support to their
companies are not as keen to start new projects due to the
projects as they see necessary,” González says. “These
changes in the mining framework.”
VIEW FROM THE TOP |
NARROWING THE MARGIN OF ERROR IN UNDERGROUND OPERATIONS CHRISTIAN BIJSTERVELD Business Manager of GroundProbe North and Central America
Q: Of your three areas of focus, open-pit, underground
recognize the areas in which more focus is required. We view
and tailings dams, where are you seeing the most potential
it as a safety tool, similar to our surface equipment, but also
for growth?
as a way to improve underground productivity.
A: We previously focused mainly on open-pit mining but only recently we began to take our technology underground. In
While constructing the mine, this technology can be used to
September 2017, we launched an instrument called GML-
assess the stability of the structure and the need for more
Underground, adapting open-pit wall movement detection
support. Operators can create a drift, carry out some blasting
technology to the underground setting. Globally, no similar
and then evaluate the impact of this on the structural integrity
technology that offers the same level of accuracy has yet been
of the mine tunnel. Our experience in underground mines is
developed. Underground is a particular area of growth for us,
that the measurement is often done in a contained area but
especially in Mexico.
these decisions can affect huge areas of the mine. We are offering a way to take a panorama of a large area to make
We have had tailings dams and dam monitoring capabilities
more informed decisions.
but until now that area has attracted a lower level of attention from mining companies. But a number of events in Mexico and
Q: With the growing number of technology companies, how
globally have proven that this area cannot be ignored. We
is GroundProbe differentiating itself?
have a new instrument that is specifically designed to monitor
A: First of all, our technology is very much cutting edge. We
tailings dams more stringently than before and is more cost-
do not work through agents but go directly to the market
effective than radar. Although radar may be required in some
and to our clients. We are offering a particularly high level of
situations, this new equipment can negate the need for this.
innovation in this field and we are specialists so we are able to
Those that have seen the technology are very interested but
continue evolving with the customer. Two out of every three
it is too soon to tell what its success rate will be like.
radars in the world is one of ours so we are the market leaders and we were the originator of that technology in mining. We
Q: How can your company help operators go deeper
want to maintain our edge and also transition our technology
underground in the search for new deposits?
to expand and position ourselves in wider markets such as
A: Our equipment can measure to an immensely small and
underground mining and tailings dams.
accurate degree the amount of movement the walls of underground tunnels are experiencing through convergence.
We also have a 24/7 ability to monitor our products remotely
We can measure the movement to less than 0.1mm in close
from anywhere in the world, 365 days a year. Sometimes our
to real time. There is nothing else on the market that can do
clients request that we monitor their activities in this way and
that. In the past, if damage was identified in the mine drifts
giving the operator a chance to react preemptively. There
or if, after a blast, the structure needed to be assessed, a
have been examples in North America where we have been
waiting period of up to days or weeks was required. With our
able to predict collapses and structural failures and issue
instrument, we can pick up the impact almost immediately
warnings in enough time for the operator to act. I do not
and evaluate where the trends are. The speed at which we can
believe any other company has this depth of capability on
pick this up is worth a great deal of money to mines.
this continent.
Sometimes about 20 percent of the cost of underground mining is in supporting the tunnels. Many of the rules regarding
GroundProbe is a global technology leader providing advanced
support infrastructure were developed many years ago. This
hardware and software solutions to the mining industry with a
instrument allows operators to measure the effectiveness
focus on end-to-end solutions for open-cut and underground
of the support and to change strategies to reduce costs or
operations. GroundProbe is a part of the Orica Group
159
| TECHNOLOGY SPOTLIGHT
GEOSYNTHETICS: THE KEY TO OPTIMIZING PRODUCTIVITY Mine operations depend on a 24-hour, 365-day work schedule and setbacks can represent million-dollar losses for operators. Given the high capital risk at mine sites, operators are prioritizing maintenance and optimization, for example in haul roads and leaching pads. Understanding this need, TDM Mexico optimizes production efficiency through a technology based on geosynthetics, including geomembranes and geogrids. Geosynthetic products can be used to install waterproof systems within leaching pits and tailings dams. Essentially, geomembranes employ geotechnical material to control fluids within projects and structures. The main benefit of the material is its resistance to water, erosion, UV rays and bacteria. Regarding its installation, TDM Mexico starts by laying out the geomembrane in strategic areas, followed by the use of an anchoring system to ensure its durability. The company carries out various tests to guarantee the high quality of the installation. These include air pressure, vacuum and electric spark tests and a trial for extrusion wielding. Besides the risk of a production setback, mining projects are also vulnerable to rockfalls and landslides. Vegetation becomes a critical factor for long-term ground erosion control and for stabilizing the surrounding areas during mining closures. This can be achieved through slope protection. TDMâ&#x20AC;&#x2122;s technology works by anchoring a specialized erosion-control metallic grid combined with turf reinforcement mats. It combats erosion on slopes and surfaces, avoiding soil vulnerabilities and landslides. When placed on the ground, it also works as a protective cover, creating a porous and absorbent layer that in turn improves germination and plant growth. In efficiently addressing the much-needed reinforcement of soft soil, TDM also offers solutions for haul roads through geogrid technology. The high resistance to deformations in the ground and an open geometry based on strong joints that laterally confine the material used to fill haul roads provide this technology with a unique rigidity. Geogrids can be used to reinforce haul roads and platforms where loads in mine sites are transferred. To complete its solutions portfolio, Geocells are another key component of TDMâ&#x20AC;&#x2122;s technology. The company developed its own manufacturing facility for HDPE Geocells, now the only one in Latin America. The applications for this technology include haul roads, slope protection, retaining walls, channels and Geomembrane protection.
161
| VIEW FROM THE TOP
POLYETHYLENE TO INCREASE SAFETY, EFFICIENCY SERGIO KURODA Director General of KRAH Mexico
162
Q: What is the added value you offer to operators and why
the world it is replacing this outdated piping system due
should they choose KRAH over its competitors?
to its high reliability and safety levels.
A: As a Mexican manufacturer that uses German technology, we saw the opportunity to offer an added
Q: How does Mexico compare to Chile as a mining
value through our products, differentiated by their
jurisdiction?
quality. The technology allows modification of the profile
A: Mining infrastructure plays a great role in the
wall of the pipes. This improves mechanical resistance
attractiveness of a country to operators. Of course,
to flattening. One problem that tailings dams have
mineralization obviously is the No. 1 requirement but
is that the pipes sink deeper over time until they can
copper mineralization in Chile, for example, is more or
no longer withstand the weight of the soil on top and
less on par with that in Mexico, but the industry in Chile is
collapse. For this reason, we designed a wall that is
much more developed. This can be attributed to a focus on
much more resistant that the normal pipe. Almost 100
installing the relevant infrastructure and implementation of
percent of the products on the market do not allow the
regulations that may make mining easier in one jurisdiction
pressure to be modified outside the pipe, but KRAHâ&#x20AC;&#x2122;s
over another. If the private sector wants efficient, effective
technology permits operators to do this. Our added value
infrastructure, it should not leave the responsibility in
is the variable profile wall that can be adapted to the
the hands of the government. It is also the private sector
parameters of the project.
that benefits from mining projects, so it should balance this by contributing infrastructure and connectivity to the
Q: How do your products help operators to increase
communities in which it is working.
productivity and lower costs? A: The pipes that exist on the market have a limited
Q: In a cyclical industry like mining, how do you mitigate
diameter. In the national market, this is normally 36 inches
the risk of low metals prices?
and when importing from the US this can go up to 60
A: Because of the level of diversification we have in our
inches. Many miners require the construction of parallel
portfolio in terms of industries, cyclicality within the mining
infrastructure to that which already exists. KRAH can
industry affects us very little. What really affects us is
provide pipes with a diameter of up to 120 inches, which
government spending on infrastructure, which depends more
allows the operator to channel a higher volume of liquids,
on politics rather than metals prices. As a service provider to
using less energy and lowering costs.
the mining industry, the cost of raw materials, such as virgin resins, affects us much more than those of metals.
We also help prevent environmental damage, given our pipes need to withstand toxic substances from leaching
Q: How resistant is the Mexican industry to new
pits. Polyethylene pipes are the safest option for mining
technologies?
because the material has high resistance to strong acids.
A: The private sector is very quick to adopt new
It is corroded neither by the waste fluids nor by the
technologies. It is the government that is resistant and takes
ground soil. In general, it is a material adopted by the
time to warm up to new ideas. Generally, the private sector
industry as a replacement for metal piping, and all around
is more easily able to see the long-term value and benefit of a product like ours. The industry is strong and has the potential for steady growth in the coming few years. We
KRAH is a 100 percent Mexican company that uses German
want to continue gaining a foothold in mining and bringing
KRAH technology to manufacture High Density Polyethylene
our portfolio of products from Germany to solve problems
Piping for sanitary sewage and Pluvial PKS. Krah MĂŠxico was
for operators. We would like to keep our market share in
established in 2009 in Silao, Guanajuato
infrastructure and grow within the mining industry.
VIEW FROM THE TOP |
ACHIEVING LOW-COST UNDERGROUND OPERATIONS DAVID JUĂ REZ Managing Director of Herrenknecht Tunneling Services Mexico
Q: What areas of opportunity has the company identified
Companies in Mexico are open to seeing and learning
in the Mexican mining industry?
about new solutions in the market. We can meet their
A: Our core business is underground infrastructure for civil
thirst for new and socialized products at a low cost. While
construction but we believe that mining is a good area of
it can be hard to prove this as the initial cost is higher,
opportunity for us. We have had a great deal of success in
the benefits of starting production in a shorter amount
infrastructure development and are seeking opportunities
of time are too great. We are not afraid of big challenges
to expand into mining. Our company has global experience
and believe that Mexico is the ideal country to work in.
in the industry. We do not seek to compete with other
The main component of our added value is to develop
underground construction companies in the area but to
the project in conjunction with our client. The Mexican
complement their services with the tools we can provide. The
office has been here for 10 years and we have a recipe for
company wants to supply new technologies and alternatives.
success to help our clients make more profit. If they are
We are leaders in mechanizing underground structures.
doing well, so are we.
Several mines throughout the country are in different
In Canada, Herrenknecht built two vertical mine shafts that were 1,000m deep
stages of development and this is an important area of opportunity for us. We can offer them tools to overcome the challenges they face, such as accessing ore bodies. This part of the development phase normally implies a significant investment of time and capital. We can provide tools and solutions that can drastically reduce these costs. We specialize in vertical access tunnels and our products have a wide variety of applications that we want to offer the sector.
Q: How are you helping Mexican companies adapt to the fact that mines are deeper and more complex?
Q: What strategies are you using to enter the sector?
A: Our company wants to show the industry that it is
A: It has not been easy entering the sector, nor has it been fast.
possible to operate deeper underground mines with cost-
The industry is still getting to know our products and the new
effective solutions and we know how to help them achieve
applications that we offer. We have been able to invite them to
this. Our company has a wide range of experience; we
meet with us. We have global success stories as proof of the
have participated in mining projects in Russia, the UK and
quality of our work. In Canada, we built two big vertical mine
Canada. We consider clients to be our partners. We start
shafts that were 1,000m deep. This was a critical step for the
collaborating with them from the first stages of the mines
mine to reach the production phase. In the first stages of the
in engineering and execution. Our specialized technicians
project, we needed to determine what was most feasible and
can support their needs from the very beginning to the end.
it trusted us to manufacture the machines it needed.
Our aftersales services are some of the best in the market. We can even provide solutions for the drilling phase of the
We seek to become an integral solution provider. We meet
mine development.
frequently with decision makers to approach the industry, holding technical meetings and explaining the concepts, machines and solutions they need for underground
Herrenknecht is the leading provider of holistic technical
construction. They can rely on our company and our
solutions in mechanized tunneling for tunnel infrastructure.
ability to provide proven technology and expertise for
The company has worked in over 4,100 projects around the
mechanized solutions.
world in all areas of application
163
| ROUNDTABLE
HOW CAN INFRASTRUCTURE DEVELOPMENT BOOST THE MINING INDUSTRY?
Infrastructure is an industry of its own, but it also represents a huge area of opportunity for mining operations. From mine development to closure and from trading to obtaining the social license to operate, infrastructure development should be a crucial priority for miners. Industry leaders share their perspectives on the role that infrastructure has to play in the growth of mining. Mexico Mining Review asked the industry leaders what operators’ main infrastructure considerations should be when developing a mine and how the public sector can help.
164
Like any other country, we must show economic and fiscal discipline through a wellstructured model that relies on infrastructure and security. This has been the main priority during the administration of President Peña Nieto and we are prioritizing the trade negotiations to make sure that all the treaties are accurate in reflecting the interests of our industries. We strive to broaden the number of companies we support and to provide them with the training and the additional services that we offer. This
ISRAEL GUTIÉRREZ CEO of the Mining Development Bank (FIFOMI)
would help those that do not currently have enough access to fund their expansion projects. We are continuously working on our ability to support companies and to find ways to do this better. FIFOMI also helps finance projects related to Corporate Social Responsibility as when they are for a mining community located close to an active project, such as an infrastructure development.
Water management systems are fundamental in mine operations as most processes require this resource. Permits for extracting water are ever more restrictive and careful, so companies are looking to seawater as an alternative for water sourcing. But desalinization demands important infrastructure given the need to pump water to desalinization plants and to the mines. Tailings dams are also important to consider as rainwater generates leachates with high mineral concentrations. These liquids need
FEDERICO CASARES Business Development and Institutional Affairs Director Mexico of Veolia
to be treated to prevent spills. Veolia offers solutions and technologies to implement for each case, not only to treat wastewater but also to recover some minerals.
Mining infrastructure plays a great role in the attractiveness of a country to operators. Of course, mineralization obviously is the number one requirement. Copper mineralization in Chile, for example, is more or less on par with that in Mexico, but the industry in Chile is much more developed. This can be attributed to a focus on installing the relevant infrastructure and implementation of regulations that may make mining easier in one jurisdiction over another. If the private sector
SERGIO KURODA Director General of KRAH Mexico
wants efficient, effective infrastructure, it should not leave the responsibility in the hands of the government. It is also the private sector that benefits from mining projects, so it should balance this by contributing infrastructure and connectivity to the communities in which it is working.
The country has made great strides when it comes to its ports and exportation options. Tampico used to be the only port in the country but Manzanillo became more popular when it was built as it offers greater access to China and Asia. Guaymas is also a strategic port but it has limited infrastructure. Altamira is also a good option for those that need to export to Europe. Despite the advancement, Mexico could take greater advantage of its coasts. Other countries have more domestic vessel traffic while Mexico depends on trucks and railways to move goods. Increasing the internal use of ports would make them safer, cheaper and would also attract more investment to ports in the south that greatly need it. It could strengthen the country’s
EDUARDO AMARO Country Manager Mexico at Cliveden Trading AG
economy by making it better-connected.
165
A project needs to undergo a thorough CSR and due diligence process before it is developed. It is becoming increasingly important to collaborate with all the people involved, including stakeholders, communities, the government and businesses. Companies need to realize that they need a high level of responsibility to obtain social license and the government should facilitate communication with surrounding communities. The authorities should visualize and support these aspects. The development of infrastructure plays an equally important role. There are also many areas in the state with high geological potential that require large investments in infrastructure that companies must provide. The government should prioritize
RAMÓN DÁVILA Minister of Economy of the State of Durango
improving these areas.
We are not greatly impacted or worried about whether the US or Mexican administrations will be able to meet their infrastructure promises. These two markets are quite minimal for us and as mentioned, our main priority is China. Even if these countries were able to fulfill all their infrastructure commitments, the rise in demand for us would not be significant. The development of these projects will mostly benefit transportation and logistics companies. Logistically, the infrastructure in Mexico is adequate. Of course, it can always improve but it is good enough. Ports like Manzanillo are quite limited in size thanks to urban sprawl and cannot expand. Our job is to analyze the different options and find the most cost-effective method for exportation.
JOSÉ ANTONIO BERLANGA General Manager Mexico of Mercuria
In my opinion the main challenges that mining companies are facing in terms of mine design and planning are in how to incorporate new technologies in mines. Geosynthetics have been proven to be an economical and technical solution for the projects in waterproofing, paved and unpaved roads, erosion control solutions, mechanically stabilized walls, embankments and foundations. We want to help companies that have issues in mine design or are considering an expansion. We have a system called TecWeb that is a new TDM product that can facilitate mine closures and reforestation as well. We have had many success cases already.
MIGUEL ANDRES ROZO General Manager of TDM
Cozamin mine, Zacatecas
MINE OPERATIONS
7
During the mining slump, most operators focused solely on reducing costs and improving capital management but the rebounding industry is opening the doors again for investment and expansion. However, companies learned their lesson about excessive spending in the previous cycle and will continue to be prudent
with their capital to mitigate risks. Operating mines are also struggling to maintain steady production of ore with high grades. In effect, the industry is actively seeking machines, equipment and technology that can optimize productivity while reducing costs. These are elements that help operators maintain a healthy balance between cashflow and debt.
In this chapter, best practices used by operators to maximize the life cycle of mine sites are analyzed along with exemplary cases of supply chain companies that are aligning themselves to the needs of the industry. Companies also share their success stories and how they can help to minimize costs, maintain safety and maximize production throughout the life cycle of a mine.
167
CHAPTER 7: MINE OPERATIONS 170
ANALYSIS: Scratching the Surface of Cost-Effective Mining
171
TREND SPOTLIGHT: A New Era Dawns and Miners Will Either Adapt or Lag Behind
172
VIEW FROM THE TOP: Richard Booth, MMD Mineral Sizing Central America
173
VIEW FROM THE TOP: Ralph Buchholz, Beumer de México
174
INSIGHT: Rudolf Michel, Global Wear Solutions
175
VIEW FROM THE TOP: Álvaro Chacón, Martin Engineering
176
VIEW FROM THE TOP: Klaus Hepp, VULKAN do Brazil
178
TECHNOLOGY SPOTLIGHT: The Industry’s First In-Line Knife Gate Valve
180
INSIGHT: Alfredo Bertrand, Epiroc México
181
VIEW FROM THE TOP: René Valle, MacLean Engineering
182
INSIGHT: Alan González, Pewag
183
VIEW FROM THE TOP: Axel Pineda, Beltservice Mexico
184
VIEW FROM THE TOP: Felipe Mues, Garlock de México
185
VIEW FROM THE TOP: Alejandro Silvera, Master Drilling Mexico
186
TECHNOLOGY SPOTLIGHT: Mine-Wall Movement Under Control
188
VIEW FROM THE TOP: Gerardo Angulo, Timken Mexico
189
INSIGHT: Javier Prados, Normet
190
TECHNOLOGY SPOTLIGHT: Revolutionizing Technology With Focus on Safety and Productivity
192
ROUNDTABLE: How Can Companies Maximize Productivity and Reduce Costs?
169
| ANALYSIS
SCRATCHING THE SURFACE OF COST-EFFECTIVE MINING When people think about a mine, the large open-pit variety often comes to mind. But as regulations for miners become stricter, the goal is to disturb as little of the ecosystem as possible. This does not necessarily mean smaller mines but more compact underground spaces While open-pit mines imply a lower initial cost, operators
says David Juárez, Managing Director of Herrenknecht. The
are starting to ponder the long-term costs associated with
company has experience working in Russia and the UK and
underground mining. For example, brownfield projects are
Canada, where a great deal of mining is underground.
preferable in the short term since the operator does not have
170
to start from scratch. But as land becomes scarce, operators
Australian company GroundProbe knows the cost involved
are realizing they have far more chance of striking gold with
in stabilizing underground mines and is innovating ways
a greenfields deposit close to their existing operations than a
to make it safer. “Sometimes about 20 percent of the cost
brownfields deposit in an area with little to no infrastructure.
of underground mining is in supporting the tunnels,” says
According to Kenneth McLeod, President and CEO of Sonoro
Christian Bijsterveld, Business Manager North and Central
Metals, “The best place to find a mine is close to where other
America. The company developed an innovative technology
miners already discovered one.”
to measure movement in the underground tunnel walls to less than 0.1mm in real time.
Miners are staying close to home, and as a result, many of the new mines popping up are a result of further exploration or
NONTRADITIONAL STATES
underground extensions on surrounding properties. Fresnillo,
One factor operators need to weigh when searching for new
for example, operates the Herradura mine in Sonora, which
deposits is the movement to nontraditional mining states.
produced 473,638 ounces of gold in 2017. The company
The potential unfolds as 2017’s biggest silver producers,
decided to dig deeper into the Centauro pit with the Centauro
according to CAMIMEX, were Goldcorp’s Peñasquito and
Deep exploration program, with 9,000m of drilling carried out
three Fresnillo mines, followed by Fortuna Silver’s San José
to date. The project is expected to start production in 2020
mine located in Oaxaca, which produced 7.5 million ounces
with an average of 65,000oz/y of gold. Similarly, Coeur Mining
and pipped Coeur Mining’s Palmarejo, Pan American Silver’s
is gradually transitioning its Palmarejo mine in Chihuahua into
La Colorada and Peñoles’ Tizapa mines to the Top 5.
an underground project at the Guadalupe deposit. These areas are preferable for underground mining for two Additionally, costs can be saved in underground mines
reasons. First, land packages in nontraditional mining states
through unexpected means. The Zacatecas Ecological
such as Oaxaca, San Luis Potosi, Campeche and Queretaro
Tax was introduced in 2016, placing a levy on waste and
are broken into thousands of much smaller packages than
polluting activities. Pan American Silver operates the La
northern states, meaning obtaining social license to operate
Colorada mine in the state but Country Manager Christopher
is complicated for a large, open pit. In Sonora, for example
Warwick says the effects of the tax would have been much
while 4.03 million ha were concessioned in 2016 according to
greater had it not been an underground mine. “Certainly,
the Ministry of Economy, there were 3,632 mines, meaning an
this tax affects our La Colorada mine but the effect is not as
average land package of 1108.79ha. But in Oaxaca, 487,313ha
devastating to an underground operation in the same way it
were concessioned with 627 mines, meaning an average of
would be to an open-pit mine due to the waste movement
777ha per mine. Underground mining would negate the need
and management that is required of waste dumps,” he says.
to acquire several permits for mining activity.
MORE SAFETY, FEWER PROBLEMS
Second, according to Sergio Almazán, Director General of
It used to be the case that underground mining was
CAMIMEX, there is more flora and fauna in these areas,
incredibly risky due to potential collapse and inhalation
entailing more work during the exploration, development
of hazardous fumes. Now, emerging technology means
and closure. “We believe that the south has just as much
underground shafts are more stable than ever and, in some
potential as the north,” he says. “The only thing is that the
cases, humans do not even need to be present in the mines.
abundance of vegetation and flora in the south make it
“Our company wants to show the industry that it is possible
a little harder to find these deposits in a timely manner.”
to operate deeper underground mines with cost-effective
These factors mean underground mining could be a good
solutions and we know how to help them achieve this,”
alternative for miners looking in new areas.
TREND SPOTLIGHT |
A NEW ERA DAWNS AND MINERS WILL EITHER ADAPT OR LAG BEHIND In the era of technological innovations, the rule is simple: adapt or lag behind. In a traditional industry like mining, where competitivity is about having efficient and productive operations, resistance to change may be an issue. Yet, to turn operational efficiency into a reality, technology is indispensable. “It is paramount to bring new thinking and operational models into the mining industry, even if it comes from adjacent industries, so we can create a more integrated and thriving business ecosystem,” says Jari Moilanen, Director of Digital Plant Outotec. According to EY’s 2017 Productivity in Mining report, productivity is on the decline, driving operators to dig
“
Productivity is more dependent on human capital and the training companies provide. If the mining industry invests in the development of its people, it will achieve higher returns” Jesús Herrera, Director General of Detector Exploraciones.
deeper and seek integrated solutions to boost their operational efficiency. “Companies need to adapt
productivity levels becomes as important as establishing
quickly to the changing environment or risk becoming
operational efficiency.
noncompetitive in an ever-competitive market,” says the report. Bradford Cooke, CEO of Endeavour silver, highlights
One alternative approach to measuring productivity through
the issue, pointing to the harm the company’s Guanaceví
labor evaluates workforce efficiency as the total material
mine suffered in 2017 due to flooding caused by the lack
moved per person in a given period. Another key indicator is
of integration between pumping, ventilation and electrical
the overall equipment effectiveness (OEE), which calculates
systems. “As a result, the mine fell behind on its production
equipment productivity times and delays. According to
guidance for the year,” Cooke says.
Vorne Industries, a company specialized in enhancing manufacturing productivity, OEE is the gold standard for
Even after recovery, these sorts of mistakes can be costly for
measuring productivity. “It identifies the percentage of
operators, both in financial and reputational terms. “Every
manufacturing time that is truly productive,” the company
hour of downtime can cost companies millions of dollars,”
says. “An OEE score of 100 percent means you are
says Heriberto Salas, Latin America Sales Director at Eagle
manufacturing only Good Parts, as fast as possible, with no
Burgmann. For his company, “integrated solutions mean
Stop Time. In the language of OEE that means 100 percent
not only provision and manufacture of sealing technology
Quality (only Good Parts), 100 percent Performance (as fast
but also understanding the equipment, engineering and
as possible), and 100 percent Availability (no Stop Time).”
mechanical aspects of the operations.” This means that a holistic approach to mine operations becomes crucial to
Technology is not the only input to develop, as new systems
drive productivity levels.
will not entirely work on their own; they require an adequate operating team. For many Mexican explorers and operators,
Mining machinery providers believe it is key to automate
the node pushing any innovation must be human capital
processes to envision the whole production picture. For
to ensure a sustainable and responsible productivity
example, SKF helps mining companies switch their models
improvement. “The industry will always seek to cut costs and
to IIoT and Industry 4.0. “The trend is moving toward the
drive up productivity,” says Jesús Herrera, Director General
development and implementation of sensors at mine sites
of Detector Exploraciones. “I believe that productivity is
and with mining machinery,” says Nacip Fayad, Industrial
more dependent on human capital and the training that
Sales Director at SKF Mexico.
companies provide. If the mining industry invests in the development of its people, it will achieve higher returns. As
According to EY, when focusing on productivity, managers
our costs will also go down, we will be more competitive
often make operational decisions that prioritize product
and our clients will give us more work,” he says.
outcome, overlooking other measures such as total material moved. But gauging productivity levels by one variable
A cost-centered view of productivity can also negatively
can be counterproductive as it disregards certain factors,
impact the environment, Herrera adds. “It is also imperative
such as the geological conditions of ore quality, that affect
that we not lower our costs at the expense of the
the output. Coming up with an objective measurement of
environment,” he warns.
171
| VIEW FROM THE TOP
GLOBAL MINING GOING GREEN RICHARD BOOTH Managing Director for North and South America of MMD Mineral Sizing Central America
172
Q: How is global mining changing and what is your
Q: What is the future for In-Pit Sizing and Conveying (IPSC)
perception of the state of the industry in Mexico?
systems in Mexico and how are mine operators responding
A: Global mining is increasingly recognizing the need
to this technology?
for greener mining. For four decades, our goal has
A: Our flagship Fully Mobile Sizer, which sits at the
been to provide equipment and solutions that reduce
heart of our largest IPSC system, can process 9,000t/h
or eliminate the need for trucks. We are developing
of overburden, with peaks of 14,000t/h demonstrated,
technology that revolves around truckless mines and
and transports material away via a conveyor network.
our equipment also enables operations to become more
However, for open-pit mines, where conveyor installation
effective and efficient. So far, we are experiencing a lot
is impractical or cost-prohibitive, operators can still
of success, especially in South America. We specialize in
make use of their existing truck fleet while enjoying the
large equipment for mass mining operations. The South
benefits of continuous mining. MMD’s latest design, the
American mining industry is growing a lot faster than in
Fully Mobile Surge Loader (FMSL), is set to eliminate
Mexico. The country has fewer big mines in comparison
inefficient truck-shovel operations. A shovel’s utilization
to the mass operations in Chile. Mexico still has a
is sometimes only 60–70 percent of what it could be, as
large number of small mines that often produce about
it has to wait for trucks to return and spot. The Surge
4,000t/h. The Mexican market is not difficult to break
Loader is positioned between the shovel and haul trucks,
into but there is still a lot of uncertainty over the impact
so the shovel operator can continue stockpiling material
of the 2018 presidential elections.
into the receiving hopper. The Surge Loader’s feeder unit loads trucks faster than when they are fed directly by the
Q: What strategies are you implementing to overcome
shovel in an automated start/stop method. This ensures
resistance in the Mexican mining industry to new solutions
each truck is hauling at maximum capacity. Trucks no
and technologies?
longer need to reverse into position, thus cutting shovel
A: The resistance often comes down to a simple lack of
waiting time. With a full hopper on the Surge Loader,
knowledge or perceived higher cost of new technologies.
the shovel can reposition without stopping truck loading.
While CAPEX costs might be slightly higher in some cases,
MMD’s simulations have demonstrated the ability to
OPEX rates are often vastly reduced, and performance
increase shovel utilization to nearly 95 percent, and
increases result in favorable ROI figures. We are now
that more material can be moved with the same number
going above and beyond by connecting our customers
or fewer trucks needed to maintain the same level of
to external financial support where CAPEX cost is the
production.
barrier. We are a highly-specialized business, but we take time to retain a presence at the top mining exhibitions
Q: How does MMD contribute to increasing safety
and conferences, enabling customers to learn more, and
in mining?
ask questions about the company and our technology.
A: I believe the biggest problem is that mines try to cut costs
Our global experience allows us to go to mines that
excessively. Sometimes the highest cost in an operation is
nobody else is willing to work in, which helps cement our
personnel, due to the number of people needed but also
reputation in Mexico.
the impact unions can have on production. With the FMSL, autonomous or semi-autonomous trucks are spotted using the latest 3D cameras and RFID sensors to assist accurate
Mining Machinery Developments (MMD) is celebrating 40
truck alignment. Our goal is to ensure the FMSL can be
years of mining innovation. The company focuses on Mineral
controlled by a single shovel operator. With personnel
Sizers, Feeders and turnkey In-Pit Sizing and Conveying (IPSC)
reduced and autonomous trucks introduced, site safety is
solutions
greatly increased.
VIEW FROM THE TOP |
SLASHING MAINTENANCE COSTS WITH AUTOMATED CONVEYOR BELTS RALPH BUCHHOLZ Director General of Beumer de MĂŠxico
Q: How would you describe the Mexican mining market
Our systems are manufactured in Europe and comply with
and how important is it for Beumer?
strict standards from the region. Their high quality makes
A: The company has a particular interest in Mexico as it is the
them last longer and require less maintenance. Despite the
biggest silver producer in the world and is experiencing a
fact that our products are manufactured in another country,
significant rise in new projects. We already collaborate with
we still find ways to offer lower costs and assemble the
the cement and limestone industry in the country, including
machines locally. This allows us to customize and adapt
companies such as Cruz Azul. The company also installed
our products to the needs of each project. Our systems
several machines for Grupo Calidra. We find that companies
can equally help projects become safer as they can detect
are starting to invest in more projects. Not only are Canadian
loose materials and malfunctions in real time and can be
players opening more gold and silver projects but they are
controlled from an operation room, which eliminates the
also significantly investing in base metal mines. This market
need to have a person on site at all times.
has a lot of potential as manganese is being produced by only one company in the country. Grupo Mexico is greatly
Q: What kind of logistical challenges do you face in
expanding its portfolio as well. Mexico will have a good market
underground mines in comparison to open pit mines?
for the next few years thanks to these new developments.
A: We can provide solutions for both, but underground mines are much more challenging and riskier to work in.
Our greatest challenge is in being a new market entrant.
We tend to especially avoid underground coal mines as any
However, we will be able to overcome this obstacle by
type of spark or malfunction can be extremely hazardous
demonstrating Beumer's success in the mining industry
and explosive. As providers, we can only prevent these
across the globe, as well as with many other bulk and other
types of risk through our products and management of
material-handling industries within Mexico. Establishing
them but operators also have make sure they are following
partnerships with Mexican mining companies will allow us
strict safety standards in their processes. But we are open
to demonstrate our value to them and illustrate that we are
to venture into other types of underground mines such
more than just a supplier.
as gold, silver or base metals such as manganese. Mexico also has significantly fewer coal mines than Germany, for
Q: How can Beumer de MĂŠxico help operators reduce costs
example, so it is not an issue in the country.
and improve productivity? A: Mines traditionally move materials from one place to
While we are able to accommodate many types of
another using massive trucks that can hold up to 50 tons at
mines, we are more concerned with the timeframe and
a time. The downside of this method is that these machines
development of the project. We work with a wide variety of
consume a large amount of diesel fuel, which is becoming
specialists from engineers and consultants to construction
increasingly more expensive. The weight of the load also
companies. We are prioritizing automation and work with
greatly damages road conditions, which implies a constant
control systems from around the world. Beumer also takes
need for maintenance. These factors combined with the
into consideration the end product, as liquid and dry
high price tags of tires and other automotive parts that
concentrates need different handling and packaging along
have to be replaced periodically can quickly add up. Long
with security and transportation costs.
distances can also force operators to buy a bigger fleet of trucks. BEUMER Group is an international manufacturing leader in
We can help companies reduce costs by implementing
intralogistics in the fields of conveying, loading, palletizing,
conveyer belts that may have a higher initial cost, but many
packaging, sortation and distribution technology. It offers a
long-term benefits including a lower total cost of ownership.
solution for almost every logistics challenge
173
| INSIGHT
SMALL COMPONENTS CAN PROVIDE BIG RESULTS RUDOLF MICHEL Global Technical Manager of Global Wear Solutions
174
Mining is typically carried out in a rough environment and
Global Wear recently made the leap to Mexico, hoping
something as simple as a rusty screw can lead to a day
to replicate its success in Australia. Michel says that,
of maintenance, hurting operations. New technology is
although it is difficult to launch a new product in a
helping lower these downtimes, says Rudolf Michel, Global
traditional industry, the company has established a
Technical Manager of Global Wear Solutions. “Maintenance
local partner and several clients after only six months
can take up to eight hours when trying to release rusted
in the market. “Through trials and presentations, we are
screws using torches and grinders. Innovative products,
showing operators in Mexico the results that we have
such as our easy-to-release screws, can reduce this time
reaped in Australian mines, and we are gaining their
to only four hours.”
trust,” he says. “We will continually enhance our product quality to achieve market leadership in Mexico just as we
Time is money in any industry and Global Wear’s priority
did in other countries.” It is already working with CMBJ
is to help companies use this resource effectively.
Peña Colorado, a collaborative project between Ternium
The company, relying on its 42-year experience in the
and ArcelorMittal.
Australian mining industry, has developed solutions that need to be replaced less often. By addressing common
Michel says this formula works because the Australian
issues like corrosion in conveyor belts and increasing
mining industry is similar to Mexico. In both countries,
the quality of the rubber in its products, Michel says the
mining is an important economic factor. Australia has
benefits for operators can be significant. “Our products
over 150 mines with a wide range of metals. Australian
last 30 percent longer while being 30 percent cheaper
companies have a large presence in Africa and are
than those offered by manufacturing leaders,” he says.
now starting to increase their presence in Mexico with
“We always endeavor not only to provide products but
increasing connectivity. “It used to be a lot more expensive
solutions based on wise investments that are beneficial
to fly from Australia to Mexico but it is becoming more
in the longer run.” The company categorizes its products
viable,” he says. “Considering the similarities and facilities
into three lines: conveyor solutions, wear and corrosion
in connectivity, Australian companies are increasingly
protection and rubber linings.
interested in entering Mexico.”
VIEW FROM THE TOP |
GENERATING ROI BY PRIORITIZING QUALITY AND EXPERTISE ÁLVARO CHACÓN Managing Director Mexico and Central America of Martin Engineering
Q: In what ways is Martin Engineering benefiting from the
A: In effect, we are analyzing our business model and
industry’s positive outlook?
production process to find ways to become more
A: The company is experiencing growth for the third
competitive without compromising quality. One way
consecutive year and we have not seen these kinds of
we are doing this is by an alliance we created with
results in two years. Part of the performance is due to
Pennsylvania State University Department of Minerals and
more selectivity in terms of purchased products and better-
conducting a study to identify the ROI that the presence
trained employees, which makes us more competitive. The
of these technicians is providing clients in terms of
industry is expanding in terms of volume and percentage
security. We are doing this because we believe increased
and in 1Q18 we were able to hit monthly targets within the
safety often implies higher productivity in comparison to
first week of each month.
projects that do not have a team of technicians and we are using data to prove this. This study is already having
On a global basis, mining represents 30-35 percent of
a significant impact on the industry and we have coined
our effort and resources and in Mexico, our participation
a new term, Return on Conveyor Safety, to show the true
in the industry is similar, with 35-40 percent dedicated
value of what we offer the sector.
to the sector. Our number one client is Goldcorp and we have a site in Peñasquito with a team of 25 technicians.
Q: What would Martin Engineering like the next
Goldcorp recently awarded us an additional two-year
administration to prioritize when it comes to the
contract. We are working on diversifying our portfolio and
mining industry?
acquiring new clients and we have already reached a deal
A: I would like the government to understand the
with Operadora de Minas, a subsidiary of Grupo México
differences between what the public and private sectors
in Cananea. Originally, we were working with it through a
can offer the country. They both play important roles in
distributor but believe that it is more efficient to deal with
Mexico and the administration should do its best not to
the operator more directly.
inhibit investment.
Q: What is the company’s main added value in comparison
Authorities should also try to diversify FDI in the country
to companies that offer similar services?
as we are highly dependent on Canadian companies and
A: We differentiate ourselves by prioritizing quality and
we could have more investment from other regions such
providing multifaceted services and solutions. Unlike other
as Latin America and Europe. They should also facilitate
companies we make sure that we have an experienced
processes and regulations, and one welcome effort
team of technicians who can help operators onsite. One
would be to overturn the recent regulation that dictates
downside is that it can be quite costly to maintain this
operators must wait 10 years to deduct exploration
quality as companies do not want to pay for the added
investment. Allowing them to do so within the first year
value. For example, in one project in Coahuila with Grupo
would greatly help the industry. All these factors are
Altos Hornos de Mexico, we are providing a team of 25
important because Mexico can be a difficult country to
technicians who work onsite all year long although the
work in as it has ejidos and surrounding communities that
operator does not fully pay for these costs. This greatly
have the power to impede projects.
impacts our profit margin and makes it difficult to balance quality with earnings, which is a normal paradox within the industry. We find that we are selling more but earning less.
Martin Engineering is an engineering firm with more than 70 years’ experience and a global presence of highly-experienced
Q: How do you overcome resistance from companies that
technicians and engineers in 19 countries on six continents, and
do not want to pay more for higher quality services?
customers in dozens of industries
175
| VIEW FROM THE TOP
GERMAN TECHNOLOGY FOR LATIN AMERICAN MARKET KLAUS HEPP President of VULKAN do Brazil
Q: How does Mexico feature in your international
operative performance, increase efficiency, bring down lead
business strategy?
times and help avoid accidents.
A: VULKAN is a 125-year-old German company that specializes 176
in power transmission solutions for marine and industrial
As for the challenge presented by the increasing need to
applications. Brazil is home to the center of competence
adapt to the digital revolution, we have already started to
for our industrial division. We form an ideal union between
equip several of our products with digitally readable sensors,
experience, quality and German engineering combined with
which will allow our customers to connect these to their digital
a passion to promote development in Latin America. We have
networks and receive important performance information over
global factories in Germany, China, India, the US and Brazil.
distances. They can also record and analyze this systematically
We have a long-term vision for the expansion of our market
for preventive maintenance.
participation in Mexico as one of the main countries in Latin America. In line with the demands of our customers, we will
Q: What added value do you offer to the Mexican mining
adjust and grow our Mexican subsidiary. Our strong advantage
industry and why should operators choose your products
is our over 40 yearsâ&#x20AC;&#x2122; experience and engagement in the South
over those of your competitors?
American industrial markets. Many companies in Mexico are
A: We have been extending our full product and service
our clients in Brazil and other South American countries.
portfolio to the Mexican mining market over the last year, which means we can now supply Mexican mining operators
VULKAN is a 125-year-old German company with 40 years of experience in South American industrial markets and a strong presence in Brazil, Chile, Peru and Colombia
in the same way as we already did over the last few decades in Brazil, Chile, Peru and Colombia. We have proven, stateof-the-art, high quality products and services, which are very competitive in comparison to those that currently dominate the Mexican mining market. Q: What is an example of a success story that demonstrates the unique benefit you can offer the industry? A: We recently supplied a Mexican mining operator with a complete brake system including 15 cutting-edge
Q: What are the main challenges operators face in terms
electrohydraulic brakes for installation in five conveyor
of mineral processing and how do your products help
belts. This substitutes old, inefficient brakes purchased
solve these?
from a competitor and helps our customer to increase the
A: We believe that the main challenges globally for mineral
efficiency and the security of its operations. In this case we
processing companies are based on the need to increase
have designed the system, supplied the brakes, supervised
the efficiency and profitability of operations to improve
the installation and successfully accompanied the entire
the safety of the entire process and to reduce their
initialization process.
environmental impact. Our products are technologically cutting-edge and thus guarantee the optimization of
Q: How much do you invest in research and development and what new products are you planning to release? A: We have several development centers within our group,
VULKAN Group helps the mining industry maintain high levels
including the global center for the industrial division in Brazil.
of performance and reliability through its power transmission
In Germany, we have a development center that specializes
solutions, such as couplings, backstops and brake systems,
in maritime solutions and several other industrial products.
among other products
Also, Vulkan Drive Tech has had a good deal of success and
deep expertise in the application of couplings, including fluid couplings, break systems and backstops that are especially designed for conveyor systems and other applications in heavy industry installations. We have a highly qualified and motivated service technician team that provides all kinds of customer service support across the Latin American region and that already serves several customers in Mexico. Q: What are your expansion plans in Mexico in the medium to long term? A: In Mexico, VULKAN has already launched a subsidiary of its Vulkan Drive Tech division with Sales Offices in Mexico City and Villahermosa dedicated to the mining and heavy industry applications of our products, as well as oil and gas and petrochemicals. The offices additionally receive strong technical engineering support from Brazil and product specialists and service technicians are frequently visiting Mexican clients. VULKANâ&#x20AC;&#x2122;s business model in Latin America consists of a small structure supported by a network of distributors and representatives. The company currently has distributors in Monterrey, Puebla and Toluca and is continuously extending its coverage. We are therefore able to offer the Mexican industry access to our wide range of couplings, brake systems and backstops for all kind of industrial applications, including safety solutions. We expect to grow quickly in Mexico and attain a position similar to that we enjoy in Brazil, thanks to the wide portfolio of products and services that we offer. Our initial expansion plan in Mexico is divided into two phases. First, we are installing our own structure and sales and service partner network, presenting ourselves to potential customers primarily in the mining, cement and steel industries, in addition to oil and gas and petrochemicals sectors across Mexico. In the second phase, we will expand our presence in the Mexican market to all other potential industrial applications and customers. Our plan is to establish ourselves in Mexico in the midterm with a small engineering and technical service center and a local logistics platform to enhance our service for this emerging market. By doing this we will take advantage of our global group structure with distributed engineering and manufacturing centers in Germany, India, China, the US and Brazil and we will supply the Mexican market with products from all these locations. Regarding the development of the Mexican mining market and its impact on our business, we are convinced that, regardless of the short-term commodity price situation, the global market demand for metals and mining byproducts will continue to grow. For this reason, we are sure that our products and solutions will find increasing interest on the Mexican market as well as in the other Latin America countries in which we have a presence, such as Brazil, Chile, Peru and Colombia.
177
| TECHNOLOGY SPOTLIGHT
US$41.04 million can be saved in
total annual downtime costs with the Series 795 Knife Gate Valve
THE INDUSTRY’S FIRST IN-LINE KNIFE GATE VALVE Even as metals prices rebound, operators are still focusing on four main points for process optimization: safety, productivity, inventory and capital. Victaulic has developed the Series 795 Knife Gate Valve (KGV), which can address all these concerns. This Series 795 is the industry’s first KGV that does not need to be removed from the piping system for servicing. All the wear parts are contained in a single cartridge kit and can be replaced in-line in just minutes. The benefits are fourfold. Firstly, in terms of safety, there are no more chains, pulleys or ropes during maintenance for this valve and reduced rigging during maintenance protects crew from hazards. Only simple hand tools are needed to get the job done. Secondly, this valve can be maintained up to 95 percent faster when compared to competitor gate valves, saving hours of labor by eliminating the need to secure and tear out the entire valve from the pipeline. Thirdly, this valve will not burden the operator’s boneyard because it never needs to be removed from the pipeline. The only wear parts on this valve are enclosed in a single cartridge kit and after scheduled maintenance shutdowns, all that is sent away is the old kit. That equates to a fraction of the shelf space and dead weight when compared to the whole valve that would normally be dragged around. Finally, and perhaps most importantly, there is no need to send capital straight to the boneyard. The fact that only the seat cartridge kit rather than the whole valve needs to be replaced during shutdown saves at least 60 percent in annual maintenance costs. Another key feature is the valve’s one-piece replacement cartridge, which eliminates the need for a second maintenance valve while reducing inventory costs. The valve’s bolt pad to bolt pad assembly valve is installationready with no loose parts. The positioning bolts provide a full 360° rotation and Victaulic's grooved ends design does not require flanges or welding to install. Using the example of a facility operating with 80 valves, Victaulic’s Series 795 KGVs would require just a fraction of the downtime and manpower of replaced flange valves. At an hourly rate of US$80, downtime and labor costs would equate to just US$32 compared to US$1,344 using replaced flange valves. Considering the maintenance costs per valve, the total yearly maintenance costs would drop by over 60 percent, to US$122,560 from US$307,520. Total annual downtime costs are slashed, to US$2.16 million from US$43.2 million.
179
| INSIGHT
AUTOMATION SOLUTIONS FOR MINES OF THE FUTURE ALFREDO BERTRAND General Manager of Epiroc México
180
Automation is shaping the future of mining, and no company
two prototypes: one in Canada and the other in South Africa.
knows this better than Atlas Copco. Targeting a higher market
A third will be implemented in Mexico with Fresnillo, and
share in Mexico, the 145-year-old company decided in 2017
Bertrand says this emphasizes the country’s interest in being
to divide its offering in two, providing specialized services
technologically advanced. “This technology implies not only a
to the industry to expand its reach and having a focus on
large capital investment but also many engineering hours from
the mining sector. The new mining-centric company, Epiroc,
our teams in Sweden and Mexico, together with our customer
still has the global expertise of the Atlas Copco Group, but
engineering department,” he says.
can now offer products and services that are 100-percent focused on mining, says Alfredo Bertrand, the company’s
Since Mexico is a very traditional country, he says there
General Manager in Mexico. “Atlas Copco decided to make
are few early-adopters like Fresnillo, which also presents a
the split because it perceived that the business model of the
hurdle when trying to reshape the company. “Some clients
mining industry is changing and it now demands companies
are hesitant about Epiroc as they have been working with
that can provide support services in remote monitoring and
Atlas Copco for over 65 years,” Bertrand says. “We face the
control of machinery,” he says. “We are eager to meet this
challenge of breaking this paradigm, despite the fact that
new challenge.”
we are only changing the name of the company. We let our clients know that we still have the same products, with the
Bertrand says Mexico has a key feature that differentiates
same service quality and furthermore, the same human talent
it from its North and South American neighbors: its market
to support the mining sector in the country but now as a
demands high-tech equipment and the most modern
highly-specialized company. We lost our old name but gained
machinery that exists in the industry. This is leading the
a better quality of support services for our clients.”
country toward automated mines. To take advantage of these opportunities, Epiroc has already started two projects,
With Mexico’s abundance in natural resources and ore
one of which is in the Peñasquito mine with Goldcorp. These
bodies, Bertrand believes it is a top market that will allow
projects consist of the monitoring of all equipment through
Epiroc to capitalize on emerging technological advances. He
control centers, so a company can identify the status of
says investors are encouraged by the geological potential in
machinery, production rates and malfunctions. This helps
the country, but warns that, after an almost five-year slump,
companies quickly complete maintenance services and
it is important to be prepared for the coming upcycle. “It
control productivity. It also provides key information to
is very important to accurately identify ore resources in
engineers that allows them to make the right decisions and
Mexico so we are ready for a rise in project demand as metal
increase efficiency. These control systems are additionally
prices continue to go up,” he says, adding that in this new
focused on security as they provide projects the ability to
environment, Mexican operators should look to diversify away
properly monitor personnel and avoid dangerous situations.
from the country’s reputation as a gold, silver and copper
“In the case of Peñasquito, we started with a pilot project in
producer. “There are nontraditional metals that are becoming
3Q17, which was highly successful,” says Bertrand. “By the end
increasingly important in the market, such as lithium.”
of 2018 we expect to have 100 percent of the drilling remotely monitored and controlled. This will reduce security risks and
Although Epiroc has its sights set on Mexico, Bertrand also
improve mine productivity.”
highlights the importance of operators setting a footprint abroad too. “I believe that it is key to not only focus on
He believes that every leading company is prioritizing
fostering FDI in Mexico but also encourage national companies
automation up to 10 years in advance. “This technology is
to go abroad as well,” he says. Several Mexican companies
key for the mines of the future,” he says. One example is
have already expanded their operations, such as Peñoles and
Epiroc’s new machine, Mobile Miner, of which there are only
Grupo México with projects in Peru and Chile.
VIEW FROM THE TOP |
DISRUPTING THE MARKET WITH FULL EV FLEET FOR MINING RENÉ VALLE General Manager, Mexico and Central America at MacLean Engineering
Q: How does MacLean’s fleet of battery powered
harder to find and we must explore deeper underground.
equipment provide a value add for its customers?
Most open-pit mines often transition toward underground
A: Our diesel-free equipment was originally created on a
operations so they can access more ore. We do not want
request from Goldcorp in Canada and this turned MacLean
to offer equipment or services that we are not familiar with
into a global supplier of full fleet electrification for the
and underground mining is what works best for us.
mining industry. In Canada we will soon have 20 units working in mines. Operators are starting to see that going
Q: How is the company preparing to expand its presence
diesel-free can reap many benefits. It makes operations
in the country?
more environmentally friendly and cuts costs on power
A: We are proving our commitment to the Mexican mining
for ventilation, which is often the second most expensive
industry by investing in an assembly plant in Queretaro.
element of a mine, after labor costs, and provides lower total
Our plan is to increase our ability to meet the needs of
cost of ownership primarily due to reduced maintenance
our customers by assembling the machines in Mexico
requirements. We are also innovating by implementing the
instead of Canada. It also reduces the cost of shipping and
use of virtual reality simulators to train employees who use
importation.
the equipment. Our system even allows users to mimic hand movements and to install rigs as it would normally be done
MacLean is holding the plant to the highest standards not
in person. It makes operations safer and lowers costs as we
only in Mexico but also in Canada by acquiring certificates
can teach five to seven people at a time how to react in
and norms. We are doing this to ensure the best quality. It
cases of emergency, such as a fire, without having to actually
also opens doors to supply the needs of not only Mexico but
make a machine malfunction. These kinds of tools make
Latin America and even Canada in the long term. We would
underground mining much safer.
be the first in the country to assemble underground mining equipment. The plant will not require a large investment as
Q: How is the Mexican market reacting to the release of
it will not manufacture the pieces, only assemble them. We
an EV fleet?
plan to invest between US$2-3 million and we hope to finish
A: Mining companies around the world are actively evaluating
it by the end of 2018 or the beginning of 2019.
the best way to embark on the EV fleet transition. In Mexico, there are a number of mine development projects that are
Q: How is the company preparing itself for the impact from
on pause, but as these begin to progress we feel that the
a change of administration?
opportunities for electric battery units will start to take shape.
A: Even though 2018 is an electoral year, we expect our results will be similar to the previous year in terms of sales.
For us, the real challenge in the Mexican market lies in the
Elections are always disruptive and we are prepared to
fact that we are still quite a new company in the country in
withstand the worst-case scenarios by selling as much as
comparison to competitors that have a multiyear presence.
possible before July. The industry is looking good in terms
But customers are getting to know us and to trust our
of metal prices but it is better to be safe than sorry. Any new
services. We are proving our commitment to the Mexican
administration could make significant changes to regulation
mining industry and breaking paradigms by talking to
and policies that could impact our business.
different suppliers. Q: What opportunities does the company see in Mexico
MacLean Engineering designs, manufactures and markets
for underground equipment?
engineered solutions. The company’s mining division has a
A: In Mexico, we see many areas of opportunity for
comprehensive line of mobile equipment for full-range support
underground mining as high-grade projects are getting
of the mining cycle across all underground mining processes
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| INSIGHT
RAISING MARKET STANDARDS THROUGH QUALITY AND TECHNOLOGY ALAN GONZÁLEZ Managing Director Mexico of Pewag
182
Mine operations are labor intensive and require machines that
Pewag manufactures its products in Austria and uses
can operate 24 hours a day. In light of price volatility, operators
dealers in Mexico to distribute its chains. “We are not
are welcoming solutions that can help them save money by
planning to open a plant in Mexico as our plants in Europe
prolonging the utility of spare parts. “Three years ago, prices
have become a trademark for Pewag,” González says.
dropped significantly at the same time that the government
The company additionally uses a distribution model that
released new tax royalties,” says Alan González, Managing
relies on dealers. “We found that it is better to retail our
Director Mexico of component supplier Pewag. “Companies
products through dealers as they have an established
needed help and we were able to provide support by offering
network of clients that have a general preference for
durable chains that can prolong the life of tires significantly.”
purchasing package solutions from trusted distributors over buying each part separately,” he says. “This has been
He says Mexico is attracting a growing number of players each
a success for us and also helps us maintain the quality of
year and that is a good development. “Despite the increased
the product as a separately sold chain can become loose.”
competition, there is enough room for everyone,” he says.
Even though the company manufactures its products in
“One example is our main competitor in Monterrey. While we
other European countries, it guarantees its ability to meet
specialize in quality tire protection chains, it specializes in
the demands of the industry by having large storage
chains for machines and construction equipment.”
capacity in Mexico.
VIEW FROM THE TOP |
FINDING BLUE OCEANS IN MINING AXEL PINEDA Director General of Beltservice Mexico
Q: What differentiates Beltservice Mexico’s cleated belts
A: Beltwall is Beltservice’s patented technology. Belts have
from similar options in the market and why should Mexican
interior and exterior covers with textile layers in between,
miners choose yours?
adding resistance to the rubber. Beltwall has crossed textiles
A: The black belt or heavy belting is the product that adds
that add transversal rigidity, making the belt fully tensed
the most value to the mining industry. We offer several
and using the band’s entire area in conveying material.
tension specifications, from 330piw to 600-900piw. Our
Also, to avoid material slipping, traditional conveyor belts
products comply with the highest security standards for
have up to a 35-degree incline; implying building a huge
conveyor belts. As we compete with the global majors in
structure that is expensive. Beltwall works like an L with up
belting, we make sure that our materials have the highest
to 90-degree inclines as it builds a box that avoids the need
quality and that our belts are designed with the most
for all the structure and its expenses. We can increase the
accurate calculations. Also, our international logistics
amount of moved material by 30 percent at a minimum.
system is optimum, making our response times some of the
made belts.
Traditional conveyor belts have up to a 35-degree incline but Beltwall works in an L-shape with up to 90-degree inclines
Another key differentiator is our wide solutions portfolio,
In 2015, Beltservice Corporation bought the Italian company
as we offer belts for every need. If we do not have it, we
BeltTS that provides filter belts for gold processing and
design it from scratch. We also provide field advisory to our
we want to venture into other metals too. When the ore
clients to make sure their belts are working properly and
is milled, the chemicals are added. Filter Belts separate
with the right tension specificity. We have been providing
the mud and liquids from the solids, which allows reuse
this service in Mexico since we started our operations in the
and better compliance with environmental regulations.
country in 1994.
This belt is only manufactured by three companies in
best in the market. If we have the required product in our warehouse in Monterrey, it is shipped within 24 hours, if not it will take up to five days from our facilities in St. Louis. Our stored equipment meets 80 percent of the mining industry’s needs; the remaining 20 percent are very specific tailor-
the world. It is a high-value piece of equipment. We have Q: Who are your main partners in the Mexican mining industry?
already implemented this system at First Majestic’s Santa
A: It used to be challenging for foreign suppliers to enter the
Elena mine. We want to expand it to other gold mines in
Mexican market because inventory and logistics costs were
the country.
very high. But as a US company, we have had the advantage of working under NAFTA, which means our black heavy
Mexico has a privileged geographical position and its mining
belts and other products are tariff-free, making us more
industry is becoming increasingly resilient and mature. We
price-competitive. We also have commercial partners such
hope to maintain our leading presence in the country. To
as FIMSA. There are many nontraditional mining providers
do so, our goal is to continue specializing. Our strategy is
that are gaining mining market share. For example, one of
to find the blue oceans in the sector.
our main distributors is Applied, which recently entered mining and found key opportunities in the industry. We sell directly to this company.
Beltservice offers the industry’s largest selection of cleated belts, 100-plus chevron cleated patterns and a wide array of
Q: What is behind the success of Beltwall for ore processing
light and heavy-duty belts designed for mining and a variety of
and what would you say is its key differentiator?
manufacturing, processing and logistics uses
183
| VIEW FROM THE TOP
COMPREHENSIVE SEALING SOLUTIONS FOR STATIC AND DYNAMIC APPLICATIONS FELIPE MUES President and General Director of Garlock de MĂŠxico
184
Q: Given Garlock works across a variety of components,
developed several training courses that can help them
where can you add the most value to the industry?
understand the product and the overall system in which they
A: The most value that Garlock has delivered since its
operate. But when talking about flange systems, this means
creation in 1887 is to bring trustworthy and reliable solutions
that they need knowledge about how the components of
for dynamic and static sealing. It is important to understand
the system interact. We are changing this mindset from a
that sealing is not a commodity. In mining, millions of dollars
product point of view to a system point of view and thus
are invested on pipelines, measuring devices and equipment
creating a more holistic outlook.
to transport fluids to be used in transformation processes. It is very important to keep the fluids controlled through
Q: What is the detail all mine managers need to know
adequate sealing solutions.
about your solutions and their performance? A: Even with the best sealing solution, if the overall
Depending on the application, the KLOZURE technology can improve the life of the bearing by 3 to 4 times compared to a common oil seal
system has a gap, there will be a failure of some kind. We recently developed and patented a new gasket technology. GLYON EPIX, released in early 2018, is designed to be a technological disruption in gasket science to obtain a tight seal with the lowest stress in the system. Another useful technology for the mining industry that we are strongly promoting in Mexico is our GPA Mechanical Seal. It focuses on abrasive applications with high solid content and allows a 60 percent reduction in the use of water.
In the mining industry the fluids used for ore processing are commonly challenging, such as sulfuric acid and sodium
We also have different product lines. KLOZURE includes
cyanide. Garlock can provide the solution for dynamic
dynamic oil seals and bearings isolators used in mills,
equipment, like pumps with our compression packing or
pumps, speed reducers, motors and haul trucks wheels.
our mechanical seals, as well in static applications such as
As the mining environment deals with dust and slurries
flanged pipelines or tanks with our gasket materials. We offer
that challenge the bearing life element and the optimal
sealing solutions that have proven their safety and reliability,
functioning of machinery, all bearings have to be protected
complying with standards such as the International Cyanide
to maintain the lubricant and avoid contamination.
Management Institute (ICMI) code.
Depending on the application, our KLOZURE technology can improve the life of the bearing by three to four times
Q: How does Garlock work alongside companies to correctly
compared to a common oil seal.
process all hazardous materials used in mine operations? A: We are working with companies that produce sodium
Q: How does Garlock solve the logistical challenges of
cyanide for sealing recommendations. We know that our
delivering its products to its Mexican customers?
customers have many things to take care of, so we want
A: Garlock is a US-based company with plants in Mexico,
to help them fill blind spots in sealing processes. We have
Canada and Germany. In Mexico, we are proud to host the global manufacturing center for the fiber gasket product line, which exports to all continents. We have eight branches
Garlock is a multinational manufacturer of high-performance
and a network of authorized distributors in the country,
fluid sealing and pipeline solutions with an emphasis on
with presence in most mining areas and, in some cases,
safety, reliability, and productivity. It works in partnership with
warehouses inside the mines. This helps us gain direct access
customers, industry associations and governmental entities
to the mine and be very close to the pump or the pipeline.
VIEW FROM THE TOP |
USING DIVERSIFICATION TO STRENGTHEN SERVICE PROVISION ALEJANDRO SILVERA Director General of Master Drilling Mexico
Q: What role did the Mexican mining industry play in the
A: We ensure success by incorporating new technology into
companyâ&#x20AC;&#x2122;s North America revenues?
our portfolio and widening the array of our basic services.
A: Mexico represents over 90 percent of the revenues we
We offer drilling at all depths and diameters. If a particular
make in North America as we just opened the Canadian
ground condition is complicated and conventional methods
and US market last year. Mexico is our main market in the
are not enough, we always are prepared to use other
region as we already have over 13 years in this country. We
innovative techniques to get the job done.
collaborate with Industrias PeĂąoles, Pan American Silver and Capstone Gold, among others. In 2017, we grew 40 percent
We are not only service providers but also strategic
in comparison to 2016, due to our diversification of services
partners. We even offer robots as a way to innovate the
and products. Our core business is still raise boring but we
services we offer and make drilling safer. Before,, miners
are also growing rapidly in dewatering services, shotcrete,
were lowered into mines using baskets to shotcrete the
flooded reverse circulation and many other services. This
walls, but now we have robots that can do these jobs. It
helped our company go from operating two raise boring
greatly reduces risk as there is no possibility of an employee
machines to 18 machines in the last few years. Our goal is
being hurt in their line of work. We strive to promote new
to achieve an annual growth of 20 percent but this can be
technology that can greatly and continuously improve
impacted by the stability of the market.
processes in a safe way.
We are wary of how the business can be impacted by a change
Master Drilling has gone from operating two raise boring machines to 18 machines in the last few years
of administration. Security issues also need to be dealt with to create a more stable environment. We mitigate these risks by having a strong track record to better promote ourselves as the services we offer are successful. We focus greatly on our efficiency and credibility. This is important in Mexico as its mining industry is small and part of a tight-knit community.
Q: How realistic is the future of automated mines in Mexico? Q: How do you differentiate yourself from your
A: In Mexico, employees have the capacity and the willingness
competitors?
to use these tools. But it all depends on the training and
A: Our expertise in raise boring is our main differentiator.
opportunities they are being given to learn how to use it. It can
We also stand out by offering services in areas that we
greatly improve operations, particularly in underground mines.
specialize in like shotcrete. However, other services like
We can provide remote-controlled equipment and sensors to
horizontal raise boring plays a bigger role in other countries,
keep people away from risk. This keeps investments safe and
such as South Africa where our headquarters are located.
lowers costs as less capital needs to be spent in relation to
In Mexico we are specializing in the services that national
accidents. More companies are starting to incorporate these
mining requires, and our growth is focused on providing
tools. Fresnillo and Industrias PeĂąoles are leading the way and
the services the market needs. We also stand out from
investing in this equipment on a larger scale, but all mines are
the crowd by manufacturing and assembling our own
doing it on the scale they can afford.
equipment. This is important because clients trust our ability to provide the high-quality equipment they need in a fast and efficient way.
Master Drilling is divided into two main operational subgroups: South African and international operations, including Europe
Q: In what ways is the company innovating in mine
and Latin America. It provides raise boring, boxhole boring,
drilling activity?
exploration drilling and value-added services
185
| TECHNOLOGY SPOTLIGHT
186
MINE-WALL MOVEMENT UNDER CONTROL Mining is known to be a risky business. Whether open pit or underground, a mine can unexpectedly collapse, posing a fatal risk to workers. But today, human lives do not have to be in danger within mine sites. Available technology means wall movements can be monitored, guaranteeing safety while maximizing productivity. Pioneering in real-time and remote monitoring to predict collapses, GroundProbe technology can understand when wall movements become a problem. Its solutions for all slope stability needs have effectively detected the acceptable amount, shape and degree of wall movement for hundreds of mine sites across the globe. Monitoring solutions ensure customers are able to maximize mine site productivity whilst enhancing high safety standards. Breaking ground on radar technologies, GroundProbe brand was launched in 2001, coinciding with the patented Slope Stability Radarâ&#x20AC;&#x2122;s (SSR) commercialization. Now the firm has systems in 29 countries and Mexico is its newest office across the globe. All its monitoring solutions use the same visualization, analysis and alarming software (SSR-Viewer) to collect and process complex data. Users are enabled to see what has moved, when and to predict the time of a mine failure. But given how varied the conditions can be in different mine sites, ensuring safety requires tailored-made radars for each context. For high-risk areas, which pose the potential or immediate threat of collapse, the SSR-XT is targeted to provide highly-accurate safety-critical monitoring. For widerange monitoring, the SSR-FX was launched in 2014 as a broad-range solution. It covers vast mine areas for longer periods, providing customers with geotechnical peace of mine and of mind. When aiming for background monitoring at long distances, the long-range, high-resolution SSR-SARx monitoring is the most useful ally. Taking the next step in radar technologies, GroundProbe combined the precision of a radar with the benefits of a laser. The outcome was the GML-Underground. Launched in 2017, this solution has geotechnical convergence monitored in underground mines by detecting rock and ground support movement with sub-millimeter accuracy. Also, the Geotech Monitoring Station (GSM) added LiDAR-based technology to the companyâ&#x20AC;&#x2122;s range of open-cut solutions. It specializes in background monitoring in open-cut pits and highly-vegetated slopes, detecting and measuring deformation on tailings dams, dumps and cuttings.
187
| VIEW FROM THE TOP
CHOOSING PROACTIVITY OVER REACTIVITY GERARDO ANGULO Director General of Timken Mexico
Q: How have Timkenâ&#x20AC;&#x2122;s recent mergers and acquisitions
bearings and other product lines, which are saving a lot
modified its portfolio in Mexico?
of time and money to miners.
A: All these acquisitions are intended to strengthen our 188
portfolio so we can be present in different markets and offer
Q: How is Timken approaching its targeted market?
more solutions and services to our customers. Our previous
A: We are closer to the end users at the moment and are
acquisitions have been successful, as our customers no
focusing on being a part of all the expansions and investments
longer perceive us as a tapered roller bearings company, but
in the mining industry. We act as an expert parts supplier in
as a firm with a complete bearing and power transmission
the market. Regarding investments, we are involved with the
portfolio that is providing solutions to market.
designers of conveyors and machinery, so we can be there when the equipment is installed. Our goal is to work with
In our endeavor to become a one-stop shop by providing
our customers from the outset so it is easier to solve any
more services, we face several challenges. We must train
problems they may have. Conversely, when the equipment has
our sales engineers and distributors, as we were previously
already been installed, we work with our clients to save time
only focused on bearings and are now moving to include
and money by providing training on good practices to the
power transmission products. We are also working with all
maintenance department while our engineering department
our customers to let them know that we have become a
proposes new solutions when they are having problems in
power transmission solution player. Likewise, all our systems
their current applications.
must be aligned to create an inventory that better supports our customers. We try to be proactive and not just reactive
Q: How does Timkenâ&#x20AC;&#x2122;s value proposition stand out from its
to the market.
competitors? A: Quality, brand recognition and the loyalty of our distributors
Q: How is the mining industry reacting to the changes
and end users. Our customers know Timken and they trust
proposed by Timken?
us, which to me is the key differentiator. With all the new
A: We are playing in a market with several highly-
products that we have now, we can provide more options
qualified national and international competitors, so we
and solutions. Our distribution network is another key asset,
have been working closely with end users as our brand
as it is strong and well-recognized by end users. If we have
is synonymous of quality and technical support. Our
good communication with the end user and our distributor,
customers are happy with our new product offering,
we can guarantee a profitable solution for both. In Mexico, our
they trust in our brand and people, so they are trying
main mining distributors are RYASA, RYBALSA, RODENSA,
our new lines with good results. We target the most
BARMEX, Casa Sommer, RESISA and Applied.
challenging applications in which our customers are having troubles and perform tests, because the best way
Q: How is Timken participating in the digitalization of the
to illustrate our quality is by showing that our products
mining industry?
perform better than the previous ones they were using.
A: Our engineering group is working with OEM
In mining, we have been promoting our couplings, house
manufacturers. As new products arrive in the market, we
units, spherical roller bearings, split roller housed unit
strive to work together with companies such as Caterpillar, Case and Komatsu. The idea is to help them reduce cost and improve performance in their applications so they can
The Timken Company engineers, manufactures and markets
be more competitive in the market. We play a very strong
bearings, gear drives, belts, chain, couplings, lubrication
role because we can design special bearings and power
systems and related products, and offers a spectrum of
transmission products to solve different challenges in their
powertrain rebuild and repair services
applications.
INSIGHT |
ADAPTING TO SMALLER SPACES IN MEXICO’S UNDERGROUND MINES JAVIER PRADOS Managing Director of Normet
The hunt for ore is pushing the industry underground,
that are more comfortable for operators,” he says. “But this is
particularly in Mexico, which is considered among the most
not always easy as contractors tell us they struggle with high
important underground mining markets in the world, says
rates of employee rotation, which implies a constant need for
Javier Prados, Managing Director of Normet, which specializes
training.” Training helps optimize the use of machines so that
in providing advanced solutions for underground mining
operators can take full advantage of their benefits.
and tunneling. “Mexico is also one of the Top 3 countries for FDI in the sector, next to Canada and Peru. The country is
The underground mining specialist is also helping mines
experiencing a boom and it is a fresh market for the mining
become more cost-effective by adapting its products to the
industry.”
varying needs of mine structures. “Mines in Mexico are smaller and have diameters that are on average 4mx4m to 5mx5m,”
Normet entered Mexico in 2012 and supports the industry
says Prados. “In effect, the company is adapting its portfolio
with spare parts, machines and other products like concrete
by designing a complete new line of machines that are built
admixtures. Soon after entering, however, prices dropped,
for smaller underground mines. These machines will have
sending the market into a down cycle that Prados says was
better technology, take up less space and also reduce sales
a blessing in disguise. The company collaborates with the
prices.” Aside from mining, Normet can also provide services
most relevant players in the industry, including Fresnillo, Peñoles, Grupo México and Minera Frisco, and Prados attributes these strong relationships to Normet’s success during the downturn. “We have been through some tough years but fortunately the context is improving and the industry is benefiting.” The company differentiates itself from its competitors by providing application services and training in some key processes like spraying concrete that Prados says no one else offers. “We want to make sure that companies know how to use our equipment and we offer technical advice for free,”
“
for civil construction through its tunneling solutions.
We have been through some tough years but fortunately the context is improving and the industry is benefiting”
Normet’s machines are manufactured in several locations
Prados says. “More often than not, clients face problems with
around the world, including Finland, China, India and Chile.
our machines when they do not know how to use it correctly.
“We considered establishing a plant in Mexico but we decided
The company wants to fix this. We offer services not only
to strengthen our manufacturing in India and China first,” he
for maintaining and operating machines but also in concrete
says. “After we solidify our position, we will consider opening
technology and design.” The latter is vital, although Prados
a plant in Mexico to better meet the needs of the market.
believes Mexico may take a few years to adapt to automated
However, we do manufacture concrete and TBM admixtures
products. “In Latin America, some operators struggle to
in the country.”
incorporate innovative machines as operators may not know how to use the technology,” he says. “This can cause problems
Despite the challenges Normet has faced in the country, it
related to operations and safety.” While he believes it may
remains positive about the future of mining in Mexico. “There
take time to adapt to these new processes, the industry can
are many projects in development and companies are looking
shorten the learning curve by focusing on training its people.
for new projects,” he says. “Fortunately, the mining sector does not depend on government investments but we do sell
Considering the risks involved in underground mining, safety
our machines in dollars and euros. If the peso continues to
is a key priority. “Our company is designing safer machines
inflate it will cause a problem for us and our customers.”
189
| TECHNOLOGY SPOTLIGHT
190
REVOLUTIONIZING TECHNOLOGY WITH FOCUS ON SAFETY AND PRODUCTIVITY As an industry leader in Electronic Blasting Systems, Orica is constantly working to make products safer, more reliable and more efficient, enabling mining operations to achieve optimal blast results. Today, Orica is revolutionizing conventional blasting practices by launching Wireless Electronic Blasting System (WebGenTM). This represents a significant step in the evolution of blast initiation and one of the most exciting initiation technologies developed in the last 35 years. Orica is the first company in the world to develop a truly wireless system without connections between the boosters, the blasthole and firing points, unlocking many safety and productivity benefits for customers. The WebGenTM system includes wireless in-hole primers which are initiated by a firing command that communicates through rock, water and air. WebGenTM removes constraints often imposed by the requirement of a physical connection to each primer in a blast. It can fundamentally change the way blasting and mining is approached and is a decisive step on the path toward full automation of drill and blast operations in the future. Ore pillars that could not be recovered before in underground operations, can be recovered now. The main body of the ore panel can now be blasted and extracted first while the temporary rib pillars hold back the waste rock backfill. The inaccessible ore pillars can be then blasted. The technology delivers reduced dilution, increases truck fill factors and improves overall productivity. Additionally, focused on solving todayâ&#x20AC;&#x2122;s challenges for customers, Orica has developed a cloud-based digital platform called BlastIQTM. The BlastIQTM Platform delivers a range of integrated technology solutions to improve productivity and reduce overall cost of drill and blast operations. BlastIQTM provides the benchmarks and insights needed to ensure sustainable, cost-effective improvements in blast performance. BlastIQTM streamlines communications, connect engineering instructions to the bench adjusting loading process in real-time based on real conditions, efficiently captures data and produces reports and analysis, anywhere, anytime. Every stage of the blasting process is now coordinated in a single platform in real-time from the design and planning to the measurement at the end of the process, opening a window of opportunities to produce a significant impact in the productivity of mining companies.
191
| ROUNDTABLE
HOW CAN COMPANIES MAXIMIZE PRODUCTIVITY AND REDUCE COSTS?
In light of the declining ore grade in existing mine sites and the search for larger reserves, companies are driven to maximize productivity on the concessions they already own. Operators demand new and optimized operational methods while exploration companies prioritize their projects to increase their chances of succeeding in finding worldclass deposits. In the meantime, technology companies and suppliers focus on advancing down the innovation path to meet the need to optimize mine processes. Industry leaders working in several links of the mining value chain share their experiences and main challenges in the search for productivity.
We are going through the process of making our mines more efficient and productive.
192
We started in Guanaceví, which was our highest cost mine in 2017. Once we achieve more efficiency at this mine, we will implement a similar program to enhance productivity at El Cubo and Bolañitos. We are trying to make our mining processes leaner as quickly as possible. We are simply trying to make better use of our equipment and people, which are our two biggest assets.
GODFREY WALTON President and COO of Endeavour Silver
The mining industry is aware of the trend toward greater technological implementation. It is racing against time and if it fails to introduce the required technology, it will lose its competitiveness. SKF remains a robust player in the Mexican market because we collaborate and have a solid relationship with the national champions. But given the high competition in the sector, the product by itself is no longer a key differentiator. Our goal is to disrupt through technology by betting on Industry 4.0. This trend
NACIP FAYAD Industrial Sales Director at SKF Mexico
started in Germany 10 years ago and while in Mexico it is still developing, mining can really benefit from it, especially given the high expenses related to staff turnover. We perceive the trend is moving toward the development and implementation of sensors at mine sites and with mining machinery.
All mining equipment is designed to achieve certain daily, weekly and monthly productivity levels. But I believe that productivity is more dependent on human capital and the training that companies provide. If the mining industry invests in the development of its people, it will achieve higher returns. As our costs would also go down, we would be more competitive and our clients would give us more work. Our main concern as a company is the safety of our people. If we lack
JESÚS HERRERA Director General of Detector Exploraciones
proper security, we will end up having accidents, which will stop production, in turn lowering output. It is crucial to provide adequate safety and security training. The industry will always seek to cut costs and drive up productivity. In our case, we focus on developing our human capital and also on modifying our technologies to have more autonomous equipment.
We are reducing our operating costs in three ways. Historically we have embraced a philosophy of continuous improvement at each of our operating mines. We are currently focused on improving our metallurgical recoveries by carrying out more research and introducing new and innovative equipment and chemicals. We are also conducting programs to improve the productivity at each mine by upgrading our operational and management systems. But the biggest difference could be the construction of new, higher-quality, lower-cost mines.
BRADFORD COOKE CEO of Endeavour Silver
We provide innovative solutions that can greatly reduce time and costs. For
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companies that are not afraid to incorporate new technology, we can help them to increase productivity rates considerably in the same window of time as more traditional systems. And for those that are more conservative and wish to retain their existing mechanical systems, we can help them find ways to improve their processes and reduce costs. We have noticed that initiation systems in the industry have evolved considerably and this could change the way blasting systems work. Programmability in detonators now allows companies to adapt blasting systems to the needs of the
HÉCTOR MIRANDA Mexico Country Manager of Orica
operation on a daily basis and we use these solutions in our portfolio.
Mexico has a key feature that differentiates it from its North and South American neighbors; its market demands high technology equipment and the most modern machinery that exists in the industry. This is leading the country toward automated mines. Epiroc has already started two projects: one in the Peñasquito mine with Goldcorp. These projects consist of the monitoring of all equipment through control centers, so a company can identify the status of machinery, production rates and malfunctions. This helps companies quickly complete maintenance services and control productivity. It also provides key information to engineers, which allows them
ALFREDO BERTRAND General Manager of Epiroc México
to make the right decisions quickly and increase efficiency. These control systems are additionally very focused on security as they allow projects the ability to properly monitor personnel and avoid dangerous situations.
One of the biggest challenges of the industry is compliance as projects need to meet a wide variety of national and international standards before starting production. Measuring environmental impact is particularly tricky as companies have to prove their ability to minimize risks before gaining a concession. Finding a middle point between controlling these risks and maximizing productivity is not easy and we can facilitate these processes by providing equipment with a high level of accuracy.
JAIME RAMÍREZ Director General at Mettler Toledo
We are going to look for unity between the miners and the mine workers” Andrés Manuel López Obrador
INDUSTRY WISH LIST FOR THE NEXT 6 YEARS The upturn in the mining cycle is coinciding with the arrival of a new federal administration under Andrés Manuel López Obrador. The incoming president's stated policies have aroused concern among many investors but they could prove beneficial to the mining industry. Among López Obrador’s priorities are insecurity and infrastructure, two areas that are also of concern to miners. But potential regulatory changes could prove a risk or a benefit, while the industry continues to call for greater transparency of the Mining Fund and for exploration investment to be 100 percent deductible in the first year.
Providing a clear picture of the industry’s expectations, Mexico Mining Review presents the concerns and suggestions from leading voices across the value chain as the president-elect prepares to take power.
195
| A LOOK BACK
THE LEGACY OF THE UNDERSECRETARIAT OF MINING: 2016-2018 The Undersecretariat of Mining was created in 2016 as part of the Ministry of Economy to supervise and coordinate mining activities in Mexico. It follows the guidelines of the the Mining Development Program 2013-2018. What have been its accomplishments during the Peña Nieto era and what can the industry expect next?
196
Mining is a strategic sector in Mexico, contributing 4 percent
FINANCING CHALLENGES
of GDP, according to the Ministry of Economy. But Mexico is
A refocusing of credit gave way to new financing strategies
also strategic to mining; the country is the top-ranked silver
for mining companies, significantly increasing the direct credit
producer globally and stands in the Top 10 for another 16
provided both by FIFOMI and federal financing programs. The
minerals. In Latin America, it is the first destination for FDI in
national credit portfolio grew to more than MX$3.5 billion in
mining exploration and the sixth worldwide, according to S&P
2017 compared with the MX$2.3 billion in 2013, according to
Metals and Mining’s 2017 rankings. Given mining’s importance,
the Ministry of Finance. FIFOMI also provided training and
it is no wonder that the Ministry of Economy, through the
technical assistance to 1,891 companies in 2017.
Undersecretariat of Mining, is actively pursuing its growth. But many complain it takes too long to access funding and
THE MILESTONES OF THE MINING DEVELOPMENT
that the current schemes do not suit all company sizes. “The
PROGRAM 2013-2018:
financial schemes that are offered by national banks such as FIFOMI do not fit the needs of junior mining companies,” says
Promote higher levels of investment and competition in the mining sector. Increase financing in the mining sector and its value chain. Promote the development of small, medium and artisanal mining within local communities that have mineral resources. Overhaul the institutional regulation for the sector and improve the internal processes related to mining concessions, including those related to responding to requests and inquiries from private parties.
Héctor Herrera, Partner at Haynes and Boone. “They often request details such as the property size when companies are still in the process of finding the capital to acquire land in the first place.”
THE INTEGRAL MODEL OF MINING ADMINISTRATION (MIAM): Transcending the current System for Integral Mining Administration (SIAM), the Undersecretariat of Mining undertook the creation of MIAM. “This work, which is currently at an advanced stage, will undoubtedly be fundamental to consolidate a more competitive regulatory framework that provides certainty for investment,” says Mario Alfonso Cantú,
Mexico improved its ranking in several international mining
Undersecretary of Mining at the Ministry of Economy. “It
surveys, such as the Behre Dolbear ranking. It considers seven
includes the digitalization of 42 mining concession-related
categories for its grading: political and economic systems,
procedures, updating of the Geographic Information System
currency stability, social license, permitting, taxation and
and the cross-referencing of polygons so they reconcile with
corruption. The country also enhanced its standing in the S&P
the Public Mining Registry.”
Metals and Mining rankings for 2017 and the Fraser Institute’s Investment Attractiveness Index 2017, up from 2016.
MIAM will also work on the systematization of documents with a unique electronic file of mining concessions. The objective is
But on a longer-term basis the country dropped from the
to reconcile all the related information to create a 360-degree
11th most attractive investment destination in 2011 to 44th
view of the concessions in the country. “We have also added
in 2017 in the Fraser Institute Survey and investment in
a temporary increase in the workforce to reduce the backlog
Mexico’s mining sector in 2017 reached just US$4.3 billion,
in the processing of procedures and correction of data from
a far cry from the US$8.04 billion registered just five years
the Public Mining Registry through cross-referencing with
earlier. “This shows us that something is definitely wrong.
historical physical records,” says Cantú.
The situation illustrates that it is necessary to revise the country’s fiscal framework in terms of mining,” says Sergio
This system stands as a most needed tool for the industry,
Almazán, Director General of CAMIMEX.
as the speed of securing mining concessions is a common
In the Where to Invest Report by
complaint among miners. “The priority would be to make
Behre Dolbear, in 2015 the country
the concession application and permitting process move
was 46.3, ranked as the fifth-best
smoothly and quickly to encourage more investment,” says
country to invest in mining.
James McDonald, President and CEO of Kootenay Silver.
Total mining investment from 2013-
THE PETITIONS
2017 equaled US$25.2 billion. By 2018 this number is expected
can already be referred to in terms of its legacy to the
to exceed the total US$25.6
mining industry. “I think the Undersecretariat of Mining is an engaged regulator, as it makes time for the mining industry and its players, which is a big step in the right direction,” says Ben Pullinger, Senior Vice President Geology of Excellon Resources. Despite the many efforts and improvements made, there are some industry petitions to enhance its performance. Almazán voices some of the most pressing. “The Undersecretariat of
POSITIVE
In just three years after its creation, the Undersecretariat
billion reached by the previous administration. The direct credit provided by FIFOMI increased to MX$1.25 billion yearly, surpassing the goal set for 2018 of MX$825 million and compared to the MX$318 million given in 2013. 197
Mining financing through federal
Mining should also be decentralized. This is not the first time
programs totaled MX$1.1 billion
that a decentralization has been proposed and it should not be
in 2017, exceeding the goal set
detrimental to the sector as long as it is planned strategically,” he says. “It will not be a simple process as the mining industry
for 2018 of MX$750 million and compared to the MX$117 provided in 2013.
covers the entire nation. It is a federal responsibility that needs to be perfectly evaluated to see what location would be the
SGM increased its 1:50,000 scale
most ideal for the Undersecretariat of Mining for permitting
cartography by 839,903km2 in 2017,
approvals and registrations.” A legal revision is also a key
reaching 95.7 percent of the total
concern. “The main obstacle for the incoming administration is to formulate a new mining policy that better recognizes the importance of the sector and its mineral deposits in the country, along with the high level of professionalism in Mexico and its technological achievements,” says Almazán.
THE UNDERSECRATARIAT OF MINING’S WISH LIST
goal of 877,717km2 by 2018.
WHAT WERE THE POSITIVES AND NEGATIVES?
FOR AMLO’S ADMINISTRATION between state and federal authorities has been a central endeavor of the Undersecretariat. “Unifying efforts is a good
While Mexico improved its investment attractiveness in 2017, according to the Fraser Institute, its 44 out of 91 ranking of surveyed
way to ensure the future of projects in the country,” says Cantú.
countries is significantly lower than
To pursue this goal, the Undersecretariat created committees
the 31 of 112 at the beginning of
with municipal and state governments in collaboration with federal authorities. These are meant to address industry needs.
Peña Nieto’s administration The number of new concessions dropped by a staggering 66
Based on his tenure working in the mining industry, Cantú
percent to 687 in 2017 from
has some suggestions for his successor. “A long-term
2,005 in 2012. In 1H18, concessions
vision and a national policy are essential to promote the
awarded totaled just 331.
development of mining and the country within a framework of sustainability, economic growth, social benefit and respect for the environment,” he says.
The mining fiscal regime was modified, increasing special and extraordinary taxes for mining companies.
AMLO has already proposed changes for the mining industry, including moving the federal Undersecretariat of mining to Chihuahua. In line with this restructuring, Cantú also proposes the constitution of a Large Projects Office to speed up response times and support mining projects in collaboration with other federal agencies.
The deductibility of pre-operational expenses was modified to 10 years. In 2017, mining exploration reached its lowest point in 10 years, experiencing an annual drop of around 8.5 percent.
NEGATIVE
Strengthening of the communication and collaboration
| ELECTION RESULTS
THE SHIFT IN POWER The July 1 elections brought the biggest change in the history
President-elect López Obrador, held less than 3 percent of
of Mexico’s federal executive power. The country now has
the chairs in the Deputies chamber for the 2012-2015 period
for the first time ever a president that is not from one of
and had no representation in the Senate for the 2012-2018
the biggest and oldest political parties PRI or PAN. But the
period, it has now jumped to holding over 40 percent of each
legislative power has also seen a tremendous shift. That
chamber. The Mexican people have spoken and it remains to
same day, Mexicans also voted for the Senators and Deputies
be seen how the President-elect will act for the benefit of the
that would represent them. While MORENA, the party of
country wielding the power in both chambers.
Mexico’s benchmark
BIGGEST WINNERS
stock index, the S&P/BMV IPC,
Company
Opening July 2
Closing July 2
Variation
Company
Opening July 2
Closing July 2
Variation
plummeted 7.6
LACOMER UBC
20.77
21.77
4.81
CIE B
20.80
18.90
-9.13
AEROMEX
26.99
27.94
3.52
VITRO A
61.00
57.85
-7.50
GSANBORN B-1
19.00
19.53
3.33
PE&OLES
355.24
331.38
-6.93
GENTERA
17.67
18.13
3.19
CIDMEGA
43.00
43.00
-6.91
SARE B
0.035
0.035
2.94
PINFRA
141.00
136.35
-5.31
percent in May, marking its biggest one-month decline since February 2009.
Source: BMV
SENATORS IN THE CHAMBER IN 2012-2018
42 RELATIVE MA JO RIT Y
198
BIGGEST LOSERS
55 PRI 34 PAN 19 PT 8 Independent candidates 7 PRD 5 PVEM
17
8 7 6
HOW ARE MEXICAN SENATORS ELECTED?
5
5 5 1 N/A
The Mexican Senate is composed of 128 seats. Of those, 64 are elected by simple majority. Every state is represented by three senators. Each party or coalition nominates a “formula” composed of two senators. The formula that earns the most votes earns two seats in the Senate for its two candidates. Another 32 senators are elected by the “first minority” system. The party that earns the second-highest
32
number of votes can send one of the two senator candidates it nominated. The remaining 32 seats in the Senate are assigned according to the principle of proportional representation and are dubbed plurinominal senators.
32
PLURINOMINAL SEATS
13 MORENA 6 PAN 6 Social Encounter 2 PRI
2 PRD 2 PT 1 Citizens' Movement
Source: Mexico's Senate, INE
2018 STATE GOVERNMENT ELECTION RESULTS
MORENA-PT-PES Citizens' Movement PAN-PRD-MC PAN-MC PAN-PRD-MC-PSI-CPP
2018 PRESIDENTIAL ELECTION RESULTS AND PERCENTAGES 199
53.19% AMLO
Source: INE
DEPUTIES IN THE CHAMBER IN 2012-2015
212
61
22.27% Anaya
16.40% Meade
214 PRI 113 PAN 99 PRD 27 PVEM 12 Citizens'
5.23% Rodríguez
12 MORENA 11 PT 10 New Alliance 2 Independient candidates
Movement
12 8 5 2
HOW ARE MEXICAN DEPUTIES ELECTED? There are 500 seats in the Mexican Chamber of Deputies. Each of the 300 uninominal deputies that occupy them are elected by simple majority. They each represent one of the 300 electoral districts into which Mexico is divided. The remaining 200 deputies are elected by proportional representation and are dubbed plurinominal deputies. No
200
party can have more than 300 deputies in total. In some districts, individual parties field their own candIdates outside of a coalition.
Together We Will Make History coalition (MORENA, PT, Social Encounter Party)
For Mexico in Front coalition (PAN, PRD, Citizens' Movement) Everyone for Mexico coalition (PRI, PVEM, New Alliance)
200
PLURINOMINAL SEATS
85 MORENA 41 PAN 37 PRI 12 PRD
11 PVEM 10 Citizens' Movement
4 PT Source: Mexico's Chamber of Deputies, INE
| PROFILES
ANDRÉS MANUEL LÓPEZ OBRADOR President-elect of Mexico
Andrés Manuel López Obrador (AMLO) started his political career in 1976 by supporting the candidature of Carlos Pellicer as Senator for the state of Tabasco. The next year he became the Director of the Indigenous Institute of Tabasco. After the creation of the Democratic Revolutionary Party (PRD) in 1989, AMLO 200
was named president of the party in Tabasco. He was PRD’s President from Aug. 2, 1996 to Apr. 10, 1999, a period during which the party gathered the widest national presence since its creation in 1989. On Dec. 5, 2000, AMLO became the Mayor of Mexico City. Among his achievements are the creation of programs to support the elderly, single mothers, unemployed, rural producers and micro-businessmen, together with major infrastructure projects such as Periferico’s second floor. His first attempt to become President of Mexico began on Aug. 11, 2005. He was supported by PRD, the Working Party (PT) and the Convergence Party. After his defeat, he published a document called Nation Project on March 20, 2011. After that, on Dec. 9 of the same year, he registered as pre-candidate to run for the presidency for a second time, supported by the same parties. Again, he was unsuccessful. After creating MORENA, AMLO became President of the party’s national council on Nov. 20, 2012. He held that position until Dec. 11, 2017. One day later AMLO registered as precandidate for the presidency for the third time, representing the coalition MORENA, PT and the Social Encounter Party (PES). On the evening of July 1, 2018, AMLO registered a consistent lead during the ballot counting process, leading to his opponents recognizing him as President-elect and offer their congratulations. On July 3, 2018, President Peña Nieto met with AMLO in the National Palace to discuss the transition plan of both administrations.
“We will seek unity among the miners as the division does not help the workers. We are also going to seek agreement with the mining entrepreneurs. Those Mexican producers dedicated to the production of steel are going to have support. We are going to support Mexican companies” Andrés Manuel López Obrador, April 4, 2018
GRACIELA MÁRQUEZ
NAPOLEON GÓMEZ
Incoming Minister
Incoming Senator
of Economy The leader of the National Union of Graciela Márquez is Professor-Researcher at
Mining, Metallurgical and Similar Workers
El Colegio de México. She has a Bachelor’s in
of the Mexican Republic (Los Mineros)
Economics from UNAM, a Master’s in Economics
is the son of a respected mining union
from El Colegio de México and a PhD in Economic
leader. He was elected General Secretary
History from Harvard University. She has taught at
of the Los Mineros union in 2002. He has
the UNAM, ITESM, the Autonomous Metropolitan
a degree in economics from the National
University, the University of Guanajuato and
Autonomous University of Mexico and a
the Autonomous University of Baja California.
postgraduate degree from the University
In addition, she was Visiting Professor at the
of Oxford, England. He went to Canada
University of Chicago and has given seminars
in self-exile after an explosion in the
at Harvard and Stanford in the US. She belongs
Pasta de Conchos mine in 2006 that left
to the National System of Researchers. She has
65 dead. Allegations surfaced that he
also edited or co-published several books on the
misappropriated US$50 million destined
economic history of Mexico and Latin America.
for the workers.
FRANCISCO QUIROGA
CARLOS URZÚA Incoming Minister of Finance
Incoming Undersecretary of Mining
Carlos Urzúa has been a consultant for the World Bank, the Latin American Economic
Francisco Quiroga has more than 18 years of
Commission and the United Nations
experience in relation to the mining industry. He
Program for the OECD. During the period
has a background in directive positions in several
2000 to 2003 Urzúa worked as Minister
major mining-metallurgical companies, such as
of Finance in Mexico City’s administration.
Grupo Villacero and ArcelorMittal. His history
Since 2004 he has been most senior national
with the Ministry of Economy dates back to 1997
researcher at the National Researchers
when he served as Trade Remedies Director in
Institute, and in 2007 he became member
Safeguards and Antidumping until 2002. Quiroga
of the Mexican Academy of Sciences. He
studied a BA in Economics at UANL, has an
graduated as mathematician from ITESM,
MA in Economics from Yale University and MS
holds a Master’s degree in mathematics from
in Operations Research from the University
IPN and a Master’s and PhD in Economics
of Auckland.
from the University of Wisconsin.
201
| POLICY PRIORITIES
SERGIO ALMAZĂ N Director General of CAMIMEX
The main priority of the industry as a whole is to recover the global competitiveness we previously exhibited as a mining jurisdiction. This makes sense as mining is one of the oldest and most economically-important sectors in the country. It is unfortunate that maintaining its global ranking is one of its main challenges considering the geological potential that lies within. The past decade was
202
particularly complicated. At the beginning, Mexico was labeled as the main destination for exploration investment in Latin America and fourth globally after Canada, Australia and the US. We are uniting our efforts to talk to the new administration and the new leaders of the ministries to show them the role and the importance of the mining industry in Mexico. Mining is indispensable for the development of any society and we should feel lucky to have such important geological deposits within the country.
BREAKING PARADIGMS Many are not aware of the concern major companies in the sector have regarding the development of the communities near mines. We want to illustrate that the main beneficiaries of a robust mining industry are the surrounding communities. Investing in these communities is now entrenched in the law thanks to the Mining Fund. It is an important source of employment and infrastructure in remote areas. The mining industry is modern, competitive and uses state-of-the-art technology. It is sustainable and in favor of the development of surrounding communities. We want the new authorities to recognize these advantages. They need to work together with the industry to develop a more effective mining policy that can help Mexico reach the level of competitiveness it needs.
UNIFYING THE MINING POLICY We seek to establish a mining law that is recognized by all the ministries and not just the Ministry of Economy. Every ministry from Source: Oraculus, X-RATES
Environment to Tax plays an important role
in the development of the sector and they
national companies would be able to invest
need to work together to strengthen its
in the sector.
10
development. Coordination would improve investment in the mining industry. The first step would be to make sure that mining companies have a constant dialogue with municipal, state and federal authorities. The sector has so many opportunities to grow and establishing coordination and homogeneity
years have passed with the main percentage of mining production coming from companies with national capital
EXPLORATION It is important to revise the fiscal structures of exploration. That is the first step in the value chain of the industry and it needs to be as competitive as possible to ensure a healthy future for mining. Unfortunately, from 2012 to 2017 exploration investment
would help in this regard.
dropped 59 percent in Mexico. This is a big hit and a red The Undersecretariat of Mining should also be decentralized.
light that needs to be taken attended to.
This is not the first time that a decentralization has been proposed and it should not be detrimental to the sector as
The mining industry is requesting authorities make
long as it is planned strategically. Authorities were not able
exploration investments 100 percent deductible in the
to complete the decentralization previously due to different
first year as it was in 2014 before the fiscal reform. This is
problems that arose but they did complete a building for
important to maintain the competitivity of Mexico as a mining
the four main areas of the mining industry at the time in
country as it is competing with mining jurisdictions around
Hidalgo. In the end, the only agency that moved was SGM
the world. This investment model needs to be promoted
in the 1980s. It will not be a simple process as the mining
and maintained. We want Mexico to regain its competitivity
industry covers the entire nation. It is a federal responsibility
in exploration.
that needs to be perfectly evaluated to see what location would be the most ideal for the Undersecretariat of Mining
To achieve this deductibility, we need to continue
for permitting approvals and registrations.
talking with the authorities. Despite the fact that many governors such as those in Durango, Sonora, Chihuahua
NATIONAL INVESTMENT IN THE MINING INDUSTRY
and Zacatecas support the re-establishment of this
In many cases, it is a myth that the mining industry in Mexico
deductibility, the resounding push happened in the final
is in the hands of foreign companies. The reality is that in
year of the previous administration. We will now have
the last 10 years, the main percentage of mining production
to wait until the new administration is settled in to push
comes from companies with national capital. Only in terms
for its approval. The Ministry of Finance can ultimately
of exploration was it ever closer to 50 percent national
approve this change and generate prosperity in the mining industry.
â&#x20AC;&#x153;We seek to establish a mining law that is recognized by all of the ministries and not just the Ministry of Economyâ&#x20AC;? July 12, 2018
FOMENTING THE DEVELOPMENT OF NONTRADITIONAL STATES Southern states such as Guerrero are starting to show a lot of interest in mining. The sector was able to grow quickly in the north thanks to the lack of superficial vegetation that allows geologists to find deposits faster. But we believe that the south has just as much potential as the north. The only hurdle is that the abundance of vegetation and flora in the south make it a little harder
and foreign investment. Canadian companies have a better
to find these deposits in a timely manner. However, the
ability to invest in the capital-intensive phase of the sector
mineral belts in the south have started to show more
as they have a strong stock exchange to support them.
potential in the last decade.
Smaller international companies are also freer to invest in these projects as they are less burdened by the bureaucratic
Another challenge is that the authorities and surrounding
requirements that larger companies often face. It allows them
communities are less used to interacting with the mining
to enter, explore and sell their projects to companies that
industry than those in states like Sonora and Chihuahua.
are more consolidated to extract easily. While in exploration
The idea is to create awareness among these leaders
national investment represents 58 percent of the projects,
and show them the advantages of strengthening the
in production and volume the lead has by far being taken
industry within their states. This can be solved through
by Mexican companies in the last decade. If exploration
the development of forums and events that speak to the
were to return to its previous deductibility status, more
advantages of mining in the area
203
| THE NATION PROJECT
AMLO’S NATION PROJECT AND MINING AMLO’s Nation Project sheds insight on the political expectations for Mexico over the next six years. But there is no specific outline on his intended policies for the mining industry and no indication has been given by MORENA on how the Nation Project will be implemented, causing much speculation
AMLO’s Nation Project focuses primarily on the energy
will gradually become less involved at a local level as
industry, education, infrastructure and foreign policy.
municipal police forces continue to professionalize.
While there is no clear signal on how AMLO will address
204
the mining industry, his Nation Project does address
LEGAL AND FISCAL CERTAINTY
some of the policy priorities highlighted by the industry
In 2014, the government implemented a fiscal reform
in our wishlist. Could AMLO's administration be the one to
that greatly increased the taxes mining companies must
quash the mining industry's doubts and give it the priority
pay to the Mexican government. The possibility of an
it deserves as one of the drivers of Mexico's economy?
additional tax hike or change in fiscal policies could impact the competitivity of Mexico’s mining jurisdiction.
SECURITY
“There is no doubt from my perspective that mining has
Security is a main concern impacting Mexico’s productive
become more challenging in Mexico over the last five
sectors, including mining. Often located in isolated
to six years,” says Mitchell Krebs, President and CEO of
regions and a prime target of organized crime, miners
Coeur Mining. “If Mexico wants to continue attracting
take security seriously as this can have a damaging
foreign capital, it should re-examine its tax structure as
impact on their operations. Many industry leaders have
it now stands out as being on the high end.”
highlighted the correlation between security and FDI. Alfredo Phillips, President of the Guerrero Mining Cluster
Political transitions are times of uncertainty. Investors
says that several companies have left the region because
fear that a newly-elected president with a perspective
security levels fell short of the basic conditions that
that greatly differs from the current administration could
allow them to operate. “This is an issue that I think the
jeopardize their investments. This has the potential to
administration must address urgently. We should look
motivate mining investors to direct FDI toward other
at reconstituting the institutional capabilities of security
jurisdictions seen as more stable. “We want stability, so
provision at a local level,” he says.
the first thing we would like from the new government is that the status quo is not disrupted too much and to
“(AMLO) has not announced a stance on the mining industry but clues can be derived from his nationalistic outlook on hydrocarbons” Jorge Sánchez, Partner at Haynes and Boone
see a continuation of positive business and economic policies,” says James Bannantine, President and CEO of Great Panther Silver. According to a Baker McKenzie report, the state must guarantee judicial certainty on awarded contracts, including mining concessions, and any revision should be carried out in accordance with the law. On fiscal matters, AMLO will be promoting an austerity and anticorruption regime. “There will be no need to increase taxes in real terms or to create new contributions, as the majority of the fiscal adjustments will come from the new public expenditure policy,” the report says.
On the matter, AMLO has made it clear that his
The Nation Project also evaluates how to make tax
administration will target corruption as the main pillar
payments simpler for contributors. It highlights that
of his security strategy. The intention to reinstate the
income taxes and VAT will not increase. But while a new
Ministry of Public Security independent from the Ministry
fiscal reform is not expected at a federal level, Baker
of Governance was announced at the beginning of
McKenzie mentions the possibility of states imposing new
September. The Ministries of Governance and Military
taxes, as was done in Zacatecas when the government
are expected to continue enforcing public security but
established the Ecological Tax.
RESOURCE NATIONALISM
Mexican mining activity is concentrated in the northern
The Energy Reform has largely been touted as one of
states, such as Sonora, this could be beneficial for workers. It
the major achievements of Peña Nieto’s administration.
is important to bear in mind that the mining industry already
But AMLO’s announced plans for the oil and gas sector
pays one of the higher salaries in the country and according
raise concerns about the future of the mining industry.
to CAMIMEX, it was the fifth best-paid sector in 2017. For
“(AMLO) has not announced a stance on the mining
example, in Sonora, the industry’s minimum wage per day
industry but clues can be derived from his nationalistic
was MX$543.8, as reported by IMSS.
outlook on hydrocarbons,” says Jorge Sánchez, Partner at Haynes and Boone. “His view on oil could easily spill
But higher wages when economic development is not on
over to the mining industry. He has stated his intention to
par leads companies to cut payroll. As long as there is a
control natural resources and to review the concessions
favorable environment, the mining industry is not likely to
that have been granted to oil companies.”
be affected. According to IMSS, mining employment grew 4.8 percent in 2017, adding 16,854 new jobs and accounting
If this translates into mining, the industry could expect
for a total of 371,556 direct jobs. Also, CAMIMEX reports
a reconfiguration of its supply chain. But this could
that more than 2.2 million people work directly or indirectly
impact the industry positively. AMLO has made it clear
in the industry.
that he will be prioritizing hydrocarbons and increasing investment, and this economic spillover could also benefit
LABOR UNIONS, COMMUNITY ACTIVITY
other extractive sectors, such as mining. He will also focus
When campaigning, AMLO’s intention to bring back the
on improving transparency and accountability in these
former union leader, Napoleón Gómez, caused controversy
sectors. Public consultations of authorizations, contracts,
among mining workers. Gómez was implicated in the
assignations, alliances and permits are intended to
disastrous Grupo México mine collapse in Sombrerete,
decrease the chances of corruption in the country.
Zacatecas that left the San Martín mine closed for 11 years.
More clarity on how mining concessions are granted, for
Only recently there has been discussion of its reopening.
example, is welcomed by the industry.
On Aug. 29, 2018, Gómez was inaugurated as a senator and the response of the mining community has been divided. Part of the unionized community gathered the
“We want stability, so the first thing we would like from the new government is that the status quo is not disrupted too much” James Bannantine, President and CEO of Great Panther Silver
same day at the Revolution Monument in Mexico City to show their support for Gómez. But others protested with a full-page advertisement in El Economista, condemning his political appointment. Baker McKenzie forecasts that the return of the new senator would intensify union and NGO activities in mining areas, which could also lead to conflict situations and a reshuffle of labor leadership. The Nation Project also sets the goal of democratizing the energy policy to enhance the role of communities and unions in decision-making. Public hearings and citizen committees are to play a greater role in public
MINIMUM WAGE AND UNEMPLOYMENT
policy creation. This goal opens up the opportunity for
According to the OECD, Mexico has the highest level
local communities to increase their participation in the
of inequality in Latin America, not to mention the
industry’s activities and regulations.
disproportionate wage parity compared with its northern partners. ProMéxico reported that the national average daily
Ultimately, change should also be seen as an opportunity
salary in 2017 was MX$333.2. While this number has slightly
for improvement. John-Mark Staude, President and CEO
increased over the years, Cepal highlights that in real terms,
of Riverside Resources, says the new administration will
the Mexican minimum wage has devalued 70 percent related
have an opportunity to prove its commitment to the
to the national basket of goods, rent and education.
mining industry. “We need to go where the investors want us to and where what we find can be reasonably
It is no wonder that raising the average salary is one of the
developed,” he said. “We are really trying to keep our
central pillars of AMLO’s intended policies. For instance, he
operations focused on Mexico and we are hopeful about
said he would “double the minimum wage in the northern
the elections and their ability to bring fresh opportunities
border as it is unfair that Mexicans can earn up to 10 times
and shine a spotlight on the sector’s potential.” The
more in the US than in Mexico.” Given that a great deal of
mining industry waits eagerly.
205
| INDUSTRY WISHLIST
206
WHAT IS ON YOUR WISH LIST FOR THE NEW ADMINISTRATION TO STRENGTHEN MEXICOâ&#x20AC;&#x2122;S MINING INDUSTRY? MARIO ALFONSO CANTĂ&#x161; Undersecretary of Mining at the Ministry of Economy
The schemes implemented by the current administration have been successful. We want to leave everything organized for the next administration with a report on our main advances along with suggestions on the main areas of opportunities that we did not get a chance to focus on. One example is updating legal framework that was approved in 1992. At the time, it may have been a leading example in the industry but now it is extremely outdated compared with other laws and regulations related with mining activity, like environmental law for example. A long-term vision and a national policy are essential to promote the development of mining and the country. It should be a framework that promotes sustainability, economic growth, social benefits and respect for the environment.
207
RAMĂ&#x201C;N DĂ VILA Minister of Economy of the State of Durango There are various topics that the new administration should prioritize in the mining industry and in general when it comes to boosting the
DARREN BLASUTTI President and CEO of Americas Silver
economic development of the country. Five years ago, the mining
Corporation
industry was in fourth or fifth place in the country and now it is much
I think all can agree that
lower. It is losing relevance but can gain back the importance it once
mining is an important
had. We need to revise mining regulations and concessions as well
industry in Mexico and
as access to capital.
we would hope that this means it is treated as such by the new government.
OCTAVIO ALVĂ?DREZ
One thing we see as an
CEO of Fresnillo
that the rules in place
The new administration needs to understand the importance
in a standardized manner.
of the mining industry in Mexico and its ability to compete
As a public company we
globally with other jurisdictions. Larger companies have the
are legally and ethically
privilege of being able to choose or buy projects in different
obligated to conduct
countries and they will prioritize investments in regions that
ourselves above reproach,
have the best investment platform in terms of permitting
while it seems that others
processes, taxes, infrastructure, mining law, clear and defined
can cut corners. If the
mining development policies, and human talent. It is crucial
government wants to
that the new mining authorities prioritize strengthening the
attract more foreign
areas in which we lack competitiveness. We need to make
investment, I think it is
exploration 100 percent deductible, we need an efficient
important that oversight
area of improvement is should be complied with
and clear permitting process, clear rules and processes for
on all industry participants
indigenous consultation when and if applicable, access to land
is seen to be consistent.
policies and guidelines and reduction of security issues to lower the cost of operations in Mexico.
| INDUSTRY WISHLIST
RANDY SMALLWOOD President and CEO of Wheaton Precious Metals I would ask for more recognition of the contribution that the mining industry has made in Mexico. It is a relatively low-impact activity compared to the amount of value and income it generates, the significant financial turnover and the jobs it creates. I would ask any government to never forget how important mining is, since it creates a substantial amount of value almost from nothing.
ROB MCEWEN, 208
Chief Owner at McEwen Mining Unfortunately, I am not optimistic about the future of foreign investment in the mining industry in Mexico. Crime is a massive problem. The US$8 million theft of gold from our El Gallo mine, the robberies at other mines and the very extended illegal blockade and work stoppage at Torex’s mine all illustrate the country’s glaring problem. Mexico has great potential but the problems and costs of operating there are growing too fast. To change this perception that Mexico is a dangerous place to invest in mining projects, the government must tackle the criminal element in the country. The additional tax royalties placed on the mining industry must be reinvested into the communities around the mines as promised. The government could start by increasing the pay for police and military forces engaged in reducing crime.
LAURA DÍAZ MITCHELL KREBS
Partner at DBR Abogados
President and CEO of Coeur Mining
I am optimistic about the change of administration and I believe that legal regulation and enforcement
There is no doubt from my perspective that mining
will improve in several aspects as this industry is
has become more challenging in Mexico over the
one of the country’s main pillars, even if it is often
last five to six years, and there are a few things
overlooked. FDI in the country has increased greatly
I think could change that. Given how important
and will continue to do so in the coming years. The
mining is to the Mexican economy, I would think the
industry used to be managed by a handful of actors
next leader would find it to be in his best interest
including Peñoles, Grupo México, Grupo Acerero del
to invest in issues like the tax rates, which are quite
Norte and Minera Frisco. Now, the industry is much
high. We have income tax, plus VAT and the royalty
more diverse and includes players with specialized
on precious metals, which all results in a very
knowledge in mining such as Canadians who are
high tax burden compared to other jurisdictions.
experts in managing capital risk. Regardless of the
If Mexico wants to continue attracting foreign
next administration, I do not think the mining sector
capital, it should re-examine its tax structure as it
will be damaged because that would be akin to
now stands out as being on the high end.
killing the goose laying the golden eggs.
PATRICIA NAKAGAWA Managing Director of Olympus MĂŠxico When Enrique PeĂąa Nieto came to power many decisions were made that did not necessarily benefit the mining industry. I think there should be more of a focus on the promotion of mining given its economic importance. I would like to see the government sit down with the mining industry and really try to understand its needs. There also should be more security, which would allow foreign investors to feel safer investing in Mexico and would in turn attract more FDI.
209
JOHN MCCLUSKEY President and CEO of Alamos Gold The outgoing administration has not been too positive
TONY ROVIRA
for the mining industry. We have faced increased taxes, new and quite high royalties and a narrow and
Managing Director of
negative treatment of tax issues related specifically
Azure Minerals
to mining. For instance, exploration costs are written
In the 12 years that we have worked in the country, we have realized that Mexico is a very pro-mining country. The government understands the benefits of the industry so we would like to see this pro-mining attitude continue. We would not like to witness the resource nationalization trends occurring in some African countries replicated in Mexico. I would like to acknowledge the big improvements that the country has made. I believe its human capital is the reason why this industry succeeds in discovering and advancing projects. Mexico and Mexicans are making mining thrive.
off over the course of a decade rather than the year they take place. There are many mines in Mexico that do not even last a decade. Miners are already reluctant to carry out exploration because they face the risk of finding something of consequence in one of every 20 holes they drill. Discouraging companies from taking a big risk will mean companies ultimately do not take the risk. Since every reserve is a function of costs, driving up costs through higher taxes and royalties reduces the size of the ore body. We only get one chance to mine a deposit where minerals have sat for 100 million years, so whatever is left in the pit will stay there forever.
| INDUSTRY WISHLIST
FELIPE RIVERA Industry Business/Process Automation Hub Leader Mexico and Central America of Schneider Electric Systems Mexico I believe that we must acknowledge that Mexico needs to improve its auditing process on how mining revenues are spent. We must aim for a more profitable but friendly tax structure that fosters foreign investment in the industry. Also, the regulations for resource management and land ownership are too complex to attract investment. I would ask for an improvement in this regard as there is much that can be done. For example, it is important to incorporate 210
more technological and innovative concepts increasingly moving toward digitalization and
DAVID WOLFIN
automation, regulations on this matter must not
President and CEO of
into the legal framework. With an industry
be overlooked.
Avino Silver & Gold It would be nice if the government put
BRENDAN CAHILL President and CEO of Excellon Resources The security of land tenure and mineral concessions is quite good in Mexico but the system is very slow. I think that making the system more efficient, releasing land much more quickly and processing mineral applications faster would be at the top of my wish list. Companies usually have other concerns, such as VAT, that are not a key issue for us given our offtake structure. But we recognize this is also a huge opportunity for the country to optimize processes to foster more investment, exploration, development and the
the tax money back into the communities. I would also like to see these taxes being returned more quickly. That is our main wish. I think that about half the taxes collected from a particular operation are supposed to go back to the community for infrastructure. There is a long list of needed infrastructure projects so there is no excuse why these funds are not being directed there. Countries need infrastructure and infrastructure comes from mines. Mining is in the Mexican DNA; people have a connection to mining as it is an industry that is longingrained in the country.
creation of jobs. These are very much needed in the industry and the country.
RICK RULE President and CEO of Sprott US Holdings Lessons could be learned from Chile in that politicians there have asked me what to aspire to. The country has ensured the social rents from mining are distributed equitably and that the rule of law is employed. The mining law includes an environmental code that is contractual, easy to understand and well-enforced. I am not trying to say Chile is perfect, but when comparing the country to any other, including the US and Canada, it carries out processes in a much better way. One of the main benefits is that Chile has managed to avoid some of the main abuses the mining industry has been guilty of over the last 50 years by virtue of the fact that the authorities are aggressive enforcers of their own environmental regulations.
ENRIQUE ESCALANTE CEO of Grupo Cementos de Chihuahua (GCC) Both the mining and cement industry are long-term industries and to work in them, businesses require certainty. Any person willing to invest and risk capital in the long term wants to make sure that the rules of the game are clear and they are standardized for all the players. For the new administration, I would suggest that it be made very clear that we are a country that applies the rule of law, and that this rule of law provides certainty for any investor regarding private property and the long-term concessions that have been obtained. Other more important things for the mining industry include the fiscal aspect. Since it is an industry that competes on a global level, it is important to make sure that the fiscal policy does not distort the competitiveness of the industry. We need to make sure that any project in Mexico can be competitive with similar projects in other parts of the world.
ROB PETERMAN Vice President of Global Business Development at Toronto Stock Exchange (TSX) and TSX Venture Exchange (TSXV)
JOSĂ&#x2030;-ORIOL BOSCH CEO of BMV Group
From a mining perspective, Mexico is a well-known and respected mining jurisdiction. The Ministry of
I think the most important thing is to spur greater
Economy is doing commendable work, but we
growth. Rather than growing 2.5 percent, Mexico
believe it would be beneficial to place mining
should grow by double that, at least. There
higher on the priority list across all governmental
have been some encouraging changes in this
levels. We believe there is an opportunity to elevate
administration with the structural reforms, but
the importance and national pride of the mining
with increased economic growth, this launches
industry at all levels of government.
a cycle whereby greater investment is attracted to the country. In August 2017, the government
Mexico is also known for its consistency. It is no
announced a series of measures for a program
secret that some of the royalties and taxes in
with the Ministry of Finance to promote the
Mexico are issues that people will raise, but overall
development of the stock market in the country.
there is a tremendous global appetite for mining
I think it would be interesting to include in the
in Mexico. Outside of Canada and the US, Mexico
agenda certain incentives to motivate companies
is the number one market for us in terms of total
to seek funding from the BMV.
corporate activity and both Canadian and Mexican mining companies echo this perception.
211
Dolores tailings, Chihuahua
ORE PROCESSING
8
Converting ore into a product that can be sold on the market requires the use of chemicals like sodium cyanide that can be devastating to the environment if handled incorrectly. Fortunately, the rise of new solutions and techniques are slowly but surely making the process safer and more sustainable. Operators and service providers are constantly on the hunt for safety protocols and tools that can boost ore recovery levels, productivity and profit margins throughout the processing phase of the mine.
Ore Processing highlights the top engineering firms and scientists that are innovating ore processing and mineral handling solutions in Mexico, including everything from fluid control to separation methods. The chapter asks the industryâ&#x20AC;&#x2122;s leaders about the main advances that have been made in ore processing and handling and their view on how far the industry still needs to go to extract ore in a sustainable way.
213
CHAPTER 8: ORE PROCESSING 216
ANALYSIS: Market Gaps Opening Doors for New, Old Players Alike
218
VIEW FROM THE TOP: Leif Lindholm, Metso
219
VIEW FROM THE TOP: Enrique Maldonado, Grupo Calidra
220
VIEW FROM THE TOP: Jeffrey Davis, Cyanco
Leonardo Martínez, Cyanco
221
INSIGHT: Brent Hutzler, Solvay Mining Solutions
222
VIEW FROM THE TOP: Claudia Márquez, Chemours Company
223
VIEW FROM THE TOP: Martin Rosser, Alexander Mining
224
TECHNOLOGY SPOTLIGHT: Breaking Paradigms in Sodium Cyanide
226
VIEW FROM THE TOP: Danilo Bittar, Bruker AXS
226
INSIGHT: Francisco Chávez, Thermo Fisher Scientific México
228
VIEW FROM THE TOP: Víctor González, Power Tech
230
EXPERT OPINON: Bradley Smith, The University of Notre Dame
231
INSIGHT: José Juan Cruz, VEGA Measurement Mexico
232
VIEW FROM THE TOP: Gustavo Menédez, Cribas y Productos Metálicos
235
VIEW FROM THE TOP: Fabio Marroni, Haver & Boecker
236
VIEW FROM THE TOP: Miguel Gordaliza, Vibrotech Engineering
237
VIEW FROM THE TOP: Roy Giorgio, Des-Case
238
VIEW FROM THE TOP: Alejandro Espejel, FLSmidth
239
INSIGHT: Benny Ong, NOV
240
ROUNDTABLE: What Environmental Problems Does the Industry Face in Ore Processing?
215
| ANALYSIS
MARKET GAPS OPENING DOORS FOR NEW, OLD PLAYERS ALIKE Fluctuations in metal prices pushed operators to dive deeper into their mines rather than acquire new ones. But this is quickly turning into an area of opportunity for sodium cyanide suppliers and companies developing new methods for ore processing as demand for higher grade output rises
216
The production process of a mine is only one element to
future put at risk their future. According to the sodium
realizing its riches. The other, mineral processing, is vital
cyanide market report released by Persistence Market
for establishing the amount of metal that can be gleaned
Research, various regulations in the industry could inhibit
from the ore. However, Jeffrey Davis, President and CEO
the use of sodium cyanide. “Regulations, such as the
of cyanide company Cyanco, says it is an often-overlooked
International Cyanide Management Code have defined a
industry. “The sodium cyanide industry has a very critical
particular limit on the use of sodium cyanide,” it says. “An
role in the global gold and silver mining value chains but
excess amount of sodium cyanide is harmful for human
for a variety of reasons, the industry is structurally under-
consumption and as a result, there has been an increased
invested,” he says. “The global market for sodium cyanide
focus on using safer alternatives.” IHS Markit emphasizes
is growing rapidly and there are only five major players
that many regions around the world are trying to ban the
that we consider to be top-tier producers. There are large
use of sodium cyanide for the recovery of gold and points
gaps between demand and supply and market capacity.”
to legislation that has been approved in US states Montana and Wisconsin to ban new operations from using sodium
The lack of supply could be of concern as analysts speculate
cyanide. In Mexico there have been no signs of trying to ban
a higher need for the chemical in the industry. According to
the chemical’s use but strict NOM-155-SEMARNAT-2007
a report released by Persistence Market Research, a third-
is in place to dictate how it should be used, transported
platform research firm, on the sodium cyanide market,
and stored.
“there has been an increase in the demand for flotation reagents, such as sodium cyanide, due to the decreasing
The use of sodium cyanide is also one of the main objections
quality of gold and silver ores.” It states that the fluctuations
against the mining industry as the chemical is highly
in gold prices have become an additional driver along with
volatile and hazardous. According to the Cyanide Code,
a bigger focus on underground mines.
“the reactivity of cyanide provides numerous pathways for degradation and attenuation” once released in the
The report states that Latin America has shown a particular
environment and can impact wildlife, aquatic organisms,
rise in local and foreign investment, which could make the
birds and mammals. One example of the detrimental effects
region a hot spot. India and China continue to be major gold-
it can have on ecosystems was seen in 2014, when a tailings
producing countries and are important drivers of demand
dam burst at the Buenavista del Cobre mine, polluting the
while Australia and South Korea are key sodium cyanide
Sonora river with toxic cyanide. The incident contaminated
exporters. IHS Markit, a research platform, emphasizes that
the water used by approximately 24,000 inhabitants in the
“close to 90 percent of sodium cyanide is used for gold and
area, according to Forbes. Greenpeace Mexico declared it
silver processing in North American markets and around 78
the “worst ecological disaster in Mexican history.”
percent is used for this purpose worldwide.” But the event is also an example of the importance of In effect, companies are rising to the challenge and
preventive methods in mine operations. Organizations
preparing themselves for those to come. “Sodium cyanide
such as the International Cyanide Management Code
is a global industry but companies achieve competitive
continuously develop international standards for the use of
advantages regionally,” says Leonardo Martinez, Business
the chemical that can greatly minimize risks when applied
Development Manager of Cyanco. “For this reason, Mexico
appropriately. Sodium cyanide producers like Chemours
is a strategic market for us as we have a factory in Houston
and Cyanco adhere to these standards and teach operators
and a distribution terminal in Hermosillo, Sonora. Mexico is
how to comply to these benchmarks. “We always want to
Cyanco’s key focus market outside the US.”
be one step ahead of possible risks,” says Claudia Márquez, Latin America Regional Director of Mining Solutions at The
ALL THAT GLITTERS
Chemours Company. “Our full-time product stewards and
Despite the bright horizon that lies ahead for sodium
technical support specialists spend the majority of their
cyanide suppliers, constraints in the market could their
time at our customers’ mines, educating the industry on
Pasmex Tailings Dam
217
best practices. We are leaders when it comes to establishing
the world’s gold mining relies on a 125-year-old method
safety standards.”
that treats gold-containing ore with large quantities of poisonous sodium cyanide, which is extremely dangerous
OPPORTUNITIES FOR NEW PLAYERS
for mine workers and can cause environmental issues,”
Although in their infancy, new and more ecological
said Bradley Smith, senior author of the study, and the
technologies such as bioleaching are emerging as
Director of the Notre Dame Integrated Imaging Facility.
potential challengers. The American Geosciences Institute
“The new container molecules that our research team
explains that biomining is the process of using micro-
created are expected to be very useful for mining gold
organisms to extract metals from either ore deposits
since they can be used in an alternative process under
or mine waste or to clean up areas contaminated with
milder conditions.”
metals. But many remain doubtful of its acceptance in the market as its cost remains relatively high.
Although sodium cyanide is 125 years old, Martinez says that it is still considered state-of-the-art technology.
Despite the doubts, Chile has become an early adopter
“There is nothing that works better,” he says. “In our view,
of this technology. According to the BBC, companies in
no product will replace sodium cyanide in the medium
the country decided to adopt bioleaching techniques
term. Alternatives like bio leaching have yet to surpass
for mine deposits with a low percentage of copper
the results of sodium cyanide because in bioleaching
and approximately 20 percent of the world’s copper
every single mineral must be processed uniquely and
production is processed with this technology.
requires different solutions, whereas sodium cyanide works on a diverse range of ore bodies.”
New solutions like biomining are being met with hesitation but companies like Alexander Mining are firm believers that the greatest potential for innovation in the mining industry lies in mineral processing. “The role of mineral processing is key because it has a material impact on feasibility and
Peru
INNOVATIVE NOTRE DAME MOLECULE H-bond donor
H-bond donor H
H
economics,” states Martin Rosser, CEO of Alexander
X
Mining. “By improving recovery by a few percent or more and hence reducing costs, operators can greatly affect returns. So far, many technology advancements have been
electron donor
incremental rather than revolutionary, so any technology that has the potential to transform the recovery of metals at the mine site has major importance.”
team of researchers at the University of Notre Dame. The technology uses molecular recognition to capture and contain precious metals ions. “Currently, most of
X
H
H
H-bond donor
H-bond donor
Another alternative was developed in mid-2018 by a
electron donor
M
SIDE VIEW M
= Au(III), Pd(II), Pt(II)
Source: University of Notre Dame
X
= Cl, Br
| VIEW FROM THE TOP
A PUSH FOR FASTER TECHNOLOGY ADOPTION LEIF LINDHOLM Vice President for Mexico, Central American and the Caribbean of Metso
218
Q: How does the Mexican mining industry compare to other
Automation allows workers to have better control of the
Latin American countries in terms of doing business?
mining processes and ensures that the industry will survive
A: The mining industry in Mexico may be smaller than in
and thrive. I do not believe that automation is a negative
Latin American countries such as Chile, Peru and Brazil, but
factor and it will not significantly impact the number of
business is good. The industry in Mexico is very similar to
workers employed in mine sites. It will cause the industry to
the Central America and Caribbean markets and 80 percent
shift from being labor-intensive to being more knowledge-
of our regional portfolio is located in the country. In Mexico,
based, pushing operators to train mine workers and educate
our biggest customers work mainly with copper, gold and
them on new technologies. Metso is helping the industry
silver and our main business is to provide them the highest
engineer this transition through the development of
quality service for bearings and spare parts. We have a team
products and equipment with technology that can improve
of people around the country with no limitations accessing
the control of mining processes.
remote areas and always striving to do so in a safe way. We make sure that our clients have the best equipment in the
Mining in general is a conservative industry, but like any
right place. Our goal is to make them succeed.
industry we must improve how we do things to remain competitive. For some years now, Metso
The country has several areas of opportunity. The industry is responsible for taking care of the people living in the areas around mines. Likewise, these communities should see the amount
80%
of Metso's regional portfolio is located in Mexico
of development that mining can foster in local areas. All mining companies
has been focused on supplying solutions, not just products. We are doing this to make sure that customers receive the most cost-effective solution for their operation that will increase their bottom lines. Moreover, Metso is doubling its investment for R&D to make sure we
strive to create good relationships with their surrounding
stay at the forefront when it comes to innovative ways of
communities while also needing to maximize profits.
improving processes in the industry.
We can help them accomplish this, as we not only sell equipment but also offer operational advice on how to
Q: What role does Metso want to play in Mexicoâ&#x20AC;&#x2122;s mining
improve processes and make sure that their equipment is
industry and how does it plan to achieve it?
meeting their needs. Our main focus in the region is to
A: Mexico is the main mining country in the region for our
provide services and spare parts to the mining industry. We
company. It has modern mining technology that is on par
also provide services to all types of mines, with almost no
with any country in the world. Our focus for the future is
limitations despite the often-remote locations.
to expand our services and maintain those that have been working for us in recent years. We have some new crushers
Q: How much of an impact will automation have on mine
and grinders that have been successful in other markets
operations and what role is Metso playing in this regard?
that we will implement in Mexico. We will also continue
A: I think that Mexico has very modern technology and
to focus on understanding the local needs of each client.
most miners are starting to automate their operations.
Growth is another key focus for the company, which we expect to be in double digits. The main drivers will be new projects coming into production as well as taking some
Metso is a global leader in the mining industry. Its knowledge,
market share from the competition. This means developing
talent and solutions lead to sustainable improvements to
better and more modern equipment for our clients. We
increase the viability of customersâ&#x20AC;&#x2122; businesses. Metsoâ&#x20AC;&#x2122;s
are here to make sure companies are improving their
products vary from mining equipment to spare parts
operations, lowering their costs and increasing their profits.
VIEW FROM THE TOP |
MEXICO IS LIME SUPPLIERâ&#x20AC;&#x2122;S PLATFORM TO LATAM ENRIQUE MALDONADO Regional Director North Mexico of Grupo Calidra
Q: What are your main priorities in Mexico in the short to
We also have a new area in the company that is in charge of
medium term?
making alliances with fleets to make sure that transportation
A: Our growth in 2017 in comparison to 2016 improved, and
is efficient. Fleets are often willing to give us a good price
we expect similar results for 2018. Mining continues to be an
since we are one of the few that can provide constant
important base for the Mexican economy and it will grow
business and timely pick up and drop offs of our material.
strongly if prices remain positive. This implies growth for the company as well. We foresee an increment in demand
Q: How will the company achieve its goals of Latin
for lime in the coming years so we are preparing for this
American market consolidation by 2020?
by increasing our production by 50 percent through an
A: In Mexico we already have a reputation for being a
additional lime kiln. By March 2019, we will start producing
serious and ethical company. Our biggest challenge is not
400t/d, which equals 12,000t/m. We have already sold 25
to expand in Mexico alone but to gain the confidence of
percent of this amount and we expect to sell 80 percent
South American miners. Our sales are growing in Argentina
of it by the end of 2019. Our biggest clients are expanding
and in Colombia where we have just installed new kilns. The
greatly, which is good news for us.
most complicated country to enter so far has been Peru, where there is a lot of market competition. We have a plant
Q: How is the rise of base metals prices impacting
in Peru that produces 400t/d and we have not been able to
your business?
gain a stronger foothold in the market despite our higher-
A: Gold, silver, copper and zinc are the metals that demand
quality product and competitive prices. Despite this, we are
the most lime. But nontraditional metals such as lithium are
acquiring more clients every day. Once we consolidate Peru,
beginning to grow as well. There is an important lithium
Colombia and Argentina, we can start to consider entering
project in Sonora and the design engineers have already
other countries in the region.
announced that it will need calcium carbonate. We want to be the projectâ&#x20AC;&#x2122;s main supplier as soon as it starts to
Q: What will be the impact of the upcoming elections?
produce. Also, our idea is to build a calcium carbonate plant
A: We are worried certain populist policies that may be
in Hermosillo at the same time as our new lime kiln, and we
implemented. Depending on the President-elect's priorities
are investing MX$300 million for both projects. The plant
for mining, it could lead to higher taxes as that is one of
will be sustainable and dust free.
the fastest and easiest ways for a government to get income. This is not good for business and it can scare away
Q: Given the increasing competition in Mexicoâ&#x20AC;&#x2122;s mining
investment. Populist governments are also less likely to
industry, how do you maintain your added value?
overturn the 10-year exploration deductibility policies that
A: The secret is to maintain quality, service and availability.
have caused exploration investment to drop. I would like to
This is not about having the lowest prices as the lime
see the incoming administration impose a new fiscal reform
industry implies a big capital investment, but we have
where companies can deduct the investments in the first
competitive prices. We can guarantee timely deliveries,
year or sooner. Authorities need to change their mindset to
quality in our product and good service. We make that
promote investments with policies that contemplate long-
possible by producing to no more than 80 percent of our
term payments via taxes rather than stopgap taxes.
capacity to make sure that when a client suddenly requires an unexpected amount of lime, we can provide it without a problem. When production starts to continuously surpass 80
Grupo Calidra was established in 1908 in Mexico as a supplier
percent, that is when we start to consider installing a new
of lime and lime byproducts. The company supplies various
kiln. The quality of the quarry is where the quality of lime
industries including mining, construction and food and
starts, and we have the best raw material in Sonora state.
beverage
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| VIEW FROM THE TOP
AN UNDERSERVED AND GROWING MARKET IN MEXICO
Jeffrey Davis President and CEO of Cyanco
220
Leonardo MartĂnez Business Development Manager of Cyanco
Q: How does the sodium cyanide segment impact the
Many of our competitors are also growing their presence
mining industry?
in Mexico. Cyplus inaugurated a plant in Veracruz in 2017,
JD: The sodium cyanide industry plays a critical role in the
Chemours announced that it is building a plant in Durango
global gold and silver mining value chains, but is structurally
that will start producing in a few years and Cyanco will
underinvested. The global market for sodium cyanide is
be the next one to increase capacity. From an outsiderâ&#x20AC;&#x2122;s
growing rapidly and there are only five major players that
perspective, it may seem that the industry is being saturated
we consider to be top-tier producers. In effect, most of the
but the demand is so great that the market requires and
major global gold producers only want to buy from one of
welcomes all these new plants.
these five companies. Considering the discrepancy between demand and supply, the industry will experience a global
Q: How are you adapting to the rise of new technologies
cyanide shortage in 2019. I would advise all our clients
such as biomining ?
to design a good supply chain strategy with trustworthy
LM: Even though sodium cyanide is 125 years old, it is still
producers. Demand is growing more quickly than capacity.
considered state-of-the-art technology. There is nothing that
We have only been in Mexico for three years and we already
works better. In our view, no product will be able to replace
have 10 percent market share. The segment will continue
sodium cyanide in the medium term. In bioleaching, every
to grow and we want to strengthen our position to remain
single mineral must be processed uniquely and requires
among the Top 3 producers in the country.
different solutions, whereas sodium cyanide works on a diverse range of ore bodies. A mine manager is not going to
Q: What role does Mexico play in the global sodium
replace a product that can guarantee an optimum percentage
cyanide industry?
recovery with something that may be more sustainable
LM: Mexico has a long history of mining and is blessed with an
but can only recover a lower percentage. The difference in
abundance of mineral resources. The level of mining activity
profits is too significant. The industry is always evaluating
also makes Mexico the second-largest consumer of sodium
alternatives but up until now no other solution provides the
cyanide in the world. Sodium cyanide may be a global industry
proven, industrial-scale reliability that cyanidation does. We
but companies can only achieve competitive advantages at a
are not closed to new technologies. If something appears
regional level. As Mexico is a strategic market for us, we have
in the market that proves to be a good alternative, we are
a factory in Houston and a distribution terminal in Hermosillo,
open to incorporating it. However, for now, sodium cyanide
Sonora. It is our key focus outside the US.
continues to be the best option for silver and gold mines.
Q: How does the company plan to expand its presence
Q: How is the company mitigating geopolitical risks and
in Mexico?
what trends are you seeing?
JD: To better serve our customers with warehoused
JD: We are not worried about the NAFTA renegotiations
products in the country, we expanded our distribution
as the Mexican mining industry is still heavily dependent
terminal in Hermosillo and our transloading capability. We
on imports and it is doubtful that anyone would allow the
also built a plant in 2012 to meet the demand in Mexico and
ecosystem to be interrupted. Otherwise, operations could
to increase our supply.
shut down overnight and there would be many angry miners. South Korea is a significant supplier of sodium cyanide for the Mexican market and any escalation on the
Cyanco is one of the worldâ&#x20AC;&#x2122;s largest producers of sodium
Korean peninsula or disruption of shipping routes could
cyanide. Founded in 1988 in Winnemuca, Nevada, the company
have a major impact on global markets. On the upside,
offers innovative cyanide solutions to increase safety and
prices are becoming stronger and our customers are
reduce mine costs
starting to see greater cash flows.
INSIGHT |
GLOBALIZING ORE PROCESING BRENT HUTZLER North American Sales Director of Solvay Mining Solutions
Mexico’s mining market can thrive under globalization,
and increasingly sustainable solutions. But given how
as more foreign investors and companies venture in and
conservative the industry is when it comes to adopting
introduce new technologies. But in internationalizing
new technologies, commercializing new products
the industry, it is crucial to deliver the right message
becomes quite a challenge. “Nobody wants to be the
to the right people, says Brent Hutzler, North American
first,” he says. “Our strategy is to partner with companies
Sales Director for Solvay Mining Solutions’ Mineral
to test our chemistries, so we have a reference point and
Processing group. “When doing business in Mexico,
case studies when going commercial.”
dealing with multinational companies is common,” he says. “Understanding the organizational makeup and who
The company is further exploring how to apply its corporate
the key people are is extremely important when providing
social responsibility approach to its manufacturing process,
a solution.”
products and innovation portfolios. “We are focused on providing more sustainable solutions to the mining industry,
Solvay says it can deliver the right solution to the right
including NaSH and xanthate replacement products,”
people due to the combination of its global resources and
he says. “We want to have stable processes that ensure
local approach, a union that creates value for the industry and enables the company to outperform its competitors. “The way in which we are structured as an organization is unique in comparison to other chemical providers. Our company, being as large as it is, places great emphasis on our ability to support customers,” Hutzler says. He believes that mining chemicals is a broad category and that advertising as such downplays expertise. “Our technical sales group is not focused on providing mining chemicals, but rather value-added mineral processing reagents,” he says.
“
environmental and workforce safety.”
Nobody wants to be the first. Our strategy is to partner with companies to test our chemistries, so we have a reference point”
When it comes to safety in ore processing, chemicals logistics Hutzler says the ultimate key to creating industry value
demand careful transportation and materials management.
is to identify the stakeholders who are able to see the
“Our supply chain and transportation logistics operations allow
value in Solvay’s products. “We want employees with
us to respond to customers quickly and safely,” Hutzler says.
deep industry knowledge, such as process, metallurgical
One of Solvay’s largest mining-focused manufacturing plants
and chemical engineers, who have worked in a production
is in Mexico, with a growing product portfolio onsite, which
environment and who understand the challenges
enables it to provide a faster response to the regional market.
customers face on a daily basis,” he says. “These are people who can bring the application expertise necessary
To further ensure dependability, Solvay’s mining group
to demonstrate the performance improvement our
works under a two-year demand scenario. “Every month
solutions bring.”
we consider a two-year forecast of what the global demand for our specialty reagents will be, so we can adapt our
Yet, even if a company provides the most optimized
manufacturing assets and analyze when we need to expand
chemicals, without the correct application, the full value
according to our capacity,” explains Hutzler. The idea is to
that those chemicals can bring is not realized, Hutzler
always have the next expansion plan and equipment ready to
adds. To better develop the full potential of mining
be implemented when the right moment arrives to mitigate
reagents, Solvay innovates and disrupts with new
the possibility of shortages.
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| VIEW FROM THE TOP
LATAM, A STRATEGIC REGION FOR CHEMOURS’ MINING SOLUTIONS CLAUDIA MÁRQUEZ Latin America Regional Director of Mining Solutions at The Chemours Company
222
Q: How does doing business in Mexico differ from doing
As lower grades become a growing reality, measurement
business in other mining jurisdictions in Latin America?
technology will continue to play a bigger role in the
A: Mexico faces challenges in security and with the
processing circuit. It is important to analyze and use mega
implementation of additional taxes. Even with those
data trends to predict output. Our customers need help
challenges Mexico has done quite well when compared to
with prediction the production output based on certain
other mining jurisdictions in Latin America. It’s number one
grades and the effect sodium cyanide can have on these.
in silver and number nine in gold production worldwide. In Latin America, Mexico is the second largest gold producer.
It will be interesting to see how the connection between
This implies a large number of operations, and in fact, an
automatization and digitalization continues to interact with
important consumption of chemicals to process these
mining and chemistry. We are experts in chemistry concerns
minerals. For us, Mexico has the largest demand of sodium
and we are introducing technology to further improve
cyanide in the region.
sodium cyanide usage and reduce risks.
Chemours is a global company but we have a very strong
Q: Why does Chemours internally promote a strong sense
local team that is close to our customers and understands
of entrepreneurship considering it is a global company?
their needs. Chemours sees itself as an enabler and strives
A: The prioritization of a start-up culture has been key for
to help its clients continue to grow while increasing
our success in Mexico. We treated entering the country the
productivity at a low cost. We have two strategically-
same way someone would treat the creation of a start-up.
located sites in Mexico, one in San Luis Potosi and one in
All of our team members feel a strong sense of ownership
Hermosillo, that can support the largest gold and silver
of the company and treat the business as if it were their
regions in the country. Additionally to those sites, we are
own. It also allows us to be autonomous, make faster
investing in a new production facility in the state of Durango
decisions, discover errors faster and therefore learn faster.
to meet the growing demand in Mexico.
Entrepreneurship is part of our five core values, followed by safety, customer centricity, simplicity and unshakeable
Q: In what ways can Chemours help operators that struggle
integrity. This guides the way we do business around
with falling grades in mine projects?
the world.
A: Many operators are struggling with grades that are not as high as they used to be, which affects their ability to
The mining industry is making a great effort to promote
maintain their production levels. This means the industry
human talent development and attraction in the country.
needs to use chemicals in more efficient ways to maintain
In Mexico’s mining history, there have been times when it
production levels. Our plan is to help the industry take
didn’t have a positive public perception but this is starting
better advantage of the power of chemistry to improve their
to change. The industry has started to communicate the
operations, and we are using our knowledge in chemistry to
reality of mining which should result in new generations
find innovative solutions for lower grade operations. Each
by raising interest in the sector. Also, public relations are
mine represents a unique opportunity to better measure
important to attract and retain talent within the newer
systems and create a more efficient output.
generations. At Chemours, we are making our own effort by having a diverse and inclusive team. In addition, to better understand the industry, we have included team members
The Chemours Company is a global leader in titanium
with an important background in the sector to make sure
technologies, fluoroproducts and chemical solutions, providing
we are speaking the same language as our clients. This
customers
helps feed the innovation in the company and allows the
with
market-defining
products,
expertise and chemistry-based innovations
application
adoption of new and more sophisticated solutions.
VIEW FROM THE TOP |
REVOLUTIONIZING ORE PROCESSING IN MIXED MINERAL DEPOSITS MARTIN ROSSER CEO of Alexander Mining
Q: What are your key business goals in Mexico?
percent or more and hence reducing costs, this can greatly
A: Our business is based on identifying geographical areas
affect returns.
with mines that have the potential of using our technology. Firstly, we determine which countries have interesting
AmmLeach, which is our core technology, is very similar
geology with potential and Mexico is definitely one of the
in terms of methodology to conventional acid leaching.
top countries due to its significantly favorable geology and
However, the most important difference is that we are using
substantial mining industry.
an ammonia reagent. AmmLeach has significant economic, environmental and efficiency benefits. The important thing
We have adopted a flexible approach. The core business
to note is that the same equipment can be used, with no
plan we have revolves around licensing our technology to
need for elevated temperature or pressure. Yet by using our
the user in exchange for a royalty. We believe this is the
patented technology with incorporating a pre-treatment
fairest and easiest way to reward us for the provision of the
step, in many cases the targeted metals can be recovered
intellectual property and for the mine operator to pay us
in a much more cost-effective way than using acid leaching.
based on successful adoption of the technology. But we have also recognized that there are other ways to be rewarded
This technology is not suitable directly for gold and silver
for our intellectual property, whether it be through an equity
projects but it is certainly suitable for base-precious metals
stake in the project or the company, or some other direct
mixed deposits, such as gold-copper or silver-zinc. A sulfide
investment involvement instead of the royalty. We are open
deposit quite often has an oxide cap and a transition zone
to discussion depending on the ownerâ&#x20AC;&#x2122;s interest.
with a precious metal component. In the instance of a copper-gold orebody, our AmmLeach product process
Q: Considering the innovation you provide, what challenges
can be used to extract the base metal, and the precious
have you encountered working in Mexico?
metal can then be leached using cyanide. Acid and cyanide
A: We talk to companies for which we have identified an
processes effectively do not work well together so this is a
opportunity at the stage when some drilling has been carried
big advantage over conventional processes.
out and the project has moved from early exploration to the project feasibility study decision. At that stage, companies
Q: How do you envision demand for base metals in the
begin to look at the mineral processing options. From our
midterm and beyond?
point of view, the company has already done most of the
A: In general, I believe base metals demand will rise significantly.
hard work in making the discovery. Because we are a service
This is based on well-known optimistic expectations for
provider, we are effectively detached from operating directly
growth in the global economy. More specifically, there will
in the country. Having said that, a beneficial environment for
be an increased demand for many base metals related to the
mining companies is important for us because it stimulates
electric vehicle (EV) revolution being forecast in the next few
activity and is more likely to lead to viable and successful
decades. In conjunction with EV technology, which will require
projects where we can get involved.
huge quantities of base metals, there will also be a boom in electricity storage batteries. Again, that will lead to increased
Q: What are the main differences between your leaching
demand for base metals and several minor metals.
processes and more traditional processes? A: The different processes of the mining cycle revolve around exploration, discovery, development, production
Alexander Mining is an AIM-listed mining and mineral
and closure. Within that, the role of mineral processing is
processing technology company with a reputation for strong
key because it has a material impact on the feasibility and
technical management and with financial markets expertise
economics of any project. By improving recovery by a few
and experience
223
| TECHNOLOGY SPOTLIGHT
224
BREAKING PARADIGMS INÂ SODIUM CYANIDE Mining has made great strides to make operations more sustainable and improve safety records. When it comes to potentially hazardous materials, sodium cyanide stands at the top of the list. The Chemours Company is introducing a new model, proving that the mining industry is perfectly capable of guaranteeing the safe handling of this chemical. Safety should be central to all phases of the mining cycle. Chemours uses its 200 years of experience in chemical production and material handling to prove that the mining industry can be productive while minimizing its environmental impact. Chemours Mining Solutions specializes in the production and safe handling of sodium cyanide (NaCN), setting the precedent for innovative solutions for its optimum management. The company is a pioneer in national and international safety protocols, as well as course development and on-site training. While breaking safety paradigms regarding chemical management, Chemours leads by example. The vision is that the process must transcend to educating the stakeholders. Chemours Mexico conducted the 11th version of the Emergency Response Course with Sodium Cyanide. The goal is to train first-responders at mines on the adequate execution of emergency protocols while developing skills for enhanced decision-making among the personal protection team and the incident command system. Also, as a reliable partner it provides training for mining staff to better avoid risks by teaching adequate NaCN handling and action protocols. But training operators and their staff only solves one part of the paradigm, as communities remain an equally important element in the equation. The Chemours Companyâ&#x20AC;&#x2122;s social responsibility policy covers the need for information and training through various courses in different states of the country. The Chemours Company has been a signatory of the International Cyanide Management Code since 2000. Almost two decades later it continues to innovate in the safest ways to pack and transport this chemical. To guarantee it remains a leader in chemicals management in Mexico, Chemours has two distribution facilities in the country, located in Hermosillo and San Luis Potosi. Responding to a growing demand for its services, it has begun constructionat its first state-of-the-art NcCN manufacturing facility in the state of Durango.
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| VIEW FROM THE TOP
INNOVATION TO REDUCE ORE PROCESSING FOOTPRINT FRANCISCO CHÁVEZ Country Leader of Thermo Fisher Scientific México
226
Q: What new mining processing and handling techniques
A: Innovation is critical because moving on to the next
or products are being developed for the next five years?
phase requires the processing of a great deal of highly
A: The mining industry has undergone a great
valuable information. Today, the process is done manually
transformation. Now, digitalization and quality control are
with a large number of people but there are many tools
critical parts of the business and also drive innovation.
that can allow companies to maximize their output. Getting
The industry is increasingly automated, digitalized and
more information on the mix’s composition is critical to
interested in data. Data analysis has become key to
operations and a key part of Thermo Fisher Scientific’s work
improving product quality and ensuring that productivity
that allows customers to get valuable data that helps them
is positive in terms of reducing costs and increasing the
make better decisions.
amount of minerals obtained. Mexico is not fast to adopt technology. The country has yet to progress in several areas,
We are testing solutions and working to put all this
such as improving infrastructure for digital processes. We
information on the cloud to increase our capabilities. In
Mexicans are not known for adopting technology early in
Mexico, we have an IT Center of Excellence (ITCOE) in
comparison to the rest of the world.
Tijuana that is developing software. The products are still under development but we might launch one in 2019.
Q: What are the most important steps and considerations for a mine site that is just starting to invest in digital
Q: How are companies like Thermo Fisher helping reduce
innovation?
the environmental risks of processing?
| INSIGHT
HOW GERMAN TECHNOLOGY CAN CONTRIBUTE TO PROCESS OPTIMIZATION DANILO BITTAR Director Latin America of Bruker AXS High-grade projects in Mexico are becoming increasingly
analytics, particularly now that the industry is facing tighter
tougher to find and the industry is starting to realize the
environmental and safety norms.” He adds that, typically, the
importance of investing in analytical tools that can provide
savings achieved by using X-ray mineralogy in the mine and
faster and more precise results, say Danilo Bittar, Director
process plant lead to less consumption of energy, chemicals
for Latin America at Bruker AXS, which specializes in high-
or wear parts and increases recovery grades. “This typically
performance scientific instruments and analytical solutions
pays back the initial CAPEX within months,” says Bittar.
to explore materials at the atomic level.
“Commodities that benefit most from our X-ray mineralogy solutions are copper, gold and polymetallic ores.”
“We target medium and large companies as the initial outlay for our high-end solutions is not cheap,” he says. “But
The company is well established in other sectors and is
smaller companies are also beginning to show interest in our
seeking to consolidate its position in the mining sector.
entry level fit-for-purpose solutions as they see the value
“Bruker is already collaborating with large players in the
the investment can provide to their operations in terms of
country, such as SGS, and helping them improve the quality
A: Our Environmental and Process Monitoring (EPM) area
brands are extremely well positioned, especially Thermo
works with governmental agencies and private companies
Fisher Scientific, which is widely used in the mining industry.
to develop solutions to improve their quality. Our mission
Most mines in the country have at least one piece of Thermo
is to help our customers around the globe live in a cleaner
Fisher Scientific equipment. We are an innovation company
world. This division works beyond the mining industry as
and our core across all divisions is innovation.
it helps every sector. We have R&D projects addressing solutions that reduce environmental impact. In the future,
We work closely with clients over their budget cycles and
solutions will be greener and this is increasingly becoming
help them identify their priorities. A common concern
a necessity for customers. We believe that this will continue
among clients is productivity; to optimize, it is necessary
to be a trend so we are investing in building machinery and
to invest in technology that is beneficial for clients in the
solutions that minimize the environmental impact.
medium and long terms. Mining in Mexico follows some of the best practices in the world. We have many years of
Q: What are supply chain companies doing to overcome
experience in the industry and now we have a consolidated
resistance to digital change?
presence in Mexico. More than machines, we sell solutions.
A: We are working closely with government and regulatory agencies to promote the creation of standards that
Q: How can your technology improve profit margins for
address these issues. It is necessary to ensure that we
mines and what success case demonstrates your expertise?
have adequate security around a solution to protect the
A: We always place our customers in the center of our
privacy of information. From a customer-related side, we
strategy. Our philosophy is that productivity is the driver for
help them to figure out the “job of the future,” meaning
innovation, which means reducing the effort required to get
how the workplace will be transformed by digital solutions.
minerals out of mines or reducing the time it takes for several
Digitalization will not eliminate jobs, but will change them.
processes, such as production.
We hope that this trend creates specialized types of jobs that do not even exist today. Thermo Fisher Scientific is a multinational developer of
Q: Who are your main clients in the mining industry?
biotechnological products. In the mining sector, the company
A: We are participating together with all the players in the
is a leader in mineral processing and precision laboratory
mining industry, both in Mexico and around the world. Our
equipment markets
of their services,” says Bittar. “We can provide robust tools
can complement the needs of the sector well. “We have the
that can withstand long hours that are common in operations.”
best analytical precision in the market,” he says.
The company can adapt to a wide range of needs from highend fully automated laboratories to benchtop analytical tools
When it comes to automation, the company is establishing
that can be installed in mobile laboratories or trucks. “These
key alliances to maintain its competitive edge. “We are
mobile solutions are ideal for the mining industry as they can
staying up-to-date by nurturing our relationships with
reduce costs by bringing laboratories closer to mining projects
companies such as FLSmidth and other integrators
and provide results at quicker turnaround times, rather than
that incorporate Bruker instrumentation such as the D8
sending samples to centralized laboratories.”
Endeavor dedicated minerals analyzer, the S2 Puma and the S8 Tiger elemental analyzers into their installations,”
Despite the technological advances the company can provide,
says Bittar.
Bruker has found resistance in the traditionally conservative Mexican mining industry. “It will take time to change the
As a new administration enters the country, Bruker would
mindset of the industry but we are prioritizing the mining
like the incoming authorities to address an issue that is
market as one of our Top 5 sectors,” explains Bittar. “We
widespread in the Latin America region. “Bureaucratic
already have key installations in other big mining companies
processes need to be simplified as these problems and
in North America, Chile and Peru. We want to expand in
delays are impacting investment,” he says. “To improve the
Mexico as it has an attractive GDP.” The company has a
GDP in the region, we need to improve these processes and
positive outlook for the 2018 and Bittar is sure the mining
tax issues. Added to high costs, all these factors are making
industry will contribute positively to its global revenues. He
small and medium companies think twice about investing
believes the company’s background in German engineering
in technology.”
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| VIEW FROM THE TOP
INDUSTRY RACES TO CATCH UP WITH TECHNOLOGICAL LEAPS VÍCTOR GONZÁLEZ General Manager of Power Tech
228
Q: What makes Power Tech’s range of products for materials
implement in the systems we sell speak to our commitment to
management the best option for Mexican miners?
offer more to our clients. We want our customers to find an
A: Mexican materials management systems manufacturers are
ally in us. We want to work together with the mining industry
often unfamiliar with basic design features that are crucial,
and guide it in the implementation of new technologies. Our
such as chute distance and belt width. For example, when
company follows collaborative values as we believe that this
an operator orders a conveyor and asks for the technical
is the way to achieve industry growth. We see ourselves as
specifications, the provider may answer based on the design
a tool for the improvement of the companies we work with.
of similar machines. We have many years of experience
To overcome the industry’s resistance to new technologies,
developing materials management systems so we know the
we invest a great deal to test our technologies along with our
important details that guarantee the highest quality. Our
clients so they can witness the benefits beforehand.
knowledge comes from a period in which we did not have all the software and technological facilities that we have today
Q: How do you ensure Power Tech can be a cost-effective
to make these calculations; we learned to pay attention to
and safe option for your clients?
details by designing by hand.
A: Everything can be reduced to a cost-benefit relationship. High-quality products mean nothing if they come at an
In 2012, we became first Mexican member of the Conveyor
inaccessible price. The Mexican market does not buy such
Equipment Manufacturers Association (CEMA), which
products and Mexicans do not tend to take care of machinery
provides us with specialized expertise and support for all
installations, usually failing to read manuals or follow the
our projects. This membership has enabled us to become
correct maintenance processes. For example, when Mexicans
acquainted with experts worldwide that now support Power
buy an electric device, such as a smartphone, they often do
Tech in areas in which they have more experience. We
not read the manual but jump directly into learn by using. This
strive to offer integrated, detail-oriented and cost-effective
happens in the mining industry and impacts the longevity of
solutions. For example, we have a program called Walk-
the machines since they are often not maintained properly.
the-Conveyor that examines and compiles a report on the conveyor’s functioning. ASGO has been a strategic partner
To address this issue, Power Tech’s added value lies in providing
that has allowed us to bring in-house the required expertise
high-quality products that are easy to use and offered at an
to professionalize this service and provide our clients with a
affordable price. The proof of this is that we won the tender to
comprehensive analysis of the state of their machinery, the
provide some of our equipment and collaborate in the design
possible failures and how to improve efficiency.
of NAIM’s FerroLoop reception systems. Remaining a costeffective option for our clients is also related to the supply
We are also working hard to offer an ever-improved customer
chain for our products. Most are manufactured in the US and
service. An example is the vulcanization process for conveyor
some in China. We provide spare parts for maintenance and
belts. Previously, we were reluctant to offer this service
manufacture our own conveyors. This broad portfolio allows
because it can be replaced by other mechanical systems.
us to offer a wide range of solutions to the industry and to
But we recognized that it was key for us to integrate our
have successful collaborations with small and large operators.
solutions with these kinds of services. All the technologies we Regarding safety, as a conveyor can carry up to 5 tons, it is fundamental to have security regulations for its operation to Power Tech is a Mexican company that provides materials
avoid accidents. But it is unfortunate that some operators
management and transportation systems to the mining
are unwilling to invest in accident prevention. We focus on
industry. It offers high-quality solutions augmented by its
having the right team to design equipment that complies with
extensive experience in the sector and its highly trained staff
international security standards. The Mexican industry often
struggles to follow these standards as some companies are
for mine operations. We contribute with our grain of sand
willing to overlook them to save some money and they are not
through training courses and creating videos that explain why
legally binding. Security is a key industrial area of opportunity.
conveyors can be misaligned and the risks this implies. The
Striving to prevent accidents is also cost-effective.
industry needs to understand that technology is taking giant leaps and we must not be left behind on cost and production
Q: How are your products improving ore processing and
efficiency.
why must miners embrace these new technologies? A: We have been in the industry more than 10 years, always
Q: What future needs are you predicting for the mining
striving to find the most innovative materials management
industry and how are you incorporating these types of
technologies. On this path, we have discovered many systems
products into your portfolio?
that are unknown to Mexican miners. For example, we
A: Given the current context in terms of metals prices, there
represent Dos Santos International in the country. Its sandwich
will be increasingly more automation and power savings
belt allows cargo elevation in a simple and cheap way. This
needed in the near future. As we see right now, the silver
technology is being used worldwide but is largely ignored
price is low and the gold price is unpredictable. As a result,
in Mexico. I think this is due to Mexican minersâ&#x20AC;&#x2122; reluctance
many projects have been put on hold. For the projects that
to adopt new technologies that they do not trust but this
are still operational, miners are trying to reduce production,
reservation is often ill-founded given that many of these
maintenance and operational costs so they can remain
technologies have thrived abroad. We also provide pneumatic
competitive in these scenarios. There are many products
systems that rather than having rollers work on an airbed with
such as soft starters, variable frequency drives, weight
the band sliding on low pressure air. These systems are low
scales and many varieties of sensors that can help operators
maintenance and long-lasting as they work on low friction. I
save money and Power Tech has the expertise to do this.
think this is innovative and people are interested when they hear about them. But I also feel that the industry is not fully
Q: What can the new government do to facilitate doing
prepared for intelligent automation systems because it lacks
business in Mexico, especially for the mining industry?
the trained staff to use and maintain these systems.
A: There are various incentives that other countries are applying and these could be replicated in Mexico to create
The industry is also lagging in the education required for our
an environment that competes well on an international
miners to make the best use of technological advancements.
level. As an example, the US economy is growing this
But I think the trend also applies to innovation, automatization
year because of considerable tax reductions. The Mexican
and improvement of the industry, especially given that it
government must try to improve investment by offering
is becoming constantly more efficient. Technology can
tax reductions to those who are willing to invest money
decrease operational costs, and while key decision-makers
in Mexico. Another issue to be addressed is tax avoidance
are aware of this, education needs to permeate the lower
because this costs the Mexican government billions
stages of the mining labor hierarchy. The mining workforce
of pesos per year. By cracking down on this alone, tax
needs to be more informed about technological innovations
collection could increase significantly and this would
and how they impact mine operation strategies; they need
also create a fairer environment for all those who pay the
to understand why technological investments are profitable
appropriate amount of tax.
229
| EXPERT OPINION
NEW CHEMICAL COMPLEXATION AGENTS FOR PRECIOUS METALS BRADLEY SMITH Professor at the Department of Chemistry and Biochemistry of the University of Notre Dame
230
Large-scale mining of precious metals often involves the
is known as supramolecular chemistry. Indeed, the
use of toxic materials and also consumes large amounts of
intellectual legitimacy of supramolecular chemistry has
energy and water. In addition, the tailings produced by a mine
been recognized twice with the Nobel prize in chemistry,
site typically contain significant amounts of the sought-after
once in 1987 and again in 2016. The field has developed
metal, though it is usually not economically feasible to treat
a sophisticated understanding of how molecules interact
the tailings to obtain the remaining metal.
with each other, and this has enabled researchers to design molecular complexation agents that can recognize and
Similarly, waste streams from factories, recycling plants and
capture a target molecule based on subtle features such as
other industrial operations are often contaminated with
the molecular shape.
precious metal waste. These metals can be damaging to waterways and other portions of the environment if released.
As a result, modern molecular complexation agents can
Although these precious metals have high value, the high cost
recognize their targets with extraordinary selectivity and
and difficulty involved with water treatment severely limits
form complexes that greatly change the chemical and physical
any current practical plan to fully extract the value of these
properties of the target. This new understanding has enabled
streams. Accordingly, more efficient and greener methods
the invention of new methods of chemical separations that
of recovering precious metals from waste streams would be
can be used for water purification, pollution control and
beneficial to mining operations, wastewater treatment plants,
recovery of high-value chemicals. In the case of precious metal
and municipal agencies.
mining there is a high possibility of inventing novel classes of chemical additives that can greatly improve the efficiency and
Over the years a lot of applied research and development
lower the cost of metal recovery methods.
has examined a range of classical separation technologies such as precipitation, liquid extraction, resin adsorption, and
The potential of these innovations is illustrated by two
membrane filtration, as a way to improve the recovery of
separate discoveries recently reported by two academic
precious metals. In many cases, this has led to commercially-
chemistry laboratories in the US that may have a major
viable methods that have been employed at specific mining
impact in gold mining. Currently, most of the worldâ&#x20AC;&#x2122;s gold
sites around the world. But the molecular basis of the
mining relies on a 125-year-old method that treats gold-
underlying technologies has not changed very much over the
containing ore with large quantities of poisonous sodium
last few decades. For example, most commercially-available
cyanide, which is extremely dangerous for mine workers
ion-exchange resins are derived from 50-year-old materials
and can cause environmental issues.
whose ion affinity is based a few simple molecular properties such as the ionic charge and molecular polarity.
Many alternative lixiviants have been explored over the years as potential replacements for cyanide, especially oxidizing
This lack of intellectual progress is curious because over
solutions that convert the ore into gold chloride or gold
the same time period there has been an explosion in
bromide. While these alternative methods are environmentally
fundamental understanding of the weak interactions
more benign, there are various technical challenges due in
between molecules - a field of scientific research that
large part to the lower stability of gold chloride and gold bromide, which complicates the purification steps. The discovery of new gold precipitation agents has the potential
Bradley Smith is an Emil T. Hofman Professor of Chemistry and
to greatly simplify the processes that separate and purify gold
Biochemistry and the Director of the Notre Dame Integrated
chloride or gold bromide from a leach solution, and keep it
Imaging Facility. His research interests encompass the areas of
in a very stable crystalline form until the reduction step that
Supramolecular and Bioorganic Chemistry
produces the pure gold metal. This technology is likely to
have financial potential in mining situations where cyanide
organic solvent after leach extraction. In all cases, the chemical
is not feasible.
additives form a gold-containing crystalline complex that can easily be separated by filtration. In addition to selective
In 2013, a research group led by J.F. Stoddart at Northwestern
precipitation, the chemical additives can be incorporated
University reported a new method of precipitating gold
into a range of green separation processes such as liquid
bromide from a leach solution using cyclodextrin, a non-toxic
extraction or membrane filtration. They may be especially
starch-like molecule that can be derived from potatoes or corn.
useful in urban mining processes that recycle gold or extract it from the waste streams of manufacturing plants that use gold.
The technology is currently licensed by Cycladex, a
Another important aspect of the Notre Dame technology is
small private company, and has led to several pilot plant
that it also can be used to capture and separate other precious
demonstrations of gold recovery from the tailings of old
metals, such as platinum, palladium or nickel, and there is high
gold mines. Cycladex claims its process reduces operating
potential for application in recycling of the precious metals
costs by approximately 30-50 percent and capital costs
that are within the catalytic converters in motor vehicles.
by 35-50 percent. It also has the major advantage of using environmentally-friendly chemicals instead of toxic and
Looking to the future, it is likely that these recent academic
expensive sodium cyanide. The Cycladex precipitation method
discoveries in selective gold complexation and precipitation
is highly selective for gold bromide and will not work for other
will catalyze further research and development efforts to
gold complexes like cyanide, chloride or thiosulfate. Thus, its
improve the current gold extraction and recovery processes
value is entirely based on the feasibility of using a lixiviant that
that are used around the world. Furthermore, the general
produces gold bromide.
supramolecular chemistry principles that underlie the selective complexation can be applied to other precious metals beyond
In 2018, a separate research group led by myself at the
gold. It is highly likely that the advanced molecular level
University of Notre Dame reported a very different series
understanding and new technologies emerging from the field
of chemical additives that precipitate gold chloride or gold
of supramolecular chemistry will have increased impact in the
bromide from either an acidic leach solution or from an
mining and recovery of precious metals.
INSIGHT |
FROM FLOTATION DEVICES TO HANDS-FREE TOOLS IN MEASUREMENT SYSTEMS JOSÉ JUAN CRUZ Director of VEGA Measurement Mexico The mining industry is eager to incorporate new products
on average in the Mexican mining industry over the next
that can not only facilitate ore processing but also make the
five years. “We like that Mexico does not rely on a single
processes involved safer. José Juan Cruz, Director of VEGA
metal, unlike in Chile, which depends almost 100 percent
Measurement Mexico, says measuring tools are the way to
on copper,” says Cruz. “The fact that the country has such a
anticipate and prevent accidents. “The 2014 accidental spill
wide portfolio of minerals that even includes lithium greatly
on the Sonora river was caused by a leakage of chemicals
diversifies risk.”
that could have been prevented with the right tools,” he says. “To avoid similar accidents, it is important to have
In the past, companies would depend on flotation devices
strong, state-of-the-art measurement systems in place.”
and buoys to measure level and density, a process that was highly inefficient. Cruz explains that electronic
Vega Measurement considers mining to be a key market,
differential pressure sensors can facilitate this process
after the chemical and aggregate sectors. “VEGA
and that they can even be used in a wide variety of
Measurement Mexico is part of VEGA Americas and the
industries. “The use of electronic differential pressure
company decided to open a branch in Mexico two years ago
sensors in mining can be beneficial as the sector uses
because of the geographical proximity,” says Cruz. Despite
them to measure the density of tanks or deposits with
these obstacles, the company expects to grow 10-12 percent
dangerous chemicals,” he says.
231
| VIEW FROM THE TOP
COMMITTED TO CUSTOMER SERVICE THROUGH GOOD AND BAD GUSTAVO MENร DEZ Director of Sales and Marketing at Cribas y Productos Metรกlicos
232
Q: What new trends have you identified in the industry
We have strong relationships with suppliers to ensure the
and how are you adapting to these?
products are always up to specification and that we can
A: Previously, the Mexican market was flooded with
ensure supply even with short notice. When importing,
suppliers offering the cheapest product. Our mentality
we have always tried to partner with companies that
has always been to provide the best-quality products
share the same values and commitment to quality. We
and the industry has recognized the value in this. It has
also look for complementary partners, so mutual benefits
gotten to the point where the Mexican customer demands
are provided.
high quality and is not willing to settle for a low-cost, low-quality product. The Mexican mining industry has
Q: Which of your products are the most in demand right
risen to the highest global standards and this is what we
now in Mexico?
strive to provide.
A: We work in mining but we also work in aggregates, and around 50 percent of our demand comes in the form
Now, as resources are becoming exhausted, it is necessary to drill further down and, even at depth, the product can be half coal, half ash
of wire cloth for the aggregates industry. This is a woven wire that is a very simple product. But for the mining industry, more complexity is required so generally our synthetic products tend to be more in demand. On the mining side, we used to sell all rubber screens but we saw that clients had different needs that required more innovative solutions so we began offering polyurethane screens. This product now accounts for about one-third of our mining sales. The industry is changing and we are changing with it. Q: How do you work with your clients to develop the
We are competing in Mexico against local and global
most cutting-edge technology?
companies but we are also competing globally against
A: We work in a mutually beneficial way with our clients.
these companies. We have started to export our products
While we try to provide the most innovative products, we
to the US and South America. The world has become
are not on the ground at a mine site every day, so certain
so small that it has allowed Mexican companies to sell
elements may not be visible at first glance. This is why we
internationally. It has also allowed foreign companies to
appreciate our client feedback and we try to incorporate
enter Mexico, meaning greater competition and higher
their requirements into the future development of our
standards. Customers now expect better components.
products. We have some very demanding clients, such as Grupo Acerero del Norte in Coahuila and Minera
We have always adhered to the highest standards. If the
Media Luna in Guerrero, and our relationships help us to
materials are available in Mexico, we carry out quality
incorporate into our products the things that our clients
tests and if they are not available, we import from abroad.
really need. To remain at the forefront of technological innovation
Cribas y Productos Metรกlicos is a supplier of wire screens
we have always been characterized by seeking the best
for the Coahuila coal region. It was established in 1965 and
material options in the market, both for our manufacturing
consolidated in 1968 and over the years, the product line was
process and the returns to our clients. We have created
expanded and alliances established
synergies with our suppliers in which our feedback
has helped them improve their offering, achieving the
whatever the supplier had available are over and clients
optimum chemical formulas for abrasion. We have also
are becoming more demanding. The industry has entered
been certified with the top anti-wear companies, so they
the era of tailor-made solutions and optimum cost
endorse our processes and train us in the best practices
strategies. While mining processes remain the same in
for processing and materials innovation.
essence, the industry has also improved its processes to yield better life quality to its people. Operators are
Q: What are the biggest challenges operators face when
constantly seeking for more efficient processes and
it comes to mineral processing?
better returns.
A: I think one of the biggest challenges is specifications, since they change over time with improvements in the
Q: What are your predictions for the industry in the
process and availability of materials. At first, companies
coming years given the low level of exploration activity?
wanted a certain grain sizing for the ores but as
A: This is a complicated year for exploration. It is a
technology changed, they needed purer, finer materials.
transition period for exploration whereby companies
The screening size has been a challenge for us because,
with projects at the exploration stage are waiting to see
previously we could be precise up to 1/200th of an inch,
what happens in terms of regulations and metals prices.
but regulations now demand precision to 1/2000 of an
Mining has been growing in Mexico and, although it has
inch. We have been adapting to the industryâ&#x20AC;&#x2122;s evolution
downcycles during which some mines are shut down,
alongside our customers.
the bad times do not tend to last long. That allows us
th
to think ahead and prepare for the mines re-opening. Mining is also becoming more difficult. For example,
At times, a mine can be slow to make payments but this
in coal mining, it used to be possible to skim from the
has not deterred us, and we continue to work as their
surface and the quality of the coal would be very good.
supplier because we know the industry due to our long
But now, as resources are becoming exhausted, it is
experience. We know that after bad times come good
necessary to drill further down and, even at depth, the
times, and our customers know that when business is
product can be half coal, half ash. This is why screening
back up and running, we will still be by their side.
products are ever more important because costs are becoming higher and we are able to ensure much
Q: What is Cribasâ&#x20AC;&#x2122; main differentiator and added value?
more efficient processes. I predict that, in the years to
A: One of our main differentiators is that we fabricate
come, the industry will continue to demand increasingly
all the sieving components. This gives us a competitive
high-precision screens and those offered by Cribas are
advantage as each application requires a different
engineered to meet those requirements. We focus on our
material. It is not possible to only offer polyurethane or
value proposition so we can anticipate client needs and
wire. To have such a diverse offering is fundamental in
provide high-quality products.
sieving but there are only a few companies that offer it. Our goal is not to be the best company in the market but
The industry is changing and it will shift from buying
the best company for our clients. Our main responsibility
generic materials to purchasing products specifically
is to our customers and we are growing to provide a
designed with engineering expertise. The days of buying
better service and in more locations.
233
234
VIEW FROM THE TOP |
LOW-MAINTENANCE, A HEAVY-DUTY EQUIPMENT FOR LARGE OPERATORS FABIO MARRONI General Manager for Haver & Boecker
Q: How is Haver & Boecker helping companies cut costs
important pieces and assemble the rest in the country
and increase production?
through a contracted manufacturer. But this was a special
A: We are a German company present in countries around
case. We would consider doing something similar again
the world, including Canada and Mexico. Haver & Boecker
with large orders. 235
helps operators cut costs and increase production by providing low-maintenance heavy duty equipment. Our
Q: How are digitalization trends shaping the
durability is our main added value.
mining industry? A: Mining is a complicated industry to digitalize as it
We do not compete with companies that supply small to
involves heavy duty processes and a lot of dust. Another
medium-sized operations as this target market involves
challenge was to incorporate sensors into our screens
Chinese suppliers that can offer cheaper products. We
as they vibrate. But we offer the industry two types of
stand out the most in large projects and have successfully
management systems that facilitate the transition. One is
positioned ourselves in this niche as most big mine
being developed through an online platform that is about
operations use our equipment in Mexico. Customers like
to be released. This system can be incorporated into any
us because our equipment requires less maintenance, which
operational system and facilitates the management of
means less wasted time and more profits. We supplied 45
machines. The second option we offer is an evaluation
machines to Grupo MĂŠxico, which the company uses across
service that measures the vibration of the equipment and
its operations, with 26 in Cananea alone.
its status.
Our vibrating screens are our most popular product as they
Q: What are your expectations for the medium to long term
help classify minerals by size and type after the production
of the mining industry?
phase. Each one can process up to 15,000t/h and can last
A: The worst part of the cycle is over. I feel that the industry
between 10 and 15 years, almost the entire lifecycle of a
is starting to improve in terms of prices and we will continue
mine. These characteristics make our machines a wise
to see more gains. Our company strives to serve our clients
investment.
as best as possible no matter the stage of the price cycle. We are also always working on ways to help operations
Q: What strategies does the company employ to offer
reduce costs. The company wants to have a bigger presence
services and support?
in the country and to reach out to more potential clients.
A: We have an office in Sonora, a well-known mining state, and we can provide a wide array of support. This office
When it comes to the change of administration in 2018, I
encompasses engineers and technicians who can meet the
hope the new authorities can find a middle point between
needs of our clients. To continue improving the services the
the needs of the industry and the surrounding communities.
company offers, we are always on the lookout for additional
The industry plays an important role in the economy but
representatives throughout the country.
the interests of the communities should also be prioritized. Otherwise, blockades happen and this costs companies a
We manufacture according to the demand and the
lot of money.
product. The largest machines are produced in Brazil while the medium to small ones are made in Canada. We also manufacture in Mexico when demand is high enough.
Haver & Boecker has over 125 years of experience developing
For example, in 2012 Grupo MĂŠxico bought 12 machines
innovative solutions for the industry. It specializes in mineral
and instead of importing the machines already assembled
processing plants, primary crushing plants, washing, pelletizing,
as we normally do, we decided to only import the most
conveying, engineering, used equipment and vibrating screens
| VIEW FROM THE TOP
LOW MAINTENANCE, LONG-LASTING TAILORMADE EQUIPMENT MIGUEL GORDALIZA General Manager of Vibrotech Engineering
236
Q: How do you guarantee the provision of quick and high-
will help us provide the complete spectrum of machinery
quality maintenance even in the most remote mines?
installation for ore processing, from sieves and crusher
A: We usually work with big operators that are very
to mills. Also, we have two commercial partners in
cautious. This means they often require a robust stock
Mexico. IMAF collaborates with us for the steelmaking
of spare parts to reduce the possibility of downtime. We
and foundry sectors, and TEASA for mining. The former
do not have specialized technical service centers in all
is also our close ally for other segments in Mexico, such
the countries we work, as we work all across the globe
as recycling. Vibrotech performs all the technical aspects
and this would be burdensome for us. But we do have
and TEASA handles the commercial part alongside our
brand representatives with the best technical training
commercial directors.
so they can directly solve minor issues locally. In case of a major problem, our headquarters in Spain are only
Q: How do you differentiate yourself from your
12 hours away and we are ready to send our technicians
competitors that offer similar products?
to solve issues.
A: Vibrotech is proud to compete against the best machinery suppliers worldwide. Our designs are just as
Our manufacturing plant is in the Valley of Trapaga, in
modern and efficient. The dollar-euro parity has been
Spain, and we are also associated with several workshops
positive for our business and along with the low cost of
in San Sebastian. We are partnering with a company
labor in Spain, we remain competitive in the market. But
that develops mills from Bilbao and are evaluating the
the quality of our equipment is the main differentiator.
possibility of acquiring it in the future. This partnership
Our machines can adjust to different terrains to better address the needs of our clients. We do not provide our customers with what we have to offer but with what they
whose
need. We have standard machines, but we also have the
core activity is the design and manufacture of vibrating
ability to design tailor-made solutions for a given clientâ&#x20AC;&#x2122;s
machinery and installations for foundries and other sectors
specific problem. We are very agile in delivering quality at
of the industry
a commercial, engineering and productive level.
Vibrotech
Engineering is
a
Spanish
company
VIEW FROM THE TOP |
THE HIDDEN DANGERS OF PARTICLES IN NEW OIL ROY GIORGIO Director of Sales - The Americas at Des-Case
Q: What role does the Mexican mining industry play in
alongside our distributors to ensure that our clients have
your companyâ&#x20AC;&#x2122;s portfolio?
the right solution from start to finish, without wasting
A: Mining is one of the top two industries for Des-Case and
energy on improperly installed or incorrectly selected
we continue to bet on the Mexican and Latin American
products. We will not suggest any solution that we believe
markets through our support and distribution team. In
will not yield at least a 30 percent return on investment. I
Mexico, we have several distributors who specialize in
have yet to see a return of anything less than 90 percent
mining. We make sure that we provide a holistic solution,
for the projects I have worked on and I once oversaw a
not just products. Anyone can provide manufacturing
project with a 2,000 percent return on repair costs alone.
services. We are expanding on our 35 years of innovation in the industry, entering the IIoT era with the marketâ&#x20AC;&#x2122;s first connected breather with IsoLogic sensor technology. We recently acquired a Dutch company called RMF Systems that specializes in new technologies for monitoring particle counts in lubricants. Many mines are adding particle counters to monitor their lubricants and how they are performing and affecting the equipment. We
Des-Case will not advise implementing any solution that it believes will not yield at least a 30 percent return on investment
are looking at standard interfaces for standalone units or the integration into systems. Today, our most popular
Q: What is the mining industry taking for granted about
solution for the industry is portable filtration systems,
breathers and what is your message for miners?
such as our TC Series.
A: I think that there are three things that people misunderstand regarding lubricants and equipment. First,
Q: How do you differentiate from similar options in the
they believe that new oil is inherently clean. Many people
market and why must Mexican markets choose Des-Case?
believe that looking through an oil sample and seeing
A: We can help increase the lifespan and reliability of any
clear liquid means that the oil is not dirty. But the human
equipment in a mine that uses lubricants. Our contribution
eye by itself cannot see the particles that actually cause
keeps equipment running three to eight times longer,
the most damage, whereas those we can see usually will
depending on the application. We are the only company
not cause damage until broken into smaller particles.
that provides solutions to protect lubricant throughout
Most major oil manufacturers will say that new oil is
its entire life cycle. Simply focusing on protecting the
not clean enough to put into service without filtering.
lubricant while it is in use or being stored does not fully
Second, that the equipmentâ&#x20AC;&#x2122;s onboard filter is always
address all the ways lubricant can become contaminated.
going to achieve the desired cleanliness level, which is
We teach people how to receive, store, transport and
more the exception than the norm. Many filters are only
clean lubricants safely by employing best practices. We
designed to prevent catastrophic or immediate failure.
also train them to monitor the health of the lubricant
Third, that the factory breather cap is going to keep dirt
and remove it safely from the plant when replaced. We
and moisture out of the oil, which is not usually what it
establish a strong partnership with our customers to
is designed to do.
make sure their oil is clean and fully protected from the moment it arrives at their plant. Des-Case provides leading, innovative products and services
The key difference between someone who manufactures
that enhance equipment reliability and increases profitability.
reliability products and a solutions provider such as Des-
Des-Case products extend the life of industrial lubricants by
Case is that we will work with the mines face to face
preventing contamination
237
| VIEW FROM THE TOP
STAYING ONE STEP AHEAD OF THE ORE PROCESSING PACK ALEJANDRO ESPEJEL Country Manager of FLSmidth
238
Q: What challenges are operators facing in terms of mineral
Q: What added benefit do you offer Mexican mining
scarcity and falling grade and how can you help them?
companies?
A: Electricity is one of the main cost-contributors in
A: We are the only company in the industry that can
mineral processing for our customers, so we want to
provide leading mining equipment, offering a full pit-to-
provide the best solution for their entire process by
port portfolio, while also delivering strong aftermarket
looking at their operation as a whole. By working closely
services. No other company in the industry can offer this
with customers, we can deliver the solution the operation
combination of projects, products and services. At the
requires, allowing us to optimize the recovery rate for
same time, we have a strong 50-year presence locally, and
our clients. When considering water, for example, we
Mexico is one of our countries of focus. We are creating
recognize that it is a scarce resource worldwide and
new synergies as a North American region, which is one
especially for a water-intensive process like mining. Our
of the important structural changes we are undergoing.
dry tailings solution EcoTails allows our customers to
Recently, FLSmidth restructured itself to focus on seven
recover as much as 90-95 percent of the water used in
regions, one of which is North America. We are pooling our
tailings management. We think this will be very important
sales and service execution resources across Canada, the
for the industry.
US, Mexico and Central America to the benefit of customers in the entire region.
Q: What solutions in particular are you promoting for the mining industry?
Q: What demand are you seeing from the mining industry
A: Among them is the dry tailings solution, EcoTails, which is
for new technologies?
a new system that dramatically improves tailings and waste
A: There is always the need to make operations more
rock disposal while economically processing mine waste
efficient. One solution we can provide is SmartCyclone, a
and increasing water recovery and reuse. We are working
monitoring and control solution in a closed-circuit grinding
with some of our customers and other stakeholders to roll
system for improving cyclone-related processes, predicting
out this type of technology across the country. In terms
and controlling cyclone maintenance schedules and
of electricity management, we provide a product called
measuring whether the battery is operating efficiently or
SAGwise total process control for the grinding circuit that
not. The difference in efficiency can be dramatic but we can
allows our customers to optimize the feed degree of their
create an alert that goes to the control room immediately.
mills, and in that way the consumption per ton of ore that
These types of fast technology-driven response and
is being processed.
monitoring systems and solutions capable of intercepting errors will become increasingly more important in mining
We are working hand-in-hand with mining groups to see
in the long term.
what new innovative technology is best suited for their needs. Some of these products include our revolutionary
Mining companies are increasingly interested in these new
Rapid Oxiditive Leaching (ROL) technology for copper
solutions but in some cases the concepts are not easy to
and gold production and our nextSTEP advanced flotation
implement in an existing facility. Any slight change in the
technology. We are now ready to roll this out in Mexico.
process can have significant consequences in efficiency and cost of production. In general, our customers are cautious about making changes in their processes and we understand
FLSmidth is a global engineering company with almost 11,700
that. Therefore, we come to them with case studies, proven
employees worldwide. It supplies the minerals and cement
technology and solid proposals to implement pilot projects
industries globally with engineering, machines and processing
based on their specific circumstances so that they can be
plants as well as maintenance, support and operation services
confident when making these kinds of changes.
INSIGHT |
APPLYING O&G EXPERIENCE TO INDUSTRIAL PROCESSES BENNY ONG Latin America Sales Manager, Industrial Technologies of NOV
Non-oil and gas markets present oil and gas companies with
Ong notes that NOV’s main differentiator is the long
an attractive opportunity to diversify their portfolios, says
experience it has gathered from the oil and gas industry.
Benny Ong, Latin America Sales Manager in NOV’s Process
“Although there are many options on the market, we provide
and Flow Technologies business unit. He says mining is an
strong capabilities with computational fluid dynamics,
ideal market for companies like NOV since many drilling
decades of experience, and proven, reliable equipment that
technologies can add value to both industries. “In oil
will last,” he says. “None of our competitors can offer the
completion and production, a wide variety of equipment
same thing.” In addition, Ong says that NOV is continuing
and solutions help companies extract oil from the well but
to work toward expanding its presence in the region to ease
these technologies are not exclusive to oil and gas,” Ong
logistical headaches and get products to customers faster.
says. “We take oil and gas synergies and apply them to industrial sectors such as pulp and paper and mining.”
NOV’s global footprint allows the company to understand and meet client needs much more efficiently, adds Ong. For
Ong says that mining has become an increasingly attractive
example, NOV has developed the XG range gear pump for
growth sector for NOV, particularly as metal prices have
drilling and blasting customers. It is a critical product that
recovered from 2015 lows. Although oil prices tend to trend
only two or three companies in the US can supply. “We
downward in the face of geopolitical instability, metals
have a global presence in China, Australia, Europe and the
prices thrive on volatility, he says. “All the critical prices
Americas, so we are able to efficiently serve our high-value
like gold, silver, and copper have gone up, and production
customers,” Ong says.
levels at mine sites have increased,” he notes. “We are really focusing on mining, which is one of the key growth areas
Ong admits that a challenge NOV faces is the ability of
for us in Mexico.”
local companies to manufacture look-alike products, but cautions customers that in such cases, appearance and
The company, a US-based multinational that is a leading
quality do not always go hand in hand. “These companies
provider of drilling equipment for the oil and gas industry,
can manufacture locally and offer a product that looks like
also offers other oil and gas technologies for mining
ours but without our quality and expertise.” Although many
applications. “We supply pumping equipment, mixing
customers tend to lean toward those companies because
equipment, composite piping systems, and valves, among
they require a smaller upfront investment, they quickly
other products,” Ong says. On the ore processing side, NOV’s
realize the equipment is not optimum, he says. “These
most popular product is Chemineer-branded agitators.
products wear out quickly, need more maintenance and cause more downtime, especially because these companies
Although these agitators are standard in the industry,
do not have the required expertise to help operators
Ong says the added value NOV can offer is its simulation
optimize their processes,” Ong says. “A reduction in the
software, which can paint a picture for operators of tangible
price of the technology does not necessarily mean it is
production gains. “We can simulate the operator’s process in
good for customers in the long run.”
the mixing environment to instill confidence the equipment will perform the way it should,” he says. While many of
NOV works closely with clients to meet the needs of the
NOV’s competitors rely on a show-and-sell strategy, Ong
industry, and Ong says one key metric of its success is the
says valuable time can be saved by using a simulator. “This
caliber of those it works with. “We do business within three
means that, even if a customer changes its requirements,
main segments: operators, drilling and blasting customers,
we can modify the simulation at a moment’s notice and the
and EPC companies,” he says. “We work with the leading
client can see what will happen, leading to optimization and
companies in each group to develop solutions that are truly
time and cost savings.”
valuable and impactful to their operations.”
239
| ROUNDTABLE
WHAT ENVIRONMENTAL PROBLEMS DOES THE INDUSTRY FACE IN ORE PROCESSING?
Ore processing is one of the most important steps in extracting ore. Correct processes can make all the difference in increasing the amount of minerals that can be extracted from the rock. But the best way to extract metals remains sodium cyanide, a toxic chemical that is often blamed for pollution of rivers and lakes after tailings dam spills. Mexico Mining Review interviews sodium cyanide suppliers, operators and environmentalists to understand the importance of sodium cyanide, the best practices for its use and evaluate the alternative technologies that are now emerging to challenge it.
The people that use sodium cyanide want to optimize their gold recovery. To avoid 240
a drop in recovery levels, they often prefer to err on the high side of concentrations and use more cyanide than necessary. Our proprietary Cyanide Control System technology allows companies to remove this variation and be more precise and effective when it comes to recovery levels. There is a sweet spot when it comes to the use of sodium cyanide, using too much cyanide can cause cyanide solutions to
LEONARDO MARTĂ?NEZ Business Development Manager of Cyanco
leach unwanted metals and using too little can drop recovery rates. This is where technology and applications can play an important role. Our tools are advantageous because they are easily incorporated into systems that are already fully automated.
According to citizen surveys, the greatest worry regarding mining activities is related to water use. People often think that because miners use hazardous substances such as cyanide, they want to get rid of them. But more often miners actually want to get these chemical components back so they can reuse them. These are released accidentally, but not through daily operations. Most of the allegations we receive are on water contamination concerns, usually based on speculation and with no
ARTURO RODRĂ?GUEZ Assistant Attorney General for Industrial Inspection at PROFEPA
support from further research such as from COFEPRIS regarding cancer incidence in a mining area.
Just prior to the finalization of our acquisition of San Dimas in Durango, there was an unfortunate spill caused by a series of breakdowns. It was mainly due to a failure of the onsite workers, whereby a truck driver left the truck abandoned on a hill and left the site. This truck was full of water that contained cyanide and the valve on the truck was rusted and began to leak. The contents spilled into the river. This had an impact on the fish in the river. This should not have happened but it is difficult to
KEITH NEUMEYER President and CEO of First Majestic Silver
prevent things like that. All we can do is provide training and hope employees follow company policies and best practices. This is just one example where it is necessary the state governments work with industry to deal with issues that arise regularly.
Many operators are struggling with grades that are not as high as they used to be, which affects their ability to maintain their production levels. This means the industry needs to use chemicals in more efficient ways to maintain production levels. Our plan is to help the industry take better advantage of the power of chemistry to improve their operations, and we are using our knowledge in chemistry to find innovative solutions for lower grade operations. Each mine represents a unique opportunity to better measure systems and create a more efficient output. As lower grades become a growing reality, measurement technology will continue to play a bigger role in the processing circuit. It is important to analyze and use mega data trends to predict output. Our customers need help with prediction the production output based on
CLAUDIA MĂ RQUEZ LATAM Regional Director of Mining Solutions at The Chemours Company
certain grades and the effect sodium cyanide can have on these.
We find that Mexican standards to avoid spills are good, but some mining companies 241
do not want to follow them as they are expensive and miners believe they can avoid accidents by themselves. Spills are often related to design and construction of mines and the industry lacks quality control in this regard. On the other hand, overregulation can be detrimental for the industry as it can hinder business development. But by constantly monitoring macroinvertebrates in water bodies we can accurately evaluate the impact that mine operations have in the areas surrounding them.
MARVIN ROSALES Country Manager Mexico of CTA
Large scale mining of precious metals often involves the use of toxic materials and also consumes large amounts of energy and water. In addition, the tailings produced by a minefield typically contain significant amounts of the sought-after metal, though it is usually not economically feasible to treat the tailings to obtain the remaining metal. These metals can be damaging to waterways and other portions of the environment if released. Although these precious metals have high value, the high cost and difficulty involved with water treatment severely limits any current practical plan to fully extract the value of these streams. Accordingly, more efficient and greener methods of recovering precious metals from waste streams would be
BRADLEY SMITH Director of the Notre Dame Integrated Imaging Facility
beneficial to mining operations, wastewater treatment plants, and municipal agencies.
AmmLeachÂŽ, which is our core technology, is very similar in terms of methodology to conventional acid leaching. However, the most important difference is that we are using an ammonia reagent. AmmLeachÂŽ that has significant economic, environmental and efficiency benefits. The important thing to note is that the same equipment can be used, with no need for elevated temperature or pressure. Yet by using our patented technology with incorporating a pre-treatment step, in many cases the targeted metals can be recovered in a much more cost-effective way than using acid leaching. This is not suitable directly for gold and silver projects but it is certainly suitable for base-precious metals mixed deposits, such as gold-copper or silver-zinc.
MARTIN ROSSER CEO of Alexander Mining
Grupo México workers
NATIONAL CHAMPIONS
9
Top Mexican mining companies are on the rise as leading global producers of gold, silver and copper despite the amount of international competition in the market. These companies have a long history in the sector and actively work to maintain their place at the head of the pack but foreign competitors continue to be a threat. In 2015, 75 percent of all foreign capital in the sector came from Canada, via FDI or indirectly through the TSX. There are 205 companies with Canadian capital established in Mexico not to mention companies from other mining jurisdictions such as Australia.
As the downturn forced out inefficient companies, a new breed of Mexican entrepreneurs emerged from the ashes with increasingly high-quality, safety and efficiency standards. It seems the national industry is consolidating and pushing standards ever higher to meet the needs of operators in Mexico. This chapter showcases national companies that have dared to take on the challenge of not only incorporating new international standards but also raising the benchmark through best practices. It shines a spotlight on national supply chain companies that continuously add real value to mining operations.
243
CHAPTER 9: NATIONAL CHAMPIONS 246
ANALYSIS: Cultivating National Talent for Global Expansion
248
VIEW FROM THE TOP: Octavio Alvídrez, Fresnillo
249
INSIGHT: José Jaime Gutiérrez, Grupo Minero Bacis
250
VIEW FROM THE TOP: Ramón Dávila, Minister of Economy of the State of Durango
251
VIEW FROM THE TOP: Carlos Silva, Carrizal Mining
252
VIEW FROM THE TOP: Jesús Herrera, Detector Exploraciones
254
INSIGHT: Jaime Lomelín, CLUSMIN
255
VIEW FROM THE TOP: Enrique Escalante, Grupo Cementos de Chihuahua (GCC)
256
VIEW FROM THE TOP: Jerjes Pantoja, CAM
245
Amelia Torres, CAM
257
VIEW FROM THE TOP: Francisco Alanis, DMV Mining Intelligence
258
VIEW FROM THE TOP: Héctor Torres, Sitsa
259
VIEW FROM THE TOP: Monserrat Montesinos, DICISA
260
VIEW FROM THE TOP: Enrique Vilchis, TMC
261
INSIGHT: Carlos Villarreal, Arsenal Tires
262
VIEW FROM THE TOP: Joel Carrasco, Solum Consulting Group
263
INSIGHT: Gerardo Guillén, Elastómeros Taza
264
ROUNDTABLE: How is the Industry Preventing a Shortage of Human Talent?
| ANALYSIS
CULTIVATING NATIONAL TALENT FOR GLOBAL EXPANSION Mexico holds first place in silver production and is ninth in gold, giving the country much to boast about when it comes to its national mining industry. Important states in the sector are known for having talented teams of geologists and efficient supply chains. Appetite to apply this success to global markets is growing Mexico’s mining industry is often characterized by the
those in Latin America, are ripe for the picking for Mexican
Big Four operators: Peñoles, Fresnillo, Minera Frisco
companies. “Many suppliers in Mexico excel in providing
and Grupo México. These four heavyweights alone have
new solutions that other Latin American mining jurisdictions
over 30 operating projects in Mexico with several more
could take advantage of,” he says. “There are a few large
properties held, but so far, the only one that has carried
companies that are taking advantage of the context.”
out any meaningful expansion beyond the country’s borders is Grupo México.
Although this move has been contained until now, it seems that many in the supply chain are awakening to the
246
Recently, Fresnillo began to see opportunities to position
opportunities that crossing the Mexican border could hold
itself in the global market. The operator, listed on the
for them. Alberto Leal, Business Development Director
LSE, owns more than 350,000ha of concessions in Peru,
of Cribas y Productos Metalicos, says many have been
making it the largest holding for exploration in the
motivated to do so due to the fact that international
country. CEO Octavio Alvídrez says Fresnillo is laying
companies are coming into Mexico to compete. “We are
the groundwork for a strong Latin American pipeline
competing in Mexico against local and global companies but
that goes beyond Mexico. “In Mexico, we have 1.8 million
we are also competing globally against these companies,”
hectares of exploration concessions and many targets
he says. “We have started to export our products to the US
to explore but we believe that it is always healthy to
and South America. The world has become so small that
diversify,” he says.
it has allowed Mexican companies to sell internationally.”
When NAFTA went into renegotiations, many industries
TRANSITIONING FROM PRIVATE TO PUBLIC
in Mexico saw the need to diversify away from the US
But to compete on a global level, companies need
market. Although Mexican mining does not depend
transparency, strong governance and accountability.
directly on the neighbor to the north, Mexico has a
José-Oriol Bosch, CEO of BMV Group, says this is exactly
strong mining relationship with Canada, and the seed of
the kind of opportunity that listing on a stock exchange
diversification seems to have been planted in the minds
can offer, pointing out that the exchange’s penetration
of miners. The Mining Undersecretariat is taking steps
within mining is still minimal. “We have a few mining
to form new relationships with new mining jurisdictions.
companies listed on the BMV, but not enough,” he says. “The mining sector represents 4 percent of the country’s
“Many MoUs the previous General Mining Coordination
GDP and there are many mining companies working in the
had signed were not being followed up. We decided to
country but we have only four companies listed on the
make sure these agreements were being put into action,”
BMV: Peñoles, Grupo México, Autlán and Minera Frisco.”
says Mario Alfonso Cantú, Undersecretary of Mining at the Ministry of Economy. “We also increased our outreach by
To improve the participation of the mining industry in
diversifying beyond Canada, even though this country will
the BMV or BIVA, the recently-created stock exchange
always be our main mining partner. The Undersecretariat
in Mexico, companies believe it could adapt more to the
identified the main mining events and regions in the
needs of the mining industry. “The BMV and BIVA need
world that the sector could benefit from and decided to
to incorporate additional and dedicated elements to truly
increase its presence in these areas, including Australia
attract investors,” says Alvídrez. “It needs to create a
and China.”
platform for mining investors and a defined plan to start creating a mining culture for investment in our country.”
SUPPLY CHAIN FOLLOWS As the government and major operators drive this change,
Companies like Fresnillo and Telson Resources have
so the supply chain follows. According to Ricardo Díaz
found opportunities in foreign stock markets, such as the
de León, Infrastructure, Mining, Logistics and Tourism
TSX and the LSE. But the Mexican market is beginning to
Coordinator at ProMéxico, international markets, especially
wake up and offer more funding options. Accendo Banco
is a Mexican bank that offers specialized products to
REAPING THE REWARDS
the mining sector, including term loans, revolving credit
Mexican mining is a traditional industry in Mexico but
facilities, bridge and mezzanine loans, nonconforming
for many years this seems to have held it back. With
project finance facilities, leasebacks and factoring
the blinkers focused solely on production levels, the
facilities.
national industry flourished, but it was confined by its own borders. Now, Mexican miners are beginning to
Javier Reyes de la Campa, Co-CEO of Accendo Banco says
institutionalize, focusing on financing, new technology,
it sees a great deal of possibility in the recovering sector.
strong governance, transparency and developing human
“This 10-year global mining industry crisis has translated
talent to create a platform to jump into other markets.
into very limited financing for mining companies, particularly for small to medium-sized companies,” he says.
ProMéxico and other governmental agencies are
“Mexico, which is among the countries with the richest
collaborating to boost this momentum further by creating
natural resources, does not have a bank that supports the
partnerships with complementary mining jurisdictions.
sector. This crisis has presented us a unique opportunity
“We should see the growth of our southern neighbors
to provide financing across the whole mining spectrum.”
more as an opportunity to collaborate than as a danger of competitors, says Díaz de León. The trade agency is
THE SEARCH FOR TALENT
focusing on creating an agreement with Chile that will be
Besides cleaning up their finances, Mexican companies
replicated in Peru and Argentina to exchange specialized
are also starting to focus on developing their talent. “We
products and technology. “We want mining companies
used to consider our growth objectives to be the biggest
to increase their vision beyond national growth and find
challenge that we faced but now that we are about to
areas of opportunity internationally. Many do not know
meet our IPO goals of doubling production in 10 years,
that they are ready to export and we can help them
we consider the lack of human talent to be a greater
get started.”
obstacle,” says Alvídrez. MEXICAN OPERATORS WITH INTERNATIONAL PROJECTS
Fresnillo is targeting this challenge by focusing on training programs for younger generations. “We are responding to the situation by supporting educational
Company
Location
Name
Status
initiatives around the country,” Alvídrez says. “We work
Grupo México
Spain
Aznalcollar
Suspended
US
Mission
Operation
Zacatecas, Sonora and Chihuahua, among others. We
Ray
Mine and plant
also provide training facilities where students can go and
Silver Bell
Mine and plant
improve their knowledge and skills.”
Hayden
Plants
Amarillo
Plants
Tantahuatay
Operation
closely with universities in Mexico City, Guanajuato,
This sentiment is echoed by Carlos Silva, CEO of Carrizal
Peru
Mining. “Human capital is a big priority for us. We do not rely on recruiters and have developed a unique system to select team members that includes a threemonth probationary period,” he says. “Finding and retaining talented people is always a challenge. Through our system, we carefully identify the strengths and weaknesses of each member and create a plan to further develop each one.” In terms of the domestic market, the rising competitivity
Los Chancas
Future project
Tia Maria
Future project
Cuajone
Operation
Toquiepala
Operations and plant
Ilo
Plant
Catanaye
Future project
Industrias Peñoles
Peru
Racaycocha
Exploration
Fresnillo
Peru
Pilarica
Prospect in Drilling
Santo Domingo
Early Stage Exploration
La Pampa
Early Stage Exploration
Supaypacha
Early Stage Exploration
Alto Dorado
Early Stage Exploration
may have many companies concerned but those that see it as an area of opportunity have found many advantages. The fresh vision has helped push the industry to improve the quality and services it provides. “It has gotten to the point where the Mexican customer demands high quality and is not willing to settle for a low-cost, low-quality product,” says Leal. “The Mexican mining industry has risen to the highest global standards and this is what we aim to provide.”
Source: CAMIMEX
247
| VIEW FROM THE TOP
PREDICTION OF A GENERATIONAL TALENT GAP CAUSED BY THE DOWNTURN OCTAVIO ALVÍDREZ CEO of Fresnillo
Q: What is the single greatest obstacle that Fresnillo will
stage in the future. The growing presence of the mining
have to overcome in the coming years?
industry has the possibility of changing the reality of the
A: We used to consider our growth objectives to be the
state as it will bring economic growth and quality jobs.
biggest challenge that we faced but now that we are about 248
to meet our IPO goals of doubling production in 10 years, we
Q: Why did the company decide to list on the LSE over
consider the lack of human talent to be a greater obstacle.
more traditional mining markets such as the TSX?
We have a large portfolio of projects but we consider the
A: Before deciding to list on the LSE, we thoroughly
most precious asset in our company to be our talent. The
reviewed the markets in London, New York and Toronto.
downcycle in the mining industry caused many people to
Due to the size of the listing we reduced our options to
stop working in the industry and now there are many gaps
New York and London. And then we saw that mining had
to fill in medium to high-level positions.
greater weight in London than in New York. Due to the listing being primary and a secondary, the tax implications
Q: How will the new anti-bribery and corruption legislation
also had a weight on the decision. As a Mexican company
impact the mining industry?
with more than a century in mining, it was very important
A: This is a very positive initiative not only for the mining
that despite the fact that Fresnillo would be incorporated
industry but for the entire country. We are listed on the
as a UK company, we would be able to pay all taxes of the
LSE and since day one we have had to comply with the UK
listing and then those required in Mexico. This was a strong
Bribery and Corruption Act. It is very strict but with our
priority that brought us to the LSE. We have been studying
company’s values and profile we have not had compliance
the possibility of a dual listing in another market but since
problems and we have seen and we know the benefits of
only 25 percent of our capital is in the UK market, further
following these types of norms. As a company with an
dividing this percentage would only put more pressure
already-strict governance structure we comply with this
on the liquidity of our shares. For this reason, we are not
new initiative in Mexico. The sector is responding positively
considering it at the moment.
to the legislation. Q: What would you like the new administration to prioritize Q: What does the company want to see in Guerrero before
when it comes to the mining industry?
advancing projects in this state?
A: The new administration needs to understand the
A: Security can be an issue in certain isolated areas within
importance of the mining industry in Mexico and its
the country and even though we have an interesting project
ability to compete globally with other jurisdictions.
in Guerrero we have not been able to deploy exploration in
Larger companies have the privilege of being able to
the area due to these issues. We have tried a couple of times
choose or buy projects in different countries and they
to start exploring it but unfortunately, we have experienced
prioritize investments in regions that have the best
safety problems and have removed our people from the
investment platform in terms of permitting processes,
area. Thanks to our large project portfolio we can pause our
taxes, infrastructure, mining law, clear and defined mining
efforts in this area and direct them toward less challenging
development policies and human talent. It is crucial that
regions. We hope that the area will be at a more stable
the new mining authorities prioritize strengthening the areas in which we lack competitiveness. We need to make exploration 100 percent deductible. We need an efficient
Fresnillo is the world’s largest silver producer and Mexico’s
and clear permitting process, clear rules and processes
largest gold producer. It is listed on the London Stock
for indigenous consultation when and if applicable, access
Exchange and has seven operating mines across Mexico. In
to land policies and guidelines and a reduction in security
2017, it produced 58,7 million ounces of silver
issues to lower the cost of operations in Mexico.
INSIGHT |
GLOBAL MINING A HARSH ENVIRONMENT THAT DEMANDS COMPETITIVITY JOSÉ JAIME GUTIÉRREZ Director General of Grupo Minero Bacis
The mining sector is ever more international, and Mexican
since the 1940s. Since then, diversification has proven to
mining companies face the threat of becoming an
be another crucial factor for competitivity and nowadays
endangered species, according to José Jaime Gutiérrez,
the Bacis group consists of several companies, while the
Director General of Grupo Minero Bacis. “Mexican mining
family also has other related but separate businesses.
has decreased in competitivity due to many factors, such
“We have had participation in various mining companies
as the cost of capital,” he says. The key is to ensure they
such as Austin Bacis. We have also participated in
remain competitive in a globalized market.
other companies that are related to the mining sector but not part of Bacis. These correspond to a personal
But guaranteeing competitivity is easier said than done. Gutiérrez proposes a series of factors that have allowed Bacis to endure in the mining market for over three centuries. Careful management of costs and pursuit of a sustained expansion is the first tip. “Our success comes from having very low costs compared to the national average. This has allowed us to grow our company over 10 times,” he says. “Keeping production costs low also enables us to operate at a zero-debt level.” Exploration should also be a priority as it is directly related to the future reserves of a company. In Bacis’ case,
“
diversification of our business, but with Bacis remaining the priority,” he explains.
Our success comes from having very low costs compared to the national average. This has allowed us to grow our company over 10 times”
it has been more profitable to fund its own operations. “We explore with our own resources. We own some of
Despite being a family company, Bacis understands
the most important reserves in Mexico, with resources of
the need to take the next step in its organizational
over 100 million silver equivalent ounces,” he says. “We
growth through institutionalization. “Becoming more
will keep prioritizing exploration as our company’s base
institutionalized is one of our current key programs
and growing our reserves as we have not yet explored
to professionalize the company,” explains the Director
more than 40 percent of our concessions’ land.”
General. “The possibility of listing the company in the stock exchange remains an attractive option to consider
In 2018 Bacis expects to produce 10 million ounces of
in the future,” he adds.
silver equivalent, accounting for a 30-35 percent YoY rise in production. Bacis’ current mill capacity is 1,500t/d
As for Gutiérrez' final tip to remain competitive, he
but the aim is to increase it to 2,200t/d in the short term.
firmly believes it is simply fundamental to understand
“This implies a significant investment in infrastructure
and consider those factors that are exogenous to the
of about US$45 million,” he says. “One the main factors
company’s control. In Bacis’ case, its primary focus is on
for mining competitivity is to understand it as a capital-
Durango but certain aspects of the state are not conducive
intensive industry.”
to mining activity. “The state has a significant lag of public infrastructure, which is its greatest weakness,” he says. As
The Bacis Group is a family-owned company with various
for the country outlook, Gutiérrez mentions that Mexico
operations in Durango stretching 100 years. It was
lacks a stronger and better-defined rule of law. “This
founded by a UK company and originally named Bacis
is one of the main problems for mining in Mexico. Our
Gold and Silver and listed on the London Stock Exchange.
grain of sand is aiming to be a role model in productivity,
In Mexico, the Gutiérrez family has owned the company
efficiency and as a socially responsible company.”
249
| VIEW FROM THE TOP
NATIONAL ACCESS TO CAPITAL KEY TO PROMOTING INDUSTRY DEVELOPMENT RAMÓN DÁVILA Minister of Economy of the State of Durango
250
Q: What do you consider to be essential elements behind a
A: Companies need a high level of social responsibility to
successful mining company in Mexico?
obtain social license and the government should facilitate
A: It is important to make timely decisions and to know
communication with surrounding communities. The
how to take calculated risks. Success depends on the
authorities should visualize and support these aspects.
expertise of integrated expert teams The success of a
The development of infrastructure plays an equally
company ultimately depends on its human talent. I also
important role. The communities need to understand that
think one of the main reasons why mining does not grow
companies are not responsible for everything and will not
in Mexico is because it depends on foreign investment
take over the duties of the government. That is why the
and the country does not have a financial system that the
Mining Fund was created: to make sure the government
industry can use. We need to find opportunities to improve
can do its part in the industry.
the country’s financial context. Banks and investors in Mexico are not familiar with the industry and feel hesitant investing in it.
Ramón Dávila has been National President of AIMMGM and President of the Education Commission at CAMIMEX, as well as
Q: How should the role of the private and public sector be
President of the Private Business Sector of the State of Durango.
divided to strengthen the Mexican mining industry?
He has also held important positions in private mining companies
VIEW FROM THE TOP |
OPERATOR PUTS CSR AT THE HEART OF MINING CARLOS SILVA Director General of Carrizal Mining
Q: As the Mexican mining industry becomes increasingly
Human capital is a big priority for us. We do not rely on
international, what are the main challenges that companies
recruiters and have developed a unique system to select
in the sector face?
team members that includes a three-month trial. Finding
A: Before the year 2000, the mining industry here was
and retaining talented people is always a challenge.
predominantly Mexican. It was not until 2003 that foreign
Through our system, we carefully identify the strengths and
companies started to enter Mexico and they have added
weaknesses of each member and create a plan to further
a new perspective to the sector. The transition has
develop each one.
not always been easy and we need to strengthen the leadership skills at both international and Mexican mining
Q: What are the companyâ&#x20AC;&#x2122;s plans for the Zimapan
companies. The industry is also struggling to maintain
concessions?
its strong family values. Before the sector became more
A: We are not owners of the concessions in Zimapan and
global, Mexican operators often invested in developing
this means that the mine has a limited lifespan. Carrizal
neighborhoods close to the mines so employees could
Mining plans to expand the mineâ&#x20AC;&#x2122;s lifecycle by acquiring the
bring their families with them. But it is no longer as
concessions. The area has a history of mining. PeĂąoles left
common for miners to take their families to projects that
the area in 2000, Trafigura then entered the area in 2004
are in remote areas and companies are no longer investing
and left in 2008 and we came into the picture in 2009.
in developing nearby neighborhoods. Miners used to work
We hope to continue the mining tradition of the area by
six days a week and rest one. Since their families were
expanding the project.
close to the mines, they were able to dedicate this day to spending time with their loved ones and to see them
Q: How are women impacting the industry and what role
at least once a week. But now miners work 20 days in a
do they play at Carrizal?
row and rest 20. Due to the family structures in remote
A: Women continue to have an important role in the
areas, often mothers must take care of the family alone
company. Most companies hire women to simply handle
for 20 days at a time. Now, Carrizal Mining is contracting
public relations with the government or for similar
families rather than employees for 20 days at a time. As
roles, but we go beyond that and make sure they are
a result, our productivity is better and the families are
an important part of our operations. We have women in
extremely happy onsite.
executive positions. We have four managers, only one of whom is male. We have a woman in charge of analyzing
Q: What have been the main results of the organizational
risk in our operations, a woman in technical services and
changes Carrizal Mining implemented?
a woman in the administrative and financial area; all are at
A: In 2013, we decided to internally change our focus
the highest level of the company. The matter of women in
because the company was in a weaker financial position.
mining is often used by companies to help strengthen their
Thanks to these changes our company has enjoyed a
reputation. But the roles that are given to women are all
steady rise in profitability over the past three years. 2017
too often superficial. Not enough women are being given
was a great year but prices did not reach the levels we
directorial or leadership positions. Carrizal is one of the few
saw in 2012. To keep profit levels up, we had to increase
companies that offers these opportunities.
productivity and efficiency. We also went back to the basics and focused on acquiring a team imbued with values that align with those of the company, such as honesty, respect
Carrizal Mining is a Mexican-owned company located in
and keeping the family close. This has helped bring more
Zimapan, Hidalgo. It produces lead, zinc and copper. It is
purpose to the company and to maintain production levels
committed to being a sustainable company, dedicated to the
at an optimal level.
environment and to the health of its human capital
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TRAINING, SECURITY THE KEYS TO BOOSTING MINING PRODUCTIVITY JESÚS HERRERA Director General of Detector Exploraciones
Q: How can mining companies succeed in boosting
interact with nature there will always be some disruption,
productivity levels?
but we try to keep it to a minimum.
A: All mining equipment is designed to achieve certain
252
daily, weekly and monthly productivity levels. But I believe
Q: What is the future relationship between miners and
that productivity is more dependent on human capital
technology in the era of automatization?
and the training that companies provide. If the mining
A: It is not viable to compete against technology. The
industry invests in the development of its people, it will
mining industry will become increasingly automated and as
achieve higher returns. As our costs will also go down, we
machinery starts to perform certain processes, companies
will be more competitive and our clients will give us more
must figure out where to relocate personnel. Machines
work. Our main concern as a company is the safety of our
cannot replace human beings; there must be someone
people. If we lack proper security, we will end up having
operating the equipment. Otherwise, we would have a
accidents, which will stop production, lowering output. It
robotized world in which humans do not work but subsist
is crucial to provide adequate safety and security training.
on money paid by the government. Technology is already here but more changes are coming. As one robot can do
The industry will always seek to cut costs and drive up
the work of 20 people, for example, this can be a worrying
productivity. In our case, we focus on developing our
future. But at the same time this can be an opportunity
human capital and also on modifying our technologies to
to increase safety. Regardless of how good a company’s
have more autonomous equipment. Our drilling machinery
security protocols may be, there is always a certain risk of
is modular and transportable. But as Detector Exploraciones
accidents when humans are involved.
was designed to create jobs in the areas in which we work, we strive to be at the forefront of technology without
Technology is also helping the industry to be more efficient.
automatizing all our processes. It is also imperative that
For example, in the exploration process, we will continue to
we not lower our costs at the expense of the environment.
require engineers and other specialists to carry out regional
We are committed as a company to avoid damage to the
studies and determine the areas with mineral potential.
environment when taking drilling samples. When humans
But the available technology, such as aerial pictures and
The industry seeks continuity through implementation of a plan for the next 20 years
geophysics, helps them predefine where to go and take samples. The existing technology, by itself, cannot tell where all the mines are located or their potential mineral grade. Q: How can the Mexican mining industry promote an increase in foreign capital inflows? A: The recent taxes are certainly driving foreign capital to other mining jurisdictions where taxes are lower or more favorable. This is especially true for high-risk capital.
initiatives but these often lack stringent regulation and
Another factor that can scare off investment is the lack
enforcement. I also believe the government has made an
of security. Mexico must have physical security first but
effort to better link the country through road infrastructure.
must also strive for investment security, with its laws and
But I believe it should keep investing in railroads, which
regulations being respected. I believe we need to seek
would benefit the whole country. We are also lagging in
continuity by implementing a plan for the country over the
our airports, and at the national level this infrastructure is
next 20 years that will transcend political administrations so
very poor. I hope to see NAIM finished and boosting the
investors can have certainty that they will receive returns
Mexican economy but the government must also invest in
on their investments. As we lack this plan, governments
local airports. 253
can easily impose new taxes to fund their deficits at the expense of Mexican competitiveness.
All these factors require a long-term master plan for growth. Every government seeks to make its own
Q: What is the main obstacle you face as a junior company
contribution, but these efforts are not often aligned to
in the mining exploration industry?
an integral long-term plan and thus do not really solve
A: One of the main obstacles for exploration is the
the problem. The next administration must also focus on
deductibility of pre-operating expenses, which is now only
improving safety in Mexico. I believe it is crucial to really
possible after 10 years. Also, it is key to clarify the regulations
enforce the law and I am optimistic about this transition.
regarding land ownership and mineral concessions so there
We must strive to have transparent governments,
are binding rules regarding the environment and the impact
starting from the municipal level. Citizen committees
that mining can have on local communities. The government
must question and audit what the government is doing.
must strive to have trained and capable people who really
Everybody enjoys complaining about the things that the
know the mining industry placed in the right positions.
government does wrong but not everybody is willing to devote time to fixing it.
Q: What is on your wish list for the next administration? A: We must eliminate all the policies that are not working, which requires a deep analysis of the impact of projects
Detector Exploraciones is a Mexican company founded in 1997.
and regulations. If all government involvement in the mining
It provides geology, geomatics and other exploration services
industry were prejudicial, the sector would have collapsed
to both mining companies and the public sector throughout
long ago. Having said that, local governments have good
the country
| INSIGHT
HOW ZACATECAS DEVELOPS THE BEST MINING TALENT JAIME LOMELÍN President of CLUSMIN
254
As the mining industry once again flourishes globally,
also provides training to technical and administrative staff,”
operators need reliable contractors, staff and a strong
explains Lomelín. CLUSMIN, with the financial support of
pipeline of human capital to make operations more efficient.
its associates, provides free courses to continue nurturing
The Mining Cluster of Zacatecas (CLUSMIN) ensures the
the current workforce. The topics vary and include
state remains an industry leader through the development
sampling techniques, welding workshops, rock mechanic
of its key asset: people. “We are convinced that the most
seminars, explosives management and structural design.
important resource of a company is its human capital,” says
“We are proud of setting the standard for a collaborative
Jaime Lomelín, the cluster’s President.
economy,” he says.
Zacatecas is the No. 2 mining state in the country, after
Several mining companies, such as Minera Frisco, have shown
Sonora, with the industry accounting for 17.9 percent of
their support for the cluster’s initiatives by opening training
the state’s economic activity, according to INEGI. To meet
and research centers in the state. “The Zacatecas cluster
the growing needs of this mining hub, CLUSMIN set out
follows a unique model that brings clients and suppliers
to define the labor needs up to 2025 through a study on
together in the same association,” says Lomelín. “Its success
the future of mining in Zacatecas and its talent challenges,
is due to the joint participation of all its members. It is a
funded by CONACYT. Its findings allowed it to better
project that transcends political administrations and with
take advantage of the state’s privileged mining features
healthy finances, it retains a small, efficient management
for developing the best talent. “The strategy strives to
team and outsources most of its services.”
ensure a healthy and safe workplace for all miners and in harmony with the environment,” Lomelín says. These goals
CLUSMIN is thriving as a promoter of mining in the state,
are achieved through training and the exchange of best
but it has not been an easy initiative. “We started from
practices among all the cluster members.
nothing and it has been an exciting road,” says Lomelín. “The cluster is moving quickly and achieving its goals thanks
The association includes several universities, such as the
to the collaboration of our members to reduce industry
National Polytechnic Institute (IPN), the Monterrey Institute
costs, improve services and have trustworthy partners.” At
of Technology and Higher Education (ITESM), the University
its inception, the cluster was an initiative of the Zacatecas
of Zacatecas (UAZ) and in particular the Technical
State Council for Economic Development. When the council
University of Zacatecas (UTEZ), which enables CLUSMIN to
determined that there were not enough operators to form
foster student involvement in the industry. “Within a 300km
a cluster, it decided to include clients and suppliers to
radius there are 18 mines, so there are many opportunities
increase productivity across the whole industry value chain,
for students to better prepare and obtain internships within
create more jobs in the area and reduce criminality.
the mining industry,” says Lomelín. This helps the state to develop high-quality talent that will graduate with real
Today, CLUSMIN is a civil association divided into four
work experience in the industry. “As mining companies
committees that endeavors to boost productivity and attract
participate in defining academic plans, there is a better
more mining investment to the state. These committees are
synergy between businesses and academic institutions,
for supplier development; human talent; health, safety and
and this already happens with IPN’s Metallurgy Engineering
environment; and technology and innovation. They have
students that spend three weeks in the classroom and one
80 associate companies and eight mining groups with 18
week in the field,” he continues.
units operating within a ratio of 300km. It also has become a regional cluster, with active participating members from
But it is not only about making sure the new generation of
Durango, San Luis Potosi and Aguascalientes. The state
mining professionals gets the best preparation. “The cluster
governments are also engaged participants.
VIEW FROM THE TOP |
NATIONAL CEMENT COMPANY COMPETING ON GLOBAL SCALE ENRIQUE ESCALANTE CEO of Grupo Cementos de Chihuahua (GCC)
Q: What role does Mexico play in the global cement market?
The company is also constantly analyzing its plants to
A: Cement is a completely globalized industry. Mexico
determine which ones need an expansion plan. We also
plays an important role in this industry because of its
look at other growth possibilities, such as acquisitions.
significant domestic consumption. Although the country
We have prepared expansion projects for our plants in
exports cement to the US, and GCC is one of the primary
Mexico and for some others in the US. As soon as we
exporters, most of the cement produced is destined for
notice that there is a solid increase in demand, we can
national consumption, given the development of the
expand these plants rapidly. These expansions in the
country’s infrastructure. Hence the importance of having
cement industry take a couple of years, but in our case,
a competitive offering. Due to the global nature of the
we have already advanced in the valuation and design
industry, many of the world’s largest cement players are in
of several projects.
Mexico, including LafargeHolcim and CEMEX. Its offering is complemented by local players such as Cementos Cruz
Q: What would GCC ask the next presidential
Azul and Grupo Cementos de Chihuahua.
administration to prioritize for the mining industry? A: Both the mining and cement industries are long-term
Grupo Cementos de Chihuahua operates in two markets, in
industries. To work in these industries, businesses require
the northern part of Mexico, almost exclusively in the state
certainty. Any person willing to invest and risk capital over
of Chihuahua except for the sale of new products or special
the long term wants to make sure that the rules of the
additives that can travel longer distances and are destined
game are clear and they are standardized for all the players.
mainly for the mining industry. We sell those across the
For the new administration, I would suggest that it be made
entire country, South America, and in the US. Both the
very clear that we are a country that applies the rule of law,
national and international markets are fairly relevant for
and that this rule of law provides certainty for any investor
the company. However, we have experienced our largest
regarding private property and the long-term concessions
growth in the US, which today represents a much larger
that have been obtained.
market than Mexico. Other important elements for the mining industry include Q: What are GCC’s plans to ensure that the company
fiscal matters. Since it is an industry that competes on a
capitalizes on all the available opportunities?
global level, it is important to make sure that the fiscal
A: The cement business requires a long-term vision.
policy does not distort the competitiveness of the industry.
Fortunately, the company’s largest shareholders have
We need to make sure that any project in Mexico can be
always had this long-term vision and have always made
competitive with similar projects in other parts of the world.
sure that all investments carried out by the company are made with this in mind. This is reflected in the company’s
Also, the insecurity levels the country has experienced
growth and the acquisition of raw material deposits that
have made some investors nervous. Federal and local
guarantee this long-term viability.
governments need to continue working to improve the country’s security conditions, particularly in those remote
In 2016, in the US, the company acquired an additional
locations where mines are normally built.
plant in the state of Texas, anticipating industry growth, both in construction cement and in the cements used by the oil industry. In June of this year, GCC acquired another
Grupo Cementos de Chihuahua was founded in 1941. It is a
cement plant in the state of Montana. We are also about
vertically-integrated company with operations in Mexico
to finish an expansion project in another plant we have in
and the US, with subsidiaries that are mainly devoted to the
South Dakota.
manufacture and sale of cement and concrete
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| VIEW FROM THE TOP
STATE-OF-THEART TECH FOR TOP-CLASS ENVIRONMENTAL ASSESSMENT Jerjes Pantoja Director General of CAM
256
Amelia Torres Commercial Director of CAM
Q: How does CAM’s modern and high-capacity
Q: What is your assessment of the environmental regulatory
environmental drilling improve its clients’ operations?
structure for mine operations?
JP: Our environmental drilling fleet is one of our
JP: I perceive that nowadays the mining industry is very
key differentiators as we are the only environmental
well structured on planning for the closing of a mine. New
consultancy certified by the Mexican Accreditations Entity
projects comply with environmental regulations, ensuring
(EMA) and PROFEPA to take soil, groundwater and waste
that mine sites will be rehabilitated after their closure.
sampling. These certifications bind us to fully comply
Regarding social rehabilitation, I find that the industry
with all regulations and to seek constant improvement in
aim is to generate community value and development so
our operations. We are audited each year, which we find
the community can begin working to ensure its economic
very beneficial to guarantee our clients that we work to
livelihood when the mine closes. I think the regulatory
the highest standards. We strive to be market leaders
framework for new operations is very comprehensive
and to be recognized for our innovation. This is why we
and the industry generally has good compliance levels
constantly invest in being at the forefront of technological
as it is often also governed by international standards for
advancements when it comes to machinery and procedures.
accessing international capital.
In 2005, CAM was the first company to rehabilitate a contaminated aquifer with hexavalent chromium
AT: I think there has been a significant regulatory improvement for environmental matters in the last couple of years. Foreign companies venturing in the country often arrive believing that our regulatory framework is lagging, but what they find is environmental standards similar to international ones. We accompany our customers, both national and international, during the process of
Our equipment has the versatility to develop operational
understanding and complying with Mexican environmental
monitoring plans. Also, regarding environmental liabilities,
regulations, which in some cases I find are more demanding
we have all the machinery to identify which factors could
than international ones due to our biodiversity. CAM’s
become problematic and to measure the degree of liability.
role is as a Mexican company that specializes in Mexican
Once this is identified, CAM has the technology and is
regulations due to its nationality and on international ones
authorized to implement in-situ remediation processes to
due to our number of foreign clients. Our goal is to be a
rehabilitate the environment.
guide and facilitator of mining projects collaborating with local communities and authorities.
AT: We strive to offer integrated solutions that solve our clients’ problems from beginning to end. This saves them the
Q: How does CAM’s commitment to innovation improve
need to look up for different providers to address different
its client’s operations?
topics while helping us build long-term relationships with
AM: As we innovate, we strive to have a close approach with
them. This reliance is extremely important when dealing
our clients to familiarize them with our new technologies.
with such sensitive matters as social ones.
Often it is mining companies who are looking for new methods for doing things as they aim to constantly improve their operations. We offer the innovation but also ensure
CAM has developed more than 70 environmental impact
provision of efficient and cost-effective technologies. We
statements, specializing in complex projects. It has also
do not offer technologies just for the sake of improving
successfully performed groundwater remediation of aquifers
sales. For us the need to help our clients to be successful
impacted by metals, hydrocarbons and chlorinated compounds
in their operations always prevails.
VIEW FROM THE TOP |
DIVERSIFICATION TO SERVE ENTIRE VALUE CHAIN FRANCISCO ALANIS CFO of DMV Mining Intelligence
Q: Why did DMV Mining Intelligence decide to cover such
Q: How do you differentiate yourself from other contracting
as wide array of business areas?
companies that offer the same services?
A: DMV was born from the synergies and experience of
A: DMV prioritizes the quality of its services through the
operating a private mine, which led the company to look for
support of its divisions such as DMV Consulting and DMV
new business opportunities within the sector. From there, the
Machinery, the use of a maintenance software and internal
opportunity to provide consulting in underground mining
operating systems. In comparison to other contractors,
became a reality and the division has grown considerably
the company has a more sophisticated service and, in the
since its inception. Since I joined DMV, my efforts have focused
audits, has been satisfactorily rated. So, the way in which
on further institutionalizing the operation of the companyâ&#x20AC;&#x2122;s
DMV operates is the main strength and added value for
divisions and strengthening their added value. The group can
its customers, as well as the experience the company has
provide a greater added value across the entire value chain
gathered over the years working in the sector.
of the mining sector, from the exploration and acquisition of mines, through the planning, development, production and
Q: How is your company maintaining its competitive edge?
mineral processing to sale and closure of the mines.
A: The main challenge is to obtain the capital to boost competitiveness. In the case of DMV, it was achieved through
Q: Which of your five divisions is the most important to
the sale of a project with Endeavor to a Canadian company
DMV Mining and why?
with access to the TSX. It has required patience to get DMV
A: In Guanacevi, Durango DMV Mining still operates in
to the place it is and to create a synergy between the services
the mines of San Rafael and Fanny through a flotation
offered by the company. It has required us to balance our
plant. But the division is also exploring another project
competitiveness when some business cycles have ups and
in Huahuapan, located in the municipality of San Dimas,
downs. For example, DMV Mining is doing well and this has
Durango. Currently, DMV Contracting is the main mining
helped the DMV Contracting, which has presented a slower
contractor for Minas de Bacis and is also working with
progress, so both divisions complement each other and
Fresnillo in its Fresnillo mining unit. DMV Contracting has
strengthen the performance of the company as a whole.
grown considerably in sales and has become the most important for the company in terms of volume, although
Q: What are DMVâ&#x20AC;&#x2122;s expectations for the coming years?
it does not contribute to marginal utility like DMV Mining.
A: The central objective for DMV is to maintain its equipment
Overall, from all the business units, the mining division has
capacity and renew it through more investments. It is
shown the best performance and some minerals such as
strategic for mining operators to invest in having their own
zinc have strengthened too. Although generally mineral
equipment to guarantee the flow of the operations, since in
prices have dropped.
the mining sector in comparison to others, the possibility to buy or rent equipment can be slim or it can take up several
In the mining area the company expects to continue with
months to arrive. DMV strategically invests in underground
same exploration and development program, but there is
mining equipment to maximize the opportunities that would
also the possibility of increasing the capacity of the plant
otherwise be lost without the ownership of the right working
by 30 percent, as well as extending the scope of future
tools such as mining jumbos and low-profile front loaders.
contracts. The company wants to shift traditional contracts that are based on the development of the underground metro and exchange these for development and operation
DMV offers services that cover the entire life cycle of a mine,
of junior mines. For this project, DMV Mining will mainly
from exploration, development to mineral processing. It is
focus on junior mines of underground mining operation
composed of five divisions: DMV Mining, DMV Contracting,
in the north of the country, due to the operative facilities.
DMV Flotation, DMV Machinery and DMV Consulting
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PORTFOLIO CONSOLIDATION TO EXTEND REACH HÉCTOR TORRES Director of Sitsa
258
The fact that mines are often located in remote areas is
an effort is being made to develop more efficient engines,
challenging, especially toward the northwestern part of
which translates into higher power using less fuel, thus
the country in traditional mining states such as Sonora and
decreasing operational costs and the environmental impact.
Chihuahua. Héctor Torres, Director of heavy machinery
“As for the mining processes, I find that companies are
distributor Sitsa, saw the need to set up its new branch in
increasingly taking more care of sustainable operations
Hermosillo with this in mind, and two of its technicians provide
given the risk of punitive economic measures,” he says. “If
services directly to the Cananea mine. “As we are newer to
mine operations are carried out with a strategic planning,
the market and despite all the years of acquired expertise that
I am convinced that the environment can be completely
backs us up, the territory is a challenge in itself,” he says. “So,
restored after the mine closes.”
we have very clearly identified that this is a pressing issue and we have people living in key logistics points.”
Entering its 11th year in Mexico’s mining industry, Sitsa is opening its eighth branch in Hermosillo, which it expects will
Sitsa is part of a group with 45 years of experience in
be fully operational by the end of the year. It will specifically
the market but as a company it started in 2007. It has
be targeted to the mining sector, like the company’s offices
experienced the cyclicality of the mining industry, through
in Durango. “We visualize a standardized block composed
both the high points and the lows. Torres says he would
by our operations in Chihuahua, Durango and Hermosillo,”
advise foreign firms entering Mexico to look for strong
he says. Sitsa’s market is segmented into three sections: big
business partners in the country and build a solid supply
mining groups, independent mining companies and mining
chain. “As for the definition of a good business partner,
contractors. About 50 percent of its portfolio is focused
I think this encompasses many different factors like the
the latter, 20 percent on the second and 30 percent on the
market role, trajectory and years of experience, among
former, according to Torres.
others,” he says. The company’s current priority is to consolidate its portfolio. He believes that the heavy machinery industry is lagging
To do so, it is establishing strategic partnerships. One
in transitioning into more sustainable machinery. However,
company with which it is working closely is Paus Machinery.
VIEW FROM THE TOP |
LINKING MANUFACTURERS’ SOLUTIONS WITH ENDUSER NEEDS MONSERRAT MONTESINOS Director of DICISA
Q: In what part of the mining cycle does DICISA offer the
Q: What are the main areas of opportunity for increasing
most value and why?
the industry’s competitivity and what is your role in
A: The mining industry represents particular challenges due
accomplishing this goal?
to its locations and demanding operations, and the goal is
A: We have to adapt and take advantage of the new
to optimize production and reduce costs. The supply chain
technologies that emerge, such as industry 4.0 or
has to be aligned to these needs and this is our role and
IOT. Our role as a channel supplier is to incorporate
the value we provide. We provide advice, technical support
manufacturers’ innovations into our customers daily
and reliable delivery service.
operations. DICISA also acts as a logistics partner as our value relies on timely delivery, so we also have to adapt
Our mandate is to provide power distribution, control and
and use these new technologies to improve our supply
lighting solutions. Based on our 35 years of experience in
chain management.
the mining segment, we have achieved a specialized and consolidated offering and our trajectory attests to our
As a Mexican company our strong values drive all our
dependability. Our clients can rest assured that we will
services, with the support of all the global firms we work
deliver on time and with the highest quality. Our goal is to
with. We are perceiving an upturn in the industry, so we
be recognized as a trustworthy solutions provider.
expect good times ahead. Our resilience to these cycles and our ability to work with our clients through the good
As an equipment supplier, we support our clients in the
and bad times has been crucial to remaining well-positioned
definition of the appropriate solution according to the
in the market. We are very focused on the mining industry
manufacturer’s offering. We are the link between end
and we want to use our industry expertise to grow our
users’ needs and manufacturer’s solutions. Our business
market participation.
model is based on our proximity to our clients. Our regular face-to-face contact allows us to identify their needs
Q: What role can women play in the mining industry and
and suggest solutions to improve their performance, all
how can the sector become more inclusive?
underpinned by the business alliances we have with the
A: I think in the mining industry, as well as in every
global manufacturers we represent.
other industry, women have to continue increasing their participation. It is proven and well-known that gender
Q: How do your services promote safer operations?
inclusion brings many benefits to any industry as it brings
A: Security is a very important element for electric
to the table different perspectives and sensibilities, and
equipment in mine operations. It has many implications,
enriches any environment. Although the mining industry
such as interrupting operations, production losses and
has been characteristically masculine, I have perceived a
especially operator security. Dealing with demanding
growing participation of women in many different activities
operations, workers are exposed to potential electrical
in the last 10 years. We still have a long way to go, as female
injuries, and technology becomes critical to increase safety.
participation is still very low, but we must break paradigms
We are key partners for mine operators to mitigate risks.
and include both men and women to progress and be more
Understanding their processes gives us the context to
competitive.
offer better solutions. In line with this concept, 10 years ago we started developing a ground fault protection panel board, known as Centinela. This solution, which will
DICISA specializes in low and medium-voltage electrical
interrupt electrical supply in the event of a failure, is used
solutions, as well as lighting projects, with more than 35 years
to protect operators in underground mines and to ensure
of experience in the mining segment, providing technical
the continuity of operations in a safe way.
support and high-quality service
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| VIEW FROM THE TOP
INTERNATIONAL EXPANSION ON THE HORIZON ENRIQUE VILCHIS Director General of TMC
260
Q: How have gains in metal prices created opportunities
Q: In what ways is the company pioneering transportation
within the Mexican mining industry?
and logistics in the mining industry?
A: We see many opportunities arising in the Mexican
A: We are pioneering transportation and logistics in the
mining industry thanks to the rise in prices for these
industry by keeping an open mind to change and innovation
commodities. This is the principal reason why the
in the market. The mining market is growing in Mexico so
investment in Mexico’s mining industry is increasing.
competition is increasing too. Currently, there are more
There is no single state without a mining project, whether
players in the field than there have been in the past five
small or large. We see new mines and projects popping
years. The only way to stay afloat is to adapt and stay one
up throughout the country every single day. The industry
step ahead of competitors.
has experienced an extraordinary boom in the last five to 10 years that has been greatly beneficial for the country
Thanks to the trust companies have in us, our services have
and the market growth.
expanded over the years. Clients continuously ask us to join them on new ventures and we are always glad to accept
Our goal is to continue the improvement of our services to
these challenges. As mentioned, our company has grown
meet the growing needs of our customers. Our company
thanks to the invitation mining operators have given us to
is deeply rooted in the mining industry and we have a
grown with them. If a client were to ask us to join them on
strong relationship with the top Mexican companies such
an international project, we would gladly accept as we feel
as Grupo México, Frisco, and Industrias Peñoles, which
we are at the right time.
have been our clients for more than 20 years. We also work with many more foreign mining companies such as
In 2000, we created TMCa, a subsidiary dedicated to
Capstone Mining.
storage. But we started to offer this service in 1994 when Peñoles asked us to create a storage for its Tizapa mine.
Q: What advances has the country made in terms of
This was the first time a company offered storage services
logistical infrastructure?
to the mining industry for exportation. As the years passed,
A: The country has improved its highways greatly. We do
we started to get more demand and we decided to launch
not have the same highways we had 20 or 30 years ago.
a company that can offer more integrated services to
Transportation is also much more regulated. It is easier to
users for storage and transportation. We now also offer
reach mines nowadays. But the country continues to have
processing and conditioning for exportation. We have a
issues in terms of security. Operators want to be able to
presence an all major ports in the country. We collaborate
use safer and faster routes. Insecurity is a strong topic in
with traders in the country such as Trafigura and Mercuria.
the industry. One of the main issues is that raw materials and mining have become part of the black market and this
Q: What would you like the next administration to prioritize
makes transportation companies a target for organized
when it comes to the Mexican mining industry?
criminals. We are responding directly by incorporating
A: We would like to see continuity in what has been
security systems, real time video surveillance and GPS
established in the mining industry. The sector provides
trackers in each of our units.
jobs for people in marginalized areas that greatly need it. A stronger mining industry would help the country’s economy. The administration should also focus on fixing Mexico’s
TMC is a company dedicated to the provision of transportation
regulation and infrastructure. In Chihuahua, we were asked
and logistics solutions. It has over 20 years of experience and
to participate in a project that greatly lacks infrastructure
started its business in the mining industry. It has a longstanding
and this implies a big challenge. I would like SCT to be more
relationship with top Mexican miners
in favor of transportation as it is overregulating the industry.
INSIGHT |
AFFORDABLE PREMIUM TIRES FOR THE BOLD CARLOS VILLARREAL CEO of Arsenal Tires
The root of any good business is to ensure there is a
nationality of a company makes no difference, as long
steady demand for the product. Carlos Villarreal, Director
as it can offer value. Arsenal competes not only on
General of Arsenal Tires says, on the contrary, the most
performance and cost, but also offers turnkey services,
important thing for the company is to create longer-
providing everything in one place for busy operators.
lasting tires. Although this lessens demand for the
“Much like the model of an all-inclusive hotel, we want
products, he says building the client relationship is much
our clients to be able to find everything they need in one
more valuable. “We really care about customers getting
place, whether it is a tire, a tube, a flap, an O-ring, a rim
the greatest benefit from our tires and being able to buy fewer. Our goal is that when they do need to buy new tires they buy from us.” Although tires have not really experienced any significant innovation since vulcanization was introduced, Villarreal insists there is a still a lot that can be done with tires to optimize operations. The first is innovation in the rubber compounds and specifications, which he says can greatly extend the life of a tire. Other factors to consider are tire pressure, rotation and how well the roads are maintained, which can all impact optimal field performance.
“
or any other tire-related component,” he says.
Our goal is that when our customers do need to buy new tires they buy from us”
The company is also expanding its initial tire offering, developing the ability to supply for any piece of equipment from a pickup truck to a 400-ton rigid dump truck. Villarreal says the company’s logistics background
Another way the company is providing innovative tires is
will also help it to extend its market share further. “We
by equipping them with sensors. “This allows us not only
can supply tires anywhere in the world now,” he says.
to automatically track tires but it can also measure the air
“We are working in seven different countries across three
pressure and temperature of all the tires in a fleet,” he says.
continents and the companies now demand the Arsenal
This technology is currently being developed by Arsenal
brand.” Rather than running up export and import costs,
and he says within the year clients will be able to find out
the company manufactures most of its products in-
the pressure and temperature of all tires of all vehicles
country with local strategic partners.
across the fleet in real-time through a cell phone app. According to Villarreal, trust and strong relationships In terms of numbers, cost savings can be significant, he
are the most important things a company should
says. “There are two aspects to consider in terms of tire
prioritize to succeed, especially in a cyclical industry
cost: the first is the initial outlay of purchasing the product
like mining. For this reason, he places great importance
and the second is the cost per kilometer or hour,” he
in backing up words with actions. He gives the example
explains. “Many focus on the initial cost but in reality the
of a miscommunication between an Arsenal sales
more costly aspect is the cost per kilometer or hour.” In this
representative and a client, whereby there is a conflict
regard, he says Arsenal has carried out studies and found
in delivery points. “No matter what it costs us, we will
that operators can save 40 percent with its tires compared
always meet the client’s expectations, whether the
to cheaper alternatives and up to 25 percent compared to
miscommunication was our fault or not,” he says. Rather
Tier 1 brands.
than believing that the customer is always right, he says it is more about creating clear lines of communication
Arsenal Tires is a Mexican company that competes
and building trust. “We want to provide what is right
with global household names, but Villarreal says the
and fair,” he adds.
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| VIEW FROM THE TOP
CONNECTING THE GAPS BETWEEN WATER SCARCITY, ENVIRONMENTAL IMPACT JOEL CARRASCO Director General of Solum Consulting Group
262
Q: How will Solum Consulting Group help spur innovation
Our approach is unique in the country as we help operations
and optimization in the Mexican mining industry?
optimize every phase of the project cycle even through
A: We help clients identify areas of opportunity in their
closure. For such projects we are able to increase cash flow
operations to reduce waste by reusing materials in every
by reinjecting leaching pads and using the capital to fund
phase of the mine cycle while minimizing the environmental
the closure of the mine. Clients understand the long-term
impact of projects. For instance, a conventional tailings
benefits of our solutions. Our company works in projects
process facility tends to consume large amounts of water
around the world, including Mexico, the US and Africa. We
and can be quite large. But we found that the filtered
can help our clients not only in terms of studies but also
tails can be reused to backfill underground workings and
engineering design, construction and operations.
eliminate surface environmental impacts. This method requires less water than the traditional one as most water is
Q: What role do you play in the Sonora Lithium Project?
recycled but may not be a viable option for every operation
A: Our team has been working on this project for several
because of the additional capital expense of filters. We
years now by overseeing the environmental permits helping
suggest this method as an option for mines in areas with
with the social impact studies and land-use permits. We also
high levels of water scarcity. Solum Consulting Group can
helped carry out field work and water availability studies.
also optimize existing and exhausted leaching pads at
The project is in a highly isolated part of the Sonora desert,
a low-cost relative to the ROI. One way to do this is by
which can be difficult as the area lacks water availability and
perforating and injecting in strategic areas to reactivate the
infrastructure. The initial investment may be higher as the
leaching pads known as secondary leaching.
company has to build new infrastructure. We are supporting the company find alternative sources of water. Fortunately, the project does not require large quantities of water and
Solum Consulting Group specializes in integral project delivery
people in the region are not high consumers of the resource.
services across a continuum of disciplines and project phases,
The company plans to start production in 2019. The industry
including design, feasibility, permitting, detailed engineering
is expressing interest in this project as it is expected to be
design, development, construction and oversight
one of the largest lithium producers in the world.
INSIGHT |
TAILORED MOLECULAR SOLUTIONS FOR UNIQUE PROBLEMS GERARDO GUILLÉN CEO of Elastómeros Taza
Mining is a cyclical industry and companies should be
the US and Chile and is incorporating new strategies to
prepared for both upturns and downturns as there are areas
diversify and expand to new target markets. “The US
of opportunity in every stage of the cycle, says Gerardo
mining industry is 10 times the size of Mexico’s,” Guillén
Guillén, CEO of Elastómeros Taza, which provides polymer
says. “At the moment, we sell through distributors in the
solutions. “We find that there are many opportunities when
country but our goal is to change our model so we can
prices go down,” he says. “Downturns give us a chance to
directly reach clients and expand our presence.” For the
test different polymer solutions for different applications
time being, the company’s portfolio is about 70 percent
and upturns allow us to demonstrate the durability of our
Mexican, with 20 percent in the US and the remaining
materials.”
“
10 percent in Chile. It is additionally considering the Peruvian market.
Elastómeros Taza focuses on developing molecule-based formulas that can adapt to the abrasion and resistance each client requires in their operations. “Each mine is unique and has different problems,” Guillén says. “We make sure to provide the right solutions for each one, keeping in mind the variations in mineral grades and abrasiveness.” The company understands the importance of personalized solutions and innovates through the design of molecules. “Everything we do is based on molecular formulas that are tailor-made for our clients.”
Each mine is unique and has different problems. We make sure to provide the right solutions for each one, keeping in mind their variations”
To meet the demand for customized products, the company
This international approach carries the need for the
invests in research and development. “Our success is based
capacity to comply and adapt to different mining
on R&D,” says Guillén. “We develop molecular polymer
contexts For example working in the US can be complex
solutions for all types of applications.” The company
since political uncertainty abounds. Nevertheless, Guillén
reinvests 50 percent of its profits into research.
is not overly worried. “As a supplier, we expected to face changes in taxes and exploration laws,” he says. “I do
Along with its personalized solutions, the company
not think that it will have a huge impact on the mining
incorporates CSR and sustainability into its model. It works
industry. We may experience some changes in taxes but
strongly to reduce its CO2 emissions, provides its employees
not very disruptive ones in my opinion.” He says that
with constant health monitoring, uses material that is
while the US mining industry continues to grow, Mexico
100 percent recyclable and contributes monetarily to an
is maintaining its position at the head of the precious
orphanage. “The perception people have of the industry can
metals pack.
have a strong impact on business,” says Guillén. “They need to know that all big mining companies fund programs that
Fresnillo, Mexico’s biggest silver producer, for example, is
focus on sustainability and CSR.” The company employs
doubling production. To continue working with companies
800 people and Guillén is convinced that the socially
of Fresnillo’s caliber and mitigate geopolitical risk,
responsible component is key to adequately supply large
Elastómeros Taza is banking on its strengths. “The company
operations.
aims to be the best supplier in the market through the durability and quality of our material,” says Guillén. “We
But the company also is focused on expanding its
are constantly developing new products to help miners
footprint. Elastómeros Taza has operations in Mexico,
continue to cut costs.”
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| ROUNDTABLE
HOW IS THE INDUSTRY PREVENTING A SHORTAGE OF HUMAN TALENT?
As the industry evolves, so does the technology. Mines are becoming more automated and complex, with the promise of autonomous equipment and man-free mines of the future. But rather than eliminating human talent, this will only create the need for more skilled, qualified workers that will be able to work remotely from cities. Mexico Mining Review asked Mexico’s mining leaders how they are adapting to this trend and what actions they are taking to strengthen the country’s human capital pipeline so it can remain a global mining powerhouse.
Mining is an important economic motor for the country and the governments at the federal and municipal levels should help promote the sector. We believe the 264
authorities should not only help Mexican companies in the industry but their international counterparts too. The help does not have to be monetary and the authorities could intervene by connecting companies with Mexican talent, which is
MIGUEL ANDRES ROZO General Manager of TDM
an important issue in the sector. The younger generations often do not get many opportunities to connect with the industry and the government could play a critical role in closing talent gaps. Companies could then train and develop people with talent. This would also help boost the economy in Mexico.
The mining industry is making a great effort to promote human talent development and attraction in the country. In Mexico’s mining history, there have been times when it did not have a positive public perception but this is starting to change. The industry has started to communicate the reality of mining which should result in new generations by raising interest in the sector. Also, public relations are
CLAUDIA MÁRQUEZ LATAM Regional Director of Mining Solutions at The Chemours Company
important to attract and retain talent within the newer generations. At Chemours, we are making our own effort by having a diverse and inclusive team. In addition, to better understand the industry, we have included team members with an important background in the sector to make sure we are speaking the same language as our clients. This helps feed the innovation in the company and allows the adoption of new and more sophisticated solutions.
The fact that mines are often in remote locations is a big challenge for the mining industry given that young people prefer to be in cities. A technology company cannot be too far from the operation. Support personnel need to speak the local language and understand the culture. You cannot simply bring a foreigner to fix the problem. It is paramount to bring new thinking and operational models into the
JARI MOILANEN Director of Digital Plant at Outotec
mining industry, even if it comes from adjacent industries, so we can create a more integrated and thriving business ecosystem. This ultimately allows companies to deliver better products to the customer by boosting collaboration not only within the industries but from other sectors as well.
Human capital is a big priority for us. We do not rely on recruiters and have developed a unique system to select team members that includes a three-month trial. Finding and retaining talented people is always a challenge. Miners used to work six days a week and rest one. Since their families were close to the mines, they were able to dedicate this day to spending time with their loved ones and to see them at least once a week. But now miners work 20 days in a row and rest 20. Due to the family structures in remote areas, often mothers now have to take care of the family alone for 20 days at a time. Now Carrizal Mining is contracting families rather than
CARLOS SILVA Director General of Carrizal Mining
employees for 20 days at a time, with better productivity as a result.
There is an increasing need for data scientists as digital disruption sets in throughout the sector. In the past, data scientists would not necessarily have been attracted to the mining industry. With its remote locations and relatively unattractive geographies, mining has always found talent attraction a challenge. This issue is one of the main reasons behind remote mining applications that can bypass the need for on-site operations. This should positively impact talent retention and the future of work within the industry, particularly the push to foster diversity and inclusion. BHP has been at the forefront of this with its aspirational plans for a 50-50 ratio target of
PHILIP HOPWOOD Global Mining Leader at Deloitte
male versus female employees by 2025.
We used to consider our growth objectives to be the biggest challenge that we faced but now we consider the lack of human talent to be a greater obstacle. We have a large portfolio of projects but we consider the most precious asset in our company to be our talent. The downcycle in the mining industry caused many people to stop working in the industry and now there are many gaps to fill in medium to high-level positions. We are responding to the situation by supporting educational initiatives around the country. We work closely with universities in Mexico City, Guanajuato,
OCTAVIO ALVĂ?DREZ CEO of Fresnillo
Zacatecas, Sonora and Chihuahua, among others. We also provide training facilities where students can go and improve their knowledge and skills.
Mines that have meaningfully invested in technology are reaping results beyond expectations. The availability of accurate information allows taking the right decision at the correct time, minimizing costs and investment. This does not necessarily mean fewer employees. On the contrary, it can improve their quality of living and pay better wages as employees are more productive. Imagine giving workers more challenging jobs that can also add more value to the industry.
ALFREDO Ă LVAREZ Energy Segment Leader Mexico and Central America at EY
In the next 10 years, robotics will play a key role in operational intelligence as mines will be managed remotely, reducing the need for a human presence on-site. Technicians need to become specialized in Industry 4.0 as these services need to reach the deepest corners of a mine. Education is simply fundamental. I think Mexico is working to keep up with these new skills. Lasec is proof of this effort. As a 100 percent Mexican company, we provide our 200 employees with constant training to remain competitive because we understand the importance of this dynamic. We have aggressive internal development programs to offer our people the best education.
JESĂ&#x161;S FLORES Director General of Lasec
265
10
THE DIGITAL REVOLUTION & INNOVATION
The mining industry has a 500-year-old history in the country that dates back to the Spanish conquistadores. Considering how deeply engrained the industry is in Mexico, companies are often reluctant to keep up with new trends in technology and automation. So how can Mexican operators take advantage of the digital revolution in the face of connectivity challenges?
Innovation is allowing operators to break out of their shells and enter the digital revolution. Those that have already taken the plunge find that technology can make mines safer, more productive and more profitable. Data analytics and centralized management systems allow managers to make informed decisions from remote locations in real time while curbing operating costs and the use of energy.
The industryâ&#x20AC;&#x2122;s leading technology providers discuss in this chapter the main trends impacting the industry, including robots and automated vehicles that will eventually replace humans doing the most dangerous tasks at mine sites, greatly reducing the probability of accidents in projects. Experts analize the potential and the challenges related to the implementation of such advanced technology in the Mexican mining market.
267
CHAPTER 10: THE DIGITAL REVOLUTION & INNOVATION 270
ANALYSIS: Cyberattacks: A Growing Concern in the Mining Industry
272
VIEW FROM THE TOP: Roberto Pérez, Siemens
273
INSIGHT: Jari Moilanen, Outotec
275
VIEW FROM THE TOP: Felipe Rivera, Schneider Electric Systems Mexico
276
INSIGHT: Bruno Juanes, Deloitte Consulting Group 269
277
VIEW FROM THE TOP: Nacip Fayad, SKF Mexico
278
VIEW FROM THE TOP: George Aguilera, GFS Corp
279
VIEW FROM THE TOP: Gerardo Gardea, Delta Solutions
280
TECHNOLOGY SPOTLIGHT: Rotating Equipment Performance
282
INSIGHT: Miguel López-Hurtado, Nanoprotech
Omar de la Fuente, Nanoprotech
283
VIEW FROM THE TOP: Alejandra Torijano, Agilent Technologies
284
VIEW FROM THE TOP: Michael Chism, AMC at IMDEX
Paul St. Onge, REFLEX at IMDEX
285
VIEW FROM THE TOP: Nick Fogarty, Seequent
286
VIEW FROM THE TOP: Patricia Nakagawa, Olympus México
287
VIEW FROM THE TOP: Álvaro Rendón, ECN Scientific
288
INSIGHT: Jesús Flores, Lasec
289
INSIGHT: Luis Tejadilla, Belden
290
ROUNDTABLE: How Can Advanced Technology Solve the Problems Operators Face in Mines?
| ANALYSIS
CYBERATTACKS: A GROWING CONCERN IN THE MINING INDUSTRY Thanks to the Internet of Things, inanimate objects such as machines and devices can now communicate with each other. While this technology is making mines safer than ever before, it has also opened new doors for hackers and competitors to break into company data and access confidential operational information Cybersecurity is a growing concern among miners as
distributes information through a synchronized network
machines and devices increasingly communicate with
in multiple sites or institutions. These transactions can
each other. According to Softpedia, 22 mining companies,
have administrators that are automatically notified when
including Rio Tinto, BHP Billiton and Fortescue Metals
a change is made or a new movement occurs without the
Group, reported 17 major cyber-attacks between 2010
need for a third party.
and 2016. Industries increasingly rely on technology and
270
automated equipment and these tools are now considered a
Blockchains may be the underlying technology of
necessity as the market-driven global economy continuously
cryptocurrencies but Ahmed explains that it has many
demands efficiency and improved quality. While technology
benefits to offer the mining industry, such as the automated
facilitates the use and manipulation of data to reduce costs
registration of mineral rights and the implementation of
and improve operations, it also means that companies
a cargo hire process that works in an “Uber-like” manner.
have the added responsibility of taking care of sensitive
It can also encrypt data being generated by IoT and
information. According to Trend Micro’s Forward-Looking
automatically execute contracts for the procurement of
Threat Research (FTR) Team, cyber attacks have a deep
everyday components such as tires and diesel.
impact on daily business operations by causing operational shutdowns, equipment damage and reputation damage,
FOMENTING TRANSPARENCY
among other events.
While blockchain can greatly protect companies from cyberattacks and facilitate processes, it has the added
The FTR team further explains that cybercriminals are much
bonus of improving the transparency of the industry. This is
more sophisticated in their technical ability and are no
a particular priority as consumers and countries are starting
longer just after money and financial information. “They are
to create requirements for companies not only to disclose
increasingly aware of the value of stolen sensitive data,” the
the source of their materials but are also increasingly
report says. Attacks can also include a wide range of players
demanding ethical supply chains.
from hacktivists, to nation-states, business competitors and even criminal syndicates.
Companies such as Samsung and Apple have declared their commitment to using ethically-sourced minerals, for
The study shows that the mining industry is particularly at
example. The Apple Supplier Code of Conduct lays out
risk as commodity trading is becoming increasingly relevant
the protections it demands for its suppliers’ employees,
in international markets, economic development relies on
including adequate living conditions, fair working hours
access to natural resources and countries need to benefit
and standards ensuring workplace safety. While this may
from their own mineral deposits. It also shares that there is
be bad news for mines that lack adequate regulation,
no clear information on the amount of cyber attacks in the
operators such as Avino Silver & Gold that can meet these
industry as companies are not required to publicly disclose
requirements are getting the opportunity to sign contracts
that they were attacked.
of exclusivity with technology companies like Samsung. “As ethical funds own part of Samsung’s stock, they
A PROMISING SOLUTION
were worried about assuring an ethical source to avoid a
But the creation of cryptocurrencies through blockchain
boycott,” said David Wolfin, President and CEO of Avino
could provide a solution and the mining industry is quickly
Silver & Gold. “Samsung chose our company because it
becoming one of its earliest adopters. According to Shabir
wanted to partner with a small company that was well
Ahmed, Mining Industry Adviser at SAP Africa in his report,
established with projects in expansion.”
Leveraging Blockchain to Revolutionize the Mining Industry, the industry discovered blockchain, which was introduced
INNOVATION IN MINING
in 2008 through the release of bitcoins, had the potential
Considering the obligations that mining companies have to
to be used outside financial services and government.
meet in the 21st century, De Beers Group, a company that
Investopedia explains that it works as a digital ledger that
provides one-third of the global supply of diamonds, has
decided to lead the way by developing the first blockchain
of attacker groups, from hacktivists and hostile regimes
platform of the diamond industry called Tracr.
to organized criminals,” It added: “Certain groups may also attempt to exploit vulnerabilities, created by the
After months of research and development, the company
industry’s heavy reliance on operational automated
finally announced in May 2018 that it had successfully
systems and IT.”
tracked 100 high-value diamonds from production to retail and expects to open the platform to the public later in the
Although the incorporation of blockchain is a sign of
year. “When fully operational, Tracr will provide consumers
openness in the industry to using new tools, the mining
with confidence that registered diamonds are natural and
sector still has a long way to go, according to Bruno Juanes,
conflict-free, improve visibility and trust within the industry
Chief Innovation Officer at Deloitte Consulting Group. “The
and enhance efficiencies across the diamond value chain,”
marriage between mining and technology companies is in
the company reported on its website. Another case of
its infancy,” he says.
mineral tracing is Gemfields’ partnership with Gübelin Gem Lab to place nanoparticles in all Kagem Mine emeralds to
José Antonio Berlanga, General Manager Mexico of metals
improve levels of transparency.
streaming company Mercuria, believes blockchain has already permeated certain aspects of mining well but it
If proven successful, the use of blockchain could easily
will take time for it to trickle down the value chain. “The
spread to other segments of the mining industry and
diamond industry is already incorporating blockchain
additional initiatives have already been put in place for
technology but for concentrate it is not the ideal time yet
the gold market. The London Bullion Market Association
as it is a business that requires face-to-face interaction,” he
(LBMA), which oversees the world’s largest spot gold
says. “For this reason, blockchain will not have an immediate
market, announced in January 2018 that it seeks blockchain
impact on the mining industry but who knows how much
proposals to prevent finance terrorism, money laundering
it will grow in the next five years. It could be used as a
and avoid conflict minerals. “Blockchain cannot be ignored,”
complement to our services.”
says Sakhila Mirza, Executive Board Director of the LBMA. “Let us understand how it can help us today and address
But as technology continues to permeate mine operations, a
the risks that impact the precious metals market.”
whole new universe of possibilities will become available for the industry. “Blockchain, an important new development,
BLOCKCHAIN IN MEXICAN MINING
could allow tokens for underground gold to be created to
In its 2017 annual report, Fresnillo, the biggest producer
serve as currency, bypassing the need to mine it at all,”
of silver in the world and the largest producer of gold
says Philip Hopwood, Global Mining Leader at Deloitte.
in Mexico, stated that cybersecurity is one of the Top
“And virtual mining and simplified supply chains could
10 risks the company faces. “As a mining company, we
derive from this. The pace of technological innovation just
may be under threat of cyberattacks from a broad set
continues to pick up.”
MAIN CHALLENGES IN CYBERSECURITY • Making sure that
• Having a strong level of
collaborators have a strong
security governance in the
sense of security awareness
supply chain
Governance
People
Threat and Technology
Process
• Investing in technology
• Incorporating best practices
deployments that rely on
into operations and
a risk-based approach
management, including
through security controls
audits and reviews
Source: The Mining Journal
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| VIEW FROM THE TOP
A TECHNOLOGY PARTNER, NOT A TECHNOLOGY PROVIDER ROBERTO PÉREZ Head of Solutions at Siemens
Q: What would you describe as the biggest needs of the
execution system replaced the 17 product management
industry when it comes the digital revolution?
solutions previously used. Development started in 2014,
A: When considering the digital revolution and innovation,
the solution was implemented in 2016 and it is expected to
we tend to think on a large scale and overlook the
generate savings of US$70 million by 2020 for the operator.
fundamentals. For example, I had initially considered that 272
a totally integrated plant using digital twins, in which
Another solution we provide is conveyor belt optimization
maintenance and operations would be fully automated,
through simulation and digital twins. Few consider the
was the big game changer. However, a year later and after
importance of conveyor belt efficiency but in fact it can
witnessing breakthroughs by my Siemens colleagues, I
create significant cost savings, reduce maintenance and
believe the common denominator in their success has
all but eliminate downtimes. Siemens continually gathers
been communication. It is essential to communicate and
data to predict failures, optimize the conveyor process and
work hand-in-hand with industry leaders and technological
ensure overall greater efficiency.
experts. This communication should also permeate the entire organization, from team meetings, to conferences,
Finally, our drive train analytics act as an overarching
think tanks and all different kinds of internal media to
monitoring system for a client’s entire operations. We
exchange experiences and information.
analyze drives, motors and gear units via a single system to match hardware and services precisely to the customer’s
Q: What kind of new products or solutions is the company
requirements. This can include the entire system or simply
planning to release in the near to medium term?
one component according to the client’s needs. This
A: Although we have a variety of products in our portfolio,
technology delivers data about the condition and health
four of these specifically offer particular added value. First,
status of the equipment to certified Siemens experts, who
Mindsphere is the cloud-based, open IoT operating system
can then advise the operator about any changes that may
from Siemens that connects products, plants, systems and
be required to prevent downtime.
machines. MindSphere connects these assets to the digital world and, through the vast amounts of data it is able to
Q: How are you stressing the value of your products to
gather, can optimize processes and production across
your clients?
a client’s activities. It is also highly scalable, secure and
A: We are on the right track for increasing direct sales by
can be used with either Siemens products or third-party
adding new team members with expertise in processes and
components.
equipment. However, in our market a low initial outlay still beats long-term value. As an industry, we must change this
The second technology I would highlight would be the
mindset and highlight the benefits digitalization can bring
Manufacturing Execution System (MES), which provides
in allowing the customer to make the right decision when
full transparency across the entire value chain and facilities.
choosing a brand. When customers face a challenge, our
In 2017, this technology was implemented by Vale across its
goal is to prove we are the right partner to help them. We
38 Brazilian sites, including 22 mines, 11 pelletizing plants,
see the potential in every mine, from a small Programmable
a railroad network and ports. Our single manufacturing
Logic Controller (PLC) to a large gearless mill mine. Siemens technology plays a key role in this shift to more
Siemens provides innovative solutions to help customers
environmentally-conscious practices. Our main goal is to be
set new benchmarks in the mining industry. Siemens offers
seen as technological partners. We want the operators and
solutions for the digitalization of plants, machines and
technology companies to understand we are all working
processes that help optimize operations
toward a common goal. Teamwork is critical.
INSIGHT |
OVERCOMING THE SYNDROME OF PROVEN TECHNOLOGY JARI MOILANEN Director of Digital Plant at Outotec
Mines are often in hard-to-reach areas and far from urban
As a technology company, Outotec is developing smart
hubs. This can cause issues when it comes to retaining talent
equipment that can provide solutions for these main issues
as trends show that more and more people are choosing
in the industry through the autonomous monitoring of
to live and work in cities thanks to the higher quality of life
operations based on a series of algorithms and artificial
on offer. “The fact that mines are often in remote locations
intelligence. This enables machines to predict failures,
is a big challenge for the mining industry given that young
allowing operators to prepare and acquire the spare parts
people prefer to be in cities,” says Jari Moilanen, Director
beforehand. Moilanen believes that the industry is heading
of Digital Plant at Outotec. “Digitalization can help as smart
toward the usage of smart and connected equipment that
plants and operations reduce the number of operators
can autonomously create technical service reports. “The
required.”
idea is to incorporate digitalization throughout the whole
“
value chain to also gather integrated data,” he says.
But with digitalization comes issues. On one hand, technology companies have to guarantee their clients that they will have the technical support they need even in the most remote areas. “A technology company cannot be too far from the operation,” Moilanen says. “Support personnel need to speak the local language and understand the culture. You cannot simply bring a foreigner in to fix the problem.” The provision of local services and connecting them with experts around the world is becoming a larger priority for companies. Outotec’s objective is to use technology to enable a global network of service support. It provides the mining industry
All companies want to benefit from new technologies but no one wants to be the first to try them”
Moilanen sees many areas of opportunity in the industry for this technology as it is starting to recover from its downturn.
with sustainable minerals processing solutions through a
He foresees the rise of brownfield projects over greenfield
comprehensive offer that delivers state-of-the-art process
developments, which will require the improvement, expansion
equipment, intelligent automation and control systems, as
and modernization of existing infrastructure. Beneath this
well as complete plants.
expansion is the growing demand for social licenses to operate. Moilanen says that digitalization will play an important
Like others in the industry, Moilanen recognizes a general
role in these trends as its incorporation can greatly ease and
resistance from the global mining industry to adopt new
expedite processes. But companies will have to overcome
technologies. “I call this the syndrome of proven technology,”
the syndrome of proven technology to fully benefit from new
he explains. “All companies want to benefit from new
solutions and break traditional paradigms.
technologies but no one wants to be the first to try them.” The syndrome is rooted in owners trying to minimize risks by
Outotec is focusing on strengthening its organizational
choosing traditional methods they are familiar with.
capabilities, skills and talent to constantly improve project execution and avoid wasting opportunities. “It is paramount
Moilanen also finds that operators do not know how to define
to bring new thinking and operational models into the
what they need in terms of technology. “They know that
mining industry, even if it comes from adjacent industries,
digitalization can greatly benefit the industry but they are
so we can create a more integrated and thriving business
not quite sure how,” he says. “We make sure to speak directly
ecosystem,” he says. “This ultimately allows companies
with our customers to create a common understanding of the
to deliver better products to the customer by boosting
problem and, step-by-step, to start building a solution that will
collaboration not only within the industries but from other
provide continuous improvement.”
sectors as well,” he adds.
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ENERGY AS A MEASUREMENT OF OPERATIONAL EFFICIENCY FELIPE RIVERA Industry Business/Process Automation Hub Leader Mexico and Central America of Schneider Electric Systems Mexico
Q: How does Schneider Electric help mining companies
to keep all equipment working at 100 percent availability; it
optimize their energy consumption?
is not viable given the high maintenance costs for this level
A: For Schneider Electric, the approach for energy
of performance. But there is an algorithm for achieving the
administration must be based on diversification of supply. This
correct operation of machinery in a certain mine that reduces
allows the creation of a strategy for cost management though
operational, energy and maintenance costs.
different energy generation possibilities. For example, some regions where mines are located are favorable for solar or
Our slogan “Energy Does Not Lie” refers to a fundamental
wind generation, among others. The idea is to build an energy
physics concept in which energy consumption reflects the
approach based on diversification and power banks, ensuring
behavior of a person, a machine and even a society. This is
availability and supply, minimizing costs and optimizing
the same principle with companies, as they must strive to
resources.
remain at their best operational performance. So, we focus on guaranteeing that their energy will be used in the best possible
All big mining companies in the country have their own
way. Within EcoStruxure there is also a specialized architecture
energy diversification plans. Schneider Electric works with
for water management that ensures the measurement of water
several of these to optimize the ways in which they can
conditions. Companies can thus manage the amount of water
generate that energy. The industry remains gas-dependent
used, how much will be cleaned, reprocessed, re-used and
so our goal is to realize a broader diversification. We are
all the energy required to achieve sustainable consumption.
convinced that the available technology, such as IoT, Big
We continuously develop technology to support EcoStruxure
Data, artificial intelligence and analytics, gives the industry a
by launching about 365 patents per year to secure optimum
tangible opportunity to optimize the use of its assets. First,
energy consumption for our clients.
companies need to strive for energy diversification and then for optimization. That is, to not depend on only one source,
Q: How can mining companies start to incorporate IoT and
but to also consume less and produce more.
IIoT into their operations for greater efficiency? A: Our technology offering can be incorporated starting
Q: How will Schneider Electric’s EcoStruxure platform
from just one sensor or engine. For example, one installed
revolutionize the Mexican mining industry?
speed shifter provides real-time readings on engine
A: This data architecture is based on the collection of all
burnout. Suddenly, the mine is working with mathematical
available technology for data management plus the company’s
algorithms as it acquires the capacity to measure and
130 years of research and development on automatization,
process information. This analysis is predictive and reports
energy optimization and asset management. At its core, it
the state of operational efficiency. Our capacity to process
impacts the capacity to process information in field devices.
information will give us power, so it is key for miners to stay
The mining industry has thousands of them, so we are
at the forefront. Technological innovation no longer takes
implementing new features for data management that allow
years but just days. As commodity prices are so volatile, the
sensors to multitask. This way, they keep performing their
industry’s needs are constantly changing. So, technology
main duty, which is to measure something like temperature
developers must keep up with these changing needs in a
or vibration, while at the same time, providing a series of
collaborative way to meet shifting demand.
readings related to the main variable. For example, this allows the measuring of a field device’s vibration, temperature and atmospheric humidity, opening the possibility for correlated
Schneider
analysis of multiple variables. As a result, it ensures a better
management, helping clients optimize energy levels and
monitoring of asset optimization and calls attention to any
resource consumption to create an overall more efficient and
piece of machinery that requires intervention. It is impossible
sustainable level of production
Electric is
a
global
leader
in
electricity
275
| INSIGHT
DIGITAL INNOVATION: THE NEXT STEP IN KEEPING CANARIES OUT OF MINE SHAFTS BRUNO JUANES Chief Innovation Officer at Deloitte Consulting Group
Process automation and lean manufacturing practices
that sensors generate can be used to create a digital twin
can optimize mining operations but Bruno Juanes, Chief
of the mine where assets and equipment can be monitored
Innovation Officer at Deloitte Consulting Group, says the
in real time from a control room,” he says. “Mathematical
next step is innovating and bringing Industry 4.0 practices
models can be applied to this information to predict and
down the pits to increase ROI. “Mining companies in Mexico
prevent failure conditions.”
are starting to realize innovation is not the circumstantial 276
answer to specific problems but a long-term, structural
The potential for technological disruption extends to
solution,” he says.
blockchains used for cryptocurrencies that can be used for material tracing from the mine’s ore to the finished
As an international professional services firm, Deloitte
product. “Any transaction can be supported by a secure
Consulting Group helps companies in areas ranging from
web to ensure it will occur,” Juanes says. “Supply chains
strategy definition and operational improvement to process
supported by blockchain will replace a substantial amount
outsourcing. “We can support our mining clients locally
of infrastructure and human activity.” Even transactional
in the main mining-intensive areas in Mexico and connect
processes surrounding mining activities offer efficiency
them with our international network of mining experts,”
that is still to be captured through innovative technologies.
Juanes says. The company has identified several areas of
“Areas such as procurement, accounts payable and human
opportunity to help mining companies operating in Mexico.
resources can already be automated.”
“
The question mining companies should be asking themselves is when to jump onto the innovation train”
Innovation has started to permeate Mexico’s economy to the point that WEF’s Global Competitiveness Report 2017-2018 ranked Mexico 70th of 137 countries in the Capacity to Innovate index. However, one of the issues that innovation faces in the country is that it has taken place unevenly among industries. “Mexico’s mining and oil and gas sectors must realize innovation is the only way to exit an adverse situation with unfavorable macroeconomic parameters,” he says.
He points out that mining operations are dangerous and complex, which makes data communication a critical topic.
Juanes says that innovation must take place at three
“We no longer bring canaries down the tunnels, but mining
levels. The core level means a company is innovative in its
has not advanced that much either,” he says, adding that
comfort zone. “It entails focusing on cost-effectiveness,
several technologies have already been developed to
social responsibility and environmental awareness while
improve mines’ safety conditions and control, but they
sticking to the markets and products where a company
are not yet widespread. He highlights smart jackets that
is comfortable,” he says. The second level is adjacent
monitor miners’ location and vital signs and sensors that
innovation, which takes place when a company attacks
detect gas leaks as examples of innovative technologies
clients, markets and products it is not familiar with and
that can improve mine security.
develops alternatives to existing products. “For mining this can mean developing special finishes for materials
Juanes also says that using drones to monitor stock piles
to cover specific needs or integrating vertically,” he
and installing sensors across a mining production chain
says. The third type is transformational innovation. This
from the mineral production point to the mineral delivery
happens “as companies develop abilities they lack but
point can enable companies to optimize costs. “The data
not necessarily need,” he adds.
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THE ADVANTAGES OF AN INDUSTRIAL REVOLUTION NACIP FAYAD Industrial Sales Director at SKF Mexico
Q: How can Industry 4.0 revolutionize the mining sector
in comparison to Chile and Peru, mainly due to the Mexican
in Mexico?
industry’s resistance to adopt new technologies and new
A: The mining industry is aware of the trend toward greater
operational models. We need to bet more on digitalization.
technological implementation. It is racing against time and
On the other hand, Mexico is competitive in maintenance
if it fails to introduce the required technology, it will lose its
strategies and general terms. I find that big operators like
competitiveness. SKF remains a robust player in the Mexican
Grupo México, Minera Frisco and Peñoles are really moving
market because we collaborate and have a solid relationship
forward. But the investment in the mining industry in Mexico
with the national champions. Our goal is to disrupt through
has decreased, as the country is becoming expensive in
technology by betting on Industry 4.0. This trend started in
terms of labor cost, among others. The Energy Reform is
Germany 10 years ago and while in Mexico it is still developing,
modifying the legal framework but there still needs to be
mining can really benefit from it, especially given the high
further consolidation to foster a greater level of investment,
expenses related to staff turnover. Seeking to foster that, we
exploration and production. Also, Mexican fiscal structures
opened a Solutions Factory in Monterrey to remotely monitor
could be modified to open access to more mineral deposits
client assets. We can efficiently and remotely supervise the
as Mexico has huge unexplored potential.
equipment’s vibration, temperature and productivity, among other key indicators. As Industry 4.0 has technology evolving
Q: What is the key to SKF’s broad diversification in the
at a faster rate, we perceive the trend is moving toward the
mining industry?
development and implementation of sensors at mine sites and
A: The key to our diversification is to work with our customers
with mining machinery.
and make them understand the added value of our products in the improvement of their production processes. The mining
We believe there are several ways in which Industry 4.0
industry has experienced some complicated years, which has
can revolutionize the industry. Monitoring through the
miners increasingly seeking to optimize and cut costs. We
implementation of control centers is one, for which we have
believe that our technology helps them to do so because we
strategic alliances with other suppliers to improve our offering
participate in the whole mining process.
in control systems. This specifically ensures the proper maintenance of critical equipment that needs to work 24/7.
Miners can be reluctant to adopt new technologies, which
Industry 4.0 is also related to energy generation and can help
often causes the industry to overuse their equipment.
provide miners with clean energy for their operations. At the
Our strategy is to work closely with mine operators so
moment, Grupo México and Industrias Peñoles are betting
they can realize the benefits of new technologies. We
on wind parks. Also, Cananea and Nacozari are some of the
analyze operators’ problems and seek solutions together.
biggest and most productive mines we are working with to
We place our human talent as close as possible to our
implement Industry 4.0 in the country. SKF is willing to input
customers, working with them at mine sites. We have
the technology and the expertise for data analysis but we first
understood that the industry demands a supply chain that
need to convince the miners about the benefits. We provide
works 24/7. But as machinery is designed to meet certain
a free trial period of around three to six months to develop
levels, operators also need to increase this capacity so
databases. This is the basis for the Internet of Things (IoT),
they can have nonstop production.
which can significantly decrease the cost of capital in mines. Q: How can the Mexican mining adopt the best practices from
SKF is a Swedish company that operates across different
other jurisdictions to increase its competitiveness?
industries. In the mining sector, the company has several
A: SKF’s broad experience in Latin America allows me to
platforms, including sealing solutions, lubrication systems,
say that Mexico is lagging along the path to digitalization
mechatronics, power transmission and services
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| VIEW FROM THE TOP
LOWER COSTS, IMPACT WITH LNG CONVERSION GEORGE AGUILERA 278
Executive Vice President of GFS Corp
Q: What makes your technology unique and why should miners buy from GFS? A: We are the only company offering a field retrofit solution that enable large mine haul trucks to operate on a blend of diesel and natural gas simultaneously. The EVO-MT system is a fully-integrated solution that can be installed in the field with minimal truck downtime. Our EVO-MT technology enables a truckâ&#x20AC;&#x2122;s diesel engine to take in a certain amount of natural gas and displace an equivalent amount of diesel. In addition to lower fuel expenditures, the overall combustion process is a lot cleaner resulting in less soot and other contaminants. Q: What cost benefit does GFS Corpâ&#x20AC;&#x2122;s alternative fuel conversion technology provide the mining industry? A: It is important to note that we store the natural gas on the truck in the form of liquid natural gas (LNG). We are focused on countries that have large open-pit mines and access to LNG either through domestic production or via import terminals. In addition to LNG availability, we look at the differential between the price of diesel and LNG on a dollar-per-energy-unit basis. This differential needs to be significant enough to offset the cost of the truck conversion and the additional equipment required to receive, store and dispense the LNG at the mine. Prior to the oil price collapse in 2014, many markets had large differentials between diesel and LNG that could justify conversion projects. The differential in Mexico today is sufficient to justify a truck conversion project and this is where our focus lies right now.
GFS Corp brings smart, sustainable and cost-effective alternative fuel solutions to customers around the world by designing innovative natural gas-conversion technologies for diesel engines
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LIBERATED FREQUENCIES WILL SPUR COMMS INVESTMENT GERARDO GARDEA Director General of Delta Solutions
Q: How has Delta Solutions’ business in the mining industry
priority since it will help create more competition, greater
evolved over its 30 years of experience?
productivity and increase safety for those working in mines.
A: When we first started working with the mining industry, radiocommunications were only used for voice systems
Q: What are the main technological trends shaping the
and their use was limited. Today, IT departments within the
future of mining communications?
industry are striving for digital radiocommunication that
A: Unified Communications is already being implemented by
includes localization services, text messaging, alert and alarms
Torex Gold’s Media Luna Mine and the Los Filos mine owned
transmission and equipment controls, as well as applications
by Leagold, in which we are also working to restructure its
for equipment and control centers, among other features.
communication systems. Delta Solutions is also working with
Of the 100 percent of our radiocommunication sales, mining
Goldcorp’s Peñasquito and Fresnillo’s Saucito mines. Besides
represents only 21 percent, but the sales volumes have grown
the unification of communications for mine operations, there
consistently as there has been a lot of industrial development
are other digitalization trends shaping the industry. The
in Mexico, especially in Monterrey. Mining is a constant
leaky feeder mine communications system operates as an
customer, as the harsh conditions of the industry require the
underground mine antenna, with the ability to work on Wi-
continuous replacement of radios. We strive to take the best
Fi. It reduces costs, it is easier to manage and it can host
care of this industry and 2017 was a record-breaking year
more devices at the same time. Delta Solutions already has
in sales for all our sectors. We took advantage of our 30-
the equipment to implement the leaky feeder wireless version
year anniversary to revolutionize the company and seek the
and have started to successfully test it in Mexico.
ISO9001 certification for technology. We also focused on the training of our human talent on strategic planning.
Technological innovation moves at a faster rate than legal processes, as every six months changes in existing technologies
Q: What is needed to achieve a unification of
emerge to improve and disrupt the industry. I think that IFT
communications in the Mexican mining industry?
should have a specific department for technology studies,
A: Radiocommunication systems are moving toward unified
so there can be a direct communication with industry
communications. This means we can provide equipment that
representatives to stay up-to-date with technological
allows cellphones calling a radio in an isolated mine. The
innovations. This will allow their timely incorporation to the
investment to change to new systems is not high as the
legal framework, achieving better integration between both.
industry already has good networks and telecommunications infrastructure. It is necessary to centralize all the different
Q: How do you break miners’ apathy to new technologies?
communications into one system that can link them all
A: I think the industry is now aware of the importance of
together. We are working in a pilot program to raise the
technology and its benefits, so we must focus on adapting
profile of unified communications in Mexico. We foresee
to companies’ budgets and investment programs, to help
a huge boom for this technology once the industry gets
them migrate from analogous to digital systems without
more acquainted with it and the Federal Institute of
interfering in their operations. To overcome the remaining
Telecommunications (IFT) passes the Secondary Law for the
resistance to change, we strive to attend mining forums and
mining industry, liberating radio frequencies for the sector.
events so we can better broadcast our technology.
This law will allow mines to increase their telecommunication investments, as the legal framework will better encompass and support them through specific mining frequencies.
Delta Solutions is a Mexican company that distributes
I think IFT is doing a great job adapting to the industry’s
radiocommunication solutions to the mining industry. The
needs, as we used to be the only country in the world with no
company represents top brands including Motorola and
specific radio frequencies for each sector. Now this is a real
Kenwood and celebrated 30 years of operations in 2018
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| TECHNOLOGY SPOTLIGHT
280
ROTATING EQUIPMENT PERFORMANCE Mining customer requirements are focused on improving the productivity, efficiency and performance of their rotating equipment. To address this market, SKF’s Rotating Equipment Performance (REP) consists of products and services that enable customers to increase the availability and reliability of industrial assets, while also reducing environmental impact and improving health and safety practices. SKF's primary goal in the development of this technology is to help end-users and OEMs meet their business goals and maintain market competitiveness throughout the whole equipment life cycle. The main premise of REP is all about combining a wide range of products, services and integrated solutions. This means the outcome is a complete portfolio of reliable engineering, high-tech condition monitoring, precision reconditioning and remanufacturing services. Most industrial companies already view maintenance as a core skill specialized to optimize processes, remanufacture critical equipment and detect early failure and corresponding root causes. These core specialties are often provided by third-party companies, as maintenance professionals recognize that day-to-day maintenance demands do not allow the time to be fully updated on the industry’s best practices. As more and more companies are taking a leap of faith and deciding to outsource maintenance functions, it becomes increasingly important to make the right choice in service providers. These must have wide-ranging knowledge of failure expertise and global standards to ensure the highest quality. This industry shift is also moving from reactive to proactive maintenance. This has led SKF to forecast a high growth in the REP market as it can meet both needs. Also, as Industry 4.0 continues to gain momentum, it is in a CEO’s best interest to implement technologies that can predict and manage industrial assets. Companies increasingly want and need to know when their equipment will fail and, most importantly, which solutions can eliminate the underlying root cause and prevent future reoccurrence. SKF’s ability to provide broad knowledge about the rotating equipment functions of applications involving bearings, seals, lubricants and power transmissions, perfectly positioning the company to take advantage of these growing trends.
281
| INSIGHT
USING NANOTECHNOLOGY TO ENHANCE MINE OPERATIONS Miguel López-Hurtado President of Nanoprotech
282
Omar de la Fuente Vice President of Nanoprotech
Adequate protection against corrosion can significantly
not trust it at first. But most tend to adopt it after sampling
minimize maintenance needs and eliminate stoppages in
the product and seeing its value,” says Omar de la Fuente,
operations by prolonging the lifespan of mine equipment,
the company’s Vice President. For example, Nanoprotech
says Miguel López-Hurtado, President of Nanoprotech.
is working with Agnico Eagle, while also doing tests with
“The costs can quickly add up if these matters are not
Grupo México and Industrias Peñoles. “We take the time
taken care of properly. Offering solutions for metal
to show clients the benefits of our coatings and lubricants.
structures is the biggest area of opportunity we saw in
We want to be at the forefront of innovation and are always
the mining industry.”
on the lookout for new solutions for our clients,” he adds.
Nanoprotech’s technology studies material at a molecular
Advancing down the innovation path, the company’s
level and offers a high amount of precision. “We are the
laboratories in Russia are constantly working to develop
only company in the mining industry offering anticorrosion
new products. “For example, we are increasing the number
lubricants and electrical insulation coatings based on
of textiles for which we can provide solutions in addition
nanotechnology, especially at our price point,” says López-
to metallic structures,” says De La Fuente. These include
Hurtado. “Our products work as an invisible layer on top of
wood, leather and even cement.
materials that can repel anything from liquids to dust and chemicals. It can be applied to machines in every phase of
The company is also promoting new waterproof solutions
the mine life cycle from exploration to production,” he adds.
that, after being designed for domestic consumption,
To put into perspective the size of a nano, 1m can host up to
were adapted to work for industrial purposes. “Many
1 billion nanos and 1cm holds 1 million nanos. Such precision
machines and trucks work under humid conditions that
can also help reduce corrosion.
cause condensation, which can make windows fog up,” says López-Hurtado. “Operations often pause for two or
But while proved successful abroad, Nanoprotech has had
three hours until the machines are completely defogged.
to face Mexican miners’ resistance to new technologies.
Our products can help remove mud, water and debris to
“People here are not used to this type of technology and do
keep windows clean day and night.”
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GREEN TECHNOLOGIES PROMOTE ANALYTICS EFFICIENCY ALEJANDRA TORIJANO Country Manager of Agilent Technologies
Q: What is Agilent Technologies’ added value to the
infrastructure that can help miners obtain a better
mining industry?
monitoring of their processes. We remain positive because
A: Our technology is characterized by robust equipment
we are constantly able to contribute with more tools for
and user-friendly software, all backed by an experienced
controlling mine operations, helping companies with
and high-level team of chemists to support our clients in the
optimization and efficiency. This is translated into better
development of their applications. These are features that
conditions for miners too, lowering their risk exposure.
translate into low operational costs and given how easy it
For example, through gas analysis we can better control
is to use our technologies, the operator does not need to
the risks of the production phase. Also, as our products
make a significant investment in training. I believe that our
serve gold, silver, base metals and other rare materials,
technology is so user friendly that the learning process is
we can cover a broader market. We provide support to
almost intuitive. As our equipment is onsite, the response
many industries but we have always had a focus on mining.
time is very short. We also offer virtual assessments so we can provide remote customer support.
We believe the future will bring a higher demand for rare earth elements, especially for the manufacture of green
We have been in Mexico for 45 years. At the moment, we
technologies, hybrid cars and other markets such as
have several mine operators using our products, such as
battery alloys, magnets and ceramics. The industry will
Industrias Peñoles, Grupo México, Agnico Eagle, Goldcorp
need to become more efficient with identification and
and Fresnillo, among others, with a significant presence
production, so the demand for analysis will grow. Most of
in Hidalgo and Zimapan. Agilent Technologies works
Mexico’s territory is unexplored, which has many foreign
with both, big companies and smaller operators. As we
companies investing in the country. This enhances the
experienced the growth of our clients along with them, we
need for mineral analysis, increasing the demand for
better understand their needs. This gives us a competitive
our products.
advantage in the market. At the same time, Agilent Global invests about 12 percent of its net earnings in R&D, so we
Q: Which regions and minerals have the most potential for
stay at the forefront of innovation and new technologies.
exploration in Mexico?
For example, we understand that the Mexican mining
A: The Mexican mining industry is meaningfully growing in
industry usually is resistant to change and apathetic to new
gold and copper production, and silver is slowly decreasing.
technologies. But we have found that miners are more than
A NASA report on mining revealed that there are rare earth
willing to experience change if it allows them to solve their
elements to be explored in Sonora and Chihuahua, so we
problems, especially related to production and costs. If a
will most likely work there in the near future. Lithium, mainly
supplier can help its client to reduce costs, the operator
used in batteries, will continue to enjoy steady demand.
will be attentive to all suggestions and open to invest. We
Also, the biggest electric car producer in the world, Tesla,
adapt to our clients’ needs as they evolve during the mining
has announced it will focus on Mexico and the country’s
cycle, which is another of our key value propositions as
lithium supply. Agilent Technologies’ goal is to deliver
our flexibility allows us to better accompany our customers
equipment that enables analytical certainty so our clients
throughout their processes.
can rest assured that the provided results are trustworthy.
Q: What is the company’s outlook for the mining industry in Mexico?
Agilent is a leader in life sciences, diagnostics and applied
A: We feel optimistic about the future given the increasing
chemical markets. The company provides laboratories worldwide
number of opportunities to analyze data within the industry.
with instruments, services, consumables, applications and
Agilent Technologies, as a supplier, has a growing analytics
expertise, enabling customers to gain the insights they seek
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| VIEW FROM THE TOP
ACCURATE GEOLOGICAL INFORMATION FOR BETTER DECISION-MAKING Michael Chism Regional Manager North America of AMC
Paul St. Onge Country Manager of Reflex
Q: AMC and REFLEX provide real-time geological
in Mexico to make sure we are close to all main projects.
information under the umbrella of IMDEX. How are you
Our main work in Mexico comes from the north but we
positioned in Mexico?
do have a few projects in the south. We are prepared to
MC: Mexico has been one of the most consistent regions
expand if the number of projects in the southern region
for us in terms of business over the last several years. The
continues to increase.
country is one of the areas where we have the best growth 284
outlook and we expect this to continue considering the
Q: How do you overcome resistance to technology from
technology we provide. Our drilling fluids line is AMCâ&#x20AC;&#x2122;s most
the Mexican mining industry?
in-demand product here. We are also starting to launch
PS: Digitalization is where the industry is going as a whole
some additional drilling systems and base tools. These
and this makes operators in Mexico more open to trying new
products took off quite quickly in other regions and we
technologies. It also helps that more and more international
believe the same will happen in Mexico once people see
companies are starting to enter the industry as some of
the benefits.
these are listed on the TSX and must follow strict standards. This is largely influencing how the sector is benchmarked.
PS: When it comes to the products offered by REFLEX, our downhole navigation solution, which includes a range of
MC: To overcome the challenges we face with companies
leading survey instruments, rig alignment tools, downhole
that are still resisting these advances, we make sure to be
motors and software and our award winning IMDEXHUB-
present at events and in the community. We also have an
IQ, is seeing strong demand in Mexico and is continuing
agent in Mexico, COMINSA, that is greatly trusted and that
to benefit from the uptick in the market. In addition to
has over 50 years of experience in the industry. This makes
improving our product lines, both AMC and REFLEX were
it easier to gain the trust of companies as they see our
rebranded recently to provide more integrated solutions
commitment to the sector and our reliability.
and become more united under the IMDEX umbrella in terms of operations. This makes sense to us as we both
Q: Through what strategies is the company helping
work with the same drilling and resource companies and
operators adapt to new trends in technology?
can provide complementary products and services.
PS: We are continuously developing leading technologies in the industry that can optimize productivity and
Q: How do you differentiate yourself from your
penetration rates. For example, the company is developing
competitors?
two new core technologies, CoreVIBE and MagHAMMER.
MC: We were one of the few companies that were investing
Drilling has not changed in the last 50 years and we
in R&D and brand expansion during the downturn. Our
believe that the technology we can provide is going to
commitment has helped us gain the trust of companies.
be a major game-changer and provide one of the biggest
We are willing to take a different approach and this is what
advances in the industry. We are also talking with Leapfrog
truly differentiates us. We also have an integrated product
and other third-party software vendors to continuously
and service offering to be able to meet client needs in a
improve our ability to manage and visualize data. The
fast and efficient manner. We have seven distribution points
new technology we announced will be able to increase the rate of productivity and penetration rates by at least 30 percent and maximize what companies can do every
AMC and Reflex are technology brands under the umbrella
day. Our idea is to transform the drilling process and help
of IMDEX, a leading global mining equipment, technology
companies do more with limited time and funds. We also
and services company. AMC and Reflex provide geological
want to provide solutions that can meet the wide variety
information in real time or near-real time
of options our clients require.
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RAPID DATA INCORPORATION FOR FASTER, INFORMED DECISION-MAKING NICK FOGARTY General Manager Mining and Minerals at Seequent
Q: What is your company’s technology strategy and how do
data management, which is about incorporating the
you meet your clients’ needs through integration?
latest data into the modeling almost as soon as it has
A: We are focused on enabling our customers to derive
been received. Our latest innovation, an advanced central
greater value from their geological data. Our integrated
management platform, creates a single source for an
solutions create insights from data that provide a
organization’s geological modeling activity. It connects
competitive advantage that delivers straight to the top
geology teams and company executives anywhere in the
and bottom line. We first introduced our revolutionary
world to offer insights and data not previously available
Leapfrog 3D geological modeling software to the mining
while improving geological risk management.
market over 10 years ago to enable quick and easy implicit modeling of data. We have a reputation as innovators and each year we make multi-million-dollar investments in product R&D to extend our capability and product offering. We partner with other like-minded innovators to provide valuable integration and a seamless end-to-end solution for the client. Our company philosophy has been that we do not reinvent the wheel in terms of acquisitions
Leapfrog 3D geological modeling software enables the quick and easy implicit modeling of data to transforms it into valuable insights
and product development. Over the past six years, we have acquired several geoscience businesses to add
Q: Why is Seequent the right partner to transform data into
new expertise and technology including a geostatistics
better business insights for mining stakeholders?
consulting business. This aided the development of our
A: In a mining operation, everything comes back to
resource estimation product Leapfrog EDGE, a grade
data. But it is meaningless if it cannot lead to a better
control solution which has allowed customers to derive
understanding of potential outcomes. There is an
greater value from the data and a science startup with
increasing recognition about the need to get on the front
valuable expertise in transforming desktop applications
foot in managing and communicating risks, off the back of
to the web.
the mining downturn. We continued to invest throughout the downturn to provide tools such as Leapfrog Geo and
Q: What is your assessment of the main mining trends and
Central to enable stakeholders including geologists,
how is Seequent helping to meet future demand through
managers and investors, to better understand the status,
its technologies?
risks and opportunities for projects. Our revolutionary
A: It is becoming increasingly difficult for companies to
Leapfrog software has a powerful implicit modeling
extract high-grade minerals from deposits. Project costs,
engine that can rapidly and dynamically model data to
complexity and risk are increasing. The industry is also
transforms it into valuable insights. New data is able
coming out of a major downturn and customers are far
to be incorporated into the model workflow almost
more conscious about cost, spend and efficiencies. But
in real-time. Our new advanced model management
they are also more open to testing emerging technologies
platform Central allows single source management for
and looking to other industries. Big Data and IoT trends
an organization’s geological modeling activity.
mean we are seeing a proliferation of data sensors and technology for capturing an abundance of data. Although that sounds like a positive thing, the real challenge is
Seequent is a global leader in the development of visual data
not just about capturing data, but modeling it to enable
science software and collaborative technologies. Its solutions
valuable insights to be drawn from it. So, one trend off the
enable people to create rich stories and uncover valuable insights
back of this is increased near-time or more continuous
from geological data, and ultimately make better decisions
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| VIEW FROM THE TOP
HELPING MINERS MAKE SMART DECISIONS PATRICIA NAKAGAWA Managing Director of Olympus México
286
Q: What is the Mexican mining industry’s role in Olympus’
far superior to similar products produced by our competitors.
global strategy?
We also have a Non-Destructive Testing (NDT) product that
A: In terms of Olympus’ global market, Mexico does not play
takes place at the deposit to detect any leakage or breakage
a very large role. In terms of the Latin American market,
of equipment. This latter technology has seen the greatest
Mexico will be the focus right now and later can act as a
penetration in the mining industry but we believe the X-ray
bridge for the company to jump into other countries in the
technology can also offer a broad range of benefits for
region. We have a presence in Brazil but given the country’s
our clients.
recent problems, Mexico has moved to the forefront as our key Latin American market. The support we have from other
Our Terra Mobile analyzer is another product worth
countries in the region, such as Canada and the US, also factor
highlighting as it is the first truly portable XRD/XRF device
into this. Latin America has shown steady growth for us across
in the market. The technology is patented and was developed
all our industries.
especially for NASA’s Mars Science Laboratory mission. It is our most advanced technology product but it has a small
Q: How does Olympus differentiate itself from other
computer built into it where the results can be accessed onsite.
companies on the market offering similar services? A: Our technologies not only help to define what kind of
Q: What is your key to success in the industry and what are
mineralization exists in a deposit but also helps companies
your predictions for the sector’s growth?
make smarter decisions. We can provide all the information
A: The most important thing for us is the information that
required so a company can make a production decision based
can be extracted from the mine site. After that, the speed
on the amount of resources that can be found. In the past, a
of the information processing is of the utmost importance
sample had to be taken, it had to be sent to a laboratory and it
because even one minute on a mine site implies huge
was a waiting game. Now, we can carry out this analysis in the
amounts of money. Our focus is to provide preliminary
field, saving more time and money. We have a sales team on
information onsite for greater speed. Then we focus on
the ground that can directly offer all our products locally. We
the detail and accuracy and with a little more time we can
can even repair the equipment in-country as we have a repair
create analyses and charts to really demonstrate the story
center in Mexico City. If we need more specialized training,
behind the deposit. The customer is the one who makes
we have a team that can come from Canada to provide this
the decision based on the information provided by the
support. Our main customers are most of the main players in
instrument. Right now, we are seeing growth in exploration.
the Mexican mining industry, including First Majestic Silver,
All markets are cyclical and we believe we are in an upturn.
Agnico Eagle, Industrias Peñoles, Fresnillo and even SGM.
This is especially evident in that companies are more willing to purchase new technology.
Q: Which of your mining products are most in demand and why?
Q: How realistic are autonomous and digital mines
A: Vanta is our brand X-ray technology that we are very
for Mexico?
confident about. This technology can help identify the
A: In Mexico this seems to be a long way off. Huge
minerals in the sample and the quality of the information is
investments in technology should be made but nowadays, the main target is the investment in mining itself. Expenditure in technology should be prioritized as it is
Olympus NDT is a specialist manufacturer of portable geochemical
a catalyst for fundamental changes that must take place
analyzers for the global exploration and mining industry. It has in-
in the country. This is true not only in regulatory matters
house expertise in using technology for geological field scenarios,
to promote the industry but in security issues to make
with analyzers engineered to be rugged and reliable
investments more attractive.
VIEW FROM THE TOP |
OFFERING OPTIMIZATION AS A SERVICE ÁLVARO RENDÓN Director General of ECN Scientific
Q: How are ECN’s solutions increasing efficiency of mine
a team specifically to gather the data for it but today
operations and where can you add the most value?
intelligent sensors can collect all the information
A: Efficiency derives from multiple factors. We have
automatically. IIoT and machine learning technology enable
solutions that impact several of these factors and can
companies to predict failures without needing to invest in
achieve a 3-5 percent improvement. For example, our
a team of people to do so by hand. This permits a better
ImpactFinder acts as a sound analyzer for mills to better
and more sustainable use of resources. 287
control and maintain the amount of material within the SAG and Ball mills. We measure efficiency by achieving
Q: How do you guide your clients in overcoming resistance
greater production with the same inputs, improving
to new technologies?
recovery. Also, our control and system information solutions
A: Miners never want to be the first-adopters when trying
optimize development costs and times by up to 30 percent
a new technology but they always want to be second. I
in the commissioning stage of a new plant operation. We
find this resistance not only in Mexico but also in other
contribute by delivering commissioned equipment on time
jurisdictions like Peru. What has worked for us best is
as it is preconfigured to be installed and start operations
to not have prototypes but projects. For example, we
in the easiest and fastest way. This also reduces the risk of
developed UD-Line as part of a mining project in which
failure when integrating our equipment. ECN has another
the client trusted us to provide a solution. Companies
technology called UD-Line, which helps to check that the
usually do not like to be the guinea pig when trying new
right chemical reactive dose for mineral flotation is being
technologies. But once you convince them to try it once,
used while saving reactive. An optimum dose is crucial to
they are more open to giving new technologies a chance
obtaining a higher mineral grade recovery.
with well-measured risk.
ECN also adds value to the industry by being a Main
Q: How do ECN’s strategic alliances improve the company’s
Automation Contractor (MAC). This is a company distinction
value and offer?
that enables us to participate in larger projects, as our clients
A: We ally with companies that complement our supply,
know that they can leave their whole automation process in
such as Thermo Scientific. A company that has some of
our hands. But while MAC speaks to our market offer, it is
Thermo Scientific’s equipment for measuring ore grades can
not a certification. ECN is certified by the Control System
further improve its operational efficiency by better dosing
Integrator Association (CSIA) for the high quality and
its chemical reagents through our UD-Line Technology. We
training of our staff and processes. This ensures our clients
are promoting the concept of optimization as a service,
that we will deliver a reliable service from beginning to end.
which I think is the biggest added value of Industry 4.0. It refers to the possibility of having integrated services
Q: How and to what extent does your solution impact the
through online measurements, in turn allowing suppliers
sustainability of mine operations?
to generate reports more directly. We have close alliances
A: Mining businesses get complicated during price
with supplying companies, such as MolyCorp, as we believe
downturns, which force operators to optimize their
that our optimization as a service initiative can significantly
operations. Our products help to improve efficiency, which
impact the supplier base.
results in a series of cuts that are in turn sustainable. For example, a mill operating at optimum capacity will save energy and be more sustainable. Also, UD-line reduces
ECN Scientific has a 25-year trajectory in the mining industry.
chemical dosing and its operational risks, which prevents
It is an equipment provider of automatization technology
environmental accidents. Predictive maintenance is
designed for process optimization. It works across various
increasingly important. Companies previously employed
industries, including mining, automotive, water and chemicals
| INSIGHT
THE DILEMMA OF HUMAN-FREE MINES JESÚS FLORES Director General of Lasec
It is only a matter of time before the industry achieves human-
function full time to prevent gas poisoning. But human-free
free mining, creating the dilemma of how to address the
mines will make ventilation needs almost obsolete.
problem of a displaced workforce, says Jesús Flores, Director
288
General of underground mining specialist Lasec. “In the next
The concept of a human-free mine also responds to the need
10 years, robotics will play a key role in operational intelligence
to develop mines beyond human capabilities. “The deeper
as mines will be managed remotely, reducing the need for a
the mine is, the riskier it is to have humans working inside,”
human presence on-site,” he says.
says Flores. “We work hard to guarantee we can provide our technologies regardless of the depth.” Lasec has strong
Flores believes digitalization is the right path because it
participation in the state of Zacatecas, mostly applicable
allows the tracking of the real-time operating conditions of
to underground mines, but it also operates in Goldcorp’s
the whole mine. “Lasec is contributing to the digital revolution
Peñasquito and Fresnillo’s Herradura open-pit mines. “Our
by offering technology solutions that add value to miners’
technological solutions work equally for open-pit and
productive processes,” he says. “We provide operational
underground mines,” he says.
“
intelligence though solutions such as high-definition and real-time video.”
But according to Flores, until automation takes place, it is also important to address the industry’s immediate needs. While
Technicians need to become specialized in Industry 4.0 as these services need to reach the deepest corners of a mine”
waiting for human-free mines to be a reality, Lasec’s Smart
While he is an advocate of digitalization, Flores also remains
The company is pioneering in R&D and has installed one
aware of the need to relocate the human staff displaced by
of the world’s biggest and most advanced leaky feeder
technology. The solution lies in education, he says. “Technicians
networks for Fresnillo and expanded across 270km. “The
need to become specialized in Industry 4.0 as these services
key value of this network is its functionality. Its usability
need to reach the deepest corners of a mine. There will be
is guaranteed up to 97 percent when the average for
a decrease in the required number of human staff but also
leaky feeders is 60 percent,” Flores says. “The high quality
increases in the level of skill workers will need. Education is
of the system’s operation allows integration of more
simply fundamental.” More specialized technology requires
functions and sensors within the mine.”
Flow system helps to fully control an operation’s workforce. “This system tracks the location of staff in a mine in real-time and in an emergency, it takes only 10 seconds to notifies all miners to evacuate,” he says. It also records the location and functioning of vehicles and other mine resources. “Smart Flow identifies the mine’s operational conditions to improve mine management,” he adds.
more specialized labor to manage it. Understanding the importance of this dynamic. Lasec provides its 200 employees
This system has become a binding security feature
with constant training to remain competitive.
for many mine operators in Mexico. The network is implemented across all Fresnillo mines and in others
Ultimately, Flores says the industry is willing to face the
belonging to Peñoles, Grupo México, First Majestic and
moral dilemma related to automation given the benefits it
Goldcorp, just to mention a few. “We ultimately contribute
represents. “Energy efficiency in mines though Industry 4.0
to the automation revolution by bringing tangible solutions
implementation can decrease costs by up to 40 percent,”
to our clients so they understand the real value of these
he says. For example, current mine-ventilation systems must
technologies to their production processes,” he adds.
INSIGHT |
CYBERSECURITY AND MINING GO HAND-IN-HAND LUIS TEJADILLA Regional Sales Director for LATAM North at Belden
Miners realize there is no choice when it comes to embracing
Understanding its role in this equation, Belden is moving from
the digital revolution; either thrive or sacrifice operational
selling products to selling solutions. “By selling a solution,
efficiency. But when opening the door to digitalization and
we are selling efficiency, savings, security and peace of mind
automation it is key to increase digital and industrial security,
instead of only a product. That is why we are changing the
says Luis Tejadilla, Belden’s Regional Sales Director for LATAM North. Belden works to keep companies cyber-protected and interconnected. “We are ready to support Industry 4.0,” he says. “Our solutions help companies connect the whole industrial world into their network.” Industrial cyber security is about minimizing production risk. But this poses a challenge with ever more machines integrated and a constant flow of internal and external data. “Belden provides software that allows control of the communication between devices such as a programmable logic controllers (PLC) and the industrial server through Deep
“
way in which we sell,” explains Tejadilla.
Our Tofino Xenon security is based on DPI, which provides better protection than industry protocols”
The company started as a cable producer for networking,
Packet Inspection (DPI),” explains Tejadilla. DPI’s advantage
broadcasting and industrial markets. Nowadays, Belden’s
lies in analyzing every packet of information shared, allowing
cables are recognized as the highest quality in the world with
it to tackle any unusual behavior to protect the whole
multiple applications, from power, control and instrumentation,
industrial network. “Unlike other cybersecurity solutions, we
to optical fiber at an industrial level and Variable Frequency
do not work with certificates. Our Tofino Xenon security is
Drive (VFD) cables. In the mining industry, Belden Cables
based on DPI, which provides better protection to industry
have the added value of a 10-year warranty as the company
protocols,” he says.
attempts to care for the investment of its customers.
With a growing flow of information, it is also key to manage
But the path for innovation also means companies need to
data traffic to ensure operational efficiency. Belden’s TripWire
compete against their core business to better serve market
software allows analysis of network devices to balance traffic
demand. In Belden’s case, a cable producer, it was about going
and prevent saturation with channels receiving too much
wireless. “Several types of cable are turning into commodities
information, as well as complete security for IT networks. “The
and we cannot remain competitive if most of our product lines
TripWire system allows greater efficiency as all devices can
are commodity-based,” says Tejadilla.
communicate better and faster,” he says. To meet the networking industry’s need to be wireless, Ultimately, network efficiency translates into a smarter
Belden provides industrial networking switches that vary
decision-making process. “The opportunity to use real-time
from Wi-Fi to GSM or LTE frequency, allowing connection
information allows better production decisions,” he says.
of devices without cabling. This saves mining companies the
“With devices talking to you all the time while creating a
expense of buying and replacing cables, a significant cut
network analysis, miners receive intelligence on how to be
in costs for big mines. The company mainly works with
better prepared for different processes,” he adds.
Hirschmann switches, which are backed up by a lifetime guarantee. “These can be used in harsh environments, high
But while it is up to miners to embrace the digital revolution
and low temperatures, underwater, in high-pressure and any
for remaining efficient and competitive, it is up to industrial
other conditions that would normally affect the functionality
providers to innovate and facilitate this transition.
of this type of device.”
289
| ROUNDTABLE
HOW CAN ADVANCED TECHNOLOGY SOLVE THE PROBLEMS OPERATORS FACE?
Digitalization and automation are becoming essential in mine operations. To remain competitive, cut costs, reduce risk and increase production, operators have to be at the forefront of innovation. It is down to the supply chain to anticipate operator needs and continuously produce newer and more advanced technology. Mexico Mining Review asked the industry leaders about the main problems operators are facing in ramping up productivity and how technology and innovation can help solve these.
I believe the biggest problem is that mines try to cut costs excessively. Sometimes the highest cost in an operation is personnel, due to the number of people needed but also the impact unions can have on production. Understandably, many mines 290
want to automate their processes to reduce costs and increase safety. With the FMSL, autonomous or semi-autonomous trucks are spotted using the latest 3D cameras and RFID sensors to assist accurate truck alignment. Distanced from the
RICHARD BOOTH Managing Director for North and South America of MMD Mineral Sizing Central America
shovel operation, truck drivers (if present) can enjoy a safer and more controlled working environment, as they are separated from the swinging shovel bucket. Our goal is to ensure the FMSL can be controlled by a single shovel operator. With personnel reduced and autonomous trucks introduced, site safety is greatly increased.
Digitalization can help as smart plants and operations reduce the number of operators required. But there is the prevalence of the syndrome of proven technology. All companies want to benefit from new technologies but no one wants to be the first to try them. They know that digitalization can greatly benefit the industry, but they are not quite sure how. So, we make sure to speak directly with our customers to create a common understanding of the problem and, step-by-step, to start building a solution
JARI MOILANEN Director of Digital Plant at Outotec
that will provide continuous improvement. The idea is to incorporate digitalization throughout the whole value chain to also gather integrated data.
The industry will always seek to cut costs and drive up productivity. In our case, we focus on developing our human capital and also on modifying our technologies to have more autonomous equipment. Our drilling machinery is modular and transportable. But as Detector Exploraciones was designed to create jobs in the areas in which we work, we strive to be at the forefront of technology without automatizing all our processes. It is also imperative that we do not lower our costs
JESÚS HERRERA Director General of Detector Exploraciones
at the expense of the environment.
The mining industry represents particular challenges due to its locations and demanding operations, and the goal is to optimize production and reduce costs. Security is a very important aspect for electric equipment in mine operations. The implications include interrupting operations, production loses and especially operators security. Dealing with heavy and demanding operations, workers are exposed to potential electrical damage, and technology becomes critical to increase safety. Aligned with this concept we started to develop a ground fault protection panel board 10 years ago, known as Centinela. This solution is used to protect the operators in underground mines and ensure the continuity of operations in a safe
MONSERRAT MONTESINOS Director of DICISA
way, as it will interrupt electrical supply in a failure event.
Mexico has many similarities with Australia. Geologically they are both very resourceabundant and both share a long history in the mining industry. The difference is that Australia is a large country and the mines are normally located in isolated and remote 291
areas. The necessity to fill in the gaps created by the lack of a workforce in these areas helped turn Australia into a hub for technology in mining. People do not want to live close to the mines as these are often thousands of kilometers away from the main cities. It can also make it really expensive to fix a broken-down machine when the nearest mechanic is far away. To fix the problem, mining companies created software that can predict the life cycle of a machine to help operators prepare better for breakdowns. Australian mines also use autonomous machines and vehicles that
NICHOLAS BAKER Trade Commissioner of Mexico, Central America & The Caribbean of Austrade
can be controlled from the capital city in that State.
Mining companies around the world are actively evaluating the best way to embark on the EV fleet transition. In Mexico, there are a number of mine development projects that are on pause, but as these start to progress we feel that the opportunities for battery electric units will start to take shape. Operators are starting to see that going diesel-free can reap many benefits. It makes operations more environmentally friendly and cuts costs on power for ventilation, which is often the second most expensive element of a mine, after labor costs, and provides lower total cost of ownership primarily due to reduced maintenance requirements.
RENĂ&#x2030; VALLE General Manager, Mexico and Central America of MacLean Engineering
In the next 10 years, robotics will play a key role in operational intelligence as mines will be managed remotely, reducing the need for a human presence on-site. Lasec is contributing to the digital revolution by offering technology solutions that add value to minersâ&#x20AC;&#x2122; productive processes. We provide operational intelligence though solutions such as high-definition and real-time video. Energy efficiency in mines though Industry 4.0 implementation can decrease costs by up to 40 percent.
JESĂ&#x161;S FLORES Director General of Lasec
Workers at Cerro San Pedro
CSR & SUSTAINABILITY
11
Maintaining a close relationship with surrounding communities is one of the toughest obstacles that mining operators face. Projects are prone to blockades or delays,
which end up costing thousands of dollars a day and tarnish the public image of a company. Along with the social license to operate, sustainability is an equally hot topic as international benchmarks and strict environmental norms are pressuring operators to minimize their environmental impact.
Fortunately, there are benefits to be reaped by companies that choose to align themselves to the global sustainability and social standards set by institutions such as the International Finance Corporation. Banks and investors often check compliance with these norms before investing capital in a project as adherence mitigates the risk of mining closures.
This chapter emphasizes the best practices promoted by government agencies like PROFEPA and those used by influential operators, consultancies and lawyers. It also sheds light on the success stories in the country for sustainable and responsible operations, while reviewing innovative products and technologies providing solutions for the consumption of valuable resources like water.
293
CHAPTER 11: CSR & SUSTAINABILITY 296
ANALYSIS: Social Infrastructure, a Path to Mining Prosperity
298
INFOGRAPHIC: The Mining Trust Fund: Where are its Resources Really Going?
301
VIEW FROM THE TOP: Arturo Rodríguez, PROFEPA
302
VIEW FROM THE TOP: Fred Stanford, Torex Gold
303
VIEW FROM THE TOP: Gilberto Domínguez, Knight Piésold
304
INSIGHT: Jesús Pablo-Dorantes, Mexican Academy of Environmental Impact
305
VIEW FROM THE TOP: Alfonso Caso, Anaf Energy Social
306
SPOTLIGHT: World-Class Operator Thrives as Local Development Engine
308
VIEW FROM THE TOP: Federico Casares, Veolia
309
INSIGHT: Andrés Jáuregui, GE Mining for Latin America
310
INSIGHT: Ugolino Durán, Ftech
311
VIEW FROM THE TOP: Paola Romero, ERM
312
VIEW FROM THE TOP: Edna Rodríguez, ISI
313
INSIGHT: Marvin Rosales, CTA
314
PROJECT SPOTLIGHT: Infrastructure, Jobs and Education:
the Legacy of Mining for San Jose del Progreso
316
VIEW FROM THE TOP: Larry De La Torre, C&C Tsurumi Pump Mexico
317
VIEW FROM THE TOP: Gabino Fraga, Grupo GAP
318
ROUNDTABLE: What is Your Assesment of the Mining Fund’s Performance?
295
| ANALYSIS
SOCIAL INFRASTRUCTURE, A PATH TO MINING PROSPERITY Minerals are embedded in most aspects of human life. This ensures a steady demand, making mining one of the wealthiest industries in the world. But with mines often located in poorly-developed areas, companies have the responsibility of returning some of this wealth to local communities through CSR best practices In Mexico, mining’s positive impact has permeated a wide
in the country. As part of its allocation process, mining
sphere of social and economic dynamics. For example,
companies often partner with local governments and
CAMIMEX reported in February 2018 that mining
communities to make sure the fund is being invested to
activities employ more than 2.1 million Mexicans, mostly
meet the needs of the local population.
in isolated communities, and that the industry represents 2.9 percent of national GDP. The Mining Chamber argues
However, in some jurisdictions it has been unclear to
that a mineral deposit should be interpreted as an
miners and local communities where the resources are
opportunity for progress and to reduce the inequalities
being destined. “Three years have now passed since the
of the population.
reform, which is a good time to make an impact, but we have yet to see any results,” says Fred Stanford, President
296
But Research Gate published a case study that examined
and CEO of Torex Gold, which operates the Media Luna
the Bowen Basin coal mining communities in Queensland,
and El Limón-Guajes mines in Guerrero. This is causing
Australia, and found that the social impacts of mining
a conundrum in the industry in which mining companies
developments on communities is not always so black and
are demanding to see their tax money being returned
white. “The limitation that isolation placed on opportunities
to surrounding communities while these communities
for economic diversification raised issues about the
continue to turn to operators for the provision of social
optimum level of social infrastructure, housing, sewage and
infrastructure.
who should pay for and provide it,” the report says. The Mexican mining landscape shares some notable similarities
Dávila says Durango has channeled 100 percent of
with Australia, given that in both countries mining activities
the funds it has received since 2014 directly into local
generally take place in arid, remote regions with a high
communities, prioritizing highways, health and education,
proportion of indigenous communities.
among other key segments, all requiring the development or modernization of infrastructure. “The reality is that the
While many companies understand the importance of
adequate use of the Mining Fund lies in the hands of the
providing social infrastructure in mine sites to retain
governments,” says Dávila. “The trick is to collaborate with
workers and diminish social disputes, the cyclical nature of
mining companies and communities to identify the main
prices and changes in tax policies undermine the sector’s
necessities and avoid just meeting the needs of municipal
ability to invest in the social development of surrounding
leaders.” For example, a leader may believe a park is the
communities. “The communities need to understand that
most important project but the community may be more
companies are not responsible for everything and will not
in need of water infrastructure.
take over the duties of the government. That is why the Mining Fund was created: to make sure the government
HIT AND A MISS
can do its part,” says Ramón Dávila, Durango Minister
According to an article published by World Policy in October
of Economy. “Companies should receive support to
2017 on the price of mining wealth in Chiapas, the southern
develop their projects as long as they are respecting the
state is an example of instances where communities are
sustainability of the region.”
left out of the mining boom. It is one of the richest states in the country for natural resources and a major source of
THE MINING FUND
multiple minerals such as gold, copper, silver and aluminum,
Given the increased mining duties imposed by the Fiscal
but its citizens feel harmed by mining activities. Lynn
Reform, the government created the Mining Trust Fund to
Holland, the author and a researcher and academic on
return some of these resources to local communities, with
international political economy and Latin America studies,
the specific goal of promoting their development through
visited Soconusco, an area located between two titanium
social infrastructure. SEDATU reports that since its creation
mines. “The two major rivers from which residents get their
in 2014 and up to 2018, the Mining Trust Fund has financed
drinking water are now contaminated by toxic particles used
more than 1,500 infrastructure projects in 270 municipalities
in the mining process and later released into the rivers,” she
Endeavour Silver worker at Guanaceví mine
writes. “A local doctor and nurse had established that the
impact in the communities. For example, upon closing the
cancer rate among local residents had risen by more than
mine at the end of its life cycle, the company carried out
three times in a 10-year period, in parallel with the increase
the relevant legal obligations, including reforestation. It also
in mining activity in the area.”
provided training to community members so they could take up new vocations, such as sewing, construction work
Soconusco is one of the many cases that taint miners’
or farming. “It is paramount to execute a successful mine
reputation but this is not a widespread representation
closure; one that leaves a positive and long-lasting legacy
of the industry. Also, many of the complaints blaming
at our hosting community,” says Armando Ortega, Vice
mining for side-effects are found to lack solid scientific
President Latin America of New Gold.
ground. “Most of the allegations we receive are on water contamination concerns, usually based on speculation
Another example is set by Goldcorp at its Marlin mine
and with no support from further research such as from
in Guatemala. The company started the Sierra Madre
COFEPRIS regarding cancer incidence in a mining area,”
foundation, along with local Citizen’s Development Corps,
explains Arturo Rodríguez, Assistant Attorney General for
to realize sustainable and community-based development.
Industrial Inspection at PROFEPA.
“Mining creates jobs and economic opportunities, and many companies also choose to invest in social
Constant communication between government, companies
infrastructure outside of their immediate sphere of
and local mining communities help to address social
operations,” explains The World Gold Council, highlighting
problems related to mine operations, but due diligence
the effort made in Guatemala.
in communicating about the projects to be carried out in the communities is also key. “Companies need to realize
As argued by the Mining Chamber, there is still a long
that they need a high level of social responsibility to
way to go for socially-responsible mining, but there has
obtain social license and the government should facilitate
been success in raising awareness about CSR. “Mining is
communication with surrounding communities. The
an industry that brings employment and opportunities to
authorities should visualize and support these aspects. The
parts of the country where no other industry is present,”
development of infrastructure plays an equally important
says Stanford. Ortega believes miners need to set the
role,” adds Dávila.
example in showing communities they have nothing to hide. “The main obstacle is to ensure that in the long run
BEST PRACTICES
our sound mining operation and community work prevails
Companies such as New Gold, which operated the Cerro
over a negative and ill-founded narrative originally crafted
San Pedro mine in San Luis Potosi, aim to have a positive
by (mining) opponents.”
297
| INFOGRAPHIC
THE MINING TRUST FUND: WHERE ARE ITS RESOURCES REALLY GOING? The fiscal reform levied special, additional and extraordinary
additional and extraordinary mining taxes to building social
taxes on the Mexican mining industry. The amendment to
infrastructure in mining communities. These funds are to be
Articles 271 and 275 of the Federal Rights Law created the
distributed according to regional mining production. By law,
Sustainable Regional Development Fund, best known as the
62.5 percent of the fund is allocated to municipalities and
Mining Trust Fund. This allocated 77.5 percent of the special,
37.5 percent to states.
16 1 298
3
5 8
MINING FUND TOTAL COLLECTION AND DISTRIBUTION MINING FUND AMONG DISTRIBUTION AND INTEGRATION ENTITIES
9 4
2
MX$11.46
18
billion in total (2014-2017)
24
14
REGIONAL SUSTAINABLE DEVELOPMENT FUND DISTRIBUTION
77.5% Mining Fund Mining Fund Federation 20% Federation 2.5% SEDATU
19
States
SEDATU
The funds from 2017 have been collected from the companies but not yet distributed back to the communities
12
Municipalities
MX$3.3 billion in total (2016)
62.5% Municipalities 37.5% States
13
MINING TRUST FUND DISTRIBUTION PER STATE AND MUNICIPALITY (2016)
>MX$500 million MX$100 - 500 million MX$20 - 100 million MX$1 - 20 million <MX$1 million
21
25
#
State
State Allocation
Municipalities Allocation
Municipalities per state
Total
1
Sonora
$438,916,809.96
$731,528,016.56
25
$1,170,444,826.52
2
Zacatecas
$239,528,157.43
$399,213,595.74
18
$638,741,753.17
3
Chihuahua
$133,370,721.42
$222,284,535.71
24
$355,655,257.13
4
Durango
$101,901,491.22
$169,835,818.74
15
$271,737,309.96
5
Coahuila
$64,273,959.63
$107,123,266.09
21
$171,397,225.72
6
Guerrero
$49,938,250.58
$83,230,417.66
7
$133,168,668.24
7
San Luis Potosi
$41,635,103.73
$69,391,839.58
9
$111,026,943.31
8
Baja California Sur
$21,862,590.08
$36,437,650.12
2
$58,300,240.20
9
Sinaloa
$21,567,800.27
$35,946,333.80
7
$57,514,134.07
10
Oaxaca
$20,715,086.65
$34,525,144.37
9
$55,240,231.02
11
State of Mexico
$19,532,521.53
$32,554,202.53
3
$52,086,724.06
12
Colima
$14,418,971.30
$24,031,618.84
6
$38,450,590.14
13
Michoacan
$13,813,482.93
$23,022,471.52
11
$36,835,954.45
14
Guanajuato
$13,736,916.33
$22,894,860.56
12
$36,631,776.89
15
Queretaro
$11,130,740.49
$18,551,234.16
9
$29,681,974.65
16
Baja California
$11,083,094.79
$18,471,824.65
2
$29,554,919.44
17
Hidalgo
$10,104,046.24
$16,840,077.03
12
$26,944,123.27
18
Aguascalientes
$8,394,271.46
$13,990,452.44
1
$22,384,723.90
19
Jalisco
$7,935,596.77
$13,225,994.55
18
20
Veracruz
$3,148,952.85
$5,248,254.73
3
21
Nuevo Leon
$2,261,395.54
$3,768,992.57
5
22
Puebla
$1,710,480.48
$2,850,800.82
4
$4,561,281.30
23
Yucatan
$646,790.38
$1,077,983.96
1
$1,724,774.34
24
Nayarit
$475,911.33
$793,185.53
4
$1,269,096.86
25
Tamaulipas
$121,475.91
$202,459.84
2
$323,935.75
26
Morelos
27
Campeche
$21,161,591.32 $8,397,207.58 $6,030,388.11
$10,321.00
$17,201.66
1
$27,522.66
$120.33
$200.54
2
$320.87
25
7
regional development committees have been created to allocate the funds
15 17
23
MINING FUND COLLECTION PER YEAR (MX$ billion)
11 20 26
27
22
3.70 3.33
6 10
These figures may not add to 100 due to rounding
2.18
2.23
2014
2015
2016
2017
4.0 3.8 3.6 3.4 3.2 3.0 2.8 2.6 2.4 2.2 2.0
Source: SEDATU
299
Caballo Blanco, Veracruz
300
VIEW FROM THE TOP |
EMPOWERING ENVIRONMENTAL AUTHORITIES FOR ENHANCED COMPLIANCE ARTURO RODRÍGUEZ Deputy Attorney General for Industrial Inspection at PROFEPA
Q: How does PROFEPA address mining-related issues?
that operated projects before the law was established
A: PROFEPA’s role is to oversee compliance with
have not acquired the permits for their later expansions.
environmental regulations established by SEMARNAT. We
Companies are not often aware of this need, but ignorance
have a policy for industrial monitoring that establishes
is no excuse for exemption from compliance. However, non-
criteria to select specific facilities for inspection. Even though
compliance is rarely due to a lack of knowledge of the law.
we lack one specific to mining these criteria are applicable
It is very typical in Mexico to ask for forgiveness instead
to it. Mining is a priority sector for us given the magnitude
of permission. 301
of its operations and the impact that an environmental accident could have. During Peña Nieto’s administration,
Day-to-day decisions are often made at low levels of
PROFEPA visited all the legal mining operations in the
the hierarchical structure. Production managers, usually
country, which is around 1,150. This monitoring effort speaks
pressed to deliver certain results to investors and
to a supervising policy that allows us to acknowledge and
shareholders, choose to violate environmental regulations.
register mine operations. This registry enables us to decide
This is what happened at Buenavista del Cobre in Sonora.
which operations we need to supervise more closely and on
The environmental recommendation said the leaching
what matters because it is not our intention to review all the
basins should not operate until the emergency ones were
environmental obligations of a mine, but only those where
functional, but management chose to take the risk. I believe
we are more likely to find a lack of compliance. It would be
environmental matters should be decided higher in the
impossible to supervise all mining operations in all aspects
company hierarchy, such as is done in other industries.
of their environmental obligations. Q: How can PROFEPA further increase its inspection and According to citizen surveys, the greatest worry regarding
enforcement capacity during the next administration?
mining activities is related to water use. People often think that
A: I think the lack of compliance is rooted in the physical
because miners use hazardous substances such as cyanide,
incapacity that the government institution has. For example,
they want to get rid of them. But more often miners actually
PROFEPA has around 300 inspectors in the whole country
want to get these chemical components back so they can
but needs to handle many companies in multiple industries
reuse them. These are released accidentally, but not through
across multiple topics. Environmental legislation in Mexico
daily operations. Most of the allegations we receive are on
keeps evolving, even if institutions are contracting. But it
water contamination concerns, usually based on speculation
is well known that environmental institutions are taking
and with no support from further research such as from
a backseat due to political will and I believe that the
COFEPRIS regarding cancer incidence in a mining area.
environmental sector has been downgraded from a political point of view. We must be aware that this sector is important
Q: What is your assessment of the main causes of
because it is in everyone’s best interest to preserve earth’s
environmental accidents in mine operations and how can
resources. Also, environmental destruction can stop huge
these be addressed?
projects, implying an economic loss. PROFEPA needs an
A: Only about 30 percent of companies are fully
urgent strengthening based on autonomy, technology and
environmentally compliant when inspected. Irregularities
proper resources.
are divided into minor errors and those severe enough to merit closure. Environmental law in Mexico was enforced in 1988 and the environmental impact regulation in 1992. So,
The Federal Environmental Protection Agency (PROFEPA)
the main environmental obligations began on these dates,
is a decentralized administrative body of the Ministry of the
as the law is not retroactive. Current legislation demands a
Environment and Natural Resources (SEMARNAT). PROFEPA’s
permit for all the subsequent operations. Many companies
task is to increase compliance with environmental regulations
| VIEW FROM THE TOP
ON TRACK TO FINDING A PERMANENT SOLUTION TO BLOCKADES FRED STANFORD President and CEO of Torex Gold
Q: How did the controversy around the El Limón-Guajes
contractors and suppliers, that have been thrown out of work
(ELG) mine develop and how has this progressed?
by Los Mineros’ actions.
A: This problem caused us to lose the last two months of
302
2017 and the first month and a half of 2018, which equates
Q: What importance do you place on community relations
to 25,000-28,000 ounces per month. What happened
in Guerrero?
was an old fashioned 1950s union raid. We have a union
A: We have always had excellent community relations.
to which over 50 percent of our employees have signed
The ELG mine was blockaded by a small sub-group of
membership cards. However, another union believes that
one community, and this group was taken advantage
it should be the union to represent our employees. There
of by the union, which gave it information that was not
is a perfectly legal process for sorting matters like that out
necessarily true. But despite the actions of this community,
with employees going through a government-sanctioned
the other surrounding communities actually came in and
independent ballot. This external union, instead of following
helped us open up a new access route so we could re-start
the legal process, decided to blockade the mine and shut
operations. It is because of the communities that we are
down operations. When taking into account the multiplier
back to work.
effect, they probably threw 7,000 people out of work, despite the fact that a union is supposed to look out for
Q: What support have you received from Guerrero’s
the best interests of the employees.
government to overcome these obstacles? A: The government has certainly provided us with support,
Torex made a US$1 billion investment in Guerrero with the El Limón-Guajes and Media Luna projects
albeit it took a little longer than we would have liked. Guerrero as a mining jurisdiction will need to re-earn some trust. Torex made a US$1 billion investment in the state, and we expect that in return the company will be able to operate every day. It is unacceptable that our operations were shut down for so long simply because someone thinks erroneously that the company has the capability of changing unions. Although there are a few problems left, I think we are on the right path
Likewise, the blockading union has tried to blame the
to a permanent solution.
company for everything bad that has happened around the area. There have been three fatalities that have nothing to do
Q: After your experience, to what extent do you feel Guerrero
with Torex or the blockade but because the deceased had
is a mining-friendly state?
some form of connection to the mine, the union has tried
A: Guerrero is not without its challenges, but it welcomes
to blame the company for the fatalities. I am accustomed
mining and the opportunities it brings. There are many
to working with unions that seek to improve the lives of
wonderful people that are happy to work with us to create
employees. It is hard to understand why a union would value
wealth and a better future for all. This recent experience has
political action and their own self-interest over the needs
been extremely difficult, but it is not a Guerrero issue. The Los
of the thousands of employees of our company, and of our
Mineros Union that has caused such economic distress for so many people, has done the same thing at many sites around the country. It is not a Guerrero issue, it a Mexico issue that is
Torex is an intermediate gold producer based in Canada. It
complicated by certain labor laws.
is engaged in the exploration, development and operation of its 100 percent-owned Morelos Gold Property, an area of
Q: How do you evaluate the effectiveness of the Mining Fund
29,000ha in the highly prospective Guerrero Gold Belt
given your focus on CSR?
A: There is a fundamental problem with the mining fund. We
do not think it will progress as quickly as it would have
only started paying it last year but not one peso has been
before. In terms of acquiring new properties, the purpose
returned so far, and only about one-third of the money we
is to diversify single-asset risk so we would not put it in the
pay will come back to Guerrero. And in a state as poor as
in a place where a single event can impact more than one
Guerrero, this is not understood. The communities do not look
of our assets. Our first acquisition would not be in Guerrero
to the government for assistance, they look to the company.
but our second one may be.
We have to explain to them that we have paid a heavy tax and cannot explain why this money has not be returned by
Q: What are your forecasts for gold prices in 2018 and 2019?
the Mining Fund for their benefit. There are recent signs that
A: My general world view is that civility is in decline and
the Mining Fund is going to approve some projects, which will
rogue states can become more rogue with the loss of US
be a positive thing for the communities.
influence. Civility in decline tends to be bad for the world and what is bad for the world tends to drive an increase in the
Q: What are your plans for your current properties and your
gold price. I think inflation is likely on the return, which is also
future in Guerrero?
bad for the world but good for gold. The world is also facing
A: Across the Balsas River at our US$500 million Media
uncertainty regarding how capital markets will respond to
Luna project we will continue to drill, although its access is
the unwinding of quantitative easing. This has the potential
still blockaded. Obviously, we need to evaluate the merits
to cause a decline in the prices of stocks and bonds, which
of that project, given the propensity to blockade, and I
I think will drive people to gold as a safe haven. 303
VIEW FROM THE TOP |
ADDRESSING THE ERROR OF SHORT-TERM PLANNING GILBERTO DOMÍNGUEZ Vice President and Senior Executive Engineer of Knight Piésold
Q: As a consultant to the mining industry, how would you
critical about enforcement of the regulations. Even though
evaluate miners’ attitudes regarding CSR?
SEMARNAT has all these requirements, there are several
A: I think miners worldwide are growing more aware of
mines in which compliance is not prioritized.
CSR’s importance, particularly in South America and Mexico, where I have seen positive changes. CSR is getting
There are important lessons to learn from the environmental
more relevant every year, as community relations are now
mistakes that have occurred in Mexico. Project
a deal breaker for projects, and the mining community is
implementation should incorporate due diligence from the
paying more attention to them. We may have not paid CSR
beginning. Mining companies need to focus on reducing
as much attention in the past, but the industry is learning,
short and long-term costs; this includes implementing good
albeit in some cases through mistakes. Knight Piésold’s
engineering practices, which in the long term represents
projects focus particularly on environmental protection
cost-efficient facilities and operations. We should not only
taking into consideration social aspects.
focus on reducing costs with cheap engineering because, in the end, that is more expensive and jeopardizes the whole
Q: How would you evaluate environmental regulations for
industry. In my case, the main lesson learned from Mexican
the Mexican mining industry?
companies is to invest in doing the right thing from the
A: As we always work and comply with international
get-go, from the studies, to the design and the operations.
requirements, when we compare those of SEMARNAT to what we typically do for our projects, we find these are at high standards. The regulations are good, but depend
Knight Piésold is an employee-owned global consulting firm
on effective enforcement. We are very environmentally
that provides specialized services to mining, power, water,
aware as a company and always strive to make sure our
infrastructure and oil and gas. It is composed of engineers,
projects do address related issues. In Mexico, I am more
environmental scientists, geoscientists and technologists
| INSIGHT
SYNERGIES CAN HELP CHANGE PUBLIC PERCEPTION JESÚS PABLO-DORANTES President of Mexican Academy of Environmental Impact
304
Environmental accidents can result in a long-lasting process
One of the challenges of involving so many entities in
for mine operators as reconciliation with society and the
the discussion is avoiding sensationalism by those with
surrounding communities can span years. The Mexican
ulterior motives, says Pablo-Dorantes. “Mexico needs a
Academy of Environmental Impact seeks to minimize the
neutral forum to discuss these topics. NGOs may have
occurrence of these events. “At the Mexican Academy of
good intentions but can lack technical guidance. Sometimes
Environmental Impact, we promote the use of three basic
they prioritize the protection of the most representative
steps to reduce environmental impact: prevention to avoid
species of the region but this may not be the one that needs
errors, mitigation to reduce risks and compensation in the
the most protection,” he says, adding that the creation of
event of an impact that cannot be mitigated or prevented,”
such a forum is a necessity in the country as there is not
says Jesús Pablo-Dorantes, President of Mexican Academy
enough communication among the industry’s different
of Environmental Impact.
players. “The lack of organization can be quite tragic as everyone including the government is trying to do the
The Mexican Academy of Environmental Impact strives
best they can with the information they have,” he says. But
to create a forum where every player from surrounding
creating consultations with communities and ejidos is more
communities, companies, authorities and NGOs can voice
than simply sharing information and requires a strategy, he
their concerns. “This is important as society believes
continues. “Some of these communities do not have a basic
that mining uses an obsolete model that only consumes
education. This can make the explanation of complicated
resources without giving back to the planet,” says Pablo-
chemical processes difficult.”
Dorantes. “It is impossible to have a world without mining as everything from cellphones to cars uses minerals but
Overall, he says that mining is in a unique position in terms
we can help reduce its impact on the environment and
of environmental impact as it is often located in remote
inform people of industry’s advances.” The association also
areas and is obligated to comply with stricter norms in
seeks to involve the opinion of academics and scientists to
comparison to other sectors. “The mining industry often
formulate proposals in terms of risks, impact and strategic
invests and offers employment in areas that others are not
environmental evaluation.
willing to even enter,” he says.
VIEW FROM THE TOP |
BUILDING LONG-TERM AGREEMENTS, AVOIDING SHORT-TERM SOLUTIONS ALFONSO CASO Founding Partner of Anaf Energy Social
Q: What role does AOS play in the Mexican mining industry?
conflict is not a good business. It is worthwhile for companies
A: Community relations must be seen as processes that
to know what they are facing in a certain area to build a
last the entire lifespan of a mine, from exploration to
solution along with the local community from the outset.
closure. We strongly believe that an adequate approach to social aspects is a strategic key element for success
In this regard, it is vital to clarify from the beginning the
in the mining industry. It is very important to take into
commitments of each party. The problem is that social
account that, once first contact is made with a community
commitments made by mining companies are rarely
a process is started that needs continuous follow up. Gaps
documented. When the community starts demanding what
in communication create misunderstandings and foster the
was promised to them, operators can argue that they did
possibilities of social conflicts. We developed platforms of
not make those commitments and are not bound to them.
social understanding covering each stage from exploration through to a closure plan. As mining companies are focused
Q: What aspect of CSR do you think the industry should
on production, the social aspects can be easily neglected.
most implement?
We help them with this issue by providing manuals and
A: Companies often neglect their relationships with local
insight into what the community needs. We also provide
communities. When evaluating whether to pursue a certain
support in the social management area through certain
project, it is key to have adequate social characteristics. A
strategies of community communication.
company must evaluate the dynamics of the community, the local authorities and the experience of neighbors,
Starting 2018, there will be a market for Clean Energy
among other factors. In that case, the social feasibility
Certificates (CELs), providing companies with certain
study becomes strategic. It is very important to define the
benefits for buying energy from renewable sources. The
relationship that the mining companies want to have with
new Law of Energy Transition binds miners to consume
local communities, as often this scheme is flawed in that
at least 5 percent of their energy from clean sources. We
some want to buy short-term solutions instead of aiming to
believe that as this market matures, prices will become
build local agreements. When a company buys its presence
more competitive. Our role is to advise mining companies
in the community it becomes counterproductive because
on how to purchase energy under better conditions. It is
they may be giving money to some but, overall, they lack
important to point out that Grupo Bal and Grupo MĂŠxico
a deeper agreement.
have created their own energy supply and will benefit from the new market rules.
A company must also nurture social awareness among its personnel. For example, an operator can have the
Q: What key areas must miners consider when planning
best relationship with the local community, but if one of
their CSR programs?
its workers does not abide by this, local collaboration is
A: The industry is aware of the fragmentation issue: as one
jeopardized. Companies must educate their people on how
company explores, another builds the mine infrastructure
to properly behave and interact with the local community.
and a third carries the operations. The first company will
It is important for the company to really hear what the
promise certain things to the local community to secure the
community wants and needs.
exploration concession, which it will most likely not fulfill because it leaves after completing its part. As a result, when operations begin, the relationship with the community is
Anaf Energy Social is a multidisciplinary company that designs
already damaged. A social feasibility study, then, is just as
and develops solutions for energy, mining and infrastructure
important as the studies for ore composition and mineral
companies. It has a strong focus on CSR and complies with the
vein reserves. The best reserves in a location with a social
OECDâ&#x20AC;&#x2122;s Anti-Corruption Program for Latin America
305
| SPOTLIGHT
306
WORLD-CLASS OPERATOR THRIVES AS LOCAL DEVELOPMENT ENGINE An aware and vigilant society demands more socially responsible mine operations. Industrias Peñoles, a world class base metals producer, believes that miners’ commitment to CSR must be based on a collaborative approach that is inclusive of staff and local communities. Furthermore, it must be an extension of mining companies’ business models and underpinned by long-term relations with workers’ families, local leaders, authorities and institutions in the areas of operation. More than being preached, a CSR industry commitment must be quantified. In 2017 that of Peñoles amounted to a monthly economic revenue of MX$1.5 billion for the communities surrounding its mines. The operator actively participates as a national economic engine for mining communities’ development, building a long trajectory for its education, health, culture and infrastructure investment programs. Besides promoting development around its operations, Peñoles' initiatives also intend to create community self-reliance after the closure of its mines. For example, in 2017 the company carried out 1,169 social programs across 59 communities in 10 states of Mexico and three localities in Peru. The entrepreneurship program has proven to be one of the most successful as it fosters business ownership in local communities. In 2017 alone, this program consulted on the creation of 31 startups in Torreon, which in turn boosted economic growth with 78 new jobs to date. Health issues derived from mine operations is another industry stigma to be addressed to prove mining can be socially responsible. Peñoles, in alliance with Fundación UNAM, promotes Health Workshops in its mines. In 2017 these workshops carried out 2,165 dentist appointments, 2,312 optometrist appointments and donated 2,138 pairs of glasses. Also, the Healthy Lifestyle Program was designed to promote a prevention culture based on a nutritious diet and exercise to anticipate and control chronic degenerative conditions. As for education, the ultimate engine of any population, the Centro de Estudios Tecnológicos de Laguna del Rey (CETLAR) has been a training alternative for low-income youth over the last 20 years. Once their CELTAR studies are completed, graduates are offered the chance to work for the company and continue pursuing professional and academic growth. Peñoles’ educative institution has had over 543 graduates up to date. Its community centers in Coahuila are another alternative for children and teenagers to develop life skills. These currently have over 464 students enrolled and aim to regenerate the social tissue of the communities.
307
| VIEW FROM THE TOP
ALLOWING MINERS TO FOCUS ON WHAT THEY ARE GOOD AT FEDERICO CASARES Business Development and Institutional Affairs Director Mexico of Veolia
Q: When seeking to secure water supply and adequate
to prevent spills. Veolia offers solutions and technologies to
water treatment, why should the Mexican mining industry
implement for each case, not only to treat wastewater but
choose Veolia?
also to recover some minerals.
A: Veolia has extensive experience developing solutions
308
for the mining sector. Goldcorp, one of our main clients in
Our work in Mexico has been very focused in the last couple
Mexico, hired us to fully manage its industrial waste, including
of years on the management of hazardous industrial materials.
hazardous and recyclable residues. We have a two-year
We have a department dedicated to the industrial sector
contract that allowed Goldcorp to save US$4 million. The
called Veolia Industrial Solutions and we have a center for
company’s expertise is to produce gold but mine operations
industrial waste management in Nuevo Leon. Veolia acquired a
often yield a series of byproducts that are discarded as
company called RIMSA in 2000 that provided the foundations
garbage. As we have the expertise for separating and
for this division. RIMSA has been working in Mexico since 1985.
managing waste, we can add value to residues. We also work closely with Grupo México, for which we manage waste, treat
Q: What is the role of a circular economy in improving the
water and decrease the risk of spills. We help our clients to
water and waste management sectors in Mexico?
obtain the social license to operate. Upon contingency, such
A: Veolia is dedicated to promoting a circular economy
as leaks, we have an industrial solutions department for
through all its processes. I think this is the global development
environmental site assessment and remediation works that
model to pursue, as it not only shifts from a linear economy
include off-site, on-site and in-situ treatment technologies.
that extracts, uses and disposes of resources, but it promotes reuse and recycling. China recently launched a regulation that
Veolia works with the main operators in Mexico including Grupo México and Goldcorp to optimize water and wastewater practices
prohibits import of material for recycling. As China was the biggest receptor of this material, countries now need to find other alternatives for disposing of their waste. This entails developing more infrastructure for waste management and recycling and modernizing existing facilities. So, if a material cannot be reused, at least it can be turned into energy. For example, EU countries estimate that China’s ban will represent an additional investment of €10 billion to convert
Q: How can you help miners optimize water and waste
its recycling facilities, so that is the challenge for local and
management while reducing environmental risk of hazardous
federal governments.
materials? A: Water management systems are fundamental in mine
Regarding the industrial sector, the circular economy
operations and permits for extracting water are ever more
demands companies have an extended responsibility
restrictive and careful, so companies are looking to seawater
approach to products. This means that after manufacturing
as an alternative for water sourcing. Tailings dams are also
a given product and delivering it to the supply chain or the
important to consider as rainwater generates leachates with
end consumer, companies believe their responsibility ends
high mineral concentrations. These liquids need to be treated
and have no obligation regarding what happens with the product in the future. This is shifting to reincorporating products into manufacturing processes after their useful life
Veolia Group is the global leader in optimized resource
ends. The industry must open space in its value chain to better
management. With nearly 169,000 employees worldwide,
use materials and waste. I believe that a circular economy
the group designs and provides water, waste and energy
approach should be driving the next administration's
management solutions
industrial agenda.
INSIGHT |
COMBATTING OLD MINDSETS WITH NEW TECHNOLOGIES ANDRÉS JÁUREGUI Strategic Account Director of GE Mining for Latin America
The last price downturn taught companies to be more
this data to make their production more efficient, he says.
prudent in their operations, especially when it comes
GE can help companies with its innovative products, such as
to investment in technology. With the sector entering a
the Digital Mine project for asset management that optimizes
positive phase, caution remains the rule that will shape the
processes in mining operations and increases productivity.
character of the rebound but which could also prove an
“We extract the data and analyze it,” Jáuregui says. “We
opportunity for innovative developers. “We are entering a
have a team of experts that then answers our customers’
new economic cycle, but this upturn will differ from others
questions online. GE takes the lead, with specialized experts
as it will be more measured given that producers are more
in our own industry.” The company is also using the industrial
aware of price-volatility permeating the industry,” says
internet to optimize performance through a set of learning
Andrés Jáuregui, Strategic Account Director of GE Mining
analytics that allow the development of innovative solutions
for Latin America.
and strategic planning.
The industrywide desire to continue reducing costs while
Along with the use of Big Data management, digital
optimizing production is broadening the sector’s embrace
technology has another key trend: Collision Avoidance
of the digital revolution. Companies are increasingly
Systems (CAS), says Jáuregui. This is important given the
releasing new technologies that can maximize operations
high accident rate in the mining industry and the demand
while at the same time reducing environmental liabilities
for high-quality products unaffected by human costs.
and increasing operational safety. One of the leaders in this
The company is betting on technology that can provide
transition, GE, whose history in mining spans electric drives
maximum productivity with reduced human harm while
for off-highway vehicles, water-treatment technologies and
complying with mining legislation for safety in operations.
innovative Digital Mine solutions, considers Mexico to be a key market thanks to the country’s principal role in the
The digital revolution is additionally creating a demand
region. But participating here is no easy feat.
for sustainable solutions such as water management. In Chile, for example, there are many operations in the
As one of the oldest industries in the world, miners have
Atacama Desert, where aquifers are protected by national
a way of doing things that are deeply embedded into
legislation. Due to the water-intensity of drilling activities,
their culture. But miners should also understand how new
Chilean miners were forced to pursue technology for
technology can improve their existing processes and provide
water desalination to gain access to the resource. Jáuregui
added value, Jáuregui says. This is what GE calls Discovered
predicts that stricter environmental legislation will require
Value Assessment (DVA), a method used to apply pilot
many operators in other countries around the world to
tests to an asset to give the client an opportunity to try
follow suit with these types of solutions.
the product and experience its benefits. “We work very closely and collaboratively with our customers to overcome
GE is developing sustainable solutions for the mining
resistance and understand their needs. We share with them
industry that address this trend, such as its new generation
how our technology can optimize their operations,” he says.
of LHD trucks fueled by lithium-ion batteries. This technology can replace diesel-fueled trucks, reduce the
The digital revolution has the potential to transform the
release of CO2 emissions and the resulting use of fans for
sector, not only in Mexico, but globally. Jáuregui believes
underground mines. “Our focus is to develop our technology
this transition bears a key question: how can miners use
jointly with our clients,” Jáuregui explains. “In Mexico there
operational information for Big Data connectivity? Mine
is great interest among our existing associates, including
operators often collect a wide range of information from their
Parts Service Supply and Cominsa, and we are also starting
different processes but they do not know how to integrate
conversations with other companies.”
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| INSIGHT
INSURANCE COMPANIES CLOSING GAPS IN SAFETY STANDARDS
“
International companies are usually much more preventive as they have to follow stricter global standards than those in Mexico.” Ugolino Durán, National Business Development Manager of Ftech
Durán says. “Tunnels also need fire protection and we can collaborate with companies to make sure these structures are protected.” He adds that the company sees a significant area of opportunity in the mining industry for fire protection as few businesses dedicate themselves to these matters although the issue is growing increasingly more important for mine operators. The company also offers training for various members of an operation, from mine managers to security guards. “The best prevention mechanism is making sure that everyone in the project has the skills to make the right decision when an emergency occurs,” he says. Ftech does not limit its
310
Mining can be a risky business not only in terms of capital
services to the mining industry and equally serves any kind
but also safety. Considering that operations run 24 hours
of market including hotels and skyscrapers. It is currently
a day and require the use of heavy machinery, Mexico’s
working with groups such as Grupo Posadas.
regulation may not be adequately guiding operations toward practices that assure prevention and safety, says
Durán explains that while Mexico may need to step up its
Ugolino Durán, National Business Development Manager
requirements in safety, insurance companies are helping
of Ftech. “The prioritization of safety is growing in Mexico
increase the standards of the sector by requiring mines
but not enough companies have access to the right
to follow strict norms not laid out by the law. “Insurance
information or are obligated to comply with the law,” he
providers play a big role in increasing the safety of
says. “International companies are usually much more
operations as they expect projects to follow specific norms,
preventive as they have to follow stricter global standards
especially if they are international.”
than those in Mexico.” While the Mexican mining industry may have its Ftech wants to change this by proving fire protection and
challenges in increasing its standards of safety, Ftech
safety does not have to be a burden. The company offers
emphasizes that this is a widespread issue not only in the
a wide variety of services and products such as smoke,
sector but in the country and Latin America. “Regulation
fire and gas detection and alarms, specialty extinguishing
in this region does not require companies to follow strict
and human fire safety protection. “We can provide the
safety practices. For example, very few kitchens or homes
mining industry suppression fire systems by installing the
have fire extinguishers,” Durán says. “It is not part of the
highest-quality carbon dioxide tanks into equipment,”
culture yet.”
VIEW FROM THE TOP |
EFFECTIVE COMMUNICATION TO FACILITATE SOCIAL LICENSING PAOLA ROMERO Partner at ERM
Q: How did the operating license evolve into a social
the real impact the project will have and ensure you are
license for projects and how does ERM help in this regard?
using the right lines and language of communication. If this
A: I have been part of the ERM team for over 25 years, with
communication is carried out at early stages of the project,
involvement in social and environmental impact studies and
it is more probable that locals will be in favor of the project.
commercial transactions. One significant change I have witnessed in my time in the industry concerns the operating
Q: Why should mine operators have a social investment
license for projects, which used to be awarded according to
plan and what must it prioritize?
the law. Companies could obtain it as long as they complied
A: Mining companies must always seek a way to
with all the pertinent regulations, and the environmental
collaborate and generate benefits for local communities,
authorities were entitled to shut down mine operations for
which is often done through social investment plans. But
breaching these requirements. But today, the culture has
this plan must be drafted very carefully between the
changed and this license has become social. Operators
developer and stakeholders, to manage the community’s
are now concerned about the communities surrounding
expectations and to ensure the company does not end
their projects, as environmental and social awareness
up carrying out duties that should be the responsibility
issues have gained more relevance. Communities ensure
of the government or other parties. It is also important
that processes are carried out correctly and they have the
for this investment to be aligned with the real needs of
power to permit or block a project or production. So, the
the community, the municipal urban planning and the
first thing that a mining company has to do before staring
company’s investment guidelines. I think that this is one
a project is to understand the social and environmental
of the keys for the success of a mining project; companies
context in which it will be immersed. ERM carries out pre-
cannot just impose an investment if it does not answer
feasibility studies to analyze a project’s footprint, mapping
the needs of the community. For example, if a community
the environmental and social non-technical risks that they
needs schools it is not logical for the company to invest
will face. Identification of these risks at a preliminary stage
in building wells. It is paramount to have a real interaction
allows operators to better navigate them through the
with the players involved to understand what worries
proper mitigation measures at early stages.
them and which are their main needs. It is also necessary to identify which group the operation will benefit, as
Q: How can companies better navigate the social risks of
some segments of the population are more vulnerable
a mine operation?
than others. Pre-feasibility studies are key to achieving
A: To understand the social risks of a mining project it is
this understanding.
crucial not only to analyze the communities’ involvement in the territory that will be exploited, but also the current
I am convinced that for a project to succeed the social
uses of the land. Miners must plan the way in which they
context in which it will be developed must be understood,
will respect and better coexist with locals. The best way
along with the implied risks. This allows companies
to get the community’s support for a project is through
to understand how to tackle these risks and start a
effective communication. We believe that communication
communication process with the community to better
must take place at very early stages of the project. It is
inform them about how their worries will be addressed.
also key to carry out a stakeholder mapping on the area of interest, which will identify the main players and their real concerns. For example, one community may be worried
Environmental Resources Management (ERM) is a global
about the water use or air pollution. The reality is that
provider of environmental, health, safety and social consulting
mining processes are increasingly to be environmentally
services. With more than 160 offices in over 40 countries and
friendly, but it is necessary to inform the community about
territories, ERM employs 4,500 people
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| VIEW FROM THE TOP
PROMOTING SOCIAL INVESTMENT THROUGH NUMBERS AND STANDARDIZED METHODOLOGIES EDNA RODRĂ?GUEZ CSO and Partner at ISI
Q: What added value can ISI offer the mining industry
revolves around the mine, from contractors to transportation
in Mexico?
services. There is no magic solution and all companies need
A: Our company differentiates itself by having a background
to invest time in this step.
in engineering and not only in social matters. This allows us
312
to talk the same language as CEOs and Directors General
Q: What strategies does your company use to prove the
and to turn plans into a series of concrete actions while
ROI on risk mitigation in CSR?
simultaneously understanding the needs of the social sector.
A: Measuring the cost of conflict is complicated, especially
ISI can provide the best techniques in project management,
within projects that have not clearly identified their social and
which is a crucial element in CSR as many social aspects
environmental risks. We show companies that prioritization
are much easier in theory than in practice.
of social issues within their project management is the best way to maintain the reputation of a brand and avoid closures
Our experience in engineering also makes us accountable for
or blockades. Our company also prioritizes the idea of shared
our promises as we can lay out our ideas with a fixed budget,
value wherein companies can increase competitiveness
benchmarks and goals, in the same way our clients lay out
by solving societal issues. The trick is to identify areas of
their production outline for the year. Our methodological
opportunity to achieve this across the entire supply chain. It
framework is well-accepted by business leaders as we include
is not only social issues. More and more people are becoming
tangible metrics that enable them to follow and understand
aware of the environment and the dangers of climate change.
what we are doing. If we did not do this, companies would
This is pushing companies to invest in sustainability to avoid
not understand why we want to execute campaigns such as
putting their brand at risk.
educational or sustainability programs. Q: What are the biggest challenges mining companies face Q: How can mining operators develop a more holistic
when it comes to balancing productivity and CSR?
approach to social and environmental risk mitigation?
A: Many companies are under pressure to move projects
A: Companies need to make sure that they have a clearly
from development to production in a short timeframe while
defined plan of action for social and environmental risk
maintaining low costs and high quality. In an ideal world,
mitigation to avoid undesired surprises. Sometimes operators
they would take the time to connect with local suppliers
leave it to their public relations team to talk to communities
that offer more cost-effective services than multinational
without truly understanding their needs. Many mine managers
companies and also regional expertise while providing
also tend to overlook the importance of the relationship
an economic boost for the surrounding communities.
between the surrounding communities and the project when
But companies often choose international suppliers they
CSR should be an integrated part of the work culture to ensure
are familiar with to save time. Contractors have the best
responsible actions. The most important step is identifying all
potential for facilitating this process by connecting projects
the ways a project will impact the environment and the people
with companies that can meet their needs from those
who are close to the mine, which implies everything from
specialized in transportation to materials.
noise pollution to the use of scarce resources such as water. This step also needs to consider the entire supply chain that
The industry is also faced with the conundrum of having to take care of the environment while at the same time extracting resources. People need to realize that mining is
Intelligent Social Investment (ISI) is a global consultancy
a necessity for the world economy and that technological
present in Colombia, Chile, Mexico and Peru. It offers
advances are being fed by a supply of minerals. The solution
methodologies for due diligence, risk management strategies,
is to find a balance between the environment, operations
investment protection and achievement of social license
and demand for these resources.
INSIGHT |
ADDRESSING THE SOCIAL LICENSE MARVIN ROSALES Country Manager Mexico of CTA
Managing social matters is key for the success of mining
tradition in northern states like Chihuahua, Sonora and
projects but can all projects have a social license? Marvin
Durango. “The difficulty often lies in tropical areas with
Rosales, Country Manager Mexico of environmental
large indigenous populations, which we believe are the most
consultancy CTA, believes the answer is no. “The greatest failure in Mexican mine operations is that companies do not address social issues from the exploration phase,” he says. “Not every mining project will have a social license, but even in the mining regions with the most opposition to projects it is possible to have projects developed through a sociallyfocused plan,” he says. Unfortunately, Rosales says many operators decide to ignore local communities until the project is profitable and worthy of development. “When companies eventually decide to acknowledge local communities, they are already offended
“
conflicted with the mining industry in Latin America,” he says.
It is easy for indigenous communities to be opposed to mining companies as they can perceive mine operations as a foreign invasion”
and opposed to the project,” he says. “Miners often face social obstacles that could have been managed from the beginning.”
NGO’s often find in indigenous communities a far-reaching sentiment. “I think there is a sense of animosity that dates
In approaching locals from the outset, it is crucial to establish
back to the Spanish conquest,” he says. “So, it is easy for
an orderly plan of what is to be offered to the communities
indigenous communities to be opposed to mining companies
throughout the whole mine cycle. For example, Rosales
as they can perceive mine operations as a foreign invasion
explains that geologists usually promise certain things to the
intended to take away their resources.” To better tackle this
community that the operator ignores. But regardless of who
issue and foster mining activity, he says it is crucial for local
promised what, locals will expect this promise to be fulfilled
governments to intervene along with mining companies in
and failing to do so could damage the social relationship.
addressing social matters. “Governments should have a specialized department to oversee the relationship between
CTA strives to prevent this from happening by making the
local communities and mining companies,” he says. “This
initial approach to local communities and gathering the
department should aim to inform communities about the
required data to create a fitting social plan. “This implies
industry and the benefits it yields.”
having regular meetings with locals to explain the project, the people involved on it and the processes they have to
To get communities on side, he says miners can also make
follow for asking clarification or giving feedback about the
extra effort not to damage local resources. He suggests
project,” he explains. CTA conducts its assessment with a
governments work from a regulatory front to enhance mining
highly-qualified staff that has extensive experience in the
performance. “We have seen that Mexico’s mining norms
industry. “Our industry expertise is broad as 90 percent of our
are lagging as they are scarcely updated due to political
clients and cases are specialized in mining,” he says. CTA has
processes,” he says. For example, laboratory provisions follow
collaborated in Mexico with Goldcorp, Coeur Mining, Minera
EPA’s standards but at a slower pace. CTA has an ISO17025
Frisco, Fresnillo and Agnico Eagle, to mention a few.
certified laboratory operating in Guatemala and outsources mainly to Canada and the US to process its samples taken in
Due to this expertise, Rosales says the central and southern
Mexico. “I advise operators to carefully vet laboratories that
regions of Mexico are the most complicated for obtaining
comply with international standards to guarantee high quality
social licenses, normally because there is a strong mining
of their reports,” he says.
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| PROJECT SPOTLIGHT
314
INFRASTRUCTURE, JOBS AND EDUCATION: THE LEGACY OF MINING FOR SAN JOSE DEL PROGRESO Besides extracting mineral wealth, the fruits of the industry are also felt by locals who benefit from the significant economic spillover that can make a community flourish. Such is the case of San Jose del Progreso, an isolated municipality in Oaxaca, where Compañía Minera Cuzcatlán has had operations since 2010. Part of Fortuna Silver Mines, the company’s efforts to give back to the area where it operates have contributed to strengthening the social tissue through infrastructure, education and social programs. In the first seven years of operation of the San José mine, the investment in the community exceeded MX$120 million. 315
Education is at the core of the social programs promoted by the company. So far, 60 scholarships have been granted and more than 600 students receive sponsorships for school supplies. But the focus is not only on enlightening the youth, as education programs also target the elderly. According to INEGI, the rate of high school enrollment increased by 6.8 percent to 10.3 percent in 2015 from 3.5 percent in 2010. The education programs are aligned with the development of better infrastructure. Minera Cuzcatlán built the Communitarian Childs Home and contributed the roofing of the preschool institutions in Maguey Largo, El Cuajilote and San Jose la Garzona. It also donated the land for the expansion of the San José de Progreso’s local school. In line with the community’s need for enhanced infrastructure, several churches are being built and rehabilitated. In 2016, a network for sewage and drinking water supply was developed across 2.5km on the main streets of the area. SEDESOL’s numbers report the impact these investments have had. The rate of families without safe water services in San Jose del Progreso decreased to 58 percent in 2015 from 88 percent in 2010, benefiting 480 families. Vulnerable families are also given the benefit of improving their residences through the donation of construction materials. With more than 1,500 actions up to date, this program’s success has decreased the number of families living on a soil floor by 10 percent. To improve the quality of living, health facilities were also built in several localities, such as Vasquez and Cuajilote.
| VIEW FROM THE TOP
HELPING COMPANIES REUSE, REDUCE, RECYCLE WATER LARRY DE LA TORRE Vice President of International Sales at C&C Tsurumi Pump Mexico
316
Q: What problems are companies facing when it comes to
Q: How are your pumps different from those of other
water management in mines and how can you help?
companies?
A: Companies spend billions of dollars in water management
A: Our main added value in the mining sector is the ability of
and there are additional processes that are starting to be a
our pumps to outlast others in the industry. Durability is an
requirement for operations. Incorporating water recycling
important matter in mines. Tsurumi entered the Mexican market
processes is particularly important in underground mines as
35 years ago and quickly became the preferred distributor in
effective dewatering of tunnels can be the difference between
the country. Companies were not used to Japanese products
life and death for workers. We are continuing to work with
and we had to gain the trust of the mining industry. Little by
Industrias PeĂąoles and Fresnillo to map ways to make mine
little, mines started to replace their traditional pumps with
operations safer through water management.
ours. The industry trusts our durability and that our equipment can withstand extreme circumstances. Other pumps in the market are surprisingly more expensive than ours and do not
Tsurumi Pump has a vast range of submersible pumps
compare in quality. This is a big advantage for us. We cover
engineered to withstand the most rugged mining and industrial
40 percent of the water pump market in Mexico and we want
applications. Many of its pumps are interchangeable so that
to expand even more. We work mostly with gold and silver
companies can achieve high head and volume within minutes
companies and some copper producers.
VIEW FROM THE TOP |
LAW AND NEGOTIATION: A RECIPE FOR SUCCESS GABINO FRAGA Managing Partner at Grupo GAP
Q: Why should companies prioritize social matters in
any sign of a conflict can end in blockades later on even if
mining projects?
an agreement is signed between both parties.
A: Companies should treat the communities they are renting or buying land from as investors. Maintaining a good relationship
We are a small firm that not only employs lawyers but also
with surrounding communities is a crucial way to guarantee
economists and social workers, which helps guarantee
the future of the project. This is especially important in Mexico,
the legal certainty of projects. The firm has a presence in
as the countryâ&#x20AC;&#x2122;s constitution places international norms over
Guerrero with Torex Gold, Durango with Excellon Resources
federal law, which means that a human rights violation could
and in several projects throughout the country owned by
have repercussions not only at the federal level but also with
Industrias PeĂąoles.
the Inter-American Court of Human Rights. Q: What social and land conflicts does the mining industry These types of consequences can be avoided by being
face in Guerrero and how do you help your clients
clear with the surrounding communities about the project
overcome these?
from the very beginning. They need to know exactly what
A: Guerrero has a great deal of potential when it comes to
they will receive and what they will have to give as well.
the mining industry but it must provide a higher level of legal
Conflict resolution is our most demanded service and our
certainty to attract more projects. During the 16th century,
main added value. We do not only facilitate access to land
the conquistadores decided to explore the land that would
but we also help clear up misunderstandings and blockades
eventually become the state of Guerrero because it was one
among other issues. Grupo GAP solves these problems by
of biggest gold-producing regions at that time.
litigating and stopping blockades as quickly as possible. Blocked operations not only cost companies thousands of
We helped Torex Gold start a project in 2011 and the
dollars, they also damage the environment because tailings
challenges were incredible. We faced continuous issues with
and waste can start to build up.
organized crime due to the location of the project. We had to establish a strong relationship with community leaders
Q: How does Grupo GAP differentiate itself from the
and make sure they understood we are not affiliated with
rising number of competitors entering the Mexican
the government. We created a new neighborhood for 120
mining industry?
families with churches, schools and more. In the end we
A: Our expertise is one of our biggest differentiators. During
were able to start the project.
a crisis, other law firms that are not specialized in mining often start to offer services to the industry but they cannot
These types of projects can show that in Guerrero it is possible
compete with our 20-year experience in the sector. We
to do business without getting involved in illicit activities.
also find that many of our competitors give advice from
Mining projects can generate employment and development
their offices without ever visiting the site, which can be a
in many areas, with the potential to change the economy
problem in social matters. When dealing with surrounding
of the state. Since we started to work in Guerrero, we have
communities, it is important to be able to perfectly
noticed that the government has become a lot more open to
combine the law with negotiations to ensure complete
the mining industry, viewing us as an ally instead of an enemy.
harmony. Other firms just send the agreements to be signed whereas we go to the field and directly get to know these communities until we can make an agreement. We also draft
Grupo GAP offers legal and social advice for mining, energy
the agreements on the spot with the communities to make
and oil projects in Mexico. It specializes in resolving conflicts
sure there are no doubts about the clauses. Sometimes this
related to land access and usage and agrarian issues, in
process can take several months but it is worth doing as
particular communication with ejido communities
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| ROUNDTABLE
WHAT IS YOUR ASSESSMENT OF THE MINING FUNDâ&#x20AC;&#x2122;S PERFORMANCE?
The imposition of special taxes at the federal level has been much criticized by industry leaders. In the midst of all the disagreement the Mining Trust Fund stands as one of the initiatives addressing industry need to bring mining wealth to its local communities. But these funds are not easy to administer, as their distribution can end up creating more social conflict if not managed with utmost transparency. Industry leaders, from operators to international intergovernmental institutions, share their perspective on how the Mining Trust Fund can be better managed by both the industry and the government.
Centralized mechanisms for fund distributions are very difficult to implement as it is hard to please everyone. We support these initiatives but we have seen that using them adequately is not an easy task. The funds need to be used in a very transparent manner and authorities need to make sure that they are investing in projects that 318
support the wellbeing of communities. Peru, for instance, transfers 50 percent of the revenues it receives from the mining industry to surrounding communities but the
PAULO DE SA Former Practice Manager, Extractive Industries Unit at the World Bank
government was not properly overseeing its use. This meant that municipal leaders were investing in the wrong type of projects and cases of corruption arose. These initiatives are meant to eliminate conflict between authorities and communities but they can sometimes end up causing more problems than they were meant to solve.
The reality is that the adequate use of the Mining Fund lies in the hands of the governments. Authorities must prioritize the appropriate use of the funds. We have been receiving capital from the fund since 2014 and have been investing it directly into the communities. Our state has used 100 percent of the funds because we prioritize its fast use to make sure it is being directed to the right areas. The use of the fund is clearly indicated by the law and divided into several priority segments,
RAMĂ&#x201C;N DĂ VILA Minister of Economy of the State of Durango
such as health, highways and education. The trick is to collaborate with mining companies and communities to identify the main necessities and avoid just meeting the needs of municipal leaders. A leader may believe a park is the most important project but the community may be more in need of water infrastructure. Constant communication clears up these doubts.
We understand that some companies do not pay the tax, but we do because this is the law of the land. The fact that other parties do not contribute means that when infrastructure is built, it is not clear who was the source of the funding. We see the infrastructure being built and the funds being distributed. We are happy that we can see some benefits from our taxes going back into the communities, but I would say that we generally prefer more direct company involvement in the process. This
DARREN BLASUTTI President and CEO of Americas Silver Corporation
would be the most efficient way to ensure that the impacted communities receive the greatest benefit from the applicable companies.
Operators are now concerned about the communities surrounding their projects, as environmental and social awareness issues have gained more relevance. Communities ensure that processes are carried out correctly since they have the power to permit or block a project and/or production. So, the first thing that a mining company has to do before staring a project is to understand the social and environmental context in which it will be immersed. To design an efficient investment plan that will benefit locals, it is key to identify the communities affected by mine operations and their most pressing needs. I believe that the industry needs to map these players to better analyze what they require the most in terms of infrastructure or health and sanitation
PAOLA ROMERO Partner at Environmental Resources Management (ERM)
services. In this way, the industry can really comprehend the social footprint it has in the country and how it can be more efficient in mitigating it.
There is a fundamental problem with the Mining Fund. We only started paying into it last year but not one peso has been returned so far, and only about one third of the money we pay will come back to Guerrero. And in a state as poor as Guerrero, this is not understood. The communities do not look to the government for assistance; 319
they look to the company. We are the ones that are present and available, so they look to us. We have to explain to them that we have paid a heavy tax and cannot explain why this money has not be returned by the authorities for their benefit. There are recent signs that the Mining Fund is going to approve some projects, which will
FRED STANFORD President and CEO of Torex Gold
be a positive thing for the communities.
We ensure an open dialogue with surrounding communities to understand what their needs are and how we can help them achieve their goals. We fund these programs along with the taxes we pay into the Mining Fund. Through these dialogues, we have realized there are two main factors that communities want us to focus on: training and employment. The company prioritizes these elements along with scholarships and normal festivities within these communities.
GODFREY WALTON President and COO of Endeavour Silver
I have seen how important it is to reinvest in the local communities. It is crucial to monitor that royalties really go to the people and not to the central government. If they do not see this investment, it will become a problem for the industry. It is also key to consider how local authorities administer these resources. Often, they do not know how to manage big influxes of money and the funds may end up being lost due to corruption, bad investment or just lack of action. I think the better practice is to let mining companies directly help communities spend the funds on what is most needed, such as building roads, hospitals or schools.
GILBERTO DOMĂ?NGUEZ Vice President and Senior Executive Engineer of Knight PiĂŠsold
View of Zacatecas
POLICY & REGULATION
12
On the road to legal certainty, operators have had to maneuver speed bumps as unforeseen events can jeopardize the smooth running of the industry. PeĂąa Nietoâ&#x20AC;&#x2122;s administration entered the country during the mining sectorâ&#x20AC;&#x2122;s peak, with gold prices breaking the US$1,800/oz mark. So, authorities found it timely to start implementing new royalties, known as the Special Mining Taxes.
Unfortunately, by the time a 7.5 percent tax on mining production and a 0.5 percent additional tax on gold, silver and platinum operations were approved in 2014, mining companies faced a steep drop in gold prices to US$1,143/oz and silver was hovering around the US$20/oz mark. Exploration too is held back as regulatory changes forbid companies from deducting pre-operative expenses incurred until after 10 years.
The nuances and complexities of Mexican mining law are addressed by top legal experts, companies and public-sector authorities throughout this chapter. Best practices and insight into strategic regulatory risk-management techniques will also be shared by executives from the leading mining companies dealing with these topics on a daily basis.
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CHAPTER 12: POLICY & REGULATION 324
ANALYSIS: Calls Grow to Make Mining Policy More Attractive
326
INSIGHT: Héctor Herrera, Haynes and Boone
Jorge Sánchez, Haynes and Boone
327
VIEW FROM THE TOP: Juan Torres Landa, Hogan Lovells
328
INFOGRAPHIC: The Mining Fiscal Requirements in Review
330
INSIGHT: Jorge Ruíz, Baker McKenzie
331
VIEW FROM THE TOP: Laura Díaz, DBR Abogados
332
INSIGHT: Alfonso Rodríguez-Arana, Legalmex
333
VIEW FROM THE TOP: Enrique Rodríguez del Bosque, RB Abogados
334
INSIGHT: Mariano Calderón, Santamarina + Steta
335
VIEW FROM THE TOP: Joel Gonzalez, ALN Abogados
336
VIEW FROM THE TOP: Alberto Vázquez, VHG Servicios Legales
337
VIEW FROM THE TOP: Carlos Pavón, The National Union of Miners and Metallurgists (SNMM)
338
INSIGHT: Adolfo Calatayud, PwC
339
INSIGHT: Alfredo Álvarez, EY
340
ROUNDTABLE: What are the Best Practices for Efficiently Navigating Mining Policies?
323
| ANALYSIS
CALLS GROW TO MAKE MINING POLICY MORE ATTRACTIVE One of the main bumps foreign investors find on the road to a new business environment is national regulation and the legal system related to mining in Mexico is certainly complex. Often hindering investment, the industry calls for its simplification In 2005, the Mexican mining law was amended to
which is good, but some of the processes are still too
simplify the process of obtaining mining concessions
bureaucratic.”
by merging the exploitation and exploration schemes.
324
Despite the improvements, many believe procedures
The country’s mining potential is undeniable. It is the largest
are still too complex and that the country needs greater
silver producer in the world, the second-largest economy
legal dynamism and a simplified legal framework. “Mexico
in Latin America and has more than 500 years of mining
continues to fall in the Fraser Institute’s rankings of
history. According to CAMIMEX, the industry created 16,854
mining-friendly jurisdictions. It used to score in the top
new jobs in 2017, employing a total of 371,556 direct staff,
quarter of many metrics but is now near the middle or
with 32 percent higher wages than the national average.
lower,” says Jason Reiner, President and CEO of Gold
“The authorities should acknowledge that the mining
Resource Corporation. “This is not a good trend and
industry has been vital for Mexico for the last 500 years
reflects the increased difficulties that mine operators
and it is one of the country’s most important industries,”
face regarding security and tax issues in the country.
says Alberto Vázquez, Senior Partner of VHG Abogados.
Companies want a stable government, business-friendly policies, local support, reasonable taxes and less
EVOLUTION OF MINING LAW
bureaucracy rather than more. But the trend in Mexico is
It is difficult for the law to develop at the industry’s pace.
not going in a favorable direction.”
Today, technology has evolved to the point that many activities have a much lower-impact. But the law does
The country dropped from the 11th-most attractive
not take this into account. “I would prefer the authorities
investment destination in 2011 to 44th in 2017, according
expedite processing for man-portable drilling, which lets
to the Fraser Institute Survey. Investment in Mexico’s
companies drill more quickly and with less impact on the
mining sector in 2017 reached just US$4.3 billion, a far
surrounding areas,” says Minaurum’s Jones. He says the
cry from the US$8.04 billion registered just five years
permit required to install a man-portable drill is often just
earlier. “This shows us that something is definitely wrong.
as burdensome as creating a road access.
The situation illustrates that it is necessary to revise the country’s fiscal framework in terms of mining,” says
To address this issue, Gardea believes that the mining law
Sergio Almazán, Director General of CAMIMEX.
needs to evolve hand-in-hand with technological innovation to create a framework that reflects the latest developments.
Investment in Mexico’s mining sector in 2017 reached just US$4.3 billion, a far cry from the US$8.04 billion registered just five years earlier
“Lawmakers need to remain up-to-date on industry innovation to provide investors the judicial certainty to keep betting on Mexico,” he says. Jones also encourages an urgent review of the existing regulations. “The authorities need to make distinctions to make processes easier,” he says. “The regulations could be revised to encourage lowimpact activities.”
COMPLEX LEGISLATION
INSTITUTIONAL FRACTURES
Legislation in the mining industry is a main concern among
The lack of centralized institutions overseeing the whole
insiders, who point to this as the culprit for the drop in the
industry is another big bump in the road. The Mining
country’s investment attractiveness. “I think the complicated
Undersecretariat was established at the end of 2017 to better
legal framework is undermining our country’s competitivity
integrate regulatory matters related to mining. But the industry
and productivity,” says Gerardo Gardea, Director General of
still relies on multiple institutions due to transversally-applying
Delta Solutions. David Jones, Director of Minaurum Gold,
laws, including but not limited to those for water use, labor,
agrees. “In terms of the regulatory aspects, I think Mexico
firearms and explosives, ecological balance and environmental
is moving toward being more careful regarding oversight,
protection. This means miners must not only deal with the
INVESTMENT ATTRACTIVENESS INDEX Country/Region
POLICY PERCEPTION INDEX
2012
2017
Variation
Finland
2
1
1
Saskatchewan
8
2
Nevada
3
Ireland
Country/Region
2012
2017
Variation
Ireland
6
1
5
6
Finland
1
2
-1
3
0
Saskatchewan
13
3
10
29
4
25
Sweden
2
4
-2
Western Australia
5
5
0
Nevada
7
5
2
Quebec
10
6
4
Northern Ireland
N/A
6
N/A
Ontario
9
7
2
Michigan
33
7
26
Chile
14
8
6
Wyoming
5
8
-3
Arizona
26
9
17
Quebec
11
9
2
Mexico
27
44
-17
Mexico
42
49
-7
Source: The Fraser Institute
Mining Undersecretariat but also with CONAGUA for water-
investment, according to Almazán. The new tax burdens
related issues, SEMARNAT for environmental permitting and
levied on the industry by the Fiscal Reform mean mining
The Ministry of Defense for explosives permissions.
in Mexico is becoming costlier. “New taxes, the lack of juridical certainty and the lack of security have become
The Undersecretariat recognizes the hurdles faced by miners
very dissuasive factors for investment in Mexico,” he says.
and acknowledges that unifying regulatory and public efforts can be the first step. “The growing investment in the mining
Felipe Rivera, Industry Business and Process Automation
sector is demanding that we increase our institutional
Hub Leader for Mexico and Central America of Schneider
capacity to provide better and easier ways for local and
Electric Systems agrees that more should be done to
foreign investors in their projects,” says Mario Alfonso Cantú,
attract investment to the industry. “We must strive for
Undersecretary of Mining at the Ministry of Economy.
a more profitable but friendly tax structure that fosters foreign investment in the industry,” he says. “Regulations
The creation of a Ministry of Mining to oversee all industry
for resources management and land ownership are too
matters is being discussed as a possibility for the upcoming
complex to attract investment. I would ask (the new
administration to boost the industry. But while creating a
administration) for an improvement in this regard as there
ministry dedicated to mining could improve its institutional
is much that can be done.”
effectiveness, it would also imply a huge allocation of public resources. Instead, Vázquez proposes changing mining’s
AMLO AND THE MINING FUTURE
institutional dependency so that it no longer relies on
Uncertainty over the election outcome may have
the Ministry Economy but on the Ministry of Energy. “The
cleared after López Obrador and the MORENA party
mining sector should not be part of the Ministry of Economy
won a landslide victory with 53.5 percent of the vote,
as it is essentially part of the energy sector,” he says. “I
effectively ending the PAN-PRI presidential duopoly. But
believe that if the mining authorities came from the Ministry
his particular policies regarding mining are still unclear.
of Energy, communication would be much more fluid.”
As the industry holds its breath, waiting to see what institutional, fiscal and regulatory revisions will be made,
Vázquez says that public officers overseeing mining matters
industry leaders to agree that the key to policy success
should also have a deep understanding of the industry’s
in mining is long-term planning to complement the long-
technical dynamics, rather than just the economic factors.
term nature of the industry. “What we need is a policy that
“It is key to have government representatives for the
lays out the investment, the promotion and the objectives
industry who are committed to the sector,” he says. “We
over the course of 10, 20 or 50 years,” says Almazán.
must have officials who comply with the law and understand
“A long-term mining vision is essential for the industry’s
the nuances and importance of mining in Mexico.”
survival.” Susana Corella, Federal Deputy for Sonora and Head of the Special Mining Commission for the Federal
FISCAL ROAD BUMPS
Government of Mexico, agrees. “It is necessary to create
An institutional and legal revision of the mining regulations
conditions that provide investments greater certainty,
should also consider the fiscal component. But in Mexico
and this includes federal and state-level mining-related
taxes are precisely one of the main hurdles to fostering
legislation,” she says.
325
| INSIGHT
POLITICAL, FINANCIAL STABILITY ENSURES A HEALTHY FUTURE Héctor Herrera Partner at Haynes and Boone
326
Jorge Sánchez Partner at Haynes and Boone
Geopolitical volatility can be both a blessing and a curse:
To protect investors from the risks associated with a
it can lead to higher gold prices while an event like the
new presidential term, the Peña Nieto administration is
Mexican presidential elections could swing policy against an
incorporating the country into the International Centre for
industry such as mining and players must weigh their options.
Settlement of Investment Disputes (ICSID), an international
“Volatility around the world is benefiting metal prices as well
arbitration institution for legal dispute resolution and
as funds in various stock exchanges,” says Héctor Herrera,
conciliation for global investors. According to Sánchez,
Partner at Haynes and Boone. “However, the country also
this tool will help investors protect themselves against any
needs to take into consideration the impacts of the 2018
attempts by the government to implement laws that are
presidential elections on investment and the exploitation of
unconstitutional. “Investors can use ICSID in Mexican courts to
mineral resources in Mexico.”
protect their investments and this will help retain investment in the country in case of volatility,” he explains. “It also protects
The wildcard Andrés Manuel López Obrador from MORENA, or AMLO as he is more commonly known, sailed to victory on July 1 with 53 percent of the vote. Despite his unequivocal win, the effects of his leadership on the mining industry are much less clear. “He has not announced a stance on the mining industry but clues can be derived from his nationalistic outlook on hydrocarbons,” says Sánchez. “His view on oil could easily spill over to the mining industry. He has publicly stated his intentions of controlling natural resources and reviewing the concessions that have been granted to oil companies.” The lawyers believe nationalizing natural resources in the country would be a grave error and this would be the least favorable scenario for the mining and hydrocarbons industry.
“
the country against any negative consequence from the NAFTA renegotiations.”
AMLO has not announced a stance on the mining industry but clues can be derived from his nationalistic outlook on hydrocarbons” Jorge Sánchez Partner at Haynes and Boone
The entrance of a left-wing presidential candidate could also imply a shift of power among nonprofit organizations in the
Overall, the partners say the law firm’s clients are positive
country. “Many nonprofit organizations have political interests
about the growth of the industry in Mexico but are concerned
that are not related to environmental and social concerns,”
about the political aspects of the country. To establish a
says Sánchez. “Left-wing parties have historically given leeway
healthier mining industry, the partners recommend creating
to these types of organization. In effect, a left-wing president
more fiscal equality between the mining sector and other
would give them more influence and visibility.”
industries. “The mining industry faces some of the strictest and highest fiscal requirements at a municipal, state and
He says this can be seen through PRD’s frequent attempts
federal level in comparison to other sectors,” says Herrera.
to implement mining law reforms that tie the granting of concessions to the completion of environmental studies
Along with legal inequality, mining companies also struggle
and social licenses. In Sánchez’s opinion, it is absurd to ask
to access capital, which is creating a reliance on international
companies to invest in these types of concessions before they
banks. “The financial schemes that are offered by national
can ensure the availability of the land. “These kinds of laws
banks such as FIFOMI do not fit the needs of junior mining
have been tried and tested in many other countries and have
companies,” Herrera says. “They often request details such as
failed because it is impossible to condition investment on
the property size when companies are still in the process of
environmental and social approval,” he says.
finding the capital to acquire land in the first place.”
VIEW FROM THE TOP |
GOVERNMENT INTERVENTION NEEDED IN MINING DISPUTES JUAN TORRES LANDA Partner at Hogan Lovells
Q: What aspects of the Mexican mining legal framework
A: Labor issues are critical as there are cases of disruptions and
should be changed to increase the countryâ&#x20AC;&#x2122;s attractiveness
issues in this matter throughout the industry. The government
to investors?
should emphasize that as long as mining companies comply
A: One factor that is not usually related to the regulatory
with employment regulations, union leaders should not be
framework but has a strong impact on the industry is
allowed to extort those companies. I believe there must be
security. Mining companies not only must include Mexican
intra-agency cooperation on a federal level, perhaps a joint
taxes in their budgets but also security factors. As mine
agency between the Ministry of Economy and the Ministry
operations are often located in isolated places and have
of Labor, to work on these issues. A more visible and public
limited communication, they are more vulnerable to
approach can show that the government is aware of the issues
organized crime. This makes their spending budget grow
and is working to prevent more disputes from arising. It should
significantly in comparison to what they would spend in
not tolerate any parties seeking to profit from creating conflict
more secure jurisdictions. The government definitely has
within the mining industry, as it is key for development,
to do something about security, which is a very delicate
taxation and employment creation. It is a matter of public
topic as organized crime has incredible economic support
policy to make sure that those companies can operate in a
based on revenue from drug prohibition-related activities.
stable environment.
The only meaningful way to change the current trend is to end drug prohibition. The government must take
Q: What would be your advice to companies seeking to
full regulatory control and thus significantly reduce the
secure mining concessions in Mexico?
ability of organized crime to undermine the security of
A: Due diligence is key for a safe and profitable investment.
mining, other industries and the population in general.
Money invested in carrying out a sophisticated analysis is money well spent. Finding a problem after initiating
Q: What strategies can the industry use to mitigate the
exploration is 10 times more expensive than preventing it
risks of higher tax rates in the mining sector?
beforehand. Being prepared also implies being mindful of
A: The first step is to try to prevent tax proposals, such as
the local communities, how they live and the impact the
the one implemented in Zacatecas, from moving forward.
operations may have on their way of living. An environmental
When these types of bills are enacted, there are several
impact statement is an equally fundamental element for
resources available that operators can use to combat
mine operations. These statements have become more
them, such as amparos. There are two legal windows:
sophisticated with time, as mining developments are
one when the law is enacted and the second when it
considered projects with a high environmental impact. These
is actually applied. It gets very technical because often
studies must be meticulous and comprehensive in determining
those two stages start at the same time. This is called
if the operation is open-pit or underground and what impact
autoaplicativas and means that the law is automatically
it could have on fauna, flora and water basins, among other
applied to a business just by being enacted. Companies
elements. Water treatment and recycling is critical as mining
must be careful to file the amparos at the right time or
is often carried out in areas where water is scarce. I find that
they will miss the opportunity to raise objections. Failure
with greater technological tools, mining activities now tend
to file an objection within the correct window means that
to have a completely balanced use of water.
they are automatically considered to consent and no longer have the chance to challenge the constitutionality of the law.
Hogan Lovells is an international law firm that has a sophisticated team with a deep knowledge of the local market.
Q: How would you describe the main legal issues companies
Together, they specialize in various industries, including energy
face when it comes to human capital?
and natural resources, infrastructure and transportation
327
| INFOGRAPHIC
THE MINING FISCAL REQUIREMENTS IN REVIEW The Fiscal Reform specifies that mining companies must pay
prices and the new fiscal requirements have companies
to hold the rights for their extractive activities. New taxes
prioritizing their investments. Miners subsequently called
brought the promise that 77.5 percent of the funds levied
for the government to strive for fiscal policies that will foster
would be distributed among mining states to improve life
investment and exploration with a long-term view, considering
quality among mining communities. The volatility of metal
the importance of mining for Mexico’s economic performance.
ZACATECAS ECOLOGICAL TAXES In December 2016, Zacatecas state Governor announced green taxes on all extractive and highly-contaminating
TOTAL TAX REVENUES COLLECTED BY MINISTRY OF FINANCE AND SAT 2017
activities in the state. The tax came into effect in January 2017 but was contested by various industries, mining chief among them. Some miners complied and paid
MX$2.85 trillion 328
the taxes, while others filed amparos questioning its constitutionality. President Peña Nieto escalated the case to the SCJN. The government of Zacatecas is still in negotiations with the main industries affected.
55.16% Income taxes (ISR) 28.58% Value-added taxes (VAT) 16.25% Other taxes
Concept
Description
Environmental remediation tax on materials production
Charge for each m3 of extracted material during the mining process.
Tax on emissions of pollutants to the soil, subsoil and water
Charge of MXN$25 for each 100m2 impacted by dangerous substances.
TAX IN MINING AND EXTRACTIVE INDUSTRIES CONTRIBUTION TO GDP
Tax on gas emissions into the atmosphere
Charge of MX$250 for each ton of carbon dioxide released into the atmosphere.
97.2% Extractive
Tax on the disposal of waste
Charge of MX$100 for each stored ton of waste in private or public landfills.
MX$481.9
industries
2.8% Mining*
billion in total
CORPORATE TAXES AT A GLANCE
MX$13.25 billion
MINING CONTRIBUTIONS*
62.5% Non-tax revenues 37.5% Tax revenues MINING NATIONAL NET COLLECTION 2017 (MX$ million) Mining*
481,979.5
13,254.7
452,009.9
8,281.5
29,969.6
4,973.3
Income taxes (ISR)
35,512.3
28,805.6
Value-Added Taxes (VAT)
-6,793.0
-20,820.3
Production and Services
-3,204.8
-3,204.8
0.1
0.3
4,455.1
192.6
Total GDP contributions Non-tax revenues Tax revenues
Foreign trade Other taxes
30% corporate income tax (CIT) rate
Withholding taxes royalties
25% for know-how and technical assistance (10% under most tax treaties)
Bonuses
Not applicable
Dividends
10% withholding tax (0% or 5% under some tax treaties)
Interest
Total tax in mining and extractive industries
Concept
Corporate income
• 4.9% paid to banks resident in a treaty country and by certain registered financial entities
*Metal and non-metal minerals. Except O&G, mining related services and other non-specified mining services
• 10% paid on negotiable instruments and to banks not resident in a treaty country • 21% paid on qualified acquisitions of machinery and equipment • 35% of other interest paid • 15% paid to reinsurance companies (These rates may be reduced to 15% or 10% under most tax treaties)
WHAT WILL US$51.1 BILLION BUY?
Since 2012, mining companies have invested US$51.1 billion in Mexico, according to CAMIMEX. With the same amount of money, it is possible to:
Build 5.6 NAIMs
Pay for the Sochi Winter Olympics
Buy 511 Boeing 757 singleâ&#x20AC;&#x2018;aisle jets
329
FISCAL REGIME Mexico does not have a tax holiday regimen, nor has it
Depreciation of assets
provided exploration incentives since 2014. As of January
Taxpayers are generally required to depreciate the cost of
2017, VAT paid during pre-operative period is creditable
fixed assets using the straight-line method. The depreciation
or refunded. Here the most relevant things to know about
deduction is adjusted for inflation from the date of
mining and taxes, explained by EY.
acquisition until the date of the deduction.
Corporate income tax
Research and development
Mexico taxes resident companies 30 percent on worldwide
A tax incentive will be granted, consisting of a 30 percent
earnings. A permanent establishment (PE) of a foreign
credit on expenses and investments made in R&D of
resident is generally taxed equally as a Mexican resident
technologies applicable against Corporate Income Tax
but only on income attributable to the PE.
payable in the fiscal year.
Pre-operating expenses
Royalties and technical assistance fees
Must be capitalized and amortized on a straight-
Withholding tax is due on royalty payments to nonresidents
line basis over a 10-year period (a longer period for
at the earlier of the date they are paid or when they become
amortization of costs is possible). Pre-operating period
due and payable. Its general rate for royalties is 25 percent,
lasts until products are sold or services are provided on
and 10 percent under most tax treaties. If royalty recipient
a continuous basis.
is subject to preferential tax regime, the rate is 40 percent.
MINING DUTIES General mining duty
Special mining duty
Mining concession holders shall pay it semiannually per
Shall be paid by mining concession holders by applying
assigned hectare (it varies depending on the size and the
7.5 percent over the extractive profits. Holders can deduct
timing of the concession)
authorized expenses for income tax purposes, except for depreciation of investments.
Extraordinary mining duty Applicable on the gross value of sales of gold, silver and
Additional mining duty
platinum, without any deductions, at a rate of 0.5 percent.
A penalty is applied when a concession is not developed.
Sources: CAMIMEX 2018 Annual Report, EY Mexico Mining and Metals Tax Guide 2017
| INSIGHT
THE CORE OF THE MEXICAN MINING FRAMEWORK JORGE RUÍZ Partner at Baker McKenzie
330
At the core of the well-structured Mexican mining legal
like ejidos. “The regulation in terms of access to mining
framework stands the process for securing mineral rights.
operations is comprehensive but I believe ejidos are
Despite the framework’s efficiency, Jorge Ruíz, Partner
the most troublesome aspect, as we often do not fully
at Baker McKenzie, says the framework is hindered by
understand what certain properties may mean to local
environmental concerns, property rights and the mining
communities,” Ruíz says. Labor laws are equally important
royalty. “Miners increasingly need to consider additional
elements that need to be prioritized in legal frameworks,
elements that revolve around it, such as real estate laws
he adds. “Without the human factor and the workers
that play a large role in the equation.”
dedicated to the mining industry it would be impossible to do anything, even with the development of robots.”
The process for obtaining a mining concession is clear, making venturing into Mexican mining more attractive to
These new technologies, pressure from environmentalists
foreign investors. “The laws behind the core regulatory
and a growing awareness about the pollution of land
aspects of mining, which entitle firms to mineral rights,
and water are pushing mining practices to become more
known as mining concessions, are quite organized and
sustainable. Ruíz says companies with mining concessions
legally upheld by different authorities here and abroad,” Ruíz
must consider the need to dip into their pockets. “Always
says. “The process to secure them is clear and to a certain
keep in mind that green actions need to go hand-in-hand
degree, transparent and efficient.” Once a concession has
with another green element, which is money,” he says.
been acquired, it is easy to convey or transfer mineral rights
“Projects need to be developed with these two things in
that belong to the Mexican state, as everything that is in the
mind.” Despite the growth of green mining practices, he
ground is the property of the nation. It can then be loaned to
says legal regulation on this matter continues to stagnate.
an individual, a company or another entity and proceed to be
This has driven the majors in certain municipalities to
recorded on a federal registry that is easy to consult online.
encourage green practices through financial incentives. “We are starting to see some majors in certain municipalities
The property regime in Mexico can be categorized into
put pressure on supply chain companies to stop
three sections: public, private and special mechanisms
pollution,” he says.
VIEW FROM THE TOP |
MINING: THE GOOSE LAYING THE GOLDEN EGG LAURA DÍAZ Partner at DBR Abogados
Q: What did the Supreme Court rule in terms of the
Q: How will the change of administration in 2018 affect the
amparos that were filed against the constitutionality of
mining industry’s FDI?
the mining royalties?
A: I am optimistic about the change of administration
A: On Nov. 15, 2017, the Supreme Court of Justice voted to
and I believe that legal regulation and enforcement will
discard all amparos related to the constitutionality of the
improve in several aspects as this industry is one of the
so-called mining royalties, which are in fact new mining
country’s main pillars even if it is often overlooked. FDI in
taxes. On that day, of all of cases that were filed for revision,
the country has increased greatly and will continue to do
three were chosen for reevaluation. The final vote ended
so in the coming years. The industry used to be managed
up being rather unusual as the result was extremely close,
by a handful of actors including Peñoles, Grupo México,
with three in favor of the tax and two against. In these
Grupo Acerero del Norte and Minera Frisco. Now, the
scenarios, votes are usually more unanimous. But this
industry is much more diverse and includes players with
resolution is not definitive, as the case files that were not
specialized knowledge in mining such as Canadians that
examined have to be sent back to their original court to
are experts in managing capital risk. Regardless of the
be resolved individually based on the conclusion of the
next administration’s outcome, I do not think the mining
Supreme Court. The final resolution will likely not be in
sector will be damaged because that would be like killing
the interest of mining companies as the court has already
the goose laying the golden eggs.
declared that the royalties do not violate constitutionality or proportionality principles.
Q: What is DBR’s overview of the industry in the past years and its short-term expectations?
Q: What is your perception of the development and impact
A: I believe that 2017 was largely positive as prices did not
of mining royalties in the industry almost three years after
drop and the market was stable in general terms. It was also
the implementation of the fiscal reform?
characterized by a concentration of market share among a
A: The economic impact of the mining royalties is
few companies, which was in part created by all the policies
unquestionable as it has caused profits to decrease and
that discouraged foreign investment, such as the mining
production costs to rise. This makes Mexico a lot less
royalties. Players that have the expertise to operate in
attractive when companies are making projections of how
Mexico–mostly Canadians—were able to consolidate their
much it costs to produce an ounce of ore in the country
presence in the mining sector.
in comparison to other mining jurisdictions. Our main competitors at the moment are Peru and Canada, whose
As for DBR Abogados, we are a reflection of the industry.
general conditions are more favorable.
We may have experienced a flat year for our firm but we also did not suffer nor did our workload decelerate. Overall,
As for how the funds from the mining royalties are being
the environment in the industry is favorable as companies
used, I do not personally know of any successful case.
continue to enter the country in search of new projects and
CAMIMEX information shows that there are several
opportunities. This implies that Mexico is still an appealing
projects being developed with this capital but we do not
country to invest in. At the moment, our focus in the
have any real evidence of their advancements or impact
industry is mainly on the purchase and sale of projects.
on the industry or the local communities where the funds are supposed to be invested. There is not a clear enough correlation being shown between the use of the funds and
DBR Abogados specializes in providing comprehensive legal
what miners are paying. But we are still one of the top 10
solutions for its clients. DBR is a firm that provides personalized
mining countries thanks to our optimal ore reservoirs, this
services that adhere to the highest standards of ethics and
in spite of the business environment.
responsibility
331
| INSIGHT
REFORM TO EVEN THE LABOR PLAYING FIELD ALFONSO RODRÍGUEZ-ARANA Managing Partner at Legalmex
Labor law in Mexico can be particularly tricky waters to
of the system is expected to be beneficial for employers,
navigate, especially for miners. Located in remote areas, labor
unions and workers alike.
disputes with workers and trade unions often end in blockades,
332
giving the operator no alternative but to ride out the storm
On paper, labor unions are meant to fight for the interest
and the workers the leverage to negotiate. Alfonso Rodríguez-
of their members, but the law has limited their power in
Arana, Managing Partner of Legalmex, says the government’s
practice. “The reform includes the creation of an organism
2017 reform of the Constitution’s article 123, related to the
to support and control labor unions, which has upset their
federal labor law, was an attempt to even the playing field and
leaders because they cannot predict how this organism will
ensure Mexico remained an attractive destination for FDI. “The
change the status quo,” explains Rodríguez-Arana.
reform was intended to professionalize the delivery of labor justice through the creation of labor tribunals and the close
The idea is to create a new agency to which labor unions
regulation of the country’s labor unions,” he says.
will report so authorities can better regulate workers’ representation and limit the power of unions that do not
Specialized in advising the mining industry on how to
necessarily have the best interests of their workers at heart.
navigate intricate Mexican labor regulations, Rodríguez-
“Social justice has not been accomplished in Mexico, in part
Arana anticipates the 2017 reform will come into effect in
due to unions prioritizing personal interests instead of those
early November 2018, a delay from its expected February
of workers,” he says.
start. “There will be a transition period needed so the authorities can create and put into effect all the new
But with a labor law composed of more than 1,000 articles,
organisms,” he says. Among these are labor tribunals,
with several related and constantly-changing regulations
which will report to the judiciary and are intended to
and codes, it is hard for mine operators, other employees
replace the existing labor boards. Rodríguez-Arana says
and employers to keep up. Rodríguez-Arana believes in
these labor boards are typically tainted by corruption
seeking deregulation. “Businessmen have to focus on their
and he welcomes a change in the law that would shift the
core business and possibly have no time to be aware of
delivery of justice to the judiciary. The professionalization
such overregulation,” he says.
VIEW FROM THE TOP |
A RENEWED APPETITE IN MEXICO FOR M&A DEALS ENRIQUE RODRÍGUEZ DEL BOSQUE Founding Partner at RB Abogados
Q: Why is it important to maintain a healthy market for
to the current financial climate and the rise in prices,
M&A deals in the Mexican mining industry?
M&A deals in the industry are starting to pick up again.
A: It is important to ensure a healthy and continuous flow
Companies are looking to expand their portfolios and
of transactions in mining because this helps to push the
merge with other players to keep shareholders happy.
discovery of high-value assets and to replenish portfolios.
Many transactions will occur as players have to dedicate
For example, a junior exploration company may take a
themselves to either being an exploration company or
property that is only worth a few hundred thousand dollars
an operator. It is too expensive to fund both, with the
and turn it into a US$4 million asset after completing drilling
exception of large companies like Pan American Silver.
and feasibility studies. Afterward the player may decide to
Australian and Asian companies that left during the
sell the asset to another company that then continues to
mining slump are starting to take interest in Mexico again.
drill in another part of the property. The concession will
We believe this upcycle will be even more dynamic than
continue to rise in value from one hand to another until
the last one. It also helps that companies are getting used
an important ore body is discovered. The project can end
to the current administration and the changes that were
up being worth US$50 million and will commonly end up
implemented over the last couple of years.
in the hands of a major operator to start production when it reaches this point as they are the ones that have the
Q: Considering RB Abogado’s participation in the
capital to continue developing the mine. For this reason, it
acquisition of Primero Mining, what are the main
is important to promote exploration, which helps increase
advantages of this deal?
the likelihood of the next big discovery. Probably one out of
A: We are representing Primero Mining in this deal and
100 exploration projects will reach this level but the process
while the company will cease to exist and therefore no
has a strong economic impact in the country, providing
longer be our client, we are happy to see our client join
employment and capital to thousands of people in Mexico.
First Majestic Silver. The company has the advantage of primarily focusing on Mexico, which means that it greatly
Unfortunately, it can be quite expensive to maintain a mining
reduces costs as other international companies have to
concession in good condition as a variety of permits need
invest in lawyers and management in each country in
be obtained and negotiations must be concluded. Medium-
which they operate. Our firm additionally helped Primero
sized players have a significant role as they help fund and
Mining acquire San Dimas from Goldcorp, one of the
continue the exploration started by smaller companies
oldest mines in Mexico with room for growth and sell
with limited budgets, which in turn helps large operators
Cerro del Gallo to Argonaut Gold in December 2017.
maintain world-class assets in their portfolios. The industry depends on constant transactions and acquisitions. Our law
RB Abogados also represents Pan American Silver, which
firm has experience working with lawyers around the world
closed a JV with Kootenay Silver in 2016 that has had great
and we specialize in M&A and project finance.
results. The JV was not a traditional move for the company as it normally chooses to work with more developed
Q: What key trends do you foresee when it comes to M&A
projects. Through due diligence, it decided to take a risk
deals in the country’s mining sector?
and the projects are performing well.
A: The global economy is volatile and the direction in which it is heading is not clear. In times of instability, investors rely on commodities as there will always be
RB Abogados is a law firm founded in 1993 by Enrique
demand for minerals. This is what truly differentiates
Rodríguez del Bosque. It has become one of the leading
mining from other industries: it is the only sector that
law firms in Mexican mining law, M&A and project finance
can guarantee consumption upon production. Thanks
transactions
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| INSIGHT
DUE DILLIGENCE KEY TO AVOID ISSUES WITH COMMUNITIES MARIANO CALDERÓN Partner at Santamarina + Steta
With the plethora of potential complications that could
communities to ensure no agrarian dispute arises after the
threaten mining projects, ranging from land disputes
commitment has already been made to start operations.”
to community issues and even taxes, it is imperative
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that companies have access to legal representation that
While investors want legal certainty, Calderón says the
can cover all bases, says Mariano Calderón, Partner at
Mexican mining industry has come across a few stumbling
Santamarina + Steta. “Companies could have performed
blocks in this regard. “Investors do not know what to expect
proper due diligence, acquired all the permits, made all the
from the tax authorities in Mexico,” he says. “They cannot
payments and on the day when operations are expected
predict if SAT will accept their deductions, question their
to start, a community can file a lawsuit claiming to be the
accounting systems or, as happened more recently, very
rightful owners of that piece of land,” he says.
aggressively negate existing agreements on transfer pricing.” He references the case of Primero Mining, a now-defunct
Santamarina + Steta has a long history in the mining
Canadian operator. The mine had an existing streaming
industry, having worked with leaders like Grupo México.
agreement with Wheaton Precious Metals and Calderón says
While the average dispute lasts around two or three years,
an advanced ruling from the Mexican government established
“We can work with both national and international mining
this transfer pricing would be dealt with at arm’s length. “Two
companies on a variety of matters, whether it be concerns
years later, the tax authorities began questioning the validity
with the Ministry of Economy, agrarian issues, community
of the ruling from the Mexican government itself,” he says.
relations, tax, labor or civil litigation or an IPO,” he adds. Another tax issue on which the firm is working is with Carrizal Calderón advises companies to carry out thorough due
Mining, that operates a lead, zinc and copper concentrates
diligence by going much further than normally required.
mine in Hidalgo. The company filed an amparo against the
“Even within public records there may be no record of ejido
fiscal reforms in 2014 that imposed special duties mining
involvement with any part of the land but it is still possible
activities, arguing the charges were in fact a tax and
that someone may stake a claim,” he says. “We would
unconstitutional. This motion was defeated in the Supreme
recommend the company touch base with the surrounding
Court by a vote of three to two and the taxes were upheld.
VIEW FROM THE TOP |
STRIKING GOLD IN NONTRADITIONAL MINING STATES JOEL GONZALEZ Partner at ALN Abogados
Q: In which mining segments are ALN Abogados’ services
opportunities that they did not previously have and that the
most in demand?
government was not able to offer. We work hard to break
A: In the last year, we have seen a lot of interest from
these paradigms, understand each community’s necessities
companies that are in the process of expanding their
and show them what projects in their area can do for them.
operations and investing in exploration. ALN works mainly with companies dedicated to gold and silver. Our
Q: How does your firm evaluate the effectiveness of the
company has a very strong presence in mining states such
regulatory framework in Mexico?
as Chihuahua, Zacatecas, Sonora and Durango; however, we
A: The legal framework is effective, despite the fact that
have seen an increase in exploration work in states such as
it can be improved in certain areas. The real challenge lies
Jalisco, Oaxaca, Guerrero and other nontraditional mining
in the lack of certainty investors feel in the country’s legal
states, where we have been expanding our practice in the
system, especially in enforcement of the legal framework.
last year. There is a great deal of potential in these regions.
The main examples are unions and communities that
We are interested in finding new ways to work with them.
organize strikes and blockades, even if there exists a perfect formal agreement duly recorded and approved by judicial
Q: What kind of experience has your law firm had working
authorities. In case of strikes or blockades, it can take weeks
with projects in nontraditional mining states?
or even longer to solve these issues and delayed operations
A: We are expanding toward Jalisco, in particular. Thanks
can cost companies millions of dollars. The justice system is
to the great results we have reaped in this state we are
lacking in providing an effective response to these issues and
currently in the process of opening an office in Guadalajara.
providing certainty to mining companies. They often have to
This will help us affirm our presence and to further expand
pay out for these problems even if the cause is unfounded.
our practice in the central and southern states where mining
This is why we strongly believe that close communication
exploration has been increasing in the last few years.
and understanding of the needs of the communities is fundamental to every project’s success. It is unfortunate and
The main setback in nontraditional states is that the public
it is a big area of opportunity for the new administration.
sector is not familiar with the mining industry. Some authorities tend to confuse norms from the Energy Reform
Another fundamental aspect related to legal framework is
with those of the mining industry. Since the promotion of
that mining companies that start exploration in Mexico need
mining in their states is in the best interests of the local
to invest more time on proper due diligence. The primary
authorities, we collaborate hand-in-hand with them and
failures during this process are reviews of whether the
make sure they understand the legal mining framework to
project is located in a Natural Protected Area, the kind of
provide better conditions for mining investments.
property regime involved in surface rights and presence of any preferential activities according to the Energy Reform.
It can also be challenging to deal with communities in these
All these factors tend to slow down the development of
areas as they usually have a negative perception of the
mining projects in the country. Companies should protect
mining industry. They may believe that the mining industry
themselves by verifying this information before making a
is still operating as it was 50 or 100 years ago, and that
purchase or engaging in any project.
companies are environmental predators that will abuse the rights of communities. But we know that this is no longer the case. The industry generates an impressive amount
ALN Abogados is a Chihuahua-based law firm with a focus on
of investment in infrastructure, education, environmental
the mining industry and its related needs. It has over 35 years of
protection and social license projects that create alternative
experience in a variety of disciplines, including environmental,
economies. People in these communities gain access to job
contractual and mining
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| VIEW FROM THE TOP
LACK OF GOVERNMENT COMMITMENT HOLDING BACK INDUSTRY ALBERTO VĂ ZQUEZ Senior Partner at VHG Servicios Legales
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Q: From a legal point of view, what is keeping the Mexican
Perhaps it is unfair to say that the whole administration is
mining industry from leaping to the forefront of the
bad, since there are people within the government fighting
national economy?
for mining. The first reason why I believe the government
A: I think the Mexican mining legislation is among the best
is overlooking the mining industry is apathy and lack of
in the world but the industry is often overlooked by the
knowledge of the industry. Also, a government that makes
government. The main problem we have faced for many
decisions in favor of the mining industry can face attacks
years is the lack of commitment by the authorities to provide
from the international community, environmental agencies
the solutions companies are demanding. I have personally
and NGOs. It is a controversial topic but it should not be,
noticed that every time a new administration enters or
provided we comply with the well-established law.
there is a new initiative, the mining industry suffers. One example of this was the Energy Reform. While of course it is
The most important international treaties that are in conflict
important to open the landscape to foreign investment, the
with Mexican federal mining laws are those on human
authorities placed the mining industry in third place after
rights. These treaties clash with the process of granting
oil and energy. Conversely, private investment in mining has
mining concessions, and I deal with these issues almost
flowed into the country for years.
every day. While an international treaty is a document that all governments agree to, it is not possible to have the
A big operator that can afford to buy 100 tickets has a much greater probability of winning a concession than a small exploration company
same criteria for developed, developing and impoverished countries. That is why I think the laws of each country should remain valid over those of the treaties in the cases where there is the possibility of conflict. I am not against international treaties; I think they are a necessary tool to improve the world. But I also think that NGOs and other agencies are using these tools for other interests that do not represent the needs of the groups they claim to represent.
I also believe the mining sector should not be part of the Ministry of Economy, as it is essentially part of the energy
Q: To what extent do you think the lottery process for
sector. I believe that if the mining authorities came from the
mining concessions is successful in fostering competition
Ministry of Energy, communication would be much more
and opportunities for smaller operators?
fluid. It would be helpful if, when a new administration enters,
A: The main problem is that we have not experienced
it could appoint officers to the Mining Undersecretariat that
many lotteries for land allocation processes, which is
at least understand the mining industry.
necessary to improve how a system works. And although this administration has shown transparency in the lottery
Q: Why do you think the government is overlooking an
processes that have taken place, the chances are that a
industry that is so important for the economy?
big operator that can afford to buy 100 tickets has a much
A: I have no answer for that. I still believe this has been
greater probability of winning than a small exploration
the worst administration in terms of mining regulation.
company that can only buy one ticket. Nevertheless, this is a huge improvement on the previous system, whereby the huge company was certain it would be awarded the
VHG is a law firm founded in Mexico City. One of its main
concession; at least now the smaller companies have a
priorities is to develop an association of service, trust,
chance of winning. Since we are now almost at the end
friendship and professionalism, always with the intention of
of the administration, it is unlikely that we will see more
maintaining a long-term relationship with all its clients
lottery processes or land liberation in the next few months.
VIEW FROM THE TOP |
CHANGING THE MINING IMAGE IN MEXICO CARLOS PAVĂ&#x201C;N General Secretary of the National Union of Miners and Metallurgists (SNMM)
Q: How do you think NAFTA renegotiations will affect
a part so the investment is not centralized. It should aim for
mining in Mexico?
more transparency. As its name states, it is a fund that should
A: I think NAFTA is a very relevant issue to consider.
be invested in mines, which is not always the case. The union
Politically the treaty is useful as it allows us to access the US
believes there should be a minersâ&#x20AC;&#x2122; committee to allow workers
and Canadian markets but renegotiations need to consider
an opportunity to vote on how the fund is dispersed.
that Mexico does not have the same living conditions as the US or Canada. We must strive to gradually diminish the
Q: How does the union help mitigate the impact supercycles
gap between NAFTA members. It must be gradual because
can have on miners?
many foreign investors chose to come to Mexico because
A: We always try to seek what is best for workers amid
of the low wages, so we cannot suddenly increase them
the ups and downs of the mining cycle. During the last
to regional parity because we would lose FDI. This could
downturn most of the publicly listed companies went out of
impact investment in the countryâ&#x20AC;&#x2122;s mining industry. We
business. Those that survived are mostly privately funded as
cannot risk bringing about more unemployment. I am a
they have a better understanding of the volatility of prices
supporter of creating more employment opportunities in
and how to financially prepare themselves to survive low
Mexico as it is a country that needs to generate more jobs.
prices. Everything that surrounds us comes from mining,
Also, the higher the profits we make in Mexico, the more
so the mining industry must prevail.
income tax increases, which can lead to high inflation rates. The mining industry is a sector that has billionaire profits but Q: What are the key challenges that mine operators face
that also requires a billionaire investment. The equipment
in terms of their workforce?
and procedures to extract ore are expensive, and most
A: A key challenge that mine operators often face is having
machines must be purchased in dollars, which makes them
optimum control of their labor force. The isolation of the
costlier for Mexican companies. Companies should really
mines can lead to unhealthy social situations like addiction
take care of their spending so they can be prepared for
to narcotics. Also, companies often experience losses due to
the impact of volatility. Our goal is to preserve and defend
theft, whether it be in material, capital or ore. These are very
wages to protect workers in this context.
delicate issues and they should be handled with extreme care. Part of our mission as SNMM is to help to prevent and
Q: What are your medium term goals for SNMM?
fight against these situations.
A: Our goal is to be the primary mining union in the country, not only in terms of growth, but also in strength
Q: What kind of relationship does the union have with the
and responsibility. We have 16 chapters representing miners
private sector in the mining industry?
across the country and we democratically-elect leaders
A: We try to foster a positive relationship with private
every two years. Our growth is based on security, labor
companies. We collaborate with the private sector to
stability and benefits for workers, either social or economic.
improve areas that surround the mines by investing in
We are creating campaigns to promote safety to show
football fields and spaces for families to spend time
miners the importance of taking care of their personal
together, among other projects. Collaboration helps us
safety as well as that of their peers.
achieve plans and goals that are adapted to the needs of each local community. The National Union of Miners and Metallurgists (SNMM) is one
Regarding the public sector, I believe the Mining Trust Fund
of the only mining unions in Mexico that is not employer-led.
is a key issue. The main problem is that it is not properly
It has 16 chapters representing miners and works with major
distributed, as the three stages of government each receive
operators to negotiate better working conditions in mines
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| INSIGHT
CHANGE TAX STRUCTURE TO INCREASE COMPETITIVITY ADOLFO CALATAYUD Tax Controversy and Dispute Resolution Lead Partner in Mexico and Latin America at PwC
338
Boosting Mexico’s attractiveness as a mining jurisdiction
expenses. “Widening access to deductibility in Mexico
has become a hot topic in the industry with the
can help attract more capital toward the country. The
competitivity of its tax regime a key focus. According
authorities should also consider a reduction in Mexican
to Adolfo Calatayud, Tax Controversy and Dispute
income tax as an important first step toward creating a
Resolution Lead Partner in Mexico and Latin America
change in the tax regime,” he says. “Lastly, authorities
at PwC, mining jurisdictions such as Chile and Peru
need to be more transparent when it comes to their use
have implemented tax structures that are much more
of taxpayer money to gain the trust of investors.”
attractive. “Consequently, compared to other jurisdictions in the region, over the last four to eight years, the Mexican
“
Calatayud believes that any modifications should aim for
industry has experienced a considerable drop in revenue
cost reduction to mitigate the industry's cyclicality. “This
and profit,” he says.
remains a priority as the volatility in mineral prices are
Adapting to new electronic requirements will be a top challenge throughout the next five years, especially for companies that have over 1,000 transactions per day”
continuing to push companies to be more efficient with their capital and operational models,” he says. The rise of the digital economy is also a key factor to consider, as it requires companies to comply with electronic invoices and incorporate the use of blockchains along with other new legal requirements. Calatayud says the digital economy will not only impact mining but will paint the country in broader strokes, across all industries in general. “The government is constantly trying to innovate and increase the level of compliance in the country. The use of the digital economy will help authorities have more control over transactions
PwC works with many of the largest operators in the
and the movement of electronic capital,” he says. “But
market that produce silver, gold and other popular
the new requirements and norms will imply a challenge
minerals to help them overcome regulatory challenges
for companies as authorities will become stricter and
and guide them through legislative hurdles. “As a firm,
it will be more difficult to avoid taxes. Adapting to
we believe in having a multidisciplinary team that not
new electronic requirements will be a top challenge
only analyzes proposals but can also anticipate and
throughout the next five years, especially for companies
prevent the impact specific reforms have on the income
that have over 1,000 transactions per day.”
statements of mining companies,” says Calatayud. “We help them become more efficient and manage challenges
The use of technology and fintech will not only bring
such as overdue tax rebates, which is an issue that made
challenges for companies but significant advantages
headlines in Mexico recently.”
as they will help operators better control revenues and reduce costs. “While Mexico represents about 2 percent
The industry waits for the government to realize the need
of the global mining industry, it has a large amount of
to modify the tax system to make sure the mining sector
potential to grow as the country is rich in minerals and
can continue to grow. Calatayud believes any changes
many of its regions have still not been explored,” he says.
implemented should consider providing more advantages
Technology can contribute to enhancing the country’s
and incentives to investors. For example, the US is
logistical infrastructure to improve exportation and
proposing to allow the immediate deductibility of certain
importation processes.
INSIGHT |
ECONOMIES OF SCALE DRIVING MINING REGULATION ALFREDO ÁLVAREZ Energy Segment Leader Mexico and Central America at EY
When seeking to attract more FDI to the mining industry the
companies to be as flexible as possible to better adapt to
main driver is not the policy of the country but the scarcity
communities and changing environments,” he says.
shaping markets, says Alfredo Álvarez, Energy Segment Leader Mexico and Central America at EY. Market dynamics
Adaptability is also beneficial when adjusting to regulatory
are changing the industry’s concentration share and the
and fiscal changes. While he says that regulations are not the
prevailing model is that which considers economies of scale.
main driver for the industry’s attractiveness, he admits that the
“As long as compliance with antitrust policies is met, the
better the regulations, the more FDI. Security and corruption
economic trend favors bigger the better,” he says.
appear to be the main problems in Mexico according to the Fraser Institute Index; tackling these would make all industries
The nature of economies of scale is to generate big players.
flourish. “Security has been a key factor for investment in
The mining industry worldwide is already dominated by major
Mexico. But in the end, if commodity prices go up, so does
companies and Mexico is no exception. While in economics fewer larger players dominating the market is generally negative for competition, mining may be an exception. “Mining depends on commodity prices and this means healthy competition will always exist,” he explains. “No company, regardless of how big, will control the price of a given metal.” To attain higher scales, technology becomes the game changer for the mining industry, leading the way to be better prepared today for the mine of tomorrow. “Mines that have meaningfully invested in technology are reaping results beyond expectations,” says Álvarez. “The availability
“
investment,” he says.
Security has been a key factor for investment in Mexico. But in the end, if commodity prices go up, so does investment”
of accurate information allows taking the right decision at the
To make the industry flourish, he says Mexico also needs
correct time, minimizing costs and investment.”
to share the wealth from extractive industries with people affected by its operations so communities can feel ownership
But more technology also carries the generalized concern for
over the project and pride that mining companies are working
workforce displacement. Álvarez believes that technology
alongside them. “It is in the best interest of mining companies
does not necessarily mean fewer jobs but more meaningful
to have communities onside, as locals will be the first to
ones and with better conditions. With today’s technology,
protect the source of the wealth that they are getting from
mining can do things that it could not even imagine before.
mining operations,” he says.
“This does not necessarily mean fewer employees,” he explains. “On the contrary, it can improve their quality of living
As a strategy to give back to local communities, taxes are
and pay better wages as employees are more productive.
meant to redistribute mining wealth. “The Mining Fund aims
Imagine giving workers more challenging jobs that can also
to use resources to generate infrastructure and goodwill in the
add more value to the industry.”
communities that mining operates,” says Álvarez. But there is a lot of controversy on how resources are used and if they
Ultimately, mining is a tough industry with a lot of controversy
are really going to the right place. He says companies should
and social impact, but also with a significant economic role.
take ownership of the process and work to assure that every
Álvarez believes that technology can be a way to enhance
penny that they pay goes to the right beneficiaries. “Mining
the positives and edge out the negatives. To adapt to this
companies will be the best overseers to ensure that the funds
changing landscape, he recommends flexibility. “I advise
do not end up in the wrong hands,” he says.
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| ROUNDTABLE
WHAT ARE THE BEST PRACTICES FOR EFFICIENTLY NAVIGATING MINING POLICIES?
The Mexican legal framework is extensive in regulating the whole mining cycle, often becoming a hurdle for national and foreign companies that want to invest in the sector. But industry leaders and regulatory experts advise several techniques that facilitate its navigation. The first trick is to seek good legal counsel that can provide a clear knowledge of the mining legal framework. Also, mining best practices are key, from being a responsible corporate citizen to promoting collaboration between government and mining companies. But the ultimate tip experts give is to ensure a thorough due diligence process to avoid regulatory issues at any stage.
Mining companies tend to be seen as the bad guys from a social perspective. In my opinion having good corporate citizenship and incorporating best practices is an efficient way to ensure the company is able to operate smoothly without disruptions. Often, mining companies want to be off the radar, which is contrary to the publicity other industries often seek. In mining, often the best approach is to attract less
340
attention. When I talk to clients about the regulatory framework in the Mexican
JUAN TORRES LANDA Partner at Hogan Lovells
mining industry, their complaints about the taxation structure stand out the most. However, some adjustments could be made to ensure Mexico is as competitive as other jurisdictions. The country does not have to eliminate all taxes but I believe we would be better served by reducing some of the tax charges and prioritizing the ability to attract more investment to the mining industry.
First, I think it is key to have a clear knowledge of country’s legal framework and of the rights and duties mining companies are entitled to. The second step would be to focus on acting within these rights and obligations. Afterward, companies must turn immediately to authorities when issues or blockades arise with the surrounding communities or additional actors instead of trying to resolve them independently. Mining, being such a crucial pillar of the country’s economy, has rights
LAURA DÍAZ Partner at DBR Abogados
that should take precedent over any other industry. It is also key to work together with local communities to acquire a social license. This can be achieved through the development and implementation of a CSR program that goes along with the company’s internal policies. I can guarantee that companies properly taking care of the social aspect will succeed.
Mexico’s mining industry is well-regulated and understood by the federal government. Investment is flowing into the country but higher royalties imposed by a new government could disappoint mining companies. A key area of opportunity is collaboration between all government levels and individual companies. A faster response from state governments to situations where the law is broken and mining companies are prevented from doing business is a key area of opportunity.
TREVOR TURNBULL Director of Gold and Precious Metals Global Equity Research at Scotia Capital
Mexico should take greater advantage of royalty streams to finance projects as mining requires large capital investments, but that can be tricky as shareholders may not like having to share their profits with these companies. It is important to include the participation of a lawyer to make sure these contracts and negotiations are beneficial. Another reality in Mexico is the low participation of companies on the Mexican Stock Exchange (BMV). This is causing First Majestic Silver to delist from the BMV as it is not profitable to participate. On the other hand, it is a lot easier to join the TSX, which has a smoother regulatory process and is less expensive. On a more positive note, Mexican companies are doing well on international stock exchanges.
ENRIQUE RODRÍGUEZ DEL BOSQUE Founding Partner of RB Abogados
The three biggest Mexican mining companies are the same size as Goldcorp and this says a lot about the state of the industry.
I like to think that mining companies are doing what they have to do. When they come to Mexico, they put their faith in legal advisers to guide them. Just like in every other industry or profession, there are good people and bad people, those with experience and those without. I think that many of the problems companies face are caused by service providers that do not have experience yet claim they are experts because
341
they see the money in the mining industry. I think the mining companies investing in Mexico really should do their due diligence on their local service providers and ensure they have the relevant experience an international company relies on when entering a new jurisdiction.
ALBERTO VÁZQUEZ Senior Partner at VHG Servicios Legales
Mining rights are the core of the legal mining framework and miners need to consider additional elements and exceptions that revolve around it such as real estate laws that play a large role in the mining equation. For example, a person with mineral rights cannot just simply begin exploration or production if they are not also owners of the land. It is tricky as mineral rights have priority over land rights. This means that mineral rights owners can begin expropriation even if an agreement has not been made with the land owners. But this is not advisable as this begins the project with a conflict. The regulation in terms of access to mining operations is comprehensive but
JORGE RUÍZ Partner at Baker McKenzie
I believe ejidos are the most troublesome aspect, as we often do not fully understand what certain properties may mean to local communities.
The legal framework we have in Mexico is effective, despite the fact that it can be improved in certain areas. The real challenge lies in the lack of certainty investors feel in the country’s legal system especially in issues related to unions as these jeopardize the wellbeing of operations. The county’s legal framework also needs to be cleared out to define the gray areas between environmental and mining law as there is some overlap. Sometimes a company discovers the project it just acquired is in a naturally protected area, which slows down the development of mines in the country. Companies should protect themselves by verifying this type of information before making a purchase.
JOEL GONZALEZ Partner at ALN Abogados
Mexican Stock Exchange on Reforma Avenue, Mexico City
FINANCE & TRADE
13
Along with the many tasks operators must balance, such as maximizing productivity and ensuring the entrance of new projects to replace aging ones, companies must also prioritize the establishment of a strong financial structure to continue attracting investors and capital. Access to funding is a hot topic in the industry as both major and junior players are on the hunt for new projects in light of the industry’s comeback. A new stock exchange – BIVA – was launched in early 2018 to offer an alternative way to raise funds domestically.
But to make sure capital stays in the country and does not stray to competing mining jurisdictions, the industry’s financial health must be held to a standard similar or higher than those seen in countries like Canada where most banks and investors are familiar with the sector’s cycle and its benefits.
This chapter explores the most pressing financial challenges that the mining sector faces and highlights best practices used by leading commodity traders. It also shares insight into the country’s logistics and its ability to foment trade through the perspective of leading service providers and operators.
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CHAPTER 13: FINANCE & TRADE 346
ANALYSIS: M&A Market Flourishes
348
VIEW FROM THE TOP: Rob Peterman, Toronto Stock Exchange (TSX) and TSX Venture
Exchange (TSXV)
349
VIEW FROM THE TOP: José-Oriol Bosch, BMV Group
350
INSIGHT: Fernando Pérez, BIVA
351
VIEW FROM THE TOP: Israel Gutiérrez, The Mining Development Bank (FIFOMI)
352
INFOGRAPHIC: FDI and National Investment Key to the Future of Mining in Mexico
354
VIEW FROM THE TOP: Javier Reyes de la Campa, Accendo Banco
356
VIEW FROM THE TOP: Armando Ortega, CANCHAM
357
VIEW FROM THE TOP: Jorge Rave, Export Development Canada (EDC)
358
VIEW FROM THE TOP: Nicholas Baker, Austrade
359
INSIGHT: Donald Smallwood, ANZMEX
360
VIEW FROM THE TOP: José Antonio Berlanga, Mercuria
361
VIEW FROM THE TOP: Randy Smallwood, Wheaton Precious Metals
362
VIEW FROM THE TOP: Rick Rule, Sprott US Holdings
363
INSIGHT: Enrique Margalef, Vander Capital Partners
364
VIEW FROM THE TOP: Trevor Turnbull, Scotia Capital
365
VIEW FROM THE TOP: Alfredo Nuñez, VES Capital Partners
366
INSIGHT: Hideki Morimoto, JOGMEC
366
VIEW FROM THE TOP: Eduardo Amaro, Cliveden Trading AG
368
VIEW FROM THE TOP: Joe Salinas, Brink’s
369
VIEW FROM THE TOP: Donovan Sánchez, SGS Minerals Services
370
VIEW FROM THE TOP: José Zozaya, Kansas City Southern Mexico
371
INSIGHT: Manuel Chavez, OEC Group Mexico
372
ROUNDTABLE: What are the Primary Financing Sources Available for Junior and Mid-Tier Miners?
345
| ANALYSIS
M&A MARKET FLOURISHES The combination of higher revenues, more efficient operations and attractive projects for sale have allowed the M&A market to blossom throughout 2017 and 2018. In 2H18 alone, the mining industry had already racked up 15 mergers and acquisitions, making it the most active sector of the period In Mexico, 220 transactions were sealed across industries
it invested US$120 million, increasing its total investment
in 2017 and mining was also at the top of the heap. Of
to US$560 million,” explains McEwen. “We bought it for
the estimated US$21 billion that was accumulated in these
US$35 million, which was equivalent to paying US$0.06 for
activities, the sector accounted for 20 percent followed by
every US$1 it invested. It came with over 1 million ounces
real estate with 17 percent. Enrique Rodríguez del Bosque,
in resources.”
Founding Partner at RB Abogados, says an active M&A market is a sign of a healthy mining industry. “It is important
After the acquisition of the Black Fox Complex and before
to ensure a healthy and continuous flow of transactions in
First Majestic Silver acquired the company, Argonaut Gold
mining because this helps push the discovery of high-value
also dipped into Primero Mining’s portfolio by acquiring
assets and to replenish portfolios.”
Cerro del Gallo mine in Guanajuato for US$15 million in November 2017. Cerro del Gallo was part of a series of
346
The law firm represents Primero Mining, which closed the
projects that had been suspended in 2014 and 2015 due
acquisition of the year by selling its shares to First Majestic
to the drop in precious metal prices. Primero Mining
Silver for US$320 million. Its key asset was its flagship San
succumbed to opening the company to the market after
Dimas project. “San Dimas is the largest gold-silver mine
several years of financial struggle caused by a decision
in the state of Durango and is one of the most important
taken by SAT to change an advanced tax agreement.
in the entire country,” says Keith Neumeyer President and CEO of First Majestic Silver. “It is a mine we have had our
PROJECT REJUVENATION
eyes on for over a decade and, when it became available
The downturn may have forced companies to post projects
due to Primero’s financial status, we were able to evaluate
for sale but the process revives the mining ecosystem as
the asset.” The acquisition is expected to eventually help
new owners inject new life into previously stagnant mines.
the company double its silver production.
One example is Campo Morado that was acquired by Telson Resources from Nyrstar in June 2017 for US$20 million. After a detailed evaluation of the mine, the company was able to
Of the estimated US$21 billion in M&A transactions completed in 2017, the mining sector accounted for 20 percent
identify many areas of opportunities within the project that had been overlooked. “The previous owner focused on zinc and processing a mix of mineral concentrates from various deposits that required more equipment, personnel and costs as each body has unique geological characteristics,” says José Antonio Berlanga, CEO and Director of Telson Mining Corporation. “We decided to instead mine and
JUNIOR PROJECTS, RIPE FOR THE PICKING
process mineral from a single deposit and to only exploit
While large operators learned their lessons from the
areas with profitable grades of gold, silver, lead and copper
downturn and are being awarded with higher purchasing
to reduce costs. We do this even if the deposit has lower
power thanks to their discipline, junior companies continue
levels of zinc as it could hold profitable minerals that were
to struggle financially. This makes way for the closing of deals
ignored by previous owners.” After acquiring the project,
that are relatively cheap and quick, a context that companies
the company was able to start production in less than four
like McEwen used to stay one step ahead of the pack. “Our
months thanks to its revaluation of the project and expertise
approach is opportunistic,” says Rob McEwen, Chief Owner
in the industry.
of McEwen Mining. “We like to buy assets that are unloved by the market. While a distressed asset purchase will guarantee
First Majestic also hopes to breathe new air into San
more work, the low purchase price limits the impact of a
Dimas by diversifying its portfolio. “When Primero owned
downside price and offers a good upside potential.”
the San Dimas mine, the stream agreement in place meant the majority of the silver went to Silver Wheaton
In line with its strategy the company recently acquired
(now Wheaton Precious Metals), while Primero focused
the Black Fox complex in Canada that was also owned by
on gold production,” says Neumeyer. “Now that the
Primero Mining, purchased in 2014 for US$300 million. “Then
asset has been sold and the stream agreement has been
Month
Original Company
Project
State
Acquiring Company
ND
Magistral del Oro
Durango
Gracepoint Mining and MX Gold
Canasil Resources
Sandra Escobar
Durango
Orex Minerals
Fresnillo
San Juan
Durango
Argonaut Gold
Santa Cruz Silver
El Gachi
Sonora
First Majestic Silver
Starcore International
San Pedrito
Queretaro
ND
Goldcorp
Los Filos
Guerrero
Leagold Mining
Biznagos
Durango
Los Lenchos
Durango
Petate
Hidalgo
Santa María del Oro
Durango
January February March April
Minera Plata del Sur
May
Prospero Silver
Bermudez
Chihuahua
Membrillo
San Luis Potosi
Santa Cruz Silver
Minera Alamos
La Fortuna
Durango
Osisko Gold
Arian Silver
Calicanto
Zacatecas
Endeavour Silver
Impact Silver
Veta Grande
Zacatecas
Endeavour Silver
ND
Pepe
Veracruz
ND
Pepe Tres
Veracruz
ND
San José
Veracruz
Distrito Pinos
Zacatecas
Lucifer
Durango
KM 66
Durango
Guadalcazar
San Luis Potosi
Cascabel
San Luis Potosi
Minera Apolo
September
October
November
December
Mexican Gold
347 Candelaria Mining
El Gato
Zacatecas
Angofasta
Thor
Sonora
Riverside Resources
Nyrstar
Campo Morado
Guerrero
Telson Resources
Pilar
Sonora
Sun
Sonora
Canadian Gold Resources
August
Fortuna Silver
Americas Mining Corporation
June
July
SSR
Colibri Resources
ND
Sarape
Sonora
Evrim Resources
Santa Cruz Silver
Gavilanes
Durango
Marlin Gold Mining
Radius Gold
Tlacolula
Oaxaca
Fortuna Silver
Grupo Minero Puma
Oposura
Sonora
Azure Minerals
Undisclosed Mexican family
Sara Alicia
Sonora
Azure Minerals
Capstone Mining
Toro del Cobre
Zacatecas
Endeavour Silver
Hot Spring Mining
Tabasqueña
Zacatecas
Advance Gold Radius Gold
Private Company
Tarros
Chihuahua
Torex Gold
Media Luna
Guerrero
Ejido Puente Sur Balsas
Goldcorp
San Nicolas
Zacatecas
Teck Resources
Altius Minerals
Cuale
Jalisco
Evrim Resources
Primero Mining
Cerro del Gallo
Guanajuato
Argonaut Gold
Goldcorp
Camino Rojo
Zacatecas
Orla Mining
GoGold Resources
Santa Gertrudis
Sonora
Agnico Eagle Mines
Exploraciones Mineras del Bajio
San Carlos
Guanajuato
Vangold Resources
Rose Petroleum
Molino Rose
Nayarit
Magellan Gold
Scion Mines
Manto Negro
Coahuila
Prize Mining
Source: CAMIMEX
renegotiated, we have incorporated both gold and silver
the industry are starting to pick up again. Companies are
streams into the agreement.”
looking to expand their portfolios and merge with other players to keep shareholders happy,” says Rodríguez
As the market recovers and major players turn their eyes to
del Bosque. “We believe this upcycle will be even more
the unloved assets left behind by those that were unable to
dynamic than the last one. It also helps that companies are
withstand the bear cycle, Mexico’s M&A market continues
getting used to the current administration and the changes
to have a strong outlook for the years to come. “Deals in
that were implemented over the last couple of years.”
| VIEW FROM THE TOP
EXPERTISE OF THE INDUSTRY WITHIN THE EXCHANGE ROB PETERMAN Vice President of Global Business Development at Toronto Stock Exchange (TSX) and TSX Venture Exchange (TSXV)
348
Q: What trends have TSX and TSXV identified with
A: We strive to have a good working relationship with
the participation of the mining industry in the
the Mexican mining industry. In 2017, we had 127 TSX and
stock exchange?
TSXV companies that have 392 projects in Mexico so the
A: From a stock exchange standpoint and taking into
relationship is a very significant one. Communication is
consideration the trends that drove the markets in
important, considering the integration that exists between
2017, we saw that lithium, cobalt and battery metals in
Mexican and Canadian companies. Canada and Mexico
general were major market drivers, which are all part
have a symbiotic relationship as Mexicans value the
of the vehicle electrification shift. We also saw price
capital and expertise Canadian companies are bringing
movements in certain commodities such as zinc driving
to the country and Canada appreciates the skill-set and
market activity. Looking ahead, the most important thing
knowledge of Mexican workers. We are continuously
for the mining sector is to get back to delivering returns
having healthy discussions with our colleagues at the
for investors.
BMV and share ideas about different issues in the market.
In 2017, there were 127 TSX and TSXV companies with 392 projects in Mexico
Q: How do TSX and TSXV differentiate themselves from other stock exchanges around the world? A: One of our main differentiators is the geological expertise that has been built within Canada. This technical expertise includes the development side of the industry as well as the investor and regulatory side. But it all starts with this expertise. When a company goes public in Canada, a
The numbers were fairly consistent for raised capital
technical report called National Instrument 43-101 prepared
in the mining sector. But in 2017, we noticed optimism
by a third-party geologist is required. This in turn is vetted
in the mining industry in two main ways. First, we saw
by geologists both at the provincial securities commission
momentum of new offerings in the market through
and our exchange. Investors are assured by the fact that
IPOs and new listings. And secondly, we saw a return
the technical reports they are receiving have been vetted
to companies seeking out dual or additional listings
by a number of professional geologists, both internally
to support their capital and liquidity needs. Last year
and outsourced. These reports provide clarity on what
was the first time in a few years we saw companies list
companies are doing, what their reserves are and their
either on the London Stock Exchange or Australian Stock
worth in the market.
Exchange and added a TSX or TSXV listing, showcasing capital access and attracting more investors. These were
Being public is definitely a challenge, and companies need
two key signs of confidence returning to the market that
to carefully prepare and think about the implications for
we hope continue well into 2018.
their business. But companies listed on TSX or TSXV are able to access capital from around the world. Companies
Q: What relationship does TSX and TSXV have with the
need to know that their listing is not limited only to
Mexican mining industry?
Canadian capital. We constantly monitor what investors look for in companies and we often find that TSX or TSXV listings are a high priority thanks to our National Instrument
Toronto Stock Exchange (TSX) and TSX Venture Exchange
43-101 (covering disclosure) and the regulatory landscape
(TSXV) are integrated, multi-asset class exchanges and are
as a whole in Canada. All companies on our markets have
global leaders in supporting the capital and liquidity needs of
a technical report built around the same principles so
global mining companies
investors are able to compare projects in a unique way.
VIEW FROM THE TOP |
EDUCATE TO ENCOURAGE GREATER BMV PARTICIPATION AMONG MINERS JOSÉ-ORIOL BOSCH CEO of BMV Group
Q: How are you attracting mining companies to the BMV?
Q: What are the implications of the new BIVA stock
A: The sector has a great deal of potential in Mexico simply
exchange for your strategy?
because of the country’s geological wealth. We have a few
A: We are not yet sure what BIVA’s strategy will be so I cannot
mining companies listed on the BMV, but not enough. The
comment much on that. However, we hope that the strategy
mining sector represents 4 percent of the country’s GDP
will involve developing the trading market as it has great
and there are many mining companies working here, but
potential. If, instead of focusing on growing the market, it
only four companies are listed on the BMV: Peñoles, Grupo
cannibalizes itself, the market will be equally as small, or even
México, Autlán and Minera Frisco. These companies can
smaller. And with two stock exchanges, this makes no sense.
take advantage of the BMV’s different products since we do not exclusively focus on the stock market. Some of these
Q: How has the BMV protected itself against external
companies also have short and long-term debt, so a lot of the
shocks caused by international tensions?
time private debt is listed on the BMV to attract investment.
A: The companies listed on the BMV are so diversified in terms of sectors, sizes and business segments that the
In Mexico, there needs to be a greater diffusion of knowledge
impact of geopolitical uncertainty has been much less
in terms of the benefits and the processes for listing on
intense in Mexico. The renegotiation of NAFTA presented
the BMV. The problem is that many companies that require
an opportunity for Mexico to turn to other markets. Mexico
financing to grow or to carry out their expansion plans are
does not only have NAFTA; it has a great number of free
not familiar with the BMV, its products or requirements. I
trade agreements with other countries, even though the
think this is the main challenge. Those companies that have
majority of trade is focused on the North American region.
taken advantage of the opportunities of the BMV have been extremely successful.
Q: What would be included in your wish list for the next government administration to make doing business easier?
Q: Why does Mexico not have a system like Toronto’s
A: I think the most important thing is to spur greater
designed for SMEs and junior mining companies?
growth. Rather than growing 2.5 percent, Mexico should
A: We have the legislation and, to a certain point, the
grow by double that, at least. There have been some
products. The issue is that the level of financial education in
encouraging changes in this administration with the
Canada is far more widespread. In Mexico, smaller companies
structural reforms, but with increased economic growth,
can already list on the stock exchange and the barriers
this launches a cycle whereby greater investment is
to entry are actually very low. For example, there are no
attracted to the country. Of the companies listed on the
financial requirements to seek financing in the debt market.
BMV, more than 90 percent are concentrated in four
Requirements for capital markets have been loosened and
states in the country: Nuevo Leon, Mexico City, State of
we have been creating new products like the Sociedades
Mexico and Jalisco. It should not be like this because
Anónimas Promotoras de Inversión Bursátil (SAPIB), which
the GDP of those four states is not 90 percent of the
are designed for small to medium-sized companies.
country’s GDP. This means something is failing and we need to look at how we can support those companies in
We also have a promotion department that focuses on
the other states.
seeking out these companies that are not necessarily large but that want to grow and that need resources to do so. For a while now, we have provided an incentive plan for
BMV Group is comprised of companies that together operate
companies with less than MX$500 million of shareholder
a stock exchange, derivative products, an OTC securities and
equity, whereby the listing fee is not charged and the first
derivatives brokerage company, a securities clearing house and
year’s maintenance fee is charged at a 50 percent discount.
a derivatives clearing house
349
| INSIGHT
CLARIFYING MEXICAN STOCK MARKET MYTHS FERNANDO PÉREZ Executive Director of BIVA
350
Miners often lack access to funding in the Mexican market
BIVA also understands that a stock exchange by itself
and normally choose to list their companies on foreign
cannot significantly increase market participation, so its
exchanges, particularly the TSX. BIVA, the country’s new
focus is rather to perform as a disruptive player. Among the
stock exchange that will compete with the BMV, could help
desired impacts is to modernize both the stock market and
change that. “We think it is important for mining companies
its regulatory framework. “Thankfully, a regulatory overhaul
to approach financial intermediaries, expand their funding
was conducted by the Mexican Financial Authorities, not
sources and reach the public market,” says Fernando
only for the creation of BIVA but to modernize the market’s
Pérez, BIVA’s Executive Director. “Our value proposition for
regulatory framework as a whole,” says Pérez. As for stock
encouraging mining companies to list on BIVA is to provide
upgrading, BIVA will have one of the most advanced stock
them with strong visibility.”
exchange technologies worldwide, including a negotiation engine and a market-surveillance system, both provided by
With about 150 listed entities, Mexico has not yet reached
NASDAQ and used in over 70 foreign markets.
the point at which BIVA can segment the market and offer a specific value for each sector. But first things first: for
Over the next three years, BIVA’s objective is to grow the
the market to grow substantially, the myths surrounding it
number of listed companies by 30 percent and operational
need to be clarified, says Pérez. “We must help demystify
volume by 50 percent. BIVA decided to associate with
the stock exchange, which is achieved through information
FTSE Russell for the design, construction and distribution
sharing, communication and by approaching different
of its indexes. “We both benefit from this partnership. BIVA
players, such as broker dealers, investment banks, investors,
provides the market knowledge and the local relationships,
associations and universities.”
while FTSE contributes with its expertise on solid corporate governance and index-building methodology,” he says. The
Pérez adds that one of the biggest myths about the Mexican
institutional stock exchange also seeks to join efforts with
public market is that it is very expensive to join. He explains
BMV to help the stock market to develop. “We have seen a lot
that, when setting aside the effort and investment required
of willingness from BMV to collaborate with us,” says Pérez.
for companies to improve their corporate governance and financial reports, once they reach their institutional peak it is
BIVA’s strategic alliances will not extend to joining the
costly neither in relative nor absolute terms. For example, all
Latin American Integrated Market (MILA). “We believe
equity placements made between 2012 and 2017 cost less
that MILA is still a young initiative and we do not see any
than 3.5 percent of the total amount placed, on average,
particular encouragement to join it. We believe that it is
while in the US this expense fluctuates between 6 and 8
much more important to focus on the Mexican market as
percent. Pérez says that listing gives a company a rubber
well as other strategic alliances in other geographies,” says
stamp that fully repays its investment.
Pérez. Rather, BIVA will focus on promoting the national stock market, highlighting the need for all players to work
Another myth that needs to be wiped out is that the stock
together to foster a stock market ecosystem. Pérez believes
exchange is only for high-net worth investors. “The truth
the conditions exist in Mexico to promote the economic
is that broker dealers as well as investment funds are
certainty and market stability that stock markets require
welcoming retail investor participation,” says Pérez. For
to thrive, including an autonomous central bank and the
example, RLH issued MX$500 million in capital a few years
Treasury Discipline Law. These factors will outweigh any
ago and was so successful that it followed up with another
political fallout from the 2018 presidential elections. “I
option for MX$1.5 billion and has other issuances scheduled.
think that Mexico’s stability goes beyond the party that
“BIVA strives to be a much more inclusive and approachable
wins an election. I believe the country is made up of solid
stock exchange,” he says.
institutions,” he says.
VIEW FROM THE TOP |
DEVELOPMENT BANK STRENGTHENS ROLE AS A FINANCIAL INTERMEDIARY ISRAEL GUTIÉRREZ CEO of The Mining Development Bank (FIFOMI)
Q: What are the biggest challenges FIFOMI faces when it
A: We need to change the resistance that Mexican
comes to facilitating access to capital?
companies have toward participating in the stock market,
A: We are focused on strengthening our role as an
which is more common in Zacatecas, Sinaloa, Chihuahua,
intermediary between the Mexican mining industry, mining
Durango, Sonora and Guerrero. Domestic companies
companies and financial institutions, not only in Mexico but
need to learn how to invest more wisely and how to
also around the world. This is a fairly novel service in the
take advantage of the financial tools available. We will
industry. We find that we can better meet the needs of the
continue working with the BMV and taking advantage
sector if we join forces with the financial industry to provide
of the information provided by SGM. The use of these
mining companies with a wider variety of financing options.
systems has been a success in Canada for the Toronto
Banks like the Industrial and Commercial Bank of China
Stock Exchange and its distribution channels as they have
(ICBC) have contacted us in international forums with the
instant access to the country’s geological information.
purpose of connecting their investors with Mexico. We can
This is an obstacle we are working to overcome in
provide a path to achieve this. Investors and international
Mexico. We also believe that BIVA, Mexico’s second stock
banks often contact us because they know that we can
exchange, will be able to attract a great deal of capital.
ease their entrance to the country and connect them with
We believe they are committed to facilitating access to
the right companies. For example, in any given project we
capital and providing more financial tools to the industry.
can offer a credit line up to FIFOMI’s maximum limit. By collaborating with other banks, we can increase this limit
Q: How can Mexico better prove its ability to provide
and help develop the industry by financing smaller projects
long-term investments?
a lot faster. We have success stories in mining Mexican
A: To gain the trust of investors we must show economic
states like Chihuahua and Sonora.
and fiscal discipline through a well-structured model that relies on infrastructure and security. This was the
We also want to bring small and medium enterprises into the
main priority during the administration of President
spotlight to promote a healthier mining industry. But only a
Peña Nieto. We are prioritizing trade negotiations to
small number of Mexican mining companies participate in
make sure that all treaties are accurate in reflecting the
the stock market, while in other countries, such as Canada,
interests of our industries. We have a strong Ministry of
SMEs are often listed on various exchanges. We also offer
Economy with the priorities of modernizing the Public
technical assistance to small mining companies. One of the
Registry of Mining, the digitalization and automation of
biggest challenges we face is creating a more democratic
Mexico’s geological information within the GeoInfoMex
access to finance. The economic reforms that were put in
platform and the strengthening of technical and
place by President Enrique Peña Nieto helped improve
financial support to companies. In addition, we work on
this by enhancing competition and availability of better
technological models involved with Industry 4.0, which
interest rates. Such significant structural reforms naturally
benefits companies. This is extremely important given
take time to be implemented. Mexico’s financial institutions,
the fact that many companies that left Mexico during
such as BANCOMEXT, NAFIN, the Agriculture and Rural
the downturn are starting to come back now that mineral
Development Bank (FIRA), The National Development
prices are starting to rise again.
Bank for Agropecuary, Forest and Fishing Industries (FND) and FIFOMI are all working together toward achieving these goals.
The Mining Development Bank (FIFOMI) is a state-owned development bank designed to promote and modernize the
Q: What are the main areas of opportunity you have
mining industry in Mexico, particularly small and medium-sized
identified in the financial culture of the mining industry?
companies, through financial loans and other forms of support
351
| INFOGRAPHIC
FDI AND NATIONAL INVESTMENT KEY TO THE FUTURE OF MINING IN MEXICO As a capital-intensive industry, the establishment of a
authorities are focusing on strengthening FDI in mining
healthy financial environment is key to maintaining the
to crank up the development of projects. But considering
competitivity of a mining jurisdiction. While mining
that only four mining companies are listed on the BMV
national investment rose to US$4.3 billion in 2017 from
in comparison to the 1,206 issuers on the TSX and TSXV,
US$3.8 billion in 2016, the number remains a far cry from
promoting the rise of national investment could be an
the US$8 billion the sector collected in 2012. In effect,
area of opportunity.
PERFORMANCE OF MINING COMPANIES ON THE BMV IN 2017 • 5% rise for mining
• Minera
sector in 2017 in
• Grupo
Autlán
Peñoles
Frisco
(GMEXICOB)
(PE&OLES)
(MFRISCO)
(up 8%)
(up 5%)
(down 27%)
México
comparison to
(AUTLAN)
2016
(up 21%)
FIFOMI provides up to US$25 million in national currency to eligible companies
FIFOMI’S AGENDA
LEVEL 1
Mineral producers
LEVEL 2
Mining industry services
352
• Minera
• Industrias
• FIFOMI can provide up to 100% of revolving credit for equipment to MSMEs (up to a maximum of US$5 million)
LEVEL 3.A
Primary mineral consumers
LEVEL 3.B
Processed mineral
LEVEL 4
• For supply chain companies, FIFOMI can supply up to 70% of the net value of sales • Based on the financial structure of projects already in
Distributors
operation, FIFOMI can finance up to 100% of investment program, excluding VAT
NATIONAL VS FOREIGN INVESTMENT IN MEXICO 2007-2017 (US$ billion) 10 8
——Mining FDI ——Mining National Investment
8 6.6 5.6
6 4.5
5.3
4 2 0
2.9
3.7
2.2
3.3 2.6
1.9 2007
2008
1.3
1.6
2009
2010
1 2011
2013
2012
TOTAL FDI IN MEXICO FROM 1999-2017 (US$ million)
0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
2011
2012
2013
2014
Source: The National Commission for FDI in Mexico, CAMIMEX, Ministry of Economy, Mining Companies Listed on TSX-TSXV
2016
29,695
34,858 2015
29,755
21,730
25,221
27,319
18,165
29,420
32,468
21,098
26,023
24,916
24,055
18,225
10
13,943
20
18,247
30
30,042
40
28,672
48,492
50
2017
DISTRIBUTION OF THE REGIONAL SUSTAINABLE DEVELOPMENT FUND 2 CANADIAN MINING ISSUERS WITH MEXICAN PROJECTS
TOP 10 MINING COMPANIES WITH PROJECTS IN MEXICO (quoted market value CA$)
TSX Companies
TSXV Companies 1
1,206
75.7% Mining issuers
Franco-Nevada Equinox Gold 17,850,920,361 414,802,211
on TSXV and TSX
mining issuers on TSXV and TSX
24.3% Mining issuers on TSXV and TSX with properties and commodities in Mexico
2
DISTRIBUTION OF THE REGIONAL SUSTAINABLE DEVELOPMENT FUND 2 VALUE OF ISSUERS WITH MEXICAN PROJECTS ON TSX
Agnico Eagle Mines Garibaldi Resources 14,079,306,872 318,034,169
3
CA$285.5 billion total quoted
71.3% companies on
Wheaton Precious Metals Alphamin Resources 12,860,702,742 212,830,198
TSX of 2015 Source: CGM, Ministry of Economy market value on TSX1 With figures to March
24.3% companies on
4
TSX with properties and commodities in Mexico
Pan American Silver SilverCrest Metals 3,605,925,699 200,567,808
DISTRIBUTION OF THE REGIONAL SUSTAINABLE DEVELOPMENT FUND 2 VALUE OF ISSUERS WITH MEXICAN PROJECTS ON TSXV
5
CA$21.4 billion total quoted
Alamos Gold Maya Gold & Silver 2,914,751,266 199,540,206
86.9% companies on
Source:market CGM, Ministry of on Economy value TSXV1 With figures to March TSXVof 2015
6
13.1% companies on
TSXV with properties and commodities in Mexico
Osisko Gold Royalties Minaurum Gold 2,245,611,598 155,547,893
7 First Majestic Silver Wealth Minerals 1,936,780,783 123,836,573 4.6
4.9
4.3
3.7
8
Source: CGM, Ministry of Economy With figures to March of 2015 1
2.1 0.003 2014
2015
New Gold Advantage Lithium 1,585,770,446 114,965,003
0.6
0.03
2016
2017
9
FINAL ASSEMBLY VS AUTO PARTS PRODUCTION (THOUSANDS) INTERNAL STRUCTURE OF INDUSTRIAL FDI 2017
SSR Mining Telson Mining 1,556,275,462 97,638,261
10
72.7% Manufacturing 16.5% Construction 5.5% Mining 5.3% Electricity Generation
MAG Silver Chesapeake Gold 1,214,146,136 88,397,732
20
15
10
5
0
100 200 300 400 500
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| VIEW FROM THE TOP
USING THE 4P MODEL TO CATER TO MEXICAN SMEs JAVIER REYES DE LA CAMPA Co-CEO of Accendo Banco
Q: Why is it so difficult to access financing for mining in
medium-sized operations underserved. Accendo Banco has
Mexico and how is Accendo part of the solution?
a huge role to play in this segment. We believe that our
A: I think there are two main factors: First, the industry has
experience and our loan products for the mining industry
suffered a very severe crisis for the last 10 years and second,
will trigger investment from national and international
mining is perceived as a risky business. For these reasons,
companies once these small and medium sized operations
sourcing financing can be very difficult. Accendo Banco
grow and gain critical mass for the larger markets.
has a professional mining team with more than 20 years of
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experience that gives us the ability to underwrite any type
Q: How does Accendo strive to change the perception of
of mining loan and the ability to always think outside the
mining within the finance industry in Mexico?
box. We are supported by our experience, the expertise of
A: For the past 20 years, the main shareholders in Accendo
our team, and the willingness to provide bespoke financial
Banco have been promoting financial services to the Mexican
products to our clients to help them reach the goals they
mining industry through targeted, tailored products, such
have set for themselves.
as trade finance, equipment leasing, financing of expansion plans and restructuring of existing loans. These services are
Q: What could the private and public sectors do to increase
provided to the whole mining supply chain, from the miners
national interest in mining investment?
themselves to their suppliers, such as contractors, drillers
A: Mexico, as a prominent mining jurisdiction, is well-
and reagent producers. Accendo Banco knows most of the
positioned because of its endowment of natural resources.
publicly traded foreign companies with assets in Mexico. We
Accendo Banco believes the country needs to actively
should note that the financial services offered by Accendo
promote the investment and financing opportunities
Banco are extended to every mining industry participant
available in Mexico globally as 90 percent of the
that has assets located in Mexico, meaning that foreign or
headquarters of international mining corporations are
national companies are eligible to receive these services as
in countries such as the US, Canada, Australia and the
long as they are located in Mexico.
UK. Accendo Banco participates in the most prominent international mining forums, including those in Toronto,
Financing mining companies through Accendo Banco
Vancouver, New York and Sydney, which are the cities in
intrinsically promotes mining. Also, participating in the
which the mining business is most concentrated
main international mining forums helps create awareness about Mexicoâ&#x20AC;&#x2122;s rich natural resources, which must not be
To increase the national interest in mining investment and
compromised by bad perceptions of certain regions of
financing the government also needs to address security
the country.
issues. The security situation in Mexico directly affects the mining industry, since there is little certainty that safety
Q: What project requirements must be met before Accendo
is guaranteed in areas of the country where mines are
Banco hands out a loan?
located. One of the main reasons several mining investment
A: We think of it as the 4 Ps: place, project, people and
and financing decisions have been delayed is security. In
price. First, the project must be based in Mexico. Second,
addition to promoting Mexico as a mining destination, we
the project must pass our rigorous due diligence process,
need to show it as a country with strong rule of law.
which means projects must be technically sound and provide growth potential. Further, our due diligence
In addition, the financial sector has limited loan coverage for
includes not only analysis of financial statements,
the mining industry in Mexico due to the aforementioned
CAPEX estimates, cashflow models, and aspects such as
security concerns and due to the majority of lenders all
technological innovations, but also geology, resources
chasing the same major clients, leaving the small and
and reserves, mining methods, metallurgical test work,
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social and community relations, permitting risks where
Q: How will this acquisition improve the services you can
applicable, legal and region-specific considerations. This
offer to the mining industry in Mexico?
thorough analysis allows us to finance projects that have
A: The acquisition will help us scale up our banking
all the components for success, thereby promoting the
operations and will allow us to broadly serve the sector.
mining industry’s growth. Third, people are the backbone
Combining this larger scale, our group’s unique 20-plus
of any project. We strive to work with reputable managers
years of expertise serving the sector and the bank’s superior
and boards of directors who run projects as if they were
service and expertise in serving midsize companies,
in the US, Canada or Australia. Finally, pricing needs to
Accendo should be positioned as the No. 1 mining bank in
make sense given the risk-reward profile of the opportunity.
the country in the coming years. According to the Ministry
It is important to state that we are the only bank in the
of Economy, the mining industry contributes an estimated 4
country with a fully-integrated mining team comprised of
percent of GDP. This is an area of opportunity for Accendo
geologists, engineers and financial analysts focused on the
Banco and our expertise will help to develop the industry’s
mining sector. Our team of experts allows us to guarantee
supply chain and the sector in general.
we are providing loans to projects that promise to be hugely successful.
Q: What would you like the next administration to prioritize when it comes to the mining industry?
Q: Why did the company decide to acquire Deutsche
A: Accendo Banco believes that the top priorities for the
Bank Mexico?
next administration must be guaranteeing the rule of law
A: Accendo Banco’s vision is to become one of the most
to ensure that the country has optimal conditions and
prominent trustee banks in Latin America, based on our
stability. Violence has scared away investment in different
experience, transparency and solid foundation. These
mining regions. Solving this, in and of itself, will attract more
features will allow us to reach international standards
investment to the Mexican mining sector. In addition, we
that maximize the profitability for our clients. Deutsche
believe Mexico needs to implement a tax reform to increase
Bank is one of the most prominent trustees in Mexico
productivity and create a more competitive environment
and Latin America. This acquisition, which was closed in
for mining companies.
June 2018, puts more than US$30 billion of trust assets under Accendo's management. We are confident that this transaction, in conjunction with our existing banking
Accendo Banco’s mission is to accelerate the productive
operation, will position us as one of the leading medium-
growth of medium-sized companies with growth potential,
sized banks in Mexico. Accendo should finish 2019 among
through the offer of exchange, fiduciary and credit services,
the Top 30 largest banks in the Mexican financial sector.
backed by reliable, transparent management
| VIEW FROM THE TOP
NAFTA UNCERTAINTY TO POSE NO RISK TO CANADAMEXICO RELATIONSHIP ARMANDO ORTEGA President of CANCHAM
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Q: How can Mexico and Canada strengthen their direct
other FTAs with the main world economies, such as the
commercial relationship, given the current reliance on
EU, Japan and Israel and 32 agreements to promote
the US a middleman?
and protect foreign investment with 33 countries. Were
A: Both countries are aware of the need to find direct
NAFTA to be canceled, Mexico would keep it alive with
connectivity between each other to foster bilateral
Canada, keep its economy unilaterally open and provide
trade and investment, avoiding the US as a springboard.
US investors with equivalent instruments to protect
For example, to better serve the services sector, both
their investments. NAFTA made Mexico a very appealing
Canadian and Mexican airlines, such as West Jet, Volaris,
case for investment but most importantly, it has been
Interjet and Aeroméxico, have increased direct and
an anchor of economic and financial responsibility
even daily nonstop flights to and from various cities.
and of modernization through the creation of new
The biggest challenge for trade in goods is maritime
independent institutions such as the COFECE, Federal
connection, and the East Coast can trigger the first
Telecommunications Institute and Unit of International
results: a route from Halifax to the Altamira and Veracruz
Trade Practices (UPCI).
ports is on the radar. However, geography matters and the US will always be the filling in the bilateral sandwich.
Q: How are Mexico and Canada connected through their mining activities and what impact, if any, will NAFTA
Q: In which areas of the Mexican economy do Canadian
have on this sector?
companies have the largest participation?
A: The bilateral relationship has been enriched by
A: Mining is the sector where Canadian investments
mining activity. Canada has brought to each mining
have flourished the most, measured by the number
operation in Mexico the effective application of both its
of companies devoted to this activity. Manufacturing
national and corporate labor, safety and environmental
in general and auto parts in particular are the leaders
standards in addition to abiding by Mexican regulations.
of employment and exports. Pharmaceutical, financial
Canadian companies have hired and trained Mexican
services and a big rainbow of other services illustrate
executives and workers and greatly improved salaries
the vibrant bilateral trade and investment landscape.
and working conditions. In short, Canada has raised the
Canadian investments have created more than 100,000
mining-business bar in Mexico for good. NAFTA has had
jobs in Mexico since NAFTA’s launch. For the near future,
little impact, since this sector was opened to foreign
AI and the creative industry will take the lead in our
investment by Mexico in 1992. Nevertheless, the overall
relationship. Furthermore, Mexico will become a vital
impact of NAFTA has been very important, in particular
supplier of professional services to Canada, from doctors,
regarding the protection of investments.
engineers, designers and nurses. Q: How are Canada and Mexico working toward creating a Q: Should NAFTA be canceled, what is Mexico’s value
stronger relationship in light of new trade diversification
without the treaty?
strategies?
A: Mexico has made enormous economic and institutional
A: Both countries have intensified high-level governmental
changes since the signing of NAFTA, including through
contacts, including with the newly elected López Obrador team. They have also reinforced business networking and new academic research projects, with all Canadian
CanCham is the voice of Canadian business in Mexico and
universities having already committed to more than 200
promotes trade and investment between the two countries.
projects with more than 100 peer Mexican institutions.
CanCham represents over 300 companies from all sectors in
The new Canadian academic contacts have reached out
Mexico
to Mexican companies for specific business partnerships.
VIEW FROM THE TOP |
GROWING CANADIAN EXPORTS, INVESTMENTS JORGE RAVE Senior Regional Manager Global Business Development and Representative in Mexico City of Export Development Canada (EDC)
Q: What services does EDC provide and how do you help
business opportunities because they lack the knowledge
the Mexican mining industry?
of international markets. Our EMarket platform allows us to
A: EDC is Canada’s export credit agency and has a mandate to
establish quicker and more efficient communication with
support and grow Canadian exports and investment overseas.
many of those companies. We see an opportunity to fill the
We provide financial services and strategic introductions to
information gap for these exporters. This knowledge is not
Canadian supply investment and we help foreign corporations.
only intended for small inexperienced businesses but, in the
Mexican mining companies are an example of this as we
case of the Mexican mining sector, for companies like Peñoles
introduce them to Canadian companies that can help them
and Minera Frisco that have also benefited from our financial
increase efficiency and innovation. We have many existing
support, knowledge and expertise in recent years.
and prospective clients in the Mexican mining sector and since 2016, we have seen a very clear focus from Mexican
Q: What are the factors behind EDC’s ranking of Mexico
companies on implementing cutting-edge technology, an
as Low to Medium risk?
aspect in which Canadian companies can easily assist them.
A: EDC is optimistic but prudent when it comes to the mining
Canada is a global leader in the provision of mining services
sector in Mexico and we are waiting to see how the new
and in the development of innovative technologies for the
government will address some of the challenges that are
mining industry. We have around 3,000 Canadian mining
part of doing business in mining, such as social conflict.
companies that provide technical, legal, financial, accounting,
Whenever EDC considers providing financial support to any
environmental and other expertise to the industry; many of
company, we look at three key pillars. First is the strength
those companies have a global presence and Mexico is no
of what we call the Canadian mandate. We want to ensure
exception. The fact that 70 percent of foreign investment in
that foreign companies have the ability and interest to work
the Mexican mining sector is of Canadian origin shows the
with Canadian companies and to leverage our knowledge
complementarity of the two countries.
of international supply chains and our understanding of Canadian capabilities. Second, EDC is a self-sustained
Q: How are your EMarket services leveraging the mining
financial organization. Our loans are neither grants nor
marketplace?
subsidies; they are commercial loans. Finally, since CSR is
A: EDC has played a significant role in helping Canadian
directly linked to sustainable financial performance over the
companies go, grow and succeed internationally by offering
long term, EDC focuses its efforts on making sure prospective
insurance and financing. At the same time, we are seeing
clients are leaders in sustainable and responsible businesses.
that leveraging our digital strategy with appropriate content
As part of country risk, it is key for us to guarantee that
can help us reach more exporters and investors with
those companies that we do business with are the best in
solutions and services that can help them along their export
dealing with any potential socio-environmental issues. Going
journey. To this end, EMarket leverages our unique and
forward, it will be important to see how social conflict is
seasoned expertise in international trade, our knowledge
addressed, not only by private companies but by local and
of international supply chains and our understanding of
central governments that also have a role to play in the
Canadian capabilities.
development of the sector. These are some of the criteria that we look at when assessing country risk.
We recognized that many of the companies that were coming to us for traditional services were only coming when they were export ready. Although it is important for us to work
Export Development Canada (EDC) is Canada’s export credit
with those companies that have international experience
agency. As an organization, EDC’s mandate is to support and
and have already exported to other countries, there are
develop, directly or indirectly, Canada’s export trade and the
many companies that may be missing out on international
capacity to respond to international business opportunities
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AUSTRALIAN MINERS SET SIGHTS ON MEXICAN HORIZONS NICHOLAS BAKER Trade Commissioner of Mexico, Central America and the Caribbean of Austrade
Q: How would you describe the advantages Mexico has
cities. It can also make it really expensive to fix a broken-
over other mining jurisdictions in Latin America?
down machine when the nearest mechanic is far away. To
A: Australian companies first entered Latin America
fix the problem, mining companies created software that
through Chile. It became a hub for Australian companies
can predict the life cycle of a machine to help operators
in the region. Our goal is to continue motivating these
better prepare for breakdowns. Australian mines also use
companies to expand to Peru and Mexico. Colombia is
autonomous machines and vehicles that can be controlled
also starting to attract the presence of many Australian
from the capital city in that state.
companies. Mexico has a unique position as it links North 358
and South America. It has the advantage of encompassing
We use these tools in Australia because the conditions are
geological diversity as Chile mines mostly copper and
so tough. This kind of technology is still not a necessity in
Colombia coal. Peru also has mines that are in remote
Mexico as mines are not as isolated. But there are many areas
areas in the Andes. It can be expensive to open a mine
of opportunity to incorporate these solutions into the life
in these areas.
cycle of operations in the country. We also seek to motivate Australian companies to invest in Mexico as there are probably
Access to mines in Mexico is much more developed in
only about a dozen such companies that have done so.
comparison. Mexico additionally has a booming oil and gas industry that Australia can work in parallel with. The
We can also relate to the water management issues that
country is opening opportunities for deepwater oil projects
the country faces as Australia is the driest continent
and Australia has expertise in this area. BHP Billiton has
in the world. Mining is a thirsty industry and requires a
already signed a historic contract with PEMEX for the Trion
high consumption of this precious resource. We can help
farmout. We are hoping that BHP will turn its attention
companies better recycle water and optimize its use.
to mining in Mexico as well. The country also has a great deal of talent, with more engineers per capita than many
Q: What strategies is Austrade using to introduce new
other countries.
solutions to the Mexican mining industry? A: We are looking for decision-makers in the Mexican
Q: How can Mexico benefit from the similarities with the
community who can advocate for what we are trying
Australian mining industry?
to establish here. The beauty of Mexico is that mining
A: Mexico has many similarities with Australia. Geologically
conferences can attract these leaders to a single space.
they are both very resource-abundant and both share a
We will bring more Australians to these conferences to
long history in the mining industry. The difference is that
introduce them to the Mexican market and present them
Australia is a large country and the mines are normally
to supply-chain managers. We are continuously organizing
located in isolated and remote areas. The necessity to fill
networking and B2B meetings.
in the gaps created by the lack of a workforce in these areas helped turn Australia into a hub for technology in
We are also prioritizing the establishment of local
mining. People do not want to live close to the mines as
partners. Partnerships are important because they can
these are often thousands of kilometers away from the main
help guide companies through the regulatory landscape and relationships with communities. We are strategically identifying the needs in the Mexican market, such as cost-
The Australian Trade and Investment Commission (Austrade)
reduction, safety and health, that can be met through
leverages
international
solutions created by Australian companies. We want to
relationships to offer a full suite of export services to Australian
help the country improve productivity through affordable
companies that are looking to grow their business in Mexico
and innovative technology.
its
commercial
knowledge
and
INSIGHT |
THE NEW STARS ENTERING MEXICO’S MINING ORBIT DONALD SMALLWOOD President of ANZMEX
Just like Mexico, Australia and New Zealand are traditional
pushing Mexico to strengthen its relationship with other
mining countries, with activities dating as far back as the
countries. The TPP-11 and Pacific Alliance trade pacts are a
gold rush of the 19th century. Oceania has produced prolific
reflection of these trends.”
mining companies, including Rio Tinto and BHP Billiton. With BHP having entered the country as a PEMEX partner
Smallwood says companies join ANZMEX to network with
for deepwater oil activities, Donald Smallwood, President
other members and to create more business opportunities.
of the Australia, New Zealand and Mexico Business Council
“Chambers are important not only for companies entering
(ANZMEX), says companies from the region see increasing
Mexico but also for those that are already established as
potential in Latin America across all industries. “Australia
even competitors can find ways to collaborate and offer
used to focus on places like South Africa more due to
better services to clients,” he says. “We want our council to
geographical advantages and cultural similarities but
be a place where people can meet others that have faced
international integration has opened new opportunities
similar issues to improve their services.”
in Latin America,” he says. “Trade agreements are helping create ties across the ocean.”
The first step when entering Mexico is to understand the country well. This helps ensure success as the country
Most of the international companies in the Mexican mining
deals with complicated matters such as land ownership
industry are Canadian but Australia is starting to cement its
and ejidos. Smallwood adds that ANZMEX can help newly-
relationship at a federal and business level in the country.
arriving companies connect with good law firms that are
“Australia and New Zealand can offer Mexican companies
members of the business council. Understanding indigenous
expertise in many industries, such oil and gas, minerals and
communities is a common thread between Mexico, Australia
agriculture, as both regions have similar characteristics,”
and New Zealand, and Smallwood says companies coming
says Smallwood. He highlights that Australia has one of
from Oceania inherently understand the difficulties and
the most technologically-developed mining industries in
intricacies of these relationships. “We have experience
the world, as well as being among the biggest exporters of
dealing with indigenous communities and creating a legal
education. “It has many universities dedicated to mining that
system that works both for communities and companies,”
companies can take advantage of by sending employees to
he says. “The area has a high level of social responsibility
learn more about the latest technology,” he says.
that Mexico can learn a lot from as it has one of the biggest indigenous populations in the world.”
ANZMEX strives to develop business opportunities for all parties involved with the council and to help individuals and
Smallwood stresses that the protection of indigenous
companies with similar approaches connect. “We facilitate
communities needs to be part of the legal system and the
networking and create atmospheres where companies can
country needs to make sure regulations are being enforced.
get together and find ways to collaborate. We also work
“Unfortunately, in Mexico the law is not always respected
with the Australian Embassy and Trade Commissioner
and this affects the well-being of these communities,” he
Service to achieve this,” Smallwood says.
explains. He says Mexico could be more open to companies that want to share expertise and collaborate as seeing
Given the global geopolitical situation and the US pulling
other people’s experience and expertise can improve best
back from its traditional alliances, ANZMEX sees great
practices. But he says small steps are being made to lay
opportunities in Mexico and is working to raise its profile.
the foundations. “Large companies in Mexico are doing
“There are many opportunities considering the increasing
this more and more each day,” he says. “Joint ventures and
integration that is being seen in the world,” Smallwood
developing legal and financial relationships with global
says. “The US pulling back from its role in the region is also
companies are beneficial steps.”
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CHINA, THE GOLDEN MARKET FOR METAL EXPORTATION JOSÉ ANTONIO BERLANGA General Manager Mexico of Mercuria
Q: How advanced are Mexico’s practices when it comes to
nickel. Construction in China paused for a while but it is
commercialization and where does Mercuria fit in?
starting to pick up pace again, which will impact the mining
A: In terms of commercialization, Mexico has good
industry as well.
practices. The market has become more open and has
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incorporated international standards. Previously, the
When it comes to precious metals, China’s stock exchange
market was quite closed and mostly overseen by the large
in Shanghai calculates its own prices for precious metals.
Mexican operators that internally commercialized their
This used to create a considerable discrepancy between the
products. But as there are more companies in the industry,
prices in China and the rest of the world. But the variation
new opportunities for traders have opened up. There
has lowered a great deal, and now it has somewhat leveled
used to be little space for traders. Some companies may
out. There will always be a difference but it is much more
want to save money by trading their products themselves
minimal. China is an important region for traders and
but they have to realize that we do much more than buy
represents more than 80 percent of exportation destinations
and sell material. We also provide solutions and offer
for metals. Overall, Asia represents a significant amount of
expertise in terms of logistics and even taxes. The return
the world’s trade, followed by Europe.
of tax money is a big issue in Mexico that can take several years. Our company offers to take over these matters in
Q: How do you expect copper prices to perform in the
the supply chain. It is also not so easy to find smelting
medium term?
companies willing to purchase material as each one is
A: Copper will continue to rise but to no more than
looking for very specific requirements and characteristics.
US$7,500/t. Eventually supply and demand will make prices fall back to a more stable position around US$6,500/t
Mexico exports around 1.6 million tons from ports such as Manzanillo in the Pacific Ocean for products moving toward the Asian market
taking into consideration the history of the metal. The prices will motivate many companies to start evaluating more projects in copper. The amount of nonferrous concentrates Mexico exports is around 1.6 million tons from ports such as Manzanillo in the Pacific Ocean for products moving toward the Asian market. There is some movement of copper toward the US but it does not compare to the level of concentrates that are exported to China.
Q: How is Chinese consumption influencing the metals trading market?
Q: What factors are behind the rise and fall of zinc prices?
A: China continues to grow technologically and its
A: Supply was greatly affected by the closure of zinc
internal demand is likely to keep rising and surpass global
mines globally. Demand rose after stocks dropped,
supply of these metals. We believe that the exportation
bringing zinc to US$3,800/t as there was a great deal of
business in China will continue to be favorable. Demand
speculation regarding EVs and batteries. Some analysts
for vehicles, both traditional and electric, will continue to
have even predicted a price of US$4000/t but this is
require lead and other battery metals such as zinc and
too optimistic. Prices will probably be further impacted as new mines
Mercuria is one of the largest energy and commodity trading
come online in the next couple of years. We believe prices
companies in the world, with over 1,000 employees and
could drop to around US$2,500/t. It may seem like a steep
operating bases in over 50 countries. Founded in 2004, its
drop but considering that this metal is normally around
turnover in 2015 was US$56 billion
US$2,300/t, it should level out at an optimal price.
VIEW FROM THE TOP |
STREAMER STICKING TO ITS SPECIALTY RANDY SMALLWOOD President and CEO of Wheaton Precious Metals
Q: What is your outlook for the San Dimas project after the
A: I think Mexico is a country in which anyone in the
acquisition of Primero Mining by First Majestic?
mining industry will feel most at home. It has a welcoming
A: San Dimas was the first streaming agreement, not only
environment from an industry perspective. Mining in Mexico
for Wheaton Precious Metals, but in the world. We took a lot
is well-accepted socially. Mexican society and culture
of value, so we needed to shrink the size of the streaming
recognize the value that mining delivers.
agreement on the asset. When Primero Mining was having difficulties, we sought a mutually beneficial process in
Our focus is silver and gold. Mexico is one of the biggest silver
which this asset was sold to a company that could take over
producers in the world and has a healthy gold production too.
Primero and pay us to reduce the streaming agreement. We
It has always been among our Top 3 countries to invest in but
terminated the original streaming agreement with Primero
the challenge is finding quality assets and funding partners.
and agreed to a new streaming agreement with First Majestic,
Also, the lack of exploration activity has been difficult.
which included 25 percent of the gold and 25 percent of the
But I think Mexico has done reasonably well compared to
silver paid in gold equivalent at a fixed exchange rate.
other mining jurisdictions in terms of maintaining a decent exploration pipeline. We do not have exact numbers of how
The challenge of the previous streaming agreement was
much we will be investing in the country but I am certain we
that Primero Mining was greatly focused on the gold-rich
will pursue any quality opportunities that we find in Mexico.
areas. We have significantly improved the restructured streaming agreement to maximize the potential of the
Q: What are the main factors driving Wheaton Precious
asset. We think the partnership with First Majestic will
Metalsâ&#x20AC;&#x2122; portfolio?
be very positive as the operator is excited about what
A: Silver prices have definitely reached a peak. As most
San Dimas has to offer. Wheaton Precious Metals has a
silver comes from lead-zinc mines, the rise of lead prices is
great deal of mining industry expertise. First Majestic is a
stimulating exploration. As 60 percent of silver is produced
company that has great respect for the capabilities of the
from base metals mines, if we do not see investment in base
domestic mining industry and we are confident it will have
metals, the supply of silver will be affected. If supply is cut
great success at San Dimas.
down, the price of this commodity will go up. I think that in the near and long term the price of silver will rise. Gold is a
Q: What characteristics do you look for in projects for
very important part of our company; our revenues consist
streaming agreements?
of 55-60 percent gold income and the rest is from silver. If
A: We look for healthy operating margins; the mine has
the silver industry picks up, we will be more than happy to
to be profitable after the stream is in place. We are taking
step up our participation in silver streaming. At the moment,
some of the value of the mine so if our partners are not
about two-thirds of our opportunities are gold-focused. I
happy, we are not happy. We have to make sure that when
do not think we will venture in other base metals, as we
we make this investment our partners will be happy on
try to keep our business model as simple as we can. We
an operating basis and will keep investing in growing the
seek high-quality and long-life assets with high revenue
mines. We typically limit exposure to less than 20 percent
margins to deliver the best exposure to precious metals to
and on average we have 10 percent of the revenue tied to
our clients. We are sticking to our specialty.
our stream. It has to have good margins so our partners are healthy and prosperous and we can profit from this prosperity when they reinvest in the asset.
Wheaton Precious Metals, formerly Silver Wheaton, is the worldâ&#x20AC;&#x2122;s largest pure silver and gold streaming company. It
Q: What are Mexicoâ&#x20AC;&#x2122;s main advantages in comparison with
offers investors cost predictability, direct leverage to increases
other mining jurisdictions in which you work?
in silver and gold prices, and a high-quality asset base
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| VIEW FROM THE TOP
IN MEXICO FOR THE LONG HAUL RICK RULE President and CEO of Sprott US Holdings
362
Q: As a brokerage and investment management firm, how
basis. But we have a very extensive project lending portfolio
do you select your investments in Mexico and how do you
and, if the project lender has 65 percent of the capital
evaluate the country as a mining jurisdiction?
deployed, by definition it becomes involved. We have been
A: We have been in Mexico for a very long time, essentially
involved in a variety of projects in Mexico. In addition, we
since the change of the mining law. We are very comfortable
are one of the primary funders of generative exploration
here, understanding there are regional sociological
worldwide, including in Mexico. The nature of generative
challenges. But we have operated in jurisdictions like
exploration, where the expectation is failure, is such that
Guerrero and Sinaloa, so we can take these aspects into
the person writing the check has to be intimately involved,
account prior to investing. Sprott is particularly well-known
at least with the development of the thesis and the process
for precious metals – in particular for silver – and we have
by which the thesis is tested.
relatively deep exposure to Mexico. Our comfort in Mexico is related to the fact there is a long-standing mining culture
Q: The majority of exploration companies in Mexico are
in place but the attraction involves, most importantly,
listed on the TSXV. What are the benefits of sourcing
geological prospects. There is also an increased availability
private funding?
of not only skilled labor but also of national Mexican
A: Private funding is very difficult to access for exploration,
talent, and this is internationally competitive. The Mexican
and the best source of private capital for exploration is
government seems to be on par with other governments
probably from high-net-worth career mining explorers
in that it is mindful of the contribution made by mining to
or from mining operators that are looking to outsource
the national economy, which is very helpful.
exploration. Mexico is fortunate in that it has five or six private individuals who are themselves eager participants
The issues we see in Mexico are common around the world.
in the Mexican exploration industry. This is something
The main issue is that the rents from mining and extractive
even the Mexican industry does not understand about
industries have traditionally been channeled to the center
itself. The fact that national investors are eager to fund
– in Mexico’s case it goes to the federal government in
these projects gives foreign investors like ourselves some
Mexico City – while the localities have been subjected to
confidence.
the costs of mining without the benefits. Despite the fact that it is not our business to insert ourselves into Mexican
Q: How do you mitigate the inherent risk that comes from
politics, we try to now be part of the process whereby we
both exploration and jurisdictions that may not be free of
as investors ensure that the benefits flow more equitably
security issues?
so we ourselves are working in jurisdictions that are largely
A: When operating in dangerous jurisdictions, the best
free of local disputes.
we can do is to know who the main players are, and to let the authorities know the company is not implicit while
Q: To what extent does Sprott get involved in the projects
assuring the local players that it does not pose a threat.
in which it invests?
There are jurisdictions where extortion and drug trafficking
A: We manage a reasonable amount of passive money,
are problems that can make things very difficult. But the
whereby we participate in a company at an arm’s length
truth is that every industry would like to mitigate all risks, but we have to juxtapose the risk with the prospects. The answer to the question is that there is no answer; there
Sprott US Holdings is a holding company made up of three
are challenges in several parts of Mexico – and Mexico is
companies: Sprott Global Resource Investments, Sprott
not alone in this – where there are very real risks. We draw
Asset Management USA and Resource Capital Investment
the line when we believe our people, whether nationals or
Corporation, a SEC-registered investment adviser
expats, are at risk. We will not take that risk.
INSIGHT |
THE VICIOUS CYCLE OF EXPLORATION FINANCING ENRIQUE MARGALEF Partner at Vander Capital Partners
Financing for mining in Mexico is notoriously hard to come
he says. “Both also have significant exploration potential
by. Enrique Margalef, Partner at Vander Capital Partners,
and neither are running at full capacity so we want to grow
says this is because the requirements for private equity
the resource bases at the current properties and search for
funding or listing on a stock exchange typically conflict
new mines to incorporate into the portfolio.”
with the business of exploration. “To list on the BMV or seek private equity, a mining company must demonstrate it has
According to Margalef, the next step for the company’s growth
been cash-flow positive for at least two years,” he says. “But
is to attract more institutional investors, such as Afores and
the main premise of the mining cycle dictates that there is
foreign pension funds. He says the problem with this is that,
no return until the mine has been built.”
often these entities are governed by strict investment rules
“
and have a lack of understanding of the intricacies of mining.
Margalef says this creates a vicious cycle wherein exploration companies need money to fund their activities but cannot obtain it through a public listing in Mexico. He pinpoints this as the reason why 75 percent of mining companies are listed on the TSXV. “On the TSXV, there is no requirement to be cash-flow positive; as long as a company has the experience and a promising project, it can obtain the funds.” Vander Capital Partners, an investment firm, began as an exploration company but when the downturn hit in
Our strategy at the moment is to acquire new mines that are ready to be moved into production”
This means institutionalization could be a long-term goal, since requirements for institutional investment include
2012, it had to change strategies to survive. “Since foreign
a proven track record of cash generation. Telson began
investment was allowed in Mexico in 1992, there have been
making money in 2Q18 but the nature of mining dictates
more than 25 years of exploration, equating to over 1,000
that its EBITDA is still negative since all the revenues it
projects,” Margalef explains. “These concessions had been
accrues are directly reinvested into the operation of Campo
explored over this time and some were ready to be put
Morado and the construction of Tahuehueto. “If we went the
into development.”
traditional route, we would have to wait until both mines were in production and then wait another two to three years
The firm took advantage of this landscape when it came
to prove our profitability,” he says. “This would be a three
across Telson Resources, a small-sized Canadian company
to five-year plan.”
with the Tahuehueto project in Durango. At the time, Vander was working with experienced miners José Antonio
The firm is now in talks with the new stock exchange,
Berlanga and Jesus Robles and jumped on the opportunity
BIVA, to evaluate the possibility of this requirement being
to acquire Telson. Campo Morado is now in commercial
eliminated. Margalef is hopeful that the new SPACs available
production, while Telson is working on advancing
in Mexico will help companies like Telson. His goal is to be
Tahuehueto. “I expect Tahuehueto to reach production
the first company to use these tools to raise funds for the
within the next year,” says Margalef.
mining industry. In the meantime, he says Vander alongside Telson will work to prove two to three years of positive
Today, Vander is focusing only on its relationship with Telson,
cash generation. “When we make it to this milestone, we
as Margalef says there is still plenty of room for the operator
can return to these funds and prove we delivered on our
to grow. “Our strategy at the moment is to acquire new
profitability promises,” he says. “This will then open us up
mines that are ready to be moved into production in much
to a wider range of investors that hopefully have a better
the same way we did with Campo Morado and Tahuehueto,”
understanding of the mining industry.”
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| VIEW FROM THE TOP
JUANICIPIO, MEXICO’S BIGGEST PRECIOUS METAL MINE IN DEVELOPMENT TREVOR TURNBULL Director of Gold and Precious Metals Global Equity Research at Scotia Capital
Q: How does Scotia Capital differentiate itself in Mexico’s
in Mexico. America Silver Corporation’s project in Sinaloa,
mining industry and how important is the industry to the
San Rafael, is also interesting. Little mining is done in this
company’s global strategy?
state so it is important to see whether Sinaloa will emerge
A: Scotiabank is quite active in Mexico through its operations
as a new mining area. It is off to a good start.
in the country. We see mining as an extremely important
364
sector because it plays such an important role in the Mexican
There are also some interesting expansion projects. The San
economy. We serve international companies investing in
Dimas operation now belongs to First Majestic, which is well-
the Mexican mining industry, such as Canadian operators.
capitalized. It should be able to ramp up investment more
Scotia Capital is one of the biggest lenders in the mining
than the previous owner. It is a good district and it will be
industry. We are known to strategically choose the locations
interesting to see how it gets developed. The Camino Rojo
and sectors we lend money to so our programs in Mexico
project that Goldcorp sold to Orla Mining may be developed
show that we have faith in the stability of the Mexican mining
soon and it is an interesting project to keep an eye on.
industry. Other banks are not as open to lending money to mining as it is a highly technical industry. Entering this sector
Q: How do you expect the prices of precious metals to
often implies hiring a new team of people but Scotiabank
perform in the short term?
has been known as a mining-friendly bank for a long time.
A: Our official long-term forecast for gold prices is US$1,300/oz, which is the current price. On the other hand,
Scotia's official long-term forecast for gold prices is US$1,300/oz, while the price of silver is expected to increase to US$19.25/ oz over the long term
the price of silver is expected to increase to US$19.25/oz over the long term but it is still quite below this benchmark. Nonetheless, we expect silver prices to catch up to gold as industrial demand and usage of this metal continue to rise. A lack of silver supply is not a particular concern as up to 70 percent of the world’s silver is processed as a byproduct. There are several large silver mines in the world but many gold and copper mines also happen to produce silver. What we need is not more supply but more industrial and investment demand for silver.
Q: What projects do you think are bound to attract more
Q: How can companies find a more stable middle point
investors or deliver a greater ROI in the short term?
between the short-term needs of investors and the long-
A: In terms of gold and silver, the biggest project is the
term goals of mining operations?
Juanicipio JV operated between Fresnillo and MAG Silver. It
A: We understand that this is not easy but mining
is going to be a large gold, silver and base metal operation
companies need to continue focusing on their long-term
and it is quite similar to Fresnillo’s Saucito, which has been
goals and educating investors as to why this is the right
incredibly profitable. It will start production by 2020 and
way to do business. Mining is a long-term industry and it
this is going to be the newest large precious metal mine
is not always possible to deliver short-term gains every quarter. Companies can also gain the trust of investors by having a strong track record that shows they can make solid
Scotia Capital is a leading provider of financial products
investments that generate real returns. It can be challenging
and services to the global mining industry. Its global mining
as sometimes operators may need to slow production to
platform incorporates corporate banking, investment banking
focus on expansion. This can easily scare off investors even
and M&A, among others
though these strategies can reap more profits in the future.
VIEW FROM THE TOP |
TRADING: A FINANCIAL MODEL FOR THE MINING INDUSTRY ALFREDO NUÑEZ President and CEO of VES Capital Partners
Q: What is your financial model for the mining industry and
or to launch it on the stock exchange. For this endeavor,
how do you choose which projects to pursue?
we require a solid mineral bank, so we are targeting 1 billion
A: Before venturing into the mining industry, we conducted
ounces in situ. We also own the titles to several mines but
a financial analysis and saw that it represented a good cost
we first want to fully develop our ongoing projects while
opportunity for us, given the potential for high returns.
awaiting the geopolitical uncertainty in Mexico to subside.
We do not approach mining from an operational front, as
This will help us avoid making rush decisions. For the Veta
we outsource experts. For example, we collaborate with
Grande project, we had a steep learning curve as we were
Canadian laboratories like SGS and renowned drilling
selling the mined ore at the price of barite when it contained
companies. Our firm’s vision is based on trading. We can
high levels of gold and silver.
either participate in a joint venture for production, list the project on the stock exchange or sell the whole mine. We
Much of our venturing into projects has been circumstantial.
focus on doing selective mining and only for underground
For example, we made a loan to a company that repaid
mines. We do not participate in open-pit mining as our
us with the titles of several mines in the state of Guerrero.
experience has taught us that it is more profitable to explore
We started to explore these and realized the project may
the mine tunnels and underground veins, which have higher-
have an interesting upside. So, we are constantly open to
grade ores without the need to crush so much material.
analyzing the feasibility of these sorts of exchanges. If we find them viable, we present the proposal to our committee
Our philosophy is that the mining industry is no sprint, but
so it can greenlight its continued development.
rather a marathon. We think that metals back up investments despite macroeconomic hurdles. That is why we are willing
Q: What main challenges have you faced when venturing
to take the risks that the mining industry may represent.
into the mining sector?
We think we are moving in the right direction. We consider
A: I think we have faced every challenge a company can
ourselves juniors in selective mining, which is why all our
possibly face when venturing into the industry. For example,
acquisitions are targeted to only high-grade deposits. This is
regarding geology, it is common to get opposing opinions
how we aim to become a key player in silver mining.
for an exploration project. This experience working with geologists tells us that some may be opportunistic and extend
Q: What are your main projects and how are they
the project to earn more money, while it is in our company’s
developing?
interest to advance fast and potentialize our investments. All
A: Regarding the projects we have under the VES Capitals
our projects have been carried out through our stakeholders’
concessions, our strategy is to adapt to the mine and
funds, with no subsidies or loans. We learned that to fully
the project. Five years ago, when we acquired a cluster
rely on geologists is naive, so we outsource more wisely. We
of properties known as the Veta Grande project, our goal
are used to high risk, but it is important to establish clear
was to mine barite but we discovered high-grade silver,
communication channels with the outsourced experts to
changing the whole vision of the project. After sending
prevent abuses of trust. Today, we work with trustworthy
the ore samples to our laboratories in Canada we also
companies, such as Detector Exploraciones, whose
discovered an interesting gold percentage. Just by
recommendations we know we can follow.
extracting the gold byproduct we can cover the costs of silver production, thus clearing the income we receive for its production. So, we constantly resize our projects based
VES Capital Partners is a mining company focused on silver
on the mine’s behavior. According to our studies, we have at
production in Mexico. The company’s objective is to develop its
least US$300 million of in situ ore to be extracted. We are
existing mineral property assets, while pursuing the acquisition
working to make the project more attractive to a partner
of other potential mineral assets
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| INSIGHT
RESOURCE DIPLOMACY HELPS GUARANTEE MINERAL SUPPLY IN JAPAN HIDEKI MORIMOTO General Manager at JOGMEC
366
Minerals are a finite resource and as high-grade projects
Considering its dependency on resources imports, Japan
get harder to find and the exploration pipeline shrinks,
is responding to the changing circumstances surrounding
governments around the world are starting to prepare
resources and energy by strengthening its ties to resource-
themselves for the possibility of a resource scarcity in the
rich countries like Mexico. As noted in JOGMEC’s 2017 annual
near future. The Japanese government established Japan
report, Japan consumes considerably more oil, natural gas
Oil, Gas and Metals National Corporation (JOGMEC) to
and mineral resources than can be domestically produced.
make sure it has a constant supply of natural resources
Moreover, the global competition for resources is fierce.
through a wide range of activities. “In the global resources
According to provisional figures from the International
market, the extent and rapidity of change in the global
Lead & Zinc Study Group, there was a global refined zinc
resources and energy sector has been further exacerbated
deficit of 485 billion tons in the first 11 months of 2017, a 135
by uncertainties associated with geopolitical risks and the
percent increase on the 206-billion-ton deficit in January-
rising tide of resource nationalism,” says Hideki Morimoto,
November 2016.
General Manager of JOGMEC Mexico. “This underlines the ongoing need for a comprehensive and multi-faceted
For this reason, JOGMEC provides support to Japanese
resources and energy strategy.”
companies that are involved in exploration and development
| VIEW FROM THE TOP
INVESTING IN QUALITY CONTROL REDUCES COSTS IN THE LONG TERM EDUARDO AMARO Country Manager Mexico at Cliveden Trading AG
Q: What advantages does Mexico offer in terms of
port in the country but Manzanillo became more popular
trading minerals?
when it was built as it offers greater access to China and
A: Mexico has a mixed market divided between national
Asia. Guaymas is also a strategic port but it has limited
and international companies. It has high-quality minerals
infrastructure. Geographically, inland freight can be cheaper
that can be marketed in Europe and Asia and provide
at times to take material from Guaymas to Manzanillo
flexibility in allocation. There are many great opportunities
and then ship from there as the latter offers better rates.
to be found in the country both in local business and in
Altamira is also a good option for those that need to export
exportation. Mexican companies such as Peñoles are some
to Europe.
of the biggest producers in the world. It is also strategically located near the North American market.
Despite the advances, Mexico could take greater advantage of its coasts. Other countries have more domestic vessel
Q: How would you describe the quality of the
traffic while Mexico depends on trucks and railways to
country’s ports?
move goods. Increasing the internal use of ports would
A: The country has made great strides when it comes to its
make them safer and cheaper and would also attract more
ports and exportation options. Tampico used to be the only
investment to ports in the south that greatly need it. That
projects by providing equity capital and liability guarantees.
panhandle belonging to Constantine Metal Resources. Both
“In Mexico, Japanese companies participate in silver, zinc
projects are expected to produce zinc.
and lithium projects in states such as Chihuahua and Sonora,” says Morimoto. “We also strengthen relationships
Combined with the capital and expertise it offers to promote
with resource-producing countries in the field of mine
exploration, recycling and the development of alternative raw
pollution control. JOGMEC can provide a variety of technical
materials, Japan is protecting itself against the instable supply
support such as holding seminars on mine pollution control
of rare metals by stockpiling resources. “Japan is ensuring it
and hosting trainees in Japan.”
has enough resources to last for several years in the case of any type of emergency that could stop the flow of mineral
Despite JOGMEC’s eagerness to carry out joint mineral
importation,” says Morimoto. In 2017, the country reported a
production, Morimoto says it can be challenging to work
national rare metals stockpiling target of 42 days and a private
with mining companies in Mexico. “Many concessions are
stockpiling target of 18 days in terms of domestic consumption
too small for us to support, while major Mexican companies
levels. It is a short-term measure the country deems necessary
have almost everything they need from capital, to technical
considering the rising risk of “supply disorder.”
expertise and the right personnel,” he says. “This makes it hard to identify areas of opportunity in which we can participate.”
Despite the precautions the government is taking, JOGMEC
Furthermore, Japanese companies are struggling to keep up
is sure that business will redesign itself to the reality of
with costs related to security and theft issues.
the industry as the deficit becomes more real. “Companies will continue to adjust to the necessities of the industry
Although its participation in Mexico is not as smoothly as
and adapt to the availability of resources,” says Morimoto.
desired, JOGMEC provided new financial assistance valued
But he adds that Mexico holds a privileged position in the
at more than 15 billion yen in its 2016 fiscal year budget
Japanese company’s portfolio. “Mexico is a lot more open
to support four exploration projects around the world,
to international investment than South American countries
including the Sunshine Silver-DOWA Los Gatos project
with mining potential that are more nationalistic. This helps
in Chihuahua and the Palmer Property in the Alaskan
us mitigate risks.”
would strengthen the country’s economy by making it
pays dividends. The issue for many small miners is obtaining
better-connected.
the capital to install these controls and filters and visualizing it as long-term investment. Many end up relying on traders and
Q: What should the industry be considering when it comes
warehouses to control elements such as moisture and quality
to insuring fleets?
but these costs can quickly add up.
A: Many mining companies do not know how to insure their cargo based on their incoterm contract agreements. This
Q: How can Mexico improve its exportation facilities?
is a common risk of trading and many companies use a
A: Ports should offer a more unified and uniform service.
variety of strategies to minimize that risk. Big companies
Traders do not want to share information with competitors
like Peñoles and Grupo México often have good insurance
but having more open data would help reduce corruption
and can cover losses in shipment but smaller businesses
and robberies at ports. The government needs to do
often cannot cover the costs. This can lead to canceled
more than just track who is paying taxes and who is not.
contracts even after they have been signed. We recommend
Fortunately, we have experience in these processes and
incorporation of a variety of control points in the process,
we can help new businesses and suppliers navigate these
whether loading the vessel at the port or in the mine.
issues. We also have the advantage of being a smaller company that can offer customized services. We are
Q: What can companies do to reduce the costs of shipping
constantly on the lookout for the best rates in the country.
and trading?
We provide services to big players such as Peñoles and
A: Small and medium companies often do not want to invest in
Fresnillo but also to medium and smaller miners.
filters for the plant that improve the conditions of the material before shipping. We try to explain that it is better to make the initial investment as international standards are quite strict. It
Cliveden Trading AG is a professional trading and marketing
can be more expensive to have material or samples rejected
company. It specializes in offering bespoke services to junior
and be forced to make adjustments right before shipping.
miners. It has a combined raw materials trading experience of
Adding this kind of quality control during the processing plan
over 50 years
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| VIEW FROM THE TOP
A NATIONWIDE NETWORK FOR COMPETITIVE LOGISTICS COSTS JOE SALINAS Senior Director Latin America of Brink’s
Q: What is the role of Mexico’s mining industry within your
transporting valuable cargo remains high in the country, so
international business strategy?
Brink’s keeps adapting but cannot cut corners and put our
A: Brink’s Global Services’ (BGS) strategy in Latin America
people and cargo at risk. Our solution is to leverage our
heavily relies on our two main pillars: Mexico and Brazil.
carrier network, adhere to our internal security procedures
Mexico is the No. 1 exporter of silver ore in the world,
and ensure we keep clients’ products safe until delivery.
a market expected to grow to US$17.8 billion by 2020,
368
mainly driven by an increase in gold exports. Due to the
Q: What is your main added value to the Mexican
market’s size, we continue to invest in equipment and
mining industry?
resources along with a fully dedicated team of supply
A: As the market leader in this industry, we focus on
chain experts who focus on multimodal transportation
developing strong commercial relationships, operational
of precious metals from Mexico to various parts of the
excellence and price competitiveness. Our strategy is to listen
world. The shipment flows are toward Canada, the US and
to what our customers need, adapt and implement. In 2017,
Switzerland, where we also have our own infrastructure to
we implemented Key Performance Indicators to measure
provide our customers with door-to-door services.
Brink’s, our subcontractors and our customers, which has lead us to an exceptional level of service performance. We
Mexico’s silver ore export market is expected to grow to US$17.8 billion by 2020
add value through 158 years of industry experience and our global network, instilling confidence in our customers when we are handling their valuable cargo. The Brink’s brand was built on trust and integrity, on its people, security and service. We will continue to build on those foundations. Also, at Brink’s we look out for the best interest of our customers. As the market and flows of precious metals
Q: What are your most demanded services in the Mexican
change, we have to work with our partners to provide
mining industry?
seamless transportation solutions to the US, Canada,
A: Brink’s Global Services has a key market position in
Europe and Asia. We ship most of our cargo by air and
the precious metals exports from Mexico. Our customers
we constantly look for the most effective way to reach
demand fast transit times and reduced costs, so we have
the various destinations. We are improving and adding
a strong nationwide network in Mexico and can provide a
value by carrying out door-to-door multimodal seamless
variety of door-to-door services through helicopters, air
international shipments with full cargo liability coverage
charters, commercial airlines and our own fleet of armored
for our customers.
trucks. The market pressure and client demand drive our teams to be creative when managing their supply chain.
Unlike general cargo, valuable cargo requires strict and
We are constantly searching for new airfreight partners
confidential flows of information. Our customers need
and routes that can improve transit times. We know there
visibility regarding their cargo throughout the supply chain.
is a need for a competitive logistics cost, yet the risk of
We have a very personalized relationship with each of our customers, so the challenge we face is providing visibility while limiting information to reduce the risk of losses. To
Brink’s is a premier provider of secure logistics and security
support our clients, we have expanded and customized
solutions including cash-in-transit, ATM replenishment and
our tracking and tracing visibility tool, Brink’s Online. Our
maintenance and cash management services. It offers the
portal is used by customers to safely track and trace their
mining industry management of the entire logistical process
shipments in a centralized and secure way.
VIEW FROM THE TOP |
BREAKING INERTIA THROUGH NEW PROCESSES, SOLUTIONS DONOVAN SĂ NCHEZ Business Director at SGS Minerals Services
Q: What role does the Mexican mining industry play in your
usually considered complex materials, requiring blending
international business strategy?
to reach an acceptable quality, we also have to perform
A: Mining represents a large portion of our business in
analysis during the blending process to make sure that
Mexico. We offer the industry a wide array of services
the blend is according to the clientsâ&#x20AC;&#x2122; expectations,
from geochemistry to geometallurgy. SGS specializes
keeping all the elements within acceptable limits.
in providing detailed ore analysis so that operators can make better decisions about their production strategies.
Each load is different as the particle size and type of
But the lack of exploration is impacting our business and
material can vary greatly so we have to be extra cautious
at the same time condemning the future of the industry
with every client. We normally take samples at ports or
and its development. Sadly, when prices drop, exploration
warehouses near them such as at Manzanillo when the
is often the first to suffer. We remain cautious about the
vessels are ready to load the material prior to it leaving
rise of the industry as we believe that some analysts are
the country or as soon as possible once the material is
being more wishful than realistic about its outlook.
discharged from the vessel.
Q: What are the main issues companies face in terms of
Q: How do you help companies with traditional mindsets
mineral analysis and how do you help them?
overcome their resistance to change?
A: The biggest challenge companies face at the moment
A: Mining companies can be quite traditional as it is an old
is their restricted budget. Exploration departments
industry. Certain operators may fear straying from processes
often have very small budgets to complete studies.
that have been giving them decent results for decades.
Based on their objectives and goals, we meet their
But we strive to show them that there is a new world of
needs by adapting our services to their limited capital.
possibilities and efficiency that can be achieved through
We can also help facilitate and optimize the process of
new processes. It also helps that regulators are starting
commercialization to help them reduce costs. Another
to direct companies in the right way by incentivizing new
issue is that not enough companies know that we have
models. Some operators are quite up to date on the newest
a high-end laboratory in the country and many shipping
technology and trends in the industry.
samples to other countries, which can be expensive. Our local knowledge is an additional advantage.
We also believe that the best way to foment change in the industry is by setting the example. By overcoming
Q: What challenges do operators face when it comes to
internal resistance to new processes, we can successfully
commercialization and trade?
show others how to do this as well. We have worked with
A: Trade and commercialization are particularly tricky as
companies and helped them install onsite laboratories in
one bad sample can put at risk an entire lot or shipment
their mines. We make sure to only install the equipment they
of concentrates. We have to make sure that we take
need to optimize costs. We seek to be well-positioned in the
representative samples of the materials according to the
country, not just in mining but across a variety of industries.
applicable international norms. This is important since our
SGS is showing companies that we are much more than just
clients need to be sure that the material they are exporting
service providers; we can be business partners.
complies with the local regulations in each country regarding contaminant levels. They also need assurances that they are below the limitations that a smelter might
SGS was established in 1878 and is the worldâ&#x20AC;&#x2122;s leading
have to treat certain materials. If a material is not within
inspection, verification, testing and certification company.
the specification it could be rejected, wasting time and
With more than 90,000 employees, SGS operates a network
money. Since the concentrates produced in Mexico are
of more than 2,000 offices and laboratories around the world
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| VIEW FROM THE TOP
RAIL PRIORITIZATION FOR EFFICIENT MINING TRADE JOSÉ ZOZAYA President of Kansas City Southern Mexico
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Q: How is KCSM helping unlock railway transportation
A: KCSM has already opened a dialogue with the newly-
potential in Mexico and what impact has it achieved in
elected administration. We have discussed the projects
the economic development of the country?
that it has planned and we believe that the scenario ahead
A: KCSM currently has 4,251km of railway in Mexico. We are
is encouraging. The national and international markets
committed to further upgrading our rail network through an
have responded to the election calmly, which is a very
annual investment in its modernization; this in order to have
good sign. Our company has worked with all types of local
a more competitive and efficient railway system. In 2018 we
governments. At a federal level we have collaborated with
have planned to invest US$165 million, but the total outlay
two parties and now will have the opportunity to work with
may end up being higher.
a third. Our line of work will continue to be institutional and very respectful of the law. We hope to carry on a very good
We believe that we are achieving our efficiency goal as
relationship, as we have for the 22 years we have spent
our key actions attest to our progress. For example, we
operating in Mexico.
collaborated with the Mexican and US authorities to establish an inspection booth at the border, which has
Q: How does KCSM remain at the forefront of innovation
helped to establish a more efficient train crossing in the
adding value to the mining industry?
area. We are also working on international crew matters
A: We cannot move our rail network to reach new mines,
to avoid having our trains stopped at the border. We
so we strive to offer greater availability instead. Regarding
have contributed a great deal financially to control and
the mining industry, we are mainly moving steel. All the
monitoring equipment for our trains, to better monitor the
investments we make in upgrading our network benefit
products we move. We think that it is key to take more
the industry as they are aimed at having a more efficient
preemptive actions instead of reactive ones.
and competitive railway. I believe that the mineral terminals enhance the process of storing ores. To add
We are also making a considerable investment in our rail
more value to the industry, it is also important to be in
yard in Nuevo Laredo, building the biggest rail infrastructure
constant communication with our clients to make sure we
that we have in the country. We expect this project to help
are helping them in the best way to achieve their growth
us speed up train movements on the northern and southern
expectations. The industry has the same rail needs across
crossings, increasing our efficiency and competitivity. Our
countries, so KCSM implements the same best practices
outlay is also focused on new equipment and locomotives.
in Mexico, the US and Canada. We build a single railway,
All of these actions may seem independent but they pursue
instead of dividing it across borders. This helps us be more
the objective of making our trains more efficient and
efficient and competitive by achieving a greater fluency
competitive. We move around 40 percent of the total rail
in circulation. The sooner we can take a carriage from
freight in the country. While we do not expect to increase
origin to destination, the greater availability we will have
this percentage, the volumes moved keep growing.
for the industry.
Q: Given López Obrador’s victory, what impact will his
Q: What are the main obstacles that the mining industry
government have on Mexico’s industrial competitiveness?
faces in terms of logistics and trade? A: The mining sector requires more availability of rail freight transportation and thus of railways. But it is up to
cross-border
the authorities to determine when and how to tender for
transportation between Mexico and the US, with customs
new rails. I think that the Mexican mining industry is very
pre-clearance for faster, lower-cost service than trucks can
well developed and has received the service that it requires
traditionally offer
through shipping lines and railways.
Kansas
City
Southern
Mexico offers
INSIGHT |
NAFTA DRIVING LOGISTICS MARKET DIVERSIFICATION MANUEL CHAVEZ General Manager of OEC Group Mexico
The logistics industry in Mexico is shifting in the wake
improvements, rail transportation is much cheaper than
of the NAFTA renegotiations. Manuel Chavez, General
road freight. This will allow us a more competitive market.”
Manager of OEC Group Mexico, says that bilateral relationships like the initial deal struck between Mexico
Comparing Mexico’s railway to that of the US, Chavez
and the US, are more likely than trilateral agreements.
points to the domestic system’s inefficiencies. “In the
“Because of NAFTA’s structure, we are seeing more
US, it takes five days to travel thousands of kilometers
bilateral negotiations with each party involved in the
by train from Los Angeles to Chicago,” he says. “In
NAFTA treaty,” he says.
comparison, in Mexico, there is a three to four-day transit window from Manzanillo to Guadalajara, which is just
The reshaped agreement, he adds, could be a blessing
300km.” According to Chavez, there is no other way to
in disguise as Mexico turns to alternative markets such
make it a more efficient form of transport without new
as China, the world’s largest consumer of raw materials.
infrastructure, which remains an expensive option.
“China is the logical choice as an export destination for raw materials because it is the world’s manufacturer,”
Monopolies are also a factor, leading to high prices, Chavez
Chavez says. “Everything from smart phones to soft toys
says. The majority of Mexico’s system is owned by three
are made in China.”
companies: Ferromex, Ferrosur and Kansas City Southern Mexico. “In this country, the monopolies are our greatest
Trade to the US will remain a key factor in the logistics
problem because a very small concentration of companies
industry due to the shared border and the substantial
are attracting all the business and charging high prices,” he
market that already exists. Nevertheless, Chavez says
says. “There is a limited number of brokers and the larger
that the change that is afoot is positive because it is
players can afford to undercut the smaller ones.”
motivating the industry to adapt and reshape itself. “Everybody is looking for new partners, which helps to
To solve this, he again looks to the US example. “In the US,
open up new opportunities around the world.”
there is a government entity called the Freight Maritime Commission (FMC). This organization oversees trade
It is also driving companies like OEC Group to find
so there is healthy competition and a correct protocol
more innovative solutions to meet the market’s needs.
and sanctions related to various circumstances. This
Chavez says the company’s philosophy is to always
organization takes everyone’s opinion into account, from
offer the client options. “We do not want to just be a
the public and private sectors, which makes it a more
freight forwarder doing something that has always been
organized, structured and cohesive way of doing business.”
done,” he says. “We want to look at problems and offer innovative solutions.” This does not necessarily mean
Chavez adds that this goes straight to the heart of
tampering with proven systems, but exploring different
what Mexico’s industries really need: a long-term vision.
options that suit the customer’s needs.
“Although there is a huge list of requests for the new government, I believe we must create far-reaching
To help improve the country’s logistics landscape in an
solutions to make everyone competitive,” he says. “The
ever-changing world, Chavez would like to see Mexico
government should evaluate and understand the current
update its once-legendary rail infrastructure, which would
market necessities and craft a long-term strategy with
speed up logistics processes. “All developed countries
real value for the industry, far beyond six years. To create
have robust railway systems,” he says. “There are fewer
a competitive country, it is necessary to consider the
accidents on railroads, it is a more environmentally-
future, envisioning where the world is going and where
friendly option and if we can make the necessary
technology is going.”
371
| ROUNDTABLE
WHAT ARE THE PRIMARY FINANCING SOURCES AVAILABLE FOR JUNIOR AND MID-TIER MINERS?
Only 30 percent of Mexico’s terrain has even been explored, and from that 30 percent a great deal of mineral wealth has been reaped. But as for the other 70 percent, among the factors holding miners back is access to funding for their projects. To put one mine into operation can cost millions or even billions of dollars, and while the majors can offset risk with production from their other projects, junior and mid-tier companies often need help in finding financing. Mexico Mining Review asked industry leaders about the often-heard complaint that there is limited funding available and asked for their solutions.
Private funding is very difficult to access for exploration, and the best source of private capital for exploration is probably from high-net-worth career mining explorers or from mining operators that are looking to outsource exploration. Mexico is fortunate in that it has five or six private individuals who are themselves eager participants in the Mexican exploration industry. This is something even the Mexican industry does not understand about itself. The fact that national investors are eager
372
RICK RULE
to fund these projects gives foreign investors like ourselves some confidence.
President and CEO of Sprott US Holdings
In mining and mineral exploration, investors come from everywhere. There is a strong European appetite to invest in exploration companies in the Americas, so we have to be listed on their stock exchanges to make it easier for their nationals to participate in financing our projects. Our companies are listed on the TSX Venture Exchange, as well as the OTC-QB and Frankfurt Exchanges. Also, Southern Silver Exploration is listed on the Santiago Stock Exchange (BVS), which provided some ability to invest
LAWRENCE PAGE Chairman and Director of Manex Group
for Mexican investors. The TSX asked us to co-list on the BVS in Chile to benefit Mexican investors. We have not yet pursued a listing on the BVM, but we would be happy to consider doing so.
There is some nervousness about the upcoming political changes but overall, I think the climate is good. When speaking to the institutions that understand the industry, there should be no trouble getting financing. For us, FIFOMI’s funding has been sufficient and has helped us with our working capital, but there are always complaints about the level of funding being constrained. I think a big company that is looking for much more financing may feel it is not enough. That being said, there are always
MIKE MCALLISTER Vice President of Corporate Development at Sierra Metals
alternative funding options available. There are different opportunities, including private equity, which funds a lot of strong, early-stage projects. There is also access to the TSX or other exchanges, such as the Venture exchange. There are many listed mining companies and they have access to public markets. Some companies will finance via a stream or off-taker agreement. The opportunities definitely exist.
A group of investors, including myself, have acquired a stake in Accendo Banco, (formerly Investabank) and through this entity we have acquired Deutsche Bank Mexico, which will be merged into our bank. Within Accendo Banco, there will be a niche whereby we will focus on the mining sector in Mexico. We will provide typical mezzanine debt financing in Mexico, for projects in the development and production stages rather than exploration. This is not new to us, as we have done it before with mining companies in Mexico and Ecuador. But now we will be more proactively seeking to finance companies domesticallythat are worth investing in.
RAMON PÉREZ President and Director of Candelaria Mining
This 10-year global mining industry crisis has translated into very limited financing for mining companies, particularly for small to medium sized companies. Mexico, being one of the richest natural resources countries, does not have a bank that supports the sector. This crisis has presented us a unique opportunity to provide financing throughout the whole mining spectrum. We are the only Mexican bank that actively serves the mining industry. We serve the mining companies, as well as the whole supply chain, such as mining industry service provides, like drillers, contractors, and reagent producers, to name a few. Mining is one of the most important sectors that Accendo Banco targets with the aforementioned bespoke products.
373
JAVIER REYES DE LA CAMPA Co-CEO of Accendo Banco
The sector has a great deal of potential in Mexico simply because of the geological wealth of the country. We have a few mining companies listed on the BMV, but not enough. The mining sector represents 4 percent of the country’s GDP and there are many mining companies working in the country, but we have only four companies listed on the BMV: Peñoles, Grupo México, Autlán and Minera Frisco. These companies are able to take advantage of the BMV through different products since we do not exclusively focus on the stock market. In Mexico, there needs to be a greater diffusion of knowledge in terms of the benefits and the processes for listing on the BMV. The
JOSÉ-ORIOL BOSCH CEO of BMV Group
problem is that many companies that require financing to grow or to carry out their expansion plans are not familiar with the BMV or its products or requirements.
One of the biggest challenges we face is creating a more democratic access to finance. We are focused on strengthening our role as an intermediary between the Mexican mining industry, mining companies and financial institutions. We find that we can better meet the needs of the sector if we join forces with the financial industry to provide mining companies with a wider variety of financing options. Banks like the Industrial and Commercial Bank of China have contacted us in international forums with the purpose of connecting more of their investors with Mexico. Investors and international banks often contact us because they know that we can ease their entrance to the country and connect them with the right companies. In any given project we can offer a credit line of up to the maximum limit but, by collaborating with other banks, we can provide several times that amount.
ISRAEL GUTIÉRREZ CEO of The Mining Development Bank (FIFOMI)
San Dimas Mine, Durango
INDUSTRY OUTLOOK
14
The mining industry is undergoing constant change. From the colonial silver mines of Taxco to the era of canaries detecting methane until now, the journey has been remarkable. But now, with new technologies and ever-increasing demand for minerals globally, the industry is accelerating at an almost unstoppable pace. In Mexico, as President Peña Nieto’s term comes to an end, the industry is preparing itself to wade through a transitional period marked by a new presidential term. In effect, the space created by the turnover of authorities could be taken as an opportunity to evaluate the current state of the industry and design the next chapter of the mining sector.
Reflecting the upcoming changes, this chapter will evaluate the strengths and shortfalls of the outgoing administration in terms of mining policy and will examine how the new administration can learn from past mistakes to unleash mining’s potential for accelerating economic growth. It will discuss ways to keep the sector ahead of the curve and remain one of the world’s top mining destinations.
375
CHAPTER 14: INDUSTRY OUTLOOK 378
ANALYSIS: Securing Minerals Amid Scarcity
380
VIEW FROM THE TOP: Philip Hopwood, Deloitte
381
INSIGHT: Eduardo Salgado, KPMG in Mexico
Mario Hernández, KPMG in Mexico
382
VIEW FROM THE TOP: Ricardo Díaz de León, ProMéxico
383
ANALYSIS: Seabed Mining, From a Pipe Dream to Reality
384
INSIGHT: Rubén del Pozo, AIMMGM
385
VIEW FROM THE TOP: Heriberto Salas, EagleBurgmann
Alejandra Rondon, EagleBurgmann
387
INSIGHT: Donald Hulse, Gustavson Associates
388
INSIGHT: Efraín Martínez, Dräger
389
VIEW FROM THE TOP: Mario Salomón, Multisistemas de Seguridad Industrial
390
INSIGHT: David Ducote, IDS
391
VIEW FROM THE TOP: Jaime Ramírez, Mettler Toledo
392
VIEW FROM THE TOP: Alfredo Phillips, Guerrero Mining Cluster
394
ROUNDTABLE: What are the Features You Look for in a New Project?
377
| ANALYSIS
SECURING MINERALS AMID SCARCITY As world-class deposits become harder to find and end users increasingly demand ethically-sourced products, both governments and the private sector are creating new strategies to assure access to minerals in the long term. Some do so through offtake contracts, others through metal streaming deals The lack of new projects and a rise in demand for consumer
they already have. “Governments are trying to mitigate
goods fueled by a growing population are driving the
the risks of minerals and metals scarcity by using scarce
need for a strategy that guarantees mineral supply. The
minerals and metals more efficiently in applications, by
UN estimates that by 2050, the global population will
recycling and by developing substitutes,” says the report.
reach 9.8 billion, and this will further increase to 11.2
It also mentions that authorities are starting to promote
billion by 2100. This swelling population is expected to
trade policies that favor international and open markets for
bring with it growing urbanization, development of new
minerals and metals.
technologies and hunger for new infrastructure. This, in turn, demands raw materials in the form of metals.
CONFLICT MINERALS Along with the drop of supply, companies are worried
378
One of the main issues standing in the way of a hungry
about the global outrage that was sparked in 2016 when
consumer base is that the recent bear market created
Amnesty International released a report that connected
a steep drop in exploration investment in 2016 and
industry giants such as Apple and Samsung to operations
operators are struggling to find high grade projects.
in the Democratic Republic of Congo. The report included
According to S&P Global Market Intelligence report,
allegations of child labor and adults working under life-
World Exploration Trends (WET), global spending on
threatening situations. Technology companies reacted
exploration dropped 21 percent in comparison to 2015.
quickly and publicly announced their commitment to
“The potential to discover new ore bodies and acquire
ethically source their materials. Apple became the first
new mining projects is still strong in Mexico, but with
company to publish the names of its cobalt suppliers.
rising costs and rising risks, new mining projects have to be higher and higher quality to be economical for
“The DRC has raised concerns about the way cobalt
development,” says Bradford Cooke, CEO of Endeavour
is extracted and its human costs,” says Tony Rovira,
Silver. “Silver supply has fallen due to the few mines built
Managing Director of Azure Minerals, which is moving
during the recent five-year bear market of low metal
its Sara Alicia gold-cobalt project in Sonora into the
prices.” However, S&P’s 2018 report found a 14 percent
development stage. “Having another source of high-
rise in global exploration investment between 2016 and
grade cobalt is important, so we are really excited about
2017, to US$7.95 billion from US$6.95 billion, for the first
the advantages of mining cobalt in Mexico.”
time in four consecutive years. By far the lion’s share of the world’s cobalt reserves is The problem with exploration having all but halted
held by the DRC. The country has 53.82 percent of the
over the course of the five-year bear market is the time
world’s cobalt, followed by Australia with 18.45 percent
frames involved in bringing a mining project online. When
and Russia and Canada are tied with 3.84 percent.
considering a greenfields project, from the process of
Given the fact that the majority of the world’s cobalt is
acquiring concessions, permitting, carrying out a drill
located in a conflict zone, Rick Rule, President and CEO
program, creating feasibility reports, raising the funding
of Sprott US Holdings, expects the price to soar in the
and developing the mine, miners look at long waits before
coming years.
they can extract a single ounce of metals. “Lead times can range from a few years to decades, depending on the
“The supply of cobalt is constrained in many senses,
type of mineral, size and grade of the deposit, financing
but in particular politically. If Mexico is seen as a risky
conditions, country factors and commodity prices,”
jurisdiction, the DRC is many times worse, and if a
according to a study by the World Bank.
company is engaged in cobalt production, it will be located in the DRC,” he says. “That is a metal where
According to PwC’s report Minerals and Metals Scarcity
there is so much fabrication utility that we have been
in Manufacturing: The Ticking Timebomb, policymakers
told the price could double if miners were able to double
around the world are starting to take matters into their
supply because fabrication technologies are not being
own hands, securing new mineral streams and employing
developed for cobalt due to a fear of restricted supply.
recycling, reuse and efficiency drives with the resources
This is unique.”
GLOBAL COBALT RESERVES (tons)
250,000
3,500,000
Canada
DRC
250,000 Russia
51,000
Papua New Guinea
23,000 US
500,000
379
Cuba
1,120,000
29,000
Australia
South Africa
270,000 Zambia
150,000
Madagascar
280,000 Philippines
Source:The Cobalt Institute
OFFTAKES, STREAMING DEALS, PARTNERSHIPS
Azure Minerals is equally starting to catch the attention of the
Although the streaming model is now well-know in the
industry. The Sara Alicia project has the potential to become
industry, it was only introduced for Durango’s San Dimas
the highest-grade cobalt exploration project in the world. “It
mine in 2004 by Silver Wheaton, now Wheaton Precious
is especially appealing given the increased demand for cobalt,
Metals and one of the most successful silver streamers
so a German investment bank and an investment fund from
in the world. The concept is based on long-term supply
New York have invested in Azure because of this project,”
agreements, which benefits both parties as the miners do
states Tony Rovira. “We are convinced that cobalt is going
not need to worry about finding a buyer for their product,
to experience high demand over the next couple of years.
and the streaming company can obtain the metals at a
The price rose from US$30,000/t in early 2017 to more than
below-market value. Of course, there is also a great deal
US$90,000/t in early 2018, an indicator of the expectations
of risk involved for both parties given the price of metals
for this metal.”
can change drastically, but this also brings a great deal of reward.
The star metal of the moment is lithium, and Mexico holds potentially the world’s largest deposit. Although this project
Another way to secure long-term sources of supply
has taken many years to get off the ground, it is now in the
is through offtake agreements, and now these are
development stage and companies are already scrambling
appearing more and more between miners and
to secure offtake agreements for the coveted metal. The
technology companies, cutting out the middle man: the
Sonora Lithium mine, owned by Bacanora Lithium, already has
metals trader. A successful example is the partnership
agreements with Japanese company Hanwa and investment
between Avino Silver & Gold Mines and Samsung C&T. The
fund BlackRock. The Sovereign Wealth Fund of The Sultanate
agreement gives Samsung exclusive access to Avino mine
of Oman (SGRF) has also signed an offtake agreement for
concentrates until Dec. 31, 2021 and includes a US$10
13,000t/y of lithium carbonate, including a conditional
million advanced prepayment for concentrates to Avino.
commitment to invest US$65 million in the company.
| VIEW FROM THE TOP
BLOCKCHAIN, AND VIRTUAL MINING: TIME TO STRUCTURE THE TECHNOLOGICAL DISRUPTION PHILIP HOPWOOD Global Mining Leader at Deloitte
380
Q: What trends has Deloitte identified in the mining
that is not necessarily a bad thing. The traditional financing
industry and how are these reshaping the sector?
model involved issuing shares, requesting a loan from the
A: We are in the middle of a bull run for the industry.
bank, or setting up a joint venture, among other measures.
Gold is in fairly stable territory while silver unfortunately
The banks are still a major part of new financing schemes
is still waiting for its moment to shine. Copper and zinc
but are becoming increasingly risk averse. But now the
are enjoying positive momentum mainly because of supply
industry has a variety of financial models to choose from
constraints. Many commodities are in a good place thanks
such as gold and silver streamers. These become more
to the growing popularity of electric vehicles (EV). Cobalt,
complex but have generally done pretty well, especially
copper, high-grade nickel, lithium, and graphite have all
during harder times when they proved a reliable source
gained renewed interest as a result of EV growth. While
of financing to build projects or to develop new assets.
today’s vehicles usually require 20kg of copper on average,
Then there’s working with investors, pension plans, and
the vehicles of the future will require as much as 80kg per
the like, that are a rather new practice. The TSX, the LME,
unit. Disruptions from digitalization and new technologies
and other sizable private equity funds are also mainstream
are also fueling major trends within the industry.
finance sources. Given the variety of options, the financing landscape is much more complex as it is different from
Q: How is technological disruption affecting human talent?
what we had in the past and we have to spend more time
A: One example is that there is an increasing need for data
structuring it.
scientists as digital disruption sets in throughout the sector. In the past, data scientists would not necessarily have been
Q: How do you expect recent geopolitical developments
attracted to the mining industry. With its remote locations
to impact the mining industry in the foreseeable future?
and relatively unattractive geographies, mining has always
A: Despite the recent political noise about threats of
found talent attraction a challenge. This issue is one of
steel and aluminum tariffs, the reality is the world needs
the main reasons behind remote mining applications that
commodities. There is a prevalent belief that countries such
can bypass the need for on-site operations. This should
as China or India will reach a point where they will need
positively impact talent retention and the future of work
fewer commodities but the numbers say otherwise. While
within the industry, particularly the push to foster diversity
there will always be peaks and valleys in the mining industry,
and inclusion. BHP has been at the forefront of this with its
the outlook remains quite positive. The fundamentals are
aspirational plans for a 50-50 ratio target of male versus
in place, mining companies have gone to great lengths to
female employees by 2025.
get their houses in order, and more collaboration within the industry is the order of the day and is helping to sort
Q: What lessons can Mexico learn from Canada regarding
out mining’s image. Technology issues are being addressed
its nascent financing models?
with chemistry innovations and miners are working with
A: Despite some nervousness in the short term, there is an
communities to develop friendlier practices when it comes
overwhelming sense of optimism for the medium term. This
to explosives, among other examples.
is because financing mechanisms have drastically changed in response to the industry’s technological disruptions, and
Yet, technology can have an impact in other ways. Blockchain, an important new development, could allow tokens for underground gold to be created to serve as
Deloitte consists of dedicated professionals in a global firm
currency, bypassing the need to mine it at all. And virtual
who collaborate to provide audit and assurance, consulting,
mining and simplified supply chains could derive from
financial advisory, risk advisory, tax and related services to
this. The pace of technological innovation just continues
select clients
to pick up.
INSIGHT |
CONCERN OVER MEXICO’S FISCAL MINING POLICIES
Eduardo Salgado Head of the Mining Industry at KPMG in Mexico
Mario Hernández Head of the Tax Mining Practice at KPMG in Mexico
With the external factors faced by miners in terms of price
lead to other states levying the same duty,” agrees Mario
volatility and cycles, they at least need protection against
Hernández, Head of the Tax Mining Practice at KPMG in
the local factors that impact their operations, says Eduardo
Mexico. “Under the current economic conditions, it could
Salgado, Head of the Mining Industry at KPMG in Mexico.
be catastrophic for the industry to impose new taxes. I think
“Legal certainty is vital to foster investment. Companies
the government should aim to help mining companies,
must be certain that they will be able to exploit and operate
instead of seeking to collect more money from them.”
the concessions they are granted,” he says, highlighting that Mexico’s tax structure is not necessarily conducive to
Hernandez proposes the implementation of Tax Certainty
a friendly business environment.
Contracts in Mexico. Already successful in Peru, these
“
If a mine is established in an undeveloped community and the company is committed to creating education and infrastructure, the government should give special incentives” Eduardo Salgado, Head of the Mining Industry at KPMG in Mexico
are used to guarantee miners that the government will maintain a stable tax regime during the time a company is investing in and operating a mine. “I think these could be very beneficial to foster investment in the country,” he says. New duties are not the only concern regarding the country’s fiscal policies. Salgado also points to the fact that exploration expenses are deductible over 10 years, while other industries can deduct their expenses as long as they comply with the lawful requirements. Hernandez proposes the mining sector should be provided incentives similar to those for Special Economic Zones (ZEEs), given the similarities in creating social development in isolated, often impoverished communities. “If a mine is established in an undeveloped community and the company is committed to creating a certain number of jobs and generating a
Legal certainty often equals tax certainty. Salgado says the
certain standard of development through education
federal royalty taxes, which impose 7.5 percent on all metals
and infrastructure, the government should give special
profits and 0.5 percent on precious metals, sent ripples
incentives,” says Salgado. “It is a clear win-win situation.”
through the industry. He says that, even though other jurisdictions have similar taxes, the issue is the punitive
Hernandez is convinced that as mine operators are obliged
percentages charged and the risk that states will follow suit
to restore the land to its previous condition, the social and
and implement other fees. “Government representatives
environmental cost of mining is covered by the law. But
claim that they will try to help and support the mining
the investment that companies make for environmental
industry,” he points out. “It would be contradictory for
recovery is made after the mine has closed and is no longer
states to impose more taxes, as that would go against their
yielding returns. “This does not make any accounting or
stated intentions.”
economic sense, as this expense is not deductible during the mine operation because it has not been paid and when
Zacatecas recently pushed forward efforts to collect an
it finally is, the company is no longer receiving income from
additional Ecological Tax, which was designed to protect
the mine,” he says. “I believe this payment should follow the
the environment and benefit local communities. “The
model of a pension fund,” he says. “Companies would pay a
possibility has the industry worried as the greatest risk of
certain amount to a trust fund for the closing of the mine,
having any new tax approved in a mining state is that it may
which could be tax-deductible.”
381
| VIEW FROM THE TOP
LATIN AMERICA A GROWTH OPPORTUNITY FOR MEXICAN COMPANIES RICARDO DÍAZ DE LEÓN Infrastructure, Mining, Logistics and Tourism Coordinator at ProMéxico
382
Q: What are ProMéxico’s priorities when it comes to the
products and technology. Many of these countries are also
mining industry?
opening to more importation and we should mirror these
A: Our main priority is identifying the strengths and
opportunities by exporting more to these areas. We want
weaknesses of the mining industry across the country. For
mining companies to increase their vision beyond national
example, we found that northern states such as Sonora,
growth and find areas of opportunity in the international
Chihuahua and Zacatecas have an excellent network of
arena. Many do not know that they are ready to export and
suppliers while growing southern states like Guerrero greatly
we can help them get started. It is also an important strategy
lack suppliers. By identifying these gaps in the market, we can
to mitigate the risks of trade wars. China is interested in
better provide solutions and advice. To better coordinate the
investing with our mining industry and exchanging abilities.
activities of the mining industry in Mexico, we believe that it is
We should not forget about key success cases, such as
important to create a variety of meetups and forums so that
Canada and its growing mining industry that can equally
businesses in the south know what is happening in the north.
provide opportunities to the Mexican mining industry.
It is also important to note that there are differences even within the regions such as mining policies and openness to
Q: What should the Mexican mining industry do to
new projects that can also make a difference. The south faces
increase its international competitivity?
a variety of challenges such as getting the cluster organized
A: The biggest issue that the country faces is its
and promoting the participation of the public sector in the
insecurity. Companies often have to invest in their own
mining industry.
security teams and this can imply up to 4 percent of the costs of the operations. It can quickly add up. For a
Companies often have to invest in their own security teams and this can imply up to 4 percent of the costs of the operations
large company, it is not such a great issue but it is hard for smaller companies to invest and guarantee safety in its operations. We need to help these small companies as they are the ones that are supplying transnational operators with the machines and products they need. This is especially important in growing states like Guerrero that have high levels of insecurity and projects in areas
Q: Why should the Mexico collaborate more with
that are not urbanized.
competing mining jurisdictions in Latin America? A: We should see the growth of our southern neighbors
Q: How can a company that wants to enter the mining
more as an opportunity to collaborate than as a danger or
industry mitigate these risks?
competitors. Many suppliers in Mexico excel in providing
A: There are many success cases to learn from and of
new solutions that other Latin American mining jurisdictions
companies that are reinventing themselves and have been
could take advantage of. There are a few large companies
able to prosper and survive. The best way to mitigate risks is
that are taking advantage of the context. We are building ties
to understand the industry well. In these matters, companies
by creating an agreement with Chile that will be replicated in
should take advantage of the intelligence that ProMéxico
Peru and Argentina. The agreement is to exchange specialized
has collected and has made available to the public to make the best investment decisions. Our goal is to not be passive promoters but to play an active role in helping companies
Proméxico is a government agency that promotes the
thrive and grab important business opportunities that are
attraction of FDI and exports of products and services. It also
arising. We also participate in international fairs and events to
strengthens the internationalization of Mexican companies to
educate companies that are interested in entering the country
contribute to economic and social development of the country
or doing business in Mexico.
ANALYSIS |
SEABED MINING, FROM A PIPE DREAM TO REALITY Approximately 70 percent of earth’s surface is water, so why limit an essential industrial activity for mankind to less than 30 percent of its potential? But, just as environmental impact is a huge industry concern onshore, for deep sea the fears of ecological harm are even more overwhelming The technological revolution is slowly but surely
discovered beneath the Pacific Ocean sea floor. This is equal
integrating itself into traditional mining operations, with
to about 1,000 times more than current proven recoverable
the incorporation of IoT and Industry 4.0, among other
onshore rare-earth reserves, according to the US Geological
technologies. But increasingly more technologies are
Survey and the study says it would be enough to supply the
being developed for offshore and deepwater oil and gas
world on a “semi-infinite basis.”
production and miners are beginning to turn to the oceans too. If it holds oil and gas potential, what other minerals
But with six recognized coral reef regions across 1,780km2
exist beneath the seabeds? “I am convinced that deep-sea
and the unknown environmental implications of deep-sea
mining will become a vital alternative to traditional mining
mining, there is hesitance among the Mexican population
methods and a solution to resource scarcity in the future,”
to begin operations. The first Mexican deep-sea mining
says Henk Van Muijen, Managing Director of IHC Mining.
project was proposed by Exploraciones Oceánicas, a subsidiary of Florida-based Odyssey Minerals, but was
Given the upturn of mineral commodity prices, exhaustion of
initially unsuccessful due to an amparo filed by locals. The
onshore deposits and the new technological advancements
Don Diego offshore phosphate initiative, in Baja California
enabling offshore production, seabed mining is attracting
Sur, was denied a license by SEMARNAT in May 2016.
the industry’s investment more and more. “Deep-sea deposits have, on average, much higher grades than those
The objective of the project is to produce 7 million t/y of
commonly found onshore and with commodity prices
phosphoric sand, over its 50-year lifetime. According to a
recovering, it is becoming more attractive by the day,” says
report compiled by Exploraciones Oceánicas, “Prices for
Van Muijen.
phosphate rock are currently US$130/t but have historically exceeded US$800/t and may considerably exceed this in
IHC Mining is one of the pioneers taking offshore experience
the future as phosphate resources become scarcer.” The
and technologies for oil and gas into the mining industry.
Mexican Supreme Court of Justice overruled the denial of
In 2000, the company launched its first subsea crawler to
the project in March 2018, setting a precedent for these
operate in depths up to 1.5km. “There is a concentrated
types of operations.
effort to improve the maximum operating depth of the subsea crawlers to at least 2km,” he adds. The world’s
PUBLIC RESISTANCE
first seabed mine is to start production in the territorial
To further address deep-sea mining reluctance and mitigate
waters of Papua New Guinea in 2019 with the Solwara 1
any potential environmental impact, the industry is trying to
Project for high-grade copper, silver, gold and aluminum.
develop technologies to make this new technique sustainable.
This groundbreaking initiative could be the pioneer that
“If we are going to dig into the seabed, we are inevitably
gives seabed mining the green light abroad. But its failure
going to influence the ecosystem to a certain degree so we are
would be a setback that would be difficult for the industry
working alongside various knowledge and research centers
to recover from, warns Van Muijen.
to minimize these impacts,” explains Van Muijen.
BAJA CALIFORNIA SUR: THE NEW FRONTIER
Deep-sea mining pioneers, such as IHC Mining and
Regarding Mexico’s position, located between two oceans
Odyssey Minerals, are carrying out offshore environmental
and with more than 11,000km of shoreline, not to mention
impact tests to measure variables like noise, plumes, CO2
the country’s already-discovered oil potential, seabed
footprint and seabed alteration. “Simulated seafloor mining
mining could represent a significant boost for the country’s
experiments have revealed significant information on the
economy. Due to the novelty of seabed mining and lack
potential impacts that may occur as also several measures
of exploration activity, there are few hard figures about
for conserving the environment have been suggested,” says
the potential the ocean beds hold. But in April 2018, a
ScienceDirect. “The idea is not to close the door to deep-
team of Japanese scientists published a paper detailing
sea mining given its unknown risk, but to start treading its
an estimated 80-100 billion tons of rare-earth deposits it
waters with extra precaution.”
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| INSIGHT
INDUSTRY MISCONCEPTIONS AND HOW TO EFFICIENTLY TACKLE THEM RUBÉN DEL POZO President of Zacatecas Chapter of AIMMGM
The mining guild is well aware of the misconceptions society
To put the industry front and center, the Zacatecas Chapter
has about the sector. Rubén Del Pozo, President of the
of AIMMGM pushed for the creation of a mining employment
Zacatecas Chapter of AIMMGM, says dark and dangerous
fair in collaboration with the state’s government. Del Pozo
places, workforce exploitation and contamination are just
says the initiative was a great success. “During its first edition
some of the many stigmas the industry carries. “One of the
we had huge lines of people seeking jobs: men and women,
worst ills afflicting mining is misinformation,” he says. “But
miners and geologists, workers and engineers,” he says.
the industry is responsible for this misguided perception.
384
We have been working in our industry without properly
But tackling mining misconceptions is not only about
informing society about it.”
providing better informing but also about integrating the local community into the industry’s activities. The
To better tackle misinformation, AIMMGM taps into mining
Zacatecas chapter of AIMMGM promotes the creation
expos, congresses and employment fairs, among other
of family workshops near mines to produce inputs that
initiatives. The Zacatecas Chapter of AIMMGM hosts a
miners require. For example, eye protection can be easily
yearly mining international expo to connect industry
fabricated by locals, just as a community sewing workshop
leaders, students and the general population. In 2018, the
could provide mining vests and overalls. “These workshops
event borrowed from another expo to better generate
initially provide for the mine but ultimately teach locals a
goodwill among citizens. The Mexico Minero Exhibition
new vocation to better provide for themselves.”
is an initiative promoted by the Zacatecas’ Chapter of AIMMGM in collaboration with CAMIMEX. “The purpose
This is an important initiative, especially when closing mines
of this effort is to foster sustainable mining, generate
leave behind ghost towns, Del Pozo says. “As mining is a
jobs and create a liaison between the industry and
finite activity, towns near thriving mines are often left to die
local communities,” Del Pozo says. “When I first saw
out when the mine closes,” Del Pozo says. “Usually, there
Mexico Minero during a mining convention in Acapulco, I
is nothing left because the mine plan was not developed
perceived a wonderful connection between civilians and
with its closure in mind.”
the interactive exhibit. I immediately thought about taking the exhibit to our event in Zacatecas.”
Del Pozo believes the government should help prevent this. While he disagrees with the implementation of mining
Mexico Minero Zacatecas took place for the first time in June
taxes, he emphasizes that if they are to be enforced, at
2018. To better capitalize on the MX$4 million investment
least they should be used for a good purpose. “If mining
it required, the exhibition opened a week before the expo
taxes are to be implemented, as they currently are, the ideal
opened and finished one week after it concluded. “We know
is for them to be properly applied. The authorities often
it was a worthy bet as thousands visited the exhibit’s tent.
focus on a fleeting benefit instead of a long-term vision.
It better acquainted people with mining activity, which is
It is important to invest taxpayer money into projects that
crucial to change the industry’s misconceptions,” he adds.
will really serve and improve the community.”
Del Pozo says there is also a need to inform people of the
Despite the wealth a mine can generate, it also represents a
economic benefits mining provides. The industry represents
significant investment of time and money. Del Pozo believes
around 11,000 direct jobs in the state, with wages 30
that the government and people often ignore this reality,
percent higher than the Zacatecas average. “I am sure that
believing that a mine inherently represents a treasure. “No
mining companies offer the best wages. But being in the
other industry is able to wait so long for its investment
middle of other industries during a general employment fair,
returns,” he says. “We must make people understand the
this information is not communicated,” he says.
real value and the huge effort that mining represents.”
VIEW FROM THE TOP |
INCORPORATING ENGINEERING AND CONSULTANCY INTO SERVICE PROVISION Heriberto Salas Latin America Sales Director of EagleBurgmann
Alejandra Rondon Commercial Director Mexico of EagleBurgmann
Q: What is the main added value you offer the mining
AR: We also realized that there was a big need in the
industry in terms of sealing technology?
market for one-stop shops after being called for sealing
HS: We offer sealing technology that is superior to what
services in projects that actually needed to replace their
is available in the country. We believe the Mexican mining
equipment. Our job is to educate and provide clients
industry and the market in general are being greatly
with the information they need. For this purpose, we
underserved in terms of sealing technology. We can
have five service centers in the country that focus on
provide the durability that mine operations require through
the strategic areas of Tampico, Monterrey, Guadalajara,
innovative products such as diamond washers.
Mexico City and Queretaro. The company will continue to grow. Our main clients include companies like Agnico
AR: But this is not always easy to prove to clients as there
Eagle, Industrias Peñoles, Grupo México, Fresnillo and
are many companies in Mexico that offer replica products
Minera Frisco, among others.
that are much cheaper than ours. Our goal is to prove the value of investing in better quality products that can prolong the utility of equipment and reduce downtime. Cheaper sealing can also cause machines to break down faster. This is our main added value. We are also starting to improve our portfolio and offering more integrated services. Q: What are the market’s needs and how are you addressing those requirements? AR: The market demands fast response times with the best product in price and quality. EagleBurgmann always
EagleBurgmann's main clients include Agnico Eagle, Industrias Peñoles, Grupo México, Fresnillo and Minera Frisco
adapts to the market’s needs, trying to standardize our products for volume management and thus improve our
Q: How would you describe your experience doing
effectiveness in the production system. Additionally, we are
business in Mexico?
always at the client’s side to offer an appropriate solution
AR: The mining industry is a quite closed community.
at a reasonable cost.
Achieving the first sale was the hardest part for us as we are offering a new product and service in the country. But
Q: What steps is the company taking to become a one-stop
once you gain the trust of the sector it becomes much
shop for the mining industry?
easier to expand. Another limitation in the country is
HS: Every hour of downtime can cost companies millions
that mines are often in remote areas with security issues.
of dollars and our goal is to help them avoid breakdowns
Other industries have plants and projects in much more
as much as possible. Sometimes mining companies acquire
visible areas. We highly prioritize the safety of our team.
products that are not the best fit for their operations when
But we are willing to step up to the challenge because
they are in a rush to start producing again after a malfunction.
we see value in the Mexican mining industry and in the
We want to help them make sure they are choosing the
solutions we can provide.
right equipment. For us, integrated solutions mean not only provision and manufacturing of sealing technology but also understanding the equipment, engineering and mechanical
Eagle Burgmann is a joint venture of the German Freudenberg
aspects of the operations. It is costly and time-consuming for
Group and the Japanese Eagle Industry Group. It is among the
companies to have to separately contact service providers
global leaders for industrial sealing technology. It also serves
to repair a pump, seal or plumbing.
various other industries
385
386
INSIGHT |
AMENDED LAW A GOOD TOOL FOR FOREIGN COMPANIES FIGHTING CORRUPTION DONALD HULSE Vice President of Mining at Gustavson Associates
As the largest silver producer in the world, Mexico
with former public officials,” according to Lexology. But
has proven its ability to attract those seeking mineral
the legal source says that federal and state authorities have
wealth within its mountains and deserts. But despite the
yet to fully incorporate this new system, and the judges in
attractiveness of its unexplored mineral potential, many see the legal framework as an important area of opportunity in the country. “The legal framework is well-written but it is not reinforced adequately,” says Donald Hulse, Vice President of Mining at Gustavson Associates. “Other countries such as Chile have a precedent-based system with a broader perspective of the law. This works better than trying to write every possible contingency into the law; with this method, certain situations are bound to be overlooked.” Nonetheless, Hulse says the international oil, gas and mining consulting firm believes advances are being made to bridge
“
charge of hearing the trials have not yet been appointed.
Government officials are finally starting to implement the National Anticorruption System, which facilitates doing business in Mexico”
the gaps in the system. “Government officials are finally starting to implement the National Anticorruption System,
Along with respect for the law, competition in the region is
which gives US and Canadian companies a tool to combat
being hindered by increased tariffs, says Hulse. “Companies
any type of corruption they may face while doing business
were upset when the special mining tax announced in 2014
in Mexico.”
was much higher than expected. After the announcement, Foreign Direct Investment (FDI) in Mexican mining dropped
This constitutional amendment was approved on May
almost in half,” he says. Some operators were preparing
27, 2015 and confirmed the country’s commitment to
themselves to move operations to Chile but to everyone’s
transparency and accountability. Secondary supporting laws
surprise the country announced a similar tax months later.
were published on July 18, 2016, and these propelled the
Now that several years have passed, the law firm has noticed
system into full force and effect. According to Lexology, an
that companies are finally getting used to the additional
international source for legal updates, the laws announced
taxes. “Companies are learning to incorporate these costs
in 2016 established sanctions for public officials, individuals
into their planning and financial models,” Hulse says.
and companies found guilty of administrative misconduct. Gustavson Associates can help the companies in the The decision has leveled out the playing field by holding
Mexican mining industry untangle these complexities.
national companies to standards their international
“We can provide operational studies to help companies
counterparts were already tied to in their home countries.
improve their costs and revenues and complete technical
“This is a big step forward considering the history of illicit
reports used to file securities on the stock exchange,” he
transactions in Mexico,” says Hulse. “We have already seen
says. The company is providing technical support to an
several success stories of companies that have used this
unnamed bank to support an investment in a mining project
tool.” The sanctions can range from fines to the dissolution
in Mexico, Hulse says. “Our main added value is that we can
of a company in the case of a particularly grave offense.
provide a variety of international expertise from geology
The General Law considers grave administrative conduct
to engineering to comparative regulatory framework and
to include “bribery, unlawful participation in administrative
international reporting standards. This is important for
proceedings, influence peddling, submitting false or altered
Canadian companies participating in Mexico or Mexican
information, misuse of public resources and contracting
companies that are listed on international stock exchanges.”
387
| INSIGHT
PRIORITIZING LABOR SAFETY, THE TIME FOR CUTTING OPERATIONAL RISKS EFRAÍN MARTÍNEZ Regional Segment Mining Marketing Manager CSA at Dräger
388
Mining is a high-risk environment that can easily put a labor
With over 100 years in the industry, mining is a key segment
force in jeopardy or risk workers' lives but safety regulations
in Dräger’s global strategy, along with oil and gas. In 1903, it
for mine processes differ significantly. Efraín Martínez,
developed one of the first autonomous breathing apparatuses,
Regional Segment Mining Marketing Manager CSA for
used for the first time one year later during a mine fire in
Dräger Mexico, says that in Mexico, plans are finally afoot to
France. Since then, the company has grown globally and
strengthen the rules. “Mexico has not done a thorough review
across several industries. “I believe that we are very well-
of these norms since 2012 but I know there are plans to do it
positioned in mining, especially due to the quality our safety
soon to implement more strict policies,” he says.
equipment,” says Martínez.
Dräger, a leading safety technology company that
Dräger also specializes in everyday workplace safety
collaborates with the industry’s key players, such as Grupo
equipment, such as gas detectors. This technology is
México, Industrias Peñoles, Pan American Silver, Goldcorp and
particularly relevant in underground mining, where many
Endeavour Silver, contributes to the safety revisions carried
operators have adopted a zero-accident target. The company’s
out by the regulatory bodies. “Usually, these entities review
expertise extends to self-contained self-rescue devices and
international standards and replicate them, instead of creating
refuge shelters for emergency situations, providing solutions
their own,” says Martínez.
across the entire safety and security value chain.
We must make miners aware of why they must use personal protection equipment and how to do so properly”
Despite technological advances and efforts to improve
“
existing regulations, the mining industry still experiences many accidents. To address this issue, Martínez believes the first priority should be to focus on training and promotion of a safety culture. “We must make miners aware of why they must use personal protection equipment and how to do so properly. The government should make a concerted effort to promote a safety culture and to foster investment.” It is also vital to regulate the safety equipment operating
Gases, dust, exposure to high vibrations and stress, just to
in the country and to ensure that it is of the highest
mention a few, are factors present in mine operations that
quality, he says.
often cause long-term illnesses. “We strive to promote safety and make the industry realize why the issue plays
With mine development involving bigger, deeper and
a vital role in mine operations,” says Martínez. “We cover
more isolated mines, the industry faces significant security
the operational part of worker safety, such as breathing
challenges. “As a technology company, Dräger endeavors
and eye protection. Dräger has always been recognized
to develop new technologies that allow our clients to
as a high-quality technology provider.”
address these risks,” Martínez says. Many mines are using drones for safety purposes. One application is to
Mining shelters, rescue vehicles, gas detectors and
measure the potential gases left after an explosion without
monitors, are some of the products Dräger offers. The
risking the well-being of a miner. But as new technologies
company also specializes in rescue and escape strategies,
revolutionize the industry, he says the purpose of safety
detection of high-risk environments and in ensuring
equipment may change. “We must analyze the industry
that the equipment matches the quality required by
trends to better understand what miners require,” he adds.
international standards to guarantee miners’ safety,
“Besides the need of the companies to protect humans,
says Martínez.
they also need to protect their assets.”
VIEW FROM THE TOP |
PREVENTION IS KEY TO ENSURE MINING SAFETY MARIO SALOMĂ&#x201C;N Country Manager of Multisistemas de Seguridad Industrial
Q: How can mining companies successfully prevent small-
company to identify threats with greater certainty, and in
scale internal robbery and finished-product theft and what
real time, and to then take preventive and reinforcement
are the key factors to consider?
measures to ensure that there are no casualties.
A: GMSI provides a return on investment to its customers because the implementation of its security strategies
Q: How did GMSI achieve the current relationship it has
can reduce the number of thefts and casualties within a
with public security agencies?
company. This translates into fewer stolen products and
A: The relationship with the public security forces has been
fewer economic loses for the company. When addressing
built at the municipal, state and federal levels. One of the
private security matters, the company should emphasize
reasons for our close relationship with public security forces
above all the prevention of casualties. This means around 80
is due to our philosophy of strict discipline that is similar
percent of the security operations of a company should be
to that of the army and other public security agencies. Our
focused on preventive measures and strategies to prevent
collaboration processes with the authorities are very clear
future casualties.
and GMSI knows what to do in case of an emergency and how to coordinate with the public security forces such as
GMSI focuses on reinforcement of preventive actions
the army, federal police and gendarmery.
for the security of the company so employees are not tempted to steal from it. Then, GMSI reinforces its security strategy with two other measures: deterrence and reaction. The deterrence strategy inhibits criminal behavior and discourages criminality. Reaction is a counter-measure to eliminate or minimize the impact of certain criminal activity. However, prevention remains the main strategy that
GSMI candidates undergo 22 different filters and at the end of the process, only one out of 10 are contracted
together with technology helps GMSI guarantee a greater maintenance of private security. GMSI relies on several
Q: How do you ensure you attract the best security talent
security systems with strong software and state-of-the-art
to the industry?
equipment to manage all stages of security and control of
A: Our candidates undergo 22 different filters. At the end of
a company.
the process, GMSI only contracts one out of 10 candidates, although in the mining sector this widens to out of 15 people.
GMSI is the only private security company in Mexico with its
The selection of private security personnel is based on the
own C5 that allows it to execute an intelligent and coordinated
physical and mental characteristics required to work in the
program that operates collaboratively with GMSIâ&#x20AC;&#x2122;s security
security field for the mining industry, so GMSI ensures all our
network, which is connected to our 34 security and
people are rigorously vetted regarding their ability to act
monitoring subsidiaries, as well as with public and state
in high-pressure situations. This involves gauging when it is
security forces. Our new C5 system is the latest technology
appropriate to use force. Our people are constantly trained
that combines security and intelligent computer systems. This
and also tested to ensure that they keep and develop their
system has facial recognition software to detect the presence
technical, physical and moral standards.
of those who may previously have stolen from the company and issues an alert. People not only have fingerprints and defining facial features but also their gait and gestures can be
Grupo Multisistemas de Seguridad Industrial (GMSI) is the
analyzed by the intelligent C5 system. Thus, even if a person
leading company in the private security sector in Mexico with
tries to change his or her physical appearance, the system
operations through its 34 subsidiaries and with more than
can recognize that person. This filter allows GMSI and the
13,000 employees
389
| INSIGHT
DEEPER HOLES REQUIRE MORE PREPARATION AND GEOTECHNICAL SUPPORT DAVID DUCOTE Mexico Operations Manager at IDS
Thanks to digitalization and technological advances, the
errors such as using magnetic tools in magnetic areas
days when survey tools required specialized technicians
that are better suited to gyroscopic tools,” says DuCote.
to decipher collected data and map out geological
“It is important to avoid these types of errors. Deposits
structures are long gone. Processing has advanced
are getting deeper, more expensive and more difficult
to the point where information can be visualized and
to find, which makes the price of mistakes much higher.
structured with the click of a few buttons. “Drilling
This is where our services can help companies reduce
systems are incredibly user-friendly today and simple to run,” says David DuCote, Mexico Operations Manager at International Directional Services (IDS). “Tools are 390
handheld and becoming not only easier to use but more reliable.” Still, DuCote finds that some companies are not taking full advantage of the tools available in the market. The drilling experts particularly promote the use of borehole and geotechnical surveys for drilling programs as it can increase resource model accuracy. “We find that some companies are very aware of the importance of
“
the most costs.”
Once silver prices reach US$20/oz, the market in Mexico will accelerate rapidly and revenues will increase for everyone”
surveys but others are not,” says DuCote. “It can be a bit disheartening to see that drilling programs are still
Along with a need for more investment in geotechnical
being executed with surveys that are not being done
surveys, Ducote believes that Mexican mines will become
frequently enough or not at all. Samples are often taken
increasingly deeper. “In Canada, it is common to drill
too far apart.”
holes that are 2,000m deep, while in Mexico, boreholes rarely reach 1,500m or even 1,000m,” he says. “We have
IDS was founded in 1997 to target these gaps in the
experience in these matters and can help companies
industry by providing directional drilling and surveying
perform multiple kick-offs from a single master hole to
services for surface and underground boreholes, which
recapture the cost of re-drilling or coring the overlaying
allows operators to have more control of the drilling bit.
formations above the mineralized zone.” This helps
“IDS is a global company but it has a specialized team
projects start drilling at 700-800m, for example, instead
in Mexico that can offer geotechnical surveys that the
of 0m. IDS achieves this by placing a steel wedge near
company is still not providing in other markets such as
the target to start the kick-off process. The company
the US and Canada,” explains DuCote. The company
also has the capability to complete straight-hole drilling
specializes in maximizing results in mineral exploration
and pilot holes for raise bore shafts and utility boreholes.
and offers precise directional drilling services and core applications. “Mexico is an excellent market for us. It is
When it comes to the number of drilling programs that
friendly to mining and has many underexplored deposits
exist in the country, DuCote says that exploration is not
that we can help companies take advantage of.”
as lucrative as it was in 2011. “Metal prices have gone up but I do not think the margin for service providers or the
IDS promotes the use of surveys because the information
miners have gone up,” he says. “Silver prices need to rise
can help companies cut down on costs that can arise
but are struggling to surpass US$17/oz. Once prices reach
from mistakes. “The lack of information about the
US$20/oz, the market in Mexico will accelerate rapidly
characteristics and controls of the deposit can cause
and revenues will increase for everyone."
VIEW FROM THE TOP |
STRICTER NORMS CALL FOR HIGHER PRECISION TOOLS JAIME RAMÍREZ Director General of Mettler Toledo
Q: What are the main needs of the industry in terms of
oxygen levels and improving data acquisition systems that
technology and analysis equipment?
can integrate with our IoT services. The company has a
A: One of the biggest challenges for the industry is
variety of clients it can serve from operators to third party
compliance as projects need to meet a wide variety
laboratories. We understand that while there are companies
of national and international standards before starting
like Industrias Peñoles that have the size and capital to have
production. Measuring environmental impact is particularly
their own laboratories, there are smaller companies that
tricky as companies must prove their ability to minimize
need the support of external laboratories. It can make more
risks before gaining a concession. Finding a middle point
sense for companies as it reduces the costs of updating and
between controlling these risks and maximizing productivity
maintaining equipment required by inhouse laboratories.
is not easy and we can facilitate these processes by providing equipment with a high level of accuracy.
Q: What are the industry’s main concerns when it comes to the use and management of data?
Q: What opportunities have you identified in the Mexican
A: All industries, including mining, should keep an eye on
mining industry?
the advancements of the privacy law that was approved
A: The cyclicality of the mining industry greatly impacts
in Europe. A similar regulation could be implemented in
investment. This can cause companies to struggle with the
Mexico but not in the near future. Companies were given
lack of capital during the lows. Mettler Toledo continuously
only a month to incorporate the new requirements regarding
works to improve its ability to provide solutions and help
use of data as stated in the privacy law and to inform their
companies overcome these challenges. We can help
users. The use of data is becoming increasingly limited as
operators adapt to IoT, also known as Industry 4.0.
governments release new legal frameworks for technology. In Mexico, we are trying to remain one step ahead by
We have the ability to measure and weigh using a scale that
predicting these kinds of changes. Our databases are
ranges from 16 decimals to thousands of tons. The company
sophisticated enough to adapt easily to these new systems.
has over 55 technicians in the country. We just established a team in Sonora that is solely dedicated to the mining
Q: What are Mettler Toledo’s top mining goals for the
industry. Our specialists can help companies negotiate the
near term?
changes in technology and legal requirements thanks to
A: We are always open to receiving new clients and want to
our state-of-the-art equipment. We can also help weigh
expand our share by being present at the biggest mining
material for distribution and exportation.
events of the industry. The mining industry differs greatly from other sectors. Directors are often quite hard to access
Q: How does your equipment compare to what already
because they are constantly traveling and visiting mines.
exists in the market?
Being present at conferences and events is one of the
A: We are the market’s premium service providers. Our
best ways to position a company in the sector. We want to
company is a blend of fine swiss technology and robust
penetrate the market even more and expand in Sonora. The
industrial knowledge from the US. All our equipment is
Mexican mining industry is experiencing a unique time. It is
developed with extensive R&D and is highly functional. We
attracting many international companies and investment.
have a support system that monitors projects and the state of our equipment to offer the best services to our clients. The company also provides inspection services but these
Mettler Toledo is a global manufacturer and marketer of
are less demanded by the mining industry. Mettler Toledo
precision instruments for laboratories, industrial and food
is certified by the EMA and several associations as well.
retail applications. In mining, the company offers solutions in
We are working on improving our ability to read PH and
the flow of materials across the mine life cycle
391
| VIEW FROM THE TOP
SHINE RETURNING TO TRADITIONAL MINING STATE GUERRERO ALFREDO PHILLIPS President of the Guerrero Mining Cluster
392
Q: How is the mining industry in Guerrero contributing to
In addition, as part of the change in the government and
the state’s GDP and how does it benefit the local economy?
the 2018 elections, the Cluster’s Board held a meeting
A: The official information we have indicates that in 2017
with the mayors-elect from the Guerrero gold belt and
about MX$800 million of services and products were
that was very important in terms of setting up a common
purchased from companies fiscally based in the state of
agenda between the companies, the cluster and the
Guerrero. That was basically a calculation of what Minera
communities through their mayoral representation. We
Media Luna and Los Filos spent, keeping in mind the former
want to create a common working group to develop
was blockaded for two months. We estimate that this year,
the value chain and for the cluster to understand
Telson’s Campo Morado is spending about MX$30 million a
regional needs and areas where we can help. This will
month on services and products, half in the Arcelia region
also help the mayors to understand the importance of
and half in Guerrero. Los Filos is spending about MX$80
the mining industry. The Cluster has also held meetings
million per month and Torex Gold is spending around MX$100
with the newly-elected members of the State Congress
million per month. The numbers for this year could be well
to openly discuss the benefits of mining for the region
above MX$2 billion, which would far exceed our initial goal of
and make sure that public policy is aimed at making the
MX$1.5 billion. In terms of direct employment and permanent
environment more conducive to increased investment
contractors, the mining sector in Guerrero provides direct
with a responsible focus.
jobs to around 6,000-7,000 people. Multiplied by five or six mines, this equates to around 40,000 total direct and
Q: What steps is the cluster taking to bolster the
indirect jobs in the state. Assuming each of the workers
competitiveness of the region’s mining companies?
provides for a family of four, mining is providing for around
A: The illegal blockade Minera Media Luna experienced
200,000 people in the state. It also should be taken into
from November to April was very helpful in making it
consideration that mining jobs are the best-paid jobs in the
clear that social license can almost never be granted
region and among the best paid in the country. According
without a strong local supplier base. Although Guerrero
to IMCO’s 2017 study, mining-related degrees are the fourth
is not a traditional, industrialized mining state, with the
best paid professions in the country with an average salary
large-scale projects that exist in Sonora, Chihuahua or
above MX$17,000 a month plus benefits.
other northern states. It has some of the most attractive opportunities and is a prolific and historical silver state
Q: What have been the Guerrero Cluster’s biggest
that hosts Taxco.
achievements in the last year? A: In 2018, we had a few ups and down in terms of mining
Becoming a service provider for a company such
operations. Minera Media Luna, the state’s largest operation
as Minera Media Luna or Los Filos helps strengthen
and the country’s third largest gold mine, experienced an illegal
the national industry. These mines do not relax their
blockade for several months, which distracted our attention.
requirements, expectations or the standards to which
Although we were not working to our full capabilities, the
they work just because they are working with a local
main achievement was the strengthening of our value chain.
supplier. It is the responsibility of the local supplier to
We launched an ambitious value chain project together with
raise its standards to meet those of the international
CONCAINGRO. The cluster alongside CONCAINGRO has
operator so it can continue working on the project.
developed a technological platform that includes a directory
This motivates the national industry to adhere to higher
of companies and their specifications. We are developing
standards and constantly improve its offering.
a registry of the needs of the mining companies to crossreference. This is based on a national CONCAMIN platform
In this process of strengthening the value chain, we help
and this really simplifies the process for many businesses.
existing companies meet the expectations of the mining
industry as well as assisting those companies that want
Q: What would you suggest to the new administration to
to set up operations in Guerrero. The business culture
strengthen mining in Mexico?
in Guerrero is at a different stage of development than
A: We would request the same things we asked from
that in Sonora or other states in the north. In Sonora
Peña Nieto’s administration: a stable environment, rule of
or Monterrey, many companies are listed on the stock
law and security and safety. This latter is still a massive
exchange, but in Guerrero there are many family-owned
issue even though thankfully the mining industry has not
companies that are still working toward integration. We
been as directly affected as others. Some companies,
want to help them become competitive on a national
such as FEMSA-Coca Cola and Bimbo, have left the
scale and we will continue to work in collaboration with
region because the level of security falls short of what
federal and state agencies to make sure our suppliers
is necessary for them to be able to operate reasonably.
have access to all the programs that can help them
This is an issue that I think the administration must
develop into national and internationally competitive
address urgently. We should look at reconstituting the
companies.
institutional capabilities of security provision at a local level. The municipalities of Cocula and Iguala still do
Q: What role does the Mining Fund play in the sustainable
not have local municipal police but rather federal police
development of states such as Guerrero?
acting on a contractual basis. But it is impossible to
A: I believe the concept of the Mining Fund adheres
enforce the law without a centralized control mechanism.
to the concept of responsible mining, supporting local community development, whatever the established duty rate may be. It goes directly to the economic development of the region in which the mine is operating. But the issue of making the mining benefits available to the communities is extremely important to responsible mining. This allows miners to obtain social license to operate. Even with all the relevant permits from authorities, without the social license, the mine project
The investment numbers for this year could well exceed MX$2 billion, above the state's initial goal of MX$1.5 billion
simply cannot go ahead. It is important to ensure that the Mining Fund is transparent, that people are aware of the
Rule of law is also important because we cannot have
way it operates and the projects it is carrying out and that
situations like that at Minera Media Luna where the mine
the projects selected should have a medium to long-term
was illegally blockaded for two months. This is a billion-
view. It is also important that the municipal authorities
dollar project and the implications of this blockade
are aware of the fund’s distribution rules so greater
were felt all the way down the value chain. While in this
institutionalization may be required in some cases.
case, the mine paid its workers during the suspension of operations, it is entirely legal to suspend payroll, and this
Q: What have been the main advancements of your
would have had a direct effect on the local community.
agreement with Sudbury, Canada?
It was at the discretion of Torex that salaries were paid.
A: With all the recent events, the establishing of the Technology Hub in Iguala was not a priority but right now
There also needs to be a vision of transparency in fiscal
it is a topic that greatly interests the new mayor-elect
matters. In some other jurisdictions, fiscal stability
of Iguala. There are many companies from Sudbury that
agreements ensure that a 30-year project will be
have been working with the mines in their underground
charged fixed duties over the course of its life cycle.
operations and as such they are setting up shop in Iguala.
Unfortunately, I do not believe Mexico has a stable fiscal
We have continued promoting a joint collaboration
environment and we do not know what will happen from
with Sudbury and we are still working on the idea of a
one administration to another. Right now, the US through
mining industrial shelter program in Iguala. I believe the
President Trump’s reforms has reduced corporate tax to
municipality can be an example for the mining industry.
20 percent, which makes Mexico even less competitive. As a long-term sector, miners need the government to
We are also working on an agreement between Sudbury’s
show a long-term vision and fiscal stability.
Laurentian University, which is one of the leading universities in underground mineral exploration globally, and Universidad Español in Acapulco to create specialized training programs.
The Guerrero Mining Cluster aims to strengthen the industry
The initially agreement will focus on four key areas, including
and its supply chain in the state of Guerrero. It works with the
environmental protection. We hope to have one of the first
government and the private sector to establish priorities for
training programs released by the end of 2018.
the health of the industry
393
| ROUNDTABLE
WHAT ARE THE FEATURES YOU LOOK FOR IN A NEW PROJECT?
Coming off the back of a downturn, miners in Mexico have learned to become ever more selective about the projects in which they invest. As the survivors of the last bear cycle learned, prudence and due diligence pays off. Some world-class miners seek scalability, while others prioritize location, fiscal incentives or installed infrastructure. Ultimately, it all boils down to mineral reserves, and in that regard Mexico is extremely wellpositioned. Mexico Mining Review asked those that came out swinging after the downturn what they look for in their ideal mining project.
Our approach is opportunistic. We like to buy assets that are unloved by the market. While a distress asset purchase will guarantee more work, the low purchase price limits the downside price and offer good upside potential. For example, our recently acquired Black Fox complex was originally purchased by Primero Mining in 2014 for US$300 million along with the assumption of US$140 million in liabilities. Then
ROB MCEWEN 394
Chief Founder of McEwen Mining
they invested US$120 million bringing their total investment to US$560 million. We bought it for US$35 million, which was equivalent to paying 6 cents for every dollar they invested. It came with over 1 million ounces in resources, annual production of 40-50,000 ounces of gold however with a short mine life, an operating mill with excess capacity, numerous exploration targets and a US$190 million-dollar tax pool, which means we can shelter US$190 million of future profits.
We expect all our projects to have a minimum of 150 million ounces of silver when it comes to reserves or 3 million ounces of gold for us to consider it suitable for our portfolio. Most of our mines are also in the first quartile in terms of production costs so this is a key aspect to consider in our projects before we think to develop them. We prioritize a stream of quality production ounces in our portfolio. The project also
OCTAVIO ALVĂ?DREZ CEO of Fresnillo
must be able to provide at least 15 percent IRR that can be achieved with higher grades or competitiveness in terms of the investment required to develop it.
I prefer to invest in projects involving people I have already done business with, meaning in the case of a dispute or disagreement this could be easily solved. I am commodity-agnostic, so although the Sprott brand is built around precious metals, the commodity that generates value is where my attention is drawn. I would also like local partners in the truest sense, so if a project were to take place in Mexico I
RICK RULE President and CEO of Sprott US Holdings
would like to involve Mexican shareholders. We like projects with scale, and in my experience, small mines have all the risk of big mines but they can only make small money. This means the risk-reward ratio in small mines does not make them attractive to the kind of business we want to do. Grade is useful but the most important factor is the difference between return on invested capital and cost of capital.
Rather than acquire other projects, we prefer to grow our own projects, starting with a mill expansion and underground pit. This is our main focus. The Oxide Tailings project was an open-pit mine we opened in the 1970s with poor recovery rates. With new modern technology we have been able to reprocess and produce more metals and this will continue to be one of the expansion plans we prioritize over the next three years. We have grown organically, not through mergers or acquisitions, so we do not have a large management team and we hire mainly locals. We do not have any interest to expand outside North America at the moment. Our goal is to continue
DAVID WOLFIN President and CEO of Avino Silver & Gold
as a major producer and employer in Mexico.
In the last year or two, many countries have created significant losses for stockholders. We feel that if we want to attract investors back to our industry, we need to be careful not to subject them to those kinds of risks. Mining is already a risky enough business that we should try to minimize as much as possible the geopolitical uncertainty that exists. We focus on only three proven mining jurisdictions where there is rule of law, contracts are honored, permitting processes are well understood, there are educated and experienced workforces and good infrastructure, and we still see plenty of opportunity in North America.
MITCHELL KREBS President and CEO of Coeur Mining
395
We look for healthy operating margins; the mine has to be profitable after the stream is in place. We are taking some of the value of the mine, so if our partners are not happy, we are not either. We have to make sure that when we make this investment our partners will be happy on an operating basis and will keep investing in growing the mines. We typically limit exposure to less than 20 percent and on average we have 10 percent of the revenue tied to our stream. It has to have good margins so our partners are healthy and prosperous and we can profit from this prosperity when they reinvest in the asset.
RANDY SMALLWOOD President and CEO of Wheaton Precious Metals
We are a public company and we need to go where the investors want us to and where what we find can be reasonably developed. We are really trying to keep our operations focused on Mexico and we are hopeful about the elections and their ability to bring fresh opportunities and shine a spotlight on the sectorâ&#x20AC;&#x2122;s potential. Right now, there is a lot of potential for Mexico, especially since zinc prices are increasing and Mexico is a zinc country. It is exciting to see such an increase in mining activity. If mining rules in Mexico were adjusted to be more favorable to FDI, investment could flood in. The southern half of Mexico has great mineral potential but there are often complications in permitting.
JOHN-MARK STAUDE President and CEO of Riverside Resources
We continue to look for high-grade, district scale projects like we found in Juanicipio and Cinco de Mayo. We set a high bar, so very few projects fit our requirements. We have actually reduced the number of properties we have in Mexico. We sold the claims we had in Zacatecas district to Defiance Silver so they can consolidate that historic 1-billion-ounce silver district. Zacatecas is probably one of the most underexplored major districts in Mexico, in large part because the land situation has been very fragmented, so we are delighted to help Defiance put together a coherent exploration package there.
PETER MEGAW Chief Exploration Officer of MAG Silver
ACRONYMS AIMMGM
Mexican Association of Mining Engineers,
M&A
Mergers and Acquisitions
Metallurgists and Geologists
MoU
Memorandum of Understanding
AMLO
Andrés Manuel López Obrador
MW Megawatts
ANZMEX
Australia, New Zealand and Mexico
NAFTA
North American Free Trade Agreement
Business Council
PEA
Preliminary Economic Assessment
BIVA
Institutional Stock Exchange
PFS Pre-Feasibility Study
BMV
Mexican Stock Exchange
Piw
Pounds per Inch Width
CAMIMEX
Mexican Mining Chamber
PROFEPA
Federal Attorney’s Office for
CANCHAM
Canadian Chamber of Commerce
CAPEX
Capital Expenditure
CFE
Federal Electricity Commission
CONAGUA
National Water Commission
CSR
Corporate Social Responsibility
EBITDA
Earnings Before Interest, Taxes,
SNMM
National Miners and metallurgists Union
Depreciation and Amortization
SGM
Mexican Geological Survey
EDC
Export Development Canada
TSX
Toronto Stock Exchange
FIFOMI
Mining Development Trust Fund
TSXV
Toronto Venture Exchange
Environmental Protection SEDATU
Ministry of Agricultural, Farming, Rural Development, Fisheries and Food
SEMARNAT
Ministry of the Environment and Natural Resources
FY Full Year
t/d
tons per day
GCC
Grupo Cementos de Chihuahua
t/y
tons per year
IoT
Internet of Things
UNAM
National Autonomous University of
IIoT
Industrial Internet of Things
IFC
International Finance Corporation
JV
Joint Venture
Mexico
TECHNOLOGY SPOTLIGHTS 136-137 IMDEX: Innovative Solutions for Accurate Drilling and An Enhanced Structural Geology 160-161
TDM: Geosynthetics: the Key to Optimizing Productivity
178-179 VICTAULIC: The Industry’s First In-Line Knife Gate Valve 186-187 GROUND PROBE: Mine-Wall Movement Under Control 190-191
ORICA: Revolutionizing Technology with Focus on Safety and Productivity
224-225 THE CHEMOURS COMPANY: Breaking Paradigms in Sodium Cyanide 280-281 SKF: Rotating Equipment Performance
MINE SPOTLIGHTS 76-77
FRESNILLO: Saucito
84-85
COEUR MINING: Palmarejo
108-109 BACANORA LITHIUM: Sonora Lithium 156-157 FRESNILLO: Juanicipio
PROJECT SPOTLIGHTS 50-51
STARCORE INTERNATIONAL: A Closer Look at Improving Mine Operations
306-307 INDUSTRIAS PEÑOLES: World-Class Operator Thrives as Local Development Engine 314-315 FORTUNA SILVER: Infrastructure, Jobs and Education: the Legacy of Mining for San Jose Del Progreso
INFOGRAPHICS 44-45
Gold Production: the Bull Stirs in Mexico
80-81
Silver, the Glowing Beacon of the Mexican Mining Industry
102-103 Copper Supply in Review 198-199 The Shift in Power 298-299 The Mining Trust Fund: Where are its Resources Really Going? 328-329 The Mining Fiscal Requirements in Review 352-353 FDI and National Investment Key to the Future of Mining in Mexico
STATE PROFILES 19
Sonora: Mexico's Leading Mining State
21
Mining Brings Employment, Growth to Chihuahua
23
Zacatecas Still Mexico's Silver Titan
25
Tapping into Durango's World-Class Deposits
27
Guerrero’s Golden Comeback
36-39
Mexico’s Main Gold Mines
68-69
Mexico’s Main Silver Mines
98-99
Mexico’s Main Base Metals Mines
MAPS
152-153 Mapping New Projects
ROUNDTABLES 28-29
How is Geopolitics Affecting Miners and How Can They Hedge Against Volatility?
60-61
How is the Rise of Blockchain Gold’s Safe-Haven Status?
88-89
How are You Mitigating the Risk Caused by Stagnating Silver Prices?
114-115
What are the Main Factors Shaping Base Metals Demand?
142-143 What are the Main Challenges for Mining Exploration In Mexico? 164-165 How Can Infrastructure Development Boost the Mining Industry? 192-193 How Can Mining Companies Maximize Productivity and Reduce Costs? 206-209 What is on Your Wish List for the New Administration to Strengthen Mexico’s Mining Industry? 240-241 What Environmental Problems Does the Industry Face in Ore Processing? 264-265 How is the Industry Preventing A Shortage of Human Talent? 290-291 How Can Advanced Technology Solve the Problems Operators Face? 318-319 What is Your Assessment of the Mining Fund’s Performance? 340-341 What are the Best Practices for Efficiently Navigating Mining Policies? 372-373 What are the Primary Financing Sources Available for Junior and Mid-Tier Miners? 394-395 What are the Features You Look for In a New Project?
| INDEX A-G Accendo Banco 16, 246, 247, 345, 354-355, 373
Cliveden Trading AG 164-165, 366-367
Agilent Technologies 94-95, 114-115, 120-121, 283
CLUSMIN 254
Agnico Eagle Mines 34, 38, 39, 52, 133, 153, 158, 282, 283,
Coeur Mining 8-11, 28-29, 36-39, 68-69, 72, 84-85, 158, 170,
286, 313, 347, 385
204-205, 206-211, 313, 394-395
AHMSA 68-69, 175
Cribas y Productos Metálicos 232-233, 246
AIMMGM 13, 250, 377, 384
CTA 240-241, 313
Alamos Gold 36-39, 46, 152-153, 206-211
Cyanco 216-217, 220, 240-241
Alexander Mining 114-115, 216-217, 223, 240-241
Cyprium Mining 98
Alio Gold 26, 34, 36-39, 52, 132, 152-153
DBR Abogados 206-211, 331, 340
ALN Abogados 323, 335, 340-341
Defiance Silver 69, 395
AMC 136-137, 284
Deloitte Consulting Group 8-11, 60-61, 120-121, 149, 264-265,
Americas Silver Corporation 66, 68-69, 78, 88-89, 93, 94-95,
270-271, 276, 380
101, 114-115, 152-153, 206-211, 318-319
Delta Solutions 279, 324
Anaf Energy Social 295, 305
Des-Case 237
ANZMEX 28-29, 345, 359
Detector Exploraciones 142, 171, 192, 252-253, 290, 365
Argonaut Gold 8-11, 34, 36-39, 47, 152-153, 333, 346-347
Dicisa 259
Arsenal 261
DMV Mining Intelligence 257
Aura Minerals 23, 58, 98-99, 120-121
Dräger 388
Australian Trade and Investment Commission 290-291, 358
DSI Underground 158
Avino Silver & Gold Mines 53, 98-99, 206-211, 270-271, 378-
Durango Ministry of Economy 24, 164-165, 206-211, 250,
379, 394-395
318-319
Azure Minerals 8-11, 111, 114-115, 135, 142-143, 148, 206-211,
Dyna Resource 38
346-347, 378-379
EagleBurgmann 385
Bacanora Lithium 8-11, 94-95, 98-99, 106-107, 108-109, 114-
ECN Scientific 287
115, 135, 148, 152-153, 378-379
Elastómeros Taza 263
Baja Mining 98-99, 152-153
Endeavour Silver 66, 67, 68-69, 74-75, 88-89, 110, 152-153,
Baker McKenzie 204-205, 330, 340-341
171, 192-193, 296-297, 318-319, 346-347, 378-379, 388
Belden 289
Epiroc 180, 192-193
Beltservice 183
ERM 311, 318-319
Beumer de México 173
Evrim Resources 125, 346-347
BIVA 8-11, 28-29, 52, 246-247, 343, 349, 350, 351, 363
Excellon Resources 68-69, 86, 88-89, 148, 196-197, 206-
BMV Group 8-11, 28-29, 53, 106-107, 111, 141, 198-199, 206-211,
211, 317
246-247, 340-341, 342, 348, 349, 350, 351, 352-353, 363,
Export Development Canada (EDC) 345, 357
372-373
EY 171, 264-265, 328-329, 339
Brink's 368
FIFOMI 12, 14-15, 22, 26, 113, 164-165, 196-197, 326, 351, 352-
Bruker AXS 226-227
353, 372-373
C&C Tsurumi Pump Mexico 142-143, 149, 315-316
Firma Holdings 36-39
CAM 256
First Majestic Silver 8-11, 23, 24, 34, 36-39, 66, 67, 68-69, 73,
CAMIMEX 8-11, 14-15, 19, 25, 27, 35, 44-45, 80-81, 102-103,
88-89, 120-121, 152-153, 183, 240-241, 286, 288, 333, 340-341,
120-121, 152-153, 170, 196-197, 202-203, 204-205, 246-247,
346-347, 361, 364
250, 296-297, 324, 329, 331, 346-347, 384
FLSmidth 226-227, 238
CANCHAM 345, 356, 396
Fortuna Silver Mines Mexico 36-39, 66, 68-69, 79, 170, 315-
Candelaria Mining 28-29, 36-39, 52, 346-347, 372-373
316, 346-347
Candente Gold 57
Fresnillo 8-11, 23, 34, 35, 36-39, 44-45, 60-61, 66, 68-69,
Capstone Mining 93, 98-99, 102-103, 110, 152-153, 185, 260,
70-71, 76-77, 80-81, 88-89, 96-97, 120-121, 133, 142-143, 148,
346-347
150-151, 152-153, 155, 156-157, 158, 170, 180, 185, 189, 206-211,
Carrizal Mining 98-99, 102-103, 152-153, 246-247, 251, 264-
246-247, 248, 257, 263, 264-265, 270-271, 279, 283, 286, 288,
265, 334
313, 315-316, 347, 346-364, 366-367, 385, 394-395
Chesapeake Gold 34, 36-39, 148, 152-153
Ftech 310
Chihuahua Ministry of Economy 20
Garlock 184
INDEX G-P | GE 309
Legalmex 332
Geologix Exploration 39
MacLean Engineering 181, 290-291
GFS Corp 278
MAG Silver 34, 66, 68-69, 147, 150-151, 152-153, 156-157, 364,
Global Wear Solutions 174
394-395
Globexplore Drilling & Analytics 126-127
Manex Resource Group 141, 142-143, 372-373
GoGold 34, 36-39, 152-153, 346-347
Marlin Gold Mining 36-39, 43, 152-153, 346-347
Goldcorp 8-11, 23, 34, 35, 42, 53, 60-61, 66, 68-69, 120-121,
MarMar Holding 38, 153
142-143, 144, 154, 155, 158, 170, 175, 180, 181, 192-193, 279, 283,
Martin Engineering 175
288, 296-297, 308, 313, 333, 340-341, 346-347, 364, 388
Master Drilling 185
Goldgroup Mining 36-39, 52, 131
McEwen Mining 8-11, 33, 34, 35, 36-39, 41, 60-61, 120-121,
Gold Resource Corporation 36-39, 59, 152-153, 324-325
152-153, 206-211, 346-347, 394-395
Great Panther Silver 36-39, 68-69, 82, 152-153, 204-205
Mercuria 60-61, 114-115, 164-165, 260, 270-271, 360
GroundProbe 159
Metallorum Holding 150-151
Grupo Bacis 36-39, 98-99, 152-153, 249, 257
Metso 218
Grupo Calidra 173, 215, 219
Mettler Toledo 192-193, 391
Grupo Cementos de Chihuahua (GCC) 206-211, 255
Mexican Academy of Environmental Impact 304
Grupo GAP 317
Mexico Mining Center 135, 142-143
Grupo México 8-11, 98-99, 102-103, 114-115, 152-153, 175, 180,
Mexus Gold 36-39, 152-153
189, 204-205, 206-211, 235, 246-247, 260, 277, 282, 283, 288,
Millrock Resources 132
305, 308, 331, 334, 346-347, 349, 352-353, 366-367, 372-
Minaurum Gold 34, 56, 324-325
373, 385, 388
Mincore 98-99
Guerrero Mining Cluster 26, 204-205, 392-393
Minera Alamos 36-39, 98-99, 346-347
Guerrero Ministry of Economy 26
Minera Frisco 8-11, 23, 36-39, 68-69, 98-99, 102-103, 152-153,
Gustavson Associates 387
189, 206-211, 246-247, 254, 260, 277, 313, 331, 349, 352-353,
Haver & Boecker 235
357, 372-373, 385
Haynes and Boone 28-29, 196-197, 204-205, 326
Minera Hecla 8-11, 68-69, 87, 87, 148, 152-153
Herrenknecht Tunneling Services Mexico 163
Ministry of Economy
Hogan Lovells 327, 340-341
Ildefonso Guajardo Villarreal 12, 26
IDS 390
Mario Alfonso Cantú 14-15, 196-197, 206-211, 246
IMDEX 136-137, 284
-247, 325
IMPACT Silver 69
MMD 169, 172, 290
Industrias Peñoles 8-11, 23, 24, 26, 36-39, 66, 96-97, 98-99,
Multisistemas de Seguridad Industrial 389
102-103, 111, 112, 114-115, 141, 149, 152-153, 154, 170, 180, 185,
Nanoprotech 282
189, 206-211, 246-247, 251, 260, 277, 282, 283, 286, 288, 306-
Normet 189
307, 315-316, 317, 331, 349, 352-353, 357, 366-367, 372-373,
Notre Dame Integrated Imaging Facility 216-217, 230-231,
385, 388, 391
240-241
Intelligent Social Investment 149, 312
NOV 239
Invecture Group 36-39, 98-99, 102-103, 152-153
OEC Group Mexico 371
Jinchuan Group 98-99
Olympus 206-211, 286
JOGMEC 366-367
Orex Minerals 133, 346-347
Kansas City Southern Mexico 370, 371
Orica 155, 159, 190-191, 192-193
Knight Piésold 303, 318-319
Orla Mining 36-39, 346-347, 364
Kootenay Silver 68-69, 102-103, 120-121, 124, 196-197, 333
Outotec 264-265, 273
Korea Resources 98, 152
Pan American Silver 8-11, 23, 24, 68-69, 102-103, 124, 133,
KPMG 28-29, 381
152-153, 170, 185, 333, 388
Krah México 162
Pewag 182
Landdrill 128
Power Tech 228-229
Lasec 264-265, 288, 290-291
Premier Gold Mines 36-39, 132
Layher Mexico 154
Primero Mining 8-11, 34, 36-39, 41, 66, 73, 333, 334, 346-
Leagold 27, 34, 36-39, 279, 346-347
347, 361, 394-395
| INDEX P-Z PROFEPA 240-241, 256, 293, 296-297, 301
Starcore International Mines 36-39, 49, 50-51, 346-347
ProMéxico 21, 23, 25, 204-205, 246-247, 382
Sunshine Silver Mining & Refining 8-11, 68-69, 112, 366-367
PwC 28-29, 60-61, 338, 378-379
TDM 150-151, 160-161, 164-165, 264-265
RB Abogados 34, 333, 340-341, 346-347
Teck Resources 98-99, 111, 152-153, 346-347
Red Tiger Mining 98-99
Telson Resources 27, 34, 36-39, 66, 98-99, 102-103, 105,
REFLEX 136-137, 284
152-153, 246-247, 346-347, 363, 392-393
Riverside Resources 130-131, 142-143, 204-205, 346-347,
Terrane Geoscience 138
394-395
The Chemours Company 216-217, 220, 222, 224-225, 240-
Rochester Resources 36-39
241, 264-265
Rose Petroleum 36-39, 152-153, 346-347
Thermo Fisher 226-227
Santamarina + Steta 148, 334
The Silver Institute 66, 67, 80-81, 83, 88-89
Schneider Electric 210, 275, 324-325
Timken Mexico 188
Scotia Capital 35, 60-61, 114-115, 340-341, 364
TMC 260
Seequent 285
Torex Gold 8-11, 26, 27, 34, 36-39, 102-103, 152-153, 206-211,
SEMARNAT 13, 52, 56, 149, 216-217, 301, 302-303, 325, 383
279, 296-297, 302-303, 317, 318-319, 346-347, 392-393
SGM 14-15, 36-39, 68-69, 98-99, 122-123, 139, 140, 150-151,
Toronto Stock Exchange 14-15, 53, 141, 206-211, 243, 246-
197, 202-203, 286, 351
247, 248, 257, 284, 340-341, 348, 350, 351, 352-353, 362,
SGS Minerals Services 226-227, 365, 369
363, 372-373, 380
SHB Perforación 129, 149
Valls Geoconsultant 139
Siemens 272
Vander Capital 363
Sierra Metals 68-69, 82, 84-85, 98-99, 102-103, 113, 125,
VEGA Measurement 231
152-153, 296-297, 372-373
Veolia 149, 164-165, 308
Sitsa 258
Ves Capital Partners 365
SKF 171, 192-193, 277, 280-281
VHG Servicios Legales 324-325, 336, 340-341
SNMM 28-29, 337
Vibrotech 236
Solum Consulting Group 262
Victaulic 178-179
Solvay Mining Solutions 221
Vulkan 176-177
Sonora Ministry of Economy 18
Wheaton Precious Metals 73, 88-89, 206-211, 334, 346-347,
SpecTIR 140
361, 378-379, 394-395
Sprott US Holdings 35, 94-95, 114-115, 133, 142-143, 206-211,
World Bank 17, 148, 200-201, 318-319, 378-379
362, 372-373, 378-379, 394-395
Xtierra 69
SSR 8-11, 68-69, 152-153, 186-187, 346-347
Zacatecas Ministry of Economy 22
PHOTO CREDITS | 4
Grupo México
107
Bacanora Lithium
12
Ministry of Economy
108
Baconora Lithium
13
Starcore International
110
Capstone Mining
14 MBP
111
Azure Minerals
16 MBP
112 MBP
17
113
Sierra Metals
114
Sprott US Holdings, Mercuria,
115
Bacanora Lithium, Americas Silver Corporation, Master Drilling
World Bank
18 MBP 20
Chihuahua Ministry of Economy
22
Zacatecas Ministry of Economy
24
Durango Ministry of Economy
26
Guerrero Ministry of Economy
116
28
Coeur Mining, MBP, KPMG
122 SGM
29
MBP, Haynes and Boone, PwC, MBP, BMV Group
124 MBP
30
Primero Mining
125
Evrim Resources
38-39
McEwen Mining
126
Globexplore Drilling & Analysis
41
McEwen Mining
127
Globexplore Drilling & Analysis
gilent Technologies Azure Minerals, MBP, Scotia Capital
42 Goldcorp
128 MBP
43
Marlin Gold Mining
130
Riverside Resources
46
Alamos Gold
132
Millrock Resources
47
Argonaut Gold
133
Orex Minerals
49
Starcore International
135
Mexico Mining Center
50
Starcore International
136
REFLEX, IMDEX
52 MBP
138 MBP
53
139 MBP
Avino Silver & Gold
56 MBP
140 SpecTIR
57 MBP
141
Manex Group
58
Aura Minerals
142
Fresnillo, Riverside Resources, MBP
59
Gold Resource Corporation
143
Sprott US Holdings, Manex Group,
60
Fresnillo, McEwen Mining, Goldcorp
61
Scotia Capital, Deloitte, Mercuria, PWC
144 Goldcorp
62
Excellon Resources
150
67
Excellon Resources
150 TDM
Mexico Mining Center, C&C Tsurumi Pump MAG Silver
70 Fresnillo
154
71 Fresnillo
155 Orica
72
Coeur Mining
156
73
First Majestic Silver
158 MBP
74
Endeavour Silver, Endeavour Silver
159 GroundProbe
Layher Mexico MAG Silver
76 Fresnillo
160 TDM
78
162 MBP
Americas Silver Corporation
79 MBP
163 MBP
82
Great Panther Silver
164
MBP, MBP, MBP
83
The Silver Institute
165
MBP, Durango Ministry of Economy,
84
Coeur Mining
Mercuria, TDM
86 MBP
166
Capstone Mining
87
Excellon Resources, Excellon Resources
172
MMD Mineral Sizing
88
Excellon Resources, Americas Silver
173
Beumer de Mexico
Corporation, Fresnillo
174 MBP
First Majestic Silver, Endeavour Silver,
175
Martin Engineering
The Silver Institute, Wheaton Precious Metals
176
Vulkan do Brasil
90
Grupo México
178 Victualic
96
Industrias Peñoles
180 MBP
101
Americas Silver Corporation
181
89
MacLean Engineering
105 MBP
182 MBP
106
183 MBP
Bacanora Lithium
PHOTO CREDITS 184 MBP
262
185 MBP
263 MBP
186 Groundprobe
264
TDM, MBP, Outotec
188 MBP
265
MBP, Deloitte, Fresnillo, EY, MBP
189 MBP
266
MAG Silver
190 Orica
272 Siemens
192
Endeavour Silver, MBP, MBP
273 Outotec
193
Endeavour Silver, Orica, MBP, MBP
275
Solum Consulting Group
Schneider Electric
194 Fresnillo
276 Deloitte
200
277 MBP
Marcos González
203 MBP
278
206 MBP
279 MBP
207
Durango Ministry of Economy, Americas Silver
280 SKF
Corporation
282
MBP, MBP
208
Canadian Trade Minister, DBR Abogados
283
Agilent Technologies
209
MBP, Azure Minerals, Alamos Gold
284
IMDEX, MBP
210
Avino Silver & Gold Mines, Sprott US Holdings
285 Seequent
211
Grupo Cementos de Chihuahua,
286 MBP
TSX, BMV Group
287 MBP
210
Pan American Silver
288 MBP
217
Pan American Silver
288
GFS Corp
ECN Scientific
218 MBP
289 Belden
219 MBP
290
MMD Mineral Sizing, MBP, Outotec
220
MBP, MBP
291
MBP, MBP, Maclean Engineering, MBP
221
Solvay Mining Solutions
292
New Gold
222 MBP
297
Endeavour Silver
223 MBP
300
Candelaria Mining
224
The Chemours Company
301 MBP
226
MBP, Bruker AXS
302
228
Power Tech
303 MBP
230
University of Notre Dame
304 MBP
Torex Gold
231 MBP
305 MBP
232
306
Cribas y Productos Metálicos
Industrias Peñoles
235 MBP
308 MBP
236
309 MBP
Vibrotech Engineering
237 Des-Case
311 ERM
238 FLSmidth
312 MBP
239 NOV
313 MBP
240
MBP, MBP, First Majestic Silver
314
Fortuna Silver Mines
241
MBP, MBP, University of Notre Dame, MBP
316
C&C Tsurumi Pump
242
Grupo México
317 MBP
248 Fresnillo
318
249 MBP 250
Durango Ministry of Economy
World Bank, Durango Ministry of Economy, Americas Silver Corporation
319
ERM, Torex Gold, Endeavour Silver, MBP
251 MBP
320
Zacatecas Ministry of Economy
252 MBP
326
Haynes and Boone
254 MBP
327 MBP
255
Grupo Cementos de Chihuahua
330 MBP
256
CAM, CAM
331
DBR Abogados
257 MBP
332 MBP
258 MBP
333 MBP
259 MBP
334 MBP
260 MBP
335 MBP
261 MBP
336 MBP
PHOTO CREDITS | 337 MBP
369
SGS Minerals Services
338 PwC
370
Kansas City Southern de México
339 EY
371 MBP
340
MBP, DBR Abogados, Scotia Capital
372
Sprott US Holdings, Manex Group, Sierra Metals
341
MBP, MBP, MBP, MBP
373
MBP, MBP, BMV Group, MBP
342
BMV Group
374
Primero Mining
348 TSX
380 Deloitte
349
381 KPMG
BMV Group
350 MBP
382 MBP
351 MBP
384 MBP
354
Accendo Banco
385 EagleBurgmann
355
Accendo Banco
387 MBP
356 MBP
388 MBP
357 EDC
389 MBP
358 MBP
390 MBP
359 MBP
391 MBP
360 Mercuria
392
Guerrero Mining Cluster
361
Wheaton Precious Metals
394
McEwen Mining, Fresnillo, Sprott US Holdings
362
Sprott US Holdings
395
Avino Silver & Gold, Coeur Mining, Wheaton
363 MBP
Precious Metals, Riverside Resources,
364
Scotia Capital
MAG Silver
366
JOGMEC, MBP
Inner Back Cover Aura Minerals
368 Brink’s
ADVERTISING INDEX | Bookmark
Accendo Banco
182
Elastómeros Taza
Inside Front Cover Fresnillo
214 Metso
6
229
Accendo Banco
Powertech Services
32 Cyanco
233 Cribas
40 Chemours
234
42
Marlin Gold Mining
236 Des-Case
46
Argonaut Gold
244
Industrial Peñoles
48
Starcore International Mines LTD.
250
Carrizal Mining
54-55
Brinks Global Services
252-253 Detector Exploraciones
64
Coeur Mining
258 Dicisa
75
Endeavour Silver
262
87
Multisistemas de Seguridad Industrial
268 SKF
Haver & Boecker
VHG Abogados
92
Grupo Calidra
274
Schneider Electric
100
Americas Silver Corporation
278
Delta Solutions
104
Telson Mining Corporation
282 Agilent
110
Azure Minerals
294
Mexico Business Publishing
118 Globexplore
304
Anaf Energy
128
310 ERM
RNG Perforación at Grupo SHB
134 Reflex
316
Grupo GAP
138
Master Drilling
322
Sindicato Nacional Minero Metalúrgico
146
Bacanora Lithium
330
DBR Abogados
154 Orica
332
RB Abogados
158 GroundProbe
334
ALN Abogados Consultores
168 Victaulic
344 Mercuria
174
376
Mexico Mining Forum
386
IOS Offices
Martin Engineering
177 Vulkan
CREDITS JOURNALIST & INDUSTRY ANALYST: Alejandra Gómez JOURNALIST & INDUSTRY ANALYST: Veronica Yepes EDITOR: Ricardo Guzmán SENIOR EDITORIAL MANAGER: Sara Warden EDITORIAL DIRECTOR: Mario Di Simine PUBLICATION COORDINATOR: Cagla Polat PUBLICATION COORDINATOR: Agata Sobolewska PUBLICATION COORDINATOR: Tathiana Martin COMMERCIAL DIRECTOR: Jack Miller SENIOR GRAPHIC DESIGNER: Ailette Córdova GRAPHIC DESIGNER: Mónica López DESIGN DIRECTOR: Marcos González WEB DEVELOPMENT: Omar Sánchez SOCIAL MEDIA COORDINATOR: Karen Sujo CIRCULATION MANAGER: Elizabeth Solís DIRECTOR GENERAL: Jeroen Posma
