Mexican Mining a Mature Industry Is Reinvigorated and Reaffirms Its Importance to the National Economy

Mexican Mining A mature industry is reinvigorated and reaffirms its importance to the national economy.

TABLE OF CONTENTS

Introduction...... p52 This report was researched and prepared by Interview with Sergio Almazan Esqueda, Global Business Reports (www.gbreports.com) for director of CAMIMEX...... p54 Engineering & Mining Journal. Regulatory Framework...... p56 Editorial researched and written by Matilde Key minerals, Big domestic players Mereghetti and Vanessa Acuna. For further and Juniors...... p56 information, contact [email protected] Interview with Rosalind Wilson, former president of CANCHAM...... p56 Exploration...... p56 Cover photo: The Mulatos open pit, looking south. Finance...... p56 Courtesy of Alamos Gold Security...... p56 Environment...... p56 Conclusion...... p56 A REPORT BY GBR FOR E&MJ

OCTOBER 2011 MEXICAN Mining MEXICAN Mining

Introduction Conquistadores: Soldiers, Priests and Miners

Photo courtesy of Great Panther Silver

Mexico’s economy is the world’s 13th largest In 2009, Mexico’s GDP contracted by 6.6%. representing an incremental to 3%, accord- in terms of nominal gross domestic product This was the sharpest decline of any Latin ing to the Silver Institute. This new precious (GDP) and is part of North American Free American economy. Mexico’s mining sector metals rush has attracted a flock of foreign Trade Agreement (NAFTA). Mexico has a also felt the pain, but has been the first in- junior companies, especially Canadian. Ca- long-standing tradition as a mining country. dustrial sector to recover. nadian companies, present in Mexico since Since the pre-Columbian days, when mining “Many exploration projects have been the mid-1990s, when Mexico opened the in Mexico was practiced by the Maya, Aztec, delayed or suspended due to lack of fund- doors to foreign investment, have helped Mixteco and Zapoteco peoples, the country’s ing, but with the recovery of prices in 2009, to re-activate many of Mexico’s centenarian underground resources have played an im- the sector has recovered faster than others,” mines, which were previously not economic portant role. The arrival of the Spaniards in- said Sergio Almazan Esqueda, general di- to operate. “High prices of metals and new tensified mining activity. Indeed, 200 years rector of the Mexican Mining Chamber (CA- technologies make it economic to develop ago mining was Mexico’s most buoyant busi- MIMEX). Moreover, given the dollar’s weak- and operate old mines,” said Andrew Sharp, ness sector and the conquest of Mexico can- ness, investors and central banks are taking general director of Great Panther Silver. not be fully understood without considering refuge in gold, causing record prices which Seventy-five percent of foreign companies the industry. Miners followed in the footsteps have stimulated the industry’s boom. “In operating within the Mexican mining industry of the conquistadores, side by side with the fact, the financial crisis has driven a posi- are Canadian and 62% of them are gold and soldiers, priests and missionaries, locating tive tendency towards precious metals. The silver producers. “Mexico is the largest re- ore deposits, creating wealth, opening roads sector is growing more and more each day,” cipient of Canadian mining investment in the and making significant contributions to the said Rosalind Wilson, former president and Central America region. Continued economic creation of new cities, towns and villages of executive advisor to Canadian Chamber in expansion in the U.S. and Canada will inject present-day Mexico. Today, Mexico is a ma- Mexico (CanCham). more money into the development of Mexi- jor producer of silver, base metals and gold, The National Institute of Statistic and Ge- can gold and silver projects as precious metal as well as a leading producer of bismuth, flu- ography (INEGI), an agency of the Mexican prices break records in 2011,” said Rosalind orite, cadmium, molybdenum, arsenic, zinc, government, reports that mining production Wilson, former president of the Canadian graphite, manganese and copper. rose by 13% in August 2010 compared to Chamber in Mexico. The country is ranked among the world’s a year earlier, with increased production in Right behind the Canadians rank new top 10 in barite, manganese, salt, lead and copper, silver and gold. Chinese investments, which in 2011, will zinc production. “Mexico is a mining country. In 2000, Mexico produced less than 20 top those of some of the giant domestic pro- The mining industry represents the third pro- mt of gold. Exploration of precious met- ducers. Despite the crisis, China has main- ductive activity, after the oil and the tourism als has since increased steadily, produc- tained the appetite for base metals such as industries, excluding money sent by Mexi- tion reaching 50 mt in 2008 and 62 mt in copper, iron, zinc and lead, which are abun- cans living in other countries. In 2011, min- 2009. In 2010, the Mexican production of dant under the Mexican soil. In 2010, six ing production amounted to about US$12 gold increased by 21% compared to 2009, Chinese mining companies have arrived in billion; very close to tourism industry’s turn- amounting to about 75 mt. CAMIMEX ex- Mexico looking for minerals to supply their over,” said Jimena Valverde, Mexico’s gen- pects gold production for 2011 to reach 90 electronics and construction industries. In eral coordinator for mining. mt. According to official figures, in 2010 2011, they are expected to invest around The recent global financial crisis had Mexico has become the sixth producer of US$2 billion, the first part of the US$12 bil- strong negative effects on the Mexican econ- gold and has overcome Peru in silver produc- lion they intend to invest over the next few omy, largely due to its economic ties and de- tion, to become the world’s largest silver pro- years on the Mexican minerals industry, in- pendence on the U.S. as an export market. ducer, with 730.9 million oz (22,733 mt), cluding exploration, acquisition of existing

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Introduction Conquistadores: Soldiers, Priests and Miners

Photo courtesy of Great Panther Silver

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projects as well as the construction of new companies into the Mexican market. Part of ones. The company Jin Chuan Group, for ex- this idea involves allowing a double listing Interview with Sergio Almazan Esqueda, Director of Mexican Mining Chamber ample, has already invested US$230 million of companies in Toronto and Mexico, which (Camara Minera de Mexico - CAMIMEX) in a copper, zinc and molybdenum project will be active by the end of 2011. “The idea in Chihuahua, and has more than US$500 is to have access to venture companies in by Mexicans living in other countries. ada, Australia and the United States, with million earmarked for exploitation in the next mining which are now raising capital in The mine production amounted to about 6% of the global budget. three years. Toronto and have operations in Mexico, to US$12 billion, so very close to the tourism After the crisis, in 2009, world invest- Currently, there are more than 700 ex- make them available for Mexican institu- industry’s turnover. ment in exploration declined to US$7.3 bil- ploration projects in Mexico, and more than tional and retailing investors and vice versa lion and Mexico has fallen from its fourth to 230 foreign companies that explore in the to allow Mexican companies to raise capital Is Mexico successfully profiting from the a sixth position, after Peru and Russia. In country. “The country has a huge geologi- in Canada,” said Luis Tellez, president of current high price of gold? 2010, investments in exploration are expect- cal potential,” said Rafael Alexandri, general the Mexican Stock Exchange. The gold production in Mexico is a success ed to grow to US$11500 million. According director of the Mexican Geological Service Another important issue for the Mexican story. In 2000, Mexico held a production of to official figures, the exploration projects in (SGM). “From a geological perspective, Mex- mining industry and the Mexican economy less than 20 mt gold. In 2010, the Mexican Mexico are over 700 and there are more than ico is a cornucopia of mineral wealth: the in general, is the escalation of violence since production of gold increased by 21% com- 230 foreign companies that explore in the opportunities for new discoveries are excel- the government’s crackdown on organized pared to 2009, amounting to about 75 mt. country, in addition to Mexican businesses. lent,” said Ben Whiting, chief geologist for crime and drug trafficking, which has led Sergio Almazan Esqueda, Director of CAMIMEX Our predictions for 2011 are 90 mt. Also, in For 2011, we expect US$4.15 billion to Orko Silver Corp. and Orex Minerals Inc. to insecurity in some regions of the country 2010, Mexico surpassed Peru again in the be spent on explorations in the country. In 2010, the Fraser Institute ranked Mex- and, subsequently, a sharp decline in foreign Please introduce us to the CAMARA production of silver, with 4,000 mt of silver ico as one of the most attractive countries direct investment flows. Mining projects, MINERA DE MEXICO (CAMIMEX). (18% of total production). Do you forecast continued growth? for geological business potential, among which are often in remote areas of the coun- The Mexican Mining Chamber (CAMIMEX) We have competitive laws. We used to have top global mining destinations, fourth in the try, have seen a rise of operational costs, as is the country’s first industrial chamber and How successful is Mexico at attracting for- two types of concessions: one for investigat- world and first in Latin America. To date, higher security services are needed. was founded in 1906. CAMIMEX members eign investors to the mining industry? ing the ground and the other for production only 25% of the national territory has been However, despite these challenges, for- include about 150 combined enterprises It has been calculated that between 2007 activity. This has been modernized and now explored, 70% of which may contain min- eign companies continue to invest in Mexico that produce 93% of the value and volume and 2012 about US$21 billion will be in- each mining company only needs a single eral deposits. Since 2009, turnover gen- as the country offers political and financial of mineral production in the country. Cami- vested in the mining industry in Mexico. concession. 70% of Mexico’s territory is erated by the mining industry in Mexico stability, as well as a very attractive tax sys- mex is a private and voluntary organization. With regard to exploration, the Canadian or- likely to contain minerals. Of this 70%, only amounted to nearly US$15.5 billion, 51% tem, without corporate taxes and royalties. ganization Metal Economic Group estimated 30% has been explored. With the immense more than in 2009. Indisputable evidence Furthermore, legal stability for investors and What are CAMIMEX’s main initiatives in 2009 a figure of US$12.6 billion dollars evolution of technology, areas can be ex- of this new interest in the mining industry a digitalized geological mapping system add within the mining industry? invested in exploration around the world. plored which were previously inaccessible. is Carlos Slim, the richest man in the world to the advantages. According to Tawn Albin- We are constantly working with the au- Mexico ranked fourth in the world, after Can- So there is a big potential. according to Forbes, who will invest US$3.6 son, president of Prospero Silver Corp., coun- thorities (the federal government, Profepa billion in the sector in 2011. But the future try manager for Baja Mining and well-known and SEMARNAT) to improve the regulatory of Mexico’s mining is not completely free of geologist, “the deposits in Mexico have at- framework for mining operations. The mining concerns. The lack of funding is a consis- tractive grades and good metallurgy and the sector is experiencing a positive cycle, so it tent limitation to the sector, especially for cost of labor is much lower than in Canada.” is necessary that we solve some of the coun- domestic small and medium mining compa- In 2010, Mexico was the Latin American try’s internal problems; including a labor re- nies that struggle to raise capital to explore country that received the highest amount of form. We would like to see the law reformed and expand their properties. investments (2009 was Peru) in the mining to promote competitiveness and productiv- The Toronto Stock Exchange has been industry and the fourth largest worldwide. For ity. To avoid impediment on acquiring new fundamental throughout the boom of invest- 2011, the CAMIMEX expects US$4.15 bil- properties and to guarantee legal certainty to ment for the past three years, raising capital lion to be spent on exploration activity in the the investor a very important issue is the ac- to invest in mining projects. The Mexican country. New mineral projects are expected cess to land. Furthermore, we have to devel- Bolsa and the Toronto stock exchange are to ensure that Mexico retains its position op environmental regulations, including the talking of creating a mechanism that would among the global leaders of mineral com- sites’ recovery after the end of the mine. On allow smaller to medium-sized Canadian modities production in the foreseeable future. this matter, progressively more companies are getting the “clean industry certification.” The lack of professionals in engineering and earth science is another important issue in the field of mining, so we have created a fund of US$1 million for teacher and student scholarships to boost quality and vocation. Since 2008, there has already been a growth in the numbers of enrolled students, but they are not sufficient. A last important factor is the competitiveness of energy prices.

What is the importance of the mining industry within the Mexican economy? After the oil and the tourism industry, the mining industry is the country’s third La Colorada Mine. Photo courtesy of Panamerican Silver productive assets, excluding money sent

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54 E&MJ • OCTOBER 2011 www.e-mj.com www.e-mj.com E&MJ • OCTOBER 2011 55 MEXICAN Mining MEXICAN Mining Mexico’s Regulatory Framework Open Key Minerals to Foreign Investors Big Domestic Players, Junior Companies

Since the beginning of former president Salinas’ administration at the However, since the time of the Mexican Revolution, many lands this short period has been outstanding and our goal is to produce end of the 1980s, Mexico has undergone profound economic changes. in Mexico are owned by local communities with collective ownership 65 million oz/y of silver and 400,000 oz/y of gold by 2018,” said Private investment has become the driving force of the Mexican econo- of the land known as “ejidos.” “The principal challenge for the min- Lomelin. Fresnillo is the world’s third largest primary silver company my and the country has opened its commercial borders. The regulatory ing industry in Mexico is the property rights of the soil. One major and Mexico’s second largest gold producer.“The company has solid framework has been simplified in order to absorb greater inflows. In problem we have is that the ejidos do not own the full domain of growth plans, but due to high prices of metals, buying other com- the field of mining, the restrictions on foreign ownership of Mexican land and earth and it is not easy to negotiate the ownership,” said panies is currently expensive, so we focus growth on development, companies have been erased. Consequently, the law allows 100% Javier Lopez Olivas, former president of the mining and metallurgist operation, building, and exploring activities,” said Lomelin. In 2010, foreign capital participation. Foreigners wanting to engage in mining association of Sonora. the Fresnillo mine ranked as the second largest primary silver mine in the country must establish a Mexican corporation for that purpose, According to the 2007 Ejidal Census, more than 35,518 ejidos with 35.91 million oz mt/y and the second richest in the world, after or enter into joint ventures with Mexican individuals or corporations. agrarian and indigenous communities are based in an extension of the Cannington mine in Australia, owned by BHP Billiton. In 2011 While previous mining legislation subjected mining companies to 105.9 million ha; 54.1% of the total of Mexican soil. Communal Fresnillo expects to spend more than US$250 million in capital ex- numerous rules, requirements and prior approval regarding bylaws, land in states such as Oaxaca, Baja California and Nayarit, repre- The Fresnillo silver mine, Mexico’s penditures to increase their silver production and gold production. oldest and richest silver mine. transfer of shares, citizenship of directors and chief executive officers, sents more than 80% of their territory. Jaime Lomelin, CEO, Fresnillo Zacatecas, Mexico present laws have abolished all of these requirements. Now laws “The primary advice to foreign companies that intend to invest in Goldcorp merely require that mining companies are incorporated under the Mexico is to carry out due diligence before starting a project,” said Silver and gold in Mexico In the same state, Goldcorp recently invested US$1.7 billion in the laws of Mexico and that their corporate purposes include the explora- Enrique Rodriguez del Bosque, founder of RB Abocados, one of the In 2010, Mexico overtook Peru in silver production, reaching the Peñasquito mine, where they plan to produce 20 million oz of silver tion or exploitation of minerals and their corporate domicile be within few Mexican law firms specialized on mining. world’s top position, with 128.6 million oz produced. After Mexico in 2011. Peñasquito is a poly-metallic mine, which produces gold, the Mexican Republic. Since the 2005 amendment of the Mexican The law firm’s team is composed of professionals graduated from and Peru, China, Australia and Chile were the world’s largest silver silver, lead and zinc. Peñasquito is Mexico’s largest open-pit mine Mining Law, mining concessions give the holder both exploration top law schools in Mexico who can provide diverse services to global producing countries in 2010. Mexico currently ranks 12th in gold and the largest single investment in the country. and exploitation rights, which have a fixed and maximum term of 50 mining firms, including due diligences over mining properties, M&A production, with a strong possibility of ranking among the top five “The fact that Mexico’s President Felipe Calderon inaugurated years. Given that the rights of mining cannot hinder or restrict the deals, drafting options, assignments, joint ventures, counseling in within the next few years. Peñasquito in 2010 is a sign of the national government’s strong rights of use and ownership that a person has on the surface of the major transactions before the Anti-trust Commission and all kind of Most metal prices have gained solidly throughout 2011, despite recognition of the mining sector’s importance for the country’s location, the concessionaire always tries to buy the property under procedures related with the Mines Bureau and the Foreign Invest- the U.S. dollar’s weakness and persistent concerns about the strength economy,” said Jimena Valverde, general coordinator for mining. which the mine will exist. ment Bureau. of the global recovery. In general, precious metals are among the “Peñasquito has generated more than 4,000 direct jobs, which Law firms additionally recommend to identify the official and infor- commodities performing better on the market as gold has become mal leaders of the “ejidos” and to deal with them directly at the be- the refuge against inflation and the volatility of international curren- ginning of the project, barging the ownership of the land in exchange cies. In 2010 and 2011, silver has performed nearly three times bet- with social and development projects for the local community. “Fol- ter than gold, reaching almost US$40/oz. Investors are seeing silver lowing formalities and dealing with the right people are mandatory el- as an alternative to gold. For its part, gold rose to over to US$1,700/ ements in your to-do list to achieve a successful business in Mexico,” oz. “The price of gold is supported by a weaker dollar and strong in- said Attorney Cruz Herrera, founder of Cruz Herrera Ltd. vestment demand,” said Luis Tellez, president of the Mexican Stock These communities are considered as legal entities, with property Exchange. As the prices of precious metals are booming, investments rights over their land and entitled to make contracts, agreements and in gold and silver mining projects mirror this trend. According to Ji- partnerships with third parties, either individuals or corporations. mena Valverde, general coordinator of mining, between 2010 and Moreover, they are allowed to transfer their property to create 2012 US$13.1 billion will be invested in the Mexican mining sector partnerships up to a period of 30 years with a renewal option. As and about 60% of this amount will be invested in gold and silver mentioned above, before closing any deal it is essential to keep in projects. In the past five years, silver and gold mining activity has mind that parties are entitled to full disclosure in order to review and grown exponentially on Mexican territory. check that titles, certificates, minutes and deeds are in good standing. “Formality is essential in any transfer, lease, joint venture or Fresnillo partnership regarding land owned by the ejidos, agrarian and indig- Fresnillo produced record levels of gold and silver, beating its tar- enous communities; therefore, if legal proceedings are not fulfilled, gets in 2010. In 2008, the company took over the precious metals those agreements or contracts will be void,” said Herrera. division of the 124-year-old Peñoles and since then is listed on the Mineral concessions must be paid in advance every six months. London Stock Exchange. When the production begins, there is an additional tax on produc- Fresnillo operates four gold and silver producing mines, one de- tion activity. As the age of the concession grows, the taxes grow velopment project, and five advanced-stage exploration projects in accordingly. Currently a discussion has evolved on the governmental Mexico. “Fresnillo will be a key factor in the industry growth. We introduction of new mining royalties, as implemented in the 1980s have completed the Saucito mining project and are expanding its and then abolished in the early 1990s when the aim was to attract capacity, as well as the Soledad and La Cienega mines, and we are foreign investment. launching the Noche Buena mine project, among many others in the Of course, the mining community is opposed to the inclusion of exploration stages,” said Jaime Lomelin, Fresnillo’s CEO. these new royalties, which would drop the level of competitiveness In 2010, Fresnillo produced a record of 38.6 million oz of silver below that of other Latin American countries. The decision will be and expects to increase this by 10% in 2011, climbing to 43 million made probably after the next election to be held in April 2012 by the oz. The company also produced 368,995 oz of gold in 2010 and is federal deputies. on track to reach its 2018 production target. “Our performance in

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56 E&MJ • OCTOBER 2011 www.e-mj.com www.e-mj.com E&MJ • OCTOBER 2011 57 MEXICAN Mining means five times more indirect jobs,” said production to 440,000 oz, and nearly qua- “In terms of numbers, I am proud to say Salvador Garcia, Goldcorp’s vice president druple silver production to 19.1 million oz. that within our company’s group, Cerro San in Mexico. Slim, who made his fortune by building Pedro in Mexico, compared to Mesquite Goldcorp, a Vancouver-based company, one of the world’s largest telecommunica- (U.S.) and Peak (Australia), is the jewel of is a fast growing gold producer with operation empires, has declared his interest to the crown. While the mine has almost the tions throughout the Americas. Over a short invest strongly in the Mexican mining sector same numbers in production as the others, period, Goldcorp has grown from a strong in the years ahead. it is the best in terms of a critical factor; intermediate player into one of the top se- Minera Frisco began trading its shares on cash cost,” said Armando Ortega, vice presi- nior gold producers in the world. At the the Mexican Stock Exchange at the begin- dent of New Gold and director general of beginning of this year, Goldcorp’s manage- ning of this year, but Slim’s family controls MSX, the Mexican subsidiary of New Gold. ment said it expects its production to rise by nearly 80% of Minera Frisco‘s new shares, Districts such as San Martin, Santa Bar- 60% over the next five years. and the stock is very thinly traded. bara, Charcas and Fresnillo have been prov- The company has three active operations en to be exploitable at rates of up to 7,500 and two developing projects in Mexico. “Los Junior companies: gold mt/d, displaying an increase of more than Filos, in the Guerrero State in 2010 was Despite 500 years of intensive exploitation 700% compared to their mid-1970s pro- The Herradura mine in the State of Sonora, part of the Fresnillo Group is one of Mexico’s richest the mine that produced the most gold in and exploration, discoveries and production duction levels. gold mine. Mexico, with 306,000 oz. Goldcorp is the advances continue to be made. Guachichiles Sonora was the most prolific gold pro- second largest producer of gold worldwide Indians communicated the presence of min- ducing state in 2010 with a production of to 175,000 oz of gold production, with the after Barrick and 55% of the Goldcorp ac- erals in the San Potosì district to Francisco 22,590 oz of gold accounting for 32% of the cost of US$355 to US$365/oz,” said Man- tive assets are in Mexico,” said Garcia. Franco in the 15th century. Since then, San total national production. ley R. Guarducci, vice president and COO of Potosì is a major mining district, which is to- In recent years, exploration activities and Alamos Gold. Minera Frisco day once more exploited by junior companies mining exploitation in the Sonora state have The company is also expanding the Minera Frisco was already producing gold finding gold deposits in the area. intensified. Over the last year, companies mine’s production. “The new high grate mill and silver when the Mexican billionaire Car- New Gold’s El Cerro de San Pedro mine, have invested a total of US$ 397 million. will give us 75,000 to 150,000 extra oz/y. los Slim took the company public at the be- located 20km northeast of San Luis Potosí, They created roughly 135,000 jobs and ex- Subsequently, we will join the 250,000 to ginning of 2010. In 2010, Frisco produced has gold reserves of 1.4 million oz and silver tracted 3,400,000 mt of metallic and non- 300,000 oz/y producers in Mexico, what 200,000 oz of gold and 5.5 million oz of reserves of 52 million oz. metallic minerals. we consider as a very significant step,” said silver from its Mexican projects. New Gold is an intermediate gold pro- An important gold mine in Sonora is Ala- Guarducci. 1n 2011, the company’s management ducer, operating assets in the United States, mos Gold’s Mulatos mine, with more than Alamos Gold recently added the Ağı said it will spend nearly US$750 million Mexico, Australia and development projects 60 million mt of reserves at close to 1.5g/ Dağı and Kirazlı properties in Turkey to its to more than double Grupo Frisco’s gold in Canada and Chile. mt. “For 2011 we are forecasting 160,000 portfolio. It also owns several exploration projects. “We expect to increase production three times over the next three or four years,” said Guarducci, who has a vast experience in Latin America’s mining industry. Alamos Gold’s Mulatos mine and other mines, such as La Herradura and El Chan- ate, have helped to make Sonora the number one producer of gold in Mexico. The NWM Mining Corporation, listed on both the Toronto and the Frankfurt Stock Exchanges, is a Canadian company that entered Mexico in 2005 to develop the Lluvia de Oro and La Jojoba gold mines located in Sonora. Lluvia Jojoba produces mainly gold, but also silver and copper. NWM owns several properties in the country, including the Sierra Pinta underground gold mine in north-west Sonora. Sierra Pinta is just 15 km away from La Herradura, Mexico’s biggest gold mine. “In a few years we will have some mature projects and several mines that will have started producing. In addition, we will increase our portfolio and as a result, investors will keep on trusting NWM mining as a good cap to invest in,” said Marco Anto- nio Bernal Portillo, administrative director for Minera Columbia de Mexico, which is NWM’s Mexican subsidiary. Yamana Gold Inc., a dynamic gold producer active in Latin America with six pro-

58 E&MJ • OCTOBER 2011 www.e-mj.com www.e-mj.com E&MJ • OCTOBER 2011 59 MEXICAN Mining means five times more indirect jobs,” said production to 440,000 oz, and nearly qua- “In terms of numbers, I am proud to say Salvador Garcia, Goldcorp’s vice president druple silver production to 19.1 million oz. that within our company’s group, Cerro San in Mexico. Slim, who made his fortune by building Pedro in Mexico, compared to Mesquite Goldcorp, a Vancouver-based company, one of the world’s largest telecommunica- (U.S.) and Peak (Australia), is the jewel of is a fast growing gold producer with operation empires, has declared his interest to the crown. While the mine has almost the tions throughout the Americas. Over a short invest strongly in the Mexican mining sector same numbers in production as the others, period, Goldcorp has grown from a strong in the years ahead. it is the best in terms of a critical factor; intermediate player into one of the top se- Minera Frisco began trading its shares on cash cost,” said Armando Ortega, vice presi- nior gold producers in the world. At the the Mexican Stock Exchange at the begin- dent of New Gold and director general of beginning of this year, Goldcorp’s manage- ning of this year, but Slim’s family controls MSX, the Mexican subsidiary of New Gold. ment said it expects its production to rise by nearly 80% of Minera Frisco‘s new shares, Districts such as San Martin, Santa Bar- 60% over the next five years. and the stock is very thinly traded. bara, Charcas and Fresnillo have been prov- The company has three active operations en to be exploitable at rates of up to 7,500 and two developing projects in Mexico. “Los Junior companies: gold mt/d, displaying an increase of more than Filos, in the Guerrero State in 2010 was Despite 500 years of intensive exploitation 700% compared to their mid-1970s pro- The Herradura mine in the State of Sonora, part of the Fresnillo Group is one of Mexico’s richest the mine that produced the most gold in and exploration, discoveries and production duction levels. gold mine. Mexico, with 306,000 oz. Goldcorp is the advances continue to be made. Guachichiles Sonora was the most prolific gold pro- second largest producer of gold worldwide Indians communicated the presence of min- ducing state in 2010 with a production of to 175,000 oz of gold production, with the after Barrick and 55% of the Goldcorp ac- erals in the San Potosì district to Francisco 22,590 oz of gold accounting for 32% of the cost of US$355 to US$365/oz,” said Man- tive assets are in Mexico,” said Garcia. Franco in the 15th century. Since then, San total national production. ley R. Guarducci, vice president and COO of Potosì is a major mining district, which is to- In recent years, exploration activities and Alamos Gold. Minera Frisco day once more exploited by junior companies mining exploitation in the Sonora state have The company is also expanding the Minera Frisco was already producing gold finding gold deposits in the area. intensified. Over the last year, companies mine’s production. “The new high grate mill and silver when the Mexican billionaire Car- New Gold’s El Cerro de San Pedro mine, have invested a total of US$ 397 million. will give us 75,000 to 150,000 extra oz/y. los Slim took the company public at the be- located 20km northeast of San Luis Potosí, They created roughly 135,000 jobs and ex- Subsequently, we will join the 250,000 to ginning of 2010. In 2010, Frisco produced has gold reserves of 1.4 million oz and silver tracted 3,400,000 mt of metallic and non- 300,000 oz/y producers in Mexico, what 200,000 oz of gold and 5.5 million oz of reserves of 52 million oz. metallic minerals. we consider as a very significant step,” said silver from its Mexican projects. New Gold is an intermediate gold pro- An important gold mine in Sonora is Ala- Guarducci. 1n 2011, the company’s management ducer, operating assets in the United States, mos Gold’s Mulatos mine, with more than Alamos Gold recently added the Ağı said it will spend nearly US$750 million Mexico, Australia and development projects 60 million mt of reserves at close to 1.5g/ Dağı and Kirazlı properties in Turkey to its to more than double Grupo Frisco’s gold in Canada and Chile. mt. “For 2011 we are forecasting 160,000 portfolio. It also owns several exploration projects. “We expect to increase production three times over the next three or four years,” said Guarducci, who has a vast experience in Latin America’s mining industry. Alamos Gold’s Mulatos mine and other mines, such as La Herradura and El Chan- ate, have helped to make Sonora the number one producer of gold in Mexico. The NWM Mining Corporation, listed on both the Toronto and the Frankfurt Stock Exchanges, is a Canadian company that entered Mexico in 2005 to develop the Lluvia de Oro and La Jojoba gold mines located in Sonora. Lluvia Jojoba produces mainly gold, but also silver and copper. NWM owns several properties in the country, including the Sierra Pinta underground gold mine in north-west Sonora. Sierra Pinta is just 15 km away from La Herradura, Mexico’s biggest gold mine. “In a few years we will have some mature projects and several mines that will have started producing. In addition, we will increase our portfolio and as a result, investors will keep on trusting NWM mining as a good cap to invest in,” said Marco Anto- nio Bernal Portillo, administrative director for Minera Columbia de Mexico, which is NWM’s Mexican subsidiary. Yamana Gold Inc., a dynamic gold producer active in Latin America with six pro-

58 E&MJ • OCTOBER 2011 www.e-mj.com www.e-mj.com E&MJ • OCTOBER 2011 59 MEXICAN Mining ducing mines and four projects currently The Chihuahua state ranks second in under construction, which will contribute Mexico for both gold and silver. Goldcorp’s to expected production growth of over El Sauzal mine, AuRico Gold’s Ocampo 60% to 1.7 million oz of gold in 2014. mine, Hochschild’s Moris mine and Mine- The first of these projects to commence finders Dolores mine are some of the big- production is the Mercedes project located gest producing mines of the state. in Sonora, Mexico. AuRico Gold’s Ocampo mine in Chi- “Construction and mine development huahua started production in 2006. Since at the project are progressing ahead of then, the company has been growing at a schedule and commercial production is steady rate. “AuRico Gold is the second now expected to begin before mid-2012”, largest Canadian gold producer in Mexico, commented Peter Marrone, Yamana after GoldCorp. Right now we have more Gold’s CEO. than US$100 million in the bank and Gold will be extracted at the Mercedes most of our explorations are funded by our project by agitated leaching with counter own cash flow,” said Luis Chavez, corpo- Luis Chavez, corporate director for Mexico, current decantation and Merrill-Crowe rate director for Mexico at AuRico Gold. AuRico Gold Keith Piggott, president and CEO, Goldgroup processing. The mine is expected to pro- In 2010, AuRico Gold’s production was duce approximately 120,000 oz/y of gold 220,000 equivalent oz of gold, meaning Goldgroup’s flagship operation is situated Junior companies: silver for over seven years. Current exploration silver and gold, including the Ocampo and in the state of Veracruz. “Caballo Blanco has “The basis of our exploration success lies in success is expected to increase both mine El Cubo mines’ production. high profit margins and on top of that will the fact that Mexico was closed to foreign life and annual production. “Our plan is to produce up to 400,000 start production by the end of 2012 with investments in the mining sector for more “We will be investing US$11 million oz in total by the end of next year. We around 100,000 oz/y. The gold here is very than 40 years and that only changed in at Mercedes in 2011 for exploration to have just announced a merger with Capital fine and leaches very rapidly, hence, the 1992. As a result, the entire country is rela- follow-up on previous successes. Organic Gold. In numbers it will be a final quote project can be set into production cheaply tively under-explored, and even old famous growth is one of Yamana’s key strategies spend by the shareholders of Capital Gold with capital costs of less than US$40 mil- silver mining districts with 450 years of pro- and achieved through continued aggres- to consolidate the acquisition adding lion and under US$400/oz operating costs. duction history have seen little modern sys- sive exploration and optimizations and 50,000 oz. Furthermore, we have several Our growth expectations are very high – from tematic exploration,” said Bradford Cooke, expansions at operations. It is through or- exploration projects that are in different 25,000 to at least 200,000 oz/y of gold Endeavour Silver’s chairman and CEO. ganic growth and exploration success that stages of progress, including Guadalupe y within less than three years time. The com- “I founded the company in 2002 to get we will continue to build significant value Calvo, which will be ready to produce in pany has no debt, more than US$40 million into silver, as at that time the gold price was for our shareholders,” said Marrone. two years,” said Chavez. in the bank and a very profitable operating rising, but the silver price was not. In my ex- mine. We are a very well financed com- perience, wherever gold goes, silver follows. pany with two world-class projects, Caballo In 2003, we came to Mexico as a very small Blanco and San Jose de Garcia, both in the company with only two people, a little bit advanced stages of exploration,” said Keith of money and an idea. The idea was to look Piggott, Goldgroup’s president and CEO. for high grade silver veins, like the Spaniards Durango State is the third producer for did centuries ago. Once we found the right both gold and silver. According to insiders, deposit, it only took us six months from sign- with massive foreign investment from major ing the agreement for the first acquisition to and junior companies alike, Durango could generate cash-flow,” said Cooke. surpass its neighbor Chihuahua in the near Since that time, the company has grown term. New promising projects in the state in- its reserves and resources, silver and gold clude Soho Resources’ Tahuehueto project, production and mine operating cash flow reactivated in 2004 and expected to be in every year. Moreover, Endeavour Silver has production in about a year. expanded the Guanacevi and the Guanajua- Furthermore, Chesapeake Goldcorp dis- to’s plants, leaving the door open for future covered a massive undeveloped gold and expansion. silver deposit in northwestern Durango in “Each year, we acquire more land and 2010. Estimates indicate the Metales proj- explore those areas and luckily, every year ect will have an investment of US$3.16 bil- since start-up, we have made at least one lion, becoming the fifth largest in the world. material new discovery. Our exploration In Zacatecas, Goldcorp hosted the official success is proof that if you bring the money inauguration of its new Peñasquito mine, and the expertise, there is definitely excel- the largest open-pit gold mine in Mexico, lent potential to discover new ore-bodies in processing 120,000 mt/d of rock in 2010. the old silver mining districts of Mexico,” Based on current estimates, Peñasquito has said Cooke. a mine life of 22 years, which includes 17.4 In general, the silver mines in Mexico are million oz of gold and more than 1 billion present along the Sierra Madre Occidental, oz of silver. The mine is a boom to the lo- or in the central plateau of Chihuahua, Coa- cal economy, as it created more than 2,000 huila and Durango, as well as in the south jobs directly on the mine site and another of the country, including Zacatecas, Guana- 12,500 indirect jobs. juato, Pachuca and Queretaro. Formations

60 E&MJ • OCTOBER 2011 www.e-mj.com www.e-mj.com E&MJ • OCTOBER 2011 61 MEXICAN Mining ducing mines and four projects currently The Chihuahua state ranks second in under construction, which will contribute Mexico for both gold and silver. Goldcorp’s to expected production growth of over El Sauzal mine, AuRico Gold’s Ocampo 60% to 1.7 million oz of gold in 2014. mine, Hochschild’s Moris mine and Mine- The first of these projects to commence finders Dolores mine are some of the big- production is the Mercedes project located gest producing mines of the state. in Sonora, Mexico. AuRico Gold’s Ocampo mine in Chi- “Construction and mine development huahua started production in 2006. Since at the project are progressing ahead of then, the company has been growing at a schedule and commercial production is steady rate. “AuRico Gold is the second now expected to begin before mid-2012”, largest Canadian gold producer in Mexico, commented Peter Marrone, Yamana after GoldCorp. Right now we have more Gold’s CEO. than US$100 million in the bank and Gold will be extracted at the Mercedes most of our explorations are funded by our project by agitated leaching with counter own cash flow,” said Luis Chavez, corpo- Luis Chavez, corporate director for Mexico, current decantation and Merrill-Crowe rate director for Mexico at AuRico Gold. AuRico Gold Keith Piggott, president and CEO, Goldgroup processing. The mine is expected to pro- In 2010, AuRico Gold’s production was duce approximately 120,000 oz/y of gold 220,000 equivalent oz of gold, meaning Goldgroup’s flagship operation is situated Junior companies: silver for over seven years. Current exploration silver and gold, including the Ocampo and in the state of Veracruz. “Caballo Blanco has “The basis of our exploration success lies in success is expected to increase both mine El Cubo mines’ production. high profit margins and on top of that will the fact that Mexico was closed to foreign life and annual production. “Our plan is to produce up to 400,000 start production by the end of 2012 with investments in the mining sector for more “We will be investing US$11 million oz in total by the end of next year. We around 100,000 oz/y. The gold here is very than 40 years and that only changed in at Mercedes in 2011 for exploration to have just announced a merger with Capital fine and leaches very rapidly, hence, the 1992. As a result, the entire country is rela- follow-up on previous successes. Organic Gold. In numbers it will be a final quote project can be set into production cheaply tively under-explored, and even old famous growth is one of Yamana’s key strategies spend by the shareholders of Capital Gold with capital costs of less than US$40 mil- silver mining districts with 450 years of pro- and achieved through continued aggres- to consolidate the acquisition adding lion and under US$400/oz operating costs. duction history have seen little modern sys- sive exploration and optimizations and 50,000 oz. Furthermore, we have several Our growth expectations are very high – from tematic exploration,” said Bradford Cooke, expansions at operations. It is through or- exploration projects that are in different 25,000 to at least 200,000 oz/y of gold Endeavour Silver’s chairman and CEO. ganic growth and exploration success that stages of progress, including Guadalupe y within less than three years time. The com- “I founded the company in 2002 to get we will continue to build significant value Calvo, which will be ready to produce in pany has no debt, more than US$40 million into silver, as at that time the gold price was for our shareholders,” said Marrone. two years,” said Chavez. in the bank and a very profitable operating rising, but the silver price was not. In my ex- mine. We are a very well financed com- perience, wherever gold goes, silver follows. pany with two world-class projects, Caballo In 2003, we came to Mexico as a very small Blanco and San Jose de Garcia, both in the company with only two people, a little bit advanced stages of exploration,” said Keith of money and an idea. The idea was to look Piggott, Goldgroup’s president and CEO. for high grade silver veins, like the Spaniards Durango State is the third producer for did centuries ago. Once we found the right both gold and silver. According to insiders, deposit, it only took us six months from sign- with massive foreign investment from major ing the agreement for the first acquisition to and junior companies alike, Durango could generate cash-flow,” said Cooke. surpass its neighbor Chihuahua in the near Since that time, the company has grown term. New promising projects in the state in- its reserves and resources, silver and gold clude Soho Resources’ Tahuehueto project, production and mine operating cash flow reactivated in 2004 and expected to be in every year. Moreover, Endeavour Silver has production in about a year. expanded the Guanacevi and the Guanajua- Furthermore, Chesapeake Goldcorp dis- to’s plants, leaving the door open for future covered a massive undeveloped gold and expansion. silver deposit in northwestern Durango in “Each year, we acquire more land and 2010. Estimates indicate the Metales proj- explore those areas and luckily, every year ect will have an investment of US$3.16 bil- since start-up, we have made at least one lion, becoming the fifth largest in the world. material new discovery. Our exploration In Zacatecas, Goldcorp hosted the official success is proof that if you bring the money inauguration of its new Peñasquito mine, and the expertise, there is definitely excel- the largest open-pit gold mine in Mexico, lent potential to discover new ore-bodies in processing 120,000 mt/d of rock in 2010. the old silver mining districts of Mexico,” Based on current estimates, Peñasquito has said Cooke. a mine life of 22 years, which includes 17.4 In general, the silver mines in Mexico are million oz of gold and more than 1 billion present along the Sierra Madre Occidental, oz of silver. The mine is a boom to the lo- or in the central plateau of Chihuahua, Coa- cal economy, as it created more than 2,000 huila and Durango, as well as in the south jobs directly on the mine site and another of the country, including Zacatecas, Guana- 12,500 indirect jobs. juato, Pachuca and Queretaro. Formations

60 E&MJ • OCTOBER 2011 www.e-mj.com www.e-mj.com E&MJ • OCTOBER 2011 61 MEXICAN Mining

million oz/y. In 2005, Pan American Silver According to Lozano, Silver Standard is opened its first open-pit mine in Mexico; the financing its exploration activity and acqui- Alamo Dorado project in the Sierra Madre sition of new mines with the sale of projects Occidental in Alamos, Sonora. In 2007, the in British Colombia that have generated mine started commercial production. Alamo US$230 million. Dorado is a very successful mine that has Another junior producer in Mexico is matured its production to 6.7 million oz/y Great Panther Silver that has its main mine on a budget of US$4.5 million/y in 2010. in Guanajuato. The mine had been previ- “In terms of our Mexico operations, in ously exploited by Spanish colonials. Great 2010, Alamo Dorado produced 28% and Panther Silver owns two operating mines in La Colorada 15% of the total silver ounces Mexico and aims to mine about 2 million oz for the company, which accounted for 43% gold equivalent in 2011. “We are success- of the total Pan American Silver oz produc- ful in organic growth of the old operations tion last year. We have studies ongoing at structure toward the new operation, with the moment developing strategies on stock- innovative equipment,” said Andrew Sharp, Bradford Cooke, chairman and CEO, Chris Warwick, country manager at Pan American piles and further waste stripping and plant general director at Great Panther Silver. Endeavour Silver Silver, Mexico expansion to increase throughput to the originated by intrusive rocks, like Taxco, mills,” said Chris Warwick, country man- “We were looking for opportunities in Mex- Copper Guerrero and Temalcaltepec have contrib- ager at Pan American Silver, Mexico. Pan ico and came up with the projects that we Just as with gold and silver, copper prices uted significantly for centuries to the gen- American Silver is looking for further inter- are now developing,” said Lozano. have increased quickly over the last few eral silver production. At present, the major esting projects to acquire. These include the Pitarilla silver and zinc years. In 2010, Mexico ranked as the world’s silver producing states are Sonora, Zacate- Silver Standard has a pipeline of 15 deposit, with more than 600 million oz of 16th largest producer of refined copper. Mexi- cas, Durango, Chihuahua, Guanajuato and projects, ranging from grassroots explora- silver. This open-pit mine has been taken can copper production has grown by 4% in Queretaro. tion to production, spread across Argen- into production during the course of 2011, 2010 compared to 2009. Pan American Silver Corp. has seven tina, Peru, Mexico, Canada, Chile, the while the company is still developing the The majority of copper comes from the operating mines in Mexico, Peru, Argen- United States and Australia. “For 50 years underground part of the mine. “In two to Mexican copper belt. The belt stretches along tina and Bolivia. In 2003, Pan American Silver Standard did nothing else than ex- three years Pitarilla will become a bimodal the west of the country to the northern state Silver acquired the La Colorada mine in ploration and acquisition,” said Guillermo operation with the open-pit and under- of Baja California through Sonora, Sinaloa, Zacatecas state. During the last five years Lozano, Silver Standard’s Mexican country ground mine,” said Lozano. The San Luis and western Chihuahua towards Chiapas. La Colorada has been a steady producer of manager. In 2002, the company came to project, a high-grade gold and silver discov- The highest producing copper operations silver with a production output of close to 4 Mexico and started a grassroot business. ery, will probably start producing in 2012. include Cananea and La Caridad, both located in Sonora, as well as Sabinas and San Martin, which are located in Zacatecas, and Santa Barbara and San Francisco del Oro located in Chihuahua.

Grupo Mexico According to official data, the state that increased its production most in 2010 was So- nora, which accounted for 67% of national copper production, thanks mainly to the mu- nicipalities of Cananea, Nacozari de Garcia and Santa Cruz. In Sonora, Grupo México operates Cananea, North America’s oldest and one of the world’s largest open-pit copper mines. Nearby is La Caridad, also owned by Grupo México. In the first quarter of 2011 the company reported a 47% increase in net earnings for the first quarter of this year’s copper production. The estimated copper production for 2011 is 830,000 mt, of which the Southern Copper mines in Latin America will produce 630,000 mt, and 200,000 mt by the Asar- co mines in the U.S. The increase in copper production was mainly due to the restart of production at the Buenavista mine, also known as Cananea, which has started to operate at full capacity after a three year strike ended in October 2010 and has even optimized the production process in order to raise the final copper

62 E&MJ • OCTOBER 2011 www.e-mj.com www.e-mj.com E&MJ • OCTOBER 2011 63 MEXICAN Mining

62 E&MJ • OCTOBER 2011 www.e-mj.com www.e-mj.com E&MJ • OCTOBER 2011 63 MEXICAN Mining MEXICAN Mining output during the first two quarters of 2011. Goldcorp became the largest producer of “Cananea will revolutionize Mexico’s copper zinc in Mexico with 65,332 mt/y of zinc. Interview with Rosalind Wilson, former president of the Canadian Chamber of production,” said Jose Armando Cordoba, di- Mexican company Industrias Peñoles is the Commerce (Cancham) in Mexico rector of mining for the Sonora government. largest zinc producer in the country. Copper production at a new project, called El Chihuahua and Zacatecas produce the Please tell us about the history of Cancham The risk for Mexico is that if a new royalty Arco in Baja California, is expected to start most zinc and lead, hosting mines including and Canadian investments in Mexico? tax is badly designed and/or implemented, by 2015. “El Arco will be a development Santa Barbara and San Francisco del Oro. In 1982, a few Canadian business people, our companies could well opt to move their pole in the Baja California state, as we plan The largest individual producers in Mexico including representatives of two banks and investments to countries with more favour- to create at least 4,000 direct jobs,” said are the Charcas mine in San Luis Potosi a mining company, founded Cancham. able tax regimes. one of the directors at Grupo Mexico. and the Francisco y Madera mine, which is The Chamber lived through some ups and The group also owns a metallurgical min- Mexico’s largest zinc mine (61,082 mt Zn downs during the the 1980s and early How do Canada’s financial institutions ing complex that includes a smelter, a refin- in 2007) in the state of Zacatecas. The Na- 1990s,, and it was not until the NAFTA was serve Mexico? ery of electrolytic copper, a precious metals ica mine, located in Chihuahua, is Mexico’s signed in late 1994 that the Chamber really Canada is a worldwide leader in terms of refinery and a copper rod’s plant, which is largest lead producer. Industrias Peñoles and started to grow. generating and obtaining financing for Small located only 24 km from its mining unit La Grupo Mexico are the largest players in this Our investment portfolio is very diverse. and Medium Sized Enterprises (SME’s) in- Caridad. Grupo Mexico, listed on the Mexi- sector. The major sectors for Canadian investments cluding junior mining projects. The Toronto Gold pour at Cerro Colorado. Photo courtesy are mining, financial services, automotive, stock exchange (TMX) has been fundamental can Stock Exchange, is the largest mining of Goldgroup Mining corporation in Mexico and the third largest Peñoles oil and gas, and transportation industries. in this entire boom of mining investment for Peñoles is a vast mining, metallurgical and in Mexico, followed by Grupo Mexico,” said We have rail cargo services connecting our the past five years not only in Mexico, but copper producer in the world. Rosalind Wilson, former president of CANCHAM chemical company. “Mining and metal- Allanis. Currently the group has six mining two countries and Air Canada is expanding worldwide. Lead & zinc lurgy are the core of Peñoles’ business. Zinc operations and a very important metallurgi- its passenger routes constantly. Most of the What kind of improvements in terms of TMX and the Mexican Bolsa de Valores According to the International Lead and is one of our strengths and we own mines cal complex for nonferrous metals, which is Canadian banks are present, with Scotiabank regulatory framework would you like to have initiated talks in terms of creating a Zinc Study Group (ILZSG) based in Lisbon, such as Bismark and Francisco y Madero, the fourth largest in the world. being a leader in retail banking services. see to facilitate the investments of Cana- mechanism that would allow for joint list- Portugal, production of zinc in 2010 was and poly-metallic mines like those in Sabi- Peñoles owns 77% of Grupo Fresnillo. Our strongest investment sector is the dian companies? ings. This is a fabulous initiative as it would 12,309,000 mt, an 8.8% increase from nas, Coahuila and Zacazonapan in the state “Our combined investment is about US$100 mining sector. Mining represents more than As most mining companies invest signifi- not only provide key financing to SME’s oper- 2009. This is explained by the increased of Mexico (a joint venture with a Japanese million a year, with very aggressive growth 50% of Canadian Foreign Direct invest- cantly in local communities as part of their ating in both countries, but would also allow production in the mines of China, Australia, company), as well as a copper mine in Sono- plans for our silver, gold, zinc, lead and cop- ment in Mexico and today the strongest task corporate social responsibility programs, re- the Mexican public to invest in companies India, Mexico and Russia. ra, and Naica in Chihuahua,” said Fernando per business,” said the company’s CEO. force within the chamber is the Mining Task cent talks of bringing in an additional royalty and projects that are being explored and de- In 2010, zinc mine production in Mexico Alanis, Peñoles’ general director. Force. We have more than 50 Canadian tax is a controversial topic. veloped in their home country. was 476,493 mt, worth 23% more than in Peñoles produces about 240,000 mt/y Iron mining companies members, which includes In general, Canadian financed mining 2009. The Penasquitos mine operated by of zinc. “Peñoles is the largest zinc producer China is the key driver of the global iron ore our biggest Canadian investor in Mexico, companies do understand the potential ben- What activities and initiatives does Can- industry, and will remain so for the foresee- Goldcorp. efits if part of the taxes go back into the local cham promote to get Canadian companies able future. Chinese investments plans on communities. But we are concerned about to invest in Mexico? iron projects in Mexico are still confidential. What is the role of the mining task force any additional tax that simply fills federal CanCham is active in most mining forums in Arcelor Mittal, Ternium and Altos Hornos de within Cancham? pockets. Mexico and we work very closely with CAMI- Mexico SAB de CV are the principal players Essentially the mining task force is a plat- This is a sensitive topic for any mining MEX in order to coordinate our efforts in an on the Mexican iron ore market. form for Canadian companies to share com- company, including the Canadians, as they effective manner. The weakened global demand caused by mon success and areas of improvement. We already invest heavily in building access We also work with local state govern- the global financial crisis in 2008 has had a meet every couple of months to share expe- roads, water treatment plants, electricity, ments and local authorities to address lo- strong negative impact on the iron ore indus- riences, find solutions and strategies to ap- health services, community development, cal mining issues and encourage dialogue try globally, including in Mexico. Arcelor Mit- proach local issues and authorities. and hospitals in many towns where mines between investors and the communities in tal, for example, had to suspend operations Currently, there are 208 mining com- are operated. The tax is an increasingly spo- which they operate. We believe that clear on its plants in December 2008 as a strategy panies with Canadian capital registered in ken of topic at this moment, and if it’s imple- and open communication leads to a healthy to address the crisis. Mexico, managing 585 projects. Basically mented the chamber will advocate a mecha- investment environment that creates inves- The company’s production restarted in 75% of the foreign financed companies in nism that encourages the flow of funds into tor confidence and therefore attracts foreign January 2010 and today, with iron ore’s the mining sector in Mexico are Canadian. the local communities. capital, which in turn generates local wealth. high prices recovering, Arcelor Mittal has new ambitious expansion plans. “The expansion project of the concentrate production at our Las Truchas plant in April 2011 has allowed scale capacity of 2 million mt/y to increase to 2.6 million mt/y,” said Bill Chisholm, Arcelor Mittal’s CEO for Mexico. Arcelor Mittal will expand the concentra- tion capacity at Las Truchas’ up to 6 million mt/y, with an investment of US$300 million over the next three years. In conclusion, with gold and silver, copper, iron, steel and zinc prices at all-time highs, the stage is set for a major push in exploration, development and production. Goldgroup Mining’s Caballo Blanco project

64 E&MJ • OCTOBER 2011 www.e-mj.com www.e-mj.com E&MJ • OCTOBER 2011 65 MEXICAN Mining MEXICAN Mining output during the first two quarters of 2011. Goldcorp became the largest producer of “Cananea will revolutionize Mexico’s copper zinc in Mexico with 65,332 mt/y of zinc. Interview with Rosalind Wilson, former president of the Canadian Chamber of production,” said Jose Armando Cordoba, di- Mexican company Industrias Peñoles is the Commerce (Cancham) in Mexico rector of mining for the Sonora government. largest zinc producer in the country. Copper production at a new project, called El Chihuahua and Zacatecas produce the Please tell us about the history of Cancham The risk for Mexico is that if a new royalty Arco in Baja California, is expected to start most zinc and lead, hosting mines including and Canadian investments in Mexico? tax is badly designed and/or implemented, by 2015. “El Arco will be a development Santa Barbara and San Francisco del Oro. In 1982, a few Canadian business people, our companies could well opt to move their pole in the Baja California state, as we plan The largest individual producers in Mexico including representatives of two banks and investments to countries with more favour- to create at least 4,000 direct jobs,” said are the Charcas mine in San Luis Potosi a mining company, founded Cancham. able tax regimes. one of the directors at Grupo Mexico. and the Francisco y Madera mine, which is The Chamber lived through some ups and The group also owns a metallurgical min- Mexico’s largest zinc mine (61,082 mt Zn downs during the the 1980s and early How do Canada’s financial institutions ing complex that includes a smelter, a refin- in 2007) in the state of Zacatecas. The Na- 1990s,, and it was not until the NAFTA was serve Mexico? ery of electrolytic copper, a precious metals ica mine, located in Chihuahua, is Mexico’s signed in late 1994 that the Chamber really Canada is a worldwide leader in terms of refinery and a copper rod’s plant, which is largest lead producer. Industrias Peñoles and started to grow. generating and obtaining financing for Small located only 24 km from its mining unit La Grupo Mexico are the largest players in this Our investment portfolio is very diverse. and Medium Sized Enterprises (SME’s) in- Caridad. Grupo Mexico, listed on the Mexi- sector. The major sectors for Canadian investments cluding junior mining projects. The Toronto Gold pour at Cerro Colorado. Photo courtesy are mining, financial services, automotive, stock exchange (TMX) has been fundamental can Stock Exchange, is the largest mining of Goldgroup Mining corporation in Mexico and the third largest Peñoles oil and gas, and transportation industries. in this entire boom of mining investment for Peñoles is a vast mining, metallurgical and in Mexico, followed by Grupo Mexico,” said We have rail cargo services connecting our the past five years not only in Mexico, but copper producer in the world. Rosalind Wilson, former president of CANCHAM chemical company. “Mining and metal- Allanis. Currently the group has six mining two countries and Air Canada is expanding worldwide. Lead & zinc lurgy are the core of Peñoles’ business. Zinc operations and a very important metallurgi- its passenger routes constantly. Most of the What kind of improvements in terms of TMX and the Mexican Bolsa de Valores According to the International Lead and is one of our strengths and we own mines cal complex for nonferrous metals, which is Canadian banks are present, with Scotiabank regulatory framework would you like to have initiated talks in terms of creating a Zinc Study Group (ILZSG) based in Lisbon, such as Bismark and Francisco y Madero, the fourth largest in the world. being a leader in retail banking services. see to facilitate the investments of Cana- mechanism that would allow for joint list- Portugal, production of zinc in 2010 was and poly-metallic mines like those in Sabi- Peñoles owns 77% of Grupo Fresnillo. Our strongest investment sector is the dian companies? ings. This is a fabulous initiative as it would 12,309,000 mt, an 8.8% increase from nas, Coahuila and Zacazonapan in the state “Our combined investment is about US$100 mining sector. Mining represents more than As most mining companies invest signifi- not only provide key financing to SME’s oper- 2009. This is explained by the increased of Mexico (a joint venture with a Japanese million a year, with very aggressive growth 50% of Canadian Foreign Direct invest- cantly in local communities as part of their ating in both countries, but would also allow production in the mines of China, Australia, company), as well as a copper mine in Sono- plans for our silver, gold, zinc, lead and cop- ment in Mexico and today the strongest task corporate social responsibility programs, re- the Mexican public to invest in companies India, Mexico and Russia. ra, and Naica in Chihuahua,” said Fernando per business,” said the company’s CEO. force within the chamber is the Mining Task cent talks of bringing in an additional royalty and projects that are being explored and de- In 2010, zinc mine production in Mexico Alanis, Peñoles’ general director. Force. We have more than 50 Canadian tax is a controversial topic. veloped in their home country. was 476,493 mt, worth 23% more than in Peñoles produces about 240,000 mt/y Iron mining companies members, which includes In general, Canadian financed mining 2009. The Penasquitos mine operated by of zinc. “Peñoles is the largest zinc producer China is the key driver of the global iron ore our biggest Canadian investor in Mexico, companies do understand the potential ben- What activities and initiatives does Can- industry, and will remain so for the foresee- Goldcorp. efits if part of the taxes go back into the local cham promote to get Canadian companies able future. Chinese investments plans on communities. But we are concerned about to invest in Mexico? iron projects in Mexico are still confidential. What is the role of the mining task force any additional tax that simply fills federal CanCham is active in most mining forums in Arcelor Mittal, Ternium and Altos Hornos de within Cancham? pockets. Mexico and we work very closely with CAMI- Mexico SAB de CV are the principal players Essentially the mining task force is a plat- This is a sensitive topic for any mining MEX in order to coordinate our efforts in an on the Mexican iron ore market. form for Canadian companies to share com- company, including the Canadians, as they effective manner. The weakened global demand caused by mon success and areas of improvement. We already invest heavily in building access We also work with local state govern- the global financial crisis in 2008 has had a meet every couple of months to share expe- roads, water treatment plants, electricity, ments and local authorities to address lo- strong negative impact on the iron ore indus- riences, find solutions and strategies to ap- health services, community development, cal mining issues and encourage dialogue try globally, including in Mexico. Arcelor Mit- proach local issues and authorities. and hospitals in many towns where mines between investors and the communities in tal, for example, had to suspend operations Currently, there are 208 mining com- are operated. The tax is an increasingly spo- which they operate. We believe that clear on its plants in December 2008 as a strategy panies with Canadian capital registered in ken of topic at this moment, and if it’s imple- and open communication leads to a healthy to address the crisis. Mexico, managing 585 projects. Basically mented the chamber will advocate a mecha- investment environment that creates inves- The company’s production restarted in 75% of the foreign financed companies in nism that encourages the flow of funds into tor confidence and therefore attracts foreign January 2010 and today, with iron ore’s the mining sector in Mexico are Canadian. the local communities. capital, which in turn generates local wealth. high prices recovering, Arcelor Mittal has new ambitious expansion plans. “The expansion project of the concentrate production at our Las Truchas plant in April 2011 has allowed scale capacity of 2 million mt/y to increase to 2.6 million mt/y,” said Bill Chisholm, Arcelor Mittal’s CEO for Mexico. Arcelor Mittal will expand the concentra- tion capacity at Las Truchas’ up to 6 million mt/y, with an investment of US$300 million over the next three years. In conclusion, with gold and silver, copper, iron, steel and zinc prices at all-time highs, the stage is set for a major push in exploration, development and production. Goldgroup Mining’s Caballo Blanco project

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term future; the company can build itself up to having a number of very serious properties, and when it is more successful, can increase Modern methods mandatory for the drilling and sell its properties at a higher price. What happens in many cases is that bigger junior companies do an arrangement to buy exploration success the exploration company, but with our management company we would go on to do what we do and we are able to do,” said Richards. In the same way, the Canadian company Argonaut has bought Despite more than 500 years of mining tradition, Mexico is con- Herrera, founder and director of Geoprocessos, which provides map- Minera Pitalla/Pediment Goldcorp., an exploration company directed sidered an underexplored exploration target. Major discoveries have ping, environmental studies, geological and topographical surveys by the young but talented geologist Alberto Orozco. Minera Pitalla, been made over the last 20 years by the application of modern geo- and basic geological support for mineral exploration, working mainly with its portfolio of exploration projects in Mexico, has become the logical and geophysical research. “Today’s exploration techniques are with the Geological Mexican Service (SGM). exploration wing of Argonaut, a mining group which has expanded its highly developed. Easy targets are no longer available in Mexico, so Private Mexican companies focus on the acquisition and devel- production for 2011. In the following few years Argonaut aims to use the exploration stage has been advanced to a point whereby we have opment of mining projects in Mexico, such as Reyna Mining & En- Minera Pitalla’s experience and projects to expand its portfolio into a to go through the indirect methods: geophysics, airborne or ground gineering S.A de C.V. and Minera Cima. Reyna Mining buys mines medium producer status with three to four new mines. An example based concepts. Good opportunities are to identify the geology that is with potential to be developed by foreign investors that have the of one of their advanced exploration projects is La Colorada, a gold 200-300 meters above the earth deposit – so called semi-conception capital to bring them to production. “We have the experience to and silver open-pit mine that has stopped producing during the crisis targets. There is always the possibility to find something drilling un- identify projects of interest and the expertise to know how to develop and will re-start its production. der an old mine, but the exploration is going in the direction of the these projects in the most efficient and rapid way,” said J. Antonio The financial crisis has especially tested the mining companies Aerial view of Panamerican Silver’s Alamo Dorado mine conception and semi-conception targets,” said Tawn Albinson, Pros- Berlanga, Reyna Mining’s general director. “Minera Cima works in that had not yet commenced operations, as the market suspended pero Silver’s president. the exploration of commodities. So far we have developed and sold proved successful grounds for producing mines. “Dia Bras´ proj- most long-term investment. This tendency has hit some companies The General Mining Office has brought forward the integration of properties of silver, gold and copper. Our business is to find and ects are mostly located in the world-famous Sierra Madre Occidental hard, such as Lincoln Mining Corp., which had to suspend its ex- Mexico’s mining cartography, digitalizing more than 2 million docu- prepare mines to sell them to people who have a very significant mineral belt of northern Mexico, which hosts a series of historic min- ploration activity in Chihuahua since 2007 because of a severe lack ments and charts to clarify the Mining Public Registry information treasury that can develop the mines. The way we generate finance for ing districts that have attracted dozens of foreign companies since of financial resources. In 2009, it re-started its precious metals ex- and processes. The Mexican Geological Survey (SGM) is the public exploration is simple. I sell a certain property, I get cash and I invest Mexico reformed its mining laws in the early 1990s,” said Daniel ploration slowly. However, already by mid-2009, most exploration body that provides geologic information. The service has already cov- that money in further exploration – it simply works as an ongoing Tellechea, Dia Bras’ president and CEO. Another example is Coneto companies had found a new flow of capital, facilitated by the boom ered Mexico’s territory with a 1:250000 cartography and about 30% revolving fund,” said Ing. Jorge E. Ordonez, Minera Cima’s general project, owned by Orex Resources, which has a history of more than in metal prices. “2008 was a difficult year for Pediment and other with 1:50000 cartography. director, whose family has been active in the mining industry for 400 years as a mining camp, since the days of the Conquistadores. exploration companies. Due to uncertainty, it was difficult to raise “The areas with greatest geological potential are the northern min- more than a century. Moreover, Coneto is a gold-silver mineral exploration project centrally money for exploration and activities almost stopped completely un- ing states, such as Chihuahua, Sonora and Guerrero. Great potential Exploration companies judge the presence of old mines as a po- positioned in the ‘Mexican Silver Trend’ - the Mesa Central on the til mid 2009,” said Filiberto Lopez Navarro, Lincoln Mining Corp.’s is also to be found in Michuacan, Jalisco, Oaxaca, which are charac- tential for further ore bodies. Properties with mines operated by the Eastern side of the Sierra Madre Occidental mountains - where the director. “Today we are already back to the levels of 2006-7,” said terized by some land property and community problems,” said Jesus Spaniards and closed by the time of the Mexican revolution have largest silver-gold mine in the world, the Fresnillo mine, is located. Alberto Orosco, Argonaut’s exploration manager. “The Sierra Madre Occidental has produced an estimated 40 million oz of gold and 2 billion oz of silver since the time of the Spanish Conquest, but as the access to the area is difficult, there has been limited exploration,” said Golden Goliath’s CEO, J. Paul Sorbara. Golden Goliath’s Uruachic property covers an area of 15 by 25 km, with numerous formerly producing gold and silver mines dat- ing back to the time of the Spaniards. “The Uruachic mining camp lies directly in the center of the several hundred kilometers trend of important past producers and new discoveries that characterize the Sierra Madre Occidental, like the recent one made by Fresnillo very close to Golden Goliath’s property,” said Sorbara, who already understood the potential of the Sierra Madre when he was working in Mexico in the 1980s after he graduated in geology. As soon as the industry opened up to foreign investors in 1992, Sorbara came back to build his exploration company. In 2011, Agni- co-Eagle Mines invested in Golden Goliath’s IPO, demonstrating the property’s high potential. This latest case is the example of a business model which helps both exploration companies seeking funding to start a project and for production companies searching for a skilled team looking to develop new projects to expand their production. Another example is Orko Silver Corp., which, after the discovery of a silver deposit, La Preciosa, arranged a joint venture with Panameri- can on the new discovery. “Orko are the discoverers, Panamerican are the builders. So the two companies together make a very good synergy. The most likely scenario for the future is Panamerican Sil- ver buying Orko, or another company taking over. We let the mining companies proceed with the mining and we will keep focusing on exploration,” said Ben Whiting, chief of exploration at Orko Silver Corp. New discoveries are the challenge for any exploration company and according to Thomas Richards, Kootenay Gold’s exploration vice president: “Two things can happen in relation to the company’s short-

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projects. A good example is Kootenay Gold whole sector. Therefore, the energy sector Gold, which entered Mexico to start grass- in Mexico has certain limitations in terms roots exploration projects. They intend to de- of private participation. Foreign companies velop their Promontorio silver project, which are allowed to operate in the country only is now at advanced drilling stage and resource through specific service contracts. For exam- evaluation, while at the same time investing ple, Intergen provides power supply in Mex- in other early stage grassroots projects. ico. Frank Thiel, Intergen’s vice president Prospero Silver built up an exploration and general manager for Mexico and Latin portfolio for about 20 properties, based on America, said: “We provide efficient, low 30 years of geology experience in the coun- cost, reliable power with the best available try. “Some are grassroots properties com- technology for each specific project. Min- pletely, and some have advanced drilling, ing operations require a lot of power and we which we are going to develop further with hope to expand operations with other mining the hope of developing about three of them companies. We also look for opportunities Daniel Tellechea, president and CEO, Dia Bras into production in the next two years,” said Panamerican Silver’s La Colorada mine for renewable energies.” Tawn Albinson, president of Prospero Silver. Grupo Mexico is also building its own “Our strategy is to support financially Prospero Silver’s president might consid- Chihuahua, Durango and Sinaloa,” said Al- combined natural gas cycle power plant with the exploration activity with our operating er the option of proceeding on to the produc- binson. Since the early 2000s, foreign and 500 MW capacity, which will be supplying projects,” said Daniel Tellechea, Dia Bras’ tion stage. “If the project is too big for us we especially Canadian companies, such as several operations, including La Caridad, El president and CEO. Dia Bras is a Canadi- will sell the project or take in a partner. We Alamos Gold and Gammon Gold (now Au- Arco, Cananea and its metallurgical complex. an listed mining company focused on pre- would focus on a medium size site with a rico Gold), were the ones investing more in Peñoles has recently begun contributing pow- cious and base metals in Peru and Mexico. good enough grade if we decide to start our exploration than Grupo Mexico and Peñoles. er generation to San Luis Potosí, integrating The company’s projects include the Bolivar own production. The areas we are exploring However, over the last two years, the giant all of its needs in order to become more com- Property in Chihuahua State, Mexico and are of the safe type, the easy accessible ones, domestic producers, such as Fresnillo, Em- petitive. “Extraction costs plus treatment and the Cusi Property, while they are also explor- and we stay away from the south of Mexico, presas Frisco and Grupo Mexico are strongly refining fees, which are almost 50% of the ing several base and precious metals targets the canyons in the western mountain range, investing in exploration in the country and production costs for zinc, are a critical part in both countries. and the agriculture type that would compli- matching foreign dollars with Mexican pesos. of the business. For Peñoles the metallurgi- With the metal prices boom, several for- cate project progress. We stick to the Plano cal complex is a strength, but it consumes a eign exploration companies arrived in Mexico Alto, the higher part of the Sierra Madre Oc- Energy supply for mining lot of energy, which is expensive in Mexico,” since 2009, taking advantage of easier condi- cidental or we go to the coastal areas. Mainly operations said Fernando Alanis, Peñoles’ general direc- tions to raise funding for long-term exploration in northern and central Mexico: Zacatecas, Despite the fact that Fresnillo is not currently tor. Power is a potential opportunity for min- investing in its own energy sources, cost ing contractors that, within their services, control was one of the reasons for Fresnillo’s build power plants. “Construplan’s team has excellent financial performance in 2010. gained experience in building thermo-electri- So far the company has an agreement with cal plants and this sector represents an in- Peñoles, which has its own energy plant, teresting business opportunity for us,” said receiving support in case of electricity short- Alfonso Reina Villegas, general director of ages. “Electricity is one of the highest costs the mining contractor company Construplan. for a mine operation,” said Salvador Garcia, “Construplan has already built a gas pipeline Goldcorp’s vice president in Mexico. big enough to prove our ability. Furthermore In January 2011, Goldcorp announced we participate in the development of our the signing of a Power Delivery Agreement country by building different facilities neces- with a subsidiary of Intergen, a global power sary for gas network including several diam- generation company with power plants lo- eters gas lines, gas compression stations and cated in Mexico, UK, Netherlands, Philip- distribution networks in urban areas.” pines and Australia. The agreement will see At its El Boleo project, Baja Mining is Intergen construct and operate a 200-250 building a cold generating plant for power, MW gas-fired combined cycle power plant to which will produce about 40MW. “Due to deliver electricity to the Peñasquito mine in the lack of fresh water we are going to use Zacatecas for a minimum term of 20 years. seawater for the leach and the fresh water “This agreement helps secure a long-term only later for the electro winning process. It supply of electricity to Peñasquito at stable is an expensive procedure because we rely pricing with anticipated substantial cost sav- on a cold generating plant for power, but it ings compared to current arrangements,” is cogenerated. When you produce sulphuric said Goldcorp’s management at the time of acid you liberate a lot of heat with which the agreement. you can turn steam turbines. So, power is Peñasquito is one of three operating mainly free except for the maintenance. In mines that Goldcorp owns in Mexico and addition we have generators running on fos- the single largest mining investment in the sil fuels, not generally diesel, but less refined country. The electricity sector in Mexico is oils which can produce about 10MW,” said federally owned, with the Federal Electricity Tawn Albinson, country manager at El Boleo Commission (CFE) essentially controlling the in Baja California.

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said Mauricio Candiani, president and industry in Mexico remains financially un- ries of activities to showcase Mexico’s in- CEO at Candiani mining. derserved for its size and sophistication. frastructure and mining potential. Promex- Finance With the double listing, Canadian “We believe mining in Mexico has the larg- ico’s chairman at that time, Bruno Ferrari, junior companies listed in Toronto, but est gap of financial investment of all the has now become Minister of Economy. Mexico draws heavy investment from Canada, second only to U.S. with their main producing assets in industries,” said Roberto Charvel, man- Ferrari believes the diversification Mexico, will be able to raise some of the ager at Vander Capital Partners. of trading partners is a good way to de- money to finance projects via the Mexi- The Vander Fund is the first Mexican crease Mexico’s excessive dependence on The importance of Canadian producing mines in Mexico operating with Canada is the second largest investor can Stock Exchange. fund raising private equity funding with the U.S. market. “We are getting rid of investment in Mexico Canadian capital, management and Cana- in Mexico, behind the United States. This On the other hand, Mexican companies a special focus on the Mexican mining the restriction caused by the single U.S. According to the Mexican Mining Chamber dian and Mexican engineering. Canadian influx of capital is also testimony listed on the Mexican Stock Exchange, industry. “Lack of specialized financial market gradually. The economic and trade (CAMIMEX), in 2010, total investment in “It is Canada’s strongest ability to gen- that Canadian companies are at an advan- such as Grupo Mexico and Peñoles, will mining structures and institutions, diffi- activities between Mexico and European the mining industry increased by 16% to erate and obtain financing. The Toronto tage over their Mexican counterparts due to have the opportunity to spin off assets culty accessing debt or equity financing, or Asian countries have become more fre- US$3.32 billion ($458 million more than in Stock Exchange has been fundamental in the support they receive from their banks at with marginal funding projects through the an incomplete market for monetizing re- quent. Mexico and China should strength- 2009). Investments between 2007-2010 this entire boom of investment for the past home. “Based in terms of liquidity and their Toronto Stock Exchange without affecting serves and a negative impact in execution en their mutual understanding and invest- amounted to US$11,986 million. Addition- three years. Especially in financing min- stable position, the Canadian banking sec- their multiple cash flow as provided by capacity are the factors that have hindered ment to bring economic and trade relations ally, US$9.3 billion in further investment is ing projects, not only in Mexico but also tor qualifies as one of the best in the world,” the Mexican market. “The double listing this type of funding. So we aim to find the to a new stage,” said Ferrari. expected over the next two years. worldwide,” said Rosalind Wilson, former said Wilson. opens up many opportunities for mining financial gaps and build a bridge in terms Chinese investors are going to invest up In terms of foreign investors, Canada president of the Canadian Chamber of Com- companies and we are going to support of funds,” said Charvel. to US$12 billion in the Mexican mining has emerged as the number one source of merce in Mexico (CANCHAM). Prospects for Canadian it. We see benefits to both of our stock A positive example in support of Mexi- sector in the short-term. Of the first US$2 capital, providing approximately 75% of the “This creates collaboration between companies markets collaborating more closely,” said co’s efforts is Peru, which operates one of billion, 30% will be invested in produc- total of foreign investment in the Mexican Mexico and Canada certainly unique in The Toronto Stock Exchange and the Mexi- Rishchynski. the best performing stock exchanges in the ing operations, 30% in developing projects mining sector. the history of our bilateral relationship and can Bolsa are to offer double listing. This “Companies with capital in excess of world and where 60% of the listed compa- close to the production site, and 30% will Some of the interest stems from the eco- something we Canadians are very proud means Canadian small and medium com- US$100 million will then be able to ac- nies are mining companies. go into exploration. nomic proximity of Canada and Mexico’s of. The Vancouver and Toronto Stock Ex- panies will be listed on the Mexican Bolsa cess institutional investors, including pen- A total of US$50 billion will be invested membership of the North American Trade change are a logical source [for capital] for to reach a broader-based public and attract sion funds and other public investors,” Chinese investments in Mexico in Mexico by China, distributed between Agreement. Mexico, especially in terms of the invest- additional investors and Mexican compa- said Luis Tellez, president of the Mexican ProMexico, a Mexican government institu- energy, ports, railways and mining. These Today, however, there are around 210 ments they are looking for to accelerate nies vice versa. The double listing will be Stock Exchange. tion in charge of strengthening Mexico’s investments plans also include a US$3 Canadian mining companies active in Mexi- the development of the mining sector,” active by the end of 2011 and developed in contribution to the international economy billion refinery, which will compete with co, managing more than 580 projects. Most said Guillermo E. Rishchynski, former Ca- the next few years. Challenges and opportunities ran Mexico’s participation in the Shanghai Peñoles’ in Torreon. of these companies are active in the explo- nadian Ambassador and honorary presi- “So far, Mexico does not have the same If the Canadian companies are so success- World Expo in October 2010. China will be a new player in the Mexi- ration phase of mining, but there are 44 dent at the CANCHAM. capacity as Canadian venture capital,” ful in raising capital to invest, the mining On that occasion, ProMexico held a se- can mining industry.

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The U.S. government estimates that 50% Guillermo Ramirez Alonso, mining director valuable ores and equipment, and in some of the cocaine shipped by Colombia’s or- at Yesera Monterrey, which produces and cases even kidnapped them for a ransom. ganized crime groups to the United States sells industrial plasters. Service companies compete to provide the transits through Mexico. Although the Moreover, many mining projects are lo- best service to their customers in the field Mexican drug war among various cartels for cated in remote areas in the forest where and have to get organized to cross these regional control has gone on for a few de- most of the marijuana and poppy cultivation remote areas. “In terms of security issues, cades, President Felipe Calderon’s offensive are and where drug traffickers hide. Nev- the situation has become worse in the last strategy against the drug gangs has created ertheless, mining activity is only indirectly few years. Suppliers are gathering in groups unprecedented levels of violence. impacted by the drug wars. in order to deliver to the mine sites. They A total of 34,612 people have died in “Security is the main problem facing the organize caravans to visit clients; travel drug-related violence in Mexico over the national and international mining compa- during the day and never send a vehicle on past four years. According to detailed gov- nies and the Mexican economy as a whole. the road alone,” said Javier Schmal, Latin ernment statistics, 2010 has seen a total Securing our delivery services by value of American manager of Martin Engineering. of 15,273 deaths, with half of the murders the load increases transportation costs,” “Mining furthers development in remote taking place in the three northern states. said Jaime Ponce, commercial director of areas of the country and for that reason the Victims include police troops and gang Freight and Cargo. government should increase its support to members, but also civilians have been “The La Colorada mine in the State of the mining industry. It is a sector that cre- caught in the crossfire. Durango has not been immune to the on- ates growth and a respectable alternative President Calderon admitted 2010 was going drug cartel war in Mexico. It has not to illegal activities,“ said Marco Antonio a year of extreme violence. This year, the had a direct impact on the mine, but the Bernal Portillo, administrative director at Governor of the Bank of Mexico, Agustin surrounding villages and towns have had Minera Columbia de Mexico. As are all the Carstens, acknowledged growing violence their police and military taken away to other industrial sectors, the mining sector is con- and insecurity are negative factors effecting major urban areas to combat the problems cerned about social insecurity in the coun- investment and economic growth in Mexico. of the cartel war, leaving these towns and try. Companies seek to protect their workers “We have high production demand from villages vulnerable to other opportunist and mining operations, but security mea- our customers and we were going to build crime in the area.” sures undertaken are not sufficient. Accord- a new plant, but we have decided to wait, Employees of various mining companies ing to the Fraser Institute, a further increase as at the moment the place that we have and their suppliers have been stopped on of violence in the country could negatively chosen is too affected by criminality,” said the roads to the mines by gangs that steal impact the medium term investment.

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to increase its clients’ production and effi- investing in exploration, channeling and ex- The consultancy provides its clients with ciency. In Mexico, the company focuses on traction projects, but more importantly by re- technical excellence and innovative solu- Environment and Water water technology solutions, which include, circulating, reusing and treating waste water. tions to help them respond to the challeng- for example, anti-scaling solutions for salt For any mining project, the Profepa (the es of sustainable development. Water is worth more than gold water and dust control solutions. “We have Federal Attorney for Environmental Protec- According to Xavier Garcia de Quevedo, a consistent market share in anti scaling tion), requests companies perform an en- Grupo Mexico’s CEO, the best international and we are developing products focused on vironmental impact study to evaluate and technologies for sustainable mining will be Grupo Mexico’s mega copper-gold project, “Agua vale mas que oro!” (Water is worth on water resources. There is no sensitivity the polymers niche market for mining com- reduce damage to the environment before- used at El Arco, and there won’t be a dis- El Arco, is located in a semi-desert area in more than gold!), was shouted repeatedly by about this topic. Hydro-geological explora- panies,” said Angel M. Pedraza, commer- hand and to plan “remediation” once the charge of waste into water. Baja California, Mexico, between two large the protesters. Water is a very important as- tion must be considered as an investment cial director for Ashland Chemicals. mining operation has been terminated. En- In relation to environmental impact, Gru- protected natural areas, Vizcaino and Valle pect of any mining project in Mexico, since and not like an expense, as buying water Ashland works with some of the main vironmental Resources Management (ERM) po Mexico’s management has established de los Cirios. This is a location that needs to there is scarcity of water and the governmen- concessions from other users is expensive,” players in the Mexican mining industry, is a leading global provider of environmen- and maintained close contact with environ- adhere to strict environmental standards to tal rules on water use are increasingly strict. said Medina. such as Frisco, Goldcorp, First Majestic tal, health, safety and social consulting ser- mental authorities and the region’s inhabit- protect its diverse environment. Quarrying and milling (crushing, screening, “Water concessions are increasingly and Panamerican Silver. The market is very vices, and has been present in the Mexican ants, to ensure environmental sustainability “This project is the second largest after washing, and flotation of mined materials), tougher to obtain. It is not necessarily relat- competitive and Ashland Chemicals is an market for 20 years. for their mining projects right from the start. Penasquito in Mexico in terms of investment. are operations that require vast amounts of ed to the reluctance or resistance of the Na- expanding global company, with technology “ERM provides sustainability consult- The center built for this purpose will be The planned investment is close to US$2 bil- water. “Many companies realize they need tional Water Commission, who grants them, and resources to grow within the market ing services, which include environmental converted into a center of economic devel- lion,” said Joaquin Rojo de la Vega Ulloa, water just when they are ready to start the but to the scarce resources and, especially, sector. “We are developing new solutions compliance, climate change project, clean opment and true sustainable development, project director at Grupo Mexico. Proximity production. If the mines are starting to look political issues. In the state of Baja Califor- and applications and consolidating our development mechanisms, energy audits as which not only retains the environmental to protected areas is a serious aspect that for water sources when in need, they won’t nia, exploiting a well has become very polit- global expertise,” said Pedraza. well as social impact studies, not only ac- wealth, but also strengthens it. This is the has to be taken into account by mining com- be prepared on time,” said Miguel Rangel icized due to pressure from vested interests Another global company offering envi- cording to the Mexican regulation, but also first mining project to be allowed in a pro- panies, since it might cause the project’s de- Medina, general director at IDEAS, a Mexi- that tend to argue that mining will affect ronmental services to help mining and ex- according to global standards”, said Manuel tected area. lay or blockade. This happened in Baja Cali- can company focused on water supply for tourism, agriculture, etc. Management of ploration companies to meet the on-going Ortiz Monasterios, general director at ERM. Grupo Mexico has carried out various fornia last January, when citizens mobilized mining operations. Medina is also professor water is problematic. So, we companies challenges, is the Canadian SGS. “Corpo- All major banks require an environmen- environmental studies to ensure environ- against two Canadian mining firms. Protest- of hydrogeology and hydrochemistry at the need to work together with the communi- rations are constantly confronted with new tal impact report for a new project and ERM mental conservation in an efficient manner. ers alerted officials of the risk of cyanide and University of Sonora. ties and, in some coastal areas, desalinate laws and regulations,” said Leslie Clark, is a leader in providing such services. For example, as the project rises among two arsenic contaminating the Sierra de La Lagu- “The infrastructure of a mine must also seawater,” said Armando Ortega, vice presi- SGS Mexico’s operations manager. “ERM is also preparing and implement- bio-regions, the Sonoran Desert and the na aquifers from the operation of an open pit be calculated in relation to the logistics dent of New Gold and director general of SGS provides a wide range of environ- ing plans to achieve environmental goals to California Floristic Province, they are col- gold mine. This forced the Secretariat of En- of the operations’ water supply network. Minera San Xavier. mental services, including water treatment minimize waste and optimize re-use, and lecting seeds of native plants and conserv- vironment and Natural Resources (SEMAR- Often, the mining companies have com- Ashland Chemicals provides chemical and laboratory testing services to assist where appropriate, recycling of resources,” ing them in a special field, turning it into a NAT) not to allow mining in the area. plete drilling projects, but no information solutions for the mining sector, which aim their clients worldwide in the preparation said Monasterios. constant source of regional species. of environmental audits and impact studies, as well as in the resolution of existing ef- fluent problems. “This can include adapting extraction processes, investing in emission- reducing and energy saving technologies and conducting ongoing environmental in- vestigations,” added Leslie Clark. Mexican law establishes that an aqui- fer is an administrative region and that a company is allowed to extract water at least 1,000 m away from another well. Another issue related to water usage in mining operations is the risk of contamination, which can create strong conflicts with the communities living nearby. “Many mining projects are situated on the top of a hill or a mountain and they risk contaminating the water with arsenic or mercury that later flows down to communities living at the bottom, in the valley,” said Medina. In case of old mines, active since the time of the Spanish colonizers that have now been transformed into new projects, soil contamination would have been created by the previous mining activity. Cyanide and arsenic remaining in the soil from old mining projects are prone to contaminate the water. It is important to eliminate passive contamination in the new project’s fields in order to avoid further pollution. Mining companies conserve water by

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“The southern part of the country has not seen much exploration yet. The communi- Communities cation is much more difficult in the south. The very large communities of indigenous It is crucial that mines ensure a healthy social environment for them to succeed groups are not interested in exploration businesses and many companies are faced with strong opposition from local NGOs. To Mining in Mexico existed before the Span- “Pinos Altos is a model mine with very Ejidos and labor relations avoid all the little problems that appear ex- iards’ arrival and, during the colonial peri- good facilities for our employees,” said Luis Mexico’s policy of the ejido (communal sys- ploring in this area, we simply stay away. od, it represented the mainstay of the New Felipe Medina Aguirre, Agnico-Eagle’s vice tem of surface land rights) was designed Being able to deal with the ejidos and World’s economy. In 2010, mining amount- president, Mexico division. In 2007, Agnico- during the Mexican revolution to take the local communities is essential for the suc- ed to 3.6% of the Gross Domestic Product Eagle signed an agreement with the Chihua- land from rich land owners and put it into cess of a mine. and it is the second most important industry hua state government on a social responsibil- the hands of the people for the purposes of “Right now it is all about the relation in the country. Mining in Mexico is a source ity program currently titled to three ejidos: farming. These rights are inalienable and are maintenance with the communities. In passed from generation to generation within of employment in areas that lack other pos- Jesus del Monte, Besaseachi and Gosachi. Ana Maria Gonzalez, community manager many cases people just have no idea what a individual communities. sibilities of economic development. The in- “Our challenge is to improve the local com- at Minefinders mining project is and what they can expect dustry fosters the building of roads and the munities’ quality life,” said Aguirre. Mining companies negotiate the use of from it when it is announced. It is essential distribution of community services, and con- Minera Dolores, a subsidiary of Minefind- land with local ejidos with different outcomes. and director general of Minera San Xavier, to build up communication channels. We tributes to healthcare and education. ers Corporation, has developed social proj- “We have been very successful to manage has navigated complicated community rela- use small cartoons, for example, with the Companies employ people locally when ects in the town of Madera, such as build- community relations, for example in Pitarilla. tions on the mine’s site. “Cerro San Pedro community to explain what mining is about they start a new project. For example, Ag- ing a church, and investing in education and All of our projects display a similar positive has been a great challenge for the company. and what purpose the mining industry has nico-Eagle de Mexico, in coordination with health programs. The company has also built case. Nevertheless, in Mexico mining compa- It has been operating despite opposition from and what it can do for them. Employing lo- the federal authorities, has implemented a new village of Dolores in the land of the eji- nies might encounter issues with the ‘ejidos.’ some groups claiming we are not fit to oper- cally, cleaning creeks, building infrastruc- infrastructure and a hydraulic pipeline, elec- do Huizopa with a school, clinic, event hall Every solution will cost money and time to ate it in a sustainable way. So, working in ture for the local communities are all an im- tric chairs and streets at Pinos Altos, in the and a church. “Minera Minefinders has an solve the issues, but I do not see a problem Cerro San Pedro has given us the opportu- portant part of the social responsibility we Ocampo municipality. The junior Canadian incredible program of Social Responsibility in finding one in the end,” said Guillermo Lo- nity to show them wrong, in the sense that like to take care of,” said Carlos E. Pacheco company is also implementing a program of and has been the subject of national award,” zano, general manager at Silver Standard. our operations are environmentally sustain- Téllex, Oremex’s general director. economic development, so that when life the said Ana Gonzalez, community manager at The Cerro San Pedro mine is located able and our process is safe. We care about mine is finished, the Pinos Altos property will Minefinders. Minefinders also subsidizes within the municipality of Cerro San Pedro, the protection of our environment. We have Women in mining include tourist facilities administered by the scholarships for students of geology and which consists of eleven small communities. a closed circuit for the handling of cyanide Since the 1990s, the mining industry has community. mining at the University of Chihuahua. Armando Ortega, vice president of New Gold and a strict management of water resourc- begun to hire women as part of the indus- es. We enforce a zero-tolerance safety and try’s personnel. Before that, women were health system and constantly train our work- not allowed to enter underground mines ers. Finally, New Gold has improved the re- because of superstition: it was believed the lationship with the surrounding community vein was a jealous woman that disappeared because of this,” he said. if another woman came near it. A social and environmental con- “The role of women in mining has been flict has emerged in San Luis Potosì difficult because in Mexico there are many around First Majestic Silver’s intentions taboos,” said Ana Maria Gonzalez, commu- to reinitiate mining activities in the area. nity manager and government relations for Wirikuta is the main religious and ceremo- Minera Minefinders. nial center of the Wixaritari peoples and the When immigration to the United States indigenous community has protested in the increased, it became difficult to meet the first part of the year against First Majestic demand for mine workers, and this is when Silver Corp.’s project, saying that it threatens women started working in mining. the lands inhabited by their communities- In the last 10 years the increase in wom- and their religious and ceremonial center. en workers at mines has grown substantial- The project is still on hold. Issues with eji- ly in all positions, from machine operators, dos and local communities have stopped drillers, handling explosives, etc. to presi- many companies from investing in Southern dent and CEOs of major international com- Mexico. “In the South of Mexico there is po- panies. According to CAMIMEX, Industrias tential for gold in Jalisco, copper and gold in Penoles was a pioneer in the field, training Michoacan and Chiapas, and Guerrero is the several women in 1997 to work at La Her- place for lead, zinc and silver. The problem radura mine in Sonora. for these areas is that there are a lot of con- “Since then, there are female mining en- flicts with narcotics dealers and local com- gineers, metallurgists, geologists and tech- munities. The size of the deposits that we nicians in practically every mining company know of at this stage might not compensate in the country,” said Ana Maria Gonzalez, for the costs of troubles one would encounter who is also co-chair of the Mining Task exploring in these areas,” said Lozano, Silver Force of the Chamber of Commerce of Can- Standard’ CEO, who has vast experiences in ada in Mexico and nominated representa- the Mexican mining industry. tive of Mexican women in mining.

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76 E&MJ • OCTOBER 2011 www.e-mj.com www.e-mj.com E&MJ • OCTOBER 2011 77 MEXICAN Mining MEXICAN Mining Small Domestic Players Services Smaller players are financially squeezed and require encouragement Service companies have been hot on the heels of investments

Not just the major and junior mining companies are taking advantage financial arm for financing the mining industry and its productive In the last 20 years mining has evolved significantly thanks to tech- of the current mining boom, small companies are also cashing in on supply chain. FIFOMI has granted credits to mining companies, as nological advances in almost every aspect of production, from min- the ongoing bonanza. Minera Atocha, founded in 2005, produces well as financing, training and technical assistance to small- to me- eral extraction to the final steps of processing. Specific extraction 120 mt/d of lead, zinc, gold and silver. “We are expanding the mine’s dium-sized mining companies. This allows more than 14,900 com- methods are developed for different minerals and extraction has production to 440 mt/d. Lately, we are also producing a little cop- panies to have the resources for work capital and the acquisition of become a high-tech operation with strict safety codes. per,” said Bernardo Ysita, general manager at Minera Atocha. Since fixed assets, as well as improving their exploration and production Drilling methods and the use of explosives have revolutionized May 2011, Minera Atocha has increased its production by three techniques and abilities. However, with the mining industry boom, and highly sophisticated machinery is designed for mineral exploi- times and expanded the mine. FIFOMI has so much demand for loans, it is only able to attend just tation. Simultaneously, new systems and logistic strategies are “The mine has a life of 20 years and we keep expanding it,” about 50% of the requests. Moreover, FIFOMI organizes safety and introduced to maximize the obtained quantity of minerals at the explained Ysita. But not all of the small producers are able to invest updating workshops, in particular for coal miners, who tend to be lowest possible cost. sufficiently in order to evaluate the current resources of their prop- inexperienced. These courses aim to avoid accidents like the gas Global equipment suppliers must employ research and develop- erty, buy equipment and expand the mine to take it into production explosion that happened in Cohahuila at the beginning of May in a ment teams that constantly work on new technologies and improv- in a profitable way. small coal mine, where 14 miners died. ing their equipment’s costs and efficiency. “We are a dying breed,” said José Jaime Gutierrez Nuñez, Minas Trafigura, the world’s second largest independent trader of non- “FLSmidth is characterized by innovative thinking and a desire Photo courtesy of Construplan de Bacis’s general director. “Small miners often do not have suf- ferrous concentrates, has a strong market share in Mexico. Trafigura to find the best possible technological solutions. Today, more than ficient liquidity to develop their business and are forced to sell their trades non-ferrous metals in all grades of transformation. 70% of 650 of the 9,000 people who make up the company’s workforce most complete flow sheets within gold, copper, silver, coal, iron ore properties,” said Arturo Perea Saenz, leader of mining association in minerals traded by the company are exported to China, so small min- are directly involved in developing the technology of the future,” and aluminum,” said Fangel. Chihuahua. For example Comisionistas y serv. industriale, managed ing companies are able to sell the mineral they produce with a better said Richard E. Fangel, general director of FLSmidth Mexico. FLSmidth has implemented an efficient global strategy to reduce by Marcos E. Escudero and which owns different deposits in Chihua- added value. Trafigura covers of all the mining states in Mexico. “Our Handling the entire production flow sheet for a complete mine equipment costs, producing components around the globe and as- hua, is trying to sell some of them in order to develop at least one of work in the mining sector goes beyond the buying and selling of met- plant, their services includes crushing, grinding, classifying, flo- sembling them in the most convenient place. “We expect Mexico to them. This fact also creates opportunities for investors with capital als. We offer financial services, logistics and storage. In this sense we tation, thickening and clarifying, vacuum and pressure filtration, play a more important role in the minerals business in the years to ready to invest and willing to buy mining properties. have managed the integration of all services, being very competitive pyroprocessing, slurry handling, materials handling, OEM quality come,” said Fangel. FLSmidth equipment is installed in more than Essential to supporting the small-medium producers is the Min- with the terms and conditions that are offered to mining companies,” replacement parts, modernization services, and other after-sale ser- 45 mines in Mexico, including mines owned by the major players ing Fostering Trust (FIFOMI), which is Mexico’s Economy Secretary’s said Edmundo Vidal, general director at Trafigura Mexico. vices. “We believe we are one of the few suppliers that have the in the industry.

Human resources In recent years, the mining sector has faced problems and difficul- ties with recruitment of professional to support and drive the mining growth cycle. “Due to the crisis in the mid-1990s and 2008, some of the universities had to close down their mining, earth sciences and geological departments. Today, we lack professionals because we lacked the long-term view back then,” said Jorge Ordonez, general director of Minera Cima. “The demand for Geologists in Mexico is immense,” said Elena Centeno, director of the Institute of Geology at UNAM (Universidad Nacional Autonoma de Mexico). UNAM, rated among the top 200 universities in the world, according to Times Higher Education, is one of the leading universities in the country for earth sciences and mining engineering careers, together with Guanajuato, Sonora and Chihuahua’s universities. “It is evident that earth science, geology and mining are not saturated fields of study, thus we need professionals on the job. Not only in the mining business, but the geotechnical part for developing any- thing from roads to a building is in need of a geological survey. The demand for geologists in Mexico is immense. UNAM tries to attract more young people, as the job prospects are strikingly better than in any other saturated field,” said Centeno. The advertisements of companies unfortunately lack the connec- tion between course-of-study and career opportunity to encourage young people to take on a geology degree. “I would advise any Eng- lish speaking, young mining engineer to learn Spanish, or any other language for that matter, and prepare for the unexpected. I have been in Mexico for nearly five years and I have no regrets on my decision to come here to live and work,” said Chris Warwick, country manager Mexico, Pan American Silver Corp.

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Next to FLSmidth, suppliers such as Cat- most 70 logistic centers. “During 2012, we nies; Orica, Austin Powder and Dyno Novel. erpillar and Komatsu work on their competi- will improve services and increase the num- Depending on requirements, some mining tiveness in terms of technological advances ber of offices and staff in Central America,” companies choose only one provider based and providing extra services. Caterpillar’s said Guillermo Tellez, sales manager, who on its proximity to their mine or plant, or official distributor for Chihuahua, Maqsa, targets a strong consolidation and expan- for the product quality, or sometimes they offers multiple services to its customers, sion in Central America in the next year. buy various explosives from different com- including field services, component repair, Cofiasa sells steel for the plaques that panies. However, the main player in the technical analysis, preventive maintenance some mining contractors use in the mines’ explosive market is the Australian company services and operation and maintenance sites. “With 49 active distribution centers Orica, dominating more than 50% of the training. To complete the service, Maqsa’s within the six states of Mexico, Cofiasa is Mexican market. “Orica’s commitment to teams monitor Caterpillar’s equipment with the company with the highest number of research and development, both directly special software from its head-office. This sales points in the northwest of Mexico. and in partnership with a wide range of re- allows the specialized personnel to get in Therefore we can offer good services and search bodies, made us a clear market lead- touch with the equipment operators before quick delivery times,” said Juan Carlos er in product and service innovations. Our the machines encounter a problem. Ares, Cofiasa’s commercial director. investment in research and development is “Maqsa’s service does not end with the In some cases, a strategic position next seven to eight times more consistent than sale. With each purchase, Maqsa can pro- to key operations can help a small business the other industry players,” said Felix Tor- vide all the expertise to support its prod- to become a key supplier for major players. res, Orica’s North Region vice president. uct and provide the needed attention to the “Swift, initiated in Cuauhtemoc, near This investment creates significant re- mining companies. To purchase our equip- Chihuahua, is a distributor for industrial turns. Through the development of market ment is only the beginning of a great sup- machinery and handles the maintenance leading technologies, Orica has improved port,” said Mariano Zubia, Maqsa’s director and reconstruction of mining equipment,” the efficiency, productivity and safety of its of operations. said Jeff Unger, general director at Swift. customer operations. “Orica’s recent break- Chualtemoc is located on a major industrial through in the development of wireless Importance of good services and corridor connecting Chihuahua to the big initiating systems and single-pass bolt in- local presence mines in the Sierra. “There are not many stallations demonstrates our clear focus on Training, assistance and support services competitors in the area, so it is a strategic continuous improvement and the provisions are so important for clients that the smaller location with excellent growth potential,” of innovative solutions for our customers,” regional suppliers that are able to develop a said Unger. said Torres. closer relation with clients and offer quicker The explosives market in Mexico is domi- ”Another important element in Mex- delivery times, are more competitive com- nated by the world’s three largest compa- ico is the regulation on explosives, which pared to global suppliers. “For certain ar- ticles, there is a very high demand and we have long delivery times, up to one year. To meet this high demand, we try to plan orders in advance and import in time the ordered equipment,” said Zubia. Local presence is an essential factor for a service provider’s business success in Mex- ico, as it shortens delivery times and guar- antees quicker maintenance and assistance services, which distinguish a company from its competitors. “Martin Engineering started its activities in the Mexican market 26 years ago and since then has expanded its presence all over the country, mainly through distributors. The company produces in Mexico for the country’s market and also for some other Latin American markets. Mexi- co isn’t one of the most important markets for Martin Engineering but one of the most profitable,” said Javier Schmal, Latin Amer- ican director for Martin Engineering, which is a leading developer and manufacturer of engineered conveyor belt cleaning and conveyor belt scraping systems. Schmal plans to transform Martin Engineering’s training center in Chihuahua into a technical university for the Latin American region. Watson-Marlow, the world’s leading specialist in peristaltic pumping, has a very strong distribution in the country, with al-

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their services and positive business expec- and we are more interested in long-term tations. When Grupo Sincom was founded contracts. We have the ambition to accept in 1985, they had 17 employees. “We cur- challenging projects and to achieve extreme rently have about 1,000 employees which quality standards in our work,” he said. provide alimentation service, laundry, Although more than 5,000 construction cleaning, transportation, medical care, ho- companies are registered in the Mexican As- tel, maintenance and industrial security ser- sociation of Construction Companies asso- vices. The company delivers 30,000 meals ciation, for the procurement of a big mining per day. We expect to grow rapidly, by 50% contract, just four to five companies have in the following five years,” said Rodolfo the abilities in terms of expertise, or the Loya Pineda, Sincom’s founder. equipment to compete. “To respond to am- Mining represents an important business bitious requests, Cominvi offers continuous sector for Grupo Sincom, but the compa- training to its staff,” said Villagomez. ny does not intend to focus on one sector “We do not intend to have the cheap- only and will keep diversifying its activities. est prices available on the market, but to Felix Torres, vice president North Region, Orica Rafael Villagomez, general director, Cominvi Pineda attributes the company’s success to deliver the highest quality projects. Hence, regulates the purchase, management, use their ability to adapt their services to their Grupo Frisco, Agnico-Eagle and AMSA. “We we accept projects from companies that see and transport of explosives. “Permission to clients’ needs, and to respecting hygienic have a specialized know-how in installing us as their industrial partners. They trust us handle explosives should be requested at and quality standards. huge equipment and can program automa- enough in order to deliver the full service. Mineral Extraction at San Pedro Mine, Newgold the beginning of the project, to avoid long The high demand for services has cre- tion processes. EDC Ingenieria mainly man- Accordingly, we strive to expand in other waiting times to obtain it,” said Enrique ated space for junior companies like EDC ages foreign brands’ electronic equipment, countries, as there are other Latin Ameri- tablish is that we are known as a responsi- rango,” said Francisco Alanis, Desarrolos Rodriguez Del Bosque, who specializes in Ingenieria, which was founded by three en- including Endress and Hauser, Siemens and can markets that represent good opportuni- ble company, which works with high safety Minero’s general director. mining industry matters. Due to the com- gineers, Valentin Espino, Cesar Duarte and Thermo,” said Duarte. ties for experienced mining contractors as standards and leading skills and quality,” Consequently, material suppliers ca- plicated conditions of safety in the coun- Ruben Hidalgo C. “We provide engineering Jomargo,” said José Martinez, Jomargo’s said Alfonso Reina Villegas, Construplan’s tering for the construction teams have try, regulations on explosives have become services to our clients, including design, Construction companies general director. general director. evolved their strategies. “For us to differ- much stricter. control plans, instrumentation, construction With the mining sector’s boom, small busi- “Our strategy is to grow in the mining With the increasing amount of mining entiate ourselves from our competitors, we and preventive and corrective maintenance nesses in the field have grown exponential- sector, offering verified experience and projects, smaller construction companies, intend to achieve a vertical integration of Mining boom drives mining services,” said Duarte. ly. Mining companies are rushing to start highly technological services. Automation such as Desarrollos Mineros y Voladuras, our products. If we offer elaborate pieces, contractors’ businesses Having started just two years ago, EDC their production. Mining contractors, such is an important sector of our business, as have a high demand for their services. “In with the best quality in a short delivery During the current metals boom, many Ingenieria’s dynamic team already works as Cominvi, Desarrollos Rod, Cominvi, Con- companies are increasingly automated. The the recent years, we have rapidly grown time, we belief we will grow rapidly,” said companies are enjoying high demand for for major players in the industry, including struplan and Desarrolos Mineros y Voladu- mission and value Construplan cares to es- thanks to the Canadian investment in Du- Juan Carlos Ares, Cofiasa’s director. ras are growing rapidly. “The company has grown quickly in the sector and has not been impacted by the global financial crisis, as we have a high demand of construction work,” said Leoni- des Rodriguez Sifuentes, general director of Desarrollos ROD Construcciones. “In some cases we have less than 15 days after the contract is signed to hire people and start building the project. Speed is the competitive advantage of Desarrol- los ROD Construcciones, as we are able to satisfy our clients’ requests in the quickest possible way. For example, Goldcorp’s project Los Filos needed to be developed before mid-May, since in that particular location, mid-May is the beginning of the raining season. The company receives so many requests that we need to narrow them down to the projects we want to participate in. Then we decide which projects to develop, according to the individual project’s potential. We intend to accept long-term projects, including more elaborate infrastructure,” said Rodriguez, general director of Desarrol- los ROD Construcciones. Rafael Villagomez, Cominvi’s general director, believes the same. “Currently, we intend to be very selective when choosing the projects we take part in, to work on the ones with the highest quality standards,

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82 E&MJ • OCTOBER 2011 www.e-mj.com www.e-mj.com E&MJ • OCTOBER 2011 83 MEXICAN Mining Conclusion Restored to Glory

2010 was a constructive year for the mining industry in Mexico. According to CA- MIMEX, mining and metallurgical production amounted to US$13.16 billion. This result surpassed the revenue generation of the tourism industry and established the mining industry as the country’s second most productive sector after oil and gas. The high price of minerals supports the rapid growth of the sector. This positive cycle has led to an increasing amount of exploration projects and the opening of new mining operations. After five years, Mexico has regained the position of world’s top producer of silver, along with substantially increased output The Fresnillo mine is the richest and oldest silver mine in Mexico, state of Zacatecas. Photo courtesy of gold, lead, molybdenum, iron, manga- of Fresnillo. nese, fluoride and sodium sulfate production. In 2010, Penasquito, Mexico’s biggest Investments grew by 16% to US$3.32 bil- Canada, Australia and United States. Official project, began operations. In addition, the lion in 2010, totaling a sum of US$11,986 sources state that in the next two years, Buenavista Cobre project, formerly known million from 2007 until 2010. According to more than US$9 billion will be invested in as Cananea, reactivated its operations the Metals Economic Group, Mexico ranked mining in Mexico. Based on recorded data reaching 100% of its production capacity fourth in the world in attracting explora- and the predictions for the future, a total already in the first quarter of 2011. tion capital, marginally below the first three investment of more than US$21 billion will have been generated between 2007 and 2012. “The good cycle of mining led to the creation of 14,000 new jobs in the country,” said Jimena Valverde, Mexican general coordinator for mining. The mining industry remains one of Mexico’s most important drivers for economic development. This is a vital advantage in some areas of the country, where mining operations are essential for the generation of quality employment, technological development, environmental stewardship, generation of local and federal taxes and the establishment of social services for communities.

GBR team wants to thank FIFOMI for the wonderful help the association has given us to organize the logistics of our project. Thanks to FIFOMI’s headquarters and also to all the directors and employees who have supported us during our trips to the Mexican mining states. We would also like to express our gratitude to the Association of Engineers (AIMMGM - Asociacion de Ingenieros de Minas, Metalurgistas y Geologos de Mexico), in particular to Sergio Trelles Monge, chairman of the board and Cesar Vazquez, general manager have welcomed us to the Mexican mining family since the beginning of our project.

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