Page 1


“Important reserves of natural resources, like petroleum and precious metals, are the bulwarks for laying the foundations for the future” Enrique Peña Nieto, President of Mexico

Following a testing four-year period of falling prices, stagnant markets, and investor skepticism, the mining industry appears to have turned a long-awaited corner in 2016. As the UK’s decision to leave the European Union and China’s sluggish economic growth fueled financial instability, investors were quick to take shelter in the safe havens of the precious metals markets. Gold and silver both enjoyed a strong rally during the first half of the year, and projects around the world were being taken off the shelf as confidence slowly returned. Of course, the sector has not yet emerged from the woods and for Mexico in particular the turnaround provided much-needed respite after a challenging 2015. Foreign investors, discouraged by the tax on exploration activities, increasingly looked to other Latin American countries for new greenfield projects. Only those companies which took advantage of the downturn to optimize processes and streamline operations will reap the rewards of the upswing, and given the persistent volatility of the past few years there is no guarantee how long the turnaround will last. As the tide turns, the mining community must now come together to ensure it capitalizes on the opportunities approaching on the horizon.

Mexico Mining Review 2017 provides all the information investors and executives need to exploit these opportunities. With expert opinions, in-depth analyses, and technology spotlights, this book highlights the key trends that have shaped the mining industry in Mexico over the past 12 months, and provides insight into which direction it will head in 2017. Mexico Mining Review 2017 allows the decision makers who shape the industry to tell the story. Whether for a mine operator seeking to improve processes, an explorer hunting new projects, or a service provider hungry for new clients, this book will be an essential resource in efforts to ride the wave of impending changes.

ALL RIGHTS RESERVED Š Toguna, S. de R.L. de C.V., 2016. This annual publication contains material protected under International, United States and Mexican Laws and international Treaties. Any unauthorized reprint or use of this material is prohibited. No part of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage and retrieval system without express written permission from Toguna S.A. de C.V. Mexico Mining Review is a registered trademark. The publisher has made all reasonable efforts to provide accurate information, and the information contained in this publication is derived from sources believed to be true and accurate. However, the information in this publication should not be considered to be complete or definitive, and may contain inaccuracies or typographical errors. The publisher accepts no responsibility regarding the accuracy of information and use of such information is at your own risk. The publisher will not be liable to any party for any direct, indirect, special or other consequential damages arising out of any use of information in this publication. The publisher provides no representations or warranties, express or implied, including any implied warranties of fitness for a particular purpose, merchantability or otherwise in relation to any information provided by the publisher in this publication.

ISBN: 978-0-9968026-4-2
































The mining industry is at a turning point and the low price environment of recent years is slowly but steadily moving toward a bonanza. Tight budgets of recent years have begun to pay off, edging out inefficient companies and creating a consolidated industry with an efficient value chain. Players are beginning to accept the virtues of the fiscal reform and are awaiting the distribution of the mining fund. Overall investment in the sector increased to US$5.2 billion in 2015 from US$4.9 billion in 2014. These figures only serve as confirmation that despite uncertainty surrounding commodity prices, Mexico remains an attractive destination for mining investment and continues to compete with its mineral-rich counterparts across the Americas.

This chapter provides an overview of the mining industry in 2015 and 2016. The key trends during this time are disseminated by the most important actors within the public and private sectors to provide a wide panorama of the dialogues from both sides. The chapter places a great deal of focus on the regulatory changes, as well as prevailing mindsets within the industry that are beginning to prioritize different factors. More emphasis on cost reduction and environmental considerations is creating a more optimized and conscientious industry that is sure to remain sustainable for years to come.





ANALYSIS: The Year In Review


INSIGHT: Marco Bernal, Mexican Association of Mining Metallurgists, Engineers, and Geologists



VIEW FROM THE TOP: Idelfonso Guajardo Villarreal, Ministry of Economy


VIEW FROM THE TOP: Mario Alfonso Cantú, Ministry of Economy


VIEW FROM THE TOP: Sergio Almazán, The Mexican Mining Chamber (CAMIMEX)


VIEW FROM THE TOP: Jaime Lomelín, Grupo BAL


EXPERT OPINION: Omar Aguilar, Bowker

Alejandra Hernández, Bowker


VIEW FROM THE TOP: Federico Borrego, Zacatecas Ministry of Economy


ANALYSIS: FDI Dips but is Expected to Recover


INSIGHT: Octavio Alvídrez, Fresnillo


VIEW FROM THE TOP: Mitchell Krebs, Coeur Mining


THE YEAR IN REVIEW PRICE INDEX1(2010=100) PRICE INDEX1 (2010=100) 140 120 100 80 8

60 40 20

precious metals precious metals





















metals and minerals metals and minerals

Source: World Bank, 2016 1 Annual indices, 2010=100, 1960 to present, real 2005 US dollars. Source: World Bank, 2016 1 Annual indices, 2010=100, 1960 to present, real 2005 US dollars.

After a few rough years, there is a light at the end of the

over two years. In the same month silver surged to US$20/

tunnel for the global mining industry. Metals prices are on

oz, a 45 percent increase since January 1. The strength of the

the upswing and industrywide investments in reducing

dollar and weakening of certain emerging market currencies

operating costs are paying off, helping companies streamline

also meant that operators and silver streaming companies

and eventually buffer bottom lines. Undoubtedly, there

were able to benefit from the exchange rate discrepancy.

are hurdles to face. The slowdown of economic growth in resource-hungry China and uncertainty in Europe, especially


the potential fallout from Britain’s decision to leave the

As one of the top players in the industry, Mexico is in a solid

EU, or Brexit, are among the clear and present economic

position to capitalize on this upswing and regain some lost

threats. Nevertheless, recovery is on the cards, even if it is

ground in terms of investment attractiveness. The industry

not quite as quick as hoped. “Admittedly this recovery has

contributed US$17.3 billion in 2014, or 1.5 percent of GDP,

been a little slower than initially hoped,” Mitchell Krebs, President and CEO of Coeur Mining, says. “The industry has certainly slowed, and there are few new discoveries,


few operations are being put into production, old mines are being exhausted, and supplies of gold and silver are beginning to decline for the first time in a decade. However, the lack of supply is also positive and will contribute toward a recovery in commodity and precious metals prices. When weighed against some of the recent restructuring of the industry, I believe it is set to become extremely successful.” TURNING THE CORNER The first half of 2016 provided some welcome respite for

23.4% gold 23.4% gold

2.0% coal 2.0% coal

global miners. With gold and silver prices already rallying,

17.2% silver 17.2% silver

1.8% molybdenum 1.8% molybdenum

Britain voted in June to leave the European Union. While

17.2% copper 17.2% copper 7% zinc 7% zinc 4.8% sand 4.8% sand 4.2% gravel 4.2% gravel 4.0% stone aggregates

1.6% lime 1.6% lime 1.0% flourite 1.0% flourite 1.0% calcite 1.0% calcite 0.9% salt 0.9% salt sulphate 0.5% sodium

the economic fallout going forward is uncertain, the initial impact was a positive for precious metals while Brexit caused global stocks to plummet. The markets lost roughly US$2 trillion in value the day after the decision was announced,

4.0% stone 3.6% iron ore aggregates

0.5% sodium sulphate 0.5% kaolin

and as global currencies also suffered investors sought

2.9% d. stones 3.6% iron ore

3.5% other 0.5% kaolin

refuge in the safe havens of gold and silver. By August 4 the

2.6% lead 2.9% d. stones

3.5% other

price of an ounce of gold had risen to US$1,374, its highest in

2.6% lead Source: SGM 2015

Source: SGM

most damaging impacts of the royalty taxes was felt



6575.8 4947.7






two new royalty taxes on the mining sector. One of the



The federal government’s 2014 fiscal reforms introduced




national investment in the Mexican mining industry.


billion the year before confirming a strong increase in



sector increased last year to US$5.2 billion from US$4.9


the sector’s recovery. Nevertheless, total investment in the



reported that FDI recovered to US$491 million, signaling


months of 2016, however, the Ministry of Economy has



direct investment of US$21 million in 2015. In the first six


inflow of US$2.123 billion in 2014 to an outflow of foreign




US$5.2 billion in 2015. FDI saw a startling drop from an


billion. Foreign and national investment continues, reaching



according to INEGI figures, compared with 2013’s US$15.6

Source: Camimex. Estimated data for 2015 Source: Camimex. Estimated data for 2015

in the exploration segment. Mexico was once ranked fourth in terms of global mining exploration behind powerhouses Australia, Canada, and the US. After

global value of M&As in the last quarter of 2015 dropped

the taxes arrived, Mexico dropped to seventh lagging

70.5 percent to US$3.2 billion over the previous quarter,

regional rivals Chile and Peru, as well as China as

experts expect attractive assets to open up in the

companies are now facing taxes on mineral exploration

medium term. Mining companies are now opting for

in the country for the first time.

new systems like SCADA, PLC, and PDC to collect vast


the GDP of the Internet of Things is expected to reach


US$1.9 trillion, and mining companies will contribute

13.2 11.4

10 5

unprecedented technologies are emerging. By 2020,



by investing in automated and smart equipment and






improve recovery and decision-making processes. The mining sector is venturing into Industry 4.0 where



amounts of information and turn it into smart data to

integrating cloud-based IT solutions.















CAMIMEX affiliated companies






Source:Metals MetalsEconomics EconomicsGroup Groupand andSNL SNLMetals Metalsand andMining Mining, Source: several years

Project expansion



New projects





Exploration expenditure is expected to drop to a

Equipment acquisition



projected US$343 million in 2016 from US$402 million




in 2015. Last year, global exploration investment fell by

Health and safety at work



19.3 percent to US$9.2 billion, according to the Mexican




Training and productivity

Mining Chamber (CAMIMEX). Still, some industry insiders

Community development



see greater opportunities in Mexico since an estimated

Clean energies



Community support

70 percent of the country’s territory is yet to be explored. INNOVATION & INVESTMENT OPPORTUNITIES













Unresolved challenges lie on the doorstep of all miners


ranging from rising stakeholder pressure, declining

Non member exploration

ore grades, and financing. In an effort to counteract the effects of the stagnant 2015 prices several mining

Mexican players and foreign companies. Although the







Mining total

players are turning to alternative sources of financing. One trend is the partnerships created between local

Assets Subtotal

Source: CAMIMEX and Ministry of Economy 1 Actual Estimated



GOLD PRODUCTION PER COUNTRY IN 2015 Gold Production per Country in 2014 Prices for gold, silver, and copper are clear indicators of the market’s cycle. These metals enjoyed an unprecedented climb to peaks in 2011, driven by demand from growing economies in emerging markets like China. But what goes up must come down. From those lofty heights, prices tumbled and the industry fell into a protracted downturn. This year, prices have stabilized and have shown continued strength. From January through to the early part of August, gold jumped 29 percent, silver soared 47 percent, and copper steadied into a near 7 percent rise. South Africa 4.6%5.2% South Africa Uzbekistan 3.6% 3.9% Mexico Mexico 3.2% 3.4% Uzbekistan Ghana 3.2% 2.8% Ghana Others 32.9% 34.8% other

China 16.1% China 15.7% Australia 9.4% 10.0% Australia Gold recovered some of its shine at the start of 2016 spurred Russia 8.6% 8.0% Russia by the slumping Chinese stock market, Brexit concerns and US 7.4% 6.6% US the resulting ripple effects caused in the European and US Canada 5.6% 4.9% Canada markets. There is still some way to go to match the glory Peru 5.2% 4.9% Peru days of 2011 where an ounce was valued at US$1,900 but GOLD


HSBC’s precious metals analysts forecast an average price


of US$1,205 in early 2016 and encouragingly raised it to US$1,275 by mid-year. Since then, the price climbed above those numbers hitting US$1,374 on August 4. Projections for 2017 are to range between US$1,300 to US$1,310.

MEXICO'S GOLDProduction PRODUCTION Mexico’s Gold 120







with 28 percent of the national market largely thanks to



its Zacatecas-based Peñasquito mine. Fresnillo followed



is mainly focused in five states led by Sonora with a market share of 32 percent while Zacatecas contributed 27 percent and Chihuahua 11 percent. These three states constitute 70.5 percent of all gold production in the country. The biggest gold producer last year was Goldcorp

with 19 percent. In 1H16 Fresnillo reported a 23 percent increase in gold production year-on-year after upgrades in ore recovery processes at Noche Buena and Herradura. INEGI reported that Mexico saw a 14.4 percent growth in gold production in 2015 at 4.3 million ounces compared to 2014 levels. With production at 756,000 ounces in 2001,










billion MX$

thousand tons *January to November

billion MX$

Source: INEGI Source: INEGI *January to November

this represents an increase of five times in 15 years


66MONTH MONTHGOLD GOLDPRICE PRICE(US$/troy (US$/troyounce) ounce)





1,800 1,600






1,000 800






200 1990 Source: InfoMine






Feb 2016

Mar 2016

Apr 2016

Jun 2016

Jul 2016

billion MX$


In Mexico, which ranks eighth globally, gold production




66MONTH MONTHSILVER SILVERPRICE PRICE(US$/troy (US$/troyounce) ounce) 24

55 50


45 40








20 15


10 5 1990


10 1995





Feb 2016

Mar 2016

Apr 2016

Jun 2016

Jul 2016

Source: InfoMine

Mexico’s Silver Production MEXICO'S SILVER PRODUCTION

While silver becomes rarer as its ratio to gold in the



Earth’s crust dwindles, consumption of “the devil’s metal”

and Peru with 15.8 percent and 13.9 percent respectively. The most notable production increases were seen in Peru, Australia, Poland, and Chile, meaning that, as a region, Latin America now accounts for 53 percent of the total

thousand tons

percent participation in global production, ahead of China



is increasing each year. Mexico reigns supreme with a 19.8



30 2




global silver production. 0 Zacatecas, home to the country’s largest silver mines, Peñasquito, Fresnillo, and Saucito, continues to lead the way in Mexican production with 42 percent. Fresnillo produced 6.3 percent more silver in 1H16 than 1H15

billion MX$





thousand tonnes thousand tons

*January to November Source: INEGI Source: INEGI *January to November





billion MX$ billion MX$

following increased capacity at Saucito and high grades processed at Ciénega. Meanwhile, First Majestic Silver reported that 2Q16 silver production rose by 23 percent

equivalent ounces. Zacatecas was followed by Durango

compared to 2Q15, reaching a total of 4.7 million silver

with a 16.6 percent share.

SILVER PRODUCTION PER COUNTRY IN 2015 Silver Production per Country in 2014

Since 1994, silver production has increased year on year, with the exception of a small decline in 2003-2003, at a rate of around 3 percent per annum. A higher level of production is anticipated for 2016, despite the fact that few projects will be entering the production stage. Fresnillo’s gold and silver San Julian project in Chihuahua is expected to account for the majority of this increase. Annual production is predicted to be 10.3 million ounces of silver and 44,000 ounces of gold once capacity is reached in 2017. According to the USGS, global silver production increased by 1.8 percent in 2015, which is equivalent to 877 million

Mexico 18.0% 19.8% Mexico


4.6% 4.8% Bolivia

ounces. The Silver Institute released figures confirming

China15.8% China 16.1% Peru 13.9% Peru 14.2%

Poland 4.8% Poland 4.6% US 4.5% 4.0% US

that total silver physical demand reached a record 1.17

Australia 7.3% 6.2% Australia Russia 6.5% 5.9% Chile Bolivia 5.0% 5.5% Russia Source: CAMIMEX Source: CAMIMEX


2.5% 1.8% Canada Others 16.7% 18.3% other

billion ounces in 2015, up 3 percent from the previous year. Industrial applications accounted for 588 million ounces in 2015 and since 2014 demand for photovoltaic applications have risen 23 percent, suggesting that solar power may become an important ally to the silver sector.

Mexico’s Copper Production MEXICO'S COPPER PRODUCTION 50









billion MX$





0 30.4% Chile Chile 9.3%China China


4.0% Russia Russia 3.7% Canada Canada

8.5%Peru Peru


3.2% Zambia Zambia


6.7%US US


Mexico 2.9% Mexico


5.3%Congo Congo


Others 20.8% other


5.1% Australia Australia










2014 2015*


billion MX$

thousand tons *January to November

billion MX$

Source: INEGI Source: INEGI *January to November

Traditionally, copper is seen as a key manufacturing component across a wide array of industries like


infrastructure, technology and automotive, and is often used as a gauge of economic health. While China’s COPPER

exponential growth had been a strong demand driver,

Like other precious metals, copper prices have seen

its weakened condition and robust global production is

an uptick of about 7 percent this year after losing 24.4

weighing on the market. As China’s economy continued

percent in 2015. Chile is still the world’s main producer.

to lag in 1H16, so too did demand for the soft metal. One

Mexico is 10th with 2.9 percent of global production,

cloud on the horizon is the excess in supply with global

providing 20 percent of North America’s extraction.

copper reserves totaling 720 million tons.

Grupo Mexico’s Buenavista del Cobre mine is the biggest extraction project, helped by a total investment of US$4.5

As well as the Buenavista del Cobre expansion, expected

billion as part of the company’s Gran Visión strategy.

to produce 300,000t/y, several new copper projects will be launched in the coming years to bolster the sector. Minero

Mexico increased copper production into 2016, after

Frisco is perservering with its Tayahua Primario project,

producing 594,451 tons in 2015, a 15.4 percent increase over

expected to reach production in 2017 with 10,000t/y.

the previous year. The country’s largest copper producer,

Sonora is sure to maintain its position at the forefront of

Grupo México, registered total production increases of

copper production with two new Grupo Mexico expansions

21 percent in 1H16 versus 1H15. These encouraging results

in addition to that of Buenavista del Cobre. El Pilar, expected

can be attributed to new operations at the company’s

to begin production in 2018, and the Buenavista Zinc project,

Buenavista del Cobre mine in Sonora. The northern state

which has no defined production date, will contribute to the

is Mexico’s primary copper producer capturing the lion’s

state’s output. Industrias Peñoles will inaugurate its Rey de

share of the 2015 market with 483,510 tons.

Plata project in Guerrero in 2018 and will produce 7,000t/y.


6 6 MONTH MONTH COPPER COOPERPRICE PRICE(thousand (thousandUS$/t) US$/t)











6 5








1 1990


Source: InfoMine





Feb 2016

Mar 2016

Apr 2016

Jun 2016

Jul 2016

ENVIRONMENT & CSR Among the challenges facing the mining industry is the environment. The sector suffers from a tarnished public

MEXICO MINING PRODUCTION VALUE (MX$ billion) Mexico Mining Production Value (Billion MX$) 250

image that has been exacerbated by isolated environmental accidents. In 2015, PROFEPA concluded the assessment of 1,130 mining installations operating legally in the country and 71 operating centers were closed and fined a total of US$2.3 million. The agency also imposed corrective measures on 656 mines where minor irregularities were found although those posed no imminent danger to the



invested in social and environmental concerns including environment, health and safety at work, community









and prevention strategies. In 2015, US$317 million was



stricter companies are investing heavily in remediation


become 2005












development, clean energies, and community support. Community relations play a pivotal role in the success of

debt burdens are rising and on a global scale, mining

any mining project. The proceeds of the Mining Fund were

ratings were downgraded from an average BAA2 in 2014

finally allocated in 2015 across the 25 states in the country

to BAA3 in 2015. An increase of 62 percent in the net debt

to boast mining activities. SEDATU has played a leading

to EBITDA ratio in the last year caused industry concern.

role in this process and has joined forces with the Regional

Nevertheless, total debt has decreased by 3 percent

Development Committees for Mining Regions across the

and net debt levels have remained steady at US$224

country to evaluate how they can benefit the communities

billion, according to PwC. Lifelines have opened up and

and where the most pressing concerns lie. Zacatecas and

companies can turn to alternative financing vehicles like

Sonora are among the winners with US$23.9 million and

royalty and metal streaming arrangements, as well as

US$32.7 million respectively. Other states like Coahuila,

equipment financing.

San Luis Potosi, Durango, and Chihuahua will also benefit. These investments will be allocated to the construction

In Mexico, foreign and national investment continues,

and refurbishment of schools, road infrastructure, public

albeit at a slower pace after a mining royalty tax came

lighting, urban mobility, and water and waste management.

into force two years ago. However, vast tracts of the country remain untapped and the potential is there. Some


top industry players are now optimistic about growth in

As the turn finally approaches and an upswing becomes

the industry, whçile admitting the challenges that could

clearer, companies that have successfully navigated the

yet hamper the sector. Although the last few years have

rocky road will emerge on the other side stronger, leaner

been challenging for miners globally, Mexico has been

and more innovative. Financing in 2015 was bleak and the

well-positioned to weather the storm and emerge a far

global mining sector was trading at earnings below those

more efficient and streamlined industry. The country

of the healthcare and retail sectors. As a result, industry

is expected to continue its growth in 2016, ramping up production volumes and attracting far greater levels of


FDI. Exploration opportunities.

MAIN MINING PRODUCER STATES There can be no doubting Mexico’s mineral potential. 25% Sonora 25% Sonora 19% Zacatecas 19% Zacatecas 10% 10%Chihuahua Chihuahua 8% 8%Durango Durango 4.8%Coahuila Coahuila 4.8% 4.6% San Luis Luis Potosi Potosi 4.6% San

3.5% State of Mexico 3.5% State of Mexico 2.6% Guerrero 2.6% Guerrero 22.5% other 22.5% other Source: SGM 2015 Source: SGM

Vast areas of the country are waiting to be turned into profitable mines, as estimates place unexplored territory at around 70% of the country. With technology continuing to develop at a steady pace and infrastructure improving by the day this process should be easier. Prices are once again on the rise and it is now up to exploration companies and mine operators to identify mineral veins, develop projects and capitalize on the glut of opportunities available in Mexico. All unattributed figures sourced from CAMIMEX




“If mining companies

It is important to work hand in hand with the public

continue to delay exploration

relationship with the promotion and development of

investment, the industry will

sector, he says, as well as with agencies that have a direct resources. Within the administrative areas of the public sector that handles mining activities, the Association tries

no longer have medium to

allocate a certain number of positions to experts in the

long term projects that can

However, Bernal admits that the Association has found

field, as the Mexican Geological Service (SGM) has done. very few opportunities to achieve this.

convert into mines” Marco Bernal, President of the Mexican Association of Mining Metallurgists, Engineers, and Geologists (AIMMGM)

The new fiscal charges for mines that do not have any other productive activity in the country are part of a risky combination of uninformed legislators, low mineral prices, and a heavy drop of investment, according to Bernal. “The

The Presidency of AIMMGM is soon to be in transition. In

implementation of royalties has limited the growth of mining

August 2016, Marco Bernal will begin his two-year period

activity, and thus caused a large number of technicians and

as head of the National Executive Board of AIMMGM.

mine employees to be dismissed,” he claims. “The changes

According to him, his goal is to solidify the actions of previous

diverted external resources that were meant to fund new

administrations and prioritize the granting of direct support

and existing Mexican exploration projects as investors are

to AIMMGM associates. “Education is another concern, and

increasingly finding the destination to be less attractive.

we are analyzing the possibility of creating an institution

Countries such as Chile and Peru are in a more competitive

or training center for officials in the mining industry as we

position to take advantage of these resources.”

used to have one that was quite successful,” he explains. “We plan on taking advantage of installations we already

However, the new fees are not the only issue thanks to the

have in important districts.” AIMMGM participates in all that

fact that players can no longer immediately deduct annual

concerns the sector from environmental science studies

exploration costs, says Bernal. Now, companies receive the

that are being conducted by higher education institutions,

deduction in annual payments divided within a 10 year time

to actively participating in legislative modifications that

frame. “Consequently, the industry found that 75 percent

may affect or benefit the mining sector.

of exploration investment was cut in 2015 in comparison to 2012,” he states. “As a way to survive in the low price

Bernal believes that the country’s legislative body is truly

market, companies are focusing their attention on the

failing to take advantage of the experience AIMMGM’s

most profitable mine sites and causing an accelerated

associates and the industry has to offer. “Often, a lack of

rate of mineral depletion. Even more dangerous, if mining

knowledge and consultancy causes authorities to miss

companies continue to delay exploration investment, the

opportunities, a particular shame for marginalized groups

industry will no longer have medium to long term projects

that do not receive the basic services in their areas,

that can be converted into mines.”

and could benefit from the economic boost of mining activities,” he laments. “The government does not realize

He believes that players must take into consideration

that in order to explore and develop mining projects,

internal factors that can delay progress. “Royalty taxes and

players often invest in infrastructure, strengthen roads

the elimination of immediate cost deductions have had an

and highways, electric power lines, education, health,

additional negative impact on exploration development as

potable water, and many other assets that can allow

there is a lack of capital,” he comments. “The Association

communities near mining operators to prosper. Mining

lends a hand by offering a wide array of events that create

companies provide the opportunity of a well-paid source

opportunities to show the public the importance of mining

of employment paired with adequate training, especially

activities. For instance, our office in Sonora hosts a biannual

in remote areas that depend on illegal activities. Our

international mining seminar, one of our most important

projects can help eliminate criminal groups by offering


communities an alternate window of income.”

Chihuahua and the International Mining Expo in Zacatecas.”










Q: How has the mining royalty impacted the industry and

and companies are now able to exploit deposits that were

what are the implications overall?

previously not economically viable.

A: Mining investment is usually a long-term project and companies make investment decisions based on multiple

Q: What remains to be done to support investors? How can

factors such as mineral prices, ore deposits, experience

the Ministry of Economy help in this process?



A: The Federal Government is committed to supporting

infrastructure, regulations, and tax policy. The decrease





small and medium sized mining enterprises. The Mexican

in foreign direct investment was not due to the royalties


imposed but rather the result of falling commodity prices.

and metallurgical advise to SMEs, while conducting

According to the Mexican Mining Chamber (CAMIMEX),

hydrogeology and environmental geology studies, physical-

investment in the Mexican mining sector increased to

chemical studies, metallurgical testing, and resource

US$8 billion in 2012 from US$1.2 billion in 2005. But global

certification. Meanwhile FIFOMI provides training and

investment has since fallen dramatically to US$9.2 billion

technical assistance to small and medium-sized mining

in 2015 from US$21.5 billion in 2012, and investment in the

projects alongside its main focus, which is making credit

Mexican mining sector dropped to US$4.6 billion from

and other financial instruments available to the sector.





US$8 billion during the same period. The mining sector is regulated by the Ministry of Economy, Nonetheless, mining companies continue to invest and

the Ministry of Environment and Natural Resources, the

develop projects that exploit Mexico’s geological potential,

Ministry of Energy, and the Ministry of Labor and Social

macroeconomic stability, infrastructure, skilled workforce,

Welfare. This requires close cooperation and constant

and strategic location. According to CAMIMEX, investment

communication. The Ministry of Economy has an office

is forecasted to reach a total of US$4.7 billion in 2016, a 1.6

that is fully and solely devoted to mining and acts as the

percent increase on the previous year. That several mines

contact point for mining companies throughout country.

started operations recently is encouraging. For example,

We are in permanent contact with both the companies

El Limon-Guajes in the state of Guerrero, a gold and silver

and local authorities to ensure we keep abreast of any

mine, was inaugurated on April 2016 with an investment of

problems and act accordingly. We also keep an eye on any

US$800 million. Two years into the Mining Fund more than

conflicts between companies and communities during the

MX$5 billion (US$274 million) has been raised, 80 percent

development and consolidation of a project, working with

of which has been allocated to states and municipalities.

the three levels of government to find alternative solutions.

The funds are used to boost community development and

As a result of this close cooperation, the number of conflicts

promote higher standards of living.

has reduced dramatically in the last few years. The Ministry of Economy has its doors open to listen to and address

Q: What impact has the unwillingness of majors to join

whatever problems may arise in the sector.

greenfield projects had on the industry? A: I do not believe that majors are unwilling to join greenfield projects per se. Investment decisions depend on the profitability of a mining project and are affected by external factors including mineral prices, costs, and quality of ore deposits. In recent years greenfield projects have not offered rapid ROI, so majors have been focusing

“Companies are now able to exploit deposits that were previously not economically

their efforts elsewhere. Given the mineral market situation


and technological developments, this trend is changing

Ildefonso Guajardo Villarreal, Minister of Economy



General Coordinator of Mining at the Ministry of Economy

Q: How would you describe the logic behind the creation

Q: What advantages can Mexico offer mining companies

of the royalty tax for mining activities?

under the current downturn?

A: The introduction of the royalty tax is important for

A: A context like the one currently facing the mining

the future health of the industry, primarily because local


communities were in conflict with mining companies

productive and efficient. It is important to note that

over issues regarding land ownership and exploration

Mexico underwent recent changes that have greatly

permits. Therefore, we had to step in and create a

benefited mining companies negotiating the downturn

system that included and emphasized the importance

turmoil. Not only were electricity prices reduced by an

of the municipal and state governments in the mining

average of 26.8 percent per kWh from December 2014 to

industry, and encourage them to resolve conflicts

December 2015, a key input in the cost structure of mining

between the ejidos and the mining companies. Since

companies but the exchange rate differential was also

this tax was implemented it raised a total of US$360

reinforced in Mexico to allow companies to operate with a

million, which will provide a significant boost to local

highly competitive cash cost.






economies and it has also reduced the number of these issues. In 2013, there were 60 registered conflicts

The General Coordination of Mining continues to work

throughout the country, and now there are just 28. Once

on its set objectives and strategies for the Mining

the local governments begin to consistently invest this

Development Program 2013-2018, among which are the

money into the right projects including infrastructure,

identification of exploration targets, provision of support

transport, health, and education, then the communities

for the development of clusters, and the offer of support

will start to reap the benefits. Of course, nobody likes

to supply companies in the sector. All of this paves the

paying taxes but it is a necessary part of society, and

way towards finding better investment and operational

I firmly believe the royalty is having the desired effect.


Q: What kind of mechanism do local and state

Q: What lessons has the Grupo MĂŠxico spill at Buenavista

governments use to distribute the collected tax revenue?

del Cobre taught the public sector?

A: To be clear, 20 percent of all proceeds from the

A: The industry learnt that continuous project monitoring

tax are reinserted into the federal tax system. Of the

can prevent a vast array of problems both financial and

remainder, a total of 62.5 percent goes to the local

environmental. The disaster could have easily been

municipality, and the remaining 37.5 percent is allocated

avoided had supervision been more adequate. As a result,

to the corresponding state. In October 2015, a total

over the last two years, companies have increased their

of 24 committees were created, comprised of one

surveillance funds. As for the government, we learned that

SEDATU representative, and a representative from each

protocol is essential to respond as soon as possible, and

the state, municipality, and community, along with a

so we have focused on reducing our emergency response.

representative of the main mining company operating

Moreover, it has improved its coordination between all

in the state. These committees were set up to disperse

the governmental institutions, including SEMARNAT,

the money throughout the surrounding municipalities,

PROFEPA, and CONAGUA so that joint decisions can

and indeed the vast majority of the money collected

be made in half the time. Synergy ensures that each

in 2014 from the royalty tax has now been distributed

institution is fully aware of what needs to be done in

into community development projects. There is still a

terms of remediation. Finally, the law now establishes that

way to go but we are certainly on the right path. I am

all mining companies have the obligation of informing

confident that mining communities will soon be seeing

authorities of any accident within 72 hours or else be

the improvements first-hand.

subject to fines.

Q: What are the main priorities for the General Mining

the national GDP than agriculture. However, the country

Coordination in the short to medium term?

lacks structural framework that can properly support the

A: Tax compliance will continue to be a main focus for

sector. Mexico vastly differs from other countries when

the Coordination. It can sometimes be challenging for

it comes to administration of the mining industry, which

mining companies to know exactly how much royalty tax

can make it particularly difficult to adequately respond to

to pay because it is referenced by EBITDA, and a holding

all the sector's needs in terms of regulations, compliance,

company has to separate its mining units from its other

and supervision. We are currently working with our

assets, which is a difficult task. Therefore, we are working

administration to be the sole reference point for mining

alongside the Ministry of Finance and Public Credit, and

matters in Mexico.

the Mexican Revenue Service to facilitate the changes for mining enterprises. We will also devote a large chunk of our resources toward permissions. The royalty tax is an essential facet of our policy to further develop local economies, and so it is vital that all companies fulfill their tax obligations. Nonetheless, the Coordination admits there are a number of internal structural issues that need to be fixed. Mexico is the 13th largest mineral producer in the world, and on a domestic level the sector contributes more to


Since this tax was implemented, it has raised a total of US$360 million, which will provide a significant boost to local economies , and it has also reduced the number of conflicts








With figures to March of 2015

11% Mazapil

2% Eduardo Neri

9% Cananea

2% Aquila

7% Nacozari de Garcia

2% Alamos

5% Fresnillo

1% Chinipas

4% Ocampo

47% other

4% Caborca 2% Sierra Mojada 2% Sahuaripa 2% Morelos

11% Mazapil

Source: CGM, Ministry of Economy 9% Cananea 1 With figures to March 2015

2% Sahuaripa 2% Morelos

7% Nacozari de Garcia

2% Eduardo Neri

5% Fresnillo

2% Aquila

4% Ocampo

2% Alamos




San Ignacio

Villa de la Paz



Lazaro Cardenas



Santiago Papasquiaro




Eduardo Neri


24.9 24.9 24.7 22.7 21.9 21.3 20.6 19.9 19.6 18.4 17.8





Nacozari de Garcia




Sierra Mojada



Santa Barbara

49.5 47.5



Director General of the Mexican Mining Chamber (CAMIMEX)

Q: Two years on from the introduction of the royalty tax,

2015. Instead of creating more obstacles for international

how would you assess its impact on the mining industry?

investors the federal government should be supporting

A: Unfortunately, the introduction of the royalty tax

and promoting foreign involvement in Mexico. Even

coincided with a marked downturn in global commodity

though CAMIMEX is greatly in favor of reinserting mining

prices. It is causing the Mexican mining industry to lose

proceeds back into the communities that surround mine

part of the competitive edge it once enjoyed over its

sites, the state and municipal authorities must do it in a

regional rivals. Operating in Mexico is now more expensive

consistent and transparent manner. We are not part of

than other countries like Chile, Peru, Argentina, Brazil,

any of the 25 state mining committees that have formed

and Colombia, all of which are working towards lowering

throughout the country.

costs for foreign companies. If there is less exploration there will be fewer discoveries of mineral deposits, and

Q: How can CAMIMEX help promote foreign investment,

limited employment. CAMIMEX is in direct contact with the

and boost the Mexican mining industry?

authorities to inform them of the strong negative impact

A: As the representative body for the mining community

the fiscal reforms have had on the industry. We are working

in Mexico, our principal task is to work alongside the

to convince those responsible in the public sector including

government to ensure that it is doing all it can to promote

the Ministry of Economy and the Ministry of Finance,

and develop our industry. We also work to encourage

not only to reduce taxation levels across the board but

positive mining practices throughout the sector in terms

more importantly to ensure that pre-operating costs for

of exploration, safety, environmental protection, and

exploration projects are tax deductible in the same year.

community development. Furthermore, CAMIMEX has set up a special commission for community development

The fact that companies can no longer deduct more

made up of specialists from the largest mining companies

than 10 percent per year has had a crippling impact on

in the country. The commission meets on a monthly

mining exploration levels in the country. A total of 154

basis to discuss recent actions, and to exchange ideas

mining projects had been suspended until December

regarding the responsibility for community development.

Fortunately, it is having a positive effect upon Mexico’s

many mines. Since the Energy Reform there are a number

mining culture. Since 2002, the Mexican Philanthropy

of new opportunities available to mining companies, who

Center (CEMEFI), and the Alliance for Socially Responsible

can now generate their own energy through cogeneration



plants and other renewable programs. Our role is to

of Socially Responsible Company (ESR) to selected





educate the community about these opportunities,

companies that fulfill specific requirements regarding

and to provide them with the tools to maximize their

community development and environmental care. In

potential. Several of the larger market players, including

its first year only one company, Industrias Peñoles, was

Industrias Peñoles, Fresnillo, Grupo México, and Minera

recognized with this honor, and now the number stands

Autlan are beginning to invest in energy generation due

at 42. It is a true reflection of the growing responsibility

to the fact that it raises competition domestically and

that mining companies have towards environmental

internationally. Indeed, there are a total of 35 mining

sustainability. Despite there is still work to be done there

projects in Mexico with valid permits for internal energy

is an undoubtable evolution toward socially responsible

creation. It represents a total installed capacity of

practices in the sector.

1,799MW, and a projected investment of US$2.7 billion, a reflection of a growing consciousness directed towards

Q: What does the fall in mineral production mean for the

energy saving opportunities.

state of the industry? A: The fact that production rates are falling at the

Q: What does CAMIMEX hope to achieve in the next 18

same time tax levels reached an all-time high is not a


coincidence. Although CAMIMEX cannot directly boost


production it can notably influence the mining operations

competitiveness the sector lost following the fiscal

though alternate strategies. A series of debates, meetings,

reforms. In 2010, Mexico was the number one Latin

and training courses on energy savings that we offer

American destination for mining exploration investment,

are an example. The Energy Reform is an increasingly

and fourth globally, behind only Canada, Australia and

pertinent issue for the sector because it opened a number

the US. Both Chile and Peru have now overtaken us, while

of new opportunities to players as they can now generate

other countries including Argentina and Colombia are

their own energy through cogeneration plants and other

taking important steps to attract further investment into

renewable schemes. Our role is to educate the community

their respective mining sectors. To buck this trend we feel

about these possibilities, and provide tools that maximize

the federal government must reduce the royalty tax and


alter the legislation so that exploration expenses are tax








deductible within one year, and not in 10 as it currently Q: How can the sector make the most of the new

stands. Moreover, we hope to soon start offering a diploma

opportunities afforded by the Energy Reform?

course on community development at CAMIMEX, which

A: The vast majority of companies are well aware of the

will serve as a training program to enable Mexican mining

potential benefits the reform brings. Energy consumption

companies to train their staff on socially responsible

can represent up to 30 percent of all operational costs for



170 160 150 140 130


120 110

Source: Ministry of Energy Source: Secretariat of Energy, 2016

Jun 2016

May 2016

Mar 2016

Apr 2016

Jan 2016

Feb 2016

Dec 2015

Nov 2015

Oct 2015

Sep 2015

Jul 2015

Aug 2015

Jun 2015

May 2015

Mar 2015

Apr 2015

Jan 2015

Feb 2015

Dec 2014

Oct 2014

Nov 2014

Sep 2014

Aug 2014

Jul 2014

Jun 2014

Apr 2014

May 2014

Mar 2014

Feb 2014

Jan 2014






Q: What are the highlights in Mexico’s value proposition

Q: What have been the main changes in the strategic

for mining companies over the past decade?


A: A careful balance in the equation of production and

compared with a decade ago?

demand must be found in the industry and in recent

A: The mining tradition in Mexico goes back 500 years

years there has been an overcapacity of production and

and today the industry has a completely new approach.

a reduction of demand. This combination has created

Technology and processes are constantly evolving to

chaos. The very core of mankind stems from the earth and

suit the new demands and financial climates and miners

its two main pillars: agriculture and mining. The former

have to adapt as well. I entered Peñoles 45 years ago, and

derives from a need for nourishment and the latter is the

the only mining operation that remains from that time is

first link in the long chain of transformation industries.

Fresnillo. This means that all current Industrias Peñoles

All great industries that have flourished in Mexico are

operations are relatively recent, dating from 1987 onwards.

sustained by mining products and in many ways modern

Mexico’s modern mining sector upholds all the norms from

civilization depends on minerals and metals. Mexico is

the OIT and other international treaties, and implements

a historic mining country and even before the Spanish

new technologies with a new business mindset to remain

set foot in the country, mining was already prevalent in







pre-Hispanic times. Fortunately, the dependency of the economy on mining is not as significant in comparison

Since 1987, Industrias Peñoles has been investing in

to other countries. Brazil and Australia depend heavily

exploration and after NAFTA was signed Mexico opened

on mining iron and coal and the same occurs in Pacific

the mining sector to foreign investment and consequently

countries like Peru and Chile that rely on copper. Mexico

experienced a boom in exploration following the entry of

has diversified and opted to support manufacturing

several junior players. The international mining companies

industries, and this is why the drop in commodity

exploring in Mexico are concentrating on gold and

prices has not heavily impacted Mexico’s economic

silver. Another consideration is that during that time the


workforce costs began to rise and subsidies were removed, which forced players to invest more in mechanization. The

Nevertheless, we cannot detract from the important role

focus today remains on productivity and efficiency so

mining continues to play in Mexico’s development, as it

automation continues to hold sway.

represents 3 percent of GDP. Interestingly, some mining products like cement and aggregates are omitted from

Q: What steps must be taken to ensure Mexico ranks

the official mining statistics while in other countries these

highly among the world leaders in human capital for the

are included in the sector. In Mexico, mining statistics

mining industry?

focus only on minerals under concession but if cement,

A: The mining industry suffered a long period of low

aggregates, and ceramic material were included the

prices between 1960 and 2005, which caused many earth

mining industry would represent over 4 percent of

science schools to close. When the market recovered

GDP. A 100 years ago mining was the beating heart of

there was a shortage of qualified human capital at all

Mexico’s economy and it continued to be so until 75

levels and in all mining regions, including Mexico. As a

years ago. During that time, export and production

result, salaries grew and interest in studying earth sciences

taxes were an important source of the state’s income.

was rekindled. Industrias Peñoles and Fresnillo, which are

Since this dependency has diminished given the country

part of the Grupo BAL, have made an effort to establish

has diversified in a positive way but mining is ranked

close ties with all the local universities where they have

among the top five industries, which include oil and gas,

operations by offering internship for undergraduates

automotive, electronics, and tourism.

during the weekends and summer breaks. The state of

Zacatecas, which is one of the most important mining

Cycles in all commodities are prevalent and the strategy

states in Mexico, has seen mining companies collaborate

companies should adopt to survive is to be a low cost

with governmental authorities, earth science schools, and

producer. If costs are in the first quartile then a company

research centers to form a Mining Cluster. This triple helix

can weather the storm. Mining requires incentives,

bridges the gap between players in order to reduce costs,

especially during the exploration stage when prices are

improve services, and develop human capital for mining

low. There are countries like Canada, Spain, and Australia

operations and their suppliers. Some of the suppliers are

that have interesting incentives in place that could apply

participating in the cluster were family businesses that

to Mexico. For instance, Australia had an incentive to

have transformed themselves into corporations with good

explore for gold, and taxes were eliminated for a 10 year

governance and have gained financial stability.

window. Spain allows for the investment of profits in exploration, and if it is not spent in a certain period of time

Q: What measures must be taken by mining companies,

the company returns it with interests and penalizations.

suppliers, policy makers, regulators, and the financial

The only incentive the mining sector has in Mexico is

community to ensure the industry’s healthy development?

the elimination of tax on diesel (IEPS) used in off-road

A: The mining sector is viewed by serious players as a

equipment. Mining is an economic and social catalyst that

long term investment, and companies that expect a quick

promotes job creation in marginalized communities. We

profit remove themselves from the race. Business plans

have opened mines where there was no mining culture

must be designed for the long term, and the exploration

and we have created important mining communities. For

stage alone can take up to 10 years. In terms of the

example, in Sonora we opened a mine and we noticed that

correlation between production and demand, there is no

in the surrounding communities the men had migrated to

doubt as to where the industry will head in years to come

the US for jobs, so we recruited women instead. This was

for modern civilization cannot thrive without minerals and

a groundbreaking gender equality initiative as it was the

metals. The demand will continue for iron, silver, copper,

first mine in Mexico to employ a female workforce. The

and other materials since developing economies will

company breaks not only economic and social barriers but

strive to reach the industrialized stage and will begin to

opens opportunities for all and removes paradigms that in

increase their consumption.

other countries remain prevalent.



OBTAINING MEXICAN MINING CONCESSIONS agree before Mexican authorities to be regarded and 22

Omar Aguilar Partner at Bowker

Alejandra Hernández Partner at Bowker

treated as Mexican citizens and they do not request the protection of their governments under penalty of losing their assets related to the dispute (in this case the mining concession) to the benefit of the United Mexican States

Unlike the US and the Canadian legal systems, which are

(Mexico). This provision can be regarded as a waiver of

based in common law, the Mexican legal structure stems

the right to call for diplomatic protection. On top of all

from civil law legislation. Because of the close economic

ancillary legal duties, entities incorporated or used for this

ties between the three countries this is often forgotten

purpose shall comply with a special registration obligation

and can be exaggerated by both Mexican lawyers and

before the Ministry of Economy. This registration and

clients overseas. Structures, agreements, and procedures

its periodical update in the National Registry of Foreign

are often misconstrued as can be witnessed with the

Investment is compulsory and for statistical purposes only.

contrasts between the trust structures in both jurisdictions.

Failure to comply with said responsibility will generate

The differences between these systems usually generate

fines for the company in breach but will not affect the

uncertainty and considerable misapprehensions on the

mining concession itself in any substantial manner.

part of those immersed in one system and doing business in another. These gaps in the understanding of how a

Concessions and assignments are granted by the Mexican

particular legal system operates shape the perception

State through the office of Mexico’s President who in turn

many foreign nationals have of most procedural matters

delegates this duty to the Ministry of Economy. First, the

in Mexico and can contribute to making processes appear

Mexican government assigns mineral allotments to the

cumbersome. Furthermore, the general perception that

Mexican Geological Service (SGM). All of those portions

the Mexican legal system is quite unique and corruption is

of land eligible for mining activity that have not been

rampant in all domains exacerbates the problem. Dissecting

distributed to SGM are subject to a mining concession and

the legal process and offering simple explanations to

could be granted to private parties who apply and fulfil

apparently convoluted Mexican legal issues will always

certain requirements. If the Ministry of Economy, through

work for the benefit of all, whether that be authorities,

SGM, decides that a specific assignment is of no further

clients, or counsel.

interest to the Mexican state for a particular reason, whether it be social, political, strategic, or economic, or

Unlike in almost all of the US and in many cases in Canada,

SGM fails to produce a justification for maintaining said

where concessions are owned by the Crown and held by

allotment, SGM will open that particular assignment to a

the federal and provincial governments, the ownership of

bidding process and the Ministry of Economy will allocate

Mexican natural resources is bestowed in the state and

said lot as a mining concession to the winning individual or

it is rooted in the Constitution. Article 27 sets forward,

entity, according to Article 10 of the Mexican Mining Law.

among other things, that all minerals belong to the state. Their use and/or exploitation may be carried out through

The Mexican Mining Bureau is the Ministry of Economy’s

a mining concession directly by nationals or through

unit whose mandate is to apply all mining regulations. It is

companies duly incorporated in Mexico. Article 10 of the

the Mexican Mining Bureau who will: (i) issue the concession

Mexican Mining Law states that, “The exploration and

titles; (ii) maintain the Public Mining Registry; and, (iii)

mining of minerals or substances referred to in article

handle requests for expropriation, temporary occupancy,

4, […] can only be carried out by individuals who have

or easements filed by the mining concession holders, in

Mexican nationality […] and corporations incorporated

accordance with Article 7 section VI of the Mexican Mining

according to Mexican Law, through mining concessions

Law. Article 46 dictates that mining concessions shall

granted by the Ministry.” Thus, only Mexicans by birth or

be recorded, kept and maintained in the Public Mining

naturalization and Mexican entities are allowed to obtain

Registry. Aside from managing mining activities through

mining concessions. However, the Mexican state grants

the Public Mining Registry, Article 8 states that the Mexican

the same right, in an indirect fashion to foreign nationals,

Mining Bureau is responsible for overseeing and promoting

provided that through their choice of legal vehicle they

the whole of the mining activity in Mexico.

A mining concession allows its holder to explore, exploit,

the three main duties mining concession holders have to

and enjoy all of the minerals that are located in the subsoil

comply with:

of a particular mining concession, according to Article 19. If the mining concession’s surface rights belong to or are

Pay the corresponding fees, royalties and taxes

in possession of someone else other than the holder of

Produce and file periodical reports

the mining concession, an authorization from the owner or

Perform certain works in the mining concession

possessor and an Environmental Impact Study approved by the corresponding ministry are required to begin

The breach of any of the responsibilities listed in the

exploration works. Although the Ministry of Economy is

Mexican Mining Law will give the government sufficient

generally in charge of most mining activities there are other

grounds for the mining concession to be cancelled, as

government ministries or agencies that enforce provisions

recorded in Articles 42 and 55 of the Mexican Mining Law.

or grant permits that relate to mining. The Ministry of Labor, SEMARNAT, CONAGUA, and the Agrarian Registry

Mining concessions are susceptible to being pledged

are examples of authorities involved in the whole of the

or mortgaged as collateral for the financing of mining

mining activity. Authorizations and authorities involved

projects. However, to be valid in benefit of creditors,

vary depending on the mining concession. Permits to store

Articles 46 and 49 hold the requirement that all liens

and use explosives, water concession, and/or permits for

shall be registered in the Public Mining Registry. Some

the discharge of water or a change of land use may or may

creditors request mining concessions pledged to be

not be required for specific mining concession.

registered at the Ministry of Economy’s Registry of Movable Securities.

Mining concessions are initially valid for 50 years provided the holder of the mining concession complies with all

It is our opinion that understanding the general makeup

stipulated mining regulations, according to Article 15. The

and the granting of Mexican mining concessions is not

same Article states that validity of a mining concession

complicated. There are just a few issues that one needs to

may be extended, upon request of the holder, for

know to have a fair awareness of them. The way the access

additional periods of time. Holders of mining concessions

and exploitation of minerals is regulated is quite similar

are ordered to comply with several requirements in

to that in force in other jurisdictions and even more agile

Article 27 of the Mexican Mining Law. The following are

than in many.

PROCESS OF ACQUIRING A MEXICAN MINING CONCESSION Constitution (Article 27) Ministry of Economy

General Coordination of Mines


General Direction of


Mining Regulations


General Direction of Mining Promotion





Individuals and







Work reports and





Source: DBR Abogados 1 Decentralized organization attached sectorally to Ministry of Economy 2 Must be Mexican




Minister of Economy of Zacatecas

Q: How is Zacatecas positioning itself to attract increasing

Q: How can you differentiate Zacatecas from other

levels of mining investment?

mineral-rich states like Sonora?

A: It is extremely difficult to attract mining activities to a

A: We can help in terms of availability of human resources,

certain location because this decision is centered mainly

implementation of the proper infrastructure, and providing

on the location of the ore deposits. We are trying to

access to operative mines. Another big difference between

attract a great deal of mining suppliers and distributors

Zacatecas and Sonora is the fact that Sonora has copper

for the community, and we have the advantage of having

deposits, whereas the mining in Zacatecas is much richer

the mining cluster (CLUSMIN) led by Jaime LomelĂ­n. He

in terms of precious metals but less voluminous. The

began this initiative and continuously works to attract

government essentially helps ease the mining process and

support and investment to the state, and the government

ensure to the best of its ability that mining operations run

fully supports this effort and helps as much as possible.

smoothly. Zacatecas provides 19 percent of income from the

CLUSMIN provides an association for a great deal of the

new tax, while Sonora pays 26 percent due to the volumes

mining supply chain working in the area. Zacatecas aims

produced. We are about to establish a flotation plant in

to be the core of mining distribution across the Americas,

Zacatecas, so the smaller mining companies are able to use

and we are on the right track to achieve that. Our goal is

this for processing of ore before it is sold to the foundry.

to make Zacatecas a synonym for mining, not only in the

This saves money in transport costs because the load will be

Americas but all over the world.

smaller and more concentrated. This plant is scheduled to begin operations in two months and is specifically designed

Q: How do you interact with CLUSMIN, and what input do

for small mining companies as the large companies have

you have into the running of the cluster?

access to their own flotation plants. We help in any way

A: The initiative is privately held but the government of

we can when a request is made for support. We can help

Zacatecas helped the companies begin the cluster with

operators obtain explosives permits and environmental

some funding. We try to offer assistance when we can

permits, as well as geological maps of the deposits. The

but the cluster is essentially independent and makes its

quantities of metals mined in terms of production levels have

own decisions. The government is invited to the CLUSMIN

reduced significantly over the last few years.

meetings and we are able to contribute to the dialogue but we have no input into the decision making process.

Q: What must operators consider in terms of regulatory

The government also helps the cluster to invite other

issues such as water pollution and water use?

businesses to the state, and we hope that Metso will be the

A: Environmental policies are implemented on a federal

next company to enter. At the end of 2015, the government

level, and all companies operating across the country

visited Scandinavia to seek mining companies that would

must adhere to the same regulations. More than an

come to Zacatecas and invest. Many state representatives

environmental issue, regulations are becoming more

visit Zacatecas in an effort to gather knowledge about the

about community and social impact and mines must now

running of CLUSMIN in order to form the same bodies in

be aware of offering more to people living in these areas

their own regions. Although other states can emulate what

than they are taking from them. One mine requires almost

we do, I believe the primary cluster in the country will

60 federal permits, so companies must consider factors

remain CLUSMIN in Zacatecas for two reasons. Firstly, we

such as water, energy supply, employees, unions, taxes,

initiated the program, and secondly, most of the companies

social security, and roads. Depending on the size of the

operating here are convinced that Zacatecas is the nucleus

mine this process can take from 1-10 years to complete

of mining activity. Jaime LomelĂ­n has done a great job of

this process. In Zacatecas, however, we were able to open

setting up the cluster and of convincing distributors of the

two different mines in a record time of two years. We are

value of belonging to CLUSMIN.

constantly working to reduce this permitting process to

ensure continued investment in the economy of Zacatecas.

the second part of the funds collected in 2014, and we

In the event of a spill, we must determine whether or not it

still have the remainder of 2014 and all of 2015’s funds to

was an accident. In the case that it was, the operator can

distribute. We believe the money collected in 2015 will

obtain all the support it needs from the government. In

total less than that from 2014 simply because the mineral

terms of cases that involve negligence, we can only help

prices have precluded many operators from producing on

so much, and operators must pay the fines and adhere

the same scale.

to the sanctions imposed by the relevant authorities. Our main priority is ensuring that employees do not suffer.

Q: What are some of the tangible results within the

Conversely, if PROFEPA’s sanctions overreach we can

communities and municipalities that receive the mining

intervene and communicate with the agency on behalf of


the company.

A: We have certainly seen a great deal of developments,


especially in the communities of Fresnillo and Mazapil. Q: How efficient do you expect the collection and

Already, we can see that infrastructure is improving with

allocation of the funds from the mining fund to be?

painted walls, and facilities like football fields installed. One

A: The federal government, which distributes them, has

rule of the royalty stipulates the money must be destined

done well so far. The government also has extremely

to the city’s or municipality’s infrastructure instead of

stringent requirements to qualify for funding, so I believe

spending on technology for instance. This is beneficial

the mechanism will work well. Although the system is

because the funds can be directed toward the entire

new, the mining companies are keeping a close eye on the

municipality not just in the immediate surroundings of the

distribution of the funds. Moreover, it is being overseen

mine. A great deal of the time, the mining companies want

by the municipality as well as the state and federal

the money to be used exclusively by the area affected

government, which creates a complementary system of

by the mine but the mining fund ensures a more even

responsibility and accountability. We recently distributed


MEXICO'S MAIN MINING CLUSTERS Chihuahua Mining Cluster Affiliates: 73 Principal extracted metals: Gold, silver, zinc, copper, and lead. Principal mines in operation: Metallic, non-metallic, and material banks.

Coahuila Mining and Oil Cluster Affiliates: more than 46 Principal extracted metals: Gold, silver, antimony, bismuth, cadmium, copper, tin, iron, lead, and zinc. Guerrero Mining Cluster The Guerrero Mining Cluster is in the process of

Principal mines in operation: Charcoal and sodium sulphate.

consolidation in order to position the mining industry in the state as one of the most important sectors, and in generating a communication strategy to spark the sense of pride among the people of the state.

Zacatecas Mining Cluster Affiliates: 103 (Mining companies, suppliers, government agencies and educational institutions.) Principal extracted metals:

Sonora Mining Cluster

Silver, lead, zinc, gold, copper, and other

Affiliates: 27


Principal extracted metals:

Principal mines in operation:

Gold, silver, aluminum, copper, iron, molybdenum, and

Metallic minerals and non-metallic material



Principal mines in operation:

Principal mines in operation:

Metallic, non-metallic, and material banks

Metallic, non-metallic, and material banks.

Source: Data provided by the clusters, and data from SGM


FDI DIPS BUT IS EXPECTED TO RECOVER There is no hiding from the fact that 2015 was a challenging

the changes included in which involved the introduction

year for the mining industry globally. As precious metal

of a tax on mining exploration activities in the country.

prices continued to stagnate, the ropes around exploration

The community is still struggling to adjust to the new

budgets tightened as top executives turned their focus

operational environment.

to restructuring processes and cutting costs. In the first


half of 2016, volatility returned to the international stock markets as China’s disappointing economic growth rate and Britain’s decision to leave the European Union sparked

67.96% exploration 67.96% exploration 16.61% postponement 16.61% postponement 11.00% production 11.00% production 4.42% development 4.42% development

investor uncertainty. The market’s loss was the mining More than two thirds of the projects operated by companies with foreign capital in Mexico are in the exploration stage

sector’s gain as gold and silver prices spiked providing mineral-producing countries with some much-needed respite. Nevertheless, prices remained significantly lower than 2011’s record levels. The impact of this trend was felt strongly in Mexico. Of the US$28 billion Mexico received in Foreign Direct Investment (FDI) during 2015, a mere US$370 million was allocated to the national mining sector, an alarming drop from 2014’s total of US$2.1 billion. This is in stark contrast to the US$6 billion received by the automotive sector during the same period.

Source: Direction Development, GeneralDirectorate Coordination Source:General Dirección GeneralofdeMining Desarrollo Minero (General of of Economy. ofMines, MiningMinistry Development), Coordinación General de Minería (General Coordination of Mines), Secretaría de Economía (Ministry of Economy).

The exploration segment, one of Mexico’s most alluring

More than two thirds (67.9 percent) of projects funded

features for foreign investors, also suffered in 2015. The

at least partially by foreign capital in 2015 were in the

country attracted 38.5 percent less in mineral exploration

exploration phase, proving that there are still substantial

in 2015 than in 2014. From having occupied the coveted 4th

gains and discoveries to be made. The traditional stronghold

position in terms of foreign exploration investment in 2014

in the north of the country continues to attract the majority

behind Australia, the US, and Canada, Mexico dropped to

of foreign mining companies, whose work is facilitated by

7 place in 2015 after being overtaken by China as well as

strong infrastructure and local support. Sonora, Chihuahua,

regional rivals Chile and Peru. Aside from the struggling

Durango, and Sinaloa lead the way in terms of foreign

markets, this loss of competitiveness and investor appetite

capital-funded projects. Canadian operator Agnico Eagle

toward Mexico can be explained by the 2014 fiscal reforms,

manages two mines in the north of the country that ranked



There are 25 states in Mexico with a presence


of companies with foreign capital in the mining industry. The largest number of projects are


concentrated in the north of the country.

125 100 99


















Nuevo Leon




Baja California Sur






State of Mexico





Baja California





San Luis Potosi










0 Sonora


Source:General Dirección Generalofde Desarrollo Minero (General of of Mining Development), Coordinación General de Minería (General Source: Direction Mining Development, GeneralDirectorate Coordination Mines, Ministry of Economy Coordination of Mines), Secretaría de Economía (Ministry of Economy).


Latin America









Eastern Australia








































Source: Fraser Institute


in the national top 10 in terms of gold production in 2015,

Moreover, the strength of the dollar against the fluctuating

the Pinos Altos mine in Chihuahua with 193,000 ounces, and

peso is often an encouragement to foreign operators in


La India in Sonora with 104,400 ounces, placing 4 and 10

the country. Mitchell Krebs of Coeur Mining shared that at

respectively. Meanwhile, Coeur Mining’s Palmarejo project

the company’s Palmarejo property, the budget was run at

and Pan American Silver’s Dolores mine, both in Chihuahua,

an exchange rate of MX$12.5 to the dollar last year, and the

ranked in the top 10 for silver production last year.

savings this generated equated to around US$10 million.


“Unlike a lot of companies that have several operations in Canadian operator Endeavour Silver contributes 3.4 million

Mexico we have only one, and even though it is sizeable

ounces of silver, 7,390 ounces of gold, and 4 million ounces

the peso devaluation has constituted a considerable

of silver equivalent to Durango’s production, with its

tailwind for us,” he comments.

Guanceví mine acquired in 2004. Similarly, Great Panther Silver’s Topia silver-lead-zinc property mined 65,000 tons

A total of 16.6 percent of projects funded by foreign

of ore in 2015. Following the northern states in terms of

capital remain postponed, a trend that must be reversed if

foreign presence is Zacatecas, with Goldcorp’s Peñasquito

the sector is to improve on the 3 percent it contributed to

still comfortably the largest gold mine in Mexico after

Mexico’s GDP in 2015. Should stability return to the global

producing 860,000 ounces in 2015. Endeavour Silver is set

markets and the Chinese economy continues to falter,

to begin production at its El Compas property in 2017 after

the mining sector’s recovery may be delayed. However

completing the acquisition in 2Q16, while MAG Silver and

with Mexico’s stable economic growth, low inflation,

Fresnillo have joined forces and plan to begin production

proximity to the US market, and well-developed mining

following the discovery of high-grade veins at Juanicipio.

infrastructure there is plenty of cause for hope that FDI into the sector could surpass the US$5.2 billion received

Oaxaca currently has 34 projects funded by foreign capital, ranking 8


on the national list. One of the most

in 2013. The world’s thirst for minerals is not going to disappear,





notable is Fortuna Silver’s San José property, which began

and few countries are better suited to providing these

production in 2016 following a US$62 million investment.

resources than Mexico.


18.0 15.0

14.7414 13.3760




12.0 9.0 6.0 3.0

Jul 2016

Jun 2016

Apr 2016

May 2016

Mar 2016

Jan 2016

Feb 2016

Dec 2015

Nov 2015

Oct 2015

Sep 2015

Aug 2015

Jul 2015

Jun 2015

May 2015

Mar 2015

Apr 2015

Jan 2015

Feb 2015

Dec 2014

Nov 2014

Oct 2014

Sep 2014

Aug 2014

Jul 2014

Jun 2014

May 2014

Mar 2014


Apr 2014

Jan 2014

Feb 2014



OVERCOMING DIPS IN THE SECTOR mining, was promoted it would be an extremely positive development for the mining industry,” he clarifies. “We must work closer with the government and make it aware 28


of the changes we can implement together to attract

CEO of Fresnillo

increased investment.” The Energy Reform has opened new doors for mining

The fiscal reform, and especially the mining royalties, was

companies that are now able to generate their own

announced at an extremely difficult time for the industry,

electricity supply, and Fresnillo has taken full advantage

says Octavio Alvídrez, CEO of Mexican silver giant,

of this opportunity. “In terms of energy, we are not only

Fresnillo. “We were already working with the communities

examining the sourcing of energy at competitive rates but

on infrastructure that served the surrounding areas, so

also the power source itself, and we are looking into clean

this is part of the reason why the country has experienced

energy sources,” he shares. “By mid-2016, I believe we

a fall in the Fraser Institute investment attractiveness

will be able to commit ourselves to a certain percentage

rankings to number 37,” he comments. He believes that

of clean energy generation.” Additionally, an important

compared to some other countries, Mexico is currently at

component for Fresnillo is diesel that is consumed in open

a disadvantage. “If we were to change certain elements

pit mines. At the moment, Alvídrez shares the company is

of the fiscal reform I am certain it would be beneficial and

testing ways to replace this source with natural gas. The

we would see investment in mining growing,” he claims.

pilot program will involve running two Fresnillo trucks in

From 2012 until last year, Mexico saw a drop in mining

La Herradura with natural gas and will start in the next

exploration, and from 2014 to 2015 exploration levels fell

few months. Depending on the results, Alvídrez plans to

by more than 30 percent from 2012 to 2015. “If Mexico

subsequently change the fuel used by Fresnillo’s entire

implemented a system in which exploration, the future of

fleet to natural gas.

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Q: What part does Mexico play in your portfolio and why

there are ups and downs all along the cost structure, and

is it an attractive destination for Coeur Mining?

although the peso devaluation has certainly helped us, it

A: We have two projects in Mexico, one that is currently

has been offset by some other factors.

operating and one that is not. Palmarejo, the project that is currently operational, is our largest mine on a global scale,

Q: How is Coeur Mining striking a balance between

and this makes Mexico a strategically important location

optimizing costs and retaining high quality employees?

for us. The country is attractive due to a number of factors,

A: Two factors that we have prioritized are increased

including favorable logistics in terms of its proximity to the

focus on grade and on scale, as both will drag the unit

US. The amount of mineral potential that exists in Mexico

cost down and offset some of the price erosion we have

makes it a truly attractive country, and when considering

seen. Approximately 95 percent of the money we spend

the long history of mining it had to develop a well-

on exploration is channeled to the areas around our

established set of laws with reasonable permitting, and

existing mines where we know we already have reserves,

quality human talent. All of these factors as a combination

Meaning the odds of finding more

make the country an extremely attractive jurisdiction but

Moreover, the payback is a lot faster because the staff,

it does have its challenges.

infrastructure, and processes are already in place so we

ore are greater.

extremely focused on programs that find higher grade. We Q: To what extent do you see opportunities for Coeur

have been successful in this endeavor both in our mine

Mining in self-generation?

in Alaska and our Palmarejo mine. At our Nevada mine,

A: We are on the grid at Palmarejo as a customer of CFE.

we have almost doubled mining, crushing, and placement

We have full generator backups that we use intermittently.

rates. With larger trucks, greater crushing capacity, and

In terms of power generation, we have a project called La

more efficient planning the costs per ounce have dropped

Preciosa in Durango that we bought in 2013 at a much

from US$25 to US$11. This can all be attributed to scaling

higher silver price environment. This is on hold at the

up mining rates and volumes, driving down unit costs, and

moment since it is not financially viable to run this project

becoming a more efficiently run company.

at a silver price of US$16. In terms of the effect of our cutbacks on human capital, Q: How have the drop in commodity prices, the

these savings are taken from our corporate office. Our

depreciation of the peso, and the Mexican mining royalty

general and administrative (G&A) costs have gone down

affected Coeur Mining’s operations?

from US$55 million in 2013 to US$34 million in 2015, a

A: We run five operations, and Mexico is the only one in

saving of 45 percent, and that is generated by a reduction

which we see any benefit, especially given the weakening

in head count and a less profound reliance on third parties.

of the peso. Last year, we ran our budget at an exchange

It is a delicate balance between identifying which skills are

rate of MX$12.5 to the dollar, and the savings this

less necessary in a declining price environment that may

generated equated to around US$10 million. Unlike a

have been needed in a different scenario. However, if too

lot of companies that have several operations in Mexico

many cuts are made the company becomes exposed to

we have only one. Even though it is sizeable the peso

certain risks that would have been mitigated with these

devaluation constituted a considerable tailwind for us. We

capabilities. I always warn our investors not to wish for

have also seen our costs per kWh of power reduced due

continuous reductions in G&A because it could reach

to increased competition from US$0.115 down to US$0.08,

the point where we begin cutting down to the bone and

and that had significant impact. Additionally, we burn a

exposing ourselves to the negative consequences. We are

tremendous amount of diesel, and the cost per gallon is

always mindful of ensuring we have just what we need and

now down from over US$3 to less than US$2. In mining,

no more.



Since the introduction of the mining royalty tax in 2014, the regulatory landscape of the Mexican mining industry has changed significantly. Now, a tax of 7.5 percent applies to all mining production, with a 0.5 percent additional tax on mining activities producing gold, silver and platinum. Any company that fails to carry out exploration or exploitation activities on its concession for a period of two years or more will be required to pay a duty. Although some players have become reluctant to invest as a result of the tax, the environment remains attractive to mining investment. Total investment in the sector increased to US$5.2 billion in 2015 from US$4.9 billion in 2014, according to CAMIMEX. Nevertheless, players now need to learn to negotiate the new environment in light of the considerable changes, meaning that advice from policy makers and legal representation is more important than ever.

This chapter will focus on disseminating the new legislation, with opinions from representatives of top legal and consultancy companies in Mexico. These actors will provide their opinions on the changes, as well as advice and recommendations for getting the most from mining activities and adjusting to the new reality. Other pertinent challenges covered include recruitment, human capital, environmental requirements, and considerations and negotiations with ejido landowners.


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VIEW FROM THE TOP: Héctor García, PwC


VIEW FROM THE TOP: Alberto López, Sonora Ministry of Economy


VIEW FROM THE TOP: Laura Díaz, Díaz, Bouchot & Raya Abogados




VIEW FROM THE TOP: Jorge Sánchez-Dávila, Haynes & Boone


VIEW FROM THE TOP: Héctor Herrera, Haynes & Boone


VIEW FROM THE TOP: Ricardo Pons, Hogan Lovells

Juan Torres, Hogan Lovells


INSIGHT: Rodrigo Sánchez-Mejorada, Sánchez-Mejorada, Velasco y Ribé


VIEW FROM THE TOP: Enrique Rodríguez del Bosque, RB Abogados


INSIGHT: Alberto Vázquez, VSG Legal Services


VIEW FROM THE TOP: Alfonso Rodríguez, LegalMex


EXPERT OPINION: Karina Rodríguez, PS&RM Abogados


INSIGHT: Rafael Cereceres, Cereceres Estudio Legal



Q: How does PwC help boost its clients productivity and

human resources procedures using our extensive market

efficiency during downturns such as the one currently

knowledge and contacts to recruit the professionals best

being experienced by the industry?

suited for the position.

A: Companies throughout the mining sector are all collectively seeking to achieve meaningful cost reductions

Q: What are the main challenges Mexican mining

and so our work is focused on shedding light on how to

companies face regarding tax regulations, and how does

boost our clients’ businesses. This includes cost reduction

PwC help its clients overcome them?



A: The most important recent development was tax

operational reviews of Enterprise Asset Management,




reform, which introduced taxation on all mining activities

readiness and risk assessment reviews for capital projects,

in the country. We help our clients deal with this added

warehousing and logistics optimization, strategic sourcing,

pressure by advising them on restructuring options, as

and spending analysis. Moreover, we carry out supply

well as the use of tax credits in certain situations. Another

and contract management reviews for Procurement and

problem is related to favorable VAT balances. When

offer Supply Chain strategy governance services. If a

mining companies make significant investments into the

client needs to improve its cash flow one option is to take

sector they pay Mexican VAT, which creates VAT favorable

out loans from banks or other sources like government

balances that should be refunded within 40 days. In the

agencies. A Canadian company recently took out a loan

last two or three years the tax authorities have been slow

from Bancomext with favorable interest rates, which has

to process these refunds, and I have witnessed companies

proven to be a shrewd business decision.

waiting for more than one year for their VAT refund to be authorized and processed. This is far too long a wait,

Q: How can your tax-related services provide benefits for

especially given the current market situation where


available cash is so hard to find so the government must

A: Many production companies have subsidiary exploration

prioritize reducing waiting time for corporate tax refunds

businesses, and often it can be beneficial to combine both

in order to support the industry’s recovery.

businesses due to certain tax clauses available under Mexican law. We can advise and aid our clients through

Q: What role does PwC Mining Center of Excellence in

this process. In early 2016, a tax incentive was authorized,

Toronto play in the organization’s participation in the

which supports mining companies in the purchase of

mining industry?

diesel. Businesses will now be able to credit 100 percent

A: This is an extremely important facility for PwC because

of tax paid during the acquisition of diesel against

it ensures that all of our clients have access to the skills,

income tax payable and withheld to third parties, which

and abilities of our mining specialists around the world.

can reduce the diesel purchasing by up to 33 percent.

The Mining Center of Excellence allows our Mexican mining

Given the quantity of diesel used throughout the mining

clients to work alongside Canadian specialists, which is an

value chain this is a significant development, and we

effective way of combining industry knowledge between

encourage mining companies to review the process they

them, and create a synergy for our clients. Moreover,

use for purchasing diesel in order to take advantage of this

it has helped build our client base because many

piece of regulation. Another area in which there is often

Canadian companies have Mexican subsidiaries and they

significant room for improvement is mine site logistics,

appreciate the fact that we can act as a bridge between

and our specialists make the effort to visit mines across

the two markets. In fact, PwC is currently in the process

the country to assess whether alterations to supply chain

of integrating its Mexican operations with its business in

management can be made to further streamline mining

the US, and from July 1, 2016 we will be operating as a

operations. Moreover, we often help our clients with their

combined, international firm.



MITIGATING THE IMPACT OF MINE CLOSURES ALBERTO LÓPEZ Director of Mining at the Ministry of Economy of Sonora 36

Q: How is Sonora positioned to attract investment,

closed their doors to the industry are reconsidering their

and how are you ensuring the business environment

options. I have no doubt collection will be efficient but the


issue starts in resource distribution, and according to the

A: According to CAMIMEX, in 2015 Mexico was expected

law these must be used for regional developments. Some

to attract US$5.4 billion of investment and Sonora could

states believe they should receive a percentage even if

be a depository for some of these resources. Sonora in

they no longer have active mining, and some neighboring

many ways has been blessed by nature due to historical

municipalities also feel the same way. Right now, we have

geologic events that occurred in the region. The state

a municipality that has received considerable investment

has been characterized with world class deposits, which

for a complex mining metallurgical plant but the 2,000

is its most attractive feature. A great percentage of the

workers live elsewhere, and will therefore not see the

discovered deposits have already been exploited and

benefits. These situations must be analyzed in depth to

now we see a trend of low ore grade pits. Mexico, along

ensure the fund is distributed proportionally.

with other countries, has reached a production stage where only low grades are being exploited and this has

Q: What were the most and the least successful elements

a significant impact on costs. Many of the current mines

in the government and private sector interaction while

will close due to depletion of resources, and as a result

addressing Grupo México’s toxic spill, and what were the

we must prepare ourselves for the economic shockwave.

major lessons learnt?

Most mines have reached their average lifecycle and

A: The remediation and appropriate reparation investments

at the moment the main concern is to substitute these

have been carried out by Grupo México but this event has

operations with new ones in order to maintain economic

tarnished the image of the sector. As a result, we have to

and production stability in Sonora. At the end of 2015, five

be very careful and increase safety measures to ensure the

mines were closed while others might close due to a drop

strictest safety levels are followed by all mining players.

in prices. We are promoting the industry to the best of our

Alongside PROFEPA and SEMARNAT, we determine points

ability in order for Sonora to continue being a safe haven

of risk and we address them. When the accident occurred,

for mining operations in Mexico.

PROFEPA visited all of the mines and we helped it in this endeavor. Sometimes PROFEPA lacks the resources to

"In 2015, Mexico was expected to attract US$5.4 billion of investment” Alberto López,

Director General of Mining at the Secretariat of Economy of the Government of Sonora

oversee all the mines in Mexico particularly those housing informal mining activities. Q: What are the key priorities fostering the growth of the mining industry in 2016, and ensure the position of Sonora as a top mining investment destination? A: The biggest priority is for Sonora not to lose its place in the industry, and to do so we must generate new mines and promote new projects. Another important priority is to promote the inclusion of SMEs into the mining supply chain

Q: What are the implications of the tax regulation

since in Sonora we see a huge contrast between the major

evolution in Sonora’s mining sector, and what are

mining activities and the small miners. In fact, the latter are



almost nonexistent in Sonora so one of our initiatives for

adequate resource distribution from the mining fund?

2016 is to generate a series of regional plants in collaboration

A: Local authorities like municipalities have shown a keen

with the private sector. One is located in the San Javier

interest in the mining fund, and even states that once

municipality and is scheduled to start operations.






COMBATTING THE MINING ROYALTY LAURA DÍAZ Partner at Díaz, Bouchot & Raya (DBR) Abogados 37

Q: What are the most visible implications of the evolution

therefore unconstitutional. We have been fighting this case

of tax regulation in the mining sector and how would you

since October 2015, and since the process normally takes

describe the efficiency of the collection process?

between six and nine months we hope to have the matter

A: Although the government has a strong motivation for

resolved by the end of 2016. However, the new Ministry of

collecting the mining royalties we in the industry are feeling

Agrarian Development is extremely involved in the process

the negative effects of the decision. We have advised our

and engaging in dialogues with the communities because

clients the royalties are unconstitutional, and we have

everyone is anxious about the outcome of the case. The

already won one case to demonstrate this with another

royalty also carries a double load for mining companies as

case currently subject to scrutiny by the Supreme Court

they must oversee tfund allocation, and ensure they are spent

of Justice of the Nation (SCJN). The government has been

in a way that benefits the community. Ultimately, the tax is

extremely efficient in its tax collection, and committees

hindering Mexico’s position as a global mining competitor.

have already been established in many states in order to distribute funds generated to the local communities.

Q: What aftermath do you expect from the limited funds?

This is a premature step as we are under the impression

A: The impact of these funds to the community remains to

the SCJN will review the current case and will ultimately

be seen as I believe this will either be extremely positive

cancel the royalty structure as a result of our arguments.

or extremely negative. On one hand, the money the

We represented two companies while filing their amparos,

communities are receiving is a result of taxes the mining

and Compania Mineria Pangea’s amparo is now at the

companies pay, and the increase in benefits can be directly

SCJN. Another six amparos are also currently under review

related to this. However, the negative aspect is the fact the

by the SCJN. As a result of the case being re-examined,

money received directly correlates with production, which

I am not sure whether the government is continuing to

is continuously decreasing. One of my clients in particular

distribute the money within the communities. I believe this

believes that ending the year successfully will be limiting

process is extremely risky as they are already expecting

losses to US$30 million, which means there will be no profits

funds that if the tax is rescinded will not be available.

to be taxed. This will directly affect communities that are being promised funds for a limited time. Even if the royalty is

Q: How would you describe your experience fighting

not rescinded the companies are not making a profit, which

cases with the SCJN?

means the communities will not receive any money.

A: It was reassuring that we had previously won one case and had reached a resolution. There are two types of

Q: What incentives are being offered by the government

royalties, Derecho Especial and Derecho Extraordinario.

for exploration activities, and do you expect tax

Derecho Especial corresponds with the 7.5 percent rate of

deductions to return?

tax imposed, whereas Derecho Extraordinario refers to the

A: The government must review all fiscal incentives but

0.5 percent surplus on all gold, silver, and platinum. The

states also have to evaluate and harmonize benefits and

SCJN allowed us to file a new amparo against Derecho

taxes that are imposed on an individual level. Fiscal duties

Especial, and this will be studied for a second time. In the

and benefits are largely incoherent, and differ from one

case of Derecho Extraordinario, we are arguing that this

state to the next. I believe that a more aligned and efficient

levy does not fall under fiscal responsibilities but rather

structure across jurisdictions would create a plethora of

rights of way. Moreover, the extra 0.5 percent applies only

benefits. Currently, a mining concession application can

to gold, silver, and platinum production when Mexico is one

take three years since companies must first obtain an

of the top 10 global producers of copper. The constitution

explosives permit and an environmental permit, among

contains a clause determining equality meaning the

other regulatory requirements. Therefore, kicking off

extra tax on these three products is discriminatory and

exploration projects is extremely complicated.



Q: What are the implications of the pro homine principle

party will receive in return, what surface type is involved,

in land concessions for the mining industry?

under which legal concept it falls, and whether or not they

A: Prior to 2011, the Mexican Constitution placed the

will become partners in the future or if the land will be sold.

state above the citizen but this was changed with the

These terms are essential in any exploration agreement

implementation of the pro homine principle, in which

especially if a resource like gold is discovered. If the price

judicial interpretation always seeks the greatest benefit for

is not set from the start the landowner could demand a

human beings. This falls under human rights since it is a

larger sum of money in exchange, which would make the

prerogative of all human beings to develop their lives to the

project unviable. If a company does not establish it is an

fullest. Judges now have to be extremely attentive not to

exploration agreement then it is liable for a human rights

violate the rights of any individual and ensure each issue is

lawsuit. Once potential is uncovered it is important for the

resolved accordingly. If the judge does not follow through

landowner to understand the project is not generating

then the court is subject to sanctions, and the case can

money at this stage and that once production commences

be taken to national and international human rights court.

then there is a possibility of increasing the pay per

While it would solve the conflict the Mexican government

hectare. When developing a mining project a company

would incur penalties for failing to follow protocol.

has to perform a public consultation where it evaluates its social and environmental impacts. In today’s panorama,

Q: How should mining companies prepare for negotiations

individuals whose rights are violated or who fear for their

with landowners and surrounding communities?

wellbeing can now sue mining companies.

A: Whenever a mining company wishes to negotiate with property owners it must pay close attention to the type of

Q: What variables must be included in the initial agreements

proposal it puts on the table. It must be clear what each

to mitigate risk and obtain the required permits?

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A: A clear initial agreement must take into account all aspects of a project including prices, times, and what would happen in the event of finding a resource. Environmental issues are also closely linked to land use and for SEMARNAT to grant concessions companies must demonstrate they have the legal use or ownership of the land. Mining companies tend to get into disputes with owners over land usage. Therefore, it is essential to establish an agreement in which owners hand over the legal possession of land in exchange for remuneration. Precision is essential as matters may be overlooked in

The pro homine principle will always benefit human rights over the state. Therefore,

negotiating with communities is of primal importance when seeking

land concessions

an agreement’s statute, which ultimately could harm the company in the future. Exact amounts and frequency of

blocking the entryway. GAP diagnosed the predicament

payments have to be defined. In the case of a legal dispute

from a social, technical, and a legal perspective to see

companies must have a backup of all documents.

if there had been any legal violations, and to identify the community leaders. We realized the community was

Q: How has GAP been involved in cases where the

a matriarchy by nature. Therefore, we began speaking

relationship between the community and the mining

with the women and learned about their needs and why

company is distorted, and what have been the most

there was so much resistance. After dialoguing with the

surprising case studies?

community and identifying the points of contention we

A: About 95 percent of the cases we have handled had

were then able to discuss the benefits the mine would

these types of problems. Many companies fall under

bring and begin negotiations with the leaders. Once

the misconception that negotiating with communities

the mining company identified the surface it needed we

and landowners is an easy task when in reality it is a

discussed the use of the land for mining, the entryways,

complicated process due to different languages, customs,

and negotiated the relocation of every family. The

and protocols that secure their legal rights. An ejido is

relocation process had to be carefully documented to

similar to a company. It is divided into an administration

prove that families were resettled into new and safer

council comprised of six leaders, and an assembly of

homes that fit their needs. During the relocation process

ejidatarios who are elected to make decisions.

we were also able to privatize the land in favor of the families and provide them with deeds, which will allow

Torex Gold had a project located in Guerrero that in eight

them to inherit and mortgage the land. It took four years

years could not advance into exploration because the

to relocate the families and finalize the documentation

community had stolen the machines, and people were





Q: Would you agree there's a lack of financing in light of

A: In the current market conditions, private equity funds are

global conditions?

extremely attractive and they have become an important

A: Whether or not a company gains access to financing

source of financing. In addition, the stock exchange has

depends on its operative and financial structure, and there

been a solid source of financing, and even the Toronto Stock

are companies that have conservative strategies, which

Exchange (TSX) has played a pivotal role despite the far-

enables them to draw attractive financing from foreign and

reaching crisis it has experienced over the past four years.

domestic banks alike. These have been able to withstand

The third most important source of financing are Canadian

the commodity price crisis relatively well. However, we

banks as they remain highly active in financing mining deals

also see companies that have been left exposed. These

worldwide given they have the expertise and sensitivity in

medium and even large players are in danger because

managing and dealing with mining crises.

of their corporate finances and the commodities they produce. Basically, companies in iron ore and coal have

Q: How do you foresee the mining industry will function

been left very much exposed as well as other companies

after the sector stabilizes?

producing base metals.

A: In Mexico, many greenfield projects are being sold and it is mainly senior, multinational, or large Mexican

Q: What are Rio Tinto and Minera Frisco doing well in

conglomerates that acquire them. The main driver

terms of financing?

behind mergers of equals is scaled economies but other

A: Rio Tinto and Minera Frisco were listed among the

alternatives exist such as joint ventures or joint exploration

companies with the strongest financial structures and

agreements. From an economic and financial standpoint

reserves during the crisis, and Industrias Peñoles can also

it can be difficult for foreign companies to seamlessly

be included as one of the most financially stable companies

integrate with local players because both parties have

worldwide. When commodity prices began to decline,

different aims and targets. Mexican companies want to

these companies stopped investing heavily in exploitation

survive the crisis, while foreign players want to make a profit

and instead opted to develop exploration activities in

as quickly as possible. A balance must be found between

order to overcome the approaching crisis. Rather than

the two parties to see where they can complement each

divest their assets and cash in exploitation they looked

other, and a viable business model would see a foreign

to exploration as a safe bet. Companies understood that

company that can contribute technology for exploration

royalty tax in conjunction with commodity prices could

allied with a Mexican company that can provide the

impact their corporate finances so they were conservative

workforce, mining concessions, and assets.

in new investments and cash allocation. On the other hand, giants like Glencore made aggressive bets on sectors like

Q: What are the main objectives Haynes and Boone wants

iron, copper, and zinc in global projects and as a result

to accomplish during 2016?

were left very much exposed to the fluctuating commodity

A: Mexico continues to be an important and attractive

prices. This is one of the reasons why a significant percent

jurisdiction and changes are expected regarding the mining

of the company’s stock value was lost. In times of crisis,

royalty. Amparos have been filed by companies and we see

there are companies that are aggressive and others

the government is reconsidering the structure of the tax

that uphold a more conservative business model when

and contemplating an increased number of tax deductions.

managing their cash and financial assets.

It is important to stress that exploration already has a broader scope of deductions and these new concepts will

Q: What are the most attractive financing alternatives for

be aimed at the exploitation stage. The investment climate

mining projects, and how do you help your clients gain

remains attractive, especially since new projects have been

access to them?

discovered and these will either be acquired or developed.



Q: What key factors must be considered by the mining

enables us to prepare our clients so they can face those

industry in terms of environmental regulation?

situations in the most informed manner possible. Science

A: There has been a pattern wherein every six years

and technology has pushed the industry forward, and it



helps companies prevent and foresee possible scenarios and

toward all industries related to the use and exploitation of




extreme situations. The sector has radically changed and

natural resources in Mexico, and mining is not an exception.

the law has been heavily reinforced by authorities. In 2015,

This also implies more expenses given the unfriendly

PROFEPA inspected 1,130 mining units in Mexico, and of

international business environment where metal prices

those, 71 were closed due to lack of compliance. This shows

are down and the drop in oil is impacting all industries.

that a minimal proportion of the sector was failing to fulfill

Despite this negative perspective the mining sector is still

the general environmental requirements. Most of those units

investing and complying, and legal advisors do their best

were small and medium mining companies, and most of the

to help clients comply with the legislation and with article

closures occurred due to hazardous waste management and

four. The sector learned its lesson, and now it is impossible

operations-related spills.

for mining companies to do business without considering the communities that might be affected. Public opinion

Q: How do you foresee the enforcement of the law,

paints the mining industry with unfavorable colors and

and what should be done to improve the fractured

refers constantly to the practices of the past century but

environmental regulations?

the current sector is totally different and opinions must


also evolve to reflect reality.

regulators, do not have enough staff to inspect the whole







industry in Mexico. In spite of that, PROFEPA has made Q: To what extent do you agree with the contention that

an effort to practically supervise most of the mining

the Federal Environmental Responsibility Act does not go

units in the country because of the well-publicized

far enough?

spills that have caused concern among the population.

A: The problem with that Act is that it cannot be

The big challenge now is to enforce the environmental

enforced by itself since it is a complementary law of the

regulation in respect to the small and medium size

environmental legislation. Its basic principle is that if a

mining companies because together they equal the

company does not comply then sanctions will be imposed.

negative environmental impact of large firms. We are

This sets forth a new right to file a lawsuit for damages

currently providing environmental legal assistance for

to the environment,but limitations are placed on who is

large companies, both Mexican and foreign. Rather than

entitled to bring litigation. In this case, only communities

wait for the regulations to become more aggressive we

that are affected, PROFEPA, NGOs, or State Environmental

urge them to be more proactive in their decision making.

Agencies. The latter in conjunction with PROFEPA. Usually,

We expect improvements in greenhouse gas emissions,

failure to comply entails an administrative process with the

waste, and water management.

environmental authorities, which follow certain procedures that might impose sanctions that can later be challenged. It follows the rules of a civil trial but the damages are solely focused on the environment and not on personal patrimony. Q: What is the process a mining company has to undergo to successfully manage a crisis such as a spill? A: We have to survey the whole operations, pinpoint all possible risks, and develop the worst case scenarios. This

In 2015, PROFEPA inspected 1,130 mining units in Mexico, and of those, 71 were closed due to lack of




Ricardo Pons Partner at Hogan Lovells

Juan Torres Partner at Hogan Lovells


Q: What is your main differentiator as a law firm that

Q: How has the mining royalty tax regime affected

provides services to the mining industry?

communities and the mining industry?

JFT: Two elements set us apart from other legal service

RP: Firstly, the charge is more of a tax than a royalty but

providers. First of all, we have a full service team. Other

there is no question that it represents a major issue for the

legal firms tend to have expertise just in mining regulatory

Mexican industry because countries are competing with

aspects, while Hogan Lovells provides a one-stop shop

each other to attract investment. There is also another 0.5

approach due to the complexity of the industry. Rarely do

percent royalty on the sale of precious metals that adds to

clients seek our services purely for inquiries about mining,

the burden. Mining companies are having significant cash

instead requiring legal advice on a range of issues such

flow issues due to these tax levies, and tax authorities are

as regulatory, tax, foreign trade, employment, corporate,

requesting information that can take months to process.

land, and water. The additional differentiator comes from

Proceedings to challenge these taxes are still in the courts

the specialties Hogan Lovells has within certain industries,

and should be resolved soon, so I would not consider it

and we complement this service with resources, talent,

unconstitutional unless it is declared so by the courts.

and connections. We recognize the fact that most of the

Most of our clients do not agree with the royalty but they

mining investment in Mexico comes from Canada and the

also feel that challenging the government would simply

US, and as a multijurisdictional law firm we are particularly

exacerbate the situation. The fee is a burden that causes

able to handle their needs.

certain companies to reduce capital flow or simply move



Sánchez-Mejorada does not place the blame squarely on the shoulders of the bureau itself as he acknowledges the institution lacks the necessary manpower, training, and resources to adequately resolve the pressing challenges.

Sánchez-Mejorada, Velasco y Ribé, the oldest Mexican law







firm still practicing today, has always had a strong focus

changes that would help update the aging concession

on the management of natural resources and acted as an

handling process. According to Sánchez-Mejorada, a

advisor to the federal government during the drafting of

priority for the Mining Bureau should be the transition to

the current Mining Law. Rodrigo Sánchez-Mejorada, one of

an online processing system where interested parties can

the firm’s partners, believes that the bureau has failed to

file everything online, and obtain instant responses. “The

evolve at the same rate as the industry that it represents

Mining Bureau continues to work extremely slowly in

putting a handbrake on the sector’s development in

releasing available territory and awarding concessions,”

Mexico. “While the Mexican mining industry is world class

he explains. “This is a complicated endeavor because

and has grown significantly, the regulatory department

the authorities have to be careful with the cartography.

has remained static with no technological improvements,”

However, if a grid system were to be implemented in which

he comments.

the mining deposits coincided with geographical grids,

to another region altogether. The market is furthermore

royalty tax, an obligation to dedicate a specific percentage

being affected by the global price of gold, and more

of overall production to the community could have been

legislation governing certain areas like environmental

imposed. A few guidelines could have been offered to

impact. Mexico is still very much open to investment

structure these community developments and avoid

but due to the conditions it is a more expensive region

having corporations invest in projects, like amusement

and royalties are punctuating this trend. Ultimately, the

parks, that do little to support this population. This method

revenue of the extra cash is supposed to flow back into

would shift the burden to the companies and force them

mining regions and contribute toward the wellbeing of

to have a more effective interaction with communities.

the population but in reality, we have yet to see any such

Ultimately, it is again up to the courts to decide whether

benefits actually materializing.

or not the referred dual structure is viable. 43

Q: What is the response of the mining industry, and what

Q: What are your expectations for the next couple of

are the arguments against the tax?

years in Mexico?

JFT: Competition centers on multiple factors while

JFT: There is an expectation that production will increase

trying to determine which market provides the greatest

again. Several states depend heavily on mining companies,

advantages. Many businessmen are questioning the

and the downturn is affecting large segments of the country.

decision to impose royalties because at the end of the

However, a connection between the mining industry and

day, the amount of investment is negatively impacted

the Energy Reform may be a ray of hope because for many

by this additional burden. The main purpose was to give

years the exploitation of gas was adequately regulated.

something back to the areas where mining companies

CNH recently released a publication with guidelines

operate because, in theory, all of the mining resources

that finally explain how to exploit resources that may be

are being taken away from these communities while they

found in the context of mining operations. Another hidden

receive nothing. The reasoning is legitimate but people are

benefit for mining companies from the Energy Reform is

wondering whether the royalty tax has actually created

the proximity between operations from other industries

any additional revenue. Economists speculate that the

and mines. Previously, an isolated mine would be forgotten

plan could backfire but it may be too early to tell.

but with more players infrastructure will inevitably improve even in remote areas. Nonetheless, all of this depends on

Sadly, when the government administrates certain projects

the stability of hydrocarbon prices, and those have been

inefficiencies are bound to be seen. Instead of creating the

affected by a sharp downturn in recent years.

a concession could be granted by reference to a specific

“The Mining Bureau continues

square, so there would be no questions as to the size and boundaries of the mining lot covered by such a concession.” This would not only save a great deal of time by allowing the bureau to issue concessions online directly but it would also give companies that own concessions the right to carry out mining operations without the need to go through the laborious process of gaining consent from the authorities.

to work extremely slowly in releasing available territory and awarding concessions” Rodrigo Sánchez-Mejorada,

Partner at Sánchez-Mejorada, Velasco y Ribé As an alternative, Sánchez-Mejorada proposes the Mining Bureau adopt the gradicula system, a state-of-the-art grid

to implement a mining tax based on the companies’ income

concept that takes into consideration the curvature of the

and profit for extracting a natural resource that belongs

earth, thus providing a precise position of the lot. This

to the Mexican nation,” he argues. “The amount of money

system would eliminate a large portion of the bureaucratic

an operator is making out of the concession is irrelevant

processes that mining companies currently have to

because an inefficient producer would not pay, whereas, an

negotiate when acquiring a concession, and could help

efficient one will. The authorities are penalizing efficiency

boost foreign investment into the sector, particularly when

and rewarding mediocrity.” A more pragmatic solution for

it comes to exploration. Of course, the falling investment

Sánchez-Mejorada would be for all mineral production

in exploration is due to a glut of other factors, not least

to be taxed at a rate depending on the current price of

the mining royalty tax, which according to Sánchez-

the commodity, making it adjustable and reflective of the

Mejorada is excessive and impractical. “It makes no sense

market conditions.




Q: What should the government do to attract more

attractive amount and sign an agreement on royalties. The

investment in the mining sector despite the difficulties it

benefit of royalties is the fact the seller will only begin to

is undergoing?

receive them after the fixed production start date but if

A: Costs in Mexico are relatively low, especially in terms of

the operator does not begin production by that fixed date

human capital, and a great deal of qualified staff can be

then small fixed monthly fees must be paid to the seller

found across the country. Mexico has no regulations for

until the production phase is reached.

foreign investment in the industry and this means foreign companies through a Mexican subsidiary can fully invest with no limit whatsoever. While the royalty tax has had an excessive impact, this is a necessary step to allow Mexico continuous growth. Another aspect that is often overlooked is that all minerals are quoted in dollars so despite the dip in commodity prices Mexican costs are lowered by 30 percent just through the exchange rate. RB Abogados’ main responsibility is to carry out industry transactions while complying with applicable law but satisfying the business structures of the parties to the transactions. Q: How is the landscape looking in terms of the sale and transfer of mining concessions, and what are the rising trends? A: Certain Canadian public companies with mining properties in Mexico are amalgamating to obtain a wider

All minerals are quoted in dollars, so in Mexico costs are lowered by 30 percent just through the exchange rate

portfolio and increase mineral reserves, which makes them more attractive to investors. Mexican mining concessionaires

Q: What are the most important projects you have

and their properties continue to be extremely attractive

worked on?

for foreign publicly traded companies so structures like

A: We have been involved in many M&A and project

reverse takeovers and joint ventures are still working well.

finance transactions for the industry. We participated

Most of the deals are more focused in share considerations

in the acquisition of San Dimas by Primero Mining from

than cash allocations, which encourages shareholders to

Goldcorp, and we facilitated a royalty stream from Coeur

approve these kinds of transactions.

Mining to Franco Nevada for revenues from La Preciosa. Additionally, we provided counsel for the joint venture

Q: How can your law firm help smooth out the transaction

between Pan American Silver and Orco Silver for La

processes to ensure the contentment of both parties?

Preciosa, and the pre-paid forward silver purchase with

A: The transactions structured abroad may represent a

JMETT as a buyer and Santa Cruz Silver Mining as a seller.

challenge and sometimes prove risky for Mexican owners

Other projects in which we were involved were establishing

who may not be aware of how publicly traded companies

the credit facility to Pan American Silver from Scotia Bank,

operate. This is an industry where small players are fervent

and overseeing the acquisition of Goldcorp’s Guanajuato

believers in their projects so it can be complicated at times

mine by Great Panther Silver. We also worked on the

to align their interests with those of major operators. In

acquisition of Peña de Bernal by Starcore from Goldcorp,

these cases, we suggest small mining companies or

and the joint venture between Excellon Resources and

individual concessionaires sell their projects for an

Apex on the La Platosa property.


TAXING TIMES FOR OPERATORS IN MEXICO General Coordination of Mines since any new project has to go through the Ministry of Energy in order to obtain


approval regardless of whether there is a possible energy

Senior Partner at VSG Legal

activity that would be preferential or coexist with the


mining sector. “I think the mining industry should not only


be considered at a Coordination level but should have its own Undersecretary, and instead of being aligned with VSG Legal Services is a young firm but its partners have a

the Ministry of Economy should report to the Ministry of

great deal of experience since its founding more than 25

Energy,” he suggests.

years ago. “We have come to consider ourselves as the most proactive firm in the mining industry because we are

Another problem Vázquez has identified is that every

actually concerned about the benefit it creates for Mexico

time the administration changes officers are usually

and the way it has evolved,” shares Alberto Vázquez, Senior

removed or transferred and the new ones sometimes lack

Partner at the firm. “We endeavor to involve third parties

experience in the industry, halting sector growth. “The

in the industry by organizing events that show external

government must understand the pivotal importance of

stakeholders how mining companies are complying with

the industry by not only attracting investors into its fold

environmental regulations.” According to Vázquez, VSG’s

but also by providing the necessary assistance in order

differentiating factor is that its staff personally visits

to correctly develop this sector,” he continues. “Once

the projects and establishes close ties with the agrarian

companies are safely settled in the market they encounter

authorities. “For every project in which we are involved the

an almost insurmountable barrier in obtaining the mining

first step is to approach the Agrarian Attorney’s Office at a

concessions and permits.” Many years ago, he observes

federal and local level to explain what we are planning to do

the main problem for operators were the communities

and involve them to ensure we look after the community’s

but now the problem is the new taxes, which have greatly

interest,” he explains. “In that way, all the companies we

raised costs for the industry. “Formerly, Mexico was one

represent have transparent interaction with the community,

of the friendliest countries in which to set up a mine and

and through this they earn the respect, confidence, and

now it is not. I do not think members of Congress have

trust of the members of the ejidos.”

ever considered the investment and effort that opening a mine requires,” he claims. “It seems they are under the

“For the last two years, the federal authorities have

misconception that mining companies can simply open a

tried to attract investment in the energy sector given

mine and extract the minerals when in fact it can take up

the implementation of the Energy Reform, and the

to 10 years of exploration and negotiation."

mining industry has been pushed aside,” he claims. “The government created a preferential right for the energy

In March 2015, companies started paying the royalty tax, and

sector, and it neglected the mining sector despite the

it was anticipated that in 2016 municipalities would begin to

important role it plays in the development of the country.”

receive the resources. According to Vázquez, this process

Due to amendments made to the Mining Law substantial

has seen little progress. “Companies may not even be in a

delays have been generated in obtaining permits from the

position right now to work jointly with the communities and ejidos to help them receive this benefit,” he explains. "In the

“Through transparent

past, it was simple for mining companies to prepare their

interaction companies earn

direct benefits as they could to impacted communities.

the respect, confidence, and

in these programs to survive and must now realize that the

trust of the members of the

own community relationship programs and provide as many However, some companies now have to reduce investment taxes they have paid have not yet generated any benefits.” However, he says that a positive aspect of the tax is that

communities and ejidos”

states that have had a strong mining presence like Sonora

Alberto Vázquez,

and this will inspire other states that were previously reticent

Senior Partner at VSG Legal Services

and Chihuahua will benefit from a great deal of resources to open their doors to the industry.



Q: What can mining operators do to work in harmony

Q: What are some examples of successful cases that

with the unions?

you have litigated relating to labor laws in the mining

A: During the past year there have been many talks and


negotiations but there have not been any significant

A: Legalmex successfully litigated a case that lasted over

changes. In June, President Enrique Peña Nieto launched

four years. This was a labor dispute valued at US$4.5

a new proposal in an effort to make unions more

million over profit sharing claims, also known as PTU, which

transparent. However, the legal framework stemming

is basically 10 percent of operating income that is paid out

from this proposal is somewhat difficult to achieve since

annually to employees. This particular case was a dispute

there are members of Congress who actively participate

regarding revenue over a single fiscal year. It is particularly

in unions. Therefore, we do not know if any development

important because in the past, many mines generated

will result from this or how long it would take to have

high income, and these cases could become extremely

any form of resolution. Presently, the mining industry

detrimental to mining companies within the current

is not only under pressure as a result of labor but it

economic environment. Legalmex has also assisted several

is also affected by the decline in commodity prices

Canadian operators in reaching competitive bargaining

worldwide, while additional taxes linked to productivity

agreements with Carlos Pavón.

have also put pressure on overall profitability. Napoleón Gómez was the main operator of the mining unions

Q: What are the main factors that foreign companies need

for many years but he lacked transparency, and a few

to consider when entering the Mexican mining industry?

years ago Carlos Pavón entered the arena. Thankfully,


he has proven to be a lot more business friendly as he

Therefore, it is crucial that proper legal advice is sought,

works closely with the mines and seems to be more

especially when dealing with expatriates, individually

transparent in his operations. The mining industry should

hired employees, or employees hired collectively. In

pursue a stronger relationship with the unions through

addition to these practices, it is also important to seek

government assistance.

legal advice relating to health and safety regulations and








public relations when dealing with local communities. Q: How have recruitment practices within the mining

It is important to implement a turnkey strategy when

industry changed with the Labor Reform?

recruiting, when entering the country, and when choosing

A: Many mine operators are currently trying to utilize

a location in which to operate. Informing the population

outsourcing or subcontracting as a way to mitigate the

of the potential employment advantages creates an

possibilities of exposure when hiring new employees.

environment in which the local communities are friendly

Unfortunately, they are given a false sense of security by

and more welcoming to the mining business.

outsourcing services as a provision to protect them. It is stated in the law that the party that directly benefits from

Q: How do you see the labor environment of the Mexican

the employees’ services is responsible for the cost of the

mining sector evolving?

employee as well as the cost of the termination of the

A: If we do not see an imminent economic rebound, we

worker’s contract. We recommend that they seek proper

will probably see an increase in labor disputes. Therefore,

legal consul to devise a strategy that works both with the

it is important that operators seek preventive legal advice

unions and with the employee to mitigate the possibility

to minimize the impact of such disputes. Operators should

of extraneous expenses when closing mines. Outsourcing

consider devising strategic plans to mitigate these issues

is theoretically attractive but it may be unsuccessful at

prior to a major problem arising because preventive

the end of the day when the court makes a judgement

measures are essential to achieving sustained success in

regarding improper dismissal.

the industry.


NEGOTIATING THE MINING ROYALTY 2013 were primary determinants, covering amendments to Federal Law in terms of civil rights and income tax. Secondly, reforms to the mining law that took place in August 2014 because of the Energy Reform contributed


to molding the regulatory framework.

Partner at PS&RM Abogados 48

Changes to the tax regime consisted of eliminating tax deductibility on exploration expenses for locating and The current Mining Law has regulated the mining sector

quantifying the value of new fields in the year these

since 1992, having been revised and edited in 1996, 2005,

operations are carried out, translating to a 10 percent

2006, and 2014. These four reforms aimed to eliminate

annual deduction. Moreover, three new laws were created.



The first legal adjustment in mining was the Derecho

concessionaire from exercising its rights, and to implement

Especial. This annual fee is determined by subtracting

mechanisms that simplified administrative aspects. The

income tax deductions from the revenues obtained from

adaptation to the Energy Reform in Mexico was subject to

the sale of extracted materials, excluding investments

similar processes. Although the Mining Law in force today

that are unrelated to exploratory mining, accrued interest

could be refined, it is a modern law that meets the needs

and default interest, annual inflation adjustment, and

of the sector and international markets. This valuable

contributions for the same activity, and applying a rate

tool is easy to use to promote the mining industry, and

of 7.5 percent to the resulting number. The Miscellaneous

is supported by approximately 50 subordinate laws and

Fiscal Tax Resolution clarified that investments in mining

pieces of legislation. These periphery criteria mainly

production and exploration would be 100 percent

center on environmental and tax concerns but also touch

deductible. The Derecho Extraordinario is a second

upon corporate operations, public health, labor law, oil

component consisting of an annual fee calculated at the

extraction, and energy, to name a few.

rate of 0.5 percent of total revenues derived from gold,





silver, and platinum sales. Thirdly, an additional duty for Within changes to the mining regulatory framework two

concessions that are not yet producing ranges from 50-

issues stand out as crucial factors in its development.

100 percent of the maximum additional fees established

Changes to the tax regime carried out in December

by the Mining Law. It was decided that these new tax



determine pollution levels,” he explains. “It is fundamental that






permits at the correct time because there always seems to be an issue that mining companies do not apply for the

Cereceres Estudio Legal (CEL), a law firm with over 20

adequate permit."

years of experience in the Mexican mining industry, advises both foreign and domestic players on regulatory

In order to avoid non-compliance issues a project must

specifications and variations to ensure that its clients are

display a strong commitment to sustainable practices

as prepared as they can be before jumping headfirst into a

from the outset, in order to convince the authorities of

project. Rafael Cereceres, the firm’s administrative partner,

their dedication to social responsibility. “If a project is

stresses the importance of thorough preparation to all

started with strong environmental practices the results will

prospective mineral explorers in Mexico. “Before a project

be positive,” notes Cereceres. “Regardless of whether this

is begun, an environmental study must be performed to

is done through ignorance or purposefully, it still counts

collections would be used to improve social development,

the Mining Law. It was expressly stated, at a constitutional

and the urban and environmental impact of mining on

level, that mining concessions could not grant preemptive

surrounding communities. The taxes would be distributed

rights for exploration or extraction of hydrocarbons except

at a ratio of 20 percent to the Federation and 80 percent to

in the presence of coal, the regulation of which related to

the Fund for Regional Sustainable Development of States

the Hydrocarbons Law.

and Mining Municipalities. Mexico City would receive 62.5 percent, allocated to the municipalities wherein extraction

The effects of changes to the Mining Act in connection

took place, and the remaining 37.5 percent would be

with the Energy Reform can be divided into two divisions.

reserved for corresponding states.

The granting of mining concessions has been limited as the authorities that preside over the energy sector must

Unfortunately, the fund distribution has not been favorably

determine the feasibility of both activities coexisting.

received by all communities, states, and municipalities

However, the specifications of this technical study have

because of limitations on the deduction of exploration

not yet been officially published, such that each possibility

expenses. The law states that funds raised for mining

should be reviewed on a case-by-case basis. Moreover,

states and municipalities must be measured by the value of

because of the elimination of gas regulations associated

production not by the revenues in place. Therefore, funds

with coal, concessionaires were granted the right to obtain

obtained in a particular municipality may not necessarily

contracts directly for exploration and gas extraction. To

be distributed fairly, which has led to some disagreements.

date, contracts have not been awarded for coal mining,

The decision led to Mexican mining assuming the burden of

for which it is necessary to demonstrate the company’s

new tax stipulations as well as lower sales prices, negatively

financial solvency and technical, administrative, and

affecting the industry. In fact, Mexico, lost competitiveness

financial aptitude.

internationally in terms of attracting new investments in mining, and struggled to retain existing investors.

Mechanisms to promote investment must be redirected toward generating real fiscal stimuli to boost the efficacy

Regarding the amendments to the Mining Law derived

of exploration, which drives all mining activities. The social

from the Energy Reform, oil extraction, and electricity

spending that mining companies conduct within mining

distribution to the public were labeled preferable mining

communities should also be taken into account for tax

activities. The changes included the possibility of refusal

purposes. Our goal, as lawyers that provide services to

to grant mining concessions, or to limit the scope therein

mining and energy companies is to understand the sector

when oil extraction and electricity distribution and

profoundly, as well as the legislative changes that are

transmission were requested by the concessionaire. Gas

occurring. This should facilitate our distribution of effective

regulations relating to coalfields were also removed from

and efficient advice to help them make adequate decisions.

as non-compliance with the requirements of the law, and

been established, a company must then have a local

sanctions will be imposed for this oversight.”

understanding of how to negotiate with ejido authorities, which includes a familiarity with the concept of how ejido

Another area to which CEL devotes much of its efforts is

land is divided and registered. For Cereceres, herein lies

on land rights and other community-related issues. Mining

the key to a project’s success or failure.

is by its very nature a divisive industry, and despite being undeniably essential to Mexico’s economy, many local

Naturally, over the course of its two decades in the

residents, including ejido land owners, react negatively

business CEL has developed the contacts, negotiating

to new projects sprouting up in their communities. For

skills, and deep industry knowledge to advise and

Cereceres, communication is a vital tool in helping mining

assist its customers on such issues. This experience tells

companies overcome such challenges. “I have seen that a

Cereceres that the sector is strong, and he plans to help

lot of mining companies in their haste to begin operations

both current and potential clients make the most of the

negotiate not with the ejido leaders but with individual

imminent recovery he expects to see in Mexico. “It will be

members of the community,” he comments. “When the

a mistake to leave Mexico because I foresee changes for

company begins giving these land proprietors money, it

the country,” he predicts. “We plan to attract and retain

will never end. Instead, it makes more sense to approach

valuable clients, helping foreign and national companies

the ejido authorities directly and come to an agreement

with projects due to our broad experience and contacts in

at this point.” Once the streams of communication have

the government.”




The majors that once dominated the market have become unwilling to enter greenfield projects, instead focusing on smaller brownfield sites. This slack is left for the juniors to pick up but a lack of sufficient funding is causing problems. The changes in exploration deductions that dictate players are only eligible for an annual deduction of 10 percent as opposed to the previous 100 percent has also exacerbated the problem. M&As and joint ventures have become increasingly common as the market tries to consolidate itself while players wait for metals prices to rise. While Mexico is still fostering its strong mining ties with Canada, eyes are beginning to look to alternative sources of FDI such as China and South East Asia due to high silver demand for industrial applications. However, in bear market conditions, new business models inevitably arise.

This chapter concentrates on dialogues with the most important financing arms for Mexican bankers, both from the public and private sector, who will discuss challenges players face in financing and investment and the ways to overcome these. We also discuss the environment as a whole and provide advice on how to navigate ebbs and flows. Public sector officials also discuss ways they are attracting investment to their jurisdictions, and operators share innovative financing strategies.


Global Services 52

Some times you take chances, other times you use Brink’s







VIEW FROM THE TOP: Armando Pérez, Mining Development Trust Fund (FIFOMI)


INSIGHT: Carlos Espinosa,  Toronto Stock Exchange


VIEW FROM THE TOP: Mario Alfonso Cantú, Ministry of Economy


VIEW FROM THE TOP: Mario Hernández, KPMG Mexico

Eduardo Salgado, KPMG Mexico


VIEW FROM THE TOP:  Mario Arregoytia, EY


VIEW FROM THE TOP: David Rascón, Baja California Ministry of Economic Development


INSIGHT: Mauricio Candiani, Candiani Mining Investment Banking


VIEW FROM THE TOP: Bradford Cooke, Endeavour Silver


INSIGHT: José Gabino, Corporativo Minero Minas de Mexico

Juan Vera, Corporativo Minero Minas de Mexico 65

INSIGHT: Sean Emmond, Export Development Canada


ANALYSIS: M&A Mega-Deals Suggest Metals Bull Run


INSIGHT: Ron Tremblay, Levon Resources


VIEW FROM THE TOP: Raul Diaz, First Mining Financing Corporation


STRENGTHENING MEXICO’S MINING BACKBONE ARMANDO PÉREZ Director General of the Mining Development Trust Fund (FIFOMI) 54

Q: What have been the accomplishments of the past year

and operational practices that lead to good governance.

for FIFOMI, and what ranks highly on the list of priorities?

A company with good management can access not only

A: For the past three years, FIFOMI has effectively

the debt market but the chances for new equity support

and proactively refocused its financing and technical

increases significantly.

assistance activities. In 2013, FIFOMI visited several mining regions and a common complaint from project

Q: What criteria do companies have to meet in order to

sponsors was that we were not supporting mining projects

qualify for a loan from FIFOMI, and how do you determine

through affordable loans. FIFOMI’s Board of Directors

when a company is ready to graduate from your support?

and the General Coordination of Mining at the Ministry

A: FIFOMI’s essence is to find and support promising

of Economy then approved a set of new programs that

projects for we cannot let a viable project die from a

shifted our efforts to support small and medium sized

lack of financing. The main requirement is to be sure

mining projects and their supply chain directly. Prior to

that future cash flows will be enough to repay the debt,

this refocusing there was no institution in Mexico actively

and if so, FIFOMI structures the debt payment profile to

financing mining projects. By the end of 2015, FIFOMI’s

reduce the risk of default. We are implementing structured

loan portfolio reflected a greater share of core activities,

financing through special purpose vehicles and we take

adding up to 65 percent, compared to what the institution

protective measures by setting adequate guarantees in

registered at the end of 2012, which was 30 percent. For

case of losses. If companies do not have enough fixed

the next three years, our goal is to continue with our core

assets, as is the case for some service supplier companies,

responsibility of financing small and medium sized mining

FIFOMI can consider long-term contracts as collaterals.

projects in both the production and processing fields.

For companies that perform contracts on a yearly or very short-term basis, long term financing is more difficult to

Toronto Stock Exchange invests US$2.1 billion in Latin America, of which more than half is allocated to Mexico

provide. We need to be extremely careful on this topic as the new rules issued by the Mexican Banking Commission obliges FIFOMI, as a loan providing institution, to evaluate as accurately as possible the credit risk. Q: What are Mexico’s unique qualities that make it an attractive investment location for foreign mining players? A: Mexico has a strong macroeconomic stability supported by its legislation, the apex of which is the central bank’s constitutional obligation to provide monetary stability in

Q: What companies stand to benefit from FIFOMI’s

the form of low inflation. In my opinion, Mexico is the only

programs and financing schemes?

major country in Latin America that provides financial and

A: FIFOMI supports SMEs that have good corporate

political stability through its institutions. It also has the

governance. Unfortunately, it is not often that we identify

advantage of being geographically close to the world’s

said players, which makes our job very challenging. This is

largest market and being one of the few countries with a

mainly due to firms of this type being family-run, and while

significant number of FTAs. All of the above are essentials

it is great that experience is passed from generation to

for foreign investors. The Toronto Stock Exchange invests

generation, they lack corporate governance practices that

US$2.1 billion in Latin America, of which more than half is

would enable them to compete in today’s global economy.

allocated to Mexico. The country holds the coveted fourth

The credit market, where FIFOMI participates, provides the

position for mining-exploration spending after Canada,

right incentive for the loan recipient to include financial

the US, and Australia.


OPPORTUNITIES FOR DUAL LISTING “Toronto can be an attractive capital marketplace for Mexican mining companies

enables companies to obtain greater visibility, liquidity, and performance. “In the case of the Mexican mining industry, we will find five large companies and a multitude of smaller ones,

because they can have world-

and the larger ones that are mainly only listed in Mexico,

class access to institutional

Toronto can be an attractive capital marketplace for

investors and analysts”

world-class access to institutional investors and analysts

Carlos Espinosa, Former Head of Business

Development, Global Mining at the Toronto Stock Exchange (TSX)

New York, or London,” Espinosa clarifies. “However, Mexican mining companies because they can have that specialize in the mining sector, as well as M&A opportunities and broad visibility.” He shares that one of the main challenges that small Mexican companies face when attempting to become listed on TSX or TSXV is the lack of the technical report NI 43-101, which is one of the

Given the turmoil the industry has undergone these past

requirements for companies that want to be listed on

few years, the TSX has had to take action to support

these exchanges.

mining companies and improve their performance. At the end of 2014, 1,492 mining companies listed on the

Now that some Mexican mining players are also aiming

TSX and TSX Venture Exchange (TSXV) raised US$6.4

to become oil producers, Espinosa believes that investors

billion. In 2015, mining companies listed on TSX and TSXV

are viewing this movement positively. “Foreign companies

raised US$4.5 billion between January and September,

are increasingly interested in accessing the Mexican

equivalent to 53 percent of the capital equity raised

energy sector since it is a totally new market,” he explains.

globally by mining companies. “TSXV has faced some

“Established mining companies in Mexico are creating

challenges, namely with companies that are raising

subsidiaries in the energy sector, and this presents a good

equity since they must work harder to attract the interest

opportunity for joint ventures with foreign companies.”

of investors,” shares Carlos Espinosa, Former Head of

Foreign companies can bring their technical expertise to

Business Development, Global Mining at TSX. “We have

the table, while local players have their investment network

been supporting companies and finding ways to assist

in place and know how to do business in Mexico. These

them during this downturn. One of the actions we

large mining companies that are exploring options in the

implemented was the agreement with the Santiago Stock

oil and gas industry are also well known in the investors’

Exchange (SSE) that we launched in May 2015 to support

arena across the world.

the development of a public venture marketplace in Chile, namely the Santiago Stock Exchange Venture (SSEV).”

TSX recently launched a new platform called TSX Private Market that allows companies access to capital and

The BMV is recognized for focusing on mega cap

liquidity in the exempt market. This platform can be used

companies and on debt issues, while in Canada most of the

by both Canadian and foreign companies connecting

issuers are SMEs. “In my opinion, the biggest opportunity

private or public companies with accredited investors,

lies in the energy sector since there is a consolidated

institutional investors, and other exempt investors, and

presence of oil and gas companies in Alberta, Canada

can be used to raise capital equity or for secondary

that possess world-class expertise and are already listed

trading. “Many emerging markets across the world are

on TSX or TSXV,” he explains. “Ultimately, the exchanges

showcasing important opportunities in industries like

aim to help companies in Mexico raise public equity

mining,” Espinoso claims. “Mexico is one of the top

capital in an efficient way.” In Mexico the only mining

priority markets for Canadian mining companies among

company that is dual-listed is First Majestic Silver. At TSX

the emerging markets. During the first half of 2015 mining

and TSXV there are 499 dual-listed companies globally

companies listed on TSX and TSXV with projects in Latin

across all industry sectors, including 18 companies dual-

America raised US$1.3 billion.” Despite the challenges

listed with Peru, 13 with Chile, three with Colombia, and

surrounding security, royalties, and community disputes,

one in Mexico, as well as companies dual-listed in the US,


London, or Australia, among other markets. Dual listing











DIVING INTO CHINA’S STAKEHOLDER POND MARIO ALFONSO CANTÚ General Coordinator of Mining at the Ministry of Economy 57

Q: What can the Ministry and other agencies do to attract

companies working in the industry in Mexico. However, we

more capital into the mining sector in the country?

are putting massive efforts into diversifying our sources

A: As part of the system we make it easier for foreign

of foreign investment, and China represents a huge

investors to direct their capital into the sector. The Minister

window of opportunity for us. We have already visited the

of Economy has recently approved a proposal to create

country four times to hold talks with some of the largest

a taskforce specifically set up to streamline the process

stakeholders, including two multi-billion-dollar private

of permit approvals, as well as the rental and purchase of

equity funds that see Mexico as a bright star in their Latin

mining concessions. It should be fully operational before

America portfolio. However, before taking the leap into

the end of 2017. We recently improved our geological

Mexico these investors are requesting information about

maps, which are administered by the Mexican Geological

how to do business in our country.

Service (SGM) because this is the most important instrument for exploration geologists. The coordination

We are convinced that by strengthening bilateral ties

invested a significant amount of funds into developing

between China and Mexico we can greatly improve the

the technological side of these maps, which are uploaded

prospects of attracting more investment into the sector.

onto INFOMEX, a free online information network. The

Mexico's President has already met his Chinese counterpart

Ministry has also made a strong effort to clarify the legal

on five occasions, and the Minister of Economy, Ildefonso

requirements that all concession acquisitions and rentals

Guajardo Villarreal, promotes business meetings aimed

must comply with, as it is a frequent stumbling block for

at strengthening bilateral trade relations and investment.

foreign institutions in Mexico.

Chinese investors are generally disinterested in exploration projects, and instead prefer to keep a close eye on

Regarding the need to increase investment into the sector,

brownfield sites that are already deep into the production

SGM and FIFOMI will be in charge of the technical and

phase, in order to make a rapid ROI. Their strategy is the

financial promotion of the respective industry. We need

polar opposite to Canadian investors, who are primarily

SGM to invest primarily in drilling, as that will add value to

greenfield explorers.

the projects and concessions, as well as work alongside INFOMEX to improve public access to geological mapping.

Q: What makes Mexico stand out from its Latin American

FIFOMI, meanwhile, will have two main responsibilities.

competitors in terms of opportunities in the mining

Firstly, it has to consolidate its lending program away from


the construction and transportation sectors, and shift it

A: In the case of China, their players have already heavily

back to its original duty, which is to support the mining

invested in Brazil, Chile, and Peru, whereas Mexico

industry. It must also provide financial support to mid-sized

remains a relatively untapped market. However, there is

companies, with a special focus on junior drilling enterprises.

no doubt that the strong relationship between President

We want FIFOMI to connect these companies with investors

PeĂąa Nieto and President Xi Jinping is a crucial factor in

and entrepreneurs in order to build up the financial side of

the growing interest. Mexico has a massive trade deficit

their businesses. We will select at least five projects in the

with China, and part of the strategy to reduce it is by

production phase to promote in our next trip to China with a

creating deals with the country and encouraging them

view to garnering further interest from this market.

to capitalize on the opportunities to be found within our local mining industry. The process has already begun as

Q: Apart from Canada, which other countries are potential

the business branch of the Chinese Geological Service

sources of foreign investment?

acquired 19 concessions in Sinaloa, while other Chinese

A: Canada is still number one and will continue to be for

mining companies working in other states are awaiting

some time, as it accounts for 173 out of the 270 foreign

project initiations in the coming months.



Mario HernĂĄndez Head of Industrial Manufacturing, Tax Partner at KPMG Mexico

Eduardo Salgado Head of Mining Industry, Audit Partner at KPMG Mexico


Q: How have the Mexican royalty fees affected the

incorporated into their structure. Most mining sites and

industry’s competitiveness?

operations provide schools, training, doctors, and other

MH: An investor deciding between Peru and Mexico might

important services that result in a pseudo city for the

decide that Peru’s ability to negotiate a tax certainty

employees and their families completely paid by the

agreement with the government is extremely attractive.

companies without any pressure from the government.

The contract allows the country to guarantee a fixed tax

The idea behind royalties is to provide additional support

percentage for a period that can be as long as 20 years.

for these communities but its mechanism is exceedingly

Peru offers solid chances for investors because they

complex. Players now have to directly pay the government

know exactly what they will be paying for a substantial

and collections have been relatively low thanks to the

time, which gives them a more accurate perspective of

market. Before the reforms, mining companies were

potential return. Mexico loses competition in this aspect

allocating funds directly to surrounding neighborhoods.

as administration changes can bring different levels of

Now, they have to go through an unnecessarily long

royalties. However, it can offer a tax certainty promise

bureaucratic process for an element of the industry that was

signed by the federal government that assures a quarter

previously working properly. Authorities divide royalties

without increased taxes, reduced benefits, or new taxes.

between the federation, the state, and the communities.

The drawback is that the agreement allows taxes to be

Our clients that are already exploring and exploiting worry

adjusted in case of a worldwide economic phenomenon

they have to pay double. Many continue to pay for benefits

that can force Mexico to establish new ones, a worrisome

and services because authorities are not stepping up to the

detail considering the global instability caused by

plate fast enough to take over the financing.

phenomena like Brexit. Q: What is the idea behind the creation of the royalties, ES: Clients often tell us they do not mind paying taxes as

and how can players struggling to pay taxes be supported?

many other countries impose similar contributions. The

MH: Ultimately, the implementation of royalties is a wise

key issue is its terms and conditions. Other regions offer

decision as Mexico was previously one out of two countries

certainty and smaller percentages, while Mexico enacted

in the mining world that did not have taxes for the sector.

relatively high royalties. Its reform should have been similar

The problem is that the reform was approved at an

to those already established in the world to improve

inconvenient time with unattractive terms. Its negotiation

competitiveness. KPMG believes that the new mining laws

occurred when the precious metal market was at a peak,

should be reviewed, and the implementation should be

and its conditions no longer work for the industry. The

aimed toward benefitting companies and the communities.

government is not collecting as much money as expected

International and local investors are interested in certainty.

in a landscape of suspended mining operations. In our

Unfortunately, the country holds a package of instability

mind, a sustained upsurge in the mineral prices would be

with issues that involve land access, corruption, insecurity,

the most effective way to help investors but it can only be

land sale limits, and agreement uncertainty created by local

controlled by the market. A more realistic solution would

communities. The laws do not need to be more restrictive

be to replace the conditions of the fixed royalty, currently

to give assurance to investors.

set at a rate of 7.5 percent and a further 0.5 percent for gold, silver, and platinum production, for a percentage

Q: How successful has the government been in reinserting

that gradually increases depending on the maturity of a

more of the proceeds from mining into community

company. It would be fairer for younger companies with


lower incomes to pay smaller royalty fees than more

MH: Returning some of the benefits mining companies

established companies. The terms should be adjusted to

receive is an obligation that many players have already

the current reality.


THE SIX PILLARS OF CASH OPTIMIZATION MARIO ARREGOYTIA Lead Partner for Mining and Metals for Mexico and Central America of EY 59

Q: How does EY perceive the point of contention

Q: How is the lack of exploration impacting the industry,

between the reform and exploration activities subjected

and what must the government do to attract more foreign

to taxation?

investment and make Mexico more competitive in the

A: The restrictions on exploration deductions have

international market?

exacerbated the crisis within the mining industry. The

A: The financial impact it has upon mining companies is

dilemma mainly derives from a drop in metal prices, and

important. An annual 10 percent deduction of exploration

the fall of the Chinese economy. For the same reason

expenses implies that companies have to wait 10 years

royalty fees have not spawned as much revenue as

to recover their investment, which in turn means there is

expected, and Mexico has fallen behind Chile and Peru

less cash available to continue exploration and extraction

in terms of foreign investment for exploration. Mining

activities. The Mexican government should reinforce public

companies were allowed to deduct 100 percent of the

policies related to the mining sector and listen to actors

exploration expenses incurred in the year before 2014.

within the industry, including the Mining Chamber, that are

Today, such expenses are considered depreciable and only

requesting a change in the tax framework applicable to

10 percent can be deducted annually.

mining companies.

Not only does the reform stipulate conditions that

Q: What can mining companies do to overcome the

demotivate foreign investment in exploration but it

stagnant metals prices?

also creates contradictions since the tax treatment only

A: Cash optimization, through the generation and

applies to “new deposits�, a term that is reasonably

preservation of capital, is indispensable for mining

difficult to define when dealing with mineral resources.

companies that are struggling to stay afloat in the

The fact that the Mexican oil industry is allowed to deduct

stagnant market. Companies should focus on the following

100 percent of its exploration expenses equally highlights

six pillars to assure a solid foundation of effective cost

disparity among industrial conditions. Mexico lags in the

management, cash release, and balance sheets positioned

international race to attract investment because many

for future growth. First on the list is cost reduction, a

other mining countries promote foreign participation by

measure that demands a balance between sustainability

granting tax incentives for exploration expenses. In my

and activities that protect against value erosion. Working

opinion it is a shame that Mexico took a different path in

capital is second as it is the single biggest area for gains

the 2014 fiscal reform.

to be made with the support of processes and systems across the supply chain, particularly spare part inventories.

Q: How is the complex web of regulation and tax

The third pillar involves a systematic and integrated end-

obligations evolving in Mexico, and in what ways can EY

to-end approach to productivity that can drive significant


improvements via asset rationalization, labor productivity,

A: The company is witnessing an incoming wave of


clients that have a great deal of questions related to

effectiveness is the fourth element as a program built

the application of new royalty fees and deductions for

on the back of efficient asset management can provide

exploration expenses. Fortunately, Mexican tax authorities

solid foundations for productivity and risk management.

are improving their audit processes and will soon be

Moreover, evidence shows that efficient portfolio strategies

optimizing royalty tax audits and the classification of

can be achieved by holding assets within the portfolio

expenses for tax purposes. EY helps clients comply with

that have different levels of risk, return, and correlation,

regulations and obligations through an array of services

which achieve an optimal return with an equal or lower

that include accounting, legal, regulatory, tax, litigation,

level of risk for the same rate. Finally, the financing pillar

advisory, and audit.

incorporates various capital release strategies to pay debt.







BAJA CALIFORNIA WORKING TO ATTRACT MINERS DAVID RASCÓN Director of Mining at the Ministry of Economic Development of Baja California 60

Q: What is your administration doing to attract investment

We also provide economic support for geological

and support mining operators and explorers in Baja

prospection and research projects, as well as technical


assistance and training programs. These are the three

A: During the State Mining Council general meeting

areas into which we channel the majority of our efforts.

guidelines for a collaboration agreement between the

Support for geological prospection is equally as vital

federal and state governments were established, which

as financial aid because often those who find mineral

will provide credit designed to boost small and medium-

alterations lack the technical expertise to truly understand

sized enterprises working in the mining industry. There

the potential of their discovery. Therefore, we send a team

are still a few legal issues to iron out but we expect the

of geologists to that location to carry out tests and assess

agreement to be signed by August 2016, and it will then

whether or not further exploration is needed. This plays a

offer vital support to small mining producers, enable

big role in boosting development in the state.

them to increase production levels, and eventually help them become large-scale mineral producers. For example,

Q: What are the biggest mining operations in the state

there is a company called La Ciénega in El Rosario that is


producing natural high-quality quartz, which is 98 percent

A: The largest producer of metallic minerals in Baja

purified, and exporting it to the US. However, it is currently

California is Minera Frisco’s San Felipe mine, which has

only producing on a small scale despite the high demand,

a total production of 40,000 tons of gold and silver ore

and so this company is one we plan to offer credit so it can

per day, while there are also a number of small-scale

construct a larger manufacturing plant that could triple or

gold producers throughout the state. Regarding non-

even quadruple production levels.

metallic minerals, there is a mine to the south of San Felipe



America and has capitalized on the market downturn and recent increase in activity. “It is a noted fact that in 2014 the M&A market was desolate, while research suggested that 2015 offered a comeback,” he explains. “For 2016, we

According to statistics released by EY, M&As within the

see a larger number of mergers between small and mid-

global mining context are becoming increasingly prevalent

tier producers. The main drivers are effort to gain enough

with over US$40 billion of deals completed in 2015. In an

size, cash flow, and a well-established balance between

environment of low prices, companies are trying to keep

productive assets and assets that are in a development or

costs low while also increasing production, meaning

early exploration stage.”

that acquisition of an existing mining asset is often an attractive option, says Mauricio Candiani, President &

He believes the mining industry will continue to wipe out junior

CEO of Candiani Mining Investment Bank. Candiani is

players but that this will be the catalyst for a survival of the

interested in brokering M&A deals in Mexico and South

fittest mentality, with the potential for modest exploration

which is producing Pumicite, a volcanic rock used in the

However, Grupo México also has a large project in the

fabrication of heat-resistant bricks and cement. On the Gulf

Ensenada municipality called El Arco, which has been in

of California side of the peninsula, as well as on the Pacific

the development phase for more than 38 years and has

coast, there are also two salt processing plants, while

the potential to produce several million tons of copper and

toward the southern point of the state there is a barite plant.

gold ore. However, the investment needed to move this

This facility was exporting barite to the west but it has now

project forward is around MX$3 billion so the company

been temporarily shut down due to the current low market

is waiting for the copper price to recover before starting

price for this mineral. Finally there is a company working in

production, and this could take up to three years. Moreover,

the state that is dedicated to producing dimensional rocks,

we are currently promoting an extremely important mining

specifically high-quality onyx for export to China.

district specifically designed for gold bearing in El Alamo, which is located 90km to the east of Ensenada. It is a

Q: What importance do Public Private Partnerships

unique geographic location with high concentrations of

(PPPs) have for the mining industry in Baja California?

high-grade gold deposits, and while the project is still in the

A: In the state government there are currently no

exploration phase it is an interesting potential destination

partnerships in mining but we have the responsibility to

for investment. Regarding exploration, there is a Chinese

provide technical support to all companies that want to

company working near the western town of El Rosario that

start mining operations in Baja California. We can say that

is finding high quantities of high-grade copper reserves,

Minera Frisco received support from us when it began its

and this is something we are keeping a close eye on.

operations at the San Felipe site. The El Arco project is on standby at the moment, which means that as soon as

Q: What are the primary hopes you have for the

Grupo México decides to reinitiate operation of the project

development of the mining sector in Baja California over

we will begin working together closely boost the project’s

the next 12-18 months?

development. The support we provide to the private

A: First and foremost we are focused on promoting and

sector is indirect, meaning that we give it all the backing

developing the El Alamo project, which already has at least

we can without any formal agreement or partnership.

two interested investors from the US. Negotiations with

We have found this to be the most effective method of

these businesses are progressing well. They are extremely

working with the private sector.

impressed with the on-site facilities and the geological potential of the location, and they are currently performing

Q: Which mines are currently in the construction phase in

the necessary financial analyses in order to move on to the

Baja California that will soon be operational?

next step. We expect at least one of these prospects to

A: The majority of developing mines in the state are

come on board during our administration, and that is one

focused on the recuperation of gold-bearing minerals.

of the biggest goals we are working toward.

of flagship projects exclusively. “Conversely in Mexico, the

It is important to divide real acquisitions and strategic

major conglomerates have unexpectedly weathered this

mergers, according to Candiani. “Some companies are

hostile environment," he comments. "Regardless of the low

invested in gaining full control of a company and are

level of their stock price, all have reduced operational costs

ready to pay in full for that control, and that is what we

significantly and kept their balance sheets in strong shape.

consider to be a real acquisition,” he explains. “A strategic

Some have made use of acquisition opportunities, while

merger is where we see two companies that are struggling

mid-tier production companies have struggled enough

and arrange a merger that is presented as an acquisition.

and they have either stopped operations or gained a new

This is due to one of the players being bigger than the

kind of momentum with smaller margins.” For the moment

other or having a stronger balance sheet." He believes the

at least, he believes that early stage exploration is dead

quadrupling of the value of operations in Latin America

and a series of conditions must be met in order to have

from US$2.8 billion in 2013 to US$11.9 billion in 2014 may

these projects reexamined. “Whenever prices rebound and

come as a surprise to some but these large acquisitions

capital markets gain some momentum to enable them to

paid in stock. “These are logical transactions to follow

expose themselves more to high-risk investments, we will

since companies are tight on cash,” he declares. “The

see new money flowing into exploration teams capable of

M&A activity in the last two years has been driven by the

discovering or re-size new deposits,” he states. “This will

fact that small and mid-size companies have interesting

only start happening when the existing inventory of mid to

projects in their pipeline but do not have enough capital

advanced projects runs out.”

to carry them out.”





Q: What have been the main highlights of Endeavour

at Bolañitos or El Cubo until free cash flows and metal

Silver’s operating mines in 2015?

prices improve. Last year’s exploration expenditures

A: For the third year in a row, we met or exceeded our

totaled US$7.2 million, and while only US$2.5 million

production and cost guidance in 2015. Our operations

was budgeted for 2016, we expect to invest substantially

group delivered another solid year of production and we

more than that thanks to the higher metal prices. We will

once again reduced our all-in sustaining costs. Guanaceví

continue our brownfield exploration drilling programs at

and Bolañitos each performed better than planned, and the

existing operations in order to extend their mine lives. Our

completion of the phase two mine expansion at El Cubo to

drilling programs at both Terronera and El Compas are

2,200t/d was a major achievement. For 2016, our priorities

focused on expanding resources this year so that we can

are to maximize after-tax free cash flow and renew our

model larger, lower-cost mines in the pre-feasibility study

focus on growth. The emphasis will be on reducing all-

for Terronera and the preliminary economic assessment

in sustaining costs (AISC) rather than increasing metal

for El Compas. All of these investments will drive the next

output. We will also be advancing Terronera toward pre-

leg of our growth.

feasibility and working to expand the resources and refine the engineering of our newly acquired El Compas mine.

At El Cubo, we expanded the plant in 2015 to 2,000t/d in an effort to drive unit costs down. When we took over El Cubo

Q: What have been Endeavor Silver’s main achievements

in 2012 the operation was losing money, and in spite of our

considering the bear market conditions?

success in driving the AISC down from more than US$40/

A: We improved the strength of our balance sheet recently

oz to less than US$20/oz of silver net of gold credits, El

with two very successful At-the-Market (ATM) financings.

Cubo continued to consume cash. Therefore we made the

Since 4Q15, we raised over US$30 million and our cash

difficult decision earlier this year to transition El Cubo to

position at the end of the 2Q16 was close to US$50 million.

care and maintenance, and we have suspended investments

We intend to use the proceeds to pay off the remainder of

on exploration and mine development until metal prices

our short term debt, fund our growth initiatives including

improve. We will mine the accessible reserves this year

exploration and acquisitions, and increase our working

at El Cubo, which means we will see a steady decline of

capital. We have also worked diligently to reduce our

production through the year until it adapts to care and

costs structure, and in 2016 we are anticipating our fourth

maintenance in 4Q16. In the meantime we are evaluating

consecutive year of reduced costs. This year we guided

new processing technologies and mining methods in order

cash costs to around US$8-9/oz of silver net of by-product

to further reduce the operating costs at El Cubo.

credits and AISC to US$12-13/oz of silver net of by-product credits. This emphasis on cost containment will allow us to generate healthy free cash flows in 2016, even in this low silver price environment. Q: What are the main drivers and trends influencing these investment decisions? A: Last year’s capital expenditures amounted to US$37.6 million, primarily for mine development, and this year we were more conservative, forecasting capital projects

“We have worked diligently to reduce our costs structure, and in 2016, we are anticipating our fourth consecutive year of reduced

totaling US$11.3 million mainly at Guanaceví where we


continue to invest in mine development in order to access

Bradford Cooke,

and replace reserves. No capital investments are planned

CEO of Endeavour Silver


FINANCIAL SUPPORT FOR SMALL SCALE MINERS the production of 500,000 silver ounces, 10,000 gold José Gabino CEO of Corporativo Minero Minas de Mexico 64

Juan Vera Director of Exploration of Corporativo Minero Minas de Mexico

ounces, and 13 million zinc pounds, providing a cash flow of between US$10 million and US$12 million per year,” he boasts. “Luckily for our project, the government imposed a 7.5 percent royalty tax to support the

Corporativo Minero Minas de Mexico began as a group

communities neighboring mining operations, which in

of businessmen focused on different industrial segments,

the future will help the municipalities generate further

until meeting Juan Vera, a geologist who gave them a

development.” Nonetheless, he is concerned that the

complete perspective of the mining sector. “We noticed

government stopped providing exploration financing

the industry is normally focused on discovering large

and even though Corporativo Minero Minas de Mexico

projects but Mexico is a land of opportunities with a

has the support of private banking institutions he

plethora of medium scale projects that are waiting to be

would like to see the authorities more involved in the

exploited,” explains José Gabino, the company’s CEO.

improvement of the sector considering its relevance for

“Hence, our mission has been to integrate ourselves into

the Mexican economy.

small mining operations. After analyzing the projects we promote them to international investors to obtain funds for

Gabino elaborates that officials from the Ministry of

development and job creation in the country.” He shares

Economy have stated that despite Mexico’s growth

that all Corporativo Minero Minas de Mexico’s current

opportunities, the country has a 15-year lag in mining

assets have undergone a thorough reengineering process

development. “We have spotted interesting projects owned

and evaluation in order to measure their true potential.

by people that do not want to deal with these operations anymore, so our approach has been to establish contact

It is important to trace back the developments and

with the land holders to grant legal support so the fields

evolutions the Mexican mining sector has experienced to

can be studied, analyzed, and exploited to the tangible

explain the business value of small projects. During the

benefit of all parties,” he clarifies. “Our job is to look for

mid-1970s Mexico started to push for the development

attractive properties, obtain funds, and start production.

of the mining sector and local companies required

Another differentiator we have is that big companies are

skilled technicians that had to be brought from overseas.

not interested in our projects so we are dealing with a

“During that time, I worked with Industrias Peñoles and I

virgin market where everybody can win.”

noticed the operations were focused on medium to large scale projects like the Reforma mine where 500t/d were

Vera continues to explain the company’s exploration

produced,” explains Juan Vera, Director of Exploration. “At

program, which aligns the group’s mission to focus on

the La Ciénega project in Durango, the necessary resources

junior mining. The strategy the company has followed is

for operations producing 2,000t/d were needed during

to locate old mining districts where previous operations

the drilling stage. At this point I became aware that small

took place but were abandoned. “We evaluate the

mining operations were lagging behind even though these

property, calculate the proven and probable mineral or

properties had deposits that would allow an operation of

metal reserves, and estimate the mine’s lifecycle to decide

150-200t/d with a higher internal rate of return than those

whether we open a plant or continue searching for other

of the major corporations.” While working as a consultant

projects,” he explains. “We believe that half a million tonnes

in the late 1980s, Vera developed a small pit mine in Nayarit

of proven minerals ensure a 10 year productive timeframe.”

in which he invested US$1 million. During its five-year life

Under this venture, Corporativo Minero Minas de Mexico

cycle over US$20 million was generated.

has identified three projects. The first one is located in the Mexican Silver Belt, near Fresnillo’s production plant. The

Vera believes that Corporativo Minero Minas de Mexico

second project, located in Sierra Mojada, has proven lead

has an efficient model focused on an abandoned market

and silver resources and Vera predicts 13 million ounces of

niche, and while large mining corporations bill billions of

zinc. The last project is more conceptual and focused at a

dollars annually his company’s projects offer a 40 percent

grassroots level in which the company has identified lead,

recovery rate for investors. “Our sales are supported by

zinc, molybdenum, and some copper.


CANADIAN COMPANIES JOINING SUPPLY CHAIN Mexico is a very important trading partner for Canada, not least due to the significance of the mining industry in both

SEAN EMMOND Regional Manager Mexico,

countries. Since the implementation of NAFTA in 1994,

International Business

trade between both countries has grown significantly each

Development Group of Export

year but Sean Emmond, Regional Manager Mexico of EDC’s

Development Canada (EDC)

International Business Development Group, believes there 65

is room for further expansion. “In my view Canada’s share of exports to Mexico is not as high as it could be but the trend

of ways. EDC maintains open lines of communication

is moving in the right direction," he comments. "Mexico is

with Bancomext, which has a similar mandate to EDC as

among the top five destinations for Canada’s exports. For

Mexico’s export credit agency. EDC also has links with the

logical reasons, the US is Canada’s natural trading partner,

Mexican public sector through other Mexican development

and often the next step for further expansion for exporters

banks and financial institutions like NAFIN, BANOBRAS,

is Mexico, particularly in view of the benefits of NAFTA.

and FIFOMI. “There are occasions when EDC participates

The sectors where Canadian exporters have seen the most

in financing in which the Mexican development banks are

success in Mexico include mining, oil and gas, and the

also lenders,” Emmmond shares. “EDC has longstanding

automotive sector. For those three sectors, Emmond claims

financing relationships with major Mexican state owned

there is a complementary aspect of dynamism in both the

enterprises such as PEMEX and CFE. The remainder of the

Canadian and Mexican economies.

direct interaction that EDC has with the Mexican public sector is indirect through our colleagues at the Canadian

Canadian mining players are active at all of the key points


along the mining value chain from exploration and project development to production, extraction, and supply. One

For mining supply companies entering Mexico, the first

of the areas that EDC is focused on is increasing the

challenge is to understand where to focus their efforts in

amount of Canadian sourced mining supply in Mexico,

order to secure orders from clients in the country. EDC

where the company works closely with Mexican and

and the Trade Commissioner Service (TCS) can provide

Canadian mining companies. “In order to be successful in

information on market opportunities and discuss market

the Mexican market Canadian suppliers must add value,”

penetration strategies with these suppliers. “In order to

Emmond explains. “EDC tries to assist with bringing the

develop business in Mexico, an important first step is to

right suppliers together with the right buyers. Especially

hire a local agent or representative who knows the market

in a low commodity price environment, mining companies

and has a network of contacts in the sector,” Emmond

are looking for ways to reduce their costs so if we can

expands. “EDC and the TCS can provide assistance in

provide them with suppliers that can do this, EDC adds

establishing these relationships.” Another challenge for

value to these miners’ operations.”

Canadian suppliers lies in gaining access to the right people at the major mining companies. EDC and the TCS

EDC puts significant effort into developing a strong

aim to facilitate this process by organizing B2B sessions

network among banks and other players in the Mexican

with mining companies that are active in Mexico, including

financial sector. “We are able to provide financing in a

as many of the active players in the mining industry in

variety of forms, including bilaterally, through participation

Mexico as possible.

in club transactions, and by involvement in syndications," he adds. "EDC’s preference is to do this alongside a

Much of EDC’s effort in Mexican mining is focused on

commercial lender, an approach we call our “partnership

helping SMEs enter the supply chains of major mining

preferred” philosophy." A component of EDC’s business

companies. “With Mexican miners we aim to open doors for

development efforts in Mexico is focused on building a

Canadian SME suppliers through matchmaking programs,”

network of contacts with local and international banks.

Emmond asserts. “We also aim to establish financing

EDC has a small team on the ground in Mexico, so it

relationships with mining companies, and then introduce

builds bridges with other financial institutions to identify

Canadian suppliers to the mining company over the life of

synergies. In tandem with these efforts EDC develops

the loan. As part of these arrangements we monitor the

relationships directly with mining companies. Interaction

volume of purchases from Canadian suppliers, recognizing

with the Mexican public sector is carried out in a number

the importance of small contracts to SME suppliers.”


M&A MEGA-DEALS SUGGEST METALS BULL RUN For junior mining companies, cash-strapped at the best of

stock markets performing as unpredictably they did in 2015,

times, one excellent way of achieving growth and raising

it should perhaps come as no surprise that the majority of

liquidity can be through arranging mergers or acquisitions

M&A activity was focused around gold. As investors sought

between themselves. An M&A deal between two juniors can

a safe haven for their cash, the yellow metal accounted for

help both companies raise cash, spread their risk, and increase

US $13.9 billion in M&A deals across the globe in 2015, a 64

investor value. Likewise mid-cap enterprises with cash to

percent increase on 2014.

burn may choose to acquire juniors in order to diversify their 66

assets, restructure their debt, or increase production levels,

The most notable of these deals, the US$1.5 billion deal to

while eagle eyed private equity firms are always scouring the

merge Alamos Gold with Aurico gold, will have significant

horizon for opportunities to make speedy ROIs. Regardless

long-term ramifications for the Mexican market. The merger

of the nature of the deal, a healthy M&A market is a sign that

of equals deal added Aurico Gold’s El Chanate mine, which

confidence is returning to the sector.

produced more than 79,000 ounces of gold in 2015, to Alamos’ flagship Mulatos mine. Both projects are located

On a global scale M&A activity in the mining sector remained

in Sonora and will be complemented by Alamos’ advanced

fairly stable in 2015, with total deal value dropping slightly

development stage project at Esperanza, Morelos. One year

from US$44.6 billion in 2014 to US$40 billion the following

on from the merger, which was the second biggest M&A in

year according to accountancy firm EY. With international

the global mining sector behind Wandle Holdings’ takeover


Original company




Acquiring company


Vista Gold

Los Cardones


Baja California Sur

Invecture Group

El Crestón

Mo, Cu, Ag


Starcore International Mines

Moly Corp February


San José

Ag, Pb, Zn


Arian Silver

Agave Silver Corporation

Nuevo Milenio

Au, Ag


Cream Minerals de Mexico

Argonaut Gold


Au, Ag


San Marco Resources

Antofagasta Alliance




Riverside Resources





Radius Gold


La Cachimba



Fidelity Holding

Alamos Gold

El Realito



Agnico Eagle Mines

Au, Ag


Agnico Eagle Mines

El Gavilán

Au, Ag, Cu, Zn, Pb


El Santuario

Ag, Au





El Rayo Tecolote Tortuga Soltoro Ltd


Tasis Resources and Estrella Gold

San Pedro Quila

San Pedro Yago

Au, Ag

Jalisco Nayarit


Alianza Minerals

San Miguel Paramount Gold


Au, Ag


Coeur Mining


Au, Ag


Rokmaster Resources

Guadalupe de los Reyes

Ag, Au





Don Ese Cream Minerals de Mexico Cangold May

Ana Paula Newstrike Capital



Great Panther Silver

Guerrero Ag, Au


Timmins Gold Corp

of Polyus Gold International, the Alamos Gold stock price has

Gold announced its intention to sell 100 percent of the

risen more than 8 percent on the New York Stock Exchange.

Mercedes mine to Premier Gold Mines through a share purchase agreement. The total value of the transaction

Another deal to affect the Mexican market was First

was negotiated at US$140 million, with US$122.5 million in

Majestic Silver’s acquisition of SilverCrest in October 2015.

cash, US$6 million in Premier Gold Mines shares, and US$3

The purchase gave First Majestic Silver its sixth producing

million in shares warrants. Perhaps most notably, Goldcorp

mine in Mexico with the Santa Elena mine in Sonora. It is

announced intentions to sell its Los Filos property in

projected to increase total production for the company by

Guerrero due to poor economies of scale, according to the

up to 5 million oz/y of silver equivalent ounces and further

company’s CEO David Garofalo.

cement First Majestic’s role as one of the leading foreign players in the Mexican mining sector. Between completion of

Despite these deals, there is still a sense that more could

the deal on October 1, 2015 to August 2, 2016, First Majestic

be done on the M&A side in the Mexican mining sector.

Silver’s share price had risen from CA$4.13 to CA$24.1 on the

Many observers lament the conservatism of the market,

Toronto Stock Exchange, a rise of 483 percent.

urging players to take a more proactive, less risk-averse approach to counter the effects of the downturn. However

Most recently, Riverside Resources provided the option

should gold and silver prices sustain their steady rally

to acquire a 70 percent stake in its Sonora Glor gold

throughout the second half of 2016, confidence will return

concession to Centerra Gold. As part of the deal, Centerra

to the markets and M&As will as always provide an excellent

Gold will be required to provide US$3.5 million in exploration

opportunity for companies of all sizes to capitalize on the

funding over the next four years. In late July 2016, Yamana

new found bullish sentiment.



Acquiring company


Santacruz Silver Mining

Cu, Au


Almadex Minerals

Rojo Resources

Au, Ag



Cerro Las Minitas



Electrum Global Holdings

Aurico Gold



Stingray Copper

El Pilar

Santa Fe Metals Corp

Cuatro Ciénegas

Calissio Resources

San Pedro


Cortez Gold Group

Altiplano (plant)

Ag, Au


Argonaut Gold



SilverCrest Mines

Santa Elena

Au, Ag

Bacanora Minerals





Original company



Minera Hochschild Mexico

San Felipe



Au, Pb, Zn

Almaden Minerals

El Cobre and 21 exploration projects

Camino Minerals Southern Silver Exploration



Alamos Gold Southern Copper


Philippine Metals


Milagros del Cobre Minería

San Luis Potosi

Starcore International Mines Riverside Resources


First Majestic Silver Corp Alix Resources

Potosi (53%) October


Planta San Guillermo



Cyprium Mining Corporation

La Chinche



Oro Silver Resources

El Compas

Ag, Au


Canarc Resources

Private individual


Ag, Au, Cu, Zn


Wealth Minerals

Prospero Silver Corp

Veta Santa Rosa (San Luis del Cordero)

Ag, Cu, Zn


Golden Minerals


La Plata mineral beneficiation plant


Minera Contracuña

Veta Grande Minillas

Oro Silver de México Zacatecas

Au, Ag, Zn, Pb

Santacruz Silver Mining

Riverside Resources



Teck Resources



Private individual

Pino de Plata

Au, Ag


Silver Spruce


Phosphate fertilizers

Baja California Sur

PEMEX Fertilizers

Grupo Fertinal


Centerra Gold Millrock Resources



ROYALTY TAX STUNTS MINE DEVELOPMENT and then investors wanted to increase the financing to US$41 million with no warrants in a bought deal, which was a strong step for the company. Unfortunately, the


metals market fell and this came with the government’s

President & CEO of Levon

decision to implement the royalty tax. “This combination


has scared the mining companies out of Mexico and it has certainly forced Levon Resources to reevaluate its business


prospects,” Tremblay states. “Today, we have no need for In today’s challenging mining market, Levon Resources

financing as we are in great shape with US$25 million in

has managed to remain debt-free and well-funded. Ron

the bank, and cash in marketable securities.” Currently,

Tremblay, the company’s President and CEO, attributes

he is waiting for the market to turn and for metal prices

this to foresight and a strong strategy. “During the

to improve, and he expresses a desire to see the Mexican

upsurge of metal prices a couple of years ago, bankers

government reconsider the royalty since he believes

suggested that we should go to London and introduce our

this extra cost has encouraged mining players to look at

project to the European investment community,” Tremblay

other mining jurisdictions rather than take advantage of

explains. “When we presented the project, silver reached

Mexico’s potential.

a peak height of over US$40/oz and there was a sense of excitement surrounding the silver market.” As a result,

El Cordero is Levon Resources’ primary project located

investors saw potential in the project and this gave the

in the state of Chihuahua, and is described as one of the

company a strong position to gain access to financing.

largest undeveloped silver deposits in the world. Spread

At first, Levon Resources agreed to a US$25 million deal

across 37,000 hectares, Levon Resources has built Cordero


FACILITATING THE NEW MINING OUTLOOK RAUL DIAZ Exploration Manager, Latin America of First Mining Finance Corporation Q: How are companies like First Mining Finance taking

A: This business model is applicable across all mining

advantage of current bear market conditions?

markets but we are looking for mineral assets in stable,

A: In bear market conditions new business models arise

mining-friendly jurisdictions across the Americas. In the

such as the mineral bank model created by First Mining

past, easy access to financing encouraged the creation

Finance. This model encourages companies to acquire

of exploration companies and for years this resulted

assets that would not be attainable or available in normal

in tremendous development of assets across Canada.

market conditions, and hold or bank them until the market

Unfortunately, in the downturn many of these players hit

improves. Then we can sell the properties or tender

a wall and were unable to raise more money. This scenario

them for joint ventures, retaining a royalty or interest in

is less frequent in Mexico. However, we are seeing some

the projects. At the moment, there are many resource

M&A activity such as Timmins Gold acquiring Newstrike

companies that are severely undervalued and this has

and First Majestic Silver’s takeover of SilverCrest. In

allowed us to acquire instead of exploring and developing

general, opportunities abound in Canada and given that

new resources.

the country hosts some of the most productive and unexplored mineral belts in the world where quality assets

Q: In which countries has First Mining Finance’s mineral

have already been developed, we see it as particularly

bank business model been successfully implemented?


into an attractive porphyry target for silver, gold, zinc,

acknowledges that mining is an important component

and lead. A Preliminary Economic Assessment has been

of the Mexican economy and believes the government

successfully completed on 30 percent of the resource,

should be more proactive in encouraging its development.

with a new one on the entire resource when the metal

The result of the royalty tax was that a high percentage of

prices improve. Other competitive advantages include the

the exploration companies left Mexico, looking for better

infrastructure close to the project since it is located close

opportunities in the US and Canada.

to power lines and plentiful water resources. “The location is convenient for the development of tailing dams so

“Mexico must be on the cutting edge and encourage

practically all variables are aligned to set up an operating

more mining investment through the implementation

mine,” Tremblay boasts. “The pit is relatively close to the

of alternative incentives like tax breaks due to the levels

main highway and there are already a few kilometers of

of risk now involved.” Foreign players like Levon must

dirt roads established, which gives us the opportunity to

compete with major local corporations like Industrias

easily transport the materials.”

Peñoles and Grupo México, and Tremblay contends that these conglomerates have monopolized a large portion

One negative of Tremblay’s experience in Mexico has

of the rich and easy to develop projects, and it is up to

been the royalty tax, and he shares that it has even

the new companies to invest and find new deposits and

prevented Levon Resources from moving forward with

bring wealth to the country. “Without a doubt Mexico

the El Cordero project. “The combination of the royalty

has strong deposits, but so too does Argentina and Chile

and the depressed metal prices has muted our interest

and these countries are putting incentives in place to

and that of other investors in the country,” he laments.

encourage operations,” he comments. “The fiscal reforms

“Due to this situation, we have decided to hold onto

completely transformed the horizon for us because the 7.5

our property and focus on remaining debt-free. We

percent royalty was not included in our projections, and

also eliminated our cost overheads and now we are

it negatively affected our future value. If that tax had not

stagnant until the market changes with the hope the

been imposed, Levon Resources would now be moving

Mexican government reconsiders its position.” Tremblay

toward the feasibility study.”

Q: How has the company been able to complete a number

ounces in the mineral resource and those that have the

of acquisitions without share dilutions?

potential to be mined considering current metal prices.

A: When the company went public, we raised nearly

The assets must be located in safe jurisdictions free of

US$5.8 million and one of the reasons we have maintained

environmental and social conflicts. Producing companies in

a healthy corporate treasury is that we are using shares

the future will look to replenish their reserves and they will

for acquisitions. We are using cash wisely, and some of

seek companies like us. Our biggest strength is the number

the recent acquisitions we have completed provided cash

of ounces we have and at the moment we are looking for

flow in addition to mineral assets. Our goal was to reach

partners that will help develop these great projects.

10 million ounces in two years and so far it has been eight months and we have already reached 9 million ounces of

Q: What are the qualities you look for in a partner and

gold equivalent. We have maintained a stable stock price

what are the most successful partnerships First Mining

since we went public and the company has appreciated

Finance has carried out?


A: Only recently have we begun to seek partners and we have already attracted Industrias Peñoles. This

Q: What have been the most attractive assets First Mining

partnership is in its early stages and given its reputation

Finance has acquired that have left the company in a

we believe it can advance the projects optioned and make

positive standing in the market?

a great success story. In a partner, we look for expertise,

A: With the acquisitions of Coastal Gold, Gold Canyon

technical and financial capacity, and a solid reputation.

Resources, PC Gold, and Clifton Star, First Mining Finance

When making deals we must have the company commit

now holds a portfolio of 21 projects in its mineral bank. In

a certain amount of funds to exploration. At this stage,

Mexico, however, we have a different category of mineral

it is important not to pressure too much for large

properties, most in early stage development, some in the

payments and be very precise in where the investment is

grass root stage, and only a few with resources. In Mexico,

to be allocated. The company must have the freedom to

three of the projects that have been drilled have resources.

concentrate on the areas it wants to explore and be given

When acquiring the assets, we look at the quality of the

the chance to test these targets.




Gold’s lofty 2011 price of US$1,900 is a distant memory but prices have been on a steady upward trajectory. After a drop of around 10 percent in 2015, 1Q16 saw gold rally 16 percent. The Bank of England cut interest rates in early August 2016, nudging prices to a 100-day average high of US$1,280. Global gold production also increased and Mexico retained its position among the world’s top gold producers at number eight. Goldcorp’s Peñasquito maintained its title as Mexico’s premier gold producer and was eighth on a global scale with 26.8 tons in 2015. The beginning of 2016 saw Mexico’s projects stand out on a global scale due to its commercially viable gold deposits, friendly and stable mining environment, and favorable mining conditions.

This chapter will provide an overview of the country’s gold mining capabilities. The key players operating in Mexico will discuss their strategies, achievements, and priorities. Juniors and foreign investors explain how they are traversing the new landscape and finding innovative ways to optimize operations and generate profits. The chapter offers a greater level of analysis, with maps and spotlights of the most relevant gold mining concessions in the country. Interviews with CEOs, Presidents, and Directors General reveal the future of the gold mining industry.


Primero Mining Corp. (TSX: P, NYSE: PPP) is a Canadian-based precious 72

metals producer that owns 100% of the San Dimas gold-silver mine and the Cerro del Gallo gold-silver-copper development project in Mexico, and 100% of the Black Fox mine and adjoining properties in Ontario, Canada.

- Awarded “Socially Responsible Company” by CEMEFI for 5th consecutive year

- San Dimas certified “Clean Industry” by PROFEPA

- San Dimas power generated by Primero-owned hydroelectric facility

- ~$1 million investment to the Tayoltita community hospital

- Employs over 1,100 people in Mexico Our core values guide us and Primero is proud of our commitment to Mexico.

- 97% of all goods and services procured in Mexico

Focused on Production. Focused on Growth.


VIEW FROM THE TOP: Gustavo Noriega, Agnico Eagle Mexico


MAP: Mexico's Main Gold Mines


VIEW FROM THE TOP: Martín Aguilar, Primero Mining


VIEW FROM THE TOP: Alberto Orozco, Argonaut Gold


INSIGHT: Robert Eadie, Starcore International Mines


VIEW FROM THE TOP: Euridice Gonzalez, McEwen Mining


INSIGHT: Armando Ortega, New Gold


INSIGHT: Randy Reifel, Chesapeake Gold


INSIGHT: Keith Piggott, Goldgroup Mining




VIEW FROM THE TOP: John McCluskey, Alamos Gold


VIEW FROM THE TOP: Akiba Leisman, Marlin Gold Mining


VIEW FROM THE TOP: David Wolfin, Avino Silver and Gold Mines


VIEW FROM THE TOP: José Berlanga, Reyna Mining


VIEW FROM THE TOP: Fred Stanford, Torex Gold Resources



GOLD GIANT SEEKS NEW GROWTH GUSTAVO NORIEGA Operations Director of Agnico Eagle Mexico


Q: How does increasing Agnico Eagle's participation

million ounces of silver. In 2014, we inaugurated the La

in the Mexican market boost its gold production, and

India mine, located 200km east of Hermosillo, Sonora.

how do its strategies enable the company to address

This mine has proven and probable reserves of 0.9 million

operational and production challenges?

ounces of gold. Agnico Eagle has become one of the

A: Agnico Eagle is a company created under Mexican

largest producers of gold in Mexico, reaching 350,000

laws with Canadian capital. With close to 60 years of

ounces annually between the three operations. For our

experience in the mining industry on a global level and

business, Mexico not only represents almost 20 percent

nine in Mexico, our philosophy has been to grow not

of total production, but it is also an important investment

only in terms of operations, but also by developing our

destination in which we work every day to discover new

database of collaborators and promoting progress in the

mineral deposits.

communities surrounding our mines. Our objective is to build a sustainable, high quality, and low risk business,

Q: What is the decision making process in the adoption

which is why we have focused on a sustained growth

of new technologies and processes, and what stepping

that allows us to find quality gold deposits and invest

stones are used to increase efficiency in production?

consistently in exploration activities, even when market

A: We are always seeking to maximize our resources and

conditions represent a challenge for the industry.

we use cutting edge technology in all our operations. Cost per ounce of the three mines is variable and depends a

Our vision has been to grow our presence in Mexico.

great deal on market value, which is one of the challenges

We began operations in the country in 2009 with the

we face nowadays in the industry. However, we have

Pinos Altos mine, our cornerstone operation in the Sierra

competitive operations. We invest in a way that allows us

de Chihuahua, and that we have turned into one of the

to optimize and accelerate our processes, and an example

primary producing gold mines in the country. It contains

of this is in our new mill in Pinos Altos.

proven and probable reserves of 1.5 million ounces of gold and 37.5 million ounces of silver. Later, we developed

Q: What strategies are implemented to maintain good

the Crestรณn Mascota satellite operation, with proven and

relations with key suppliers?

probable reserves of 0.2 million ounces of gold and 1.6

A: For our company relationships with all agents involved in the development of our operations, including suppliers, are extremely important. This forms an integral part of our operative and growth strategy. Our objective is to operate within a work environment with high health and safety standards. We believe that by working together we can succeed and promote the wellbeing of our partners and suppliers. In order to achieve these goals, we implement engineering principles for the design and operation of our installations. We offer adequate training to all employees

Pinos Altos contains

proven and probable reserves of 1.5 million ounces of gold

for the development of their careers at all levels of exploration, construction, development, and operation. We have workplace health and industrial hygiene programs, and we offer the necessary tools to carry out the work in a safe and efficient manner. We also operate under a preventive culture with a high level of preparation in order to overcome potential emergency situations.

Q: What is your assessment of the success of the

the funds are returned to the communities, boosting the

allocation of the mining fund?

development of mining states and communities.

A: For Agnico Eagle, our relationship with the players involved, especially with the communities surrounding our

Q: What are the main priorities for Mexico’s operations

mines, is extremely important. We have a commitment to

that reflect the opportunities and commitments of the

generate prosperity and we firmly believe in promoting a

company to the local mining market?

culture of excellence based on the pillars of trust, respect,

A: We are seeking new properties and we have some internal

equality, family, and responsibility. Proof of this can be

projects in early stages. We have redoubled our efforts

seen by the fact that we have received certifications like

in exploration, and without doubt, adding an advanced

Socially Responsible Company (ESR) from the Mexican

exploration project to our portfolio is a priority. Although it is

Center of Philanthropy, and the Clean Industry award from

true that we have been successful in exploration and we have

PROFEPA. We have also been awarded the Gilberto Rincón

managed to increase reserves in our projects, Pinos Altos,

Gallardo distinction from the Ministry of Labor for being

La India, and now El Barqueño have all been acquisitions.

an Inclusive Company and a Family Friendly Company,

We will continue exploring while simultaneously evaluating

and we have been recognized for having implemented the

properties to acquire in a more advanced stage. In order

Gender Equality Model by the National Women’s Institute.

to achieve this we must have the absolute support of the

As well as obtaining the H Certificate for clean camp

company and have the resources to make an important

services, we have recently been recognized as the most

acquisition and continue with planned exploration. However,

advanced company in Mexico that is working to eliminate

it is true that the Mexico Division has to compete with other

child labor with the “Mexico without Child Labor” award

divisions for projects in Europe and North America. This is

given by the Ministry of Labor.

why it is necessary to work closely with our representative organization, as well as with the federal government, in order

We are also working actively with all three levels

to regain the competitiveness of Mexico as a mining country,

of government in order to achieve progress in the

not only in terms of the quality of deposits or personnel

communities in which we operate. Agnico Eagle Mexico

training, but also in terms of competitiveness as a country.

forms part of the committee charged with defining the

This competitiveness is essential for any activity. In the

allocation of the Regional Sustainable Development

interests of all parties, we must make this sector attractive

Fund for Mining States and Municipalities. We represent

for national investors and for those who are prepared to

companies in Chihuahua with the goal of ensuring that

invest in the mining industry in Mexico.



3 4 3






6 6

















13 14


19 17 18 20 19




21 21


23 23


22 22


28 28


27 27

30 30


25 25




29 29

31 31



33 32 32

26 26






San Felipe

Minera Frisco


Baja California


San Antonio

Argonaut Gold


Baja California Sur







La Herradura





Noche Buena





El Chanate

Alamos Gold




San Francisco

Timmins Gold




Cierro Prieto





Santa Gertrudis

GoGold Resources




Las Mercedes

Yamana Gold




La Cecilia

Chesapeake Gold




La Colorada

Argonaut Gold




La India

Agnico Eagle





Alamos Gold




Alamo Dorado

Pan American Silver





Pan American Silver




Santa Maria de Moris

JV Hochschild (70%) Exmin (30%)





Minera Frisco




Pinos Altos

Agnico Eagle




39 39


35 34








Minera Frisco





Coeur Mining




San Julián





San Francisco del Oro

Minera Frisco




El Gallo

McEwen Mining




Nuestra Señora

Americas Silver Corp




La Trinidad

Marlin Gold










Endeavour Silver




San Dimas

Primero Mining




El Castillo

Argonaut Gold




Pyrites Plant





















Minera Frisco




Camino Rojo





El Coronel

Minera Frisco




Cerro de San Pedro

New Gold


San Luis Potosi


El Porvenir

Minera Frisco





Endeavour Silver





Great Panther Silver




El Cubo & Las Torres

Endeavour Silver




San Martin

Starcore International Mines

Production & Advanced Exploration



La Guitarra

First Majestic Silver


State of Mexico



Alamos Gold




El Limon-Guajes

Torex Gold




Ana Paula

Timmins Group




Morelos Gold

Torex Gold




Los Filos





San Jose

Fortuna Silver




El Águila

Gold Resources




36 36



38 38

40 41 42 40 41


43 43

44 44

45 45

46 47 48 49 46




51 51

50 50





Q: What are the primary advantages and disadvantages

A: In 2014, San Dimas produced 2,460t/d of gold ore, with

you have seen as a foreign operator working within the

that figure rising to 2,720t/d in 2015. Over the course of

local mining industry?

the past two years we have updated and improved the

A: Although Primero Mining is based in Canada, its focus has

processing plant, adding new tanks, an extra mill, and a new

always been in Mexico. The company was formed in August

filter. These developments all contributed to the increase in

2010 with its acquisition of the San Dimas mine on the

production in 2015 to 2,720t/d, and we want to further build

border of Sinaloa and Durango, followed by the purchase

on that success by achieving 3,000t/d in the near future.

of Cerro del Gallo in Guanajuato in 2013. Mining is always

Of course, in order to accomplish this goal we depend on

a risky activity, whatever the country, but I believe that

the results of our exploration projects. One development

Mexico offers a number of opportunities for foreign mining

that should enable the company to increase expansion is

companies despite the challenges. First and foremost,

the acquisition of the Expanded Lechuguilla, to the south of

it has a vast array of mineral reserves, which is always

San Dimas, which was completed in June 2016. We recently

the most important and decisive factor for exploration

came across topography in this previously unexplored area

companies. Our mine at San Dimas is located in an area that

that suggested that there were further mineral veins, so we

is accustomed to mining activities since operations have

decided to buy the mineral concessions and we expect to

been ongoing for over 100 years, so we have experienced

begin more thorough exploration work before the end of

remarkably few challenges from local communities.

2016. Progress will take some time because the geology makes drilling complicated and time consuming but the

Q: What technology is in place at San Dimas to make the

underground infrastructure is already in place, which is

mine more sustainable and environmentally friendly?

a solid start. Exploration will be crucial to continuing the

A: A total of 75 percent of the energy used at San Dimas

momentum we have created at San Dimas, because we

is generated by a hydro-electric plant owned by the

mine our reserves down continuously.

company. We redirect water from a jungle river 45km away from San Dimas into a dam, which is 700m above

Q: What have been the latest developments on the Cerro

the plant, and we then use the difference in elevation

del Gallo project?

to generate vast quantities of clean electrical power.

A: It is now in the advanced development phase, and we are

Between the hydroelectric plant and the mine there are a

currently in the process of obtaining permits to continue

number of indigenous communities with whom we share

work on the project. In addition to permits, we are waiting for

this energy. Indeed, were it not for Primero Mining these

gold prices to increase further before proceeding with drilling

people would not have access to any electricity. Another

work on the 18,000ha we own there. However, Cerro del

important factor of our environmental work is our tailings

Gallo is a well-known mineral deposit with potential for both

handling philosophy. At San Dimas, we have invested

underground and open pit mining development, so we are

approximately US$25 million over the last 10 years to

excited for what the future holds for that particular project.

fund construction of a dry stack tailings storage facility

Our principal focus will continue to be San Dimas, and more

in order to protect the surrounding ecosystems. This is

specifically we will concentrate on developing the 30,000ha

state-of-the-art technology using belt filtration to ensure

we have recently acquired at Expanded Lechuguilla. By

that waste produced from the mine is fully dried when it is

continuing to invest in Mexico, Primero Mining hopes to

deposited, and therefore drastically limiting the impact of

become a mid-sized operator in the medium to long term,

our mining activity on the environment.

and with optimization and expansion of our existing mines and potentially even further acquisitions our goal is to be

Q: What did the company do differently to achieve the

producing 400,000oz/y between our operations in Canada

increase in production at San Dimas?

and Mexico.



UNWAVERING COMMITMENT OF GOLD PRODUCERS ALBERTO OROZCO Vice President of Exploration Mexico at Argonaut Gold


Q: What have been the major changes Argonaut Gold has

projects. These are San Agustín in Durango, San Antonio

implemented in response to the current market situation?

in Baja California Sur, and Magino Gold in Ontario, Canada.

A: We are fully committed to all of our projects, from our operating mines to those in development. Our

Q: How can joint ventures and exploration agreements

ambition remains unchanged, as we want to grow into

help to expand Argonaut’s reach in the market?

an intermediate, mid-tier producer, and to achieve this

A: Argonaut Gold’s historic growth strategy has been

we had to make some changes to our business model,

formed surrounding acquisitions, and during difficult

given the current market conditions. The focus has been

times, we also carry out option agreements to explore

to reduce costs following the drop in gold prices and to

certain sites. While the industry is troubled, there are many

increase efficiency across all of our processes. Naturally,

opportunities that will arise. Projects will become available,

our exploration budget has been reduced and this is

and companies will be more willing to consider favorable

one of the first things to occur during times of hardship.

agreements in order to move forward. We treat JVs on

However, we have not stopped all of our key activities and

a case by case basis using our in-depth evaluations. All

we are sustaining all operations while keeping costs low

companies are struggling since there are fewer resources

and evaluating the possibilities for three key development

and share prices are lower, so it would have to make a lot



The second acquisition was the El Altiplano processing

President & CEO of Starcore

plant, which needed financing and did not have the ability

International Mines

to raise funds. “When we acquired it, it had some drums and a couple of buildings,” Eadie boasts. “We built the

In today’s mining industry organic growth seems to be

facility from the ground up in the middle of the desert.”

a thing of the past. Inorganic growth is one of the only

This processing plant will help small and medium sized

ways to generate and sustain the required development

miners convert their production into doré bars. However,

companies need to remain competitive. “In the past two

there will be a steep learning curve for the small operators

years, we have acquired two companies that have allowed

because according to Eadie, they expect more than just

us to continue building internally and organically,” shares

support to produce their product as they are accustomed

Robert Eadie, President and CEO of Starcore International

to financial aid from the government. El Crestón is currently

Mines. The company's first acquisition was the El Crestón

at the pre-feasibility stage, meaning there has been a large

molybdenum project in Sonora that had gone into

amount of engineering work carried out, which entailed

bankruptcy, with the belief that it was an undervalued

approximately 50km of drilling. It is an advanced project

asset, which, once the commodity prices pick up again,

missing only one more outstanding study before it is ready

can be a very lucrative business option. “We might find a

to go into production. “All the information from that project

company that specializes in molybdenum and we would

is digitalized, and as soon as the ejido issue we have there is

focus on the gold by either selling or trading it,” he reveals.

resolved, then we can resume our activities,” Eadie explains.

of sense for us to acquire something. If we were to acquire

A: Argonaut Gold is relatively traditional in its mining

a project it would have to be ready for production and at

methods and we are highly diligent in the hydrological,

the moment the company is not as prepared as it was in

metallurgical, and environmental studies we carry out.

the past to grasp these opportunities. The Magino Gold

We have been lucky to find quality deposits that are well

project is of a larger scale and now we are looking for

tailored to open pit heap leaching, and the same applies to

something smaller.

projects like La Colorada, San Antonio, and El Castillo. Those that have potential to grow in the future are in our hands

Q: What key decisions have you made to optimize costs in

and the remainder we will auction, JV, or divest. Because

El Castillo and La Colorada?

of the difficult times, we will begin to see more land and

A: In general terms, we have been reviewing our purchasing

concessions opening up. This happened in the early 2000s

contracts and, while the industry finds itself in a precarious

during a crisis and a great deal of ground became available.

position we continue to increase our production. Capital

As time progresses we will see attractive projects that have

expenditures are being evaluated in order to keep what is

drilling and studies becoming available.

truly necessary, and through this endeavor we also help our suppliers. The new taxes that were implemented in

Q: What main strategies have enabled the company to

2013 are high, and while I doubt they will be eliminated

maintain its active exploration program?

some fiscal incentives should be implemented in order to

A: Our exploration projects will continue and we will

help companies survive these market conditions. A major

develop our networks in the country even further. Mexico

obstacle is the non-deductibility of exploration expenses,

is a country worth investing in, and it has yet to be fully

as these can only be deducted over a 10-year period. This

explored. Argonaut Gold goes a step beyond the traditional

inhibits exploration, which is a critical concern because if

and brings added value to the communities in which it is

companies do not invest in exploration then it will be difficult

present. For example, our San Antonio project has some

for mining to continue at the same pace as it has in the past.

interesting hydrological benefits, and by relocating the water rights when it begins production it will benefit the

Q: What has been the progress of your other exploration

water basin in the region. Given the proximity to the sea,

stage projects, and what is needed for these to take off

there is a saline intrusion that will be mitigated to help the

and begin the next stage?

area suffering from water scarcity.

Starcore is proud of its dry tailings stack with a relative

are rolling out an initiative to identify each worker with a

moisture level of 20 percent that is installed at its San

tag so we will be able to locate everyone underground,”

Martín mining operations. This is possible because the

he shares. “Finally, we have a trained rescue team that

company extracts between 75-80 percent of the chemicals

recently rescued two miners after the federal government

from waste for recycling. “Our mine is one of two in Mexico

requested our assistance in a mercury mine collapse.”

that recycle all the used chemicals, and people tend not to understand the concept until they see the innovation

Eadie explains that Starcore brought litigation against the

involved in the tailings,” Eadie comments. “Regarding

government after the mining tax was imposed, and he

operations, safety is a priority for us so we make sure

believes that the tax will be revoked. “I believe that the

that all procedures are followed.” Starcore also has a

tax has affected the image of stability in the country, and

greenhouse to grow vegetables that are used in its kitchen

when added to insecurity issues the country currently faces,

daily, and the excess the mine accumulates is sold below

this creates a negative perspective of Mexico,” he laments.

cost to the people working at the mine. Additionally, Eadie

“Mining companies like Starcore International have always

shares that the operator negotiates with local retailers to

aimed to provide sustainable growth for communities.

ensure discounts for mine workers, which allows the mine

Moreover, I do not believe that the government stepping

to work as a family.

into the process will help them.” He claims that compared to the oil and gas industry, mining accidents are insignificant.

Eadie believes that the digital databases used by the

“Nevertheless, I understand the reason behind the imposition

company are not only making it more competitive but

of the mining tax under the Energy Reform because this

that this phenomenon is becoming an industry standard.

was needed to improve the country’s performance,” he

Moreover, Starcore also uses lights with lithium batteries,

concedes. “The Energy Reform is the turning point for

creating greater efficiencies, an extended lifecycle, and

the country in many ways but the authorities should also

very little wasted energy. “From a safety perspective, we

consider a mining reform.”





Q: How did the company ensure growth in the midst of

A: The key operational challenges for McEwen were our

a low metal price environment, causing McEwen Mining

growth from an exploration company to an operating

(NYSE:MUX) shares to increase 12 percent?


A: One of the most influential reasons for the increase

productive in the shortest time possible. Some of our

in our share price and trading volume was related to the

inherent production and operational challenges include

rebalancing indexes. McEwen Mining was included in the

grade control, managing and achieving recovery rates,

Van Eck Vector Gold Miners ETF (GDX), the Standard &

managing stripping costs, quantities, and sequencing,

Poor’s/Toronto Stock Exchange Composite Index (S&P/

and dealing with weather conditions. Moreover, in Mexico

TSX), and gained an increased position in the Market

specifically, there are security issues, VAT recovery, and

Vectors Junior Gold Miners ETF (GDX-J). McEwen Mining

permitting issues to consider. In terms of taxation, the

has a high beta to gold ratio of 2.7 over a three-year

new tax reforms adversely impact our business so we

average, meaning that when gold moves up MUX moves

have decided to challenge them. We are also dealing with

strongly alongside. The company is working toward

new customs requirements, and this impacts our invoicing

inclusion on the S&P 500. There are very few mining

process. There are some silver linings that make Mexico

companies that can be included in the S&P 500 because

an attractive jurisdiction to work in such as the peso

the company must be incorporated in the US in order to be

devaluation, which has provided some temporary relief to

eligible. McEwen is Colorado incorporated making us one

offset rising costs. Nevertheless, only about 30 percent to

of five companies able to do so. However, we would also

40 percent of vendors are paid in pesos.








need a market cap of US$5 billion and three consecutive quarters of retained earnings.

Q: What have been the key investments and decisions the company has made in order to optimize processes and

Q: What have been the main accomplishments and

costs in the El Gallo mine?

highlights of McEwen Mining in Mexico?

A: The main reasons for the extension of the El Gallo mine

A: We had an extremely successful 2015 at the El Gallo

lay in the prospect of a longer life for the El Gallo 1 mine.

mine, which contributed to our free cash flow. Our grade in

The challenge has been in lowering costs to make lower

the open pit last averaged 4.3g/t of gold, which is almost

grade ores profitable and in expanding exploration near

double the reserve grade of 2.2g/t. We also had improved

the operating mine. The major improvements made at El

recoveries at the mine, and this contributed to the overall

Gallo include a major modernization and expansion of the

success of our operations and increased cash flow. The third

process plant and crushing plant to be able to process up to

way we were able to lower our costs involved renegotiating

4,500t/d. Two leach pad expansions have ensured efficient

our agreements with our contract miners. All three of these

leaching of ores. Additionally, the focus on safety, the

items led to improved financials and operations. McEwen

installation of new liners in all process ponds, and increased

has maintained an extremely healthy balance sheet with

physical security has all helped ensure the mine is operated

over US$42 million in liquid assets and cash, no debt, and

in a safe, secure, and environmentally responsible manner.

an anti-royalty policy. Nevertheless, our decision to buy

El Gallo 2 is fully permitted and we are hopeful that with the

Coeur Mining’s NSR tiered royalty on El Gallo was simple

improving silver price we will be able to make a decision to

as it provided us a cost saving of US$40/oz, which makes a

proceed with this project soon. Given the security issues in

significant impact on our balance sheet over the long run.

Sinaloa, and the fact that US$8.5 million of gold was stolen last year, we have fortified the mine and refinery. We have

Q: What are the key production and operational

installed cameras throughout the property, put in additional

challenges the company has encountered in trying to

fencing, and implemented additional security measures and

reach these goals in Mexico?

procedures for personnel.


SOCIALLY RESPONSIBLE MINING PRACTICES Miners know that it is easy to be productive in times of high commodity prices but when prices dip, being a low cost


producer makes a difference among competitors, according

Vice President Latin America

to Armando Ortega, Vice President Latin America of New

of New Gold, and Managing

Gold, and Managing Director of Minera San Xavier. The

Director of Minera San Xavier

message he wants to send to investors and stakeholders is that New Gold is able to produce under extremely competitive conditions. “The most important aspect of

“Even if the cyanide is highly diluted and used in a closed

our operations is focusing on the factors we can control,”

circuit with all sorts of safeguards people tend to feel

Ortega shares. “The price of gold, unfortunately, is not one

uneasy about its implications.” New Gold is among the few

of them.” Minera San Xavier, New Gold’s Mexican mining

Mexican companies that voluntarily applied for and received

subsidiary, contributed to lowering the company’s costs

accreditation from the International Cyanide Management

considerably. New Gold engaged in an extremely ambitious

Code, which certifies that the company employs the proper

project by reevaluating all aspects of operations. Although

management, use, transportation, and disposal of cyanide

the company closed 2014 with high costs due to several

in a scrutinized custody chain. As a result, Ortega believes

factors, among them a dedicated stripping exercise within

that New Gold has proven its commitment to ensuring that

the mine, in 2015 costs have been significantly reduced.

it operates within stringent environmental guidelines.

The company’s Cerro de San Pedro mine was recently

In terms of environmental obligations there are almost 300

awarded the distinction Safe Company Level Three by

biophysical covenants that must be honored by mining

the Ministry of Labor. “Due to misconceptions regarding

companies. New Gold has a commitment to reforest more

lack of safety in the mining industry, it is important for

than 350 hectares, which roughly equates to the size of

our company to be awarded with the accolade in order

the site impacted by operations of the San Xavier mine.

to change that view,” Ortega stresses. However, having

The company has taken a proactive approach since the

produced more than 3 million working hours with no lost

obligation only applies after the mine closure but having

time incidents (LTI), and achieving more than 780 days

begun the program four years ago, New Gold has already

without LTIs, New Gold is proof that mining can be a safe,

met the requirements. “The second stage is to ensure the

sustainable, and regulated business. Ortega indicates that

survival of the trees and cacti we planted, and we have

one of the factors associated with this success is Optalert,

involved the communities, hiring local workers and paying

a system that works with lenses connected to a central

for environmental services,” Ortega points out. New Gold

station and reads the movement of the worker’s eyes, in

will also restore 144,000 tons of old mineral residues left

order to detect worker fatigue. “There are more, similar

behind by ASARCO in a nearby location. “One of our

technologies employed in New Gold mines that contribute

values is integrity, and we believe that this is the right thing

to the overall culture of safety as a primary objective of

to do,” Ortega emphasizes. “This remediation is extremely

operations, helping us maintain our primary, corporate,

complex and costly because we will move the residues to

‘Zero-Harm’ policy,” Ortega boasts.

a special cell with environmental safeguards, and we will seal it to ensure no leakage.”

The San Xavier mine is adjacent to the colonial town of Cerro San Pedro so, according to Ortega, operationally

The social aspect is the toughest regarding the closure plan,

every day is a challenge. The National Institute of

says Ortega, and Cerro San Pedro is a town that is aware of

Anthropology and History (INAH), together with the

the impacts of an inadequate closure as a result of its long

Ministry of Defense (SEDENA), enforced stringent vibration

mining history. Two years ago, New Gold laid the foundations

limits for detonations in order to ensure that tremors do not

for the closure by providing adequate information on its

jeopardize two colonial churches in the town. The mine was

implications before recruiting an independent NGO to act

discovered in 1590 and exploited as a huge underground

as the liaison between the main community stakeholders

mine but since 2007 it has been operated as an open pit

and the company. As a result, the company learnt that many

mine. “The metallurgical processes we perform call for the

would continue working in the mining industry, while others

use of cyanide, which is environmentally challenging due to

requested support for personal enterprises or employment

common misconceptions about its danger,” Ortega shares.

opportunities elsewhere.



DEVELOPING THE WORLD’S LARGEST GOLD AND SILVER MINE our day to day operations,” he explains. For exploration, weaker metal prices sometimes provide opportunity to generate more prospects that otherwise might not be available since capital markets affected by bearish metal


prices will impact liquidity and access to financing.

President of Chesapeake Gold Chesapeake has worked in several states in both northern and southern Mexico and Reifel shares details of his most 84

Chesapeake Gold discovered El Sauzal in Chihuahua state,

memorable experiences. “In Oaxaca, we had a very difficult

and the discovery then went on to become the largest

time doing business with the communities in terms of

gold mine in Mexico until about five years ago, attracting

educating them about the mining process especially from a

a stampede of Canadian investment and exploration

grassroots perspective,” he comments. “From our experience,

activity in the country. Although Randy Reifel, Chespeake’s

the cost of doing business and social license is higher in

President, believes that the country has high potential

Oaxaca than our experience in northern Mexico.” As a result,

mineral discoveries, there are also increasing challenges

the company decided to focus its exploration efforts more

compared to 10 years ago. “Security is a growing issue and

in the north, and it currently has projects in Durango and

negotiating with the ejidos has become more engaging and

Sinaloa. In fact, Chesapeake recently completed an updated

costly. Fortunately, over time we have developed a network

pre-feasibility study on its Metates mine in Durango, which

and gained the trust of the communities where we work,”

is the largest undeveloped gold and silver deposit in Mexico.

he shares. This conflict also extends to government policy,

“The pre-feasibility study demonstrated that Metates has the

he says. While in Durango and Sinaloa he has seen a strong

option to be built as a smaller mine producing 30,000t/d,

political will to see projects advanced to construction, the

and internal cash flow can largely fund the operation to full

new tax policy has made Mexico less competitive than other

scale capacity of 90,000t/d,” Reifel boasts. Few world class

nations. “However, Chesapeake is an exploration company,

deposits are scalable due to their remote location, lack of

and as such the low commodity prices don’t directly impact

infrastructure, and other factors.



Piggott aims to increase gold production to 1,50oz/m.

Chairman & CEO of Goldgroup

“We are finalizing this optimization process and we


also underwent a major management analysis to further reduce costs,” he comments. “Our current sustaining

Goldgroup is a publically traded mining operator listed

cost is around US$850/oz and we can maintain that

on both the Toronto Stock Exchange (TSX) and Mexican


Stock Exchange (BMV), as well as trading shares on the Over-The-Counter (OTC) exchange. However, just a few

Given the limited amount of resources Goldgroup had

years ago, Goldgroup’s Cerro Prieto mine was the only

access to, the company was forced to invest out of cash

asset in operation, and during 2014 it was a high cost, low

flow. Recovery was carefully studied so the operator

recovery property. “In 2015, we invested in a process to

opted for very fine crushing and agglomeration, which

increase our fine crushing capacity and agglomeration,

provides higher recovery. “In 2014, our recovery was



below 50 percent, in 2015 it reached 60 percent, and

explains. In 2014, Goldgroup’s gold recovery per month

now we expect our recovery to be in the 65-70 percent

was a negligible 400 ounces on average, and the

range,” Piggott clarifies. “I do not believe we will be able

company doubled this figure in 2015 to 800oz/m. In 2016,

to go far beyond that due to the way gold liberates from





Reifel shares that, after having de-risked the project and

of major civil infrastructure, process plant, power network,

providing scalable alternatives for its future development,

water facilities, and modern camp facilities. He highlights

Chesapeake’s focus over the next 12-18 months will be to

that the tailings management system Chesapeake uses

explore and advance other projects around Metates. “We

is also important. “The first gold mine in Mexico utilizing

believe developing an organic pipeline will add dimension

dry stack tails was our El Sauzal mine, which was a great

and value to a large industrial complex that will one day

success,” he explains. “Likewise, we have incorporated

be built at Metates,” he explains. This de-risking process

dry stacked filtered tails instead of a wet tailings storage

required several considerations to be made. Large scale

compound at Metates.” Filtered tailings increase the capital

mines like Metates require significant water and power,

and operating costs but the long term benefits include

and the Mexican government’s construction of a natural

water conservation through recycling over 50 percent of

gas pipeline down the west coast has resulted in low

the water, lower environmental risk, and greater stakeholder

cost, clean energy for the project. Regarding water, the

support. “The dry stacking system at Metates is innovative

government raised the tariff rate by 100 percent last year,

in that we will have concurrent reclamation during the mine

and with a life of over 25 years, the mine’s future water

life by covering the waste rock with the filtered tailings,” he

availability and the cost of the resource is uncertain.

comments. “This integrated system will mitigate acid rock

“Fortunately, Metates is relatively close to the Pacific

drainage and allow plants and trees to grow as the mine is

Ocean and uses low cost energy,” Reifel points out. “The

in operation.”

recent pre-feasibility study incorporates desalination as the water source, which ensures long term supply and

The time taken to advance this project to full feasibility

much less stakeholder risk.”

will be approximately two years, Reifel predicts. “Many experts believe that gold mine production has peaked and

“We have been undertaking regional exploration around

will decline in the years ahead," he declares. "Discoveries

Metates seeking new potential bulk tonnage gold and silver

of new significant gold deposits are scarce and some

prospects, and currently we have three,” Reifel divulges.

countries are not miner friendly. We strongly believe gold

One is located 40km north of Metates, one 11 km south of

producers will need to replace reserves, in many cases

Metates, and the third is located near the proposed plant

through M&A activity.” Chesapeake, however, will focus on

facilities. As a mine that is tipped to become one of the

developing an organic pipeline of satellite deposits that

largest gold and silver mines in the world Reifel anticipates

could see the Metates camp become one of the largest

that the development of Metates will entail the construction

gold and silver producers in the world for 30-40 years.

leaching operations. However, with careful metallurgy we

heap leach extraction, making Cierro Prieto heap leaching

are increasing our results.” Goldgroup also studied the

extremely innovative.

mining circuits to ensure optimal rock was sent to the crushers but recovery had to be addressed first. Now,

Piggott shares that the company is currently in the

producing between 350-400oz/w Goldgroup has a

midst of an ongoing dispute with a US enterprise over a

healthy cash flow.

project called San Jose de Gracia in Sinaloa, a property 50 percent owned by Goldgroup. “We spent US$18 million

In order to optimize operations the company recruited

for half ownership of the property, which is inferred to



have 1.1 million ounces of resources, and where we drilled

how the business was run from top to bottom. Areas of





299 holes,” Piggott asserts. “Unfortunately, the company

opportunity were identified mainly in communication

with which we are involved is attempting to take the

and now Goldgroup uses superior reporting techniques,

concession through subversive means. We have since been

therefore creating a more accurate analysis. “When metal

working with the Mexican legal system, which is relatively

prices were high a great deal of companies put cost

slow, and in the end we believe we will prevail. When we

control aside,” Piggott comments. “Operation costs were

obtain that property again, which has incredible potential

important but production took center stage during that

if worked properly, Goldgroup will take a significant step

era. Therefore, when prices dropped, we had to react to the

forward.” The company is also looking for other operations

situation by improving our processing techniques.” From a

in Mexico, mainly brownfield assets due to the prevailing

technical point of view, Goldgroup uses fine crushing and

trend of small exploration projects being picked up by

agglomeration, as well as a high pressure grinding roll, and

large companies as small operators lack the necessary

is one of the few companies in the world using this for

financial capacity.




PEÑASQUITO The Peñasquito mine is Mexico’s largest gold producer, and delivered a record production of 860,300 ounces in 2015. Goldcorp estimates that in 2016 gold production will dwindle to between 520,000 and 580,000 ounces due to mining in the lower-grade area of the pit. The operation is also expected to produce 22-24 million ounces of silver, a total of 375-400 million pounds of zinc, and 145-155 million pounds of lead. It consists of two open pits, Peñasco and Chile Colorado, located in Zacatecas, 14km east of Mazapil. Peñasquito boasts accessibility to roads, power, and adept personnel thanks to the area’s lengthy mining record. The mine is nestled along the eastern Mexican fold belt that contains carbonate and Mesozoic clastic sedimentary units. It lies upon two funnel-shaped diatreme breccia pipes that dwell into Cretaceous clastic units and overlay a Tertiary felsic intrusive complex. The property exhibits veinlets, and minimal fractures that encompass minerals such as electrum, sphalerite, galena, and various sulfosalts. As an open pit mine, Peñasquito utilizes a flotation and grinding processing method supported by two 50,000t/d sulphide lines, and a 30,000t/d high pressure grinding roll (HPGR) circuit. It has a milling capacity of 130,000t/d. The operation has also adopted the “Pyrite Leach Project”, which envisions utilizing zinc flotation circuit tails to leach a pyrite concentrate that can save gold and silver from being lost inside the tailings facility. The investment is expected to be approved by mid-2016, and the project should be in production by the end of 2018. When it comes to environmental regulations, Peñasquito not only complies with a Waste Comprehensive Plan, a Single Environmental License, and the Annual Operation Certificate and Management Plan for the Reproduction of the White-Tailed Deer, it also incorporates a National Environmental Audit Program. Furthermore, the company has rescued more than 448,000 plants, of which 18,000 were endangered cactus species. Its nursery additionally harvests an estimated 3 million plants per year that will be used in future reclamation work. Peñasquito is a socially responsible mine as it perpetuates a solid relationship with surrounding communities and local authorities. Its policies ensure employment opportunities for state residents, with 75 percent of Peñasquito’s employees from Zacatecas. Through scholarships, adult education programs, and the construction of a Technical School (CONALEP) that provides mechanical and electrical training with student housing, the mine is extremely socially conscious. Health care is equally supported in coordination with the Youth Integration Center (CIJ) that grants seminars on specific topics.





Q: What have been the highlights of the merger between

portions of the operation on an ongoing basis, instead

Alamos Gold and AuRico Gold, and how will this strengthen

of waiting until the end of the mine life. At Mulatos we

your growth portfolio?

have already reclaimed more than 20ha of leach pad and

A: The merger has given us increased scale with diversified

waste dump area. In addition, we invested approximately

production from three operating gold mines, two of which

US$10 million in a water treatment facility well before this

are in Sonora, Mexico, and the third is in Canada. We

became a requirement of mining operations. Our goal is to

expect to produce 370,000–400,000 ounces of gold in

contribute to the local ecosystems around our operations

2016, of which 200,000-220,000 ounces is expected to

so that beyond the closure of our mines, we leave the area

be generated from our Mexican operations, making us

in a more advantageous position.

one of the largest gold producers in the country. This has given us increased buying power at our Mexican mines,

Q: Given the bear market conditions, what are the

which has helped contribute to approximately US$20

company’s objectives for 2016?

million in annual synergies realized through the merger

A: Gold miners in Mexico have been losing money for

thus far. Additionally, our higher rate of production from a

several years so the higher gold prices are extremely

diversified portfolio of assets gives us a stronger platform

welcome. Our focus in 2016 will be increasing production

from which to grow and reduces risk in the eyes of investors.

and lowering costs at our Young-Davidson and Mulatos

With a strong balance sheet and strong cash flow growth

mines, a strategy that includes developing the lower cost

expected from our core operations, we are well positioned

Cerro Pelón and La Yaqui deposits. We expect this to

to fund future growth from our development pipeline.

drive significant free cash flow growth in the years ahead, which will help fund future growth from our development

Q: How do you support your projects such as the Cerro

pipeline. As well as our La Yaqui and Cerro Pelón projects,

Pelón and La Yaqui developments?

we have a third project in Morelos called Esperanza. The

A: These growth initiatives are supported through cash flow.

site contains roughly 1.1 million ounces of gold and we see

Our operating mines are generating sufficient cash flow to

it as a promising low cost operation that could create a

fund their growth capital spending and exploration budgets,

great deal of employment in an area that has suffered

including those at Cerro Pelón and La Yaqui. Despite

economically for a number of years.

lower gold prices over the past few years, we continue to invest in exploration and we have made some important breakthroughs, particularly at Cerro Pelón and La Yaqui where we recently reported substantial reserve and resource growth. We are in the process of obtaining environmental permits for these sites and expect to start construction on La Yaqui, the first of the two projects later this year. We expect initial production from La Yaqui mid-2017. Q: What steps have you taken toward environmental protection in the areas surrounding your sites? A: Reclamation has been a substantial focus from the outset. We were planting trees before we started mining, and we relocated hundreds of trees and shrubs which were considered endemic to the region. We follow a process of progressive reclamation, which means that we reclaim

Esperanza contains roughly 1.1 million ounces of gold


FINDING EFFICIENCIES IN DIFFERENT JURISDICTIONS AKIBA LEISMAN Interim Executive Chairman of the Board and Interim CEO of Marlin Gold Mining

Q: What were Marlin’s 2015 highlights, and what did the

Q: What are the steps you are taking to increase the

company do to endure the current hostile situation?

production and cash flow of La Trinidad?

A: Marlin Gold underwent two main changes in 2015. The

A: We are focused on reaching the high grade zone as

first was the changeover in management, where I took

quickly as possible. This means we made the decision to

the role of CEO and Chairman, and the second was the

defer the south-end of the pit and focus on the north end,

incorporation of Sonora Resources’ personnel. The biggest

and when cash flow begins we can return to the south side

change to take place since its integration is that we now

of the pit. We accelerated the access to the high grade, and if

have a more focused mine plan. This plan aims to obtain

gold prices continue to be depressed at U$700/oz, the south

the high grades of the mine in a quicker and more efficient

entrance of the pit should remain part of the property. We

manner than what was previously being done. We laid the

have a new mining contractor that has a much more efficient

groundwork to access those high grade zones in the second

fleet, lower costs, and a higher degree of productivity, which

quarter of 2016. Additionally, Marlin is not only carrying

has reduced Marlin’s monthly run rate from US$3.2 million

out exploration in Mexico to expand its assets but it is

per month to approximately US$2 million.


leveraging on the current market downturn to aggressively acquire other mining assets in different jurisdictions. Our







royalty subsidiary, Sailfish Royalty, has an underlying stream

processes have you implemented to be more competitive?

where it will provide the construction capital to build the

A: Our mine in Mexico and our project in the US are both

mine and in return it will be receiving an initial 40 percent

open pit heap leach mines that use technology that has

of the gold production at US$700/oz until the principal

been proven and tested. We prefer building small assets

interest is returned, after which its share will drop to 20

with proven technology and thinking of ways to efficiently

percent of production. In addition, we sold the El Compas

operate, and then growing from there by applying best

silver-gold development project located in Zacatecas to

practices in terms of our geology. Mexico happens to be

Carnarc Resources and Marlin is the largest stakeholder.

a jurisdiction that embraces medium sized open pits and

In this project Carnarc is advancing at a much faster rate

small scale, and these low capital intensity type of projects

because in the past it was a low priority asset for Marlin.

fit Marlin’s profile.

Equipos sencillos y robustos cuya operación y mantenimiento no es complicado. La más alta relación Beneficio - Costo del Mercado. También contamos con Equipos de barrenación para las diferentes aplicaciones en vetas angostas.

Anclador Bolter 88

Equipo de barrenación frontal Muki FF

Equipo de barrenación larga Raptor 55 XP

Vialidad San Simón # 10, Col. Privada la Cañada. Guadalupe, Zacatecas México

+52 (492) 9231722 | +52 (492) 102 2724


DURANGO PROJECT BACK ON TRACK DAVID WOLFIN President & CEO of Avino Silver and Gold Mines


Q: As a Canadian explorer with an extensive amount of

Q: To what do you attribute the loss of competitiveness in

operations in Mexico, what kind of exploration plans does

the exploration sector in Mexico?

the company have in the country?

A: The price of metals around the world have caused

A: Avino’s exploration projects include the Avino property

earnings to shrink over the last five years, and in effect,

which has an extensive system of veins and a variety of

limited the industry’s ability to explore and develop. The

targets. We also have other standalone claims that are

new Mexican tax regime is an additional factor. Even

not being explored significantly at the moment, such as

though part of its objective is to support surrounding

the Anna Maria, El Hueco, and El Laberinto in Durango.

communities we have noticed little change. Our company

Development of the Avino mine and its surrounding

is disappointed but has continued to play an active role

exploration targets is being prioritized for the coming

in supporting the communities in lieu of the additional

months. Exposed veins on the surface show us a window of

government money that has been allocated for this

dozens of targets, as well as old mines that are centuries old

purpose, which from what we can see has not yet been

that need further exploration and development. Progress in


these areas comes down to the amount of capital we have. As we receive more money, we can continue to explore and

Q: What is behind the remarkable rise in the company’s

develop these targets. They are all high priority but progress

stock price since November 2015?

depends completely on funding. As we accumulate capital

A: Several factors have lent a hand, such as our excellent

we can continue to explore and develop these targets with

share structure that limits the overhang of stock.

the goal of expanding the Avino property’s operations.

Higher metal prices and demand are pushing stocks up

We are also considering using private money and IPOs to

throughout the sector. Our stock in particular was able

finance the projects. Over the past five years, many of our

to achieve such substantial gains in part because we

exploration projects have been restrained due to the low

do not have hundreds of millions of shares outstanding.

market conditions but more favorable metal prices and

Additionally, declaring commercial production at the

earnings could help accelerate our near-term exploration

historic Avino during 2Q16 also helped. The company

plans. Our budget for 2016 is about US$1 million, and we are

started to operate the Avino Mine in 1974 but was forced

hoping to double or triple it next year.

to close it after 27 years in 2001 due to low metal prices. At the time, gold was below US$300/oz, and Industrias Peñoles stopped buying our concentrate. Prior to NAFTA, foreign companies were only allowed to own 49 percent of an operation in Mexico. Following the shut down in 2001 and new NAFTA regulations that allowed full ownership by foreign companies, Avino decided to buy the other half of the Avino mine from its Mexican partners. The negotiations took three years and we eventually agreed in 2006 to give shares of the public company in exchange for a 100 percent interest in the Mexican subsidiary company that owns the mine. After the negotiations were made public, the company’s extensive network of followers rushed to contact us. We were able to raise US$10 million, which was enough capital to rehire a team of approximately 480 people and lay the foundation to bring the project back into operation. In 2008, we started drilling and discovered

new exploration targets, so we opted to create a new mine rather than immediately re-open the main Avino Mine. The new mine, which is known as San Gonzalo, is smaller and its ore is higher grade. Revenues from the San Gonzalo mine, where we declared commercial production in 4Q12, were enough to finance the re-opening of the Avino mine. To resume operations at the Avino Mine, the existing underground workings had to be de-watered. The dewatering process lasted 482 days, was completed in May 2014, and successfully removed over 1 million cubic meters of water. Following the dewatering, we brought in new equipment to increase milling capacity and service the mine, then started processing fresh ore from the Avino Mine underground by the beginning of 2015. The company was able to subsidize the mine’s development in 2015 by running the mill and making a profit through

Avino’s exploration budget for 2016 is about US$1 million, and the company is hoping to double or triple it next year

the processing of development material. In April 2016, following the implementation of the efficient long-hole

time they were mined. Subsequently, sulphide tailings

sublevel caving mining method we declared commercial

from our more recent operations have been placed on top.

production. Following the declaration of commercial

The oxide resource cannot be accessed until the company

production, the market is anxious to see Avino’s revenue in

decommissions the existing tailings, and builds a new

2016, as proceeds from the sale of Avino Mine concentrate,

facility. We recently received a construction permit, and

which last year totaled US$21 million, were classified as

plans are being discussed with a contractor to commence

a recovery of exploration and evaluation expenses and

construction in 2016. Following decommissioning of the

were not included in our top line revenue figure of US$19.5

existing TSF, wells are going to be drilled to drain the

million. Overall, the property is expected to produce

bottom and make it safe. Additionally, there are 3.5 million

between 2.5-3 million ounces of silver equivalent in 2016.

tons of copper sulphide tailings sitting on top of the oxide tailings that could potentially be capitalized on if it

Q: How does the long hole sublevel caving method

is determined it will leach. If it does, the PEA economics

increase efficiency?

will increase, and if not the top can be stripped off and

A: Traditional methods require parallel drills and jack

converted it into a separate operation. The operation

hammers that are quite labor intensive and costly. Long

will be a combination of heap leach and Merrill-Crowe

hole sublevel caving is cheaper because it uses a spiral

precipitation, exactly as Goldcorp uses. It can begin

ram that enters beside the main system through levels that

operating once the new facilities are completed, the

are 20-30m apart. Jumbos are then used to drift 450m

current pile is decommissioned, and the wells are drilled at

along in opposite directions when the vein is cut, and 50m

the bottom, which will take a couple of years.

walls are slashed. Once the underground levels are ready, track drills or mining jumbos drill straight down. Gravity

Q: What strategies are in place to continue to expand

causes the broken rocks to naturally drop to the level

and develop Avino Silver and Gold over the next few

underneath, and machines follow by scooping the material

years, and what are the company’s primary goals going

out. This form of mining is ultimately more cost-effective


than traditional methods.

A: The company plans to expand using our oxide tailings resource. Additionally, the Avino mine, which has a robust

Q: How does Avino plan on using its tailings storage

stockwork system, is currently processing 1,250t/d at the

facility (TSF) to contribute to the production of the mine?

plant but has the potential to expand considerably. We

A: A Preliminary Economic Assessment (PEA) by Tetra

are currently considering an expansion of the mill, tailings,

Tech suggested that our oxide tailings could economically

underground facilities, and the mining fleet. If metal prices

produce over 1 million ounces of silver, and 6,500oz/y of

go up we will be able to manage more drilling to continue

gold over for five years from a heap leach or Merrill Crowe

exploration on the property. There is significant potential

processing operation. The oxide tailings were created

to find other narrow vein higher grade systems that would

during the 1970s from our open pit operation and are

become a priority because margin is everything. A few drill

currently sitting at the bottom of the pile as they did not

holes and installations on exploration targets can increase

recover well under conventional milling methods at the

production rapidly.





Q: What process has Reyna Mining taken to identify the

project is called Tahuehueto, and the company had been

most attractive assets in the market?

exploring there for the past 18 years with investments

A: We have endeavored to diversify our activities in the

having reached US$30 million to date. It is an interesting

mining sector. We now have anthracite mines in Sonora

project and we are taking a whole new approach in its

and we have ventured into iron as well. In that sector we

development. Its deposits are comprised of 75 percent

see that national players face unfair competition from

gold, 11 percent silver, and the remainder lead and zinc.

Chinese iron dumping and also informal operations. Here we encountered some difficulties stemming from acquiring

Q: What process does Reyna Mining undertake when

the necessary permits, and in response to the informality

acquiring small projects?

in this sector the government imposed restrictions on

A: A perfect example of this transformation is the

exports that ultimately stifled national production.

Tahuehueto project since it had many areas of improvement. We reevaluated the engineering and we decided to begin

Q: How have you attracted financing, and how have your

production with 500t/d, and in two years scale the

projects developed recently?

production increased to 3,000t/d. Within this concept

A: The projects we have developed such as La Negra

we will mine veins that are clearly defined in order to be

and El Barqueño have been made possible through

competitive and make the project bankable. Projects take

national investors. Investing in mining can be a long term

an average of 19.5 years to enter into production from the

commitment but the returns can be very attractive. We

discovery stage, compared to 18 years in the period 2006

increased the share value of Aurcana Corp from US$0.04 in

to 2013. Reyna’s first purchase was La Negra, which was

2005 to US$2 years later. The unfriendly market conditions

acquired during a time of crisis. In addition to Tahuehueto,

have caused junior companies to flounder since it becomes

we are in the midst of buying the San Andrés de la Sierra

far more difficult to find financial resources. We closely

gold-silver project, which has a 300t/d plant and all the

followed the progress of these companies and we created

permits, as well as agreements with the community. We

an agreement with Telson Resources, and through a private

have learned that we are not an exploration company so

placement we gained control of the company. The flagship

we seek projects that have passed this stage.



Q: How would you assess the last 12 months for the

would be inclined to believe. However, our mine does not

company, and what should investors expect for the rest

release any process water to the environment, since it is all

of 2016?

recycled. This makes the claim easy to refute and after the

A: The last 12 months have been a period of major

state government inspected the mine site it rejected these

transition for Torex as we finished construction and

claims. It then worked with the blockaders to demonstrate

began producing gold, and the market tends to re-rate or

that their actions based on perceptions and not facts were

increase a mining company’s share price if this transition

damaging the economic prospects of a great many local

goes well. The re-rating of our share price has started,

citizens. We appreciate the government’s success in using

and I would expect this to continue through 2016 as we

dialog to resolve the issues.

demonstrate successive quarters of solid operational and cost performance.

Q: What were the main revelations of the preliminary economic assessment (PEA) for the Media Luna project,

Q: What inspired the decision to introduce the 10 for one

and what is the timeframe for this project to initiate metal

share consolidation on Torex Gold’s outstanding shares?


A: There are a number of large institutional investors

A: The PEA was published last July and it shows strong

that cannot invest in companies with share prices as low

potential for an economic underground mine with a capital

as ours currently stands. There are also brokerage rules

investment of approximately US$500 million. Operating

that prevent margin buying of ‘low price’ shares. We

costs would be expected to be close to the operating costs

have approximately 780 million shares outstanding, and

for the ELG mine. The project is now undergoing a permitting

spreading the value of the company across that many

phase as we prepare for underground exploration to further

shares is the reason the share price is where it is. While

define the deposit in preparation for the next level of

consolidating the number of shares by a factor of 10

technical study. The PEA indicated that production could

does not inherently change the value of the company, it

start four years after a construction decision, which could

does spread that value over fewer shares. The resulting

happen after the completion of further technical studies. The

higher share price will make our shares accessible to new

PEA envisioned 7000t/d of production at approximately

large investors, which should increase demand and hence

4.5g/t of gold equivalent, which means that this concession

benefit all shareholders. As noted, global uncertainty is

shows promise of producing gold equivalent ounces at a

negative for society but positive for gold. Torex is now

similar level to the ELG mine. The low costs at our mine are

producing and can take advantage of the increased gold

primarily a function of the high grades of ore that are near

price. The market will recognize this, which should lead to

to the surface. The Guerrero Gold Belt offers the potential

a positive outcome for Torex investors.

for elusive high grades.

Q: Why were operations at El Limon-Guajes (ELG)

“As with any company that

temporarily suspended in April 2016? A: Production was halted because a blockade was set up in an attempt by a small group of families to force us to pay compensation for perceived environmental damage. The state government investigated the claims and found that they were unfounded. A mine is a fairly easy target for such claims but ours is not an ordinary mine. For

produces a commodity, the share price also tends to reflect changes in the commodity price”

example a claim that the mine is polluting the reservoir

Fred Stanford,

and harming the fish is something that some people

President and CEO of Torex Gold Resources




Mexico maintained its position as a silver titan with a 19.8 percent share of global participation. Although prices have fallen since peaks of US$35 in 2011, silver enjoyed a steady rally throughout 1H16, to highs of US$20.36 in July from a low of US$13.75 in January. The bullish outlook was bolstered mid-year by Brexit fears and uncertainty in the European markets that caused investors to seek solace in precious metals. Silver demand is expected to increase in the near to medium term due to high usage levels in industrial applications, in automotive and especially in photovoltaic panels.

This chapter begins with an interview with the world’s largest silver producer, Mexico’s Fresnillo, and continues with insights from global silver giants operating in the country. A variety of companies operating in Mexico at different stages, including discovery, exploration, and production, provide their opinions about the attractiveness of the market and their strategies for investment in the country. Mexico’s mining ties with Canada are explicit in this chapter with the majority of important silver mining projects boasting investment from the country’s northern counterpart. Moreover, silver streamers and analysts help give the chapter a broad overview of the industry.




VIEW FROM THE TOP: Octavio Alvídrez, Fresnillo


MAP: Mexico's Main Silver Mines


VIEW FROM THE TOP: Mitchell Krebs, Coeur Mining


VIEW FROM THE TOP: Fernando Alanís, Industrias Peñoles


INSIGHT: Michael DiRienzo, The Silver Institute




VIEW FROM THE TOP: Peter Megaw, MAG Silver


VIEW FROM THE TOP: Keith Neumeyer, First Majestic Silver


VIEW FROM THE TOP: Bradford Cooke, Endeavour Silver


VIEW FROM THE TOP: Bruce Winfield, Defiance Silver




VIEW FROM THE TOP: Christopher Warwick, Pan American Silver México


INSIGHT: Frederick Davidson, IMPACT Silver




INSIGHT: Randy Smallwood, Silver Wheaton





Q: What strategies has Fresnillo implemented to mitigate

cycles. Subsequently, the commodity prices drop and the

the effects of the drop in commodity prices and the fiscal

company will face a number of challenges, impairments,


write-offs, and may even need to sell the asset. In the

A: Since 2011, every year has been a challenge, with

case of Fresnillo, we have not undergone any write-

consistently lower metal prices. Mining in itself is a

downs despite the difficult period and this not only

challenge, and the prices have only made the environment

shows the strength of our projects, but also that of our

more hostile. We are able to depend on a concerted effort

operations. We then implement cost control strategies.

from our people, which is our most valued asset, and this

The majority of our mines are in the first quartile in terms

is one of the key features in Fresnillo. Our top team has

of production costs, especially the silver mines, including

been working together for the last 20-25 years, which

our newest mine Saucito and our flagship mine Fresnillo.

is an asset in itself. Therefore, we have survived many

In the next few months, we will bring San Julian onstream,

industry cycles and we are well versed in downturns, with

which was injected with a US$515 million investment, and

the knowledge that the importance lies in the long-term

with this mine we will achieve our 10 year objective of

strategy. With this human capital and knowledge, we have

reaching 65 million ounces of silver by 2018. Last year,

based our strategy on our exploration, from early stage

we produced 43 million ounces of silver, making Fresnillo

prospects to the construction phase, and subsequently

the largest silver producer worldwide, as I believe KGHM

mining operations. A strong exploration team is invaluable

produced 41 million ounces during the same period. Our

because we only bring onstream those projects that

competition has traditionally laid with this company, as

make sense in the long term and can withstand the

in the previous years, we have been producing at similar

unpredictability of the industry.

volumes but with San Julian we will intensify our levels of production.

This differs from the strategies of other companies, which normally entails project acquisition or operations in strong

Q: What was the motivation behind the separation of Industrias Peñoles and Fresnillo, and what have been the benefits of this strategic decision? A: Industrias Peñoles was a large conglomerate with interest in base metals, precious metals, smelting and refining, and railroad infrastructure. Therefore, it was difficult for investors to really value the company, so Fresnillo was created as a vehicle to separate all the precious metals assets. This, along with the company’s launch on the London Stock Exchange (LSE), made it easier for analysts to value Fresnillo and indirectly value

This year Fresnillo is aiming for 45-47 million ounces of silver, compared to the 43 million ounces it produced last year

Industrias Peñoles since the latter owns 75 percent of Fresnillo shares. We set clear objectives and we placed the most qualified staff in Fresnillo in order to achieve the portfolio growth and achieve production objectives. We now have a company that is extremely focused on precious metals with well-defined growth objectives. Fresnillo purchased Newmont Mining’s portfolio in 2014, acquiring their 44 percent of Herradura, Noche

Buena, and Soledad Dipolos. As of March this year, we

surrounding communities that will be able to remain

have cash in hand of US$590 million, and with the cash

even when we leave the area.

flow and low level of debt present in our operations, it may be possible to acquire new operations. When we

Q: How satisfied have you been with the allocation of

compare these possibilities against developing our

funds collected from the royalty taxes, and how can

own projects, however, we are always falling short in

operators contribute to community development?

acquisitions. This is why we have not acquired any more

A: We must work closely with the municipalities, in order

operations recently. Nevertheless, we focus on early

to align our beliefs with theirs. In some municipalities we

stage prospects, and with the help of our highly trained

have seen that the money can sometimes be allocated

geologists we are able to identify considerable potential

to those areas outside the mining communities that may

in some of these deposits. In the last year, we have been

represent more votes or higher standing in the region.

able to close some profitable deals on those early stage

We are participating in a group to decide which products


are valuable for the communities, and that may better 99

serve the communities that neighbor mine sites. Q: Fresnillo recently announced an investment of between US$500 and US$700 million of CAPEX per

One important feature of our strategy is sustainability. I

year. How are you planning to allocate these funds?

cannot understand how any mining company can operate

A: This year, we plan to invest approximately US$560

without a sustainability strategy running in parallel.

million, with next year’s allocation increasing to US$700

For this, we must create and foster extremely strong

million, and this will subsequently decrease to US$650

relationships with communities and different stakeholders,

million. However, with our portfolio of prospects, we

and implement a strategy that is fair and makes sense to all

are also thinking about the next objectives for the

of these parties. We are benchmarking our sustainability

consecutive years. As mentioned before, we aim to

strategy based on various indexes worldwide and we are

produce 65 million ounces of silver and 750,000 ounces

seeing tangible results. This year, we may begin our entry

of gold by 2018. We are currently in the process of

into the FTSE4Good index and the NYSE Sustainability

updating our strategic plan for the next 10 years since

index to benchmark the company against the strategies

we are confident we will reach our goals by 2018. We

that others are implementing. We are confident that we

have 2 million hectares of exploration ground in Mexico

will do well in both of these endeavors.

and 250,000 hectares of exploration concessions in Peru, so we are assured that we will bring onstream

Q: Fresnillo is positioned at number 58 in the FTSE100,

several new projects to contribute to our production

so what do you think accounts for the company’s

goals for the future.

success both in Mexico and internationally? A:








Q: What are you doing differently in San Julian from

companies can place themselves in the international

the other mines, and why is this development unique in

context without a problem. Fresnillo, coming from the

Fresnillo’s portfolio?

Peñoles group, which has been listed in Mexico for 50

A: San Julian is an extremely interesting project, located

years now reflects the strength that we have in terms

in an isolated area. However, this is one of our strengths,

of corporate governance, the solid structure, and the

and we have succeeded in working in these areas before,

potential of the company to compete with our peers

as can be seen with the example of Ciénega. Thirty years


ago, when we started to develop this concession, the area was extremely isolated, and it took about 12 years

Ultimately, the experience of our people makes us

to bring that project onstream.

extremely competitive. All of these elements combine to contribute to our success, not just in Mexico, but on

We then started with an operational life of 10 years,

an international scale. One example is our participation

and now 20 years later, we have 12 years remaining in

in the LSE. This year, we will not see a significant

terms of resources and reserves. San Julian is relatively

increase in silver production, and we are aiming for 45-

similar to the way that Ciénega used to be, and this type

47 million ounces of silver, compared to the 43 million

of project is particularly rewarding as we can observe

ounces we produced last year. In terms of gold, we will

the condition of the area upon arrival, and compare

produce between 775,000-790,000 ounces so overall the

this to the positive changes brought about by the

production numbers for the first quarter are extremely

operation of the mine. For the communities, we bring

positive. If demand for precious metals continues to surge

core infrastructure, roads, electricity, and schools, and

as it has done during the first half of 2016, we expect to

our aim is to bring in some sustainable projects for the

the company enjoy another profitable year.


1 1

2 2







11 11




8 8















17 17


16 16







19 19

21 22 23 24 21










Yamana Gold




Santa Elena

First Majestic Silver




La Colorada

Argonaut Gold




Álamo Dorado

Pan American Silver





Pan American Silver




Pinos Altos

Agnico Eagle





Minera Frisco





Coeur Mining




El Sauzal





San Francisco del Oro

Minera Frisco




La Encantada

First Majestic Silver




Nuestra Señora

Americas Silver Corp




San Rafael

Americas Silver Corp





Endeavour Silver





Great Panther Silver










Silver Standard




La Platosa

Excellon Resources




San Dimas

Primero Mining




La Preciosa

Coeur Mining




La Parilla

First Majestic Silver





30 28 29 28 29 30

34 31 32 35 33


38 38

39 39



26 27








Industrias Peñoles




Del Toro

First Majestic Silver




La Colorada

Pan American Silver










Minera Frisco





Aura Minerals





MAG Silver/Fresnillo














Francisco Madero

Industrias Peñoles














San Ramón





El Compas

Endeavour Silver





Capstone Mining




San Acacio

Defiance Silver




El Coronel

Minera Frisco




Cerro San Pedro

New Gold


San Luis Potosi



San Martin

First Majestic Silver





Terronera del Oeste

Endeavour Silver





Endeavour Silver




San Ignacio

Great Panther Silver





Great Panther Silver




Cerro del Gallo

Primero Mining




El Cubo

Endeavour Silver




Promontorio-La Negra

Kootenay Silver





Industrias Peñoles


State of Mexico


La Guitarra

First Majestic Silver


State of Mexico


Campo Morado





Rey de Plata

Industrias Peñoles




Los Filos





El Águila

Gold Resource




San José

Fortuna Silver





37 37

40-44 40 42 41



45 45

46 47 46 47


49 49



50 51 51

52 52





Q: What are some of the challenges that you have

of leverage. This means that when precious metal prices are

witnessed during your time operating in Mexico?

incrementing, it is a good idea to buy CDE stocks because

A: Most operators would express generic concerns over

the company is liquid and anchored to the price of silver

security, ejido relations, and infrastructure, but for us, the

and gold. Another factor that contributed to the price surge

most challenging aspect has been on the taxation side.

was the release of our year-end results, which demonstrated

Firstly, the industry was hit by the new EBITDA tax a few

some of our strengths in terms of cost reduction, improved

years ago, which was the wrong move at the wrong time, and

operating performance, and strong liquidity with US$200

has pushed Mexico down the list in terms of competitiveness

million in the bank. Investors were able to obtain tangible

and tax regimes in comparison with other countries. In my

proof of the implementation of intelligent strategies, offering

opinion, the most significant deterrent from considering

greater confidence in our stocks. This has been a reward for

investment in Mexico is the VAT refund. Coeur Mining (CDE)

the solid execution that we have demonstrated over the last

has not received an VAT refund from the Mexican Revenue

few years, and a combination of these factors is the reason

Service (SAT) since 2012. As a result, the tax authority is

for our solid growth during this short period.

withholding US$30 million of VAT that we are unable to reclaim for reasons that are unclear. This casts a long shadow

Q: How is the Paramount project developing, and what

over our operations in Mexico, because apart from this, our

is the role of joint ventures and acquisitions in Coeur’s

experience in the country has been wonderful. We have held


a considerable number of meetings with SAT to obtain some

A: With the Paramount deal, we acquired certain deposits

clarity on the reasons why the authorities are refusing our

that were split by a property boundary. In Mexico, this was

refund, and we have found that there is some uncertainty

called Don Ese, and on the US side of the border it was

regarding the handling of VAT that we attach to certain

called Independencia. Now that we own 100 percent of

monthly payments that we make to a Canadian royalty

these deposits, the entirety of the site has been named

holder called Franco Nevada.

Independencia. One of the first things we did when we closed on that acquisition last year was that we drove

Q: What strategies have you implemented to recover so

two declines from our current underground mine called

impressively since the downturn in January?

Guadalupe 800m over to Independencia to start developing

A: Our stock is up by 170 percent, and one of the best

that second new source of higher grade underground ore.

performers on the NYSE and in the mining sector, and there

Our goal was to get there by the end of the year, and this

are a few reasons for this. Firstly, we have seen the prices

was achieved, meaning that we have now begun mining

of silver and gold recover slightly in 1Q2016, with gold up

from Independencia. Meanwhile, we continue to drill and

17 percent and silver prices increasing by 11 percent. That

expand the mine, and one of the benefits of driving those

certainly helped our shares. Additionally, last year, there was

two declines is that we cut through a great deal of structures

such a negative sentiment toward the industry, and with all

along the way that we will now go back and drill, hopefully

the anticipation around the US Federal Reserve and interest

ending up with some additional new sources of ore. That

rates, many companies shorted their stocks, and Coeur

Don Ese piece that we acquired from Paramount has only

was able to develop a considerable short position. Once

around 400m of strike length, in a context of a considerable

the Federal Reserve raised rates and the prices of precious

land position that the company had, meaning that we have

metals started increasing in January, there was then a rush

a lot of work still to do in the area. The focus has been on

to cover those short positions, which only added fuel to

that strip, which is the consolidation of the Independencia

the fire in terms of our share price. We have always been

deposit with high grade deposits, and this is where the real

an extremely liquid investment. We have been trading on

short-term payback is going to come from. This really helps

NYSE for a quarter of a century, and we have a great deal

set this mine up for a strong production and cash flow.

Q: What are your production goals for Palmarejo?

has certainly slowed, and there are few new discoveries,

A: We are on track to produce 4.3 million ounces of

few operations are being put into production, old mines

silver and 67,000 ounces of gold in 2016. Of the four

are being exhausted, and supplies of gold and silver are

quarters this year, the first was the lightest for Palmarejo

beginning to decline for the first time in a decade. However,

because we only recently began mining into the new

the lack of supply is also positive and will contribute toward

Independencia deposit. We anticipate mining rates here

a recovery in commodity and precious metals prices. When

to climb throughout the year, and as that happens, our

weighed against some of the recent restructuring of the

production rates will increase and cash flow will grow. Due

industry, I believe it is set to become extremely successful.

to the fact that Palmarejo is such an important part of the

After a decade of relatively poor performance from the

company, we see the trends of this mine as the benchmark

industry, despite the rise in prices, I am looking forward to a

for our other projects in terms of cost and cash flow. It is a

decade in which operations are optimized to ensure overall

high risk year for the mine given the level of simultaneous

profitability returned to shareholders.

transition and uncertainty, but so far, the plan is being 103

executed extremely well. Q: What do you foresee for the future of the mining sector in Mexico, and what will be Coeur Mining’s role in its development? A: I believe the industry needs to consolidate more because it is an extremely fragmented business, and at conferences there can be up to 150 different precious metals mining companies all carrying out the same activities. This is a capital-intensive industry and in order to access this, companies must always ensure they are relevant. I think Coeur has been a pioneer, but the industry as a whole has begun to optimize itself in anticipation of solid profits in the coming years, although admittedly this recovery has been a little slower than initially hoped. The industry

The Don Ese deposit acquired from Paramount has around 400m of strike length

Coeur’s vision is to create the leading, sustainable, innovative and value-driven precious metals company.




Q: What have been the highlights in the evolution of

to reposition the mining industry as a strategic sector in the

Mexico as a jurisdiction for mining investment in the past

country, and I am sure that this will happen soon. There is


no doubt that the sector is being driven by cost efficiency.

A: In general terms, Mexico is an open economy, and the

Decision makers must take advantage of all the different

mining sector is no exception. Mexico has received a

tools available to them that can boost productivity, reduce

tremendous amount of foreign investment throughout

costs, and improve competitiveness. Industrias Peñoles is

the last decade, mainly from Canada. This trend can be

investing substantially in training our workforce and using

explained by three factors. Firstly, Mexico is recognized

state-of-the-art technology such as underground simulators.

within the sector as a mining country and the potential

We want to be sure that our staff are highly trained and fully

for exploration here is enormous. Secondly, the country

capable of extracting the most from our equipment.

enjoys a stable economy and regulations that foster the development of the industry. Thirdly, Mexico benefits from

Q: With the implementation of the Energy Reform, how

its proximity to one of the most important markets in the

are you planning on optimizing your energy consumption?

world, the US, which continues to consume the vast majority

A: We anticipated the Energy Reform and we began

of metals produced in Mexico. All the ingredients are there

preparing for it 15 years ago. We are one of the major



when taxes of any kind are levied on individual countries,

Executive Director of The

such as Mexico,” he shares. Nevertheless, over the last

Silver Institute

year, the silver market has seen its share of fluctuations, as DiRienzo explains. “On one hand, primary silver co-product

When the stocks and securities market takes a dip, the

cash costs plus CAPEX fell by 11 percent to US$11.74/oz, a

first instinct of investors is to look for a safe bet, and this

drop driven by weaker local currencies, aggressively lower

usually comes in the form of gold and silver. After the

CAPEX, and lower fuel prices,” he claims. “The producer

UK’s recent vote to leave the European Union, universal

silver hedge book grew by 7.8 million ounces in 2015,

markets floundered, and precious metals prices soared.

as fresh hedging more than offset maturing contracts.”

Mexico, as the number one silver producing country in the

The news was not so positive for silver scrap supply,

world, and its major operators like Fresnillo and Goldcorp

which dropped by 13 percent to 146.1 million ounces, the

reaped the benefits of the market fluctuations. Despite

lowest volume recorded in over 10 years and the fourth

the recent royalty tax imposed on the country’s operators

consecutive year of declines. “Behind the decline were

by the Mexican government, Michael DiRienzo, Executive

fewer active collectors in the market, and some holding

Director of The Silver Institute shares that the company’s

back material awaiting higher prices,” he clarifies.

priorities have not changed at all, and instead that Mexico plays a considerable role in its global activities. “We want

DiRienzo continues by highlighting silver’s use in a variety

a fair silver trade for all countries, although it is difficult

of manufacturing, including in the photovoltaic, ethylene

consumers of electricity in the country, using close to

is by nature a finite business, and we want to be sure

330 MW, and we generate 84 percent of that energy in-

that we will not leave behind an abandoned community

house. We have a 25-year contract with a thermal plant in

when operations end. We also invest substantial funds

San Luis Potosi, as well as two wind power generators in

designed for improving education for the communities,

Oaxaca and a third generator currently in the development

and we believe that the best way to impact the quality

phase in Coahuila. These projects complement our belief

of education is to provide teacher training. Additionally,

in environmental protection and the use of renewable

we are committed to sport, as we believe it is a vital tool

energy where possible, and with the development of new

in fostering a culture of teamwork, responsibility, and a

technology, wind power is now more competitive than gas.

healthy lifestyle, especially in young people. For example, we currently work with the Santos soccer club and we









development initiatives Industrias Peñoles has carried

sponsor a number of sports clinics for disadvantaged children around the country.

out in the regions in which it operates? A: Firstly, water is a significant concern and so we must be

Q: What practices does Industrias Peñoles adopt to

respectful of this resource and show the local community

maintain a strong investment profile?

that we can add value to both the quality and quantity

A: From the start of the exploration process, a minimum

of their supply. Secondly, it is essential to understand the

of 10 years is needed to develop a project, so a short-

individual needs and beliefs of the community to ensure

term vision is not practical in this business. I would say the

that we can add value to their society. For example, when

company is now more open and flexible than it has been

we began work on the La Ciénega mine in Durango, which

in the past. When the latest version of our strategic plan

is owned by our subsidiary Fresnillo, we found that the

was put together in 2010, we identified 18 key strategic

community suffered from extreme poverty. We therefore

objectives and projects. We have already implemented 11

installed a series of trout farms in the area, recruited

of those projects, and we are currently working on multi-

experienced professionals to teach the locals how to

million dollar projects in Guerrero, Chihuahua, and Torreon.

export trout eggs, and now the business has taken off.

However, Industrias Peñoles has been operating for 129

The community around La Ciénega is now economically

years, and 40 years ago a clear vision for the company

independent of mining and this is vital because mining

objectives was set out.

oxide, and automotive industries. The largest component

industrial demand is projected to grow this year, he predicts

of physical silver demand, industrial applications, which

this will be a slow increase.

accounted for 50 percent of total physical silver demand last year totaled 588.7 million ounces. “This drop was largely due

In addition to physical investment, silver has an active over-

to weaker fabrication demand in developing countries and

the-counter (OTC) market, serving as a mechanism for risk

a stagnant global economy,” he comments. “On a regional

and price management. OTC trade can have a meaningful

basis, modest increases in industrial demand were posted in

impact on silver prices because of the market’s depth. In

the US and Japan, the second and third largest sources of

2015, the volume of silver transferred in the London bullion

industrial demand, respectively.” Electrical and electronics

market, the largest OTC market for silver worldwide,

use, he says, declined by 10 percent last year to 246.7 million

totaled approximately 36.8 billion troy ounces (1.14 million

ounces, as a result of slower economic growth in developing

tons), with a value of $575 billion, according to data

countries and the continued weakness in computer sales.

published by London Bullion Market Association. “Over

However, there were several highlights within the industrial

the last year, there has been a 24 percent growth in silver

segment. “Silver demand for photovoltaic applications

coin and bar investment to reach 292.3 million ounces, the

rose 23 percent in 2015 to 77.6 million ounces, marking the

highest annual demand level in GFMS’ records, overtaking

second consecutive year of increases in this sector, driven

the previous high in 2013,” DiRienzo reveals. “Coin and

by strong growth in Chinese solar panel installations,” he

bar demand accounted for 25 percent of total physical

expounds. “Silver demand for ethylene oxide (EO) grew by

demand in 2015, the highest market share on record and

an impressive 103 percent to 10.2 million ounces. The GFMS

up from just 5 percent a decade earlier.” With lower silver

team at Thomson Reuters estimates residual volumes of

prices and the need for investors to gain access to hard

137.5 million ounces of silver in EO plants around the world

assets, silver coin and medal demand amounted to 134.1

at year end 2015, which is the equivalent to 16 percent of

million ounces of demand last year due to unprecedented

last year’s silver mine production.” Although he admits that

growth in several key markets, notably the US and India.




PALMAREJO Only 15 kilometers east of Temoris, Chihuahua, the Palamarejo mine has been producing gold and silver since 2009, and is wholly owned by Coeur Mining, a company that owns five precious metals mines in the Americas. Palmerajo’s operations are carried out both in open pit and underground mines. The local electricity company supplies enough energy so that its onsite generators only have to be used in the case of emergencies. Feasibility studies have brought to light proven and probable silver reserves of 44.9 million ounces of silver, and 690,000 ounces of gold. In 2015, production totaled 5.1 million silver ounces, and 70,922 ounces of gold, and for the present year the company is expecting to generate 3.9-4.4 million ounces of silver, and 67,000-72,000 ounces of gold. As it is located upon the occidental Sierra Madre, superficial mining is achieved through conventional operations that penetrate with the help of explosives, trucks, and shovels. Three main portals that rely on a ramp system grant access to its underground mining sites. Operations are currently running at full capacity. Palmarejo’s plant is fed by a mixture of underground and superficial sources. The content is churned together through the main shredder at a rate of approximately 6000t/d. Tasks related to milling, flotation, carbon leaching, electrowinning, Merril Crowe processes, and doré are all sent to refining and smelting associates that are found in Europe and the US. The







multiple seams, breaches, and fractures. The structure dips between 40° and 70°. The highest grade of silver can be found among the superior part of the mineralized structures, while the highest grade of gold is among the lower portions. Palmarejo encompasses a rich spectrum of areas of interest, of which the most important is in the northern region of the concessions. Palmarejo is continuing the company’s focus on operational excellence and profitability by progressing only toward higher grade, and higher margin underground operations. Underground mining rates at Guadalupe averaged 1,800t/d in 1Q16. Coeur Mining is aiming to reach 4,000t/d in the Guadalupe and Independencia sites by mid-2017. The company has greatly prioritized process optimization, which has increased recoveries, and reduced processing costs. Production rates also improved thanks to the acquisition of additional property in April 2015. A gold streaming agreement between Coeur Mining and Franco Nevada will further improve cash flow by late 3Q16.





Q: How do you plan to invest the capital generated by the

concerned about how we are going to continue to add value

Juanicipio project, and where do you see the company in

to their investment beyond the cash flows we anticipate.

10 years’ time?

We believe the answer is in the geological potential of the



Juanicipio JV property below the Bonanza zone, as well

developmental position as the 44 percent junior partner









as the other prospective opportunities on the JV property

on the Juanicipio project, and our focus is on bringing the

where potential value can be realized. We therefore have

Juanicipio project into production and cash flow. As we

two drilling programs in progress, one finishing in August

near cash flow, MAG Silver will evaluate the reinvestment

and one anticipated to be complete at the end of the year. In

and shareholder distribution alternatives. In 10 years’

addition, we are focusing on the anticipated cash flows once

time, we will be generating substantial cash flow from the

in production and the shareholder distribution alternatives

Juanicipio project, and MAG will be generating additional

that production will represent.

shareholder value through additional discoveries within Q: How has the company managed to continue growing

the Juanicipio JV, and its other properties.

despite the ongoing industry downturn? Q: What are the main concerns that your investors have

A: MAG Silver has always been built on grade and size. We

at this moment?

put the company together in 2002 with the idea that there

A: Five years ago, one of the main concerns was whether

were sizeable deposits in Mexico with high enough grades

or not the Juanicipio project would shape out enough to

to make a profit even at the US$4/oz silver price at the

support development. Once that was addressed, the next

time. We are able to ride out market downturns primarily

issue was raising the necessary funds to maintain our 44

because we and our shareholders believe the quality of

percent stake in the project, which we were fortunate enough

the ounce is more important than the quantity, and this,

to also accomplish. Currently, our investors are concerned

coupled with our strict financial discipline, gives us a firm

with more general themes regarding Mexico, such as the tax

foundation for sustained growth. We focus on internal

regime in the country, the impact of the royalty tax that was

rate of return because at the end of the day our job is to

put in place, and security issues. Our shareholders are also

increase shareholder value.

Our law firm has over 25 years’ experience in mining.


Our practice is focused in the Mexican mining sector, and we are experts in: Incorporation and registration of Mexican mining companies. Formation of joint ventures.

Obtainment of mining concessions and compliance of mining obligations. Due diligence of mineral properties.

Negotiation and drafting of mining contracts.

Financing and securities for mining projects in Mexico.

Processing and obtainment of expropriation, temporary occupation, easement of

way creation, permits for use of explosives, and other procedures required before the regulatory authorities.

Av. Nuevo León 202 Piso 8, Colonia Hipódromo, 06100 Ciudad de México Tel. (52-55) 5207 2800/06 /



Q: Which of First Majestic’s achievements over the past

the crushing capacity to 3,000t/d was completed in June

decade are you proudest of, and in which ways have they

2015, reducing AISC by approximately 20 percent.

shaped the company? A: Over the past decade, each year has been unique in

Q: Which measures to reduce operating costs have

terms of the successes they have brought to the company.

been most effective in your efforts to optimize financial

First Majestic Silver is the second largest producer in Mexico


and it has taken many variables to achieve this leadership

A: Three years ago, we decided to transform the company

position. It has all come down to exceptional human

and treat it like a manufacturing business. We are now able

capital, trained teams, profitable assets, shareholders, and

to identify inefficiencies and deploy technologies within

the strategy the company has put forth to raise capital

it. We have embraced the automation trend and we have

and deploy it, ultimately benefitting the shareholders. As

automated the laboratory processes, meaning the access

a mining company focused on silver production in Mexico,

to the mineral is faster and we can control variables like

the manner in which we could benchmark our performance

temperature, cyanide, chemical, and pH levels in ore

to other silver producers would be determined by how

processing, which positively affect the throughput. There

we save costs. Nevertheless, it is difficult to compare our

are dozens of alternatives we have implemented that have

performance on only that variable because we are the

impacted our operation costs. First Majestic has been

leaders in pure silver production. First Majestic strives to

one of the first to ride the technology wave and we have

develop its existing mineral property assets and presently

seen that it has benefitted the sector both in terms of

it owns and operates six silver producing mines, La Parrilla,

competitiveness and environmental responsibility. Mines in

San Martin, La Encantada, La Guitarra, Del Toro, and the

the US and Canada have been forced, over time, to change

newly acquired Santa Elena.

and in many ways they are decades beyond mines in Mexico.

Q: How have First Majestic’s operational practices

Q: What is First Majestic’s plan for the development of

contributed to the increase in silver equivalent production?

the Santa Elena mine?

A: The combined effort of the six operating mines has

A: The company’s total CAPEX in 2016 is US$64 million,

enabled First Majestic to reach these production levels,

of which US$45 million is earmarked for sustaining and

and 2016 is poised to become an equally promising year.

US$19 million is earmarked for expansion. Production will

The acquisition of the Santa Elena silver mine has certainly

remain in the 5 million ounce range and the main focus will

bolstered our growth, as it is a 5 million ounce producer.

be to extend the lifetime of the mine. Production levels

This acquisition enabled the company to finish the year

in 2015 reached approximately 16 million ounces and this

on a strong note, and the final quarter saw an all-time

will increase to 19 million, with this growth stemming from

production record. The Santa Elena mine is comprised of

the Santa Elena mine. The cost per ounce ranges between

concessions stretching across 51,172 hectares. It combines

US$11-13 and we hope to either sustain it or reduce it

ore processing from the remaining reserves in the open pit

even further but this will depend on the Mexican peso

with updated reserves from the underground development,

and the current commodity prices. There is a sizeable

in addition to the reprocessing of spent ore from the

land package with interesting geology that is now being

existing heap leach pad. Currently, we are mining on three

mapped. The previous owners did little on that front so we

stopes in order to reach underground production levels of

plan to define drilling targets over the coming years. It is

1,500t/d. The weakening peso and the addition of Santa

one of our lowest cost mines because of its gold credits.

Elena in the fourth quarter had a positive impact on our

There are many factors that make it a low cost operation,

all-in sustaining costs (AISC) in 2015. In addition, the US$14

which include a good mill, a well-developed mine, and top

million spent on the expansion at La Encantada to increase

quality planning thanks to a wealth of mapped resources.





Q: What have been the main highlights in the exploration

targets. We intend to continue aggressively exploring

of existing projects and possibilities of acquiring new

and engineering this project in 2016.

mining projects? A: We succeeded in replacing silver reserves and

In May of this year, we announced the acquisition of the

boosting silver resources last year, and we identified

El Compas mine project in Zacatecas. The El Compas

new mineralized zones at each mine as well as at the

gold-silver mine project has strong exploration potential

emerging new Terronera project in Jalisco, where

to expand resources and solid acquisition potential to

we recently made a new greenfield silver discovery.

consolidate stranded resources and exploration targets

Terronera is an exciting new, high-grade silver-gold

within the Zacatecas mining district. Our short-term goal

find that has the potential to become our largest and

is to invest in exploration to upgrade and expand the

most profitable mine. Late last year, deep drilling at

resource, consolidate properties in the district to extend

Terronera intersected the highest grades yet found on

mine life, refurbish the plant, re-evaluate the economics

the property. The main mineralized zone is still open at

to develop the mine, and complete an updated mineral

depth and along strike, and surface sampling of several

resource estimate by year end. If successful, we would

other veins identified multiple new high-grade drill

commence production at El Compas in 2017.


SILVER JUNIOR BANKING ON SAN ACACIO PROJECT BRUCE WINFIELD President & CEO of Defiance Silver Q: What have been the key milestones and achievements

Q: Bearing in mind the positive results, how will this affect


your exploration efforts looking ahead?








opportunities have you spotted in the San Acacio project?

A: We are still in the early stages, with a total of 25,000m of

A: We were able to use the funds that were invested

drilling to complete. Our first phase is expected to stretch

into the company in early 2014 in order to complete the

5,000m, the second phase 10,000m, and the third phase

acquisition of surface rights, obtain environmental drilling

10,000m. We are still in the midst of Phase One but we are

permits, and carry out three different drilling campaigns

encouraged by our early successes and this will drive us

on the project, which total approximately 3,000m. We are

into Phases Two and Three. The property has produced

still assessing the results from the aforementioned drilling

100 million ounces of silver over the last 500 years and we

but overall it was extremely positive, with wide, high grade

have always maintained that there is potential for 50-100

intersections. We marketed ourselves on the promise that

million ounces remaining in the mine to be produced. Our

we could drill below the old workings and increase the

aim is to prove this potential, and this is what we have

number of ounces of our resource, offering the least risk

started to do with the first 3,000m. Now, it is a matter of

and highest reward.

increasing our efforts.

Q: What made Guanaceví so successful for you given it

mining operations feeding a central 1,600t/d plant to

had run out of ore and were struggling to survive?

produce bulk silver-gold concentrates. In 2015, Bolañitos

A: At Guanaceví, we have discovered seven high-grade

produced 1.5 million ounces of silver, exceeding guidance,

silver-gold ore bodies along a 6km length of the Santa

and 23,966 ounces of gold, totaling 3.1 million ounces of

Cruz vein since acquiring the property in 2004. Today,

silver equivalent. Cash costs at Bolañitos in 2015 were

three underground mines feed the central, 1,200t/d plant

US$4.31/oz of silver, while AISC were US$11.79/oz of silver,

that produces doré bars. In 2015, Guanaceví outperformed

both net of gold credits. Over the course of last year, we

guidance due to higher than expected ore grades, producing

developed the new La Luz-Asunción (LL-Asunción) mine

3.4 million ounces of silver and 7,390 ounces of gold,

and successfully transitioned our main production to it

totaling 4 million ounces of silver equivalent. Cash costs in

from the Lucero mine. We further explored and delineated

2015 were US$8.66/oz of silver, while all-in sustaining costs

the LL-Asunción ore body, drilling more than 9,500m in 39

(AISC) were US$12.97/oz of silver, both net of gold credits.

holes, and developed another 4.1km of the underground

We drilled 9,550m in 38 holes to successfully expand the

mine. In 2016, Bolañitos will continue to produce 800-

high-grade silver-gold mineralization at Santa Cruz and

900t/d of ore, primarily from the LL-Asunción deposit. In

Porvenir Centro. In 2016, production will continue at the

1H16, the plant will operate close to its 1,600t/d capacity as

plant’s capacity of 1,200t/d, with ore coming primarily

it processes the 75,000 ton ore stockpile.

from the Porvenir Cuatro, Porvenir Norte, and Santa Cruz deposits. The year’s production is forecast at 3.1-3.3 million

Q: How does the company plan to capitalize on

ounces of silver, and 6,000-7,000 ounces of gold, for 3.6-


3.8 million ounces of silver equivalent.

potential in each of the regions where it operates?






A: We continue to explore our existing properties to unfold Q: What factors contributed to your similar successes

their full potential for the discovery and development

with Bolañitos, and how has this project developed?

of new mines. We also continue to acquire properties in

A: At Bolañitos, we have discovered seven high-grade

other historic districts where we see strong but untested

silver-gold ore bodies since acquiring the property in

exploration potential. The property of the exciting new

2007, and we have opened one new mine and completed

Terronera discovery covers an entire district of outcropping

three plant expansions. There are now two underground

veins containing high-grade silver-gold mineralization.

Q: What characteristics does the San Acacio project have

we were fortunate to find an investor in Windermere Capital

that makes it a viable and interesting development?

that could see the potential of the project and was willing to

A: San Acacio is one of the last major mines with substantial

invest US$1 million in order to support it. We have applied

production that has experienced little modern exploration.

for another set of concessions with the Minerva Group in

Now we need to increase our success levels in order to

northern Mexico. This is another old mine in which we see

be able to acquire the property for the US$5.5 million full

great potential for modern exploration, and although it is

purchase price within the next three years. Another thing

still only in the application process, we think it is a solid

that makes San Acacio so exciting is that it is a previously

opportunity. However, we are currently concentrating our

producing mine with tremendous future potential. Moreover,

efforts on San Acacio simply because funds are limited and

it is only located 6km north of Zacatecas, which is a fully

we need to dedicate them to the most important project.

developed city, so we are able to benefit from paved roads and power lines throughout the property. There is a well-

Q: What are the key goals you have for 2016, and where

developed history of mining in the town, and we have not

do you see the company in the coming five years?

experienced a great deal of resistance from the locals. For

A: In 2016, we want to continue drilling and developing

instance, we obtained drilling permits within six weeks,

the project. Within five years, we hope to have advanced

which is unheard of in Mexico.

the project to the point where we can start conducting pre-feasibility studies in order to justify building a mine.

Q: What has enabled you to thrive and survive?

In my view, San Acacio certainly has the potential to be

A: The San Acacio mine is a solid project that has allowed us

a substantial modern mine like Capstone Gold’s Cozamin

to attract enough capital even though this has admittedly

mine, which is located just 2.5km south of San Acacio.

been difficult over the last four years. Moreover, investment

Despite the fact that our concession lies on the northern

in high-risk projects is not forthcoming at the moment, so it

structure, the two are very similar, so we believe that our

has helped that ours is at a more advanced stage. In 2014,

project can be just as productive.




FRESNILLO The municipality of Fresnillo consists of valleys and plains, with rising plateaus and deep canyons. Nestled among the Sierra de Chapultepec and Sierra de Fresnillo mountains, the Fresnillo gold and silver mine has been operating since 1554. Mexico is the largest silver producer in the world, generating 192.9 million tons in 2014. It is no surprise then that the largest silver producer in the world is Mexico's Fresnillo, which surpassed its closest rival in 2015 to achieve an output of 45 million ounces. The Fresnillo mine makes a significant contribution to the portfolio of the owner and operator. The Fresnillo concession is currently the eighth largest silver producing mine in the world. In 2015, the mine produced 2.4 million tons of ore, of which 15.6 million ounces were silver with a grade of 220g/t and 34,100 ounces were gold with a grade of 0.57g/t. In 1Q16, Fresnillo celebrated its third consecutive improvement in grade, rising to 236g/t, despite some issues including the veins narrowing faster than expected, a natural decline in grade, and adverse changes in rock quality. Nevertheless, the operator has implemented several strategies to combat these problems, including infill drilling with a closer grid, improved infrastructure planning, and adaptation to new mining concessions. The Fresnillo mine announced cost for this mine at US$48/t, cash cost at US$5.6/oz, and all-in sustaining cost (AISC) at US$11.5/oz. With a remaining lifecycle of eight years, Fresnillo is implementing strategies to increase production levels, and is investing an estimated US$30 million in an optimization project that involves mine development, detailed engineering, and plant adequation. This strategy is designed to facilitate an average annual production rate of 3 million ounces of silver and will be completed by year end 2017. In 2015, the mine experienced lower silver production volumes as well as lower grades, although lead and zinc production rose by 17 percent and 25 percent respectively, with expected higher grades as the mine is deepened. Silver grade has depreciated from 396g/t since 2011 to 220g/t but the operator expects the average for the rest of the mine’s life to raise to 260g/t. Looking forward, Fresnillo is predicting an increase in average development rates and a double-digit increase in ore milled in the year 2016. With the Fresnillo mine in its portfolio, Fresnillo looks set to achieve its aim is to produce 65 million ounces of silver and 750,000 ounces of gold annually by 2018.



OPTIMIZATION TO PREPARE FOR NEW UPTURN CHRISTOPHER WARWICK Country Manager and Director General of Pan American Silver México


Q: What are the main drivers behind your current projects

and although we do not mind mining other metals like

in Mexico and how do you see them strengthening your

gold, zinc, lead, and copper, finding those substances

growth portfolio?

is not our primary goal. The La Virginia and La Bolsa

A: Pan American Silver is fully committed to business in

projects are primarily gold projects, so they do not fit

Mexico. The country is investor friendly, straightforward for

into the Pan American Silver portfolio. Nevertheless,

business and regulatory purposes, and extremely receptive

these projects have already been drilled, and going

to what we are trying to achieve through our investments in

forward consideration will be given to how they fit into

country, which leads to growth for our company and most

the Pan American Silver portfolio, especially when metal

importantly for the shareholders' return value. Growth for

prices rebound.

the company in Mexico also stimulates the development of the surrounding communities and the people that work and

“US$130 million has been

live in the areas in which we operate. Ultimately, investment in Mexico benefits all parties concerned, including the Mexican government and the Mexican people as a whole. Q: Despite the unfavorable market conditions, what have

invested in a new mine shaft and plant at the La Colorada mine in Zacatecas”

been the highlights for Pan American Silver in 2015? A: Of our three operations, two are currently undergoing extensive expansion work. At La Colorada mine in

Christopher Warwick, Country Manager and Director

General of Pan American Silver México

Zacatecas, the company has invested in a new shaft and a new plant with associated underground development infrastructure, which equates to an investment of US$130

Q: What success stories have you had in transferring

million and will increase the mine’s expected minimum

practices from the US or Canada into Mexico or vice

lifespan to at least 15 years. The plant is already 50


percent complete and the shaft work is 85-90 percent

A: Pan American Silver has seven running operations, and

complete, and both are due to come online in September

each mine is unique so what works in one mine will not

2016. Likewise, the company plans to invest US$200

necessarily work in another. Nonetheless, an accident in

million on expansion work at the Dolores mine over the

one operation will be shared across all sites regardless

next two years. The funds will be invested in a new mine

of the circumstances in order to ensure that repetition of

development by way of an underground ramp to facilitate

such an error or oversight is avoided in the future. Our

the beginnings of an underground mining operation to

mine operations in Mexico have won several Casco de Plata

work in tandem with the existing open pit and a new pulp

awards, which is the highest safety award a mine in Mexico

agglomeration plant at the mine site. The ramp progress

can receive. We are careful not to cut corners on that

is already at the one year advanced stage and the plant

front, and we try to give the workers the most productive

works will soon begin. The Alamo Dorado mine, our

platform to work from. It is essential to be aligned with

third operation in Sonora, is already at steady state of

the communities’ environmental concerns and carry out

production and will continue to operate in this capacity.

our responsibilities as operators. We reforest and replant as we progress, and as far as I know, we have never had

Q: What current activity is there in the La Virginia and La

one incident of non-compliance during any previous

Bolsa projects?

inspection. We will always continue to do the right thing

A: It is important to remember that our main objective in

to minimize the impact on the ecosystems surrounding

terms of metals lies in silver as per our company name,

our operations.



From a grassroots exploration company to a significant silver producer in the space of just a few years, IMPACT Silver can be seen as a mining success story, especially


within the current market. The company’s President and

President & CEO of

CEO, Frederick Davidson, explains that the company’s


trajectory was the result of a daring acquisition. “IMPACT Silver took on a historic mine that was about to expire and only had two months of ore left,” he recalls. “We decided to

gold. “There are a series of epithermal veins running

make a heavy investment in three main areas to revive the

North-West and South-East that have vertical depths that

project, and the first step focused on exploration in order

range between 250-300m,” he reveals. “These are the old

to develop further resources to keep the mine running.”

Taxco veins, and in fact we have several geologists from

In 2015, IMPACT Silver was operating at 140g/t and in

Taxco that can easily identify them. We trace the vein and

2016, it has managed to increase this figure to 200g/t by

identify the highest ore grade that is economically viable,

substantially reducing losses. “This has enhanced the cash

and these are all processed in the central mill.”

flow and in turn IMPACT has expanded ownership through staking and development,” Davidson boasts. “In 2015, we

These veins have been mined for over 500 years, and

finally reached the 1 million ounce figure and all of our

through IMPACT Silver’s exploration the operator has

activity in the past five years has been financed by the

discovered over 4,000 workings and ancient Spanish

cash flow generated in the mines.”

smelters. “It is an exciting prospect that we look forward to exploring with added capital,” he admits. In addition,

Contrary to today’s market, IMPACT Silver’s strategy had

IMPACT Silver has acquired a new tailing dam and has

been one of expansion, having developed the reserves

planted approximately 10,000 trees in order to expand the

of the area and expanding the mill to 500t/d, mostly

site even further. San Ramón is the highest grade deposit

from organic operations cashflows and bootstrapping.

that the company has and it has been actively drilling there,

“Obviously, given current market conditions, we are

with positive results. “In May, we announced wide sections

focused on cost control and profitable ounces and we

of some of the highest grade silver we have encountered in

are determined to keep the cash in the bank, retain our

the last decade on the property at San Ramón. We found

workforce, and continue operations,” Davidson maintains.

14.82m of 481g/t silver and 21.74m of 271g/t silver,” Davidson

IMPACT’s current land package includes a number of veins

discloses. As a result, IMPACT Silver is garnering more

encompassed in the San Ramon Mine, the Noche Buena

attention from investors, yet it continues to monitor the

Mine, and the Cuchara-Oscar Mine. The company currently

market for possible acquisitions and deals to create more

produces concentrates containing silver, lead, zinc, and

value and increase production beyond 1 million ounces.

A reputation for Excellence TSX: PAA | NASDAQ: PAAS




JUANICIPIO The Juanicipio mine in Zacatecas is part of a joint venture between Fresnillo, owner of 56 percent, and MAG Silver, which holds the remaining 44 percent, and is overall a standalone project. The silver mine is expected to produce an annual average of 10 million ounces of silver and 30,000 ounces of gold with a lifespan of more than 15 years. It additionally holds an indicated amount of 160 million ounces of silver at a grade of 601g/t, and an inferred amount of 48 million ounces of silver at 626g/t. As of 2015, the indicated mineral resource for the portions of the Valdecañas deposit within the Minera Juanicipio property that belong to Fresnillo, contains 4.7 million tons of minerals at a cutoff grade of US$70.29/t, and a grade of 1.86g/t for gold, and 522g/t for silver. When it comes to the vein’s contained metal, the property holds 285,000 ounces of gold, and 80 million ounces of silver. The presence of lead and zinc are also indicated, at quantities of 103,000 tons and 193,000 tons, respectively. The





three compelling high grade silver veins, Valdecañas, Deprendido, and lastly, Juanicipio. The most significant allocation of indicated and inferred silver, gold, lead, and zinc resources are settled upon the Valdecañas vein, and partly on the Juanicipio vein. After penetrating the land with five deep drill holes on the first vein, a massive amount of extraction potential was detected. Consequently, the mine’s ramp was lengthened to 2,180 meters, and metallurgical studies were conducted. For the remainder of 2016, more exploration drilling, ramp development, and intrinsic engineering studies are to be conducted. To design the exploration and development programs of the property, a Minera Juanicipio Technical Committee has been assigned with the approval of Minera Juanicipio Board of Directors, to be ultimately executed by Fresnillo, the project operator. MAG Silver covers its share of the costs through its 44 percent interest, and grants a small amount of additional expenses to cover related technical studies, and a direct oversight of drilling programs. MAG Silver initially discovered the deposit, ranked as the second biggest silver investment in Mexico, and optioned the controlling shares to Fresnillo due to the company’s vast resources and experience within the area. The joint venture is expected to spend a total of approximately US$305 million on the project. Juanicipio’s projected district production for 2018 is 50-55 million oz/y, divided between 10.3 million ounces in Juanicipio, 20.1 million ounces in Fresnillo, and 22 million ounces in Saucito I & II.



MARKET VOLATILITY POSITIVE FOR PRECIOUS METALS streaming agreement for the Cotabambas mine, a promising copper asset with good silver and gold credits. “We have structured the agreement in such a way that it is sustainable


and it gives Panoro an opportunity to further develop the

President & CEO of Silver

project,” he comments. Silver Wheaton will be granted 100


percent of the silver output and 25 percent of the gold until 90 million silver equivalent ounces has been obtained. Afterward, Silver Wheaton’s take will drop to 16.7 percent of


Despite the volatility of the commodity markets, 2015

gold and 66.7 percent of silver respectively for the remainder

was Silver Wheaton’s strongest year due to a number of

of the mine’s life. “We like these agreements because it gives

factors. The company made strategic acquisitions and

us long term growth opportunities and these promising

acquired an additional 25 percent of the gold production

projects are exactly what we are looking for,” Smallwood

of a mine in Brazil that is finally coming to fruition in terms

asserts. “The challenge the industry faces is availability of

of production. In addition, it also acquired all of Glencore’s

assets given the fact that there is little investment because

silver production from the Antamina mine in Peru. “These

of the lack of equity support and risk capital.”

two acquisitions have a total value of US$1.8 billion, so naturally 2015 has been the biggest year in terms

The current market volatility surrounding uncertainty in

of acquisitions and metals coming into the company,”

China, the dollar prices, and the UK’s exit from the European

explains Randy Smallwood, the company’s CEO. “Some

Union have all impacted the role of gold as an investor

of our previous investments are also starting to come to

haven, according to Smallwood. “For some time we have

fruition and this means that with every quarter of the year

stated that the US dollar is too strong, and banks continue

we are setting production and growth records.” Silver

to print more money, causing inflation," he warns. "We are

Wheaton’s revenue is divided into 60 percent silver and

now faced with having to stimulate growth in a potentially

40 percent gold, and in 2013 and 2014, Silver Wheaton

negative interest rate situation. We are now seeing a

was operating at around 30 million ounces with a 2015

weakness in the US dollar because people do not believe

target of 44.5 million ounces. Due to the success observed

the Federal Reserve is capable of managing the value

by the company it increased the goal for 2016, expecting

of the US dollar on a consistent basis without resorting

to reach well over 50 million ounces.

to the implementation of negative rates.” Although the implications of these trends are currently unknown, he

Goldcorp’s Peñasquito mine continues to be the largest

believes that market uncertainty will only bring confidence

silver producer in the company’s portfolio, closely followed

and value to tangible silver and gold assets.

by Primero Mining’s San Dimas project. “In many ways this asset was the foundation upon which the company and

The downturn in China is an important trend and Smallwood

the streaming model was created," Smallwood shares. "It

believes the investments are based on governmental

continues to be a flagship project for us and Primero has

support and are not sustainable on a long term basis.

worked tirelessly in investing back into the mine." Primero

China’s growth and consumption levels will drop and this

has successfully conducted further exploration and it

will have a strong impact on base metal prices. “We obtain

has also increased production, reaching 2,500t/d, which

most of our precious metals from base metal mines and

Smallwood believes shows that even in the low commodity

these miners’ need for capital is still strong, which means we

setting, both Goldcorp and Primero are investing in their

will continue to be busy working to acquire new streams,”

assets to improve and optimize them. Moreover, Silver

he claims. “In 2015, the company reaped the rewards of

Wheaton has incorporated other smaller assets into

previous investment, and 2016 is poised to see the same

its production role, like Capstone Gold’s Cozamin mine

growth.” Silver Wheaton’s business model is to reinvest all

and Goldcorp’s Los Filos concession. When focusing on

the money it generates to continue adding ounces, growth,

acquiring a concession, the most important criteria for

and production to its portfolio. “Investments continue to

Silver Wheaton is that the asset lies at the bottom of the

pour into assets located in Mexico and we will see organic

cost curve, which will maximize profits.

growth in this jurisdiction,” he predicts “There have been no new discoveries or projects of a scale we are interested in,

Smallwood reveals that the company has made an agreement

but we will keep our eye on Mexico and the opportunities

with Peru-based Panoro Minerals for an early deposit

that lie in its base metal mines.”




Copper prices tumbled in 2H15, hitting a low of US$1.94 in January 2016 from US$2.92 in May 2015. The metal looked to be in better shape in 1Q16 until turmoil in Chinese markets threw it for a loop. Despite the unpredictable times, copper recovered some of its glimmer, closing 1H16 around US$2.20. Likewise, iron ore rallied from a low of US$41.25 in January 2016 to US$59.58 in April, only for the market to turn bearish once again with a fall to US$51.36 by the end of 1H16. Similarly, 2015 saw a sharp drop in steel prices from US$480 in February 2015 to US$170 by year end, and the bear market continued into 2016 with a fall to US$50 by March. A significant bounce in early June 2016 put the metal back in the US$300 range by the middle of the month. The base metals market has been a roller coaster of volatility this year but many commodities have started to recover.

This chapter will concentrate on the main operators within Mexico producing copper and base metals, who provide details of strategies they have adopted to mitigate the effects of today’s turbulent market. Metals streamers and leading equipment providers also weigh in to provide a wide panorama of the supply chain as a whole. Finally, mine spotlights and maps provide greater insight to the state of today’s copper and base metals industry in Mexico.




VIEW FROM THE TOP: Oscar González, Americas Mining Corporation


MAP: Mexico's Main Base Metals Mines


VIEW FROM THE TOP: Carlos Silva, Carrizal Mining


INSIGHT: Hiromitsu Morishima, Marubeni Mexico


MINE SPOTLIGHT: Buenavista del Cobre


VIEW FROM THE TOP: Uriel García, Mercuria


VIEW FROM THE TOP: Anthony Rovira, Azure Minerals


TECHNOLOGY SPOTLIGHT: Future Discoveries with Man Portable Drill Rigs


INSIGHT: Carlos Rojas, Techflow




INSIGHT: Antonio Valdez, Prydisa


INSIGHT: Joel Carrasco, Ausenco





Q: How optimistic are you that the recovery seen in 2Q16

and we expect this higher productivity to have a positive

will last, and what could this mean for Americas Mining

impact on our 2Q16 results when they are released.

Corporation? A: We predict that copper prices could rise to around

Q: According to the company 1Q16 report, zinc production

US$2.50/lb during 2016. Earlier in the year, prices were

is due to increase by 41 percent and gold by 35 percent in

averaging around US$2.14/lb, before rising to US$2.25

2016. Is this trend representative of a strategy to diversify

following the fallout from the UK’s decision to leave the

the company portfolio?

European Union, and the ongoing weakening of the dollar.

A: The group has a number of underground mines in

As a group, we have made some structural changes to

Mexico producing large quantities of zinc, while there

adapt to the changing economic climate, including the

are also zinc reserves at Buenavista del Cobre. Indeed,

decision to create a new subsidiary company to align

we are in the process of acquiring a permit to begin

our operations in the Americas. This enterprise, Americas

construction of a beneficiation plant onsite specifically

Mining Corporation, will soon be listed on either the

for zinc production. Moreover, we recently acquired the

New York Stock Exchange (NYSE) or on the London

Aznalcollar mine near Sevilla, Spain, which principally

Stock Exchange (LSE), depending on market conditions,

produces zinc, as well as smaller quantities of copper

and is designed to centralize and streamline many of

and lead. This mine was shut down in 1998 due to a



tailings dam rupture that polluted a nearby river with

departments. Unfortunately, this meant that we were

toxic waste, and one of the clauses included in the

forced to cut around 200 jobs but it was a necessary step

acquisition is to invest at least US$300 million toward

given the state of the industry, and we are confident that

improving the mine site’s environmental protection

this new structure will allow the business to continue its

facilities. We are happy to fulfill this requirement, and

growth trajectory. Americas Mining Corporation will unite

in the meantime we are also carrying out exploration

ASARCO, Southern Copper, Minera Mexico, and Southern

in order to identify further veins on that property, so

Peru, in order to merge Grupo México’s global mining

therein lies the explanation for our bullish expectations

interests into one entity. Streamlining the administrative

regarding zinc production in 2017.





processes of these subsidiary organizations will allow the group to maximize its cost efficiency, as well as improving

Q: As a company that is well known for its commitment

global sales, which have been hit by the falling metals

to community development, how satisfied have you been

prices. This should have a positive knock-on effect on the

with the effects of the new mining royalty tax?

profitability of the company.

A: We have mixed feelings about the tax and its effects on community development. Firstly, it is important to note

Q: How will the group’s recent completion of an expansion

that in 2015 Grupo México paid a total of US$56 million

project at Buenavista del Cobre affect the mine’s levels of

as a result of this tax, which is a significant number. In


Peru, the rate of taxation we pay is around 3.5 percent,

A: We invested close to US$4 billion on both a new leaching

but in Mexico it is 7.5 percent, so there is a noticeable

plant and a beneficiation plant, which will increase the

difference. According to the reforms, 80 percent of these

mine’s production by 120,000t/y of cathodic copper and

proceeds were due to be reinjected into the communities

190,000t/y of fine copper. This comes in addition to an

surrounding mining regions via the corresponding state

ongoing US$1.2 billion investment on the Toquepala mine

and municipal governments, and we have seen some

in Peru. The new produce, which is already being sold on


the market both directly and through traders, will bring our

delighted to see that the Cananea municipal and state

total production to 1.2 billion t/y of fine copper by 2018,

governments have started construction work on a new






road in the Magdalena neighborhood. Unfortunately, however, only around 50 percent of the tax proceeds have been redistributed to the authorities in the regions in which we work, putting strain on the development projects they had put in place. Therefore, we are currently working with CAMIMEX in an attempt to arrange discussions with the Ministry of Economy so they may explain to us why the full percentage has not been awarded. Q: What has Grupo México done to recover the damage caused by the spill at Buenavista del Cobre, and what did the company learn from this incident? A: Since the spill, we have worked tirelessly alongside

Streamlining its subsidiary organizations will allow the group to maximize its cost efficiency

the Sonora state government to repair the damage, and both CONAGUA and SEMARNAT have acknowledged that

A: We will continue to focus on simultaneously reducing

the river is now healthy again and that the surrounding

costs and increasing production, and we are investing heavily

communities have clean water to drink. We have also

in order to achieve this goal. We have issued three long-term

built a series of dams that will prevent similar events from

bonds of US$2 billion each, and we expect to issue a fourth

reoccurring. Of course, there is still work to be done, most

in early 2017 if necessary. We will use this liquidity to invest in

notably on repairing the road that runs along the Sonora

the new plants at Toquepala and Tía María in Peru, in order to

river, and we hope to initiate this project in the immediate

complement our expansion at Buenavista del Cobre. Once in

future. The spill was an isolated accident that unfortunately

operation, the new beneficiation plant will eventually increase

caused significant damage to the surrounding ecosystems,

our copper production in Peru to 520 million t/y, including

and we are doing everything to make sure that such an

production at Tía María. Elsewhere, we will continue with our

event does not repeat itself.

dedication to environmental care by introducing new, green technology into each of our operations, and by working with

Q: Looking forward, what is the group’s main focus for

local authorities to support tree planting, preservation, and

the rest of 2016 and 2017?

renewable energy programs.



1 2 3 1 2

6 6













11 11

10 10

14 14

16 15 18 17 15




20 20

Copper Zinc/Lead Closed/Abandoned

13 12









Industrias Peñoles





Minera Frisco




Buenavista del Cobre

Grupo México




La Caridad

Grupo México




Piedras Verdes

Cobre del Mayo





Industrias Peñoles





Sierra Metals




San Francisco del Oro

Minera Frisco




Santa Barbara

Grupo México




Nuestra Señora

Americas Silver Corp





Indsutrias Peñoles










Minera Frisco





Industrias Peñoles














Francisco I. Madero

Industrias Peñoles




Cozamin (San Roberto)

Capstone Mining





Grupo México


San Luis Potosi



Minera Frisco





Carrizal Mining




El Baztán






Industrias Peñoles (51%) Sumitomo (10%) Dowa Mining Corporation (39%)


State of Mexico


19 19

21 21

23 23

22 22





Q: What strategies has the company implemented to

A: As well as leading the operations for Carrizal Mining, I

manage the effects of the recent regulatory changes?

also serve as president of the Mexican Sustainable Mining

A: Since 2013, when the prices of precious metals began to

Federation, which seeks to provide support for small and

fall, Carrizal Mining began to change its operational structure

medium-sized mining companies. Currently, the federation

in order to continue to grow in spite of the market volatility.

is working in Autlan, Jalisco, where there are vast reserves

Recognizing the growing importance of its workforce, the

of manganese and other metals. Its work is enabling more

company increased its focus on internal training schemes in

limited mining enterprises to manage small-scale mines that

a bid to improve productivity and lower costs. Since 2014,

produce 30-40t/d, with a view to expanding production

we have invested more than 8,000 hours into personnel

when possible. These smaller projects help complement

training, focusing on the theme of security as well as

Carrizal’s main operations in Zimapan, Hidalgo.

other more technical issues. We have also revamped our recruitment process, and we are currently putting a lot of

Q: How can a sustainable mining company ensure that

effort into attracting new, talented individuals to join our

local communities continue to prosper following the

team and move the company forward. This has included

closure of a mine?

working with a number of educational institutions, such as

A: Small mining towns often find themselves abandoned

the University of Guanajuato, the University of Hidalgo, and

once production is completed. I am constantly working

the Zimapan Technological Mining University. On average,

with all levels of the Hidalgo state authorities, including the

Carrizal Mining produces between 2.5 million and 3.5 million

governor, to encourage alternative sources of economic

oz/y of silver equivalent but in 2015 the company’s output

development while production is still ongoing. I believe

totaled 5 million silver equivalent ounces, which represents

educational institutions, such as the Zimapan Technological

encouraging growth given the market situation. This success

Mining University can play a key role in acting as a motor

was achieved with women occupying three of the five top

for economic development both during and following

executive positions within the company.

the completion of mining operations. Previously, the city was dependent on the mining industry but it has now

Q: After exploration projects at Toliman were halted last

developed strong university and tourism infrastructure.

year due to financial constraints, are there any plans to

Although mining is no longer as strong as it once was in

recommence operations?

this region, the city is continuing to thrive thanks to the

A: We are currently receiving support on these projects

alternative financing sources that it developed.

from Industrias PeĂąoles. Of course, we have not stopped exploration entirely; rather we are focusing on those

Q: What level of support does the company receive from

geological regions that can be analyzed at low cost. We are

the local government for such initiatives?

working on reopening a small mine in Durango, and once

A: We can at times be deeply frustrated with the

our negotiations with the ejido that owns the concession

local government because of the short-term vision it

are completed as expected, we should have a mine

adopts regarding economic development. The federal

producing between 300-400t/d of minerals. This project

government directs significant resources into developing

should be open within 12 months and will employ around

tourism in the country but that money does not find its

80 laborers in a very remote area that suffers greatly

way to the smaller communities such as Zimapan, and

from unemployment, so we hope that the mine will have a

that is detrimental to our attempts to foster sustainable

positive socio-economic impact on the area.

economic development. Undoubtedly, we require further support from the authorities but I also believe that the

Q: How committed is Carrizal Mining to developing a

mining community itself has a duty to become more unified

culture of sustainable mining in Mexico?

and work together toward generating development.


MEXICO PROMISING MARKET FOR DISTRIBUTOR The Marubeni trading and investment company is focused on four primary fields, the mining, automotive, consumables, and energy industries. The company has been present in Mexico for more than 60 years, and the


country holds great importance for its overall Latin and

President of Marubeni Mexico

North America strategy. The domestic automotive sector is booming, with unit production expected to exceed 5 million by 2020, and Marubeni sees a lot of opportunities

inventory control, checking the mileage of each tire, and

for its business within this industry, according to the

recommending suitable tire specification by analyzing its

company’s Mexico President Hiromitsu Morishima. “In

conditions of use.”

order to combat the stagnant industry, we have the advantage of a diverse investment portfolio, which means

Morishima believes that one of the primary advantages

that the success of the company is not so directly linked

Mexico holds over its regional competitors at the

to the state of the commodity markets,” he shares. “Of

moment is its stability, both in a political and financial

course, mining is a large focus for us but thanks to our

sense. Mexico has a population of 120 million, a GDP per

extensive network of clients across the sectors in which

capita of US$10,000, and an average age of 28 years old.

we work, our risk is spread across a number of fields.”

However, one challenge the company constantly faces is the fluctuating value of the peso. “Of course, this is a direct

Marubeni is always sure to keep abreast of opportunities in

result of Mexico being so closely linked to the US, which has

the mining industry. “Before we join a project, we look for

its benefits but this constant volatility presents difficulties

a partner with local knowledge of the sector in order to

when developing our long-term business strategy for

add value to the project, and move on from there,” explains

Mexico,” he laments. “Nevetheless, we are always on the

Morishima. Marubeni’s main focus in Mexico is selling tires

lookout for new projects in which to invest, which can add

for development machinery in the construction and mining

some value to the company’s portfolio. This can be either

industries, and the company is the official representative for

greenfield or brownfield operations because as long as we

Bridgestone tires for construction and mining machinery

see opportunity for growth we will be prepared to invest

in Mexico. “Our engineers work alongside our clients to

in any viable project.” He shares that Marubeni is hoping

ensure that they receive the most comprehensive service

to join with a valuable partner and build a project in that

possible, and also to enable our customers to maximize

way. In the short term, the company will be focusing on

the potential of the Bridgestone tires,” he comments. “This

expanding its industrial machinery, chemical, and consumer

includes demonstrating the optimum inflation pressure, tire

goods segments, as well as consolidating its presence in

rotation to apply for each vehicle, tire mount and dismount,

the domestic automotive and consumables sectors.

MISSION Being a sustainable company, with a commitment to the environment, safeguarding the safety and health of our human capital. Fullfilling the applicable regulations, the code of ethics and business practices to generate resources for our contributors and society.

A 100% Mexican company, founded on February 5, 2009 with the purpose of exploiting, extracting, and commercializing the nonferrous metal minerals of Lead, Silver, Copper, and Zinc.

VISION Being an industry reference and a case study for contributing to social development, with industry-trained leaders, contributing to the best operation practices, innovation, creativeness, and an all round excellence in business.




BUENAVISTA DEL COBRE The state of Sonora is notorious for its wealth of mining activities






Buenavista del Cobre mine is not only one of the biggest in Mexico but is also the second largest copper mine in the world in terms of reserves. The open pit mine is located 250km from the city of Hermosillo and 40km from the US border. At Buenavista del Cobre, copper concentrates and catodes are produced, as well as gold, silver, and molybdenum. The mine has one concentrator plant and two extraction plants named ESDE I and ESDE II for solvents and electrodepositing. In addition, the mine is equipped with two crushing systems and bands, named Quebalix I and Quebalix II, for the transport of leachable minerals. Other features include leaching pads, dams, and a significant vehicle and machinery fleet that comprises heavy trucks, diggers, drills, and tractors. In 2010, Grupo México launched a strategic growth plan for the mine after it was revealed that Buenavista del Cobre is in fact much larger than was first anticipated. With an investment of US$4.5 billion, the program is designed to extend the lifespan of the mine to 80 years and create a continued source of employment and ore for the industrial sectors. As part of the expansion plan, a new concentration plant will be built that will increase annual production of copper by 188,000 tons, as well as silver by 2.3 million ounces and gold by 21,000 ounces. Storage space will increase to 300,000 tons of raw ore and a new molybdenum plant will add 160 million ounces of capacity. A third extraction plant named EDSE III is expected to increase annual production by 120,000 tons of copper cathode, and two more crushing systems, Quebalix III and Quebalix IV, will add 20 million tons and 80 million tons, respectively, of leachable minerals. In terms of transport and machinery, the investment will provide 61 trucks each with a 400 ton capacity and six trucks each with a 360 ton capacity. Seven diggers and eight drills will also complement the new machinery. Not only this, but the infrastructure is due to undergo a considerable overhaul, with a new tailings dam, a service area for the mine, substations, aqueducts, electricity lines, and roads all set to be added or replaced. Grupo México will also construct a housing area for workers, as well as sports and training facilities. This is all part of the company’s global growth plan that aims to increase production across all its subsidiaries to 1.143 million tons of copper.



LACK OF DEMAND FOR ZINC URIEL GARCĂ?A Director General Mexico of Mercuria


Q: With the relative recovery in commodities, what do

on silver exports from China in an effort to incentivize

you think would be the future of precious metal prices?

internal sales. This caused significant losses due to the

A: Since operation costs are in pesos and production is sold

price discrepancies so Chinese refineries did not want silver

in dollars, operators are always able to profit when the US

concentrations. Now the tax has disappeared and China is

currency is high. This also helps to keep mines operating,

demanding silver, copper refineries are transforming into

because if a silver ounce is US$15 and operators gain MX$18

silver ones, and these factors are going to take the silver

per dollar, this generates profit. Precious metals prices are

price to a higher level.

strongly related to conflicts, stock markets, and speculation, as people see a natural financial refuge in them. Both gold

Q: In comparison, how are base metals performing at the

and silver are undervalued at the moment.

moment? A: Base metals, primarily copper, lead, and zinc, are the

There is a particularity with silver as everyone in the

ones that we commercialize. Copper is the most expensive

western world buys on the London Metals Exchange (LME)

even though at the beginning of the year copper operators

while in China the Shanghai Stock Exchange is used to buy

were about to collapse due to cheap prices. Zinc is

this metal. In the past few years, the difference in prices

tremendously undervalued as it is the most commonly

was quite notorious due to the fact that there was a tax

used base metal, with 75 percent going to the galvanization


AZURE MINERALS FOCUSING ON EL ALACRAN ANTHONY ROVIRA Managing Director of Azure Minerals Q: How did Rio Tinto’s expertise help you with the first

order to do so, it needs to drill a considerable amount so

exploration phase in the Promontorio project?

this is the start of what we hope is going to be a substantial

A: The joint venture with Rio Tinto has been running for

and ongoing drilling campaign for the next few years.

15 months and during that time we were undertaking a variety of different geophysical and geological testing of

Q: What are the main highlights of La Cascada deposit?

the property, particularly via ground and airborne surveys.

A: La Cascada and Promontorio are both relatively

We have a strong technical team who evaluated all that

small deposits of high grade copper, gold, and silver

information, and they have identified a number of highly

mineralization, and they both occur at surface level. They

attractive targets within the area, and as a result of this

are not economically viable given the current metals

first stage we are now in a position to start drilling some

prices so we are looking to find something bigger and

of those targets. Under the terms of the JV agreement, Rio

better. Two years ago we started drilling beneath both

Tinto can continue with its exploration over the next five

deposits and we found indications of a large copper

years, and in that period it has to spend US$20 million. In

system several hundred meters below the surface, and it

industry. In 2008, zinc was at US$5,000/t and then it went

Q: Since the acquisition of JPMorgan’s commodities

down to US$1,200/t. Several major zinc mines have closed

portfolio, what are the next steps for growth in Mexico?

and major expansions have been delayed in recent years

A: The impact of JPMorgan’s portfolio has been limited due to

as a result of prices. Industrias Peñoles will double its

the fact that it consisted mostly of oil and gas commodities.

zinc production in the near future but other than those

Nevertheless, we now have access to more advanced

owned by Industrias Peñoles and Minera Frisco there

financial instruments such as futures. We opened this office

are no other zinc mines. Lead is extremely important for

in early 2014, and since we have been in the mining sector

battery manufacturing, and now that many car companies

for decades we knew a great deal of the players in the sector.

are building electric cars, we will see the demand for lead

However, when doing business in Mexico it is necessary to

growing. However, this market is cyclical so, when lead

have support and we have our parent company Mercuria on

surpasses US$2,500/t many people will start to recycle

our side. We pay very quickly and offer strong profit ratios to

batteries and saturate the market again.

our clients. We began with small mining operations and the natural course has taken us to become the primary trader for

Q: How has the company protected itself from the

that segment and an important actor for major operators.

downturn in the market?

We doubled our volume in 2015 compared to 2014 levels,

A: For traders, the problem comes when prices are low

and this year we almost doubled 2015’s production in the

and production starts to decrease, since it is harder to find

first quarter. We do want to undergo an acquisition but we

a supplier. Moreover, traders normally have substantial

need to find mines to develop the forward-buying business,

credit lines to cover transactions, especially within oil and

and we are working hard to achieve this.

gas. If we compare this with mid-size traders, they did not have the power to buy ore concentrations with high prices given the size of their credit lines. Since they were used to a certain price, it is very difficult to accumulate the same purchasing power at three times the price. Prices did not grow in conjunction with credit lines. In conclusion, commodity prices do not affect us and any change in the

“Zinc is tremendously undervalued as it is the most commonly used base metal”

market is supported by our investment fund of around

Uriel García,

US$1.2 billion dollars.

Director General Mexico of Mercuria

was the discovery of this large porphyry-related copper

so we will also be undertaking the environmental studies.

mineralization that attracted Rio Tinto’s attention to the

However, there is a lot of existing infrastructure like

project. Cascada and Promontorio are both indications of

railways, roads, and skilled human capital. The major

a bigger system that is present deeper down.

challenge will be to ensure that we can bring the project to production in a responsible way in terms of managing

When we closed the deal with Rio Tinto, we identified the

the community expectations and complying with all the

Alacran project near Cananea. We have worked on that site

environmental requirements.

for over a year now, and in that time, we have discovered what looks to be a very significant silver deposit. Our

Q: Aside from your partnership with Teck, what other

main focus now is on that project, so 2016 will be a year

possibilities do you see in the Mexican mining market?

of drilling at Alacran to determine its size so that we can

A: The possibilities for future collaboration are promising.

move to the feasibility study. As a result of this discovery,

For instance, the Loreto project, which has a great deal

the value of our company has increased fivefold in the last

of potential for copper and gold mineralization within the

six months, from US$10 million market capitalization to

property, has two major copper companies really interested

US$50 million.

in developing the exploration. When the government transfers the ownership to us this venture can be

Q: How much investment do you expect to put into El

constructed. However, as the government has not granted


the title to us after three years, these major companies may

A: We anticipate that in 2016, we will be investing between

walk away and the opportunity will be lost. There are many

US$3-4 million in the project. Most of that will be for

opportunities in Mexico for Azure to acquire projects and

drilling and for the feasibility study. As with any exploration

then attract major international companies into the country

project, we need to carry out a lot of early stage work

for joint ventures.




FUTURE DISCOVERIES WITH MAN PORTABLE DRILL RIGS Mexico’s exploration timeline has reached a point where many of the most accessible targets have already been explored. It is predicted that more of the future discoveries will be found in more remote areas without roads that traditional larger size drill rigs cannot reach. In addition to the challenge of remote, hard to reach targets, SEMARNAT has made a concerted effort to minimize the environmental impact of exploration by increasing the wait time for approval and has reduced the amount of road and drill pad construction permits. If and when road permits are issued, there can be additional challenges stemming from local ranchers, surface right holders, and the high cost of building lengthy roads over extremely challenging terrain to reach targets. The solution to these challenges can be achieved with ultra-light, high powered man portable drill rigs.

“100 percent of Globexplore’s man portable rig fleet is on contract and Globexplore is buying 10 more man portable rigs to meet demand” Armando Lucero, Director of Operations of Globexplore Drilling

Globexplore Drilling’s man portable drill rigs are some of the most powerful drills available, and are custom built in Canada by the highest quality manufacturer. Once in location, Globexplore can operate on a compact drill pad less than 4x4m and drill to depths of 850m in HQ, 1,200m in NQ, and 1,600m in BQ. Even for shallower targets, its clients with experience realize that the high power of its rigs keeps it straight and helps pass through the most difficult ground conditions. When working 100km from the nearest highway, this eliminates the risk of unexpected delays as a result of getting stuck or missing the target. Globexplore Drilling operates its rigs with the most experienced professionals and coupled with its corporate culture of safety and solid infrastructure required to support efficient filed operations, it can provide clients with a competitive price without sacrificing on quality or safety. These virtues, combined with the company’s ability to average 1,800 meters per month per man portable drill rig, have enabled Globexplore to become a frontrunner in the market.



INCREASING NEEDS FOR ADDED VALUE continues. “In recent years, we have seen that mining companies are increasingly looking for more durable and efficient products, as well as further technical support, and


this is precisely what we offer our clients.”

Regional Manager of Techflow One of the major trends within the mining industry lies in safety, and Rojas claims that Techflow is always looking


In today’s market, turnkey services, personalization,

to introduce new, innovative products that provide the

and specialization have become essential to ensuring

safety boost the mining sector in Mexico needs. “There are

competitiveness in a saturated market. One of Techflow’s

several manufacturers now who are replicating European

biggest successes in recent years, according to the

valve systems, which are often more advanced in terms

company’s Regional Manager Carlos Alberto Rojas, is

of safety than local designs,” he shares. “In Europe, knife

the fact companies that use sustainable flow control

gate valves with exposed shutters have to be completely

machinery have been actively seeking out Techflow’s

closed, whereas in the US and in Mexico these machines

services as a way to reduce costs and improve efficiency

are often left open, which can be extremely dangerous.

while offering a sustainable solution. “We have been able

Therefore, we have been working with RF Valve, and a

to build strong relationships with many of our clients in

US-Finland based company, on bringing their RF SKG

recent years due to the extensive technical support we

knife gate valve, which is designed based on European

provide, both in person, at the plant, and via telephone

standards, to mines in Mexico.”

and internet,” he shares. “Moreover, our sister company CiDRA Minerals has developed a mineral mud flow control

Innovation can take time and, in the case of the RF SKG

mechanism, called SONARtrac, which is installed outside

valve, Techflow had to promote the product for five years

of the tubing system and measures the mineral content

before it was fully accepted by customers. “The process

of the material. This increases the expected life of the

today is undoubtedly easier than it was five years ago

mechanism from six months to 10 years, and we are proud

due to of all the information that is available through the

to have been part of the development and distribution of

internet and satellites,” he maintains. “This also increases

these machines that are making a positive impact on the

competition because it means companies have many

sustainability of the mining industry in Mexico.”

more options to choose from and are far more informed, but we view this as a positive development as it forces us

Of course, Rojas admits that the current price environment

as the distributors to provide the most advanced possible

has had a somewhat negative effect on the business just

products and service.”

like it has on many companies within the sector. “Many new projects that were planned before the downturn

Techflow tries to remain conscious of the need to protect

began have had to be postponed or even cancelled,

the environment during all stages of its operation, whether

which has been detrimental to our business,” he explains.

that is refraining from printing something that does not

“What is more, many of the projects that were already

need to be printed or using as little water as possible.

in operation are looking for cost reduction methods.”

Moreover, the company provides valves that have minimal

However, he maintains that Techflow’s product and service

effect on the environment and flow control mechanisms

quality is of the highest standard, meaning that most

that are specifically designed to detect and prevent

clients recognize it as an essential part of the success of

leaks. Gradually, the bigger operators are adopting more

their business. Therefore, the company has been able to

sustainable valve solutions, according to Rojas. “Last year,

continue growing despite the market gyrations.

one of the biggest Mexican mining companies made a significant investment in flow control technology for the

The quality of client service is the most important part of

piping between plants and tailings dams, and now all

Techflow’s business, and the company works closely with

of its mines are equipped with a system that detects a

the manufacturers to ensure delivery of the highest quality

burst tube almost immediately,” he boasts. “This allows

products to solve clients’ needs. “This dedication to detail

technicians to repair the issue before too much damage

has been an important part of our success over the years

is done to the environment, and these are the kinds of

and has helped us establish ourselves in the market,” Rojas

products that we support at Techflow.”




VELARDEÑA The Velardeña mine in Cuencame, Durango has state of the art technology and sustainability standards thanks to its use of solar panels, LED illumination, and water treatment plants. The operation consists of an underground mine and a work plant. In 2015, it managed to produce over 2 million tons of total ore, and 80,538 tons of zinc, along with 3,170 tons of lead. The mine also delivered 22,885kg of silver, and 1,862 tons of copper. Furthermore, the mine ended 1Q16 with 520,709 total tons of ore. Industrias






operation in May 2013. It now has an installed capacity of 1.9 million t/y of milled ore and utilizes 100 percent of its capacity. Velardeña recorded an investment of US$206 million for construction and equipment. The project carries a whopping MX$3.7 billion in net fixed assets as of December 2015. As the mine is more than 400m underground, it is one of the country’s most meticulous operations. Both men and women collaborate within the operation to produce the highest standards in terms of techniques, technology, and safety measures with the objective of extracting metal from distinct sublevels. Social harmony and tranquility is a clear priority for Industrias Peñoles, as the mine steps out of the box with its tiny internal zen garden, and its external ecological reserve where American bison, llamas, ostriches, and horses, among other species mingle freely. The territory even has gardens in nearby gas stations with plants, artificial grass, and waterfalls in maintenance areas. Velardeña assures proper access to bathrooms and rest areas within the mine. It redesigns traditional mine layouts as it was completely developed by its own staff. The company hopes to apply the concept to other mining units thanks to its success. To process the metals physically and chemically, rocks are broken into miniature pieces, so that the particles can easily be liberated. The fragments are crushed until they reach a size of 40 microns, before they are sent to processing lots. Reactive chemicals are employed to attain concentrates. The mine obtains mostly zinc from the ore, among a small amount of other minerals. In a normal day, 700-1,000 tons of zinc can be collected. Afterward, the pulp is filtered and separated with water until it obtains a solid form, and the product is then sent to Met Mex Peñoles in Torreon or in Manzanillo. Ultimately, the concentrate is exported by ship in 32 ton containers.



QUALITY AT THE FOREFRONT OF THE MARKET “The mining industry is highly

so we traveled by car around the country to Mexico City,

demanding, and there is a

grew as the Prydisa name became better known within

lot of competition, but it is


Sonora, and San Luis Potosi, and gradually the business the industry,” explains the company’s Director General Antonio Valdez. “We now work with the biggest mining

also essential to remember

operators in the country, including Industrias Peñoles and

that there are numerous

in northern Sonora.” This has been a vastly successful

opportunities for business in

and has been a mutually beneficial arrangement that has

the industry” Antonio Valdez, Director General of Prydisa

Grupo México, with whom we work on the Cananea mine project for both Prydisa and Grupo México over the years, helped both companies continue to grow. Valdez attributes one of the keys to Prydisa’s success over the years to its focus on the quality of the product that it is selling, as quality is the crucial factor in the mining

Prydisa started as a small, family run business with the

industry. “The mining industry is highly demanding, and

goal of distributing ironware equipment to companies

there is a lot of competition, but it is also essential to

throughout the mining and construction sectors. Initially,

remember that there are numerous opportunities for

it focused on electromagnetic cables and struck a deal

business in the industry,” he claims. “Indeed, there are

with Camesa, the world’s leader in this industry, and

more and more foreign companies entering the industry

subsequently expanded its portfolio to include valves,

in Mexico thanks to the Energy Reform, from the US and

screws, hydraulic cylinders, and many more components.

Canada but also from Europe and even Australia, and

“At the time, there was limited domestic air travel, and

this can only benefit the sector as a whole as it forces


FILTERED TAILS OFFER IMPROVED SUSTAINABILITY the sustainability of the industry. “Filtered tailings are a


perfect example of how operations can reduce fresh water

Mexico Manager of Ausenco

consumption and recycle as much water as possible," he notes. "Not only do filtered tails help reduce fresh water

With events such as the devastating 2014 toxic spill at

use, but they also reduce the environmental imprint

Buenavista del Cobre still fresh in the memory, mine

compared to more conventional facilities." Filtered, or

managers across the country are constantly looking for

“dry stack,” tails are not by any means new technology

innovative ways to reduce the environmental footprint of

but Ausenco is one of the few companies around the

their operations. Recent technological advancements in the

world with focused dry stack expertise, and the group

area of tailings management have provided a crucial boost

has already had success implementing its technology in

to the global industry, although the new practices have so

Latin America. “One example of a filtered tailings project

far been slow to take off in Mexico. Ausenco, an Australian

we are developing is in La Escondida in Chile, the largest

engineering and project management provider with over

copper mine in the world," he adds. "Many companies in

25 years’ experience in the mining industry, is working to

Mexico have been implementing programs focused on

change this. Joel Carrasco, Ausenco’s manager for Mexico,

dry stack facilities for environmental considerations. Key

explains how the company’s filtered tailings solutions,

players that are interested in transitioning their aim toward

which involve the use of vacuum or pressure filters to

these facilities are frequently requesting help from our

dewater tailings, are making an impact on improving


companies to improve.” During the company’s 45 years,

products that we distribute,” he declares. “Of course,

Valdez shares that Prydisa has experienced the whole

accidents can always happen as mines are dangerous

range of market fluctuations, both good and bad, and has

places in which to work but throughout our entire history

learnt that the most important thing in this business is

there have been no accidents caused by any of our


products. This is because we always make sure the client is fully aware of how to operate the equipment in the

“Thanks to the trust we have built up with our most

safest and most efficient manner, which not only reduces

important clients over many years they stick with us

the risk of accident but also increases productivity and

during downturns and we stick with them,” he comments.

efficiency for their business.”

“The low prices of metals are affecting everyone in the industry, and during these difficult times people turn to

For growth in 2016, Prydisa hopes to open a branch in

those they can trust. We help our key clients by continuing

Cananea in order to develop its already substantial

to offer them vital products at competitive prices, and

business in that part of the country. The four most

they help us by putting their faith in the quality of our

important states for mining in Mexico are Sonora, which

service so this is a mutually beneficial platform.” Further

the company will cater to through its new branch in

than that, he says that Prydisa recognizes the benefits

Cananea, Chihuahua, Zacatecas, and Durango.

that new technology can bring in terms of increasing cost efficiency, and so the company is always careful to stay on

“We will then cover all the most important mining hubs in

top of the latest technological developments in order to

the country,” Valdez explains. “This strategy has allowed

offer state of the art technology to its clients.

us to improve our logistical performance, which in turn enables us to provide a more efficient and complete

One of the most important aspects of Prydisa’s business is

service to our clients. We will also focus on continuing

in staff training, because knowledge of how each machine

to strengthen the company from within by providing

operates is vital to the success of its clients’ operations.

further training to our staff and adding new departments

“We always have a technician available, whether it be in

designed to boost the administrative side of the company.

person or on the telephone, to deal with any technical

We believe that this will allow us to achieve harmonious,

or operational issues that might arise with any of the

steady growth in the long term.”

As well as dry stack tails, another focus for Ausenco is

Mexican mining pond are attracted to Ausenco not only

the conversion of waste into energy, in particular via the

for its experience of having worked on over 100 mining

introduction of co-disposal facilities. By combining waste

projects across 34 countries, but also for the “cradle to

rock from mines and tailings into one facility co-disposal

grave” service it offers. “We have been collaborating with

systems significantly improve mine sustainability and

key players such as Fresnillo and Industrias Peñoles for the

greatly simplify the complicated mine closure process.

past 10 years," states Carrasco. "Ausenco provides design

The same is true for heap leach operations, which require

services and supports during construction as needed, as

considerable amounts of space, liners, and infrastructure.

well as assisting in the development of risk management

Carrasco explains how Ausenco tackles this problem

programs. The company prides itself on the complete,

through regeneration of heap leach pads. “Ausenco strives

customized service it provides, from design and engineering

to focus on the spent heap leach piles and analyze whether

to project management and feasibility assessment."

these piles can be further used,” he states. “Two things can happen, the ore can continue to be placed in the leach pile

“Collaboration between the public and private sectors

or re-leach can be initiated by injection wells. Reinjecting

is essential to creating efficient environmental and

the heap leach piles can increase metal extraction as well

sustainability norms,” Carrasco claims. “Ausenco finds that

as recovery rates. These options can be the alternative to

educating the government and universities of the country

constructing additional facilities or creating more waste

reaps plenty of benefits. Oaxaca, for example, is a seismic


zone that is extraordinarily difficult for mining companies to negotiate because permits are not easily obtained and

One company which has recognized the benefits of such

people are resistant to the industry.” In response, Ausenco

solutions is Fresnillo, which sought the assistance of

developed an approach with a mining company to analyze

Ausenco to install tailings facilities on its San Julian silver-

regulatory compliance and exhibit what can be expected

gold project. According to Carrasco, the biggest fish in the

from consultants in these situations.




Exploration is arguably the most important phase of a mining project, the effectiveness of which can dictate the profitability of any project. Although global exploration investment fell by 19.3 percent to US$9.2 billion in 2015, there are increasing opportunities in Mexico since an estimated 70 percent of its territory is yet to be explored. Drilling monopolizes a great deal of operators’ budgets and in a tough environment these are usually the first to be cut. Operators also have continued to seek out the fastest, most high-quality services at the lowest prices, putting pressure on drilling companies to constantly innovate to streamline these processes and stay competitive. A low-price market has weeded out inefficient drillers and left a landscape of qualified service providers able to offer quality services to the Mexican mining industry. The drilling and exploration environment has been irrevocably changed by the latest market downturn.

This chapter contains insights from industry insiders who share their experiences of navigating the new market conditions and their strategies for staying competitive in an era of reduced budgets. Recent, prestigious exploration discoveries are discussed by those responsible for the finds. Drilling companies also talk about the innovative new equipment designed to reduce costs and increase recovery.




148 150 152 Victor Díaz, Globexplore Drilling Jorge Gastelum, Globexplore Drilling Armando Lucero, Globexplore Drilling 154

VIEW FROM THE TOP: Brigette Martini, Corescan


VIEW FROM THE TOP: Morgan Poliquin, Almaden Minerals


INSIGHT: Margot Molina, Teknol


TECHNOLOGY SPOTLIGHT: Core Logging Web Services with Onsite Hyperspectral and X-Ray Fluorescence Analysis


VIEW FROM THE TOP: Chris Drielsma, DGI Geoscience


VIEW FROM THE TOP: Jesús Herrera, Detector Exploraciones


TECHNOLOGY SPOTLIGHT: Drone Technology to Map Mine Sites


INSIGHT: William Delano, Chesterton Mexicana


VIEW FROM THE TOP: Luis Sánchez, Intercore


INSIGHT: Marcelo Mott, PANalytical


VIEW FROM THE TOP: María Fernández, Refacciones Neumáticas La Paz


INSIGHT: Francois Dumont, Versa Perforaciones


VIEW FROM THE TOP: Ramón Luna, Servicios y Proyectos de México


INSIGHT: Brenda Carranza, Falcon Drilling


VIEW FROM THE TOP: Daniel Venegas, Dimanor


VIEW FROM THE TOP: Efraín Becerra, Interlub





Q: What industry trends have you witnessed recently in

Terracore and a number of other spectrometry companies


to share experiences and increase the accuracy and depth

A: Exploration is the base of all mining activity, and it is

of our findings. We have another center in Oaxaca.

essential not only for the development of a project but also for the sustained success of the mining industry. Currently,








there is a tendency to reduce costs and risks as much as

exploration, and what process do you follow to ensure

possible and to seek out large, high-grade mineral deposits

the best results?

that can boost production. The geological mapping and

A: Geological mapping is the first step to discovering a

other studies that SGM carries out act as vital tools for the

new mineral deposit, and is the basis for all exploration.

industry because they provide more detailed information

Our maps divulge a great deal of information and are

that helps operators during the planning phase.

free to use via the SGM website. Once uploaded, the

Given the recent mineral price downturn, investment for

platforms. We use our vast database, which we have

information can be taken and transferred to other software exploration has been dropping on a global scale in the

built over 100 years, to choose the regions with greatest

last few years, to US$9.2 billion in 2015 from US$21.5

mineral-geological potential and we then begin mapping.

billion in 2012 according to SNL Metals & Mining. Mexico

This provides private sector mining companies with all

has suffered as a result, with exploration in the country

the necessary information to carry out more detailed

dropping to US$528 million in 2015 from US$1.1billion in

exploration in those areas. Once enough exploration has

2012 according to CAMIMEX, and there is no doubt that

been performed, SGM can then turn the areas into mining

this trend has had a profound effect on the industry’s

concessions. These concessions, which have already

growth rate. Nevertheless this has not deterred the SGM,

been extensively explored and evaluated, are then made

which has continued its own exploration programs and

available for the private sector to acquire.

geological surveys. Our maps, which are 1:50,000 in scale, identify zones that contain potential mineral deposits and in doing so help explorers save both time and money. The geophysical analysis we carry out is also used by investors to determine or predict ROI. Q: How does SGM work alongside the private sector when

“The Sierra Madre Occidental has extensive unexplored epithermal deposits, including vast gold and silver reserves”

carrying out mapping? A: SGM has the technical, scientific, and technological expertise to perform and support any form of exploration,

Raúl Cruz, Director General of the Mexican Geological

Survey (SGM)

including cartography, geophysics, digital geoscience, and hydrology. We can perform both land and aerial projects via satellite imaging to generate 3D epipolar geometric

Q: What technology does SGM use during its exploration

images that complement our geological consultancy

projects, and how does it ensure that each flight is

services. These images provide detailed information


regarding alterations,

mineral mineral




hydrothermal and


A: We only fly in regions that we know have high potential for mineral deposits. It is vital to identify the area and to

analysis. We have an experimentation center in Chihuahua,

explore it with geological data. We only fly when there is

where we have a team working with FLSmidth’s Hylogger

low humidity, cloud-cover, and intense solar light, to help us

technology for drilling analysis. We also work with

obtain the most accurate data. The data collected from the


aerial sensor is confirmed by our experimentation centers

auction. These include the La Soledad copper deposit

and cross-referenced with our database to optimize the

in Durango, the Delia ore deposit in Sonora, and the Los

interpretation. SGM uses a hyperspectral camera with

Borregos manganese-silver-lead deposit.

two sensors to obtain 360° band data and five portable Moderate-Resolution



Q: In which regions should mineral explorers focus their

(MODIS), which can compare mineral alterations with


those registered in the spectral library. This library

A: The Sierra Madre Occidental has extensive unexplored

contains digital images, mineral maps, and other drilling

epithermal deposits, including vast gold and silver

and geochemical data. This technology is by no means

reserves. There is great potential for iron deposits at Arco

new but it is extremely useful and practical. Although

Alisitos in Baja California Norte and the Alcalina Province

the majority of mining projects in Mexico have still not

in the west of the country. Meanwhile, there are large

adopted it, this is gradually changing as operators realize

copper reserves in the Panuco deposit in Coahuila and a

its benefits. SGM is a pioneer for the use of hyperspectral

significant amount of lead and zinc in the sea basins of

technology, having used it for regional flight exploration

central Mexico’s Mesozoic region. Many southern states,

programs. We also use Hylogger for nuclear drilling, which

including Oaxaca, Chiapas, and Guerrero, are relatively

scans extracted fragments for mineral alteration.

unexplored and SGM will continue to work in the comping years to develop more detailed cartography for these

Q: How would you assess the recent discoveries SGM has

regions. We hope to eventually have detailed geological

made, and what implications will they have for the mining

maps for the entire country, which in turn we hope will

sector in Mexico?

facilitate and boost investment in exploration. The market

A: SGM has uncovered innumerable mineral reserves

is becoming more dynamic. The wealth of information

throughout Mexico that have since become valuable

that SGM has collected and analyzed over the years

mines. For example, both Fresnillo’s San Julian mine in

will continue to be fundamental for mineral explorers. I

Chihuahua and the El Limon-Guajes project in Guerrero,

believe that Mexico can continue to compete with the US,

now owned by Torex Gold, were initially explored and

Canada, Australia, and Chile because the mining sector

analyzed by SGM geologists. With technological advances

in this country has favorable conditions for investment.

we can conduct more accurate exploration and therefore

SGM plays a pivotal role in this because of the first-class

create more detailed maps, which we have used recently

information and technology we offer both foreign and

to identify a number of targets that will soon be up for

national companies.




Q: What was the process that led to the development of

experienced partner. The company has built three similar

the Juanicipio project?

mines within sight of our location with almost identical mill

A: Mexico is an obvious and historic destination for silver

structures, and so they were the best possible operators

exploration. A total of 25 percent of all silver mined in

to build the Juanicipio mine. Moreover, a junior company

human history comes from the country and eight of

trying to develop the skillset required to build a mine of

the 14 biggest silver districts worldwide are here. Until

this size is a real challenge, and in most cases a mistake.

1975, Fresnillo was not a major silver district by Mexican

We are explorers before anything else, and we are happy

standards. This is partly because there is heavy cover

to let someone else do the “heavy lifting” as it allows us to

around the area, which makes it challenging to locate

focus our efforts on identifying further exploration targets

deposits but also because the mineralized zones tend to

and projects.

be exposed at much deeper levels than in other districts. Then Industrias Peñoles, which was operating the mine at

Q: What have been the most important technological

the time, made what could be regarded as the first big

breakthroughs that have made it possible to pursue these

“blind” discovery in Mexico when the Santo Niño veins

deeply covered veins in Mexico?

were located. This was a seminal event for exploration in

A: The true breakthroughs have come from a conceptual,

the country because the majority of Mexico is covered,

rather than technological perspective because people now

and it is clear that major deposits exist beneath cover.

understand that it is not necessary to find ore in outcrop in

As the geological understanding of the big vein deposits

order to locate a deposit. The fluids that form ore deposits

has improved over the last 30 years, it has become easier

affect and alter a remarkably large volume of rocks around

to determine where mineralization may be found, and

them, and knowledge of this helps the explorer to judge

today we use technology such as satellite image analysis

where the deposit will be, how big it will be, and therefore

and, in particular, geophysics to see through deep cover

whether or not it is worth spending US$15 million on

to accurately pinpoint where to direct our drill holes. A

exploring the area. The fact that we now understand

combination of these techniques led us to discover the

what deposits look like hundreds of meters above the

deposit at Juanicipio that we are starting to develop.

level of economic actual mineralization helps us make the discoveries that lead to mines. This is the biggest and most

Q: Given that Fresnillo is the operator in the Juanicipio

important development. We started working in Fresnillo in

project, where does MAG Silver’s participation in the

the late 1990s on ground that had been abandoned years

project end, and how much responsibility is now on your

before and restaked as Juanicipio. When I first visited


the site, the alteration that I saw was what I would have

A: Despite the fact that Fresnillo is driving the operation,

expected well above Fresnillo-style veins and I suspected

we remain heavily involved with the project at the

there would be a similar deposit underneath Juanicipio. By

technical committee level, and we also interact with the

that time, Fresnillo had found the San Carlos vein, which

project geologists on a regular basis. Over the years, we

meant its focus was moving westward toward Juanicipio,

have developed a strong understanding of each other’s

which reinforced this interpretation. Subsequent work

strengths and weaknesses, and the project needs both

indicates that post-mineral faulting dropped the Juanicipio

sets of expertise in order to be successful. Fresnillo is in

block down relative to the rest of the district and therefore

charge of executing the development strategy, but the

preserved the alteration.

development of this strategy is very much a joint process. Overall, the relationship with Fresnillo has been extremely

Q: What led to the Cinco de Mayo discovery?

positive, and as a junior company we are pleased to be

A: It was an extremely similar process to the Juanicipio

working with such a professional, knowledgeable, and

development but it began many years ago while I was


studying the carbonate replacement deposits of Mexico,

benefit the people without changing their lifestyle too

which form the backbone of underground base metal

much. We feel a duty to be a valuable addition to the

mining in the country. During my research, I saw a trend

community. Although a mine would obviously create a

of the biggest deposits in Mexico and pinpointed a gap in

significant number of jobs and economic growth for the

northern Chihuahua where the space between the deposits

community, at the same time we have to be careful to keep

was so big that there simply had to be one somewhere

expectations realistic because the project still needs 3-5

in the middle. We were helped by Teck Resources and its

years of exploration before a development decision can

subsidization of systematic regional exploration, which

be made.

ultimately led to extensive drilling with MAG and discovery of the deposit.

Q: Turning our focus to the present, what have been the most recent developments at the Juanicipio project?

Q: When do you predict you will be able to gain access

A: We carried out the first drilling on the project in

to Juanicipio, and what considerations must you bear in

2003, and in 2005 we agreed on a JV with Fresnillo in


order to advance the deposit. The first hole we drilled

A: It is difficult to set a timeline for access to Juanicipio

in 2003 cut a 2m wide vein running 730g silver and 12g

because it is a question of working with an ejido and

gold, which was a positive start. Then, toward the end of

explaining what we hope to do, and then following the

2005 when the JV was drilling its sixth hole we hit the

legal procedures to obtain approval. The location is ideal

ValdecaĂąas vein. The initial discovery intercept on this

for the local community. The deposit lies about 12km out

vein was almost 10m wide, with 1,800g silver, 3g gold,

of town and there is practically nothing in the way of

and about 8 percent combined lead and zinc. We knew

agriculture or housing that needs displacement. In return

immediately that it was a major vein similar to others in

for access to the land, we would work with the community

the district but it took six years to drill sufficiently in order

on a CSR program to improve the town’s health and

to begin development. In late 2013, we started building

educational facilities, as well as stimulating the local

the ramp and in 2017, we will start to develop stopes and

business environment. Of course, introducing a mine into

continue to move the project forward toward anticipated

a small agriculture-based community can be disruptive

production in 2018. We are currently advancing the ramp

so it is very important to demonstrate how a mine can

at over at 100m per month.








6 6

4 5 4 5

10 10

7 7

8 8

9 9

11 11

12 12






18 18

15 15

21 21


16 16


22 23


23 22


20 20

19 19

33 33

28 28

29 29

30 30

25 26 27 26









First Mining Finance






First Mining Finance





Centauro Deep







Agnico Eagle (59%) Colibri Reources (41%)






Riverside Resources





La Bolsa

Pan American Silver



Ag, Au


Sierra Salada

Riverside Resources






Colibri Resources



Ag, Cu, Pb, Zn



Stoneshield Capital





Llano del Nogal

Evrim Metals Corp



Au, Ag


San Antonio

Trimetals Mining





La Verde

Americas Silver Corp



Ag, Cu


Santa Maria

Golden Minerals



Au, Ag



Garibaldi Resources



Ag, Au






Ag, Au



Alta Vista Ventures



Ag, Au, Pb, Zn



Coeur Mining



Au, Ag


La Cruz

Golden Goliath




34 34

31 32 32




36 36

35 35


37 37








Guadalupe y Calvo

Endeavour Silver



Ag, Au


La Cigarra

Kootenay Silver






Golden Goliath



Ag, Pb, Zn



Endeavour Silver



Ag, Au


Veta Colorada

Silver Standard






Levon Resources



Ag, Au, Pb, Zn


Los Azules

Canasil Resources



Ag, Au, Cu


La Patilla

Garibaldi Resources





San Marcial

Silver Standard



Ag, Au, Zn, Pb



Canasil Resources



Ag, Au, Cu, Pb, Zn



Santa Cruz Resources






Primero Mining





La Lajita

Oceanus Resources



Au, Ag


San Diego

GoGold Resources



Ag, Au


La Platosa

Excellon Resources

Exploration & Production


Ag, Au, Cu, Pb, Zn


La Esperanza

Canasil Resources



Ag, Pb, Zn



Hochschild Mining



Au, Ag


El Barqueño

Agnico Eagle



Ag, Pb, Zn, Cu


El Horcon

Great Panther Silver



Ag, Au



Endeavour Silver



Ag, Au


El Petate

Prospero Silver



Ag, Pb, Zn



Almaden Minerals



Au, Ag


Las Minas

Source Exploration



Au, Ag, Cu


Media Luna

Torex Gold



Au, Ag, Cu



Argentum Silver



Ag, Au



Radius Gold



Ag, Au


Las Margaritas

Gold Resources



Ag, Au


39 39

40 40

41 41

42 42

43 43

44 44

45 45





Q: During these times when limited exploration budgets

Q: How will your continued growth and success during

are more carefully spent than ever, why do you think

one of the most severe downturns affect your future in

so many exploration and mining companies chose

the next upturn?


A: Our current high rate of rig utilization has given our

A: The answer is that we have earned a well-deserved

company the advantage in several important areas.

positive reputation from our solid track record through

Firstly, it allowed us to retain the most qualified of our

delivering the highest quality results for our clients. We

existing team while allowing us to attract qualified staff

are proud to state the fact that every client we have ever

to the company. Secondly, it has allowed us to optimize

worked with would hire us again and recommend our

all company operations from our logistical support for our

services. We back this up with written testimonials from

field operations, human resources, and most importantly

over 30 of the most respected mining and exploration

our safety procedures. There is no better way to make

companies operating in the country. During this severe

constant improvement then when your company is

downturn, 95 percent of our fleet is contracted and we

working at a high level.

must now buy 10 more rigs to meet our clients’ demand, which is evidence that many clients are extremely happy

Q: How is the quality of your equipment and range of

with our performance. While the mining industry is picking

services related with your success?

up again, most would argue that over the last four years

A: We have only expanded into different types of drilling if

we have experienced the most severe downturn in the

we are sure that we can be at the forefront of this particular

last 40 years. Drilling budgets suffered the most as the

market. Over time, we slowly expanded by maintaining

steepest expense for many companies. Currently, the

our high standards of industry leading performance and

drilling industry is still severely struggling with an average

safety. We are proud that we can reassure new clients with

of 25 percent of all drills in the country in operation, yet

positive recommendations from our previous performance

Globexplore is surpassing expectations.

with their respected colleagues on each of the following activities that can take a client from greenfield exploration

Q: How has Globexplore managed to stay competitive

to reserve expansion. We believe we are running the most

enough to win so many contracts? A: Toward the end of 2012, as the market began to contract, we reacted quickly by reviewing all our systems and procedures and we determined several areas where we could reduce costs and become more efficient without cutting our high safety and quality standards. We were subsequently able to pass these savings on to our clients. Most of the experienced, successful, and well respected mining and exploration companies understand that most drilling contractors share common costs for genuine quality and safety. However, the lack of projects opens the sector up to poor practices as a result of restricted budgets and poor quality but inexpensive services. Thankfully, we have found that the most experienced mining and exploration companies are aware that unrealistic prices are rarely sustainable and end up costing them more money with poor performance, production delays, decreased sample recovery, missed targets, and higher accident rates. The reality is that we have two client bases at the moment, one that recruits Globexplore from the outset, and the other that seeks our services in order to reperform or finish a failed contract.

During this severe

downturn, 95 percent of the Globexplore fleet is contracted

Jorge Gastelum, CFO; Armando Lucero, Director of Operations; Víctor Díaz, Director; Marc Kieler, President of Globexplore

modern fleet in Mexico with all of our rigs being no older

and material consumptions as it happens so that we are

than six years. This provides our clients with the highest rates

not dipping below our minimum inventory levels, which

of reliability, accuracy, productivity, and safety. Our Diamond

allows us to maximize accurate production. With our

Core service offers top of class power to advance through

Geosite Analytical Division we offer onsite mineralogy,

challenging ground to reach depths of up to 2,200m, yet the

geochemistry, and core logging. At the drill rig or core

equipment is compact enough to fit in a pad size measuring

shack we can run hyperspectral analysis of core and RC

less than 4x4m. We offer PQ, HQ, NQ, and BQ diameters

rock chip samples that provide statistical values between

with track, truck, skid, underground, Heli- and Man-Portable,

mineralogy and geochemistry in a shareable platform

geotechnical, survey, oriented, and directional drilling with

for 3D mapping, and volumetric and dimensional value

averages of 1,800m per rig per month.

quantifications. We also can include x-ray fluorescence for elemental analysis from Magnesium to Uranium.

Our reverse circulation fleet offers some of the smallest footprints in the industry, requiring a pad size as small as 6x8m which is less than half the 20x20m size more commonly required. This reduces the environmental impact of larger road and drill pad construction. Our newly designed drills offer the same high power production capacity of rigs twice their size with depths of 420m. They are equipped with a host of modern features such as automated rod loaders, break outs, and remote control operations that help increase sample production while reducing the most common causes of injury. Selfpropelled by track or buggy, either rig can turn complete circles within its own footprints and move laterally, aiding in faster movements between holes and greater access to tighter and more remote locations. Our rigs tow their own remote high output air compressors that can be run up to 150m from the rig, which further increases the client’s drill target flexibility. Our RC rigs are ideal for infill, double wall RAB, mine services, and underground drilling. Q: How has innovation and technology complemented your success? A: Technology is a key component to our leading performance in the field and our ability to offer cutting edge services to our clients. For our field operations, the Globexplore Management System monitors all our functions and consumption with real time data. Using tablets and smartphones, we can capture our productivity





Q: How did Corescan develop, and why did Mexico

A: Although Mexico is conservative, I do not believe

represent an attractive market for the company?

the country is alone in this. When first introduced to

A: Corescan was formed in 2000 in Perth, Australia,

our technology, many geologists are concerned that

as a vertically integrated, hyperspectral core imaging

our system, which carries out automated mineralogical

company. As well as designing and manufacturing the

identification and textural mapping, will remove the

scanner, we also provide a scanning service and core and

need for their human input. However, that is not the case,

sample preparation assistance. Once the data has been

and one of our most important jobs is to explain that

acquired, our analysts in Australia and Canada analyze the

our technology is not replacing geologists but rather

information and upload it to a virtual shared core library

augmenting their work. Corescan’s technology essentially

where it is stored in perpetuity. Our analysts are trained

gives geologists a valuable tool and enables them to carry

geologists, and so we work alongside the client, which

out more consistent and accurate logging. Moreover, our

ranges from geologists, to metallurgists and engineers, in

system creates a rare bridge between geologists and

order to provide a 360-degree consultancy service.

metallurgists, because the increased accuracy provides metallurgists with a consistent data stream in a much

About five years ago we began working with Newcrest

shorter space of time than a human can achieve. This allows

Mining in Australia, which was an important step in

geologists to optimize and shorten the time-consuming

developing and optimizing our mining and exploration

process of logging, and to begin collaborating with the

products. We have then successively moved out into

metallurgists to discuss what the geology truly signifies.

further markets in Southeast Asia, Chile, Peru, Canada,

For example, in a typical timeline, once drilling permits

and the US, and have more than 300km of core in our

have been acquired, it often takes one year of drilling

archives. The technology works on a variety of different

and analysis before pre-feasibility studies can be carried

ore deposits but it is particularly effective in analyzing

out, but our technology reduces that period by at least



six months. This is immensely valuable for an exploration

considering the prevailing trend of ore deposits in Mexico,

company leasing a concession because it can then decide

it was a simple strategic decision to move our operations

whether or not to continue holding the ground.





into this country. However, we never operate in a country without the support of the local mining community,

Q: How can Corescan technology help clients reduce the

and so we were delighted to receive the support of our

downtime of their operations?

partners at GeoResolution. Through this partnership, we

A: The new data source typically takes between three to

became aware that several leading executives working

four weeks for geologists to get accustomed to, and we

in the top mining companies in Mexico, particularly in

endeavor to make it user friendly. We now offer quasi-

Fresnillo and Grupo MĂŠxico, were eager to try our new

realtime scanning, which can generate full mineral maps

technology and were keen to use it to refresh their

within four hours of extracting the core from the drillhole.

operations, increase profit, and lower margins. Since

The point data that our system produces is then exported

arriving in the country, we have also begun working with

to a mineral percentage log, which can then stream

a number of Canadian and Australian junior exploration

directly into whichever third-party software is in use, such

companies who we assist with small quantities of

as Leapfrop, Vulcan, Gocad, Target, or MineSite.

directed exploration scanning. Q: How does the scanner operate? Q: How far have you seen the mining industry’s traditional

The system is made up of three components. Firstly,

conservatism changing since you began working in

there is a 50-micron spatial resolution camera for


detailed photographic image generation. Secondly, there

is a hyperspectral imager, which has a spectral range

the world on various cloud servers. In order to control access

of 450-2,500 nanometers in 510 bands at an average

to data, each user has a username and password, and this is

of 3.8 nanometers. This provides exceptionally high

generally only given to a senior figure who can then decide

spectral resolution, which allows the user to conduct

who to share it with. We do not store this information, so

fantastically detailed mineral identification as well as

if a password is forgotten, the system generates a new

mineral composition, such as the difference between

one, and this ensures that the only person who can access

magnesium versus iron-rich chlorite. We conduct analyses

information is the client. Furthermore, we have some clients

for thousands of minerals and mineral sub-species across

whose policy dictates that their data cannot be stored on the

the surface of core at 500-micron resolution, which turns

cloud, and in these cases we transfer data to their internal

out to be approximately 200,000 pixels per meter of

database, essentially creating an individual Coreshed for

core. Lastly, there is a laser profiling instrument, which

that client. Of course, we always keep a backup ourselves as

is a standard laser that produces information regarding

we believe that to be vital but we are happy to avoid storing

the core’s topography. This data can be used to extract

data on the cloud if that is what the client prefers.

standard geotechnical variables including rock quality designation (RQD), roughness, breaks-per-meter, fracture

Q: How are Corescan’s partnerships with companies such

spacing, and fracture orientation. All three technological

as GeoResolution mutually beneficial, and how will the

components are perfectly geospatially linked, and the

group’s business in Mexico develop over the next few

scanning process from start to finish takes about 7-12


minutes per box of core. Geologists can then analyze

A: We would not be in Mexico without GeoResolution and

the data after a further five minutes so there is a rapid

Itzcoatl Drilling because they are vital to our operations.

turnaround. Corescan will then upload the results and

Together, we form a perfect network of remote sensing,

the data to the client via as well as final

resource geologists, and drilling expertise, and the support

delivery of jpeg files so decisions can be made about

we receive from these partnerships is essential in our efforts

the geological model, viability of further drilling, and/or

to introduce new technology into the market. Mexico has

metallurgical domains.

become one of the most important markets for the company going forward, and we are committed to the country for

Q: Given that the data is uploaded onto a cloud, how do

the long term. We are currently assessing the possibility of

you protect your clients from cybercriminal threats?

merging our drilling and core scanning services because we

A: Security is one of the most important services we offer

believe that not only could that be a far more efficient way of

our clients. Corescan can curate core collections and host

operating but it could also drive prices down for our clients.

the data for as long as necessary via In Perth,

Moreover, we are planning to develop the consultancy side

we have duplicated servers in constant operation, meaning

of the business in order to truly offer a complete solution to

data is always backed up, while we also mirror data around

our clients.





Q: With a proven track record of over 50 years of

Blanco was our first discovery, and although we have now

entrepreneurship, how would you define your current

sold that project, our sister company owns a royalty on it

record in the Mexican mining sector?

and so we are still involved. It is unique because it is right

A: My father is the founder of the company, and after

beside a highway and a power plant in a very well-known

having started working in Mexico in the 1970s, he saw great

area of Mexico. There are roughly 1 million ounces within

geological potential there. When Almaden went public in

a kilometer of the highway, which is a perfect example of

1986, one of the first things he did was to get involved

Mexico’s potential. Again, Ixtaca is 20km by paved road

in Mexico, and when the legislation change happened in

from an industrial park, and it has solid grades despite the

Mexico in 1992, we were one of the first juniors to begin

fact it is located in a developed part of the country.

operating in the country. We had immediate success, especially with the acquisition of the La Trinidad project

Q: What stage is the Ixtaca project at, and what needs to

in Sinaloa. We then made a new conceptual discovery,

be done to move it into a commercial stage?

Caballo Blanco, in Veracruz. We have been working in

A: Unfortunately, since we made the discovery metal

eastern Mexico ever since, and we believe that we know

prices have fallen by 40 percent but luckily our new

more about this part of Mexico geologically than most.

mine plan shows that even at these prices, the deposit is

Mexico has considerable geological potential, and has

still economically viable. We are always looking for new

always been extremely open for prospectors like us to

opportunities, and in a downturn opportunities can be

explore these regions. We certainly see ourselves as

found that would not otherwise exist. For example, we

pioneers, and we feel we have a great deal of potential

found a used mill in Alaska, the construction of which had

to go further. The interesting thing about Mexico is that

taken an investment of US$250 million. We were able to

there are areas that are misunderstood geologically, and

buy it for US$6.5 million ,and despite the shipping costs to

that represents an opportunity.

Mexico, this will dramatically reduce the capital required to build the mine. The next steps are to produce more

Q: What drove you to explore the Tuligtic Project and the

advanced studies, which will enable us to procure the

Ixtaca Deposit, and how has the project developed?

production financing. Later this year, we expect to finish

A: This project began because we felt the area had

the next step, which is the pre-feasibility study.

potential for epithermal deposits. However, there is no gold on the surface, only clay alteration. If there is clay,

Q: How has the current industry trend of reduced

there is no guarantee of gold but we saw vast arrays of clay

investment impacted your business model and targets?

throughout eastern Mexico. Therefore in 2010, we decided

A: Of course it is a challenging time. Ours was a blind

to take a chance and ultimately had the fortune of hitting

discovery, meaning that it was not exposed at surface level

300m of strong gold and silver mineralization. Caballo

but as a developer that has made a discovery we have had to focus on reducing the project’s risk. This is a change

“Mexico has considerable

to the exploration mentality because unfortunately we

geological potential, and has

exploration as we would like. However, Almaden has

always been extremely open

exploration. We own our own geophysical equipment and

for prospectors like us” Morgan Poliquin,

President & CEO of Almaden Minerals

do not currently have the luxury to focus as heavily on tried to increase innovation through reducing the cost of we have a drilling team that is 100 percent Mexican, so we drill inexpensively, and all of those things combined mean that we are able to do more than what would otherwise be possible.


INNOVATION AS THE ULTIMATE EXPLORATION TOOL The narrative of Mexico as a sleeping giant in the world of innovation has been told since times immemorial. In mining, the focus is now on cutting edge research in university and R&D centers, as well as resource estimates


and feasibility studies carried out by computer modelling

CEO of Teknol

and geostatistical software. The inextricable link between innovation and exploration is undeniable, since periods of marked acceleration in deposit discovery production

complex for Teknol. “We asked the General Directorate of

correlates with the introduction of new technological

Mines for its support with no success, since it considers

methodologies. This sentiment is also echoed by Margot

this information to be almost classified,” she adds. Hence it

Molina, CEO of software development and technology

sent a liaison to every regional office to gather information

solutions provider, Teknol. “One of the golden rules of the

and it resulted in the creation of Quick Mining, an app

business world is that if a company does not innovate,

that shows all the relevant information and data about

it is sentenced to die,” she states. This not only includes

a specific piece of land. Quick Mining and GeoInfoMex

products, but also processes, internal structures, and

can be integrated to provide a complete vision of the

business approaches. Bearing this in mind, Teknol’s role

country’s mining situation. “An additional advantage is

has been to help mining companies use new solutions to

that our software provides other relevant information such

strengthen their operations. “It is necessary to be open to

as the communities surrounding the area of interest, and

change and innovate in every aspect,” she adds.

if the land is an ejido territory,” she points out. The only requirement is for mining companies and investors to pay

GeoInfoMex has garnered recognition from the sector and it

a monthly or yearly fee to use this platform.

includes the information owned by the Mexican Geological Service (SGM). This in-touch system allows users to see all

Molina stresses the important relationship the company

the information gathered by the SGM for the last seven

has with SGM, which has enabled the development of

decades. “This includes geochemical, geophysical, and

its solutions. “When we first presented our proposal six

geological data, as well as main mineral deposits in Mexico,

years ago to SGM, we agreed on putting a touchscreen

tectonics, historic information and density maps to identify

in every office it had so miners, investors, and other

zones with geochemical anomalies by specific elements,”

stakeholders interested in any terrain could access the

she lists. This surplus of information is incredibly valuable

information freely,” she describes. When SGM wanted

as it speeds up the decision making of mining players.

to go a step further by sharing its data globally, Teknol

Traditionally, the visuals of this information are relegated

was tasked with developing the portable software, and

to maps and Excel, making it difficult to digest. Teknol

it has become the favored distributor of the information

condensed the information into layers so when the user

it generates. “Being a Mexican company certainly was an

selects a place it is researching, it can have the complete

advantage when establishing ties with SGM, and it was

picture of the site. “Another new layer that can be added

an important leverage since the entity would naturally

is the mining permits, which tells the interested party if

not feel comfortable sharing its years of research with

the piece of land of their interest already has an exploiting

a foreign business,” she adds. There is always room for

concession,” she boasts.

improvement, and Molina concedes that Teknol is no exception. In its endeavor to improve its solutions it will

This final layer was a product of innovation from within

lobby with the General Directorate of Mines in order to

Teknol’s own processes, and it developed thanks to the

make the information available to all the mines in the

feedback of the private sector. Molina explains, “Users

country. Teknol aims to strengthen its ties with the private

appreciate the geological information we provide in

sector. “Since Gold Corp was one of our first clients and

our software and they began to ask for more in-depth

we developed some interesting technology for them, we

information, especially regarding the status of the land.”

now have the experience to work with Grupo México on

This is incredibly relevant since companies want to know

their new concessions,” she shares. “Teknol’s greatest

whether the land was being exploited, under concession,

success has been in closing the gap between the mining

or waiting for a resolution. While it might sound simple,

industry and the use of reliable technology to ease their

the process of retrieving this information has been






in a matter of seconds. XRF results allow us to provide

Globexplore Drilling in conjunction with TerraCore. The

geochemical values. It is a proven and valued method for

companies are currently introducing this technology

rapidly determining the presence of key minerals at mining

within the Mexican mining industry.

sites worldwide. Its speed, flexibility, and ease of use make it the tool of choice for today’s mining professionals and

Hyperspectral Analysis is a technique used to determine

mineral geologists. It is a non-destructive analysis and

mineralogy just after the extraction of the cores or

requires minimal sample preparation.

the RC’s using the Hyperspectral Core Image System (HCIS). This analysis allows the mapping of the minerals

Core Logging Web Service can record analyses performed

distribution by a color-mineral alteration identification of

with the above techniques conducted at the drilling site

the entire scanned core box or chip tray. The analysis is

through a unique web service platform. This allows easy

used for various applications in the core logging and data

integration of all collected data in a single centralized

exploration process with alternative types for different

location. Data can be accessed and scrutinized from

applications such as modelling, geological positioning,

any location with internet access without the need to

and geological characterization.

download significant amounts of data. This is one of a variety of ways in which geologists can view their drill core








interpretation images provide geological content to the

or chip trays, and different data sets can then be overlaid to acquire specific information.

mapped zones in the core image data. Spectral features or parameters are used to interpret the presence of minerals,

The Core Logging Web Service is a visual and friendly

assemblages, zones, or changing mineral parameters. This

way to show all spectral images, detected minerals, and

technology can be used in correlation with the geological

alterations organized by box, depth, and interpolating

material so that geologists can explore the significance of

additional values like geochemistry. This powerful visual

these occurrences. Spectral feature images provide detail

platform manages all the features required for any core

on the changing spectral signatures in the drill core, and

logging, and with precision generates a comprehensive

these are generated in many different ways.

set of data products specific to the requirements of the individual client. As an online interface, it allows the client

The results are accurate and represent the data result

to view all generated products, from the scale of an

obtained from a mathematical process but are related to

individual pixel in a given core or chip tray, to the scale of

the spectral data and do not carry geological interpretation

the entire drill hole.

information. Moreover, results can be obtained in true color image of the core if the image data covers the visible

Both natural and false color images are available in the

region. False color composites of the core images are

generated data sets. This provides the ability to view

often generated by infrared data. These images provide

multiple sensor products within the same window, and

a base image on which further geological mapping and

also allows products to be overlaid directly on a core or

logging can be undertaken, and provide a direct link from

chip tray or the entire drill hole. The technology has the

the data back to the drill core.

ability to overlay multiple data sets on core tray images, and geologists can obtain mineralogical information

Portable X-Ray Fluorescence Analysis (XRF) works by

about the scanned lithology without directly having to

exposing a sample to be measured to a primary x-ray

sample it. In addition to this, high quality natural color

beam. The atoms of the sample absorb energy from the

images allow the user to characterize mineral textures

x-ray, become temporarily stimulated, and emit secondary

and structural elements without having to go onsite. This

x-rays. Each chemical element emits x-rays at a unique

also makes it possible to relate results directly to the core

energy. By measuring the intensity and characteristic

while exploring the multiple sensor data associated with

energy of the emitted x-rays, an XRF analyzer can provide

it. This is achieved with the use of a number of statistical

qualitative and quantitative analysis regarding the thickness

data plots, which can be customized, and accessed

and composition of the material being tested. Today this

through the dashboard menu. Both the image and digital

process can achieve laboratory grade analysis from raw

data can be exported to a compatible or readable format

materials to refined products, and everything in between

to the client at any stage.





Q: What are the largest projects the company is currently

the operator to understand technical risks and hazards

working on in Mexico?

associated with the activity. Traditional means of acquiring

A: DGI has been working in Mexico for more than a decade,

that information would be through drilling and extracting

and we are in the process of establishing a permanent

data from the core. However, in the corebox, the areas of

office in the country. Mexico has a strong and educated

higher geotechnical interest often contain only rubble and

workforce, and it continues to be an interesting jurisdiction

it is extremely difficult to extract usable information from

for mining investment. As a value added service provider,

those areas. By acquiring in-situ, the information can be

Mexico is a very attractive location for DGI because there is

acquired from the entire length of hole.

great scope for growth throughout the country. In terms of projects, recently we have been working with Goldcorp on

Q: What are the defining features you have to consider

a number of different assignments, including at El Camino

when carrying out operations in underground mines?

Rojo in Zacatecas. For a number of years, we assisted the

A: Goldcorp is producing at Peñasquito, an open-pit mine.

company by providing information for their prefeasibility

Although the existing pit shell is being used, the company

studies, including geotechnical and structural data from

is looking to expand, and if possible to increase the

drill holes. We measured the true strike and dip of faults,

stripping ratios. The high pit shell walls drive down costs by

joints, foliation, and contacts. This is particularly valuable

moving less waste rock, with less environmental impact. In

when carrying out pit shell design work because it allows

Peñasquito, we acquired geotechnical information inside


SHOULDERING MINE OPERATORS’ FISCAL BURDEN JESÚS HERRERA Director General of Detector Exploraciones Q: What objectives have you accomplished in the past

to their costs and sometimes make investments that are

two years and what are your next steps?

not necessarily cost-effective. However, in a downturn we

A: The year 2012 was our best-performance period,

must have the vision to maintain and direct our team, our

reaching the highest peak in production in the history of

work, and our clients to a sustainable operational phase. If

our company. We consolidated our Mexican operations

this does not happen and service companies like us are not

by drilling over 250km. In 2013, we all encountered the

consolidated they will disappear.

fall in commodity prices, and from then on we focused on maintaining our personnel and lowering our operational

Q: Does the company conduct exploration on its own or

costs so we would still have projects in the pipeline. We

just provide its services to third parties?

reached this by being more productive with our highly

A: Detector Exploraciones does not have concessions as

competitive prices. During times of abundance and high

this would create a conflict of interest with our customers.

commodity prices, companies often do not pay attention

The companies that employ us gain several advantages,

the pit so Goldcorp could refine its pit shell model and

with Mexican companies to provide our services directly.

therefore reduce costs. In an underground environment, we

We have been taking the proactive approach of co-

routinely assist on brownfield underground explorations by

hosting workshops in Chihuahua and Hermosillo. We

mapping structures and understanding geotechnical risks

want to build up the knowledge base within the eager

but also in instances of underground expansion. Recently

Mexican mining community. By establishing a permanent

we worked on an interesting project for one of our clients.

office with Mexican staff we can serve the market locally

The company is developing a new underground area, and

because we do not want our Mexican clients to have to

prior to our involvement it was drilling a series of three

contact Canada or the US if they are looking for services

holes to triangulate and understand the geotechnical risks

in the region. Therefore, we are looking at options for

prior to allowing workers to enter the mine. This took a

Mexican partnerships because we feel that having local

great deal of time and drilling costs so we worked with

knowledge will be key to achieving growth. Of course

our client to devise a new strategy where it would drill

we could grow organically but we feel that it would be a

just one long, flat drill hole of about 600m in advance of

slower growth, and we believe that we can learn from the

the drift. We then gathered the needed information from

knowledge of Mexican companies, which would add more

the hole with televiewers. This had a number of benefits.

value to our clients.


Firstly, by drilling one hole instead of three, the drilling costs were reduced by two thirds. Secondly, we provided the geotechnical information much sooner, and thirdly, it provided the most complete information because now they would get that information throughout the entire hole and not just from areas with competent core. Q: How do you expect the Mexican mining industry to develop over the next few years, and what will be the role of DGI Geoscience? A: We are very excited about Mexico and its future. We have seen increasing investment in the country by our Canadian and US clients that brought us to Mexico to work on their projects. Recently, we have been in extensive discussions

DGI devised a

new strategy

where it would drill just one long, flat drill hole of about 600m in advance of the drift

including our expertise in land use and our preeminent drilling

is more convenient for them to come to us. This is mainly

knowledge. Recently, we acquired a drone that photographs

because they would not have to carry a fiscal burden with

the land and its structures. This tells me we are on the right

the responsibility of security problems, permits, and even the

track, and if the federal government supports the Mexican

investment in drilling equipment falling on our shoulders. In

Geological Service, companies could invest with more

the last few years, all the mine operators used to have their

certainty. The other point is that the General Coordination

exploration and drilling departments but now they know that

of Mines must expedite its processes and make them more

this venture is not profitable for them. When I worked for

efficient so they could have concession resolutions on time.

Autlan, in a year we would drill 8,000m with eight machines,

We have been on hold for the past three years because the

which is extremely inefficient. At Detector Exploraciones we

Coordination cancels inactive or unexplored concessions

can drill the same distance with one machine in six months.

but takes a great amount of time to publish them again. The problem is that there have been many cancellations due to

Q: What are the objectives that Detector Exploraciones

concessions shrinking that have not been published again.

wants to accomplish in the next 12-18 months?

This does not allow companies to make new investments in

A: We made a cartography for the Mexican Geological Service

areas with more probable reserves.

(SGM) many years ago and Colombia is now in the process of replicating it. This not only helps foreign investment to

Q: Why would mine operators acquire your services when

flow in, supported on accurate information to locate possible

most of them have their own geologists?

deposits, but it also helps identify if a certain construction

A: Even when companies have the infrastructure to explore,

is safe or whether the rock could hold any structure. This is

most of the time it is not sufficiently developed. With

why we have also received calls from Paraguay and other

defined exploration programs operators calculate that it

countries to assist them with their cartography.



DRONE TECHNOLOGY TO MAP MINE SITES Detector Exploraciones’ drone project was designed to create georeferenced aerial photography of any linear or surface project. In order to conduct an aerial photographic survey, the processing and post processing of the information was divided into two activities, a field phase and an interpretation phase. The study area comprised two areas, one a powerline with a length of 40km, and the second with a length of 70km. The 110 control points were defined using sub-meter GPS accuracy, in order to make an adjustment in the post-processing for generating the photomosaic of the land. Each and every one of the points was marked with square shaped references with a dimension of 2m2, and in the center a 0.5in rod was placed. Checkpoints were erected prior to the flight day. During the preparation and calibration stage, air vehicle assembly, calibration, remote control, telemetry link, review, and breakeven load was performed. Based on the reference coordinates (AOI) and points previously recorded, control software defined the flight pattern in the flight plan to cover the area of interest. In this case, it defined a flight path from recorded coordinates. 10 photography sessions were held with an approximate duration of 45 minutes each. In total, more than 202 pictures were taken with a geographic reference (geotag). Subsequently, during the interpretation stage, the processing and initial calibration of photos was carried out to determine flight altitude. Regarding the flying height and positioning data of each of the photos, the initial processing and calculation with an optimal resolution of 7.96cm/pixel was generated. The data processing was performed using the WGS 84 UTM zone 13 coordinates system. From geolocation data, relative terrain heights were calculated, with the goal of using the point cloud to generate the mooring or tie between images. Once the point cloud generated the mooring, both the filtered point cloud and the densified format were created. Based on the structure of the point cloud, the digital surface model (DSM), which corresponds to a continuous numerical model representing the terrain heights and surface objects like buildings and vegetation, is generated. From the set of pictures calibrated, the process of image orthorectification with the help of ground control points was performed. Pairing or matching of images was established from the control points and the number of pictures present on the scenes. Finally, an investigation of the area was carried out in the National Agrarian Registry and the Land Registry in order to obtain all the legal background and to define the land surface layer.



USING MINING SYNERGIES TO ENTER SEGMENT SpiralTrac® technology to position Chesterton as the leader in sealing technology in abrasive and critical applications in Slurry Market,” Delano shares. “Our latest mechanical


seal was a split seal, which is designed to reduce downtime

General Manager of

because it requires no disassembly of the shaft. In the mining

Chesterton Mexicana

industry in particular, the equipment is large and it takes a long time to take it apart, and this is why these solutions are ideal for the segment.” Additionally, Chesterton’s Mechanical


As a company that traditionally worked in the oil and gas

Packing R&D department has developed a dual pack with

sector, Chesterton knew immediately when the prices

the advantage of being soft on the internal side so as not

began to slide that it would be necessary to diversify

to damage the shaft, and being tough on the external side.

into a new area of expertise. “Our main products were traditionally sold on an individual basis with one unit

Delano confirms that the Mexican mining industry is

sold at a time,” comments William Delano, the company’s

typically extremely cost-conscious but it seems to

General Manager. “Mines work differently because there is

consider cost in the wrong way. “Personally, I believe that

no time to wait while suppliers visit the mine to evaluate

the key lies in a synergy between purchasing, production,

the needs, due to their isolated locations. We had not


previously paid attention to this, meaning that we had

department is given a mandate to reduce costs, meaning

to adapt all our operating conditions and methods to

that the most attractive option is to buy at the cheapest

incorporate a representative that lives in the area, and

cost. The production department's mission is to increase

understands the conditions and the community.”

productivity and minimize downtime. However, the






maintenance department is the entity that is qualified As of 2015, Chesterton began working within the segment

to see that this cheap product does not work due to the

although there were no significant orders, Delano shares.

increased manpower needed to service the pump, and

“We are exploring our options with the main groups, and we

that it is causing the majority of the downtime between

have been in communication with First Majestic Silver,” he

failures.” When he speaks to maintenance departments

explains. Although Chesterton’s Mexican arm is not strictly

he discovers that the mechanical packing, which is the

involved in innovation, the global company has won a series of

most often-replaced product in the mining industry and

awards for its designs for mechanical seals, pumps, agitators,

should last around three months, is being replaced every

and mixers. “A significant breakthrough in our Mechanical

week due to the fact that cheap products are being

Seal R&D is what we call The Slurry Pump Program, which

bought. In this way, he says, maintenance, production,

utilizes Chesterton's highly differentiated product to give a

and purchasing must work together to develop the most

competitive advantage, particularly with our 170,442 and

effective solutions that are truly cost effective.



Q: What strategies has Intercore implemented to maintain

efficient drilling program, as it will be easier to identify the

its pioneering spirit despite the bear market conditions?

areas that must be reached. Once the market recovers,

A: In the past we used to acquire the equipment from a

companies must ensure geological departments have

range of OEMs, and after careful deliberation we decided

detailed information in order to obtain good results.

to exclusively distribute for one brand called Cortech.

Downtimes are dreaded, so we have a quick response time

This is a Chinese brand whose drills are assembled with

if a machine fails, and we have all the spare parts available

top of the line components from around the world with

for urgent maintenance.

Cummins engines and Rexroth pumps. Our two year strategy was to update all of our equipment and ensure it

Q: What are the most complex and challenging drilling

is completely hydraulic and track mounted. We have sold

projects that Intercore has been involved in, and how did

Cortech drills in Peru, Colombia, Chile, Uruguay, and even

it persevere?

to our competitors in Mexico. Drilling continues to be our

A: Our flagship project was the Ana Paula concession

core business and while the market has experienced a dip,

located in Guerrero whose current owner is Timmins

our involvement in top exploration projects continues. We

Gold. We started the project by drilling immediately with

have an equipment occupation rate of approximately 30-

four rigs on site, one of which, the CS-3000, is suited

40 percent, which shows we are still active and we will

for deep holes and can reach depths of 3,000m with a

survive this rough patch the mining sector is undergoing.

weight of approximately 30 tons. The conditions were difficult because of the terrain and various security issues,

Q: How are the needs of your clients evolving, and how

and we had to take additional precautions to ensure we

are you becoming more competitive in the drilling milieu?

did not overstep the cultural and social boundaries with

A: When speaking of competitiveness, the first thing that

the communities. Another challenging project was in

comes to mind is costs. Offering a competitive price may

Chihuahua because access was extremely difficult and the

be tempting for drilling companies and mining operators

environment was harsh for the type of operations we carry

alike but this does not guarantee the service level. If the

out. Logistically, it was very challenging because we had

budget is short, a drilling company will not have access

to repair the roads, set up camps, and navigate the rough

to the most appropriate equipment, drills, and additives

terrain. We had to race against time since the client was

to carry out the job. In a drilling project, we must stick

meeting investors and needed results quickly.

to the drilling program by reaching a certain recovery percentage, and adhering to the required number of holes

Q: What are the added value services Intercore provides

made in accordance to degrees and depth. In operations,

that heighten your stance in the market?

recovery is paramount but a variable that cannot be

A: As a medium sized company, Intercore owns 14 drill rigs

overlooked is community relations. We must convince

and a spare parts warehouse with equipment worth US$1

communities of the work we carry out and by offering

million that is ready for any maintenance eventuality. This

employment, we cement a good standing in those regions.

enables us to respond to any downturn immediately. Each project poses unique challenges, from the ground type

Q: How do you optimize the drilling program and help

to the recovery. One of the newest drilling techniques

reduce the time taken to bring a project to fruition?

is directional drilling, which entails drilling to a certain

A: According to CAMIMEX, it can take up to 19 years for

depth and deviating the hole into others at different

a mining project to reach production stage, so we must

angles. One of the advantages is that it is less disruptive

ensure that we reduce it. The division responsible for

to surface activities but it requires special equipment to

time reduction is the geological department, since an

deviate the holes, which might result in additional costs

accurate mapping of the property will naturally mean an

and time.


GET THE INSIDE PERSPECTIVE ON MEXICO’S MAIN INDUSTRIES Mexico Business Publishing supports business and political leaders in driving the development of Mexico’s main industries by offering first hand industry intelligence and analysis based on face to face interviews with carefully selected stakeholders. As the independent publisher of comprehensive, high-level annual reviews, our mission is to accelerate the exchange of vital industry information that enables Mexico and its business community to capitalize on emerging opportunities.


ROCK ANALYSIS THAT OFFERS GREATER PRECISION When PANalytical decided to expand its presence in Mexico in 2006, one of its primary objectives was to take advantage of the wealth of opportunities in the


mining sector, and the company’s belief in this potential

Regional Manager for Latin

has not diminished, according to its Regional Manager

America of PANalytical

for Latin America Marcelo Mott. However, since 2013, he has noticed that some foreign companies and investors have been struggling to find the fiscal incentives to enter

because it can improve the precision of chemical analysis

the mining sector in Mexico. “This is due to a number of

and is extremely simple to use and install.

reasons but I believe the main one to be the security issues in the country,” he asserts. “Despite the benefits the mining

“We are currently working on some automatization

industry offers foreign players, such as low operating costs

projects, offering a complete cost-effective solution as

and high ROI, many view other countries such as Australia

consultants to the major mining players,” he continues.

as a safer investment destination because of the security

“This complete solution uses an automatic sample

issues that persist in Mexico, mainly in regions that border

preparation method using robust machines and offering

the US.”

precise results to support the clients’ analytical needs.” The automated process removes the risk of human

In Mexico, he shares that he has experienced a sharp

error, and eliminates the need for harmful chemicals.

growth in demand for PANalytical products since 2011, and

Moreover, PANalytical has been working with Dutch

although that demand has dropped in the past two years

automation giant Philips in developing new products and

due to the challenges facing the global mining industry,

solutions for mining customers. “The company benefits

the company still sees ample room for growth in this sector

not only from the influence of Phillips but also from the

thanks to potential for exploration and production in the

PANalytical R&D laboratory in the Netherlands, which

country. Within this sector, PANalytical provides a variety

is an extremely advanced and well-equipped facility,”

of services including the X-Ray fluorescence technology

he boasts. This, he says, is the component that allows

(XRF) that performs elemental chemical analysis and can

the company to stay at the forefront of technology at

be used throughout the mineral extraction process, from

all times.

exploration to development and production. “For the exploration phase, we recently released a highly compact

The mining community in Mexico is traditionally extremely

X-ray spectrometer, called Epsilon 1 Mining, which is

conservative, and Mott believes this is one of the biggest

designed to accurately quantify a wide variety of ores,

challenges the sector faces today. “In Brazil, where the

rocks, and stream-sediment samples,” he explains. “It uses

mining industry is more or less at the same level of

very little energy and no additional operational chemical,

development as Mexico’s, practically every mining service

setting it apart from wet-chemical techniques, and it is

laboratory is using our XRF technology simply because

easily transportable. These factors make it an extremely

it is the most advanced, safe, and efficient solution

useful tool for mineral exploration projects.”

available,” he explains. PANalytical Is working with a wide client base in Mexico to increase its visibility, and provides

For the production phase, the company has developed

services to notable names like Grupo México, Industrias

the Epsilon 3, which is also an XRF-based analyzer but

Peñoles and Minera Autlan. “Nevertheless, many mining

is more advanced and can analyze larger rock samples.

companies we approach tend to prefer to continue

This machine needs to be installed in a laboratory at a

to use their current analytical techniques despite the

controlled temperature to ensure the most accurate results.

benefits that our systems offer,” he laments. “I believe this

“Finally, if a client requires rapid analysis we have the

conservatism will change gradually as the benefits of the

Zetium Minerals Edition analyzer, which is fitted with more

XRF technique become more well-known in the country.”

robust and more powerful X-Ray tubes than conventional

He shares that, in the future PANalytical will continue to

solutions,” Mott declares. “This machine is designed for

promote the two products that it has recently released,

multi-element chemical composition analysis in seconds,

the Epsilon 1 Mining model and the Zetium Minerals

and can complete up to 250 analyses per day.” This design

Edition model, both of which were specifically developed

is particularly useful for copper and iron analysis, he says,

for the mining industry.





Q: How does RNP maintain low costs while providing high

RNP mostly works with major mining groups in Mexico

quality products?

such as IMMSA, Industrias Peñoles, First Majestic Silver,

A: The company has a program that seeks out continuous

Minera Frisco, Pan American Silver, Endeavour Silver, and

improvement through analysis. The process may have a

Primero Mining. We grant our clients training for their

higher cost but it is more time and cost efficient in the

staff either at the factory or at the mine site. For optimal

long run. Technology is constantly changing and we strive

safety conditions RNP recommends companies take both

to stay one step ahead of the competition with the latest

courses. The first has a theoretical focus that includes a

computer numeric control (CNC) machines and tools,

bench test where customers learn the main functions of

as well as always having well trained labor capable of

the drills, maintenance, and operation. Secondly, the mine

solving the problems that might arise. We are aware of

site provides hands on instruction where staff learn about

the complicated situation that many mining entities are

the parameters of the drills with the opportunity to identify

suffering, and we strive to create win-win situations. The

and solve key problems that tend to arise in operations.

company promotes itself with a sales and technician team that constantly travel around the country, visiting our

Q: What innovative products does RNP offer?

main customers and providing answers to any doubts that

A: Our value proposition dictates that we stress the

potential clients may have.

importance of a slightly higher cost but higher quality product that does not constantly need to be upgraded,

Q: As a consequence of the downturn in the market, how

meaning that costs are saved over the long term. The drills

has the attitude of key players changed in terms of supply

we offer may be traditional but our technical support is

and demand, and how do they react toward the added

greatly appreciated by customers as it assures them

value the company offers?

they are making the most attractive investment. The

A: The fall of prices in the market has caused many

metrics and performance of our products are delivered

important changes. When commodity prices are in

to our clients so they can compare our prices to those

favorable conditions, mining companies do not care

of our competition. The business makes sure to keep its

about the costs and their only focus is production. Now

warehouse well stocked so that shipping is available at any

directors are beginning to worry about capital and they

time. When mines are in particularly difficult areas, RNP

come to us in search of lower cost suppliers. The fall of

sends technicians with the selected parts and drills as a

commodity prices has been beneficial for us because

support mechanism to smooth the process. In the case of

mining companies are scrambling to reduce costs as much

an emergency, some companies expect us to deliver parts

as possible. RNP is an ideal alternative thanks to the fact

the very next day. We are aware of the logistical obstacles

it provides spare parts and drills, which facilitates quality

and we prepare ourselves accordingly.

performance at a low price with the added bonus of technical support.

Q: Where does RNP see room for growth in the next five years globally?

Q: How has the company achieved a global presence, and

A: First and foremost, our market is going to be centered

what have been its key factors for success?

on Latin America, although we are also expecting to open

A: We attend international mining shows to introduce our

offices in the US and Canada. RNP is currently working

products to new markets. Customers feel the confidence to

on expanding our operations. We might possibly enter the

invest in our products when they get to know the company

South African market as well. To achieve its objectives, the

directors that have strong visibility in the industry, along

business has to be aware of new technology that is being

with technicians who are prepared to travel to mines to

released and consumption trends so that it can stay one

install the drills and solve any problems they might have.

step ahead of competition.


FRANCOIS DUMONT General Manager of Versa Perforaciones



The industry is still very slow and difficult, a small but





notwithstanding, Manager





“Proposal inquiries have been on the rise for us, and companies are being more active,” he shares. “Some corporations have been consolidating their businesses, and some of our clients are asking us for extra support with our services. On the whole, the sector is stronger and clients demand more but there is still an underlying focus on cost reduction throughout the sector, to which we have responded by lowering our revenue margins in order to increase our competitiveness.” Although the company began in Venezuela, Dumont shares that Mexico has been a perfect fit given the volume of mining operations. There are a variety of clients Versa is currently working with including Goldcorp, which has been present in its portfolio for several years. “We have developed a new portable drill that is extremely flexible and can reach extremely challenging destinations while retaining its potency,” he comments. “This product is already in operation on a variety of mines, and it has generated encouraging results. What differentiates us from our competitors is the standardization of our fleet for both open pit and underground mining. The same goes for our spare parts, which are practically the same for every machine.” Another critical factor, he says, is the use of electronic equipment because it is the most difficult to repair, sometimes taking days for a problem to be found and fixed. Difficult projects are normally located in very remote places, and in these cases Versa having its own personnel and transportation systems gives it the advantage of being able to select the right equipment for the right project. “This is essential in order to meet the goals on time for each project,” Dumont claims. “There is also greater demand for portable drilling projects than traditional drilling machines as they offer companies the flexibility to reach remote locations and still fall under the spectrum of viable costs.”


DRILLING COMPANIES GIVE NEW BREATH OF LIFE TO PROJECTS RAMÓN LUNA Director General of Servicios y Proyectos Mineros de México (SPM)


Q: What opportunities do you discern within the mining

and we explain this is not something we can because we


always put quality above cost.

A: Companies in the drilling sector are lowering their costs to such an extent that the market is destabilized.

Q: Could you mention a relevant project that reflects the

Certain industry players are reducing their costs by far too

quality of service you offer?

much. Unfortunately, these companies are only interested

A: We are currently proud to be working on the Santa

in obtaining contracts and are neglecting their services’

Gertrudis project, owned by GoGold Resources. When

quality. The first item to be sacrificed is commonly

we came to know and scrutinize the project we noticed

employee payroll, shortly followed by quality, repair parts,

that the company it belonged to did not have the same

and supplies. Employees, in turn, are not motivated to

vision for it as we did. It did not appreciate its quality from

perform adequately, and spare parts are not satisfactory,

the same angle as we did. It is important for each mining

leading to a further decay in quality. At SPM, we believe

company to adapt its exploration and operations to the

this attribute is key and strive for it not to be undermined

market, as specializations may not always be relevant

in any way. Prospective clients have, at times, made it

in certain climates. It seems that in this environment

clear that they are looking for the least expensive option,

our vision was on point. We took the lead in the Santa



difficult terrains. They can go deeper without disturbing

Manager Mexico of Falcon

the environment, and there is no need to build extra


infrastructure. We can reach a depth of 600m with HQ size drills, and 1,300m with NQ size equipment,” she boasts.

Latin America maintained its position as the most attractive region for exploration investment and Mexico obtained

Every time a project is concluded, the drills return to the

7 percent of the global investment in 2015, according to

workshop for routine maintenance and replacement of key

Falcon Drilling’s Executive Director Global Marketing and

components in order to ensure the equipment maintains

General Manager Mexico Brenda Carranza. “The past few

the highest standards. “As a company, we ensure there are

years have transformed expectations of players and many

no leaks and that all hydraulic components are in perfect

wish to invest in new solutions and technologies, and

shape in order to reduce the likelihood of waste or the

embrace a preventive way of thinking in order to prepare

dispersal of contaminated materials,” Carranza points out.

for what lies ahead in the future,” she claims. Drilling

“If the exploration stage of a project is completed in a

can be a complicated process especially if the region

proper manner and with excellent drilling techniques, then

has blockades or is located in a harsh environment, and

the company can easily present the findings to SEMARNAT

gaining access can equate to a great deal of money and

and other agencies in order to obtain expedited permits in

time. In this respect, Carranza believes that Falcon can be

the future.” Falcon can even offer payroll and transportation

of assistance. “We provide portable drills that can reach

services to clients. “Mining activities are moving to remote

Gertrudis project, raising its potential of 500,000 ounces

rather, it needed low-cost projects that would lead to fast

to 1 million ounces in just one year. In 2016, it will be ready

and abundant production. Rather than search for a project

to start operations, and we expect the first production

with a higher potential, we decided to see what the site

batches to be ready in September. While many companies

already had to offer, and how we could develop it. Looking

are struggling to survive, GoGold Resources is considering

more closely into the mine, we realized a larger potential

opening a second mine in Sonora, adding to its various

could be attained using the experience acquired over

other projects underway.

various previous operations.

SPM raised the potential of the Santa

Q: What is the role of companies such as yours to

Gertrudis project from 500,000 ounces to 1 million ounces in just

one year

strengthen the project pipelines that firms have? A: In light of many mine closures in the near future, we were able to revive a nearly abandoned project. The main pillar we rely on is our experience, which we believe allows a company to appreciate the value of a project differently, and confers it a certain vision. A mining firm may have an excellent team but these may be limited to 3-5 geologists. Our team counts 20, who undertake projects one after the other, and who can also be seen as gaining experience one after the other. Our activities

Q: How did you reach the successful perspective for

are not limited by administrative charges, allowing us

the Santa Gertrudis mine that allowed the potential to

to enter and exit a project at the most convenient time

increase so dramatically?

for our client. While certain mining firms may focus on

A: Each exploration and operating company needs to learn

a single project for 10 years, we strive to diversify and

to adapt to the circumstances in the market. I believe the

undertake various jobs because we want to offer our

previous owner of the Santa Gertrudis project was only

customers the experience provided by years of projects.

focused on exploration, hoping to discover a large deposit.

In our seven years of existence we have engaged in 30

A year and a half ago, the market did not need exploration;

different projects.

and hard to reach locations, and we have been involved in

The F1000 is a hydraulically driven drill powered by a

projects where we have had to transport our drills through

four cylinder diesel engine that provides maximum fuel

walking trails a little over a meter wide,” she states. “In

efficiency. It is equipped with a five foot head stroke

other cases, we have had to deal with extremely steep

for improved productivity and core recovery. The drill is

terrains and this is challenging when considering the

extremely versatile and can be mounted on skids, a truck,

implications of moving 500kg equipment. Nevertheless,

or an all-terrain vehicle. “It can be quickly taken apart and

our modules are built with these difficult treks in mind.”

moved by helicopter from one site to another, minimizing the environmental impact as well as reducing site

Safety is also a priority for Falcon, and the company

reclamation requirements and costs,” Carranza explains.

applies a robust safety program in its local offices and on the field. “We once had to drill on a hill over 1km high ,

Like many companies, Falcon Drilling has been forced

and although no drilling company in the past could reach

to optimize its operational and business practices as a

a depth of 1,300m, we took on the challenge,” Carranza

result of the current economic situation and the state of

comments. This complex procedure was made even

the industry. “Drilling companies are desperate to win

more difficult since the land was fractured and presented

projects in order to survive, and this has destabilized the

some cavities that had to be addressed with the proper

market," warns Carranza. "While competition is always

additives before Falcon was finally able to reach depths of

healthy, many contractors are now drastically lowering

1,300m. “The platform was built flat on an uneven terrain

their prices and offering cheap services, and their flimsy

so we also had to make sure that all drilling practices were

business models mean that they are likely to not reach

in place to make it a safe operation and avoid any safety

targets. These poor practices and unprofessional drilling

incident,” she recalls. Moreover, the F1000 drill rigs fleet

companies upset the market, and often these players

was purposely designed and built by Falcon Drilling for

either enter bankruptcy or are unable to complete their

use at remote drilling sites accessible only by helicopter.






Q: What role does Dimanor play in the mining industry

product. For this reason, around five years ago we set up

in Mexico?

a plan whereby the client can rent for six months, and

A: As well as providing John Deere agricultural machinery,

upon buying the product can opt for the 24-0 program,

we also distribute drilling equipment from established

giving them a further 24 months of interest free usage.

brands such as Furukawa Drill. Mining is a cyclical industry,

The client therefore receives 30 months of interest free

and the sector is currently experiencing an extended

usage of the technology, and roughly 80 percent of all

downturn, which has had a profound effect on our

equipment we sell to the mining industry is purchased

business like many others. We have around 80 machines

under this plan.

rented throughout the mining industry in Mexico, and with the fall of the metal prices not only did the number

Q: What innovative products does Dimanor plan to

of rentals decrease but more importantly the quantity

introduce into the Mexican mining industry to improve

of rental hours also declined drastically. We usually have

productivity within the sector?

around 600 hours of usage for our rented equipment in

A: One product that is certainly leading the way in terms

the mining sector but at the moment that figure is down

of technology is the John Deere 1050K bulldozer, which

to less than 200 hours.

not only has a dual-path hydrostatic transmission but also has a setting that reduces fuel consumption by up to 25

Q: What financing solutions does Dimanor offer its clients

percent. However, more importantly than the machinery

in order to be more competitive and flexible?

itself, we believe it is essential for users to be able to keep

A: As an official John Deere distributor we have our

track of the machine’s location, fuel usage, and overall

own finance arm, called John Deere Financial, which is

performance. For this reason we developed the JD Link

in charge of the financial side of the business. Our most

system, which falls under the broader WorkSight solution.

popular program is the “24-0”, which enables the client

This is an administrative tool that allows both Dimanor as

to use the product for 24 months with 0 percent interest.

the provider and the user to digitally monitor and analyze

The vast majority of our clients rent our equipment first

usage of the equipment, and therefore helps to prevent

and then after a period of 6-8 months decides to buy the

maintenance issues from arising.

Nuestro servicios: Geología Geomática / Topografía Propiedad Minera Capital Humano

Jesús Herrera Ortega +52 55 5586 8848

Christian Roa +52 55 5754 8370


SMALL EXPENSES MAKE BIG IMPACT EFRAÍN BECERRA Director Industrial Lubricants Division of Interlub

Q: What were the objectives behind the creation of Interlub and how has it evolved since its inception? A: Our main objective is to create biodegradable and highly effective lubricants that reduce the ecological footprint of industrial companies. Our scientists have developed a broad range of smart lubricant solutions that are tailored to the unique requirements of each

Lubrication expenses generally do not surpass 2 percent of the overall

maintenance budget

customer and designed to resist the most challenging

with each of our customers’ needs and unseen issues are

and “out-of-standard” operating conditions. Fortunately,

communicated properly. Our services include assessment,

Interlub has sustained double digit growth rates since its

implementation, documentation of benefits, and follow-up.

inception thanks to its customer centric approach, flexible

We have recently developed a new line of high-performance

technology platform, world class production facilities, and

biodegradable lubricants for one of the leading Mexican

superb logistics capabilities that serves customers in 37

mining companies that supports up to 300 percent higher

countries. Moreover, our company has established itself as

loads, reduces wear by 75 percent, and could therefore

leaders for critical applications in a broad range of heavy

extend the service life of open gears in ball and SAG mills

industry sectors such as mining, steelmaking, cement, and

by up to 30 percent. As a result, our client was able to

sugar production, among others.

increase the productivity of the equipment and expects to reduce capital investment significantly. Our increased

Q: How does the company participate in the mining

innovation capability stems from research partnerships with

sector and what services does it offer to these players?

the Massachusetts Institute of Technology (MIT), UNAM,

A: In general, we offer highly specialized lubricants that are

and other prestigious institutions. Despite Mexico’s lack

combined with diagnostics, installation, and maintenance

of sustainability norms and regulations, we have adapted

services. Our consulting team’s specialty is the detection

our products to international norms that are upheld by the

of issues such as high lubricant consumption, short service

European Union and the OECD in order to guarantee the

life of mechanical components, and high maintenance

quality and sustainability of our products.

complexity that are frequently hidden in plain sight and that can be improved through proper lubrication. Moreover,

Q: Why are the monitoring and installation services

our tribology experts are specialized in creating innovative,

Interlub provides for mining players attractive in a cost


constrained market?








ecological monitoring,

A: Our customers are operating in a dynamic environment.

documentation, and maintenance services assure positive

Critical variables such as temperatures, load, contaminants,

returns on investment and the continuous improvement of

and productivity measures are changing constantly and

key performance indicators in the mining operation.

affecting the performance of lubricants. The regular personal assistance and monitoring services of our








consultants assure the on time detection of critical changes


and enable us to adjust the value proposition accordingly.

A: One of our greatest achievements has been the

Finally, our reporting services assist maintenance managers

development of a robust new product development

in the preventive maintenance of critical equipment and



help them plan and optimize their maintenance budget. It

methodology is a process of co-creation that assures the

is important to highlight that our company does not charge

flow of customer input to the processes of product and

for these types of services as we consider them to be part

solutions design. This ensures the solutions are aligned

of the packaged solution we offer.









With a constant focus on budgets and fast ROI, construction and planning companies are equally as affected as drilling and exploration companies. Operators are trying to tighten margins to make new projects economically viable. Among considerations that must be taken into account at this stage are mine logistics, safety, and worker accommodation, all the while negotiating the minefield of ejido lands. Other emerging trends involve communications and mine optimization technologies and software, as operators gain greater insight about how their operations will be run on a low cost, high-productivity model.

This chapter begins by examining the strategies of suppliers of basic services vital to the profitable operations of mines. The key players in logistics then provide their opinions about the trials and tribulations of operating in such remote environments, as well as inventive tactics for overcoming these hurdles. Construction companies and component suppliers are interviewed to provide a perspective on the changing mindset within the industry in relation to the importance of strategic mine planning and development. Communications cannot be overlooked as the glue that binds all these components together to create a strong mining operation based on solid and well-planned foundations.




VIEW FROM THE TOP: Gustavo Ortega, Mexican Mining Chamber (CAMIMEX)


VIEW FROM THE TOP: Juan Castillo, Kepler Constructora


MINE SPOTLIGHT: Cerro del Gallo


VIEW FROM THE TOP: Servando Valdez, Grupo Cementos de Chihuahua


INSIGHT: José Zozoya, Kansas City Southern Mexico


VIEW FROM THE TOP: Francisco Alanís, DMV Consultores


VIEW FROM THE TOP: Eduardo Zarza, Espaciomovil


INSIGHT: Roberto Reyes, Commosa


VIEW FROM THE TOP: Victor Gamas, Gamas


VIEW FROM THE TOP: Luis Carlos Teran, Connect Logistics


TECHNOLOGY SPOTLIGHT: Chihuahua’s Official Exxonmobil Distributor


VIEW FROM THE TOP: Alberto Ramírez, Maptek


VIEW FROM THE TOP: Hugo Arroyo, Datamine


INSIGHT: Jorge Vera, Doka México


VIEW FROM THE TOP: Joaquín Patrón, Ankla


INSIGHT: Christof Blumer, Georg Fischer

Oscar Puente, Georg Fischer 197

INSIGHT: Marcos Gluyas, Gluyas Construcciones


INSIGHT: Rudolf Hess, RH Shipping



TRIPLE HELIX APPROACH GENERATES RESULTS GUSTAVO ORTEGA President of Innovation, Technological Development, and Energy at the Mexican Mining Chamber (CAMIMEX)


Q: What are the most prevalent trends you have witnessed

A: The adoption of change automatically provokes a

in terms of innovation of technology and energy?

certain reticence. The most effective tool to promote a

A: I have witnessed the need to maximize the use of assets

favorable environment is the involvement of operative

in the mining industry, and to increase the recovery of

personnel in the planning and execution of innovative

spending on consumables and materials used in industrial

projects, rather than just those responsible for research.

processes, including diversification of product lines. For

Taking ownership of the change substantially increases

example, metals recovery can be performed in rare earth

the potential of making a positive general impact, favoring

through the treatment of commonly processed materials.

the progressively simpler adoption of innovation and

The essential difference in being part of a restrictive

subsequent technological development projects. This

environment is in the fact that the number of measures that

can be seen in terms of the number of projects that are

can be implemented is lessened, but the quality never drops.

executed over time, because if the number increases, the

Operators are choosing only to embark on the projects that

process of adaption to the change is being carried out in

present a clearer positive impact for the company. Investing

the correct manner.

in projects within this framework is a solid affirmation that the company has confidence that they will be profitable

Q: What kind of investment is innovation in mining

in the future. Moreover, the geological diversity of mining


sites in Mexico is fertile ground for the development of

A: The country must strengthen its triple helix cooperation

specific projects and technologies to target each variable

mechanism between the private sector, public sector,

of the deposits. Additionally, the country’s Universities

and academia. Finding mechanisms that allow a focused

and Research Centers constitute a solid foundation for the

use of research resources in the academic arena in order

development of technology.

to resolve current problems in industry will be the most promising legacy possible for the consolidation of a

Q: How are digital workforce engagement and enhanced

sustainable innovation system. Innovation in the mining

asset management manifesting themselves in the mining

area has been increasingly considered as a way to


improve the performance of daily processes. However, it

A: Process automation is a significant area of opportunity.

is important to also allocate resources to applied research,

With the higher level of complexity in the activities

which would allow the diversification of current processes.

carried out, a smaller variability can be obtained in the

The development of innovation hubs in common areas of

processes, generating an increase in efficiency. While the

interest would be an attractive practice to adopt.

use of tools like 3D printers is minimal at the moment, this kind of technology holds an interesting potential. An

Q: How has the Energy Reform sparked innovation in

example is the eventual possibility of being able to create

mining in terms of self-generation of power?

spare parts for heavy machinery and other equipment

A: The new regulation will allow mining companies

with 3D printers, which would reduce the operation and

that are characterized by their extensive use of energy

maintenance costs of the machinery. An alternative that

resources to allocate resources for energy generation in

will allow an increase in profitability without sacrificing

competitive conditions. In this sense, mining companies

results involves achieving an adequate automation of

are consolidating specific areas for development of

processes, obviously without compromising quality on the

energy generation projects, which will serve as catalysts

occasions that human presence is necessary.

for applied R&D projects in this area. We hope that the legislation will serve as a framework to facilitate a greater

Q: How do you evaluate Mexican miners’ changing

interaction between the entities that generate knowledge

mentality to these technologies?

and the consumers of this knowledge.


KEEPING PROJECTS ON TRACK JUAN CASTILLO Director General of Kepler Constructora

Q: How does Kepler manage its workforce capacity to

encounter during construction projects is the logistics

overcome the tight timeframes?

process and it is important for companies to have strong

A: Most of the time, clients come to us with contracts in

logistics in order to efficiently transfer materials and

which they tell us that we have 10-15 days to mobilize and

equipment across different locations and on time.

create our teams. By the end of the first week, we have already contacted and selected our teams, so that in the

Q: What is Kepler’s strategy to obtain a larger market

second week we can bring the teams to the job site to

share within the mining industry and which projects have

perform medical exams and identify safety measures. Thus

given the company the most visibility?

by the beginning of the third week, the teams are ready

A: We have worked on a variety of projects with renowned

to begin working. When new supplies are needed, such

companies such as Peñasquito with Goldcorp, Palmarejo

as security equipment, our purchasing department finds

with Coeur Mining, and Pueblo Viejo in the Dominican

the suppliers and begins buying immediately. We have a

Republic. The challenge we encountered in Palmarejo was

large network of suppliers, so we can have access to any

that the project was isolated, which made it extremely

materials across the country. Sometimes the contract

difficult to reach it. Pueblo Viejo is one of the largest gold

stipulates that if the client cannot provide something then

mines in the world, and in this project we learned about

the contractor is obligated to acquire it. In these cases

regulatory compliance and how to adapt to the customs

agreements must be made regarding when and where each

and labor force of another country. We also gained a great

material will be purchased and delivered. This is relevant

deal of experience shipping materials to and from Mexico

since each construction material has a different purchasing

and we discovered that in the Tampico Port, it was crucial

time frame, for example, a cement mixing plant usually

that the arrivals were on time because if they were early or

takes two months from mobilization and installation on site.

delayed, the company would have to pay large fines.

Q: Mining operations take place under harsh climate

Q: Which is Kepler’s strategy to differentiate from its

conditions. How do you prevent downtime and probable



A: From 2010 onwards, mining players have noted that

A: Each mine faces a different challenge and with our

they cannot opt for cheap contractors since in the long

experience we apply the lessons learnt to the new mining

term these do not fulfill their responsibilities. Some of

projects in order to avoid committing the same mistakes.

the companies that were our competition in the past

We have to adapt to the different environments and

have disappeared because of low quality services.

circumstances to each project. In Canada and European

We are focusing on maintaining our standards, which

countries, companies have to provide their workers with

is something that our clients notice. There are many

jackets because of the extremely low temperatures,

elements to consider, from having the expertise and

while we have to give workers cold water to avoid heat

implementing processes on time to keeping costs low.

stroke. One of the most difficult tasks is establishing living

Years ago, it was the operation and construction areas

quarters for the labor force, so we recruit a company to

that made the majority of decisions but nowadays the

construct the living spaces that come with integrated

purchasing departments are playing a more dominant

kitchens, bathrooms, and bedrooms. Our main task

role. The mistake that many of these departments make

within mines focuses on their construction rather than

is that they usually go for materials that are cheaper and

the development or exploration. We carried out internal

as a result low quality constructions are being made. The

meetings with our different departments to plan and

mining industry is going through a rough patch but 2016

determine the resources that must be delivered for mining

looks hopeful since we have started the year negotiating

construction projects. One of the biggest challenges we

projects with Peña Colorada and Peñasquito.



CERRO DEL GALLO Within the San Antón property, with its porphyry coppergold deposits, intrusion-related gold deposits, epithermal silver-gold deposits, and gold-copper skarn deposits, Primero Mining’s Cerro del Gallo development project is underway. Cerro del Gallo is situated in the Mesozoic Sierra Madre Oriental terrane at 80km north of the Trans-Mexico Neovolcanic Belt. Sierra Madre Oriental is characterized by its late Cretacious-early Tertiary belt with its high level felsic intrusions. Before the discovery of Cerro del Gallo’s large low grade gold-copper-silver deposit, the San Antón property’s mining activities centered around epithermal veins. Nevertheless, now attention is shifting to these new, highly viable mineral resources. In May 2012, previous to Primero’s acquisition of the property in December 2012, Cerro del Gallo underwent a Definitive Feasibility Study (DFS) for the stage 1 heap leach. The DFS predicted an initial 7.2 year lifespan for the mine, finding that this could be prolonged by the operator by an additional 6.8 years through use of techniques such as second stage carbon-in-leach and heap leach mill expansion. Measured and indicated resources for the Cerro del Gallo concession amounted to 47.8 million tons, with 923,000 ounces of gold at a grade of 0.6g/t. Maximum gold output of 99,100oz/y is expected to be reached in year three of production. Measured silver resources amount to 20.5 million ounces at a grade of 13.3g/t, and copper production is expected to reach a potential 103 million pounds. The DFS outlines that the Cerro del Gallo project will go ahead as an open pit truck and shovel operation and will incorporate a processing plant with a capacity of 4.5 million tons per year. Removal of copper before gold recovery will be made possible due to the planned SART processing stage, but conventional cyanide heap leach will be used to extract the majority of the minerals. The plant is expected to produce 95,000oz/y of gold equivalent with an estimated cash cost of US$700/oz. The pre-production mining fleet costs outlined in the DFS for the first stage includes primary mining equipment, support equipment, blasting, and mine maintenance totals US$18.7 million. The sustaining capital, to include mining capital, leach pad expansion, and stacking equipment is expected to amount to US$28.9 million. The DFS concludes that the Cerro del Gallo deposit is a viable project for production of gold, silver, and copper through heap leaching and weathered and oxidized material. The feasibility study claims that the project has a positive cash flow and its economic potential is strong based on financial, operating, production, and reserve estimates.





Q: What products does the company have in the pipeline

Q: Which products were developed in CIT that have now

that it is planning to release in the Mexican market in the

been established as a solution for the mining industry in

near future?


A: In order to ensure that we remain leaders in our field,

A: Microsilex is an innovative alternative to silica fume

we opened the Technical Innovation Center (CIT) in

developed in CIT, which is now being manufactured at our

Switzerland, which consists of a group of highly trained

Ciudad Juarez plant. It is used in mining as an additive to

researchers dedicated to developing new solutions and

form high-performance concrete, and its features include

improving on existing ones to serve our clients not only in

high density, low permeability, high adhesion, sulphate

the mining industry but also in the oil and gas, construction,

resistance, mitigation of added alkali reaction, and

and infrastructure sectors. In terms of our products, we will

increased resistance that can lead to 28, 60, and 90 days

continue to promote our range of dry concrete solutions

of shelf life. For mining applications, this is mainly used

such as Dinamix FR and Dinamix FR 40/6, which are highly

in shotcrete as well as in special concrete for machinery

resistant hydraulic compounds designed to set in two

foundations. The Milpillas and Bismark mines belonging

hours or less. This is particularly useful when constructing

to Industrias PeĂąoles are currently employing this

bridges and roads, allowing cars and even large trucks to

technology, as well as a mining company called NEMISA

travel over the cement shortly after the works have been

based in Santa Maria de la Paz.

completed and minimizing travel disruption. In 2016, we plan to introduce a new version of this technology that

Q: What technology does Lanzamix use, and how does it

will significantly improve productivity. These dry concrete

differ to similar shotcrete solutions on the market today?

solutions will be the main focus for the company in terms

A: The Lanzamix technology is a dry product that assumes

of product development over the next 12-18 months.

the characteristics of a combination of Fraguamix and quality aggregates when water is added. In addition to its

Q: Which of your products receives the most demand

high strength, it provides a short setting time of up to 150kg/

from the mining industry in Mexico?

cm2 in the first two hours, which increases to 250kg/cm2

A: Mining is an important part of our business in Mexico,

within six hours. This provides a greater level of continuity to

representing around 10 percent of the company’s total

rapid stabilization works in difficult terrains with rock quality

income. For the most part, mining operators require

issues by providing a higher level of safety, and the number

traditional cement solutions for use in their production

of accidents caused by rock falls in mines using Lanzamix is

processes. This includes cemented rock fill (CRF) products,

significantly lower than in those using traditional shotcrete

which is a mix of crushed and screened waste rock used in

solutions. Moreover, our CRF process is a mining method

mines around the world to fill mining voids with stable mass,

comprised of preparing a mixture containing a small amount

while it can also be used in tailings processes. Moreover,

of cement and pre-crushed waste rock to generate a support

we offer a range of leading shotcrete and bagged cement

mixture for the holes created inside the mine as a result of

solutions, which can be used during mine construction.

mineral production. It simultaneously serves to extract the

The vast majority of our business comes from Chihuahua

adjacent ore blocks, preventing the loosening of large rocks

state, and while we are well established locally, we are

due to vibrations and eliminating the dilution of the mineral.

determined to develop new solutions in order to expand

This CRF method, like filling methods using a cement paste,

our presence in the mining sector not only throughout

allows the extraction of the total ore without any remaining

Mexico but also regionally in South America and the US. In

columns. As long as the value of the mineral is greater than

fact, we already have three cement manufacturing plants

the process cost, GCC provides the cement, production

in the US, and I have no doubt that there is a large market

capacity, logistics, and technical support in the mixing and

for our products in the country.

sampling of the specimen.


CARRYING THE LOAD OF THE MINING INDUSTRY Railroads have always been a significant part of Mexican


culture but after the Mexican revolution in the 1930s, the

President, General Manager,

network was made public, and subsequently neglected

and Executive Representative

until its privatization in 1996. This was an opportunity

of Kansas City Southern

seized by Kansas City Southern (KCS) and Transportación

Mexico (KCSM)

Marítima Mexicana (TMM), who worked on a joint venture in the northeast of the country. This JV spawned the creation of KCSM, which went on to become Mexico’s

carrying out preventive surveillance,” Zozaya shares. “One

most important railway freight transportation company.

of the biggest challenges is that we have learned that

According to KCSM’s President, General Manager, and

we must act to improve systems, rather than waiting for

Executive Representative José Zozaya, Mexico now

the government to take action.” He believes that there is

accounts for 48 percent of the parent company’s business,

a requirement to work with the government but also to

since both operate not as two separate networks but as

establish independent initiatives and invest in requirements

one unified system as a response to today’s network

like security. When that process is established, incidents

economy and as a way to increase efficiency. “Although,

can be mitigated and prevented. In terms of working with

in the last 18 months, we have been capitalizing on the

the public sector, Zozaya’s responsibilities include a duty

opportunities brought about by the Energy Reform and

to establish strong relationships at various government

the booming automotive market, we have also continued

levels. “I interact with the President, Ministers, Governors,

to foster growth within our traditional sectors of grain,

and Mayors because we have a concession that we must

minerals, metals, steel, and petrochemicals,” maintains

maintain,” he declares. “In order to do so, we must fulfil


our obligations under this concession, meaning that open lines of communication with the authorities are vital.”

KSCM is currently in the midst of a considerable investment

KCSM also receives as much support as possible from

process. In 2015, the company invested US$324 million in

the Mexican government, and has established a strong

Mexico, US$160 million in railroad rolling stock, US$108

relationship over the years, he adds.

million in infrastructure and tracks, and US$56 million in business development. This provides an idea of the level of investment expected for this year. “We have made an investment commitment of US$154 million to the Mexican Revenue Service (SAT), while also negotiating

In 2015, KCSM invested US$324 million in Mexico

with the government entity about the possibility of KCS constructing the remainder of the Celaya bypass,” he

KCSM places innovation at the forefront of its development,

discloses. “This would mean a further investment to add to

and has even set up an employee forum so its staff can have

this initial figure.” Within KCSM’s concession, it has invested

a platform to share their ideas. “We want to hear about

a great deal of money in updating tracks, infrastructure,

improvements that can be made, not only to equipment

equipment, and systems, among other components.

or machinery but also in working conditions and problem solving,” Zozaya claims. “Regarding technology, we are

For the mining industry specifically, he believes that the

continuously researching in conjunction with machinery

company can offer efficiency, lower costs, and greater

producers to find out about new developments. We have

capacity. “Some of our competitors have an advantage

been extremely successful in building a more efficient

in that they not only own the railroads but also the

operation with the experience of the US railroad as well

mines, whereas we simply render services where they are

as the valuable experience of our Mexican employees who

required,” he states. Security is a polemic issue in mining,

previously worked for Ferrocarriles Nacionales de Mexico.”

and in order to guarantee the security of the goods it

These actors, he says, have provided a great deal of ideas

transports, KCSM has an extremely close relationship

on grid operations that can save time and money, meaning

with all the federal, municipal, and state authorities. “We

that KCSM is able to pass the savings onto clients. Zozaya

also work with intelligence agencies in Mexico and the

aims to become increasingly efficient as this will enable the

US, and we have an internal security team that works 24

company to provide a less expensive service to the mining

hours a day and is constantly monitoring our cargo and

industry, in which transportation is key to competitiveness.





Q: How do you encourage synergy between different

Q: What other competitive advantages does DMV have to

divisions to create business opportunities?

help their clients become more efficient and competitive?

A: We are currently involved in a project in Coahuila

A: If DMV was a smaller consulting firm and had the same

where we are extracting barite. At first we had entered

platform, it would be much more complicated to make

the project as shareholders to make a profit from the mine

suggestions or comments to the companies. An advantage

but slowly we became more involved by contributing to

we have is that we adhere to internal operation parameters

the startup process and overall development of the mine.

to make the correct recommendations about the current

The company is also participating in another project

company standards. Another advantage is that we can

for the contracting division in which we help document

directly contact engineers that work in different divisions



of DMV Group as well as other experts that have extensive

improvement, and develop a more strict planning strategy.




knowledge about the industry and processes to assist us with

Our consulting division has created a partnership with the

creating tailored solutions. Everything in a project can vary

Spanish engineering company Torsa in order to provide

from the amount of infrastructure available and how much

our customers with technological mining solutions. We are

capital is invested to the social and cultural surroundings

beginning to offer personnel localization in mines by using

of the project. We have been involved in some projects in

radio localization (Total Tracking), anti-collision systems

which cost reduction strategies are not implemented in the

(Total Detector), and traffic control equipment over ramps

company. The decisions are generally taken by CFOs who

to increase operational efficiency (Total Traffic). Our goal

base them on financial statements, when COOs should be

is for our clients to recognize our name and request our

the ones to identify where cost reduction strategies could be

services because they are aware of the quality services

used to increase productivity.

that we offer. Q: What innovations has DMV Consultores implemented Q: What was your contribution to mining projects and

in Mexico?

how did you help your clients optimize processes?

A: We have constructed our own plant with an internal

A: We were involved in Silver Standard's La Pitarilla

group, and have also made some in-house adjustments

Mine, and First Majestic Silver’s La Parrilla projects as a

in our own mines. The company wants to bring systems

contractor, which means we arrive with our own work

into the market that prevent machinery from colliding and

team and machinery to develop ramps, entrances, and

crushing miners, and also worker localization systems.

fronts inside the mine. The company is in charge of

These types of systems can help in case of emergencies

creating the cave’s internal infrastructure, and the revenue

like in the case of mine collapses, indicating the exact

depends on the tasks completed by the work team. Once

location of the miners so they can be rescued immediately.

that is completed, the team begins to extract the minerals,

This system also helps evacuate all personnel in drills or

moving them through ramps and the entire infrastructure

when blasting is about to begin. The current system is

the company had previously built. We have an eight

not completely reliable because often the miners forget

year contract with First Majestic Silver, and we also have

to check in and there could be people inside that are not

contracts with a national firm in Durango. All the projects

accounted for. It also reduces productivity because if

in which we are involved are underground mines where we

somebody forgets to check out, the system would indicate

use drill jumbos and other equipment made by Oldenburg

that the individual is still working inside the mine, which

and other main equipment brands. There are many

would delay processes such as blasting. The technology

projects that could be developed at the moment with little

we are bringing into the market is already being used in

investment, and investors can wait for market prices to

mines in Canada, Chile, Peru, and Spain. At the moment,

rise again and sell projects to make a profit or reinvest.

we are introducing the product onto the market.





Q: Can you explain how the company was formed, and

speed is a crucial aspect of our business and something that

what gap in the market you were trying to fill?

is vital for our customers. We had a client who was working

A: Espaciomovil is a company that thrives on innovation,

on a significant transport project for a mine, and we installed

so my partner worked on a patented development unit

a camp fitted with dormitories, dining rooms, and office

that allowed the replacement of components onsite, and

spaces for 150 people within three months.

developed a mechanism whereby it was easy to replace the components such as doors and windows. There are a

Q: How can Espaciomovil’s mobile units help its clients to

great deal of options that we offer that a traditional unit

reduce the operational costs of their businesses?

may not. Our modular units allow more people to fit inside

A: One of the main benefits our business model provides

even though it takes up less space simply as a result of

is that, given the rental option we offer, our customers

the design of the furniture, which is customized to the

are not forced to make any long-term investment. The

particular unit. At that point, the virtues of our product

products are not luxury items that require significant

were relatively misunderstood but we have now been


able to become an industry reference in terms of modular

sustainable, and affordable mobile solutions that not

capabilities. The company initially began to rent and sell

only last for several years but also have little or no lasting

on a small scale, and between 1998 and 2002 our regional

effect on the surrounding environment. It should be noted

fleet increased to 40 units.

that this is not a short-term fix that we have devised as a







result of the current market conditions but rather a longQ: Which products or services see the most demand in

term strategy designed to ease the financial strain felt by

the Mexican mining market?

our clients. One of our most popular patented products,

A: The mining sector is extremely important as not only

the mobile office and camp unit, requires no preparatory

does it represent 15-20 percent of the company’s sales but

excavation work prior to installation. This means that the

it has also allowed us to learn to develop products, grow in

building infrastructure can be put in place and taken away

areas to which we are not accustomed, and to understand

without any drilling, which of course benefits the ground

security, which is an integral part of our business. In the

underneath the structure. We also design our products

last few years, although the sector has not seen the growth

to use as little air conditioning and heating power as

of previous periods we still see it as an important part of


our business, and it is merely a question of waiting for the market to recover.

Q: What plans does the company have in place to further establish itself in the mining market both in Mexico and

Q: What importance does flexibility have in the mobile


accommodation industry?

A: Our principal role in the mining industry is to improve

A: There is a large quantity of insulating materials and

the quality of life for those living and working in and

flooring equipment currently available, which makes it

around the mines so we will continue to design new and

easier to continuously improve our designs through trial

spacious living quarters for mine workers and for those

and error. We recognize and embrace the need to build a

who travel to mines, such as service providers. We are

deep knowledge of the area and its geology before starting

currently working with our R&D team to create six-floor-

a project, and we work together with the client to develop

high mobile hotels that can be easily and quickly installed

a solution that will meet his or her particular needs. For

on the mine site and will provide all the necessary services.

example, usable space often comes at a premium on mine

This is a product that will be on the market before the

sites, and one of the biggest advantages our products have

end of 2016 and is one of the most innovative designs

is that they are easily adapted to fit any location. Moreover,

Espaciomovil has ever produced.


FLEXIBLE SOLUTIONS FOR HARSH ENVIRONMENTS A key issue that mining operators must frequently negotiate is that of security, and many of the larger mines around the country are located in regions suffering from insecurity. Therefore, the operators ask the army to install


soldiers to live on the mine site in order to protect those

Director General of Commosa

working on the project. Commosa built a temporary camp specifically for soldiers at a mine in Chihuahua, which consisted of a series of “Double Wide” mobile units. “These

developed a strong commercial network throughout the

installations are 60m and can provide comfortable living

country, enabling us to foster long-term relationships built

quarters not only for soldiers but also for regular workers,

on trust, and this trust helps us to continually develop and

and this is a trend that we are seeing more and more of

improve the quality of our products.” Commosa also has

from the mining community today,” says Roberto Reyes,

two manufacturing plants, allowing the company to reach

the company’s Director General.

any location nationwide quickly and efficiently, which is


something that Reyes believes has not yet been achieved Although the company’s activity in the mining industry

by competitors. “A distributor has two main expenses:

has been fairly limited over the past year, this is something

depreciation of metal prices and maintenance work,” he

Reyes is planning to change in the coming months because

states. “Market volatility is something outside our control

the mining sector is of great importance to the company’s

so we concentrate all of our efforts toward making sure

growth strategy. “Of course, we continue to work on the

that our products require the least possible amount of

biggest projects, including at the Peñasquito mine in


Zacatecas, which is operated by Goldcorp, a long-standing client of ours,” he reveals. “However, like many companies

When working on a new project with a client, Commosa

working in the energy sector throughout the country, our

always have a third party to take care of the financing side

business has been affected by current restructuring that

of the project. Companies such as Williams Scotsman and

has been taking place at PEMEX, and this explains why our

Caterpillar act as the intermediary between the client and

growth so far in 2016 has not been spectacular.”

the manufacturer. “Indeed, our relationships with financers represent 80 percent of Commosa’s business, and these

As a mobile solutions provider, Reyes reveals that

institutions account for the majority of our sales,” he states.

Commosa’s principal strength is in the quality of its

“For example, we are currently increasing our export

products. “We have worked with global leading brands

business in Central America, and Caterpillar has been crucial

over periods lasting several years, such as GE, Williams

in the financing and sales sides of this project by providing


us with positive recommendations and vital contacts.”











Q: How has Gamas carved a niche in the mining sector?

Q: Why should mining companies recognize the value of

A: Logistics is an important enabler, and customs

outsourcing their supply chain and logistics solutions?

brokerage and transportation services tackle security

A: When creating a supply chain and logistics solutions,

concerns. In the mining sector, Gamas has become an

it is important to first identify the size of the company

option that provides security, savings, transparency,

and its immediate needs and concerns. Companies

and efficiency across the value chain. Our participation

dedicated to exploration have unique needs that are

in the sector began in the early 1980s and our roots

particular to that niche of the sector and differ from those

can be traced to the iconic mining activities of Sonora.

that operate mines. There are many layers that are tied

Throughout the years we have learnt how the supply chain

to logistics solutions, from the design of a supply chain

of top operators works, along with their needs, and areas

to the outsourcing of supply chains and services to the

of interest. Sonora is a pioneer in the mining sector with

mine pits. In our organization, we specialize in all three of

noted operations like Grupo México’s Cananea mine. This

these levels, and the most complex is the outsourcing of

wealth of history and knowledge has revolutionized the

supply chains. We have to liaise with the various suppliers,

manner in which logistics is carried out by the sector, and

order and structure them, and ensure that the services

we have formed part of this wave. Now, Gamas takes a

and products are delivered on time to the mine. We have

leadership position in logistics and customs brokerage

a string of success stories in the outsourcing of supply

services in the mining sector.

chains, and in Peñasquito we were in charge of preparing


CONNECTING THE MINING SUPPLY CHAIN LUIS CARLOS TERAN Director of Connect Logistics Q: How has Connect Logistics’ local expertise benefitted

fact that logistics is an enabler of investment and plays

the logistics of Sonora?

a predominant role in the decision making capabilities of

A: The business strategy Connect Logistics embraced

top mining companies. The rough patch mining companies

since its inception was the creation of strategic alliances.

are going through has forced logistics companies to

These partners are either located in the US or have a

optimize their services so they stand out from ordinary

strong foothold in Mexico, and these alliances enable

transportation companies. Strengthening communication

us to expand our logistics network. The mining industry

with our clients make this efficiency possible since it is

demands freight movements that transcend the borders

much easier to track the merchandise and decide the

of Mexico, and having this international support is a pillar

times and routes.

in our strategy. Our participation in the sector has naturally increased our expertise and knowledge, and we expect to

Q: What are the most complex and unique logistics

grow exponentially in the medium term. It is a well-known

challenges mining companies are facing?

the logistics of 95 percent of all the equipment in the

be present in the minds of all mining companies operating

mine. Likewise, in Sonora we have worked in the most

in Mexico or those wishing to enter the market. We have

emblematic mine by optimizing the supply chains and

seen that foreign companies sometimes struggle to

improving the logistics network. There are many benefits

adapt to the Mexican way of doing business since they

mining companies can gain from outsourcing their supply

are accustomed to other market conditions. Companies

chain logistics, and one of them is that it allows them to

should carry out audits once a year so Gamas provides

be more stringent and demanding with their suppliers.

preventative auditing. As customs brokers and advisors,

By having a controlled supply chain, mining players can

we always advise compliance in all matters, from value of

uphold higher quality criteria and create competitiveness

merchandise, place of origin, and tax returns, to updated

between suppliers.

permitting and concessions.

“By having a controlled

Q: What unique services have you come up with to cater

supply chain, mining players

A: If a mining company does not hire a logistics specialist

can create competitiveness

arrive to the mine on time, but also without any damage,

between suppliers”

of waiting for the spare parts to arrive. In Peñasquito, we

Victor Gamas,

Director General of Gamas

to mining players? then the costs will escalate. The merchandise must not only as this would mean that the mine potentially faces months were in charge of the entire equipment logistics and we were involved from the conclusion of the exploration stage to the construction phase. In the space of a year, Gamas coordinated the transfer of all equipment from trucks and

Q: What are the biggest obstacles Gamas has faced in

bulldozers to conveyor belts. Volatility and fluctuating

providing integrated logistics solutions to its mining

volumes are prevalent in the industry and we must be


extremely flexible in order to deal with this. We attain this

A: The biggest challenge we face is in the planning stage

flexibility by working closely with our clients in the design

of the supply chain logistics, and often the whole supply

of the supply chain logistics. It is crucial that we are aware

chain must be reworked and the logistics reconditioned

of requirements and volumes so we can provide service

to suit the needs of the mining client. Compliance should

forecasts to ensure that everything is on time and on budget.

A: The most important struggle is downtime and we

merchandise into the mine, rather than the trucks leaving

have seen that many of the products used in mining are

empty, sometimes clients will take advantage of the units

manufactured abroad and imported. As a result, we must

to transport back equipment that requires maintenance,

ensure that these arrive to their final destination on time.

and approximately 50 percent of our units are used for

Multimodal services are ideal when there is a constant large

this purpose. If we decide to subcontract a transportation

volume to be transferred and this is an option when the

company, we have a series of requirements that must be

transfer can be planned ahead of time. Multimodal is ideal

upheld. For example, these companies undergo interviews,

for projects that are about to start since every second is

background checks, client base checks, all with the purpose

precious in those stages of a project. In order to reduce the

of ensuring the safety of our clients’ merchandise. The units

response times, we have a Team Driver service, which entails

must be recent and equipped with the latest safety features,

two drivers being responsible for each unit so if a driver uses

and drivers must be insured and have previous training.

up his driving quota the other one steps in, meaning that the truck never stops. This service has reduced transit time by

Q: What are the priorities of Connect Logistics in 2016 to

40 percent. Volatility and fluctuating volumes are prevalent

ensure its position in the mining sector?

challenges in the industry, and we counteract this through

A: The alliances we have created over the years have

open communication channels with clients.

strongly positioned us in the Sonora region. The plan for 2016 is to expand our presence and establish an office in

Q: What measures have you implemented to ensure the

Mexico City because many corporate offices of top mining

safe transfer of merchandise?

operators are located there. This strategy will strengthen

A: Detailed planning must be carried out in order to trace

our ties with our clients and will enable us to tend to their

the fastest and safest route for a given unit. When we move

needs much more quickly.




CHIHUAHUA’S OFFICIAL EXXONMOBIL DISTRIBUTOR Aceites Lubricantes de Chihuahua (ALCHISA) is a company with a variety of environmental certifications, and it has ExxonMobil’s stamp of approval, operating as the lubricant company’s sole distributor in the state of Chihuahua. ALCHISA has supplied lubricants for several notable projects, namely Coeur Mining’s Palmarejo concession. The operator was experiencing a great deal of difficulty as a result of using a standard mineral oil to lubricate its ball mill gearboxes. As a result, temperatures of the equipment reached 90°C, causing the system to go into lockdown to prevent an accident. As a result, the project was experiencing a substantial amount of downtime and recruited services from ALCHISA. Specialized ExxonMobil engineers were then sent by the distributor to assess the situation and make a recommendation, and as a response they replaced the existing lubricant with Mobil SHC 632 synthetic gear oil, which was able to reduce friction and increase efficiency in sliding mechanisms. That eliminated the problems Coeur was facing with high temperatures. In fact, since implementing Mobil SHC 632 and the monitoring system Signum Oil Analysis temperatures in the equipment have decreased by 18°C and the company has estimated annual savings of US$470,000. Downtime and costs were reduced, and efficiency and safety were boosted by the implementation of these recommendations. Another notable project involving the distributor was ALCHISA’s work on Goldcorp’s famous Peñasquito mine. With a record gold production of 860,300 ounces in 2015, the mine’s machinery undergoes rigorous operating conditions and scheduling, and staff were forced to relubricate the gear coupling units in the mill feed pumps every 720 hours to avoid excessive temperatures. This resulted in increased downtime, labor costs, and disposal expenses. ALCHISA engineers recommended a transition to Mobilgrease XTC, which was designed to provide low bleed and high temperature stability through its high viscosity base oil and heavy duty additive package. After 10 months spent monitoring the progress of the change, Goldcorp’s personnel recorded that the substitution resulted in a reduction in staff costs, and an extension of de-greasing intervals by a factor of three from 720 hours to 2,160 hours. Not only has this increased efficiency but as a direct result of ALCHISA engineering, costs associated with the gear coupling units reduced by an estimated US$625,000. Therefore, ALCHISA’s distribution network for ExxonMobil has contributed to the increased efficiency of several significant mining operations across the country.





Q: What gap in the market was Maptek trying to exploit

provide training, direct technical support, and consultancy

when it was formed?

services. We work with practically all the major mining

A: The company was formed by an Australian geologist

operators in Mexico, including Yamana Gold, Goldcorp,

who sought to provide technical solutions that were not

Endeavour Silver, Industrias Peñoles, Fresnillo, Coeur

available at the time, such as drill visualization software

Mining, Nyrstar, Capstone Gold, Holcim, Minera Frisco,

and mine planning solutions, to mining companies. Maptek

First Majestic Silver, and Alamos Gold. We also have clients

continued to develop new technology based on the

in El Salvador, Costa Rica, the Dominican Republic, and

geological and engineering challenges facing the mining

other countries throughout the Caribbean region.

industry, and this allowed the company to rapidly expand its client base in a short period of time. Today, we focus

Q: What are the main advantages and disadvantages for

on developing and delivering innovative technological

foreign companies in the Mexican mining industry?

solutions for mining operators all over the world. One

A: One of the most significant challenges for foreign

of our main activities is software development, and we

enterprises who expand their businesses into Mexico is the

have various programs that offer digital mine planning,

need to acclimatize to the unique culture of doing business

geology, and topography solutions. However, in order to

in the country, which is different to other countries in the

maximize the potential of our clients’ businesses we also

region. Moreover, the mining sector in Mexico takes a



Q: Why is Mexico is a strategic country for Datamine?

experienced other downturns, and we have learnt that

A: Datamine is a well-recognized leader in specialized

through helping our customers during these periods we

software for the mining industry. We develop software

gain trust, confidence, and develop strong relationships. The

focused on various areas across the lifecycle of a mine.

low price environment is unfortunate, but we have to act

We have therefore developed different solutions to help

accordingly. We focus on improving our clients’ operations

customers globally. Mexico is a strategic market for the

by helping them in optimization, and we have a dedicated

company due to its position in the global mining industry

team of professional consultants in areas like planning and

and in the Americas. Datamine was recently acquired

geology that can help with operations optimization.

by Constellation Software and our parent company has an extremely focused strategy in the mining market. It is

Q: How has the recent acquisition by Constellation

through years of expertise and industry orientation that

improved Datamine’s position within the mining industry?

Datamine is recognized as a leader in software development

A: Constellation, as a global leader in software development,

for the mining industry. We are a strong company that has

is focusing on building strong leaders in the software market

conservative approach when it comes to new technology,

rescue shaft and therefore safely transport the miners

as it is expensive to invest in the development of new

back to the surface. The success of the operation was

products. However, the industry in Mexico benefits from

significant, not just for Maptek but for all the companies

the large presence of foreign investors, primarily from

involved in the rescue and for the industry as a whole. It

Canada, so there is an encouraging amount of capital

reminded everyone of the perils of mining but also of the

flow to complement the vast potential of the country’s

power of technology.

mineral reserves. I think the government should do more to encourage foreign investment because if the mining

Q: How have the market gyrations affected Maptek’s

industry can develop, it will bring a wealth of new jobs

business and the demand for its products, and how will

into the country as well as boost other sectors connected

the company combat this over the next 18 months?

to mining like construction and electronics. Moreover,

A: It has had a profound impact because investment

mining brings a great deal of benefits to communities

budgets have dropped significantly throughout the

who live in the regions surrounding mining operations. In

sector, and we have therefore found more conservatism

Mexico, however, the situation is different and the recent

when it comes to adopting new technologies. However,

restrictions on investment and tax increases, coupled

our software provides cost cutting solutions to its users,

with the low prices for precious metals are making many

which can be beneficial not only now when the market

investors withdraw their investments in favor of other

is depressed but also when the market picks up. When

markets that are more favorable for doing business.

the market is in a downturn, we work closely with our clients on a day-to-day basis in order to demonstrate the

Q: What role did Maptek play in the rescue of the 33

benefits our products can make to their business. We

miners trapped inside the mine in Chile?

are focused on continuing to build and expand our client

A: Maptek participated actively in the rescue process,

base in Mexico, while working closely with our existing

both to determine precisely in which part of the mine the

customers in order to emerge from this difficult period

miners were trapped, and in the process of designing the

together. We also plan to develop new technology to help

rescue shaft. We used our Vulcan product to develop a

mine production plans, and we have recently released

three dimensional mine because there was no accurate

the latest version of Vulcan, called Vulcan 10, which will

representation of the underground topography of the

allow our clients to operate all of our programs from one

mine. This allowed us to plan the target location for the

central base.

through a strong technical commitment. Therefore, our

Q: What successful project has Datamine been involved

clients are able to recognize our solutions, and as leaders

in, and what problems did it solve for the client?

in the industry we can identify the commitment by recent

A: We have developed different solutions for our clients

acquisitions such as Alford Mining Systems (AMS) in February

across a wide range of targets including resources estimation,

this year, which is well known for developing mining-specific

mine planning, and geology solutions. The Core Profiler is a

tools like the AMS Stope Optimizer (MSO).

solution developed by CSIRO, which is one of our business partners. The Core Profiler is a software-based logging

Q: How receptive have Mexican operators been with your

tool that builds a scaled continuous image of drill core

services given the fact the market is largely reluctant to

from handheld core tray or core split photographs, solving

adopt new technology?

issues like inconsistencies in visual observations between

A: Mining contractors are becoming increasingly interested in

observers or photographic records. We have two solutions

acquiring our software because the technology allows them

that are highly demanded in Mexico, and these are oriented

to communicate efficiently with their clients. We prepare

to supporting operations in resource estimation and mine

our clients through short training courses and we are also

planning. Our products covering these areas are our Studio

working with universities. We understand the importance of

5D Planner and the Studio RM suites, which help to facilitate

creating more awareness and interest in academia in regards

these tasks in an easier and more reliable way. We do not

to mining in Mexico. In Zacatecas, we have been providing

keep client data or have access to their information. The

courses to geology and mining engineering students in the

new Datamine Summit technology is a cloud-based tool we

local university and teaching them how to use Datamine.

have developed to create, store, analyze, and share mining

Rather than conducting a lecture, we bring product licenses

technical data. Data is protected by encryption during

and allow the students to interact with the systems to create

transfer, and data centers are physically and electronically

a more comprehensive learning experience.

secured to the highest standards.



FOCUS ON VIRTUAL FORMWORK TECHNOLOGY and scaffolding. The company’s competence center works for all Doka operations around the world from Russia


and South Africa to Chile, Peru, Australia, and Mexico.

Director General of Doka

The first step is the consulting stage and this entails the


risk evaluation, technical viability analysis, and proposal of formwork solutions. The second and third steps are engineering and safety measures, which includes


With over 12 percent of the market share in Mexico,

the planning of cycles, structural analysis, safety and

Doka México is currently the largest formworks system

inspection systems, and list of materials. The fourth step is

provider in the country. The infrastructure market has

the formwork solutions that Doka provides. The remaining

become a pillar in the company’s growth strategy since

two pillars are logistics and on-the-ground services, and

its technology is far better suited to the demands of

these are crucial since they smooth out the implementation

this particular industry. Nevertheless, Doka provides

process on site. “Doka is regulated by strong specifications

innovative, unique solutions for the mining industry, oil

from Europe and this means we cannot be lax in our safety

and gas, and largescale developments. “Our equipment is

standards and policy procedures,” Vera indicates. “At

state of the art and it is not a cheap system to acquire

Doka, we never tropicalize our procedures, especially in

since it can be difficult to import from Europe,” concedes

terms of safety.”

Jorge Vera, Director General of Doka México. However, Doka attributes its added value to the detailed design of the projects and its engineering department that offers integrated services. “Our engineers in Mexico are highly skilled and our hub offers services to all markets in Latin America and Europe as well,” says Vera. “In Austria, we have a competence center and it is a specially made division that focuses solely on the mining sector.” Vera admits that underground mining can be a difficult

“Doka is regulated by strong specifications from Europe and this means we cannot be lax in our safety standards and policy procedures”

area in which to fully integrate because the technology

Jorge Vera,

is expensive. Doka has a tunnel formwork solution that is

Director General of Doka México

hydraulic and automatized, and this means it can move easily in the constricted tunnels of an underground pit.

Doka has developed a solution called Concremote that

For tunnels built with the mining-bored underground

measures in real time the strength of the concrete in an effort

construction method the required cavity is created by

to help improve the implementation of formworks, permitting



more accurate management of the forming and cost in place

work. After ensuring the success of several safeguards

(CIP) concrete operations. The system makes it possible to

in the process such as shotcrete and watertightness, the

measure concrete strength on the site by using the weighted

tunnel’s inner shell is completed using various options.

maturity method to provide reliable and standard-compliant

Mines in Mexico continue to use traditional formworks for

information on the strength development of the concrete.

underground tunneling. However, Vera is beginning to see

Influenced by Big Data and IoT trends, this system also has

a change of mindset across the whole value chain from

a mobile web application that allows users to access data

investors and contractors to subcontractors. “Normally

on the development of their concrete from anywhere, on

these players focus on cash flow but now they are

notebooks, tablets, and even smartphones. The implications

beginning to evaluate the cost/benefit of our products,”

of this solution is that it makes the development process

he shares. “The area where Doka has found its foothold is

much faster, and the sensors on the slabs mean that the

in shoring systems for open pit operations.”

users can remove the scaffolding and molds, and then move




on to the next area. With an online platform called myDoka Doka’s 360° Performance Cycle is made up of six main

that controls project data, the client is able to control its

pillars, and the idea behind it is to provide the sector an

inventory and have an encompassing view of the planning

added-value package that goes beyond renting formwork

and construction of the project.



Q: What role has satellite communications played in

and we are currently the only Spanish speaking partner

removed site evolution?

servicing Mexico and Latin America. We have approached

A: The mining industry spearheads exploration and

the sector, and it is interested in this technology that

operations in areas so remote that no towns can be seen

serves on a local and global platform and where one

for miles and communication is critical since the world’s

device can communicate and thousands can receive. This

economy now revolves around the flow of information. Data

solution opens a new communication platform where

must be fast and accurate and the sole solution available

transferring information from a remote site to corporate

to create this bridge is satellite technology, in fact not

headquarters located in Canada, Mexico, US, or elsewhere

a lot of hardware is needed, except for the required on-

is made possible on the same channel.

site equipment. Ankla is a company that offers in depth experience in the sector thanks to the strategic alliances it

Q: How do you ensure a strong communication network

has formed in the industry. We have made these strategic

in order to help the smooth running of systems in the

alliances with companies that offer key solutions to mining


players, and by combining this with our expertise, we can

A: The trend of Big Data is influencing all industries and the

offer solutions that fit a mining operator’s budget. Satellite

mining sector has moved from a macro perspective to tiny

communication is expensive and companies are weary of

increments of information. The thirst for information means

being overrun by the costs, so bearing this in mind we have

more transceivers and bandwidth, and the more devices are

cost efficient solutions. This is an economy of information,

implemented the more complex the process, and human

and the flow has to be fast since minutes and seconds are

error will increase. A company will then reach point of

precious especially during critical situations like accidents.

requiring more bandwidth and communication flows, and

In these situations, we need emergency response notified as

this is where we step in to help streamline communication

soon as possible through secure channels of communication

and define the information it wants to transmit. Industries

that cannot be compromised and will not fail, and satellite is

are aiming to become more efficient in their operations,

one of the solutions.

and Ankla helps them reach the desired level of perfection. It is important to streamline communication in order to

Q: What are the benefits of being a partner to Iridium

transmit the crucial information ranging from production

in Mexico, and how will the solutions you provide to the

to efficiency. Big Data is today and we are the bridge that

mining industry make huge strides in efficiency?

enables the flow of information.

A: As an Iridium partner we are able to offer truly global solutions. It doesn’t matter if the production site is in northern Mexico, the regional office in Mexico City and the worldwide HQ in another country, because everyone can be connected in a highly reliable and private network that ensures quality of communications. We are bringing new technology and new ways of communication, an example would be the Extreme Iridium Push to Talk (PTT), which is a radio based solution that uses satellite technology. Radio is a standard way of communicating in industrial settings and it is normally restricted to a geographic area that does not go beyond 2km, and from that point onwards infrastructure is required, and this is basically non-existent in the mining sector. Our solution goes one step further,



TURNKEY PLASTIC PIPING SERVICES Goldcorp’s Peñasquito mine, the largest open pit mine in the country that contains gold, silver, lead, and zinc, GF supplied HDPE piping solutions and manifolds. Christof Blumer Managing Director of Georg Fischer (GF)

Oscar Puente National Sales Manager of Georg Fischer (GF)

“We always look to add value during the specification process, including custom fabrication capabilities,” he states. “At GF Piping Systems our focus is on specifying and delivering a complete solution.” With more than 30


As a global company working in the safe transport of

R&D centers around the globe, the company is aiming

liquids and gases, GF sees a plethora of opportunities in

to produce standard products that can be used in many

the Mexican mining sector, according to the company’s

different applications across different industries. When

Managing Director Christof Blumer. “GF Plastic Piping

talking to engineering companies,it is important to firstly

Systems have been relied on for decades to convey media,

try to understand what the customers are trying to

whether it is water, slurries, or hazardous chemicals used

accomplish, according to Blumer, and the company can

in mineral processing,” he argues. “Wherever plastic

then help them make the most appropriate choices for

piping systems are a suitable material of construction

the piping material. “A solid example is a mine in Chile,

replacing traditional metal piping, we see opportunities,

where it was necessary to measure the amount of water

making Mexican mining an excellent fit for our company.”

that ran through the pipes,” Blumer explains. “One option

GF is adept at identifying the challenges end users face

would have been to simply sell the instrument but we

and helping them to design non-corrosive fluid handling

went beyond and assembled the sensor, the instrument,

solutions to help increase operator productivity, and to

and the saddle around the pipe in order to simplify and

save long term costs.

accelerate the installation process.”

Blumer identifies the main opportunities existing in

For Blumer, the most significant challenge in assembling

water distribution, specifically in pressure and drainage,

and providing these solutions is usually in logistics and

chemical dosing and distribution, compressed air, safety

pre-assembly of piping systems for remote locations. As

showers and eyewash stations, power stations, and water

a company that works with the end users and organizes

treatment. Corrosion, he says, is no longer a problem

transportation from the manufacturing facility to the

when choosing the appropriate GF piping and fluid

assembly location, and finally to the point of installation,

control system. “We have developed different plastic

there are various factors that must be considered. “Our

materials depending on the chemicals to be conveyed,

production plants, our sales and support centers, and

the pressure, and the temperature,” he comments. “For

our GF distributors all play an important role in the

mining applications, we have eight different plastic

supply chain to satisfy customer needs,” he comments.

piping solutions that cover the different needs and

“There are numerous reputable competitors in our

characteristics of each mine.” GF’s National Sales

industry, and each one of them is specialized in a part of

Manager Oscar Puente discusses a solution the company

the piping system.”

is currently offering in Zacatecas, called Double-See. “This is a double containment system, a pipe within a

“Quality plays an important part in the construction

pipe, designed for cyanide transportation,” he explains.

segment and in the mining industry, so our customers are

“If, during the conveyance of the chemical there is a leak

acutely aware of the risks involved in buying or obtaining

the second pipe will contain it, helping the company

the cheapest product,” Puente maintains. “Selling into

firstly by avoiding extra costs and providing safety

this market is extremely demanding and the process is

to the employees, and secondly by complying with

complicated due to its length.” Ultimately, Blumer believes

environmental protection laws.”

the differentiating factor provided by GF lies in the long term cost and benefit to the end user or operator. “We

During the sales process, GF places a great deal of

distance ourselves from a price driven business model

importance on a significant amount of time spent with

since our focus is quality and added value,” he explains.

the engineering companies. “If specifying engineers are

“Our direct work in many different market segments

knowledgeable about our solutions, they will suggest

gives us the opportunity to sell quality, reliability, safety,

them when a mine is being built,” Blumer clarifies. For

and environmental confidence.”


CONSTRUCTION COMPANY CARVES OUT MINING NICHE As one of the top 10 most important construction companies in the state of Sonora, Gluyas Construcciones has carved a niche in the mining sector since this particular


industry demands highly specialized infrastructure. By

Director General of Gluyas

using the expertise it has acquired in the construction


sector, it is able to supply its mining clients with high quality,





according to the company’s Director General, Marcos

machinery almost every three years as well as carrying

Gluyas. “This would not be possible without the support of

out regular maintenance, and this creates a more complex

financial institutions since we need to invest in specialized

supply chain. “It is important to gain the trust of financial

equipment and the infrastructure that is being erected is

institutions since miners have a clear way of working

highly complex,” he concedes. Gluyas Construcciones has

and there are no significant advanced payments, which

been involved in large infrastructure projects ranging from

makes us rely on these entities to acquire the necessary

roads and bridges to complex urban developments and

machinery,” Gluyas shares. “The contracts have to be well

this has helped the company to offer unique solutions in

defined in terms of the amount of equipment necessary

the mining industry.

for the project and the payments can be dealt with later on.” For Gluyas, a quick response is the most critical








component in the mining industry and this ensures any

preparation and often Gluyas Construcciones acts as the

company a place in the mining supply chain. Technology

first contractor that enters the site during the construction

and automation has been embraced in the mining industry

stage. Its mandate is to make way for other contractors

and the construction sector is no exception. “We are

by opening the areas where the large equipment will be

now influenced by new applications and trends like

installed. “We carry out excavations of great lengths and

project management in order to make our construction

depths, and in order to prepare the sites to the best of our

processes more efficient,” Gluyas explains. “While the

ability, we continuously replace our equipment,” Gluyas

equipment advances in leaps and bounds and becomes

comments. In order to deliver large volumes, the company

more sophisticated, it makes the response time more

requires large equipment, and as providers of solutions,

complicated because if there is a failure in the machines

each project is considered on an individual basis. “Last

it can be difficult to obtain the needed technical support.”

year in one project for Buenavista del Cobre alone, we moved 35 million m3 of material,” Gluyas boasts. “We offer

Gluyas Construcciones works according to volume and

excavation of large volumes, road works, site preparation,

sometimes this fluctuates in accordance to the amount of

and rock crushing.” According to him, players in the

resources the miner has. Moreover, the company navigates

construction industry have been able to find a safe haven

two sectors, the public and the private, and with this

in the mining industry because public sector projects and

experience, it has come to see great distinctions between

bids are extremely limited within infrastructure projects.

the two. “The private sector is always under time pressure

“Public developments are scarce and the budgets are even

and demands a fast response time,” Gluyas explains. “On

more limited, but the mining sector is bound to generate

the other hand, the public sector does not put so much

more projects of greater volume,” he predicts. Gluyas

emphasis on time and projects take longer to complete.”

Construcciones relies on other suppliers that specialize in

In the previous administration the public infrastructure

other branches in order to generate a complete solution,

was incredibly restricted to a few players, according to

and as a result, the supply chain is strengthened.

Gluyas, which was the reason for the company’s decision to diversify into the mining sector. “Over the years, we

Gluyas explains that the supply chain of top equipment

have seen that no matter how isolated and remote the

providers is extremely limited in Mexico, and the proximity

mines are located, there is always an economic and

to the US is not enough to bridge this gap. The country

social prosperity,” he comments. “Mines pave the way to

largely relies on large volumes of machinery and he

new infrastructure and the construction industry battles

finds that the aftermarket and service support of some

with obtaining financing and sourcing equipment and

suppliers is negligible. In order to maintain quality and

materials in order to become a trustworthy supplier of

safety standards, Gluyas Construcciones replaces its

top mining players.”




LOCAL KNOWLEDGE BOOSTS SMOOTH LOGISTICS HANDLING Transporting precious minerals across international borders is a costly process that is fraught with challenges. A swathe of logistical issues, customs laws, and even sea piracy


concerns can all delay freight arrival and have potentially

President & CEO

disastrous impacts on productivity and profit margins. RH

of RH Shipping

Shipping manages to transport cargo over land, air, and sea with minimal fuss thanks to its subjective approach and attention to detail. “We can face risks on every project

are threatened by criminal organizations. Hess explains

so it is important to have a strong and defined project

how the company always works hand in hand with local

management team on each venture,” explains Rudolf Hess,

and international law enforcement agencies to reduce

the company’s President and CEO. “We have a specialized

these risks as much as possible. “Communication is of

project division that analyzes every project individually,

utmost importance when it comes to security threats,”

taking into consideration all the specific customer

he stresses. “These issues are factored into the budget

requirements. Once we have fully assessed the project, we

of every project because the success of our business

put together the project plan and begin searching for the

depends on the trust our clients have in our ability to

necessary equipment, engineers, and vendors.”

transport their cargo.”

With mine sites often found in remote, deserted areas of

“Our surveyors and field supervisors

the country building infrastructure is complicated and essential services like water, transport, and energy are often lacking as a result. In the effort to overcome such challenges, Hess stresses the importance of recruiting local knowledge, which he says can hold the key to ensuring smooth logistical operations. “Mine sites are usually located in areas far removed from urban centers,” he clarifies. “The access roads are complicated, mostly unpaved, and steep, posing a significant risk to heavy

undergo stringent assessments so that we can be sure they understand the local issues pertaining to every project” Rudolf Hess, President & CEO of RH Shipping

loaded trailers carrying goods or equipment. Severe weather conditions frequently add to this risk. Therefore,

In recent years low commodity prices have added to

we recruit vendors from the local area who have complete

the hurdles facing RH Shipping, with mining companies

knowledge of the conditions particular to that region.”

turning their focus away from external expansion and toward the consolidation of internal processes. Thanks

This local touch is invaluable when dealing with

to the company’s extensive global reach, however, it

communities surrounding mine sites, which often add

has managed to mitigate the effects of the downturn.

to logistical complications by opposing the influence

In 20 years RH Shipping has built a presence in over 60

of mining on their towns, villages, and ecosystems.

countries and in a variety of sectors, including oil and gas,

Although RH Shipping and other service providers do

aerospace, and healthcare. According to Hess, this broad

not have to deal with issues regarding land ownership

and diverse portfolio has helped the company achieve

rights unlike many mine operators, it is not infrequent to

sustained long-term growth. “RH Shipping is not focused

run into protestors blocking access roads in and around

on one single sector,” says Hess. “We go where the current

project sites. “When transporting cargo, demonstrations

market situation leads, we grow with our customers, and

can cause delays and protestors even vandalize our

we follow their strengths.” That said, mining has become a

freight on occasion,” notes Hess. “Our surveyors and

crucial facet of the company’s business, and with the rally

field supervisors undergo stringent assessments so

in gold and silver prices in 1H16 Hess is understandably

that we can be sure they understand the local issues

bullish about the sector’s future prospects. “The mining

pertaining to every project.” Organized crime concerns

industry has become a vitally important part of our

are also at the forefront of RH Shipping’s business

business,” he concludes. “We already offer a wide range of

strategy at all times. Pirates can still be found lurking in

logistics services within the sector and we are looking to

international waters, and in mines in Mexico in particular

increase our volume every year.”




Open pit mines are an imposing sight, often hollowed out among vast expanses of desert or woodland, like a formidable crater forged into the sediment to form a subterranean village. Some of the largest projects in Mexico are formed by open pit mines, by far the favorite option for the country’s operators due to low costs and fewer safety risks than underground operations. This type of mining is preferred for extracting gold, silver, and uranium. Although open pit mining has a number of advantages, such as shorter time to production, normally the mines have a shorter lifespan, on average four to five years, after which it becomes necessary to resort to underground methods to extract larger orebodies. Heap leaching has also contributed to the extraction of a large tonnage of low-grade deposits in Mexico.

This chapter will explore the roles of the players across the value chain of open pit mining, from equipment providers, to manufacturers, to logistics companies. A complete overview includes insights into the impact of the market conditions across the supply chain and the strategies to provide the greatest possible ROI. These industry players discuss the ongoing struggle between quality and price and explain their value propositions that enable mining players to get the most out of their services.




Eliminates the need for fusing HDPE pipe. NO special training NO heating or cooling NO weather concerns Show up and install.






INSIGHT: Carlos Caicedo, Atlas Copco


VIEW FROM THE TOP: Gerardo Angulo, Timken


INSIGHT: Jorge Escamilla, RYASA




INSIGHT: Andrew Auns, Williams Scotsman


VIEW FROM THE TOP: Erik Rorem, Geobrugg North America


VIEW FROM THE TOP: Agustín Monzón, GGD Bandas


TECHNOLOGY SPOTLIGHT: Flexibility and Versatility in Modular Building


VIEW FROM THE TOP: Raúl Ortegon, Maquinaria Rivero


INSIGHT: Luis Martínez, ACE Drilling Supplies


VIEW FROM THE TOP: Mauricio de Silva, Concrete Canvas


VIEW FROM THE TOP: Ricardo Román, Grupo Carvel


INSIGHT: Eduardo Bennett, Komatsu



IMPORTANCE OF CONTINUED INNOVATION OF TECHNOLOGIES When customers think of Atlas Copco, the product that immediately springs to mind is air compressors, according to Caicedo. However, in the last few years the mining industry


has come to know the company for its drilling products.

Managing Director of Atlas

“Drills are key to productivity in the mining industry and


our products, like the COP rock drills, are known for delivering the best results,” he boasts. As part of its new Green Line, Atlas Copco also offers an electric loader, and a


With a long history of innovation, Atlas Copco is one of

few mines are already seeing results from this technology.

the leaders in product development in the mining industry.

The product can provide savings in fuel, ventilation, and

After developing the first hydraulic rock drill in the 1970s,

reduce CO2 emissions but the drawback is that mines have

the company pioneered the “Swedish method”, consisting

to adapt or create new infrastructure to be able to power

of a light weight rock drill with a pneumatic pusher leg.

the loaders. Atlas Copco is currently developing battery-

Atlas Copco’s ambitions did not stop there. It has a plan to

operated electrical loaders, which means that modification

create a full line of products for autonomous mines by 2020.

of the mine will no longer be a requirement.

Many customers in Mexico are using remote controllers developed by the company for some of their applications

The challenges that underground mining presents are

in order to increase safety and productivity. Automation,

different to open pit developments. For the latter, it is

autonomous machines, remote monitoring, and continuous

easier to transmit wireless Wi-Fi signals through the air

mining equipment for hard rock are in demand across

and receive satellite positioning information. “Regarding

the industry. “We have rigs working in many places with

underground mining, our Rig Control System (RCS) uses

different degrees of development,” says Carlos Caicedo,

the same technological platform for the equipment so most

Managing Director of Atlas Copco.

of our rigs have automatic functions that can be integrated


FINDING EFFICIENCIES FOR MINING OPERATORS GERARDO ANGULO Director General of Timken Q: What new products has Timken introduced into Mexico

12 technology and engineering centers that are located

that enabled them to hold such an important position in

around the world where we work to find solutions that

the industry?

help improve the reliability and performance of equipment









performance products. We are interested in providing our clients with a variety of products, including all

Q: How do you support m ine operators with maintenance

bearing types, the most complete housed unit line, chain,

and adequate training for your equipment?

couplings, gears, and other power transmission solutions.

A: We spend numerous hours working with the heads of each

Our engineers can create different types of seals that can

department and schedule training sessions with operations,

protect our bearings from a larger variety of contaminants.

maintenance, and any other work group in the mine. We

We also offer different types of coatings for different

also work very closely with our distributors, preparing them

industries. We analyze various markets and working

for any problem that they could come in contact with while

conditions in order to create specialized products that are

working with our equipment. It is crucial to know the product

able to adapt to their duties and environment. We have

inside out so if a problem arises it can be fixed as quickly as

for a fully automated operation,” Caicedo explains. “One of

automatize the systems.” The process of exchanging

the difficulties would be to transmit the information in the

information is highly important to the mining industry and

mine through kilometers of tunnels then to interface our

a compliment to the automatization of products is found

machines to the mine system. To address this issue we have

in Atlas Copco monitoring systems. These monitoring

also developed a project called Mobile Machine Integration

systems will be easy to use, and receiving the information

alongside ABB.”

may be as simple as plugging in a USB drive to transfer the data or receiving real-time information via Wi-Fi. Caicedo

Another example of a recently developed product is the

expects these systems to benefit mining companies by

EASER, a versatile raise boring machine that Caicedo

allowing them to monitor, control, and optimize production,

expects to radically increase productivity in several

and ultimately increase efficiency.

operations, particularly in Mexico. One of the benefits of the EASER is the dramatic time reduction taken for

According to Caicedo, the company’s main differentiator

slot raises in production drilling, and the technology is

is its focus on maintaining a low operational cost when

extremely important for production in deep holes as well

designing its products. “Whenever we develop a new

as in ventilation shafts. “Current raise boring technology is

product its operational costs must be optimized to offer the

oversized, difficult to move inside the mine, and involves a

client the greatest ROI,” he shares. “We analyze costs related

lengthy setup process," shares Caicedo. "With the EASER, it

to maintenance, production, consumables, and capital, along

will be much easier to mobilize inside the mine and quickly

with excellent customer support to ensure the functionality

create slot raises. After analyzing the productivity of the

of the machine.” The company has been servicing the

equipment and witnessing the quick return companies will

market for more than 140 years and it is known as one of

recognize the benefits of this investment.”

the leaders in innovation and sustainability. In Mexico, Atlas Copco has been established since 1952 and has placed an

The company is developing new products based on a

emphasis on working with customers to integrate feedback

control system that can be adapted to work with multiple

into innovation and ultimately increase productivity. “We

products. “For several years, we have used our RCS with

have recently concluded the building of our new facilities in

CAN-Bus technology,” explains Caicedo. “This technology

Zacatecas to support the mining market with some of the

has allowed us to further integrate our products and

most advanced technology we offer,” Caicedo concludes.

possible without impacting the production time of the pit.

Q: What are the opportunities that Timken has spotted in

Nowadays, most mining companies have their suppliers with

the mining industry?

them in the mines, which work with our suppliers to provide

A: Since acquiring Torrington, we offer a diverse portfolio

them with correct solutions.

of bearing and related products and have become even stronger in the market, which increases our presence with

We are always interested in our customers’ areas of

our end users. The challenge is to communicate all of this

opportunity. We like to know in which processes they are

to our clients but we have reached a point where our clients

having problems or where they are having bottlenecks.

are familiar with the Timken brand and the quality of all of

We like to work together to figure out a solution. If a

our products. The biggest challenge that Timken has right

customer looks to us and tells us they are changing

now is the economy. However, this also offers an opportunity

a part too often, we investigate the causes and the

to help our customers save money and increase uptime

problem to come up with a solution. We recently saw

with the products and solutions that we offer. We know the

an opportunity in housed units in the market, and came

importance of maintenance times and our innovations focus

up with the split-housing units called “Revolvo”. Instead

on how we can help our customers save money in low cycles.

of taking hours to replace a housed unit, it now takes only 15-20 minutes. We have been successful with our

Q: What position does Timken aim to hold within the

Solid Block Units and Couplings. In the mining market,

mining industry?

couplings need lubrication and the whole part must

A: We want to be the first choice not only for our distributors

constantly be replaced. We offer a solution that works

but also for our end users. We want our customers to link our

as an insert, and that way it would only be necessary

distributors and us together as one supplier. Our goal is that

to replace one component and not the whole thing. The

whenever our customers have a problem, they will turn to us

savings that a company would have in this product are

for a solution. We strive to solve the problems in each sector

70-80 percent.

to make it easier for everybody and become a one stop shop.



ACQUISITIONS AND EXPANSIONS FOR EQUIPMENT PROVIDER products because they are aware of the strength of its distribution chain.

JORGE ESCAMILLA Operations Director, North

In Mexico, Meusnier is an ISO 9001:2008 certified

Region of RYASA

manufacturer and rebuilder of large-size gear reducers and components used on steel and sugar mills, as well as mines. “The manufacturer had the state of the art









technology and engineering skills to produce, and

accessories” in Spanish, today its scope goes far beyond

RYASA had the sales force, contacts, and expertise to

bearings to cover all kinds of power transmission

distribute their equipment throughout the country, so the

components, including belts, chains, sprockets, motors,

merger made sense for both parties,” explains Escamilla.

and gear reducers to companies throughout the mining

“RYASA acquired 50 percent of Meusnier, and so far this

industry and other sectors. The company has expanded to

combination has brought success not only to the two

own 50 branches across the country and has evolved into

companies but also to the mining industry in Mexico in

a holding group of power transmission-related companies,

general, which now has access to this vital technology that

boosted by the 2012 merger with gearbox manufacturer

can significantly boost productivity and efficiency.” Pinion

Meusnier and the 2014 merger with Pirco, which specializes

shafts, produced by Meusnier and used in most gear train

in building industrial equipment such as conveyors and

assemblies, have seen increasing demand with RYASA

travelling cranes. The company’s Operations Director,

clients in the mining industry due to the quality levels

North Region, Jorge Escamilla, believes that the key to

and the modern equipment in which they are now used,

RYASA’s success across all the industries in which it works

according to Escamilla.

is diversification and turnkey services. He shares that the company will be expanding into Costa “We work in cement, glass, and steel-making as well as

Rica in the next few months, and it has plans to be present

mining, and the fact that we provide on-site maintenance

in Panama before year end. “These two countries are

and technical support to all our users in the form of

attractive to RYASA because CEMEX, for whom we supply

consignment inventories is one of our main differentiators,”

a variety of products in Mexico, has production plants

he explains. "Another crucial factor to our success is the

in the locations, so we will be supplying there as well,”

diversification of our clients, which helps us minimize our

Escamilla reveals. “We aim to open branches in these two

risk.” The company offers a wide variety of products, and

countries before 2017. In the next few years, it will also be

given its nationwide branch network, Escamilla shares

essential to consolidate and streamline our business, as it

that companies are seeking RYASA out to distribute their

has grown very rapidly in recent years.”


DANGEROUS WASTE DISPOSAL AVOIDS ACCIDENTS JAIME RODRÍGUEZ Director General of Técnica Especializada de Mantenimiento Ecológico (TEMESA)

Q: What was the gap in the market the company was

evaluating projects in the mining sector to separate

trying to fill when it was created?

hydraulic oil from used oil with the aim of saving costs

A: In October 1997 the National Institute of Ecology

for the client and for TEMESA. Used black oil mixed with

requested that PEMEX Refining implement cleaner practices

diesel and ammonium nitrate for blasts can generate up to

in its offices and storage areas through its service station

40 percent fuel savings, and operational cost reductions.

maintenance program. In 2000, TEMESA began offering its

To achieve a homogenous concoction our process installs

collection, transport, storage, and final disposal of dangerous

a metering unit in the mixing tank before the installation of

waste service, creating cost-free added value. In 2011 the

the subsequent tanks.

company was certified by Clean Industry, becoming the first storage center in the state to garner this award. We currently


have a presence across Chihuahua, Coahuila, Sonora,








Durango, and Sinaloa. The company’s growth strategies in

A: TEMESA is known as a company working toward a

the last 20 years have been modified according to trends

common good and striving for sustainable development

emerging in our market and the Mexican economy but our

in an environment free of pollution. Simultaneously, we

main principles have remained the same. We aim to comply

maintain our quality standards in services and client

with transparency regulations for the handling of dangerous

relationships. The supply of correctly labeled containers

wastes and constantly train personnel in waste management.

and the cleaning of storage areas is carried out with the

TEMESA became a service provider in mining in 2006 and

goal of satisfying and facilitating the best internal control

we now represent 30 percent of total collected dangerous

of client processes. TEMESA has provided support in

wastewater. Within the sector, TEMESA has worked with all

separating solid urban waste generated in the community

of the major mining companies, including Agnico Eagle on

and mines. Moreover, the company offers clients training

the Tajo Mascota project, First Majestic Silver on La Parrilla,

organized by the human resources department with

and Goldcorp on Peñasquito.

several themes, including management of dangerous waste, leak control, and health and safety.

Q: What are the main challenges mine operators face regarding waste disposal, and how does TEMESA help

Q: What environmental progress has been made in recent

them overcome these issues?

years, and what still needs to be done?

A: TEMESA urges its clients to dispose of residue in the most

A: TEMESA is involved in environmental progress through

practical and sensible way. One of the internal problems

the formulation of solid fuel created by mixing plastics,

is soil contamination and the combination of dangerous

textiles, oily muds, and cardboard. The residue, now used

residues with clean residues. TEMESA provides training

as an alternative fuel, is fed into cement ovens where it

in a variety of subjects, including spill management and

is destroyed without causing damage to the environment.

residue management for mine personnel. These courses are


free and the number of participants is unlimited. TEMESA

groups, and has made a commitment to receive solids

supports clients with the supply of storage tanks for used

contaminated with hydrocarbons and to provide low cost

oils and collection trucks equipped with box and ramp

processing and disposal. This allows the generators to

for collections at different generation points in the mine.

share the benefits and reduce costs with a commitment

We also oversee the condition of temporary storage areas

to preserve quality standards and improve services. This

for waste and monitor the state of the help signs, floor

system contributes to conservation of non-renewable

epoxy sealants, and land installations. In administrative

energy resources, the elimination of risk for the generator

and storage terms we implement a personalized collection

by guaranteeing the disposal of all residues, and the

program to improve service logistics. We are currently

conversion of industrial residues into useful byproducts.







CABLE TELE-FONIKA TIPO GGC JUMBOFLEX: CUBIERTA DE POLIURETANO TPU Y CHAQUETA RELUCIENTE El cable eléctrico Tele-Fonika tipo GGC JUMBOFLEX es el más avanzado en la industria minera con la combinación perfecta de resistencia y visibilidad para mayor duración y seguridad en interior mina.

La cubierta amarilla de poliuretano contiene un material RELUCIENTE extruido en el 100% de la chaqueta del cable que permite su visibilidad aun en ambientes totalmente oscuros y que permite al operador del equipo su 208 continua visibilidad para evitar su daño. El cable reluce al contacto con cualquier fuente de luz, además conserva por milisegundos la luz en la chaqueta que permite que sea visible antes y después de su ubicación. El cable Tele-Fonika jumboflex de poliuretano reluciente es visible aún si es cubierto por polvo y lodos ya que la cubierta amarilla de poliuretano contiene el material reluciente en el 100% de la misma.

estiramientos, enrollamientos y por su resistencia no genera cocas. Los cables de goma estándar que si están expuestos a todos esos elementos tienen un plazo de reposición muy rápido generando altos costos de reemplazo en tiempos muy cortos. El Cable de poliuretano reluciente tiene un periodo de reemplazo más largo que cualquier cable de goma. Contrario a los que se piensa el poliuretano es un material flexible y se fabrica en la configuración de cubierta integral tipo grado minero que la otorga más resistencia y durabilidad.

• Reluce • Seguro y visible • Disponible en calibres desde 2 AWG hasta 4/0 AWG en 2KV • Configuración tipo G-GC 3 conductores más tierras más verificador • Grado Minero cubierta integral • Cumple MSHA

El cable de poliuretano TPU es por sus características el material más resistente a golpes, arrastre, abrasión,



CUTTING TIME THROUGH CONSTRUCTION IN PARALLEL Accommodation in the mining industry has always been problematic but Williams Scotsman is bridging the gap by providing innovative modular full service solutions called


construction in parallel. The modules are manufactured

Vice President & General

and assembled off-site to allow customers to work on other

Manager of Williams

key priorities, and once they are ready to move onto the


site Williams Scotsman installs the modules, eliminating one third of the time it takes to deliver projects. “We offer a large variety of flexible solutions to our customers

and have expertise in effective establishment of camps,

that cover all of the basic needs of the projects,” boasts

as well as knowledge necessary asset to support a mining

Andrew Auns, Vice President and General Manager of the

operation. With a product portfolio that can solve most

company. “In the future, we hope to evolve into a complete

of the space needs of any mine, Williams Scotsman has

service provider and assume the operational capabilities

worked with major developers and adapted to their

of camps by offering cooking, cleaning, and security

specifications. “The best practice we have developed in

services, which we call workforce accommodation.”

Mexico is being able to adopt the AsFlex product much faster than our counterpart in the US,” Auns boasts. “We








have already used the AsFlex product in four large projects,

company’s most attractive asset is the ability to design and

from initial assembly to disassembly for new projects.”

build a personalized solution to cater to individual client

These projects are not always straightforward and several

needs. With its new “360° service”, Williams Scotsman

problems are presented from a technical standpoint but

sources furniture, site services, or other preparatory

Williams Scotsman is able to continue providing solutions

necessities that are not a core competency for mining

in an innovative and effective way.

companies, providing them with all requirements for the beginning of a project. In this way, the companies can focus their attention on areas that are crucial to the productivity and operation of the project. Another asset of the company is the flexibility of the product that it is developing. “In the past when people thought of modules they thought of 8x38ft trailers, which we still offer, and they form effective solutions,” Auns shares. “However, they do not provide the capacity for adaptation and our new offering can be modified to changing needs.” Williams Scotsman’s products can combine a variety of features that will allow workers to live closer to the site, which leads to a greater level of productivity. The company’s products can provide complete work camp solutions that allow better control of workers, create adequate living quarters, and reduce safety and security concerns. “This will ultimately lead to a happier

“We are the largest mobile space supplier in North America and we have the ability to analyze our resources and costs in different economies of scale to ensure we can offer the best deals for our customers”

workforce, less safety incidents, and the completion of

Andrew Auns, Vice President & General Manager

projects on time,” Auns says. As far as controlling costs, he

of Williams Scotsman

notes the company is constantly looking for more efficient ways to source. “We are the largest mobile space supplier

In the mining industry, the company is eager to ensure its

in Mexico and North America, and we have the ability to

market positioning and its provision of added value. The

analyze our resources and costs in different economies

company has ambitions of doubling its market share on

of scale to ensure we control our costs and offer the best

a global scale, and it sees great potential in the modular

deals for our customers.”

and mobile space sector, especially in Mexico, provided the company is able to adapt to the different needs of

Practices used by the company in Mexico have been

the market. “The potential is huge and we are trying to

imported from Canada and Australia, which are both

position ourselves by making sure that our salesforce is

mature markets that already incorporate all business lines

closer to our key customers,” conveys Auns.




Q: How much business does Mexico represent for

This saves money, time, and is a much faster and more

Geobrugg's global operations?

innovative solution.

A: Although our participation is not currently significant,


we believe Mexico has promising potential in comparison

Q: What is the most difficult project you have developed

with other markets because we know there are numerous

in Mexico, and how was the process facilitated?

opportunities and significant activity. Our products are

A: Most of the projects we have developed in Mexico are

designed specifically for the mining industry, which is an

civil works along highways. We constructed the safety

important distinction because many of the alternatives

fencing around the Formula 1 race track in Mexico City

used in the mining sector have been adapted from other

using the same technology that we use in the mining

industries. Our solutions were developed to solve specific

industry but with a few modifications to protect the

mining problems whether it is rock bursting, underground

spectators from potential crashes. We are in the business

support, or barriers for catching rocks. Many companies

of stopping moving objects whether it is rocks or high

use chain link fences to catch falling rocks, failing to take

speed cars. This was a high profile project for us but

into account that these were originally designed as entry

there were many challenges in terms of logistics. We also

barriers not for catching heavy rocks. The same thing

developed protection barriers in the Media Luna open pit

occurs when underground mining companies use materials

to protect locals from falling rocks and debris. This was

like shotcrete and weld mesh for ground support, which is

situated in a remote area and since it was part of a nature

not their original intended use. Until now, there were a lack

reserve, the company could potentially have been charged

of alternatives and many people in Mexico are not aware

for every square meter affected by the works. Not only was

that specific technology for the mining industry now exists.

our solution eco-friendly, it also was the most affordable because we used the least amount of land area. It was an

Q: Can you explain the intricacies and processes involved

extremely challenging process because the project was

in underground mining?

difficult to reach.

A: When carrying out ground support in underground mines it is crucial that the support material used is both

Q: How is Geobrugg’s automated underground meshing

strong and flexible. Materials that are flexible absorb

system changing the role in certain areas of the mining

energy while stiff materials do not. Our meshes are


flexible and extremely strong, serving as an ideal tool

A: Our mesh was first developed for underground wall

for tension loading. The ground support system has

support but what differentiates our product from the

several components that are working together as one,

competition is that we sell our mesh in rolls and it is

and companies often use incompatible components,


hampering the performance of the system.

automated process that would allow mining companies to






install the product. The automation was proven to improve We have worked with mining companies all over the

productivity and safety in the mines, and miners no longer

world for decades, and we have a team of experts that are

had to expose themselves to danger in tunnels that are

constantly communicating and sharing their experiences.

not properly supported, instead being able to work on the

All of our products are tested in full-scale field tests after

implementation from a safe distance. El Teniente, the largest

applying computer modeling, meaning the conditions of

underground mine in Chile, implemented our technology,

a mine can initially be simulated on the computer and

and it has been highly successful. Now CODELCO has

then innovative techniques can be attempted before the

decided that it wants to adapt our technology as standard

financial outlay of full-scale testing. The field tests are not

practice. This success serves as our primary reference for

carried out until the virtual processes have been perfected.

the market as an example of our work.



Q: What have been the most significant contributions

of origin, and it takes some time to convince them of

GGD Bandas has made for the Mexican mining industry?

alternatives. The advantage of GGD Bandas is that we

A: IThe commercialization of our products used to be

have Asian, American, and European suppliers, and this

carried out by distributors but three years ago we decided

enables us to offer a range of opportunities that uphold

to remove this intermediary and approach the end user

different norms.

directly. Today, we supply 100 percent of conveyor belts and our strongest area is in the mine interior. Safety has been significantly improved due to improved technology. We have replaced rubber with PVC in the bands. This transition has already been embraced by other mining

“Sometimes companies opt for expensive applications

markets in Russia, China, and Australia.

in simple operations and we

Q: How does your technology encourage efficiency

guide them to simple, more

across mining operations? A: There is a type of conveyor system that uses steel cabling as a structural element and as such it requires constant monitoring to identify failures. In the past we had to bring the technology and technical assistance from overseas to address these failures, and obviously

economic alternatives that perform better” Agustín Monzón, Director General of GGD Bandas

this led to longer lead times and higher costs for clients. We decided to purchase this technology and offer the

Mexico is a complicated country in which to do business

services ourselves. Choosing the right supplier of this

since for many years it was battered by low quality

technology was difficult but we found a Russian supplier

products from other markets. To remove this distrust

that has a strong presence in the Chilean mining sector.

from the mining sector we have to rely on testimonies or

The supplier’s ties to the Chilean market enabled us to

success stories in other industries and carry out multiple

create a strong business environment and we were able

testing stages. In these evaluations, companies can analyze

to adapt it to the needs of the Mexican mining sector.

and benchmark our products against their traditional

The first projects we will carry out will be sent to Russia

alternatives. The process of becoming an integrated

for evaluation to ensure a high quality service. The

service supplier is long since we must demonstrate the

main advantage of this product is the safety it ensures

cost benefit of our solutions and our in-depth engineering

since damages in conveyor systems are sometimes not


discernable to the eye and the scanner detects them swiftly. The maintenance is faster and there is no need

Q: What advantages has the company spotted by

to import technical expertise and machinery from abroad,

upholding norms from a wide array of markets around

and everything can be dealt with locally.

the globe? A: Our presence in several industries means we are able to

Q: How do you help mining companies embrace new

transfer technology from one sector to another and offer

solutions to allow them to enter this new technological era?

a wide product portfolio. This diversification means we

A: Many industries in Mexico are accustomed to working

are flexible in the solutions we offer and we are able to

with US technology given the strong ties between the two

spot areas of opportunity. The cost of energy is extremely

countries. We have seen that some mining companies are

high so we are improving our conveyor systems to reduce

fully committed to one type of technology and country

energy consumption.




FLEXIBILITY AND VERSATILITY IN MODULAR BUILDING Just as the techniques that are employed in the oil and gas industry have developed and modernized over time, so have the ways that mines operate and the infrastructure that supports them. As such, a number of different structures are built to support mining operations throughout the various stages of a mine’s life, from living quarters and offices to laboratories and plants. Installing these temporary structures, as opposed to more permanent buildings, brings financial and logistical benefits for management teams. To respond to the growing needs of the mining industry, William Scotsman has recently launched a new modular building solution that could transform the way mine operators develop their facilities and camps. Moduflex™ is a modular panel unit designed to offer the flexibility and versatility any mine operator could require. Its design allows multiple configurations so that customers can optimize their temporal modular spaces. The adaptability of Moduflex™ allows it to easily adapt to any type of terrain, even rugged terrain or those difficult to access. Thanks to its modular design, Moduflex™ users can extend or reduce the floor space depending on the needs of their projects. Both the interior panels (walls) and outdoor (facades) can be easily replaced in case users want to make changes in the standard configuration. The unit can also be optionally supplemented with different types of equipment such as custom brick facades, windows, terraces, caps perimeter, raised floors and accessories like air conditioning, climate control, voice and data, and sanitary items among others. As these modular spaces come equipped with different types of insulation, people can also remain comfortable in any weather condition. One of the most attractive features of Moduflex™ is its capacity to help reduce their overall infrastructure costs and to minimize environmental impacts. Mining operations use high levels of energy, and the industry is increasingly concerned about how to reduce its energy consumption and improve its environmental impact. Moduflex™'s temporary infrastructure can also complement mine companies in their broader environmental strategies. The biggest benefit is that Moduflex™ is designed specifically so that it can be dissembled and removed from the field easily when they are no longer needed. This brings a practical advantage to an industry where mining companies are required to leave the mines they operate on in the same state as, if not better than, when they arrived there.





Q: What importance does the mining sector have for

in October this year. It is under construction and is using

Maquinaria Rivero’s business compared to other sectors?

a TD-25M bulldozer provided by Dressta Machinery, a

A: As a new company, Maquinaria Rivero has recently

Polish company bought by LiuGong in 2012. This piece

discovered the importance of the mining sector. It highly

of equipment is similar to a Caterpillar D8. We have also

differentiates itself from other sectors we serve as the

provided a LiuGong 856 Wheel Loader and a Case 590

machines need to run day and night unlike other industries


that work on specific shifts. Consequently, a main chunk of profit received from sales is entrenched in high demand

Q: How would you describe your relationship with the

for equipment maintenance and service. Serving the

Mining Development Trust Fund (FIFOMI)?

mining sector reaps a great deal of profit. The company

A: The agency helps us sell equipment to mines. We

plans to align its objectives toward mining, and eventually

entered its office and presented our products with the

implement it as one of our branches along with industry

help of Maxmiliano Urbos, who facilitated the alliance.

and construction. One of the mining projects we are

We had to take its introductory mining course, and the

providing machinery for is located in El Realito, Culiacan.

process took time as the initial prices were bounced back

It is a gold mining site that is scheduled to start operating

and forth through revisions and discussions for six months



of exploration activity. “As a result, when a tender comes

General Manager of ACE

up there is more competition so prices for services had

Drilling Supplies

to be lowered in order to remain competitive,” he shares. “Therefore companies must reduce costs, meaning they

Before ACE Drilling Supplies, the Mexican mining industry

must develop ways to produce the same level with lower

was forced to source its equipment and components from

drilling budgets. This inevitably creates an increase in

abroad in order to guarantee reliability and quality. “ACE

equipment quality.”

Drillling Supplies provides equipment that is manufactured in Mexico but adheres to international standards,” reveals

After a learning curve of improving the company’s

Luis Martínez, the company’s General Manager. “Instead of

results, Martínez is now confident of the performance

having to import the tools, companies working in Mexico

of its products. “The consistency of our products allows

can now purchase supplies that were manufactured in the

us to know precisely how many meters each drill bit

country, saving both time and money.”

will sink," he points out. "The more profound the levels drilled, the less expensive it will be for clients." As well

Like all companies in the current context, ACE Drilling

as price related performance, he is also extremely proud

Supplies has faced its share of challenges and Martínez

of the investment in ACE Drilling Supplies’ staff training.

acknowledges that right now there is less demand for

As a result, the company has been able to make several

drilling services as a result of reduced budgets and a lack

technological advances and is constantly working on

until the operation finally closed in December. The fact that

their country’s evaluation system creates obstacles when

FIFOMI recognized LiuGong’s machinery was helpful. We

it comes to certification. Ultimately, Maquinaria Rivero

continue to work with the agency as it bought a package

is forced to be slightly stricter to give our clients more

of equipment maintenance and services for the next two

assurance and become a locally and internationally

years. FIFOMI has also shown a commitment to buy five

recognized company of quality.

more pieces of equipment in the coming months. Q: What are the greatest challenges the company faces? Q: When it comes to choosing machinery suppliers, what

A: Entering and placing ourselves in the market has

kind of decision making process does Maquinaria Rivero

been our main obstacle. Many changes have occurred


in the environment and Grupo Rivero had to learn to

A: Case Construction manages heavy machinery such

adapt. The challenge is enrooted in understanding the

as crawler dozers, compact and standard excavators,

construction and heavy machinery market in Mexico

backhoes, and loaders. Through Terex and LiuGong we

along with equating Rivero to the established LiuGong

can access trucks. Offering our clients a sense of support

brand to gain clients’ trust. The company has been able

is a high priority, and we continuously work toward

to achieve this in less than four years due to a rapid level

improving the services we provide when we choose new

of growth. Services that are supported by Grupo Rivero

suppliers. Even though LiuGong has the bonus of having

are received well in the Mexican market despite the fact

an office in Houston, companies like Case Construction

that the market has a negative perception of China due

that have plants in Mexico can offer a different level of

to other faulty brands that ruined the country’s image.

support. Case Construction is attractive as clients are

Even though our equipment is from China, we have

more receptive to more strategically located companies

proven ourselves to be a trustworthy company and our

with the endorsement of technicians, and it can help

clients have faith in the quality of our services. LiuGong

Maquinaria Rivero be more recognized locally and

is an attractive supplier as a result of the premium heavy

internationally. Mines and major construction companies

machinery it manages and it is also the largest producer

need maintenance services from certified technicians that

of front loaders in the world. The company also has the

assure quality. LiuGong and other Chinese companies

advantage of having a distribution center in Houston,

have the ability to provide these types of services yet

only eight hours from our offices.

developing more products that are able to offer cost

claims. “Besides drill bits, we also distribute some drilling

savings in speed and duration.

lubricants and additives to companies we already have contact with. It is not our core business but given the

As far as product development goes, the company

connections we have we leverage our position to provide

constantly works to adapt to industry changes. “Every

the service if our clients need it.”

time we encounter a new kind of soil, we modify the melting mixture of our product so we obtain optimized

Now that Martínez is safe in the knowledge that ACE

performance for that kind of land,” he boasts. “Our

Drilling Supplies is producing a quality product, he shares

advantage is our geological expertise.” The company

that the company needs to overcome some challenges.

is testing a new drill bit known as Extreme, which is

“First of all, we must develop a network of distributors

continually being produced more and more consistently

around the country since we currently manage every

to the necessary specifications. “Our sister company, BD

transaction from Guadalajara,” he explains. “Recently, we

Drilling, is our main client, and it was the first to test our

signed an agreement with an additive drilling distributer

product,” says Martínez. “Although the company was

that has presence in Colombia, Peru, and Central America.

initially reluctant to use ACE Drilling Supplies’ equipment,

Hopefully this increases our local participation.” Now the

it now exclusively uses our products.”

company has revenue, the next step will be to build rods needed for drilling, meaning ACE Drilling Supplies will be

Although there are now a few dealers and retailers in

able to provide the drill bits and the rod to fit inside. “We

Mexico, Martínez believes that ACE Drilling Supplies’

are evaluating the most prestigious steel market suppliers

unique differentiator is that it is the only producer of

so we can find a high quality tube to start testing new

drill bits in the country. “We cover the whole production

products,” he comments. “Companies seek one provider

value chain in Mexico, making it easier for companies to

to supply most of their consumables so we are creating

acquire our products and reduce transportation costs,” he

this turnkey service."





Q: What are the unique technological qualities of

kilometers in conditions that are dangerous in heavy

Concrete Canvas and what added value has it brought to

trucks. During the wet season, there are landslides that

Mexico’s top industries?

cause downtimes and this can be extremely expensive

A: Concrete Canvas originates from the UK and has launched a

for mining companies. Instead of using cement or other

revolutionary new construction material called Geosynthetic

materials in a restricted area, with the assistance of

Cementitious Composite Mats (GCCM), a flexible, concrete

three or four people a company can install our product

impregnated fabric that hardens when water is poured

to make safe roads and walls. For Goldcorp, we installed

onto it to form a thin, durable, waterproof and fire resistant

our product in the entrance of its mine where landslides

concrete layer. In simple terms, it is concrete on a roll. It can

were common. The product is available in three different

be extended over slopes as a way to prevent landslides or

thicknesses but it is essential to have a civil engineer

create water channels. It is extremely easy to use, and can

present before deciding which product will be used.

be adapted to any terrain. After setting the product on the

In Spain, there have been studies performed to create

land for a couple of hours it dries and is unmovable, and

underground tunnels using the product but it is an ongoing

depending on the project multiple layers can be used or even

investigation. This product would be useful in developing

sealed to prevent leaks. The advantage of this product is that

temporary mine walls but it may not be the best option

it is able to resist up to 407kg/cm and it uses less water than

for tunnels, especially going through mountains and other

traditional methods. While Concrete Canvas may be more

rough terrains. The construction of temporary walls with

expensive than regular concrete products, the benefits are

Concrete Canvas is much faster than traditional methods.


greater and can be used in times of emergency. Q: How can this product contribute to the development Q: How have companies reacted to these new construction

of safer infrastructure that can resist natural disasters?


A: Companies place anchors and spray concrete wherever

A: The first customer to adopt this technology was

it is needed but it wears rapidly. If the concrete gets soft,

Goldcorp. It was a difficult process due to the high price of

cracks begin to form and vegetation grows. Using our

the dollar and the fact the project we were involved in was

product will not allow these types of effects to occur. The

located in a risky zone in Iguala, Guerrero. Since then, we

difference between spray concrete and our product is that

have created additional installations and it has opened the

our product has a lifetime guarantee of 50 years. This makes

doors to new business ventures in Mexico. During natural

safer and durable infrastructures due to the high quality

disasters, Concrete Canvas can deliver quality solutions in a

of the materials and the installation methods. If there is

short amount of time in a great variety of terrains. It is easy

a correct installation, it is difficult for water to penetrate

to install and it is possible to make emergency shelters or

the concrete or for plants to crack through. In water

spaces within 24 hours. This product may be more expensive

management infrastructure, it can anchor down slopes and

but the results are much greater and it optimizes structures.

prevent water from leaking through to undesired areas. We

In Mexicali, CFE has created a geothermal plant called

have a new product that allows companies to place layers

Cerro Prieto that has kilometers of concrete canals and we

of concrete to create a stronger seal. It has been proven

have conducted several trials with our products, efficiently

to work efficiently in the creation of water management

transporting this water for the development of clean energy.

and tailings infrastructure. We are currently working on a residual water treatment in which we will conduct a study

Q: How is Concrete Canvas applied to unique and complex

of one of the water tanks. As years pass, water tanks

infrastructures like open pit installations?

deteriorate and cracks begin to form on the surface. Placing

A: One of the most complex engineering infrastructures

Concrete Canvas on top would protect and increase the

is the entrance of a mine. Miners have to travel for several

lifetime of these expensive infrastructures.


FUELING CHIHUAHUA’S MINING SECTOR Grupo Carvel started out by providing diesel oil to the mining and transport industries in Chihuahua in 2010, originally delivering the product in small containers. As the company grew, it started to use larger containers in order to transport larger quantities at a time, and it now focuses on purchasing fuel from PEMEX, the only manufacturer it

“Carvel System is based on a premise of providing control, administration, and security to

works with, and distributing this fuel to other companies

users’ flotilla”

throughout the state of Chihuahua. “We have two storage

Ricardo Román, Project Engineer at Grupo Carvel

plants, the main one is in Chihuahua city and the second one is located in Dolores and is specifically designed to

of Carvel System. The program is split into two separate

serve the mining sector,” shares Ricardo Román, a Project

systems, one that focuses on the fuel tanks themselves,

Engineer at the company.

and the other that tracks the coming and going of transportation vehicles, and also monitors how much fuel

When transporting diesel to mines throughout the state,

each vehicle is carrying. Both systems can be accessed

Roman believes that security is always the biggest issue

from tablets, smartphones, and computers, allowing the

as the highways in Mexico are not always safe. However,

user to stay up-to-date on their operations 24 hours a

Grupo Carvel has not experienced any problems, and

day, even outside working hours. “This provides security

he attributes this to its dedication to and focus on its

benefits as well, as users are alerted in real time of any

work. “We avoid contact with criminal groups by only

theft taking place,” Roman comments. “Each system also

transporting fuel during the day, and we have GPS

has strict privacy settings and password requirements to

tracker systems and emergency alert buttons fitted onto

further boost user control. Put simply, Carvel System is

each and every one of our vehicles so that we are always

based on a premise of providing control, administration,

in close radio or telephone contact with our staff when

and security to users’ flotilla.”

they are on the road,” he explains. “Moreover, all of our mobile units are regularly checked for tire degradation

Another program that the company is going to continue

and other maintenance concerns, because there is a lot

developing this year will allow clients to track the progress

of stress put on vehicles when travelling long distances

of any fuel orders they place. This means that the client

on a regular basis.”

no longer has to speak to the driver of the truck, or the logistics manager, or the group director, or the plant

Carvel System was developed as the solution to an in-

operator in order to find out when and where their order

house problem. With an ever-growing number of operating

shall be delivered. “The clients will be in complete control

vehicles, the company needed a system to track which

and will have all the necessary information regarding the

vehicles were transporting fuel, how much, from where to

progress of the order, which will in turn help them plan

where, and other logistical issues. This led to the creation

their operations more efficiently,” Roman states.

Stronger. By Design.




SEEING THE MINING INDUSTRY IN A NEW LIGHT Road Machinery had been a strategic partner and distributor of Komatsu’s for many years. The latter decided to purchase the former simply because the time to increase Komatsu’s commercial presence in Mexico had arrived, according to Eduardo Bennett, Mexico President of


Komatsu. This purchase followed the company’s decision

Mexico President of Komatsu

to buy MAKOMEX in April 2015. “The two companies are now working together as one single unit, and this company will be renamed Komatsu Maquinarias de Mexico once the relevant legal paperwork has been completed,” Bennett explains. This investment, which totaled US$200 million, was the largest investment made by the entire Komatsu group in 2015.


Bennett shares that Komatsu invests between 3-5 percent of all annual revenue into research and development. This strategy has been in place for more than 40 years and has enabled the company to become known as a technological leader across many sectors. “One solution we have devised is Komtrax, a satellite-operated GPS fleet control system, which allows the user not only to see the physical location of the equipment but also provides in-depth performance indicators, including engine temperature, engine revolutions, vehicle speed, and motor performance,”

Komatsu invests between 3-5 percent of all annual revenue into research and


he explains. This allows Komatsu to make improvements regarding the efficiency of its machinery, and of course

offering Komatsu clients flexible financial solutions based

helps the user to reduce downtime and consequently

on their individual circumstances or needs. “The service

maintenance costs. The service, which comes included with

we provide differs from that of conventional financial

the price of all Komatsu equipment, also brings a number

institutions given that we understand the way in which

of security benefits because by keeping constant track of

construction and mining companies can be affected by

the machine, both Komatsu and the client can detect any

unquantifiable factors,” Bennett explains. “For example, we

irregular or illegal activity at an early stage.

know that a mining company cannot operate in the jungle in Peru during the rainy season, which can last up to three

Another Komatsu-designed product is the autonomous

months, and we therefore understand that the company’s

haulage system (AHS), which allows some models of

income or CAPEX during that period will be significantly

Komatsu mining trucks to run completely autonomously

reduced.” Komatsu therefore set up flexible payment

without the need for an operator either on the vehicle

plans to help its clients through such periods, which is

or operating remotely. “These trucks can control their

something traditional lenders such as banks might not be

own movement 24 hours a day, or for however long it

able to do. The service can be particularly useful for small

is necessary to complete the loading process,” Bennett

and medium sized mining companies, Bennett claims.

describes. Komatsu designed this technology around 15

“When a small, family run mining company grows to the

years ago and it is now being used on mine sites around

extent it needs excavators with larger tonnage capacity,

the world, including in Australia and Chile. The technology

traditional financial institutions will not be available to

has not yet been introduced into Mexico but given the

lever this growth,” he states. “However, Komatsu’s financial

typical landscape of Mexican mine sites, Bennett believes

products allow the small miner to complete this purchase

that Mexico is a well-suited market for the AHS technology.

with flexible payment plans, easing the pressure on its CAPEX.” This is vital not only for the client but for the

As well as its innovative products, Komatsu also offers

sector in general as it gives a helping hand to new mining

unique solutions, especially in terms of financing. Komatsu

companies, which Bennett believes represent the future

Financial Solutions was set up 10 years ago with the goal of

of the sector.



Underground mining is notoriously risky. Precautions must be taken to ensure the appropriate structures are in place or operators face the ever-present possibility of a collapse. Weather conditions also add to the peril, as heavy rain and landslides can exacerbate the danger of being trapped within the confines of a mine shaft. However, this kind of mining is also the most fruitful. The higher grade and higher concentrations of ore are normally located deep below the earth’s surface. Often equipment must be specially adapted to endure the grueling conditions present in underground mines and as a result, a niche market has emerged for easy to use, sturdy and durable machinery. From tires to LEDs to rock bolters, every eventuality must be covered to ensure the conditions in an underground mine assure the highest level of safety possible for workers.

In this chapter, we hear the opinions of the top equipment manufacturers from this mining subsector regarding the increasing need for durability in this environment. Directors and CEOs discuss the need to predict accidents, meaning that a preventive approach is all the more important. Against this background, key players explain that cost reduction takes a backseat as operators seek ways to predict variables to guarantee worker safety.




VIEW FROM THE TOP: Gary Nash, Yokohama Tyre Mexico

José Garcia, Yokohama Tyre Mexico


INSIGHT: Efraín Martínez, Dräger


INSIGHT: Luis Del Bosque, Segman




VIEW FROM THE TOP: Marc Carriere, Victaulic


INSIGHT: José Luis Durón, Immersive Technologies


VIEW FROM THE TOP: Gregorio Castruita, Resemin


VIEW FROM THE TOP: Frederick Davidson, Energold Drilling


INSIGHT: Tony Caron, MacLean Engineering

René Valle, MacLean Engineering 236



INSIGHT: Pedro Robles, Megamak


VIEW FROM THE TOP: Matt Blattner, TUMI Raise Boring


INSIGHT: Wayne Oldenburg, Oldenburg Group

Ryan Oldenburg, Oldenburg Group 242

TECHNOLOGY SPOTLIGHT: The Hidden Benefits of the Mighty Filter


INSIGHT: Erick Sanchez, Tensar


VIEW FROM THE TOP: José Ferreyros, TDM Group


VIEW FROM THE TOP: Sebastian Romero, Walden Group Mexico


INSIGHT: Cesar Fimbres, Dumas


VIEW FROM THE TOP: René Molina, Tele-Fonica Cable Americas




Gary Nash President of Yokohama Tyre Mexico


José García National OTR Sales Manager Exports of Yokohama Tyre Mexico

Q: Given how Mexico is one of the fastest growing

JG: There is a lot more fluctuation in our other commercial

mining industries, what role does the country hold within

and consumer segments due to the involvement of pesos

Yokohama’s global market share?

in payment but our OTR transactions are all in dollars.

JG: Yokohama’s parent company, The Yokohama Rubber

The mining industry is not performing poorly in Mexico

Co., is headquartered in Tokyo, Japan, and has been a

because expenses are all in pesos and they sell their

global manufacturing and sales company of premium

products in dollars.

tires since 1917. Globally, the US holds the top position in terms of market size and opportunities followed closely by

Q: What steps does Yokohama take to create innovative

Canada. Mexico is not far behind, and it is now becoming

technologies, and how has it helped your clients reach

one of Japan’s top five countries in terms of importance.

desired levels of efficiency?

When it comes to mining, Mexico was included in the

JG: In the LTR industry, we have proven that our niche

business vision for its market potential. We have a strong

market is in underground mine tires and port tires. Our

presence in the US. and Canada and we look forward to

focus has moved towards radial while maintaining our

adding Mexico to that list. It is a priority for Yokohama to

leadership in bias, and we specialize in scenarios where a

explore new markets and customer bases, and we wish to

bias can outrun a radial tire. The Y69U tire works perfectly

expand our product availability.

for underground mining as it features the industry’s first non-ferrous sidewall reinforcement, which protects it from

GN: It is important that companies have the ability to

chipping and cutting without extra risk of sparking. All

expand globally and operate successfully in multiple

mining operations are based on cost per hour so naturally

locations. In a sense, Mexico was the missing piece of

all of our tires are based on cost per hour. Traditionally a

the puzzle to our North America Mining division. Today’s

tire can last 1,000-2,000 hours but the tire we offer has a

mining industry operates on a global scale, and contracts

unique protection that was designed specifically for the

are won in the same manner. With almost 100 years of

mining industry. Our products are proven to save money

experience, Yokohama is building an image of the product

and give a better cost per mile.

that is a reflection of the positive aspects of Japanese technology, and we have chosen Queretaro as the place to develop our market position. Q: The OTR market fluctuates regarding supply issues on a global scale, so in your eyes, what are the major causes of this change, and what did Yokohama do to adapt to these fluctuations? GN: The root of this fluctuation can be traced to the drop in oil prices since it has a significant impact on the tire business. If oil prices are stable then the manufacturing and commercialization of tires is easier and the profit margin can increase. When oil prices dropped, it drove

Traditionally a tire can last 1,000-2,000 hours but the tire Yokohama offers has a unique protection that was designed specifically for the mining industry

down tire prices, and the devaluation of the peso also contributed to currency fluctuations. We offer the mining

GN: Our clients detail the challenges and circumstances of

industry flexibility, ensuring protection regardless of price

their operations, and based on that we tailor our products.

fluctuation. The tires are produced in Japan and sold to

For the Y69U we use a Zeon Super Composite (ZSC) that

the US and Mexico in dollars.

creates a wavy side profile on the sidewall, protecting the

tire from chipping. Innovation is an important driver and

Q: What are the key priorities in your agenda in order

our products are game changers in the industry. When

to become the leader in radial tires for Mexico, and what

doing business in Mexico this alone is not enough, and

new technologies do you wish to deploy in the market?

many of our clients seek integrity in doing business and

JG: Many mines are downsizing because of a lack

product offering.

of availability of large tires. There has been a lack of competition in the development of these products,

Q: What are the root causes of the mistrust of mining

creating a shortage. Other companies downsized to

players in acquiring products like tires, and how has

reduce costs since smaller equipment creates fewer

Yokohama helped erase these misconceptions?

expenses. Here in Mexico, companies are running the

JG: Mexico was for many years a dumping ground for

equipment for much longer but generally the market has

tires and the mining industry suffered since the tires

remained stable. Companies are standardizing equipment

that were used were not well-suited. This experience

across multiple operations since it facilitates technology

has left a bad taste in the mouths of mining players. Our

transfer and lowers costs.

strength is that we always look to adapt to the customer and on the field we give them the authority to make

GN: We plan to introduce five new radial tires per year.

decisions. We have gathered the trust of clients due to

If evidence emerges demontrating that bias tires are

the integrity under which we operate and our stellar

performing better than the new radials we will adjust our


strategy to the indications. These indicators will depend on the companies with which we are working and their global

GN: When carrying out tests on site the recommendations

demand. The US market demand is a determinant factor

we give are based on ton miles per hour (TMPH). A tire can

in the global market for large-sized tires. I see Yokohama’s

have a 480TMPH and another around 600TMPH, and this

entry into Mexico as bringing an experienced, professional

is a measurement that allows the company to understand

player into the mining industry, offering technical support

the endurance limits of the products. Yokohama also

and the expertise needed to make decisions. We hope to

creates special order compounds so the products we

provide education to mine managers so they can make

provide companies are tailored to suit their needs.

strategic decisions.



INTUITIVE SAFETY PRODUCTS FOR HIGH STRESS SITUATIONS Dräger has a new ace up its sleeve with its latest solution developed in collaboration with one of its biggest clients,


Goldcorp. Taking all these variables into consideration Dräger

Mining Segment Manager for

presented the MRV 9000, the newest mine rescue truck in

Central and South America of

the industry. “The MRV 9000 was developed to help brigades


travel longer distances at a quicker speed, and so they can be as close to the incident as possible," he adds. "This truck also provides respiratory protection and integrates various tools


In a mine no emergency is alike and as the Incident

that facilitate the work of brigades and keeps them from

Management Teams and Mines Rescue Services officers

harm’s way.” One of the added values of this is that it creates

scramble for a contingency plan, the key is to ultimately

a pressurized, contaminated free environment atmosphere,

minimize response time. The critical elements are time

which comes in handy not only during fires but also during

and prompt detection, timely warnings, and a proficient

situations where there are oxygen deficiencies.

response by underground miners can have a tremendous impact on the consequences of an underground incident.

The development process of the MRV 9000 was arduous and to make it possible Dräger carried out an alliance

Balancing all these elements is achievable by combining

with German vehicle manufacturer Paus to develop the

technology and trained personnel, and this synergy

passenger cabin that resembles a mobile mining refuge.

has been perfected by safety specialist Dräger. Efraín

Goldcorp is now in possession of two of these trucks and

Martínez, Mining Segment Manager for Central and South

each truck is fully equipped with both exterior and interior

America at Dräger, takes pride in the 14 new products the

gas monitoring systems, an interchangeable compressed

company has developed to improve security. “Mines are

air system, and can be autonomous for up to six hours.

getting bigger each year, miners are exposed to more toxic

According to Martínez, this innovation would not have

substances, and raising awareness with our customers

been possible without the interaction with the customer.

in the use of preventative technologies is a primordial

“We worked with Goldcorp’s Mine Rescue Project Manager,

concern for Dräger,” he explains.

Markus Uchtenhagen, to develop this new vehicle," he says.


SPOTTING INVISIBLE SAFETY CONCERNS stringent safety standards and top technologies that will


safeguard their workers’ lives.

Sub-Director of Segman “No other industry is as demanding as mining because Good ventilation of the work area is essential to prevent

there have been many accidents due to the fact

pockets of gas forming that can lead to deadly explosions.

that these types of safety controls were not taken,”

Gas levels must be closely monitored at all instances

Del Bosque explains. Industrias Peñoles obliges its

and areas swiftly evacuated if levels exceed standards.

workforce to have a medical certificate from a private

Segman Sub-Director, Luis Del Bosque, points out that in

institution that includes personal medical information so

Mexico unfortunately not many companies know about

that in any eventuality they would know exactly how to

the explosion limits (LIE). “Norms in the country are based

address it. Segman is equally stringent with its workers.

on international standards similar to those in Canada and

Whenever they enter the mine they use portable

the US but the government has not fully implemented

detectors of up to three different types of gases and are

a regulatory framework in regards to mining safety,” he

equipped with the necessary safety gear. The detector

laments. This has led companies to embrace the most

emits three types of alarms, one vibrates, one chimes,

"Our biggest drivers were to increase the security of the mines and develop technologies that improve the safety of the daily tasks.” The truck includes many other applications, from thermal imaging cameras and communication systems to emergency kits and oxygen tanks that can be changed in 40 minutes. “This was a breakthrough project because there was nothing like it in the market, and it compliments all of the existing rescue and safety products,” he boasts. Martínez explains how prevention is the golden term in mining safety measures and the company’s staple

"Dräger has a new ace up its sleeve, with its latest solution developed in collaboration with one of its biggest clients, Goldcorp" Efraín Martínez, Mining Segment Manager for

Central and South America of Dräger

product, the BG4 addresses these issues. The product will be launched shortly as a mask that contains its own

are working correctly.” For Martínez this is just a stepping

communication system and can be connected to any radio

stone since all of Dräger’s equipment is validated by NIOSH

system the mine uses. The company is also working on new

and EN international standards. Dräger has moved from a

developments that work with telemetry and are suited to

product supplier to an integrated solutions provider that

underground mines since these are more complicated to

can offer a variety of solutions that range from rescue

share information given the distance, depth, and thickness

to toxic air monitoring and hazmat. Martínez describes

of tunnels. In the case of full-face masks, communication

a rescue situation scenario and the images it conjures

is often lost when giving instructions due to the noise and

highlight the complexities and preventative measures that

chaos inside a mine. Dräger’s mask has a speakerphone

are put into place in a mining operation. “Miners first see a

and a hearing aid to help miners communicate efficiently.

warning light on their monitors identifying the dangerous situation, and if they cannot evacuate they go to refuges

Safety equipment must undergo a series of tests before

that can keep them safe,” he adds. Knowing a product is

being fully embraced by miners and while the assessments

not enough, and the miner must be able to seamlessly

might seem unsurmountable for some suppliers, but not

use it during high-tense situations. Martínez agrees, “the

for Dräger. “CAMIMEX has a Mine Rescue Competition

products we develop have to be eminently easy to use

every two years," he shares. "We have participated in the

because if the products are difficult to use once stress

air tightness test that consists of 15 different trials where it

kicks in, the solution will not work as efficiently as it should.

verifies that there is no loss of pressure and that the valves

They must be intuitive, easy, and fast.”

and the other is an LED light. It does not matter where

must not conflict with the oxygen and they must be

the detector is on the worker’s body, it will automatically

friendly to both the environment and workers. “Normally

display the percentage of danger. Working in a mine

we create customized equipment for certain types of

can be perilous since rocks naturally secrete gases and

risks and have special detectors that inform the operator

corrosive chemicals that are harmful, and this can be

when a worker is crossing the safety limits,” he adds. Fire

expedited when carving up those rocks since it hastens

damps are particularly dangerous, containing methane

the release of gases. “Almost all mines have extractors

or other flammable gases, and in these circumstances

which are now used to take out the contaminants that

the faster the response rate the less devastation it will

could either explode or endanger the mine workers,"

cause. “The equipment we offer in these circumstances

he explains. "One thing is certain. Mines are becoming

is the FM200 or dry gas that helps extinguish fires," he

better equipped for the safety of the miners."

adds. "We do not know how often these events will occur until we give maintenance to the equipment.” Trends like

Safety is in the details and Segman has spotted that

automation and robotics has certainly influenced safety

communication in underground mining operations can be

suppliers like Segman, and Del Bosque is looking forward

difficult to maintain, so it has developed key counteracting

to introducing robots manufactured by Smiths into the



Mexican market. “Instead of humans entering a dangerous

intercoms so that miners can hear throughout the entire






setting we now have robots that can do it for us," he

mine and we also have detectors that send signals to the

says. "They have a camera installed to allow operators

main dashboards,” he says. Segman also supplies clean

to visualize and assess the risks so the workforce is not

agents, although Del Bosque points out that these agents





GE’S BATTERY POWERED LHDS Battery powered LHDs are leading the way toward green mining by eliminating emissions created by diesel particulates without sacrificing performance or flexibility. These bring multiple advantages such as cutting ventilation and maintenance costs, improving health conditions, and even outperforming diesel machines on productivity. With ore bodies present deeper under the ground the cost of installing and operating fans to heat and cool will grow significantly. GE has spoken to many customers who want to be greener and reduce their carbon footprint but productivity and cost reduction are a must for these companies to take the leap. The challenge comes not only from a mine’s dependency on diesel but also from the high cost of underground ventilation systems. For most underground mines around the world the typical ventilation rate is between 100 to 125ft3 per minute for every installed horsepower, which is probably mandated by legislature in a lot of instances. GE applies its expertise in battery-powered vehicles for coal mining to the hard rock industry through battery powered LHDs. It currently offers a 7T Battery LHD with a 3.1m3 standard bucket designed to work in underground hard rock mines. This uses batteries coupled with an AC propulsion system. In continuous operation, one battery supplies up to eight hours of power while one or two additional batteries charge. At the end of each shift the battery can be changed in 10-15 minutes using a proprietary swap-out system that does not require a crane or other infrastructure. The LHD is relatively robust for hardrock mining use. Its frame is built out of three-quarter-inch steel plates, machined and welded. The GE motors and inverters used on the LHD require only passive cooling, meaning no fans or cooling pumps are required. Maintenance is simplified since there’s no internal combustion engine to maintain. The 7T battery LHD has a total length of 8,916mm, maximum width of 2,197mm, and maximum height with canopy of 2,229mm. The exterior turning radius is 5,918mm and interior is 3,222mm. The maximum bucket reach at the pin is 3234mm. The tramming capacity is 6,800kg with a lift breakout force of 134kN for both lift and tilt. The maximum vehicle travel speed, both loaded and level, is 17km/h. In addition, its electric propulsion system enables a seamless integration of telemetric data to help customers monitor operating conditions and duty cycles. It allows clients to efficiently monitor their maintenance intervals, reduce operating cost, and improve their availability.





Q: How has the drop in commodity prices influenced your

177N and it has the same features, pressure ratings, and

position within the market, and how have you changed

benefits. A benefit of manufacturing our own casting is

your value proposition?

that we can create sweeping bends, and this extends the

A: The drop in commodity prices has forced a complete

lifecycle of the system and allows the customer to have

shift toward productivity and cost efficiency in the medium

tailor-made designs. Ultimately, the systems are more

term. Nevertheless, in the short term it has been a difficult

practical. They increase lifecycles of equipment, and they

situation to withstand. Mining players are misled by the belief

reduce maintenance costs.

that opting for cheaper products will be more cost-effective but these cheap alternatives do not necessarily mean the

Q: What top innovations have you carried out in the paste

desired levels of productivity will be reached. Victaulic has

backfill piping systems that are being implemented in

stayed ahead of the curve and these market changes have


not affected its value proposition because it has made

A: Victaulic has two systems, the ES system for 2500

inroads in countries where it previously lacked strength. We

psi/17250 kPa and the double groove system for 4000

have new products to offer potential clients and this can also

psi/27500 kPa services. We designed a valve that can

help minimize the effects of the drop in the mining market.

tolerate the abrasive paste with elbows that are finely bent to reduce wear, allowing for diversion from one area

“The market changes have

to another and reducing labor intensity. It takes a couple of minutes to assemble rather than the traditional six

not affected Victaulic's value

hours. The Series 725 diverter valve is the first grooved

proposition because it has

lines. Providing 180° service, the Series 725 eliminates the

made inroads in countries

to more efficient operations. Constructed from durable

where it previously lacked strength� Marc Carriere,

Global Mining Manager of Victaulic

end valve specifically designed for use on paste backfill need to re-position fill lines, reducing handling and leading ductile iron, Series 725 is available in 6in/150mm size for systems rated up to 1000psi/6900kPa. Designed with a standard ISO 5211 mounting flange the Series 725 diverter valve can be provided with electric actuation or with a gear operator. The gear operator provided with the Series 725 has an optional input flange, and one of the competitive advantages of this system is that it is automated remotely.

Q: What new products are you deploying in the Mexican

Q: How does R&D enable Victaulic to position itself as a

mining industry that will foster productivity and operative

leader in the market?


A: Much of the innovation is driven by visits to the mines in

A: We have made improvements on our standard

order to recognize the areas of opportunities and problems



that need to be solved. The concept of building something

productivity. Our new couplings are installation ready,

the client needs is rarely realized because firstly, clients

which means they do not have to be taken apart and

tend not to know what they want, and secondly, there can


assembled. This is important for underground activities

be misconceptions regarding the problems they face. We


since if even a small component such as a nut is lost, the

talk to the engineers, fitters, managers, and field workers


operator would rather throw away the entire coupling

to gain an idea of the inside workings of the mine, how

and get a new one. This new coupling is called Style

things are used, and the cost of ownership.












It is almost impossible for operators to predict when issues will arise with machinery, and staff training is crucial to


ensuring minimal downtime and lowering costs. To ensure

Regional Manager for Mexico,

that staff are equipped to deal with the machinery before

Central America & Caribbean

actually operating it, Immersive Technologies designed

of Immersive Technologies

a simulation technology that is able to mock mine conditions in order to streamline the learning process for operators. “We cater to the whole market and because

The IM360 has the flexibility to train on surface mining

mid-tier or small companies always have the biggest gaps

environments even though it was designed specifically for

in terms of efficiency, productivity, or safety, our services

underground mining. It delivers cutting edge technologies

and products are tailor-made to adapt to all budget sizes,”

in a lower cost high fidelity platform. In Mexico he shares

boasts José Luis Durón, the company’s Regional Manager

that more PRO3B than IM360s have been sold, although

for Mexico, Central America and the Caribbean. “Large

Immersive Technologies is projecting considerable growth

mining operators are technology oriented but there is

in the deployment of both platforms.

always room for improvement, especially in expansion projects where they will require more equipment and

Immersive Technologies has relationships with OEMs


across the board and in cases such as Caterpillar, Komatsu, Hitachi, and Liebherr, these come in the form

In terms of popularity in Mexico, Durón shares that the top

of exclusive alliances. This provides the company with

products are the Pro3 and IM360. The former is specifically

unique access to engineering information, which allows it

designed for surface mining and one interesting feature is its

to create a trustworthy simulator. “Of course there have

curved screen that offers a greater depth perception, which

been considerable developments in terms of computer

is very useful for shovels or loaders. The other product,

based programs and screens, for which we have coped by

the IM360, has four visual panels from roof to floor that is

interacting a lot with our customers and OEMs to update

ideal in training for underground equipment. This simulator

and upgrade our software,” Durón concedes. “Other

also enables the operator to simulate walking around a

innovations we have incorporated can change the weather

mine to learn safety procedures in case of fire, fracture,

conditions and scenarios of the simulators and as such,

or landslide. “PRO3-B delivers cutting edge technologies

trainees have a wide variety of options at their disposal.”

that dramatically increase realism to a level not previously

The company also provides a training model that ensures

seen by the mining industry,” explains Durón. “The PRO3-B

high levels of staff readiness and operational improvement

provides a robust, industry proven high fidelity platform for

while taking advantage of a range of technologies to

driving operator optimization and business improvements.”

ensure the most cost effective solution.









Q: What is Mexico’s position in your global portfolio?

the simplicity of the products they are as productive as

A: The company entered Mexico six years ago. We sold

any other underground machine.

our first machines to Mexican and Canadian companies, mostly to Negociación Minera Santa María de la Paz

Q: What is needed to improve safety conditions in

(NEMISA) and Endeavour Silver. When Resemin realized

underground mines?

that product demand was increasing it saw a need to open

A: Mines all over the world, whether they are open pit or

a branch in Mexico that could offer technical support and

underground, operate under high safety standards with

retrofit our clients. The country has granted us important

the objective of eliminating the possibility of accidents.

growth considering we started with only six or seven

For this reason, Resemin makes sure that each piece of

machines and we now manage a fleet of over 30. Currently,

equipment complies with safety norms and standards with

the metals prices have not allowed us to operate as we

the most advanced technology available in the market.

would like but we are still managing to position ourselves

We offer our clients specialized equipment that ultimately

well in the market.

creates safer operating environments such as our Bolter 88 and small Bolter 88 roof bolters and our Scalemin

Q: Why are the Raptor and Bolter technologies especially

scaler. These machines carry out dangerous work that was

innovative and what distinguishes them from competing

previously performed by humans and was the root of a


great deal of accidents. This is eliminated with the use of

A: Resemin manufactures a wide range of equipment for

our equipment.

underground mining operations, including long-hole drills for developing fronts called Raptor, Bolter equipment, and

Q: How has the fall in metal prices affected your business?

the Troidon for production. Within each of these categories

A: Fortunatelly the growth we have experienced in Mexico

we have 2-4 models and with this variety we are able to

is mainly due to selling simple, productive, and economic

cover different sized projects for mines with production

products. A simple machine does not require so many

ranging from 500t/d to 7,000t/d. The main components

electrical components, which reduces acquisition and

we use in our equipment are well-known technological

maintenance prices. Although it is complicated when

processes that are used by other manufacturers of this

clients implement a savings and cost reduction strategy, we

type of equipment. As a result, we are able to achieve a

see it as an area of opportunity. However, while the metal

high level of trust and we ensure the availability of the

prices remain low we will be subject to a moderate growth.

components. Q: What are your most innovative machines that help Q: Why does Resemin manufacture simple machinery in

clients reduce operational costs?

an environment so focused on automation?

A: Resemin implemented a project two years ago called

A: Resemin’s main focus is to build durable and simple

MUKI, one of the most compact units in the underground

machines that are productive. Underground mining

mining industry with a width of only 105cm to exploit 2m2

operators often prefer simpler machines that eliminate

sections of deposits. There are several narrow vein mineral

the possibility of electrical problems. Companies are

deposits, with a potential that ranges from 60 or 70cm

happy to accept this type of equipment as mining

to a few meters. These mineral deposits can be exploited

operations in Mexico demand it. Our experience in Mexico

with high productivity and a reduced dilution and in this

is positive and our clients know and appreciate the

way volume and quality can be obtained at a low cost.

simplicity of our products. Operation and maintenance

This machine has seen great success in Peru and we have

personnel see the equipment as an advantage because

already sold some of these machines in Mexico, so we are

it makes for easier operations and maintenance. Despite

sure we will see the same success.





Q: How has Energold helped its mining clients overcome

the area. We can help fund a program, meaning that if we

adverse market conditions and develop successful

are recruited to drill 700m we can fund the other 300m to


reach 1,000m, making the drilling process more efficient.

A: As one of the largest drilling players in Mexico we

We try to always develop economies of scale whenever

are currently focusing on brownfield work. Energold is

possible since most of our clients are no longer junior

venturing into underground drilling and is developing new

companies but are now seasoned production companies.

capacities for what is commonly known as a diamond driller, and it now has the capacity to carry out RC drilling

Q What key R&D initiatives in core product offerings has

and open-hole drilling.

Energold Drilling implemented? A: We have developed highly portable S3 Rigs that come

We are still able to provide information to the client at

equipped with a kit and air compressor that allows for RC

approximately 60 percent of the cost of diamond drilling.

drilling. We developed this particular rig in Argentina and

Clients are recognizing the advantages as they do not

this equipment allows for remote and low cost drilling.

have enough funds for full scope projects and are opting

When carrying out RC drilling, as the drill perforates

to reduce the size of their programs. When projects are

downward and pumps air the chips of the destroyed rocks

prolonged we can make a large margin as our crew has

are blown up to the surface and collected in a sequence

time to get accustomed to the program and operations in

cyclone. When drilling open holes it can be even cheaper


ROBUST DESIGNS TO MEET SAFETY STANDARDS Africa,” says Tony Caron, the company’s General Manager Tony Caron General Manager for Latin America of MacLean Engineering

René Valle General Manager of Mexico & Central America for MacLean Engineering

for Latin America. “We made the investment in international branches so that we could be on the ground in the hard rock mining hubs around the world and deliver local service and support on four continents.” Caron shares that several

MacLean is known for its signature rock bolter but over

variables had to be considered when setting up a company

the years the company has expanded its product suite

in Mexico, especially since MacLean is a relatively small,

to include a full range of ground support, ore flow, and

family company that is new to the process. “We managed

production support units for the mining and construction

to enter Mexico, Peru, Africa, Australia, and the US in one

industries. “The need for underground equipment that

year,” he states. “Mexico is definitely the most challenging

improves safety, productivity, and machine availability is

to enter yet more rewarding as the results have been

universal but MacLean has learned that the introduction

quite positive just three years in.” This is not only due to

of our products and support also needs to be culturally

regulatory areas but also adaption of the equipment. Caron

adapted to places like Australia, Mexico, Chile, and South

continues, “We initially had to adjust to the geological

since the chips are not collected but rather scattered

activities and has been venturing into new sectors like oil

around the area. This can be beneficial for those that

and gas, geothermal, and infrastructure.

are looking for galena. Once this is identified expansive Q: What benefits has Energold identified in diversifying

drilling can be applied.

its activities and service portfolio in the mining sector?

“We are considered one

A: In 2011, 100 percent of our revenue stemmed from mining

of the most sustainable

figure dropped to 30 percent in 2013. The remaining 70

service companies and our

energy and geothermal, to water and infrastructure. If we

drilling and through concentrated efforts to diversify, this percent entails drilling across a wide array of sectors from had not diversified we would not been able to retain our

rigs encompass the most

human capital. We continue to focus on mineral drilling

stringent environmental

but we also provide additional services. By carrying out


retain the staff and improve their technical experience. We

Frederick Davidson,

clients appreciate this flexibility.

more projects across different sectors we are able to are able to integrate these services into one project and

President & CEO of Energold Drilling


Q: How can you protect scarce resources like water and Generally, our R&D initiatives focus on geotechnical

reduce your environmental footprint?

work related to mining, such as dewatering wells and

A: The S-series rigs are modular, which means there is no

geotechnical services for tailing dams. The latter for the

need to create new roads or remove trees to gain access.

most part are well engineered but any prudent mine

The rigs can be taken apart and connected with hydraulic

manager will make sure samples are taken to prevent

hoses, which reduces our environmental footprint. We do

any accidents. Many of our clients are required by their

not use toxic additives and they are all screened prior to



their implementation. We have also designed a new rig

also carry out dewatering in wells because many mines





that can be remotely controlled and it can drive through

may encounter water inflows that could potentially

the landscape and has minimal impact on the flora. This rig

be dangerous. Since 2011, Energold has diversified its

entailed a US$1 million investment in R&D.

variables between Canada and Mexico. Ground conditions

electrification of the mining industry in Canada that could

in Canada are different than in Mexico so we had a learning

be imported to Mexico.” Maclean is therefore establishing

curve when we first entered the market."

a fleet of electrical equipment that eliminates the diesel engine, and Caron sees these products as part of the answer

In the face of such hurdles, René Valle, the company's

to reduced profitability in the mining industry. MacLean uses

General Manager of Mexico and Central America, says

ground support as a way to help mining companies save

constant communication with the customer is essential.

capital through cost reductions, multifunctional machines,

“The company depends on a structure designed for

electrification, and the development of new products like

resilience in the face of market variations and this helps keep

its LR3 High Reach/Heavy Load machine that replaces

up us afloat,” he points out. “The company’s clients were

the telehandler. “The latter equipment is becoming illegal

not easy to convince but they are responsive to machines

in most countries as it is usually not certified for lifting

that provide safety and are adapted to norms.” Over the

workers and does meet these countries’ braking standards

last two years the government has established many fiscal

for underground mining,” Caron clarifies. “MacLean comes

changes, and companies are struggling to adapt to the

to the rescue by developing its own heavy duty equipment

new landscape. To thrive, players have to learn quickly,

that can replace the hazardous forklift.”

understand, and adapt to the taxes and new procedures. Valle does not believe the mining industry will change Caron emphasizes the value of innovation in the company’s

greatly in the near future but it will quickly grow after it

strategy. “MacLean strives to develop cutting edge products

overcomes the downturn. “Clear rules and guidelines need

and is constantly on the lookout for ways to adapt to new

to be established to support long-term growth in recognition

markets,” he explains. “There is a dominant trend toward the

of how important the sector is for the economy,” he adds.



LA COLORADA La Colorada was officially acquired by Pan American Silver in 1998. The Zacatecan underground mine is nuzzled among epithermal veins, breccia pipes, and quarries, with limestone replacement in Candelaria, Estrella, and Recompensa. Its overall production capacity consists of 1,250t/d. It processes silver and gold doré, and silver rich lead and zinc concentrates through a cut and fill stopping method. The Pan American Silver property utilizes oxide and sulphide plants to treat oxide and sulphide ore. The oxide plant is a traditional cyanide leach plant geared toward crushing, ball mill grinding, leaching, Merril-Crowe zinc precipitation, and even onsite refining. Its purpose is to process silver and gold doré. The sulphide plant similarly uses crushing and ball mill grinding, with the added bonus of having selective lead and zinc froth flotation circuits that collect silver, gold, zinc, and lead in independent lead and zinc concentrates. The first plant boasts a daily processing capacity of 650t/d, while the sulphide plant offers 750t/d. Pan American Silver gave the green light in 2013 for an expansion project. By 2017, the mission is to increase operations to 1,800t/d. The expansion began in 2014, and encompasses the construction of renovated mining infrastructure, including a 600m deep extraction shaft that has the ability to raise 2,300t/d of ore and waste. It will serve as the mining team’s principal access to working areas. As part of the approved expansion plant, the installation of a new 115kV power line will synchronize with the national electricity grid. The plans even include an upgrade of the mine’s dewatering and ventilation system, and a larger tailings storage facility. In 2014, Pan American Silver invested US$ 17.9 million on the La Colorada expansion, mostly to acquire new underground mobile mining devices, push forward underground mine lateral development, engineering work, and community infrastructure, and endow indirect project costs. More recently,







commissioning of the new sulphide processing plant. In comparison to the 750t/d capacity of its previous plant, it will now achieve production rates of over 1,400t/d. Between 2014 and 2017, the company estimates that it will spend a total of US$163.8 million, an investment fully funded by internal resources. The expansion will raise productivity by 67 percent, which equates to approximately 7.7 million ounces, by 2018. In Mexico, Pan American Silver plans to not only expand La Colorada, but also its Dolores mine, in an effort to reduce costs, and obtain a higher profit margin.




INDUSTRY CONTINUES TO WAIT FOR RECOVERY It is well known that underground mining operations are much more cost efficient, and that is why these projects have been flourishing over the traditionally popular open pit projects during the downturn in metals prices. Megamak


Mining Manager, Pedro Robles, maintains that in Mexico

Mining Manager of Megamak

and around the world underground mining continues to gain popularity and the number of projects have increased recently. “Most of the longstanding mining projects in

proper facilities, and we continue to include the most

Mexico started as underground mining,” he explains. “Given

qualified people,” he reveals. “Of course, since Cummins

the current market situation, underground mining has been

is a global company and we are their distributer, that says

the choice of investors and operators, and we are pleased

a lot about our operations. Cummins has alliances with

as that is the segment we cover.” Last year, Megamak

some OEMs like Atlas Copco and Sandvik, so they can

anticipated that mining’s importance to its portfolio would

build more effective strategies.” Megamak also distributes

increase to constitute 50 percent, and the company has

Hyundai, Sandvik, and other important brands such as

spent the last 12 months working to develop new strategies

Allisson transmissions. With Allisson, Megamak is working

in order to work closer with the final customer. “We also

to implement all the proper training for technicians and

work for the marine, oil and gas, automotive, power

customers alike. “We already have active transmissions in

generation, and every industrial sector that uses engines

several mines in Mexico and we want to make sure they are

but Mexico constitutes the greatest part of our portfolio,”

still working properly regardless of the engine band used,”

Robles comments. “We are now working with companies in

he expresses. “Our corporate offices evaluate the brands

the northeast region especially with natural gas companies.”

that could be economically beneficial for Megamak, and normally the most prestigious brands bring the most profit.”

In past few years, Megamak has had to reduce its workforce and become more efficient across the board. Robles shares that the company has been more aggressive in maintenance processes and results, which gives the customer the sense of confidence. “This is why we have broadened our activities with technicians and we have promoted training sessions,” he explains. “In general we have been looking for new business opportunities to keep our labor force on board. In the case of underground mining we reduced our workforce and our facilities are now being used to cover other industries as well. We need to seek new projects in

“If the operators do not grow enough it is hard for us to maintain our current position” Pedro Robles,

Mining Manager of Megamak

different markets like industry and automotive.” He believes the main consideration for miners today is the reliability of

Cummins has different emissions levels for different

the acquired equipment. “Companies are always trying to


reduce their operational costs so they invest in high quality

percentile. Robles comments that the company works

equipment that would boost their operations and would not

very closely with the application engineer in Cummins to

experience technical problems,” he maintains. “Cummins

develop a special calibration for the type of engine the

is working hard with several OEMs so we can find a good

company is working on. “We make sure the engine is

match to build equipment and engines.”

meeting environmental and operational requirements,” he






continues. “If we are operating in a high altitude and we Megamak is currently present in 90 percent of Industrias

can see a lot of black smog in the air, we need to work with

Peñoles and Fresnillo underground mines, as well as those

the customer to develop a new calibration for this kind of

of Grupo México. Moreover, the supplier has established

engine.” Robles expects the next two and a half years to

a partnership with Cummins that evolved from a mutual

be flat. “For the next five years there will be limited growth

respect for standards, according to Robles. “We started

and as for Megamak, we will continue to improve our

distributing their engines and we try to follow Cummins’

facilities and our personnel in order to be more efficient,”

strategies in order to be sure we have the right technicians,

he concludes.





Q: What are the company’s plans for expansion, and what

The advantage of the SR model is that it allows the miner

attracted the company to the Mexican mining industry?

to drill a larger diameter hole, which means a greater

A: The company works exclusively in raise boring although

round can be created with fewer explosives. A 13in burn

we have plans to move into other sectors in the future.

hole would allow a 1m2 explosion, while we can drill a 2.1m

Mexico represents about 35 percent of all raise boring

hole, which creates a 6m2 explosion.

machines on an international scale, meaning the country presents an attractive market share for us. Additionally, most of the ground in Mexico tends to be relatively soft, which is extremely cost effective for raise boring due to high cutter cost. We have five machines currently working in Mexico, three of which were sold to a contractor and the other two were sold to mines. We plan to continue our successful partnership with Part Service Supply. Q: What differentiates you from competitors within the same market? A: There are few companies that provide raise boring equipment, and of these TUMI is the only company that provides the complete package from one manufacturer.

Mexico represents about 35 percent of all raise boring machines on an international scale

Our service provides a guarantee that any issues found with any part of the raise boring equipment can be solved

This provides lower costs and faster production rates.

by a single provider. We understand all the small details

Moreover, a standard raise boring machine has a power pack

that come with running a raise boring machine, and we

unit, a control console unit, and an electrical unit in addition

are extremely flexible and never treat our clients as just a

to the machine itself, which is attached to a cement pack.

number. However, raise boring machines can total US$10

On the other hand, the SR model was designed to be mobile

million, which is a substantial investment for any company

so it is self-leveling, self-pinning, and self-secure. Normal

and it is unlikely to be made in such an environment.

production rate on a raise boring machine is between 80m and 100m per month, whereas an SR model drill provides

Q: What innovative technology have you developed, and

between 200m and 250m per month.

what makes it unique in raise boring? A: Our SBM 400SR machine is revolutionary in that it is

Q: What part does safety play in your business strategy?

completely automated and compact. One was sold to

A: In all of our machines we have integrated fail safes so

Molycorp in the US, which is a subsidiary of Chevron.

that if a component breaks down, there is always a backup

Two were sold in Chile, and some will shortly be sent to

option to continue operating. The machine can drive itself

Australia. There is a significant technological gap between

to the location, level itself at the hole, and position the rake

the standard raise boring machine and the SBM 400SR or

at the level the client requires from 35° to 90°. On a typical

the larger version, which is the SBM 700SR. Slot raising

raise boring machine the set-up time is between 5-7 days

mining, which involves inserting a burn hole in the center

just for the cement floor, whereas with this mechanism the

of a mineral pocket, drilling smaller holes around it and

set-up time is 15 minutes. We reduced human interaction

setting off an explosion, allows the minerals to collapse

with the machine as much as possible so by implementing

into a given space. Without the burn hole the mineral

automatic pipe positioners, automatic upper wrenches, and

would be trapped.

automatic bottom wrenches.


SAFETY A PRIORITY FOR US SUPPLIER “We have battery drills and small battery trucks that can

When Oldenburg Group owned Stamler, it introduced battery powered equipment that revolutionized that industry. Oldenburg is now looking to incorporate this

run the length of a shift on a

battery technology into its hard rock mining equipment.

battery, the obvious benefit

run the length of a shift on a battery. The obvious benefit

being that there are no

“This is important in underground mining since it allows


power loss, and it has added health benefits for the miners.

Wayne Oldenburg, Founder of Oldenburg Group

“We have battery drills and small battery trucks that can is that there are no emissions,” explains Wayne Oldenburg. deeper penetration, operation at high altitudes without While it might be difficult to introduce products like these in the current market, there is a great deal of potential since the regulations are bound to become stricter.” The

When Oldenburg Group first entered the Mexican market

ADS-500 is a new face pattern system with an interface

in 1995 it was through the acquisition of a small company.

that allows operators to program drill patterns into the

“As we piece together our product portfolio we have

system and use advanced hole location and auto depth

incorporated technological innovations that are in tune

technology to drill faces out accurately and consistently.

to the untapped potential of the market,” shares Wayne

This means there are no field measurements required

Oldenburg, the company’s Founder. “We have dedicated

since everything can be programmed from the cab, and

services and sales teams, and we also have the support

the operator only has to carry out the alignment and

of Matco and Caterpillar in our distribution network.

proceed. Mining engineers can follow up and update it

Throughout the years we have created a full product

in order to fine tune the pattern and ensure the operator

line, incorporating basically everything that one needs

drilled correctly. The added benefit of ADS-500 is the ease

for underground mining. We have grown dramatically

of use, since other similar systems used in the industry

in Mexico and Latin America and these are our highest

must be modified and updated continuously by the OEM.

growth areas.” Ryan Oldenburg, Corporate Development

Oldenburg’s platform makes it easy to modify and change

Strategist at Oldenburg continues, “The acquisition of

patterns since the system belongs solely to the client and

the small company in 1995 marked the entry of the group

no subscription is required.

into the Mexican mining industry and during that time we owned Stamler, a global supplier of coal mining equipment.

The Founder has identified a trend in the demand for

We had manufacturing presence in Australia, South Africa,

smaller equipment within the industry. “For a long time

and the US, and this acquisition helped us develop several

one size fits all machines have been pushed on customers

machines that were integrated into our product line.”

with little adjustment for the specific market,” he laments. “In the Mexican market, size plays a key role as machines

The Corporate Development Strategist maintains that safety

need to fit and maneuver in smaller spaces. We are

has always been a priority for Oldenburg equipment. “We

developing brand new equipment, such as the SV11 scaler,

believe our customers and their employees should never be

while simultaneously downsizing our existing products to

put at risk, and we incorporate safety and durability into

better serve our customers’ needs rather than trying to

every design,” he explains. “This will continue to be at the

force an existing product on the market.”

forefront as new technologies like simulator training and remote controlled operation become reality.” The company has worked closely with customers in Mexico like Industrias Peñoles to develop equipment specifically tailored to the Mexican market. “By listening to the challenges and needs of our customers we were able to develop our SV11 Scaler, which offers the size and features that benefit Mexican mines such as a boom that swings independent of the articulated chassis, SAHR brakes, and a compact size

“We believe our customers and their employees should never be put at risk, and we incorporate safety and

that will fit in smaller tunnels without compromising the

durability into every design”

durability and safety that Oldenburg products are known

Ryan Oldenburg, Corporate Development Strategist of

for in the US,” comments the company’s Founder.

Oldenburg Group




THE HIDDEN BENEFITS OF THE MIGHTY FILTER Electrical power systems, such as transformers, motors, and fuses are colliding with the emerging energy efficiency market as it brings to light consequential problems that involve the distortion of harmonic current flows that require specialized filters to obstruct the damage. The issue is that most electrical equipment was designed many years ago to only use practically perfect sinusoidal currents, while nonlinear loads have a strong presence of harmonic currents that greatly damage the equipment’s current and voltage waveforms. On top of these technical issues, the industry must also take into consideration the alarming fact that in Mexico, the manufacturing and mining industries are the only ones that face an annual loss of MX$44.6 million. 243

Fortunately, Técnica Salgar has been developing reactive power technology since 1976, and offers dual filters that can rescue the mining industry from unnecessary capital loss and inefficiency with a single application. The technology includes automatic absorption filters, and a high capacity dual system that can filter harmonic voltage or currents. The company first introduced rejection filters into the market in 1984, and it was not until the 1990s that it finally created a normalized product line for harmonic current absorption filters. Its essential feature, the technical support it gives to clients and supplies, boosts the company’s reputation to equal that of any other prestigious transnational company. Técnica Salgar’s dual filter technology can save the day by being the only one in the market that can repair the flow of harmonic currents in electrical power systems, as well as adjusting the potency factor, which in turn offers an overall superior energy quality. With the use of this technology the industrial sector in Mexico will be preventing over 1 million tons of CO2 in annual emissions levels. More specifically, the dual filter can reduce 50 percent of total harmonic distortion in wave forms, and save an impressive 7 percent of electric energy. Técnica Salgar’s technology can also increase productivity by 10 percent. The filters are part of many solutions the company can grant to boost process optimization, and electric energy savings for the mining and metallurgic sectors across the Americas. The company declares that it has played an important role in Mexico’s journey toward becoming a modern, dynamic, and open nation by being a technological pioneer in the reactive power field through projects. Today, it is a solid, institutionalized company that is committed to its team, distributors, and clients.


SUSTAINABLE TAILINGS AND ROAD SOLUTIONS extend dams,” claims Sanchez. “In Mexico, we are working on revegetation and erosion control projects. The Tensar TriAx Geogrid is our star product because it can contribute


a variety of benefits to our clients and their projects,

Regional Engineer Mexico and

including low cost, high performance, and the use of less

Central America of Tensar

base course aggregate for the construction of the roads.” This product can confer a greater load bearing capacity to the soil, and this resistance allows the equal distribution

Mine access routes can be treacherous yet they serve as

of loads. Geogrid can also confine the aggregate, and

a vital artery connecting the organs of the mine to the

the product can be applied to all roads that typically

supply chain. Trucks with loads of up to 300 tons traverse

experience heavy loads. Without Geogrid, more journeys

the routes daily, meaning the engineering needs to be

and more machinery would be needed.

adapted to certain weather conditions, such as rain, and 244

must be sustainable. One of the services offered by Tensar is the reinforcement of the geomembranes through an

“Vegetation and erosion

electrolyte process. “Problems with soil are industry wide,

control is extremely

and this is the area in which we specialize,” comments Erick Sanchez, Regional Engineer Mexico and Central America of Tensar. Tensar can work both in joint ventures and as a distributor but the company is currently interested in the mining industry, and in roads and infrastructure, with highresistance walls. At the moment, about 5 percent or so of Tensar’s sales are focused on the mining sector. “When we entered the market the Mexican mining industry was

important because these dormant projects could be contaminating communities” Erick Sanchez, Regional Engineer Mexico and

Central America of Tensar

experiencing a downturn, whereas now the sector is beginning to recover,” explains Sanchez. “Nevertheless, opportunities come from capital, and with investors from

There are certain projects that have been dormant for

Canada and Australia, we must constantly make our

three years, says Sanchez, and now SEMARNAT is pushing

offering more competitive.”

the owners of the mine concessions to focus their attention on the environment surrounding them. “We work with

The metal prices are recovering, with the exception of

biologists and specialists in local seeds,” he comments.

copper, so mines in Mexico are more focused on silver

“Due to varying climates and ecosystems, we cannot use

and gold, according to Sanchez.

“We not only sell

the same solutions in Sonora as we would in Guerrero.

products but also an engineered and alternative solution

Vegetation and erosion control is extremely important

that can save projects considerable amounts of money,”

because these dormant projects could be contaminating

he boasts. “Our main clients in Mexico are Grupo México,


Minera Frisco, Industrias Peñoles, and Goldcorp. There are several projects that are on hold at the moment, and

In Mexico, Tensar is working with two distributors, TDM

the SEMARNAT regulations force operators to adhere

and Ecomex. “We currently have clients in around 25

to environmentally friendly processes.” Tensar provides

mines, and we expect that next year, we will acquire

solutions for revegetating dam slopes and erosion control.

about six new clients or mines, Sanchez explains. "These

In some mines, tailings dams are full and it is difficult to find

mines are gold and silver, so are smaller. We are trying

a new location for the deposits, but Tensar can extend the

to approach the medium market because the total

dams to provide up to 80 percent more capacity.

SME market amounts to more potential profit than the majors.” Having worked on a great deal of projects in the

The products Tensar produces are all polymeric, meaning

Americas, Sanchez believes that Tensar has the relevant

the acids and PH balance poses no adverse environmental

experience from projects in Chile and Peru that it must

effect. Unlike steel, Tensar products do not corrode,

now translate into the Mexican market. Tensar’s aim is to

making this an attractive option for mining companies.”

prioritize mining to become its second most important

Our competitors do not have the same technology to

sector after infrastructure.



Q: What position does Mexico play in TDM’s global

out of our products. We have found this to be a successful

portfolio, and how has this position developed over the

approach as it ensures the client makes the expected

past few years?

savings, and therefore increases the likelihood of further

A: TDM Group is a Peruvian company that has been

business down the line.

in operation for over 24 years, manufacturing and distributing three main groups of products, asphalt, geosynthetics, and steel goods. We entered the Mexican market in 2012, focusing mainly on the infrastructure sectors, but in 2016 we decided to expand our focus into the local mining industry. We see a vast amount of potential for our products in this sector, and indeed in other industries such as oil and gas and construction because our products can reduce operational costs for

TDM Group has sold more than 1 million m2 of its polypropylene geogrid for use on the new airport project in Mexico City

businesses in a number of ways. We operate in a total of five countries, Peru, Colombia, Brazil, Chile, and Mexico,

Q: To what extent are there any plans to import

and certainly Mexico will be a large focus of ours for the

geomembranes from Peru to Mexico?

next few years.

A: We started exporting geomembranes to Mexico in May 2016, mainly to ponds and reservoirs but we are

Q: How can your products succeed in reducing costs for

expecting to secure our first order for this line of products

your clients?

from the mining industry in Mexico before the end of the

A: Our Tensar polypropylene geogrid systems for haul

year. We are currently considering developing a second

roads allow for more effective soil recycling and use

plant in Mexico due to the low operational costs and its

thinner paving structures than conventional solutions. This

close proximity to the other markets in North America.

enables the user to transport heavier loads without the risk

We see a lot of potential demand for these products from

of damaging the road itself, which of course significantly

our clients in the US. However, we are waiting to gauge

reduces time and funds usually lost on maintenance

the level of return we get from the plant in Peru, which

works. This is a system that uses technology designed in-

we only acquired in full this year, and these results will

house by our supplier Tensar more than 30 years ago, and

determine if and when we build an additional plant.

is used throughout the mining and transport industries in Peru and other parts of South America. However, from our

Q: Where do you see the most potential for the growth of

experience in Mexico, it is a relatively unknown piece of

TDM Group in Mexico?

technology. That said, we have already sold more than 1

A: I believe that our products are most widely applicable for

million m2 for use on the new airport project in Mexico

the infrastructure industry, and particularly the new airport

City, and we hope to soon attract new clients within the

project, which represents a fantastic opportunity for the

mining and oil and gas industries.

group. There are a number of pending bids for this project which include the use of our geogrid system. Depending on

Q: How does TDM differentiate itself from competitors?

how construction at the site progresses, I would anticipate

A: The key is in the quality of service we provide. We do

that this will be the main focus for TDM Group’s Mexican

not simply manufacture the product and then distribute

operations for the next three to four years. Regarding the

it, but rather we develop a relationship with each client

mining industry, we have only recently turned our attention

by helping them through the installation process and

to this market, and we are still in the process of learning and

explaining precisely how to get the most benefit possible

exploring all the opportunities for our products.


246 (55) 6724-1000

(55) 5546-6890


Tecnología sustentable para la industria



Q: What position does Mexico hold within the overall

schemes. The client will then see first-hand the increase in

business strategy of Walden Group?

productivity and decide to purchase the product.

A: Mexico is the third most important market for Walden Group’s global strategy, and the company is constantly

Q: Given that your equipment is used mainly for

looking for new investment opportunities to expand the

underground mining operations, what are the main safety

business in this country. Our focus on Mexico comes as

considerations when developing new technology?

part of the overall policy to expand our existing presence

A: Every piece of equipment used in underground mining

into Latin America, Europe, and the Middle East. We work

must be fitted with reflective labels and lights. It is also

with a number of large mines in and around Zacatecas,

important to consider the CO2 emissions created by

which is ideally placed in the center of the country and

each product because underground mines can become

well connected to the mining regions of Durango and

extremely polluted, hot, and humid. Therefore, one of our

Chihuahua, as well as Mexico City.

main concerns is to reduce the environmental footprint of our products from the manufacturing phase through to

Q: How has Walden Group been affected by the new

operation. This is a growing trend for equipment suppliers

royalty tax on mining production and the downturn on

throughout the underground mining industry in Mexico.

precious metal prices?

We are focusing on diversifying our portfolio, so we want

A: It has become more challenging to sell our capital

to expand our business in all the sectors in which we work.

equipment, our main source of income, because many mine

Rather than a specific sector, our focus is on developing

operators are trying to reduce their costs to adjust to the

the equipment side of our business, and more specifically

lower metal prices. This means that executives currently

the rental side. In the current environment, mine operators

favor trying to repair old equipment to purchasing new

lack the capital to purchase new equipment, and their lines

technology. This has been particularly challenging for the

of credit with financial institutions are drying up. Therefore,

group because not only are operators buying less but there

rental is becoming an increasingly attractive option

is more and more competition in the marketplace. However,

because operators do not own the equipment and they are

we differentiate ourselves by offering a more thorough

thus not so tied down by maintenance and labor costs.

customer service. To complement our after-sales support we also provide a full logistical service by distributing the

Q: How do you expect the Mexican mining industry to

equipment directly to the mine itself if required.

change over the next few years? A: Everything is dependent on the performance of

Moreover, we provide financial support to our customers,

commodities on the international markets. I believe

not only through flexible and split-payment schemes but

the industry will gradually start to move away from its

also by connecting them to banks and other financial

traditionally conservative roots and become more open

institutions in both the public and private spheres. These

to new technology, and this is where the Walden Group

contacts can help our clients seek new sources of financing,

can lead the way. Many of our clients have introduced new

which is particularly valuable given the current pressure

designs into their operations but more often than not they

on balance sheets throughout the industry. We try to

eventually revert to their original systems. This is because

demonstrate in what ways our new equipment will improve

the operators are not well trained to use the equipment

on the client’s existing technology, which is often damaged

effectively, which adversely affects productivity. However,

and therefore less productive. Instead of spending

as mining companies adopt long term strategies, they are

significant funds on repairing old technology, which is a

realizing the benefits that new technology can bring to their

risky investment,we suggest they adopt our product on a

businesses, and over the next two years I expect this to

temporary basis either on trial or through one of our rental

become the norm.




that every safety aspect is covered. For example, a daily

Altos shaft project with

any mine site in Mexico. Many explorers work on a three-

Agnico Eagle and we are working on a development in

alcohol test is obligatory for every worker before entering strike basis, which means that after three failed tests, a worker is banned from the site. However, Dumas has zero tolerance for alcohol. “We are

Oaxaca at a rate of 50m per

also extremely strict on the issue of Personal Protective


Canada, we recently installed a small strobe-light on the

Equipment (PPE), and following a fatal accident in back of our helmets,” Fimbres explains. “We are the only

Cesar Fimbres, Mexico Country Manager of Dumas

contractor to equip its workers with this device. Moreover, we provide constant safety training for all of our miners,


Dumas has a wealth of experience as an underground

and in order to encourage a culture of safety awareness

mining contractor, having worked in the industry for over

we stress that the measures we take are primarily for

20 years. The company began operations in Canada as a

their protection.” In recent discussions, Dumas presented

response to the needs of the major operators for a reliable

Fresnillo with two separate figures in its offer for the San

and high quality contractor to develop their tunnels. As well

Carlos shaft contract. The first was the overall budget,

as Canada, the company now has a presence in Guatemala,

and the second was the percentage of that budget that

Peru and Mexico, where it currently has two active projects.

will be spent on safety. “Fresnillo commented that it

“We are finalizing the Pinos Altos shaft project with Agnico

has never encountered this approach before, and was

Eagle and we are working on a development in Oaxaca at

extremely impressed,” Fimbres shares. “I am sure that

a rate of 50m per month,” shares the company’s Mexico

other contractors will soon be more specific in terms of

Country Manager Cesar Fimbres. “We are currently bidding

their safety budgets, as mine safety is an absolutely vital

for several contracts within Mexico, including the San

concern for all mining operators in Mexico.”

Carlos shaft at Fresnillo’s mine in Fresnillo and the El Boleo mine in Santa Rosalia, Baja California.”

Fimbres communicates that Oaxaca is one of the most difficult states to work in as a miner in Mexico, as the

Dumas built Agnico Eagle’s new 634m production shaft at

local authorities have strict and specific regulations, and

the mine, as well as installing the necessary infrastructure

they view mining projects with a great deal of suspicion.

for the project. “We have worked with Agnico Eagle

“However, we have been working there for 18 months now

on a number of projects in the past, and through these

without a single problem with the community,” he boasts.

experiences, our two organizations have developed a strong

“This is because we make efforts to rent houses, eat in

relationship,” Fimbres boasts. “Although we are not the

local restaurants, and rent local vehicles to transport our

cheapest contractor in the industry, Agnico Eagle is aware of

workers at the end of every shift. We also hire a community

our excellent safety record and high quality of performance,

relations officer for each of our projects to ensure that the

and this was a crucial factor in the decision to hire Dumas as

needs and beliefs of each individual group are respected.”

the contractor.” During the project, Dumas was advancing

With a goal to become the first choice contractor for all

at a rate of around 3.5m per day, including drilling, shaft-

of the big Mexican companies, Fimbres hopes to be able

sinking, and the installation of concrete support structures,

to do that by winning the San Carlos contract. “We want

and Pinos Altos will celebrate the inauguration of the shaft

people to understand that Dumas is a Mexican company

with a ribbon-cutting ceremony in the near future. In fact,

with support from Canada, and that is why we offer

news of the company’s performance on the project reached

Mexican prices with international standards,” he reveals.

the executive board at Fresnillo, which led to the invitation

“When we finished the Pinos Altos project, we inevitably

for it to bid on the San Carlos project.

let a number of people go, but the vast majority of our workers said that they would be more than happy to work

Fimbres shares that when Dumas begins working on a

for Dumas again. This is something we feel proud of and

project, it combines the most stringent safety measures

we hope that we can continue to build on this reputation

from its experience with those of the client, to ensure

in the coming years.”


CABLES IN MEXICO BECOMING A PRICE MARKET RENÉ MOLINA Commercial Representative Mexico of Tele-Fonica Cable Americas

Q: What is the company’s strategy for capturing such a

additional growth opportunity thanks to the market gap

significant market share?

our cables can satisfy within those industries as well.

A: Our main strategy is to expand and search for new markets, while constantly improving the quality of our

Q: What type of challenges or resistance has Tele-Fonika

products. Tele-Fonika has a strict production process,

experienced and how has it overcome these?

and a prestigious global service network. We prioritize

A: Our biggest challenge lies in facing resistance to change

the development of specialized cables that are innovative

and new technology. The Mexican cable market has

enough to break national benchmarks in each market.

unfortunately become a price market. Many national and

Within the mining industry, an increasing amount of

foreign manufacturers eliminated intermediary distribution

players are convinced of the mechanic properties that

channels in order to directly supply mines, which in turn

polyurethane can offer for electric pulling cables thanks

started a price war. Sometimes it is difficult to convince

to its physical properties that have double the resistance

users that our cables offer long term savings and added

of other traditional rubber bases. In the case of Mexico

value. Electric cables for mobile equipment in mines are

and South America, the company has a primal focus on

regulated by international security agencies for dangerous

manufacturing electric cables for mobile equipment.

environmental work. In Mexico, users commonly request

Our TPU cable not only has mechanical polyurethane

the international certificate MSHA from our machines as it

advantages, but also, a patented shiny material composition

is related with security and occupational health in mines.

that covers 100 percent of the cable. The product is called Jumboflex Reluciente as it is mostly used in jumbos, drills, and anchors in the interior of mines. It has been quite successful as it eliminates damage and grants security to users that are in total darkness, while our competitors limit themselves to strips that only cover 30 percent. Most of our growth in Mexico is enrooted in the mining industry. Q: In what ways can Tele-Fonika provide more productivity, efficiency, and safety in the Mexican mining sector? A: We are constantly developing strategies to offer

“Electric pulling cables that use polyurethane have double the resistance of other traditional rubber bases” René Molina, Sales Representative at Tele-Fonica Cable Americas

competitive prices that reduce logistic and transportation costs for our clients. The company recently finalized the

Q: What are the main business objectives of the company

implementation of a fiscal precinct in its distribution

for Mexico in the short and long term?

center in the US to generate efficiency both in importation

A: Tele-Fonika’s main objective is to widen its participation

and the customs office. In January 2014, Tele-Fonika Cable

in 8kv wires. Nonetheless, our 600v and 5kv cables are

Americas, negotiated a 3-year blanket contract, for USE-2

well known and used in the mining industry. We have the

type cables, for a large public utility, in the south central

advantage that our commonly manufactured 8kv and 15kv

US. This boosts our position, particularly in markets

pulling cables for mines are rare in Mexico. The company is

that do not commercialize these type of cables. Tele-

working on an intense specification campaign for the latter.

Fonika targets the mining cable market, but third parties

Likewise, our short term objectives are in strengthening

frequently invite it to participate in the cable bidding

our promotion and specialization efforts for our electric

rounds that CFE grants for large distribution projects.

high voltage cables, particularly targeting companies in

That large amount of investment that the bidding rounds

the utility sector like CFE and PEMEX to be able to take

for deepwater extraction and exploration attract is an

full advantage of the country’s Energy Reform.




Operators are now demanding the constant extraction of higher volumes and higher grades despite declining reserves. In 2015, global gold production increased to a record volume of 3,000 tons compared to 2,280 tons in 2014. Most of the highest grade gold mines in the world are based in the Americas, in the US, Chile and Peru, giving greater urgency to Mexico’s drive to increase grade. Initial cost of equipment is becoming less important as operators are aware that these investments will help on the road to fast ROI and decreased processing costs. The new green mindset within the industry is also penetrating this notoriously toxic subsector of Mexican mining and operators are seeking new extraction methods that mitigate lasting damage to the environment.

In this chapter, we will examine the emerging procedures for processing ore in a more efficient and effective way. CEOs discuss environmental concerns regarding the use of cyanide in these processes and offer advice on reducing or eliminating lasting damage to the surrounding areas. The most up-to-date technologies that can revolutionize the industry are described in depth. As the sector evolves, industry leaders explain that it is necessary for manufacturers and distributors to grow alongside it and offer tailored and turnkey services with a crucial added value.



Total lifecycle support FLSmidth’s dedication to our customers is evident through our world-class service and aftermarket support, which are customized to each customer’s level of need and expectation. Our global network of support personnel, coupled with our local customer service teams gives assurance that we will be there when you need us with the right expertise, the right tools and the right spare parts. We’ll keep your equipment running safely, smoothly and properly. We are dedicated to ensuring you have the lowest total ownership cost. For more information, visit


INSIGHT: Richardt Fangel, FLSmidth


INSIGHT: Leif Lindholm, Metso


VIEW FROM THE TOP: Jeffrey Davis, Cyanco

Leonardo Martínez, Cyanco


VIEW FROM THE TOP: Mario Muñoz, Croda


INSIGHT: Richard Booth, MMD Mineral Sizing


VIEW FROM THE TOP: Angel Pedraza, Solenis


VIEW FROM THE TOP: Armando Santacruz, Pochteca


VIEW FROM THE TOP: Carlos Morales, Masaba




TECHNOLOGY SPOTLIGHT: NextSTEP in Forced-Air Flotation Technology


VIEW FROM THE TOP: Alberto Leal, Cribas y Productos Metálicos


TECHNOLOGY SPOTLIGHT: Progressive Dosing for Flotation Systems


INSIGHT: Tonatiuh Jiménez, Bosch Rexroth


VIEW FROM THE TOP: Juan Jiménez, Ayeasa


VIEW FROM THE TOP: José Sánchez, Mettler Toledo

César Correa, Mettler Toledo




INSIGHT: Alberto Treviño, Tododren


TECHNOLOGY SPOTLIGHT: Improved Pump Efficiency with Chesterton Superset


INSIGHT: Manuel Escobar, Construmac



DRY STACK TAILINGS SOLUTIONS FOR WATER SHORTAGES substitution of old equipment with newer technology, and combining high uptime with the latest technology ensures our customers can become low-cost producers.”

RICHARDT FANGEL Director General of FLSmidth

FLSmidth has also been involved in Goldcorp’s Peñasquito


project. Around 80 percent of the equipment in Peñasquito was sourced from FLSmidth, meaning ¡ the mine’s daily process rate of 130,000 tons is the ¡ company’s most


Given the current market conditions, FLSmidth is taking

important reference in Mexico. Nevertheless, for a global

a two-pronged approach. One is focused on reducing

company such as FLSmidth, these success stories are

the unit cost of processed tons and the other is providing

present around the world. “Success only comes after many

adequate services to the local industry. Under the current

different operating challenges like a change in the ore

circumstances, new equipment installation has dropped

grade causing an impact on the process, or operators that

considerably whereas provision of services has maintained

are not adequately trained to use the equipment,” Fangel

its base because production is increasing, according to

explains. “We work hard to provide the correct solution for

Richardt Fangel, the company’s Mexico Director General.

our customers, which might include training, changing the

With a goal to increase its local service offerings to ensure

installation, or modifying the process but our philosophy is

higher uptime of equipment for customers, FLSmidth

never to abandon a problem.” This mentality led FLSmidth

is constantly focusing on the cost of equipment and has

to adjust its local structure, and the service center in

noticed that Mexico has become increasingly attractive for

Zacatecas is part of this local expansion. “The center

manufacturing. “Innovations carried out on new equipment

is able to offer complete service of a processing plant

can provide energy savings and increase recovery rates

from primary crushing to filtration,” comments Fangel.

while helping with the throughput and production,” claims

“Our local service offerings are part of the FLSmidth life

Fangel. “Companies can actually earn money with the

cycle services, where we combine CAPEX and OPEX in



have been able to avoid breakdowns since our inspection

Central America and the

programs allow them advanced warning of any potential

Caribbean at Metso

issue, and take pre-emptive action before this issue becomes problematic,” says Lindholm.

Even in light of the chronically low mineral prices around the world the majority of mines remain operational, and for

With the services the company offers, it is able to support

the companies that operate within them efficiency is of the

customers by allowing their processes to generate a

utmost importance. “Essentially, we are a global company,

higher tonnage volume without the need to upgrade to

and we capitalize on the knowledge and experience we

more expensive equipment. Metso essentially corrects

have gathered globally in order to optimize services for

the areas in need of improvement in order to enable the

local customers,” boasts Leif Lindholm, Vice President of

customer a higher degree of accuracy. In certain mining

the company’s operations in Mexico, Central America, and

sites, the company has been able to increase capacity and

the Caribbean. “This applies, not only in terms of products

lower costs, but with no new capital investments. In turn,

but also regarding operational practices.” Metso has

this generates savings on expenditure, and subsequently a

been carrying out inspections for Industrias Peñoles for

higher profit margin. “In the current mining climate even a

over seven years, meaning that both companies are long-

marginal cost saving will create increased profits, and this

time affiliates. “With Industrias Peñoles in particular, we

is one of the key areas of focus due to tightening budgets

one source to benefit the local end user, a concept that

and mining companies may have conflicting interest

ensures high ROI for our customers.”

with the agriculture sector for the same source,” Fangel comments. “The consequences of this are that mining

Although the company normally carries out its own R&D

companies are now more interested than ever in investing

at its Technological Mining Center in Salt Lake City, it is

in new technology within this area.” In November 2015,

continuously working on projects with global and Mexican

FLSmidth participated in the Mining Dialogue between

clients. This may include its latest dry stack tailings concept

Mexico and the Nordic Countries conference at UNAM,

or the Next Step rotor, a product that reduces energy

where SEMARNAT, PROFEPA, and various technical

use by 20 percent while improving recovery rates. “From

Nordic suppliers were able to suggest water efficiency

time to time, we may collaborate with niche technology

solutions. “We introduced the dry stack concept at this

providers, and lately we have signed an agreement with

event but there are currently no dry stack guidelines,”

BASF on arsenic-challenged copper deposits,” Fangel

Fangel laments. “Our impression from that dialogue

boasts. “After adequate internal specialist training these

was that all stakeholders in the industry are extremely

solutions are made available to our local customers.” Apart

interested in applying new technologies to contribute to

from technologies, FLSmidth also brings new concepts to

water availability solutions.”

the market, an example of which is the complete turnkey solution concept. “We have the complete flow sheet

Mexico and its mining industry are changing, according to

technical solution, including the process and equipment,

Fangel. Since the mining industry was opened to foreign

and we can integrate these into a complete process plant

investment in 1993, there have been increasing numbers

on turnkey basis,” he declares.

of new players coming into Mexico. “With the suppliers’ change in mentality from single equipment manufacturer

Historically, Fangel says, Mexico was characterized for its

to complete flowsheet process plant we see a trend of

access to relatively inexpensive water compared to other

a new customer mindset,” Fangel observes. “Our One

countries, and for that reason there was no economic

Source concept allows us to challenge the division of

incentive to invest in water saving technologies. Now that

responsibilities along the chain, and those customers

water shortages are increasing due to the vast increases in

that want to set new standards in the industry should

Mexico’s manufacturing processes, the price for industrial

consider the flexiblility that the One Source concept can

fresh water is increasing fast. “Water is a scarce resource,


and the lack of innovative technologies,” Lindholm shares.

Metso was involved in the trial of a state-of-the-art pit

“The main challenge we have faced in the global mining

crushing and conveying system in the Olkon Olenegorskiy

market is its traditionally conservative mindset.” The

GOK iron ore mine in Russia. Before Metso provided its

majority of customers are generally very independently-

solution, Olkon operated a traditional crushing process with

minded, meaning that great effort is needed in order to

no in-pit facilities so Metso’s provision of in-pit crushing

convince them that Metso can be of value as an affiliate.

and conveying essentially saved the company money on

According to Lindholm, the mining industry in Mexico is

operational costs related to truck fleets, mitigating on-

relatively advanced and stable, and he has perceived no

site accidents, and creating an environmentally-friendly

real fluctuations that could pose a potential threat.

reduction of CO2 emissions. With Metso’s technology, the ore can be crushed in the pit and transported on, which is

As an affiliate of all the major mining companies in Mexico,

far more efficient than the traditional method of moving

such as Grupo México, Industrias Peñoles, Fresnillo, and

the blasted ore using trucks. Not only does Metso’s

Minera Frisco, Metso seeks partnerships with strong

system carry out primary and secondary crushing but it

industry players in order to allow its products a stronger

also provides conveying facilities to streamline operations,

market platform. “Life cycle service contracts are the

operating at a capacity of 1,200t/h. “Although we have not

future for Mexico, and these companies constitute part of

yet implemented the Russian system in Mexico due to lack

that chain,” Lindholm indicates. “As part of this service, we

of demand we have a high level of advanced technology,”

offer a comprehensive portfolio, not only products such

Lindholm points out. “We employ quantified grinding

as spare parts but we also offer access to our process

techniques in the mines, which is essentially a grinding

technology and service optimization making Metso a

method that is more efficient in its use of energy, using up

remarkable competitor, not only in the Mexican industry but

to 30 percent less energy to produce the results created

in partnerships all over the world.”

by conventional grinding techniques.”




Jeffrey Davis President & CEO of Cyanco

Leonardo Martínez Business Development Manager for Mexico of Cyanco

Q: How has the drop in commodity prices impacted the

even when gold production drops. Nevada reached peak

requirement for your essential products and how has

gold in 2008, and despite the fact that gold production

Cyanco reacted to this?

has since declined by over 50 percent, our sales have

JD: It takes significant resources and a considerable

increased each year. This is not a result of new customers;

amount of time to develop precious mineral resources

it can be exclusively attributed to overall ore grade decline.

so, in our experience, once the mine is operational, 256

provided the cash cost is below the market price and

Q: In what ways have you had to adapt your wrap-around

the company is making profit it will continue mining.

services to the market here in Mexico?

This is an almost independent factor from the gold

JD: We place considerable importance in the International

price, and when mapping production versus gold prices

Cyanide Management Code (ICMC). We encourage

over a 30 year period almost no statistical correlation

all of our customers to comply with ICMC, and most of

can be found between both phenomena. Compared

our customers are currently ICMC certified. We also

to many bulk chemicals, sodium cyanide is basically

provide support in this instance, with complementary

a niche chemistry with approximately a 1 million ton

site assessments, periodic operational assessments, and

market. In terms of overall value, the segment represents

feedback regarding the areas in need of improvement.

a small, single digit percentage of mining chemicals

In terms of community involvement, we hold an annual

and we typically constitute around 2-5 percent of

session in Sonora to train the first responders, federal

the developer’s cash cost per ounce on average. We

police, emergency services, ambulance drivers, and clinics.

like to think of our segment as a mission-critical niche

We offer the necessary information regarding the risks

since without our product not a single ounce of gold

of cyanide, proper handling, and incident management.

can be recovered. We are also a diversified company,

This service is provided in every community in which we

serving a wide range of users from the top five global

operate across the globe.

producers to quite a few smaller single-mine juniors. A large part of our segmentation when deciding upon our

In terms of driving cost, we offer a technology that can

ideal customer base is competitiveness of the resource,

optimize costs and efficiency. When sodium cyanide

the mine’s potential cash cost, adaptability to possible

is dissolved it becomes an extremely diluted solution,

market downturns, and profits on upturns. When the

often around 150ppm. Even in multi-billion dollar mines,

metal price decreases pressure builds throughout the

the molecule is handled by one operator turning several

industry, organizations, and value chains, but this does

dials, and then a concentration measurement is taken,

not reduce consumption since our product is an essential

which should remain within a certain target range. If the

component in the mining process. In fact, consumption

concentration is too low the recovery will immediately

increases with the need to produce more ounces in order

drop, meaning lower production. As a result, there

to maintain revenue on lower gold prices.

is a tendency to err on the high side with regards to concentrations but this increases usage of the cyanide.

The other unique phenomenon in the sodium cyanide

As a response, we have developed our Cyanide Control

industry is that the amount of cyanide required for

System (CCS), which is real-time closed loop feedback

producing an ounce of gold increases exponentially as the

technology that has the ability to take measurements

ore grade declines. This relationship has been modeled

every 60 seconds at anywhere from two to six points,

over many years via the statistically proven Gavin Mudd

continuously analyzing and providing feedback to the

formula, so as the grade decreases there is a need for more

distribution valve, meaning that the operating range is

cyanide, and more ore per ounce. Due to this relationship,

tightened, and often reducing cyanide intensity by 8-10

the cyanide industry enjoys an inherent growth in demand

percent. As yet, we have not installed a CCS in Mexico,

as we have found that if the technology seems overly complex, there is a certain amount of hesitance but we are actively marketing this solution in the Mexican market. Q: What are your previous success stories using the technology that Mexican companies can use as a precedent for potential incorporation of the solution in the country? JD: We are unique in that we provide sodium cyanide both in the solid form and in solution form, which is less

Sodium cyanide represents around 2-5 percent of miners’ cash cost

well-known thus far in Mexico. In our plant in Nevada, we produce a 30 percent aqueous solution basically

We also enjoy liaising with the local community, and we

delivering the product in ‘as-used’ form. In most mines

often join the mining companies in creating dialogues with

in Mexico the product is delivered as solid briquettes

local stakeholders regarding the properties and proper

in a one ton bag or box. The box must be lowered over

handling of sodium cyanide. Generally, people outside of

a splitter and the solid material dissolved by a system,

the mining industry tend to have negative connotations

requiring operator input, manual handling, and hazardous

of the word ‘cyanide’, and we provide useful education

waste disposal. For our solutions customers, the process

to the community regarding the potential risks and most

is much safer, simpler, and less time-consuming. The

effective mitigation of those risks.

mine employees have no responsibility for handling the molecule, as our specialized team takes care of the entire

LM: It is important to note that we strictly adhere to the

process within 45 minutes.

ICMC, and we encourage all clients, even those without official certifications, to follow these regulations to

LM: When comparing the costs of solid cyanide versus the

the letter. Typically, we audit our clients regularly to

solution, the savings are in the range of US$300/t. The

ensure safe practices within the mines, and we provide

recoveries are also optimized, and variations are mitigated

recommendations on any aspects in need of improvement.

since there is an accurate record of exactly what has

We also provide a full route assessment before we begin

been fed into the system. Therefore, the benefits of the

to supply a new mine, evaluating the transport and

technology are manifold.

infrastructure in order to ensure the safest transportation of our product and prevent hazards.

JD: Another angle is that in certain regions like Zacatecas, the mines are located in areas that experience chronic

Q: How has your implementation of the vendor managed

water shortages. The fact that miners must use water to

inventory (VMI) provided an added value for your

dissolve the solid cyanide can be problematic, and millions

customers in the mining industry?

of dollars are often spent on systems to pump water to

JD: The way in which we established our company in

the mine’s location. Therefore, we ship 70 percent of

Nevada 25 years ago centered on this local service model

water along with our product at no charge, meaning the

that we refer to as ‘worry-free delivery’. We have sensors

company does not require nearly as much water to dilute

and telemetry that allow us to monitor tank levels in real

the solution.

time and schedule deliveries to keep each customer’s tank levels within their desired levels. Because our facility

Q: In terms of environmental considerations, how do you

is centrally located and the customers are all within a

help clients implement effective waste disposal practices?

300km radius, we are able to dispatch trucks 24 hours a

JD: Environmental concerns are a significant part of our

day, with constant GPS monitoring. Our customer-centric

ethos. Although cyanide poses a danger in terms of human

model basically manages the entire cyanide supply

exposure it is actually a relatively benign chemical. It is

process on the customers’ behalf. The ultimate goal of

biodegradable, it is not a heavy metal, it is not radioactive,

our worry-free delivery concept is that miners do not

and after use, the hazards are neutralized over time. After

have to consider cyanide. Operators have multiple factors

the mine has spent barren solution, we have technologies

to consider when mining and we want to allow them to

and equipment that we install at our customers’ sites

focus on ore extraction and precious metal recoveries.

to dilute the remaining cyanide down to a weak acid

We are trying to replicate this model on a wider scale.

dissociable (WAD) cyanide solution with exceedingly low

We have a terminal in Hermosillo, a terminal in the Abitibi

ppm levels, effectively eliminating its potential to damage

region of Canada, and we are preparing to build another

the environment.

in Zacatecas.


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Q: Which are the main areas of opportunity identified by

from 100 percent natural raw materials. We manufacture

Croda in the Mexican mining industry?

monomeric and polymeric emulsifiers for bulk and

A: Greater investment is carried out for optimum mining

cartridge systems and the one brand that has proven its

techniques aiming to ensure higher recovery and cost

mettle is Anfomul. This brand offers low volatility, and has

effective mineral extraction. Croda is a UK company

high compatibility with other systems and techniques.

present in many sectors and is a preponderant supplier to the mining industry, which is a key pillar that holds

Q: What novel products have you deployed in the mining

sway in Mexico’s economy. Our green vision is what sets


us apart from our competitors. There are two main areas

A: Many chemical companies are lowering their prices

of opportunity for the company, namely the emulsifier

drastically, and low margins leave little space to maneuver.

products for explosives and the mining of ore processing.

This is essentially dumping, and Croda abides by different

In the latter, our priority is to supply green chemistry for

business ethics. Our target is a niche market since we offer

mine extraction, flotation, dispersal, among others. It is

specialized chemical solutions. We invest heavily in R&D

important to invest in a sustainable future. Our customers

to create new molecules that are greener and surpass

face growing demand to adopt greener products. These

the performance of traditional, aggressive alternatives.

can improve performance, increase purity, provide safe

One of the novel products for flotation is the Crodamide,

use, and in some cases be readily biodegradable or made

and there are two alternatives. Firstly, there is the MP, a

from renewable sources.

saturated fatty amide that enhances the flotation of nonsulphide and industrial minerals such as potash, phosphate

Q: Which main products have proven their mettle in the

and iron ore when blended with a typical amine collector.

Mexican mining sector?

The second is Crodamide O, an unsaturated fatty amide

A: The extraction of gold and silver uses aggressive

that enhances the flotation of non-sulphide minerals when

and dangerous chemicals that are hazardous to the

blended with an amine collector. The benefits of this

environment. Croda seeks to reduce this by supplying

solution are that it is green and it increases the recovery

products that have green credentials and deviate from

rate, which is a primordial concern for mining players.

this destructive mentality. The extraction, processing, and transportation of minerals is likely to generate significant

Q: What sustainability and green practices have you

amounts of airborne respirable dust. In nonmetal, stone,

incorporated in your products?

metal, and sand mining operations the generation

A: As a European company we uphold strict environmental

of respirable silica dust is a primary concern for our

regulations and transmit this concern to the Mexican

clients, and we have a range of dust control chemicals

authorities, particularly to SEMARNAT. We hope the

and solutions. We supply high performance surfactants

government will implement environmental regulations in

into the mining industry and we manufacture a range of

an efficient manner and reduce bureaucratic processes.

biodegradable wetting and binding agents suitable for use

Croda is part of the everyday lives of people and there is

as dust suppressants in spray techniques. They provide

a synergy among the business divisions. For example, the

an array of benefits from decreased water usage, which

homecare division is concerned with water management

lengthens machinery lifetime, to increasing personnel

in order to reduce contaminants and increase the recovery

safety. Some of Croda’s products benefit water based

of the source. This expertise is transferred to the mining

systems by improving particle wetting rates and reducing

sector, the country’s main water consumer. We also offer

water droplet coalescence. Selected products have

water and soil remediation solutions that are valuable

some additional desirable properties such as inhibiting

when rescuing contaminated sites and in the process of

corrosion, which act as foaming agents and are made

decommissioning mining pits.



SOLID FOUNDATIONS FOR NEW TECHNOLOGIES Booth maintains that the company’s strength has always been based on its focus on three key areas, mineral sizers


to break and process minerals, feeders to efficiently

Senior Vice President for

deliver material for processing, and in-pit sizing and

Latin America of MMD Mineral

conveying (IPSC) Solutions. “Essentially the same basic

Sizing (MMD)

design that was originally developed in 1978 remains at the heart of the patented MMD Twin Shaft Mineral Sizer,” he comments. “We also developed the heavy


Alan Potts was working for the British Coal Board when he

duty apron plate feeder. In order to offer our customers

noticed there was a large amount of material shedding from

higher capacity sizer machines we needed to provide

the longwall face in slab form during the traditional mining

a regulated feed of material into the sizing plant. The

process, which was cutting the underground belts. Potts

feeder did this and crucially could handle the undefined

designed a machine that could not only size coal at a rate

impact forces from direct loading.” Cementing its global

of 2,000t/h but could accept infeed pieces of up to 1m in

reputation as a leader in mineral sizing technology, MMD

length, while depositing material in the centre of the belt for

has since worked to develop mobile, semi-mobile, and

efficient transportation out of the mine. The unit was fitted

static solutions. The majority of the company’s Mexican

with a gearbox and a motor, and installed onto the longwall

clients are small aggregate producers using 600-800

panel. “This underground, mobile, 2,000t/h sizer, based

ton machines, he shares, and its mission is to open a

on a concept called “pick and scroll”, was the first MMD

spares and maintenance facility within the next two years,

product,” explains the company’s Senior Vice President for

providing the next level of local and dedicated support to

Latin America, Richard Booth. “Although originally designed


solely for underground use, Mineral Sizers now handle over 75 different minerals for both surface and underground

The Senior Vice President believes that cost reduction is

applications in more than 60 countries worldwide.”

the most significant contribution that MMD’s products



Q: What position does Solenis hold in the scope of the

Q: How does Solenis transform itself from a product

overall mining chemicals global market?

provider to an integrated solutions supplier?

A: Globally, we support some of the largest precious and

A: With our global manufacturing capacities, in-house

base metal mines in the world and are solving tough

R&D, and local service and applications advisors, our

problems for customers in over 50 countries. Within

approach already ensures higher client productivity and

the global mining chemicals market, we specialize in

competitiveness. A copper mine located in the northern

value-added solutions including antiscalants, grinding

region of Mexico had a problem due to declining ore grade

aids, viscosity modifiers, flocculants and coagulants,

and as a result, its production processes, including dynamic

dust control, flotation and utility water treatment. These

leaching had to be adapted. One of the variables Solenis

solutions are supported by equally strong experts and an

identified was the mine’s use of seawater rather than

equipment portfolio including our OnGuard portfolio of

fresh water, which led to increased gypsum scale. With

analyzers, controllers, and data management services and

the involvement of both regional and global applications

feed equipment.

experts a thorough understanding of the customer’s

offer to customers. “Currently, we are attracting more

altogether or moving toward short-haul truck and shovel

business than ever in Mexico because the installation and

operations only,” he claims. “High throughputs and short

operating costs of our equipment is much lower than most

equipment relocation times combined with reductions in

of our competitors,” he boasts. “Our machines require no

greenhouse emissions, dust and noise pollution, facilitate

civil works because they are fitted onto mobile structures,

Green Mining Solutions.” MMD has developed high-capacity

and this can save several million dollars.” As a result,

systems that work with hard rock rated up to 300MPa, and

many companies are now approaching MMD to request

the company’s sizers are capable of processing 10,000-

replacements for their existing systems. The door has

12,000t/h. “Our flagship fully mobile sizer is currently

opened for the company to begin working in new sectors

located at the Pingshuo coal mine in China, and is fed

in Mexico, such as the limestone industry.

by a P&H 4100XPC shovel,” Booth reveals. “The rig loads material directly onto a conveyor belt system at 9,000t/h,

For Grupo Calidra, MMD removed its old crushing process

eliminating the need for trucks.”

and replaced it with its own technology, increasing the percentage of usable material from 28-36 percent, making a considerable difference to the year-end profit margin, especially when precious metals prices are down. “Nevertheless, a culture of continuous innovation with the ability to provide custom solutions keeps our technology at the forefront,” Booth maintains. “Many of the machines


we installed 30 years ago are still in operation and remain highly productive.” Global mining is changing, according to Booth, and

mobile operation, either eliminating the need for trucks

MMD’s sizers are capable of processing 10,000-12,000t/h

process was developed and a robust product selection

processes, and lead to significant increases in gold

process was used to select a new Solenis anti-scaling

recoveries. Mines using our VM and flocculants are seeing

product for low pH conditions. The performance of the

significant increases in thickener solids densities and ore

solution was verified via our OnGuard 3S scale analyzer on

throughput. We optimize product dosage with our real-time

OnGuard Online data management software. Additionally,

OnGuard 3S scale analyzers and OnGuard P-controllers.

companies are recognizing that there are more efficient and sustainable ways to work. As a result, mine operators are also looking to reduce their environmental impact. “MMD’s equipment is ideally suited for mobile or semi-

we noted that the mill recovery rate was decreasing so we investigated through use of our viscosity modifier

Q: How do you persuade clients that your solutions can

(VM) solution to increase the amount of solids in the

help them achieve production efficiency?

throughput. Using a holistic plant view, Solenis carefully

A: We have a dedicated mining R&D laboratory that

assesses how the implementation of our solutions impacts


both downstream and upstream processes in order to

specifically for the mining market, including our patented

ensure the client has the highest ROI across the entire

Zalta chemistries and OnGuard equipment. With decades

production chain.

of expertise, we also possess the global resources to share





best practices from mines all over the world. For example, a Q: How is Solenis improving its complex mining chemicals

gold mine must have a high pH in its heap leaching process

to maintain costs and productivity?

in order for the cyanide to be as effective as possible in the

A: Continued investment is critical for the mining industry

extraction of gold. We had a client whose pH was lower

to both increase reserves and lower cost per ounce of

than 11 because its anti-scaling solution could not operate

production. Through our INNOVA R&D process, we have

at that level and this impacted the recovery. Rather than

developed Zalta antiscalants that eliminate the need

lowering the pH and decreasing the overall recovery, we

to spend US$500,000 on cleaning and repairing pipes,

suggested a new anti-scaling solution that could operate

eliminate the need to spend millions of dollars on redesign

at optimum pH levels.




Q: How is being a macro-distributor of Shell lubricants

solvent processes to reduce the companies’ environmental

supporting your position and presence in other industries?

footprint. Fees are reduced for residues by recovering the

A: Mining has been an important industry for Pochteca but

customer’s dirty solvent and delivering top specification

catering to mines is expensive, due to distance or lack of

solvent. We can redistill these solvents and return them to

existing road infrastructure. Therefore, the more products

the company as fully functional products again, which is

that can be loaded onto one truck, the lower the logistics

cheaper than a virgin product.

overheads are for us. In the same way, if a sales person has to make the trip to a mine, it is more beneficial to offer

Q: What added value in terms of compliance or green

many products simultaneously in order to keep travel

chemicals are you bringing to the market?

costs down. Offering several product types simplifies the

A: We do not yet have any mines in the closed-loop

process for our clients and allows Pochteca to save on

system but we have paint and automotive manufacturers

logistics by offering our range of over 5,000 products at


once. Industrial procurement is complex in itself, and now

investigating how we can extend this to other applications,

many companies require their suppliers to be certified as

and searching for products that are as environmentally

reliable. We do not operate the low-cost hub and spoke

inert as possible, while keeping in line with market trends.

model in terms of location, preferring to be closer to

There will always be certain products that are dangerous,

our clients so that we can guarantee faster delivery than

and will need to be handled with care. There will never


be a clean way to use cyanide. However, we can always







work to reduce the risk of a client being involved in Q: How has the drop in commodity prices influenced your

litigation due to an accident during the delivery process.

inventory and the range of products that you offer?

As a member of the National Association of Chemical

A: To compensate for the drop in mineral prices, everyone

Distributors (NACD), we were the first company in Latin

needs to be more efficient and ensure that logistics are

America to be certified as a responsible distribution

extremely well organized. We have invested a great deal

process company. Following NACD auditors visiting and

of time, money, and effort into improving our sales and

analyzing our facilities every year, we became the only

operations planning, as holding inventory in a deflationary

company with this qualification outside of Canada and

environment is relatively expensive. As a result, we have

the US.

reduced our inventory quarter on quarter in order to reduce the impact of price reductions without compromising the

Q: How do you plan to focus your efforts on increasing

breadth of our portfolio offering and its timely availability.

your 34 distribution points across Mexico?

Our proximity to our clients’ facilities means that we can

A: For those especially hard-to-reach locations we position

also reduce lead times, allowing our customers to trim their

containers nearby with supplies that are restocked on a

inventory levels and lessene waste caused by accidents

weekly basis, so as not to allow our clients’ supply to drop

during storage. This minimizes the risk of over purchasing

dramatically. Pochteca has been reinforcing its presence

a product and incurring price erosion costs, and optimizes

in all strategic locations while training a more robust and

the companies’ working capital.

technically proficient sales force. Our clients deal with an account manager on a day-to-day basis, as well as with

Q: How are you helping companies achieve efficiency and

specialists that can provide them with more detailed

optimization in their chemical consumption?

information on each product area. These specializations

A: Pochteca designs and creates customized blends for

include mining processes, water treatment, and sanitation,

solvents that can be adapted to various environments and

among other activities. Nevertheless, we have a long way

applications on demand. We also produce closed-loop

to go in terms of our portfolio.









their operations. For this reason our equipment is able to

products and make Masaba stand out from other brands?

meet the new needs of the sector. When we sell any unit of

A: Our equipment is characterized by its robustness, and

equipment, our distributors offer training to the end user,

as a guarantee of its quality, we offer the longest warranty

but if we do not yet have a distributor in the territory we

in the market over five years, regardless of whether the

directly train the end user.

equipment is standard or customized. Moreover, we face no shipping or importation problems as our equipment

Q: What products in Masaba’s portfolio are your most

meets NAFTA specifications so there is no need for


our customers to pay customs tariffs and most of our

A: One of our best sellers is the Magnum Telescopic

equipment has a kingpin for easy haulage by a tractor.

Conveyor, which is equipped with different features and

We have a team of 16 people at our factory capable of

options. It can extend from 130-190ft in length, with

fulfilling an order for any customized requirement we

widths from 36-60in. This is an extremely interesting

receive from our customers. We recently sold three

product as it has a stinger feature that can move without

spreads to the Baffinland iron mine in north Canada.

any cable or winch, and is equipped with the fully

These spreads are equipped with crushers, screeners, and

patented Masaba Tracking System. It is hydraulically

telescopic conveyors with a capacity of up to 2,500t/h.

controlled, more stable, more efficient, and requires

This equipment is operating under harsh conditions of

less maintenance. It also has an extremely user-friendly

-40°, so we fully adapted our equipment to withstand

flexible automatic PLC. This can be used in mining,

the environment.

aggregate, and seaports to load ships and barges. The second most popular product is the Low Profile Truck

Q: What are the main challenges mining operators face in

Unloader, a portable piece of equipment used to unload

conveying, crushing, and screening in Mexico?

trucks with belly dump or rear dump configurations. It is

A: The main challenge lies in becoming more effective and

a perfect match for the Magnum Telescoping Conveyor.

efficient in their business by purchasing more up to date

Both pieces of equipment can reach a rate up to 1,500t/

technologies and using less fuel, maintenance, and labor in

hr at 100lbs/ft3.

grupo-pochteca-mineria-curvas.pdf 1 18/04/2016 04:32:40 p.m.




GREENER MINING FROM MMD MMD is a company that is recognized as a global leader in in-pit sizing and conveying technology (IPSC), and has been providing greener and more cost-effective solutions for operators worldwide for over 35 years. After five years’ development, MMD has designed and built the world’s most advanced fully mobile sizer. The rig is the third generation model in a series of high-capacity mobile units that removes the need for trucks by processing and delivering material onto conveyors. Developed in China, the Fully Mobile Sizer can process 9,000t/h of overburden, and reaches peaks of 14,000t/h. Commencing operations in 2013, the rig has already generated significant waves in the industry. Working closely with a shovel, the rig remains in position to receive material into the hopper for subsequent processing and discharge onto a conveyor. Thereafter, the material is returned to ground to undergo processing or leaching, depending on the application. To match the production capabilities of MMD’s IPSC system, approximately two shovels and 34 trucks would be required to work at maximum efficiency, operated by over 60 workers, according to the company. At the heart of the Fully Mobile Sizer sits the patented Twin Shaft Mineral Sizer™, fed by a short, heavy-duty Apron Plate Feeder capable of processing more than 100 tons of material dumped directly onto its plates. The Mineral Sizer can handle any combination of wet, sticky, or dry material and breaks oversized material through stress, bending, tension, and sheer force before delivering a consistent, three-dimensional product size. Mobility is provided by a single pair of rough terrain crawler tracks, reducing the need for ground preparation and enabling the Fully Mobile Sizer to go wherever the shovel is. Tracks positioned at the front and rear of the structure eliminate any issues with the center of gravity, which is a problem with in-line track units. However, cross-tracks provide increased maneuverability and the Sizer can be turned on the spot. The Low Profile Mobile Sizer has been designed for ease of operation and maintenance. The operator’s cab on the top level forms the nerve center of the rig, acting as a central hub where all operational processes are safely controlled and monitored 24 hours a day. An automated safety startup system via a Programmable Logic Controller (PLC) unit operates the Discharge Conveyor, Transfer Conveyor, Sizer, and the Feeder in sequence, which is the reverse order generated during operation. This ensures safe initialization and eliminates human error, which could result in damage to equipment.



turbulence eddy dissipation in comparison to those

In an environment of low commodity prices operators

obtained by the traditional non-slotted design. Froth

are increasingly seeking new solutions that will optimize

mobility and coarse particle recovery is also significantly

performance and improve recovery rates. FLSmidth’s

improved with the nextSTEP design due to the preferred

nextSTEP advanced flotation mechanism can dramatically

slurry flow and positive froth movement pattern generated

improve mineral-bubble attachment rates, which leads to

at the top of the tank. Other notable features include the

an increase in recovery of up to 5 percent. The technology

system’s stronger air dispersion near the rotor/stator and

leads the market in terms of low power consumption

stronger pumping effect beneath the rotor, as well as a

with a 10-15 percent reduction compared to FLSmidth’s

higher air hold-up. Testing based on a range of impeller

closest competitor, which in turn leads to a decrease in

speeds also found that the nextSTEP provided excellent

operational costs. Long-term operating costs for greenfield

mixing capabilities.

projects are reduced further as a result of optimized wear distribution and extending the lifespan of the rotor/stator,

In comparison to similar technologies, testing showed that

which was created through extensive studies and in-plant

wear on nextSTEP was distributed more evenly, which

testing. Brownfield projects can also benefit from the

prolongs the technology’s lifespan due to a lack of focused

technology as the new mechanism can substitute existing

wear on certain parts of the technology. As a result, use

FLSmidth forced-air flotation technologies and retrofit is

of FLSmidth’s forced air-flotation system not only means

possible in any forced-air flotation cell.

reduced replacement frequency of the component but also reduces downtime. The rotor can even be operated in


The nextSTEP rotor’s innovative design includes patented

reverse, which further increases the technology’s lifespan.

slots in the stator, which increases flotation efficiency due

The nextSTEP was developed after the testing of over

to higher homogenized turbulence dissipation. The results

200 different rotor/stator combinations, demonstrating

of laboratory testing of this slotted design revealed a

FLSmidth’s commitment to taking the next step in forced-

dramatic improvement in the attachment rate and lowered

air flotation technology.


HIGH-RESISTANCE SCREENING SOLUTIONS ALBERTO LEAL Market Development Manager of Cribas y Productos MetĂĄlicos (Cribas)

Q: What trends have you noticed in the mechanical

We always try to work directly with each individual

screening industry in recent years?

customer to develop specific solutions to their problems

A: The company was born out of the Mexican mining

so we are constantly innovating hand-in-hand with our

industry with the goal of filling the need for a Mexico-

clients. Word of mouth is vital in this industry, and we

based sieve manufacturer. We have been present in the

gain a lot of new customers because our existing clients

market since the beginning, growing with it, and we have

recommend us to their co-workers and acquaintances

led many of the technological developments. Originally,

throughout the mining community.

the company only manufactured wire and perforated plates but over the years the prevalent material used in the screening process has been switched to more synthetic products like rubber. Lately, we have seen several hybrid options arising with rubber and wire conversions, where the elasticity of the rubber is complemented by wire cloth to achieve more efficiency. We only vulcanize natural rubber, which improves the efficiency of the material and the wear life when used in screening applications.

“Thanks to M&As, the community is becoming more international and forwardthinking� Alberto Leal, Market Development Manager of Cribas

Q: What products is Cribas developing that are breaking

Q: What are the main challenges the company has

new ground in terms of innovation and technology?

overcome during its long existence?

A: We have developed a self-cleaning screen that has been

A: Like many other businesses, the main challenge comes

on the market for some years. This mechanism allows the

from falling metal prices and issues associated with

wires to vibrate independently of one another to help with

economic recessions. I believe this is due to the family-

binding issues. We are the only company in Mexico that

owned structure we have in place, which allows us more

can manufacture this type of screening system, and in fact

flexibility in the face of market gyrations. In the future,

we can manufacture every available screening system at

we will be focused on consolidating our customer base

our plant in Monterrey, making us unique in Mexico. We

both in Mexico and externally. We have distributors in

have also started using different materials in our wire. We

every country throughout Central America and South

have developed a special formulation high-carbon wire,

America, and we want to strengthen our presence in this

which is stronger and more resistant than traditional wire

region specifically. Additionally, we have recently opened


a sales office in the US, and over time we want to be able to offer our customers there the same level of service we

Q: How do your clients react to you offering a new

offer our clients in Mexico. Moreover, our products can


be used in a variety of different industries, and although

A: It is true that there is a certain resistance to change

we have traditionally been focused on serving the mining

within the industry but thanks to the wide array of

industry we also want to expand our network into the oil

mergers and acquisitions in recent years, the community is

and gas, architectural, and food industries as they can also

becoming more international and therefore more forward-

benefit from our technology and local service. We invest

thinking. We offer initial trial periods for all our new

the majority of our profit into product development, plant

products, and because we have been working with the

improvements, and customer service in order to provide

majority of our clients for many years, they trust that our

our clients with a higher quality product, faster lead times,

recommendations will provide a solution to their problem.

and superior service.




PROGRESSIVE DOSING FOR FLOTATION SYSTEMS As the technology of separating minerals from gangue has evolved, scientists have learned to adapt the process to a broad range of mineral types, including copper, lead, and coal. To extract the maximum benefit from flotation, operators must control flow rate using a dosing mechanism, which accurately and efficiently facilitates the management of a wide reagent flow range. Electro







integrator with more than 25 years in the field, has designed a progressive dosing system that uses precise flow measurement tools integrated into its core to reach a reliably high grade on in-plant experiments. The UDLine system is a robust and accurate reagents dosing solution that concentrates the highest possible number of dosing channels in each unit, while simultaneously providing improved control of reagent distribution. This serves to minimize the quantity of intermediate tanks and containers required for feeding peristaltic or diaphragm pumps, creating a much more compact system than traditional solutions. The system is fitted with process control blocks, allowing it to accurately calculate mass balance inside the flotation and grinding circuits, revealing the results in g/t. Moreover, the process controller, which can be easily integrated into a central distributed control system (DCS) through Profibus DP, Modbus, or Ethernet IP, allows for the UD-Line solution to be installed into an established in-plant process with consummate ease. Once installed, the UD-Line can be fed by the use of magnetic drive centrifugal pumps or even gravity-fed arrangements if the plant design permits. Depending on the requirements of the operator, ECN’s design can also be set to operate autonomously without relying on a central DCS. The versatility of the UD-Line system allows for the construction of reliable experiment designs based on the constant stream of statistical data generated. This enables the operator to find, through a series of tests, the optimal reagent quantity needed in variable chemical processes, all done with a reliable system inside the plant. The technology facilitates the management of a host of reagents, ensuring higher performance, reliability, and precision of the flotation process while also considerably simplifying the dosing process and reducing the risk of reagent handling. ECN’s system has been implemented in two of Mexico’s largest copper concentrator plants, achieving significant increases in the percentage of mineral recovery.



REMOTE MONITORING SYSTEMS TAKE CENTER STAGE markets,” shares Tonatiuh Jiménez, Sales Manager at Bosch Rexroth.


As part of the Bosch family, Rexroth is not limited to

Bosch Rexroth

offering hydraulic control solutions for mine operations. Benefitting from its parent company’s expertise in the automotive, software, and agriculture sectors, Rexroth

Industry 4.0 is gradually taking over industrial sectors

has the ability to develop catered solutions for the entire

across the world, and mining is no exception. Also

value chain. It is in this variety where the company’s true

known as the fourth industrial revolution, Industry 4.0

differentiator lies, according to Jiménez. “The value of

encompasses trends including the Internet of Things and

our service lies in the flexibility and adaptability of our

cloud computing. In the quest for improved reliability and

mining products.”

pinpoint accuracy, mine operators are increasingly open 270

to automation technology and data exchange systems.

One such solution is the Rexroth Remote Monitoring

This plays right into the hands of Bosch Rexroth, whose

System for hydraulic components that drastically improves

hydraulic control systems can be adapted to fit the whole

communication links between user and machine via fiber

range of mineral processing operations.

optic digital signaling programs, says Jiménez. “The system enables the user to monitor product performance

“A variety of extraction processes are in employed in

and temperature in real time through a portal,” he

mines throughout the world, and Rexroth has therefore

explains. “It is connected to the internet, which means

developed a range of products including hydraulic

the client is able to make an instant, more accurate, and

motors and power units which can be adapted to regional

more informed decision from anywhere in the world.”



Q: What was the conceptual idea behind the creation of

than 12 hours to process in laboratories. Players had to


pause operations to manually collect samples, a risky

A: The design of our equipment started in a laboratory

act considering how significant mining processes are.

and we have found ways to fit traditional laboratory

Then, laboratories underwent a cumbersome process

services into a convenient device that saves not only time

of weighing the concentration, drying it, and evaluating

and money, but lives as well. Ayeasa fills two main gaps


in the mining market, operational measurement, and

time. Our equipment automatically processes data by

equipment durability. Due to the heavy duty demands

the second from all of the material being processed in

of the mining industry, players learned to accept the

belt conveyors, and displays the information instantly.

frequent rotation of equipment like tires and spare parts.

It is a dynamic, precise, and practical way to measure

Our equipment is made to survive the volatility of the

concentrations. Our first client was Pan American Silver

industry, and even our oldest clients still use devices that

in Sonora, the second one was Minera Autlan, a company

we sold them 15 years ago. In the past, important data

whose equipment is still in operation today, followed by

such as the percentage of humidity would take more

Industrias Peñoles, and Grupo México.






This remote control is particularly vital in underground mines, and as a result the majority of Rexroth’s mining clients are in this segment. “Underground mines require compact, safe, and efficient machinery," he explains. "Rexroth has developed solutions specifically designed

“Underground mines require compact, safe, and efficient machinery. Rexroth

for the Mexican market."

has developed solutions

This attention to detail and focus on technological

specifically designed for the

development is typical of the Bosch group, which reinvests








development. This work has a specific goal, which is to construct applications designed to solve client-specific

Mexican market” Tonatiuh Jiménez, Sales Manager of Bosch Rexroth

issues rather than saturating the market with generic products. “We want to offer our clients a tangible

developed infrastructure. However, we are determined to

solution to their problems,” Jiménez stresses.

bring this technology to our clients in the sector because it represents the future of the industry.”

In Mexico the process of introducing groundbreaking technology is not always a smooth one, with top executives

Aiming to continue to play a leading role in this future,

known for being risk averse and unwilling to change an

Jiménez explains Rexroth’s ambitious plans to expand its

installed product that is delivering results. However, the

presence in the local mining sector over the coming years.

sentiment is gradually shifting toward a more open-

These plans have been encouraged by the improving

minded approach, and Jiménez believes Rexroth to be

precious metals price environment in 2016. “We will

at the heart of this process in Mexico. “Bosch Rexroth

be opening new offices and a workshop in Mexico City,

has welcomed the growing trend of inter-connectivity

which will perform state of the art hydraulic tests,” he

between machinery and labor force,” he claims. “This

reveals. “We strive to create stronger client relationships

is yet to be fully integrated into the mining industry in

by supporting them in their search for efficiency and

Mexico due the challenging project locations and under-


Q: Why are operational measurements significant for the

ships. Any off-balance percentage must be taken care of,

mining industry and how does Ayeasa intervene?

often by delaying the shipment so the concentration can



dry. Drastic measures are taken as after a certain percentage

percentages as material that is slightly out of range can






of humidity, the dirt can no longer absorb the moisture, and

be completely ruined, even if it is only by 1 percent. Water

water mirrors start to form. In everyday situations, the risk is

has the ability to transform the property of minerals and

minimal. However, in the case of a giant ship with 100,000

their viscosity. For instance, the copper mining industry

tons of concentrated material and a humidity level over 2

processes extracted material with the copper’s sulfuric

percent, the liquid can move to one side and easily flip the

acid, passes it to an electrolytic system, and creates a

ship. At the Guaymas port in Sonora there is a strict limit

concentration that is completed with acid. Humidity is a

to the amount of material and humidity that is permitted.

huge danger within this cycle as it can destroy its efforts.

Our equipment plays an important role in these types of

Our company adapted to the mining industry upon

situations as operators are more willing to take the time to

entering by implementing a precise humidity control, as

collect data if a ship can be analyzed in less than a minute. Our

a strategy to save money, time, and avoid operational

machines, equipped with infrared lights, scan the material


when boarding the container through a conveyor belt. It is settled at 25cm above the belt, allowing the infrared light

Q: What kind of obstacles can the mining industry expect

to bounce off the material at about 600 times per minute.

when it comes to data and accuracy?

The equipment also gives accurate separate measurements,

A: Players have to prioritize the collection of accurate

and as different mine sites have different information, we

information. Ayeasa can help in three areas, the purchase

can identify in half an hour which concentrations from

of concentrated products, the usage of energy, and

which mine sites comply with the humidity and shipping

environmental norms and regulations. Humidity is an

requirements, and double check the measurements of each

especially troublesome task for material that is sent on

mine site that may not be correct.





José Sánchez Commercial Director of the Lab Division at Mettler Toledo







main the






César Correa Champion Process Analytics at Mettler Toledo


losses, focus human resource efficiency, and obtain


more control. Analytics solutions, simply explained, are

JLS: Our main offering to the mining sector is cost

real-time measurements, and even though the mining

reduction by reduction or elimination of reworks. In this

industry has seen impressive development, operators

industry, mainly in the exploitation stage, analytical

are extremely traditional and fear automation because

measurements are critical and gold yield depends

this means having to make real-time decisions in critical

on several variables. Mettler Toledo, through process

circumstances. In order to solidify our commitment to

automation increases efficiency and operator safety. For

client needs Mettler Toledo invests 10 percent of its

Mexico, we have developed automation solutions and

operative utility in R&D.

leaching measurements, and along with Brazil and Chile the country is a global reference for best practices. The

Q: What have been Mettler Toledo’s main innovations that

key to our success is the way we train our salesforce, who

revolutionized the mining industry?

specialize in understanding our client’s process in order

JLS: One of the main expenses for mining companies

to identify their problems and provide a solution, and this

is equipment and infrastructure maintenance, so we

has been crucial in differentiating us from our competitors.

developed the iSense (ISM) technology, which involves

Also, Mettler Toledo is not in the price-driven market, nor

smart sensors that help analyze the mechanisms in which

in the volume segment, and as leaders we sell value, which

mining processes occur.

is our business model. CC: Maintenance has always come at a cost and a few Q: Which example shows how your solutions optimize

years ago the approach was simply corrective rather than

operations and reduce costs?

preventive. With our technology, the industry can actually

JLS: Mettler Toledo is present at all stages of the productivity

evolve into predictive maintenance. Instead of changing

chain of a mine, from exploration with industrial weighing

all the pieces that broke the sensors analyze the wear

systems to the mills. For instance, the combination of

of the equipment, generating savings, and reducing the

chlorine and caustic soda is one of the most difficult

prevalence of potential downtimes.

processes for us and competitors could not conceive how to install an analytical instrument inside the tanks, so we

Q: What is the relevance of the ultramicrobalance system,

studied the process and established the equipment with

and why does the industry need this?

the material and a design that was able to resist those

JLS: When studying the viability of a gold mining project,

settings. Recent research on gold leaching tanks shows

the grain must be evaluated in order to predict production

that in order to improve extraction, measuring the oxygen

based on the escalation of the sample result. There are some

concentration during the process increases its efficiency.

grains from which only 10-20g/t of gold can be extracted,

Ee developed the necessary equipment to measure and

which means a weight difference of only a milligram

control the concentration in the tanks.

implies a lot of yield. Mettler Toledo has a Good Weighting Practice initiative that teaches our customers the benefits

CC: Improvement in the leaching or bioleaching process

of weighting with a high precision tool. Therefore, for gold

is a new development, so the instrumentation used to

exploitation, the extracted mineral undergoes a treatment

support those processes is measured through further

to obtain a metal filament that is weighted to the amount

measurements and data. Analytics relates to processes.

of metal in the deposit. Mettler Toledo has an 80 percent

Our philosophy is to show operators how to evolve

market share in the precision weighting segment in Mexico

from traditional control to an online based process

and Minera Frisco, Grupo México, and GoldCorp are among

control, which allows mining companies to reduce

our customers.





Q: How has FIMSA evolved within the mining sector in

decision helped us survive during the downturn in the

Mexico, and what makes it stand out from its competitors?

mining industry and established our name as a specialist in

A: The company was founded in the 1970s when the Mexican

trituration, and we are now known in both the construction

mining sector was dominated by small businesses. There

and mining industries as experts in this field. As a result

were few foreign companies operating in the country, and

of the current downturn, we searched for commercial

FIMSA made the decision to focus on providing for small

partners and allied with several financial sector leaders

and medium-sized enterprises, leading to significant early

from both the international and domestic spheres, that

success. When it then became less costly to enter the

have an interest in the mining and construction industries.

Mexican mining sector, many foreign companies began

This enables us to offer our clients diverse financing

investing. Faced with this challenge, FIMSA decided to


stop manufacturing equipment for all levels of the mining process, which we had been doing previously, and instead

Q: What innovative technologies has FIMSA released into

focus on the trituration stage specifically. In order to

the market recently?

make ourselves less susceptible to global drops in prices

A: Our entire production team is under our control, which

of precious metals, we diversified our industry focus and

separates us from our competitors. The entire process,

began providing for the construction sector, where there

from design and manufacturing to installation, is overseen

was also demand for our trituration technology. This

by our staff. Due to this unique structure, we have been


IMPROVED EFFICIENCY IN PLASTIC PIPING maintenance costs for the user but it also reduces the risks


of leaks or spillages, which provides a safer environment

Director General of Tododren

for the ecosystems surrounding the mines,” according to Alberto Treviño, the company’s Director General.

Pipes made from high density polythene (HDPE) have a number of benefits over other materials used in plastic

There are four primary applications that bring Tododren

piping markets, such as PVC. First of all, HDPE has high PH

the most business from its mining costumers, leaching and

resistance, which is particularly important for its operations,

flotation, both of which are mineral extraction technologies,

given the high acidity levels produced by mining waste.

tailings dams, and security jacket pipes. “For all of these

Additionally, the performance of conventional piping

applications our HDPE perforated pipes are attractive,

systems can often be adversely affected by extreme

providing more flexibility and greater ease of transportation

weather conditions, but HDPE, given its high resistance,

and installation than traditional concrete or steel pipe

mitigates this risk for the user. This differentiator is just

solutions,” Treviño asserts. “Our pipe system is used for water

what Tododren was counting on when it launched HDPE

treatment and drainage of chemical and waste materials

products for the mining market. “Not only does the use of

away from the mine sites, as well as for underground

HDPE make the pipes last longer, reducing downtime and

electrical and telecommunication cable installations.”

able to develop a range of new technology, including

worked on. The machine is designed to transport mineral

new engineering software intended to speed up and

underground instead of overland via trucks, which is an

improve the design process. We have become the Mexican

extremely costly method of transportation. We have

representatives and distributors for two world leaders

been working on the project for four years, and despite

in advanced technological equipment that is currently

the inevitable bumps along the way we are now in the

unavailable on the Mexican market. One is an Australian

final completion stage. It is a 5km conveyor which has

company that specializes in metallurgy and manufactures

been completely designed, manufactured and installed

groundbreaking technology for metallurgical recovery and

by FIMSA, and will reduce costs and improve efficiency

gravimetry. The technology increases production levels

for Minera Frisco.

significantly while reducing operating costs. The second is a South African team who specialize in magnets, a tool

Q: What challenges has FIMSA faced when attempting to

that is used extensively throughout the process of iron

introduce new technology into the marketplace?

production. Last year we began introducing the products

A: In certain projects, we have substituted old technologies

to the Mexican market, and we have had encouraging

and equipment for more modern and efficient ones which

results so far. These relationships have helped us to

not only improves productivity but also saves time, space,

establish our position.

and funds. It can be challenging to convince industry leaders of the importance of implementing these technologies

Q: What is the process FIMSA follows when developing

because mining is an inherently traditional business, run

new projects?

by members of the older generation who are accustomed

A: With new projects it is vital to understand what cost

to certain practices and do not immediately see the

and production expectations the client has, and with

benefit of new machinery. We have recently diversified

expansion projects we must cater to the client’s specific

into offering our clients sub-contraction services. Not

needs whilst taking into consideration any restrictions

only do we provide our clients with equipment but we can

to which they are subject. Once the project moves

also provide them with trained personnel to operate that

into the manufacturing stage we maintain close client

equipment if necessary. The client then does not have to

contact. There are always modifications that need to

spend valuable time and resources training staff on how

be addressed so it is crucial that we remain flexible.

to operate the machinery, which in today’s climate with

We are currently developing an underground conveyor

investment budgets under severe pressure, is a welcome

with Minera Frisco, which is the largest project we have

method of improving productivity.

According to Treviño, there are two designs that are

want to use our knowledge of the piping industry, which



we have acquired over the course of more than 50 years

TDR Ultra and TDR Perforated. TDR Ultra is an HDPE

of operation, to become a one-stop shop for mining

corrugated double-wall pipe used primarily in drainage

companies’ piping needs,” Treviño shares. In order to

and tailings solutions. This product employs double

achieve this, a new 860,000ft2 plant will be opened

layered cuff technology and double arch structure, which

in Queretaro, for the manufacture of a wide variety of

makes the design tougher and therefore stronger. TDR

new products, mainly for the mining industry, which are

Perforated is a corrugated pipe designed to improve

currently in the development phase.





productivity in the leaching process specifically. “Both designs feature examples of market leading technology that is not available in any other pipe designs in Mexico, and this is where the true value of Tododren products lies,” he boasts. “Moreover, our pipe designs are extremely easy to install so our clients require very little technical support during the installation process, which again helps

“Mining companies often require unique pipe specifications, such as fittings

to reduce operational costs.”

and connections that must be

The primary goal for the company in the next 12 months

produced and installed at very

will be to add new products to its inventories in order to complement its existing pipes and be able to provide turnkey solutions for clients’ upcoming projects. “We

specific angles” Alberto Treviño, Director General of Tododren



products with the EnviroSeal SpiralTrac Environmental


Controller, which improves packed stuffing box efficiency.

In a mineral beneficiation plant, slurry pumps in flotation

This combination reduces flush water consumption and

areas can often only maintain optimum performance for

optimizes fluid quality, generating energy savings and

three to five days, while the shaft sleeves themselves

improving ore recovery levels and grade quality.

wear down so rapidly that they must be replaced every fortnight. This can be tiresome for mine managers, forcing

During a recent live test, the Superset was added to the

them to either carry out constant maintenance work or

packing system of a fully functional lead, zinc, and copper

renew their exhausted machinery, a process that is not

mineral processor with impressive results. Thanks to the

only expensive but also time consuming.

new technology, the pump system operated for a total of 35 days, seven times its previous life expectancy, while the


This is where the Chesterton Superset solution comes

shaft sleeve lasted twice as long as it would under normal

into play. While it also manufactures high performance

circumstances. Chesterton’s total sealing solution boosts

lubricants and automatic lubrication systems, Chesterton

packing and equipment service life while dramatically

is known throughout the mining community for its sealing

reducing flush rates, and crucially increasing the mean

expertise, and durable design, engineering polymeric

time before failure (MTBF) of its users’ pump systems.

solutions for use in various ore processing operations.

The system generates a positive impact on its clients’

Using its long history of working closely with mining and

systems not only in terms of productivity but also for the

ore processing companies across the globe, the company

safety and operational side of its customers' businesses.

has developed a pump solution that can help mine

The total savings generated by the Superset solution

operators dramatically reduce maintenance costs, and

vary depending on the ore processing system on which

improve efficiency during mineral processing procedures.

it is used. However, results from the live test suggest that

The Chesterton Superset, which includes both a slurry

companies running base metal processing plants can

sealing packer and a solids repeller, combines the superior

recover their initial investment in just five weeks from just

sealing capabilities of Chesterton’s compression packing

one Superset system.


INCREASING CAPACITY WITH PROVEN TECHNOLOGIES For the past 40 years, Construmac has borne witness to a great deal of changes in Mexico, and each administration


has made its mark on the industries, according to

Commercial Director

the company’s Commercial Director of Construction

of Construction and







Infrastructure at Construmac

performance of the country deeply influences our growth strategy, and in the past 14 years the economy has been stable, which has allowed Construmac steady growth,” he

boasts. “This volume is extremely attractive since it is

comments. “Many sectors endure radical seasonality and

higher yield and lower costs.” These products have

as a result we are extremely cautious with our investments

been in the market for over 30 years but the electric

to ensure our growth and presence.” This strategy means

component is new and he has witnessed demand from

the company is well positioned to persevere in the mining

mining operators seeking to lower costs and increase

industry, considering this sector’s natural fluctuations.

production efficiency.









evolve with its strategy now focusing on bringing new

Construmac also has a joint venture with AMECO, a

technologies and solutions to the market. “We have new

company owned by Fluor Corporation. Together they

solutions for the crushing market, and we have a new

have developed a leasing program, which appeals mainly

German line called Kleemann offering a range of solutions

to mining players that do not need a static machine and

that can improve the performance and offer important

would benefit from portable equipment. “Our relationship

economic savings,” Escobar explains.

with AMECO is longstanding and we have successfully carried out this rental fleet scheme in the past for the

The company is negotiating with the Mexican mining

infrastructure industry,” Escobar explains. “Each machine

market, given the fact that this particular sector is

that is leased will be accompanied by a technician that

notoriously cautious in implementing new solutions. As

will visit the equipment every month or even every 15

a response to the mining sector’s need for specialized

days. The customers will have a service contract and this

technicians and engineers, Construmac has established

means that they do not have to worry about maintenance

several branches across the country. The company has

or service of the machines, and their sole focus can remain

three main business areas, crushing, pumps, and surface

on the smooth running of the mines.”

mining, and for the latter it has recently introduced a wellestablished product line on a global scale into the Mexican


market. “It is critical to have a local presence in the states

machines from Wirtgen that have been present in the

where mining rules supreme, such as Sonora, Chihuahua,

global mining milieu for over 40 years and that the

and Durango,” Escobar comments. “An added value is that

company now wants to introduce into Mexico. “So far,

our local service team and spare parts are readily available

we have two mines that have acquired this product, and

in case of a contingency and combining this with our in-

the benefits include higher performance and savings

depth knowledge of the industry makes us an attractive

in blasting costs and movement of materials,” Escobar

option.” To attend to demand, Construmac is establishing

states. “The mining industry jealously guards its supply

a new branch in Guanajuato. As it stands, the company’s

chain and it is by showing the success stories we have

mining participation is among 5-10 percent and it holds

collected from other industries that we will convince

top positions in certain niche segments.

players of the value of this product.” Moreover, mine






operators have come to rely on the Wirtgen 2200 SM In the crushing segment, most machines are powered

surface miner in order to exploit seams of valuable

by hydraulics, and according to Escobar this is slightly

minerals in an economically and environmentally friendly

problematic for mining players as they prefer electric

manner. This product includes special cutting drums that

machinery. Constumac’s track mounted impact crushers

are tailored to the job at hand. Construmac used to be a

from Kleemann’s MOBIREX series offer this electric

household name in the mining sector and Escobar shares

component. “Traditional machines have a capacity of

his desire to make this once again a reality by offering

500 tonnes per hour, which is a small volume while

new products that speak to the pressing needs of mining

our products can take on from 600-1,000t/h” Escobar





The new buzzword in the mining industry is automation. Although Mexico has been slow to climb on the bandwagon, it is undeniably clawing out a niche among forward-looking operators. With many operators focusing on increased production at higher grades as reserves decline, process automation, simulation, and data solutions are undeniably emerging as the elusive key to improved performance. With the passing of the Energy Reform, mining companies were given the capacity to generate their own power, and several majors have already capitalized on these opportunities. Miners can also produce extra revenue by selling surplus electricity, creating an integrated network that eliminates CFE’s market monopoly.

This chapter begins by delving into automation, giving insights into groundbreaking solutions that can provide operators with significant cost savings. Presidents and Directors of automation and communications companies explain how Industry 4.0 is taking over the market and opening possibilities for features such as Big Data and the Internet of Things. Leaders of companies tasked with power saving and innovative use of energy explain the benefits the reform can bring to mining operators willing to embrace the new landscape.


LA POTENCIA QUE IMPULSA LA PRODUCTIVIDAD EN MÉXICO Empresa mexicana con 40 años de experiencia


En Técnica Salgar nuestros clientes son lo primero y por eso nuestro objetivo es ofrecerles una solución integral que les permita lograr los resultados deseados y la optimización de costos con la mejor relación precio / beneficio.


VIEW FROM THE TOP: Alejandro Preinfalk, Siemens Mesoamérica


VIEW FROM THE TOP: Milind Karkare, Andritz Automation

Luiz Vega, Andritz Automation


VIEW FROM THE TOP: Pedro Hoyos, GlobalSat


INSIGHT: Jorge Villarreal, Elara Comunicaciones


VIEW FROM THE TOP: Gerardo Gardea, DELTA Solutions


INSIGHT: Mario Lamas, Grupo ABSA


INSIGHT: Alfonso Bonillas, MISOM Technologies Latin America


VIEW FROM THE TOP: Adrián Hernández, Intergraph de México


VIEW FROM THE TOP: Arturo Freydig, ECN


VIEW FROM THE TOP: Pedro Berriel, Power Electronics


INSIGHT: Arel Cardenas, Danfoss Drives


VIEW FROM THE TOP: Víctor Hernández, IICE


VIEW FROM THE TOP: Mauro Mendes, WEG Mexico


INSIGHT: Alfonso Caso, ANAF Energy


VIEW FROM THE TOP: David Fatzinger, InterGen


VIEW FROM THE TOP: Bernardo Salcido, Técnica Salgar


VIEW FROM THE TOP: Vernon Murray, Emerson


VIEW FROM THE TOP: Mauricio Toache, SEL Mexico


TECHNOLOGY SPOTLIGHT: More Mining with Less Fuel



LIFECYCLE SERVICES FOR MINING OPERATIONS ALEJANDRO PREINFALK Vice President of Digital Factory and Process Industries and Drives Divisions at Siemens Mesoamérica

Q: What role has Siemens played in the development of

engines and instrumentation that enable the extraction

the Mexican mining industry?

processes, while in the production stage we provide

A: Siemens has a long and fruitful history in Mexico that

drives and control systems for use throughout the mine, as

began over 120 years ago when we implemented the

well as mobile substations and onsite power distribution

first public lighting system along Reforma in Mexico City.

equipment. Not only do we provide hardware, but we also

Today Siemens boasts over 6,000 employees in Mexico

have a strong services and consultancy division for mining.

and has nine manufacturing sites in strategic locations like 282

Monterrey, Guadalajara, Queretaro, and Ciudad Juarez.

Q: How has the Totally Integrated Power Solution been

Siemens has played a major role in Mexico by helping the

implemented in Mexico, and what are its benefits?

country with technology in different sectors like industry,

A: Mining operators require safe a power supply since they

infrastructure, healthcare, and power generation. We

must work under challenging circumstances. The stakes

have worked successfully with both private and public

are high since they must meet productivity goals and

companies. In mining, we encompass the entire value chain

guarantee continuous operations of many variables like

and lifecycle of a mine. In the exploration stage we provide

conveyor belts, crushers, mills, and float lines. Siemens’



Milind Karkare Senior Vice President of Andritz Automation

Luiz Vega Brazil Sales Manager of Andritz Automation

Q: What position does Mexico play in Andritz Automation’s

is often overlooked. We have two kinds of training programs,

global strategy, and what makes the country an attractive

one that takes place in a computer-based system. The other


part of the training we offer is our IDEAS simulator. No

MK: Andritz Automation began in the copper market in Chile

matter how much theoretical training is provided, operation

when we realized this sector was using older technology from

of the mill is a completely different situation. This system has

the 1990s. We began to optimize equipment and arranged

been developed over the course of 15 years for mining, and

training for operators, which was extremely popular. There

we now have advanced models across the lifecycle of the

was an environmental disaster where a pipeline was leaking,

mine. We can find errors in the process design, and we can

and in most cases these types of incidents are caused by

test the DCS logic.

human error. We want to ensure that humans perform in a more efficient way through the use of technology. After all,

Q: What specific technologies have you developed for

a large part of the asset base is human, the training of which

the sector?

Totally Integrated Power (TIP) takes a comprehensive view

our solutions contribute to power efficiency for mills

of mining electrification and examines all aspects from

and grinding processes, and we help reduce power

generation to utility infeed. However, we know this not

consumption as well as costs and CO2 emissions. The

only involves a power element but also automation and

industry is taking a step forward into the digitalization

digitalization across the entire lifecycle. We interconnect

era and in that regard, we can install sensors in key areas

different systems until we achieve an integrated power

of the production process and measure exactly what is

network where all areas communicate. This intricacy

happening with the operation. We measure equipment

enables the user to gauge the energy consumption of one

temperature and energy consumption and then we gather

mill and then balance the consumption throughout the day

all this data in the cloud and convert it into smart data,

to avoid peaks. Another benefit is that the operator will

which enables operators to improve their decision making

have an integrated database on hand so it will be easier

processes. With this smart data, we can carry out analytics

to carry out changes to the setup of operations, identify

and identify trends so operators can proactively schedule

potential downtimes and react immediately.

prescriptive maintenance before equipment failure.

Q: What have been the most innovative solutions that

Q: How will Siemens usher the mining sector to the new

Siemens has brought forth to the mining industry that

Industry 4.0 trend?

ensure higher productivity?

A: The speed with which new productive projects need

A: In terms of power generation we have succeeded in

to start has fostered the adoption of Industry 4.0 and this

projects like La Caridad with Grupo MĂŠxico, which was a

has spread across the whole value chain. In the design

project that set a benchmark for Siemens globally. In the

process, companies need the information quicker and with

distribution business segment, one of the solutions that

feasible solutions to potential problems, which requires

have meant a big change is the mobile substations that

CAD solutions. Through our solution, designers can build

we have designed because these do not tie the operator

a Digital Twin of the production line, and this 3D model

to a single exploration point, therefore eliminating the

can run simulations, which enables the detection of faults.

necessity to build a new substation each time work is

Use of this Digital Twin can reduce time when constructing

carried out in another area of the mine. Together, all

the real product by up to 50 percent.

MK: We are integrating operator actions into our systems

MK: We have brought our IDEAS technology into

to become fully automated and create a system called

universities with one university in Belo Horizonte, Brazil

Andritz Control Expert (ACE). This technology is capable

using the tool for thesis studies. In terms of measuring the

of thinking like an operator but at a much higher and faster

ROI we benchmark this through precedent. For example,

level. Behind that lies our BRAINWAVE technology, which

power generation plants can run for 12-18 months without

was invented using a concept developed in the 1800s by a

a shutdown, meaning that the staff is not well-practiced

French mathematician. This is currently being used in Chile.

in the shutdown and startup processes. Emergency

Typically this technology has been proven to provide a 2-3

situation management is not experienced until it happens,

percent improvement in production rate and a 30 percent

and by constantly retraining these operators on such

reduction in variability, which is a considerable amount of

abnormal situations we can ensure that human safety is

money for mines.

not compromised during emergencies.

LCV: The variability on processes is extremely difficult to

LCV: It is difficult to measure the direct value of the

control but BRAINWAVE is a Model Predictive Control

equipment because we must first measure the number

(MPC). This means that instead of waiting for the process

of mistakes made by operators and the cost implication

to leave the set point the system will automatically make

related with this before we can measure a quantitative

modifications before this happens. BRAINWAVE is the

improvement. When learning to drive a car, practical

software that will reduce this variation, and we will then

lessons always have a degree of trial and error so the

create a layer in ACE that allows the controls to reflect

IDEAS operator training system will allow the same

the changes in set point and increase savings, quality, and

for the operation of multi-million dollar plants or mills.


In this way we can pinpoint the mistakes and the consequences of these mistakes in a situation that does

Q: How do you measure the return on investment (ROI)

not place considerable amounts of money and human

from such technology?

safety at stake.



TELECOMMUNICATIONS UNEARTHS ECONOMIC SAVINGS PEDRO HOYOS Deputy Director of Commercial, Innovation, and Marketing at GlobalSat

“We do not anticipate a

Q: In what ways are the Internet of Things (IoT), SCADA, and Big Data impacting the productivity of key industries in Mexico? A: We connect SCADA technology, which requires a low bandwidth and is a low-cost service, enabling companies to keep efficient records. In terms of IoT, much of the equipment in mining must be monitored and a satellite 284

drop in the need for satellite services in Mexico since this is something that is lacking in rural parts”

link ensures the continuity of information, and it is the only option due to budget restrictions. One of the problems to have emerged from Big Data is the vast

Pedro Hoyos, Deputy Director of Commercial,

amount of information being generated from all sources,

Innovation and Marketing at GlobalSat

which means that a tremendous amount of equipment is being connected to the web. For this scenario we have

Q: The mining sector differs greatly from that of oil and

developed several effective solutions. When we gather

gas, so what is your strategy for negotiating this segment?

data, rather than sending it directly to the client, the

A: One of the main problems of Mexico’s mining industry

client installs equipment on our NOC and we process a

is security, and even though mineral prices have not

proportion of the information. The client is able to isolate

increased we have been making steady progress within

the important information through our systems to send

the sector. There are a number of reasons for these trends,

to the mainframe, unloading significant capacity from

including the fact that our services reduce the need for

their site. The connection is extremely secure, and the

travel and provide access to telecommunication services

equipment is located on a high-availability NOC. This

that translate into a necessity as a service provider. Mine

began as a pilot project around three years ago, and has

directors seldom travel and instead use videoconferencing

since been developed with encouraging initial results.

facilities and data provided by us. This reduces travelling expenses, risk, and provides real-time information. We

Q: In what way has the drop in commodity prices

have a team of sales representatives that visit the mines

impacted the demand for your services?

periodically in order to disseminate the recent trends and

A: Companies realize how essential our solutions are when

evaluate industry needs, and in this we are unique in the

commodities like oil or metal drop. We have also developed


new solutions to address the current issues within these industries. We have a tariff where the client pays only for the

Q: With companies like Facebook now introducing ‘free

amount of bandwidth used, and if the initial purchase limit is

basic’ services, what does this mean for the satellite

exceeded more can be bought. We have also given the client


the flexibility and power through the cloud to login to their

A: We do not anticipate a drop in the need for satellite

account to monitor usage levels. These kinds of services all

services in Mexico since it is lacking in rural parts. We are

include filtering and bandwidth control so this mitigates costs

beginning to provide more integrated services so we do not

and allows the client tighter controls on consumption levels.

depend on simply delivering a link. Several mining operations

This solution has been easy to implement as most clients

need voice services, and we deliver solutions that include the

already have the required equipment installed and have

voice component, meaning that we provide the equipment,

trained personnel to work with this equipment. Therefore,

the identification, and all the services the company could

the solution can be used to limit costs and transmit only the

need. This is not just a satellite link but also a telephone

required information instead of a steady stream that could

service, a content distribution solution, a back-up network,

not be closely controlled.

and a monitoring system.


OVERCOMING LOCATIONAL HURDLES The CEO of Elara Communicaciones, Jorge Villarreal, was nominated Executive of the Year by the World Teleport Association, as well as Visionary Executive of the Year at


the SATCON Conference and Exhibition in 2013. According

CEO of Elara

to him, this is a result of its long-term focus on innovation


and flexibility, trying to better understand where it can add value for customers and designing solutions according to specific needs. “The award has not only been a recognition

wherein Elara Communicaciones supplied connectivity

of my work but the work of everyone in the company

to the mine, and in conjunction with another provider,

as well as the strategy we have been implementing,”

integrated a Wi-Fi solution to the area surrounding the

he comments. “This success is a combination of a deep

mine. This provided Internet that fulfilled corporate

understanding of customer requirements and the creation

requirements of the mine and also to the residential area

of a value-added service.”

in the surrounding community and those working in the mine. This was achieved through the use of a specialized

Villarreal believes that cutting-edge IT solutions and



telecommunication systems must be developed in order to be able to operate in remote locations. “In mining, we have


been implementing satellite solutions in remote areas, as

connections in order to maintain speeds and services,

well as strengthening terrestrial communication systems

and Villarreal confirms that the company’s products

such as fiber optics,” he explains. “We use satellite as a

are specifically designed for these conditions, meaning

backup system in the event that terrestrial communication

the reliability of the service is extremely high, and only

systems fail.”












customers experience problems that require a callout. For Villarreal, satellite has been a key component in

“This technology has been evolving year on year, and we

the telecommunication arena for decades, and there

can deliver a seamless integration between the satellite

is a need for this specifically in terms of industries

and the rest of the technology,” he states. “We connect

like mining, in which operations are often carried out

our interoperable systems with a range of technologies

in remote locations where terrestrial communication

such as fiber optic and mobile networks.”

options are inviable. “The product we provide bridges that gap in terms of availability and speed, and satellite communications technology as a whole has been evolving tremendously over the last few years meaning that we have been able to provide greater efficiency and higher bandwidth to the customer at a more competitive price,” he boasts. “Satellite technology is becoming an increasingly attractive solution, especially in light of the

By 2017, the cost per MB will drop by up to 50 percent for satellite


current environment.” Elara Communicaciones has also developed a technology As the telecommunications technology evolves and

evolution map as an indicator and guide for the direction

becomes more competitive different solutions emerge.

of its technology. It is already looking to the future and

“No matter their size we have been able to combine an

is aware of what will be available in the next three to five

integrated and personalized approach to their business,”

years. “By 2017 we anticipate a major change in the satellite

he clarifies. “I believe there are significant opportunities

services that are available, and eventually the goal is to

for the industry to bring turnkey solutions to customers

utilize more powerful satellites that can transmit higher

in the mining sector, and this will be a growing trend

MB to the customer,” Villarreal surmises. “As a result, the

over the next few years. If this is integrated with a

cost per MB will drop dramatically, by up to 50 percent

telecommunications service there is a potentially niche

in some instances, so eventually satellite connectivity

market for providers like us.” One particular success story

will be a much more attractive option in terms of cost of

was the provision of a solution to a mining customer





Q: What growth opportunities have you identified for the

operators depending on the length of time a radio remains

company in the mining sector?

at a certain angle. Our solutions are capable of finding the

A: DELTA Solutions has been in the market for 28

exact location of all employees in a mine, and in case of

years and our main product line is focused on radio

emergency, they can send a mass alert and monitor all

communications. Mining has always been extremely

further communications. These needs are covered by a

attractive, the technology has evolved rapidly, and the

wide range of technologies but now innovation carried

industry now represents 18 percent of our total sales.

out by technology providers will allow migration to digital

The sector demands increasingly potent interior and

technology to improve mine operations.

exterior communications equipment. These days there is a great deal of equipment that mines can use to optimize

Q: Which of your products and solutions have helped

processes and as a company we have been able to meet

your clients maintain strong levels of efficiency while

the expectations of the mining exploitation segment. We

maintaining low costs?

are fortunate enough to receive support from technology

A: The legal and fiscal reforms applied to the mining sector

providers like Motorola, which provides diagnostics tools

have transformed the operators’ vision and now providers

for our clients, as well as developing various applications

must be aligned with competitiveness, productivity, and

for integrated radio communication. Instead of only voice

high safety standards. To reach these three objectives

messaging facilities, radios can now detect issues with

it is necessary to convince them that communication



the country from one base, giving the company a more

Commercial Director of Grupo

defined, efficient overall business strategy and offering


a more accurate service to our clients.” Grupo ABSA has identified several opportunities in the automation

For Grupo ABSA, by far the most significant event in the

and energy control fields. In 2015, the company made a

last 12 months has been the merging of its two companies

significant investment by setting up a specific department

into one consolidated business. Previously, it operated

comprised of 10 strategically selected engineers. Their

as two separate companies one to cater the northern

purpose was to cover energy quality management and

markets of Sonora, Chihuahua, and Sinaloa, and a second

principally to develop new solar LED technology for the

one to provide services in central and southern Mexico.

mining sector.

“This has been a great improvement for ABSA because the mining industry and the automotive industry are the

Given the investment made in developing these solar

most important markets for the company, representing

systems, Lamas strongly believes in the product and

20 percent of the total income of the group,” explains

is working hard to promote it to clients throughout the

Mario Lamas, the company’s Commercial Director. “We

industry. Grupo ABSA’s solar LED designs can monitor

will now be able to serve our mining clients throughout

the performance of every solar panel in any given solar

technology should not be considered as an extra cost but

by an operations center. As a result, it was complicated to

rather as a long term investment. In order to help clients

precisely control the staff across the facilities as well as

overcome the challenges of systems migration, we offer

manage security issues. The company ran our diagnostics,

innovative financial plans that include Motorola’s guarantee

took out the leasing plan, and was able to complete the

of repurchasing analog devices at a decent price, and some

migration in the space of three and a half weeks. To help

leasing alternatives. We have been providers to the mining

control the number of employees in the mine, our radios

sector for more than 24 years, catering to the needs of

include an additional accessory that identifies users and

the major mining groups in the country, and we have been

their locations. In terms of productivity, this new radio

able to migrate systems in some of their mines due to our

communications technology doubles the transmission

innovative processes, quality technology, and constant

capacity, allowing users simultaneous communication

certifications obtained from our many partnerships.

without interference.

Through new lifting technology, we are changing our

Q: What new technologies and solutions can you bring to

focus with mining companies. Previously, our relationship

the Mexican market to help the industry?

with them was based solely on providing quotations,

A: When analog to digital communications migration

acquisition orders, and product supply. However, given the

reached the market, Motorola allowed international

complexity of the technology we offer, we now provide

developers to modify the source software in order to

consulting services and help them realign their focus on

improve results. The applications we use for mining

communication technologies.

operations came from a Russian software company called Turbonet, and we believe this platform is ideal for mining

Q: What process do you use to migrate a mine’s

operations. DELTA Solutions is in constant communication

communication platforms, and what success is generated

with this provider to share and apply client feedback from

from this complexity?

the actual users. Our radios can also detect explosive risks,

A: The first successful migration we carried out was in

monitor the vital signs of the operator, and identify leaks

a mine in Durango, where we facilitated the migration

to avoid gas explosions. As well as radio communications,

of more than 600 pieces of equipment simultaneously,

which represent 65 percent of our sales, we have an

and Motorola considers this a global success story. This

Integral Security department that focuses on CCTV,

underground mine operates 24 hours per day and all the

access control, fire prevention, and alarm systems catering

analog communications were administered and overseen

exclusively to the industrial segment.

field. This system informs the user of any malfunction in

up-to-date decisions on their energy systems. Therefore,

any of the panels in real time via an Ethernet network,

the products that Grupo ABSA offers are designed

and displays the reason behind the malfunction and how

to keep mine managers and other decision makers

to repair the issue. This can lead to substantial savings

constantly informed, wherever they are in the world, as

in time, energy, and maintenance expenses, as well

to how their energy systems are performing on each of

as improving mine safety and efficiency, says Lamas.

their projects.

“However, despite the numerous benefits there are very few mine operators using this system in Mexico at the

“We are working alongside companies such as Cisco and

moment, and this inherent conservatism I believe is one of

Rockwell to develop programs that are designed to bridge

the industry’s biggest challenges as it tries to modernize

the gap between operational and information technology,”

production systems,” he laments.

he boasts. He stresses the importance of working together to ensure that the solutions developed not only work

The company is currently working on three principal

on a technical level but also provide real-time, accurate

mining projects. Two are with Grupo México in Chihuahua

performance indicators. “For us, this is the future of

and Hermosillo, and the third is with Industrias Peñoles at

automation technology, and we are currently travelling

Mina del Toro, Zacatecas. “We have installed adjustable

around the country demonstrating our designs and

speed drives in these mines, which excel not only in

encouraging mine managers to try them,” he declares. “We

energy control mechanisms but more importantly in the

have a prototype already installed in the Peña Colorada

area of communication,” Lamas shares. Recently, the

mine in Colima, and we hope to install many more in the

focus in the automation market has switched toward

coming years because we believe this technology offers

communication to enable executives to make informed,

great value for our customers.”


San Luis de la Paz Plant is Officially Inaugurated Natural gas-fired power generation Following years of hard work, planning and effort, InterGen celebrated a milestone in its history when the Energía San Luis de la Paz power plant was officially inaugurated on May 17, 2016. Energía San Luis de la Paz, located in Guanajuato, sells the majority of its power to a mining company under a 20-year power delivery agreement.





The Secretary of Energy Pedro Joaquin Coldwell, Governor of Guanajuato Miguel Marquez Marquez, InterGen’s CEO Neil Smith, InterGen Mexico’s General Manager David Fatzinger, and Mayor of San Luis de la Paz Guillermo Rodríguez, inaugurated the plant. With this latest addition to the InterGen fleet, the company now has 12 power plants in operation, representing a total generation capacity of 7,220 megawatts (5,562 net equity MW) and including a wind farm. In addition, InterGen operates three compression facilities and a 65-km gas pipeline. These facilities are located in the United Kingdom, The Netherlands, Mexico and Australia. InterGen is a leading energy company generating safe, reliable and sustainable power in the communities in which we operate.

For More Information:


INTEGRATED SOLUTIONS FOR COMPLEX INDUSTRY Given the drop in the prices of commodities over the last few years, mining companies are increasingly seeking ways to optimize operations and develop innovative,


cost-effective technologies. That is an area in which

Vice President of MISOM

MISOM Technologies excels. “MISOM has always focused

Technologies Latin America

on getting the most out of the data and system you already have, meaning we do not push expensive technology






The incorporation of new technologies, Bonillas believes,

President of MISOM Technologies Latin America. Instead,

has impacted the development of the mining industry

the company promotes the recalibration of existing

over the past decade, and MISOM has played a key role in

technology to achieve step-change outcomes such as

fostering these new innovations. The software provided

mine to mill or optimization projects. MISOM provides

by the company has helped speed up the decision making

the tools that companies need to make decisions, and its

process, and as in most industries the most important

software is able to identify and address issues related to a

factor for mining companies is the maintenance of low

decline in productivity, representing an attractive service

overheads. “In the past, it may have taken 10 times as

for mining companies in the current climate. Bonillas

much time to identify the cause of a problem because

believes the main idea behind business intelligence is

of the lack of accurate data,” says Bonillas. “With

to motivate and to help drive improvement. Companies

these advances in technology, we have the ability to

have different approaches to their data and asset

pull data from different sources and integrate them.”

management and this means that MISOM must tailor

Sometimes problems may arise in the presence of too

solutions and provide flexible services in order to stand

much information and no clear analytic strategy, and

out from the competition.

this is where MISOM has found its niche. The company offers the services of its mining and software engineers

However, Bonillas wants to shatter the misconception that

and provides the mine managers with the tools that will

integrating data is a simple process, and highlights its

enable them to make the right decision.

complex nature due to the varying types of data systems and structures. The first step entails understanding these

Currently the most profitable activities, according to

structures and characterizing the data, and the information

Bonillas, are MISOM’s integrated data solutions where

is then cross-referenced with other data to produce the

both mine and plant can be analyzed in the same

desired report. Most of MISOM’s integrations are conducted

environment. “This strategy can deliver more effective

using Microsoft Analysis Services to integrate all the data

and far less expensive solutions, and with simple

sources or systems into a data warehouse containing near

use, set-up, and maintenance, even small mines and

real-time and historical data. On top of this, an Online

contractors can take advantage of the services,” says

Analytical Processing (OLAP) system is built and used to

Bonillas. MISOM sees this as the greatest technological

analyze data, and this technology helps the company to

opportunity of this generation due to the significant

process massive amounts of data at a faster pace.

influence of smart phone technologies. Moreover, the company offers mine to mill studies to help identify any

The business intelligence architecture employs Analysis

leaks or deficiencies in company processes. Each step is

Services but the front-end has a dynamic JQUERY

mapped in the integrated information solution, from rock

interface, allowing users easy access to the information

blasting to delivery of the material to the plant. Reports

on multiple screens. Cloud storage is also offered by the

are then generated with the findings and analyses are

company, and the advantage of this infrastructure, says

provided that measure efficient use of resources. The

Bonillas is its cost-efficiency in terms of storage and

mining process is closely integrated with the milling

support. MISOM’s cloud sites have professionals that set up

process by linking key data in the plant with data from

firewalls and security to keep the data safe. “The bottom

the mine. “Our approach is unique in that we build M2M

line is that there are considerable savings by opting for

into our integrated data solution,” boasts Bonillas. “This

cloud based storage,” Bonillas argues. “As there is no need

constitutes a preemptive, continuous process, rather

to pay for maintenance or exorbitant energy costs to keep

than a retrospective action taken when mill performance

the servers operational.”

has already fallen.”




Q: What is Intergraph’s role in the digitalization of the

are dead documents that represent old information that

mining industry and how can you help mines overcome

cannot be used since it is just a report of a specific item at a

mala praxis?

specific moment in the past. Intergraph provides usable data

A: Intergraph is part of Hexagon, a larger holding that offers

and information to be exploited, helping operators make

specific mining solutions through the Hexagon Mining

more appropriate decisions.

division with special focus on planning and other solutions.


We focus on automation and engineering data management

Q: How do Intergraph’s solutions help operators increase

for mines with the main objective of achieving operational

efficiency in the planning phase?

efficiency. We complement Hexagon Mining services

A: We offer solutions for the electro mechanic installation

because we operate in different areas but with the same

of a mine along with conceptual engineering, which is

clients, allowing the operator to exploit the information they

when the mine plan is decided. This is complemented with

gather through our services. Operators believe that drawings

instrumentation engineering to control the process and

and blueprints comprise the whole engineering information.

electric structure that will power devices and instruments.

However, there is significant data that is not embodied there,

With 3D modeling, we represent all the details, including

like the components or behavior of an installation. Blueprints

the location of each structure, and the way it is going to be



Q: What are the most recent automation trends in

operational budgets, and this circumstance presents an

the mining sector and how have the requirements of

opportunity for us.

operators evolved? A: The drop in commodity prices has irrevocably changed

Q: How has ECN adapted its business strategy in order

the mining landscape and all suppliers must adapt to the

to deliver the added value that mining operators are

new business environment. Automation and technology


providers must always perform to the highest standards

A: We developed the Main Automation Contractor (MAC) in

and most importantly be aligned to the client’s objectives.

the early 2000s, and at that time it was entirely focused on

During times of prosperity our responsibility is to be the

efficiently developing large projects in the US and Mexico.

depository of knowledge and convey all the information

However, today that same product is focusing primarily on

and results in a clear and concise manner. The segment has

process optimization rather than simple efficiency. ECN is

changed and the new focus is to meet process efficiency in

perfecting the business model that will allow customers

the previous investment carried out in automation. Today

higher quality, more control on hazardous residues

mining companies have to produce more with smaller

management, and improved safety. For several years ECN

supported. At this stage, the analytics start to take place

and measures sent by each component are analyzed by

in the development of a project because we can see the

algorithms to predict the possible outcome. If an operator

pipeline routes in order to ensure connectivity and avoid

does not have this data, it is probable that either the

interference. While we do adapt to the client’s requirements,

installation or the tools will fail.

it is important to point out that we are working to change the operator’s mindset since they are used to seeing blueprints

Q: The mining industry takes its time to introduce new

and making decision according to what they see. However

technology, so how are you tackling this situation among

showing drawings does not provide any value and adding

your clients?

information to them is a complete waste of time. With our

A: We usually show success cases and global references

software mine operators can see the functionality of the

of other mining companies that have had related issues,

project they are engaged with, and by offering complete

as well as the way in which Intergraph’s solution helped

reports with useful data and reliable information we ease

them overcome the problem. Preventing accidents and

the decision-making process. Our software helps the mine

downtime brings cost savings, and this is only possible

owner and operator to create and build based on data.

when operators have adequate and reliable information. Another argument for operators is that income might be

Q: How can mining companies benefit from your software?

available sooner, and that quality improvements due to the

A: One of the main benefits operators can get is that they

data provided will make operations much more efficient.

have daily reliable information that will help extend the life of their equipment. The data provides information

Grupo México recently used Intergraph’s solution for a

regarding when and which parts will need replacement,

leaching project in the Buenavista pit with promising

while it also prevents accidents due to the lack of

results, and it is now developing other projects for

knowledge of the state of the equipment. When a project

Southern Copper. Our strategy is to increase market

is starting our solution helps the engineering developers

share in Mexico by collaborating with Hexagon Mining

to buy the right materials, which translates to efficiency.

and Hexagon Ventures to offer a wider portfolio and

The benefits are always transferred to the operator. Some

more attractive solutions. Even though metal prices are

of the equipment sends information directly to a server,

depressed, the investments are flowing so an integrated

not necessarily a SCADA system, and the calibrations

approach is going to be better for operators.

has worked to develop a metallurgical suite, consisting of a

intelligence and presents an opportunity for operators to

five-product portfolio that includes several elements to help

experiment, change, and develop new strategies in their

optimize the milling and flotation process. The data runs

formulas for ore processing. A customer asked us to

over a central software called Balmet, an embedded system

analyze the dosage used in its mining process because the

that automatically analyzes the metallurgical balance within

company was in need of reducing the maintenance costs,

the control systems of the mining operations. To support this

and based on our findings we suggested the use of a low

solution, we have other products to complement efficiency,

maintenance dosage system that lowered the operational

including Judiline, which allows the operator to streamline

expenses and amount of spare parts needed.

the dosage of the reagents used during the mining extraction process, thus removing a substantial operational

Q: In a market rife with competition, what attributes

expense. Dispensing the correct amount of reagent in the

differentiate ECN from its peers?

right phase of the process means a higher mineral recovery

A: ECN provides solutions that range from basic control

rate. An additional benefit is that the correct use of this

management systems to complete automation solutions

product helps meet environmental compliance targets.

for field work and control room converting relevant information into valuable data. Automation has always

Q: How can your solutions provide a more efficient input

been aligned to information. Given the development and

to the mining processes?

growth of the industry, this data provides a complete

A: For many years, the exact chemical dosage for

picture for top executives and improves the decision



making process. Our expansion in the mining market will

processing were not of particular concern for operators.






be possible through the development of our products. We

By implementing our products, mining operators gained

have six new products in the pipeline, including a bubble

new insight into which reagent to use and when to apply

speed meter for the floatation process, which will reinforce

it. This information provides relevant statistics for business

our suite.




Q: How has Power Electronics cashed in on the increasing

standards that we and the client wanted. We decided to

interest in renewable projects?

seek the expertise of an engineer based in Australia and

A: One of the noted implications of the Energy Reform is the

he surveyed the whole system, spotted the problem, and

drop in electricity prices. This year we have seen a slight drop

solved it. The error did not lie in our system but in the

but not comparable to what was seen in the industrial sector.

incorrect wiring of our client’s installation.

Energy sources like hydropower, geothermal, and even wind have the potential to come to the forefront of the Mexican 292

arena, especially for mining players. However, at Power Electronics we are slightly wary of the true opportunities renewable power may experience after this groundbreaking reform. In my opinion, renewables stand little chance in Mexico, especially the sector where we have a noted expertise, which is PV. The UK is our biggest market for PV and last year we installed 2GW, while in Mexico we expect the solar market to amass only 150MW. Power Electronics has carried out hybrid projects for electricity production that include a wide array of products from its portfolio, while

“We have a longstanding relationship with Industrias Peñoles and we wish to increase our participation with Goldcorp and Grupo México” Pedro Berriel, Director General of Power Electronics

in mining it is known for pumping and ventilation systems. In 2015, we encountered some obstacles mainly due to the

Q: How are you tailoring your value proposition given the

royalties, and mining players are more cautious with their

desire of mining companies to lower energy costs?

investments. We have a longstanding relationship with

A: Reducing energy consumption in Mexico is complicated

Industrias Peñoles and we wish to increase our participation

because mines are located away from the needed

with Goldcorp and Grupo México.

infrastructure. It is almost impossible for CENACE to trace the transmission to these remote locations and for CFE to

Q: Which project reflects the capabilities and competitive

carry it out, so mining players must be inventive in their

advantages of Power Electronics in the mining sector?

energy production. The technology in the mines is growing

A: One of the competitive advantages of Power Electronics

at a slow pace precisely because of these conditions.

is its service, and the foundation for this has always been

For mining companies, the priority is to ensure the flow

its value proposition. When the company was created 27

of production because that is the heart of a mine. Some

years ago, the founder stressed that it would not fight

players even consider avoiding automation processes in

against giants like ABB or Siemens with marketing or

fear that the production rhythm will not be maintained

production volume but rather on service. This strategy

given the quality of the power onsite. The tide is turning

has proven successful and the client list is a testament,

and mining companies are beginning to understand that

with companies like PEMEX, CEMEX, Schlumberger, and

energy efficiency plays an important part in the production

Baker Hughes. These are mostly clients with roots in the

line and the equipment's life cycles.

oil and gas industry, and this is mainly due to the limited opportunities in the mining sector. Nevertheless, we hope

We want to ensure the continuous presence of our

to remedy this situation. We had a client that decided to

products in the mines scattered across Mexico. The oil

buy our product and after we carried out the installation.

and gas sectors will surpass the mining industry, and with

This success enabled us to sell another four products to

the resources we gain from the former we will continue to

the same client. In the fifth installation we encountered

provide quality products and outstanding services to the

difficulties in the startup as it would not perform to the

mining sector, which is pivotal to Mexico’s growth.



Danfoss has been present in Mexico for a number of years now with a food and beverage manufacturing plant in Monterrey but the company now wants to focus on


making the mining industry in this country more efficient,

Regional Sales Manager at

according to Arel Cárdenas, Regional Sales Manager of

Danfoss Drives

Danfoss Drives. “Four years ago we developed a clear strategy regarding our participation in the sector in Mexico, which revolves around maximizing the use of electricity

“Our products often significantly reduce carbon dioxide

and environmental care.” he shares. At the start of 2015

emissions, and therefore clients seeking green projects

Danfoss acquired Vacon, a Finnish company specializing

often decide to install our technology,” he declares. “In

in AC drive manufacturing, making the former the second

most cases ROI will be generated in less than one year.”

highest producer of drives globally, and Cardenas expects

The Cobre del Mayo operating company recently decided

to be number one by 2018. “These machines can be used

to install four 350hp water-operated drives in an attempt

in all stages of the mining process, including underground

to save energy, and lengthen the expected lifespan of the

and open pit mines, to control motor speed and improve

machinery in place. Danfoss is always heavily involved in

energy efficiency for pump systems,” he explains. “They

the engineering process from the outset, ensuring the

also help improve mine ventilation by extracting gases

client is fully aware of how to operate the equipment in

through the use of a comprehensive monitoring system.”

order to reduce the safety risks. “In order to ensure that

Danfoss is currently focusing its efforts on improving its

the client is completely satisfied with the product. We

ventilation technology and the team at Vacon are currently

have a “try before you buy” policy, whereby each customer

working on the PBS-3000 drive, which will be a medium-

has 30 days to install the equipment and make a decision

tension drive designed to make mining operators more

as to whether it will suit the business or not without any

compact, reliable, and robust.

obligation to pay,” Cárdenas states.




Q: Mining is one of the most energy-intensive industries,

deficient, that it is the maximum utilization rate that this

so how is IICE taking advantage of this situation?

kind of technology can reach. With a capacitor bank we

A: Business opportunities in the mining sector have always

optimize the power rate, helping the facility reach the 90

been present, and even more so with the Energy Reform

percent minimum limit regardless of its equipment. In the

since there is a rising need for clean and energy efficiency

case of harmonics present in the grid, we can install a filter

solutions. In the past, companies were only able to produce

consisting of a capacitor coupled with a reactor.

power and sell it through CFE but now private actors can 294

increase their self-supply capacity, seek more competitive

Q: What benefits can miners obtain from your solutions?

prices, and even sell the surplus to third parties. In the

A: Our equipment comes with a transistor protection

case of industrial electricity consumers, the optimal power

system consisting of peak suppressors. This additional

factor is set at 90 percent as lower utilization rates are

equipment is used in cases where damaged equipment

penalized financially in the electricity tariff. We can help

impacted by harmonics also begins to generate them.

companies reach optimal power factor levels and mining

Harmonics are an increase in the number of frequencies

players stand to benefit.

present in the electrical grid that result from non-linear electric loads. We have two types of filters available to

Q: What new solutions do you have in place to serve the

correct this issue, one that increases the power factor and

energy needs of the mining sector?

other that eradicates harmonics. The first type, known

A: Industrial facilities are obliged to consume at least

as a rejection filter, is utilized when a facility’s power

90 percent of the energy supplied by the utilities, which

factor is below 90 percent and it will correct the factor

previously corresponded solely to CFE. To maintain

rather than eradicate the harmonic. The second product,

a facility’s energy usage above that limit, we provide

known as an active or absorbing filter, will eliminate the

capacitor banks and filters as this eliminates the formation

harmonics present in an electric grid but it will not correct

of harmonics. Companies with energy consumption rates

the power factor. For instance, a rejection filter can lower

below 90 percent received a fine from CFE, which made

the fifth harmonic from 300Hz to 225Hz. This frequency

it financially attractive for companies to invest in solutions

is easier to manage by the capacitor, which increases the

optimizing this factor. Nowadays, all kind of industries

equipment’s power. Nevertheless, the harmonic problem

incorporate the use of electronic and automatized

is not eliminated from the equipment. To eradicate the

equipment in their processes. These types of systems can

harmonics the 300Hz must be addressed in a linear

cause a problem in the electric system known as harmonics,

manner with an active filter.

which brings noise to the grid and can damage sensitive equipment. Our solutions help clean the electrical signals

Q: What are the risks faced by that electronic equipment

in a process known as energy cleaning optimization.

while using capacitor banks? A: It is important to distinguish between a capacitor bank

Q: What are the technologies that represent important

and a filter, since the first consists only of the capacitor

energy savings in the mining sector?

while a filter is formed by a capacitor coupled to a reactor.

A: Capacitor banks have changed the energy efficiency

The capacitor bank compensates the electrical line using

game since industries must contend with a limited amount

the capacitance current to decrease the angle and improve

of energy to create power, and even with new and efficient

the power factor. When a capacitor is coupled to a reactor,

equipment, not all the energy received can be transformed.

the system generates a short circuit. This process misaligns

For instance, engines can usually only transform 80

the system and pushes it further from the fifth harmonic

percent of the electrical energy into mechanical power

waves without eliminating the inductance current that has

and, while this value does not imply that the engine is

to pass through the capacitor. In the case of an active or


absorbing filter the system aligns both currents forcing

life and avoiding the occurrence of power outages and

the harmonic current to pass through the capacitor,

system breakdowns.

eliminating them completely and cleaning the grid. We focus on the misaligned systems as we generally look to

Q: How are you planning to position the company in the

improve the power factor of our clients.

mining industry in the short to-medium term? A: Our product portfolio, which mainly includes capacitor

Q: How do you raise awareness among miners about the

banks, is highly relevant for the mining industry because

benefits of using your solutions?

it can bring different economic and technical benefits to a

A: Despite the number of companies that ignore

company. By using our technology, miners avoid problems

the power factor fine there is an increasing interest


in acquiring energy efficient equipment due to the

power outages, and electrical noise from harmonics. Our

possibility of saving money by increasing a facility’s

distribution network is already collaborating with miners,

power factor. Besides the economic benefits there are

providing them with the required technical support and

also positive implications of introducing a capacitor bank

knowledge to increase their confidence in our products.

in the electrical system of a plant, such as the reduction

Unfortunately there is an important level of mistrust in the

in maintenance services resulting from the elimination

usage of capacitor banks due to the lack of experience and

of waste heat from the transformers. By lowering the

technical skills among people in the sector. If a technician

kilovolts-amperes, the company decreases the amount

does not have the required skills and does not perform a

of heat released by the system. Additionally, having

network analysis before installing the capacitors, there is a

fewer amperes running through a cable reduces the

risk the installed equipment will create more damage than

deterioration rate of the equipment, increasing its useful

benefits to the system.









Q: What importance does Mexico have for the WEG Group?

A: At the moment, many mining operators are combining

A: We are investing US$220 million in Mexico with new

motors with drives in order to control the speed of the

plants and offices. The Mexico plant will be used to service

motor, allowing for a much more efficient system. We are

Canada, the US, Mexico, and Central America. We believe

now manufacturing the W50 three phase motor in Mexico

the mining sector will quickly bounce back from the difficult

and selling to a number of different industries. The W50

times it is experiencing. We have a solid position in Mexico

has seen a great deal of success since it offers the same

and we have developed products that are specifically

horsepower as our older lines but in a smaller motor. Soon

designed for the industry like copper bar rotors motors,

we will launch a line of new products called the W60,

which fit mining requirements. As the years progress, we

which will be manufactured in Mexico. While the W50

see more opportunities to develop new products so we

is a closed motor the W60 is an open motor, which is a

are constantly adding funding. We plan to invest around

different concept for certain applications. For instance, in

US$240 million to increase production capacity in Mexico.

a clean environment the W60 is more suitable, whereas in

As a base to the US and Canada, several exclusive products

a tougher context the W50 would be more suited due to

will be built in Mexico. We have developed a number of

the closed design’s ability to protect the motor.

manufacturing plants in our portfolio, going from just two buildings to eight. We also have a foundry for electric


motors and even though we are currently buying cast

cogeneration techniques to generate power?







iron from Brazil, we expect to be manufacturing all the

A: With an energy source that can be burned, cogeneration

components in Mexico within the next two years. Currently,

is possible. WEG on a global scale has a renewable energies

we buy copper and aluminum in Mexico to build the motor,

division. Although this is not yet present in Mexico, there

and the only component currently missing is cast iron. We

are plans to introduce a wind power division. In Brazil we

have already begun the construction of this plant.

have power quality analysis equipment that was developed over five years ago. We already have hydro generators

Q: How do your motors help boost efficiency and

and now we plan to expand to wind generation, which we

productivity for your clients?

expect to be sold to CFE.


ENERGY REFORM’S POSSIBILITIES FOR MINING In the mining industry, energy consumption represents around 35 percent of total cost. Having extensive experience working in the energy sector in Mexico in


companies such as Luz y Fuerza del Centro and PEMEX,

Director General of ANAF

the founders of ANAF Energy saw an opportunity to act


as a solution provider for efficient energy consumption. “We believe the Mexican market will become one of the most significant energy buyers," comments Alfonso Caso,

the mandatory consumption of clean energy due to the

ANAF Energy’s Director General. "From our perspective,

new Energy Transition Law, according to Caso.

all new projects regarding energy generation and energy self-supply should consider this new business opportunity

He believes the first wave of suppliers will consist of

due to the competition the market will create,”

energy retailers for qualified users. Most consumption could be acquired via a Power Purchase Agreement (PPA),

ANAF has experience in creating, developing, and

and around 30 to 40 percent could be then quoted on the

executing projects regarding energy savings and efficient

open market, as a way to benchmark prices. An operator

use of energy for petrochemical companies and steel

could ask a supplier for a quote on cost per Kw and

manufacturers. Additionally, it has been implementing

negotiate the conditions. The supplier could then create a

natural gas cogeneration projects for private companies.

package for various cycles as well as managing the Clean

“At the governmental level we have developed projects

Energy Certificates the purchaser needs. The supplier

for Mexico’s City sewage system (SACM) regarding

can also analyze the overall energy consumption in order

the improvement and repair of its electric generation

to create spot offers. The suppliers can also analyze the

equipment, its functionality, and its operation,” Caso

overall energy consumption in order to create spot offers.

comments. For the Mexico City Metro, ANAF prepared

“Companies will be able to create innovative combinations



that will be attractive to consumers, regardless of the

recruited the firm to design and operate a natural gas

traditional energy consumption structure,” Cano explains.

gathering system in Tamaulipas. “Moreover, we have been

“For mining companies, the possibility to create purchasing

providing technical diagnosis for the operation of fuel

power structures will become a new business area.”





supply and distribution terminals (TARs),” he declares. “After the execution of our projects, our clients have been able to reduce their energy-related expenses by between

“For mining companies, the

5-30 percent.”

possibility to create purchasing

He believes the Energy Reform has created certain

power structures will become a

opportunities in the mining industry. “The new market model allowed large mining companies to be registered as

new business area”

qualified users to acquire power supply in the wholesale

Alfonso Caso,

electricity market or through suppliers,” he explains.

Director General of ANAF Energy

“Additionally, small and medium mining companies can create purchase structures or establish strategic alliances

According to Caso, the mining industry may face hurdles

to buy energy through a non-regulated energy supplier

when generating its own power supply because the new

for long term basis power purchase agreement (PPA)

legal framework needs to be . and properly analyzed

contracts, or alternatively obtain part of their supply in the


spot market.” CFE and other suppliers can offer favorable


rates to large users that are not regulated by new pricing

dictates that the adjustment will take two or three years, but

schemes. “The natural gas network will provide the

this first stage of the market also offers the most interesting

possibility of constructing new power combined cycle

investment possibilities,” he clarifies. “We see opportunities

plants,” he indicates. Geothermal power generation and

more than hurdles for the mining industry, with a wider

the extraction of coal bed gas will both become interesting

scope for power generation due to the construction of gas

areas for investment in order to ensure compliance with

and renewable power generation infrastructure.”












THE WHOLESALE ELECTRICITY MARKET DAVID FATZINGER Vice President and General Manager Latin America of InterGen

Q: How is your company adapting to the Mexican

competitors and partners does not compromise business

electricity market evolution?


A: We have adjusted our technology to meet new clean


energy guidelines considering that in 2018 clean energy

Q: Regarding the Energy Reform, what challenges does

certificates (CELs) will be required for all qualified users.

the mining industry face and how can the business meet

The company speculates that clean energy solutions will

their needs?

become more sophisticated over time, driving project

A: The Energy Reform gives mining companies new

developers to use mixed technologies instead of relying on

electricity purchasing options but most players are

only one. Renewable energies and distributed generation

confused about new market instruments and possibilities.

are two trends we expect to grow in Mexico.

InterGen can intervene and offer players transparency and knowledge about the change. Mining companies are

Q: What potential do you see for developing transborder

facing the same challenge as those in other industries,

energy projects between the US and Mexico, and what

which is the choice between single and multiple sources.

challenges do such initiatives bring?

The Mexican energy market remains relatively volatile, and

A: InterGen has experience in transborder energy projects,

qualified users still suffer under constrained electricity

including La Rosita, a combined cycle natural gas power

supply options. For large energy consumers, transitional

plant that we built in Mexicali, Baja California 17 years ago.

solutions are the best option. Bilateral contracts provide a

It serves customers in Mexico and Southern California,

smoother transition into the wholesale electricity market

and it was the first time we had a project built on Mexican

as they can be migrated to the qualified user scheme at a

land that was regulated under two jurisdictions. Another

pace chosen by the company. We also offer these because

project we developed is the Energía Sierra Juárez wind

they are similar to the self-supply scheme that used to be

farm, which was our first transborder renewable energy

employed by industrial users. Our company has the benefit

project developed between the US and Mexico. Thanks to

of being particularly positioned to meet the special and

our prior experience, handling the regulatory framework

intensive energy requirements of the mining industry.

of two countries does not present a challenge for us. The complexity is similar to building projects across two

Q: What was your flagship project of 2015-2016, and what

states, something InterGen has done for more than 20

made it so special?

years. We expect to see more transborder projects both in

A: Our new power plant in Guanajuato, which will supply

the US and Mexico. At the moment, US gas-based power

energy to Goldcorp, is the most noteworthy project we

plants exporting energy to Mexico are the most common

have developed in Mexico. The company was willing to

projects but we do not discount the possibility of more

sign a contract for most of the power plant’s capacity.

transborder renewable plants in the future.

This is significant considering that finding power purchase agreements large enough to make a customized project

Q: How has your business relationship with CFE changed

profitable for InterGen is not easy. We typically build energy

now that you are its direct competitor?

solutions using different kinds of technologies but the

A: The state-owned utility is no longer a large company

Guanajuato plant was completely tailored to meet the needs

but rather a group of different units gathered under

of the mine. We established a bilateral contract directly

one corporation. Some of the subsidiaries will become

with the plant’s main user but we also built the plant so

partners while others will turn into competitors or clients

we could sell energy to other industrial customers through

due to its focus on different areas of the electricity

the wholesale electricity market. It was our first project

value chain. Ultimately, we expect Mexico to be like any

developed under the new regulatory framework, and our

other market where we operate. A mixed landscape with

entry into the mining industry.



Q: How has mining’s energy-intensive nature influenced

Q: What kind of solutions does Técnica Salgar offer for

Técnica Salgar's decision to invest in the sector?

avoiding energy losses in the mining industry?

A: In mining activities, the energy expenses represent a

A: Técnica Salgar has different technological solutions

high percentage of the total production cost, reaching

for avoiding heat losses in power generation equipment.

shares as high as 48 percent in some mining facilities.

These also achieve considerable energy savings, and have

Técnica Salgar recognized the potential of energy

been certified by IIE, CFE’s specialty unit of engineering,

efficiency to increase the competitiveness of the mining

and IPN. To award the certification, the institutes

industry, which encouraged the company to invest in the

measured the energy consumption of different devices in

creation of tailored energy management solutions. The

a manufacturing plant in San Juan del Rio before and after

Cananea mine in Sonora became the first customer that

using the energy efficiency solutions. The results showed

we supported by improving its energy practices. The vast

energy savings of 7.8 percent, a rate that would represent

extension of the mines’ infrastructure and operations

considerable savings for a company consuming significant

entails the performance of analyses across many areas in

amounts of energy.

order to identify specific energy needs. Using this strategy, Técnica Salgar has been able to identify the sections in

We have worked on a number of successful projects in

which the implementation of energy efficient solutions

the mining industry including Cananea, Nacozari, Saucito,

might be the most effective such as in the pumping or

and Náica. A flagship project is Industrias Peñoles’ mine La

leaching processes. The opportunities created by the

Herradura, in which Salgar collaborated since the beginning

Energy Reform include the development of renewable

of the project, and delivered one of the most efficient

projects, as in the case of Industrias Peñoles’ wind farm,

facilities of the operator. In this case the success was due to

and the installment of cogeneration systems such as the

the engagement of the company from the planning stage

two 250MW generators in Cananea.

of the project, which allowed Técnica Salgar to assess the mining company in the purchasing and installment of the








equipment. This project was so successful that Industrias

revolutionized the energy efficiency industry?

Peñoles decided to invite Técnica Salgar to participate in a

A: We have stood at the forefront of innovation in the

new mine development in Chihuahua.

sector by being the first company in Mexico to develop an automatic harmonic filter. A few years ago, Técnica

Q: How is Técnica Salgar helping to solve the main

Salgar also developed a filter for mining shovels that was

challenges faced by the mining industry?

extremely successful, and to date it is a flagship product

A: The most popular solution for the mining industry is

for the company. Furthermore, Técnica Salgar remains

the isolation of electricity connections by means of three

the sole manufacturer of high-voltage reactors in Mexico,

high-voltage reactors and harmonized current filters. The

another popular product for the mining industry. The

purpose of this arrangement is to control the energy flux

demand for this kind of reactor has been increasing as

the mine receives from the grid, eliminating distortions

the interest for cogeneration projects rises in the sector.

and avoiding the breakdown of the facility's transformers.

An interesting product that Técnica Salgar offers to the

The reactors work as a wall, blocking the path of high

mines is the winch filter, which utilizes a regenerative brake

currents directly to the transformers while the filters are

to produce power while the winch is being raised. In this

connected to the reactor to allow for the use of cross-flow

case, early communication with the mine is important as

electricity. The aforementioned arrangement diminishes

the equipment used in the winch must comply with certain

the system's energy losses and improves production by

characteristics in order to work properly and must eliminate

allowing the mine's equipment to function at full capacity

the use of internal capacitors or power electronic devices.

and obtain substantial energy savings.





Q: What is Emerson’s focus in the mining sector?

Q: What makes Emerson stand out among other process

A: The company is repositioning this year around two

management companies in Mexico?



A: One investment that made a significant difference to

and Residential Solutions. The Automation Solutions

Emerson’s value in Mexico was the decision to open a

business contains major product and service solutions,

Mining Center of Excellence in Santiago, Chile around three

which are families related to control systems, regulation,

years ago. At this center we are working in conjunction

measurement and analytical, final control, and specialized

with the Chilean government to develop applications



and solutions for the mining industry to be exported to

automation has focused on processes and not safety. In

other locations like Mexico, focusing on areas like control

the future the growth of automation will be significant

and water quality. Our Rosemont magnetic flow meters

for safety and environmental applications. In the mining

monitor the amount and quality of the water returned by

sector we are present throughout the supply chain,

mines to local rivers. In copper mining the monitoring of

with applications covering variable measurement, flow,

leaching pads is an extremely intensive process from a

and pressure systems. Mining is a vital sector for our

human capital and safety standpoint as they can extend

emerging markets portfolio, and therefore Mexico offers

to the size of a soccer field. Emerson utilizes automated

significant growth opportunities for the company for the

monitoring to measure wireless technology flow, pressure,

next 3-5 years.

temperature, and level. Previously operators had to









Q: How have the recent changes in the regulatory

been steadily increasing our participation in this segment

framework in Mexico created opportunities for SEL?

over the last couple of years.

A: With the Energy Reform, more and more companies are either working in Mexico or are looking to expand their

Q: In what ways can SEL help mining companies make the

businesses into the country from abroad, and that creates

transition to self-generated power?

opportunities for SEL because we now have a much wider

A: Mining processes use many electric motors, and we

potential customer base. Traditionally, we have served

have systems that not only protect people and motors but

mainly utilities and some industrial companies in Mexico

can also integrate the information from those motors into

but now several investors are looking at the opportunities

a single location allowing mine operators to keep track

afforded by the Energy Reform, particularly within the

of performance and understand causes of system faults.

mining sector, which opens new doors for us. A number of

When a company decides to produce its own power we

mining companies have now set out plans to generate their

have applications that can protect its generation station

own energy, and even to participate in the new market by

to ensure the generator keeps running, and that it is

selling the surplus, and we can offer our expertise and

protected against even the most hard-to-detect failures.

experience to help them through this process. We have

We have solutions that integrate all power sources with

recruit personnel to physically take measurement points

Q: How do you face companies that are concerned about

surrounded by extremely dangerous substances, but now all

the lack of human capital in automation?

the variables and levels can be monitored with our systems

A: Emerson chooses to see it more as a complement to

and instruments. The company’s portfolio allows us to

human capital that allows businesses to make more informed

manage complex projects while improving reliability, safety,

decisions. Instead of having people frequently go to the field

and productivity.

to take critical flow control measurements, our instruments allow experts to access variables that can boost day to day

Q: How would you compare the country to other

productivity, reliability, efficiency, and safety. Mines are a

international markets?

tough environment and wireless instrumentation allows

A: One of the benefits of the Mexican mining industry is that

players to monitor more variables than what was possible

it is mostly privately owned and developed, which means

20 years, which is a major advance. The incorporation of

that players frequently adopt best practices. Mexico is on

more instruments in the network provides greater reliability

par to what Emerson has experienced in other international

and automation allows operators a clearer image of their

markets like Australia and Chile. However, the country still

operations to make wiser improvements and decisions.

has obstacles to overcome when it comes to reliability, safety, and the environment. Mexico is one of the largest

Q: What role does Emerson want to play within the mining

countries Emerson serves, and the company has 15,000


employees and 20 manufacturing facilities locally. The

A: Emerson wants to differentiate itself from other suppliers

country has several benefits, such as the fact that many of our

by transforming into a trusted advisor that not only delivers

instruments, valves, and control systems are manufactured

equipment but entire solutions. We are committed to

locally. We have regional offices and a solid network of local

helping companies improve efficiency, productivity, and

business partners. Our offices allow us to be in any mine

their overall business results. Emerson is a consultant

within minutes, as that is what the market demands. An hour

that mining companies can contact to find solutions

of downtime could imply US$250,000 of lost production at

for their toughest problems. We value a local presence

a gold mine and players will not risk sourcing services from a

in manufacturing. Emerson is planning on building two

company that is not local and fast.

additional manufacturing plants in the next two years.

the loads, and are activated in less than 20 milliseconds

A: We serve several larger players in the sector simply

when an abnormal condition arises. This keeps the system

because these companies consume more power and

stable, the generator safe, and ensures the system is

therefore have a greater need for our services. We have

continuously in operation.

around 1,000 devices installed at a mine in Sonora, which reveals the complexity of that particular system. Companies

Q: How do you explain the benefits of your system to

with more extensive processes tend to need more advanced

mining companies?

and integrated solutions for their operations, whereas

A: Some mining companies are more progressive than

smaller companies often require more simplicity.

others, and so the approach to new technology varies significantly. However, we try to find out how many times a

Q: How do you predict electricity generation within the

certain company has lost power in recent months or years,

mining industry will evolve,?

and to what extent productivity was affected during that

A: There are some companies that see participation in the

period. With those facts we help stakeholders to justify

electricity market as a new revenue stream, while others

the implementation of our solutions. In terms of ROI,

see it as an opportunity to reduce operating costs through

much is dependent on the size and type of system the

in-house energy generation. The more players enter the

mine has. However, with many of our remedial systems,

electric market, the more pressure on prices there will

after just one problem is prevented the client makes a full

naturally be. Players are also turning to new generation

ROI. We have a metering solution that allows for internal

sources like wind, solar, and others in the renewables

analysis of energy consumption to understand costs,

sector. Given the increased competition, I would expect to

properly allocate them, and include this as factors into a

see mining companies and others eventually reevaluating

ROI analysis of new projects.

their power generation initiatives. Generation operations will







Q: Which companies represent your target demographic

necessarily have today, which is where I believe that SEL

for the mining sector?

can add significant value.




MORE MINING WITH LESS FUEL With exploration budgets tightening and drilling an

In the private sector the system is used by Toyota Motors

increasingly risky expense, many mine operators are

and Del Monte Food, while the New York City Department

focusing their attentions on improving internal processes.

of Environmental Protection and the United States Coast

One avenue in which to hunt for profit is in energy

Guard show the solutions’ public sector use.

efficiency, with new technologies for the segment constantly popping up on the market. RAISE Energy

The catalyst reduces off-road equipment fuel consumption

Solutions is a socially responsible company that works

by 3-8 percent, stationary generators’ consumption by 5-8

to improve clients’ energy conservation, generation,

percent, and truck tractors’ usage by 11 percent. It can

storage, and distribution. It has recently added the RAISE

bring down greenhouse gas emissions by 19.2 percent,

REDUCTION fuel catalyst to its diverse portfolio of energy

black smoke by 44.8 percent, and particulate matter by

saving solutions.

58.2 percent. Crucially it also extends engine life by up to 20 percent, generating substantial savings for mining

The catalyst is proven to reduce fuel consumption, harmful

operations. Moreover, the system has no effect on the

emissions, and engine maintenance costs while extending

engine itself, rather it simply preconditions the fuel to

engine life for mine operations. It works by passing fuel

accept more oxygen to improve combustion efficiency.

over a patented combination of metals and rare earth

Companies make a full ROI within 12 months. To add to

elements, releasing a small amount of hydrogen and pre-

the cost savings, the system is exceptionally easy to install

conditioning the fuel to increase the surface area of the

on mining applications, requires no maintenance, and

fuel molecules during combustion. When fuel is passed

extends time between oil changes. It can also generate

through the catalyst, a series of reactions occur. Firstly, the

carbon credits given that for each 100 gallons of diesel

saturated straight chain aliphatic paraffins are converted

fuel unconsumed, 1 metric ton of CO2 is prevented from

into unsaturated ring compound aromatics, resulting in

being emitted into the atmosphere.

a release of a small amount of hydrogen gas. Secondly, clustered fuel molecules are separated, increasing their

Aside from its industry-leading technology, RAISE Energy

exposure to oxygen at the point of combustion. Finally,

Solutions is also committed to social responsibility and is

further reactions result in lowered vapor density, improved

focused on educating clients about power usage, energy

atomization, and cooler flames.

saving, and other environmental concerns. With each purchase from RAISE Energy, the customer participates

The catalyst, which can facilitate the flow of 1136-1700L

in a donation of energy products and energy savings to

at 55lbs/in2, is available in 17 different models for various

those lacking necessary resources.

applications and industries including mining, transportation, power generation, and furnaces. Applications based on elements including Zirconium, Cerium, Rhodium, Platinum, Palladium, and Iridium can benefit from the system. The catalyst is designed to maintain an internal pressure of up to 350lbs/in2, ensuring minimal flow restriction, while it is also equipped with JIC10 hydraulic fittings, although KIC8 and JIC6 fittings and a whole range of adaptors can also be used effectively. The fittings are installed metal-tometal, making an impenetrable seal.

The catalyst can bring down

greenhouse gas emissions by 19.2 percent, black smoke by 44.8 percent, and particulate matter by 58.2 percent

Each unit undergoes rigorous testing before entering the

The RAISE REDUCTION fuel catalyst is still relatively new

market. Tests have been carried out by institutions including

to the mining sector. However, with the extensive savings

Virginia Tech University, the Italian Ministry of Defense, and

it can make to both underground and open pit operations

the Southwest Research Institute. This extensive testing has

and the increasingly open-minded approach adopted

yielded strong results. In over 20 years of test operation

by top executives throughout the sector regarding

there has never been a report of a problem, and the

technology, it should not be long before the largest players

catalyst has now been installed on over 28,000 projects.

take notice of the solution.

RAISE Energy Solutions is a wholly owned subsidiary of US-based RAISE Global Services. RAISE is an incubator, manufacturer, and integrator of energy efficiency technologies.




For perhaps the first time, issues of environmental and social responsibility are at the forefront of the mining industry’s priorities. Environmental restrictions have been tightened, and regulators like SEMARNAT and PROFEPA are intensifying their sanctions against those companies found to be in breach of the Environmental Responsibility Law. In 2015, PROFEPA inspected 1,130 mining units in Mexico. Of those, 71 were closed due to lack of compliance. Players are becoming increasingly conscious of their accountability in providing for the communities surrounding mines and crafting sustainable closure plans that will not leave the area barren when the mine is closed. The distribution of the mining fund may either help or hinder these new relationships but overall a more balanced development of states and municipalities is projected over the coming years.

In this chapter, we hear from players across the value chain who share the ways in which they are prioritizing environmental and community development. Industry leaders share details of the most innovative technologies that allow the earth surrounding mines to remain free of contaminants. This chapter also shares firsthand considerations that must be taken into account by operators when opening and maintaining a mine, both in terms of environment and community relations.


ERM: The business of sustainability

ERM has completed more than 4,000 mining and metals projects and draws upon more than 30 years’ experience. These projects span from Canada to North Sumatra and Kazakhstan to the Pilbara region of Australia.

rePlan, an ERM Group company, specializes in managing the community impacts, risks and opportunities associated with resource and infrastructure development projects.

We have worked in more than 85 countries worldwide, providing services related to the following: • • • • • •

Social Assessment & Management. Land Acquisition & Resettlement. Community Development & Livelihoods. Regional & Community Plans. Worker Housing & New Town Plans. Social Closure & Economic Transition Plans.

For more information. Jaime Martínez Partner and Business Development Director

Ivette Catalán Partner

Renato Urresta Project Director




EXPERT OPINION: Environmental Concerns in the Mining Industry


EXPERT OPINION: CSR Challenges Facing Miners


VIEW FROM THE TOP: Scott Fleming, Amec Foster Wheeler

Humberto Preciado, Amec Foster Wheeler


INSIGHT: Gerardo Suárez, Terracon Ingeniería


VIEW FROM THE TOP: Ivette Catalan, ERM

Renato Urresta, rePlan


VIEW FROM THE TOP: Julio Aravena, Siat Mining


VIEW FROM THE TOP: Ricardo Palacios, Hi-Pro


INSIGHT: Paula González, Paques


VIEW FROM THE TOP: Brian Weihs, Kroll Mexico


INSIGHT: Marcos Monroy, Centro de Estudios Servicios y Consultorias Ambientales


EXPERT OPINION: Giacomo Bonfanti, Grupo Desarrollo Infraestructura


VIEW FROM THE TOP: Luis Medal, Servicios ATS


VIEW FROM THE TOP: Carlos Ortíz, Greenergy


INSIGHT: Teresa Cornejo, Aceites Lubricantes de Chihuahua


VIEW FROM THE TOP: Reynaldo Cárdenas, FIMEX


VIEW FROM THE TOP: Luis González, Fire Service Plus Mexico





Q: What are the most common noncompliance issues of

a strong grip on their duties and the consequences of

the industry?

noncompliance, not to mention a clear understanding of

A: The main noncompliance issues that were detected

the benefits that can be reaped from a positive relationship

within the industry revolved around a consistent failure

between environmental and economic performance.

to meet the conditions and requirements set up by the

Many incentives exist with the objective of optimizing the

environmental impact authorization that SEMARNAT

efficiency of productive processes, and the use of natural

grants before operational start-up. As any other agency,

resources. Green practices tend to be associated with cost

the set of conditions demanded by SEMARNAT are a

reduction, and an excellent public image.

requirement for players that wish to avoid any type of possible penalty. Companies must assure that they

Q: What kinds of programs or actions were implemented

understand their obligations, and should verify the steps

as a result of the spill at Buenavista del Cobre?

that need to be taken in each case. Recently, a greater

A: As a result of the accident, a commission was formed

number of norms and obligations have been added to

to address the different environmental areas that were

the list of requirements. The latter implies that industrial

affected in order to allow authorities to pay closer attention

activities, unlike other economic activities, need to have

to the issue, and grant a more coordinated follow up.

Furthermore, both local and national academic institutions

compliance. Players also benefit from having a thorough

were involved in drafting a remediation program. The

understanding of the resulting administrative and legal

Federal Commission for the Protection against Health

procedures. Certifications that can be obtained through

Risks (COFEPRIS) was also involved as it implemented


health related actions to treat the possible side effects of

commonly used voluntary mechanisms by players, in

the contaminated material in water and soil. The National

which a company’s commitment to comply with all federal,

Water Commission (CONAGUA) also played an important

state, and local regulations are reviewed by PROFEPA. The

role by taking care of the program in charge of monitoring

inspections are a way for the agency to not only oversee,

the quality of water meant for human consumption.

but also create superior relationships with businesses,

An order was made to remove more than 6,500m of

as the certifications and work plans are a nonobligatory

contaminated soil near the origin of the Buenavista

way to obtain recognition for going above and beyond

accident, authorized by the Attorney General. A site was

standardized regulations. Companies can use PROFEPA’s

specially designed to encapsulate the contaminated soil,

certifications as a competitive strategy to stand out in the

and ultimately, avoid further contamination to the zone.

market, both nationally and internationally.







PROFEPA organized an assessment of all the possible issues that could arise from toxic residues such as

Q: What challenges must PROFEPA and the Mexican

atmospheric emissions and environmental impact.

mining industry confront in the short and long term? A: Inspections represent a difficult hurdle for the agency.

Q: How significant is the promotion of cooperation

Even though General Law of Environmental Protection

between institutions, agencies, municipalities and the

(LGEEPA) clearly defines which types of industries are the

private sector?

responsibility of the General Attorney, the country has almost

A: Entities should seek to interact with the federation,

200,000 businesses that are subject to a compliance review

states, and municipalities to consult on several aspects.

under the federal environmental legislation. Fortunately,

All things considered, effective cooperation implies

the renovation, growth, evolution, and the increasing



sophistication of environmental norms and legislations are

regulated sectors as clear and transparent communication

taking industrial compliance to another level, while pushing

regarding industrial obligations are the best way to ensure

authorities to use sharper monitoring tools.












Alejandro Preinfalk VP of Digital Factory and Process Industries and Drives Divisions at Siemens Mesoamérica



In the industrial segment,

commodity, which means

mining takes first place

we must implement water

in the consumption of

management and remediation technologies. We

energy. Grupo México and Siemens collaborated

recirculate the muds to recover as much water as

in the development of a cogeneration plant in

possible and reuse it in the drilling process. Intercore

Sonora. This project provided many benefits for



our customers, ranging from a steady and safe

separate solids from water and extract additives

power supply to cost savings. In that respect,

for recycling. Additives are more environmentally

power reliability is crucial in processes of intensive

friendly and we ensure that our drilling techniques

industries like mining since it avoids power

are on point to prevent percolation and loss of

shortages and unforeseen stops of production.

water. The government is increasingly tightening

The need for power continues to rise in the mining

the noose on environmental regulations and we

industry and most companies are wagering on

must uphold all standards and make sure impact is

combined cycle or natural gas due to the fact that

limited. We have man portable rigs that are easy to

it is a high energy intensive industry and these

maneuver and transport, and this means the impact

alternatives fit the bill. It will play a bigger role in

to surroundings is limited when transporting the

the future, especially given the structural changes


spurred by the Energy Reform.

We recycle water because we are aware that it

The railroad allows significant energy savings

is a scarce commodity, and we are going one

by substituting thousands of trucking units as

step beyond by redesigining standard pumps

well as by having a more efficient use of fuel.

for water wells to make them self-sustaining.

Transporting freight by train instead of by trucks

Many NGOs operate under the belief that value

can reduce greenhouse gases up to 75 percent

is placed on the number of water wells they drill,

on average. A train can move a ton of freight

and to keep costs down they use cheap pumps.

for 700km with less than four liters of fuel, and

The first thing to fail in a traditional small village

only one intermodal train can carry the freight

well is the pump and while it is not a complex

of 280 trucks. One of Kansas City Southern

part, it can be difficult to obtain. Our clients that

Mexico’s priorities is avoiding the generation of

wish to build water wells in the communities close

carbon dioxide emissions, so our environment

to the mines also go through the same learning

protection strategy includes several elements

curve. Communities found in remote locations

like our fleet transformation and the purchase of

must travel for kilometers for water. By building

12 “green” locomotives, which can save up to 25

water wells we provide a clean water source to

percent of fuel per month. They can also reduce

the communities and we strengthen the trust

use of lubricating oil by up to 50 percent and 70




and ties between the

percent of greenhouse

mining company and the

gas emissions can be



Frederick Davidson President & CEO of Energold Drilling & Impact Silver

José Zozaya President, General Manager, and Executive Representative of Kansas City Southern



Morgan Poliquin President & CEO of Almaden Minerals

Bruce Winfield President & CEO of Defiance Silver

It really comes down to


our local stakeholders.









essential the





them as pawns in a game, we think of them as

to resist the temptation to cut corners. We

partners. The foundation of our CSR program is

always strive to maintain strong relationships

to be transparent and open, and a key aspect of

with landowners, going out of our way to meet

that is educating the local population about the

them and the ejido representatives. We find

company and the project. Ixtacamaxtitlan is an

that open communication channels are essential

extremely marginalized community, and when

when embarking on any type of mining project.

operating in these communities, it is essential to

We also have an excellent local manager, who

be sure that locals’ needs are being addressed.

is from Zacatecas and therefore has extensive

We want them to grow along with the project. For

local knowledge and experience of mining in

example, there is a mother and child clinic in a

the region. This has been greatly beneficial to us

village near the Ixtaca property, and it did not have

because local expertise and a knowledge of local

an ultrasound machine. One of our shareholders is

communities is invaluable when presenting our

a physician who specializes in childbirth, and he

projects to the authorities. A project cannot be

was able to procure an ultrasound machine which

imposed on the local society, rather it is necessary

we provided training for.

to work together.

Community support is an extremely important

In the case of Guanacevi, we started working

facet of Primero Mining’s business ethos. The

with local municipal and ejido representatives

San Dimas site is essentially a hole in the ground,

to support repainting and refurnishing the

and is only accessible by plane. Primero Mining


therefore developed a program to provide

trees, sponsoring town clean-up days, kids

internet and mobile phone networks at the mine

camps, sports teams, and religious and secular

site because today communication technology is

celebrations. We developed a community wants

a basic requirement for all communities. What is

and needs list, sponsored the first doctor,

more, we built recreational parks to encourage

nurse, clinic, ambulance, ATM bank machine,

local children, who represent about 40 percent

and garbage truck for the local community,

of the population at San Dimas, to engage in

and carried out road improvements and creek

sports and other communal activities. Finally, we

widening to reduce flooding during the wet

invested more than US$1 million on a complete


renovation of the local hospital, which was badly

for local children to go to university, training

lacking in facilities and staff. We are constantly

programs for the young and unemployed to learn

seeking new ways to support the economy in

career skills in the mining sector, and agricultural






order to make it less

activities local mothers


can do to learn new



mining activity.

Martin Aguilar Mexico Country Manager of Primero Mining


skills and earn income.

Bradford Cooke CEO of Endeavour Silver






Scott Fleming Principal and Mexico Mining Area Manager of Amec Foster Wheeler

Humberto Preciado Senior Geotechnical Engineer at Amec Foster Wheeler

as construction support and quality assurance and control. In the operational stage we offer services including process cycle optimization, infrastructure design, tailings management, process water and stormwater quality

Q: In which mining segment is the company most strongly

and control, and embankment stability. According to

positioned in the local market and why?

the Mexican environmental laws a mine must generate

SF: Amec Foster Wheeler is involved in the whole cycle of

a closure plan that is periodically updated. Currently we

a mine from its conception to its closure. We are involved

are involved in closure plan updates for three Mexican

in the early stages by offering scoping, prefeasibility, and

precious metals mines.

feasibility studies, as well as the whole range of mining


engineering services within the process plant, including

Q: Which flagship project reflects the value proposition

mine surface and subsurface development and surface

and strengths of Amec in the mining sector?

infrastructure categories. We also support companies

HP: Relatively speaking, there are still few greenfield

in the permitting process within the CONAGUA and

projects because so many mineral rich areas have been

SEMARNAT regulatory system to ensure that mining

developed in the last 400 years of Mexico’s mining

clients understand the Mexico-specific operational and

history. The Spanish developed mines in Mexican states

environmental regulations. In the design and construction

such as Durango, Zacatecas, and Guanajuato where silver

stage of a project, we also have a strong presence through

was relatively accessible at surface outcroppings. Over

both the Amec Foster Wheeler Mining & Metals and

the past 20 years, and facilitated by the NAFTA treaties

Environment & Infrastructure groups.

between Mexico, Canada, and the US, the trend has been to focus the operation of legacy mines with a limited

HP: One of the ways mines are cost efficiently developed

number of greenfield projects when compared to the rest

is through EPC management. Amec Foster Wheeler is able

of the world. Given that many projects are legacy mines

to mobilize at that level in order to offer key services such

there tends to be demand for experience in expanding



mines, and their only function was to measure safety levels

Director General of Terracon

of controlled explosions. Terracon Ingeniería is now working


to encourage mining companies to utilize the sensors in a systematic way to take care of the mine’s structural

Terracon Ingeniería was founded with safety as its main

integrity and avoid environmental or social contingencies.

focus and offering innovative solutions to guarantee

Suárez explains that mining companies could benefit from

structural safety as a way to protect companies’ assets and

instrumentation services in several ways. For instance, in

communities’ well-being. The company offers two types

an open pit the slip of embankments can be prevented

of services, risk analysis for natural phenomena such as

by monitoring the activity of the mine and detecting the

earthquakes, hurricanes, or flooding, and instrumentation

signals before the event occurs. Preventing this kind of

services to assess and monitor a project’s structural

event allows companies to protect not only their assets but

behavior. In the past, according to the company’s Director

also the well-being of their staff. Instrumentation of tailings

General Gerardo Suárez, it was rare to see seismic sensors in

dams could also have important environmental benefits as

existing mine infrastructure, process plant facilities, and to expand stable tailings storage capacity. SF: An example of this type of legacy mine development can be seen with Endeavour Silver in Guanajuato and Durango. In these operations, Amec Foster Wheeler has carried out a variety of environmental engineering services, from water balance, hydrology and hydraulics, tailings storage stability and expansion, and stormwater management. Additionally, Endeavour Silver managed to increase the production rate over the historic mining rates

“Amec Foster Wheeler can help processing plants become more cost effective and obtain a higher level of metal recovery” Humberto Preciado, Senior Geotechnical Engineer

at Amec Foster Wheeler

at this legacy mine. Naturally, this created the challenge of an increased rate of tailings waste production to be

the milling process, and as a result improves the flotation

managed and disposed of in a stable and environmentally

or leaching process specific to the ore type. With this

responsible manner. Amec Foster Wheeler was tasked

proprietary modelling, we have been able to simulate

with finding a sustainable solution.

different gradations and recovery options to optimize the recovery process and minimize the all-inclusive and final

Q: What optimization services do you have in place in

cost of production.

order to reduce bottlenecks in plants and mines? HP: We have mine processing and engineering specialists

Q: How is Amec Foster Wheeler improving water

that carry out dynamic simulations using modeling to

management strategies and optimizing the consumption

simulate real time and full scale operational conditions.

of this resource?

We have in-house proprietary simulation software that

SF: The downstream waste of the processed ore is a

replicates the operations of a plant and allows us to

mixture of milled ore and water normally discharged as

identify the processing bottlenecks and see where the

a slurry to a final tailing storage facility. The physical and

process circuit needs to be modified. In this manner,

chemical characteristics of tailings and their methods of

Amec Foster Wheeler can help processing plants

handling and storage are a significant mining cost. New

become more cost effective and obtain a higher level

technology has allowed the exploitation of lower average

of metal recovery. Milling costs rank high on the list of

grade ores and thus the generation of higher volumes of

expenditures in a mining operation, and one of the best

tailings storage demand. In addition, there has been an

ways to reduce costs is to reduce the amount of fines in

increased focus in Mexico in recent years on the stability

the grinding phase. We have a simulator that optimizes

of tailings storage facilities and on mine site water quality.

they contain the mine’s residues, which can be a source of

rock deformation sensors. In tailings dams, piezometers

pollution. “Instrumentation products monitoring the dam’s

can also be placed downriver to measure the pressure of

structure prevent environmental damages like those that

the fluids, which detects the presence of polluting flows as

occurred in Brazil in 2015, when a tailings dam belonging

well as structural damages such as cracks.”

to an iron ore mine burst, unleashing 50 million tons of toxic mud and waste, which was the equivalent of 25,000

Although it has only recently entered the Mexican market,

Olympic pools,” Suárez warns. “As a result, the Brazilian

Terracon Ingeniería has already been involved in Fresnillo’s

government has sued the companies responsible for US$7.2

prolific La Herradura mine. In this facility, the company has

billion in damages.”

installed three high-resolution seismographs to evaluate the impact the controlled detonations have on the mine’s

In Mexico, he explains that SEMARNAT is considering

structural integrity. Suárez shares that the company is

adopting the measures used in Canadian norms, which

planning to open new galleries in the mine, which could have

will make instrumentation in tailings dams mandatory.

implications for the mine’s open pit structure. “Therefore,

A combination of seismic and geotechnical sensors are

we are stressing the importance of using instrumentation

currently being used worldwide in mining operations. “To

to monitor the galleries’ activities, as well as their tailings

carry out this process, one needs to evaluate the stress

dams,” he states. “For this purpose, we recommend they

concentrated in the collapse area,” he explains. “For this

utilize piezometers as well as extensometers to monitor the

purpose, miners can rely on both seismic sensors and

dam’s activities and prevent environmental damages.”



BRIDGING THE GAP BETWEEN OPERATOR AND COMMUNITY Renato Urresta Project Director of rePlan, an ERM Group company

Ivette Catalan Partner at ERM

effective way. We help to set up structures, systems, and chains of communication, and we train groups in community relations. We understand our role as a facilitator and also as a bridge between the company and community. We are


Q: How did ERM’s acquisition of rePlan come about, and

currently working in a project in Sonora that began with a

what will the partnership bring to the group?

dialogue process and evolved into a voluntary resettlement

IC: ERM had been growing organically on a global scale for

process, requested by the community and agreed by the

many years, to such an extent that, eventually, it decided

company. This is an ongoing process, with a company and

to look for potential strategic acquisitions that could

community that were in constant conflict. As a result, we are

add value to the group’s overall corporate profile. These

helping the parties to reach an agreement, solving a historic

acquisitions tend to involve companies that are focused

problem through dialogue with proper methodologies

on specific sectors, and so the rePlan purchase was a

and a clear path. Finally, the project aims to improve the

direct result of ERM’s desire to expand its social services

community’s quality of life and conditions.

within the mining industry in particular. Q: How can you help to construct sustainable mine closure Q:









plans that are mutually beneficial for the communities


and operators?

RU: The World Bank and the International Finance

IC: A lot of the mines that are currently operating and

Corporation (IFC) have developed funds dedicated to

have been at this stage for many years still do not have

social concerns, particularly in terms of resettlement.

closure plans crafted. These plans must take into account

We apply these standards in our projects, as well as

environmental considerations as well as the financial

other global best practices, to ensure the client fulfils the

implications that a mine closure will require. The processes

necessary requirements in order to attract funding. The

are complex, especially in terms of environmental issues

private banking sector also follows the IFC standards,

due to the level of restoration required, including water

which include transparency and participatory and well-

sources, surrounding greenery, animal and plant species,

documented practices, among others, ensuring that the

and prevention of leaks from tailings dams.

client has the capability to access funds from private banks. RU: We help to construct a social management closure Q: Focusing on Mexico, what are the main environmental

plan, firstly to identify those people that will be most

and social challenges that mine operators face?

affected by the company’s exit, and secondly help them to

IC: There are whole number of issues that any mining

find new livelihoods. The primary consideration is finding

project must deal with, including risk mitigation, worker

new sources of employment or change of livelihood within

safety, and environmental sustainability, which includes

the same area, although if the mine opens elsewhere, they

tailings and waste management. Unfortunately, Mexico

will have the option to retain their positions and commute.

has fallen behind other countries in Latin America, for

In Colombia, we worked with Prodeco on a plan for a mine

example Chile, in terms of its mining legislation, and we

that had to transport the coal to port, which was upgraded

therefore believe it is important for companies like us to

in a different location and had to be closed. The whole

help mining industry players improve their procedures for

community surrounding the port was lacking employment,

handling environmental concerns.

so we helped them to generate small businesses so that the families could engage in new activities. Some of the

RU: Another trend that we see is influx, and when a project

families decided to move with the port and continue

arrives, it creates a certain amount of activity in the town

working in their old posts. In Mexico, we are involved in a

and if this is not properly managed, it can destabilize the

conceptual project in Morelos for a gold site that has not

community, instead of helping its growth. Moreover, there are

even entered into the permitting stage yet. At a very early

social liabilities from previous projects that have encountered

stage, we are already working on a closure plan for this

problems in the past and failure to manage grievances in an

site as part of the stakeholder engagement strategy.



Q: What are the competitive advantages in mud

and we simply adapted and transferred it to the mining


sector. The MC200 is a mud cleaner that can achieve 50








percent water savings. It is adaptable to the interior of a

with surrounding communities, and one of the points

mine, it can be easily assembled and mounted, it requires

of contention is the availability of potable water. The

minimal maintenance, and it runs on diesel and has its own

industry's image has been tarnished by environmental

hydraulic system. The Mud Camel MC-6421 is a dewatering

disasters and if companies are committed to improving

system that reduces not only the amount of additives used

their record, they should implement these technologies.

but also decreases the number of tailings that must be

The advantage of recirculating the mud is that it massively

built to store the waste.


reduces water consumption and has a positive impact on the environment. Innovation is a pillar in Siat Mining’s

Q: Which companies have begun to embrace your

strategy, and we have witnessed that in many ways the


mining industry falls behind on this front. There are very

A: While exploration companies have been relatively

few miners that truly care about the environment and we


hope that in the future there will be a change of mindset.

Drilling has been open to our suggestions and we have

We know that costs for water are rising and it is becoming

implemented some solutions in a project called Milpillas.

a precious and scarce commodity, and as a result we have

We have worked hand in hand with Minera Frisco in the

seen some companies begin to take an interest in the

Boquillas project, located in Aguascalientes, and now it

technology we develop

is only consuming 10m3 of water per day. We have also






worked with other operators and they too have reached The equipment we sell is extremely simple, involving

record consumption levels of only 3-4m3, compared to the

hydraulic mud and hydrocyclone separator filters that

astounding 80m3 of the past. In my eyes, the only mining

permit mud recirculation. There are many hidden costs

operator that has fully embraced this greener vision has

that surface when our technology is implemented. As

been Endeavour Silver because its perspective reaches

an example, traditional drilling operations require the

beyond the business aspect and truly delves into the

excessive use of water trucks, and each truck can cost

environmental repercussions of its operations.

over US$12,000. Our technology reduces their use of water trucks, maintenance, and it improves contractors'

Q: How is your portfolio divided between selling and

operations. In some instances, it can be difficult to envision

leasing equipment, and in which cases can clients benefit

the amount of water that is wasted but in one sector 20

from these modalities?

drills can be found, each of which consumes 160m3 of

A: Equipment leasing has proven to be the more popular

water, meaning that the numbers are astronomical.

of the two and clients benefit from low costs. Mining compani