Mexico Mining Review 2022

2022

2022

Introduction Global economies are recovering from the COVID-19 pandemic, leading to an exponential increase in demand for minerals, which is driving prices up in a trend that is forecast to continue in 2022. As a result, the industry is expected to perform significantly better this year. As a major mining country, Mexico will benefit from these market opportunities. However, to make the most of them, the sector must first address internal challenges.

In 2021, the mining industry remained one of the country’s main catalysts for employment opportunities and development, solidifying its position as a main pillar of the economy. Although investment attractiveness has been wanting due to the lack of incentives and legal certainty, Mexico continues to be a great option to develop mining projects. The country’s resources, geography and rich mining tradition have allowed it to remain the world’s leading producer of 17 minerals, some of which are booming due to their role in decarbonizing industrial activities. Experts say that as the green transition takes hold, Mexico’s need for production will increase.

All these factors make Mexico a rich jurisdiction to work in and undertake large projects.

In 2021, better dialogue was also achieved between Mexican authorities and the private sector to address some of mining’s main issues. While the relationship has improved, there are still many gaps that need to be addressed for the country to truly unleash its mining potential. Despite the situation in the sector, experts assure that the Mexican mining industry will remain strong worldwide, as it is becoming smarter, safer, more responsible and, therefore, more competitive. The opportunity is there to strengthen the sector and boost the country’s economic and social development.

However, a strong relationship between the public and private sectors remains of the essence.

Mexico Mining Review 2022 presents in-depth analyses, interviews and insights on the main challenges and opportunities facing the Mexican mining sector, as well as the external factors that are shaping it. Regaining the country’s investment attractiveness and providing certainty to investors, improving the relationship between companies and the government, as well as making the industry safer and smarter are paramount. If these matters improve, Mexico could further enhance market opportunities and regain its place as a top mining destination.

Table of Contents

Introduction

2

State of the Industry

4

Finance & Investment

25

Exploration & Development

43

Production & Technology

62

1

State of the Industry Mining remains a fundamental pillar for Mexico’s economic development. In 2020, the industry contributed 8.3 percent of industrial GDP and 2.3 percent of national GDP. However, the industry registered an accumulated contraction of 4.6 percent in its contribution to national GDP for the fourth consecutive year. The decline was mainly due the country’s loss of investment attractiveness and market dynamics.

What the mining situation is like in 2022 could depend on the outcome of the government’s proposed energy reform. If approved, the reform will put at risk the country’s investment attractiveness and could even lead companies to move to other jurisdictions. However, experts say there are reasons to remain optimistic, such as the high prices of key metals, which have boosted the value of national production, and the fact that several projects will go into production, increasing national output.

Although this is expected to be a better year for the industry, experts agree that Mexico will not be able to develop its full mining potential. This will only happen when the country regains its investment attractiveness, for which the government will need to provide better incentives and legal certainty.

1

State of the Industry

7

Analysis 2021: A Year Full of Challenges for the Mining Sector

8

Conference Highlights Mining’s Importance in the Present Set to Expand in the Future

9

View From the Top Christopher Avila Mier | President of the Legislative Liaison | CAMIMEX

10

View From the Top Efraín Alva Niño | Director of the Extractive Industries Unit | Ministry of Economy

11

View From the Top Sergio Almazán | President | AIMMGM

12

Expert Contributor Adrián Juarez | Founder and CEO | CTA Consultoría y Tecnología Ambiental

13

View From the Top Alberto Vazquez | Partner | VHG Servicios Legales

14

View From the Top Felipe Ibarra | D. Minister, Promotion and Economic Comp. | Sinaloa Ministry of Economy

15

Analysis Can the Government Really Push the Lithium Industry Alone?

17

Expert Contributor Armando Alatorre | President | CIMMGM

18

View From the Top Gerardo Duran | Director General | CLUMIN

19

Conference Highlights Communication Strategies Battle Mining Misconceptions

20

Roundtable What Is Mexico’s Lithium Potential?

21

View From the Top Jennifer Burge | CEO | WorldWise Coaching

23

View From the Top Ruben Cano | Founding Partner | CR Legal

24

Content Links

State of the Industry | 7

2021: A Year Full of Challenges for the Mining Sector Mexico’s mining industry must consider the multiple challenges it faced in 2021 if it wants to have a better 2022. Experts believe the sector will perform better as new projects are expected to start commercial production and more states attract investors. However, most challenges, especially the electricity reform, will remain.

In October, President López Obrador announced that he had sent his energy reform to Congress, which includes a proposal to restrict lithium reserves and their exploitation to the public sector.

In December, he announced that if legislators do not approve his electricity reform, there is another plan to ensure the exploitation of lithium does not go into private hands. “If the legislators decide to act against this initiative, which would be contrary to the national interest, we have a Plan B for lithium. We are already preparing in case this happens. Do not be excited if the reform is not approved, because lithium will remain in Mexico.” The new plan is being overseen by MORENA Deputy Lidia García Anaya and seeks to nationalize lithium without prohibiting concessions to the private sector, with most of the profits going to the Mexican state.

Experts believe the reform is unlikely to pass, as other initiatives have previously been blocked for not allowing free competition.

However, most agree that López Obrador’s statements are sending the wrong message to the entire industry. According to CAMIMEX, the reform is an obstacle for the mining sector to move toward greater sustainability since the cancellation of permits would prevent it from accessing clean energy sources. Experts believe that the reform would force companies to reduce their use of renewable energy, worsening their ESG performance and making them less attractive to investors. Major companies like Torex Gold have said that the government-led uncertainty is the enemy of investment. As an example, due to the reform proposal, the company’s plan to build an 8.5MW solar plant is on hold until there is greater clarity regarding the reform.

Other major obstacles have held back the development of mining projects in Mexico, chief among them the delay in permits. Pablo Méndez, President, CLUMIN, told MBN that SEMARNAT has denied various requests for mining projects, generating distrust among authorities in this type of megaproject. Furthermore, he highlights that many permits have been denied as mining is still labeled a dirty industry. “The greatest challenge that the mining industry faces is not related to the permissibility of the authorities but to the current stigmatization that exists on mining activities in our country, which, unfortunately, is generally unfounded,” says Méndez.

Some companies have also announced that their projects were delayed in 2021 due to lack of funding and the COVID-19 pandemic.

However, most have forecast a successful 2022, as they have ambitious exploration and production goals. Overall, 2022 is on track for greater success as new projects will start producing, increasing the country’s annual output. Furthermore, according Read the complete article More about this topic

to experts, the great geological potential of Sonora, Guerrero and Oaxaca has attracted more attention from investors, creating an opportunity for new exploration projects.

Conference

Highlights State of the Industry | 8

I

f the last two years have proven the resilience of Mexico’s mining industry, then the years to come will prove its central importance to the country’s economy and prosperity, says Efraín Alva Niño, a central figure in the sector’s current landscape.

Alva Niño is the Director of the Extractive Industries Unit at the Ministry of Economy, created in April 2021 to replace the Undersecretariat of Mining, eliminated in 2020. Due to its recent creation, Alva Niño says the promotion of the industry and its image for the purposes of attracting investment are a big part of his present role.

Alva Niño also says that his unit has an interest in clarifying certain misunderstandings that were “usually poured into the general population,” which negatively impacted the image of the Mexican mining industry and made it more difficult to recognize that the country is one of the best destinations for mining investment.

Alva Niño emphasizes that the mining industry will be a key pillar in the energy transition. Alva Niño referenced the controversial

Mining’s Importance in the Present Set to Expand in the Future Efraín Alva Niño Director of the Extractive Industries Unit | Ministry of Economy

language included in the recently proposed electricity reform that states that any mineral that could prove “crucial” to Mexico’s energy transition be considered a “strategic resource” that could be nationalized at any time. While Alva Niño did not allude to the political process surrounding this law or the implications of nationalizing any mineral, he notes that his unit was involved in the creation of this list of minerals. “This list has to be dynamic, not fixed; the minerals that could be classified as critical to the energy transition now might be irrelevant three to five years down the road because of the speed with which the energy industry is innovating its own technologies and processes.”

Alva Niño explains that it would be difficult to secure future national endeavors without increasing investment in mining exploration. In his view, additional incentives will be needed for investment in exploration activities to reach the levels that will satisfy the industry’s future needs. In an interview with MBN, Alva Niño also made clear that the conditions that were preventing more investment from entering the industry were in part related to the availability of information. “The lack of legislative certainty has kept investors on edge. The legislative situation in our country must be improved through the provision of more information.”

Alva Niño believes that this kind of work can be done within the context of the government’s current policy to stop issuing new permits and concessions. As he stated at the time, “unfortunately, there is a presidential order to stop mining permits. However, and this is where we come in, while we understand that there will be no new mining permits for the time being, we are asking the government to allow us to work on those we already have. That is what we are working on, in addition to lithium exploration and tax reductions.”

His outlook on the positive role the unit can play in the industry’s future remains positive. “We understand mining is a core part

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of the country’s development efforts. Our commitment is to communicate the benefits of mining and the high quality of the Mexican mining industry.”

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from the

Q: What are some of CAMIMEX’s most important goals for 2022?

A: We want to be involved in all legislative initiatives that could have an impact on Mexico’s legal framework for mining so that the sector’s voice can be heard during these proceedings. These include laws that could indirectly impact mining activities, such as those related to the environment, labor and taxes, as well as those presented within federal legislation. At first, much of our attention will be directed toward the president’s efforts to alter the constitutional status of certain minerals, such as lithium.

Our plans include lobbying the Senate’s mining commission, which analyzes initiatives that could prohibit all mining activities in protected natural areas and change the legal framework surrounding public consultation of indigenous communities prior to extraction activities to give certainty to projects and communities. In addition, there are initiatives that could alter the tax regime (green taxes) that impact the mining industry, mainly at the local level. We also want to convince legislators who might be working on the 2023 budget to make sure resources accumulated under the Mining Fund are allocated to the municipalities where the mining industry works, instead of being redirected elsewhere.

Christopher Avila Mier

Q: How has the relationship between the mining sector and the government evolved in the last few years?

A: We were lucky when the present administration began as

President of the Legislative Liaison | CAMIMEX

there was still an Undersecretariat of Mining that managed to get a great deal of work done in building relationships between the government and the industry. A great deal of progress was made regarding institutional synergies and educating the public sector on the structure of the industry

2022: Crucial Year for IndustryGovernment Liaisons

and its main units. Cooperation treaties and agreements were signed at that time, such as that signed with the Federal Protection Service, which led to the creation of the misnamed “mining police,” which in reality is a service available to all industries called the “federal public service.”

Important liaisons were also built with SAT and SEMARNAT, meaning a great deal of crucial dialogue took place. Since the Undersecretariat was eliminated in 2020, many of these responsibilities have been led by Efraín Alva Niño, Director of the Extractive Industries Unit created in 2021 at the Ministry of Economy (SE). Our relationship with Efraín is quite healthy and we are very proud and satisfied with the work he has accomplished together with Minister of Economy Tatiana Clouthier.

We have also had to stay abreast of the many changes that have taken place at SEMARNAT. For instance, we need to strengthen our relationships with every director of this institution so they can make informed choices that take into account the many ways in which the mining industry contributes to Mexico’s environmental welfare.

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In general, our relationship with the government is progressing. Our main goal at CAMIMEX is to consolidate this relationship. We want to make clear that the basis of this relationship is a mutual understanding that the well-being of the industry translates into the well-being of the country.

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from the

Q: What were the most important steps your unit took in 2021?

A: One of the most important endeavors our unit was responsible for in 2021 was the continuation of lithium exploration efforts. We established a database of Mexico’s lithium reservoirs, which led us to establish an open channel of communication with Mexico’s governmental authorities regarding the amount and diversity of the country’s lithium reservoirs, located mostly in Mexico’s northwestern states. We also clarified the legal status of these reservoirs by defining which parts were already controlled by existing concessions. In addition, we worked with legislators to define which minerals could be considered strategic for the energy transition process and for the production of clean energies. The criteria that determines whether or not a mineral is “strategic” has not been defined. The nature of this classification is quite delicate, given the vast implications that it could have on the mining industry.

Q: How do Mexico’s lithium reserves compare to those of other countries?

A: Lithium can be found in three different types of deposits: brines, pegmatites and in certain sedimentary rocks, which in Mexico’s case are mostly hectorite clays. Brine deposits are quite rare in Mexico but very common in South America, and they represent a category of their own regarding extraction

Efraín Alva Niño

because much of the work is done by mother nature, so the investment needed is very low. To extract lithium from hectorite clay, a large number of additional processing steps need to be added to the industrial procedure through which

Director of the Extractive Industries Unit | Ministry of Economy

the mineral is extracted. This means more money and energy.

For instance, you might obtain three grams of lithium from each kilogram of hectorite clay. Therefore, it might not be economically viable to extract many of Mexico’s lithium reserves at this time since more direct exploration and more

Exploration Essential to Maintain Investments

technology might be required. The reservoirs that we and the SGM (Mexican Geological Service) are working on do not include those already in private concessions — those that are located within indigenous lands and those located within protected natural areas. This has left us with close to 83 outcroppings that have been intensely explored. This information will be used as a basis to determine which specific locations merit more in-depth exploration.

Q: How has Mexico’s position as a destination for mining investment changed in the last year?

A: We promote investment by providing the legal certainty for investors to facilitate their business in Mexico. This is part of the Ministry of Economy’s broader mission of creating and sustaining legal conditions to promote investment and assure investors that legislative initiatives will not result in concession cancellations or major and retroactive changes in the environmental regulations that govern the industry. We work with SEMARNAT to promote environmental protections and protect the rights of indigenous communities. Mining projects involve long and complicated processes that begin with the

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granting of concessions. We want people to understand this concept. The viability of a mining project involves a number of important exploration tasks that come after the concession is granted, so investments made in this sense already come with a substantial degree of risk.

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Q: What were the main challenges for the mining industry in 2021?

A: The pandemic was a remarkable challenge, both worldwide and in Mexico. Fortunately, our operations did not stop as they did in 2020, when they were paused for almost two months. In 2021, the main challenges remained the pandemic alongside new policies from the federal administration.

Q: How much interest are companies showing in exploring Mexico’s geological potential?

A: Unfortunately, mining exploration has been a problem. There have been no new concessions and this has impacted investment in mining exploration, which has decreased by 60 percent from 2014 to 2020. The entire mining sector must work together with the authorities to promote mining exploration in the country.

Q: What is AIMMGM’s role in building stronger private and public relationships?

A: AIMMGM has always been an important organization, counting on expert knowledge to deal with mining’s most pressing topics through engagement with the state and federal government.

With the technical and scientific expertise available to us, we can develop the best mining practices in Mexico.

Sergio Almazán

Q: What role does AIMMGM play in the development of talent within the industry?

A: This is one of AIMMGM’s main objectives. Our goal is to

President | AIMMGM

continue gathering experts on different mining topics. We have recently included more topics due to the global integration of the metallurgical mining sector. AIMMGM continues to train experts who have a greater knowledge of mining operations.

Uniting the Mining Industry

Q: How likely is it for Mexico to become globally competitive in terms of lithium production?

A: Mexico is a country with great opportunities in the mining industry. Seventy percent of the territory is categorized as likely to contain mineral deposits equal to or greater than those already discovered. Mexico has always been considered a country with great mineral resource potential.

Regarding lithium, we must recognize that the knowledge we have about this highly in-demand metal is not enough. In Mexico, the indicators of lithium’s potential are still insufficient.

We do have some anomalies that are worth exploring in greater detail. Nevertheless, we cannot say that Mexico today has great lithium potential. Mexico has around 1 percent of the global lithium reserves and it is too soon to have serious conversations regarding it.

Q: What is the best way to handle the misunderstandings surrounding the mining sector and its impact on Mexico?

A: There must be effective communication about how mining is

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done in Mexico, including good practices and offering hard data that proves the work that has been done in the sector. Our main job is to introduce reliably-sourced information on how modern mining operates in Mexico. It is a big challenge due to the polarization of information and fake news that misrepresents the industry.

T

he world wants to advance to an economy that is based on renewable energy and electric mobility.

This requires the supply of metals for the equipment that takes energy from the sun or the wind, as well as the metals that are required for electric mobility;

therefore, the world wants lithium, copper, nickel, cobalt and steel, mainly. Where will these metals come from if not from mines that can operate in a regulatory and socially favorable environment, one that provides certainty to investors about the rules that will apply to the business?

In North America, a mining-oriented country like Canada wants to position its mining industry at the forefront to generate the metals that will supply the world. Canada sees this opportunity for its industry to take the lead knowing that it will bring benefits to the country. Canada does not need to have a state monopoly to achieve its goal, in contrast to the plans of President Andrés Manuel López Obrador.

State of the Industry | 12

My father had great admiration for López Obrador and saw him

Mexico Wants Metals but Does Not Want Mines. What’s Wrong Here?

Adrián Juarez Founder and CEO | CTA Consultoría y Tecnología Ambiental

as a man of integrity and with good intentions; however, in my opinion, that is not enough. You need to be well informed and understand how the market works, how financial flows move and what is the preference of investors. Currently, a significant group of investors are seeking to invest in companies that intrinsically incorporate socio-environmental aspects into their operations rather than doing so independently. These aspects are linked in all their decisions because they want to reduce risks and manage a good reputation. If López Obrador only let the market work and directed his intervention to generate stability, clear rules and improve security, the future would be more favorable for Mexico because mining is the industry that can generate well-paid employment in rural areas.

I have read the statements from María Luisa Albores, head of SEMARNAT, that 10.64 percent of the Mexican territory has been delivered through mining concessions and of her “achievement” of reducing that to 8.59 percent. When I have heard López Obrador talk about this, it gives the impression that he understands that the entire concession area is being intervened by mining, when in reality the intervened area is always very small in relation to the total area, and that it can only be intervened if the owners of the land accept the deal offered by the miners. The concession does not generate a superior right over the rights that the owners of the land have.

If the landowner agrees to have his land explored, he will have an opportunity to generate extra income, and later, a higher income, if that effort turns into a potential mine. And let’s not forget the thousands of jobs that this opportunity can generate, meaning that our countrymen will not have to emigrate from their land to get a decent job. The more concessions are delivered, the more opportunities there will be to generate mines and not the other way around. What does AMLO want?

He says he wants more jobs, so why does he go in the opposite direction?

What Albores perceives as a threat can be an opportunity if

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she cares about the well-being of Mexicans. Isn’t it better for Mexico to adopt a concept like that which Canada is adopting?

Do you want to scare away the goose that lays the golden eggs and replace it with an entity that will deny Mexicans the benefits they deserve?

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Q: How is the federal administration’s messaging regarding the regulation of the mining sector impacting the sector?

A: We are no longer talking about mixed-messages, we are talking about a very concrete posture by way of the federal administration against mining. The president’s comments and actions confirm the government’s position, which is that the industry has been satanized and the groups in opposition have been gaining strength as a result.

The biggest impact of this has been the lack of new investors, the lack of interest by foreign companies that before would turn to Mexico as an alternative for investment, taking the financial risk to discover new and innovative projects. There are no new projects, no new investors, and there will not be.

The mining industry is a supplier to other industries. I call it the mother industry of all others. So financially, I do not think it will be affected. Obviously if there is a lack of a certain mineral, its price will increase and the stock value of the companies that produce that mineral will benefit. But for the lack of new projects in Mexico, the biggest impact is inside the country. It will mean a lack of employment creation in rural areas. It also affects the migration and separation of families because people have the necessity to look for other opportunities that they could have in their place of origin.

Alberto Vazquez

That is the result of the lack of authorizing new projects or permit renewals. This has caused a drastic and negative change within the operations of the industry.

Partner | VHG Servicios Legales

Q: What will change in the mining industry if the new energy reform, including the nationalization of lithium, is passed?

A: What is being proposed is an aberration. The mineral belongs to the Mexican nation; you cannot nationalize what

Legislation for Mining Authorization Needed

is already nationalized in some way. Creating a parastatal dedicated to lithium for the state’s exclusive benefit is akin to the creation of a new PEMEX or a new CFE, where the parastatal does not have the capacity for investment or development, the technology or the certainty of existence of reserves. It could even result in international conflicts because of global agreements. This possibility of creating a parastatal that is dedicated to the exploitation of lithium is overvalued.

There are three types of reserves in which this type of mineral can be exploited. In other countries, you can practically pick it up like sand but there is no inversion to process it. There are other types of reserves where exploitation is very expensive.

The remaining types are basically impossible. Those are the ones that have been found in Mexico.

It seems that the administration is legislating at its own will instead of for the general good or to maintain a state of law for the projects that they think, without being certain, will benefit Mexico. The mining industry has the necessity of handling money in the best way possible because these companies have a responsibility to their investors, foreign or local.

People from all over the world can invest in these companies,

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even Mexicans can invest and benefit from their stock values increasing. With the administration’s proposal, we would fall into a lack of transparency, a lack of capacity to invest in projects in a way that is sustainable, which is very important within the mining sector.

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from the

Q: What opportunities could boost the mining industry in the state?

A: We know from our experience and from neighboring states that mining is an industry that generates significant profits and employment. In 2021, private investment in mining in Sinaloa totaled MX$7.8 billion (US$381.51 million), exports were valued at US$245 million and employment increased by 20 percent.

We want to grow more, so we are always promoting mining and trying to make Sinaloa a more attractive state for exploration. We do not consider traditional mining states Sonora and Zacatecas as competition but as role models because they have had a great deal of success in developing their industries.

We believe there are many opportunities to boost mining in Sinaloa. First, some of the concessions are not being fully exploited. These concessions represent a great opportunity, especially for investors looking to expand their business.

Second, the information we have developed with the Ministry of Economy is available to investors so we can later provide them with a tailor-made business plan. Third, the logistics infrastructure in the state, which allows the easy exit of merchandise. Gov. Rocha Moya and Minister of the Economy Javier Gaxiola Coppel have recently commented that the Sinaloa government and the government of Chihuahua want to create a commercial corridor that could significantly benefit

Felipe Ibarra

both states. On the one hand, Chihuahua would have access to ports as well as establishing connections with the US. This initiative would make it easier to travel to the US through Sinaloa instead of through California. Lastly, we have a great

D. Minister, Promotion and Economic Comp. | Sinaloa Ministry of Economy

deal of human capital that wants to work in the mining industry because it pays very well. I consider this to be a unique opportunity, since it is often difficult to find local talent.

Q: What opportunities exist to continue developing gold

Sinaloa’s HighGrade Unexplored Deposits Are Opportunities

and silver mining operations in the state and how does the ministry help miners take advantage of these?

A: Of the 1,470 mining concessions in Sinaloa, 32 percent are gold and silver. Most are not exploited, so the potential is enormous since the ore has already been found but has not yet been worked. More investment is needed, which we know is complicated. However, we believe that for companies looking for new assets, this is a unique opportunity.

The ministry’s role is to communicate and connect concessionaires and investors interested in entering the state. The ministry serves as a link between both parties so that investment agreements can be reached. In addition, we help companies with paperwork and permits, especially for their export processes. We are here to help them with whatever they need.

Q: How does the ministry improve safety and environmental responsibility in mining operations?

A: We believe that safety is a training issue, so we seek to improve communication with mining companies and train their

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operators so they understand the logistics necessary for a safe mine. Likewise, we help companies obtain certifications that are requested by the government and by the market. We believe that in the coming years, a new group of miners with a strong safety mindset will emerge, taking the industry to another level.

2021-25 CAGR 2021-22 CAGR

COMMODITY DEMAND OUTLOOKS

The electricity reform sent to Congress seeks to give the state exclusive control over the country’s lithium reserves and to withdraw private concessions that do not meet the newly established criteria. Experts, however, have stressed that

Lithium Chemical (LCE)

Mexico does not have the reserves, knowledge or technology to become a lithium powerhouse, especially without the help of private parties.

Refined Cobalt

“The federal government suffers from an extreme limitation

Primary Nickel

of resources, even for the most urgent tasks. Where would the money for such an undertaking come from? Moreover, the success of mining exploration is by no means guaranteed. The

Refined Copper

whole process would take several presidential terms and cost millions of dollars. Why not let private capital take the risk?”

Refined Zinc

Armando Alatorre, President, CIMMGM, says.

Seaborne Iron Ore

On Oct. 1, President López Obrador announced he had sent the electricity reform to Congress, which seeks to guarantee energy 0%

5%

10%

15%

20%

25%

security in the country and control costs by handing 56 percent of the country’s energy market to CFE, while 46 percent will go to the private sector. López Obrador announced that the reform

Source: S&P Global

includes the issue of lithium, with the state taking exclusive control over this resource. In terms of potential, Mexico’s reserves look promising at first glance. Bolivia ranks fisrt in terms of the largest lithium reserves with 21 million tons, followed by Argentina with 19 million tons, Chile with 9.8 million tons, US with 9.1 million tons, Australia with 7.3 million tons, China with 5.1 million tons, Congo with 3 million tons, Canada with 2.9 million tons, Germany with 2.7 million tons and, in 10th place, Mexico with 1.7 million tons, according to the US Geological Survey.

LITHIUM RESERVES POTENTIAL (Million Tons)

of the Constitution to stop granting concessions on strategic minerals, such as lithium, giving the state the exclusive right

2nd

to exploit and produce them. The Ministry of the Interior says

19.0

21.0

21.0

Mexico’s reform seeks to modify the sixth paragraph of Art. 27

1st

17.5

that the concessions that have already been granted for other minerals will be maintained but cannot be used for lithium.

“The reform to Article 27 of the Constitution will generate

14.0

great uncertainty and insecurity for investments, not only because of the lithium that is no longer available but because it restricts other essential metals that are strategic for the energy transition,” adds Sergio Almazán, President, AIMMGM.

4th

Currently, the country has 36 lithium projects, which are financed

5th

and controlled by Organimax Nutient, Bacanora Lithium, One 6th

Alien Metals, Zenith Minerals, Lithium Mex, Pan American Lithium

Source: US Geological Service

Germany

Canada

Congo

China

Australia

US

Chile

Argentina

0

10th

and ZEOX. Of all the companies, only three have advanced their projects: Bacanora, Organimax and One World Lithium.

1.7

9th

Mexico

7th 8th 3.0

3.5

World Lithium, Radius Gold, Infinite Lithium, Rock Tech Lithium,

2.7

5.1

7.3

7.0

2.9

9.8

3rd

9.1

10.5

Bolivia

State of the Industry | 15

Can the Government Really Push the Lithium Industry Alone?

Analysts are skeptical about whether the reform will lead to constitutional changes since MORENA, López Obrador’s party, needs a supermajority in Congress to carry this through. After losing seats during the last elections, the party needs the support of opposition parties to pass the reform. After the project was presented, the opposition parties PAN and PRD announced

they would vote against it, while PRI said it would be open to debate. PAN announced that if the proposal is approved with the support of PRI, the coalition between both parties will end. However, Alejandro Moreno, President of PRI, responded that the party would vote by consensus.

Experts believe that the reform could be blocked since it would not be the first time that a reform proposed by López Obrador has been rejected for not allowing free competition and causing legal problems. “I really doubt that (authorities) can successfully cancel or revoke lithium concessions that have already been granted.

Any attempt to do so would face legal challenges,” adds Jorge Ruiz, Partner at Baker McKenzie. Nevertheless, on Oct. 7, López Obrador said that if his electricity reform is not approved, he will ensure that his government does not grant lithium concessions to private companies. “If lithium does not remain in the hands of the nation, we will deny any request for an exploitation concession.

We have the power to do so and we are not afraid of going to court to prevent our resources from falling into foreign hands.”

The government’s actions are worrying as they will further affect investment, competitiveness and employment in the sector, according to Almazán. He explains that investments in exploration will be the most affected, leading the downward trend to continue.

Investments in exploration have fallen 70 percent over the last eight years, from US$1.165 million in 2012 to US$338 million in 2020.

Experts have explained that Mexico’s lithium deposits require a great deal of technology and resources that the country does not have. In general, lithium can be found in rocks, brines, oil wells, geothermal fields, clays and oceans. However, only brines and rocks have proven to be viable for extraction methods. In Mexico, most of the lithium reserves are found in hard-to-extract clay deposits, which are very expensive and difficult to access. “Mexico’s only possible lithium source to go into production is a clay type. No country in the world has yet produced any lithium from such rocks. The company investing in Sonora has published technical reports that state that lithium can be separated from clay and, in a second step, converted into lithium carbonate. The development of the mine and construction of a chemical plant will require over US$400 million in investment,” says Alatorre in an Expert Opinion piece for MBN. Fernando Alanis, President, CAMIMEX, explained that Mexico’s lithium has a concentration of only 0.001 percent per ton and, to bring it to a battery percentage (30 percent), the cost and energy demand would be very high. Likewise, the Chamber mentioned that it is unaware that the government has technology for an economically viable exploitation.

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T

he chemical element lithium was probably used for the first time as a remedy for depression and later for bipolar disorders. From there, it has had numerous uses in thermal shock-resistant glass and ceramics, high-performance lubricants,

polymers, as a cleaning agent in air systems, metallic alloys, mainly for airplanes, and, obviously, in batteries. This last market segment was born in the 1990s and has seen a dramatic change in the present century, from being one of the uses of lithium to becoming the main use.

In 2020, batteries reached an outstanding 70 percent share of the lithium market. That has happened because Li-batteries are smaller, lighter, and have a better charge capacity than other technologies.

In Mexico, a misunderstanding of our Li-potential appeared due to an internet publication stating we have the world’s largest lithium mine. The problem was that the classification

State of the Industry | 17

only considered the number of tons as its criteria,

Mexico Ignoring the Facts on Lithium and Energy Armando Alatorre President | CIMMGM

disregarding the grade of each deposit. The even larger and better grade Manono (Democratic Republic of Congo) pegmatite was not even included.

Unfortunately, what was read by the public was that Mexico has millions of tons of lithium, almost ready to be sold. But history shows that our only fully explored deposit consists of 243.8Mt of ROCK containing 0.348 percent lithium.

That grade ranks 34th among the other 38 on the planet.

Considering the proposed annual rate of production, it ranks seventh among 14 deposits. Therefore, it should be understood that the Sonora orebody will be additional to the world’s lithium supply but very far from being the expected panacea.

To make things worse, a government minister said that lithium was the world’s “new petroleum” that could provide economic rewards as never seen before. As a result, legislators saw an opportunity to nationalize (as they said) lithium to keep such richness in the country. Accordingly, in the last year, between Sept. 8, 2020, and Oct. 1, 2021, five different legislative proposals, from the same number of legislators, all from the same political party, have been issued on this matter. One of the reasons expressed by one of them was that like oil, lithium must be nationalized. For bad or good, none of the proposed laws have led to results.

Finally, assuming that the government has the economic resources and takes control of lithium mining, where will its production go? The government appears to be ignoring that, today, China gets nearly 80 percent of the lithium produced to continue running its EV battery plants. Then, the question arises, why not forget about controlling the mining and, instead, consider implementing a value chain where Mexican lithium goes into Li-batteries made in the country and, if dreaming is permitted, someday have EVs also made here?

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For the time being, the latest news is that the presidential proposal is on hold until sometime in April. However, the mining sector has to work with legislators to help them better understand that lithium should be used along with the clean and renewable energy sources that the world requires.

VIEW TOP State of the Industry | 18

from the

Q: How do mining opportunities in Chihuahua compare to opportunities in other mining states?

A: One of our main advantages is the Sierra Madre Occidental that runs through our state, providing a number of exciting mining plays. Unlike other states, such as Sonora and Zacatecas, there is still a great deal of exploration to be done. This leads people to assume that there is less geological richness here but we only need the exploration investment to solidify our knowledge. Unfortunately, the fiscal conditions at a federal level in Mexico do not incentivize this exploration work. Chihuahua is Mexico’s largest state by land area, totaling 27,745,500ha, of which 8.33 percent is held under mining concessions.

This means that a little under 92 percent of our state’s territory remains unexplored. Of the land that is under mining concessions, only 0.12 percent of the state’s total area is being exploited, equivalent to 29,000ha.

Q: What are some of the cluster’s main objectives in terms of its communications with public authorities?

A: No industry can thrive under the type of fiscal conditions that are being imposed on Mexico’s mining industry — we need to continue arguing in favor of a change in this matter. We maintain close ties with Chihuahua’s municipal and state governments and with the federal government. We want to generate

Gerardo Duran

incentives and better conditions that promote exploration in the state. We want to use these networks to help companies that are new to the state find their footing. We want to help them manage their ESG and security issues — our statewide expertise

Director General | CLUMIN

can help make their social engagement much more effective.

Unfortunately, we are still very limited by the industry’s fiscal landscape, so we are forced to wait for a better moment to further accelerate our activities.

Supplier Development to Offset Lack of Exploration

Q: What role is the cluster playing in the development of Chihuahua’s local suppliers and service providers?

A: We have done a great deal of work in the development of supply chains. Our cluster has to consolidate Chihuahua’s mining supplier network. To increase our investment and development of mining suppliers, we have also formed strategic alliances with embassies and consulates of countries that have strong mining industries, such as Chile, Peru, Australia, Canada and the US. We also have a commercial office in Arizona. We want to promote partnerships between foreign companies and Chihuahua’s suppliers and generate greater local economic activity and statewide tax revenue.

Toward the end of 2021, we hosted our annual Business Gathering, which has grown to be quite an important event. We bring together all of the state’s mining operators and we arrange for them to sit face-to-face in B2B meetings with local suppliers.

Over 495 meetings were set up, which represented a 20 percent increase compared to the previous year. Over 150 suppliers participated, along with the state’s 16 major mining projects, and over 300 people attended. We are studying the economic

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impact of this activity and we are expecting to obtain great results. In 2019, this same event generated over US$14 million.

We are hoping that this year´s results can equal or even surpass that. This figure would allow us to consolidate and promote this event as one of the industry’s most important at a national level.

Conference

State of the Industry | 19

Highlights

Communication Strategies Battle Mining Misconceptions Christopher Ávila Mier Deputy Director of Government and Institutional Relations | Baluarte Minero

Angie Robson Vice President, Corporate Affairs and Social Responsibility | Torex Gold Resources Inc

Alfredo Phillips VP Corporate Affairs & ESG and Director | Argonaut Gold

José Jabalera Batista General Director of Mining Development | Mexican Ministry of Economy

Luiz Camargo Country Manager | Minera Cuzcatlán

C

ommunication strategies have become a pressing issue for the mining industry as Art. 2 of the Mexican Constitution as well as Convention 169 of the International Labor Organization and the United Nations Declaration on the Rights of

Indigenous Communities require mining companies to receive approval from local communities in rural areas to carry out projects. As such, many industry misconceptions need to be addressed while the prolonged efforts to limit the impact of the industry on the environment and nearby communities must be better communicated, experts say.

Angie Robson, Vice President of Corporate Affairs and Social Responsibility, Torex Gold, points out the company’s impact on Guerrero communities since it became the country’s secondbiggest gold producer, with 99 percent of its workforce coming from Mexico. For its Media Luna project, Torex has provided “agreements with each of the communities surrounding our projects; each have their own elected committees to help define agreements according to their own needs,” Robson says.

Luiz Camargo, Country Manager, Minera Cuzcatlán, says its Oaxaca and Guerrero operations are in some of the most complex areas because of the large number of municipalities.

One project can impact three or four municipalities. The best way to manage these relations is to be transparent, empathetic with the community and truly enter these municipalities to understand their needs, says Camargo.

Recognizing past negative impacts inflicted by the industry is also important in correcting misconceptions, says José Jabalera, General Director of Miner Development at the Ministry of Economy, adding that such recognition of the adverse impact the industry has had on local communities is an important factor in moving past them. He also believes surveys and hard data are needed to measure the true positive impact community efforts are having on local individuals.

Alfredo Phillips, Vice President of Corporate Affairs and ESG and Director, Argonaut Gold, highlights a recent doctoral thesis from the University of Sonora that analyzed the logic behind what companies do with communities. “CSR usually focuses on what the companies are interested in. The real focus should be on empowering the communities,” Phillips says. Phillips

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notes that successful programs are those that are focused on understanding the community requirements instead of pushing forward company beliefs.

The potential for lithium mining in Mexico was one of the hottest topics of 2021. Although the government believes that lithium is

What Is Mexico’s Lithium Potential?

the new oil, experts say that Mexico is far from becoming a lithium powerhouse, especially as new initiatives are reducing investment inflows for all minerals. Mexico Business News asked industry experts about the country’s potential to develop a strong lithium industry and the impact that creating a state-owned company for its exploitation and production could have on the country’s position

State of the Industry | 20

as a leading lithium hub.

A misunderstanding of our lithium potential followed a publication stating we have the world’s largest lithium mine. The problem was that the classification only considered the number of tons, disregarding the grade of each deposit. To make things worse, a government minister said that lithium was the world’s “new oil” that could provide economic rewards as never seen before. As a result, legislators saw an opportunity to nationalize lithium to keep such richness in the country. However, the government appears to be ignoring where its production will go. Why not forget about controlling the mining and, instead, implement a value chain where Mexican lithium goes into

Armando Alatorre

lithium-ion batteries made in the country and, if dreaming is permitted, someday have EVs also made here?

President | CIMMGM

Mexico, as one of the richest countries in minerals around the world, also has large lithium deposits. However, Mexican these are encapsulated in clay, which prevents lithium from being extracted through simple drilling processes. Instead, a very complicated and expensive process is required. Unfortunately, Mexico lacks the necessary technology to conduct this, which renders lithium extraction almost impossible. The nationalization of lithium represents a threat to the national economy rather than a benefit to Mexican society, since it may create widespread mistrust among foreign investors. This could cause job losses as a result of the closure of enterprises

Pablo Méndez President | CLUMIN

dedicated to lithium extraction and lead to a lack of economic support to those communities where lithium exploration projects are developed.

What is being proposed is an aberration. The mineral belongs to the nation; you cannot nationalize what is already nationalized. Creating a parastatal dedicated to lithium for the state’s exclusive benefit is akin to the creation of a new PEMEX or CFE, where the parastatal does not have the capacity for investment or development, the technology or the certainty of existence of reserves. In addition, there are three types of reserves in which this mineral can be exploited.

In other countries, you can practically pick it up like sand but there is no inversion to process it. There are other types of reserves where exploitation is very expensive. The remaining

Alberto Vazquez Partner | VHG Servicios Legales

types are basically impossible. Those are the ones that have been found in Mexico.

VIEW TOP State of the Industry | 21

from the

Q: To what degree has the pandemic improved intercultural communication, given the common experiences it has generated?

A: The pandemic has created greater opportunities for individuals and businesses to communicate across borders. People are more open to the idea of communicating and doing business through new digital tools, which can translate to greater success.

However, more communication does not necessarily mean efficient communication, which would be messaging that hits its intended mark with the message the sender intended. Most professionals need advanced tools to effectively communicate and access new markets outside their native country. “More communication” rarely means “better communication” and I have seen more miscommunication than opportunities won as a result. However, it is important to recognize the opportunities that emerged from the pandemic, especially because it opened new channels that would have been very difficult to achieve in the past. For example, at the Arizona-Sonora women’s empowerment conference “Mega Women of the MegaRegion” that WorldWise Coaching organized on International Women’s Day 2021, we opened a communication channel for women in mining in Arizona and Sonora, which had never existed.

Q: You have said that Mexico works in a “collaborative” model versus the American “individualist” model. To what degree has the pandemic changed these?

Jennifer Burge

A: Both models have become more rigid. Individualistic cultures, such as in the US, the UK, Australia and Canada, have intensified this pattern and people are often working in silos. While different

CEO | WorldWise Coaching

communication channels have opened during the pandemic, working from home has made isolation a habit. Meanwhile, in collaborative cultures like those in Latin America, there has been more cross-border collaboration and more trade agreements have been created. In fact, COVID-19 has been shown to benefit

Communication, Transparency Will Be Key in PostPandemic World

intercultural trade in these countries.

In Mexico, the collaborative community has worked very well.

However, it has not resulted in innovation or growth. The country could benefit enormously if it were to be more open to people outside its borders. The Mexican business culture is based on trust, which is why the pandemic has brought these work communities closer and strengthened them to the point of excluding others.

Q: What gaps still exist in the industry regarding female inclusion and how can Mexico make progress on this matter?

A: Over my 25 years of experience in more than 50 countries, it has become obvious to me that what an industry presents on the surface is rarely the reality of what is happening. When I started working in the Mexican mining industry, I saw many organizations, associations and publications interviewing women in mining, so it appeared that there was strong support of women’s empowerment. However, the more heavily involved I became in the industry, the clearer the traditional male hierarchy and discrimination became. So, while we have heard a great deal of discussion about female empowerment, there has not been much action.

To include more women in mining, we must provide greater educational opportunities and incentivize young women to join STEM programs. You will only be able to encourage women to

join the sector if they see that successful female role models participate already. However, there have been major setbacks, especially during the pandemic, as women working from home became nearly 100 percent responsible for all the tasks at home, ’such as taking care of children, cooking and cleaning. This unequal distribution of unpaid work not only affects women in Mexico but worldwide. In my opinion, the biggest hurdle is making childcare more accessible and affordable to mothers.

Also, women need to better support each other.

Excessively competing with one another does not help the cause for women as it contributes to negative workplace morale, which is extremely damaging to teams and productivity. We also need men to be more supportive in the workplace by providing advancement and development opportunities for women and helping to eliminate the idea that mining is only for men. If you look at any industry, anywhere in the world, the unique set of skills and leadership style women bring to the table provide significant benefits to shareholders. It is important that people recognize how the natural leadership, organizational and entrepreneurial talent of women improve work and team building everywhere.

Promoting female participation is not only the right thing to do but it has been proven to be good economics.

Q: What gap have you have identified in the industry related to ESG issues and how can it be closed?

A: There is an enormous gap between what companies say and what they do. In the US, female inclusion is often mandatory, especially for ESG criteria. It is no longer socially acceptable for companies to omit ESG from their mission and priorities. While researching information on mining companies around the world, it became glaringly obvious that most of these companies publicly state on their website that female inclusion is their priority.

However, the majority do not provide any data or transparency about their actions to ensure this happens.

In mining, effective communication is essential, not only regarding inclusion but other social matters too.

Communication with local communities is key for companies to have a positive impact on them and to be able to operate on their land. Companies that just go into a community to extract resources and leave will eventually be stopped from operating at all. Moreover, for the future conversion to electric infrastructure that much of the world desires, we need more mining and it must be responsible. Positive ESG performance can be achieved only if companies understand the value of communication at all levels and if they communicate effectively internally and externally with stakeholders, especially within communities where mines are planned and operated.

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VIEW TOP State of the Industry | 23

from the

Q: What are the most important changes in Mexico’s mining legal landscape since the beginning of López Obrador’s government?

A: The López Obrador administration’s National Development Plan 2019 to 2024 includes principles such as honesty, the eradication of corruption, respect for the rule of law, the stoppage of migration due to hunger or violence and the economic support for popular welfare. These pillars include the need for promotion of economic growth and sustainable development, as well as the provision opportunities for the less fortunate. The mining industry is and should be recognized as a strategic ally to the Mexican federal government and to the new president to be elected in 2024.

Although the Mining Law has not been amended by our Congress during this presidency, there have been some relevant amendments to other federal laws that regulate the industry and have a direct impact, including the reform to other industries’ legal frameworks, such as the electric and hydrocarbon laws. For many years, there have been voices requesting the amendment of the Mining Law. Nevertheless, if we consider amending the legal framework of our mining activity, it is important to make a respectful but firm call to our authorities to complete a deep, comprehensive and technically supported analysis on any given initiative of reform. This analysis should contemplate the effects these reforms would have on local and foreign investments, as well

Ruben Cano

as international treaties signed by Mexico.

Q: How can mining companies best protect themselves against the risk of expropriation?

Founding Partner | CR Legal

A: Expropriation by definition is the “formal and materially administrative act by virtue of which private property is extinguished, for reasons of public utility, through compensation.”

It is regulated in Mexico by the Expropriation law of 1936, which

The Legal Path to Success in Mexico’s Mining Industry

was amended for the last time in 2012. We need to analyze this legal term from two perspectives. First, the Mining Law recognizes in Art. 6, the “public utility” character of exploration, exploitation, and beneficiation activities. Expropriation is a mechanism that with some limits, including a preference for oil exploration and extracting activities, can be used and has been used by mining companies and holders of mining concessions to obtain access to the usage of the surface area covered by the mining lot.

But there is second type of “expropriation,” which is known as the action of a government to interfere with the private activities in the form of suspension of granted permits or recognized rights.

This could be the case of Article 57 of the Hydrocarbons Law, which entitles the Mexican authorities to suspend permits granted within this industry to “secure the interests of the nation.” I believe this kind of legal language does not provide certainty to investors or key players in any given industry in any country. Considering that expropriation is an administrative act, the Expropriation Law considers and describes the proper legal resources and mechanisms to oppose these kinds of practices. Formally, we recommend that each case shall be analyzed depending on its own merits and legal framework to determine the best protective

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mechanism. We believe this second, negative “expropriation” practice should be removed from the law and should be contained and avoided by our lawmakers. As I have explained before, they should be very responsible and cautious of the content of the law they wish to amend or enact.

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Does Zero-Carbon Lithium Exist?

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COP26, North American Leaders Summit Boost Mining 12/29/2022

The Right of Indigenous Communities to Prior Consultation Pablo Méndez President, CLUMIN

Lessons for Mining From a Six-Year-Old Ana Laura Muñoz Director General, Rama Mantenimiento Industrial Total

AMLO Provides Wrong Information at NALS 11/30/2021

2

Finance & Investment Attracting financing and investment has been a constant challenge for miners, especially amid a riskier environment following COVID-19. However, 2022 is expected to be a better year for miners to attract capital. Experts believe that mining will continue to be a leading destination for FDI, especially since the entry into production of large projects, such as Camino Rojo and Juanicipio, that will make the sector more attractive.

Due to the country’s legal and political uncertainty in 2021, the industry attracted US$4.25 billion, which was 15.6 percent below the US$5.03 billion expected. Although these problems are expected to remain, experts say the growing relevance of the country’s resources, the further development of projects and new trends could turn the tables.

In 2022, investment and financing decisions are expected to be primarily influenced by ESG criteria, environmental concerns, supply challenges and the pandemic. As mining has proven to play a key role in combating climate change, companies that supply key minerals for the energy transition and maintain high ESG standards will have easier access to capital.

Additionally, while the pandemic will remain a challenge, it could also push up metal prices.

Furthermore, many budgets for mining projects in 2022 are higher than in previous years.

Experts agree that Mexico’s performance will depend on how the country addresses the opportunities that lie ahead.

2

Finance & Investment

28

Analysis Copper Industry Faces National, International Challenges

29

Conference Highlights Mining Markets Set to Extend 2021 Trends Into 2022

30

View From the Top Armando Ortega | President of the Mining Task Force | CANCHAM

31

View From the Top Dean McPherson | H. Business Development, Global Mining | TSX, TSX Venture Exchange, TMX Group

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Expert Contributor David Wolfin | President and CEO | Avino Silver & Gold Mines Ltd.

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View From the Top John Darch | Chairman of the Board | Sonoro Gold

34

Expert Contributor Ulises Neri | Vice Chair Mexico - Latin America | United Nations/UNECE

36

Analysis Mexico Could Miss Out on New Investment Opportunities

37

View From the Top Bradford Cooke | Executive Chairman of the Board | Endeavour Silver

38

Conference Highlights Precious, Base Metals Could Provide Shelter From Volatility

39

View From the Top Petur Georgesson | CEO and Founder | Technology Metals Market

41

View From the Top Enrique Rodríguez del Bosque | Founding Partner | RB Abogados

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Content Links

Finance & Investment | 28

Copper Industry Faces National, International Challenges MAIN COPPER PRODUCING STATES IN 2020

Copper has become increasingly relevant for its role in the world’s green transition. However, producers face great challenges. While experts believe that, in the short term, global factors such as China’s energy supply crisis will not pose a great risk to the industry but, in the long run, some might. In Mexico, the red metal is at immediate risk due to the electricity reform.

81.1% Sonora 8.3% Zacatecas 4.0% San Luis Potosi 2.6% Chihuahua 2.3% Baja California Sur 1.6% Others

According to experts, copper has benefited from the willingness of countries to comply with the Paris Agreement and replace fuel energies with green alternatives. “Copper is truly perfect. It is essential to achieve a low-carbon world. I believe that the future of industry, society and our lives will largely depend on copper as there is no other replacement for it. Perhaps silver could be an option but it is more expensive. As a result, copper will be the metal to lead the world’s green transition,” Steve Robertson, CEO, Infinitum Copper, told MBN. According to Warren Patterson, Head of Commodities Strategy, ING, world copper consumption is almost 29 million tons. In addition, the red metal had an annual growth rate of 1.97 percent from 2012 to 2019. The energy sector is set to increase its participation in the copper industry. “For our most aggressive scenario, annual copper demand (from the energy sector) could grow to as much as 7.8mt by 2040,” says Patterson.

WORLD BANK COPPER PRICE FORECAST (US$/ton)

Despite the positive forecast, experts say there is also a risk scenario for battery metals such as copper. Mining magnate

2015

Robert Friedland has warned that access to metals like copper

5,510

2016

is becoming a security problem in many countries. “In the

4,868

2017

short term, we have had a big increase in the price of copper.

6,170

2018

But in the medium term, copper has really become a national security problem. It has become fundamental to what we want

6,530

2019

to do with our economy,” Friedland said at the CRU World

6,010

Copper Conference.

6,174

2020

Current investments in copper have focused on upward trends

9,300

2021

in demand fueled by green energy. However, little attention has

8,800

2022

been given to its supply. The pandemic had a major impact on

8,200

2023 2024

7,500

2025

7,544

global copper production due to disruptions and lockdowns around the world, which caused mined copper supply to fall short by 80,000 tons compared to 2019. While many countries have recovered economically and, with that, the situation for

7,769

2030

minerals, there are still problems ahead. One concern is the inevitable depletion of existing mines. Experts worry that despite

8,000

2025 0

2,000

4,000

6,000

8,000

10,000

new discoveries and capital, some production replacements may not be able to keep up with growing demand.

“Trying to satisfy increasing demand is where we run into a

Source: CAMIMEX

problem. The giant, high-grade copper deposits exposed on the surface have been found, are already being mined and, in some cases, have already been depleted. We now need to drill deep below the surface to find new deposits. All of this in the face of an increasing regulatory burden and increasing Read the complete article More about this topic

taxation. It is getting harder and harder to put a copper mine into production, so copper shortages are not easily supplied,” Robertson told MBN.

Conference

Highlights Finance & Investment | 29

M

arket trends that experienced significant transformations in 2021 are likely to define the course of 2022 for international mining companies and investors, according to Dean McPherson, Head of Business Development for the Global Mining

division of both TSX and the TSX Venture Exchange.

McPherson identifies five market trends that experienced definite change in 2021 and that will likely show up again as leading factors in investment decisions for 2022. The first is the market interest in ESG, which McPherson characterized as “becoming front and center of the investment decision center in 2021, and will likely continue to play that role and take a leading role in investment decisions in the sector in 2022.” McPherson explains that mining companies were responding positively to inquiries investors and the exchanges were making into their ESG practices, centering these within their business plans to address all concerns that could limit or qualify investment decisions. These inquiries were severely accentuated in 2021 and were likely to continue impacting the industry’s course in 2022.

The second trend emphasizes environmental concerns and the

Mining Markets Set to Extend 2021 Trends Into 2022 Dean McPherson Head of Business Development, Global Mining | TSX, TSX Venture Exchange, TMX Group

impact surrounding climate change. 2021 was a key year for the mining industry’s environmental awareness, as McPherson notes that a number of key declarations and discussions that took place at COP26 identified the industry’s key role in both the global carbon footprint, as well as the energy transition that will be necessary to address it. Global emission reduction targets are likely to drive an acceleration in demand for metals involved in the manufacturing of batteries, electrical infrastructure and EV components throughout 2022. Mining investors will be spending the year favoring projects that can promise both an approach that could reduce the carbon footprint of mining operations while simultaneously prioritizing metals and minerals listed as applicable to the development of green technologies and products.

The third trend is commodity prices being driven by the current relationship between base metal supply and demand, which was significantly unbalanced in 2021 in a way that will continue to create a number of opportunities for investors well into 2022.

The fourth trend is the rise in M&A activity that was very much talked about in 2020 and 2021 and is expected to continue throughout 2022 as competition increases to secure supply lines that became fragile during the pandemic. McPherson provides the example of Australia, a jurisdiction characterized by companies that “used to work exclusively within their national borders but are now expanding and diversifying, particularly into markets in the Americas.” This trend is partially illustrated by the activity on the exchange in terms of new company listings. “In 2021, 80 new mining companies listed, compared to 57 in 2020. Equity capital raised went up to US$10 billion against US$7.5 billion in 2020.”

The fifth and final trend concerns the impact of the pandemic, which McPherson expects to continue as a top-of-mind concern for investors throughout this year. There is still a fundamental caution to how the market perceives the effect of COVID-19, especially after omicron has forced a repeat of some of the shutdown procedures that characterized the pandemic’s early

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stages. McPherson believes that “volatility will continue to loom large over the mining markets, despite the stability of other factors that underpin it.”

VIEW TOP Finance & Investment | 30

from the

Q: How would you evaluate 2021 in terms of development and growth for Canadian mining companies in Mexico?

A: 2021 was a challenging year for all mining companies operating in Mexico through Canadian capital. Although the industry was declared an essential economic activity and could continue throughout the pandemic, the mining sector still experienced severe consequences despite all of the sanitary measures enforced at each mine. For instance, supply chains were very much disrupted, along with operators’ relationships with communities and workforces. The impact of all of these factors on productivity throughout 2021 cannot be ignored, even if they were more severe in other industries, such as automotive.

The industry also faced a business environment in Mexico that was not favorable for investment attraction. The political ecosystem, which played a significant role in generating this environment, also introduced a number of legislative initiatives that were not conducive to the industry’s daily operations. Thankfully, none of these passed. One of the initiatives called for the state to have exclusive access to the mining and production of lithium, as well as any other minerals that might play an important role in the energy transition. This description is vague and worrying, since any number of minerals could be considered essential to the energy transition process. The fact that the minerals in question are not explicitly mentioned or listed creates an uncertainty that results in

Armando Ortega

animosity toward new investments.

Despite these challenges, it is always important to remember that Canadian mining companies operate in Mexico in a manner that is

President of the Mining Task Force | CANCHAM

arguably independent from politics and completely dedicated to the communities they cooperate with. Major investment decisions were made throughout the year and many of projects from many Canadian companies achieved organic growth. In general, the sector was successful despite politicized media noise surrounding

Canadian Companies Successful in 2021 Despite Challenges

it. Companies, such as Alamos Gold, Torex, Endeavour Silver and Newmont, announced exciting new projects, showcasing the industry’s resilient outlook.

Q: How did the USMCA leaders’ meeting in 2021 impact the outlook for Canadian mining companies in Mexico?

A: The fact that this meeting even took place at all represents an auspicious and positive gesture for the future of this trilateral relationship. The meeting highlighted political willingness to support the conditions and standards dictated by the USMCA, creating legal certainty that is favorable for business in the industry. However, there are still disagreements that need to be worked through as part of these negotiations. We have seen these disagreements play out publicly in other industries and international disputes, such as those in the automotive and dairy industries. Other industries, such as energy, highlight disagreements that are not explicitly mentioned in these meetings but are quite prevalent in terms of disputes between the USMCA and changing regulatory frameworks of each country. There is a mutual, unspoken understanding that legislative efforts that negatively impact market competition

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and unduly benefit state enterprises represent an approach to political action that runs counter to the spirit of the USMCA. We expect these discussions surrounding those frictions to take place in meetings such as that which took place last year, resulting in an outlook that is arguably more positive.

VIEW TOP Finance & Investment | 31

from the

Q: How have the mining market’s dynamics changed recently?

A: In terms of our daily operations, an increased number of tasks continues to be done virtually and the processes have improved.

Nevertheless, 2021 saw the industry returning to many activities being conducted physically when compared to 2020. More importantly, we have been pleasantly surprised at the way in which the mining sector has rebounded in the two years since March 2020. In this sense, the dynamics of the market have been quite active as well as its investors. M&A has also been busy in 2021, as well as the industry’s focus on ESG and socially responsible mining — all of these have defined the key market dynamics for this year.

The minerals that are receiving the most attention include lithium, which has had a wonderful year. This has been generally true for base metals and battery metals. These include lithium cobalt, nickel and copper. Many people do not realize that copper plays a major role in the current momentum toward developing clean energy tech. Success for base and battery metals is dictated by longstanding market fundamentals, as well as by new clean energy tech ambitions, applications and interest. Electrification is a big part of this momentum, making investors pay attention. Meanwhile, precious metals continue to be attractive due to the optimal levels of gold and silver prices. Considering all of this, we can say that the market dynamics are placing Mexico at the forefront of these trends and that is why it continues to be a key jurisdiction for us.

Dean McPherson

Q: What are some of the most important ways in which the energy transition continues to impact the mining sector?

H. Business Development, Global Mining | TSX, TSX Venture Exchange, TMX Group

A: As the energy transition continues its accelerating evolution, we expect more research and development investments aimed at discovering new applications for base and battery metals in green technologies. This will increase the volume of investments, not only because interest will increase but because an increasing amount

Mining Markets Show Appetite for Energy Transition

of resources destined to legacy energy sectors like oil, gas and coal will be increasingly divested by investors who are comfortable with extraction industries; mining will be the next logical place for them to go. This principle also applies to the decarbonization of industrial supply chains, such as the processes of the mining industry itself. As a stock exchange, we see this interest already being expressed across the board, not just in mining.

Q: How can the market’s supply of base and battery metals be optimized to meet the increasing demand for these commodities?

A: Demand for these commodities, in particular copper and nickel, will increase exponentially and indefinitely because they play a role not only in green energy products but also in its infrastructure: more clean technology means more connectivity and a greater need to redevelop existing distribution infrastructure, while also growing and developing new grids. Every time a new battery innovation is achieved, replacements for those networks are needed. Right now, the volume of investments that we have seen in this area has been insufficient and that is why supply seems so low when compared to demand. We now realize that these investment levels need to be drastically increased to better

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address this imbalance and close the gap between the supply and demand for these commodities. 2021 was an outstanding year in working toward that goal because investors are recognizing there is a definitive supply shortfall that can represent an enormous opportunity for them.

M

any countries have set net zero pledges for 2050, which means that over the next 29 years you will see a very large and deliberate global transformation to renewable energy. At Avino Silver & Gold Mines we share this ambition

and have begun implementing modern technologies and techniques that align with this goal and will continue to search for ways to do our part over the coming decades.

Generally, miners will be focusing on cutting greenhouse gas emissions, moving to solar panels, looking for ways to use clean energy and decarbonizing. Some will shift to Battery Electric Vehicles (BEVs) for their mine site vehicles, moving their fleets away from diesel.

What does this green energy revolution mean for Avino and other silver miners? We believe that the green energy revolution is already pointing to an increase in demand for silver, and although other metals will be needed, we think that

Finance & Investment | 32

silver will play a key role. Vehicles, solar panels, electronics

Positioned for the Green Energy Revolution David Wolfin President and CEO | Avino Silver & Gold Mines Ltd.

and even medicine are just a few of the industrial applications for silver and this list will undoubtedly continue to grow. Look at your desk right now, look at what you drive, what you wear, what recreational toys you have, and the phone(s) you use.

Did you ever wonder how these are made and what materials are in them?

Silver is an extremely useful precious metal. It is used in solar technology, electronics, soldering and brazing, engine bearings, medicine, cars, water purification, and jewelry.

Therefore, if by 2050 net zero is to be achieved, then it stands to reason that mining of silver is crucial to the future’s green energy shift. There will be monumental upgrades needed worldwide to power all the electric products that will be in use. Silver and other metals, such as copper, will be in high demand.

We believe that mining will be the only way to meet this demand. More mines will need to be discovered, permitted, financed, and developed. Discovering a new mine and bringing it into production could take from 10 to 20 years, so this time lag from discovery to production may lead to supply delays, and if supply can’t keep up, this in turn means that prices will go up.

The industrial global demand for silver is real and could see the silver price rise in the near future, with huge demand growth anticipated. Silver miners will benefit as the sheer volume of silver needed to keep up with the demand of electric vehicles alone will be a boon. The stock prices of silver miners should rise as demand for the metal grows and owning the silver producers will be the best leverage to metals.

The green energy revolution is here and is part of the global awakening for a safer and brighter future. The goals of net

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zero emissions are admirable, but this cannot be achieved without something to replace the ways of the past. Silver will be a key player in the brighter future, which also means that the mining of silver is absolutely vital right now and moving forward.

VIEW TOP Finance & Investment | 33

from the

Q: What progress is being made at Cerro Caliche?

A: Over the past few years, the operations at Cerro Caliche evolved from highly prospective exploration to development, following a successful drilling program. Our goal within the next 12 months is to begin production. We completed a preliminary economic assessment (PEA) that will support financing for seven years, initially. During the first three years of operation, we expect to produce in excess of 50,000oz of gold a year.

Q: How did the company’s PEA showcase the potential of Cerro Caliche and how does it change the company’s priorities or plans?

A: The PEA validated our 2019 business plan, which aimed to move to production as quickly and professionally as possible to a financially sustainable operation that will allow us to continue operating and expanding. Achieving this would extend the conceptual seven-year mine life to a minimum 14 years.

Q: How will the company’s recent financing agreement align with the company’s plan to bring the mine into production as soon as possible?

A: We started drilling in early December. We expect to acquire

John Darch

financing of about US$2.5 million, which will enable us to fund drilling until March or April. Depending on the results, we will decide whether to do additional drilling or to move straight to production. We will continue to discuss financing

Chairman of the Board | Sonoro Gold

with potential project lenders to begin our Caliche operation within 12 months. The drilling will show that Cerro Caliche’s potential is considerably higher than the PEA indicates. We plan to continue expanding our assets to reach a minimum of 1Moz, which would prove that Cerro Caliche has a life of at

Sonoro Gold Looks Ahead

least 14 years.

Q: As a junior mining company, what have been the main difficulties in accessing financing?

A: Under the circumstances, we have been successful in acquiring financing despite several factors. The first barrier is that the market sentiment toward gold and mining companies is not strong, so we are fortunate to have shareholders that believe in the project. Second, December is the traditional tax-law setting period in which Canadian investors can book gains on behalf of other companies, which can be offset against losses. As a result, some investors are selling shares simply because of the tax environment. We have explained to shareholders that December is the wrong time to invest and, even though we are selling Sonoro shares now, this is only for tax reasons and the shares will be repurchased during the first quarter of 2022.

Q: What financing alternatives are gaining strength and why is Sonoro Gold considering them?

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A: The company comprehensively studies all sources of financing, such as project debt, royalties, gold, amounts of debt and equity. Our concerns as a mining company are shared by lenders and thanks to our experience, we are able to work with them. We are always studying what is best for Sonoro.

S

ocieties depend on the availability of various types of resources. The utilization of natural resources has been promoting and shaping overall development globally, particularly in Latin America and the Caribbean (LAC). Production of raw materials

in LAC countries has increased greatly in the last decade. In the coming decades, region-wide primary energy demand is expected to grow. Consequently, a sound paradigm rooted in sustainable resource management that will ensure a good social, environmental, and economic outcome is essential to the region. However, governments, companies and financial institutions face multiple challenges in the region. For any resource development project to proceed to implementation, many technical, economic, social, and environmental issues must be resolved and all over Latin America, there have been prevalent tensions between resource-oriented industries and the communities where they operate.

With the increase of foreign and national investments in

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resource development projects, some organizations have

Int’l Centers of Excellence and Sustainable Resources Management Ulises Neri Vice Chair Mexico | Latin America United Nations / UNECE

developed collaborative processes to address the issue.

At the same time, certain social movements have formed formidable fronts of resistance that have proven capable of stopping the development of the targeted projects. Even in the field of renewable energy, despite the great potential that lies in Latin America, the construction of hydroelectric plants or solar energy projects has often been problematic, due to social and environmental impacts, in particular, the necessary displacement of the local communities. In most cases, the local community feels that the benefits from natural resources production and utilization are not being distributed equitably.

Because of this lack of “social license to operate,” it becomes challenging to prevent conflict and to avoid further escalation once it arises. On the other hand, it becomes frustrating for investors to always face blockades that either postpone or inhibit the development of the project.

Successful resolution of these issues is essential for responsible development and use of resources and ensuring good social, environmental, and economic outcomes. For businesses in the oil and gas, mining, and other energy resources sectors, which mostly have long-term projects that will take years to develop, attention to classification and management of resources, taking into account social and environmental factors, will be leveraged to implement sustainable development.

The United Nations Framework Classification for Resources (UNFC) and the United Nations Resource Management System (UNRMS) are frameworks developed by experts from government, industry, the financial sector, and academia to bring in the required rigor in the sustainable management of all resources. UNRMS is a globally applicable system that can be applied to petroleum, mineral, renewable energy, nuclear fuels, injection projects, and anthropogenic resource endowments.

Rather than tracking a single metric of volumes or quantities that can be produced and the profits, UNRMS considers a range of socio-economic, technological, and knowledge factors that are important for the sustainable development of each project.

The UNRMS guiding principle is to make resource management entirely in alignment with the 2030 Agenda for Sustainable Development and see how resource production can contribute to each of the 17 Sustainable Development Goals (SDGs).

To achieve each of the SDGs by 2030, it is crucial to promote the institutionalization of mechanisms that support Mexico and Latin America, making energy and raw material resource management a catalyst for sustainable development. UNRMS provides a unique model for transparent and coherent estimation, classification, management, production and utilization of resources, which are critical for assurance of the energy and raw material supplies required for sustainable development.

On the other hand, the International Centres of Excellence on Sustainable Resource ManagementICE-SRM3 will strengthen the sustainability and financial resilience of the resource management sectors. The focus will be on the development of a financially profitable, competitive and resilient resource management sector in the region, as well as the core vision of “Resources for Sustainable Development.” The system will ensure actions that are required to promote acceptability among stockholders and stakeholders. Resource management, when undertaken through the UNRMS framework, will bring good social, environmental, and economic outcomes in Latin America, and in Mexico as the leader of the project.

In 2019, a large-scale project (pilot project)4, led by the National Hydrocarbons Commission (CNH) in coordination with the Ministry of Energy (SENER) and the Safety, Energy and Environment Agency (ASEA), was implemented in Mexico.

International Centres of Excellence on Sustainable Resource Management (ICE-SRM) is a collaborative network of organizations focused on supporting the sustainable management of the resources needed for development in line with the 2030 Agenda for Sustainable Development and the Paris Climate Agreement. The centers are conceived to provide — in full compliance with the adopted United Nations standards and guidelines – policy support, technical advice and consultation, education, training, dissemination, and other critical activities for stakeholders involved in the sustainable development of extractive industries and energy.

Each center will promote within its activity footprint the global deployment of the United Nations Framework Classification for Resources (UNFC) and the United Nations Resource Management System (UNRMS) to describe the resources needed for the attainment of the 2030 Agenda for Sustainable Development and support their management. The center for Mexico and Latin America is led by Ulises Neri, a member of the Expert Group on Resource Management EGRM.

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Finance & Investment | 36

Mexico Could Miss Out on New Investment Opportunities ENERGY SOURCING IN THE MINING INDUSTRY (percentage)

With the decarbonization megatrend, investors are putting additional weight on ESG credentials. That bodes ill for Mexico if

2020

the proposed electricity reform is approved because the reforms could hinder the country’s progress on sustainability, jeopardizing the arrival of investments. “The electricity reform forces all productive sectors of Mexico to acquire energy from CFE, no matter how dirty, expensive or inefficient it is. The government

2019

needs to provide greater legal certainty regarding the electricity reform initiative, because even without its approval, investment

54% Self-sufficient, fuel 32% Purchased from CFE 14% Clean energies

and projects are being lost,” says Karen Flores, Director, CAMIMEX. According to a mining report from Fitch Solutions, decarbonization is changing the industry. It is bringing copper and green steel back to life, promoting the emergence of new subsectors like lithium and condemning non-environmentally friendly industries like coal.

The report explains that this shift in mining trends represents risks and opportunities for the entire industry. Subsectors, such as lowquality iron, steel and zinc, are being disrupted, while access to investment is becoming more difficult for junior mining companies

35% Self-sufficient, fuel 34% Purchased from CFE 31% Clean energies

that have greater difficulty implementing ESG programs. The opportunities will be for those companies that conform with the push toward decarbonization. Mining companies that have significantly reduced their emissions will have greater investment capacity, while those that produce low-carbon products will benefit from a premium price as their clients strive to improve their environmental performance.

MEXICO’S INVESTMENT ATTRACTIVENES

The future of the Mexican mining industry around the trend is still uncertain. Whether the country is more in the zone of

Year

Investment Attraction Index Ranking

2010

20

2011

11

2012

25

when it currently has a market share of 38 percent, and to grant the

2013

31

state exclusive control over strategic minerals like lithium.

2014

24

According to CAMIMEX, the reform is an obstacle to the mining

2015

37

sector to move toward greater sustainability. Flores explains

2016

50

2017

44

Currently, the sector obtains 34 percent of its energy from clean

2018

29

sources. Following the reform, there is a risk of not only slowing the

2019

38

2020

42

opportunities or risks will depend on the decision of Congress to approve the electricity reform proposed by President López Obrador, according to industry experts. The main reform proposals that put the development of the sector at risk are to grant CFE a guaranteed market share of 56 percent of electricity generation,

that the cancellation of permits proposed in the reform would prevent the sector from having access to clean energy sources.

progress of the sector but of a setback.

Given the uncertainty surrounding the sector and the risks that are being presented, CAMIMEX, together with other companies and sectors, has called on the government to open a dialogue in

Source: CAMIMEX

which the opinion of all interested parties and an in-depth analysis of the impact of the electricity reform on the development of the country can be considered. “The electricity reform is putting at risk existing mining companies, which generate well-being for more than 690 communities in the country and employ more than 2.3 Read the complete article More about this topic

million people on which families depend. We need to establish a better dialogue with the authorities and show them the risks of the reform,” says Flores.

VIEW TOP Finance & Investment | 37

from the

Q: How have President López Obrador’s policies affected Mexico’s mining investments?

A: This administration has presented policies that are contrary to fair and reasonable investment. In sectors such as hydrocarbons and infrastructure, we have seen a trend toward abandonment of public-private partnerships and projects. Their treatment of PEMEX and the cancellation of NAIM are two unfortunate precedents that directly and negatively impact how foreign investors view Mexico. Despite these short term concerns, we remain optimistic for the long term potential of Mexico. We hope things will move back toward more rational policies over time. However, we have addressed this political volatility and higher risk by expanding our activities in both Chile and the US. Q: What compelling arguments advocate in favor of the role of mining in Mexico’s economy?

A: The best thing that any government can do is create positive conditions conducive for new investments and economic activity.

Mexico’s mining industry is focused on generating economic activity in remote, rural and impoverished areas because that is where the mines are located. We work in places where there is scarcity of employment, education, health resources and public infrastructure. At every significant mining project in Mexico, companies invest in the development of the communities, in

Bradford Cooke

education by developing local and diversified workforces, talents and skills and in health by facilitating new clinics and medical services. Our industry’s ESG work in the country is exemplary and it sets a standard for all new investors to follow.

Executive Chairman of the Board | Endeavour Silver

The freezing of new mining permits and concessions places these beneficial activities at risk. We can exemplify that with our own activities in Mexico. For example, we are in the final permitting and initial construction phases of our next and largest mine, with

Demonstrating the Value of Mining to Mexico

an initial capital investment of US$175 million that will create economic activity worth over US$1 billion over the coming 10 years. We have to move very carefully at this stage because we are risking a significant amount of our shareholders’ capital in this new project. However, it is a desirable mine for all stakeholders, and we continue to view Mexico as a desirable jurisdiction, so I believe we can weather this current storm. We hope that the government comes to understand that the halting of all new exploration activity prevents the discovery of new orebodies and the development of new mines and therefore cuts the industry off at its knees.

Q: How does your outlook for gold and silver compare to the growing potential of other metals?

A: We still favour the precious metals although we are happy to produce base metals as byproducts. The precious metals have a key role to play in the global financial system, as a store of value and a hedge against inflation. Given the massive amount of monetary inflation worldwide during the global financial crisis of 2008, and more recently due to the COVID pandemic, gold and silver prices still have a way to go on the upside. However, silver is special in that it is also an industrial metal. Much of the

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enthusiasm for base metals has to do with the role they play in transitioning to a low carbon global economy, and you cannot have a green economy without silver. Silver is the backbone element of photovoltaic panels for solar power and of all electronic circuitry in electric vehicles.

Conference

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Highlights

Precious, Base Metals Could Provide Shelter From Volatility Dean McPherson Head of Business Development Global Mining | TSX

Andrew Snowden CFO | Torex Gold

John Darch Chairman | Sonoro Gold

Etienne Morin Chief Financial Officer | Orla Mining Ltd.

Jerry Huang CFO | Impact Silver

A

s geopolitical factors continue to turn up the heat for investors, some of Mexico’s key mining operators and industry analysts advocate in favor of both precious and base metals as an effective protection against volatility. Dean McPherson, Head of

Business Development for Global Mining at both the Toronto Stock Exchange and TSX Venture Exchange, says two questions need to be addressed: “what are the factors that are impacting metal prices and how can those factors create opportunities to build a robust business plan that can help avoid market volatility?”

Jerry Huang, CFO, Impact Silver, advocates in favor of the advantages provided by silver ventures using his own project as an example, which he characterized as a “midtier cap” project that was globally competitive in the precious metals context due to its yield, given its status as a “pure silver” project. Huang says that there are simply not that many pure silver mines and assets out there in the global investment market and that in the coming years, this would make the value of silver increase in a reliable fashion as the difficulties inherent to both its exploration and processing became more obvious and its application in multiple industries, many of them crucial to the energy transition, continues to rise.

John Darch, Chairman, Sonoro Gold, agrees with Huang’s enthusiasm for the potential of precious metals as a safe investment, saying that despite his obvious bias in favor of gold, “the big opportunity for Mexico lies in silver, copper and lithium, as we move toward a green energy transition.” Darch explains that it is important to be clear on the multidimensional levels inherent to the factors that increased market uncertainty. “Uncertainty could be traced back to these larger questions related to international conflicts, to interruptions in supply chains that could be caused by those conflicts or by the pandemic or by trends in political risk, such as a skewing toward nationalism and resource sovereignty.”

The question of political risk was further emphasized by Carlos Díaz de la Garza, CEO, Moody’s de Mexico, who noted that he has been aware of uncertainty coming from investors who are concerned about the role of lithium in the electricity law still pending review by Mexico’s legislative chambers. Andrew Snowden, CFO, Torex Gold, and Etienne Morin, CFO, Orla Mining, also argue in favor of the equal importance of base metals.

Snowden says that Mexico continues to be an attractive jurisdiction and a safe destination for investments due to its connection to

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both precious and base metal projects, noting that, “Mexico is already a Top 10 producer of gold, silver and copper, so it can leverage those to benefit from the energy transition.”

VIEW TOP Finance & Investment | 39

from the

Q: What is TM2’s role in metal trade and what value do you offer investors looking for the best options?

A: In all the places we have worked, a certain amount of raw material is exported through typical trading and brokerage and processed elsewhere. As a result, we are building a primary and secondary market metal exchange, which is based on physical metal. Effectively, we are a traditional physical metal exchange that allows trading. We also plan to enter the derivatives market. However, our main goal is to create an investment market. There is no market anywhere in the world where physical metal is traded and spot prices are created, which is what we seek to achieve.

In recent decades, trade has followed the producer-brokerfinal supplier model. We are creating a democratized, transparent and reliable market in which all metals can be traded. We trade metals like stocks. That is the opportunity we offer. We expand the investment universe by creating a new form of investment for liquid, tradable, technology metals.

Q: What are the benefits of having trade deals physically backed and how does this compare with new investment alternatives like cryptocurrencies?

A: Having a trade that is physically backed is completely

Petur Georgesson

different from cryptocurrencies. The ability to invest in any asset class will be in constant demand over the long term. We are in a 100-year super-cycle, where there is more demand for physical metal than supply. As a result, these assets will

CEO and Founder | Technology

Metals Market

increase in value. This is a unique opportunity.

While crypto and physically-backed trading are different, we really like crypto’s liquidity. We are working to allow the crypto universe to invest in our products. People can take a 100

TM2 Offers New Investment Market for Tradable Technology Metals

percent backed product and put it in a tokenized form and sell it on a crypto exchange.

Q: How is NASDAQ’s cloud-deployed matching process providing investors with real-time prices?

A: The NASDAQ name is known worldwide as a second-tonone market systems provider. They have been reliable and have powerful systems. As a result, we have been able to achieve both the type of footprint and the scalability that we expected. It has been a great relationship; we call them our big brothers because they work with us on so many different levels. Not only regarding technology in the market distribution of our products and prices but in our general marketing as well.

Q: How does TM2 work on data extraction of metal prices?

A: The process is accomplished in two ways. First, in the primary market, the gateway is when a product goes to a physical custodian. Second, a process then starts where the supplier on the TM2 platform lists prices directly. Effectively, prices come from the primary source of supply when the product arrives on the market. In the secondary market, where NASDAQ provides the technology, we have something called price discovery, where buyers meet sellers, and soon after a pricing process takes place. What we end up having is really

the most transparent form of pricing that can happen.

Our main objective at the moment is to increase our liquidity to reflect that even more. When you have buyers meeting sellers in a neutral way, that is when you get the truest reflection of the price.

Q: What are some mistakes that investors and metal counterparties still make in a metal trade?

A: TM2 seeks to educate people about metals because many times what readers learn about the industry comes from newspapers and often reflect a journalist’s interpretation. It takes more than one article to really understand investing. It is an ongoing education. If we can provide better information, people will be able to make their own decisions and understand why they are making them. Since most things need metals, it is important to understand the value of these resources and their future potential.

Q: What are the key aspects investors are looking for in a trade?

A: The No. 1 priority for investors is not to lose money and this can be achieved by being informed. The main element to understand is the lack of supply that exists in the market. By understanding the value of metals and their production, people can understand how supply and demand dynamics work. Investors should think about products they use in their lives, since everything is connected to a technological metal.

Each metal has its supply chain and most of them have a demand 10 to 20 times greater than the supply available. Understanding the dynamics of the market is the most important factor for investors.

Q: What metal is positioned as the metal of the future?

A: It really depends on the type of future you are envisioning. If you take the periodic table, there are at least 20 metals that will fuel the 21st century. The key metals will be those necessary for energy production.

For example, metals such as platinum, palladium and rhodium will be key in the automatic catalyst process.

Meanwhile, cobalt, graphite and vanadium will be very important on the electric vehicle side. In the aerospace and defense sectors, there will be other metals, such as rare elements, that will be essential.

All metals for these industries have different dynamics of supply and demand; therefore, there are both advantages and disadvantages. What matters is to invest in metals that will be required in three years.

If you are successful, you will have a good return on investment.

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VIEW TOP Finance & Investment | 41

from the

Q: How has the mining industry performed in your portfolio of activities when compared to other industries that you work with?

A: The mining industry has been our main source of work for more than 20 years. While many law firms have had problems derived from the COVID-19 pandemic, for the past two years, we have had the good fortune of participating in mediumsized transactions in the Mexican mining industry but in the last six months, we have been involved in much larger transactions that deal with world-class projects.

At the beginning of 2020, we witnessed a new wave of interest in Mexican mining projects, particularly due to a cyclical alignment of factors that included fluctuating commodity prices and the added uncertainty with which investors were contemplating their next move in the midst of the pandemic. Many people considered mining as a kind of shelter from this uncertainty and instability. Companies that invest in mining want to avoid declines in share prices that are too sudden, steep, dramatic or definitive. Investors want protection, so they place their resources in mining projects.

This is why there is a significant number of junior companies participating in mining exploration projects in Mexico.

Enrique Rodríguez del Bosque

We also work with the tourism and pharmaceutical sectors and neither of those industries saw the activity that the mining sector did. Furthermore, the resurgence we witnessed in 2020 was sustained throughout 2021, and the larger companies got involved this time as well. There were many ownership

Founding Partner | RB Abogados

transfers of established and consolidated brownfield mining projects. Many of these junior companies that came to Mexico through only one project in 2020 spent 2021 looking for their second and third projects. All of this happened despite the industry spending three months at the beginning of the

Demand Shows No Sign of Slowdown Amid Growing Concerns

pandemic with almost all of its activities completely halted.

This did not stop the tide of investments and projects in the mining sector.

Q: What important opportunities have you have identified in Mexico’s mining sector in terms of M&A? A: We have identified a number of interesting opportunities, especially among junior companies. Some of these companies were ready to launch their projects but ended up running into obstacles when trying to raise capital at the last minute, or they failed to reach their investment goals by small margins.

Others were small Mexican companies connected to one or two people who had trouble hanging onto some of their capital due to unforeseen circumstances generated by the pandemic. This created an opening for M&A surrounding smaller mining projects that have potential and that are incorporating their reserves.

These are not famous world-class projects but they have a role to play in the industry. In general, many investors turned out to be more interested in those projects than in larger

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mines that are in the production phase. Moreover, commodity prices are recovering quite well and are expected to rise further. Therefore, investors are not necessarily eager to cash out in the short term. They are looking for assets to back up and strengthen their portfolios.

Equinox Gold’s Mine Sold for US$100 Million in Cash 11/06/2022

Mining Industry’s Potential as Green Energy Market 12/28/2021

Mexico’s Mining Pipeline Increased to US$9.08 Billion 11/22/2022

Mining Companies Cut Budgets for 2022 11/18/2021

Costs for Miners Increase Between 4-7 Percent 11/11/2021

A Third of The Energy Used in Mining is Renewable: CAMIMEX 11/09/2021

Operational Costs Are Expected to Increase Throughout 2022 11/09/2021

Investment Will Drop to Zero With Electricity Reform: CAMIMEX 10/27/2021

Electricity Reform Puts Sector’s Sustainable Progress at Risk 10/26/2021

China’s Energy Crisis Hits Copper Prices 10/01/2021

3

Exploration & Development The sector’s recovery, following the pandemic and with high metal prices, is expected to boost exploration in 2022. The global exploration budget is expected to be 15 times higher than in 2021, circling US$12.8 billion, a figure not seen since 2013.

Despite a 63 percent hike in the exploration budget of junior miners — climbing to US$4.1 billion year-on-year in 2021 — major miners continue to lead exploration work, accounting for more than half of the exploration budget.

This trend is expected to continue in 2022.

Latin America is expected to remain a main destination for investment with Chile as the most attractive hub, followed by Mexico and Peru.

Mexico has gradually lost its attractiveness for investment in exploration, especially due to the 2013 tax reform and legal uncertainty, which could worsen if the government’s proposed energy reform is approved. This would, in turn, impact other activities in the sector. Still, the situation could turn around as companies will benefit from the market environment. Permitting is an element to watch out for, however, as overly restricting procedures could hinder projects and planned works.

3

Exploration & Development

46

Analysis Mexico’s Next Poles for Mining Exploration

47

Conference Highlights Communication, Technology Crucial for Exploration Decision-Making

48

Expert Contributor Michael Wood | CEO | Reyna Gold

49

View From the Top Damien Tang | Global Dealer Manager | GHH Group

50

View From the Top Taj Singh | President, CEO and Director | Discovery Silver

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View From the Top Jason Simpson | President, CEO and Director | Orla Mining

53

Analysis Mining Still Strong in Mexico Despite Short-Term Concerns

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View From the Top Silvia Regalado | Deputy Director | Brinks Global Services Mexico

55

View From the Top Luz Venegas | Business Development Manager | Ausenco

56

Conference Highlights Keeping Track of Developing Mining Projects in Mexico

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Roundtable Where Do Mining Companies See the Greatest Potential for Exploration?

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View From the Top Abraham Tacho | Managing Director | WSP Mexico

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View From the Top Carlos Espinosa | President, CEO and Director | Monarca Minerals

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Content Links

Exploration & Development | 46

Mexico’s Next Poles for Mining Exploration The great geological potential of Sonora, Guerrero and Oaxaca is attracting greater attention from investors and companies.

Experts believe that these states will be the new poles for exploration projects, as many areas remain unexplored.

Furthermore, experts say that if the sector’s uncertainty is addressed, there will be greater opportunities to develop the states’ capabilities.

“There are many factors that make Mexico an attractive destination for investments. The geology of the country is favorable for exploration and many areas still have opportunities to be explored with modern technology. In addition, there are many areas yet to be discovered in Mexico. The recent surge in metal prices is reviving exploration, especially in the north,” says Craig Gibson, Technical Director, ProDeMin.

MINING INVESTMENT IN MEXICO (US$ billion)

Currently, there are 307 exploration projects in the country, which represent 26 percent of the mining projects in the

2012

country, according to CAMIMEX. More exploration projects

8.04

2013

are expected as Mexico has joined the lithium rush, which is

6.57

2014

mainly benefiting northern states such as Sonora. “The gold belt in Sonora has developed further and it is considered

4.94

a more important area for gold in Mexico. In addition, exploration is expanding into new areas for battery metals,

3.75

2015

such as lithium in Sonora. These factors are benefiting

4.30

2016 2017

4.89

2018

4.89

the north of Mexico more than the south, so the main opportunities are there,” says Gibson.

The Guerrero Gold Belt, one of the country’s most prominent gold deposits, is getting a positive update on its reserve figures.

4.65

2019

After approximately three decades of exploration and drilling, the Guerrero Gold Belt has become one of the most exploited

2.50

2020

areas in Mexico, specifically its extraction of gold, reports MBN. According to David Jones, world-renowned geologist, very

4.24

2021 0

2

few or no assets in Mexico can come close to the combined

4

6

8

10

operations of the two most prominent extraction projects in the belt. Torex estimates the El Limón-Guajes mine will yield 430,000-470,000oz of gold this year, positioning itself as the

Source: CAMIMEX

third-largest producer in the country, while Equinox has adjusted its estimates for the Los Filos mine to anywhere between 50,000 and 140,000oz this year.

Mining opportunities are also ripe in Oaxaca. “We are very optimistic because Oaxaca offers great mineral conditions as it remains a relatively unexplored state,” says Luiz Camargo, Director General Mexico, Minera Cuzcatlan. In 2020, Oaxaca ranked fifth in silver and lead production, representing 4.9 and 3.2 percent of national production, respectively, CAMIMEX reported. Currently, there are 16 mining projects in Oaxaca, which include the San Jose mine of Fortuna Silver, the El Aguila and Alta Gracia mines of Gold Resource and Yautepec, Magdalena and Rama de Oro of Madoro Metals. The emerging belt has become the target of many exploration companies Read the complete article More about this topic

in Oaxaca. Likewise, in Oaxaca there is an opportunity with an emerging deposit of volcanogenic massive sulfides, which Vortex Metal plans to work on soon.

Conference

Exploration & Development | 47

Highlights

Communication, Technology Crucial for Exploration Decision-Making Lauren Megaw Investor Relationships | Reyna Silver

Magda Orozco Head of Administration and Commercial Relations | Maza Drilling

Ben Whiting President and CEO | Orex Minerals

Viridiana Lagarda Geology Director | Bylsa Drilling

Michael Konnert CEO and Founder | Vizsla Silver

M

exico has played a major role in the mining industry, given its growing geological potential. There are still enormous opportunities for exploration in the country that could be exploited through good community relationships, assertive communication,

technology and supply chain cooperation, agree industry experts.

“There is a cornucopia of mineral wealth in Mexico. It is not always easy to find the best locations but the country certainly has great geological potential,” says Ben Whiting, President and CEO, Orex Minerals. Drilling companies play an important role in the Mexican mining industry as well, says Magda Orozco, Management, Maza Drilling. “One of the most relevant factors is the level of knowledge that drilling companies have, in addition to high quality services for customers to feel comfortable. Also, providing a comprehensive service and focusing on sustainability are important.”

The economic geography of the country’s various regions was influenced by the development of this sector. Cities like Durango, San Luis Potosi, Guadalajara, Chihuahua, Guanajuato, Pachuca, Zacatecas, Parral and Fresnillo were founded precisely as a result of the flourishing mining industry. Since then, they have continued to grow and gain importance without being totally dependent on mining, according to Karina Rodríguez Matus, Partner, Rodríguez, Matus & Feregrino, in an article for MBN. Attempts to address global warming and transition to a netzero carbon economy have increased interest in renewable infrastructure, which demands the use of minerals, especially lithium, cobalt, nickel and copper. Besides mining’s contributions to these attempts, the sector has also been pressured to use greener sources of energy in its processes, and technology has often been an important asset to address these. “We are focusing on the decarbonization of our processes. Also, water recirculation processes are crucial in our efforts toward sustainability,” says Viridiana Lagarda, Geology Director, Bylsa Drilling.

While technology is crucial among mining field operations, it “goes beyond physical equipment and also impacts the way industry players communicate, both internally and externally,” says Lauren Megaw, Head of Investor Relationships, Reyna Silver.

Besides the legal aspects and concessions, mining companies must involve communities where they are working and maintain an ESG approach. While this has become an important trend in

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most industries, including the mining sector, in reality, this mindset regarding communities has always existed in the industry, says Michael Konnert, CEO and Founder, Vizsla Silver.

T

he West Coast of America was populated and developed on the back of the California Gold Rush, which started in 1848, after the Mexican-American War. Over 300,000 gold seekers flocked to the area and the state of California was founded in 1850.

American politicians at the time greatly encouraged not only Americans but people from all around the world to flock to the newly acquired land in search of gold, which greatly benefited the US economy.

Around 150,000 of the gold seekers, who became affectionately known as “49ers” — the year of peak immigration — came from overseas, mainly from Europe, Australia, China and Latin America, and went on to settle on the West Coast of America.

California became known as the Golden State and Nevada the Silver State, although Nevada has now produced more gold, at around 215m ounces to California’s 118m. Add in Arizona, and the area has produced 350m ounces of gold, around 5.3% of the

Exploration & Development | 48

total gold ever produced.

Northwestern Mexico’s Great Potential for Gold Discoveries Michael Wood CEO | Reyna Gold

This type of mass gold exploration has never occurred south of the border in Mexico. Still fresh from independence from Spain in 1821 — and having had two major invasions from both the French and Americans — Mexico was wary about further invasion and did not welcome the gold rushes of the 1840/50s.

And although US investment started to emerge in the later part of the 19th century, it was stopped by the Mexican Revolution.

Foreign investment did not really restart until the signing of NAFTA in 1994.

During this period up to 1994, while California and Nevada produced vast quantities of gold, Sonora and Chihuahua experienced mainly small-scale local production, which lacked the capital or the expertise to explore for major discoveries.

Until the signing of NAFTA, for a foreign company to explore or operate in Mexico, it needed to have a majority Mexican partner.

This greatly restricted the capital and expertise needed to make gold discoveries.

However, since the signing of NAFTA, things have started to change for the better. Based on an inflow of mainly Canadian and American capital, on the back of which major companies such as Goldcorp, Pan American Silver and First Majestic were formed with exploration assets in Mexico, two major gold trends have been identified flowing into Mexico from the US: the MojaveSonora Megashear and the Sierra Madre Gold and Silver Belt.

Over 50Moz of gold have now been discovered on these two trends and the discovery of intergenerational deposits like La Herradura has shown the vast potential the trends hold.

Also, the discoveries of bulk tonnage heap leachable gold deposits in Northwestern Mexico similar to those that catapulted Nevada to produce over 5 percent of global gold supply every year, have attracted a lot more interest in gold exploration in Sonora and Chihuahua. However, the knowledge of the gold trends is still decades behind peers California and Nevada in terms of understanding of the geology and consequently

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unlocking the gold mineralization. This grand prize is what excites the likes of Peter Megaw and Doug Kirwin, two of the world’s preeminent exploration geologists who are leading the exploration team for Reyna Gold, a newly formed company focused on gold exploration in Northwestern Mexico.

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from the

Q: What solutions does GHH offer and why do those solutions matter to your clients?

A: GHH provides solutions related to underground mining, tunneling and other heavy-duty industries. We have a strong global presence, with production facilities in Germany, Poland and South Africa. Our product range is diverse; we offer loaders, dump trucks, drill rigs and utility vehicles. It is important to us to provide products that are truly tailored to customer needs to be as fit-forpurpose as possible. Our customers know that our products are high quality and robust, ensuring their use for the long term.

We believe that our equipment can have a great impact on mining operations in various aspects, such as safety, cost and productivity. We have more than 900 employees, of whom more than 150 are engineers who understand in-depth mining processes and the needs of the market. This is one of our strongest differentiators.

Q: What is the role of technology and innovation in the company’s business?

A: The customer’s top priority is being able to safely stay productive while having full-time profitable solutions. As a result, we seek to make our equipment safer and more innovative.

New trends are moving toward greater electric and hydrogen

Damien Tang

solutions, which we are excited to offer to our customers.

However, today, the most valuable factor for companies is still the ability of machines to self-diagnose, monitor and remotely track themselves. As a result, we focus on making our mining machines

Global Dealer Manager | GHH Group

more manageable and efficient in planning mining tasks. We know the needs of customers vary; some want greater security, others focus on productivity or reducing costs. We adapt to the needs of each client and provide them with the best solution.

GHH: New Ally for the Mexican Mining Sector

Q: What are the most important needs that you expect your customers to have in the near future?

A: The main trend for the future is to have more cost-effective and environmentally friendly machines. We are already delivering zero-emission solutions with our electric loaders, which provide the customer with flexibility because their price is competitive, the battery size does not need to be huge and they use electrical cabling as a power source. We are seeing very positive results in Europe.

Automation is another strong trend in the market. In Europe, we are helping a customer develop a long-term remote, surface operation. Therefore, we are implementing different types of systems, machines and monitoring devices to achieve full automation. It is going to be a long journey but we are very excited to help our client. For this trend, I think the challenge is the ability to introduce reliable and safe technology but also the willingness of companies to adopt these new technologies and educate their staff on the new changes.

In Mexico, these trends are gaining traction, especially

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automation. It is important to understand that there are different levels of automation and what we have mainly identified in Mexico is that companies are looking for machines that can automatically detect a slowdown or a problem. We see great opportunities in this area.

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from the

Q: What makes the Cordero project so special for Discovery Silver?

A: Cordero is a development stage project in Chihuahua Mexico located on a well-known, major precious metals belt. We just released a technical study that presents it as one of the largest silver mines in the world, with very impressive NPV (current silver prices over CA$1.5 billion [US$1.2 billion]), IRR, payback and relatively modest capex. The combination of margin, size and scalability make this a clear Tier 1 silver asset and probably one of the most meaningful and important development-stage silver assets in the world right now.

Q: What are the highlights of your recent PEA and updated resource estimate for Cordero?

A: The total resource size of Cordero is over 1 billion oz AgEq and approximately 90 percent of this is in the M&I category (moving to Proven and Probable Reserves on completion of our PreFeasibility Study). Cordero ranks as one of the largest primary silver deposits in the world, just with its silver content alone.

The Cordero PEA outlines excellent project economics with a base scenario of US$22/oz, including an after-tax NPV at 5 percent of US$1.2 billion, an IRR of 38 percent and payback in 2.0 years. These financials are backed by a 16-year mine life

Taj Singh

with average annual production of 26Moz AgEq, which would make Cordero one of the largest primary silver operations in the world, comparable in scale to the total production of most senior silver producers. The average life-of-mine all-in

President, CEO and Director | Discovery Silver

sustaining cash costs stands at US$12.35/oz, which ranks among the lowest in the industry. The capital efficiency of the project is also industry-leading, with a base case NPV to capex ratio of 3.2.

Studies Reveal Exponentially Larger Potential

Q: Discovery has a cash position of over CA$70 million (US$55.1 million). How far into your project timeline will this take you?

A: Our current cash balance should allow us to progress Cordero to construction within two years with approximately the same cash balance as we have now. The approximate cost of all of the work required to advance the project to this stage (drilling, engineering, permitting, among other elements), including regional work looking for new deposits, should be offset by the inflow of approximately CA$40 million (US$31.5 million) worth of warrants and options to be exercised in 2022.

Q: What is your vision for filling a pipeline of earlystage growth projects for Discovery Silver?

A: Cordero is located on a 35,000ha land package. The resource/PEA area represents less than 1,000ha of this package.

During 2H21, we had reconnaissance teams mapping and sampling the property to build up targets using current and historical data. Also, several months ago, an airborne geophysics program (mag/EM) was carried out on the property as well.

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Between the geological, geochemical and geophysical layers of information we have compiled, we have already outlined +15 very interesting early-stage targets that have seen limited exploration work. We believe there is high potential for a brandnew discovery at this property in 2022.

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from the

Q: What was the main achievement for the company in 2021?

A: The most remarkable achievement was at Camino Rojo in Zacatecas, where we had the first gold pour shortly after 12 months of construction. The Mexico team is working to maintain that ramp-up by accelerating the mine and processing plant with the goal of reaching commercial production by the end of the 1Q22. In addition, we are using the ramp-up period to identify and resolve bottlenecks, while increasing daily production, execution time and performance.

Q: What strategic steps is the company taking to start commercial production?

A: Our priority is for the processing facilities to reach their capacity of 18,000 tons per day. A key factor will be keeping our employees safe, which has been a great challenge due to the pandemic. In 2021, we designed and built the mine with approximately 1,000 people on site under safe and healthy conditions. In addition, we seek to maintain our excellent performance as we ramp up in the first quarter of 2022 and then move to commercial production, which will lead to strong cash-flow generation which will finance our growth, especially with our exploration programs in Mexico. We believe there are many opportunities to find additional ounces of gold near our existing infrastructure. Furthermore, we will continue to make

Jason Simpson

progress and evaluate the sulphide project below the oxide pit, as we think there is still a great deal of value to unlock.

Q: How do you think the project will be affected

President, CEO and Director | Orla Mining

by market conditions for gold and silver?

A: In 2020, we were very fortunate to have ordered most of our major capital components for Camino Rojo, thereby avoiding some of the strong inflationary pressures in 2021.

Orla Mining’s Opportunities Go Beyond Commercial Production

Our focus in 2022, amid such an environment, will be to keep our total costs low.

The Camino Rojo oxide project is a low-cost operation and we believe that the healthy price of gold, which has been reasonably stable in recent years, will allow us to continue generating strong cash flows. The project is lower cost in part because we are located in the state of Zacatecas, a region very familiar with mining, which makes it easier to find highly qualified employees, suppliers and service providers.

In addition, the open pit processing that we have developed and will continue to mine in the next decade is an ore body that is close to the surface on flat ground, resulting in a low strip ratio and, therefore, lower cost. On the processing side, we have oxide ore that is amenable to heap leaching, which is a cost-effective processing method. All these variables contribute to a low all-in sustaining cost of about US$600 per ounce. Compared to the gold price, which is US$1,800 an ounce, this project generates strong margins.

Q: What are the main strategies the company will implement to increase the profitability of the project?

A: The project should generate strong margins . However, our goal is to reach nominal capacity in 1Q22 and after achieving that, we will work immediately to increase capacity. We believe there is a great opportunity to improve the tons-per-

day production. In addition, our team will find ways to save money and maintain our profit margin for our shareholders.

There are also two pieces that will add value to our Mexican assets. One is to find more gold in the 160,000ha that we have under our concession and process it in our infrastructure that is already built.

Second, there are 9 million additional ounces of gold that are in a sulphide format underneath our oxide pit, which is a tremendously important way to enhance Orla’s value. However, this will require a new processing plant and this is a potential future investment in Mexico that we want to achieve. Nevertheless, this is a longterm plan. The first step was to develop the oxide project and bring it to full capacity. Then we will work to optimize it and try to find more gold. The future for Orla in Mexico is very bright.

Q: What do you think is the best approach to further unlock the value of the project?

A: We have many options and as a result our plans have not yet solidified. We are considering an open pit scenario, meaning we could exploit a larger resource but with a lower overall grade. Another scenario is underground, which means that we would have the ability to extract a higher-grade portion of the mineral deposit with less waste. The last option is processing ore at Newmont’s Peñasquito’s plant, which would save us the capital cost of construction but would force us to cede 70 percent of the sulphide project value to Newmont. We are conducting studies to analyze these options and then compare their results regarding mineral resources, recovery rates, capital and operating costs. The end game is to generate the greatest possible value for Orla’s stakeholders, communities and employees. We do not know yet what the best approach will be but we hope to reach a decision later this year.

Q: What is the company’s ESG approach for 2022?

A: Zacatecas is a very good jurisdiction for projects but even in the best jurisdictions, companies still have responsibilities to fulfill. ESG is of great importance and underpins company decision-making. For Orla, ESG is highlighted by our care for employees, host communities, countries, environment, assets and investments. We believe that if we can generate benefits for all of our stakeholders, we will strengthen the long-term sustainability of our business. In addition, if you want to be considered a good long-term investment option, you need to manage your business responsibly and that includes all ESG matters.

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Mexico remains a major mining jurisdiction, as its long mining

STATUS OF MINING PROJECTS IN MEXICO

tradition, resources and geography make it one of the best places to develop a project. Even though the sector faces great challenges, chief among them uncertainty, expectations for the future remain positive with industry leaders hoping short-term hurdles are addressed. “Mexico finds itself in a fine position to grasp the opportunity to lead the Americas and the world again.

However, fear — of unstable taxes, labor, safety and government

63.30% Postponed 25.70% Exploration 6.55% Production 3.60% Development 0.67% Closure

policies — has pushed the country’s favorability as a resource development destination down to the lowest it has been in the past 30 years,” John-Mark Staude, CEO, Riverside Resources, says.

For decades, Mexico’s mining potential has been widely recognized worldwide, especially as it is home to high-value minerals, such as gold and silver. Its attractiveness has only increased with the discovery of deposits that contain the minerals of the future, such as copper and lithium. Extraction of the latter is still uncertain but it has attracted investor attention nonetheless. “The ongoing global push for decarbonization of the energy chain could propel Mexico’s mining sector in a positive direction to provide commodities and mineral products to fuel global growth and the transition to clean energy, clean air and clean water. The time for Mexico’s people and resources is now,” says Staude.

800 754

1,190

Although the minerals’ boom is benefiting mining worldwide, CAMIMEX reports that the performance of the Mexican mining sector worsened due to government decisions and legal uncertainty. In 2021, the sector attracted US$4.246 million, higher

600

than what was collected in 2020 but 15.6 percent below what was expected, which was US$5.03 billion. Alberto Vázquez, Partner, VHG Servicios Legales, told MBN that the federal administration’s

Projects in total

400

position is no longer about mixed-messages but a concrete posture against mining. “The president’s comments and actions confirm that the industry has been satanized. The biggest impact of this has been the lack of new investors, the lack of interest from foreign

307

companies that before would turn to Mexico as an alternative for investment. There are no new projects, no new investors and

200

there will not be,” says Vázquez. Delays and restrictions regarding there are 29 environmental permits pending from SEMARNAT and 8

43

78

permits have also raised concerns among investors. Currently, 34 from CONAGUA involving mining companies.

Closure

Development

Production

Exploration

0 Postponed

Exploration & Development | 53

Mining Still Strong in Mexico Despite Short-Term Concerns

Dialog is key in improving the relationship between the private and public sectors in favor of the industry. “By facilitating this dialogue, we can foster scenarios where every actor wins,” says Ivan García, Head of Technical Coordination at the Senate’s Mining Commission.

If the most pressing internal challenges are addressed, experts

Source:CAMIMEX

believe the country can become the top destination for mining projects in Latin America, as it just needs to become a more welcoming hub. Taj Singh, President and CEO, Discovery Silver, who has been involved in Mexican mining for more than 10 years, from exploration to production work, says the country has unique opportunities for miners compared to other jurisdictions. Besides Read the complete article More about this topic

permitting and Mexico’s geological fertility, Singh highlights the country’s talent pool and operating costs among the main advantages the country offers.

VIEW TOP Exploration & Development | 54

from the

Q: What effect has the pandemic had on metal transport security and how has Brink’s adapted?

A: Since road risks have increased in the last couple of years, we are facing unexpected challenges that trigger Brink’s to change the way we work, boosting tailored solutions to meet our clients’ needs and adapt to the new environment conditions. As we understood the new burglary modus operandi the pandemic introduced to the mining industry, the mandatory inclusion of technology in our solutions showed up and we enhanced our armored trucks to transport precious metals. Moreover, we detected that our operations needed to be perfectly aligned with our customer onsite protocols in order to minimize risks.

Our main concern has always been to understand and respond to our customer expectations and requirements. When the pandemic started, we reached out miners to find out their specific security issues and onsite protocols. Even when there was some resistance at the beginning, soon our clients understood that security is a synergy of our capabilities and local procedures: we are strategic partners to ensure safety and fluency in mining logistics.

Q: What variables are taken into account when developing a security plan for mining companies?

A: Our three main variables are landscape, communications and

Silvia Regalado

protocols. Let us take Sonora for example: Unfortunately, the landscape for transportation in Sonora has deteriorated over the years. We have increased our communication strategies with the mining companies. People in the mines are the first to know

Deputy Director | Brinks Global Services Mexico

when there is a security issue in the area, so we handle any issue through direct communication channels. We monitor areas with armored personnel, and if our experts consider conditions unsafe or detect vulnerabilities, we reschedule the service. Our clients – and their values – security are always the priority for Brink’s, our

Security Is Everything When it Comes to Precious Metals

technologies guarantee the safety of the truck and its content.

Q: What can mining companies do to improve security and what is one factor they should always prioritize?

A: Mining companies should focus on improving their communications with security providers. Mines have their own safety protocols in place, different from those employed by security providers. Everybody needs to be on the same page to prevent any conflicts when it comes to protocols. We need to work together and be in constant communication with our clients to complement and unify safety procedures. For instance, we have set up alert protocols with some of our mining clients.

We can see in real time if there is an incident in progress or if a transport is under threat. We are now introducing new protocols to communicate any issue even inside the mine.

Q: How do you choose your storage, logistics and telematics partners to offer the best service to clients?

A: We carry all local road services through PanAmericano’s fleet without any third party; we only collaborate with reliable airlines.

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We are constantly working with our air partners to improve the processes and ensure the threat of theft is minimized. We have boots on the ground confirming the arrival of precious metals at the points of departure and arrival. At the border, we also have a Brink’s station to serve as an entry point for the US and Mexico.

VIEW TOP Exploration & Development | 55

from the

Q: What does Ausenco aim to achieve in the Mexican mining industry and how did the pandemic affect the company’s strategy?

A: Ausenco is a global company that offers a diversified portfolio of solutions to various industries, including the shipping, railway and mining industries. Of those, mining represents a huge area of opportunity for Ausenco. We are excited to be working in Mexico again because it is a very important and strategic market for us. We are in the process of reestablishing trusting relationships with our Mexican clients. Ausenco combines all of its international expertise to provide mining companies with world-class consulting services.

The pandemic, however, has challenged the way we go about meeting clients. It is very important for us to visit clients and to get to know their projects because a project that is poorly designed can have detrimental repercussions. Our Director of Minerals and Metals Jim Norine and I are focusing our client out-reach efforts on personally visiting our clients and their projects. This demonstrates our level of commitment and respect for our clients.

Q: SilverCrest Metals has high hopes for the Las Chispas property in Sonora. What is Ausenco’s

Luz Venegas

role in ensuring the success of this operation?

A: We have a couple of important projects in Mexico, including Las Chispas. For this project, we have been bringing people

Business Development Manager | Ausenco

from our international branches to design its development.

Ausenco is also working on elements related to environmental and social responsibility.

Q: How should mining companies view

Ausenco Sees Opportunity in Mining Sector Despite Govt Actions

nationalistic governmental proposals?

A: Mexico is going through a very interesting time because there are many challenges ahead and the mining industry has been pushed out of its comfort zone. Mining companies will have to equip themselves with teams and alliances to face these challenges. Having the right teams will allow mining companies to develop in interesting ways. As an international company, we are required to adapt to different administrations and regulations, which is a plus for us. We always have the utmost respect for the administration in charge and its laws.

In regard to the government’s recent proposals, I believe that the industry must work closely together to improve existing practices. Mexico’s industry has so many good things going for it, including great engineering and fantastic personnel.

The country itself is rich in natural resources. The government needs to realize that the mining industry is at the forefront of multiple other industries in the country. It is the hidden catalyst for the recovery and future development of Mexico.

We remain optimistic. These challenges represent a great

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opportunity for the industry to grow in terms of its strength and resilience. For us, this means that we are going to be working very closely with our clients, providing them the tools and the information they need to ensure their projects are successful.

Conference

Exploration & Development | 56

Highlights

Keeping Track of Developing Mining Projects in Mexico Douglas Cavey Vice President Corporate Development | Defiance Silver Corp

Forbes Gemmell VP Corporate Development | Discovery Silver Corp

James Anderson CEO | Guanajuato Silver

Mehran Bagherzadeh Corporate Vice President | Riverside Resources

Kenneth McLeod President and CEO | Sonoro Gold

D

espite the hurdles the Mexican mining industry has faced in recent years, industry experts from top mining companies agree that establishing good community relationships, developing strong multinational teams, enforcing correct processes

and choosing the best financing options are the keys to overcome challenges and obtain success.

“Prioritizing for mining projects to succeed is a multilayer process. You have to work on many aspects from an early stage. One of the main ingredients is that you are never too early to become part of the community and get involved in discussions with local stakeholders. Local jurisdictions and politicians have a greater impact in how we interact with the community than federal authorities,” says James Anderson, CEO, Guanajuato Silver.

Today, jurisdiction is among the most important aspects to consider for mining projects to succeed. Establishing operations in states with long mining traditions helps companies to have an engagement and understanding with local communities and governments, says Douglas Cavey, Vice President of Corporate Development, Defiance Silver Corp.

“Sonora’s jurisdiction is one of the best in the world for mining companies. The state has relied on the revenues of mining production. The relationship between mining companies and the state government will surely continue to be very positive.

We have all the elements to make a very successful project in Sonora,” says Kenneth MacLeod, President and CEO, Sonoro Gold.

More projects are expected to be developed in 2022. For instance, in Chihuahua, Discovery Silver continues development on its 100 percent-owned Cordero project. Cordero “is one of the biggest undeveloped silver deposits globally,” says Forbes Gemmell, Vice President of Corporate Development, Discovery Silver Corp.

When it comes to establishing good communication practices, companies must engage with their communities and jurisdictions, hire the right people, manage risks and partner with the proper third parties. “It comes down to hiring the right people for the job and being sure that everything is done

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properly, following processes. Keeping communication open with our partners is important,” says Mehran Bagherzadeh, Corporate Vice President, Riverside Resources.

Exploration & Development | 57

Where Do Mining Companies See the Greatest Potential for Exploration?

Even though investment attractiveness has taken a hit due to policies and new initiatives, Mexico remains a prime destination for exploration. The country has many opportunities for companies since only 21 percent of the territory with mining potential has been explored. Companies assure that even those deposits that have been tackled could yield greater results with new technologies.

Mexico Business News asked major mining companies about the country’s exploration potential and their plans to unlock it.

We identified a great mining opportunity in Mexico, especially since it is the world’s leading silver producer. We do not have plans to invest in places other than Mexico, since its potential cannot be matched. Although we know that there are factors that affect the sector, its potential will continue over the long term. Our main project is San José, which is our new discovery in Chihuahua. Of the 15 holes we drilled, we received results from seven of them, demonstrating the high potential of the project. We were hoping to find more silver.

Instead, we found more gold and copper. We are waiting for other results to confirm which mineral is predominant. Our

Carlos Espinosa

new exploration program will reconfirm the results and will approach other areas.

President, CEO and Director | Monarca Minerals

Northwestern Mexico is highly prospective for gold mineralization. Geologically, it is very similar to California and Nevada but has never received the same level of investment or international attention. The discoveries of bulk tonnage heap leachable gold deposits in Northwestern Mexico similar to those that catapulted Nevada to produce over 5 percent of global gold supply every year, have attracted a lot more interest in gold exploration in Sonora and Chihuahua. However, the knowledge of the gold trends is still decades behind peers California and Nevada. This grand prize is what excites Peter Megaw and Doug

Michael Wood CEO | Reyna Gold

Kirwin, two of the world’s preeminent exploration geologists who are leading the exploration team for Reyna Gold, a newly formed company focused on gold exploration in Northwestern Mexico.

In 2020, we produced over 6.2 million oz of silver and we were among the Top 10 biggest silver mines in the country. In 2021, those numbers dropped due to the depletion of metals in main veins, which is why we are pushing forward additional mass exploration programs looking to boost our reserves. We are very optimistic in this regard as Oaxaca offers great mineral conditions and remains a relatively unexplored state.

In 2021, we began our intensive exploration project in San José.

Our US$10.9 million budget is specifically targeting Oaxaca, where we want to reach over 40,000m in exploration. We began

Luiz Camargo Country Director | Minera Cuzcatlán

the year with 34,000m and, throughout the exploration process, we have identified new areas that show indicators of potential resources.

VIEW TOP Exploration & Development | 58

from the

Q: Why should mining companies choose Golder, which has been acquired by WSP, for their transition to modern and environmentally friendly solutions?

A: Golder is now part of WSP, a 55,000-strong team of engineers, scientists and consultants in over 500 offices around the world. Around 14,000 belong to our world-leading Earth and Environment practice that can leverage a deeper bench of resources and a broader global footprint to better serve clients around the world.

Our industry-leading professionals share a common passion for technical excellence and innovation, delivering end-to-end environmental advisory and technical services to mining clients worldwide. We help our clients address the ever-evolving challenges that the Earth, environment and energy present to our client’s projects and operations.

Golder’s technical support for our clients covers the complete mine life cycle, from exploration, planning and design, development and operations, to closure. We have a special focus on key services, such as mine waste and water management, tailings storage, mine stability and geotechnical issues, environmental and permitting, mine closure and remediation.

Abraham Tacho

Our mining clients can find the precise skill and knowledge their projects require to achieve and deliver the expected results.

Q: How is Golder helping mining companies drive

Managing Director | WSP Mexico

productivity and operational improvement, while reducing their environmental impact?

A: One of our key objectives and that of the global innovation program of our parent company WSP, is to be Future Ready.

Deep Resources, Global Footprint Benefit End-toEnd Advisory

With Future Ready, we analyze future trends through four key lenses, namely Climate, Society, Technology and Resources – all of which are relevant to our clients in the mining industry. We bring our clients solutions today to meet tomorrow’s challenges in their projects and developments.

Q: How can Golder’s solutions improve the performance of mining companies, regardless of the mine and market conditions?

A: The extensive knowledge and experience of our consultants, engineers and scientists can provide great solutions and value from the start of the design phase, which are then carried through development and on to operations and the optimization phases.

We are now positioned to play a pivotal role in the decades ahead in achieving a sustainable, equitable and prosperous future for our employees, clients, stakeholders and society at large.

Q: What aspects of the market are benefiting miners the most and how can miners take advantage of them?

A: Right now, we foresee that the market will continue to demand commodities to achieve and realize the desired greener future. Renewable energies, electric cars, smart cities and

better public transportation require the minerals our clients produce. These requirements will increase as greener energies grow and are put in place, so we foresee continuous demand for commodities. The wider WSP is already working to design our sustainable communities of the future.

Also, our expertise is often called upon by mining industry organizations, like the International Council on Mining & Metals (ICMM), and by international nongovernmental bodies, such as the International Organization for Standardization (ISO), that seek to inform and guide businesses with best-practice principles and approaches.

Q: What impact does incorporating the company’s engineering and environmental services in the early stages of the mine planning process have on the life of a mine?

A: There is a great impact for our clients because we can plan the most relevant aspects involved in a project’s approval and social licensing, from the beginning through the integrated work of multidisciplinary teams involved in the concept and development of our client’s projects.

Q: When do you recommend mines start to develop the social and mine closure elements of a project and why?

A: Our recommendation is to include the social license to operate and mine closure requirements early in the definition and design phases. This is the most effective way to include them. The later they are considered into the development stages, the more expensive that those considerations and the related project modifications are. Doing this earlier provides owners with full visibility of potential risks and mitigations. They also can allocate resources to cover the expenses related to those items. In a perfect world, the development, the social license to operate and mine closure considerations interact and influence one another to obtain the best results and reduce uncertainties.

Q: How much does the environmental and social impact of a company change if Golder’s closure and post-closure solutions are incorporated?

A: It could significantly change. It could be as important as defining the mining plans, water and waste management plans. For example, if we can design the mine from the very beginning, we can consult with our clients on the best way to manage all of those items to plan and design the most efficient route to a safe mine closure.

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VIEW TOP Exploration & Development | 60

from the

Q: What market opportunities led Monarca Minerals to specialize in silver and gold projects?

A: Monarca Minerals is a Canadian-based company that identified a great mining opportunity in Mexico, especially since it is the world’s leading silver producer. In addition, we believe that the country has been very stable in terms of regulations, mainly because it has a long mining history.

Together, these factors made Mexico the best option for Monarca Minerals to enter the mining industry. Since then, we have focused on two things: precious metals and the Mexican territory. We do not have plans to invest in places other than Mexico, since its potential cannot be matched. Although we know that there are political and economic factors that affect the sector, its potential will continue over the long term.

Q: How does the company protect itself against market volatility?

A: Since we are an exploration company, we need large budgets to carry out our activities. This has forced us to be very disciplined and cautious in how we invest our financial resources. Most of our budget is allocated to exploration work while diversifying our projects. Our main project is San José, which is our new discovery in Chihuahua. We do not buy projects that have been developed by other companies. We

Carlos Espinosa

prefer to develop them from scratch. When our geologists told us that they had discovered this high-potential project.

We conducted lab tests and geophysical studies, which showed its vast potential, so we decided to acquire it. This

President, CEO and Director | Monarca Minerals

year, we did the first 4,640m drilling campaign and we are now verifying the results and planning to drill 10,000m next year. San José is a long-term investment that we are planning to turn into a mine.

Opportunities for Mining Exploration in Mexico Are Unmatched

Q: What is San José’s potential?

A: Of the 15 holes we drilled, we have received results from seven of them, demonstrating the high potential of the project.

In each hole, we found mineralization, confirming it is a very large deposit. Regarding mineral content, we found gold, silver, zinc and copper. We were hoping to find more silver.

Instead, we found more gold and copper. We are waiting for other results to confirm which mineral is predominant and based on that, we will do a geological model to do further drilling next year. The new exploration program is expected to reconfirm the results obtained and explore other areas as soon as we get the authorization from ejidos. We are currently negotiating with them and hope to continue exploration soon.

Q: What is the company’s approach to water and how does it plan to use it responsibly?

A: While we were drilling in San José, we found a great deal of underground water. We are planning to make use of it once operations begin. We are discussing not only how to make use of this water but also how to recycle it because we want

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to implement responsible management and minimize our environmental impact. These water issues have been very important to us because they have allowed us to get closer to host communities. Some communities do not have access to this resource. We develop a well to improve their access.

Territory Concessioned to the Mining Industry Has Decreased 12/08/2021

SEMARNAT Approves Zacatecas Silver’s Drilling Permits 01/17/2022

CFE Grid Connection Delays Major Mining Project 12/29/2021

SEMARNAT Green Lights Minera Cuzcatlán 12/22/2021

Orla Mining’s Camino Rojo Project Pours First Gold Bars 12/20/2021

Looking Deeper for NextGeneration Copper Discoveries Steve Robertson

Peñoles Plans to Explore Other Mining Countries in 2022 12/09/2021

Lack of Permit Forces Great Panther to Close Operations 12/06/2021

Capstone Copper: New Copper Giant 12/07/2021

Oaxaca: The Next Pole for Mining Projects 10/19/2021

4

Production & Technology As the world recovers from the COVID-19 pandemic, minerals continue to experience high demand. In Mexico, several major mining projects will start their production phase in 2022, significantly increasing national production. Some of these projects were expected to start production in 2021 but were delayed due to COVID-19 and a lack of resources and permits.

For years, mining companies in Mexico have highlighted that one of the biggest challenges to starting a new project is permits, since without them they cannot continue operating and, in some cases, operations are forced to shut down. In addition, political uncertainty is making it difficult to operate in Mexico, especially due to the electricity reform, with some companies weighing the potential of expropriation risk. Although authorities said that concessions granted would be respected, experts say that this will remain uncertain until the reform is settled.

Mining companies in Mexico will continue to face strong challenges in 2022. However, they are in a better market environment, with healthy profit margins. Additionally, new technology is allowing miners to recover more minerals, increasing their production and profits. Should conditions improve or remain unchanged, miners could even have a better year ahead.

4

Production & Technology

65

Analysis Mining in 2022: External Opportunities, Internal Challenges

67

Conference Highlights Multiple Strategies Needed to Remain Competitive

68

View From the Top Luiz Camargo | Country Manager | Minera Cuzcatlán

69

View From the Top Jody Kuzenko | CEO | Torex Gold

70

Expert Contributor Bradford Cooke | Executive Chairman of the Board | Endeavour Silver

71

View From the Top Mauricio Takashima | Country Manager Mexico | Furukawa Electric LatAm

72

Expert Contributor Ralph Shearing | CEO | Altaley Mining

74

Analysis Space Mining an Eventual Necessity

75

View From the Top Adrián Márquez | Director General | VMX MinePro

76

View From the Top Miguel Angel Perez | Operations Director | Aquafim

77

Conference Highlights Mining Takes Action Toward Positive Impact

79

Spotlight 2022 Looks Brighter for Sonoro Gold

80

View From the Top Chiro Ideriha | President | Hanwa American Corp. (New York branch)

81

Content Links

MINING EXPLORATION BUDGETS (US$ billion) 24

1,800

20

1,500

16

1,200 5%-15%

12

900

—

Aggregate nonferrous exploration budget

Cooper demand from solar and wind energy (thousand tons)

2022f

2021

2020

2019

2018

2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

0 2005

0 2004

300

2003

4

2002

600

2001

8

Min/Max

The mining sector’s recovery and high commodity prices are expected to benefit E&P mining companies around the world in 2022. While challenges remain, especially for those still in the process of launching new projects, several companies are planning to ramp up production to reap the benefits projected for this year.

MARGINS IN GOLD AND COPPER PRICES

“Early in 2022, Mexico finds itself in a fine position to grasp the

$/oz Gold

$/lb Copper

2,000

4.5

opportunity to lead the Americas and the world again,” JohnMark Staude, CEO, Riverside Resources, told MBN. In September 2021, junior and intermediate mining companies surpassed 2020 investment of US$12.1 billion, with a total of US$14.8 billion, amid a high metal-price environment. This is expected to continue in 2022, setting this year’s global exploration budget expectation 15 percent above 2021 levels, reports S&P Global.

1,500 3.0

However, according to experts, only minerals that show promising yields will benefit from this environment. Gold, which reached a new base level of US$1,700/oz in 2021, is expected

1,000

to remain the main exploration target. Meanwhile, green energy metals, such as copper and nickel, are expected to see 1.5

an increase in prices, while lithium and cobalt exploration is forecast to grow significantly. As a result, 2022 will set the stage

500

for prices to remain above the historical average until 2025. This trend will be mainly driven by an increase in demand for metals to fuel the energy transition, according to S&P Global.

0 2022f

2021f

2020

2019

2018

0 2017

Production & Technology | 65

Mining in 2022: External Opportunities, Internal Challenges

Adrián Juárez, Founder and CEO, CTA Consultoría y Tecnología Ambiental, says that as the world moves toward a renewablesand mobility-based economy, demand for some metals will

AISC

AISC Margin —

Price

AISC

AISC Margin —

Price

increase, among them lithium, copper, nickel, cobalt and steel.

This is an incredible opportunity for the country as the drive for the decarbonization of the energy chain will make Mexico a key player in the supply of raw materials and mineral products that

Source: S&P Global

will drive global growth and the transition to clean energy, air and water.

Production & Technology | 66

The COVID-19 pandemic also had an impact on commodity prices as investors searched for safe havens amid uncertainty.

Base metals and gold are the commodities that have benefited the most from this uncertainty. The increase in gold prices led companies that focus on this metal to healthy margins of 72 percent for 2020 and 2021. In 2022, margins are expected to climb above 85 percent for gold miners, reaching an alltime high. Meanwhile, for copper companies, experts forecast margins above 100 percent in 2022 as the weakness of the US dollar strengthens the mineral price, reports S&P Global.

Steve Robertson, CEO, Infinitum Copper, says copper companies have tremendous opportunities in Mexico, as it is home to worldclass deposits and has many undiscovered exploration deposits.

“It is certainly a good time to have quality copper projects.

Companies well positioned with the right people and projects in the industry get a lot of attention when the price of copper rises. We have a fantastic opportunity with our Adelita project in Sonora. Its exploration potential is great and in the current bull copper environment, we believe it has the potential to become a major project in Mexico.”

Significant projects will also start their production phase in 2022, increasing national production. Altaley Mining expects its Tahuehueto project in Durango to begin mineral exploitation in early 2022. The company said that exploitation of the mine was delayed in 2021 as Accendo Banco, one of the project’s financers, was unable to grant the loan due to the loss of its operating license. Altaley obtained a new loan of US$5 million from Sail Natural Resources LP to cover the expenses to finish the project’s construction. Meanwhile, SilverCrest Metals has announced that it will start production at its Las Chispas project in 2Q22. The company has said that it recently used US$30 million of its US$120 million credit line to advance the construction of its project.

In a nutshell, experts believe that the companies that will benefit the most in 2022 are those that work with trend minerals. As one of the largest producers of 17 minerals and with large deposits, Mexico could greatly benefit. However, the sector’s performance in 2022 will be impacted by national challenges.

Certain government initiatives could prevent Mexico from becoming a major supplier of metals for the energy transition, in addition to jeopardizing the development of the copper and lithium industries. Juaréz says that the authorities want Mexico to become an energy and technology leader, which is why the government wants more participation in the mining sector.

However, instead of promoting mining, it hinders it and thus reduces the attractiveness of the country. “It seems that Mexico wants metals but does not want mines,” Juaréz says. Projects that are already established or have concessions and permits granted are not expected to have significant problems in 2022. However, for those still waiting for clearance, their future is uncertain.

Luz Venegas, Business Development Manager, Ausenco, believes Mexico is going through a very interesting time as there are many challenges ahead. “The government needs to realize that the mining industry is at the forefront of multiple other industries in the country. It is the hidden catalyst for Mexico’s Read the complete article More about this topic

recovery and future. However, we remain optimistic. These challenges represent a great opportunity for the industry to grow in terms of its strength and resilience,” says Venegas.

Conference

Production & Technology | 67

Highlights

Multiple Strategies Needed to Remain Competitive Karen Flores General Director | CAMIMEX

Faysal Rodriguez VP | Torex Gold Resources Mexico

Rafael Rebollar CEO | Industrias Peñoles

Peter Hughes-Hallet

M

exico’s top mining companies must take into consideration multiple strategies, challenges and innovations to remain competitive and overcome obstacles brought on by the pandemic. While experts are confident

investments will increase this year as new projects start commercial production, most challenges will remain and the long-term context should be front and center.

“Long-term projects need to tackle exploration and production, along with various internal and external processes, such as regulations, community context and environmental requirements,” says Jaime Gutiérrez Nuñez, President, CAMIMEX. Nuñez says experience, adaptability and the ability to change

Country Manager | Newmont Mexico

to address external and internal market and government

Jaime Gutiérrez Núñez

issues are key to succeeding in the industry. Counting on

President | CAMIMEX

experience and having the right equipment are two more key factors in improving performance, regardless of external scenarios, says Rafael Rebollar, CEO, Industrias Peñoles.

Leading companies also need to apply excellent execution and have a focus on risk management, according to Peter HughesHallet, Country Manager, Newmont Mexico.

“Overall, companies need to prove they care about the well-being of workers and the community and this is mostly achieved through genuine leadership and a holistic, wellness view from the company,” says Hughes-Hallet.

The latter will increase the company’s margins and spur a culture of continuous improvement to develop competitive advantages through human talent. “Responsible mining operations through and through will drive profitability,” says Hughes-Hallet.

Enacting operational protocols for efficiency and productivity has been the top strategy for Torex Gold. “That coupled with a strong environmental, social and corporate commitment,” adds Faysal Rodriguez, Vice President, Torex Gold Resources Mexico. Despite these strategies, each company will have to tackle its unique challenges related to the region it works in. “Guerrero, for instance, is one of the poorest states in the country, with a social complexity that does not resemble anywhere else. For us, the strategies need to go

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beyond corporate responsibility and really connect with the community to understand its social structure and not be disruptive,” says Rodriguez.

VIEW TOP Production & Technology | 68

from the

Q: How is production progressing at San José and what plans do you have to further increase it?

A: In 2020, we produced over 6.2Moz of silver and we were among the Top 10 biggest silver mines in the country, in addition to the 33,000 oz of gold we produced. For 2021, there is the possibility of a drop in those numbers due to the depletion of metals in the main veins, which is why we are pushing forward additional mass exploration programs looking to boost our reserves, which will increase our silver and gold production. We have been extracting 3,000 tons per day since 2016. Within the lifespan of the mine, we are planning to continue that production level with the veins that will be uncovered during the exploration projects. We are very optimistic in this regard because Oaxaca offers great mineral conditions as it remains a relatively unexplored state.

In 2021, we began our intensive exploration project in San José.

Our US$10.9 million budget is specifically targeting Oaxaca, where we want to reach over 40,000m in exploration. We began the year with 34,000m and throughout the exploration process this year, we have identified new areas in the deepest parts of the mine, which show indicators of potential resources.

Q: What are the new technologies that are generating a significant improvement in the company’s operations?

Luiz Camargo

A: We are in contact with the biggest worldwide technology suppliers to optimize mining operations. We do not settle with just reducing costs and increasing production. We are also looking to further minimize our environmental impact, as

Country Manager | Minera Cuzcatlán

well as improving our internal communication systems within the operation. In addition, we are looking to improve truck logistics and operating equipment to decrease carbon dioxide emissions. We are transitioning to having fewer and smaller equipment on site, which will eventually open the door to finding

Exploring the Unexplored in Oaxaca

more technologically advanced solutions, specifically on the automated spectrum.

Q: How does Minera Cuzcutlán push community development throughout the mine’s life cycle?

A: Our objective goes beyond producing silver and gold, we also aim to contribute to the development of neighboring communities.

The community’s voice is just as important as our own. Over 70 percent of the 1,200 employees in the mine are from neighboring communities. They get access to all the training necessary to operate the mine; in fact, the training they get could prepare them for other industries. In addition, we have a firm commitment of maintaining an open channel with the community to properly communicate the benefits of mining.

When we first arrived in 2006, we were met with a mass migration of working men from the state of Oaxaca searching for better opportunities in the US. With the arrival of the mine and all the opportunities that came with it, there is no longer a need to travel to the US. We also provide training courses and financial support exclusively to women. In the beginning, women made the uniforms

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for our employees. Today, some women have their own clothing businesses, which we are dearly proud of. In addition, the arrival of the mine meant further development for local businesses, which over 150 local suppliers that now contribute to the community by also developing businesses and activities.

VIEW TOP Production & Technology | 69

from the

Q: How is the company working to capitalize on the success at ELG while looking toward its developments at Media Luna?

A: We will need to deliver on the present and build our future simultaneously, which means 2022 will be a pivotal year for Torex.

To optimize and extend ELG, we are working on four key areas.

First, we continue to build on the company’s culture as a key strategic differentiator, which contributes to safety and production results. Second, we aim to deliver on our commitments associated with safety, production and costs. Just like the past three years, Torex wants to continue reaching its production guidance to the market. Third, we are looking toward the future as we work on our transition from ELG to Media Luna, with first production expected from Media Luna by 2024. The goal is to deliver smooth cash flow and production while we transition from ELG’s open pits toward Media Luna’s underground operations. Finally, we consider it essential to extend the life of ELG’s underground via ongoing exploration efforts. Torex has drilled a lot since it turned the mine on in late 2018. It has been a great asset, so the goal is to keep it going for as long as possible. Our exploration results look promising.

Q: What are the next steps for Torex’s Media Luna project following its feasibility study?

A: We have all hands on deck to finalize the project’s feasibility

Jody Kuzenko

study. Torex’s work for Media Luna in 2022 is clear. First of all, we need to finish the engineering properly, issue the capital estimates and complete the feasibility study, all while meeting our highquality standards and setting the company up for project delivery.

CEO | Torex Gold

We also want to continue our exploration and drilling plan on the south side of the river near Media Luna. We had an extensive infill drill program over 2021, drilling 80,000m and investing US$22 million. In 2022, we aim to drill between 64,000 and 65,000m at a cost of US$19 million. This would allow us to create a plan for our

A Pivotal Year for Torex’s Transition Between Key Mining Assets

existing resources while adding to our reserves.

Torex also wants to execute its early works for the mine. The Media Luna deposit is 7km away from existing infrastructure, across a river. Our ongoing work aims to access the deposit via a series of tunnels moving from north to south and vice versa. When we bring the mine online, we will become a diversified metals producer, adding 800 million oz of copper to our production.

Q: How is the company planning to continue with its permitting plan for the mine?

A: We were granted our EIA by SEMARNAT, which enabled us to start construction. Torex submitted its application for an integral EIA to bring all our activities into one broad permit and we have had constructive discussions with the regulator to this end, allowing us to move forward and reach a decision. Permitting is a reciprocal process and should be looked at on a case-bycase basis. Some of the stories surrounding delays in permitting are true. A reduction in SEMARNAT’s staff and a global health pandemic are not conducive to fast permitting. Nevertheless, a company’s reputation, as well as the scale, environmental impact

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and social approach of a project and the quality of the application are crucial. Torex is in a great position regarding all these elements. Our approach with SEMARNAT and CONAGUA has been positive and we look forward to working constructively with them as the project develops.

T

he Fraser Institute of Canada conducts an annual survey of government policies and performance related to the mining industry worldwide, to see which regions of the world have the most attractive versus least attractive government policies and performance

regarding the mining sector. Its 2020 survey shows that Mexico has a long way to go to be competitive in the world of mining.

MEXICO BEST POLICY PERFORMANCE Government Policy

Country Ranking (total 77)

Attractiveness Score (total 5.0)

Labour Availability

30/77

4.2/5.0

Geological Database

37

3.9

Infrastructure Quality

36

3.3

Environmental Uncertainty

44

3.0

Production & Technology | 70

Even though its best policies are in the middle of 77 different

How Can the Government Help Rural Mining Communities?

Bradford Cooke Executive Chairman of the Board | Endeavour Silver

jurisdictions worldwide, Mexico has a decent pool of skilled labor for the mining industry, a well-developed geological database to support exploration and mining, good infrastructure, such as airports, roads, power grid and social services, and reasonable certainty of environmental regulations, although the changes and slow down in permitting is a recent and rising concern.

Here is how Mexico scored on its worst four policies:

MEXICO WORST POLICY PERFORMANCE

Country Ranking (total 77)

Attractiveness Score (total 5.0)

73/77

0.4/5.0

Social Conditions

69

1.1

Labour Regulations

72

1.4

Political Stability

65

1.4

Government Policy Security Risk

Mexico’s worst policies and performance are readily apparent to most of us working in the mining sector and include security risks, social conditions, labor regulations and political instability.

So, what can the federal government do to help facilitate healthy employment and economic activity in these rural, economically challenged areas of Mexico? Clearly the policy areas with the worst performance need improvement. It is interesting to note that each of these four policy areas are not unique to the mining industry, they negatively impact all aspects of economic, social and political progress in Mexico.

Take security as an example. Rule of law cannot be found in many parts of the country. There is no quick fix to this problem, but doing the right thing in a quiet, systematic, consistent and persistent way will ultimately make a positive difference. In terms of social conditions, rural people are tired of not receiving the Read the complete article More about this person More about this company

public services found elsewhere in Mexico. In many cases, if a mining company wants to develop a mine in a rural area, it must also play a key role in the local community by assisting with public services. This we do quite willingly because it is the most efficient way to raise the quality of life in these rural areas.

VIEW TOP Production & Technology | 71

from the

Q: What are the main difficulties miners have regarding communication systems and why is Furukawa the best choice to solve them?

A: Communication is very important in every sector. In mining, the biggest difficulty is that the facilities at some companies are out of date, which makes the transition to Mining 4.0 difficult.

We help the industry by providing optical solutions with a higher bandwidth than are available at many facilities. Also, some miners fight electromagnetic interference; our fiber optics eliminate that challenge. Fiber optics is an essential mining technology for the future. If customers install it today, it will last at least 25 years.

Q: How can miners ensure that Furukawa’s optical fibers are tailored to their needs?

A: Furukawa not only supplies materials but also provides consulting to better guide customers who are inexperienced with fiber optics. The most important factor is to support our clients and find the best solution according to their requirements.

When we do consultations, we always consider the CAPEX and OPEX of our clients, demonstrating the monetary advantages of using fiber optic cables versus copper. Our clients then realize that investing in fiber optics is much better and more competitive than other traditional solutions.

Mauricio Takashima

Q: What benefits do the company’s solutions bring to miners?

A: Fiber optic cables do not need as much space for the installation

Country Manager Mexico | Furukawa Electric LatAm

of cables, which saves resources for companies. When using copper cables, every channel (length of 100m) requires the use of switches in the transition to the new channel, which is why many companies tend to spend more money on equipment and larger installations, in addition to require more energy consumption.

Fiber Optics the Future of Mining

Fiber optics perform up to 20km without the need for equipment in between (only on the edges: OLT and ONT), saving significant resources. In addition, these cables offer higher data rate and transmission standards, better resist high and low temperatures and have greater corrosive resistance against oils, greases and chemicals, which are common in underground and open pit mining.

Q: What infrastructure or resources does a company need to have to start using your solutions?

A: Furukawa’s solutions adapt to any mining environment, including harsh environments. Since many companies have not yet dealt with fiber optics, they believe they need a very different infrastructure to implement our solutions. But it is quite the opposite. If companies already have an infrastructure where copper cabling is used, it can be adapted to fiber optics.

Q: How does Furukawa introduce its solutions to the mining sector?

A: We are working hard in Sonora. We are strategic partners of the Sonora Cluster and offer webinars every month to promote our

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IoT portfolio, which has a wide range of solutions for the mining sector. With this alliance, we are not only getting closer to large companies but also to equally important suppliers. So far, we have had a very positive response. The sector is traditional, but companies are increasingly interested in using our technology.

I

t is estimated that one in every 10,000 exploration projects becomes a mine. Only a tiny percentage of companies move from the exploration stage to production, a truly tremendous achievement. Getting into production is just the beginning, though. Like any business, mining companies are continuously

working on streamlining their processes and improving the bottom line.

Although Campo Morado has been in commercial production since its June 2020 restart and is currently processing around 2,000 tons per day, the company is in an ongoing quest to maximize base and precious metal production returns. It is also exploring the opportunity of recovering previously sacrificed precious metals.

With the hopes of transitioning from a zinc producer into a primary precious metal producer with strong base metal byproducts, Altaley is exploring competing methods for better recoveries at Campo Morado. The initial plan includes microfine grinding and processing through one of several possible advanced flotation technologies. Next, it would follow up with forced oxidization of

Production & Technology | 72

tailings, using either the Albion™ or Leachox™ processes.

Dueling Tech: Which Alternative Will Pass the Test?

Ralph Shearing CEO | Altaley Mining

In recent years, rising energy costs have prompted the mining industry to find new solutions for increased metal recoveries. The development of entirely new flotation vessels and improvements to existing technology have prompted producers to explore microfine grinding and advanced flotation technologies. These new flotation plants reduce the company’s physical footprint, capital investment, operating costs, and power consumption and return improved recoveries. The three primary suppliers of advanced flotation cell technologies are Maelgwyn Mineral Services’ Imhoflot™ Cell, Glencore Technology’s Jameson™ Cell, and Woodgrove Technologies’ SFR or FDR. The Imhoflot™ pneumatic flotation pilot plant is up and running at Campo Morado and a three-month extensive metallurgical testing program has been initiated. Maelgwyn Mineral Services’ (MMS) Imhoflot™ technology was introduced to the mining industry more than 25 years ago and is typically characterized as being a nonimpeller flotation system. The technology offers high selectivity in terms of grade versus recovery relationship due to very small bubble sizes initially generated in the reactor and very high energy utilization in the mineral collection. It is also efficient in recovering small (<20µm) and coarse (>350µm) particles where tank flotation is inefficient.

Additionally, Altaley is now in the process of finalizing the delivery of a Jameson Cell™ flotation pilot plant. Glencore Technology’s Jameson Cell™ was developed to overcome the design and operating inadequacies of conventional flotation cells and column cells. It boasts creating the smallest bubbles for the highest particle attachment to deliver the most concentrate.

Altaley will initially test the recoveries generated by the Imhoflot™ and JamesonTM pilot plants to compare with the recoveries currently being realized within the mine’s traditional mechanical flotation circuit.

The company is also exploring and comparing the results from two forced oxidation technologies, the Albion™ Process, and the Leachox™ Process, as an additional opportunity to increase metal recovery at Campo Morado. Both have returned successful results in first-phase testing. Glencore Technology’s Albion Process TM has been used to produce high recoveries in refractory gold and

base metal concentrates at their six Albion Process™ plants in operation across the globe. The process is a combination of ultrafine grinding and oxidative leaching at atmospheric pressure. The sulfides in the base or precious metal concentrate feed are oxidized and valuable metals liberated, with the economic metals recovered by conventional downstream processing.

At Campo Morado, first phase Albion Process™ testing of fresh flotation tailings and historic tailings confirmed the potential to increase recoveries of gold and silver, plus increased zinc recoveries and zinc concentrate grade.

On the other hand, MMS’ Leachox™ Process also offers opportunity to increase metal recovery. The process uses an Aachen Reactor, a proprietary low-pressure, high-shear mass transfer device utilizing oxygen to partially oxidise the sulphides. When combined with the liberation of gold by the ultra-fine grinding of concentrates, it results in acceptable economic gold recoveries. The LeachoxTM process also dramatically accelerates the leach kinetics, reducing the leach time to a few hours from 24 hours for open tank leaching.

The LeachoxTM Process can be used to process fresh and historic tailings to potentially recover both base and precious metals not originally recovered within a mine’s traditional mechanical flotation cells. Successful first-phase Leachox™ testing previously conducted on Campo Morado mineralization in 2013 by the mine’s previous owner showed that recovery increases of up to 65 percent gold and 86 percent silver are possible at Campo Morado.

Altaley plans to move to second phase testing of the Leachox™ and Albion™ processes at micro-fine grind levels by testing tailings and/or concentrate produced through the best performing pneumatic flotation technologies currently being tested at Campo Morado. This second-phase testing will be conducted on fresh tailings from ongoing mining operations as well as the historic tailings stored on site within Campo Morado’s lower tailing’s facility. This historic tailing facility stores over 3.2 million tons of tailings containing significant base and precious metals not recovered in initial historic processing.

A successful phase two program of Leachox™ or Albion™ testing could pave the way to significantly increase recoveries and revenue from current production and possibly allow for a significant second revenue source at the mine by establishing an independent processing facility to reprocess the historic tailings.

Initial test results, expected by year end, will be compared to the recoveries currently being realized within the mine’s traditional mechanical flotation circuit. Once the results are in and the chosen technology is proven effective, it will be designed, funded and installed into the mill circuit.

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Production & Technology | 74

Space Mining an Eventual Necessity Going to net zero means that more mining is needed. Experts have said that the current supply cannot support the necessary metals demand for the green transition. As a result, new mining alternatives have gained greater relevance, among them space mining. Several countries, including Mexico, have shown their interest in this alternative, creating a new space race.

“There will come a point when there is nothing left to mine on the surface, prompting mines to reach even further below. But even those resources are destined to run out and so we will aim toward ocean mining, which already has specific technologies that are being developed. Nevertheless, even those mines are limited as well. The mine of the future, which today may seem unlikely, will no longer be on our planet. There will be a time when space mining will be as common as an open leach mine,” Eder Lugo, Minerals Head, Siemens, told MBN. Consequently, the mining industry has sought alternatives to achieve the required supply. Options include recycling and improved mine waste management, sea mining and space mining. The latter is considered one of the alternatives with the greatest potential. Despite the lack of knowledge regarding space mining, it has become a very attractive option since the planet is running out of resources. While some people believe that land-based mining is cheaper than space mining, experts believe this may change in the long term. Furthermore, within the solar system there are countless bodies rich in minerals, ores and elements that will accelerate the fight against climate change.

More than 150 million asteroids measuring approximately 100m are believed to be in the inner solar system alone. In addition, astronomers have also identified abundant minerals near the Earth’s space and the Main Asteroid Belt. There are three main groups into which asteroids are divided: C- type, S- type, and M- type. The last two groups are the most abundant in minerals such as gold, platinum, cobalt, zinc, tin, lead, indium, silver, copper and rare earth metals.

Experts have warned about a new space race, especially among US, China and Russia. The latter two are expected to join forces in an attempt to stop US from dominating the majority of the space commerce. The US has already announced NASA’s US$28 billion plan to launch a mission to the moon this year, followed by a crewed flyby in 2023 and lunar landing in 2024. Meanwhile, Russia is pursuing plans to return to space and establish a long-term base on the Moon.

Luxembourg was one of the first countries to show interest for mining space. Its Space Agency (LSA) seeks to accelerate collaboration to boost exploration and commercialization of space resources. In addition, the country has plans to begin extracting minerals from the moon in 2025. In Latin America, Mexico is taking a key role in the development of space mining.

Airbus Defense and Space, the Mexican Space Agency (AEM) and Mexican startup Dereum Labs recently announced they Read the complete article More about this topic

are joining forces to develop technologies to extract lunar resources and build the industrial ecosystem necessary to build this technology in Mexico.

VIEW TOP Production & Technology | 75

from the

Q: How can VMX MinePro help Mexican miners deal with difficulties related to heavy machinery?

A: One of the main challenges that occurs when using high production heavy machinery, is the equipment’s availability.

This availability within a mining process can greatly affect total mine production. Miners engineer their plans based on production targets; the certainty with which they expect to reach those targets can be greatly jeopardized by the availability of heavy machinery. VMX MinePro focuses on providing solutions. As a result, our sales are based on the added value of after-sales services packages and aftermarket support for each one of our products. This greatly improves the availability of heavy machinery. Imagine that you are a mine operator working with heavy machinery that costs US$2,500 a minute to use and if a technical issue makes this equipment unavailable for an hour, that operator is now looking at a stratospheric added expense for that downtime. Our after-sales support teams are trained to manage and solve these kinds of issues on site as quickly as possible. All of this amounts to a tangible material contribution to the productivity of any mine in which our products are present.

Q: What is the main difference between the company’s product and service offerings to those of its main competitors?

Adrián Márquez

A: We have different competitors depending on what stage of a mining process we are talking about. We are involved in all the processes that encompass the entirety of a mine’s productive value chain, from drilling to foundry. However, most

Director General | VMX MinePro

of a mine’s mobile heavy machinery is used in specific parts and processes of the mine and that receives most of our attention.

In that space, we can find ourselves competing with OEMs like Caterpillar, Komatsu, Sandvik and others, just to name a few.

Some of these competitors might also show up in our catalogues

Supporting Continuous Operations Through Component Supply

as well, since some of those companies can play several roles at once within the industry. These OEMs that we compete with have an advantage over us when one of their products, perhaps a piece of heavy machinery worth US$30 million, is still being used within its warranty period. Due to the value of that product and the corresponding value of that warranty, sticking to what the warranty offers makes sense in many cases.

However, when anything happens to void that warranty, we now have an advantage over them, since our services will be more comprehensive and less expensive than anything they can offer. For example, our service packages can include skilled technicians who can measure the wear and tear of each component in a piece of heavy machinery, such as a bulldozer.

That data can be implemented into our repair services and be available digitally to be monitored by the client. The warranties on our components are also extremely competitive. For instance, we can offer warranties for up to 20,000 hours on some of our components. In some cases, a single component can be worth up to US$1 million. Our warranty includes a twin component as a backup in our clients’ operations, in case of any failures. We are solving our clients’ issues of availability and if

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a failure takes place, other companies might promise to send a technician who will look at the issue and eventually decide if the warranty covers the repair or replacement. We offer a replacement upfront to keep our client´s operations going and worry about everything else later.

VIEW TOP Production & Technology | 76

from the

Q: What is the landscape for water availability related to mining operations in Mexico?

A: Water availability is very much a challenge that all industries are facing. Traditionally, water dams were specifically designed for agricultural activities but that water has been diverted to other industries. For mining, the situation is not looking great. CONAGUA reports that out of 150 aquifers the industry uses, over 30 percent are overused and others present high levels of salinization. In other words, 10 years ago, there was around 15 million hm of subterranean water available. Today, that number has dropped to 8.5 million. While mines do not compete with densely populated areas or with the agricultural industry, all their processes require water. We need to look for newer and innovative alternatives in regard to how the water is used to increase its efficiency.

Q: What is the future standard for water management and what areas of improvement should mining companies focus on?

A: We specialize in irrigation systems. Lixiviation is a big area for us and our focus is on increasing its efficiency. It has been proven that dripping irrigation systems in the lixiviation phase provide a level of uniformity that is hard to outperform. It is highly efficient and easy to monitor. Some situations however, due to hard-to-reach areas or weather-related situations, require sprinkler irrigation, for which we have top of the line irrigation technologies that allow operations

Miguel Angel Perez

to improve their efficiency and mineral return, as an example, recovering from Heap Leach Pad slopes with lower irrigation rate, using micro sprinklers.

Operations Director | Aquafim

Gold and copper mines will get the most benefit from our solutions. All of our lixiviation systems focus heavily on durability and solution-spread uniformity, which are both key for improving efficiency and metal yield. Another of our areas is ecology. When a mining operation concludes, green areas must be restored. This is

The Challenge of Water Availability

where we come in with our irrigation and greenhouse systems for plant nurseries. In addition, monitoring is an important factor with these systems. The reality of lixiviation projects is that even when developing an entire plan prior to the operation, there is always something unexpected or different when operations commence.

With a monitoring system installed, you can anticipate potential issues and minimize operators’ risks. In addition to the monitoring system, we visit the site and run various tests to identify how the dripping system is performing.

Q: How does Aquafim help companies to achieve their ESG goals?

A: When our systems are installed, mining companies can enjoy higher water efficiency and a higher return from their metal resources. For instance, mines that are operating in particularly high-temperature states, such as Sonora or Baja California, could see a huge increase in their water savings by switching from a sprinkler lixiviation to drip or microsprinkler solutions. Our greenhouse systems also allow mining companies to improve their environmental performance.

The way we like to present our solutions is not by showing how

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much water would be saved but, rather, how much will their core business improve. For instance, a mining company should not get an irrigation system just to save water. They should consider the irrigation system as a way to maximize their resource gains and their efficiency.

Conference

Production & Technology | 77

Highlights

Mining Takes Action Toward Positive Impact Ana Mallen Independent ESG Senior Consultant

Yuren castillo Earth & Environment Manager México | Golder WSP

Bradford Cooke Executive Chairman of the Board | Endeavour Silver

Cristina Rodríguez Subdirector of Sustainability | Minera Cuzcatlán

Ulises Neri Vice Chair México | EGRM and United Nations Economic Commission for Europe

Melissa Sanderson Founder of ESG | Mel Sanderson Consulting

Future challenges for the mining industry in Mexico abound. From water management in the face of scarcity to the implementation of greener alternatives at mining sites, best practices for approaching communities and ways to ensure benefits, as well as self-sufficiency for local communities after mining projects are completed are among the hurdles miners are determined to address.

A good start, says Yuren Castillo, Earth and Environment Manager, Golder WSP, is to look at other frameworks for inspiration, especially regarding climate change uncertainty. One challenge is that many mining companies in Mexico are close to the end of their mine life. For this reason, Castillo recommends and urges companies to ensure their projects end responsibly.

Regarding water supply, Castillo says water stewardship as an effective solution because of the inclusion of stakeholders and environmental well-being in a transition from simple water management to stewardship.

The consumption of elevated amounts of energy, says Castillo, is also among the highest operational costs for mining operations.

Demand for fuel is also projected to rise because processes are more arduous with lower quality ore, which requires greater processing. “Mining companies need to install green energy sources to minimize operational costs. Companies also need to engage in an open dialogue with the local communities and not create false expectations,” Castillo says. “It is important to communicate risks promptly once they have been identified.”

It is one thing to look at external frameworks for inspiration and quite another to allow outside forces to drive the mining agenda.

Bradford Cooke, Founder and Executive Chairman, Endeavour Silver, says that establishing a principle of responsibility for what he calls “corporate social integrity” is a better course of action.

For Endeavor Silver, this consists of private-public partnerships in which the company financially backs up community projects.

Successful partnerships with local communities, Cooke believes, are the result of establishing relationships prior to doing business.

Cooke adds that the industry’s most important water impact is from tailings facilities. “Wet” facilities, where the ground-up rock after minerals have been extracted are stored as clay in water behind a dam, can be replaced by dry stack tailing, which allows the recycling of water. “It may come at a greater cost but it provides a huge benefit where water can be up to 90 percent recycled, as is the case of Endeavour Silver,” he says.

The company recognizes the end dates of mining projects, which is why it invests in legacy projects whose impact can be broad.

One such example is the provision of scholarships for education well beyond mining interests.

Melissa Sanderson, Founder, Mel Sanderson Consulting, highlights the need for fresh planning as a key strategy in aligning the industry and communities on climate action, dust pollution within communities surrounding the mine sites, as well as other social factors. Sanderson emphasizes that that the expansion of social media has empowered all communities so the traditional image of stakeholders surrounding communities that have been directly impacted by projects may no longer be appropriate. As such, companies need to step up their game to adapt to a new climate, which calls for updated sustainable and social impact plans.

Increasingly, technologies and new mining techniques, are reducing water dependency by introducing earthfriendly bio-based chemical agents. Many mines today are enforcing measures to capture rainwater that flows into reservoirs and into use, Sanderson explains. Through her extensive work aimed at reaching agreements with local communities, Sanderson advises companies enter negotiations “looking for a compromise where both communities and companies gain. To achieve this, setting aside cultural prejudices and truly understanding the human side of these communities is required,” she says.

A staggered approach is another strategy for combating climate change. Cristina Rodríguez, Deputy Director, Minera Cuzcatlán, says her company’s emphasis is on setting short, medium and long-term goals for technological innovation to reduce its footprint in multiple areas, such as water, tailings and energy. The company is working with close cycles of water management to reduce impact and has a new project that uses solar panels. By measuring the impact of its 72 solar panels, the company has reduced over 100 tons of labor-related CO2.

Minera Cuzcatlán also ensures it leaves a positive impact on the local community. This is done by seeking out an understanding of what is needed in the community. The company has provided employment opportunities that have led to a reduction in migration out of the communities by those seeking better financial opportunities. In particular, Rodríguez says the company has greatly impacted the opportunities for local women.

In the end, an appropriate balance between shareholders and stakeholders and local residents and governments regarding mining projects is necessary, says Ulises Neri, Mexican Vice Chair, Expert Group on Resource Management and United Nations Economic Commission for Europe (UNECE). Companies need to consider how to do that, he says. There are many tools and standards to analyze goals and prioritize which activities are possible to develop in future stages, Neri says.

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SPOTLIGHT

Production & Technology | 79

Sonoro Gold Corp: Ideal Balance Between Risk, Reward The price of gold has been consolidating over the last year and looks set to resume its upward trend. Although gold stocks have received less attention than the precious metal itself, a clear pattern has emerged, and investors are now weighing which companies to invest in. Vancouver based Sonoro Gold Corp has achieved an ideal balance of risk and reward, making it an attractive option for investors, especially during the early stages of the current metals upswing.

The company has resumed drilling at the project while it develops its proposed heap leach mining operation (HLMO). The drilling program has been designed to expand the project’s resource and test the potential of higher-grade targets. The apparent risks of high-impact brownfield exploration are balanced with a far lower Read the complete article More about this company

risk mine development. Given that an independent PEA completed on Cerro Caliche indicates the proposed mine should generate an annual pre-tax cash flow greater than its current market capitalization suggests Sonoro’s stock is trading at bargain prices.

Share Structure

Warrants ($0.30)

73.04 million

Stock Options (WAEP $0.25)

9.85 million

Shares Fully Diluted

202.15 million

0.25

6.0

0.20

4.0

0.15 0.10

2.0 0.0

0.05

Oct-21

119.26 million

0.30

8.0

Sep-21

Current Issued & Outstanding

0.35

Aug-21

$20 million

10.0

Jul-21

Market Capitalization

0.40

12.0

Jun-21

3.9 million

May-21

Average Monthly Volume

SONORO GOLD TRADING VOLUME

Apr-21

$0.16

Mar-21

Year-Low

Feb-21

$0.39

to fund Company growth without dilution.

Jan-21

Year-High

immediate objective is clear: bring Cerro Caliche into production

Dec-20

$0.18

become a leading gold exploration and development company. Its

0.0

Share Pirce

Recent Share Price

opportunity. Management has a well-defined, realistic strategy to

Nov-20

CANADA……TSX.V: SGO USA…….OTCQB: SMOFF GERMANY……FRA: 23SP

Volume (million)

Trading Symbols

Sonoro Gold has developed into a relatively rare investment

VIEW TOP Production & Technology | 80

from the

Q: How did the company specialize in the trade of steel and recycled metals?

A: Recycled materials represent a fraction of our management of steel products. We acquire many steel products from primary sources as well, including blast furnaces. However, we have developed special kinds of alloys that are very common among volumes of recycled material. We began working on this line of business approximately 75 years ago. In its early days, it represented a very small and marginal percentage of our activities.

We were not always able to take this material to the market due to its inconsistencies in quality. However, this segment has grown steadily since then, in part because we are very keen to engage with recycled materials due to the environmental benefits that result from these kinds of operations. I joined this company 40 years ago and even back then, taking meaningful actions to reduce our environmental impact was an important part of our mission.

Our specialization in recycled materials comes from understanding the great reduction in emissions and waste that can be achieved by focusing on this segment of the business, which is a segment in our portfolio that has grown significantly over time.

Q: What are the main roadblocks to steel recycling in Mexico?

A: Scrap steel recycling is still a complicated business in Mexico.

It has a long way to go in terms of available infrastructure and

Chiro Ideriha

resources, especially due to the high volume of steel imported

by Mexico, primarily from the US. The decommissioning of major infrastructure needs to happen earlier and more diligently so that scrap metal can be available for recycling.

President | Hanwa American Corp.

(New York branch)

Mexico continues to be an important manufacturer of domestic steel products and, as such, its steel manufacturing pipeline needs to become more agile to satisfy an increasing percentage of this demand. The US began exporting its scrap metal for recycling

Steel, Non-Ferrous Recycling an Environmental Cornerstone

much earlier than Mexico, so it has an advantage over Mexico regarding the sophistication of its recycling industry, but we believe that Mexico is on the road to achieving that sophistication.

Q: How did the pandemic change the steel and non ferrous metal market?

A: Based on our activities in Mexico and other countries, we have not seen steel consumption and steel product demand affected significantly by the pandemic. In Mexico, we have seen demand for steel products continue to increase steadily throughout this period.

This is a trend that has become more generalized in developing countries — steel consumption is growing at a reliable rate every year. Our supply lines have increased in quantity, and they will continue to do so since we do not expect affectations for this market. In the US, there is an increasing need for supply and we are positioning ourselves to satisfy that demand.

Q: What will be the impact of the USMCA on steel markets?

A: It has been challenging. New US anti-dumping taxes and regulations have generated a significant impact in the way we

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manage our business in the US and Mexico. This is a major factor that remains out of our control, we are focusing our efforts to offer solutions to our customers. We understand the role of these anti-dumping measures, and some of them can even be effective at fulfilling certain trade and market objectives.

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Deep Sea Mining: Green Solution or Potential Disaster?

10/27/2021

Torex Gold Investments for 2022 11/04/2021

IoT Capability in Valve Products Reduces Downtime, Saves Money Rodrigo Garza Branch Manager, Bray Válvulas de México

Cosalá Operations Expected to Fully Ramp Up in December 11/11/2021

Minera Alamos Pours First Gold Doré at Santana Project 11/10/2021

Torex Gold Sees Steady Production for Years to Come 11/29/2021

Peñoles Plans to Explore Other Mining Countries in 2022 12/09/2021

2022: A Great Year for Mining Projects in Mexico 01/05/2022

Odyssey Marine Exploration’s Fight Against Mexico 01/13/2022

Acronyms AI

Artificial Intelligence

ICMM

AIMMGM

International Council on Mining and Metals

Association of Mining Engineers, Metallurgists and Geologists of Mexico, Zacatecas District

INEGI

National Institute of Statistic and Geography

AISC

American Institute of Steel Construction

INPI

National Institute of Indigenous Peoples

AMIA

Mexican Academy of Environmental Impact

IPO

Initial Public Offering

CAMIMEX

MBN

Mexico Business News

Mexican Mining Chamber

CANCHAM

MMF22

Mexico Mining Forum 2022

Canadian Chamber of Commerce in Mexico

MORENA

Movimiento Regeneración Nacional

CAPEX

Capital Expenditure

NGOs

Non Governmental Organizations

CIMMGM

Colegio de Ingenieros de Minas, Metalurgistas y Geólogos de México

NYSE

The New York Stock Exchange

CO2

PEA

Preliminary Economic Assessment

Carbon Dioxide

CSR

R&D

Research and Development

Corporate Social Responsibility

CTA

ROI

Return On Investment

Consultoría y Tecnología Ambiental

DTS

Dry Stack Tailings

SEMARNAT

Ministry of Environment and Natural Resources

ESG

Environment, Social and Governance

SLS

Solid to Liquid System

EVs

Electric Vehicles

SME

Society for Mining, Metallurgy & Exploration

FDI

Foreign Direct Investment

TMTC

FMS

TAKRAF Mining Technology Center (TMTC)

Fleet Management System

GDP

TSX

TSX Venture Exchange

Gross Domestic Product

HSE

Health, Safety and Environment

UNEP

United Nations Environment Program

ICMC

the International Cyanide Management Code

USMCA

United States Mexico Canada Agreement

ICME

International Council on Metals and the Environment

WIM

Women in Mining

Advertising Index Convención Minera de Sinaloa

1

Sonoro Gold 44

Bylsa Drilling 5

WSP Golder

Emerson

16

Cyplus 59

Iberdrola

22

Baltic Scientific Instruments Ltd

Torex Gold Sandvik

35

Epiroc 40

26

Promimex

52

73

Altaley Mining

78

63

Index 11

AIMMGM

Latin America United Nations

Altaley Mining

72

Minera Cuzcatlán

Aquafim 76

Monarca Minerals 32

Avino Silver

Orla Mining

Brinks Global Services Mexico 9

CAMIMEX

CIMMGM

CR Legal

17

60

51

RB Abogados

41

48 14

Sonoro Gold 33, 79 TM2

23

39

Torex Gold

CTA 12

69

TSX, TSX Venture Exchange, TMX Group

Discovery Silver

50

VHG Servicios Legales

Endeavour Silver 37, 70

VMX MinePro 75

Furukawa 71

WolrdWise Coach

GHH Group Hanwa

8, 10

Sinaloa Ministry of Economy

18

CLUMIN

54

Reyna Gold

30

CANCHAM

68

Ministry of Economy

55

Ausenco

34

80

49

WSP

58

21

13

29, 31

Photo Credits

Cover

Sonoro Gold Corp.

47

MBN

4

Torex Gold

48

Reyna Gold

8

MBN

49

GHH Group

9

CAMIMEX

50

Discovery Metals

10

Efrain Alva

51

Orla Mining

11

AIMMGM

54

Brinks Global Services Mexico

12

CTA

55

Ausenco

13

VHG Servicios Legales

56

MBN

14

Secretaría de Economía del Gobierno de Sinaloa

57

Monarca Minerals, Reyna Gold, Minera Cuzcatlán

17

CIMMGM

58

Golder

18

CLUMIN

60

Monarca Minerals

19

MBN

61

Orla Mining

20

CIMMGM, CLUMIN, VHG Servicios Legales

62

CyPlus Idesa

21

WorldWise Coach

67

MBN

23

CR Legal

68

Minera Cuzcatlán

24

Sonoro Gold

69

Torex Gold

25

Sonoro Gold

70

Endeavour Silver

29

TSX, TSX Venture Exchange and TMX Group

71

Furukawa

30

CANCHAM

72

Altaley Mining

31

TSX, TSX Venture Exchange and TMX Group

75

VMX MinePro

32

Avino Silver

76

Aquafim

33

Sonoro Gold Corp.

77

MBN

79

Sonoro Gold Corp.

80

Hanwa

81

GL Detect

34 Latin America United Nations - United Nations Economic Commission for Europe 37

Endeavour Silver

38

MBN

39

TM2

41

RB Abogados

42

Torex Gold

43

Sonoro Gold

84

Gold Resources

Credits Journalist & Industry Analyst: Paloma Durán Journalist & Industry Analyst: Lorenzo Núñez Editor: José Escobedo Senior Editor: Mario Di Simine Managing Editor: Alejandro Salas Publication Coordinator: Mayra Gasca Publication Coordinator: Constanza Blanco Content Partnership Coordinator: Alexa Villarruel Content Partnership Coordinator: Miguel García Content Marketing Coordinator: Christopher Reyes Graphic Designer: Marcela Muñoz Ledo Graphic Designer: Paulina Quiroz Senior Graphic Designer: Mónica López Design Director: Marcos González Web Development: Omar Sánchez Collaborator: Pedro Alcalá Collaborator: Cas Biekmann Director General: Jeroen Posma

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