Álvaro Chacón
Managing Director
Martin Engineering
View from the Top

Boosting the Relationship Between Productivity and Safety

Thu, 10/17/2019 - 13:08

Q: What changes are required in the Mexican mining industry to boost its development?
A: A better link between the industry and academia is required to boost the integration of technology. Some steps have already been taken in this regard. Universities are inviting companies to learn about new technologies and the benefits they could reap from investing in innovation. The University of Guanajuato, for example, is helping companies understand how they can achieve automation and implement the IIoT. Universities are also providing courses on how to adapt to changes related to human capital; for instance, how to coexist with millennials. This generation already understands how to use all the new technologies available. In addition, companies such as Fresnillo and Peñoles have opened innovation and technology departments that did not exist before, which highlights how important digitalization and automation are becoming in the industry.
Q: Last year, you highlighted a need for more diversified FDI. What is your view now, given the current mining landscape?
A: The banking sector is evolving and adapting to the specific needs of the mining sector, which changes the equation somewhat. Although it is great that there is abundant FDI investment in the industry, we also need to strengthen small and medium-sized Mexican mining companies to continue growing and these SMEs benefit from local financing. The priority now is to promote the national banking sector so it can support the growth of mining SMEs.
Q: Martin Engineering carried out a project with Penn State University to study the relationship between productivity and safety. What are the main results of this research?
A: The research resulted in an algorithm we use to calculate what we call return on belt conveyer safety. The theory is that implementing safety technologies provides a return on investing and this return can be calculated. For instance, GoldCorp invested US$158,000 to install safety improvements at its Peñasquito mine. Our analysis using the Penn State algorithm showed that this investment would lead to a 3 percent increase in productivity. We showed we can give clients a clear answer regarding ROI when investing in this technology. We finished the analysis of Peñasquito in 2018 and believe the mining industry will benefit from these findings.
Q: How has demand for Martin Engineering’s services evolved in the past year?
A: Since January 2019 our EBITDA is 30 percent below our expectations for this period, while sales are 50 percent below expectations as the economy has slowed. Martin Engineering has 14 factories worldwide and in 2016, 2017 and 2018, the facility in Mexico was the most profitable. The situation today is difficult and we have implemented some budget cuts. Our main success story is related to the productivity study we presented to Goldcorp for Peñasquito, which we hope to build on.  
Q: What strategies has Martin Engineering implemented to protect itself against external factors such as Brexit or the US-China trade war?
A: The key is diversification. Gold, for example, has once again become a safe haven and that is something we have to take into account. In Latin America, we have operations in Mexico, Peru and Brazil. Our priority is to identify the most profitable operations. We have even moved resources temporarily from Mexico to Peru to distribute costs and improve margins with respect to EBITDA.
Q: What are Martin Engineering’s expectations in the short and medium terms?
A: Our goal is to improve the profitability of our Mexican operations by reducing costs and attracting new customers. Through these actions, by 2020 we expect our sales to be only 35 percent below expectations, with EBITDA coming in just 15 percent below expectations.