Coeur Mining Strengthens Commitment to Community Health

Q: How has the COVID-19 outbreak changed the way Coeur Mining evaluates risk?

A: The pandemic has challenged and stretched every company in ways that were hard to anticipate. So far, COVID-19 has been a sprint, but it is likely that the sprint will become a marathon. When it comes to risk management, there are the obvious health protocols that we will have to follow in our daily lives. As we move into the marathon, we will have to include those protocols within larger strategies. Technology and testing are key. Technology will help us screen people to know if they present symptoms or have been in touch with someone with symptoms. It can also enable us to better practice social distancing at work. Before anyone comes on-site at our Palmarejo mine in the State of Chihuahua, Mexico, we use infrared cameras to measure their temperature. Moreover, we are developing a testing protocol that allows us and our communities to be regularly tested for the virus.

But the pandemic also affects other risk areas. Supply chains are a case in point. We have to be careful about over-relying on certain suppliers. It is of paramount importance to have enough materials on-site to withstand disruptions. Also, it has become more important to carry out scenario and contingency planning to determine how long our different operations can financially withstand varying disruption levels.

We formed an internal multidisciplinary committee in late February to lead our response to the pandemic. Our No. 1 goal remains to keep our people, their families and the communities safe and healthy. Goal No. 2 is minimizing business interruption. To achieve these goals, we have taken guidance from the CDC in the US, the WHO and Mexico’s and Canada’s health authorities.

Q: Will the pandemic result in higher ESG expectations for mining companies?

A: Companies pre-pandemic were already expected to provide value to communities beyond compliance with local laws. This is bound to accelerate given the strains that healthcare infrastructure is experiencing. An example of this can be found on the testing front. We are putting a great deal of energy and investment into testing infrastructure. Once implemented, we plan to let the local communities leverage the testing infrastructure. That is an example of a new addition to our community-based programs, but at Palmarejo, we have an on-site clinic that provided free healthcare to roughly 2,350 patients from the community in 2019. We will make the necessary investments so that the clinic is able to handle increased demand if needed. When our activities were temporarily suspended in compliance with the COVID-19 decree in Mexico, our clinic remained open to the community.

Apart from strictly COVID-19-related needs, the rest of our ESG commitments remain firm. A major one is tailings management. We have two active tailings facilities, including one at Palmarejo. It is a great responsibility, and we are focused on maintaining a low-risk profile for all of our tailing dams. The tailings facility at Palmarejo is a downstream construction, built on top of bedrock so that it does not move. The dam is very stable and we have strong water control techniques in place, along with robust surveillance and monitoring practices. Another of our key ESG commitments is promoting and exceeding fair employment practices (we pay our 880 workers and 345 contractors 39 percent more than the Mexican average wage). All our employees and their families — almost 3,000 people — are provided with free healthcare.

Q: What are the pillars of Palmarejo’s strong performance?

A: Palmarejo was our largest source of production ounces and cash flow in 2019, and 2020 started in the same fashion. It was our top-performing operation for 1Q20. Then, unfortunately, we had to temporarily suspend active mining operations due to the COVID-19 decree issued by the Mexican government. Palmarejo’s performance has been driven by continued solid planning, strong drilling results and the introduction of a third new underground deposit. The thing that has boosted our performance is a real focus on the processing facility and on improving our recovery rates. We used third-party experts to help us identify a few areas of opportunity that we have addressed to improve our recovery rates.

There is still some room for further improvement at Palmarejo. The processing plant is capable of handling roughly 6,200 to 6,500 tons per day. Prior to the suspension of activities, we were averaging just over 5,000 tons per day. We are now working our way back to that level. In any case, the remaining capacity can be a great source of growth for Palmarejo and the company as a whole. Grasping the opportunity is a function of drilling and finding incremental ore sources. Then, the logistics of hauling the material back to the processing plant will have to be sorted out. Our three deposits are about 7km away from the processing plant, so we will need to think through how we haul the material safely, efficiently and cost-effectively.

Furthermore, there is a metallurgical opportunity at Palmarejo that we are working to take advantage of. There are areas in Independencia, one of the three mining areas at Palmarejo, that present some silver encapsulation. Silver recovery there is challenging because it is encapsulated in silica. It is hard to liberate without aggressively increasing crushing. We can crush the ore up to the point where the silver can be liberated; however, that implies a trade-off in terms of grinding costs. Solving this metallurgical opportunity will also further strengthen Palmarejo’s future performance.

Q: What does Palmarejo’s future look like?

A: The key is to keep drilling and there are plenty of good targets at Palmarejo. We are interested in extending the three underground deposits. Also, there are other targets in the district that are in an earlier stage but show a great deal of promise. We increased our exploration budget for Palmarejo by roughly 30 percent compared to last year. The budget for 2020 is approximately US$13 million, which we expect will be disrupted a little due to the downtime we have had. Nevertheless, the main course of action remains the same. Up until the suspension decree, we had increased the number of drill rigs to 10, which is the most we have ever had at Palmarejo. Out of the approximately US$13 million, roughly 70 percent is expected to be focused on a resource-expansion program. We are not trying to take the existing resources and convert them into reserves. Rather, we want to find new resources and make new discoveries. Later, in subsequent years, we can shift the focus back to infill drilling with the goal of converting those newly-discovered resources into reserves. Any new reserves would go into the mine plan, contributing to mine life extension.