Copper Mining Success Despite Financial StrifeWed, 10/21/2015 - 09:18
At a time when significant volatility plagues the precious metals market, operating as a base metal oriented company has helped Capstone Mining (Capstone) overcome these hard times, according to Manuel Estrada, the General Manager of its Cozamin Mine in Zacatecas. However, he does not attribute Capstone’s resilience to its focus on copper alone. “Obviously, continuously improving our operations is a key technique that helps us to resist the market’s instability, although we still feel the impact of rising costs. Right now, this is the correct business for us, and we intend to continue down this path,” he explains. So far, Cozamin’s production levels have backed up Estrada’s enthusiasm. After extracting 45.5 million pounds of copper in from Cozamin in 2013, Capstone decided to spend US$3 million on exploration at the site throughout 2014. Also in 2013, an underground infill drilling program was completed to extend the mine’s life, enabling exploration in 2014 to be focused on 10,000m of surface drilling. Capstone has seen a significant annual increase in reserves at Cozamin since it began commercial production in 2006. “Originally, we only planned to be here for six to eight years,” Estrada comments. “We now have another eight years ahead of us, as Cozamin’s lifespan is expected to run until 2022. We have a new exploration program in place which we expect to be as successful as the previous one.”
Estrada sees Capstone’s improvement in efficiency as being a particularly important aspect toward anchoring Cozamin’s lengthened future. He explains that in order to make the most out of this extended presence in Zacatecas, Capstone is focusing on lowering costs and has positioned itself to implement a long-term strategy with its vendors. Estrada knows that the geography of Cozamin provides a lot of benefits. For example, Capstone does not need to maintain a camp at the location, nor does it need to fly people in and out, since the site is close enough to be reached by road. Furthermore, Zacatecas’ position as a mining hotspot has peopled the area with plenty of skilled, local workers, meaning that Capstone does not need to create excess expenditure by hiring non-local personnel. “Geography, plenty of local talent, and the efficiency of our production have all played their part in forging Capstone’s ompetitiveness. Our logistics infrastructure spreads to nearby air and sea ports, and our energy supply is important to maintain our low operational costs,” reveals Estrada.
The principal obstacle lying in Capstone’s path is the introduction of the new mining royalty. Despite being confident about the mine’s continued financial viability, Estrada admits that specific areas will certainly be impacted, such as local community development. “This new tax is to be applied to the social development of the community where the mine is located, so we would be paying double,” he remarks. Capstone’s existing program will have to be integrated into this scheme, but Estrada laments the lack of clarity concerning what deductions the company can make under these new conditions. “The other challenge is how to ensure that money reaches the local community. The money collected will go to the Treasury, but when it comes back, it might not impact the exact community where our mine is located. This means people from that community will not be happy and will come to us asking for their money. We are waiting to see how all of this will evolve.” Other costs have also risen, such as fuel, water, and other supplies. Part of this rise has been driven by demand within the mining industry but environmental factors have also weighed in. For example, Capstone has had to learn to operate at a higher tonnage with less water consumption. “We are in the middle of the desert and we are competing for water with the Grupo Modelo brewery, the biggest in Latin America. The water we need is being transformed into Corona and then exported out of the country,” explains Estrada.
Dealing with these challenges in Zacatecas has raised Capstone’s reputation within Zacatecas’s mining cluster, CLUSMIN, which Capstone helped to found. Estrada says that Capstone is actively participating within various CLUSMIN committees, which can be powerful tools for networking and business. “We have a mill that is similar to one of the mills owned by Minera Frisco at the Tayahua mine, so we are sharing spare parts with them. That relation started very simply: they encountered a problem, we had the spare part they needed, they found out about it through the cluster, and we helped them,” he states. While such relationships existed prior to CLUSMIN, the body has created a formal platform to share information, technology, and personnel development ideas. Another bonus is CLUSMIN’s ability to bring new suppliers and commercial partners to Mexico. Capstone encouraged its partners to get in touch with the cluster and then open offices in the region. This allowed the company to have access to technical support within a few kilometers of the mine, instead of having to rely on support from bases as far flung as Canada or Germany.