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ESG Criteria and Technological Developments Key for Top Mines

By Cas Biekmann | Wed, 02/10/2021 - 17:03

You can watch the video of this panel here.

During Mexico Mining Forum’s first day of its 2021 online edition, the fourth panel discussed the current state of mining operations in Mexico. Moderated by Dean McPherson, Global Head of Mining at the TMX Group, the seven panelists, involved in precious metal mining in the country, discussed various topics regarding operating in Mexico, ranging from investment, ESG issues to technological developments.

The companies made a brief presentation of their operations. “We have not one but two new discoveries that we like to take into production in Mexico,” said Bradford Cooke, CEO of Endeavour Silver, adding that the company, which already has three operations in the country, would continue to explore.

Eric Fier, CEO of SilverCrest Metals, said it was currently building the Las Chispas mine in Sonora, with some of the highest quality silver found worldwide. “We are hoping to have US$30 million of revenue by the end of that year,” he noted, adding that there were further satellite deposits to explore.

Jason Simpson, CEO of Orla Mining, with resources of over 10 million gold ounces in Mexico and Panama said what makes the company tick is the support by its industry veterans, as well as reputable board and partners. “But most importantly, we have the support of the communities we operate,” Simpson said.

Ralph Shearing, CEO of Telson Mining Corporation, outlined the company’s operation in Mexico “We are producing one mine and building another one. After purchasing one mine, it can now look forward to 2,000 tons p/d production at its new flagship project: Tahuehueto in Durango. It is a district-scale project, which is now 50 percent built. As the company is finalizing funding, it is hoping to complete construction by the end of 2021 and is hoping US$20 million free cash flows in operations or more.

As CEO of Golden Minerals Company, Warren Rehn operates Valerdena and is the newest gold and silver producer in the country after it started producing the Rodeo open pit mine in January 2021. The project looks promising, with US$1000 or less per ounce of cash cost.

Taj Singh, CEO of Discovery Metals, is developing Cordero silver in Chihuahua. The company is working a very extensive drill program to expand resource “We think it has the potential. We posted over a billion ounces of silver equivalent,” he said, adding that scalable silver assets are rare.

The final panelist is Stephen Orr, CEO of Gatos Silver, a company focused on exploration, development and production of silver at the Cerro Los Gatos mine in Chihuahua, which is now cash-flow positive. This year, the company listed its IPO on both the NYSE and TSX.

After a successful year, “there has been a lot of angst about going forward,” noted Dean McPherson. For a top operation, a top environment is a must as well. However, some panelists agreed that investors should not worry about demand or Mexico’s potential. Most metals have entered into a bull market in the past year,” Cooke said, noting that gold’s outlook was great because of various value drivers. However, the panel highlighted that silver could soon surpass gold: “Silver is both a precious and industrial metal. Industrial need can make it outperform gold: electric vehicles, 5G and solar power will drive a 20 percent growth in demand,” he said. Orr, in turn, highlighted the important role of government spending in this area: “Metals have been helped by massive demand coming from China,” he said.

As a precious metal, Simpson noted that gold would be popular as a hedge against inflation. However, this increased demand also means that precious metals should be extracted in a in a way that benefit far exceeds the cost.”

Singh agreed that precious metals work well as an inflation hedge, noting that silver outperforms gold when the metals are truly boosted. “We are in the early innings of what should be a good ride,” he said. As a key silver global producer, Mexico stands to benefit greatly from this wave as well.

In regards to operating in Mexico, all panelists agreed that the county offered favorable conditions. “Mexico is very safe,” said Fier. In addition, Rehn noted that low operational costs add to the benefits: “Diamond drilling is one third of the cost in Mexico compared to the US, and half of that in Argentina,” adding that its geography was spectacular. Mining is in Mexico’s blood,” Singh noted about the strong local mining culture. Permitting is clear and straightforward too, and environmental considerations were catching up fast, he added. Simpson, however, argued that there are still some challenges the country faces and that there is always room for improvement. Nevertheless, he rated Mexico four out of five stars.

With a return of more generalist investors to the mining sector, McPherson pointed out that environmental, social and governance (ESG) criteria have been brought back to the forefront. Investors now demand that miners prove that their operations are as sound as they can be. Singh, for instance, has not even gone into production, but will still do an inaugural ESG report because the company believes it is an important area to document. However, these issues are nothing new for miners: ¨Mining companies did not recently suddenly discover ESG, only the investors did,” Cooke said, explaining his company’s efforts to build infrastructure while involving the community in the process, making it more than just a handout. Rehn agreed: “Before the resurfacing of ESG, we had a good relationship with communities and investors in regards to social and environmental issues, but we did not do a very good job in communicating that with the rest of the world,” Rehn said. As an example, Fier showed his company’s long-existing ‘qualified’ approach toward gender equality, featuring internal targets: 50 percent of its executives are women and 30 percent of the board as well. Orr agrees with the importance of ESG, whether it is the latest trend or not: “We believe that we have an obligation to make people’s lives better.” Even though one of Orr’s projects only had one nearby ejido, the company built a hospital that is now staffed by health personnel provided by the local government. As a result, it has become a regional clinic.

Touching upon technological developments needed to become a top mining operation, Shearing said he managed to get higher recoveries using so-called Leachox testing. “Using Leachox testing, we can improve recoveries from current levels of gold at 15-20 percent and silver 30-40 percent, which would significantly increase the mines profitability by increasing the ounces of gold and silver produced at Campo Morado,” he said.

Rehn mentioned that for the Valerdena mine, a bioxidation plant significantly boosted gold recovery by using bacteria that metabolize sulphur. “The plant is a first in Mexico as far as I know,” he added.

For Orr, heat coming up during drilling of the Cerro Los Gatos mine caused significant issues. These were dealt with by building a refrigeration plant, which Orr said, “make a huge difference in productivity.” As a result, more of these plants are in the cards.

Cas Biekmann Cas Biekmann Journalist and Industry Analyst