ESG Excellence Key To Success at Palmarejo MineBy Cas Biekmann | Wed, 02/17/2021 - 11:54
Q: What has Coeur Mining learned from 2020 that it can apply to its business?
A: In 2020, COVID-19 took us all by surprise but we worked hard to put controls in place that allowed us to maintain our business flow. We did face a 45-day government-mandated shutdown at our Palmarejo operation in early 2020. We were happy to restart operations but had to do so under strict COVID-19 health protocols. For us, there is nothing more important than keeping our teams, their families and the communities where we operate safe. The great thing was that our team had the motivation and mindset to get back on track. Despite the downtime, the company had great results. The recovery of Palmarejo has been fantastic. Our third quarter results showed a 92 percent production increase compared to the previous quarter. We plan to use the knowledge we have gained in 2020 to improve our operations in Mexico and abroad through sharing best practices. Even though it was undoubtedly a tough year, it has also been effective in terms of learning how to improve our business.
Q: What role did Palmarejo play in Coeur Mining´s quarterly results?
A: Palmarejo plays a key part. When you look at its contribution both in silver and gold production, it is a significant part of our portfolio. The exploration results we released in August 2020 demonstrated that we continue to seek to expand our Mexican operations, which is a critical piece of our portfolio. We are continuing to invest in Palmarejo. Our overall free cash flow contribution in 3Q20 was approximately US$45 million. It is a good price environment at the moment and the team is working hard and achieving great results. This was a major factor in Q3.
Q: Where do you think are the areas of opportunity to further improve operations at Palmarejo?
A: Palmarejo has a healthy business improvement culture. It was an open pit mine, which transitioned to underground. The team is doing a fabulous job at innovating, while developing new technologies and techniques to optimize efficiency. When you examine the costs of Palmarejo and compare them to past costs, it is quite amazing how these costs have been kept down in a more challenging environment. This includes underground above-ground operations, where several high-profile business improvement processes have been implemented. Recovery was traditionally difficult in the mine, but the team has greatly improved this process. In 2019, Palmarejo delivered over US$7 million in sustainable additional contributions and benefits from recovery projects through this Business Improvement program. This is just one of the many successful changes implemented in the transition to underground, which has lasted around one year. In prior years, the average production was between 4,600 and 5,000 tons per day. Following the temporary shutdown, production increased to 5,300 tons per day while improving the team’s safety and training.
Q: What are the medium and long-term exploration goals at the site?
A: We want to extend the mine life at Palmarejo. This is why we continue to explore the area, investing between US$50 million and US$60 million in exploration in 2020 across the whole company. This was a record for Coeur. If you compare that to the three-year overall outlook for the company issued in December, we plan to allocate around US$175 million in the aggregate to exploration. Our ambition is to extend the life of all our mines.
Q: Other than COVID-19, what are the main risks you think Coeur will need to manage in Mexico?
A: We have a robust risk-management framework and continue to improve processes and controls to manage the key risks we face. We have made a huge effort and are proud of the progress we’ve made both in ESG programs and in our ESG disclosures, including publishing our initial Responsibility Report in 2020. We strive to be a leader in ESG, not just among mining companies. As part of our ESG initiative, we undertook an internal materiality assessment to identify the ESG factors that are most material to Coeur. We identified 16 factors addressing governance, people and safety, the environment, anti-corruption and communities, among other items. We have also bolstered our internal resources dedicated to ESG initiatives. We do not see a trade-off between responsibility and profitability; we see them as directly aligned. Furthermore, Coeur aligns toward a vision of zero-harm mine sites from both a health and safety and environmental perspective.
Q: What is a tangible example of the company’s ESG approach having a positive effect on the company’s operations?
A: An example can be how we approach our permitting and licensing processes. We try to apply best practices that will be beneficial for the long term. For instance, at our Nevada operation, we were the first mining operation to participate in a State of Nevada sage grouse conservation program, a species of bird. By purchasing conservation credits, we not only helped protect over 3,000 acres of critical sage grouse habitat but also bolstered our already strong community relations. This type of investment benefits all stakeholders in our operation. Following the right path and applying best practices yields results because we receive support from government and locals alike, as well as having the support of our workers. It is good to communicate our efforts as a business. Coeur, therefore, tries to execute a balanced scorecard-type approach. This involves business risk, ESG, health and safety, as well as operational excellence and execution because we are in business to generate value responsibly. This approach is also balanced with how we execute capital projects, develop resources, build our team and take care of them. We look at all these parts and balance them in a short, medium and long-term framework. We have a tiered approach in regard to how we do business and build robust, executable plans, based on opportunities we can identify. Instead of working only on a one-year plan, we work toward five and 10-year plans. We also balance costs and budget with value, impacts and controls. The company continues to improve its processes from a lean business mindset so that we can be recognized as a leader in business management.
Coeur Mining Inc. is a well-diversified precious metals producer with five operations in North America. Coeur’s wholly-owned operations include the Palmarejo gold-silver complex in Mexico, the Rochester silver-gold mine in Nevada, the Kensington gold mine in Alaska, the Wharf gold mine in South Dakota and the Silvertip silver-zinc-lead mine in British Columbia.