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Insight

Industrias Peñoles Remains a Key Pillar of Mexican Mining

Mon, 10/21/2013 - 16:13

Billionaire Alberto Baillères, Mexico’s second richest man, has become an icon of the Mexican business world based on his leadership of Grupo BAL, the industrial, financial, agricultural and retail holding company. The Group’s integrated mining group Industrias Peñoles is an important player in both the domestic and international mining industry, and played an important role in the transformation of the Mexican mining industry. 1961 was perhaps one of the most significant years for the company, as it played a leading role in the governmental effort to ‘mexicanize’ the mining industry, which at the time was dominated by foreigners. During the period of mexicanization Raúl Baillères, father of Alberto, and José García played a big part in bringing ownership of Industrias Peñoles back to a 51% Mexican share, giving it a majority stake over its American partner and original owner, American Metals Company. In that same year Industrias Peñoles acquired 51% of Minera Fresnillo, located in Zacatecas State. Industrias Peñoles’ 2008 corporate restructure separated its metals divisions into Fresnillo, which focuses on precious metals, and Peñoles, which focuses on base metals.

Industrias Peñoles’ is today the largest primary silver and metallic bismuth producer in the world, and also plays a leading role in the Latin American region, where it is the biggest producer of primary gold and lead. Industrias Peñoles is currently Mexico’s second largest mining company, with a turnover of US$7 billion in 2012, 45.3% of which comes from silver production, and 30.5% from gold production. The company holds seven base metal units, seven precious metal units, two projects under development, three chemical plants and three metallurgical operations, as well as other energy and transportation infrastructure units. Exploration has been a defining part of Peñoles’s strategy, and a means to ensuring a steady stream of solid mining projects. The company invested US$312.9 million in exploration in 2012, which is three times more than it had invested just five years before. Its main exploration projects are in the Mexican states of Guerrero, Sonora, Chihuahua and Zacatecas, and internationally in Peru and Chile. Jaime Lomelín Guillén, one of the Mexican mining industry’s key leaders and the former CEO of Peñoles and Fresnillo and current Corporate Director of Grupo BAL, views the Group’s commitment to consistent spending on exploration as having been essential to its growth. During his time as CEO at Peñoles, Lomelín Guillén adhered to the strategy of making fixed investments in exploration activities each year, regardless of fluctuations in the market. For Lomelín Guillén, a good exploration strategy must be backed up by a strong team, and the company’s success is largely attributed to its employees, which in 2012 stood at 9,515. “To have a successful mining company you need three things – exploration, maintenance, and people – and people are the most important of those three requirements. If you do not have people you do not have anything,” he says.

Peñoles’s achievements over many years represent the company’s well established operative efficiency and effective cost control, as well as its successful development and application of new technologies and disciplined execution of growth projects. Among its most recent projects is the startup of the Noche Buena mine in Sonora, a unit that has set a new gold production record for the company, and the construction of the zinc mine in Velardeña, Durango, which is a decision that fits the Company’s vertical integration strategy in metallurgical operations. The polymetallic mine Rey de Plata is expected to produce zinc, copper, silver, lead and gold in 2015, the year in which the expansion of the Group’s chemical operations Química del Rey will also be completed.