Investing in Quality Control Reduces Costs in the Long Term

Q: What advantages does Mexico offer in terms of trading minerals?
A: Mexico has a mixed market divided between national and international companies. It has high-quality minerals that can be marketed in Europe and Asia and provide flexibility in allocation. There are many great opportunities to be found in the country both in local business and in exportation. Mexican companies such as Peñoles are some of the biggest producers in the world. It is also strategically located near the North American market.
Q: How would you describe the quality of the country’s ports?
A: The country has made great strides when it comes to its ports and exportation options. Tampico used to be the only port in the country but Manzanillo became more popular when it was built as it offers greater access to China and Asia. Guaymas is also a strategic port but it has limited infrastructure. Geographically, inland freight can be cheaper at times to take material from Guaymas to Manzanillo and then ship from there as the latter offers better rates. Altamira is also a good option for those that need to export to Europe.
Despite the advances, Mexico could take greater advantage of its coasts. Other countries have more domestic vessel traffic while Mexico depends on trucks and railways to move goods. Increasing the internal use of ports would make them safer and cheaper and would also attract more investment to ports in the south that greatly need it. That would strengthen the country’s economy by making it better-connected.
Q: What should the industry be considering when it comes to insuring fleets?
A: Many mining companies do not know how to insure their cargo based on their incoterm contract agreements. This is a common risk of trading and many companies use a variety of strategies to minimize that risk. Big companies like Peñoles and Grupo México often have good insurance and can cover losses in shipment but smaller businesses often cannot cover the costs. This can lead to canceled contracts even after they have been signed. We recommend incorporation of a variety of control points in the process, whether loading the vessel at the port or in the mine.
Q: What can companies do to reduce the costs of shipping and trading?
A: Small and medium companies often do not want to invest in filters for the plant that improve the conditions of the material before shipping. We try to explain that it is better to make the initial investment as international standards are quite strict. It can be more expensive to have material or samples rejected and be forced to make adjustments right before shipping. Adding this kind of quality control during the processing plan pays dividends. The issue for many small miners is obtaining the capital to install these controls and filters and visualizing it as long-term investment. Many end up relying on traders and warehouses to control elements such as moisture and quality but these costs can quickly add up.
Q: How can Mexico improve its exportation facilities?
A: Ports should offer a more unified and uniform service. Traders do not want to share information with competitors but having more open data would help reduce corruption and robberies at ports. The government needs to do more than just track who is paying taxes and who is not. Fortunately, we have experience in these processes and we can help new businesses and suppliers navigate these issues. We also have the advantage of being a smaller company that can offer customized services. We are constantly on the lookout for the best rates in the country. We provide services to big players such as Peñoles and Fresnillo but also to medium and smaller miners.