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News Article

Keeping Track of Developing Mining Projects in Mexico

By Antonio Gozain | Thu, 01/27/2022 - 16:07

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Despite the challenging years the Mexican mining industry has recently faced, mining companies plan to continue working on exploration and production projects.  

This is why industry experts from top mining companies agree that by establishing good community relationships, developing strong multinational teams, enforcing correct processes and choosing the best financing options are keys to overcome challenges and obtain success.

“Enlisting priorities for mining projects to success is a multilayer process. You have to work on many aspects from an early stage. One of the main ingredients is that you are never too early to become part of the community and get involved in discussions with local stakeholders. Local jurisdictions and politicians have a greater impact in how we interact with the community than federal authorities,” said James Anderson, CEO, Guanajuato Silver.

Today, mining projects are developing in states with long mining traditions. For instance, jurisdiction is one of the most important aspects to consider for mining projects to succeed, and establishing operations in states with long mining traditions help companies to have an engagement and understanding with local communities and governments, said Douglas Cavey, Vice President Corporate Development, Defiance Silver Corp.

One of the states that has a prominent mining history in Mexico is Sonora, considered the largest contributor to the country’s mining industry with an outstanding share of 34.2 percent, according to CAMIMEX. Of the 1,190 active projects throughout the country, Sonora is home to 267 projects, representing  22 percent of national total. The main metals the states produces are copper, which represents 81.1 percent of the country's total production and gold, which represents 29.8 percent, reported MBN.

In Sonora, Sonoro Gold completed a PEA on their Cerro Caliche property in September 2021 with very promising results, reported by MBN. The open-pit heap leach operation at Cerro Caliche is expected to yield an average 45,700 gold-equivalent ounces per year over a seven-year period, the current estimated mine-life, corresponding to a total of 323,500 gold-equivalent ounces. The assessment further revealed that during the first three years of life, the mine would produce an annual total of 56,500 gold-equivalent ounces. Forecasted cash costs are of US$1,227 per g-e ounce.

“Mexico is a fine jurisdiction. Sonora’s jurisdiction is one of the best in the world for mining companies. The state has relied on the revenues of mining production. The relationship between mining companies and the state government will surely continue to be very positive. We have all the elements to make a very successful project in Sonora,” said Kenneth MacLeod, President and CEO, Sonoro Gold. At Cerro Caliche, “we have been drilling for the last three years. We are proceeding with the submittal of the EIA and the expectation is to start producing by 1Q2023.”

More projects are expected to be developed in 2022. For instance, in Chihuahua, Discovery Silver continues development on its 100-percent-owned Cordero project. Cordero “is one of the biggest undeveloped silver deposits globally,” said Forbes Gemmell, VP Corporate Development, Discovery Silver Corp, and added that the results of the PEA showed an NPV of over US$1 billion and an IRR close to 40 percent. The company anticipates delivering a pre-feasibility study by the end of 2022 and a feasibility study by the end of 2023.

When it comes to establishing good communication practices, companies must engage with their communities and jurisdictions, hire the right people, manage risks, and partner with the proper third parties.

“It comes down to hiring the right people for the job and be sure that everything is done properly, following processes. Keep communication open with our partners is important,” said Mehran Bagherzadeh, Corporate Vice President, Riverside Resources.

Third-party help is necessary for all mining companies in the country, which have to rely on their legal counsels and environmental groups - which do an important job, said Anderson. In addition, Anderson explained that all decision makers in Guanajuato Silver  are Mexican nationals, making conversations with third-party suppliers “very direct” and helping the company to succeed.

Multinational teams can also help during communication between mining companies, third-party suppliers and other important players, for instance.

“Our technical and field teams are all Mexican. However, when it came time of producing PEA, we brought an experienced Canadian team that had already worked in some projects in northern Mexico. This team had the ability to both effectively communicate with local third-parties and project information to any financial institution in the world. We have been able to combine the best of Mexican talent and the best of international talent,” said MacLeod.  

He also emphasized that both international and local talent have been blended together and will continue to overlap as the project goes through EIA. “Once production begins, it will be an all-Mexican team,” said MacLeod.

Challenges to Comply with ESG Principles

ESG has become one of the major trends among many industries, including the mining sector. Although ESG has always been inherent to mining, due to its social impact and community relationships, small companies face big challenges to address many of its principals while keeping production at optimal levels, agreed industry experts.

“ESG is a big question for small companies. The international market looks at us and expects us to address all these principles. From our perspective, the relationship with the community is crucial. We do not have a relationship with communities, we are the communities,” said Anderson.

Sonoro Gold has always practiced ESG in its own way, said MacLeod, and pointed that these frameworks have introduced regulatory measures that place mining companies in danger, given the difficulties they bring to raising capital.

“ESG regulations could end up affecting at local levels. If you are strangled by ESG regulations you will not build a mine and no schools are going to be built in the region,” said MacLeod.

The data used in this article was sourced from:  
MBE, MBN
Photo by:   MBN
Antonio Gozain Antonio Gozain Journalist and Industry Analyst