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Analysis

Leaders in Lead Optimizing Guerrero Operations,

Wed, 10/21/2015 - 09:40

Originating from a 2007 merger between Australian mining company Zinifex and Belgian materials technology company Umicore, Nyrstar has become one of the leading integrated metals and mining companies worldwide. It possesses prominent market positions in zinc and lead, as well as in the development of other base and precious metals. With smelting, mining, and other operations located in Europe, China, Australia, and the Americas, Nyrstar has an established global presence and employs over 7,000 people. Notably, Nyrstar is one of the largest primary lead smelting and refining companies in the world. The company produces lead concentrate and refined market lead, over half of which comes from scrap. In addition to mining and lead production, Nyrstar also recovers sulfur during its processes. This sulfur is used to produce a significant quantity of high-purity sulfuric acid. This chemical has become a vital commodity in any modern economy, with its consumption rate representing a reliable gauge for a nation’s prosperity. The chemical is an essential ingredient in the production of many products, including fertilizers, fibers, paint, rubber, plastics, steel, detergents, and medicines, and can even be found in many beers and soft drinks. One of its more specialized uses is in the production of high-strength fibers for use in bulletproof vests and yacht sails. Nyrstar produces hundreds of thousands of tonnes of sulfuric acid at its global locations every year.

Whilst Nyrstar is a relatively young company, most of its operations have a rich mining history. The company’s current projects are scattered across five continents and include nine mining operations and seven metals processing operations. Located in Guerrero, the Campo Morado mine is comprised of approximately 12,000 hectares across six mining concessions, and lies around 160km south-southwest of Mexico City in the municipality of Arcelia. Discovered in 1885, Campo Morado has extensive historical significance in Mexico as it was a key provider of metal for coinage during the Mexican revolution. Nowadays, some of the mineral deposits that are being mined at Campo Morado are comprised of high grade zinc, copper, lead, gold and silver, particularly the G-9 deposit which has been at the commercial production stage since April 2009. There are also three additional ore bodies which have since been identified, namely Reforma, El Rey, and Naranjo.

Nyrstar gained ownership of Campo Morado in January 2011, when it acquired then owner Farallon Mining. Nyrstar has recently placed Campo Morado in a process of operation optimization, helping it to produce significant amounts of zinc and copper, as well as gold and silver. The production capacity of Campo Morado is currently at 2,200 t/d, but Nyrstar believes that the mine possesses significant exploration potential. Since taking control of Campo Morado, the company has focused the majority of its exploration activities on an accelerated in-fill drilling program in order to extend any known mineral deposits. Once these activities are complete, Campo Morado could increase its production capacity by a considerable amount.

Toward the end of 2014, Nyrstar settled an existing silver streaming agreement with Silver Wheaton. Previously, 75% of Campo Morado’s Silver production was delivered to Silver Wheaton at approximately one quarter of the market price. This deal was ended on 31 December, 2014. Nyrstar agreed to make a payment of US$25 million to Silver Wheaton by 31 January, 2015, as well as granting the company a five year right of first refusal on any silver streaming transaction at any of Nyrstar’s properties.

While production at Campo Morado was relatively successful during 2014, the year still offered up its share of problems for Nyrstar. On November 13, 2014, mining and milling activities at the mine were suspended for two weeks due to a blockade by the CTM Trade Union. Nyrstar declared that the blockage by union activists was illegal as it was “preventing all mining and milling activities.” As a result of this interruption, Nyrstar evacuated all employees from the site for their own safety, although allowing work to continue on areas such as as site maintenance, environmental safeguards, and site security. Despite this reaction, Nyrstar forged ahead with negotiations with both the local and federal chapters of CTM to bring the matter to a swift close. The blockade ended up lasting from November 13 to 28 before discussions were successful and the union ended its protest. Nyrstar warned that this shutdown would have an impact on production volumes for the fourth quarter of the year, to the tune of approximately 2,000 tonnes of zinc concentrate. However, the mine’s production returned to pre-blockade levels in only a few days.

Besides this example of unrest, Guerrero itself also experienced particular civil strife in 2014, making the state a unique and challenging place in which to operate. While unfortunate local events have not directly affected Campo Morado, the situation highlighted the tension and the potential obstacles that mining companies could face in Guerrero. Nevertheless, given the state’s mining background, companies like Nyrstar continue to believe in its potential.