Oscar González
Executive President
Americas Mining Corporation
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View from the Top

Mexican Institutions Sets Sights on Zinc

Wed, 10/18/2017 - 14:04

Q: How do you assess the impact of regulatory reforms for the mining industry in Mexico and what changes have ensued?

A: We have been paying a significant amount of tax since the mining royalties were introduced in Mexico in 2014, including MX$1.8 billion toward miners’ rights. From our experience, the local governments in Cananea and Nacozari – the municipalities where our Buenavista del Cobre and La Caridad mines are located respectively – are investing the resources generated from the Mining Trust Fund into projects that will have a lasting beneficial impact on local populations. We are fully supportive of the fund and we plan to continue allocating more resources for many years to come. An important part of our investment strategy is to spend US$25 million on exploration, so we were delighted to see Sonora’s governor recommend to Congress a reduction in exploration costs in the state. This would be a positive development that would boost the mining sector not only in Sonora but throughout the country.

We are also optimistic about the long-term effect that the Energy Reform will have on Mexico’s mining sector. We are already using our gas and wind-based energy generators to cover our in-house needs, as well as making a profit on the surplus. This is a strategy that is bringing great rewards for the company and we are committed to continuing our work in the local energy sector.

Q: How is your investment strategy evolving in light of volatile international commodity markets?

A: Copper remains the most important commodity in our portfolio, representing 80 percent of sales in 2016. Naturally, the fall in price of the brown metal has had a damaging effect on the business. This effect has been mitigated to an extent by our investment plan, which is designed to raise overall production levels across our  assets. For example, in 4Q16, copper production rose by 16 percent compared with the same period in 2015, helped by a rise of 57 percent in production at Buenavista del Cobre.

We have also begun to focus more on the base-metal sphere, particularly zinc. We acquired and reopened the Aznalcollar zinc mine in southern Spain in 2015, and we have great hopes for this project because we are confident that zinc is heading for a sustained period of strong price performance. Zinc production rose by 20 percent in 4Q16, while we also reduced AISC across the board. Despite the lower price environment for copper, our high production levels and low costs enabled the company to perform very well in 2016.

Q: Considering your extensive list of projects in the development and exploration phase across Latin America, where will you be focusing your efforts in 2018?

A: We are planning to move forward with a number of projects in the next few years, and Mexico is a priority for our investment plan, holding a vital place in our portfolio. In 2016, a total of 65 percent of metal and mineral production came from Mexico.

The primary focus is the San Martin deposit in Zacatecas, which has enormous potential but has been in limbo for the past 10 years due to a senseless strike that has been detrimental to workers, the state and the company alike. We are also preparing to move forward with the El Pilar, Pilares and Buenavista Zinc projects in Sonora, before turning our focus onto the Angangueo and El Arco assets.

On the financial side, we are waiting for the macroeconomic climate to improve in order to proceed with our plans to apply for an IPO for Americas Mining Corporation. Southern Copper has a dual-listing in Lima, Peru and New York, while Grupo México is listed on the BMV in Mexico City. We are convinced that an IPO will have a positive effect on the Americas Mining Corporation investment profile, although we are still evaluating where would be the best location for the company.