Mexico Must Amplify Exploration to Reap Rewards like JuanicipioBy Cas Biekmann | Thu, 08/26/2021 - 11:48
You can watch the video of this presentation here.
As the world’s number one silver producer, Mexico’s potential is boosted by a bullish market and growing demand. To make optimal use of this opportunity, long-term exploration, successful operation and regulatory certainty need to be up to par. MAG Silver and Fresnillo’s Juanicipio project is gearing up to play a key role in the industry, making good on this promise.
In 2020 Mexico produced approximately 178 million oz of silver, beating Peru with its 110 million oz by a landslide. Fresnillo, located in Zacatecas, is the world’s primary silver camp, and while it is the biggest, it certainly is not the only asset Mexico can count on.
“Looking at camps that have produced over 1 billion oz of silver, Mexico takes up 8 spots of the Top 15,” said Peter Megaw, CXO of Canadian exploration and development company MAG Silver. What makes Mexico so special when it comes to its silver is hard to pin down, Megaw explained. “But what is more important is that people recognize this potential and, crucially, know where to look in their exploration efforts. Experts already note that silver has been bullish for a while now, but that demand could grow even further on the long term,”He continued.
“Fresnillo is cautiously bullish about the price of gold and silver in the near future. We expect prices to be at a good level in 2021,” said Octavio Alvídrez, CEO of Fresnillo plc.
Mining has a long and rich history in Mexico. “Historic global silver production has been between 48 and 50 billion oz, of which 12 billion oz have come from Mexico,” said Megaw. Part of this production goes back many centuries: “Conquistadores came for gold but stayed for the silver. It was silver that supported the Spanish empire for several centuries.”
Landmark silver vein discoveries go back as far as 1522. In Megaw’s point of view, this makes silver the “economic heart” of Mexico. Carbonate Replacement deposits (CRDs) and epithermal vein systems offer riches under the surface, but many remain unexplored.
Nevertheless, Megaw does not agree with the notion that exploration is coming to a standstill.
“Exploration in Mexico is not dead. There have been decades with low production and exploration, but since the mining law in 1991 and the rise in metal prices in 2003, it has grown exponentially,” he said. Much can be done by looking just past existing production, such as in the Fresnillo district. Here, Megaw highlighted the Santo Nino vein, discovered in 1975, yielded over 5,000 g/t of silver. The San Carlos vein found in 1997 is a whopping 6 km long.
Further exploration is crucial for Mexico’s development. “If you explore you can find crucial silver deposits with a life cycle on the long term and knowing that demand will only go up, you can support both the Mexican and the local economy to the fullest for many years to come,” said Megaw. Now that the clean energy transition is picking up steam, silver will become more demanded as a core component for renewable energy technologies.
For MAG Silver, a key recent discovery is that of Juanicipio, also located in the Fresnillo mining trend. Here, MAG also discovered the Valdecañas vein, a 6.35m long featuring almost 2 kilometers of gold, various grams of silver as well as lead and zinc, located 350 m below the ground. Altogether, a rather promising prospect. MAG announced an update on its Juanicipio project for 1H21 in August 2021: a recently started production of 80,830 tons yielded 835,706 oz of silver, 1,340 oz of gold, 270 tons of lead and 408 tons of zinc. MAG owns 44 percent of the project in joint venture with Fresnillo, which owns the 56 percent majority. Production is expected to ramp up fast, according to Fresnillo.“The Juanicipio plant is expected to come in on budget and as scheduled to commence commissioning during the 4Q2021, reaching 40 to 50 percent of its 4,000 tpd nameplate capacity by the end of 2021 and reaching 90 to 95 percent of its nameplate capacity in 2022,” reported the companies earlier this year. The project’s mill and floatation plant is under construction and expected to be completed soon.
Megaw stressed that the realities of mining need to be addressed if Mexico truly wants to remain the number one silver producer.
“Mining and exploration are high risk, high-cost long-term endeavors,” said Megaw, with only one out of 3000 prospects becoming a mine. It then takes 10 to 20 years to move a discovery toward production. “To maintain production, you must maintain exploration. If we want to be successful, miners must be sure about long-term investments, rule of law and regulatory frameworks,” he said.
Megaw emphasized that all further developments depend on having confidence in the Mexican political system in the long term, so the country’s regulatory framework should be strengthened further. “If Mexico strengthens its regulatory framework, it will continue to be the world's leading silver producer. Its exploration potential is tremendous and there are still many deposits to discover,” he said.
Keeping mining’s ESG track record in mind is equally crucial. “Going beyond the regulatory standards regarding social and environmental issues is simply the right thing to do. We need to be responsible and recognize that any mess that is made eventually affects everyone else in the world,” concluded Megaw.