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News Article

Mining Boom Triggers Diversification and Growth

Mon, 10/21/2013 - 22:46

Construcciones Cihuacoatl faced the last mining boom with almost three decades of experience under its belt. During that time, Rafael Gutiérrez Badilla, Founder and Director General of the company, identified opportunities in the drilling market and started Itzcoatl Drilling & Services together with his son, Rafael Gutiérrez Medina. “A lot of people in the area knew Construcciones Cihuacoatl as a construction company that provides great service. Therefore, they were convinced that Itzcoatl would do the same great job that Cihuacoatl had done. We can provide the two services, and our clients just deal with one contractor,” Gutiérrez Badilla highlights.

Having survived more than one mining market downturn, Construcciones Cihuacoatl has been able to diversify to manage the inherent risk in the market. The company is focused on the exploration stage of the industry, for which it can do most construction work. “When mining goes well, a lot of projects are available and employment is created,” explains Gutiérrez Badilla. It has been thanks to its exploration and mining clients that the company has been able to break into the Chihuahua, Sonora, Nayarit and Baja California markets. “We are the first ones to work on a new project, building access. This is the reason why we were able to start Itzcoatl Drilling & Services, which started operating in February 2011 and now has two teams in Minera Largo, a subsidiary of Golden Minerals, in Zacatecas.”

“The initial growth of Itzcoatl Drilling & Services was the result of a combination of our human talent and the mining boom, which allowed us to invest in the company. It was a very drilling friendly period and that helped us to position the company and expand our team to five drills,” says Gutiérrez Medina, Director General of Itzcoatl Drilling & Services. Currently, the company has five active drills and it is in the process of adding its sixth. “We perform diamond drilling and focus on making our equipment more versatile and adaptable to our clients’ needs. We have HQ, MQ and PQ equipment by diameter order, and a capacity of 800m to 1,300m, depending on the angle and drilling conditions. The industry is asking for 600m and 800m up to 1,300m drilling holes; these are dimensions that our equipment covers,” he adds.

One of the biggest challenges Construcciones Cihuacoatl constantly faces is the harsh terrain it is asked to operate in, such as in the Sierra Madre, where it is very difficult to drill. In these cases the company’s ability to use different types of explosives in steep terrain and difficult topography to access logistically difficult sites is an advantage. Gutiérrez Badilla notes that the hardest part is getting the required

permits. “It is currently almost impossible to get explosives permits, given the security issues in the country. The government is cautious and restrictive in terms of whom it can give the explosives to. If you are careful in handling the material there are no problems. But we are being asked not to store explosives, and instead to only apply for explosives to be used on a one day basis. That translates to high costs. We have found other alternatives, but they do not allow us to operate as quickly as we can with explosives,” he adds.

“For years we have successfully dealt with environmental and safety matters, and we can therefore provide reliable services to our clients on these very important matters. The same happens in drilling, where we are not just the company that drills, but we also provide quality samples,” Gutiérrez Badilla says. “Personalized service is what makes us different. We are always in touch with our clients because we believe communication is key to moving a company forward in this sector. We adapt easily to our clients’ needs,” explains Gutiérrez Medina.

Even though many juniors have exited the market since they have not been able to raise the necessary capital for exploration, diversifying their portfolio has enabled both companies to work with well-established mining companies such as Fresnillo and Peñoles. “For example, Grupo Mexico was very satisfied with our service on the Nacozari project because of the high production rate we achieved. We gave them excellent productivity levels, and what is even more important: quality service,” Gutiérrez Medina adds. For both Construcciones Cihuacoatl and Itzcoatl Drilling & Services, being small Mexican companies has proved to be a double-edged sword. On the one hand, most exploration capital is foreign and the lack of an international reputation has proved to be a disadvantage. On the other hand, the companies have the clear advantage over foreign companies in terms of project control and management. “We are locals, we speak the language, and we can supervise the operation at any moment. That has a direct impact on operating costs and effectiveness,” Gutiérrez Medina observes.

As Construcciones Cihuacoatl has survived the cyclical nature of the mining market, Itzcoatl Drilling & Services benefits from its years of experience. “The market is stabilizing slowly. We have clients that are willing to increase their workload, and when they are ready Itzcoatl will have the necessary human capital and structure to provide them with the best service. Currently, our goal is to work on training our people,” Gutiérrez Medina emphasizes.