Mining Operator Seeks to Put Sinaloa on the MapWed, 10/21/2015 - 08:08
Q: How was El Gallo in Sinaloa developed and how did you become involved in the operation?
A: The Mexican subsidiary of McEwen Mining, Compañia Minera Pangea, had been created in 1994 as a subsidiary of Queenstake Resources and had been operating in Sinaloa since 2000. At that time, Minera Pangea was focused on making contact with the local communities and carrying out exploration around a closed underground mine from the 1950s, which is now El Gallo 1. Queenstake Resources began building a new mine, Magistral, there in January 2002, after negotiations had been finalized. At that point, the price of gold was around US$340 per ounce, which meant that few companies were looking to invest in such projects. In fact, there was no other mining company operating in Sinaloa at the time. I joined Minera Pangea in November 2002 as a process assistant. My background was in teaching English but I decided to seek out a job at the mine out of curiosity. I was then moved around within the company and served as an administrative assistant, AutoCAD designer, warehouse assistant, warehouse manager, and exploration coordinator.
McEwen Mining approached Minera Pangea in the end of 2006 when the project was in standby mode after having operated from 2002 to 2006, due to operating challenges in the mine that had made the operation economically unviable. The great majority of employees were dismissed, leaving only 10 workers that were considered to be the most skillful. Rob McEwen decided to buy Minera Pangea and invest in exploration work around the existing mine. In August 2007, I was made Interim General Manager of Minera Pangea and by January 2008, Rob arrived with a complete exploration team, which I helped to guide since I knew the area very well. At the end of 2008, we found the El Gallo silver deposit, 7km away from the Magistral deposit, and invested in the tools and analyses required to define its economic value. After four years of exploration, I was officially appointed General Manager. Before the gold price peaked at the end of 2010, Rob decided to reopen the Magistral gold mine, which became known as El Gallo 1, to acquire funds to start building the El Gallo 2 silver mine. We were and still are very excited about El Gallo 2 since it is an important silver deposit found near the surface with no signs of previous mining works.
Q: What had to be done to reopen and improve the operations of the former Magistral mine?
A: In January 2012, McEwen Mining invested a little under US$15 million to re-commission the mine facilities. In January 2014, we decided to invest a little more to make adaptations and improvements to process equipment such as crushing and to double the capacity of the gold adsorption-desorption-recovery (ADR) plant. The mining plan that we had for the Magistral mine was based on a certain gold price, which also had to be modified to fit the market conditions of the time. When Magistral first started operating, only primary and secondary crushing was being done. Due to the large size of the crushed minerals, we were not recovering the gold efficiently through our lixiviation pads. With the new investment, we bought new crushers and added a tertiary crushing process which made the operation much more efficient. Throughout the process, we focused on maximizing our investment and in the end we completed the expansion under budget. Soon after we began with the expansion, the market witnessed a drop in the silver price which made the El Gallo 2 silver project economically unviable. We are now working to improve the CAPEX, the operational plan, and the metallurgical process of El Gallo 2 to create an attractive business case.
Q: Considering that McEwen Mining has another operation in Argentina, how important is El Gallo 1 for the company, and what can we expect to happen there in the next few years?
A: El Gallo 1 is 100% owned and operated by McEwen Mining. The San José mine in Argentina, on the other hand, is 49% owned by McEwen Mining while being 51% owned and 100% operated by our JV partner, Hochschild Mining. El Gallo 1 is important for the company since it is the only project that the company fully operates. In El Gallo 1, we are working on finding the ideal operational capacity of our crusher and increasing the capacity of our processing plant. One cannot know a crusher’s maximum capacity and the ideal crushing rate unless the equipment is tried out. Our 2014 projection was a production of 35,700oz of gold, but by 2015 we want to be at a production level of 70,000oz of gold. This jump in production is in line with our production plan which dictates that by 2015 we will be mining higher grade deposits. This means that we might be moving and processing the same amount of tonnes but recovering more metal.
Q: You have lived through most of the stages of Minera Pangea’s existence. How has the working philosophy changed since Rob McEwen bought the company?
A: Rob McEwen is heavily focused on quality, which extends to the quality of the lives of each of the company’s employees. Rob is always striving to be better and he transmits this goal to all of us in McEwen Mining. This is why our main priorities go hand in hand with production, safety, the environment, and CSR. As part of this working philosophy, we have to constantly assess the impact and implications of our decisions on operations and on the surroundings. We are driven by the principle of continuous improvement and innovation, and the company is now genuinely interested in contributing to the development of the area where we work in. McEwen Mining wants the communities around our operations to grow as we grow.
Q: Given that there are not many mines operating in Sinaloa, what is the general attitude towards mining in the state?
A: The people in Sinaloa are not accustomed to mining operations. For many decades, Sinaloa was predominantly an agricultural state, becoming known as “the granary of Mexico”. As a result, the governmental infrastructure was dedicated to supporting agricultural activities. Most mining companies that have come to the state since 2009, driven by the high metal prices, have focused on exploration. There are now over 70 registered junior companies in Sinaloa. Most of the activity is minimal, however, and is simply being done to meet the concession requirements. Some small mining projects, mostly focused on iron ore and base metals, have been operating in Sinaloa for over 20 years, but without support from the state, the industry has not been able to flourish. This makes Minera Pangea the pioneer of modern mining in Sinaloa.
Q: What were the exploration priorities for McEwen Mining prior and during the expansion of El Gallo 1?
A: When we began exploring, Ian Ball, our former president, and I decided to revisit the Magistral gold deposit that had been proven using older technologies and techniques. This led to mineral deposit discoveries which increased our reserves by around 30%. As the expansion project of El Gallo 1 took place, we invested funds and time into the exploration of several targets within the property since we knew that the resulting knowledge was crucial for the development of the project. The silver deposit we found was the fruit of the company’s exploration efforts, which ranged from prospecting and drilling to aerial magnetic surveys, geophysics, and geochemical studies. Based on these results, we have identified other areas of interest, which are worthy of further exploration. During this time, we have also supported small-scale mining projects by analyzing samples or field studies. In this way, we keep ourselves open to new possibilities within the region.
Q: What are the short and long-term aims of Minera Pangea and McEwen Mining in Mexico?
A: McEwen Mining is just getting started in Mexico, the company still has a long path ahead of it. We are following Rob’s vision of making our Mexican operations develop into a world-class mine. Sinaloa has great mineral potential, which is largely unknown to the outside world. To prove this, we will carry out in-depth analyses on exploration targets which are still at the prospecting stage. We have a good relationship with the state government and we recently formed the Mexico Mining Business Council, which is dedicated to better organizing the mining industry in Sinaloa. This council might eventually turn into a cluster once we have organized ourselves adequately. The Council seeks to represent of small-scale mining as well as large mining operations, while creating awareness of the reality of the industry within Sinaloa. We have already built up credibility for the company within the Mexican mining industry and this has led to people offering to sell their projects or make them grow together with us.