A New Silver Giant Is Born

Q: What were the main motivations behind the merger between Carrizal Mining and Santa Cruz Silver?
A: The objective of the merger was to bring together two Mexican companies, one listed on the TSX. For over 10 years, I have witnessed how precarious financing is in our industry. The only way to grow a company is to venture into the stock exchange but the BMV tends to lack the proper tools. Instead, I think foreign stock exchanges, such as TSX, are better suited for the mining industry. We were lucky to find in Santa Cruz Silver the opportunity and access to a stock listing that we needed. For its part, Santa Cruz Silver succeeded in attracting financing but lagged in its operations. The merger aligns the operational excellence of Carrizal Mining with the financial access of Santa Cruz Silver.
Carrizal is always looking for good projects. We know that the Zimapán mine has a limited life span and a low ore grade. It is not a strong growth project despite how productive and efficient we made it. But together with Santa Cruz Silver, we can develop great projects with huge potential. We have around 9,000ha in Vetagrande, Zacatecas. For over half a century, this area saw just 57 small miners that could not develop the project. We now own 100 percent of the property, which has a significant number of veins. This is the main reason why Santa Cruz Silver attracted my attention. We wanted to quickly develop Vetagrande. We started by implementing a diamond drilling program that hopefully will yield a high ore grade. All the mines that we will develop will be underground and high-grade. I think this project will become one of the main silver projects in the country. We will construct a plant that will start operating in 2020 and increase productivity to 2,000t/d. I think that in three years we can ramp up production to 4,000t/d. Our budget to develop the plant is US$25 million and we also estimate another US$20 million to complete the exploration of the property.
We also own the Minillas project that was previously owned by a small miner, which is why it was never exploited. It used to be a coin house given its abundance of silver. Our goal is to bring all its history back by continuing exploring the property in 2019 and exploiting it in 2020. Our budget for this project is US$5 million for exploration and US$5 million for development. By 2020, Carrizal Silver Mining will invest US$60 million, which is our levy target on the stock exchange. The company also owns a smaller project named Charcas in San Luis Potosi, with a 300t/d production capacity and is applying for the La Libertad mine concession in Durango.  
The structure and foundations of Carrizal Silver Mining are simple. The previous philosophy of Santa Cruz Silver will evolve and adapt to that of Carrizal Mining, employing the same people but organizing them more effectively through a distribution of responsibilities. We have an excellent workforce, mostly composed of millennials.
Q: What has been your personal experience with mine financing in Mexico?
A: I have been seeking financing for mine operations in Mexico for over 10 years. After knocking on countless doors, I realized that Mexico is not favorable for accessing this kind of investment; it is much easier in Toronto. We had an opportunity to access credit from FIFOMI but it was a difficult experience. When we finally got the money, we no longer required it. As a result, Carrizal Mining largely relied on our guile as resources were so scarce. But I do acknowledge that FIFOMI prepared us to comply with the highest financing requirements. If a company can meet FIFOMI’s standards, it is easier to later succeed with stock exchanges. As a result, Carrizal Silver Mining is much more institutionalized and our governance is much stronger. I advise junior companies to look beyond Mexico and reach out to foreign stock exchanges, but it is necessary to first have a well-planned project with demonstrated potential.
Q: How do you manage human capital to keep productivity up and turnover low?
A: Not all the potential of a mining project lies in its mineral reserves. For example, the Charcas project is a small operation but it offers significant potential for us in terms of talent. If we lack people at one of our major operations, we can get the human capital we need from our smaller projects. The industry competes for the best talent and we focus on this. My strategy is to develop my employees. For us, this means keeping our people with us and having a low turnover rate. Seventy-five percent of Carrizal Mining’s staff is millennial, a generation often perceived as unpredictable, yet our turnover is very low. The secret is to listen to what employees want. Millennials demand new challenges and growth opportunities. We also develop our people by contributing to their education. For example, we share expenses for Master’s programs and training. The success of Carrizal Mining’s operations lies with its people and this will continue to be the case for Carrizal Silver Mining.
Q: What is the expansion outlook at Zimapán and how are you expanding the mine’s life cycle?
A: The training and further development of our people will be the key for success. We did not implement cutting-edge technology at Zimapán because Carrizal Mining had a limited budget, but we worked at highly efficient rates with the equipment we had. The focus on our people was also crucial because the returns or losses of the company were directly reflected in the gains or losses of the people of Zimapán. As for the outlook of the mine, we will carry out further exploration to get more volume elsewhere. We understand that the ore grade of the property is low but we can achieve higher volumes.
Q: Where do you see Carrizal Silver Mining positioned over the next five years?
A: My goal for the company is to have at least five operations, each with a production rate above 2,000t/d before 2025. Our production goal over the next five years is between 10,000-14,000t/d of silver. I prefer to set the company and staff ambitious goals even if we cannot accomplish them all, rather than achieve mediocre targets. Carrizal Mining was able to create 150 direct jobs with zero investment, growing instead through cashflow generation. I therefore consider myself an expert on mining without money, meaning I can use this experience to add greater value for Carrizal Silver Mining. Imagine what can be done with a US$60 million investment.
The social license is another factor on which I have focused during my professional carrier and Zimapán is no exception. We have a very good relationship with ejidos, surrounding communities and local authorities. Our goal is to enforce transparent mining at all our projects and this is one of the pillars of Santa Cruz Silver. The social license is not something that can be delegated; it is rather the responsibility of the company leader. We aim to become the first Mexican mining company with a socially responsible certification under the IRMA program. We expect to be certified by 2020.