No Time for Sonora to Rest on its LaurelsBy José Escobedo | Mon, 05/30/2022 - 16:04
Q: How well did Sonora’s mining industry do in 2021 and what were the main challenges faced by miners in the state?
A: Considering that we were still in the pandemic, we did well despite the challenges posed by the omicron variant, which caused several disruptions. However, none were large enough to significantly interrupt business. Metal prices have maintained good levels and operations are going well. We have seen more exploration coming into the state, though still not as much as we would like. Exploration is an area in which we still have to progress further, especially when compared to previous mining cycles, although new companies are doing exploration work in the state. In 2021, we saw more exploration activity than in the previous year.
Q: Why will Sonora continue to be the most important Mexican mining state, despite the potential of other states?
A: Firstly, it comes down to geology and mineral potential. Sonora is the country’s top producer of copper and gold. Although other Mexican jurisdictions are coming closer, we are still very much ahead in copper, producing over 80 percent of the total national production. Copper is a major factor in Sonora maintaining its leading positioning. Regarding gold, we still have one of the largest mines in the country: Herradura. These mining assets have a long life, which allows us to think toward the future. However, we know that we must not fall behind: other states, like Guerrero, are catching up. That is why we need exploration. Some of the previous cycle’s assets are beginning to shut down, such as the El Chanate mine. Other properties may have a shorter life but those with the longest lives are what sets Sonora apart.
Moreover, Sonora is a very welcoming state for investment, boasting good infrastructure and technical capacity to work in all stages of a project’s life, including exploration, development, operations and even environmental remediation. Furthermore, Hermosillo is a natural cluster for mining providers in the country, so the city provides many options for the local industry.
Q: Despite the government’s refusal to grant concessions, how is the cluster promoting the local industry and attracting investors?
A: The cluster does not really focus on the geological part of the business. Nevertheless, we are concerned about the lack of concessions and believe that granting them will create more opportunity for the country. However, the cluster puts its providers at the heart of its efforts: we want to find ways to diversify provider options for our current operators. We focus on connecting these opportunities.
The cluster is also a big promoter of Sonora itself. It has various international alliances and relationships that help bring attention to the state. Canada, the US, Chile, Australia and New Zealand are countries with which we have collaborated on events to create better exposure for the state.
Q: What are the main concerns among the cluster’s members?
A: There are a few concerns, such as the government’s limited granting of concessions. We would like to see that situation improve. Exploration security has also been a major concern across the country, not just in Sonora. We have seen activity disrupted by security issues, including problems in transport or at the operations themselves. We were concerned about the pandemic too, but the industry, which values safety, responded resolutely and adapted quickly by establishing protocols. Other disruptions provoked by the pandemic, like supply chain issues and slow permitting, are now primary causes for concern.
Overall, companies are worried about the legal certainty of some projects. Other than the concessions, this includes permitting, water rights and consultations. Although we are very much in favor of having strong environmental regulation and appropriate consultations, we would like to see greater clarity on the required steps. Moreover, the cluster would like to see the Mining Fund returned to its destined communities, another persistent problem in the industry. If the government sets clear rules, the country can attract more investment.
Q: What are the cluster’s main priorities for 2022 and what support do you plan to provide to your members?
A: Our main priority is always to make sure that our region evolves within the mining sector. This includes creating more opportunities for our operators and helping secure their supply chains, facilitating efficient operations that result in lower prices and increased margins. We also want to generate more opportunities for providers. Here, we still have an opportunity to grow significantly. We have over 210 cluster members, of which around 20 are operators, the remaining majority are providers. Fostering a better business environment regarding safety, sustainability and innovation will always be crucial for the cluster, too.
Q: What is the outlook for the mining industry in 2022 and what will be Sonora’s role in it?
A: Sonora will remain the largest producing state in Mexico, that is not going to change. Nevertheless, I do not see new projects beginning here, nor anywhere else in the country. Furthermore, Sonora is still trailing in exploration and development. In 2022, business will be much like 2021. Sonora’s production will be just short of 2021’s levels.
It will be an interesting year for the cluster, since we are replacing our director general. This will also generate opportunity.
The Sonora Mining Cluster is a nonprofit civil association of mining companies and suppliers throughout the state of Sonora. The cluster’s members have organized to generate an attractive environment for investment in the state, with the goal of turning it into a benchmark for responsible and sustainable mining.