Optimizing Production and CSR at Campo Morado

Q: What were the main factors behind the company’s decision to purchase Campo Morado, a mine that had been closed for several years?
A: Its potential, resources, infrastructure and areas of opportunity were the main factors behind our decision. We carefully analyzed the reasons behind its closure in January 2015 and determined that an improved operational strategy and establishing a strong relationship with surrounding communities could make it viable. For instance, the previous owner focused on zinc and processing a mix of mineral concentrates from various deposits that required more equipment, personnel and costs as each body has unique geological characteristics. We decided to instead mine and process mineral from a single deposit and to only exploit areas with profitable grades of gold, silver, lead and copper to reduce costs. We do this even if the deposit has less zinc as it could encompass profitable minerals that were ignored by previous owners.
We also optimized by requiring less than 50 percent of the 600 collaborators the mine once needed for operations. Our experience and human capital allowed us to start production in less than four months after acquiring the project. We had to first thoroughly analyze the maintenance needs of the mine and plant. In the first phase of production, we expect to produce 1400t/d by processing with an autogenous mill that does not require steel balls. In February, we will increase production to 2000t/d by adding steel balls. In the first month we will be able to produce 56,000 tons, including 1,037 tons of lead concentrates and 2,453 tons of zinc concentrates.
Q: How did you mitigate the security risks of the area?
A: The company mitigated these risks by reaching out to the community as soon as a preliminary agreement was signed. All the people we spoke to unanimously said yes and were eager to help us reopen the mine as soon as possible. These communities and local authorities recognize the positive impact and development that mines can foment. Before Campo Morado, Arcelia was a town and it grew to become a dynamic and safe city when the mine arrived. Our outreach helped us start the project on a very good note with the surrounding communities, which in my opinion is the best way to mitigate safety risks.
Q: What are your projections for the Tahuehueto mine in the short term?
A: We want to start production by 4Q18 at a rate of 1,000t/d. We have already completed exploration and feasibility studies, acquired the necessary permits and purchased equipment. Pre-production toll milling from Tahuehueto processed 9,503 tons of ore at the Atocha Mill during 1Q18 for an average of 106t/d, and during construction we will continue to produce around 150t/d in this plant. This small volume of production generates approximately U$1.5 million in sales per month. We were also able to close an offtake agreement with Trafigura for US$15 million that we are using to complete the costs of construction, which started in January 2018. The project has significant geological potential that we will continue to explore through mine development projects. We believe it has the potential to be one of the biggest mines in the country.
Q: What does Mexico need to increase its global position as a top gold producer?
A: We need to increase our level of exploration investment to the level we had five years ago. The country needs to be more competitive to attract more FDI. One of the biggest limitations is the fact that exploration companies can no longer deduct projects in the first year. This caused many players to leave the country due to the clack of capital. The new mining taxes are equally affecting production along with the mining fund. These were created with a good intention but are failing to meet their objectives as communities are not receiving any benefits. In response, mining companies are, as always, continuing to prioritize surrounding communities and we are working with authorities to make Mexico a more attractive place to invest in.