Peñoles Suspends Operations at Francisco I. Madero

Reuters reported that Mexican miner Industrias Peñoles “will suspend operations of its Francisco I. Madero zinc unit in Zacatecas indefinitely due to difficult mining conditions and low metal prices.”

Peñoles said it has started dismissing unionized workers at Francisco I. Madero, without specifying the number. The Reuters article added that the company indicated that it will attempt to relocate workers to other mining units. The suspension of operations will not affect Peñoles’ production of fine zinc.

Reuters quoted the following company’s statement to the Mexican Stock Exchange, which explains the reasons that led to its decision: “The low grade of ore that has been present for several months, its hardness and the depth of the mineral bodies, added to the abrupt drop in the price of zinc and the high operating cost, make this mining unit no longer affordable for the company.”

Peñoles said that Francisco I. Madero is one of the largest zinc mines in Mexico and is equipped with its own concentrator plant. It has been in operation since 2001, with an installed capacity of 2.7 million tons per year of ground mineral. In 2019, Francisco I. Madero ground and processed 2.3 million tons of ore and produced 41,541 tons of zinc and 8,905 tons of lead. In 2018, the unit ground and processed 2.5 million tons of ore and produced 27.9 tons of silver, 45,288 tons of zinc, 8,531 tons of lead and 1,320 tons of copper.

Data released by the London Metals Exchange shows that, since January 2020, zinc prices have fallen 15.15 percent, compared to a fall of 16.22 percent in copper prices and of 17.02 percent in lead prices. Nevertheless, during the last month, zinc has risen from US$1,908/ton on April 15 to US$1,949/ton on May 15, hitting a peak of US$2,018/ton on May 12.

Top players in the zinc industry expect the recovery of zinc metal prices to continue. As reported by Metal Bulletin, Luxembourg-based Nexa Resources declared that “stronger Asian demand is outpacing supply cuts and there are no expectations for a review of annual zinc treatment charges due to the COVID-19 pandemic.” The company’s CEO, Tito Martins went on to remark the following: “We are seeing a market adjustment in Asia. Both the quarantine being enforced in Peru and China’s higher consumption are supporting a price recovery.”

Reuter’s columnist Andy Home wrote that zinc’s recent recovery is “part of a broader mini-recovery across the base metals complex as the market focuses on the supply shock running alongside the demand shock caused by the spread of the coronavirus.” However, Home says that “the analyst consensus is that a more fundamental rebalancing of supply and demand will be needed to save zinc from revisiting the price lows.”