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A Pivotal Year for Torex’s Transition Between Key Mining Assets

Jody Kuzenko - Torex Gold


Cas Biekmann By Cas Biekmann | Journalist and Industry Analyst - Fri, 02/18/2022 - 12:09

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Q: What were the company's main milestones in 2021?

A: 2021 was a challenging but outstanding year for Torex. The year’s goal was to hit our targets regarding safety, production and costs at El Limón Guajes (ELG). We achieved an all-time production record and delivered on operational guidance for the third consecutive year, producing 468,000oz at ELG, all at a healthy total cash cost and all-in sustaining cost.

As an operator, I am most proud of having reached these milestones safely. Our lost time injury frequency rate (LTIFR) sits at 0.14. We experienced just one lost time injury in April 2021, involving a contractor. This demonstrates to the world that you can be a best-in-class producer, produce with excellent margins and do so safely. Torex achieved great results despite COVID-19’s significant challenges, which affected both our supply chain and workers. Through cost-containment programs, we reached an excellent all-in sustaining margin in the 50 percent range. We closed 3Q21 with no debt and US$370 million of available liquidity and further improved our results in 4Q21. This healthy balance sheet funding will be directed into the Media Luna project for the coming years.

Q: What factors are behind Torex’s success in its safety-oriented performance?

A: Torex works hard on safety every day, from the top of the house to the front lines. Getting the right leaders in the right roles is important: When I hire, I look for people who have similar beliefs when it comes to running a mine safely. Gold can be produced without hurting people; all accidents can be prevented. The company also operates with clear and effective  systems of work. Planned work is safer because nobody is running around without direction. A well-defined, meticulously enforced set of rules is essential. People need to know what these rules are and why they were created.

Additionally, Torex Gold aims to connect the head with the heart. People need a reason to work safely other than systems, procedures or rules. In Mexico, Torex connects this to relationships between employees and with their respective families. We have specific programs built around personal reasons to get home safely. Combined with Torex’s approach to hire the right people, our strong systems and clear rules, this sets the company apart in terms of performance. This approach may sound easy but it is anything but simple to do this every day and get everyone to have the same mindset. 

Q: How is the company working to capitalize on the success at ELG while looking toward its developments at Media Luna?

A: We will need to deliver on the present and build our future simultaneously, which means 2022 will be a pivotal year for Torex. To optimize and extend ELG, we are working on four key areas. First, we continue to build on the company’s culture as a key strategic differentiator, which contributes to safety and production results. Second, we aim to deliver on our commitments associated with safety, production and costs. Just like the past three years, Torex wants to continue reaching its production guidance to the market. Third, we are looking toward the future as we work on our transition from ELG to Media Luna, with first production expected from Media Luna by 2024. The goal is to deliver smooth cash flow and production while we transition from ELG’s open pits toward Media Luna’s underground operations. Finally, we consider it essential to extend the life of ELG’s underground via ongoing exploration efforts. Torex has drilled a lot since it turned the mine on in late 2018. It has been a great asset, so the goal is to keep it going for as long as possible. Our exploration results look promising.

Q: What are the next steps for Torex’s Media Luna project following its feasibility study?

A: We have all hands on deck to finalize the project’s feasibility study. Torex’s work for Media Luna in 2022 is clear. First of all, we need to finish the engineering properly, issue the capital estimates and complete the feasibility study, all while meeting our high-quality standards and setting the company up for project delivery. We also want to continue our exploration and drilling plan on the south side of the river near Media Luna. We had an extensive infill drill program over 2021, drilling 80,000m and investing US$22 million. In 2022, we aim to drill between 64,000 and 65,000m at a cost of US$19 million. This would allow us to create a plan for our existing resources while adding to our reserves.

Torex also wants to execute its early works for the mine. The Media Luna deposit is 7km away from existing infrastructure, across a river. Our ongoing work aims to access the deposit via a series of tunnels moving from north to south and vice versa. When we bring the mine online, we will become a diversified metals producer, adding 800 million oz of copper to our production. With the transition to a low-carbon economy, this resource is essential to the global industry.

Q: How is the company planning to continue with its permitting plan for the mine?

A: We were granted our EIA by SEMARNAT, which enabled us to start construction. Torex submitted its application for an integral EIA to bring all our activities into one broad permit and we have had constructive discussions with the regulator to this end, allowing us to move forward and reach a decision. Permitting is a reciprocal process and should be looked at on a case-by-case basis. Some of the stories surrounding delays in permitting are true. A reduction in SEMARNAT’s staff and a global health pandemic are not conducive to fast permitting. Nevertheless, a company’s reputation, as well as the scale, environmental impact and social approach of a project and the quality of the application are crucial. Torex is in a great position regarding all these elements. Our approach with SEMARNAT and CONAGUA has been positive and we look forward to working constructively with them as the project develops.

Q: How is Torex planning to integrate renewable energy into its projects?

A: We developed a plan to build an 8.5MW on-site solar energy project by partnering with Scatec. It will complement our existing power supply and represents our first venture into renewables, which we aim to grow in the future as it fits our identity of constant innovation and proves that Torex is serious about diminishing its carbon footprint. Investors are tired of hearing all talk and no meaningful action regarding decarbonization. The project will bring economic benefits, reduce energy costs and help curb emissions. Furthermore, it will create jobs for our community and leave a net-positive legacy there. Transforming mineral resources into sustainable prosperity over time is important to us.

We submitted our permit application for construction of the project in 2021 and had positive discussions but the government’s constitutional energy reform proposal has caused delays. We will let this situation play out, though we are monitoring developments closely. For companies like Torex, availability of a power supply in remote regions is crucial. Reliability is equally important to run our equipment optimally. Our energy bill is expensive, so competitive pricing is of the essence. The energy mix, with added clean capacity, is another key point for Torex. We work closely with associations to ensure that a new reform supports the mining industry instead of creating more headwind.


Q: What would the company like to have achieved by the end of 2022 to call the year a success?

A: A brilliant 2022 means nobody gets hurt. A successful 2022 would see Torex setting up a smooth transition from ELG to Media Luna, finishing its feasibility study for the latter project, getting into execution and managing to deliver on its production guidance and cost guidance to the market. Another objective is to look at growth outside of our Morelos gold property. I would like Torex to become a million-ounce-plus producer on an aggressive timeline. To foster the company’s consolidation, we are spending time to evaluate opportunities in M&As. Because our business is well-structured, we can be prudent, patient and opportunistic in these transactions until we find something that truly creates value for our shareholders and the business. It is beneficial to move slightly outside of the gold market, where companies are somewhat forced to be price-takers.

Torex Gold is an intermediate gold producer based in Canada. In Mexico, it focuses on exploration, development and operation of its 100 percent-owned Morelos gold property, a 29,000ha area in the highly prospective Guerrero Gold Belt.

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