The Roots of Mining in San Luis Potosi

Q: New Gold’s Cerro San Pedro mine is the company’s sole project in Mexico, and has been operating almost continuously since the 1600s. Can you tell us about the history of the mine and your operations today?

A: This mine is extremely important to the history of the state of San Luis Potosi, and explains the very erection of the state’s capital city. It was a Spanish captain, Captain Caldera, who found the ore body of gold and silver, and thanks to him the small city of Cerro San Pedro, and later the current capital, were established. Although the capital of San Luis Potosi was founded in Cerro San Pedro in 1590, following some problems with the water wells it was later decided that the capital should be in a different place, where water would be more readily available. They moved southwest of that little town to the site where the city of San Luis Potosi is now located.

The roots of mining in Cerro San Pedro are very deep and go far back in history. The mine has been in operation since the late 1500s, with some intermittent breaks due to technical and other problems, in the mid-1900s. It used to be an underground mine, until the first years of the 1990s when a US company called Metallica confirmed that there were additional reserves and, due to the dispersion of the ore grade, proposed that it should be an open pit mine. Through different mergers and acquisitions New Gold became the owner of the project in 2009, when the operation had just begun. We are very proud of the work we have done on the mine – it is a very sound and sustainable operation, as well as being secure for our workers.

Q: How has the work New Gold has done as well as the attributes of the mine itself combined to make Cerro San Pedro a successful operation?

 A: New Gold has very high standards in the areas of health, safety, environment, operations, and care for its neighboring communities. These policies are applied horizontally across all of the company’s mines and projects. As a result we have a very good mine. Since 2009 all of the company’s actions have been aimed at simply applying its general corporate policies to a mine that is very good – the cash cost is very competitive, it is operationally efficient, and it is an example of a very well designed pit. Right now New Gold is very proud to have had more than 400 days of work without lost time, and is about to reach 2 million man hours without accidents. I would also say that a company needs to be resilient, and rigorous in terms of applying its protocols and systems. New Gold has an ISO 14001 certification, and has also been granted the Socially Responsible Company (ESR) award four times in a row; at the corporate level New Gold won the Developer of the Year Award in January 2013.

Q: What is New Gold’s overall strategy and how does that apply to its Cerro San Pedro mine?

A: New Gold’s main priority is to build a solid operation, based on the company’s high corporate standards, which are very stringent and go beyond any of the national laws in the jurisdictions in which we operate. In terms of the community, New Gold recently won the Viola R. MacMillan Award for company or mine development, at the PDAC conference in Canada. The company is very proud of this award, which was given to New Gold in recognition of the company’s very successful negotiations in dealing with First Nation communities. The company has an ongoing operation near Kamloops, 300km east of Vancouver, and an exploration project in Blackwater, which is around 200km north of Vancouver. On both projects the agreements reached between New Gold and First Nation communities have prioritized promoting development for the surrounding communities and conducting work related to education, for example.

New Gold has been able to show that the many tests carried out on the water from different wells in Cerro San Pedro are trustworthy by having tests carried out in two different nationally and internationally recognized labs, with an additional Canadian expert overviewing both of them. Through their environmental permit companies are obligated to make what is called a ‘geobiological’ closure of the mine, but this regulation does not extend more widely than the confines of the mine site itself. The company’s environmental obligations are spelt out in its Environmental Impact Statement, through which companies commit, up to a sum of more than US$18 million, to do whatever needs to be done in order to clean up, mitigate, neutralize, and remediate, after their mining operations are completed. If fulfilling this commitment is simply about meeting your obligations then New Gold wants to go beyond that and do something that in the future we can look back upon and say ‘this is what we left for good in that community’. For example, there is a tourism project that New Gold is working on with the municipal and state authorities, investing in a number of different areas, and thankfully Cerro San Pedro is now a better town with better facilities, and as a result there are people who love to go there each weekend to visit.

Q: What are the benefits of being a smaller company, in terms of fulfilling different responsibilities towards the community, the environment, and the local government?

A: While having the support of a bigger corporation gives you certain luxuries, for instance having a bigger budget, I would say that a smaller company in general is able to respond more quickly, and there is more flexibility to react. You have less weight on your shoulders in terms of your decision making process, as well as allowing more direct communication with management. At New Gold we tend to look at many potential projects, and for us the process of reaching the main geologist and having his team come and lick the rocks to see whether it is a feasible project or not is probably easier than it would be if we were larger.

New Gold is a very good company, and is managed by experienced miners, and the members of our financial management team have been linked for many years to other large mines or to large companies in the mining world. The company is being managed by people that are sensitive to the industry. New Gold is very proud of its Cerro San Pedro operation and is working very hard towards the crafting and execution of its sustainability and responsible closure plan. New Gold is always searching for new opportunities in Mexico and elsewhere.