Fred Stanford
President and CEO
Torex Gold
View from the Top

On Track to Finding a Permanent Solution to Blockades

Mon, 10/22/2018 - 17:03

Q: How did the controversy around the El Limón-Guajes (ELG) mine develop and how has this progressed?
A: This problem caused us to lose the last two months of 2017 and the first month and a half of 2018, which equates to 25,000-28,000 ounces per month. What happened was an old fashioned 1950s union raid. We have a union to which over 50 percent of our employees have signed membership cards. However, another union believes that it should be the union to represent our employees. There is a perfectly legal process for sorting matters like that out with employees going through a government-sanctioned independent ballot. This external union, instead of following the legal process, decided to blockade the mine and shut down operations. When taking into account the multiplier effect, they probably threw 7,000 people out of work, despite the fact that a union is supposed to look out for the best interests of the employees.
Likewise, the blockading union has tried to blame the company for everything bad that has happened around the area. There have been three fatalities that have nothing to do with Torex or the blockade but because the deceased had some form of connection to the mine, the union has tried to blame the company for the fatalities. I am accustomed to working with unions that seek to improve the lives of employees. It is hard to understand why a union would value political action and their own self-interest over the needs of the thousands of employees of our company, and of our contractors and suppliers, that have been thrown out of work by Los Mineros’ actions.
Q: What importance do you place on community relations in Guerrero?
A: We have always had excellent community relations. The ELG mine was blockaded by a small sub-group of one community, and this group was taken advantage of by the union, which gave it information that was not necessarily true. But despite the actions of this community, the other surrounding communities actually came in and helped us open up a new access route so we could re-start operations. It is because of the communities that we are back to work.
Q: What support have you received from Guerrero’s government to overcome these obstacles?
A: The government has certainly provided us with support, albeit it took a little longer than we would have liked. Guerrero as a mining jurisdiction will need to re-earn some trust. Torex made a US$1 billion investment in the state, and we expect that in return the company will be able to operate every day. It is unacceptable that our operations were shut down for so long simply because someone thinks erroneously that the company has the capability of changing unions. Although there are a few problems left, I think we are on the right path to a permanent solution.
Q: After your experience, to what extent do you feel Guerrero is a mining-friendly state?
A: Guerrero is not without its challenges, but it welcomes mining and the opportunities it brings. There are many wonderful people that are happy to work with us to create wealth and a better future for all. This recent experience has been extremely difficult, but it is not a Guerrero issue. The Los Mineros Union that has caused such economic distress for so many people, has done the same thing at many sites around the country. It is not a Guerrero issue, it a Mexico issue that is complicated by certain labor laws.
Q: How do you evaluate the effectiveness of the Mining Fund given your focus on CSR?
A: There is a fundamental problem with the mining fund. We only started paying it last year but not one peso has been returned so far, and only about one-third of the money we pay will come back to Guerrero. And in a state as poor as Guerrero, this is not understood. The communities do not look to the government for assistance, they look to the company. We have to explain to them that we have paid a heavy tax and cannot explain why this money has not be returned by the Mining Fund for their benefit. There are recent signs that the Mining Fund is going to approve some projects, which will be a positive thing for the communities.
Q: What are your plans for your current properties and your future in Guerrero?
A: Across the Balsas River at our US$500 million Media Luna project we will continue to drill, although its access is still blockaded. Obviously, we need to evaluate the merits of that project, given the propensity to blockade, and I do not think it will progress as quickly as it would have before. In terms of acquiring new properties, the purpose is to diversify single-asset risk so we would not put it in the in a place where a single event can impact more than one of our assets. Our first acquisition would not be in Guerrero but our second one may be.
Q: What are your forecasts for gold prices in 2018 and 2019?
A: My general world view is that civility is in decline and rogue states can become more rogue with the loss of US influence. Civility in decline tends to be bad for the world and what is bad for the world tends to drive an increase in the gold price. I think inflation is likely on the return, which is also bad for the world but good for gold. The world is also facing uncertainty regarding how capital markets will respond to the unwinding of quantitative easing. This has the potential to cause a decline in the prices of stocks and bonds, which I think will drive people to gold as a safe haven.