Mexico Mining Forum 2019 - Mexico Business Events (mbe)

Government Adopts Active Role in the Industry

Francisco Quiroga, Deputy Minister of Mining at the Ministry of Economy
Francisco Quiroga

Hoping to give certainty to industry participants, Undersecretary of Mining at the Ministry of Economy Francisco Quiroga showcased the government’s strategy to work toward a mining sector that can work harmonically to contribute to the country’s pacification and reconciliation. “We can collaborate toward peace, justice and prosperity, which will be the legacy of the new administration,” he said on Wednesday during the keynote speech of Mexico Mining Forum 2019 at the Sheraton Maria Isabel Hotel in Mexico City.

Quiroga opened his presentation acknowledging that perception regarding the national mining industry is taking on negative connotations. To fix this, the new administration at the Undersecretariat has established an industry policy that includes all players and has a long-term vision focused on innovation, diversification and inclusion. According to Quiroga, the Undersecretariat of Mining will be at the helm of this transformation, acting as “a leader and facilitator for the industry and as a mediator when needed in an honest and impartial manner.”

All public industry agencies will have a role in strengthening the national industry, said Quiroga. The Directorate General of Mining, for example, will work on fixing its processes and working toward digitalization. “Our response times are an embarrassment and an obstacle in project development and termination,” he says. “By the end of the administration, we want full digitalization of paperwork, which will help us tackle the backlog in concessions.”

Quiroga also mentioned the Mexican Geological Survey, which he says will become an industry authority with credibility, and the Mining Trust Fund, which will have the mandate of ensuring funds reach communities, thus maximizing the opportunity of new projects being welcomed.

Among its general goals, the Undersecretariat wants to implement new models based on best industry practices and sustainability. Quiroga highlights Canadian TSM standards as a way to improve the industry in Mexico, as well as closer collaboration with communities to help projects move forward and make mining a driver for economic development. “Even when we get a ‘yes’ from communities, that sometimes turns into a ‘no’ due to lack of communication and participation,” he said.

The Undersecretary was not afraid to address the elephant in the room as well, saying that the country must break the stigma regarding mining and the ideas on lack of safety. Under the new administration, Quiroga says the government will work to eliinate fatalities or natural disasters caused by mining activities, mainly through direct and honest communication between government dependencies and with the private sector. “We want to look forward and find solutions to the industry’s problems, creating alliances with the private sector and with other government institutions and consolidating wills and mindsets,” he said. “Our sole objective is to boost the mining industry for the benefit of the country.”

Communication Between Mining Companies and Communities: Key to a Mine’s Success

Primer panel MMF19

Many complex calculations lay behind the success of a mining project. Chief among them is the relationship with the local community. A good relationship can mean smooth sailing, while a troubled one might lead to delays and even mine closures. During the fourth edition of Mexico Mining Forum, panelists agreed on the importance of this relationship and analyzed best practices to ensure a successful approach and impact on the local community.

“Involving society in the mining process is now a real demand that requires the participation of the entire industry,” said Moderator David Guillén, Founding Partner of Rios Ferrer, on Wednesday at Sheraton Maria Isabel in Mexico City. Guillén highlighted the importance of the sector to Mexico’s economy, especially considering that it represents 4 percent of the country’s GDP.

The economic impact of the mining industry goes far beyond its mayor players. He adds that 70 percent of Mexico’s mining sector are micro companies with less than 10 employees and highlights that these economic benefits can also trickle down to the community living next to a mining project. However, change is often seen with distrust so companies must ensure that communities feel involved in the changes that are happening to their surroundings.

The relationship between operators and the community is key to the mining company, explained Luiz Camargo, Director of Finances and Corporate Affairs of Minera Cuzcatlán. He quoted a study by EY that identified “permission to operate” among the Top 10 major risks for a mining company, which refers not just to government approval but permission from the local community where the mine is located. José Antonio Berlanga, CEO of Telson Mining Corporation, agreed on the relevance of involving communities from the start of the project. “It is necessary to begin projects by communicating with local communities or they can halt these projects,” he said.

Renato Urresta, Principal Consultant at ERM, did not skirt he image issues that might pose concerns to local communities. “The mining sector is a development engine but it is still controversial. One of the reasons is its strong link to poverty, as communities close to mining projects have a 76 percent poverty rate.” However, he highlighted the role mining projects can have in improving said communities. “It is necessary for companies to work closely with local governments to empower these mining communities.”

Through research of the social impact of the mine it is possible to create strategies to act in the area and develop agreements with local communities to develop win-win situations for both parties, agreed Camargo.

As mines can last for up to 50 years, staying for long terms allows companies to develop complex community projects to empower the local population, explained Urresta. He called on the audience to analyze their own engagement plans with local communities and measure their impact. The speaker highlighted the importance of developing social engagement teams from the beginning of the project that support community from the beginning. “If we don’t develop social engagement plans, the mining sector will face an increased resistance in local communities.”

The impact of a good relationship might extend far beyond he company and the community. “Companies generate platforms alongside the local authorities that lead to the pacification of the state,” said Camargo referring to Mexico’s insecurity concerns and how they affect mining companies. Mario Salomón, Country Manager of Multisistemas de Seguridad Industrial, agreed on the three-part link between mining operations, community and safety. “The most important aspect of security is prevention, for that reason we strongly promote personal responsibility among our employees,” said Salomón.

All speakers agreed that a mine’s success often relies on fully understanding the area it is located in. Camargo used a project in Oaxaca as an example. As the region has a significant number of indigenous communities, the company performed a comprehensive sociological study to fully understand local customs and develop strategies to promote social development. The other speakers agreed, with Berlanga going on to summarize the panel. “The most important thing is to ensure close communication with the community at all times.”

Alliances and Innovation to Boost Mexican Mining Sector

SegundoPanel MMF2019

The success of any business lies on the strength of its supply chain, and mines are no different. The mining industry’s value chain is a key area of opportunity for Mexican companies and none more so than operators who are the top stakeholders. During Mexico Mining Forum 2019, which took place in the Sheraton Maria Isabel on Feb. 6, panelists discussed the importance of creating stronger alliances throughout not only the supply chain, but also with government and educational institutions to truly foster the growth of the Mexican mining industry.

During the event, Hector Quezada, Director Mexico of Victaulic, led the discussion of the panel that discussed strengthening Mexico’s supply chain to understand the importance of technology, education and innovation in the mining supply chain and the role clusters are playing.

Although the clusters are rather young, the Zacatecas, Sonora and Guerrero Mining Clusters are working arduously to professionalize SMEs and promote the use of technology to boost the efficiency of the sector, the participants agreed. “Clusters play a vital role in the mining sector and in the last few years we have focused greatly in the evolution of local companies and assisting them to professionalize their processes with the help of educational institutions,” said Alberto Mendoza, Director of Zacatecas Mining Cluster.

As for the Sonora Mining Cluster, its main focus has been sustainability. It is currently the only mining association that is certified in Social Responsibility, striving to take down barriers between local communities and miners. Alberto Orozco, President of the Sonora Mining Cluster, discussed how the cluster is identifying indicators that will help find areas of opportunity within the supply chain and monitor how companies are flourishing and how to help them grow even faster.

The Guerrero Mining Cluster is the youngest cluster in Mexico. “The state’s situation is far more complex due to the insecurity problems that exist. Our main goal is to help protect investments and help them grow,” said Alfredo Philips, President of the Guerrero Mining Cluster. The vast majority of the companies in Guerrero are small and have only one asset in operation. Professionalization is a priority for the cluster, but the state’s unique situation makes transparency extremely important in order to not only attract more investment, but to retain it.

Integrating new technologies is a great challenge for Mexican mining companies and requires a great deal of training. Each cluster is approaching universities and research centers to create more learning and training opportunities for miners. The Zacatecas Mining Cluster is currently developing a research and science center to help companies bridge their technology gap. Guerrero is working toward creating specialized programs to help increase local companies’ skills.

All clusters agreed that exploration activity has declined in the last few years and this is beginning to pose an important challenge for the industry. Orozco explained that Sonora experienced a boom in 2012 where it created great value, new mines opened and renewed operations. Nevertheless, many are reaching the end of their life cycle and have yet to generated new reserves. “We need to place a bet on exploration to continue generating jobs,” said Orozco.

All panelists agreed that 2019 will be a year of collaboration, where the mining clusters will all prosper together. “But it will not be the same alliances and collaboration as before. More players will be involved, including NGOs, mayors, municipal presidents and educational institutions,” said Phillips.

This also involves a closer relationship with communities. Orozco insisted that companies will have to step out of the box to not only integrate technology and innovation, but to integrate communities in order to be truly sustainable. “The community aspect needs to be done correctly from the very start or else it will continue creating setbacks in the life cycle of a project. Everybody in the chain must be aware of the social and sustainable implications their operations have,” said Orozco.

Digital Transformation Demands Planning, Gradual Implementation

Guido Mangieri, Director of IIot, Plantweb and Digital Transformation at Emerson

Even though IoT has become a buzzword in many industries, few players know the best way to adapt their processes to such disruption. For Guido Mangieri, Director of IIoT, Plantweb and Digital Transformation at Emerson, it is all about understanding how technology can add value to the productive process and gradually escalate implementations. “Think big but start small and measure, then replicate and amplify successful results,” he said during Mexico Mining Forum 2019 at the Sheraton Maria Isabel Hotel in Mexico City.

According to Mangieri, an Emerson survey found that 90 percent of the industry leaders interviewed thought a roadmap was critical to reaching digital transformation. However, 78 percent of these companies also found that pilot automation systems were normally hard to homologate with other processes. “Scalability is key,” says Mangieri, “as well as investment in human capital development.”

Following Emerson’s roadmap toward digital transformation, companies must first map their KPIs in four key areas: safety, reliability, productivity and energy and emissions, coupling results with KPIs regarding two enablers: organizational effectiveness and systems and data. “Mapping these indicators can help to develop a vision regarding the future of the company, providing a roadmap to gradually incorporate manual inspection, equipment monitoring, predictive analysis, all the way to full automation,” says Mangieri. “You cannot control what you do not measure.”

Referencing Emerson’s survey, Mangieri said over 60 percent of all companies interviewed think IoT is ready for industrial applications and highlighted the US$430 billion opportunity that exists in improving project performance. However, he also acknowledged there is still some reluctance to board the innovation train. According to Emerson’s survey, most companies consider risk aversion and conflict with status quo their main obstacles to implementing disruption and innovation, while budget constraints are among the least important reasons.

Coercing players to make a change, Mangieri used a well-known game theory model named the Prisoner’s Dilemma to exemplify what could happen to companies that fail to adapt to new technologies. “If everyone innovates, there will be a maximization of market benefits,” he said. “However, if a company fails to adapt, it will lose its position in the market.”

Big Data Can Help the Mining Industry, if the Industry Lets it

Tercer Panel MMF2019

Thanks to technology, companies are increasingly acquiring real time information that allows them to make faster decisions that directly impact their profitability and expenses. While some of the of the principles of IoT are increasingly reaching the mining sector through specialized tools that measure and process real time data, companies have been reluctant to fully implement this technology, agreed panelists on Wednesday at Mexico Mining Forum 2019.

“Realtime information will become essential to mine operations,” said Cindy Collins, Founder of Mining Technology Partners and CTO of Geosite. “Technology is placing us closer to real time information from the field. We can use this information to make important real time drilling decisions such as continuing drilling or move to another place.” She explained that companies can use real time data to better understand the mineral potential of a site and avoid wasting money drilling in the wrong place. Considering the numerous advantages, she asked panelists: “why has this methodology not been widely adopted?”

Lynda Bloom, President of Analytical Solutions, recognized the potential of new measuring equipment to provide faster information with which to make decisions. However, the information the equipment provides is still not sufficient, she added. Ben Pullinger, Senior VP of Geology at Excellon Resources, agreed. “Handheld equipment allows for precise measuring of small samples but a comprehensive analysis is still required before starting operations,” he said.

Another barrier to the complete implementation of IoT in the mining sector is cost. Antoine Caté, Structural Geology Consultant at SRK Toronto, explained that “adopting new technology requires time and money. If everything is going well in an ongoing project, the company does not want to try anything new. It will only do so if there is a problem, however by that time it is often late.”

The investment goes beyond the acquisition of equipment as companies must train their personnel on the use of the new machines. “Adopting new technology might feel quite threatening because it involves changing people’s jobs,” said Bloom. The problem, summarized Pullinger, is that no one wants to be the first. “Often early adoption comes at high costs, while adopting it later often means that there are more people that already are proficient with the software.”

However, ignoring the data can also be expensive. “With more data, you can make more decisions. So, it is necessary to factor the cost of lacking this data in the operation. Without using the data, companies will spend more money,” said Danté Águilar, Founder and Director of Geotech and Exploration Support. Caté agreed. “By not using this technology we can lose a lot of money. Having this information might allow a company to decide whether to continue drilling or not.”

Once companies decide to adopt the technology, the next challenge to address will be processing all that information. “Information will come from many different companies, all with different ways to upload this data. The mining industry uses a lot of proprietary software, so data collected by one source cannot be read by another,” said Caté. However, once the initial investment is made, data collection will benefit many across the sector. “There will be a large amount of data, true, but different people will want different things from this data. Specific tests can only be used for a specific reason but a single data set can address the needs of many different people,” he added.

Bridging Mining Financial Gap through Better Communication

Cuarto Panel MMF2019

Within the mining industry, raising funds is an arduous task. The industry has capital-intensive projects with high risks that not all financial institutions are ready to take on. During Mexico Mining Forum, which took place on Feb 6. at the Sheraton Maria Isabel hotel in Mexico City, panelists discussed how the industry could come together to close the gap between capital and mining projects in Mexico.

FIFOMI is Mexico’s mining development bank and is usually the gateway for companies entering the industry. “We want to be the seed of the industry through supporting micro companies in Mexico which is one of the most unattended sectors. It is a sector that requires a great risk and in order to provide them with the necessary support, we must create alliances with government entities to share the risk,” said Alfredo Tijerina, Director of FIFOMI.

Sara Warden, Senior Editorial Manager of Mexico Mining Review led the discussion on how financial institutions are adapting to the unique needs of mining companies and how the industry itself can obtain more funds. Throughout the discussion, the need to better communicate financial options and to provide industry specific solutions were the main points of discussion.

The Mexican financial market continues to develop but some mining companies such as Carrizal Mining have found it easier to raise capital through international stock exchanges. “On TSX there are 130 issuers that have a project in Mexico. The blend between Mexican and Canadian expertise adds great value. We are seeing a great amount of family-owned businesses looking to list on the stock exchange and more and more private equity companies are also looking to share the risk,” said Rob Peterman, Vice President, Global Business Development at Toronto Stock Exchange (TSX).

From the perspective of an operator, Carlos Silva, Director General of Carrizal Mining believes that the country’s lack of financial structure specialized in mining makes it difficult for companies to raise funds. “As a Mexican mining company, it was difficult to receive funds to carry out our projects, but when we became a public company, funds poured in. We were able to invest US$60 million in the span of three years. This was because utilities were reinvested in the company constantly. The type of money the industry needs is only available in the stock exchange,” said Silva.

The complexity of the Mexican market encourages the specialization of financial institutions. Accendo Bank has been in the market for over 20 years and has participated in many mining operations. “We have an expertise that I believe is unique in the industry. We look to banks such as FIFOMI as allies,” said Javier Reyes, Co-CEO of Accendo Banco.

But with institutions such as these, Warden asked if the financial gap was instead a communication gap between the funding sector and the miners. According to Tijerina, there is a communication gap and a lack of information to the industry. “Miners are going to institutions that have the best communication. We must start tearing down communication barriers and allow information to flow freely throughout the industry,” he said.

“The financial gap is not covered and it is the biggest area of opportunity in the industry. There are signals that the cycle is changing, and with it will flow more capital. There are few Mexican companies willing to take the leap to become a public company, and it is not just in the mining sector. As long as companies keep doing the right thing and setting the example, more money will continue to flow,” Reyes concluded. 

Human Capital Irreplaceable Asset

Napoleón Gómez , Senator
Presentación Napoleón

Echoing the plan stated by the Undersecretary of Mining at Mexico Mining Forum 2019 at the Sheraton Maria Isabel hotel in Mexico City, Napoleón Gómez, Senator and President of the Congress’ Work and Social Provision Commission, highlighted the importance of a social approach in mining operations and the role of human capital in boosting efficiency and productivity.

“To this day, all government offices tout growth in the mining sector, as well as the new technologies being implemented to boost efficiency. However, very few mention the role of human capital in this process. Human capital is the most important asset of any company,” said Gómez during the closing presentation of the forum.

According to Gómez, the country must integrate innovation and human development strategies to boost social development, not only because of social justice but to boost demand and purchasing power. To do this, however, the country needs a new corporate culture more in line with social and environmental issues. Gómez highlighted security as one of the main national issues that could be addressed through mining development. “Mines are normally located in remote areas with limited access to economic activities,” he said. “If workers are deprived of the opportunity to participate in mining activities, they tend to turn to criminality.”

There is political will to help the mining sector grow but this must be done with a social approach, based on education, human capital development and environmental sustainability. “In many industries, client is king. However, we should make human capital the main focus of our operations,” he said. “By doing this, we will see a result in productivity and the image of the company.” Gómez also put countries like Finland and Chile as examples of how a social approach can make Mexico a leader in welfare and mining productivity.

Safety and security are also key topics for legislators according to the Senator, especially considering the working conditions in this industry. “Mining has always been the most dangerous activity in the national economy, which is why it is imperative to reduce risks and improve safety and hygiene standards in the industry,” said Gómez.

The topic is already on the government agenda, as well as the potential risk that growing automation and Industry 4.0 could pose to human labor. According to Gómez, the global automation rate will increase from 33 percent to 75 percent in the next fie years, leaving 47 percent of all workers in North America at risk of losing their job. He is positive about the industry’s future, though, saying “there is no technology or artificial intelligence that could replace the human workforce in its entirety to this day.”

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