TBY talks to Xavier García de Quevedo, Executive President, Grupo Mexico-Minera Mexico, on the mining sector, copper reserves, and diversification strategies.
TBY What main steps has Grupo Mexico-Minera Mexico (GM-MM) taken to become one of the largest resource companies globally?
XAVIER GARCÍA DE QUEVEDO Grupo Mexico has 65.4 million tons of copper reserves, and we are the fifth largest copper and the third largest molybdenum producer in the world. We have achieved this position because we have excellent methods to calculate our reserves, moreover we are continuously investing and exploring. The innovation applications in our operational model and the utilization of best practices are the key elements behind GM-MM’s positioning as one of the largest mining corporations in the world. Hard work and strict planning are also key elements that have made Grupo Mexico what it is today.
What is the distribution of your operations across Mexico, Peru, and the US?
Around 80% of our revenue comes from copper, 7% comes from molybdenum, and the rest is derived from silver, zinc, and other metals. In the US we have three large open-pit mines, and we operate four open-pit mines in Peru and Mexico. The largest open-pit mine is Buenavista del Cobre in the northern part of Sonora, Mexico. The Quajone mine in Peru is about the same size. In addition to these, we have five underground mines in Mexico.
What is the production capacity of the Buenavista del Cobre copper mine?
It’s operating at full capacity, with additional projects to bring the total capacity of the mine from 190,000 tons of copper a year to 450,000 tons in the next four years. Around $3 billion will be invested in the expansion project. Buenavista del Cobre alone holds 25 million tons worth of copper reserves.
How does Grupo Mexico contribute to the international mining industry in terms of best practice and innovation?
We extensively consider benchmarking an important way to control and improve our operations, and we constantly invest in new technologies. We always follow the best practices and apply the latest techniques and methods; one of our core characteristics is our efficiency. As a result, our cost of production is one of the lowest in the world.
How do you see the demand for resources evolving in the next five years, and what main trends can you identify?
There will continue to be growth in demand for commodities in the developing world and China. Another factor is that the grade of ore is going down and reserves are falling. As a result, I think we have a bright future and that prices will rise as a result.
How has Grupo Mexico developed over the years and what was its main strategy?
In the past we were just a local mining company. Our plan was to first complete our program of integration to become a more balanced company that produced not only minerals, but also fine metals. We completed this part of our strategy in the 1990s. Then our goal was to diversify, so we entered the railroad business, becoming the largest railroad company in Mexico with 10,000 kilometers of main railroad tracks. Our final goal was to become international; we achieved this by acquiring ASARCO, which in 1965 owned 100% of Grupo Mexico. Today, Grupo Mexico owns 100% of ASARCO. One of ASARCO’s principal assets was its Peruvian mines, which were included in the acquisition.
What main benefit did the acquisition of ASARCO and its Peruvian mining assets bring to Grupo Mexico?
As a result of acquiring ASARCO, the value of Grupo Mexico grew organically. The acquisition of new assets improved our performance in terms of production and capacity. Consequently, the company’s shares are listed on the New York Stock Exchange, the Mexican Stock Exchange (BMV), and the Lima Stock Exchange.
How would you assess the participation of foreign mining companies in Mexico’s mining sector?
There are about 230 Canadian companies performing exploration in Mexico, not to mention US, Australian, and other Mexican companies.
Do you think Grupo Mexico is creating a Mexican model in the mining sector that could be exported to other countries?
Mexico is number one in Latin America in terms of exploration. There are new lines and projects coming on stream as well. Mexico is open to investments in this industry; the taxation regimen for companies operating in this sector is very competitive, and many foreign companies are interested in the market. There’s also a friendly social environment for mining companies here, despite ongoing problems of security throughout the country. It’s a country where you can work hand-in-hand with local communities. This enables a kind of sustainable development, which is part of our long-term strategy as Grupo Mexico. By sustainable, I mean not just economically, but also socially and environmentally. This is very important to Grupo Mexico. Furthermore, we look toward contributing to the development of communities and to the development of human resources.
How much of Mexico’s mining and mineral resource potential do you think has been tapped?
I would say around less than 30%. Around 70% remains to be discovered. That’s why Mexico has so much potential for foreign companies, because there is a lot to discover, and therefore a big opportunity for growth and development in the mining sector.
How do you think the mining sector will evolve in Mexico and internationally?
Mexico is constantly increasing its position in the international market, and therefore its importance. For the first time ever, mining now brings in more foreign cash flow than tourism and remittances, and it’s now the third biggest export industry in Mexico after the oil and automotive
sectors.
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