NO PIT FALLS

Mexico 2015 | ENERGY & MINING | INTERVIEW

TBY talks to Xavier García de Quevedo, Executive President of Infrastructure Divison, Grupo Mexico, on the evolution of the Mexican mining industry, weathering the fall in metal prices, and the Buena Vista project.

Xavier García de Quevedo
BIOGRAPHY
Xavier García de Quevedo studied a degree in chemical engineering at the National University of Mexico. He has worked for Grupo Mexico since 1969. His first position at the company was as a production supervisor. He serves on the Board of Directors of Grupo Mexico, Southern Copper Corporation, Grupo Ferroviario Mexicano and Ferrosur, International Copper Association, Ascaro, Inc, and Banamex—Consejo Consultivo.

How has Grupo Mexico-Minera performed last year in light of the worldwide fall in metal prices?

The price of copper dropped around 7%, but the drop was more dramatic for other metals such as silver and molybdenum. Despite the decrease in the prices of copper, Ebitda has only decreased by 6% due to certain factors such the project in Buena Vista, which increased overall production. We also reduced infrastructure costs by implementing an integrated center for transactional activities (Shared Services Center) located in Hermosillo that carries out operations for México, Perú, and America. Additionally, the inauguration of the combined cycle energy plants and a Wind Farm reduced the costs. The transportation, petroleum, gas, and construction divisions experienced growth that surpassed last year. We broke our previous record in extraction. This year, we will produce significantly more critical mass due to the exploitation of the Buena Vista Mine, with over 300,000 tons of copper, representing an increment of 178% in production and a 140% increase of molybdenum production. In terms of oil extraction, we have five drilling rigs in shallows waters in Campeche in operation, and we are installing two more, the “Veracruz and the Tamaulipas".

Regarding the energy division of your company, what are the opportunities for the group given the recent energy reform in Mexico?

Our aim is to be self-sufficient in terms of energy, however we also view the operation as an opportunity to enter the free market. We acquired a wind power park in Oaxaca called El Retiro, purchased from Gamesa, a Spanish company. It is running at 100% capacity and caters to the low- and medium-range activities of the group, provides green energy to the Cinemex conglomerate.

Can you elaborate on the projects in Peru located in Tía María and Toquepala?

We are starting in Toquepala because we have received the construction license to do so. Nonetheless, in Tía María we have the environmental impact documentation in place, but the official license hasn't been issued due to opposition from anti-mining groups that have obstructed the process. We are awaiting the resolution of this problem, hopefully in a few weeks, and we are confident because we have received support from many government institutions. The project will benefit the country because it will be located in an isolated area without important economic activity, and it will generate employment for the local community. For the Toquepala project that began operations, the annual production will double to 200,000 tons of copper.

How do you think the mining industry will evolve in the next 5 years in Mexico?

The exploration rate has decreased due to the changes in policies requiring exploration costs to be deferred 10 years, instead of deducting the expenses immediately. As this is risk capital, the decision to implement this policy was inadequate and it had a considerable impact on the industry. The main foreign investors were Canadian companies and more than half of them abandoned their operations in Mexico after this policy was implemented. Despite this current situation, I believe that if policies are adjusted, these foreign investors will return to the country.

For 2015 you announced an investment of $3 billion dollars. What are the expectations of the group for this year?

We expect to finish construction of the Buena Vista project that represents an investment of $3.4 billion. We must also finish the modular oil platforms construction. The railway is also receiving an important investment of $400 million. There is a lot of possibility to expand as it currently covers only 24% of the cargo transportation routes in Mexico. We aim to complete the construction of our projects in Mexico and definitely to participate in the oil drilling round 0 for Pemex.