2020: 6 MILLION OUNCES OF SILVER

Mexico 2020 | ENERGY | VIP INTERVIEW

TBY talks to Carlos Silva, CEO of Santa Cruz Silver Mining, on getting started, the recent merger, and plans for the coming year.

What was the objective behind the merger between Santa Cruz Silver Mining and Carrizal Mining this year?

In Santa Cruz, we are trying to reach our business's vision of continuing to make responsible, sustainable, and profitable mining happen in the country. I went to the stock market and saw that it is easy to access capital in Toronto when you have good assets to keep building on, while in Mexico it is difficult. With Santa Cruz on the stock market, we can access a larger amount of capital. In Mexico, financial institutions do not know the industry well so it is more difficult to properly finance a project, especially given the volume of capital the mining industry needs (capital intensive industry). What we are doing, merging with a company in the TSX, is the best option. I chose Santa Cruz because it already had experience in the stock market but could benefit from the operational experience of Carrizal Mining in Mexico, making this a perfect match. The two companies are 10 years old. Carrizal Mining was made with zero money, and we created 750 jobs and are producing close to the equivalent of five million ounces of silver a year, more than Santa Cruz Silver was producing even though they were listed in the stock exchange. Considering that we were able to do so much without capital, our access to the Toronto Stock Exchange makes our possibilities even bigger. We have good mining projects with a solid future, especially in Zacatecas. With this merge, Santa Cruz now operates three mines: Zimapan, Vetagrande, and Charcas San Luis de Potosi. We also have projects to develop other operations, one of which is called Panuco in Zacatecas. It will start producing in 1.5 years if we can get around USD20 million in CAPEX that are needed to build this strong mine.

How were you able to start Carrizal Mining without initial capital?

Trafigura hired me to go to work in Zimapan, in which Trafigura invested a lot of money. They hired me in 2007 with a contract through 2018. I worked with them for two years, and in those two years I did many things: I expanded a plant, developed a mine, and explored all that before they decided to leave. I quit because I had a 10-year contract with them, but they decided to close the project. They asked me why I didn't work on my own. I told them that I had no money, and they told me that they would give me the money once they saw how I was doing. So I decided to form a company without money. To do so, I began to negotiate with Peñolese, and they gave me a contract for the exploitation of the mine for 10 years. I had to cover the claim fees and another series of restrictions/conditions, but Peñoles decided to give me the mine. I started looking for money, but nobody wanted to invest. I spent the entirety of 2009 like that and didn't get anything. I had engineers working with me who earned good salaries, but I couldn't pay them. Still, they didn't leave because they believed in the project. I hired them in July 2009 and only started paying them in March 2010. In October, they asked me if we could grind and concentrate ore in October for about a week of production. We saw the calculations and decided to work a week and get money. We produced concentrate, sold it, and my first billing that week was USD300,000. That is how I started.

What are your goals and priorities for 2020?

We have to consolidate the company and produce six million ounces of silver by the end of the year. Currently, Santa Cruz produces 1.2 million. We are now looking for an appropriate way to finance the growth of the Company, we are rich in assets right now, so we need to get the story out and take this Company to a new level, starting now. Our organic growth will come from Veta Grande Zacatecas as we develop Minillas and explore San Manuel San Gil, areas which have blue sky potential, we will build a world class operation here as well.

What is Santa Cruz silver doing different when it comes to socially responsible mining?

I've been working on something that the sub-secretary of mining started talking about recently, which is that the Mexican mining industry should have a certification in responsible mining. The acronym in English is IRMA. There is already an international standard. Since 2017 I started the process to earn the IRMA Certificate at our Zimapan mine, which by the way, it will be the first mining operation in the Country to receive such award and the second worldwide with this recognition, we are almost there. We were working hard on the required compliance protocols and will submit all the papers work, for them (IRMA organization) to review. I shared this with the Sub-Secretary of Mining and he wants this to be a benchmark for the entire industry.