LUIZ CAMARGO AND TONY ROVIRA

Mexico 2020 | MINING | B2B

Despite mixed signals from the current administration arising from changes in regulations and concessions, mining operators are optimistic about Mexico's bright mining future.

Luiz Camargo
LUIZ CAMARGO
Country Head
Compañía Minera Cuzcatlán
Tony Rovira
TONY ROVIRA
Managing Director
Azure Minerals

What drove Compañía Minera Cuzcatlán to start a project in Oaxaca, a non-traditional mining state?
LUIZ CAMARGO We have been successful in making sustainable agreements with local communities to explore and profit from ore bodies. We strive to explain the benefits of our industrial operation in generating wealth, employment, and sustainable development to the communities around our operations, so we can create a friendly environment for everyone. Oaxaca has one of the most complex government systems in Mexico, with 570 municipalities and around 405 of them governed by indigenous communities' customs and traditions. Amidst this complexity, we have succeeded working in the state because the majority of our people, or about 70%, belong to the community. This gives us first-hand knowledge and also increases our awareness of community worries and expectations. We are convinced that it is fundamental to go deep into a community and understand their needs before signing any agreements or making any promises. We believe Oaxaca is one of the best targets for mining in the country, and we will continue to work to strengthen our position in it.

What have been the main advances of your Oposura zinc-lead-silver project, which recently started production?
TONY ROVIRA We have been carrying out a small-scale mining and processing operation, and we expect to see cash flow into the company in 1Q2020. That will be extremely important for us moving forward, because we can use that cash flow to do more exploration and expand our projects. The project has surprised us because we found larger quantities and higher grades than what we were expecting, compared to resource drilling. Full production capacity is still some time away, however. Once we process the ore from the first 6,000 tons, the cash flow begins, and we can prove that the operation works, then we will go back and continue with small-scale mining and processing, and expand that cash flow. We are looking to do more drilling to increase the project's resources, which has delayed the feasibility study and large-scale production. We have decided that we need to expand the project's resource base to make it more valuable and attractive.

What are your thoughts about Mexico's mining potential and the current administration?
LC The new administration is facing a tough business environment. We support its efforts to eliminate invalid invoices, for example, and to regularize improperly paid concessions. The new government has a social vision focused on giving more opportunities to communities, which we agree with. However, we would like to have more certainty on specific matters, such as financial regulations for companies and the Mining Trust Fund. The latter is particularly important for us since we paid MXN170 million (USD8.59 million) in 2018 and MXN440 million (USD22 million) since it was created, in addition to taxes. We expect to be able to verify soon that this money goes to the community in which we operate, as we have a social and moral obligation to our stakeholders and want to ensure that the community receives these funds to build up a sustainable platform for its own development. We would also like to have clarity regarding to the anti-mining messages from different ministries, as these raise concerns amongst investors and jeopardize investors' confidence in Mexican mining. We defend Mexico because its legal, social, and political frameworks give excellent possibilities for establishing businesses.

TR We believe that there is great potential in Mexico, and there are still opportunities to acquire good projects and find new deposits. For example, when we acquired Oposura, it was unrecognized and had not been worked in since the 1980s. We have also discovered two new silver deposits at Alacrán. Our team in Mexico has been successful in finding new projects, making new discoveries, and developing good relationships with local owners and communities. At the same time, the current environment is slightly difficult for mining companies because the new administration is not as fast as previous administrations at releasing properties or processing applications for exploration.