Mexico Mining Review talks to Armando Ortega, Vice President of New Gold, Inc. and Director General of Minera San Xavier, to discuss the right way to close a mine and how has the company improved community relations.
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Q: What role did New Gold’s Mexican operations play in achieving the lowest costs in the company’s history?
A: Minera San Xavier, which is our Mexican mining subsidiary, contributed with its fair share in lowering our costs. Particularly, we engaged in an extremely ambitious project by reevaluating all aspects of our operations, from our cost structure to the relations with our suppliers. We closed 2014 with high costs due to several factors, among them a dedicated stripping exercise within the mine, but in 2015 we have significantly reduced our operating costs. Miners know that it is easy to be productive in times of high commodity prices, but when prices go south, being a low cost producer makes a difference among competitors. The message we want to send to investors and stakeholders is that we are able to produce under very competitive conditions. As my masters at New Gold tell me, focus on what you can control, the price of gold is not one of them.
Q: What has the process been like for embarking on a gradual closure plan and future residual leaching process that continues to uphold the enviable record of compliance and best practices for other players in the industry?
A: This company has operated in a sustainable manner with outstanding environmental results. It has been extremely challenging because the mine is adjacent to a colonial town (Cerro San Pedro) so, operationally every day is a challenge, every time we carry out blasting within the pit is demanding, because the town is just 200 meters away. The National Institute of Anthropology and History (INAH), together with the Ministry of Defense (SEDENA), enforced very stringent levels of vibrations for detonations in order to ensure that that tremors do not jeopardize two colonial churches in the town. We have relentlessly adhered to these guidelines in the seven years we have worked on this pit.
The mine was discovered in 1590 and exploited as a huge underground mine. Since 2007, it has been operated as an open pit mine, so the metallurgical processes we perform call for the use of cyanide, which is environmentally challenging due to common misconceptions about its danger. Even if the cyanide is highly diluted and used in a closed circuit with all sorts of safeguards, people tend to feel uneasy about its implications. We are among the few Mexican companies that voluntarily applied for and received accreditation from the International Cyanide Management Code, which certifies that we implement the proper management, use, transportation and disposal of cyanide in a scrutinized custody chain. In short, I believe this company has undertaken relevant commitments to ensure that it operates within very stringent environmental guidelines.
Q: What major environmental mitigation and preventative practices have you put into place in accordance to Mexican regulations to make the land safe and useful as well?
A: In connection with the environmental obligation, there is a whole set of biophysical covenants (almost 300) that we must honor. One is related to reforestation and we have a commitment to reforest more than 350 hectares, which is more or less the size of the site that we have impacted with our operation. The logic of the Ministry of Environment (SEMARNAT) is that if we impacted more than 300 hectares, we are obliged to reforest the same size or more. The company has taken a proactive approach because we are obliged to carry this out after the mine closes, but we diligently began the program four years ago and I can confirm that we have already achieved our obligation. The second stage is to ensure the survival of the trees and cactus we planted, and we have surpassed our responsibilities by involving the communities, hiring local workers and paying for environmental services renting their own surface land.
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