Mexico, the world’s largest silver
producer, has become the latest country to enforce a suspension of
non-essential activities in response to the outbreak of the coronavirus
pandemic, after confirmed cases climbed above 1,000, with 29 deaths.
The government decree, effective until
April 30, is expected to have a significant impact on the supply of silver
at a time when demand for silver coins is high.
With the exception of Newmont
Mining (NYSE: NEM), Argonaut
Gold (TSX: AR), Pan
American Silver (TSX: PAAS) and Sierra
Metals (TSX: SMT), which have all announced temporary suspensions of
its Mexican mines, resource companies present in the country have yet to react
to the government’s order, despite a warning that those flouting the order will
face fines or prosecution.
Newmont, which operates the Peñasquito mine in the state of Zacatecas, said it was taking steps towards a safe and orderly ramp down of operations at the asset, which is the country’s largest gold mine, second biggest silver mine and one of the top producers of zinc and lead.
Mexico is the world’s largest silver miner, accounting for roughly 23% of world production.
Argonaut has confirmed
that it is stopping mining, crushing and stacking activities, but given
that it operated heap leach mines, metal production and metal sales will
continue during the suspension.
Pan American, which operates
the La Colorada (Zacatecas, pictured) and Dolores (Chihuahua) mines, has
also begun to voluntarily reduce throughput by about 10% to 20% at its Timmins operation
in Canada, hoping to further enhance physical distancing at
the site.
Last year, La Colorada produced 8.2
million ounces of silver, while Dolores’ output came in at 5.1 million ounces.
Toronto-based Sierra Metals is only
maintaining an essential services crew at its Bolivar mine site until April 30
and its Cusi mine site has already been placed into care and maintenance.
Bolivar, an underground mine with a
3,600 tonnes-a-day processing capacity, had previously been expected to produce
16,402 – 18,225 tonnes of copper-equivalent this year, while the Cusi
underground mine was slated to generate between 1,732 and 2,126 silver ounces.
Pushing for an exemption
Mexican industry leaders are
pushing for an exclusion to the temporary halt of non-essential activities.
They argue that mining should be allowed to continue due to its importance to
national supply chains and the wellbeing of host communities.
Mexico is responsible for nearly
23% of world production of silver, churning out more than 200 million ounces last
year, up from 196.6 million ounces in 2018. It also has major copper and zinc
mines, operated by Grupo Mexico and Southern Copper, and produces a significant
amount of gold, making the mining sector responsible for about 4% of the nation’s
gross domestic product.
“To define the mining sector
as non-essential, is not only to economically affect thousands of workers, but
also to leave 656 communities alone where we operate and to whom we provide
basic health services,” Fernando Alanís, president of the Camimex Mexican
mining chamber, said via Twitter.
The industry body’s call was
mirrored by the Sonora state branch of the Mexican association of mining
engineers, metallurgists and geologists (AIMMGM).
“Without the operation of the
mining industry various isolated communities would be affected by a decrease in
health services which are so important in the current situation. It is
important to find a balance,” mining representatives of Sonrora, Mexico’s top
gold and copper producing region, said on
Twitter.
Scotiabank analysts Ovais
Habib and Trevor Turnbull said in a note they believed businesses that would
suffer irreparable harm as a result of the suspension should be exempted.
“In our opinion, mining could fall
under this on a case-by-case basis,” they added.
People close to the matter, who
asked to remain anonymous, told
Reuters that some companies will be allowed to continue with some activities
in an effort to avoid the “paralyzation” of future operations, as well as to
promote mine safety.
The measure would also save about
2.6 million direct and indirect jobs, the sources noted, adding that an
official decision on the matter is expected as early as next week.