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Mexico mining suspension to hit silver supply
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 in the country 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.
As of press time, with the exception of Newmont (NYSE: NEM), Argonaut Gold (TSX: AR), Pan American Silver (TSX: PAAS), Sierra Metals (TSX: SMT), Excellon Resources (TSX: EXN) and Equinox Gold (TSX: EQX; NYSE-AM: EQX), which have all announced temporary suspensions of their 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.
Argonaut Gold 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 Silver, 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.
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 Mexican mining chamber (Camimex), 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).