Mexico miners, steelmakers ramping up after power disruption

Mining companies in Mexico are returning to full production after electricity shortages related to the Texas freeze impacted operations.

Operations at silver, gold, coal and iron ore mines in the country were suspended or limited after the US state halted natural gas exports amid historic winter storms.

The move led to power outages and a surge in natural gas spot prices.

Mexico is heavily dependent on cheap natural gas from Texas, with the state providing 84% of total supply in 2019.

Power restrictions were eased from Friday (February 19) after Mexico secured liquefied natural gas shipments and supplies from the US began to rise.

MOSTLY RESOLVED

Endeavour Silver CEO Brad Cooke told BNamericas on Monday (February 22) that the power supply issues at its three Mexican mines were “mostly resolved.”

The Guanaceví, El Compás and Bolañitos silver and gold mines were running at full capacity and normal rates by around midday Mexico time on Monday, Cooke said in an email.

Power constraints had forced the company to turn to generators to power limited milling activities and the flotation circuit at Guanaceví, with the crushing circuit temporarily suspended.

No impact on Q1 production is expected, Cooke added.

RESTART UNDERWAY

Steelmaker Altos Hornos de México (Ahmsa) said the company had prepared to begin restarting suspended operations from midday Friday.

Coal and iron ore mines and steel plants were halted for four days due to restricted electricity supplies, resulting in around 20,000t of lost liquid steel output.

But limited natural gas supplies continue to weigh on operations.

The company has put in place an emergency plan to maintain production with reduced natural gas availability, which was around 50% of normal levels, Ahmsa said in a Mexican stock market filing on Friday.

POWER RESTORED

Gatos Silver said on Monday that full grid power had been restored at the Cerro Los Gatos primary silver mine.

The company suspended operations at its processing plant as a result of power restrictions last week, while continuing reduced underground mining and surface administrative facilities using diesel generators.

The process plant will resume operation early this week upon completion of maintenance activities which were brought forward during the suspension.

“Given the expedited restoration of full grid power, the outage has had minimal impact on the company’s mining and processing activities,” Gatos said in a release.

A spokesman for First Majestic Silver told BNamericas on Monday that the company’s trio of Mexican silver-gold mines have not been affected by power supply constraints.

COST CONCERNS

Some mining companies have warned that production costs will be impacted by the natural gas shortage, which sent prices soaring.

Excellon Resources said it expected higher Q1 production costs at its Platosa primary silver mine in Durango state after natural gas prices surged to US$300 per MMBTU from US$3.00.

The company’s power contract is backed by natural gas.

First Majestic said last week that its costs were not affected as its energy prices were fixed for five years, while Alamos Gold said its Mulatos gold mine is unaffected as power is provided by diesel generators.

A spokesperson for Agnico Eagle Mines, with the Pinos Altos, Creston Mascota and La India primary gold mines in northern Mexico, told BNamericas that no impacts on operating costs were expected as the mines do not use natural gas.

The disruption to natural gas shipments has prompted calls for Mexico to invest in gas storage and diversify its energy mix.