Volume 11 | Issue 4 | Year 2008

Peñoles was founded in 1887 by a group of Mexican entrepreneurs in the region of Durango which, as a territory rich in mineral resources, traces its mining roots to before the colonization of America. Since its inception as a mining company, Peñoles has switched owners several times, at different stages running under the supervision of German and U.S. proprietors. It was not until 1961 that the government passed a nationalization decree of the Mexican mining industry and the company ended up under local ownership once more. Currently the enterprise operates six metal base mines and owns a handful of metallurgical and chemical plants throughout the country of Mexico. These in turn are manned by over 6,251 fulltime employees, 4,000 contractors and over 33,000 indirect employees. Peñoles is a fully owned subsidiary of Grupo BAL, a private investing group with diversified stakes in the fields of insurance, financial services, agriculture, retail stores, and education.
In the past few years, the Mexico-based enterprise has been experiencing double-digit growth and spearheading mining exploration initiatives throughout Latin America. The company’s success, notes communications officer Francisco Javier Siliceo, is in part due to the cyclical aspect of the industry. “As metals are commodities, both our prices and the demand for our products are extremely sensitive to the global economy,” he notes. “Today prices and the demand for metals are very favorable, and we have been exploiting these good circumstances for four or five years now.” Even in this era of prosperity, however, Peñoles has not become complacent. The company is reinvesting millions of dollars in the pursuit of more efficient processes and additional mining concessions that will improve its standing within the global mining community.

Peñoles’ high regard as a mining and metallurgical powerhouse would not be possible if not for the sizeable reinvestment the company allocates to exploration. “Thanks to our policy favoring exploration, today we find ourselves in a very advantageous position both operations-wise and reserves-wise,” notes Siliceo. “Furthermore, we have a number of very promising exploration projects and prospects.” In addition to its emphasis on exploration, Peñoles invests heavily in research and development as well as in the implementation of best practices throughout its facilities. Explains Siliceo: “Although we have not produced technologies of our own that impact the international mining industry, our research and development efforts have resulted in internal efficiencies that make our processes simpler and less costly. These efforts are being reflected in our reduction of energy and supply chain costs.”

Peñoles is also exploring in various Latin American regions with great mining potential. In addition to developing the Sonora, Durango, Chihuahua, and Zacatecas areas in Mexico, the enterprise boasts of presence in Peru and Chile, territories that Siliceo believes will constitute an integral part of Peñoles’s mining assets in the near future. The company’s strategy to invest heavily in research and exploration has spearheaded unprecedented growth. In fact, Peñoles enjoyed an impressive growth sales rate of 16 percent in 2007 alone.

Peñoles is extremely conscious of its social obligation as a global company and has taken significant measures to both care for the environment and foster the growth of its workforce. Explains Siliceo: “We are convinced that it is not possible to grow economically without assuming our social responsibility within the communities where we operate and maintain a healthy relationship with nature and the environment. Thus, we seek a balance between economic gain and the social benefit yielded by our operations.” Peñoles has recounted its social development activities for the past seven years in an annual report, and has been presented a handful of accolades rewarding the company’s dedication to safety, ethics, and energy efficiency. These include the Silver Helmet award given by the Mexican Chamber of Mines and the Ethics & Values recognition awarded by the Confederation of Mexican Chambers of Industry.

Furthermore, Peñoles holds important industry certifications such as ISO: 14001 – minimizing the effect of companies on the environment – and ISO 9000, which serves to ensure quality management systems. Lastly, the enterprise also conforms to the OHSAS 18000, an international occupational health and safety management system specification. As Siliceo notes, Peñoles places particular emphasis on its standards of excellence to further improve the company’s presence in the international mining industry. “Our mission is to add value to our non-renewable natural resources in a sustainable manner, and our vision is to become the most widely recognized Mexican enterprise in the world for our global outreach, the quality of our processes, and the excellence of our people.”

The sustainable development strategy that Peñoles is undertaking – with a focus on its stakeholders – is illustrated in some of the following ways:
• It continues to be a growing, profitable company for shareholders, with low costs thanks to technology, operating efficiency and secure investments in value-added projects;
• It operates in a teamwork environment that is pleasant, safe, participatory and innovative offering all employees continuous and planned development, competitive compensation and recognition based on results, which translates into a sense of belonging;
• It establishes strategic alliances with clients based on an understanding of their needs and obligation to supply them with products and services in a timely, competitive manner and at a fair price;
• It establishes long-term alliances with key suppliers, who know Peñoles’ needs and provide it with reliable products and services in a timely, competitive manner and at a fair price;
• It has credibility and acceptance by the community and regulatory authorities because:
• It is improving its environmental performance through the committed actions of all personnel, developing a true culture of respect for the environment; and we are adapting our processes in a timely manner to comply with the strictest international standards;
• It contributes to the economic and social development of the communities in which it interacts and strengthens the image and reputation of the company.

Environmental objectives are as follows:
• Water resource – Optimize consumption and control wastewater discharge;
• Energy – Optimize consumption and seek clean and renewable source;
• Waste – Reduce and manage/dispose of safely and appropriately.
• Atmospheric emissions – Control and reduce;
• Ecosystem preservation – Protect flora and fauna of mines in operation and remediate close mines.

Peñoles features six major mining facilities in Mexico: Milpillas, in Sonora, Peñoles´s first important copper mine; Bismark in Chihuahua, zinc mine; Naica in Chihuahua, México´s largest lead mine; Sabinas in Zacatecas, lead, zinc and copper mine; Francisco I. Madero in Zacatecas, México´s largest zinc mine and Tizapa in State of México, poly-metallic mine, chiefly zinc. The company also features Met-Mex Peñoles, located in the city of Torreón, the world’s fourth largest metallurgical complex and largest producer of refined silver and metallic bismuth in the world; refined gold, zinc and lead, sulfuric acid and sulfur dioxide. Finally, the chemical plant Química del Rey in Coahuila constitutes the world’s largest sodium sulfate producer, in addition to magnesium compounds.

All in all, Peñoles employs over 14,800 providers, 87 percent of which are based nationally. The company’s sales in 2007 topped 44.7 billion Mexican pesos ($4.26 billion), out of which $87 million was reinvested in exploration and research. Its vast output makes Peñoles one of Mexico’s largest exporters, with its products reaching over 35 nations and topping 39,000 shipments in 2007. Although the major beneficiary of Peñoles is North America, the enterprise has recently upped its presence in the Asian and European markets.

A testimony of Peñoles’ increasing global presence is the company’s current venture into the London Stock Exchange. The Mexican enterprise separated its precious metals assets from its base metals business and successfully completed a $2 billion float of the new gold and silver miner in London. Peñoles will retain its metallurgical and chemical divisions, and will maintain at least a 75 percent of the equity of the precious metals company-Fresnillo PLC. Siliceo believes the deal will maximize efficiencies within the company.

“What we are seeking are two separate managements each focused on its specific segment,” he notes. “This will allow for greater flexibility in the management of resources and in the implementation of strategies in regards to the markets each division targets.” In addition, the deal will help Peñoles diversify its financing sources and provide more flexibility for the company to participate in international transactions.

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