Volume 11 | Issue 6 | Year 2008

Like all businesses, mining is about profitability. That is why the history of the industry has been dictated by the price of the precious metals it produces. Nowhere is this correlation more blatant than in Mexico, where price fluctuations have given rise to mining towns that have faded into dust. It was during the current upward swing, which has seen the prices of gold and silver rise to meteoric levels, that GPR President and CEO Robert Archer joined Francisco Ramos to spearhead the acquisition of the Guanajuato mines in 2005.
Home to some of the world’s most prolific and best known silver mines, the Guanajuato Mining District has been a household name within the industry since 1548, when the precious metal was first discovered. During the 18th century, the district was reportedly producing one third of the world’s silver. But as production decreased and prices stagnated, entire mining towns were wiped out and hundreds were left without jobs.

It was not until the 21st century that the industry began to rebound, and with this turnaround came a revival of economic activity. Recalls general manager Carlos Castro: “In the last few years the mining sector around the world and in Mexico has flourished. A lot of it has to do with the increase in the price of precious metals, which has allowed many of the abandoned mines in Mexico to reopen.”

Today, GPR forms part of Great Panther Resources Limited, one of the fastest growing primary silver producers in Mexico. In addition to managing the Guanajuato mine, the parent company owns a 100-percent interest in the Topia mine in Durango and supervises two major exploration projects elsewhere in Mexico.

RIGHTING THE SHIP
When Archer and Ramos acquired the Guanajuato mine from a local cooperative, it was in dire financial straits. With annual production value hovering at about 300,000 silver equivalent ounces, the production facility had been struggling to pay its employees’ salaries and its providers’ bills. Additionally, the economic hardship made it difficult to maintain equipment essential to ensuring efficiency and optimum working conditions. Keeping this equipment up to date was one of Archer’s foremost priorities as the head of the company. “Unlike our predecessors,” explains Castro, “we are very conscious of equipment maintenance. While they could not invest in maintenance because of lack of resources, we have established programs that ensure the proper functioning of equipment.”

GPR also managed to improve other internal processes. Utilizing a different set of reactants, GPR has increased the purity of its main product, silver and gold concentrate. While in the past a ton of concentrate contained three-and a-half kilograms of silver and 35 grams of gold, today one ton accumulates 13 kilograms of silver and 90 grams of gold. Upping the quality of the concentrate threefold has resulted in lower transportation and processing costs.

Furthermore, Castro stresses GPR’s strong commitment to environmental standards. “Our hope is that in the future we will be able to obtain the Clean Industry certification granted by our government. In the meantime, we are soliciting to PROFEPA [Procuraduría Federal del Medio Ambiente] that they include us in the voluntary environmental audits.” Through these audits, the state organization would submit GPR’s facilities through rigorous tests and confirm the company’s adherence to ecological norms.

Lastly, to demonstrate GPR’s long-term commitment to the community, the company has agreed to work with local, state, and federal governments to restore some of the colonial properties of the once-great city of Guanajuato and to fund scholarships for the local Guanajuato School of Mines, the foremost education center for miners in the country.

EXPANDING BOUNDARIES
GPR’s significant investments in infrastructure and internal processes are minimal compared to the capital being redirected to exploration ventures. Guanajuato’s four main mines – Valenciana, Cata, San Vicente, and Rayas – are located on the Veta Madre (Mother Lode) structure stretching through the district for at least 25 kilometers. Throughout its entire tenure, GPR has aggressively explored the 4.5-kilometer stretch that is currently under its ownership. Successful discoveries, however, have been few and far between. “At most we have exploited only 20 percent of the 4.5-kilometer stretch of the Veta Madre that belongs to us,” explains Castro. “Unfortunately, the lode is extremely wide and not all of it is mineralized. Mineralized sections are difficult to pinpoint as they are not always located where we think they are.”

So far, GPR has completed over 100 surface and underground drill holes testing the vein structure of the lode. During this phase the company has discovered four new silver-gold zones and provided further definition on three previously discovered mineralized sections. Additionally, an underground sampling program currently underway is seeking to check the reliability of previous analyses and gather empirical information about the region.

The company is pumping approximately 90 percent of its earnings into further exploration of the Veta Madre, a testament to GPR’s emphasis on long-term, sustainable growth.

REAPING THE HARVEST
GPR’s significant investments on infrastructure have resulted in unprecedented growth. Although at peak capacity the mine can produce up to 1,200 tons of mineral extract per day, when Archer took over the operation in 2005 the output was closer to 300 tons. Following the refurbishing of obsolete equipment and the aforementioned improvements in processes, the company began producing extract at a rate of 600 tons a day mostly originating from the “aguilarita” mineral, which is endemic to Guanajuato. Out of the four major mines, Valenciana and Cata are the most productive – netting 200 daily tons of extract each – and also the ones with the most potential. “Currently these are the two mines we are exploring most aggressively,” Castro notes. “In fact, we are developing deep ramps with the goal to gain knowledge about the geology further down these regions.” Castro hopes that through further exploration, production can be upped to 800 tons by the end of the year.

In value, GPR’s quarterly output has jumped from 70,000 silver equivalent ounces in the last quarter of 2006 to over 184,000 ounces in the last quarter of 2007. The goal, Castro notes, is to reach the figure of 1.2 million ounces per annum, which equates to about 195,000 tons worth of mineral extract. To achieve this number, GPR would have to run its mines at capacity and employ approximately 300 workers laboring three daily shifts seven days a week. Additionally, the company will need to closely monitor its equipment, which includes three ball mills, flotation cells, and filters.

GPR sells 100 percent of its output to Torreón-based Met-Mex Peñoles, the world’s fourth largest metallurgical complex. This plant is in charge of smelting and refining the gold-silver concentrate and producing the final result in the form of silver and gold bars.

Despite its massive growth the past few years, GPR is still considered a medium-sized company within Mexico’s mining industry, covering 1,108 total acres and featuring 29 mining lots. The good news, of course, is that the upside is considerable and that leaders like Castro are keeping their eye on the ball. “There is no doubt that we are a young company,” reflects Castro. “What we want to do is continue to grow, and that is why we are investing so heavily in exploration and infrastructure.”