TORONTO (miningweekly.com) – Community relations can make or break mining projects large or small. Faced with local concerns, or even strident opposition, companies that reach an accord and then establish robust community bonds warrant close attention, as do the methods they employed.
Torex Gold Resources acquired the Morelos gold/silver project 180 km southwest of Mexico City in 2009. It also inherited a property suffering a lengthy blockade by local people. Resolving this standoff was the company’s main priority.
“Morelos was initially owned by Teck [Resources] and Mike Murphy [now a company director] negotiated the rights to purchase the asset in early 2009,” Torex director, president and CEO Fred Stanford told Mining Weekly Online. “About $254-million was raised in October 2009 and the property was subsequently purchased for $150-million. The remaining cash was used to get things going.”
“The property had been blockaded for about two years, but we had the advantage of being the new kid on the block; we knew the anger wasn’t specifically directed at us,” he said.
The local communities affected by the project are represented by three sub-municipal entities called ejidos. “Two of the ejidos already had deals in place, but the third thought its agreement wasn’t to its advantage,” Stanford said, explaining one of the root causes behind the blockade.
Torex decided to immediately redraft these deals, hoping this would allow the company to move forward and enable it to start building an amicable relationship. It had several guiding principles in mind when negotiating.
“The company works with what we call a ‘values continuum’. Condensed, this means understanding that communities judge actions through six value brackets: fair to unfair; loving to unloving; trustworthy to untrustworthy; courageous to cowardly; dignifying to disrespectful; and honest to dishonest. You have to be on the left hand-side of each bracket in order to succeed,” Stanford said
“Our deals were the same for each ejido and we worked out the difficulties through a series of key meetings,” he said.
“The first was a meet and greet session … the second was to establish where the problems lay. After many hours of discussion, we jointly agreed that the past couldn’t be changed and that the best thing for all concerned was to move forward. The third meeting was to discuss recovery for what people thought they had lost,” he added.
The deals were then renegotiated to the liking of all three ejidos. Local people and civic leaders have been regularly consulted ever since; interactions that helped facilitate the company in relocating a village.
Detailed planning work on the new village included local people helping decide its location and layout, the housing prototypes, the design of community buildings, and the various lots that will be assigned to each family. “The people have now chosen their new housing options,” Stanford said.
Good relations also helped Torex in securing its necessary permits. “We negotiated surface rights with the ejidos at the end of 2011 and the start of 2012. We also have the necessary water rights and have been conducting environmental impact assessments. [All of] this will feed into the formal change of land use from forestry to mining … Once your permits are in place you can construct and get going,” Stanford said.
At a wider level, Torex had cemented ties with the other branches of government. “We’ve got excellent relations with the federal, state and municipal governments. The [federal] government is newly-elected and already has some good strategies on the drawing board,” Stanford said.
ON TRACK
With local relations mended, Torex implemented a determined exploration programme to delineate Morelos’ two main deposits, El Limón and Guajes.
“[Before Torex arrived] about 100 000 m of drilling had been conducted on the property over a period of around ten years. We did about the same amount of drilling within a year-and-a-half. We were single-mindedly focused and our immediate strategy was to get the resource up from three-million ounces gold to five-million ounces,” Stanford said.
Effective August 11, 2012, El Limón and Guajes have total National Instrument 43-101-compliant proven and probable reserves of 48.8-million tonnes at 2.61 g/t gold for 4.09-million ounces gold contained. Silver stands at 4.35 g/t for 6.81-million ounces contained.
The company has been exploring other targets at the property and discovered gold/copper/silver mineralisation at both the Media Luna and Media Luna West zones during 2012.
Recent drill data was unveiled on February 20. Highlights included borehole WZML-07 at Media Luna, which intersected 36.18 g/t gold, 53.95 g/t silver and 1.76% copper from 485.7 m to 512.5 m. At Media Luna West, borehole MLW-05 intersected 48 g/t gold from 834.4 m to 837.2 m.
“We’re looking to get an inferred level resource out [for a portion of Media Luna], which is the best we can do from surface,” Stanford said. “We should be able to finish off an inferred level by end-2013 and get a resource estimate out during Q1 2014.”
“Exploration [for more detailed delineation] will go underground after this, taking about two years to mine into the drilling areas to provide access for the drill equipment,” he added.
“In the meantime, our surface drilling will shift to greenfield targets on the remainder of the property,” he said.
Keeping the site and the workforce safe and secure is important. The state in which Torex operates is poor, with limited police resources available. The company even experienced theft of trucks in early 2011. Torex immediately took the precaution of hiring a security team.
“Our property has a security team in place and we’ve had no problems since the security precautions were implemented,” Stanford stressed.
Initial production at Morelos is scheduled to start during 2015 and Stanford confirmed that the company remains on track to achieve this. For further funding, the company hopes to build on the $380-million equity financing that was completed in October 2012. Several future options are available, Stanford added.
“[So] from a financing point of view we’re in good shape,” he said. “We’re on track … We’ll build through the downturn and be well poised to capture the upturn.”