Goldcorp issues Mexico gold mine warning

Goldcorp Inc. [G-TSX; GG-NYSE] has warned that it will soon be forced to suspend production at its flagship Penasquito Mine in Mexico. This is because access to the mine has been blocked for 12 days by transporters and local residents.

In a warning that was published in local newspaper, Goldcorp said it will soon be “inevitable that the production of the mine will be suspended, which would put at risk the stability of thousands of Zacatecan families.” The warning was signed by Goldcorp director of public affairs Michael Harvey.

Published reports say the blockade follows a dispute over the transportation of concentrates from the mine site.

Goldcorp shares eased 1.92% or $0.36 to $18.38 on Friday. The 52-week range is $19.32 and $15.

Penasquito is a large scale open pit operation in northwest Mexico about 780 km northwest of Mexico City. It produces gold, silver, lead and zinc. Having produced 476,000 ounces of gold last year at an all-in sustaining cost of US$370/oz, the mine accounts for 18% of Goldcorp’s total production.

According to Goldcorp, it has 3,500 employees and contractors on the payroll. The company has said Penasquito is an important part of its overall plans to increase production by 20% by 2021.

Goldcorp hopes to achieve that goal by spending $420 million to improve the processing facilities. For example, a Pyrite Leach Project aims to make processing higher carbon sulphide ore more efficient, and recover 40% of the gold that currently sits in the tailings as waste.

The company is also developing a second open pit, Chile Colorado, to gain access to gold and other metals at the site.

As well, the company plans to mine higher gold grades in the Penasco pit area.

Meanwhile, news that Goldcorp has threatened to suspend production is the latest in a series of incidents involving mining companies and local residents Latin America.

Pan American Silver Corp. [PAAS-TSX, NASDAQ] recently announced that the security situation at its Dolores Mine in Mexico has improved following increased patrols and enforcement by Mexican Authorities.

In late May 2018, the company reduced activities on site, including underground and open pit mining and leach pad expansion. The company said these steps followed security incidents along the access roads being used to transport personnel and materials to and from the Dolores Mine.

It did not elaborate.

Back in late April, Pan American suspended operations at its Huaron Mine in Peru as a result of road blockades instituted by members of the nearby Huayllay community. Pan American said the community members were demanding compensation from the company for alleged impacts to the community land, as well as additional service contracts for construction work, haulage and material supply at the mine.

The brief suspension, which has since been lifted, will not impact the company’ production guidance for 2018, analysts said.