Exploration: projects and prospects
Extend the growth pipeline
Exploration focus and criteria
We believe that consistent investment in exploration is essential in maintaining a healthy project pipeline; therefore core to our growth strategy and a key element in extending mine life. We routinely apply advanced geospatial, geochemical and geophysical technologies such as tomograhic imagining, high resolution satellite imagery, airborne and core hyperspectral technologies, and hand-held and down-hole instruments as an aid to improving geologic interpretations that guide exploratory drilling leading to ore discovery. We maintain the largest land area of concessions for precious metals exploration and mining in Mexico. We do this through continuous investment in exploration irrespective of price cycles, and ongoing acquisition of mining concessions and surface land.
The economic environment may change, but quality opportunities will always endure. Since our earliest days, we have maintained a strategic commitment to continuous exploration regardless of fluctuations in the prices of precious metals.
Key growth driver
Unlike the majority of mining companies in Mexico or elsewhere, Fresnillo has been built on a long-term commitment to exploration. Where others seek to grow mainly through acquisition, we focus on creating our own pipeline of reserves and resources. Where they bend when the economic winds change direction, we remain firm in our belief that steady, consistent and significant investment in exploration across all precious metals price cycles is the best way to deliver our growth ambitions.
Our approach is to evaluate opportunities within existing mines and at new locations against a set of strict criteria – including a minimum potential of 150 moz of silver or 2 moz of gold for standalone projects – to ensure they meet our operational and revenue objectives. We also evaluate further factors before commencing activities, such as ore grades, metallurgical recoveries, extraction costs, environmental impact and community costs. Only those projects that score well against these requirements receive a green light. Our experienced exploration team has been responsible for our most significant breakthroughs, such as those at San Julián and Saucito, and is ideally qualified to identify and develop future mines.
The Group has four Exploration Offices in Mexico – Zacatecas, Toluca, Chihuahua and Hermosillo and one in each of Peru and Chile. Each has an HSECR programme focused on health, safety, environmental management systems and community engagement initiatives that allow us to build positive relationships from the earliest interactions. We have built an experienced exploration team of over 100 geologists in Mexico, Peru and Chile – supported by 40 specialists in claims management, negotiation, community relations and environmental control, as well as 250 assistants drawn from local communities. The team comprises a well-balanced mix of senior and junior professionals, many of whom have been with us since our first days.
We ensure that our team is provided with the tools to do their job at all times by investing in training and technology across price cycles. Through a systematic approach to selecting targets, the latest geospatial, geological, geochemical and geophysical technologies, including satellite imagery and hyperspectral surveys, among others, constitute the foundations that increase the probability that our geologists will make the next discovery.
Our geologists have significant technical expertise and a proven track record of new discoveries. We also look for opportunities to acquire early-stage projects with strong growth potential or to partner with other groups through agreements that allow us to share the inherent benefits and risks of prospect exploration. This comprehensive approach results in a pipeline of projects that extend across the multiple stages of exploration (detection, discovery and definition) and ensure long-term organic growth.
Our long-term objective is to discover and develop economically viable silver-gold deposits and to advance new and early stage prospects into the drilling and advanced exploration phases.
Investment at current mines helps replenish reserves and explore areas of influence; at development projects we convert resources into reserves and expand the total resource base; prospecting and drilling at early stage prospects and projects feeds our growth pipeline. The development of underground mines takes time, with results from surface drilling requiring confirmation by underground exploration and the metallurgical testing of bulk samples. We conduct initial underground exploration and development in the pre-feasibility phase in a manner that will optimise the investment and shorten future mine development schedules.
Exploration Highlights (1H19)
Exploration continues to be a key pillar of our strategy and in 1H19 risk capital invested in exploration totalled US$91.3 million. The Group focused its exploration efforts in 13 areas, with interesting results obtained at Fresnillo, San Julián and San Juan extending known ore shoots and identifying new structures. Negotiations with communities to obtain access permits to drill continued advancing at several project areas in Peru and Chile. Total risk capital expected to be invested in exploration for the full year 2019 has been increased to approximately US$160 million, while capital expenditure for the year has been reduced to US655 million to reflect the lower rate of capital deployment at our different mines and projects.