MINING
Our strength lies in the constant pursuit of improvements in productivity, efficiency and safety in our mining operations, even under difficult circumstances.
MINING PRODUCTION

GOLD
koz

16
971.5
17
951.8
18
963.4
19
910.9
20
824.1
-9.5%

SILVER
Moz

16
58.1
17
66.4
18
69.8
19
62.3
20
62.6
+0.4%

LEAD
kt

16
80.7
17
78.8
18
83.3
19
84.3
20
86.4
+2.5%

ZINC
kt

16
286.5
17
285.1
18
289.6
19
292.3
20
288.1
-1.4%

COPPER*
kt

16
34.5
17
32.1
18
31.2
19
31.3
20
21.4
-31.6%

* Includes copper cathodes.

Contribution by mine
%

GOLD

  • Herradura
  • Saucito
  • Noche Buena
  • Ciénega
  • San Julián
  • Fresnillo
  • Others

SILVER

  • Saucito
  • San Julián
  • Fresnillo
  • Tizapa
  • Ciénega
  • Sabinas
  • Capela
  • Others

LEAD

  • Saucito
  • Fresnillo
  • Tizapa
  • San Julián
  • Sabinas
  • Velardeña
  • Madero
  • Capela
  • Others

ZINC

  • Velardeña
  • Saucito
  • Tizapa
  • Fresnillo
  • San Julián
  • Capela
  • Bismark
  • Madero
  • Others

COPPER*

  • Milpillas*
  • Sabinas
  • Velardeña
  • Capela
  • Tizapa
  • Bismark
  • Madero

* Includes copper cathodes.

At the close of 2020, Peñoles had four underground mining units operating in Mexico, producing zinc, lead and copper concentrates: Velardeña in Durango; Sabinas in Zacatecas; Capela in Guerrero—whose productive life began this year—and Tizapa in the State of Mexico, in which the company owns a 51% stake.

Operations at the Madero mine in Zacatecas and the Milpillas unit in Sonora were indefinitely suspended in April due to a steep drop in zinc and copper prices combined with high operating costs and low grades. Milpillas will continue producing copper cathodes from the ore deposited in its leaching pads. Also, and as planned, after 28 years of uninterrupted operation, we began the process of closing down the Bismark unit in Chihuahua, due to depletion of its reserves.

We also consolidated the production of Fresnillo plc, a subsidiary that produces gold and silver concentrates, dorés, precipitates and other materials in seven mines: Fresnillo and Saucito, in Zacatecas; San Julián, in Chihuahua; Ciénega and San Ramón—satellite—in Durango, all of them underground mines; and Herradura and Noche Buena, two open-pit mines in Sonora.

All together, these mines position us as Mexico’s largest producer of metal zinc and lead content. Furthermore, thanks to Fresnillo plc, we are the leading silver producer in the world and the largest gold producer in Mexico.

Actions in connection with COVID-19

All of our mining operations strictly followed internal protocols and the guidelines established by the Mexican Social Security Institute (IMSS) and the Ministry of Labor and Social Planning (STPS) to protect employee health. We obtained authorization to work according to the Sanitary Safety Protocol established by government agencies, and the IMSS awarded the company its Sanitary Safety distinction in recognition of our compliance with guidelines to control contagion.

Both the vulnerable personnel and administrative staff worked under the work-from-home scheme.

We maintain the national leadership in the mining production of gold, zinc and lead and international in silver.

We supported communities neighboring our operations with donations of 2,747 packages of basic food and supplies, 36,300 face masks and 1,169 containers of antibacterial gel, with a total value of Ps. 2.6 million. We also engaged ten physicians from UNAM to provide medical services and, in coordination with the authorities, we held campaigns to promote the sanitary measures necessary to prevent contagion.

We donated 50 Philips model E30 ventilators to the governments of Chihuahua and Guerrero in order to strengthen their medical infrastructure.

Two community committees were created during the year: one at Capela, in which a council of inhabitants from the mining region of Tehuixtla, Guerrero was formed to follow up on social infrastructure projects that would benefit neighboring communities; and the San Martín Health Committee in Sombrerete, Zacatecas, involving the Sabinas unit, in support of COVID-19 prevention actions.

Production and performance

Consolidated mining production (including 100% of payable production by Fresnillo plc) in 2020, and the change against the previous year, was as follows:

2020 2019 % chge.
Ore milled and deposited (Mt) 44.0 55.5 -20.7
Gold (oz) 824,087 910,871 -9.5
Silver (koz) 62,551 62,325 0.4
Lead (t) 86,420 84,332 2.5
Zinc (t) 288,072 292,291 -1.4
Copper (t) 8,969 8,806 1.8
Copper cathodes (t) 12,444 22,488 -44.7

The volume of ore milled and deposited was 44.0 million metric tons, 20.7% less than in the previous year due to pandemic-related restrictions and the suspension of operations at Madero, Milpillas and Bismark. Production at Herradura and Noche Buena was also affected, since in the state of Sonora, public health restrictions were extended to open pit mines. For this reason, gold production decreased by 86,785 ounces, or 9.5% compared to the previous year.

Silver production—62.6 million ounces—was similar to that of the previous year, supported by volume at Capela—which began operations in 2020—, the development ore from the Juanicipio project—which was processed at the Fresnillo plant—, and higher head grades at San Julián, Fresnillo, and Tizapa; the latter, in addition to improvements in recovery. These units offset lower production at Saucito and Sabinas due to a decline in volume processed and lower grades; at Velardeña, due to a lower head grade; Herradura, due to lower volume; and shortfalls at Madero and Bismark, resulting from the suspension of their operations.

The production of lead in concentrates grew slightly—2,070 metric tons—due to the contribution from Capela and the higher head grades obtained in Saucito, Ciénega, Sabinas and Tizapa, which offset lower grades and recoveries at Velardeña and San Julián, in addition to the absence of production from Madero and Bismark, which were out of commission for the entire period.

Production of zinc content dropped slightly—4,291 metric tons—due to the lack of production from Madero and Bismark and, to a lesser extent, lower head grades at San Julián. However, these effects were almost completely offset by the production of Saucito, Fresnillo, Sabinas and Tizapa, all four with higher grades; Velardeña, with a higher volume of ore milled and processed, and the production from the new Capela unit.

Regarding copper in concentrates, the output from Capela and Velardeña offset the lower volume from Bismark, Madero, Sabinas and Tizapa; the latter two also reported lower head grades and metallurgical recoveries. Milpillas produced a lower amount of cathodic copper because of the suspension of operations, although the ore deposited in the leaching pads will continue to be processed to produce cathodes, until it is exhausted.

US$ 477 M
invested in operations and projects in the Mining Division.

Mining unit highlights


CONTENTS

2020 brought us great challenges and lessons. Our Annual Report highlights the strengths that have allowed us to overcome difficulties while generating value to our stakeholders.

The following abbreviations will be used throughout the report:

oz =
lb =
Mm3 =
Ml =
Mlb =
Mlbe =
Moz =
koz =
t =
Mt =
kt =
MI =
US$B =
US$M =
US$/t =
US$/oz =
US¢/lb =
US¢/lbe =
ounces
pounds
million cubic meters
million liters
million pounds
million pounds equivalent
million ounces
thousand ounces
metric tons
million metric tons
thousand metric tons
million liters
billion dollars
million dollars
dollars per metric ton
dollars per ounce
dollar cents per pound
dollar cents per pound equivalent

PROFILE
We are a proud Mexican company, committed to our country, with presence in the international market.

FINANCIAL HIGHLIGHTS
In a complex environment, we focused on preserving liquidity, while continuing our priority investments.

MANAGEMENT REPORTS
We manage our business responsibly and prudently, with a long-term vision.

PERFORMANCE
Our operations faced great challenges during the year. We improved our processes and sought cost reduction.

ENERGY AND TECHNOLOGY
We incorporated new technologies to increase productivity and efficiency.

CORPORATE GOVERNANCE
Our corporate governance ensures transparency, the compliance with organizational values and accountability.

INFORMATION FOR SHAREHOLDERS
Contacts available for our shareholders

FINANCIAL STATEMENTS
We present our audited financial information in thousand US dollars.



DISCLAIMER
This Annual Report contains certain forward-looking information relating to Industrias Peñoles, S.A.B. de C.V. and its subsidiaries (Peñoles or the Company) that is based on assumptions made by its management. Such information, as well as the statements with respect to future events and expectations are subject to certain risks, uncertainties and factors that could cause the actual results, performance or achievements of the Company to be materially different at any time. Such factors include changes in general economic, governmental policy and/or business conditions nationally and globally, as well as changes in interest rates, inflation rates, exchange rates, mining performance in general, metal demand and quotations, and raw material and fuel prices, among others. Due to these risks and factors, actual results may vary materially from the estimates described herein, for which reason Peñoles does not assume any obligation with respect to such variations or to information provided by official sources.