SUPPLIERS
Shipping suppliers at Tizapa
SUPPLIERS
101-2.2, 101-2.5, 103-1, 103-2, 103-3
In managing our sourcing, we try to ensure a reliable supply of raw materials, key inputs and services, according to the needs of our business; this is a strategy for achieving excellence and operating continuity in all our processes.
We want to be a strategic partner to all our suppliers, and that our business relations with them be grounded in good commercial practices with a deep ethical commitment and in mutual long-term benefit.
In our interactions, we seek to:
Our goal is to provide an excellent supply of goods and services to our business units, ensuring their optimum profitability by identifying and evaluating the best products and suppliers in the world.
We focus our strategies on goods that are critical to our productive operations, in order to improve business sustainability and support local, regional and national development.
We consider critical suppliers those which supply goods:
To reduce risks in our supply chain we have a due diligence process that every supplier must undergo, and which provides information on their compliance with the laws and regulations governing their operations. as well as matters of business and social conduct—discriminatory practices, dubious partners, among others.
In the case of our raw material suppliers, this due diligence process includes a more in-depth examination of their environmental and social qualifications. We also identify suppliers who are currently the only ones to supply certain critical goods, in order to seek out other potential suppliers, compare specifications and conduct testing for possible future authorization.
We identify opportunities and obstacles in our vendor sourcing based on a catalogue that includes both domestic and foreign suppliers, and a department specializing in imports (Procurement) and foreign trade (Tax Planning), that ensure compliance with laws and regulations on such transactions. Our strategy also promotes direct acquisition from goods manufacturers anywhere in the world, and our data system is multi-country and multi-currency.
Contractors at the Tizapa unit
Every year, the Procurement area prepares an operating plan that defines strategies for every category of goods, which encompasses our research into potential suppliers both locally and abroad. Within this plan we define projects that would enable a more thorough systematization and automation of procurement processes, and we review our progress against that plan every month to detect discrepancies and take action to ensure compliance. A regular report is drawn up on purchases from our suppliers, broken down by category of goods and operating unit.
407-1, 408-1, 409-1, 412-1, EM-MM-510a.1
As a matter of policy, Peñoles is committed to high ethical standards. We hold trust, responsibility, integrity and loyalty to be essential values and we abide at all times by internal regulations and the laws that apply to us. We promote respect for human rights and endeavor to maintain a supply chain free of ethical and legal conflict. We avoid relations with third parties that do not share these values and standards.
In order to comply with OECD and United Nations standards, we maintain a zero-tolerance stance on money-laundering, fraud, bribery and corruption. We do not do business with parties that may actually or in appearance participate in such activities, and we cancel any existing contracts with those who do.
We do not do business with partners in high-risk countries or conflict zones that are not respectful of the environment, life, health and ecosystems, in harmony with the community and sustainable development. Neither do we engage with organizations relating to the mining industry that benefit from, contribute to, aid or facilitate forced labor, child labor, armed groups, human rights violations, or labor discrimination; have dealings with subversive organizations; offer unsafe work conditions; or fail to respect political religious and sexual preferences, among others. Our suppliers and contractors share our values, and we treat them fairly and honestly.
The following summarizes our main actions in 2020 with suppliers of raw materials (remitters), services (contractors) and transportation (freight) services.
Raw material suppliers: remitters
Ensuring a reliable supply of raw materials, key inputs and services according to the needs of the business is a strategic path to excellence and operating continuity in our processes.
In metallurgical operations, we have a catalogue of specific information on each supplier of lead and zinc concentrates, doré and ore. In 2020 we worked with 71 remitters: 60 domestic and 11 international.
27
evaluations of potential and current remitters in 2020.
DOMESTIC REMITTERS BY STATE
13
1
1
12
1
2
3
1
1
1
1
4
1
6
12
| Number of remitters | ||
|---|---|---|
| Chihuahua | 13 | |
| Coahuila | 1 | |
| Colima | 1 | |
| Durango | 12 | |
| State of Mexico | 1 | |
| Guerrero | 2 | |
| Hidalgo | 3 | |
| Michoacan | 1 | |
| Number of remitters | ||
|---|---|---|
| Nayarit | 1 | |
| Oaxaca | 1 | |
| Querétaro | 1 | |
| San Luis Potosí | 4 | |
| Sinaloa | 1 | |
| Sonora | 6 | |
| Zacatecas | 12 | |
| Total | 60 | |
INTERNATIONAL REMITTERS BY COUNTRY (%)
1
3
3
4
| Number of remitters | ||
|---|---|---|
| Honduras | 1 | |
| Bolivia | 3 | |
| United States | 3 | |
| Peru | 4 | |
| Total | 11 | |
Of course, it is important to ensure that remitters of raw materials have the concessions and permits necessary to produce the materials they ship to Metalúrgica Met-Mex, as part of our effort to ensure responsible procurement of ore in a supply chain free of conflict and risk.
For this reason, and in keeping with our policies and Code of Conduct, all our active remitters are subject to a process of due diligence to determine their degree of risk. We also rate the quality, quantity and timeliness of their deliveries in the period evaluated. In 2020, we conducted 27 evaluations of potential and current remitters, in addition to four reviews currently in process.
Each key remitter is sent a report detailing the criteria that will affect their compliance rating, so that they can take the pertinent preventive and corrective measures.
Service suppliers: contractors
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In order to maximize the return on our business, we consider the hiring of external contractors and services to be the most efficient use of our own resources. All of our divisions hire contractors for work relating to engineering services and projects, construction and services for operational projects, maintenance, mining, exploration, energy and technology services.
We recommend to contractors who supply services in remote locations that, to the extent possible and in keeping with the established requirements, they provide job opportunities to people in local communities.
Mines Division
This division holds annual meetings to recognize contractors’ safety performance, while encouraging them to create ways to reward their own employees for their safety performance. In mining work contracts, we promote our contractors’ productivity by establishing a recognition-penalty system for efficiencies. The user of each service evaluates the contractor’s performance.
Given the nature of mining work, we strive to determine the best conditions to our contractors—better camps, services, recreation, and more. We also carry out actions like work tables for brainstorming, agreements and change analysis, in order to reduce staff turnover.
All new contractor workers receive a five-day safety and security induction course followed by ongoing tracking of their results. In addition, contractors participate in specific courses such as rock mechanics.
In 2020, we recognized and encouraged contractors for their performance, and in most contracts, we also eliminated the requirement to pay for casualty insurance and performance bonds.
Total amount paid in 2020
OUTSOURCING*
50%
development and works
27%
maintenance
9%
miscellaneous professional fees
8%
major repairs
7%
other services
* These data include the operations of Industrias Peñoles and its subsidiaries.
Peñoles’ suppliers actions against COVID-19, Capela unit
This year we supported entrepreneurs in the community neighboring the Capela unit by selling personnel transport trucks under an equipment operating and financing credit agreement and signing of service contracts.
Metals Division
The Metals Division identified critical suppliers based on contract volume, contract value and servicing of critical equipment. We have a process of supplier evaluation that includes both business management and service indicators, by which we can detect areas of opportunity based on a two-year action plan.
In contractor management, our priority is service quality, employee safety, business ethics, and mutually beneficial, long-term relations. Contractors must abide by our own internal rules and management system procedures when working on our premises.
We have a process for supporting our contractors’ development, encouraging the growth of local companies and in turn receiving better services with more highly qualified personnel. We have an indicator to identify the number of reliable suppliers and generate action plans to correct any areas of opportunity detected. We also have indicators of service contract volume and value.
As we do every year, we recognized companies that attained Reliable Supplier level—a total of 37 companies in 2020. This recognition is publicized in local news media.
In the area of safety, we evaluate and recognize companies that achieve the Zero-Accidents target for a certain number of years. In 2020 there were 59 companies who earned this distinction for between 1 and 17 consecutive years of zero accidents.
In the matter of health, we created a COVID-19 Contractor Crisis Committee, made up of representatives from the medical, safety, contracts and engineering areas, to ensure compliance with the requested health and hygiene measures.
Onboarding courses were given virtually during the year in order to continue training new hires. We also asked all contractor companies to undergo online training provided by the Mexican Social Security Institute.
We monitored compliance with pandemic-control protocols and measures on a daily basis, including the use of face masks, hand washing, safe distancing and temperature taking, with checkpoints at plant entrances, bathrooms and dressing rooms, and in employee dining rooms.
General services unit, Química del Rey
37
companies attained Reliable Supplier level.
59 contractors earned the distinction for having zero incapacitating accidents in 2020.
Química del Rey
At Química del Rey, the largest unit in the Chemicals Division, we have a collective bargaining agreement with the National Union of Workers of Companies providing Services for Industries and Companies of the Mexican Republic, which includes a salary tabulator established by category. The contract includes benefits and salaries that are higher than those established by the Federal Labor Law, and even considering the definition of the minimum wage in border areas, no category falls below that level. In November 2020 the tabulator was revised to apply a 3% increase, effective in 2021.
A total of 11 due diligence reviews were applied to the same number of contractors in 2020; due diligence was renewed for four of them, and the process was begun for three more. We also applied the new Third-Party Acceptance and Continuity Form for four contractors.
Because of the public health emergency, the weekly face-to-face meetings with environmental, health and safety coordinators were not held, and the Todos Somos Laguna del Rey cleanup campaigns were also canceled.
The companies subject to permanent evaluations include 17 that work with Química del Rey on an ongoing basis and are mostly local companies. Controls were also established for contractors in the areas of safety, health and the environment, which are tracked on a monthly basis. The level of compliance by local contractors was 73% in safety, 70% in health and 67% in environment.
For hoisting maneuvers within the plant, we have seven cranes that have been certified for verification of operating conditions, issued by companies recognized by the Mexican Accreditation Agency as verification units. Two of these were recertified during the year. These cranes are operated by staff who have earned professional skill or qualification certificates after undergoing 240 hours of training.
Public health emergency
Because of the start of the COVID-19 pandemic during the year we began limiting contractor activities in the month of March. Subsequently, the Ministry of Health published a ruling in the Official Gazette of the Federation on May 14, article four, which deemed construction, mining and the manufacture of transportation equipment as essential activities, which were resumed as of June 1, under certain guidelines.
With this, our contractors began returning to work between May 18 and 31, in accordance with health and safety rules published by the Ministry of Health and in coordination with the Ministries of the Economy and Labor and Social Planning, as well as the Mexican Social Security Institute.
Protocols were applied to each contractor for the purpose of guaranteeing the safety of personnel before entering our plant for physical work and/or services. They were also provided with guidance on complying with the official health and safety rules, as established in the following documents:
17
contractors evaluated for their safety, health and environmental performance.
In 2020, Peñoles recognized 31 contractors who had no accidents of any kind in 2019.
With this, 51 contractors passed their Health and Safety Protocol Self-Evaluation, 36 of which presented sanitary protocols.
Sanitizing measures at Capela
With this, 51 contractors passed their Health and Safety Protocol Self-Evaluation, 36 of which presented sanitary protocols.
Before returning to the job, 197 workers took a course on “Recommendations for a safe return to work during COVID-19”, available on the IMSS platform at https://climss.imss.gob.mx/and all obtained their corresponding certificate. This training was incorporated into the requirements for contractor personnel to obtain their entry credential.
Panoramic view of Química del Rey at sunset
Health checkpoints at plant entrance, Capela
In this 2020 Report we present the sustainability performance of the operations of Peñoles and the generation of shared value with the groups of interest.
