Services and Equipment
Decentralized markets, central challenges
Latam North and the Caribbean present challenging markets for third-party service or equipment providers: As a middle child of the Americas, the region sits awkwardly between the larger mining hubs of the two hemispheres. Mexico’s significant mining industry has a service hub of its own, but this is still routinely supported out of the Canadian, American, Peruvian or Chilean offices of multinationals, whether out of convenience or necessity. Colombia has also grown a local suppliers sector, though most local providers focus on multiple verticals within the country rather than being purely dedicated to mining.
As for the other countries, where there are few, if any, producers, indigenous services sectors have not had the time nor the chance to develop, and are usually comprised of intermediaries of sorts, that often count on a single large client. Of course, mining operations in these countries still require everything from equipment to drilling services and support on their latest studies, just like in any other country. Places like Nicaragua, Guyana, and even Ecuador are served through a “mining services without borders” model, characterized by satellite offices, cross-regional talent, and rather interesting organizational structures. Epiroc, for instance, serves the CVCA region of 11 countries from its headquarters in Colombia, while its biggest client sits in the Dominican Republic; Orica also groups Colombia (local HQ) with the Caribbean as a single unit. Others, like Scania, aggregated all those countries too small to validate direct subsidiaries under “Independent Markets,” with representatives in Central America and the Caribbean.
In many cases, larger service providers, and especially consultancies, that do not necessarily require local infrastructure, operate through a decentralized model, completing projects as required in a certain jurisdiction. A large project, such as Ausenco had at Las Chispas in Mexico or Klohn Crippen Berger (KCB) has had at Fruta del Norte in Ecuador, motivates the establishment of a direct local footprint. Ausenco had been working in Mexico’s mining sector for over two decades from its North American offices until it opened shop in the country in 2020; it now has two Mexican offices. KCB has also worked with Lundin Gold since 2013, seeing the Fruta del Norte through the PFS, FS and detailed engineering phases. “When the project reached the construction stage, Lundin Gold requested that we establish an entity in Ecuador. We opened a satellite office in the country in 2018. Once Fruta del Norte entered commercial production in 2020, we started hiring permanent local staff and ultimately established a local office in 2022 in Cuenca,” said Luis Matute, the Ecuador office manager for KCB.
KCB is the Engineer of Record for both the Fruta del Norte gold mine and the Mirador copper mine of Ecuacorriente, a role that underscores the long-term local partnerships with the two large-scale operations existing in the country.
With Mexico and Colombia’s more established mining sectors on a flat growth trajectory, and countries like Ecuador, Guyana and Suriname seeing increased mining and exploration activity, we expect continued local expansion and the cross-pollination of skills from the hubs to the frontiers.
Mañana is not tomorrow: Understanding local differences
Naturally, being on the same timezone and within the same sphere of knowledge with leading centers of mining excellence in both of the Americas holds strong advantages, allowing mining companies in the Latam North and Caribbean region a broad selection of potential partners. Service and equipment companies can build off existing relationships with clients with international portfolios, like Alamos Gold, Agnico Eagle, Coeur Mining, Hecla Mining, or G Mining Ventures operating across the Americas.
Local expertise, whether coming through a partnership, previous experience, or a temporary set-up in the country, is, however, a must, if not for all the matter-of-fact specific challenges that are to be discussed below in this article, then for the cultural element alone. “When it comes to Latin America, there’s a whole different business language. For example, when someone says ‘mañana’, it doesn’t always mean literally tomorrow — culturally and linguistically, it often implies ‘sometime in the future,’ with a more relaxed sense of urgency. Understanding these nuances and being able to communicate effectively at different levels with stakeholders across the region is essential in our line of work,” said Homero Herrera, the president and CEO of Latin American Cargo (LAC).
On the ground: logistics, security, talent, and the elements
As this report has hopefully helped illustrate, the region is highly diverse. From the northernmost point in Tijuana, Mexico, to the southernmost in Zamora, Ecuador, there are over 5,000 km in a straight line. Logistics within the region are hampered by outdated infrastructure, the lack of direct connections, and poor border management. A World Bank report has found that the aggregate effect of logistics bottlenecks can more than double optimum logistics costs for both high and low value goods. Additional challenges stemming from historically low water levels at the Panama Canal, a key passage point between the Pacific and Atlantic oceans, have recently exacerbated logistics hurdles. Montreal-based logistics company Latin American Cargo (LAC) had cargo stuck in the Panama Canal for over three months at the time of our interview.
On land, logistics providers face another challenge in the shortage of qualified drivers and established logistics companies. Enrico Boehme, managing director for Mexico at Noatum Logistics, explained: “The market is often served by individual owners/operators with a single truck, contracted through layers of intermediaries. This fragmented structure creates an unregulated environment. As a result, whenever a new project gets underway, securing dependable and consistent logistics support is a problem.”
Service providers in the region must also learn how to grapple with security issues. Craig Gibson, the co-founder of Mexican-based exploration services company PRODEMIN (Prospeccion y Desarrollo Minero del Norte) has been working in the country for three decades, learning to accommodate to the different and sometimes dangerous security conditions. “During Felipe Calderón’s administration more than 10 years ago, drug activity had increased significantly – and so did the drug war. During that time, certain parts of Mexico had become unsafe to operate in. The situation has improved since. Fortunately, PRODEMIN has extensive experience across all parts of Mexico. We have worked in the most dangerous parts of the country and we were able to get things done and advance projects – and this is another reason why explorers choose to work with us.”
Another consideration for service providers is the natural environment, from climate to topography and seismic risks, which again call for an intimate local knowledge. In Ecuador, Luis Matute of Klohn Crippen Berger paints a vivid picture: “Unlike flat countries where it is easier to build infrastructure like roads, processing plants, and storage areas, Ecuador’s mountainous terrain requires much more careful planning. You have to cut into steep slopes carefully, which requires special techniques and can be expensive; manage water flows since steep areas can create drainage and erosion issues; or design narrow and winding roads, as straight roads are often not possible in the mountains.”
Another hurdle is the availability of local expertise. While Mexico represents a center of mining excellence with top-tier talent, that talent is not as readily available in nascent mining jurisdictions. In Ecuador, for instance, the mining sector has benefited from the expertise developed in oil and gas, a cousin industry. But that is not sufficient, according to Matute: “For very specialist tasks, the mining services sector is still in its infancy and requires professional support from countries with a longer mining culture (such as Peru) to come to Ecuador and transfer their skills to the local people. My view is that we are about five years away from being able to export our own local talent to other KCB offices worldwide – and that, for me, will highlight that we have completed the full cycle for KCB’s growth story in the country.”
“Knight Piésold is consistently called upon to address the rising demand for infrastructure that meets international standards for design, construction and operation of waste and water management facilities”
Gilberto Domínguez, Vice President US & Operations Manager Mexico, Knight Piésold
Above the ground: Navigating a mixed bag of market conditions
The region presents a mix of one leading minerals producer (Mexico), a large coal producer with emerging opportunities in copper and gold (Colombia), a starting copper-gold producer with additional advanced development projects (Ecuador), a buoyant oil industry with an emerging mining exploration sector (Guyana and Suriname), a huge gold producer from one operation with a string of explorers (the Dominican Republic), a stalled but large copper producer (Panama), a few smaller gold producers with uncertain permitting pathways (Nicaragua and Guatemala), and a bauxite producer with early-stage gold-copper prospects (Jamaica). An alternative overview of the region is provided by Jenny Engström, the general manager for CVCA Region at Epiroc: “CVCA is a very dynamic and diverse region where mining is very much in the public eye and a key point of political debate. Panama and Guatemala have put a hold on new mining permits, while in Colombia permit approvals are also lagging. However, Suriname and Guyana are booming, particularly for gold exploration.”
Speak to any service provider in the region, and, depending on their own footprint and priorities, they will provide a slightly similar assessment of market conditions in the region, with a different growth plan. What emerges most prominently is a stagnation in growth from conspicuous players like Mexico, Colombia and Panama, balanced by new prospects in Ecuador, Guyana and Suriname. Speaking of the Mexican market, Gerardo Flores, the director of technical service operations at explosives producer Austin Powder Mexico, said: “Considering the 2023 regulatory amendments under AMLO’s government and the subsequent change in government, the Mexican mining sector is currently at a standstill (…) Austin Power holds approximately 60% of the underground market share in Mexico, so growth in this segment is currently limited, with few new projects coming through. Meanwhile, the open pit sector is experiencing even bigger difficulties in terms of obtaining permits.”
Considering the growth constraints within Mexico, Austin Powder Mexico is diversifying its business into aggregates, clay, stone, construction, roads, civil works, cement and government infrastructure. Its competitor, Orica, is eyeing other countries. We spoke to Manuelangel Aldana, general manager for Colombia and the Caribbean at Orica: “We aim to expand our footprint in Guyana by increasing in-country inventories and technical support capabilities to respond to growing demand from existing clients and capture emerging demand from new clients. Although Orica has worked with the major mining companies in the country since the 90s, supported by key local partners, in the coming months, we will invest in an explosives warehouse facility. We primarily provide explosives to the quarries, construction and mining sectors, leveraging our network of production facilities in Colombia, Mexico, Peru, Brazil, and the US,” Aldana said.
At least half of the service and equipment interviewed for this report highlighted regional expansion as a priority. John T. Boyd Company, for instance, whose South American headquarters are in Colombia, is looking to expand beyond Colombia: “The project pipeline here is currently stagnant, with the exception of metallurgical coal projects,” said Carlos Felipe Barrera, managing director for the region.
Energold Group, a global driller specialized in greenfield exploration, has significantly decreased operations in Mexico in the past six years, once one of its top markets, as a result of the recent political changes that have crippled the exploration sector. However, the region presents an ideal setting for its modular, lightweight and compact drill rigs, designed primarily for greenfield frontier exploration programs in difficult-to-access areas, and thereby well-suited for Nicaragua’s jungles or Ecuador’s rain forests.
“We are very spread out - we have people in management positions across all leading 14 locations in the region, but we also leverage remote systems to centralize operations. Culturally, we recognize the unique business environments of each country.”
Jenny Engström, General Manager, CVCA Region, Epiroc
Common ground: Compliance
Regardless of these regional differences, overarching trends unite the region and its service providers alike. One of the major growth drivers for service providers, primarily concerning engineering firms and consultancies, is the industry’s need to comply with both international and local standards, both evolving yet not always evolving in tandem with one another. In Mexico, for example, we note an accelerated interest in complying with international mineral resource classification instruments, primarily the NI 43-101 Canadian standard.
The same focus on compliance falls on tailings management. The need for professionals with experience in designing tailings management facilities in compliance with international standards is what brought the likes of Knight Piésold into Mexico five years ago, when the Global Industry Standard on Tailings Management (GISTM) was introduced. “We brought in specialists from the US, Chile and other hubs, while also investing in training local engineers to develop the know-how in the country. After celebrating our fifth year in Mexico, our team has become a trusted partner for clients seeking expert insight and top-tier solutions,” said Gilberto Domínguez, vice president of US & operations manager for Mexico, at Knight Piésold.
Though neither the GISTM nor filtered tailings (dry stacking) technologies are new, the technologies to make these dehydrated tailings safer and more stable are, as explained by Diego Cobos, president and practice leader in geotechnical and tailings engineering at SRK Consulting Colombia: “The industry is shifting away from simply walking away from an old tailings facility to finding innovative solutions to repurpose them in a way that contributes to the surrounding communities and the environment. We have worked on such projects where we converted old facilities into solar and wind farms, as well as a small hydropower energy project concept at the Buriticá project in Colombia. Other closed facilities were transformed into parks and recreation areas. This is a positive change here in Colombia and we are proactively incorporating it into our designs, recommending ways in which landforms can be repurposed.”
If international compliance is purported as the MNC’s domain, local compliance calls for local expertise. Gruminex, a multidisciplinary engineering house focused on updates and optimizations of mineral processing plants, has a diverse project list, sometimes helping companies meet new regulatory requirements by Mexico’s STPS (Secretariat of Labor and Social Welfare), and other times helping with accurate facility documentation for Cyanide Code certification. Crucially, it is evident that both local and international providers must blend expertise to navigate both realms of regulations. “One of our standout projects involved supporting the development of a new industrial plant whose processes and technologies were based on European designs. Our role was to adapt the entire design, technical codes and specifications to Mexican regulations, ensuring full compliance without compromising the original project vision. This project demonstrated our ability to bridge international engineering standards with local regulatory frameworks,” commented Cynthia Villa Nafarrate, Gruminex’s founder.
A third dimension to international and local legal compliance is the voluntary standards and targets set under the umbrella of ESG. Industry efforts to reduce carbon emissions, water consumption, pollution and other metrics have been transforming the mining services and equipment sector. Mexican producers like Torex Gold have started new mines on 100% battery electric powered equipment – that sends a chain reaction to the OEMs providing the equipment, the contractors making the recommendations, and consultancy and software companies designing, monitoring and analyzing the implementation. Clean power options, electrically powered equipment, waste-to-value and circular projects, lifecycle assessments, a strong local training mandate, ESG data monitoring, and consultancy on social engagement have become staples of the requirements that the services sector has adapted to – and flourished in, as these demands provide new growth vectors.
Article header image courtesy of Barrick Mining