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The high price of security at Mexican mines

Thanks to the always interesting weekly column by Gustavo Álvarez in El Sol de Hermosillo, we now know how for much the Mexican government is shaking down mining companies in order to provide adequate security at their precious metals mines, infamously targets for narcogangs and assorted bandidos and naughty people. More specifically, the Sonora region of Mexico is one of the hot spots for mine robberies; among several others we’ve seen Penmont’s Herradura suffer a serious heist back in 2015 and more recently, Alamos lost a consignment to thieves who just happened to know exactly where and when the company would be loading ingots onto their privately chartered international flight.

Due to the latter theft from AGI, earlier this year the AMLO government pledged to set up a special “Mining Police Force” and did so, forming a new wing of its police force. All this sounds like a great idea until you find out the government is in fact charging the companies sizeable fees for the new layer of security. Our example is the aforementioned Herradura mine owned by Penmont, the company’s main gold mine and good for 500k oz Au of very profitable ounces per year from this open pitter. According to Álvarez, here’s what Penmont paid for security to the government of Mexico during the first two months of the new mining police force:

  • October 2020: MXN$5,472,078.44
  • November 2020: MXN$9,105,445.52
  • Total: MXN$14,577,523.96
  • Total USD approx: U$714,584

We also know why October was cheaper from previous reports of the start of the “Servicio de Protección Federal (SPF)”, as it is named, because the contract began on October 18th when “over 100 officers” of the group (this photo from that link…

…were detailed there. So, long story short, Penmont paid around U$715,000 for six weeks of coverage by 100 heavily armed and trained State police officers to keep the naughty bandidos away from their gold. It works out at U$16,250 per day and, as there’s no way that each of those officers gets anywhere close to U$162.50 per day in pay (my guess is the poor grunt gets around 10%), it’s clear the Mexican government has found a great new way of taxing the mining companies. AMLO made them an offer they couldn’t refuse, as it were.

1 Comment

    In old mex all jrs pay something to someone. The real problem is when a territory changes hands between the gupos de gente malos. Then half your workforce must flee. Wonder how much that security works out per oz compared to the excessive fuel bill before? Fosas en la zona de ninos… no more old Mex for me.

    Reply

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