Goldcorp disappearances raise Mexican mining safety fears

Last week four workers at Goldcorp's (TSE:G) Los Filos mine in Mexico were reported missing in what authorities now believe could have been a kidnapping.

Los Filos is located in the violent southern state of Guerrero, Mexico's fifth biggest gold producing region. The Los Filos operation consists of two open-pit mines and one underground mine in production since 2007. Los Filos produced 258,700 ounces in 2014 and production of between 265,000 and 290,00 ounces is expected in 2015.

The incident comes a month after the week-long suspension of construction at Torex Gold's $800 million Limón-Guajes gold project after about 13 people were kidnapped, including mineworkers, a female custodian and a contractor. 11 of those kidnapped have been freed with the help of the Mexican Army.

The 21-month construction at El Limon-Guajes started in November 2013 but has been delayed into at least the fourth quarter of this year as a result of difficulties securing contractors willing to work in the state due to the security concerns.

The open pit gold deposit has current measured and indicated resources of 4.95 million ounces of gold. Torex also owns the advanced stage Media Luna exploration project in the Guerrero gold belt which boasts inferred resources of 5.8 million gold equivalent ounces.

BNamericas reports Belgium-based Nyrstar also halted operations at its Campo Morado zinc-copper-gold-silver mine in Guerrero state in February, citing the systematic intimidation of workers:

"The latest kidnappings again show that criminal gangs in Guerrero are not afraid to conduct activities in the midst of major mining companies that have strong federal support.

"In addition to difficulties recruiting and retaining skilled workers, security fears impact takeover demand and valuations for projects in the state, although operating mines are unlikely to be impacted, Scotiabank head of gold and precious metals Trevor Turnbull told BNamericas previously."

Goldcorp disappearances raise Mexican mining safety fears

Mexican states where most of the conflict takes place, in red. (Wikipedia)


Guerrero state has the highest homicide rate in Mexico. The uncovering of mass graves believed to be of 43 students killed by police acting in collusion with organized crime in the state last year led to wide-spread protests throughout the country. TeleSUR reports in July 2013 two workers from the Los Filos mine were executed by criminal elements.

With a market capitalization of $15.5 billion on the NYSE, Goldcorp is the world's most valuable gold mining company and the fourth largest in terms of production.

The Vancouver-based company produced 2.87 Moz of gold in 2014, including discontinued operations, or 7.5% more than in 2013 (2.67 Moz). This increase was due to development of production at Penasquito (Mexico, +41%) and Pueblo Viejo (Dominican Republic, +36%) mines, and commissioning of Cerro Negro (Argentina) and Eleonore (Canada) mines.