Wednesday 8 April 2015

Canadian-owned mine knocked off for $8.5 million in gold concentrate

As the CJNG cartel battles it out with local, state, and federal authorities in Jalisco, the criminal element in Sinaloa is pulling off gold heists: on Tuesday, April 7, Canada's McEwen Mining Inc. reported that armed robbers walked off with an estimated 900 kilograms of gold-bearing concentrate, containing approximately 7,000 ounces of gold, from its El Gallo 1 mine in western Mexico.
McEwen's operations in western Mexico (Source: McEwen Mining Inc.)

But this isn’t the same as knocking off Fort Knox.

“No mines in Mexico have gold,” says David Robillard, a Mexico City-based advisor on business and reputational risk. “It takes a lot of technology and work to refine it into what we call gold.”

How much work? Robillard says that to refine the concentrate, otherwise known as “doré”, would require another $100 million investment.

“You don’t have those capabilities in Sinaloa,” he says. “You have to do that in an industrial area – a Canadian-owned operation will usually have that done in Canada. It’s not like you can put it on a ship and send it to China. It’s not iron ore. You can’t just send it to any old refinery.”

La politica has been told that some Canadian operations do refine in Mexico. However, these refineries are not set up to offer refining services, particularly not to drug cartels.

Robillard says that, from a security perspective, mines in Mexico do have a protection problem, but it relates mostly to equipment theft.

“The biggest threat to mining operations has more to do with heavy equipment,” he says. “Particularly for vehicles like SUVs that can be resold. And that continues to happen. As a result, many companies aren’t buying brand new SUVs anymore.”

With regard to the theft at the El Gallo 1 mine, it is difficult to conceive of such a crime occurring without the approval of the Sinaloa cartel, one of the largest criminal organizations in the world.

However, Robillard’s view is that the criminals themselves could not have been very sophisticated.

“I think they don’t know what they’re doing,” he says. “This is more ‘disorganized crime.’ All it indicates is that they had access to heavy weapons. They think they’re robbing the stagecoach. Now that they’ve stolen it they’ll try and set up a makeshift foundry, but they won’t even get it to 10 carat gold.”

That said, if the Sinaloa cartel has somehow managed to find access to the proper refining facilities, then they may have a new business on their hands. The question is, where would they find these capabilities? They certainly haven’t built them on their own, so they would have to find a refiner somewhere that doesn’t ask questions.

And this does happen. There are small illegal operations all over Latin America, and the ore ultimately finds its way into pure gold and silver. The global market in contraband gold is alive and well. If anyone could pull off a deal like this, it would be a big criminal organization like the Sinaloa cartel.

As it stands, McEwen Mining said that it was “working closely with its insurance carrier to determine the extent of available coverage," but that the company's policy “will not be sufficient to cover the entire expected loss."

It also reported that that “the crime is being vigorously investigated by the Mexican authorities”.

In fact, CEO Rob Mcewen has expressed concern that the material may never be recovered, telling Business News Network -

 "Mexico has a long history of mining, There is a lot of mining equipment around, and refineries."

If the concentrate is recovered, then it is likely the Sinaloa cartel was not involved, and that the small time crooks will answer for their sins. And if there are no arrests, and this sort of crime becomes more commonplace? Then it would be an indication, unlikely as it seems, that the Sinaloa cartel has struck gold.

(TE Wilson is the author of Mezcalero, a Detective Sánchez novel.)

For an update on this story see: Doing business the Canadian way: McEwen Mining has a “good relationship” with Mexican cartel.

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