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Are LatAm miners facing a COVID-19 supply chain crisis?

Bnamericas Published: Thursday, March 26, 2020
Are LatAm miners facing a COVID-19 supply chain crisis?

Supply chain disruptions caused by the COVID-19 pandemic pose a growing threat to Latin America’s mining companies.

Consumables supplies to the sector have been impacted by a two-month lockdown in China, with border closures and quarantines aimed at stemming the disease’s spread in Latin America now threatening to exacerbate the problem.

While mining companies have responded by securing new supplies and upping stocks of key inputs, analysts warn that a prolonged pandemic could see stockpiles dwindle, potentially resulting in mine suspensions.

DETERIORATING SITUATION

Calibre Mining said increasing logistical challenges sourcing consumables, reagents and other supplies coupled with a deteriorating global environment were behind its decision to suspend operations at its Nicaraguan gold mines.

“While we have consumables and reagents on site to continue operating, the ability to keep the supply chains open is deteriorating every hour as the world shuts borders and self-isolates to flatten the curve,” CEO Russell Ball told a conference call.

The announcement on Wednesday came despite no confirmed COVID-19 cases at any of the company’s locations.

While Nicaragua has only reported two coronavirus cases, Ball said real rates are likely to be much higher, warning it was only a matter of time before employees or residents in nearby communities were infected.

LOCKDOWN IMPACTS

While Nicaragua has yet to impose significant restrictions on movement to combat the pandemic, measures in other parts of the region will impede supplies.

In Peru a 15-day quarantine has disrupted supplies as well as leading to multiple mine suspensions and reductions, including at the Las Bambas copper operation.

“The transport of concentrates and critical supplies will also be significantly restricted during the period of national emergency,” operator and 62.5%-owner MMG said in a release.

Similar measures are also in place in other established and emerging mining jurisdictions such as Argentina, Colombia and Ecuador.

INDUSTRY RESPONSE

Mining companies in Latin America have responded to the emerging threat by increasing stocks of consumables in order to ensure operations can continue.

In Chile, state copper miner Codelco confirmed it had secured inputs such as sulfuric acid ahead of the outbreak.

Barrick Gold, one of the region’s biggest gold producers, said it had secured supplies and equipment to last at least three months, with Mexico-focused gold miner Torex Gold holding critical supplies to enable it to operate for an extended period.

Newmont, whose operations include mines in Argentina, Mexico, Peru, Suriname and the Dominican Republic, has established a global supply chain taskforce to assess potential risks and develop contingency plans to stay ahead of supply disruptions.

Yamana Gold is also conducting a review of its supply chain, which has in some cases resulted in setting up alternative supplies of materials from in-country suppliers.

In Brazil, iron ore giant Vale has gone one step further, announcing measures to support small suppliers hit by coronavirus-related credit restrictions.

ANALYSIS

Many mining companies have reported no significant supply chain issues to date.

Measures taken to bolster stocks of materials and secure back-up supplies have left the industry well placed to continue operations for months, where government steps to combat COVID-19 allow.

But the situation is deteriorating as more countries enforce strict lockdowns and close their borders.

Whether a supply chain crunch will hit the sector depends on the duration of the pandemic, which remains unclear.

Companies with mines in Latin America have a strong record of resilience, Control Risks partner Daniel Linsker told BNamericas earlier in March.

“When you’re used to coping with closures, protests and political instability you build up a bit of everything, such as chemicals and explosives, to have the capacity to operate,” he said.

“If the crisis drags on you are going to end up with some disruption.”

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