ith a smile and a twinkle in his eye, Vidal Muhech Dip welcomes visitors to his cor ner office in Grupo Mexico’s head quarters building in Mexico City’s swank Polanco district. Muhech, who is General Director of Engineering and Construction at the world’s fifth largest copper miner, is an engaging raconteur and speaks with a firm grasp of details, especially when the conversation turns to the cost factors that make all the difference in the commodity business of mining. An engineering graduate of the Na tional Autonomous University of Mexico, Muhech has seen boomand bust cycles come and go over a 45year career at Grupo Mexico. But today’s interview and its focus on the turn key US$580 million electric power plant that Siemens has been building for his company near its La Caridad copper mine in northern Mexico has him especially animated.
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His enthusiasm stems in no small partfrom the 40 percent cost savings in electricity that the combined cycle, 500megawatt plant will deliver once fully operational. The facility near Nacozari in northwestern Sonora
Grupo Mexico has developed the most innovative turnkey plant with
the technological support of Siemens. It is the largest userowned
electric power plant in Latin America. La Caridad Power Plant will allow
Grupo Mexico to cut costs in electricity by 40 percent and help the state
of Sonora and the country by supplying power to the grid.
Text: Chris Kraul Photos: Adriana Zehbrauskas, Chris Kraul, Michael Vetter
An Expert with 40 Years Experience
Ing. Vidal Muhech Dip, General Director of Engineering and Construction for Grupo Mexico, has been with the company since 1969.
“ We intend to keep growing
and the Siemens plants
will allow us to do so.”
Vidal Muhech Dip
u
state will be the largest end user owned electric power plant in Mexico and provide Grupo Mexico with a crucial competitive advantage in the global copper market.
Turnkey-Ready
Power for Mining
“ The new plant will
supply electricity not
just to the smelter that
produces copper at La
Caridad, but also to
the Buenavista mine
and a lime plant near
Agua Prieta.”
Luis Felipe Garrido, La Caridad plant manager for Grupo Mexico
By capturing the heat, 33 percent additional electricity can be created. Grupo Mexico’s US$600 million in the power plant is unusual among big companies that are the end users in that most leave it for third parties to finance the power generation fa cilities, then simply sign longterm commitments to use the energy. Grupo Mexico is betting on the eco nomics of producing their own ener gy and consuming it. Garrido says he doesn’t know of many other com panies with that kind of commit ment. Back in Mexico City, Ing. Vidal Muhech Dip explains the strategy behind such a decision.
Recently, Living Energy visited the new Grupo Mexico electric power plant built by Siemens at the La Caridad mine site as workers there were put ting finishing touches on the second of two combined cycle power genera tion systems. “Once fully operational in May, the plant will make the world’s lowestcost copper producer even more efficient,” says Luis Felipe Garrido, the Grupo Mexico project manager who is overseeing the new power plant’s integration into the mining complex.
“Mexican law passed a decade ago lets companies build power plants for their own use,” says Garrido, adding that the new Siemens facility
will enable the company to achieve important economies of scale. The new installation will supply electricity to several mines, not just the smelter that produces copper at La Caridad, but also the Buenavista mine in Cananea and to a sulfur mine and a lime plant near Agua Prieta. Garrido adds that the power plant fits into Grupo Mexico’s goal of be ing an environmentally friendly miner. As a combined cycle plant, the installation produces about two thirds of its electricity from a tur bine fueled by natural gas. The rest comes from exhaust heat which then heats water to create vapor that powers a second steam turbine. Living Energy: Grupo Mexico is making a substantial investment in the new electric
power plant at La Caridad. What is its strategic importance for the company? Vidal Muhech Dip: Mining is an energy-intensive business and we thought we could take advantage of the closeness of Nacozari to the United States, which these days has the cheapest natural gas in the world. Using Siemens’ combined cycle technology, we thought we could generate our own electricity at a much lower cost than what is avail-able through the national power utility.
Now, with half of the plant finished and delivering 250 megawatts, and with the other half in a testing phase, I can say that we are highly satisfied. Once it’s complete, we expect the power plant will allow us to reduce the cost of producing a pound of copper to 89 cents from the previous 93 cents, which is a big cost advantage.
LE: Why is the power plant’s location in northern Sonora state a key factor?
VMD: The closeness to the La Caridad mine and also to our Buenavista de Cobre mine in Cananea, which is also in Sonora state, means lower transmission costs. The size of the investment in the power plant built with Siemens technology is relatively common for Grupo Mexico. But it will allow for expansion. For example, we are investing a total US$3.2 billion in the expansion of the Buenavista mine in the coming years.
u
Power for Mining
Mexico
La Caridad mine is located in northeastern Sonora, about 23 kilometers from the town of Nacozari. The complex includes an open-pit mine containing copper, molybdenum, silver and gold.
The La Caridad Mining Complex in Numbers
Ore extracted from the mine comes with a
copper grade
of over0.30%.
1,074
employees produced113.7
kilotonnes
of copper in 2011.
La Caridad is located in the northeastern hills of Sonora state in
Mexico. The deposit is situated near the crest of the Sierra Juriquipa, about
23
kilometers southeast of the town of Nacozari.Gold
0.12 MT
Molybdenum 9,796 MT
Retrieved on March 19, 2014, at http://www.gmexico.com/business-lines/scc.php and http://mexicomin-ingreview.com/mines/mine_17.html
Silver
59.26 MT
Copper 125,717 MT
Copper has been mined and smelted in north-eastern Sonora for over
100 years
. Mining has ushered in the industrial era in this region.Mineral Extraction per Year
The mining complex contains
9.97
megatonnes of provenand probable reserves of copper.
La Caridad uses state-of-the-art computer monitoring systems at the concentrator, the crushing plant and the flotation circuit to optimize operations. The concentrator has a current capacity of
90,000
tonnes of ore per day.The molybdenum recovery plant has a capacity of
2,000
tonnes
per day of copper- molybdenum concentrates.The lime plant has a capacity of
340
tonnes
of finished product per day.Grupo Mexico …
… will invest
US$3.2
billion to double the output
of Buenavista de Cobre mine near Cananea, Sonora state. … is the world’s
fifth
-largest copper miner.… has more than
US$10
billion in annual revenue.… will own Mexico’s and Latin America’s largest proprie-tary electric power plant, the
new
500-MW
cogenera-tion facility at La Caridadmine that Siemens built.
… will save approximately
40
percent
On the current electricity prices.
… oversees the largest copper reserves worldwide. With their fully integrated operations, they are the leader in low-cost production.
… also owns
74
percent
of Ferromex, Mexico’s
largest railroad network.
LE: You compete on a global scale against miners in the USA, Chile, Australia and elsewhere. How do you measure success?
VMD: Mining is a commodities business. There is no difference in the end product as long as quality standards are met. The competition comes in controlling production costs. Grupo Mexico’s electric power plant built with Siemens state-of-the-art technology will not just help lower our costs but make expansion at La Caridad and Buenavista more feasible.
LE: Why did you select Siemens to build the power plant?
VMD: We conducted a tender and bids were evaluated on different levels, including the technology part, lowest cost, heat rate, even the impact of free trade agreements. Siemens was selected in part because their turbines are among the most technologically advanced and also because they gave us a turnkey proposal, which was another comfort factor. Our business is in mining. Power generation is not our specialty.
Although rocky and forbidding, the area in which the new Grupo Mexico electricity generation plant built with Siemens technology and La Caridad mine are situated is one that is rich in indigenous tradition and where discussions of power often refer to the spiritual variety. Three “etnias,” or indigenous groups live in and around Nacozari, says Osvaldo Giron, the power plant’s human resources manager. He is an “adopted brother” of the Yaqui com munity, which is one of them. He describes people here as rich not necessarily in possessions, but in their style of life, their philosophy – “indomitable, unbreakable people,” in his words. The Yaquis were never conquered and were among Pancho Villa’s toughest soldiers during the Mexican Revolution. Land and water are sacred to them. For Giron, this reinforces the sense of respect and responsibility that he and his comin ers have for natural resources. He explains that people here see mining as God giving up something he made with his own hands in exchange for people’s survival.
Osvaldo Giron is a native Sonoran who rose from humble origins by dint of hard work and study to a top management level job at the mining complex. To count such loyal people with appreciation for the land and its history among Grupo Mexico’s work force is something General Manager Vidal Muhech Dip is proud of.
Out of the mine, and off to the customers: At the smeltering facility in the Sonora mountains near Nacozari, the red-hot copper is
worked into high-quality wire and plates.
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Living Energy at
siemens.com/living-energy/ la-caridad
View Mexico City-based director Michael Vetter’s film about the two combined cycle plants that power Grupo Mexico’s mines in the mystic Sonora mountains.
Capturing the Treasure in the Desert
A former foreign correspondent for the
Los Angeles Times, Chris Kraul is a freelance
business, science and technology writer based in Bogotá, Columbia.
LE: Any other projects on the horizon?
VMD: We intend to keep growing, which our new plant built by Siemens will allow us to do. Our Buenavista mine in Sonora state will expand from 180,000 annual tonnes of copper to 460,000 annual tonnes by the end of 2015. La Caridad mine currently processes 150,000 tonnes of copper per year. All together, the operations of the company in Mexico, the USA and Peru add up to 1,100,000 annual tonnes.
LE: What are Grupo Mexico’s challenges ahead and do you see Siemens helping the company achieve its goals?
VMD: Mexican President Enrique Peña Nieto and Congress recently pushed through an energy reform law that not only opens up the Mexican oil and gas industry to foreign investment but also may allow private companies like ours to enter the elec-tricity generation business. There is more liberty for private companies and that’s what we talked to Siemens about. At the same time we are committed to protecting the environment. Pending on the secondary laws, the energy reform presents a growth opportunity in the energy sector, in both, conventional and nonconventional energy sources, such as wind and solar amongst others.
“ This project makes me proud, as
Grupo Mexico not only generates work
but helps build streets and schools.
Its presence means more than jobs.”
Mayra Santos, chemical engineer
LE: Copper prices boomed over the last ten years and then recently started to fall. What are the macroeconomic reasons for this?
VMD: We are living in a price cycle pushed by huge demand in China and to a lesser extent India. Lately prices have fallen because demand has fallen, but they will never return to levels of ten years ago, partly because the cost of producing copper has risen.
LE: The area surrounding the La Caridad mine is barren and arid. It’s hard to believe that such terrain can provide economic benefits.
VMD: Mining has played an important role in Mexico’s economy for 400 years, since Spanish colonial times. And it continues to be important, representing 5 percent of the country’s economic output. Above all, mining is an activity that has given economic development to cities and small towns where there isn’t much of anything else, in places where there are few other sources of work.
As the main source of employment in northwest Sonora state, mining is a bellwether industry for the region’s economy. The construction of the Grupo Mexico power plant built by Siemens and the expansions of exist ing mines that it will facilitate are welcome news to local Sonorans since this means the possibility of employ ment at a moment of little job growth in the country.
Very happy with her job is Mayra Santos, a 25yearold chemical engi neer. She says she is not only prac ticing what she was trained to do, but Grupo Mexico supports the commu nity and La Caridad is close to her hometown in Nacozari. Santos has a crucial role at the power plant: She monitors levels of contaminants such as silica, iron and phosphates left after the water filtration process to guard against incrustations in the steam turbine.
Before returning to her spectropho tometer, an instrument that detects minute but rogue levels of minerals by their colors, Santos says working at this enormous project makes her proud, as does the fact that she beat out five other job applicants for the position. After all, she lives in a city that is growing fast. In her view, Grupo Mexico not only generates
work but helps build streets and schools. Its presence means more than jobs. Ing. Vidal Muhech Dip at Grupo Mexico’s headquarters is well aware of this fact and is intent on helping to grow not only the company, but Mexico’s economy.
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