Operational Excellence Axis

We seek to constantly improve our competitiveness vis à vis other producers and maintain the security of our assets in order to cope with possible downward price cycles. We do this by maximizing the value of existing operations through a series of actions that are aimed at:

Boosting the utilization capacity

Operational stability

Continuous cost improvements

Capital rationalization

Likewise, we invest in technology, innovation and automation to improve our productivity and competitiveness, broaden our safety culture and support key sustainability goals, such as increased water recycling and reduced CO2 emissions and waste generation. SDG 9.4

Through the ongoing actions taken, we were able achieve of our operational excellence targets from 2025 to 2023.

Mining

One of the examples of investments in Mining operational excellence is the construction of a new ramp linking the surface to the Pasco Complex’s (Atacocha and El Porvenir) mines, which reduces the distance and the cost of transportation of manpower and ores. An underground electric loader is also being tested to operate in deep and remote areas, enabling more efficient and productive work at the site. Additionally, in 2018 we adopted a more productive ore recovery method (sublevel stoping). The set of initiatives will raise the mine’s productivity as of 2019.

In Vazante, the emphasis has been on the application of technology recently adopted by the mining industry, known as ore sorting (more information in Innovation and Technology). In the unit there was also 70% progress in the dry stacking tailings project, which consists of the installation of a new filtering, drying, handling process and disposal of dry tailings. The solution will replace dam-based conventional waste disposal methods.

In Cerro Lindo, the implementation of the first phase of digital access control was finalized. The second phase will begin in 2019, with greater control and details regarding the circulation of people in the area. In the year, the swap out of trucks from 35 to 50 tons was consolidated, representing transportation availability above the mine’s current production capacity. In the second half of 2018, the development of the mine increased by 30%, with better results, the opening of new access areas and higher productivity contributing to the stabilization of local production.

We also are highlighting the improvement of the geometallurgy process, as a result of the concern with the predictability and operational stability of the mines. The project involves the taking of samples, complete mineralogical characterization of mines, definition of geometallurgical fields, flotation tests and recovery models that provide a detailed knowledge of the ore, year-by-year, guaranteeing time to anticipate, identify and solve problems present in our operational areas.

Other important projects carried out in 2018:

Construction of the new waste disposal deposit (Botadero Pahuaypite) to permit continued operations at Cerro Lindo, which is expected to start operating in the first quarter of 2019. The desalination plant’s seawater pipeline also was replaced, at an investment of US$ 11.8 million, to provide the mine with a reliable supply of water from the coast.

Improvements were made in the management of the Pasco Complex’s assets, increasing reliability, availability and yield. Level A critical assets were identified within the ten critical assets of the complex, which were prioritized in 2018.

Expansion of Cava San Gerardo in Atacocha, confirmed after updating the model of geological resources and reserves. The new pit has reserves on the order of 6 million tonnes of ROM and an estimated useful life of 6 years. We are in the second phase of the project, finishing the geomechanical studies and licensing process, with the beginning of the excavations scheduled for the second half of 2019.

Completion of a total of 5.5 kilometers of drilling in Morro Agudo, mainly for identification and detailing of new ore bodies. In addition, 5.2 kilometers of drilling has been completed focusing on the conversion and updating of mineral resources.

Implementation of the remote detonation process in Morro Agudo, leading to a production increase of around 10%, while also improving the safety of the workers, who are no longer directly exposed to the detonations.

Implementation of the remote detonation process in Morro Agudo, leading to a production increase of around
10%

Smelting

Throughout 2018, the following operational efficiency projects were highlights:

Jarosite Project in Cajamarquilla – Industrial-scale implementation of the conversion process of the Goethite (an iron oxide mineral) production to the Jarosite (iron sulfate), boosting the zinc extraction yield from 94% to 97% and increasing nominal capacity from 330 thousand to 340 thousand tonnes/year. Investments in the project, which is expected to be completed in the third quarter of 2019, are estimated at US$ 45 million.

Energy Matrix in Cajamarquilla – Structuring of Cajamarquilla’s energy matrix project, in the implementation phase. This project aims to replace with natural gas all liquid fuels (diesel oil, heavy oil from auxiliary boilers, heating the unit and the roaster during shutdowns), significantly reducing greenhouse gas emissions and fuel costs.

Biomass Boiler in Três Marias – With a more efficient operation than had been projected, the replacement of boilers operated with petroleum-derived oil to a biomass boiler, begun in 2017, resulted in a reduction of 30% in greenhouse gas emissions and 35% in steam production costs.

Autoclave Dehalogenation in Juiz de Fora – The removal of impurities (Waelz oxide, fluorine and chlorine halides) from steel industry waste showed a higher than expected yield, proving the efficacy of the process.

Sale of Waelz Aggregates in Juiz de Fora – Structured and signed contract for the sale of slag produced in the Waelz Oven (approximately 20 thousand t/month), for the production of Sinter and Iron Ore. In the approval stage for the Licensing Operation, with startup expected in the second half of 2019.