A Canadian mineral producing company is one of our highest conviction names in one of our funds. The company built a mine in Mexico in 2016; we were early seed investors and had an active dialogue with management that ensured best safety and environmental practices were implemented from the start and the company was actively engaged with the local community.
This is best reflected in the most recently completed fiscal year with a loss-time injury frequency of less than one (per one million hours), a workforce that is 98% from Mexico, 63% from the local state and 52% from nearby local communities. This is in addition to having implemented strong environmental practices that are externally audited twice a year and resulted in zero reportable incidents in 2018.
A recent example of why it is so important to harbor good relations with the local community occurred this year. A very small subset of the workforce put a blockade on the mine operations as they were looking to replace the current local employees’ union with a bigger national union. During this period, management made themselves accessible and had an active dialogue with us, walking us through each step they took to resolve the issue. Rather than use a heavy-handed approach and create negative goodwill within the community – the company looked to work with local members and hear the concerns of the aggrieved.
The management team’s first step was to suspend operations in order to ensure the safety of all mine employees. They initiated a dialogue with the dissident group and expressed their openness to new union elections provided it was what the majority of the work force wanted. The company avoided involving the state police or any sort of violence to ensure safety remained paramount to their operations. Eventually, because of the goodwill they had created with the wider community through a history of community outreach programs, the issue was resolved by local community members ordering the removal of the blockade (in a non-violent manner). The communication management had with us alongside their actions have been very reassuring and we consequently remained invested in the shares. As a matter of fact, we consider management’s actions a model for other companies operating in undeveloped regions. The case also demonstrates the added value of strong community support.