Fresnillo achieves record gold, silver production

Fresnillo achieved record gold and silver production in 2016, even though the miner experienced some delays in implementing its turnaround plan.

The FTSE 100 miner set a target for an average development rate of 4.8m per month, and experienced “some issue during the year” in implementing the turnaround plan, and the company said it has addressed them as it aims for a year-on-year increase in silver production in the range of 7-10% at the mine in 2017.

For the fourth quarter of 2016, silver production, including silverstream, rose 9.5% to 13.3m ounces, compared to the same period the previous year, while silver production increased 13.1% compared to the third quarter.

This resulted in a record yearly silver production of 50.3m ounces, including silverstream, up 7.1%, compared to the previous year and in line with guidance, mainly due to the start of of the first phase of production at the San Julián mine in Mexico.

With quarterly gold production increased 24.2% compared to last year and 22.0% compared to the third quarter, for the calendar year Fresnillo delivered record annual gold production of 935.5k ounces, an increase of 22.8% and ahead of guidance, due to reduced gold inventories at Herradura and an an improved average speed of recovery at the Noche Buena site.

The ramp-up of the first phase of San Julián is currently processing 3,600 tonnes per day, which is 20% above its nominal capacity.

For 2017, Fresnillo expects silver production to be in the range of 58-61m ounces, including 4m ounces from the silverstream, while gold production is expected to be in the range of 870-900k ounces, due to stabilisation of production at Herradura following the reduction in inventories.

Phase two of the San Julián mine is on track to be commissioned in the second quarter of 2017 and the company has an exploration budget of about $160m, including capitalised exploration expenses.

Chief executive Octavio Alvídrez, said both phases of San Julián produces a combined annual average of 10.3m ounces of silver and 44k ounces of gold, and that further progress was made at the Pyrites plant project which is set to deliver 3.5m ounces of silver and 13k ounces a year once commissioned in 2018, while construction of the second line of the Dynamic Leaching plant at Herradura is on track.