Fresnillo Reaffirms Output Guidance; San Julian Expansion Delayed--Update
October 12 2016 - 5:27AM
Dow Jones News
By Alex MacDonald
LONDON--Mexican precious-metals producer Fresnillo PLC (FRES.LN)
on Wednesday reported higher third quarter gold and silver output
and reaffirmed its full-year output guidance but said the
completion of its San Julian expansion project has been delayed due
to heavy rain and other factors that slowed construction work.
The U.K.-listed business, the world's largest primary silver
producer and Mexico's second-largest gold producer, reported a 6.7%
rise in silver production, including output from the Silverstream
contract, to 11.8 million ounces for the three months ended Sept.
30, 2016 compared with the same quarter the year before.
This was mainly due to the start-up of the first phase of San
Julian expansion project, increased ore processed at the Saucito
mine and an increased contribution from the Silverstream contract.
Silver output, however, fell 9.4% compared with the second quarter
due to lower ore grades at the Saucito mine and reduced equipment
availability due to recurring maintenance issues and a "temporary
shortage" of skilled workers at the Fresnillo mine.
Fresnillo's shares were down 2% at 1,612 pence a share as of
0944 GMT.
Meanwhile gold production rose 21% to 220,000 troy ounces in the
third quarter compared with the same period a year before due to
higher volumes and grades at both its Herradura and Noche Buena
mines.
This means Fresnillo has produced 37 million ounces of silver
and 667,000 ounces of gold during the first nine months of the
year, up 6.3% and 22% respectively compared with the same period a
year earlier.
Looking ahead, the company reaffirmed plans to produce between
850,000 and 870,000 ounces of gold this year, up from its previous
guidance of between 775,000 and 790,000 ounces. It also reaffirmed
its silver production guidance of between 49 million and 51 million
ounces, including production from the Silverstream contract.
"The turnaround plan at Fresnillo continues to progress,
although not at the pace at which we had originally planned," said
Fresnillo Chief Executive Octavio Alvidrez. "We continue to expect
an increase in silver grades and production for the full year
compared to 2015, however, recently volumes processed have come
under pressure as a result of some equipment availability and
personnel issues," he said.
At the San Julian mine, the first phase of the expansion project
has been operating normally since August while the second phase is
now forecast to commission in the second quarter rather than the
end of 2016. This is due to unusually heavy rainfall, high rotation
of construction workers, security incidents and equipment delivery
delays that resulted in slower progress.
Fresnillo is investing $515 million into the San Julián
silver-gold project, which aims to produce 10.3 million ounces of
silver and 44,000 ounces of gold annually once phase 2 is
commissioned and it reaches full production capacity.
-Write to Alex MacDonald at alex.macdonald@wsj.com
(END) Dow Jones Newswires
October 12, 2016 06:12 ET (10:12 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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