Fresnillo PLC (LSE:FRES) dropped 6% as the Mexican gold and silver miner warned that Penoles, its partner in the Silverstream agreement, was having production trouble at the Sabinas mine.
Sabinas, fully owned by Peñoles, is covered by the Silverstream Agreement entered into by Fresnillo and Peñoles in December 2007.
Under that contract, Fresnillo is entitled to receive all the proceeds (before treatment and refining charges) minus US$5.0 per ounce (plus inflation as of 2013) of payable silver produced by Sabinas.
In its statement today, Fresnillo said it has started discussions with Peñoles to assess the extent of these operational difficulties and any associated impact on the Silverstream Agreement.
“Although it is too early to reach any specific conclusions, at this time Fresnillo considers that there is a reasonable likelihood that the process may lead to significant adjustments to the Silverstream Agreement.”
Shares fell 6.4% to 633p.