viewFresnillo Plc

Silver Producer Fresnillo delivers Record Breaking Production in third quarter


Mexico’s largest silver miner Fresnillo (LSE: FRES) reported a new company record level of silver production in the quarter. Today’s quarterly production report revealed that Central American operating precious metals miner silver produced to 9.7m ounces, which represents a 9.3% increase from Q3 2008.

The new record level of silver production for the quarter was achieved largely as a result of 160,758 additional silver ounces extracted from the development works at Saucito and processed at the Fresnillo mill. Additionally the Fresnillo mine increased the level of ore output and the Ciénega produced higher ores grades, both of which also supplemented the higher level of production.

Following the Q3 production numbers Fresnillo look set to achieve their full year 2009 production target of 40.1 million ounces of attributable silver, should they reach the anticipated level it would represent a 7.2% increase in production compared to 2008.

In terms of Fresnillo’s other metals, production remained inline with expectations. Gold production achieve an increase of 4.5% but was lower on a quarter-on-quarter basis due to a temporary shut down at the Merrill Crowe plant. However the gold content remained in solution and will be recovered during the year.

Fresnillo and Ciénega produce by-products of lead and zinc, remained steady against the previous quarter and the corresponding quarter of 2008. Although levels are now lower than the turn of the year due to the relatively higher primary silver ore grades at Ciénega.

At Fresnillo’s development projects progress remains on track, construction of Soledad and Dipolos are on course for ‘start up’ in Q1 2010, with pre-operational tests scheduled in January. Engineering work at the Saucito project remains on track with both ramp and access road construction continuing. At the Saucito shaft, electric works have been carried out, guidance wires for the hoist were hung and the construction of the Jarillas shaft continued.

In the third quarter, 160,758 silver ounces and 733 gold ounces were obtained from the development works at Saucito and processed at the Fresnillo mill. Saucito continues to accumulate ore from its development works.

Fresnillo’s management has focused on production cost across the group over recent periods, in Q3 costs at the three operating mines are in line with the levels reported in the half year report for 2009.

Production of all metals in the period was as expected, with silver production across the Company hitting another record. The management expects full year production to reach 40.1 moz attributable silver, a 7.2% increase over 2008, and 265.0 koz attributable gold.

Fresnillo CEO, Jaime Lomelín commented on the precious metal producer’s performance and highlighted the additional benefits the strengthening metal prices will provide;

"Production reached a new record level, the development of our two projects, Soledad and Dipolos and Saucito, remain on track ... The Company will benefit from the stronger precious metal prices over the period, and we are confident that solid production, higher prices and our ongoing efforts to optimise productivity and reduce costs will ensure a good outcome for 2009 as a whole."

Quick facts: Fresnillo Plc

Price: 771.8 GBX

Market: LSE
Market Cap: £5.69 billion

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