Fresnillo’s Silver Production Climbs in 2018; Decline Expected This Year

Fresnillo (LSE:FRES), the world’s largest silver producer, achieved record silver production for 2018, with output rising 5.3 percent from 2017, the company announced on Wednesday (January 23).

The miner produced 61.8 million ounces for the year, including Silverstream. The output increase was largely thanks to 2018 being the first full year of operations at phase 2 of San Julián.

“Record annual silver production and a very strong gold performance does not mask what was a challenging year for Fresnillo,” stated Octavio Alvídrez, CEO.

Despite making gains from the previous year, Fresnillo acknowledged that its production was not as high as it anticipated, mostly due to lower-than-expected ore grades at the Fresnillo and Saucito mines, which persisted into the final quarter, together with operational issues.

“We are taking action to address this, not least by intensifying our infill drilling programmes, controlling dilution and further investment in equipment and infrastructure. The flotation plant to process historical and ongoing tailings at the Fresnillo mine is progressing and is expected to improve overall recoveries once completed in 1H20,” noted Alvidrez.

The company’s fourth-quarter silver production came in at 15.5 million ounces, including Silverstream, but remained flat from the third quarter, and decreased by 3.2 percent compared to Q4 2017. The decrease was due to lower volumes of ore processed and ore grade at Fresnillo and Saucito.

In terms of gold production, the miner was able to surpass expectations from the beginning of the year, and was in line with its upwardly revised guidance. 

Fresnillo produced 923,000 ounces of the yellow metal, which was a 1.3 percent increase from 2017. Output rose thanks to a higher ore grade and recovery rate at Saucito, the contribution of the new Pyrites plant at Saucito and higher ore grade at Fresnillo.

Quarterly gold production was 232,000 ounces, in line with the prior-year quarter and up 3 percent from Q3 2018, mainly due to higher ore grades and recovery rates at Herradura and San Julián (phase I/vein system).

Looking ahead, Fresnillo expects silver production to be slightly lower in 2019, anticipating a range of 58 million to 61 million ounces. Gold production is expected to be flat, with output in the range of 910,000 ounces to 930,000 ounces for the year.

“We will continue to conservatively invest in the business to deliver sustainable growth and returns to shareholders. I fully expect to be able to make a further positive announcement on our Juanicipio development project in due course,” revealed Alvidrez

The company has set a 2019 exploration budget of approximately US$140-million, which includes capitalized exploration expenses.

As of 11:03 a.m. EST, Fresnillo was up 1.83 percent, trading at GBX 912.20.

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Securities Disclosure: I, Nicole Rashotte, hold no direct investment interest in any company mentioned in this article.