Fresnillo cuts 2019 production, cites challenging times
Shares in Fresnillo (LON:FRS), the world’s largest silver miner, dropped by almost 5% to the bottom of the FTSE 100 after it cut its annual production targets, citing lower-than-expected ore grades and construction delays at its gold mines in Mexico.
The company, one of the 100 business with the highest market capitalization listed on the London Stock Exchange, revised its silver guidance for 2019 to between 55 million and 58 million ounces, down from a previous range of 58 million to 61 million ounces.
Expected gold production for the year, in turn, was reduced to between 880,000 and 910,000 ounces, from the previously guided 910,000 to 930,000 ounces. The company, which is also Mexico’s second largest bullion producer, attributed the decrease to both lower grades and delays in the construction of a leaching pad at its Herradura mine.
During the three months leading up to June 30, Fresnillo’s silver production, including its silverstream contract, fell 6% to 14.4 million ounces, from 15.3 million ounces in the year-earlier period. Gold production fell 5.4% to 221,307 ounces.
Fresnillo also flagged a negative cost impact for the first half of the year of around $135 million due to previously disclosed accounting reclassifications and growth initiatives, among other factors.
“As we have previously guided, we expect 2019 to be challenging and we remain cautious,” CEO Octavio Alvidrez said in the statement.
He noted, however, that production had continued to recover to targeted levels since the first quarter. He also said that Fresnillo was starting to see the positive impact of operational measures and investments it had made into infrastructure, equipment and infill drilling.
The company, which floated in London in 2008, is 75% owned by Mexican billionaire Alberto Bailleres and Saucito, the world’s largest silver operation, is its flagship operation.
Fresnillo last traded in London at 896.8p per share, 2.7% lower than the previous day. The Mexico-focused miner’s market capitalization now sits at £6.6 billion (about $8.2bn).