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Fresnillo’s production hit by labour shortages, lower grades

Mexico-focused Fresnillo (LON:FRES) said on Wednesday that labour reforms in the Latin American country have caused a shortage of staff at some of its mines, as the new rules limit the hiring of subcontractors. 

The precious metals producer, which operates seven mines in Mexico, said the hiring restrictions have hit its Fresnillo and Saucito mines the most and were also affecting equipment availability and utilization rates at some of its projects. 

Mexican President Andrés Manuel López Obrador’s government has been criticized by the mining industry for its policy of no new concessions, as well as what have been described as unprecedented regulatory delays. 

Earlier this month, the leftist leader further fed industry worries by proposing a constitutional reform that would restrict future lithium mining, in addition to placing similar limits on other “strategic minerals” needed for Mexico’s energy transition. 

The news came as the company reported a 4.7% fall in third-quarter silver production, which totalled 12.7 million ounces against 13.3 million ounces it churned out in the same quarter of 2020.  

When compared with second-quarter figures, Fresnillo said the drop in production hit 15%, mainly driven by anticipated lower grades at the San Julián project, as well as lower volumes of ore processed at Fresnillo and Saucito. 

The company kept silver production guidance for 2021 in the 53.5 million ounces to 59.5 million ounces range. 

Fresnillo also said that it is monitoring further potential headwinds, such as inflationary pressures and the average revaluation of the Mexican peso versus the US dollar, which might affect costs. 

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