Fresnillo Cuts Gold Output Target, Silver on Track

July 17, 2013 at 08:15

truthing

Mexican miner Fresnillo, the world’s largest primary silver producer, said it would miss its 2013 gold production target following a legal challenge at one mine, but forecast silver output to be in line with earlier estimation.

The company on Wednesday downgraded its forecast for gold production for 2013 to 465,000 ounces from 490,000 ounces, after a court stopped work at the Dipolos mine, where part of the project must now be relocated.

Silver has traditionally been Fresnillo’s larger business but in 2012 gold accounted for around 49% of its revenues with silver delivering 47% of revenues.

Fresnillo in January forecast growth in its gold business alongside stable output in silver. Gold production of 465,000 ounces would be lower than last year’s 473,034 ounces, however.

Second quarter gold production was down 6.8% against the same quarter last year to 118,315 ounces.

The company said attributable silver production came in at 10.9 million ounces in the second quarter, 6.3% higher than the same period last year, and putting it on track to meet full-year guidance of 41 million ounces.

The company in April launched a review of its spending and exploration plans in the light of tumbling gold and silver prices but said it would press ahead with a US$235 million expansion of its Saucito mine and the construction of the San Julian mine.

Gold and silver prices have plunged this year.  Gold was down 23% in the April-June period while silver posted an even steeper drop, although both have recovered slightly in the past week.

The company, which in April sold shares to help meet Britain’s blue-chip index’s tougher free-float requirements, is facing the additional headwind of a possible royalty tax on mining profits.

Shares in Fresnillo, which have plunged 45% in the last six months, closed at 1,016 pence on Tuesday, valuing the group at ₤7bil (US$10.6 billion)