(Alliance News) - Fresnillo PLC shares were down on Wednesday following a mixed bag of results for the final quarter of 2021, and predictions that production faces tough times heading into 2022.
The Mexico-City based precious metals miner said silver production for all of 2021 was below guidance, staying flat on 2020 at 53.1 million ounces. Higher ore grades from the San Julian ore body and the addition of development ore from the Juanicipio project were offset by lower volumes of ore at a lower grade processed at the Saucito and Fresnillo mines.
All of Fresnillo's seven operating mines are in Mexico. The company claims to be the world's large primary silver company and Mexico's largest gold producer.
Fresnillo reports attributable silver production, including Silverstream, for the fourth quarter of 12.9 million ounces. Whilst this was up 2.1% over the previous quarter, owing to a higher contribution of development ore, it remained flat over the fourth quarter of 2020, due to the lower volumes and grades of ore at Saucito and Fresnillo.
Fresnillo's share price fell by 11% to 716.40 pence each in London on Wednesday morning.
Attributable gold production for the full year came in ahead of expectations, but was still down 2.4% year-on-year at 751,200 ounces. Fresnillo said this was due to lower ore grade at Cienega, and lower grade and volume processed at the San Julian Veins. This was offset by a higher volume and grade at Noche Buena.
Fourth quarter gold production was suppressed by operational challenges in Herradura, with increased silt restricting the plant's filter capacity, Fresnillo said. Production in this period was down 30% year-on-year at 150,300, which was also a 13% drop from the previous quarter.
The miner faced significant challenges, which continue, it said. Labour reform in Mexico from September meant Fresnillo had to internalise a high proportion of its contractor workforce. Contractor uptake varied in the subsequent period, with Fresnillo and Cienaga hit by higher workforce turnover and staff vacancies. The reform also reduced the availability of equipment, which had previously been supplied and maintained by contractors. Fresnillo is launching recruitment campaigns, and investing in new equipment and staff training.
A fourth wave of Covid is now sweeping over Mexico, which is compounding staffing shortages, mostly due to self-isolation. Fresnillo said this has increased over January, and expects the disruption to continue into the first quarter of 2022.
In light of these challenges, Fresnillo lowered its estimates for silver production for 2022 to a range of 50.5 million to 56.5 million ounces, including Silverstream, staying flat on 2021. This is due to the operational challenges at Saucito, and the instability caused by increased seismicity in Jarillas vein, which yielded a lower ore grade, and limited access to higher ore grades. The delay in national grid supply timeline to the Juanicipo plant and Pyrites plant at Fresnillo will also reduced their contributions.
Fresnillo expects gold production to be in the range of 600,000 to 650,000, as its Noche Buena mine comes to the end of its mining life.
Fresnillo will announce its full 2021 results on March 8.
By Elizabeth Winter; elizabethwinter@alliancenews.com
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Fresnillo (FRES)