Fresnillo persists with targets despite metals crunch

Precious metals miner Fresnillo increased production in the last quarter but will now review all expenditure and exploration projects after the recent sharp falls in gold and silver prices.

Octavio Alvdrez, Chief Executive Officer of the Mexico-focused group, admitted "the outlook for the precious metals market had become increasingly challenging over the first few months of the year".

"In the wake of the recent sharp falls in gold and silver prices we will review all capital expenditure and assess future exploration projects."

He added that, even before looking at new cost-saving initiatives, the board was confident all current development projects remained attractive in spite of the gold and silver price crunch.

"They have been designed to be low cost projects and our modelling suggests they will continue to deliver industry leading margins and profits at precious metals prices far below today's levels," he explained.

The company therefore was determined to keep on with its long-term goals of producing 68m ounces of silver and 500,000 oz of gold a year by 2018, but Alvdrez insisted that it would do so "with a view to maximizing benefits for all our stakeholders".

In the three months to the end of March attributable silver production increased 2.6% to 10.1m ounces over the same period in 2012 mainly due to the continued ramp-up and higher than expected ore grades at the Saucito mine.

Attributable gold production decreased 3.5% to 117,500 ounces due to a lower recovery rate and reduced volume of ore deposited at Soledad-Dipolos and lower ore grade at Cinega, mitigated by a ramp-up of production at Noche Buena.

As for its development projects, Fresnillo reported that construction of a dynamic leaching plant at Herradura is on track to start up in the fourth quarter, with engineering for the processing plants and construction at San Julin advancing according to schedule.

All in all the group said it remained on track to achieve the 2013 production targets of 41m ounces of silver and 490,000 attributable ounces of gold.

OH