TIDMFRES
RNS Number : 7584F
Fresnillo PLC
17 July 2019
Fresnillo plc
21 Upper Brook Street
London W1K 7PY
United Kingdom
www.fresnilloplc.com
17 July 2019
SECOND QUARTER PRODUCTION REPORT
FOR THE THREE MONTHSED 30 JUNE 2019
Octavio Alvídrez, Chief Executive Officer, said:
"Production has continued to recover towards target levels since
the first quarter as we begin to see the positive impact of
operational measures and investments we have made into
infrastructure, equipment and infill drilling, in particular at our
Fresnillo and Saucito mines. The improvement and growth initiatives
at all our operations, combined with the impact of the change to
the accounting treatment of stripping costs at Herradura, have
resulted in higher costs for the period.
I was pleased to have confirmed Board approval for our next
major growth project; the Juanicipio mine. Since then, progress on
Juanicipio has been rapid with multiple engineering milestones
delivered, and construction on track for our 2020 year-end
commissioning target.
As we have previously guided, we expected 2019 to be challenging
and we remain cautious. We have therefore decided to reduce our
full year production guidance, driven by lower-than-expected ore
grades and ore throughput at the Fresnillo mine, a delay in the
construction of a leaching pad at Herradura and the lower ore
throughput at the dynamic leaching plant. However, we will continue
to work hard to ensure the improvements we have seen this quarter
are maintained in the second half of the year."
TOTAL PRODUCTION
2Q 19 1Q 19 % change 2Q 18 % change 1H 19 1H 18 % change
Silver (koz) 13,636 12,372 10.2 14,459 -5.7 26,009 28,694 -9.4
-------- -------- --------- -------- --------- -------- -------- ---------
Silverstream
(koz) 782 766 2.1 884 -11.5 1,548 2,070 -25.2
-------------- -------- -------- --------- -------- --------- -------- -------- ---------
Total Silver
(koz) 14,418 13,138 9.7 15,343 -6.0 27,557 30,764 -10.4
-------------- -------- -------- --------- -------- --------- -------- -------- ---------
Gold (oz) 221,307 211,110 4.8 233,841 -5.4 432,417 465,299 -7.1
-------------- -------- -------- --------- -------- --------- -------- -------- ---------
Lead (t) 13,039 12,125 7.5 13,223 -1.4 25,164 24,853 1.3
-------------- -------- -------- --------- -------- --------- -------- -------- ---------
Zinc (t) 20,654 21,752 -5.0 22,014 -6.2 42,406 41,054 3.3
-------------- -------- -------- --------- -------- --------- -------- -------- ---------
HIGHLIGHTS
Silver
-- Quarterly silver production of 14.4 moz (including
Silverstream) up 9.7% vs. 1Q19 driven by higher ore grades and
volume of ore processed at both Fresnillo and San Julián
Disseminated Ore Body (DOB), and higher recovery rates at
Saucito.
-- Quarterly silver production (including Silverstream) down
6.0% vs. 2Q18 due to expected lower ore grade and volume of ore
processed at Saucito, and lower ore grade at Fresnillo.
-- First half silver production (including Silverstream) down
10.4% vs. 1H18 due to lower volumes of ore processed and lower ore
grades at both Fresnillo and Saucito.
Gold
-- Quarterly gold production of 221.3 koz, up 4.8% vs. 1Q19
mainly due to a higher volume of ore processed and higher grade at
Noche Buena and Fresnillo, and an increased ore grade and higher
recovery rate at Herradura.
-- Quarterly gold production down 5.4% vs. 2Q18 as a result of a
lower volume of ore processed at Noche Buena and lower ore grade
and ore processed at Saucito.
-- First half gold production down 7.1% vs. 1H18 primarily
driven by a lower volume of ore processed at Noche Buena and lower
speed of recovery and ore processed at Herradura.
By-Products
-- Quarterly by-product lead production increased 7.5% vs. 1Q19
due to a higher volume of ore processed and higher ore grade at
Fresnillo. Quarterly and first half lead production remained at
similar levels vs. 2Q18 and 1H18.
-- Quarterly by-product zinc production decreased 5.0% vs. 1Q19
driven by lower grades at Saucito, mitigated by a higher ore grade
at Fresnillo and Ciénega. Quarterly by-product zinc production
decreased 6.2% vs. 2Q18 due to a lower ore grade and volume of ore
processed at Saucito and lower ore grade and recovery rate at
Fresnillo. First half by-product zinc production increased 3.3% vs.
1H18 due to higher grades and recovery rates at both Saucito and
Ciénega, offset by a lower ore grade and rate of recovery at
Fresnillo.
Development Projects
-- Construction of the Juanicipio project commenced immediately
after Board approval in April 2019. Good progress has been made on
engineering and early stage construction works in accordance with
plan. The project is expected to be concluded by late 2020.
-- Construction of the Pyrites plant (phase II) in the Fresnillo
district remains on track and on budget, with commissioning
expected in the second half of 2020.
-- Fresnillo flotation plant optimisation to cope with higher
content of lead and zinc is progressing according to plan and is
expected to be concluded on time by 2H20.
Outlook
We have reduced our FY19 production guidance as follows and for
the reasons noted below:
-- 2019 silver production guidance is decreased from 58-61 moz
to 55-58 moz (including Silverstream) mainly due to lower ore
grades and ore throughput at the Fresnillo mine.
-- 2019 gold production guidance of 910-930 koz gold is
decreased to 880-910 koz mainly driven by the delay in the
construction of a leaching pad at Herradura and lower ore processed
at the DLP.
Estimated Cost Guidance
A combination of events has affected production costs,
depreciation charges, exploration costs and administrative and
corporate expenses. To facilitate estimates of the expected 2019
First Half Financial Results we are providing the following
guidance relative to 1H18:
-- 1H19 adjusted production costs have been impacted by the following events:
o Previously disclosed accounting reclassification: US$45
million
o Previously disclosed growth initiatives: US$45 million
o Previously disclosed cost inflation guidance: US$15
million
o Increased use of consumables, maintenance and contractor costs
associated with longer haulage distances, narrower veins, better
equipment availability and infill drilling: US$30 million
The aggregate impact of these items will increase adjusted
production costs for 1H19 by approximately US$135 million, compared
to 1H18.
-- The commissioning of new assets such as the pyrites plant and
the 2(nd) line of the dynamic leaching plant, tailings dam at San
Julián and additional equipment at all our operations, together
with the amortisation of capitalised mining works and stripping
will increase the 1H19 depreciation by approximately US$50 million,
in accordance with our accounting policies.
-- Having accelerated exercise exploration activities, we have
spent an additional US$5 million in 1H19 versus 1H18, with an
upward revised guidance of US$160 million (including capitalised
exploration expenses of US$10 million) for 2019.
-- New operations and the development of new projects, together
with additional advisory services have increased administrative and
corporate expenses by approximately US$5 million.
Please note that these financial effects stated above are
unaudited numbers and the result of an estimated variation analysis
(1H19 vs 1H18).
Management will host a conference call for analysts and
investors on Wednesday 17th July at 8:00am (London time). The dial
in details are as follows:
UK: 0808 109 0700
Int'l access: +44 (0) 20 3003 2666
Participant password: Fresnillo
A replay of the call will also be available for seven days after
the event and details to access it will be published in our website
after the conference call.
Interim Results
Fresnillo will announce its 2019 Interim Results on 30(th) of
July 2019.
For further information, please visit our website
www.fresnilloplc.com or contact:
FRESNILLO PLC Tel: +44 (0)20 7399 2470
London Office
Gabriela Mayor, Head of Investor
Relations
Patrick Chambers
Mexico City Office Tel: +52 55 52 79 3206
Ana Belem Zárate
POWERSCOURT Tel: +44 (0)20 7250 1446
Peter Ogden
MINING OPERATIONS
FRESNILLO MINE PRODUCTION
2Q 19 1Q 19 % change 2Q 18 % change 1H 19 1H 18 % change
Ore Processed
(t) 619,852 574,347 7.9 620,906 -0.2 1,194,199 1,258,316 -5.1
-------- -------- --------- -------- --------- ---------- ---------- ---------
Production
-------- -------- --------- -------- --------- ---------- ---------- ---------
Silver (koz) 3,455 2,952 17.0 3,793 -8.9 6,407 8,129 -21.2
-------- -------- --------- -------- --------- ---------- ---------- ---------
Gold (oz) 13,489 11,446 17.8 10,953 23.2 24,935 21,384 16.6
--------------- -------- -------- --------- -------- --------- ---------- ---------- ---------
Lead (t) 5,233 3,537 48.0 5,052 3.6 8,769 10,835 -19.1
--------------- -------- -------- --------- -------- --------- ---------- ---------- ---------
Zinc (t) 6,710 5,247 27.9 7,979 -15.9 11,957 16,846 -29.0
-------- -------- --------- -------- --------- ---------- ---------- ---------
Ore Grades
-------- -------- --------- -------- --------- ---------- ---------- ---------
Silver (g/t) 192 181 6.1 211 -8.9 187 222 -15.7
-------- -------- --------- -------- --------- ---------- ---------- ---------
Gold (g/t) 0.90 0.82 9.8 0.70 28.5 0.86 0.68 26.6
-------- -------- --------- -------- --------- ---------- ---------- ---------
Lead (%) 0.97 0.72 34.7 0.90 7.9 0.85 0.95 -10.8
-------- -------- --------- -------- --------- ---------- ---------- ---------
Zinc (%) 1.60 1.31 22.1 1.74 -8.2 1.46 1.82 -19.9
--------------- -------- -------- --------- -------- --------- ---------- ---------- ---------
Quarterly silver production increased 17.0% vs. 1Q19 due to an
increase in ore throughput resulting from the improved mine
coordination and operational control achieved following the
investment in technology and systems together with other
productivity initiatives. The increase in ore processed, together
with some early stage improvements in dilution control, had a
positive effect on the silver ore grade.
Quarterly and first half silver production decreased 8.9% and
21.2% vs. 2Q18 and 1H18 respectively, primarily driven by lower ore
grades resulting from the differences with the geological model and
the delays in development as previously identified.
Mine performance improvement remains a key priority and a number
of iniativies are on-going. The infill drilling programme has
progresed well, which will result in an updated and more accurate
geological model. We anticipate the lower dilution rate to continue
following the introduction of operational measures and controls and
the more effcient and accurate topographic scanner. With these new
measurements, blasting, operational controls and mine design will
be adjusted and further improvements in dilution control are
expected towards the last quarter of the year.
Development rates averaged 3,100 mts per month in 2Q19 as more
preparation and infrastructure (electricity, ventilation, waste
haulage) of the mine was needed to ensure continuous improvement.
Training of new personnel and improvements to maintenance programme
to increase equipment availability are still underway.
Despite the improvements achieved in 2Q19, the pace at which
these initiatives are progressing is not expected to compensate for
the low production in 1H19. As a result the Group's total silver
production will be impacted and guidance has been adjusted.
Silver ore grade in 2019 is expected to be between 190-200 g/t,
while gold, lead and zinc ore grades are estimated to remain around
current levels of 0.85 g/t, 0.85% and 1.45 respectively.
Quarterly by-product gold production increased against all
comparable periods as a result of higher grades.
SAUCITO MINE PRODUCTION
2Q 19 1Q 19 % change 2Q 18 % change 1H 19 1H 18 % change
Ore Processed
(t) 662,023 665,650 -0.5 711,463 -7.0 1,327,673 1,385,008 -4.1
-------- -------- --------- -------- --------- ---------- ---------- ---------
Production
-------- -------- --------- -------- --------- ---------- ---------- ---------
Silver (koz) 4,507 4,332 4.0 5,161 -12.7 8,840 9,994 -11.5
-------- -------- --------- -------- --------- ---------- ---------- ---------
Gold (oz) 17,987 18,729 -4.0 22,722 -20.8 36,716 39,602 -7.3
--------------- -------- -------- --------- -------- --------- ---------- ---------- ---------
Lead (t) 4,562 5,877 -22.4 5,327 -14.4 10,439 8,510 22.7
--------------- -------- -------- --------- -------- --------- ---------- ---------- ---------
Zinc (t) 5,941 9,110 -34.8 7,549 -21.3 15,052 11,465 31.3
-------- -------- --------- -------- --------- ---------- ---------- ---------
Ore Grades
-------- -------- --------- -------- --------- ---------- ---------- ---------
Silver (g/t) 242 243 -0.4 260 -6.8 243 260 -6.8
-------- -------- --------- -------- --------- ---------- ---------- ---------
Gold (g/t) 1.15 1.13 1.8 1.25 -8.3 1.14 1.20 -4.1
-------- -------- --------- -------- --------- ---------- ---------- ---------
Lead (%) 0.83 1.03 -19.4 0.86 -4.0 0.93 0.72 29.6
--------------- -------- -------- --------- -------- --------- ---------- ---------- ---------
Zinc (%) 1.33 1.94 -31.4 1.64 -18.5 1.64 1.31 25.3
--------------- -------- -------- --------- -------- --------- ---------- ---------- ---------
Quarterly silver production increased 4.0% vs. 1Q19, driven by a
higher recovery rate as a result of the optimised granulometry at
the milling process.
In line with our expectations, quarterly and first half silver
production decreased 12.7% and 11.5% vs. 2Q18 and 1H18 respectively
due to a lower volume of ore processed and lower ore grade. The
lower ore throughput resulted from a decrease in the Jarillas vein
width, and downtime in the milling area due to technical issues.
The lower ore grade is a result of the gradual depletion of higher
ore grade areas.
Infill drilling at this mine continues to advance and, similarly
to the Fresnillo mine, results are and will continue to be
processed within the next months, which will result in increased
certainty of the geological model.
The silver ore grade for 2019 is now expected to be in the range
of 230-240 g/t, while gold ore grade is estimated to remain around
the 1.1 g/t mark.
Quarterly by-product gold production decreased 4% vs. 1Q19 due
to a lower recovery rate. Quarterly and first half by-product gold
production decreased 20.8% and 7.3% vs 2Q18 and 1H18 respectively
driven by lower grades and lower volume of ore processed.
PYRITES PLANT (PHASE I)
2Q 19 1Q 19 % change 2Q 18 % change 1H 19 1H 18 % change
Ore Processed
(t) 39,159 47,846 -18.2 11,745 233.4 87,005 11,745 640.1
------- ------- --------- ------- --------- ------- ------- ---------
Production
------- ------- --------- ------- --------- ------- ------- ---------
Silver (koz) 333 306 8.8 73 356.2 638 73 774.0
------- ------- --------- ------- --------- ------- ------- ---------
Gold (oz) 1,215 1,100 10.5 186 553.2 2,315 186 1,144.6
--------------- ------- ------- --------- ------- --------- ------- ------- ---------
Ore Grades
------- ------- --------- ------- --------- ------- ------- ---------
Silver (g/t) 352 267 31.8 452 -22.2 305 452 -32.4
------- ------- --------- ------- --------- ------- ------- ---------
Gold (g/t) 2.57 2.10 22.4 3.37 -23.8 2.31 3.37 -31.5
------- ------- --------- ------- --------- ------- ------- ---------
The leaching plant of the pyrites plant at Saucito contributed
333 koz of silver and 1,215 oz of gold in 2Q19, up 8.8% and 10.5%
respectively vs. 1Q19. This resulted from the higher than expected
ore grades, which more than offset the lower volumes processed as
the stock pile is depleted.
The plant was commissioned mid-2018, thus comparable figures vs.
2018 are not relevant.
The expected silver ore grade for 2019 continues to be between
190-210 g/t.
CIENEGA MINE PRODUCTION
2Q 19 1Q 19 % change 2Q 18 % change 1H 19 1H 18 % change
Ore Processed
(t) 329,117 320,990 2.5 330,879 -0.5 650,107 650,885 -0.1
--------------- -------- -------- --------- -------- --------- -------- -------- ---------
Production
--------------- -------- -------- --------- -------- --------- -------- -------- ---------
Gold (oz) 15,075 14,681 2.7 16,689 -9.7 29,757 33,066 -10.0
--------------- -------- -------- --------- -------- --------- -------- -------- ---------
Silver (koz) 1,457 1,463 -0.4 1,518 -4.0 2,920 2,757 5.9
-------- -------- --------- -------- --------- -------- -------- ---------
Lead (t) 1,353 981 37.9 1,352 0.1 2,335 2,687 -13.1
--------------- -------- -------- --------- -------- --------- -------- -------- ---------
Zinc (t) 2,130 1,712 24.4 1,231 73.0 3,842 2,237 71.7
-------- -------- --------- -------- --------- -------- -------- ---------
Ore Grades
-------- -------- --------- -------- --------- -------- -------- ---------
Gold (g/t) 1.57 1.53 2.6 1.65 -5.4 1.55 1.66 -6.6
-------- -------- --------- -------- --------- -------- -------- ---------
Silver (g/t) 162 165 -1.8 166 2.8 163 154 6.0
-------- -------- --------- -------- --------- -------- -------- ---------
Lead (%) 0.64 0.49 30.6 0.67 -4.4 0.56 0.67 -15.6
-------- -------- --------- -------- --------- -------- -------- ---------
Zinc (%) 1.10 0.89 23.6 0.77 43.0 1.00 0.74 33.9
--------------- -------- -------- --------- -------- --------- -------- -------- ---------
Quarterly gold production increased 2.7% vs. 1Q19 due to higher
volume of ore processed resulting from efficiency gains in the
maintenance programme, and a slightly higher ore grade.
Quarterly and first half gold production decreased 9.7% and
10.0% vs. 2Q18 and 1H18 respectively driven by lower ore grades
resulting from the natural depletion of high ore grade areas in the
deeper levels at Las Casas and East Taspana. A lower recovery rate
also impacted quarterly and first half gold production.
Silver production decreased 4.0% vs. 2Q18 mainly due to lower
ore grade at Las Casas and Rosario Transversal.
First half silver production increased 5.9% vs. 1H18 driven by a
higher ore grade driven by the access to higher silver ore grade
areas, particularly at Rosario.
Expected gold ore grade in 2019 remains in the range of
1.60-1.70 g/t and silver ore grade is still anticipated to be
between 150-160 g/t.
SAN JULIÁN MINE PRODUCTION
2Q 19 1Q 19 % change 2Q 18 % change 1H 19 1H 18 % change
Ore Processed Veins
(t) 338,797 322,883 4.9 289,775 -16.9 661,680 600,517 10.2
--------------------- -------- -------- --------- -------- --------- ---------- ---------- ---------
Ore Processed DOB
(t) 562,534 545,341 3.2 540,261 4.1 1,107,875 1,071,720 3.4
--------------------- -------- -------- --------- -------- --------- ---------- ---------- ---------
Total production
at San Julián
--------------------- -------- -------- --------- -------- --------- ---------- ---------- ---------
Gold (oz) 18,303 18,139 0.9 20,097 -8.9 36,443 39,888 -8.6
--------------------- -------- -------- --------- -------- --------- ---------- ---------- ---------
Silver (koz) 3,589 2,953 21.5 3,533 1.6 6,542 7,100 -7.9
--------------------- -------- -------- --------- -------- --------- ---------- ---------- ---------
Production Veins
--------------------- -------- -------- --------- -------- --------- ---------- ---------- ---------
Gold (oz) 17,667 17,632 0.2 19,584 -9.8 35,299 38,695 -8.8
--------------------- -------- -------- --------- -------- --------- ---------- ---------- ---------
Silver (koz) 1,246 1,084 14.9 1,263 -1.3 2,330 2,707 -13.9
-------- -------- --------- -------- --------- ---------- ---------- ---------
Production DOB
--------------------- -------- -------- --------- -------- --------- ---------- ---------- ---------
Gold (oz) 636 508 25.2 513 24.0 1,143 1,193 -4.2
--------------------- -------- -------- --------- -------- --------- ---------- ---------- ---------
Silver (koz) 2,343 1,868 25.4 2,270 3.2 4,212 4,393 -4.1
-------- -------- --------- -------- --------- ---------- ---------- ---------
Lead (t) 1,891 1,730 9.3 1,493 26.7 3,621 2,821 28.4
-------- -------- --------- -------- --------- ---------- ---------- ---------
Zinc (t) 5,873 5,682 3.4 5,254 11.8 11,555 10,507 10.0
-------- -------- --------- -------- --------- ---------- ---------- ---------
Ore Grades Veins
-------- -------- --------- -------- --------- ---------- ---------- ---------
Gold (g/t) 1.71 1.78 -3.9 2.12 -19.4 1.74 2.04 -14.7
-------- -------- --------- -------- --------- ---------- ---------- ---------
Silver (g/t) 124.34 114.81 8.3 144.58 -14.0 119.69 151.71 -21.1
-------- -------- --------- -------- --------- ---------- ---------- ---------
Ore Grades DOB
-------- -------- --------- -------- --------- ---------- ---------- ---------
Gold (g/t) 0.08 0.08 0.0 0.07 17.8 0.08 0.08 0.0
-------- -------- --------- -------- --------- ---------- ---------- ---------
Silver (g/t) 149.17 124.45 19.9 156.71 -4.8 137.00 151.72 -9.7
-------- -------- --------- -------- --------- ---------- ---------- ---------
Lead (%) 0.44 0.43 2.3 0.42 4.6 0.44 0.41 6.0
-------- -------- --------- -------- --------- ---------- ---------- ---------
Zinc (%) 1.42 1.37 3.6 1.26 12.8 1.40 1.28 8.9
-------- -------- --------- -------- --------- ---------- ---------- ---------
SAN JULIÁN VEINS
Quarterly silver production increased 14.9% vs. 1Q19 due to a
temporarily higher ore grade found on the Santa Maria vein and an
increased volume of ore processed due to the optimisation of the
maintenance programme.
Compared to 2Q18, quarterly silver production remained broadly
unchanged due to a lower ore grade, mitigated by a higher volume of
ore processed. Similarly, first half silver production decreased
13.9% due to a lower than expected ore grade as a result of the
different quality of the areas exploited.
Quarterly gold production remained flat vs 1Q19 due to a higher
volume of ore processed, offset by a lower ore grade. Quarterly and
first half gold production decreased 9.8% and 8.8% vs. 2Q18 and
1H18 respectively, driven by lower grades, mitigated by higher
volumes of ore processed.
We expect gold ore grades to be in the range of 1.6-1.7 g/t and
reduce silver grades to average 110-125 g/t, from 130-140 g/t.
SAN JULIÁN DISSEMINATED ORE BODY (DOB)
Quarterly silver production increased 25.4% vs. 1Q19 mainly due
to a higher ore grade, in line with the sequencing of the mine
plan, and higher ore processed.
Compared to 2Q18, silver production increased 3.2% due to a
higher volume of ore processed and increased recovery rates. This
was partly offset by a lower ore grade as the sequencing of the
mine plan was temporarily changed to maintain the geotechnical
stability of some high ore grade stopes.
First half silver production decreased 4.1% vs. 1H18 mainly due
to lower ore grade resulting from additional safety procedures
taken as a result of the instability in areas with higher silver
ore grade.
These changes to the mine plan have impacted silver ore grade
and the guidance for the full year is decreased from 160-170 g/t to
125-140 g/t.
HERRADURA TOTAL MINE PRODUCTION
2Q 19 1Q 19 % change 2Q 18 % change 1H 19 1H 18 % change
Ore Processed
(t) 5,466,791 5,695,073 -4.0 5,605,427 -2.5 11,161,864 11,590,068 -3.7
--------------- ----------- ----------- --------- ----------- --------- ----------- ----------- ---------
Total Volume
Hauled (t) 32,100,458 29,132,741 10.2 33,560,118 -4.3 61,233,200 67,713,885 -9.6
--------------- ----------- ----------- --------- ----------- --------- ----------- ----------- ---------
Production
--------------- ----------- ----------- --------- ----------- --------- ----------- ----------- ---------
Gold (oz) 119,987 116,879 2.7 117,886 1.8 236,866 243,129 -2.6
--------------- ----------- ----------- --------- ----------- --------- ----------- ----------- ---------
Silver (koz) 280 354 -20.9 363 -22.9 634 604 5.0
----------- ----------- --------- ----------- --------- ----------- ----------- ---------
Ore Grades
----------- ----------- --------- ----------- --------- ----------- ----------- ---------
Gold (g/t) 0.84 0.81 3.7 0.76 10.9 0.82 0.72 15.2
----------- ----------- --------- ----------- --------- ----------- ----------- ---------
Silver (g/t) 2.48 2.90 -14.5 2.60 -4.3 2.70 2.22 21.7
----------- ----------- --------- ----------- --------- ----------- ----------- ---------
Quarterly gold production increased 2.7% vs. 1Q19 due to a
higher ore grade and a higher recovery rate resulting from the
increased irrigation at the pads. This was offset by a lower volume
of ore deposited and processed due to the delay in the construction
of the additional leaching pad.
When compared to 2Q18, gold production slightly increased driven
by a higher ore grade. This was offset by a slower overall speed of
recovery as described in the prior quarter. Similarly, first half
gold production decreased 2.6% vs. 1H18 due to the slower overall
speed of recovery resulting from the higher level of the leaching
pads, which increased the residence time of the solution in the
pads. This was mitigated by a higher ore grade from the increased
production at the 2(nd) line of the Dynamic Leaching Plant.
The construction of the 13(th) leaching pad has been delayed by
at least 6 months due to a longer than anticipated permitting
process that in turn affected the coordination of the subsequent
activities. The leaching pad is now expected to be concluded in
early 3Q19 and irrigation will commence in late July. However,
given the two to three months irrigation cycle, gold production is
expected to be affected in 2H19, therefore the Group's gold
guidance has been decreased.
As previously disclosed, the number of components to which
stripping costs are allocated were reduced from two to one in 2H18.
This change resulted in recognising the entirety of the stripping
cost in the income statement as opposed to partially capitalising
it. This will have an adverse effect half on half as the total
volume hauled in 1H18 was 67.7 million tonnes but only 39.1 million
tonnes were expensed; while the total volume hauled in 1H19 of 61.2
million tonnes will be taken to costs in 1H19. This increase
impacted adjusted production costs by an additional US$46
million.
Expected gold ore grade in 2019 remains at 0.70-0.75 g/t.
NOCHE BUENA TOTAL MINE PRODUCTION
2Q 19 1Q 19 % change 2Q 18 % change 1H 19 1H 18 % change
Ore Processed
(t) 3,663,549 2,911,779 25.8 4,550,915 -19.5 6,575,328 8,965,705 -26.7
--------------- ----------- ----------- --------- ----------- --------- ----------- ----------- ---------
Total Volume
Hauled (t) 13,135,058 12,980,551 1.2 22,073,319 -40.5 26,115,609 42,594,558 -38.7
--------------- ----------- ----------- --------- ----------- --------- ----------- ----------- ---------
Production
--------------- ----------- ----------- --------- ----------- --------- ----------- ----------- ---------
Gold (oz) 35,252 30,134 17.0 45,308 -22.2 65,386 88,043 -25.7
--------------- ----------- ----------- --------- ----------- --------- ----------- ----------- ---------
Silver (koz) 17 12 41.7 18 -5.6 29 37 -21.6
----------- ----------- --------- ----------- --------- ----------- ----------- ---------
Ore Grades
----------- ----------- --------- ----------- --------- ----------- ----------- ---------
Gold (g/t) 0.56 0.50 12.0 0.54 3.7 0.53 0.53 0.0
----------- ----------- --------- ----------- --------- ----------- ----------- ---------
Silver (g/t) 0.22 0.22 0.0 0.18 27.6 0.22 0.20 12.2
----------- ----------- --------- ----------- --------- ----------- ----------- ---------
Quarterly gold production increased 17.0% vs. 1Q19 due to a
higher volume of ore processed in accordance with the mine plan and
a higher ore grade, offset by a lower overall speed of recovery as
a result of the increased height of the leaching pads.
Quarterly and first half production decreased 22.2% and 25.7%
vs. 2Q18 and 1H18, respectively due to a lower volume of ore
processed, but in accordance with the mine plan. The lower speed of
recovery further impacted quarterly gold production.
Expected gold ore grade in 2019 remains at approximately 0.55
g/t.
SILVERSTREAM
Quarterly and first half Silverstream production decreased 11.5%
and 25.2% vs. 2Q18 and 1H18 respectively due to a lower ore grade
as predicted in the geological model. Production (ore grade) is
expected to stabilise at current levels. When compared to the
previous quarter, silver production increased 2.1%.
UPDATE ON DEVELOPMENT PROJECTS
PYRITES PLANT
Construction of the flotation plant at the Fresnillo mine (phase
II) remains on track and is due to be commissioned in the second
half of 2020. The assembly of the flotation cells and milling
structure continued as well as the construction of the maintenance
workshop and compressors.
The project is expected to improve overall recoveries of both
gold and silver by processing historical and ongoing tailings from
the Fresnillo and Saucito mines.
Once both phases are commissioned and operating at nominal
capacity, this US$155 million project is expected to contribute an
additional annual production of c. 3.5 moz of silver and c. 13 koz
of gold.
JUANICIPIO
The project received Board approval in April and construction
commenced immediately. Mine development continued and progress in
engineering and construction of the beneficiation plant was
made.
Juanicipio is expected to contribute a total average annual
production of 11.7 moz silver and 43.5 koz gold, with an initial
life of mine of 12 years. The timetable remains unchanged with
construction expected to be concluded by late 2020.
SAFETY PERFORMANCE
We deeply regret to report a contractor fatality in 2Q19 at
Herradura. Maintaining a safe and healthy workplace is our highest
priority. The "I Care We Care" programme continued to be rolled
across our operations and safety training for all employees and
contractors have been reinforced. We remain committed to our zero
fatalities target.
ESTIMATED FINANCIAL EFFECTS
As described above in the cost guidance section, Fresnillo plc's
financial performance has been affected by several factors which
have impacted costs for the first half. To facilitate its impacts
on the 1H19 Financial Statement estimates, the following guidance
is provided:
-- Impacts to Adjusted Production Costs of US$135 million made up of:
Previously disclosed accounting reclassification
(i) the reassessment in 2018 of the number of mining components
at Herradura from two to one, effective from July 2018, which
increased the total volume of material hauled expensed by 23.5
million tonnes (+60% vs. 1H18), which would have otherwise been
capitalised (US$45 million);
Previously disclosed growth initiatives
(ii) the increase in development works (US$25 million);
(iii) additional costs following the commissioning of the
pyrites plant at Saucito and the 2(nd) line of the dynamic leaching
plant at Herradura (US$20 million);
Previously disclosed cost inflation guidance
(iv) general cost inflation (US$15 million);
Increased used of consumables and contractors
(v) additional costs incurred due to increased requirements for
maintenance, operating materials and contractors, associated with
longer haulage distances, narrower veins, better equipment
availability and infill drilling (US$30 million).
The aggregate impact of these items will increase adjusted
production costs for 1H19 by approximately US$135 million, compared
to 1H18.
-- Increase in depreciation due to new plants, new tailings
dams, new equipment and depreciation of capitalised mining works
and stripping: US$50 million.
-- Accelerated exercise of exploration budget in 1H19 by US$5
million, with an upward revised guidance of US$160 million
(including capitalised exploration expenses of US$10 million) in
2019.
-- Increase in Administrative and Corporate Expenses of US$5
million due to new operations and new development projects together
with additional advisory services.
Please note that these financial effects stated above are
unaudited numbers and the result of an estimated variation analysis
(1H19 vs 1H18).
ABOUT FRESNILLO PLC
Fresnillo plc is the world's largest primary silver producer and
Mexico's largest gold producer, listed on the London and Mexican
Stock Exchanges under the symbol FRES.
Fresnillo plc has seven operating mines, all of them in Mexico -
Fresnillo, Saucito, Ciénega (including the San Ramón satellite
mine), Herradura, Soledad-Dipolos(1) , Noche Buena and San Julián
(Phase I and II), two development projects - the Pyrites Plant at
Fresnillo and Juanicipio, and three advanced exploration projects -
Orisyvo, Las Casas Rosario & Cluster Cebollitas and Centauro
Deep, as well as a number of other long term exploration
prospects.
Fresnillo plc has mining concessions and exploration projects in
Mexico, Peru and Chile.
Fresnillo plc has a strong and long tradition of exploring,
mining, a proven track record of mine development, reserve
replacement, and production costs in the lowest quartile of the
cost curve for silver.
Fresnillo plc's goal is to maintain the Group's position as the
world's largest primary silver company and Mexico's largest gold
producer.
(1) Operations at Soledad-Dipolos are currently suspended.
FORWARD LOOKING STATEMENTS
Information contained in this announcement may include
'forward-looking statements'. All statements other than statements
of historical facts included herein, including, without limitation,
those regarding the Fresnillo Group's intentions, beliefs or
current expectations concerning, amongst other things, the
Fresnillo Group's results of operations, financial position,
liquidity, prospects, growth, strategies and the silver and gold
industries are forward-looking statements. Such forward-looking
statements involve risk and uncertainty because they relate to
future events and circumstances. Forward-looking statements are not
guarantees of future performance and the actual results of the
Fresnillo Group's operations, financial position and liquidity, and
the development of the markets and the industry in which the
Fresnillo Group operates, may differ materially from those
described in, or suggested by, the forward-looking statements
contained in this document. In addition, even if the results of
operations, financial position and liquidity, and the development
of the markets and the industry in which the Fresnillo Group
operates are consistent with the forward-looking statements
contained in this document, those results or developments may not
be indicative of results or developments in subsequent periods. A
number of factors could cause results and developments to
differ materially from those expressed or implied by the
forward-looking statements including, without limitation, general
economic and business conditions, industry trends, competition,
commodity prices, changes in regulation, currency fluctuations
(including the US dollar and Mexican Peso exchanges rates), the
Fresnillo Group's ability to recover its reserves or develop new
reserves, including its ability to convert its resources into
reserves and its mineral potential into resources or reserves,
changes in its business strategy and political and economic
uncertainty.
LEI: 549300JXWH1UV5J0XV81
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
DRLFDLBFKDFXBBD
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July 17, 2019 02:00 ET (06:00 GMT)
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