Boost for Fresnillo as explosives ban at key mine is lifted

26th Feb 2014 08:00

Shares in Mexico-focused gold miner Fresnillo received a boost after the company announced that a debilitating suspension on the use of explosives at its key Herradura mining operation has been lifted. The suspension was imposed last October at the Herradura unit at Minera Penmont after a dispute with the local community, or ejido, which has rights to certain land under Mexican law. The suspension hurt the stock as it led to the company lowering its 2013 gold target.Today Fresnillo announced that Mexican Ministry of Defense has granted a new explosives permit for Herradura, thereby allowing it to resume the use of explosives.As a result, the company will place an explosives order "without delay" and expects to begin operations next week at Herradura, where drill holes are already available in preparation for blasting. The company added that it looks forward to resuming normal operations at Herradura "as soon as possible" and confirmed its guidance for gold production as announced in its recent production report of 450,000 attributable ounces.Fresnillo has six operating mines, all of them in Mexico - Fresnillo, Saucito, Ciénega (including the San Ramón satellite mine), Herradura, Soledad and Noche Buena. In total, its mining concessions cover approximately 2.1m hectares in Mexico.The group's goal is to maintain its position as the world's largest primary silver company, producing 65m ounces of silver and 500,000 ounces of gold by 2018.In early morning trade Fresnillo shares were up 2.4% or 23.5p to 991p, valuing the company at £7.27bn. KP