Fresnillo reports flat silver production in second quarter

16th Jul 2014 11:29

Shares in Mexico-focused precious metals miner Fresnillo declined on Wednesday after the company said that silver production was flat year-on-year in the second quarter.Output totalled 10.9m ounces in the three months to June 30th, up 5% over the first quarter as ore grades at the Fresnillo and Ciénega projects increased and as ore throughput at Saucito rose.However, quarterly and year-to-date production was flat on the same periods of 2013 as higher ore processed at Saucito and increased output from Silverstream operations was offset by lower grades at the Fresnillo mine.Meanwhile, gold production was 32% higher quarter-on-quarter at 108,664 ounces, but quarterly and year-to-date output was down 8% and 19% on the year, respectively. This was due to temporary disruptions at Herradura and a suspension of operations at Soledad-Dipolos.Despite the declines over the year, the company said it is still on track to hit its 2014 guidance of 43m silver ounces and 450,000 gold ounces."I am very pleased to report a strong second quarter of silver and gold production," said Chief Executive Octavio Alvídrez."Our portfolio of high quality assets and our operational expertise enables us to manage production over the quarters while focusing on addressing the lower grades at the Fresnillo mine and therefore we remain confident of achieving our full-year production target."Analysts at Sanlam pointed out that Saucito II and San Julian projects will contribute significant additional production of 8.4m oz and 10.3m oz silver annually, but to put it into context, the Fresnillo mine used to produce 35,000 oz per year and is now producing nearer 20,000 oz. So Saucito II and San Julian are replacing lost production."Fresnillo remains the de facto silver play and we expect it to perform well should the silver price perform," resources analyst Charlie Long wrote. "Otherwise it is fighting hard to replace Fresnillo and its high rating requires successful delivery not only underground at Fresnillo but also in its new mine projects."The stock was down 1.3% at 901.5p by 11:17.BC