Fresnillo ups silver production in Q3 while gold output falls

17th Oct 2013 08:10

- Full-year silver guidance kept at 41m ounces- Silver output up 7.6% in Q3, gold down 9.8%- Gold guidance dependent on explosives permitMexico-focused precious metals group Fresnillo said that it was on track to hit silver production targets this year after a decent third quarter, but failed to give guidance on gold output.Attributable silver production totalled 11.1m ounces in the three months to September 30th, up 7.6% on last year, helped by higher volumes of ore and improved grades from the Saucito and Ciénega mines. This was in part offset by expected lower grades at Fresnillo, the world's largest primary silver mine, which continues to mature.The firm reiterated that it still expects to mine 41m ounces of silver this year.However, gold production was down 9.8% at 114,359 ounces after lower output from Soledad-Dipolos following a court ruling that an area surrounding the Dipolos pit should be evacuated."We continue to evaluate the impact on 2013 gold production guidance and will provide a further update following the lifting of the suspension of the explosives permit at Herradura, expected in the next week," the company said.Equity Analyst Charlie Long from Samlan Securities said that while the company had various growth projects to replace the maturing Fresnillo mine, it might struggle to maintain the running of "smooth" operations with more mines and development programmes in the mix."These potential challenges will be superseded by the direction of the silver price, but as the Fresnillo mine continues to mature, the company has to work much harder to maintain its position and grow," he said.Long pointed out that the stock, despite undergoing a significant re-rating over the last 12 months - down over 50% - still trades at 12.9 times 2013 estimated earnings.The stock fell 1.42% to 924.19p in early trading on Thursday.BC