TIDMFRES
RNS Number : 5443B
Fresnillo PLC
18 April 2012
Fresnillo Plc
28 Grosvenor Street
London W1K 4QR
United Kingdom
www.fresnilloplc.com
18 April 2012
Interim Management Statement and Production Report
for the three months ended 31 March 2012
Overview
-- Noche Buena commenced first commercial gold production within time and budget in March.
-- Quarterly attributable gold production above expectations and
an increase of 26.3% to 121,792 ounces compared with 1Q 2011.
-- Quarterly attributable silver production of 9.8 million
ounces, including the Silverstream, on target with a small decrease
of 2.9% when compared with 1Q 2011.
-- Construction of the dynamic leaching plant at Herradura
remains on track to become operational in 2013.
-- Good progress of exploration programme and development
workings at San Julian, Orisyvo and Centauro Deep.
-- Entered into an association agreement with Canadian listed
miner, Orex Minerals to explore and develop as one large project
each company's adjacent mineral concessions in Coneto, Durango.
Jaime Lomelin, Chief Executive Officer, said:
"The strong operational performance that Fresnillo enjoyed in
2011 has continued into 2012. We have delivered another strong
quarter of production with gold beating our expectations, up more
than 26%, and silver production in line. As operators, we
continually manage and adjust our operations to ensure our
production profile is optimised to extract the maximum value from
our portfolio. In the case of our gold production, we optimised our
mine plan in order to take advantage of the high gold prices.
The highlight of the quarter has been the completion and
commissioning of our new gold mine at Noche Buena in the Herradura
district. We are particularly pleased that this was accomplished on
time and within budget. Commercial production began in March and
the mine will produce around 42,000 attributable ounces of gold per
year once it reaches its full capacity which we expect to occur by
the end of this year. This will significantly increase the
proportion of gold production within our portfolio. We believe this
is another strong example of the company delivering on its growth
ambitions and represents a step forward to consolidate Fresnillo's
position as a significant gold producer in its own right."
Total Production - Attributable
1Q 12 1Q 11 % change 4Q 11
--------------- -------- ------- --------- --------
Silver prod'n
(koz) 8,769 9,083 -3.5 9,258
--------------- -------- ------- --------- --------
Silverstream
(koz) 1,027 1,010 1.7 1,088
--------------- -------- ------- --------- --------
Total silver
prod'n (koz) 9,796 10,093 -2.9 10,346
--------------- -------- ------- --------- --------
Gold prod'n
(Oz) 121,792 96,407 26.3 122,621
--------------- -------- ------- --------- --------
Lead prod'n
(t) 6,265 5,245 19.4 5,501
--------------- -------- ------- --------- --------
Zinc prod'n
(t) 6,925 5,864 18.1 5,932
--------------- -------- ------- --------- --------
Quarterly total silver production (including Silverstream) was
in line with the Group's expectations. The anticipated natural
decline in silver grades at the Fresnillo mine was compensated by
the ramp-up of production at Saucito, thus limiting the adverse
effect in silver production when comparing to the first and fourth
quarters of 2011.
Quarterly attributable gold production increased by 26.3%
compared with the same period of 2011 mainly due to increased
throughput at Saucito, Cienega and Herradura. In addition,
commercial production at Noche Buena commenced in March, further
benefiting quarterly attributable gold production. Gold production
remained stable compared to the fourth quarter of 2011.
Quarterly by-product lead and zinc production increased by 19.4%
and 18.1%, respectively, over the first quarter of 2011 as a result
of higher ore grades, recovery rates and tonnage milled at the
Fresnillo mine and increased volumes of ore milled at Saucito.
Fresnillo mine production
1Q 12 1Q 11 % change 4Q 11
-------------- ------ ------ --------- ------
Silver (kOz) 6,748 8,532 -20.9 7,014
-------------- ------ ------ --------- ------
Gold (Oz) 8,731 6,134 42.3 7,678
-------------- ------ ------ --------- ------
Lead (t) 4,277 3,365 27.1 3,475
-------------- ------ ------ --------- ------
Zinc (t) 4,125 3,221 28.1 3,076
-------------- ------ ------ --------- ------
Quarterly silver production at the Fresnillo mine fell by 20.9%
when compared to the first quarter of the previous year due to the
natural and expected decline in silver ore grades from 445 g/t to
335 g/t. This decline was mitigated by the increased volumes of ore
processed at the Fresnillo mill as access to long hole stopes was
regained following backfilling activities carried out in 2011 to
reinforce safety conditions. On a sequential basis, quarterly
silver production declined 3.8% from the fourth quarter of 2011 due
to lower ore grades, in line with the forecast of 330-340 g/t for
2012 as a whole.
The increase in quarterly by-product lead and zinc production
over the first quarter of 2011 was explained by higher volumes of
ore milled, ore grades and improved recovery rates.
Engineering work to expand the milling capacity from 8,000 to
10,000 tonnes per day began in the quarter with site selection and
general layout already defined. This project, combined with
additional mine development will maintain annual silver production
within a range of 26 to 28 million ounces.
Saucito mine production*
1Q 12 1Q 11 % change 4Q 11
-------------- ------- ------ --------- ---------------
Silver (kOz) 1,494 187 >100.0 1,651
-------------- ------- ------ --------- ---------------
Gold (Oz) 11,358 831 >100.0 11,662
-------------- ------- ------ --------- ---------------
Lead (t) 485 59 >100.0 517
-------------- ------- ------ --------- ---------------
Zinc (t) 349 45 >100.0 349
-------------- ------- ------ --------- ---------------
* 1Q11 figures: ore processed as a result of the initial tests
during the commissioning of Saucito.
As expected, the Saucito concentrator milled 2,500 tonnes per
day and silver and gold production was in line with the Group's
outlook. Notwithstanding, quarterly silver, gold and lead
production decreased when compared to the fourth quarter of 2011
which was higher due to the higher throughput from the ore
stockpile as we commenced ramp up. The stockpile has run down and
Saucito continues to ramp up the mine to full capacity of 3,000
tonnes per day which is expected by the end of 2012.
The construction of the Jarillas shaft progressed well over the
period and remains on track to be concluded in late 2012. This new
shaft will have a capacity of 5,000 tonnes per day and will reduce
haulage and hoisting costs of Saucito.
Cienega mine production
1Q 12 1Q 11 % change 4Q 11
-------------- -------- -------- --------- -------
Gold (Oz) 31,546 26,956 17.0 31,157
-------------- -------- -------- --------- -------
Silver (kOz) 466 275 69.5 532
-------------- -------- -------- --------- -------
Lead (t) 1,503 1,822 -17.5 1,509
-------------- -------- -------- --------- -------
Zinc (t) 2,451 2,598 -5.7 2,508
-------------- -------- -------- --------- -------
Quarterly gold production increased by 17.0% over the first
quarter of 2011 due to higher volumes of ore processed after
completion of the expansion of milling capacity to 930,000 tonnes
per year in June 2011. Quarterly silver production increased
significantly over the same period in 2011 as a result of higher
ore grades and throughput. However, lower volumes of ore hauled and
milled from the San Ramon satellite mine affected quarterly silver
production at Cienega when compared to the previous quarter. This
was because we managed production at Cienega to extract the most
value out of the mine and optimise production. To capitalise on
current gold prices we prioritised ore throughput from the Cienega
mine which has higher gold content than that from San Ramon, which
has a higher silver content. As a result we changed the production
balance at Cienega and therefore saw a slight decrease in silver
production at Cienega for the quarter when compared with the fourth
quarter of 2011.
Quarterly lead and zinc production decreased compared to the
same quarter of 2011 as a result of lower ore grades.
Herradura mine production - Attributable
1Q 12 1Q 11 % change 4Q 11
-------------- -------- -------- --------- -------
Gold (Oz) 46,722 41,974 11.3 48,804
-------------- -------- -------- --------- -------
Silver (kOz) 49 76 -35.5 49
-------------- -------- -------- --------- -------
Attributable gold production for the first three months of 2012
increased by 11.3% over the same period in 2011 due to improved
recovery rates and increased ore deposited.
However, the expected lower ore grades caused quarterly
attributable gold production to decrease by 4.3% compared to the
previous quarter. This decline in the ore grade is in line with our
decision to process lower grade ore which is profitable at current
gold prices and thus managing the mine to extract maximum value and
optimise production.
The exploration programme and mine development at the Centauro
Deep project is progressing according to schedule.
In the first quarter, we evaluated an expansion of the Centauro
pit under alternative price scenarios. Results were encouraging
enough to relocate the site of the dynamic leaching plant project
to accommodate an eventual expansion. Additional drilling will
provide further information to confirm the viability of the
project.
Soledad-Dipolos mine production - Attributable
1Q 12 1Q 11 % change 4Q 11
-------------- -------- -------- --------- -------
Gold (Oz) 21,209 20,511 3.4 23,321
-------------- -------- -------- --------- -------
Silver (kOz) 12 14 -14.3 11
-------------- -------- -------- --------- -------
Quarterly attributable gold production was slightly higher
compared to the same quarter of 2011 as a result of increased
volumes of ore deposited and improved recovery rates. As at
Herradura, the decision to treat lower grade ore affected quarterly
attributable gold production when compared to the fourth quarter of
2011.
Noche Buena mine production - Attributable
1Q 12 1Q 11 % change 4Q 11
-------------- ------- ------ --------- ------
Gold (Oz) 2,227 - - -
-------------- ------- ------ --------- ------
Silver (kOz) 1 - - -
-------------- ------- ------ --------- ------
The construction of the Noche Buena gold mine was successfully
concluded on time and within the US$63 million budget. Commercial
production commenced in March with 2,227 gold ounces produced.
Commercial ramp up at Noche Buena is progressing as planned as we
look to produce around 42,000 attributable ounces of gold a year at
full capacity.
Update on development projects
-- Dynamic leaching plant at Herradura
The construction of the dynamic leaching plant at Herradura
remained on track to become operational in 2013. This US$106.8
million project is expected to process high grade ore from the
Herradura and Soledad-Dipolos pits, which will increase gold
production by an average of 51,000 ounces per year over the
2013-2020 period. Due to the possible expansion of the Centauro
pit, the site for the new leaching plant will be relocated without
significant delays and additional costs.
Update on exploration
Exploration drilling continued in the first quarter of 2012 with
52 surface drill rigs at the Herradura, Noche Buena, Cienega and
Fresnillo mines, and the San Julian, Orisyvo, Juanicipio, Lucerito,
Candamena, Tajitos, Guanajuato, Cebadillas, Yesca, and Amata
projects. Deep gold mineralization was extended at both Herradura
and Noche Buena. Interesting gold-silver values were intersected in
new areas on the Shalom and Minas veins at San Julian, and the
Huilota veins in Guanajuato. Exploration cross cuts to obtain
metallurgical samples continue on schedule at San Julian and
Orisyvo.
Several targets for additional study have been identified on our
claims in the Mesa Central and Herradura Corridor gold belts, and
are in the process of being evaluated.
In February Fresnillo signed an association agreement with Orex
Minerals Inc ("Orex"), a Canadian exploration company listed on the
TSX Venture exchange, the US OTC Pink Sheets and the Frankfurt
Exchange. In accordance with the agreement, Fresnillo will invest a
minimum of US$2 million during the first year of exploration and
will have the option to spend an additional US$2 million per year
on exploration for each of the following two years. The agreement
will enable Orex and Fresnillo to explore and develop each
company's respective mineral concessions in the Coneto gold-silver
mining district in Durango, Mexico, together under one large
exploration project. The combined concessions of Orex and Fresnillo
total over 17,600 hectares.
In return for the initial investment of US$6 million over three
years Fresnillo will acquire a 55% stake in the association, and
may increase its participation after the initial three years to 70%
by investing an additional US$21 million or completing a
prefeasibility study. As part of the arrangement, Fresnillo
invested US$2 million in Orex shares, including warrants, at a
fixed price of CAN $0.80 per share.
Safety Performance
As reported in the Preliminary Announcement, one fatality
occurred in January at the Fresnillo mine. A supervisor's failure
to follow safety procedures resulted in the regrettable loss of a
contractor's life. The Group continues to reinforce safety
procedures and programmes and as a result, the accident rate has
decreased in the first quarter of the year. We continue to work
diligently on a behavioural change programme and implementing a
broad awareness campaign across all mine units and contractors.
Fresnillo plc remains committed to improve its safety performance
and achieve its zero fatal accidents target.
There will be a conference call for analysts and investors on
Wednesday 18 April 2012 at 09.00am BST (London time). The dial in
details are as follows:
Participants' dial in number: +44 (0) 1452 542 400
Access code: 71453499
For further information, please visit our website
www.fresnilloplc.com or contact:
Fresnillo plc Tel: +44 (0)20 7399 2470
London Office
Arturo Espinola, Head of Investor
Relations
Mexico City Office Tel: +52 55 52 79 3203
Gabriela Mayor
Brunswick Group Tel: +44 (0)20 7404 5959
Carole Cable
David Litterick
About Fresnillo plc
Fresnillo plc is the world's largest primary silver producer and
Mexico's second largest gold producer, listed on the London Stock
Exchange under the symbol FRES.
Fresnillo has seven operating mines, all of them in Mexico -
Fresnillo, Saucito, Cienega, San Ramon, Herradura, Soledad-Dipolos
and Noche Buena; one development project -a dynamic leaching plant
to treat high grade gold ore from the Herradura and Soledad-Dipolos
mine; and five advanced exploration prospects - San Julian,
Centauro Deep, Juanicipio, Orysivo and Las Casas as well as a
number of other long term exploration prospects. In total, has
mining concessions covering approximately 2.1 million hectares in
Mexico.
Fresnillo has a strong and long tradition of mining, a proven
track record of mine development, reserve replacement, and
production costs in the lowest quartile of the cost curve for both
silver and gold.
Fresnillo's goal is to maintain the Group's position as the
world's largest primary silver company, producing 65 million ounces
of silver and 500,000 ounces of gold by 2018.
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.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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