Fresnillo share price: Silver miner releases Q4 production report

on Jan 25, 2017
Updated: Oct 21, 2019
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Fresnillo (LON:FRES) has posted its fourth-quarter production update this morning.

**Highlights from the group statement:**
Overview
· Record annual silver production of 50.3 moz (including Silverstream), up 7.1% vs. 2015, in line with our guidance and 4Q16 silver production of 13.3 moz (including Silverstream) up 9.5% vs. 4Q15, mainly due to the start up of San Julián phase I. A higher ore grade at Ciénega and an increased contribution from the Silverstream also had a positive impact on production

· Quarterly silver production increased 13.1% vs. 3Q16 due to San Julián (phase I) ramp-up, higher ore processed at Saucito and a higher ore grade and ore processed at Fresnillo
· Record annual gold production of 935.5 koz, up 22.8% vs. 2015 and ahead of guidance, mainly due to reduced gold inventories at Herradura. Additionally the San Julián (phase I) start-up and an improved overall average speed of recovery at Noche Buena contributed

· Quarterly gold production increased 24.2% vs. 4Q15 and 22.0% vs. 3Q16 mainly due to reduced gold inventories at Herradura and the San Julián start up
· Successful ramp-up of San Julián (phase I), which is currently processing 3,600 tpd, 20% above its nominal capacity
· One fatal accident reported at Saucito in 4Q16

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2017 Production Outlook

· Silver production expected to be in the range of 58-61 moz including 4 moz from the Silverstream
· Gold production expected to be in the range of 870-900 koz, due mainly to the stabilisation of production at Herradura following the reduction in inventories
· Turnaround plan at Fresnillo to advance with the aim of maintaining an average development rate of 4,800m /month
· San Julián phase II to be commissioned in 2Q17
· Continued construction of Pyrites Plant (1H18 – 3.5 moz Ag & 13 koz Au p/a) and second Dynamic Leaching Plant at Herradura
· 2017 exploration budget of approximately US$160 million (including capitalised exploration expenses)

Octavio Alvídrez, Chief Executive Officer, said:
“I am pleased to report that Fresnillo plc has delivered record production in 2016, having produced 50.3 moz of silver and 935.5 koz of gold. The successful ramp-up of San Julián (phase I) was the principal reason for the 7% increase in annual silver production, although higher silver grades at both Ciénega and Fresnillo also contributed to the rise in production.
At the Fresnillo mine, despite reporting a slight improvement in silver production, we continued to experience some issues during the year that impacted the delivery of our turnaround plan. We have however, implemented a number of measures and remain focused on addressing these issues and are targeting a year-on-year increase in silver production in the range of 7-10% at the mine in 2017.
Our 2016 gold production of 935.5 koz exceeded our revised guidance, primarily due to the reduction of inventories at Herradura. The start-up of San Julián (phase I) and a strong performance at Noche Buena also contributed to the increase to gold production.
We continued to make good progress with our development projects in 2016. Construction of San Julián phase II continued to advance and is on track to be commissioned in the second quarter of 2017, with both phases of San Julián producing a combined annual average of 10.3 moz of silver and 44 koz of gold. Further progress was made at the Pyrites Plant project which is set to deliver 3.5 moz silver and 13 koz a year once commissioned in 1H18, while the construction of the second line of the Dynamic Leaching Plant at Herradura remained on track.
Looking ahead, our 2017 gold production is anticipated to be between 870-890 koz as we expect to reach a steady level of inventories after last year’s inventory reductions at Herradura; whilst silver production is expected to be within the range of 58-61 moz, on track to reach 65moz by 2018.”
As of 07:18 GMT, Wednesday, 25 January, Fresnillo Plc share price is 1,479.72p.

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