REG - Fresnillo Plc - 1Q22 Production Report
27/04/2022 07:16
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RNS Number : 4533J Fresnillo PLC 27 April 2022
Fresnillo plc
21 Upper Brook Street
London W1K 7PY
United Kingdom
www.fresnilloplc.com (http://www.fresnilloplc.com)
27 April 2022
FIRST QUARTER PRODUCTION REPORT
FOR THE THREE MONTHS ENDED 31 MARCH 2022
Octavio Alvídrez, Chief Executive Officer, said:
"We are reporting a solid first quarter's production, in line with
expectations. We have taken proactive steps to manage the impact of the Mexico
labour reforms, and though we continue to see some covid-related absenteeism
at our mine sites, this declined during the quarter and we are currently
seeing a limited covid impact. Like other industry sectors, the labour market
remains very tight, and we have also seen some delays to equipment deliveries
given the global supply constraints. That said, we remain committed to
delivering on our targets for the year, completing the labour reform process,
ramping up new Juanicipio production rapidly once connection to the
electricity grid is enabled by mid-2022, capitalising on the considerable
opportunities presented by our highly prospective exploration programme, while
never losing focus on our people, their well-being and their safety. Our full
year guidance is unchanged."
HIGHLIGHTS
Silver
Quarterly attributable silver production of 13.3 moz (including Silverstream),
up 2.8% vs. 4Q21 mainly driven by a higher contribution of ore from Juanicipio
and a higher volume of ore processed and ore grade at Fresnillo, partly offset
by the anticipated lower volume of ore processed at Saucito.
Quarterly attributable silver production increased 5.1% vs. 1Q21 primarily due
to a higher contribution of ore from Juanicipio, offset by the anticipated
lower volume of ore processed at Saucito.
Gold
Quarterly attributable gold production of 149.8 koz, flat vs. 4Q21 mainly due
to a lower volume of ore processed at Noche Buena and to a lesser extent, a
lower volume of ore processed at Saucito and San Julian Veins, mitigated by a
higher ore grade and recovery rate at Herradura.
Quarterly attributable gold production decreased 34.4% vs. 1Q21 primarily due
to an expected lower volume of ore processed and ore grade at Herradura.
Silver Equivalent Basis 1
Attributable silver equivalent ounces of 25.3 moz in 1Q22 (1Q21: 30.9 moz).
OPERATING ENVIRONMENT
As previously reported, the labour reform in Mexico which restricts
subcontracting of labour came into effect from 1st September 2021 resulting in
the requirement to internalise a high proportion of our contractor workforce.
The actions we announced to address this short term challenge will continue,
including recruitment campaigns, training and investment in new equipment.
These initiatives are on-going and have been effective, and we expect to
complete the staffing process in the Fresnillo District, San Julián and
Ciénega in the third quarter of this year, while our open pit mines, which
saw a lesser impact, are now fully staffed. However, challenges remain: in
common with other industry sectors, the labour market remains very tight, with
considerable competition for talent. We are also experiencing some delays to
new equipment deliveries due to global supply bottlenecks.
COVID-19 UPDATE
As reported in 4Q21, a fourth wave of Covid-19 reached Mexico. We began to see
the impact of this increase in terms of staff absenteeism due mainly to
self-isolation at the end of last year and this accelerated throughout January
and into February. Covid-related absenteeism has since dropped off in March.
Though we remain alert to any future waves and have the protocols in place to
manage this, we are currently seeing limited impact of the pandemic on our
operations.
By-Products
• Quarterly attributable by-product lead production increased 3.4%
vs. 4Q21 due to a higher contribution of development ore from Juanicipio,
partially offset by a lower ore grade at San Julián DOB.
• Quarterly attributable by-product zinc production increased 3.6%
vs. 4Q21 due to a higher contribution of development ore from Juanicipio and a
higher ore grade and recovery rate at Saucito, offset by a lower ore grade at
Fresnillo.
• Quarterly attributable by-product lead and zinc production
decreased 20.2% and 8.3% vs. 1Q21 respectively, driven primarily by lower ore
grades and decreased volumes of ore processed at Saucito.
Attributable 1Q22 4Q21 % Change 1Q21 % Change
Silver (koz) 12,528 12,230 2.4 11,839 5.8
Silverstream (koz) 748 684 9.4 796 (6.0)
Total Silver (koz) 13,276 12,914 2.8 12,635 5.1
Gold (oz) 149,792 150,313 (0.3) 228,193 (34.4)
Lead (t) 12,244 11,837 3.4 15,340 (20.2)
Zinc (t) 23,726 22,899 3.6 25,881 (8.3)
DEVELOPMENT PROJECTS
The construction of the Juanicipio plant was delivered on schedule during
4Q21. We remain focused on complying with the requirements from the
state-owned electricity company and the energy regulator to complete the
tie-in to the national power grid, expected in mid-2022.
Once the required permits have been granted, we expect to ramp up operations
to 85%-90% capacity by the end of the year.
SAFETY PERFORMANCE
The safety and wellbeing of our people is our priority. Despite the sustained
improvement in total and lost time injury frequency rates, we deeply regret to
report a fatal incident in early 2022, as disclosed in our Preliminary
announcement. The tragic loss of our colleague is unacceptable. We are firmly
committed to eliminating all injuries, and especially fatalities. To this end,
we have reviewed the progress of the High Potential Incident and Critical Risk
Control programme. The Company is sharing the lessons learnt following every
accident or high potential incident with our employees and contractors across
all our operations. Management and the workforce are collaborating to
identify, design, implement and verify on-site the critical controls to
prevent fatal and serious injuries. We reviewed the approach and effectiveness
of the "I Care, We Care" programme in fostering leadership, accountability,
safety culture, risk-based management and engineering systems and lessons
learnt.
2022 OUTLOOK
2022 guidance remains unchanged. Attributable silver production is expected to
be in the range of 50.5 to 56.5 moz (including Silverstream) while
attributable gold production is expected to be in the range of 600 to 650 koz.
For further information, please visit our website www.fresnilloplc.com
(http://www.fresnilloplc.com) or contact:
FRESNILLO PLC Tel: +44 (0)20 7399 2470
London Office
Gabriela Mayor, Head of Investor Relations
Patrick Chambers
Mexico City Office Tel: +52 55 52 79 3206
Ana Belem Zárate
POWERSCOURT Tel: +44 (0)7793 858 211
Peter Ogden
MINING OPERATIONS
FRESNILLO MINE PRODUCTION
1Q22 4Q21 % Change 1Q21 % Change
Ore Processed (t) 575,499 528,103 9.0 561,360 2.5
Production
Silver (koz) 3,015 2,655 13.5 3,260 (7.5)
Gold (oz) 8,480 8,648 (1.9) 8,375 1.3
Lead (t) 4,787 4,525 5.8 4,492 6.6
Zinc (t) 9,381 10,025 (6.4) 7,143 31.3
Ore Grades
Silver (g/t) 179 170 5.6 203 (11.6)
Gold (g/t) 0.64 0.71 (9.5) 0.69 (6.3)
Lead (%) 0.99 1.03 (3.6) 0.95 4.4
Zinc (%) 2.24 2.65 (15.5) 1.82 22.5
Quarterly silver production increased 13.5% vs. 4Q21 due to a higher volume of
ore processed as a result of regaining access to some mining areas following
the commissioning of the pumping station during the quarter. We also saw the
positive impact of improved labour resource allocation and the expected higher
ore grade.
Quarterly silver production decreased 7.5% vs 1Q21 primarily due to a lower
ore grade resulting from the impact of the labour reform in Mexico and
operational challenges, as set out in prior quarters, restricted operational
flexibility.
Mine development rates remained flat quarter-on-quarter at an average of
2,866m per month in 1Q22 (4Q21: 2,832m per month), primarily due to the
covid-related absenteeism experienced in January. February and March saw
development rates above 2,900m which gives us confidence that we can regain a
rate of 2,900 to 3,100 m per month on average during 1H22, as previously
targeted.
Following a field trial in a production zone, the tunnel boring machine (TBM)
is being relocated back to a development area which has more advantageous
geomechanical characteristics than those found in production areas. This
relocation will occur over the course of the following quarter, and therefore
we do not expect to see any contribution from the TBM towards the mine's
development rate until the second half of the year.
Actions to address the impact of the labour reforms (in particular recruitment
campaigns and training) are ongoing and we expect to complete that process in
the third quarter.
Quarterly by-product gold production decreased 1.9% vs. 4Q21 driven by a lower
ore grade, mitigated by a higher volume of ore processed.
Quarterly by-product gold production increased 1.3% vs. 1Q21 due to a higher
recovery rate, offset by a lower ore grade.
The silver ore grade in 2022 is expected to remain in the range of 190-210
g/t, while the gold ore grade is expected to remain in the range of 0.55-0.70
g/t.
SAUCITO MINE PRODUCTION
1Q22 4Q21 % Change 1Q21 % Change
Ore Processed (t) 495,419 558,101 (11.2) 650,884 (23.9)
Production
Silver (koz) 2,738 2,990 (8.4) 3,148 (13.0)
Gold (oz) 16,388 17,719 (7.5) 26,819 (38.9)
Lead (t) 4,264 4,272 (0.2) 7,841 (45.6)
Zinc (t) 7,299 6,672 9.4 11,848 (38.4)
Ore Grades
Silver (g/t) 193 186 3.5 177 8.8
Gold (g/t) 1.29 1.26 2.0 1.65 (22.1)
Lead (%) 0.98 0.90 9.5 1.40 (29.9)
Zinc (%) 1.81 1.60 13.2 2.48 (26.9)
Quarterly silver production decreased 8.4% vs. 4Q21 as a result of a lower
volume of ore processed due to the aforementioned impact of the labour reforms
and Covid-related absenteeism. As explained in the prior quarter, we expect
some variability in the ore grade and reduced volumes of ore to be processed
in 2022 driven by the need for additional development of the mine in order to
recapture operational flexibility following high levels of localised
seismicity.
Quarterly silver production decreased 13.0% vs. 1Q21 for reasons described
above, mitigated by a higher ore grade and recovery rate.
We have continued our recruitment and training campaigns at the mine with the
target of gradually reducing the shortage of personnel and returning the mine
to its potential capacity, once fully staffed. Through these actions, expected
to take effect during the first three quarters of the year, we are targeting a
return to an average development rate of more than 3,000 metres a month during
2022. However, as set out above, challenges remain. The labour market remains
tight and we are also experiencing some delays to new equipment deliveries due
to global supply bottlenecks.
Quarterly by-product gold production decreased 7.5% vs. 4Q21 mainly driven by
a lower volume of ore processed.
Quarterly by-product gold production decreased 38.9% vs. 1Q21 due to a lower
volume of ore processed and ore grade.
Full year 2022 silver ore grade is estimated to remain between 175-195 g/t,
while the gold ore grade is estimated to continue to be around 1.10-1.20 g/t.
PYRITES PLANT (PHASE I)
1Q22 4Q21 % Change 1Q21 % Change
Iron Concentrates Processed (t) 32,364 31,976 1.3 41,760 (22.5)
Production
Silver (koz) 150 121 24.6 137 9.9
Gold (oz) 510 455 12.2 678 (24.7)
Ore Grades
Silver (g/t) 193 158 21.8 143 35.4
Gold (g/t) 1.59 1.39 14.1 1.64 (3.0)
Quarterly silver and gold production increased 24.6% and 12.2% vs. 4Q21
respectively due to higher ore grades from the Saucito flotation plant.
Quarterly silver production increased 9.9% vs. 1Q21 due to a higher ore grade
from Saucito's flotation plant, and to a lesser extent, higher recovery rate,
partially offset by a lower volume of pyrite concentrates processed from the
Saucito flotation plant.
Quarterly gold production decreased 24.7% vs. 1Q21 due to a lower volume of
pyrite concentrates processed.
In 2022, we continue to estimate silver production from the Pyrites plant at
Saucito to be in the range of 700 to 750 koz while gold production is
estimated to remain in the range of 1.5 to 2.5 koz.
As noted in previous reports, the Pyrites plant (phase II) was completed in
4Q20 but as with Juanicipio, we are focusing on complying with the new
requirements from the state-owned electrical company and the energy regulator
to complete the tie-in to the national power grid. We continue to expect this
by mid-2022.
CIENEGA MINE PRODUCTION
1Q22 4Q21 % Change 1Q21 % Change
Ore Processed (t) 282,568 301,968 (6.4) 326,163 (13.4)
Production
Gold (oz) 9,990 10,596 (5.7) 14,289 (30.1)
Silver (koz) 1,416 1,401 1.1 1,299 9.0
Lead (t) 926 772 20.0 1,227 (24.5)
Zinc (t) 1,351 1,240 9.0 1,973 (31.5)
Ore Grades
Gold (g/t) 1.20 1.18 1.8 1.45 (17.5)
Silver (g/t) 179 166 8.1 145 23.2
Lead (%) 0.50 0.43 16.1 0.59 (15.1)
Zinc (%) 0.85 0.75 13.4 1.07 (20.3)
Quarterly gold production decreased 5.7% vs. 4Q21 due to a lower volume of ore
processed given the continued impact of the labour reform in Mexico and
covid-related absenteeism.
Quarterly silver production increased 1.1% and 9.0% vs. 4Q21 and 1Q21
respectively due to a higher ore grade, partially offset by a lower volume of
ore processed for the reasons explained above.
Quarterly gold production decreased 30.1% vs. 1Q21 due to the lower ore grades
year-on-year, in line with the mine sequence and lower volumes of ore
processed for the reasons explained above.
The gold and silver ore grades for 2022 are estimated to remain in the ranges
of 1.20-1.40 g/t and 145-155 g/t respectively.
SAN JULIÁN MINE PRODUCTION
1Q22 4Q21 % Change 1Q21 % Change
Ore Processed Veins (t) 294,144 308,691 (4.7) 288,673 1.9
Ore Processed DOB (t) 541,030 533,631 1.4 448,674 20.6
Total production at San Julián
Gold (oz) 11,684 12,887 (9.3) 13,802 (15.3)
Silver (koz) 3,640 3,967 (8.2) 3,430 6.1
Production Veins
Gold (oz) 10,844 12,142 (10.7) 12,828 (15.5)
Silver (koz) 1,060 1,200 (11.7) 966 9.8
Production DOB
Gold (oz) 840 745 12.8 974 (13.7)
Silver (koz) 2,580 2,768 (6.8) 2,465 4.7
Lead (t) 1,608 1,914 (16.0) 1,694 (5.1)
Zinc (t) 4,725 4,419 6.9 4,783 (1.2)
Ore Grades Veins
Gold (g/t) 1.21 1.29 (5.6) 1.47 (17.5)
Silver (g/t) 123 131 (5.6) 115 7.6
Ore Grades DOB
Gold (g/t) 0.08 0.08 0.0 0.12 (33.7)
Silver (g/t) 173 187 (7.6) 197 (12.6)
Lead (%) 0.39 0.45 (15.2) 0.47 (18.0)
Zinc (%) 1.11 1.10 0.4 1.38 (19.9)
SAN JULIÁN VEINS
Quarterly gold and silver production decreased 10.7% and 11.7% vs. 4Q21
respectively due to a lower than expected ore grade following in-situ
reconciliation with the geological model and a lower volume of ore processed
driven by thinner veins.
Quarterly gold production decreased 15.5% vs. 1Q21 due to a lower ore grade as
a result of depletion of the mine.
Quarterly silver production increased 9.8% vs. 1Q21 due to a higher ore grade,
in line with the mining sequence.
We continue to expect the 2022 silver and gold ore grades to average 120-130
g/t and 1.35-1.55 g/t, respectively.
SAN JULIÁN DISSEMINATED ORE BODY (DOB)
Quarterly silver production decreased 6.8% vs. 4Q21 due to an expected lower
ore grade as the mining sequence advanced towards the periphery of the ore
body.
Quarterly silver production increased 4.7% vs. 1Q21 due to a higher volume of
ore processed driven by the damage to the lead circuit housing in 1Q21 as
previously reported adversely impacting the volumes of ore that could be
processed at the time, partially offset by an expected lower ore grade.
We continue to expect the 2022 silver ore grade to be in the range of 150-170
g/t as we continue to advance towards the lower grade areas in the periphery
of the ore body.
HERRADURA TOTAL MINE PRODUCTION
1Q22 4Q21 % Change 1Q21 % Change
Ore Processed (t) 4,216,598 4,271,069 (1.3) 6,011,862 (29.9)
Total Volume Hauled (t) 32,784,771 33,115,154 (1.0) 33,501,176 (2.1)
Production
Gold (oz) 77,602 69,177 12.2 149,175 (48.0)
Silver (koz) 218 168 29.2 303 (28.1)
Ore Grades
Gold (g/t) 0.69 0.65 5.8 0.92 (25.6)
Silver (g/t) 2.25 1.91 17.5 2.30 (2.0)
Quarterly gold production increased 12.2% vs. 4Q21 mainly due to an increased
rate of solution flow following the short term disruption caused in the prior
quarter due to the increased silt in solution restricting filtering capacity.
Quarterly gold production decreased 48.0% vs. 1Q21 due to a lower volume of
ore processed in line with the mine plan as a result of larger haulage cycles
and a lower ore grade in line with expectations.
The gold ore grade in 2022 is estimated to remain in the range of 0.65-0.75
g/t.
NOCHE BUENA TOTAL MINE PRODUCTION
1Q22 4Q21 % Change 1Q21 % Change
Ore Processed (t) 1,789,478 2,903,023 (38.4) 1,173,414 52.5
Total Volume Hauled (t) 5,178,188 6,482,783 (20.1) 6,663,112 (22.2)
Production
Gold (oz) 21,869 28,591 (23.5) 14,665 49.1
Silver (koz) 8 11 (27.5) 5 71.7
Ore Grades
Gold (g/t) 0.62 0.70 (10.6) 0.48 29.2
Silver (g/t) 0.31 0.20 55.5 0.21 48.4
Quarterly gold production decreased 23.5% vs. 4Q21 due to an expected lower
volume of ore processed and ore grade. This was mitigated through the recovery
of inventories at the pads.
Quarterly gold production increased 49.1% vs. 1Q21 due to a higher volume of
ore deposited as a result of a lower stripping ratio, decreasing the waste
material moved, in addition to a higher ore grade, partially offset by a lower
recovery rate due to shorter irrigation cycles as a result of the ore being
deposited in smaller areas as we approach the end of mine life.
The 2022 estimated gold ore grade remains in the range of 0.40-0.50 g/t, as
the mine approaches the end of its operational life.
JUANICIPIO
Development and stope ore from Juanicipio continued to be processed in the
Fresnillo and Saucito flotation plants. On an attributable basis, Juanicipio
produced 1,344 koz of silver and 3,269 oz of gold in 1Q22.
As previously disclosed, the construction of the Juanicipio plant was
delivered on schedule during 4Q21. We remain focused on complying with the
requirements from the state-owned electricity company and the energy regulator
to complete the tie-in to the national power grid. We continue to expect this
in mid-2022.
Once the required permits have been granted, we expect to ramp up operations
to 85%-90% capacity by the end of the year.
SILVERSTREAM
Quarterly Silverstream production increased 9.4% vs. 4Q21 due to a higher ore
grade.
Quarterly Silverstream production decreased 6.0% vs. 1Q21 due to a lower
volume of ore processed.
Silver production in 2022 is estimated to be in the range of 2.5-3.5 moz.
ABOUT FRESNILLO PLC
Fresnillo plc is the world's largest primary silver producer and Mexico's
largest gold producer, listed on the London and Mexican Stock Exchanges under
the symbol FRES.
Fresnillo plc has seven operating mines, all of them in Mexico - Fresnillo,
Saucito, Ciénega (including Las Casas Rosario & Cluster Cebollitas),
Herradura, Soledad-Dipolos(1), Noche Buena and San Julián (Veins and
Disseminated Ore Body), two development projects - the Pyrites Plant at
Fresnillo and Juanicipio, both of which have been completed but approvals to
operate are pending, and three advanced exploration projects - Orisyvo, Rodeo
and Guanajuato, as well as a number of other long term exploration prospects.
Fresnillo plc has mining concessions and exploration projects in Mexico, Peru
and Chile.
Fresnillo plc has a strong and long tradition of exploring, mining, a proven
track record of mine development, reserve replacement, and production costs in
the lowest quartile of the cost curve for silver.
Fresnillo plc's goal is to maintain the Group's position as the world's
largest primary silver company and Mexico's largest gold producer.
(1) Operations at Soledad-Dipolos are currently suspended.
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.
LEI: 549300JXWH1UV5J0XV81
1 Au:Ag ratio of 80:1
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