REG - Fresnillo Plc - 1Q23 Production Report
26/04/2023 07:00
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RNS Number : 4567X Fresnillo PLC 26 April 2023
Fresnillo plc
21 Upper Brook Street
London W1K 7PY
United Kingdom
www.fresnilloplc.com (http://www.fresnilloplc.com)
26 April 2023
FIRST QUARTER PRODUCTION REPORT
FOR THE THREE MONTHS ENDED 31 MARCH 2023
Octavio Alvídrez, Chief Executive Officer, said:
"I am pleased to report a solid start to the year. Silver and gold production
are both up on the previous quarter driven by the increasing contribution from
our new Juanicipio mine and the strong performance at our Herradura gold mine
in particular. We have a very clear set of priorities that we are focused on
in the second quarter. This includes the continued safe ramp up of the
Juanicipio plant now that we have successfully completed the commissioning
phase, while also progressing the tie-in to the national power grid of our new
Pyrites Plant. Both of these projects will support our production objectives
into the future. We have successfully managed through considerable recent
challenges, reaching a sound level of operational consistency, putting us well
on track to meet our full year production guidance."
HIGHLIGHTS
Silver
· Quarterly attributable silver production of 13.1 moz (including
Silverstream), up 5.1% vs. 4Q22 mainly driven by a higher ore grade at San
Julián (DOB) and the increased contribution of ore from Juanicipio, partly
offset by the lower volume of ore processed at Saucito.
· Quarterly attributable silver production remained flat (-0.9%) vs.
1Q22 primarily due to the lower ore grade and decreased volume of ore
processed at San Julián (DOB) and Ciénega, offset by the increase in volume
of ore processed at Fresnillo and higher ore grade at San Julián Veins.
Gold
· Quarterly attributable gold production of 173.0 koz up 3.0% vs. 4Q22
mainly due to the higher ore grade at Saucito and higher ore grade and
recovery rate at Herradura, partly offset by the lower recovery rate and
decrease in ore grade at Noche Buena.
· Quarterly attributable gold production up 15.5% vs. 1Q22 primarily
due to the higher volume of ore processed and ore grade at Herradura and the
higher ore grade at Saucito, partly offset by the decrease in gold production
at Noche Buena.
By-Products
• Quarterly attributable by-product lead production up 4.8% vs. 4Q22
due to a higher ore grade at Saucito and San Julián (DOB) and the increased
contribution from Juanicipio, partly offset by the lower ore grade and volume
of ore processed at Ciénega.
• Quarterly attributable by-product zinc production up 4.6% vs. 4Q22
due to the higher volume of ore processed at Fresnillo, increased contribution
from Juanicipio and the higher ore grade at San Julián (DOB) and Saucito,
partly offset by the lower ore grade, volume of ore processed and recovery
rate at Ciénega.
• Quarterly attributable by-product lead production increased 9.2%
vs. 1Q22 due to the higher volume of ore processed at Fresnillo and higher ore
grade at San Julián (DOB), partly offset by the decrease in volume of ore
processed and lower ore grade at Ciénega.
• Quarterly attributable by-product zinc production slightly
increased by 1.7% vs. 1Q22, driven by the higher volume of ore processed and
ore grade at Fresnillo, partly offset by the lower ore grade, recovery rate
and volume of ore processed at Saucito and San Julián (DOB).
Operations
The commissioning of Juanicipio was completed as planned during 1Q23. We are
now in the ramp-up phase, with full nameplate capacity expected by 3Q23. As
previously reported, ore will continue to be processed at the nearby Saucito
and Fresnillo plants as required.
We remain focused on complying with the requirements from the state-owned
electricity company and the energy regulator to complete the tie-in of the
Pyrites Plant to the national power grid, with the commissioning and start up
of operations expected in 2Q23.
Attributable 1Q23 4Q22 % Change 1Q22 % Change
Silver (koz) 12,337 12,073 2.2 12,528 (1.5)
Silverstream (koz) 821 450 82.6 748 9.8
Total Silver (koz) 13,158 12,522 5.1 13,276 (0.9)
Gold (oz) 173,034 167,969 3.0 149,792 15.5
Lead (t) 13,368 12,756 4.8 12,244 9.2
Zinc (t) 24,118 23,060 4.6 23,726 1.7
Silver Equivalent Basis 1 (#_ftn1)
Attributable quarterly silver equivalent ounces of 27.0 moz in 1Q23 (4Q22:
25.9 moz, 1Q22: 25.3 moz).
SAFETY PERFORMANCE
We are extremely saddened to report that following an accident in the first
quarter, and subsequent complications in hospital, we tragically lost a
colleague from the Saucito mine. The safety and wellbeing of our people
remains our priority. We will continue working to strengthen the deployment of
our safety programmes, and protocols that protect our people throughout all
our operating units and identify preventive measures to provide a safe
environment for our workforce. Our "I care, We care" programme still needs to
mature and be transformed into the safety culture in our company, an objective
that we are placing even more focus
on.
2023 OUTLOOK
2023 guidance remains unchanged. Attributable silver production is expected to
be in the range of 57.0 to 64.0 moz (including Silverstream) while
attributable gold production is expected to be in the range of 590 to 640 koz.
Expressed in silver equivalent ounces(1), production is expected to be 104
-115 million ounces.
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
Mark Mochalski
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
1Q23 4Q22 % Change 1Q22 % Change
Ore Processed (t) 668,366 624,105 7.1 575,499 16.1
Production
Silver (koz) 3,557 3,606 (1.4) 3,015 18.0
Gold (oz) 8,750 8,314 5.2 8,480 3.2
Lead (t) 5,651 5,609 0.7 4,787 18.0
Zinc (t) 12,094 11,097 9.0 9,381 28.9
Ore Grades
Silver (g/t) 184 197 (6.8) 179 2.7
Gold (g/t) 0.57 0.58 (2.4) 0.64 (12.0)
Lead (%) 1.00 1.05 (5.2) 0.99 1.1
Zinc (%) 2.42 2.37 1.9 2.24 8.2
Quarterly silver production slightly decreased 1.4% vs. 4Q22 mainly due to a
lower ore grade as a greater portion of ore was extracted from the western
areas of the mine with lower silver ore grade but higher base metal content.
This was mitigated by the higher volume of ore processed from these areas.
Quarterly silver production increased 18.0% vs. 1Q22 mainly as a result of the
higher volume of ore processed from the Candelaria, San Alberto, San Ricardo,
San Mateo and San Carlos areas and, to a lesser extent, the higher ore grade.
Mine development rates increased quarter on quarter to an average of 3,105m
per month in 1Q23 (4Q22: 2,933m per month), primarily due to the availability
of equipment and the higher productivity of some contractors and unionised
personnel.
Quarterly by-product gold production increased 5.2% and 3.2% vs. 4Q22 and 1Q22
respectively, mainly driven by the higher volume of ore processed, partially
offset by the lower ore grade.
The silver ore grade in 2023 is expected to remain in the range of 185-205
g/t, while the gold ore grade is expected to remain in the range of 0.50-0.70
g/t.
SAUCITO MINE PRODUCTION
1Q23 4Q22 % Change 1Q22 % Change
Ore Processed (t) 471,959 508,455 (7.2) 495,419 (4.7)
Production
Silver (koz) 2,804 3,026 (7.3) 2,738 2.4
Gold (oz) 21,378 18,076 18.3 16,388 30.5
Lead (t) 4,301 3,859 11.5 4,264 0.9
Zinc (t) 5,991 5,868 2.1 7,299 (17.9)
Ore Grades
Silver (g/t) 207 208 (0.5) 193 7.5
Gold (g/t) 1.77 1.39 26.7 1.29 37.4
Lead (%) 1.07 0.90 18.9 0.98 9.1
Zinc (%) 1.68 1.56 8.0 1.81 (7.2)
Quarterly silver production decreased 7.3% vs. 4Q22 mainly driven by the
decrease in volume of ore processed due to lower availability of mining
scalers and haulage equipment at the West and Central areas.
Quarterly silver production increased 2.4% vs. 1Q22 due to higher ore grade at
the Jarillas West area and lower dilution, which more than compensated for the
lower volume of ore processed in 1Q23.
Quarterly by-product gold production increased 18.3% and 30.5% vs. 4Q22 and
1Q22 respectively, mainly driven by a higher ore grade at the Jarillas West
area, partly offset by the lower volume of ore processed.
We will continue working toward increasing the availability of equipment and
utilisation rates, whilst improving the productivity of our personnel. These
measures are expected to increase volumes of ore processed in the coming
months.
Full year 2023 silver ore grade is estimated to remain between 190-210 g/t,
while the gold ore grade is estimated to continue to be around 1.20-1.40 g/t.
PYRITES PLANT (PHASE I)
1Q23 4Q22 % Change 1Q22 % Change
Iron Concentrates Processed (t) 27,952 32,211 (13.0) 32,364 (13.6)
Production
Silver (koz) 111 111 0.2 150 (25.9)
Gold (oz) 270 374 (27.7) 510 (47.0)
Ore Grades
Silver (g/t) 177 145 22.0 193 (8.3)
Gold (g/t) 1.31 1.19 9.3 1.59 (17.8)
Quarterly silver production remained flat vs. 4Q22 as the decrease in volume
of pyrite concentrates processed and lower recovery rates were offset by a
higher ore grade from the Saucito's flotation plant due to lower dilution and
better ore grade at long hole drilling areas.
Quarterly silver production decreased 25.9% vs. 1Q22 due to the decreased
volume of pyrite concentrates processed, and lower ore grade and recovery
rate.
Quarterly gold production decreased 27.7% vs. 4Q22 due to the lower recovery
rate and decreased volume of pyrite concentrates processed, partly offset by
the higher ore grade from Saucito's flotation plant.
Quarterly gold production decreased 47.0% vs. 1Q22 as a result of the lower
ore grade and recovery rate and the decrease in volume of pyrite concentrates
processed.
After the successful tie-in of Juanicipio mine in the 4Q22, the Pyrites Plant
awaits the tie-in process to the national grid in 2Q23. Once this takes place,
commissioning and ramp up will start immediately.
CIENEGA MINE PRODUCTION
1Q23 4Q22 % Change 1Q22 % Change
Ore Processed (t) 240,148 256,928 (6.5) 282,568 (15.0)
Production
Gold (oz) 9,302 9,122 2.0 9,990 (6.9)
Silver (koz) 980 982 (0.2) 1,416 (30.8)
Lead (t) 748 930 (19.6) 926 (19.2)
Zinc (t) 1,002 1,372 (27.0) 1,351 (25.9)
Ore Grades
Gold (g/t) 1.30 1.20 8.5 1.20 8.6
Silver (g/t) 147 139 5.9 179 (17.7)
Lead (%) 0.47 0.56 (14.7) 0.50 (6.0)
Zinc (%) 0.77 0.94 (18.2) 0.85 (9.1)
Quarterly gold production increased 2.0% vs. 4Q22 due to a higher ore grade as
a result of the positive variation with the geological model. This was partly
offset by the lower volume of ore processed which resulted from the longer
than expected maintenance programme and delay in the preparation of stopes
driven by the reduced availability of equipment. These factors are expected to
improve in the coming months, thus increasing volumes of ore processed by
3Q23.
Quarterly gold production decreased 6.9% vs. 1Q22 mainly due to the lower
volume of ore processed in accordance to the mine plan, mitigated by the
higher ore grade as a result of the previously mentioned factors.
Quarterly silver production remained flat vs. 4Q22 mainly as a result of the
higher ore grade, offset by the lower volume of ore processed.
Quarterly silver production decreased 30.8% vs. 1Q22 due to the lower ore
grade as a result of higher dilution in narrow veins and decreased volumes of
ore processed.
The gold and silver ore grades for 2023 are estimated to remain in the ranges
of 1.0-1.1 g/t and 150-160 g/t respectively.
SAN JULIÁN MINE PRODUCTION
1Q23 4Q22 % Change 1Q22 % Change
Ore Processed Veins (t) 283,752 294,582 (3.7) 294,144 (3.5)
Ore Processed DOB (t) 522,260 517,733 0.9 541,030 (3.5)
Total production at San Julián
Gold (oz) 12,033 11,907 1.0 11,684 3.0
Silver (koz) 3,412 3,113 9.6 3,640 (6.3)
Production Veins
Gold (oz) 11,139 11,062 0.7 10,844 2.7
Silver (koz) 1,312 1,288 1.9 1,060 23.8
Production DOB
Gold (oz) 894 845 5.7 840 6.4
Silver (koz) 2,100 1,825 15.1 2,580 (18.6)
Lead (t) 1,855 1,712 8.4 1,608 15.4
Zinc (t) 3,755 3,604 4.2 4,725 (20.5)
Ore Grades Veins
Gold (g/t) 1.28 1.23 3.6 1.21 5.0
Silver (g/t) 158 149 6.1 123 27.9
Ore Grades DOB
Gold (g/t) 0.09 0.08 9.0 0.08 11.2
Silver (g/t) 146 130 11.9 173 (15.5)
Lead (%) 0.46 0.43 8.2 0.39 19.5
Zinc (%) 0.96 0.93 3.1 1.11 (13.2)
SAN JULIÁN VEINS
Quarterly silver and gold production slightly increased 1.9% and 0.7% vs. 4Q22
respectively, due to a higher ore grade at the San Antonio, Ultima Tierra and
Eliza areas which compensated for the lower volume of ore processed due to the
optimisation in the maintenance programme in 4Q22.
Quarterly silver production increased 23.8% vs. 1Q22 mainly driven by the
aforementioned higher ore grade which was partly offset by the lower volume of
ore processed.
Quarterly gold production increased 2.7% vs. 1Q22 due to the higher ore grade
and, to a lesser extent, the improved recovery rate which compensated for the
lower volume of ore processed.
We continue to expect the 2023 silver and gold ore grades to average 130-140
g/t and 1.20-1.30 g/t, respectively.
SAN JULIÁN DISSEMINATED ORE BODY (DOB)
Quarterly silver production increased 15.1% vs. 4Q22 mainly due to higher ore
grades at the 2,400 level and, to a lesser extent, the higher recovery rate.
Quarterly silver production decreased 18.6% vs. 1Q22 due to the lower ore
grade in the areas in the periphery of the ore body, as expected.
Additionally, the lower volume of ore processed due to unplanned maintenance
stoppage at the beneficiation plant in 1Q23 also contributed to the decrease
in silver production.
We continue to expect the 2023 silver ore grade to be in the range of 130-140
g/t.
HERRADURA TOTAL MINE PRODUCTION
1Q23 4Q22 % Change 1Q22 % Change
Ore Processed (t) 6,485,710 7,084,437 (8.5) 4,216,598 53.8
Total Volume Hauled (t) 29,223,867 27,446,767 6.5 32,784,771 (10.9)
Production
Gold (oz) 106,832 103,826 2.9 77,602 37.7
Silver (koz) 208 191 9.1 218 (4.4)
Ore Grades
Gold (g/t) 0.73 0.71 3.7 0.69 6.9
Silver (g/t) 1.72 1.35 27.4 2.25 (23.4)
Quarterly gold production increased 2.9% vs. 4Q22 mainly driven by the higher
recovery rate resulting from the increased irrigation of inventory as leaching
pad 14B is accessed, and higher ore grade, partly offset by the lower volume
of ore processed driven by the failure of the main transformer at the dynamic
leaching plant, which is temporarily being replaced by a lower capacity
transformer while the main transformer is repaired.
Quarterly gold production increased 37.7% vs. 1Q22 mainly due to the increase
in volume of ore processed and higher ore grade mainly as a result of a
positive variation with the geological model. This was partly offset by the
lower recovery rate driven by gold contents in solution still in the leaching
process.
The adjusted production costs were impacted by the increase in waste material
hauled charged to costs, rather than capitalised, despite the 20.6% decrease
in the total volume of waste material hauled (capitalised and charged to
costs). This is because in 1Q22 the total stripping ratio of c. 6.8 was
significantly higher than the prevailing average stripping ratio for the life
of the mine (LOM) (under IFRIC 20 stripping costs above the average LOM
stripping ratio are capitalised), this higher stripping ratio was due to the
need to prepare and gain access to the mineral benches; whereas in 1Q23 the
3.5 total stripping ratio was only slightly higher than the prevailing average
stripping ratio for LOM, thus decreasing the portion of volume being
capitalised.
The gold ore grade in 2023 is estimated to be in the range of 0.65-0.75 g/t.
NOCHE BUENA TOTAL MINE PRODUCTION
1Q23 4Q22 % Change 1Q22 % Change
Ore Processed (t) 1,711,348 1,232,125 38.9 1,789,478 (4.4)
Total Volume Hauled (t) 6,595,264 7,296,832 (9.6) 5,178,188 27.4
Production
Gold (oz) 11,078 13,331 (16.9) 21,869 (49.3)
Silver (koz) 4 3 41.4 8 (48.1)
Ore Grades
Gold (g/t) 0.48 0.51 (5.6) 0.62 (22.9)
Silver (g/t) 0.15 0.21 (26.9) 0.31 (52.1)
Quarterly gold production decreased 16.9% vs. 4Q22 due to the lower recovery
rate driven by higher leaching pads and the lower ore grade, partly offset by
the higher volume of ore processed.
Quarterly gold production decreased 49.3% vs. 1Q22 due to the decrease in
recovery rate as described above, and a lower ore grade and volume of ore
processed.
The 2023 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
1Q23* 4Q22** % Change 1Q22** % Change
Ore Processed (t) 222,024 165,786 33.9 145,485 52.6
Production
Silver (koz) 1,260 1,042 20.9 1,344 (6.3)
Gold (oz) 3,392 3,020 12.3 3,269 3.8
Lead (t) 813 647 25.7 658 23.6
Zinc (t) 1,275 1,119 13.9 970 31.4
Ore Grades
Silver (g/t) 363 415 (12.5) 597 (39.2)
Gold (g/t) 1.08 1.31 (17.6) 1.58 (31.6)
Lead (%) 0.74 0.84 (11.9) 0.94 (21.3)
Zinc (%) 1.44 1.60 (10.0) 1.74 (17.2)
* Includes ore processed as part of the initial tests during the commissioning
of the Juanicipio plant and ore processed at the Fresnillo and Saucito
beneficiation plants.
** Ore processed at the Fresnillo and Saucito beneficiation plants.
The commissioning of Juanicipio was completed as planned during 1Q23. The
ramp-up phase has begun, with full nameplate capacity expected by 3Q23. As
previously reported, ore will continue to be processed at the nearby Saucito
and Fresnillo plants as required.
As previously disclosed, Juanicipio will be an increasingly major influence in
Fresnillo plc operations with total average annual silver and gold production
of 11.7 moz and 43.5 koz respectively over the life of mine.
UPDATE ON ADJUSTED PRODUCTION COSTS
Adjusted production costs in 1Q23 continued to be impacted by:
1. ongoing cost inflation, along with the revaluation of the Mexican peso
vs. the US dollar of approximately +13.2% yoy;
2. a 53.8% increase in ore processed at Herradura (+2.3 million tonnes);
together with an increase in waste material hauled at Herradura charged to
costs (+65.1%, +8.4 million tonnes).
SILVERSTREAM
Quarterly Silverstream production increased 82.6% vs. 4Q22 due to the higher
volume of ore processed following the technical stoppage of the flotation
plant in December and, to a lesser extent, a higher ore grade.
Quarterly Silverstream production increased 9.8% vs. 1Q22 due to a higher
volume of ore processed and higher recovery rate, partly offset by the lower
ore grade.
Silver production in 2023 is estimated to be in the range of 2.5-3.5 moz.
UPDATE ON THE BILL TO REFORM MINING LAW PROPOSED IN MEXICO
The Company notes the regulatory initiative sent to the Mexican Congress by
the President of Mexico on 28 March 2023 (the "Initiative") with a view to
reforming several codes of legislation, including Mexico's Federal Mining Law.
The Initiative was reviewed, modified and initially approved on 20 April 2023
(the "Reformed Initiative") by the lower house of Congress (Chamber of
Deputies), subject to further discussion and analysis by the upper house of
Congress (the Mexican Senate) in accordance with the legislative process in
Mexico. The Reformed Initiative has now been presented to the Mexican Senate
for discussion, review and, if thought fit, approval. Any such approval will
be subject to its return to the Federal Executive Branch for publication in
due course as a new law, which has not yet occurred. The Company will,
however, be monitoring these events closely, in order to review and assess the
possible outcomes and their potential consequences for the mining sector in
general, and Fresnillo plc in particular.
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 eight operating mines, all of them in Mexico - Fresnillo,
Saucito, Juanicipio, Ciénega, Herradura, Soledad-Dipolos(1), Noche Buena and
San Julián (Veins and Disseminated Ore Body), one development project - the
Pyrites Plant at Fresnillo, which has been completed and is awaiting tie-in of
the plant to the national electricity grid, and four advanced exploration
projects - Orisyvo, Rodeo, Guanajuato and Tajitos 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.
1 (#_ftnref1) Au:Ag ratio of 80:1
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