Fresnillo Expects Lower Annual Production in 2022

Fresnillo announced that it cut its gold and silver production projections for 2022 following a greater-than-expected impact of the omicron COVID-19 variant on mining operations. The company said that even though production is not expected to increase, it has taken action to address these challenges.

In a press release, the company announced that it now expects its silver output to range between 50.5 and 56.5Moz. The figure is below Fresnillo’s previous estimate as a result of a lower processed ore volume. In addition, the world’s largest silver producer reported that its gold production in 2022 will decrease to 600,000 - 650,000oz, partly because the Noche Buena mine is reaching the end of its life cycle.

The company explained that its lower silver production projection happened mainly due to the omicron variant, which has been more contagious and therefore caused staffing issues starting in December 2021. Initially, Fresnillo expected this to be a temporary problem but cases increased significantly throughout January, leading to more workers becoming unavailable and thus a lower volume of ore processed.

The company stated that new Mexican labor laws have limited its subcontracting capabilities. As a result, Fresnillo had to internalize more of its workforce, which affected equipment availability and use as contractors had their own equipment and performed maintenance work to boot.

Fresnillo said that although production for 2022 will not increase, it has begun to address these issues via recruitment campaigns, training and investment in equipment. “Looking ahead, our priorities for this year are clear. We must continue to navigate the challenges presented by both COVID-19, while adapting to the new labor reform. Our people’s safety is our priority, as is ensuring we continue to roll-out performance improvement measures across our portfolio,” said Octavio Alvídrez, CEO, Fresnillo.

In 2021, Fresnillo’s silver production was 53.1Moz, which was only slightly below the predicted 53.5-59.5Moz but flat compared to 2020. The company faced lower ore grade production and less volume at Saucito and Fresnillo. Meanwhile, gold production surpassed expectations even though it was still down 2.4 percent year-on-year at 751,200oz. The company attributed this to a lower ore grade at Cienega, as well as a lower ore grade and volume at the San Julián veins. This issue was partly offset by a higher volume of ore processed with a better ore grade at Noche Buena.