Fresnillo’s 1H22 Profit Decreases SignificantlyBy Paloma Duran | Wed, 08/03/2022 - 16:54
Fresnillo released its interim 1H22 results, revealing its half-year profit fell by more than 30 percent due to lower production and decliniung ore prices. Despite the setbacks, the company remains on track to reach its 2022 production guidance.
The company's total revenue in 1H22 was US$1.25 billion, a decrease of 14.2 percent compared to 2H21 due to lower sales and silver prices. The price of silver decreased from US$26.4/oz in 1H21 to US$22.8/oz in 1H22, showing a decrease of 13.8 percent. Additionally, production fell 28 percent down to 308,800oz due to lower ore grades and a drop in ore processed at the Herradura and Saucito operations. All these variables caused Fresnillo’s profit to diminish 38.5 percent, reaching US$459.1 million.
In addition to financial and production issues, the company highlighted that one of its biggest challenges have been a reform that restricts the outsourcing of labor, which entered into force in April 2021. Due to labor restrictions, the company has had to internalize a high number of contracted laborers. It also had to carry out recruitment campaigns, training and invest in new equipment. Through these actions, Fresnillo has been able to fully staff its open pit projects. It expects to complete the same process at Fresnillo and San Julián in 3Q22, and at Ciénega and Saucito in 4Q22.
Fresnillo announced it is confident of meeting its full-year 2022 production guidance of between 50.5 and 56.5Moz of attributable silver and from 600 to 650koz of attributable gold. However, the company stressed that it will still have to deal with a constricted job market, global supply chain bottlenecks and inflation in 2H22.
“These challenges will have some impact in the second half of 2022. However, we are confident in our ability to weather these short term challenges, without limiting our ambitious longer term growth plans. We look forward to achieving connection to the electricity grid at Juanicipio in the coming weeks, and rapidly ramping up production, while also continuing to develop the Rodeo and Orisyvo mining projects,” said Octavio Alvídrez, CEO, Fresnillo.
Previously, Fresnillo estimated its 2022 spending would reach US$690 million. The Mexican mining giant has not said it would lower this amount, suggesting an increase compared to the US$592 million invested last year. Fresnillo highlighted that of the entire budget of US$571 million is for its sustaining CAPEX, while the remaining US$119 million is for its project development’s CAPEX. Of the latter, US$112 million will be allocated to the development of the Juanicipio project, which is expected to come online this year.