La Herradura

Sat, 10/28/2017 - 12:12

Fresnillo appears to be going from strength to strength. The Industrias Peñoles subsidiary is firmly established as the world’s primary silver producer – targeting 70 million oz/y by 2019 – but in 2016 it overtook Goldcorp as Mexico’s largest gold producer after recording 935,000 ounces output. This is in large part thanks to the company’s primary gold asset, La Herradura, now the biggest gold mine by production in Mexico after recording 520,900 ounces output in 2016, up 30.5 percent from the previous year.

Drilling first began at La Herradura - an 18,211 hectare asset in the heart of Sonora's gold belt - in 1991. The project, which is 125 km northwest of the nearest town Caboroa, was soon turned into a conventional open-pit, heap leach gold mine, achieving commercial production in 1998 with an original life span of 10 years. During 1H17, it produced 224,000 ounces of gold at a cash cost of US$483.9/oz, a slight decrease from the 248,600 ounces output during 1H16 due to falling grade, which the company expects will turn around during the second half of the year. Silver production also fell during the first half of the year to 222,000 ounces from 304,000 ounces in 1H16.

Despite the slip in production levels, La Herradura was Fresnillo’s most profitable asset during 1H17, contributing 29.2 percent to the company’s total gross profit of US$460 million. It is by far and away Fresnillo’s most valuable gold asset, accounting for 51.7 percent of goldadjusted revenues during 1H17, and is central to reaching the company’s 2017 gold production target of 870,000- 900,000oz.

While the current performance of La Herradura is a shining light in Fresnillo’s portfolio, the future looks even brighter. As of December 2016, the deposit holds 5.2 million ounces of gold in reserves and 10.8 million ounces in resources, while the company has invested US$110 million in the construction of a new on-site dynamic leaching plant, to be commissioned in 2018. This facility will extend the life of mine to 12 years and will help secure average annual gold production of 390,000oz.

Illustrating the importance of this asset to Fresnillo’s growth strategy, the company is in the midst of an intensive exploration program at the site. During 1H17, Fresnillo spent US$8.4 million on exploration activities at La Herradura, mainly focused on developing the Centauro vein. This was Fresnillo’s biggest outlay on exploration across its portfolio.