Peñoles Faced Uncertainty, Challenges in 2022

Industrias Peñoles released part of its 2022 results, showing a drop in profits and production due to the decline in metal prices and inflation. Notwithstanding a market recovery in 3Q22, the company explained this was not enough to improve its financial and productive performance.

According to a financial report sent to the Mexican Stock Exchange, Peñoles had a profit of US$380.3 million, 60.8% less than its 2021 profit of US$971 million. The company explained that the deterioration was due to low metal prices in 2022. For instance, the annual average price of silver was US$21.76/oz, 13.6% less than in 2021. In addition, the price of copper registered a drop of 5.6%.

The fall in prices also affected its revenues in 2022, totaling US$5.971 billion, declining 7.5% compared to 2021. EBITDA totaled US$1.070 billion, 36.9% lower than the 2021 EBITDA of US$1.695 billion.

Regarding production, Peñoles registered a decrease in several metals. In 2022, the company produced 811,992oz of gold and 11,281t of copper, 13.3% and 12.1% less respectively compared to 2021. Additionally, zinc production was 274,049t and lead production fell 78,758t, falling 1.7% and 0.7%, respectively.

“In the last quarter of 2022, the end of the zero COVID-19 policy in China and the slowdown in the inflation rate in the US renewed optimism in the markets. This had a favorable effect on metal prices,” Peñoles said. However, the company explained that this was not enough to reverse the drop in its profits earlier in the years.

In 2022, several mining companies were forced to raise their 2022 cost guidance due to inflationary pressures that drove up prices for key inputs. Jackie Przybylowski, Analyst, BMO Capital Markets Metals & Mining, warned of a growing trend of mining companies getting hit by inflation: for byproduct companies, cost inflation occurs due to higher primary product prices or lower byproduct costs. This latter variable is severely impacting base metals companies, which had significant profits from their by-products.

Last month, after better-than-anticipated retail sales in the US that could prompt the Federal Reserve to raise interest rates, the Mexican Stock Exchange (BMV) experienced a decline in value. Shares of Industrias Peñoles went down 3.16 percent to MX$230.