Rising Metal Prices Boost Fresnillo Profits

Fresnillo has published its 1H21 operational and financial results, showing a significant increase in profits due to rising metal prices and increased production volumes. The company explained these strong results have allowed it to continue to advance  in its development and exploration projects, such as Juanicipio in Zacatecas.

During H121, the company generated adjusted revenues totaling US$1.54 billion, showing an increase of 37.1 percent compared to 1H20, which is 75.8 percent due to higher metal prices and 24.2 percent for larger volumes. The company’s average silver price increased from US$16.8 per oz in 1H20 to US$26.4 in 1H21, showing an increase of 57.3 percent. Meanwhile the average gold price increased 6.7 percent from US$1,676.8 per oz in 1H20 to US$1,789.2 per oz in 1H21.

Fresnillo’s silver production in 1H21 was 27.5Moz, representing a 2.7 percent increase compared to 1H20 records due to higher ore grade at San Julián and Juanicipio. The company's gold production in 1H21 was 428,356oz, 12.3 percent more than in 1H20 due to a higher volume processed at Herradura and higher ore grade at Saucito, which was partially offset by lower ore grade at Ciénega and Noche Buena.

The company also made a significant progress on the development of its projects in 1H21, especially at Juanicipio, which beneficiation plant commissioning is expected in 4Q21. The company explained that the connection of the new flotation circuit to the flotation plant was completed in 1Q21, while in 2Q21 the programming of the control loop system was completed. “Mine development fell behind over the last three months but, with a new contractor in place, it is now advancing as planned. We continue to process development ore through the Fresnillo beneficiation plant. Juanicipio will be a major factor in the Group's future silver production,” reported the company in a press release.

Fresnillo announced that it is on track to reach its 2021 guidance of 53.5-59.5Moz of silver and 675,000-725,000koz of gold. The company has reduced its estimated CAPEX from US$680 million to US$580 million to show its lower capital deployment rate in its different projects. In addition, exploration costs are expected to range between US$175-US$180 million.

The company said it is currently analyzing any potential impact that the new law that restricts the possibility of outsourcing labor in Mexico could have. However, it is not expected to affect production during 2H21.