Fresnillo delaying, modifying Mexican projects

Tuesday, August 1, 2017

Mexican precious metals miner Fresnillo announced changes to the timing and scope of projects with combined capex of US$815mn.

The company plans to complete projects worth US$1.65bn by end-2021, boosting silver output by about 28Moz/y.

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Fresnillo postponed a US$30.0mn optimization at its namesake mine, which will take throughput to 9,000t/d, compared to the 4,800t/d target for 2H17.

"We are delaying that project to start later and finish it by 1Q20, in order to be ready to cope with higher base metals content at depth and to have the optimal number of stopes so that we can jump to 9,000t/d," CEO Octavio Alvídrez told the company's H1 results call.

The optimization was previously forecast for completion by end-2018, and is expected to lift production by 3Moz/y silver.


Fresnillo also announced a delay to the US$305mn Juanicipio project, with production now expected in 1H20 compared to 1Q19.

This is to allow time for a feasibility study which will take into account deeper ore with higher lead and zinc content at the project, a 56:44 JV with MAG Silver, Alvídrez said.

The feasibility study is due to conclude in H2, following which the JV partners will seek board approval.

The project in its current form is expected to generate 10Moz/y silver and 30,000oz/y gold.


At the Herradura gold mine, Fresnillo is re-evaluating its US$65.0mn Centauro Deep project to investigate the possibility of exploiting the orebody through an open pit rather than underground operation, the CEO added.

No details of the possible impact on the timeline were given. Initial production is currently earmarked for 2020. Centauro Deep is expected to lift production by 65,000oz/y gold.


First gold production at the US$350mn Orisyvo project has been put back about six months to mid-2021.

Fresnillo is looking to lower capex and is conducting additional metallurgical studies in order to boost recoveries, Alvídrez told the call.


Fresnillo expects to ramp up the second phase of its US$515mn San Julián silver-gold mine in the coming months after completing commissioning in July.

The US$155mn pyrites project, which will process tailings from the Fresnillo and Saucito mines, is on track for commissioning in 2018, and is expected to boost production by 3.5Moz/y silver and 13,000oz/y gold.

The second dynamic leach plant at Herradura is also on track for commissioning next year. The US$110mn project will increase gold output by 36,000oz/y and extend the mine life by 12 years.


In light of the changes to the project pipeline, Fresnillo lowered its capex guidance for 2017 to US$700mn from US$800mn.

Capex in 2018 is expected at US$860mn, followed by US$740mn in 2019 and US$520mn the following year.

Fresnillo confirmed production guidance for 2017 of 58-61Moz silver and 870-900,000oz gold.


The company recorded a US$310mn profit for H1, up from US$166mn in the same period last year, with adjusted revenue at US$1.07bn, up from US$959mn, boosted by higher silver volume and prices, a higher gold prices and increased lead and zinc volumes and prices.