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Fresnillo reports 5.1% increase in silver production despite labour concerns

Fresnillo shares were up 2.4% to 791.3p in early morning trading on Wednesday, following a 5.1% increase in silver production compared to Q1 2021 and flat rate of gold production against Q4 2021 of 149.8 koz.

The mining group mentioned a 34.4% drop in attributable gold production compared to Q1 2021, due to an expected lower volume of ore processed and ore grade at its Herradura mine.

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Fresnillo commented that its boost in silver production came as a result of a higher contribution of ore from its Juanicipio plant, however the uptick was offset by the projected lower volume of ore processed at its Saucito mine.

The company confirmed that gold production remained flat due to a lower volume of ore processed at its Noche Buena operation, alongside the smaller impact of a lower volume of ore processed at Sautico and San Julian Veins.

However, Fresnillo saw its decline in gold offset by a higher ore grade and recovery rate at Herradura.

The firm also mentioned an attributable silver equivalent ounces of 25.3 moz across Q1 2022.

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The company noted a 3.4% rise in attributable by-products against Q1 2021 due to a higher contribution of development ore from Juanicipio, which was slightly offset by a lower ore grade at San Julian DOB.

Fresnillo added that its by-product zinc production increased 3.6% as a result of a higher contribution of development ore from Juanicipio, along with a higher ore grade and recovery at Saucito.

The production was partially offset by a lower ore grade at Fresnillo, with a 20.2% attributable by-product lead and zinc production decrease, which was driven by lower ore grades and decreased volumes of ore processed at Saucito.

Fresnillo said its full-year guidance remained unchanged, with an estimated silver production between 50.5 to 56.5 moz and attributable gold production between 600 to 650 koz.

Mexico Labour Regulations

The recent labour reforms in Mexico saw Fresnillo scramble for staff as a result of the regulations’ restrictions on subcontracted labour.

The company continued to roll out its selection of initiatives during Q1 to tackle the labour shortage, including recruitment campaigns, training and investment in new equipment.

Fresnillo said it expected to complete the staffing process at its San Julián and Ci é nega operations in Q3 2022, with its open pit mines already fully-staffed.

The mining group also warned that it was experiencing delays with new equipment deliveries due to global supply bottlenecks.

“We are reporting a solid first quarter’s production, in line with expectations,” said Fresnillo CEO Octavio Alvidrez.

“We have taken proactive steps to manage the impact of the Mexico labour reforms, and though we continue to see some covid-related absenteeism at our mine sites, this declined during the quarter and we are currently seeing a limited covid impact.”

“Like other industry sectors, the labour market remains very tight, and we have also seen some delays to equipment deliveries given the global supply constraints. Our full year guidance is unchanged.”

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