Fresnillo’s output up but San Julian plant to be commissioned later than expected

Shares in Fresnillo (LON:FRES) took a hit Wednesday after the Mexico-focused silver and gold miner said the milling plant at its San Julian operation would be commissioned later than initially forecast, due to a combination of unusually high rainfall, labour issues and delays in the delivery of equipment.

The stock dropped as much as 2.4% to 1608 pence in London after the announcement, but recovered later in the day and was trading at 1629 pence mid-afternoon.

Fresnillo, the world’s largest primary silver producer and Mexico’s second-largest gold producer, is now predicting that the second phase of San Julian’s plant will be operational in the second quarter of 2017.

The company, which has six operating mines in Mexico, said that silver output rose 6.7% to 11.8 million ounces for the three months ended Sept. 30, 2016 compared with the same quarter the year before. This was mainly due to the start-up of the first phase of San Julian plant, increased ore processed at its Saucito mine and strong performance at its Silverstream mine.

Gold output, in turn, rose 21% to 220,000 ounces in the period compared to the third quarter of 2015 due to higher volumes and grades at both its Herradura and Noche Buena mines.

As a result, Fresnillo has produced 37 million ounces of silver and 667,000 ounces of gold during the first nine months of the year, up 6.3% and 22% respectively compared with the same period a year earlier.

This means the company is on track to achieve its recently raised full year silver production forecast of 49 million – 51 million ounces and gold forecast of 850,000-870,000 ounces.