Fresnillo shares drop on cautious silver outlook

(Sharecast News) - Precious metals miner Fresnillo reported a "robust" period for production in the second quarter and said that gold output was trending towards the upper end of full-year guidance, though silver results have been weaker than hoped. Attributable gold production is expected to come in at the higher end of the 525,000-580,000-ounce target range.

Silver output should still meet the 49m-56m-ounce guidance, "albeit impacted by the weaker Silverstream contribution and lower grades at the Fresnillo mine", according to chief executive Octavio Alvídrez.

Quarterly attributable silver production totalled 12.5m ounces in the second quarter, up 1% over the first quarter but down 14.7% over the year before, with mining activities finishing at San Julián DOB, lower ore grades and decreased recovery rates at Ciénega, and lower ore grades at Juanicipio.

As a result, first-half silver output of 24.9m ounces was down 11.8% on last year.

Gold production was also 1% higher than the first quarter at 157,700 ounces, but 21.3% higher than the last year, resulting in a 15.9% increase in first-half output to 313,800 ounces.

In terms of by-products, lead production was up "slightly" on the first quarter, while zinc production rose 12.5%.

Alvídrez said: "I am pleased to report another quarter of robust silver and gold production, reflecting the resilience and dedication of our teams and consistent performance of our operating mines [...] Our rigorous focus on operational optimisation and cost reduction initiatives continues to yield positive results, combined with favourable precious metals prices."

Fresnillo shares were down nearly 3% at 1,423p by 0815 BST.