Production
Report - for the three months ended 31 December 2010
Overview
Quarterly
attributable silver production of 10.5m oz, up 3.6% on the corresponding period
last year (including 0.91m oz from the Silverstream).
Record quarterly
attributable gold production of 100,822 oz, a 26% increase over the
corresponding period last year as Soledad-Dipolos
exceeds expectations.
Record
annual silver production of 42.1m oz, up 2.0% year on year (including 3.5m oz
from the Silverstream).
Record annual
attributable gold production of 368,995 oz, up 33% year on year
Construction of the Saucito development project, and
expansions at Ci nega and
Soledad-Dipolos are on track to be concluded in 1H
2011.
Board approval of Noche Buena gold project with commercial production
expected in H1 2012 with an estimated average production of 75,000 oz pa.
Outlook for
2011
Silver production expected
to increase by 5% to 44m oz (including 3m oz from the Silverstream)
as Saucito starts up in H1 2011.
Attributable gold
production expected to increase by 8% to 400,000 oz as Soledad-Dipolos and Ci nega expand production throughout 2011.
Construction of Noche Buena will commence for expected production in 2012.
Exploration budget to
be significantly increased to US$251.4m, up 151% on the approximately US$100.1m
spent in 2010.1
Cost control
initiatives and operating efficiencies will continue across all
operations.
Jaime
Lomel n, Chief Executive Officer, said:
"I
am very pleased to report that we have concluded 2010 by producing a record
amount of silver and gold. Our newest gold mine, Soledad-Dipolos,
was an important factor in this excellent performance, as well as efficiency
measures at our mines and the implementation of the six sigma management tool
improvements. We are on track for the next phase of growth with the start up of
Saucito, the expansion at Ci
nega and Soledad-Dipolos
and the commencement of construction at Noche Buena.
Our aim of producing 65 million ounces of silver and more than 400,000 ounces
of gold by 2018 is getting closer with these new projects and is supported by
our solid track record of delivery."
Total Production - Attributable
|
4Q 10
|
4Q 09
|
% change
|
3Q 10
|
FY 10
|
FY 09
|
% change
|
Silver prod'n (kOz)
|
9,596
|
9,361
|
2.5
|
9,868
|
38,571
|
37,916
|
1.7
|
Silver stream prod'n (kOz)
|
908
|
780
|
16.4
|
819
|
3,542
|
3,359
|
5.4
|
Total Silver production (kOz)
|
10,503
|
10,141
|
3.6
|
10,687
|
42,113
|
41,275
|
2.0
|
Gold prod'n (Oz)
|
100,822
|
80,080
|
25.9
|
91,822
|
368,995
|
276,584
|
33.4
|
Lead prod'n (t)
|
5,036
|
4,652
|
8.3
|
4,797
|
18,977
|
17,264
|
9.9
|
Zinc prod'n (t)
|
5,805
|
4,645
|
25.0
|
5,842
|
22,472
|
19,526
|
15.1
|
Quarterly
attributable silver production increased by 2.5% when compared to the fourth
quarter of 2009 due to higher ore tonnage milled at the Fresnillo
mine. However, when compared with the previous quarter, silver production
decreased by 2.8% as 91,043 tonnes of ore from Saucito were stock piled in preparation for the start-up of
the Saucito mill.
In
the fourth quarter of 2010, Fresnillo plc accrued
907,600 silver ounces under the Silverstream
Agreement. This production level represented increases of 16.4% and 10.8% when
compared to the corresponding period of 2009 and the previous quarter,
respectively, as a result of higher ore grades at the Pe
oles' Sabinas mine.
Attributable
silver production for the full year 2010 recorded an increase over 2009, achieving
a record level at 42.1 million ounces of silver, including 3.52
million ounces produced at the Sabinas mine under the
Silverstream Agreement.
Quarterly
attributable gold production reached a record level of 100,822 ounces.
Similarly to previous quarters of 2010, the 25.9% increase over the comparable
period of 2009 was largely explained by the start of commercial production at
Soledad-Dipolos during 2010..
Fourth quarter gold production increased by 9.8% when compared to the
previous quarter of the year due to higher volumes of ore deposited and better
recoveries at Herradura and the continued ramp-up at
Soledad-Dipolos.
Annual
attributable gold production increased more than expected reaching a record
high of 368,995 gold ounces. In addition to the start-up of Soledad-Dipolos, the 33.4% increase reflected the increased volumes
of ore deposited, higher ore grades and improved
recoveries at the Herradura mine. Furthermore, higher
mill throughput and improved metallurgical recoveries at Ci
nega also contributed to the increase in gold
produced.
This
excellent performance of our operations was in part the result of the initial
benefits obtained through the implementation of the six-sigma methodology and
several efficiency projects.
Fresnillo mine production
|
4Q 10
|
4Q 09
|
% change
|
3Q 10
|
FY 10
|
FY 09
|
% change
|
Silver prod'n (kOz)
|
9,037
|
8,700
|
3.9
|
9,048
|
35,906
|
35,420
|
1.4
|
Gold prod'n (Oz)
|
7,401
|
6,079
|
21.7
|
6,090
|
24,979
|
24,684
|
1.2
|
Lead prod'n (t)
|
3,348
|
3,194
|
4.8
|
3,052
|
12,236
|
11,058
|
10.7
|
Zinc prod'n (t)
|
3,097
|
2,743
|
12.9
|
3,102
|
12,212
|
11,510
|
6.1
|
Quarterly
silver production at the Fresnillo mine increased
when compared to the final quarter of 2009 as a result of higher volumes of ore
milled and improved metallurgical recoveries. Production was broadly stable
compared with the previous quarter of 2010.
On
an annual basis, record silver production was achieved as a result of the
increase in ore milled over the year. These higher volumes are the result of
the increased milling capacity from 7,500 to 8,000 tonnes
per day that followed the implementation of six-sigma methodology and the
efficiencies obtained from the increased use of long-hole mining.
Quarterly
by-product gold production increased when compared to the corresponding period
in 2009 and the third quarter of 2010 as a result of higher gold ore grades;
whilst annual gold production remained stable when compared to 2009. Annual
lead and zinc production, which are also considered by-products, increased,
again due to higher ore grades.
The
production figures for the Fresnillo mine do not include
development ore from Saucito processed at the Fresnillo mill. In the fourth quarter of 2010, 208,150 oz
of silver, 1,335 oz of gold, 59 tonnes of lead and 40
tonnes of zinc were recovered from the Saucito ore and are included in the total production figures
but not in the Fresnillo mine figures. However, in
preparation for the start-up of the Saucito mill in
1Q 2011, 91,043 tonnes of ore were stock piled.
On
an annual basis, 1.2 million oz of silver, 6,323 oz of gold, 273 tonnes of lead and 147 tonnes of
zinc were produced from the development works at Saucito.
The
construction of the San Carlos shaft continued to progress according to
schedule and is expected to be concluded in the second half of 2011. This
US$19.1 million project will enable the extraction of mineral from the western
zone of the San Carlos vein, thus reducing haulage costs at the Fresnillo mine.
Ci nega mine production
|
4Q 10
|
4Q 09
|
% change
|
3Q 10
|
FY 10
|
FY 09
|
% change
|
Gold prod'n (Oz)
|
29,155
|
29,710
|
-1.9
|
28,424
|
113,351
|
103,510
|
9.5
|
Silver prod'n (kOz)
|
275
|
446
|
-38.3
|
247
|
1,198
|
1,589
|
-24.6
|
Lead prod'n (t)
|
1,628
|
1,448
|
12.4
|
1,611
|
6,468
|
6,118
|
5.7
|
Zinc prod'n (t)
|
2,668
|
1,900
|
40.4
|
2,634
|
10,112
|
7,950
|
27.2
|
Quarterly
gold production decreased slightly when compared to the corresponding period in
2009 as a result of a temporary decline in ore grades, which was in part
mitigated by higher volumes of ore milled. However, quarterly gold production
increased by 2.6% when compared to the third quarter of 2010 due to higher ore
grades.
Gold
production for the full year increased by 9.5% mainly due to higher volumes of
ore milled which was the result of the timely preparation of new stopes, maintenance improvements and the initial benefits
from the implementation of the six-sigma methodology. As expected, gold ore
grade remained steady at 4.3 g/t in 2010.
Quarterly
and annual by-product silver production was affected by the expected lower
silver grades, resulting in a 38.3% and 24.6% decline in comparison to the
corresponding periods in 2009, respectively. This adverse effect was more than
compensated by the increased gold production. Quarterly silver production
increased as a result of higher ore grades and improved recovery rates when
compared to the previous quarter of 2010.
Lead
production increased over all comparable periods mainly as a result of higher
volumes of ore milled and improved recovery rates. Quarterly and annual zinc
production increased significantly due to better ore grades, recovery rates and
volumes of ore milled when compared to the corresponding periods in 2009.
The
US$13.3 million project to sink the shaft at Ci nega a further 300 metres to gain
access to deeper ore reserves remained on track and is expected to be concluded
in the second half of 2011. In the fourth quarter of 2010, the shaft sinking
was completed. The remainder of the mining works, crusher installation and
change of hoist cables will be concluded in 2011.
The
expansion of milling capacity from 755,000 to 930,000 tonnes
per year is progressing according to schedule and is expected to be completed
in the first half of 2011, following investment of US$24.9 million and
sustaining capital expenditure of US$0.5 million per annum. This project will
contribute to maintain our production target of 110,000 gold ounces per year.
Herradura mine production - Attributable
|
4Q 10
|
4Q 09
|
% change
|
3Q 10
|
FY 10
|
FY 09
|
% change
|
Gold prod'n (Oz)
|
44,462
|
43,407
|
2.4
|
38,953
|
162,984
|
145,510
|
12.0
|
Silver prod'n (kOz)
|
65
|
64
|
1.6
|
29
|
216
|
171
|
26.3
|
Quarterly
and annual attributable gold production achieved new record levels due to the
increased ore volumes deposited at the leaching pads, which resulted from the
purchase of additional trucks and loaders.
Higher
ore grades and improved recoveries also contributed to increasing annual
attributable gold production. The expansion of the beneficiation plant to
increase flow to 1,600m3 per hour combined with the implementation
of the six sigma methodology increased efficiency at the Merrill-Crowe plant.
These factors, added to the larger areas under
irrigation at the leaching pads and drove recoveries above 2009 levels.
In
the fourth quarter, initiatives aiming at ensuring continuity of operations and
reducing costs continued to progress. Construction of the ninth leaching pad
began and the first stage is expected to be concluded by the second half of
2011.
In
December, the installation of the Mine Star software aimed at increasing
productivity by optimising the assignment of trucks
and loaders was completed. Initial benefits from this project are expected in
the first quarter of 2011.
The
construction of the diesel dispatch center remained on schedule to be concluded
in the first quarter of 2011. The benefits will include reducing costs and
ensuring continuity of operations by optimising
equipment utilisation .
At
the laboratory, efficiency will be enhanced by investing US$2.4 million to
automate the assay process. This project, which complements the automated
sampling system, will be concluded by the third quarter of 2011 and will
increase the volume of samples analysed per day from
the Herradura and Soledad-Dipolos
mines.
Lastly,
a new system to add lime evenly to the mineral before depositing it in the pads
was installed as part of an initiative to optimise
sodium cyanide consumption in the leaching process, which will ultimately
improve gold recovery and reduce costs.
At Centauro Deep, mining works aimed at confirming resources
and conducting metallurgical tests continued. These activities will assist in
defining a potential underground mine below the main pit of Herradura.
In the last quarter of 2010, the exploration ramp advanced by approximately 218
metres, achieving a total of 460 metres
for the full year. The target is to develop 2,000 metres
of exploration mine works at this project by 2012.
Soledad-Dipolos mine
production - Attributable
|
4Q 10
|
4Q 09
|
% change
|
3Q 10
|
FY 10
|
FY 09
|
% change
|
Gold prod'n (Oz)
|
18,469
|
-
|
N/A
|
15,365
|
61,358
|
-
|
N/A
|
Silver prod'n (kOz)
|
11
|
-
|
N/A
|
7
|
29
|
-
|
N/A
|
Quarterly
attributable gold production increased by 20.2% when compared to the previous
quarter of 2010 due to higher volumes of ore deposited at the recently
concluded second leaching pad. In the first year of start-up, attributable gold production surpassed the expected annual
production achieving 61,358 ounces of gold. Increased stripping and the
acquisition of additional equipment in anticipation of the expansion
contributed to the production increase.
Construction
of the third, fourth and fifth leaching pads remained on schedule. This US$18.0
million investment is part of the expansion to produce 130,000 total gold
ounces per annum and is expected to be completed in 2011.
Saucito Project
Construction
of the Saucito project is progressing according to
schedule and commercial production is expected to start in the first half of
2011. In the first quarter of 2011 the mill will start its commissioning.
The
total length of the ramps and development works to date is 33,695 metres. Sinking of the Jarillas shaft reached 365 metres
depth out of the total 645 metres planned.
Development
ore from Saucito was processed at the Fresnillo mill during 2010. Additionally, 91,043 tonnes of ore was stock piled during the quarter under
review in preparation for the mill start-up in Q1 2011, with initial estimated
production of 4.7 million ounces of silver in 2011.
Noche Buena project
Following
the positive outcome of the Noche Buena feasibility
study in October, the Board of Directors approved the construction of this gold
project located within the Herradura District. Noche Buena is owned by the Penmont
joint venture, which is 56% owned by Fresnillo plc
and 44% by Newmont Mining Corporation.
Noche Buena will be an open pit mine and
is expected to produce 376,000 gold ounces over the initial five year mine
life.
The
estimated pre-operative capital expenditure is US$63 million and the mine is
expected to become operational in the first half of 2012 with an estimated
annual average production of 75,000 gold ounces.
The
2008 purchase of the Noche Buena from Seabridge Gold Inc ("Seabridge")
included a US$5 million payment on commencement of production and a 1.5%
royalty. In December 2010, Penmont purchased the
royalty and the cash payment for a total consideration of US$10.12 million in
cash.
Update
on exploration
The
2010 exploration programme was successfully
completed, totaling US$100.1 million. In the fourth quarter of 2010,
exploration continued on budget with 40 diamond drill rigs and three reverse
circulation rigs in operation. Internal reserve and resource estimates were
completed in December, for Saucito, Noche Buena, San Juli n, Orisyvo, Juanicipio, Centauro Deep, San
Ram n and Las Casas. The audited results will be
released at the time of the Preliminary Financial Results in March 2011. Good
results were obtained at the Minera Saucito, Centauro Deep and Orisyvo projects, where the gold-silver resources
increased. Resources were also successfully upgraded to the indicated category
with infill drilling at the San Juli n (Chihuahua),
San Ram n (Ci nega District),
Noche Buena (Herradura
District) and Minera Juanicipio
(56% Fresnillo plc and 44% Mag
Silver) projects.
Positive
drilling results were obtained in the early stage San Nicolas del Oro
(Guerrero), El Cairo (Durango), and Guanajuato (Guanajuato) projects, where new
targets were identified by mapping and sampling. Drilling was also initiated at
the Manzanillas (Durango), Tajitos
(Sonora), Jaralillo (Zacatecas), and Tocayos (Zacatecas) properties continuing our focus on the Ci nega, Herradura
and Fresnillo mining districts. Drilling resumed at
San Juan in a new target area.
Permit
applications were submitted for drill programmes at
the Candame a gold property (Chihuahua), optioned in
the third quarter of 2010, and the Cebadillas and Yesca silver-gold properties (Nayarit) that were optioned
in the quarter under review.
The
exploration budget for 2011 will be expanded to US$251.4 million, a 151.0%
increase over 2010. The 2010 and 2011 exploration figures include drilling
activities across the growth pipeline and mining works for exploration.
Scoping
studies and pre-feasibility studies
San Juli n
In
the fourth quarter, the Company received the results of the scoping study for
the San Juli n project conducted by AMC Consultants
(Canada) Limited AMC recommends developing the disseminated ore body to be
followed later by the development of the gold vein system which still requires
additional exploration. This sequential development plan is expected to maximise the present value of the project. However, additional
exploration activities and metallurgical tests must be conducted before a
definitive mine plan can be developed for this project.
As
part of the total exploration budget for 2011, the Board authorised
an investment of US$105 million to construct ramps and develop mining works
that will enable the Company to further optimise the
economic viability of this project.
Orisyvo
The
scoping study for the eventual open pit mine confirmed the dimensions and
resources (over 5 million gold ounces) using untested and conservative recovery
rates for oxide and sulphide ores. Given the results
of the scoping study, the Company will continue metallurgical testing and
exploration to improve the project economics.
The
construction of an adit to conduct underground drilling
and to obtain bulk samples for larger scale metallurgical tests is included in
the 2011 budget approved by the Board. This will help to increase and upgrade
the resources and confirm the economic viability of the project.
Juanicipio
In
December, AMC presented the progress of the Juanicipio
prefeasibility study. AMC will deliver the final draft of the report by the end
of January 2011.
Safety
performance
It
is with deep regret to report that one of our unionised
workers suffered a fatal accident in November at the Fresnillo
mine. In a breach of the safety protocol set by the company, a scoop-tram
operator fell into an ore pass while mucking. A detailed investigation of the
accident was carried out immediately which confirmed that the accident was
caused by a failure to comply with the established safety procedures.
Nevertheless, additional measures were taken to prevent such an incident from
occurring again. Fresnillo plc reiterates its
commitment to reinforce the existing safety procedures and programmes
and will continue pursuing its zero fatal accidents target. The Company extends
its sincere condolences to the family of our colleague.
There
will be a conference call for analysts and investors on Friday 14 January at
9.00am GMT (London time). The dial in details are
as follows:
Participants'
dial in number: +44 (0) 1452 541 076
Conference
ID: 36062675
A
replay of the conference call will be available for one week on the following
number:
Dial
in number: +44 (0) 1452 55 00 00
Conference
ID: 36062675#
For
further information, please visit our website www.fresnilloplc.com or contact:
Fresnillo
plc
London
Office
Arturo
Esp nola, Head of
Investor Relations
|
Tel: +44 (0)20 7399 2470
|
Mexico
City Office
Gabriela
Mayor
|
Tel: +52 55 52 79 3203
|
Brunswick
Group
Carole
Cable
David
Litterick
|
Tel: +44 (0)20 7404 5959
|
About Fresnillo plc
Fresnillo Plc is the world's largest primary
silver producer and Mexico's second largest gold producer, listed on the London
Stock Exchange under the symbol FRES.
Fresnillo has four producing mines, all of
them in Mexico - Fresnillo, Ci
nega, Herradura and
Soledad-Dipolos; two development projects - Saucito and Noche Buena; and four
advanced exploration prospects -San Juan, San Juli n,
Orysivo and Juanicipio as
well as a number of other long term exploration prospects and, in total, has
mining concessions covering approximately 1.91 million hectares in Mexico.
Fresnillo has a strong and long tradition of
mining, a proven track record of mine development, reserve replacement, and
production costs in the lowest quartile of the cost curve for both silver and
gold.
Fresnillo's goal is to maintain the Group's
position as the world's largest primary silver company, producing 65 million
ounces of silver and over 400,000 ounces of gold by 2018.
Forward
Looking Statements
Information
contained in this announcement may include 'forward-looking statements'. All
statements other than statements of historical facts included herein,
including, without limitation, those regarding the Fresnillo
Group's intentions, beliefs or current expectations concerning, amongst other
things, the Fresnillo Group's results of operations,
financial position, liquidity, prospects, growth, strategies and the silver and
gold industries are forward-looking statements. Such forward-looking statements
involve risk and uncertainty because they relate to future events and
circumstances. Forward-looking statements are not guarantees of future
performance and the actual results of the Fresnillo
Group's operations, financial position and liquidity, and the development of
the markets and the industry in which the Fresnillo Group operates, may differ materially from those
described in, or suggested by, the forward-looking statements contained in this
document. In addition, even if the results of operations, financial position
and liquidity, and the development of the markets and the industry in which the
Fresnillo Group operates are consistent with the
forward-looking statements contained in this document, those results or
developments may not be indicative of results or developments in subsequent
periods. A number of factors could cause results and developments to differ
materially from those expressed or implied by the forward-looking statements
including, without limitation, general economic and business conditions,
industry trends, competition, commodity prices, changes in regulation, currency
fluctuations (including the US dollar and Mexican Peso exchanges rates), the Fresnillo Group's ability to recover its reserves or
develop new reserves, including its ability to convert its resources into
reserves and its mineral potential into resources or reserves, changes in its
business strategy and political and economic uncertainty.