Fresnillo shares drop on lower gold output forecast

Fresnillo Plc’s (LSE: FRES) stock was down nearly 12% on the LSE midday Wednesday, as the company reported that forecasts lower gold output for 2021, mainly after a land slip at one of its mines in Mexico restricted operations.

Mexico’s largest gold producer said a land slip in one of the pit walls at the Noche Buena project last year resulted in limited access to mining in deeper areas.

Fresnillo cut its full-year gold production outlook twice in 2020 due to covid-19 restrictions at its project in the Herradura district in Mexico, after it was forced to operate with reduced number of workers.

The company expects attributable gold production to be in the range of 675-725 koz in 2021.

Gold output fell to 769.6 kilo ounces (koz) in the full-year ended December 31, down from 875.9koz in 2019.

The company said attributable silver production was expected to be in the range of 53.5-59.5 moz for this year, as it produced 53.1 moz of silver last year.

The company said continued progress was achieved on the construction of the Juanicipio processing plant during the last quarter. Commissioning of the plant is now expected by Q421.

Construction of the Pyrites plant (phase II) at the Fresnillo district was commissioned on time in Q420 and in line with the budget, the miner said in a press release.

“As previously disclosed, the start of operations has been deferred due to a delay in final inspections by the authorities as a result of covid-19 restrictions,” Fresnillo said.

“Given the current covid-19 situation in Mexico, we do not foresee inspections taking place in the first half of the year, and this is reflected in our 2021 production outlook.”