The world’s largest silver mining corporation saw significant declines today. Stock prices took a hit on Tuesday after Fresnillo (LON: FRES) announced that they missed their long-term production targets. Additionally, the company warned that silver prices could reach lower levels, and when combined with potential inflation and foreign exchange risks, might have a significant impact on the Mexico-focused precious metals miner.
The company, which trades on the London Stock Exchange, disappointed investors by not hitting its 65-million-ounce production target. This has mainly been due to subpar results from their Fresnillo and Saucito mines. Other reasons include higher stripping rations alongside different operational issues.
Despite this, the world’s largest silver miner, as well as Mexico’s second largest gold producer, still achieved a record annual silver production of 61.8 million ounces in 2018, alongside a 1.3 increase in gold production ending the year at 923,000 ounces. While these figures were respectable, 2019 is predicted to be a difficult year for the miner.
“Looking ahead, I expect 2019 to be another challenging year. We face a number of headwinds, including lower prices for precious metals and higher inflation,” said the company’s CEO Octavio Alvidrez in an official statement. “I also expect to see higher depreciation costs as a result of the investments we have made in recent years into the operations, while we continue to expect to work through operational issues and lower grades at certain mines during the year. All this has resulted in us slightly lowering our silver production guidance for 2019.”
In contrast to miners of other metals such as gold and palladium, silver miners have been struggling. Many have struggled to remain profitable as prices for the precious metal have failed to rise throughout most of 2018.
Large companies such as Pan American Silver (TSE: PAAS) having been making major mergers in an effort to capture cost savings through synergies. Smaller silver miners have been left struggling, appreciating the increase in silver prices that have been taking place over the past couple months. Should this trend change, these some companies would be left in a difficult position.
In response to the news, stock prices dropped 11 percent, before ending the day at an 8 percent loss – a significant decline for the multi-billion-dollar company.
Fresnillo Company Profile
Fresnillo plc is a holding company. Through its subsidiaries, the Company is engaged in the mining and beneficiation of non-ferrous minerals, and the sale of related production. The primary contents of this production include silver, gold, lead and zinc.
The Company has six operating mines: Fresnillo, located in the State of Zacatecas, which is primary silver mine; Saucito, located in the State of Zacatecas, an underground silver mine; Cienega, located in the State of Durango, an underground gold mine, including the San Ramon satellite mine; Herradura, located in the State of Sonora, a surface gold mine; Soledad-Dipolos mine, located in the State of Sonora, a surface gold mine, and Noche Buena, located in State of Sonora, a surface gold mine. The Company has two development projects, which include Saucito II and San Julian. The Company’s subsidiaries include Minera Fresnillo, S.A. de C.V., Minera Penmont, S. de R.L. de C.V., Minera Saucito, S.A. de C.V. and Fresbal Investments, Ltd. – Reuters