Fresnillo is making hay while the sun shines: the precious metals miner said today it is hiking gold production, as investors flee to safe havens following the Brexit vote.
In a quarterly update this morning, Fresnillo said it expected full-year silver production to increase six per cent compared with 2016.
It produced 13m ounces of silver during the quarter, up 14.5 per cent from from the same period last year, and 6.3 per cent up from the first quarter of this year. In the first half, that figure was 25.2m ounces, up 6.1 per cent from the same period last year.
Gold production hit 218,000 ounces in the first half, up 19.6 per cent from the same period last year, and 448,000 ounces in the first half, up 23 per cent from the same period last year.
However, gold production fell 5.3 per cent on from the previous quarter as it carried out maintenance at the Herradura storage pond.
But it said it expected to make that up during the full-year, raising full-year guidance to 850,000-870,000 ounces, from 775,000-790,000 ounces before.
Shares edged up in early trading, rising 0.5 per cent to 1,887p.
Why it's interesting
When investors' backs are against the wall, they tend to turn to so-called "safe haven" assets such as gold.
Thus, Fresnillo has had a pretty good few weeks, with shares jumping from 1,200p-odd on the day of the EU referendum to almost 1,900p now. Gold prices, meanwhile, have spent most of the past few weeks above $1,300 an ounce – a record high (although last week it made its first weekly loss since May).
But miners have also been casualties of market volatility: in March, Fresnillo reported that it was taking cost-cutting measures after gold prices fell to historic lows in 2015.
At the time, though, it added that "we do not expect significant shifts in the factors driving current volatility". Which just goes to show that you never know what's just around the corner…
Podcast: Is now the time to invest in gold?
What Fresnillo said
Octavio Alvidrez, its chief executive, said:
We continue to progress the turnaround at our Fresnillo mine, consolidating the improvements already made. I am confident that we remain on track to return Fresnillo to a more satisfactory operating level, and expect full year silver production at this mine to show an increase of around 6% compared to 2015.
Construction of the leaching plant at our San Julián mine was completed on time and on budget at the end of the second quarter. As we previously announced, we expect to resume regular production by the first week of August, post a minor issue with the lubrication system at the mill. Our full year silver production guidance remains unchanged, as higher than expected volumes produced at Saucito will compensate for the shortfall in production at San Julián.
With gold prices hitting record highs, Fresnillo is well positioned to cash in.