Fresnillo share price: 3 things to watch out for in its half-year results

Fresnillo saw its share price fall more than 10% over the last five trading sessions after the company cut its production guidance last week.

Investors will be particularly interested in how its production guidance downgrade will impact the mining company’s bottom line when it unveils its half-year results on Wednesday next week.

Fresnillo opts to cut full-year production guidance

2019 remains a challenging year for most mining companies with the sector encumbered by a myriad of headwinds, leading many to take a particularly cautious stance.

As such, the Mexican-based mining company opted to slash its full-year production guidance last week, driven by lower-than-expected ore grades and ore throughput at its Fresnillo mine and a delay in the construction of a leaching pad at Herradura.

2019 silver production guidance was decreased from 58-61 moz to 55-58 moz, driven mainly by lower ore grades and ore throughput at the Fresnillo mine.

Meanwhile, gold production guidance of 910-930 koz gold is decreased to 880-910 koz mainly driven by the delay in the construction of a leaching pad at Herradura and lower ore processed at the DLP.

Fresnillo pledges stronger performance in H2

Despite the setback, production levels at Fresnillo have continued to recover towards target levels since the first quarter as the company begins to see the positive impact of operational measures and investments it has made into infrastructure, equipment and infill drilling.

‘We will continue to work hard to ensure the improvements we have seen this quarter are maintained in the second half of the year,’ Fresnillo CEO Octavio Alvídrez said.

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Development projects in the pipeline

Construction of the Juanicipio project commenced immediately following the management’s approval in April 2019, with good progress made on engineering and early stage construction works in accordance with Fresnillo’s plans.

The project is expected to be concluded by late 2020.

Meanwhile, construction of the Pyrites plant (phase II) in the Fresnillo district remains on track and on budget, with commissioning expected in the second half of 2020.

Fresnillo flotation plant optimisation to cope with higher content of lead and zinc is progressing according to plan and is expected to be concluded on time by 2H20, the company said.