London-listed Fresnillo has met its 2022 guidance, producing 53.7-million ounces of silver and 635 900 oz of gold from its mines in Mexico.

Silver production was slightly above 2021’s output, with production from the Juanicipio mine and increased volumes of ore processed at Fresnillo, both in the Zacatecas region, offset by the lower ore grade at the Chihuahua/Durango border-based San Julián mine.

In the fourth quarter, Fresnillo produced 12.5-million ounces of silver (including Silverstream), which was down quarter-on-quarter by 7.8%, with stronger performances at the Fresnillo mine and San Julián, and offset by lower production at other mines.

CEO Octavio Alvídrez says silver output was driven by a strong performance from the Fresnillo mine, which is showing consistent improvement and the continued contribution of the new Juanicipio project offsetting the expected lower grades at San Julián.

Attributable silver production in the fourth quarter decreased 3% year-on-year owing to a decrease in ore throughput and lower ore grade at San Julián and Ciénega, mitigated by increased volumes of ore processed and higher ore grades at the Fresnillo mine.

Despite gold production in 2022 being within guidance, full-year production was down 15.3% year-on-year, primarily owing to a lower recovery rate as higher volumes of sulphide ore were processed and lower ore grades at Herradura. In addition, the Noche Buena, Saucito and Ciénega mines produced lower volumes and grades during the year.

Quarter-on-quarter, Fresnillo produced 5.5% more in the fourth quarter of 2022 at 168 000 oz, mainly as a result of an increase in volumes of ore deposited at Herradura. Fourth-quarter production, however, was partly offset by decreased volumes of ore processed and a lower recovery rate and lower ore grade at Noche Buena, as well as a decrease in ore throughput at Saucito.

Year-on-year, the company produced 11.7% more gold in the fourth quarter, driven by increased volumes of ore deposited and higher ore grades at Herradura, partly offset by decreased volumes of ore deposited and lower ore grade at Noche Buena.

“During the year we have worked hard to minimise the impact of a very tight labour market and to mitigate the impact of the labour reform in Mexico. Our recruitment and training campaigns are now complete and the mines are well staffed for 2023,” he says.

Alvídrez adds that a key highlight in the fourth quarter was the successful tie-in to the national electricity grid of Fresnillo’s new Juanicipio mine. “Commissioning is ongoing and we expect a gradual ramp-up in the coming months. This major new project [will] … mak[e] a sizeable addition to our overall production for many years to come.”

Having achieved Juanicipio's tie-in to the national grid, the focus is to get the pyrites plant connected by the end of the first quarter, with commissioning and ramp-up starting immediately afterwards.

As for production of by-products, Fresnillo produced 6.4% less lead year-on-year in 2022, owing to a decrease in the volume of ore processed and lower ore grade, at Saucito, and decreased ore grade at San Julián.

Decreased lead production was, however, mitigated by increased ore throughput and higher ore grade at Fresnillo and increased contribution from Juanicipio.

In the fourth quarter, production of lead was down 4.9% quarter-over-quarter, owing to decreased ore throughput and lower ore grade at Saucito and a lower volume of ore processed from Juanicipio.

Zinc production in the fourth quarter decreased 9.8% quarter-over-quarter, owing to a decreased volume of ore processed and lower ore grades at Saucito and Fresnillo, and lower contribution from Juanicipio.

In terms of project development, the miner reports that its commissioning of the Juanicipio plant is ongoing, with the project expected to be gradually ramped up, reaching full nameplate capacity in the third quarter of 2023.

For the second half of 2022, Fresnillo expects its adjusted production costs to increase by about 20% to such costs of the first half of 2022, mainly owing to 33.2% more ore processed at Herradura, 6.2% more at Fresnillo mine and 5.6% more produced at Saucito.

Higher cost inflation observed in the second half is also expected to impact production costs, as is an increase of 49% in waste material hauled charged to costs.

Second half of 2022 production costs are also expected to be impacted by increased maintenance as a result of the purchase of additional in-mine equipment and increased personnel costs following the labour reform, an increase in maintenance to guarantee the continuity of operations and increased consumption of diesel and other operating materials owing to longer haulage distances.

Exploration expenses in the second half are expected to be between $165-million and $170-million.

Going forward, Fresnillo’s attributable silver production this year is expected to be in the range of between 57-million ounces and 64-million ounces; while attributable gold production is expected to range between 590 000 oz and 640 000 oz.

Production of silver equivalent ounces this year is expected to range between 104-million ounces and 115-million ounces.