It’s been a disappointing start to 2021 for the Fresnillo (LSE: FRES) share price. The silver digger has fallen 17% in value since New Year trading started on January 4.
The price of the FTSE 100 firm has dropped an eye-watering 12%+ so far on Wednesday. Broad risk-aversion across UK share markets hasn’t helped the commodities giant’s cause. The FTSE 100 and FTSE 250 are down 2% and 1% in afternoon trade and are still slipping.
Fresnillo’s also tracking precious metals prices southwards. At $24.80 per ounce, silver is down around 60 cents on the day. Meanwhile gold, at $1,840 per ounce, is down around 10 bucks.
However, Fresnillo’s share price has dropped mainly as a consequence of production downgrades for 2021. Here’s what the precious metals firm, the biggest FTSE 100 faller in mid-week trade, has announced today.
Fresnillo expects gold output will drop
In its latest production update, Fresnillo — which operates a slew of silver and gold assets across Mexico — reduced its full-year gold forecasts for the new year.
The digger said that it expects to pull between 675,000 and 725,000 ounces of the yellow metal out of the ground this year. This compares with the 769,618 ounces which Fresnillo produced back in 2020.
Explaining the reasons for 2021’s predicted fall, Fresnillo said that this was mainly due to “a minor landslip at Noche Buena… and a lower ore grade at Ciénega.” The company said that the landslide has affected access to the deeper parts of the Noche Buene mine, which has in turn affected mining sequencing.
Fresnillo’s gold production in 2020 represented a 12% year-on-year fall. But production in the fourth quarter of last year rocketed 25% from the prior three-month period. The mining giant said that this reflected “higher volumes of ore processed, ore grade and recovery rate at Herradura.” Third-quarter production had been hit by Covid-19 operational restrictions earlier in 2020, which reduced ore deposits at its open pits and subsequently hit the recovery cycle at its leaching pads.
Silver production tipped to rise
In other news on a key part of its business, Fresnillo said that it expected to produce between 53.5m ounces and 59.5m ounces of silver in 2021.
The firm explained that this would be down to “the Covid-19-related impact on the timings of the Juanicipio development and delay to the start of operations of the Pyrites Plant at Fresnillo.” A 20-day partial shutdown at the San Julián lead circuit and reduced production from the Saucito asset would hit volumes too, Fresnillo said.
In 2020, the business posted total output of 53.1m ounces, down 3% year-on-year. Fourth-quarter production, meanwhile, also dropped 3% from the third quarter. This was caused by “a lower ore grade and volume of ore processed at Saucito,” Fresnillo said. Though this was offset by a higher ore grade at its San Julián Disseminated Ore Body (DOB).
Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Fresnillo. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.