By Alex MacDonald
LONDON–Mexican precious metals producer Fresnillo PLC (FRES.LN) said Wednesday that a court ordered stoppage of its majority-owned Dipolos open pit mine won’t have a material economic impact on the company.
Gabriela Mayor, head of Fresnillo’s investor relations, told journalists in a conference call that Minera Penmont, a joint venture between Fresnillo and Newmont Mining Corp. (NEM), received a court order over the weekend to vacate the surface area of its Dipolos open pit mine.
As a result, Minera Penmont, which is 56% owned by Fresnillo and 44% owned by Newmont, has stopped production at both the Dipolos and Soledad open pit mines. It will no longer mine the Dipolos open pit mine but will restart operations at Soledad once the beneficiation plant at Dipolos has been relocated to a yet-to-be determined site.
The court order is expected to reduce the company’s full-year attributable gold output by 5.1% or 25,000 troy ounces to 465,000oz, the company said.
“The economic impact will not be material,” Ms. Mayor said. The Soledad-Dipolos complex only has three years of mine life left and has the lowest mine life out of all of Fresnillo’s assets, she said.
Ms. Mayor said it was too early to say whether next year’s gold output will be affected by the court order (given the need to relocate the beneficiation plant) but she said that she doesn’t “believe that 2014 will be that affected.” An update will be provided in two weeks, she said.
Ms. Mayor also said that there are no write downs planned at the moment as a result of this year’s steep drop in gold and silver prices. Fresnillo is one of the world’s lowest-cost silver producers with cash costs at the bottom quartile of the cost curve.
Nevertheless the company said it continues to review all of its exploration and capital expenditure budgets, with a view to prioritising projects with the greatest potential. The company will give more details about its capital expenditure plans and how it will finance them at its interim financial results on Aug 6, Ms. Mayor said.
Fresnillo’s shares were up 2.5% at 1,041 pence a share as of 0759 GMT while the FTSE 350 mining index was up 1.6%.
Write to Alex MacDonald at [email protected]