Fresnillo shares plunge as COVID absences hit production

Fresnillo now expects its silver production guidance for this year to fall between 50.5 million and 56.5 million ounces. Photo: Jean Luis Arce/Reuters

Fresnillo (FRES.L) shares lost their shine on Wednesday, falling as much as 12%, after the company revealed COVID-related absences weighed on production in its final quarter.

The FTSE 100 (^FTSE) precious metals miner revealed that a fourth wave of infections in Mexico affected staff attendance as the new Omicron strain swept across the country.

It saw the impact of absenteeism mainly due to workers having to self isolate from the second week of December, which has also accelerated throughout January.

Meanwhile, new labour laws restricting the use of contractors also hit workforce availability from 1 September onwards. This in turn hit equipment availability, some of which was previously provided by contractors, and utilisation rates, the company said.

It now expects its silver production guidance for this year to fall between 50.5 million and 56.5 million ounces.

Fresnillo fell as much as 12% on Wednesday after it revealed COVID-related absences weighed on production in its final quarter. Chart: Yahoo FinanceFresnillo fell as much as 12% on Wednesday after it revealed COVID-related absences weighed on production in its final quarter. Chart: Yahoo Finance

Fresnillo fell as much as 12% on Wednesday after it revealed COVID-related absences weighed on production in its final quarter. Chart: Yahoo Finance

Fresnillo also cut its outlook for gold, with fourth quarter gold production suppressed by operational challenges in Herradura, with increased silt restricting the plant’s filter capacity. Gold production came in at 751,200 ounces, down 2.4% on 2020 but ahead of guidance of 675,000 to 725,000 ounces.

Production during the period was down 30% year-on-year at 150,300, which was also a 13% drop from the previous quarter.

The firm, which has seven operating mines in Mexico, slumped to the bottom of London’s benchmark index on the back of the news.

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“Given the challenges presented by both the continued effect of the pandemic and more recent government labour reform initiatives, as well as certain operational issues, we have delivered a creditable performance during the year, with silver production marginally short of guidance, but gold production exceeding expectations,” Octavio Alvídrez, chief executive, said.

“During the year we have also made further progress on our development pipeline, with construction of the Juanicipio plant delivered on time and on budget though we await approval to complete the tie-in to the national power grid which we now expect at the end of the second quarter.”

He added that COVID cases were accelerating in Mexico again.

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