Fresnillo Q3 production falls; Warns on labour shortages, inflation

(Sharecast News) - Mining company Fresnillo reported lower silver and flat gold production in the third-quarter as it warned of the impact of labour shortages and inflationary pressures.
The company on Wednesday said total silver production was down 4.7% to 12.7m ounces year on year for the three months to September 30. The fall was 15% compared with the prior three months.

Gold output in the period fell to 172,500 ounces, down 0.1% from a year ago and a 14% decline from the second quarter.

Fresnillio said it was on track to meet 2021 guidance of 53.5m - 59.5m ounces of silver and 675,000 - 725,000 ounces of gold.

"We continue to monitor the possible impact of the labour reform and general shortage of personnel, as well as potential headwinds, in particular inflationary pressures and the average revaluation of the Mexican peso vs US dollar, which may impact costs," the company said.

New labour reform in Mexico restricting the ability to subcontract labour came into effect last month resulting in Fresnillo internalising a proportion of its contractor workforce.

The company said contractor uptake has varied, with underground mines, in particular in the Fresnillo District and at Cienega, more affected due to a higher number of contractor workforces on site "resulting in an increased number of staff vacancies and a higher workforce rotation".

"This in turn has affected equipment availability and utilisation rates. We continue to take a series of actions to mitigate this impact, including new recruitment campaigns, training and investment in new equipment," Fresnillo said.

"These actions will continue in the following months and we expect volumes to gradually return to a normalised level during 2022. The transition has been largely seamless in our open pit mines."