The world's top silver miner Fresnillo declared 2008 to be a milestone year for the company with an all-time high of 34.8 million ounces of silver production, and forecast that this year's production will be in line with last year's totals.
Attributable 2008 gold production was also in line with expectations at 263,000 ounces of gold with this year's production expected to match last year's total.
However, Fresnillo cautioned that in light of the difficult market conditions in 2009, we will focus on critical capex and intermediate and advanced exploration projects only. Nevertheless, the London-based miner declared, We are in a strong position to pursue acquisition opportunities of high quality assets to boost our rate of growth.
Meanwhile, Fresnillo said the company anticipates significant decreases in the prices of some keys, such as explosives, steel balls and reagents during 2009, which will benefit the company's production costs.
Notwithstanding our solid financial position, Fresnillo plc continues with its cost control programme which is expected to help preserve margins even in the current macroeconomic environment, the company said.
In addition, given the magnitude of the global financial crisis, the Mexican Government is putting in place a series of measures aimed at mitigating the adverse effects on industrial production. Specifically, electrical rates will be reduced between 7 to 20 percent. As energy is one of the key components of the company's production costs, these initiatives will further support our efforts to protect our profitability levels.
Fresnillo has taken a number operational efficiency measures to manage costs more effectively and enhance operating performance. Octavio Alvidrez, head of investor relations for the company, told Reuters that 2009 capex was being reduced by about $25 million to $285 million.
Whilst we remain positive on the evolution of precious metals prices, the global economic slowdown will represent a challenge to the mining industry in 2009, the company said. Containing costs and improving performance will continue to be the priority for Fresnillo.
The company forecast that this year's production at the Fresnillo and Ciénega mines, both in Mexico, will be in line with 2008 production, while Herradura, also in Mexico, is expected to gain a 6% increase over last year's production.
Fresnillo stressed the company intends to maintain its position as the world's largest primary silver producer with the aim of approximately doubling production, on a silver equivalent ounce basis, within the next ten years and increasing its gold production.