UPDATE 2-Fresnillo upbeat on 2012 silver output targets

Wed Jul 18, 2012 6:41am EDT

Related Topics

* Sees full-year gold, silver production meeting targets

* Confident on long-term goals, finds more gold

* Q2 silver output down 12.6 pct vs Q2 2011

* Q2 gold output up 15.4 pct vs Q2 2011

* Shares up 3.8 percent

By Sarah Young

LONDON, July 18 (Reuters) - Mexican precious metals producer Fresnillo is on track to meet silver and gold output targets for this year, helped by the ramping up of production at its new Saucito mine.

The world's largest primary silver producer said on Wednesday silver output at Saucito was building up successfully and a plant being built to process gold at Herradura was progressing well, giving it confidence about the long term.

It also said it found more gold at both its Noche Beuna mine and its flagship Fresnillo mine.

Shares in the FTSE 100 miner climbed 3.8 percent to 1,461 pence at 0855 GMT, making the company the top gainer on Britain's blue chip index, and outperforming other mining companies in Europe which were collectively trading 0.6 percent higher.

"The good read-through was more on the project side. They've found more gold for Noche Beuna, looks like they're going to expand capacity, and then they've also found a couple of extra veins at the Fresnillo mine," Numis analyst Cailey Barker said.

Royal Bank of Canada analyst Jonathan Guy highlighted that a less solid performance at rival miners made Fresnillo's in line performance stand out.

"A lot of the big gold miners have disappointed both in terms of production and guidance recently, so a company coming in on track with all their development projects on track, is a significant outperformance relative to the rest of the sector," he said.

HITTING TARGETS

Fresnillo posted a 12.6 percent fall in silver output in the three months to June 30, compared to the same period last year, due to falling grades at the Fresnillo mine. But the company was still confident of meeting an annual production target of 41 million ounces of silver.

Silver production from Saucito, which started operating in 2011, and higher ore grades from another mine, Cinega, helped compensate for lower ore grades being produced at the Fresnillo mine, where silver has been mined for 500 years.

"We will continue focusing our efforts towards stabilising production at our Fresnillo mine, delivering growth through new operations and discovering new deposits of precious metals," Chief Executive Jaime Lomelin said in a statement.

Quarterly gold production was positive, jumping 15.4 percent to 127,003 ounces to reach a record level for the quarter, Fresnillo said, putting it on track to meet its annual output target of 460,000 ounces of gold.

The company said the expansion of gold milling capacity at its Fresnillo mine, and the coming onstream of the Herradura plant next year, would help cement the group's position as a gold-producer in its own right.

Fresnillo, whose shares have fallen 9 percent in the last three months, has a market capitalisation of about 10.5 billion pounds ($16.4 billion).

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