Mexico's Penoles says miner Fresnillo not for sale

MEXICO CITY, Jan 24 (Reuters) - Mexican mining company Penoles PENOLES.MX quashed speculation on Monday that it planned to sell its majority-owned subsidiary Fresnillo FRES.L, the world's largest primary silver producer.

A rumor resurfaced earlier this month that Minera Frisco MFRISCOA1.MX, controlled by Mexican billionaire Carlos Slim, might bid for the London-listed gold and silver producer, lifting Frisco's shares.

“Neither Penoles, nor Fresnillo are for sale. Recent media reports are not true,” Penoles said in a statement to the Mexican stock exchange.

Rumors of Slim’s alleged interest in Fresnillo first emerged several months ago and reappeared in Mexican newspapers in mid-January, after the world’s richest man listed Frisco as a separate company on the stock exchange.

Analysts have dismissed the rumors as unlikely since Slim has a penchant for buying struggling businesses cheaply and then turn them around to profitability.

Fresnillo produced record levels of gold and silver in 2010, beating its targets at a time of higher precious metal prices, and said output should continue to rise this year. [ID:nLDE70C25P]

The company’s success would make it an expensive buy.

In the first 11 days of trading, Frisco’s stock rallied 74 percent from its spinoff auction price, Santander said in a report on Monday, initiating its coverage of Slim’s mining company with a hold recommendation.

“We believe that the significant growth in production ... is the main driver behind this rally. With silver production projected to quadruple, and gold production to triple, which would make Frisco the fastest-growing company in our Latin American universe of coverage,” wrote Santander’s Victoria Santaella. (Reporting by Mica Rosenberg; editing by Gunna Dickson)