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Fresnillo brings forward Juanicipio production targets, shares jump

(Reuters) - Fresnillo FRES.L said on Monday it expects to start production at its Mexican joint venture with Canada's MAG Silver MAG.TO earlier than expected this year, raising its expectations for initial output while wearing $45 million (35 million pounds) in additional costs.

Fresnillo, which cut its full-year production forecasts four times last year, has been striving to cut capital investment and costs after core profits almost halved in the first six months of 2019.

But it said it would now see Juanicipio reach 85% of planned capacity in the fourth quarter of 2021, compared to previous guidance of 65%.

Its stock, which has recovered steadily from a three-year low in recent months, jumped 6% in response to hit a seven-month high, also helped by a more than 2% jump in gold prices globally due to coronavirus concerns.

By 0806 GMT, the stock, which fell out of the UK bluechip index in December, was among the top gainers on the mid-cap FTSE 250 .FTMC.

Fresnillo said a pre-operative capital cost of $395 million, estimated in early 2018, had been revised to $440 million.

Fresnillo is constructing, developing and operating the Juanicipio mine and holds a 56% stake in the venture, with MAG Silver owning the rest.

The standalone project, which is located in the Fresnillo District, is expected to produce 11.7 million ounces of silver and 43,500 ounces of gold annually once operational.

To compare, Fresnillo reported silver production of 51.8 million and gold output of 875,913 for 2019.

Reporting by Muvija M in Bengaluru; Editing by Bernard Orr and Patrick Graham

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