During a conference call Tuesday to discuss financial results, Fresnillo management said they will continue to stress exploration this year, authorizing a 58% increase in the exploration budget to $77.6 million.
The world's largest primary silver producer's 2009 exploration program added 173.6 million ounces of silver to the resource base for a 15.6% increase, and also added 1.9 million ounces of gold for a 15.8% increase.
As of December 31, 2009, Fresnillo reported total proven and probable gold reserves of 4.26 million ounces, up 3.5%, while silver proven and probable reserves dropped 8.8% to 374 million ounces. Proven and probable lead reserves were reported at 510,000 tonnes while zinc reserves were reported to be 958,000 tonnes.
In a presentation to analysts Tuesday, Fresnillo Vice President of Exploration David Giles estimated the Fresnillo mine now has 12.8 years of mine life, Ciénega has 13.5 years, and Herradura with 11.9 years.
During 2009 the company completed the Soledad-Dipolos gold and silver project, which is held by a joint venture between Fresnillo (56%) and Newmont (44%). As commercial production commenced in January, Soledad-Dipolos is expected to increase Fresnillo's total gold production by 20% this year or 100,000 ounces. The new mine's gold production is eventually expected to be 130,000 ounces annually.
Fresnillo CEO Jamie Lomelín told analysts silver production this year is expected to be in line with the record attributable production of 38 million ounces, a 9% increase over 2008 production.
Meanwhile, the Saucito development project construction remains on track for start up in 2011. Located six kilometers southwest of Fresnillo, the project is expected to yield 4.7 million ounces of silver and 22.5koz of gold during its first year of production. Project capex is estimated at US$309 million.
During the conference call, Lomelín said the company's 2010 capex budget is $450 million, much of it allocated for expansion of current operations although $129 million will be allocated to the Saucito project. Saucito ore is already being processed in the Fresnillo mill and is contributing to silver production.
Lomelín noted that the company is on track to deliver one new mine or mine expansion annually until 2014. Fresnillo aims to mine 65 million ounces of silver and more than 400,000 ounces of gold annually by 2018.
Disclosure: The author holds no positions in the company