Operations

Location:

It is located approximately 60 kilometres northwest of Zacatecas City, the capital of the State of Zacatecas, in one of the oldest mining dristricts of Mexico.

Products:

Silver and gold contained in lead and zinc concentrates.

Milestones:

2009 - Fresnillo production capacity expands by de-bottlenecking from 2,300,000 to 2,500,000 tonnes per year.

Employees:

During 2009, an average of 894 persons were employed at Fresnillo and 637 contractors.

Fresnillo Mine Production

	4th Q 2009	Full year 2009
Silver (kOz)	8,700	33,776
Gold (Oz)	6,079	24,008
Lead (t)	3,194	11,058
Zinc (t)	2,743	11,510

The Fresnillo mine, which is 100% owned by Fresnillo, is the world's largest primary silver mine. It has been in near continuous operation since 1550. It is located approximately 60 kilometres northwest of Zacatecas City, the capital of the State of Zacatecas, in one of the oldest mining districts in Mexico. The unit consists of an underground mining operation and a concentrator plant. 

Total annual silver production in 2009 reached a new record high of 35.4 million ounces as a result of the increase in ore milled. Lead production increased mainly as a result of higher ore grade, while zinc production remained stable. The preparation of additional stopes at Fresnillo has led to higher operational flexibility and better grade control.

Production figures for the Fresnillo mine do not include ore from the development works at Saucito processed at the Fresnillo mill. Metal contents from Saucito in 2009 totalled 735,744 silver ounces, 2,880 gold ounces, 88 tonnes of lead and 65 tonnes of zinc, all of which are included in the total production figures but not in those of the Fresnillo mine.

Over the course of the year, 105,263 metres of diamond drilling was conducted, resulting in a 55.0% increase in the mine's total resources, from 34.0 million tonnes at 538 g/t of silver to 52.7 million tonnes at 374 g/t. Promising potential remains in the western zone of the mine. Based on proven and probable reserves, the expected life of the mine is 12.8 years, compared to 12.5 years in 2008.

Productivity and cost reduction initiatives

A new water treatment plant became fully operational in November, following an investment of US$4.3 million. This project allows sewage water from the Fresnillo municipality to be obtained at no cost, and once treated, it is used in the milling process instead of fresh water. This preserves local aquifers, reduces the Group's fresh water costs and lowers the municipality's water treatment costs. The plant has capacity to treat 150 litres per second; and cost savings from the reduction of fresh water consumption will be fully realised in 2010 onwards.

Construction of a new shaft to extract mineral from the western zone of the San Carlos vein is underway, with the structure of the concrete head frame completed in December. Sinking advanced 342 metres of a planned total 557 metres. This US$19.1 million project, which will reduce haulage costs, is expected to be concluded by 1H 2011. The second stage of the project will be developed six or seven years after the shaft is operational, to access ore resources at deeper levels.

In 2009 implementation of Six Sigma quality control methodology was initiated at the beneficiation plant to increase milling capacity and recoveries.