San Julián (Phase I and II)

 

Ownership: 100% Fresnillo plc
Location: Chihuahua/Durango border
Commodity: Silver/Gold
Facilities: Underground mine, flotation plant and a dynamic leaching plant
Workforce: 125 employees, 1,411 contractors
Operational since: 2H16 (Phase I) / 1H17 (Phase II)
Anticipated Production: Avg. annual production of 14.2 moz silver, 49.3 koz gold
Pre-operative Capex: US$515 million
Life of Mine: 9.0 Years

The San Julián silver-gold project is a cornerstone of our 2018 production goals. Contributing 18% of total silver production and generating 6.9% of total adjusted revenue (2017). The geological potential identified in the region thus far may be sufficient to establish a new mining district in the future. The San Julián project includes construction of two plants: i) a dynamic leaching plant to treat ore from the veins and ii) a flotation plant with 6,000 tpd capacity to process ore from the disseminated body.


Quarterly Production

 

3Q18

3Q17

% change

2Q18

Ore processed - Phase I(t)

332,836

333,674

-0.3

289,775

Ore processed - Phase II (t)

561,808

448,150

25.3

540,261

         

Production - Phase I

       

Gold (oz)

18,458

22,493

-17.9

19,584

Silver (koz)

1,347

1,495

-9.9

1,263

         

Production - Phase II

       

Gold (g/t)

994

967

2.8

513

Silver (g/t)

2,279

2,004

13.7

2,270

Lead (%)

1,263

1,661

-24.0

1,493

Zinc (%)

5,041

3,282

53.6

5,254

         

Ore grades - Phase I

       

Gold (g/t)

1.84

2.12

-13.1

2.12

Silver (g/t)

137.19

148.09

-7.4

144.58

Ore grades - Phase II

       

Gold (g/t)

0.11

0.13

-17.6

0.07

Silver (g/t)

155.54

169.26

-8.1

156.71

Lead (%)

0.40

0.52

-23.3

0.42

Zinc (%)

1.33

1.13

18.0

1.26

Financial Highlights

Adjusted Revenue (US$m, FY17)

287.2 % 326.1 Change

Segment Profit (US$m, FY17)

174.7 % 281.4 Change

Capital Expenditure (US$m, FY17)

79.1 % (41.0) Change

Exploration (US$m, FY17)

2.5 % n/a Change

Production Highlights: 3Q18

San Julián (Phase I – veins):

  • Quarterly silver production decreased 9.9% vs. 3Q17 as a result of the lower ore grade due to the depletion of the higher grade areas and, to a lesser extent, lower recovery rate.

  • Quarterly silver production increased 6.7% vs. 2Q18 as a result of the higher volume of ore processed now that sufficient water volumes are available (after a shortage of water as reported in the Q2 Production Report). This positive effect was partly offset by the lower ore grade and recovery rate.

  • Year to date silver production decreased 9.4% vs. YTD17 as a result of lower ore grade and lower volume of ore processed.

  • The expected silver ore grade for the full year 2018 is in the range of 150-160 g/t.

  • Quarterly and YTD18 gold production decreased 17.9% and 10.0% vs. 3Q17 and YTD17 respectively, mainly as a result of a lower ore grade due to the depletion of higher ore grade veins.

  • Quarterly gold production decreased 5.7% vs. 2Q18 as a result of lower ore grade and an increase in inventory levels during 3Q18 as opposed to a reduction in inventory levels during 2Q18 when there was a shortage of water supply. This was mitigated by an increase in the volume of ore processed.

  • Expected average gold grade for the full year 2018 remains unchanged at 1.9-2.1 g/t. 

  • During the period, the Group successfully concluded the indigenous consultation required to obtain the permits for the construction of a water reservoir that will provide a consistent source of water. Permits have been granted and the construction of this facility, which is expected to take one year, has begun.

San Julián (Phase II – JM disseminated ore body):

  • Quarterly and year to date silver production increased vs. 3Q17 and YTD17 respectively as a result of higher volumes of ore processed following the start of operations at San Julián JM (Phase II) in July 2017. This offset the lower ore grade.

  • Quarterly by-product gold production slightly increased 2.8% vs. 3Q17 as a result of higher volume of ore processed, offsetting a lower ore grade. 

  • Year to date by-product gold production increased vs. YTD17 as a result of the ramp-up of operations, which more than compensated for the lower ore grade and recovery rate.

  • Quarterly gold production increased significantly vs. 2Q18 due to higher ore grade, recovery rate and higher volume of ore processed.

  • Expected silver ore grade for 2018 continues to be in the range of 145-155 g/t. 

  • Quarterly by-product lead production decreased 24.0% and 15.4% vs. 3Q17 and 2Q18 respectively as a result of lower ore grades and recovery rates. Year to date lead production increased due to higher volume of ore processed, which was partly offset by the lower ore grade and recovery rate.

  • Quarterly and year to date by-product zinc production increased vs. 3Q17 and YTD17 respectively driven by the higher volume of ore processed, ore grades and recovery rates. Quarterly by-product zinc production decreased 4.1% vs. 2Q18 due to a lower recovery rate.

Performance Highlights: 1H18

San Julián (Phase I):

  • Nameplate capacity of 3,000 tpd – Currently operating at c. 3,600 tpd

  • Expected lower ore grade due to less availability of the higher silver grade areas

  • Lower volume of ore processed as a result of the low water availability

San Julián (Phase II):

  • Nameplate capacity of 6,000 tpd – Currently operating at 6,400 tpd

  • Extraction of ore from lower grade areas & processing ore from the development stockpile due to low water availability

  • Resulted in temporarily deviating from original production plan

Performance Targets - 2H18

  • Initiatives in place to collect process water now ensure the plant will run at full capacity in 2H18 and going forward
  • Construction of wells for water collection while continuing the process to obtain permits for the construction of the water reservoir
  • Continue preparation and development of the mine
  • Identify, explore and evaluate the District's geological potential