Fresnillo slumps as Penoles reports Sabinas mine woes

Fresnillo PLC announced on Tuesday that its largest shareholder and silver production partner, Industrias Penoles SAB, has reported operational challenges at its Sabinas mine in Mexico, which are affecting silver output.

Fresnillo slumps as Penoles reports Sabinas mine woes

After the earnings were published, as a result, Fresnillo's shares fell 6.2% to 634.00 pence each in London on Tuesday morning. Penoles, which owns approximately 75% of Fresnillo, stated that the issues at the Sabinas mine are having a negative impact on silver production. Fresnillo entered into a silverstream agreement with Penoles for the mine in December 2007. The Mexico-focused precious metals producer, however, cautioned that the agreement may require "significant adjustments" due to the ongoing issues at Sabinas.

Company's comment

"Fresnillo and Penoles have begun discussions to assess the scope of the operational difficulties and their potential impact on the silverstream agreement. While it is too early to draw definitive conclusions, Fresnillo believes there is a reasonable chance that this process could result in significant adjustments to the agreement," the company stated. Fresnillo was previously a wholly owned subsidiary of Penoles before it was partially spun off in an initial public offering on the London Stock Exchange in May 2008.