Fresnillo Buys Control of Newmont Venture for $450 Million

Fresnillo Plc, the world’s biggest producer of primary silver, will buy partner Newmont Mining Corp.’s share in a venture in Mexico for $450 million to increase the company’s gold output.

Purchasing the 44 percent it doesn’t already own in the Penmont joint venture will give Fresnillo full ownership of the Herradura, Noche Buena and Soledad Dipolos mines and other exploration properties, the company said today in statement.

“The acquisition will allow us to maximize the value of two of our producing gold mines,” Fresnillo Chief Executive Officer Octavio Alvidrez said today in a call with reporters.

The acquisition will see Fresnillo increase its 2018 gold production target to 750,000 ounces from 500,000 ounces, the company said. The deal will add 2 million ounces of gold to Fresnillo’s reserve base and 5.1 million ounces to its resource base.

Fresnillo shares gained as much as 1.5 percent to 831.50 pence and traded at 822 pence as of 8:22 a.m. in London. The stock has risen almost 10 percent this year.

With full ownership of Penmont, gold production this year will be between 600,000 ounces and 620,000 ounces, Fresnillo said. Output for Fresnillo alone would be 4 percent to 8 percent lower than a target of 450,000 ounces as work continues at the Herradura mine. The company said it will make up for the reduction next year.

Fresnillo may also consider hedging some of the gold mines, given the size of the acquisition, Chief Financial Officer Mario Arreguin said.

“This is something that we could obviously do and would consider doing,” Arreguin said on the call with reporters. “Given the size of the investment, we would definitely consider doing it.”

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