Fresnillo had a horrible H1 in 2019 and hence the lack of participation in the current gold rally. The punishment for taking a 24% depreciation charges and revising down production by 5% for upgrading various facilities and dealing with on-going short term issues is providing an excellent buying opportunity. The capex for the new mine which they own 56% will yield 6M ounces of silver per year from late 2020 at a cost of $5 AISC. The entire mine cost is repaid back in two years and has 9 years of follow on payback as a minima. It also adds 20,000 ounces of gold per year as the cherry on top. This development stabilises Fresnillo on its silver production side. The upgrade on one of its gold mines that is now happening should see production on gold stabilise next year to expected levels. The company is implementing cost controls across the business.
I will be going through the debt repayment schedule and other costs today. I agree with a lot of the broker coverage that Fresnillo is likely to very good value in 2020. I believe Fresnillo might actually be the best pick of miners for future investment and one to include on the list.