UPDATE 1-Mexico’s Fresnillo says to be No. 1 silver miner

* Fresnillo’s silver, gold output to jump next year

* Mexico to surpass Peru as world’s top silver producer

* Company steers clear of metals hedges
(Recasts, updates with quotes, details, byline)

By Mica Rosenberg and Krista Hughes

MEXICO CITY, Dec 23 (BestGrowthStock) – Mexican miner Fresnillo
says aggressive expansion plans at its local mines will vault
it into first place as the world’s top silver producer next

Mexico will push ahead of Peru in 2011 as the world’s No. 1
silver producer largely due to Fresnillo’s domestic growth,
Chief Executive Jaime Lomelin and Chief Financial Officer Mario
Arreguin told Reuters on Thursday. All of Fresnillo’s operating
mines are in Mexico.

As the company’s Saucito development project in central
Mexico comes online, Fresnillo will increase silver production
to between 42 million and 43 million ounces next year, Lomelin
said — about 6 percent of global output.

Fresnillo now advertises itself as the world’s largest
primary silver producer because it controls more silver mines
than any other company, but global miner BHP Billiton (BLT.L: )
produces more silver overall as a byproduct from other metals.

“Next year, Fresnillo will be the No. 1 producer of all
types of silver,” Lomelin said.

Encouraged by rising silver prices (XAG=: ), which nudged up
to $29.24 an ounce in late New York trade on Thursday,
Fresnillo is broadening exploration at existing mines and some
potential sites in Peru.

“As long as there continues to be investor appetite, silver
(prices) will stay where they are or continue to rise,”
Arreguin said at the company’s Mexico City offices.

Mexican miner Penoles (PENOLES.MX: ) spun off Fresnillo
(FRES.L: ) as its precious metals unit and offered shares in

So far Fresnillo has shied away from hedging its production
against price volatility and has no plans to change its

“Our investors don’t want to hedge. They want to take on
the price risk,” Lomelin said. “As long as the investors don’t
want to,” there will be no hedging, he said.

Increased capacity at the Soledad-Dipolos mine near the
U.S.-Mexico border will also boost total gold production to
around 400,000 ounces in 2011, he said. The company operates
some mines in joint ventures in which it only owns a portion of
the output.

In its third-quarter report, Fresnillo said it was on track
to meet a 2010 production target of 41.1 million ounces of
silver and 340,000 ounces of gold.
(Editing by Steve Orlofsky)

UPDATE 1-Mexico’s Fresnillo says to be No. 1 silver miner