Davis Index: Market Intelligence for the Global Metals and Recycled Materials Markets

Rising production costs and inventory changes impacted Industrias Peñoles, S.A.B. de C.V.’s (Peñoles) net income in 2019, despite growing output and refining capacity for lead, zinc, and copper.


The miner reported a 1.2pc increase in lead production that rose to 84,332t (76504.3mt) in 2019 from 84,325t in 2018. Zinc output also rose by 0.9pc to 292,291t last year from 289,638t during the year prior. However, copper production decreased by 12.4pc in 2019 to 8,806t from 10,050t in 2018, even though copper cathode output increased by 6.1pc to 22,488t from 21,198t in 2018.


In Q4 2019, however, mineral output across all ores—except copper cathode—mined by Peñoles decreased due to lower grades across its mines. The Mexican miner reported a 7.1pc decrease in lead output during the quarter to 21,637t compared with 23,294t mined in Q4 2018. 


Zinc production also decreased by 2.3pc to 75,713t in Q4 2019 from 77,491t during the same period in 2018. Copper output fell by 16pc in Q4 2019 to 2,112t from 2,516t in Q4 2018, while copper cathode output increased by 5.3pc to 5,276t from 5,008t during the same comparable periods.


The company’s refining operations fared better across all metals in 2019, with refined lead production increasing by 14.2pc to 118,889t from 104,107t a year earlier. In Q4 2019, refined lead production increased by 13.5pc to 32,630t from 28,740t during the same quarter in 2018. 


Refined zinc production rose by 23.9pc in 2019 to 283,611t from 228,842t in 2018, and increased by 33.4pc in Q4 2019 to 75,628t from 56,705t during the same quarter in 2018. Peñoles indicated that the increase in refined production, especially for zinc, was mainly due to the company increasing its refining capacity. The miner added another 120,000t a year in January 2020, bringing its annual refining capacity to 350,000t.


The higher production volumes were also reflected in a 1.9pc increase in the company’s sales, which grew to around $4.472 bn in 2019 compared with $4.39bn in 2018. Of its total sales, the company achieved 10.2pc growth in Q4 alone with $1.126bn, up from $1.02bn during Q4 2018. 


Peñoles’ cost of sales increased in 2019 because of inventory changes and higher production costs, which the company attributed to growth projects starting, as well as its smelter capacities expanding. These also impacted the company’s net income with its EBITDA declining by 24.7pc to $968.7mn in 2019 from $1.28bn in 2018.

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