Industrias Peñoles, the Mexican conglomerate and largest global producer of refined silver, faced a major setback as it reported a net loss of US$39mn in the first quarter of 2024. This was a stark contrast to the US$3.4mn profit it made in the same period last year, sending shockwaves through the Mexican stock market.
The company attributed the loss to higher production costs and a substantial inventory movement charge of US$23.7mn. Last year, Peñoles had accumulated zinc inventories to meet customer demands in the US, which ultimately led to higher costs this year.
Following the release of these disappointing results, the company’s shares plummeted by 12.4%, marking its worst day on the Mexican stock market in over four years. This significant drop wiped out approximately 14.5bn pesos (US$860mn) from its market value.
Despite reporting revenues of US$1.40bn, slightly lower than market expectations, Peñoles struggled with lower prices of base metals like zinc, copper, and lead. The company’s efforts to offset these challenges with increased processed volumes of zinc and higher gold and silver prices were not enough to maintain profitability.
Looking ahead, Fitch Ratings had forecasted a potential improvement in Peñoles’ profitability for 2024. The company’s mining activities are conducted through its subsidiaries Fresnillo plc and Minas Peñoles, with operations in Mexico, Peru, and Chile. Investors and industry observers will be closely monitoring Peñoles’ strategies and performance in the coming months as it strives to navigate through these turbulent times.
