* Q2 silver output rises to record 9.6 mln ounces
* Confident to meet year target of 5-6 pct higher output
* Looking for other takeover targets in Mexico
* Shares up 2.2 pct, fourth biggest gainer in FTSE 100
(Adds conference call, shares)
By Eric Onstad
LONDON, July 16 (Reuters) - Mexico's Fresnillo Plc <FRES.L>,
the world's largest primary silver producer, mined a record
amount of the metal in the second quarter and expects that
positive trend to continue, it said on Thursday, boosting its
shares.
The cash-rich firm, which last month dropped a hostile
takeover bid for MAG Silver <MAG.TO>, also said it was looking
for other possible targets.
The London-listed group posted a 6.7 percent rise in
attributable silver production to a record 9.6 million ounces in
the three months to end June, from 9.0 million in the same
period last year.
Gold production fell 1.5 percent to 68,000 ounces, added
Fresnillo, a unit of Mexico's Penoles <PENOLES.MX>.
Cazenove said in a research note that the production figures
were in line with estimates.
"Since listing in May last year Fresnillo has established
itself as the default silver play in the UK market and today's
results should further cement that position," it said,
reiterating its "in-line" rating.
Fresnillo shares, which have more than doubled so far this
year, gained 2.2 percent to 570.75 pence by 0805 GMT.
It was the fourth best performer in a weaker FTSE 100
<.FTSE> and outperformed a 1.4 percent fall in the UK mining
index <.FTNMX1770>.
"Management remains confident of achieving its full year
2009 production target levels," the company said in a statement,
which did not give figures for the target.
Octavio Alvidrez, head of investor relations, told a
conference call that full-year production of both silver and
gold was expected to rise about 5-6 percent. In 2008, Fresnillo
produced 264,000 ounces of gold and 34.8 million ounces of
silver.
LOWER COSTS
Costs were down, but figures would have to wait until
interim results were released on Aug. 17, Alvidrez said.
"The great majority of those lower costs have to do with
foreign exchange, with the devaluation of the peso, but also we
have also seen some lower input costs, especially in steel and
explosives."
For 2008, Fresnillo posted a 10.8 percent fall in
attributable profit, hit by foreign exchange losses and higher
taxes. [ID:nLK344796]
Silver prices <XAG=> have gained about 17 percent this year
and were indicated at $13.23 per ounce on Thursday morning.
Alvidrez said Fresnillo, which had $212 million in cash at
the end of last year, was looking at other possible acquisitions
after announcing on June 22 that it had dropped a hostile
takeover offer worth $179 million for MAG Silver. [ID:nLM673966]
"Right now, our main growth platform remains organic
growth... but also with the position of the company, with no
debt on the balance sheet and with a strong cash position, we
are looking for some other alternatives basically in Mexico."
Fresnillo, which has a stake of just under 20 percent in
MAG, was interested in MAG's 44 percent holding in the
Juanicipio project that sits near its flagship mine.
The firm was now looking at consolidating its position in
areas near some of its other mines so it could utilise existing
infrastructure, Alvidrez said.
(Reporting by Eric Onstad; Editing by David Holmes and Simon
Jessop)
Keywords: FRESNILLO/
