Peoles’ Q1 profits soar (May 22, 2006)

Vancouver — The world’s top silver producer, Industrias Peoles (IPOAF-O), more than doubled its first-quarter profits in 2006 over the previous year’s corresponding period, due to soaring metal prices and a large asset sale.

The company posted 3-month profits of US$104.7 million ($1.14 billion Mexican pesos), up 101% from the first quarter of 2005. Besides reaping the benefit of silver’s surge, the sale of its Pinos Altos gold project to Agnico-Eagle Mines (AEM-T, AEM-N) netted about US$87 million ($949.8 million pesos) in cash and shares for the Mexican-based company. However, a stronger peso offset some of the gains.

Peoles’ mining operations include:

* The Fresnillo underground silver mine — the world’s richest — in Zacatecas state, producing about 34 million oz. silver per year plus about 30,000 oz. gold, 22 million lbs. (10,000 tonnes) lead and over 32 million lbs. (15,000 tonnes) zinc;

* La Herradura open-pit operation in Sonora state, Mexico’s largest gold mine. The 56%-held joint venture with Newmont Mining (NMC-T, NEM-N) produces about 180,000 oz. gold and 33,000 oz. silver per year;

* The highest-grade gold mine in Mexico, La Cenega in Durango state, which produces about 145,000 oz. gold, 1.8 million oz. silver, 22 million lbs. (9,800 tonnes) lead and 24 million lbs. (11,000 tonnes) zinc annually;

* Francisco I. Madero, the country’s largest zinc mine, with annual output of about 145 million lbs. (66,000 tonnes) zinc, 20 million lbs. (9,000 tonnes) lead and 1.4 million oz. silver, as well as minor copper;

* The Sabinas base metal-silver mine in Zacatecas, which produces more than 3.5 million oz. silver, 70 million lbs. (32,000 tonnes) zinc, 17 million lbs. (7,800 tonnes) copper and 11 million lbs. (5,000 tonnes) lead annually;

* Mexico’s largest and richest lead mine, Naica, in Chihuahua state, posts output of 50 million lbs. (23,000 tonnes) lead, 39 million lbs. (18,000 tonnes) zinc and about 3 million oz. silver per year, plus minor copper and gold;

* Tizipa, a joint venture with Dowa Mining (DWMNF-O) (39%) and Sumitomo (10%), annually produces about 3.4 million oz. silver, 56 million lbs. (25,000 tonnes) zinc, 12 million lbs. (5,000 tonnes) lead, and some copper and gold; and

* The Bismark zinc mine in Chihuahua produces about 100 million lbs. (45,000 tonnes) zinc, 3 million lbs. (1,300 tonnes) copper and 380,000 oz. silver per year.

Peoles also owns Met-Mex, the world’s fourth-largest metallurgical-smelting-refining complex and the top producer of refined silver and metallic bismuth. In addition, its Qumica del Rey chemical facility is the world’s largest sodium sulphate-producing plant.

From its own mines, the company posted 2005 silver output of 47.4 million oz., plus over 376,000 oz. gold, 192,000 tonnes (423 million lbs.) zinc and 56,000 tonnes (124 million lbs.) lead.

Listed on the Mexican Stock Exchange, shares of Peoles have risen more than 75% in 2006. The silver giant, founded in 1887, posts a market capitalization of about US$3.5 billion.