13th Feb 2015 07:53
LONDON (Alliance News) - Fresnillo PLC Friday said a number of items including foreign exchange and write-downs will impact its financial results for 2014.
The silver producer said foreign exchange movement in 2014 between the dollar and the Mexican peso will lead to a deferred tax charge of around USD55 million, but said it will have "no corresponding effect on cashflow during the period".
Fresnillo also is expecting to record a USD25 million foreign exchange loss on the devaluation of the Mexican peso, which also is not expected to effect cashflow in the period.
Fresnillo has re-assessed its plans for the Soledad and Dipolos operations in Mexico, where the company is focused, and said it will record a USD17 million write-down of plant and equipment that could not be utilised or reassigned at the project.
The company said the Herradura project and the dynamic leaching plant at the site was only operational for three-and-a-half months in the first half of the year before being fully operational in the second half. As a result, the company is expecting depreciation to be USD30 million higher in the second half than in the first half of the year, it said in a statement.
In addition, Fresnillo is expecting an adverse impact on its cost of sales due to the ramp up at Herradura in 2014 and the start up of the leaching plant, which suffered some processing capacity issues in the period, resulting in a hit to gross profit of around USD20 million, which will be recorded as a cash item, the company said.
Following a re-evaluation of its Silverstream operations, also in Mexico, Fresnillo is expecting to record a USD75 million gain based on an increased resource grade at the Salinbas project, lower discount rates, higher-than-expected production, and amortization effects, said the company.
By Joshua Warner; [email protected]; @JoshAlliance
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