4th Aug 2015 10:27
LONDON (Alliance News) - Mexico-focused precious metals miner Fresnillo PLC on Tuesday said its gold and silver production both rose in the first half, but its pretax profit plunged as the prices for its metals dropped heavily.
The FTSE 100-listed company said its pretax profit for the six months to the end of June was USD136.1 million, sharply down from the USD208.2 million it posted a year earlier, despite total revenue rising to USD752.3 million from USD677.1 million. On the back of the fall in pretax profit, Fresnillo said it will pay an interim dividend of 2.1 US cents, less than half the 5 cents it paid out a year earlier.
The group's silver production in the half was up by 11% to 23.8 million ounces from 21.5 million ounces a year earlier, while gold production increased to 364,020 ounces from 265,670 ounces, up 37%. But despite the rise in production, Fresnillo said its realised price for silver fell by 18% in the half, while its realised price for gold was down 7.4%. The fall in realised prices, plus the operational challenges it faced at the Fresnillo mine, where it experienced lower ore grades, drove down profit.
Back in its second quarter trading update in July, Fresnillo upgraded its production guidance for the year for gold to between 715,000 and 730,000 ounces from 670,685 ounces, mainly thanks to production from the now-operational Herradura site, which had suffered a temporary explosives permit suspension a year earlier. Fresnillo also had cited increased contribution from the Saucito and Noche Buena mines. Silver production guidance for the year was maintained.
Fresnillo added that the positive drilling results from the Ciénega and Juanicipio will mean its inferred resource estimate will be increased.
But the company said stage 1 of the San Julián mine project is now expected to be commissioned in the first quarter of 2016, delayed from its previous expectation of the fourth quarter of 2015. The Pyrites project remains on track for production to start in 2017, it said. In addition, Fresnillo cut its capital expenditure guidance for the full year to USD570 million, down from USD700 million previously.
"The pricing environment remains challenging, with ongoing precious metals price volatility. Our strategic objectives remain unchanged, and we continue to take a long-term view, but we will also take into account the effect of market dynamics on our operating assumptions, if necessary deferring expenditures without compromising the profitable growth we continue to deliver, as evidenced by our reduced capital expenditure estimate for the full year 2015," said Chief Executive Octavio Alvídrez.
"We are fortunate to have both the financial and operational flexibility to adapt to market conditions as needed. Our high-quality, low-cost assets and significant quality growth pipeline, combined with our balance sheet strength, leave us in a strong position even in challenging market circumstances," Alvídrez added.
Fresnillo shares were up 1.5% to 642.50 pence on Tuesday, rising in line with other blue-chip miners as they recovered from a sell-off of resources stocks on Monday.
By Sam Unsted; [email protected]; @SamUAtAlliance
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