Lower silver prices impact Fresnillo's full-year profits

Profit contracted by 19 per cent to 845m dollars for the year ended December 31st at FTSE 100 gold and silver producer Fresnillo.

Profit contracted by 19 per cent to 845m dollars for the year ended December 31st at FTSE 100 gold and silver producer Fresnillo.

In its financial results for the year, the group said that the impact on profit was mostly due to four things: lower silver price; anticipated lower ore grades at the Fresnillo mine; higher depreciation; and higher exploration expenses.

Silver production contracted to 40.93bn ounces in 2012 from 41.87bn ounces one year earlier. Gold production rose by 5.4% to 473,034 ounces from 448,866 ounces.

Adjusted revenues of $2.29bn reflected a 0.9% decrease from 2011. The increased volume and higher average price of gold resulted in a total favourable effect of $109.1m, and the increased volume of lead sold contributed a $0.6m benefit, but this was more than offset by the $129.9m adverse effect of the lower average silver price and reduced volumes of silver sold from the Fresnillo mine.

These variables resulted in a combined net negative effect of $20.2m in adjusted revenues.

Earnings before interest, tax, depreciation and amortisation (EBITDA) - calculated as gross profit plus depreciation, less administrative, selling and exploration expenses - decreased by 14.8% in the year to $1.31bn mainly due to the adverse effect of lower gross profit and increased exploration expenses. The EBITDA margin declined accordingly from 70.2% in 2011 to 60.8% in 2012.

The group declared a final dividend of 42.4 cents per ordinary share which is in addition to the interim dividend of 15.5 cents per share which was paid on September 11th 2012.

Octavio Alvdrez, Chief Executive Officer of Fresnillo, commented: "Our performance over a year of volatile silver prices has illustrated how strong our business model is. Operationally we met our guidance for 2012 and we are pleased that EBITDA margins have remained amongst the strongest in the industry at 60%.

"Our model is structured to deliver a balance between growth and returns, and our track record of delivering profitable growth, investing in our future and returning cash to shareholders, has continued over the year under review. "

He added: "We are focused on low cost, high return operations and continue to invest throughout the cycles to ensure the sustainability of our business. Looking ahead, we are excited about the strength of the growth pipeline, and the four exploration projects we have highlighted today illustrate some of the many opportunities for future growth."

Fresnillo has six producing mines and a satellite mine, all of them in Mexico.

MF

Recommended

Imperial Brands has an 8.3% dividend yield – but what’s the catch?
Share tips

Imperial Brands has an 8.3% dividend yield – but what’s the catch?

With an impressive dividend yield of 8.3%, Imperial Brands looks to be one of the most attractive income stocks in the FTSE 100 . But investors should…
6 Jul 2022
Can Royal Mail continue to deliver its 7.6% yield?
Share tips

Can Royal Mail continue to deliver its 7.6% yield?

Royal Mail shares are yielding 7.6% this year. But it’s facing some huge challenges, says Rupert Hargreaves. So is Royal Mail’s dividend sustainable?
6 Jul 2022
Saga’s figures are heading in the right direction – so should you buy?
Share tips

Saga’s figures are heading in the right direction – so should you buy?

Saga the over-50s travel and financial services specialist, has been struggling for years. But now, with the pandemic behind, it it is planning for fu…
5 Jul 2022
Director dealings w/e 1 July: what company insiders are buying and selling
Stocks and shares

Director dealings w/e 1 July: what company insiders are buying and selling

Directors’ share dealings can often give investors an insight into the sentiment of company insiders. Here are some of the biggest deals by company di…
5 Jul 2022

Most Popular

Ray Dalio’s shrewd $10bn bet on the collapse of European stocks
European stockmarkets

Ray Dalio’s shrewd $10bn bet on the collapse of European stocks

Ray Dalio’s Bridgewater hedge fund is putting its money on a collapse in European stocks. It’s likely to pay off, says Matthew Lynn.
3 Jul 2022
Persimmon yields 12.3%, but can you trust the company to deliver?
Share tips

Persimmon yields 12.3%, but can you trust the company to deliver?

With a dividend yield of 12.3%, Persimmon looks like a highly attractive prospect for income investors. But that sort of yield can also indicate compa…
1 Jul 2022
Is inflation about to drop as recession takes hold?
UK Economy

Is inflation about to drop as recession takes hold?

Central banks are raising interest rates in an attempt to curb soaring inflation. But will that push the economy into recession? John Stepek looks at …
5 Jul 2022