Mining giant Fresnillo has reported another year of good operational performance as it announced its new Chief Executive and confirmed the placing of 19.7m new shares at 1,130p each.
Speaking at its annual general meeting, the company unveiled Octavio Alvdrez as its new Chief Executive Officer, who Chairman Alberto Baillres described as "an experience and effective leader".
In his address to investors, Baillres said the group had done well in what has been a year of challenges for the mining industry.
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"As you will be aware, precious metal miners are operating in an environment of exceptionally volatile metal prices, higher production costs and growing social and environmental pressures," he said.
"In 2012, the weak gold price in the first half of the year recovered during the second half of the year as central banks increased reserves and investors sought protection against economic uncertainty and possible inflation. The pattern for silver was similar, although its recovery in the second half of the year was less than that for gold, so while our average realised price for gold ended the year around 6.0% higher than in 2011, silver prices were around 10% lower.
"The volatility has extended into 2013, with particularly steep falls in prices seen in mid-April as a result of speculation of European central banks selling their gold reserves, as well as expectations that Western economies would stop implementing quantitative easing measures. These trends may continue into the remainder of this year but your management continue to bear down on costs, and keep Fresnillo within the lowest quartile of the cost curve with industry leading margins. This comes despite industry pressures arising from higher labour and energy costs and higher unit costs for operating materials such as explosives, tyres and reagents."
The Chairman also said the company had delivered "significant progress" in the growth of its ore resource bases, having confirmed resources at San Julin, Orisyvo and Centauro Deep.
"The group's production and project implementation schedule is on track to meet our growth targets," he continued.
"Furthermore, a large number of prospects in early stage exploration, in both current and new districts, should ensure our longer term project pipeline.
"The board recognises the challenging environment for mining companies and has decided to continue to invest in only those projects that are essential to achieve our long term targets and which meet certain investment criteria. We will only invest in those projects which we believe have attractive internal rates of return, are low cash cost and will continue to create value for our stakeholders. We will continue to exercise caution and discipline when analysing new projects and as we announced at our first quarter results we are reviewing all capital expenditure and future exploration projects.
"The board has authorised a total budget of $279.6m to be invested in exploration and early stage underground development in 2013, a decrease of 12.3% over 2012. As we look ahead to the second half of this decade and our 2018 commitments, this investment reflects our disciplined approach to allocating risk capital to the continued profitable growth of the group."
The share price fell 1.31% to 1,162p.
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