By Alex MacDonald
LONDON--Mexican precious metals miner Fresnillo PLC (FRES.LN)
reported Wednesday a worse-than-expected profit for 2014 but
reaffirmed its commitment to pay a dividend as it expands its
production base even in a lower gold and silver price
environment.
Fresnillo, the world's largest primary silver producer and
Mexico's second-largest gold producer, said net profit fell 55% to
$108 million last year as revenue fell 12% to $1.41 billion.
Earnings before interest, taxes, depreciation and amortization, or
Ebitda, dropped 22% to $567 million. The Ebitda figure missed
analysts' expectations of $610 million based on a FactSet poll of
seven analysts.
At 1151 GMT Fresnillo's shares were down 4.9% at 753 pence a
share while the FTSE 350 mining index was down 2.1%.
"Overall a disappointing result, although [it] has been heavily
skewed by a number of one-offs," analysts at Numis Securities said
in a note. In February the company warned of higher depreciation,
the impact of currency movements, and a write-down of its Soledad
Dipolos mines.
Fresnillo's Chief Executive Octavio Alvídrez said: "We have
delivered a reasonable performance considering the lower silver and
gold prices that impacted the industry as a whole."
Gold and silver prices fell for a fourth consecutive year last
year, more than eclipsing a 4.9% rise in silver output to a record
45 million troy ounces, including output from the Silverstream
contract. The company's gold output dropped 2.4% to 596,000 ounces
last year due to the suspension of its Soledad and Dipolos mines
following a court ruling that handed landed back to a local
agrarian community.
Mr. Alvidrez said the company remains focused on containing
costs and improving operating efficiency, while growing its
production base to 750,000 ounces of gold and 65 million ounces of
silver in 2018. This takes into account last year's purchase of the
remaining 44% stake in the Penmont joint venture and investment in
$2 billion worth of growth projects between now and 2020.
Fresnillo's Chief Financial Officer Mario Arreguin said the
growth projects could be entirely financed through internal
cashflow even if the gold and silver prices remain relatively flat.
However, if silver and gold prices fall further and for a long time
period, the company may have to tap near-term debt to cover its
peak spend in 2016, Mr. Arreguin noted.
Fresnillo plans to produce 45 million to 47 million ounces of
silver, including output from its Silverstream contract, and
670,000 ounces to 685,000 ounces of gold this year. This will
largely come from the ramp up of its Saucito mine and the start of
production at its San Julian mine in the fourth quarter.
The company declared a final dividend of $0.03 a share and said
it had $449.3 million of cash and short-term investments on hand at
the end of December.
-Write to Alex MacDonald at alex.macdonald@wsj.com
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