Fresnillo Net Profit Slumps On Lower Precious Metal Prices

By Alex MacDonald

LONDON--Mexican precious metals miner Fresnillo PLC (FRES.LN) said Wednesday that net profit slumped last year due to lower gold and silver prices and falling gold output, which more than offset higher silver production.

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 after revenue fell 12% to $1.41 billion and 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.

"In 2014 we have delivered a reasonable performance considering the lower silver and gold prices that impacted the industry as a whole," said Fresnillo's Chief Executive Octavio Alvídrez. He noted that the company suffered from operational challenges at its Fresnillo and Herradura mines last year but said it remains confident that initiatives put in place at those mines will help boost production in 2015.

The company said it expects to produce 750,000 troy ounces of gold and 65 million ounces of silver in 2018 following its acquisition of the remaining 44% stake in the Penmont joint venture last year.

This compares with gold output of 596,000 troy ounces last year, down 2.4% on year due to the suspension of its Soledad Dipolos mines as a result of a legal dispute with a local agrarian community. Silver output, including output from the Silverstream contract, however rose 4.9% last year to a record 45 million troy ounces.

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.

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