Fresnillo Plc (LON:FRES) blames lower price of silver for poor profits.
Fresnillo (LSE: FRES), the world’s largest primary silver producer and the second largest gold producer in Mexico, is currently over 3% down on publication of its full-year results for 2012.
The company reported that profit was down almost 19%, at $845m. It blamed the decrease on four main factors: a fall in the price of silver (the average realised price of silver was 9.8% lower than in 2011), expected lower ore grades at the Fresnillo mine, higher depreciation costs and higher exploration expenses.
The company's silver production was down over 2% compared with 2011, at just under 41 million ounces but, in better news, reported that gold production rose 5.4%, to a record 473,000 ounces.
The board has declared a final dividend of 42.4 cents per share, which brings the full-year dividend to 57.9 cents per share, for a current yield of about 2.6%
Having already invested a record $319m for exploration this year, the company expressed its intent to continue investment in its future growth, which will be helped by the fact that it remains debt-free, and has $614m on its balance sheet.
Octavio Alvídrez, CEO 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.
"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."
Although it's up an impressive 186% over the past five years, Fresnillo's recent performance has been more than somewhat disappointing -- it's almost 18% down on this time last year, and nearly 22% down so far in 2013.
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> Jon doesn't own shares in Fresnillo