Fresnillo Plc Plunges Following 68% Dividend Cut

Profits fall at Fresnillo plc (LON:FRES) after steep drops in the price of silver and gold.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Shares in Fresnillo (LSE: FRES) fell by more than 8% in early trade this morning, after it was hit by tumbling gold and silver prices.

In its interim results, the miner warned that total gross profits decreased 27% from $710.9m in the first half of 2012 to $518.9m for the six months to 30 June 2013, while adjusted revenue fell 10.6% to $982.3m.

Partly, this was as a result of the average realised price for silver plunging 20.3% to $24.67 per oz, while average realised gold price dropped 10.6% to $1,471.67 per oz.

However, rising production costs “associated with higher volumes from the expanded business and higher electricity and diesel prices” also contributed to the loss of profits.

Following the bleak appraisal, management took the decision to cut the dividend by 68%, which drops down to $0.049 per share.

Chief executive officer Octavio Alvídrez commented:

 “Fresnillo enjoyed a strong operational performance in the first half, with attributable silver production up 6.9% (excluding the Silverstream). As Saucito continues to ramp up and the grades at Fresnillo move higher to more normal levels, we are on track to meet our 41 million ounces of silver target this year.  Our gold production target is 465,000 ounces for the year.

“The dramatic decline in gold and silver prices since mid April had a significant impact on revenues over the half year. This coupled with higher production costs… pushed EBITDA and profit lower. In light of this backdrop Fresnillo plc’s continued focus on cost cutting and operational efficiency remains more relevant than ever and we remain confident that our assets will continue to be amongst the lowest cost precious metals producers.  

“Our project pipeline and investment in exploration is critical to our success as a sustainable long term producer that generates free cash, creates value and can grow profitably in any metal price environment. Fresnillo has the assets, the discipline to control costs and the strong balance sheet to achieve that goal for the benefit of all stakeholders.”

The Group continues to have a very strong balance sheet with no bank debt and US$570 million in cash and cash equivalents as at 30 June. Some investors will be asking whether today’s dips represent a buying opportunity, bearing in mind the cyclical nature of miners.

But if you’re looking for a company outside of the mining sector that should soar in price, we’ve pinpointed our favourite growth share and produced a special report in which we evaluate its finances, risks and growth prospects going forward. 

Simply click here to get your copy delivered to your inbox immediately — completely free.

> Sam does not own shares in Fresnillo.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

More on Investing Articles

Investing Articles

I reckon these 2 penny shares are hidden gems worth a closer look!

Some penny shares are well-known, whereas many others go under the radar, but that doesn’t necessarily mean they aren’t potentially…

Read more »

Investing Articles

Just released: our 3 best dividend-focused stocks to buy before August [PREMIUM PICKS]

Our goal here is to highlight some of our past recommendations that we think are of particular interest today, due…

Read more »

Investing Articles

2 FTSE 100 shares with blockbuster yields investors should consider buying

Our writer has noticed that these FTSE 100 shares offer mammoth dividend yields, and reckons investors should take a closer…

Read more »

Stack of British pound coins falling on list of share prices
Investing Articles

Down 36% and yielding 7.8%, is this FTSE 250 share a bargain?

Christopher Ruane looks at a FTSE 250 share with a sizeable dividend yield and a recent record of dividend growth.…

Read more »

Investing Articles

Is Barclays one of the FTSE 100’s best bargain stocks?

Right now, Barclays' shares are cheaper than those of FTSE 100 rival stocks Lloyds and NatWest. So should I buy…

Read more »

Happy young female stock-picker in a cafe
Investing Articles

Is a takeover offer about to boost the Rentokil stock price, and should I buy?

The Rentokil share price is up 10% on takeover rumours. Is it a stock to buy or one to be…

Read more »

Investing Articles

Here’s my Rolls-Royce dividend forecast for 2024-27!

Our writer considers whether the Rolls-Royce dividend might be reinstated in coming years, based on financial performance and stated payout…

Read more »

Investing Articles

What would I do if Rolls-Royce shares plunged 50%? History suggests a big decline is coming

While Rolls-Royce shares have delivered massive outperformance in recent years, they also have a history of significant declines.

Read more »