Fresnillo Plc Rises On Positive AGM Statement

The share price of Fresnillo (LSE: FRES) — the  Mexican-based precious metals mining company — is currently up 3.6%, following publication of the statement that Chairman Alberto Baillères will make at the company’s AGM later today.

Mr Baillères says that 2014 was a challenging year for producers of precious metals, with all companies in the sector being affected by a decline in prices. However, he says that Fresnillo enjoyed some protection thanks to its “high quality assets, low cost operations, strong balance sheet and solid pipeline of organic growth projects“.

Fresnillo’s production of gold was strengthened by the acquisition of the remaining 44% of the Penmont Joint Venture, for $450m, which has enabled the company to raise its gold production target for 2018 by 50%, from 500,000 ounces to 750,000 ounces.

Silver production exceeded budget in 2014, at 45m ounces, and Mr Baillères says that there has been a strong start to 2015, with  over 12m ounces of silver and 182,000 ounces of gold in the first quarter, and that the company remains remains on track to achieve its production guidance for 2015.

Whilst the company’s total investment in exploration in 2014 was significantly reduced from the original $225m million budgeted, to $184.5m, Mr Baillères says that “the pace of progress was essentially unchanged from plan“, thanks to declining costs for contracted exploration and drilling.  The company was able to increase its gold reserves by 45% and its silver reserves by 21%.

Mr Baillères says that Fresnillo’s top priority is “firmly set on value creation” and that he is confident that the company has the operational and financial strength to address the challenges it faces.

But even with today’s increase, at 780p, Fresnillo’s share price is up just 1.7% on the year to date, in which time the FTSE 100 has risen 6.3%.  And the longer-term story is even worse, with Fresnillo having lost 12% over the past five years, whilst the FTSE 100 has gained 32%.

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Jon Wallis has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.