Fresnillo shares tank as 2014 profits plunge 40%

4th Mar 2015 07:31

Mexican precious metals producer Fresnillo said it delivered a "reasonable performance" in 2014 in the face of lower silver and gold prices as profits plunged, sending the shares firmly into the red on Wednesday.While revenues declined 12.5% to $1.41bn, pre-tax profits dropped 40% to $251.1m as a result of lower prices and higher production costs.The company exceeded its guidance with record annual silver production of 45m ounces in 2014, up 4.9% on 2013, though this was offset by an 18.4% fall in the average realised silver price to $18.6 per ounce.Meanwhile, gold output met guidance with a 2.4% fall to 595,920 ounces, but prices fell 10.2% to $1,257.7 per ounce.Chairman Alberto Baillères said it was a "challenging year" for the industry."Geopolitics, global security concerns, economic uncertainties and market volatility, which may have driven investors to precious metals as a safe haven in the past, had no direct correlation to prices this year; gold and silver prices were both lower in the year."Fresnillo ended 2014 with cash, cash equivalents and short-term investments of $449.3m, down from $1.25bn at the beginning of the year partly due to the $450m acquisition of Newmont's 44% interest in Penmont and purchases of property, plant and equipment.Nevertheless, the company said its balance sheet is "well-placed" to meet its current capital expenditure budget of $700m for 2015, up from $425.6m in 2014.The stock was down 8.7% at 722.5p in early deals.