Fresnillo's profits fall on drop in gold and silver prices

6th Aug 2013 07:31

Precious metals producer Fresnillo posted a 27 per cent decline in gross profit to 518.9m dollars in the first half as revenues dropped on falling gold and silver prices.Adjusted revenue came to $982.3m, down 14% on the previous year, reflecting a 20.3% decrease in the average realised silver price to $24.67 per ounce (oz) and a 10.6% dip in the average realised gold price to $1,471.67 per oz.Earnings before interest, tax, depreciation and amortisation (EBITDA) slipped by 29.1% to $486.3m in line with the EBITDA margin which decreased to 52.5% from 63.2%Attributable silver production rose 4.9% to 20.98m oz, due to the continuous ramp-up of the Saucito mine and higher ore grade and volume of ore processed from San Ramón. Attributable gold production fell by 5.2% as a result of a slower recovery rate and lower ore deposited at Soledad-Dipolos and the anticipated decline in Cienega's ore grade. Octavio Alvídrez, Chief Executive Officer of Fresnillo, said as the ramp up of Saucito continues and the grades at Fresnillo move higher to more normal levels, the group was on track to meet its 41m oz of silver target this year. The gold production target is 465,000 oz for the year. "The dramatic decline in gold and silver prices since mid-April had a significant impact on revenues over the half year," Alvídrez said. "This coupled with higher production costs associated with higher volumes from the expanded business and higher electricity and diesel prices pushed EBITDA and profit lower."In light of this backdrop Fresnillo'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." The group ended the period with a cash position of $570.8m and no debt. An interim dividend of $0.049 per share, or $36.11m, has been recommended. RD