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Falling precious metal prices impact Fresnillo

Steve Clayton | 4 August 2015 | A A A
Falling precious metal prices impact Fresnillo

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No news or research item is a personal recommendation to deal. All investments can fall as well as rise in value so you could get back less than you invest.

Fresnillo USD0.50

Sell: 900.00 | Buy: 901.00 | Change -5.00 (-0.55%)
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Half year results from the precious metals miner saw falling prices impacting profits. Lower realised Silver (US$16.61 per ounce, down 18%) and gold prices (US$1,206.10 per ounce, down 7.4%) underlay a 34.6% decline in profitability from continuing operations to US$136.1 million in the period (H1 2014: US$208.2 million).

Nonetheless, the group's six operating mines, all of them in Mexico, reported increased production for both silver (+10.6%) and gold (+37%). Management noted that "Fresnillo plc's operating results were driven by a strong performance at Saucito due to the start-up and successful ramp up of Saucito II, and Herradura and its dynamic leaching plant being fully operational post the temporary explosives permit suspension that affected first half 2014 production." Group action to aid performance going forward also continued to be taken, with capital expenditure for the full year 2015 now expected to be in the region of US$570 million (versus previous expectation of c. US $700 million). The share price rose by over 1% in mid-morning UK stock market trading.
Management Outlook Comment:
"Volatility in precious metals prices is expected to remain, driven by the likelihood of the US Federal Reserve increasing interest rates in the near term, geopolitical risk and concerns around the stability of the Eurozone. However, we are well placed to address these cyclical uncertainties. The strength of our balance sheet, the quality of our assets, the low cost nature of our operations, and the attractive returns generated on our growth projects set Fresnillo apart, and provide us with the flexibility to take market conditions into account whilst continuing to invest through the cycle. We remain on track to meet our 2018 production targets of 65 million ounces of silver and 750 thousand ounces of gold."

Read more share research from Hargreaves Lansdown

This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication. Non-independent research is not subject to FCA rules prohibiting dealing ahead of research, however HL has put controls in place (including dealing restrictions, physical and information barriers) to manage potential conflicts of interest presented by such dealing. Please see our full non-independent research for more information.