Fresnillo unable to avoid silver's losing streak
Silver miner Fresnillo (LON:FRES), the world’s largest producer of the metal by output, continues to feel the impact of declining prices and higher costs, forcing the group to cut operating spending and delay a few capital investment, after net income dropped over 60% in the first half of the year.
The Mexico-focused company has seen silver prices drop 35% this year so far, more than gold’s 25% loss, while its shares have fallen 50%, including an 11% plunge yesterday after it reported a 61% fall in first-half net profit.
The miner, currently gaining more revenues from gold than from silver, saw its silver output climb by almost 7%. However, costs were higher due to wages and energy prices rises as well as a stronger Mexican peso.
Despite the gloomy results, the company avoided any write-offs. “We have reviewed the operations we have at these prices and even at stress scenarios we do not have to go into write-offs,” CEO Octavio Alvídrez, said in a statement.
Fresnillo reiterated its plans to produce 41 million ounces of silver, including 4 million from its Silverstream contract, and 465,000oz of attributable gold this year.
Gold production guidance, however, was revised down by 25,000oz in July after the company stopped production at its Mexican Soledad-Dipolos mines, in response to a court order to close its open pit Dipolos mine following a dispute with locals.
The ruling stemmed from legal proceedings launched by farmers, which claimed ownership rights to the land.