Shares in Mexico-focused precious metals miner Fresnillo (LON:FRES) took a hit Tuesday after the company warned of possible lower prices, higher inflation and worsening foreign exchange rates in 2019.
The company also disappointed investors by missing its long-term production target of 65 million ounces of silver, due mainly to lower than expected grades at its Fresnillo and Saucito mines.
There were also some operational issues, it said, including higher stripping rations at Herradura.
Even when missing guidance, the world’s largest primary silver producer and Mexico’s No.2 gold miner, still achieved record annual silver production of 61.8 million ounces last year. It also as churned out 923,000 ounces of gold last year, up 1.3% from 2017.
The figures contrast with the miner’s pessimistic outlook for 2019, which it expects to be a more challenging year than 2018.
“We face a number of headwinds, including lower prices for precious metals and higher inflation,” chief executive officer Octavio Alvidrez said in a statement. “I also expect to see higher depreciation costs as a result of the investments we have made in recent years into the operations, while we continue to expect to work through operational issues and lower grades at certain mines during the year.”
Shares dropped about 11% on the news to 870.4p in early trading in London. Year-to-date however, the stock has climbed almost 10% as per Monday’s closing price.
Even though profit before tax for the year totalled $483.9 million, compared with $741.5 million the year before, the board has recommended a final dividend of $16.7 cents per share, bringing the total paid for the year to $201.9 million.