Mexico-based Fresnillo is making the most of this favourable environment and is on course to outstrip last year’s record production. First-half output for silver and gold increased by 2.6 and 17.1 per cent to 21.4m and 206,477 ounces, respectively, and with the silver price doubling year-on-year and the average realised gold price up by 25 per cent in the period, revenues and profits soared. However, the precious metals miner was saddled with an increased wage bill, in addition to rising costs for materials and equipment. It also had to contend with a 6.1 per cent revaluation of the peso against the US dollar.
Despite adverse cost pressures, Fresnillo boosted cash profits by 92 per cent to a record $757m (£465.89m) and increased cash profit margins by 6.5 per cent. And with the benefit of strong cash flows Fresnillo’s cash-pile rose by 28 per cent to $717m which supported a sharp dividend hike.
| FRESNILLO (FRES) | ||||
|---|---|---|---|---|
| ORD PRICE: | 1,698p | MARKET VALUE: | £12.2bn | |
| TOUCH: | 1,698-1,701p | 12-MONTH HIGH: | 1,782p | LOW: 982p |
| DIVIDEND YIELD: | 2.0% | PE RATIO: | 21 | |
| NET ASSET VALUE: | 270¢ | NET CASH: | $718m | |
IC VIEW:
With Saucito ramping-up, which is viewed as a key driver of future production and earnings, Fresnillo is on track to meet its production targets for 2015. However, cost pressures show no sign of easing and priced on a forward PE ratio of 21, the good news is factored into the shares. Fairly priced.
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