Fresnillo misses consensus

The other good news is that Fresnillo gradually expects to restore gold production at its open-pit Herradura mine. It has just been granted a new explosive permit by Mexico's Defence Ministry, following a dispute with local farmers. Shareholders can also take heart from a 4 per cent increase in silver production, to 42.7m ounces, thanks to the ongoing ramp-up at Saucito and higher output at Cienega. Overall, Fresnillo confirmed that it was on track to deliver 43m ounces of attributable silver in 2014, while gold output should rise by 6 per cent to 0.45m ounces as operations at Herradura resume and production at Noche Buena ramps up.

The marked fall in precious metals prices was the main reason why Fresnillo's financial performance disappointed: the group's average realised gold price fell 16 per cent to $1,401 per ounce, while silver slumped 27 per cent to $22.8 per ounce.

Fresnillo initiated a capital review in the wake of the price falls in a bid to streamline its operations. But with so many growth projects in play to meet the group's 2018 production targets, it is little wonder that the capital outlay is budgeted to rise by 12 per cent to $642m this year. Management confirmed that the miner is still experiencing some cost pressures at an operating level, particularly from staff and fuel. The group has vowed to offset any increases by improving efficiency at its mines, but there's only so much fat to be cut; Fresnillo already has one of the industry's leanest cost profiles.