Mexican silver and gold miner Fresnillo delivered a strong set of results broadly in line with analysts' expectations. Fresnillo is the world's largest silver producer and in the year achieved record silver output of 37.9m ounces, up 9 per cent on 2008. Attributable gold production was 5 per cent higher at 276,584 ounces. Higher input costs were more than offset by the devaluation of the Mexican peso (70 per cent of production costs are in pesos).
The company expects to continue its steady production growth and plans to open one new mine or expand current mines (it currently has four operating mines) each year until 2014. That's part of a wider goal to reach annual production of 65m ounces of silver and over 400,000 ounces of gold by 2018. The recent start-up of the Soledad-Dipolos mine will boost current-year gold production by some 20 per cent. Major construction on the first stage of the Saucito mine will near completion this year. Ore is already being processed and contributing to silver production, and gold production is expected from 2011. With the company's strong balance sheet, acquisitions could also boost production.
On the back of rising production cash flows, the company has increased its 2010 exploration budget by 58 per cent to $77.6m. Broker Numis is forecasting 2010 pre-tax profits of $532m and EPS of 49¢, rising to 73¢ in 2011.
| FRESNILLO (FRES) | ||||
|---|---|---|---|---|
| ORD PRICE: | 808p | MARKET VALUE: | £5.79bn | |
| TOUCH: | 808-809p | 12-MONTH HIGH: | 935p | LOW: 311p |
| DIVIDEND YIELD: | 1.1% | PE RATIO: | 27 | |
| NET ASSET VALUE: | 164¢ | NET CASH: | $312m | |
| Year to 31 Dec | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2005 | 417 | 199 | * | * |
| 2006 | 555 | 292 | * | * |
| 2007 | 648 | 236 | 22.6 | * |
| 2008 | 720 | 267 | 18.6 | 13.6 |
| 2009 | 850 | 457 | 44.9 | 13.0† |
| % change | +18 | +71 | +141 | -5 |
Ex-div: TBC Payment: TBC *Pre-flotation †Final dividend pending; based on 2008 final £1=$1.494 | ||||
