Mexican silver producer Fresnillo (FRES) is one of the best miners around. It has a large net cash pile, its operating costs are low for the sector, development projects should deliver production growth of over 10 per cent year on year until 2018, and it hasn't overspent on mega-acquisitions at the peak of the cycle.
But all this means little if metals prices continue to fall. Fresnillo produced 41m ounces of silver in 2012 - roughly flat on 2011 - but silver prices fell 9.8 per cent over the same period to average $31.40 (£21) per ounce. That, along with higher production costs, lower ore grades, higher exploration expenses and higher taxes, contributed to net profit slumping 18.4 per cent year on year to $736m.
Fresnillo expects another flat year in 2013 as a ramp-up at one mine offsets an expected decrease in silver ore grade at another. Management also expects "volatility to be a permanent factor" in terms of metals prices and adds that there's "no certainty that the fundamentals will remain in place to support long-term demand for both silver and gold".
Prior to these figures, Citigroup was forecasting EPS of $1.14 for 2013 and $1.04 for 2014 ($1.04 in 2012).
FRESNILLO (FRES) | ||||
|---|---|---|---|---|
| ORD PRICE: | 1,491p | MARKET VALUE: | £10.7bn | |
| TOUCH: | 1,490-1,492p | 12-MONTH HIGH: | 2,033p | LOW: 1,259p |
| DIVIDEND YIELD: | 2.6% | PE RATIO: | 22 | |
| NET ASSET VALUE: | 311¢ | NET CASH: | $614m | |
| Year to 31 Dec | Turnover ($bn) | Pre-tax profit ($bn) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2008 | 0.77 | 0.27 | 19 | 13.6 |
| 2009 | 0.85 | 0.46 | 45 | 21.5 |
| 2010 | 1.41 | 1.02 | 93 | 44.8 |
| 2011 | 2.19 | 1.53 | 126 | 102.5 |
| 2012 | 2.16 | 1.16 | 103 | 57.9 |
| % change | -1 | -24 | -18 | -44 |
Ex-div: 17 Apr Payment: 8 May £1=$1.50 | ||||
