Lower volumes, prices take shine off Fresnillo interims

Lower volumes and prices have hit half year results at gold and silver miner Fresnillo, with core profits down 45.7%, the company said on Tuesday.

Earnings before interest, tax, depreciation and amortisation fell to $307.9m in the six months to June 30 on a 10% fall in revenues to $1bn. Gross profit fell 59.1% to $205.5m.

The average realised silver price fell 7.5% to $15.2 per ounce during the period while the average realised gold price remained flat at $1,320.7 .

First half silver production fell 10.4% year on year mainly as a result of the lower volumes of ore processed and lower ore grades at the Fresnillo and Saucito mines.

Gold production for the term was 7.1% lower mainly as a result of the lower volume of ore processed at the Noche Buena mine, but in line with plans which reflects the gradual decrease in ore deposited towards the end of the its life.

Fresnillo cut production targets for 2019 earlier this month, citing lower-than-expected grades of ore grades and delays in construction work at its Herradura gold mine in Mexico as it reported year-on-year falls in second-quarter output.

The company earlier this month cut its 2019 gold production forecast to 880,000-910,000 ounces from an earlier target of 910,000-930,000 ounces, while reducing that for silver production to 55m - 58m ounces from 58m – 61m.

Chief executive Octavio Alvídrez said the company had seen short term improvement in mine performance at both Fresnillo and Saucito and “we expect to see a gradual improvement in the following quarters, albeit not at the rate we had anticipated”.

“Performance of the business in the first half has not met our expectations,” he said.