Fresnillo profit edges up amid record silver production

Precious metals miner Fresnillo reported a small jump in full-year pre-tax profit on Tuesday amid record silver production, but warned that 2018 will be "challenging".

In the year to 31 December 2017, pre-tax profit was up 3.2% to $741.5m, while total revenue rose 9.9% to $2.1bn and earnings before interest, tax, depreciation and amortisation pushed up 2.7% to $1.06bn.

The company declared an interim dividend of 10.6 cents per share, with a final dividend of 29.8 cents per share, up from 21.5 cents.

Silver production was up 16.6% to 58.7m ounces, in line with guidance partly as a result of the first complete year of San Julián phase I operating at full capacity and the start of operation at San Julian phase II, while gold production fell 2.6% to 911.1 koz. Although gold output fell due to the expected lower reduction of gold inventories and the anticipated lower ore grade deposited at the leaching pads at Herradura, it came in slightly ahead of guidance.

For 2018, silver production is expected to come in between 67m ounces and 70m ounces, while gold output is forecast to be in a range between 870,000 and 900,000 ounces.

Fresnillo said that although it expects all if its operations to perform at their maximum levels this year, 2018 will be "challenging". Inflationary pressures are likely to increase and it is unclear whether precious metals prices have already bottomed out, or may drift lower. In addition, the miner said the election in Mexico this year will doubtless bring an unwelcome degree of volatility to exchange rates.

Chief executive officer Octavio Alvídrez said: "I am pleased to report another resilient performance, built on the foundations of our consistent, conservative, sustainable long term strategy.

"Core to our organic growth strategy is ensuring we deliver the potential of our existing assets while expanding our development pipeline. We made good progress in 2017. Operations at the Fresnillo mine continue to strengthen, performance has improved year-on-year and we expect an increase in ore throughput in 2018. The successful completion of San Julián (phase II) was a significant milestone and is expected to make a meaningful contribution to 2018 production now it is operating at full capacity.

"Construction of the Pyrites Plant project has continued and the Dynamic Leaching Plant at Herradura is on track. We expect to commission both projects in 2018. We also expect to approve the feasibility study of Juanicipio in the first half of 2018 and begin construction soon after."

At 1210 GMT, the shares were down 1.8% to 1,308.35p.