MINER Fresnillo plunged to the bottom of the FTSE 100 yesterday morning, after reporting a 14.7 per cent fall in half-year revenue due to the decline in gold and silver prices.
Earnings fell 29.1 per cent to $486.3m (£316.1m) and the dividend – which is calculated in line with earnings – was cut by 68 per cent to 4.9 cents per share, falling short of Deutsche Bank’s 11 cents estimate.
Shares fell nearly seven per cent in early trading and closed 10.9 per cent lower at 924.50p.
The miner pledged to continue to cut costs, which rose a higher than expected 29.4 per cent in the first half due to dwindling metal prices and higher production expenses, although no specific targets were outlined.
“Fresnillo’s continued focus on cost cutting and operational efficiency remains more relevant than ever and we remain confident that our assets will continue to be amongst the lowest cost precious metals producers,” said chief executive Octavio Alvidrez.
Fresnillo is on track to achieve its full-year production target for silver of 41m oz and revised gold target of 465,000oz, which was reduced in the second quarter after a mine was closed.
As a low-cost producer, Fresnillo has so far avoided the hefty writedowns announced by a number of rivals such as Barrick Gold. Alvidrez said gold prices would need to head below $900 an ounce on a long-term basis before it would have to take such steps.
“Fresnillo remains a class act and the one to own in the silver space if you can stomach the silver price volatility,” said broker Numis in a note. “Some disappointment over the dividend has led to share weakness today.”