Fresnillo sees silver price lift its profits

City A.M. Reporter
FRESNILLO, the world’s largest primary silver producer, said high metals prices boosted 2011 profit and helped more than double its final dividend, offsetting rising electricity prices, wages and the cost of tighter safety controls.

The Mexican miner has no debt and $685m (£434m) in cash on its balance sheet at the end of 2011, but said it was unlikely to repeat December’s extraordinary dividend this year because of its exploration push and spending on new mines to offset lower grades at its flagship Fresnillo mine, active for 500 years.

London-listed Fresnillo also poured cold water on deal speculation, almost three years after withdrawing its bid for smaller Canadian rival MAG Silver, still its partner in the Juanicipio project.

“Prices at this moment are very high, it is very expensive to buy anything. And on top of that, the quality of many of the projects that we have evaluated (means they) do not give proper value to our shareholders”, chief executive Jaime Lomelin said.

“For the moment we prefer organic growth.” Core profit, or earnings before interest, tax, depreciation and amortisation (EBITDA), at the Mexican miner rose 63 per cent to $1.54bn in 2011, in line with analyst expectations, while profit before interest and tax rose 39 per cent.

The miner also boosted its final dividend to 40 cents per share, taking its total payment to 102.85 cents from 44.8 cents.

“A good set of results... I suspect they will be over a billion dollars in cash by the end of this year,” analyst Cailey Barker at Numis said.