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Slump hits Fresnillo

FRESNILLO, the world&rsquo;s largest silver producer, yesterday said its profits in the first-half had slumped 10.8 per cent, as prices for the precious metal tumble in the downturn.<br /><br />The Mexican company, which is listed in London, said pre-tax profits for the period were $179.9m (&pound;110.3m) down from $201.6m the previous year.<br />But the miner said it was upbeat about the outlook for the rest of the year.<br /><br />&ldquo;We remain positive about the second half of 2009, reiterate our production targets for the full year and remain confident of achieving ... our current profit margins,&rdquo; chief executive Jaime Lomelin said.<br /><br />Net income dropped to $121.1m, down from $141m a year earlier, while sales slid 11 per cent to $378.9m. Fresnillo said its interim dividend was 5.25 cents a share.<br /><br />Full-year gold output will be about 264,000 ounces and the company will produce an additional 70,000 ounces in 2010, Lomelin said.<br /><br />&ldquo;We expect renewed cost inflation, driven by higher oil prices, in the second half to begin to erode margins, despite our expectation of higher silver prices,&rdquo; Jonathan Guy at Investec said.<br /><br />The price of silver, which is used in industrial electronics and as an investment vehicle and inflation hedge, is pegged to the state of the global economy.<br /><br />Silver prices hit a two-month high of $15.16 an ounce on Friday, amid hopes economic recovery would boost industrial demand for the metal.