Higher gold and silver prices, along with higher volumes of zinc and lead sold, contributed to a 5.3% year-on-year increase in Mexico-based precious metal miner Fresnillo's revenue to $1.12-billion for the six months ended June 30.
The miner has declared an interim dividend of $16.9-million, equating to $0.023 a share.
"The combination of higher commodity prices and lower costs has resulted in a significant rise in profitability during the first half.
"Our performance improvement initiatives we have set out in previous reports are having a positive impact. We remain committed to delivering a sustainable improvement in our operating performance and maintaining the momentum in the improvement plan into the second half," comments CEO Octavio Alvídrez.
Gross profit for the period was $321.2-million, up 56.3% from the corresponding period in 2019. This includes a $65.1-million benefit from the positive impact of the reassessment of the recoverable gold inventories on the leaching pads at the Herradura mine.
The miner’s operating profit was $216.9-million, while earnings before interest, taxes, depreciation and amortisation was $469.9-million – representing year-on-year increases of 232.1% and 52.6%, respectively.
Profit before income tax of $127.9-million was up 136.6%, and included the adverse effect of the Silverstream valuation of -$31.8-million and foreign exchange losses of $41-million.
Profit for the period, however, decreased by 20.3%, to $56.5-million, as a result of the adverse effect of the 21.9% devaluation of the Mexican peso against the dollar on deferred taxes.
Basic and diluted earnings a share from continuing operations were down by 7.4% to $0.088c apiece, while earnings a share prior to the Silverstream valuation effect were adjusted to $0.188c apiece, up 40.5%.
Cash generated from operations, before changes in working capital increased by 44.3%, to $456.2-million.
Fresnillo has a strong balance sheet with cash and other liquid funds, as at June 30, of $514.7-million, up from the $336.6-million held as at December 31, 2019.
OPERATIONS & OUTLOOK
In terms of operations, Fresnillo reports a 2.7% year-on-year decrease in interim silver production (including Silverstream), mainly as a result of the expected lower ore grade at Saucito.
Interim gold production decreased by 11.8% year-on-year, as a result of a lower volume of ore processed at Herradura and Noche Buena, primarily owing to a six-week suspension of mining activities related to Covid-19 restrictions. These were mitigated by the ability to process inventories on the leaching pads and stockpiled material through the dynamic leaching plants.
First-half by-product lead and zinc production increased by 19.6% and 16.4%, respectively, mainly resulting from higher ore grades at Fresnillo, Saucito and Ciénega.
In terms of its outlook, Fresnillo is retaining its initially revised consolidated production guidance, with total gold production guidance being decreased to between 785 000 oz and 815 000 oz.
This reduction is the result of the Covid-19 operational restrictions at the Herradura district in the second quarter of the year.
Total silver production guidance (including Silverstream) remains within the range of 51-million to 56-million ounces.
Exploration expenses are expected to be reduced to about $120-million, from the previously budgeted $135-million, reflecting the miner’s limited ability to explore certain prospects as a result of travel restrictions related to Covid-19 guidelines.
Similarly, capital expenditure is anticipated to reduce to $525-million, mainly as a result of the deferral of expenditures at the Juanicipio project and San Julián.
"Production at our underground mines remains broadly in line with plan, despite a reduction in the number of workers on site.
"The impact on our openpit gold mines has been greater, as mining activities had to cease for around six weeks, although processing continued. However, mining has now restarted and activities are ramping up. I am also pleased our development projects continued to make progress," says Alvídrez.