Fresnillo Plc (LON:FRES) have seen their shares in red, on the back of a disappointing set of final results.
The gold miner noted that profits had dived within a tough year for the firm.
Octavio Alvídrez, CEO said: “2019 was a more challenging year as expected, but we remain determined and optimistic for the future.
Production did not meet our expectations in 2019. Total silver production fell by 11.6% to 54.6 moz as a result of the expected lower ore grade at Saucito as well as lower than expected ore grades at Fresnillo and San Julián Veins and Disseminated Ore Body (DOB).”
Looking at the figures for Fresnillo’s financial year, the firm told the market that pretax profit had slumped 63% to $178.8 million.
Looking at the figure to include earnings before interest, tax, depreciation, and amortisation it declined 26% to $674.0 million.
The firm posted revenues of $2.12 billion, which was a slight rise of 0.8% from the 2018 figure.
When studying gold production figures, the FTSE 250 lister noted that gold prediction fell 5.1% across 2019 to 875,913 ounces.
Silver production also fell 12% year on year, giving a total of 54.6 million ounces.
Going forward, Fresnillo have noted that gold production should lie within the 815,000 ounces and 900,000 ounces ball park.
Silver production is expected to meet targets between 51 million to 56 million ounces – and the guidance has remained consistent since January.
“While the broader macro economic environment remains uncertain, we are confident on the outlook for mining in Mexico, where we have welcomed the on-going support of the Mexican Government. We will continue to work hard to ensure that mining is supported by all parts of the federal and state administration.
We will rise to the immediate challenges confronting our business today, and we move forward with certainty and vigour. Our assets are of high quality and our exploration pipeline continues to confirm promising prospects. We have a clear strategy, a talented and committed team, and we look ahead with confidence.”
Following the disappointing results, Fresnillo have lowered their annual dividend, and are paying out a 14.5 US cent total dividend for 2019, made up of a 2.6 cent interim payout and an 11.9 cent final return.
The CEO concluded concluded: “Our focus in 2020 is on maximising the potential of our existing operations. We are committed to working smarter and more efficiently in order to extract maximum value from our asset base. We have implemented a major performance improvement plan across our portfolio that includes intensive infill drilling to improve the certainty of the geological model, dilution control and raising development rates, together with actions to address contractor productivity and equipment availability.
We are investing in infrastructure, plant and machinery including the new Tunnel Boring Machine which is now being ramped up at Fresnillo – one of the first of its kind. We have also begun to define a new programme to control costs and increase productivity.
Though it will take time for these measures to take full effect, we do expect production to stabilise in 2020 and start increasing during 2021.”
Fresnillo’s third quarter
In October, Fresnillo saw their third quarter fundamentals slip within a mixed update.
The precious metals miner reported that gold and silver production on an annual scale would be at the lower end of its target.
In the three months to the end of September, silver production fell 14.5% from the third quarter of last year to 13,283 kilo ounces and gold production was down 6.9% to 209,752.
Fresnillo said that the low production rates for silver was due to expected lower ore grade at the Saucito mine and lower ore grades at Fresnillo and San Julián.
The company, therefore issued a statement saying that total production should be around 55-58 million ounces and 880-910 koz, for gold and silver respectively.
Fourth quarter slips
A few weeks back, Fresnillo once again updated the market on their fourth quarter activity.
Fresnillo, who were a former FTSE 100 listed firm told the market that they had produced 233,744 ounces of gold in the fourth quarter of 2019, 11% higher on the previous quarter and 0.7% higher year-on-year.
Looking on an annualized basis across 2019, Fresnillo saw gold production fall 5.1% to 875,913 ounces. In December, it had set guidance at 885,000 ounces, from previous guidance of 880,000 ounces to 910,000 ounces.
The Mexican gold miner said that fourth quarter results were boosted by better performance as the Herradura mine, offsetting lower throughput and grades at Noche Buena. Notably, production volumes fell due to lower output at Noche Buena and lower grades at San Julian.
In the silver production sector, fourth quarter production was impressive standing at 13.8 million ounces.
Silver production did see a 3.7% climb from third quarter production, however this figure did represent an 11% fall on the figure on year ago. In 2019, the figure was 54.6 million ounces, 12% lower year-on-year.
Fresnillo concluded by saying that that they expect silver production to be between 51 million and 56 million ounces.
Shares in Fresnillo trade at 603p (-2.74%). 3/3/20 10:19BST.