UK Edition
Mexican peso’s fall is gold miner Fresnillo’s gain
Donald Trump’s election in the US has lent a helping hand to gold and silver miner Fresnillo, which benefited from falling costs due to the plunging Mexican peso.
The currency tumbled 17pc against the US dollar on average in 2016, on the back of Mr Trump’s hostile rhetoric towards Mexico. The fall meant that Fresnillo, which reports its accounts in dollars, found its six mines in Mexico were cheaper to operate.
The FTSE 100-listed miner also gained from a tighter rein on costs and higher precious metal prices, driving a 90pc jump in cashflow to $1bn (£80m) and a 238pc surge in full-year pre-tax profits to $718m. Revenues climbed 35pc to $1.9bn.
Octavio Alvídrez, chief executive, said Fresnillo’s strong performance was “48pc due to stronger productivity and 52pc due to external factors” such as the peso devaluation.
He said that Fresnillo would “focus on what we can control” and keep its costs as low as possible to deal with swings in prices.
“We remain committed to balancing growth with returns,” Mr Alvídrez added.
Fresnillo will pay a final dividend of 21.5 cents per share, up 541pc, for a total payout of $158.4m. Mr Alvídrez refused to be drawn on whether Fresnillo might put some of its spare cash towards a special dividend later in the year. “We review the dividend on a yearly basis and we will see where we are.”
Despite the stellar results, the miner’s shares slipped 2.36pc in early trade after Fresnillo indicated its gold production would slip fractionally in 2017. Mr Alvídrez said Fresnillo would update investors on new long-term production targets later this year.
Fresnillo, which floated in London in 2008, is 75pc owned by Mexican billionaire Alberto Bailleres. The Investor Association recently proposed changes to corporate governance in the UK that could mean companies commit to a minimum 50pc free float, potentially affecting Fresnillo.
Mr Alvídrez said Fresnillo had been compliant with UK corporate governance since its listing and would review any change “if it comes”.