(Alliance News) - Fresnillo PLC on Tuesday halved its half-year payout in response to a steep drop in profit, but maintained its production guidance for all of 2023.

Fresnillo shares were down 8.4% to 566.20 pence in London early Tuesday, the worst FTSE 100 performer.

The gold and silver miner in Mexico said profit from continuing operations before tax was USD47.9 million in the six months that ended June 30, down from USD155.2 million a year before. The two figures include negative revaluation effects of the Silverstream contract of USD17.0 million and USD36.3 million, respectively.

Revenue from continued operations was USD1.34 billion in the recent half year, up 6.7% from USD1.26 billion a year prior. Adjusted revenue was USD1.43 billion, up 6.1% from USD1.35 billion. Adjusted revenue adds back treatment and refining charges and the effects of metals prices hedging.

Mexico City-based Fresnillo explained that it sold more gold and silver volume at higher prices, though this was somewhat offset by lower zinc prices.

Silver production was 28.0 million ounces in the recent six months, up 1.4% from 27.6 million a year before. Gold production was 325,415 ounces, up 5.4% from 308,752.

However, cost of sales grew by 19% to USD1.06 billion from USD893.2 million, as adjusted production costs rose by 17% to USD773.9 million from USD659.3 million. Fresnillo said production costs were increased by the rise of the Mexican peso against the dollar and by costs for the start-up of the beneficiation plant at the Juanicipio project.

The ramp-up at the new Juanicipio mine is progressing as planned, Fresnillo said, with full nameplate capacity expected in the third quarter.

Earnings before interest, tax, depreciation and amortisation declined by 24% to USD351.0 million in the first half from USD459.1 million a year before.

Amid the lower profit, Fresnillo cut its interim dividend by more than half to 1.40 US cents from 3.4 cents a year before.

Fresnillo reported the deaths of two contractors during the recent six months. It said this was a reminder of the need to focus on "instilling a true culture of safety across the business".

Looking ahead, Fresnillo left production guidance unchanged. It expects attributable silver production of 57.0 million to 64.0 million ounces including Silverstream. Gold production is guided at 590,000 to 640,000 ounces. This would compare to 53.7 million silver ounces and 635,926 gold ounces dug out in 2022.

"We are committed to managing costs and further improving productivity, while delivering on the promise of Juanicipio as we complete the ramp up," said Chief Executive Officer Octavio Alvidrez. "We are well placed to meet our operating targets for the year."

By Tom Waite, Alliance News editor

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