A 70% jump in full year earnings failed to lift the negative mood hanging over gold and silver miner Fresnillo (FRES) after the company missed forecasts.

The company reported a 73.4% jump in 2020 (to 31 December) earnings before interest, taxes, depreciation and amortization (EBITDA) to $1.16 billion but this missed the $1.2 billion analysts had expected. EPS, or earnings per share, also fell short of $0.48 forecasts at $0.44 despite soaring 90%.


Fresnillo’s share price has been in decline since August, falling from over £13.50 to 904p today. The stock’s performance has largely tracked the gold price, which has retreated from $1,950 per ounce records six months ago as investors bet on improved chances of global economic recovery following the emergence of multiple Covid-19 vaccines.

Gold is currently trading at around the $1,730 mark.

Total revenue for 2020 came in 14.6% higher to $2.43 billion, despite a 12.1% drop in gold production to just under 770,000 ounces, while silver output dipped 2.9% to 53 million ounces.


Fresnillo also told investors to expect lower production volumes this year as the Mexican miner remained cautious with the pandemic continuing to impact operations.

The miner reiterated 2021 production guidance of 53.5 million to 59.5 million ounces of silver and 675,000 to 725,000 ounces of gold, with silver production set to benefit from operational programmes to increase output at its Juanicipio and Fresnillo mines.

Gold output is set to be lower than last year due to lower ore grade at its Ciénega mine, together with reduced activity at Noche Buena in line with the mine closure plan there, as well as slightly lower volumes at its Herradura mine.

However Fresnillo insists ‘the longer-term prospects for gold are good’, with production supported by potential new mines at Rodeo and Orisyvo.


Fresnillo has seven operating mines, three development projects and four advanced exploration sites, all of which are in Mexico, a country that has been particularly badly hit by the pandemic.

While its shares are up over 50% on its pre-pandemic level, one reason for Fresnillo’s underperformance relative to silver and gold prices – despite a brief surge on the back of interest from Reddit day traders via r/WallStreetBets – has been a string of disappointments when it comes to meeting production and output targets.

Commissioning of one of its development projects has been delayed by the pandemic, for example, while other mishaps have had an impact too, including a landslide at its Noche Buena gold mine.


Despite earnings coming in lower than forecast, the miner had some good news for investors having declared a final dividend of 23.5 US cents per share, ahead of the 21 cents expected by analysts and which brings its total full year payout to 25.8 cents, equivalent to around a 2% yield.

The dividend will be paid on 1 June to shareholders on the register on 23 April, and the dividend will be paid in UK pounds sterling unless shareholders elect to be paid in US dollars.


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Issue Date: 02 Mar 2021