The benefits of a higher gold price and greater output volumes are very clear in Fresnillo’s (FRES) half year results. Its profit has jumped by 116% to $165.6 million and the dividend is lifted by a very generous 309.5% to 8.6c.

The miner increased its gold production by more than a fifth to 448,000 ounces, which was driven by more output from its open pit mines Herradura and Noche Buena.

Silver production has risen to 25.2 million ounces in the six months to 30 June, following a ramp-up at Saucito II and plant optimisation, as well as higher grades at Ciénega and the Fresnillo mine.

Total revenue jumped from $752.3 million in the first half of 2015 to $886.9 million due to increased sales volumes and higher gold prices.

This has been partly offset by higher treatment and refining charges from bigger volumes of produced lead and zinc concentrates.

Fresnillo is guiding for 850,000 to 870, 000 ounces of gold for the full year and a 49 million ounce to 51 million ounce range for silver production.

VSA Capital says the strong gold output and rising gold prices in the first half of the year has supported shareholder returns, but no longer believes the stock is a bargain for new investors.


Issue Date: 02 Aug 2016