(Updates with details on revaluation, headwinds.)
By Oliver GriffinFresnillo PLC (FRES.LN) said Tuesday that first-half net profit fell 25%, citing the impact of a negative revaluation of its Silverstream contract, foreign-exchange headwinds and lower silver prices.
The precious-metals miner, which has operations in Mexico, said net profit for the six months ended June 30 fell to $230.0 million from $308.7 million in the year-earlier period.
Pretax profit declined 17% to $323 million, dragged down by the negative revaluation of Fresnillo's Silverstream contract. The company said Silverstream booked a $21.8 million valuation loss following a decision to increase its reference discount rate to be in line with the London Interbank Offered Rate, or Libor.
Fresnillo said it booked an $11.8 million foreign-exchange loss due to the marginal devaluation of the Mexican peso against the U.S. dollar. This compared with a $3.8 million foreign-exchange gain in the first half of 2017.
Also contributing to the profit decline was the average realized price of silver, which fell 5.5% to $16.5 an ounce from $17.4 an ounce over the period.
Revenue for the half rose 12% to $1.12 billion, Fresnillo said. It raised its interim dividend by 0.9% to 10.7 cents a share.
Last week, Fresnillo shares dropped after it posted softer-than-anticipated silver production for the second quarter, and lowered its full-year silver production guidance to a range of 64.5 million to 67.5 million ounces.
Fresnillo reiterated its silver production guidance of between 65.5 million ounces and 67.5 million ounces, down from the 67 million to 70 million ounces it had expected before posting second-quarter results last week. Gold production guidance for the year was reiterated at 900,000 ounces to 930,000 ounces, from 870,000 ounces to 900,000 ounces previously.
The company kept its overall production guidance in silver-equivalent ounces unchanged.
Write to Oliver Griffin at [email protected]