Profit contracted by 19 per cent to 845m dollars for the year ended December 31st at FTSE 100 gold and silver producer Fresnillo.

In its financial results for the year, the group said that the impact on profit was mostly due to four things: lower silver price; anticipated lower ore grades at the Fresnillo mine; higher depreciation; and higher exploration expenses.

Silver production contracted to 40.93bn ounces in 2012 from 41.87bn ounces one year earlier. Gold production rose by 5.4% to 473,034 ounces from 448,866 ounces.

Adjusted revenues of $2.29bn reflected a 0.9% decrease from 2011. The increased volume and higher average price of gold resulted in a total favourable effect of $109.1m, and the increased volume of lead sold contributed a $0.6m benefit, but this was more than offset by the $129.9m adverse effect of the lower average silver price and reduced volumes of silver sold from the Fresnillo mine.

These variables resulted in a combined net negative effect of $20.2m in adjusted revenues.

Earnings before interest, tax, depreciation and amortisation (EBITDA) - calculated as gross profit plus depreciation, less administrative, selling and exploration expenses - decreased by 14.8% in the year to $1.31bn mainly due to the adverse effect of lower gross profit and increased exploration expenses. The EBITDA margin declined accordingly from 70.2% in 2011 to 60.8% in 2012.

The group declared a final dividend of 42.4 cents per ordinary share which is in addition to the interim dividend of 15.5 cents per share which was paid on September 11th 2012.

Octavio Alvídrez, Chief Executive Officer of Fresnillo, commented: "Our performance over a year of volatile silver prices has illustrated how strong our business model is. Operationally we met our guidance for 2012 and we are pleased that EBITDA margins have remained amongst the strongest in the industry at 60%.

"Our model is structured to deliver a balance between growth and returns, and our track record of delivering profitable growth, investing in our future and returning cash to shareholders, has continued over the year under review. "

He added: "We are focused on low cost, high return operations and continue to invest throughout the cycles to ensure the sustainability of our business. Looking ahead, we are excited about the strength of the growth pipeline, and the four exploration projects we have highlighted today illustrate some of the many opportunities for future growth."

Fresnillo has six producing mines and a satellite mine, all of them in Mexico.

MF

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