Fresnillo to pay 6.8 cents special dividend

DividendMax Ltd.

Fresnillo to pay 6.8 cents special dividend

2013 Highlights

Maintaining operational excellence

Silver production, including the Silverstream contract, increased 4.3 per cent reflecting continued ramp up of Saucito and increased production at Ciénega

Attributable gold production decreased by 10.0% to 425,831 ounces as a result of disrupted operations at Herradura District

Successful ramp-up of production at Noche Buena, despite being temporarily affected by the suspension of explosives permits in 2H 2013

Optimised milling capacity at Ciénega and increased ore processed by 11.6%, mitigating the adverse effect of the lower gold ore grade

Focus on efficiency gains (US$27.4 million) and cost control reinforced company position as a low cost producer of precious metals with world class margins

Appointment of Roberto Díaz as Chief Operating Officer

Investing in growth through the cycle

Completion of Dynamic Leaching Plant on time and on budget

Investment in exploration totalled US$233.3 million resulting in 5.0 and 5.2 per cent increase in total silver and gold resources mainly at San Julián, Centauro Deep, Noche Buena and in the Ciénega District.

Gold and silver reserves declined by 14.5 and 4.3 per cent due to: i) lower prices used (Ag:US$19.5/oz, -27.8%; Au:US$1,250/oz, -10.7%); ii) change to more conservative open pit mine designs; and iii) use of 2012 Edition of the JORC code, a more prudent methodology

Acceleration of Saucito II in favour of San Julián to maximise returns and favour net positive cash flows while maintaining growth profile

Focus on capital discipline 

Maintain appropriate exploration budget to increase reserves and resources, continue the development of a profitable growth pipeline while balancing returns to our shareholders

Focused on projects with highest rates of return and favouring those which generate cash quicker

Maintained a strong balance sheet from cash flow generated from operating mines, US$800 million bond and US$346.1 million placement of shares, demonstrating market confidence in our long-term strategy

Managing non-financial risk

Initiated a comprehensive review of the status of our land rights and fostering strong community relations through investment in community programmes in light of the increased industry focus on this matter

Advancing the maturity of our HSECR system; positive trends for several indicators, including a range of safety metrics; however, two fatalities in the year indicate more work is required

Financial results

Fresnillo's 2013 results were impacted primarily by a combination of lower precious metals prices, the lower gold production which arose from the legal dispute surrounding explosives permits at the Minera Penmont operations, and the non-cash loss generated by the Silverstream revaluation. As a result, revenues, EBITDA and net profits were lower than in 2012.

Against that backdrop we continue to be focused on operational efficiency and seeking the best performance and returns from our quality assets. We remain confident in our ability to deliver on our strategy now and in the future.

Further to the Company's announcement of 24 October 2013, Fresnillo paid an extraordinary dividend of US$165.0 million, equivalent to 22.39 US cents per share on 11 November 2013, which included dividend payments that shareholders may otherwise have expected to receive from dividends payable in 2014. In addition to this, Fresnillo paid an interim dividend of US$36.1 million, equivalent to 4.90 US cents per share on 10 September 2013. Today Fresnillo is pleased to recommend a special and one-off dividend of US$50.1 million, equivalent to 6.8 US cents per share.

This has been recommended by the Board of Fresnillo reflecting their confidence in the strength of the balance sheet and in the company's capital expenditure plans for its development and exploration projects. As a consequence the Board believes that it is appropriate to make a one-off distribution.

This distribution is incremental to Fresnillo's existing dividend policy which remains in place, and takes into account the profitability of the business and underlying growth in earnings of the Fresnillo Group, as well as its capital requirements and cash flows.

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