Last checked at 
(Correcting title to clarify reduction in dividend)
(Alliance News) - Fresnillo PLC on Tuesday said that profits had sunk as a result of increased exploration expenses in 2023, resulting in a cut to the annual dividend despite a bump in revenue.
Fresnillo is a precious metals miner with operations across central and northern Mexico.
In 2023, Fresnillo's pretax profit more than halved, ending up at USD114.0 million from USD248.6 million in 2022.
The company blamed the decline in profits on lower gross profit as well as increased administrative and exploration expenses.
Exploration expenses rose to USD182.4 million from USD165.8 million, in line with the group's strategy to "intensify exploration activities in specific target areas".
Earnings before interest, tax, depreciation and amortisation fell 13% to USD655.7 million from USD751.1 million, while earnings per share dropped to USD0.31 from USD0.35 a year prior.
Total revenue, however, was up 11.2% to USD2.71 billion from USD2.43 billion.
Fresnillo's final dividend of 4.2 cents per share brought its annual dividend to 5.6 cents, down from a 16.7 cents total in 2022.
The drop is reflective of the company's dividend policy of paying out between 33% and 50% of post-tax profit to shareholders.
In terms of output, silver production was up 4.7% to 56.3 million ounces from 53.7 million in 2022. Gold production fell 4.0% to 610,646 ounces from 635,926 ounces.
While revenue benefitted from higher gold and silver prices, the company said this was offset by the impacts of inflation in the year, which were made "significantly worse" by an unfavourable dollar to peso exchange rate. Increased investment in Mexico was due to the central bank offering higher rates of interest, Fresnillo said, as well as increased interest from foreign companies in establishing a business presence in the country.
Fresnillo also credited the peso-dollar exchange rate to a 12% increase in its adjusted production costs, which rose to USD1.62 billion from USD1.45 billion.
Chief Executive Officer Octavio Alvidrez said: "We focused on increasing productivity and raising development rates while advancing our pipeline of future projects. We continued to identify and implement cost reduction measures, as well as improve efficiency across all of our mines. However, the impact of the revaluation of the Mexican peso against the US dollar and inflation were headwinds that affected costs across the business."
Looking ahead to 2024, Fresnillo expects silver production to be in the range of 55.0 to 62.0 million ounces, and gold production to end up between 580,000 to 630,000 ounces.
Exploration expenses will continue to rise to around USD190 million, though the company said it was intent on optimising production and reducing costs throughout 2024.
Shares in Fresnillo were up 1.1% at 481.10 pence per share in London on Tuesday morning.
By Hugh Cameron, Alliance News reporter
Comments and questions to newsroom@alliancenews.com
Copyright 2024 Alliance News Ltd. All Rights Reserved.