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Investing.com -- Shares of Fresnillo Plc (LON:FRES) rose more than 9% on Tuesday after the company posted a nearly fourfold increase in first-half net profit, driven by higher gold prices, increased volumes, and reduced costs.
The miner also beat market expectations on most key metrics, despite reporting a dividend below forecasts and announcing the buyback of its Silverstream agreement at a steep discount.
Net profit for the six months ended June 30 rose to $467.6 million from $117.7 million a year earlier, according to the company’s interim report.
Revenue climbed 30.1% to $1.94 billion, aided by a 45.8% increase in the average realized gold price to $3,167.6 per ounce and a 21.9% rise in silver prices to $33.7 per ounce.
EBITDA rose 102.5% to $1.1 billion, above RBC Capital Markets’ estimate of $1 billion and 7% ahead of consensus.
Free cash flow reached $882 million, exceeding RBC’s $430 million forecast and consensus of $458 million. RBC attributed the beats to “stronger EBITDA, working capital and lower taxes.”
Adjusted earnings per share of $0.72 were 36% above RBC’s projection and 31% higher than consensus.
Gross profit increased 160.7% to $1.02 billion, while adjusted production costs fell 20.2% to $673.5 million, supported by a weaker Mexican peso and lower processing volumes.
The interim dividend was declared at $0.208 per share, totaling $153.3 million, below RBC’s $0.27 estimate and the consensus of $0.22.
Net cash stood at a loss of $983 million, compared with RBC’s expectation of a loss of $474 million, due to stronger-than-expected cash generation.
Gold production rose 15.9% to 313,840 ounces, driven by improved grades and leach pad recovery at Herradura.
Silver output fell 11.7% to 24.9 million ounces, including Silverstream contributions, due to the closure of San Julián DOB and lower grades at Ciénega and Juanicipio.
Fresnillo increased its 2025 gold production guidance to 550,000-590,000 ounces from 525,000-580,000 ounces.
Silver guidance was lowered by 2 million ounces through 2027 to reflect the termination of the Silverstream agreement with Peñoles, bought back for $40 million.
RBC noted the asset had a prior book value of $258 million and NAV estimates of $499 million for RBC and $486 million for consensus.
“We expect the buyback to reduce consensus NAV expectations by -5% to $7.7bn,” the brokerage said.
Capex guidance for 2025 was cut to $450 million from $530 million due to project delays and extended use of existing equipment. Spending for 2026 and 2027 remained unchanged.
Fresnillo reported two fatalities during the period. TRIFR declined to 6.98 from 7.59, and LTIFR fell to 4.40 from 4.75. Exploration spending totaled $76.7 million, with full-year spending forecast at $190 million.