Interim results for Fresnillo (LON:FRES) show silver output rising 6.1% to 25.2mozs and gold production powering ahead by 23% to 448kozs YoY. Profit YoY rose 117% to US$165.6m or US$0.227/sh. An interim dividend of US$0.086 will be paid due to strong cash generation and a healthy cash position of US$701m.
The San Julian leaching plant stage 1 has been completed and will re-start in coming days. Centauro Extension project and the Pyrites project have been approved for development by the board.
Forward guidance for the year has been raised on production of gold by a further 75kozs to 850kozs – 870kozs while silver output has been guided at prior levels of 49-51mozs.
The strong showing on gold output combined with a rising gold price in H1 2016 has significantly supported returns to shareholders in these latest numbers. We look for this to continue through H2, although we feel that the shares no longer represent a bargain for new investors.
Polymetal International (LON:POLY)
Polymetal (LON:POLY) has completed the acquisition of Orion Minerals LLP, the holding company of the Komarovskoye gold deposit in Kazakhstan, from Kazzinc, a subsidiary of Glencore (GLEN LN). US$100m cash was paid and deferred payments, up to US$80m, will be paid based upon project performance and gold prices above US$1250/oz in future.
The deposit contains Probable reserves of 14.2mt grading 2gAu/t for 0.9mozs and additional resources of 9.8mt grading 2.2gAu/t for 0.7mozs. Production should begin in Q4, 2016.
POLY continues to add ounces and production plants in further scale up and nation diversity in its revenue mix. The acquisition cost we feel is economical as well and exploration upside will only add to the value in coming years.