Fresnillo shares sink as profits fail to match expectations

Precious metals miner Fresnillo (LON:FRES) reported a modest increase in pre-tax profit on Tuesday, as silver production hit record levels.

Pre-tax profit rose 3.2 percent to $741.5 million in 2017, up from $718.2 million the previous year, after silver production rose 16.6 percent to 58.7 million ounces.

The group was boosted by good production during the first phase of its San Julian silver and gold mine in Mexico, which operated at full capacity for the first full year.

Gold production for the year was 911,132 ounces, down 2.6 percent compared to the previous year, and adjusted revenue rose by 9.2 percent to $2,233.2 million.

However, figures for the year came in below expectations and caused shares to sink at market open. The group also said it expects cost inflation in 2018 to be about 7 percent, compared with the 6.4 percent it faced in 2017.

Looking towards the new year, silver production is set to grow further to a range of between 67 million to 70 million ounces, while gold production is expected to be in the range of 870,000 to 900,000 ounces. Fresnillo expects capital expenditure this year to be approximately $755 million.

Fresnillo shares are currently trading down 2.55 percent at 1,298.00 (1027GMT).