Shares in Fresnillo Plc (LON:FRES) (LSE:FRES.L) have fallen 2.15% today after the release of its 2016 results to the stock market. Silver production increased 7.1% to 50,303 kOz and gold production was 22.8% higher at 935,513 Oz. Fresnillo’s total revenue moved 31.9% higher to $1905.5 million, while EBITDA was 88.5% up at $1032 million. Profit for the year was 512.4% higher at $425 million, which led to an increase in earnings per share of 556.5%.
Obviously, Fresnillo’s financial results are much better than they were in 2015. It benefitted from increased volumes and also from higher metal prices. Forex changes in terms of the devaluation of the Mexican peso versus the US dollar also positively affected production costs, which has been good news for the company’s investors.
The company has also been able to reduce the cost per tonne and cash cost at all mines, due in part to forex benefits but also because of investment in cost reduction initiatives. Gold and silver resources were increased 8.2% and 10.2% respectively and Fresnillo is guiding towards production of 58-61 moz of silver and 870-900 koz of gold in 2017.
Shares in Fresnillo have risen 13% in the last 3 months. That’s ahead of the shares of other mining stocks such as Rio Tinto plc (LON:RIO) (LSE:RIO.L), Glencore PLC (LON:GLEN) (LSE:GLEN.L), Anglo American plc (LON:AAL) (LSE:AAL.L) and BHP Billiton plc (LON:BLT) (LSE:BLT.L). Glencore’s shares are 12% higher, Anglo American’s stock price is 1% up, BHP Billiton has fallen 3% and Rio Tinto’s shares are 5% higher.
As an investor in Fresnillo, I’m optimistic about its long term future. I think its ability to reduce costs and increase production will improve its share price performance. I also think it could benefit further from forex fluctuations and higher prices for silver and gold as uncertainty regarding the global economic outlook builds. Therefore, while I think Glencore, Anglo American, BHP Billiton and Rio Tinto have investment appeal, I think Fresnillo’s shares could make the better investment.