Fresnillo hit by FX and write-downs, but revalues Silverstream higher

Mexican precious metals miner Fresnillo delivered a mixed update on Friday as it explained how movements in foreign exchange, the revaluations of assets and depreciation would affect its 2014 results.

A strengthening dollar against the Mexican peso led to a significant increase to the deferred tax charge in 2014 with the adverse effect estimated to be $55m. The deferred tax charge is the difference between the carrying amount of assets and liabilities (denominated in US dollars) and their tax bases (denominated in pesos).

Additional foreign exchange losses are also expected to be around $25m.

Meanwhile, a revaluation of its Silverstream project resulted in a gain of $75m due to better silver grades, lower discount rates, higher-than-expected production and amortisation effects.

However, Fresnillo said it was also taking a write-down of $17m on the value of its Soledad and Dipolos operations, $4.1m of which was recognised at the half-year results.

Depreciation in the second half is forecast to be $30m higher than the first half, while cost of sales are expected to have a $20m adverse impact on gross profits, the company said.

Fresnillo’s share price was up 0.6% at 875.5p by 08:31 on Friday.