London-listed Mexican miner Fresnillo, the world's biggest primary silver miner, continues to command a significant market value, relative to its peers. Annual results for 2009, just published, show that Fresnillo produced operating cash flow of USD 391m in 2009, down a little on the number for 2008. The group recorded a 9% rise in attributable silver production to 38m ounces, and slightly higher gold output, at 277,000 ounces. Precious, USD/oz Current From low* From high* Gold 1116.70 29.1% -9.0% Platinum 1549.35 50.7% -6.5% Palladium 435.88 130.0% -8.3% Silver 16.45 39.1% -15.5% Industrial, USD/lb Copper 3.36 121.6% -5.1% Aluminium 0.97 65.8% -10.5% Lead 0.98 111.7% -19.3% Tin 7.73 73.5% -7.8% Nickel 9.73 127.6% -1.7% Zinc 1.01 103.7% -18.9% * 12-month USD m 2009 2008 2007 Operating cash flow 391 415 79 Capital expenditure -250 -185 -103 Other 45 54 -222 Net 186 284 -246 Free cash flow Operating cash flow 391 415 79 Capital expenditure -250 -185 -103 Free cash flow 140 230 -24 Debt repaid/(raised) 455 -356 Equity raised 855 Cash on hand 312 212 5 Debt -456 Net debt 312 212 -451 Equity distribution -407 -198 Dividends 94 42 Selected silver stocks Stock From From Value price high* low* USD bn GBP 7.92 -15.3% 154.9% 8.488 USD 15.26 -14.3% 169.6% 5.222 USD 21.79 -20.2% 72.7% 2.290 GBP 2.59 -30.2% 53.8% 1.308 USD 17.32 -32.3% 48.7% 1.246 USD 14.72 -40.8% 167.6% 1.150 USD 5.33 -28.6% 355.6% 1.290 EUR 9.28 -11.6% 445.4% 1.051 CAD 6.83 -19.1% 172.1% 1.071 CAD 0.61 -34.4% 41.9% 0.181 CNY 18.92 -26.7% 85.1% 0.633 CAD 3.36 -25.7% 103.6% 0.300 CAD 1.12 -25.3% 107.4% 0.123 MAD 982.00 -10.7% 71.1% 1.947 CAD 3.45 -24.5% 151.8% 0.203 CAD 0.73 -18.9% 265.0% 0.170 CAD 2.29 -23.9% 197.4% 0.210 CAD 0.87 -30.4% 176.2% 0.095 CAD 0.36 -56.6% 63.6% 0.027 CAD 1.06 -28.9% 152.4% 0.049 CAD 0.33 -37.7% 407.7% 0.040 CAD 0.17 -31.3% 57.1% 0.040 CAD 0.45 -26.2% 221.4% 0.035 CAD 0.15 -34.1% 70.6% 0.010 CAD 0.11 -35.3% 175.0% 0.012 CAD 0.67 -11.8% 179.2% 0.072 CAD 0.09 -32.0% 88.9% 0.019 CAD 0.16 -73.3% 166.7% 0.008 CAD 0.74 -25.3% 94.7% 0.015 CAD 3.95 -25.3% 223.8% 0.267 CAD 1.24 -20.0% 113.8% 0.062 CAD 0.06 -40.0% 20.0% 0.011 CAD 6.87 -10.8% 41.6% 0.330 AUD 0.19 -55.3% 280.0% 0.020 CAD 1.62 -33.9% 63.6% 0.062 USD 2.61 -24.8% 137.3% 0.060 CAD 0.16 -35.4% 138.5% 0.011 CAD 1.24 -15.6% 117.5% 0.137 CAD 0.15 -49.1% 314.3% 0.009 CAD 0.23 -38.7% 155.6% 0.023 CAD 0.88 -14.6% 112.0% 0.039 CAD 3.41 -23.4% 143.6% 0.175 CAD 0.36 -35.5% 22.4% 0.020 CAD 0.16 -20.5% 181.8% 0.009 Averages/total -28.8% 149.6% 28.504 Weighted averages -20.3% 130.5% WORLD'S TOP SILVER PRODUCERS GBP 20.75 -4.5% 102.4% 192.549 PLN 98.20 -11.8% 191.0% 6.737 GBP 7.92 -15.3% 154.9% 8.488 EUR 9.28 -11.6% 445.4% 1.051 Kazakhmys GBP 14.12 -9.4% 502.8% 11.294 USD 21.79 -20.2% 72.7% 2.290 USD 38.42 -16.9% 46.9% 28.183 USD 33.98 -20.4% 99.9% 9.341 USD 9.60 -5.3% 68.4% 3.834 USD 30.08 -18.7% 137.8% 25.568 GBP 2.59 -30.2% 53.8% 1.308 GBP 34.65 -8.4% 162.1% 122.664 USD 38.32 -7.6% 1368.2% 22.217 USD 14.72 -40.8% 167.6% 1.150 GBP 10.66 -18.2% 269.2% 46.821 Spot silver/oz USD 16.45 -15.5% 39.1% Gold:silver ratio (times) 67.89 * 12 month
Fresnillo holds a current market value of USD 8.5bn, and can be compared to Hochschild Mining, also listed in London, which produced 28m attributable silver-equivalent ounces in 2009, but is valued at a rather more modest USD 1.3bn. US-listed Pan American Silver, which raised silver production 23% in 2009 to 23m ounces, and gold production to 101,000 ounces, is valued at USD 2.3bn.
Investors may be focused on Fresnillo's longer-term goals, "to maintain the group's position as the world's largest primary silver company, producing 65m ounces of silver and over 400,000 ounces of gold by 2018".
Fresnillo's books show that for 2009, the market price for gold averaged USD 972.98 an ounce, compared to USD 871.71 an ounce in 2008, while the average market silver price was USD 14.67 an ounce, compared to USD 14.99 an ounce in 2008. Both prices are comfortably higher today.
METAL PRICES
Fresnillo's group revenues for the year of USD 850m produced, as noted, operating cash flows of USD 319m, and free cash flow (after capital expenditure) of USD 140m. Revenues for 2008 were USD 721m, which produced operating cash flows of USD 415m, and free cash flow of USD 230m. ‘
Fresnillo raised USD 855m in its 2008 rights issue, of which USD was redirected as a capital redistribution. Fresnillo listed late in 2007, after implementing a structure to consolidate the precious metals interests of Mexico's Industrias Peñoles, which continues to hold 77% of Fresnillo.
Fresnillo's stock price has been volatile, in the great tradition of primary silver stocks. The price was savaged down to GBP 1.00 a share, but has subsequently traded over GBP 9.00 a share, arguably departing from many of its underlying metrics. Fresnillo is also evidently keen to participate in corporate activity, and runs a marvelously clean balance sheet should anything that needs muscle appear suddenly on the horizon.
Fresnillo and its joint venture partner for gold in Mexico, Newmont, the world's No 2 gold producer, exchanged multiple takeover offers with Goldcorp, another gold major, for Canplats Resources, owner of the Camino Rojo gold-silver-lead-zinc deposit. Goldcorp's CAD 309m bid for Canplats prevailed.
Like a good number of stocks marketed as primary gold or primary silver producers, Fresnillo can be lined up alongside likely diversified peers for "valuation checks".
KGHM Polska Miedź, which produces the same amount of silver as Fresnillo, but as byproduct, holds a market value of USD 6.7bn. The big metal here is copper, which produced some of the most impressive margins seen in mining during 2009, despite a very poor start to the year.
During 2009, the Polish miner produced just over 500,000 tonnes of copper, and is planning to grow that to 700,000. During 2009, the group's unit cost of copper production was PLN 11,170 a tonne; the average sale price was PLN 17,343.
In the result, operating cash flows for KGHM Polska Miedź chimed in for 2009 at PLN 2.5bn (about USD 750m), and free cash flow computed at around USD 460m. These kind of numbers leave Fresnillo deeply in the shade, and show up the advantages, for Fresnillo, of having a relatively captive market centered around a London listing, along with the premium ratings traditionally accorded primary silver, and also gold, producers.
Source:
market data; table compiled by Barry Sergeant
miningweb.com
Selasa, 02 Maret 2010
Behind the Fresnillo's billion dollar silver
