UPDATE 1-Fresnillo shares hit as profit tumbles on lower production, costs

Fresnillo's profit plunged by more than two-thirds in the first half, hit by a drop in production and higher costs, the silver and gold miner said as it cut its capital spending budget for the year, sending shares more than 6% lower.

The precious metals miner has repeatedly warned of a troubled year ahead and earlier this month trimmed its output forecast, blaming lower quality ore and construction delays in Mexico. "Continued challenges at our Fresnillo, Saucito and Herradura mines, combined with higher costs, have impacted profitability for the period," Chief Executive Officer Octavio Alvídrez said in a statement.

Profit for the six months ended June 30 stood at $70.9 million, compared with $229.3 million a year earlier, while first-half core earnings of $307.9 million missed consensus estimates by 6%, according to Jefferies analysts. The Mexico-based miner, which said it would put in place a cost control programme in the second half of the year, said it now expected annual capital expenditure of $655 million, down from its previous plan of $710 million.

Silver production of 27.6 millions of ounces fell 10.4%, while gold production fell 7.1%. The FTSE 100 company had earlier this month cut its 2019 gold production forecast to 880,000-910,000 ounces from a prior target of 910,000-930,000 ounces and silver production to 55-58 million ounces from 58-61 million ounces.

Last year, the miner cut its outlook for silver production twice.