Miner Fresnillo skirts tax change with early dividend payout

Reuters

LONDON, Oct 24 (Reuters) - Mexican silver miner Fresnillo will distribute part of its 2014 dividend in November,sparing shareholders a new tax charge by handing them a $165million payout seven months earlier than expected.

The world's largest primary silver producer said on Thursday it considered it appropriate to pay the extraordinary dividendof 22.39 cents per share ahead of schedule next month, afterverifying it was well placed to fund spending on its projects.

With the early payment the group, 75-percent-owned by theBailleres family-controlled mining company Penoles,will avoid changes to the withholding tax that Mexico levies onstockholders' dividend payments.

Shares in the company, which last made a one-off return toshareholders in 2011, climbed over 2.5 percent in early tradebefore paring gains to be up 1.6 percent by 1040 GMT.

Liberum analyst Kate Craig said the payment would come outof Fresnillo's full 2013 dividend, and therefore would not hitthe company's cash balance at a time of peak spending.

"We'd speculate that this was related to the new tax lawsdue to come into effect next year, and specifically withholdingtax on dividends," she added.

Distributing the payment before the end of the year couldsave shareholders around $16.5 million in future taxes, JPMorgan said in a note.

Fresnillo typically distributes 33 to 50 percent of earningsand trades at a premium to its peers in part because of adividend yield that is almost double. Two-thirds of the dividendare distributed at the full year.

But it said in August its interim dividend would fall by 68percent to 4.9 cents per share, after profits were hit by steepfalls in silver and gold prices and high costs.

Thomson Reuters data puts Fresnillo's forward price/earningsratio at 32.6 against peers at 20.9.

The company, which earns an increasing proportion ofrevenues from gold, has seen output of the metal impacted by atemporary ban on its use of explosives at some of its projects.

It stopped short of forecasting 2013 gold output onThursday, however, and said it remained confident that it wouldbe able to resume using explosives, despite a legal procedure it said was taking longer than expected.

The company had expected the ban to be lifted this week, butsaid the timeframe would now be early November as a result ofadditional hearings, at which time it said it would provide anupdate on its gold production guidance.

Fresnillo also on Thursday appointed Roberto Diaz as chiefoperating officer. He was formerly a vice president ofoperations at the company.

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