Fresnillo’s profits more than doubled in the first half of the year as it reaped windfall gains from the price of silver.

Executives at the London-listed Mexican miner, the world’s biggest primary producer of silver, said they expect silver prices to stay near today’s elevated levels as long as there are concerns about global debt and an impulse for haven assets.

A new gold and silver mine called Saucito – one of several projects that Fresnillo is promising over the next few years – offset declining silver output from its flagship Fresnillo mine.

While Fresnillo’s first-half silver production rose less than 3 per cent to 21.5m ounces, the company sold silver at an average price of $35.74 an ounce, 99 per cent higher than the interim 2010 period. Gold production rose by 17 per cent to more than 200,000 ounces, as Fresnillo gained from a 25 per cent rise in average gold prices.

The combined effect pushed pre-tax profits from $355m to $776m. Mexico’s Bailleres family, owners of three-quarters of the stock, will receive most of Fresnillo’s 21 cent interim dividend worth $151m. The company disburses about 50 per cent of its net profits every year as dividends.

Echoing concerns across the industry Jaime Lomelin, chief executive, said costs for input materials are escalating and squeezing boom-time profitability. Fresnillo’s average weighted price of operating materials – ranging from tyres to steel to the chemicals that make explosives – rose 13.2 per cent.

The company is placing orders for equipment up to three years in advance as it tries to protect operations from rising prices and and delayed delivery times for equipment such as mills.

While production costs at the Fresnillo mine rose 43 per cent to $5.53 per ounce, the company is selling to a market that paid about $40 an ounce for silver last month.

Surging cash flows increased Fresnillo’s cash pile by more than 80 per cent to $718m. Mr Lomelin said the group was using its cash to fund exploration, as it searches for new deposits in Peru to augment its Mexican base. The exploration budget this year is $250m.

Revenues rose from $636m to $1.1bn, while a pre-tax profit margin of 70 per cent reflected unusually high silver prices.

“We think [the] price of silver will be holding at levels we are seeing today,” Mr Lomelin said. “I don’t think the sentiment around the world economy will change in just a few months.”

Earnings per share rose from 30.8 cents to 68.1 cents. Shares rose 79p to £18.13.

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