Mexican billionaire Carlos Slim is becoming one of the biggest victims of the collapse in gold prices to a six-year low.
His mining company, Minera Frisco, has tumbled 53 per cent this year, the worst performance among 90 international peers. Mexico City-based Frisco has had only one profitable quarter in the past nine, and this year's 6.7 per cent slide in gold prices is just making things worse.
Slim owns 78 per cent of Frisco, making him the biggest loser from the stock's collapse; it has contributed to a US$7.2 billion tumble in his fortune this year.
Laura Villanueva, an analyst at Mexican brokerage Monex Casa de Bolsa, sees more losses ahead for Frisco as the company struggles with falling output and a high debt load.
"The performance of the company has been significantly influenced by the fall in international metal prices as well as a very high debt level," Villanueva said. She sees the stock falling a further 7 per cent by the end of the year.
Of course, it is not just Frisco that has taken a toll on Slim's fortune.
The US-traded shares of his telephone behemoth, America Movil, have lost 12 per cent, from losses in the Mexican peso and changes wrought by regulators who are cracking down on dominant telecommunications companies. Shares in Slim's bank, Grupo Financiero Inbursa, also have fallen.
But it is Frisco that stands out these days as the biggest blight on Slim's empire. This year's stock slide follows declines of 20 per cent last year and 51 per cent in 2013. The company, which Slim bought in 1984, mainly produces gold and silver bars at nine Mexican mines.
"Every time Frisco's earnings fall, it means losses for Slim," said Jose Helue, a senior equity research analyst at Interacciones Casa de Bolsa.
The performance has been so awful that the stock was ejected in May from the MSCI LatAm Standard Index, a benchmark for regional equities. Two years ago, Frisco was booted from Mexico's benchmark IPC index.
Arturo Elias, a spokesman for Slim, said operations at Frisco and the billionaire's other companies were healthy and recent losses were due to "a difficult environment".
"The important thing for Minera Frisco is that the operations are going well," Elias said. "The results are a reflection of temporary effects of a fall in metal prices and the devaluation of the peso versus the dollar."
Moody's Investors Service said in a statement on Monday it saw Frisco increasing production with new projects, improving operating efficiency and reducing debt.
Indeed, one of the biggest obstacles to a turnaround is the company's high debt load; with limited capacity to borrow more, and with cash flow sapped by falling gold prices, Frisco has fewer resources to invest in future production, according to Credit Suisse.
The company's net debt is 4.5 times its earnings before interest, taxes, depreciation and amortisation, according to Javier Santiago, a mining analyst at BBVA Bancomer. That is the highest ratio among the country's four biggest mining companies.
Frisco's Munguia said the official ratio it reported to lenders was lower, at 3.86 times.
The company's cash flow from operations dwindled to 787.7 million pesos in the second quarter, down 67 per cent from a year earlier.
Frisco's milling and deposit production dropped 5 per cent as the Maria copper mine in the state of Sonora completed its production cycle.
Frisco's "tight liquidity position is a strong constraint on exploration spending," Credit Suisse analyst Ivano Westin wrote in a July 23 report.
Westin has a sell rating on the stock, with a 12-month price target of 8.4 pesos per share. On Monday, it closed at 10.06 pesos.
Original Article: http://www.scmp.com/business/markets/article/1849090/carlos-slims-mexican-gold-digger-hit-mine-stocks-fall
