Mexican precious metals miner Fresnillo PLC (FRES.LN) Tuesday said it will stick to its current dividend policy after accruing a large cashpile that will likely be used to finance a hefty capital expenditure program this year.

"This year we are not expecting an additional dividend to be paid," Fresnillo's Chief Financial Officer Mario Arreguín told reporters on a call about the company's full-year results. "We are planning to have quite a bit of capex this year," he noted.

Fresnillo, the world's largest primary silver producer and Mexico's second largest gold producer, said it plans to bring online every year a new mine or expansion project over the next five years, placing it on track to produce 65 million troy ounces of silver and a revised 500,000 attributable ounces of gold annually by 2018. The previous gold target was 400,000 oz but it already produced more than that in 2011.

To fund that growth, Fresnillo plans to invest $200 million in sustainable capital expenditure annually over the next five years and plans to invest about $600 million in annual growth capital expenditure over the same period, Fresnillo's Chief Executive Jaime Lomelin said in a call with reporters.

It also plans to spend $360 million on exploration in 2012, bringing the grand total capital expenditure budget in 2012 to about $930 million, up from $602 million in 2011. "That's a lot of money," Lomelin noted.

As a result Fresnillo is sticking to its dividend policy of returning 50% of its net profit to shareholders, casting aside some analysts' hopes that it might unveil another special dividend in the year ahead following last year's $300 million special dividend.

It also unveiled a full-year dividend of $1.03 a share in 2011, up from $0.45 a share in 2010 and said it had $685 million in cash and no debt on its balance sheet at the end of 2011.

The FTSE-100 listed miner Tuesday posted a 36% rise in its full-year net profit to $902 million, largely due to higher gold and silver prices and higher gold output, while revenues rose 56% to $2.19 billion.

The company expects to produce 41 million ounces of silver in 2012, broadly flat on year once the 3 million troy ounces from the Silverstream contract is taken into account, and 448,866 oz of gold in 2012 as it starts up its Noche Buena mine in the second quarter.

Costs remain a concern but analysts say the company has shown ability in controlling cost inflation, a plight faced by the wider mining community as miners race to build new mines to meet growing demand for commodities, primarily in emerging economies.

Fresnillo expects operating unit costs for items such as tires and explosives to rise 10% to 12% in 2012 and energy costs to rise 15%, both on par with a similar percentage rise in 2011, Fresnillo's senior executives said.

At 1248 GMT, Fresnillo's shares were up 1.4% or 25 pence at 1,857 pence a share in contrast to a 1.1% drop in the FTSE 350 mining index.

Fresnillo has five producing mines, all of them in Mexico--Fresnillo, Cienega, Herradura, Soledad-Dipolos and Saucito; two development projects--Noche Buena and San Ramon; and five advanced exploration prospects.

-By Alex MacDonald, Dow Jones Newswires; 44 20 7842 9328; alex.macdonald@dowjones.com

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