* FY profit down 19 pct to $845 mln vs forecast $836 mln
* Lower silver price, cost rises hurt profits
* Company expects costs to rise this year
* Shares down 2 percent
By Sarah Young
LONDON, March 12 (Reuters) - Mexican miner Fresnillo joined rivals in warning of rising energy and equipment costs, as well as volatile silver and gold prices, as it posted a 19 percent drop in 2012 profit.
Miners across the world have had their profits crunched by increased costs and softer prices, and have been scaling back expansion plans and spending, raising concerns that a decade-long mining boom is over.
Fresnillo, the world's largest miner focused on producing silver, said on Tuesday it expected challenging macro-economic conditions to continue this year and forecast volatility could be a permanent factor.
"There is no certainty that the fundamentals will remain in place to support long-term demand for both silver and gold, but we are well positioned to supply those markets at competitive costs," it said.
Fresnillo, in the lowest quarter of the industry in terms of production costs per tonne, said it would make savings by, for example, training staff to use explosives more efficiently and upgrading roads to increase the life of tyres on its trucks.
However, its shares fell to their lowest since July and at 1135 GMT were down 2 percent at 1,460 pence, among the biggest falls on Britain's blue-chip stock index.
"The market's reacted to the growth in costs," Royal Bank of Canada analyst Evgenii Risovich said.
Fresnillo, which is also Mexico's second-largest gold miner, posted a profit of $845 million for 2012, down on 2011 but ahead of a company-supplied consensus forecast of $836 million.
The fall was due to a 10 percent drop in average realised silver prices, as well as a rise in costs per tonne.
The company said part of the cost increase reflected the fact it was having to mine a lower grade section of its flagship eponymous silver mine, which has been active for 500 years.
In order to meet production targets from lower grades, the company had to process a higher volume of ore, pushing up costs, chief executive Octavio Alvidrez, who took over last year, said on a call with reporters on Tuesday.
"We think Fresnillo still remains one of the lowest all-in cash cost producers out there and it's best positioned as a defensive pick in a falling gold price environment," Royal Bank of Canada's Risovich said.
Other concerns around Fresnillo include a potential equity placement needed to meet new UK rules on the proportion of a listed company's shares that have to be freely tradeable, as well as a possible new royalty payment in Mexico, but analysts said these were already well-known factors.
Companies that want to be included in FTSE's UK indices - including the blue-chip FTSE 100 - must ensure that at least 25 percent of their shares are freely tradeable. Companies have until the beginning of 2014 to comply.
Alvidrez said Fresnillo, which is 77 percent controlled by Mexican mining company Penoles, was analysing its options with regard to this rule. He added the company also continued to lobby against royalties in Mexico.
Fresnillo said in January it met 2012 production targets and guided it expected silver output to be stable in 2013, while anticipating growth in its gold business.
The company said it will pay a final dividend of 42.4 cents per share, bringing the full-year total to 57.9 cents, compared with the 2011 payout of 102.85 cents. The 2011 payout was boosted by an extraordinary dividend, which Fresnillo had warned was unlikely to be repeated for 2012.