Fresnillo Plc · LSE:FRES
Fresnillo — FY2016 Earnings Presentation
59 slides from Fresnillo's earnings presentation, Feb 28, 2017
Slide 1: Dedicated to meeting our commitments
28 February 2017 Dedicated to meeting our commitments
Slide 2: Disclaimer
Disclaimer This document includes statements that are, or may be deemed to be, “forward-looking statements”. These forward-looking statements can be identified by the use of forward-looking terminology, including the terms “believes”, “estimates”, “plans”, “projects”, “anticipates”, “expects”, “inte
Slide 3: Agenda
Agenda Overview > Octavio Alvídrez, CEO Operations, Development Projects & Exploration > Octavio Alvídrez, CEO Financial Review > Mario Arreguín, CFO Strategy & Outlook > Octavio Alvídrez, CEO Q&A 3
Slide 4: PTTL ALR
PTTL ALR
Slide 5: Introduction
Introduction Strategic objectives remain unchanged ˗ Strict operational and financial discipline ˗ Investment decisions continue to be evaluated against key criteria ˗ Focus on maximising margins and profitability ˗ Continue to take a long-term view ˗ Balance profitable growth with returns whilst ma
Slide 6: 2016 Full Year results - Highlights
2016 Full Year results - Highlights Record silver production of 50.3 moz, up 7.1% on 47.0 moz in 2015 Record gold production of 935.5 koz, up 22.8% on 761.7 koz in 2015 C1 and AISC lowered at all mines 2017 guidance: 58–61 moz silver & 870–900 koz gold San Julián phase I commissioned, production cur
Slide 7: Health, Safety, Environment, Community Relations
Health, Safety, Environment, Community Relations Health & Safety • 3 Fatal accidents during 2016 and 1 at the beginning of 2017 • Lost time injury frequency rate improved vs 2015 • No new cases of Occupational Diseases in 2016 Environment, Community Relations and Awards • We achieved 100% maturity o
Slide 8: Operations & Projects
Operations & Projects
Slide 9: Operations
Operations Fresnillo Saucito Key operating statistics 2016 vs 2015 Key operating statistics 2016 vs 2015 Silver production – moz 15.9 15.6 Silver production – moz 21.9 22.0 Gold production – koz 42.4 34.1 Gold production – koz 86.2 84.9 Cost per tonne – US$/t 43.9 48.2 Cost per tonne – US$/t 36.8 42
Slide 10: Operations Cont.
Operations Cont. Ciénega San Julián (Phase I & II) Key operating statistics 2016 vs 2015 Key operating statistics 2016 vs 2015 Gold production – koz 72.9 85.7 Gold production – koz 31.4 NA Silver production – moz 5.1 4.8 Silver production – moz 2.1 NA Cost per tonne – US$/t 55.5 63.0 Reserves 2016 1
Slide 11: Operations Cont.
Operations Cont. Herradura Noche Buena Key operating statistics 2016 vs 2015 Key operating statistics 2016 vs 2015 Gold production – koz 520.4 398.9 Gold production – koz 182.3 158.2 Silver production – koz 638 526 Silver production – koz 33 73 Cost per tonne* – US$/t 7.7 8.7 Cost per tonne* – US$/t
Slide 12: Projects
Projects San Julián (Phase I & II) Expected 2017 silver production 11.6 moz Expected 2017 gold production 63.7 koz Expected Cash cost 2017* $0.9/oz Expected Cost per tonne 2017 $46.4/tonne Expected All-in sustaining costs 2017* $4.9/oz Phase II capacity (flotation plant to process 6,000 TPD ore from
Slide 13: San Julián District Potential
San Julián District Potential 13
Slide 14: Projects Cont. - Pyrites Plant Project
Projects Cont. Pyrites Plant Project in the Fresnillo District IRR of 25% Avg. annual silver production 3.5 moz US$18/oz of Ag Avg. annual gold production 13.0 koz Pre-operative capex $155 m Cash cost (average LoM) $2.51 /oz Expected commissioning 2018 Overview Improve overall recoveries of gold and
Slide 15: Projects Cont. - 2nd Line of Dynamic Leaching Plant
Projects Cont. 2nd Line of Dynamic Leaching Plant Project at Herradura Ore type • Detailed engineering continued • Milling area advanced • Order of various components placed • The project will enable sulphides occurring deeper in the pit to be processed more efficiently • As a result of the project,
Slide 16: Projects Cont. - Juanicipio
Projects Cont. Juanicipio (JV with MAG Silver. Fresnillo: 56%) 8km from the Fresnillo mine; Juanicipio’s mineral zones are located in silver-gold rich sulphide shoots of the veins. This project will be developed on a stand-alone basis Key metric estimates (100% basis) 10moz silver Avg. annual produc
Slide 17: ULUELE DA DEDOLALAVEUETEL EET EE
ULUELE DA DEDOLALAVEUETEL EET EE eH PUN EUAU ANP EELU LOU AGUTO CELT PTET 3 WIT rine ALLL
Slide 18: Strong Organic Growth Pipeline
Strong Organic Growth Pipeline 2017/ Budget: US$ 160 m Pipeline Fresnillo allows us to focus on Saucito projects that have the Herradura Mine Operations 36 % potential to be developed Nochebuena Ciénega - San Ramón into low cost, Soledad &Dipolos* world-class mines San Julián Pyrites Plant Cebollita
Slide 19: Guanajuato District Potential
Guanajuato District Potential 19
Slide 20: Silver Reserves
Silver Reserves Increase in tonnage (+17%) due to lower Cut Off Grade (COG) and exploration. Decrease in tonnage by 17%. Millions of oz Lower ore grade 21%. 79% of the silver in veins and 21% in the disseminated 81% of the silver is in veins orebody at San Julián. and 19% in the There is a total of
Slide 21: Gold Reserves
Gold Reserves Increase tonnes (+17%) due to Increased tonnage 5% and exploration and lower COG. lower ore grade -7%. Reserve depletion. Millions of oz Increase in tonnes (+20%) due to exploration and lower COG. 72% of the gold is in pits 74% of the gold is in pits and the 28% in veins. and 26% in ve
Slide 22: Silver Resources (Mines & Projects)
Silver Resources (Mines & Projects) Millions of oz Increase due to new drilling. The proportion of the silver resources remains Increase due to 80% in veins and the rest in exploration and silver the disseminated ore body at price. San Julián and as by-product. 80% of the silver is in veins and 20%
Slide 23: Gold Resources (Mines & Projects)
Gold Resources (Mines & Projects) Distribution of gold resources in 2016: 36% Herradura District 25% Orisyvo Increase due to higher 12% Fresnillo District gold price in the Pit 27% Other projects modelling. 80% of the resources are Resources included in M&I and half are in the the Herradura Pit. ope
Slide 24: Financial Review
Financial Review $ Bch r ay oa E af) ee
Slide 25: Metal prices, average exchange rate, energy & inflation
Metal prices, average exchange rate, energy & inflation ACCUM DECEMBER CONCEPT 2016 2015 % CHG GOLD (US$/OZ) 1,246.50 1,126.50 10.7 SILVER (US$/OZ) 17.23 15.56 10.7 LEAD (USC$/LB) 85.10 79.49 7.0 ZINC (USC$/LB) 100.54 83.79 20.0 AVERAGE SPOT EXCHANGE RATE ($/USD) 18.6572 15.8481 17.7 (KWH) WEIGHTED
Slide 26: Income Statement (IFRS)
Income Statement (IFRS) ACCUM DECEMBER CHANGE CONCEPT (Million USD) 2016 % 2015 % $ % ADJUSTED REVENUES 2,045.0 1,583.3 461.7 29.2 HEDGING (METALS) 1.6 3.9 (2.3) (59.0) TREATMENT AND REFINING CHARGES (141.1) (142.8) 1.7 (1.2) REVENUES 1,905.5 100.0 1,444.4 100.0 461.1 31.9 ADJUSTED PRODUCTION COST (
Slide 27: Contribution by mine and by metal to the Adjusted Revenues
Contribution by mine and by metal to the Adjusted Revenues 2016 2016 Adjusted Revenues : US$1,487.9m By mine By metal 3% 4% 19% 11% 5% 35% 32% 55% 26% 9% Fresnillo Saucito Ciénega Silver Gold Herradura Noche Buena San Julián Lead Zinc Fresnillo Ciénega Herradura Saucito Noche Buena San Julián Consol
Slide 28: Adjusted Production Cost Analysis
Adjusted Production Cost Analysis (Consolidated) USD MILLION 60.0 50.0 3.69 (5.17) (8.63) 39.77 40.0 (45.20) 30.0 20.0 10.0 (15.55)* 0.0 (10.0) (20.0) (30.0) Production Cost Deflation (Fresnillo, Saucito and Ciénega) Others MXP/USD Devaluation effect Decr. in Adj. Prod.Cost Efficiencies * Net of unp
Slide 29: Consolidated Gross Profit Analysis
Consolidated Gross Profit Analysis CHANGE YTD16 YTD15 $ % USD MILLION Gross Profit 882.1 433.1 449.0 +103.7% 490.0 * 8.6 5.2 449.0 17.5 12.2 441.0 45.2 392.0 167.5 343.0 48% Attributable to operations 294.0 52% Factors out of our control 245.0 196.0 192.8 147.0 98.0 49.0 0.0 Efficiencies Higher Prod
Slide 30: Contribution by mine to the Gross Profit
Contribution by mine to the Gross Profit 2016 & 2015 2016 2015 17.9% 3.0% 18.3% 6.2% 35.7% 35.7% 31.1% 3.6% 42.8% 5.6% US$882.1 M US$433.1 M Fresnillo Saucito Ciénega Herradura Noche Buena San Julián 30
Slide 31: Income Statement (IFRS)
ACCUM DECEMBER 2016 Operating Units Income Statement (IFRS) ACCUM DECEMBER Fresnillo Ciénega CHANGE 8.0 14.0 (Million USD) CONCEP T 2016 % 2015 Saucito % $ % 9.6 ADJUSTED REVENUES 2,045.0 1,583.3 Herradura461.7 29.2 13.6 HEDGING (METALS) 1.6 Noche Buena 3.9 (2.3) (59.0) 1.3 TREATMENT AND REFINING CH
Slide 32: Cash Flow (IFRS)
Cash Flow (IFRS) CASH FLOW CHG. YTD 2015 (USD MILLION) YTD 2016 YTD 2015 $ % CASH GENERATED BY OPERATIONS BEFORE CHANGES IN WORKING CAPITAL 1,023.3 537.3 486.0 90.5 WORKING CAPITAL (10.6) 51.3 (61.9) (120.6) INCOME TAX AND PROFIT SHARING PAID (114.8) (45.8) (69.1) 150.9 NET CASH FROM OPERATING ACTIV
Slide 33: Cash Flow (IFRS)
•Increase in trade and other receivables Cash Flow (IFRS) • due to higher volume sold to Met-Mex • $USD 39.5 million •Increase in accounts payable of $USD 5.1 • million •Decrease in gold ore inventories at CASH FLOW (Million USD) CHG. YTD 2015 • Herradura and Noche Buena $USD 23.7 (USD MILLION) YTD
Slide 34: Balance Sheet (IFRS)
Balance Sheet (IFRS) Change Concept (Million USD) 31-DEC-16 31-DEC-15 % Assets Cash and Investments 912.0 500.1 82.3 Trade and Other Receivables 286.7 305.7 (6.2) Inventories 276.9 300.6 (7.9) Prepaid Expenses 2.8 3.0 (4.3) Silverstream 467.5 384.8 21.5 Derivative Financial Instruments 23.2 117.1 (8
Slide 35: Cost Per Tonne (IFRS)
Cost Per Tonne (IFRS) ACCUM DECEMBER CHANGE 2016 2015 % CHG. COST PER TONNE * MINE UNIT A Fresnillo US$/TON 43.93 48.20 -8.9% A Saucito US$/TON 36.75 42.49 -13.5% A Ciénega US$/TON 55.49 62.99 -11.9% B Herradura US$/TON 7.72 ** 8.68 ** -11.0% C Total Vol. Hauled Charged to Costs US$/TON 2.31 2.32 -0
Slide 36: Cash Cost (IFRS)
Cash Cost (IFRS) ACCUM DECEMBER CHANGE 2016 2015 % CHG. CASH COST * MINE UNIT Fresnillo PER OZ. SILVER 2.09 5.60 -62.6% Saucito PER OZ. SILVER -0.39 1.15 -133.4% Ciénega PER OZ. GOLD (By-prod.) -217.19 245.49 -188.5% PER OZ. GOLD (Co-prod.) 488.68 625.42 -21.9% PER OZ. SILVER (Co-prod.) 6.75 8.35 -1
Slide 37: Margins by mine (Metal price – Cash Cost)
Margins by mine (Metal price – Cash Cost) (YTD16 vs YTD15) (USD/Oz) Fresnillo Saucito Ciénega Herradura Noche Buena 14.6Moz. 14.5Moz. 20.3Moz. 20.4Moz. 76.6Koz. 66.6Koz. 409.0Koz. 516.4Koz. 143.2Koz. 180.7Koz. Chg. + -0.5% Chg. +0.2% Chg. -13.0% Chg. +26.3% Chg. +26.2% Ounces Sold Note I: San Julián
Slide 38: All In Sustaining Cost (US$/Oz)
All In Sustaining Cost (US$/Oz) ACCUM DEC 2016 2015 % CHG. CASH COST * MINE UNIT Fresnillo PER OZ. SILVER 7.82 11.48 -31.9% Saucito PER OZ. SILVER 4.77 7.11 -32.9% Ciénega PER OZ. GOLD 428.00 710.37 -39.7% Herradura PER OZ. GOLD 731.69 888.04 -17.6% Noche Buena PER OZ. GOLD 823.04 1,015.40 -18.9% No
Slide 39: Margins by mine (Metal price – All In Sustaining Cost)
Margins by mine (Metal price – All In Sustaining Cost) (YTD16 vs YTD15) (USD/Oz) Fresnillo Saucito Ciénega Herradura Noche Buena 14.6Moz. 14.5Moz. 20.3Moz. 20.4Moz. 76.6Koz. 66.7Koz. 409.0Koz. 516.4Koz. 143.2Koz. 180.7Koz. Chg. + -0.5% Chg. 0.2% Chg. -13.0% Chg. +26.3% Chg. +26.2% Ounces Sold Note I
Slide 40: Group Consolidated Cash Cost & All In Sustaining Cost
Group Consolidated Cash Cost* & All In Sustaining Cost** (US$/Oz) ACCUM DECEMBER CHANGE CASH COST 2016 2015 % CHG. PER OZ SILVER EQ. As a Silver Company 5.98 7.01 -14.7% Silver Eq. Oz (Moz) Sales Volume 108 93 16.1% PER OZ GOLD EQ. As a Gold Company 433.48 507.71 -14.6% Gold Eq. Oz (Koz) Sales Volum
Slide 41: Strategy
° Strateay
Slide 42: Expected Delivery of Growth
Expected Delivery of Growth Subject to ongoing internal review Approved by the Board 42 (Subject to Board approval)
Slide 43: Expected Silver Production Profile
Expected Silver Production Profile Million Oz Attributable 90.0 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 - 2017 2018 2019 2020 Yr Target of 65 moz silver by 2018 43
Slide 44: Expected Gold Production Profile
Expected Gold Production Profile Thousand Oz Attributable 1,200.0 1,100.0 1,000.0 900.0 800.0 700.0 600.0 500.0 400.0 300.0 200.0 100.0 - 2017 2018 2019 2020 Yr Target of 750 koz gold by 2018 44
Slide 45: CAPEX Spend Expectations
CAPEX Spend Expectations 2017 US$ Million Sustaining (Operations) 900 820 800 800 Fresnillo 121M 730 Saucito 116 M 700 Herradura 122M Ciénega 66M 600 Noche Buena 24M 500 500 San Julián 77M 434 Others 6M 400 300 Projects Approved 200 San Julián 40M 100 Pyrites Plant 74M Centauro Extension 60M 0 2016
Slide 46: Outlook
Outlook Safety and support of the workforce • Introduce a new safety system at all our mines starting at Saucito in March 2017 Disciplined growth through exploration and development • Deliver San Julián Phase II in the 2Q17 • Advance the Pyrites Plant • Continue construction of the 2nd Line of DLP •
Slide 47: Investment Case
Investment Case Strong balance sheet High quality assets Low-cost and flexible operations Disciplined approach to development Commitment to sustainable business practices 47
Slide 48: Appendix
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Slide 49: Fresnillo Mine
Fresnillo Mine Resources and Reserves Reserves: 24.78Mt @ 258 g/t Ag, 0.75 g/t Au Resources: 72.76Mt @ 341 g/t Ag, 0.73 g/t Au Life of Mine: 9.4 yrs Metres developed per month 2016 Performance 5,000 4,000 2016 2015 % 3,000 Ore Processed kt 2,373 2,410 (1.5) 2,000 1,000 Production Silver m oz 15.9 15
Slide 50: Saucito Mine
Saucito Mine Resources and Reserves Reserves: 15.63Mt @ 245 g/t Ag, 1.72 g/t Au Resources: 49.06Mt @ 267 g/t Ag, 1.31 g/t Au Life of Mine: 5.9 yrs 2016 Performance 2016 2015 % Ore Processed kt 2,635 2,339 12.7 Production Silver m oz 21.9 22.0 (0.2) Gold k oz 86.2 84.9 1.5 Grade Expectations Ore Grad
Slide 51: Ciénega Mine
Ciénega Mine Resources and Reserves Reserves:12.7Mt @ 162 g/t Ag, 2.00 g/t Au Resources: 37.46Mt @ 132 g/t Ag, 1.34 g/t Au Life of Mine: 10 yrs 2016 Performance Grade Expectations 2016 2015 % Ore Processed kt 1,275 1,329 (4.1) Gold (g/t) Production Silver m oz 5.1 4.8 6.3 Gold k oz 72.9 85.7 (15.0)
Slide 52: Herradura Mine
Herradura Mine Resources and Reserves Reserves:221.24Mt @ 0.73 g/t Au Resources: 450.02Mt @ 0.74 g/t Au Life of Mine: 8.6 yrs Inventories (koz) 170 146 138 2016 Performance 150 132 129 120 120 115 130 115 114 2016 2015 % 101 110 86 Ore Processed mt 25.2 22.9 10.0 90 72 Total Volume 70 Hauled mt 118.
Slide 53: Noche Buena Mine
Noche Buena Mine Resources and Reserves Reserves: 54.58Mt @ 0.51 g/t Au Resources: 57.42Mt @ 0.51 g/t Au Life of Mine: 3.2 yrs 2016 Performance 2016 2015 % Ore Processed mt 17.4 17.4 0.2 Total Volume 81.4 82.4 -1.2 Hauled mt Production Grade Expectations Gold k oz 182.3 158.2 15.2 Gold (g/t) Ore Gra
Slide 54: San Julián Mine
San Julián Mine Resources and Reserves Vein Reserves: 6.43Mt @ 161 g/t Ag, 1.82 g/t Au Vein Resources: 16.5Mt @ 127 g/t Ag, 1.45 g/t Au Disseminated Reserves: 13.88Mt @ 228 g/t Ag, 0.08 g/t Au Disseminated Resources: 16.9Mt @ 220 g/t Ag, 0.08 g/t Au Life of Mine: 12 yrs Grade Expectations (g/t) 2016
Slide 55: Consolidated Cost Inflation 2016 (USD Based)
Consolidated Cost Inflation 2016 (USD Based) Consolidated Unit Price Weighted Increase % Weight (*) Average Labour Unionized Personnel -11.0% 7.5% -0.8% Employees -11.3% 3.0% -0.3% Weighted -11.1% Operating Materials -6.5% 21.2% -1.4% Energy Electric Energy -16.6% 6.3% -1.0% Diesel -15.6% 11.3% -1.8
Slide 56: Adjusted Production Cost Analysis
0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 (30.0) (20.0) (10.0) * Net of unproductive costs USD MILLION 1 Start-up of San Julián (phase 1) 20.44 2 Increased Prod. at Herr (HL) 16.72 Increased Ore Processed at Saucito 12.58 (Consolidated) 3 Higher cost of contractors 4 4.83 5 Lower Reclasification 3.69 O
Slide 57: Adjusted Production Cost Analysis
Adjusted Production Cost Analysis (Consolidated) Volume Processed (Mton) YTD16 YTD15 Chg USD MILLION Volume Processed (Mton) 2.37 2.41 -1.5% YTD16 YTD15 Chg +4.6% 22.67 20.10 +12.8% +3.7% -4.4% Average spot MXP/USD 70.0 (0.07) (1.78) YTD16 YTD15 Chg 3.26 3.14 (3.43) (3.99) 60.0 3.69 (4.67) 18.66 15.
Slide 58: Consolidated Gross Profit Analysis
0.0 53.0 106.0 159.0 212.0 265.0 318.0 371.0 424.0 477.0 530.0 1 Higher Metal Prices 167.5 2 Increased production at Herradura USD MILLION 128.9 3 Start-up of San Julián (phase 1) 45.8 4 MXP/USD Devaluation effect 45.2 Gross Profit 5 Higher ore grade at Fresnillo 29.0 Higher production at NB 6 23.4
Slide 59: Consolidated Gross Profit Analysis
Consolidated Gross Profit Analysis Ore Grade NB: Ore Grade Ciénega: YTD16 YTD15 Chg YTD16 YTD15 Chg CHANGE Au g/t 0.69 0.50 +38.6% Zn g/t 1.00 0.80 +26.1% Ore Grade Saucito: YTD16 Ag g/t 143.45 129.04 YTD15 +11.2% $ % YTD16 YTD15 Chg USD MILLION Pb g/t 0.68 0.61 +11.9% Recovery NB: Gross Profit 882.