Fresnillo Plc · LSE:FRES
Fresnillo — Goldman Sachs Annual Global Metals and Mining Conference 2015
34 slides from Fresnillo's conference presentation, Dec 1, 2015
Slide 1: Annual Global Metals and Mining Conference, Goldman Sachs
“Well placed to address cyclical uncertainties” Annual Global Metals and Mining Conference Goldman Sachs December 1 & 2, 2015 CFO Mario Arreguín LSE:Fres BMV:Fres www.fresnilloplc.com
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”, “int
Slide 3: Fresnillo at a Glance
Fresnillo at a Glance Location Key Highlights HERRADURA World’s largest silver producer (45 moz in 2014) and Mexico’s DISTRICT second largest gold producer (596 koz in 2014) ORISYVO Market cap of US$7.5 billion* SAN JULIÁN Silver resources of 2 billion ounces and gold resources of 34 million
Slide 4: Our Business Model and Strategy
Our Business Model and Strategy Our Business Model… …supported by four strategic pillars to create value 1. Maximise potential of existing operations • Operate at 100% capacity • Low-cost producer • Optimise mining method and metallurgy to maintain high recovery rates 2. Deliver growth through devel
Slide 5: 2014 Highlights
2014 Highlights • Silver production of 45 moz and gold production of 596 koz • Revenues: US$1.4 billion • Continued focus on cost control • Operating profit: US$245.6 million • EBITDA: US$567.3 million; EBITDA margin of 40.1% • Capex of US$425.6 million and total investment in exploration of US$184.
Slide 6: Operations Review
Operations Review Fresnillo Key operating statistics 1H15 Silver production – moz 7.8 Cost per tonne – US$/t 48.5 Gold production – koz 15.1 Cash cost - US$/oz 5.8 Silver ore grade - g/t 220 AISC - US$/oz 11.1 Gold ore grade - g/t 0.50 AISC (LoM) (2023) – US$/oz 6.20 1H15 silver production decreased
Slide 7: Operations Review (Cont'd): Saucito, Ciénega
Operations Review (Cont’d) Saucito Ciénega Key operating statistics 1H15 Key operating statistics 1H15 Silver production – moz 11.4 Gold production – koz 45.7 Gold production – koz 44.7 Silver production – moz 2.1 Silver ore grade - g/t 341 Gold ore grade - g/t 2.25 Gold ore grade - g/t 1.50 Silver
Slide 8: Operations Review (Cont'd): Herradura, Noche Buena
Operations Review (Cont’d) Herradura Noche Buena Key operating statistics 1H15 Key operating statistics 1H15 Gold production – koz 188.1 Gold production – koz 70.5 Gold ore grade – g/t 0.74 Gold ore grade - g/t 0.48 Ore processed – mt 10.9 Ore processed – mt 8.7 Total volume hauled – mt 57.7 Total v
Slide 9: Expected Delivery of Growth
Expected Delivery of Growth Expected Avg. Investm ent YEAR (US$ m illion) Annual 2015 2016 2017 2018 2019 2020 Production (1) (2) PROJECT CONSTRUCTION LEACHING 10.3 m ill Oz Ag (3) PLANT 515 & 44 thds Oz SAN JULIÁN PRODUCTION Au CONSTRUCTION FLOTATION PLANT MINE DEVELOPMENT & PLANT ADEQUATION FRESNI
Slide 10: Approved Projects: San Julián
Approved Projects San Julián Key metric estimates Avg. annual silver production 10.3 moz Avg. annual gold production 43.9 koz Pre-operative capex $515 m Cash cost (average LoM) $7.77 /oz All-in sustaining costs (average LoM) $9.33 /oz Phase 1 capacity (DLP to treat ore from 3,000TPD veins) Phase 2 c
Slide 11: San Julián: Commissioning 1H16
Approved Projects San Julián: Commissioning 1H16 12/1/2015 11
Slide 12: Approved Projects: Pyrites Plant
Approved Projects Pyrites Plant Key metric estimates Avg. annual silver production 3.5 moz Avg. annual gold production 12.8 koz Saucito I Saucito II Fresnillo Plant Pre-operative capex $155 m Cash cost (average LoM) $2.51 /oz Old Tailings Fe Tailings Plant Plant Hauling Filtration Leaching Plant Pla
Slide 13: Potential Brownfield Expansions
Potential Brownfield Expansions Ciénega Fresnillo Centauro Extension Centauro Deep Optimisation Optimisation Potential underground Natural evolution of Optimisation project to Optimisation project to mine beneath the Description the Centauro pit at increase capacity increase capacity Centauro pit at
Slide 14: Advanced Exploration Projects
Advanced Exploration Projects Juanicipio (JV with MAG Silver. Fresnillo: 56%) Orisyvo 8km from the Fresnillo mine; Juanicipio’s mineral zones are Assessing a 8,000TPD mine with a DLP processing facility; located in silver-gold rich sulphide shoots of the veins. focusing on higher grade zones of the
Slide 15: Strong Organic Growth Pipeline
Strong Organic Growth Pipeline 2015 Budget: c.US$160m Pipeline allows us to focus on Fresnillo projects that have the Saucito I & II Mine Operations Herradura (DLP) 34% potential to be developed Noche Buena into low cost, Ciénega - San Ramón world-class mines Soledad &Dipolos* Development Projects S
Slide 16: Proven Track Record of Delivering on Time and on Budget
Proven Track Record of Delivering on Time and on Budget Saucito I commissioning San Ramón satellite at Ciénega Commissioning of DLP ($273m / 9 moz Ag) ($20m/ 25 koz Au; 2.5 moz Ag) ($116m / 50 koz Au) 2010 2011 2012 2013 2014 Commercial production at Commercial production at Soledad-Dipolos began No
Slide 17: Achieving 65moz Silver by 2018
Achieving 65moz Silver by 2018 Thousand Oz Attributable Juanicipio - 56% 100,000 Pyrites Plant 90,000 San Julián 80,000 Saucito II 70,000 Saucito I 60,000 50,000 Noche Buena 40,000 Herradura 30,000 Ciénega Expansion 20,000 Ciénega 10,000 9,000 TPD Fres Expansion - Fresnillo 2014 2015 2016 2017 2018
Slide 18: Achieving 750koz Gold by 2018
Achieving 750koz Gold by 2018 Thousand Oz Attributable Orisyvo 1,000 Juanicipio - 56% 900 San Julián 800 Pyrites Plant 700 Saucito II 600 Saucito I 500 Ciénega Expansion 400 Ciénega 300 Fresnillo 200 Nochebuena 100 Dynamic Leaching - 2014 2015 2016 2017 2018 Herradura Yr 18
Slide 19: CAPEX & Exploration Spend
CAPEX & Exploration Spend CAPEX Expectations US$ Million 2015 Million Usd 900 Sustaining New Prior • Sustaining $145 $185 800 • Mining Works 700 $105 $87 (Underground) • Mining Works 600 $89 $89 (Stripping) 500 New Projects 400 • San Julián $130 $133 • Pyrites Plant $1 $60 300 • Saucito II $53 $53 2
Slide 20: Advancing our Sustainable Development
Advancing our Sustainable Development Zero fatalities since May 2014 Zero new cases of occupational diseases in 1H15 Fresnillo included in the new “Euronext‐Vigeo EM 70” Environment, Social and Governance (ESG) Index Maintaining sound relations with personnel and unions Focusing on effecti
Slide 21: Conclusions & Outlook
“Well placed to address cyclical uncertainties” Conclusions & Outlook
Slide 22: Conclusions and Outlook
Conclusions and Outlook • Pricing environment continues to be challenging • However our strategic objectives remain unchanged – Invest through the cycle, delivering growth and returns for our shareholders – Low cost operating mines to continue to provide a solid platform for growth – Development pro
Slide 23: Investment Case
Investment Case World-class assets Strong organic growth pipeline Operational excellence Competitive cash cost performance Financial strength and flexibility Strong community support 12/1/2015 23
Slide 24: Appendix
“Well placed to address cyclical uncertainties” Appendix
Slide 25: 2014 Production Overview
2014 Production Overview 2014 PRODUCTION* 2013 PRODUCTION* SILVER GOLD SILVER GOLD (Koz) (Oz) (Koz) (Oz) Fresnillo mine Silver underground mine 20,098 35,676 22,764 33,079 Saucito mine Silver underground mine 15,397 57,227 11,581 45,177 Ciénega mine Gold-Silver underground mines 4,075 108,211 4,240
Slide 26: Income Statement (IFRS)
Income Statement (IFRS) ACCUM JUNE CHANGE CONCEP T 1H 2015 % 1H 2014 % $ % ADJUSTED REVENUES 822.4 750.4 72.0 9.6 HEDGING (METALS) 0.8 0.0 0.8 8,971.1 TREATMENT AND REFINING CHARGES (70.9) (73.3) 2.4 (3.2) REVENUES 752.3 100.0 677.1 100.0 75.2 11.1 ADJUSTED PRODUCTION COST (316.2) (42.0) (291.3) (43
Slide 27: Cash Flow (IFRS)
Cash Flow (IFRS) CHANGE C O N C E P T (Million USD) 1H 2015 1H 2014 $ % CASH GENERATED BY OPERATIONS BEFORE CHANGES IN WORKING CAPITAL 314.9 336.7 (21.8) (6.5) WORKING CAPITAL (18.0) (71.5) 53.5 (74.8) INCOME TAX AND PROFIT SHARING PAID (33.5) (110.5) 77.0 (69.7) NET CASH FROM OPERATING ACTIVITIES 2
Slide 28: Balance Sheet (IFRS)
Balance Sheet (IFRS) Change Concept (Million USD) 30-JUNE-15 31-DIC-14 % Assets Cash and Investments 475.7 449.3 5.9 Trade and Other Receivables 430.7 456.1 (5.6) Inventories 321.7 305.6 5.3 Prepaid Expenses 1.7 3.4 (50.0) Silverstream 373.6 392.3 (4.8) Derivative Financial Instruments 27.9 14.6 91.
Slide 29: Cost Per Tonne (IFRS)
Cost Per Tonne (IFRS) 1H 2015 1H 2014 % CHANGE COST PER TONNE * MINE UNIT Fresnillo US$/TONNE 48.53 45.02 7.8% Saucito US$/TONNE 42.65 62.09 -31.3% Ciénega US$/TONNE 66.66 67.61 -1.4% Herradura US$/TONNE 8.71 ** 8.03 ** 8.5% Noche Buena US$/TONNE 8.16 ** 8.89 ** -8.2% * Cost per tonne is calculated
Slide 30: Cash Cost (IFRS)
Cash Cost (IFRS) 1H 2015 1H 2014 % CHANGE CASH COST * MINE UNIT Fresnillo PER OZ. SILVER 5.75 6.13 -6.2% Saucito PER OZ. SILVER 0.64 3.36 -81.1% Ciénega PER OZ. GOLD (By-prod.) 296.99 180.64 64.4% PER OZ. GOLD (Equiv.) ** 702.08 649.50 8.1% PER OZ. GOLD (Co-prod.) ** 643.83 586.86 9.7% PER OZ. SILVE
Slide 31: All In Sustaining Cost (US$/Oz)
All In Sustaining Cost (US$/Oz)* LIFE OF MINE 1H 2015 1H 2014 % CHANGE WEIGHTED AVERAGE CASH COST * MINE UNIT Fresnillo PER OZ. SILVER 11.05 9.93 11.3% 6.20 (2023) Saucito PER OZ. SILVER 5.95 7.66 -22.3% 6.00 (2021) Ciénega PER OZ. GOLD 649.97 594.58 9.3% 803.12 (2026) Herradura PER OZ. GOLD 873.23
Slide 32: Consolidated Cost Inflation (1H15 vs. 1H14, USD Based)
Consolidated Cost Inflation (1H15 vs. 1H14, USD Based) Unit Price Weighted Increase % Weight (*) Average Labour Unionized Personnel -8.3% 7.4% -0.6% Employees -9.3% 2.7% -0.3% Weighted -8.5% Operating Materials -2.1% 21.3% -0.4% Energy Electric Energy -31.3% 7.4% -2.3% Diesel -5.9% 9.4% -0.6% Gasoli
Slide 33: Breakdown of Adjusted Production Costs (1H15)
Breakdown of Adjusted Production Costs (1H15) Adj Prod Cost: US$316.2m 1 Contrac Op Mat Energy & Diesel Mainten Person Others Freights 1 Contractors are hired to execute specific tasks. Fees paid include labour, operating materials, equipment, diesel and any other items required to fulfill such task
Slide 34: Margins by mine (Metal price – AISC)
Margins by mine (Metal price – AISC*) (1H15 vs. 1H14) (USD/Oz) Fresnillo Saucito Ciénega Herradura NB 10.2moz 7.4moz 6.1moz 10.6moz 48.6koz 39.8koz 103.8koz 188.3koz 63.8koz 68.4koz Chg. + -27.4% Chg. +73.3% Chg. -18.3% Chg. +81.9% Chg. +7.2% Ounces Sold Stoppage of operations continued at Soledad-D
Fresnillo — Goldman Sachs Annual Global Metals and Mining Conference 2015 on 6ix