Fresnillo Plc · LSE:FRES
Fresnillo — H1 2009 Earnings Presentation
26 slides from Fresnillo's earnings presentation, Aug 17, 2009
Slide 1: Interim Results to 30 June 2009
Interim Results to 30 June 2009 August 17, 2009 Jaime Lomelín, CEO Fresnillo plc
Slide 2: 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 DISCLAIMER “believes”, “estimates”, “plans”, “projects”, “anticipates”, “expects”, “inte
Slide 3: Agenda
AGENDA 1. H1 2009 Highlights 2. Operations, Development Projects and Exploration 3. Financial Review 4. Conclusion 5. Q and A 3
Slide 4: Delivery and growth firmly on track
1. 2009 INTERIM RESULTS Silver price US$13.92/oz, down 21.9% Cost per tonne down in all three mines EBITDA US$203.5m, down 4.1% EBITDA margins up to 53.7% from 50.0% Attributable profit US$121.1m, down 14.1% Financial Results Cash flow before changes in working capital US$234.3m, down 7.2% Earnings
Slide 5: Operating results: delivery and growth firmly on track
1. 2009 INTERIM RESULTS Record silver production Record gold production at Herradura Optimisation at operating mines Growth pipeline: – Soledad and Dipolos Q1 2010 Operating Results – Saucito approved – Silver resources increased Excellent safety record Delivery and growth firmly on track 5
Slide 6: Operating mines
Fresnillo Fresnillo - Underground Ciénega - Underground Ciénega Herradura Herradura – 1 Open pit 2. OPERATIONS, DEVELOPMENT PROJECTS AND EXPLORATION H1 2009 Attributable production Silver: 17.9m oz 6.5% Silver: 0.7m oz 48.1% Silver: 0.1m oz 42.6% Gold: 14.0k oz 18.5% Gold: 48.0k oz 25.8% Gold: 71.0k
Slide 7: Asset optimisation
2. OPERATIONS, DEVELOPMENT Optimisation Projects PROJECTS AND EXPLORATION Fresnillo Ciénega Herradura Sewage water treatment Leaching circuit optimisation Expansion of beneficiation plant to be concluded in 3Q to be concluded at end of plant to be concluded at end 2009 2009 of 2009 - reduce costs an
Slide 8: Soledad-Dipolos: on target to commence production in Q1 2010
2. OPERATIONS, Pre-stripping activities DEVELOPMENT PROJECTS AND EXPLORATION Development projects Soledad-Dipolos Construction of the leaching pads, ponds and admin offices Construction of the Merrill Crowe plant On target to commence production in Q1 2010 8
Slide 9: Development projects Saucito – First Stage
2. OPERATIONS, DEVELOPMENT PROJECTS AND EXPLORATION Development projects Saucito – First Stage Minera Saucito’s veins (100% Fresnillo Plc): Saucito, Mezquite, Madroño, Jarillas, Sta. Natalia, Valdecañas East and West Minera Juanicipio’s veins (56% Fresnillo Plc): Valdecañas Central, Juanicipio 9
Slide 10: Development projects Saucito - First Stage
2. OPERATIONS, DEVELOPMENT PROJECTS AND EXPLORATION Pre-feasibility study for first stage Saucito project Approved by Board Based on audited Total Reserves and Resources at year-end 2008 3,000 tpd operation Development Planned Capex: (US$m) 2008 2009 2010 2011 projects $50 $51 $140 $68 Sustaining ca
Slide 11: Exploration at mines and projects
San Julián San Julián 2. OPERATIONS, - 34 diamond drill holes (17,465m) completed DEVELOPMENT - Mineralization extended along strike in the JM PROJECTS AND disseminated silver deposit EXPLORATION - Ramp construction initiated Orisyvo - 9 diamond drill holes (4,675m) completed - North oxide & sulphid
Slide 12: Interim Results to 30 June 2009 – CFO
Interim Results to 30 June 2009 August 17, 2009 Mario Arreguin, CFO Fresnillo plc
Slide 13: Consolidated Income Statement
3. CONSOLIDATED (US$ MILLIONS) ACCUM JUNE CHANGE 2009 % 2008 % AMOUNT % INCOME STATEMENT NET REVENUES 378.9 100.0 424.2 100.0 (45.3) (10.7) COST OF SALES (158.8) (41.9) (150.5) (35.5) (8.3) 5.5 GROSS PROFIT 220.1 58.1 273.7 64.5 (53.6) (19.6) ADMINISTRATIVE EXPENSES (25.9) (6.8) (58.4) (13.8) 32.5 (
Slide 14: Consolidated Income Statement: gross profit
3. CONSOLIDATED CHANGE INCOME STATEMENT (US$ MILLIONS) 1H09 1H08 AMOUNT % ADJUSTED REVENUE1 426.0 493.8 (67.8) (13.7) TREATMENT AND REFINING CHARGES (35.1) (47.2) 12.1 (25.6) HEDGING LOSSES (PREVIOUS YEARS) (12.4) (22.4) 10.0 (44.6) HEDGING EARNINGS (THIS PERIOD) 0.4 - 0.4 100.0 NET REVENUES 378.9 4
Slide 15: Consolidated gross profit analysis
profit analysis 3. CONSOLIDATED INCOME STATEMENT Consolidated gross 0.0 12.0 24.0 36.0 48.0 60.0 (60.0) (48.0) (36.0) (24.0) (12.0) Decrease in Gross Profit (53.6) USD MILLION MXP/USD Devaluation effect 15.2 Higher prod at 14.0 Herradura Gross Profit Lower treatment and refining 12.1 charges Lower h
Slide 16: Variables impacting production costs
CHANGE 3. CONSOLIDATED 1H09 1H08 AMOUNT % INCOME STATEMENT Cost of Sales 158.76 150.51 +8.25 +5.48 Less Change in work in progress 5.49 6.98 -1.49 -21.35 Less Depreciation 31.34 21.75 +9.59 +44.09 Less Profit Sharing 17.84 17.81 +0.03 0.17 Less Hedging 3.66 - +3.66 N/A USD MILLION Adjusted Productio
Slide 17: Cost per tonne
3. CONSOLIDATED INCOME STATEMENT % change % change 1H 2009 1H 2008 2H 2008 1H09 vs 1H08 1H09 vs 2H08 Fresnillo US$/TONNE MILLED 34.97 37.90 (7.7%) 44.40 (21.2%) Ciénega US$/TONNE MILLED 57.12 58.88 (3.0%) 68.03 (16.0%) Cost per tonne* Herradura US$/TONNE DEPOSITED 4.68 5.88 (20.4%) 5.89 (20.5%) * Co
Slide 18: Consolidated Income Statement
3. CONSOLIDATED ACCUM JUNE CHANGE 2009 % 2008 % AMOUNT % INCOME STATEMENT NET REVENUES 378.9 100.0 424.2 100.0 (45.3) (10.7) COST OF SALES (158.8) (41.9) (150.5) (35.5) (8.3) 5.5 GROSS PROFIT 220.1 58.1 273.7 64.5 (53.6) (19.6) ADMINISTRATIVE EXPENSES (25.9) (6.8) (58.4) (13.8) 32.5 (55.6) EXPLORATI
Slide 19: Consolidated EBITDA
3. CONSOLIDATED EBITDA % 1H 2009 1H 2008 change Gross Profit 220.15 273.69 (19.6%) + Depreciation 31.34 21.75 44.1% - Administrative Expenses (25.94) (58.37) (55.6%) - Exploration Expenses (22.10) (25.01) (11.6%) EBITDA 203.45 212.06 (4.1%) EBITDA MARGIN 53.69% 49.99% 19
Slide 20: Consolidated Cash Flow Statement
(US $ millions) 1H09 3. CONSOLIDATED CASH GENERATED BY OPERATIONS BEFORE CHANGES IN WORKING CAPITAL 234.3 CASH FLOW STATEMENT WORKING CAPITAL (57.3) INCOME TAX AND EMPLOYEE PROFIT SHARING PAID (82.8) NET CASH FROM OPERATING ACTIVITIES 94.2 OTHER PROCEEDS SILVERSTREAM CONTRACT 20.6 NET INTEREST RECEI
Slide 21: Consolidated Balance Sheet (at June 30)
CHANGE 3. CONSOLIDATED CONCEPT 1H09 Dec 08 % BALANCE SHEET Assets (AT JUNE 30) Cash and cash equivalents 174.6 212.0 (17.6) Trade and other receivables 145.5 81.5 78.5 Inventories 34.7 38.6 (10.1) Prepayments 1.3 1.9 (31.6) Silverstream contract 297.7 318.3 (6.5) Available for sale financial assets
Slide 22: Conclusion: delivery and growth firmly on track
5. CONCLUSION Focussed on operational excellence to maximize returns throughout cycles Generating solid cash flow from high margin assets Strong balance sheet to fund growth Strong near and medium term growth pipeline Continuing to grow reserves for the long term Delivery and growth firmly on track
Slide 23: Appendix
4 FRESNILLO . APPENDIX
Slide 24: Fresnillo cost per tonne analysis
CHANGE 1H09 1H08 AMOUNT % Gross Production Cost 42.38 43.56 -1.18* -2.71 Ore milled (K tonnes) 1,211.8 1,149.2 +62.6* +5.45 Cost per tonne 34.97 37.90 -2.93* -7.73 USD MILLION 5.5 0.21 (0.03) (1.65) 0.81 4.6 1.79 3.7 (5.96) 2.8 Higher labour cost, +8% as result of annual negotiation with the 1.89 Un
Slide 25: Ciénega cost per tonne analysis
CHANGE 1H09 1H08 AMOUNT % Adjusted Production Cost 21.92 21.73 +0.19* +0.87 Ore milled (ktonnes) 383.9 369.1 14.8* +4.01 Cost per tonne 57.12 58.88 -1.76* -2.98 USD MILLION Ore milled increased by +4.0% 10.0 Maintenance to employees’ houses, mining concession, higher cost of insurance. (1.94) 0.80 8
Slide 26: Herradura cost per tonne analysis
CHANGE 1H09 1H08 AMOUNT % Gross Production Cost 36.19 38.39 -2.20* -5.73 Ore deposited (M tonnes) 7.7 6.5 1.2* +18.46 Cost per tonne 4.68 5.88 -1.20* -20.41 USD MILLION Additional contractors were hired due to Additional personnel and higher labour the increase in stripping activities and 0.7 cost,