Fresnillo Plc · LSE:FRES
Fresnillo — H1 2013 Earnings Presentation
58 slides from Fresnillo's earnings presentation, Aug 6, 2013
Slide 1: Interim Results for period ending 30 June 2013
Interim Results for period ending 30 June 2013 Octavio Alvídrez, CEO Mario Arreguín, CFO David Giles, VP Exploration August 6, 2013
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 2013 Highlights Operations Review Financial Review Exploration Projects Outlook Q&A 06/08/2013 3
Slide 4: Our strategy & four pillars to create value
Our strategy & four pillars to create value 1 2 Maximise the potential of existing operations Deliver growth through • Operate at 100% capacity development projects • Low-cost producer • Focus on delivery timeline • Optimise mining method • Disciplined CAPEX control and metallurgy to maintain • Spec
Slide 5: What differentiates us
What differentiates us Operational excellence World class assets Strong organic growth pipeline Competitive cash cost performance Financial strength and flexibility Strong community support 06/08/2013 5
Slide 6: H1 2013 Operational Highlights
H1 2013 Operational Highlights Production: • Silver production, including Silverstream, up 4.5% to 21.0 Moz • Attributable gold production, down 5.2% to 235,827 ounces • 2013 guidance on track: 41moz of silver and 465,000oz gold • Cost reduction and efficiency initiatives continue to be a focus Proj
Slide 7: H1 2013 Financial Highlights
H1 2013 Financial Highlights • Average realised silver price of US$24.67 per oz, and gold of US$1,471.67 per oz, down 20.3% and 10.6% respectively • Adjusted Revenue of US$982.3m, down 14.0% • Estimated weighted average cost inflation was 7.1% • Gross profit of US$518.9m, down 27.0% • EBITDA decreas
Slide 8: Operations Review
Aa FRESNILLO. Operations Review
Slide 9: Fresnillo District
Fresnillo District FRESNILLO SAUCITO H1 2013 H1 2012 Change % H1 2013 H1 2012 Change % Attributable production Silver m oz 11.2 13.4 -2.2 -16.2 5.6 3.2 2.4 73.3 Gold k oz 13.6 15.9 -2.2 -14.1 22.0 21.7 0.3 1.5 Lead kt 7.2 8.7 -1.5 -17.7 2.6 1.1 1.4 125.2 Zinc kt 6.9 8.3 -1.4 -17.1 2.2 0.7 1.4 202.5
Slide 10: Ciénega District
Ciénega District CIÉNEGA H1 2013 H1 2012 Change % Attributable production Gold k oz 59.6 65.3 -5.7 -8.7 Silver m oz 2.2 1.2 1.0 83.9 1 Adjusted Revenue Adj Revenue US$ m 141.5 148.4 -6.9 -4.7 Contribution % 14.4 13.0 Costs Cost per tonne US$/t 73.6 74.1 -0.6 -0.8 Cost per AU oz US$/oz -86.3 60.8 -14
Slide 11: Herradura District
Herradura District HERRADURA SOLEDAD-DIPOLOS NOCHE BUENA H1 2013 H1 2012 Change % H1 2013 H1 2012 Change % H1 2013 H1 2012 Attributable production Gold k oz 91.2 94.4 -3.2 -3.3 22.2 38.9 -16.6 -42.8 27.0 12.6 Adjusted Revenue 1 Adj Revenue US$ m 244.0 278.8 -34.8 -12.5 58.6 113.8 -55.2 -48.5 70.4 36
Slide 12: Update on Soledad-Dipolos
Update on Soledad-Dipolos • Minera Penmont has vacated an area at the Soledad-Dipolos operations • Dipolos open pit gold mining has ceased and equipment removed • Soledad will continue to operate once plant is relocated • Explosives permit temporarily suspended for all Penmont mines but inventories
Slide 13: Improving costs and efficiencies
Improving costs and efficiencies • Targeting cost savings of US$40 million for 2013, which is a 4-5% decrease in operating costs for the Group • Fresnillo District (Fresnillo and Saucito mines) Higher efficiency from contractors Operating materials: optimise drill patterns, training in blasting tech
Slide 14: Ore Grades
Ore Grades FRESNILLO (Gms/Ton) SAUCITO 350 325 300 275-285 275 265 250 300-310 250 225 2011 2012 2013E 2014E 2015 E 2016 E 2017 E 2018 E Ore grade in reserves: 281g/t Ore grade in reserves: 357g/t CIENEGA GOLD CIENEGA SILVER 105-115 2.8-3.3 Ore grade in reserves: 1.38g/t Ore grade in reserves: 111g/
Slide 15: Focus on Improving Safety
Focus on Improving Safety • Two fatalities in the Fresnillo District in June and July • Action Plan to fully integrate the Health, Safety, Environment and Community Relations System across Fresnillo plc is underway • Progress made against safety KPIs: “No More Accidents” programme Lost work days rat
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Slide 17: Financial Review
Ai FRESNILLO. Financial Review
Slide 18: Income Statement (IFRS)
Income Statement (IFRS) ACCUM JUNE CHANGE C O N C E P T (Million USD) 1H 2013 % 1H 2012 % $ % ADJUSTED REVENUES 982.3 1,141.7 (159.4) (14.0) HEDGING (METALS) 0.1 0.0 0.1 N/A TREATMENT AND REFINING CHARGES (56.5) (56.5) 0.0 (0.1) REVENUES 925.9 100.0 1,085.2 100.0 (159.3) (14.7) ADJUSTED PRODUCTION C
Slide 19: Adjusted Revenues (IFRS)
Adjusted Revenues (IFRS) ACCUM JUNE CHANGE BY: PRODUCT (Million USD) 1H 2013 1H 2012 VOLUME PRICE TOTAL GOLD 496.7 580.8 (24.1) (60.0) (84.1) SILVER 443.9 516.8 36.5 (109.3) (72.9) LEAD 22.7 21.9 (0.7) 1.5 0.8 ZINC 18.9 22.2 (2.4) (0.8) (3.3) ADJUSTED REVENUES 982.3 1,141.7 9.2 (168.7) (159.4) 06/08
Slide 20: Contribution by mine and by metal to the adjusted revenues
Contribution by mine and by metal to the adjusted revenues 1 2013 Adjusted Revenues : US$982.3m By mine By metal Fresnillo Saucito Ciénega Silver Gold Herradura Sol & Dip Noche Buena Lead Zinc Fresnillo Ciénega Herradura Sol & Dip Saucito Noche Buena Consol Gold 16.84 5.6% 83.52 59.0% 239.02 98.0% 5
Slide 21: Income Statement (IFRS)
Income Statement (IFRS) ACCUM JUNE CHANGE C O N C E P T (Million USD) 1H 2013 % 1H 2012 % $ % ADJUSTED REVENUES 982.3 1,141.7 (159.4) (14.0) HEDGING (METALS) 0.1 0.0 0.1 N/A TREATMENT AND REFINING CHARGES (56.5) (56.5) 0.0 (0.1) REVENUES 925.9 100.0 1,085.2 100.0 (159.3) (14.7) ADJUSTED PRODUCTION C
Slide 22: Adjusted production cost analysis (consolidated)
Adjusted production cost analysis (consolidated) CHANGE 1H13 1H12 $ % Adjusted Production Cost 339.0 262.0 77.0* +29.4 Change in inventories -51.0 -23.9 -27.1 N/A Depreciation 114.3 109.0 +5.3 +4.9 PTU 8.8 25.5 -16.7 -65.4 Hedging (mxp/usd exchange rate) -4.1 (Profit) 1.8 (Loss) -5.8 N/A USD MILLION
Slide 23: Adjusted production cost analysis (consolidated)
Adjusted production cost analysis (consolidated) • Increase in diesel (+24.4%) and electricity CHANGE • (+9.8%) prices. 1H13 1H12 $ provided to%equipment at • Higher consumption of diesel and electricity at • Maintenance Adjusted Production Cost • Noche Buena and339.0Soledad-Dipolos due262.0 to the
Slide 24: Cost Per Tonne
Cost Per Tonne 1H2013 1H2012 % CHG. COST PER TONNE * MINE UNIT Fresnillo US$/TON 46.60 43.51 7.1% Saucito US$/TON 59.17 60.92 -2.9% Ciénega US$/TON 73.59 74.15 -0.8% Herradura US$/TON 7.13 6.21 14.9% Soledad & Dipolos US$/TON 9.96 5.90 69.0% Noche Buena US$/TON 8.20 N/A N/A Note: Cost per tonne move
Slide 25: Cash Cost (Traditional)
Cash Cost (Traditional) 1H2013 1H2012 % CHG. COST PER TONNE * CASH COST * MINE UNIT Fresnillo PER OZ. SILVER 5.46 5.09 7.3% Saucito PER OZ. SILVER 2.19 0.48 352.8% Ciénega PER OZ. GOLD -86.29 60.75 N/A Co-Product Cash Cost PER OZ. GOLD 475.61 436.53 9.0% Co-Product Cash Cost PER OZ. SILVER 8.13 8.00
Slide 26: Margins by mine (Metal price – Cash Cost 2013 vs 2012)
Margins by mine (Metal price – Cash Cost 2013 vs 2012) (USD/Oz) Fresnillo Saucito Ciénega Herradura SD NB 12.4Moz. 10.5Moz. 3.1Moz. 5.3Moz. 62.7Koz. 57.9Koz. 166.6Koz. 161.5Koz. 68.1Koz. 39.1Koz. 22.3Koz. 47.3Koz. Chg. + -14.8% Chg. +71.1% Chg. -7.7% Chg. -3.1% Chg. -42.6% Chg. +111.8%* Ounces Sold
Slide 27: All-In Sustaining Costs (AISC)
All-In Sustaining Costs (AISC) 1H 2013 * * All-In Sustaining Costs (AISC) is calculated as traditional cash cost plus on-site general, corporate and administrative costs, community costs related to current operations, capitalised stripping & underground mine development, sustaining capital expenditu
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Slide 29: Income Statement (IFRS)
Income Statement (IFRS) ACCUM JUNE CHANGE C O N C E P T (Million USD) 1H 2013 % 1H 2012 % $ % ADJUSTED REVENUES 982.3 1,141.7 (159.4) (14.0) HEDGING (METALS) 0.1 0.0 0.1 N/A TREATMENT AND REFINING CHARGES (56.5) (56.5) 0.0 (0.1) REVENUES 925.9 100.0 1,085.2 100.0 (159.3) (14.7) ADJUSTED PRODUCTION C
Slide 30: Consolidated Gross Profit Analysis
Consolidated Gross Profit Analysis CHANGE 1H13 1H12 $ % Gross Profit 518.9* 710.9 -192.0 -27.0 USD MILLION * 1 2 3 4 5 6 7 8 9 10 11 12 13 14 31/07/2013 30
Slide 31: Consolidated Gross Profit Analysis
Consolidated Gross Profit Analysis CHANGE 1H13 1H12 $ % Silver,Gold and Zinc prices (USc/Lb) 518.9* Average -192.0 spot MXP/USD 1H13 1H12 Chg USD MILLION Gross Profit Lower 710.9 ore grade: -27.0 1H13 1H12 Chg Ag 24.7 31.0 (20.3%) • Ciénega Au: -20.8% 12.56 13.26 -5.3% Au 1,471.7 1,645.5 (10.6%) Zn
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Slide 33: Contribution by mine to the Gross Profit
Contribution by mine to the Gross Profit CHANGE 1H13 1H12 US$ % Fresnillo 173.8 34.6% 305.5 43.4% (131.7) (43.1) Saucito 105.0 20.9% 67.9 9.7% 37.1 54.6 Ciénega 64.8 12.9% 80.5 11.4% (15.7) (19.5) Herradura 125.1 24.9% 166.4 23.7% (41.3) (24.8) Sol & Dipolos 18.1 3.6% 62.6 8.9% (44.5) (71.1) Noche B
Slide 34: Income Statement (IFRS)
Income Statement (IFRS) ACCUM JUNE CHANGE C O N C E P T (Million USD) 1H 2013 % 1H 2012 % $ % ADJUSTED REVENUES 982.3 1,141.7 (159.4) (14.0) HEDGING (METALS) 0.1 0.0 0.1 N/A TREATMENT AND REFINING CHARGES (56.5) (56.5) 0.0 (0.1) REVENUES 925.9 100.0 1,085.2 100.0 (159.3) (14.7) ADJUSTED PRODUCTION C
Slide 35: Income Statement (IFRS)
Income Statement (IFRS) ACCUM JUNE CHANGE C O N C E P T (Million USD) 1H 2013 % 1H 2012 % $ % ADJUSTED REVENUES 982.3 1,141.7 (159.4) (14.0) HEDGING (METALS) 0.1 0.0 0.1 N/A TREATMENT AND REFINING CHARGES (56.5) (56.5) 0.0 (0.1) REVENUES 925.9 100.0 1,085.2 100.0 (159.3) (14.7) ADJUSTED PRODUCTION C
Slide 36: Consolidated Cashflow
Consolidated Cashflow CHANGE CONCEPT (Million USD) YTD 2013 YTD 2012 $ % CASH GENERATED BY OPERATIONS BEFORE CHANGES IN WORKING CAPITAL 496.4 716.7 (220.3) (30.7) WORKING CAPITAL (53.0) (71.1) 18.1 (25.4) INCOME TAX AND PROFIT SHARING PAID (254.5) (352.8) 98.3 (27.9) NET CASH FROM OPERATING ACTIVITI
Slide 37: Consolidated Cashflow
Consolidated Cashflow • Increase in ore inventories at Soledad- • Dipolos and Noche Buena (-$57.2). • Net increase in accounts payables CHANGE CONCEPT (Million USD) • (+$4.1).YTD 2012 YTD 2013 $ % CASH GENERATED BY OPERATIONS BEFORE CHANGES IN WORKING CAPITAL 496.4 716.7 (220.3) (30.7) WORKING CAPIT
Slide 38: Consolidated Balance Sheet (IFRS)
Consolidated Balance Sheet (IFRS) Change Concept 31-JUNE-13 31-DIC-12 % Assets Cash and Investments 570.8 613.8 (7.0) Trade and Other Receivables 265.8 263.6 0.8 Inventories 254.8 198.0 28.7 Prepaid Expenses 1.8 3.1 (43.3) Silverstream 343.0 487.8 (29.7) Derivative Financial Instruments 1.0 2.8 (64.
Slide 39: Consolidated Income Statement without Silverstream Effect
Consolidated Income Statement without Silverstream Effect ACCUM JUNE CHANGE C O N C E P T (Million USD) 1H 2013 % 1H 2012 % $ % ADJUSTED REVENUES 982.3 1,141.7 (159.4) (14.0) HEDGING (METALS) 0.1 0.0 0.1 N/A TREATMENT AND REFINING CHARGES (56.5) (56.5) 0.0 (0.1) REVENUES 925.9 100.0 1,085.2 100.0 (1
Slide 40: Exploration
iN FRESNILLO. Exploration
Slide 41: Exploration Projects
Exploration Projects Fresnillo Saucito Mine Operations Herradura Soledad-Dipolos Nochebuena Ciénega - San Ramón Dynamic Leaching 2018 Development Projects Saucito II Pyrites Plant San Julián CentauroDeep Juanicipio Advanced Exploration Cluster Cebollitas Orisyvo Guachichil Fresnillo District Gran Ce
Slide 42: Exploration Strategy
Exploration Strategy Where we explore: • In countries which have mineral endowment, cultural affinity and stability Mexico Peru Chile Colombia • In mining districts where we have operations or projects under construction Fresnillo District Herradura District Ciénega District San Julián District • In
Slide 43: Exploration Strategy (cont’d)
Exploration Strategy (cont’d) How we do it: People • Keep a strong and motivated exploration team Assets • Current operations: • Maintain 10 years reserves • New prospects: • Minimum 100m oz silver and 2m oz gold potential • Focus on high quality, low cost assets: metals grade, mine & metallurgical
Slide 44: Projects
Ai FRESNILLO. Projects
Slide 45: Growth Projects
Growth Projects Project Development Chart Investment Expected YEAR Risk 2013 2014 2015 2016 2017 2018 (US$ m illion) Production PROJECT 10 m ill Oz Ag Medium 500 & 44 thds Oz SAN JULIÁN CONSTRUCTION PRODUCTION Au 20 thds Oz Au CIENEGA 5,000 TPD DETAILED Low 45 & 1.3 m ill Oz CONSTRUCTION PRODUCTION
Slide 46: Growth Projects: Dynamic Leaching
Growth Projects Dynamic Leaching CAPEX(100%) Annual Average Operation Pre- Project Location Production Risk Start - Up Operative (100%) (Million) Sonora Dynamic Herradura 2013 50,000 Oz Gold US$ 120 Low Leaching District 2013 2014 2015 2016 2017 2018 . . . 2022 CONSTRUCTION PRODUCTION Gold price (US
Slide 47: Growth Projects: San Julián
Growth Projects San Julián CAPEX(100%) Annual Average Operation Pre- Project Location Production Risk Start - Up Operative (100%) (Million) 10.3m Oz Silver Chihuahua – 44,000 Oz Gold San Julián Durango 2H-2014 6,000 Tons Lead US$ 500 Medium 14,000 Tons Zinc 2013 2014 2015 2016 2017 2018 CONSTRUCTION
Slide 48: Growth Projects: Cienega Expansion
Growth Projects Cienega Expansion CAPEX(100%) Annual Average Operation Pre- Project Location Production Risk Start - Up Operative (100%) (Million) Ciénega Durango 20,000 Oz Gold Expansion Cienega 2015 1.3m Oz Silver US$45 Low 5,000 TPD District 2013 2014 2015 2016 2017 2018 ... 2027 BASIC / DETAILED
Slide 49: Growth Projects: Saucito II
Growth Projects Saucito II CAPEX(100%) Annual Average Operation Pre- Project Location Production Risk Start - Up Operative (100%) (Million) 8.4m Oz Silver Zacatecas 36,000 Oz Gold Medium Saucito II Fresnillo 2H - 2015 9,000 Tons Lead US$ 235 Low District 11,000 Tons Zinc 2013 2014 2015 2016 2017 201
Slide 50: Growth Projects: Fresnillo Expansion
Growth Projects Fresnillo Expansion CAPEX(100%) Annual Average Operation Pre- Project Location Production Risk Start - Up Operative (100%) (Million) Fresnillo Zacatecas Expansion Fresnillo 2015 10m Oz Silver US$ 170 Low 10,000 TPD District 2013 2014 2015 2016 2017 2018 . . . 2036 BASIC CONSTRUCTION
Slide 51: Growth Projects: Pyrites Treatment Plant
Growth Projects Pyrites Treatment Plant CAPEX(100%) Annual Average Operation Pre- Project Location Production Risk Start - Up Operative (100%) (Million) Pyrites Zacatecas 4m Oz Silver Treatment Fresnillo 2015 18,000 Oz Gold US$55 Medium Plant District 2013 2014 2015 2016 2017 2018 ... 2038 BASIC CON
Slide 52: Growth Projects: Mega Centauro
Growth Projects Mega Centauro CAPEX(100%) Annual Average Operation Pre- Project Location Production Risk Start - Up Operative (100%) (Million) Sonora Mega Aprox. Herradura 2017 200,000 Oz Gold Medium Centauro District US$ 200 2013 2014 2015 2016 2017 2018 ... 2030 EXPLORATION DEVELOPMENT PRODUCTION
Slide 53: Growth Projects: Mega Centauro
Growth Projects Mega Centauro CAPEX(100%) Annual Average Operation Pre- Project Location Production Risk Start - Up Operative (100%) (Million) Sonora Mega Aprox. Herradura 2017 200,000 Oz Gold Medium Centauro District US$ 200 2013 2014 2015 2016 2017 2018 ... 2030 EXPLORATION DEVELOPMENT PRODUCTION
Slide 54: Growth Projects: Centauro Deep
Growth Projects Centauro Deep CAPEX(100%) Annual Average Operation Pre- Project Location Production Risk Start - Up Operative (100%) (Million) Sonora Centauro Aprox. Medium Herradura 2017 200,000 Oz Gold Deep District US$ 250 High 2013 2014 2015 2016 2017 2018 ... 2029 EXPLORATION DEVELOPMENT PRODUC
Slide 55: Growth Projects: Juanicipio
Growth Projects Juanicipio CAPEX(100%) Annual Average Operation Pre- Project Location Production Risk Start - Up Operative (100%) (Million) Zacatecas 10.5m Oz Silver Medium Juanicipio Fresnillo 2018 32,000 Oz Gold US$ 300 Low District 2013 2014 2015 2016 2017 2018 ... 2033 BASIC DETAILED CONSTRUCTIO
Slide 56: Growth Projects: Orisyvo
Growth Projects Orisyvo CAPEX(100%) Annual Average Operation Pre- Project Location Production Risk Start - Up Operative (100%) (Million) Aprox. Orysivo Chihuahua 2017 136,000 Oz Gold US$ 350 High + 2013 2014 2015 2016 2017 2018 ... 2033 PFS BASIC DETAILED EXPLORATION CONSTRUCTION PRODUCTION ENGINEER
Slide 57: Conclusion and Outlook
Conclusion and Outlook 06/08/2013
Slide 58: Conclusion and Outlook
Conclusion and Outlook • Strong operational performance • On track to produce 41moz silver and 465,000oz gold in 2013 • Safety, our people, communities & environment are our priority • Growth projects on track • Dynamic leaching plant at Herradura on track to start in 4Q13 • San Julián on track to s