Fresnillo Plc · LSE:FRES
Fresnillo — Deutsche Bank Metals and Mining Conference 2014
27 slides from Fresnillo's conference presentation, Nov 5, 2014
Slide 1: Deutsche Bank Metals and Mining Conference
“Looking beyond the cycle” Deutsche Bank Metals and Mining Conference 5 November 2014 Floriana Michalowska Fresnillo plc 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 and Mexico’s second largest DISTRICT gold producer ORISYVO Market cap of US$8 billion* SAN JULIÁN Mining concessions of 2.1m hectares in Mexico and almost 90 thousand hectares in Peru Cash costs and AISC amongst
Slide 4: Our strategy - four pillars to create value
Our strategy - four 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 development projects • Track record of delivery on time and on bud
Slide 5: Production overview
Production overview 2013 PRODUCTION 2012 PRODUCTION SILVER GOLD SILVER GOLD (Koz) (Oz) (Koz) (Oz) Fresnillo mine Silver underground mine 22,764 33,079 26,383 29,573 Saucito mine Silver underground mine 11,581 45,177 7,054 45,246 Ciénega mine Gold-Silver underground 4,240 112,053 3,329 125,275 San Ra
Slide 6: 2013 highlights
2013 highlights • 2013 Silver production of 42,743 koz and Gold production of 425,831 oz • Revenues: US$1.6 billion • Continued focus on cost control • Operating profit: US$488.1 million • Total assets: US$4.1 billion • Capital invested in exploration: US$233.3 million • Total workforce: 6,412 (50.9
Slide 7: 1H14 highlights
1H14 highlights • Production: – Attributable silver production, including the Silverstream), of 21.3moz up 1.7% due to higher ore processed at Saucito and increased production from the Silverstream – Attributable gold production decreased by 18.9% as a result of temporary disruptions at Herradura wh
Slide 8: Q3 production report highlights
Q3 production report highlights • Production: – Quarterly and YTD attributable silver production (including the Silverstream) remained at similar levels to the comparable periods of 2013, mainly due to higher ore volumes processed at Saucito and increased production from the Silverstream, which comp
Slide 9: Penmont acquisition
Penmont acquisition • Acquisition of Newmont Mining’s 44% interest in the Penmont Joint Venture Acquisition • Fresnillo previously held a 56% interest in JV and holds 100% post completion • Consolidates control of producing and exploration assets already operated by Fresnillo Highlights • Builds on
Slide 10: Strategic rationale for acquisition
Strategic rationale for acquisition Full control of the Penmont assets enables Fresnillo to maximize the value of current producing mines, develop quality assets in a key growth area and continue aggressive regional exploration programme Fresnillo has both extensive experience of operating in the He
Slide 11: High quality portfolio supports long-term growth
High quality portfolio supports long-term growth Fresnillo Saucito Mine Operations Herradura (DLP) Soledad NocheBuena Ciénega - San Ramón Development Projects Saucito II San Julián Mega Centauro Centauro Deep Pyrites Plant Juanicipio Advanced Exploration Cluster Cebollitas Orisyvo Guachichil Fresnil
Slide 12: Significant group growth profile
Significant group growth profile Investment Expected YEAR Risk (US$ m illion) Production 2014 2015 2016 2017 2018 PROJECT (1) (2) Medium 8.4 m ill Oz Ag & 235 SAUCITO II CONSTRUCTION PRODUCTION Low 35 thds Oz Au 10.3 m ill Oz Ag Medium 515 & 44 thds Oz SAN JULIÁN CONSTRUCTION PRODUCTION Au 15 thds O
Slide 13: Achieving 65moz silver by 2018
Achieving 65moz silver by 2018 Million Oz 90,000 Juanicipio - 56% 80,000 Pyrites plant 70,000 San Julián 60,000 Saucito II 50,000 Saucito I 40,000 Ciénega expansion 30,000 Ciénega 20,000 Fresnillo expansion 10,000 Fresnillo - 2013 2014 2015 2016 2017 2018 Note: Attributable silver production. Silver
Slide 14: New target of 750koz gold by 2018
New target of 750koz gold by 2018 Thousand Oz Orisyvo 1,400 1,300 Centauro Deep 1,200 Mega Centauro 1,100 Juanicipio - 56% 1,000 Soledad&Dipolos 900 San Julián 800 Pyrites Plant 700 Saucito II 600 Saucito I 500 Dynamic Leaching 400 Nochebuena 300 Herradura 200 Cienega expansion 100 Ciénega - 2013 20
Slide 15: Outlook
“Looking beyond the cycle” Outlook
Slide 16: Outlook: balancing growth & returns
Outlook: balancing growth & returns Ongoing efficiency gains at operations, investing in productivity and controlling costs to maintain our cost position and world-class margins Focus on managing ore grades at Fresnillo Start up of Saucito II in Q4 2014 and San Julián in 2H 2015 Acquisition of Newmo
Slide 17: Appendix
“Looking beyond the cycle” Appendix
Slide 18: Fresnillo district – 1H 2014 Highlights
Fresnillo district – 1H 2014 Highlights Fresnillo: Saucito: • 10.5moz silver produced in 1H 14 down 5.8% • 6.3moz silver produced in 1H 14 up 12.2% due to due to lower ore grades increased ore processed • Approaching average grade of the deposit of • Silver ore grades expected to remain within guide
Slide 19: Ciénega district – 1H 2014 Highlights
Ciénega district – 1H 2014 Highlights Gold: Silver: • 53,984oz gold produced in 1H 14 down 9.5% due • 2.1moz silver produced down 5.3% due to lower to expected decline in ore grades ore grades • Ore grade guidance of 2.0-2.5 g/t remains • Ore grade guidance of 120-125 g/t remains • Milling capacity
Slide 20: Herradura district – 1H 2014 Highlights
Herradura district – 1H 2014 Highlights Herradura: Noche Buena: • 58,532oz attributable gold produced in 1H 14 • 36,099oz attributable gold produced in 1H 14 up down 35.8% due to the disrupted operations 33.5% due to higher ore deposited and recovery following temporary suspension of explosives rate
Slide 21: Saucito II Project
Saucito II Project Project Highlights Average Annual Silver Production 8.4 Million Oz Average Annual Gold Production 35.0 Thousand Oz Pre-operative CAPEX US$235.0 Million Life of mine 22 years Processing Capacity 3,000 TPD Expected Start-up 4Q14 IRR @ Ag:US$22.0 /oz* 32.1% Traditional cash cost* US$
Slide 22: San Julián Project
San Julián Project Project Highlights* Average Annual Silver Production 10.3 Million Oz Average Annual Gold Production 43.9 Thousand Oz Pre-operative CAPEX US$515.0 Million Life of mine 13 years Disseminated Processing Capacity 6,000 TPD Veins Processing Capacity 3,000 TPD Expected Start-up 2H 15 IR
Slide 23: Income Statement (IFRS)
INCOME STATEMENT (IFRS) ACCUM JUNE CHANGE CONCEP T (Million USD) 1H 2014 % 1H 2013 % $ % ADJUSTED REVENUES 750.4 982.3 (231.9) (23.6) HEDGING (METALS) 0.0 0.1 (0.1) (92.2) TREATMENT AND REFINING CHARGES (73.3) (56.5) (16.8) 29.8 REVENUES 677.1 100.0 925.9 100.0 (248.8) (26.9) ADJUSTED PRODUCTION COS
Slide 24: Cash Flow (IFRS)
CASH FLOW (IFRS) CHANGE CONCEPT (US $ millions) YTD 2014 YTD 2013 $ % CASH GENERATED BY OPERATIONS BEFORE CHANGES IN WORKING CAPITAL 336.7 496.4 (159.7) (32.2) WORKING CAPITAL (71.5) (53.0) (18.5) 35.0 INCOME TAX AND PROFIT SHARING PAID (110.5) (254.5) 144.0 (56.6) NET CASH FROM OPERATING ACTIVITIES
Slide 25: Consolidated Cost Inflation 2014 (USD Based)
Consolidated Cost Inflation 2014 (USD Based) Consolidated Unit Price Weighted Increase % Weight (*) Average Labour Unionized Personnel 1.0% 7.9% 0.08% Employees 0.1% 3.0% 0.00% Weighted 0.8% Operating Materials -1.6% 20.4% -0.33% Energy Electric Energy 1.6% 9.5% 0.15% Diesel 6.2% 8.4% 0.52% Fuel 7.5
Slide 26: Cost Per Tonne (IFRS)
Cost Per Tonne (IFRS) ACCUM JUN CHANGE 1H 2014 1H 2013 % CHG. COST PER TONNE * MINE UNIT Fresnillo US$/TON 45.02 46.60 -3.4% Saucito US$/TON 62.09 59.17 4.9% Ciénega US$/TON 67.61 73.59 -8.1% Herradura US$/TON 8.03 ** 7.13 12.6% Soledad & Dipolos US$/TON - 9.96 N/A Noche Buena US$/TON 8.89 8.20 8.3%
Slide 27: All In Sustaining Cost (US$/Oz)
27 All In Sustaining Cost (US$/Oz) LIFE OF MINE 1H 2014 1H 2013 % CHG. WEIGHTED AVERAGE CASH COST * MINE UNIT Fresnillo PER OZ. SILVER 9.93 9.45 5.1% 9.24 (2025) Saucito PER OZ. SILVER 7.66 6.83 12.2% 6.9 (2022) Ciénega PER OZ. GOLD 594.58 463.50 28.3% 725 (2025) Herradura PER OZ. GOLD 839.51 735.83
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