Fresnillo Plc · LSE:FRES

Fresnillo — FY2017 Earnings Presentation

52 slides from Fresnillo's earnings presentation, Feb 27, 2018

  1. Slide 1: Full Year 2017 Preliminary Results

    Full Year 2017 Preliminary Results February 27, 2018

  2. 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

  3. Slide 3: Agenda

    Agenda • Overview Octavio Alvídrez, CEO • Operations & Development Projects Octavio Alvídrez, CEO • Exploration David Giles, VP of Exploration • Financial Review Mario Arreguín, CFO • Strategy & Outlook Octavio Alvídrez, CEO • Q&A 3

  4. Slide 4: 4

    4

  5. Slide 5: A decade of progress and achievement

    A decade of progress and achievement+ Operate Develop Explore Sustain By optimising capacity and • Consistently invested over Maintained a strategic We work hard to ensure the recoveries, generating continuous US$4 billion in both existing commitment to continuous health and safety of our people imp

  6. Slide 6: All made possible by

    +all made possible by High quality, low-cost, flexible operations Disciplined approach to development Dedicated and experienced management and workforce Strong balance sheet Commitment to sustainable business practices 6

  7. Slide 7: A decade of progress and achievement

    A decade of progress and achievement 160 40 140 128% Increase 35 Average realised silver price 120 30 Production (eq Ag moz) 100 25 US$/oz 80 20 60 15 40 10 20 5 0 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018F Operational Fresnillo IPO Soledad & Noche Buena Saucito II San Julián Pha

  8. Slide 8: Growth and Returns

    Growth and Returns Investing in Growth Growth Outcome Returns Total Exploration Expenses from Increase in silver equivalent EBITDA the last decade (2008 to 2017) resources (2007-2017) (2008 to 2017) Total EBITDA – US$ 8,570m US$ 1,570.0 million 4,458.5 million ounces* Average EBITDA – US$ 857m (Incr

  9. Slide 9: Health, Safety, Environment & Community Relations

    Health, Safety, Environment & Community Relations Health & Safety • 1 Fatal accident at the beginning of 2017 • The enhanced Health & Safety approach piloted at Saucito in 2017 and subsequently adopted at both Fresnillo and Ciénega following positive results, is set to be rolled out across our other

  10. Slide 10: 2017 Full Year results - Highlights

    2017 Full Year results - Highlights 70 Operational Highlights Production (moz) Production 60 50 Silver 40 30 Silver production of 58.7 moz (including Silverstream), up 16.6% inline with guidance, and gold production of 911.1 20 10 koz, down 2.6% though above guidance 0 2014 2015 2016 2017 Constructi

  11. Slide 11: See

    od 0 c ) s © See ® o. O a —= - @® Ey Oo o.2 o 2 Oo.

  12. Slide 12: Operations

    Operations Fresnillo Saucito Key operating statistics FY 2017 vs FY 2016 Key operating statistics FY 2017 vs FY 2016 Silver production – moz 16.5 15.9 Silver production – moz 21.2 21.9 Gold production – koz 38.8 42.4 Gold production – koz 69.9 86.2 Cost per tonne – US$/t 47.5 43.9 Cost per tonne – U

  13. Slide 13: Operations Cont.

    Operations Cont. Herradura Noche Buena Key operating statistics FY 2017 vs FY 2016 Key operating statistics FY 2017 vs FY 2016 Gold production – koz 473.6 520.4 Gold production – koz 172.3 182.3 Silver production – koz 551 638 Silver production – koz 31 33 Cost per tonne* – US$/t 8.0 7.7 Cost per to

  14. Slide 14: Operations Cont.

    Operations Cont. Ciénega Key operating statistics FY 2017 vs FY 2016 Gold production – koz 71.9 72.9 Silver production – moz 5.4 5.1 Cost per tonne – US$/t 66.5 55.5 Cash cost - US$/oz of Au -163.7 -217.2 Reserves 2017 * 54.1 moz Ag, 0.6 moz Au Resources 2017 * 167.3 moz Ag, 1.7 moz Au FY17 Achievem

  15. Slide 15: Operations Cont.

    Operations Cont. San Julián Phase I San Julián Phase II Key operating statistics FY 2017 vs FY 2016 Key operating statistics FY 2017 vs FY 2016 Gold production – koz 82.8 31.4 Gold production – koz 1.8 NA Silver production – moz 5.9 2.1 Silver production – moz 4.6 NA Cost per tonne – US$/t * 52.1 48

  16. Slide 16: Projects

    Projects Pyrites Plant Project in the Fresnillo District Avg. annual silver production 3.5 moz Avg. annual gold production 13.0 koz Cash cost (average LoM) $2.51 /oz Leaching plant at Saucito expected 2Q18 commissioning Fresnillo tailings flotation plant expected 2019 commissioning Overview Improve

  17. Slide 17: Projects Cont.

    Projects Cont. 2nd Line of Dynamic Leaching Plant Project at Herradura Ore type • Detailed engineering continued • Expected to be commissioned in 2Q18 The project will enable sulphides occurring deeper in the pit to be processed more efficiently At the time of analysis, this project was expected to

  18. Slide 18: Projects Cont.

    Projects Cont. Juanicipio (JV with MAG Silver. Fresnillo: 56%) JUANICIPIO RAMP 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 Av

  19. Slide 19: ne ou

    ne ou iaanaee ir a Ex] = 75 ene ei t=

  20. Slide 20: Strong Organic Growth Pipeline

    Strong Organic Growth Pipeline Fresnillo 2018 Budget: Pipeline Saucito Herradura US$ 200 m allows us to focus on Mine Operations Nochebuena 42% projects that have the Ciénega - San Ramón potential to be developed Soledad &Dipolos* into low cost, San Julián world-class mines Pyrites Plant Cebollitas

  21. Slide 21: Gold Resources (Mines & Projects)

    Gold Resources (Mines & Projects) Total Gold Resources 38,900 187 -436 Mines & Exploration Projects: 102 + 118 koz, + 0.3% vs 2016 38,700 141 -13 91 -45 4 38,525 130 38,500 38,407 -241 Thousands of oz 89 38,300 80 235 -97 61 -171 38,100 37,900 37,700 37,500 Others Fresnillo Soledad & San Juan Guachi

  22. Slide 22: Silver Resources (Mines & Projects)

    Silver Resources (Mines & Projects) 2,350,000 8,992 6,075 -80 2,320,539 9,843 9,296 2,300,000 8,163 92,084 Thousands ounces 2,250,000 Total Silver Resources 2,200,000 14,671 Mines & Exploration Projects: 2,171,496 + 149,043 koz, + 7.0% vs 2016 2,150,000 2,100,000 Projects OP Others Guanajuato Fresni

  23. Slide 23: Gold Reserves

    Gold Reserves 12,000 2,544 38 -75 11,710 11,500 11,000 Total Gold Reserves + 2,169 koz, + 23% vs 2016 10,500 Thousands of oz 10,000 9,541 -7 -153 9,500 -178 0 9,000 8,500 8,000 7,500 7,000 2016 Fresnillo Saucito Ciénega San Julián Herradura S&D Noche Buena 2017 23

  24. Slide 24: Silver Reserves

    Silver Reserves 540 530.29 -25.84 520 9.93 -12.03 -0.52 501.83 500 Millions of oz 480 460 440 420 400 2016 Fresnillo Saucito Ciénega San Julián 2017 24

  25. Slide 25: 25

    25

  26. Slide 26: 2017 Financial Summary

    2017 Financial Summary 2017 2016 Change Revenue US$m 2,093.3 1,905.5 10% EBITDA US$m 1,060.1 1,032.0 3% Adjusted production cost US$m 769.2 618.9 24% Gross profit US$m 925.4 882.1 5% Exploration expenses US$m 141.1 121.2 16% Operating profit US$m 709.3 676.5 5% Basic EPS US cents 0.76 0.58 31% Cash

  27. Slide 27: Metal prices, average exchange rate, energy & inflation

    Metal prices, average exchange rate, energy & inflation ACCUM DECEMBER CONCEPT 2017 2016 % CHG GOLD 1,267.44 1,246.47 1.7 SILVER 16.97 17.23 (1.5) LEAD 105.37 85.10 23.8 ZINC 134.14 100.54 33.4 EXCHANGE RATE AT THE BEGINNING OF THE YEAR ($/USD) 20.6640 17.2065 EXCHANGE RATE AT 31 DECEMBER ($/USD) 19

  28. Slide 28: Consolidated Cost Inflation 2017 (USD Based)

    Consolidated Cost Inflation 2017 (USD Based) Consolidated Unit Price Weighted Increase % Weight (*) Average Labour Unionized Personnel 3.4% 6.7% 0.2% Employees 3.0% 2.8% 0.1% Weighted 3.3% Operating Materials -1.1% 19.9% -0.2% Energy Electric Energy 28.9% 7.5% 2.2% Diesel 22.2% 10.1% 2.2% Gasoline 1

  29. Slide 29: Income Statement (IFRS)

    Income Statement (IFRS) ACCUM DECEMBER CHANGE CONCEPT 2017 % 2016 % $ % ADJUSTED REVENUES 2,233.2 2,045.0 188.2 9.2 HEDGING (METALS) 0.0 1.6 (1.6) N/A TREATMENT AND REFINING CHARGES (139.9) (141.1) 1.2 (0.8) REVENUES 2,093.3 100.0 1,905.5 100.0 187.8 9.9 ADJUSTED PRODUCTION COST (769.2) (36.7) (618.

  30. Slide 30: Contribution by mine and by metal to the Adjusted Revenues 2017

    Contribution by mine and by metal to the Adjusted Revenues 2017 2017 Adjusted Revenues : US$2,233.2m By mine By metal 9% 19% 5% 4% 7% 10% 50% 23% 38% 27% 9% Fresnillo Saucito Ciénega Silver Gold Herradura Noche Buena San Julián JM San Julián Veins Lead Zinc Fresnillo Ciénega Herradura Saucito Noche

  31. Slide 31: Adjusted Production Cost Analysis

    Adjusted Production Cost Analysis (Consolidated) CHANGE YTD 17 YTD 16 $ % Adjusted Production Cost 769.2 618.9 150.3 24.3 Change in inventories and others 14.6 40.4 -25.8 -63.9 Depreciation 367.6 346.5 21.1 6.1 16.5 14.7 1.7 11.8 PTU USD MILLION Hedging (mxp/usd exchange rate) 0.0 2.8 (Loss) -2.8 N/

  32. Slide 32: Consolidated Gross Profit Analysis

    Consolidated Gross Profit Analysis CHANGE YTD17 YTD16 $ % USD MILLION Gross Profit 925.4 882.1 43.3 +4.9% 250.0 4.7 (40.2) 225.0 72.3 200.0 (48.3) 175.0 142.9 150.0 (88.1) 125.0 100.0 75.0 * 43.3 50.0 25.0 0.0 Development & Production Devaluation Cost Inflation Lower ore YTD17 Gross Higher Metal (De

  33. Slide 33: Income Statement (IFRS) Operating Units

    Income Statement (IFRS) Operating Units Fresnillo 15.8 Saucito 11.7 Ciénega 10.8 ACCUM DECEMBER CHANGE CONCEPT 2017 % San Julián2016 % $ 8.4 % ADJUSTED REVENUES 2,233.2 Herradura 2,045.0 188.2 8.2 9.2 HEDGING (METALS) 0.0 Noche Buena 1.6 (1.6)6.1 N/A TREATMENT AND REFINING CHARGES (139.9) (141.1) 1.

  34. Slide 34: Cash Flow (IFRS)

    Cash Flow (IFRS) CASH FLOW CHG. YTD 2016 (USD MILLION) YTD 2017 YTD 2016 $ % CASH GENERATED BY OPERATIONS BEFORE CHANGES IN WORKING CAPITAL 1,073.9 1,023.3 50.6 4.9 WORKING CAPITAL (2.9) (10.6) 7.6 (72.4) INCOME TAX AND PROFIT SHARING PAID (309.3) (114.8) (194.5) 169.4 NET CASH FROM OPERATING ACTIVI

  35. Slide 35: Cash Flow (IFRS)

    Cash Flow (IFRS) CASH FLOW CHG. YTD 2016 (USD MILLION) YTD 2017 YTD 2016 $ % CASH GENERATED BY OPERATIONS BEFORE CHANGES IN WORKING CAPITAL 1,073.9 1,023.3 50.6 4.9 WORKING CAPITAL (2.9) • 3,675,679 (10.6)MOz proceeds7.6 from the(72.4) • silverstream contract, which INCOME TAX AND PROFIT SHARING PAI

  36. Slide 36: Balance Sheet (IFRS)

    Balance Sheet (IFRS) Change Concept (Million USD) 31-DEC-17 31-DEC-16 % Assets Cash and Investments 896.1 912.0 (1.7) Trade and Other Receivables 402.1 286.7 40.3 Inventories 271.1 276.9 (2.1) Prepaid Expenses 3.5 2.8 24.8 Silverstream 538.9 467.5 15.3 Derivative Financial Instruments 0.4 23.2 (98.4

  37. Slide 37: Group Consolidated Cash Cost & All In Sustaining Cost (US$/Oz)

    Group Consolidated Cash Cost* & All In Sustaining Cost ** (US$/Oz) ACCUM DECEMBER CHANGE 2017 2016 % CHG. CASH COST PER OZ. SILVER EQ. As a Silver Company 6.13 5.98 2.4% Silver Eq. Oz (Moz) sales volume 115 108 6.8% PER OZ. GOLD EQ. As a Gold Company 453.77 433.48 4.7% Gold Eq. Oz (koz) Sales Volume

  38. Slide 38: 38

    38

  39. Slide 39: Expected Delivery of Growth

    Expected Delivery of Growth (1) (2) (3) (4) (1) Estimated (2) Total average annual production (3) Total investment (of which 56% Fresnillo plc; 44% MAG Silver) according to PFS dated June 2012 (4) On hold Subject to ongoing internal review 39 Approved by the Board (Subject to Board approval)

  40. Slide 40: Expected Silver Production Profile

    Expected Silver Production Profile Million Oz Attributable 80 70 60 50 40 30 20 10 0 2018 2019 2020 Target of 65 moz silver by 2018 40

  41. Slide 41: Expected Gold Production Profile

    Expected Gold Production Profile Thousand Oz Attributable 1,100 1,000 900 800 700 600 500 400 300 200 100 0 2018 2019 2020 Target of 750 koz gold by 2018 41

  42. Slide 42: CAPEX Spend Expectations

    CAPEX Spend Expectations 2018 US$ Million Million Usd 900 Sustaining (Operations) 800 755 Fresnillo 90 M 725 Saucito 100 M 700 Herradura 136 M 605 590 Ciénega 70 M 600 Noche Buena 35 M San Julián 90 M 500 Others 9M 400 Projects Approved 300 San Julián 17 M 200 Pyrites Plant 47 M Centauro Extension 3

  43. Slide 43: Outlook

    Outlook Safety and support of the workforce • Role out our enhanced safety system across all our mines following positive results at Saucito during 2017 • Launch a programme to engage our organisation in defining KPIs in respect of outcomes that are significant to our stakeholders and material to th

  44. Slide 44: Investment Case

    Investment Case High quality, low-cost, flexible operations Disciplined approach to development Dedicated and experienced management and workforce Strong balance sheet Commitment to sustainable business practices 44

  45. Slide 45: Fresnillo

    FRESNILLO. VALOPOUTVODEQUNDUUERAOUALRUEOU UA EOEEUUOTU EMEDTV EELEG TT HAV ESST TE QUALAUEEDONTOAEOUOUVEREONO TE EDOOETT TERETE

  46. Slide 46: Cost Per Tonne (IFRS)

    Cost Per Tonne (IFRS) ACCUM DECEMBER CHANGE 2017 2016 % CHG. COST PER TONNE * MINE UNIT Fresnillo US$/TON 47.48 43.93 8.1% Saucito US$/TON 47.60 36.75 29.5% Ciénega US$/TON 66.53 55.49 19.9% San Julián Veins US$/TON 52.09 48.30 *** 7.8% San Julián JM US$/TON 31.88 *** - N/A Herradura US$/TON 7.97 **

  47. Slide 47: Cash Cost (IFRS)

    Cash Cost (IFRS) ACCUM DECEMBER CHANGE 2017 2016 % CHG. CA SH COST * MINE UNIT Fresnillo PER OZ. SILVER 0.71 2.09 -66.3% Saucito PER OZ. SILVER 1.50 -0.39 -489.5% Ciénega PER OZ. GOLD (By-prod.) -163.74 -217.19 N/A PER OZ. GOLD (Co-prod.) 540.55 488.68 10.6% PER OZ. SILVER (Co-prod.) 7.28 6.75 7.9%

  48. Slide 48: Margins by mine (Metal price - Cash Cost)

    Margins by mine (Metal price - Cash Cost) (YTD17 vs YTD16) (USD/Oz) (USD/Oz) Fresnillo Saucito Ciénega Herradura Noche Buena 14.6Moz. 15.2Moz. 20.4Moz. 19.6Moz. 66.7Koz. 66.8Koz. 516.4Koz. 471.4Koz. 180.7Koz. 170.2Koz. Chg. + +4.1% Chg. -3.8% Chg. +0.3% Chg. -8.7% Chg. -5.8% Ounces Sold 48

  49. Slide 49: All In Sustaining Cost (US$/Oz)

    All In Sustaining Cost (US$/Oz) ACCUM DECEMBER 2017 2016 % CHG. CASH COST * MINE UNIT Fresnillo PER OZ. SILVER 8.20 7.82 5.0% Saucito PER OZ. SILVER 7.09 4.77 48.5% Ciénega PER OZ. GOLD 691.43 428.00 61.6% San Julián Veins * PER OZ. SILVER 0.83 -7.06 -111.7% San Julián JM * PER OZ. SILVER 7.88 - N/A

  50. Slide 50: Margins by mine (Metal price - All In Sustaining Cost)

    Margins by mine (Metal price - All In Sustaining Cost) (YTD17 vs YTD16) (USD/Oz) (USD/Oz) Fresnillo Saucito Ciénega Herradura Noche Buena 14.6Moz. 15.2Moz. 20.4Moz. 19.6Moz. 66.7Koz. 66.8Koz. 516.4Koz. 471.4Koz. 180.7Koz. 170.2Koz. Chg. + +4.1% Chg. -3.8% Chg. +0.3% Chg. -8.7% Chg. -5.8% Ounces Sold

  51. Slide 51: Contribution by mine to the Gross Profit

    Contribution by mine to the Gross Profit 2017 & 2016 2017 2016 3.0% 10.2% 6.3% 18.3% 20.9% 6.2% 35.7% 32.0% 24.9% 31.1% 5.9% 5.6% US$925.4 M US$882.1 M Fresnillo Saucito Ciénega Herradura Noche Buena San Julián 51

  52. Slide 52: Volume and Ore grades

    Volume and Ore grades Volume Gold grade Silver grade Gold grade Silver grade Processed 2017 2017 2017 2018e 2018e Units (t) (g/t) (g/t) (g/t) (g/t) Mine Fresnillo 2,447,394 0.64 229 0.63 235 Saucito 2,753,876 1.09 280 1.21 285 San Julián San Julián I 1,273,129 2.10 157 1.70 150 San Julián II 945,057

Fresnillo — FY2017 Earnings Presentation on 6ix