Fresnillo Plc · LSE:FRES
Fresnillo — FY2015 Earnings Presentation
61 slides from Fresnillo's earnings presentation, Mar 1, 2016
Slide 1: Preliminary Results
Well placed to address cyclical uncertainties Preliminary Results 12 months ended 31 December 2015 Mario Arreguín, CFO Roberto Díaz, COO David Giles, VP Exploration 1 March 2016
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: Agenda
Agenda § Overview > Mario Arreguín, CFO § Operations Review & Development Projects > Roberto Díaz, COO • Financial Review > Mario Arreguín § Exploration > David Giles, VP of Exploration § Strategy & Outlook > Roberto Díaz & Mario Arreguín § Q&A 2
Slide 4: Overview
Well placed to address cyclical uncertainties Overview
Slide 5: Introduction
Introduction Ø Strong headwinds continue to challenge industry: Ø Cyclically low precious metals prices Ø Increased technical difficulty in accessing metal resources Ø However, Fresnillo continues to demonstrate its capacity to meet these challenges: Ø Strong balance sheet Ø High quality assets Ø Lo
Slide 6: Overview
Overview Ø Record year of production Ø Silver at top end of guidance Ø Surpassed long-term 2018 gold target Ø Substantial operational progress Ø Saucito II ramped up ahead of schedule Ø Reached steady state at Herradura Ø Improvements in grade and throughput in 4Q15 as a result of measures put in pl
Slide 7: Operations Review
Well placed to address cyclical uncertainties Operations Review
Slide 8: Fresnillo Mine
Fresnillo Mine 2015 Summary Ø Lower silver production Ø Lower grades Ø Lower volumes Ø Improvements in silver grade and production in H2 Ø Lead and zinc production increased 17% and 25% respectively Ø Expected higher ore grades as we go deeper into the mine 2015 Performance Looking Forward 2015 2014
Slide 9: Turnaround at the Fresnillo Mine
Turnaround at the Fresnillo Mine Expected results/ Main issues Secondary effects Measures put in place Short-term targets Veins narrowing faster Increase in stoping than expected Required increase in area from 12,000 m2 to Infill drilling with a rate of development 20,000m2 closer grid Natural and e
Slide 10: Saucito Mine
Saucito Mine 2015 Summary Ø Ramp-up of Saucito II by 2Q15 Ø Significantly ahead of plan Ø On budget Ø Silver production increased Ø Start-up of Saucito II & ramp-up Ø Milling efficiencies, higher grade areas, improved dilution Ø Increased Saucito I milling capacity by 20% to 3,600TPD 2015 Performanc
Slide 11: Ciénega Mine
Ciénega Mine 2015 Summary Ø Gold production decreased on expected lower grade Ø Silver production increased Ø Richer veins at San Ramón satellite Ø High grade development ore from Taspana vein Looking Forward Ø Continue exploration in areas of influence to extend district’s mine life (Gms/T) Grade E
Slide 12: Herradura Mine
Herradura Mine 2015 Summary Ø Second Merrill Crowe plant commissioned 4Q15 as planned Ø Reached steady state operations (4Q15) Ø Gold production increased Ø Mine & DLP operational for full period Ø Higher overall speed of recovery Ø Installation of second Merrill Crowe plant Ø Increase in ore grade
Slide 13: Noche Buena Mine
Noche Buena Mine 2015 Summary Ø Gold production increased Ø Higher rate of recovery (full year of leaching pads 4 & 5) Ø Partly offset by lower ore grade (ore deposited from higher banks to control haulage costs) Ø Further efforts to improve efficiency & control costs Ø Optimisation of tyre consumpt
Slide 14: Development Projects
Well placed to address cyclical uncertainties Development Projects
Slide 15: San Julián
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 capacity (flotation
Slide 16: San Julián: Phase 1 - 2Q16, Phase 2 – 4Q16
San Julián: Phase 1 - 2Q16 , Phase 2 – 4Q16 12
Slide 17: Financial Review
Well placed to address cyclical uncertainties Financial Review
Slide 18: 2015 Financial Highlights
2015 Financial Highlights Ø Adjusted revenues up 2.5% on increased sales volumes which more than offset lower silver and gold realised prices (-16.1% and -10.4%, respectively) Ø Adjusted production cost decreased 6.4% Ø Mainly due to efficiencies achieved at Saucito, Noche Buena, Ciénega and the dyn
Slide 19: Income Statement (IFRS)
Income Statement (IFRS) ACCUM DECEMBER CHANGE CONCEP T (Million USD) 2015 % 2014 % $ % ADJUSTED REVENUES 1,583.3 1,545.0 38.3 2.5 HEDGING (METALS) 3.9 0.1 3.8 3,732.1 TREATMENT AND REFINING CHARGES (142.8) (131.4) (11.4) 8.7 REVENUES 1,444.4 100.0 1,413.7 100.0 30.7 2.2 ADJUSTED PRODUCTION COST (634
Slide 20: Income Statement (IFRS) Non-recurring Effects
Income Statement (IFRS) Non-recurring Effects ACCUM DECEMBER CHANGE CONCEP T (Million USD) 2015 % 2014 % $ % ADJUSTED REVENUES 1,583.3 1,545.0 38.3 2.5 HEDGING (METALS) 3.9 0.1 3.8 3,732.1 TREATMENT AND REFINING CHARGES (142.8) (131.4) (11.4) 8.7 REVENUES 1,444.4 100.0 1,413.7 100.0 30.7 2.2 MXP / U
Slide 21: Adjusted Production Cost Analysis (Consolidated)
Adjusted Production Cost Analysis (Consolidated) CHANGE 2015 2014 $ % Adjusted Production Cost * 634.5 678.0 -43.5* -6.4 Change in inventories 6.3 -104.7 111.0 -106.0 Unproductive Costs and others -2.1 9.5 -11.5 -121.8 Depreciation 331.2 296.2 35.0 11.8 PTU 12.8 12.6 0.2 1.4 USD MILLION Hedging (mxp
Slide 22: Adjusted Production Cost Analysis (Consolidated)
Adjusted Production Cost Analysis (Consolidated) CHANGE 2015 2014 $ % Adjusted Production Cost * 634.5 678.0 -43.5* -6.4 Volume Processed Change in inventories Volume Processed 6.3 -104.7 111.0 -106.0 (Mton) Unproductive Costs and others (Mton) -2.1 9.5 -11.5 -121.8 296.2 35.0 11.8 2015 2014 ChgDepr
Slide 23: Cost Per Tonne (IFRS)
Cost Per Tonne (IFRS) ACCUM DEC CHANGE 2015 2014 % CHG. COST PER TONNE * MINE UNIT Fresnillo US$/TON 48.20 47.29 1.9% Saucito US$/TON 42.49 59.14 -28.2% Ciénega US$/TON 62.99 70.84 -11.1% Herradura US$/TON 8.68 ** 9.29 ** -6.6% Noche Buena US$/TON 7.93 ** 9.98 ** -20.5% * Cost per tonne is calculate
Slide 24: Cash Cost (IFRS)
Cash Cost (IFRS) ACCUM DEC CHANGE 2015 2014 % CHG. CASH COST * MINE UNIT Fresnillo PER OZ. SILVER 5.60 5.29 5.9% Saucito PER OZ. SILVER 1.15 2.48 -53.4% Ciénega PER OZ. GOLD (By-prod.) 245.49 288.00 -14.8% Herradura PER OZ. GOLD 472.53 465.42 1.5% Noche Buena PER OZ. GOLD 972.74 945.63 2.9% * Cash c
Slide 25: All In Sustaining Cost (US$/Oz)
All In Sustaining Cost (US$/Oz)* 2015 2014 % CHG. CASH COST * MINE UNIT Fresnillo PER OZ. SILVER 11.48 9.84 16.7% Saucito PER OZ. SILVER 7.11 5.43 31.0% Ciénega PER OZ. GOLD 710.37 786.40 -9.7% Herradura PER OZ. GOLD 888.04 862.19 3.0% Noche Buena PER OZ. GOLD 1,015.40 1,051.00 -3.4% * All in sustai
Slide 26: Consolidated Gross Profit Analysis
0.0 81.0 162.0 243.0 324.0 405.0 486.0 567.0 648.0 729.0 810.0 YTD14 Gross Profit 521.05 USD MILLION Incr. ore vol. Processed 1 and higher ore grade at Saucito 117.24 2 MXP/USD Devaluation effect 48.01 Gross Profit 3 Efficiencies & Others 26.57 4 Normalised operations at Herradura 23.79 5 Ramp-up of
Slide 27: Consolidated Gross Profit Analysis
Consolidated Gross Profit Analysis CHANGE Ciénega Ore Grade: USD MILLION Volume Processed (Mton) 2015 2014 Chg 2015 YTD14 2015 2014 Chg $ % Silver and Gold average realised prices (USc/Lb) Au g/t 2.07 2.59 -20.0% 20.10 20.09 +0.1% 2015 2014 Chg Ag Gross Profit 433.1* 521.1 -88.0 -16.9% 15.6 18.6 (16
Slide 28: Margins by mine (Metal price – Cash Cost)
Margins by mine (Metal price – Cash Cost) (2015 vs. 2014) (USD/Oz) Fresnillo Saucito Ciénega Herradura Noche Buena 19.5Moz. 14.6Moz. 14.7Moz. 20.3Moz. 97.0Koz. 76.6Koz. 263.6Koz. 409.0Koz. 127.9Koz. 143.2Koz. Chg. + -25.0% Chg. +38.5% Chg. -21.0% Chg. +55.2% Chg. +11.9% Ounces Sold Stoppage of opera
Slide 29: Cash Flow (IFRS)
Cash Flow (IFRS) CHANGE C O N C E P T (Million USD) YTD 2015 YTD 2014 $ % CASH GENERATED BY OPERATIONS BEFORE CHANGES IN WORKING CAPITAL 537.3 575.4 (38.0) (6.6) WORKING CAPITAL 51.3 (260.3) 311.6 (119.7) INCOME TAX AND PROFIT SHARING PAID (45.8) (183.2) 137.4 (75.0) NET CASH FROM OPERATING ACTIVITI
Slide 30: Cash Flow (IFRS)
Cash Flow (IFRS) • Decrease in trade and other receivables • due to lower metal prices: $USD 58.2m • Decrease in gold ore inventories at • Herradura and Noche Buena $USD 5.0m • Decrease in payable accounts $USD 12.8 million • Increase of prepayments and other assets CHANGE (Million USD) • $USD 0.9 m
Slide 31: Balance Sheet (IFRS)
Balance Sheet (IFRS) Change Concept (Million USD) 31-DIC-15 31-DIC-14 % Assets Cash and Investments 500.1 449.3 11.3 Trade and Other Receivables 305.7 456.2 (33.0) Inventories 300.6 305.6 (1.6) Prepaid Expenses 3.0 3.4 (11.6) Silverstream 384.8 392.3 (1.9) Derivative Financial Instruments 117.1 14.6
Slide 32: Exploration
Well placed to address cyclical uncertainties Exploration
Slide 33: Exploration Highlights
Exploration Highlights Ø Continued investment to maintain medium and long-term growth pipeline Ø Total risk capital of US$151m in 2015 Ø Exploration mainly focused on areas of influence at current operating mines and key exploration sites Ø Sound resource base maintained despite revised price assump
Slide 34: Reserves 2015
Reserves 2015 CONTAINED METAL INCREASE VS. 2014 RESERVES GRADE GOLD SILVER LEAD ZINC GOLD SILVER LEAD ZINC (g/t) (koz) (koz) (kt) (kt) (koz) (koz) (kt) (kt) FRESNILLO 296 (+11%) * 525 201,643 371 747 -27 -27,605 -21 -46 SAUCITO 313 (-20%) * 732 130,704 194 381 228 15,132 36 94 CIÉNEGA 162 (+6%) * 80
Slide 35: Reserves 2015
Reserves 2015 Silver Reserves: ↓35 Moz, -6% Gold Reserves: ↓144 koz, -1.5% Cut-offs increased 21% for veins and disseminated Tonnes: - 23% veins and -25% disseminated Ag Grade increased to 180 g/t veins and 211 g/t Lower silver price assumption disseminated affected gold reserves Cut-off increased f
Slide 36: Resources at Mines 2015
Resources at Mines 2015 CONTAINED METAL INCREASE VS. 2014 RESOURCES GOLD SILVER LEAD ZINC GOLD SILVER LEAD ZINC (koz) (koz) (kt) (kt) (koz) (koz) (kt) (kt) FRESNILLO 1,617 747,023 945 1,881 55 -5,956 15 30 SAUCITO 1,802 373,726 480 893 159 -73,456 -16 -6 CIÉNEGA 1,517 152,286 172 304 -66 9,882 2 20
Slide 37: Total Resources 2015
Total Resources 2015 Total Silver Resources: ↓38 Moz, -1.9% Total Gold Resources: ↑1.4 Moz, +4.2% - 5 Moz, lower metal prices Silver (moz) - 25 Moz, reserve depletion Gold (koz) Resource depletion - 43 Moz, model & exploration 2,200 37,000 = - 73 Moz 46 10 81 55 1,697 159 2,008 1,971 36,000 35,522 2
Slide 38: Project Resources 2015
Project Resources 2015 Silver Resources - Projects: ↑ 46 Moz, +10% Gold Resources - Projects: ↑ 1.7 Moz, +9% Silver (moz) Gold (koz) 530 21,500 Tonnes: + 27% (Exploration) 21,204 521 Au grade increased 8% to 2.8 g/t 264 5 1 520 7 Tonnes, +16% 124 21,000 (Exploration) Tonnes: + 20% (Deep 152 10 180 E
Slide 39: Strong Organic Growth Pipeline
Strong Organic Growth Pipeline 2016 Budget: c.US$135-140m Pipeline allows us to focus on Fresnillo projects that have the Saucito Mine Operations Herradura 27% potential to be developed Nochebuena into low cost, Ciénega - San Ramón world-class mines Soledad &Dipolos* Development Projects San Julián
Slide 40: Strategy & Outlook
Well placed to address cyclical uncertainties Strategy & Outlook
Slide 41: Expected Delivery of Growth
Expected Delivery of Growth (1) (2) Expected Investm ent YEAR (US$ m ) Avg. Annual 2015 2016 2017 2018 2019 2020 2021 Production PROJECT CONSTRUCTION LEACHING PLANT 10.3 m oz Ag 515 & 44 koz Au SAN JULIÁN PRODUCTION CONSTRUCTION FLOTATION PLANT MINE DEVELOPMENT FRESNILLO 9,000 TPD 30 3 moz Ag PRODUC
Slide 42: Potential Brownfield Projects
Potential Brownfield Projects Ciénega Fresnillo Centauro Pyrites Plant Centauro Deep Optimisation Optimisation Extension Potential Tailings Optimisation Optimisation Natural evolution underground mine processing from Description project to increase project to increase of the Centauro pit beneath the
Slide 43: 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 44: Expected Silver Production Profile
Expected Silver Production Profile Million Oz Attributable 90.0 80.0 Juanicipio - 56% 70.0 Pyrites Plant San Julián 60.0 Noche Buena 50.0 Centauro extension Dynamic Leaching Plant 40.0 S&D Herradura 30.0 Ciénega optimisation Ciénega 20.0 Saucito 10.0 Fresnillo optimisation Fresnillo - 2016 2017 2018
Slide 45: Expected Gold Production Profile
Expected Gold Production Profile Thousand Oz Attributable 1,000 900 Centauro Deep Orisyvo 800 Juanicipio - 56% 700 Pyrites Plant San Julián 600 Saucito 500 Ciénega optimisation Ciénega 400 Fresnillo optimisation 300 Fresnillo S&D 200 Noche Buena 100 Centauro extension Dynamic Leaching 0 2016 2017 20
Slide 46: CAPEX Spend Expectations
CAPEX Spend Expectations Capital expenditure US$ Million Million Usd 2016 800 Sustaining(operations) • Fresnillo 102m 700 • Saucito 101m 600 • Herradura 96m • Ciénega 50m 500 • Noche Buena 13m 400 • Others 3m 300 Sustaining (projects approved) 35m 200 ProjectsApproved 100 • San Julián 127m • Pyrites
Slide 47: Conclusions and Outlook
Conclusions and Outlook Ø Precious metal prices continue to be challenging Ø However, we are well-placed to withstand volatility and lower precious metals prices and to reap the benefits of an eventual upturn, supported by our strong foundations: Ø Strong balance sheet Ø High quality assets Ø Low-co
Slide 48: Appendix
Well placed to address cyclical uncertainties Appendix
Slide 49: Adjusted Revenues
Adjusted Revenues ACCUM DECEMBER CHANGE BY: PRODUCT 2015 2014 VOLUME PRICE TOTAL GOLD 827.4 720.5 176.7 (69.8) 106.9 SILVER 617.4 714.9 22.1 (119.6) (97.5) LEAD 67.1 51.4 24.4 (8.7) 15.7 ZINC 71.3 58.1 24.0 (10.8) 13.2 ADJUSTED REVENUES 1,583.3 1,545.0 247.2 (208.9) 38.3 41
Slide 50: Contribution by Mine and by Metal to the Adjusted Revenues 2015
Contribution by Mine and by Metal to the Adjusted Revenues 2015 1 2015 Adjusted Revenues : US$1,583.3m By mine By metal 11% 20% 4% 5% 28% 52% 39% 30% 11% Fresnillo Saucito Ciénega Silver Gold Herradura Noche Buena Lead Zinc Fresnillo Ciénega Herradura Saucito Noche Buena Consol Gold 35.04 11.0% 88.3
Slide 51: Breakdown of Adjusted Production Costs
Breakdown of Adjusted Production Costs Adj Prod Cost: US$634.5m 1 Contractors Operating Materials Energy & Diesel Maintenance Personnel Others Freights Charge for use of contractor’s equipment 1 Contractors are hired to execute specific tasks. Fees paid include labour, operating materials, equipment
Slide 52: Breakdown of Adjusted Production Costs
Breakdown of Adjusted Production Costs Adj Prod Cost: US$634.5m Contractors Operating Materials Energy & Diesel Maintenance Personnel Others Freights Charge for use of contractor’s equipment 44
Slide 53: Breakdown of Adjusted Production Costs
Breakdown of Adjusted Production Costs 5.23% 1.55% Adj Prod Cost: US$634.5m 10.68% 27.72% 1 Contrac Op Mat Energy & Diesel 14.95% Mainten Person Others Freights 1 Contractors are hired to execute specific tasks. Fees paid include labour, operating materials, equipment, diesel and any other items req
Slide 54: Consolidated Cost Inflation 2015 (USD Based)
Consolidated Cost Inflation 2015 (USD Based) 46
Slide 55: Cash Cost (IFRS)
Cash Cost (IFRS) ACCUM DEC CHANGE 2015 2014 % CHG. CASH COST * MINE UNIT Fresnillo PER OZ. SILVER 5.60 5.29 5.9% Saucito PER OZ. SILVER 1.15 2.48 -53.4% Ciénega PER OZ. GOLD (By-prod.) 245.49 288.00 -14.8% PER OZ. GOLD (Co-prod.)** 625.42 623.98 0.2% PER OZ. SILVER (Co-prod.) ** 8.35 9.27 -9.9% PER
Slide 56: Margins by mine (Metal price – AISC)
Margins by mine (Metal price – AISC*) (2015 vs. 2014) (USD/Oz) Cash Fresnillo Saucito Silver Cash Cost Ciénega Herradura Noche Buena Gold Price Cost Price 32.0 32.0 1,900 1,900 27.4 27.4 1,629 1,629 1,257.66 1,257.66 1,357 1,257.66 1,357 22.9 22.9 1,150.89 1,150.89 18.62 18.62 1,150.89 1,086 1051.00
Slide 57: Income Statement (IFRS): Exploration Expenses
Income Statement (IFRS): Exploration Expenses ACCUM DECEMBER CHANGE 2015 2014 Chg. CONCEP T (Million USD) 2015 % Operating 2014 % Units $ % ADJUSTED REVENUES 1,583.3 Ø Fresnillo 1,545.0 38.310.1 Ø2.55.6 4.5 HEDGING (METALS) 3.9 Ø Ciénega0.1 3.820.5 3,732.1 Ø 27.6 -7.1 TREATMENT AND REFINING CHARGES
Slide 58: Pyrites Plant
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 Plant (Truck) To be p
Slide 59: Mineral Reserves 2015
Mineral Reserves 2015 Tonnes and Grades Metal content Mine / project Tonnes Grades Au Ag Pb Zn Ag Eq. * Cut-off Mt Au gpt Ag gpt % Pb % Zn koz Moz kt kt Moz Fresnillo 2015 231 g/t AgEq 21.17 0.77 296 1.75 3.53 525 202 371 747 368 2014 165 g/t AgEq 26.79 0.64 266 1.46 2.96 552 229 392 793 402 % Incr.
Slide 60: Mineral Resources 2015: Mines & San Julián
Mineral Resources 2015: Mines & San Julián Tonnes and Grades Metal content Mine / project Tonnes Grades Au Ag Pb Zn Ag Eq. * Cut-off Mt Au gpt Ag gpt % Pb % Zn koz Moz kt kt Moz Fresnillo 2015 122 g/t AgEq 64.68 0.78 359 1.46 2.91 1,617 747 945 1,881 1,191 2014 103 g/t AgEq 66.20 0.73 354 1.41 2.80
Slide 61: Mineral Resources 2015: Exploration Projects
Mineral Resources 2015: Exploration Projects Tonnes and Grades Metal content Mine / project Tonnes Grades Au Ag Pb Zn Ag Eq. * Cut-off Mt Au gpt Ag gpt % Pb % Zn koz Moz kt kt Moz Orisyvo 2015 Multiple** 277.00 0.99 1 8,851 13 691 2014 Multiple** 279.42 0.97 1 8,718 11 568 % Incr. -0.9% 2.4% 12.2% 1