Fresnillo Plc · LSE:FRES
Fresnillo — FY2018 Earnings Presentation
48 slides from Fresnillo's earnings presentation, Feb 26, 2019
Slide 1: Full Year 2018 Preliminary Results
Full Year 2018 Preliminary results Tuesday 26th February 2019
Slide 2: Disclaimer
DISCLAIMER 2 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”, “in
Slide 3: Agenda
AGENDA 3 • Strategic Performance • HSECR • 2018 Highlights • Operational Performance • Exploration Results • Financials • 2019 Outlook
Slide 4: Investment Proposition
INVESTMENT PROPOSITION 4 OUR KEY COMPETITIVE ADVANTAGES POSITION US TO MEET NEAR-TERM COMMITMENTS AND DRIVE LONG-TERM VALUE HIGH QUALITY ASSETS LOW COST AND FLEXIBLE DISCIPLINED APPROACH TO COMMITMENT TO SUSTAINABLE STRONG BALANCE SHEET OPERATIONS DEVELOPMENT BUSINESS PRACTICES 2.2 BNOZ OF SILVER RE
Slide 5: Commitment to Sustainable Business Practices
COMMITMENT TO SUSTAINABLE BUSINESS PRACTICES 5 We believe that responsible mining is compatible with high stakeholder expectations in terms of ethical, social and environmental performance, and recognise that our social licence to operate is dependent upon being trusted by our stakeholders. HEALTH S
Slide 6: Tailings Safety Management
TAILING SAFETY MANAGEMENT 6 Programme in Peer reviewed by Tailing Dams in Place international specialists our Portfolio Fresnillo plc has a programme in In 2016, all dams were independently Fresnillo plc has a mix of upstream and place to review all its tailings dams. audited. downstream dams, all o
Slide 7: 2018 Full Year Results - Highlights
2018 FULL YEAR RESULTS - HIGHLIGHTS 7 SILVER PRODUCTION 80 Operational Highlights Production (moz) 60 40 • Record annual silver production of 61.8 moz (including Silverstream) up 5.3% vs. 2017. 20 • Annual gold production of 922.5 koz, up 1.3% vs. 2017. 0 2015 2016 2017 2018 • Commissioned 1st Stage
Slide 8: Operating Performance
OPERATING PERFORMANCE 8 Operating Performance
Slide 9: Operations: Fresnillo
OPERATIONS 9 FRESNILLO KEY OPERATING STATISTICS FY 18 FY 17 Silver production – moz 15.1 16.5 Gold production – koz 42.3 38.8 Cost per tonne – US$/t 49.4 47.5 Cash cost - US$/oz of Ag 0.5 0.7 AISC – US$/oz of Ag 8.9 8.2 Reserves 2018 * 176.7 moz Ag, 0.6 moz Au Resources 2018 * 811.9 moz Ag, 1.8 moz
Slide 10: Operations: Saucito
OPERATIONS 10 SAUCITO KEY OPERATING STATISTICS FY 18 FY 17 Silver production – moz 19.8 21.2 Gold production – koz 86.1 69.9 Cost per tonne – US$/t 60.1 47.6 Cash cost - US$/oz of Ag 1.0 1.5 AISC – US$/oz of Ag 8.6 7.1 Reserves 2018 * 130.3 moz Ag, 0.7 moz Au Resources 2018 * 428.2 moz Ag, 1.9 moz A
Slide 11: Operations: San Julián
OPERATIONS 11 SAN JULIÁN (VEIN SYSTEM) SAN JULIÁN (DISSEMINATED ORE BODY) KEY OPERATING STATISTICS FY 18 FY 17 KEY OPERATING STATISTICS FY 18 FY 17 Gold production – koz 79.2 82.8 Gold production – koz 3.1 1.8 Silver production – moz 5.4 5.9 Silver production – moz 9.2 4.6 Cost per tonne – US$/t 57.
Slide 12: Operations: Ciénega
OPERATIONS 12 CIÉNEGA KEY OPERATING STATISTICS FY 18 FY 17 Gold production – koz 66.9 71.9 Silver production – moz 6.0 5.4 Cost per tonne – US$/t 70.8 66.5 Cash cost - US$/oz of Au 25.9 -163.7 AISC – US$/oz of Au 1,413.9 691.4 Reserves 2018 * 56.9 moz Ag, 0.6 moz Au Resources 2018 * 133.9 moz Ag, 1.
Slide 13: Operations: Herradura
OPERATIONS 13 HERRADURA KEY OPERATING STATISTICS FY 18 FY 17 Gold production – koz 474.2 473.6 Silver production – koz 1,523 551 Cost per tonne* – US$/t 13.2 8.0 Cash cost - US$/oz of Au 504.0 492.9 AISC – US$/oz of Au 806.7 807.7 Reserves 2018 ** 7.4 moz Au Resources 2018 ** 10.2 moz Au 2018 SUMMAR
Slide 14: Operations: Noche Buena
OPERATIONS 14 NOCHE BUENA CASH COST 1,000 US$ /OZ. GOLD 900 KEY OPERATING STATISTICS FY 18 FY 17 800 Gold production – koz 167.2 172.3 700 Silver production – koz 52 31 600 Cost per tonne* – US$/t 6.8 7.5 2014 2015 2016 2017 2018 Cash cost - US$/oz of Au 735.4 793.5 • At time of acquisition in 2008,
Slide 15: Disciplined Approach to Development - Projects: Pyrites Plant
DISCLIPINED APPROACH TO DEVELOPMENT - PROJECTS 15 PYRITES PLANT PROJECT IN THE FRESNILLO DISTRICT OVERVIEW Expected avg. annual silver production 3.5 moz Expected avg. annual gold production 13.0 koz Expected cash cost (average LoM) $2.51 /oz Expected IRR at US$20/oz Ag & US$1,200/oz Au 29.3% Leachi
Slide 16: Projects Cont.: 2nd Line of Dynamic Leaching Plant at Herradura
PROJECTS Cont. 16 2ND LINE OF DYNAMIC LEACHING PLANT PROJECT AT HERRADURA OVERVIEW ORE TYPE • Commissioned in 2H18 • The project enables sulphides occurring deeper in the pit to be processed more efficiently • At the time of analysis, this project was expected to extend the LOM at Herradura to 12 ye
Slide 17: Projects Cont.: Juanicipio
PROJECTS Cont. 17 JUANICIPIO (JV WITH MAG SILVER. FRESNILLO: 56%) OVERVIEW 8km from the Fresnillo mine This project will be developed on a stand-alone basis KEY METRIC ESTIMATES (100% BASIS)* • Feasibility study was concluded by AMC. 10moz silver Expected avg. annual production 30koz gold • Currentl
Slide 18: Other Project & Potential Projects - Orisyvo, Guanajuato & Rodeo
DISCLIPINED APPROACH TO DEVELOPMENT - PROJECTS 18 OTHER PROJECT & POTENTIAL PROJECTS – ORISYVO, GUANAJUATO & RODEO OVERVIEW - ORISYVO • Improved recoveries following metallurgy testing leading to a stronger project. • Assessing a 8,000 TPD mine with a DLP processing facility; focusing on higher grad
Slide 19: Exploration: Strong Organic Growth Pipeline
EXPLORATION 19 STRONG ORGANIC GROWTH PIPELINE Pipeline allows us to focus on projects that have the potential to be developed into low cost, world-class mines
Slide 20: Exploration: Strong Resource Base
EXPLORATION 20 STRONG RESOURCE BASE SILVER RESOURCES GOLD RESOURCES 2,204.0 moz 39.1 moz - 116,566 koz, -5.0% vs 2017 +580 koz, 1.5% vs 2017 Metal prices used for 2018 resource estimation: Gold 1,250 US$/oz, Silver 17.0 US$/oz, 0.90 US/pound Lead and 1.1 US/pound Zinc. "Others" include decrease in m
Slide 21: Seeking Further Resource Conversion to Expand Reserve Base
EXPLORATION 21 SEEKING FURTHER RESOURCE CONVERSION TO EXPAND RESERVE BASE SILVER RESERVES GOLD RESERVES 475,991.5 moz 11,009.6 moz - 25,671 koz, -5.1% vs 2017 - 701 koz, -6% vs 2017 Metal prices used for 2018 resource estimation: Gold 1,250 US$/oz, Silver 17.0 US$/oz, 0.90 US/pound Lead and 1.1 US/p
Slide 22: Exploration: Mexico, Peru, Chile
EXPLORATION 22 MEXICO PERU CHILE • Drilling at the San Julián district increased • Santo Domingo: Mapping delineated a large • Systematically prospecting the coastal silver-gold resources on the South veins. Mapping, vein system carrying gold-silver values. belt. geochemical and airborne Versatem st
Slide 23: Financial Performance
FINANCIAL PERFORMANCE 23 Financial Performance
Slide 24: Income Statement (IFRS)
INCOME STATEMENT (IFRS) 24 CONCEPT (MILLION USD) ACCUM DECEMBER CHANGE 2018 % 2017 % $ % ADJUSTED REVENUES 2,243.42 2,233.24 10.2 0.5% HEDGING (METALS) 1.6 0.0 1.6 N/A TREATMENT AND REFINING CHARGES (141.2) (139.9) (1.3) 0.9% REVENUES 2,103.8 100 2,093.3 100 10.5 0.5 ADJUSTED PRODUCTION COST (952.0)
Slide 25: Adjusted Revenues (IFRS)
ADJUSTED REVENUES (IFRS) 25 MILLION USD ACCUM DECEMBER CHANGE BY 2018 2017 VOLUME PRICE TOTAL PRODUCT Gold 1,118.5 1,125.3 (8.2) 1.4 (6.8) Silver 815.5 844.7 51.8 (81.0) (29.2) Lead 105.6 101.8 11.7 (7.9) 3.8 Zinc 203.9 161.4 53.1 (10.6) 42.5 ADJUSTED REVENUES 2,243.4 2,233.2 108.3 (98.2) 10.2
Slide 26: Contribution by Mine and by Metal to Adjusted Revenues 2018
CONTRIBUTION BY MINE AND BY METAL TO THE ADJUSTED REVENUES 2018 26 12018 ADJUSTED REVENUES : US$2,243.4M BY MINE BY METAL 8% 9% Herradura 8% 5% Gold Saucito 27% Silver Fresnillo Lead Noche Buena 8% Zinc Ciénega San Julián DOB 50% San Julián Veins 10% 36% 22% 17% FRESNILLO CIÉNEGA HERRADURA SAUCITO N
Slide 27: Consolidated Cost Inflation 2018 (USD Based)
CONSOLIDATED COST INFLATION 2018 (USD BASED) 27 CONSOLIDATED Unit price increase % Weight (*) Weighted average LABOUR: UNIONIZED 4.80% 6.10% 0.30% PERSONNEL EMPLOYEES 3.60% 2.50% 0.10% WEIGHTED 4.50% OPERATING 2.30% 20.10% 0.50% MATERIALS ENERGY: ELECTRIC ENERGY -6.50% 6.50% -0.40% DIESEL 7.70% 10.8
Slide 28: Adjusted Production Cost - FY 2018
ADJUSTED PRODUCTION COST – FY 2018 28 US$ 952.0 Million Operating Materials 27% Costs from Contractors = 31% Own 20% Ctrt. 7% Maintenance & repairs 18% Energy 20% Own 16% Own 18% Ctrt. 2% Ctrt. 2% Others 11% Own 7% Ctrt. 4% Equipment Ctrt. Personnel 15% 9% Own 8% Ctrt. 7% * Includes: Freights, Taxes
Slide 29: Adjusted Production Cost Analysis (Consolidated)
ADJUSTED PRODUCTION COST ANALYSIS (CONSOLIDATED) 29 CHANGE YTD 18 YTD 17 $ % ADJUSTED PRODUCTION COST 952.0 769.2 182.8 23.8 CHANGE IN INVENTORIES AND OTHERS -53.2 14.6 -67.8 N/A DEPRECIATION 411.8 367.6 44.2 12.0 PTU 12.5 16.5 -4.1 -24.1 COST OF SALES 1,323.1 1,167.9 155.2 +13.3% USD MILLION 230.0
Slide 30: Consolidated Gross Profit Analysis
DOB - Disseminated Ore Body 241.7 48.4 193.4 290.1 0.0 145.0 96.7 (145.0) (96.7) (48.3) USD MILLION 1 Reassessment of gold inventories at Herradura 94.40 2 Higher ore grade and speed of recovery at Herradura 68.42 3 Higher production at San Julián (DOB) GROSS PROFIT 67.09 CONSOLIDATED GROSS PROFIT A
Slide 31: Income Statement (IFRS)
INCOME STATEMENT (IFRS) 31 CONCEPT (MILLION USD) ACCUM DECEMBER CHANGE 2018 % 2017 % $ % OPERATING UNITS ADJUSTED REVENUES 2,243.42 2,233.24 10.2 0.5% FRESNILLO 15.6 HEDGING (METALS) 1.6 0.0 1.6 N/A SAUCITO 16.3 TREATMENT AND REFINING CHARGES (141.2) (139.9) (1.3) 0.9% CIÉNEGA 16.4 SAN JULIÁN 12.2 R
Slide 32: Cash Flow (IFRS)
CASH FLOW (IFRS) 32 YTD CHANGE (USD MILLION) 2018 2017 $ % CASH GENERATED BY OPERATIONS BEFORE CHANGES IN WORKING 930.7 1,073.9 (143.3) (13.3) CAPITAL WORKING CAPITAL (127.9) (2.9) (125.0) 4282.59 INCOME TAX AND PROFIT SHARING PAID (214.4) (309.3) 94.9 (30.7) NET CASH FROM OPERATING ACTIVITIES 588.4
Slide 33: Cash Flow (IFRS)
CASH FLOW (IFRS) 33 YTD CHANGE • Increase in inventories mainly at Herradura - US$63.9 million • Increase in recoverable VAT - US$86.1 million • Decrease in accounts receivables from Met - Mex US$12.8 million (USD MILLION) 2018 2017 $ % • Decrease in other accounts receivables US$14.0 million • Incr
Slide 34: Balance Sheet (IFRS)
BALANCE SHEET (IFRS) 34 CONCEPT CHANGE 31-Dec-18 31-Dec-17 % CHG. ASSETS Cash and Investments 560.8 896.1 (37.4) Trade and Other Receivables 462.0 402.1 14.9 Inventories 335.0 271.1 23.6 Prepaid Expenses 15.5 3.5 337.2 Silverstream 519.1 538.9 (3.7) Derivative Financial Instruments 0.3 0.4 (17.7) Pr
Slide 35: Cost per Tonne (IFRS)
COST PER TONNE (IFRS) 35 ACCUM DECEMBER CHANGE 2018 2017 % CHG. COST PER TONNE* MINE UNIT Fresnillo US$/TON 49.41 47.48 4.1% Saucito US$/TON 60.05 47.60 26.1% Ciénega US$/TON 70.83 66.53 6.5% San Julián Veins US$/TON 57.37 52.09 10.1% San Julián DOB US$/TON 36.22 31.88 13.6% Herradura US$/TON 13.21*
Slide 36: Cash Cost (IFRS)
CASH COST (IFRS) 36 ACCUM DECEMBER CHANGE 2018 2017 % CHG. CASH COST* MINE UNIT Fresnillo PER OZ. SILVER 0.46 0.71 -35.2% Saucito PER OZ. SILVER 0.97 1.50 -35.6% Ciénega PER OZ. GOLD (by-prod.) 25.88 -163.74 115.8% PER OZ. GOLD (Co-prod.) 660.06 540.55 22.1% PER OZ. SILVER (Co-prod.) 8.06 7.28 10.6%
Slide 37: Margins by Mine
MARGINS BY MINE 37 (METAL PRICE – CASH COST)(FY18 VS FY17) OUNCES SOLD OUNCES SOLD 15.2 Moz. 13.9 Moz. 19.6 Moz. 18.6 Moz. 5.8 Moz. 5.3 Moz. 3.5 Moz. 7.8 Moz. 66.8 Koz. 62.7 Koz. 471.4 Koz. 459.8 Koz. 170.2 Koz. 166.7 Koz. Chg. -8.3 % Chg. -5.0 % Chg. -9.0 % Chg. -125.6 % Chg. -6.2% Chg. -2.4% Chg.
Slide 38: All In Sustaining Cost (US$/oz)
ALL IN SUSTAINING COST (US$/OZ) 38 ACCUM JUNE CHANGE 2018 2017 % CHG. MINE UNIT Fresnillo PER OZ. SILVER 8.92 8.20 8.7% Saucito PER OZ. SILVER 8.64 7.09 21.9% San Julián Veins PER OZ. SILVER 5.05 0.83 508.9% San Julián DOB PER OZ. SILVER 10.01 7.88* 26.9% Ciénega PER OZ. GOLD 1,413.87 691.43 104.5%
Slide 39: Margins by Mine
MARGINS BY MINE 39 (METAL PRICE – ALL IN SUSTAINING COST) (FY18 VS FY17) OUNCES SOLD OUNCES SOLD 15.2 Moz. 13.9 Moz. 19.6 Moz. 18.6 Moz. 5.8 Moz. 5.3 Moz. 3.5 Moz. 7.8 Moz. 66.8 Koz. 62.7 Koz. 471.4 Koz. 459.8 Koz. 170.2 Koz. 166.7 Koz. Chg. -8.3 % Chg. -5.0 % Chg. -9.0 % Chg. 125.6 % Chg. -6.2% Chg
Slide 40: Outlook 2019
OUTLOOK 40 Outlook 2019
Slide 41: Expected Delivery of Growth
EXPECTED DELIVERY OF GROWTH 41 1 2 Expected Avg. Investment (US$ YEAR million) Annual 2018 2019 2020 2021 2022 2023 2024 Production PROJECT LEACHING 3.5 moz Ag & 13 PYRITES PLANT PLANT 155 koz Au PRODUCTION (Optimization project) CONSTRUCTION TAILINGS FLOTATION FRESNILLO 9,000 TPD 30 3 moz Ag DEVELO
Slide 42: Expected Attributable Production Profile
EXPECTED ATTRIBUTABLE PRODUCTION PROFILE 42 Million Oz Thousand Oz ATTRIBUTABLE SILVER* ATTRIBUTABLE GOLD 80 1,000 70 900 60 800 700 50 600 40 500 30 400 20 300 200 10 100 0 0 2018 2019 2020 2021 2018 2019 2020 2021 *Including Silverstream Thousand Tons Thousand Tons ATTRIBUTABLE BY-PRODUCT LEAD ATT
Slide 43: Capex Spend Expectations
CAPEX SPEND EXPECTATIONS 43 2019 US$ Million MILLION USD 900 SUSTAINING (OPERATIONS) 800 730 FRESNILLO 134.4M 710 700 670 SAUCITO 114.5M HERRADURA 52.8M 600 540 CIÉNEGA 71.0M 500 NOCHE BUENA 13.0M 400 SAN JULIÁN 70.1M OTHERS 11.5M 300 PROJECTS APPROVED 200 SAN JULIÁN 12.3M PYRITES PLANT 47.7M 100 CE
Slide 44: Outlook
OUTLOOK 44 PRIORITISE SAFETY, CONTINUED CREATE VALUE SUPPORT OF THE OPERATIONAL FOCUS TO THROUGH DISCIPLINED WORKFORCE AND MAXIMISE POTENTIAL OF GROWTH, EXPLORATION ENVIRONMENT OUR EXISTING MINES & DEVELOPMENT PRODUCTION (Eq Ag oz) 140 200 PRODUCTION (EQ AG OZ) PER THOUSAND SHARES 180 PRODUCTION EQ
Slide 45: Appendix
APPENDIX
Slide 46: Grade Expectations for 2019
GRADE EXPECTATIONS FOR 2019 46 GOLD (OZ) MINE MINE TYPE 2018 2019E FRESNILLO UNDERGROUND SILVER 0.70 0.60-0.65 SAUCITO UNDERGROUND SILVER 1.25 ~1.30 CIÉNEGA UNDERGROUND GOLD & SILVER 1.60 1.60-1.70 HERRADURA OPEN PIT GOLD 0.76 0.70-0.75 NOCHE BUENA OPEN PIT GOLD 0.52 ~0.55 SAN JULIÁN (VEINS) UNDERGR
Slide 47: High Quality Assets
HIGH QUALITY ASSETS 47 • District consolidation strategy enables us to leverage local knowledge and shared infrastructure • Portfolio contains over 2,204 moz of attributable silver resources and 39.1 moz of gold resources GOLD (OZ) MINE MINE TYPE 2018 2017 FRESNILLO UNDERGROUND SILVER 42,290 38,784
Slide 48: Low Cost and Flexible Operations
LOW COST AND FLEXIBLE OPERATIONS 48 • Asset quality enables us to extract mineral profitably across metal price cycles • Maximise the potential of each operation by customising mine plans, leveraging technology and sharing personnel, expertise and plant capacity across districts • Continual quest fo