Fresnillo Plc · LSE:FRES
Fresnillo — H1 2011 Earnings Presentation
37 slides from Fresnillo's earnings presentation, Aug 2, 2011
Slide 1: Interim Results 30 June 2011
Interim Results 30 June 2011 Fresnillo plc August 2, 2011
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 • 2011 Highlights Jaime Lomelín CEO • Operations Review Jaime Lomelín CEO • Exploration David Giles VP Exploration • Financial Review Mario Arreguín CFO • Conclusions Jaime Lomelín CEO • Q&A Interim Results H1 2011 August 2, 2011 3
Slide 4: H1 2011 Operational Highlights
H1 2011 Operational Highlights • Record half year silver production of 21.5 million ounces , (including the Silverstream), up 2.6% • Record attributable gold production of 206,477 ounces, up 17.1% • On track to achieve full year production targets of 44moz of silver (including 3.0 million ounces fro
Slide 5: H1 2011 Financial Highlights
H1 2011 Financial Highlights • Average realised silver price US$35.74 per oz, up 99.3% • Average realised gold price US$1,462.31 per oz, up 24.8% • Adjusted Revenue[1] of US$1,114.1m, up 75.1% • Gross Profit of US$774.6m, up 91.8% • EBITDA[2] up 92.0% to US$757.0m, margins increased to 71.6% from 65
Slide 6: Operations Review
Operations Review August 2, 2011
Slide 7: Operation Review – Fresnillo District
Operation Review – Fresnillo District FRESNILLO SAUCITO H1 2011 H1 2010 Change % H1 2011 H1 2010* Change % Attributable production Silver m oz 16.9 17.8 (1.0) (5.4) 1.9 0.5 1.5 N/M Gold k oz 12.5 11.5 1.0 8.7 9.1 2.0 7.1 N/M Lead kt 6.7 5.8 0.9 15.5 0.6 0.1 0.5 N/M Zinc kt 6.6 6.0 0.6 9.4 0.3 0.0 0.
Slide 8: Operation Review – Ciénega District
Operation Review – Ciénega District CIÉNEGA H1 2011 H1 2010 Change % Attributable production Gold k oz 53.4 55.8 (2.4) (4.3) Silver m oz 0.6 0.7 (0.1) (14.8) Adjusted Revenue Adj Revenue US$ m 108.0 84.6 23.4 27.6 Contribution % 9.7 13.3 Costs Cost per tonne US$/t 70.1 60.8 9.3 15.2 Cost per AU oz U
Slide 9: Operation Review – Herradura District
Operation Review – Herradura District HERRADURA SOLEDAD-DIPOLOS H1 2011 H1 2010 Change % H1 2011 H1 2010 Change % Attributable production Gold k oz 88.2 79.6 8.7 10.9 43.3 27.5 15.7 57.2 Silver m oz 0.1 0.1 0.0 16.4 0.0 0.0 0.0 N/M Adjusted Revenue Adj Revenue US$ m 231.6 167.6 64.0 38.2 111.4 57.5
Slide 10: Estimated project delivery programme
Estimated project delivery programme On track to produce 65m oz of silver and over 400k oz of gold by 2018 Project 2011 2012 2013 2014 2015 2016 Nochebuena Construction Production Herradura Feasibility Construction Production Leaching Pre - San Julián Feasibility Construction Production Feasibility
Slide 11: Exploration
aN FRESNILLO.. Exploration August 2, 2011
Slide 12: Exploration
Exploration • Exploration expenses US$ 83.9 million • 44 drill rigs advanced 226,500 m • Good drilling results: – Herradura District: Centauro Deep and Noche Buena – Fresnillo District: Infill drilling at Minera Juanicipio – Ciénega District: San Ramón veins – San Julián Project: Shalom and Todos Sa
Slide 13: Exploration
Exploration Fresnillo plc mines HERRADURA DISTRICT Development projects Advanced exploration projects Prospects in drilling 1H11 SAN JULIAN Prospects at an early stage PROJECT CIENEGA DISTRICT FRESNILLO DISTRICT GUANAJUATO PROJECT PERU Interim Results H1 2011 August 2, 2011 13
Slide 14: Exploration
Exploration Exploration Fresnillo Budget Herradura Mine Operations Ciénega 17% Soledad-Dipolos Saucito I Nochebuena Development Projects 16% San Ramón Saucito II San Julián Centauro Deep Juanicipio Advanced Exploration Orisyvo Las Casas 48% Corredor Fresnillo Guanajuato Manzanillas Lucerito Prospect
Slide 15: Financial Review
Financial Review August 2, 2011
Slide 16: Consolidated Income Statement (IFRS)
Consolidated Income Statement (IFRS) ACCUM JUNE CHANGE CONCEPT (US$ MILLIONS) 1H2011 % 1H2010 % $ % ADJUSTED REVENUES 1,114.1 636.3 477.9 75.1 TREATMENT AND REFINING CHARGES (57.2) (30.6) (26.6) 86.9 REVENUES 1,056.9 100.0 605.7 100.0 451.3 74.5 ADJUSTED PRODUCTION COST (191.6) (18.1) (140.5) (23.2)
Slide 17: Consolidated Income Statement without Silverstream Effect (IFRS)
Consolidated Income Statement without Silverstream Effect (IFRS) ACCUM JUNE CHANGE CONCEPT (US$ MILLIONS) 1H2011 % 1H2010 % $ % ADJUSTED REVENUES 1,114.1 636.3 477.9 75.1 TREATMENT AND REFINING CHARGES (57.2) (30.6) (26.6) 86.9 REVENUES 1,056.9 100.0 605.7 100.0 451.3 74.5 ADJUSTED PRODUCTION COST (
Slide 18: Contribution by mine and by metal to the Adjusted Revenues
Contribution by mine and by metal to the Adjusted Revenues 1 Adj Revenues : US$1,114.1m By mine By metal 2% 6% 2% 10% 10% 39% 53% 57% 21% Saucito Fresnillo Herradura Silver Gold Ciénega Sol & Dip Zinc Lead Fresnillo Ciénega Herradura Sol & Dip Saucito Consol Gold 14.67 2.5% 72.90 67.5% 222.96 96.3%
Slide 19: Consolidated Income Statement (IFRS)
Consolidated Income Statement (IFRS) ACCUM JUNE CHANGE CONCEPT (US$ MILLIONS) 1H2011 % 1H2010 % $ % ADJUSTED REVENUES 1,114.1 636.3 477.9 75.1 TREATMENT AND REFINING CHARGES (57.2) (30.6) (26.6) 86.9 REVENUES 1,056.9 100.0 605.7 100.0 451.3 74.5 ADJUSTED PRODUCTION COST (191.6) (18.1) (140.5) (23.2)
Slide 20: Breakdown of the Adjusted Production Costs
Breakdown of the Adjusted Production Costs Adj Prod Cost: US$191.6m 7% 1% 23% 13% Op Mat Mainten Energy & Diesel Contrac* Person Others Freights 20%* 18% 18% Fresnillo Ciénega Herradura Sol & Dip Saucito Consol Personnel 10.81 19.7% 5.27 17.1% 5.81 10.0% 2.80 8.3% 0.60 4.4% 25.28 Maintenance and rep
Slide 21: Increase in unit costs (USD)
Increase in unit costs (USD) INPUTS 1H 11 VS 1H10 Electricity 11.2% Energy Diesel 21.6% Wages 13.0% Labour Fringe benefits 7.7% Steel balls for milling 20.8% Steel for drilling 9.6% Explosives 12.7% Operating Tyres 9.6% Materials Sodium cyanide 26.7% Other reagents 23.3% Oils and other lubricants 22
Slide 22: Adjusted Production Cost Analysis (Consolidated)
Adjusted Production Cost Analysis (Consolidated) CHANGE 1H11 1H10 $ % Adjusted Production Cost 191.6 140.5 51.1* +36.4 Change in inventories -15.6 -7.6 -8.0 +105.3 Depreciation 69.8 48.8 +21.0 +43.0 PTU 41.3 22.7 +18.6 +81.9 Hedging (mxp/usd exchange rate) -4.7 (Profit) -2.5 (Profit) -2.2 +88.0 USD
Slide 23: Adjusted Production Cost Analysis (Consolidated)
Adjusted Production Cost Analysis (Consolidated) CHANGE 1H11 1H10 $ % Adjusted Production Cost 191.6 140.5 51.1* +36.4 Change in inventories -15.6 -7.6 -8.0 +105.3 Depreciation 69.8 48.8 +21.0 +43.0 PTU 41.3 22.7 +18.6 +81.9 Hedging (mxp/usd exchange rate) -4.7 (Profit) -2.5 (Profit) -2.2 +88.0 USD
Slide 24: Cost Per Tonne (IFRS)
Cost Per Tonne (IFRS) COST PER TONNE* MINE UNIT 1H2011 1H2010 % CHG. Fresnillo US$/TON 42.27 39.97 5.7% Ciénega US$/TON 70.06 60.81 15.2% Herradura US$/TON 5.52 5.03 9.8% Soledad & Dipolos US$/TON 6.14 4.64 32.3% * Cost per tonne is calculated as total production costs less depreciation, profit shar
Slide 25: Cash Cost (IFRS)
Cash Cost (IFRS) CASH COST* MINE UNIT 1H2011 1H2010 % CHG. Fresnillo PER OZ. SILVER 5.53 3.86 43.2% Ciénega PER OZ. GOLD 91.27 163.84 (44.3%) Herradura PER OZ. GOLD 306.75 323.48 (5.2%) Soledad & Dipolos PER OZ. GOLD 447.03 307.34 45.5% * Cash cost per ounce is calculated as total cash cost (cost of
Slide 26: Consolidated Income Statement (IFRS)
Consolidated Income Statement (IFRS) ACCUM JUNE CHANGE CONCEPT (US$ MILLIONS) 1H2011 % 1H2010 % $ % ADJUSTED REVENUES 1,114.1 636.3 477.9 75.1 TREATMENT AND REFINING CHARGES (57.2) (30.6) (26.6) 86.9 REVENUES 1,056.9 100.0 605.7 100.0 451.3 74.5 ADJUSTED PRODUCTION COST (191.6) (18.1) (140.5) (23.2)
Slide 27: Contribution by mine to the Gross Profit
Contribution by mine to the Gross Profit CHANGE 1H 11 1H 10 US$ % Fresnillo 451.7 58.6% 224.2 55.9% 227.5 101.5 Herradura 150.9 19.6% 96.0 24.0% 54.9 57.2 Ciénega 54.0 7.0% 43.4 10.8% 10.6 24.4 Sol & Dipolos 68.2 8.8% 37.3 9.3% 30.9 82.8 Saucito 46.2 6.0% - 0.0% 46.2 N/A Total for operating mines 77
Slide 28: Consolidated Gross Profit Analysis
0.0 57.0 114.0 171.0 228.0 285.0 342.0 399.0 456.0 513.0 570.0 1 Increase in silver price 298.8 Increase in gold 2 price 77.3 USD MILLION Interim Results H1 2011 Higher ore 3 milled/deposited at 50.0 Cien, Fres & Herr Saucito Gross Profit 4 (new mine) 46.2 Gross Profit Increased prod at 5 36.1 S&D I
Slide 29: Consolidated Gross Profit Analysis
Consolidated Gross Profit Analysis CHANGE 1H11 1H10 $ % Gross Profit 774.6 403.8 +370.8* +91.8 Higher TRC’s due to: • 77,249 gold oz produced • Increase in volumes shipped to Met-Mex. • with the expanded capacity. • Effect of higher metal prices on price escalator. Increase in ore vol. processed: •
Slide 30: Consolidated Income Statement (IFRS)
Consolidated Income Statement (IFRS) ACCUM JUNE CHANGE CONCEPT (US$ MILLIONS) 1H2011 % 1H2010 % $ % ADJUSTED REVENUES 1,114.1 636.3 477.9 75.1 TREATMENT AND REFINING CHARGES (57.2) (30.6) (26.6) 86.9 REVENUES 1,056.9 100.0 605.7 100.0 451.3 74.5 ADJUSTED PRODUCTION COST (191.6) (18.1) (140.5) (23.2)
Slide 31: Consolidated Income Statement (IFRS)
Consolidated Income Statement (IFRS) • Increased number of administrativeACCUM JUNE CHANGE CONCEPT (US$ MILLIONS) • personnel hired to service a larger 1H2011number % 1H2010 % $ % ADJUSTED REVENUES • of mines and projects. 1,114.1 636.3 477.9 75.1 TREATMENT AND REFINING CHARGES • Legal and advisory
Slide 32: Consolidated Cash Flow (IFRS)
Consolidated Cash Flow (IFRS) CHANGE CONCEPT (US $ millions) 1H2011 1H2010 $ % CASH GENERATED BY OPERATIONS BEFORE CHANGES IN WORKING CAPITAL 798.2 419.9 378.3 90.1 WORKING CAPITAL (42.6) (53.3) 10.7 (20.0) INCOME TAX AND PROFIT SHARING PAID (166.2) (61.0) (105.2) 172.5 NET CASH FROM OPERATING ACTIV
Slide 33: Consolidated Cash Flow (IFRS)
Consolidated Cash Flow (IFRS) • Increase in working capital resulted • mainly from higher prices and volumes • sold to Met-Mex Peñoles (smelting & CHANGE CONCEPT (US $ millions) • refining). 1H2010 1H2011 $ % CASH GENERATED BY OPERATIONS BEFORE CHANGES IN WORKING CAPITAL 798.2 419.9 378.3 90.1 WORKI
Slide 34: Consolidated Balance Sheet (IFRS)
Consolidated Balance Sheet (IFRS) Change Concept 30-JUNE-11 31-DEC-10 % Asset Cash and Investments 717.9 559.5 28.3 Trade and Other Receivables 239.5 236.7 1.2 Inventories 79.1 63.1 25.4 Prepaid Expenses 1.4 2.5 (43.6) Silverstream 462.2 427.7 8.1 Derivative Financial Instruments 6.8 4.1 67.6 Proper
Slide 35: Conclusion
aN FRESNILLO.. August 2, 2011
Slide 36: Focus on improving safety
Focus on improving safety • Reinforce our zero tolerance policy focus on health and safety performance. Regrettably we suffered two fatalities of unionised personnel, additionally, the contractors at our operations, suffered six fatalities. • Conduct additional awareness campaigns and training • Hir
Slide 37: Outlook
Outlook • Volatile metal prices set to continue • Focus on increasing productivity, containing costs, expanding the resource and reserve base, and strengthening our growth pipeline • Looking ahead in 2011: – Silver production to grow by 5% to 44moz per year – Gold production to grow by 8% to 400,000