Fresnillo Plc · LSE:FRES
Fresnillo — H1 2017 Earnings Presentation
46 slides from Fresnillo's earnings presentation, Aug 1, 2017
Slide 1: Dedicated to meeting our commitments
01 August 2017 Dedicated to meeting our commitments 1
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
Slide 3: Agenda
Agenda Overview > Octavio Alvídrez, CEO Operations, Development Projects & Exploration > Octavio Alvídrez, CEO Financial Review > Mario Arreguín, CFO Strategy & Outlook > Octavio Alvídrez, CEO Q&A 3
Slide 4: PTTL ALR
PTTL ALR
Slide 5: Introduction: Strategic objectives remain unchanged
Introduction • Strict operational and financial discipline • Investment decisions continue to be evaluated against key Strategic objectives criteria • Focus on maximising margins and profitability remain unchanged • Continue to take a long-term view • Balance profitable growth with returns whilst ma
Slide 6: 1H 2017 results - Highlights
1H 2017 results - Highlights Operational Highlights Silver production of 28.0 moz (including Silverstream), up 11.2%, and gold production of 446 koz, broadly in line Construction of San Julián (phase II) completed on time and on budget and commercial production began in mid-July The turnaround plan
Slide 7: Health, Safety, Environment, Community Relations
Health, Safety, Environment, Community Relations Health & Safety • 1 Fatal accident at the beginning of 2017 • We continue to reinforce our safety measures in order to fulfil our zero fatalities commitment on an ongoing basis • We are currently implementing an enhanced safety approach in Saucito tha
Slide 8: Operations & Projects
Operations & Projects
Slide 9: Operations
Operations Fresnillo Saucito Key operating statistics 1H 2017 vs 1H 2016 Key operating statistics 1H 2017 vs 1H 2016 Silver production – moz 8.9 8.3 Silver production – moz 10.8 11.7 Gold production – koz 20.7 20.6 Gold production – koz 33.9 41.8 Cost per tonne – US$/t 44.1 43.8 Cost per tonne – US$
Slide 10: Operations Cont.
Operations Cont. Herradura Noche Buena Key operating statistics 1H 2017 vs 1H 2016 Key operating statistics 1H 2017 vs 1H 2016 Gold production – koz 224.0 248.6 Gold production – koz 89.8 99.7 Silver production – koz 222 304 Silver production – koz 14 16 Cost per tonne* – US$/t 7.1 7.6 Cost per tonn
Slide 11: Operations Cont.
Operations Cont. Ciénega San Julián Phase I Key operating statistics 1H 2017 vs 1H 2016 Key operating statistics 1H 2017 vs 1H 2016 Gold production – koz 36.4 36.9 Gold production – koz 41.0 NA Silver production – moz 2.8 2.5 Silver production – moz 3.0 NA Cost per tonne – US$/t 64.4 55.2 Cost per t
Slide 12: San Julián Phase II commissioned
Operations Cont. San Julián Phase II commissioned 12
Slide 13: Operations Cont.: San Julián (Phase I & II)
Operations Cont. San Julián (Phase I & II) Expected 2017 silver production 11.6 moz Expected 2017 gold production 63.7 koz Expected Cash cost 2017* $0.9/oz Expected Cost per tonne 2017 $46.4/tonne Expected All-in sustaining costs 2017* $4.9/oz Phase II capacity (flotation plant to process 6,000 TPD
Slide 14: Projects
Projects Pyrites Plant Project in the Fresnillo District 2nd Line of Dynamic Leaching Plant Project at Herradura Key operating statistics 1H 2017 vs 1H 2016 Key operating statistics 1H 2017 vs 1H 2016 Avg. annual silver production 3.5 moz Plant capacity 8,000TPD Avg. annual gold production 13.0 koz
Slide 15: Projects Cont.: Juanicipio
Projects Cont. Juanicipio (JV with MAG Silver. Fresnillo: 56%) 8km from the Fresnillo mine; Juanicipio’s mineral zones are located in silver-gold rich sulphide shoots of the veins. This project will be developed on a stand-alone basis Key metric estimates (100% basis) 10moz silver Avg. annual produc
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Slide 17: Strong Organic Growth Pipeline
Strong Organic Growth Pipeline 2017/ Budget: US$ 160 m Pipeline Fresnillo allows us to focus on Saucito projects that have the Herradura Mine Operations 36 % potential to be developed Nochebuena Ciénega - San Ramón into low cost, Soledad & Dipolos* world-class mines San Julián Pyrites Plant Cebollit
Slide 18: Financial Review
Financial! Review
Slide 19: Metal prices, average exchange rate, energy & inflation
Metal prices, average exchange rate, energy & inflation ACCUM JUNE CONCEPT 1H17 1H16 % CHG GOLD (US$/OZ) 1,250.25 1,245.61 0.4 SILVER (US$/OZ) 17.44 16.58 5.2 LEAD (USC$/LB) 101.96 77.09 32.3 ZINC (USC$/LB) 123.46 85.42 44.5 EXCHANGE RATE AT THE BEGINNING OF THE YEAR ($/USD) 20.66 17.21 20.1 EXCHANG
Slide 20: Income Statement (IFRS)
Income Statement (IFRS) ACCUM JUNE CHANGE CONCEPT (Million USD) 2017 % 2016 % $ % ADJUSTED REVENUES 1,069.5 959.4 110.1 11.5 HEDGING (METALS) 0.0 1.5 (1.5) N/A TREATMENT AND REFINING CHARGES (73.6) (74.1) 0.4 (0.6) REVENUES 995.8 100.0 886.9 100.0 109.0 12.3 ADJUSTED PRODUCTION COST (343.0) (34.4) (
Slide 21: Adjusted Revenues (IFRS)
ADJUSTED REVENUES (IFRS) ACCUM JUNE CHANGE BY: P R O D U C T (Million USD) 2017 2016 VOLUME PRICE TOTAL GOLD 543.9 542.2 (0.3) 2.0 1.7 SILVER 413.2 342.9 51.2 19.1 70.3 LEAD 46.8 34.9 0.6 11.3 11.9 ZINC 65.6 39.4 7.2 18.9 26.1 ADJUSTED REVENUES 1,069.5 959.4 58.7 51.4 110.1 53.3% 46.7% 21
Slide 22: Contribution by mine and by metal to the Adjusted Revenues 1H 2017
Contribution by mine and by metal to the Adjusted Revenues 1H 2017 2017 Adjusted Revenues : US$1,069.5m By mine By metal 10% 4% 21% 6% 10% 51% 39% 26% 24% 10% Fresnillo Saucito Ciénega Silver Gold Herradura Noche Buena San Julián Lead Zinc Fresnillo Ciénega Herradura Saucito Noche Buena San Julián C
Slide 23: Consolidated Cost Inflation YTD 2017 (USD Based)
Consolidated Cost Inflation YTD 2017 (USD Based) Consolidated Unit Price Weighted Increase % Weight (*) Average Labour Unionized Personnel -3.0% 6.7% -0.2% Employees -3.3% 2.8% -0.1% Weighted -3.1% Operating Materials -3.7% 20.2% -0.7% Energy Electric Energy 37.2% 7.9% 2.9% Diesel 20.3% 10.4% 2.1% G
Slide 24: Adjusted Production Cost Analysis
Adjusted Production Cost Analysis (Consolidated) YTD 17 YTD 16 $ CHANGE % Adjusted Production Cost * 343.0 299.7 43.3* 14.4 Change in inventories and others 16.0 15.0 1.0 6.8 Depreciation 168.0 165.3 2.6 1.6 PTU 8.9 9.9 -1.0 -10.1 Hedging (mxp/usd exchange rate) 0.0 2.6 (Loss) -2.6 N/A Cost of Sales
Slide 25: Adjusted Production Cost (US$343M)
25 Adjusted Production Cost (US$343M) Real Accumulated 1H 2017 EQUIPMENT Ctrt. 11% MAINTENANCE & REPAIRS 17% Own 15% Ctrt. 2% PERSONNEL 16% Own 9% Ctrt. 7% ENERGY 22% OPERATING MATERIALS Own 20% 27% Ctrt. 2% Own 20% OTHERS Ctrt. 7% 7% Own 6% Ctrt. 1% Costs from Contractors 30% * Includes: Freights,
Slide 26: Consolidated Gross Profit Analysis
Consolidated Gross Profit Analysis CHANGE YTD17 YTD16 $ % USD MILLION Gross Profit 460.0 394.4 65.6 +16.6% 150.0 135.0 11.4 (5.8) 49.7 (21.9) 120.0 (33.7) 105.0 90.0 75.0 65.9 (65.6) * 60.0 45.0 30.0 15.0 0.0 Cost Inflation Higher Metal Prices Others Lower ore grade Higher Production MXP/USD Devalua
Slide 27: Contribution by mine to the Gross Profit 1H17 & 1H16
Contribution by mine to the Gross Profit 1H17 & 1H16 1H17 1H16 5.8% 7.2% 6.5% 5.5% 0.0% 29.2% 9.4% 35.6% 17.0% 22.7% 26.4% 31.0% US$460.0 M US$394.4 M 27
Slide 28: Income Statement (IFRS)
ACCUM JUNE 2017 Operating Units Fresnillo 8.1 Income Statement (IFRS) Ciénega Saucito 4.4 5.5 ACCUM JUNE CHANGE CONCEP T (Million USD) 2017 % Herradura 2016 % $ % 3.1 Noche Buena 2.5 ADJUSTED REVENUES 1,069.5 959.4 110.1 11.5 HEDGING (METALS) 0.0 San 1.5 Ramón (1.5) N/A2.1 TREATMENT AND REFINING CHA
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Slide 30: Cash Flow (IFRS)
Cash Flow (IFRS) CASH FLOW ACCUM JUNE CHG. YTD 2016 (USD MILLION) 1H17 1H16 $ % CASH GENERATED BY OPERATIONS BEFORE CHANGES IN WORKING CAPITAL 540.3 475.2 65.1 13.7 WORKING CAPITAL 25.8 0.5 25.2 N/A INCOME TAX AND PROFIT SHARING PAID (211.9) (67.9) (144.1) 212.2 NET CASH FROM OPERATING ACTIVITIES 35
Slide 31: Cash Flow (IFRS)
Cash Flow (IFRS) •Decrease in trade and other receivables • due to VAT recovered US$6.0 million •Decrease in gold ore inventories at Herradura CASH FLOW ACCUM•and JUNENoche Buena CHG. US$14.1 YTD million 2016 (USD MILLION) 1H17 •Increase 1H16 in payable $ accounts US$4.9 million % CASH GENERATED BY
Slide 32: Balance Sheet (IFRS)
Balance Sheet (IFRS) Change Concept (Million USD) 30-JUN-17 31-DEC-16 % Assets Cash and Investments 884.9 912.0 (3.0) Trade and Other Receivables 369.4 286.7 28.9 Inventories 262.7 276.9 (5.1) Prepaid Expenses 2.9 2.8 0.9 Silverstream 500.2 467.5 7.0 Derivative Financial Instruments 0.4 23.2 (98.3)
Slide 33: Cost Per Tonne (IFRS)
Cost Per Tonne (IFRS) ACCUM JUNE CHANGE 2017 2016 % CHG. COST PER TONNE * MINE UNIT A Fresnillo US$/TON 44.07 43.80 0.6% A Saucito US$/TON 45.16 40.34 11.9% A Ciénega US$/TON 64.39 55.18 16.7% San Julián US$/TON 48.97 *** - N/A B Herradura US$/TON 7.10 ** 7.61 ** -6.6% C Total Vol. Hauled Charged to
Slide 34: Cash Cost (IFRS)
Cash Cost (IFRS) ACCUM JUNE CHANGE 2017 2016 % CHG. CASH COST * MINE UNIT Fresnillo PER OZ. SILVER 1.25 3.56 -64.9% Saucito PER OZ. SILVER 1.64 0.83 96.3% Ciénega PER OZ. GOLD (By-prod.) -242.81 -121.68 N/A PER OZ. GOLD (Co-prod.) 507.30 530.27 -4.3% PER OZ. SILVER (Co-prod.) 7.04 6.99 0.7% PER OZ.
Slide 35: 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 7.7Moz. 8.2Moz. 10.4Moz. 9.9Moz. 34.0Koz. 33.9Koz. 246.2Koz. 222.5Koz. 99.6Koz. 89.0Koz. Chg. + +6.6% Chg. -5.3% Chg. -0.3% Chg. -9.6% Chg. -10.7% Ounces Sold Note I: San Juli
Slide 36: All In Sustaining Cost (US$/Oz)
All In Sustaining Cost (US$/Oz) ACCUM JUNE 2017 2016 % CHG. CASH COST * MINE UNIT Fresnillo PER OZ. SILVER 7.57 8.31 -8.9% Saucito PER OZ. SILVER 6.50 5.53 17.6% Ciénega PER OZ. GOLD 419.16 525.86 -20.3% San Julián PER OZ. SILVER 5.65 - N/A * Herradura PER OZ. GOLD 810.82 721.24 12.4% Noche Buena PE
Slide 37: 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 7.7Moz. 8.2Moz. 10.4Moz. 9.9Moz. 34.0Koz. 33.9Koz. 246.2Koz. 222.5Koz. 99.6Koz. 89.0Koz. Chg. + +6.6% Chg. -5.3% Chg. -0.3% Chg. -9.6% Chg. -10.7% Ounces Sold Not
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Slide 39: Expected Delivery of Growth
Expected Delivery of Growth (1) (2) Expected Avg. Investm ent YEAR (US$ m illion) Annual 2016 2017 2018 2019 2020 2021 2022 Production PROJECT CONSTRUCTION 10.3 m oz oz Ag LEACHING P LA NT 515 & 44 koz Au SAN JULIÁN PRODUCTION FLOTATION PLANT CONSTRUCTION LEACHING PLANT 3.5 m oz Ag & PYRITES PLANT D
Slide 40: Expected Silver Production Profile
Expected Silver Production Profile Million Oz Attributable 80 70 60 50 40 30 20 10 0 2017 2018 2019 2020 Target of 65 moz silver by 2018 40
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 2017 2018 2019 2020 Target of 750 koz gold by 2018 41
Slide 42: CAPEX Spend Expectations
CAPEX Spend Expectations 2017 US$ Million Million Usd Sustaining (Operations) 1,000 900 860 Fresnillo 109 M Saucito 119 M 800 740 Herradura 96 M 700 700 Ciénega 61 M Noche Buena 20 M 600 520 San Julián 79 M 500 Others 5 M 434 400 Projects Approved 300 San Julián 35 M 200 Pyrites Plant 58 M 100 Centa
Slide 43: Outlook
Outlook Safety and support of • Introduce an enhanced safety system at all our mines starting at Saucito in March 2017 the workforce •Ramp San Julián Phase II up to full capacity in 3Q17 Disciplined growth •Maintain Fresnillo mine at full capacity through exploration and •Advance the Pyrites Plant •
Slide 44: Investment case
Investment case Strong balance sheet Commitment to sustainable High quality business assets practices Disciplined & consistent Low-cost and approach to flexible growth and operations returns 44
Slide 45: 2nd Line of the DLP at Herradura
2nd Line of the DLP at Herradura 45
Slide 46: Pyrites Plant in the Fresnillo District
Pyrites Plant in the Fresnillo District 46