Fresnillo Plc · LSE:FRES
Fresnillo — Denver Gold Forum 2018
44 slides from Fresnillo's conference presentation, Sep 25, 2018
Slide 1: Denver Gold Forum
DENVER GOLD FORUM Tuesday 25th Sept 2018 Octavio Alvídrez, CEO
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 • Overview • 10 years as a listed business • Performance Update • The Fresnillo Proposition: • High quality assets • Low cost and flexible operations • Disciplined approach to development • Commitment to sustainable business practices • Strong balance sheet • Outlook
Slide 4: Fresnillo at a Glance: Key Highlights
FRESNILLO AT A GLANCE 4 A DECADE OF PROGRESS AND ACHIEVEMENT KEY HIGHLIGHTS • World’s largest silver producer (58.7 moz in 2017) and Mexico’s largest gold producer (911.1 koz in 2017) • Total assets of US$ 4.7 billion1 and market cap of US$8.2 billion 2 • Silver resources of 2.3 billion ounces and g
Slide 5: A Consistent, Conservative Strategy
A CONSISTENT, CONSERVATIVE STRATEGY 5 OPERATE DEVELOP EXPLORE SUSTAIN By optimising capacity and Consistently invested over US$4 billion Maintained a strategic commitment We work hard to ensure the health recoveries, generating continuous in both existing operations and to continuous exploration acr
Slide 6: Balancing Growth with Returns
BALANCING GROWTH WITH RETURNS 6 INVESTING IN GROWTH GROWTH OUTCOME RETURNS Total Exploration Expenses from the Increase in silver equivalent EBITDA last decade (2008 to 2017) resources (2007-2017) (2008 to 2017) US$ 1,570.0 million 4,458.5 million ounces* Total EBITDA – US$ 8,570m Average EBITDA – U
Slide 7: A Decade of Production and Resource Growth per Share
FRESNILLO AT A GLANCE 7 A DECADE OF PRODUCTION AND RESOURCE GROWTH PER SHARE 140 180 Production (Eq Ag oz) per thousand shares 160 PRODUCTION (EQ AG MOZ) Production (Eq Ag oz) per 120 PRODUCTION 140 thousand shares 100 120 80 100 60 80 60 40 40 20 20 - - 2007 2008 2009 2010 2011 2012 2013 2014 2015
Slide 8: 2017 Full Year & 1H18 Results - Highlights
2017 FULL YEAR & 1H18 RESULTS - HIGHLIGHTS 8 1000 70 1,200 1,200 PRODUCTION (MOZ) 60 800 PRODUCTION (KOZ) 900 US$ MILLION 50 900 US$ MILLION 600 40 600 600 30 400 20 300 200 300 10 0 0 - - 2014 2015 2016 2017 2014 2015 2016 2017 2014 2015 2016 2017 2014 2015 2016 2017 SILVER PRODUCTION GOLD PRODUCTI
Slide 9: Investment Proposition
INVESTMENT PROPOSITION 9 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 Largest concession
Slide 10: High Quality Assets
HIGH QUALITY ASSETS 10 • District consolidation strategy enables us to leverage local knowledge and shared infrastructure • Portfolio contains over 2,320 moz of attributable silver resources and 38.5 moz of gold resources GOLD (OZ) MINE MINE TYPE 1H 2018 FY 2017 FRESNILLO UNDERGROUND SILVER 21,384 3
Slide 11: Low Cost and Flexible Operations
LOW COST AND FLEXIBLE OPERATIONS 11 • 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
Slide 12: Disciplined Approach to Development - Projects
DISCLIPINED APPROACH TO DEVELOPMENT - PROJECTS 12 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$1,200/oz Au 29.3% Leachi
Slide 13: Projects Cont. - Second Dynamic Leaching Plant at Herradura
PROJECTS Cont. 13 2ND LINE OF DYNAMIC LEACHING PLANT PROJECT AT HERRADURA OVERVIEW ORE TYPE • Final testing is underway and commercial production is expected in 3Q18 • The project will enable sulphides occurring deeper in the pit to be processed more efficiently • At the time of analysis, this proje
Slide 14: Projects Cont. - Juanicipio
PROJECTS Cont. 14 JUANICIPIO (JV WITH MAG SILVER. FRESNILLO: 56%) OVERVIEW 8km from the Fresnillo mine This project will be developed on a stand-alone basis • Feasibility study was concluded by AMC • Currently being discussed by the technical committee KEY METRIC ESTIMATES (100% BASIS)* • Approval p
Slide 15: Exploration
EXPLORATION 15 STRONG ORGANIC GROWTH PIPELINE • Apply stringent viability criteria to all new projects • The Pyrites Plant at Saucito has been commissioned and final testing at the Second Pipeline allows us to focus on projects that Dynamic Leaching Plant is on have the potential to be developed int
Slide 16: Expected Delivery of Growth
EXPECTED DELIVERY OF GROWTH 16 1 2 Expected Avg. Investment (US$ YEAR million) Annual 2017 2018 2019 2020 2021 2022 2023 Production PROJECT LEACHING PLANT CONSTRUCTION 3.5 moz Ag & 13 PYRITES PLANT 155 koz Au PRODUCTION (Optimization project) CONSTRUCTION TAILINGS FLOTATION DEVELOPMENT Extended LoM
Slide 17: Expected Attributable Production Profile
EXPECTED ATTRIBUTABLE PRODUCTION PROFILE 17 Million Oz Thousand Oz SILVER* GOLD 80 1,000 70 900 800 60 700 50 600 40 500 30 400 300 20 200 10 100 0 0 2017 2018 2019 2020 2017 2018 2019 2020 *Including Silverstream Target of 65 moz silver by 2018 Target of 750 koz gold by 2018 Thousand Tons Thousand
Slide 18: Capex Spend Expectations
CAPEX SPEND EXPECTATIONS 18 2018 US$ Million MILLION USD 900 SUSTAINING (OPERATIONS) 800 755 FRESNILLO 90M 725 700 SAUCITO 100M 605 590 HERRADURA 136M 600 CIÉNEGA 70M 500 NOCHE BUENA 35M 400 SAN JULIÁN 90M 300 OTHERS 9M PROJECTS APPROVED 200 SAN JULIÁN 17M 100 PYRITES PLANT 47M 0 CENTAURO EXTENSION
Slide 19: Commitment to Sustainable Business Practices
COMMITMENT TO SUSTAINABLE BUSINESS PRACTICES 19 HEALTH SAFETY ENVIRONMENT COMMUNITY RELATIONS Occupational Health programme “I care, we care” programme being 60% of electricity consumption comes We partner with the NGO ongoing implemented across all of our from wind power, aim to get to 75% by Inter
Slide 20: Strong Balance Sheet (IFRS)
STRONG BALANCE SHEET (IFRS) 20 31 JUNE 2018 US$ Million KEY CONCEPTS CASH AND INVESTMENTS 688.6 SENIOR NOTES 800.0 NET DEBT TO EBITDA 0.1 x
Slide 21: Outlook
OUTLOOK 21 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
Slide 22: Appendix
APPENDIX ean
Slide 23: Operations - Fresnillo
OPERATIONS 23 FRESNILLO KEY OPERATING STATISTICS 1H 18 1H 17 Silver production – moz 8.1 8.9 Gold production – koz 21.4 20.7 Cost per tonne – US$/t 46.9 44.1 Cash cost - US$/oz of Ag -0.8 1.25 Reserves 2017 * 179.7 moz Ag, 0.6 moz Au Resources 2017 * 812.8 moz Ag, 1.9 moz Au INCREASE IN ANNUAL SILVE
Slide 24: Operations - Saucito
OPERATIONS 24 SAUCITO KEY OPERATING STATISTICS 1H 18 1H 17 Silver production – moz 10.1 10.8 Gold production – koz 39.8 33.9 Cost per tonne – US$/t 53.6 45.2 Cash cost - US$/oz of Ag 1.3 1.6 Reserves 2017 * 133.2 moz Ag, 0.7 moz Au Resources 2017 * 513.6 moz Ag, 2.1 moz Au ANNUAL SILVER PRODUCTION 1
Slide 25: Operations - San Julián
OPERATIONS 25 SAN JULIÁN PHASE I (VEIN SYSTEM) SAN JULIÁN PHASE II (DISSEMINATED ORE BODY) KEY OPERATING STATISTICS 1H 18 1H 17 KEY OPERATING STATISTICS 1H 18 1H 17 Gold production – koz 38.7 41.0 Gold production – koz 1.2 NA Silver production – moz 2.7 3.0 Silver production – moz 4.4 NA Reserves 20
Slide 26: Operations - Ciénega
OPERATIONS 26 CIÉNEGA KEY OPERATING STATISTICS 1H 18 1H 17 Gold production – koz 33.1 36.4 Silver production – moz 2.8 2.8 Cost per tonne – US$/t 68.4 64.4 Cash cost - US$/oz of Au -10.6 -242.8 Reserves 2017 * 54.1 moz Ag, 0.6 moz Au Resources 2017 * 167.3 moz Ag, 1.7 moz Au 1H18 SUMMARY 2H18 PRIORI
Slide 27: Operations - Herradura
OPERATIONS 27 HERRADURA KEY OPERATING STATISTICS 1H 18 1H 17 Gold production – koz 243.1 224.0 Silver production – koz 604 222 Cost per tonne* – US$/t 10.3 7.1 Cash cost - US$/oz of Au 364.9 483.9 Reserves 2017 ** 7.7 moz Au Resources 2017 ** 10.3 moz Au 1H18 SUMMARY 2H18 PRIORITIES • Consistently h
Slide 28: Operations - Noche Buena
OPERATIONS 28 NOCHE BUENA CASH COST 1,000 900 US$ /OZ. GOLD KEY OPERATING STATISTICS 1H 18 1H 17 800 Gold production – koz 88.0 89.8 700 Silver production – koz 37 14 600 Cost per tonne* – US$/t 10.25 7.1 2013 2014 2015 2016 2017 1H - 2018 Cash cost - US$/oz of Au 772.8 804.1 • At time of acquisitio
Slide 29: Income Statement (IFRS)
INCOME STATEMENT (IFRS) 29 CONCEPT (MILLION USD) ‘ACCUM JUNE CHANGE 2018 % 2017 % § % ‘ADJUSTED REVENUES 1189.9 10695 1204 a TREATMENT AND REFINING CHARGES (74.8) (736) (12) 16 a i ANIUSTED PRONUCTION COST (4299) (386) (3030) (344) (870) 754 PROFIT SHARING am) an (89) (09) (29 320 DEPRECIATION (929)
Slide 30: Adjusted Revenues (IFRS)
ADJUSTED REVENUES (IFRS) 30 ACCUM JUNE CHANGE BY: 2018 2017 VOLUME PRICE TOTAL PRODUCT Gold 593.0 543.9 21.4 27.7 49.1 Silver 432.1 413.2 42.8 (23.9) 18.9 Lead 55.6 46.8 5.0 3.7 8.8 Zinc 109.2 65.6 30.3 13.4 43.7 ADJUSTED REVENUES 1,189.9 1,069.5 99.6 20.8 120.4 82.7% 17.3% 100%
Slide 31: Contribution by Mine and by Metal to Adjusted Revenues 1H18
CONTRIBUTION BY MINE AND BY METAL TO THE ADJUSTED REVENUES 1H 18 31 1 1H 18 ADJUSTED REVENUES : US$1,189.9M BY MINE BY METAL Fresnillo 8% 5% Gold 18% 9% Saucito 8% Silver Ciénega Zinc Herradura Lead 10% Noche Buena San Julián JM 50% San Julián Veins 21% 36% 28% 8% FRESNILLO CIÉNEGA HERRADURA SAUCITO
Slide 32: Consolidated Cost Inflation 1H18 (USD Based)
CONSOLIDATED COST INFLATION 1H 18 (USD BASED) 32 CONSOLIDATED Unit price increase % Weight (*) Weighted average LABOUR: UNIONIZED PERSONNEL 8.4% 6.3% 0.5% EMPLOYEES 7.3% 2.6% 0.2% WEIGHTED 8.1% OPERATING MATERIALS 3.4% 20.2% 0.7% ENERGY: ELECTRIC ENERGY -7.0% 7.0% -0.5% DIESEL 5.2% 9.4% 0.5% GASOLIN
Slide 33: Adjusted Production Cost - FY 2017
ADJUSTED PRODUCTION COST – FY 2017 33 US$ 769.2 Million Costs from Contractors = 27% Operating Materials 26% Own 20% Ctrt. 6% Energy 21% Own 19% Ctrt. 2% Maintenance & repairs 17% Own 15% Ctrt. 2% Others 11% Own 10% Ctrt. 1% Equipment Personnel 16% Ctrt.9% Own 9% Ctrt. 7% * Includes: Freights, Taxes
Slide 34: Adjusted Production Cost Analysis (Consolidated)
ADJUSTED PRODUCTION COST ANALYSIS (CONSOLIDATED) 34 CHANGE 1H 18 1H 17 $ % ADJUSTED PRODUCTION COST 429.9 343.0 87.0 25.4 CHANGE IN INVENTORIES AND OTHERS -21.7 16.0 -37.7 N/A DEPRECIATION 192.8 168.3 24.9 14.8 PTU 11.8 8.9 2.9 32.0 USD MILLION COST OF SALES 612.9 535.8 +77.1 +14.4% 95.0 4.01 86.98
Slide 35: Consolidated Gross Profit Analysis
28.0 14.0 42.0 56.0 70.0 84.0 0.0 112.0 126.0 98.0 140.0 USD MILLION 1 Increase in inventories at Herradura 46.00 2 Higher ore grade 36.30 GROSS PROFIT 3 Higher Production CONSOLIDATED GROSS PROFIT ANALYSIS 21.63 4 Higher Metal Prices 20.35 502.2 1H 18 5 MXP/USD Revaluation effect (4.01) Cost Inflat
Slide 36: Exploration Expenses by Project and Prospect
CONSOLIDATED GROSS PROFIT ANALYSIS 36 OPERATING UNITS FRESNILLO 7.7 SAUCITO 8.1 CIÉNEGA 7.9 SAN JULIÁN 4.0 HERRADURA 6.8 NOCHE BUENA 1.4 SAN RAMÓN 1.4 37.3 PROJECTS VALLES 0.0 CENTAURO DEEP 3.3 JUANICIPIO 2.3 GUANAJUATO 3.7 ORISYVO 2.1 SAN JAVIER 0.3 CARINA 1.8 CANELAS 1.5 ROSARIO 0.1 14.9 PROSPECTS
Slide 37: Cash Flow (IFRS)
CASH FLOW (IFRS) 37 • Increase in accounts receivables (VAT) - US$49.6 million • Decrease in accounts receivables from Met - Mex US$16.2 million • Increase in inventories mainly at Herradura - US$23.7 million • Decrease in payable accounts - US$ 2.6 million • Increase in prepaid payments and other a
Slide 38: Balance Sheet (IFRS)
BALANCE SHEET (IFRS) 38 CONCEPT Cash and Investments Trade and Other Receivables Inventories Prepaid Expenses Silverstream Derivative Financial Instruments Property, Plant and Equipment Other Assets (Long term) Total Assets STJUNE 2018 31DECEMBER 2017 "CHG. 688.6 896.1 (23,2) 449.2 402.1 17 294.8 an
Slide 39: Cost per Tonne (IFRS)
COST PER TONNE (IFRS) 39 ACCUM JUNE CHANGE 2018 2017 % CHG. COST PER TONNE* MINE UNIT Fresnillo US$/TON 46.92 44.07 6.5% Saucito US$/TON 53.56 45.16 18.6% Ciénega US$/TON 68.39 64.39 6.2% Herradura US$/TON 10.25** 7.10** 44.3% Total Vol. Hauled Charged to Costs US$/TON 1.75 1.53 15.0% Noche Buena US
Slide 40: Cash Cost (IFRS)
CASH COST (IFRS) 40 ACCUM JUNE CHANGE 2018 2017 % CHG. CASH COST* MINE UNIT Fresnillo PER OZ. SILVER -0.82 1.25 -165.7% Saucito PER OZ. SILVER 1.25 1.64 -23.5% Ciénega PER OZ. GOLD (by-prod.) -10.60 -242.81 95.6% Herradura PER OZ. GOLD 364.85 483.91 -24.6% Noche Buena PER OZ. GOLD 772.79 804.12 -3.9
Slide 41: Margins by Mine (Metal Price - Cash Cost)
MARGINS BY MINE 41 (METAL PRICE – CASH COST)(1H18 VS 1H17) (USD/Oz) (USD/Oz) Cash FRESNILLO SAUCITO Silver Cash CIÉNEGA HERRADURA NOCHE BUENA Gold Cost Price Cost Price 22.4 22.4 1,630 1,312.77 1,312.77 1,312.77 1,630 17.44 17.44 16.48 16.48 1,250.25 1,250.25 1,250.25 18.5 18.5 1,361 1,361 14.6 14.6
Slide 42: All In Sustaining Cost (US$/oz)
ALL IN SUSTAINING COST (US$/OZ) 42 ACCUM JUNE 2018 2017 % CHG. MINE UNIT Fresnillo PER OZ. SILVER 6.79 7.57 -10.3% Saucito PER OZ. SILVER 7.88 6.50 21.2% Ciénega PER OZ. GOLD 1,198.16 419.16 185.8% Herradura PER OZ. GOLD 715.92 810.82 -11.7% Noche Buena PER OZ. GOLD 1,051.80 908.73 15.7% CONSOLIDATE
Slide 43: Margins by Mine (Metal Price - AISC)
MARGINS BY MINE 43 (METAL PRICE – ALL IN SUSTAINING COST) (1H18 VS 1H17) (USD/Oz) (USD/Oz) Cash FRESNILLO SAUCITO Silver Cash CIÉNEGA HERRADURA NOCHE BUENA Gold Cost Price Cost Price 24.0 24.0 1,900 1,900 20.6 20.6 1,629 1,312.77 1,312.77 1,312.77 1,629 17.44 17.44 1,250.25 1,250.25 1,250.25 16.48 1
Slide 44: International Cost Curves
INTERNATIONAL COST CURVES 44