Fresnillo Plc · LSE:FRES
Fresnillo — H1 2020 Earnings Presentation
56 slides from Fresnillo's earnings presentation, Jul 28, 2020
Slide 1: Half Year Interim Results
HALF YEAR I N T E R I M R E S U LT S
Slide 2: Disclaimer
DISCLAIMER 2 This document includes statements that are, or may be deemed to be, “forward-looking identified in this document which could cause actual results to differ before making an investment statements”. These forward-looking statements can be identified by the use of forward-looking decision.
Slide 3: Agenda
AGENDA 3 01 Investment proposition 02 1H20 highlights 03 COVID-19 response 04 Operational performance & development projects 05 Exploration update 06 Financial performance 07 2020 outlook
Slide 4: Investment Proposition
INVESTMENT PROPOSITION FRESNILLO.
Slide 5: 2020 Half Year Results – Investment Proposition
2020 HALF YEAR RESULTS – INVESTMENT PROPOSITION 5 OUR KEY COMPETITIVE ADVANTAGES POSITION US TO MEET NEAR-TERM COMMITMENTS AND DRIVE LONG-TERM VALUE HIGH QUALITY ASSETS HEALTHY MARGINS DISCIPLINED APPROACH COMMITMENT TO STRONG BALANCE SHEET SUPPORTED BY A FOCUS TO DEVELOPMENT SUSTAINABLE BUSINESS ON
Slide 6: Gold and silver prices have rallied
2 0 2 0 H A L F Y E A R R E S U LT S – S I LV E R A N D G O L D 6 Gold and silver prices have rallied following a combination of: • negative real rates • US Federal Reserve stimulus and • Investors looking for a storage of wealth following geopolitical and economic uncertainty Both metals are touchi
Slide 7: Half Year 2020 Highlights
HALF YEAR 2020 HIGHLIGHTS FRESNILLO.
Slide 8: Operational Performance Highlights
2 0 2 0 H A L F Y E A R R E S U L T S – O P E R AT I O N A L P E R F O R M A N C E H I G H L I G H T S 8 FIRST HALF SILVER PRODUCTION JUANICIPIO REMAINS ON TRACK OPERATIONAL HIGHLIGHTS 26.8MOZ MID-2021 • COVID-19 had limited impact on underground silver mines. Open pit gold mines in Herradura distri
Slide 9: Financial Performance Highlights
2020 HALF YEAR RESULTS – FINANCIAL PERFORMANCE HIGHLIGHTS 9 GROSS PROFIT (US$) ADJUSTED EPS* (US CENTS PER SHARE) FINANCIAL HIGHLIGHTS 321.2M 11.8US¢ per share • Cash generated from operations, • Gross profit of US$321.2m, up before changes in working capital, of 56.3%, including US$65.1 million US$
Slide 10: COVID-19 Response
COVID-19 RESPONSE ae FRESNILLO.
Slide 11: 2020 Half Year Results – COVID-19 Response
2020 HALF YEAR RESULTS – COVID -19 RESPONSE 11 O U R P U R P O S E I S T O C O N T R I B U T E T O T H E W E L L B E I N G O F P E O P L E , T H R O U G H T H E S U S T A I N A B L E M I N I N G O F S I LV E R A N D G O L D SUSTAINING OPERATIONAL CONTINUITY • Engagement with Mexican Mining Authoriti
Slide 12: 2020 Half Year Results – COVID-19 Response
2020 HALF YEAR RESULTS – COVID -19 RESPONSE 12 O U R P U R P O S E I S T O C O N T R I B U T E T O T H E W E L L B E I N G O F P E O P L E , T H R O U G H T H E S U S T A I N A B L E M I N I N G O F S I LV E R A N D G O L D WORKFORCE ENGAGEMENT DURING COVID-19 WORKFORCE AND TEST AVAILIBILITY 4000 •
Slide 13: Operational & Projects Performance
O P E R AT I O N A L & P R O J E C T S PERFORMANCE
Slide 14: Health & Safety
2020 HALF YEAR RESULTS – HEALTH & SAFETY 14 FATAL INJURIES TOTAL RECORDABLE INJURY FREQUENCY RATE (24 MONTHS) 5 35 30 Frequency Rate 2 25 1 20 0 15 10 2017 2018 2019 2020 5 0 INJURY FREQUENCY RATES Lost Time Injury Frequency Rates (LTIFR) 12 Month Rolling Average Monthly Data Linear (12 Month Rollin
Slide 15: Fresnillo District Action Plan Update
2 0 2 0 H A L F Y E A R R E S U LT S – F R E S N I L L O D I S T R I C T AC T I O N P L A N U P DAT E 15 FRESNILLO PROJECT PURPOSE PROGRESS San Carlos shaft deepening Access to deeper reserves Mining works concluded Tunnel boring machine Increase development rates Averaging 6 m/day, targeting 10 m/d
Slide 16: Operations – Fresnillo
2 0 2 0 H A L F Y E A R R E S U L T S – O P E R AT I O N S 16 FRESNILLO Series1 Silver Production Series2 Silver Ore Grade Production Grade 20 250 Million Ounces 15 200 Grams/Tonne 10 150 5 100 0 50 2017 2018 2019 2020e** 1H20 SUMMARY 2H20 PRIORITIES KEY OPERATING STATISTICS 1H 20 1H 19 • COVID-19 m
Slide 17: Operations – Saucito
2 0 2 0 H A L F Y E A R R E S U L T S – O P E R AT I O N S 17 SAUCITO Series1 Silver Production Series2 Silver Ore Grade Production Grade 25 300 20 250 Million Ounces Grams/Tonne 15 200 10 150 5 100 0 50 2017 2018 2019 2020e** 1H20 SUMMARY 2H20 PRIORITIES KEY OPERATING STATISTICS 1H 20 1H 19 • COVID
Slide 18: Operations – San Julián
2 0 2 0 H A L F Y E A R R E S U L T S – O P E R AT I O N S 18 SAN JULIÁN (VEIN SYSTEM) S A N J U L I Á N ( D I S S E M I N AT E D O R E B O DY ) KEY OPERATING STATISTICS 1H 20 1H 19 KEY OPERATING STATISTICS 1H 20 1H 19 Gold production – koz 30.2 35.3 Gold production – koz 1.3 1.1 Silver production –
Slide 19: Operations – Ciénega
2 0 2 0 H A L F Y E A R R E S U L T S – O P E R AT I O N S 19 CIÉNEGA 1H20 SUMMARY 2H20 PRIORITIES KEY OPERATING STATISTICS 1H 20 1H 19 • COVID-19 measures implemented • Implement additional costs control initiatives and • Costs control initiatives implemented maintain strict control of sustaining c
Slide 20: Operations – Herradura
2 0 2 0 H A L F Y E A R R E S U L T S – O P E R AT I O N S 20 HERRADURA 1H20 SUMMARY 2H20 PRIORITIES KEY OPERATING STATISTICS 1H 20 1H 19 • COVID-19 measures implemented • Fully ramp up operations, adhering to protocols • 6-week operational shutdown in 2Q20, • Continue reviewing long term mine plan
Slide 21: Operations – Noche Buena
2 0 2 0 H A L F Y E A R R E S U L T S – O P E R AT I O N S 21 NOCHE BUENA 1H20 SUMMARY 2H20 PRIORITIES KEY OPERATING STATISTICS 1H 20 1H 19 • COVID measures implemented • Lower cash cost profile • Cash cost increased, driven by lower • Adjust fixed costs to reflect the smaller operation as Silver pr
Slide 22: Pyrites Plant
2020 HALF YEAR RESULTS – PROJECTS 22 PYRITES PLANT EXPECTED AVG. ANNUAL SILVER PRODUCTION EXPECTED IRR AT US$20/OZ AG & HIGHLIGHTS 3.5MOZ US$1,200/OZ AU 29.3% • The project will improve overall recoveries of gold and silver by processing historical and ongoing • Phase II will treat the ongoing and h
Slide 23: Optimisation of Beneficiation Plant at Fresnillo Mine
2020 HALF YEAR RESULTS – PROJECTS 23 O P T I M I S AT I O N O F B E N E F I C I AT I O N P L A N T AT T H E F R E S N I L L O M I N E THREE PHASES: MAIN REQUIREMENTS TO INCREASE CAPACITY (PHASE III): 1. Zinc thickener installed in 2017 • San Carlos shaft deepening 2. Increase flotation cells (ongoin
Slide 24: Juanicipio (JV with MAG Silver)
2020 HALF YEAR RESULTS – PROJECTS 24 JUANICIPIO (JV WITH MAG SILVER. FRESNILLO: 56%) OVERVIEW KEY METRIC ESTIMATES (100% BASIS) • Mine development continued, first stope fully prepared by the end of 3Q20 CAPEX FROM 1ST JANUARY 2018 US$ 440 M • Pace of progress at Juanicipio slowed in 2Q20 due to COV
Slide 25: Exploration Update
EXPLORATION UPDATE ae FRESNILLO.
Slide 26: Exploration Update
2 0 2 0 H A L F Y E A R R E S U L T S – E X P L O R AT I O N U P D AT E 26 ▪ Exploration objective: 2 Moz gold or 150 Moz silver, satellite orebodies 1 Moz gold (or silver equivalent). Fresnillo Saucito ▪ Brownfields: Herradura, Fresnillo, Ciénega, San Julián & Herradura Guanajuato. Mine exploration
Slide 27: Financial Performance
FINANCIAL PERFORMANCE ev FRESNILLO.
Slide 28: Income Statement (IFRS)
2 0 2 0 H A L F Y E A R R E S U L T S – I N C O M E S T AT E M E N T ( I F R S ) 28 (MILLION USD) ACCUM JUNE CHANGE CONCEPT 2020 % 2019 % $ % ADJUSTED REVENUES 1,125.1 1,069.0 56.1 5.3 HEDGING (METALS) 1.5 0.1 1.4 1,753.2 TREATMENT AND REFINING CHARGES (72.4) (67.1) (5.3) (7.9) REVENUES 1,054.2 100.
Slide 29: Adjusted Revenues (IFRS)
2 0 2 0 H A L F Y E A R R E S U LT S – A DJ U S T E D R E VE N U E S ( I F R S ) 29 (MILLION USD) ACCUM JUNE CHANGE BY: PRODUCT 2020 2019 VOLUME PRICE TOTAL GOLD 611.9 556.8 (84.9) 140.0 55.1 SILVER 383.0 366.1 (19.1) 35.9 16.9 LEAD 47.4 45.3 7.3 (5.2) 2.1 ZINC 82.9 100.8 11.0 (29.0) (18.0) ADJUSTED
Slide 30: Contribution by Mine and by Metal to Adjusted Revenues
2 0 2 0 H A L F Y E A R R E S U LT S – C O N T R I BU T I O N B Y M I N E A N D B Y M E TA L TO A DJ U S T E D 30 REVENUES 2020 2020 ADJUSTED REVENUES : US$1,125.1M BY MINE BY METAL 8% 4% 16% 7% 7% 7% 21% 54% 34% 31% 10% Fresnillo Saucito Ciénega Silver Gold Herradura Noche Buena San Julián JM San J
Slide 31: Consolidated Cost Inflation YTD 2020
2 0 2 0 H A L F Y E A R R E S U L T S – C O N S O L I D AT E D C O S T I N F L AT I O N Y T D 2 0 2 0 31 ( U S D BA S E D ) Consolidated Unit Price Weighted Increase % Weight (*) Average Labour Unionized Personnel -8.1% 6.0% -0.5% Employees -9.2% 3.0% -0.3% Weighted -8.5% Operating Materials -1.9% 1
Slide 32: Adjusted Production Cost Analysis
2 0 2 0 H A L F Y E A R R E S U LT S – A D J U S T E D P RO D U C T I O N C O S T A N A LY S I S 32 ( C O N S O L I DAT E D ) YTD 20 YTD 19 $ % Adjusted Production Cost 506.6 566.4 * -59.8 -10.6 Change in inventories and others 33.2 14.8 +18.4 +124.6 Depreciation 251.7 240.5 +11.2 +4.7 USD MILLION P
Slide 33: Gross Profit Analysis
2 0 2 0 H A L F Y E A R R E S U LT S – G RO S S P RO F I T A N A LY S I S 33 ( C O N S O L I DAT E D ) CHANGE YTD 20 YTD 19 $ % USD MILLION Gross Profit 321.2 205.5 +115.7 +56.3% 320.0 288.0 34.57 (3.05) (11.23) 256.0 65.07 (25.01) 224.0 (25.65) 192.0 (60.80) 160.0 141.80 * 128.0 115.69 96.0 64.0 32
Slide 34: Income Statement (IFRS)
2 0 2 0 H A L F Y E A R R E S U L T S – I N C O M E S T AT E M E N T ( I F R S ) 34 (MILLION USD) ACCUM JUNE CHANGE ACCUM JUNE 2020 CONCEPT 2020 % 2019 % $ % Operating Units ADJUSTED REVENUES 1,125.1 1,069.0 Fresnillo56.1 5.3 3.3 HEDGING (METALS) 1.5 0.1 1.4 1,753.2 Saucito 7.4 TREATMENT AND REF
Slide 35: Cash Flow (IFRS)
2 0 2 0 H A L F Y E A R R E S U LT S – C A S H F LO W ( I F R S ) 35 (MILLION USD) CHANGE CONCEPT YTD 2020 YTD 2019 $ % CASH GENERATED BY OPERATIONS BEFORE CHANGES IN WORKING CAPITAL 456.2 316.1 140.2 44.3 WORKING CAPITAL 37.3 (7.6) 44.9 N/A INCOME TAX AND PROFIT SHARING PAID (71.0) (140.8) 69.8 49.
Slide 36: Cash Flow (IFRS)
2 0 2 0 H A L F Y E A R R E S U LT S – C A S H F LO W ( I F R S ) • Decrease in accounts receivables (+US$71.3M): VAT -US$97.8 million, Met-Mex +US$9.0 million, and 36 (MILLION USD) • other receivables +US$17.4 million • Increase in inventories -US$43.1 million • Increase in trade and other payables
Slide 37: Balance Sheet (IFRS)
2 0 2 0 H A L F Y E A R R E S U LT S – BA L A N C E S H E E T ( I F R S ) 37 Change (MILLION USD) Concept 30-JUNE-20 31-DEC-19 % Assets Cash and Investments 514.7 336.6 52.9 Trade and Other Receivables 367.6 517.8 (29.0) Inventories 406.9 363.7 11.9 Prepaid Expenses 17.1 18.3 (7.0) Silverstream 497.
Slide 38: 2020 Outlook
2020 OUTLOOK FRESNILLO.
Slide 39: Consolidated Outlook
2 0 2 0 H A L F Y E A R R E S U L T S – C O N S O L I D AT E D O U T L O O K 39 1 2 Expected Avg. Investm ent YEAR (US$ m illion) Annual 2019 2020 2021 2022 2023 2024 Production PROJECT 3.5 m oz Ag & PYRITES PLANT 155 13 koz Au PRODUCTION (Optimization project) CONSTRUCTION TAILINGS FLOTATION 4 FRES
Slide 40: Expected Attributable Production Profile
2 0 2 0 H A L F Y E A R R E S U L T S – E X P E C T E D AT T R I B U T A B L E P R O D U C T I O N P R O F I L E 40 Million Oz Thousand Oz Silver* Gold 80 1,000 70 60 800 50 600 40 4 30 400 20 200 10 0 0 2019 2020 2021 2022 2019 2020 2021 2022 Thousand Tons Lead Zinc Thousand Tons 70 100 60 50 80 40
Slide 41: Capex Spend Expectations
2 0 2 0 H A L F Y E A R R E S U L T S – C A P E X S P E N D E X P E C T AT I O N S 41 Million Usd 700 2020 US$ M illion 600 560.0 565.0 Sustaining (Operations) 525.0 4 Fresnillo 69 M 500 Saucito 86 M 415.0 Ciénega 32 M 400 San Julián 40 M Herradura 80 M Noche Buena 3 M 300 Others 3 M 200 Projects Ap
Slide 42: Concluding Remarks
2020 HALF YEAR RESULTS – CONCLUDING REMARKS 42 STRONG COMMITMENT FOCUS ON REDUCING PRIORITISING THE PURPOSEFUL CREATE VALUE THROUGH TO OPERATIONAL COSTS AND CAPTURING HEALTH OF OUR ENGAGEMENT WITH DISCIPLINED GROWTH, DELIVERY, EFFICIENCIES WORKFORCE DURING STAKEHOLDERS EXPLORATION & MAXIMISING COVID
Slide 43: Appendix
APPENDIX FRESNILLO.
Slide 44: Grade Expectations
G R A D E E X P E C T AT I O N S F O R 2 0 2 0 44 GOLD (G/T) MINE MINE TYPE FY 2020e 1H20 Fresnillo Underground silver 0.70 0.72 Saucito Underground silver ~0.95 1.21 Ciénega Underground gold & silver 1.65-1.75 1.65 Herradura Open pit gold 0.75-0.80 0.82 Noche Buena Open pit gold 0.50-0.55 0.54 San
Slide 45: HSECR – Our Approach to Sustainability
2020 HALF YEAR RESULTS – HSECR 45 OUR APPROACH TO SUSTAINABILITY 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 STAK
Slide 46: Silver Resources Highlights
RESERVES & RESOURCES 46 STRONG RESOURCE BASE SILVER RESOURCES HIGHLIGHTS 2,257Moz • Total of 2,257 Moz silver resources CHANGE (22 yrs of production*) 2018 2019** Koz % + 52,844Koz, +2.4% Total silver resources 2,203,974 2,256,817 52,844 2.4% • Earlier cut-off date for R&R audit, as of 31st May 2019
Slide 47: Gold Resources Highlights
RESERVES & RESOURCES 47 STRONG RESOURCE BASE GOLD RESOURCES HIGHLIGHTS 39.0Moz • Total of 39.0 moz gold resources (34 yrs of CHANGE production*) 2018 2019** Koz % 132Koz, -0.3% - Total gold resources 39,105.2 38,973.6 -131.6 -0.3% • Earlier cut-off date for R&R audit, as of 31st May 2019 • Resources
Slide 48: Silver Reserves Highlights
RESERVES & RESOURCES 48 S E E K I N G F U R T H E R R E S O U R C E C O N V E R S I O N T O E X PA N D R E S E R V E B A S E SILVER RESERVES HIGHLIGHTS 483,997Moz • Reserves increased 1.7% vs. 2018 CHANGE 2018 2019** Koz % • Total of 484 moz silver reserves (8.9 yrs of + 8,006 Koz, +1.7% Total silve
Slide 49: Gold Reserves Highlights
RESERVES & RESOURCES 49 S E E K I N G F U R T H E R R E S O U R C E C O N V E R S I O N T O E X PA N D R E S E R V E B A S E GOLD RESERVES HIGHLIGHTS 9,248Koz • Reserves decreased 16% vs. 2018 CHANGE 2018 2019** Koz % • Total of 9,248 koz gold reserves (10.5 yrs of 1,761Koz, -16% - Total gold reserv
Slide 50: Other Projects – Orisyvo, Guanajuato & Rodeo
2020 HALF YEAR RESULTS – PROJECTS 50 O T H E R P R O J E C T & P O T E N T I A L P R O J E C T S – O R I S Y V O, G U A N A J U AT O & R O D E O ORISYVO (GOLD) RODEO (GOLD) GUANAJUATO (SILVER / GOLD) • Following improved metallurgy recovery results in • This project is in close proximity to infrastr
Slide 51: Cost per Tonne (IFRS)
2 0 2 0 H A L F Y E A R R E S U LT S – C O S T P E R TO N N E ( I F R S ) 51 ACCUM JUNE CHANGE 2020 2019 % CHG. COST PER TONNE * MINE UNIT Fresnillo US$/TON 65.60 58.87 11.4% Saucito US$/TON 70.34 65.96 6.6% Ciénega US$/TON 72.98 79.46 -8.2% San Julián Veins US$/TON 70.03 66.54 5.2% San Julián JM US
Slide 52: Cash Cost (IFRS)
2 0 2 0 H A L F Y E A R R E S U LT S – C A S H C O S T ( I F R S ) 52 ACCUM JUNE CHANGE 2020 2019 % CHG. CASH COST * MINE UNIT Fresnillo PER OZ. SILVER 4.86 3.12 56.0% Saucito PER OZ. SILVER 1.19 2.36 -49.7% Ciénega PER OZ. GOLD (By-prod.) -84.59 176.85 -147.8% PER OZ. GOLD (Co-prod.) 736.46 771.02
Slide 53: Margins by Mine (Metal Price – Cash Cost)
2 0 2 0 H A L F Y E A R R E S U LT S – M A RG I N S B Y M I N E ( M E TA L P R I C E – C A S H C O S T ) 53 (YTD20 VS YTD19) Fresnillo Saucito San Julián San Julián Ciénega Herradura Noche Buena (USD/Oz) Veins JM (USD/Oz) 5.8Moz. 6.2Moz. 9.0Moz. 7.5Moz. 2.3Moz. 2.1Moz. 3.6Moz. 3.5Moz. 28.1Koz. 29.9K
Slide 54: All In Sustaining Cost (US$/oz)
2 0 2 0 H A L F Y E A R R E S U LT S – A L L I N S U S TA I N I N G C O S T ( U S $ / O Z ) 54 ACCUM JUNE 2020 2019 % CHG. CASH COST * MINE UNIT Fresnillo PER OZ. SILVER 11.14 12.46 -10.6% Saucito PER OZ. SILVER 6.07 10.02 -39.4% Ciénega PER OZ. GOLD 613.93 1,533.84 -60.0% San Julián Veins PER OZ. S
Slide 55: Margins by Mine (Metal Price – All In Sustaining Cost)
2020 HALF YEAR RESULTS – MARGINS BY MINE (METAL PRICE – ALL IN SUSTAINING COST ) 55 (YTD20 VS YTD19) Fresnillo Saucito San Julián San Julián Ciénega Herradura Noche Buena Vetas JM (USD/Oz) (USD/Oz) 5.8Moz. 6.2Moz. 9.0Moz. 7.5Moz. 2.3Moz. 2.1Moz. 3.5Moz. 3.5Moz. 28.1Koz. 30.0Koz. 233.6Koz. 201.8Koz.
Slide 56: Notes
NOTES 56 4