Fresnillo Plc · LSE:FRES
Fresnillo — FY2014 Earnings Presentation
67 slides from Fresnillo's earnings presentation, February 2015
Slide 1: Preliminary Results to year ending 31 Dec 2014
Preliminary Results to year ending 31 Dec 2014
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 • Overview Octavio Alvídrez, CEO • Financial Review Mario Arreguín, CFO • Operations Review Roberto Díaz, COO • Approved Projects Roberto Díaz, COO • Exploration Review David Giles, VP of Exploration • Strategy & Outlook Octavio Alvídrez, CEO • Q&A 2
Slide 4: 2014 Overview
2014 Overview – Industry-wide reaction to continued decline in gold and silver prices included capex cuts, lower exploration spending, new projects being delayed, divestments of non-core assets and major write-offs and impairments – However, the quality of our assets, the low cost nature of our oper
Slide 5: Operational Highlights
Operational Highlights • Maximise the potential of existing operations – Annual silver production (including Silverstream) up 4.9% to 45.0 moz – Annual attributable gold production down 2.4% to 596 koz due to stoppage at Soledad-Dipolos – Optimised milling capacity to 4,000 tpd at Ciénega; milling e
Slide 6: Operational Highlights
Operational Highlights • Extend the growth pipeline – Despite lower price assumptions1, total gold and silver reserves rose 45% and 21% respectively; gold resources rose 2%; silver resources declined 6% – Gold reserves and resources at Centauro pit grew 96% and 32% respectively; evaluated Mega Centa
Slide 7: Summary
Summary • Ongoing optimisation of existing assets – addressing dilution at Fresnillo, Cienega mill optimisation • Strong growth profile – low cost ounces being added from development projects, supported by brownfield and greenfield exploration • Quality asset portfolio with low cost profile provides
Slide 8: Financial Review
a4 FRESNILLO. Financial Review
Slide 9: 2014 Financial Highlights
2014 Financial Highlights • Adjusted revenue of US$1,545m, down 12.3% as a result of lower prices (Au -10.2%; Ag -18.4%) and the stoppage of operations at Soledad-Dipolos • Cost inflation in US$ terms remained subdued (+1.6%) • Increase in production costs of 19.4% as a result of the restart of Herr
Slide 10: 2014 Financial Highlights (Cont'd)
2014 Financial Highlights (Cont’d) • Increase in working capital of US$183m mainly due to increase in recoverable taxes (VAT and income tax) and higher volumes sold to MetMex (together US$105m), and increase in inventories at our open pit operations of US$97m • Financial strength and flexibility ena
Slide 11: Income Statement (IFRS)
Income Statement (IFRS) ACCUM DECEMBER CHANGE CONCEP T 2014 % 2013 % $ % ADJUSTED REVENUES 1,545.0 1,761.9 (216.9) (12.3) HEDGING (METALS) 0.1 0.3 (0.2) (61.1) TREATMENT AND REFINING CHARGES (131.4) (147.0) 15.6 (10.6) REVENUES 1,413.7 100.0 1,615.2 100.0 (201.5) (12.5) ADJUSTED PRODUCTION COST (678
Slide 12: Consolidated Gross Profit Analysis
Consolidated Gross Profit Analysis CHANGE YTD14 YTD13 $ % Gross Profit 521.1* 767.4 -246.4 -32.1% USD MILLION * 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 11 10
Slide 13: Consolidated Gross Profit Analysis
Consolidated Gross Profit Analysis CHANGE Volume Processed YTD14 YTD13 Ore Grade Fresnillo: $% Average spot MXP/USD Silver,Gold and Lead average (Mton) YTD14 YTD14 YTD13 Chg realised prices (USc/Lb) Ore GradeUSD GrossYTD14 Profit YTD13 Chg 521.1* YTD13 Chg 767.4 -246.4 -32.1% MILLION Herradura: 13.2
Slide 14: Adjusted Production Cost Analysis (Consolidated)
Adjusted Production Cost Analysis (Consolidated) CHANGE YTD14 YTD13 $ % Adjusted Production Cost * 678.0 567.7 110.3* 19.4 Change in inventories -104.7 -1.3 -103.4 N/A Unproductive Costs and others 9.5 26.1 -16.7 -63.8 Depreciation 296.2 239.3 56.8 23.7 PTU 12.6 20.2 -7.6 -37.4 Hedging (mxp/usd exch
Slide 15: Adjusted Production Cost Analysis (Consolidated)
Adjusted Production Cost Analysis (Consolidated) CHANGE YTD14 YTD13 $ % Adjusted Production Cost * 678.0 567.7 110.3* 19.4 Change in inventories -104.7 -1.3 -103.4 N/A Unproductive Costs and others 9.5 26.1 -16.7 -63.8 Depreciation 239.3 296.2 Volume Processed 56.8 Volume 23.7 Processed PTU 12.6 20.
Slide 16: Cost Per Tonne (IFRS)
Cost Per Tonne (IFRS) ACCUM DEC CHANGE 2014 2013 % CHG. COST PER TONNE * MINE UNIT Fresnillo US$/TON 47.29 45.60 3.7% Saucito US$/TON 59.14 61.00 -3.1% Ciénega US$/TON 70.84 70.81 0.0% Herradura US$/TON 9.29 8.38 10.8% ** Total Vol. Hauled Charged to Costs US$/TON 2.37 2.67 -11.3% Soledad & Dipolos
Slide 17: Cash Cost (IFRS)
Cash Cost (IFRS) ACCUM DEC CHANGE 2014 2013 % CHG. CASH COST * MINE UNIT Fresnillo PER OZ. SILVER 5.29 5.87 -9.9% Saucito PER OZ. SILVER 2.48 3.61 -31.3% Ciénega PER OZ. GOLD (By-prod.) 288.00 37.68 664.2% PER OZ. GOLD (Co-prod.) ** 623.98 532.96 17.1% PER OZ. SILVER (Co-prod.)** 8.45 8.88 -4.8% PER
Slide 18: All In Sustaining Cost (US$/Oz)
* All In Sustaining Cost (US$/Oz) LIFE OF MINE YTD 2014 YTD 2013 % CHG. WEIGHTED AVERAGE CASH COST * MINE UNIT Fresnillo PER OZ. SILVER 9.84 9.06 8.6% 6.20 (2023) Saucito PER OZ. SILVER 5.43 6.66 -18.5% 6.00 (2021) Ciénega PER OZ. GOLD 786.40 547.95 43.5% 803.12 (2026) Herradura PER OZ. GOLD 862.19
Slide 19: Income Statement (IFRS)
Income Statement (IFRS) YTD 14 YTD13 Chg. Centauro Deep 31.7 37.4 -5.7 Ciénega ACCUM DECEMBER CHANGE 21.7 11.5 10.1 CONCEP T 2014 % 2013 % $ % (Million USD) Herradura 14.7 25.4 -10.7 ADJUSTED REVENUES 1,545.0 Orisyvo 1,761.9 (216.9) 14.0 15.5 -1.5 (12.3) HEDGING (METALS) 0.1 0.3 (0.2) (61.1) TREATME
Slide 20: Income Statement (IFRS)
Income Statement(IFRS) ACCUM DECEMBER CHANGE CONCEP T 2014 % 2013 % $ % (Million USD) ADJUSTED REVENUES 1,545.0 1,761.9 (216.9) (12.3) HEDGING (METALS) 0.1 0.3 (0.2) (61.1) TREATMENT AND REFINING CHARGES (131.4) (147.0) 15.6 (10.6) REVENUES 1,413.7 100.0 1,615.2 100.0 (201.5) (12.5) ADJUSTED PRODUCT
Slide 21: Income Statement (IFRS)
Income Statement (IFRS) ACCUM DECEMBER CHANGE CONCEP T 2014 % 2013 % $ % ADJUSTED REVENUES 1,545.0 1,761.9 (216.9) (12.3) HEDGING (METALS) 0.1 0.3 (0.2) (61.1) TREATMENT AND REFINING CHARGES (131.4) (147.0) 15.6 (10.6) REVENUES 1,413.7 100.0 1,615.2 100.0 (201.5) (12.5) ADJUSTED PRODUCTION COST (678
Slide 22: Cash Flow (IFRS)
Cash Flow (IFRS) CHANGE C O N C E P T (Million USD) YTD 2014 YTD 2013 $ % CASH GENERATED BY OPERATIONS BEFORE CHANGES IN WORKING CAPITAL 568.5 750.2 (181.7) (24.2) WORKING CAPITAL (183.4) 34.5 (217.9) N/A INCOME TAX AND PROFIT SHARING PAID (263.5) (338.6) 75.2 (22.2) NET CASH FROM OPERATING ACTIVITI
Slide 23: Cash Flow (IFRS)
Cash Flow (IFRS) • Increase in trade and other receivables (-$105.2) • mainly as a result of higher production levels at •Saucito and increased recoverable taxes • Increase in inventories (-$97.5) mainly at • Herradura CHANGE C O N C E P T (Million USD) YTD 2014 • Increase YTD 2013in trade and$ othe
Slide 24: Balance Sheet (IFRS)
Balance Sheet (IFRS) Change Concept (Million USD) 31-DIC-14 31-DIC-13 % Assets Cash and Investments 449.3 1,251.7 (64.1) Trade and Other Receivables 456.1 267.5 70.5 Inventories 305.6 208.1 46.8 Prepaid Expenses 3.4 5.3 (37.0) Silverstream 392.3 372.8 5.2 Derivative Financial Instruments 14.6 2.1 60
Slide 25: Operations Review
a4 FRESNILLO. Operations Review
Slide 26: Fresnillo Mine: Summary
Fresnillo Mine: Summary 2014 2013 Change % Ore processed kt 2,625.0 2,703.4 -78.4 -2.9 Ore grade Silver g/t 258.5 285.3 -26.8 -9.4 Gold g/t 0.5 0.5 0.0 6.1 Lead % 0.6 0.6 0.0 -6.4 Zinc % 1.0 0.9 0.0 4.0 Total production Silver m oz 20.1 22.8 -2.7 -11.7 Gold k oz 35.7 33.1 2.6 7.9 Lead kt 13.9 15.6 -
Slide 27: Fresnillo Mine: Outlook
Fresnillo Mine: Outlook • Clearly identified measures necessary to address issues experienced at Fresnillo: – To control dilution: minimize height of stopes (banks), conduct further blasting training & decrease stope lengths to improve precision in drilling activities – Additional contractors brough
Slide 28: Fresnillo Mine: Block Model
Fresnillo Mine: Block Model San Carlos Block Model (mined out area) Value Usd/t San Carlos Development 2015-2019 27
Slide 29: Saucito Mine: Summary
Saucito Mine: Summary 2014 2013 Change % Ore processed kt 1,534.6 1,181.7 352.8 29.9 Ore grade Silver g/t 338.9 329.6 9.4 2.8 Gold g/t 1.4 1.4 0.0 -0.4 Lead % 0.7 0.6 0.2 34.4 Zinc % 1.3 0.9 0.5 52.5 Total production Silver m oz 15.4 11.6 3.8 32.9 Gold k oz 57.2 45.2 12.1 26.7 Lead kt 10.0 5.6 4.4 7
Slide 30: Saucito Mine: Outlook
Saucito Mine: Outlook • Focus on ramping up Saucito II towards full capacity (6,000TPD together with Saucito) – US$180m spent as of December 2014; remaining US$55m expected to be invested in 2015 as part of ramp-up – Extensive mine development to support ramp up – Expect to reach full capacity ahead
Slide 31: Saucito Mine: Jarillas Vein
Saucito Mine: Jarillas Vein Development of Jarillas Vein 2015 2016 2017 2018 2019 2020 Meters/Year CENTRAL CENTRAL JARILLAS JARILLAS 7,920 6,500 6,200 6,100 6,600 6,500 JARILLAS ORIENTE EAST JARILLAS 6,885 6,800 7,000 7,000 7,500 8,100 JARILLAS PONIENTE WEST JARILLAS 7,660 9,500 9,500 10,500 10,500
Slide 32: Ciénega Mine: Summary
Ciénega Mine: Summary 2014 2013 Change % Ore processed kt 1,341.6 1,242.2 99.4 8.0 Ore grade Gold g/t 2.6 2.9 -0.3 -10.5 Silver g/t 108.5 121.6 -13.0 -10.7 Lead % 0.5 0.6 0.0 -5.3 Zinc % 0.7 0.8 0.0 -3.4 Total production Gold k oz 108.2 112.1 -3.8 -3.4 Silver m oz 4.1 4.2 -0.2 -3.9 Lead kt 4.7 4.8 -
Slide 33: Ciénega Mine: Outlook
Ciénega Mine: Outlook • In order to maintain equivalent gold production and compensate for lower average gold ore grade compared to historical levels: – Milling capacity optimised – Various alternatives for an expansion of the plant being evaluated • Ciénega would produce an average of 95koz of gold
Slide 34: Herradura Mine: Summary
Herradura Mine: Summary GOLD Ore Grade 2014 2013 Change % (Gms/T) 22,305.1 Total Ore processed kt 14,363.3 7,941.8 55.3 1.2 Ore grade 1.1 Gold g/t 0.7 0.6 0.1 18.9 1.0 Silver g/t 1.2 1.1 0.1 12.0 0.9 0.8 0.72 0.65 0.61 Total production 0.7 0.57 0.6 Gold k oz 265.6 264.6 1.0 0.4 0.5 Silver k oz 679.1
Slide 35: Herradura Mine: Outlook
Herradura Mine: Outlook • Resolved issue of excess suspended solids in solution at DLP • Install a second Merrill Crowe plant, partly taken from inactive operations at Soledad-Dipolos, to solve the processing capacity issue which led to a build up of inventories • Expect to reach steady state produc
Slide 36: Herradura Mine: Leaching Process
Herradura Mine: Leaching Process Gold Production Heap Leach Pads (HL) Gold Inventory of the Heap Leach Pads Dynamic Leaching Plant (DLP) 35
Slide 37: Noche Buena Mine: Summary
Noche Buena Mine: Summary 2014 2013 Change % Total Ore processed kt 15,607.2 12,283.7 3,323.5 27.1 Ore grade Gold g/t 0.5 0.5 0.0 -6.1 Silver g/t 0.4 0.2 0.1 50.5 Total production Gold k oz 129.2 108.7 20.5 18.9 Silver k oz 102.4 49.2 53.1 108.0 • 100% Fresnillo post acquisition of Newmont’s 44% sta
Slide 38: Noche Buena Mine: Outlook
Noche Buena Mine: Outlook • Cost containing programme: – Plan to deposit waste nearer to the mine, reducing haulage distances and associated costs – Improving blasting designs and optimisation of other mining operations • With expanded capacity having been reached, Noche Buena will produce around 16
Slide 39: Costs
Costs • Ongoing focus on costs across all of our operations • Thorough cost and productivity review being carried out at the Fresnillo and Herradura mines in 2015 • This initiative will be extended to the remainder of our operations • Reinforcement of management team with new appointments at various
Slide 40: Projects Review
a4 FRESNILLO. Projects Review
Slide 41: In Construction: San Julián
In Construction San Julián The project encompasses an underground mine and the construction of two plants: i) a flotation plant with 6,000 TPD capacity to process ore from the disseminated body ii) a DLP to treat 3,000 TPD of ore from the veins Construction progressing with the DLP expected to be co
Slide 42: Approved Projects: Pyrites
Approved Projects Pyrites Fresnillo plant Hauling distance of 10.5 km. Saucito tailings Tailings dam. . plant. San Saucito I & II Road to plants Carlos Jerez. Area. Saucito leaching plant. . 41
Slide 43: Approved Projects: Pyrites (Cont'd)
Approved Projects Pyrites (Cont’d) This facility is expected to increase silver and gold recovery by processing on-going tailings from the Fresnillo and Saucito mines, as well as historical tailings from Fresnillo The plant will froth float pyrite concentrates that will be leached in a 2,000TPD DLP
Slide 44: Exploration Review
a4 FRESNILLO. Exploration Review
Slide 45: Exploration
Exploration SANTO DOMINGO DISTRICT (PERU) Claims: 2.1 million hectares in Mexico and 280,000 hectares in Peru 44
Slide 46: Exploration Highlights
Exploration Highlights • Successful 2014 exploration programme with total risk capital of US$184.5m invested. Maintained medium and long-term growth pipeline – 19 properties drilled (391,500 mts) in 2014 – Positive drilling results at Guanajuato and Rodeo • Increased silver and gold reserves despite
Slide 47: Reserves 2014
Reserves 2014 Silver Ore Reserves: ↑ 102 Moz, Gold Ore Reserves: ↑ 3 Moz, + 21.3% vs 2013 + 45% vs 2013 46
Slide 48: Reserves 2014
Reserves 2014 Tonnes and Grades Metal content Mine / project Tonnes Grades Au Ag Pb Zn Ag Eq. * Cut-off Mt Au gpt Ag gpt % Pb % Zn koz Moz kt kt Moz Fresnillo 2014 165 gpt Ag Eq. 26.79 0.64 266 1.46 2.96 552 229 392 793 402 2013 125 gpt Ag Eq 31.83 0.65 271 1.47 2.75 668 278 467 875 460 % Incr. 32.0
Slide 49: Resources 2014
Resources 2014 Total Silver Resources: ↓ 132 Moz Ag, Total Gold Resources: ↑ 565 koz Au, -6.2% vs 2013 +1.7% vs 2013 48
Slide 50: Strong Pipeline
Strong Pipeline 2015 budget Fresnillo Saucito I & II Mine Operations Herradura (DLP) Nochebuena 32% Ciénega - San Ramón Soledad &Dipolos* Development Projects San Julián Pyrites Plant 1% Mega Centauro Orisyvo Juanicipio Advanced Exploration Cluster Cebollitas Centauro Deep 35% Fresnillo District Rod
Slide 51: Project Resources 2014
Project Resources 2014 Silver Resources - Projects: ↑ 10 Moz Ag, Gold Resources - Projects: ↓ 29 koz Au, + 2.1% vs 2013 -0.2% vs 2013 50
Slide 52: Strategy and Outlook
a4 FRESNILLO. Strategy and Outlook
Slide 53: Our strategy & four pillars to create value
Our strategy & four pillars to create value Looking through the cycle 1 2 Maximise the potential of existing operations Deliver growth through • Operate at 100% capacity development projects • Low-cost producer • Focus on delivery timeline • Optimise mining method • Disciplined CAPEX control and met
Slide 54: Expected delivery of growth
Expected delivery of growth Expected Investm ent YEAR (US$ million) Avg. Annual 2015 2016 2017 2018 2019 2020 Production (1) (2) PROJECT CONSTRUCTION 10.3 m oz Ag LEA CHING P LA NT 515 & 44 koz Au SAN JULIÁN PRODUCTION CONSTRUCTION FLOTATION PLANT LEACHING PLANT CONSTRUCTION PRODUCTION 3.5 m oz Ag &
Slide 55: Achieving 65moz silver by 2018
Achieving 65moz silver by 2018 Thousand Oz 100,000 Juanicipio - 56% 90,000 Pyrites Plant 80,000 San Julián 70,000 Saucito II 60,000 Saucito I 50,000 40,000 Ciénega Expansion 30,000 Ciénega 20,000 10,000 TPD Fres Expansion 10,000 Fresnillo - 2014 2015 2016 2017 2018 Yr 54
Slide 56: Achieving 750koz gold by 2018
Achieving 750koz gold by 2018 Thousand Oz 1,000 Orisyvo 900 Juanicipio - 56% 800 San Julián Pyrites Plant 700 Saucito II 600 Saucito I - - 500 - - Ciénega Expansion Ciénega 400 - - - - - Fresnillo 300 - Nochebuena - - 200 - - Dynamic Leaching - 100 Mega Centauro Herradura - 2014 2015 2016 2017 2018
Slide 57: CAPEX & Exploration Spend
CAPEX & Exploration Spend CAPEX 2015 US$ Million US$ Million Sustaining 1,000 • Sustaining $185 900 • Mining Works (Underground) $87 800 • Mining Works (Stripping) $89 700 US$ 600 New Projects Million 500 • San Julián $133 400 • Pyrites Plant $60 300 • Saucito II $53 200 100 • Merrill Crowe at DLP $
Slide 58: 2015: Key Areas of Focus
2015: Key Areas of Focus • Fresnillo: stabilise production to develop a solid base for potential expansion • Saucito II: ramp-up of Saucito II to advance during 2015 • Ciénega: conclude analysis of alternatives for potential expansion • Herradura: installation of a second Merrill Crowe plant; expect
Slide 59: Conclusions and Outlook
Conclusions and Outlook Outlook • We enter 2015 in a strong position, with operations performing well and providing a good platform for growth • Financial and operational flexibility maintained • We will maintain focus on stringent cost control across all operations • We continue to invest prudently
Slide 60: Appendix
a4 FRESNILLO. Appendix
Slide 61: Other Projects
Other Projects Orisyvo In 2014, we conducted 17,023m of diamond drilling and infill drilling to confirm grade in oxides and convert inferred resources into the indicated category This aforementioned information is being used to prepare a preliminary economic assessment (PEA); which is expected to be
Slide 62: Contribution by mine to the Gross Profit
Contribution by mine to the Gross Profit CHANGE YTD14 YTD13 US$ % Fresnillo 206.7 36.4% 316.6 42.3% (109.9) (34.7) Herradura 136.2 24.0% 126.9 17.0% 9.3 7.3 Ciénega 40.8 7.2% 94.7 12.7% (53.9) (56.9) Saucito 188.9 33.3% 181.3 24.2% 7.5 4.2 Sol & Dipolos (16.5) -2.9% 10.1 1.4% (26.6) N/A Noche Buena
Slide 63: Margins by mine (Metal price – Cash Cost)
Margins by mine (Metal price – Cash Cost) (2014 vs 2013) (USD/Oz) Fresnillo Saucito Ciénega Herradura SD NB * 21.7Moz. 19.5Moz. 11.1Moz. 14.7Moz. 106.8Koz. 97.0Koz. 262.2Koz. 263.5Koz. 46.6Koz. 0.0Koz.* 106.9Koz. 127.9Koz. Chg. + -10.1% Chg. +32.6% Chg. -9.3% Chg. +0.5% Chg. -100.0% Chg. +19.7% * St
Slide 64: Consolidated Cost Inflation 2014
Consolidated Cost Inflation 2014 (USD Based) Unit Price Weighted Increase % Weight (*) Average Labour Unionized Personnel 1.7% 7.3% 0.1% Employees 0.8% 2.7% 0.0% Weighted Average 1.4% Operating Materials -1.8% 19.9% -0.4% Energy Electric Energy 0.2% 8.6% 0.0% Diesel 6.3% 9.2% 0.6% Gasoline 4.3% 1.4%
Slide 65: Consolidated Income Statement without Silverstream Effect
Consolidated Income Statement without Silverstream Effect ACCUM DECEMBER CHANGE C O N C E P T (Million USD) 2014 % 2013 % $ % ADJUSTED REVENUES 1,545.0 1,761.9 (216.9) (12.3) HEDGING (METALS) 0.1 0.3 (0.2) (61.1) TREATMENT AND REFINING CHARGES (131.4) (147.0) 15.6 (10.6) REVENUES 1,413.7 100.0 1,615
Slide 66: Mineral Resources 2014: Operating mines & San Julian project
Mineral Resources 2014: Operating mines & San Julian project Tonnes and Grades Metal content Mine / project Tonnes Grades Au Ag Pb Zn Ag Eq. * Cut-off Mt Au gpt Ag gpt % Pb % Zn koz Moz kt kt Moz Fresnillo 2014 103 gpt Ag Eq 66.20 0.73 354 1.41 2.80 1,563 753 931 1,851 1,176 2013 83 gpt Ag Eq 69.48
Slide 67: Mineral Resources 2014 (cont): Exploration projects
Mineral Resources 2014 (cont): Exploration projects Tonnes and Grades Metal content Mine / project Tonnes Grades Au Ag Pb Zn Ag Eq. * Cut-off Mt Au gpt Ag gpt % Pb % Zn koz Moz kt kt Moz Orisyvo 2014 Multi ple ** 279.42 0.97 1 8,718 11 568 2013 Multi ple ** 321.47 0.96 1 9,892 13 648 % Incr. 0.0% -1