Fresnillo Plc · LSE:FRES
Fresnillo — FY2011 Earnings Presentation
39 slides from Fresnillo's earnings presentation, Mar 6, 2012
Slide 1: Preliminary Results to year ending 31 Dec 2011
Preliminary Results to year ending 31 Dec 2011 March 6, 2012 Strengthening our Precious Metals Position
Slide 2: Disclaimer
March 6, 2012 Preliminary Results 2012 2 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”, “p
Slide 3: Agenda
March 6, 2012 Preliminary Results 2012 3 Agenda • 2011 Highlights Jaime Lomelín CEO • Operations Review Jaime Lomelín CEO • Exploration Jaime Lomelín CEO • Financial Review Mario Arreguín CFO • Conclusions Jaime Lomelín CEO • Q&A
Slide 4: 2011 Operational Highlights
March 6, 2012 Preliminary Results 2012 4 2011 Operational Highlights • Record attributable gold production of 448.9 k oz (up 21.6%) due to ramp-up at Soledad-Dipolos and higher throughput at Herradura • Stable silver production (41.8 m oz) benefited from the start-up of Saucito • Noche Buena to comm
Slide 5: 2011 Financial Highlights
March 6, 2012 Preliminary Results 2012 5 2011 Financial Highlights • Profit and Loss: • Adjusted revenue1 of US$2,307.4 million, up 57% • Operating Profit of US$1,36.9 million, up 63% • EBITDA2 of US$1,538 million, up 63% (EBITDA margin of 70%) • Profit for the year of US$1,038.6 million, up 39% (in
Slide 6: 2011 Financial Highlights
March 6, 2012 Preliminary Results 2012 6 2011 Financial Highlights • Cash Flow • Net Cash from operations activities US$1,249.2 million, up 78% • US$179 million capital invested in exploration (including US$45 million which were capitalized) • US$423 million invested in CAPEX (not including capitali
Slide 7: Operations Review
March 6, 2012 Preliminary Results 2012 7 Operations Review
Slide 8: Silver - Fresnillo District
March 6, 2012 Preliminary Results 2012 8 Silver - Fresnillo District FRESNILLO SAUCITO 2011 2010 Change % 2011 2010* Change % Attributable production Silver m oz 30.3 35.9 (5.6) (15.6) 5.9 1.2 4.7 N/M Gold k oz 26.2 25.0 1.3 5.0 33.5 6.3 27.2 N/M Lead kt 13.4 12.2 1.1 9.4 1.7 0.3 1.5 N/M Zinc kt 12.
Slide 9: Gold - Herradura District
March 6, 2012 Preliminary Results 2012 9 Gold - Herradura District HERRADURA SOLEDAD-DIPOLOS 2011 2010 Change % 2011 2010 Change % Attributable production Gold k oz 183.5 163.0 20.5 12.6 88.8 61.4 27.4 44.7 Silver m oz 0.2 0.2 0.0 5.1 0.1 0.0 0.0 72.4 Adjusted Revenue Adj Revenue US$ m 521.9 366.8 1
Slide 10: Gold - Ciénega District
March 6, 2012 Preliminary Results 2012 10 Gold - Ciénega District CIÉNEGA 2011 2010 Change % Attributable production Gold k oz 116.8 113.4 3.5 3.1 Silver m oz 1.5 1.2 0.3 23.0 Lead kt 6.3 6.5 (0.2) (2.4) Zinc kt 9.3 10.1 (0.8) (7.9) Adjusted Revenue Adj Revenue US$ m 250.1 186.4 63.7 34.2 Contributi
Slide 11: Exploration
March 6, 2012 Preliminary Results 2012 11 Exploration
Slide 12: Resources and Reserves
March 6, 2012 Preliminary Results 2012 12 Resources and Reserves • Substantial increase in Total Resources (Measured, Indicated and Inferred): • Silver 1,811 Moz, up 23% • Gold 23.5 Moz, up 17% MOz • Ten year Reserve Life: • Silver 403 Moz, down 8% • Gold 4.6 Moz, up 2% • Our exploration programme g
Slide 13: Exploration
March 6, 2012 Preliminary Results 2012 13 Exploration • Fresnillo District: • Drilling of new geophysical-geochemical targets was initiated in two areas and totalled 10,434 metres in 15 holes. • Infill drilling continued to upgrade Fresnillo resources on Juanicipio Mine Operations Saucito Herradura
Slide 14: Exploration
March 6, 2012 Preliminary Results 2012 14 Exploration • San Julián • Silver and gold resources both increased from the previous year and three gold-silver veins were discovered. The San Julián ramp was extended to 13,389 metres and 237 metres were constructed on the new Todos Santos adit. • Orisyvo
Slide 15: Estimated project delivery
March 6, 2012 Preliminary Results 2012 15 Estimated project delivery On track to produce 65m oz of silver and new target of 500k oz of gold by 2018 Project 2011 2012 2013 2014 2015 2016 Nochebuena Construction Production Herradura Feasibility Construction Production Dynamic Leaching Pre - San Julián
Slide 16: Financial Review
March 6, 2012 Preliminary Results 2012 16 Financial Review
Slide 17: Consolidated Income Statement (IFRS)
March 6, 2012 Preliminary Results 2012 17 Consolidated Income Statement (IFRS) ACCUM DECEMBER CHANGE C O N C E P T (US$ MILLION) 2011 % 2010 % $ % ADJUSTED REVENUES 2,307.5 1,473.9 833.5 56.6 HEDGING (METALS) 0.0 0.0 0.0 N/A TREATMENT AND REFINING CHARGES (114.8) (64.4) (50.4) 78.3 REVENUES 2,192.7
Slide 18: Consolidated Income Statement without Silverstream Effect (IFRS)
March 6, 2012 Preliminary Results 2012 18 Consolidated Income Statement without Silverstream Effect (IFRS) ACCUM DECEMBER CHANGE C O N C E P T (US$ MILLION) 2011 % 2010 % $ % ADJUSTED REVENUES 2,307.5 1,473.9 833.5 56.6 HEDGING (METALS) 0.0 0.0 0.0 N/A TREATMENT AND REFINING CHARGES (114.8) (64.4) (
Slide 19: Consolidated Gross Profit Analysis
March 6, 2012 Preliminary Results 2012 19 Consolidated Gross Profit Analysis CHANGE 2011 2010 $ % USD MILLION Gross Profit 1,563.5 979.4 +584.1* +59.6 * 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Slide 20: Consolidated Gross Profit Analysis
March 6, 2012 Preliminary Results 2012 20 Consolidated Gross Profit Analysis CHANGE Average exchange rate Zinc and Lead price (USc/Lb) 2011 12.42 mxp/usd 2010 2011 $ • Prop., Plant % and Equip.MUS$ 2011 2010 Chg 12.64 mxp/usd 2010 2011 2010 Chg USD MILLION Zn 96.8 97.5 (0.7%) Gross Profit 1,563.5 97
Slide 21: Adjusted Production Cost Analysis (Consolidated)
March 6, 2012 Preliminary Results 2012 21 Adjusted Production Cost Analysis (Consolidated) CHANGE 2011 2010 $ % Adjusted Production Cost 419.4 307.1 112.3* +36.6 Change in inventories -25.5 -16.8 -8.7 +52.0 Depreciation 172.1 105.2 +66.9 +63.5 PTU 69.1 37.7 +31.4 +83.3 Hedging (mxp/usd exchange rate
Slide 22: Adjusted Production Cost Analysis (Consolidated)
March 6, 2012 Preliminary Results 2012 22 Adjusted Production Cost Analysis (Consolidated) CHANGE 2011 2010 $ % AdjustedinProduction Change inventories Cost 419.4 307.1 112.3* +36.6 • 6.5% increase in wages in mxp. -25.5 -16.8 -8.7 +52.0 Depreciation 172.1 • Higher production volumes (additional per
Slide 23: Increases in unit costs (USD)
March 6, 2012 Preliminary Results 2012 23 Increases in unit costs (USD) INPUTS 2011 VS 2010 Electricity 15.4% Energy Diesel 15.2% Labour Wages 3 8.3% Steel balls for milling 14.1% Explosives 18.7% Tyres 4.8% Operating Sodium cyanide 29.0% Materials Other reagents 8.9% Anchors 8.1% Oils and other lub
Slide 24: Cost per tonne and Cash Cost
March 6, 2012 Preliminary Results 2012 24 Cost per tonne and Cash Cost COST PER TONNE OF ORE PROCESSED DECEMBER MINE UNIT 2011 2010 % CHG Fresnillo US$/TON 43.03 40.93 5.1% Ciénega US$/TON 73.36 63.18 16.1% Herradura US$/TON 5.96 5.61 6.2% Soledad & Dipolos US$/TON 5.81 5.70 2.0% CASH COST PER OZ SO
Slide 25: Fresnillo – Cash Cost (US/Oz)
March 6, 2012 Preliminary Results 2012 25 Fresnillo – Cash Cost (US/Oz) Change 2011 2010 US $ % DIRECT MINING COST 3.95 3.13 0.82 26.2 BY-PRODUCT CREDITS (2.94) (2.06) (0.88) 42.7 NET DIRECT MINING COST 1.01 19% 1.07 33% (0.06) (5.6) TREATMENT & REFINING CHARGES 3.03 58% 1.50 46% 1.53 102.0 PROFIT S
Slide 26: Fresnillo – Cash Cost Analysis
March 6, 2012 Preliminary Results 2012 26 Fresnillo – Cash Cost Analysis CHANGE 2011 2010 $ % Cash Cost 5.24 3.27 +1.97* +60.2 USD Profit base increased by 30% * Higher cost per tonne +5.14% Gold Lead Zinc Prod 5.0% 9.4% 3.4% Price 24.0% 8.7% 0.2% 2011 2010 Chg Ag Ore Grade 395.9 474.4 (16.5)
Slide 27: Margins by mine (Metal price – Cash Cost)
March 6, 2012 Preliminary Results 2012 27 Margins by mine (Metal price – Cash Cost) (2011 vs 2010) USD / Oz Fresnillo Ciénega Herradura Soledad & Dipolos Cash Silver Cash Gold Cost Price Cost Price 34.75 1,585.33 1,585.33 1,585.33 35.0 35.0 1,600 1,600 30.0 30.0 1,400 1,252.05 1,400 1,252.05 1,252.0
Slide 28: Contribution by mine to the Gross Profit
March 6, 2012 Preliminary Results 2012 28 Contribution by mine to the Gross Profit CHANGE 2011 2010 US$ % Fresnillo 792.8 51.1% 576.8 59.2% 215.9 37.4 Herradura 338.5 21.8% 217.7 22.3% 120.7 55.5 Sol & Dipolos 153.2 9.9% 84.2 8.6% 69.0 81.9 Saucito 136.3 8.8% - 0.0% 136.3 N/A Ciénega 129.6 8.4% 96.4
Slide 29: Consolidated Income Statement (IFRS)
March 6, 2012 Preliminary Results 2012 29 Consolidated Income Statement (IFRS) ACCUM DECEMBER CHANGE C O N C E P T (US$ MILLION) 2011 % 2010 % $ % ADJUSTED REVENUES 2,307.5 1,473.9 833.5 56.6 HEDGING (METALS) 0.0 0.0 0.0 N/A TREATMENT AND REFINING CHARGES (114.8) (64.4) (50.4) 78.3 REVENUES 2,192.7
Slide 30: Consolidated Income Statement (IFRS)
March 6, 2012 Preliminary Results 2012 30 Consolidated Income Statement (IFRS) • Increase in salaries (+6.8% ACCUMinDECEMBER USD) CHANGE C O N C E P T (US$ MILLION) • Increased advisory fees2011associated % with the 2010 % $ % new Bribery Act, Risk Management, Taxes, ADJUSTED REVENUES 2,307.5 1,473.
Slide 31: Consolidated Cash Flow (IFRS)
March 6, 2012 Preliminary Results 2012 31 Consolidated Cash Flow (IFRS) CHANGE CONCEPT (US $ millions) 2011 2010 $ % CASH GENERATED BY OPERATIONS BEFORE CHANGES IN WORKING CAPITAL 1,612.1 983.6 628.5 63.9 WORKING CAPITAL (36.1) (166.0) 129.9 (78.3) INCOME TAX AND PROFIT SHARING PAID (326.8) (117.0)
Slide 32: Consolidated Cash Flow (IFRS)
March 6, 2012 Preliminary Results 2012 32 Consolidated Cash Flow (IFRS) • Increase in ore inventories in the leaching CHANGE CONCEPT (US $ millions) 2011 pads at Herradura 2010 and Soledad-Dipolos. $ % CASH GENERATED BY OPERATIONS BEFORE CHANGES IN WORKING CAPITAL 1,612.1 983.6 628.5 63.9 • 2.9 MOz
Slide 33: Consolidated Balance Sheet (IFRS)
March 6, 2012 Preliminary Results 2012 33 Consolidated Balance Sheet (IFRS) Change Concept 31-DEC-11 31-DEC-10 % Asset Cash and Investments 684.9 559.5 22.4 Trade and Other Receivables 249.3 236.7 5.3 Inventories 99.8 63.1 58.2 Prepaid Expenses 3.2 2.5 27.4 Silverstream 478.1 427.7 11.8 Derivative F
Slide 34: Conclusions
March 6, 2012 Preliminary Results 2012 34 Conclusions
Slide 35: Conclusions
March 6, 2012 Preliminary Results 2012 35 Conclusions • Production • Maintained silver production and exceeded gold production targets • Successful expansions at Ciénega and Soledad-Dipolos • Safety • Implemented Safety Action Plan • Costs • Cost pressures from equipment and consumable shortages • P
Slide 36: Conclusions
March 6, 2012 Preliminary Results 2012 36 Conclusions • In 2012 we will: • Reinforce safety procedures • Maintain silver production at 41 million ounces • Increase attributable gold production to 460,000 ounces • Continue cost control initiatives • Expand our resource base with record US$360 million
Slide 37: Appendix
March 6, 2012 Preliminary Results 2012 37 Appendix
Slide 38: Contribution by mine and by metal to the Adjusted Revenues
March 6, 2012 Preliminary Results 2012 38 Contribution by mine and by metal to the Adjusted Revenues 1 2 2011 Adjusted Revenues: US$2,307.5m By mine By metal 10% 2% 2% 11% 46% 11% 44% 52% 22% Saucito Fresnillo Herradura Silver Gold Ciénega Sol & Dip Lead Zinc Fresnillo Ciénega Herradura Sol & Dip Sa
Slide 39: Breakdown of the Adjusted Production Costs
March 6, 2012 Preliminary Results 2012 39 Breakdown of the Adjusted Production Costs Adj Prod Cost: US$419.4m 2% 7% 23% 13% 1 Contrac Op Mat Energy & Diesel Mainten Person Others Freights 16% 1 Contractors are hired to execute specific tasks. Fees 22% paid include labour, operating materials, equipm