Fresnillo Plc · LSE:FRES
Fresnillo — H1 2018 Earnings Presentation
46 slides from Fresnillo's earnings presentation, Jul 31, 2018
Slide 1: First Half 2018 Interim Results
First Half 2018 Interim Results July, 31 2018
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: Overview
Overview
Slide 5: Investment Case
Investment Case Dedicated Commitment High quality, and Disciplined to low-cost, experienced Strong approach to sustainable flexible management balance sheet development business operations and practices workforce 5
Slide 6: Health, Safety, Environment & Community Relations
Health, Safety, Environment & Community Relations Health Safety Environment Community Relations Occupational Health “I care, we care” 60% of electricity Centre for Technical programme ongoing programme being consumption comes Studies (CETEF) trains implemented across all from wind power, aim to mini
Slide 7: 1H18 results – Financial Highlights
1H18 results – Financial Highlights Gross Profit • Adjusted revenues of US$1,189.9m, up 11.3% 600 • Gross profit and EBITDA of US$502.2m and US$566.9m, up 480 US$ million 9.2% and 8.5%, respectively 360 • Silverstream valuation, a non-cash item, had an adverse effect 240 on profit before income tax,
Slide 8: 1H18 results – Operational Highlights
1H18 results – Operational Highlights • Gold production of 234 koz, up 4.6% vs. 2Q17 Half year Gold Production 500 • Gold guidance marginally increased to 900-930 koz for FY 450 Production (koz) • 1H18 silver production of 30.8 moz (including Silverstream), up 400 9.7% vs. 1H17 350 • Silver guidance
Slide 9: Consolidated Production Profile – Silver Equivalent Ounces
Consolidated Production Profile – Silver Equivalent Ounces 160 140 120 Production (eq Ag moz) • Consistent strategy of investing in exploration 100 through the cycles 80 • Continues to result in increases in resources 60 • In turn, providing the Group with a solid foundation from where to continue t
Slide 10: Operations & Development Projects
Operations & Development Projects
Slide 11: Operations: Fresnillo
Operations 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 1H18 Summary Increase in an
Slide 12: Operations Cont.: Saucito
Operations Cont. 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 1H18 Summary Annual sil
Slide 13: Operations Cont.: San Julián
Operations Cont. SAN JULIÁN PHASE I SAN JULIÁN PHASE II 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 2017 * 30.3 moz Ag, 0.4 moz Au Reserv
Slide 14: Operations Cont.: Ciénega
Operations Cont. 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 Pri
Slide 15: Operations Cont.: Herradura
Operations Cont. 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 • Consistently higher observe
Slide 16: Operations Cont.: Noche Buena
Operations Cont. NOCHE BUENA Cash Costs 1,000 900 Key operating statistics 1H 18 1H 17 US$ /OZ. GOLD Gold production – koz 88.0 89.8 800 Silver production – koz 37 14 Cost per tonne* – US$/t 10.25 7.1 700 Cash cost - US$/oz of Au 772.8 804.1 Reserves 2017 ** 0.8 moz Au 600 Resources 2017 ** 0.8 moz
Slide 17: Projects: Pyrites Plant Project
Projects PYRITES PLANT PROJECT IN THE FRESNILLO DISTRICT Overview Avg. annual silver production 3.5 moz Avg. annual gold production 13.0 koz Expected cash cost (average LoM) $2.51 /oz Leaching plant at Saucito commissioned 2Q18 Fresnillo tailings flotation plant expected 2019 commissioning • The pla
Slide 18: Projects Cont.: 2nd Line of Dynamic Leaching Plant at Herradura
Projects Cont. 2ND LINE OF DYNAMIC LEACHING PLANT PROJECT AT HERRADURA Overview Ore type • Final testing is underway and commercial production is expected in 3Q18 • The project will enable sulphides occurring deeper in the pit to be processed more efficiently • At the time of analysis, this project
Slide 19: Projects Cont.: Juanicipio
Projects Cont. JUANICIPIO (JV WITH MAG SILVER. FRESNILLO: 56%) Overview 8km from the Fresnillo mine; Juanicipio’s mineral zones are located in silver-gold rich sulphide shoots of the veins. This project will be developed on a stand-alone basis • Feasibility study has been concluded by AMC Key metric
Slide 20: Exploration
Exploration STRONG ORGANIC GROWTH PIPELINE Fresnillo 2018 Budget: Pipeline Saucito Herradura US$ 180 m allows us to focus on Mine Operations Nochebuena 42% projects that have the Ciénega - San Ramón potential to be developed Soledad &Dipolos* into low cost, San Julián world-class mines Pyrites Plant
Slide 21: Financial Review
Financial Review
Slide 22: Income Statement (IFRS)
Income Statement (IFRS) ACCUM JUNE CHANGE C O N C E P T (Million USD) 2018 % 2017 % $ % ADJUSTED REVENUES 1,189.9 1,069.5 120.4 11.3 TREATMENT AND REFINING CHARGES (74.8) (73.6) (1.2) 1.6 REVENUES 1,115.0 100.0 995.8 100.0 119.2 12.0 ADJUSTED PRODUCTION COST (429.9) (38.6) (343.0) (34.4) (87.0) 25.4
Slide 23: Adjusted revenues (IFRS)
Adjusted revenues (IFRS) ACCUM JUNE CHANGE BY: PRODUCT 2018 2017 VOLUME PRICE TOTAL 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% 100.0% 23
Slide 24: Contribution by mine and by metal to Adjusted Revenues 2018
Contribution by mine and by metal to the Adjusted Revenues 2018 1 2018 Adjusted Revenues : US$1,189.9m By mine By metal 8% 5% 18% 9% 8% 10% 50% 21% 36% 28% 8% Fresnillo Saucito Ciénega Silver Gold Herradura Noche Buena San Julián JM San Julián Veins Lead Zinc Fresnillo Ciénega Herradura Saucito Noch
Slide 25: Consolidated Cost Inflation YTD 2018 (USD Based)
Consolidated Cost Inflation YTD 2018 (USD Based) Consolidated Unit Price Weighted Increase % Weight (*) 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% Gasoline
Slide 26: Adjusted Production Cost Analysis (Consolidated)
Adjusted Production Cost Analysis (Consolidated) CHANGE YTD 18 YTD 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 Cost of Sales 612.9 535.8 +77.1 +14.4% USD MILLION 95.0 4.01 86.98 *
Slide 27: Consolidated Gross Profit Analysis
Consolidated Gross Profit Analysis 112.0 126.0 140.0 USD MILLION 14.0 28.0 42.0 56.0 70.0 84.0 98.0 0.0 46.00 Increase in inventories at Herradura 1 Gross Profit 36.30 Higher ore grade 2 21.63 Higher Production 3 20.35 Higher Metal Prices 4 502.2 YTD18 (4.01) MXP/USD Revaluation effect 5 (7.68) YTD1
Slide 28: Income Statement (IFRS)
Operating Units Income Statement (IFRS) Fresnillo Saucito 7.7 8.1 Ciénega 7.9 San Julián 4.0 (Million USD) ACCUM JUNE HerraduraCHANGE 6.8 CONCEPT 2018 % 2017 % $ % Noche Buena 1.4 ADJUSTED REVENUES 1,189.9 1,069.5 San Ramón120.4 11.3 1.4 TREATMENT AND REFINING CHARGES (74.8) (73.6) (1.2) 1.6 37.3 RE
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% Ee [ LEFT BLANK ON PURPOSE] 29
Slide 30: Cash flow (IFRS)
Cash flow (IFRS) erat YTD CHG. YTD 2017 (USD MILLION) REAL 2017 $ % WORKING CAPITAL (63.9) 25.8 (89.7) NIA INCOME TAX AND PROFIT SHARING PAID (145.3) (211.9) 66.6 (31.4) OTHER PROCEEDS SILVERS TREAM CONTRACT 223 23.0 (0.7) (3.1) PROCEEDS FROM THE SALE OF PROPERTY, PLANT AND EQUIPMENT 01 13.1 (13.0)
Slide 31: Cash flow (IFRS)
•Provisional Tax Payments: US$77.9m • Increase in accounts receivables (VAT) •2017 Income Tax Payment: US$33.3m • -US$49.6 million Cash flow (IFRS) •Special Mining Right: US$19.8m • Decrease in accounts receivables from Met- •2017 Profit Sharing: US$14.3m • Mex US$16.2 million • Increase in inventor
Slide 32: Balance sheet (IFRS)
Balance sheet (IFRS) Change Concept 31-JUNE-18 31-DEC-17 % Assets Cash and Investments 688.6 896.1 (23.2) Trade and Other Receivables 449.2 402.1 11.7 Inventories 294.8 271.1 8.7 Prepaid Expenses 4.1 3.5 16.2 Silverstream 495.2 538.9 (8.1) Derivative Financial Instruments 0.6 0.4 58.9 Property, Plan
Slide 33: Cost Per Tonne (IFRS)
Cost Per Tonne (IFRS) ACCUM JUNE CHANGE 2018 2017 % CHG. COST PER TONNE * MINE UNIT Fresnillo US$/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 34: Cash Cost (IFRS)
Cash Cost (IFRS) 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% C
Slide 35: Margins by mine (Metal price – Cash Cost)
Margins by mine (Metal price – Cash Cost)(YTD18 vs YTD17) (USD/Oz) (USD/Oz) Fresnillo Saucito Ciénega Herradura Noche Buena 8.2Moz. 7.4Moz. 9.9Moz. 9.3Moz. 33.9Koz. 31.6Koz. 222.5Koz. 241.3Koz. 89.0Koz. 87.8Koz. Chg. + -9.2% Chg. -6.1% Chg. -6.8% Chg. 8.4% Chg. -1.3% Ounces Sold 35
Slide 36: All In Sustaining Cost (US$/Oz)
All In Sustaining Cost (US$/Oz) ACCUM JUNE 2018 2017 % CHG. CASH COST * 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% CO
Slide 37: Margins by mine (Metal price – All In Sustaining Cost)
Margins by mine (Metal price – All In Sustaining Cost) (YTD18 vs YTD17) (USD/Oz) (USD/Oz) Fresnillo Saucito Ciénega Herradura Noche Buena 8.2Moz. 7.4Moz. 9.9Moz. 9.3Moz.. 33.9Koz. 31.6Koz. 222.5Koz. 241.3Koz. 89.0Koz. 87.8Koz. Chg. + -9.2% Chg. -6.1% Chg. -6.8% Chg.+8.4% Chg. -1.3% Ounces Sold 37
Slide 38: Strategy & Outlook
Strategy & Outlook
Slide 39: Expected Delivery of Growth
Expected Delivery of Growth (1) (2) Expected Avg. Investm ent YEAR (US$ m illion) Annual 2017 2018 2019 2020 2021 2022 2023 Production PROJECT LEACHING PLANT CONSTRUCTION 3.5 m oz Ag & PYRITES PLANT 155 13 koz Au PRODUCTION (Optimization project) CONSTRUCTION TAILINGS FLOTATION DEVELOPMENT Extended
Slide 40: Expected attributable production profile
Expected attributable production profile Silver* Gold Million Oz Thousand Oz 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 By-product L
Slide 41: CAPEX Spend Expectations
CAPEX Spend Expectations 2018 US$ Million Sustaining (Operations) Fresnillo 90 M Saucito 100 M Herradura 136 M Ciénega 70 M Noche Buena 35 M San Julián 90 M Others 9 M Projects Approved San Julián 17 M Pyrites Plant 47 M Centauro Extension 35 M Projects for Approval Others 123 M 41
Slide 42: Outlook
Outlook Safety and support of the workforce and environment • Reinforce our safety measures throughout the Group • Continue to implement the “I care, we care” programme across all of our operations • Reach our goal of consuming 75% of our electricity needs from wind power by the second half of 2019
Slide 43: Investment Case
Investment Case Dedicated Commitment High quality, and Disciplined to low-cost, experienced Strong approach to sustainable flexible management balance sheet development business operations and practices workforce 43
Slide 44: Appendix
FRESNILLO. Appendix PTTL c
Slide 45: Volume and Ore grades
Volume and Ore grades Volume Gold grade Silver grade Gold grade Silver grade Processed 1H18 1H18 1H18 FY18e FY18e Units (t) (g/t) (g/t) (g/t) (g/t) Mine Fresnillo 1,258,316 0.68 222 0.63 215-225 Saucito 1,396,753 1.20 262 1.21 255-265 San Julián San Julián I 600,517 2.04 152 1.9-2.1 165-175 San Juli
Slide 46: Metal prices, average exchange rate, energy & inflation
Metal prices, average exchange rate, energy & inflation ACCUM JUNE CONCEPT 1H18 1H17 % CHG GOLD (US$/OZ) 1,312.71 1,250.25 5.0 SILVER (US$/OZ) 16.48 17.44 (5.5) LEAD (USC$/LB) 109.69 101.96 7.6 ZINC (USC$/LB) 144.19 123.46 16.8 EXCHANGE RATE AT THE BEGINNING OF THE YEAR ($/USD) 19.74 20.66 EXCHANGE