Fresnillo Plc · LSE:FRES
Fresnillo — FY2013 Earnings Presentation
48 slides from Fresnillo's earnings presentation, Mar 4, 2014
Slide 1: Preliminary Results to year ending 31 Dec 2013
Preliminary Results to year ending 31 Dec 2013 March 4, 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 • Strategy & Highlights Octavio Alvídrez, CEO • Operations Review Roberto Díaz, COO • Financial Review Mario Arreguín, CFO • Exploration Review David Giles, VP of Exploration • Projects Review Executive team • Outlook Octavio Alvídrez, CEO 4/03/2014 3
Slide 4: Our strategy & four pillars to create value
Our strategy & four pillars to create value Looking beyond 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 meta
Slide 5: 2013 Operational Highlights
2013 Operational Highlights • Maintaining operational excellence – Silver production, including the silverstream, of 42.7moz increased 4.3 per cent reflecting continued ramp up of Saucito and increased production at Ciénega – Attributable gold production decreased by 10.0% to 425,831 as a result of
Slide 6: 2013 Operational Highlights (cont’d)
2013 Operational Highlights (cont’d) • Focus on capital discipline – Maintain appropriate exploration budget to increase reserves and resources, continue the development of a profitable growth pipeline while balancing returns to our shareholders – Focused on projects with highest rates of return and
Slide 7: 2013 Financial Highlights
2013 Financial Highlights • Revenue of US$1.62 billion, down 25.1% as silver price declined by 27.3%, gold price declined by 16.3% and gold volumes sold declined due to the disrupted operations at the Herradura district • Group’s average weighted cost inflation estimated at 7.3% • Lower exploration
Slide 8: Operations & Projects Review
Operations & Projects Review
Slide 9: Operation Review – Fresnillo District
Operation Review – Fresnillo District FRESNILLO SAUCITO 2013 2012 Change % 2013 2012 Change % Attributable production Silver m oz 22.8 26.4 -3.6 -13.7 11.6 7.1 4.5 64.2 Gold k oz 33.1 29.6 3.5 11.9 45.2 45.2 -0.1 -0.2 Lead kt 15.6 16.2 -0.6 -3.9 5.6 2.8 2.8 102.1 Zinc kt 14.9 15.0 -0.1 -0.3 4.5 1.8
Slide 10: Operation Review – Ciénega District
Operation Review – Ciénega District CIÉNEGA 2013 2012 Change % Attributable production Gold k oz 112.1 125.3 -13.2 -10.6 Silver m oz 4.2 3.3 0.9 27.4 Ore processed kt 1,242.2 1,112.8 129.4 11.6 Ore grades Gold g/t 2.9 3.6 -0.7 -19.4 Silver g/t 121.6 105.2 16.4 15.6 4/03/2014 10
Slide 11: Operation Review – Herradura District
Operation Review – Herradura District HERRADURA SOLEDAD-DIPOLOS NOCHE BUENA 2013 2012 Change % 2013 2012 Change % 2013 2012 Attributable production Gold k oz 148.2 176.1 -28.0 -15.9 26.5 60.1 -33.6 -55.9 60.9 36.7 Ore processed kt 14,363.3 24,641.1 -10,277.8 -41.7 6,701.8 15,317.9 -8,616.1 -56.2 12,
Slide 12: Fresnillo district
Fresnillo district Fresnillo District • Fresnillo: silver production of 22.8moz, down 13.7% due to lower ore grades (328g/t to 285g/t) • World class mine with almost 12 years of mine life and continuing low cost operation • Temporarily limited access to high ore grade areas that delayed development
Slide 13: Fresnillo district Saucito II
Fresnillo district Saucito II Project construction commenced in 1Q 2013 We have pro-actively advanced this project as a result of skilled execution, infrastructure synergies and ongoing capital evaluation Completion date brought forward from mid 2015 to 4Q 2014 21,680 metres developed in 2013, guara
Slide 14: Ciénega district
Ciénega district Cienega District • Annual gold production down 10.6% due to the expected depletion of high ore grade bodies • Partially mitigated by increased volumes of ore throughput • Milling capacity increased from 2,800 to 3,600 tpd • Silver production up 27.4% from higher throughput from the
Slide 15: Herradura district
Herradura district • Herradura: Attributable gold production was down 15.9% due to • Noche Buena: Successful ramp-up of production, despite lower ore deposited resulting from explosives permit suspension, temporary suspension of explosives permits somewhat mitigated by material already in inventory:
Slide 16: Herradura district
Herradura district • Soledad-Dipolos: Attributable gold production decreased DYNAMIC LEACHING PLANT 55.9% to 26,480oz due to the stoppage of operations in July. Capex: US$115.6 million • Average ore grade was 0.54 g/t in the 1H13 Processing of high grade ore from Herradura • Stripping ratio rose fro
Slide 17: Herradura district Dynamic Leaching Plant
Herradura district Dynamic Leaching Plant
Slide 18: San Julián Project
San Julián Project Ownership 100% Fresnillo plc Underground mine, dynamic leaching plant for epithermal silver-gold veins (to start first) and a flotation plant for disseminated silver-lead- zinc system. Project delivery deferred to mid 2015 and CAPEX increased slightly due to preference of capital
Slide 19: Financial Performance
ai FRESNMILLO. Financial Performance
Slide 20: Income Statement (IFRS)
INCOME STATEMENT (IFRS) ACCUM DECEMBER CHANGE CONCEPT (Million USD) 2013 % 2012 % $ % ADJUSTED REVENUES 1,761.9 2,287.2 (525.3) (23.0) BY-PRODUCT HEDGING 0.3 0.0 0.3 N/A TREATMENT AND REFINING CHARGES (147.0) (129.8) (17.2) 13.2 REVENUES 1,615.2 100.0 2,157.4 100.0 (542.2) (25.1) ADJUSTED PRODUCTION
Slide 21: Consolidated Cost Inflation 2013 (USD Based)
Consolidated Cost Inflation 2013 (USD Based) Unit Price Weighted Increase % Weight (*) Average Labour Unionized Personnel 9.3% 8.4% 0.78% Employees 8.4% 2.8% 0.24% Weighted Average 9.1% Operating Materials 1.5% 20.0% 0.30% Energy Electric Energy 7.2% 7.8% 0.56% Diesel 19.5% 7.8% 1.53% Fuel 15.2% 1.6
Slide 22: Adjusted Production Cost Analysis (Consolidated)
Adjusted Production Cost Analysis (Consolidated) CHANGE YTD13 YTD12 $ % Adjusted Production Cost 567.7 569.1 -1.4* -0.2 Change in inventories -1.3 -70.9 69.6 -98.1 Unproductive Costs 26.1 - 26.1 N/A Depreciation 239.3 243.8 -4.4 -1.8 PTU 20.2 48.8 -28.6 -58.6 Hedging (mxp/usd exchange rate) -4.3 (Pr
Slide 23: Adjusted Production Cost Analysis (Consolidated)
Adjusted Production Cost Analysis (Consolidated) CHANGE YTD13 YTD12 $ % Adjusted Production Cost 567.7 569.1 -1.4* -0.2 Change in inventories -1.3 -70.9 69.6 -98.1 Unproductive Costs 26.1 - 26.1 N/A Depreciation 239.3 243.8 -4.4 -1.8 PTU 20.2 Average spot MXP/USD 48.8 -28.6 -58.6 Hedging (mxp/usd ex
Slide 24: Cost Per Tonne (IFRS)
Cost Per Tonne (IFRS) ACCUM DECEMBER CHANGE 2013 2012 % CHG. COST PER TONNE * MINE UNIT Fresnillo US$/TON 45.60 44.52 2.4% Saucito US$/TON 61.00 60.93 0.1% Ciénega US$/TON 70.81 77.05 -8.1% Herradura US$/TON 8.38 ** 6.23 34.6% Soledad & Dipolos US$/TON 9.90 ** 6.32 56.6% Noche Buena US$/TON 7.84 **
Slide 25: Cash Cost (IFRS)
Cash Cost (IFRS) ACCUM DECEMBER CHANGE 2013 2012 % CHG. COST PER TONNE * CASH COST1 MINE UNIT Fresnillo PER OZ. SILVER 5.87 5.59 4.9% Saucito2 PER OZ. SILVER 3.61 0.49 630.8% 3 Ciénega PER OZ. GOLD 37.68 -84.84 144.4% Herradura PER OZ. GOLD 651.23 470.56 38.4% Soledad & Dipolos PER OZ. GOLD 820.28 6
Slide 26: Margins by mine (Metal price – Cash Cost)
Margins by mine (Metal price – Cash Cost) (2013 vs 2012) (USD/Oz) Fresnillo Saucito Ciénega Herradura SD NB 24.5Moz. 21.7Moz. 6.7Moz. 11.1Moz. 120.6Koz. 106.8Koz. 311.2Koz. 262.2Koz. 105.7Koz. 46.6Koz. 64.8Koz. 106.9Koz. Chg. + -11.3% Chg. +66.3% Chg. -11.4% Chg. -15.8% Chg. -55.9% Chg. +64.9%* Ounc
Slide 27: All In Sustaining Cost (US$/Oz)
All In Sustaining Cost* (US$/Oz) ESTIMATED ACCUM DECEMBER CHANGE LIFE OF MINE 2013 2012 % CHG. WEIGHTED AVERAGE MINE UNIT Fresnillo PER OZ. SILVER 9.06 9.72 -6.8% 7.9 (2024) Saucito PER OZ. SILVER 6.66 7.57 -12.0% 6.6 (2023) Ciénega PER OZ. GOLD 547.95 520.35 5.3% 560 (2025) Herradura PER OZ. GOLD 1
Slide 28: Consolidated Gross Profit Analysis
Consolidated Gross Profit Analysis CHANGE YTD13 YTD12 $ % Gross Profit 767.4* 1,364.6 -597.2 -43.8 USD MILLION * 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 28
Slide 29: Consolidated Gross Profit Analysis
Consolidated Gross Profit Analysis Ore Grade Ciénega: YTD13 YTD12 Chg YTD13 YTD12 Chg Au g/t 2.9 CHANGE 3.6 -20.0% Herradura: YTD13 YTD12 $ % Silver,Gold and Zinc prices Au g/ton 0.606 0.567 +6.9% (USc/Lb) Soledad-Dipolos: 767.4* 1,364.6 -597.2 -43.8 YTD13 YTD12 Chg Au g/ton USD MILLION 0.539Gross0.
Slide 30: Contribution by mine to the Gross Profit
Contribution by mine to the Gross Profit CHANGE YTD13 YTD12 US$ % Fresnillo 316.6 42.3% 590.3 43.8% (273.8) (46.4) Herradura 126.9 17.0% 316.2 23.5% (189.3) (59.9) Ciénega 94.7 12.7% 170.4 12.6% (75.7) (44.4) Saucito 181.3 24.2% 148.8 11.0% 32.6 21.8 Sol & Dipolos 10.1 1.4% 80.8 6.0% (70.7) (87.5) N
Slide 31: Income Statement (IFRS)
INCOME STATEMENT (IFRS) ACCUM DECEMBER CHANGE YTD 13 YTD12 Chg. CONCEPT (Million USD) 2013 % 2012 % $ % Centauro Profundo 37.4 33.1 4.3 ADJUSTED REVENUES 1,761.9 2,287.2 (525.3) (23.0) BY-PRODUCT HEDGING 0.3 Herradura 0.0 25.4 0.3 13.5 N/A 11.9 TREATMENT AND REFINING CHARGES (147.0) Noche Buena (129
Slide 32: Income Statement (IFRS)
INCOME STATEMENT (IFRS) ACCUM DECEMBER CHANGE CONCEPT (Million USD) 2013 % 2012 % $ % ADJUSTED REVENUES 1,761.9 2,287.2 (525.3) (23.0) BY-PRODUCT HEDGING 0.3 0.0 0.3 N/A TREATMENT AND REFINING CHARGES (147.0) (129.8) (17.2) 13.2 REVENUES 1,615.2 100.0 2,157.4 100.0 (542.2) (25.1) ADJUSTED PRODUCTION
Slide 33: Consolidated Income Statement without Silverstream Effect
Consolidated Income Statement without Silverstream Effect ACCUM DECEMBER CHANGE C O N C E P T (Million USD) 2013 % 2012 % $ % ADJUSTED REVENUES 1,761.9 2,287.2 (525.3) (23.0) BY-PRODUCT HEDGING 0.3 0.0 0.26 N/A TREATMENT AND REFINING CHARGES (147.0) (129.8) (17.2) 13.2 REVENUES 1,615.2 100.0 2,157.4
Slide 34: Cash Flow (IFRS)
CASH FLOW (IFRS) YEAR TO DATE CHANGE CONCEPT (Million USD) 2013 2012 $ % CASH GENERATED BY OPERATIONS BEFORE CHANGES IN WORKING CAPITAL 750.2 1,356.7 (606.6) (44.7) WORKING CAPITAL 34.5 (99.8) 134.3 N/A INCOME TAX AND PROFIT SHARING PAID (338.6) (513.3) 174.6 (34.0) NET CASH FROM OPERATING ACTIVITIE
Slide 35: Cash Flow (IFRS)
CASH FLOW (IFRS)• Decrease in trade and other receivables ($66.6) • mainly as a result of lower metal prices and • volumes sold to Met-Mex. •YEAR TO DATE Increase in inventories (-$13.5) mainly spare • parts. CHANGE CONCEPT (Million USD) 2013 2012 $ % • Decrease in trade and other payables (-$13.6)
Slide 36: Balance Sheet (IFRS)
BALANCE SHEET (IFRS) Change Concept (Million USD) 31-DIC-13 31-DIC-12 % Assets Cash and Investments 1,251.7 613.8 N/A Trade and Other Receivables 267.5 263.6 1.4 Inventories 208.1 194.6 7.0 Prepaid Expenses 5.3 3.1 71.7 Silverstream 372.8 487.8 (23.6) Derivative Financial Instruments 2.1 2.8 (27.6)
Slide 37: Exploration Review
FRESNMILLO. Exploration Review
Slide 38: High quality portfolio feeds pipeline
High quality portfolio feeds pipeline 2014 Exploration Budget: US$225.0m* Mines in operation • Fresnillo • Saucito • Ciénega & San Ramón Development projects • Soledad-Dipolos • Herradura Operate • Dynamic leaching plant • Noche Buena assets • Saucito II (at Saucito) US$70.8m • San Julián Advanced e
Slide 39: Exploration 2013-2014
Exploration 2013-2014 • New areas in drilling ─ South veins, Fresnillo District: Silver-Gold ─ El Fraile, Guanajuato District: Silver-Gold ─ Bellavista, Herradura District: Gold ─ San Ramón, Ciénega District: Gold-Silver ─ North Veins, San Julián District: Silver-Gold ─ Rodeo, Mesa Central: Gold ─ P
Slide 40: Resources
Resources Contained Metal Increase vs 2012 Resources Gold Silver Lead Zinc Gold Silver Lead Zinc (koz) (koz) (kt) (kt) (koz) (koz) (kt) (kt) Fresnillo 1,688 800,155 1,006 1,961 8 1,415 -141 -423 Saucito 2,054 517,986 611 1,060 14 -9,514 13 80 Ciénega 1,609 144,042 171 303 -61 7,272 -15 -24 Herradura
Slide 41: Reserves
Reserves Contained Metal Increase vs 2012 Reserves Gold Silver Lead Zinc Gold Silver Lead Zinc (koz) (koz) (kt) (kt) (koz) (koz) (kt) (kt) Fresnillo 668 277,550 467 875 -62 -30,910 -58 -193 Saucito 604 128,528 182 304 34 9,658 16 47 Ciénega 809 67,376 81 129 -21 1,236 6 5 Herradura (56%) 1,517 1,907
Slide 42: Conversion inferred to indicated resources
Conversion inferred to indicated resources Contained Metal in M & I resources Increase vs 2012 M & I Resources Gold Silver Lead Zinc Gold Silver Lead Zinc (koz) (koz) (kt) (kt) (koz) (koz) (kt) (kt) Fresnillo 921 463,120 591 1,102 -39 -19,300 -38 -156 Saucito 772 155,104 216 364 72 13,794 24 64 Cién
Slide 43: Growth Plan
FRESNMILLO. Growth Plan
Slide 44: Expected delivery of growth
Expected delivery of growth Investment Expected YEAR Risk 2014 2015 2016 2017 2018 (US$ m illion) Production PROJECT (1) (2) 8.4 m ill Oz Ag Medium CONSTRUCTIO 235 & 35 thds Oz SAUCITO II PRODUCTION Low N Au 10.3 m ill Oz Medium 515 Ag & 44 thds SAN JULIÁN CONSTRUCTION PRODUCTION Oz Au 20 thds Oz Au
Slide 45: Achieving 65moz silver by 2018
Achieving 65moz silver by 2018 Million Oz Note: Attributable silver production. Silver Stream not included. 4/03/2014 45
Slide 46: Achieving over 500koz gold by 2018
Achieving over 500koz gold by 2018 Million Oz Note: Attributable gold production. 4/03/2014 46
Slide 47: Outlook
FRESNMILLO. Outlook
Slide 48: Conclusions and Outlook for 2014
Conclusions and Outlook for 2014 • Despite anticipated decreases in profit margins in 2013 due to lower metal prices, Fresnillo’s margins will continue to be very healthy and among the highest in the industry • Important lessons learned from the ejido El Bajío conflict, helping us to manage future c