Fresnillo Plc · LSE:FRES
Fresnillo — Denver Gold Forum 2016
31 slides from Fresnillo's conference presentation, Sep 19, 2016
Slide 1: Denver Gold Forum
“Driving Long-Term Value from Solid Foundations” Denver Gold Forum Octavio Alvídrez 19 September 2016
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: Fresnillo at a Glance
Fresnillo at a Glance Location Key Highlights HERRADURA Ø World’s largest silver producer (47 moz in 2015) and Mexico’s DISTRICT second largest gold producer (762 koz in 2015) ORISYVO Ø Market cap of US$16 billion* SAN JULIÁN Ø Silver resources of 2 billion ounces and gold resources of 36 million ou
Slide 4: Our Business Model and Strategy
Our Business Model and Strategy Our Business Model… …supported by four strategic pillars to create value 1. Maximise potential of existing operations • Operate at 100% capacity • Low-cost producer • Optimise mining method and metallurgy to maintain high recovery rates 2. Deliver growth through devel
Slide 5: Highlights
Highlights 2015 1H16 Silver production moz 47 25 Gold production koz 762 448 Revenues US$ million 1,444 887 Gross profit US$ million 433 394 Operating profit US$ million 200 304 EBITDA US$ million 548 474 EBITDA margin % 38 53 Total CAPEX US$ million 475 199 Exploration expenses US$ million 140 52 W
Slide 6: Operations Review
Operations Review Fresnillo mine Key operating statistics 1H16 Ore processed - mt 1.19 Gold ore grade - g/t 0.70 Silver production – moz 8.3 Cost per tonne – US$/t 43.8 Gold production – koz 20.6 Cash cost - US$/oz 3.56 Silver ore grade - g/t 234 AISC - US$/oz 8.31 Ø Medium term trend positive Turna
Slide 7: Operations Review (Cont’d)
Operations Review (Cont’d) Saucito Ciénega Key operating statistics 1H16 Key operating statistics 1H16 Ore processed - mt 1.28 Ore processed - kt 642 Silver production – moz 11.7 Gold production – koz 36.9 Gold production – koz 41.8 Silver production – moz 2.5 Silver ore grade - g/t 318 Gold ore gra
Slide 8: Operations Review (Cont’d)
Operations Review (Cont’d) Herradura Noche Buena Key operating statistics 1H16 Key operating statistics 1H16 Gold production – koz 249 Gold production – koz 99.7 Gold ore grade – g/t 0.69 Gold ore grade - g/t 0.49 Ore processed – mt 12.6 Ore processed – mt 8.6 Total volume hauled – mt 60.8 Total vol
Slide 9: San Julián
San Julián Key metric estimates Avg. annual silver production 10.3 moz Avg. annual gold production 43.9 koz Pre-operative capex $515 m Cash cost (average LoM) $7.77 /oz All-in sustaining costs (average LoM) $9.33 /oz DLP capacity (phase 1) 3,000TPD Flotation plant capacity (phase 2) 6,000TPD Life of
Slide 10: Expected Delivery of Growth
Expected Delivery of Growth (1) (2) Expecte d Avg. Inves tm ent YEAR (US$ million) Annual 2015 2016 2017 2018 2019 2020 2021 Production PROJECT CONSTRUCTION LEACHING PLANT 10.3 moz oz Ag 515 & 44 k oz Au SAN JULIÁN PRODUCTION CONSTRUCTION FLOTATION PLANT LEACHING PLANT 3.5 m oz Ag & PYRITES PLANT CO
Slide 11: Brownfield Projects
Brownfield Projects Centauro Ciénega Fresnillo Pyrites Plant Centauro Deep Extension Optimisation Optimisation Potential Tailings Natural evolution Optimisation Optimisation underground mine processing from Description of the Centauro pit project to increase project to increase beneath the Fresnillo
Slide 12: Proven Track Record of Delivering on Time and on Budget
Proven Track Record of Delivering on Time and on Budget Saucito I commissioning San Ramón satellite at Ciénega Commissioning of DLP ($273m / 9 moz Ag) ($20m/ 25 koz Au; 2.5 moz Ag) ($116m / 50 koz Au) 2010 2011 2012 2013 2014 Commercial production at Commercial production at Soledad-Dipolos began No
Slide 13: Expected Silver Production Profile
Expected Silver Production Profile Million Oz Attributable 90.0 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 - 2016 2017 2018 Yr Target of 65 moz silver by 2018 13
Slide 14: Expected Gold Production Profile
Expected Gold Production Profile Thousand Oz Attributable 1,100.0 1,000.0 900.0 800.0 700.0 600.0 500.0 400.0 300.0 200.0 100.0 - 2016 2017 2018 Yr Target of 750 koz gold by 2018 14
Slide 15: CAPEX Spend Expectations
CAPEX Spend Expectations Million Usd 900 800 700 600 500 400 300 200 100 0 2016 2017 2018 Sustaining CAPEX New Projects 15
Slide 16: Conclusions and Outlook
Conclusions and Outlook Ø Precious metal prices have performed strongly YTD, but sustainability of any rally in gold and silver prices will always remain uncertain Ø Therefore maintaining our cautious approach: contingency plan remains in place Ø Proven strategy remains unchanged ˗ Invest through th
Slide 17: Investment Case
Investment Case Strong balance sheet High quality assets Low-cost and flexible operations Disciplined approach to development Commitment to sustainable business practices 17
Slide 18: Appendix
“Driving Long-Term Value from Solid Foundations” Appendix
Slide 19: 1H16 Overview
1H16 Overview Ø Strong production ˗ Silver +6.1%; gold +23.0% ˗ Full year gold guidance raised to a record of 850-870 koz; accelerating medium term plan Ø Substantial operational progress ˗ Continue to progress turnaround plan at Fresnillo ˗ Decreased inventories further at Herradura ˗ Increased cap
Slide 20: 1H16 Financial Highlights
1H16 Financial Highlights Ø Adjusted revenues increased 16.7% vs. 1H15 mainly as a result of higher gold volumes sold (+24.5%) and the higher realised gold price (+3.3%) Ø Adjusted production cost decreased 5.2% ˗ Mainly due to favourable FX effects (19.3% average spot peso devaluation vs. dollar);
Slide 21: Income Statement (IFRS)
Income Statement (IFRS) ACCUM JUNE CHANGE CONCEP T (Million USD) 2016 % 2015 % $ % ADJUSTED REVENUES 959.4 822.4 137.0 16.7 HEDGING (METALS) 1.5 0.8 0.7 84.4 TREATMENT AND REFINING CHARGES (74.1) (70.9) (3.1) 4.4 REVENUES 886.9 100.0 752.3 100.0 134.6 17.9 ADJUSTED PRODUCTION COST (299.7) (33.8) (31
Slide 22: Cash Flow (IFRS)
Cash Flow (IFRS) CHANGE C O N C E P T (Million USD) YTD 2016 YTD 2015 $ % CASH GENERATED BY OPERATIONS BEFORE CHANGES IN WORKING CAPITAL 475.2 314.9 160.3 50.9 WORKING CAPITAL 0.5 (18.0) 18.6 N/A INCOME TAX AND PROFIT SHARING PAID (67.9) (33.5) (34.4) 102.9 NET CASH FROM OPERATING ACTIVITIES 407.9 2
Slide 23: Balance Sheet (IFRS)
Balance Sheet (IFRS) Change Concept 30-JUN-16 31-DIC-15 % Assets (Million USD) Cash and Investments 701.2 500.1 40.2 Trade and Other Receivables 278.4 305.7 (8.9) Inventories 295.9 300.6 (1.5) Prepaid Expenses 1.7 3.0 (41.5) Silverstream 471.6 384.8 22.6 Derivative Financial Instruments 1.1 117.1 (9
Slide 24: Consolidated Cost Inflation 1H16 (USD Based)
Consolidated Cost Inflation 1H16 (USD Based) 23
Slide 25: Breakdown of Adjusted Production Costs
Breakdown of Adjusted Production Costs 1.27% 4.81% 19.42% 9.51% 19.04% 28.92% 17.04% Adj Prod Cost: US$299.7m Operating Materials Energy & Diesel Maintenance 5.78% incurred by contractors 1.63% incurred by contractors 1.84% incurred by contractors Labour Others Freights Charge for use of contractor’
Slide 26: Cost Per Tonne (IFRS)
Cost Per Tonne (IFRS) ACCUM JUNE CHANGE 1H 2016 1H 2015 % CHG. COST PER TONNE * MINE UNIT Fresnillo US$/TON 43.80 48.53 -9.8% Saucito US$/TON 40.34 42.65 -5.4% Ciénega US$/TON 55.18 66.66 -17.2% Herradura US$/TON 7.61 ** 8.71 ** -12.6% Noche Buena US$/TON 7.80 ** 8.16 ** -4.5% * Cost per tonne is ca
Slide 27: Cash Cost (IFRS)
Cash Cost (IFRS) ACCUM JUNE CHANGE 1H 2016 1H 2015 % CHG. CASH COST * MINE UNIT Fresnillo PER OZ. SILVER 3.56 5.75 -38.1% Saucito PER OZ. SILVER 0.83 0.64 31.2% Ciénega PER OZ. GOLD (By-prod.) -121.68 296.99 -141.0% PER OZ. GOLD (Co-prod.)** 530.27 643.83 -17.6% PER OZ. SILVER (Co-prod.) ** 6.99 8.7
Slide 28: All In Sustaining Cost (US$/Oz)
All In Sustaining Cost (US$/Oz)* 1H 2016 1H 2015 % CHG. CASH COST * MINE UNIT Fresnillo PER OZ. SILVER 8.31 11.05 -24.8% Saucito PER OZ. SILVER 5.53 5.95 -7.2% Ciénega PER OZ. GOLD 525.86 649.97 -19.1% Herradura PER OZ. GOLD 721.24 873.23 -17.4% Noche Buena PER OZ. GOLD 826.11 940.87 -12.2% * All in
Slide 29: Contribution to the Adjusted Revenues and Gross Profit 1H16
Contribution to the Adjusted Revenues and Gross Profit 1H16 1 1H16 Adjusted Revenues : US$959.4m 1H16 Gross Profit Contribution2 By mine By metal By mine 4% 6% 19% 4% 13% 8% 37% 18% 36% 32% 57% 26% 10% 32% Fresnillo Saucito Ciénega Silver Gold Fresnillo Saucito Ciénega Herradura Noche Buena Lead Zin
Slide 30: Margins by mine (Metal price – Cash Cost)
Margins by mine (Metal price – Cash Cost) (1H16 vs. 1H15) (USD/Oz) Fresnillo Saucito Ciénega Herradura Noche Buena 7.4Moz. 7.7Moz. 10.6Moz. 10.4Moz. 39.8Koz. 34.0Koz. 186.8Koz. 246.2Koz. 70.0Koz. 99.6Koz. Chg. + 3.3% Chg. -1.4% Chg. -14.4% Chg. +31.8% Chg. +42.4% Ounces Sold Stoppage of operations c
Slide 31: Exploration Highlights
Exploration Highlights Ø Continued investment to maintain medium and long-term growth pipeline Ø Total risk capital of US$59.8m invested in exploration 1H16 Ø Exploration drilling: Ø 265km across Fresnillo, Herradura, Guanajuato, San Julián & Guazapares Districts in Mexico, and Pilarica & Huacravilc