Fresnillo Plc · LSE:FRES
Fresnillo — FY2012 Earnings Presentation
47 slides from Fresnillo's earnings presentation, Mar 12, 2013
Slide 1: Preliminary Results to year ending 31 Dec 2012
Preliminary Results to year ending 31 Dec 2012 March 12, 2013
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 Octavio Alvídrez, CEO • Financial Review Mario Arreguín, CFO • Exploration Review David Giles, VP of Exploration • Projects Review Executive team • Outlook Octavio Alvídrez, CEO 12/03/2013 3
Slide 4: Our strategy & four pillars to create value
Our strategy & four pillars to create value 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 metallurgy to maintain • Spec
Slide 5: What makes Fresnillo different
What makes Fresnillo different Strategy and model balances growth and returns US$ Silver cash cost curve Ag price • Maintaining operational excellence – Lowest quartile of the cost curve – Track record of delivering on production • Managing the portfolio Source: CRU* Attributable silver resources –
Slide 6: 2012 Financial Highlights
2012 Financial Highlights • Lower silver prices and lower ore grades at Fresnillo mine • Revenue flat at US$2.16 billion • Increase in adjusted production cost mainly from new operations and higher volumes of ore processed • Higher depreciation charges (+47.5%) • Higher exploration expenses (+74.3%)
Slide 7: Operations Review
ai ~ FRESNILLO. Operations Review
Slide 8: 2012 Operations Highlights
2012 Operations Highlights Four pillars of the business model supports 2012 operational results: 1. Maximise the potential of existing operations • Record attributable gold production of 473,034 ounces, up 5.4% • Silver production of 41m oz (including 4 m oz from the Silverstream) in line with guida
Slide 9: 2012 Highlights (continued)
2012 Highlights (continued) 3 Expand the growth pipeline • Silver resources increased to 2 bn oz, up 12.2%, and gold resources to 27moz, up 15.0% • San Julián (silver project) construction commenced • Converted resources to reserves at Saucito, key to growth • Aggressive exploration at Herradura Dis
Slide 10: Ore Grades
Ore Grades FRESNILLO (Gms/Ton) SAUCITO 350 325 300 275-285 275 265 300-310 250 250 225 2011 2012 2013E 2014E 2015 E 2016 E 2017 E 2018 E Ore grade in reserves: 281g/t Ore grade in reserves: 357g/t CIENEGA GOLD CIENEGA SILVER 105-115 2.8-3.3 Ore grade in reserves: 1.38g/t Ore grade in reserves: 111g/
Slide 11: Financial Performance
ai ~ FRESNILLO. Financial Performance
Slide 12: 2012 Financial performance
2012 Financial performance • Average realised silver price US$31.43 per oz, down 9.8% • Average realised gold price US$1,674.14 per oz, up 5.6% • Average spot exchange rate ($/USD) 13.1677, annual average devaluation of 6.0% • Cost inflation: Unit Price Increase % Weight Labour 0.4% 10.5% Operating
Slide 13: INCOME STATEMENT (IFRS)
INCOME STATEMENT (IFRS) ACCUM DECEMBER CHANGE C O N C E P T (Million USD) 2012 % 2011 % $ % ADJUSTED REVENUES 2,287.2 2,307.5 (20.2) (0.9) TREATMENT AND REFINING CHARGES (129.8) (114.8) (15.0) 13.1 REVENUES 2,157.4 100.0 2,192.7 100.0 (35.3) (1.6) ADJUSTED PRODUCTION COST (576.2) (26.7) (419.4) (19.
Slide 14: INCOME STATEMENT (IFRS)
INCOME STATEMENT (IFRS) ACCUM DECEMBER CHANGE C O N C E P T (Million USD) 2012 % 2011 % $ % ADJUSTED REVENUES 2,287.2 2,307.5 (20.2) (0.9) TREATMENT AND REFINING CHARGES (129.8) (114.8) (15.0) 13.1 REVENUES 2,157.4 100.0 2,192.7 100.0 (35.3) (1.6) ADJUSTED PRODUCTION COST (576.2) (26.7) (419.4) (19.
Slide 15: INCOME STATEMENT (IFRS)
INCOME STATEMENT (IFRS) ACCUM DECEMBER CHANGE C O N C E P T (Million USD) 2012 % 2011 % $ % ADJUSTED REVENUES 2,287.2 2,307.5 (20.2) (0.9) TREATMENT AND REFINING CHARGES (129.8) (114.8) (15.0) 13.1 REVENUES 2,157.4 100.0 2,192.7 100.0 (35.3) (1.6) ADJUSTED PRODUCTION COST (576.2) (26.7) (419.4) (19.
Slide 16: Consolidated Gross Profit Analysis
Consolidated Gross Profit Analysis CHANGE 2012 2011 $ % USD MILLION Gross Profit 1,350.7* 1,563.5 -212.8 -13.6 * (new operations) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 16
Slide 17: Consolidated Gross Profit Analysis
Consolidated Gross Profit Analysis CHANGE • Saucito: Average spot MXP/USD YTD 2012 YTD 2011 • Au (gms/ton): 1.8 vs.1.4; +22.6%$ • Prop.,%Plant and Equip.MUS$ 2012 2011 Chg • Ag (gms/ton): 265 vs. 250; +6.0% 2012 2011 Chg USD MILLION Gross Profit 13.17 12.43 +6.0% 1,350.7* 1,563.5 -212.8 -13.6 478.0
Slide 18: Cost Per Tonne (IFRS)
Cost Per Tonne (IFRS) ** ** 23% of ore processed came from development works and was assigned a very low cost per ton (similar to the Fresnillo mine). * Cost per tonne is calculated as total production costs less depreciation, profit sharing and the exchange rate hedging effects. 12/03/2013 18
Slide 19: Margins by mine (Metal price – Cash Cost)
Margins by mine (Metal price – Cash Cost) (2012 vs 2011) (USD/Oz) Fresnillo Saucito Ciénega Herradura SD NB 27.9Moz. 24.5Moz. 5.3Moz. 6.7Moz. 109.9Koz. 120.6Koz. 321.2Koz. 311.2Koz. 154.9Koz. 105.7Koz. 64.8Koz. Chg. -12.1% Chg. +25.7% Chg. +9.7% Chg. -3.1% Chg. -31.8% Ounces Sold 12/03/2013 19
Slide 20: INCOME STATEMENT (IFRS)
INCOME STATEMENT (IFRS) ACCUM DECEMBER CHANGE C O N C E P T (Million USD) 2012 % 2011 % $ % ADJUSTED REVENUES 2,287.2 2,307.5 (20.2) (0.9) TREATMENT AND REFINING CHARGES (129.8) (114.8) (15.0) 13.1 REVENUES 2,157.4 100.0 2,192.7 100.0 (35.3) (1.6) ADJUSTED PRODUCTION COST (576.2) (26.7) (419.4) (19.
Slide 21: INCOME STATEMENT (IFRS)
Changes in: Forward silver prices 5 years Long-term silver prices beyond 5 years INCOME STATEMENT (IFRS) Inflation and exchange rate Interest rate Resources ACCUM DECEMBER CHANGE CONCEPT 2012 % 2011 % $ % ADJUSTED REVENUES (Million USD) 2,287.2 2,307.5 (20.2) (0.9) TREATMENT AND REFINING CHARGES (12
Slide 22: Consolidated Cashflow
Consolidated Cashflow CHANGE C O N C E P T (Million USD) 2012 2011 $ % CASH GENERATED BY OPERATIONS BEFORE CHANGES IN WORKING CAPITAL 1,364.5 1,612.1 (247.6) (15.4) WORKING CAPITAL (107.6) (36.1) (71.5) N/A INCOME TAX AND PROFIT SHARING PAID (513.3) (326.8) (186.4) 57.0 NET CASH FROM OPERATING ACTIV
Slide 23: Consolidated Cashflow
Consolidated Cashflow CHANGE C O N C E P T (Million USD) YTD 2012 • Increase in ore inventories YTD 2011 $ at leaching % • pads (open pit mines) $98.2. CASH GENERATED BY OPERATIONS BEFORE CHANGES IN WORKING CAPITAL 1,364.5 1,612.1 • Increase in trade and (247.6) (15.4) other receivables WORKING CAPI
Slide 24: Exploration Review
ai ~ FRESNILLO. Exploration Review
Slide 25: Increase in resources
Increase in resources The US$318.9m capital invested in exploration resulted in double digit increases in both resources and reserves: a) Silver resources +12.2% and gold resources +15.0% Metal Content Increase vs Resources 2011 Gold Silver Lead Zinc Gold Silver Lead Zinc (koz) (koz) (kt) (kt) (koz)
Slide 26: Increase in reserves
Increase in reserves b) Silver reserves +23.6% and gold reserves +19.0% Metal Content Increase vs Reserves 2011 Gold Silver Lead Zinc Gold Silver Lead Zinc (koz) (koz) (kt) (kt) (koz) (koz) (kt) (kt) Fresnillo 733 308,467 524 1,068 2 -16,280 -17 10 Saucito 569 118,879 166 257 395 94,236 156 243 Cién
Slide 27: Exploration – New Projects
Exploration – New Projects GUANAJUATO (Guanajuato) • Resources: 2.44 Mt @ 2.2 g/t gold and 115 g/t silver. Metal content 174 koz gold and 9.0 Moz silver (sulfides). • Potential open. • Extensive system of silver-gold bearing veins in a major mining district. • Flotation plant and operation infrastru
Slide 28: Exploration – New Projects
Exploration – New Projects CANDAMEÑA (Chihuahua) • Resources: 56.2 Mt @ 0.63 g/t gold and 15 g/t silver. Metal content 1.1 Moz gold and 26.7 Moz silver (30% oxides). • Potential: open. • Disseminated gold-silver values in silicified volcanics. • Amenable to open-pit mining, adjacent virgin target ar
Slide 29: Projects Review
ai ~ FRESNILLO. Projects Review
Slide 30: Expected delivery of growth
Expected delivery of growth Investment Expected YEAR (US$ million) 2013 2014 2015 2016 2017 2018 Production PROJECT (1) (2) 50 thds Oz DYNAMIC LEACHING CONSTRUC- PRODUCTION 120 (Optimization project) TION Au 10 mill Oz Ag & 500 SAN JULIÁN CONSTRUCTION PRODUCTION 45 thds Oz Au 10 mill Oz Ag & 235 SAU
Slide 31: Achieving 65moz silver by 2018
Achieving 65moz silver by 2018 Million Oz 80 Juanicipio 70 San Julián 60 Pyrites Plant 50 Saucito II 40 30 Saucito 20 Fresnillo Expansion 10 Fresnillo 0 2012 2013 2014 2015 2016 2017 2018 Ciénega Note: Attributable silver production. Silver Stream not included. 12/03/2013 31
Slide 32: Dynamic Leaching Plant
Dynamic Leaching Plant Ownership 56% Fresnillo plc Processing of high grade ore from Herradura and Soledad & Dipolos open pit mines increasing the gold recovery rate from 70% (currently obtained by the heap leaching process) to 95%. Construction activities progressed after relocation due to the pote
Slide 33: San Julián Project
San Julián Project Ownership 100% Fresnillo plc Underground mine, flotation plant for disseminated silver-lead-zinc system and a dynamic leaching plant for epithermal silver-gold veins. Detailed engineering for the plant continued and construction activities progressed, including a landing strip. Mi
Slide 34: Saucito II Project
Saucito II Project Ownership 100% Fresnillo plc Underground mine. Recently approved by the Board. The project is located in a well-known district, which has the required infrastructure available for the development. Saucito II The project has the advantage of being able to start production earlier b
Slide 35: Outlook
ai ~ FRESNILLO. Outlook
Slide 36: Outlook: balancing growth & returns
Outlook: balancing growth & returns Amidst volatile prices in 2012 and a higher cost environment, Fresnillo delivered on growth: • New production from Noche Buena • Increased production from Ciénega and Herradura and returns: • EBITDA margins remain amongst the highest in the industry • Dividend Loo
Slide 37: Appendix
ai ~ FRESNILLO. Appendix
Slide 38: High quality portfolio feeds pipeline
High quality portfolio feeds pipeline Mines in operation • Fresnillo • Saucito • Ciénega & San Ramón Development projects • Soledad-Dipolos • Herradura Operate • Dynamic leaching plant • Noche Buena assets • San Julián • Saucito II (at Saucito) Advanced exploration projects • Centauro Deep Develop P
Slide 39: Operation Review – Fresnillo District
Operation Review – Fresnillo District FRESNILLO SAUCITO 2012 2011 Change % 2012 2011 Change % Attributable production Silver m oz 26.4 30.3 -3.9 -12.9 7.1 5.9 1.2 19.5 Gold k oz 29.6 26.2 3.3 12.7 45.2 33.5 11.8 35.1 Lead kt 16.2 13.4 2.8 21.0 2.8 1.7 1.0 59.2 Zinc kt 15.0 12.6 2.3 18.6 1.8 1.2 0.6
Slide 40: Operation Review – Ciénega District
Operation Review – Ciénega District CIÉNEGA 2012 2011 Change % Attributable production Gold k oz 125.3 116.8 8.4 7.2 Silver m oz 3.3 1.5 1.9 125.8 Ore processed kt 1,112.8 966.8 146.0 15.1 Ore grades Gold g/t 3.6 3.9 -0.3 -7.7 Silver g/t 105.2 53.3 51.9 97.4 Key developments • Commercial production
Slide 41: Operation Review – Herradura District
Operation Review – Herradura District HERRADURA SOLEDAD-DIPOLOS NOCHE BUENA 2012 2011 Change % 2012 2011 Change % 2012 2011 Attributable production Gold k oz 176.1 183.5 -7.4 -4.0 60.1 88.8 -28.7 -32.3 36.7 0.0 Ore processed kt 24,641.1 21,020.4 3,620.7 17.2 15,317.9 12,264.9 3,053.0 24.9 8,447.3 0.
Slide 42: Saucito II Project
Saucito II Project Jarillas Shaft Saucito Shaft 12/03/2013 42
Slide 43: Dynamic Leaching Plant
Dynamic Leaching Plant 12/03/2013 43
Slide 44: San Julián Project
San Julián Project 12/03/2013 44
Slide 45: Increase in resources by mine/project
Increase in resources by mine/project 221.8 MILLION SILVER OUNCES RESOURCE INCREASE 2.6 MILLION GOLD OUNCES RESOURCE INCREASE CONTRIBUTION BY MINE/PROJECT CONTRIBUTION BY MINE/PROJECT 6% 2% 12% 18% Fresnillo District 8% 4% Candameña Pilarica 33% Lucerito Guachichil 7% 9% Candameña Lucerito San Nicol
Slide 46: Contribution by mine to the Gross Profit
Contribution by mine to the Gross Profit CHANGE 2012 2011 US$ % Fresnillo 590.3 44.2% 792.8 51.1% (202.4) (25.5) Herradura 304.7 22.8% 338.5 21.8% (33.8) (10.0) Ciénega 170.4 12.8% 129.6 8.4% 40.8 31.5 Saucito 148.8 11.1% 136.3 8.8% 12.4 9.2 Sol & Dipolos 80.8 6.1% 153.2 9.9% (72.4) (47.3) Noche Bue
Slide 47: Consolidated Balance Sheet (IFRS)
Consolidated Balance Sheet (IFRS) Change Concept 31-DEC-12 31-DEC-11 % Assets Cash and Investments 613.8 684.9 (10.4) Trade and Other Receivables 263.6 249.3 5.8 Inventories 198.0 99.8 98.3 Prepaid Expenses 3.1 3.2 (3.8) Silverstream 487.8 478.1 2.0 Derivative Financial Instruments 2.8 - N/A Propert