Fresnillo Plc · LSE:FRES
Fresnillo — HSBC 6th Annual LATAM Conference 2016
44 slides from Fresnillo's conference presentation, Jun 22, 2016
Slide 1: HSBC 6th Annual LATAM Conference
“Driving Long-Term Value from Solid Foundations” HSBC 6th Annual LATAM Conference 22-23 June, 2016, New York, U.S. Gabriela Mayor, Head of IR LSE:Fres BMV:Fres www.fresnilloplc.com
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 World’s largest silver producer (47 moz in 2015) and Mexico’s DISTRICT second largest gold producer (762 koz in 2015) ORISYVO Market cap of US$12.5 billion* SAN JULIÁN Silver resources of 2 billion ounces and gold resources of 36 million ounces
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: 2015 Highlights
2015 Highlights • Silver production of 47 moz and gold production of 762 koz • Revenues: US$1.4 billion • Continued focus on cost control • Operating profit: US$200 million • EBITDA: US$548 million; EBITDA margin of 38% • Capex of US$475 million and exploration expenses of US$140 million • Total wor
Slide 6: Operations Review
Operations Review Fresnillo mine Key operating statistics 2015 Ore processed - mt 2.4 Gold ore grade - g/t 0.57 Silver production – moz 15.6 Cost per tonne – US$/t 48.2 Gold production – koz 34.1 Cash cost - US$/oz 5.6 Silver ore grade - g/t 220 AISC - US$/oz 11.5 Main issues: Secondary effects: Mea
Slide 7: Operations Review (Cont'd)
Operations Review (Cont’d) Saucito Ciénega Key operating statistics 2015 Key operating statistics 2015 Ore processed - mt 2.3 Ore processed - mt 1.3 Silver production – moz 22.0 Gold production – koz 85.7 Gold production – koz 84.9 Silver production – moz 4.8 Silver ore grade - g/t 327 Gold ore grad
Slide 8: Operations Review (Cont'd)
Operations Review (Cont’d) Herradura Noche Buena Key operating statistics 2015 Key operating statistics 2015 Gold production – koz 398.9 Gold production – koz 158.2 Gold ore grade – g/t 0.73 Gold ore grade - g/t 0.50 Ore processed – mt 22.9 Ore processed – mt 17.4 Total volume hauled – mt 117.0 Tota
Slide 9: Expected Delivery of Growth
Expected Delivery of Growth (1) (2) Expected Avg. Investm ent YEAR (US$m ) Annual 2015 2016 2017 2018 2019 2020 2021 Production PROJECT A CONSTRUCTION LEACHING PLANT 10.3 m oz Ag & 515 44 koz Au SAN JULIÁN PRODUCTION CONSTRUCTION FLOTATION PLANT MINE DEVELOPMENT FRESNILLO 9,000 TPD 30 3 moz Ag PRODU
Slide 10: Approved Projects San Julián
Approved Projects 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 Phase 1 capacity (DLP to treat ore from 3,000TPD veins) Phase 2 c
Slide 11: Approved Projects San Julián: Commissioning 2Q16
Approved Projects San Julián: Commissioning 2Q16 Phase 1 Phase 2 11
Slide 12: Approved Projects Pyrites Plant
Approved Projects Pyrites Plant Key metric estimates Avg. annual silver production 3.5 moz Avg. annual gold production 12.8 koz Saucito I Saucito II Fresnillo Plant Pre-operative capex $155 m Cash cost (average LoM) $2.51 /oz Old Tailings Fe Tailings Plant Plant Hauling Filtration Leaching Plant Giv
Slide 13: Centauro Extension Project Approved
Centauro Extension Project Approved 2nd Line of Dynamic Leaching Plant Overview Ore type Centauro Extension project, the natural evolution of the main Centauro pit, approved by the board Encompasses second line of dynamic leaching plant Will enable more efficient processing of sulphides which occur
Slide 14: Centauro Extension - Cut off grade for Sulphides
Centauro Extension - 2nd Line of DLP Cut off grade for Sulphides 14
Slide 15: Centauro Extension - Gold Production Differential
15 Centauro Extension - 2nd Line of DLP Gold Production Differential Thousand Oz Difference in Gold Production 50 45 40 35 30 25 20 15 10 5 - 2016 2017 2018 2019 2020 2021 15
Slide 16: Potential Brownfield Expansions
Potential Brownfield Expansions Ciénega Fresnillo Centauro Pyrites Plant Centauro Deep Optimisation Optimisation Extension Potential Tailings Optimisation Optimisation Natural evolution underground mine processing from Description project to increase project to increase of the Centauro pit beneath t
Slide 17: Advanced Exploration Projects
Advanced Exploration Projects Juanicipio (JV with MAG Silver. Fresnillo: 56%) Orisyvo 8km from the Fresnillo mine; Juanicipio’s mineral zones are Assessing a 8,000TPD mine with a DLP processing facility; located in silver-gold rich sulphide shoots of the veins. focusing on higher grade zones of the
Slide 18: Strong Organic Growth Pipeline
Strong Organic Growth Pipeline 2016 Budget: c.US$135-140m Pipeline allows us to focus on Fresnillo projects that have the Saucito Mine Operations 27% potential to be developed Herradura Nochebuena into low cost, Ciénega - San Ramón world-class mines Soledad &Dipolos* Development Projects San Julián
Slide 19: 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) ($116m / 50 koz Au) 2010 2011 2012 2013 2014 Commercial production at Commercial production at Soledad-Dipolos began No
Slide 20: Expected Silver Production Profile
Expected Silver Production Profile Million Oz Attributable 90.0 80.0 Juanicipio - 56% 70.0 Pyrites Plant San Julián 60.0 Noche Buena 50.0 Centauro extension Dynamic Leaching Plant 40.0 S&D Herradura 30.0 Ciénega optimisation Ciénega 20.0 Saucito 10.0 Fresnillo optimisation Fresnillo - 2016 2017 2018
Slide 21: Expected Gold Production Profile
Expected Gold Production Profile Thousand Oz Attributable 1,000.0 Centauro Deep Orisyvo 900.0 Pyrites Plant 800.0 Juanicipio - 56% San Julián 700.0 Saucito 600.0 Ciénega Optiimisation Ciénega 500.0 Fresnillo Optimisation 400.0 Fresnillo Soledad&Dipolos 300.0 Noche Buena 200.0 Centauro extension Dyna
Slide 22: CAPEX Spend Expectations
CAPEX Spend Expectations Capital expenditure US$ Million 2016 Million Usd Sustaining (operations) 900 • Fresnillo 102m 800 • Saucito 101m • Herradura 96m 700 • Ciénega 50m 600 • Noche Buena 13m 500 • Others 3m 400 Sustaining (projects approved) 35m 300 Projects Approved 200 • San Julián 127m 100 • P
Slide 23: Conclusions & Outlook
“Well placed to address cyclical uncertainties” Conclusions & Outlook
Slide 24: Conclusions and Outlook
Conclusions and Outlook Precious metal prices continue to be volatile However, we are well-placed to withstand this volatility and to reap the benefits of higher prices, supported by our strong foundations Near-term priorities Turnaround at Fresnillo (low double-digit percentage increase expected in
Slide 25: Investment Case
Investment Case Strong balance sheet High quality assets Low-cost and flexible operations Disciplined approach to development Commitment to sustainable business practices 25
Slide 26: Appendix
“Well placed to address cyclical uncertainties” Appendix
Slide 27: Income Statement (IFRS)
Income Statement (IFRS) ACCUM DECEMBER CHANGE CONCEP T (Million USD) 2015 % 2014 % $ % ADJUSTED REVENUES 1,583.3 1,545.0 38.3 2.5 HEDGING (METALS) 3.9 0.1 3.8 3,732.1 TREATMENT AND REFINING CHARGES (142.8) (131.4) (11.4) 8.7 REVENUES 1,444.4 100.0 1,413.7 100.0 30.7 2.2 ADJUSTED PRODUCTION COST (634
Slide 28: Cash Flow (IFRS)
Cash Flow (IFRS) CHANGE C O N C E P T (Million USD) YTD 2015 YTD 2014 $ % CASH GENERATED BY OPERATIONS BEFORE CHANGES IN WORKING CAPITAL 537.3 575.4 (38.0) (6.6) WORKING CAPITAL 51.3 (260.3) 311.6 (119.7) INCOME TAX AND PROFIT SHARING PAID (45.8) (183.2) 137.4 (75.0) NET CASH FROM OPERATING ACTIVITI
Slide 29: Balance Sheet (IFRS)
Balance Sheet (IFRS) Change Concept (Million USD) 31-DIC-15 31-DIC-14 % Assets Cash and Investments 500.1 449.3 11.3 Trade and Other Receivables 305.7 456.2 (33.0) Inventories 300.6 305.6 (1.6) Prepaid Expenses 3.0 3.4 (11.6) Silverstream 384.8 392.3 (1.9) Derivative Financial Instruments 117.1 14.6
Slide 30: Cost Per Tonne (IFRS)
Cost Per Tonne (IFRS) ACCUM DEC CHANGE 2015 2014 % CHG. COST PER TONNE * MINE UNIT Fresnillo US$/TON 48.20 47.29 1.9% Saucito US$/TON 42.49 59.14 -28.2% Ciénega US$/TON 62.99 70.84 -11.1% Herradura US$/TON 8.68 ** 9.29 ** -6.6% Noche Buena US$/TON 7.93 ** 9.98 ** -20.5% * Cost per tonne is calculate
Slide 31: Cash Cost (IFRS)
Cash Cost (IFRS) ACCUM DEC CHANGE 2015 2014 % CHG. CASH COST * MINE UNIT Fresnillo PER OZ. SILVER 5.60 5.29 5.9% Saucito PER OZ. SILVER 1.15 2.48 -53.4% Ciénega PER OZ. GOLD (By-prod.) 245.49 288.00 -14.8% PER OZ. GOLD (Co-prod.)** 625.42 623.98 0.2% PER OZ. SILVER (Co-prod.) ** 8.35 9.27 -9.9% PER
Slide 32: All In Sustaining Cost (US$/Oz)
All In Sustaining Cost (US$/Oz)* 2015 2014 % CHG. CASH COST * MINE UNIT Fresnillo PER OZ. SILVER 11.48 9.84 16.7% Saucito PER OZ. SILVER 7.11 5.43 31.0% Ciénega PER OZ. GOLD 710.37 786.40 -9.7% Herradura PER OZ. GOLD 888.04 862.19 3.0% Noche Buena PER OZ. GOLD 1,015.40 1,051.00 -3.4% * All in sustai
Slide 33: Consolidated Cost Inflation 2015 (USD Based)
Consolidated Cost Inflation 2015 (USD Based) 33
Slide 34: Contribution by Mine and by Metal to the Adjusted Revenues 2015
Contribution by Mine and by Metal to the Adjusted Revenues 2015 1 2015 Adjusted Revenues : US$1,583.3m By mine By metal 11% 20% 4% 5% 28% 52% 39% 30% 11% Fresnillo Saucito Ciénega Silver Gold Herradura Noche Buena Lead Zinc Fresnillo Ciénega Herradura Saucito Noche Buena Consol Gold 35.04 11.0% 88.3
Slide 35: Breakdown of Adjusted Production Costs
Breakdown of Adjusted Production Costs Adj Prod Cost: US$634.5m 1 Contractors Operating Materials Energy & Diesel Maintenance Personnel Others Freights Charge for use of contractor’s equipment 1 Contractors are hired to execute specific tasks. Fees paid include labour, operating materials, equipment
Slide 36: Breakdown of Adjusted Production Costs
Breakdown of Adjusted Production Costs Adj Prod Cost: US$634.5m Contractors Operating Materials Energy & Diesel Maintenance Personnel Others Freights Charge for use of contractor’s equipment 36
Slide 37: Breakdown of Adjusted Production Costs
Breakdown of Adjusted Production Costs 5.23% 1.55% Adj Prod Cost: US$634.5m 10.68% 27.72% 1 Contrac Op Mat Energy & Diesel 14.95% Mainten Freights Person Others 1 Contractors are hired to execute specific tasks. Fees paid include labour, operating materials, equipment, diesel and any other items req
Slide 38: Margins by mine (Metal price – AISC) (2015 vs. 2014)
Margins by mine (Metal price – AISC*) (2015 vs. 2014) (USD/Oz) Cash Fresnillo Saucito Silver Cash Cost Ciénega Herradura Noche Buena Gold Price Cost Price 32.0 32.0 1,900 1,900 27.4 27.4 1,629 1,629 1,257.66 1,257.66 1,357 1,257.66 1,357 22.9 22.9 1,150.89 1,150.89 18.62 18.62 1,150.89 1,086 1051.00
Slide 39: Operations: Fresnillo Mine
Operations Fresnillo Mine 2015 Summary Lower silver production Lower grades Lower volumes Improvements in silver grade and production in H2 Lead and zinc production increased 17% and 25% respectively Expected higher ore grades as we go deeper into the mine 2015 Performance Looking Forward 2015 2014
Slide 40: Operations: Turnaround at the Fresnillo Mine
Operations Turnaround at the Fresnillo Mine Expected results/ Main issues Secondary effects Measures put in place Short-term targets Veins narrowing faster Increase in stoping than expected Required increase in area from 12,000 m2 to Infill drilling with a rate of development 20,000m2 closer grid Na
Slide 41: Operations: Saucito Mine
Operations Saucito Mine 2015 Summary Ramp-up of Saucito II by 2Q15 Significantly ahead of plan On budget Silver production increased Start-up of Saucito II & ramp-up Milling efficiencies, higher grade areas, improved dilution Increased Saucito I milling capacity by 20% to 3,600TPD 2015 Performance L
Slide 42: Operations: Ciénega Mine
Operations Ciénega Mine 2015 Summary Gold production decreased on expected lower grade Silver production increased Richer veins at San Ramón satellite High grade development ore from Taspana vein Looking Forward Continue exploration in areas of influence to extend district’s mine life (Gms/T) Grade
Slide 43: Operations: Herradura Mine
Operations Herradura Mine 2015 Summary Second Merrill Crowe plant commissioned 4Q15 as planned Reached steady state operations (4Q15) Gold production increased Mine & DLP operational for full period Higher overall speed of recovery Installation of second Merrill Crowe plant Increase in ore grade Sta
Slide 44: Operations: Noche Buena Mine
Operations Noche Buena Mine 2015 Summary Gold production increased Higher rate of recovery (full year of leaching pads 4 & 5) Partly offset by lower ore grade (ore deposited from higher banks to control haulage costs) Further efforts to improve efficiency & control costs Optimisation of tyre consump