Fresnillo Plc · LSE:FRES
Fresnillo — H1 2014 Earnings Presentation
47 slides from Fresnillo's earnings presentation, Aug 5, 2014
Slide 1: Interim Results 2014
Interim Results 2014 Strong operations to weather cyclical challenges August 5, 2014 1
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 • Projects review Executive Team • Exploration Review David Giles, VP of Exploration • Outlook Octavio Alvídrez, CEO 5/08/2014 3
Slide 4: Our strategy & four pillars to create value
Our strategy & four 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 development projects • Focus on delivery timeline • Disciplined CA
Slide 5: H1 14 Operational Highlights
H1 14 Operational Highlights Existing Operations: – Gold and silver production on track to meet full year guidance of 43 Moz silver (including Silverstream) and 450,000 oz gold – Gold production at Herradura resumed in March and returning to normal levels – Ongoing focus on grade optimisation at Fre
Slide 6: 1H 14 Financial Highlights
1H 14 Financial Highlights Weaker silver and gold prices and temporary disruption at Penmont: • Resulted in the decline of adjusted revenue by 23.6% to US$750.4m But with successful cost control: • EBITDA margins remain among the best in the industry albeit at a slightly lower level at 47.9% Generat
Slide 7: Operations Review
av FRESNILLO. Operations Review
Slide 8: Fresnillo district
Fresnillo district Fresnillo: Saucito: • 10.5moz silver produced in 1H 14 down 5.8% due to • 6.3moz silver produced in 1H 14 up 12.2% due to increased lower ore grades ore processed • Approaching average grade of the deposit of 255 g/t • Silver ore grades expected to remain within guided range of le
Slide 9: Ciénega district
Ciénega district Gold: Silver: • 53,984oz gold produced in 1H 14 down 9.5% due to • 2.1moz silver produced down 5.3% due to lower ore grades expected decline in ore grades • Ore grade guidance of 120-125 g/t remains • Ore grade guidance of 2.0-2.5 g/t remains • Higher throughput partially mitigated
Slide 10: Herradura district
Herradura district Herradura: Noche Buena: • 58,532oz attributable gold produced in 1H 14 down 35.8% • 36,099oz attributable gold produced in 1H 14 up 33.5% due to the disrupted operations following the temporary due to higher ore deposited and recovery rates suspension of the explosives permits, wh
Slide 11: Financial Performance
av FRESNILLO. Financial Performance 11
Slide 12: Income Statement (IFRS)
INCOME STATEMENT (IFRS) ACCUM JUNE CHANGE CONCEPT (Million USD) 1H 2014 % 1H 2013 % $ % ADJUSTED REVENUES 750.4 982.3 (231.9) (23.6) HEDGING (METALS) 0.0 0.1 (0.1) (92.2) TREATMENT AND REFINING CHARGES (73.3) (56.5) (16.8) 29.8 REVENUES 677.1 100.0 925.9 100.0 (248.8) (26.9) ADJUSTED PRODUCTION COST
Slide 13: Consolidated Cost Inflation 2014 (USD Based)
Consolidated Cost Inflation 2014 (USD Based) Consolidated Unit Price Weighted Increase % Weight (*) Average Labour Unionized Personnel 1.0% 7.9% 0.08% Employees 0.1% 3.0% 0.00% Weighted 0.8% Operating Materials -1.6% 20.4% -0.33% Energy Electric Energy 1.6% 9.5% 0.15% Diesel 6.2% 8.4% 0.52% Fuel 7.5
Slide 14: Adjusted Production Cost Analysis (Consolidated)
Adjusted Production Cost Analysis (Consolidated) CHANGE 1H14 1H13 $ % Adjusted Production Cost 291.3 339.0 -47.7* -14.1 Change in inventories -60.8 -51.0 -9.8 19.2 Unproductive Costs 9.2 - 9.2 N/A Depreciation 133.3 114.3 19.1 16.7 PTU 8.6 8.8 -0.2 -2.1 Hedging (mxp/usd exchange rate) 0.2 (Loss) -4.
Slide 15: Adjusted Production Cost Analysis (Consolidated)
Adjusted Production Cost Analysis (Consolidated) • Better control of the rock bolting CHANGEprocess 1H14 1H13 $ % • Use of wire mesh to optimise shotcreting Adjusted Production Cost 291.3 339.0 activities. -47.7* -14.1 Change in inventories Volume Processed -60.8 -51.0 -9.8 19.2 Unproductive Costs (
Slide 16: Cost Per Tonne (IFRS)
Cost Per Tonne (IFRS) ACCUM JUN CHANGE 1H 2014 1H 2013 % CHG. COST PER TONNE * MINE UNIT Fresnillo US$/TON 45.02 46.60 -3.4% Saucito US$/TON 62.09 59.17 4.9% Ciénega US$/TON 67.61 73.59 -8.1% Herradura US$/TON 8.03 ** 7.13 12.6% Soledad & Dipolos US$/TON - 9.96 N/A Noche Buena US$/TON 8.89 8.20 8.3%
Slide 17: Cash Cost (IFRS)
Cash Cost (IFRS) ACCUM JUN CHANGE 1H 2014 1H 2013 % CHG. 1 CASH COST MINE UNIT Fresnillo PER OZ. SILVER 6.13 5.46 12.3% Saucito PER OZ. SILVER 3.36 2.19 53.9% Ciénega PER OZ. GOLD 180.64 -86.29 309.3% Herradura PER OZ. GOLD 403.74 492.95 -18.1% Soledad & Dipolos PER OZ. GOLD - 672.71 N/A Noche Buena
Slide 18: Margins by mine (Metal price – Cash Cost)
Margins by mine (Metal price – Cash Cost) (2014 vs 2013) (USD/Oz) Fresnillo Saucito Ciénega Herradura SD NB * 10.5Moz. 10.2Moz. 5.3Moz. 6.1Moz. 57.9Koz. 48.6Koz. 161.5Koz. 103.8Koz. 39.1Koz. 0.0Koz.* 47.3Koz. 63.8Koz. Chg. + -3.0% Chg. +15.9% Chg. -16.0% Chg. -35.7% Chg. -100.0% Chg. +34.9% * Stoppa
Slide 19: All In Sustaining Cost (US$/Oz)
19 All In Sustaining Cost (US$/Oz) LIFE OF MINE 1H 2014 1H 2013 % CHG. WEIGHTED AVERAGE CASH COST * MINE UNIT Fresnillo PER OZ. SILVER 9.93 9.45 5.1% 9.24 (2025) Saucito PER OZ. SILVER 7.66 6.83 12.2% 6.9 (2022) Ciénega PER OZ. GOLD 594.58 463.50 28.3% 725 (2025) Herradura PER OZ. GOLD 839.51 735.83
Slide 20: Consolidated Gross Profit Analysis
Consolidated Gross Profit Analysis CHANGE 1H14 1H13 $ % Gross Profit 295.1* 518.9 -223.8 -43.1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Slide 21: Consolidated Gross Profit Analysis
Consolidated Gross Profit Analysis CHANGE 1H14 1H13 $ % Average spot MXP/USD Volume Processed (Mton) 1H14 295.1* 1H13 Chg 518.9 Ore Grade -223.8 Ciénega: -43.1 Silver,Gold and Lead average USD MILLION Gross Profit 1H14 1H13 Chg 1H14 1H13 Chg 13.12 12.56 +4.4% realised prices (USc/Lb) Ore Grade Herra
Slide 22: Contribution by mine to the Gross Profit
Contribution by mine to the Gross Profit CHANGE 1H14 1H13 US$ % Fresnillo 117.4 37.5% 173.8 34.6% (56.4) (32.5) Herradura 59.9 19.1% 125.1 24.9% (65.2) (52.1) Ciénega 28.6 9.1% 64.8 12.9% (36.2) (55.9) Saucito 85.0 27.2% 105.0 20.9% (20.1) (19.0) Sol & Dipolos (5.0) -1.6% 18.1 3.6% (23.0) N/A Noche
Slide 23: Income Statement (IFRS)
INCOME STATEMENT (IFRS) ACCUM JUNE CHANGE CONCEPT (Million USD) 1H 2014 % 1H 2013 % $ % ADJUSTED REVENUES 750.4 982.3 (231.9) (23.6) HEDGING (METALS) 0.0 0.1 (0.1) (92.2) TREATMENT AND REFINING CHARGES (73.3) (56.5) (16.8) 29.8 REVENUES 677.1 100.0 925.9 100.0 (248.8) (26.9) ADJUSTED PRODUCTION COST
Slide 24: Cash Flow (IFRS)
CASH FLOW (IFRS) CHANGE C ONC EPT (US $ millions) YTD 2014 YTD 2013 $ % CASH GENERATED BY OPERATIONS BEFORE CHANGES IN WORKING CAPITAL 336.7 496.4 (159.7) (32.2) WORKING CAPITAL (71.5) (53.0) (18.5) 35.0 INCOME TAX AND PROFIT SHARING PAID (110.5) (254.5) 144.0 (56.6) NET CASH FROM OPERATING ACTIVITI
Slide 25: Cash Flow (IFRS)
• Increase in trade and other receivables CASH FLOW (IFRS) • (-$55.4) from the higher volume of dore • sold to Met-Mex in 2Q14 • Increase in ore inventories (-$56.9) at Herradura and Noche Buena • Increase in trade and other payables • (+$36.9) to suppliers • Others +$3.9 million CHANGE C ONC EPT (U
Slide 26: Balance Sheet (IFRS)
BALANCE SHEET (IFRS) Change Concept (Million USD) 30-JUNE-14 31-DIC-13 % Assets Cash and Investments 1,164.3 1,251.7 (7.0) Trade and Other Receivables 327.9 267.5 22.6 Inventories 265.0 208.1 27.3 Prepaid Expenses 3.0 5.3 (43.2) Silverstream 389.4 372.8 4.4 Derivative Financial Instruments 4.4 2.1 1
Slide 27: Near term projects and growth plans
Near term projects and growth plans 27
Slide 28: Saucito II Project
Saucito II Project Project Highlights Average Annual Silver Production 8.4 Million Oz Average Annual Gold Production 35.0 Thousand Oz Pre-operative CAPEX US$235.0 Million Life of mine 22 years Processing Capacity 3,000 TPD Expected Start-up 4Q14 IRR @ Ag:US$22.0 /oz* 32.1% Traditional cash cost* US$
Slide 29: San Julián Project
San Julián Project Project Highlights* Average Annual Silver Production 10.3 Million Oz Average Annual Gold Production 43.9 Thousand Oz Pre-operative CAPEX US$515.0 Million Life of mine 13 years Disseminated Processing Capacity 6,000 TPD Veins Processing Capacity 3,000 TPD Expected Start-up 2H 15 IR
Slide 30: Strong pipeline
Strong pipeline Fresnillo Saucito Mine Operations Herradura (DLP) Soledad Nochebuena Ciénega - San Ramón Development Projects Saucito II San Julián Pyrites Plant Centauro Deep Mega Centauro Juanicipio Advanced Exploration Cluster Cebollitas Orisyvo Guachichil Fresnillo District Lucerito Tajitos Cand
Slide 31: Exploration Projects
Exploration Projects Districts in Drilling Centauro Deep • Herradura: Centauro Deep, Tajitos, Bellavista • Ciénega: San Ramón, Cebollitas • Fresnillo: South veins, Plateros, Huisache • San Julián: Última Tierra, María Antonieta • Guanajuato: Opulencia, San Gregorio, Cerro Blanco Area Opulencia Area
Slide 32: Exploration Projects
Exploration Projects Early Stage Projects in Drilling Rodeo - El Cañón • Rodeo, Durango (Gold) • Pilarica, Perú (Silver) Rodeo - El Cañón Projects with resources in assessment • Orisyvo, Chihuahua (Gold) • Lucerito, Durango (Gold-Silver) Evaluation of JV proposals • Resources update at year end 5/08
Slide 33: Growth Plans
av FRESNILLO. Growth Plans 33
Slide 34: Expected delivery of growth
Expected delivery of growth Investment Expected YEAR Risk (US$ m illion) Production 2014 2015 2016 2017 2018 PROJECT (1) (2) Medium 8.4 m ill Oz Ag & 235 SAUCITO II CONSTRUCTION PRODUCTION Low 35 thds Oz Au 10.3 m ill Oz Ag Medium 515 & 44 thds Oz SAN JULIÁN CONSTRUCTION PRODUCTION Au 15 thds Oz Au
Slide 35: Achieving 65moz silver by 2018
Achieving 65moz silver by 2018 Million Oz 90,000 Juanicipio - 56% 80,000 Pyrites plant 70,000 San Julián 60,000 Saucito II 50,000 Saucito I 40,000 Ciénega expansion 30,000 Ciénega 20,000 Fresnillo expansion 10,000 Fresnillo - 2013 2014 2015 2016 2017 2018 Note: Attributable silver production. Silver
Slide 36: Achieving over 500koz gold by 2018
Achieving over 500koz gold by 2018 Million Oz Orisyvo 1,000 Centauro Deep - 56% 900 Mega Centauro - 56% 800 Juanicipio - 56% Soledad&Dipolos - 56% 700 San Julián 600 Pyrites plant 500 Saucito II Saucito I 400 Dynamic leaching - 56% 300 Noche Buena 56% 200 Herradura - 56% 100 Ciénega expansion Ciéneg
Slide 37: Outlook
av FRESNILLO. Outlook 37
Slide 38: Outlook
Outlook Strong operations to weather cyclical challenges • Ongoing focus on maximising efficiency of our operations, investing in productivity and controlling costs • Absolute focus on managing ore grades at Fresnillo • Start up of Saucito II in Q4 2014 and San Julián in 2H 2015, on time and on budg
Slide 39: Appendix
av FRESNILLO. Appendix 39
Slide 40: Operation Review – Fresnillo District
Operation Review – Fresnillo District FRESNILLO SAUCITO H1 14 H1 13 Change % H1 14 H1 13 Change % Attributable production Silver m oz 10.5 11.2 -0.6 -5.8 6.3 5.6 0.7 12.2 Gold k oz 15.9 13.6 2.2 16.4 26.8 22.0 4.8 21.7 Lead kt 6.7 7.2 -0.5 -6.9 3.1 2.6 0.5 19.5 Zinc kt 7.4 6.9 0.5 7.6 3.4 2.2 1.3 59
Slide 41: Operation Review – Ciénega District
Operation Review – Ciénega District CIÉNEGA 1H 14 1H 13 Change % Attributable production Gold k oz 54.0 59.6 -5.7 -9.5 Silver m oz 2.1 2.2 -0.1 -5.3 Ore processed kt 663.4 611.4 51.9 8.5 Ore grades Gold g/t 2.6 3.1 -0.5 -16.3 Silver g/t 111.5 127.2 -15.64 -12.3 5/08/2014 41
Slide 42: Operation Review – Herradura District
Operation Review – Herradura District HERRADURA SOLEDAD-DIPOLOS NOCHE BUENA 1H 14 1H 13 Change % 1H 14 1H 13 Change % 1H 14 1H 13 Change % Attributable production Gold k oz 58.5 91.2 -32.7 -35.8 0.0 22.2 -22.2 -100.0 36.1 27.0 9.1 33.5 Ore processed kt 9,076.0 11,910.5 -2,834.6 -23.8 0.0 6,111.8 -6,
Slide 43: Adjusted Revenues (IFRS)
ADJUSTED REVENUES (IFRS) ACCUM JUNE CHANGE BY: PRODUCT (Million USD) 1H 2014 1H 2013 VOLUME PRICE TOTAL GOLD 331.5 496.7 (115.0) (50.2) (165.2) SILVER 373.3 443.9 9.7 (80.3) (70.6) LEAD 21.8 22.7 (0.4) (0.5) (0.9) ZINC 23.7 18.9 2.9 1.9 4.8 ADJUSTED REVENUES 750.4 982.3 (102.8) (129.1) (231.9) 5/08/
Slide 44: Contribution by mine and by metal to the Adjusted Revenues
Contribution by mine and by metal to the Adjusted Revenues 1 2014 Adjusted Revenues : US$750.4m By mine By metal Fresnillo Saucito Ciénega Silver Gold Herradura Noche Buena Lead Zinc Fresnillo Ciénega Herradura Saucito Noche Buena Consol Gold 18.10 7.3% 63.79 58.5% 134.54 95.7% 32.09 19.2% 82.95 98.
Slide 45: Breakdown of the Adjusted Production Costs
Breakdown of the Adjusted Production Costs Adj Prod Cost: US$291.3m 1 Contrac Op Mat Energy & Diesel Mainten Person Others Freights 1 Contractors are hired to execute specific tasks. Fees paid include labour, operating materials, equipment, diesel and any other items required to fulfill such tasks.
Slide 46: Consolidated Income Statement without Silverstream Effect
Consolidated Income Statement without Silverstream Effect ACCUM JUNE CHANGE CONCEPT 1H 2014 % 1H2013 % $ % (Million USD) ADJUSTED REVENUES 750.4 982.3 (231.9) (23.6) HEDGING (METALS) 0.0 0.1 (0.1) (92.2) TREATMENT AND REFINING CHARGES (73.3) (56.5) (16.8) 29.8 REVENUES 677.1 100.0 925.9 100.0 (248.8
Slide 47: 5/08/2014
5/08/2014 47