BofAML: Global Metals, Mining & Steel Conference May 16, 2018 - - PowerPoint PPT Presentation

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BofAML: Global Metals, Mining & Steel Conference May 16, 2018 - - PowerPoint PPT Presentation

BofAML: Global Metals, Mining & Steel Conference May 16, 2018 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


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SLIDE 1

BofAML: Global Metals, Mining & Steel Conference

May 16, 2018

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SLIDE 2

Disclaimer

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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”, “intends”, “may”, “will”, or “should” or, in each case, their negative or other variations or comparable terminology, or by discussions of strategy, plans, objectives, goals, future events or intentions. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this document and include, but are not limited to, statements regarding the Fresnillo Group’s intentions, beliefs or current expectations concerning, among other things, the Fresnillo Group’s results of operations, financial position, liquidity, prospects, growth, strategies and the silver and gold industries. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. Forward-looking statements are not guarantees of future performance and the actual results of the Fresnillo Group’s operations, financial position and liquidity, and the development of the markets and the industry in which the Fresnillo Group operates, may differ materially from those described in, or suggested by, the forward-looking statements contained in this document. In addition, even if the results of operations, financial position and liquidity, and the development of the markets and the industry in which the Fresnillo Group operates are consistent with the forward-looking statements contained in this document, those results or developments may not be indicative of results or developments in subsequent

  • periods. A number of factors could cause results and developments to differ materially from those expressed or implied by the forward-looking statements including, without

limitation, general economic and business conditions, industry trends, competition, commodity prices, changes in regulation, currency fluctuations (including the US dollar and Mexican Peso exchange rates), the Fresnillo Group’s ability to recover its reserves or develop new reserves, including its ability to convert its resources into reserves and its mineral potential into resources or reserves, changes in its business strategy, political and economic uncertainty. Forward-looking statements may, and often do, differ materially from actual results. Any forward-looking statements in this document speak only as of the date of this document, reflect the Fresnillo Group’s current view with respect to future events and are subject to risks relating to future events and other risks, uncertainties and assumptions relating to the Fresnillo Group’s operations, results of operations, growth strategy and liquidity. Investors should specifically consider the factors identified in this document which could cause actual results to differ before making an investment decision. Subject to the requirements of the Prospectus Rules, the Disclosure and Transparency Rules and the Listing Rules or applicable law, the Fresnillo Group explicitly disclaims any obligation or undertaking publicly to release the result of any revisions to any forward-looking statements in this document that may occur due to any change in the Company’s expectations or to reflect events or circumstances after the date of this document.

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SLIDE 3

World’s largest silver producer (58.7 moz in 2017) and Mexico’s largest gold producer (911.1 koz in 2017) Total assets of US$4.7 billion1 and market cap of US$12.9 billion 2 Silver resources of 2.3 billion ounces and gold resources of 38.5 million are the foundation for creating long term value Growth potential supported by mining concessions of 1.8m hectares in Mexico and 350 thousand hectares in Peru Margins sustained by cash costs and AISC amongst the lowest in the industry Production target at IPO of 65 moz of silver and 750 koz of gold by 2018 Substantial, high quality project pipeline and strong commitment to disciplined and sustainable growth Focus on greenfield and brownfield projects that can be developed into low-cost, world-class mines

1 As of 31 Dec 2017 2 As at 11 May 2018 3 Operations at Soledad-Dipolos are currently suspended

Location Key Highlights

Fresnillo plc mines (7 principal mines and 2 satellite mines)3 Development projects (2) Advanced exploration projects (4) Prospects in drilling Prospects at an early stage

SOUTH PERU HERRADURA DISTRICT CIÉNEGA DISTRICT FRESNILLO DISTRICT ORISYVO SAN JULIÁN

Fresnillo at a Glance – A Decade of Progress and Achievement

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SLIDE 4

A decade of progress and achievement

4

Operate

Silver Production Gold Production Silver Reserves Gold Reserves Dividends Paid

Develop

  • Consistently invested over

US$4 billion in both existing

  • perations and growing our

portfolio of quality assets.

  • 4 new mines developed &

commissioned: Saucito San Julián Noche Buena Soledad & Dipolos

  • Due to commission 2 projects

in 2018: Pyrites Plant at Saucito 2nd Dynamic Leaching Plant at Herradura Up 69% since IPO Up 225% since IPO Up 23% since IPO Up 216% since IPO Paid US$2.5 Billion

Explore

Maintained a strategic commitment to continuous exploration across all precious metals price cycles.

  • US$1.6 Billion invested in

exploration since IPO

  • Silver Resources grown 177%

to 2.3 Billion ounces since IPO

  • Gold Resources grown 305%

to 39 Million ounces since IPO

  • ~95% Organic Growth
  • Strong pipeline of projects

including Juanicipio, due to be commissioned in 2020 By optimising capacity and recoveries, generating continuous improvements in productivity and cost controls while leveraging expansion opportunities, we have:

Sustain

We work hard to ensure the health and safety of our people and that their communities see a return on their investment of time, skills and commitments.

  • Over US$32 Million invested in

local communities since IPO

  • Close to US$130 Million

invested in health, safety and environmental initiatives since IPO

  • Inclusion into the FTSE4Good

UK 50 scheme, amongst

  • thers
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SLIDE 5

A decade of Production and Resource Growth per Share

5 Silver: Gold 74 : 1

  • 1

2 3 4 5 6 7 8

  • 1,000

2,000 3,000 4,000 5,000 6,000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Resources (Eq Ag oz) per share Resources (Eq Ag moz) Resources (Eq Ag oz) per share

Production Resources

  • 20

40 60 80 100 120 140 160 180

  • 20

40 60 80 100 120 140 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Production (Eq Ag oz) per thousand shares Production (Eq Ag moz) Production (Eq Ag oz) per thousand shares

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SLIDE 6

Growth and Returns

6

*Measured, Indicated and Inferred resources, considering a Gold/Silver ratio of 74. Includes resources mined and processed.

Total Exploration Expenses from the last decade (2008 to 2017) US$ 1,570.0 million Increase in silver equivalent resources (2007-2017) 4,458.5 million ounces* (Increase of 158%) Production growth (2007 to 2017) Silver – 69% Gold – 225% Total Dividends Paid since IPO (2008 to 2017) US$ 2,492.2 million Total CAPEX from the last decade (2008 to 2017) US$ 4,281.8 million EBITDA (2008 to 2017) Total EBITDA – US$ 8,570m Average EBITDA p.a. – US$ 857m Average EBITDA margin – 53%

Investing in Growth Growth Outcome Returns

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SLIDE 7

Health, Safety, Environment & Community Relations

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Health & Safety

  • 2 Fatal accidents year to date
  • The enhanced Health & Safety approach piloted at Saucito in 2017 and subsequently adopted at both Fresnillo and Ciénega is set to be rolled out

across our other operations, emphasising risk awareness and encouraging reporting

  • Investment in Health increased to US$12.5m, up 15% vs. 2016

Environment, Community Relations and Awards

  • Working along side Ethisphere, we hosted the first Business Ethics Leadership Alliance (BELA) roundtable in Mexico City bringing together leading

industry figures to share best practises on ethics and compliance programmes

  • Our social investment portfolio contributes to 4 of the UN’s sustainability goals, they are: Capacity building, Water, Education & Health
  • Our Environment, Social and Governance (ESG) performance was recognised by the inclusion of Fresnillo in the FTSE4 GOOD UK 50 ranking
  • Released our first Modern Slavery Statement, setting out the steps taken to prevent any involvement in slavery and human trafficking
  • Reviewed the new requirements of the EU Non-financial Reporting Directive for the Strategic Report which resulted in the Company adopting the

six capitals approach of the IIRC

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SLIDE 8

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2017 Highlights

  • Silver production of 58.7 moz (including Silverstream), up 16.6% inline with guidance, and gold production of 911.1

koz, down 2.6% though above guidance

  • Gold (38.5 moz) & silver resources (2.3 bnoz) both increased 0.3% and 6.9% respectively vs. 2016
  • Adjusted revenue of US$2,233.2m, up 9.2%; Gross profit of US$925.4 m, up 4.9%
  • EBITDA of US$1,060.1m, up 2.7% - EBITDA margin of 50.6%
  • Cash flow from operations of US$1,073.7 million, up 4.9%
  • Healthy balance sheet and low leverage ratio; cash and other liquid funds as at 31 December 2017 of US$896.1

million

  • Construction of San Julián (phase II) completed on budget and now operating at nameplate capacity

2018 Update

  • Silver production from the Fresnillo mine continues to increase, 7-9% increase expected this year
  • Pyrites plant and 2nd Dynamic leaching plant expected to be commissioned in 2Q18
  • 2018 guidance: 67-70 moz silver & 870-900 koz gold

10 20 30 40 50 60 70 2014 2015 2016 2017 Production (moz) 200 400 600 800 1000 2014 2015 2016 2017 Production (koz)

Gold Production Silver Production

  • 300

600 900 1,200 2014 2015 2016 2017

US$ million

EBITDA

  • 300

600 900 1,200 2014 2015 2016 2017

US$ million

Cash flow from

  • perations

2017 Highlights & 2018 Update

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Fresnillo

Key operating statistics FY 2017 Silver production – moz 16.5 Gold production – koz 38.8 Cost per tonne – US$/t 47.5 Cash cost - US$/oz of Ag 0.71 Reserves 2017 *

179.7 moz Ag, 0.6 moz Au

Resources 2017 *

812.8 moz Ag, 1.9 moz Au

Saucito

Key operating statistics FY 2017 Silver production – moz 21.2 Gold production – koz 69.9 Cost per tonne – US$/t 47.6 Cash cost - US$/oz of Ag 1.50 Reserves 2017 *

133.2 moz Ag, 0.7 moz Au

Resources 2017 *

513.6 moz Ag, 2.1 moz Au

2018 targets

  • Continue stabilising ore grades and ore throughput
  • Maintain development rates in the short term, while increasing

them in the long term

  • Carry out intensive in-fill deep drilling to increase certainty in
  • perational planning
  • Expected 7-9% increase in silver production in 2018

FY17 Achievements

  • Installed a new zinc thickener at the beneficiation plant
  • Continue to prepare for the deepening of the San Carlos shaft

FY17 Achievements

  • Advanced preparation work for the deepening of the Jarillas

shaft

  • Successfully converted resources into reserves while also

increasing our resource base (reserves up 8.1% & resources up 21.9%)

2018 targets

  • Maintain development rates
  • Initiate deepening of the Jarillas shaft
  • Intensify exploration to the south

* As of December 2017

Operations

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SLIDE 11

Operations Cont.

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San Julián Phase II

Key operating statistics FY 2017 Silver production – moz 4.6 Gold production – koz 1.8 Cost per tonne – US$/t * 31.9 Cash cost - US$/oz of Ag * 3.9 Reserves 2017 **

104.5 moz Ag, 0.1 moz Au

Resources 2017 **

121.8 moz Ag, 0.1 moz Au

2018 targets

  • Optimise the milling capacity of the plant

* San Julián Phase II cost per tonne and cash cost figures are not representative as it started up in July 2017 and continues to process ore from the stockpile that originated during the construction period **As of December 2017

San Julián Phase I

Key operating statistics FY 2017 Silver production – moz 5.9 Gold production – koz 82.8 Cost per tonne – US$/t 52.1 Cash cost - US$/oz of Ag

  • 4.3

Reserves 2017 **

30.3 moz Ag, 0.4 moz Au

Resources 2017 **

103.2 moz Ag, 1.3 moz Au

FY17 Achievements

  • Commissioned the floatation plant (Phase II) by mid-year 2017 and ramped up to nameplate capacity within two months
  • Full year of operations at Phase I, operating above nameplate capacity
  • Optimised the usage of water found in-mine through the water circulation system at the tailings dam

2018 targets

  • Obtain permits for the water reservoir and begin construction
  • Expand tailings dam
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Operations Cont.

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Ciénega

Key operating statistics FY 2017 Gold production – koz 71.9 Silver production – moz 5.4 Cost per tonne – US$/t 66.5 Cash cost - US$/oz of Au

  • 163.7

Reserves 2017 *

54.1 moz Ag, 0.6 moz Au

Resources 2017 *

167.3 moz Ag, 1.7 moz Au

2018 targets

  • Intensify exploration at the Rosario vein and develop access

ramp

  • Commence basic engineering for the plant expansion to 5,000

tpd at Ciénega

FY17 Achievements

  • Began development of the Taspana vein
  • Commenced construction of the third tailings dam

* As of December 2017

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SLIDE 13

Operations Cont.

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Herradura

Key operating statistics FY 2017 Gold production – koz 473.6 Silver production – koz 551 Cost per tonne* – US$/t 8.0 Cash cost - US$/oz of Au 492.9 Reserves 2017 **

7.7 moz Au

Resources 2017 **

10.3 moz Au

Noche Buena

Key operating statistics FY 2017 Gold production – koz 172.3 Silver production – koz 31 Cost per tonne* – US$/t 7.5 Cash cost - US$/oz of Au 793.5 Reserves 2017 **

0.8 moz Au

Resources 2017 **

0.8 moz Au

2018 targets

  • Commission the second line at the DLP
  • Continue exploration to strengthen the Centauro expansion

project

FY17 Achievements

  • Continued construction of the second line at the DLP, as planned
  • Expanded the life of the mine by increasing the reserve base

2018 targets

  • Maintain comparative low cash cost profile
  • Maximise production by extracting ore from the new areas

FY17 Achievements

  • Contained costs
  • Explored adjacent areas, which revealed limited upside

potential despite some positive results *Cost per tonne excluding unproductive costs ** As of December 2017

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SLIDE 14

Projects

14

Improve overall recoveries of gold and silver by processing historical and ongoing tailings from the Fresnillo and Saucito mines. The plant will froth float pyrite concentrates that will be leached in a 2,000 tpd dynamic leaching plant and Merrill Crowe plant to produce precipitates. The leaching plant at Saucito advanced as expected. Construction of the flotation plant at Fresnillo began. Pyrites Plant Project in the Fresnillo District

  • Avg. annual silver production

3.5 moz

  • Avg. annual gold production

13.0 koz Cash cost – US$/oz Ag (average LoM) $2.51 /oz Leaching plant at Saucito expected commissioning 2Q18 Fresnillo tailings flotation plant expected commissioning 2019

Overview

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SLIDE 15

Projects Cont.

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Key metric estimates Plant capacity 8,000TPD Pre-operative capex US$110m Increase in gold production per year 36koz Expected commissioning 2Q18

Ore type

Oxides Mixture Sulphides

  • Detailed engineering continued
  • Expected to be commissioned in 2Q18

The project will enable sulphides occurring deeper in the pit to be processed more efficiently At the time of analysis, this project was expected to extend the LOM at Herradura from 6 to 12 years with an average annual gold production of 390 koz With current reserves and the above production rate, the LOM has been revised to just over 20 years

2nd Line of Dynamic Leaching Plant Project at Herradura

At Herradura, gold reserves have increased 48% vs. 2016, to 7.7moz

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SLIDE 16

16

Projects Cont.

Juanicipio (JV with MAG Silver. Fresnillo: 56%)

Key metric estimates (100% basis)

  • Avg. annual production

10moz silver 30koz gold Indicated & inferred resources 248 moz silver 1.4 moz gold First production 1H 2020

8km from the Fresnillo mine; Juanicipio’s mineral zones are located in silver-gold rich sulphide shoots of the veins. This project will be developed on a stand-alone basis Exploration in 2017 was focused on the depth extension

  • f the Valdecanas vein.

Feasibility study in the process of being concluded

Feasibility Study is due to be concluded in the coming weeks.

JUANICIPIO RAMP

Total Development in 2017 5,634 M Development from 2013-2016 5,307 M

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SLIDE 17

Strong Organic Growth Pipeline

17

* Operations at Soledad & Dipolos are currently suspended.

Systematic Project Generation 2018 Budget: US$ 180 m

Pipeline allows us to focus on projects that have the potential to be developed into low cost, world-class mines Fresnillo Saucito Herradura Nochebuena Ciénega - San Ramón Soledad &Dipolos* San Julián Pyrites Plant Cebollitas Cluster Centauro Extension Juanicipio

Guanajuato Rodeo Fresnillo District

Tajitos Candameña Guachichil

Pilarica (Perú) San Juan Guazapares

Olivos Lucerito Minitas Cebadillas La Yesca Dátil Norias Argentum Sonora and Sinaloa : Nudo Lejano Carina Cerritos Rosario Elena San Manuel Santo Niño Chihuahua: Rosetillas SJ Pinal Lucero Tempisque Uruachi Durango: Canelas-VTopia El Carmen Zacatecas: Urite Atotonilco Corredor Concha-Nieves Villa García Perú: Sto. Domingo La Pampa Supaypacha Alto Dorado

Mine Operations Development Projects Prospects in drilling Early stage Exploration Advanced Exploration PEA - Feasibility

Centauro Deep Orisyvo 42% 33% 25%

Underlain by 1.8m hectares of concessions in Mexico and 350k hectares in Peru

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SLIDE 18

2017 Financial Summary

18

2017

Revenue

US$m

2,093.3

EBITDA

US$m

1,060.1

Adjusted production cost

US$m

769.2

Gross profit

US$m

925.4

Exploration expenses

US$m

141.1

Operating profit

US$m

709.3

Basic EPS

US cents

0.76

Cash generated by operations before changes in working capital

US$m

1,073.7

Income tax and profit sharing

US$m

309.3

Silverstream contract

US$m

43.3

Purchase of property, plant & equipment

US$m

604.8

Cash and other liquid funds at 31 December

US$m

896.1

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SLIDE 19

Group Consolidated Cash Cost* & All In Sustaining Cost ** (US$/Oz)

19

CHANGE 2017 2016 % CHG. CASH COST PER OZ. SILVER EQ. As a Silver Company 6.13 5.98 2.4% Silver Eq. Oz (Moz) sales volume 115 108 6.8% PER OZ. GOLD EQ. As a Gold Company 453.77 433.48 4.7% Gold Eq. Oz (koz) Sales Volume 1,554 1,488 4.5% ALL IN SUSTAININ G COST PER OZ. SILVER EQ. As a Silver Company 10.34 9.49 9.0% Silver Eq. Oz (Moz) Sales Volume 115 108 6.8% PER OZ. GOLD EQ. As a Gold Company 765.88 687.45 11.4% Gold Eq. Oz (koz) Sales Volume 1,554.2 1,487.8 4.5% ACCUM DECEMBER

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Expected Delivery of Growth

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(1) Estimated (2) Total average annual production (3) Total investment (of which 56% Fresnillo plc; 44% MAG Silver) according to PFS dated June 2012 (4) On hold

Approved by the Board Subject to ongoing internal review (Subject to Board approval)

(1) (2) (3) (4)

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SLIDE 22

10 20 30 40 50 60 70 80 2018 2019 2020

Attributable

Expected Silver Production Profile

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Target of 65 moz silver by 2018

Million Oz

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SLIDE 23

100 200 300 400 500 600 700 800 900 1,000 1,100 2018 2019 2020

Attributable

Expected Gold Production Profile

23

Thousand Oz

Target of 750 koz gold by 2018

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SLIDE 24

605 755 725 590

100 200 300 400 500 600 700 800 900 2017 2018 2019 2020 Million Usd

Sustaining CAPEX New Projects - Preoperative CAPEX

CAPEX Spend Expectations

24

US$ Million

2018

Sustaining (Operations) Fresnillo 90 M Saucito 100 M Herradura 136 M Ciénega 70 M Noche Buena 35 M San Julián 90 M Others 9 M Projects Approved San Julián 17 M Pyrites Plant 47 M Centauro Extension 35 M Projects for Approval Others 123 M

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Outlook

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Proven Strategy Delivering Value through Growth and Returns

Safety and support of the workforce

  • Role out our enhanced safety system across all our mines
  • Launch a programme to engage our organisation in defining KPIs in respect of outcomes that are significant to our stakeholders

and material to the business

Disciplined growth through exploration and development

  • Deliver the Pyrites Plant at Saucito in 2Q18
  • Commission the 2nd Line of DLP in 2Q18
  • Conclude the feasibility study at Juanicipio and present to the Board for approval
  • Continue to invest in exploration – focusing on converting resources into reserves

Continue to create value through growth and returns

  • Produce 67–70moz Silver & 870–900koz Gold in 2018
  • Stabilise development rates across our operations
  • Optimise the operational performance at San Julián
  • Continue implementation of IT projects across group

Geopolitical events

  • Mexican Presidential election 2018
  • North American Free Trade Agreement negotiations
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Investment Case

26

Strong balance sheet Dedicated and experienced management and workforce High quality, low-cost, flexible operations Disciplined approach to development Commitment to sustainable business practices