DENVER GOLD FORUM Tuesday 25 th Sept 2018 Octavio Alvdrez, CEO - - PowerPoint PPT Presentation
DENVER GOLD FORUM Tuesday 25 th Sept 2018 Octavio Alvdrez, CEO - - PowerPoint PPT Presentation
DENVER GOLD FORUM Tuesday 25 th Sept 2018 Octavio Alvdrez, CEO DISCLAIMER 2 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
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
- perates, 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
- perations, 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.
DISCLAIMER
2
AGENDA
3
- Overview
- 10 years as a listed business
- Performance Update
- The Fresnillo Proposition:
- High quality assets
- Low cost and flexible operations
- Disciplined approach to development
- Commitment to sustainable business practices
- Strong balance sheet
- Outlook
FRESNILLO AT A GLANCE
A DECADE OF PROGRESS AND ACHIEVEMENT 4
KEY HIGHLIGHTS
- 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$8.2 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 700 thousand hectares in Peru, the
largest in both countries
- Margins sustained by cash costs and AISC amongst the lowest in the industry
- Production target of 65 moz of silver by 2018, having already surpassed the gold target of 750 koz
- Substantial, high quality project pipeline and strong commitment to disciplined and sustainable growth
- Dedicated and experienced management team supported by an international high caliber Board with a commitment to
strong governance
- 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 21 September 2018
A CONSISTENT, CONSERVATIVE STRATEGY
5
OPERATE DEVELOP EXPLORE SUSTAIN
By optimising capacity and recoveries, generating continuous improvements in productivity and cost controls while leveraging expansion opportunities, we have: Consistently invested over US$4 billion in both existing operations and growing our portfolio of quality assets. Maintained a strategic commitment to continuous exploration across all precious metals price cycles. We work hard to ensure the health and safety of our people and that their communities see a return on their investment of time, skills and commitments.
4 new mines developed & commissioned:
- Saucito
- San Julián
- Noche Buena
- Soledad & Dipolos
Commissioned 2 projects in 2018:
- Pyrites Plant at Saucito
- 2nd Dynamic Leaching Plant at
Herradura
- US$ 1.6 billion invested in
exploration
- Silver Resources grown 177% to
2.3 billion ounces
- Silver Reserves up 23%
- Gold Resources grown 305% to
39 million ounces
- Gold Reserves up 225%
- ~95% Organic Growth
- Strong pipeline of projects
including Juanicipio, due to be commissioned mid 2020
- Over US$ 32 million directly invested
in local communities
- Close to US$ 130 million invested in
health, safety and environmental initiatives
- Inclusion into the FTSE4Good UK 50
scheme, amongst others
Figures stated relate from IPO to year end 2017
- Silver production up 69%
- Gold production up 225%
- Majority of operations running
consistently above nameplate capacity
- Two expansion projects
successfully implemented, 1st Dynamic leaching Plant at Herradura and Ciénega
- Improved recovery rates at
Herradura
BALANCING GROWTH WITH RETURNS
6
INVESTING IN GROWTH GROWTH OUTCOME RETURNS
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%) EBITDA (2008 to 2017) Total EBITDA – US$ 8,570m Average EBITDA – US$ 857m Average EBITDA margin – 53% Total Dividends Paid since IPO (2008 to 2017)
US$ 2,492.2 million
Production growth (2007 to 2017)
Silver – 69% Gold – 225%
Total CAPEX from the last decade (2008 to 2017)
US$ 4,281.8 million
*Measured, Indicated and Inferred resources, considering a Gold/Silver ratio of 74. Includes resources mined and processed.
7
FRESNILLO AT A GLANCE
A DECADE OF PRODUCTION AND RESOURCE GROWTH PER SHARE
- 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
- 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
Silver : Gold 74 : 1
8
2017 FULL YEAR & 1H18 RESULTS - HIGHLIGHTS
10 20 30 40 50 60 70 2014 2015 2016 2017
PRODUCTION (MOZ)
200 400 600 800 1000 2014 2015 2016 2017
PRODUCTION (KOZ)
- 300
600 900 1,200 2014 2015 2016 2017
US$ MILLION
- 300
600 900 1,200 2014 2015 2016 2017
US$ MILLION
SILVER PRODUCTION GOLD PRODUCTION EBITDA CASH FLOW FROM OPERATIONS HALF YEAR SILVER PRODUCTION HALF YEAR GOLD PRODUCTION HALF YEAR GROSS PROFIT HALF YEAR EBITDA
15 18 21 24 27 30 33 1H15 1H16 1H17 1H18
PRODUCTION (MOZ)
250 300 350 400 450 500 1H15 1H16 1H17 1H18
PRODUCTION (KOZ)
120 240 360 480 600 1H15 1H16 1H17 1H18
US$ MILLION
120 240 360 480 600 1H15 1H16 1H17 1H18
US$ MILLION
9
INVESTMENT PROPOSITION
OUR KEY COMPETITIVE ADVANTAGES POSITION US TO MEET NEAR-TERM COMMITMENTS AND DRIVE LONG-TERM VALUE
COMMITMENT TO SUSTAINABLE BUSINESS PRACTICES STRONG BALANCE SHEET HIGH QUALITY ASSETS LOW COST AND FLEXIBLE OPERATIONS DISCIPLINED APPROACH TO DEVELOPMENT Maintain strong financial position with a healthy cash balance and low leverage ratio Balance investment in profitable growth with returns to shareholders while optimising
- perations
Largest concession holder in Mexico & Peru Portfolio of low cost gold and silver mines, high potential development projects and advanced exploration prospects High quality assets allow us to extract mineral profitably across the cycle AISC below average realised prices at each
- f our mines
Development projects meet stringent viability criteria, including environmental and social impact, sustaining capital expenditures and rates
- f return
Understand the needs of
- ur local communities
Continue to work to ensure the safety and health of our people, and strive for continuous improvement in minimising our environmental footprint
10
HIGH QUALITY ASSETS
GOLD (OZ) MINE MINE TYPE 1H 2018 FY 2017 FRESNILLO UNDERGROUND SILVER 21,384 38,784 SAUCITO UNDERGROUND SILVER 39,788 69,948 CIÉNEGA UNDERGROUND GOLD & SILVER 33,066 71,947 HERRADURA OPEN PIT GOLD 243,129 473,638 NOCHE BUENA OPEN PIT GOLD 88,043 172,282 SAN JULIÁN UNDERGROUND SILVER & GOLD 39,888 84,532 TOTAL 465,299 911,132 SILVER (KOZ) MINE MINE TYPE 1H 2018 FY 2017 FRESNILLO UNDERGROUND SILVER 8,129 16,512 SAUCITO UNDERGROUND SILVER 10,067 21,215 CIÉNEGA UNDERGROUND GOLD & SILVER 2,757 5,394 HERRADURA OPEN PIT GOLD 604 551 NOCHE BUENA OPEN PIT GOLD 37 31 SAN JULIÁN UNDERGROUND SILVER & GOLD 7,100 10,534 SILVERSTREAM SABINAS POLYMETALIC - OPERATED BY PENOLES 2,070 4,435 TOTAL 30,764 58,673
1 1 Operations at Soledad-Dipolos are currently suspended
- District consolidation strategy enables us to leverage local knowledge and shared infrastructure
- Portfolio contains over 2,320 moz of attributable silver resources and 38.5 moz of gold resources
11
LOW COST AND FLEXIBLE OPERATIONS
- Asset quality enables us to extract mineral profitably across metal price cycles
- Maximise the potential of each operation by customising mine plans, leveraging technology and sharing personnel, expertise and plant capacity across districts
- Continual quest for improvement to maintain our position as a low cost producer
- 100.00
200.00 300.00 400.00 500.00 600.00 2013 2014 2015 2016 2017
- 1.00
2.00 3.00 4.00 5.00 6.00 7.00 8.00 9.00 US$/oz US$/oz
CASH COST
Consolidated Cash cost of sales per Ag oz (by-product) (US$/Oz) (RHS) Consolidated Cash cost of sales per Au oz (by-product) (US$/Oz) (LHS)
- 2.00
4.00 6.00 8.00 10.00 12.00 14.00
- 100.00
200.00 300.00 400.00 500.00 600.00 700.00 800.00 900.00 2013 2014 2015 2016 2017 US$/oz US$/oz
AISC
All In Sustaining cost of sales per Ag oz (by-product) (US$/Oz) (RHS) All In Sustaining cost of sales per Au oz (by-product) (US$/Oz) (LHS)
12
DISCLIPINED APPROACH TO DEVELOPMENT - PROJECTS
PYRITES PLANT PROJECT IN THE FRESNILLO DISTRICT
OVERVIEW Expected avg. annual silver production 3.5 moz Expected avg. annual gold production 13.0 koz Expected cash cost (average LoM) $2.51 /oz Expected IRR at US$20/oz Ag & US$1,200/oz Au 29.3% Leaching plant at Saucito commissioned 2Q18 Fresnillo tailings flotation plant expected commissioning 2019
- The plant will froth float pyrite concentrates that will be leached in a 2,000 tpd
dynamic leaching plant and Merrill Crowe plant to produce precipitates.
- First stage completed on time: commissioned the leaching plant at Saucito in
2Q18, following a US$ 50.3 million investment.
- Second stage continues: Construction of the flotation plant at Fresnillo on track
with a US$ 7.3 million investment as of June 30 2018. US$ 46.5 million remains to be invested.
- This project will improve overall recoveries of gold and silver by processing
historical and ongoing tailings from the Fresnillo and Saucito mines.
13
PROJECTS Cont.
2ND LINE OF DYNAMIC LEACHING PLANT PROJECT AT HERRADURA
OVERVIEW KEY METRIC ESTIMATES Plant capacity 8,000TPD Pre-operative capex US$ 110m Expected avg. increase in gold production per year 36 koz Expected IRR at US$1,200/oz Au 14.7%
Oxide Mixed Sulphide
- Final testing is underway and commercial production is expected in 3Q18
- 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 to 12 years with an average annual gold production of 390 koz
- With current reserves and the above production rate, the LOM is just over 20 yrs
ORE TYPE
*As of December 2017
At Herradura, gold reserves have increased 48% vs. 2016, to 7.7moz *
14
PROJECTS Cont.
JUANICIPIO (JV WITH MAG SILVER. FRESNILLO: 56%)
OVERVIEW KEY METRIC ESTIMATES (100% BASIS)* Expected avg. annual production 10moz silver 30koz gold Indicated & inferred resources 248 moz silver 1.4 moz gold Expected first production Mid 2020 8km from the Fresnillo mine This project will be developed on a stand-alone basis
* According to PFS dated June 2012
- Feasibility study was concluded by AMC
- Currently being discussed by the technical committee
- Approval process to follow
- Discussions with suppliers of long term delivery equipment as well as
construction contractors has been initiated.
- Exploration & development works continue as planned
15
EXPLORATION
STRONG ORGANIC GROWTH PIPELINE
Pipeline allows us to focus on projects that have the potential to be developed into low cost, world-class mines
- Apply stringent viability criteria
to all new projects
- The Pyrites Plant at Saucito
has been commissioned and final testing at the Second Dynamic Leaching Plant is on
- track. Both projects will make
a meaningful contribution to
- verall 2018 production
YEAR
PROJECT 360 130
* Represents 100% of the investment ( 56%Fresnillo plc + 44% MAG Silver ). (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 PROD CENTAURO UNDERGROUND DEVELOPMENT PRODUCTION DEVELOPMENT & CONSTRUCTION DEVELOPMENT & CONSTRUCTION PRODUCTION DEVELOPMENT & CONSTRUCTION PRODUCTION OPTIMISATION - PRE FEASIBILITY STUDY - DEVELOPMENT & CONSTRUCTION PRODUCTION PRODUCTION PRODUCTION CONSTRUCTION TAILINGS FLOTATION DEVELOPMENT 2ND DYNAMIC LEACHING PLANT CONSTRUCTION LEACHING PLANT CONSTRUCTION Extended Pit LoM
- f 470 koz Au &
UG 65 Koz Au
CENTAURO PIT EXPANSION / CENTAURO UNDERGROUND 350
136 koz Au
ORISYVO 305
10 moz Ag & 30 koz Au
JUANICIPIO 55
15 koz Au & 1.3 moz Ag
CIENEGA 5,000 TPD (Optimization project) 30
3 moz Ag
FRESNILLO 9,000 TPD (Optimization project) 110
Extended LoM of 390 koz Au
CENTAURO EXTENSION
2017 2018 2019 2020 2021 2022 2023
155
3.5 moz Ag & 13 koz Au
PYRITES PLANT (Optimization project)
EXPLORATION Investment (US$ million) Expected Avg. Annual Production PRE-STRIPPING & CONSTRUCTION
16
EXPECTED DELIVERY OF GROWTH
3 4 1 2
17
EXPECTED ATTRIBUTABLE PRODUCTION PROFILE
10 20 30 40 50 60 70 80 2017 2018 2019 2020
SILVER*
100 200 300 400 500 600 700 800 900 1,000 2017 2018 2019 2020
GOLD
10 20 30 40 50 60 70 2017 2018 2019 2020
BY-PRODUCT LEAD
20 40 60 80 100 120 2017 2018 2019 2020
BY-PRODUCT ZINC
Million Oz Thousand Oz Thousand Tons Thousand Tons Target of 65 moz silver by 2018 Target of 750 koz gold by 2018 *Including Silverstream
18
CAPEX SPEND EXPECTATIONS
2018 US$ Million SUSTAINING (OPERATIONS) FRESNILLO 90M SAUCITO 100M HERRADURA 136M CIÉNEGA 70M NOCHE BUENA 35M SAN JULIÁN 90M OTHERS 9M PROJECTS APPROVED SAN JULIÁN 17M PYRITES PLANT 47M CENTAURO EXTENSION 35M PROJECTS FOR APPROVAL OTHERS 123M
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
19
COMMITMENT TO SUSTAINABLE BUSINESS PRACTICES
HEALTH SAFETY ENVIRONMENT COMMUNITY RELATIONS
Occupational Health programme
- ngoing
Health weeks across our mining districts benefitting 11,000 people annually “I care, we care” programme being implemented across all of our
- perations
60% of electricity consumption comes from wind power, aim to get to 75% by 2H19 Herradura and Saucito obtained the Environmental Excellence Award granted by the Federal Attorney for Environmental Protection recognising the highest level of environmental compliance We partner with the NGO International Board on Books for Young People, currently benefitting 8,186 children in 66 schools. Community projects include working in partnership with health authorities to foster a preventive and self-care culture.
Our Environment, Social and Governance (ESG) performance was recognised by the inclusion of Fresnillo in the FTSE4 GOOD UK 50 ranking
20
STRONG BALANCE SHEET (IFRS)
31 JUNE 2018 US$ Million KEY CONCEPTS CASH AND INVESTMENTS 688.6 SENIOR NOTES 800.0 NET DEBT TO EBITDA 0.1 x
OUTLOOK
21 PRIORITISE SAFETY, SUPPORT OF THE WORKFORCE AND ENVIRONMENT CONTINUED OPERATIONAL FOCUS TO MAXIMISE POTENTIAL OF OUR EXISTING MINES CREATE VALUE THROUGH DISCIPLINED GROWTH, EXPLORATION & DEVELOPMENT
APPENDIX
23
OPERATIONS
FRESNILLO
KEY OPERATING STATISTICS 1H 18 1H 17 Silver production – moz 8.1 8.9 Gold production – koz 21.4 20.7 Cost per tonne – US$/t 46.9 44.1 Cash cost - US$/oz of Ag
- 0.8
1.25 Reserves 2017 *
179.7 moz Ag, 0.6 moz Au
Resources 2017 *
812.8 moz Ag, 1.9 moz Au
INCREASE IN ANNUAL SILVER PRODUCTION
1H18 SUMMARY
- 1H18 silver grade of 222 g/t. Full year 2018 silver grade expected to be: 215-225 g/t
- US$44.8 million invested in development, infrastructure and sustaining capex
- Development rate of 3,130 m/m
- Continued deepening of the San Carlos shaft
- Reduced costs as a result of vertical conveyor belt
2H18 PRIORITIES
- Hire a new contractor company
- Continue investing in infrastructure
- Tunnel boring machine
*As of December 2017
14 15 16 17 18 19 20 2014 2015 2016 2017 2018e
MILLION OUNCES
24
OPERATIONS
SAUCITO
KEY OPERATING STATISTICS 1H 18 1H 17 Silver production – moz 10.1 10.8 Gold production – koz 39.8 33.9 Cost per tonne – US$/t 53.6 45.2 Cash cost - US$/oz of Ag 1.3 1.6 Reserves 2017 *
133.2 moz Ag, 0.7 moz Au
Resources 2017 *
513.6 moz Ag, 2.1 moz Au
ANNUAL SILVER PRODUCTION
1H18 SUMMARY
- 1H18 silver grade of 262 g/t. Full year 2018 silver grade expected to be: 255-265 g/t
- US$59.2 million invested in development, infrastructure and sustaining capex
- Additional contractor to increase development rates successfully hired
- Purchase of smaller equipment to better control dilution
- Production from Natalias veins continued to ramp up
2H18 PRIORITIES
- Further reduce dilution
- Development of the Huizache veins
- Ramp up Pyrites plant
- Initiate the deepening of the Jarillas shaft
*As of December 2017
- 5
10 15 20 25 2014 2015 2016 2017 2018e
MILLION OUNCES
25
OPERATIONS
*As of December 2017
SAN JULIÁN PHASE I (VEIN SYSTEM) SAN JULIÁN PHASE II (DISSEMINATED ORE BODY)
KEY OPERATING STATISTICS 1H 18 1H 17 Gold production – koz 38.7 41.0 Silver production – moz 2.7 3.0 Reserves 2017 *
30.3 moz Ag, 0.4 moz Au
Resources 2017 *
103.2 moz Ag, 1.3 moz Au
KEY OPERATING STATISTICS 1H 18 1H 17 Gold production – koz 1.2 NA Silver production – moz 4.4 NA Reserves 2017 *
104.5 moz Ag, 0.1 moz Au
Resources 2017 *
121.8 moz Ag, 0.1 moz Au
- Nameplate capacity of 3,000 tpd – Currently operating at c. 3,600 tpd
- Expected lower ore grade due to less availability of the higher silver grade areas
- Lower volume of ore processed as a result of the low water availability
- Nameplate capacity of 6,000 tpd – Currently operating at 6,400 tpd
- Extraction of ore from lower grade areas & processing ore from the development stockpile due to
low water availability
- Resulted in temporarily deviating from original production plan
- Initiatives in place to collect process water now ensure the plant will run at full capacity in 2H18 and going forward
- Construction of wells for water collection and construction of the water reservoir
- Continue preparation and development of the mine
- Identify, explore and evaluate the District's geological potential
1H18 SUMMARY 1H18 SUMMARY 2H18 PRIORITIES
26
OPERATIONS
*As of December 2017
CIÉNEGA
KEY OPERATING STATISTICS 1H 18 1H 17 Gold production – koz 33.1 36.4 Silver production – moz 2.8 2.8 Cost per tonne – US$/t 68.4 64.4 Cash cost - US$/oz of Au
- 10.6
- 242.8
Reserves 2017 *
54.1 moz Ag, 0.6 moz Au
Resources 2017 *
167.3 moz Ag, 1.7 moz Au
- Lower than expected ore grade following the depletion of higher grade veins
- Reduced dilution by around 20%
- Increased availability of equipment
- One more contractor company hired to develop new areas
- Increased contribution from Taspana (28,000 tonnes per month) to the overall mine production
- Total development of 14,700 mts, increased 16.5% half on half
- Continue development at Taspana and Las Casas
- Continue construction of third tailings dam
- Further exploration to support a 2,000 tpd expansion of milling capacity at the main Ciénega mine
1H18 SUMMARY 2H18 PRIORITIES
27
OPERATIONS
*Cost per tonne excluding unproductive costs ** As of December 2017.
HERRADURA
KEY OPERATING STATISTICS 1H 18 1H 17 Gold production – koz 243.1 224.0 Silver production – koz 604 222 Cost per tonne* – US$/t 10.3 7.1 Cash cost - US$/oz of Au 364.9 483.9 Reserves 2017 **
7.7 moz Au
Resources 2017 **
10.3 moz Au
- Consistently higher observed resources on the leaching pads lead to inventory re-statement due to
higher recovery rates
- Higher speed of recovery due to an intensive targeted irrigation programme and better dilution
- Complete the installation of vibrating screens to increase gold recovery by 3-4%
- Drilling and exploration to continue at Centauro Deep and areas of influence
1H18 SUMMARY 2H18 PRIORITIES
28
OPERATIONS
*Cost per tonne excluding unproductive costs ** As of December 2017
NOCHE BUENA
KEY OPERATING STATISTICS 1H 18 1H 17 Gold production – koz 88.0 89.8 Silver production – koz 37 14 Cost per tonne* – US$/t 10.25 7.1 Cash cost - US$/oz of Au 772.8 804.1 Reserves 2017 **
0.8 moz Au
Resources 2017 **
0.8 moz Au
- Contained costs
- Continued to explore areas of influence, which continued to show limited upside
- Detailed engineering for a Carbon in Column facility initiated and is expected to be concluded by
year end 2019
- Maintain comparative low cash cost profile
- Maximise production
1H18 SUMMARY 2H18 PRIORITIES
600 700 800 900 1,000 2013 2014 2015 2016 2017 1H - 2018 US$ /OZ. GOLD
CASH COST
- At time of acquisition in 2008, the project was estimated to produce 376,450 Au ounces over the 5 year life of
mine
- To date, Noche Buena has produced 904,273 Au ounces
- As of YE17, Measures & Indicated resources of 818,506 Au ounces remain
29
INCOME STATEMENT (IFRS)
30
ADJUSTED REVENUES (IFRS)
ACCUM JUNE CHANGE BY: 2018 2017 VOLUME PRICE TOTAL PRODUCT Gold 593.0 543.9 21.4 27.7 49.1 Silver 432.1 413.2 42.8 (23.9) 18.9 Lead 55.6 46.8 5.0 3.7 8.8 Zinc 109.2 65.6 30.3 13.4 43.7 ADJUSTED REVENUES 1,189.9 1,069.5 99.6 20.8 120.4 82.7% 17.3% 100%
31
CONTRIBUTION BY MINE AND BY METAL TO THE ADJUSTED REVENUES 1H 18
18% 21% 8% 28% 10% 8% 8% 50% 36% 9% 5%
Fresnillo Saucito Ciénega Herradura Noche Buena San Julián JM San Julián Veins Gold Silver Zinc Lead
BY METAL BY MINE
FRESNILLO CIÉNEGA HERRADURA SAUCITO NOCHE BUENA SAN JULIÁN JM SAN JULIÁN VEINS CONSOL Gold 23.74 11.0% 41.39 43.5% 317.49 96.8% 45.24 18.3% 114.98 99.9% 0.62 0.6% 49.52 53.6% 592.98 49.8% Silver 122.15 56.7% 42.05 44.2% 10.46 3.2% 153.09 62.0% 0.08 0.1% 61.34 63.3% 42.92 46.4% 432.09 36.3% Lead 24.07 11.2% 5.94 6.2%
- 18.92
7.7%
- 6.63
6.8%
- 55.56
4.7% Zinc 45.55 21.1% 5.84 6.1%
- 29.50
12.0%
- 28.35
29.2%
- 109.25
9.2% TOTAL 215.51 100% 95.22 100% 327.95 100% 246.75 100% 115.05 100% 96.94 100% 92.45 100% 1,189.87 100%
1H 18 ADJUSTED REVENUES : US$1,189.9M
1
1 Adjusted Revenue is revenue as disclosed in the income statement adjusted to exclude treatment and refining charges.
32
CONSOLIDATED COST INFLATION 1H 18 (USD BASED)
CONSOLIDATED Unit price increase % Weight (*) Weighted average LABOUR: UNIONIZED PERSONNEL 8.4% 6.3% 0.5% EMPLOYEES 7.3% 2.6% 0.2% WEIGHTED 8.1% OPERATING MATERIALS 3.4% 20.2% 0.7% ENERGY: ELECTRIC ENERGY
- 7.0%
7.0%
- 0.5%
DIESEL 5.2% 9.4% 0.5% GASOLINE 13.8% 1.1% 0.2% WEIGHTED 0.9% CONTRACTORS 4.8% 31.7% 1.5% MAINTENANCE 1.8% 15.2% 0.3% FREIGHTS 11.4% 1.0% 0.1% INSURANCE
- 6.2%
0.6% 0.0% OTHERS 1.9% 4.9% 0.1% TOTAL 3.52%
(*) Not including Depreciation and Profit Sharing
Important Note: Excluding the revaluation effect, cost inflation would have been 2.4%
33
ADJUSTED PRODUCTION COST – FY 2017
Personnel 16% Own 9%
- Ctrt. 7%
Maintenance & repairs 17% Own 15%
- Ctrt. 2%
Operating Materials 26% Own 20%
- Ctrt. 6%
Energy 21% Own 19%
- Ctrt. 2%
Others 11% Own 10%
- Ctrt. 1%
Equipment Ctrt.9%
Costs from Contractors = 27%
US$ 769.2 Million
* Includes: Freights, Taxes & Licenses, Insurance Costs, Computer Leasing, Fees and Others.
34
ADJUSTED PRODUCTION COST ANALYSIS (CONSOLIDATED)
32.98 32.45 9.85 7.68 4.01 86.98 0.0 9.5 19.0 28.5 38.0 47.5 57.0 66.5 76.0 85.5 95.0
Increase in stripping to cost, maintenance,consumables, services,etc Higher Production Lower volume of ore processed from development at Saucito Cost Inflation MXP/USD Revaluation effect
- Incr. in Adj. Prod.Cost
CHANGE 1H 18 1H 17 $ % ADJUSTED PRODUCTION COST 429.9 343.0 87.0 25.4 CHANGE IN INVENTORIES AND OTHERS
- 21.7
16.0
- 37.7
N/A DEPRECIATION 192.8 168.3 24.9 14.8 PTU 11.8 8.9 2.9 32.0 COST OF SALES 612.9 535.8 +77.1 +14.4%
USD MILLION
* 1 2 3 4 6 5
35
CONSOLIDATED GROSS PROFIT ANALYSIS
CHANGE 1H 18 1H 17 $ % GROSS PROFIT 502.2 460.0 +42.1 +9.2%
USD MILLION 46.00 36.30 21.63 20.35 (4.01) (7.68) (9.85) (29.16) (31.43) 42.14
0.0 14.0 28.0 42.0 56.0 70.0 84.0 98.0 112.0 126.0 140.0
Increase in inventories at Herradura Higher ore grade Higher Production Higher Metal Prices MXP/USD Revaluation effect Cost Inflation Lower volume of ore processed from development at Saucito Higher Depreciation Higher Stripping at Herradura 1H18 Gross Profit
* 2 1 3 4 5 6 7 8 9 10
36
CONSOLIDATED GROSS PROFIT ANALYSIS
OPERATING UNITS FRESNILLO 7.7 SAUCITO 8.1 CIÉNEGA 7.9 SAN JULIÁN 4.0 HERRADURA 6.8 NOCHE BUENA 1.4 SAN RAMÓN 1.4 37.3 PROJECTS VALLES 0.0 CENTAURO DEEP 3.3 JUANICIPIO 2.3 GUANAJUATO 3.7 ORISYVO 2.1 SAN JAVIER 0.3 CARINA 1.8 CANELAS 1.5 ROSARIO 0.1 14.9 PROSPECTS SONORA 2.2 DURANGO 3.1 CHIHUAHUA 3.5 ZACATECAS 0.1 NAYARIT 0.1 GUERRERO 0.0 PERÚ 2.6 11.5 REGIONAL PROSPECTING 7.8 MINING RIGHTS 9.5 FIXED ASSETS PARREÑA (CAPITALISED) 0.2 TOTAL RISK CAP. INV. EXP. 81.4 CAPITALISED EXP. (3.0) TOTAL EXPLORATION EXP. 78.3
37
CASH FLOW (IFRS)
- Increase in accounts receivables (VAT) - US$49.6 million
- Decrease in accounts receivables from Met - Mex US$16.2 million
- Increase in inventories mainly at Herradura - US$23.7 million
- Decrease in payable accounts - US$ 2.6 million
- Increase in prepaid payments and other accounts -US$4.2 million
- Provisional Tax Payments: US$77.9m
- 2017 Income Tax Payment: US$33.3m
- Special Mining Right: US$19.8m
- 2017 Profit Sharing: US$14.3m
- 1,978,057.9 moz proceeds from the silverstream contract, which do not
go through the Income Statement Herradura US$103.3 million
- Stripping activities and construction of
- leaching pads
- Construction of the Second Dynamic
- Leaching Plant
Saucito US$65.1 million
- Mining works
- Fe concentrates leaching and flotation plant
- (Pyrites Plant Project)
- Construction of the Jarillas shaft
- Purchase of in-mine equipment
Fresnillo US$49.6 million
- Mine development and mining works
- Tailings dam construction
- Purchase of in-mine equipment
San Julián US$23.0 million
- Purchase of in-mine equipment
- Construction of ramps and mining works
- Construction of tailings dam
Ciénega US$35.1 million
- Mine development and mining works
- Purchase of long drilling equipment
- Purchase of in-mine equipment
Noche Buena US$24.6 million
- Purchase of in-mine equipment
Others US$51.5 million
38
BALANCE SHEET (IFRS)
39
COST PER TONNE (IFRS)
*Cost per tonne is calculated as total adjusted production costs divided by total volume of ore processed ** Cost per tonne excluding unproductive costs
ACCUM JUNE CHANGE 2018 2017 % CHG. COST PER TONNE* MINE UNIT Fresnillo US$/TON 46.92 44.07 6.5% Saucito US$/TON 53.56 45.16 18.6% Ciénega US$/TON 68.39 64.39 6.2% Herradura US$/TON 10.25** 7.10** 44.3% Total Vol. Hauled Charged to Costs US$/TON 1.75 1.53 15.0% Noche Buena US$/TON 6.74** 7.00**
- 3.8%
Total Vol. Hauled Charged to Costs US$/TON 1.42 1.46
- 2.6%
40
CASH COST (IFRS)
* Cash cost per ounce is calculated as total cash cost (cost of sales plus treatment and refining charges less depreciation) less revenues from by-products divided by the silver or gold ounces sold.
ACCUM JUNE CHANGE 2018 2017 % CHG. CASH COST* MINE UNIT Fresnillo PER OZ. SILVER
- 0.82
1.25
- 165.7%
Saucito PER OZ. SILVER 1.25 1.64
- 23.5%
Ciénega PER OZ. GOLD (by-prod.)
- 10.60
- 242.81
95.6% Herradura PER OZ. GOLD 364.85 483.91
- 24.6%
Noche Buena PER OZ. GOLD 772.79 804.12
- 3.9%
CONSOLIDATED PER OZ. GOLD EQ. 435.97 448.59
- 2.8%
Gold Eq. Oz (Koz)
781.05 765.54 2.0% PER OZ. SILVER EQ. 5.47 6.26
- 12.5%
Silver Eq. Oz (Moz)
62.20 54.88 13.3%
41
MARGINS BY MINE
(METAL PRICE – CASH COST)(1H18 VS 1H17)
(USD/Oz)
22.4 18.5 14.6 10.6 6.7 2.8
- 1.1
- 5.0
22.4 18.5 14.6 10.6 6.7 2.8
- 1.1
- 5.0
- 0.82
1.64 1.25 1.25 2017 2018 2017 2018 17.44 16.48 17.44 16.48
Margin 16.19 92.8% Margin 17.30 105.0% Margin 15.80 90.6% Margin 15.23 92.4%
FRESNILLO SAUCITO
Cash Cost Silver Price
(USD/Oz)
1,630 1,361 1, 093 824 556 287 19
- 250
1,630 1,361 1, 093 824 556 287 19
- 250
- 10.60
- 242.81
2017 2018 2017 2018 1,250.25 1,312.77
Margin
1,493.06 119.4%
Margin
1,323.37 100.8%
CIÉNEGA HERRADURA
Cash Cost Gold Price
2017 2018
NOCHE BUENA
483.91 364.85 804.12 772.79 1,250.25 1,312.77 1,250.25 1,312.77
Margin
766.34 61.3%
Margin
947.92 72.2%
Margin
446.13 35.7%
Margin
539.98 41.1%
8.2Moz. 7.4Moz
- Chg. -9.2%
9.9Moz. 9.3Moz.
- Chg. -6.1%
33.9Koz. 31.6Koz.
- Chg. -6.8%
222.5Koz. 241.3Koz.
- Chg. 8.4%
89.0Koz. 87.8Koz.
- Chg. -1.3%
OUNCES SOLD OUNCES SOLD
42
ALL IN SUSTAINING COST (US$/OZ)
Note: All In sustaining cost is calculated as traditional cash cost plus on-site general, corporate and administrative costs, community costs related to current operations, capitalised stripping & underground mine development, sustaining capital expenditures and remediation expenses.
ACCUM JUNE 2018 2017 % CHG. MINE UNIT Fresnillo PER OZ. SILVER 6.79 7.57
- 10.3%
Saucito PER OZ. SILVER 7.88 6.50 21.2% Ciénega PER OZ. GOLD 1,198.16 419.16 185.8% Herradura PER OZ. GOLD 715.92 810.82
- 11.7%
Noche Buena PER OZ. GOLD 1,051.80 908.73 15.7% CONSOLIDATED PER OZ. GOLD EQ. 827.46 754.98 9.6%
Gold Eq. Oz (Koz)
781.05 765.54 2.0% PER OZ. SILVER EQ. 10.39 10.53
- 1.3%
Silver Eq. Oz (Moz)
62.20 54.88 13.3%
43
MARGINS BY MINE
(METAL PRICE – ALL IN SUSTAINING COST) (1H18 VS 1H17)
(USD/Oz)
24.0 20.6 17.2 13.7 10.3 6.9 3.4 0.0 24.0 20.6 17.2 13.7 10.3 6.9 3.4 0.0
6.50 2017 2018 2017 2018 17.44 16.48 17.44 16.48
FRESNILLO SAUCITO
Cash Cost Silver Price
(USD/Oz)
1,900 1,629 1,357 1,086 814 543 271 1,900 1,629 1,357 1,086 814 543 271
2017 2018 2017 2018 1,250.25 1,312.77
CIÉNEGA HERRADURA
Cash Cost Gold Price
2017 2018
NOCHE BUENA
908.73 419.16 1,250.25 1,312.77 1,250.25 1,312.77
Margin
341.52 27.3%
Margin
260.97 19.9%
7.57 6.79 7.88
Margin 9.87 56.6% Margin 9.69 58.8% Margin 10.94 62.7% Margin 8.60 52.2%
1,198.16 810.82 715.92 1,051.80
Margin
596.85 45.5%
Margin
439.42 35.1%
Margin
114.61 8.7%
Margin
831.09 66.5%
8.2Moz. 7.4Moz.
- Chg. -9.2%
9.9Moz. 9.3Moz.
- Chg. -6.1%
33.9Koz. 31.6Koz.
- Chg. -6.8%
222.5Koz. 241.3Koz.
- Chg. +8.4%
89.0Koz. 87.8Koz.
- Chg. -1.3%
OUNCES SOLD OUNCES SOLD