First Half 2018 Interim Results July, 31 2018 Disclaimer This - - PowerPoint PPT Presentation
First Half 2018 Interim Results July, 31 2018 Disclaimer This - - PowerPoint PPT Presentation
First Half 2018 Interim Results July, 31 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 forward-looking
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”, “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.
2
Agenda
- Overview | Octavio Alvídrez, CEO
- Operations, Development Projects & Exploration | Octavio Alvídrez, CEO
- Financial Review | Mario Arreguín, CFO
- Strategy & Outlook | Octavio Alvídrez, CEO
- Q&A
3
Overview
Investment Case
5
High quality, low-cost, flexible
- perations
High quality, low-cost, flexible
- perations
Disciplined approach to development Disciplined approach to development Dedicated and experienced management and workforce Dedicated and experienced management and workforce Strong balance sheet Strong balance sheet Commitment to sustainable business practices Commitment to sustainable business practices
Our Environment, Social and Governance (ESG) performance was recognised by the inclusion of Fresnillo in the FTSE4 GOOD UK 50 ranking Our Environment, Social and Governance (ESG) performance was recognised by the inclusion of Fresnillo in the FTSE4 GOOD UK 50 ranking
Health, Safety, Environment & Community Relations
6 Health Health Safety Safety Environment Environment Community Relations Community Relations
Occupational Health programme ongoing Health weeks across our mining districts benefitting 11,000 people annually “I care, we care” programme being implemented across all
- f our operations
60% of electricity consumption comes from wind power, aim to get to 75% by 2H19 Herradura and Saucito
- btained the
Environmental Excellence Award Centre for Technical Studies (CETEF) trains mining technicians. Ethical behaviours continue to be embedded throughout the group
1H18 results – Financial Highlights
7
- Adjusted revenues of US$1,189.9m, up 11.3%
- Gross profit and EBITDA of US$502.2m and US$566.9m, up
9.2% and 8.5%, respectively
- Silverstream valuation, a non-cash item, had an adverse effect
- n profit before income tax, which came down 16.6% to
US$323.0m
- In addition, profit for the period of US$229.3m, down 26.1%,
was adversely impacted by changes in the MXP/USD exchange rate and inflation rate on deferred taxes (non-cash item)
- Cash generated from operations, before changes in working
capital of US$575.9m, up 6.6%
- Strong balance sheet with cash and other liquid assets as at
30 June 2018 of US$708.6m
- Interim dividend of US$78.8m (10.7 US cents per share)
120 240 360 480 600 1H15 1H16 1H17 1H18
US$ million
Gross Profit
120 240 360 480 600 1H15 1H16 1H17 1H18
US$ million
EBITDA
15 18 21 24 27 30 33 1H15 1H16 1H17 1H18
Production (moz)
1H18 results – Operational Highlights
8
- Gold production of 234 koz, up 4.6% vs. 2Q17
- Gold guidance marginally increased to 900-930 koz for FY
- 1H18 silver production of 30.8 moz (including Silverstream), up
9.7% vs. 1H17
- Silver guidance marginally reduced to 64.5-67.5 moz silver for FY
- Pyrites plant has been completed on budget and with minor
delays and is now ramping up production
- Dynamic Leaching Plant complete, currently undergoing final
testing – Commercial production expected in 3Q18
- Ongoing tests at the Herradura leaching pads have resulted in an
increase of 98.9 thousand ounces of gold in the inventory as of 1 January 2018
- 2018 guidance in equivalent ounces remains the same
Half year Gold Production
250 300 350 400 450 500 1H15 1H16 1H17 1H18
Production (koz)
Half year Silver Production
20 40 60 80 100 120 140 160 2012 2013 2014 2015 2016 2017 2018e Production (eq Ag moz)
Consolidated Production Profile – Silver Equivalent Ounces
9
Silver : Gold 74 : 1
- Consistent strategy of investing in exploration
through the cycles
- Continues to result in increases in resources
- In turn, providing the Group with a solid
foundation from where to continue to grow the quality ounces produced
Operations & Development Projects
Operations
11 FRESNILLO 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 *As of December 2017. 1H18 Summary
- 1H18 silver grade of 222 g/t. Full year 2018 silver grade expected to be: 215-225 g/t
- US$44.8 million invested in development, infrastructure and sustaining capex
- Development rate of 3,130 m/m
- Continued deepening of the San Carlos shaft
- Reduced costs as a result of vertical conveyor belt
2H18 Priorities
- Hire a new contractor company
- Continue investing in infrastructure
- Tunnel boring machine
14 15 16 17 18 2015 2016 2017 2018e
Million Ounces
Operations Cont.
12 SAUCITO SAUCITO
Key operating statistics 1H 18 1H 17 Silver production – moz 10.1 10.8 Gold production – koz 39.8 33.9 Cost per tonne – US$/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
*As of December 2017. 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
- 5
10 15 20 25 2012 2013 2014 2015 2016 2017 2018e
Million Ounces
Operations Cont.
13 SAN JULIÁN PHASE I SAN JULIÁN PHASE I
*As of December 2017
SAN JULIÁN PHASE II SAN JULIÁN PHASE II
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
1H18 Summary
- 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
1H18 Summary
- 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
2H18 Priorities
- 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 while continuing the process to obtain permits for the construction of the water reservoir
- Continue preparation and development of the mine
- Identify, explore and evaluate the District's geological potential
Operations Cont.
14
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$/oz of Au
- 10.6
- 242.8
Reserves 2017 *
54.1 moz Ag, 0.6 moz Au
Resources 2017 *
167.3 moz Ag, 1.7 moz Au
1H18 Summary
- Lower than expected ore grade following the depletion of higher grade veins
- Reduced dilution by around 20%
- Increased availability of equipment
- One more contractor company hired to develop new areas
- Increased contribution from Taspana (28,000 tonnes per month) to the overall mine
production
- Total development of 14,700 mts increased 16.5% half on half
*As of December 2017. 2H18 Priorities
- Continue development at Taspana and Las Casas
- Continue construction of third tailings dam
- Further evaluate a 2,000 tpd expansion of milling capacity at the main Ciénega mine
CIÉNEGA CIÉNEGA
Operations Cont.
15
Key operating statistics 1H 18 1H 17 Gold production – koz 243.1 224.0 Silver production – koz 604 222 Cost per tonne* – US$/t 10.3 7.1 Cash cost - US$/oz of Au 364.9 483.9 Reserves 2017 **
7.7 moz Au
Resources 2017 **
10.3 moz Au
1H18 Summary
- Consistently higher observed resources on the leaching pads lead to inventory re-statement due
to higher recovery rates
- Higher speed of recovery due to an intensive targeted irrigation programme and better dilution
*Cost per tonne excluding unproductive costs ** As of December 2017.
2H18 Priorities
- Continue inventory analysis with an aim to conclude the process by year end
- Complete the installation of vibrating screens to increase gold recovery by 3-4%
- Drilling and exploration to continue at Centauro Deep and areas of influence
HERRADURA HERRADURA
1H18 Summary
- Contained costs
- Continued to explore areas of influence, which continued to show limited upside
- Detailed engineering for a Carbon in Column facility initiated and is expected to be concluded
by year end 2019
2H18 Priorities
- Maintain comparative low cash cost profile
- Maximise production
Operations Cont.
16
Key operating statistics 1H 18 1H 17 Gold production – koz 88.0 89.8 Silver production – koz 37 14 Cost per tonne* – US$/t 10.25 7.1 Cash cost - US$/oz of Au 772.8 804.1 Reserves 2017 **
0.8 moz Au
Resources 2017 **
0.8 moz Au
*Cost per tonne excluding unproductive costs ** As of December 2017.
NOCHE BUENA NOCHE BUENA
600 700 800 900 1,000 2013 2014 2015 2016 2017 1H - 2018 US$ /OZ. GOLD
- 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
Cash Costs
Projects
17 PYRITES PLANT PROJECT IN THE FRESNILLO DISTRICT PYRITES PLANT PROJECT IN THE FRESNILLO DISTRICT
- Avg. annual silver production
3.5 moz
- Avg. annual gold production
13.0 koz Expected cash cost (average LoM) $2.51 /oz Leaching plant at Saucito commissioned 2Q18 Fresnillo tailings flotation plant expected commissioning 2019 Overview
- 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: commission of the leaching plant at Saucito on
time, following a US$50.3 million investment.
- Second stage continued: Construction of the flotation plant at Fresnillo on
track with a US$7.3 million investment to date. US$46.5 million remain 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.
Projects Cont.
18 2ND LINE OF DYNAMIC LEACHING PLANT PROJECT AT HERRADURA 2ND LINE OF DYNAMIC LEACHING PLANT PROJECT AT HERRADURA
Key metric estimates Plant capacity 8,000TPD Pre-operative capex US$110m Increase in gold production per year 36koz Overview Ore type
At Herradura, gold reserves have increased 48% vs. 2016, to 7.7moz *
*As of December 2017
Oxide Mixed Sulphide
- Final testing is underway and commercial production is expected in 3Q18
- The project will enable sulphides occurring deeper in the pit to be processed more
efficiently
- At the time of analysis, this project was expected to extend the LOM at Herradura to
12 years with an average annual gold production of 390 koz
- With current reserves and the above production rate, the LOM is just over 20 yrs
Projects Cont.
19 JUANICIPIO (JV WITH MAG SILVER. FRESNILLO: 56%) JUANICIPIO (JV WITH MAG SILVER. FRESNILLO: 56%)
Overview 8km from the Fresnillo mine; Juanicipio’s mineral zones are located in silver-gold rich sulphide shoots of the veins. This project will be developed on a stand-alone basis
- Feasibility study has been concluded by AMC
- Draft being reviewed by the technical committee
- Approval process to follow
- Discussions with suppliers of long term delivery equipment as well as
construction contractors has been initiated.
- Exploration & development works continue as planned
Key metric estimates (100% basis)*
- Avg. annual production
10moz silver 30koz gold Indicated & inferred resources 248 moz silver 1.4 moz gold First production Mid 2020
* According to PFS dated June 2012
20
Underlain by 1.8m hectares of concessions in Mexico and 700k hectares in Peru
* Operations at Soledad & Dipolos are currently suspended.
Systematic Project Generation 2018 Budget: US$ 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%
STRONG ORGANIC GROWTH PIPELINE STRONG ORGANIC GROWTH PIPELINE
Exploration
Financial Review
C O N C E P T 2018 % 2017 % $ % ADJUSTED REVENUES 1,189.9 1,069.5 120.4 11.3 TREATMENT AND REFINING CHARGES (74.8) (73.6) (1.2) 1.6 REVENUES 1,115.0 100.0 995.8 100.0 119.2 12.0 ADJUSTED PRODUCTION COST (429.9) (38.6) (343.0) (34.4) (87.0) 25.4 PROFIT SHARING (11.8) (1.1) (8.9) (0.9) (2.9) 32.0 DEPRECIATION (192.8) (17.3) (168.0) (16.9) (24.9) 14.8 HEDGING (MXP/USD EXCHANGE RATE) 0.0 0.0 0.0 0.0 0.0 N/A CHANGE IN INVENTORIES 21.7 1.9 (16.0) (1.6) 37.7 N/A COST OF SALES (612.9) (55.0) (535.8) (53.8) (77.1) 14.4 GROSS PROFIT 502.2 45.0 460.0 46.2 42.1 9.2 ADMINISTRATIVE & CORPORATE EXPENSES (38.4) (3.4) (33.1) (3.3) (5.3) 16.1 EXPLORATION EXPENSES (78.3) (7.0) (64.2) (6.5) (14.1) 21.9 OTHER INCOME (EXPENSE) (2.3) (0.2) 23.4 2.3 (25.7) N/A SELLING EXPENSES (11.4) (1.0) (8.2) (0.8) (3.2) 39.0 PROFIT FROM CONTINUING OPERATIONS 371.7 33.3 377.9 37.9 (6.1) (1.6) SILVERSTREAM AMORTIZATION EFFECT FOR THE PERIOD 23.3 2.1 22.8 2.3 0.5 2.4 SILVERSTREAM REVALUATION (45.1) (4.0) 32.1 3.2 (77.2) N/A GOLD HEDGING PROFIT/LOSS
- (35.2)
(3.5) 35.2 N/A FINANCE INCOME / (EXPENSE) (15.1) (1.4) (13.9) (1.4) (1.2) 8.5 FOREIGN EXCHANGE GAIN / (LOSS) (11.8) (1.1) 3.8 0.4 (15.7) N/A PROFIT BEFORE INCOME TAX 323.0 29.0 387.4 38.9 (64.4) (16.6) MINING RIGHT (10.9) (1.0) (15.1) (1.5) 4.3 (28.1) INCOME TAX EXPENSE (82.8) (7.4) (62.2) (6.2) (20.7) 33.3 PROFIT FOR THE PERIOD 229.3 20.6 310.1 31.1 (80.8) (26.1) ATTRIBUTABLE TO: EQUITY SHAREHOLDERS OF THE GROUP 230.0 20.6 308.7 31.0 (78.7) (25.5) MINORITY INTEREST (0.7) (0.1) 1.4 0.1 (2.1) N/A 229.3 20.6 310.1 31.1 (80.8) (26.1) EBITDA 566.9 50.8 522.5 52.5 44.4 8.5 ACCUM JUNE CHANGE
Income Statement (IFRS)
22
(Million USD)
Adjusted revenues (IFRS)
23
P R O D U C T 2018 2017 VOLUME PRICE TOTAL 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
ACCUM JUNE
CHANGE BY: 82.7% 17.3% 100.0%
Contribution by mine and by metal to the Adjusted Revenues 2018
24
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%
2018 Adjusted Revenues : US$1,189.9m
By metal By mine
1 Adjusted Revenue is revenue as disclosed in the income statement adjusted to exclude treatment and refining charges.
1
Fresnillo Saucito Ciénega Herradura Noche Buena Silver Gold Zinc Lead San Julián JM San Julián Veins
18% 21% 8% 28% 10% 8% 8% 50% 36% 9% 5%
Consolidated Cost Inflation YTD 2018 (USD Based)
25
Unit Price Weighted Increase % Weight (*) 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%
1.1%
TOTAL
1.00
3.52%
(*) Not including Depreciation and Profit Sharing
Consolidated
Important Note: Excluding the revaluation effect, cost inflation would have been 2.4%
Adjusted Production Cost Analysis (Consolidated)
26
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
*
4 5 2 3
USD MILLION
1 6 YTD 18 YTD 17 $ % Adjusted Production Cost 429.9 343.0 87.0 25.4 Cost of Sales 612.9 535.8 +77.1 Change in inventories and others
- 21.7
16.0
- 37.7
N/A Depreciation 168.3 PTU 11.8 8.9 2.9 32.0 +14.4% 192.8 24.9 14.8 CHANGE
Consolidated Gross Profit Analysis
27
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 YTD17 Gross Profit
YTD18 YTD17 $ % Gross Profit 502.2 460.0 +42.1 +9.2% CHANGE 1
2 3 4 5 6 7
*
USD MILLION
8 9 10
C O N C E P T 2018 % 2017 % $ % ADJUSTED REVENUES 1,189.9 1,069.5 120.4 11.3 TREATMENT AND REFINING CHARGES (74.8) (73.6) (1.2) 1.6 REVENUES 1,115.0 100.0 995.8 100.0 119.2 12.0 ADJUSTED PRODUCTION COST (429.9) (38.6) (343.0) (34.4) (87.0) 25.4 PROFIT SHARING (11.8) (1.1) (8.9) (0.9) (2.9) 32.0 DEPRECIATION (192.8) (17.3) (168.0) (16.9) (24.9) 14.8 HEDGING (MXP/USD EXCHANGE RATE) 0.0 0.0 0.0 0.0 0.0 N/A CHANGE IN INVENTORIES 21.7 1.9 (16.0) (1.6) 37.7 N/A COST OF SALES (612.9) (55.0) (535.8) (53.8) (77.1) 14.4 GROSS PROFIT 502.2 45.0 460.0 46.2 42.1 9.2 ADMINISTRATIVE & CORPORATE EXPENSES (38.4) (3.4) (33.1) (3.3) (5.3) 16.1 EXPLORATION EXPENSES (78.3) (7.0) (64.2) (6.5) (14.1) 21.9 OTHER INCOME (EXPENSE) (2.3) (0.2) 23.4 2.3 (25.7) N/A SELLING EXPENSES (11.4) (1.0) (8.2) (0.8) (3.2) 39.0 PROFIT FROM CONTINUING OPERATIONS 371.7 33.3 377.9 37.9 (6.1) (1.6) SILVERSTREAM AMORTIZATION EFFECT FOR THE PERIOD 23.3 2.1 22.8 2.3 0.5 2.4 SILVERSTREAM REVALUATION (45.1) (4.0) 32.1 3.2 (77.2) N/A GOLD HEDGING PROFIT/LOSS
- (35.2)
(3.5) 35.2 N/A FINANCE INCOME / (EXPENSE) (15.1) (1.4) (13.9) (1.4) (1.2) 8.5 FOREIGN EXCHANGE GAIN / (LOSS) (11.8) (1.1) 3.8 0.4 (15.7) N/A PROFIT BEFORE INCOME TAX 323.0 29.0 387.4 38.9 (64.4) (16.6) MINING RIGHT (10.9) (1.0) (15.1) (1.5) 4.3 (28.1) INCOME TAX EXPENSE (82.8) (7.4) (62.2) (6.2) (20.7) 33.3 PROFIT FOR THE PERIOD 229.3 20.6 310.1 31.1 (80.8) (26.1) ATTRIBUTABLE TO: EQUITY SHAREHOLDERS OF THE GROUP 230.0 20.6 308.7 31.0 (78.7) (25.5) MINORITY INTEREST (0.7) (0.1) 1.4 0.1 (2.1) N/A 229.3 20.6 310.1 31.1 (80.8) (26.1) EBITDA 566.9 50.8 522.5 52.5 44.4 8.5 ACCUM JUNE CHANGE
Income Statement (IFRS)
28
(Million USD)
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 0.2 (Capitalised) Total Risk Cap. Inv. Exp. 81.4 Capitalised Exp. (3.0) Total Exploration Exp. 78.3
[ LEFT BLANK ON PURPOSE]
29
Cash flow (IFRS)
30
Cash flow (IFRS)
31
- 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
- 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$51.5million
- Provisional Tax Payments: US$77.9m
- 2017 Income Tax Payment: US$33.3m
- Special Mining Right: US$19.8m
- 2017 Profit Sharing: US$14.3m
Balance sheet (IFRS)
32
Concept 31-JUNE-18 31-DEC-17
%
Assets Cash and Investments 688.6 896.1
(23.2)
Trade and Other Receivables 449.2 402.1
11.7
Inventories 294.8 271.1
8.7
Prepaid Expenses 4.1 3.5
16.2
Silverstream 495.2 538.9
(8.1)
Derivative Financial Instruments 0.6 0.4
58.9
Property, Plant and Equipment 2,595.4 2,448.6
6.0
Other Assets (Long term) 216.3 184.4
17.3
Total Assets 4,744.3 4,745.1
(0.0)
Liabilities Profit Sharing 12.0 14.2
(15.5)
Other Liabilities (Short term) 131.0 178.6
(26.7)
Retirement and Pension Plan Reserves 10.0 9.2
8.1
Deferred Taxes 511.1 491.7
3.9
Senior Notes 800.0 800.0
- Other Liabilities ( Long term)
188.5 184.8
2.0
Total Liabilities 1,652.5 1,678.5
(1.5)
Share Capital and Share Premium 1,153.8 1,153.8
N/A
Share Capital Subscribed 368.5 368.5
N/A
Retained earnings 1,990.8 1,962.8
1.4
Other Accounts (481.5) (473.8)
1.6
Stockholder's Equity 3,031.6 3,011.3
0.7
Minority Interest 60.2 55.2
9.0
Total Stockholder´s Equity 3,091.8 3,066.6
0.8
Total Liabilities and Stockholder's Equity 4,744.3 4,745.1
(0.0) Change
Cost Per Tonne (IFRS)
33
* Cost per tonne is calculated as total adjusted production costs divided by total volume of ore processed. ** Cost per tonne excluding unproductive costs.
CHANGE 2018 2017 % CHG. COST PER TON N E * MINE UNIT Fresnillo US$/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%
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% ACCUM JUNE
Cash Cost (IFRS)
34
Cash cost per ounce is calculated as total cash cost (cost of sales plus treatment and refinning charges less depreciation) less revenues from by-products divided by the silver or gold ounces sold.
*
*
Margins by mine (Metal price – Cash Cost)(YTD18 vs YTD17)
35
(USD/Oz)
Fresnillo Saucito Ciénega Herradura Noche Buena
Ounces Sold
8.2Moz. 7.4Moz. 9.9Moz. 9.3Moz. 33.9Koz. 31.6Koz. 222.5Koz. 241.3Koz. 89.0Koz. 87.8Koz.
- Chg. + -9.2%
- Chg. -6.1%
- Chg. -6.8% Chg. 8.4% Chg. -1.3%
(USD/Oz)
All In Sustaining Cost (US$/Oz)
36
Note: All In sustaining cost is calculated as traditional cash cost plus on-site general, corporate and administrative costs, community costs related to current
- perations, capitalised stripping & underground mine development, sustaining capital expenditures and remediation expenses.
2018 2017 % CHG. CASH COST * MINE UNIT Fresnillo PER OZ. SILVER 6.79 7.57
- 10.3%
Saucito PER OZ. SILVER 7.88 6.50 21.2% Ciénega PER OZ. GOLD 1,198.16 419.16 185.8% Herradura PER OZ. GOLD 715.92 810.82
- 11.7%
Noche Buena PER OZ. GOLD 1,051.80 908.73 15.7% CONSOLIDATED PER OZ. GOLD EQ. 827.46 754.98 9.6%
Gold Eq.Oz (Koz)
781.05 765.54 2.0% PER OZ. SILVER EQ. 10.39 10.53
- 1.3%
Silver Eq. Oz (Moz)
62.20 54.88 13.3% ACCUM JUNE
Margins by mine (Metal price – All In Sustaining Cost) (YTD18 vs YTD17)
37
(USD/Oz)
Fresnillo Saucito Ciénega Herradura Noche Buena
(USD/Oz)
Ounces Sold
8.2Moz. 7.4Moz. 9.9Moz. 9.3Moz.. 33.9Koz. 31.6Koz. 222.5Koz. 241.3Koz. 89.0Koz. 87.8Koz.
- Chg. + -9.2%
- Chg. -6.1%
- Chg. -6.8% Chg.+8.4% Chg. -1.3%
Strategy & Outlook
YEAR
PROJECT 360 130
DEVELOPMENT & CONSTRUCTION PRODUCTION OPTIMISATION - PRE FEASIBILITY STUDY - DEVELOPMENT & CONSTRUCTION PRE-STRIPPING & CONSTRUCTION CENTAURO UNDERGROUND DEVELOPMENT PRODUCTION PRODUCTION CONSTRUCTION TAILINGS FLOTATION DEVELOPMENT 2ND DYNAMIC LEACHING PLANT CONSTRUCTION LEACHING PLANT CONSTRUCTION DEVELOPMENT & CONSTRUCTION PRODUCTION DEVELOPMENT & CONSTRUCTION Extended Pit LoM of 470 koz Au & UG 65 Koz Au
CENTAURO PIT EXPANSION / CENTAURO UNDERGROUND 350
136 koz Au
ORISYVO 305
10 moz Ag & 30 koz Au
JUANICIPIO 55
15 koz Au & 1.3 moz Ag
CIENEGA 5,000 TPD (Optimization project) 30
3 moz Ag
FRESNILLO 9,000 TPD (Optimization project) 110
Extended LoM
- f 390 koz Au
CENTAURO EXTENSION
3.5 moz Ag & 13 koz Au
PYRITES PLANT (Optimization project)
2017 2018 2019 2020 2021 2022 2023
155
Investment (US$ million) Expected Avg. Annual Production PRODUCTION PRODUCTION PRODUCTION EXPLORATION
Expected Delivery of Growth
39
(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 (1) (2) (3) (4)
Expected attributable production profile
40
100 200 300 400 500 600 700 800 900 1,000 2017 2018 2019 2020
Gold
20 40 60 80 100 120 2017 2018 2019 2020
By-product Zinc
10 20 30 40 50 60 70 2017 2018 2019 2020
By-product Lead
10 20 30 40 50 60 70 80 2017 2018 2019 2020
Silver*
Million Oz Thousand Oz Thousand Tons Thousand Tons Target of 65 moz silver by 2018 Target of 750 koz gold by 2018 *Including Silverstream
CAPEX Spend Expectations
41 2018
US$ Million 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
Outlook
42
Safety and support of the workforce and environment
- Reinforce our safety measures throughout the Group
- Continue to implement the “I care, we care” programme across all of our operations
- Reach our goal of consuming 75% of our electricity needs from wind power by the second half of 2019
Continued operational focus to maximise the potential of our existing mines Fresnillo Mine
- Add a new contractor, continue investing in infrastructure and maintain the positive silver production trajectory
Saucito Mine
- Increase development and continue to focus on reducing dilution
San Julián Mine
- Initiatives in place to collect process water now ensure the plant will run at full capacity in 2H18 and going forward
Continue to create value through disciplined growth, exploration and development
- Optimise production at the new Pyrites Plant at Saucito – Continue works on the Flotation Plant at Fresnillo
- Begin commercial production at the 2nd Line of DLP in 3Q18
- Approval process for Juanicipio to follow
- Continue to invest in exploration – focusing on converting resources into reserves
- Produce 64.5-67.5 moz of Silver (including Silverstream) and 900-930 koz Gold in 2018
Investment Case
43
High quality, low-cost, flexible
- perations
High quality, low-cost, flexible
- perations
Disciplined approach to development Disciplined approach to development Dedicated and experienced management and workforce Dedicated and experienced management and workforce Strong balance sheet Strong balance sheet Commitment to sustainable business practices Commitment to sustainable business practices
44
Volume and Ore grades
45
Volume Processed 1H18 Gold grade 1H18 Silver grade 1H18 Gold grade FY18e Silver grade FY18e Units (t) (g/t) (g/t) (g/t) (g/t) Mine Fresnillo 1,258,316 0.68 222 0.63 215-225 Saucito 1,396,753 1.20 262 1.21 255-265 San Julián San Julián I 600,517 2.04 152 1.9-2.1 165-175 San Julián II 1,071,720 0.08 152 0.10 145-155 Ciénega 650,885 1.66 154 1.80 160 Herradura 11,590,068 0.72 2.2 0.75 NA 67,713,885* Noche Buena 8,965,705 0.53 0.2 0.48 NA 42,594,558* *Total Volume Hauled (t)
Metal prices, average exchange rate, energy & inflation
46
CONCEPT 1H18 1H17 % CHG GOLD (US$/OZ) 1,312.71 1,250.25 5.0 SILVER (US$/OZ) 16.48 17.44 (5.5) LEAD (USC$/LB) 109.69 101.96 7.6 ZINC (USC$/LB) 144.19 123.46 16.8 EXCHANGE RATE AT THE BEGINNING OF THE YEAR ($/USD) 19.74 20.66 EXCHANGE RATE AT 30 JUNE ($/USD) 19.86 17.90 11.0 DEVALUATION (REVALUATION) (MXP/USD) FOR THE PERIOD (%) 0.65 (13.39) AVERAGE SPOT EXCHANGE RATE ($/USD) 19.07 19.49 (2.2) (KWH) WEIGHTED AVERAGE COST (USC$) 7.05 7.58 (7.0) DIESEL AVERAGE COST (USC$/LT) 79.01 75.05 5.3 COST INFLATION (DEFLATION) (%) 3.52 4.28 (17.8) ACCUM JUNE