Fresnillo Plc · LSE:FRES
Fresnillo — H1 2019 Earnings Presentation
45 slides from Fresnillo's earnings presentation, Jul 30, 2019
Slide 1: Half Year 2019 Interim results
Half Year 2019 Interim results Tuesday 30th July 2019 LSE: FRES BMV: FRES www.fresnilloplc.com
Slide 2: Disclaimer
DISCLAIMER 2 This document includes statements that are, or may be deemed to be, -looking statements . These forward-looking statements can be identified by the use of forward-looking terminology, including the terms or or, in each case, their negative or other variations or comparable terminology,
Slide 3: Agenda
AGENDA 3 • Strategic Performance • HSECR • 1H19 Highlights • Operational Performance • Exploration Update • 1H19 Financials • Outlook
Slide 4: Investment Proposition
INVESTMENT PROPOSITION 4 OUR KEY COMPETITIVE ADVANTAGES POSITION US TO MEET NEAR-TERM COMMITMENTS AND DRIVE LONG-TERM VALUE HIGH QUALITY ASSETS LOW COST AND FLEXIBLE DISCIPLINED APPROACH TO COMMITMENT TO SUSTAINABLE STRONG BALANCE SHEET OPERATIONS DEVELOPMENT BUSINESS PRACTICES 2.2 BNOZ OF SILVER RE
Slide 5: Commitment to Sustainable Business Practices
COMMITMENT TO SUSTAINABLE BUSINESS PRACTICES 5 We believe that responsible mining is compatible with high stakeholder expectations in terms of ethical, social and environmental performance, and recognise that our social licence to operate is dependent upon being trusted by our stakeholders. HEALTH S
Slide 6: 1H19 Results - Highlights
1H19 RESULTS - HIGHLIGHTS 6 SILVER PRODUCTION 40 Half Year Operational Highlights Production (moz) 30 • Silver production of 27.6 moz (including Silverstream) down 10.4% vs. 1H18. 20 10 • Gold production of 432.4 koz, down 7.1% vs. 1H18. 0 1H16 1H17 1H18 1H19 • Approval of Juanicipio project in Apri
Slide 7: Operating Performance
OPERATING PERFORMANCE 7 Operating Performance
Slide 8: Operations: Fresnillo
OPERATIONS 8 FRESNILLO KEY OPERATING STATISTICS 1H19 1H18 Silver production moz 6.4 8.1 Gold production koz 24.9 21.4 Cost per tonne US$/t 58.9 46.9 Cash cost - US$/oz of Ag 3.1 -0.8 AISC US$/oz of Ag 12.5 6.8 Reserves 2018 * 176.7 moz Ag, 0.6 moz Au Resources 2018 * 811.9 moz Ag, 1.8 moz Au 1H19 SU
Slide 9: Operations: Saucito
OPERATIONS 9 SAUCITO KEY OPERATING STATISTICS 1H19 1H18 Silver production moz 8.8 10.0 Gold production koz 36.7 39.6 Cost per tonne US$/t 66.0 53.6 Cash cost - US$/oz of Ag 2.4 1.3 AISC US$/oz of Ag 10.0 7.9 Reserves 2018 * 130.3 moz Ag, 0.7 moz Au Resources 2018 * 428.2 moz Ag, 1.9 moz Au 1H19 SUMM
Slide 10: Operations: San Julián
OPERATIONS 10 SAN JULI` N (VEIN SYSTEM) SAN JULI` N (DISSEMINATED ORE BODY) KEY OPERATING STATISTICS 1H 19 1H 18 KEY OPERATING STATISTICS 1H 19 1H 18 Gold production koz 35.3 38.7 Gold production koz 1.1 1.2 Silver production moz 2.3 2.7 Silver production moz 4.2 4.4 Cost per tonne US$/t 66.5 58.2 C
Slide 11: Operations: Ciénega
OPERATIONS 11 CI NEGA KEY OPERATING STATISTICS 1H 19 1H 18 Gold production koz 29.8 33.1 Silver production moz 2.9 2.8 Cost per tonne US$/t 79.5 68.4 Cash cost - US$/oz of Au 176.9 -10.6 AISC US$/oz of Au 1,533.8 1,198.2 Reserves 2018 * 56.9 moz Ag, 0.6 moz Au Resources 2018 * 133.9 moz Ag, 1.3 moz
Slide 12: Operations: Herradura
OPERATIONS 12 HERRADURA KEY OPERATING STATISTICS 1H 19 1H 18 Gold production koz 236.9 243.1 Silver production moz 0.6 0.6 Cost per tonne* US$/t 18.0 10.3 Cash cost - US$/oz of Au 770.3 364.9 AISC US$/oz of Au 925.4 715.9 Reserves 2018 ** 7.4 moz Au Resources 2018 ** 10.2 moz Au 1H19 SUMMARY 2H19 PR
Slide 13: Operations: Noche Buena
OPERATIONS 13 NOCHE BUENA KEY OPERATING STATISTICS 1H 19 1H 18 Gold production koz 65.4 88.0 Silver production moz 0.03 0.04 Cost per tonne* US$/t 9.3 6.7 Cash cost - US$/oz of Au 821.9 772.8 • At time of acquisition in 2008, the project was estimated to produce 376,450 Au ounces over the 5 year lif
Slide 14: Disciplined Approach to Development - Projects Cont. (Juanicipio)
DISCLIPINED APPROACH TO DEVELOPMENT - PROJECTS Cont. 14 JUANICIPIO (JV WITH MAG SILVER. FRESNILLO: 56%) OVERVIEW 8km from the Fresnillo mine This project is being developed on a stand-alone basis KEY METRIC ESTIMATES (100% BASIS)* • Fresnillo plc will develop, construct and operate Juanicipio. 11.7
Slide 15: Exploration: Strong Organic Growth Pipeline
EXPLORATION 15 STRONG ORGANIC GROWTH PIPELINE Pipeline allows us to focus on projects that have the potential to be developed into low cost, world-class mines
Slide 16: Financial Performance
FINANCIAL PERFORMANCE 16 Financial Performance
Slide 17: Income Statement (IFRS)
INCOME STATEMENT (IFRS) 17 CONCEPT (MILLION USD) ACCUM JUNE CHANGE 1H19 % 1H18 % $ % ADJUSTED REVENUES 1,069.0 1,189.9 (120.9) (10.2) HEDGING (METALS) 0.1 0.0 0.1 N/A TREATMENT AND REFINING CHARGES (67.1) (74.8) 7.8 (10.4) REVENUES 1,002.0 100 1,115.0 100 (113.1) (10.1) ADJUSTED PRODUCTION COST (566
Slide 18: Adjusted Revenues (IFRS)
ADJUSTED REVENUES (IFRS) 18 MILLION USD ACCUM JUNE CHANGE BY 1H19 1H18 VOLUME PRICE TOTAL PRODUCT Gold 556.8 593.0 (39.7) 3.5 (36.2) Silver 366.1 432.1 (35.2) (30.8) (66.0) Lead 45.3 55.5 1.3 (11.6) (10.3) Zinc 100.8 109.2 7.1 (15.5) (8.4) ADJUSTED REVENUES 1,069.0 1,189.8 (66.5) (54.4) (120.9)
Slide 19: Contribution by Mine and by Metal to Adjusted Revenues 1H19
CONTRIBUTION BY MINE AND BY METAL TO THE ADJUSTED REVENUES 1H19 19 11H19 ADJUSTED REVENUES : US$1,069.0 M BY MINE BY METAL SJN Veins, 8% PB, 4% ZN, 9% Herradura SJN DOB, 8% Gold Saucito HERR, 30% Silver Fresnillo Zinc CiØnega NB, 8% Lead Noche Buena San JuliÆn DOB San JuliÆn Veins AU, 52% CIEN, 9% A
Slide 20: Consolidated Cost Inflation 1H19
CONSOLIDATED COST INFLATION 1H19 (USD BASED) 20 CONSOLIDATED Unit price increase % Weight (*) Weighted average LABOUR: UNIONIZED 6.7% 5.8% 0.4% PERSONNEL EMPLOYEES 4.7% 2.7% 0.1% WEIGHTED 6.0% OPERATING 2.0% 20.9% 0.4% MATERIALS ENERGY: ELECTRIC ENERGY 3.3% 6.3% 0.2% DIESEL 11.3% 11.5% 1.3% GASOLINE
Slide 21: Adjusted Production Cost 1H 2019
ADJUSTED PRODUCTION COST 1H 2019 21 US$ 566.4 Million Costs from Contractors = 27% * Includes: Freights, Taxes & Licenses, Insurance Costs, Computer Leasing, Fees and Others.
Slide 22: Adjusted Production Cost Analysis (Consolidated)
ADJUSTED PRODUCTION COST ANALYSIS (CONSOLIDATED) 22 ACCUM JUNE CHANGE 1H 19 1H 18 $ % ADJUSTED PRODUCTION COST 566.4 429.9 136.5 31.7 CHANGE IN INVENTORIES AND OTHERS -14.7 -21.7 7.0 (32.3) DEPRECIATION 240.5 192.8 47.7 24.7 PTU 4.3 11.8 -7.5 (49.7) COST OF SALES 796.5 612.8 183.7 30.0 USD MILLION 1
Slide 23: Consolidated Gross Profit Analysis
CONSOLIDATED GROSS PROFIT ANALYSIS 23 ACCUM JUNE CHANGE 1H19 1H18 $ % GROSS PROFIT 205.5 502.2 -296.7 -59.1 USD MILLION 1 2 3 4 5 6 7 8 9 10 11 DOB - Disseminated Ore Body
Slide 24: Income Statement (IFRS)
INCOME STATEMENT (IFRS) 24 CONCEPT (MILLION USD) ACCUM JUNE CHANGE 1H19 % 1H18 % $ % OPERATING UNITS ADJUSTED REVENUES 1,069.0 1,189.9 (120.9) (10.2) FRESNILLO 7.9 HEDGING (METALS) 0.1 0.0 0.1 N/A SAUCITO 7.1 TREATMENT AND REFINING CHARGES (67.1) (74.8) 7.8 (10.4) CI NEGA 6.6 SAN JULI`N 9.8 REVENUES
Slide 25: Cash Flow (IFRS)
CASH FLOW (IFRS) 25 YTD CHANGE (USD MILLION) 1H19 1H18 $ % CASH GENERATED BY OPERATIONS BEFORE CHANGES IN WORKING 316.1 575.9 (259.8) (45.1) CAPITAL WORKING CAPITAL (7.6) (63.9) 56.3 (88.2) INCOME TAX AND PROFIT SHARING PAID (140.8) (145.3) 4.5 (3.1) NET CASH FROM OPERATING ACTIVITIES 167.7 366.6 (1
Slide 26: Cash Flow (IFRS)
CASH FLOW (IFRS) 26 • Decrease in accounts receivables Met- Mex +US$18.7 YTD CHANGE million • VAT -US$3.1 million (USD MILLION) 1H19 1H18 $ % • Increase in trade and other payables +US$10.4 million • Decrease in inventories -US$25.9 million CASH GENERATED BY OPERATIONS BEFORE CHANGES IN WORKING • De
Slide 27: Balance Sheet (IFRS)
BALANCE SHEET (IFRS) 27 CONCEPT CHANGE 30-Jun-19 31-Dec-18 % CHG. ASSETS Cash and Investments 362.1 560.8 (35.4) Trade and Other Receivables 474.3 462.0 2.7 Inventories 360.9 335.0 7.7 Prepaid Expenses 23.1 15.5 49.0 Silverstream 517.3 519.1 (0.3) Derivative Financial Instruments 2.8 0.3 786.9 Prope
Slide 28: Cost per Tonne (IFRS)
COST PER TONNE (IFRS) 28 ACCUM JUNE CHANGE 1H19 1H18 % CHG. COST PER TONNE* MINE UNIT Fresnillo US$/TON 58.87 46.92 25.5% Saucito US$/TON 65.96 53.56 23.2% CiØnega US$/TON 79.46 68.39 16.2% San JuliÆn Veins US$/TON 66.54 58.24 14.3% San JuliÆn DOB US$/TON 38.98 34.50 13.0% Herradura US$/TON 18.02**
Slide 29: Cash Cost (IFRS)
CASH COST (IFRS) 29 ACCUM JUNE CHANGE 1H19 1H18 % CHG. CASH COST* MINE UNIT Fresnillo PER OZ. SILVER 3.12 -0.82 N/A Saucito PER OZ. SILVER 2.36 1.25 88.8% CiØnega PER OZ. GOLD (by-prod.) 176.85 -10.60 N/A PER OZ. GOLD (Co-prod.) 771.02 645.46 19.5% PER OZ. SILVER (Co-prod.) 8.87 8.11 9.4% PER OZ. GO
Slide 30: Margins by Mine (Metal Price - Cash Cost)
MARGINS BY MINE 30 (METAL PRICE CASH COST)(1H19 VS 1H18) OUNCES SOLD OUNCES SOLD 7.4 Moz. 5.8Moz. 9.3 Moz. 9.0 Moz. 2.6 Moz. 2.3 Moz. 3.7 Moz. 3.6 Moz. 31.6 Koz. 28.1 Koz. 241.3 Koz. 233.6 Koz. 87.8 Koz. 65.3 Koz. Chg. -21.4 % Chg. -2.6% Chg. -12.6% Chg. -4.8 % Chg. -11.0% Chg. -3.2% Chg. -25.6% DOB
Slide 31: All In Sustaining Cost (US$/oz)
ALL IN SUSTAINING COST (US$/OZ) 31 ACCUM JUNE CHANGE WEIGHTED AVERAGE LIFE 1H19 1H18 % CHG. OF MINE MINE UNIT Fresnillo PER OZ. SILVER 12.46 6.79 83.5% 4.7 Saucito PER OZ. SILVER 10.02 7.88 27.2% 9.7 San JuliÆn Veins PER OZ. SILVER 10.85 4.89 121.9% 8.8 San JuliÆn DOB PER OZ. SILVER 9.49 9.50* -0.1%
Slide 32: Margins by Mine (Metal Price - AISC)
MARGINS BY MINE 32 (METAL PRICE ALL IN SUSTAINING COST) (1H19 VS 1H18) OUNCES SOLD OUNCES SOLD 7.4 Moz. 5.8 Moz. 9.3 Moz. 9.0 Moz. 2.6 Moz. 2.3 Moz. 3.7 Moz. 3.6 Moz. 31.6 Koz. 28.1 Koz. 241.3 Koz. 233.6 Koz. 87.8 Koz. 65.3 Koz. Chg. -21.4 % Chg. -2.6 % Chg. -12.6 % Chg. -4.8 % Chg. -11.0% Chg. -3.2
Slide 33: Outlook 2019
OUTLOOK 33 Outlook 2019
Slide 34: Expected Delivery of Growth
EXPECTED DELIVERY OF GROWTH 34 1 2 Expected Avg. Investment (US$ YEAR million) Annual 2018 2019 2020 2021 2022 2023 2024 Production PROJECT LEACHING 3.5 moz Ag & 13 PYRITES PLANT PLANT 155 koz Au PRODUCTION (Optimization project) CONSTRUCTION TAILINGS FLOTATION FRESNILLO BASE 35 2 moz Ag METALS & 9,
Slide 35: Expected Attributable Production Profile
EXPECTED ATTRIBUTABLE PRODUCTION PROFILE 35 Million Oz Thousand Oz ATTRIBUTABLE SILVER ATTRIBUTABLE GOLD 80 1,000 60 800 600 40 400 20 200 0 0 2018 2019 2020 2021 2018 2019 2020 2021 *Including Silverstream Thousand Tons Thousand Tons ATTRIBUTABLE LEAD ATTRIBUTABLE ZINC 80 120 100 60 80 40 60 40 20
Slide 36: Capex Spend Expectations
CAPEX SPEND EXPECTATIONS 36 2019 US$ Million SUSTAINING (OPERATIONS) FRESNILLO 126M SAUCITO 126M CI NEGA 58M SAN JULI`N 55M HERRADURA 49M NOCHE BUENA 12M OTHERS 10M PROJECTS APPROVED JUANICIPIO 126M PYRITES PLANT 46M SAN JULI`N 12M CENTAURO EXTENSION 7M PROJECTS FOR APPROVAL FRESNILLO OPTIMISATION 2
Slide 37: Outlook
OUTLOOK 37 PRIORITISE SAFETY, CONTINUED CREATE VALUE SUPPORT OF THE OPERATIONAL FOCUS TO THROUGH DISCIPLINED WORKFORCE AND MAXIMISE POTENTIAL OF GROWTH, EXPLORATION ENVIRONMENT OUR EXISTING MINES & DEVELOPMENT
Slide 38: Appendix
APPENDIX
Slide 39: Grade Expectations for 2019
GRADE EXPECTATIONS FOR 2019 39 GOLD (OZ) MINE MINE TYPE 1H19 FY19 E FRESNILLO UNDERGROUND SILVER 0.86 ~ 0.85 SAUCITO UNDERGROUND SILVER 1.14 ~ 1.10 CI NEGA UNDERGROUND GOLD & SILVER 1.55 1.60-1.70 HERRADURA OPEN PIT GOLD 0.82 0.70-0.75 NOCHE BUENA OPEN PIT GOLD 0.53 ~ 0.55 SAN JULI`N (VEINS) UNDERGR
Slide 40: Exploration: Strong Resource Base
EXPLORATION 40 STRONG RESOURCE BASE SILVER RESOURCES GOLD RESOURCES 2,204.0 moz 39.1 moz - 116,566 koz, -5.0% vs 2017 +580 koz, 1.5% vs 2017 Metal prices used for 2018 resource estimation: Gold 1,250 US$/oz, Silver 17.0 US$/oz, 0.90 US/pound Lead and 1.1 US/pound Zinc. "Others" include decrease in m
Slide 41: Exploration: Seeking Further Resource Conversion to Expand Reserve Base
EXPLORATION 41 SEEKING FURTHER RESOURCE CONVERSION TO EXPAND RESERVE BASE SILVER RESERVES GOLD RESERVES 475,991.5 moz 11,009.6 moz - 25,671 koz, -5.1% vs 2017 - 701 koz, -6% vs 2017 Metal prices used for 2018 resource estimation: Gold 1,250 US$/oz, Silver 17.0 US$/oz, 0.90 US/pound Lead and 1.1 US/p
Slide 42: Disciplined Approach to Development - Pyrites Plant Project
DISCLIPINED APPROACH TO DEVELOPMENT - PROJECTS 42 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% Leachi
Slide 43: Other Projects: Orisyvo, Guanajuato & Rodeo
DISCLIPINED APPROACH TO DEVELOPMENT - PROJECTS 43 OTHER PROJECT & POTENTIAL PROJECTS ORISYVO, GUANAJUATO & RODEO OVERVIEW - ORISYVO • Improved recoveries following metallurgy testing leading to a stronger project. • Assessing a 8,000 TPD mine with a DLP processing facility; focusing on higher grade
Slide 44: Exploration: Mexico, Peru, Chile
EXPLORATION 44 MEXICO PERU CHILE • Drilling at the San JuliÆn district increased • Santo Domingo: Mapping delineated a large • Systematically prospecting the coastal silver-gold resources on the South veins. Mapping, vein system carrying gold-silver values. belt. geochemical and airborne Versatem st
Slide 45: Tailing Safety Management
TAILING SAFETY MANAGEMENT 45 Tailing Dams in Programme in Peer reviewed by our Portfolio Place international specialists Fresnillo plc has 11 tailings dams, all Fresnillo plc has a programme in place to In 2016, all dams were independently located in Mexico and all of which comply review all its tai