Global Metals, Mining & Steel Conference 2014 May 14, 2014

Transcription

1 Looking beyond the cycle Bank of America Merrill Lynch Global Metals, Mining & Steel Conference 2014 May 14, 2014 Octavio Alvídrez, CEO Fresnillo plc

2 Disclaimer This document includes statements that are, or may be deemed to be, forward-looking statements. These forwardlooking 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 forwardlooking 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. 2

3 About Fresnillo Who we are What we do Our goal How we do it Where we do it World s largest silver producer & one of Mexico s largest gold producers Total workforce of 6,412 people Mining concessions of 2.1m hectares in Mexico & 78,800 ha in Peru Headquartered in Mexico City; listed in London and Mexico Exploration, development, construction and mining of silver and gold Focus on projects that can be developed into low-cost, world-class mines Focus on consolidation of districts To produce 65 million ounces of silver and over 500,000 ounces of gold per year by 2018, with reserves to support that level of production for at least ten years Ongoing investment in exploration and mine development Operational excellence A strong commitment to disciplined and sustainable growth Core operations in Mexico, which has a mining history extending more than 500 years Continue to seek and evaluate potential mergers and acquisitions, both in Mexico and Latin America 3

4 1 Maximise the potential of existing operations Operate at 100% capacity Low-cost producer Optimise mining method and metallurgy to maintain high recovery rates Our business model and strategy to create value 2 Deliver growth through development projects Focus on delivery timeline Disciplined CAPEX control Specialized Engineering and Construction team 3 Extend the growth pipeline Evaluate early-stage acquisitions Maintain reserves for 10 years Ensure organic growth 4 Advance our sustainable development Improve general health Reinforce safety Minimise environmental impacts Maintain sound relations with communities 4

5 Where we operate Three operating mining districts and two regions with potential to become districts in the future ORISYVO HERRADURA DISTRICT SAN JULIÁN Fresnillo plc mines (6 and a satellite mine) Development projects (2) Advanced exploration projects (4) Prospects in drilling Prospects at an early stage CIÉNEGA DISTRICT FRESNILLO DISTRICT SOUTH PERU 5

6 Mining Districts HERRADURA DISTRICT Mines: Herradura, Soledad and Noche Buena 2013 production: 235.5k oz gold Resources: 6.52 Moz gold New facilities: Dynamic Leaching Plant Exploration: Centauro Deep, Tajitos, Choya, San Javier, Las Norias, El Nudo, Carina, Cerritos, El Dorado CIÉNEGA DISTRICT Mines: Ciénega and San Ramón satellite mine 2013 production: 112.1k oz gold, 4.2 Moz silver Resources: 1.61 Moz gold, Moz silver Exploration: Cluster cebollitas, Manzanillas, Pereñita, La Huerta FRESNILLO DISTRICT Mines: Fresnillo and Saucito 2013 production: 34.3 Moz silver, 78.3k oz gold Resources: 1,318.1 Moz silver, 3.74 Moz gold Projects: Saucito II, Pyrites plant Exploration: Juanicipio II, Fresnillo District 6

7 Districts of the Future SAN JULIÁN Under construction Silver-gold veins and disseminated ore body Resources: Moz silver, 893 koz gold Approved CAPEX: US$515m Flotation plant with 6,000 tpd capacity Dynamic leaching plant with 3,000 tpd capacity Average expected level of production: 10.3 Moz silver and 44koz of gold ORISYVO Porphyry system Resources: 9.9 Moz gold Define mining method and metallurgy 7

8 Looking beyond the cycle 2013 Business Review

9 2013 Business Review 1. Existing operations Silver production, including the silverstream, of 42.7moz increased 4.3 per cent reflecting continued ramp up of Saucito and increased production at Ciénega Attributable gold production decreased by 10.0% to 425,831 as a result of disrupted operations at Herradura District Successful ramp-up of production at Noche Buena, despite being temporarily affected by the suspension of explosives permits in 2H 2013 Optimised milling capacity at Ciénega and increased ore processed by 11.6%, mitigating the adverse effect of the lower gold ore grade Focus on efficiency gains (US$27.4 million) and cost control reinforced company position as a low cost producer of precious metals with world class margins 2. Projects development Completion of Dynamic Leaching Plant on time and on budget Acceleration of Saucito II in favour of San Julián to maximise returns and favour net positive cash flows while maintaining growth profile 9

10 2013 Business Review (continued) 3 Investment in exploration Investment in exploration totaled US$233.3 million resulting in 5.0 and 5.2 per cent increase in total silver and gold resources mainly at San Julián, Centauro Deep, Noche Buena and in the Ciénega District. Silver and gold reserves declined by 4.3 and 14.5 per cent due to: i) lower prices used (Ag:US$19.5/oz, -27.8%; Au:US$1,250/oz, -10.7%); ii) change to more conservative open pit mine designs; and iii) use of 2012 Edition of the JORC code, a more prudent methodology 4. Sustainable development Advancing the maturity of our HSECR system; positive trends for several indicators, including a range of safety metrics. Continue to enhance safety programmes, however, two fatalities in the year indicate more work is required 10

11 2013 Business Review 2013 PRODUCTION 2012 PRODUCTION SILVER (Koz) GOLD (Oz) SILVER (Koz) Fresnillo mine Silver underground mine 22,764 33,079 26,383 29,573 Saucito mine Silver underground mine 11,581 45,177 7,054 45,246 GOLD (Oz) Ciénega mine San Ramón satellite mine Gold-Silver underground mines 4, ,053 3, ,275 Herradura mine Gold open pit mine , ,146 Soledad-Dipolos mine Gold open pit mine 17 26, ,104 Noche Buena mine Gold open pit mine 28 60, ,690 Subtotal 38, ,831 36, ,034 Silverstream Sabinas underground mine (operated by Peñoles) 3,945 N/A 4,035 N/A Total 42, ,831 40, ,034 11

12 2013 Business Review Cash Cost within the lowest in the industry ESTIMATED LIFE OF MINE CASH COST Traditional* All-in sustaining costs** WEIGHTED AVERAGE MINE UNIT Fresnillo PER OZ. SILVER (2024) Saucito PER OZ. SILVER (2023) Ciénega PER OZ. GOLD (2025) Herradura PER OZ. GOLD , (2019) Soledad-Dipolos PER OZ. GOLD (2017) Noche Buena PER OZ. GOLD , ,043.0 (2019) * 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. ** All-In Sustaining Costs (AISC) 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. 12

13 High quality portfolio feeds pipeline Mine Operations Development Projects Fresnillo Saucito Herradura Soledad-Dipolos Nochebuena Ciénega - San Ramón Saucito II San Julián Advanced Exploration Prospects in drilling Early stage Exploration Centauro Deep Juanicipio Las Casas (Ciénega) Orisyvo Guachichil Fresnillo District Gran Centauro Lucerito Tajitos Candameña San Nicolás Coneto Guanajuato Cebadillas La Yesca Cairo Tocayos Amata (Perú) Pilarica (Perú) Sonora and Sinaloa : San Javier Norias Nudo Carina Bella Vista Cerritos Dorado Rosario Dátil Olivos Chihuahua: S. Brígida Rosetillas SJPinal Bellavista C. Blanco Lucero Los Alisos Durango: Rodeo Pereñita La Huerta El Carmen Zacatecas: Urite Atotonilco Corredor Concha-Nieves Argentum Coyotes Villa García Plateros Michoacán: Otzumatlán Perú: Huacravilca Sto. Domingo Systematic Project Generation 13

14 2013 Business Review Continuous growth in resources resulted from our investment in exploration Attributable silver resources (M oz) Attributable gold resources (M oz) Resources Reserves Resources Reserves In 2013, the US$233.3m capital invested in exploration resulted in: a) Increases in silver resources +5.0% and gold resources +5.2% b) Decreases in silver reserves -4.3% and gold reserves -14.5% 14

15 2013 Business Review (continued) Financial Highlights Average silver price US$/Oz Average gold price US$/Oz 1, ,674.1 Revenues US$ million 1, ,157.4 Gross Profit US$ million EBITDA US$ million ,315.3 EBITDA margin 45.2% 61.0% Profit attributable to equity shareholders of the Company, excluding Silverstream revaluation effects US$ million Risk capital invested in exploration US$ million Cash generated by operations before changes in working capital US$ million ,356.7 Interest-bearing loans US$ million N/A CAPEX US$ million Dividends paid US$ million Total assets US$ million 4, ,

16 Looking beyond the cycle Projects for the future

17 Growth Projects Project Development Chart Risk Investment (US$ million) (1) Expected Production (2) PROJECT YEAR Medium Low mill Oz Ag & 35 thds Oz Au SAUCITO II CONSTRUCTIO N PRODUCTION Medium mill Oz Ag & 44 thds Oz Au SAN JULIÁN CONSTRUCTION PRODUCTION Low thds Oz Au & 1.3 mill Oz Ag CIENEGA 5,000 TPD (Optimization project) DETAILED ENGINEERI NG CONSTRUCTION PRODUCTION Low mill Oz Ag FRESNILLO 10,000 TPD (Optimization project) BASIC & DETAILED ENGINEERING CONSTRUCTION PRODUCTION Medium mill Oz Ag & 18 thds Oz Au PYRITES PLANT (Optimization project) DETAILED ENGINEERING CONSTRUCTION & DEVELOPMENT PRODUCTION Medium thds Oz Au GRAN CENTAURO PIT EXPLOR ATION DEVELOPMENT PRODUCTION Medium High thds Oz Au CENTAURO DEEP EXPLORATION & DETAILED ENGINEERING DEVELOPMENT CONSTRUCTION PRODUCTION Medium Low mill Oz Ag & 30 thds Oz Au JUANICIPIO DETAILED ENGINEERING DEVELOPMENT AND CONSTRUCTION PRODUCTION High thds Oz Au BASIC DETAILED ORISYVO CONSTRUCTION PRODUCTION ENGINEERING ENGINEERING (1) Estimated. (2) Total average annual production. 17

18 Achieving 65moz silver by 2018 Million Oz Note: Attributable silver production. Silver Stream not included. 18

19 Achieving over 500koz gold by 2018 Million Oz Note: Attributable gold production. 19

20 Fresnillo district Saucito II Project construction commenced in 1Q 2013 We have pro-actively advanced this project as a result of skilled execution, infrastructure synergies and ongoing capital evaluation Completion date brought forward from mid 2015 to 4Q ,680 metres developed in 2013, guaranteeing access to the ore body for the first year of operation Expected to produce an average of 8.4 moz silver and 35,000 oz gold per year at full capacity Project Highlights Average Annual Silver Production Average Annual Gold Production Pre-operative CAPEX Life of mine Processing Capacity Expected Start-up Ag:US$18.0 /oz* Ag:US$22.0 /oz* Traditional cash cost* All-in cash cost* 8.4 Million Oz 35.0 Thousand Oz US$235.0 Million 22 years 3,000 TPD 4Q % 32.1% US$2.54/oz US$3.70/oz * Feasibility study approved on the 6th of March

21 San Julián Project Ownership 100% Fresnillo plc Underground mine, dynamic leaching plant for epithermal silver-gold veins (to start first) and a flotation plant for disseminated silver-leadzinc system. Project delivery deferred to mid 2015 and CAPEX increased slightly due to preference of capital allocation for Saucito II. The slower pace of development is beneficial as we have seen the following: Fresh water from wells not enough to sustain plant operation, thus the need to go to the alternate plan of constructing a water reservoir Increase in the number of incidents heightened security requirements for our people and assets Delays in obtaining environmental and construction permits, which have now been solved Mine workings and ventilation raises advanced 13,094 metres and 891 metres in 2013, respectively, totaling 50,395 metres of development Project Highlights* Average Annual Silver Production 10.3 Million Oz Average Annual Gold Production 43.9 Thousand Oz Pre-operative CAPEX US$515.0 Million Life of mine 13 years Disseminated Processing Capacity 6,000 TPD Veins Processing Capacity 3,000 TPD Expected Start-up Mid 2015 Ag:US$18.0/oz 10.1% Ag:US$22.0/oz 17.4% Traditional cash cost US$7.77/oz All-in cash cost US$9.33/oz * Revised on December

22 Looking beyond the cycle Conclusion and Outlook

23 Outlook: balancing growth & returns Conclusions In 2013, conditions for precious metals miners were challenging due to lower silver and gold prices. However Fresnillo plc continued to deliver healthy margins Unchanged strategy: we will continue to invest in growth while balancing it with returns Looking ahead to 2014 and beyond: Precious metals market will continue to be volatile Focus on cost control, optimize capacity and improve recovery rates Continue to invest through the cycle to expand our resource base Deliver returns to our shareholders in balance with our expected growth plans On track to achieve our long-term goals of producing 65 million ounces of silver and 500,000 ounces of gold a year by

24 Looking beyond the cycle Appendix

25 Operation Review Fresnillo District FRESNILLO SAUCITO Change % Change % Attributable production Silver m oz Gold k oz Lead kt Zinc kt Ore processed k t 2, , , Ore grade Silver g/t Gold g/t

26 Operation Review Ciénega District CIÉNEGA Change % Attributable production Gold k oz Silver m oz Ore processed k t 1, , Ore grades Gold g/t Silver g/t

27 Operation Review Herradura District HERRADURA SOLEDAD-DIPOLOS NOCHE BUENA Attributable production Change % Change % Gold k oz Ore processed k t 14, , , , , , , ,447.3 Ore grades Gold g/t Silver g/t

28 INCOME STATEMENT (IFRS) ACCUM DECEMBER CHANGE C O N C E P T (Million USD) 2013 % 2012 % $ % ADJUSTED REVENUES 1, ,287.2 (525.3) (23.0) BY-PRODUCT HEDGING N/A TREATMENT AND REFINING CHARGES (147.0) (129.8) (17.2) 13.2 REVENUES 1, , (542.2) (25.1) ADJUSTED PRODUCTION COST (567.7) (35.1) (569.1) (26.4) 1.4 (0.2) PROFIT SHARING (20.2) (1.2) (48.8) (2.3) 28.6 (58.6) DEPRECIATION (239.3) (14.8) (243.8) (11.3) 4.4 (1.8) HEDGING (EXCHANGE RATE) (2.1) (0.1) 6.4 N/A CHANGE IN WORK IN PROGRESS (69.6) (98.1) UNPRODUCTIVE COSTS (26.1) (1.6) - - (26.1) N/A COST OF SALES (847.7) (52.5) (792.8) (36.7) (54.9) 6.9 GROSS PROFIT , (597.2) (43.8) ADMINISTRATIVE EXPENSES (29.5) (1.8) (29.3) (1.4) (0.2) 0.7 CORPORATE EXPENSES (32.7) (2.0) (23.9) (1.1) (8.8) 36.9 EXPLORATION EXPENSES (207.8) (12.9) (233.5) (10.8) 25.8 (11.0) OTHER INCOME (EXPENSE) (2.4) (0.1) (10.9) (0.5) 8.5 (78.2) SELLING EXPENSES (7.0) (0.4) (6.3) (0.3) (0.6) 10.3 PROFIT FROM CONTINUING OPERATIONS , (572.6) (54.0) SILVERSTREAM REVALUATION (65.7) (4.1) (118.2) N/A SILVERSTREAM AMORTIZATION EFFECTS FOR THE PERIOD (53.5) (82.1) FINANCE INCOME / (EXPENSE) (8.9) (0.6) (16.6) N/A FOREIGN EXCHANGE GAIN / (LOSS) (6.5) (0.4) (8.4) (0.4) 1.9 (23.1) PROFIT BEFORE INCOME TAX , (758.9) (64.4) INCOME TAX EXPENSE (121.5) (7.5) (322.6) (15.0) (62.3) MINING RIGHT DEFERRAL (36.2) (2.2) - - (36.2) N/A PROFIT FOR THE PERIOD (594.0) (69.5) ATTRIBUTABLE TO: EQUITY SHAREHOLDERS OF THE GROUP (500.8) (67.6) MINORITY INTEREST (93.2) (81.9) (594.0) (69.5) EBITDA , (585.5) (44.5) 28

29 CASH FLOW (IFRS) YEAR TO DATE CHANGE C O N C E P T (Million USD) $ % CASH GENERATED BY OPERATIONS BEFORE CHANGES IN WORKING CAPITAL ,356.7 (606.6) (44.7) WORKING CAPITAL 34.5 (99.8) N/A INCOME TAX AND PROFIT SHARING PAID (338.6) (513.3) (34.0) NET CASH FROM OPERATING ACTIVITIES (297.6) (40.0) OTHER PROCEEDS SENIOR NOTES N/A PLACEMENT OF NEW ORDINARY SHARES N/A SILVERSTREAM CONTRACT (46.8) (42.3) LOANS FROM PARTNERS N/A PROCEEDS FROM THE SALE OF PROPERTY, PLANT AND EQUIPMENT (1.6) (11.9) NET INTEREST RECEIVED (PAID) (0.3) (4.5) CAPITAL CONTRIBUTION TOTAL OTHER PROCEEDS 1, , PURCHASE OF PROPERTY, PLANT AND EQUIPMENT (572.1) (527.3) (44.9) 8.5 DIVIDENDS PAID (505.2) (423.8) (81.4) 19.2 TRANSACTIONS COSTS SENIOR NOTES (4.9) 0.0 (4.9) N/A OTHERS N/A USES OF CASH (1,077.0) (950.4) (126.6) 13.3 NET INCREASE / (DECREASE) IN CASH DURING THE PERIOD (72.3) N/A EFFECT OF EXCHANGE RATE ON CASH AND CASH EQUIVALENTS (0.2) (18.9) CASH AND CASH EQUIVALENTS AT 01 JANUARY (71.1) (10.4) CASH AND CASH EQUIVALENTS AT 31 DECEMBER 1, N/A 29

30 BALANCE SHEET (IFRS) Concept (Million USD) 31-DIC DIC-12 % Assets Change Cash and Investments 1, N/A Trade and Other Receivables Inventories Prepaid Expenses Silverstream (23.6) Derivative Financial Instruments (27.6) Property, Plant and Equipment 1, , Other Assets (Long term) (32.6) Total Assets 4, , Liabilities Profit Sharing (60.6) Loans from Newmont to Penmont N/A Other Liabilities (Short term) (29.1) Retirement and Pension Plan Reserves Deferred Taxes (12.0) Senior Notes N/A Other Liabilities ( Long term) Total Liabilities 1, N/A Share Capital and Share Premium 1, ,177.3 N/A Placement of new Ordinary Shares N/A Retained earnings 1, ,536.1 (17.3) Other Accounts (518.9) (474.2) 9.4 Stockholder's Equity 2, , Minority Interest Total Stockholder s Equity 2, , Total Liabilities and Stockholder's Equity 4, ,