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

Transcription

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

2 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 operates, may differ materially from those described in, or suggested by, the forward-looking statements contained in this document. In addition, even if the results of operations, financial position and liquidity, and the development of the markets and the industry in which the Fresnillo Group operates are consistent with the forward-looking statements contained in this document, those results or developments may not be indicative of results or developments in subsequent periods. A number of factors could cause results and developments to differ materially from those expressed or implied by the forward-looking statements including, without limitation, general economic and business conditions, industry trends, competition, commodity prices, changes in regulation, currency fluctuations (including the US dollar and Mexican Peso exchange rates), the Fresnillo Group s ability to recover its reserves or develop new reserves, including its ability to convert its resources into reserves and its mineral potential into resources or reserves, changes in its business strategy, political and economic uncertainty. Forward-looking statements may, and often do, differ materially from actual results. Any forward-looking statements in this document speak only as of the date of this document, reflect the Fresnillo Group s current view with respect to future events and are subject to risks relating to future events and other risks, uncertainties and assumptions relating to the Fresnillo Group s operations, results of operations, growth strategy and liquidity. Investors should specifically consider the factors identified in this document which could cause actual results to differ before making an investment decision. Subject to the requirements of the Prospectus Rules, the Disclosure and Transparency Rules and the Listing Rules or applicable law, the Fresnillo Group explicitly disclaims any obligation or undertaking publicly to release the result of any revisions to any forward-looking statements in this document that may occur due to any change in the Company s expectations or to reflect events or circumstances after the date of this document. 2

3 Fresnillo at a Glance A Decade of Progress and Achievement Location HERRADURA DISTRICT Key Highlights World s largest silver producer (58.7 moz in 2017) and Mexico s largest gold producer (911.1 koz in 2017) ORISYVO Total assets of US$4.7 billion 1 and market cap of US$12.9 billion 2 CIÉNEGA DISTRICT SOUTH PERU SAN JULIÁN FRESNILLO DISTRICT Silver resources of 2.3 billion ounces and gold resources of 38.5 million are the foundation for creating long term value Growth potential supported by mining concessions of 1.8m hectares in Mexico and 350 thousand hectares in Peru Margins sustained by cash costs and AISC amongst the lowest in the industry Production target at IPO of 65 moz of silver and 750 koz of gold by 2018 Fresnillo plc mines (7 principal mines and 2 satellite mines) 3 Development projects (2) Advanced exploration projects (4) Prospects in drilling Prospects at an early stage Substantial, high quality project pipeline and strong commitment to disciplined and sustainable growth Focus on greenfield and brownfield projects that can be developed into low-cost, world-class mines 1 As of 31 Dec As at 11 May Operations at Soledad-Dipolos are currently suspended 3

4 A decade of progress and achievement Operate Develop Explore Sustain By optimising capacity and recoveries, generating continuous improvements in productivity and cost controls while leveraging expansion opportunities, we have: Silver Production Gold Production Silver Reserves Gold Reserves Dividends Paid Up 69% since IPO Up 225% since IPO Up 23% since IPO Up 216% since IPO Paid US$2.5 Billion Consistently invested over US$4 billion in both existing operations and growing our portfolio of quality assets. 4 new mines developed & commissioned: Saucito San Julián Noche Buena Soledad & Dipolos Due to commission 2 projects in 2018: Pyrites Plant at Saucito 2 nd Dynamic Leaching Plant at Herradura Maintained a strategic commitment to continuous exploration across all precious metals price cycles. US$1.6 Billion invested in exploration since IPO Silver Resources grown 177% to 2.3 Billion ounces since IPO Gold Resources grown 305% to 39 Million ounces since IPO ~95% Organic Growth Strong pipeline of projects including Juanicipio, due to be commissioned in 2020 We work hard to ensure the health and safety of our people and that their communities see a return on their investment of time, skills and commitments. Over US$32 Million invested in local communities since IPO Close to US$130 Million invested in health, safety and environmental initiatives since IPO Inclusion into the FTSE4Good UK 50 scheme, amongst others 4

5 A decade of Production and Resource Growth per Share Production Production (Eq Ag moz) Resources (Eq Ag moz) Resources 6,000 5,000 4,000 3,000 2,000 1,000 - Production (Eq Ag oz) per thousand shares Resources (Eq Ag oz) per share Resources (Eq Ag oz) per share Production (Eq Ag oz) per thousand shares Silver: Gold 74 : 1 5

6 Growth and Returns 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 ( ) 4,458.5 million ounces* (Increase of 158%) EBITDA (2008 to 2017) Total EBITDA US$ 8,570m Average EBITDA p.a. US$ 857m Average EBITDA margin 53% Total CAPEX from the last decade (2008 to 2017) US$ 4,281.8 million Production growth (2007 to 2017) Silver 69% Gold 225% Total Dividends Paid since IPO (2008 to 2017) US$ 2,492.2 million *Measured, Indicated and Inferred resources, considering a Gold/Silver ratio of 74. Includes resources mined and processed. 6

7 Health, Safety, Environment & Community Relations Health & Safety 2 Fatal accidents year to date The enhanced Health & Safety approach piloted at Saucito in 2017 and subsequently adopted at both Fresnillo and Ciénega is set to be rolled out across our other operations, emphasising risk awareness and encouraging reporting Investment in Health increased to US$12.5m, up 15% vs Environment, Community Relations and Awards Working along side Ethisphere, we hosted the first Business Ethics Leadership Alliance (BELA) roundtable in Mexico City bringing together leading industry figures to share best practises on ethics and compliance programmes Our social investment portfolio contributes to 4 of the UN s sustainability goals, they are: Capacity building, Water, Education & Health Our Environment, Social and Governance (ESG) performance was recognised by the inclusion of Fresnillo in the FTSE4 GOOD UK 50 ranking Released our first Modern Slavery Statement, setting out the steps taken to prevent any involvement in slavery and human trafficking Reviewed the new requirements of the EU Non-financial Reporting Directive for the Strategic Report which resulted in the Company adopting the six capitals approach of the IIRC 7

8 2017 Highlights & 2018 Update Silver Production Production (moz) Highlights Silver production of 58.7 moz (including Silverstream), up 16.6% inline with guidance, and gold production of koz, down 2.6% though above guidance Gold (38.5 moz) & silver resources (2.3 bnoz) both increased 0.3% and 6.9% respectively vs Gold Production Production (koz) Adjusted revenue of US$2,233.2m, up 9.2%; Gross profit of US$925.4 m, up 4.9% EBITDA of US$1,060.1m, up 2.7% - EBITDA margin of 50.6% Cash flow from operations of US$1,073.7 million, up 4.9% Healthy balance sheet and low leverage ratio; cash and other liquid funds as at 31 December 2017 of US$896.1 million EBITDA US$ million 1, Construction of San Julián (phase II) completed on budget and now operating at nameplate capacity Update Cash flow from operations US$ million 1, Silver production from the Fresnillo mine continues to increase, 7-9% increase expected this year Pyrites plant and 2 nd Dynamic leaching plant expected to be commissioned in 2Q guidance: moz silver & koz gold 8

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10 Operations Fresnillo Saucito Key operating statistics FY 2017 Silver production moz 16.5 Gold production koz 38.8 Cost per tonne US$/t 47.5 Cash cost - US$/oz of Ag 0.71 Reserves 2017 * Resources 2017 * moz Ag, 0.6 moz Au moz Ag, 1.9 moz Au FY17 Achievements Installed a new zinc thickener at the beneficiation plant Continue to prepare for the deepening of the San Carlos shaft 2018 targets Continue stabilising ore grades and ore throughput Maintain development rates in the short term, while increasing them in the long term Carry out intensive in-fill deep drilling to increase certainty in operational planning Expected 7-9% increase in silver production in 2018 Key operating statistics FY 2017 Silver production moz 21.2 Gold production koz 69.9 Cost per tonne US$/t 47.6 Cash cost - US$/oz of Ag 1.50 Reserves 2017 * Resources 2017 * moz Ag, 0.7 moz Au moz Ag, 2.1 moz Au FY17 Achievements Advanced preparation work for the deepening of the Jarillas shaft Successfully converted resources into reserves while also increasing our resource base (reserves up 8.1% & resources up 21.9%) 2018 targets Maintain development rates Initiate deepening of the Jarillas shaft Intensify exploration to the south * As of December

11 Operations Cont. San Julián Phase I San Julián Phase II Key operating statistics FY 2017 Silver production moz 5.9 Gold production koz 82.8 Cost per tonne US$/t 52.1 Cash cost - US$/oz of Ag -4.3 Key operating statistics FY 2017 Silver production moz 4.6 Gold production koz 1.8 Cost per tonne US$/t * 31.9 Cash cost - US$/oz of Ag * 3.9 Reserves 2017 ** 30.3 moz Ag, 0.4 moz Au Reserves 2017 ** moz Ag, 0.1 moz Au Resources 2017 ** moz Ag, 1.3 moz Au Resources 2017 ** Optimised the usage of water found in-mine through the water circulation system at the tailings dam 2018 targets Optimise the milling capacity of the plant moz Ag, 0.1 moz Au FY17 Achievements Commissioned the floatation plant (Phase II) by mid-year 2017 and ramped up to nameplate capacity within two months Full year of operations at Phase I, operating above nameplate capacity 2018 targets Obtain permits for the water reservoir and begin construction Expand tailings dam * San Julián Phase II cost per tonne and cash cost figures are not representative as it started up in July 2017 and continues to process ore from the stockpile that originated during the construction period **As of December

12 Operations Cont. Ciénega Key operating statistics FY 2017 Gold production koz 71.9 Silver production moz 5.4 Cost per tonne US$/t 66.5 Cash cost - US$/oz of Au Reserves 2017 * Resources 2017 * 54.1 moz Ag, 0.6 moz Au moz Ag, 1.7 moz Au FY17 Achievements Began development of the Taspana vein Commenced construction of the third tailings dam 2018 targets Intensify exploration at the Rosario vein and develop access ramp Commence basic engineering for the plant expansion to 5,000 tpd at Ciénega * As of December

13 Operations Cont. Herradura Noche Buena Key operating statistics FY 2017 Gold production koz Silver production koz 551 Cost per tonne* US$/t 8.0 Cash cost - US$/oz of Au Reserves 2017 ** Resources 2017 ** 7.7 moz Au 10.3 moz Au FY17 Achievements Continued construction of the second line at the DLP, as planned Expanded the life of the mine by increasing the reserve base 2018 targets Commission the second line at the DLP Continue exploration to strengthen the Centauro expansion project Key operating statistics FY 2017 Gold production koz Silver production koz 31 Cost per tonne* US$/t 7.5 Cash cost - US$/oz of Au Reserves 2017 ** Resources 2017 ** 0.8 moz Au 0.8 moz Au FY17 Achievements Contained costs Explored adjacent areas, which revealed limited upside potential despite some positive results 2018 targets Maintain comparative low cash cost profile Maximise production by extracting ore from the new areas *Cost per tonne excluding unproductive costs ** As of December

14 Projects Pyrites Plant Project in the Fresnillo District Avg. annual silver production Avg. annual gold production Cash cost US$/oz Ag (average LoM) Leaching plant at Saucito expected commissioning Fresnillo tailings flotation plant expected commissioning 3.5 moz 13.0 koz $2.51 /oz 2Q Overview Improve overall recoveries of gold and silver by processing historical and ongoing tailings from the Fresnillo and Saucito mines. The plant will froth float pyrite concentrates that will be leached in a 2,000 tpd dynamic leaching plant and Merrill Crowe plant to produce precipitates. The leaching plant at Saucito advanced as expected. Construction of the flotation plant at Fresnillo began. 14

15 Projects Cont. 2nd Line of Dynamic Leaching Plant Project at Herradura Detailed engineering continued Expected to be commissioned in 2Q18 The project will enable sulphides occurring deeper in the pit to be processed more efficiently At the time of analysis, this project was expected to extend the LOM at Herradura from 6 to 12 years with an average annual gold production of 390 koz With current reserves and the above production rate, the LOM has been revised to just over 20 years Ore type Key metric estimates Plant capacity Pre-operative capex Increase in gold production per year Expected commissioning 8,000TPD US$110m 36koz 2Q18 Oxides Mixture Sulphides At Herradura, gold reserves have increased 48% vs. 2016, to 7.7moz 15

16 Projects Cont. Juanicipio (JV with MAG Silver. Fresnillo: 56%) 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 Key metric estimates (100% basis) Avg. annual production Indicated & inferred resources 10moz silver 30koz gold 248 moz silver 1.4 moz gold First production 1H 2020 JUANICIPIO RAMP Development from ,307 M Total Development in ,634 M Exploration in 2017 was focused on the depth extension of the Valdecanas vein. Feasibility study in the process of being concluded Feasibility Study is due to be concluded in the coming weeks. 16

17 Strong Organic Growth Pipeline Mine Operations Development Projects PEA - Feasibility Advanced Exploration Fresnillo 2018 Budget: Saucito US$ 180 m Herradura Nochebuena 42% Ciénega - San Ramón Soledad &Dipolos* San Julián Pyrites Plant Cebollitas Cluster Centauro Extension Juanicipio Centauro Deep Orisyvo Guanajuato Rodeo Pipeline allows us to focus on projects that have the potential to be developed into low cost, world-class mines 33% Prospects in drilling Early stage Exploration 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 25% Underlain by 1.8m hectares of concessions in Mexico and 350k hectares in Peru Systematic Project Generation * Operations at Soledad & Dipolos are currently suspended. 17

18 2017 Financial Summary 2017 Revenue US$m 2,093.3 EBITDA US$m 1,060.1 Adjusted production cost US$m Gross profit US$m Exploration expenses US$m Operating profit US$m Basic EPS US cents 0.76 Cash generated by operations before changes in working capital US$m 1,073.7 Income tax and profit sharing US$m Silverstream contract US$m 43.3 Purchase of property, plant & equipment US$m Cash and other liquid funds at 31 December US$m

19 Group Consolidated Cash Cost* & All In Sustaining Cost ** (US$/Oz) ACCUM DECEMBER CHANGE CASH COST % CHG. PER OZ. SILVER EQ. As a Silver Company % Silver Eq. Oz (Moz) sales volume % PER OZ. GOLD EQ. As a Gold Company % Gold Eq. Oz (koz) Sales Volume 1,554 1, % ALL IN SUSTAINING COST PER OZ. SILVER EQ. As a Silver Company % Silver Eq. Oz (Moz) Sales Volume % PER OZ. GOLD EQ. As a Gold Company % Gold Eq. Oz (koz) Sales Volume 1, , % 19

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21 Expected Delivery of Growth (1) (2) (3) (4) (1) Estimated (2) Total average annual production (3) Total investment (of which 56% Fresnillo plc; 44% MAG Silver) according to PFS dated June 2012 (4) On hold Approved by the Board Subject to ongoing internal review (Subject to Board approval) 21

22 Expected Silver Production Profile Million Oz 80 Attributable Target of 65 moz silver by

23 Expected Gold Production Profile Thousand Oz 1,100 Attributable 1, Target of 750 koz gold by

24 CAPEX Spend Expectations 2018 US$ Million Million Usd Sustaining (Operations) 900 Fresnillo 90 M Saucito 100 M 700 Herradura Ciénega 136 M 70 M Noche Buena 35 M San Julián 90 M 500 Others 9 M 400 Projects Approved 300 San Julián Pyrites Plant 17 M 47 M 200 Centauro Extension 35 M 100 Projects for Approval Others 123 M Sustaining CAPEX New Projects - Preoperative CAPEX 24

25 Outlook Safety and support of the workforce Role out our enhanced safety system across all our mines Launch a programme to engage our organisation in defining KPIs in respect of outcomes that are significant to our stakeholders and material to the business Disciplined growth through exploration and development Deliver the Pyrites Plant at Saucito in 2Q18 Commission the 2 nd Line of DLP in 2Q18 Conclude the feasibility study at Juanicipio and present to the Board for approval Continue to invest in exploration focusing on converting resources into reserves Continue to create value through growth and returns Produce 67 70moz Silver & koz Gold in 2018 Stabilise development rates across our operations Optimise the operational performance at San Julián Continue implementation of IT projects across group Geopolitical events Mexican Presidential election 2018 North American Free Trade Agreement negotiations Proven Strategy Delivering Value through Growth and Returns 25

26 Investment Case High quality, low-cost, flexible operations Disciplined approach to development Dedicated and experienced management and workforce Strong balance sheet Commitment to sustainable business practices 26