Interim Results 2014

Interim Results 2014
Strong operations to weather cyclical challenges
August 5, 2014
1
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.
5/08/2014
2
Agenda
• Strategy & Highlights
Octavio Alvídrez, CEO
• Operations Review
Roberto Díaz, COO
• Financial Review
Mario Arreguín, CFO
• Projects review
Executive Team
• Exploration Review
David Giles, VP of Exploration
• Outlook
Octavio Alvídrez, CEO
5/08/2014
3
Our strategy & four pillars
to create value
1. Maximise potential of existing operations
• Operate at 100% capacity
• Low-cost producer
• Optimise mining method and metallurgy to maintain high
recovery rates
2. Deliver growth through development projects
• Focus on delivery timeline
• Disciplined CAPEX control
• Specialised Engineering and Construction team
3. Extend the growth pipeline
• Evaluate early-state acquisitions
• Maintain reserves for 10 years
• Ensure organic growth
4. Advance sustainable development
• Improve general health
• Reinforce safety
• Minimise the environmental impact
• Maintain sound relations with communities
4
H1 14 Operational Highlights
Existing Operations:
– Gold and silver production on track to meet full year guidance of 43 Moz silver
(including Silverstream) and 450,000 oz gold
– Gold production at Herradura resumed in March and returning to normal levels
– Ongoing focus on grade optimisation at Fresnillo
– Cost reduction initiatives and process improvements successful
Development Projects:
– Successful start up of the dynamic leaching plant at Herradura
– Saucito II and San Julián on track for start up in 4Q 2014 and 2H 2015
Growth Pipeline:
– Exploration programme expected to result in increased resources at year end
5/08/2014
5
1H 14 Financial Highlights
Weaker silver and gold prices and temporary disruption at Penmont:
• Resulted in the decline of adjusted revenue by 23.6% to US$750.4m
But with successful cost control:
• EBITDA margins remain among the best in the industry albeit at a slightly lower level at
47.9%
Generating significant cash flow:
• Of US$336.7m before changes in working capital
And a strong balance sheet:
• With cash and cash equivalents and short term investments of US$1,164.3m as at 30
June 2014
Resulting in a special dividend:
• Together with silver and gold prices which have stabilised over the half under review,
the Board declared a special dividend of US$36.8 million, or 5 US cents per share
• No change to the existing dividend policy
5/08/2014
6
Operations Review
7
Fresnillo district
Fresnillo:
Saucito:
• 10.5moz silver produced in 1H 14 down 5.8% due to
• 6.3moz silver produced in 1H 14 up 12.2% due to increased
lower ore grades
ore processed
• Approaching average grade of the deposit of 255 g/t
leads to confidence of grade stability at this level
• Silver ore grades expected to remain within guided range of
320-325 g/t for 2014
• Working to optimise the mine plan
• Conducting more infill drilling to increase certainty of
our geological model
On track to meet FY 2014 gold and silver production guidance of 43
moz silver (incl. Silverstream) and 450,000oz gold (attributable)
5/08/2014
8
Ciénega district
Gold:
Silver:
• 53,984oz gold produced in 1H 14 down 9.5% due to
• 2.1moz silver produced down 5.3% due to lower ore grades
expected decline in ore grades
• Ore grade guidance of 2.0-2.5 g/t remains
• Ore grade guidance of 120-125 g/t remains
• Higher throughput partially mitigated lower silver grades
• Milling capacity of 3,600 tpd mitigated lower gold grades
On track to meet FY 2014 gold and silver production guidance of 43
moz silver (incl. Silverstream) and 450,000oz gold (attributable)
5/08/2014
9
Herradura district
Herradura:
Noche Buena:
• 58,532oz attributable gold produced in 1H 14 down 35.8%
• 36,099oz attributable gold produced in 1H 14 up 33.5%
due to the disrupted operations following the temporary
suspension of the explosives permits, which was resolved
in March
due to higher ore deposited and recovery rates
• On track to achieve expanded capacity of 75,000ozpa
(attributable)
• Process of depositing mineral on the leaching pads was
• Ore grade guidance of 0.50-0.53 g/t remains
normalised in 2Q14
• Recovery cycles expected to reach regular levels in 2H14
• Ore grade guidance of 0.75-0.80 g/t remains
5/08/2014
On track to meet FY 2014 gold and silver production guidance of 43
moz silver (incl. Silverstream) and 450,000oz gold (attributable)
10
Financial Performance
11
INCOME STATEMENT (IFRS)
CONCEPT
(Million USD)
ADJUSTED REVENUES
HEDGING (METALS)
TREATMENT AND REFINING CHARGES
REVENUES
ADJUSTED PRODUCTION COST
PROFIT SHARING
DEPRECIATION
HEDGING (EXCHANGE RATE)
CHANGE IN INVENTORIES
UNPRODUCTIVE COST
COST OF SALES
GROSS PROFIT
ADMINISTRATIVE EXPENSES
CORPORATE EXPENSES
EXPLORATION EXPENSES
OTHER INCOME (EXPENSE)
SELLING EXPENSES
PROFIT FROM CONTINUING OPERATIONS
SILVERSTREAM REVALUATION
FINANCE INCOME / (EXPENSE)
FOREIGN EXCHANGE GAIN / (LOSS)
PROFIT BEFORE INCOME TAX
MINING RIGHT
INCOME TAX EXPENSE
PROFIT FOR THE PERIOD
1H 2014
ACCUM JUNE
%
1H 2013
750.4
0.0
(73.3)
677.1
982.3
0.1
(56.5)
925.9
100.0
CHANGE
%
100.0
$
%
(231.9)
(0.1)
(16.8)
(248.8)
(23.6)
(92.2)
29.8
(26.9)
47.7
0.2
(19.1)
(4.3)
9.8
(9.2)
25.0
(14.1)
(2.1)
16.7
N/A
19.2
N/A
(6.1)
(223.8)
(43.1)
(0.9)
(0.3)
45.7
(7.0)
(1.5)
6.4
2.3
(39.9)
894.0
43.1
(50.6)
(291.3)
(8.6)
(133.3)
(0.2)
60.8
(9.2)
(382.0)
(43.0)
(1.3)
(19.7)
(0.0)
9.0
(1.4)
(56.4)
(339.0)
(8.8)
(114.3)
4.1
51.0
(407.0)
(36.6)
(1.0)
(12.3)
0.4
5.5
0.0
(44.0)
295.1
43.6
518.9
56.0
(2.3)
(2.1)
(10.2)
(1.1)
(0.7)
(14.5)
(14.1)
(114.7)
(0.8)
(3.5)
(1.6)
(1.5)
(12.4)
(0.1)
(0.4)
183.4
27.1
371.3
40.1
(187.9)
47.3
(24.5)
2.0
7.0
(3.6)
0.3
(112.5)
(3.7)
(5.3)
(12.1)
(0.4)
(0.6)
159.8
(20.8)
7.3
N/A
565.0
N/A
208.2
30.8
249.8
27.0
(41.6)
(16.6)
(13.1)
(58.1)
(1.9)
(8.6)
(73.0)
(7.9)
(13.1)
14.9
N/A
(20.4)
137.1
20.2
176.8
19.1
(39.7)
(22.5)
130.1
19.2
144.7
15.6
(14.6)
(10.1)
(15.4)
(14.5)
(69.0)
(7.8)
(5.1)
ATTRIBUTABLE TO:
EQUITY SHAREHOLDERS OF THE GROUP
MINORITY INTEREST
5/08/2014
EBITDA
7.0
1.0
32.0
3.5
(25.1)
(78.3)
137.1
20.2
176.8
19.1
(39.7)
(22.5)
(161.8)
(33.3)
324.5
47.9
486.3
52.5
12
Consolidated Cost Inflation 2014
(USD Based)
Consolidated
Unit Price
Increase %
Weight (*)
Weighted
Average
7.9%
3.0%
0.08%
0.00%
Weighted
1.0%
0.1%
0.8%
Operating Materials
-1.6%
20.4%
-0.33%
Energy
1.6%
6.2%
7.5%
4.0%
9.5%
8.4%
1.3%
0.15%
0.52%
0.10%
Contractors
0.5%
30.0%
0.15%
Maintenance
0.2%
13.0%
0.03%
Freights
1.9%
1.0%
0.02%
Insurance
-1.0%
1.3%
-0.01%
Others
4.7%
4.2%
0.20%
100.0%
0.91%
Labour
Unionized Personnel
Employees
Electric Energy
Diesel
Fuel
Weighted
3.4%
TOTAL
(*) Not including Depreciation and Profit Sharing
13
Adjusted Production Cost Analysis
(Consolidated)
CHANGE
1H14
Adjusted Production Cost
Change in inventories
Unproductive Costs
Depreciation
PTU
Hedging (mxp/usd exchange rate)
Cost of Sales
USD MILLION
1H13
291.3
-60.8
9.2
133.3
8.6
0.2 (Loss)
382.0
$
339.0
-51.0
114.3
8.8
-4.1 (Profit)
407.0
%
-47.7*
-9.8
9.2
19.1
-0.2
4.3
-25.0
-14.1
19.2
N/A
16.7
-2.1
N/A
-6.1
*
5/08/2014
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
14
Adjusted Production Cost Analysis
(Consolidated)
1H14
USD
Adjusted Production Cost
291.3
Volume Processed
Change in inventories
-60.8
(Mton)
9.2
Unproductive Costs
1H14 1H13 Chg 133.3
Depreciation
PTU
1.38
1.33 +4.1% 8.6
Volume Processed
0.2 (Loss)
Hedging (mxp/usd exchange rate)
(Mton)
MILLION
Cost of Sales
382.0
+4.0%
1H14 1H13 Chg
0.66
0.56 +18.0%
5/08/2014
1
Chg
+13.6%
2
3
1H14
0.66
1H13
0.61
4
5
-2.1
N/A
-6.1
-0.2
4.3
-25.0
-1.6%
Average spot MXP/USD
1H14 1H13 Chg
13.12 12.56 +4.4%
Volume Processed
(Mton)
Volume Processed
(Mton)
1H13
6.57
8.8
-4.1 (Profit)
407.0
+0.8%
+0.5%
1H14
7.46
• Better control of the rock bolting
process
CHANGE
1H13
$
%
• Use of wire mesh to optimise shotcreting
339.0
-47.7*
-14.1
activities.
-51.0
-9.8
19.2
• Lower
tonne of some
- consumption per
9.2
N/A
114.3
19.1
16.7
reagents
*
Chg
+8.5%
6
7
8
9
10
11
12
13
14
15
16
17
18
15
Cost Per Tonne (IFRS)
ACCUM JUN
1H 2014
CHANGE
1H 2013
% CHG.
COST PER TONNE *
MINE
UNIT
Fresnillo
US$/TON
45.02
46.60
-3.4%
Saucito
US$/TON
62.09
59.17
4.9%
Ciénega
US$/TON
67.61
73.59
-8.1%
Herradura
US$/TON
8.03 **
7.13
12.6%
Soledad & Dipolos
US$/TON
-
9.96
N/A
Noche Buena
US$/TON
8.89
8.20
8.3%
* Cost per tonne is calculated as total production costs less depreciation, profit sharing and the exchange rate hedging effects.
** Cost per tonne excluding unproductive costs.
5/08/2014
16
Cash Cost (IFRS)
ACCUM JUN
1H 2014
CASH COST
1
CHANGE
1H 2013
% CHG.
1
MINE
UNIT
Fresnillo
PER OZ. SILVER
6.13
5.46
12.3%
Saucito
PER OZ. SILVER
3.36
2.19
53.9%
Ciénega
PER OZ. GOLD
180.64
-86.29
309.3%
Herradura
PER OZ. GOLD
403.74
492.95
Soledad & Dipolos
PER OZ. GOLD
-
672.71
Noche Buena
PER OZ. GOLD
737.27
896.10
-18.1%
N/A
-17.7%
Cash cost per ounce is calculated as total cash cost (cost of sales plus treatment and refining charges and
mining rights less depreciation) less revenues from by-products divided by the silver or gold ounces sold.
5/08/2014
17
Margins by mine (Metal price – Cash Cost)
(2014 vs 2013)
(USD/Oz)
Fresnillo
Saucito
Ciénega
Herradura
SD
NB
*
10.5Moz.
10.2Moz.
Chg. + -3.0%
5.3Moz.
6.1Moz.
Chg. +15.9%
57.9Koz. 48.6Koz.
Chg. -16.0%
161.5Koz. 103.8Koz.
Chg. -35.7%
39.1Koz. 0.0Koz.*
Chg. -100.0%
47.3Koz. 63.8Koz.
Chg. +34.9%
* Stoppage of operations continued at Soledad-Dipolos.
5/08/2014
18
19
All In Sustaining Cost (US$/Oz)
LIFE OF MINE
1H 2014
1H 2013
% CHG.
WEIGHTED AVERAGE
CASH COST *
MINE
UNIT
Fresnillo
PER OZ. SILVER
9.93
9.45
5.1%
9.24
(2025)
Saucito
PER OZ. SILVER
7.66
6.83
12.2%
6.9
(2022)
Ciénega
PER OZ. GOLD
594.58
463.50
28.3%
725
(2025)
Herradura
PER OZ. GOLD
839.51
735.83
14.1%
687
(2019)
Soledad-Dipolos
PER OZ. GOLD
-
756.62
N/A
850
(2018)
Noche Buena
PER OZ. GOLD
969.02
1,334.66
-27.4%
1,056.0
(2019)
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.
5/08/2014
** All In cost is includes the aforementioned costs plus non sustaining exploration and capital expenditures and community costs not related to current operations.
19
Consolidated Gross Profit Analysis
CHANGE
Gross Profit
1
2
3
4
5
6
7
1H14
1H13
$
%
295.1*
518.9
-223.8
-43.1
8
9
10
11
12
13
14
15
16
17
18
19
20
Consolidated Gross Profit Analysis
CHANGE
1H14
Volume Processed (Mton)
Gross Profit
1H14 1H13
Chg
USD MILLION
Ore Grade Herradura:
1H14 1H13 Chg
Au g/t
0.71 0.61 +17.0%
0.66
0.56
+18.0%
• Ore Processed:
+4.1%
• Recovery Rate (Ag): +0.7%
• Recovery Rate: +14.5%
• Ore Processed: +13.6%
• Ore Grade (Au): +2.7%
1H13
$
Average spot MXP/USD
Ciénega:
1H14
1H13 Chg 518.9 Ore Grade -223.8
295.1*
1H13
1H14
13.12 12.56 +4.4%
Ag g/t 258.2 287.2
Volume Processed
(Mton)
2
3
4
5
6
7
Chg.
Ag Refining Charge (Usd/Oz)
+44.5%
Zn Treatment Charge (Usd/Ton) +7.9%
Ore Grade Ciénega:
1H14 1H13
Au g/t
2.6
3.1
8
Silver,Gold and Lead average
realised prices (USc/Lb)
1H14
1H13
Chg
Ag
20.3
24.7 (17.9%)
Au 1,302.1 1,471.7 (11.5%)
Pb
93.8
95.7
(2.0%)
-43.1
Chg
-10.1%
+0.9%.
1H14 1H13 Chg
0.66 0.61 +8.5%
1
%
9
10
11
12
13
14
15
Chg
-16.5%
16
*
17
18
19
21
Contribution by mine to the Gross Profit
1H14
Fresnillo
Herradura
Ciénega
Saucito
Sol & Dipolos
Noche Buena
Total for operating mines
MXP/USD exchange rate hedging gains
Other subsidiaries
Total Fresnillo plc
CHANGE
US$
%
1H13
117.4
59.9
28.6
85.0
(5.0)
26.9
312.7
37.5%
19.1%
9.1%
27.2%
-1.6%
8.6%
100.0%
173.8
125.1
64.8
105.0
18.1
16.2
502.9
34.6%
24.9%
12.9%
20.9%
3.6%
3.2%
100.0%
(56.4)
(65.2)
(36.2)
(20.1)
(23.0)
10.7
(190.2)
(32.5)
(52.1)
(55.9)
(19.0)
N/A
66.0
(37.8)
(0.2)
4.1
(4.3)
N/A
(17.4)
11.9
(29.3)
(246.2)
295.1
518.9
(223.8)
(43.1)
Gross Profit from operating units: US$312.7m
5/08/2014
22
INCOME STATEMENT (IFRS)
CONCEPT
(Million USD)
ADJUSTED REVENUES
HEDGING (METALS)
TREATMENT AND REFINING CHARGES
REVENUES
ADJUSTED PRODUCTION COST
PROFIT SHARING
DEPRECIATION
HEDGING (EXCHANGE RATE)
CHANGE IN INVENTORIES
UNPRODUCTIVE COST
COST OF SALES
GROSS PROFIT
ADMINISTRATIVE EXPENSES
CORPORATE EXPENSES
EXPLORATION EXPENSES
OTHER INCOME (EXPENSE)
SELLING EXPENSES
PROFIT FROM CONTINUING OPERATIONS
SILVERSTREAM REVALUATION
FINANCE INCOME / (EXPENSE)
FOREIGN EXCHANGE GAIN / (LOSS)
PROFIT BEFORE INCOME TAX
MINING RIGHT
INCOME TAX EXPENSE
PROFIT FOR THE PERIOD
1H 2014
ACCUM JUNE
%
1H 2013
750.4
0.0
(73.3)
677.1
982.3
0.1
(56.5)
925.9
(291.3)
(8.6)
(133.3)
(0.2)
60.8
(9.2)
(382.0)
295.1
(15.4)
(14.5)
(69.0)
(7.8)
(5.1)
183.4
47.3
(24.5)
2.0
208.2
(13.1)
(58.1)
137.1
ATTRIBUTABLE TO:
EQUITY SHAREHOLDERS OF THE GROUP
MINORITY INTEREST
5/08/2014
EBITDA
130.1
100.0
CHANGE
%
100.0
$
%
(231.9)
(0.1)
(16.8)
(248.8)
(23.6)
(92.2)
29.8
(26.9)
(43.0)
(1.3)
(19.7)
(0.0)
9.0
(1.4)
(56.4)
(339.0)
(8.8)
(114.3)
4.1
51.0
(407.0)
(36.6)
(1.0)
(12.3)
0.4
5.5
0.0
(44.0)
47.7
0.2
(19.1)
(4.3)
9.8
(9.2)
25.0
(14.1)
(2.1)
16.7
N/A
19.2
N/A
(6.1)
(3.6)
0.3
(3.7)
(5.3)
(0.4)
(0.6)
(20.8)
7.3
565.0
N/A
27.0
(41.6)
(16.6)
• Centauro Profundo
9.4 Guanajuato
•
Herradura
8.5
Rodeo
43.6
518.9
56.0
(223.8)
(43.1)
• Orisyvo
6.5
Perú
(2.3)
(14.5)
(1.6) 5.2
(0.9)
6.4
• San Ramón
Pilarica
(2.1)
(14.1)
(1.5)
(0.3)
2.3
• Ciénega
4.6 45.7
Nuevo Corredor
(10.2)
(114.7)
(12.4)
(39.9) Herradura
• Saucito (0.8)
San Juan 894.0
(1.1)
(0.1) 4.3
(7.0)
(0.7)
(0.4)
• Fresnillo(3.5)
3.9 (1.5)
San Julián 43.1
• Noche Buena
2.4 La Joya
27.1
371.3
40.1
(187.9)
(50.6)
• Guazaparez
2.1 Guachichil
(12.1) 12.5 159.8
N/A
•7.0
Others(112.5)
Lucerito
30.8
249.8
• Higher forward silver prices
(1.9)
N/A
• Lower reference
interest
rate(13.1)
(LIBOR) on the
30 of June
(8.6)
(73.0)
(7.9)
14.9
(20.4)
• 2014 compared to the 31st of December 2013
20.2
• Higher 176.8
volume of19.1
ounces sold
(39.7)
than expected
(22.5)during
• the first half 2014
19.2
144.7
15.6
(14.6)
(10.1)
7.0
1.0
32.0
3.5
(25.1)
(78.3)
137.1
20.2
176.8
19.1
(39.7)
(22.5)
(161.8)
(33.3)
324.5
1.9
1.7
1.6
1.4
0.9
0.8
0.4
0.4
0.3
0.2
47.9
486.3
52.5
23
CASH FLOW (IFRS)
C ONC EPT
(US $ millions)
YTD 2014
YTD 2013
CASH GENERATED BY OPERATIONS BEFORE CHANGES IN WORKING CAPITAL
336.7
496.4
WORKING CAPITAL
(71.5)
CHANGE
$
%
(159.7)
(32.2)
(53.0)
(18.5)
35.0
(110.5)
(254.5)
144.0
(56.6)
154.7
188.9
(34.2)
(18.1)
31.4
37.3
(5.9)
(15.8)
PROCEEDS FROM THE SALE OF PROPERTY, PLANT AND EQUIPMENT
5.3
6.5
(1.3)
(19.5)
CAPITAL CONTRIBUTION
1.6
1.2
0.4
37.0
OTHERS
2.6
1.8
0.8
N/A
PLACEMENT OF NEW ORDINARY SHARES
-
INCOME TAX AND PROFIT SHARING PAID
NET CASH FROM OPERATING ACTIVITIES
OTHER PROCEEDS
SILVERSTREAM CONTRACT
TOTAL OTHER PROCEEDS
346.1
(346.1)
N/A
40.9
392.9
(352.0)
(89.6)
(212.0)
(324.1)
112.2
34.6
DIVIDENDS PAID
(50.1)
(304.1)
254.0
(83.5)
NET INTEREST RECEIVED (PAID)
(19.4)
(22.1)
N/A
PURCHASE OF PROPERTY, PLANT AND EQUIPMENT
USES OF CASH
NET INCREASE / (DECREASE) IN CASH DURING THE PERIOD
EFFECT OF EXCHANGE RATE ON CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS AT 01 JANUARY
CASH, CASH EQUIVALENTS AND SHORT TERM INVESTMENTS AT 30 JUNE
5/08/2014
2.7
(281.4)
(625.6)
344.1
(55.0)
(85.9)
(43.8)
(42.1)
96.2
(1.5)
0.8
(2.3)
N/A
1,251.7
1,164.3
613.8
570.8
637.9
103.9
593.4
104.0
24
• Increase in trade and other receivables
• (-$55.4) from the higher volume of dore
• sold to Met-Mex in 2Q14
• Increase in ore inventories (-$56.9) at
Herradura and Noche Buena
• Increase in trade and other payables
• (+$36.9) to suppliers
• Others +$3.9 million
CASH FLOW (IFRS)
C ONC EPT
(US $ millions)
YTD 2014
CASH GENERATED BY OPERATIONS BEFORE CHANGES IN WORKING CAPITAL
336.7
WORKING CAPITAL
(71.5)
INCOME TAX AND PROFIT SHARING PAID
(110.5)
NET CASH FROM OPERATING ACTIVITIES
YTD 2013
496.4
(53.0)
CHANGE
$
%
(159.7)
(32.2)
(18.5)
35.0
• Decreased
paid.
(254.5) value added
144.0 tax (56.6)
154.7
188.9
(34.2)
(18.1)
31.4
37.3
• 2.1 Moz.
(5.9)
(15.8)
PROCEEDS FROM THE SALE OF PROPERTY, PLANT AND EQUIPMENT
5.3
6.5
(1.3)
(19.5)
CAPITAL CONTRIBUTION
1.6
OTHERS
2.6
PLACEMENT OF NEW ORDINARY SHARES
-
OTHER PROCEEDS
SILVERSTREAM CONTRACT
TOTAL OTHER PROCEEDS
40.9
PURCHASE OF PROPERTY, PLANT AND EQUIPMENT
(212.0)
DIVIDENDS PAID
NET INTEREST RECEIVED (PAID)
USES OF CASH
(50.1)
• Special dividend of US$6.8 cents
• per share paid in May 2014.
NET INCREASE / (DECREASE) IN CASH DURING THE PERIOD
EFFECT OF EXCHANGE RATE ON CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS AT 01 JANUARY
CASH, CASH EQUIVALENTS AND SHORT TERM INVESTMENTS AT 30 JUNE
5/08/2014
(19.4)
(281.4)
(85.9)
(1.5)
1,251.7
1,164.3
1.2
0.4
37.0
Herradura
• Construction
of
dynamic
leaching
plant
1.8
0.8
N/A
• and purchase of components for mobile
346.1
(346.1)
N/A
• equipment and
additional trucks.
Saucito
392.9
(352.0)
(89.6)
• Development works and purchase of in(324.1)
112.2
34.6
• mine equipment. Expansion of Saucito
(304.1)
(83.5)
• (Saucito II). 254.0
San
Julián
Project
2.7
(22.1)
N/A
• Construction of ramps and purchase of
(625.6)
(55.0)
• equipment. 344.1
Ciénega
(43.8)
(42.1)
96.2
• Construction of facilities for employees
• and
works. N/A
0.8 development
(2.3)
Fresnillo
613.8
637.9
103.9
• Purchase of components for mobile
570.8
593.4
104.0
• equipment, automatisation
of the sample
• and smelting area.
Noche Buena
• Construction of leaching pads and
• stripping activities.
25
BALANCE SHEET (IFRS)
Change
Concept
(Million USD)
30-JUNE-14
31-DIC-13
%
Assets
Cash and Investments
Trade and Other Receivables
Inventories
Prepaid Expenses
Silverstream
Derivative Financial Instruments
Property, Plant and Equipment
Other Assets (Long term)
1,164.3
327.9
265.0
3.0
389.4
4.4
1,903.4
199.9
1,251.7
267.5
208.1
5.3
372.8
2.1
1,838.1
149.2
Total Assets
4,257.3
4,094.9
9.2
40.9
116.9
12.3
351.8
800.0
130.7
20.4
40.9
88.9
11.5
334.2
800.0
127.0
Total Liabilities
1,461.7
1,422.9
2.7
Share Capital and Share Premium
Placement of new Ordinary Shares
Retained earnings
Other Accounts
Stockholder's Equity
Minority Interest
1,522.4
0.0
1,346.3
(484.0)
2,388.4
407.1
1,177.3
345.1
1,270.0
(518.9)
2,273.4
398.5
29.3
Total Stockholder´s Equity
2,795.5
2,672.0
4.6
Total Liabilities and Stockholder's Equity
4,257.3
4,094.9
4.0
(7.0)
22.6
27.3
(43.2)
4.4
112.9
3.6
33.9
4.0
Liabilities
Profit Sharing
Loans from Newmont to Penmont
Other Liabilities (Short term)
Retirement and Pension Plan Reserves
Deferred Taxes
Senior Notes
Other Liabilities ( Long term)
5/08/2014
(55.2)
31.5
7.6
5.3
2.9
N/A
6.0
(6.7)
5.1
2.2
26
Near term projects and
growth plans
27
Saucito II Project
Project Highlights
Average Annual Silver Production
Average Annual Gold Production
Pre-operative CAPEX
Life of mine
Processing Capacity
Expected Start-up
IRR @ 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
4Q14
32.1%
US$2.54/oz
US$3.70/oz
* Feasibility study approved on the 6th of March 2013
Detailed engineering works concluded
Mills and flotation cells structures assembled
Mine development ahead of schedule and on
track for start up in Q4 2014
5/08/2014
28
San Julián Project
Project Highlights*
Average Annual Silver Production
Average Annual Gold Production
Pre-operative CAPEX
Life of mine
Disseminated Processing Capacity
Veins Processing Capacity
Expected Start-up
IRR @ Ag:US$22.0/oz
Traditional cash cost
All-in cash cost
10.3 Million Oz
43.9 Thousand Oz
US$515.0 Million
13 years
6,000 TPD
3,000 TPD
2H 15
17.4%
US$7.77/oz
US$9.33/oz
* Revised on December 2013
Development of the vein system continued
Additional orders for equipment placed
Surface land acquired
Construction of leaching plant commenced
On track for 2H 2015 start up
5/08/2014
29
Strong pipeline
Mine Operations
Development Projects
Advanced Exploration
Prospects in drilling
Early stage
Fresnillo
Saucito
Herradura (DLP)
Soledad
Nochebuena
Ciénega - San Ramón
Saucito II
Pyrites Plant
San Julián
Centauro Deep
Mega Centauro
Juanicipio
Cluster Cebollitas
Orisyvo
Guachichil Fresnillo District Lucerito Tajitos
Candameña
Guanajuato Rodeo
San Nicolás Coneto Cebadillas
La Yesca
Cairo Dátil Amata (Perú) Pilarica (Perú)
Sonora and Sinaloa : San Javier
Norias Nudo Carina
Cerritos Dorado Rosario Bellavista Olivos
Chihuahua: S. Brígida Rosetillas SJPinal Bellavista Lucero
Exploration
Durango: Pereñita
La Huerta
El Carmen
Zacatecas: Urite Atotonilco Corredor Concha-Nieves Argentum Coyotes
Villa García
Plateros
Michoacán: Otzumatlán
Perú: Huacravilca Sto. Domingo Las Pampas
Systematic Project Generation
5/08/2014
30
Exploration Projects
Districts in Drilling
Centauro Deep
• Herradura: Centauro Deep, Tajitos, Bellavista
• Fresnillo: South veins, Plateros, Huisache
Area Opulencia
5/08/2014
•
•
•
Ciénega: San Ramón, Cebollitas
San Julián: Última Tierra, María Antonieta
Guanajuato: Opulencia, San Gregorio, Cerro Blanco
Area San Gregorio
Area La Luz
31
Exploration Projects
Early Stage Projects in Drilling
• Rodeo, Durango (Gold)
Rodeo - El Cañón
• Pilarica, Perú (Silver)
Rodeo - El Cañón
Projects with resources in assessment
• Orisyvo, Chihuahua (Gold)
• Lucerito, Durango (Gold-Silver)
Evaluation of JV proposals
• Resources update at year end
5/08/2014
32
Growth Plans
33
Expected delivery of growth
(US$ m illion)
Expected
Production
(1)
(2)
Medium
Low
235
8.4 m ill Oz Ag &
35 thds Oz Au
SAUCITO II
Medium
515
10.3 m ill Oz Ag
& 44 thds Oz
Au
SAN JULIÁN
Low
55
15 thds Oz Au
& 1.3 m ill Oz Ag
CIENEGA 5,000 TPD
(Optimization project)
Low
105
8 mill Oz Ag
FRESNILLO 10,000 TPD
(Optimization project)
BASIC & DETAILED
ENGINEERING
CONSTRUCTION
PRODUCTION
Medium
140
5 m ill Oz Ag &
18 thds Oz Au
PYRITES PLANT
(Optimization project)
DETAILED
ENGINEERING
CONSTRUCTION & DEVELOPMENT
PRODUCTION
Medium
150
180 thds Oz
Au
MEGA CENTAURO PIT
FEASIBILITY
DEVELOPMENT
PRODUCTION
Medium
High
365
225 thds Oz
Au
CENTAURO DEEP
EXPLORATION &
DETAILED
ENGINEERING
Medium
Low
300
10 m ill Oz Ag &
30 thds Oz Au
JUANICIPIO
DETAILED
ENGINEERING
High
350
136 thds Oz
Au
ORISYVO
BASIC ENGINEERING
Risk
Investment
(1) 5/08/2014
Estimated.
YEAR
2014
2015
2016
2017
2018
PROJECT
(2) Total average annual production.
CONSTRUCTION
PRODUCTION
PRODUCTION
CONSTRUCTION
DETAILED
ENGINEERING
CONSTRUCTION
PRODUCTION
DEVELOPMENT
PRODUCTION
CONSTRUCTION
DETAILED
ENGINEERING
CONSTRUCTION
PRODUCTION
PRODUCTION
34
Achieving 65moz silver by 2018
Million Oz
90,000
Juanicipio - 56%
80,000
Pyrites plant
70,000
San Julián
60,000
Saucito II
50,000
Saucito I
40,000
Ciénega expansion
30,000
Ciénega
20,000
Fresnillo expansion
10,000
Fresnillo
2013
2014
2015
Note:
Attributable silver production. Silverstream not included.
5/08/2014
2016
2017
2018
35
Achieving over 500koz gold by 2018
Million Oz
Orisyvo
1,000
Centauro Deep - 56%
900
Mega Centauro - 56%
800
Juanicipio - 56%
Soledad&Dipolos - 56%
700
San Julián
600
Pyrites plant
Saucito II
500
Saucito I
400
Dynamic leaching - 56%
300
Noche Buena 56%
200
Herradura - 56%
100
Ciénega expansion
Ciénega
2013
2014
2015
2016
2017
2018
Fresnillo
Note: Attributable gold production.
5/08/2014
36
Outlook
37
Outlook
Strong operations to weather cyclical challenges
•
Ongoing focus on maximising efficiency of our operations, investing in
productivity and controlling costs
•
Absolute focus on managing ore grades at Fresnillo
•
Start up of Saucito II in Q4 2014 and San Julián in 2H 2015, on time and on
budget
•
We continue to balance investment in future growth with shareholder returns to
create long term value throughout the cycles
5/08/2014
38
Appendix
39
Operation Review – Fresnillo District
FRESNILLO
H1 14
H1 13
SAUCITO
Change
%
H1 14
H1 13
Change
%
Attributable production
Silver
m oz
Gold
k oz
Lead
kt
Zinc
kt
10.5
15.9
6.7
7.4
11.2
13.6
7.2
6.9
-0.6
2.2
-0.5
0.5
-5.8
16.4
-6.9
7.6
6.3
26.8
3.1
3.4
5.6
22.0
2.6
2.2
0.7
4.8
0.5
1.3
12.2
21.7
19.5
59.3
Ore processed
kt
1,382.3
1,328.1
54.3
4.1
661.7
560.9
100.9
18.0
Ore grade
Silver
Gold
g/t
g/t
258.2
0.46
287.2
0.44
-29.0
0.0
-10.1
4.8
320.7
1.49
336.7
1.44
-16.0
0.1
-4.7
3.5
5/08/2014
40
Operation Review – Ciénega District
CIÉNEGA
1H 14
5/08/2014
1H 13
Change
%
Attributable production
Gold
k oz
Silver
m oz
54.0
2.1
59.6
2.2
-5.7
-0.1
-9.5
-5.3
Ore processed
kt
663.4
611.4
51.9
8.5
Ore grades
Gold
Silver
g/t
g/t
2.6
111.5
3.1
127.2
-0.5
-15.64
-16.3
-12.3
41
Operation Review – Herradura District
SOLEDAD-DIPOLOS
HERRADURA
1H 14
1H 13
Change
%
1H 14
1H 13
Change
NOCHE BUENA
%
1H 14
1H 13
Change
%
Attributable production
Gold
k oz
Ore processed
kt
58.5
91.2
-32.7
-35.8
0.0
22.2
-22.2 -100.0
36.1
27.0
9.1
33.5
9,076.0 11,910.5
-2,834.6
-23.8
0.0
6,111.8
-6,111.8 -100.0
7,462.6
6,571.6
890.9
13.6
Ore grades
Gold
g/t
0.72
0.61
0.1
17.0
0.00
0.55
-0.5 -100.0
0.54
0.53
0.0
2.6
Silver
g/t
1.38
0.97
0.4
41.9
0.00
0.44
-0.4 -100.0
0.38
0.23
0.1
61.5
5/08/2014
42
ADJUSTED REVENUES (IFRS)
ACCUM JUNE
PRODUCT
(Million USD)
1H 2014
1H 2013
GOLD
331.5
496.7
SILVER
373.3
443.9
LEAD
21.8
ZINC
ADJUSTED REVENUES
5/08/2014
VOLUME
(115.0)
CHANGE BY:
PRICE
TOTAL
(50.2)
(165.2)
9.7
(80.3)
(70.6)
22.7
(0.4)
(0.5)
(0.9)
23.7
18.9
2.9
1.9
4.8
750.4
982.3
(102.8)
(129.1)
(231.9)
43
Contribution by mine and by metal
to the Adjusted Revenues
1
2014 Adjusted Revenues : US$750.4m
By mine
Fresnillo
Herradura
Saucito
18.10
206.71
12.32
12.52
249.65
Ciénega
Noche Buena
Fresnillo
Gold
Silver
Lead
Zinc
TOTAL
By metal
Ciénega
7.3%
82.8%
4.9%
5.0%
100%
63.79
35.75
3.89
5.53
108.95
Herradura
58.5%
32.8%
3.6%
5.1%
100%
134.54
6.00
140.54
Saucito
95.7%
4.3%
100%
32.09
123.87
5.63
5.70
167.29
Silver
Gold
Lead
Zinc
Noche Buena
19.2%
74.0%
3.4%
3.4%
100%
82.95
0.97
83.92
Consol
98.8%
1.2%
100%
331.47
373.30
21.83
23.75
750.35
44.2%
49.8%
2.9%
3.2%
100%
• Adjusted revenue is the revenue shown in the income statement adjusted to add back treatment and refining costs and lead and zinc hedging. The
Company considers this is a useful additional measure to help understand underlying factors driving revenue in terms of volumes sold and realised prices
44
Breakdown of the Adjusted Production
Costs
Adj Prod Cost: US$291.3m
1
Contrac
Op Mat
Energy & Diesel
Mainten
Person
Others
Freights
1
Contractors are hired to execute specific tasks. Fees
paid include labour, operating materials, equipment,
diesel and any other items required to fulfill such tasks.
Fresnillo
Personnel
Maintenance and repairs
Operating materials
Diesel
Electricity
Energy & Diesel
Contractors
Freight
Others
Production Costs
11.58
9.14
12.69
1.49
10.87
12.36
12.57
0.48
3.41
Ciénega
18.6%
14.7%
20.4%
2.4%
17.5%
19.9%
20.2%
0.8%
5.5%
62.23 100.0%
6.27
3.47
9.53
0.61
4.68
5.29
16.82
1.08
2.40
Herradura
14.0%
7.7%
21.2%
1.4%
10.4%
11.8%
37.5%
2.4%
5.4%
44.85 100.0%
10.22
11.40
22.01
14.40
5.52
19.92
17.11
1.78
(9.59)
Sol & Dip
-13.2%
0.02
1.6%
1.18 100.0%
0.00
0.0%
0.0%
0.00
0.0%
0.00
0.0%
0.02
2.1%
0.0%
(0.04) -3.7%
72.85 100.0%
1.18 100.0%
14.0%
15.7%
30.2%
19.8%
7.6%
27.3%
23.5%
2.4%
Saucito
0.81
3.63
5.80
0.25
6.28
6.53
19.19
0.53
4.60
Noche Buena
2.0%
8.8%
14.1%
0.6%
15.3%
15.9%
46.7%
1.3%
11.2%
41.09 100.0%
3.66
10.16
15.17
8.51
0.95
9.46
24.57
1.25
2.06
Other
5.5%
15.3%
22.9%
12.8%
1.4%
14.3%
37.0%
1.9%
3.1%
66.33 100.0%
0.04
(0.08)
0.09
0.18
0.18
0.82
0.02
1.74
2.81
Consol
32.60
38.91
65.29
25.26
28.47
53.73
91.09
5.13
4.58
11.2%
13.4%
22.4%
8.7%
9.8%
18.4%
31.3%
1.8%
1.6%
291.33 100.0%
45
Consolidated Income Statement without
Silverstream Effect
CONCEPT
(Million USD)
ACCUM JUNE
1H 2014
%
CHANGE
1H2013
%
$
%
100.0
(231.9)
(0.1)
(16.8)
(248.8)
(23.6)
(92.2)
29.8
(26.9)
47.7
0.2
(19.1)
(4.3)
9.8
(9.2)
25.0
(14.1)
(2.1)
16.7
(105.9)
19.2
N/A
(6.1)
(223.79)
(43.1)
(0.9)
(0.3)
45.7
(7.0)
(1.5)
6.4
2.3
(39.9)
894.0
43.1
ADJUSTED REVENUES
HEDGING (METALS)
TREATMENT AND REFINING CHARGES
REVENUES
750.4
0.0
(73.3)
677.1
100.0
982.3
0.1
(56.5)
925.9
ADJUSTED PRODUCTION COST
PROFIT SHARING
DEPRECIATION
HEDGING (MXP/USD EXCHANGE RATE)
CHANGE IN INVENTORIES
UNPRODUCTIVE COST
COST OF SALES
(291.3)
(8.6)
(133.3)
(0.2)
60.8
(9.2)
(382.0)
(43.0)
(1.3)
(19.7)
(0.0)
9.0
(1.4)
(56.4)
(339.0)
(8.8)
(114.3)
4.1
51.0
(407.0)
(36.6)
(1.0)
(12.3)
0.4
5.5
(44.0)
295.1
43.6
518.9
56.0
(15.4)
(14.5)
(69.0)
(7.8)
(5.1)
(2.3)
(2.1)
(10.2)
(1.1)
(0.7)
(14.5)
(14.1)
(114.7)
(0.8)
(3.5)
(1.6)
(1.5)
(12.4)
(0.1)
(0.4)
183.4
27.1
371.3
40.1
(187.9)
(50.6)
0.0
(24.5)
2.0
0.0
(3.6)
0.3
0.0
(0.4)
(0.6)
0.0
(20.8)
7.3
N/A
565.0
N/A
160.9
23.8
362.3
39.1
(201.3)
(55.6)
MINING RIGHT
INCOME TAX EXPENSE
(13.1)
(43.9)
(1.9)
(6.5)
(104.7)
(11.3)
(13.1)
60.8
N/A
(58.1)
PROFIT FOR THE PERIOD
104.0
15.4
257.6
27.8
(140.5)
(54.6)
97.0
14.3
225.5
24.4
(128.5)
(57.0)
7.0
1.0
32.0
3.5
(25.1)
(78.3)
104.0
15.4
257.6
27.8
(153.6)
(59.6)
GROSS PROFIT
ADMINISTRATIVE EXPENSES
CORPORATE EXPENSES
EXPLORATION EXPENSES
OTHER INCOME (EXPENSE)
SELLING EXPENSES
PROFIT FROM CONTINUING OPERATIONS
SILVERSTREAM REVALUATION
FINANCE (INCOME) / EXPENSE
FOREIGN EXCHANGE
PROFIT BEFORE INCOME TAX
0.0
(3.7)
(5.3)
ATTRIBUTABLE TO:
EQUITY SHAREHOLDERS OF THE GROUP
MINORITY INTEREST
5/08/2014
46
5/08/2014
47