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 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
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 Dedicated Dedicated Commitment Commitment High quality, High quality, and and Disciplined Disciplined to to low-cost, low-cost, experienced experienced Strong Strong approach to approach to sustainable sustainable flexible flexible management management balance sheet balance sheet development development business business operations operations and and practices practices workforce workforce 5
Health, Safety, Environment & Community Relations Health Health Safety Safety Environment Environment Community Relations Community Relations Occupational Health “I care, we care” 60% of electricity Centre for Technical programme ongoing programme being consumption comes Studies (CETEF) trains from wind power, aim to implemented across all mining technicians. of our operations get to 75% by 2H19 Health weeks across our Ethical behaviours mining districts Herradura and Saucito continue to be embedded benefitting 11,000 people obtained the throughout the group annually Environmental Excellence Award Our Environment, Social and Governance (ESG) performance was recognised by the inclusion of Fresnillo in Our Environment, Social and Governance (ESG) performance was recognised by the inclusion of Fresnillo in the FTSE4 GOOD UK 50 ranking the FTSE4 GOOD UK 50 ranking 6
1H18 results – Financial Highlights Gross Profit • Adjusted revenues of US$1,189.9m, up 11.3% 600 • Gross profit and EBITDA of US$502.2m and US$566.9m, up 480 US$ million 9.2% and 8.5%, respectively 360 • Silverstream valuation, a non-cash item, had an adverse effect 240 on profit before income tax, which came down 16.6% to 120 US$323.0m 0 1H15 1H16 1H17 1H18 • In addition, profit for the period of US$229.3m, down 26.1%, was adversely impacted by changes in the MXP/USD EBITDA exchange rate and inflation rate on deferred taxes (non-cash 600 item) 480 US$ million • Cash generated from operations, before changes in working capital of US$575.9m, up 6.6% 360 240 • Strong balance sheet with cash and other liquid assets as at 30 June 2018 of US$708.6m 120 0 • Interim dividend of US$78.8m (10.7 US cents per share) 1H15 1H16 1H17 1H18 7
1H18 results – Operational Highlights Half year Gold Production • Gold production of 234 koz, up 4.6% vs. 2Q17 500 • Gold guidance marginally increased to 900-930 koz for FY 450 Production (koz) • 1H18 silver production of 30.8 moz (including Silverstream), up 400 9.7% vs. 1H17 350 • Silver guidance marginally reduced to 64.5-67.5 moz silver for FY 300 • Pyrites plant has been completed on budget and with minor 250 1H15 1H16 1H17 1H18 delays and is now ramping up production Half year Silver Production • Dynamic Leaching Plant complete, currently undergoing final testing – Commercial production expected in 3Q18 33 30 Production (moz) • Ongoing tests at the Herradura leaching pads have resulted in an 27 increase of 98.9 thousand ounces of gold in the inventory as of 1 24 January 2018 21 • 2018 guidance in equivalent ounces remains the same 18 15 1H15 1H16 1H17 1H18 8
Consolidated Production Profile – Silver Equivalent Ounces 160 140 120 Production (eq Ag moz) • Consistent strategy of investing in exploration through the cycles 100 • Continues to result in increases in resources 80 60 • In turn, providing the Group with a solid foundation from where to continue to grow the 40 quality ounces produced 20 0 2012 2013 2014 2015 2016 2017 2018e Silver : Gold 9 74 : 1
Operations & Development Projects
Operations FRESNILLO FRESNILLO Key operating statistics 1H 18 1H 17 Silver production – moz 8.1 8.9 Gold production – koz 21.4 20.7 Cost per tonne – US$/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 1H18 Summary Increase in annual silver production • 1H18 silver grade of 222 g/t. Full year 2018 silver grade expected to be: 215-225 g/t 18 • US$44.8 million invested in development, infrastructure and sustaining capex • Development rate of 3,130 m/m • Continued deepening of the San Carlos shaft 17 • Reduced costs as a result of vertical conveyor belt Million Ounces 2H18 Priorities 16 • Hire a new contractor company 15 • Continue investing in infrastructure • Tunnel boring machine 14 2015 2016 2017 2018e * As of December 2017. 11
Operations Cont. SAUCITO SAUCITO Key operating statistics 1H 18 1H 17 Silver production – moz 10.1 10.8 Gold production – koz 39.8 33.9 Cost per tonne – US$/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 1H18 Summary Annual silver production • 1H18 silver grade of 262 g/t. Full year 2018 silver grade expected to be: 255-265 g/t 25 • US$59.2 million invested in development, infrastructure and sustaining capex • Additional contractor to increase development rates successfully hired 20 • Purchase of smaller equipment to better control dilution • Production from Natalias veins continued to ramp up Million Ounces 15 2H18 Priorities 10 • Further reduce dilution • Development of the Huizache veins 5 • Ramp up Pyrites plant • Initiate the deepening of the Jarillas shaft - 2012 2013 2014 2015 2016 2017 2018e * As of December 2017. 12
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