Investor FAQs

The Fresnillo Group seeks to create value for stakeholders across precious metals cycles through ongoing investment in exploration, mine development, operational excellence and a strong commitment to disciplined and sustainable growth. The four components of our strategy are:

1. Maximise the potential of existing operations
2. Deliver growth through development projects
3. Extend the growth pipeline
4. Reinforce the sustainability of the Group

The company was incorporated on 15 August 2007 and was acquired by the Penoles Group, for nominal consideration, on 11 January 2008. Prior to its acquisition by the Penoles Group, the company had no operations. The company is currently a wholly-owned subsidiary of Penoles.

2,449 employees and 1,972 contractors in 2010.

Fresnillo does not offer any share or cash-based long-term incentives to management.

A cash-based short-term incentive plan is in place with a number of Key Performance Indicators and payments equivalent to 0% to 50% of annual salary. A scoring system is used whereby each objective set for the executive at the beginning of the year is allocated a points-rating which represents a median performance target for that objective. Upper and lower point thresholds are set to allow for outstanding performance and ensure that underperformance is not rewarded.

Fresnillo’s objective in terms of mine life based on proven and probable reserves at its mines is minimum of 10 years.

Current proven and probable reserves at the end of 2010 contain 442m oz silver and 4.5m oz gold. Total resources measured indicated and inferred inclusive of reserves stand at 1.5 billion oz silver and 20.1m oz gold.

Fresnillo produces lead and zinc concentrates with high contents of precious metals as well as precious metals dore and participates. All of these are sold to Met-Mex under long-term agreements based on international market terms that are negotiated on a yearly basis. As this is a related party transaction the T&Cs are overseen by the Audit Committee.

The Arbitration Panel formed according to the Arbitration Rules of the International Chamber of Commerce has delivered its decision in respect of claims made by Vancouver-based MAG Silver Corp (TSX: MAG and NYSE:MVG), Fresnillo's joint venture partner in the advanced exploration stage Juanicipio silver project in Mexico.

The Arbitration Panel rejected MAG's claims that Fresnillo was deficient in the execution pace or performance of drilling at the project. The Arbitration Panel denied both of MAG's principal demands, specifically: (a) that Fresnillo be ordered to pay damages to MAG of up to US$61 million related to MAG's claims that delays by Fresnillo delayed the start of production; and (b) that Fresnillo be ordered to sell or transfer its equity participation in the Minera Juanicipio joint venture to MAG.

The Arbitration Panel upheld certain other MAG claims, including claims related to Fresnillo's announcement in December 2008 that it intended to make an unsolicited bid to acquire MAG. Fresnillo announced its intention based on the opinion of external legal counsel regarding a certain clause in the JV Agreement. The Arbitration Panel, based on a different interpretation of that clause, ordered Fresnillo to reimburse MAG for legal fees of US$1.86 million incurred by MAG in connection with the announcement of Fresnillo's intended offer.

The cost of the arbitration was US$775,000. The Arbitration Panel ruled that each party should pay 50% of the arbitration cost and bear its own legal costs.

Depending on the metal prices at any particular time, our adjusted 2010 revenue comes from 51% silver, 44% from gold and 5% from lead and zinc.

The silver price is highly correlated to gold. Silver benefits from gold’s strength, the weakness of the U.S. dollar and general growth in investors’ interest in commodities amid a low-interest rate environment. Weakness in the U.S. currency drives the appeal in gold and silver as an alternative asset and makes dollar-priced commodities cheaper for holders of other currencies. Silver has grown year on year since 2001 to the onset of the financial crisis. Aside from investment demand, a key driver for 2010 will be for new market places in silver; one of these will include demand in silver-zinc batteries for electric cars, one of the major drivers behind a rise in prices because it may absorb a lot of silver. The ever-expanding industrial sector for silver now includes LCD/plasma television screens, solar panels, water purification and medical and superconductivity applications as well as a critical new use in biocides.

33-50% expected net profit for the year into one-third and two-thirds interim dividend and final payment. Dividends will be declared by the company in US$. Unless a shareholder elects to receive dividends in US$, they will be paid in pounds sterling with the US dollar dividend being converted into pounds sterling at exchange rates prevailing at the time of payment. The company may only pay dividends if distributable reserves are available for this purpose. The company is reliant upon receiving dividends from its subsidiaries in order to pay dividends to its Shareholders and its ability to pay dividends is affected by certain Mexican tax regulations.

Fresnillo looks for additional growth opportunities and have entered into several purchase option agreements relating to early stage exploration projects. However, as metals prices have increased, so have the value of assets that may be available to purchase. Therefore, we are concentrating on organic growth by developing our own assets, whilst continuing to look for acquisitions opportunities at the right price.

Our low cash cost position is a combination of the geological characteristics of the ore bodies in our mines. The use of productive mining metals with modern equipment and technology and the operational excellence attitude of our people, which generates solid cash flow from our high margin assets, resulting in a strong balance sheet to fund growth with zero debt.

Our main objective is to maintain our position as the world’s largest primary silver producer with the aim to double production by 2018 reaching approximate level of 65m oz silver and 4k oz gold.

Fresnillo does not hedge any of its precious metals. We head a portion of our by-product of lead and zinc production as well as our currency needs.

Improved safety performance

Commissioning of Saucito

Commissioning of expanded milling capacity and deeper shaft at Ciénega

Completion of Soledad-Dipolos expansion

Silver production to grow by 5% to 44moz

Gold production to grow by 8% to 40koz

All of the employees in the mining sector in Mexico belong to a national mining union , however, each mine belongs to a section and negotiates with the company French benefits every 2 years and salary on a yearly basis. Fresnillo works very closely with members of the local sections, being aware of their needs and in addition to that we have a very good track record of no strikes in the last six years.

Mexico is supportive of mining as an economic activity. It has a modern mining law reflected in the fact of many exploration mining companies and activity throughout the country. Mexico is among the top 20 most attractive regions in the world for exploration and mining, according to results of a recent survey conducted by The Fraser Institute, an independent Canadian research organization. The country’s appeal to mining companies stems from a combination of factors including a strong mining culture, excellent geology, political stability and favourable tax and permitting structures.

Employees: Provide professional development opportunities and workplace satisfaction for our personnel

Health and Safety: Control occupational illnesses and improve general health through preventive car and zero fatal accidents through the elimination of dangerous workplace conditions and behaviours

Environment: Minimise environmental impact of all operations and throughout the lifecycle of a mine by complying with legal and regulatory requirements and align our operations with international best practices

Community Relation: Enhance the perception of Fresnillo plc as a responsible mining company in the communities where we operate

Over the last year, many companies have become aware that their shareholders have received unsolicited phone calls or correspondence concerning investment matters. These are typically from overseas based ‘brokers’ who target UK shareholders, offering to sell them what often turns out to be worthless or high risk shares in US or UK Investments. These operations are commonly known as ‘boiler rooms’. Shareholders are advised to be very wary of any solicited advice, offers to buy shares at a discount or offers of free company reports. If you receive any unsolicited investment advice:

• Ensure you get the correct name of the person and organization
• Check that they are properly authorised by the FSA before getting involved by visiting www.fsa.gov.uk/register
• Report the matter to the FSA either by calling 0845 606 1234 or visiting www.moneymadeclear.fsa.gov.uk
• If the calls persist, hang up

If you deal with an unauthorised firm, you will not be eligible to receive payment under the Financial Services Compensation Scheme.