Performance

Production Report - FY19

Octavio Alvídrez, Chief Executive Officer, said: “2019 was a more challenging year as expected, but we remain determined and optimistic for the future. Production did not meet our expectations in 2019. Total silver production fell by 11.6% to 54.6 moz as a result of the expected lower ore grade at Saucito as well as lower than expected ore grades at Fresnillo and San Julián Veins and Disseminated Ore Body (DOB). Gold production of 875.9 koz was down compared to 2018 due to the expected lower production from Noche Buena and a lower ore grade at San Julián Veins. This challenging operating environment was reflected in our financial performance, with gross profit and EBITDA decreasing by 40.9% and 26.3% respectively. Profit margins decreased accordingly but still remained at healthy levels. We maintained a solid financial position, with US$336.6 million in cash and other liquid funds1 as of 31 December 2019, notwithstanding paying dividends of US$142.2 million, investing US$559.3 million in capex and spending US$157.9 million on exploration to underpin future growth. Our focus in 2020 is on maximising the potential of our existing operations.

We are committed to working smarter and more efficiently in order to extract maximum value from our asset base. We have implemented a major performance improvement plan across our portfolio that includes intensive infill drilling to improve the certainty of the geological model, dilution control and raising development rates, together with actions to address contractor productivity and equipment availability. We are investing in infrastructure, plant and machinery including the new Tunnel Boring Machine which is now being ramped up at Fresnillo – one of the first of its kind. We have also begun to define a new programme to control costs and increase productivity. Though it will take time for these measures to take full effect, we do expect production to stabilise in 2020 and start increasing during 2021.” Read full release »

2019 Highlights

Higher gold and silver prices offset by lower volumes and operational setbacks

  • Adjusted revenue of US$2,270.2 million, up 1.2% over 2018, due to higher gold and silver prices.

  • Profit margins decreased but remained at healthy levels. Gross profit and EBITDA down 40.9% and 26.3%, to US$461.7 million and US$674.0 million respectively.

  • Profit from continuing operations of US$171.7 million, down 66.1%.

  • Capex of US$559.3 million, down 16.4% primarily due to the commissioning of several projects including the pyrites plant at Saucito and the dynamic leaching plant at Herradura in 2018.

  • Strong balance sheet and low leverage ratio; cash and other liquid funds2 of US$336.6 million, down 40.0% mainly due to the high level of capex and dividends albeit being lower 16.4% and 52.3% respectively vs. 2018.

  • Dividends of US$142.2 million paid, down 52.3% mainly due to lower profits for the period, in accordance with our dividend policy.

Delivering on development projects and operational improvements

  • Full year silver production of 54.6 moz (including Silverstream) down 11.6% on 2018, driven by the lower ore grades at Saucito, Fresnillo and San Julián, both veins and disseminated ore body.

  • Gold production of 875.9 koz down 5.1% vs. 2018 mainly driven by the anticipated lower volume of ore processed at Noche Buena, exacerbated by lower ore grades at San Julián.

  • Board approval of Juanicipio early in 2019. Mine development at Juanicipio reached over 25 km, with ore from these activities set to be processed at the Fresnillo beneficiation plant from June 2020.

  • Construction of the Juanicipio beneficiation plant delayed by six months with commissioning now expected in mid 2021.

  • The Fresnillo Full Potential (FFP) project underway to address the structural challenges posed by deeper operations, narrower veins and greater ore variability at the Fresnillo and Saucito mines.

  • Construction of the new Pyrites Plant at Fresnillo on track for completion in 2H 2020.

  • The second phase of the beneficiation plant optimisation at Fresnillo also continued to progress.

  • Successfully commissioned new US$22.7m state-of-the-art tunnel boring machine (TBM) at Fresnillo.

  • US$69.3m project to deepen the Jarillas shaft to 1,000 metres at Saucito progresses, with completion due in 2024.

  • Silver resources increased 2.4%; gold resources remained stable at 39.0 moz.

  • Silver reserves increased 1.7% reflecting the recognition of reserves at Juanicipio for the first time offset by the decrease in reserves at the underground silver mines.

  • Gold reserves decreased 16.0% mainly due to the exclusion of reserves at Soledad & Dipolos following the absence of an agreement with the Ejido community, and the exclusion of a number of benches at Herradura resulting from the negative infill drilling results and revised calculations.

  • We are committed to improving our safety record as we regret to report that two fatalities occurred during 2019.

  • We began work on defining a new programme to control costs and increased productivity in 2H19.

Outlook – stable 2020, return to silver growth in 2021

  • In 2020, Fresnillo expects to produce in the range of 51 to 56 moz of silver and 815 to 900 koz of gold.

  • The 2019 capex projects will continue in 2020 and will account for the majority of our investment in the year ahead, together with an increase in capex as the construction of Juanicipio progresses.

 

FY18 Full Year Gold Silver Production FY18 Cash Flow Dividends

Total Production

 

4Q19

3Q19

% change

4Q18

% change

FY19

FY18

% change

Silver (koz)

13,131

12,624

4.0

14,647

-10.4

51,764

58,079

-10.9

Silverstream (koz)

643

659

-2.4

860

-25.2

2,850

3,725

-23.5

Total Silver (koz)

13,775

13,283

3.7

15,507

-11.2

54,614

61,804

-11.6

Gold (oz)

233,744

209,752

11.4

232,026

0.7

875,913

922,527

-5.1

Lead (t)

14,997

15,561

-3.6

15,252

-1.7

55,722

53,181

4.8

Zinc (t)

24,832

25,340

-2.0

24,531

1.2

92,578

88,520

4.6


Financial Performance

 

2019

2018

2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

Total attributable silver
production incl. Silverstream (Moz)

54.6

61.8

58.7

53.0

47.0

45.0

43.0

41.0

41.9

42.1

41.3

34.8

Attributable Gold Production (koz)

875.9

922.5

911.1

935.5

761.7

596.0

425.8

473.0

448.9

369.0

276.6

263.6

EBITDA (millions of US$)

674.0

915.1

1,060.1

1,032.0

547.5

567.3

729.8

1,315.3

1,538.5

945.0

496.6

337.4

Cash flow from operating activities
before changes in working capital
(millions of US$)

685.5

930.7

1,073.7

1,023.3

537.3

568.5

750.2

1,356.7

1,612.1

983.6

548.8

405.8


Decade of progress and achievement

Prelims 27FEB17 Decade Of Progress And Achievement

Key Commitments and Targets

1. Explore » Ensure business continuity and growth by replenishing depleted reserves and maintaining a robust growth pipeline
Evaluate early-state acquisitions and maintain reserves for 10 years. Ensure organic growth and assess key acquisition opportunities.
2. Develop » Deliver growth through development projects
Deliver profitable growth by advancing new projects towards commissioning, whist optimising cash flow and returns. Maintain track record of delivery on time and on budget and focus on CAPEX control as well as specialised engineering and construction teams.
3. Operate » Maximise the potential of exisiting operations
Maximise our potential of exisiting operations whilst maintaing our position as leading low cost producer. Operate at 100% capacity and remain a low-cost producer whilst optimising mining methods and metallurgy to maintain high recovery rates.
4. Sustain » Advance and enhance the sustainability of our business and uphold our licence to operate
Strengthen our safety performance with zero tolerance for non-compliance, and increase investment and support for training and oversight. Improve general health and minimise environmental impact whilst maintaining sound relations within our communities.