Performance

Production Report - 3Q18

Octavio Alvídrez, Chief Executive Officer, said: “Gold production continues to beat expectations and we are once again revising our guidance upwards following another strong quarter, in particular at our Saucito and Noche Buena mines where volumes exceed targets. Though silver production is up against all comparable periods, we are revising full year silver guidance following continued challenges at the Fresnillo and Saucito mines. These are world class, tier one silver assets, and we remain both determined, and confident, given the actions we are taking, that we will deliver a better performance in the last quarter and in 2019. In line with our strategy, we continue to conservatively invest in the business to deliver sustainable growth and returns to shareholders. The Pyrites Plant in the Fresnillo district, which will improve overall recoveries of both gold and silver from the Fresnillo and Saucito mines, is progressing well. The first stage of the project, the leaching plant at Saucito, is now ramping up and already making a contribution to overall production. We expect to complete construction of phase 2, the flotation plant at the Fresnillo mine, by the end of 2019. We look forward to this project making a positive impact on performance.”

Overview

  • Quarterly silver production of 15.5 moz (including Silverstream), up 6.3% vs. 3Q17 due to the contribution of the new Pyrites Plant, higher ore grades at Fresnillo, Herradura and Ciénega, and higher volumes of ore milled at San Julián phase II. 3Q18 production in line with 2Q18.

  • Year to date silver production (including Silverstream) of 46.3 moz, up 8.5% vs. YTD17 mainly as a result of the start of operations at San Julián JM (Phase II) in July 2017.

  • Quarterly gold production of 225 koz, down 3.5% vs. 3Q17 as a result of higher than normal speed in the recovery rate at the leaching pads in 3Q17 and the lower grade and volume of ore deposited on the pads at Herradura in 3Q18.

  • Quarterly gold production down 3.7% vs. 2Q18 mainly due to a lower speed in the recovery rate at the leaching pads at Herradura in 3Q18, and the lower ore grade and recovery rate at Noche Buena.

  • Year to date gold production of 690 koz, up 1.7% vs. YTD17 mainly due to higher ore grade at Saucito and a higher volume of ore processed at Noche Buena.

  • Full year consolidated production guidance has been revised marginally: total gold production to 920 – 940 koz (previously 900 – 930 koz) and total silver production to 62.0 – 64.5 moz (previously 64.5 – 67.5 moz) including Silverstream due to continued challenges at the Saucito and Fresnillo mines, which are currently being addressed.

Financial highlights (1H18/1H17 comparisons)

  • Adjusted revenues1 of US$1,189.9m, up 11.3%

  • Gross profit and EBITDA2 of US$502.2m and US$566.9m, up 9.2% and 8.5%, respectively

  • Silverstream valuation, a non-cash item, had an adverse effect on profit before income tax, which came down 16.6% to US$323.0m

  • In addition, profit for the period of US$229.3m, down 26.1%, was adversely impacted by changes in the MXP/USD exchange rate and inflation rate on deferred taxes (non-cash item)

  • Basic and diluted EPS from continuing operations of US$31.2 cents per share, adjusted EPS of US$33.3 cents per share, down 25.5% and 9.3%

  • Cash generated from operations, before changes in working capital of US$575.9m, up 6.6%

  • Net cash from operating activities of US$366.6m, up 3.5%

  • Strong balance sheet with cash and other liquid assets as at 30 June 2018 of US$708.6m

  • Interim dividend of US$78.8m (10.7 US cents per share)

Operational highlights (1H18/1H17 comparisons)

  • Silver production of 30.8 moz (including Silverstream), up 9.7%, and gold production of 465 koz, up 4.4%

  • Ongoing tests at Herradura leaching pads resulted in increase of 98.9 koz gold in inventory as of 1 January 2018

  • Full year consolidated production guidance marginally revised: total gold production 900 – 930 koz (previously 870 – 900 koz) and total silver production 64.5 – 67.5 moz (previously 67 – 70 moz) including Silverstream

  • Pyrites plant at Saucito commissioned with minimal delays and on budget

  • Final testing of second line dynamic leaching plant on track with commercial production expected 3Q18.

1H18 Half Year Gold Silver Production1H18 Gross Profit Ebitda

Total Production

 

3Q18

3Q17

% change

2Q18

YTD18

YTD17

% change

Silver (koz)

14,738

13,529

8.9

14,459

43,432

39,281

10.6

Silverstream (koz)

796

1,084

-26.6

884

2,865

3,376

-15.1

Total Silver (koz)

15,533

14,613

6.3

15,343

46,297

42,657

8.5

Gold (oz)

225,202

233,311

-3.5

233,841

690,501

679,081

1.7

Lead (t)

13,076

12,472

4.8

13,223

37,928

35,318

7.4

Zinc (t)

22,935

17,688

29.7

22,014

63.989

46,413

37.9


Financial Performance

 

2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

Total attributable silver production incl. Silverstream (Moz)

58.7

53.0

47.0

45.0

43.0

41.0

41.9

42.1

41.3

34.8

Attributable Gold Production (koz)

911.1

935.5

761.7

596.0

425.8

473.0

448.9

369.0

276.6

263.6

EBITDA (millions of US$)

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$)

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
Deploy US$200 million in exploration investment; 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.