Performance

Production Report - 3Q21

Octavio Alvídrez, Chief Executive Officer, said: “Silver production has remained in line with the first nine months of last year with gold production over the same period ahead of expectations as our Herradura gold mine continues to deliver strong results. We have made good progress with our next flagship mining project Juanicipio in the quarter and we are well set to commission the plant before the end of the year subject to the timely power connection by the national grid. We have seen some limited short term disruption as a result of the new labour reforms in Mexico which has impacted the performance of our Fresnillo and Saucito mines in particular, due to the higher proportion of contractors at those underground mines. However, the combination of continued efficiency measures, the higher volume of ore processed at Herradura, the ongoing contribution of development ore from our Juanicipio project and an increase in silver ore grades at San Julián Disseminated Ore Body, give us confidence in our full year guidance."  
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Silver

  • Year-to-date attributable silver production of 40.2 moz (including Silverstream), in line with YTD20 due to a higher ore grade at San Julián DOB and, to a lesser extent, the contribution of development ore from Juanicipio, offset by a lower ore grade and volume of ore processed at Saucito.
  • Quarterly attributable silver production of 12.7 moz (including Silverstream), down 15.1% vs. 2Q21 mainly driven by the anticipated lower ore grade at San Julián Disseminated Ore Body (DOB) following the exceptional high grades in the previous quarter. The lower ore grade and volume of ore processed at Fresnillo and Saucito also contributed to the decrease in quarterly attributable silver production.
  • Quarterly attributable silver production (including Silverstream) decreased 4.7% vs. 3Q20 due to a lower volume of ore processed and a lower ore grade at Saucito, mitigated by a higher ore grade at San Julián DOB.

Gold

  • Year-to-date attributable gold production of 600.9 koz, up 8.5% vs. YTD20, primarily due to the higher volume of ore processed at Herradura following the lifting of Covid-19 restrictions which resulted in lower volumes of ore deposited last year, partly offset by a lower ore grade at Ciénega.
  • Quarterly attributable gold production of 172.5 koz, down 13.8% vs. 2Q21, primarily due to lower volumes of ore processed and recovery rates at Herradura and Noche Buena as well as a lower volume of ore processed and ore grade at Saucito.
  • Quarterly attributable gold production in line with 3Q20 as a result of a lower ore grade at Ciénega and San Julián Veins, offset by the good performance at Herradura and Noche Buena.

By-Products

  • Year-to-date attributable by-product lead production remained flat vs. YTD20 primarily due to lower ore grades at both Fresnillo and Ciénega, compensated by higher ore grades at both Saucito and San Julián DOB.
  • Year-to-date attributable by-product zinc production remained flat vs. YTD20 due to a higher ore grade at Saucito, offset by a lower ore grade at Ciénega.
  • Quarterly attributable by-product lead and zinc production decreased 20.6% and 17.2% vs. 2Q21 respectively, driven primarily by lower ore grades and decreased volumes of ore processed at Saucito.
  • Quarterly attributable by-product lead production decreased 14.1% vs. 3Q20 due to a lower ore grade and volume of ore processed at Saucito.
  • Quarterly attributable by-product zinc production decreased 12.9% vs. 3Q20 due to a lower ore grade and volume of ore processed at Saucito, mitigated by a higher ore grade at Fresnillo.

Development Projects

The construction of the Juanicipio plant continued to progress. Pre-commissioning testing has begun for key systems as we approach mechanical completion. Our focus in the upcoming weeks will be to progress from construction to no-load and water testing, with full load commissioning with ore expected by year end.

New Labour Reform in Mexico

The new labour reform in Mexico restricting the ability to subcontract labour came into effect from 1st September 2021 resulting in the requirement to internalise a proportion of our contractor workforce. While Fresnillo took significant steps to prepare since the reform was announced in April, subsequent contractor uptake has varied, with underground mines, in particular in the Fresnillo District and at Cienega, more affected due to a higher number of contractor workforces on site resulting in an increased number of staff vacancies and a higher workforce rotation. This in turn has affected equipment availability and utilisation rates. We continue to take a series of actions to mitigate this impact, including new recruitment campaigns, training and investment in new equipment. These actions will continue in the following months and we expect volumes to gradually return to a normalised level during 2022. The transition has been largely seamless in our open pit mines.

Safety Performance

We are deeply saddened to confirm a fatal accident at the Fresnillo mine during the quarter. A full independent investigation was carried out in conjunction with relevant authorities and we are providing support to the employee’s family and colleagues. We remain absolutely committed to a strong safety culture in our mines and we will continue reinforcing our commitment to a safe operation with stringent monitoring of safety implementation, a focus on training, and emphasis on the follow up of critical controls as well as technical key indicators. The importance of building a healthy and safe working environment for all through our mines is critical and we will continue encouraging safety procedures. The ‘I Care, We Care’ programme continues to be rolled out across the business and is a central aspect of all new development projects and operations.

2021 Outlook

We remain on track to meet our 2021 full year guidance of 53.5 to 59.5 moz of silver (including Silverstream) and 675 to 725 koz of gold. We continue to monitor the possible impact of the labour reform and general shortage of personnel, as well as potential headwinds, in particular inflationary pressures and the average revaluation of the Mexican peso vs US dollar, which may impact costs.

Total Production

 

3Q21

2Q21

% change

3Q20

% change

YTD21

YTD20

% change

Silver (koz)

11,800

14,092

(16.3)

12,572

(6.1)

37,730

38,063

(0.9)

Silverstream (koz)

851

803

6.0

709

20.2

2,451

2,037

20.3

Total Silver (koz)

12,651

14,895

(15.1)

13,281

(4.7)

40,181

40,100

0.2

Gold (oz)

172,534

200,163

(13.8)

172,718

(0.1)

600,890

554,037

8.5

Lead (t)

13,010

16,386

(20.6)

15,144

(14.1)

44,736

45,229

(1.1)

Zinc (t)

22,930

27,687

(17.2)

26,320

(12.9)

76,498

75,701

1.1


Financial Performance

 

2020

2019

2018

2017

2016

2015

2014

2013

2012

Total attributable silver
production incl. Silverstream (Moz)

53.1

54.6

61.8

58.7

53.0

47.0

45.0

43.0

41.0

Attributable Gold Production (koz)

769.6

875.9

922.5

911.1

935.5

761.7

596.0

425.8

473.0

EBITDA (millions of US$)

1,169.1

674.0

915.1

1,060.1

1,032.0

547.5

567.3

729.8

1,315.3

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

1,168.7

685.5

930.7

1,073.7

1,023.3

537.3

568.5

750.2

1,356.7


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.