Performance

Full Year - FY20

Octavio Alvídrez, Chief Executive Officer, said: “"Against a backdrop of the significant challenge presented by Covid-19, we have prioritised the wellbeing of our people and communities while delivering a robust financial and operating performance. By engaging with all our stakeholders, we have been able to keep people safe and minimise the impact of the pandemic on our business. Even in the face of such an unprecedented challenge, I am pleased to report that we have largely stabilised production, a key priority. We remain committed to achieving our operational objectives and delivering our development projects. Total silver production remained broadly stable and within our guidance at 53.1 million ounces. The marginally lower production compared to 2019 was due to the Covid-19 preventive measures and a lower ore grade at Saucito, mitigated by a higher grade at San Julián Disseminated Ore Body and the processing of development ore from our new Juanicipio mine for the first time. Mining operations at the Herradura and Noche Buena open pit gold mines were impacted by Covid-19 operational restrictions affecting the volumes of ore deposited, which combined with reduced workforce levels, resulted in gold production decreasing by 12.1% to 769.6 koz, within our revised guidance. Fresnillo reported a strong financial performance with US$2,608.1 million in Adjusted Revenue in 2020, an increase of 14.9% on 2019 due mainly to better precious metals prices. Gross profit rose by 90.5% to US$879.4 million, driven by a combination of higher prices and lower costs. We declared an interim dividend of 2.3 US cents per share, with a final dividend of 23.5 US cents per share, bringing the total for the year to 25.8 US cents per share.” Read full release»


FY20 Highlights

Rapid and united response to the threat of Covid-19, highlighting the commitment to support our workforce and local communities in line with our overall Purpose

  • Management and the workforce collaborated to introduce a wide range of preventive measures to protect our people, including social distancing at work as well as during transportation to and from our sites, the strict use of PPE and the installation of sanitization stations.
  • All vulnerable colleagues (including contractors), asked to remain at home on full pay.
  • Extensive testing - 30,000 rapid test kits acquired, self isolation and tracing tactics implemented.
  • Direct partnership with local communities, through donation of testing kits, hospital equipment, medical supplies including ventilators to local health authorities, in addition to food, masks and anti-bacterial gels to vulnerable people in and around our communities.
  • Continued to make sure our employment and procurement processes put the needs of local communities first; including maintaining our payment terms and providing help to enable contractors and suppliers to implement health protocols.
  • In the city of Fresnillo, we made some of our land available for a facility that increased the capacity of the local hospital.
  • Worked closely with the Mexican Mining Chamber and Mining Authorities to develop national workplace guidance for our industry - and that collaboration was central to the Government's reclassification of mining as an essential industry, enabling us to ramp up our open pit operations in May 2020.
  • Piloted a virus awareness programme in collaboration with the Smithsonian Museum and Innovec aimed at encouraging children to understand the dangers and then use their 'pester power' to pass the message on to their parents and other relatives. 

Strong financial performance in 2020, supported by high precious metals prices and a robust operational performance despite Covid-19

  • Adjusted revenue increased 14.9% year-on-year due to higher gold and silver prices, which were partially offset by the lower volumes of gold and silver sold.
  • Adjusted production costs decreased by 8.0% primarily as a result of lower volume of ore processed at Herradura and Noche Buena due to Covid-19 operational restrictions and the favourable effect of the devaluation of the Mexican peso vs. US dollar.
  • Cost of sales was further benefitted by the positive effect from changes in inventory in 2020 compared to that in 2019 resulting from the reassessment of gold content in the leaching pads at Herradura.
  • Gross profit and EBITDA rose to US$879.4 million and US$1,169.1 million, a 90.5% and 73.4% increase over 2019.
  • Restructured the Company's debt, buying back US$482.1 million from the US$800 million Senior Notes at 5.5% due in 2023 and issuing new US$850 million Senior Notes at 4.25% due in 2050.
  • Locked-in prices for 7% of 2021's silver production with an average floor price of US$20 per ounce, and with an average price ceiling of approximately US$50 per ounce.
  • We improved our already strong financial position, with US$1,070.4 million in cash and other liquid funds as of 31 December 2020 notwithstanding paying dividends of US$104.7 million in accordance with our policy and despite the pandemic, investing US$412.3 million in capex and spending US$107.3 million on exploration expenses to underpin our future growth.
  • Recommended a final dividend of 23.5 US cents per share, which is equivalent to US$173.2 million. We anticipate that dividend payments relating to 2020 and future years will attract the withholding obligation.

Maintaining focus on operational improvement and delivering our development projects

  • The Fresnillo Full Potential (FFP) project to exploit the great potential that exists at our Fresnillo and Saucito mines is on track: in 2020 we refined our mine planning operations, enhanced the certainty of our geological models and took action to stabilise production, focusing on controlling dilution and enhancing our blasting and drilling techniques to manage the deeper operations and narrower veins at both mines.
  • Our US$22.7 million tunnel boring machine (TBM) began operations in the Fresnillo mine -  advancing over 1,300 metres by the end of December - working alongside the manufacturer, further improvements are expected in 2021. Investment in new technology is ongoing.
  • The deepening of the San Carlos Shaft advanced well and once fully operational in 2022, will transport ore more efficiently and directly to the surface - reducing the haulage costs while decreasing our environmental footprint. Started in June 2016, this project has extended the shaft from 550m down to 990m, helping to provide access to 56% of the mine's reserves.
  • At Saucito, we continued to deepen the Jarillas shaft to 1000 metres, which will help to provide access to deeper levels of the mine where almost half of the reserves are located. Due to be completed in 2024, this will also allow us to transport ore to the surface more efficiently and quickly than is possible using access ramps.
  • The first production stope at Juanicipio concluded on schedule in 3Q 2020. Commissioning is now expected in 4Q 2021, due mainly to Covid-19 related delays. A joint project with MAG Silver in which we hold a 56% share, the mine is forecast to produce 11.7 moz of silver and 43.5 koz of gold per year on average over the life of the mine once fully operational.
  • The new Pyrites Plant at the Fresnillo mine was completed on schedule early in Q4 - the start of operations has been deferred mainly due to a delay in final inspections by the authorities as a result of Covid-19 restrictions on travel and other regulatory delays. Once it becomes fully operational, and including production from the Saucito plant, we anticipate that it will produce an average of 3.5 moz of silver and 13 koz of gold per year.
  • Further actions are enhancing productivity at Fresnillo, including the US$30 million plant optimisation project at Fresnillo to cope with higher content of lead and zinc from lower levels of the mine ongoing. The new flotation circuit was completed in the second half of 2020 as anticipated. The connection of this new circuit to the beneficiation plant is expected to be undertaken in early 2021.
  • Exploration budget for 2021 increased: the potential mine at Rodeo is on track to come before the Board for approval in mid-2022. We are increasingly confident that Orisyvo will join our portfolio of operational mines in the coming years.
  • Silver resources stood at 2.3 boz, a 1.6% increase over 2019 mainly as a result of exploration at Saucito. Gold resources remained stable 38.9 moz.
  • Silver reserves decreased 5.5% to 457.5 moz mainly due to depletion and higher cut-off grades at Fresnillo, and an updated mine production plan at San Julián which incorporates new geotechnical criteria, mitigated by the increase at Saucito.
  • Gold reserves decreased 8.8% to 8,438 koz primarily due to more stringent geotechnical and cost considerations at Herradura and depletion at Noche Buena.

Cautious 2021 outlook, confidence in longer term prospects

  • Fresnillo remains cautious for 2021 due to the continued impact of the pandemic in Mexico.
  • In 2021, Fresnillo expects attributable production in the range of 53.5 to 59.5 moz of silver (including Silverstream) and 675 to 725 koz of gold.
  • Silver volumes expected to benefit from increasing production at Juanicipio, while the multiple ongoing operational programmes are forecast to increase production at Fresnillo.
  • Lower ore grade at Ciénega, together with reduced activity at Noche Buena in line with the mine closure plan, as well as slightly lower volumes at Herradura, are likely to lead to reduced gold production. However, the longer-term prospects for gold are good, supported by the potential new mines at Rodeo and Orisyvo.

Changes to the Board

Pursuant to rule 9.6.11 (3) of the UK Listing Rules, the Company announces as follows: Ms. Georgina Kessel has been appointed a member of the Audit Committee and Ms. Guadalupe de la Vega has been appointed a member of the Remuneration Committee; in both cases, with immediate effect. There are no other matters to disclose under the Listing Rules.

 

1H20 Operational Highlights   1H20 Financial Highlights
 

Total Production

 

4Q20

3Q20

% change

4Q19

% change

FY20

FY19

% change

Silver (koz)

12,207

12,572

-2.9

13,131

-7.0

50,270

51,764

-2.9

Silverstream (koz)

743

709

4.9

643

15.6

2,780

2,850

-2.5

Total Silver (koz)

12,950

13,281

-2.5

13,775

-6.0

53,050

54,614

-2.9

Gold (oz)

215,581

172,718

24.8

233,744

-7.8

569,618

875,913

-12.1

Lead (t)

18,013

15,144

18.9

14,997

20.1

63,242

55,722

13.5

Zinc (t)

31,092

26,320

18.1

24,832

25.2

106,793

92,578

15.4


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.