TIDMFRES
RNS Number : 8976F
Fresnillo PLC
23 May 2017
Fresnillo plc
21 Upper Brook Street
London W1K 7PY
United Kingdom
www.fresnilloplc.com
23 May 2017
Annual General Meeting Statement
Fresnillo PLC will hold its Annual General Meeting today at 12pm
(noon) in London, and Mr. Alberto Baillères, Chairman, will make
the following statement:
"Whilst precious metals prices remained volatile in 2016, they
did recover during the year, reversing the downward trend we had
seen for several years. At Fresnillo, we remained focused on our
long-term goal: to maintain the Group's position as the world's
largest primary silver company and a leading gold producer in
Mexico in a profitable and sustainable manner. Our average realised
gold and silver prices rose 10.7% and 10.3% respectively when
compared to 2015. Against this background, we delivered record
silver production of 50.3 million ounces, in line with our guidance
and an increase of over 7% vs 2015, and gold production of 935.5
thousand ounces which exceeded our revised guidance and was almost
23% higher than in 2015.
As a result of our record production, higher metal prices and
the devaluation of the Mexican peso during the year, we saw robust
financial results for 2016. We generated over US$2 billion in
adjusted revenues, a rise of 29% over 2015, with a 505% increase in
profit attributable to shareholders. We almost doubled the cash
generation from our mines in 2016, which more than offset our
capital expenditure and the payment of dividends, resulting in
Fresnillo being net cash flow positive with a closing cash balance
of US$912.0 million by year end.
Our strong financial performance in 2016 led the Board to
declare an interim dividend of 8.6 US cents per share and a final
dividend of 21.5 US cents per share, totalling US$158.4
million.
Looking at our operational performance in more detail, our
record silver production reflected the initial contribution of San
Julián phase I and higher grades at Fresnillo and Ciénega. We also
reported record gold production for the year, mainly a result of
reduced inventories at Herradura.
San Julián phase I was commissioned in the third quarter and it
is now operating at levels above its designed capacity. Despite the
unfortunate circumstances which lead to the delay of the start-up
of San Julián phase II, we are pleased to report that this second
phase is on track to be commissioned at the end of the second
quarter of this year. We remain confident that San Julián will be a
successful new mine and will open up additional growth potential in
the district.
At the Fresnillo mine, despite reporting a slight improvement in
silver production in 2016, we continued to experience some issues
that impacted the delivery of our turnaround plan. However, we
implemented additional measures to increase mine preparation and
expect a gradual improvement in production during 2017. As reported
in our 1Q 2017 production report, the mine continues to show
positive signs with two consecutive quarters of increased ore
grades and silver ounces produced and three consecutive quarters of
increased ore processed. Our target of reaching 4,800 metres of
development per month by the end of 2017 remains on track.
Looking further at our production results for the first quarter
of 2017, we reported quarterly silver production of 13.5 million
ounces (including Silverstream), up 10.7% against 1Q16, and
quarterly gold production of 222.3 thousand ounces. We remain on
track to achieve our production guidance for 2017, with silver
production of between 58-61 million ounces (including
Silverstream), and gold production of between 870-900 thousand
ounces. Our capital expenditure is anticipated to be approximately
US$800 million and exploration expenses of around US$160 million,
including the capitalised portion.
Regrettably, we reported three fatalities in 2016 and one in
early 2017, representing a major setback to our safety programme.
Following investigations, our management team has taken decisive
steps to prevent the type of human errors that are invariably a
root cause in these accidents. Safety continues to be our highest
priority, above production and profitability. We recognise that
even with best-in-class systems and practices in place, our safety
culture must be further strengthened and deeply embedded within the
Company. To that end, the Board's Health, Safety, Environment and
Community Relations (HSECR) Committee continues to review the
safety culture and values at the Company.
In 2016 we continued to optimise our operations. Not only did we
make good progress with our development projects but we also
increased our resource base. The pyrites plant and second line of
the dynamic leaching plant at Herradura advanced largely according
to plan, with commissioning of both due in 2018.
We received positive results from our exploration programme in
2016, with an 8.2% and 10.2% increase in total gold and silver
resources respectively. Gold reserves remained stable, whilst
silver reserves decreased 3.2%. Our resource base remains very
sound as we progress towards our 2018 goals.
2016 saw a number of changes to our Board. Charles Jacobs was
appointed Senior Independent Director at the AGM in May 2016, and
we welcomed Alberto Tiburcio to the Board as an Independent
Non-executive Director, serving on the Audit Committee. As Chairman
and CEO of Ernst & Young Mexico from 2001 until his retirement
in 2013, Mr Tiburcio brings with him extensive experience as
statutory auditor and advisor to many prestigious Mexican
companies. Additionally, as announced last month, the Nominations
Committee has recommended to the Board of Directors, and the Board
has agreed, that Dame Judith Macgregor be proposed for election as
an independent non-executive director at today's meeting. Dame
Judith was the British Ambassador to Mexico from 2009 to 2013 and
British High Commissioner in South Africa from September 2013 until
early 2017.
I am grateful for the service of the two members who stood down
from the Board in 2016: Rafael MacGregor, Non-executive Director,
whose role as Chairman of the Health, Safety, Environment and
Community Relations Committee has been filled by Arturo Fernández,
Non-executive Director; and María Asunción Aramburuzabala,
Independent Non-executive Director who also served on the HSECR
Committee. Both Directors made significant contributions to the
Board and Company during their eight and four years of respective
service.
In 2017, despite the recovery we saw in 2016, we believe gold
and silver prices will remain volatile. We therefore maintain our
disciplined approach to investment: growth projects will continue
to be evaluated against a range of metrics, including operational
and technical factors, pricing and market considerations, as well
as our financial position.
For the near term, our focus remains on efficiency, cost control
and meeting our operational commitments: the turnaround of the
Fresnillo mine and the successful start-up of the second phase of
San Julián. We will continue to set the bar higher for ourselves in
other areas such as safety, governance processes and organisational
effectiveness.
It is as a result of our combined efforts, with our focus on
operational delivery, disciplined approach to investment and clear
commitment to sustainable business practices, that we remain well
positioned to continue to optimise our performance, maintain our
strong financial position and deliver considerable long-term value
for our shareholders.
Thank you."
For further information, please visit our website:
www.fresnilloplc.com or contact:
Fresnillo plc
London Tel: +44(0)20 7339 2470
Gabriela Mayor, Head
of Investor Relations
Patrick Chambers
Mexico Tel: +52 55 52 79 3206
Ana Belém Zárate
Bell Pottinger Tel: +44(0)20 3772 2500
Liz Morley
Marianna Bowes
Aarti Iyer
About Fresnillo plc
Fresnillo plc is the world's largest primary silver producer and
Mexico's largest gold producer, listed on the London and Mexican
Stock Exchanges under the symbol FRES.
Fresnillo plc has seven operating mines, all of them in Mexico -
Fresnillo, Saucito, Ciénega (including the San Ramón satellite
mine), Herradura, Soledad-Dipolos(1) , Noche Buena and San Julián
(phase 1), three development projects - San Julián (phase 2), the
Pyrites plant, and second line of DLP at Herradura, and four
advanced exploration projects - Orisyvo, Juanicipio, Las Casas
Rosario & Cluster Cebollitas and Centauro Deep, as well as a
number of other long term exploration prospects. In total,
Fresnillo plc has mining concessions covering approximately 1.8
million hectares in Mexico.
Fresnillo plc has a strong and long tradition of mining, a
proven track record of mine development, reserve replacement, and
production costs in the lowest quartile of the cost curve for
silver.
Fresnillo plc's goal is to maintain the Group's position as the
world's largest primary silver company, producing 65 million ounces
of silver per year by 2018, having already surpassed the gold
target of 750,000 ounces.
(1) Operations at Soledad and Dipolos are currently
suspended.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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