Source - LSE Regulatory
RNS Number : 8976F
Fresnillo PLC
23 May 2017

                                                                                                        Fresnillo plc

21 Upper Brook Street

London W1K 7PY

United Kingdom


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: or contact:


Fresnillo plc



Gabriela Mayor, Head of Investor Relations

Patrick Chambers

Tel: +44(0)20 7339 2470


Ana Belém Zárate


Tel: +52 55 52 79 3206


Bell Pottinger

Liz Morley

Marianna Bowes

Aarti Iyer


Tel: +44(0)20 3772 2500


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-Dipolos1, 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.

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