21 Upper Brook Street
London W1K 7PY
30 May 2018
Fresnillo plc - Annual General Meeting Statement
Fresnillo plc (the "Company") will hold its Annual General Meeting today at 12pm (noon) in London, and the following Company update will be made:
"Although we have a history stretching back to the year 1910, Fresnillo only became a listed company on the London Stock Exchange in 2008. Today, as we stand on the brink of our second decade, we can look back on our achievements with justifiable pride, and look forward with confidence.
Despite a changing market environment and pressures affecting the mining industry, we are delivering on our long-term commitments and continuing to create value through growth and returns for our stakeholders. Over the last decade, we have paid US$2.5 billion in dividends, invested over US$6 billion to sustain and expand our operations, develop new projects, undertake strategic acquisitions and increase silver equivalent resources by 158%.
At the time of the IPO, we set ourselves two demanding targets for our first decade of operations. Our gold production target of 750 thousand ounces was reached in 2015, three years ahead of plan, while our 65 million ounces objective for silver is on track to be achieved in 2018.
2017 has again proved the importance of our consistent, conservative long-term strategy based primarily on organic growth. This provided the foundation for another year of record silver production and stable gold production. We produced 58.7 million ounces of silver (including Silverstream), and while gold production was marginally down, we exceeded guidance.
Against a backdrop of relatively stable precious metals prices and an upward trend of by-product base metal prices, we also have delivered sound financial results. The Group reported over US$2,230 million in adjusted revenue in 2017, a rise of 9.2% over the prior year, with a 32.0% increase in profit for the period. Fresnillo plc's dividend policy is closely aligned with our focus on creating value through growth and returns. We declared an interim dividend of 10.6 US cents per share, with a final dividend of 29.8 US cents per share, bringing the total for the year to US$297.7 million.
There were a number of key operational developments during the year, in particular the completion of the second phase of our silver-gold San Julián project. This is a real milestone for Fresnillo. San Julián Phase II was commissioned on budget, and the project reached nameplate capacity as expected in the third quarter. This new mine is a cornerstone of our future prospects and opens a promising district to further growth.
Both the Pyrites plant in the Fresnillo district and the second Dynamic Leaching Plant at Herradura, have advanced on time and on budget. We expect to commission both projects during the second quarter and for them to make a positive contribution to full year production in 2018.
We continue to take a disciplined investment approach to future growth, focusing on projects with the potential to be developed into world class, low-cost mines. The Board expects to approve the development of the Juanicipio project in the coming months, and we anticipate the start-up of production in mid-2020.
Fresnillo has started the year well and delivered a solid operating performance in the first quarter of 2018. First quarter silver production rose to 14.2 million ounces, driven by the positive contribution from the second phase of the new San Julián mine. We also achieved a solid gold production performance, up 4.1% versus the same quarter last year, driven by strong results at the Herradura mine.
As a result, our outlook for the year is unchanged. We are on track to achieve 2018 production guidance of 67 to 70 million ounces of silver, (including Silverstream) and 870 to 900 thousand ounces of gold.
Exploration is a key pillar of our Company. We have a well-established record of replenishing reserves and resources, and 2017 again saw good progress in this respect. Overall, our resource base has continued to grow. Silver resources have grown from 2.2 billion ounces in 2016 to 2.3 billion ounces in 2017, while gold resources remained stable at 38.5 million ounces. Gold reserves increased by 22.7%, while silver reserves showed a decrease of 5.4%.
I regret to report one fatal accident that occurred in early 2017. Any fatality is unacceptable. We will never sacrifice the health and safety of our people - or the long-term sustainability of our business - for short-term gain, and strive to implement best-in-class systems and practices throughout the Company. However, it is clear that there remains more work to do, particularly in ensuring contractors meet our stringent safety measures. During the year we took decisive steps to re-engage all our contactors in our health and safety culture and we will continue to roll this out throughout 2018.
We continue to seek to improve energy efficiency and progressively integrate renewables and clean technologies into our energy mix. I am pleased to report 60% of our electricity consumption comes from wind power and our aim is to get to 75% by the second half of 2019.
One of the most important functions of the Board is to ensure strong and effective corporate governance. We have continued to identify and, where appropriate, implement best practice in line with the UK Corporate Governance Code and evolving stakeholder expectations in both the UK and Mexico. This includes new anti-bribery and corruption legislation in Mexico; continued support for greater gender diversity at Board level; and evolution of the independent representation on the Board.
To this effect, we have seen a number of changes to our Board. After 9 years serving as an independent non-executive director, Guy Wilson will be stepping down from his role at today's meeting. The Board has, therefore, approved a recommendation from the Nominations Committee that Alberto Tiburcio be appointed as Chairman of the Audit Committee and Mr Charles Jacobs be appointed as a member to the Audit Committee. In addition, the Board has approved a recommendation from the Nominations Committee that Dame Judith Macgregor be appointed as an additional member of the Health, Safety, Environment and Community Relations Committee, all of which are to take effect at today's meeting.
As announced in February, the Nominations Committee has recommended to the Board of Directors, and the Board has agreed, that Ms Georgina Kessel be proposed for election as an independent non-executive director of the Company at today's meeting, with her appointment to take effect from the conclusion of the AGM. Ms Kessel worked in the Mexican government where she served as Secretary of State in the Ministry of Energy from 2006 to 2011. She also chaired the Governing Board of the Federal Electricity Commission and has been President and a member of the Board of Directors of Petróleos Mexicanos (PEMEX).
The Board has further approved the appointment of Mr Alejandro Baillères as Deputy Chairman of the Company.
I should like to take this opportunity to thank Mr Wilson for his outstanding contribution to the Board and the Audit Committee during the past nine years. His significant efforts in overseeing the sound financial and internal controls environment of the Company since the IPO will be greatly missed. I am though delighted that Ms Kessel has agreed to join the Board. Her significant political experience and knowledge of the energy sector will greatly support the Company and the Board. I look forward to welcoming her to the Board following today's meeting.
As we approach the tenth anniversary of our listing on the London Stock Exchange, I am pleased to report that, while our business model has remained consistent, we are also continuing to learn and evolve - particularly in the areas of sustainability, the application of IT and corporate governance. Corporate culture is also a key agenda item for every Board meeting, with updates on the cultural programme provided as part of the CEO's report. These regular bulletins are supported by an annual presentation by the Head of Sustainability.
Looking forward, we will continue to maintain our disciplined approach to investment in order to support the key 'Explore, Develop, Operate and Sustain' elements of the business model. Our focus will once again be on efficiency and cost control to underpin projects, ongoing performance improvements at Fresnillo, increased production at San Julián, development of Juanicipio and the continued evaluation of our other growth projects.
The Board and I reiterate our confidence in our established and proven strategy and in the capacity of the Executive Committee to execute it. While volatility in exchange rates or precious metals prices may present short-term challenges, we anticipate further growth and returns over the longer term.
Finally, on behalf of the Board and shareholders I want to express my gratitude to our employees for their efforts.
Mr Alberto Baillères
Chairman of the Board"
For further information, please visit our website www.fresnilloplc.com or contact:
Gabriela Mayor, Head of Investor Relations
Tel: +44 (0)20 7399 2470
Mexico City Office
Ana Belem Zárate
Tel: +52 55 52 79 3206
Tel: +44 (0)20 7250 1446
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 I and II), two development projects - 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-Dipolos are currently suspended.
Forward Looking Statements
Information contained in this announcement may include 'forward-looking statements'. All statements other than statements of historical facts included herein, including, without limitation, those regarding the Fresnillo Group's intentions, beliefs or current expectations concerning, amongst other things, the Fresnillo Group's results of operations, financial position, liquidity, prospects, growth, strategies and the silver and gold industries are forward-looking statements. Such forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. Forward-looking statements are not guarantees of future performance and the actual results of the Fresnillo Group's operations, financial position and liquidity, and the development of the markets and the industry in which the Fresnillo Group operates, may differ materially from those described in, or suggested by, the forward-looking statements contained in this document. In addition, even if the results of operations, financial position and liquidity, and the development of the markets and the industry in which the Fresnillo Group operates are consistent with the forward-looking statements contained in this document, those results or developments may not be indicative of results or developments in subsequent periods. A number of factors could cause results and developments to differ materially from those expressed or implied by the forward-looking statements including, without limitation, general economic and business conditions, industry trends, competition, commodity prices, changes in regulation, currency fluctuations (including the US dollar and Mexican Peso exchanges rates), the Fresnillo Group's ability to recover its reserves or develop new reserves, including its ability to convert its resources into reserves and its mineral potential into resources or reserves, changes in its business strategy and political and economic uncertainty.
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