TIDMFRES
RNS Number : 0203V
Fresnillo PLC
25 January 2017
Fresnillo plc
21 Upper Brook Street
London W1K 7PY
United Kingdom
www.fresnilloplc.com
25 January 2017
Production Report
for the three months ended 31 December 2016
Overview
-- Record annual silver production of 50.3 moz (including
Silverstream), up 7.1% vs. 2015, in line with our guidance and 4Q16
silver production of 13.3 moz (including Silverstream) up 9.5% vs.
4Q15, mainly due to the start up of San Julián phase I. A higher
ore grade at Ciénega and an increased contribution from the
Silverstream also had a positive impact on production
-- Quarterly silver production increased 13.1% vs. 3Q16 due to
San Julián (phase I) ramp-up, higher ore processed at Saucito and a
higher ore grade and ore processed at Fresnillo
-- Record annual gold production of 935.5 koz, up 22.8% vs. 2015
and ahead of guidance, mainly due to reduced gold inventories at
Herradura. Additionally the San Julián (phase I) start-up and an
improved overall average speed of recovery at Noche Buena
contributed
-- Quarterly gold production increased 24.2% vs. 4Q15 and 22.0%
vs. 3Q16 mainly due to reduced gold inventories at Herradura and
the San Julián start up
-- Successful ramp-up of San Julián (phase I), which is
currently processing 3,600 tpd, 20% above its nominal capacity
-- One fatal accident reported at Saucito in 4Q16
2017 Production Outlook
-- Silver production expected to be in the range of 58-61 moz
including 4 moz from the Silverstream
-- Gold production expected to be in the range of 870-900 koz,
due mainly to the stabilisation of production at Herradura
following the reduction in inventories
-- Turnaround plan at Fresnillo to advance with the aim of
maintaining an average development rate of 4,800m /month
-- San Julián phase II to be commissioned in 2Q17
-- Continued construction of Pyrites Plant (1H18 - 3.5 moz Ag
& 13 koz Au p/a) and second Dynamic Leaching Plant at
Herradura
-- 2017 exploration budget of approximately US$160 million
(including capitalised exploration expenses)
Octavio Alvídrez, Chief Executive Officer, said:
"I am pleased to report that Fresnillo plc has delivered record
production in 2016, having produced 50.3 moz of silver and 935.5
koz of gold. The successful ramp-up of San Julián (phase I) was the
principal reason for the 7% increase in annual silver production,
although higher silver grades at both Ciénega and Fresnillo also
contributed to the rise in production.
At the Fresnillo mine, despite reporting a slight improvement in
silver production, we continued to experience some issues during
the year that impacted the delivery of our turnaround plan. We have
however, implemented a number of measures and remain focused on
addressing these issues and are targeting a year-on-year increase
in silver production in the range of 7-10% at the mine in 2017.
Our 2016 gold production of 935.5 koz exceeded our revised
guidance, primarily due to the reduction of inventories at
Herradura. The start-up of San Julián (phase I) and a strong
performance at Noche Buena also contributed to the increase to gold
production.
We continued to make good progress with our development projects
in 2016. Construction of San Julián phase II continued to advance
and is on track to be commissioned in the second quarter of 2017,
with both phases of San Julián producing a combined annual average
of 10.3 moz of silver and 44 koz of gold. Further progress was made
at the Pyrites Plant project which is set to deliver 3.5 moz silver
and 13 koz a year once commissioned in 1H18, while the construction
of the second line of the Dynamic Leaching Plant at Herradura
remained on track.
Looking ahead, our 2017 gold production is anticipated to be
between 870-890 koz as we expect to reach a steady level of
inventories after last year's inventory reductions at Herradura;
whilst silver production is expected to be within the range of
58-61 moz, on track to reach 65moz by 2018."
Total Production
4Q 4Q 3Q YTD YTD
16 15 % change 16 16 15 % change
-------------- -------- -------- --------- -------- -------- -------- ---------
Silver
(koz) 12,247 11,336 8.0 10,607 45,677 43,023 6.2
-------------- -------- -------- --------- -------- -------- -------- ---------
Silverstream
(koz) 1,069 830 28.8 1,168 4,625 3,955 16.9
-------------- -------- -------- --------- -------- -------- -------- ---------
Total
Silver
(koz) 13,316 12,166 9.5 11,775 50,303 46,977 7.1
-------------- -------- -------- --------- -------- -------- -------- ---------
Gold (oz) 268,104 215,892 24.2 219,840 935,513 761,712 22.8
-------------- -------- -------- --------- -------- -------- -------- ---------
Lead (t) 13,003 12,675 2.6 12,473 48,144 42,413 13.5
-------------- -------- -------- --------- -------- -------- -------- ---------
Zinc (t) 16,989 14,625 16.2 14,476 56,845 46,022 23.5
-------------- -------- -------- --------- -------- -------- -------- ---------
Full year silver production (including Silverstream) increased
7.1% vs. 2015 as a result of: i) the start-up of operations at San
Julián phase I that increased the nominal milling capacity from
3,000 tonnes per day (tpd) to 3,600 tpd; ii) higher silver ore
grades at Ciénega as a result of high grade development ore from
the Rosario and Las Casas areas; iii) higher ore grade at Fresnillo
due to the regained access to high ore grade areas at San Carlos
and San Alberto; and iv) higher production at Sabinas
(Silverstream) resulting from a higher ore grade.
Quarterly silver production (including Silverstream) increased
9.5% vs. 4Q15 as a result of the start-up of San Julián (phase I)
and, to a lesser extent, a higher ore grade at Ciénega. This more
than compensated for the expected lower silver ore grade at Saucito
and the lower ore processed at Fresnillo.
Quarterly silver production increased 13.1% vs. 3Q16 as a result
of: i) the ramp-up of San Julián (phase I); ii) increased ore
throughput at Saucito from the West and Central Jarillas areas,
and; iii) higher ore grade and ore processed at Fresnillo due to
additional contractors and tightened supervision in the maintenance
process.
In 2017, silver production is expected to reach 54-57 moz
(excluding the Silverstream) reflecting the first full year of
operations of phase I at San Julián, commissioning of phase II of
San Julián, and an increase in production at Fresnillo reflecting
access to additional stopes.
Full year gold production increased 22.8% vs. 2015 as a result
of the reduction of inventories in the leaching pads at Herradura,
to 72 koz, the start-up of phase I at San Julián, and higher speeds
of recovery at Noche Buena. These factors more than compensated for
the expected lower ore grade and ore processed at Ciénega.
Quarterly gold production increased 24.2% vs. Q415 as a result
of the reduction of inventories at Herradura, the start-up of San
Julián (phase I), and higher ore grade and ore processed at
Saucito. These more than compensated for the lower overall average
speed of recovery at Noche Buena.
Quarterly gold production increased 22.0% vs. 3Q16 as a result
of the reduction of inventories at Herradura, the successful
ramp-up of San Julián (phase I), and higher ore grade and ore
processed at Saucito.
In 2017, gold production is anticipated to be between 870-900
koz as no further reductions of inventories at Herradura are
expected.
Full year by-product lead production increased vs. 2015 as a
result of higher ore grades at the Ciénega and Fresnillo mines.
Quarterly by-product lead production increased 4.2% vs. 3Q16 as a
result of higher ore processed and a higher ore grade at Saucito
and Ciénega which compensated for the lower ore grade at
Fresnillo.
Full year and quarterly by-product zinc production both
increased when compared to the same periods in 2015 as a result of
higher ore grades and recovery rates at Ciénega and Fresnillo.
Additionally, the higher recovery rate and ore throughput at
Saucito also contributed to the increased zinc production.
Quarterly by-product zinc production increased 17.4% vs. 3Q16
due to higher ore grades, ore processed and recovery rates at
Saucito and Fresnillo.
Fresnillo mine production
4Q 4Q 3Q YTD YTD
16 15 % change 16 16 15 % change
--------------- -------- -------- --------- -------- ---------- ---------- ---------
Ore Processed
(t) 595,963 620,412 -3.9 587,492 2,373,092 2,410,033 -1.5
--------------- -------- -------- --------- -------- ---------- ---------- ---------
Production
--------------- -------- -------- --------- -------- ---------- ---------- ---------
Silver
(koz) 3,847 4,058 -5.2 3,732 15,865 15,612 1.6
--------------- -------- -------- --------- -------- ---------- ---------- ---------
Gold (oz) 10,678 10,435 2.3 11,111 42,421 34,120 24.3
--------------- -------- -------- --------- -------- ---------- ---------- ---------
Lead (t) 5,766 5,277 9.3 6,017 21,326 16,248 31.3
--------------- -------- -------- --------- -------- ---------- ---------- ---------
Zinc (t) 7,718 6,172 25.0 7,228 25,898 19,029 36.1
--------------- -------- -------- --------- -------- ---------- ---------- ---------
Ore Grades
--------------- -------- -------- --------- -------- ---------- ---------- ---------
Silver
(g/t) 221 222 -0.5 217 227 220 3.0
--------------- -------- -------- --------- -------- ---------- ---------- ---------
Gold (g/t) 0.73 0.68 6.4 0.77 0.73 0.57 26.5
--------------- -------- -------- --------- -------- ---------- ---------- ---------
Lead (%) 1.05 0.94 12.2 1.13 0.99 0.75 32.4
--------------- -------- -------- --------- -------- ---------- ---------- ---------
Zinc (%) 1.78 1.46 22.2 1.72 1.56 1.18 31.6
--------------- -------- -------- --------- -------- ---------- ---------- ---------
Full year silver production increased slightly compared to 2015
as a result of access to higher grade veins at the San Carlos and
San Alberto areas.
Quarterly silver production decreased vs. 4Q15 due mainly to
lower ore processed, reflecting delays in accessing higher grade
zones due to slower than expected development rates. In 4Q15,
silver production saw an increase as a result of the initial
measures taken to address the issues at this mine.
Additional skilled contractors have been brought in and
operative supervision has been tightened to improve the maintenance
process, increasing equipment availability and the preparation of
several areas allowing for access to additional stopes. These
changes started to show positive results with quarterly silver
production increasing 3.1% vs. 3Q16.
We expect that with continued hiring and training of personnel,
development rates will increase to 4,500 m/month again in 2017 and
reach a sustained rate of 4,800 m/month by year-end. As a result,
an increase in ore throughput of approximately 5% and an average
silver ore grade of around 230 g/t are expected in 2017.
Full year and quarterly by-product gold production increased
24.3% and 2.3% respectively when compared to the same periods of
2015 as a result of higher ore grades. However, quarterly
by-product gold production decreased 3.9% vs. 3Q16 due to a lower
ore grade.
Annual and quarterly by-product lead production increased 31.2%
and 9.3%, respectively when compared to the same periods of 2015
mainly as a result of higher ore grades. Quarterly by-product lead
production decreased 4.2% vs. 3Q16 as a result of a lower ore grade
which was partially offset by an increase in ore processed and the
recovery rate.
Full year and quarterly by-product zinc production increased
36.1% and 25.0% vs. the same periods of 2015 due to higher ore
grades and recovery rates. Similarly, quarterly by-product zinc
production increased 6.8% vs. 3Q16 due to the higher ore grade, ore
processed and recovery rate.
Saucito mine production
4Q 4Q 3Q YTD YTD
16 15 % change 16 16 15 % change
--------------- -------- -------- --------- -------- ---------- ---------- ---------
Ore Processed
(t) 709,261 613,496 15.6 642,040 2,635,093 2,339,096 12.7
--------------- -------- -------- --------- -------- ---------- ---------- ---------
Production
--------------- -------- -------- --------- -------- ---------- ---------- ---------
Silver
(koz) 5,336 5,851 -8.8 4,903 21,946 21,984 -0.2
--------------- -------- -------- --------- -------- ---------- ---------- ---------
Gold (oz) 25,160 20,958 20.1 19,216 86,198 84,884 1.5
--------------- -------- -------- --------- -------- ---------- ---------- ---------
Lead (t) 5,802 5,903 -1.7 5,133 20,935 20,740 0.9
--------------- -------- -------- --------- -------- ---------- ---------- ---------
Zinc (t) 7,379 6,810 8.4 5,324 23,498 21,023 11.8
--------------- -------- -------- --------- -------- ---------- ---------- ---------
Ore Grades
--------------- -------- -------- --------- -------- ---------- ---------- ---------
Silver
(g/t) 287 332 -13.5 289 303 327 -7.6
--------------- -------- -------- --------- -------- ---------- ---------- ---------
Gold (g/t) 1.53 1.33 14.6 1.31 1.39 1.42 -2.7
--------------- -------- -------- --------- -------- ---------- ---------- ---------
Lead (%) 1.02 1.10 -7.3 0.94 0.93 1.01 -7.7
--------------- -------- -------- --------- -------- ---------- ---------- ---------
Zinc (%) 1.68 1.91 -11.9 1.41 1.49 1.70 -12.6
--------------- -------- -------- --------- -------- ---------- ---------- ---------
Full year silver production decreased marginally compared to
2015 as a result of the expected return to normal ore grades after
mining the extraordinarily high grade ore from the Mesquite vein
and exhausting the high grade development ore in 2015. These were
offset by higher ore processed (+12.7%) from the Jarillas West and
Central areas in conjunction with increased plant capacity
following the installation of the vibrating screens at the Saucito
II plant in 1Q16.
Quarterly silver production decreased 8.8% vs. 4Q15 as a result
of the lower ore grade and recovery rate due to the previously
mentioned factors. These were offset by higher ore processed.
Quarterly silver production increased 8.8% vs. 3Q16 primarily
due to the higher ore processed from the West and Central Jarillas
areas in conjunction with plant efficiencies.
In 2017, the silver ore grade is expected to average around 290
g/t.
Quarterly by-product gold production increased 20.1% vs. 4Q15
and by 30.9% vs. 3Q16 due to higher ore grades and increased ore
throughputs.
Quarterly by-product lead production increased 13.0% vs. 3Q16
due to a higher grade and ore processed which were partially offset
by a lower recovery rate.
Full year and quarterly by-product zinc production increased
11.8% and 8.4% vs. 2015 respectively due to higher recovery rates
and ore processed. Similarly, quarterly by-product zinc production
increased 38.6% vs. 3Q16 due to higher recovery rate, ore processed
and grade.
Ciénega mine production
4Q 4Q 3Q YTD YTD
16 15 % change 16 16 15 % change
--------------- -------- -------- --------- -------- ---------- ---------- ---------
Ore Processed
(t) 327,416 329,444 -0.6 305,474 1,274,939 1,329,364 -4.1
--------------- -------- -------- --------- -------- ---------- ---------- ---------
Production
--------------- -------- -------- --------- -------- ---------- ---------- ---------
Gold (oz) 17,583 20,007 -12.1 18,372 72,851 85,662 -15.0
--------------- -------- -------- --------- -------- ---------- ---------- ---------
Silver
(koz) 1,298 1,251 3.8 1,320 5,131 4,828 6.3
--------------- -------- -------- --------- -------- ---------- ---------- ---------
Lead (t) 1,435 1,495 -4.0 1,323 5,883 5,425 8.4
--------------- -------- -------- --------- -------- ---------- ---------- ---------
Zinc (t) 1,892 1,642 15.2 1,925 7,450 5,970 24.8
--------------- -------- -------- --------- -------- ---------- ---------- ---------
Ore Grades
--------------- -------- -------- --------- -------- ---------- ---------- ---------
Gold (g/t) 1.74 1.96 -11.2 1.94 1.84 2.07 -11.2
--------------- -------- -------- --------- -------- ---------- ---------- ---------
Silver
(g/t) 143 134 6.0 154 143 129 11.2
--------------- -------- -------- --------- -------- ---------- ---------- ---------
Lead (%) 0.66 0.66 0.7 0.65 0.68 0.61 11.9
--------------- -------- -------- --------- -------- ---------- ---------- ---------
Zinc (%) 0.99 0.91 8.4 1.04 1.00 0.80 26.1
--------------- -------- -------- --------- -------- ---------- ---------- ---------
Full year and quarterly gold production decreased compared to
the same periods in 2015 as a result of: i)- an expected lower ore
grade due to the depletion of higher grade ore veins and increased
dilution from narrower veins at the East and West areas, and ii)
lower ore processed resulting from the extraction of harder mineral
from the Rosario, Las Casas and Carmen areas.
Quarterly gold production decreased 4.3% vs. 3Q16 due to a lower
ore grade resulting mainly from temporary development delays
limiting access to richer stopes at the Taspana vein. This was
partly offset by a higher volume of ore processed.
In 2017, the average gold ore grade is expected to be around 1.9
g/t.
Annual silver production increased compared to 2015 as a result
of higher ore grades from the Rosario and Las Casas areas. This was
partly offset by lower ore processed. Similarly, quarterly silver
production increased vs. 4Q15 as a result of a higher ore
grade.
The average silver ore grade in 2017 is expected to be around
140 g/t.
Full year by-product lead production increased vs. 2015 as a
result of the higher ore grade which compensated for the lower ore
processed. However, quarterly by-product lead production decreased
vs. 4Q15 mainly due to the lower recovery rate.
Quarterly by-product lead production increased vs. 3Q16 due to
an increase in ore processed.
Annual and quarterly by-product zinc production increased when
compared to the same periods in 2015 as a result of higher ore
grades and recovery rates which compensated for the lower volume of
ore processed.
Herradura mine production
4Q 4Q 3Q YTD YTD
16 15 % change 16 16 15 % change
--------------- ----------- ----------- --------- ----------- ------------ ------------ ---------
Ore Processed
(t) 6,325,705 6,616,148 -4.4 6,208,336 25,158,600 22,875,421 10.0
--------------- ----------- ----------- --------- ----------- ------------ ------------ ---------
Total Volume
Hauled (t) 29,821,575 30,115,575 -1.0 28,255,782 118,841,295 117,033,171 1.5
--------------- ----------- ----------- --------- ----------- ------------ ------------ ---------
Production
--------------- ----------- ----------- --------- ----------- ------------ ------------ ---------
Gold (oz) 148,549 115,127 29.0 123,258 520,366 398,866 30.5
--------------- ----------- ----------- --------- ----------- ------------ ------------ ---------
Silver (koz) 173 166 4.2 161 638 526 21.3
--------------- ----------- ----------- --------- ----------- ------------ ------------ ---------
Ore Grades
--------------- ----------- ----------- --------- ----------- ------------ ------------ ---------
Gold (g/t) 0.68 0.72 -5.4 0.78 0.71 0.73 -2.9
--------------- ----------- ----------- --------- ----------- ------------ ------------ ---------
Silver (g/t) 1.13 1.23 -8.1 1.27 1.16 1.24 -7.0
--------------- ----------- ----------- --------- ----------- ------------ ------------ ---------
Full year gold production increased when compared to 2015 as a
result of the reduction of inventories to 72 koz at Herradura. This
reduction was possible by the commissioning of the second Merrill
Crowe Plant in the DLP (Dynamic Leaching Plant) in 4Q15, which
enabled the elimination of the bottleneck in processing volumes of
rich solution coming from the leaching pads and the DLP.
Quarterly gold production increased vs. both 4Q15 and 3Q16
mainly due to the reduction of inventories and, to a lesser extent,
a higher overall average speed of recovery resulting from the
increase in the use of lime that improved the leaching reaction and
more than compensated for the lower ore grade.
The average gold ore grade is expected to be around 0.72 g/t in
2017.
Noche Buena mine production
4Q 4Q 3Q YTD YTD
16 15 % change 16 16 15 % change
--------------- ----------- ----------- --------- ----------- ----------- ----------- ---------
Ore Processed
(t) 4,380,536 4,370,888 0.2 4,464,960 17,431,718 17,399,931 0.2
--------------- ----------- ----------- --------- ----------- ----------- ----------- ---------
Total Volume
Hauled (t) 20,521,024 19,949,209 2.9 20,609,275 81,422,716 82,373,385 -1.2
--------------- ----------- ----------- --------- ----------- ----------- ----------- ---------
Production
--------------- ----------- ----------- --------- ----------- ----------- ----------- ---------
Gold (oz) 41,769 49,365 -15.4 40,850 182,280 158,179 15.2
--------------- ----------- ----------- --------- ----------- ----------- ----------- ---------
Silver (koz) 11 11 0.0 6 33 73 -54.8
--------------- ----------- ----------- --------- ----------- ----------- ----------- ---------
Ore Grades
--------------- ----------- ----------- --------- ----------- ----------- ----------- ---------
Gold (g/t) 0.53 0.49 8.3 0.53 0.51 0.50 3.8
--------------- ----------- ----------- --------- ----------- ----------- ----------- ---------
Silver (g/t) 0.14 0.13 6.3 0.10 0.11 0.19 -39.3
--------------- ----------- ----------- --------- ----------- ----------- ----------- ---------
Full year gold production increased vs. 2015 due to a higher
overall average speed of recovery resulting from new mineral layers
at the leaching pads. Nevertheless, quarterly gold production
decreased vs. 4Q15 as a result of a lower overall average speed of
recovery due to the slower leaching recovery dynamic of the ore
mined in the second half of 2016 which was partly offset by the
higher ore grade.
Quarterly gold production slightly increased vs. 3Q16 as a
result of a higher overall average speed of recovery.
In 2017, the average ore grade is expected to be around 0.49
g/t.
San Julián
4Q 3Q YTD
16 16 % change 16
--------------- -------- -------- --------- --------
Ore Processed
(t) 301,235 121,833 147.3 423,069
--------------- -------- -------- --------- --------
Production
--------------- -------- -------- --------- --------
Gold (oz) 24,365 7,032 246.5 31,397
--------------- -------- -------- --------- --------
Silver (koz) 1,581 485 226.1 2,066
--------------- -------- -------- --------- --------
Ore Grades
--------------- -------- -------- --------- --------
Gold (g/t) 2.67 1.96 36.0 2.47
--------------- -------- -------- --------- --------
Silver (g/t) 181.33 150.53 20.5 172.46
--------------- -------- -------- --------- --------
The leaching plant at San Julián has been in operation since
mid-August 2016 and has since surpassed its 3,000 tonnes per day
(tpd) nominal milling capacity, reaching 3,600 tpd. As a result of
the ramp-up, silver and gold production were 2.1 moz and 31 koz,
respectively, in 2016. In 2017, with the additional optimisation
projects, milling capacity at the leaching plant is expected to
further increase to 4,000 tpd.
We remain confident the commissioning of the flotation plant
(phase II) will take place in the second quarter of 2017 as
previously announced. During 4Q16, good progress was made on the
grinding bay structure while construction of the main conveyor belt
and thickeners, electric installation of the pumps and flotation
cells were all concluded.
Total pre-operative investment for both phases I & II of the
San Julián silver-gold project is expected to be in line with our
guidance of US$515 million. Once phase II has been commissioned,
and reached full capacity like phase I, the mine will have an
average annual life of mine production of 10.3 moz of silver and 44
koz of gold.
Update on development projects
Pyrites Plant
During 4Q16 detailed engineering was concluded and further
progress of the leaching plant construction is anticipated in 2017.
This US$155 million project is expected to increase overall
recoveries of gold and silver by processing historical and ongoing
tailings from the Fresnillo and Saucito mines, which otherwise
would have been lost. Annual production of 3.5 moz of silver and 13
koz of gold is expected once the plant is commissioned in 1H18 and
reaches full capacity.
Second Dynamic Leaching Plant
Detailed engineering continued to progress, the foundations of
the milling area advanced, and orders for various components were
also placed. The construction of this new plant will continue
throughout 2017 with commissioning expected in 2018.
This US$110 million project will enable sulphides occurring
deeper in the pit to be processed more efficiently and is expected
to be commissioned in 2018. As a result, the life of mine at
Herradura will be extended to 12 years with an average life of mine
annual gold production of 390 koz.
Update on Exploration
Exploration in the fourth quarter was focused on our Herradura,
Fresnillo, Ciénega and San Julián mining Districts, and the
Guanajuato, Rodeo, Candameña and Pilarica projects. Resources and
reserves (in the case of the operating mines) were increased and
are presently in audit by SRK. Results will be disclosed in the
first quarter of 2017. Parametric drilling was also carried out at
the Guazapares, Coneto and Cairo early stage prospects. Diamond
drilling at these mines, projects and prospects totalled 214,206
metres in the period.
Channel sampling and a revision of the resource models were
conducted at the Orisyvo and Centauro gold deposits where
preliminary economic studies will be advanced in 2017. Five project
submittals were evaluated in Mexico, Peru, Chile and Argentina, and
systematic prospecting of gold-silver belts in the same regions are
in progress.
Safety Performance
We deeply regret to report that during 4Q16 one of our
contractors suffered a fatal accident at the Saucito mine. We
continue to reinforce our safety measures, with our management
systems and organisational programmes centered on personnel safety.
We remain committed to our zero fatalities target.
Update on Taxation
On 31 December 2016, the State of Zacatecas, located in northern
Mexico, published a new tax law (the "Tax Law") that came into
effect on 1 January 2017.
The Tax Law includes a new set of 'environmental taxes' relating
to the following activities undertaken within the State of
Zacatecas:
(i) the extraction of materials other than minerals referenced
in Article 4 of the Mexican Mining Law (gold, silver, lead, zinc,
etc.) from the soil and sub-soil through open-pit processes;
(ii) the emissions of certain substances into the atmosphere;
(iii) the deposit of contaminants into the soil;
(iv) the storage of waste in public or private landfills.
In addition, the Tax Law also includes certain other
modifications and adjustments to pre-existing taxes in Zacatecas
such as the payroll tax and the tax for the University of
Zacatecas.
Together with its internal and external advisors, the Company is
conducting a full assessment of the detail of the Tax Law as well
as its potential impact on the Company. To date, as a result of
this review, the Company believes that there are solid grounds to
legally challenge, on a Federal level, the imposition of the
environmental taxes contained in the new Tax Law in Zacatecas. The
Company is currently formulating an appropriate defence strategy
and will keep the market updated with any material
developments.
Based on current assessments, the Company estimates that the
potential net impact on the Company's income statement of the new
taxes referenced above, if legal challenges should not prove
successful, would be in the range of USD $4 - $7 million for the
2017 fiscal year.
The Company remains in compliance with all applicable
environmental regulations and is fully committed to operating in a
sustainable way.
Exceptional items affecting the full year financial
statements
Ahead of the release of the Company's Full Year Results on 28th
February 2017, and in order to facilitate the estimation of the
full year financial results, we are providing guidance on the
impact of material changes in gold and silver prices as well as the
Mexican peso/US dollar exchange rate on our financial results.
These variables are expected to impact some non operating/non-cash
items in the Company's full year financial results. The Gold
Hedging position and the Foreign Exchange Result will be adversely
impacted, whilst the Silverstream Revaluation will benefit; the net
gain from these three items is estimated to be in the range of USD
$70 - $75 million before taxes. These same variables also impacted
the deferred taxes, both favourably and unfavourably. As a result,
we are expecting an effective tax rate of around 45% - 47% for the
full year (including the special mining rights).
For further information, please visit our website
www.fresnilloplc.com or contact:
Fresnillo plc Tel: +44 (0)20 7399
London Office 2470
Gabriela Mayor, Head
of Investor Relations
Patrick Chambers
Mexico City Office Tel: +52 55 52 79 3206
Ana Belem 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 second largest gold producer, listed on the London and
Mexican Stock Exchanges under the symbol FRES.
Fresnillo plc has six operating mines, all of them in Mexico -
Fresnillo, Saucito, Ciénega (including the San Ramón satellite
mine), Herradura, Soledad-Dipolos(1) and Noche Buena, 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 2 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.
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.
(1) Operations at Soledad-Dipolos are currently suspended.
This information is provided by RNS
The company news service from the London Stock Exchange
END
DRLKZLFLDFFEBBX
(END) Dow Jones Newswires
January 25, 2017 02:00 ET (07:00 GMT)
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