REG - Fresnillo Plc - Final Results for the year ended 31 December 2024
04/03/2025 07:15
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RNS Number : 2570Z Fresnillo PLC 04 March 2025
Fresnillo plc
Financial results for the year ended 31 December 2024
Fresnillo plc today announced its financial results for the full year ended 31
December 2024.
Octavio Alvídrez, CEO said:
"I am pleased to report a solid financial performance for Fresnillo in 2024,
underpinned by higher precious metal prices, operational discipline, and a
continued focus on cost efficiencies. This result is testament to the hard
work and diligence of our teams on the ground, who have delivered another year
of operational consistency.
"Our adjusted revenue grew by 26.9% to US$3.64 billion, while EBITDA more than
doubled to US$1.55 billion, reflecting our ability to capitalise on market
conditions and drive efficiencies across our operations. As a result of this
strong financial performance, and in line with our dividend policy, we are
returning US$192.3 million to shareholders as final ordinary dividend and an
additional US$308.0 million as a one-off special dividend. These, together
with the interim ordinary dividend, bring Fresnillo's total distribution to
shareholders for 2024 to US$547.5 million, our highest return
"Operationally, we delivered silver production in line with guidance and gold
production slightly ahead, with lead and zinc production also up strongly over
the year. Meanwhile, we have made significant strides in improving
efficiencies, optimising mine plans, and advancing key projects, including the
full commissioning of the San Carlos shaft at our Fresnillo mine.
"Looking ahead, we remain committed to responsible growth with the safety of
our people at its heart, further cost optimisation, and advancing our
exploration pipeline to ensure long-term value creation for our stakeholders.
Our financial position remains strong, with a net cash position of $458.3
million, allowing us to continue investing in the future while delivering
returns to shareholders."
Financial Highlights - 12 months to 31 December 2024
$ million unless stated 2024 2023 % change
Silver Production(1) (kOz) 56,307 56,282 0.0
Gold Production(1) (Oz) 631,573 610,646 3.4
Total Revenue 3,496.4 2,705.1 29.3
Adjusted Revenue(2) 3,639.9 2,869.1 26.9
Gross Profit 1,246.3 503.2 147.7
EBITDA(3) 1,547.3 655.7 136.0
Profit Before Income Tax 743.9 114.0 552.5
Profit for the year 226.7 288.3 (21.4)
Basic and Diluted EPS excluding post-tax Silverstream effects (USD)(4) 0.364 0.310 17.4
1 Fresnillo attributable production, plus ounces registered in production
through the Silverstream Contract.
2 Adjusted Revenue is revenue as disclosed in the income statement adjusted to
exclude treatment and refining charges and lead and zinc hedging.
3 Earnings before interest, taxes, depreciation and amortisation (EBITDA) is
calculated as gross profit plus depreciation less administrative, selling and
exploration expenses. The reconciliation of EBITDA to amounts determined in
accordance with IFRS can be found in the Financial Review.
4. The weighted average number of ordinary shares was 736,893,589 for 2024 and
2023. See note 18 in the consolidated financial statements.
2024 Highlights
Increased profit margins and strong financial position underpinned by higher
precious metal prices, operational discipline and focus on costs
· Adjusted revenue of US$3,639.9 million, up 26.9% vs 2023 primarily
due to the higher precious metals prices and higher volumes of all metals
sold.
· Revenue of US$3,496.4 million, up 29.3% vs 2023 driven by the
increase in adjusted revenue and lower treatment and refining charges.
· Adjusted production costs(1) of US$1,582.2 million, down 2.6% vs 2023
primarily driven by the efficiencies and economies of scale achieved and the
favourable effect of the devaluation of the Mexican peso vs. US dollar, partly
offset by cost inflation.
· Gross profit of US$1,246.3 million, up 147.7%; EBITDA2 of US$1,547.3
million, up 136.0%.
· Exploration expenses of US$163.0 million, down 10.6%.
· Profit from continuing operations of US$945.8 million, up 563.8%.
as a result of higher gross profit and lower administrative and exploration
expenses.
· Silverstream revaluation loss, net of its amortisation and before
taxes, of US$182.3 million as a result of the initial assessment of the
possible implication of the operational and financial difficulties at the
Sabinas mine on the Silverstream Agreement.
· Income tax expense and mining rights of US$390.2 million and
US$127.0 million, compared negatively to the tax income of US$205.0 million
and mining rights of US$30.8 million in 2023, primarily as a result of the
impact of the 20.0% devaluation of the spot Mexican peso/US dollar on the tax
value of assets and liabilities in 2024.
· Profit for the year attributable to equity shareholders of the Group
of US$140.9 million, down 39.8% on 2023.
· US$1,297.8 million in cash and other liquid funds as of 31 December
2024. Net cash position of US$458.3 million as of 31 December 2024.
· Final ordinary dividend of 26.1 cents per share, amounting to
US$192.3 million.
· One-off special dividend of 41.8 cents per share, amounting to
US$308.0 million.
Total 2024 dividend payment of 32.5 US cents per share, or US$239.5 million,
plus a one-off special dividend of 41.8 US cents per share amounting to
US$308.0 million.
· Final ordinary dividend of 26.1 US cents per share, amounting to
US$192.3million. This is in addition to the 2024 interim ordinary dividend of
6.4 US cents per share, amounting to US$47.2 million, which was paid in
September 2024 and represented 1/3 of the expected total dividend for 2024.
This brings the total ordinary dividend for the year to 32.5 US cents per
share, amounting to US$239.5 million. This is in line with the Group's
dividend policy to pay out 33-50% of the profit attributable to equity
shareholders of the company after making certain customary adjustments to
exclude extraordinary non-cash effects in the income statement.
· One-off special dividend of 41.8 US cents per share, equivalent to
US$308.0 million which will also be payable on 30 May 2025 to shareholders on
the register as at 22 April 2025. This decision was made after a comprehensive
review of the Group's financial position, its strong balance sheet and took
into consideration the positive free cash flow that the Group is expecting to
generate in the coming years.
1 Adjusted production costs are calculated as cost of sales less depreciation,
profit sharing, hedging, change in inventories and unproductive costs. The
Company considers this a useful additional measure to help understand
underlying factors driving production costs in terms of the different stages
involved in the mining and plant processes, including efficiencies and
inefficiencies as the case may be and other factors outside the Company's
control such as cost inflation or changes in accounting criteria.
2 Earnings before interest, taxes, depreciation and amortisation (EBITDA) is
calculated as profit for the year from continuing operations before income
tax, less finance income, plus finance costs, less foreign exchange
gain/(loss), less revaluation effects of the Silverstream contract and other
operating income plus other operating expenses and depreciation.
Consistent operating performance with silver in line and gold slightly ahead
of guidance
· Full year attributable silver production of 56.3 moz (including
Silverstream) in line with guidance and flat vs 2023 as the higher ore grades
and increased volumes of ore processed at San Julián Veins and Saucito and,
the higher contribution of Juanicipio were offset by the decreased production
at San Julián DOB as it approached the end of its life, and lower
contribution from Fresnillo and the Silverstream agreement.
· Full year attributable gold production of 631.6koz, up 3.4% vs. FY23
mainly due to the higher ore grade at Fresnillo and increased ore processed
and higher ore grades at Saucito and San Julián Veins.
· Full year attributable by-product lead and zinc production up 14.8%
and 8.3% vs. FY23 respectively, mainly due to higher ore grades at Fresnillo
and Juanicipio and increased volume of ore processed and higher lead ore grade
at Saucito, partly offset by the decreased contribution from San Julián DOB.
Ongoing focus on operational improvement and projects that will increase
efficiencies
· US$40.0 million in efficiencies and cost savings achieved, including
efforts to rationalise the contractor base and increase the efficiency of the
maintenance process across the Group.
· The connection of the two sections of the San Carlos shaft at
Fresnillo was concluded and is fully operational, with reductions in haulage
costs expected from 2025. Development rates increased to an average of 3,236
metres per month.
· At Saucito, the project to deepen the Jarillas shaft from 630m to
1,000m progressed with completion expected in 2027.
· Optimised plant operation at San Julián veins, together with
improvements to the mine plan, enabled it to deliver a solid operational and
cost performance.
· The reassessment of the strategic mine plan at Herradura progressed
and identified several optimisation projects that have been compiled in an
Operational Excellence programme, with phase one implemented in 2024.
Continued progress at our advanced exploration projects and promising
exploration results
· Silver resources increased 1.4% vs 2023 to 2.25bn oz due to
additional drill hole information and revised economic assumptions at the
Guanajuato and Lucerito exploration projects and the Fresnillo mine, partly
offset by depletion at most of our mines.
· Gold resources increased 1.4% vs 2023 to 38.5 moz primarily driven by
the positive exploration results at Guanajuato, Lucerito and Candameña,
partly offset by depletion at our underground mines.
· Proven reserves were reported at all mines.
· Silver reserves decreased 7.1% vs 2023, mainly driven by mining
depletion and a more conservative approach to reserve estimation at San
Julián and Ciénega.
· Gold reserves increased 2.5% vs 2023, mostly due to the higher price,
and cut-off grades strategy at Herradura.
· Several pre-feasibility level studies were completed at Orisyvo and
are currently under review.
· Conceptual studies continued at Tajitos and a preliminary economic
assessment is in progress.
· Resources increased at Guanajuato and a preliminary economic
assessment of priority areas is ongoing.
· Long-term land access with local communities was reached at Rodeo and
drilling resumed, albeit in the last quarter.
Further improvement in the sustainability of our operations
· Improved TRIFR to 7.59 and decreased Fatality Frequency Rate to
0.044.
· Increased proportion of municipal wastewater consumption to 30.2%.
· Increased our electricity supply from renewable sources from 53.3% in
2023 to 80.6% in 2024.
· Generated a positive economic impact 1 of US$2,152.5 million in
2024.
2025 outlook and longer term prospects
· Attributable silver production expected to be in the range of 49.0 to
56.0 moz (including Silverstream).
· Attributable gold production expected to be in the range of 525 to
580 koz.
· Expressed in silver equivalent ounces(1), production is expected to
be 91-102 million ounces.
· Capex for 2025 is anticipated to be approximately US$530 million and
will continue to be primarily focused on mining works, sustaining capex, the
deepening of the Jarillas shaft at Saucito and a haulage conveyor at
Juanicipio.
· Exploration expenses are expected to be c.US$190 million, maintaining
our strategy to intensify exploration activities in specific target areas.
· Continue to monitor costs closely and capture further efficiencies
where possible.
· Continue working towards reducing our TRIFR and Fatality rate to the
ICMM range by 2026.
Board Committee changes
Fresnillo plc announces that its Board of Directors, on the recommendation of
the Nomination Committee has approved changes to the composition of the Audit
and Remuneration Committees effective as at today, 4 March 2025.
Ms Rosa Vázquez has been appointed as an additional member of the Audit
Committee and Ms Georgina Kessel has been appointed as an additional member of
the Remuneration Committee. Ms Vázquez and Ms Kessel are currently
Independent Non-Executive Directors.
Ms Vázquez has proven previous experience in risk, audit and oversight
committees and the Board believes that she brings valuable insight to the work
of the Audit Committee.
Ms Georgina Kessel's experience in the finance sector will bring additional
skills and relevant experience to the Remuneration Committee. As part of
this change, Ms Kessel will step down as a member of the Health, Safety,
Environment and Community Relations (HSECR) Committee.
Analyst Presentation
Fresnillo plc will be hosting a webcast presentation for analysts and
investors today at 9:00am (GMT). A link to the webcast will be made available
on Fresnillo's homepage: www.fresnilloplc.com (http://www.fresnilloplc.com) or
can be accessed directly here:
https://sparklive.lseg.com/Fresnillo/events/294a5f20-2bb7-4365-8dca-b7a2a299ac12/fresnillo-fy24-prelim-results
(https://sparklive.lseg.com/Fresnillo/events/294a5f20-2bb7-4365-8dca-b7a2a299ac12/fresnillo-fy24-prelim-results)
Event registration: https://registrations.events/direct/LON387064
(https://registrations.events/direct/LON387064)
For further information, please visit our website: www.fresnilloplc.com
(http://www.fresnilloplc.com) or contact:
Fresnillo plc
London Office Tel: +44(0)20 7339 2470
Gabriela Mayor, Head of Investor Relations
Mark Mochalski
Mexico City Office Tel: +52 55 52 79 3206
Ana Belém Zárate
Sodali Tel: +44(0)7793 858 211
Peter Ogden
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 eight operating mines, all of them in Mexico - Fresnillo,
Saucito, Juanicipio, Ciénega, Herradura, Soledad-Dipolos(1) and San Julián
Veins and four advanced exploration projects - Orisyvo, Rodeo, Guanajuato and
Tajitos as well as a number of other long term exploration prospects.
Fresnillo plc has mining concessions and exploration projects in Mexico, Peru
and Chile.
Fresnillo plc's goal is to maintain the Group's position as the world's
largest primary silver company and Mexico's largest gold producer.
( )
(1) Operations at Soledad-Dipolos are currently suspended
Chairman's statement
Alejandro Baillères
Shaping our business for the opportunities and challenges ahead
This year we delivered a welcome increase in profitability as our positive
production performance was complemented by high silver and gold prices. While
we expect to continue facing challenges in the years ahead, the encouraging
attitude towards mining shown by the new administration in Mexico, coupled
with our own operational efficiencies and exciting project pipeline, are
sources for cautious optimism.
Throughout our history, Fresnillo plc has proudly built a track record of
managing the setbacks associated with mining and weathering storms not of our
own making. Never was that resilience more relevant than in 2024, when our
teams rose to the production challenges posed by rising costs and a range of
operational issues, including decreasing ore grades. In addition, the
possibility of greater regulation and a political climate not well disposed
towards mining cast a shadow over our industry.
To have achieved the results outlined in this report is little short of
outstanding, and I would like to pay tribute to the management and operating
teams who worked hard to ensure that we delivered an excellent performance
that repays the trust and support that all our stakeholders have placed in our
company.
Steady production despite difficulties
Silver production was in line with our guidance for the year, while production
of gold was marginally above the top end of guidance. Key factors affecting
silver production included good performances at San Julián Veins, Saucito and
Juanicipio, which helped to offset lower output at San Julián DOB and
Fresnillo. Gold production rose on the back of a strong increase in production
at Fresnillo, Saucito and San Julián Veins, as well as an effective
turnaround at La Herradura following heavy rains and changes to the mine
sequence.
The cost reductions and operational efficiencies we have introduced in our
mines are yielding results in line with - or in some cases ahead of - our
expectations. Perhaps the greatest example of turnaround has been at Ciénega,
where both performance and prospects have been transformed. At the start of
the year we believed that the mine had only a limited future, but the
situation today could not be more different due to the successful execution of
a high-quality plan. We have seen excellent results and positive cashflow,
with exploration activities opening up new areas that have the potential to
contribute to production in both the short and long term.
We achieved US$3,639.9 million in adjusted revenue during the year. This
represented an increase of 26.9%, primarily due to the increase in silver and
gold prices, supported by our positive production performance, which
represented 19.2% of the increase. Gross profit more than doubled, with an
increase of 147.7% year-on-year to US$1,246.3 million, mainly driven by higher
adjusted revenue and decreased costs, primarily due to cost reduction
initiatives and efficiencies and, to a lesser degree, by the effect of a
weaker Mexican peso vs US dollar exchange rate. These factors partially offset
inflationary headwinds during the year. Cash and other liquid funds increased
from US$534.6 million to US$1,297.8 million primarily driven by cash generated
from our mining operations, which more than offset the use of funds in capital
expenditure and dividend payments.
Our well-established and respected dividend policy, which is the basis for
continued shareholder returns, remains unchanged. We aim to pay out 33-50% of
profit after tax each year, while making certain adjustments to exclude
non-cash effects in the income statement. Dividends are paid in the
approximate ratio of one-third as an interim dividend and two-thirds as a
final dividend. Before declaring a dividend, the Board carries out a detailed
analysis of the profitability of the business, underlying earnings, capital
requirements and cash flow. Our goal is to maintain enough flexibility to be
able to react to movements in precious metals prices and seize attractive
business opportunities.
For 2024, we declared an interim ordinary dividend of 6.4 US cents per share,
with a final ordinary dividend of 26.1 US cents per share, bringing the total
for the year to 32.5 US cents per share.
Following a comprehensive review of the Group's financial position, its strong
balance sheet, and in light of the positive free cash flow that we are
expecting to generate in the coming years, we have decided to declare a
one-off special dividend of 41.8 US cents per share, payable at the same time
as the 2024 final ordinary dividend.
A changing political climate
We anticipate a more positive approach to mining from the team working under
President Claudia Sheinbaum, given their increased focus on dialogue which
bodes well for the future. Our belief and expectations are that we can now
look forward to a more supportive business environment - one that will provide
greater certainty over future mining concessions, while also helping us to
achieve our ambitious targets around the use of renewable energy.
Preparing for the future
In addition to ongoing operational efficiencies, we anticipate that we will
begin to reap the rewards of our exploration pipeline in the near future.
Although Orisyvo may take longer than initially expected to become an
operational mine, we have made good progress at Rodeo and Tajitos, as well as
at Guanajuato, where the discovery of significant silver-rich veins is giving
rise to optimistic forecasts.
We continue to invest in exploration activities across Mexico, notably on
brownfield sites, as well as in South America. In Chile, we have progressed a
joint venture with a local company, while in Peru we have begun drilling at
several of our projects. At the same time, we are constantly identifying and
evaluating good projects and M&A opportunities in Mexico and in other
mining jurisdictions, such as Canada, where we see potential for acquiring
late-stage exploration projects to complement our existing portfolio.
In a rapidly evolving world, sustainability remains central to how we create
long-term value for our stakeholders. We believe that caring for society and
the environment enhances, rather than detracts from profitability; and that by
focusing on the challenges and opportunities most material to our business and
the regions where we operate, we will be able to align our strategic goals to
create meaningful, lasting and beneficial impact for society and the
environment, as well as for our business.
The wellbeing of our workforce is the cornerstone of any sustainable future,
and I am pleased to note that our underlying safety metrics again showed
improvement. Performance at several of our mines is at or close to being
within the ranges of the International Council on Mining and Metal (ICMM)
safety indexes. However, the fact that we experienced the fatalities of two
contractors during the year shows that we must do better.
We have continued to make advances in sustainability matters that are critical
to our business and underline our commitment to be a responsible corporate
citizen. For example, we have made significant progress in increasing our
renewable electricity consumption and replacing freshwater with municipal
treated wastewater in our industrial processes. Furthermore, we strengthened
partnerships with the government through our contribution to the 2024-2030
National Water Plan, supporting the human right to water with a voluntary
annual return of 300,000 m³ and a US$7 million investment in water treatment
and potabilisation projects in the Fresnillo district.
One of the key challenges we face is around the operating environment in
Mexico. As I have mentioned above, the early indicators of the new
government's approach are broadly positive and I look forward to collaborating
with them to ensure that the work we carry out at Fresnillo plc benefits all
our stakeholders, including the people and economy of Mexico.
Board activities
During our regular meetings, the Board discussed a wide range of matters
including operational efficiencies as well as how possible political
developments could impact the business, as the election drew closer.
Three key themes guided our deliberations during the year. The theme of
'Re-balancing Focus' demonstrated our recognition that Board members should
have a full and detailed understanding of how Fresnillo plc works as well as
the challenges and opportunities we face. To this end, the key Board event of
the year was a three-day visit to Mexico in July when members gained valuable
knowledge of the mines at Saucito and Juanicipio and held two days of strategy
discussions with the Executive Team.
'Managing Succession' was our second important theme. As I report below, the
Board underwent a number of changes at the 2024 AGM and this process will
continue, although to a lesser extent, at the 2025 AGM.
Finally, we focused on 'Reconnecting' in order to identify the most
appropriate balance between online and in-person meetings. When we come
together in person, for example at the meeting in July, we are able to forge
and enhance vital personal relationships that will benefit the Board when it
holds meetings online.
Changes to the Board
The AGM in May saw a number of changes to the Board.
Bárbara Garza Lagüera stepped down having served as an independent NED for
ten years. Charlie Jacobs also ceased to be an independent NED, and Senior
Independent Director, but remains on the Board as a Non-Independent NED, while
Juan Bordes did not stand for re-election and therefore ceased to be a
Director. I would like to thank all three for their past service and I look
forward to continuing to work with Charlie in the years ahead.
We were pleased to appoint Judith Macgregor as Senior Independent Director,
and also Ms Luz Adriana Ramírez and Ms Rosa Vázquez as Independent
Non-Executive Directors. In addition, Georgina Kessel and Guadalupe de la Vega
were appointed as members of the Nominations Committee in place of Bárbara
Garza Lagüera and Charlie Jacobs.
The Board and I believe that these appointments will underpin the excellent
progress we have made towards benefiting from a talented, diverse Board of
Directors.
Outlook
We expect global geopolitics to continue dominating the months ahead, with the
ongoing wars in Ukraine and the Middle East adding to the possibility of
increased tensions between the US and China, as well as greater protectionism
following the recent election in the US. We will continue to monitor
developments and, where practicable, shape our business to meet any challenges
and opportunities that emerge. Closer to home, we anticipate that a more
business-friendly climate will begin to have an impact during the latter
months of 2025 and in the following years.
The operational efficiencies initiated by our teams led to a good production
performance in 2024 and I expect this to also be the case in 2025, with steady
profitability underpinned by continued high prices for silver and gold.
The longer-term outlook is encouraging. We anticipate that at least one of the
prospects in our exploration pipeline will join our development portfolio in
the coming two to three years, and expect our investments in exploration in
Mexico, Chile and Peru to also make good progress.
As always, our efforts will be guided by our Purpose 'to contribute to the
wellbeing of people through the sustainable mining of silver and gold' and
will be delivered by skilled, dedicated teams with the experience and
expertise that is the envy of many of our peers. On behalf of the Board, I
thank every employee at Fresnillo plc as well as our other stakeholders -
suppliers, local communities, the government and shareholders - for their
support during what has been a successful year. I look forward to working with
you all in 2025 as we continue to navigate the challenges and opportunities
ahead.
Alejandro Baillères
Chairman
Chief Executive's statement
Octavio Alvídrez
A positive performance, an optimistic outlook
2024 was a year in which events in Mexico and globally threatened to
negatively impact our performance. However, due to the actions we undertook,
together with a number of positive economic trends, we ultimately achieved a
highly satisfactory outcome. Production was in line with expectations, while
sustained high prices and a weaker exchange rate combined to ensure that we
delivered a positive financial performance.
As the year began, several factors beyond our control threatened to make 2024
one of the most challenging years in Fresnillo plc's history. Although some of
our assets, such as Juanicipio, were producing high volumes of good quality
ore, decreasing grades elsewhere, together with a range of operational
difficulties and external factors, threatened to come together and lead to a
relatively poor financial outcome.
The response from our teams was to work diligently to systematically identify
and implement a series of initiatives that targeted those levers under our
control, such as costs and efficiencies, while mitigating where possible the
geological factors that could cause difficulties. Our people worked tirelessly
and with a high degree of skill, once again highlighting the value of the
extensive pool of proven talent that has established Fresnillo plc as a global
leader. The results of their efforts are reflected in our financial results,
which also benefitted from sustained high prices for silver and gold
throughout the year as well from a weaker Mexican peso vs US dollar exchange
rate.
In addition to the good progress we made with our existing operations, we also
advanced several exciting exploration projects along our pipeline. These
provide significant optimism for the medium- and long-term future of Fresnillo
plc, and we look forward to reporting more developments in due course.
Production highlights and price review
Overall, production was stable and consistent across the year, in line with
the guidelines we set out in January.
Attributable silver production remained at 56.3 moz, driven by good results at
San Julián Veins, Saucito and Juanicipio, as well as a strong turnaround at
Ciénega. Although weather-related issues affected gold production at La
Herradura earlier in the year, a recovery programme saw performance at this
mine improve rapidly in the last half which, together with higher production
at Fresnillo, Saucito and San Julián Veins, led to an increase in gold
production of 3.4% to 631.6 koz.
Attributable by-product lead and zinc production increased 14.8% and 8.3% to
66,400 tonnes and 116,646 tonnes respectively, primarily due to the increased
contribution of Juanicipio and Saucito and higher ore grades at Fresnillo.
During 2024, the increase in silver and gold prices was even more pronounced
than in the previous year. The average realised silver price was US$28.78 and
that for gold US$2,453.58, up 21.7% and 25.3% respectively. The average price
for zinc increased by 8.7%, while that for lead decreased by 2.7%.
Demand for silver outweighed supply for the sixth consecutive year, driven by
its role as an essential component in photovoltaic applications, 5G networks,
and electric vehicles and their infrastructure. Despite some countries rowing
back on their net zero ambitions, we believe that the world in general will
continue to pursue these new technologies, underpinning demand for silver.
Silver is also essential to many applications of nanotechnology in the food,
medical and electronics sectors, all of which are forecast to grow in the
years ahead.
Demand for gold remained healthy, in line with the increased global demand for
consumer electronics as well as emerging applications in the automotive,
aerospace and high-speed computing sectors. Gold is also valued as an
investment and safe haven, and is vital to the jewellery sector.
For both metals, demand from investors was exacerbated by geopolitical
tensions. These included the expectation of interest rate changes at the end
of 2023 and again early in 2024, and uncertainties around the US election -
followed by speculation about the measures that may or may not be implemented
by the incoming President.
Executing our strategy
Our four strategic pillars guide every aspect of our actions, and shape the
way in which we aim to seize the opportunities and rise to the challenges
ahead.
Maximising the potential of existing operations
Our assets are one of our greatest strengths. They are the foundation upon
which our past performance was built as well as the platform for future
success - and we work hard to ensure that they operate as efficiently as
possible.
During 2024, we made good progress at many of our mines. At Juanicipio, for
example, the beneficiation plant is now operating at full capacity and the
flotation plant has been optimised, leading to an increase in both the
recovery rate and the volume of ore processed.
While volumes reduced at Fresnillo due to several factors, the preparation of
new stopes is being expedited by the purchase and implementation of new
equipment for the narrower veins we have been encountering. Furthermore, the
commissioning of the new San Carlos shaft followed by the successful
connection of the two sections of shaft towards the end of the year is already
paying dividends in terms of reduced haulage and therefore lower costs.
At Saucito, increased productivity and greater availability of equipment have
driven a strong comeback from the mine's low point in 2023. The Saucito team
is now confident that they can not only maintain but also build upon the
recent improvements in production.
Given the challenges faced, the most impressive performance was at Ciénega.
Our previous view was that this mine had a limited lifespan in the Fresnillo
plc portfolio, with sale or closure a possibility in the short term. However,
now both performance and prospects have been transformed by a team of
retrained miners rigorously implementing a set of efficiency, cost reduction
and mitigation measures. These miners are now expected to become future
leaders at other mines across the business.
A similarly important step change took place at San Julián, where the
Disseminated Ore Body (DOB) approached the end of its life. Production at San
Julián Veins increased during the year on the back of higher ore grades and
improved dilution control, partially compensating for the fall in production
at the DOB. Exploration activities have identified high grades of silver and
also some gold, giving us renewed confidence in the future of the mine.
Performance at our open pit La Herradura mine remained a challenge, with the
loss of skilled people in the previous year being further aggravated by floods
and changes in the mine sequence in the first half of the year to impact
preparation and development. However, a plan was put in place and production
recovered in the fourth quarter and is now stable. We are continuing to define
how best we can develop underground activities at La Herradura and expect
operations to commence towards the end of 2025 or early in 2026, adding
important production that is not currently included in our projections.
Towards the end of 2024, we received notification from our parent company
Industrias Peñoles that operational difficulties at the Sabinas mine could
impact the Silverstream Agreement between our companies. After assessing the
possible implications of this situation, and based on the information
available we reassessed the valuation of the Silverstream Agreement. This
resulted in the recognition of a loss of US$182.3 million, net of its
amortisation and before taxes, at the end of the year. Please see note 14 to
the financial statements for further details.
In the year ahead, we will continue working on increasing productivity and
implementing cost reduction activities across all our mines with the objective
of prioritising profitability, while optimising production levels.
Delivering growth through development projects
As we reported last year, we have a number of very exciting exploration
projects that are making good progress through our pipeline.
Many metallurgical and economic studies are currently underway across all the
projects discussed in the strategic pillar below, as we work towards
identifying those with the greatest operational and financial feasibility.
Extending the growth pipeline
We continue to benefit from a range of mining concessions and exploration
projects in Mexico, Peru and Chile. These include four advanced exploration
projects that all have the potential to become development projects.
Among these, Guanajuato is expected to be a stellar performer and to make an
important contribution to the Group's silver production. Guanajuato is a
historic, world-class silver and gold epithermal vein field stretching more
than 40 kilometres along this central Mexican state. During the year, we
carried out 101,521 metres of core drilling, with a focus on the emerging
southern area where significant silver-rich veins have been discovered. A
preliminary conceptual study has highlighted good economic potential for the
development of this area, and we are therefore ramping up our step-out
drilling, metallurgical, environmental permitting, and community engagement
activities. Further exploration and studies will be carried out over the next
five years with the aim of developing this project in 2030.
Over the last 12 months we concluded that the gold project at Orisyvo could
take longer to come to fruition than previously expected. This is due to
challenges associated with resources and the recovery rates required to
increase production volumes, combined with the potentially large capital
expenditure required. A disseminated gold deposit in the Sierra Madre
mountains of Chihuahua state, Orisyvo was the subject of pre-feasibility
studies in the first half of the year, which showed positive opportunities for
an underground operation and associated infrastructure, including mineral
processing and tailings storage facilities. We have also continued to engage
with local communities and authorities around education, health, environmental
care and entrepreneurship - and we expect to commence consultations with
indigenous communities in 2025.
Tajitos will be a key focus for our efforts next year, in parallel with Rodeo.
An open-pit, disseminated gold project in the Herradura Corridor of
northwestern Sonora state, Tajitos was subject to a full evaluation of the
main resource area in 2024, with encouraging results. This was followed by an
update of the mineral resources and a preliminary economic assessment. We
drilled 41,640 metres during the year and also started environmental studies
as well as continuing our community relations programme.
At the Rodeo open pit gold project, in central Durango state, we commenced
exploration activities following positive engagement with the local Ejidos.
The drilling programme focused on increasing the resources in the main pit
area and obtaining samples for detailed metallurgical testing. We expect to
finalise exploration during the middle part of 2025 and will then be in a
position to evaluate our options.
Brownfield exploration continued across the portfolio, specifically in the
Fresnillo and San Julián districts, while greenfield activities at the
Lucerito and Candameña projects showed positive results for both gold and
silver.
Outside Mexico, we began drilling at some of our prospects in Peru, and we
made progress in Chile with our joint gold-silver venture with Sociedad
Química y Minera de Chile (SQM), the world's biggest lithium producer. We
continue to monitor opportunities to acquire projects in the later stages of
exploration, with recent efforts focusing on Canada.
At the end of the year, silver in consolidated overall mineral resources
increased 1.4% vs 2023 at 2.25bn oz as the positive exploration results at the
Guanajuato and Lucerito exploration projects and Fresnillo were offset by
depletion. Gold in consolidated overall mineral resources also increased 1.4%
vs 2023 to 38.5 moz primarily driven by the positive exploration results at
Guanajuato, Lucerito and Candameña, partly offset by depletion at our
operating mines.
Silver in consolidated overall ore reserves decreased 7.1% to 331.3 moz mainly
from
mining depletion and a more conservative approach to resource estimation at
San Julián and Ciénega. Gold in consolidated overall ore reserves increased
2.5% to 7.2 moz mostly as a result of the higher price and lower costs and
cut-off grades at La Herradura.
For 2025, the exploration budget will increase to US$190 million.
Advancing and enhancing the sustainability of our operations
Although our injury frequency rates continue to move in a positive direction,
with a steady overall improvement since 2017-a 37.2% reduction in TRIFR (7.59)
and a 35.8% reduction in LTIFR (4.75)-we sadly experienced two fatalities
during the year. No loss is acceptable, and we remain deeply committed to
ensuring that everyone who works at our facilities returns home safely at the
end of each day. Our hearts go out to their families, friends and colleagues
during this difficult time, and we will honour their memory by continuing to
strengthen our safety culture.
Both fatalities occurred in non-routine tasks involving contractor personnel,
underlining the urgent need for greater rigor in planning, risk analysis, and
control of activities both within and outside our productive value chain. We
are strengthening engagement with business partners to bring them up to the
same standards we uphold. Through the 'I Care, We Care' strategy, we will
continue to consolidate our health and safety management system by minimising
risks, improving safety and enhancing productivity.
Sustainability-related issues around water, community relations, the
environment and the use of renewables remain critical to Fresnillo plc, but
also to the Mexican incumbent administration. Continued dialogue with
policymakers following the election supports the sustainable future of mining
in Mexico.
In terms of our environmental performance, we have already met and in fact
exceeded our ambitious target for 75% of renewable electricity consumption by
2030 - recording a new high of 80.6% during 2024 - and are continuing our
efforts to maintain future levels above 75%. Additionally, the dual-fuel
infrastructure at La Herradura is expected to be commissioned in 2025, further
reducing our overall carbon intensity, which has already seen a 28% decrease
versus 2023.
We earn and maintain the trust of communities through accountability,
meaningful engagement, and support for their key concerns. In 2024, we
launched three inaugural programmes to strengthen community relations:
fostering collaboration between operational teams and communities, improving
communication about Fresnillo plc's performance and responsible mining
practices, and mitigating local social risks with a strong emphasis on ethics
and human rights.
In 2025, we will have the opportunity to test our community relations model
further when we accelerate engagement with several isolated communities. At
Orisyvo, where alternatives to mining for sustainable employment are limited,
our focus will be on listening carefully to local needs and clearly
communicating the economic and social benefits of mining.
While mining has historically been a male-dominated industry, we have made
significant strides in diversity and inclusion. Women now represent 12.46% of
our total workforce and 9.43% of managerial positions, surpassing our 2025
goals. We eagerly anticipate welcoming a woman as a general manager of an
operating mine in the near future, reflecting our commitment to inclusivity
and leadership diversity. We are also proud to maintain our position as one of
the Mexican public companies with the highest share of women on our Board of
Directors.
Looking ahead
The global economy is in a state of flux, and as has been the case for several
years, 2025 is expected to be a period of challenge and uncertainty.
Geopolitical tensions are likely to increase, with the ongoing wars in Ukraine
and the Middle East continuing to contribute to instability. Tensions between
the US and China as well as in Korea may intensify, further fuelling negative
sentiment.
Within Fresnillo plc, our challenges will centre around the structural changes
in some of our mines, specifically at San Julián where there is greater onus
on its Veins now that the DOB has been depleted. La Herradura could also see
production fall compared to the levels achieved in 2024.
However, with challenges come opportunities - and we are committed to managing
our operations efficiently without compromising on the safety of our people or
on our continued investment into our longer-term growth pipeline.
Our financial situation is sound, with healthy cashflow able to fund the
significant investments that are necessary in order to drive Fresnillo plc
forward. For example, we will continue to invest in new operational and cost
reduction measures, while also doing everything we can to make sure that our
leading exploration prospects can take that important next step and become
real development projects. Furthermore, we will remain alert to acquisition
opportunities and work with the grain of government to ensure that the voice
of mining continues to be part of the conversations around how best to support
the Mexican economy.
Although metals prices are beyond our control, demand for silver and gold is
increasing, largely in line with the shift towards green technologies, and we
do not expect to see this trend reversed. In our view, prices will in all
probability remain at high levels through the months ahead.
This was a year when our teams stepped up and showed themselves to be among
the most talented and dedicated in our industry, and it has been a privilege
to work alongside them. I would like to thank all stakeholders - from
suppliers, government officials and local communities to the investors who
continue to place their trust in us - for their support and encouragement.
Together, we can face the future with confidence.
Octavio Alvídrez
Chief Executive
Financial review
The consolidated financial statements of Fresnillo plc are prepared in
accordance with UK-adopted international accounting standards. This financial
review intends to explain the main factors affecting performance as well as
provide a detailed analysis of the financial results in order to enhance the
understanding of the Group's financial statements. All comparisons refer to
2024 figures compared to 2023, unless otherwise noted. The financial
information and year-on-year variations are presented in US dollars, except
where otherwise indicated.
The following report presents how we have managed our financial resources.
Commentary on financial performance
The Group's financial performance in 2024 reflects the positive impact of
higher precious metals prices coupled with a more stable operational
performance, notwithstanding the challenges faced during the year.
Adjusted revenue(1) increased 26.9% vs 2023 to US$3,639.9 million. This was
primarily due to higher gold, silver and zinc prices and the increase in
volumes of all metals sold. Revenue increased 29.3% year-on-year to US$3,496.4
million, primarily due to the increase in Adjusted revenue.
Adjusted production costs (2) decreased 2.6% vs 2023. This was mainly due to
the efficiencies and economies of scale achieved, principally at Saucito,
Juanicipio, Ciénega and San Julián veins, and the favourable effect of the
devaluation of the Mexican peso vs. US dollar. These factors were partly
offset by cost inflation of 2.3%, excluding the exchange rate devaluation, as
well as the longer haulage distances associated with mining deeper in the
earth, which increased maintenance, contractors' costs and diesel consumption,
particularly at Herradura and Fresnillo.
As a result, gross profit and EBITDA(3) more than doubled to US$1,246.3
million and US$1,547.3 million in 2024.
We maintained our strong financial position, with US$1,297.8 million in cash
and other liquid funds as of 31 December 2024, a net increase of US$763.2
million over the period, having paid dividends of US$78.2 million in
accordance with our policy (adjusted for extraordinary, non-cash items, in
particular the revaluation of the Silverstream contract and the effect of the
exchange rate on deferred taxes), invested US$370.5 million in capex, and
spent US$163.0 million on exploration expenses.
Income statement highlights
2024 2023 Amount change US$ million Change %
US$ million US$ million
Adjusted revenue(1) 3,639.9 2,869.1 770.8 26.9
Total revenue 3,496.4 2,705.1 791.3 29.3
Cost of sales (2,250.1) (2,201.8) (48.3) 2.2
Gross profit 1,246.3 503.2 743.1 147.7
Exploration expenses 163.0 182.4 (19.4) (10.6)
Operating profit 945.8 142.5 803.3 563.7
EBITDA(3) 1,547.3 655.7 891.6 136.0
Special mining rights 127.0 30.8 96.2 312.3
Income tax (Tax income)(4) 390.2 (205.0) 595.2 N/A
Profit for the period 226.7 288.3 (61.6) (21.4)
Profit for the period, excluding post-tax Silverstream effects 354.3 282.9 71.4 25.2
Basic and diluted earnings per share (US$/share)(5) 0.191 0.317 (0.126) (39.7)
Basic and diluted earnings per share, excluding post-tax Silverstream effects 0.364 0.310 0.054 17.4
(US$/share)
1 Adjusted revenue is revenue as disclosed in the income statement
adjusted to exclude treatment and refining charges and metals prices hedging.
2 Adjusted production costs are calculated as cost of sales less
depreciation, profit sharing, hedging, change in inventories and unproductive
costs. The Company considers this a useful additional measure to help
understand underlying factors driving production costs in terms of the
different stages involved in the mining and plant processes, including
efficiencies and inefficiencies, as the case may be, and other factors outside
the Company's control such as cost inflation or changes in accounting
criteria.
3 Earnings before interest, taxes, depreciation and amortisation
(EBITDA) is calculated as profit for the year from continuing operations
before income tax, less finance income, plus finance costs, less foreign
exchange gain/(loss), less revaluation effects of the Silverstream contract
and other operating income plus other operating expenses and depreciation.
4 Tax income resulted from the favourable impact of the revaluation
of the Mexican peso vs the US dollar.
5 The weighted average number of Ordinary Shares was 736,893,589 for
2024 and 2023. See note 18 to the consolidated financial statements.
The Group's financial results are largely determined by the performance of our
operations. However, other factors beyond our control, including a number of
macroeconomic variables, affect our financial results. These include:
Metals prices
The average realised silver price increased 21.7% from US$23.6 per ounce in
2023 to US$28.8 per ounce in 2024, while the average realised gold price rose
25.3% to US$2,453.6 per ounce. The average realised zinc by-product price
increased 8.7% to US$1.28 per pound, with the lead by-product price decreasing
2.7% vs 2023 to US$0.92 per pound.
MX$/US$ exchange rate
Spot exchange rate at 31 December 2024 Spot exchange rate at 31 December 2023 Impact
$20.27 per US dollar $16.89 per US dollar The 20.0% spot devaluation had an adverse effect on deferred taxes and special
mining rights
Average Mexican peso/US dollar exchange rate 2024 Average Mexican peso/US dollar exchange rate 2023 Impact
$18.30 per US dollar $17.77 The 3.0 devaluation had a positive effect of US$29.8 million on the Group's
costs denominated in Mexican pesos (approximately 45% of total costs) when
converted to US dollars.
Cost inflation
The Mexican Consumer Price Index for 2024 was 4.3%. However, to evaluate the
Group´s cost inflation for the year, we calculate the unit price increase for
each component of adjusted production costs and take into consideration their
weighted average within the Group's basket. The resulting cost inflation
estimate for 2024 was 0.2%, which included the favourable effect of the 3.0%
average devaluation of the Mexican peso against the US dollar. Underlying cost
inflation (cost inflation excluding the revaluation of the Mexican peso vs. US
dollar) was 2.3%. We conduct the same exercise for each individual mine
operation, whose basket components may carry different weightings.
The main components driving our cost inflation are listed below:
Labour
Unionised workers received on average a 7% increase in wages in Mexican pesos,
while non-unionised employees received on average a 6% increase in wages in
Mexican pesos; when converted to US dollars this resulted in a weighted
average labour inflation of 0.5%.
Energy
Electricity
The weighted average cost of electricity in US dollars decreased 16.2% from
US$9.70 cents per kW in 2023 to US$8.13 cents per kW in 2024.
Diesel
The weighted average cost of diesel increased 4.7% in US dollars to 111.9 US
cents per litre in 2024, compared to 106.9 US cents per litre in 2023.
Contractors
Agreements are signed with each individual contractor company and include
specific terms and conditions that cover not only labour, but also operating
materials, equipment and maintenance, among others. Contractor costs are
mainly denominated in Mexican pesos and are an important component of
our total production costs. In 2024, increases per unit (i.e. per metre
developed/per tonne hauled) granted to contractors whose agreements were due
for review during the period, resulted in a weighted average increase of
approximately 0.1% in US dollars, after considering the devaluation of the
Mexican peso vs the US dollar.
The effects of the above external factors, combined with the Group's internal
variables, are further described below through the main line items of the
income statement.
Revenue
Consolidated revenue
2024 2023 Amount Change %
US$ million US$ million US$ million
Adjusted revenue(1) 3,639.9 2,869.1 770.8 26.9
Treatment and refining charges (143.6) (164.0) 20.4 (12.4)
Total revenue 3,496.4 2,705.1 791.3 29.3
Adjusted revenue increased by US$770.8 million primarily driven by the higher
gold and silver prices and the increased volumes of all metals sold. Changes
in the contribution by metal were the result of the relative changes in metals
prices and volumes produced. The effect by metal, both in terms of volume and
price, is shown in the table below.
Adjusted revenue(1) by metal
2024 2023
US$ million % contribution US$ million % contribution Volume Price Total net Change %
variance variance change
US$ million US$ million US$ million
Gold 1,514.7 41.6 1,186.2 41.4 27.7 300.8 328.5 27.7
Silver 1,673.9 46.0 1,310.6 45.7 61.2 302.2 363.3 27.7
Lead 139.8 3.8 121.5 4.2 21.9 (3.6) 18.3 15.1
Zinc 311.5 8.6 250.8 8.7 37.3 23.4 60.7 24.2
Total Adjusted revenue 3,639.9 100.0 2,869.1 100.0 148.2 622.7 770.8 26.9
1 Adjusted revenue is revenue as disclosed in the income statement
adjusted to exclude treatment and refining charges and metals prices hedging.
Adjusted revenue by mine
The contribution by mine to Adjusted revenues is outlined in the table below.
This is expected to change further in the future, as new projects are
incorporated into the Group's operations and as precious metals prices
fluctuate.
2024 2023
(US$ million) % contribution (US$ million) % contribution Change %
Herradura 884.7 24.3 708.7 24.7 24.8
Saucito 760.0 20.9 527.8 18.4 44.0
Juanicipio 662.8 18.2 492.5 17.2 34.6
Fresnillo 591.2 16.2 479.6 16.7 23.3
San Julián (Veins) 354.5 9.7 205.1 7.1 72.8
San Julián (DOB) 115.1 3.2 201.3 7.0 (42.8)
Ciénega 228.4 6.3 169.3 5.9 34.9
Noche Buena 43.4 1.2 84.8 3.0 (48.8)
Total 3,639.9 100 2,869.1 100 26.9
Treatment and refining charges
Treatment and refining charges(1) are reviewed annually using international
benchmarks. Treatment charges per tonne of lead and zinc concentrate and
silver refining charges decreased in dollar terms by 10.0%, 25.7% and 23.0%,
respectively. These factors, combined with the higher volumes of lead and zinc
concentrates shipped from our mines to Met-Mex, resulted in a 12.4% decrease
in treatment and refining charges set out in the income statement in absolute
terms when compared to 2023.
1 Treatment and refining charges
include the cost of treatment and refining as well as the margin charged by
the refiner.
Cost of sales
Concept 2024 2023 Amount Change %
US$ million US$ million US$ million
Adjusted production costs(2) 1,582.2 1,624.1 (41.9) (2.6)
Depreciation 619.8 497.3 122.5 24.6
Profit sharing 12.3 2.2 10.1 459.1
Hedging 0.0 (0.2) 0.2 (100.0)
Change in work in progress 35.8 52.6 (16.8) (31.9)
Unproductive costs including inventory reversal and unabsorbed production 0.0 25.9 (25.9) (100.0)
costs(3)
Cost of sales 2,250.1 2,201.8 48.3 2.2
2 Adjusted production costs are calculated as cost of sales less
depreciation, profit sharing, hedging, change in inventories and unproductive
costs. The Company considers this a useful additional measure to help
understand underlying factors driving production costs in terms of the
different stages involved in the mining and plant processes, including
efficiencies and inefficiencies, as the case may be, and other factors outside
the Company's control such as cost inflation or changes in accounting
criteria.
3 Unproductive costs primarily include unabsorbed production costs
such as non-productive costs from the temporary suspension of activities at
Herradura and non-productive fixed mine costs incurred at Noche Buena from the
finalisation of mining activities.
Cost of sales increased 2.2% to 2,250.1 million in 2024. The main factors
driving the US$48.3 million increase are listed below:
• Adjusted production costs decreased by US$41.9 million as shown in the
graph below:
The ongoing efforts to implement cost reduction initiatives generated positive
results in 2024, driving US$40.0 million net worth of operating efficiencies.
These included efficiencies and economies of scale (-US$69.8M) at Saucito and
Juanicipio due to decreased contractor costs, and at Ciénega and San Julián
as a result of the rationalisation of contractors together with initiatives to
optimise the maintenance process. This achievement was offset by
inefficiencies (+US$29.8M) at Herradura due to the longer haulage distances,
and at Fresnillo as a result of increased haulage costs as ore was hauled via
ramps while the two sections of the deepened San Carlos shaft were connected,
and increased contractors' and maintenance costs.
• Depreciation (+US$122.5 million) due to increased depreciation of the
asset base at San Julián DOB as it approached the end of its life and, to a
lesser extent, the depreciation of the additional asset base at Juanicipio and
the increased depletion factor at Ciénega and Saucito.
Gross profit
Gross profit is a key financial indicator of profitability at each business
unit and the Fresnillo Group as a whole.
Total gross profit doubled from US$503.2 million in 2023 to US$1,246.3 million
in 2024.
The main factors driving the US$743.0 million increase in gross profit are
shown in the graphic below:
The contribution by mine to the Group's consolidated gross profit and the
year-on-year variations are outlined in the chart below:
Contribution by mine to consolidated gross profit
2024 2023 Change
US$ million % contribution US$ million % contribution US$ million %
Juanicipio 384.8 31.0 202.8 41.0 182.0 89.7
Saucito 281.7 22.7 80.4 16.2 201.3 250.4
Herradura 274.2 22.0 124.2 25.1 150.0 120.8
Fresnillo 180.0 14.5 61.2 12.4 118.8 194.1
San Julián 89.3 7.2 56.3 11.4 33.0 58.6
Ciénega 29.6 2.4 (29.8) (6.0) 59.4 (199.3)
Noche Buena 3.2 0.2 (0.1) 0.0 3.3 >100
Total for operating mines 1,242.8 100 495.0 100 747.8 151.1
Metal hedging and other subsidiaries 3.5 8.2 (4.7) (57.3)
Total Fresnillo plc 1,246.3 503.2 743.1 147.7
Administrative and corporate expenses
Administrative and corporate expenses decreased 14.7% from US$128.4 million in
2023 to US$109.5 million in 2024, mainly due to the lower fees incurred for
advisory and consulting services, the favourable effect of the devaluation of
the Mexican peso vs the US dollar on administrative expenses denominated in
pesos, including personnel salaries, and the cost reduction initiatives
resulting from services provided in accordance with the Shared Services
Agreement with Peñoles.
Exploration expenses
Exploration expenses decreased 10.6% from US$182.4 million in 2023 to US$163.0
million in 2024. In line with our strategy, exploration continued to focus on
the Fresnillo and San Julián districts, with special emphasis on intensifying
activities aimed at increasing the resource base, converting resources into
reserves and improving the confidence of the grade distribution in reserves.
An additional US$2.0 million was capitalised, mainly relating to exploration
expenses at the Guanajuato project. As a result, risk capital invested in
exploration totalled US$165.0 million in 2024, compared to US$185.9 million in
2023 (of which US$3.5 million was capitalised). This represents a year-on-year
decrease of 11.2%.
EBITDA
EBITDA is a gauge of the Group's financial performance and a key indicator to
measure debt capacity. It is calculated as profit for the year from continuing
operations before income tax, less finance income, plus finance costs, less
foreign exchange gain/(loss), less the net Silverstream effects and other
operating income plus other operating expenses and depreciation
2024 2023 Amount Change %
US$ million US$ million US$ million
Profit from continuing operations before income tax 743.9 114.0 629.9 552.5
- Finance income (46.9) (50.6) 3.7 (7.3)
+ Finance costs 73.6 88.8 (15.2) (17.1)
- Revaluation effects of Silverstream contract 182.3 (7.7) 190.0 N/A
- Foreign exchange loss, net (7.0) (2.0) (5.0) 250.0
- Other operating income (39.2) (35.3) (3.9) 11.0
+ Other operating expense 21.0 51.2 (30.0) (58.6)
+ Depreciation 619.8 497.3 122.5 24.6
EBITDA 1,547.3 655.7 891.6 136.0
EBITDA margin 44.3 24.2 - -
In 2024, EBITDA more than doubled to US$1,547.3 million primarily driven by
the higher gross profit and lower administrative and exploration expenses. As
a result, EBITDA margin expressed as a percentage of revenue increased, from
24.2% in 2023 to 44.3% in 2024.
Other operating income and expense
In 2024, a net gain of US$18.3 million was recognised in the income statement
primarily as a result of assigning the rights and obligations of the
non-core Guazapares mining concessions to Coeur Mining. In contrast, a loss
of US$15.8 million was registered in 2023 mainly as a result of the illegal
extraction of ore from the leaching pads at Soledad-Dipolos by third parties,
which has now ceased.
Silverstream effects
The Silverstream contract related to Industrias Peñoles' Sabinas mine silver
production is accounted for as a derivative financial instrument carried at
fair value.
Following a notification from Industrias Peñoles that its Sabinas mine was
experiencing operational and financial difficulties, which increased the risk
of Peñoles' being unable to fully comply with the terms and conditions of the
Silverstream, the Company has decided to incorporate this uncertainty into the
model used to estimate the fair value of the financial derivative instrument.
This resulted in a US$231.6 million loss before taxes and the period's profit
amortisation of US$49.3 million, with an overall net impact of US$182.3
million in the income statement.
The Group expects that further unrealised gains or losses related to the
valuation of the Silverstream contract will be taken to the income statement
in accordance with silver price cyclicality or changes in the variables
considered in valuing this contract. Further information related to the
Silverstream contract is provided in the balance sheet section in notes 14 and
30 to the consolidated financial statements.
Net finance costs
Net finance costs of US$26.6 million compared favourably to the US$38.2
million recorded in 2023. The US$11.6 million decrease was primarily due to
the lower interest paid as in 2024 net finance costs mainly reflected interest
paid on the US$850 million principal amount of 4.250% Senior Notes due 2050.
Conversely, in 2023 the Group paid interest on the outstanding US$317.9
million of 5.500% Senior Notes due 2023, in addition to the interests
described above. Detailed information is provided in note 10 to the
consolidated financial statements. During the year ended 31 December 2024
there were no capitalised borrowing costs (2023: US$2.1 million).
Taxation
Income tax expense for the year was US$390.2 million, which compared
negatively to the tax income of US$205.0 million in 2023. The effective tax
rate, excluding the special mining rights, was 52.5% (2023: -179.8%), compared
to the 30% statutory tax rate. The reason for the variation in the effective
tax rate is the difference between the tax and the accounting treatment
related mainly to the effect of the spot exchange rate on the tax value of
assets and liabilities. This adverse effect was mitigated by the effect of the
Mexican inflation on the restatement of tax value of fixed assets as described
in the table below:
2024 2023
Spot exchange rate devaluation (revaluation) 20.0 (12.8)
Exchange rate effect on tax value of assets and liabilities US$300.2 million (US$214.5 million)
Inflationary uplift of the tax base of assets and liabilities (US$55.2 million) (US$54.8 million)
Mining rights in 2024 were US$127.0 million compared to mining rights of
US$30.8 million charged in 2023. The significant increase is due to higher
deferred mining rights driven by the devaluation of the Mexican peso/US dollar
spot exchange rate in 2024 and the fact that the special mining right will
increase from 7.5% to 8.5% from 2025 onwards.
Profit for the period
Profit for the year decreased year-on-year by 21.0% as a result of the factors
described above.
2024 2023 Amount change US$ million Change %
US$ million US$ million
Profit for the period 226.7 288.3 (61.6) (21.4)
Profit for the period, excluding post-tax Silverstream effects 354.3 282.9 71.4 25.2
Profit due to non-controlling interests(1) 85.8 54.4 31.4 57.7
Profit attributable to equity shareholders of the Group 140.9 233.9 (93.0) (39.8)
Basic and diluted earnings per share (US$/share)(5) 0.191 0.317 (0.126) (39.7)
Basic and diluted earnings per share, excluding post-tax Silverstream effects 0.364 0.310 0.054 17.4
(US$/share)
(1) The increase reflects the higher profit generated at Juanicipio, where MAG
Silver owns 44% of the outstanding shares.
Cash flow
A summary of the key items from the cash flow statement is set out below:
2024 2023 Amount Change %
US$ million US$ million US$ million
Cash generated by operations before changes in working capital 1,559.8 649.3 910.5 140.2
Decrease/Increase in working capital (162.9) 20.6 (183.5) N/A
Taxes and employee profit sharing paid (97.1) (244.0) 146.9 (60.2)
Net cash from operating activities 1,299.8 425.9 873.9 205.2
Silverstream contract 30.0 40.2 (10.2) (25.4)
Proceeds from the sales of mining concessions (layback agreement in 2023) (see 10.0 22.8 (12.8) (56.1)
note 2 to the consolidated financial statements)
Purchase of property, plant and equipment (370.5) (483.4) 112.9 (23.4)
Dividends paid to shareholders of the Company (78.2) (108.4) 30.2 (27.9)
Financial expenses and foreign exchange effects (9.8) (6.4) (3.4) 53.1
Repayment of interest-bearing loans 0.0 (317.9) 317.9 (100.0)
Net (decrease)/increase in cash during the period after foreign exchange 763.2 (434.5) 1,197.7 N/A
differences
Cash and other liquid funds at 31 December(1) 1,297.8 534.6 763.2 142.8
1 Cash and other liquid funds are disclosed in note 17 to the
consolidated financial statements.
Cash generated by operations before changes in working capital more than
doubled to US$1,559.8 million, primarily due to higher precious metals prices
and increased production volumes during the year. Working capital increased
US$162.9 million, mainly due to: i) a US$196.2 million increase in trade
receivables from related parties principally because of higher precious metals
prices; and ii) a US$28.0 decrease in trade payables. This was partly offset
by a decrease in ore inventories of US$50.6 million; and ii) a US$10.7 million
decrease in prepayments mainly to contractors.
Taxes and employee profit sharing paid decreased 60.2% vs 2023 to US$97.1
million, mainly due to: i) a decrease in provisional tax payments paid in
2024; ii) the lower final income tax paid in 2024, net of provisional taxes
paid, corresponding to the 2023 tax fiscal year; iii) a decrease in mining
rights payments; and iv) lower profit sharing paid.
As a result of the above factors, net cash from operating activities increased
205.2% from US$425.9 million in 2023 to US$1,299.8 million in 2024.
Main uses of funds were:
i) The purchase of property, plant and equipment for a total of US$370.5
million.
ii) Dividends paid to shareholders of the Group in 2024 totalled US$78.2
million, a 27.9% decrease vs 2023, in line with our dividend policy which
includes a consideration of profits generated in the year, adjusted for the
extraordinary, non-cash items, in particular the revaluation of the
Silverstream contract and the effect of the exchange rate on deferred taxes.
The 2024 payment included the 2023 final ordinary dividend of 4.20 cents per
share paid in May 2024, totalling US$31.0 million, and the 2024 interim
ordinary dividend paid in September of US$47.2 million.
iii) Financial expenses and foreign exchange effects of US$9.8 million, an
increase of 53.1% vs 2023. Financial expenses in 2024 included interest paid
on the 4.250% Senior Notes due 2050. In addition, financial expenses in 2023
included interest paid on the outstanding US$317.9 million 5.500% Senior
Notes due November 2023.
The sources and uses of funds described above resulted in an increase in net
cash of US$763.2 million (net increase in cash and other liquid assets), which
combined with the US$534.6 million balance at the beginning of the year
resulted in cash and other liquid assets of US$1,297.8 million at the end of
December 2024.
Balance sheet
Fresnillo plc continued to maintain a solid financial position during the
period with cash and other liquid funds(1) of US$1,297.8 million as of 31
December 2024. Taking this and the US$839.5 million outstanding Senior Notes,
Fresnillo plc's net cash was US$458.3 million as of 31 December 2024. This
compares to the net debt of US$304.4 million as of 31 December 2023. In 2023
the Group had a net debt/EBITDA ratio of 0.46x(1).
Inventories decreased 9.5% to US$482.2 million, mainly due to: i) the decrease
of gold inventories at Noche Buena, ii) a reduction in the gold content at the
leaching pads and to be processed at the dynamic leaching plants at Herradura,
iii) the decreased inventories of zinc concentrate at all our underground
mines, and iv) a decrease in inventories of operating materials and spare
parts.
Dividends
Based on the Group's 2024 performance, the Directors have recommended a final
ordinary dividend of 26.1 US cents per Ordinary Share, which will be paid on
30 May 2025 to shareholders on the register on 22 April 2025. The dividend
will be paid in UK pounds sterling unless shareholders elect to be paid in US
dollars. This is in addition to the interim ordinary dividend of 6.40 US cents
per share. This final ordinary dividend remains in line with the Group's
dividend policy to pay out 33-50% of the profit attributable to equity
shareholders of the company after making certain customary adjustments to
exclude extraordinary non-cash effects in the income statement.
In addition, the Board has declared a one-off special dividend of 41.8 US
cents per share, equivalent to US$308.0 million which will also be payable on
30 May 2025 to shareholders on the register as at 22 April 2025. This decision
was made following a comprehensive review of the Group's financial position,
its strong balance sheet and taking into consideration the positive cash flow
that the Group is expecting to generate in the coming years.
As disclosed in previous reports, the corporate income tax reform introduced
in Mexico in 2014 created a withholding tax obligation of 10% relating to the
payment of dividends, including to foreign nationals. The 2024 final ordinary
dividend and special dividend will be subject to this withholding obligation.
1 Net debt is calculated as debt at 31 December 2023 less Cash and
other liquid funds at 31 December 2023 divided by the EBITDA generated in the
last 12 months.
MANAGING OUR RISKS AND OPPORTUNITIES
Our approach to risk.
The effective management of risk is integral to good management practice and
fundamental to living up to our purpose and delivering our strategy. By
understanding, prioritising and managing risk, Fresnillo plc safeguards our
people, our assets, our values and reputation, and the environment, and
identifies opportunities to best serve the long-term interest of all our
stakeholders. We are focused on conducting our business responsibly, safely,
and legally, while making risk-informed decisions when responding to
opportunities or threats that present themselves. Risk management is a key
accountability and performance criterion for our leaders.
Our risk management process helps us to manage risks that have the potential
to impact our business objectives and timely risk monitoring is at the core of
our management practices. All employees have responsibility for identifying
and managing risks. Our risk management framework reflects the importance of
risk awareness across Fresnillo plc. It enables us to identify, assess,
prioritise and manage risks to deliver the value creation objectives defined
in our business model.
Risk appetite.
Defining risk appetite is key in embedding the risk management system into our
organisational culture. The Company's risk appetite statement helps to align
our strategy with the objectives of each business unit, clarifying which risk
levels are, or are not, acceptable. It promotes consistent decision-making on
risk, allied to the strategic focus and risk/reward balance approved by the
Board.
We define risk appetite as 'the nature and extent of risk Fresnillo plc is
willing to accept in relation to the pursuit of its objectives'. We look at
risk appetite from the context of severity of the consequences should the risk
materialise, any relevant internal or external factors influencing the risk,
and the status of management actions to mitigate or control the risk. A scale
is used to help determine the limit of appetite for each risk, recognising
that risk appetite will change over time.
The risk appetite statement for each principal risk is the level of risk that
the Board is willing to accept to achieve our strategic objectives. It
articulates what is an acceptable level of exposure, relative to the amount of
reward we are seeking, and helps to determine how much control or mitigating
actions may be required.
Risks that are approaching the limit of the Company's risk appetite may
require management actions to be accelerated or enhanced to ensure the risks
remain within appetite levels. If a risk exceeds appetite, it will threaten
the achievement of objectives and may require a change to strategy.
Risk management framework.
Our strategy, values and risk appetite inform and shape our risk management
framework. We embed risk management at every level of the organisation to
effectively manage threats and opportunities to our business and host
communities, and our environmental impact.
Fresnillo plc has an enterprise-wide risk management information system which
includes a set of integrated tools and applications to capture, manage and
communicate material risks to the business. This system considers the three
lines of defence we have in place at Fresnillo plc: 1st. - Unit leaders
including mine, exploration and project personnel, as well as leaders of
corporate and support areas; 2nd. - Corporate level oversight functions
involve the risk management team, the Health, Safety, Security, Environment
and Community Relations (HSECR) team, the project oversight function and the
Executive Committee and 3rd. - Group Internal Audit.
Governance structure.
This governance structure supports our risk management framework and enables
effective management of material risks.
Top down Bottom up Board and Committees Third line of defense
Board. Audit Committee / HSECR Committee. Int
ern
Overall responsibility for assessing the nature and extent of principal and Responsible for reviewing the effectiveness of the Company's risk management al
emerging risks and the risk appetite of the Company and for facilitating systems and processes. Review assurance over mitigating controls. Aud
effective, entrepreneurial and prudent management of the business. it.
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recommending risk appetite and tolerance to the Board. Develops Company of regional and function risk management.
strategy in line with Board appetite.
Operations & projects Exploration & ore reserves Finance Legal, ethics & compliance Security
Human resources and Union Communities relations Safety & health TI-TO Insurance policies and coverage
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Strategic risks People, operational, safety and communities' risks Financial risks
- Resources to reserves risks - People and culture risks* - Liquidity risks
- Potential actions by governments* - Union risks* - Market risks
- Exploration risks* - Operation, maintenance and planning risks - Credit risks
- Project risks*- Technology risks - Health, safety and environment risks* - Tax risks
- Low-carbon transition risks - Communities and social risks* - Disclosure risks
- Climate change and natural disaster risks* - Ethics and compliance risks - Global macroeconomic developments*
- Security risks* - Cyber risks* - Impact of metals prices and exchange rates*
- Tailings Dams*
*Principal risk
Risk management process.
Set strategy, objectives and risk appetite 1. Risk analysis 2. Controls and risk responses 3. Audit & assurance 4. Communication & monitoring 5. Improvement & embed 6. Resilience
Identify, prioritisation and evaluate risks to our strategy and objectives Implement controls and actions to manage risks within risk appetite Check and verify that controls and actions are effective in managing the risks Communicate principal and emerging risk and escalate as appropriate Build risk capability Development of the company's culture and capacity to adapt, resist, absorb and
recover from the impact of a risk
and culture so
active management
is embedded in how
we run our business
First line - Risk assessment and identification of new risks in the business units - Continuous improvement of processes and controls. - Control self-certifications - Preparation of risk dashboards and risk matrices presenting the status of - Compliance with the highest international industry standards such as TSF's
individual risks in the business units
- Implementation of corrective and preventive actions based on the results of
leadership team monitoring
Second line - Review of Key Risk Indicators (KRIs) and mitigation actions - Implementation of controls and mitigations in response to risk scenarios - Monitoring compliance with international risk standards - On-going reviews of risks and threats. - Promoting the risk culture across the Company through workshops and training - Creating risk scenarios to anticipate impacts and prepare risk responses
- Preparation of quarterly, half-yearly and annual reports and briefings to
the Audit and HSECR Committee
Third line - Execution of the annual internal audit programme. - Advice and recommendations regarding the most exposed or new risks - Implement appropriate policies and guidelines to build resilience to risks
Culture & leadership
1. Risk analysis.
A complete view of our risk universe starts with the analysis of our business,
the external environment in which we operate, the regulatory landscape and our
internal operations. This includes the impacts on and of our strategy,
initiatives, governance, and processes.
The Board, the Audit Committee, the HSECR Committee, the Executive Committee
and Internal Audit, periodically use working sessions and interviews to review
the evolution of principal and emerging risks, as well as the appetite for
each risk. At these working sessions, the views and suggestions of Board
members are heard, and adjustments are made according to the factors
influencing each risk.
We mainly use the following methods in risk assessment:
· Scenario planning
· Horizon scanning
· Real time risk management monitoring
· Social media monitoring
· Collaboration with others organisation's such as third-party
suppliers
Aspects we review when assessing our principal and key risks:
· Risk ownership: each risk has an owner. In addition, each key
risk is sponsored by a member of the Executive Committee who drives the
monitoring and progress of mitigation measures.
· Probability and impact: five-by-five scoring matrix applied
globally.
· Gross risk: before preventive controls.
· Net risk: after preventive controls have been applied.
· Risk appetite: defined at the principal and emerging risk level
and approved by the Board.
· Risk tolerance: in data format, shows the amount of deviation
from risk appetite.
· Key risk indicators: quantitative and qualitative measures that
provide early signals of a change in the degree of risk.
· Actions: key controls in place and activities required to
mitigate them if necessary.
· Impact on the Company´s strategic pillars and interdependencies
between key risks.
· Any relevant risks where the principal risk is affected or may
affect the emerging risk.
All principal risks are detailed in a standardised statement. This ensures
effective review, understanding and monitoring across the Company, together
with consistency, both in terminology and in the underlying assessment itself.
Following the establishment of climate change as a separate principal risk in
2020/21, reviews have been carried out at various levels, including the
Executive Committee and the Board. These include the identification and
documentation of climate-related risks and the review and consideration of
appropriate risk responses. This consolidated view is an input to our review
of the Company's risk profile.
As part of the top-down process, an updated assessment was completed for each
principal risk by the relevant risk owner, working with the Executive
Committee risk sponsor and the risk function.
The framework is based on ISO 31000 (International standard that provides
guidelines and principles for managing risk), ISO 22301 (International
standard for Business Continuity Management Systems) and COSO ERM.(( 3 ))
Emerging risk considerations.
Emerging risks are very uncertain by nature. Given the diversity of our
operations and projects as well as our geographic footprint, we are exposed to
many highly uncertain, complex, and often interrelated risks. The Company
continues to focus on horizon scanning activity to inform and support
identification of the most pertinent internal and external trends and
developments.
We monitor key indicators of emerging risks and their potential impact on our
business, markets and host communities. Many emerging risk topics are reviewed
on a recurring basis, alongside ongoing activity addressing their impacts.
However, it is acknowledged that the nature of the emerging risks will evolve
and could drive future trends in the long term which the Company will need to
prepare for.
2. Controls and risk responses.
We use five key processes to better address our risks: (i) a monthly procedure
for evaluating and mitigating principal risks; (ii) a process to identify and
analyse the impact of the geopolitical instability in all the Company's risks,
including projects, with a main focus on the safety and identification of new
risks; (iii) dashboards for each business unit to monitor mitigation actions
and risk level; (iv) impact and probability scenarios which were conducted for
risks related to security, supply chain of critical inputs for operations,
cost increases and projects, and (v) collaboration with government, the
mining sector and communities to ensure that we followed best practice.
Fresnillo plc has an internal control framework in place to mitigate the
impact of principal and emerging risks. Our executives (including operations,
exploration and project managers, the controllership group, HSECR team),
regularly engage in strengthening the effectiveness of our current controls.
During 2024, with the support of a specialist team and external advice, the
comprehensive internal control framework was enhanced to document material
financial and non-financial controls, responsibilities and accountabilities
and align them with the Company's processes. This improves risk management,
reduces potential negative impacts, and ensures compliance with regulatory
requirements for internal controls.
The new mining laws in Mexico, the security near our business units, the
increase in the cost of operation, the geopolitical instability, the license
to operate and climate disruption posed new challenges for the Risk Department
and the Executive Committee. Due to the uncertainty around these topics, this
year, in addition to our established risk management activities, all strategic
decisions by the Company were analysed using risk scenarios modelling their
potential impacts.
3. Audit and assurance.
The Board, in pursuing the Company's business objectives, cannot give absolute
assurance that the implementation of a risk management process will overcome,
eliminate, or mitigate all material risks. However, by developing and
implementing an annual and ongoing risk management process to identify, report
and manage significant risks, the Board intends to provide reasonable
assurance against material misstatement or loss.
We monitor how well we manage material risks to our objectives by checking and
verifying the implementation of our response plans (actions and controls) and
our actual performance against objectives. We enhance the "check and verify"
step by applying the three lines of defence approach:
The internal audit team consists of highly experienced professionals from
various specialties, who frequently review operational, financial, exploration
and project processes in the field, using international standard tests and
methodologies.
First line -Annual self-assessments of controls and the bi-annual compliance assurance
statements.
Second line -As part of our ERM approach, we the Risk Team conduct specialised reviews to
assess risks and controls to ensure compliance, focused on validating and
testing key controls to augment the first line attestations.
-The risk team annually reviews key controls for our principal risks,
significant local risks and response plans to identify and respond to any
significant changes in the control environment. While many controls are
tailored to business unit requirements, there are consistent themes across our
control environment, such as clear oversight and reporting by business unit
management teams, governance processes for operations, maintenance and
tenders, attention to health and safety, the well-being of our people and the
priority of maintaining integrity and a strong ethical culture.
Third line and external activities -We are supported by external partners in certain specialised areas, we are
also subject to significant assurance activities and third line audits
conducted through our Internal Audit team, external third parties,
certification standards and customer requirements in our various business
lines.
-The work plan of the internal audit area considers all the company's
operational and financial processes, permanently following up on the
recommendations made in each audit, with a particular focus on the most
exposed risks or risks that have an impact on regulatory non-compliance or
business disruption.
-External reviews include those that support the range of ISO certifications
we manage across the business as well as independent performance and
regulatory reports on Fresnillo plc operations. Examples include:
- business continuity risk inspections of all business units by
Hawcroft Consulting in 2024.
- ISO 45001 and ISO 14001 audits of Fresnillo and Saucito mines by BSI
Group auditors.
- certification that the Herradura mine leaching operations comply
with the Cyanide Code issued by the International Cyanide Code Institute.
Governance -The HSECRC Committee meets before every Board meeting to review the
effectiveness of our risk management and internal control systems, with
particular attention paid to safety, climate, tailings dams and environmental
risks.
-The Audit Committee continues to focus closely on key financial processes,
material risks and internal control. Further close attention has been given to
the key areas of judgement and estimation in the financial statements. It
receives regular reporting from Internal Audit, Internal Control and Risk
Management, to allow it to determine whether internal controls and processes
are functioning appropriately.
4. Communication and monitoring.
Risk can be of any nature and manifest itself and escalate from any part of
the business as a threat or even an opportunity. When risks are material to
the Company, they are escalated to the Executive Committee and, where
appropriate, to the Board or its Committees. This requires a strong risk
culture, which we continue to develop and encourage.
Although we deploy controls to reduce the likelihood and consequences of
risks, some risks inherent in our business remain. These include natural
catastrophes, for which there is limited capacity in international insurance
markets. We monitor these threats closely and develop business resilience
plans.
The previous steps of the risk assessment process allow for analyses, reports
and briefings that communicate the results and main findings; this information
is mainly presented and discussed at the Audit Committee and the Board.
5 & 6. Improvement, embedding and resilience.
To ensure that we can prioritise our efforts and resources, we regularly
assess the potential consequences and likelihood of impact of our principal
risks, creating impact scenarios to implement prevention-mitigation measures
and response plans. These assessments, and the effectiveness of our associated
controls, reflect management's current expectations, forecasts and
assumptions. They involve subjective judgements and depend on changes in our
internal and external environment.
The Board confirms that:
- a robust assessment of principal and emerging risks has been carried out
- with support from the Audit and the HSECR Committees, it has monitored the
risk management framework throughout the year
- it has reviewed the planning, progress and preliminary results of the
enhancement of the comprehensive internal control framework
Principal risks and uncertainties.
The principal risks and uncertainties outlined in this section reflect the
risks that could materially affect (negatively or positively) our ability to
meet our strategic objectives.
We define principal risk as "risk, or a combination of risks, which may
seriously affect the business model, performance, future or reputation of the
Company".
The Company's risk profile has been developed based on the most significant
risks in our business profiles. All of our principal risks were reviewed at
least twice during the year, including through KRIs, which were developed to
help embed the risk appetite framework in the business and enhance the
monitoring and mitigation of risks.
Due to the effects caused by geopolitical instability, the Russia-Ukraine and
Hamas-Israel wars, attacks on commercial shipping in the Red Sea by
Iran-backed Houthi rebels, the effects of global inflation affecting the cost
of operation, security and violence near business units, cyber-attacks,
climatic disturbances, environmental situations close to our operations and
changes to the laws and regulations in the mining industry in Mexico, it was
necessary to reassess the principal risks and reorder their materiality,
likelihood and impact, as well as reassess related mitigation actions.
These risks are summarised in the following table in order of maximum
reasonable consequence, probability and change since 2023.
Current assessment of principal risks / As of February 2025
2024 Principal risk Risk Risk level Change in risk level vs 2023
Appetite*
1 Potential actions by governments (political, legal, regulatory, tax & Low Very high Stable V
concessions)
2 Security Low Very high Stable V
3 Cybersecurity Low High Increasing
4 Impact of metals prices and exchange rates High High With attention V
5 Global macroeconomic developments (energy and supply chain disruptions, Medium High With attention
inflation and cost)
6 Access to Land (full access to the lands) Low High Increasing
7 Union Relations (labour relations) Low High Increasing V
8 Human Resources (attract and retain requisite skilled people/talent crisis) Medium High Stable
9 Projects (performance risk) Medium High With attention
10 Safety (incidents due to unsafe acts or conditions could lead to injuries or Low High Stable V
fatalities)
11 Licence to Operate (community relations) Medium Medium Stable
12 Exploration (new ore resources) High Medium Stable
13 Climate change (comply with international standards and regulations) Medium Medium Stable V
14 Tailings dams (overflow or collapse of tailings deposits) Low Medium Stable V
15 Environmental Incidents (cyanide spills and chemical contamination) Low Medium Stable V
* Appetite determined by the Board in January 2025.
With attention. - Potential for increase in the short term
(V) Risks that were considered for the viability assessment
Emerging risks.
Mining is a long-term business, and so our strategy aims to create sustained
value over the life of our mining operations and beyond. This involves careful
allocation of key resource inputs - the natural, human, intellectual,
financial, manufactured, and social and relationship capitals - which are
essential to achieving this aim.
In the longer term, as the world transitions to a low-carbon future and
consumer demand for sustainable goods flows through the value chain, the
supply-demand dynamics of commodities are expected to shift. This will lead to
increasing demand for sources and solutions with low CO2 emissions, and a
lower social and environmental footprint, in addition to a growing demand for
transparent, sustainable and circular value chains.
Fresnillo plc defines an emerging risk as "new manifestation of risk that
cannot yet be fully assessed, a risk that is known to some degree but is not
likely to materialise or have an impact for several years, or a risk that the
company is not fully aware of but that could, due to emerging macro trends in
the mid or long-term future, have significant implications for the achievement
of our strategic plan". Furthermore, we consider emerging risks in the context
of longer-term impact and shorter-term risk velocity. We have therefore
defined emerging risks as those risks captured on a risk register that: (i)
are likely to be of significant scale beyond a five-year timeframe; or (ii)
have the velocity to significantly increase in severity within the five-year
period.
Emerging risks constantly change, can materialise quickly, and can
significantly affect the company and its operations. Procedures must be in
place for continuous monitoring of these risks to allow the company to adapt
or develop appropriate actions.
To strengthen our emerging risks management framework, during 2024 we carried
out activities to: (i) identify new emerging risks in light of geopolitical
instability, technological disruption and climate change; (ii) re-assess the
emerging risks identified in 2023; (iii) deploy effective monitoring
mechanisms recognising the potential for emerging risks to evolve or
materialise quickly; (iv) carry out horizon scanning to consider disruptive
scenarios, and (v) implement mitigating control actions and enhance our risk
awareness culture.
This process involved workshops, surveys and meetings with the Executive
Committee, business unit leaders, support and corporate areas, as well as
suppliers, contractors and customers. We also consulted third-party
information from global risk reports, academic publications, risk consulting
experts and industry benchmarks.
Emerging risks can impact our principal risks directly or can become elevated
to a standalone principal risk. The way we manage emerging risks is dynamic -
it reflects the outcomes of our monitoring and the evolution of the risk as
well as findings from our scenario analysis. Managing emerging risks involves
staying on top of technological advances in the mining industry and beyond;
seeking value-capturing innovations a focussing on efficiencies; drawing on
new sources of information and working closely with universities specialising
in mining and geology; as well as training and upskilling our people.
Emerging Risk Description Timescale
Geopolitical instability The potential political, economic, military, and social risks that can emerge < 5
from a nation's involvement in international affairs. These risks can have
far-reaching implications for both the country itself and the global community Years
at large. There are many factors that can contribute to geopolitical risks,
such as a nation's economic stability, its political relations with other
countries, and its military strength.
Water stress and drought Increased depletion of water resources to meet the demand for water < 5
consumption in a region, coupled with extreme heat waves in desert regions.
Years
Transition to a low-carbon future The transition to a low-carbon future is a "transition risk" according to the > 5
TCFD and presents challenges and opportunities for our portfolio in the short
and long term. It is considered within the climate change principal risk Years
mitigation strategy. However, we consider this risk to be an emerging risk due
to the speed of potential new climate change regulations and the obstacles
that government may place in the way of investment support for clean energy.
Technological disruption & the rapid proliferation of Artificial Failure to identify, invest in, or adopt technological and operational < 5
Intelligence productivity innovations that significantly replace or optimize a process
through new systems with recognizably superior attributes. We have the threat Years
that artificial intelligence could replace skilled labour.
Future of the workforce Create a culture of talent under an inclusive, empowered, and confident < 5
culture, together with the appropriate career paths, to generate a
future-ready workforce. Years
Increasing societal and investor expectations There is increasing expectation and focus on social equality, fairness and < 5
sustainability. Financial institutions are also placing greater emphasis on
Environmental, Social and Governance (ESG) considerations when making Years
investment decisions.
Replacement on depletion of ore reserves The inability to replace depleted ore reserves in key business units through > 5
exploration, projects or acquisitions.
Years
Unexpected mine-closure liabilities that have the potential to increase costs This is important to consider because it is possible that government > 5
authorities will change the environmental provisions and obligations of the
mine closure process in a more strict and costly manner. Years
Emerging risks are currently managed through the Group's risk management
framework, regularly enhancing controls and mitigating actions for each of
them. Emerging risk topics have been discussed in executive level committees
throughout 2024, with key actions assigned to closely monitor their
manifestation and potential opportunities and, in some cases, also form part
of the business planning process.
For 2025, it is also planned to deepen certain emerging risk topics such as
Technological disruption & the rapid proliferation of Artificial
Intelligence and Water stress and drought, by conducting scenarios of
operational and financial impacts to implement risk reduction measures and
risk mitigation actions.
1
Potential actions by governments (political, legal, regulatory, tax &
concessions)
Risk description
Regulatory initiatives or policies issued by the Mexican government, at all
three levels: federal, state and municipal, may have an adverse impact on the
operation of the Company. This could include new laws, regulations, rules or
guidelines with a negative impact on the mining industry in Mexico. Although
the law in Mexico does currently allow for the possibility of open pit mining
for strategic reasons, the previous administration's prohibition of new open
pit concessions remained in place under the new administration during 2024,
and no new concessions were granted .
With the recent change in Mexico's judiciary, current lawsuits, "amparos" and
other legal processes are at risk. Under the previous administration, which
was in office from 2018-2024, it had been very challenging to obtain permits
and licences for construction and environmental matters from the Ministry of
Economy and the Ministry of Environment. However, the change of approach from
the new administration is easing the process and we are now starting to see
the granting of permit applications that fully comply with regulations.
Failure or delay in obtaining permits and licences to operate, could adversely
affect our operations and develop projects.
We paid special attention to the following aspects:
· Prohibition of new concessions for open-pit mining.
· Permits for building/expanding tailings dams and projects.
· Inability to obtain necessary water concessions due to government
control or private interests.
· Discrepancies in the criteria used in audits carried out by the
tax authority.
· Possible new taxes or royalties on the mining industry.
· Possible profit sharing with indigenous communities.
· Potential trade disputes under United States-Mexico-Canada
agreement.
Factors contributing to risk
A considerable level of uncertainty is likely to dominate the Mexican legal
landscape for the foreseeable future, with potential impacts on the timing,
consistency and nature of legal decisions:
- Reorganization of the Mexican Supreme Court and election of Justices
and Federal Judges by popular vote.
- New judicial administration body and new judicial discipline
tribunal.
- Legal reforms to the following laws: "Mining Law", "Law on National
Waters", "Law on Ecological Balance and Environmental Protection" and "General
Law for the prevention and integrated management of waste in the field of
mining and water concessions", impacting on the granting of new concessions
and their duration, exploration activities and consultation with communities
and indigenous peoples as well as payments of 5% of profits to the
communities.
Controls, mitigating actions and outlook
1. As a result of the new mining law, risk scenarios were developed for each
change and impact, considering the legal and operational criteria to implement
the necessary mitigation and prevention measures. These scenarios are
constantly updated.
2. Commitment to constant communication with all levels of government.
3. Increased monitoring of the processes being implemented at the Ministry of
Energy, Environment, Labour and Economy and daily monitoring, follow-up and
attention to issues before the Congress of the Union that may affect the
mining industry.
4. Collaboration with other members of the mining community through the
Mexican Mining Chamber to lobby against any new harmful taxes, royalties or
regulations. Support for industry lobbying efforts to improve the general
public's understanding of the mining industry.
Link to strategy Risk appetite
1 - 2 - 3 - 4 Low
Risk owner Risk oversight
· Government Relations Department · The Board
· Legal Department · Audit Committee
· Taxes and royalties Department
· Mining and water concessions Department
Behaviour Risk rating (relative position)
Stable 2024: Very high (1)
2023: Very high (1)
2
Security
Risk description
In all our business units, we face the risk of theft, which can occur within
the mines or during transportation. Our employees, contractors and suppliers
are also at risk of violence due to insecurity in some of the regions in which
we operate.
According to information from the Ministry of Security and Citizen Protection
and the National Guard, the presence of organised crime and high impact crimes
(homicide, kidnapping and extortion) increased in 2024, especially in the
states where our business units are located such as Zacatecas, Sonora and
Guanajuato.
The main risks we face are:
· High-impact thefts in ore transportation, most notably of gold
doré and silver concentrates.
· Theft of assets such as vehicles, equipment, spare parts and
fuel.
· Homicide.
· Kidnappings.
· Extortions.
· Vandalism.
· Consumption and sale of toxic substances in our mining units.
Factors contributing to risk
Influence and territorial disputes by drug cartels, organised crime and
anarchy in some regions of Mexico where we have operations, projects and
exploration camps. Especially close to our operations in Fresnillo, Zacatecas
and Caborca, Sonora.
The remote nature of many of our locations and projects.
Controls, mitigating actions and outlook
1. Our property security teams closely monitor the security situation,
maintaining clear internal communications and coordinating work in areas of
greater insecurity.
2. We maintain close relationships with authorities at federal, state and
local levels
3. We interact and meet regularly with people of the National Guard; Army and
the Navy in some cases. There are military installations located near most of
our operations.
4. We continue to implement greater technological and physical security at our
operations:
- the use of a remote monitoring process at the Herradura, Noche
Buena, San Julián, Juanicipio, Saucito and Fresnillo mines.
- local operating and command centres for each business unit in the
Saucito and Fresnillo mines and the Juanicipio development project
- security services during the mine construction process at the
Juanicipio development project
5. Increase in logistical controls to reduce the potential for theft of
mineral concentrate such as:
- real-time tracking technology;
- surveillance cameras to identify alterations in the transported
material;
- protection and support services on distribution routes;
- reduction in the number of authorised stops to optimise delivery
times and minimise exposure of trucks transporting ore concentrates or doré.
6. We continue to invest in community programmes, infrastructure improvements
and government initiatives to support the development of legal local
communities and discourage criminal acts.
7. To combat drug consumptions we have:
- increased the number of anti-doping tests conducted at the start of
the day in the mining units.
- frequent inspections out inside the mines to verify that drugs are
not consumed and sold.
- Drug consumption prevention campaigns, focused on employees.
Link to strategy Risk appetite
1 - 2 - 3 - 4 Low
Risk owner Risk oversight
· Security Department · Audit Committee
· Legal Department · Executive Committe
Behaviour Risk rating (relative position)
Stable 2024: Very high (2)
2023: Very high (2)
3
Cybersecurity
Risk description
Information is an asset that must always be protected; it requires maintaining
confidentiality, integrity, and availability throughout all business
processes. Breaches in, or failures of, our information security management
could adversely impact our business activities. Malicious interventions
(hacking) of our information or operations' networks could affect our
reputation and/or operational continuity.
Loss or harm to our technical infrastructure and the use of technology within
the organisation from malicious or unintentional sources.
The following top eight cybersecurity and privacy risks comprise Fresnillo plc
overall cybersecurity and privacy risk profile:
1. Corruption of data - Critical data where any unauthorised modification
can have adverse impacts.
2. Unauthorised access - Cybersecurity and privacy incidents due to
incorrect access permissions or system abuse, exploitation, or misuse.
3. Breach and data theft - Disclosure of critical and sensitive company
data by an internal or external source.
4. Business disruption - Disrupting key applications or systems for a
period.
5. Lack of cybersecurity ownership - Failure to assign responsibility for
implementing and adopting cybersecurity practices daily.
6. Non-compliance - Cybersecurity and privacy incidents resulting in
non-compliance with applicable regulations, including privacy.
7. Health and safety incidents - Breach of availability, integrity or
confidentiality of data which impacts health and safety.
8. Halt or loss of operations - Cybersecurity and privacy incidents which
result in loss of operating licence or closure of operations.
Factors contributing to risk
Globally, cyber-attacks have increased in frequency and impact across all
industries; we suffered a cyber-security incident (partial disruption of
services) in July 2024, which had negative consequences for the Group
(Peñoles and Fresnillo plc).
Rising geopolitical tensions.
Heavy reliance on technology and automated systems to support operations
within the mining industry.
The industrial and mining sectors are seen as having a considerably weak level
of whilst the damage that can be caused is very high.
The level of global and national maturity of cybersecurity and cybercrime
regulations that could deter criminals is not yet adequate and is still
developing.
Controls, mitigating actions and outlook
Our cybersecurity programme, aligned with business strategies, is based on a
governance model with three lines of defence, involving all operational,
tactical, and strategic business levels to prevent and mitigate the effects of
computer risks. Our approach is also based on the NIST Cybersecurity Framework
which is used to assess and improve our ability to prevent, detect, and
respond to cyber-attacks.
1. We maintain continuous awareness of cybersecurity at all levels of the
organisation, through workshops, communications, campaigns, and exercises that
allow us to understand and increase our cybersecurity culture. Cybersecurity
is a risk that requires more active involvement of Executive teams, which is
why this year awareness and training exercises focused on this level have been
carried out.
2. The Security Operations Centre (SOC) provides analytics that correlate
information from multiple business unit sources, helping us to easily identify
the impact of a threat and address the incident in a timely manner.
3. Cybersecurity incident response plans are in place and regularly
assessed to ensure we can respond quickly and effectively to cybersecurity
incidents.
4. We conduct ongoing assessments of the technology controls implemented
in operations and services.
5. We have constant threat intelligence monitoring that allows us to
analyse trends in the environment that enable adjustments in our operation to
anticipate and apply necessary controls.
6. In addition, our systems, networks, and assets are continuously
monitored through cybersecurity tools that use Artificial Intelligence and
Machine Learning technology to analyse behaviours in the organisation's
networks, identifying and mitigating advanced threats.
7. Controls are in place to comply with the 'Ley Federal de Protección de
Datos Personales en Posesión de Particulares' (LFPDPPP).
8. We carried out the second phase of auditing our Personal Data
Management System with the NYCE office, with the objective of achieving
certification in our business units.
Our plan for 2025 is to focus our efforts on mitigating cyber risks,
implementing, and maturing controls in line with the threat landscape and
emphasising the importance of individual employee responsibility to remain
vigilant and alert to cyber threats.
Risk Assessment, Disaster Recovery Plans, Data Loss Prevention, Pen testing,
IT/OT Network Behavioural Analysis, and targeted security enhancements for
Operational Technology (OT) environments are some of the initiatives that will
increase our Level of Cybersecurity Maturity (based on NIST CSF).
Link to strategy Risk appetite
2 - 3 Low
Risk owner Risk oversight
· IT & TO Department · The Cyber Security Committee
· Cybersecurity Office · Audit Committee
Behaviour Risk rating (relative position)
Increasing 2024: High (3)
2023: High (6)
4
Impact of metals prices and exchange rates
Risk description
Our results are heavily dependent on commodity prices - principally gold and
silver. There is an inherent risk when investing or planning for the future
price of these precious metals.
The volatility of these prices is high and unpredictable. The prices of these
commodities are strongly influenced by a variety of external factors,
including wars, geopolitics disruptions, world economic growth, inventory
balances, industry demand and supply, possible substitution, etc.
Our sales are mainly denominated in US dollars, although some of our operating
costs are in Mexican pesos. Thus, any strengthening of the Mexican peso may
negatively affect our financial results.
Factors contributing to risk
Macro-economic and geopolitical factors that directly affect the price of
commodities, both positively and negatively, such as the wars between
Ukraine-Russia and Israel-Hamas, the recent US elections and trade tension in
the US-China relationship.
Increased attraction of investing in instruments such as cryptocurrencies
could lead to investors reducing their investment activities in precious
metals.
Controls, mitigating actions and outlook
1. We consider exposure to commodity price fluctuations an integral part of
our business and our usual policy is to sell our products at prevailing market
prices although we do have a hedging policy for precious metals.
2. We monitor the commodity markets closely to determine the effect of price
fluctuations on earnings, capital expenditure and cash flows. Very
occasionally, when we feel it is appropriate, we use derivative instruments
to manage our exposure to commodity price fluctuations. We run our business
plans through various commodity price scenarios and develop contingency plans
as required.
3. We have hedging policies for exchange rate risk, including those associated
with project-related capex.
4. We focus on cost efficiencies and capital discipline to deliver competitive
all-in sustaining cost.
Link to strategy Risk appetite
1 - 2 - 3 High
Risk owner Risk oversight
· Financial Planning · The Investment Committee
· Treasury · Audit Committee
Behaviour Risk rating (relative position)
With attention 2024: High (4)
2023: High (4)
5
Global macroeconomic developments (energy and supply chain disruptions,
inflation and cost)
Risk description
Geopolitics has the potential to increase trade tensions, affecting
rules-based trading systems. Trade actions can affect our key markets,
operations or projects, limiting the benefits of being a multinational company
with a global presence.
Disruptions or restrictions in the supply of critical operating inputs such as
steel, cyanide, copper, diesel, transport equipment, oxygen and truck tyres,
electricity, diesel and gas, steel, sulphuric acid or mining equipment spare
parts (supplied mainly by land transport from the US and by sea from China and
Europe) could negatively affect production or increase its cost.
Factors contributing to risk
The recent US elections.
US imposes tariffs rate on Mexico.
China-US tensions.
Indirect impacts of the war in Ukraine and conflict in the Middle East.
Lack of electricity infrastructure of the state-owned company (Comisión
Federal de Electricidad CFE), which supplies energy in Mexico.
Possible inflation growth in Mexico.
Controls, mitigating actions and outlook
1. We execute operational excellence initiatives to counter inflation and
improve margins, and also enhance cost competitiveness by improving the
quality of the portfolio.
2. We maintain a rigorous, risk-based supplier management framework to ensure
that we engage solely with reputable product and service providers and keep in
place the necessary controls to ensure the traceability of all supplies
(including avoiding any conduct related to modern slavery).
3. To achieve cost competitiveness, we endeavour to buy the highest possible
proportion of our key inputs, such as fuel and tyres, on as variable a price
basis as possible and to link costs to underlying commodity indices where
this option exists.
4. We are committed to incorporating sustainable technological and innovative
solutions, such as using sea water and renewable power when economically
viable, to mitigate exposure to potentially scarce resources.
Link to strategy Risk appetite
1 - 2 - 3 Low
Risk owner Risk oversight
· Procurement and contracts · Audit Committee
· Operational Comptrollers
· Financial Planning
Behaviour Risk rating (relative position)
With attention 2024: High (5)
2023: High (3)
6
Access to land (full access to plots of land)
Risk description
Significant failure or delay in accessing surface land above our mining
concessions and other lands of interest is a permanent risk to our strategy
and has a potentially high impact on our objectives.
The biggest risk is failing to gain full control of the lands where we explore
or operate.
Possible barriers to access to land include:
· Increasing landowner expectations.
· Refusal to comply with the terms of previous land acquisitions
and conditions regarding local communities.
· Influence of multiple special interests in land negotiations.
· Conflicts regarding land boundaries, and the subsequent
resolution process.
· Succession problems among landowners resulting in a lack of
clarity about the legal right to own and sell land.
· Risk of litigation, such as increased activism by agrarian
communities and/or judicial authorities.
· Presence of indigenous communities in proximity to lands of
interest, where prior and informed consultation and consent of such
communities are required.
Factors contributing to risk
The new mining law complicates efforts to regularise access to land and the
procedures for obtaining new permits.
It is becoming increasingly difficult to negotiate land prices, with
landowners demanding more money and benefits for access to land.
Social insecurity prevailing in the regions where our mining interests are
located may not allow the necessary work to be carried out to demonstrate the
minimum investments required by law, leading to the possible cancellation of
the concession.
The Federal Government continues its policy of not granting new mining
concessions.
Controls, mitigating actions and outlook
1. We undertake meticulous analysis of exploration objectives and construction
project designs to minimise land requirements.
2. Initiatives undertaken to secure access to land in areas of strategic
interest or value include:
· Judicious use of lease or occupation contracts with purchase
options, in compliance with legal and regulatory requirements.
· Early participation of our community relations teams during the
negotiation and acquisition of socially challenging objectives.
· Strategic use of our social investment projects to build trust.
· Close collaboration with our land negotiation teams, which
include specialists hired directly by Fresnillo and provided by Peñoles as
part of the service agreement.
3. We perform ongoing reviews of the legal status of our land rights, we
identify certain areas of opportunity and continue to implement measures to
manage this risk on a case-by-case basis. Such measures include, wherever
possible, negotiations with agricultural communities for the direct purchase
of land.
4. We use mechanisms provided for in agricultural law and use other legal
mechanisms under mining legislation that provide greater protection for land
occupation.
5. Negotiate carefully with the government on concessions with geological
mining interest that have already been granted.
Link to strategy Risk appetite
1 - 2 - 3 Medium
Risk owner Risk oversight
· Legal · Audit Committee
· Community Relations
Behaviour Risk rating (relative position)
Increasing 2024: High (6)
2023: Medium (10)
7
Union relations (labour relations)
Risk description
Our highly skilled unionised workforce and experienced management team are
critical to sustaining our current operations, executing development projects
and achieving long-term growth without major disruption. We are committed to
safety, non-discrimination, diversity and inclusion, and compliance with
Mexico's strict labour regulations.
The Labour Reform allows the existence of several unions within a company and
gives freedom of choice to the employee. This has led to a complex, rarefied
work environment at the Fresnillo mine, with violent clashes between the union
and a group of workers seeking to register a new independent union. The risk
is that the fighting will continue and worsen and eventually the mine's
workforce will be reduced. There is also a risk that this conflict could
spread to other mines.
There is a risk of strikes or illegal work stoppages at some of our mining
units by workers who do not agree with profit sharing or some of the benefits,
mainly at the La Herradura mine.
Factors contributing to risk
Adverse coalitions that could disrupt operations illegally, mainly at the
Herradura mine. We had a minor disruption in May 2023.
We run the risk of an outside union seeking to destabilise the current union.
We could also be adversely affected by National union politics.
Controls, mitigating actions and outlook
1. We remain attentive to any developments in labour or trade union issues.
Our executive leadership and the Executive Committee recognise the importance
of trade union relations and follow any developments with interest. Our
strategy is to integrate unionised personnel into each team in the business
unit. We achieve this by clearly assigning responsibilities and through
programmes aimed at maintaining close relations with trade unions in mines and
at the national level.
2. There are long-term labour agreements (usually three years) in place with
all the unions at our operations, helping to ensure labour stability.
3. We seek to identify and address labour issues that may arise throughout the
period covered by the labour agreements and to anticipate any potential issues
in good time. When appropriate, we hire experienced legal advisors to support
us on labour issues.
4. We have increased communication with trade union leaders in mining units to
monitor the working environment and conducted a review of the contractual
benefits for union members in our mines.
5. We maintain constructive relationships with our employees and their unions
through regular communication and consultation. We are proactive in our
interactions with unions Union representatives and trade union leaders at
various levels of the organisation are regularly involved in discussions
about:
- the future of the workforce
- the economic situation facing the industry;
- our production results;
6. We encourage union participation in our security initiatives and other
operational improvements. These initiatives include the Security Guardians
programmes, certification partnerships, integration of high productivity
equipment, and family activities.
Link to strategy Risk appetite
2 - 3 Low
Risk owner Risk oversight
· Human Resources · Audit Committee
· Legal · People & Remuneration Committee
Behaviour Risk rating (relative position)
Increasing 2024: High (7)
2023: Medium (9)
8
Human resources (attract and retain requisite skilled people / talent crisis)
Risk description
Our ability to achieve our operating strategy depends on attracting,
developing and retaining a wide range of skilled and experienced internal and
external people.
Managing talent and maintaining a high-quality workforce in a rapidly changing
technological and cultural environment is a key priority for us. Any failure
in this regard could negatively impact current operating performance and
future growth prospects.
We face multiple risks in the processes of recruiting, hiring, training and
retaining talented, skilled and experienced people:
- Sourcing skilled labour in the mining sector has become a major
risk, and our industry requires more and more people who are trained and
experienced in mining processes.
- Digital and technological innovation has the potential to generate
substantial improvements in the Company's productivity, safety and
environmental management. There is a risk that our workforce will be unable to
transform to the extent necessary or will be resistant to change and unwilling
to accept the impact of automation or to acquire new technological skills.
- The lack of reliable contractors with sufficient infrastructure,
machinery, performance history and trained personnel is also a risk that could
affect our ability to develop and build mine sites.
In addition, contractual terms prohibit us from hiring specialised personnel
from business partners or contractors.
Factors contributing to risk
The shortage of skilled and experienced technical labour in the mining
industry is leading to increased competition in the regions where we operate.
In certain regions where we operate, there are not enough candidates with the
necessary skills to operate mining equipment.
We have business units far from cities and with limited and complicated
access, making it difficult to find skilled labour in those regions.
Changing societal expectations are putting pressure on our corporate and
employer brand: who we are and what we stand for.
Controls, mitigating actions and outlook
1. We enhance the talent of our employees through training and career
development, invest in initiatives to broaden the talent pool and are
committed to our diversity and inclusion policy. Through these actions we aim
to increase employee retention, as well as the number of women, people with
disabilities and employees with international experience in the workplace.
2. Our employee performance management system is designed to attract and
retain key employees by creating appropriate reward and remuneration
structures and providing personal development opportunities. We have a talent
management system in place to identify and develop internal candidates for key
management positions, as well as to identify suitable external candidates
where appropriate.
3. We aim for continuous improvement, driven by opportunities for training,
development and personal growth; in short, we focus on fair recruitment, fair
pay and benefits and gender equality.
4. Our goal for retaining talent is to be an employer of choice, and we
recognise that, to be a profitable and sustainable business, we need to create
value for our employees and their families. We do this by providing a healthy,
safe, productive and team-oriented work environment that not only encourages
our people to reach their potential, but also supports process improvement.
5. A renewed approach to talent management was implemented in the human
resources areas of the business units, ensuring that all our employees have a
meaningful conversation about their performance, motivations and experience,
as well as a quality development plan that enables them to acquire the skills
and experience they need for the future.
6. Employees who live far away from the business units are permanently
supported with transportation, medical care for them and their families,
health and nutrition programmes with access to high quality food and support
with clothing and accessories to protect them from weather changes.
7. A global graduate programme and strategic partnerships are in place to
establish mutually beneficial relationships with universities and schools
specialising in mining and geology.
8. Local internship training programmes and other future skills development
partnerships are in place.
9. We have continued our performance appraisal process, reinforcing formal
feedback. We promote certification of key technical competencies for
operational staff and have implemented a leadership and management competency
development programme for required positions. We develop our high-potential
middle managers through the Leaders with Vision programme.
10. Ongoing training workshops are held for staff by business partners and
contractors, especially in new technologies and best practices in the mining
industry, for example with Caterpillar, Matco, Epiroc, Robbins, Sanvik, etc.
Link to strategy Risk appetite
1 - 2 - 3 - 4 Medium
Risk owner Risk oversight
· Human Resources · Audit Committee
· People & Remuneration Committee
Behaviour Risk rating (relative position)
Stable 2024: High (8)
2023: High (5)
9
Projects (performance risk)
Risk description
The pursuit of advanced exploration and project development opportunities is
essential to achieving our strategic goals. However, this carries certain
risks:
· Current or new government regulations that obstruct, limit or
restrict the granting of mining concessions; delay or fail to obtain permits,
licences, authorisations, etc.
· Economic viability: the impact of the cost of capital to develop
and maintain the mine; future metals prices; and operating costs throughout
the mine's life cycle.
· Access to land: a significant failure or delay in land
acquisition has a very high impact on our projects.
· Delivery risk: Projects can exceed the budget in terms of cost
and time; they cannot be built according to the required specifications or
there may be a delay during construction; and major mining teams cannot be
delivered on time.
· Other uncertainties such as: fluctuations in the degree of ore
and recovery; unforeseen complexities in the mining process; poor quality of
the ore; unexpected presence of groundwater or lack of water; lack of
community support; and inability or difficulty in obtaining and maintaining
the required building and operating permits.
The following risks relate specifically to prospective projects in Chile and
Peru:
· Government instability, especially in Peru.
· Potential actions by governments (political, legal, regulatory
and tax).
· Security.
· Licence to operate (community relations)
· Access to water (national regulation and geographic
complications).
· Environmental compliance.
· Competition for land (threat from green power generation
companies, for example thermosolar).
· Informal mining.
· Industrial safety compliance (National Geological and Mining
Service SERNAGEOMIN).
· Increased mining taxes and fees.
Factors contributing to risk
Prohibition of new open-pit mining concessions.
Uncontrolled increases in the costs of critical inputs directly affect the
progress of projects and affect the planning of each project.
In some regions there are no specialised contractors or contractors with the
technology to develop the projects.
Contractor productivity may be lower than anticipated, causing delays in the
programme.
Increase in the number of high impact crimes (homicide, kidnapping, extortion)
in the regions of the projects.
We have identified the following threats to project development:
· Insufficient resources for project execution.
· Changes in operational priorities that can affect projects.
· Inadequate management structure for project supervision.
· Delays in obtaining necessary permits for construction and
operation.
· Lengthy procedures for land acquisition, electricity supply and
water.
Controls, mitigating actions and outlook
1. Our investment assessment process determines how best to manage available
capital using the following criteria:
• Technical: we evaluate and confirm the resource estimate; conduct
metallurgical research of mineral bodies to optimise the recovery of economic
elements; calculate and determine the investment required for the overall
infrastructure (including roads, energy, water, general services, housing) and
the infrastructure required for the mine and plant.
• Financial: we analyse the risk in relation to the return on the proposed
capital investments; set the expected Internal Rates of Return (IRR) per
project as thresholds for approving the allocation of capital based on the
current value of expected cash flows of invested capital; and perform
stochastic and probabilistic analyses.
• Qualitative: we consider the alignment of investment with our Strategic
Plan and business model; identify synergies with other investments and
operating assets; and consider the implications for safety and the
environment, the safety of facilities, people, resources and community
relations.
2. The management of our projects is based on the Project Management Body of
Knowledge (PMBOK) standard of the Institute of Project Management (PMI). It
allows us to closely monitor project controls to ensure the delivery of
approved projects on time, within budget and in accordance with defined
specifications. The executive management team and the Board of Directors are
regularly updated on progress.
3. Each advanced exploration project and major capital development project has
a risk record containing the project-specific identified and assessed risks.
Link to strategy Risk appetite
2 Medium
Risk owner Risk oversight
· Projects · Audit Committee
· Legal · The Investment Committee
· Community Relations
· Access to Land Department
Behaviour Risk rating (relative position)
With attention 2024: High (9)
2023: High (7)
10
Safety (incidents due to unsafe acts or conditions could lead to injuries or
fatalities)
Risk description
The mining industry is inherently dangerous. Major hazards across our
operations and projects include process safety, underground mining, surface
mining and tailings and water storage.
Our workforce faces risks such as fire, explosion, electrocution and carbon
monoxide poisoning, as well as risks specific to each mine site and
development project. These include rockfalls caused by geological conditions,
cyanide contamination, explosion, becoming trapped, electrocution, insect
bites, falls, heavy or light equipment collisions involving machinery or
personnel and accidents occurring while personnel are being transported.
These risks have the potential to cause death, illness or injury, damage to
the environment, and disruption to communities. A poor safety record or
serious accidents could have a long-term impact on morale and on our
reputation and productivity.
We are saddened to report that two fatalities were recorded during 2024, and
that we experienced increases in accidents related to:
· Rockfall/terrain failure.
· Loss of vehicle/equipment control.
· Team-vehicle-person interaction.
· Accident in transport of staff.
· Contact with electric power.
· Becoming trapped.
· Contact with hazardous substances.
Factors contributing to risk
Frequent transportation of our people to remote business units is an ongoing
feature of our operations. In many cases, these units have poor accessibility
by road.
Failure to comply with safety programmes, measures and audits or with the
findings of inspections.
High turnover of workforce, including contractors.
Controls, mitigating actions and outlook
1. Nothing is more important than the safety and wellbeing of our employees,
contractors and communities. Our objective is first and foremost to have zero
fatalities. We believe all incidents and injuries are preventable, so our
focus is on identifying, managing and, where possible, eliminating risks. We
constantly seek to improve our safety and health risk management procedures,
with focus on the early identification of risks and the prevention of
fatalities.
2. We are raising awareness of the risks generated by our operational
activities. This includes quarterly meetings on the main safety risks at each
mining unit, projects and exploration sites, overseen by the Executive
Committee.
3. Continuing the implementation of the "I Care, We Care" programme in all our
operations, including strengthening the programme's five lines of action.
4. We are reinforcing the four pillars of our "Safety and Occupational Health"
strategy:
a. Safety and health risk management: workers at all levels are able to
identify hazards and controls, so that all jobs are carried out safely.
b. Leadership: all employees and contractors are health and safety leaders and
we demonstrate our commitment through each individual's responsible behaviour.
c. Contractor management: our contractors are an integral part of our safety
team and culture, and we work together to improve.
d. Reporting, research and learning from our accidents: we share good
practices and learn from our mistakes.
5. We have implemented technical and safety standards and procedures for slope
geotechnical, tailings management, underground mining and process safety.
6. We are advancing the automation of hazardous processes.
7. The critical controls that reduce risk in the business units are
periodically updated and improved through inspections and performance
evaluations, which are carried out by the safety team, external auditors such
as 'Real Safety' and even by government authorities such as the Ministry of
Labour and PROFEPA.
Link to strategy Risk appetite
3-4 Low
Risk owner Risk oversight
· Safety · HSECR Committee
· Human Resources
Behaviour Risk rating (relative position)
Stable 2024: High (10)
2023: High (8)
11
Licence to operate (community relations)
Risk description
At both a local and global level, the mining industry's stakeholders have high
expectations relating to social and environmental performance. These
expectations go beyond the responsible management of negative impacts to
include continuous engagement and contribution to stakeholder development.
Failure to adequately address these expectations increases the risk of
opposition to mining projects and operations. Negative sentiment towards
mining or specifically towards Fresnillo plc could have an impact on our
reputation and acceptability in the regions where we have a presence.
We monitor the following risks:
· Negative perception of the Company's social and environmental
performance.
· Failure to identify and address legitimate concerns and
expectations of the community and of society at large.
· Insufficient or ineffective engagement and communication.
· Failure to contribute purposefully to community development.
Factors contributing to risk
Higher expectations and scrutiny of social and environmental performance.
Rising expectations on shared benefits regarding land agreements.
Perceived competition on access to natural resources, notably water.
Significant reduction in government spending on community infrastructure,
development programmes and services.
Anti-mining activism fuelling opposition to mining.
Community concerns about insecurity, access to water and the environmental
impact of a. the operations of the business units.
Controls, mitigating actions and outlook
1. We hold regular meetings with key community stakeholders to communicate
about the company, and its social and environmental practices.
2. An internet listening module was implemented, which makes it possible to
capture concerns from the community, whose cases can even remain anonymous,
thus expanding coverage in sectors where technology makes it easier to find
questions about the organization and offer care in the same way that cases
presented in person.
3. We closely monitor threat and social opportunities associated with our
operations through constant and direct contact with the leaders of each
business unit, social studies, and media monitoring complaints and claims
process.
4. Governance over the complaints process is improving every year. Complaints
are received, assessed and managed, involving line managers, while
dissatisfied stakeholders are kept informed of the status of each case, until
satisfactory closure agreements are reached.
5. We deploy social programmes in the communities near the business units,
such as support for schools, clinics and health, supply of medicines,
nutrition and food, maintenance of roads and bridges, water supply, etc.
LINK TO STRATEGY RISK APPETITE
1 - 2 - 3 - 4 Low
Risk owner Risk oversight
· Community Relations · HSECR Committee
· Human Resources
BEHAVIOUR RISK RATING (RELATIVE POSITION)
Stable 2024: Medium (11)
2023: Medium (11)
12
Exploration (new ore resources)
Risk description
We are highly dependent on the success of the exploration programme to meet
our strategic value-creation targets and our long-term production and reserves
goals.
Maintaining a reasonable investment in exploration, even when metals prices
are low, has been our policy through the years. While continuous investment
has always been a hallmark of our exploration strategy, replenishing exploited
reserves and increasing our total amount of resources could be a challenge in
the future.
The growing level of insecurity, a more challenging land access scenario, and
delays in obtaining government permits detailed previously, translates into a
longer timeframe to deliver new discoveries and improve the category of
resources. In addition, difficulties in obtaining new mineral concessions
could hamper the exploration in new target areas.
Factors contributing to risk
In Mexico, the new mining law establishes that exploration activities in new
concessions will be carried out only by the Mexican Geological Services
assigned to the Ministry of Economy.
New concessions would be granted through a bidding process following
exploration orders submitted to the Service. However, pre-existing concessions
may continue to be explored by their holders and may be commercialised upon
authorisation by the federal Ministry of Economy. Fresnillo plc's concessions
will allow the company to continue its brownfield and greenfield exploration
programmes, at least in the medium term. Access to new concessions will be
difficult.
This year, we have seen that the exploration programme has been complicated
and delayed mainly for the following reasons:
· Restrictions on new mining concessions.
· Delays in procedures regarding access to land.
· Presence of organised crime (insecurity) in the regions where we
have projects and exploration camps.
· Delays and failures to obtain permits and licenses from
government authorities.
· Increased exploration costs.
· In Chile, risk factors include lack of water in the Atacama
Desert in the north and possibility of conflict with forestry or agricultural
interests in the south, overall higher costs compared to those in Mexico,
seasonal restrictions to exploration in the High Andes, scarcity of open
grounds for staking, poor infrastructure in remote zones, presence of
anti-mining communities or NGOs, and strong competition for mining claims and
staff.
· In Peru, the main risk factors include the long lead time
required to obtain social permits (emphasizing the need for strong community
relations teams and programs), delays in obtaining government permits, poor
infrastructure in mountainous regions, the presence of anti-mining communities
or NGO's and the possibility of invasion of illegal miners.
Controls, mitigating actions and outlook
1. Increasing regional exploration drilling programmes to intensify
efforts in the districts with high potential.
2. For local exploration, aggressive drilling programmes to upgrade the
resources category and convert inferred resources into reserves.
3. A team of highly trained and motivated geologists, including both
employees and long-term contractors.
4. Advisory technical reviews by international third-party experts and
routine use of up-to-date and integrated GIS databases, cutting edge
geophysical and geochemical techniques, large to small scale hyperspectral
methods, remote sensing imagery and analytical software for identifying
favourable regions to be field checked by the team.
5. Maintain a pipeline of drill-ready high priority projects.
Link to strategy Risk appetite
1 Medium
Risk owner Risk oversight
· Exploration · The Board
· Projects · The Investment Committee
· Legal
BEHAVIOUR RISK RATING (RELATIVE POSITION)
Stable 2024: Medium (12)
2023: Medium (12)
13
Climate change
Risk description
The mining industry is highly exposed and sensitive to climate change:
- Societal responses to the transition to a low-carbon economy include
stricter regulations to reduce emissions, a transformation of the global
energy system, changes in behavioural and consumption choices, and emerging
technologies.
- Our operations and projects are expected to face severe physical
risks from extreme weather events, such as high temperatures, drought and
extreme rainfall from more frequent and intense hurricanes in the Pacific
Ocean. These potential natural disasters can affect the health and safety of
our people, damage access roads and mine infrastructure, disrupt operations
and affect our neighbouring communities.
The most significant risk we currently face relates to compliance with all
provisions and requirements of international agreements to reduce pollution
and greenhouse gas emissions and regulatory disclosure standards in both
Mexico and the UK.
In addition, the mining industry is also expected to face chronic risks in a
few years, such as rising temperatures, which may increase our demand for
water, or a decrease in annual rainfall, which is certain to exacerbate water
stress in the regions where we operate. The former risks may also intensify
competition for access to water resources, increasing the risks to the social
licence to operate.
Factors contributing to risk
Burning fossil fuels: Adds greenhouse gases to the atmosphere, which increases
the greenhouse effect and global warming.
Deforestation in areas where we have operations and projects: Intentional
logging, which adds greenhouse gases to the atmosphere.
Increased temperatures in desert areas where we operate: Can worsen air
quality and have effects on respiratory and cardiovascular health.
Changes in weather patterns: Can worsen air quality and cause respiratory and
cardiovascular effects.
Forest fires near units where we have operations or projects: Generate smoke
and other air pollutants harmful to health.
Oil and gas extraction: Main source of CO2 pollution.
Increasing livestock farming: Cows and sheep produce large amounts of methane
when they digest their food.
Controls, mitigating actions and outlook
1. Understanding our exposure on each asset through assessment programmes,
such as our critical risk assessment and asset integrity assurance programme,
and climate change resilience assessments with support from external
consultants such as PWC, Marsh, Zurich.
2. Having business resilience plans and emergency response plans, training and
annual exercises to prepare for a natural disaster, including established
communication plans and coordination with local, regional and state agencies.
3. Using the latest generation of climate analysis (weather forecasts, climate
outlooks, modelling and disaster projections) to obtain quantitative
information on short-, medium- and long-term physical climate risks.
4. Applying protection principles rather than a compliance-based approach
across our operations. Foster proactive relationships with international civil
society organisations, governments and environmental departments to support
protective legislation.
5. Actively supporting and reporting on our practices in relation to the
commitments in the International Council on Mining and Metals statement on
water management.
Link to strategy Risk appetite
1 - 2 - 3 - 4 Low
Risk owner Risk oversight
· ESG Department · HSECR Committee
· Legal Department
Behaviour Risk rating (relative position)
Stable 2024: Medium (13)
2023: Medium (13)
14
Tailings dams (overflow or collapse of tailings deposits)
Risk description
Ensuring the stability of our tailings storage facilities (TSFs) during their
entire lifecycles is central to our operations. A failure, collapse or
overtopping of any of our TSFs could result in fatalities, damage to the
environment, regulatory violations, reputational damage and disruption to the
quality of life of neighbouring communities as well as our operations.
Before constructing a dam, we conduct a series of studies to confirm the
suitability of the area. These studies include geotechnical, geological,
geophysical, hydrological, hydrogeological, and seismic analyses. Before
construction begins, the Ministry of Environment and Natural Resources
(SEMARNAT), through the Federal Office for Environmental Protection (PROFEPA),
conducts several assessments.
Most of our operative facilities were designed and constructed under local and
national controls and standards; following investigation, re-design, and
construction process over the last 4 years they also comply with Fresnillo´s
new tailings policy and guidelines.
Our understanding of historic facilities' conditions is not as mature as that
of the operative facilities but is a work in progress. As such, those
facilities remain on care and maintenance status (non-operative).
Having permits, licences and certifications from the government to be able to
operate TSFs is a risk due to the time involved in these procedures and the
legal complications. Planning new TSFs with the necessary time and to
international standards is also a risk, due to the limitations of the land
around our mines and the costs and time involved in constructing them. If we
don't manage these in a timely manner, we run the risk of disrupting the
operation.
Factors contributing to risk
The climate in recent years has become harsher in the regions where we
operate, i.e. more severe and prolonged rainfall, more intense air that takes
away the geomembrane liners, snowfall, and frost that complicates the
operation, etc.
Controls, mitigating actions and outlook
1. The Global Industry Standard on Tailings Management (GISTM) was
published in 2020 and is considered to be best practice. We understand the
value and importance it brings to our industry, and we continually review and
assess the impact of compliance. Taking GISTM into account, we have updated
our risk assessment methods with a focus on more detailed risk identification,
failure modes, and controls to avoid catastrophic failures.
2. We launched a new tailings policy in 2023, based on the industry´s
best practices, reinforcing our commitment to the safety and health of our
workforce, communities, and the environment. Each year, internal audit and
external auditors specialised in tailings dams such as "Hawcroft Consulting"
and "Knight Piésold Consulting" check our compliance with the policy.
3. Catastrophic failures of TSFs are unacceptable and their potential for
failure is evaluated and addressed throughout the life of each facility. We
manage our TSFs in a manner that allows the effectiveness of their design,
operation, and closure to be monitored at the highest levels of the Company:
- Our TSFs are constantly monitored, and all relevant information is
provided to the authorities, regulating bodies, and the communities that could
be affected.
- We manage our TSFs using data, modelling, and construction and
operating methods validated and recorded by qualified technical teams and
reviewed by independent international experts, whose recommendations we
implement to strengthen the control environment.
- Risk management includes timely risk identification, control
definition, and verification. Controls are based on the consequences of the
potential failure of the tailing's facilities.
4. In 2024 we continued several initiatives to align our governance practices
with current best practices:
- Updating the inventory of the TSFs and validating the data log.
- Reviewing findings of the Independent Tailings Review Panel (ITRP) and
prioritizing recommendations arising from inspections.
External sources of confidence
- Complying with Independent Tailings Review Panel (ITRP) annual
review program. This panel is comprised by renowned international experts.
- Periodically we are inspected by the Independent Tailings Review
Panel, who issue corrective and preventive recommendations to keep the
tailings dams in good condition. In 2024, the Independent Tailings Review
Panel visits were made to all Fresnillo plc tailings dams.
Behaviour Risk rating (relative position)
Stable 2024: Medium (14)
2023: Medium (14)
Risk owner Risk oversight
· TSF´s Department · HSECR Committee
· Safety & Environmental Department · Executive Committee
Link to strategy Risk appetite
4 Low
15
Environmental incidents (cyanide spills and chemical contamination)
RISK DESCRIPTION
Environmental incidents are an inherent risk in our industry. These incidents
include the possible cyanide spills and dust emissions, any of which could
have a high impact on our people, communities and businesses. We seek to
achieve operational excellence to ensure that our employees and contractors go
home safe and healthy, and that there are no adverse impacts on the
communities and the environment where we operate.
An operating incident that damages the environment could affect both our
relationship with local stakeholders and our reputation, reducing the social
value we generate.
We continue to be alert to the following risks:
· Cyanide management risk.
· Impact on the environment through erosion/deforestation/forest
loss or disturbance of biodiversity because of the operations of the business
unit or project activities.
· An event involving a leak or spill of cyanide or SO2, which due
to its chemical properties could generate an event of major consequence on the
premises of the business unit and / or in the nearby area. Tailings pipelines
leading from the plant to the storage deposits are where there is the highest
risk of spills, especially at the Fresnillo and Saucito mines.
Environmental issues directly related to climate change and tailings storage
are considered in our specific principal risks 'Climate Change' and 'Tailings
dams'.
FACTORS CONTRIBUTING TO RISK
Climate change in the regions where we operate is beginning to increase the
risk of incidents impacting the environment, mainly due to more extreme
rainfall.
We operate in challenging environments, including forests and agricultural
areas in Chihuahua and Durango, and Sonora Desert, where water scarcity is a
key problem.
Disruptions and lack of supply of critical inputs for the operation.
Failure to address the recommendations of external audits, especially those
related to the environment.
CONTROLS, MITIGATING ACTIONS AND OUTLOOK
1. We work to raise awareness among employees and contractors, providing
training to promote operational excellence.
2. The potential environmental impact of a project is a key consideration when
assessing its viability, and we encourage the integration of innovative
technology in the project design to mitigate such impacts.
3. We have an environmental management system in place. We have strengthened
the regulatory risk pillar of the environmental management system,
incorporating monthly updates of environmental regulations. Furthermore, we
now regularly monitor the Environmental Authority inspection processes to
assure compliance with our environmental commitments and action plans.
4. Each site maintains updated environmental emergency preparedness and
detailed closure plans with appropriate financial provisions to ensure
physical and chemical stability once operations have ceased.
5. We comply with international best practices as promoted by the
International Cyanide Management Institute (ICMI) and the Mexican standard
NOM-155SEMARNAT-2007, which establishes environmental requirements for gold
and silver leaching systems.
External sources of confidence
Fresnillo and Saucito are ISO 9001 certified; Fresnillo, Saucito, Herradura
and Noche Buena are ISO 14001 and ISO 45011 certified.
Our Herradura and Noche Buena leaching operations comply with the Cyanide Code
issued by the International Cyanide Code Institute with the respective
certification.
Behaviour Risk rating (relative position)
Stable 2023: Medium (15)
2022: Medium (15)
Risk owner Risk oversight
· Safety & Environmental Department · HSECR Committee
Link to strategy Risk appetite
4 Low
Statement of Directors' responsibilities
The Directors are responsible for preparing the annual report and the Group
and Parent Company financial statements in accordance with applicable United
Kingdom law and regulations.
The Directors are required to prepare financial statements for each financial
year which present a true and fair view of the financial position of the
Company and of the Group and the financial performance and cash flows of the
Company and of the Group for that period. The Directors have elected to
prepare the Group and Parent Company financial statements in accordance with
UK-adopted International Accounting Standards.
In preparing those financial statements, the Directors are required to:
• select suitable accounting policies in accordance with IAS 8:
'Accounting Policies, Changes in Accounting Estimates and Errors' and then
apply them consistently;
• make judgements and accounting estimates that are reasonable and
prudent;
• present information, including accounting policies, in a manner that
provides relevant, reliable, comparable and understandable information;
• provide additional disclosures when compliance with the specific
requirements in IFRSs is insufficient to enable users to understand the impact
of particular transactions, other events and conditions on the Company and of
the Group's financial position and financial performance;
• state whether UK-adopted international accounting standards have been
followed, subject to any material departures disclosed and explained in the
financial statements; and
• prepare the accounts on a going concern basis unless, having assessed
the ability of the Company and the Group to continue as a going concern unless
it is appropriate to presume that the Company and/or the Group will not
continue in business.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company's and Group's transactions and
which disclose with reasonable accuracy at any time the financial position of
the Company and of the Group and enable them to ensure that the financial
statements comply with the Companies Act 2006. They are also responsible for
safeguarding the assets of the Company and the Group and hence for taking
reasonable steps for the prevention and detection of fraud and other
irregularities.
Under applicable UK law and regulations, the Directors are responsible for the
preparation of a Strategic report, Directors' report, Directors' Remuneration
report and Corporate Governance statement that comply with that law and
regulations. In addition, the Directors are responsible for the maintenance
and integrity of the corporate and financial information included on the
Company's website. Legislation in the UK governing the preparation and
dissemination of financial statements may differ from legislation in
other jurisdictions.
Neither the Company nor the Directors accept any liability to any person in
relation to the annual financial report except to the extent that such
liability could arise under English law. Accordingly, any liability to a
person who has demonstrated reliance on any untrue or misleading statement or
omission shall be determined in accordance with section 90A and schedule 10A
of the Financial Services and Markets Act 2000.
Directors' responsibility statement under the UK Corporate Governance Code
In accordance with Provision 27 of the 2018 UK Corporate Governance Code, the
Directors consider that the annual report and accounts, taken as a whole, is
fair, balanced and understandable and provides information necessary to enable
shareholders to assess the Company's position, performance, business model and
strategy.
Responsibility statement of the Directors in respect of the annual report and
accounts
Each of the Directors confirm that to the best of their knowledge:
a) the consolidated financial statements, prepared in accordance with
UK-adopted international accounting standards give a true and fair view of the
assets, liabilities, financial position and profit and loss of the Company and
the undertakings included in the consolidation taken as a whole; and
b) the annual report (including the Strategic report encompassed within the
'Overview', 'Strategic report', 'Performance' and 'Governance' sections)
includes a fair review of the development and performance of the business, and
the position of the Company and the undertakings included in the consolidation
taken as a whole, together with a description of the principal risks and
uncertainties that they face.
For and on behalf of the Board.
Alberto Tiburcio
Independent Non-executive Director
3 March 2025
Year ended 31 December 2024 Year ended 31 December 2023
Notes US$ thousands US$ thousands
Pre-Silverstream Silverstream Total Pre-Silverstream Silverstream Total
revaluation
revaluation
revaluation
revaluation
effect
effect
effect
effect
Revenues 5 3,496,385 3,496,385 2,705,086 2,705,086
Cost of sales 6 (2,250,112) (2,250,112) (2,201,848) (2,201,848)
Gross profit 1,246,273 1,246,273 503,238 503,238
Administrative expenses (109,514) (109,514) (128,428) (128,428)
Exploration expenses 7 (163,048) (163,048) (182,447) (182,447)
Selling expenses (46,154) (46,154) (34,023) (34,023)
Other operating income 9 39,559 39,559 35,324 35,324
Other operating expenses 9 (21,296) (21,296) (51,169) (51,169)
Profit before net finance costs and income tax 945,820 945,820 142,495 142,495
Finance income 10 46,936 46,936 50,623 50,623
Finance costs 10 (73,571) (73,571) (88,846) (88,846)
Revaluation effects of Silverstream contract 14 - (182,276) (182,276) - 7,732 7,732
Foreign exchange gain 6,993 6,993 2,014 2,014
Profit before income tax 926,178 (182,276) 743,902 106,286 7,732 114,018
Corporate income tax 11 (444,870) 54,683 (390,187) 207,367 (2,320) 205,047
Special mining right 11 (127,024) (127,024) (30,765) (30,765)
Income tax 11 (571,894) 54,683 (517,211) 176,602 (2,320) 174,282
Profit for the year 354,284 (127,593) 226,691 282,888 5,412 288,300
Attributable to:
Equity shareholders of the Company 268,513 (127,593) 140,920 228,497 5,412 233,909
Non-controlling interest 85,771 85,771 54,391 54,391
354,284 (127,593) 226,691 282,888 5,412 288,300
Earnings per share: (US$)
Basic and diluted earnings per Ordinary Share 12 0.191 0.317
Adjusted earnings per share: (US$)
Adjusted basic and diluted earnings per Ordinary Share 12 0.364 0.310
( )
Year ended 31 December
Notes 2024 2023
US$ thousands
US$ thousands
Profit for the year 226,691 288,300
Other comprehensive income/(expense)
Items that may be reclassified subsequently to profit or loss:
Foreign currency translation (3,366) (2,318)
Net other comprehensive loss that may be reclassified subsequently to profit (3,366) (2,318)
or loss:
Items that will not be reclassified to profit or loss:
Changes in the fair value of cash flow hedges (201) 452
Total effect of cash flow hedges (201) 452
Changes in the fair value of equity investments at fair value through other 35,309 (53,136)
comprehensive income (FVOCI)
Remeasurement loss on defined benefit plans 22 (199) (126)
Income tax effect on items that will not be reclassified to profit or loss 11 (10,502) 15,826
Net other comprehensive income/(loss) that will not be reclassified to profit 24,407 (36,984)
or loss
Other comprehensive income/(loss), net of tax 21,041 (39,302)
Total comprehensive income for the year, net of tax 247,732 248,998
Attributable to:
Equity shareholders of the Company 162,022 194,476
Non-controlling interests 85,710 54,522
247,732 248,998
.
As at 31 December
Notes 2024 2023
US$ thousands
US$ thousands
ASSETS
Non-current assets
Property, plant and equipment (PPE) 13 2,538,665 2,860,916
Equity instruments at FVOCI 30 (b) 139,968 107,991
Silverstream contract 14 214,437 446,538
Deferred tax asset 11 466,734 665,302
Inventories 15 69,760 69,760
Other receivables 16 5,264 43,528
Other assets 3,101 4,553
3,437,929 4,198,588
Current assets
Inventories 15 412,417 462,973
Trade and other receivables 16 674,211 419,666
Prepayments 13,881 23,178
Income tax recoverable - 62,740
Derivative financial instruments 30 - 79
Silverstream contract 14 44,204 35,802
Short-term investments 17 187,403 -
Cash and cash equivalents 17 1,110,413 534,580
2,442,529 1,539,018
Total assets 5,880,458 5,737,606
EQUITY AND LIABILITIES
Capital and reserves attributable to shareholders of the Company
Share capital 18 368,546 368,546
Share premium 18 1,153,817 1,153,817
Capital reserve 18 (526,910) (526,910)
Hedging reserve 18 (92) 50
Fair value reserve of financial assets at FVOCI 18 66,594 42,591
Foreign currency translation reserve 18 (7,570) (4,204)
Retained earnings 18 2,800,956 2,737,962
3,855,341 3,771,852
Non-controlling interests 355,029 295,345
Total equity 4,210,370 4,067,197
As at 31 December
Notes 2024 2023
US$ thousands
US$ thousands
Non-current liabilities
Interest-bearing loans 20 839,507 839,002
Notes payable 30(a) - 22,726
Lease liabilities 25 7,581 9,777
Provision for mine closure cost 21 233,748 280,467
Pensions and other post-employment benefit plans 22 11,454 13,211
Deferred tax liability 11 209,213 133,202
1,301,503 1,298,385
Current liabilities
Trade and other payables 23 223,779 258,105
Notes payable 30 (a) 2,055 72,634
Income tax payable 113,221 21,779
Derivative financial instruments 30 189 -
Lease liabilities 25 4,312 4,813
Provision for mine closure cost 21 11,781 11,849
Employee profit sharing 13,248 2,844
368,585 372,024
Total liabilities 1,670,088 1,670,409
Total equity and liabilities 5,880,458 5,737,606
These financial statements were approved by the Board of Directors on 3 March
2025 and signed on its behalf by:
Dr Arturo Fernández
Non-executive Director
3 March 2025
Year ended 31 December
Notes 2024 2023
US$ thousands
US$ thousands
Net cash from operating activities 29 1,299,802 425,922
Cash flows from investing activities
Purchase of property, plant and equipment 3 (370,542) (483,409)
Proceeds from the sale of property, plant and equipment and other assets 2,563 1,592
Proceeds from the sale of mining concessions 9 10,000 -
Proceeds from Silverstream contract 14 29,957 40,158
Proceeds from the Layback Agreement(1) 2 (c) - 22,800
Purchase of equity instruments at FVOCI 30 (b) (1,466) (2,313)
Disposal of equity instruments at FVOCI 30 (b) 5,098 -
Short-term investments 17 (187,403) -
Interest received 46,333 51,641
Net cash used in investing activities (465,460) (369,531)
Cash flows from financing activities
Proceeds from notes payable 30(a) - 22,726
Payment of notes payable 30(a) (92,361) (32,965)
Repayment of interest-bearing loans 20 - (317,879)
Principal element of lease payments 25 (a) (5,443) (6,068)
Dividends paid to shareholders of the Company(2) 19 (78,156) (108,351)
Dividends paid to non-controlling interests in subsidiaries 4 (a) (26,400) -
Capital contribution(3) - 9,667
Interest paid(4,5) (45,917) (62,964)
Net cash used in financing activities (248,277) (495,834)
Net decrease in cash and cash equivalents during the year 586,065 (439,443)
Effect of exchange rate on cash and cash equivalents (10,232) 4,963
Cash and cash equivalents at 1 January 534,580 969,060
Cash and cash equivalents at 31 December 17 1,110,413 534,580
(1) (Corresponds to the last payment of the Layback Agreement entered with
Orla Mining Ltd in December 2020 for the right to expand the Camino Rojo oxide
pit onto Fresnillo mineral concession.)
(2) (Includes the effect of hedging of dividend payments made in currencies
other than US dollar (note 19).)
(3) (Corresponds to capital contributions provided by Minera los Lagartos,
S.A. de C.V.)
(4) (During the year ended 31 December 2024 there were no amounts
capitalised. Total interest during the year ended 31 December 2023 less
amounts capitalised totalling US$2.1 million which is included within the
caption Purchase of property, plant and equipment.)
(5) (As of 31 December 2024 includes US$1.2 million related to a commitment
fee in respect of undrawn amounts of the syndicated revolving credit facility
entered by the Group. No amounts have been drawdown from the credit facility
as of 31 December 2024.)
Attributable to the equity holders of the Company
Notes Share Share premium Capital reserve Hedging reserve Fair value reserve of financial assets at FVOCI Foreign currency translation reserve Retained earnings Total Non-controlling interests Total
capital
equity
US$ thousands
Balance at 1 January 2023 368,546 1,153,817 (526,910) (91) 79,786 (1,886) 2,612,469 3,685,731 231,206 3,916,937
Profit for the year - - - - - - 233,909 233,909 54,391 288,300
Other comprehensive income, net of tax - - - 173 (37,195) (2,318) (93) (39,433) 131 (39,302)
Total comprehensive income for the year - - - 173 (37,195) (2,318) 233,816 194,476 54,522 248,998
Hedging loss transferred to the carrying value of PPE purchased during the - - - (32) - - - (32) (50) (82)
year
Capital contribution - - - - - - - - 9,667 9,667
Dividends declared and paid 19 - - - - - - (108,323) (108,323) - (108,323)
Balance at 31 December 2023 368,546 1,153,817 (526,910) 50 42,591 (4,204) 2,737,962 3,771,852 295,345 4,067,197
Profit for the year - - - - - - 140,920 140,920 85,771 226,691
Other comprehensive income, net of tax - - - (95) 24,716 (3,366) (153) 21,102 (61) 21,041
Total comprehensive income for the year - - - (95) 24,716 (3,366) 140,767 162,022 85,710 247,732
Hedging loss transferred to the carrying value of PPE purchased during the - - - (47) - - - (47) (1) (48)
year
Transfer of gain on disposal of equity investments at FVOCI to retained 30 (b) - - - - (713) - 713 - - -
earnings (net of tax)
Recognition of non-controlling interest 4 (a) - - - - - - (375) (375) 375 -
Dividends declared and paid 19 - - - - - - (78,111) (78,111) (26,400) (104,511)
Balance at 31 December 2024 368,546 1,153,817 (526,910) (92) 66,594 (7,570) 2,800,956 3,855,341 355,029 4,210,370
1. Corporate information
Fresnillo plc. ("the Company") is a public limited company and registered in
England and Wales with registered number 6344120 and is the holding company
for the Fresnillo subsidiaries detailed in note 5 of the Parent Company
accounts ('the Group').
Industrias Peñoles S.A.B. de C.V. ('Peñoles') currently owns 75 percent of
the shares of the Company and the ultimate controlling party of the Company is
the Baillères family, whose beneficial interest is held through Peñoles. The
registered address of Peñoles is Calzada Legaria 549, Mexico City 11250.
Copies of Peñoles' accounts can be obtained from www.penoles.com.mx. Further
information on related party balances and transactions with Peñoles' group
companies is disclosed in note 27.
The consolidated financial statements of the Group for the year ended 31
December 2024 were authorised for issue by the Board of Directors of Fresnillo
plc on 3 March 2025.
The Group's principal business is the mining and beneficiation of non-ferrous
minerals, and the sale of related production. The primary contents of this
production are silver, gold, lead and zinc. During 2024 99.6% of the
production were sold to Peñoles' metallurgical complex, Met-Mex (2023: 99.9%
of the production), for smelting and refining. Further information about the
Group operating mines and its principal activities is disclosed in note 3.
2. Significant accounting policies
(a) Basis of preparation and consolidation, and statement of compliance
Basis of preparation and statement of compliance
The Group consolidated financial statements have been prepared in accordance
with UK-adopted international accounting standards in accordance with the
provisions of the Companies Act 2006.
The consolidated financial statements have been prepared on a historical cost
basis, except for trade receivables, derivative financial instruments, equity
securities and defined benefit pension scheme assets which have been measured
at fair value.
The consolidated financial statements are presented in dollars of the United
States of America (US dollars or US$) and all values are rounded
to the nearest thousand ($000) except when otherwise indicated.
Going concern
The Group's business activities, together with the factors likely to affect
its future development, performance and position are set out above in the
Strategic Review. The financial position of the Group, its cash flows and
liquidity position are described in the Financial Review. In addition, note 31
to the financial statements includes the Group's objectives, policies and
processes for managing its capital; its financial risk management objectives;
details of its financial instruments and hedging activities; and its exposures
to credit risk and liquidity risk.
In making their assessment of the Group's ability to manage its future cash
requirements, the Directors have considered the Company and Group budgets and
the cash flow forecasts for the period to 31st December 2026. In addition,
they reviewed a more conservative cash flow scenario with reduced silver and
gold prices of US$12.8 and US$1,057 respectively throughout this period,
whilst maintaining current budgeted expenditure while only considering
projects approved by the Executive Committee. This resulted in our current
cash balances reducing over time but maintaining sufficient liquidity
throughout the period.
The Directors have further calculated prices (US$16.1 and US$1,325 for silver
and gold respectively), which should they prevail to the end of 2026 would
result in cash balances decreasing to minimal levels by the end of 2026,
without applying mitigations.
Should metal prices remain below the stressed prices above for an extended
period, management have identified specific elements of capital and
exploration expenditures which could be deferred without adversely affecting
production profiles throughout the period. On the other hand, management could
amend the mining plans to concentrate on production with a higher margin in
order to accelerate cash generation without affecting the integrity of the
mine plans. Finally, to maintain a strong liquidity, in January 2024
management acquired a committed revolving credit facility of US$350 million,
which could be used if needed.
After reviewing all of the above considerations, the Directors have a
reasonable expectation that management have sufficient flexibility in adverse
circumstances to maintain adequate resources to continue in operational
existence for the foreseeable future The Directors, therefore, continue to
adopt the going concern basis of accounting in preparing the annual financial
statements.
Basis of consolidation
The consolidated financial statements set out the Group's financial position
as of 31 December 2024 and 2023, and the results of operations and cash flows
for the years then ended.
Entities that constitute the Group are those enterprises controlled by the
Group regardless of the number of shares owned by the Group. The Group
controls an entity when it is exposed to, or has the right to, variable
returns from its involvement with the entity and has the ability to affect
those returns through its power over the entity. Entities are consolidated
from the date on which control is transferred to the Group and cease to be
consolidated from the date on which control is transferred out of the Group.
The Group applies the acquisition method to account for business combinations
in accordance with IFRS 3.
All intra-group balances, transactions, income and expenses and profits and
losses, including unrealised profits arising from intra-group transactions,
have been eliminated on consolidation. Unrealised losses are eliminated in the
same way as unrealised gains except that they are only eliminated to the
extent that there is no evidence of impairment.
Non-controlling interests in the net assets of consolidated subsidiaries are
identified separately from the Group's equity therein. The interest of
non-controlling shareholders may be initially measured either at fair value or
at the non-controlling interest's proportionate share of the acquiree's
identifiable net assets. The choice of measurement basis is made on an
acquisition by-acquisition basis. Subsequent to acquisition, non-controlling
interests consist of the amount attributed to such interests at initial
recognition and the non-controlling interest's share of changes in equity
since the date of the combination. Any losses of a subsidiary are attributed
to the non-controlling interests even if that results in a deficit balance.
Transactions with non-controlling interests that do not result in loss of
control are accounted for as equity transactions - that is, a transaction with
the owners in their capacity as owners. The difference between fair value of
any consideration paid and the relevant share acquired of the carrying value
of net assets of the subsidiary is recorded in equity. Gains or losses on
disposals to non-controlling interest are also recorded in equity.
(b) Changes in accounting policies and disclosures
The accounting policies adopted in the preparation of the consolidated
financial statements are consistent with those applied in the preparation of
the consolidated financial statements for the year ended 31 December 2023.
New standards, interpretations and amendments (new standards) adopted by the
Group
A number of new or amended standards became applicable for the current
reporting period. The Group did not have to change its accounting policies or
make retrospective adjustments as a result of adopting these standards.
The Group has evaluated the applicability of Pillar II rules considering that
the Parent Company and the main subsidiaries of the Group are tax resident in
Mexico, management also assessed the status of the Pillar II legislation in
the country, however no laws or regulations have been enacted to the date of
this report.
Standards, interpretations and amendments issued but not yet effective
The International Accounting Standards Board (IASB) has issued new standards,
interpretation and other amendments resulting from improvements to IFRSs that
management considers do not have any impact on the accounting policies,
financial position or performance of the Group except for the new standard
IFRS 18-Presentation and Disclosure in Financial Statements; this new standard
replaces IAS 1-Presentation of Financial Statements, with a focus on updates
to the statement of profit or loss. This new standard is applicable for
periods commencing 1 January 2027, early adoption is permitted. The Group is
currently assessing the impact of IFRS 18 and plans to adopt the new standard
on the required effective date.
The Group has not early adopted any standard, interpretation or amendment that
was issued but is not yet effective.
(c) Significant accounting judgements, estimates and assumptions
The preparation of the Group's consolidated financial statements in conformity
with IFRS requires management to make judgements, estimates and assumptions
that affect the reported amounts of assets, liabilities and contingent
liabilities at the date of the consolidated financial statements and reported
amounts of revenues and expenses during the reporting period. These judgements
and estimates are based on management's best knowledge of the relevant facts
and circumstances, with regard to prior experience, but actual results may
differ from the amounts included in the consolidated financial statements.
Information about such judgements and estimates is contained in the accounting
policies and/or the notes to the consolidated financial statements.
Judgements
Areas of judgement, apart from those involving estimations, that have the most
significant effect on the amounts recognised in the consolidated financial
statements for the year ended 31 December 2024 are:
Recoverability of Soledad and Dipolos assets:
In 2009, five members of the El Bajio agrarian community in the state of
Sonora, who claimed rights over certain surface land in the proximity of the
operations of Minera Penmont ('Penmont'), submitted a legal claim before the
Unitarian Agrarian Court (Tribunal Unitario Agrario) of Hermosillo, Sonora, to
have Penmont vacate an area of this surface land. The land in dispute
encompassed a portion of surface area where part of the operations of the
Soledad & Dipolos mine are located. The litigation resulted in a
definitive court order, with which Penmont complied by vacating 1,824 hectares
of land in 2013, resulting in the suspension of operations at Soledad &
Dipolos. Whilst the claim and the definitive court order did not affect the
Group's legal title over the mining concession or the ore currently held in
leaching pads near the mine site, land access at the mine site is required to
further exploit the concession at Soledad & Dipolos.
Penmont is the legal and registered owner of the land where the leaching pads
are located but has not yet been able to gain physical access to these pads
due to opposition by certain local individuals. This land was purchased by
Penmont from the Federal Government of Mexico in accordance with legal
procedures. The Group has a reasonable expectation that Penmont will
eventually regain access to the Soledad & Dipolos assets and process the
ore content in the Soledad & Dipolos leaching pads. This expectation
considers different scenarios, including but not limited to the different
legal proceedings that Minera Penmont has presented in order to regain access
to the land, and other proceedings that members of the El Bajío agrarian
community have presented seeking the cancellation of Penmont's property deed
over this area, which proceedings are pending final resolution. Therefore, the
Group continues to recognise property, plant & equipment and inventory
related to Soledad & Dipolos, as disclosed in note 13 and note 15,
respectively. Due to the fact that it is not yet certain when access may be
granted so that the inventory can be processed, this inventory is classified
as a non-current asset.
In regard to the inventory, during the first half of the year 2023 the Company
identified certain suspected illegal extraction of gold content at its
Soledad-Dipolos leaching pads. The Company estimates a loss of approximately
20,000 ounces of gold content and consequently recognised a write off of
US$21.9 million regarding the Soledad-Dipolos gold contents in inventory,
which has been presented as other expenses in the Consolidated Income
Statement. The Company took relevant actions with the support of diverse
authorities to stop the illegal extraction. During the second half of the
year, a procedural visit by authorities took place. During the visit of the
authorities to the mine site it was confirmed there were no personnel carrying
out any illegal mining activities at Soledad & Dipolos leaching pads. The
inventory write-off considered both the estimation of recoverable amount of
gold existing at the leaching pad, and potential volume of solution being
irrigated on the area that is believed to have been leached to date. However,
the nature of estimation means that actual outcome may differ from those
estimates. During 2024 the Group has not identified further losses of this
inventory.
Furthermore, claimants from the El Bajío community also presented claims
against occupation agreements they entered into with Penmont, covering land
parcels other than the surface land where Soledad & Dipolos is located.
Penmont has had no significant mining operations or specific geological
interest in the affected parcels and these lands are therefore not considered
strategic for Penmont. The Agrarian Court has issued rulings declaring such
occupation agreements over those land parcels to be null and void and that
Penmont must remediate such lands to the state that they were in before
Penmont's occupation as well as returning any minerals extracted from this
area. The case relating to the claims over these land parcels remains subject
to final conclusion, as appeals are progressing as expected. However, given
that Penmont has not conducted significant mining operations or had specific
geological interest in these land parcels, any contingencies (including
environmental remediation) relating to such land parcels are not considered
material by the Group. There are no material assets recognised in respect of
these land parcels at 31 December 2024.
Climate change:
In the climate disclosure in the Strategic Report, the Group set out its
assessment of climate risks and opportunities (CROs). The Group recognises
that there may be potential financial statement implications in the future in
respect of the mitigation and adaptation measures to the physical and
transition risks. The potential effect of climate change would be in respect
of assets and liabilities that are measured based on an estimate of future
cash flows. The Group specifically considered the effect of climate change on
the valuation of property, plant and equipment, deferred tax assets, the
Silverstream contract, and the provision for mine closure cost. The Group does
not have any assets or liabilities for which measurement is directly linked to
climate change performance (for example: Sustainability-Linked Bonds).
The main ways in which climate has affected the preparation of the financial
statements are:
• The Group has already made certain climate-related strategic decisions,
such as to focus on decarbonisation and to increase the use of wind energy.
Where decisions have been approved by the Board, the effects were considered
in the preparation of these financial statements by way of inclusion in future
cash flow projections underpinning the estimation of the recoverable amount of
property, plant and equipment and deferred tax assets, as relevant.
• As described in Note 14, the costs inherent in the Silverstream contract
are determined based on the provisions of that contract. This reduces the
exposure of the valuation of the asset to the effect of any cost implications
related to CROs.
• Further information about the potential effect of CROs on the provision
for mine closure cost is set out in Note 21.
The Group's strategy consists of mitigation and adaptation measures. To
mitigate the impacts by and on climate change the Company relies on renewable
electricity, fuel replacement and efficiency opportunities to reduce the
carbon footprint. The approach to adaptation measures is based on climate
models to produce actionable information for the design, construction,
operation and closure of its mining assets, considering climate change. In
addition, societal expectations are driving government action that may impose
further requirements and cost on companies in the future. Future changes to
the Group's climate change strategy, global decarbonisation signposts and
regulation may impact the Group's significant judgements and key estimates and
result in material changes to financial results and the carrying values of
certain assets and liabilities in future reporting periods. However, as at the
balance sheet date the Group believes there is no material impact on balance
sheet carrying values of assets or liabilities. Although this is an estimate,
it is not considered a critical estimate.
Uncertain tax positions:
The current income tax charge is calculated on the basis of the tax laws
enacted or substantively enacted at the end of the reporting period in the
countries where the company and its subsidiaries operate and generate taxable
income. Management periodically evaluates positions taken in tax returns with
respect to situations in which applicable tax regulation is subject to
interpretation, and it considers whether it is probable that a taxation
authority will accept an uncertain tax treatment. The Group measures its tax
balances based on either the most likely amount or the expected value,
depending on which method provides a better prediction of the resolution of
the uncertainty.
Estimates and assumptions
Significant areas of estimation uncertainty considered by management in
preparing the consolidated financial statements include:
Estimated recoverable ore reserves and mineral resources, note 2(e):
Ore reserves are estimates of the amount of ore that can be economically and
legally extracted from the Group's mining properties. Mineral resources are an
identified mineral occurrence with reasonable prospects for eventual economic
extraction. The Group estimates its ore reserves and mineral resources based
on information compiled by appropriately qualified persons relating to the
geological and technical data on the size, depth, shape and grade of the ore
body and suitable production techniques and recovery rates, in conformity with
the Joint Ore Reserves Committee (JORC) code 2012. Such an analysis requires
complex geological judgements to interpret the data. The estimation of
recoverable ore reserves and mineral resources is based upon factors such as
geological assumptions and judgements made in estimating the size and grade of
the ore body, estimates of commodity prices, foreign exchange rates, future
capital requirements and production costs.
As additional geological information is produced during the operation of a
mine, the economic assumptions used and the estimates of ore reserves and
mineral resources may change. Such changes may impact the Group's reported
balance sheet and income statement including:
· The carrying value of property, plant and equipment and mining
properties may be affected due to changes in the recoverable amount, which
consider both ore reserves and mineral resources, refer to note 13;
· Depreciation and amortisation charges in the income statement may
change where such charges are determined using the unit-of-production method
based on ore reserves, refer to note 13;
· Stripping costs capitalised in the balance sheet, either as part
of mine properties or inventory, or charged to profit or loss may change due
to changes in stripping ratios, refer to note 13;
· Provisions for mine closure costs may change where changes to the
ore reserve and resources estimates affect expectations about when such
activities will occur, refer to note 21;
· The recognition and carrying value of deferred income tax assets
may change due to changes regarding the existence of such assets and in
estimates of the likely recovery of such assets, refer to note 11.
Estimate of recoverable ore on leaching pads, note 15:
In the Group's open pit mines, certain mined ore is placed on leaching pads
where a solution is applied to the surface of the heap to dissolve the gold
and enable extraction. The determination of the amount of recoverable gold
requires estimation with consideration of the quantities of ore placed on the
pads, the grade of the ore (based on assay data) and the estimated recovery
percentage (based on metallurgical studies and current technology).
The grades of ore placed on pads are regularly compared to the quantities of
metal recovered through the leaching process to evaluate the appropriateness
of the estimated recovery (metallurgical balancing). The Group monitors the
results of the metallurgical balancing process and recovery estimates are
refined based on actual results over time and when new information becomes
available. Any potential future adjustment would be applicable from the point
of re-estimation and would not by itself change the value of inventory and as
such no sensitivity included.
Silverstream, note 14:
The valuation of the Silverstream contract as a derivative financial
instrument requires estimation by management. The term of the derivative is
based on the Sabinas life of mine and the value of this derivative is
determined using a number of estimates, including the estimated future silver
production which is based on the ore Management considers is possible to
extract on the same basis a market participant would consider. For the year
ended 31 December 2024, and following consideration of the mine's operational
difficulties notified by Penoles in November 2024, Management has re-evaluated
the estimation considering only recoverable ore reserves (31 December 2023:
ore reserves and a portion of mineral resources considering the expected rate
of conversion to reserves). Additionally, in the valuation of the contract
Management considers other estimates including future production profile of
the Sabinas mine , the estimated recoveries of silver from ore mined,
estimates of the future price of silver and the discount rate used to discount
future cash flows. Further detail on the inputs that have a significant
effect on the fair value of this derivative, and the impact of changes in key
assumptions are included in note 14.
Income tax, notes 2 (r) and 11:
The recognition of deferred tax assets, including those arising from
un-utilised tax losses, requires management to assess the likelihood that the
Group will generate taxable earnings in future periods, in order to utilise
recognised deferred tax assets. Estimates of future taxable income are based
on forecast cash flows from operations and the application of existing tax
laws in each jurisdiction. Estimated cash flows are not significantly
sensitive to reasonable possible changes to key assumptions on which
management bases the recoverable value calculations. The carrying value of
deferred tax assets is disclosed in note 11.
(d) Foreign currency translation
The Group's consolidated financial statements are presented in US dollars,
which is the Parent Company's functional currency. The functional currency for
each entity in the Group is determined by the currency of the primary economic
environment in which it operates. The determination of functional currency
requires management judgement, particularly where there may be more than one
currency in which transactions are undertaken and which impact the economic
environment in which the entity operates. For all operating entities, this is
US dollars.
Transactions denominated in currencies other than the functional currency of
the entity are translated at the exchange rate ruling at the date of
the transaction. Monetary assets and liabilities denominated in foreign
currencies are re-translated at the rate of exchange ruling at the balance
sheet date. All differences that arise are recorded in the income statement.
Non-monetary items that are measured in terms of historical cost in a foreign
currency are translated using the exchange rates as at the dates of the
initial transactions. Non-monetary items measured at fair value in a foreign
currency are translated into US dollars using the exchange rate at the date
when the fair value is determined.
For entities with functional currencies other than US dollars as at the
reporting date, assets and liabilities are translated into the reporting
currency of the Group by applying the exchange rate at the balance sheet date
and the income statement is translated at the average exchange rate for the
year. The resulting difference on exchange is included as a cumulative
translation adjustment in other comprehensive income. On disposal of an
entity, the deferred cumulative amount recognised in other comprehensive
income relating to that operation is recognised in the income statement.
(e) Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation
and impairment, if any. Cost comprises the purchase price and any costs
directly attributable to bringing the asset into working condition for its
intended use. The cost of self-constructed assets includes the cost of
materials, direct labour and an appropriate proportion of production
overheads.
The cost less the residual value of each item of property, plant and equipment
is depreciated over its useful life. Each item's estimated useful life
has been assessed with regard to both its own physical life limitations and
the present assessment of economically recoverable reserves of the mine
property at which the item is located. Estimates of remaining useful lives are
made on a regular basis for all mine buildings, machinery and equipment, with
annual reassessments for major items. Depreciation is charged to cost of sales
on a unit-of-production (UOP) basis for mine buildings and installations,
plant and equipment used in the mine production process (except mobile
equipment) or on a straight-line basis over the estimated useful life of the
individual asset that are not related to the mine production process. Changes
in estimates, which mainly affect unit-of-production calculations, are
accounted for prospectively. Depreciation commences when assets are available
for use. Land is not depreciated.
The average expected useful lives based on actual life of mines are as
follows:
Years
Buildings 6
Plant and equipment 10
Mining properties and development costs(1) 10
Other assets 5
(1 Depreciation of mining properties and development cost are determined using
the unit-of-production method.)
An item of property, plant and equipment is de-recognised upon disposal or
when no future economic benefits are expected from its use or disposal. Any
gain or loss arising at de-recognition of the asset (calculated as the
difference between the net disposal proceeds and the carrying amount
of the asset) is included in the income statement in the year that the asset
is de-recognised.
Non-current assets or disposal groups are classified as held for sale when it
is expected that the carrying amount of the asset will be recovered
principally through sale rather than through continuing use. Assets are not
depreciated when classified as held for sale.
Disposal of assets
Gains or losses from the disposal of assets are recognised in the income
statement when all significant risks and rewards of ownership are transferred
to the customer, usually when title has been passed.
Mining properties and development costs
Payments for mining concessions are expensed during the exploration phase of a
prospect and capitalised during the development of the project when incurred.
Purchased rights to ore reserves and mineral resources are recognised as
assets at their cost of acquisition or at fair value if purchased as part
of a business combination.
Mining concessions, when capitalised, are amortised on a straight-line basis
over the period of time in which benefits are expected to be obtained from
that specific concession.
Mine development costs are capitalised as part of property, plant and
equipment. Mine development activities commence once a feasibility study
has been performed for the specific project. When an exploration prospect has
entered into the advanced exploration phase and sufficient evidence of the
probability of the existence of economically recoverable minerals has been
obtained pre-operative expenses relating to mine preparation works are also
capitalised as a mine development cost.
The initial cost of a mining property comprises its construction cost, any
costs directly attributable to bringing the mining property into operation,
the initial estimate of the provision for mine closure cost, and, for
qualifying assets, borrowing costs. The Group cease the capitalisation of
borrowing cost when the physical construction of the asset is complete and is
ready for its intended use.
Ore generated as part of the development stage may be processed and sold,
giving rise to revenue before the commencement of commercial production. Where
such processing is necessary to bring mining assets into the condition
required for their intended use (for example, in testing the plants at the
mining unit in development), revenues from metals recovered from such
activities are recognised in profit or loss.
Upon commencement of production, capitalised expenditure is depreciated using
the unit-of-production method based on the estimated economically proven and
probable reserves to which they relate.
Mining properties and mine development are stated at cost, less accumulated
depreciation and impairment in value, if any.
Construction in progress
Assets in the course of construction are capitalised as a separate component
of property, plant and equipment. On completion, the cost of construction is
transferred to the appropriate category of property, plant and equipment. The
cost of construction in progress is not depreciated.
Subsequent expenditures
All subsequent expenditure on property, plant and equipment is capitalised if
it meets the recognition criteria, and the carrying amount of those
parts that are replaced, is de-recognised. All other expenditure including
repairs and maintenance expenditure is recognised in the income statement as
incurred.
Stripping costs
In a surface mine operation, it is necessary to remove overburden and other
waste material in order to gain access to the ore bodies (stripping activity).
During development and pre-production phases, the stripping activity costs are
capitalised as part of the initial cost of development and construction of the
mine (the stripping activity asset) and charged as depreciation or depletion
to cost of sales, in the income statement, based on the mine's units of
production once commercial operations begin.
Removal of waste material normally continues throughout the life of a surface
mine. At the time that saleable material begins to be extracted from the
surface mine the activity is referred to as production stripping.
Production stripping cost is capitalised only if the following criteria are
met:
· It is probable that the future economic benefits (improved access
to an ore body) associated with the stripping activity will flow to the Group;
· The Group can identify the component of an ore body for which
access has been improved; and
· The costs relating to the improved access to that component can
be measured reliably.
If not all of the criteria are met, the production stripping costs are charged
to the income statement as operating costs as they are incurred.
Stripping activity costs associated with such development activities are
capitalised into existing mining development assets, as mining properties and
development cost, within property, plant and equipment, using a measure that
considers the volume of waste extracted compared with expected volume, for a
given volume of ore production. This measure is known as "component stripping
ratio", which is revised annually in accordance with the mine plan. The amount
capitalised is subsequently depreciated over the expected useful life of the
identified component of the ore body related to the stripping activity asset,
by using the units of production method. The identification of components and
the expected useful lives of those components are evaluated as new information
of reserves and resources is available.
The capitalised stripping activity asset is carried at cost less accumulated
depletion/depreciation, less impairment, if any. Cost includes the
accumulation of costs directly incurred to perform the stripping activity that
improves access to the identified component of ore, plus an allocation of
directly attributable overhead costs. The costs associated with incidental
operations are excluded from the cost of the stripping activity asset.
(f) Impairment of non-financial assets
The carrying amounts of non-financial assets are reviewed for impairment if
events or changes in circumstances indicate that the carrying value may not be
recoverable. At each reporting date, an assessment is made to determine
whether there are any indicators of impairment. If there are indicators
of impairment, an exercise is undertaken to determine whether carrying values
are in excess of their recoverable amount. Such reviews are undertaken on an
asset by asset basis, except where such assets do not generate cash flows
independent of those from other assets or groups of assets, and then the
review is undertaken at the cash generating unit level.
If the carrying amount of an asset or its cash generating unit exceeds the
recoverable amount, a provision is recorded to reflect the asset at
the recoverable amount in the balance sheet. Impairment losses are recognised
in the income statement.
The recoverable amount of an asset
The recoverable amount of an asset is the greater of its value in use and fair
value less costs of disposal. In assessing value in use, estimated future cash
flows are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks
specific to the asset. The cash flows used to determine the recoverable amount
of mining assets are based on the mine plan for each mine. The mine plan is
determined based on the estimated and economically proven and probable
reserves, as well as certain other resources that are assessed as highly
likely to be converted into reserves. Fair value less cost of disposal is
based on an estimate of the amount that the Group may obtain in an orderly
sale transaction between market participants. For an asset that does not
generate cash inflows largely independently of those from other assets, or
groups of assets, the recoverable amount is determined for the cash generating
unit to which the asset belongs. The Group's cash generating units are the
smallest identifiable groups of assets that generate cash inflows that are
largely independent of the cash inflows from other assets or groups of assets.
Reversal of impairment
An assessment is made each reporting date as to whether there is any
indication that previously recognised impairment losses may no longer exist or
may have decreased. If such an indication exists, the Group makes an estimate
of the recoverable amount. A previously recognised impairment loss is reversed
only if there has been a change in estimates used to determine the asset's
recoverable amount since the impairment loss was recognised. If that is the
case, the carrying amount of the asset is increased to the recoverable amount.
That increased amount cannot exceed the carrying amount that would have been
determined, net of depreciation, had no impairment loss been recognised in
previous years. Such impairment loss reversal is recognised in the income
statement.
(g) Financial assets and liabilities
Financial assets
The Group classifies its financial assets in the following measurement
categories:
· those to be measured at amortised cost.
· those to be measured subsequently at FVOCI, and.
· those to be measured subsequently at fair value through profit or
loss.
The classification depends on the Group's business model for managing the
financial assets and the contractual terms of the cash flows.
For assets measured at fair value, gains and losses will either be recorded in
profit or loss or OCI. For investments in equity instruments that are not held
for trading, this will depend on whether the group has made an irrevocable
election at the time of initial recognition to account for the equity
investment at FVOCI.
The Group reclassifies debt investments when and only when its business model
for managing those assets changes.
Purchases or sales of financial assets that require delivery of assets within
a time frame established by regulation or convention in the market place
(regular way trades) are recognised on the trade date, i.e., the date that the
Group commits to purchase or sell the asset.
At initial recognition, the Group measures a financial asset at its fair value
plus, in the case of a financial asset not at fair value through profit or
loss (FVPL), transaction costs that are directly attributable to the
acquisition of the financial asset. Transaction costs of financial assets
carried at FVPL are expensed in profit or loss.
Financial assets with embedded derivatives are considered in their entirety
when determining whether their cash flows are solely payment of principal and
interest.
Subsequent measurement of debt instruments depends on the Group's business
model for managing the asset and the cash flow characteristics of the asset.
Classification
The Group holds the following financial assets:
Amortised cost
Assets that are held for collection of contractual cash flows where those cash
flows represent solely payments of principal and interest are measured at
amortised cost. Interest income from these financial assets is included in
finance income using the effective interest rate method. Gains and losses are
recognised in profit or loss when the asset is derecognised, modified or
impaired..
The Group's financial assets at amortised cost include receivables (other than
trade receivables which are measured at fair value through profit and loss).
Equity instruments designated as fair value through other comprehensive income
Upon initial recognition, the Group can elect to classify irrevocably its
equity investments as equity instruments designated at fair value through OCI
when they meet the definition of equity under IAS 32 Financial Instruments:
Presentation and are not held for trading. The classification is determined on
an instrument-by-instrument basis.
Gains and losses on these financial assets are never recycled to profit or
loss. Dividends are recognised as other income in the statement of profit or
loss when the right of payment has been established, except when the Group
benefits from such proceeds as a recovery of part of the cost of the financial
asset, in which case, such gains are recorded in OCI. Equity instruments
designated at fair value through OCI are not subject to impairment
assessment.
The Group elected to classify irrevocably its listed equity investments under
this category.
Fair value through profit or loss
Assets that do not meet the criteria for amortised cost or FVOCI are measured
at FVPL. A gain or loss on a debt investment that is subsequently measured at
FVPL is recognised in profit or loss and presented net within other
gains/(losses) in the period in which it arises.
Changes in the fair value of financial assets at FVPL are recognised in other
gains/(losses) in the statement of profit or loss as applicable.
The Group's trade receivables and derivative financial instruments, including
the Silverstream contract, are classified as fair value through profit or
loss.
De-recognition of financial assets
Financial assets are derecognised when the rights to receive cash flows from
the financial assets have expired or have been transferred and the Group has
transferred substantially all the risks and rewards of ownership.
Impairment of financial assets
The Group assesses on a forward-looking basis the expected credit losses
associated with its debt instruments carried at amortised cost and FVOCI. The
impairment methodology applied depends on whether there has been a significant
increase in credit risk.
For receivables (other than trade receivables which are measured at FVPL), the
Group applies the simplified approach permitted by IFRS 9, which requires
expected lifetime losses to be recognised from initial recognition of the
receivables.
Financial liabilities
The Group classifies its financial liabilities as follows:
Financial liabilities are classified, at initial recognition, as financial
liabilities at fair value through profit or loss, loans and borrowings,
payables, or as derivatives designated as hedging instruments in an effective
hedge, as appropriate.
All financial liabilities are recognised initially at fair value and, in the
case of loans and borrowings and payables, net of directly attributable
transaction costs.
The Group's financial liabilities include trade and other payables, loans and
borrowings and derivative financial instruments.
Measurement
For purposes of subsequent measurement, financial liabilities held by the
Group are classified as financial liabilities as amortised cost.
After initial recognition, interest-bearing loans and borrowings are
subsequently measured at amortised cost using the effective interest rate
(EIR) method. Gains and losses are recognised in profit or loss when the
liabilities are derecognised as well as through the EIR amortisation process.
Amortised cost is calculated by considering any discount or premium on
acquisition and fees or costs that are an integral part of the EIR. The EIR
amortisation is included as finance costs in the statement of profit or loss.
De-recognition of financial liabilities
A financial liability is derecognised when the obligation under the liability
is discharged or cancelled or expires. When an existing financial liability is
replaced by another from the same lender on substantially different terms, or
the terms of an existing liability are substantially modified, such an
exchange or modification is treated as the derecognition of the original
liability and the recognition of a new liability. The difference in the
respective carrying amounts is recognised in the statement of profit or loss.
(h) Inventories
Finished goods, work in progress and ore stockpile inventories are measured at
the lower of cost and net realisable value. Cost is determined using the
weighted average cost method based on cost of production which excludes
borrowing costs.
For this purpose, the costs of production include:
- personnel expenses, which include employee profit sharing;
- materials and contractor expenses which are directly attributable to the
extraction and processing of ore;
- the depreciation of property, plant and equipment used in the extraction
and processing of ore; and
- related production overheads (based on normal operating capacity).
Work in progress inventory comprises ore in leaching pads as processing is
required to extract benefit from the ore. The recovery of gold is achieved
through the heap leaching process. The leaching process may take months to
obtain the expected metal recovery and mainly depends on the continuity of the
leaching process. When the ore in leaching pads is in active leaching, it is
classified as current. When the leaching process has stopped and not expected
to restart within twelve months, ore in the leaching pads affected is
classified as non-current.
Operating materials and spare parts are valued at the lower of cost or net
realisable value. An allowance for obsolete and slow-moving inventories is
determined by reference to specific items of stock. A regular review is
undertaken by management to determine the extent of such an allowance.
Net realisable value is the estimated selling price in the ordinary course of
business less any further costs expected to be incurred to completion and
disposal.
(i) Short-term investments
Where the Group invests in short-term instruments with a maturity higher than
three months and which are either not readily convertible into known amounts
of cash or are subject to risk of changes in value that are not insignificant,
these instruments are classified as short-term investments.
(j) Cash and cash equivalents
For the purposes of the balance sheet, cash and cash equivalents comprise cash
at bank, cash on hand and short-term deposits held with banks that are readily
convertible into known amounts of cash and which are subject to insignificant
risk of changes in value. Short-term deposits earn interest at the respective
short-term deposit rates between one day and three months.
(k) Provisions
Mine closure cost
A provision for mine closure cost is made in respect of the estimated future
costs of closure, restoration and for environmental rehabilitation costs
(which include the dismantling and demolition of infrastructure, removal of
residual materials and remediation of disturbed areas) based on a mine closure
plan, in the accounting period when the related environmental disturbance
occurs. The provision is discounted and the unwinding of the discount is
included within finance costs. At the time of establishing the provision, a
corresponding asset is capitalised where it gives rise to a future economic
benefit and is depreciated over future production considering proven and
probable reserves from the mine to which it relates. The provision is reviewed
on an annual basis by the Group for changes in cost estimates, discount rates
or life of operations based on the estimated mine production which includes
ore reserves and a certain amount of mineral resources. Changes to estimated
future costs are recognised in the balance sheet by adjusting the mine closure
cost liability and the related asset originally recognised. If, for mature
mines, the revised mine assets net of mine closure cost provisions exceed the
recoverable value, the portion of the increase is charged directly as an
expense. For closed sites, changes to estimated costs are recognised
immediately in profit or loss.
(l) Employee benefits
The Group operates the following plans for its employees based on Mexico:
Defined benefit pension plan
This funded plan is based on each employee's earnings and years of service.
This plan was open to all employees in Mexico until it was closed to new
entrants on 1 July 2007. The plan is denominated in Mexican Pesos. For members
as at 30 June 2007, benefits were frozen at that date subject to indexation
with reference to the Mexican National Consumer Price Index (NCPI).
The present value of defined benefit obligations under the plan is determined
using the projected unit credit actuarial valuation method and prepared by an
external actuarial firm as at each year-end balance sheet date. The discount
rate is the yield on bonds that have maturity dates approximating the terms of
the Group's obligations and that are denominated in the same currency in which
the benefits are expected to be paid. Actuarial gains or losses are recognised
in OCI and permanently excluded from profit or loss.
Past service costs are recognised when the plan amendment or curtailment
occurs and when the entity recognises related restructuring costs or
termination benefits.
The defined benefit asset or liability comprises the present value of the
defined benefit obligation less the fair value of plan assets out of which
the obligations are to be settled directly. The value of any asset is
restricted to the present value of any economic benefits available in the form
of refunds from the plan or reductions in the future contributions to the
plan.
Net interest cost is recognised within finance cost and return on plan assets
(other than amounts reflected in net interest cost) is recognised in OCI and
permanently excluded from profit or loss.
Defined contribution pension plan
A defined contribution plan is a post-employment benefit plan under which the
Group pays fixed contributions into a separate entity and has no legal or
constructive obligation to pay further amounts. Obligations for contributions
to defined contribution pension plans are recognised as an employee benefit
expense in profit or loss when they are due. The contributions are based on
the employee's salary.
This plan started on 1 July 2007 and it is voluntary for all employees to join
this scheme.
Seniority premium for voluntary separation
This unfunded plan corresponds to an additional payment over the legal
seniority premium equivalent to approximately 12 days of salary per year
for those unionised workers who have more than 15 years of service.
Non-unionised employees with more than 15 years of service have the right
to a payment equivalent to 12 days for each year of service. For both cases,
the payment is based on the legal current minimum salary.
The cost of providing benefits for the seniority premium for voluntary
separation is determined using the projected unit credit actuarial valuation
method and prepared by an external actuarial firm as at each year-end balance
sheet date. Actuarial gains or losses are recognised as income or expense in
the period in which they occur.
Other
Benefits for death and disability are covered through insurance policies.
Termination payments for involuntary retirement (dismissals) are charged to
the income statement, when incurred.
(m) Employee profit sharing
In accordance with the Mexican legislation, companies in Mexico are subject to
pay for employee profit sharing ('PTU') equivalent to ten percent of the
taxable income of each fiscal year capped to three months of salary or average
of the profit sharing paid in the last three years.
PTU is calculated based on the services rendered by employees during the year,
considering their most recent salaries. The liability is recognised as it
accrues and is charged to the income statement as personnel expenses. PTU,
paid in each fiscal year, is deductible for income tax purposes.
(n) Leases
Group as a lessee
The Group assesses at contract inception whether a contract is, or contains, a
lease. That is, if the contract conveys the right to control the use of an
identified asset for a period of time in exchange for consideration.
Assets and liabilities arising from a lease are initially measured on a
present value basis. Lease liabilities include the net present value of the
following lease payments:
- fixed payments (including in-substance fixed payments), less any lease
incentives receivable variable lease payment that are based on an index or a
rate;
- amounts expected to be payable by the lessee under residual value
guarantees;
- the exercise price of a purchase option if the lessee is reasonably
certain to exercise that option; and
- payments of penalties for terminating the lease, if the lease term
reflects the lessee exercising that option.
The lease payments are discounted using the interest rate implicit in the
lease. If that rate cannot be determined, the lessee's incremental borrowing
rate is used, being the rate that the lessee would have to pay to borrow the
funds necessary to obtain an asset of similar value in a similar economic
environment with similar terms and conditions.
Right-of-use assets are measured at cost comprising the following:
- the amount of the initial measurement of lease liability;
- any lease payments made at or before the commencement date less any
lease incentives received;
- any initial direct costs; and
- restoration costs.
Each lease payment is allocated between the liability and finance cost. The
finance cost is charged to profit or loss over the lease period so as to
produce a constant periodic rate of interest on the remaining balance of the
liability for each period. The right-of-use asset is depreciated over the
shorter of the asset's useful life and the lease term on a straight-line
basis.
The Group is exposed to potential future increases in variable lease payments
based on an index or rate, which are not included in the lease liability until
they take effect. When adjustments to lease payments based on an index or rate
take effect, the lease liability is reassessed and adjusted against the
right-of-use asset.
Variable lease payments that are not linked to price changes due to changes in
a market rate or the value of an index and are linked to future performance or
use of an underlying asset are not included in the measurement of the lease
liability. Such costs are recognized in profit and loss as incurred.
Payments associated with short-term leases and leases of low-value assets are
recognised on a straight-line basis as an expense in profit or loss.
Short-term leases are leases with a lease term of 12 months or less. Low-value
assets comprise IT-equipment.
(o) Revenue from contracts with customers
Revenue is recognised when control of goods or services transfers to the
customers based on the performance obligations settle in the contracts with
customers.
Sale of goods
Revenue associated with the sale of concentrates, doré, slag, precipitates
and activated carbon (the products) is recognised when control of the asset
sold is transferred to the customers. Indicators of control transferring
include an unconditional obligation to pay, legal title, physical possession,
transfer of risk and rewards and customers' acceptance. This generally occurs
when the goods are delivered to the customer's smelter or refinery agreed with
the buyer; at which point the buyer controls the goods.
The revenue is measured at the amount to which the Group expects to be
entitled, being the estimate of the price expected to be received in the
expected month of settlement and the Group's estimate of metal quantities
based on assay data, and a corresponding trade receivable is recognised. Any
future changes that occur before settlement are embedded within the
provisionally priced trade receivables and are, therefore, within the scope of
IFRS 9 and not within the scope of IFRS 15.
Given the exposure to the commodity price, these provisionally priced trade
receivables will fail the cash flow characteristics test within IFRS 9 and
will be required to be measured at fair value through profit or loss up from
initial recognition and until the date of settlement. These subsequent changes
in fair value are recognised in revenue but separately from revenue from
contracts with customers.
Invoiced revenues to our customers for products other than refined silver and
gold, are derived from the value of metal content which is determined by
commodity market prices and adjusted for the treatment and refining charges to
be incurred by the metallurgical complex of our customers. Refining and
treatment charges represent an element of the cost that will be incurred by
our customers in processing the products further to extract the metal content
for onward sale to its customers (See note 5(c)).
(p) Exploration expenses
Exploration activity involves the search for mineral resources, the
determination of technical feasibility and the assessment of commercial
viability of an identified resource.
Exploration expenses are charged to the income statement as incurred and are
recorded in the following captions:
Cost of sales: costs relating to in-mine exploration, that ensure continuous
extraction quality and extend mine life, and
Exploration expenses:
- Costs incurred in geographical proximity to existing mines in order to
replenish or increase reserves, and
- Costs incurred in regional exploration with the objective of locating
new ore deposits, which are identified by project, in areas where the Group
carriers out exploration activity. Currently the Group carries out exploration
activities in Mexico and Latin America.
- Costs incurred are charged to the income statement until there is
sufficient probability of the existence of economically recoverable minerals
and a feasibility study has been performed for the specific project from which
time further expenses are capitalised as exploration costs on balance sheet as
Property, plant and equipment.
(q) Selling expenses
The Group recognises in selling expenses a levy in respect of the
Extraordinary Mining Right as sales of gold and silver are recognised. The
Extraordinary Mining Right consists of a 0.5% rate, applicable to the owners
of mining titles. The payment must be calculated over the total sales of all
mining concessions. The payment of this mining right must be remitted no later
than the last business day of March of the following year and can be credited
against corporate income tax. In November 2024 the Mexican Federal Executive
proposed a change in the Federal Rights Law increasing the rate of the
Extraordinary Mining Right from 0.5% to 1.0%. This amendment was enacted in
December 2024 and applies for the fiscal year commencing 1 January 2025
onwards.
The Group also recognises in selling expenses a discovery premium royalty
equivalent to 1% of the value of the mineral extracted and sold during the
year from certain mining titles granted by the Mexican Geological Survey (SGM)
in the San Julian mine. The premium is settled to SGM on a quarterly basis.
(r) Taxation
Current income tax
Current income tax assets and liabilities for the current and prior periods
are measured at the amount expected to be recovered from or paid to the
taxation authorities. The tax rates and tax laws used to compute the amount
are those that are enacted or substantively enacted, at the reporting date in
the country in which the Group operates.
Deferred income tax
Deferred income tax is provided using the liability method on temporary
differences at the balance sheet date between the tax bases of assets
and liabilities and their carrying amounts for financial reporting purposes.
Deferred income tax liabilities are recognised for all taxable temporary
differences, except:
· where the deferred income tax liability arises from the initial
recognition of goodwill or of an asset or liability in a transaction that is
not a business combination and, at the time of transaction, affects neither
the accounting profit nor taxable profit loss; and
· in respect of taxable temporary differences associated with
investments in subsidiaries, associates and interests in joint ventures, where
the timing of the reversal of the temporary differences can be controlled and
it is probable that the temporary differences will not reverse in the
foreseeable future.
Deferred income tax assets are recognised for all deductible temporary
differences, carry forward of unused tax credits and unused tax losses, to
the extent that it is probable that taxable profit will be available against
which the deductible temporary differences, and the carry forward of unused
tax credits and unused tax losses can be utilised, except:
· where the deferred income tax asset relating to deductible
temporary differences arise from the initial recognition of an asset or
liability in a transaction that is not a business combination and, at the time
of the transaction, affects neither the accounting profit nor taxable profit
or loss; and in respect of deductible temporary differences associated with
investments in subsidiaries, associates and interests in joint ventures,
deferred income tax assets are recognised only to the extent that it is
probable that the temporary differences will reverse in the foreseeable future
and taxable profit will be available against which the temporary differences
can be utilised.
The carrying amount of deferred income tax assets is reviewed at each balance
sheet date and reduced to the extent that it is no longer probable
that sufficient taxable profit will be available to allow all or part of the
deferred income tax asset to be utilised.
Unrecognised deferred income tax assets are reassessed at each balance sheet
date and are recognised to the extent that it has become probable that future
taxable profit will allow the deferred tax asset to be recovered.
Deferred income tax assets and liabilities are measured at the tax rates that
are expected to apply to the year when the asset is realised or the liability
is settled, based on tax rates (and tax laws) that have been enacted or
substantively enacted at the balance sheet date.
Deferred income tax relating to items recognised directly in other
comprehensive income is recognised in equity and not in the income statement.
Deferred income tax assets and deferred income tax liabilities are offset, if
a legally enforceable right exists to set off current tax assets against
current income tax liabilities and the deferred income taxes relate to the
same taxable entity and the same taxation authority.
Mining Rights
The Special Mining Right is considered an income tax under IFRS and states
that the owners of mining titles and concessions are subject to pay an annual
mining right of 7.5% of the profit derived from the extractive activities
(note 11 (e)). The Group recognises deferred tax assets and liabilities on
temporary differences arising in the determination of the Special Mining Right
(See note 11).
Sales tax
Expenses and assets are recognised net of the amount of sales tax, except when
the sales tax incurred on a purchase of assets or services is not recoverable
from the taxation authority, in which case, the sales tax is recognised as
part of the cost of acquisition of the asset or as part of the expense item.
The net amount of sales tax recoverable from, or payable to, the taxation
authority is included as part of receivables or payables in the balance sheet.
(s) Derivative financial instruments and hedging
The Group uses derivatives to reduce certain market risks derived from changes
in foreign exchange which impact its financial and business transactions.
Such derivative financial instruments are initially recognised at fair value
on the date on which a derivative contract is entered into and are
subsequently remeasured at fair value. Derivatives are carried as assets when
the fair value is positive and as liabilities when the fair value is negative.
The full fair value of a derivative is classified as non-current asset or
liability if the remaining maturity of the item is more than 12 months.
Any gains or losses arising from changes in fair value on derivatives during
the year that do not qualify for hedge accounting are taken directly to
the income statement as finance income or finance cost respectively.
Derivatives are valued using valuation approaches and methodologies (such as
Black Scholes and Net Present Value) applicable to the specific type
of derivative instrument. The fair value of forward currency and commodity
contracts is calculated by reference to current forward exchange rates
for contracts with similar maturity profiles, European foreign exchange and
commodity options are valued using the Black Scholes model. The Silverstream
contract is valued using a Net Present Value valuation approach.
The documentation includes identification of the hedging instrument, the
hedged item, the nature of the risk being hedged and how the Group will assess
whether the hedging relationship meets the hedge effectiveness requirements
(including the analysis of sources of hedge ineffectiveness and how the hedge
ratio is determined). A hedging relationship qualifies for hedge accounting if
it meets all of the following effectiveness requirements:
• There is 'an economic relationship' between the hedged item and the
hedging instrument.
• The effect of credit risk does not 'dominate the value changes' that
result from that economic relationship.
• The hedge ratio of the hedging relationship is the same as that resulting
from the quantity of the hedged item that the Group actually hedges and the
quantity of the hedging instrument that the Group actually uses to hedge that
quantity of hedged item.
Hedges which meet the criteria for hedge accounting are accounted for as cash
flow hedges.
For derivatives that are designated and qualify as cash flow hedges, the
effective portion of changes in the fair value of derivative instruments is
recorded as in other comprehensive income and are transferred to the income
statement when the hedged transaction affects profit or loss, such as when a
forecast sale or purchase occurs. For gains or losses related to the hedging
of foreign exchange risk these are included, in the line item in which the
hedged costs are reflected. Where the hedged item is the cost of
a non-financial asset or liability, the amounts recognised in other
comprehensive income are transferred to the initial carrying amount of the
non-financial asset or liability. This is not a reclassification adjustment
and will not be recognised in OCI for the period. The ineffective portion of
changes in the fair value of cash flow hedges is recognised directly as
finance costs, in the income statement of the related period.
If the hedging instrument expires or is sold, terminated or exercised without
replacement or rollover, or if its designation as a hedge is revoked, any
cumulative gain or loss recognised directly in other comprehensive income from
the period that the hedge was effective remains separately in other
comprehensive income until the forecast transaction occurs, when it is
recognised in the income statement. When a forecast transaction is no longer
expected to occur, the cumulative gain or loss that was reported in other
comprehensive income is immediately transferred to the income statement.
When hedging with options, the Group designates only the intrinsic value
movement of the hedging option within the hedge relationship. The time value
of the option contracts is therefore excluded from the hedge designation. In
such cases, changes in the time value of options are initially recognised in
OCI as a cost of hedging. Where the hedged item is transaction related,
amounts initially recognised in OCI related to the change in the time value of
options are reclassified to profit or loss or as a basis adjustment to
non-financial assets or liabilities upon maturity of the hedged item, or, in
the case of a hedged item that realises over time, the amounts initially
recognised in OCI are amortised to profit or loss on a systematic and rational
basis over the life of the hedged item.
When hedging with forward contracts, the forward element is included in the
designation of the financial instrument. Therefore, there is no cost of
hedging in relation to forward contracts.
(t) Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or
production of an asset that necessarily takes 12 or more months to get ready
for its intended use or sale (a qualifying asset) are capitalised as part of
the cost of the respective asset. Borrowing costs consist of interest and
other costs that an entity incurs in connection with the borrowing of funds.
Where funds are borrowed specifically to finance a project, the amount
capitalised represents the actual borrowing costs incurred. Where surplus
funds are available for a short term from funds borrowed specifically to
finance a project, the income generated from the temporary investment of such
amounts is also capitalised and deducted from the total capitalised borrowing
cost. Where the funds used to finance a project form part of general
borrowings, the amount capitalised is calculated using a weighted average of
rates applicable to relevant general borrowings of the Group during the
period.
All other borrowing costs are recognised in the income statement in the period
in which they are incurred.
(u) Fair value measurement
The Group measures financial instruments at fair value at each balance sheet
date. Fair values of financial instruments measured at amortised cost are
disclosed in note 30(b).
Fair value is the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at
the measurement date. The fair value measurement is based on the presumption
that the transaction to sell the asset or transfer the liability takes place
either:
In the principal market for the asset or liability, or;
In the absence of a principal market, in the most advantageous market for the
asset or liability.
The principal or the most advantageous market must be accessible to the Group.
The fair value of an asset or a liability is measured using the assumptions
that market participants would use when pricing the asset or liability,
assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market
participant's ability to generate economic benefits by using the asset in its
highest and best use or by selling it to another market participant that would
use the asset in its highest and best use.
The Group uses valuation techniques that are appropriate in the circumstances
and for which sufficient data are available to measure fair value, maximising
the use of relevant observable inputs and minimising the use of unobservable
inputs.
All assets and liabilities for which fair value is measured or disclosed in
the financial statements are categorised within the fair value hierarchy,
described as follows, based on the lowest level input that is significant to
the fair value measurement as a whole:
Level 1 - Quoted (unadjusted) market prices in active markets for identical
assets or liabilities
Level 2 - Valuation techniques for which the lowest level input that is
significant to the fair value measurement is directly or indirectly observable
Level 3 - Valuation techniques for which the lowest level input that is
significant to the fair value measurement is unobservable
For assets and liabilities that are recognised in the financial statements on
a recurring basis, the Group determines whether transfers have occurred
between levels in the hierarchy by re-assessing categorisation (based on the
lowest level input that is significant to the fair value measurement as a
whole) at the end of each reporting period.
For the purpose of fair value disclosures, the Group has determined classes of
assets and liabilities based on the nature, characteristics and risks of the
asset or liability and the level of the fair value hierarchy as explained
above. Further information on fair values is described in note 30.
(v) Dividend distribution
Dividends on the Company's ordinary shares are recognised when they have been
appropriately authorised and are no longer at the Company's discretion.
Accordingly, interim dividends are recognised when they are paid and final
dividends are recognised when they are declared following approval by
shareholders at the Company's Annual General Meeting.
3. Segment reporting
For management purposes, the Group is organised into operating segments based
on producing mines.
At 31 December 2024, the Group has seven reportable operating segments as
follows:
The Fresnillo mine, located in the state of Zacatecas, an underground silver
mine;
The Saucito mine, located in the state of Zacatecas, an underground silver
mine;
The Cienega mine, located in the state of Durango, an underground silver-gold
mine;
The Herradura mine, located in the state of Sonora, a surface gold mine;
The Noche Buena mine, located in state of Sonora, a surface gold mine;
The San Julian mine, located on the border of Chihuahua / Durango states, an
underground silver-gold mine, and
The Juanicipio mine, in the State of Zacatecas, an underground silver mine.
The operating performance and financial results for each of these mines are
reviewed by management. As the Group´s chief operating decision maker (CODM)
does not review segment assets and liabilities, the Group has not disclosed
this information.
Management monitors the results of its operating segments separately for the
purpose of performance assessment and making decisions about resource
allocation. Segment performance is evaluated without taking into account
certain adjustments included in Revenue as reported in the consolidated income
statement, and certain costs included within Cost of sales and Gross profit
which are considered to be outside of the control of the operating management
of the mines. The table below provides a reconciliation from segment profit to
Gross profit as per the consolidated income statement. Administrative
expenses, Exploration expenses, Selling expenses, and Other income and
expenses not related to production activities included in the consolidated
income statement are not allocated to operating segments. Also, the Group's
financing (including finance cost and finance income) and income taxes are
managed on a Group basis and are not allocated to operating segments.
Transactions between reportable segments are accounted for on an arm's length
basis similar to transactions with third parties.
In 2024 99.6% of revenue was derived from customers based in Mexico (2023:
99.9% of revenue was derived from customers based in Mexico)
Operating segments
The following tables present revenue and profit information regarding the
Group's operating segments for the year ended 31 December 2024 and 2023,
respectively. Revenues for the year ended 31 December 2024 and 2023 include
those derived from contracts with customers and other revenues, as shown in
note 5.
Year ended 31 December 2024
US$ thousands Fresnillo Herradura Cienega Saucito Noche San Julian Juanicipio Other(4) Adjustments and eliminations Total
Buena
Revenues:
Third party(1) 499,519 883,571 222,455 764,708 42,923 455,995 627,214 - - 3,496,385
Inter-segment 36,409 - - - - - 152 50,839 (87,400) -
Segment revenues 535,928 883,571 222,455 764,708 42,923 455,995 627,366 50,839 (87,400) 3,496,385
Segment profit(2) 277,333 323,696 92,898 405,077 4,348 253,494 475,113 49,102 (2,662) 1,878,399
Depreciation and amortisation in cost of sales (619,779)
Employee profit sharing in cost of sales (12,347)
Gross profit as per the income statement 1,246,273
Capital expenditure(3) 90,335 55,049 17,111 97,270 - 49,429 59,263 2,085 370,542
(1 During 2024 all segment revenues were derived from Met-Mex, except in
Juanicipio which includes sales of iron concentrate to another external
customers of US$14.7 million.)
(2 The Group's CODM primarily uses this measure to monitor the operating
results directly related to the production of its business units separately to
make decisions about resource allocation and performance assessment. Segment
profit excluding foreign exchange hedging gains, depreciation and amortisation
and employee profit sharing.)
(3 Capital expenditure represents the cash outflow in respect of additions to
property, plant and equipment, excluding additions relating to changes in the
mine closure provision. Significant additions include expansions of tailings
damn at Saucito, Fresnillo, Juanicipio and San Julian, mining works at San
Julian, Fresnillo and Saucito and stripping cost and construction of leaching
pads at Herradura mine.)
(4 Other inter-segment revenue corresponds to leasing services provided by
Minera Bermejal, S.A. de C.V; capital expenditure mainly corresponds to Minera
Bermejal, S. de R.L. de C.V.)
Year ended 31 December 2023
US$ thousands Fresnillo Herradura Cienega Saucito Noche San Julian Juanicipio(4) Other(5) Adjustments and eliminations Total
Buena
Revenues:
Third party(1) 422,963 708,242 162,013 590,269 84,210 385,469 351,920 - - 2,705,086
Inter-segment 4,254 - - - - - 90,368 52,287 (146,909) -
Segment revenues 427,217 708,242 162,013 590,269 84,210 385,469 442,288 52,287 (146,909) 2,705,086
Segment profit(2) 156,849 157,233 18,926 185,995 5,632 158,663 271,558 33,602 14,312 1,002,770
Depreciation and amortisation in cost of sales (497,303)
Employee profit sharing in cost of sales (2,229)
Gross profit as per the income statement 503,238
Capital expenditure(3) 97,809 56,923 43,841 125,052 52 74,824 82,167 2,741 - 483,409
(1 During 2023 all segment revenues were derived from Met-Mex, except in
Juanicipio which includes sales to another external customer of US$0.6
million.)
(2 The Group's CODM primarily uses this measure to monitor the operating
results directly related to the production of its business units separately to
make decisions about resource allocation and performance assessment. Segment
profit excluding foreign exchange hedging gains, depreciation and amortisation
and employee profit sharing. Segment profit for Fresnillo and Saucito
considers the sales and the corresponding processing cost of the ore from
Juanicipio.)
(3 Capital expenditure represents the cash outflow including interest
capitalised in respect of additions to property, plant and equipment,
excluding additions relating to changes in the mine closure provision.
Significant additions include stripping cost at Herradura mine and the
construction of tailing damns at San Julian and Saucito mines.)
(4 Some of the ore production of Juanicipio mine has been processed through
Fresnillo and Saucito facilities.)
(5 Other inter-segment revenue corresponds to leasing services provided by
Minera Bermejal, S.A. de C.V; capital expenditure mainly corresponds to Minera
Bermejal, S. de R.L. de C.V.)
4. Group information
The list of the Company's subsidiaries included in the consolidated financial
statements and its principal activities are shown in Note 5 on the Parent
Company's separate financial statements. The country of incorporation or
registration is also their principal place of business.
(a) Material partly-owned subsidiaries
The table below shows the detail of non-wholly owned subsidiaries of the Group
that have non-controlling interests:
Portion of ownership interest held by non-controlling interest Profit (loss) allocated to non-controlling interest Accumulated non-controlling interest
31-Dec-24 31-Dec-23 31-Dec-24 31-Dec-23 31-Dec-24 31-Dec-23
Minera Juanicipio, S. A. de C.V. 44% 44% 90,616 35,853 266,153 195,991
Equipos Chaparral, S. A. de C.V. 44% 44% (10,891) 18,311 86,443 97,377
Other subsidiaries with non-controlling interests not considered to be - - 6,046 227 2,433 1,977
material(1)
(1 In October 2024 the Group entered into an exploration joint venture in
Chile through its subsidiary Minera Capricorno, SCM (Capricornio) and Sociedad
Quimica y Minera de Chile, S.A. de C.V. (SQM), a Chilean mining company. The
agreement considers a transfer of 25% ownership which represent a net share of
US$0.4 million.)
Set out below is the summarised financial information for each subsidiary that
has non-controlling interests that are material to the Group. Figures are
presented in thousands of US dollars unless otherwise indicated.
Summarised income statement for the year ended 31 December 2024 and 2023
Minera Juanicipio, S. A. de C.V. Equipos Chaparral, S. A. de C.V.
31-Dec-24 31-Dec-23 31-Dec-24 31-Dec-23
Revenue 627,366 442,288 - -
Profit/(loss) before income tax 366,541 102,447 (21,698) 45,412
Income tax charge 160,595 20,962 3,054 3,797
Profit/(loss) for the year 205,946 81,485 (24,752) 41,615
Other comprehensive (loss)/gain (30) 31 90 8
Total comprehensive income/(loss) 205,946 81,516 (24,842) 41,623
Attributable to non-controlling interests 90,629 35,867 (10,930) 18,314
Dividends paid to non-controlling interests (26,400) - - -
Summarised statement of financial position as at 31 December 2024 and 2023
Minera Juanicipio, S. A. de C.V. Equipos Chaparral, S. A. de C.V.
31-Dec-24 31-Dec-23 31-Dec-24 31-Dec-23
Current
Assets 161,736 120,396 29,462 34,990
Liabilities (82,572) (197,260) (7,919) (35,708)
Total current net assets/(liabilities) 79,164 (76,864) 21,596 (718)
Non-current
Assets 730,074 776,156 174,871 222,030
Liabilities (204,266) (253,858) (6) -
Total non-current net assets 525,808 522,298 174,865 222,030
Net assets 604,972 445,434 196,461 221,312
Attributable to:
Equity holders of parent 338,819 249,443 110,018 123,935
Non-controlling interest 266,153 195,991 86,443 97,377
Summarised cash flow information for the year ended 31 December 2024 and 2023
Minera Juanicipio, S. A. de C.V. Equipos Chaparral, S. A. de C.V.
31-Dec-24 31-Dec-23 31-Dec-24 31-Dec-23
Operating 354,895 133,299 17,521 (33,126)
Investing (40,104) (48,936) 692 340
Financing (297,489) (57,448) (24,485) 509
Net increase/(decrease) in cash and cash equivalents 17,302 26,915 (6,272) (32,277)
5. Revenues
Revenues reflect the sale of goods, being concentrates, doré, slag,
precipitates and activated carbon of which the primary contents are silver,
gold lead and zinc.
(a) Revenues by source
Year ended 31 December
2024 2023
US$ thousands
US$ thousands
Revenues from contracts with customers 3,503,662 2,706,292
Revenues from other sources:
Provisional pricing adjustment on products sold (7,277) (1,206)
3,496,385 2,705,086
(b) Revenues by product sold
Year ended 31 December
2024 2023
US$ thousands
US$ thousands
Lead concentrates (containing silver, gold, lead and by-products) 1,652,909 1,320,155
Doré and slag (containing gold, silver and by-products) 753,747 708,036
Zinc concentrates (containing zinc, silver and by-products) 380,169 290,138
Precipitates (containing gold and silver) 522,077 301,707
Activated carbon (containing gold, silver and by-products) 172,747 84,416
Iron concentrates (containing silver, gold, lead and by-products) 14,736 634
3,496,385 2,705,086
(c) Value of metal content in products sold
Invoiced revenues are derived from the value of metal content which is
determined by commodity market prices and adjusted for the treatment and
refining charges to be incurred by the metallurgical complex of our customer.
The value of the metal content of the products sold, before treatment and
refining charges is considered as an alternative performance measure for the
Group. The Group considers this a useful additional measure to help understand
underlying factors driving revenue in terms of volumes sold and realised
prices. The value of production sold by metal is as follows:
Year ended 31 December
2024 2023
US$ thousands
US$ thousands
Silver 1,673,901 1,319,423
Gold 1,514,702 1,177,386
Zinc 311,557 250,782
Lead 139,789 121,483
Value of metal content in products sold 3,639,949 2,869,074
Refining and treatment charges(1) (143,564) (163,988)
Total revenues(2)(,) 3,496,385 2,705,086
(1 The methodology to determine the refining and treatment charges takes into
account industry benchmark charges and adjustments to reflect ore composition
and transport costs (refer to note 27(b).)
(2 Includes provisional price adjustments which represent changes in the fair
value of trade receivables resulting in a loss of US$7.2 million (2023: loss
of US$1.2 million). For further detail, refer to note 2(o).)
(
)
( )
The average realised prices for the gold and silver content of products sold,
prior to the deduction of treatment and refining charges, were:
Year ended 31 December
2024 2023
US$ per ounce
US$ per ounce
Gold 2,453.58 1,957.72
Silver 28.78 23.64
( )
6. Cost of sales
Year ended 31 December
2024 2023
US$ thousands
US$ thousands
Depreciation and amortisation 619,779 497,303
Contractors 351,474 393,997
Operating materials 304,946 292,450
Maintenance and repairs 289,475 299,924
Energy 249,517 256,507
Personnel expenses (note 8(a)) 230,312 210,583
Mine equipment leased (1) 59,156 69,754
Mining concession rights and contributions 27,192 23,045
Surveillance 21,705 23,983
Insurance 12,727 12,056
IT services 10,785 11,464
Freight 7,607 9,365
Other 29,672 23,154
Cost of production 2,214,347 2,123,585
Unabsorbed production costs(2) - 25,920
Gain on foreign currency hedges - (232)
Change in work in progress and finished goods (ore inventories) 35,765 52,575
2,250,112 2,201,848
(1 Corresponds to mine equipment leased to contractors, the lease payments are
based on a variable rate linked to the usage of the assets.)
(2 During 2023 corresponds to fixed cost at Juanicipio and pyrites plant of
US$3.9 million and US$1.7 million respectively, non-productive cost for the
temporary stoppage of activities in Penmont US$11.9 million and non-productive
fixed mine cost incurred in Noche Buena resulting from finalisation of mining
activities US$4.0 million. During 2024 there were no unabsorbed productions
cost.)
(
)
( )
( )
7. Exploration expenses
Year ended 31 December
2024 2023
US$ thousands
US$ thousands
Contractors 101,514 122,973
Mining concession rights and contributions 30,437 28,777
Personnel expenses (note 8(a)) 15,461 13,315
Assays 5,746 8,950
Administrative services 1,406 2,057
Rentals 869 570
Other 7,615 5,805
163,048 182,447
These exploration expenses were mainly incurred in the operating mines located
in Mexico; the Guanajuato and Orisyvo projects; and the Tajitos prospect.
Exploration expenses of US$17.6 million (2023: US$14.1 million) were incurred
in the year on projects located in Peru and Chile.
Cash flows relating to exploration activities are as follows:
Year ended 31 December
2024 2023
US$ thousands
US$ thousands
Operating cash outflows related to exploration activities 162,837 182,359
8. Personnel expenses
Year ended 31 December
2024 2023
US$ thousands
US$ thousands
Salaries and wages 108,800 109,470
Statutory healthcare and housing contributions 48,214 42,393
Bonuses 36,547 34,099
Other benefits 29,704 28,414
Employees' profit sharing 13,609 2,390
Post-employment benefits 9,684 12,799
Vacations and vacations bonus 8,727 6,541
Legal contributions 5,625 6,104
Training 1,923 2,532
Other 4,625 5,313
267,458 250,055
(a) Personnel expenses are reflected in the following line items:
Year ended 31 December
2024 2023
US$ thousands
US$ thousands
Cost of sales (note 6)(1) 230,312 215,952
Administrative expenses 21,685 20,788
Exploration expenses (note 7) 15,461 13,315
267,458 250,055
(1 During 2023 includes amounts recognised as unabsorbed production cost
amounting to US$5.4 million. During 2024 there were no unabsorbed productions
cost.)
(b) The monthly average number of employees during the year was as follows:
Year ended 31 December
2024 2023
No.
No.
Mining 3,572 3,497
Plant 1,040 1,091
Exploration 101 270
Maintenance 1,261 1,327
Administration and other 1,266 1,118
Total 7,240 7,303
9. Other operating income and expenses
Year ended 31 December
2024 2023
US$ thousands
US$ thousands
Other income:
Gain on sale of mining concessions(1) 24,149 -
Reversal of accruals(2) - 25,793
Recovery of personnel expenses - 4,156
Insurance claims recovered 6,302 -
Gain on sale of property, plant and equipment and other assets 1,004 882
Selling of sundry materials and scrap 1,549 -
Change in mine closure cost provision(3) 1,222 -
Indemnities from suppliers 599 -
Rentals 543 35
Other 4,191 4,458
39,559 35,324
Year ended 31 December
2024 2023
US$ thousands
US$ thousands
Other expenses:
Write-off of inventories (note 2 (c)) - 21,861
Cost subject to insurance claims - 8,349
Allowance for obsolete and slow-moving inventories 6,165 1,221
Donations 4,517 1,685
Maintenance(4) 3,554 3,477
Indemnities to suppliers 2,151 -
Write-off of PPE assets(5) 1,704 1,920
Change in mine closure cost provision (3) 1,214 3,226
Environmental activities(6) 599 3,963
Consumption tax expensed 709 943
Other 683 4,524
21,296 51,169
(1.) (In July 2024, the Group entered into a contract to assign the rights and
obligations of certain mining concessions to Coeur Mexicana, S.A. de C.V.,
subsidiary of Coeur Mining Inc. The total consideration amounted US$25
million. The settlement considers three payments: US$10.0 million that was
paid upon ratification of the contract, US$10.0 million that will be paid no
later than 30 June 2025, US$5.0 million that will be paid no later than 30
June 2026.)
(2 The Group has reversed the accrued energy costs recognised since July 2020,
following the favourable ruling in favour of its related parties
Termóelectrica Peñoles, S.A. de C.V. and Eólica de Coahuila, S.A. de C.V,
filed against the Mexican Government regarding an increase of energy supply
costs required to be recharged to its customers.)
(3 Relates to changes in estimates after the completion of mining activities.)
(4 Costs relating to the rehabilitation of the facilities of Compañía Minera
las Torres, S.A. de C.V. (a closed mine).)
(5 In 2024 and 2023 mainly correspond to mobile equipment damaged.)
(6 Main activities were related to improvement in tailing dams in Cienega
(2023: Main activities were related to improvement in tailing dams in
Fresnillo and Cienega).)
10. Finance income and finance costs
Year ended 31 December
2024 2023
US$ thousands
US$ thousands
Finance income:
Interest on short-term deposits and investments 42,210 47,592
Interest on tax receivables 3,117 2,479
Other 1,609 552
46,936 50,623
Year ended 31 December
2024 2023
US$ thousands
US$ thousands
Finance costs:
Interest on interest-bearing loans and notes payables 43,845 60,741
Unwinding of discount on provisions (note 21) 24,997 22,578
Interest on lease liabilities (note 25(a)) 1,574 1,220
Other 3,155 4,307
73,571 88,846
11. Income tax expense
a) Major components of income tax expense:
Year ended 31 December
2024 2023
US$ thousands
US$ thousands
Consolidated income statement:
Corporate income tax
Current:
Income tax charge 187,027 80,769
Amounts (over) / under provided in previous years (158) 4,235
186,869 85,004
Deferred:
Origination and reversal of temporary differences 258,001 (292,371)
Revaluation effects of Silverstream contract (54,683) 2,320
203,318 (290,051)
Corporate income tax 390,187 (205,047)
Special mining right
Current:
Special mining right charge (note 11 (e)) 66,469 22,708
Amounts (over)/under provided in previous years (238) 1,686
66,231 24,394
Deferred:
Origination and reversal of temporary differences 60,793 6,371
Special mining right 127,024 30,765
Income tax expense reported in the income statement 517,211 (174,282)
Year ended 31 December
2024 2023
US$ thousands
US$ thousands
Consolidated statement of comprehensive income:
Deferred income tax (charge)/credit related to items recognised directly in
other comprehensive income:
Changes in fair value of cash flow hedges 60 (135)
Changes in fair value of equity investments at FVOCI (10,593) 15,941
Remeasurement losses on defined benefit plans 31 20
Income tax effect reported in other comprehensive income (10,502) 15,826
(b) Reconciliation of the income tax expense at the Group's statutory income
rate to income tax expense at the Group's effective income tax rate:
Year ended 31 December
2024 2023
US$ thousands
US$ thousands
Accounting profit before income tax 743,902 114,018
Tax at the Group's statutory corporate income tax rate 30.0% 223,170 34,205
Exchange rate effect on tax value of assets and liabilities(1) 300,243 (214,521)
Expenses not deductible for tax purposes 7,122 14,277
Inflationary uplift of the tax base of assets and liabilities (55,170) (54,763)
Special mining right deductible for corporate income tax (38,107) (9,230)
Non-taxable/non-deductible foreign exchange effects (18,601) 16,689
Update of tax values(2) (13,468) -
Incentive for Northern Border Zone (12,921) 1,760
Deferred tax asset not recognised 6,392 11,688
Inflationary uplift of tax losses (4,701) (5,361)
Current income tax (over)/underprovided in previous years (1,977) 2,137
Inflationary uplift on tax refunds (935) (744)
Other (861) (1,184)
Corporate income tax at the effective tax rate of 52.5% (2023: (179.8%)) 390,187 (205,047)
Special mining right 127,024 30,765
Tax at the effective income tax rate of 69.5% (2023: (152.9%)) 517,211 (174,282)
(1 Mainly derived from the tax value of property, plant and equipment.)
(2 Correspond to the update of tax values of Juanicipio's property, plant and
equipment for assets expensed during 2021 to 2023.)
The most significant item increasing the effect of effective tax rate is the
exchange rate effect on the tax value of assets and liabilities partially
offset by the inflationary uplift of the tax base of assets and liabilities
and the deduction of the Special Mining Right. The future effects of inflation
and exchange rate will depend on future market conditions.
(c) Movements in deferred income tax liabilities and assets:
Year ended 31 December
2024 2023
US$ thousands
US$ thousands
Opening net asset/(liability) 532,100 232,568
Income statement (charge) / credit arising on corporate income tax (203,318) 290,051
Income statement charge arising on special mining right (60,793) (6,371)
Exchange difference 34 26
Net charge related to items directly charged to other comprehensive income (10,502) 15,826
Closing net asset 257,521 532,100
The amounts of deferred income tax assets and liabilities as at 31 December
2024 and 2023, considering the nature of the related temporary differences,
are as follows:
Consolidated balance sheet Consolidated income statement
2024 2023 2024 2023
US$ thousands
US$ thousands
US$ thousands
US$ thousands
Related party receivables (352,650) (181,236) 171,414 22,439
Other receivables (11,656) (6,233) 5,423 2,259
Inventories 148,629 152,378 3,749 (36,995)
Prepayments (2,939) (3,499) (560) 1,076
Derivative financial instruments including Silverstream contract (71,833) (138,171) (66,278) (9,852)
Property, plant and equipment arising from corporate income tax 300,222 366,694 66,472 (224,453)
Exploration expenses and operating liabilities 90,201 107,711 17,510 (16,446)
Other payables and provisions 73,659 87,705 14,046 (13,543)
Losses carried forward 90,124 141,091 50,999 (23,402)
Post-employment benefits 1,821 2,100 310 (576)
Deductible profit sharing 3,974 852 (3,121) 2,243
Special mining right deductible for corporate income tax 39,886 7,445 (32,441) 3,293
Equity investments at FVOCI (10,017) 1,368 792 (2,364)
Other 7,580 (17,416) (24,996) 6,270
Net deferred tax asset related to corporate income tax 307,001 520,789
Deferred tax credit related to corporate income tax 203,319 (290,051)
Related party receivables arising from special mining right (99,487) (44,963) 54,524 5,422
Inventories arising from special mining right 41,664 37,124 (4,540) (8,439)
Property plant and equipment arising from special mining right (22,444) (11,689) 10,756 19,576
Other 30,787 30,839 52 (10,188)
Net deferred tax liability related to special mining rights (49,480) 11,311
Deferred tax credit 264,111 (283,680)
Reflected in the statement of financial position as follows:
Deferred tax assets 466,734 665,302
Deferred tax liabilities (209,213) (133,202)
Net deferred tax asset 257,521 532,100
Deferred income tax assets and liabilities are offset when there is a legally
enforceable right to offset current tax assets against current tax liabilities
and when the deferred income tax assets and liabilities relate to the same
fiscal authority. Under Mexican tax legislation, tax losses cannot be offset
against taxable profits from other legal entities within the same group.
Based on management's internal forecast, a deferred tax asset of US$79.6
million (2023: US$141.1 million) has been recognised in respect of tax losses
amounting to US$265.3 million (2023: US$470.3 million). If not utilised,
US$7.8 million (2023: US$7.1 million) will expire within five years and
US$292.6 million (2023: US$463.2 million) will expire between six and ten
years. Of the total deferred tax asset related to losses, US$21.7 million
(2023: US$69.4 million) is covered by the existence of taxable temporary
differences, the remaining US$57.9 million (2023: US$71.7 million) corresponds
to Fresnillo plc which maintained a deferred net asset position. Management
has considered the taxable profit generated in the current year of US$15.8
million and based on a consideration of this, combined with future financial
and tax projections, Management considers that there is evidence that
sufficient taxable profits will be available against which these unused tax
losses can be utilised. Management has performed a sensitivity assessment on
key inputs of the deferred tax asset assessment, such as interest income or
finance expense. Management concluded that there are no reasonably possible
changes to these key inputs that could result in the deferred tax asset
recognised in respect of tax losses not being recoverable.
The Group has also performed an assessment of the recoverability of tax losses
from mining entities based on financial projections that are consistent with
the Group's impairment assessment (refer to note 13), together with relevant
tax projections which consider the amount and timing of certain tax
deductions. Based on those assumptions, the Group expects to fully utilise its
recognised losses.
The Group has further tax losses and other similar attributes carried forward
for companies out of Mexico of US$119.7 million (2023: US$112.3 million) on
which no deferred tax is recognised due to insufficient certainty regarding
the availability of appropriate future taxable profits. Based on the
applicable tax legislation the tax losses are not subject to expiry.
(d) Unrecognised deferred tax on investments in subsidiaries
The Group has not recognised all of the deferred tax liability in respect of
distributable reserves of its subsidiaries because it controls them and only
part of the temporary differences is expected to reverse in the foreseeable
future. The temporary differences for which a deferred tax liability has not
been recognised aggregate to US$1,139.3 million (2023: US$1,015.0 million).
(e) Corporate Income Tax ('Impuesto Sobre la Renta' or 'ISR') and Special
Mining Right ("SMR")
The Group's principal operating subsidiaries are Mexican residents for
taxation purposes. The rate of current corporate income tax is 30%.
On 30 December 2018, the Decree of tax incentives for the northern border
region of Mexico was published in the Official Gazette, which provided a
reduction of income tax by a third and also a reduction of 50% of the value
added tax rate, for taxpayers that produce income from business activities
carried out within the northern border region. The tax incentives were
applicable since 1 January 2019 and remained in force until 31 December 2020.
On 30 December 2020 and extension of the Decree was published in the Official
Gazette which remains in force until 31 December 2024. On 24 December 2024 a
further extension of the Decree was published in the Official Gazette which
remains in force until 31 December 2025. Some of the Group companies which
produce income from business activities carried out within Caborca, Sonora,
which is considered for purposes of the Decree as northern border region,
applied for this Decree tax incentives before the Mexican tax authorities, and
were granted authorization for income tax and value added tax purposes.
The special mining right "SMR" states that the owners of mining titles and
concessions are subject to pay an annual mining right of 7.5% of the profit
derived from the extractive activities and is considered as income tax under
IFRS. The 7.5% tax applies to a base of income before interest, annual
inflation adjustment, taxes paid on the regular activity, depreciation and
amortization, as defined by the new ISR. This SMR can be credited against the
corporate income tax of the same fiscal year and its payment must be remitted
no later than the last business day of March of the following year.
In November 2024 the Mexican Federal Executive proposed a change in the
Federal Rights Law increasing the rate of the SMR from 7.5% to 8.5%. This
amendment was enacted in December 2024 and applies for the fiscal year
commencing 1 January 2025 onwards. The change in rate resulted in an increase
in the deferred tax liability of US$13.6 million.
12. Earnings per share
Earnings per share ('EPS') is calculated by dividing profit for the year
attributable to equity shareholders of the Company by the weighted average
number of Ordinary Shares in issue during the period.
The Company has no dilutive potential Ordinary Shares.
As of 31 December 2024 and 2023, earnings per share have been calculated as
follows:
Year ended 31 December
2024 2023
US$ thousands
US$ thousands
Earnings:
Profit attributable to equity holders of the Company 140,920 233,909
Adjusted profit attributable to equity holders of the Company 268,513 228,497
Adjusted profit is profit as disclosed in the Consolidated Income Statement
adjusted to exclude revaluation effects of the Silverstream contract of
US$240.3 million loss (US$168.2 million net of tax) (2023: US$7.7 million gain
(US$5.4 million net of tax)).
Adjusted earnings per share have been provided in order to provide a measure
of the underlying performance of the Group, prior to the revaluation effects
of the Silverstream contract, a derivative financial instrument.
2024 2023
thousands
thousands
Number of shares:
Weighted average number of Ordinary Shares in issue 736,894 736,894
2024 2023
US$
US$
Earnings per share:
Basic and diluted earnings per share 0.191 0.317
Adjusted basic and diluted earnings per Ordinary Share 0.364 0.310
13. Property, plant and equipment
Year ended 31 December 2024(1)
Land and Plant and equipment(2) Mining properties and development costs Other assets(3) Construction in progress Total
buildings
US$ thousands
Cost
At 1 January 2024 435,884 3,132,445 3,240,706 453,048 285,473 7,547,556
Additions 40,627 32,215 144,041 (51,426) 136,565 302,022
Disposals(4) (70) (27,069) (4,148) (6,318) - (37,605)
Transfers and other movements 2,154 100,488 50,058 (275) (152,425) -
At 31 December 2024 478,595 3,238,079 3,430,657 395,029 269,613 7,811,973
Accumulated depreciation
At 1 January 2024 (246,713) (1,991,095) (2,185,700) (263,132) - (4,686,640)
Depreciation for the year(5) (35,483) (265,219) (281,539) (40,119) - (622,360)
Disposals(5) 68 25,513 4,082 6,029 - 35,692
At 31 December 2024 (282,128) (2,230,801) (2,463,157) (297,222) - (5,273,308)
Net book amount at 31 December 2024 196,467 1,007,278 967,500 97,807 269,613 2,538,665
(1 Amounts include Right-of-use assets as described in note 25.)
(2 The amount of Property, plant and equipment related to Soledad &
Dipolos at 31 December 2024 is US$30.4 million and reflects capitalised mining
works and the amount recognised in the cost of)
(Property plant and equipment related to estimated remediation and closure
activities.)
(3 From the additions in "other assets" category US($42.7) million corresponds
to the reassessment of mine closure rehabilitations costs, see note 21.)
(4 From the total net amount of disposals, US$1.4 million correspond to a
write off of assets as disclosed in note 9.)
(5 Depreciation for the year includes US$620.9 million recognised as an
expense in the income statement and US$1.2 million capitalised as part of
construction in progress.)
Year ended 31 December 2023(3)
Land and Plant and equipment(4) Mining properties and development costs Other assets(2) Construction in progress Total
buildings
US$ thousands
Cost
At 1 January 2023 412,984 2,828,920 3,001,661 377,813 461,490 7,082,868
Additions 903 103,835 5,428 37,839 358,579 506,584
Disposals(5) (308) (26,480) (2,763) (12,345) - (41,896)
Transfers and other movements 22,305 226,170 236,380 49,741 (534,596) -
At 31 December 2023 435,884 3,132,445 3,240,706 453,048 285,473 7,547,556
Accumulated depreciation
At 1 January 2023 (222,166) (1,810,484) (1,947,868) (239,786) - (4,220,304)
Depreciation for the year(1) (24,837) (205,238) (240,595) (30,276) - (500,946)
Disposals(5) 290 24,627 2,763 6,930 - 34,610
At 31 December 2023 (246,713) (1,991,095) (2,185,700) (263,132) - (4,686,640)
Net book amount at 31 December 2023 189,171 1,141,350 1,055,006 189,916 285,473 2,860,916
(1 Amounts include Right-of-use assets as described in note 25.)
(2 The amount of Property, plant and equipment related to Soledad &
Dipolos at 31 December 2023 is US$37.2 million and reflects capitalised mining
works and the amount recognised in the cost of Property plant and equipment
related to estimated remediation and closure activities.)
(3 From the additions in "other assets" category US$28.1 million corresponds
to the reassessment of mine closure rehabilitations costs, see note 21.)
(4 From the total net amount of disposals, US$1.9 million correspond to a
write off of assets as disclosed in note 9.)
(5 Depreciation for the year includes US$498.5 million recognised as an
expense in the income statement and US$2.5 million capitalised as part of
construction in progress.)
( )
(
)
( )
( )
The table below details construction in progress by operating mine and
development projects
Year ended 31 December
2024 2023
US$ thousands
US$ thousands
Fresnillo 60,674 73,761
Saucito 81,712 94,092
Juanicipio 48,846 29,028
Cienega 13,843 13,432
San Julian 15,820 56,938
Herradura 48,422 13,307
Other(1) 296 4,915
269,613 285,473
(1) (Mainly) (corresponds to Minera Bermejal, S.A. de C.V. (2023: Minera
Bermejal, S.A. de C.V.).)
During the year ended 31 December 2024 there were no capitalised borrowing
costs. During the year ended 31 December 2023, the Group capitalised US$2.1
million of borrowing costs paid within construction in progress. Borrowing
costs were capitalised at the rate of 5.02%.
Sensitivity analysis
As disclosed in note 2(f) management performs at each reporting date an
assessment to determine whether there are any indicators of impairment. As at
31 December 2024, the carrying amounts of mining assets is supported by their
recoverable values.
The key assumptions on which management bases the recoverable value
calculations of the mining assets are commodity prices, future capital
requirements, production costs, reserves and resources volumes (reflected in
production volumes) and discount rate.
The models are most sensitive to changes in commodity price assumptions,
operating costs and production volumes.
Other than as disclosed below, management has considered no reasonably
possible change in any other key assumption above would cause the carrying
value of any of its mining assets to exceed its recoverable amount.
In the absence of any changes to any of the other key assumptions, a change in
the below assumptions would have the following impact as at 31 December 2024:
· A decrease of 10% in gold and 15 % silver prices would result in
an impairment charge of US$54.3 million.
· An increase of 10% in operating costs would result in an
impairment charge of US$8.1 million.
· A decrease of 5% in the forecasted volume of gold and silver
produced would result in an impairment charge of US$8.0 million.
14. Silverstream contract
On 31 December 2007, the Group entered into an agreement with Peñoles through
which the Group is entitled to receive the proceeds received by the Peñoles
Group in respect of the refined silver sold from the Sabinas Mine ('Sabinas'),
a base-metals mine owned and operated by the Peñoles Group. The agreement
required an upfront payment of US$350 million by Fresnillo. In addition, a per
ounce cash payment of US$2.00 in years one to five and US$5.00 thereafter
(subject to an inflationary adjustment that commenced from 31 December 2013)
is payable to Peñoles. The cash payment to Peñoles per ounce of silver for
the year ended 31 December 2024 was US$5.74 per ounce (2023: $5.65 per ounce).
Under the contract, the Group has the option to receive a net cash settlement
from Peñoles attributable to the silver produced and sold from Sabinas, to
take delivery of an equivalent amount of refined silver or to receive
settlement in the form of both cash and silver. If, by 31 December 2032, the
amount of silver produced by Sabinas is less than 60 million ounces, a further
payment is due from Peñoles to the Group of US$1 per ounce of shortfall.
In November 2024, the Group received notification from Peñoles, that its
Sabinas mine is experiencing operational difficulties impacting silver
production. The Group has started evaluating the implications of the
operational difficulties in the Silverstream contract and has updated its
estimates of future mine production and the risks attached. The main changes
have been applied in the expected future silver production and adjusting the
discount rate to capture a higher operational risk. The expected Sabinas' life
of mine has been significantly reduced as a result on the change in estimation
of the ore to be mined, which now represents only reserves and no longer
includes a portion of resources.
The Silverstream contract represents a derivative financial instrument which
has been recorded at FVPL and classified within non-current and current assets
as appropriate. The term of the derivative is based on Sabinas' life of mine
which is currently 10 years considering ore reserves Changes in the
contract's fair value, other than those represented by the realisation of the
asset through the receipt of either cash or refined silver, are charged or
credited to the income statement. In the year ended 31 December 2024 total
proceeds received in cash were US$30.0 million (2023: US$40.2 million) of
which, US$5.0 million was in respect of proceeds receivable as at 31 December
2023 (2023: US$8.3 million in respect of proceeds receivable as at 31 December
2022). Cash received in respect of the year of US$24.9 million (2023: US$31.8
million) corresponds to 1.4 million ounces of payable silver (2023: 2.29
million ounces). As at 31 December 2024, a further US$16.5 million (2023:
US$5.1 million) of cash receivable corresponding to 713,061 ounces of silver
is due (2023: 278,342 ounces).
A reconciliation of the beginning balance to the ending balance is shown
below:
2024 2023
US$ thousands
US$ thousands
Balance at 1 January 482,340 511,474
Cash received in respect of the year (24,907) (31,816)
Cash receivable (16,515) (5,050)
Remeasurement gains recognised in profit and loss (182,276) 7,732
Balance at 31 December 258,641 482,340
Less - Current portion 44,204 35,802
Non-current portion 214,437 446,538
The US$182.3 million unrealised loss recorded in the income statement (31
December 2023: US$7.7 million gain) resulted mainly from the change in the
criteria of not consider remaining resources, to an update in the reserves
production plan and an increase in the spread applied to the discount rate,
these factors were partially mitigated with an increase in the forward and
long term silver prices, and the amortization effect.
Significant assumptions used in the valuation of the Silverstream contract are
as follows:
- Forecasted volumes (millions of ounces/moz)
- Silver to be produced and sold over the life of mine 29.0 moz (2023:
82.8 moz)
- Average annual silver to be produced and sold 2.9 moz (2023: 3.5
moz)
- Weighted average discount rate 20.1% (2023: 9.79%)
- Future silver prices (US$ per ounce)
Year ended 31 December Year 1 Year 2 Year 3 Year 4 Year 5 Long-term
2024 29.70 31.36 32.74 33.31 33.77 24.5
2023 24.41 25.44 26.43 26.64 26.85 19.58
The fair value of the Silverstream contract is determined using a valuation
model including unobservable inputs (Level 3). This derivative has a term of
10 years and the valuation model utilises several inputs that are not based on
observable market data due to the nature of these inputs and/or the duration
of the contract. Inputs that have a significant effect on the recorded fair
value are the volume of silver that will be produced and sold from the Sabinas
mine over the contract life, the future price of silver, future inflation and
the discount rate used to discount future cash flows.
The estimate of the volume of silver that will be produced and sold from the
Sabinas mine requires estimates of the recoverable silver reserves, the
related production profile based on the Sabinas mine plan and the expected
recovery of silver from ore mined. The estimation of these inputs is subject
to a range of operating assumptions and may change over time. Estimates of
reserves are updated annually by Peñoles, the operator and sole interest
holder in the Sabinas mine and provided to the Company. The production profile
and estimated payable silver that will be recovered from ore mined is based on
the operational mine plan, with certain amendments to reflect a basis that a
market participant would consider, that is provided to the Company by
Peñoles. The inputs assume no interruption in production over the life of the
Silverstream contract and production levels based on the most recent
information available.
Management regularly assesses a range of reasonably possible alternatives for
those significant unobservable inputs described above and determines their
impact on the total fair value. The fair value of the Silverstream contract is
significantly sensitive to a reasonably possible change in future silver
price, the discount rate used to discount future cash flows and total
recoverable reserves over the life of mine. The sensitivity of these key
inputs is as follows:
Commodity price Discount rate Volumes produced
Year ended 31 December Increase/ Effect on profit before tax: increase/ Basis point increase/ Effect on profit before tax: increase/ Increase/ Effect on profit before tax: increase/
(decrease) in
(decrease)
(decrease)
(decrease)
(decrease)
(decrease)
silver price
US$ thousands
in interest rate
US$ thousands
in reserves and resources
US$ thousands
2024 15% 47,906 - - 25% 64,660
(15%) (47,906) (75) 3,677 (25%) (64,660)
2023 10% 63,222 - - 10% 48,141
(10%) (63,222) (75) 27,473 (10%) (48,141)
Management considers that an appropriate sensitivity for volumes produced and
sold is on the total recoverable reserve quantities over the contract term
rather than annual production volumes over the mine life.
The significant unobservable inputs are not interrelated. The Sabinas mine is
a polymetallic mine that contains copper, lead and zinc as well as silver,
which is produced as a by-product. Therefore, changes to base metals prices
(rather than the price of silver) are most relevant to the Sabinas mine
production plans and the overall economic assessment of the mine.
The effects on profit before tax and equity of reasonably possible changes to
the inflation rates and the US dollar exchange rate compared to the Mexican
peso on the Silverstream contract are not material. The Group's exposure to
reasonably possible changes in other currencies is not material.
15. Inventories
As at 31 December
2024 2023
US$ thousands
US$ thousands
Finished goods(1) 36,766 34,212
Work in progress(2) 274,936 314,802
Ore stockpile(3) 6,281 4,779
Operating materials and spare parts 177,043 185,624
495,026 539,417
Allowance for obsolete and slow-moving inventories (12,849) (6,684)
Balance as 31 December 482,177 532,733
Less - Current portion 412,417 462,973
Non-current portion(4) 69,760 69,760
(1 Finished goods include metals contained in concentrates and doré bars on
hand or in transit to a smelter or refinery.)
(2 Work in progress includes metals contained in ores on leaching pads for an
amount of US$253.5 million (2023: US$292.7 million) and in stockpiles US$21.4
million (2023: US$22.1 million) that will be processed in dynamic leaching
plants (note 2(c)).)
(3 Ore stockpile includes ore mineral obtained at Juanicipio.)
(4 Non-current inventories relate to ore in leaching pads where the leaching
process has stopped and is not expected to restart within twelve months. As at
31 December 2024 and 2023 non-current inventories corresponds to Soledad &
Dipolos mine unit (note 2 (c)).)
Concentrates are a product containing sulphides with variable content of
precious and base metals and are sold to smelters and/or refineries. Doré is
an alloy containing a variable mixture of gold and silver that is delivered in
bar form to refineries. Activated carbon is a product containing variable
mixture of gold and silver that is delivered in small particles.
The amount of inventories recognised as an expense in the year was US$2,254
million (2023: US$2,201.8 million). During 2024 and 2023, there was no
adjustment to net realisable value allowance against work-in-progress
inventory. The adjustment to the allowance for obsolete and slow-moving
inventory recognised as an expense was US$6.2 million (2023: US$1.2 million).
16. Trade and other receivables
Year ended 31 December
2024 2023
US$ thousands
US$ thousands
Trade receivables from related parties (note 27) 548,760 306,668
Value Added Tax receivable 89,441 93,010
Other receivables from related parties (note 27a) 17,339 11,509
Other receivables from contractors - 2,662
Other trade receivables 2,079 174
Other receivables 16,885 8,658
674,504 422,681
Expected credit loss of 'Other receivables' (293) (353)
Trade and other receivables classified as current assets 674,211 419,666
Other receivables classified as non-current assets: - -
Other receivable 5,264 773
Value Added Tax receivable - 42,755
Trade and other receivables classified as non-current assets 5,264 43,528
Total trade and other receivables 679,475 463,194
Trade receivables are shown net of any corresponding advances, are
non-interest bearing and generally have payment terms of 46 to 60 days.
The total receivables denominated in US dollars were US$584 million (2023:
US$316.3 million), and in Mexican pesos US$95.4 million (2023: US$147.6
million)
Balances corresponding to Value Added Tax receivables and US$2.3 million
within Other receivables (2023: US$6.2 million) are not financial assets.
As of 31 December for each year presented, except for 'other receivables' in
the table above, all trade and other receivables were neither past due nor
credit-impaired. The amount past due and considered as credit-impaired as of
31 December 2024 is US$0.3 million (2023: US$0.4 million). Trade receivables
from related parties and other receivables from related parties (see note 14)
are classified as financial assets at FVTPL and are therefore not considered
in the expected credit loss analysis. In determining the recoverability of
receivables, the Group performs a risk analysis considering the type and age
of the outstanding receivable and the credit worthiness of the counterparty,
see note 31(b).
17. Cash and cash equivalents and short-term investments
The Group considers cash and cash equivalents when planning its operations and
in order to achieve its treasury objectives.
As at 31 December
2024 2023
US$ thousands
US$ thousands
Cash at bank and on hand 2,194 3,556
Short-term deposits 1,108,219 531,024
Cash and cash equivalents 1,110,413 534,580
Cash at bank earns interest at floating rates based on daily bank deposits.
Short-term deposits are made for varying periods of between one day and three
months, depending on the immediate cash requirements of the Group, and earn
interest at the respective short-term deposit rates. Short-term deposits can
be withdrawn at short notice without any penalty or loss in value.
As at 31 December
2024 2023
US$ thousands
US$ thousands
Short-term investments 187,403 -
Short-term investments are made for fixed periods longer than three months and
earn interest at fixed rates without an option for early withdrawal. As at 31
December 2024 short-term investments are held in fixed-term bank deposits of
US$187.4 million (31 December 2023: US$ nil).
18. Equity
Share capital and share premium
Authorised share capital of the Company is as follows:
As at 31 December
2024 2023
Class of share Number Amount Number Amount
Ordinary Shares each of US$0.50 1,000,000,000 $500,000,000 1,000,000,000 $500,000,000
Sterling Deferred Ordinary Shares each of £1.00 50,000 £50,000 50,000 £50,000
Issued share capital of the Company is as follows:
Ordinary Shares Sterling Deferred Ordinary Shares
Number US$ Number £
At 1 January 2023 736,893,589 $368,545,586 50,000 £50,000
At 31 December 2023 736,893,589 $368,545,586 50,000 £50,000
At 31 December 2024 736,893,589 $368,545,586 50,000 £50,000
As at 31 December 2024 and 2023, all issued shares with a par value of US$0.50
each are fully paid. The rights and obligations attached to these shares are
governed by law and the Company's Articles of Association. Ordinary
shareholders are entitled to receive notice and to attend and speak at any
general meeting of the Company. There are no restrictions on the transfer of
the Ordinary shares.
The Sterling Deferred Ordinary Shares only entitle the shareholder on winding
up or on a return of capital to payment of the amount paid up after repayment
to Ordinary Shareholders. The Sterling Deferred Ordinary Shares do not entitle
the holder to payment of any dividend, or to receive notice or to attend and
speak at any general meeting of the Company. The Company may also at its
option redeem the Sterling Deferred Ordinary Shares at a price of £1.00 or,
as custodian, purchase or cancel the Sterling Deferred Ordinary Shares or
require the holder to transfer the Sterling Deferred Ordinary Shares. Except
at the option of the Company, the Sterling Deferred Ordinary Shares are not
transferrable.
Reserves
Share premium
This reserve records the consideration premium for shares issued at a value
that exceeds their nominal value.
Capital reserve
The capital reserve arose as a consequence of the Pre-IPO Reorganisation as a
result of using the pooling of interest method.
Hedging reserve
This reserve records the portion of the gain or loss on a hedging instrument
in a cash flow hedge that is determined to be an effective hedge, net of tax.
When the hedged transaction occurs, the gain or the loss is transferred out of
equity to the income statement or the value of other assets.
Cost of hedging reserve
The changes in the time value of option contracts are accumulated in the costs
of hedging reserve. These deferred costs of hedging are either reclassified to
profit or loss or recognised as a basis adjustment to non-financial assets or
liabilities upon maturity of the hedged item, or, in the case of a hedge item
that realises over time, amortised on a systematic and rational basis over the
life of the hedged item.
Fair value reserve of financial assets at FVOCI
The Group has elected to recognise changes in the fair value of certain
investments in equity securities in OCI, as explained in note 2(g) . These
changes are accumulated within the FVOCI reserve within equity. The Group
transfers amounts from this reserve to retained earnings when the relevant
equity securities are derecognised.
Foreign currency translation reserve
The foreign currency translation reserve is used to record exchange
differences arising from the translation of the financial information of
entities with a functional currency different to that of the presentational
currency of the Group.
Retained earnings
This reserve records the accumulated results of the Group, less any
distributions and dividends paid.
19. Dividends declared and paid
The dividends declared and paid during the years ended 31 December 2024 and
2023 are as follows:
US cents per Amount
Ordinary Share
US$ thousands
Year ended 31 December 2024
Final dividend for 2023 declared and paid during the year(1) 4.2 30,950
Interim dividend for 2024 declared and paid during the year(2) 6.4 47,161
10.6 78,111
Year ended 31 December 2023
Final dividend for 2022 declared and paid during the year(3) 13.3 98,007
Interim dividend for 2023 declared and paid during the year(4) 1.4 10,317
14.7 108,324
(1 This dividend was approved by the Shareholders on 21 May 2024 and paid on
29 May 2024)
(2 This dividend was approved by the Board of Directors on 29 July 2024 and
paid on 17 September 2024)
(3 This dividend was approved by the Shareholders on 23 May 2023 and paid on
26 May 2023)
(4 This dividend was approved by the Board of Directors on 31 July 2023 and
paid on 14 September 2023)
A reconciliation between dividend declared, dividends affected to retained
earnings and dividend presented in the cash flow statements is as follows:
Year ended 31 December
2024 2023
US$ thousands
US$ thousands
Dividends declared 78,111 108,324
Foreign exchange effect - (1)
Dividends recognised in retained earnings 78,111 108,323
Foreign exchange and hedging effect 45 28
Dividends paid 78,156 108,351
The directors have proposed a final dividend of US$26.1 cents per share, which
is subject to approval at the annual general meeting and is not recognised as
a liability as at 31 December 2024. Dividends paid from the profits generated
from 1 January 2014 to residents in Mexico and to non-resident shareholders
may be subject to an additional tax of up to 10%, which will be withheld by
the Group.
20. Interest-bearing loans
Senior Notes
On 13 November 2013, the Group completed its offering of US$800 million
aggregate principal amount of 5.500% Senior Notes due November 2023 (the
5.500% Notes). On 29 September 2020, the Group repurchased certain of its
5.500% Notes that had a carrying value of US$482.1 million for a consideration
of US$543.0 million.
On 2 October 2020, the Group completed its offering of US$850 million
aggregate principal amount of 4.250% Senior Notes due 2050 in the Euronext
Dublin. The proceeds were partially used to finance the repurchase mentioned
above.
On 13 November 2023, the Company paid the outstanding amount of the 5.500%
Notes at its maturity date including due interest for a total of US$326.6
million.
Movements in the year in the debt recognised in the balance sheet are as
follows:
As at 31 December
2024 2023
US$ thousands US$ thousands
Opening balance 839,002 1,158,557
Payments of 5.500% Notes - (317,879)
Accrued interest 38,093 53,919
Interest paid(1) (37,986) (56,371)
Amortisation of discount and transaction costs 398 776
Closing balance 839,507 839,002
(1 Interest was payable semi-annually on 13 May and 13 November for 5.500%
senior notes and is payable semi-annually on 2 April and 2 October for 4.250%
senior notes.)
The Group has the following restrictions derived from the issuance of all
outstanding Senior Notes:
Change of control:
Should the rating of the senior notes be downgraded as a result of a change of
control (defined as the sale or transfer of 35% or more of the common shares;
the transfer of all or substantially all the assets of the Group; starting a
dissolution or liquidation process; or the loss of the majority in the board
of directors) the Group is obligated to repurchase the notes at an equivalent
price of 101% of their nominal value plus the interest earned at the
repurchase date, if requested to do so by any creditor.
Pledge on assets:
The Group shall not pledge or allow a pledge on any property that may have a
material impact on business performance (key assets). Nevertheless, the Group
may pledge the aforementioned properties provided that the repayment of the
Notes keeps the same level of priority as the pledge on those assets.
21. Provision for mine closure cost
The provision represents the discounted values of the risk-adjusted estimated
cost to decommission and rehabilitate the mines at the estimated date of
depletion of mine deposits. Uncertainties in estimating these costs include
potential changes in regulatory requirements, decommissioning, dismantling and
reclamation alternatives, timing; the effects of climate change, and the
discount, foreign exchange and inflation rates applied. Closure provisions are
typically based on conceptual level studies that are refreshed at least every
three years. As these studies are renewed, they incorporate greater
consideration of forecast climate conditions at closure.
The Group has performed separate calculations of the provision by currency,
discounting at corresponding rates. As at 31 December 2024, the discount rates
used in the calculation of the parts of the provision that relate to Mexican
pesos range from 9.84% to 10.50% (2023: range from 9.87% to 11.19%). The range
for the current year parts that relate to US dollars range from 3.69% to 4.00%
(2023: range from 3.70% to 4.68%).
Mexican regulations regarding the decommissioning and rehabilitation of mines
are limited and less developed in comparison to regulations in many other
jurisdictions. It is the Group's intention to rehabilitate the mines beyond
the requirements of Mexican law, and estimated costs reflect this level of
expense. The Group intends to fully rehabilitate the affected areas at the end
of the lives of the mines.
The provision is expected to become payable at the end of the production life
of each mine, based on the estimation of reserves and resources, which ranges
from 1 to 22 years from 31 December 2024 (2 to 21 years from 31 December
2023). As at 31 December 2024 the weighted average term of the provision is 12
years (2023: 10 years).
As at 31 December
2024 2023
US$ thousands
US$ thousands
Opening balance 292,316 247,207
Decrease to existing provision (4,072) (2,111)
Effect of changes in discount rate (28,736) 1,436
Unwinding of discount rate 24,997 22,578
Payments (3,093) (4,376)
Foreign exchange (35,883) 27,582
Closing balance 245,529 292,316
Less - Current portion 11,781 11,849
Non-current portion 233,748 280,467
The provision is sensitive to a reasonably possible change in discount rates,
exchange rate US Dollar compared to Mexican peso, change in future costs,
and change on the expected life of mine (years). The sensitivity of these key
inputs is as follows:
Discount rate Foreign currency Estimated costs Change in LOM
Year ended 31 December Basis point increase/ Effect on provision: increase/ Strengthening/ Effect on provision: increase/ Increase/ Effect on provision: increase/ Increase/ Effect on provision: increase/
(decrease)
(decrease)
(weakening)
(decrease)
(decrease)
(decrease)
(decrease)
(decrease)
in interest rate
US$ thousands
of US dollar
US$ thousands
in estimated costs
US$ thousands
in years
US$ thousands
2024 50 8,783 10% (19,030) 5% 12,991 2 (9,751)
(50) (11,708) (5%) 11,017 (5%) (12,991) (2) 11,764
2023 50 11,710 10% (21,990) 5% 14,616 2 (10,061)
(50) (24,205) (5%) 12,731 (5%) (14,616) (2) 10,044
Change on the provision would be principally offset by a change to the value
of the associated asset unless the asset is fully depreciated, in which case
the change in estimate is recognised directly within the income statement.
22. Pensions and other post-employment benefit plans
The Group has a defined contribution plan and a defined benefit plan.
The defined contribution plan was established as from 1 July 2007 and consists
of periodic contributions made by each Mexican non-unionised worker and
contributions made by the Group to the fund matching workers' contributions,
capped at 8% of the employee's annual salary.
The defined benefit plan provides pension benefits based on each worker's
earnings and years of services provided by personnel hired up to 30 June 2007
as well as statutory seniority premiums for both unionised and non-unionised
workers.
The overall investment policy and strategy for the Group's defined benefit
plan is guided by the objective of achieving an investment return which,
together with contributions, ensures that there will be sufficient assets to
pay pension benefits and statutory seniority premiums for non-unionised
workers as they fall due while also mitigating the various risks of the plan.
However, the portion of the plan related to statutory seniority premiums for
unionised workers is not funded. The investment strategies for the plan are
generally managed under local laws and regulations. The actual asset
allocation is determined by current and expected economic and market
conditions and in consideration of specific asset class risk in the risk
profile. Within this framework, the Group ensures that the trustees consider
how the asset investment strategy correlates with the maturity profile of the
plan liabilities and the respective potential impact on the funded status of
the plan, including potential short-term liquidity requirements.
Death and disability benefits are covered through insurance policies.
The following tables provide information relating to changes in the defined
benefit obligation and the fair value of plan assets:
Pension cost charge to income statement Remeasurement gains/(losses) in OCI
Balance at Net Foreign Sub-total recognised Benefits Return on plan assets (excluding amounts included Actuarial changes arising from changes in financial assumptions Sub-total included Contributions by employer Defined benefit decrease due to personnel transfer Balance at
1 January Service cost interest exchange in the year paid in net in OCI(1) 31 December
2024 interest 2024
US$ thousands
Defined benefit obligation (32,671) 222 (2,664) 5,713 3,271 1,458 (672) (672) (496) (29,110)
Fair value of plan assets 19,460 1,486 (3,252) (1,766) (1,120) 474 474 256 352 17,656
Net benefit liability (13,211) 222 (1,178) 2,461 1,505 338 474 (672) (198) 256 (144) (11,454)
Pension cost charge to income statement Remeasurement gains/(losses) in OCI
Balance at Net Foreign Sub-total recognised Benefits Return on plan assets (excluding amounts included Actuarial changes arising from changes in financial assumptions Sub-total included Contributions by employer Defined benefit decrease due to personnel transfer Balance at
1 January Service cost interest exchange in the year paid in net in OCI(1) 31 December
2023 interest 2023
US$ thousands
Defined benefit obligation (26,014) (1,797) (2,559) (3,952) (8,308) 2,133 (457) (457) (25) (32,671)
Fair value of plan assets 16,552 1,871 2,527 4,398 (2,133) 331 331 332 (20) 19,460
Net benefit liability (9,462) (1,797) (688) (1,425) (3,910) - 331 (457) (126) 332 (45) (13,211)
Of the total defined benefit obligation, US$12.1 million (2023: US$13.9
million) relates to statutory seniority premiums for unionised workers which
are not funded. The expected contributions to the plan for the next annual
reporting period are nil. The principal assumptions used in determining
pension and other post-employment benefit obligations for the Group's plans
are shown below:
As at 31 December
2024 2023
%
%
Discount rate 10.14 10.08
Future salary increases (National Consumer Price Index) 5.25 5.25
The life expectancy of current and future pensioners, men and women aged 65
and older will live on average for a further 22.5 and 23.7 years respectively
(2023: 23.2 years for men and 26.0 for women). The weighted average duration
of the defined benefit obligation is 7.8 years (2023: 8.7 years).
The fair values of the plan assets were as follows:
As at 31 December
2024 2022
US$ thousands
US$ thousands
State owned companies 279 337
Mutual funds (fixed rates) 17,377 19,123
17,656 19,460
As at 31 December 2024 and 2023, all the funds were invested in quoted debt
instruments.
The pension plan has not invested in any of the Group's own financial
instruments nor in properties or assets used by the Group.
A quantitative sensitivity analysis for significant assumptions as at 31
December 2024 is as shown below:
Assumptions Discount rate Future salary increases Life expectancy of pensioners
(NCPI)
Sensitivity Level 0.5% 0.5% 0.5% + 1
0.5% Decrease increase decrease Increase
Increase
Year ended 31 December 2024 (1,026) 1,101 270 (260) 167
(Decrease)/increase to the net defined benefit obligation (US$ thousands)
Year ended 31 December 2023 (1,152) 1,243 215 (226) 289
(Decrease)/increase to the net defined benefit obligation (US$ thousands)
The sensitivity analysis above has been determined based on a method that
extrapolates the impact on net defined benefit obligation as a result of
reasonable changes in key assumptions occurring at the end of the reporting
period. The pension plan is not sensitive to future changes in salaries other
than in respect of inflation.
23. Trade and other payables
As at 31 December
2024 2023
US$ thousands
US$ thousands
Trade payables 110,891 118,110
Other payables to related parties (note 27(a)) 39,203 56,434
Accrued expenses 38,188 54,749
Other taxes and contributions 35,497 28,812
223,779 258,105
Trade payables are mainly for the acquisition of materials, supplies and
contractor services. These payables do not accrue interest and no guarantees
have been granted. The fair value of trade and other payables approximate
their book values.
Balances corresponding to Accrued expenses and Other taxes and contributions
are not financial liabilities.
The Group's exposure to currency and liquidity risk related to trade and other
payables is disclosed in note 31.
24. Commitments
A summary of capital expenditure commitments by operating mines and
development project is as follows:
As at 31 December
2024 2023
US$ thousands
US$ thousands
Saucito 28,030 30,761
Fresnillo 20,324 26,503
San Julian 4,785 14,655
Juanicipio 21,776 12,246
Herradura 16,167 6,610
Cienega 2,603 2,984
Noche Buena - 206
Other(1) 657 4,040
94,342 98,005
(1 Mainly corresponds to Minera el Bermejal, S. de R.L. de C.V.
)
( )
25. Leases
(a) The Group as lessee
The Group leases various offices, buildings, plant and equipment and IT
equipment. The resulting lease liability is as follows:
As at
31 December 2024 31 December 2023
US$ thousands
US$ thousands
IT equipment 5,925 10,387
Plant and equipment 3,123 3,501
Buildings 2,845 702
Total lease liability 11,893 14,590
Less - Current portion 4,312 4,813
Non-current portion 7,581 9,777
The total cash outflow for leases for the year ended 31 December 2024, except
short term and low value leases, amounts to US$7.0 million (2023: US$7.3
million), including finance costs of US$1.6 million (2023: US$1.2 million).
The table below details right-of-use assets included as property plant and
equipment in note 13.
Year ended 31 December 2024
Buildings Computer equipment Plant and Equipment Total
US$ thousands
Cost
At 1 January 2024 5,035 19,279 4,056 28,370
Additions 942 1,329 83 2,354
Disposals (70) (4,820) - (4,890)
At 31 December 2024 5,907 15,788 4,139 25,834
Accumulated depreciation
At 1 January 2024 (3,034) (11,155) (801) (14,990)
Depreciation for the year (763) (3,926) (589) (5,278)
Disposals 68 4,780 - 4,848
At 31 December 2024 (3,729) (10,301) (1,390) (15,420)
Net book amount at 31 December 2024 2,178 5,487 2,749 10,414
Year ended 31 December 2023
Buildings Computer equipment Plant and Equipment Total
US$ thousands
Cost
At 1 January 2023 4,620 21,284 3,933 29,837
Additions 723 4,286 123 5,132
Disposals (308) (6,291) - (6,599)
At 31 December 2023 5,035 19,279 4,056 28,370
Accumulated depreciation
At 1 January 2023 (2,585) (12,394) (234) (15,213)
Depreciation for the year (739) (4,880) (567) (6,186)
Disposals 290 6,119 - 6,409
At 31 December 2023 (3,034) (11,155) (801) (14,990)
Net book amount at 31 December 2023 2,001 8,124 3,255 13,380
Amounts recognised in profit and loss for the year, additional to depreciation
of right-of-use assets, included US$1.6 million (2023: US$1.2 million)
relating to interest expense, US$62.1 million (2023: US$73.7 million) on
relating variable lease payments (note 6) of which US$2.9 million (2023:
US$4.2 million) were capitalised as a part of stripping cost, US$0.3 million
(2023: US$0.9 million) relating to short-term leases and US$2.7 million
(2023:US$2.9 million) relating to low-value assets.
(b) The Group as a lessor
Operating leases, in which the Group is the lessor, relate to mobile equipment
owned by the Group with lease terms of between 12 to 36 months. All operating
lease contracts contain market review clauses in the event that the lessee
exercises its option to renew. The lessee does not have an option to purchase
the equipment at the expiry of the lease period. The Group's leases as a
lessor are not material.
26. Contingencies
As of 31 December 2024, the Group has the following contingencies:
- The Group is subject to various laws and regulations which, if not
observed, could give rise to penalties.
- Tax periods remain open to review by the Mexican tax authorities
(SAT, by its Spanish acronym) in respect of income taxes for five years
following the date of the filing of corporate income tax returns, during which
time the authorities have the right to raise additional tax assessments
including penalties and interest. Under certain circumstances, the reviews may
cover longer periods. As such, there is a risk that transactions, and in
particular related party transactions, that have not been challenged in the
past by the authorities, may be challenged by them in the future.
It is not practical to determine the amount of any potential claims or the
likelihood of any unfavourable outcome arising from this or any future
inspections that may be initiated. However, management believes that its
interpretation of the relevant legislation is appropriate and that the Group
has complied with all regulations and paid or accrued all taxes and
withholding taxes that are applicable.
- On 8 May 2008, the Company and Peñoles entered into the
Separation Agreement (the 'Separation Agreement'). This agreement relates to
the separation of the Group and the Peñoles Group and governs certain aspects
of the relationship between the Fresnillo Group and the Peñoles Group
following the initial public offering in May 2008 ('Admission'). The
Separation Agreement provides for cross-indemnities between the Company and
Peñoles so that, in the case of Peñoles, it is held harmless against losses,
claims and liabilities (including tax liabilities) properly attributable to
the precious metals business of the Group and, in the case of the Company, it
is held harmless by Peñoles against losses, claims and liabilities which are
not properly attributable to the precious metals business. Save for any
liability arising in connection with tax, the aggregate liability of either
party under the indemnities shall not exceed US$250 million in aggregate.
- In 2011, following a flooding in the Saucito mine, Group filed an
insurance claim in respect of the damage caused (and in respect of business
interruption). This insurance claim was rejected by the insurance provider. In
early 2018, after the matter had been taken to mutually agreed arbitration,
the insurance claim was declared valid; however, there is disagreement about
the appropriate amount to be paid. In October 2018 the Group received US$13.6
million in respect of the insurance claim, however this does not constitute a
final settlement and management continues to pursue a higher insurance
payment. Due to the fact that negotiations are on-going and there is
uncertainty regarding the timing and amount involved in reaching a final
settlement with the insurer, it is currently not practicable to determine the
total amount expected to be recovered.
- On 4 July 2024, the SAT issued the tax assessment ruling regarding
the 2016 tax audit of Comercializadora de Metales Fresnillo where it confirmed
its findings on the tax treatment of the Silverstream premium payment
amounting to US$16.8 million, which includes the effect of time value of the
money, penalties and surcharges. The Company filed an administrative appeal on
30 August 2024 to challenge the SAT assessment.
Regarding the 2017 tax audit of Comercializadora de Metales Fresnillo,
findings were shared by the SAT on 21 March 2024, which mainly relate to the
tax treatment of the Silverstream transaction. The Company responded on 19
April 2024 and began a Conclusive Agreement procedure before the Mexican tax
ombudsman (PRODECON).
The tax audit in respect of the Silverstream transaction for the year 2018 is
ongoing, however management expects the SAT to also challenge the tax
treatment of the Silverstream premium payment as in the case of the 2016 and
2017 tax audits. On 6 November 2024, the SAT initiated an audit of the income
tax computation of Comercializadora de Metales Fresnillo for the year 2019. It
is not practical to determine the amount of any potential claims or the
likelihood of any unfavourable outcome arising from this or any future
inspections that may be initiated.
The Directors and their external tax advisors consider management´s
interpretation of the relevant legislation and assessment of taxation to be
appropriate, that the Group has complied with all regulations and paid or
accrued all taxes and withholdings that are applicable and that it is probable
that the Group's tax position will be sustained.
- It is probable that interest income will be earned on the Group's
outstanding income and value added tax receivable balances; however, there is
no certainty that this interest will be realised until the underlying balance
is recovered. Due to that uncertainty, it is also not practicable to estimate
the amount of interest income earned but not recovered to date.
27. Related party balances and transactions
The Group had the following related party transactions during the years ended
31 December 2024 and 2023 and balances as at 31 December 2024 and 2023.
Related parties are those entities owned or controlled by the ultimate
controlling party, as well as those who have a minority participation in Group
companies and key management personnel of the Group.
(a) Related party balances
Accounts receivable Accounts payable
As at 31 December As at 31 December
2024 2023 2024 2023
US$ thousands
US$ thousands
US$ thousands
US$ thousands
Trade:
Metalúrgica Met-Mex Peñoles, S.A. de C.V. 548,760 306,668 6,622 5,840
Other:
Industrias Peñoles, S.A.B. de C.V.(1) 16,516 5,050 - -
Metalúrgica Met-Mex Peñoles, S.A. de C.V. 322 261 1,791 739
Servicios Administrativos Peñoles, S.A. de C.V. - - 6,420 24,486
Servicios Especializados Peñoles, S.A. de C.V. - - 10,374 7,147
Fuentes de Energía Peñoles, S.A. de C.V. - - 6,373 6,239
Termoeléctrica Peñoles, S. de R.L. de C.V. - - 439 3,362
Peñoles Tecnología, S.A. de C.V. - - 1,640 1,261
Eólica de Coahuila S.A. de C.V. - - 2,693 2,986
Minera Capela, S.A. de C.V. - - 2 9
Grupo Nacional Provincial, S.A. B. de C.V.(2) 357 5,715 - -
Other 144 483 2,849 4,365
Sub-total 566,099 318,177 39,203 56,434
Less-current portion 566,099 318,177 39,203 56,434
Non-current portion - - - -
(1 This balance corresponds to the cash receivable related to the Silverstream
contract, see note 14.)
(2 This balance corresponds to excess payments to the defined contribution
plan which will be refunded.)
Related party accounts receivable and payable will be settled in cash.
Other balances with related parties:
Year ended 31 December
2024 2023
US$ thousands
US$ thousands
Silverstream contract:
Industrias Peñoles, S.A.B. de C.V. 258,641 482,340
The Silverstream contract can be settled in either silver or cash. Details of
the Silverstream contract are provided in note 14.
(b) Principal transactions with affiliates, including Industrias Peñoles
S.A.B de C.V., the Company's parent, are as follows:
Year ended 31 December
2024 2023
US$ thousands
US$ thousands
Income:
Sales:
Metalúrgica Met-Mex Peñoles, S.A. de C.V. (1) 3,481,650 2,704,452
Insurance recovery
Grupo Nacional Provincial, S.A. B. de C.V. 8,317 241
Other income 4,678 4,012
Total income 3,494,645 2,708,705
(1 Invoiced revenues are derived from the value of metal content which is
determined by commodity market prices and adjusted for the treatment and
refining charges to be incurred by the metallurgical complex (refer to note
5(c)).)
(
)
( )
( )
( )
Year ended 31 December
2024 2023
US$ thousands
US$ thousands
Expenses:
Administrative services:
Servicios Administrativos Peñoles, S.A. de C.V. (2) 52,352 56,636
Servicios Especializados Peñoles, S.A. de C.V. (3) 18,738 26,626
Peñoles Tecnología, S.A. de C.V. 4,970 5,343
76,060 88,605
Energy:
Termoeléctrica Peñoles, S. de R.L. de C.V. 7,295 28,454
Fuentes de Energía Peñoles, S.A. de C.V. 35,711 15,945
Eólica de Coahuila S.A. de C.V. 46,057 33,563
89,063 77,962
Operating materials and spare parts:
Wideco Inc 5,315 5,383
Metalúrgica Met-Mex Peñoles, S.A. de C.V. 55,525 35,551
60,840 40,934
Equipment repair and administrative services:
Serviminas, S.A. de C.V. 2,760 10,068
Insurance premiums:
Grupo Nacional Provincial, S.A. B. de C.V. 21,068 18,909
Other expenses: 2,755 3,960
Total expenses 252,546 240,438
(2 Includes US$0.9 million (2023: US$0.6 million) corresponding to expenses
reimbursed.)
(3 Includes US$8.5 million (2023: US$9.6 million) relating to engineering
costs that were capitalised.)
(c) Compensation of key management personnel of the Group
Key management personnel include the members of the Board of Directors and the
Executive Committee.
Year ended 31 December
2024 2023
US$ thousands
US$ thousands
Salaries and bonuses 6,044 3,412
Post-employment benefits 395 290
Other benefits 342 435
Total compensation paid in respect of key management personnel 6,781 4,137
As at 31 December
2024 2023
US$ thousands
US$ thousands
Accumulated accrued defined benefit pension entitlement 4,325 5,035
This compensation includes amounts paid to directors disclosed in the
Directors' Remuneration Report.
The accumulated accrued defined pension entitlement represents benefits
accrued at the time the benefits were frozen. There are no further benefits
accruing under the defined benefit scheme in respect of current services.
28. Auditor's remuneration
Fees due by the Group to its auditor during the year ended 31 December 2024
and 2023 are as follows:
Year ended 31 December
Class of services 2024 2023
US$ thousands
US$ thousands
Fees payable to the Group's auditor for the audit of the Group's annual 2,048 1,616
accounts
Fees payable to the Group's auditor and its associates for other services as
follows:
The audit of the Company's subsidiaries pursuant to legislation 975 650
Audit-related assurance services(1) 748 773
Total 3,771 3,039
(1 Includes US$0.6 million (2023: US$0.6 million) for the limited review of
the Half Yearly financial report, US$0.2 (2023: US$0.1 million) for the
Mexican tax audit opinions and US$0.1 million (2023: US$0.1 million) for the
limited assurance services over certain GHG's KPIs.)
29. Notes to the consolidated statement of cash flows
Notes 2024 2023
US$ thousands
US$ thousands
Reconciliation of profit for the year to net cash generated from operating
activities
Profit for the year 226,691 288,300
Adjustments to reconcile profit for the period to net cash inflows from
operating activities:
Depreciation and amortisation 13 620,867 498,469
Employee profit sharing 8 13,609 2,390
Deferred income tax expense/(credit) 11 264,111 (283,680)
Current income tax expense 11 253,100 109,398
Write-off of assets 9 1,704 1,920
Gain on the sale of property, plant and equipment and other assets (1,004) (882)
Net finance costs 25,131 36,974
Foreign exchange loss/(gain) (2,200) (1,142)
Difference between pension contributions paid and amounts recognised in the (63) 2,061
income statement
Non-cash movement on derivatives (301) (2)
Changes in fair value of Silverstream 14 182,276 (7,732)
Change in mine closure cost provision 9 8 3,226
Gain in sale of mining concessions 9 (24,149) -
Other - 38
Working capital adjustments
Increase in trade and other receivables (196,196) (45,597)
Decrease in prepayments and other assets 10,741 10,396
Decrease in inventories 50,556 54,631
(Decrease)/increase in trade and other payables (28,016) 1,196
Cash generated from operations 1,396,865 669,964
Income tax paid(1) (94,957) (233,060)
Employee profit sharing paid (2,106) (10,982)
Net cash from operating activities 1,299,802 425,922
(1) (Income tax paid includes US$72.1 million corresponding to corporate
income tax (2023: US$187.0 million) and US$22.9 million corresponding to
special mining right (2023: US$46.0 million), for further information refer to
note 11.)
30. Financial instruments
(a) Fair value category
As at 31 December 2024
US$ thousands
Financial assets: Amortized Fair value through OCI Fair value (hedging instruments) Fair value through profit or loss
cost
Trade and other receivables(1) 8,542 - - 565,276
Equity instruments at FVOCI - 139,968 - -
Silverstream contract (note 14) - - - 258,641
Financial liabilities: Amortized Fair value (hedging instruments) Fair value through profit or loss
cost
Interest-bearing loans (note 20) 839,507 - -
Notes payable(2) 2,055 - -
Trade and other payables (note 23) 2,150,094 - -
Derivative financial instruments - 189 -
( )
As at 31 December 2023
US$ thousands
Financial assets: Amortized Fair value through OCI Fair value (hedging instruments) Fair value through profit or loss
cost
Trade and other receivables(1) 9,894 - - 311,718
Equity instruments at FVOCI - 107,991 - -
Silverstream contract (note 14) - - - 482,340
Derivative financial instruments - - 79 -
Financial liabilities: Amortized Fair value (hedging instruments) Fair value through profit or loss
cost
Interest-bearing loans (note 20) 839,002 - -
Notes payable(2) 95,360 - -
Trade and other payables (note 23) 174,544 - -
( )
(
)
( )
( )
(1 Trade and other receivables and embedded derivative within sales contracts
are presented net in Trade and other receivables in the balance sheet.)
(2 Corresponds to interest-bearing notes payable received from Minera los
Lagartos, S.A. de C.V. which holds a non-controlling interest in Juanicipio
project. The notes are denominated in US Dollars and bear interest at a of
6.76% (2023: 6.72% to 7.36%) with a maturity of six months. (2023: nine to
eighteen months US$72.6 million short-term and US$22.7 million long-term,).
During the year there were no proceeds and payments from these Notes amounted
to US$92.4 million (2023: proceeds amounted to US$22.7 million, and payments
amounted to US$33.0 million). Interest paid amounted to US$5.0 million (2023:
US$7.6 million).)
(b) Fair value measurement
The value of financial assets and liabilities other than those measured at
fair value are as follows:
As at 31 December
Carrying amount Fair value
2024 2023 2024 2023
US$ thousands
US$ thousands
US$ thousands
US$ thousands
Financial assets:
Trade and other receivables 8,542 9,894 8,542 9,894
Financial liabilities:
Interest-bearing loans(1) (note 20) 839,507 839,002 605,396 645,745
Trade and other payables 150,094 174,544 150,094 174,544
Notes payable 2,055 95,360 2,055 95,324
(1 Interest-bearing loans are categorised in Level 1 of the fair value
hierarchy.)
The financial assets and liabilities measured at fair value are categorised
into the fair value hierarchy as at 31 December as follows:
As of 31 December 2024
Fair value measure using
Quoted prices in active markets Level 1 Significant observable Level 2 Significant unobservable Level 3 Total
US$ thousands US$ thousands
US$ thousands
US$ thousands
Financial assets:
Trade receivables - - 548,760 548,760
Other receivables from related parties(1) - - 16,516 16,516
Derivative financial instruments:
Option and forward foreign exchange contracts - - - -
Silverstream contract - - 258,641 258,641
Other financial assets:
Equity instruments at FVOCI 139,968 - - 139,968
139,968 - 823,917 963,885
(1 This balance corresponds to the cash receivable related to the Silverstream
contract, see note 14.)
(
)
( )
( )
( )
As of 31 December 2023
Fair value measure using
Quoted prices in active markets Level 1 Significant observable Level 2 Significant unobservable Level 3 Total
US$ thousands US$ thousands
US$ thousands
US$ thousands
Financial assets:
Trade receivables - - 306,668 306,668
Other receivables from related parties(1) - - 5,050 5,050
Derivative financial instruments:
Option and forward foreign exchange contracts - 79 - 79
Silverstream contract - - 482,340 482,340
Other financial assets:
Equity instruments at FVOCI 107,991 - - 107,991
107,991 79 794,058 902,128
(1 This balance corresponds to the cash receivable related to the Silverstream
contract, see note 14.)
There have been no transfers between Level 1 and Level 2 of the fair value
hierarchy, and no transfers into and out of Level 3 fair value measurements.
A reconciliation of the opening balance to the closing balance for Level 3
financial instruments other than Silverstream (which is disclosed in note 14)
is shown below:
2024 2023
US$ thousands
US$ thousands
Balance at 1 January: 306,668 275,844
Sales 3,503,662 2,706,292
Cash collection (3,254,312) (2,674,262)
Changes in fair value 32,638 27,034
Realised embedded derivatives during the year (39,896) (28,240)
Balance at 31 December 548,760 306,668
The fair value of financial assets and liabilities is included at reflects the
amount at which the instrument could be exchanged in a current transaction
between willing parties, other than in a forced or liquidation sale.
The following valuation techniques were used to estimate the fair values:
Option and forward foreign exchange contracts
The Group enters into derivative financial instruments with various
counterparties, principally financial institutions with investment grade
credit ratings. The foreign currency forward (Level 2) contracts are measured
based on observable spot exchange rates, the yield curves of the respective
currencies as well as the currency basis spreads between the respective
currencies. The foreign currency option contracts are valued using the Black
Scholes model, the significant inputs to which include observable spot
exchange rates, interest rates and the volatility of the currency.
Silverstream contract
Further information relating to the valuation techniques used to estimate the
fair value of the Silverstream contract as well as the sensitivity of the
valuation to the key inputs are disclosed in note 14.
Equity investments:
The fair value of equity investments is derived from quoted market prices in
active markets (Level 1). These investments were irrevocably designated at
fair value through OCI as the Group considers these investments to be
strategic in nature. As of 31 December 2024, approximately 90.4% of the
investments correspond to 9,314,877 shares (2023: 9,314,877 shares) of Mag
Silver, Corp. for an amount of US$126.5 million (2023: US$96.9 million) and
7.3% of Endeavor Silver Corp. represented by 2,800,000 (2023: 2,800,000
shares) shares for an amount of US$10.3 million (2023: US$5.5 million). These
equity investments are listed on the Toronto stock Exchange. The prices per
share as 31 December 2024 were US$13.58 (2023: US$10.41) and US$3.66 (2023:
US$1.96), respectively.
In August 2024 the Group purchased 500,000 shares of Osisko Mining Inc., a
Canadian exploration company, for a total consideration of US$1.5 million. In
October 2024 the Group disposed its equity investment of 1,500,000 shares in
Osisko Mining Inc. The shares sold had a fair value of US$5.1 million and the
Group realised a gain of US$1.0 million which had already been included in
OCI. This gain has been transferred to retained earnings, net of tax of US$0.3
million.
Interest-bearing loans
The fair value of the Group's interest-bearing loan is derived from quoted
market prices in active markets (Level 1).
Trade receivables:
Sales of concentrates, precipitates doré bars and activated carbon are
'provisionally priced' and revenue is initially recognised using this
provisional price and the Group's best estimate of the contained metal.
Revenue is subject to final price and metal content adjustments subsequent to
the date of delivery (see note 2 (o)). This price exposure is considered to be
an embedded derivative and therefore the entire related trade receivable is
measured at fair value.
At each reporting date, the provisionally priced metal content is revalued
based on the forward selling price for the quotational period stipulated in
the relevant sales contract. The selling price of metals can be reliably
measured as these metals are actively traded on international exchanges but
the estimated metal content is a non-observable input to this valuation.
31. Financial risk management
Overview
The Group's principal financial assets and liabilities, other than
derivatives, comprise trade and other receivables, cash, equity instruments at
FVOCI, interest-bearing loans, notes payable and trade payables.
The Group has exposure to the following risks from its use of financial
instruments:
- Market risk, including foreign currency, commodity price, interest
rate and equity price risks
- Credit risk
- Liquidity risk
This note presents information about the Group's exposure to each of the above
risks and the Group's objectives, policies and processes for assessing and
managing risk. Further quantitative disclosures are included throughout the
financial statements.
The Board of Directors has overall responsibility for the establishment and
oversight of the Group's risk management framework.
The Group's risk management policies are established to identify and analyse
the risks faced by the Group, to set appropriate risk limits and controls, and
to monitor risks and adherence to limits. Risk management policies and systems
are reviewed regularly to reflect changes in market conditions and the Group's
activities. The Group, through its training and management standards and
procedures, aims to develop a disciplined and constructive control environment
in which all employees understand their roles and obligations.
The Fresnillo Audit Committee has responsibility for overseeing how management
monitors compliance with the Group's risk management policies and procedures
and reviews the adequacy of the risk management framework in relation to the
risks faced by the Group. The Audit Committee is assisted in its oversight
role by Internal Audit, which undertakes both regular and ad hoc reviews of
risk management controls and procedures, the results of which are reported to
the Audit Committee.
(a) Market risk
Market risk is the risk that changes in market factors, such as foreign
exchange rates, commodity prices or interest rates will affect the Group's
income or the value of its financial instruments.
The objective of market risk management is to manage and control market risk
exposures within acceptable parameters, while optimising the return on risk.
In the following tables, the effect on equity excludes the changes in retained
earnings as a direct result of changes in profit before tax.
Foreign currency risk
The Group has financial instruments that are denominated in Mexican peso and
other foreign currencies which are exposed to foreign currency risk.
Transactions in currencies other than the US dollar include the purchase of
services, fixed assets, spare parts and the payment of dividends. As a
result, the Group has financial assets and liabilities denominated in
currencies other than functional currency and holds cash and cash equivalents
in Mexican peso.
In order to manage the Group's exposure to foreign currency risk on
expenditure denominated in currencies other than the US dollar, the Group has
entered into certain forward and option derivative contracts.
The following table demonstrates the sensitivity of cash and cash equivalents,
trade and other receivables, trade and other payables and derivatives
financial instruments (excluding Silverstream which impact is disclosed in
note 14) to a reasonably possible change in the US dollar exchange rate
compared to the Mexican peso, reflecting the impact on the Group's profit
before tax and equity, with all other variables held constant. It is assumed
that the same percentage change in exchange rates is applied to all applicable
periods for the purposes of calculating the sensitivity with relation to
derivative financial instruments.
Year ended 31 December Strengthening/ Effect on Effect on equity:
(weakening)
profit before tax: increase/
increase/
of US dollar
(decrease)
(decrease)
US$ thousands
US$ thousands
2024 10% 955 (582)
(5%) (2,228) 582
2023 10% (1,504) (275)
(5%) 871 276
The Group's exposure to reasonably possible changes in other currencies is not
material.
Commodity risk
The Group has exposure to changes in metals prices (specifically silver, gold,
lead and zinc) which have a significant effect on the Group's results. These
prices are subject to global economic conditions and industry-related cycles.
The table below reflects the aggregate sensitivity of financial assets and
liabilities (excluding Silverstream which impact is disclosed in note 14) to a
reasonably possible change in commodities prices, reflecting the impact on the
Group's profit before tax with all other variables held constant.
The sensitivity shown in the table below relates to changes in fair value of
commodity derivatives financial instruments contracts (excluding Silverstream)
and embedded derivatives in sales.
Year ended 31 December Increase/(decrease) in commodity prices Effect on Effect on equity:
profit before tax: increase/
increase/
(decrease)
(decrease)
US$ thousands
US$ thousands
Gold Silver Zinc Lead
2024 10% 15% 10% 10% 38,509 -
(10%) (15%) (10%) (10%) (38,509) -
2023 10% 10% 10% 10% 26,375 -
(10%) (10%) (10%) (10%) (26,375) -
Interest rate risk
The Group is exposed to interest rate risk from the possibility that changes
in interest rates will affect future cash flows or the fair values of its
financial instruments, principally relating to the cash balances and the
Silverstream contract held at the balance sheet date as explained in note 14.
Interest-bearing loans and notes payable are at a fixed rate, therefore the
possibility of a change in interest rate only impacts its fair value but not
its carrying amount. Therefore, interest-bearing loans, notes payable and
loans from related parties are excluded from the table below.
The following table demonstrates the sensitivity of financial assets and
financial liabilities (excluding Silverstream which impact is disclosed in
note 14) to a reasonably possible change in interest rate applied to a full
year from the balance sheet date. There is no impact on the Group's equity
other than the equivalent change in retained earnings.
Year ended 31 December Basis point increase/ Effect on profit before tax: increase/
(decrease)
(decrease)
in interest rate
US$ thousands
2024(1) - -
(50) (6,556)
2023(1) - -
(75) (3,307)
The sensitivity shown in the table above primarily relates to the full year of
interest on cash balances held as at the year end.
(1 Based on actual market conditions management considers an increase in
interest rates is likely remote.)
Equity price risk
The Group has exposure to changes in the price of equity instruments that it
holds as equity investments at FVOCI.
The following table demonstrates the sensitivity of equity investments at
FVOCI to a reasonably possible change in market price of these equity
instruments, reflecting the effect on the Group's profit before tax and
equity:
Year ended 31 December Increase/ Effect on Effect on equity: increase/
(decrease)
profit before tax: increase/
(decrease)
in equity price
(decrease)
US$ thousands
(US$ thousands)
2024 80% - 111,958
(20%) - (27,989)
2023 40% - 43,196
(45%) - (48,596)
(b) Credit risk
Exposure to credit risk arises as a result of transactions in the Group's
ordinary course of business and is applicable to trade and other receivables,
cash and cash equivalents, the Silverstream contract and derivative financial
instruments.
The Group's policies are aimed at minimising losses as a result of
counterparties' failure to honour their obligations. Individual exposures are
monitored with customers subject to credit limits to ensure that the Group's
exposure to bad debts is not significant. The Group's exposure to credit risk
is influenced mainly by the individual characteristics of each counter party.
The Group's financial assets are with counterparties with what the Group
considers to have an appropriate credit rating. As disclosed in note 27, the
counterparties to a significant proportion of these financial assets are
related parties. At each balance sheet date, the Group's financial assets were
neither credit-impaired nor past due, other than 'Other receivables' as
disclosed in note 16. The Group's policies are aimed at minimising losses from
foreign currency hedging contracts. The Company's foreign currency hedging
contracts are entered into with large financial institutions with strong
credit ratings.
The Group has a high concentration of trade receivables with one counterparty
Met-Mex Peñoles, the Group's principal customer throughout 2024 and 2023. A
further concentration of credit risk arises from the Silverstream contract.
Both Met-Mex and the counterparty to the Silverstream contract are
subsidiaries in the Peñoles group which currently owns 75 per cent of the
shares of the Company and is considered by management to be of appropriate
credit rating.
The Group's surplus funds are managed by Servicios Administrativos Fresnillo,
S.A. de C.V., which manages cash and cash equivalents, including short-term
investments investing in several financial institutions. Accordingly, on an
ongoing basis the Group deposits surplus funds with a range of financial
institutions, depending on market conditions. In order to minimise exposure to
credit risk, the Group only deposits surplus funds with financial institutions
with a credit rating of MX-1 (Moody´s) and mxA-1+ (Standard and Poor's) and
above. As at 31 December 2024, the Group had concentrations of credit risk as
22 percent of surplus funds were deposited with one financial institution of
which the total investment was held in short term deposits.
The maximum credit exposure at the reporting date of each category of
financial asset above is the carrying value as detailed in the relevant notes.
See note 17 for the maximum credit exposure to cash and cash equivalents and
short-term investments, note 16 for other receivables and note 27 for related
party trade and other receivables. The maximum credit exposure with relation
to the Silverstream contract is the value of the derivative as at 31 December
2024, being US$200.6 million (2023: US$482.3 million).
(c) Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its
financial obligations as they fall due.
The Group monitors its risk of a shortage of funds using projected cash flows
from operations and by monitoring the maturity of both its financial assets
and liabilities.
The table below summarises the maturity profile of the Group's financial
liabilities based on contractual undiscounted payments.
US$ thousands
Within 1 year 2-3 years 3-5 years > 5 years Total
As at 31 December 2024
Interest-bearing loans 37,986 75,973 75,973 1,647,713 1,837,645
Trade and other payables ,150,094 - - - 150,094
Notes payable 2,055 - - - 2,055
Lease liabilities 4,994 6,092 2,604 - 13,691
US$ thousands
Within 1 year 2-3 years 3-5 years > 5 years Total
As at 31 December 2023
Interest-bearing loans 37,986 75,973 75,973 1,685,699 1,875,631
Trade and other payables 180,565 - - - 180,565
Notes payable 72,634 22,726 - - 95,360
Lease liabilities 5,944 7,502 2,829 494 16,769
The payments for financial derivative instruments are the gross undiscounted
cash flows. However, those amounts may be settled gross or net. The following
table shows the corresponding estimated inflows based on the contractual
terms:
US$ thousands
Within 1 year 2-3 years 3-5 years > 5 years Total
As at 31 December 2024
Inflows 13,191 - - - 13,191
Outflows (12,403) - - - (12,403)
Net 788 - - - 788
US$ thousands
Within 1 year 2-3 years 3-5 years > 5 years Total
As at 31 December 2023
Inflows 5,777 - - - 5,777
Outflows (5,587) - - - (5,587)
Net 190 - - - 190
The above liquidity tables include expected inflows and outflows from currency
option contracts which the Group expects to be exercised during 2025 as at 31
December 2024 and during 2024 as at 31 December 2023, either by the Group or
counterparty.
Management considers that the Group has adequate current assets and forecast
cash from operations to manage liquidity risks arising from current
liabilities and non-current liabilities.
Capital management
The primary objective of the Group's capital management is to ensure that it
maintains a strong credit rating and healthy capital ratios that support its
business and maximise shareholder value. Management considers capital to
consist of equity and interest-bearing loans, excluding net unrealised gains
or losses on revaluation of derivatives financial instruments and equity
instruments at FVOCI. Refer to notes 18, 20 and 30 respectively for a
quantitative summary of these items.
In order to ensure an appropriate return for shareholders' capital invested in
the Group, management thoroughly evaluates all material projects and potential
acquisitions and approves them at its Executive Committee before submission to
the Board for ultimate approval, where applicable. The Group's dividend policy
is based on the profitability of the business and underlying growth in
earnings of the Group, as well as its capital requirements and cash flows,
including cash flows from the Silverstream.
One of the Group's metrics of capital is cash and other liquid assets which in
2024 and 2023 consisted of only cash and cash equivalents, which details are
disclosed in note 17.
In January 2024 the Group entered into a syndicated revolving credit facility
("the facility") with a term from January 2024 to January 2029. The maximum
amount available under the facility is US$350.0 million. The facility is
unsecured and has an interest rate on drawn amounts of SOFR plus an interest
margin of 1.15%. The terms of this facility include financial covenants
related to leverage and interest cover ratios. No amounts have been drawn from
the facility to date.
1 Economic Value Distributed is considered to be a social performance
measure and includes wages, taxes and payments to suppliers.
2 Main areas of executive management
3 The Committee of Sponsoring Organizations (COSO) of the Treadway
Commission Enterprise Risk Management (ERM) framework.
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