REG - Fresnillo Plc - Financial Results for the Year Ended 31 Dec 2015 <Origin Href="QuoteRef">FRES.L</Origin> - Part 4
01/03/2016 07:12
- Part 4: For the preceding part double click ID:nRSA5523Qc
in accordance
with the transitional requirements of IFRIC 4.
(p) Revenue recognition
Revenue is recognised to the extent that it is probable that economic benefits will flow to the Group and the revenue can
be reliably measured. Revenue is measured at the fair value of consideration received excluding discounts, rebates, and
other sales taxes.
Sale of goods
Revenue is recognised in the income statement when all significant risks and rewards of ownership are transferred to the
customer, usually when title has been passed. Revenue excludes any applicable sales taxes.
The Group recognises revenue on a provisional basis at the time concentrates, precipitates and doré bars are delivered to
the customer's smelter or refinery, using the Group's best estimate of contained metal. Revenue is subject to adjustment
once the analysis of the product samples is completed, contract conditions have been fulfilled and final settlement terms
are agreed. Any subsequent adjustments to the initial estimate of metal content are recorded in revenue once they have been
determined.
In addition, sales of concentrates and precipitates throughout each calendar month, as well as doré bars that are delivered
after the 20th day of each month, are 'provisionally priced' subject to a final adjustment based on the average price for
the month following the delivery to the customer, based on the market price at the relevant quotation point stipulated in
the contract. Doré bars that are delivered in the first 20 days of each month are finally priced in the month of delivery.
For sales of goods that are subject to provisional pricing, revenue is initially recognised when the conditions set out
above have been met using the provisional price. The price exposure is considered to be an embedded derivative and hence
separated from the sales contract. At each reporting date, the provisionally priced metal is revalued based on the forward
selling price for the quotation period stipulated in the contract until the quotation period ends. The selling price of the
metals can be reliably measured as these are actively traded on international exchanges. The revaluing of provisionally
priced contracts is recorded as an adjustment to revenue.
The customer deducts treatment and refining charges before settlement. Therefore, the fair value of consideration received
for the sale of goods is net of those charges.
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.
Other income
Other income is recognised in the income statement when all significant risks and rewards of ownership are transferred to
the customer, usually when title has been passed.
(q) 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:
o Costs incurred in geographical proximity to existing mines in order to replenish or increase reserves, and
o Costs incurred in regional exploration with the objective of locating new ore deposits in Mexico and Latin America and
which are identified by project. 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.
(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 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. 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, as
applicable;
When receivables and payables are stated with the amount of sales tax included.
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 and commodities price
which impact its financial and business transactions. Hedges are designed to protect the value of expected production
against the dynamic market conditions.
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.
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 options are valued using the Black Scholes model. The Silverstream contract is valued using a Net Present Value
valuation approach.
At the inception of a hedge relationship, the Group formally designates and documents the hedge relationship to which the
Group wishes to apply hedge accounting and the risk management objective and strategy for the undertaken hedge. The
documentation includes identification of the hedging instrument, the hedged item or transaction, the nature of the risk
being hedged and how the entity will assess the hedging instrument's effectiveness in offsetting the exposure to changes in
the hedged item's fair value or cash flows attributable to the hedged risk. Such hedges are expected to be highly effective
in achieving offsetting changes in fair value or cash flows and are assessed on an ongoing basis to determine that they
actually have been highly effective throughout the financial reporting periods for which they were designated.
Hedges which meet the strict criteria for hedge accounting are accounted for as follows:
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 are 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. 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. Changes in fair
value of time value is recognised in the income statement in finance costs.
Embedded derivatives
Contracts are assessed for the existence of embedded derivatives at the date that the Group first becomes party to the
contract, with reassessment only if there is a change to the contract that significantly modifies the cash flows. Embedded
derivatives which are not clearly and closely related to the underlying asset, liability or transaction are separated and
accounted for as stand-alone derivatives.
(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 notes 31 and 32.
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 on the basis of 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 31.
(v) Dividend distribution
Dividends payable to the Company's shareholders are recognised as a liability when these are approved by the Company's
shareholders or Board as appropriate. Dividends payable to minority shareholders are recognised as a liability when these
are approved by the Company's subsidiaries.
3. Segment reporting
For management purposes, the Group is organised into operating segments based on producing mines.
At 31 December 2015, the Group has six reportable operating segments represented by six producing mines as follows:
The Fresnillo mine, located in the State of Zacatecas, the world's largest primary 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 gold mine; including the San Ramon satellite mine;
The Herradura mine, located in the State of Sonora, a surface gold mine;
The Soledad-Dipolos mine, located in the State of Sonora, a surface gold mine; and
The Noche Buena mine, located in State of Sonora, a surface gold mine.
The operating performance and financial results for each of these mines are reviewed by management. As the Group´s chief
operating decision maker 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. Other income and
expenses included in the consolidated income statement 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 2015 and 2014, substantially all 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 2015 and 2014, respectively:
Year ended 31 December 2015
US$ thousands Fresnillo Herradura Cienega Soledad- Saucito Noche Buena Other11 Adjustments and eliminations Total
Dipolos
Revenues:
Third party1 265,347 459,904 154,334 - 395,417 165,518 3,866 1,444,386
Inter-Segment 78,622 (78,622) -
Segment revenues 265,347 459,904 154,334 - 395,417 165,518 78,622 (74,756) 1,444,386
Segment Profit2 149,986 219,045 71,094 (7,995) 295,219 26,706 65,925 (14,322) 805,659
Hedging (28,589)
Depreciation and amortisation (331,209)
Employee profit sharing (12,791)
Gross profit as per the income statement 433,070
Capital expenditure3 205,5734 119,7435 24,6326 -7 108,2768 2,6499 13,81910 474,692
1 Total third party revenues include treatment and refining charges amounting US$131.4 million.
1 Total third party revenues include treatment and refining charges amounting US$142.8 million.
2 Segment profit excluding foreign exchange hedging losses, depreciation and amortisation and employee profit sharing.
3 Capital expenditure consists of additions to property, plant and equipment, including mine development and stripping
activity asset but excluding additions relating to changes in the mine closure provision.
4 Capital expenditure consists of mine development work, the construction of San Julian project, and purchase of mine
equipment.
5 Capital expenditure consists of surface mine stripping activity, construction of second beneficiation plant (Merrill
Crowe), construction of leaching pads and purchase of mine equipment.
6 Capital expenditure consists of mine development work and purchase of mine equipment.
7 During 2015, this segment did not operate due the Bajio conflict (note 27).
8 Capital expenditure consists of mine development work expansion of flotation plant and mine equipment.
9 Capital expenditures consists of construction of leaching pads and purchase of land.
10 Capital expenditure consists of the acquisition of property, plant and equipment and exploration expenditures
capitalised, including Juanicipio project, and expansion of administrative office.
11 Other includes inter-segment leasing services provided by Minera Bermejal, S.A. de C.V.
Year ended 31 December 2014
US$ thousands Fresnillo Herradura Cienega Soledad-Dipolos Saucito Noche Other11 Adjustments and eliminations Total
Buena
Revenues:
Third party1 394,644 341,409 191,553 - 323,398 162,596 101 1,413,701
Inter-Segment - - - - - - 71,443 (71,443) -
Segment revenues 394,644 341,409 191,553 - 323,398 162,596 71,443 (71,342) 1,413,701
Segment Profit2 271,878 170,299 96,961 (8,203) 235,015 25,832 58,524 (20,063) 830,243
Hedging (1,118)
Depreciation and amortisation (295,452)
Employee profit sharing (12,619)
Gross profit as per the income statement 521,054
Capital expenditure3 175,8754 63,1195 37,8906 __7 114,4388 20,8879 13,36510 - 425,574
1 Total third party revenues include treatment and refining charges amounting US$131.4 million.
2 Segment profit excluding foreign exchange hedging losses, depreciation and amortisation and employee profit sharing.
3 Capital expenditure consists of additions to property, plant and equipment, including mine development and stripping
activity asset but excluding additions relating to changes in the mine closure provision.
4 Capital expenditure consists of mine development work, the construction of San Julian project, and purchase of mine
equipment.
5 Capital expenditure consists of surface mine stripping activity, final phase of the construction of the dynamic
leaching plant and purchase of land.
6 Capital expenditure consists of mine development work, purchase of mine equipment and construction of employees'
facilities.
7 During 2014, this segment did not operate due the Bajio conflict (note 27). As a result of the Bajio dispute, the site
was remediated and certain fixed assets were dismantled for a net amount of US$ 16.9 million (note 9 and 13).
8 Capital expenditure consists of mine development work, the construction of Saucito II plant and mine equipment.
9 Capital expenditures consists of construction of leaching pads and expansion of beneficiation plant.
10 Capital expenditure consists of the acquisition of property, plant and equipment and exploration expenditures
capitalised, including Juanicipio project, mine equipment purchased by Minera El Bermejal and expansion of administrative
office.
11 Other includes inter-segment leasing services provided by Minera Bermejal, S.A. de C.V. The presentation of other and
adjustments and eliminations have been changed to be consistent with the presentation in the 2015 table above.
4.Group information
The list of the Company's subsidiaries included in the consolidated financial statements and its principal activities are
showed in the Company's separate financial statements.
(a) Material partly-owned subsidiaries
As at 31 December 2015 and 2014, there are no material partly-owned subsidiaries. Non-controlling interests showed in the
income statement for the year ended 31 December 2014 include US$24,969 thousand corresponding to partly-owned subsidiaries
where the non-controlling interest has subsequently been purchased, as explained in the note 4(b) below. Condensed
financial information relating to partly-owned subsidiaries for the period were as follows:
Summarised income statement for the year ended 31 December 2014
The following amounts relate to the results before the Group acquired the non-controlling interest in the subsidiaries (see
note 4(b)).
Minera Penmont, S de R.L. de C.V. Desarrollo Mineros Fresne S de R.L. de C.V. Proveedora de Equipos Fresne S de R.L. de C.V. Minera el Bermejal S de R.L. de C.V.
Revenue 632,079 427,963 32,257 53,374
(Loss)/profit before income tax (16,503) 87,454 (3,849) 27,073
Income tax credit/(charge) 3,175 (35,054) 2,486 (8,035)
(Loss)/profit for the year for continuing operations (13,328) 52,400 (1,363) 19,038
Other comprehensive income - - - -
Total comprehensive income (13,328) 52,400 (1,363) 19,038
Attributable to non-controlling interests (5,864) 23,056 (600) 8,377
Dividends paid to non-controlling interests - - - -
Summarised cash flow information for the year ended 31 December 2014
The following amounts relate to the results before the Group acquired the non-controlling interest in the subsidiaries|
(see note 4(b)).
Minera Penmont, S de R.L. de C.V. Desarrollo Mineros Fresne S de R.L. de C.V. Proveedora de Equipos Fresne S de R.L. de C.V. Minera el Bermejal S de R.L. de C.V.
Operating (25,272) 26,655 26,067 (11,034)
Investing (13,247) (64,990) (27,404) (1,370)
Financing 47,844 39,985 (804) 10,900
Net increase/(decrease) in cash and cash equivalents 9,325 1,650 (2,141) (1,504)
(b) Transactions with non-controlling interests
On 6 October 2014, the Group acquired the remaining 44% of the issued shares of Minera Penmont, S. de R.L. de C.V.,
Desarrollos Mineros Fresne, S. de R.L. de C.V, Proveedora de Equipos Fresne, S. de R.L. de C.V. and Minera Bermejal, S. de
R.L. de C.V. (together referred to as Penmont), for a purchase consideration of US$450,540 thousand including acquisition
expenses. After the transaction, the Group holds 100% of the equity share capital of the previously mentioned companies.
The carrying amount of the non-controlling interest in Penmont on the date of acquisition was US$426,652 thousand. The
group derecognised the non-controlling interest of US$ 426,652 thousand and recorded a decrease in equity attributable to
owners of the parent of US$ 23,844 thousand. To determine the amount of non-controlling interest corresponding to the above
mentioned subsidiaries, the Group used the figures as of 30 September 2014, due to the fact that there were no material
transactions from that date to the date of purchase. The effect of the changes in the ownership interest in Penmont on the
equity attributable to owners of the Group during 2014 is summarised as follows:
Minera Penmont, S de R.L. de C.V. Desarrollo Mineros Fresne S de R.L. de C.V. Proveedora de Equipos Fresne S de R.L. de C.V. Minera el Bermejal S de R.L. de C.V. Total
Carrying amount of non-controlling interest acquired 222,557 64,216 93,488 46,390 426,651
Consideration paid to non-controlling interest 171,791 54,065 120,294 104,390 450,540
(Deficit)/excess of consideration paid recognised in parent's equity (50,766) (10,151) 26,806 58,000 23,889
During 2015, the Group did not carry out any transactions with any non-controlling interest that resulted in changes to the
ownership of a subsidiary.
5. Revenues
Revenues reflect the sale of goods, being concentrates doré, slag, and precipitates of which the primary contents are
silver, gold, lead and zinc
(a) Revenues by product sold
Year ended 31 December
2015 2014
US$ thousands US$ thousands
Lead concentrates (containing silver, gold, lead and by-products) 691,096 777,560
Doré and slag (containing gold, silver and by-products) 626,446 504,000
Zinc concentrates (containing zinc, silver and by-products) 81,184 70,695
Precipitates (containing gold and silver) 45,660 61,446
1,444,386 1,413,701
Substantially all lead concentrates, precipitates, doré and slag, were sold to Peñoles' metallurgical complex, Met-Mex, for
smelting and refining.
(b) Value of metal content in products sold
For products other than refined silver and gold, invoiced revenues are derived from the value of metal content adjusted by
treatment and refining charges incurred by the metallurgical complex of the customer. The value of the metal content of the
products sold, before treatment and refining charges is as follows:
Year ended 31 December
2015 2014
US$ thousands US$ thousands
Silver 617,434 714,928
Gold 828,476 720,536
Zinc 73,018 58,076
Lead 68,277 51,581
Value of metal content in products sold 1,587,205 1,545,121
Adjustment for treatment and refining charges (142,819) (131,420)
Total revenues1, 1,444,386 1,413,701
1 Include provisional price adjustments which represent changes in the fair value of embedded derivatives resulting a gain
of US$2.3 million (2014: gain of US$2 million) and hedging gain of US$3.9 million (2014: gain of US$ 0.1 million). For
further detail, refer to note 2(p).
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
2015 2014
US$ per ounce US$ per ounce
Gold2 1,126.5 1,257.7
Silver2 15.6 18.6
2 Revenue of products sold does not include hedging gains.
6. Cost of sales
Year ended 31 December
2015 2014
US$ thousands US$ thousands
Depreciation and amortisation (notes 2 (e) and 13) 331,209 295,452
Personnel expenses (note 8) 80,567 81,256
Maintenance and repairs 94,837 88,180
Operating materials 135,059 136,694
Energy 117,908 132,540
Contractors 175,898 219,622
Freight 9,821 11,764
Insurance 5,042 6,567
Mining concession rights and contributions 10,853 9,860
Other 15,211 14,318
Cost of production 976,405 996,253
Losses on foreign currency hedges 28,589 1,118
Change in work in progress and finished goods (ore inventories) 1,309 (122,289)
Inventory write down (note 16) 5,013 17,565
1,011,316 892,647
7. Exploration expenses
Year ended 31 December
2015 2014
US$ thousands US$ thousands
Contractors 105,161 129,443
Administrative services 6,907 8,598
Mining concession rights and contributions 15,684 14,595
Personnel expenses (note 8) 5,748 5,614
Assays 2,788 3,509
Maintenance and repairs 384 686
Operating materials 416 809
Rentals 1,874 3,912
Energy 454 608
Other 830 1,010
140,246 168,784
These exploration expenses were mainly incurred in areas of the Fresnillo, Herradura, La Ciénega and Saucito mines, the San
Ramon satellite mine and the San Julian, Orysivo, Rodeo, Guanajuato and Centauro Deep projects. In addition, exploration
expenses of US$8.4 million (2014: US$6.8 million) were incurred in the year in projects located in Peru.
The following table sets forth liabilities (generally trade payables) incurred in the exploration activities of the Group
companies engaged only in exploration, principally Exploraciones Mineras Parreña, S.A. de C.V. Liabilities related to
exploration activities incurred by the Group operating companies are not included since it is not possible to separate the
liabilities related to exploration activities of these companies from their operating liabilities.
Year ended 31 December
2015 2014
US$ thousands US$ thousands
Liabilities related to exploration activities 917 3,545
Cash flows relating to exploration activities are as follows:
Year ended 31 December
2015 2014
US$ thousands US$ thousands
Operating cash out flows related to exploration activities 142,874 165,461
8. Personnel expenses
Year ended 31 December
2015 2014
US$ thousands US$ thousands
Employees' profit sharing 12,791 12,619
Salaries and wages 36,544 38,572
Bonuses 10,713 10,410
Legal contributions 12,644 13,757
Other benefits 8,084 7,967
Vacations and vacations bonus 2,464 2,070
Social security 5,310 5,233
Post-employment benefits 1 4,572 4,349
Other 8,262 8,953
101,384 103,930
1
1 Post- employment benefits include US$1.6 million associated to benefits corresponding to the defined contribution plan
(2014: US$1,463).
(a) Personnel expenses are reflected in the following line items:
Year ended 31 December
2015 2014
US$ thousands US$ thousands
Cost of sales (note 6) 80,567 81,256
Administrative expenses 15,069 17,060
Exploration expenses (note 7) 5,748 5,614
101,384 103,930
(b) The monthly average number of employees during the year was as follows:
Year ended 31 December
2015 2014
No. No.
Mining 1,560 1,406
Plant concentration 552 475
Exploration 519 655
Maintenance 755 694
Administration and other 976 600
Total 4,362 3,830
9. Other operating income and expenses
Year ended 31 December
2015 2014
US$ thousands US$ thousands
Other income:
Rentals 166 313
Other 612 267
778 580
Year ended 31 December
2015 2014
US$ thousands US$ thousands
Other expenses:
Maintenance1 1,098 1,966
Donations 714 435
Environmental activities 4,022 371
Loss on sale of property, plant and equipment 3,757 1,791
Write-off of property, plant and equipment2 - 16,912
Impairment on available-for-sale financial assets 2,896 982
Engineering and design studies 974 -
Other 3,189 3,665
16,650 26,122
1 Costs relating to Compañía Minera las Torres, S.A. de C.V.
2 Corresponds to Soledad and Dipolos fixed assets, (note 13)
10. Finance income and finance costs
Year ended 31 December
2015 2014
US$ thousands US$ thousands
Finance income:
Interest on short-term deposits and investments 1,779 4,364
Fair value movement on derivatives1 61,224 1,464
Other 2,835 1,632
65,838 7,460
Year ended 31 December
2015 2014
US$ thousands US$ thousands
Finance costs:
Interest on interest-bearing loans 35,969 44,421
Unwinding of discount on provisions 8,586 8,725
Other 908 1,470
45,463 54,616
1 Principally relates to the time value associated with Gold commodity options see note 31 for further detail.
11. Income tax expense
a) Major components of income tax expense:
Year ended 31 December
2015 2014
US$ thousands US$ thousands
Consolidated income statement:
Corporate income tax
Current:
Income tax charge 118,410 130,029
Amounts (over)/underprovided in previous years (29,093) 4,872
89,317 134,901
Deferred:
Origination and reversal of temporary differences 31,373 (39,746)
Revaluation effects of Silverstream contract 8,316 23,116
39,689 (16,630)
Corporate income tax 129,006 118,271
Special mining right
Current:
Special mining right charge1 6,384 910
6,384 910
Deferred:
Origination and reversal of temporary differences 7,574 14,790
Special mining right 13,958 15,700
Income tax expense reported in the income statement 142,964 133,971
1 Without regards to credits permitted under the special mining right (SMR) regime, the current special mining right charge
would have been US$14.6 million (2014: US$ 10 million). However, the SMR allows as a credit the payment of mining
concessions rights up to the amount of SMR payable. During the fiscal year ended 31 December 2015, the Group credited
US$8.2 million (2014: US$ 9.1 million) of mining concession rights against the SMR. Total mining concessions right paid
during the year were US$17 million (2014: US$16 million) and have been recognised in the income statement within cost of
sales and exploration expenses. Mining concessions rights paid in excess of the SMR cannot be credited to SMR in future
fiscal periods, and therefore no deferred tax asset has been recognised in relation to the excess.
Year ended 31 December
2015 2014
US$ thousands US$ thousands
Consolidated statement of comprehensive income:
Deferred income tax effect related to items charged or credited directly to other comprehensive income:
Net (charge)/credit arising on (losses)/gains on cash flow hedges recycled to income statement (7,927) 974
Net (charge)/credit arising on unrealised (gains)/losses arising on valuation of cash flow hedges (11,856) 3,531
Net credit/(charge) arising on unrealised losses/(gains) on available-for-sale financial assets 3,522 (7,145)
Net credit arising on cash flow gains reclassified to value of other assets - 66
Net credit arising on remeasurement losses on defined benefit plans 361 296
Income tax effect reported in other comprehensive income (15,900) (2,278)
(11,088)
(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
2015 2014
US$ thousands US$ thousands
Accounting profit before income tax 212,354 251,065
Tax at the Group's statutory corporate income tax rate 30.0% 63,706 75,319
Expenses not deductible for tax purposes 2,983 2,749
Inflationary uplift of the tax base of assets and liabilities (2,626) (13,051)
Current income tax (over)/underprovided in previous years (1,142) 735
Exchange rate effect on tax value of assets and liabilities1 77,473 53,388
Non-taxable/non-deductible foreign exchange losses (5,437) (84)
Inflationary uplift of tax losses (3,250) (2,348)
Deferred tax asset not recognised 3,025 1,808
Special mining right deductible for corporate income tax (4,187) (4,710)
Other (1,539) 4,465
Corporate income tax at the effective tax rate of 60.7% (2014: 47.1%) 129,006 118,271
Special mining right 13,958 15,700
Tax at the effective income tax rate of 67.3% (2014: 53.4%) 142,964 133,971
1 Mainly derived from the tax value of property, plant and equipment.
(c) Movements in deferred income tax liabilities and assets:
Year ended 31 December
2015 2014
US$ thousands US$ thousands
Opening net liability (279,046) (277,972)
Income statement (charge)/credit arising on corporate income tax (39,689) 16,630
Income statement charge arising on special mining right (7,574) (14,790)
Exchange difference 14 (636)
Net charge related to items directly charged to other comprehensive income (15,900) (2,278)
Closing net liability (342,195) (279,046)
The amounts of deferred income tax assets and liabilities as at 31 December 2015 and 2014, considering the nature of the
temporary differences, are as follows:
Consolidated balance sheet Consolidated income statement
2015 2014US$ thousands 2015 2014
US$ thousands US$ thousands US$ thousands
Related party receivables (124,719) (148,112) (23,393) 90,960
Other receivables (469) (2,714) (2,245) 1,517
Inventories 121,668 144,146 21,602 (124,344)
Prepayments (830) (883)
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