REG - Fresnillo Plc - Financial Results for the Year Ended Dec 2014 <Origin Href="QuoteRef">FRES.L</Origin> - Part 4
04/03/2015 07:24
- Part 4: For the preceding part double click ID:nRSD4641Gc
Financial Liabilities - Amendments to IAS 32: These amendments clarify the meaning of
"currently has a legally enforceable right to set-off" and the criteria for non-simultaneous settlement mechanisms of
clearing houses to qualify for offsetting and is applied retrospectively. These amendments have no impact on the Group,
since none of the entities in the Group has any offsetting arrangements.
Disclosure for impairment for non-financial assets - Amendments to IAS 36. This amendment removed certain disclosures of
the recoverable amount of CGUs which had been included in IAS 36 by the issue of IFRS 13. Addition the IASB added two
disclosure requirements:
· Additional information about the fair value measurement of impaired assets when the recoverable amount is based on
fair value less costs of disposal;
· Information about the discount rates that have been used when the recoverable amount is based on fair value less
costs
of disposal using a present value technique. The amendments harmonise disclosure requirements between
value in
use and fair value less costs of disposal.
These amendments have no impact on the Group, since there are no impairment in non-financial assets.
Novation of Derivatives and Continuation of Hedge Accounting - Amendments to IAS 39: These amendments provide relief from
discontinuing hedge accounting when novation of a derivative designated as a hedging instrument meets certain criteria and
retrospective application is required. These amendments have no impact on the Group as the Group has not novated its
derivatives during the current or prior periods.
IFRIC 21 Levies: IFRIC 21 clarifies that an entity recognises a liability for a levy when the activity that triggers
payment, as identified by the relevant legislation, occurs. For a levy that is triggered upon reaching a minimum threshold,
the interpretation clarifies that no liability should be anticipated before the specified minimum threshold is reached.
Retrospective application is required for IFRIC 21. There was no impact on prior year comparative figures as a result of
the application of IFRIC 21.
Annual Improvements 2010-2012 Cycle: In the 2010-2012 annual improvements cycle, the IASB issued seven amendments to six
standards, which included an amendment to IFRS 13 Fair Value Measurement. The amendment to IFRS 13 is effective immediately
and, thus, for periods beginning at 1 January 2014, and it clarifies that in the Basis for Conclusions, short-term
receivables and payables with no stated interest rates can be measured at invoice amounts when the effect of discounting is
immaterial. This amendment to IFRS 13 has no impact on the Group.
Standards, interpretations and amendments issued but not yet effective
The standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Group's
financial statements are disclosed below. The Group intends to adopt these standards that consider will be applicable to
the Group's financial statements, when they become effective.
IFRS 9 Financial Instruments: In July 2014, the IASB issued the final version of IFRS 9 Financial Instruments which
reflects all phases of the financial instruments project and replaces IAS 39 Financial Instruments: Recognition and
Measurement and all previous versions of IFRS 9. The standard introduces new requirements for classification and
measurement, impairment, and hedge accounting. IFRS 9 is effective for annual periods beginning on or after 1 January 2018,
with early application permitted. Retrospective application is required, but comparative information is not compulsory.
Early application of previous versions of IFRS 9 (2009, 2010 and 2013) is permitted if the date of initial application is
before 1 February 2015. The Group is currently assessing the impact of IFRS 9 and plans to adopt the new standard on the
required effective date.
Annual improvements 2010-2012 Cycle: These improvements are effective for annual periods beginning on or after 1 July 2014
and are not expected to have a material impact on the Group. They include:
IFRS 3 Business Combinations
The amendment is applied prospectively and clarifies that all contingent consideration arrangements classified as
liabilities (or assets) arising from a business combination should be subsequently measured at fair value through profit or
loss whether or not they fall within the scope of IFRS 9 (or IAS 39, as applicable).
IFRS 8 Operating Segments
The amendments are applied retrospectively and clarifies that:
- An entity must disclose the judgements made by management in applying the aggregation criteria in paragraph 12 of
IFRS 8, including a brief description of operating segments that have been aggregated and the economic characteristics
(e.g., sales and gross margins) used to assess whether the segments are 'similar'
- The reconciliation of segment assets to total assets is only required to be disclosed if the reconciliation is
reported to the chief operating decision maker, similar to the required disclosure for segment liabilities.
IAS 24 Related Party Disclosures
The amendment is applied retrospectively and clarifies that a management entity (an entity that provides key management
personnel services) is a related party subject to the related party disclosures. In addition, an entity that uses a
management entity is required to disclose the expenses incurred for management services.
Annual improvements 2011-2013 Cycle: These improvements are effective for annual periods beginning on or after 1 July 2014
and are not expected to have a material impact on the Group. They include:
IFRS 13 Fair Value Measurement
The amendment is applied prospectively and clarifies that the portfolio exception in IFRS 13 can be applied not only to
financial assets and financial liabilities, but also to other contracts within the scope of IFRS 9 (or IAS 39, as
applicable).
IFRS 15 Revenue from Contracts with Customers: IFRS 15 was issued in May 2014 and provides a model framework to recognise
revenue, which is the five step model framework that will apply to revenue arising from contracts with customers. Under
IFRS 15 revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in
exchange for transferring goods or services to a customer. The principles in IFRS 15 provide a more structured approach to
measuring and recognising revenue. The new revenue standard is applicable to all entities and will supersede all current
revenue recognition requirements under IFRS. Either a full or modified retrospective application is required for annual
periods beginning on or after 1 January 2017 with early adoption permitted. The Group is currently assessing the impact of
IFRS 15 and plans to adopt the new standard on the required effective date.
The amendments are effective prospectively for annual periods beginning on or after 1 January 2016, with early adoption
permitted. These amendments are not expected to have any impact to the Group given that the Group has not used a
revenue-based method to depreciate its non-current assets.
Annual improvements 2012-2014 Cycle
These improvements are effective from 1 January 2016 and are not expected to have a material impact on the Group. They
include:
IFRS 7 Servicing contracts
This amendment clarifies that a servicing contract that includes a fee can constitute continuing involvement in a financial
asset. An entity must assess the nature of the fee and arrangement against the guidance for continuing involvement to
assess whether the disclosures are required. The assessment of continuing involvement is applied retrospectively but
disclosures are required prospectively.
IFRS 7 Applicability of the offsetting disclosures to condensed interim financial statements
The amendment, which is applied retrospectively, clarifies that, unless there is a significant update from the most recent
annual report, the disclosures required by IFRS 7 in respect of offsetting financial assets and liabilities are not
required in the condensed interim financial report.
IAS 19 Discount rate: regional market issue
The amendment clarifies that in determining the discount rate for determining the present value of defined benefit
obligations, market depth of high quality corporate bonds is assessed based on the currency in which the obligation is
denominated, rather than the country where the obligation is located. When there is no deep market for high quality
corporate bonds in that currency, government bond rates must be used. This amendment is applied prospectively.
IAS 34 Disclosure of information 'elsewhere in the interim financial report'
The amendment, which is applied retrospectively, states that the required interim disclosures must either be in the interim
financial statements or incorporated by cross-reference between the interim financial statements and wherever they are
included within the greater interim financial report (e.g., in the management commentary or risk report). The Board
specified that the other information within the interim financial report must be available to users on the same terms as
the interim financial statements and at the same time. If users do not have access to the other information in this manner,
then the interim financial report is incomplete.
The IASB have issued other amendments to standards, including those resulting from Improvements to IFRSs that management
considers do not have any impact on the accounting policies, financial position or performance of the Group.
The Group has not early adopted any standard, interpretation or amendment that was issued but is not yet effective.
3. Segment reporting
For management purposes the Group is organised into operating segments based on producing mines.
At 31 December 2014 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.
The exploration services provided by the exploration companies listed in note 4 and projects under development have been
aggregated into the Other segment below.
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 2014 and 2013 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 2014 and 2013, respectively:
Year ended 31 December 2014
US$ thousands Fresnillo Herradura Cienega Soledad- Saucito NocheBuena Other10 Adjustments and eliminations Total
Dipolos
Revenues:
Third party 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 71,544 (71,443) 1,413,701
Segment Profit9 271,878 170,299 96,961 (8,203) 235,015 25,832 58,524 (20,063) 830,243
Hedging (1,118)
Depreciation (295,452)
Employee profit sharing (12,619)
Gross profit as per the income statement 521,054
Capital expenditure1 175,8752 63,1193 37,8904 __5 114,4386 20,8877 13,3658 - 425,574
1 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.
2 Capital expenditure relates to mine development work, the construction of San Julian project, and purchase of mine
equipment.
3 Capital expenditure relates to surface mine stripping activity, final phase of the construction of the dynamic
leaching plant and purchase of land.
4 Capital expenditure relates to mine development work, purchase of mine equipment and construction of employees'
facilities.
5 During 2014 this segment did not operate due the Bajio conflict (note 29). 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 10 and 14).
6 Capital expenditure relates to mine development work, the construction of Saucito II plant and mine equipment.
7 Capital expenditures relates to construction of leaching pads and expansion of beneficiation plant.
8 Capital expenditure relates to 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.
9 Treatment and refining charges amounting to US$131.4 million are included in Segment Profit.
10 Other includes leasing services provided by Minera Bermejal, S.A. de C.V.
Year ended 31 December 2013
US$ thousands Fresnillo Herradura Cienega Soledad-Dipolos Saucito Noche Other10 Adjustments and eliminations Total
Buena
Revenues:
Third party 502,699 378,151 233,433 68,366 284,739 147,518 260 - 1,615,166
Inter-Segment - - - - - - 51,616 (51,616) -
Segment revenues 502,699 378,151 233,433 68,366 284,739 147,518 51,876 (51,616) 1,615,166
Segment Profit9 379,472 180,543 146,142 30,034 211,890 45,117 40,660 (11,221) 1,022,637
Hedging 4,323
Depreciation (239,347)
Employee profit sharing (20,173)
Gross profit as per the income statement 767,440
Capital expenditure1 121,9752 129,7423 59,2754 1,7015 71,1976 52,1677 136,0838 - 572,140
1 Capital expenditure consists of additions to property, plant and equipment, including mine development and stripping
activity asset but excluding additions reRecent news on Fresnillo
See all newsREG - Fresnillo Plc - 1Q24 Production Report
AnnouncementREG - Fresnillo Plc - Annual Financial Report and Notice of AGM
AnnouncementREG - Fresnillo Plc - Conversion rate for 2023 final dividend
AnnouncementREG - Fresnillo Plc - Board changes
AnnouncementREG - Fresnillo Plc - Board and Committee Changes
Announcement