REG - Fresnillo Plc - Interim results for the six months to 30 June 2014 <Origin Href="QuoteRef">FRES.L</Origin> - Part 3
29/10/2014 10:08
- Part 3: For the preceding part double click ID:nRSE2367Ob
2,388,398 2,273,437
Non-controlling interests 407,114 398,534
Total equity 14 2,795,512 2,671,971
Non-current liabilities
Interest-bearing loans 795,331 795,306
Provision for mine closure cost 130,679 127,008
Provision for pensions and other post-employment benefit plans 12,347 11,475
Deferred tax liability 351,786 334,181
1,290,143 1,267,970
1,290,143
1,267,970
Current liabilities
Trade and other payables 110,408 81,905
Loans from related party 41,451 40,920
Derivative financial instruments 181 848
Employee profit sharing 9,159 20,440
161,199 144,113
Total liabilities 1,451,342 1,412,083
Total equity and liabilities 4,246,854 4,084,054
Interim Consolidated Cash Flow Statement
Notes For the six months ended 30 June
2014(Unaudited) 2013(Unaudited)
(in thousands of US dollars)
Net cash from operating activities 19 154,660 188,890
Cash flows from investing activities
Purchase of property, plant and equipment (211,956) (324,135)
Proceeds from the sale of property, plant and equipment and other assets 5,259 6,530
Loans granted to contractors - (3,000)
Repayments of loans granted to contractors 2,585 5,876
Silverstream contract 10 31,408 37,279
Short-term investments (750,000) -
Interest received 3,767 2,772
Other payments - (1,095)
Net cash used in investing activities (918,937) (275,773)
Cash flows from financing activities
Capital contribution 1,628 1,188
Dividends paid to shareholders of the Company (50,108) (304,120)
Issue of share capital 14 - 346,397
Transaction cost associated with the issue of share capital - (272)
Interest paid on interest-bearing loans (23,134) -
Other interest paid (15) (93)
Net cash used in financing activities (71,629) 43,100
Net decrease in cash and cash equivalents during the period (835,906) (43,783)
Effect of exchange rate on cash and cash equivalents (1,512) 839
Cash and cash equivalents at 1 January 13 1,251,694 613,773
Cash and cash equivalents at 30 June 13 414,276 570,829
Interim Consolidated Statement of Changes in Equity
(in thousands of US dollars)
Balance at 1 January 2013 (Audited) 358,680 818,597 (526,910) 684 52,573 (542) 1,536,075 2.239,157 373,082 2,612,239
Profit for the period - - - - - - 144,750 144,750 32,047 176,797
Other comprehensive income, net of tax - - - (614) (41,475) 136 - (41,953) - (41,953)
Total comprehensive income for the period - - - (614) (41,475) 136 144,750 102,797 32,047 134,844
Capital contribution - - - - - - - - 1,188 1,188
Issue of share capital 14 9,866 335,220 - - - - - 345,087 - 345,087
Dividends paid 15 - - - - - - (304,076) (304,076) - (304,076)
Balance at 30 June 2013 (Unaudited) 368,546 1,153,817 (526,910) 70 11,098 (406) 1,376,749 2,382,964 406,317 2,789,281
Balance at 1 January 2014 (Audited) 368,546 1,153,817 (526,910) 721 7,845 (363) 1,269,781 2,273,437 398,534 2,671,971
Profit for the period - - - - - - 130,131 130,131 6,952 137,083
Other comprehensive income, net of tax - - - 2,630 32,297 12 - 34,939 - 34,939
Total comprehensive income for the period - - - 2,630 32,297 12 130,131 165,070 6,952 172,022
Capital contribution - - - - - - - - 1,628 1,628
Dividends paid 15 - - - - - - (50,109) (50,109) - (50,109)
)
Balance at 30 June 2014 (Unaudited) 368,546 1,153,817 (526,910) 3,351 40,142 (351) 1,349,803 2,388,398 407,114 2,795,512
2,388,398
407,114
2,795,512
Notes to the Interim Condensed Consolidated Financial Statements
1 Corporate Information
Fresnillo plc ("the Company") is a public limited company registered in England and Wales with the registered number
6344120.
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. 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 18.
The interim condensed consolidated financial statements of the Group for the six months ended 30 June 2014 ("interim
consolidated financial statements"), were authorised for issue by the Board of Directors of Fresnillo plc on 4 August
2014.
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. 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 statement of compliance
The interim consolidated financial statements of the Group for the six months ended 30 June 2014 have been prepared in
accordance with IAS 34 Interim Financial Reporting as adopted by the European Union. They do not include all the
information required for full annual financial statements for the Group, and therefore, should be read in conjunction with
the Group's annual consolidated financial statements for the year ended 31 December 2013 as published in the Annual Report
2013.
These interim consolidated financial statements do not constitute statutory accounts as defined in section 435 of the
Companies Act 2006. The financial information for the full year is based on the statutory accounts for the financial year
ended 31 December 2013. A copy of the statutory accounts for that year, which were prepared in accordance with
International Financial Reporting Standards (IFRS) as adopted by the European Union up to 31 December 2013, has been
delivered to the Register of Companies. The auditors' report in accordance with Chapter 3 of Part 16 of the Companies Act
2006 in relation to those accounts was unqualified.
The interim consolidated financial statements have been prepared on a historical cost basis, except for derivative
financial instruments, available-for-sale financial instruments and defined benefit pension scheme assets which have been
measured at fair value.
The interim 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 where otherwise indicated.
The impact of seasonality or cyclicality on operations is not considered significant on the consolidated interim financial
statements.
(b) Basis of consolidation
The interim consolidated financial statements set out the Group's financial position as of 30 June 2014 and 31 December
2013, and its operations and cash flows for the periods ended 30 June 2014 and 30 June 2013.
The basis of consolidation adopted in the preparation of the interim consolidated financial statements is consistent with
that applied in the preparation of the consolidated financial statements for the year ended 31 December 2013. As described
in note 2 (c), the Group adopted at 1 January 2014, the new IFRS 10 "Consolidated financial statements", which require
management to exercise significant judgement to determine which subsidiaries are controlled, and therefore, are required to
be consolidated. Entities that constitute the Group are those investees controlled by the Group regardless of the number of
shares owned by the Group. The Group consolidates investees in which it is exposed, or has rights, to variable returns from
its involvement, and has the ability to affect those returns through its power over the investee.
2 Significant accounting policies continued
(c) Changes in accounting policies and presentation rules
The accounting policies adopted in the preparation of the consolidated interim financial statements are consistent with
those applied in the preparation of the consolidated financial statements for the year ended 31 December 2013, except for
the adoption of new standards and interpretations effective as of 1 January 2014, the amendment to the cash and cash
equivalents accounting policy and the new accounting policy for short-term investments.
Amendments to the cash and cash equivalents accounting policy
In light of the Group placing funds in new types of instruments and short-term deposits, as compared to prior period, the
Group has amended its accounting policy for cash and cash equivalents as follows:
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 and have maturities of between one day and four months. Short-term deposits earn interest at the
respective short-term deposit rates.
For the purposes of the cash flow statement, cash and cash equivalents as defined above are shown net of outstanding bank
overdrafts.
Short-term investments accounting policy
Where the Group invests in short-term instruments 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. Short-term investments are classified as loans and receivables.
The Group's accounting policy for financial instruments classified as loans and receivable has not changed and was
presented in the Group's Annual Report 2013.
New standards and interpretations as adopted by the Group
The Group has applied, for the first time, certain standards and interpretations. These include the new IFRS 10
Consolidated Financial Statements, IFRS 12 Disclosure of Involvement with Other Entities and IFRIC 21 Levies. As required
by IAS 34, the nature and the effect of these changes are disclosed below.
- IFRS 10 Consolidated Financial Statements: The standard replaces the portion of IAS 27 Consolidated and Separate
Financial Statements that addresses the accounting for consolidated financial statements. IFRS 10 establishes a single
control model that applies to all entities including special purpose entities. The changes introduced by IFRS 10 require
management to exercise significant judgement to determine which entities are controlled, and therefore, are required to be
consolidated being those investees in which the Group is exposed, or has rights, to variable returns from its involvement,
and has the ability to affect those returns through its power over the investee. This Group adopted this standard as at 1
January 2014, as adopted by the European Union. The adoption of this standard did not have any impact on the financial
position and performance of the Group.
- IFRS 12 Disclosure of Involvement with Other Entities: IFRS 12 includes all of the disclosures that were previously in
IAS 27 related to consolidated financial statements, as well as all of the disclosures that were previously included in IAS
31 and IAS 28. These disclosures relate to an entity's interests in subsidiaries, joint arrangements, associates and
structured entities. A number of new disclosures will also be required. This standard is effective for annual periods
beginning on or after 1 January 2014 with the adoption of IFRS 10, IFRS 11, IAS 27 (2012) and IAS 28 (2012). The adoption
of this standard did not have a significant impact on the financial position and performance of the Group.
- IFRIC 21 Levies: In May 2013, the IASB issued IFRIC 21 , an interpretation of IAS 37 - Provisions, Contingent
Liabilities and Contingent Assets ("IAS 37"), on the accounting for levies imposed by governments. IAS 37 sets out
criteria for the recognition of a liability, one of which is the requirement for the entity to have a present obligation
as
a result of a past activity or event ("obligating event") described in the relevant legislation that triggers the payment
of the levy. IFRIC 21 was effective January 1, 2014.
(c) Changes in accounting policies and presentation rules continued
The Group recognises a levy in respect of the Extraordinary Mining Right on a progressively basis as sales of gold and
silver are recognised during the fiscal year. The Extraordinary Mining Right consists of a 0.5% rate, applicable to the
owners of mining titles, over its sales of gold and silver obtained during a fiscal year. The payment must be calculated
over the total sales relating to 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. As at 30 June 2014, the
Group has recognised a liability of US$1.8 million in this respect.
There was no impact on prior year comparative figures as a result of the application of IFRIC 21.
The IASB and IFRIC have issued 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.
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 30 June 2014 the Group has six reportable operating segments which consist of the Group's 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.
All revenues were derived from customers based in Mexico.
The exploration services provided by the exploration companies 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 interim 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 interim consolidated income statement.
Other income and expenses included in the interim 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.
3 Segment reporting continued
Operating segments
The following tables present revenue and profit information regarding the Group's operating segments for the six months
ended 30 June 2014 and 2013, respectively.
Six months ended 30 June 2014
US$ thousands Fresnillo Herradura Cienega Soledad-Dipolos (2) Saucito Noche Other (1) Adjustments and eliminations Total
Buena
Revenues:
Third party 209,050 139,972 100,717 - 143,858 83,469 - - 677,066
Hedging - - - - - - - 9 9
Inter-Segment - - - - - - 24,797 (24,797) -
Segment revenues 209,050 139,972 100,717 - 143,858 83,469 24,797 (24,288) 677,075
Segment Profit 149,401 80,203 56,099 (384) 104,551 28,825 20,954 (2,765) 436,884
Hedging - - - - - - - - (240)
Depreciation - - - - - - - - (132,929)
Employee profit sharing - - - - - - - (8,626)
Gross profit as per the income statement - - - - - - - - 295,089
(1) Other includes exploration services provided by the exploration companies.
(2) See note 17 as a reference for the operations at Soledad-Dipolos.
Six months ended 30 June 2013
US$ thousands Fresnillo Herradura Cienega Soledad-Dipolos (2) Saucito Noche Other (1) Adjustments and eliminations Total
Buena
Revenues:
Third party 268,387 243,233 133,869 58,181 152,089 70,021 - - 925,780
Hedging - - - - - - - 116 116
Inter-Segment - - - - - - 33,291 (33,291) -
Segment revenues 268,387 243,233 133,869 58,181 152,089 70,021 33,291 (33,175) 925,896
Segment Profit 206,851 153,687 88,868 29,828 118,453 26,402 29,797 (15,989) 637,897
Hedging - - - - - - - - 4,055
Depreciation - - - - - - - - (114,261)
Employee profit sharing - - - - - - - (8,812)
Gross profit as per the income statement - - - - - - - - 518,879
(1) Other includes exploration services provided by the exploration companies.
(2) See note 17 as a reference for the operations at Soledad-Dipolos.
4 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
Lead concentrates (containing silver, gold, lead and by-products) 389,025 481,431
Doré and slag (containing gold, silver and by-products) 223,441 371,434
Zinc concentrates (containing zinc, silver and by-products) 32,307 31,354
Precipitates (containing gold and silver) 32,302 41,677
677,075 925,896
677,075
925,896
Substantially all lead and zinc 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:
Silver 373,304 443,935
Gold 331,470 496,697
Zinc 23,748 18,931
Lead 21,841 22,811
Value of metal content in products sold 750,363 982,374
Adjustment for treatment and refining charges (73,288) (56,478)
Total revenues 677,075 925,896
Total revenues
677,075
925,896
The average realised prices for the gold and silver content of products sold prior to the deduction of treatment and
refining charges, were:
Gold 1,302.07 1,471.67
Silver 20.26 24.67
Gold
1,302.07
1,471.67
Silver
20.26
24.67
5 Cost of sales
Depreciation and amortisation (notes 9) 133,326 114,261
Personnel expenses(1) 41,226 42,110
Maintenance and repairs 38,908 41,048
Operating materials 61,247 68,461
Energy 57,772 57,853
Contractors 91,086 120,416
Mining rights and contributions 4,931 4,133
Freight 5,133 5,312
Insurance 3,829 2,687
Other 8,774 5,777
Cost of production 446,232 462,058
Loss / (gain) on foreign currency hedges 240 (4,055)
Change in work in progress and finished goods (ore inventories) (64,486) (50,986)
Cost of sales 381,986 407,017
Cost of sales
381,986
407,017
(1) Personnel expenses include employees´ profit sharing of US$8.6 million for the six months ended 30 June 2014 (six
months ended 30 June 2013: US$8.8 million).
6 Finance income and finance costs
Six months ended 30 June
2014 2013
(in thousands of US dollars)
Finance income:
Interest on short term deposits 2,626 1,831
Mark to market movements on currency derivatives - 48
Other 1,141 957
3,767 2,836
Finance costs:
Interest on interest-bearing loans 23,269 -
Unwinding of discount on provisions 3,420 4,193
Mark to market movements on currency derivatives 751 2,216
Other 813 110
28,253 6,519
7 Income tax expense
Current corporate income tax:
Current corporate income tax charge 78,389 123,549
Amounts underprovided in previous years 4,715 1,756
83,104 125,305
Deferred income tax related to corporate income tax:
Origination and reversal of temporary differences (39,216) (20,621)
Revaluation effects of Silverstream contract 14,189 (31,690)
(25,027) (52,311)
Corporate income tax 58,077 72,994
Current special mining right:
Current special mining right charge (1) - -
- -
Deferred income tax related to special mining right:
Origination and reversal of temporary differences 13,082 -
Special mining right 13,082 -
Income tax expense as reported in the income statement 71,159 72,994
Income tax expense as reported in the income statement
71,159
72,994
(1) Without regard to credits permitted under the special mining right regime, the current special mining right charge
would have been US$3.9 million. However, the special mining right allows as a credit the payment of mining concession
rights up to the amount of special mining right payable. In the six months ended 30 June 2014, the Group credited US$3.9
million of mining concession rights against the special mining right such that the charge for the six months ended 30 June
2014 was nil.
The total mining concession rights paid during the year were US$8.3 and have been recognised in the income statement within
cost of sales and exploration expenses. Mining concessions rights paid in excess of the special mining right cannot be
credited to special mining rights in future fiscal periods, and therefore, no deferred tax asset has been recognised in
relation to the excess.
The effective tax rate for the corporate income tax, for the six months ended 30 June 2014 is 27.89% (six months ended 30
June 2013: 29.22%). The factors that have reduced this rate from the statutory rate of 30% include principally the effects
of foreign exchange and inflationary adjustments.
The effective income tax rate, including temporary differences of the deferred income tax related to the special mining
right is 34.17% at 30 June 2014.
8 Earnings per share
Earnings per share ('EPS') is calculated by dividing profit for the period 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 30 June 2014 and 30 June 2013, earnings per share have been calculated as follows:
Six months ended 30 June
2014 2013
Earnings:
Profit from continuing operations attributable to equity holders of the Company (in thousands of US dollars) 130,131 144,750
Adjusted profit from continuing operations attributable to equity holders of the Company (in thousands of US dollars) 97,022 225,556
Adjusted profit is profit as disclosed in the Interim Consolidated Income Statement adjusted to exclude revaluation effects
of the Silverstream contract of US$47.3 million gain (US$33.1 million net of tax) (2013: US$112.5 million loss and US$80.8
million net of tax).
Adjusted earnings per share have been provided in order to provide a measure of the underlying performance of the Group,
prior to the revaluation effects of the Silverstream contract, a derivative financial instrument.
Six months ended 30 June
2014 2013
Number of shares: Weighted average number of ordinary shares in issue ('000) 736,894 724,615
Six months ended 30 June
2014 2013
Earnings per share: Basic and diluted earnings per ordinary share from continuing operations (US$) Adjusted basic and diluted earnings per ordinary share from continuing operations (US$) 0.177 0.132 0.200 0.311
9 Property, plant and equipment
The significant changes in property, plant and equipment during the six months ended 30 June 2014 are additions of US$206
million (six months ended 30 June 2013: US$330 million) and depreciation and amortisation of US$133.3 million (six months
ended 30 June 2013: US$114.3 million). Additions consist of mine development works at the underground mines, stripping
activity asset at the surface mines, mine equipment such as scoops, trams, trucks, optimization of milling facilities and
installation of certain riddles, the purchase of land, and the construction of employee camps at certain mine sites. In the
six months ended 30 June 2014, the Group wrote off property, plant and equipment of US$4.5 million.
10 Silverstream contract
On 31 December 2007, the Group entered into an agreement with Peñoles through which it 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, for an upfront payment of US$350 million. In addition, a per ounce cash payment of
$2.00 in years 1 to 5 and $5.00 thereafter (subject to an inflationary adjustment commencing on 31 December 2013) is
payable to Peñoles. 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 of US$1 per ounce of shortfall.
The Silverstream contract has been recorded as a derivative financial instrument at fair value and classified within
non-current and current assets as appropriate. 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 six months ended 30 June 2014 total proceeds received in cash were US$31.4 million (six months ended 30
June 2013: US$37.3 million), of which US$8.1 million was in respect of proceeds receivable as at 31 December 2013 (six
months ended 30 June 2013: US$11.0 million). Cash received in respect of the period of US$23.3 million (six months ended 30
June 2013: US$26.3 million) corresponds to 2.1 million ounces of payable silver (six months ended 30 June 2013: 1.4 million
ounces). As at 30 June 2014, a further US$7.5 million (30 June 2013: US$6.0 million) of cash corresponding to 473,272
ounces of silver is due (30 June 2013: 410,730 ounces).
In the six months ended 30 June 2014, the most significant drivers of the US$47.3 million unrealised gain taken to income
(six months ended 30 June 2013: loss of US$112.5 million) were the updating of assumptions utilised to value the
Silverstream contract, most significantly the forward price of silver which was higher than the observed forward price at
31 December 2013, the decrease of the reference discount rate (libor) and the difference between payments received during
the six months ended 30 June 2014 and estimated payments in the valuation model at 31 December 2013.
A reconciliation of the beginning balance to the ending balance is shown below.
2014 2013
(in thousands of US dollars)
Balance at 1 January: 372,846 487,779
Cash received in respect of the period (23,281) (26,298)
Cash receivable (7,487) (6,021)
Re-measurement gains / (losses) recognised in profit or loss 47,298 (112,496)
Balance at 30 June 389,376 342,964
Less - Current portion 42,168 41,066
Non-current portion 347,208 301,898
11 Trade and other receivables
Trade receivables from related parties (note 18) 127,940 96,641
Value added tax receivable 66,663 47,377
Advances to suppliers and contractors 8,574 7,885
Other receivables from related parties (note 18) 7,514 8,152
Loans granted to contractors 1,514 2,639
Other receivables arising on the sale of fixed assets 11,489 10,163
Other receivables 21,072 15,862
244,766 188,719
Provision for impairment of other receivables (664) (662)
244,102 188,057
Other receivables classified as non-current assets :
Loans granted to contractors 5,554 7,012
Other receivables arising from the sale of fixed assets 1,313 7,898
6,867 14,910
250,969 202,967
250,969
202,967
12 Short-term investments
Fixed-term bank deposits 750,000 -
Short-term investments 750,000 -
750,000
-
Short-term investments are made for fixed periods no longer than four months (2013: none) and earn interest at fixed rates
without an option for early withdrawal.
13 Cash and cash equivalents
Cash at bank and on hand 7,838 1,054
Short-term deposits 406,438 1,250,640
Cash and cash equivalents 414,276 1,251,694
414,276
1,251,694
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 four months (2013: one day and three months), depending on the immediate cash requirements
of the Group, and earn interest at the respective short-term deposit rates.
14 Equity
Pursuant to the placing of shares announced on 29 April 2013, the Group issued on 3 May 2013, 19,733,430 new ordinary
shares at £11.30 (US$17.60) per share for gross proceeds of £222.9 million (US$346.1 million). The placing of shares
ensured that Fresnillo plc is compliant with changes to the Ground Rules of the FTSE UK Index Series that require
constituents to maintain a minimum free float of 25%. The proceeds of the placing were used for general corporate purposes
and the Company's working capital needs.
As a result, the Company's issued ordinary share capital now consists of 736,893,589 (2013: 736,893,589) ordinary shares of
US$0.50 each with voting rights. The Company does not hold any ordinary shares in treasury. Therefore, the total number of
voting rights in the Company is 736,893,589. There have been no changes to equity during the period ending 30 June 2014.
15 Dividends paid
Dividends declared by the Company are as follows:
Per shareUS Cents Amounts$Million
Six months ended 30 June 2013
Total dividends paid during the period (1) 42.4 304.1
Six months ended 30 June 2014
Total dividends paid during the period (2) 6.8 50.1
(1) Final dividend for 2012 approved at the Annual General Meeting on 3 May 2013 and paid on 8 May 2013.
(2) Special dividend for 2013 approved at the Annual General Meeting on 16 May 2014 and paid on 22 May 2014.
16 Commitments
A summary of capital expenditure commitments is as follows:
As at 30 June 2014 As at 31 December 2013
(in thousands of US dollars)
Minera Saucito, S.A. de C.V. 61,829 56,597
Minera Penmont, S. de R.L. de C:V. 10,291 16,944
Minera Mexicana La Ciénega, S.A. de C.V. 2,912 4,192
Minera Fresnillo, S.A. de C.V. 134,496 84,604
Minera El Bermejal, S. de R.L. de C.V. 1,610 1,804
Minera Juanicipio, S.A. de C.V 6,326 -
217,464 164,141
17 Contingencies
The contingencies in the Group's annual consolidated financial statements for the year ended 31 December 2013 as published
in the 2013 Annual Report, are still applicable as of 30 June 2014, including the El Bajio Ejido conflict. An update of
such conflict is described as follows:
- The Agrarian Magistrate has issued a procedural order in execution of his ruling pertaining to the 1,824 hectares
which Minera Penmont ("Penmont") delivered before the Agrarian Court in July 2013. In this procedural order, the Magistrate
determines, amongst other aspects, that Penmont must remediate the lands to the same state that they were before Penmont's
occupation. Penmont conducted mining activities in approximately 300 hectares of such lands. In the opinion of the Company,
this procedural order is excessive since such level of remediation was not considered as part of the original agrarian
ruling and also because the procedural order appears not to consider the fact that Penmont conducted its activities
pursuant to valid mining concessions and environmental impact permits. Penmont has challenged the procedural order before
Federal courts and is awaiting resolution of this filing.
- In addition, claimants have also presented other claims against occupation agreements entered into by them with
Penmont, covering land parcels separate from the land described above. In such parcels, Penmont has no significant mining
operations or specific geological interest. These lands are not considered strategic for Penmont.
- Various claims and counterclaims have been made between the relevant parties. There is significant uncertainty
relating to the finalisation and ultimate result relating to these legal proceedings.
18 Related party balances and transactions
The Group had the following related party transactions during the six months ended 30 June 2014 and 30 June 2013 and
balances as at 30 June 2014 and 31 December 2013.
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 accounts receivable and payable
Accounts receivable Accounts payable Loans
As at 30 June 2014 As at 31 December 2013 As at 30 June 2014 As at 31 December 2013 As at 30 June 2014 As at 31 December 2013
In thousands of US dollars
Trade:
Metalúrgica Met-Mex Peñoles, S.A. de C.V. 127,940 96,641 - - - -
Loans:
Newmont Mining Corporation 1 - - - - 41,451 40,920
Other:
Industrias Peñoles, S.A.B. de C.V. 7,487 8,127 - - - -
Other 27 25 5,176 2,542 - -
Sub-total 135,454 104,793 5,176 2,542 40,920 40,920
Less-Current portion 135,454 104,793 5,176 2,542 40,920 40,920
Non-current portion - - - - - -
1 Loan received from Newmont bears interest at a fixed rate of 2.58% and has a maturity of one year. Interest payable for
the six months ended 30 June 2014 is US$0.5 million (Six months ended 30 June 2013: nil)
Related party accounts receivable and payable will be settled in cash.
18 Related party balances and transactions continued
Other balances with related parties:
(in thousands of US dollars)
Silverstream contract:
Industrias Peñoles, S.A.B. de C.V. 389,527 372,846
The Silverstream contract can be settled in either silver or cash. Details of the Silverstream contract are provided in
note 10.
(b) Principal transactions with affiliates are as follows:
Income:
Sales(1):
Met-Mex Peñoles, S.A. de C.V. 677,066 925,780
Other income 558 183
Total income 677,624 925,963
Total income
677,624
925,963
(1) Figures do not include hedging losses.
Expenses:
Administrative Services:
Servicios Administrativos Peñoles, S.A. de C.V. (2) 19,996 17,981
Servicios de Exploración, S.A. de C.V. 141 2,508
20,137 20,489
Energy:
Termoelectrica Peñoles, S. de R.L. de C.V. 15,927 14,986
Operating materials and spare parts:
Wideco Inc 1,722 3,024
Metalurgica Met-Mex Peñoles, S.A. de C.V. 2,137 1,739
3,859 4,763
Equipment repairs and administrative services:
Serviminas, S.A. de C.V. 1,669 2,468
Insurance premiums:
Grupo Nacional Provincial, S.A.B. de C.V. 2,284 2,285
Interest expense:
Newmont Mining Corporation 531 -
Other expenses: 3,630 2,486
Total expenses 48,037 47,477
Total expenses
48,037
47,477
(2) Effective 1 January 2013, a new Service Agreement with Servicios Administrativos Peñoles, S.A. de C.V., ("SAPSA"), a
wholly owned Peñoles subsidiary. This Service Agreement comprises administrative and non-administrative services from 1
January 2013 through 31 December 2018, for an annual fee of US$7.4 million and MX$362.8 million.
During the six months ended 30 June 2014, the Company incurred expenses of US$19.9 million under the new above mentioned
agreement (US$17.9 million for the six months ended 30 June 2013). Expenses include administrative services of US$14.4
million (US$14.1 million for the six months ended 30 June 2014), exploration services of US$0.06 million (US$0.2 million
for the six months ended 30 June 2013) and US$5.4 million that were capitalised (US$3.6 million for six months ended 30
June 2013).
18 Related party balances and transactions continued
(c) Compensation of key management personnel of the Group
Key management personnel include the members of the Board of Directors and the Executive Committee who receive
remuneration.
Salaries and bonuses 1,717 1,679
Post-employment pension 72 74
Other benefits
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