REG - Fresnillo Plc - Interim Results for the six months to 30 June 2015 <Origin Href="QuoteRef">FRES.L</Origin> - Part 3
04/08/2015 07:01
- Part 3: For the preceding part double click ID:nRSD9577Ub
76,063
172,022
Interim Consolidated Balance Sheet
ASSETS
Non-current assets
Property, plant and equipment 9 2,047,776 1,969,418
Available-for-sale financial assets 81,232 86,078
Silverstream contract 10,18 342,972 358,965
Deferred tax asset 47,391 57,705
Inventories 11 84,412 84,412
Other receivables 12 3,372 3,853
Other assets 2,907 3,872
2,610,062 2,564,303
Current assets
Inventories 11 237,278 221,200
Trade and other receivables 12 307,405 287,595
Income tax recoverable 123,342 168,498
Prepayments 1,679 3,356
Derivative financial instruments 18 27,914 14,551
Silverstream contract 10,18 30,647 33,311
Short-term investments 13 220,000 295,000
Cash and cash equivalents 13 255,748 154,340
1,204,013 1,177,851
Total assets 3,814,075 3,742,154
EQUITY AND LIABILITIES
Capital and reserves attributable to shareholders of the Company
Share capital 368,546 368,546
Share premium 1,153,817 1,153,817
Capital reserve (526,910) (526,910)
Net unrealised losses on cash flow hedges (7,366) (9,946)
Net unrealised gains on available-for-sale financial assets 21,656 24,515
Foreign currency translation reserve (623) (597)
Retained earnings 1,320,269 1,265,877
2,329,389 2,275,302
Non-controlling interests 29,488 26,539
Total equity 2,358,877 2,301,841
Non-current liabilities
Interest-bearing loans 796,507 796,160
Provision for mine closure cost 165,766 153,802
Provision for pensions and other post-employment benefit plans 13,940 13,838
Deferred tax liability 353,519 336,751
1,329,732 1,300,551
1,329,732
1,300,551
Current liabilities
Trade and other payables 102,153 100,351
Derivative financial instruments 18 17,079 27,033
Income tax - 814
Employee profit sharing 6,234 11,564
125,466 139,762
Total liabilities 1,455,198 1,440,313
Total equity and liabilities 3,814,075 3,742,154
Interim Consolidated Cash Flow Statement
Notes For the six months ended 30 June
2015(Unaudited) 2014(Unaudited)
(in thousands of US dollars)
Net cash from operating activities 17 263,415 154,660
Cash flows from investing activities
Purchase of property, plant and equipment (229,125) (211,956)
Proceeds from the sale of property, plant and equipment and other assets 4,305 5,259
Repayments of loans granted to contractors 767 2,585
Short-term investments 13 74,730 (750,000)
Silverstream contract 10 22,727 31,408
Interest received 1,623 3,767
Net cash used in investing activities (124,973) (918,937)
Cash flows from financing activities
Dividends paid to shareholders of the Company (22,054) (50,108)
Capital contribution 3,080 1,628
Interest paid1 (18,763) (23,149)
Net cash used in financing activities (37,737) (71,629)
Net increase/ (decrease) in cash and cash equivalents during the period 100,705 (835,906)
Effect of exchange rate on cash and cash equivalents 703 (1,512)
Cash and cash equivalents at 1 January 13 154,340 1,251,694
Cash and cash equivalents at 30 June 13 255,748 414,276
1Total interest paid during the six months ended 30 June 2015 including amounts capitalised as part of fixed assets
projects totalling US$23.1 million (30 June 2014: US$23.1 million).
Interim Consolidated Statement of Changes in Equity
(in thousands of US dollars)
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 14 - - - - - - (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
Balance at 1 January 2015 (Audited) 368,546 1,153,817 (526,910) (9,946) 24,515 (597) 1,265,877 2,275,302 26,539 2,301,841
Profit for the period - - - - - - 76,499 76,499 (131) 76,368
Other comprehensive income, net of tax - - - 2,580 (2,859) (26) - (305) - (305)
Total comprehensive income for the period - - - 2,580 (2,859) (26) 76,499 76,194 (131) 76,063
Capital contribution - - - - - - - - 3,080 3,080
Dividends paid 14 - - - - - - (22,107) (22,107) - (22,107)
Balance at 30 June 2015 (Unaudited) 368,546 1,153,817 (526,910) (7,366) 21,656 (623) 1,320,269 2,329,389 29,488 2,358,877
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 74.99 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 16.
The interim condensed consolidated financial statements of the Group for the six months ended 30 June 2015 ("interim
consolidated financial statements"), were authorised for issue by the Board of Directors of Fresnillo plc on 03 August
2015.
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's 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 2015 have been prepared in
accordance with IAS 34 Interim Financial Reporting as adopted by the European Union (EU). 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 2014 as published in the Annual Report
2014.
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 2014. A copy of the statutory accounts for that year, which were prepared in accordance with
International Financial Reporting Standards (IFRS) as adopted by the EU up to 31 December 2014, 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 assets 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 interim consolidated financial
statements.
(b) Basis of consolidation
The interim consolidated financial statements set out the Group's financial position as of 30 June 2015 and 31 December
2014, and its operations and cash flows for the periods ended 30 June 2015 and 30 June 2014.
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 2014.
(c) Changes in accounting policies and presentation rules
The accounting policies adopted in the preparation of the interim consolidated financial statements are consistent with
those applied in the preparation of the consolidated financial statements for the year ended 31 December 2014.
New standards and interpretations as adopted by the Group
There was no significant accounting standards or interpretations or any consequential amendments, required for the Group to
adopt effective January 1, 2015.
The IASB and IFRIC have issued, and the EU have adopted, certain 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 2015 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 operations based in Mexico.
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 statements, 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.
Operating segments
The following tables present revenue and profit information regarding the Group's operating segments for the six months
ended 30 June 2015 and 2014, respectively.
Six months ended 30 June 2015
US$ thousands Fresnillo Herradura Cienega Soledad-Dipolos 1 Saucito Noche Other Adjustments and eliminations Total
Buena
Revenues:
Third party 140,405 230,045 79,449 - 218,895 82,690 - 751,484
Hedging 824 824
Inter-Segment 2 34,509 (34,509) -
Segment revenues 140,405 230,045 79,449 - 218,895 82,690 34,509 (33,685) 752,308
Segment profit 82,901 120,762 37,034 - 170,792 19,845 16,592 1,581 449,507
Hedging (10,186)
Depreciation (159,733)
Employee profit sharing (5,950)
Gross profit as per the income statement 273,638
Capital expenditure3 95,422 57,902 11,788 - 58,092 846 5,075 - 229,125
1 Operations at Soledad-Dipolos were suspended in 2H 2013 as a result of the dispute disclosed in Note 15.
2 Inter-segment revenues include leasing services provided by Minera Bermejal, S.A. de C.V.
3 See note 9 for a description of the main capital expenditures.
Six months ended 30 June 2014
US$ thousands Fresnillo Herradura Cienega Soledad-Dipolos 1 Saucito Noche Other 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 2 - - - - - - 35,257 (35,257) -
Segment revenues 209,050 139,972 100,717 - 143,858 83,469 35,257 (35,246) 677,075
Segment profit 4 149,401 80,203 56,099 (384) 104,551 28,825 19,257 (1,068) 436,884
Hedging (240)
Depreciation (132,929)
Employee profit sharing (8,626)
Gross profit as per the income statement 295,089
Capital expenditure3 71,737 43,928 17,414 -- 62,221 12,389 4,267 - 211,956
1 Operations at Soledad-Dipolos were suspended in 2H 2013 as a result of the dispute disclosed in Note 15.
2 Inter-segment revenues include leasing services provided by Minera Bermejal, S.A. de C.V.
3 See note 9 for a description of the main capital expenditures.
4 Other segment profit and adjustments and eliminations have been amended in order to be consistent with 2015 disclosure.
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) 371,867 389,025
Doré and slag (containing gold, silver and by-products) 312,734 223,441
Zinc concentrates (containing zinc, silver and by-products) 43,602 32,307
Precipitates (containing gold and silver) 24,105 32,302
752,308 677,075
32,302
752,308
677,075
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 332,652 373,304
Gold 421,748 331,470
Zinc 36,540 23,748
Lead 32,283 21,841
Value of metal content in products sold 823,223 750,363
Adjustment for treatment and refining charges (70,915) (73,288)
Total revenues 752,308 677,075
Total revenues
752,308
677,075
The average realised prices for the gold and silver content of products sold prior to the deduction of treatment and
refining charges, were:
Gold 1,206.10 1,302.07
Silver 16.61 20.26
Gold
1,206.10
1,302.07
Silver
16.61
20.26
5 Cost of sales
Depreciation and amortisation (note 9) 159,733 133,326
Personnel expenses1 37,875 41,226
Maintenance and repairs 45,452 38,908
Operating materials 67,502 61,247
Energy 57,643 57,772
Contractors 93,229 91,086
Mining concessions rights and contributions 5,041 4,931
Freight 5,076 5,133
Insurance 2,585 3,829
Other 7,485 8,774
Cost of production 481,621 446,232
Losses on foreign currency hedges 10,186 240
Change in work in progress and finished goods (ore inventories) (13,137) (64,486)
____________________________ _________________________________
Cost of sales 478,670 381,986
____________________________
_________________________________
Cost of sales
478,670
381,986
1 Personnel expenses include employees´ profit sharing of US$5.9 million for the six months ended 30 June 2015 (six months
ended 30 June 2014: US$8.6 million).
6 Finance income and finance costs
Six months ended 30 June
2015 2014
(in thousands of US dollars)
Finance income:
Interest on short term deposits 889 2,626
Mark to market movements on derivatives1 19,733 -
Other 555 1,141
21,177 3,767
Finance costs:
Interest on interest-bearing loans 18,656 23,269
Unwinding of discount on provisions 4,968 3,420
Mark to market movements on derivatives - 751
Other 453 813
24,077 28,253
1 Principally relates to the time value associated with Gold commodity options- see note 18 for further detail.
7 Income tax expense
Current corporate income tax:
Current corporate income tax charge 88,377 78,389
Amounts (over)/underprovided in previous periods (31,720) 4,715
56,657 83,104
Deferred corporate income tax:
Origination and reversal of temporary differences (8,593) (39,216)
Revaluation effects of Silverstream contract 529 14,189
(8,064) (25,027)
Corporate income tax 48,593 58,077
Current special mining right:
Current special mining right charge1 4,914 --
4,914 --
Deferred special mining right:
Origination and reversal of temporary differences 6,265 13,082
Special mining right 11,179 13,082
Income tax expense as reported in the income statement 59,772 71,159
Income tax expense as reported in the income statement
59,772
71,159
1 The special mining right allows the deduction of payments for mining concession rights up to the amount of the special
mining right payable within the same legal entity. In the six months ended 30 June 2015, the Group credited US$4.1 million
(2014: US$3.9 million) of mining concession rights against the special mining right. Without regard to credits permitted
under the special mining right regime, the current special mining right charge would have been US$9.0 million. (2014:
US$3.9).
The total mining concession rights paid during the six month period were US$9 million (2014: US$8.3 million) 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 corporate income tax for the six months ended 30 June 2015 is 35.69% (six months ended 30 June
2014: 27.89%). The main factor that has increased this rate from the statutory rate of 30% is the effect of foreign
exchange rates as a result the appreciation of the US dollar against the Mexican peso.
The effective income tax rate, including the special mining right for the six months ended 30 June 2015 is 43.90% (six
months ended 30 June 2014: 34.17% ).
As part of the income tax reform in Mexico enacted at the end of 2013 and effective 1 January 2014, the tax law changed in
respect of the treatment of certain mining related expenditure for tax purposes. As at 31 December 2014, there was
uncertainty in relation to the tax treatment of certain expenditure incurred in the year. As a result, in calculating the
tax provision as at 31 December 2014, the Group deducted only a portion of the total related expenditure incurred in the
year. A deferred tax asset in respect of the remaining future tax benefit was also recognised. Subsequent to the approval
of the Annual Report 2014, management performed further analysis of this expenditure ahead of submitting tax computations
and concluded that this expenditure incurred in 2014 is deductible in full for tax purposes. The Group has submitted tax
computations for 2014 on this basis. As a result, the Group has reflected a reduction of US$29.9 million in current tax in
respect of previous periods. There is a corresponding increase in the deferred tax expense and, therefore, no impact on the
total effective tax rate.
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 2015 and 30 June 2014, earnings per share have been calculated as follows:
Six months ended 30 June
2015 2014
Earnings:
Profit from continuing operations attributable to equity holders of the Company (in thousands of US dollars) 76,499 130,131
Adjusted profit from continuing operations attributable to equity holders of the Company (in thousands of US dollars) 75,267 97,022
Adjusted profit is profit as disclosed in the Interim Consolidated Income Statement adjusted to exclude revaluation effects
of the Silverstream contract of US$1.8 million gain (US$1.2 million net of tax) (2014: US$47.3 million loss and US$33.1
million net of tax).
Adjusted earnings per share have been provided in order to provide a measure of the underlying performance of the Group,
prior to the revaluation effects of the Silverstream contract, a derivative financial instrument.
Six months ended 30 June
2015 2014
Number of shares: Weighted average number of ordinary shares in issue ('000) 736,894 736,894
Six months ended 30 June
2015 2014
Earnings per share: Basic and diluted earnings per ordinary share from continuing operations (US$) Adjusted basic and diluted earnings per ordinary share from continuing operations (US$) 0.104 0.102 0.177 0.132
9 Property, plant and equipment
The significant changes in property, plant and equipment during the six months ended 30 June 2015 are additions of US$246.4
million (six months ended 30 June 2014: US$206 million) which includes a rehabilitation asset amounting US$8.0 million (six
months ended 30 June 2014:nil) and depreciation and amortisation of US$166.7 million, of which US$5.2 million was
capitalised as a part of the cost of other fixed assets (six months ended 30 June 2014: US$142.1 million, of which US$8.8
million was capitalised). Additions consist of mine development works at the underground mines, stripping activity at the
surface mines, mine equipment such as scoops, trams and trucks, optimisation of milling facilities and installation of
certain riddles, the purchase of land, the construction of employee camps at certain mine sites and the effect of changes
in the mine closure provision. In the six months ended 30 June 2015 no write off on property, plant and equipment was
recorded by the Group (30 June 2014: US$4.5 million).
As of 30 June 2015 the Group has contractual commitments related to the construction and acquisition of property, plant and
equipment of US$163.9 million (31 December 2014: US$217.5 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
US$2.00 in years one to five and US$5.00 thereafter (subject to an inflationary adjustment commencing on 31 December 2013)
is payable to Peñoles. The cash payment per ounce for the six months ended 30 June 2015 was US$5.10 (six months ended 30
June 2014 US$ 5.05 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 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 2015 total proceeds received in cash were US$22.7 million (six months ended 30
June 2014: US$31.4 million), of which US$6.9 million was in respect of proceeds receivable as at 31 December 2014 (six
months ended 30 June 2014: US$8.1 million). Cash received in respect of the period of US$15.8 million (six months ended 30
June 2014: US$23.3 million) corresponds to 1.9 million ounces of payable silver (six months ended 30 June 2014: 2.1 million
ounces). As at 30 June 2015, a further US$4.7 million (30 June 2014: US$7.5 million) of cash corresponding to 440,115
ounces of silver is due (30 June 2014: 473,272 ounces).
In the six months ended 30 June 2015, the most significant drivers of the US$1.8 million unrealised gain taken to income
(six months ended 30 June 2014: gain of US$47.3 million) were the updating of assumptions utilised to value the
Silverstream contract, most significantly the unwinding of the effect of discounting future cash flows, the difference
between payments received during the six months ended 30 June 2015 and estimated payments in the valuation model at 31
December 2014, net of the increase in the US dollar exchange rate against the Mexican peso, the increase of the reference
discount rate (LIBOR) and the forward silver price which was lower than expected given the cyclical nature of prices.
A reconciliation of the beginning balance to the ending balance is shown below.
2015 2014
(in thousands of US dollars)
Balance at 1 January: 392,276 372,846
Cash received in respect of the period (15,753) (23,281)
Cash receivable (4,665) (7,487)
Re-measurement gains recognised in profit or loss 1,761 47,298
Balance at 30 June 373,619 389,376
Less - Current portion 30,647 42,168
Non-current portion 342,972 347,208
11 Inventories
Finished goods 3,944 2,094
Work in progress1 246,547 235,261
Operating materials2 71,199 68,257
Inventories at lower of cost and net realisable value 321,690 305,612
Less - Current portion 237,278 221,200
Non-current portion 84,412 84,412
221,200
Non-current portion
84,412
84,412
1 Includes an inventory write down of US$17.6 million to reduce the cost of inventory to net realizable value (December
2014: US$17.6 million).
2 Includes an allowance for obsolete and slow-moving inventory of $2.7 million (31 December 2014: US$2.6 million).
12 Trade and other receivables
Trade receivables from related parties (note 16) 122,835 139,620
Value added tax receivable 152,711 106,903
Advances to suppliers and contractors 12,290 13,734
Other receivables from related parties (note 16) 4,665 7,015
Loans granted to contractors 2,708 2,866
Other receivables arising on the sale of fixed assets 1,906 6,009
Other receivables 10,602 11,766
307,717 287,913
Provision for impairment of other receivables (312) (318)
307,405 287,595
Other receivables classified as non-current assets :
Loans granted to contractors 3,236 3,853
Other receivables arising from the sale of fixed assets 136 -
3,372 3,853
310,777 291,448
310,777
291,448
13 Cash, cash equivalents and short term investments
Cash at bank and on hand 5,239 3,979
Short-term deposits 250,509 150,361
Cash and cash equivalents 255,748 154,340
255,748
154,340
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, 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.
Short-term investments 220,000 295,000
220,000
295,000
Short-term investments are made for fixed periods no longer than four months and earn interest at fixed rates without an
option for early withdrawal. As at 30 June 2015 short-term investments are held in fixed-term bank deposits of US$220,000
(31 December 2014: US$295,000).
14 Dividends paid
Dividends declared by the Company are as follows:
Per shareUS Cents Amounts$Million
Six months ended 30 June 2014
Total dividends paid during the period1 6.8 50.1
Six months ended 30 June 2015
Total dividends paid during the period2 3.0 22.1
1 Special dividend for 2013 approved at the Annual General Meeting on 16 May 2014 and paid on 22 May 2014.
2 Final dividend for 2014 approved at the Annual General Meeting on 18 May 2015 and paid on 22 May 2015.
15 Contingencies
The contingencies in the Group's annual consolidated financial statements for the year ended 31 December 2014 as published
in the 2014 Annual Report, are still applicable as of 30 June 2015, including the El Bajio agrarian community conflict as
described below:
- As previously reported by the Company, the Unitarian Agrarian Court issued a procedural order in execution of its
original agrarian ruling pertaining to the 1,824 hectares. Amongst other aspects, the Court determined that Minera Penmont
("Penmont") must remediate the lands to the same state that they were before Penmont's occupation. Penmont had been
conducting mining activities in approximately 300 hectares of these lands, where the Dipolos mine is located. Pursuant to
such ruling, Penmont placed the entirety of the disputed lands at the disposition of the Magistrate in July 2013, who in
turn placed them in deposit before a joint commission comprised of both the claimants and the Ejido assembly, pending
remediation activities. In the opinion of the Company, this procedural order is excessive since such level of remediation
was not considered as part of the original ruling and because the procedural order appears not to consider the fact that
Penmont conducted its activities pursuant to valid mining concessions and environmental impact permits. The execution of
the procedural order is subject to appeal.
- In addition, the claimants also presented other claims against occupation agreements they had entered into with
Penmont, relating to land parcels separate from the land described above. As Penmont has had no significant mining
operations or specific geological interest in these parcels, they are not considered strategic for Penmont. However, the
Unitarian Agrarian Court has issued a ruling declaring such occupation agreements to be null and void and that Penmont must
remediate these parcels to the same state that they were before Penmont's occupation as well as return any minerals
extracted from this area. The ruling also makes reference, in this same context, to the separate court case involving the
1,824 hectares mentioned above. Penmont has appealed this decision since it is the owner of the mining concessions and all
mining activities were conducted in accordance with Mexican law. Any execution involving minerals regarding the lands where
the Dipolos pit is located would be subject to additional appeals process.
- 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.
16 Related party balances and transactions
The Group had the following related party transactions during the six months ended 30 June 2015 and 30 June 2014 and
balances as at 30 June 2015 and 31 December 2014.
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
As at 30 June 2015 As at 31 December 2014 As at 30 June 2015 As at 31 December 2014
In thousands of US dollars
Trade:
Metalúrgica Met-Mex Peñoles, S.A. de C.V. 122,780 139,620 55 619
Other:
Industrias Peñoles, S.A.B. de C.V. 4,665 6,974 - --
Servicios Administrativos Peñoles, S.A de C.V. - 41 2,411 -
Servicios Especializados Peñoles, S.A. de C.V. - - 2,109 -
Fuerza Eólica del Istmo, S.A. de C.V. - - 1,771 -
Other 55 - 650 1,083
127,500 146,635 6,996 1,702
Related party accounts receivable and payable will be settled in cash.
Other balances with related parties:
(in thousands of US dollars)
Silverstream contract:
Industrias Peñoles, S.A.B. de C.V. 373,619 392,276
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:
Sales1:
Metalúrgica Met-Mex Peñoles, S.A. de C.V. 751,484 677,066
Other income 375 558
Total income 751,859 677,624
Total income
751,859
677,624
1 Figures do not include the results from hedging.
Expenses:
Administrative Services:
Servicios Administrativos Peñoles, S.A. de C.V.2 10,288 19,996
Servicios Especializados Peñoles, S.A. de C.V. 2 9,042 -
Servicios de Exploración, S.A. de C.V. - 141
19,330 20,137
Energy:
Fuerza Eólica del Istmo, S.A. de C.V. 1,863 -
Termoeléctrica Peñoles, S. de R.L. de C.V. 11,296 15,927
13,159 15,927
Operating materials and spare parts:
Wideco Inc 2,802 1,722
Metalúrgica Met-Mex Peñoles, S.A. de C.V. 2,228 2,137
5,030 3,859
Equipment repairs and administrative services:
Serviminas, S.A. de C.V. 1,925 1,669
Insurance premiums:
Grupo Nacional Provincial, S.A.B. de C.V. 2,624 2,284
Interest expense:
Newmont Mining Corporation -- 531
Other expenses: 3,491 3,630
Total expenses 45,559 48,037
Total expenses
45,559
48,037
2 Effective 1 January 2013, a new Service Agreement with Servicios Administrativos Peñoles, S.A. de C.V., ("SAPSA"), a
wholly owned Peñoles subsidiary, was signed. 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. On 1
January 2014 Peñoles created a new legal entity named Servicios Especializados Peñoles, S.A. de C.V. to, along with SAPSA,
provide the administrative services in accordance with the terms of the service agreement above mentioned.
During the six months ended 30 June 2015, the Company incurred expenses of US$19.3 million under the new above mentioned
agreement (US$19.9 million for the six months ended 30 June 2014). Expenses include administrative expenses of US$15.9
million (US$14.4 million for the six months ended 30 June 2014), exploration expenses of nil (US$0.1 million for the six
months ended 30 June 2014) and US$3.4 million that were capitalised exploration and development expenditure (US$5.4 million
for six months ended 30 June 2014).
(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 1,894 1,717
Post-employment pension 129 72
Other benefits 125 302
Total compensation paid to key management personnel 2,148 2,091
Total compensation paid to key management personnel
2,148
2,091
17 Notes to the consolidated cash flow statement
Reconciliation of profit for the period to net cash
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