REG - Fresnillo Plc - Interim results for the six months to 30 June 2016 <Origin Href="QuoteRef">FRES.L</Origin> - Part 2
02/08/2016 08:05
- Part 2: For the preceding part double click ID:nRSB9222Fa
17,297 18.6
ZINC (MT)
Fresnillo 9,043 6,765 33.7
Ciénega 3,053 2,490 22.6
Saucito 8,850 7,826 13.1
Total Zinc (MT) 20,946 17,081 22.6
Cost of sales
Change
H1 16 H1 15 Amount %
Adjusted production costs4 299.7 316.2 -16.5 -5.2
Depreciation and amortisation 165.3 159.7 5.6 3.5
Change in work in progress 37.6 -13.4 51.0 N/A
Profit Sharing 9.9 6.0 3.9 67.2
Hedging 2.6 10.2 -7.6 -74.8
Reversal of inventories write-down -22.6 0.0 -22.6 N/A
Cost of Sales 492.5 478.7 13.8 2.9
4 Adjusted production cost is calculated as total production costs less depreciation, profit sharing and the effects of
exchange rate hedging.
Cost of sales of US$492.5 million increased by 2.9% over the first half 2015 as a result of the following combination of
factors:
· Adjusted production costs of US$299.7 million decreased 5.2% over the first half of 2015. The US$16.5 million decrease
was largely explained by the positive effect of the 19.3% devaluation of the average Mexican peso/US dollar spot exchange
rate estimated at US$22.2 million. In addition, lower ore throughput at Ciénega, Fresnillo and Noche Buena decreased
production costs by an estimated 2.4 million. This was partly offset by: i) additional production costs related to the
increased ore throughput at Herradura and Saucito estimated at US$13.3 million; and ii) an estimated US$2.1 million
increase in development and maintenance costs, mainly at the Fresnillo, Saucito and Ciénega mines. In addition, each
production cost component was affected by the below cost inflation/deflation (excluding the benefit of the devaluation):
− Personnel costs, excluding profit sharing, increased by US$2.1 million as a result of the 5.0% increase in wages in
Mexican pesos
− Contractor costs rose by US$2.0 million due to the contract adjustments recorded during the first half of the year;
up 2.0%-12.5% in Mexican pesos
− Cost of energy decreased by US$6.4 million due to lower unit prices of electricity and diesel
− Cost of operating materials decreased by US$3.0 million
− Cost of maintenance decreased by US$2.0 million
· Depreciation increased by US$5.6 million mainly as a result of: i) a higher depletion factor at Herradura and Saucito due
to the higher production volumes; ii) increased depreciation at Herradura following the commissioning of the second Merrill
Crowe plant; and iii) additional mining works depreciated mainly at the Fresnillo mine.
· The variation in change in work in progress was an adverse effect of US$51.0 million half on half. Change in work in
progress resulted in a change of US$37.6 million in the first half of 2016. This was explained by the decrease in
inventories on the leaching pads at Herradura following the increased ore throughput and commissioning of the second
Merrill Crowe plant in 4Q15, which allowed the elimination of the bottleneck in processing volumes of rich solution coming
from the leaching pads and the dynamic leaching plant, and, to a lesser extent, a decrease in inventories on the leaching
pads at Noche Buena. In contrast, change in work in progress resulted in a benefit of US$13.4 million in the first half of
2015 as a result of the increase in inventories on the leaching pads at Herradura as part of the process to normalise
production at this mine.
· Profit sharing increased by US$4.0 million due to the higher profits generated.
· Mexican peso/US dollar hedging in production costs: In 2015, the Group entered into a combination of put and call options
structured as zero cost (collars) to hedge US$152.0 million of costs and expenses denominated in Mexican pesos with average
floor and cap exchange rates of $14.54 and $18.06 per US dollar respectively, resulting in a US$2.6 million loss recorded
in the income statement. The total outstanding position using collar structures as of 30 June 2016 was US$46.0 million with
monthly maturity dates throughout July and August 2016 with average floor and cap exchange rates of $16.15 and $18.93 per
US dollar respectively. These instruments guarantee a minimum exchange rate should the market rate fall below the floor.
Between the floor and cap exchange rates the Group sells US dollars at the market rate, and when the Mexican peso per US
dollar exchange rate goes above the cap rate, the Company is obliged to sell US dollars at the contract rate. The Company
decided that it will no longer be continuing with this programme, so has not entered into further hedging contracts, but is
maintaining the outstanding position to maturity.
· Reversal of the provision (US$14.5 million) recorded in December 2015 related to the decrease in the gold price below the
inventory carrying cost at Soledad-Dipolos as a result of the stronger gold price.
Cost per tonne and cash cost per ounce
Cost per tonne is a key indicator to measure the effects of mining inflation and cost control performance at each mine.
This indicator is calculated as total production costs, plus ordinary mining rights less depreciation, profit sharing and
exchange rate hedging effects, divided by total tonnage processed.
COST PER TONNE
%
H1 16 H1 15 Change
Fresnillo US$/TONNE MILLED 43.80 48.53 -9.8
Saucito US$/TONNE MILLED 40.34 42.65 -5.4
Ciénega US$/TONNE MILLED 55.18 66.66 -17.2
Herradura US$/TONNE DEPOSITED 7.61 8.71 -12.6
Noche Buena US$/TONNE DEPOSITED 7.80 8.16 -4.5
The 19.3% devaluation of the average Mexican peso against the US dollar and the lower unit prices of electricity (28.6%)
and diesel (19.6%) benefitted cost per tonne across the Group. These positive effects were mitigated by the 5.0% increase
in wages in Mexican pesos for unionised workers and the increase in contractor fees. Factors affecting cost per tonne at
each mine are described below:
Fresnillo
Cost per tonne milled decreased by 9.8% over the first half of 2015 mainly due to the devaluation of the Mexican peso and
the lower cost of energy, together with lower maintenance costs resulting from the maintenance delays experienced in the
second quarter of 2016; and a decrease in the cost of operating materials mainly due to lower consumption of steel balls
and liners for the mill. This was partly offset by higher contractor costs resulting from the increased number of
contractors hired to accelerate development; and higher personnel costs due to increased headcount.
Saucito
Cost per tonne decreased by 5.4% mainly as a result the devaluation of the Mexican peso and the lower cost of energy,
together with lower maintenance costs and a lower unit price of operating materials. This was partly offset by increased
development recorded as costs in the first half 2016 income statement, whereas in 2015 a greater portion was capitalised;
and a larger number of contractors and personnel to increase development rates and volumes of ore hauled.
Ciénega
Cost per tonne milled decreased 17.2% mainly as a result of the devaluation of the Mexican peso and the lower cost of
energy, together lower consumption of electricity and sodium cyanide. These positive effects were partly offset by an
increased number of contractors.
Herradura
Cost per tonne decreased 12.6% mainly due to the devaluation of the Mexican peso and the lower cost of diesel, together
with the decline in unit costs of operating materials, lower maintenance costs and the additional efficiencies achieved
from the increased ore throughput.
Noche Buena
Cost per tonne decreased by 4.5% as a result of the devaluation of the Mexican peso and the lower cost of diesel, together
with the decrease in unit costs of operating materials and maintenance of haulage trucks. This was partly offset by the
increased consumption of diesel and sodium cyanide; and increased contractor costs due to higher volumes hauled.
CASH COST PER OUNCE5
%
H1 16 H1 15 Change
Fresnillo US$ per silver ounce 3.56 5.75 -38.1
Saucito US$ per silver ounce 0.83 0.64 31.2
Ciénega US$ per gold ounce -121.68 296.99 N/A
Herradura US$ per gold ounce 485.23 490.18 -1.0
Noche Buena US$ per gold ounce 778.38 897.91 -13.3
5 Cash cost per ounce is calculated as total cash cost (cost of sales plus treatment and refining charges and mining rights
less depreciation) less revenues from by-products divided by the silver or gold ounces sold.
Fresnillo: US$3.56/oz (1H16) vs US$5.75/oz (1H15), (-US$2.19/oz; -38.1%)
The decrease in cash cost per ounce was primarily driven by higher by-product credits (gold, zinc and lead), lower cost per
tonne and higher silver ore grades. This was partly offset by higher treatment and refining charges resulting from the
increased volumes of lead and zinc concentrates produced.
Saucito: US$0.83/oz (1H16) vs US0.64/oz (1H15), (+US$0.19/oz; +31.2%)
Cash cost per silver ounce increased due to the expected lower silver ore grade and, to a lesser extent, lower by-product
credits and higher profit sharing. These negative factors were mitigated by the lower cost per tonne and lower treatment
and refining charges.
Ciénega: -US$121.68/oz (1H16) vs US$296.99/oz (1H15), (-US$418.67/oz; N/A)
The decrease in cash cost was primarily explained by higher by-product credits per gold ounce and lower cost per tonne.
This was partly offset by the lower gold ore grade, higher treatment and refining charges resulting from the increased
volumes of lead and zinc concentrate produced.
Herradura: US$485.23/oz (1H16) vs US$490.18/oz (1H15), (-US$4.95/oz; -1.0%)
Cash cost per gold ounce decreased mainly as a result of lower cost per tonne, offset by the expected lower gold ore grade
and higher profit sharing.
Noche Buena: US$778.38/oz (1H16) vs US$897.91/oz (1H15), (-US$119.53/oz; -13.3%)
The decrease in cash cost was driven by the reversal of the write down of gold inventories on the leaching pads following
the recovery of the gold price; a higher gold ore grade; and lower cost per tonne.
All in sustaining cost
H1 16 H1 15 Change %
Fresnillo US$ per silver ounce 8.31 11.05 -24.8
Saucito US$ per silver ounce 5.53 5.95 -7.2
Ciénega US$ per gold ounce 525.86 649.97 -19.1
Herradura US$ per gold ounce 721.24 873.23 -17.4
Noche Buena US$ per gold ounce 826.11 940.87 -12.2
All-in sustaining costs are calculated as traditional cash cost plus on-site general, corporate and administrative costs,
community costs related to current operations, capitalised stripping and underground mine development, sustaining capital
expenditures and remediation expenses.
The changes in all-in sustaining costs at each mine are explained below:
Fresnillo: All-in sustaining cost decreased due to a lower cash cost, a decrease in capitalised mine development works and
lower community and administrative costs.
Saucito: All-in sustaining cost declined due to lower capital expenditure.
Ciénega: The decrease in all-in sustaining cost was mainly driven by the decrease in cash cost.
Herradura: All-in sustaining cost decreased mainly due to the lower cost per tonne.
Noche Buena: The decrease in all-in sustaining cost was due to a decrease in capital expenditures and lower cash cost.
All-in sustaining costs are affected by ad hoc expenses recorded in each particular year, and therefore may significantly
vary year on year.
Gross profit
Total gross profit, excluding hedging gains and losses, increased by 44.1% to US$394.4 million in the first half of 2016.
The US$120.8 million increase resulted from: i) the positive effect of the increased volumes processed at Herradura
estimated at US$57.2 million; ii) the US$22.2 million favourable effect of the Mexican peso/US dollar exchange rate
devaluation; iii) the US$19.2 million estimated positive effect of the increased gold ounces produced at Noche Buena; iv)
the favourable impact of the higher ore grades at the Fresnillo mine estimated at US$18.9 million; v) the US$15.5 million
estimated benefit of the increase in gold price; vi) the reversal of the write down of inventories at Soledad-Dipolos of
US$14.5 million; vii) the US$6.9 million positive effect of hedging; viii) the cost deflation estimated at US$6.2 million;
and ix) other favourable impacts estimated at US$0.9 million.
These factors were partly offset by: i) the expected lower ore grades at Herradura and Saucito, which had an estimated
adverse impact of US$19.4 million and US$8.1 million respectively; ii) the US$7.7 million negative effect of the lower
lead and zinc prices; and iii) the increase in depreciation of US$5.6 million.
On a per mine basis, the increased gold production at Herradura resulted in a 49.4% increase in gross profit to US$139.8
million, which represented 35.6% of the Group's consolidated gross profit, excluding hedging effects. Saucito was the
second most important contributor, generating US$121.6 million or 31.0% of the Group's gross profit, despite the 4.4%
decrease over the first half of 2015. Fresnillo's gross profit rose 32.9%, reflecting the progress made in the turnaround
plan at this mine. However, its contribution to the consolidated gross profit remained relatively stable at 17% in the
first half of 2016. The increased revenues and lower costs at Noche Buena resulted in an increase in gross profit to
US$28.4 million, increasing this mine's contribution to the Group's gross profit from 0.4% in the first half of 2015 to
7.2% in the same period of 2016. Similarly, gross profit at Ciénega doubled during the first six months of 2016,
contributing 5.5% of the consolidated gross profit.
|
(US$ millions) Change
H1 16 H1 15 Amount %
Herradura 139.8 35.6% 93.6 33.6% 46.2 49.4
Saucito 121.6 31.0% 127.2 45.6% (5.6) (4.4)
Fresnillo 66.7 17.0% 50.2 18.0% 16.5 32.9
Noche Buena 28.4 7.2% 1.1 0.4% 27.3 N/A
Ciénega 21.8 5.5% 10.3 3.7% 11.5 111.7
Soledad-Dipolos 14.5 3.7% (3.6) -1.3% 18.1 N/A
Total for operating mines 392.8 100.0% 278.8 100.0% 114.0 40.9
MXP/USD exchange rate hedging (losses) and gains -2.6 -10.2 7.6 -74.5
Other subsidiaries 4.2 5.0 -0.8 -16.0
Total Fresnillo plc 394.4 273.6 120.8 44.2
Administrative expenses
Administrative expenses decreased from US$33.4 million to US$26.5 million in the first half of 2016. The 20.9% decrease was
explained by a decrease in non-recurring engineering and construction services provided by Peñoles relating to new
projects, lower cost of services provided by third parties and the positive effect of the devaluation of the Mexican peso
against the US dollar in administrative expenses denominated in pesos.
Exploration expenses
BUSINESS UNIT / PROJECT (US$ millions) Exploration expenses Capitalised expenses
Ciénega 3.2
Fresnillo 2.4
Herradura 9.5
Saucito 4.4
Noche Buena 1.2
San Julián 2.1
Centauro Deep 1.2 0.7
Orisyvo 1.3 0.2
San Ramón 2.3
Cebollitas and Manzanillas 3.1
Corredor Herradura 0.6
Pilarica 0.6
Guazaparez 1.2
Rodeo 0.4
Candameña 0.3
Guanajuato 1.4 0.1
Perú 1.5
Juanicipio 0.0 6.7
Others 15.4
TOTAL 52.1 7.7
Exploration expenses for the first half of 2016 totalled US$52.1 million, a 30.9% decrease over the first half of 2015, as
a result of a slower pace of drilling. An additional US$7.7 million was capitalised mainly related to exploration expenses
at Juanicipio project. However, Risk Capital Invested in Exploration is expected to increase in the second half of 2016
reaching a total in the range of US$135- US$140 million for the full year.
EBITDA
EBITDA and EBITDA Margin
Six months ended 30 June
(in millions of US$)
H1 2016 H1 2015 % change
Gross Profit 394.4 273.6 44.1
+ Depreciation and amortisation 165.3 159.7 3.5
- Administrative Expenses -26.5 -33.4 -20.9
- Exploration Expenses -52.1 -75.4 -30.9
- Selling Expenses -7.2 -6.7 7.7
EBITDA 474.0 317.9 49.1
EBITDA Margin 53.4% 42.3%
A key indicator of the Group's financial performance is EBITDA, which is calculated as gross profit plus depreciation, less
administrative, selling and exploration expenses. This indicator increased by 49.1% to US$474.0 million in the first half
of 2016 as a result of the higher gross profit and lower administrative and exploration expenses. Likewise, the EBITDA
margin increased from 42.3% in the first half of 2015 to 53.4% in the same period of 2016.
Silverstream revaluation effects
The Silverstream contract is accounted for as a derivative financial instrument carried at fair value. In the first half of
2016, the revaluation of the Silverstream contract generated an US$88.2 million non-cash gain mainly as a result of the
higher forward price of silver, the decrease of the reference discount rate (LIBOR), and to a lesser extent, the impact of
the US dollar exchange rate against the Mexican peso. In addition, a US$21.7 million non-cash gain was generated by the
unwinding of the discount and the difference between payments received during the six months ended 30 June 2016 and
estimated payments in the valuation model at 31 December 2015. The total effect recorded in the first six months of 2016
was US$109.9 million, which compared favourably against the US$1.8 million non-cash gain registered in the same period of
2015.
The cumulative non-cash revaluation gains that have been recognised in the income statement since 2008 increased to
US$660.2 million in total; whilst cumulative cash received or receivable at the end of the first half 2016 from the
Silverstream contract totalled US$522.1 million.
It is expected that the Group will record further unrealised gains or losses in the income statement in accordance with the
cyclical behaviour of the silver price or changes in the assumptions used when valuing this contract. Further information
related to the Silverstream contract is provided in the Balance Sheet section below and in notes 10 and 18 to the Interim
Financial Statements.
Finance costs and income
Finance costs decreased from US$19.8 million in the first half of 2015 to US$13.9 million in the same period of 2016 mainly
due to an increase in the interest on the US$800 million principal amount of 5.5% Senior Notes, that has been capitalised
as part of the San Julián project.
In addition, a US$136.6 million non-cash finance loss was generated by the mark-to-market time value of the outstanding
gold hedging programme put in place to protect the investment made in the acquisition of the 44% stake of Newmont in
Penmont. This compared negatively to the US$16.9 million non-cash finance gain generated in the first half of 2015.
Foreign exchange
A foreign exchange loss of US$8.6 million was recorded in the income statement as a result of the realised transactions in
the period and the adverse effect of the 9.9% spot devaluation of the Mexican peso against the US dollar in the six months
ended 30 June 2016 on the value of peso-denominated net monetary assets. This represented a 44.7% decrease from the US$15.6
million foreign exchange loss recognised in the first half of 2015.
Taxation
Income tax expense increased by 51.6% to US$73.7 million as a result of the increase in profit generated in the first half
2016. The effective tax rate, excluding the special mining rights, was 28.9% which was in line with the 30% statutory tax
rate. Including the effect of the special mining rights, the effective tax rate was 35.1%. The effective tax rate is
calculated using forecasts of gold and silver prices; and foreign exchange rates for the second half of 2016.
Profit for the period
Profit for the period was US$165.6 million, which represented a 116.9% increase half on half as a result of the factors
discussed above.
Excluding the effects of the Silverstream valuation, profit for the period increased 18.0% to US$88.7 million in the first
six months of 2016.
Cash Flow
A summary of the key items from the cash flow is set out below:
Cash Flow Key Items
Six months ended 30 June
(in millions of US$)
H1 16 H1 15 (US $) (%)
Cash generated by operations before changes in working capital 475.2 314.9 160.3 50.9
Decrease (increase) in working capital 0.5 -18.0 18.6 N/A
Taxes and Employee Profit Sharing paid -67.9 -33.5 -34.4 102.7
Net cash from operating activities 407.9 263.4 144.5 54.9
Silverstream contract 20.1 22.7 -2.6 -11.5
Purchase of property, plant & equipment -198.8 -229.1 30.3 -13.2
Dividends paid -24.8 -22.1 -2.7 12.3
Net interest paid -9.3 -17.1 7.9 -45.9
Net increase in cash and short term investments during the period before foreign exchange differences 201.8 26.0 175.8 676.2
Cash, cash equivalents and short term investments at 30 June* 701.2 475.7 225.4 47.4
*As disclosed in the Consolidated Cash Flow Statement, cash and cash equivalents at 30 June 2016 totalled US$581.2 million
and short-term investments held in fixed-term bank deposits amounted to US$120.0 million. Cash and cash equivalents at 30
June 2015 accounted for US$255.7 million and short-term investments amounted to US$220.0 million.
In the first half of 2016, cash generated by operations before changes in working capital totalled US$475.2 million, a
50.9% increase due to higher profits generated. In addition, working capital decreased by US$0.5 million as a result of the
net impact of the following factors:
· A US$10.7 million increase in trade and other receivables which resulted mainly from an increase in the volume of
lead and zinc concentrates and dore sold to Met-Mex
· A US$4.6 million decrease in ore inventories on the leaching pads at Herradura, and to a lesser extent, at Noche
Buena
· A US$1.4 million decrease in prepayments and other assets
· An increase in trade and other payables of US$5.2 million
Taxes and employee profit sharing paid of US$67.9 million increased by 102.7% over the first half 2015 due to higher
profits generated.
As a result of the above factors, net cash from operating activities for the first half of 2016 increased by 54.9% to
US$407.9 million.
The Group also received proceeds of US$20.1 million from the Silverstream Contract.
The Group purchased property plant and equipment for a total of US$198.8 million, a 13.2% decrease compared to the first
half of 2015. However, the Group expects to increase capital expenditures in the second half of the year, and continues to
anticipate a total spend of around US$600 million for the full year. Capital expenditures for the first six months of 2016
are further described below:
Purchase of property, plant and equipment*
(US$ millions)
H1 16
Herradura mine 38.0 Stripping activities and construction of leaching pads and tailings ponds.
Saucito mine 43.6 Development works and purchase of equipment to optimise the beneficiation plant
Ciénega mine 17.2 Development works, construction of tailings dam and purchase of in-mine equipment and components
Fresnillo mine 25.8 Mine development and purchase of in-mine equipment.
Noche Buena 2.0 Construction of leaching pads
San Julián 62.4 Construction of dynamic leaching plant and mining works
Juanicipio project 6.7 Exploration expenses
Other 3.1 Exploraciones Mineras Parreña and SAFSA.
Total Purchase of property, plant and equip. 198.8
*In addition to purchases of property, plant and equipment above, additions to property, plant and equipment on the balance
sheet include capitalised depreciation (US$7.1 million).
Dividends paid to shareholders in the first half 2016 totalled US$24.8 million as a result of the final dividend of 3.35 US
cents per share paid in May 2016. Other uses of funds included the US$9.3 million net interest paid in the first half of
2016.
The sources and uses of funds described above resulted in a net increase of US$201.8 million in cash, cash equivalents and
short term funds, which combined with the US$500.1 million balance at the beginning of the year and the effect of the
exchange rate (-US$0.7 million), resulted in cash, cash equivalents and short term funds of US$701.2 million as at 30 June
2016.
Balance Sheet
Fresnillo plc continued to maintain a solid financial position with short term funds increasing to US$701.2 million as of
30 June 2016 from US$500.1 million at the beginning of the year. This represented a 47.4% increase compared to the short
term funds of US$475.7 million as of 30 June 2015, reflecting the ability of our mines to generate solid cashflow, and, to
a lesser extent, the higher average realised gold price.
Trade and other receivables (including income tax recoverable) decreased from US$305.7 million as of 31 December 2015 to
US$278.4 million as at 30 June 2016 mainly due a decrease in recoverable taxes in the first half of 2016. This was partly
offset by higher volumes sold, which increased accounts receivables.
Inventories slightly decreased (1.5%) over the 2015 year-end figure to US$295.9 million, mainly as a result of the decrease
in gold inventories on the leaching pads of Herradura and Noche Buena This was partly offset by the reversal of the write
downs of inventories at Soledad-Dipolos.
The change in the value of the Silverstream derivative from US$384.8 million at the beginning of the year to US$471.6
million as of 30 June 2016 reflects proceeds of US$23.0 million, (US$17.3 million in cash generated in respect of the
period and US$5.7 million receivable) and the revaluation effects of US$109.9 million in the Group's income statement.
The net book value of property, plant and equipment remained steady at US$2,157.6 million at 30 June 2016 (US$2,138.6 at 31
December 2015).
Fresnillo plc's total equity for the first half of 2016 was US$2,529.4 million, an increase of 6.5% when compared to the
figure at the beginning of the year, which reflected retained earnings from 2015.
Going concern
The Group's business activities, together with the factors likely to affect its future development, performance and
position are set out above in the Operational Review, with further detail in the Annual Report 2015. The financial position
of the Group, its cash flows and liquidity position are described in the Financial Review. In addition, the Group's
objectives, policies and processes for managing its capital; its financial risk management objectives; and its exposures to
credit risk and liquidity risk were set out in the Annual Report 2015. Details of its financial instruments and hedging
activities as at 30 June 2016 are set out in note 18 to the interim report.
In making their assessment of the Group's ability to manage its future cash requirements, the Directors have considered the
Company and Group budgets and the cash flow forecasts for the period to 31 December 2017 as at July 2016. In addition, they
reviewed a more conservative cash flow scenario with silver and gold prices reduced below current expectations, whilst
maintaining current budgeted expenditure, which resulted in our current cash balances reducing over time to a small but
adequate margin of liquidity towards the end of 2017.
The Directors have agreed with management's proposal to maintain the 'Contingency Plan' established at the beginning of the
year which has reduced or deferred capital and/or exploration expenditures as well as continuing with cost reduction
initiatives.
After reviewing all of the above considerations, the Directors have a reasonable expectation that management has sufficient
flexibility in potential adverse circumstances to maintain adequate resources to continue in operational existence for the
foreseeable future. The Directors, therefore, continue to adopt the going concern basis of accounting in preparing these
interim financial statements.
Dividends
The Board of Directors has declared an interim dividend of 8.6 US cents per share totalling US$63.4 million which will be
paid on 9 September 2016 to shareholders on the register on 12 August 2016. This decision was made after a comprehensive
review of the Group's financial situation, assuring that the Group is well placed to meet its current and future financial
requirements, including its development and exploration projects.
Fresnillo's existing dividend policy remains in place, which takes into account the profitability of the business and
underlying earnings of the Group, as well as its capital requirements and cash flows whilst maintaining an appropriate
level of dividend cover. To reiterate the policy, a total dividend of between 33 and 50 percent of profit after tax is paid
out each year in the approximate proportion of one-third to be paid as an interim dividend, two-thirds to be paid as a
final dividend.
The interim dividend will be paid in UK pounds sterling to shareholders, unless a shareholder elects to receive dividends
in US dollars. The interim dividend will be paid in UK pounds sterling with the dividend being converted into UK pounds
sterling on or around 16 August 2016.
Risks and uncertainties
In the first half of 2016, the Board and the Executive Committee continued to monitor Fresnillo plc's principal risks as
part of our risk management as we work towards achieving our long-term objectives.
Fresnillo plc currently monitors eleven principal risks which have not changed from those set out in the Strategy section
of the Strategic Report of the Annual Report for the year ended 31 December 2015 (published in April 2016). A copy of
Fresnillo plc's 2015 Annual Report is available at the Company's website at www.fresnilloplc.com.
The principal risks are shown below:
· Impact of global macroeconomic developments (silver and gold prices)
· Access to land
· Potential actions by the Government (e.g. taxes, more stringent regulations, permits)
· Security
· Public perception against mining
· Projects (performance risk)
· Safety
· Union relations
· Exploration
· Human Resources
· Environmental incidents
Directors
The names and functions of the current directors and senior management team of Fresnillo plc are shown on the Group's
website: www.fresnilloplc.com
Statement of directors' responsibilities
The Directors of the Company hereby confirm that to the best of their knowledge:
(a) the condensed set of financial statements has been prepared in accordance with IAS 34 as adopted by the European Union
and gives a true and fair view of the assets, liabilities, financial position and profit and loss account of the Fresnillo
Group as required by DTR 4.2.4; and
(b) the interim management report includes a fair review of the information required by DTR 4.2.7 (being an indication of
important events that have occurred during the first six months of the financial year and their impact on the condensed set
of financial statements; and a description of the principle risks and uncertainties for the remaining six months of the
year) and DTR 4.2.8 (being related party transactions that have taken place in the first six months of the current
financial year and that have materially affected the financial position or performance of the entity during that period and
changes since the last annual report).
On behalf of the board of directors of Fresnillo plc.
Octavio Alvídrez
Chief Executive Officer
INDEPENDENT REVIEW REPORT TO FRESNILLO PLC
Introduction
We have been engaged by the Company to review the interim condensed set of financial statements in the half-yearly
financial report for the six months ended 30 June 2016 which comprises the interim consolidated income statement, the
interim consolidated statement of comprehensive income, the interim consolidated balance sheet, the interim consolidated
cash flow statement, the interim consolidated statement of changes in equity and the related Notes 1 to 18. We have read
the other information contained in the half yearly financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in the interim condensed consolidated set of financial
statements.
This report is made solely to the Company in accordance with guidance contained in International Standard on Review
Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the
Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company, for our work, for this report, or for the conclusions we have formed.
Directors' Responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are
responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
As disclosed in Note 2a, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by
the European Union. The interim condensed consolidated set of financial statements included in this half-yearly financial
report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted
by the European Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on the interim condensed consolidated set of financial
statements in the half-yearly financial report based on our review.
Scope of Review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board
for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and other review procedures. A review is
substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland)
and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be
identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the interim condensed consolidated
set of financial statements in the half-yearly financial report for the six months ended 30 June 2016 is not prepared, in
all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the
Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.
Ernst & Young LLP
London
2 August 2016
Interim Consolidated Income Statement
Notes For the six months ended 30 June
2016 (Unaudited) 2015 (Unaudited)
(in thousands of US dollars)
| Pre-Silverstream revaluation effect Silverstream revaluation effect Total Pre- Silverstream revaluation effect Silverstream revaluation effect Total
Continuing operations:
Revenues 4 886,877 886,877 752,308 752,308
Cost of sales 5 (492,479) (492,479) (478,670) (478,670)
Gross profit 394,398 394,398 273,638 273,638
Administrative expenses (26,459) (26,459) (33,436) (33,436)
Exploration expenses (52,053) (52,053) (75,379) (75,379)
Selling expenses (7,205) (7,205) (6,689) (6,689)
Other operating income 501 501 38 38
Other operating expenses (4,918) (4,918) (5,321) (5,321)
Profit from continuing operations before net finance costs and income tax 304,264 304,264 152,851 152,851
Finance income 6 3,721 3,721 21,177 21,177
Finance costs 6 (154,162) (154,162) (24,077) (24,077)
Revaluation effects of Silverstream contract 10 - 109,919 109,919 - 1,761 1,761
Foreign exchange loss (8,607) (8,607) (15,572) (15,572)
Profit from continuing operations before income tax 145,216 109,919 255,135 134,379 1,761 136,140
Corporate income tax 7 (40,732) (32,976) (73,708) (48,064) (529) (48,593)
Special mining right 7 (15,801) (15,801) (11,179) (11,179)
Income tax expense 7 (56,533) (32,976) (89,509) (59,243) (529) (59,772)
Profit for the period from continuing operations 88,683 76,943 165,626 75,136 1,232 76,368
Attributable to:
Equity shareholders of the Company 90,093 76,943 167,036 75,267 1,232 76,499
Non-controlling interests (1,410) (1,410) (131) (131)
88,683 76,943 165,626 75,136 1,232 76,368
Earnings per share: (US$)
Basic and diluted earnings per ordinary share from continuing operations 8 0.227 - 0.104
Adjusted earnings per share: (US$)
Adjusted basic and diluted earnings per ordinary share from continuing operations 8 0.122 0.102 -
Interim Consolidated Statement of Comprehensive Income
Profit for the period 165,626 76,368
Other comprehensive income/(expense)
Items that may be reclassified subsequently to profit or loss:
Reclassification relating to cash flow hedges recycled to income statement 1,052 9,361
Income tax effect (315) (2,809)
Changes in the fair value of cash flow hedges (52,308) (5,675)
Income tax effect 15,692 1,703
Net effect of cash flow hedges (35,879) 2,580
Changes in the fair value of available-for-sale financial assets 64,930 (4,846)
Income tax effect (19,479) 1,454
Impairment on available-for-sale financial assets taken to income during the period - 761
Income tax effect - (228)
Net effect of available-for-sale financial assets 45,451 (2,859)
Foreign currency translation (390) (26)
Net other comprehensive income that may be reclassified subsequently to profit or loss 9,182 (305)
Items that will not be reclassified to profit or loss:
Remeasurement losses on defined benefit plans (188) -
Income tax effect 30 -
(158) -
Other comprehensive income/(loss), net of tax 9,024 (305)
Total comprehensive income, net of tax 174,650 76,063
Attributable to:
Equity shareholders of the Company 176,060 76,194
Non-controlling interests (1,410) (131)
174,650 76,063
174,650
76,063
Interim Consolidated Balance Sheet
ASSETS
Non-current assets
Property, plant and equipment 9 2,157,621 2,138,588
Available-for-sale financial assets 136,371 71,442
Silverstream contract 10,18 435,350 358,164
Derivative financial instruments 18 - 97,473
Deferred tax asset 47,410 30,814
Inventories 11 91,620 76,375
Other receivables 12 1,625 2,289
Other assets 3,236 3,372
2,873,233 2,778,517
Current assets
Inventories 11 204,321 224,200
Trade and other receivables 12 256,040 237,992
Income tax recoverable 22,397 67,690
Prepayments 1,734 2,966
Derivative financial instruments 18 1,148 19,602
Silverstream contract 10,18 36,209 26,607
Short-term investments 13 120,000 118,718
Cash and cash equivalents 13 581,168 381,420
1,223,017 1,079,195
Total assets 4,096,250 3,857,712
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)
Hedging reserve 335 36,214
Available-for-sale financial assets reserve 61,748 16,297
Foreign currency translation reserve (1,121) (731)
Retained earnings 1,439,098 1,296,906
2,495,513 2,344,139
Non-controlling interests 33,882 30,202
Total equity 2,529,395 2,374,341
Non-current liabilities
Interest-bearing loans 797,539 797,032
Derivative financial instruments 18 65,990 -
Provision for mine closure cost 188,881 195,476
Provision for pensions and other post-employment benefit plans 13,862 14,534
Deferred tax liability 393,911 373,009
1,460,183 1,380,051
1,460,183
1,380,051
Current liabilities
Trade and other payables 90,180 89,630
Derivative financial instruments 18 6,957 1,427
Employee profit sharing 9,535 12,263
106,672 103,320
Total liabilities 1,566,855 1,483,371
Total equity and liabilities 4,096,250 3,857,712
- More to follow, for following part double click ID:nRSB9222FcRecent news on Fresnillo
See all newsREG - Stock Exch Notice - Admission to ISM - 04/03/2026
AnnouncementREG - Fresnillo PLC - Preliminary Results
AnnouncementREG - Fresnillo PLC - 4Q25 Production Report
AnnouncementREG - Fresnillo Plc - Fresnillo completes acquisition of Probe Gold
AnnouncementREG - Stock Exch Notice - Admission to ISM - 25/11/2025
Announcement