REG - Fresnillo Plc - Interim results for the six months to 30 June 2017 <Origin Href="QuoteRef">FRES.L</Origin> - Part 2
01/08/2017 07:08
- Part 2: For the preceding part double click ID:nRSA6672Ma
pads at Herradura,
albeit not of the same magnitude as the decrease in 1H16.
· Profit sharing decreased slightly by US$1.0 million.
· Given that the Mexican peso exchange rate hedging programme was suspended, there was no effect in the income statement in
1H17, whereas a US$2.6 million loss was recorded in 1H16.
· There was no effect recorded in the income statement as a result of the valuation of inventory carrying cost at
Soledad-Dipolos, whereas a favourable effect of US$22.6 million was recorded in 1H16.
Cost per tonne and cash cost per ounce
Cost per tonne is a key indicator to measure the effects of mining inflation and cost control performance at each mine.
This indicator is calculated as total production costs, plus ordinary mining rights less depreciation, profit sharing and
exchange rate hedging effects, divided by total tonnage processed.
COST PER TONNE
%
H1 17 H1 16 Change
Fresnillo US$/TONNE MILLED 44.07 43.80 0.6
Saucito US$/TONNE MILLED 45.16 40.34 11.9
Ciénega US$/TONNE MILLED 64.39 55.18 16.7
San Julián (phase I)* US$/TONNE MILLED 48.97 - N/A
Herradura US$/TONNE DEPOSITED 7.10 7.61 -6.6
Noche Buena US$/TONNE DEPOSITED 7.00 7.80 -10.2
* Start-up period
Cost per tonne across the Group were benefited by the 8.1% devaluation of the average Mexican peso against the US dollar.
This positive effect was offset, and in some cases more than offset, by the higher unit prices of electricity (37.2%) and
diesel (20.3%) and by the 5.75% increase in wages in Mexican pesos for unionised workers and the higher contractor fees.
Factors affecting cost per tonne at each mine are described below:
Fresnillo
Cost per tonne milled remained broadly unchanged half on half. Higher cost of energy, together with higher contractor costs
and personnel costs due to an increased headcount and the increase in wages in Mexican pesos, were mostly offset by the
devaluation of the Mexican peso and the efficiencies achieved from the 5.8% increase in ore throughput.
Saucito
Cost per tonne milled increased 11.9% mainly as a result of an increase in development works charged to production costs,
an increase in contractor costs resulting from the higher fees paid and additional contractors hired, the increase in
energy costs and the 5.75% increase in wages in Mexican pesos granted to unionised workers. These adverse effects were
mitigated by the devaluation of the Mexican peso against the US dollar.
Ciénega
Cost per tonne milled increased 16.7% mainly as a result of the lower volume of ore processed, increased in development
works and maintenance, an increased number of contractors, the higher unit price of electricity and diesel and the increase
in wages in Mexican pesos to unionised personnel. This was mitigated by the devaluation of the Mexican peso.
Herradura
Cost per tonne decreased 6.6% mainly due to the lower stripping costs charged to production costs, the positive impact of
the higher ore deposited and the devaluation of the Mexican peso, which more than offset the increase in the unit price of
diesel.
Noche Buena
Cost per tonne decreased by 10.2% as a result of the increased volumes of ore deposited, the devaluation of the Mexican
peso and the lower cost of operating materials. This was partly mitigated by the higher cost of energy.
CASH COST PER OUNCE5
%
H1 17 H1 16 Change
Fresnillo US$ per silver ounce 1.25 3.56 -64.9
Saucito US$ per silver ounce 1.64 0.83 96.3
Ciénega US$ per gold ounce -242.81 -121.68 N/A
San Julián (phase I)* US$ per silver ounce -4.73 - N/A
Herradura US$ per gold ounce 483.91 485.23 -0.3
Noche Buena US$ per gold ounce 804.12 778.38 3.3
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.
* Start-up period
Fresnillo: US$1.25/oz (1H17) vs US$3.56/oz (1H16), (-US$2.31/oz; -64.9%)
The decrease in cash cost per ounce was primarily driven by higher by-product credits (zinc and lead) and, to a lesser
extent, higher silver ore grades.
Saucito: US$1.64/oz (1H17) vs US0.83/oz (1H16), (+US$0.81/oz; +96.3%)
Cash cost per ounce increased due to the higher cost per tonne and the expected lower silver ore grade. These negative
factors were mitigated by the higher lead and zinc by-product credits and lower profit sharing.
Ciénega: -US$242.81/oz (1H17) vs -US$121.68/oz (1H16), (-US$121.13/oz; N/A)
The decrease in cash cost per gold ounce was primarily explained by the higher by-product credits, which were partly offset
by the increase in cost per tonne.
Herradura: US$483.91/oz (1H17) vs US$485.23/oz (1H16), (-US$1.32/oz; -0.3%)
Cash cost per gold ounce remained stable half on half mainly as a result of the lower cost per tonne, offset by the lower
gold ore grade.
Noche Buena: US$804.1/oz (1H17) vs US$778.38/oz (1H16), (US$25.74/oz; 3.3%)
The increase in cash cost was driven by the adverse effect of the reversal of the write down of gold inventories on the
leaching pads in 1H16. This was partly compensated for by the lower cost per tonne and the higher gold ore grade in 1H17.
All in sustaining cost
H1 17 H1 16 Change %
Fresnillo US$ per silver ounce 7.57 8.31 -8.9
Saucito US$ per silver ounce 6.50 5.53 17.6
Ciénega US$ per gold ounce 419.16 525.86 -20.3
San Julián US$ per silver ounce 5.65 - N/A
Herradura US$ per gold ounce 810.82 721.24 12.4
Noche Buena US$ per gold ounce 908.73 826.11 10.0
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 lower administrative costs and a decrease in cash cost, partially offset
by the increase in sustaining capex.
Saucito: All-in sustaining cost increased due to the higher cash cost and an increase in sustaining capex.
Ciénega: The decrease in all-in sustaining cost was mainly driven by the decrease in cash cost.
Herradura: Higher all-in sustaining cost due to the increased capitalised stripping costs and higher administrative costs.
Noche Buena: The increase in all-in sustaining cost was due to higher 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 16.6% to US$460.0 million in 1H17. The US$65.6 million
increase resulted from: i) the gross profit of US$69.3 million generated by the new San Julián mine (phase I); ii) the
US$49.7 million estimated benefit of the increase in metal prices; iii) the positive effect of the increased volumes
produced at Fresnillo estimated at US$13.9 million; iv) the US$11.4 million favourable effect of the Mexican peso/US dollar
exchange rate devaluation; and v) other favourable impacts estimated at US$11.4 million. These factors were partly offset
by: i) cost inflation estimated at US$21.9 million; ii) the expected lower ore grades at Saucito estimated at US$21.7
million; iii) the lower gold grades at Herradura, which had an estimated adverse impact of US$19.1 million; iv) the
positive effect of the reversal of the write down of inventories at Soledad-Dipolos of US$14.5 million in 1H16; and v) the
lower gold production at Noche Buena with an estimated impact of US$13.0 million.
On a per mine basis, Herradura and Saucito remain the major contributors to the Group's consolidated gross profit, whilst
Ciénega and Noche Buena reflected marginal changes over the period. Fresnillo's gross profit increased 55.2%, reflecting
the progress made to operate this mine at full capacity. The commencement of commercial production at San Julián (phase I)
resulted in a 9.4% contribution to the consolidated gross profit.
(US$ millions) Change
H1 17 H1 16 Amount %
Herradura 133.1 29.2% 139.8 35.6% -6.7 -4.8
Saucito 120.5 26.4% 121.6 31.0% -1.1 -0.9
Fresnillo 103.5 22.7% 66.7 17.0% 36.8 55.2
San Julián (phase I) 43.0 9.4% - - 43.0 N/A
Ciénega 29.7 6.5% 21.8 5.5% 7.9 36.2
Noche Buena 26.6 5.8% 28.4 7.2% -1.8 -6.3
Total for operating mines 456.4 100.0% 392.8 100.0% 63.6 16.2
MXP/USD exchange rate hedging (losses) 0.0 -2.6 -2.6 N/A
Metal hedging 0.0 1.5 -1.5 N/A
Other subsidiaries 3.6 17.2 -13.6 -79.1
Total Fresnillo plc 460.0 394.4 65.6 16.6
Administrative expenses
Administrative expenses increased from US$26.5 million to US$33.1 million in 1H17. The 24.9% increase was primarily
explained by an increase in services provided by third parties associated with telecommunications and additional
administrative personnel hired to service a larger number of mines and projects. Additionally, increased administrative
services provided by Servicios Industriales Peñoles, S.A.B de C.V. in relation to San Julián (phase I) also contributed to
the increase in administrative expenses in 1H17.
Exploration expenses
BUSINESS UNIT / PROJECT (US$ millions) Exploration expenses Capitalised expenses
Ciénega 2.8 -
Fresnillo 8.1 -
Herradura 8.4 -
Saucito 5.5 -
Noche Buena 2.5 -
San Julián 3.7 -
Centauro Deep 1.0 0.0
Orisyvo 0.9 -
San Ramón 2.1 -
Cebollitas and Manzanillas 1.6 -
Corredor Herradura 0.3 -
Pilarica 1.1 -
Guazaparez 1.7 -
Candameña 2.1 -
Guanajuato 1.8 0.4
Perú 1.8 -
Juanicipio 0.0 1.0
Others 18.8 0.3
TOTAL 64.2 1.7
Exploration expenses totalled US$64.2 million in 1H17, a 23.4% increase over the same period of 2016 due to intensified
exploration activities at Herradura, San Julián and Cebollitas in the Ciénega district. An additional US$1.7 million was
capitalised mainly related to exploration expenses at the Juanicipio project. Thus, risk capital invested in exploration
totalled US$65.9 million and remains at US$160 million for the full year.
EBITDA
EBITDA and EBITDA Margin
Six months ended 30 June
(in millions of US$)
H1 2017 H1 2016 % change
Gross Profit 460.0 394.4 16.6
+ Depreciation and amortisation 168.0 165.3 1.6
- Administrative Expenses -33.1 -26.5 24.9
- Exploration Expenses -64.2 -52.1 23.4
- Selling Expenses -8.2 -7.2 13.7
EBITDA 522.5 474.0 9.4
EBITDA Margin 52.5% 53.4%
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 from US$474.0 million in 1H16 to US$522.5
million in 1H17 as a result of the higher gross profit, which was partly offset by the higher administrative and
exploration expenses. However, the EBITDA margin decreased slightly from 53.4% in 1H16 to 52.5% in 1H17.
Other income
During the period, US$23.4 million income was recognised in the income statement resulting from the sale of non-strategic
mining claims to Argonaut Gold Inc around its Castillo mine. This compares favourably against the US$4.4 million expense
recorded in 1H16, which included disposals of fixed assets and remediation works.
Silverstream revaluation effects
The Silverstream contract is accounted for as a derivative financial instrument carried at fair value. The total effect of
the revaluation of the Silverstream contract recorded in 1H17 was a US$54.8 million gain, which was lower than the US$109.9
million gain registered in 1H16. US$32.1 million arose mainly as a result of the reclassification from silver resources to
reserves at the Sabinas mine and a higher price of silver. A further US$22.8 million gain was generated by the unwinding of
the discount and the difference between payments received during the 1H17 and estimated payments in the valuation model at
31 December 2016.
The cumulative non-cash revaluation gains that have been recognised in the income statement since 2008 increased to
US$738.6 million in total; whilst cumulative cash received or receivable at the end of 1H17 from the Silverstream contract
totalled US$582.6 million (which compares favourably to the upfront payment of US$350 million paid on 31 December 2007).
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
Finance costs of US$17.0 million reflected the interest on the US$800 million principal amount of 5.5% Senior Notes, net of
amounts capitalised totaling US$6.9 million in 1H17.
In addition, a US$35.2 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 in
2014. This compared favourably to the US$136.6 million non-cash finance loss generated in 1H16.
Foreign exchange
A foreign exchange gain of US$3.8 million was recorded in the income statement as a result of the realised transactions in
the period and the positive effect of the 13.4% spot revaluation of the Mexican peso against the US dollar in the six
months ended 30 June 2017 on the value of peso-denominated net monetary assets. This compared favourably against the US$8.6
million foreign exchange loss recognised in the first half of 2016.
The Group also enters into certain exchange rate derivative instruments as part of a programme to manage its exposure to
foreign exchange risk associated with the purchase of equipment denominated in Euro (EUR), Swedish krona (SEK) and Canadian
dollar (CAD). At the end of June, the total EUR, SEK and CAD outstanding net forward position was EUR 7.17 million, CAD 0.0
and SEK 8.23 million with maturity dates from September through December 2017. Volumes that expired during 1H17 were EUR
15.03 million with a weighted average strike of 1.1019 USD/EUR, CAD 0.48 million with a weighted average strike of 1.3385
CAD/USD and SEK 14.18 million with a weighted average strike of 8.9443 SEK/USD, which has generated an insignificant gain
in the period.
Taxation
Income tax expense decreased by 15.7% from US$73.7 million in 1H16 to US$62.2 million in 1H17, despite the fact that profit
before taxes increased by 51.8%. This was a result of the 13.4% revaluation of the Mexican peso in 1H17 versus the 9.9%
devaluation in 1H16 on the tax value of assets and liabilities; together with the impact of the higher inflation rate
(3.18% in 1H17 vs 0.16 in 1H16) on the inflationary uplift of the tax base of assets and liabilities.
The effective tax rate, excluding the special mining rights, was 16.0%, which was below the 30% statutory tax rate. This
was mainly due to the revaluation of the Mexican peso against the US dollar, which impacted the carrying amount of assets
and liabilities (denominated in US dollars) and their tax bases (denominated in Mexican pesos), together with the tax
credit related to the special tax on diesel. Including the effect of the special mining rights, the effective tax rate was
20.0% in 1H17.
Profit for the period
Profit for the period was US$310.1 million, which represented an 87.2% increase half on half as a result of the factors
discussed above.
Excluding the effects of the Silverstream valuation, profit for the period increased 206.3% to US$271.7 million in 1H17.
Cash Flow
A summary of the key items from the cash flow is set out below:
Cash Flow Key Items
Six months ended 30 June
(in millions of US$)
H1 17 H1 16 (US $) (%)
Cash generated by operations before changes in working capital 540.3 475.2 65.1 13.7
(Increase) decrease in working capital -25.8 0.5 -26.3 N/A
Taxes and Employee Profit Sharing paid -211.9 -67.9 -144.0 -13.2
Net cash from operating activities 354.2 407.9 -53.7 -13.2
Silverstream contract 23.0 20.1 2.9 14.4
Purchase of property, plant & equipment -264.3 -198.8 -65.5 33.0
Dividends paid -158.4 -24.8 -133.7 539.5
Net interest paid -8.5 -9.3 0.8 -8.6
Net increase in cash and short term investments during the period -27.1 201.0 -228.1 N/A
Cash, cash equivalents and short term investments at 30 June* 884.9 701.2 183.7 26.2
*As disclosed in the Consolidated Cash Flow Statement, cash and cash equivalents at 30 June 2017 totalled US$394.9 million
and short-term investments held in fixed-term bank deposits amounted to US$490.0 million. 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.
In 1H17, cash generated by operations before changes in working capital totalled US$540.3 million, a 13.7% increase due to
higher profits generated. Further, working capital decreased by US$25.8 million as a result of the net impact of the
following factors:
· A US$6.0 million decrease in trade and other receivables
· A US$14.1million decrease in ore inventories on the leaching pads at Herradura
· A US$0.7 million decrease in prepayments and other assets
· An increase in trade and other payables of US$4.9 million
Taxes and employee profit sharing paid of US$211.9 million increased by 212.2% over 1H16 due to higher profits generated.
As a result of the above factors, net cash from operating activities decreased by 13.2% to US$354.2 million.
The Group also received proceeds of US$23.0 million from the Silverstream Contract.
The Group purchased property plant and equipment for a total of US$264.3 million, a 33.0% increase over 1H16. The Group
expects capital expenditures of around US$700 million for the full year. Capital expenditures for 1H17 are further
described below:
Purchase of property, plant and equipment*
(US$ millions)
H1 17
Herradura mine 61.2 Construction of second line of the dynamic leaching plant and stripping activities.
San Julián 55.6 Development works and construction of flotation plant at San Julián (phase II)
Saucito mine 53.2 Construction of the pyrites plant, development works and deepening of the Jarillas shaft
Fresnillo mine 49.5 Mine development and purchase of in-mine equipment.
Ciénega mine 19.0 Development works, construction of tailings dam and purchase of land
Noche Buena 8.7 Construction of leaching pads
Juanicipio project 1.0 Exploration expenses
Other 16.1 Exploraciones Mineras Parreña and SAFSA.
Total Purchase of property, plant and equip. 264.3
Dividends paid to shareholders in 1H17 totalled US$158.4 million as a result of the final dividend of 21.5 US cents per
share paid in May 2017. Other uses of funds included the US$8.5 million net interest paid in the first half of 2016.
The sources and uses of funds described above resulted in a net decrease of US$27.1 million in cash, cash equivalents and
short term funds, which combined with the US$912.0 million balance at the beginning of the year, resulted in cash, cash
equivalents and short term funds of US$884.9 million as at 30 June 2017.
Balance Sheet
Fresnillo plc continued to maintain a solid financial position with short term funds of US$884.9 million as of 30 June
2017. This represented a 3.0% decrease versus December 2016 but a 26.2% increase compared to the short term funds of
US$701.2 million as of 30 June 2016.
Trade and other receivables (including income tax recoverable) increased from US$286.7 million as of 31 December 2016 to
US$369.4 million as at 30 June 2017 mainly due to the increase in recoverable taxes in 1H17 and higher volumes sold at
higher prices, which increased accounts receivables.
Inventories decreased 5.1% over the 2016 year-end figure to US$262.7 million, mainly as a result of the decrease in gold
inventories on the leaching pads of Herradura.
The change in the value of the Silverstream derivative from US$467.5 million at the beginning of the year to US$500.2
million as of 30 June 2017 reflects proceeds of US$22.1 million, (US$17.0 million in cash generated in respect of the
period and US$5.1 million receivable) and the revaluation effects of US$54.8 million in the Group's income statement.
The net book value of property, plant and equipment increased by 5.1% to US$2,290.8 million at 30 June 2017 (US$2,180.2 at
31 December 2016), reflecting the larger asset base following the commissioning of San Julián (phase I).
Fresnillo plc's total equity for 1H17 was US$2,891.4 million, an increase of 6.4% when compared to the figure at the
beginning of the year, which reflected retained earnings from 2016.
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 2016. 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 2016. Details of its financial instruments and hedging
activities as at 30 June 2017 are set out in note 19 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 2018 as at July 2017. 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 more than
adequate margin of liquidity towards the end of 2018.
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 10.6 US cents per share totalling US$78.1 million which will be
paid on 8 September 2017 to shareholders on the register on 11 August 2017. 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, 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,
remains in place. 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 15 August 2017.
Risks and uncertainties
In the first half of 2017, the Board and the Executive Committee continued to oversee Fresnillo plc's principal risks as
part of our risk management framework as we work towards achieving our strategic objectives.
Fresnillo plc currently monitors eleven principal risks which have not changed from those set out in the Strategic Report
of the Annual Report for the year ended 31 December 2016 (published in April 2017).
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
· Safety
· Projects (performance risk)
· 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 2017 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 19. 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 2017 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
31 July 2017
Interim Consolidated Income Statement
Notes For the six months ended 30 June
2017 (Unaudited) 2016 (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 4 995,833 995,833 886,877 886,877
Cost of sales 5 (535,798) (535,798) (492,479) (492,479)
Gross profit 460,035 460,035 394,398 394,398
Administrative expenses (33,076) (33,076) (26,459) (26,459)
Exploration expenses (64,247) (64,247) (52,053) (52,053)
Selling expenses (8,189) (8,189) (7,205) (7,205)
Other operating income 6 27,268 27,268 501 501
Other operating expenses (3,910) (3,910) (4,918) (4,918)
Profit from continuing operations before net finance costs and income tax 377,881 377,881 304,264 304,264
Finance income 7 7,812 7,812 3,721 3,721
Finance costs 7 (56,978) (56,978) (154,162) (154,162)
Revaluation effects of Silverstream contract 11 - 54,834 54,834 - 109,919 109,919
Foreign exchange loss 3,843 3,843 (8,607) (8,607)
Profit from continuing operations before income tax 332,558 54,834 387,392 145,216 109,919 255,135
Corporate income tax 8 (45,701) (16,451) (62,152) (40,732) (32,976) (73,708)
Special mining right 8 (15,131) (15,131) (15,801) (15,801)
Income tax expense 8 (60,832) (16,451) (77,283) (56,533) (32,976) (89,509)
Profit for the period from continuing operations 271,726 38,383 310,109 88,683 76,943 165,626
Attributable to:
Equity shareholders of the Company 270,335 38,383 308,718 90,093 76,943 167,036
Non-controlling interests 1,391 1,391 (1,410) (1,410)
271,726 38,383 310,109 88,683 76,943 165,626
Earnings per share: (US$)
Basic and diluted earnings per ordinary share from continuing operations 9 0.419 - 0.227
-
Adjusted earnings per share: (US$)
Adjusted basic and diluted earnings per ordinary share from continuing operations 9 0.367 - 0.122 -
Interim Consolidated Statement of Comprehensive Income
Profit for the period 310,109 165,626
Other comprehensive income/(loss)
Items that may be reclassified subsequently to profit or loss:
Loss on cash flow hedges recycled to income statement - 1,052
Income tax effect - (315)
Changes in the fair value of cash flow hedges - (52,308)
Income tax effect - 15,692
Net effect of cash flow hedges - (35,879)
Changes in the fair value of available-for-sale financial assets 17,683 64,930
Income tax effect (5,305) (19,479)
Impairment of available-for-sale financial assets 36 -
Income tax effect (11) -
Net effect of available-for-sale financial assets 12,403 45,451
Foreign currency translation 460 (390)
Net other comprehensive income that may be reclassified subsequently to profit or loss 12,863 9,182
Items that will not be reclassified to profit or loss:
Remeasurement losses on defined benefit plans - (188)
Income tax effect - 30
Net other comprehensive loss that will not be reclassified to profit or loss - (158)
Other comprehensive income, net of tax 12,863 9,024
Total comprehensive income, net of tax 322,972 174,650
Attributable to:
Equity shareholders of the Company 321,581 176,060
Non-controlling interests 1,391 (1,410)
322,972 174,650
322,972
174,650
Interim Consolidated Balance Sheet
ASSETS
Non-current assets
Property, plant and equipment 10 2,290,850 2,180,217
Available-for-sale financial assets 19 133,855 116,171
Silverstream contract 11,19 468,776 438,811
Derivative financial instruments 19 9 16,532
Deferred tax asset 63,502 20,023
Inventories 12 89,351 89,351
Other receivables 13 786 990
Other assets 2,647 3,385
3,049,776 2,865,480
Current assets
Inventories 12 173,371 187,499
Trade and other receivables 13 299,819 286,678
Corporate income tax recoverable 69,578 -
Prepayments 2,865 2,839
Derivative financial instruments 19 379 6,618
Silverstream contract 11,19 31,387 28,718
Short-term investments 14 490,000 200,000
Cash and cash equivalents 14 394,903 711,954
1,462,302 1,424,306
Total assets 4,512,078 4,289,786
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)
Available-for-sale financial assets reserve 60,011 47,608
Foreign currency translation reserve (268) (728)
Retained earnings 1,788,174 1,637,888
2,843,370 2,680,221
Non-controlling interests 47,995 36,147
Total equity 2,891,365 2,716,368
Non-current liabilities
Interest-bearing loans 798,429 798,027
Derivative financial instruments 19 11,212 16
Provision for mine closure cost 169,201 149,109
Provision for pensions and other post-employment benefit plans 10,788 9,095
Deferred tax liability 508,079 463,050
1,497,709 1,419,297
1,497,709
1,419,297
Current liabilities
Trade and other payables 114,495 121,633
Corporate income tax payable - 18,842
Derivative financial instruments 19 1,130 630
Employee profit sharing 7,379 13,016
123,004 154,121
Total liabilities 1,620,713 1,573,418
Total equity and liabilities 4,512,078 4,289,786
Interim Consolidated Statement of Cash Flows
Notes For the six months ended 30 June
2017(Unaudited) 2016(Unaudited)
(in thousands of US dollars)
Net cash from operating activities 18 354,161 407,895
Cash flows from investing activities
Purchase of property, plant and equipment (264,341) (198,817)
Proceeds from the sale of property, plant and equipment 6,13 13,078 219
Repayments of loans granted to contractors 402 1,299
Short-term investments 14 (290,000) (1,282)
Silverstream contract 11 23,028 20,123
Interest received 7,801 3,717
Net cash used in investing activities (510,032) (174,741)
Cash flows from financing activities
Dividends paid to shareholders of the Company (158,433) (24,776)
Capital contribution 10,457 5,090
Interest paid1 (16,267) (12,987)
Net cash used in financing activities (164,243) (32,673)
Net (decrease)/increase in cash and cash equivalents during the period (320,114) 200,481
Effect of exchange rate on cash and cash equivalents 3,063 (733)
Cash and cash equivalents at 1 January 14 711,954 381,420
Cash and cash equivalents at 30 June 14 394,903 581,168
1Total interest paid during the six months ended 30 June 2017 less amounts capitalised totalling US$6.9 million (30 June
2016: US$10.2 million)which were included within the caption Purchase of property, plant and equipment.
Interim Consolidated Statement of Changes in Equity
(in thousands of US dollars)
Balance at 1 January 2016 (Audited) 368,546 1,153,817 (526,910) 36,214 16,297 (731) 1,296,906 2,344,139 30,202 2,374,341
Profit for the period - - - - - - 167,036 167,036 (1,410) 165,626
Other comprehensive income, net of tax - - - (35,879) 45,451 (390) (158) 9,024 - 9,024
Total comprehensive income for the period - - - (35,879) 45,451 (390) 166,878 176,060 (1,410) 174,650
Capital contribution - - - - - - - - 5,090 5,090
Dividends paid 15 - - - - - - (24,686) (24,686) - (24,686)
Balance at 30 June 2016 (Unaudited) 368,546 1,153,817 (526,910) 335 61,748 (1,121) 1,439,098 2,495,513 33,882 2,529,395
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