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Edited Transcript of FRES.L earnings conference call or presentation 30-Jul-19 8:00am GMT

Half Year 2019 Fresnillo PLC Earnings Call

London Aug 22, 2019 (Thomson StreetEvents) -- Edited Transcript of Fresnillo PLC earnings conference call or presentation Tuesday, July 30, 2019 at 8:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Gabriela Mayor

Fresnillo Plc - Head of IR

* Mario Arreguín

Fresnillo Plc - CFO

* Octavio M. Alvídrez

Fresnillo Plc - CEO

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Conference Call Participants

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* Alan Henri Spence

Jefferies LLC, Research Division - Equity Analyst

* Amos Charles Fletcher

Barclays Bank PLC, Research Division - Director

* Daniel Edward Major

UBS Investment Bank, Research Division - Director and Analyst

* Daniel Harry David Shaw

Morgan Stanley, Research Division - Research Analyst

* Danielle Chigumira

Macquarie Research - Analyst

* James Andrew Keith Bell

RBC Capital Markets, LLC, Research Division - Analyst

* Justin Chan

Numis Securities Limited, Research Division - Analyst

* Krishan M. Agarwal

Citigroup Inc, Research Division - Analyst

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Presentation

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Octavio M. Alvídrez, Fresnillo Plc - CEO [1]

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Thank you for joining us in the room and also on the phone. For those on the phone, this is Octavio Alvídrez, CEO; and I'm joined this morning by Mario Arreguín, our CFO; and our investment relations team here in London. As usually, I'll go through the strategy and the operational sides, and Mario will go through the financials and then we will take your questions.

We recognize it has been a more challenging year for the business, and this is reflected on the numbers we've announced this morning. However, we remain confident that the -- we're committed, of course, to the long-term strategy that has given us good results, going from exploration to the efficient, low-cost operation, disciplined approach when we take on the development of the project, of course all of these on sustainable business practices supported by a strong balance sheet.

Nonetheless, as I mentioned, we recognize the challenges we are facing. And with this long-term focus and strategy, we are implementing in the short term various initiatives across core operations that will give us good results so that we can change the current trend.

On sustainable business practices, I'm sad to report 2 fatalities in the first half of 2019. We continue to deploy now across all of our operations our programs I care, we care. This is the program that we piloted at Saucito, and now it is being implemented across all of operations. This aims not only as one more safety system but really as a cultural change in our company. We are covering not only our employees from top to bottom, being very [transparent] on the supervision, but also across all of our contractor companies and their employees as well.

On the environment, I'm glad to report that the objective we have on electricity consumption from wind power is going at 68% and on track to achieve 75% by the end of the year. Also, we have continued to revise our 11 tailings dams, all of them located in Mexico and all of them comply to both the Mexican and the Canadian standards. Since we have discussed this item in our last report, I'm happy to say that we have some review from international consultants with some minor observations being addressed, and we will continue to emphasize this review program across all of our stated [tailings projects].

On the numbers, and as I mentioned, we recognize the effect that some of the lower production has had on the results for the company. And therefore, in our production report for second quarter this year, we have to revise lower our silver production guidance for the year as well as the gold production guidance for the year. I'm glad to say that Juanicipio, after being Board approved in April, we are making good advances on the construction. The long-lead equipment that usually is on the critical path is going very well and according to time, to program, as we ordered this with the support of the main supplier in January of this year.

As I mentioned also, we published some of the financial effects in our latest production report. We are subject also to some inflationary pressure across our operation but also some accounting changes at Herradura, all of those flat, and therefore we have the financial results being [plagued] by lower production but as well as higher costs. Nonetheless, we still have a strong balance sheet with $360 million at the end of June of this year, and I'm also glad to report that we declared an interim dividend of $0.026 per share.

Going to the operations on Fresnillo and the several initiatives that we've put in place. From previous grade guidance of 210 to 220 grams per tonne, we are lowering this for the year, recognizing the challenges we have there, to 190 to 200 grams per tonne. Also, we are emphasizing some of the initiatives that we have for the mine.

In terms of infrastructure, you know that we continue deepening the San Carlos shaft. When we have this piece of infrastructure ready, it will be reflected on lower costs in the area that we are trucking ore by grams and by trucks, and we will be more efficient in getting out that ore from the bottom of the San Carlos area. Also, the tunneling machine is already in Fresnillo, it is being assembled, and we will get that down to 6 95 level and we will start developing with this tunneling machine in mid-October.

The estimated development rate of 300 meters per month on the main haulage level of 6 95 going to the west. That will give us the possibility not only to develop to the west but also, later on, to prepare additional production stopes that will give us the possibility to stabilize and get better silver grade.

Also, I would like to report that we've made some advances on the contractor development per month, going from 2,800 in previous quarters to 3,100, with the target being 3,500 meters per month by year-end.

We continued, as we mentioned, with several initiatives in order to better define the grade that we are achieving in the short term, starting very carefully the dilution that we have and the dilution that we should set as on objective depending on the various widths of the different veins that we have across the operation.

Also, with -- we are starting all the way the process from sampling -- from collecting the sampling all the way to the [year] time. And at the same time, we are very carefully starting the geological model and the relation to the bed spacing on the tailing. We continue to put in place an infill drilling so that we have there information for the short term.

On Saucito -- well, going back to Fresnillo. I recall that we mentioned in our previous conference that we were expecting 1 more million ounce of silver compared to 2018. In 2018, we achieved 15.1 million ounces of silver. We were expecting 1 million more. Now the expected production for Fresnillo this year is in between 14 million and 14.3 million ounces of silver for this year.

For Saucito, well, I'm glad to report that the expected lower grade and lower production compared to 2018 is not as acute as we were expecting. Saucito was one of the mines in which the expected production for this year made us lower the guidance going from 2018 to 2019. And we said we were going to produce 17.5 million ounces of silver, and now we are expecting higher production than this, given that the guided grade of silver between 210 and 220 that we mentioned in this -- at the start of the year it looks more at 240 -- or around 240 grams per tonne.

We continue with the initiatives for Saucito in order to fully improve their stability and making advances. The development rate at Saucito continued to improve: 3,200, 3,250, 3,300 meters per month, with the target, as we mentioned, also being at 3,500 meters per month by year-end.

In San Julián, it will -- and you will see in the -- in this graph we have marginally lower production on silver on the vein system and also on the disseminated ore body compared to 2018. In the vein system, we have lower grades than expected. And therefore, we will produce for this year a lower silver. But in general, a marginal decrease compared to 2018.

On the San Julián disseminated ore body, and this is taken into account as well, we have faced some geotechnical issues, temporary geotechnical situations that are (foreign language), the mine sequence. And therefore, we are decreasing the silver grade as well going into first half of 2020 and finally going to the original sequence at the second half of 2020. With that, we are expecting a little bit lower silver production as well.

Mario, by the way, will take control of the costs results for the different operations and how those costs have impacted our results this year.

For Ciénega, well, we've made some good progress in terms of explorations. We've been able to go across the transversal fault in the Rosario area, and that opens up good potential in this mine. That not only will favor on some exploration costs because we will stop doing the exploration from surface and going from that exploration from underground, saving some of the costs that we have incurred on that one. We are going through the first phase and we will conclude the first phase of the third tailings dam in Ciénega. We will be able to use it, and we are starting the permitting process for the fourth tailings dam as well. So we have that in advance.

In Herradura, we were expecting a little bit higher gold production. However, we had some late development on the 13th leaching pad due to a permitting process that delayed the operation -- or putting in operation of the 13th leaching pad. Therefore, we have to trade some of the ore in the old leaching pads with height. And therefore, the recovery of the gold was taking longer than expected.

Now we have operation of the 13th pad, and you will see a gradual increase in production for the second half of this year. However, with that impact, we had to lower the guidance, as I mentioned, on the gold side as well marginally and approximately 2.5%, 3%.

For Noche Buena, we continue to have good production and good cost numbers. However, we are facing the last years of the operation of this mine. 2020 and 2021 will be the last years for operation after we depleted the reserve we have there. And then after, we will continue producing out the leaching pads for probably 2 to 2.5 years after we have sterilized or completely sterilized the pad.

A few words on Juanicipio. As I mentioned, that is going very well after the Board approval. We continue with the development of the mine. Also the long-lead delivery equipment, as I mentioned, is going very well according to program, and we will start pretty soon all the civil work aiming to conclude this project by the end of 2020. You have in front of you on this slide the new production numbers reported in our feasibility study and reported when we approved -- the Board this new project.

On the exploration side, compared to 2018, where we are spending a little bit lower than the previous year, recognizing that some of the operations needed some more exploration in order to better define the short-term reserves. And you will see from this breakdown of the exploration that our emphasis is on the -- around core operations approximately 60% of $460 million budget is to be spent around our current operations, going from 42% on the previous years.

On the development projects, some few words on the pyrites plant that we are building on the second phase, the flotation plant out of the Fresnillo mine. Fresnillo will give us the possibility to treat the current tailings at Fresnillo and also the old tailings at Fresnillo. That is to be concluded in the second -- at the end of 2020.

On Orisyvo, and as we reported, we made some good progress on the metallurgical recovery of coal going to 80%. What we are doing right now is sampling or have a more representative sample across all of the ore body subject to the mines so that we can confirm the metallurgical results. Then after, we will finish our feasibility study in order to see the strength of this project with this new and improved metallurgical recovery.

So there, we continue to go and deal, trying to acquire the surface land. So out of the communities and (foreign language) in the area so that we can continue advancing on exploration and pulled at our [Durango] project because we do have some good resources there in Rodeo with good metallurgical recoveries on the oxide portion of the project.

In Guanajuato, it is a place in which we have good discoveries there. In -- we have 3 areas in Guanajuato, the North, the Central and the South. Approximately 1.2 million ounces of gold resources and approximately 60 million to 70 million ounces of silver. However, given the fact that we have 3 different areas, right now, we are studying which of the 3 areas have the more strength in order to focus our exploration and our development out of those 3 areas.

Further advance of the exploration in Chile, in which we'll be exploring. We drilled holes already in the ground on the start of the year. And also in Peru, in which we have 650,000 hectares of exploration ground.

And with that, I will pass on to Mario for the financial results.

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Mario Arreguín, Fresnillo Plc - CFO [2]

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Thank you, Octavio. Can everyone hear me okay? And on the line, too, I assume? Okay. I would like to start on Page 17, please, Gaby. Okay.

This slide shows the income statement for the first half of 2019, and we compare that to the first half of 2018. And as you can see, basically all different profit lines, which are outlined in gold, came down substantially. Gross profit came down by 59%, operating profit came down by 82%, profit for the period came down 69% and EBITDA came down almost 46%.

So why don't we start with gross profit and try to explain the $300 million decrease compared to last year. And as you can see from the slide, there were 3 main reasons for that. One has to do with the lower revenues, the lower adjusted revenues. The other has to do with increased production costs. And thirdly, the increase in depreciation. And let's go one by one, starting with adjusted revenues.

Revenues decreased by almost $121 million, of which 46% were due to lower prices. Price of silver was lower by 7.7%, price of lead was lower 21% and the price of zinc was lower 13%. So again, that accounted for 46% of the $121 million. The remaining 54% was due to lower volumes. We produced 9.4% less silver and 7.1% less gold. So that pretty much explains the lower revenues line.

Now I would like to move to the adjusted production costs and dedicate a bit of time to analyze why we had this increase of $136.5 million. And to do that, I would like to move on to Page 23 (sic) [Page 22], where we have what we call the rainbow chart. As you can see on the column on the far right, we had a $136.5 million reduction in adjusted production costs, and the 5 main reasons for that are shown in the red bars from 1 to 5, basically.

Starting with the first one. As we've mentioned previously, actually since 2000 -- at the end of 2018, we informed that we had a change in criteria at the [spend on mine], basically at the Herradura mine, whereby we changed from 2 to 1 components. That's an accounting change in criteria, it has no impact in terms of cash, cash flow, because this is basically a decision of where you place the stripping that you pay. You can either bake it directly to the income statement or you can capitalize it and amortization it through time. So with this change from 2 to 1, basically 100% of the stripping is now being taken to the income statement. So 50% of the stripping which was previously capitalized in other years is now being taken directly to the income statement.

Now this $46 million, what does this mean in terms of going forward in the next years. Okay. In the next few years, we will continue to see this number in the income statement. However, we will start to see the benefit of lower depreciation, due to the fact that we're not capitalizing any of this, slowly throughout the next following 6 to 8 years. That's when basically the lower depreciation will be equal to the increase in the (inaudible).

So regarding column #2, the $33.75 million. This is due to additional maintenance that we did, additional operating materials that we used and also the additional use of contractors. And all of this is associated with longer hauling distances, narrower veins, trying to make sure that we have the availability of the equipment that we need, and of course, the addition of infill drilling that we've put in place, among other things. But I would say these are the main ones that somehow are related to this $33.75 million that we show on bar #2.

Bar #3, this is an increase in development works. This is also something that we have been very clear on in the past. And we have announced previously that our aim is to increase the development works, which are needed in order to be able to have all the areas that we need available for production. So I consider this to be something that will stick around for a while. Not only that, we are aiming to reach our first 3,500 meters per month, and there's still some way to go. So this item actually will increase a bit more in the future years.

Bar #4 is related to new operations. Of course, this is associated with additional production volume. We have the new pyrites plant. We also have the new dynamic leaching plant at Herradura. So this operation did not exist in the first half of 2018 and they come along with their costs, which implied an increase of almost $21 million.

And lastly, we had guided before that we expected for this year an inflation -- a cost inflation of around -- between 3% to 5%. For the first half of the year, it has been 3.8% or 3.9%, which extrapolates into this $17.23 million that you see in this bar.

I must say that I was a bit disappointed to see that many analysts were not able to pick up on this, even though we clearly stated most of these numbers in our second quarter production report, but it was a bit frustrating to see that they were not reflected in the consensus. Some analysts did include them, and I congratulate those, but many did not.

So going back to the income statement, please, Gaby. So we covered the adjusted production costs, the increase, and the next item that I mentioned had an -- impacted negatively the gross profit is the increased depreciation. And of course, that's associated with new operations coming in. Like I mentioned before, the pyrites plant, the second dynamic leaching plant. And also, the capitalization of stripping and development works in 2018 are now starting to be reflected in the first half of 2019.

And also, this had to do with the small reduction in reserves that we reported earlier in the year, which obviously impacts the life of mine and, hence, the depreciation. So all of those reasons are behind the $47.6 million increase in depreciation.

If we continue to move downward in the income statement, you will see that the profit from continuing operations decreased $306 million, which is 82% or so. The reasons behind this decrease really are the ones that I just explained in relation to gross profit. Because even assuming that the items between gross profit and operating profit were 0, in other words that the variation would have been $297 million instead of $306 million, that would've meant that operating profit would have come down by almost 80%. So it's only 2 additional points. The reason for that were basically the increase in exploration and also the increase in corporate expenses, which are very small compared to the previous variations that I just described.

From thereon down, you have the Silverstream, which you are already familiar with, the finance income and the foreign exchange again. Regarding the finance income, I do want to mention that this includes -- the $27.8 million that you see there, this includes the interests that were accrued on the $800 million debt that we have and also the interest that we gained on our excess cash. But important to mention is that it also includes the correction regarding the amendment for the treatment of mining works, the tax treatment. Remember that we reported earlier on for the years 2014 to 2018. That was approximately $2 million in interest and surcharges that were included here in the finance income, in this $27.8 million.

Now you might find interesting to see that profit for the period after tax was higher than profit before income tax. And the reason for that is that we had a positive mining rights and also positive income tax expense. And this has to do with the adjustment related to the tax basis of assets and liabilities. It's impacted by foreign exchange and also impacted by inflation. And also the effect of -- in the period with respect to the voluntary amendment for the treatment of mining works for the years 2014 to 2018. Again, this impact did -- this correction that we did impacted this line.

And also the tax credit related to the special tax on diesel, together with the fact that the base of profit before taxes was relatively small. And you put all of this together, that's how you get to these positive numbers. We explained this in a lot more detail in the interim report, specifically in the financial review section.

Moving on now to the cash flow, if you will, on Page 25. Gaby, please. Okay. As you can see, net cash from operating activities of $168 million was down 54% compared to last year. Again, this is all related to the lower profits that I just explained a few minutes ago. But I would say that the main uses of cash that you can see from this slide were the purchase of property, plant and equipment, were $248 million, which was lower by almost 30% compared to last year, and also the dividends paid of $123 million, which was also lower by 44% compared to last year.

All of this meant a reduction in our cash balance of almost $200 million. So cash and cash equivalents at the end of June were $362.1 million. And you have several slides there explaining the variations of several of the lines in the cash flow statement.

I'd like to dedicate just a few minutes to the cost per tonne slide, which is on Page 28. And as you can see here, we are also reporting important increases in terms of cost per tonne. And these are basically related to the increasing production costs, which I just covered on Page 23, the rainbow.

For example, in the case of Fresnillo, where you see at 25.5% increase in cost per tonne, this was mainly related to development works, additional development works, and also to the increase in the use of operating materials and maintenance, which are basically bars #2 and 3, which I pointed out when we discussed the production cost, the rainbow.

In the case of Saucito, the increase of 23% is associated with the new operations and the new pyrites plant, and also an increase in development. So this had to do with bar #3 and bar #4, which I showed you in the rainbow for the production costs.

In the case of Ciénega, you see a 16% increase. That had to do with the increase of -- in the use of contractors due to narrower veins and also the fact that we are increasing development works at this mine. So that's associated with bars #2 and 3 of the rainbow in the production costs.

In the case of San Julián veins, it was -- it had to do more with the development works that were increased at this mine. And in the case of San Julián [GM], it had to do with the increase of operating material, the use of increase of operating materials for this particular mine.

In the case of Herradura, where you see a 75.8% increase of costs, that was hit by, again, the change in the accounting criteria from 2 to 1 component and the longer distance of haulage.

Lastly, in the case of Noche Buena, the 38% increase was mainly associated with the lower volume that was processed at this mine as we are approaching the end of the mine life of this mine.

Just a few words on cash cost. In the case of Fresnillo -- yes, are we done already? In the case of Fresnillo we want down -- we went up from a negative $0.82 to $3.12. So in addition to the higher cost per tonne that I just explained, we also have a lower ore grade. And of course, that is reflected in the higher cash cost. And I would say that was the main reason, together with the higher cost per tonne for the other mines, the lower ore grade that we saw at Saucito and also at Ciénega, contributed to this increase in the cash cost.

Lastly, a few words on all-in sustaining costs. Here, you have to be very careful at how you look at these numbers. For example, in the case of Fresnillo, it went up from $6.79 to $12.46. But as you know, we are deepening the shaft here at Fresnillo. And this year, we invested a lot in that particular project. We consider that to be sustaining capital, and it was -- all of the investment that we did this year was fully charged to the all-in sustaining costs. So that's something to take into consideration.

And that's why we mentioned, at the right-hand part of the slide, what we call the weighted average life of mine all-in sustaining cost. This is, I would say, if you will, a bit aspirational but based on our long-term mine plans. And as you can see, Fresnillo shows a $4.7 per ounce weighted average life of mine.

What would it take to reach this? Of course, it would take an increase in the ore grade, getting closer to 300 grams per tonne. It will also take increasing the throughput to 9,000 tonnes per day. So if we're able to achieve that, then we will also be able to meet this aspirational target of $4.7 long term.

In the case of Saucito, we also have some sustaining CapEx and capital -- I mean development works, which were capitalized. So that was the reason why you see that increase in the all-in sustaining costs.

In the case of Ciénega, there was a very important increase in all-in sustaining costs. Again, here we're building the tailings dam. And everything that was invested in the tailings dam during this year, we consider that to be sustaining CapEx, so it was fully charged to the all-in sustaining cost per ounce this year. And as you can see, this is another example of a much lower weighted average life of mine all-in sustaining cost, we aspire to get somewhere close to $330, which we believe we can achieve in the long term for this particular mine.

And again, the changes in the remaining mines that you see here in this chart were basically due to development works which were capitalized and sustaining CapEx.

And with that, I think we're done with the financial statements. And of course, during the Q&A, I will be more than happy to answer any questions. So we can go back to the [discussion].

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Octavio M. Alvídrez, Fresnillo Plc - CEO [3]

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Thank you, Mario. Going into to the outlook, this is a typical chart, the expected delivery of projects in which very much we have the project that we foresee in the medium term.

The pyrites plant, as I mentioned, the second leg, which is the flotation plant at Fresnillo, is advancing very well. We need to complete that in Q3, Q4 of 2020. That will give us larger recoveries of the current tailings at Fresnillo and also the old tailings. That production that you see on the left, the 3.5 million ounces and the 13,000 ounces of gold is when we complete the second leg at Fresnillo. Right now, the one that we are operating is only the portion of the pyrites plant at Saucito, being able to treat the current tailings at Saucito and some of the iron concentrate that we saw in the -- in previous months.

For the Fresnillo base metals and 9,000 tonnes per day, we wanted to change a little bit the name of this project so that we can better explain what this is about. As you know, at depth in Fresnillo down from the 450 million, 500 meters below, we have higher contents of base metals, lead and zinc. And of course, we will have or we have a good portion of reserves and resources on that area and lower silver grade. So what we will do is very much -- the way that we'll take the inside of the flotation plant at Fresnillo. So we'll continue increasing the flotation capacity and the filtering capacity on the flotation plant. If we were not to do that we would not be able to even process the 8,000 tonnes per day because the limit to the throughput would be the capacity on the flotation of the base metal. So we will need to adjust that flotation capacity and filtering capacity to a new of the upcoming increase on base metals. And whenever we are ready at the mine, we will increase the throughput of the mine from 8,000 to 9,000 tonnes per day, but the main objective is to cope with higher contents of base metals.

And what we have there, to conclude at the end of 2020 is the surface part which is the higher capacity of the flotation of the -- for base metals. The 9,000 tonnes will come later, and you will see and we will inform when we are ready to [then christen] the mine site.

Juanicipio, I explained already. Ciénegaas I mentioned, we made some good progress on the exploration side. We will expect to confirm the second half the potential for the ore and the vein once we pass the transversal fault of Rosario, and we will continue with the feasibility for the potential expansion. For Orisyvo, I explained already. The numbers that you will see there, the higher increase on the CapEx, is based on a PEA that we recently concluded, where the expected production of approximately 180,000 ounces gold. And the last project in the Centauro expansion is the yearly exercise that we do after a campaign or a yearly campaign of exploration at Ciénega.

If we find larger resources that will convert into reserves in the current pit shell of the open pit, that would mean that we made this a stronger case. If we find resources and reserves out of the pit shell, that would mean that we would need to expand the pit so that we capture those new resources and reserves.

As we last disclosed, I believe last year, last year we had a positive NPB for an expansion. However, given the good results in exploration -- however, the larger risks of expanding the pit were not compensated by the rather small NPB. But we will continue as we put emphasis on the exploration on Herradura. Every year, we will run this exercise on a yearly basis.

This is the expected attributable production profile for the 4 metals that we produce. Silver, you will notice that 2020 would lower the expected production. That is recognizing that Fresnillo will take longer to firstly, being stabilized and then after, being able to increase the production. Right now, we are expecting in 18 months, as I mentioned, the rest of the year as well as the full 2020, so that we have a stable operation with more infrastructure. The main infrastructure that I mentioned, the San Carlos shaft, the haulage level 6 95, larger development with more flexibility, operational flexibility. And then in 2021, we've lowered a bit also that production because that jump from production, silver production from 20 to 21 is being reflected on a better product -- better operation for Fresnillo, but mainly on the Juanicipio, new production in 2021.

For gold, before we had a flattish production for 2019 and 2020, which is very much the case, although we lower a bit 2020 expected production. 2021 -- and that is because of a lower production at Herradura be coming to the last stage of the mine life. And 2021, that is more on Herradura as well and also on lower production in Noche Buena mill and a bit lower production for Herradura.

For lead and zinc, the increase that we thought we were going to have for base metals in Fresnillo and Saucito sooner rather than later are not materializing. And therefore, we are moderating that increase in base metals for lead and zinc.

Recognizing the results that we're having in 2019, we reviewed the CapEx -- projected CapEx [extended to] for the operations, and we lowered 2019 from 710 to 655 on projects that would not impact results, our production results in 2019 and also in 2020. So with the first one of those projects for 2020, and we changed the strategy in some of the deployment of the CapEx. Instead of buying new equipment, for example, we [rehaulaged] some of the equipment. We deferred some of the non-needed infrastructure in some of the mines this year and more into 2020. And in 2020 and '21, we've made a difference on that [capital that is] approved, and that is still to be approved. And we lowered also 2020 from $740 million to $700 million and increasing a bit on 2021.

What is if the projects not approved in 2021? Well, some portion of Ciénega expansion that is still to be materialized and also Orisyvo as well in 2021. And the largest portion of the approved CapEx of both projects -- CapEx in '20 and partly in 2020 [have Juanicipio in place].

And with that and before concluding, the fundamentals for operations are still there. We continue with our strategy of exploration. And I recall the title for annual report, which right now is, Gaby do you recall it?

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Gabriela Mayor, Fresnillo Plc - Head of IR [4]

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Consolidating.

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Octavio M. Alvídrez, Fresnillo Plc - CEO [5]

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Consolidating our growth, which is very much what we need to do, and efficiently grow in the following years. So we're going through that consolidation process. We are making stronger our operations with more infrastructure, stabilizing the operations and making strong continued operation a focus on maximizing the potential of our existing mines. And then as I mentioned, with also disciplined growth, exploration and development.

And with that, we'll conclude the presentation, and we'll open up for your questions.

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Questions and Answers

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Krishan M. Agarwal, Citigroup Inc, Research Division - Analyst [1]

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Thanks a lot for the detailed presentation. My question is to Mario.

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Octavio M. Alvídrez, Fresnillo Plc - CEO [2]

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Could you state your name, sorry, so we...

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Krishan M. Agarwal, Citigroup Inc, Research Division - Analyst [3]

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Yes, this is Krishan from Citigroup. Last time, when we were sitting here for the full year presentation, you said that the rate of the cash costs will be similar to the second half, which actually turned out to be a great forecast. Better than the analysts' forecast. What is your expectation for the cash cost mandate in the second half of 2019? Is the first half '19 a better benchmark? Or because of the development CapEx, you see a little bit of no cost inflation in the second half as well, taking the full year cash cost to 1.1, 1.2, what number?

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Mario Arreguín, Fresnillo Plc - CFO [4]

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Yes. On the cost inflation, we continue to expect for the full year something between 3 to 5, so in line with the 3.9 that we saw in the first half of the year. And I would say, for the remaining of the year, we would more or less maintain the same levels that we've reported in the first half of the year.

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Krishan M. Agarwal, Citigroup Inc, Research Division - Analyst [5]

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So first half [inflate] plus the cost inflation?

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Mario Arreguín, Fresnillo Plc - CFO [6]

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That is correct. James?

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James Andrew Keith Bell, RBC Capital Markets, LLC, Research Division - Analyst [7]

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James Bell, RBC. Just a question on reserve grades. Obviously you're mining well below at both Saucito and Fresnillo currently. Should we think about a risk to those reserve grades [following your thing]? And how long -- what's your assumption on getting back to those reserve grades at Saucito and Fresnillo? Like are we looking, obviously at a lower 2020 today, but are we looking at '21? How are you thinking about that?

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Octavio M. Alvídrez, Fresnillo Plc - CEO [8]

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Sure. The reserve grades, the reserve grade is according to [mature] the guidelines that we follow taking into account the all-in sustaining costs. So with higher costs and therefore cutoff grades, you will have higher grades. And that's the 3 20, for example, in Fresnillo. Now the -- what you can mine efficiently and physically is different because you have, for a certain time, you have the costs [which are on] on the operational cost that you're facing in exploration at a certain time. If you're referring, for example, to the 200 grams of silver, 0.65 or 0.6 of gold that we have for Fresnillo, the 1.3, 1.4 lead and probably the 2% in zinc, that gives you an ore value of approximately $160 to $170 per tonne to at current value -- at $12.50- $15 per ounce of silver and [core onlay metal] values and with the [color] that we have. So that ore is economically feasible to be able to recover.

Looking at the model that we have, and we have reflected and in the previous charts in previous presentations, you will see that the grade will tend to go higher in the following years.

What I can tell you from that mine life exercise that we do every year on reserves and resources is 22, 23, 24, 25 that we hit those levels. But of course, while we will try to do better because we have not done so well, is to tell you what we have for grade production in the following year of course during the following 3 years so the streamline has the 3-year forecast that we are reflecting in our charts in the presentation.

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James Andrew Keith Bell, RBC Capital Markets, LLC, Research Division - Analyst [9]

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Okay. And then maybe just as a follow-on, in terms of your cut guidance obviously last year, we've had a cut this year, 2020 has come down. How much conservatism on margin have you given yourself in, say, 2020 in terms of operational challenges or grade? Are we finished the downgrade cycle here? Or is this -- are we at risk of further downgrades next year?

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Octavio M. Alvídrez, Fresnillo Plc - CEO [10]

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We've been quite conservative now this time. We want to really hit the numbers and very much, if we can, surprise on the positive side. As I mentioned from some months ago to now, in the case of Fresnillo, we were expecting 16 million ounces of silver, right now it's between 14 million and 14.3 million ounces. And that is very much what we are expecting for next year, which is lowest production for Fresnillo in many years.

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James Andrew Keith Bell, RBC Capital Markets, LLC, Research Division - Analyst [11]

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Okay. And then just one quick one, if I can, on permitting. Herradura, part of the downgrade in production was a delay in a permit for the leaching pad. You're obviously trying to apply for permits at Ciénega for the tailings dam expansion. Is there any permit risk around the production profile that you see in the next, call it, 12 to 18 months?

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Octavio M. Alvídrez, Fresnillo Plc - CEO [12]

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No. No for Herradura. We achieved that. For Ciénega, what's at risk the tailings number 3, but we will be able to put in operation the first phase. And already, we are permitting the 4 tailing dams well in advance [so we can save from] same situation.

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James Andrew Keith Bell, RBC Capital Markets, LLC, Research Division - Analyst [13]

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So if you were to receive no more permits, so let's just say all permits were stopped due to bureaucratic issues, would you be able to maintain your production profile as guided?

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Octavio M. Alvídrez, Fresnillo Plc - CEO [14]

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Yes. Yes because tailings #3 for Ciénega is good for the next 4 to 5 years or so.

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Danielle Chigumira, Macquarie Research - Analyst [15]

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Danielle Chigumira from Macquarie. Just on Slide 31, where you've given the life of mine all-in sustaining cost. What price assumptions are baked into those?

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Mario Arreguín, Fresnillo Plc - CFO [16]

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Yes. The price assumptions that we used were the current consensus long-term prices. You want the specific number?

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Danielle Chigumira, Macquarie Research - Analyst [17]

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Maybe I can circle back.

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Mario Arreguín, Fresnillo Plc - CFO [18]

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We use basically the long-term consensus from analysts.

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Octavio M. Alvídrez, Fresnillo Plc - CEO [19]

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And James, just going back to the permitting comment -- or question that you made. In Juanicipio, we are in the latter stages of the permitting process. Specifically, we are having an alternative -- we are analyzing 2 possibilities of the tailings points, and we are in the latter stages of the permitting process for Juanicipio. I think that will be like the only one that we could face.

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Daniel Harry David Shaw, Morgan Stanley, Research Division - Research Analyst [20]

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Dan Shaw from Morgan Stanley. You mentioned earlier just about Noche Buena, after the mine comes to the end of its life you're going to be processing some material on leaching pads I think for 2021. What sort of levels of production do you expect in those, kind of, final years of the life there?

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Octavio M. Alvídrez, Fresnillo Plc - CEO [21]

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Yes. Well, in Noche Buena is an operation that produces approximately 130,000 ounces of gold. And then of course, we will have lower production in 2020, but more reflected on 2021, probably going to half of that production. And then after, as I mentioned, we will continue producing out of the leach -- out of the leaching pads probably for the following 2, 2.5 years until we finally stabilize those leach pads. But also in 2021, we face higher throughput from sulfites and transitional ore out of Herradura and a little bit lower grade. We will have lower production in Herradura itself as well, but not as large as the one I mentioned to, for Noche Buena.

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Daniel Harry David Shaw, Morgan Stanley, Research Division - Research Analyst [22]

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And is there much in the way of remediation costs with the closure of Noche Buena, or not really?

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Octavio M. Alvídrez, Fresnillo Plc - CEO [23]

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Mario?

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Mario Arreguín, Fresnillo Plc - CFO [24]

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Yes. We've pretty much reserved that already. So we're not expecting a larger number than the one we have already reserved.

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Daniel Harry David Shaw, Morgan Stanley, Research Division - Research Analyst [25]

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So it's contained in provisions already.

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Mario Arreguín, Fresnillo Plc - CFO [26]

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That is correct.

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Daniel Harry David Shaw, Morgan Stanley, Research Division - Research Analyst [27]

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And -- but the cash has not been paid for that yet, right?

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Mario Arreguín, Fresnillo Plc - CFO [28]

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No, not yet.

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Daniel Harry David Shaw, Morgan Stanley, Research Division - Research Analyst [29]

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So what roughly would be the cash impact?

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Mario Arreguín, Fresnillo Plc - CFO [30]

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I don't remember that, but I can get back to you. But it's been provisioned, as you said.

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Alan Henri Spence, Jefferies LLC, Research Division - Equity Analyst [31]

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Alan Spence from Jefferies. Given the CapEx reductions in 2019 and 2020, are those broader-based reductions into the mines or are there any certain development projects or aspects, or is this all coming in outside cuts?

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Octavio M. Alvídrez, Fresnillo Plc - CEO [32]

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No, there were rights probably across the mines, the different mines, for example, in Fresnillo. This year 7 point million less plus we have exploration platform in infrastructure that's not needed this year. In Ciénega, 10 million to 12 million less, San Julián [brazer job] 14 million less. Herradura as well, so across all of the operations. And in 2020, very much the same in all of the operations. We'll review in the 3 [years].

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Alan Henri Spence, Jefferies LLC, Research Division - Equity Analyst [33]

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Which -- the Fresnillo base metals are 9,000 tonnes per day optimization. When do you think there will be a final investment decision made on that?

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Octavio M. Alvídrez, Fresnillo Plc - CEO [34]

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Very soon. This year.

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Daniel Harry David Shaw, Morgan Stanley, Research Division - Research Analyst [35]

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Dan Shaw from Morgan Stanley again. Just on the slide that you give on the exploration, Slide 15. There's been quite a big reduction in the share of expense that's going to be allocated towards kind of the more early-stage project -- or prospective stage. Does that mean that you will potentially be releasing some of that land? Or will you hold onto it? And if you hold onto it, does it cost you very much to hold onto it or not?

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Octavio M. Alvídrez, Fresnillo Plc - CEO [36]

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Which one, sorry?

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Daniel Harry David Shaw, Morgan Stanley, Research Division - Research Analyst [37]

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On the bottom part. So yes, so on the bottom part you see it's standing at 25, is now 10 in percentage. Will you release some of that land or will you hold onto it. And if you hold onto it, does it cost you very much to retain...

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Octavio M. Alvídrez, Fresnillo Plc - CEO [38]

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For those prospects there is a very dynamic process for the ones on the bottom. Those very much we get to a decision of get them or releasing them with a view of prospecting in detail of our geologist teams. Those that are not interesting in the eyes of our geologists are released. And then after those that are interesting, we'll go to the following stage, which is budgeting some hunts to drill them. And that's the way very much. So the bottom part is a very dynamic, very much with the prospecting for the geologists in detail. And as you may recall, in previous year we had 2.5 million hectares of concessions in Mexico, and that is coming down to 1.8 million now. But on the contrary, we increased and grew in which 5 years from now or 6 years probably to now, we took a contrarian view on many of the mining companies in Peru, in which they were going out of Peru and we were entering, and we were able to get a good position in the exploration [there].

Okay. I would like to ask if there is a call of those on the phone line.

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Operator [39]

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We currently have 2 questions on the phone line, and the first one comes from the line of Justin Chan.

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Justin Chan, Numis Securities Limited, Research Division - Analyst [40]

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Just my first question's on the life of mine assumptions on Slide 31, where you show your life of mine all-in sustaining cost assumptions. For Fresnillo especially, there's a significant decrease. And my question is, is that based on reserve grade? And related to some of James Bell's questions earlier, you think you'll get to reserve grade in sort of the mid-2020s? Is that dependent on reducing dilution and hitting your mining targets? Or is that more geologic -- geologically driven, getting to different areas of the mine and the ore body?

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Octavio M. Alvídrez, Fresnillo Plc - CEO [41]

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Yes, it's one of the variables. The dilution, of course, and that's something that we are starting and better controlling and better defining what the objective of each one of the veins that we mine at a particular time. So that it is very important. And very much -- the other is the information we will -- we are getting and that we are dynamically every year upgrading into our reserve depending on the drilling that we do, on the mine development that we do on a yearly basis. And all of them -- and the sampling we do from production of stopes as well. All of that dynamically, and as it should be, is reflected in the new resource and reserve statement. But I can tell you, I mean depending on the mining plans that we have in '22, '23, '24 is when the -- we achieve the higher grades.

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Justin Chan, Numis Securities Limited, Research Division - Analyst [42]

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Okay. And the life of mine all-in sustaining sort of guidance number of 4 70 an ounce, that's based on reserve grade primarily through the life of mine?

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Octavio M. Alvídrez, Fresnillo Plc - CEO [43]

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It takes on all of the reserve grade and also part of the resource that we have, considering when we turn that into reserve, it's all of the investment and expense that we have to do in the mine life.

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Justin Chan, Numis Securities Limited, Research Division - Analyst [44]

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Okay. That's quite helpful. And just my second one is on Herradura and the stripping ratio. I realize that a big portion of it is because you expense all of it rather than capitalize some of it. But in terms of the absolute profile or the absolute amount of stripping, could you give a sense on what that profile looks like in the next, call it, 5 years? Are you currently in a high period? Or is it relatively stable?

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Octavio M. Alvídrez, Fresnillo Plc - CEO [45]

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Well, last year, we were doing 3.65, 3.66 stripping ratio. This year, and we moved approximately, from memory, 128 million tonnes. This year, we are at 4.5, 4.6 approximately. And what I can tell you from the current projection, that can change, of course, depending on the year-end reserve. In 2021, we could go higher than that stripping ratio.

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Justin Chan, Numis Securities Limited, Research Division - Analyst [46]

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Okay. And sort of in the medium-term profile, is that ratio likely to increase moderately every year? Or are you reducing it as you go deeper?

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Octavio M. Alvídrez, Fresnillo Plc - CEO [47]

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As general, I yearly would increase. And then later on in the mine life, it would decrease. The average stripping ratio, I don't know, Mario, do you recall it?

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Mario Arreguín, Fresnillo Plc - CFO [48]

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4 point something.

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Octavio M. Alvídrez, Fresnillo Plc - CEO [49]

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Close to 5. We released that before. One more on the line, I believe?

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Operator [50]

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(Operator Instructions) Next question comes from the line of Daniel Major.

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Daniel Edward Major, UBS Investment Bank, Research Division - Director and Analyst [51]

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So a couple of questions. Firstly, relating to costs and I guess how you provide guidance to the market. On Page 31, first question. Why is there a difference in the year-on-year change between the published gold equivalent and silver equivalent all-in sustaining costs? And if you look at the way that your peers that have a mix of gold and silver guide to the market, they tend to guide using a static ratio because the market obviously cares about the delta in costs. So why is there a difference there? And what are your price inputs used to calculate that equivalent cost metric?

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Mario Arreguín, Fresnillo Plc - CFO [52]

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Okay. All right. For purposes of the weighted average life of mine, we are maintaining the ratio constant at around 85, okay? And each mine, depending on the main metal, it's either at the equivalent in silver or equivalent in gold. I don't know if that answers your question.

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Daniel Edward Major, UBS Investment Bank, Research Division - Director and Analyst [53]

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Well, you provided group level guidance. So if it's a group level, should it not be the same difference if you look at the percentage change year-on-year between the silver equivalent cost and the gold equivalent cost should be the same? Am I not correct?

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Mario Arreguín, Fresnillo Plc - CFO [54]

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I'm not sure I understand what you mean by group guidance. The consolidated?

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Daniel Edward Major, UBS Investment Bank, Research Division - Director and Analyst [55]

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Yes, the consolidated.

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Mario Arreguín, Fresnillo Plc - CFO [56]

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But we're not giving any guidance there.

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Daniel Edward Major, UBS Investment Bank, Research Division - Director and Analyst [57]

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Not guidance, your history. You say that at the group level, your gold equivalent cost and your silver equivalent cost are x and the percentage change. Should they not be the same, because if the ratio between the metals used to calculate H1 '18 versus H1 '19 are the same, the difference in gold equivalent and silver equivalent should be the same, unless I'm getting the calculation wrong.

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Mario Arreguín, Fresnillo Plc - CFO [58]

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No. I don't agree with that, that they should be the same.

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Daniel Edward Major, UBS Investment Bank, Research Division - Director and Analyst [59]

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Okay. Let me explain. If you convert every ounce of your production into a gold equivalent or a silver equivalent number using a consistent ratio, the percentage change year-on-year between the costs, so basically you're calculating costs divided by the equivalent ounce and the equivalent ounce is revenue divided by the number of units. And if the ratio between the 2 metals is the same, the difference should be exactly the same. Or am I interpreting your calculation of gold and silver equivalent incorrectly?

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Octavio M. Alvídrez, Fresnillo Plc - CEO [60]

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I'll share with you the way we calculate the consolidated numbers, but it's done -- I mean the first half '18 was done with the set of numbers for the first half of '18 and the...

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Daniel Edward Major, UBS Investment Bank, Research Division - Director and Analyst [61]

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Right. So you're using a consistent ratio. So your history is based on -- so the reflection, it reflects the move higher in the gold/silver ratio. Is that how, so it's not a...

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Octavio M. Alvídrez, Fresnillo Plc - CEO [62]

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That is correct.

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Daniel Edward Major, UBS Investment Bank, Research Division - Director and Analyst [63]

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Right. So it's not a like-for-like. That's fine. And kind of going forward, you also mentioned that the consensus haven't picked up the cost increases. Why is it not possible to provide groupwide cost guidance on a consistent basis? Your peers do. And it seems to prevent the very large discrepancies in market expectations around your cost profile. So that's the first part of the question.

And then the second part, when I look forward on your costs, adding up -- obviously there you don't provide specific guidance at a group level, but would it be fair to assume even the run rates of costs is not coming down when I add up all of your commentary around slightly higher stripping ratio at Herradura, higher development rates, et cetera. So will it be fair to assume on an OpEx per unit basis, OpEx is flat or up in 2020 and 2021? Is that a fair assumption?

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Mario Arreguín, Fresnillo Plc - CFO [64]

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That would be a fair assumption. And regarding your other point of giving guidance, we have not specifically given guidance. We have done that exceptionally, like we did in the second quarter production report. We might consider in the future, in the near future very soon to start providing also cost guidance in order to somehow make sure that every one of the analysts are in the same -- same line of thought as we are.

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Daniel Edward Major, UBS Investment Bank, Research Division - Director and Analyst [65]

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Yes. I think that will be useful in terms of, if we look at your peers, most people provide a group level all-in sustaining and total cost target for the current year, which more clearly allows people, I guess, to be on a consistent basis, but closer to so to speak knowing exactly where you're heading in those numbers. Okay.

And the second question I had was on your gold guidance update in Herradura. So for 2021, you've brought down that guidance by several hundred thousand ounces, it looks like, from your chart. Is that what we should be expecting in sort of a run rate going forward on the gold side until obviously reserves or resources, your assets is 800,000 ounces of realized -- is sort of realistic group number on a medium-term basis?

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Octavio M. Alvídrez, Fresnillo Plc - CEO [66]

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It all depends on the mix of oxide ore and sulfur in transitional ore at Herradura. Just as a view, I mean we started with the first Dynamic Leaching Plant. And then of course, we had a second in mind because we were going to increase the throughput from sulfide and transitional ore. In the mine level of Herradura, we may or may not [but evaluate] in that case see a third Dynamic Leaching Plant. And depending on that mix, it will be the production in future years. But then later on, we have also some other gold projects on site. One being Orisyvo, of course, in the future. And one being also Rodeo that have probably the strength to become an operation. And we will update you accordingly when that is the time.

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Operator [67]

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And the next question comes from the line of Ian (sic) [Izak] Rossouw from Barclays.

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Amos Charles Fletcher, Barclays Bank PLC, Research Division - Director [68]

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It's Amos Fletcher from Barclays, actually. I was, just had a couple of questions the first quarter. The first one I wanted to ask was, just can you, just to clarify one of the points you were making, I didn't hear properly, but you expect the Fresnillo mine production to decline further in 2020?

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Octavio M. Alvídrez, Fresnillo Plc - CEO [69]

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Yes, very much to what we are expecting this year taking a conservative view, the 14 million, 14.3 million ounce of silver.

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Amos Charles Fletcher, Barclays Bank PLC, Research Division - Director [70]

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Okay. So 14 to 14.3 in 2020 as well, is what you were saying?

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Octavio M. Alvídrez, Fresnillo Plc - CEO [71]

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Yes.

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Amos Charles Fletcher, Barclays Bank PLC, Research Division - Director [72]

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Okay. And then I just wanted to ask a question about the development rates. What kind of development rate do you need to get to? And how long do you need to sustain it in order to deliver the 9,000 tonnes per day expansion at Fresnillo?

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Octavio M. Alvídrez, Fresnillo Plc - CEO [73]

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Yes. We targeted for the current level of production 3,500 sustained and stable. And we are still working on the future development rates given the veins that we will have in the future as well. So yes, you will see an increase to those 3,500, but still we are working on that -- on those numbers.

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Amos Charles Fletcher, Barclays Bank PLC, Research Division - Director [74]

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Okay. So a working assumption you get to 3,500. But to go to 9,000 tonnes a day, what kind of rate do you need to get to?

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Octavio M. Alvídrez, Fresnillo Plc - CEO [75]

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Higher than 3,500 probably, but still working those numbers. 4,000, I believe, came before.

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Amos Charles Fletcher, Barclays Bank PLC, Research Division - Director [76]

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Okay. And then I had a question on exploration spending. Obviously, you've kind of ramped it up to sort of underwrite the grade profile in the near term. I'm just wondering what sort of level should we assume exploration stays at or goes to beyond this year to deliver the guidance that you put out today?

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Octavio M. Alvídrez, Fresnillo Plc - CEO [77]

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Exploration is the one that we're looking in the past. I mean this is a good budget, the ones that we have, 160, 170. Probably for the next year, it will come slightly down. And realizing that we have to cancel exploration one from greenfield and the other one brownfield. On the greenfield side, we've gone from 45, 50 to 70, 75 on a yearly basis. And then on the brownfield, which is around our mines, a lot of that is exploration with direct mining works and also drilling the rest. So around those levels of exploration, I think it's sensible if we maintain what is the exploration in and around the operation, but also a good portion on the greenfield side.

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Amos Charles Fletcher, Barclays Bank PLC, Research Division - Director [78]

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Okay. And then I just had a further question just on Silverstream. Can you tell us within the guidance that you set out on Page 35 of the attributable silver production, how much production have we got coming out of Silverstream? Because obviously it seems like the grades have been coming down there over the last couple of years. Do you assume that they start recovering? Or what do you factor into the guidance?

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Octavio M. Alvídrez, Fresnillo Plc - CEO [79]

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No. I mean the first, out of the mine, we have the agreement with Penoles which is [havina] have a large resource and reserve base. And the agreement we have is for the mine life. So it continues. It's been producing between 3.5 million and 4 million ounces of silver per year. In the future, they do have some higher silver content, but for the time being, I mean we are just projecting at that rate.

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Amos Charles Fletcher, Barclays Bank PLC, Research Division - Director [80]

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Okay. Because the -- if you look at the production levels in the first half of this year, it was at 3.1 million ounces annualized. So do we -- you are expecting it to recover quite sharply going into next year, for example?

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Octavio M. Alvídrez, Fresnillo Plc - CEO [81]

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It's been quite stable between 3.5 and 4 although yes, as you mentioned, in the first half we saw smaller production. What I would say that [havina] is a by-product. They do not track us as closely as some of the projects have, but I would say, for projection purposes, I mean between 3.5 and 4 per year is safe.

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Operator [82]

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And the next question comes from the line of [Keith Ankeshuala], a private investor.

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Unidentified Participant, [83]

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Just a quick question. Obviously, Fresnillo's had a hard time over the past 3 years, it's underperformed both the FTSE, which it was indexed on, and also its peer group. And today, the management has cut dividend by 75%. What is the policy with total shareholder return, the management currently has, and is there going to be any reinvigoration of that going forward? And I have one follow-up.

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Unidentified Company Representative, [84]

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(foreign language) No the dividend policy is independent. We have defined our dividend policy as being 50% approximately of the net profit being paid back to our shareholders annually. We've consistently applied that criteria regardless of the performance of any individual mine.

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Unidentified Participant, [85]

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Thank you. And the second question was regarding SG&A, it's gone up quite a bit and seems to be out with your cut sales were. Is there going to be -- is that going to be reviewed as part of your cost-cutting exercise?

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Gabriela Mayor, Fresnillo Plc - Head of IR [86]

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You're referring to administrative and corporate expenses? Yes. (foreign language)

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Mario Arreguín, Fresnillo Plc - CFO [87]

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No, we are not expecting those to go up. They've recently gone up because our operations have grown. Our next important new operation will be Juanicipio, but that's not due for a couple of years. So I would expect those to stabilize this year and the following year, perhaps go up a little when Juanicipio comes in line.

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Octavio M. Alvídrez, Fresnillo Plc - CEO [88]

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Any further questions here?

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Operator [89]

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We have no further questions at this time. You may continue.

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Octavio M. Alvídrez, Fresnillo Plc - CEO [90]

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Okay. We'd like to thank you for your attendance and good afternoon.

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Operator [91]

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And this concludes the conference call today. Thank you all for participating. You may all disconnect.