REG - Fresnillo Plc - 2Q23 Production Report

FresnilloAnnouncement

26/07/2023 07:00

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RNS Number : 1779H  Fresnillo PLC  26 July 2023

 
 
  Fresnillo plc

21 Upper Brook Street

London W1K 7PY

United Kingdom

www.fresnilloplc.com (http://www.fresnilloplc.com)

 

26 July 2023

SECOND QUARTER PRODUCTION REPORT

FOR THE THREE MONTHS ENDED 30 JUNE 2023

 

Octavio Alvídrez, Chief Executive Officer, said:

 

"I am pleased to report a solid production performance in the first half and
confirm that our full year guidance is unchanged. Higher silver production was
in part due to the on-going ramp up of our new Juanicipio mine, which is
progressing as planned and we expect to reach full nameplate capacity in the
next quarter. The continued strong grades and volumes at our Herradura mine,
together with an increased contribution from Saucito, generated an increase in
gold production from the previous half. We were also pleased to complete the
tie-in of the new Pyrites Plant to the national power grid with the plant
moving quickly into operations. Looking ahead, our focus remains on the safe
operation of our mines, with a particular attention on costs, which continue
to be impacted by inflation and the revaluation of the Mexican peso against
the dollar, while meeting our longer term development objectives."

 

HIGHLIGHTS

 

Silver

 

·    Quarterly attributable silver production of 14.9 moz (including
Silverstream), up 12.9% vs. 1Q23, mainly driven by the ramp-up of Juanicipio
and, to a lesser extent, a higher ore grade at San Julián Disseminated Ore
Body (DOB) and the increase in volume of ore processed at Saucito, partially
offset by the lower ore grade at Fresnillo.

 

·    Quarterly and first half attributable silver production (including
Silverstream) increased 3.5% and 1.4% vs. 2Q22 and 1H22 respectively,
primarily due to the ramp-up of Juanicipio, partially offset by the lower ore
grade at San Julián (DOB).

 

 

Gold

 

·    Quarterly attributable gold production of 152.4 koz down 11.9% vs.
1Q23 mainly due to the lower volume of ore processed at Herradura as a result
of the temporary suspension of operations following an illegal stoppage by a
very small group of unionised employees, as reported in May.

 

·    Quarterly attributable gold production down 4.1% vs. 2Q22 primarily
due to the decrease in gold production at Noche Buena, partly offset by the
ramp-up of Juanicipio and increased ore processed at Saucito.

 

·    First half attributable gold production increased 5.4% vs. 1H22
mainly due to the increased volume of ore processed and higher ore grade at
Herradura and Saucito, partially compensated for by the decrease in gold
production at Noche Buena.

 

 

By-Products

 

•     Quarterly attributable by-product lead production up 4.7% vs. 1Q23
due to the ramp-up at Juanicipio, partly offset by the lower ore grade at
Saucito and Fresnillo.

 

•     Quarterly attributable by-product zinc production up 6.4% vs. 1Q23
due to the ramp-up at Juanicipio and the higher volume of ore processed at
Saucito, partly offset by the lower ore grade at Fresnillo.

 

•     Quarterly attributable by-product lead production decreased 3.7%
vs. 2Q22 due to the lower ore grades at Saucito, and Fresnillo and lower ore
grade and recovery rate at San Julián (DOB), partly offset by the ramp-up at
Juanicipio.

 

•     Quarterly attributable by-product zinc production decreased 4.2%
vs. 2Q22, driven by the lower ore grades at Saucito and San Julián (DOB),
partly offset by the ramp-up at Juanicipio.

 

•     First half by-product lead production increased 2.2% vs. 1H22 due
to the increased contribution from Juanicipio and higher ore processed at
Fresnillo, partly offset by the lower ore grade at Saucito.

 

•     First half by-product zinc production decreased 1.5% vs. 1H22 due
to the lower ore grades at Saucito and San Julián (DOB), mitigated by the
increased production at Juanicipio and the higher ore processed at Fresnillo.

 

 

                     2Q23     1Q23     % Change  2Q22     % Change  1H23     1H22     % Change
 Silver (koz)        14,135   12,337   14.6      13,664   3.4       26,472   26,192   1.1
 Silverstream (koz)  725      821      (11.7)    692      4.8       1,546    1,440    7.4
 Total Silver (koz)  14,860   13,158   12.9      14,356   3.5       28,018   27,632   1.4
 Gold (oz)           152,380  173,034  (11.9)    158,960  (4.1)     325,415  308,752  5.4
 Lead (t)            13,994   13,368   4.7       14,535   (3.7)     27,363   26,779   2.2
 Zinc (t)            25,670   24,118   6.4       26,808   (4.2)     49,788   50,533   (1.5)

 

 

Silver Equivalent Basis( 1 
(http://otp.investis.com/clients/uk/fresnillo2/rns/regulatory-story.aspx?cid=191&newsid=1609706#_ftn1)
)

 

Attributable quarterly silver equivalent ounces of 27.1 moz in 2Q23 (1Q23:
27.0 moz, 2Q22: 27.1 moz) and attributable first half silver equivalent ounces
of 54.1 moz (1H22: 52.3 moz).

 

SAFETY PERFORMANCE

 

We are extremely saddened to report a fatal accident at the Saucito mine in
the last week of June. Fresnillo, together with the authorities, carried out a
thorough investigation of the incident to ensure all lessons can be learned.
We continue to reinforce our safety measures with both contractors and
employees with the objective of strengthening our safety culture throughout
the Company.

 

 

2023 OUTLOOK

 

2023 guidance remains unchanged. Attributable silver production is expected to
be in the range of 57.0 to 64.0 moz (including Silverstream) while
attributable gold production is expected to be in the range of 590 to 640 koz.
Expressed in silver equivalent ounces(1), production is expected to be 104
-115 million ounces.

 

Cost inflation and the revaluation of the Mexican Peso versus the US Dollar
are expected to continue to impact costs in the second half of the year
following an increase in 1H 23 (See Items Impacting the Income Statement on
page 9).

 

INTERIM RESULTS

 

Fresnillo will announce its 2023 Interim Results on 1(st) of August 2023.

 

For further information, please visit our website www.fresnilloplc.com
(http://www.fresnilloplc.com) or contact:

 FRESNILLO PLC                                                  Tel: +44 (0)20 7399 2470

 London Office

 Gabriela Mayor, Head of Investor Relations

 Mark Mochalski
 Mexico City Office                                             Tel: +52 55 52 79 3206

 Ana Belem Zárate

 POWERSCOURT                                                    Tel: +44 (0)7793 858 211

 Peter Ogden

 

MINING OPERATIONS

 

FRESNILLO MINE PRODUCTION

 

                    2Q23     1Q23       % Change  2Q22     % Change  1H23       1H22       % Change
 Ore Processed (t)  667,776   668,366   (0.1)     618,860  7.9       1,336,142  1,194,359  11.9

 Production
 Silver (koz)       3,233     3,557     (9.1)     3,595    (10.1)    6,789      6,609      2.7
 Gold (oz)          10,997    8,750     25.7      9,668    13.7      19,747     18,148     8.8
 Lead (t)           5,321     5,651     (5.8)     5,644    (5.7)     10,972     10,432     5.2
 Zinc (t)           10,696    12,094    (11.6)    10,758   (0.6)     22,790     20,139     13.2

 Ore Grades
 Silver (g/t)       170       184       (7.6)     197      (13.7)    177        189        (6.3)
 Gold (g/t)         0.72      0.57      26.3      0.69     4.3       0.64       0.67       (4.5)
 Lead (%)           0.93      1.00      (7.0)     1.10     (15.5)    0.96       1.04       (7.7)
 Zinc (%)           2.12      2.42      (12.4)    2.46     (13.8)    2.27       2.35       (3.4)

 

Quarterly silver production decreased 9.1% vs. 1Q23 mainly due to a lower ore
grade as a result of increased dilution and delays in the preparation of some
stopes as long drilling equipment required additional calibration. Both of
these factors have been addressed through training and increased equipment
availability and no further delays are expected in the second half.

 

Quarterly silver production decreased 10.1% vs. 2Q22 mainly as a result of the
lower ore grade and lower recovery rate. These factors were mitigated by the
higher volume of ore processed from the San Alberto, Candelaria, San Ricardo
and San Mateo areas.

 

First half silver production increased 2.7% vs. 1H22 mainly as a result of the
increase in volume of ore processed, partly offset by the lower ore grade and
recovery rate.

 

Mine development rates increased quarter on quarter to an average of 3,288m
per month in 2Q23 (1Q23: 3,105m per month), primarily due to the higher
productivity of the unionised personnel.

 

Quarterly by-product gold production increased 25.7% vs. 1Q23 mainly driven by
the higher ore grade.

 

Quarterly by-product gold production increased 13.7% vs. 2Q22 mainly due to
the increased volume of ore processed and higher ore grade.

 

First half by-product gold production increased 8.8% vs. 1H22 primarily as a
result of the higher volume of ore processed, partly offset by the lower ore
grade.

 

The silver ore grade in 2023 is expected to remain in the range of 185-205
g/t, while the gold ore grade is expected to remain in the range of 0.50-0.70
g/t.

 

The tie in of the Pyrites Plant to the national grid at Fresnillo was
completed in 2Q23 and commissioning began immediately with ramp up of
production expected in 2H23.

 

 

SAUCITO MINE PRODUCTION

 

                    2Q23     1Q23       % Change  2Q22     % Change  1H23       1H22       % Change
 Ore Processed (t)  562,962   471,959   19.3      512,739  9.8       1,034,921  1,008,158  2.7

 Production
 Silver (koz)       3,006     2,804     7.2       3,043    (1.2)     5,811      5,781      0.5
 Gold (oz)          18,702    21,378    (12.5)    16,785   11.4      40,080     33,172     20.8
 Lead (t)           3,950     4,301     (8,2)     5,180    (23.7)    8,251      9,444      (12.6)
 Zinc (t)           7,001     5,991     16.9      8,367    (16.3)    12,993     15,665     (17.1)

 Ore Grades
 Silver (g/t)       188       207       (9.2)     205      (8.3)     197        199        (1.0)
 Gold (g/t)         1.31      1.77      (26.0)    1.31     0.0       1.52       1.30       16.9
 Lead (%)           0.84      1.07      (21.5)    1.19     (29.4)    0.95       1.09       (12.8)
 Zinc (%)           1.62      1.68      (3.6)     2.12     (23.6)    1.65       1.97       (16.2)

 

Quarterly silver production increased 7.2% vs. 1Q23 mainly driven by the
increase in volume of ore processed from the Central area, following the lower
availability of scalers and haulage equipment at the West and Central areas in
1Q23 and part of 2Q23. This was partly offset by the lower ore grade as a
result of the aforementioned lower availability of equipment, which delayed
mine preparation and limited operational flexibility. We continued working on
increasing the availability of equipment and improving the productivity of our
personnel and expect to further increase volumes of ore processed in 2H23.

 

Quarterly and first half silver production remained at similar levels vs. 2Q22
and 1H22, as higher volumes of ore processed were offset by the aforementioned
lower ore grade.

 

Quarterly by-product gold production decreased 12.5% vs. 1Q23 mainly driven by
a lower ore grade, partially mitigated by the higher volume of ore processed.

 

Quarterly by-product gold production increased 11.4% vs. 2Q22 primarily driven
by the higher volume of ore processed.

 

First half by-product gold production increased 20.8% vs. 1H22 as a result of
the higher ore grade and increase in volume of ore processed.

 

Mine development rates increased quarter on quarter to an average of 3,069m
per month in 2Q23 (1Q23: 2,975m per month; 1H22: 2,436m per month), primarily
due to the higher productivity of the unionised personnel.

 

Full year 2023 silver ore grade is estimated to remain between 190-210 g/t,
while the gold ore grade is estimated to continue to be around 1.20-1.40 g/t.

 

 

 

PYRITES PLANT (PHASE I)

 

                                    2Q23    1Q23      % Change  2Q22    % Change  1H23    1H22    % Change
 Pyrite Concentrates Processed (t)  27,892   27,952   (0.2)     33,326  (16.3)    55,844  65,690  (15.0)

 Production
 Silver (koz)                       127      111      14.4      126     0.8       238     277     (14.1)
 Gold (oz)                          331      270      22.6      422     (21.6)    601     932     (35.5)

 Ore Grades
 Silver (g/t)                       207      177      16.9      160     29.4      192     176     9.1
 Gold (g/t)                         1.58    1.31      20.6      1.21    30.6      1.44    1.40    2.9

 

 

 

CIÉNEGA MINE PRODUCTION

 

                    2Q23     1Q23       % Change  2Q22     % Change  1H23     1H22     % Change
 Ore Processed (t)  261,253   240,148   8.8       280,526  (6.9)     501,401  563,094  (11.0)

 Production
 Gold (oz)          8,132     9,302     (12.6)    8,917    (8.8)     17,434   18,907   (7.8)
 Silver (koz)       1,010     980       3.1       1,069    (5.5)     1,991    2,485    (19.9)
 Lead (t)           756       748       1.1       758      (0.3)     1,504    1,684    (10.7)
 Zinc (t)           919       1,002     (8.3)     1,245    (26.2)    1,921    2,596    (26.0)

 Ore Grades
 Gold (g/t)         1.06      1.30      (18.5)    1.08     (1.9)     1.18     1.14     3.5
 Silver (g/t)       141       147       (4.1)     138      2.2       144      159      (9.4)
 Lead (%)           0.47      0.47      0.0       0.43     9.3       0.47     0.47     0.0
 Zinc (%)           0.67      0.77      (13.0)    0.79     (15.2)    0.72     0.82     (12.2)

 

Quarterly gold production decreased 12.6% vs. 1Q23 mainly due to a lower ore
grade as a result of increased dilution in narrower veins. This was partly
mitigated by the higher volume of ore processed due to the timely preparation
of stopes and increase in development rate resulting from the increased
availability of equipment.

Quarterly gold production decreased 8.8% vs. 2Q22 mainly due to the lower
volume of ore processed in accordance with the mine plan, and lower ore grade.

First half gold production decreased 7.8% vs. 1H22 mainly due to the lower
volume of ore processed in accordance with the mine plan, partly mitigated by
the higher ore grade.

Quarterly silver production increased 3.1 vs. 1Q23 as a result of the higher
volume of ore processed which more than compensated for the lower ore grade.

Quarterly silver production decreased 5.5% vs. 2Q23 mainly as a result of the
lower volume of ore processed in accordance with the mine plan, partly
mitigated by the higher ore grade.

First half silver production decreased 19.9% vs. 1H22 due to the decrease in
volume of ore processed and lower ore grade as a result of the increased
dilution and the delay in the preparation of a stope with higher silver ore
grades.

The gold and silver ore grades for 2023 are estimated to remain in the ranges
of 1.0-1.1 g/t and 150-160 g/t respectively.

 

 

SAN JULIÁN MINE PRODUCTION

 

                                  2Q23     1Q23       % Change  2Q22     % Change  1H23       1H22       % Change
 Ore Processed Veins (t)          274,505   283,752   (3.3)     289,821  (5.3)     558,257    583,966    (4.4)
 Ore Processed DOB (t)            527,898   522,260   1.1       535,326  (1.4)     1,050,158  1,076,326  (2.4)

 Total production at San Julián
 Gold (oz)                        10,259    12,033    (14.7)    11,748   (12.7)    22,292     23,433     (4.9)
 Silver (koz)                     3,596     3,412     5.4       4,328    (16.9)    7,008      7,968      (12.0)

 Production Veins
 Gold (oz)                        9,325     11,139    (16.3)    10,865   (14.2)    20,464     21,710     (5.7)
 Silver (koz)                     1,168     1,312     (11.0)    1,175    (0.6)     2,480      2,235      11.0

 Production DOB
 Gold (oz)                        934       894       4.5       883      5.8       1,828      1,723      6.1
 Silver (koz)                     2,428     2,100     15.6      3,152    (23.0)    4,528      5,733      (21.0)
 Lead (t)                         2,062     1,855     11.2      2,325    (11.3)    3,917      3,933      (0.4)
 Zinc (t)                         4,020     3,755     7.1       5,368    (25.1)    7,775      10,093     (23.0)

 Ore Grades Veins
 Gold (g/t)                       1.11      1.28      (13.3)    1.22     (9.0)     1.20       1.22       (1.6)
 Silver (g/t)                     146       158       (7.6)     138      5.8       152        131        16.0

 Ore Grades DOB
 Gold (g/t)                       0.09      0.09      0.0       0.09     0.0       0.09       0.08       12.5
 Silver (g/t)                     165       146       13.0      213      (22.5)    156        193        (19.2)
 Lead (%)                         0.50      0.46      8.7       0.51     (2.0)     0.48       0.45       6.7
 Zinc (%)                         1.03      0.96      7.3       1.29     (20.2)    0.99       1.20       (17.5)

 

SAN JULIÁN VEINS

Quarterly silver and gold production decreased 11.0% and 16.3% vs. 1Q23,
respectively due to the lower ore grade and to a lesser extent, the decreased
volume of ore processed as a result of lower availability of bolting and
shotcreting equipment, which delayed access to the San Atanasio vein with
higher ore grades.

Quarterly gold production decreased 14.2 vs. 2Q22 mainly due to the lower ore
grade and decreased volume of ore processed for the reasons mentioned above.

Quarterly silver production remained flat vs. 2Q22 as the higher ore grade
offset the lower volume of ore processed.

First half silver production increased 11.0% vs. 1H22 mainly due to the higher
ore grade at San Antonio, Ultima Tierra and Elisa stopes, partly offset by the
lower volume of ore processed.

First half gold production decreased 5.7% vs. 1H22 mainly due to the decrease
in volume of ore processed and lower ore grade.

Additional bolting equipment is expected to arrive in 3Q23, which will
contribute to the normalisation of mining cycles.

We continue to expect the 2023 silver and gold ore grades to average 130-140
g/t and 1.20-1.30 g/t, respectively.

 

SAN JULIÁN DISSEMINATED ORE BODY (DOB)

Quarterly silver production increased 15.6% vs. 1Q23 mainly as a result of
accessing the higher ore grade areas as planned.

Quarterly and first half silver production decreased 23.0% and 21.0% vs. 2Q22
and 1H22 respectively, mainly due to the expected lower ore grade in the areas
in the periphery of the ore body and structural geological features which
slowed down the long hole drilling cycles.

We continue to expect the 2023 silver ore grade to be in the range of 130-140
g/t.

 

HERRADURA TOTAL MINE PRODUCTION

 

                          2Q23        1Q23         % Change  2Q22        % Change  1H23        1H22        % Change
 Ore Processed (t)        5,219,844    6,485,710   (19.5)    5,301,678   (1.5)     11,705,553  9,518,276   23.0
 Total Volume Hauled (t)  21,445,659  29,223,867   (26.6)    31,548,611  (32.0)    50,669,525  64,333,382  (21.2)

 Production
 Gold (oz)                83,037       106,832     (22.3)    83,043      0.0       189,869     160,644     18.2
 Silver (koz)             136          208         (34.6)    169         (19.5)    344         387         (11.1)

 Ore Grades
 Gold (g/t)               0.76        0.73         4.1       0.67        13.4      0.74        0.68        8.8
 Silver (g/t)             1.33        1.72         (22.7)    1.49        (10.7)    1.55        1.83        (15.3)

 

Quarterly gold production decreased 19.5% vs. 1Q23 mainly driven by the lower
volume of ore processed as a result of the temporary suspension of operations
following an illegal stoppage by a very small group of unionised employees, as
reported in May. This was partly mitigated by the higher ore grade.

Quarterly gold production remained flat vs. 2Q22 as the higher ore grade in
the sulphides was offset by the lower recovery rates in the pads as the cycle
was impacted by the temporary suspension of activities.

First half gold production increased 18.2% vs. 1H22 mainly driven by the
increased volume of ore processed and higher ore grade in the sulphides and
positive variations with the geological model. The aforementioned factors were
partly offset by the lower recovery rate driven by the temporary suspension
and the slower pace of irrigation.

As part of its regular processes, the Group compares the ore grades placed on
the pads to the quantities of metal recovered through the leaching process to
evaluate the appropriateness of the estimated recovery. Recovery estimates are
then refined based on actual results over time and when new information
becomes available. As a result of this, the mine updated its estimate of the
recoverable remaining gold content in leaching pads, resulting in an increase
of 30.7 thousand ounces of gold as at 1 January 2023.

The adjusted production costs were impacted by the increase in waste material
hauled charged to costs, rather than capitalised, despite the 28.9% decrease
in the total volume of waste material hauled (capitalised and charged to
costs). This is because in 1H22 the stripping ratio for the main component of
the Herradura mine of c. 7.3 was significantly higher than the prevailing
stripping ratio for the life of the mine (LOM) of this component (under IFRIC
20 stripping costs above the average LOM stripping ratio are capitalised),
this higher stripping ratio was due to the need to prepare and gain access to
the mineral benches; whereas in 1H23 the 3.4 stripping ratio was below the
prevailing stripping ratio for LOM of this component, thus registering all the
stripping as cost in the income statement.

The gold ore grade in 2023 is estimated to be in the range of 0.65-0.75 g/t.

 

NOCHE BUENA TOTAL MINE PRODUCTION

 

                          2Q23       1Q23         % Change  2Q22       % Change  1H23       1H22        % Change
 Ore Processed (t)        799,290     1,711,348   (53.3)    2,594,599  (69,2)    2,510,639  4,384,077   (42.7)
 Total Volume Hauled (t)  1,829,412  6,595,264    (72.3)    8,105,466  (77.4)    8,424,676  13,283,655  (36.6)

 Production
 Gold (oz)                14,801      11,078      33.6      25,234     (41.3)    25,878     47,103      (45.1)
 Silver (koz)             4           4           0.0       6          (33.3)    8          14          (42.9)

 Ore Grades
 Gold (g/t)               0.45       0.48         (6.3)     0.53       (15.1)    0.47       0.57        (17.5)
 Silver (g/t)             0.20       0.15         33.3      0.22       (9.1)     0.17       0.26        (34.6)

 

Quarterly gold production increased 33.6% vs. 1Q23 mainly due to a higher
recovery rate at the leaching pads, partly offset by the decreased volume of
ore processed and lower ore grade following the mine closure process which
started in May.

Quarterly and first half gold production decreased 41.3% and 45.1% vs. 2Q22
and 1H22, respectively as a result of the decrease in the volume of ore
processed and lower ore grade due to the previously mentioned factors,
partially mitigated by the higher recovery rate at the leaching pads.

The final 2023 gold ore grade was 0.47 g/t as no additional volumes will be
deposited.

 

JUANICIPIO - ATTRIBUTABLE

 

                    2Q23*      1Q23*      % Change  2Q22**   % Change  1H23*    1H22**   % Change
 Ore Processed (t)   211,522    124,333   70.1      86,279   145.2     335,855  167,751  100.2

 Production
 Silver (koz)        2,954      1,260     134.4      1,328   122.4     4,214    2,672    57.7
 Gold (oz)           5,958      3,392     75.6      3,143    89.6      9,351    6,412    45.8
 Lead (t)            1,905      813       134.3     628      203.3     2,718    1,286    111.4
 Zinc (t)            3,034      1,275     138.0      1,071   183.3     4,309    2,041    111.1

 Ore Grades
 Silver (g/t)        498        363       37.2       567     (12.2)    448      582      (23.0)
 Gold (g/t)          1.25       1.08      15.7       1.49    (16.1)    1.18     1.53     (22.9)
 Lead (%)            1.05       0.74      41.9       0.91    15.4      0.94     0.92     2.2
 Zinc (%)            1.92       1.44      33.3       1.73    11.0      1.74     1.73     0.6

* Includes ore processed as part of the initial tests during the commissioning
of the Juanicipio plant and ore processed at the Fresnillo and Saucito
beneficiation plants.

** Ore processed at the Fresnillo and Saucito beneficiation plants.

Attributable quarterly silver and gold production increased vs. 1Q23 due to
the ramp-up following the commissioning completed in 1Q23. Full nameplate
capacity is expected to be reached by 3Q23. As previously reported, ore will
continue to be processed at the nearby Saucito and Fresnillo plants if
required.

 

SILVERSTREAM

Quarterly Silverstream production decreased 11.7% vs. 1Q23 due to the
decreased volume of ore processed and lower recovery rate, partly mitigated by
a higher ore grade.

Quarterly Silverstream production increased 4.8% vs. 2Q22 mainly due to a
higher ore grade, partially compensated for by the decreased volume of ore
processed and lower recovery rate.

First half Silverstream production increased 7.4% vs. 1H22 as a result of the
increase in volume of ore processed and higher ore grade.

Silver production in 2023 is estimated to be in the range of 2.5-3.5 moz.

 

ITEMS IMPACTING THE INCOME STATEMENT

 

Adjusted production costs in 1H23 were impacted by:

1.   The 10.2% average revaluation of the Mexican peso vs. the US dollar
from $20.28 per US dollar in 1H22 to $18.21 per US dollar in 1H23, which is
expected to have an adverse effect of c. US$45 million.

2.   Ongoing cost inflation of 6.2%, excluding the effect of the revaluation
of the Mexican peso vs. US dollar, which is expected to have a negative impact
of c. US$40 million.

3.   An increase in waste material hauled at Herradura charged to costs,
rather than capitalised, despite the 28.9% decrease in the total volume of
waste material hauled (capitalised and charged to costs), with an expected
impact of approximately US$20 million, (See Herradura page 7).

 

In addition, cost of sales is expected to be impacted by a decrease in
inventories both at Juanicipio as a result of the start up of the
beneficiation plant, enabling additional volumes to be processed and the
stockpile to be reduced, and at Noche Buena as it approached the end of its
mine life. This, together with the favourable effect of the reassessment of
the gold inventories at Herradura (See Herradura page 7), resulted in an
estimated reduction in inventories of c. US$25 million in 1H23.

Further to the disclosures that the Company has previously made regarding the
stoppage of operations at Soledad-Dipolos, the Company has identified certain
suspected illegal extraction of gold content at its leaching pads. The Company
estimates a loss of approximately 20 thousand ounces of gold content and
consequently will recognise a write off of c. US$22 million regarding the
Soledad-Dipolos gold contents in inventory, which will be presented as other
expenses in the Interim Consolidated Income Statement. The Company is taking
relevant actions so that the illegal leaching activities be ceased as soon as
possible. The Company does not currently expect any further losses of this
inventory to be significant.

We have front loaded 2023 exploration spend, with c. US$97 million in 1H23.
The FY guidance of US$175 million remains unchanged.

The Silverstream effect is expected to have an adverse impact of c. US$17
million mainly due to the lower forward silver price as at 30 June 2023 and a
decrease in silver reserves at the Sabinas mine.

 

 

 

ABOUT FRESNILLO PLC

Fresnillo plc is the world's largest primary silver producer and Mexico's
largest gold producer, listed on the London and Mexican Stock Exchanges under
the symbol FRES.

Fresnillo plc has eight operating mines, all of them in Mexico - Fresnillo,
Saucito, Juanicipio, Ciénega, Herradura, Soledad-Dipolos(1), Noche Buena and
San Julián (Veins and Disseminated Ore Body) and four advanced exploration
projects - Orisyvo, Rodeo, Guanajuato and Tajitos as well as a number of other
long term exploration prospects.

Fresnillo plc has mining concessions and exploration projects in Mexico, Peru
and Chile.

Fresnillo plc has a strong and long tradition of exploring, mining, a proven
track record of mine development, reserve replacement, and production costs in
the lowest quartile of the cost curve for silver.

Fresnillo plc's goal is to maintain the Group's position as the world's
largest primary silver company and Mexico's largest gold producer.

(1) Operations at Soledad-Dipolos are currently suspended.

 

 

FORWARD-LOOKING STATEMENTS

Information contained in this announcement may include 'forward-looking
statements'. All statements other than statements of historical facts included
herein, including, without limitation, those regarding the Fresnillo Group's
intentions, beliefs or current expectations concerning, amongst other things,
the Fresnillo Group's results of operations, financial position, liquidity,
prospects, growth, strategies and the silver and gold industries are
forward-looking statements. Such forward-looking statements involve risk and
uncertainty because they relate to future events and circumstances.
Forward-looking statements are not guarantees of future performance and the
actual results of the Fresnillo Group's operations, financial position and
liquidity, and the development of the markets and the industry in which the
Fresnillo Group operates, may differ materially from those described in, or
suggested by, the forward-looking statements contained in this document. In
addition, even if the results of operations, financial position and liquidity,
and the development of the markets and the industry in which the Fresnillo
Group operates are consistent with the forward-looking statements contained in
this document, those results or developments may not be indicative of results
or developments in subsequent periods. A number of factors could cause results
and developments to differ materially from those expressed or implied by the
forward-looking statements including, without limitation, general economic and
business conditions, industry trends, competition, commodity prices, changes
in regulation, currency fluctuations (including the US dollar and Mexican Peso
exchanges rates), the Fresnillo Group's ability to recover its reserves or
develop new reserves, including its ability to convert its resources into
reserves and its mineral potential into resources or reserves, changes in its
business strategy and political and economic uncertainty.

 

 

Note: financials disclosed in this statement are unaudited

 

 

 1 
(http://otp.investis.com/clients/uk/fresnillo2/rns/regulatory-story.aspx?cid=191&newsid=1609706#_ftnref1)
 Au:Ag ratio of 80:1

 

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