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Fresnillo's (FNLPF) CEO Octavio Alvidrez Discusses Interim Results 2015 Presentation Call Transcript

Fresnillo Plc. (OTCPK:FNLPF) 2015 Interim Results Presentation Conference Call August 8, 2015 4:00 PM ET

Octavio Alvidrez - Chief Executive Officer

Good morning, everyone; thank you for attending Fresnillo's interim results presentation.

Today, we are going to run you through the presentation. First of all, I would like to draw your attention to the disclaimer as we'll have some forward-looking statements.

The agenda for today, we have with us Roberto Diaz, our COO, will cover the operational review; Mario Arreguin, our Financial Officer, will cover the financial review. And then after, going into the growth pipeline covered briefly by David Giles, our Vice President of Exploration, and the development projects by Roberto Diaz, before, I will come and close the presentation with the conclusion and outlook, before opening up for Q&A.

Well, there is no doubt that this first-half 2015 has been a challenging time for all of the precious metals producers. However, in the case of Fresnillo, we have not changed our strategy. You will see that our strategy doing good at spending and adapting to the circumstances, I think that we will be in good shape after this down part of the cycle.

We saw, the first half with 11% increase in silver production. This is due to the Saucito II startup, running at a faster pace than anticipated. When we told you back a couple of years that we are going to push Saucito II ahead of San Julian, that's because we realized that we could do so, and that would give us more flexibility on the silver side, recognizing that Fresnillo was coming down temporarily. And this is one example in which we with the experience we've been able to weather these issues at Fresnillo with more production coming out of Saucito II.

On the gold side, we increased our gold production 37%. This is due to Herradura and the dynamic leaching plant comparing favorably to the first half of 2014, in which we had a temporary suspension, due to the explosives permit; and the dynamic leaching plant being already in shape to operate but not having ore due to these temporary explosives permit as well.

Of course, we did a larger gold production. We have increased our guidance to 715,000 to 730,000 ounces, plus 6% from the previous guidance. We have confirmed our guidance in terms of silver to 45 to 47 million ounces including the Silverstream.

Turning into our financial performance, and despite significantly lower commodity prices, silver minus 18%, and gold minus 7.4%, we have been able to deliver positive earnings, and we have also delivered on a robust profit margin as you can see in the slide. With lower cash generated from the operation, compared to 2014, but it's still significant at $315 million, our balance sheet remained strong with a cash position to June 30, of $476 million. With this cash position, with the measures that we've taken in 2015 to lower the CapEx investment, and with the projects that will come on stream with investment in 2016 and onwards, we have declared an interim dividend of $15.5 million approximately, which is equivalent to $0.021 per share.

Now, going to cover some of the highlights for the growth pipeline; this also remains on track. The pyrites project, we have advanced the project on the basic engineering. On the detailed engineering we are ready to place the long-lease time equipment order. This has allowed us to put some of the CapEx that we had anticipated spending on 2015 into 2016, without any effect to the pyrites project. And that will come on stream in 2017. A very strong project; 25% plus internal rate of return, and another project on the Fresnillo district, that will bring us more silver at a very low cash-cost.