Production Report
for the three months ended 31 December 2012
Overview
Record annual attributable gold production of 473,034 ounces, up 5.4% year on year, exceeding the full-year target of 460,000 ounces, mainly due to the successful first year of operations at Noche Buena and continuous ramp-up at Saucito.
Annual attributable silver production of 41Moz, (including 4.0Moz from the Silverstream), in line with our guidance; the ramp-up at Saucito offset the anticipated natural decrease in silver ore grade at the Fresnillo mine.
Quarterly attributable silver production of 10.6Moz, (including the Silverstream), slightly above 4Q11.
Construction of the dynamic leaching plant at Herradura remains on track to become operational in 4Q13.
Significant progress in the construction of the Jarillas shaft at Saucito is on track for commissioning in 1Q13.
Construction of the US$500M San Julián silver mine began immediately after board approval in 4Q12.
Positive exploration results during the quarter with final audited figures expected to be released in early March.
On track to produce 65 million ounces of silver and target of 500,000 attributable ounces of gold annually by 2018
Outlook for 2013
A focus on safety across all our operations and exploration projects to improve performance and meet our zero fatalities target.
Attributable silver production to remain stable at 41Moz, including 4Moz from the Silverstream, with expected ramp-up to approximately 8.5Moz at Saucito offsetting the expected decrease in silver ore grade at Fresnillo.
Attributable gold production expected to reach 490,000 ounces due to ramp-up at Noche Buena.
Exploration budget to be increased to US$270m (excluding capitalised exploration expenses), up 15% above the US$234m spent in 2012.
Production levels will be maintained at Ciénega, despite expected lower ore grades, as a result of the increase in ore processed through the optimization of the milling process.
Evaluate the expansion of the main pit at Herradura and the construction of the pyrites plant in the Fresnillo District.
Commissioning of the dynamic leaching plant at Herradura in 4Q13 which will contribute an additional average attributable gold production of 28,000 ounces per year.
Conclude detailed engineering at San Julián and continue the construction of the processing plant. Start-up is expected in 2H14.
Submit the Saucito II silver project for Board approval in 1Q13 and begin construction in 2H13. This project is expected to produce an average of 8.4Moz of silver and 35,000 ounces of gold per year.
Conclude the construction of the pumping station at Centauro Deep project and continue exploration activities to increase our resource base, including the construction of a shaft which will allow direct access to the ore body.
Exploration programme to continue at Juanicipio in accordance with recommendations set out in the prefeasibility study.
Cost control initiatives will continue across all operations to compensate for the expected inflation in operating materials, increased stripping ratios and longer haulage distances.
Octavio Alvídrez, Chief Executive Officer, said:
"In 2012, we further consolidated our position as a leading precious metals producer with gold production exceeding our full-year target and reaching a new record of 473,035 ounces. This was mainly the result of the higher than expected production volumes at Noche Buena in the first year of operation, which illustrates our ongoing commitment to advance our development projects towards the operational phase as efficiently as possible. Furthermore, the strong performance at Saucito, demonstrated by the increased volumes of ore processed, further contributed to higher gold production.
Annual silver production remained steady at 41 Moz as a result of the ramp-up at Saucito, higher silver ore grade at Ciénega and increased ore milled at Fresnillo, all of which compensated for the anticipated lower ore grade at our flagship mine.
In accordance with our strategy to maintain a strong pipeline of projects and prospects, exploration expenses reached a record of US$234 million, resulting in encouraging results, mainly at Herradura, Noche Buena, Lucerito, Guachichil and Guanajuato. A US$270M exploration budget, excluding capitalised exploration expenses, has been approved for 2013 following successful exploration results in 2012. Board approval for the San Julián project was granted in October with capital expenditure estimated at US$500M. This is a key project in our journey towards our goal of producing 65 million ounces of silver a year by 2018.
Construction of the Jarillas shaft at Saucito, which will provide access to additional stopes and reduce haulage costs, will be concluded in 1Q13.
As previously stated, Fresnillo believes remaining a member of the FTSE 100 index is important. As such, the Board continues to consider a wide range of options to increase the Company's free float to 25% by the end of 2013 deadline.
Unfortunately, we suffered six fatal accidents as a result of breaches of the Group's safety procedures over the year. We continue to reinforce our policies and to implement new initiatives to improve the safety culture across all our operations. These actions reduced the number of incidents compared to the previous year and put us in the right path towards achieving our zero fatalities target. We remain committed to provide a safe workplace to our personnel and will continue focused in making safety the most important value in Fresnillo plc."
