FNLPF - Fresnillo plc (FNLPF) Q4 2023 Earnings Call Transcript

2024-03-06 17:31:11 ET

Fresnillo plc (FNLPF)

Q4 2023 Earnings Conference Call

March 05, 2024 4:00 AM ET

Company Participants

Octavio Alvidrez – Chief Executive Officer

Mario Arreguín – Chief Financial Officer

Tomás Iturriaga – Chief Operating Officer, Central Area

Guillermo Gastélum – Vice President, Exploration

Daniel Diez – Chief Operating Officer, North

Conference Call Participants

Daniel Major – UBS

Jason Fairclough – Bank of America

Richard Hatch – Berenberg

Sandeep Peety – Morgan Stanley

Amos Fletcher – Barclays

Krishan Agarwal – Citigroup

Patrick Jones – JPMorgan

Presentation

Octavio Alvidrez

Good morning, everyone. And thank you for being here for Fresnillo's Year-End Results 2023. I'm glad to be – I'm Octavio Alvidrez, and I'm glad to be joined by Mario Arreguín, our CFO; also Tomás Iturriaga, our Central Area Chief Operating Officer; Guillermo Gastélum, the Vice President of Exploration; and also joined by Daniel Diez, who is the newest addition to the team, and he will coordinate the northern part of the operations.

The key themes that we will be discussing and talking about this morning and coming back from a few years on operational challenges, I would say it's about operations or stability in our operations, our focus on how to control and costs, of course, with a large setting on projects and across the areas, how we go about disciplined approach and also one more aspect, which is the investment in exploration through the cycles. But as I mentioned, I mean, in 2021 and 2022, we had this operational challenges across our operations. We have some difficulties to meet the guidance. So the very important aspect that time was to have a much better grasp on the operations and therefore, meet the guidance, something that we've been doing in recent years.

However, I mean, last year, with the inflation running globally and in Mexico, more aggravated by the strength of the peso, now the focus is in controlling the cost, running very efficient our operations and trying to be – or get the best out of our current operation. I'm pleased with the performance of last year's despite the fact that we are running in a very tough environment in terms of – all the way, I would say, in all the change in exploration, but also on the permitting process and also on the construction and across with communities. Therefore, despite all these challenges, I mean we've been able to post a strong year-end results.

I would like to see – to say that the aim of strengthening our team also with Daniel Diez is twofold. One, so that Tomás and Daniel are closer to the operations, given the challenges we face, but importantly is that they coordinate the efforts more efficiently all the way from the exploration, construction phase and bringing the new projects into operation. This is a key aspect in our company. First of all, I would go to the disclaimer. The agenda for today is about the highlights that I will be presenting then, some of the HSECR initiatives, the operations and update will be given by Tomás Iturriaga. And then after, we will hear about the exploration portfolio and how the projects are evolving by Guillermo Gastélum. Then after, Mario will give us an update on the financial part of the company and coming back to the outlook and the closing of the presentation, so that we can take your Q&A.

Well, Fresnillo remains the largest silver producer, world's largest silver producer and the leading producer of gold in Mexico. We do have a sizable set of assets, all the way from the exploration concessions to the projects that we are developing and ending on the operations across our portfolio. We produced healthy margins, of course, underpinned by the strength of our operation, as I mentioned, the control on cost and efficiencies. Attractive returns, of course, a strong balance sheet and free cash flow from our operations. We continue to make good progress the fact that we have headwinds on the projects front, specifically, the extension of the permitting process, which is a bit challenging in Mexico nowadays. However – and we will go in more detail. We are making some advances.

$2.7 billion in revenues, US$0.31 per share are the numbers that we are posting – reporting this morning, healthy dividend, and Mario will explain more about the rationale behind this dividend so that we also have a strong EBITDA numbers and cash flow generations. Something that I would like to mention is that our results have been affected, but by the inflation running globally in Mexico as well in the mining industry, but this is being aggravated by the strength of the peso. As of yesterday, I mean, we – the peso broke the – some of the floors, making – or showing this strength, just below Ps.17 per U.S. dollar.

Some of the HSECR initiatives, very important, the safety of our personnel, guaranteeing the integrity of all those that we work at Fresnillo plc is something that we've been dealing with, especially coming back from 2022 in which we had the labor reform in Mexico. And therefore, we had to include in our headcount or bringing to the company a lot of contractor people and presenting a challenge in terms of the culture of that personnel. We suffered some fatality last year and that reversing the trend that you see on the screen from the lost time as well as a TRIFR coming down from 2018 to last year in which we reversed that good trend that we had before. So it's about reinforcing our measure, showing our leadership in terms of safety in our company.

We start the week with a meeting, a safety meeting involving all of the leadership groups across our operations, our exploration offices and also in the administrative areas as well. But these incidents and accidents, I mean, is just a reminder that we have to do more every time. So with these measures in place, very directly or more directly not only to a personnel, but importantly to our contractor base. We are hoping to reverse this trend. On environment, we continue to work on aspects, key aspects like water. Of course, the sustainability across our operations, trying to reduce our carbon footprint with different projects. We continue to gather information, importantly, a study that we develop with the – on climate change that we developed through the University of Arizona....

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