Octavio Alvídrez, Chief Executive Officer, commented:

“We have remained committed to our purpose during the year, with the safety and well-being of our people the key priority in every decision we make as a company. Though the impact of the pandemic has reduced over time, the recent fifth wave in Mexico highlights how we must continue to support our people and our communities, in particular as we face new uncertainties in these challenging times.

“We have proactively addressed these challenges and I am pleased to report a good financial performance in the first half. The actions we have taken to implement the Mexican labour reform have been effective. We are on track to complete the staffing process at Fresnillo and San Julián by the end of 3Q22, and at Ciénega and Saucito by year end, despite a tight labour market. The global supply chain bottlenecks that so many industries are facing, together with cost inflation will have some impact in the second half. However, we are confident in our ability to weather these short term challenges, without limiting our ambitious longer term growth plans. We look forward to achieving connection to the electricity grid at Juanicipio in the coming weeks, and rapidly ramping up production, while also continuing to develop the Rodeo and Orisyvo mining projects.

“We benefit from a consistent strategy, exceptional assets, an exciting growth pipeline and a very strong balance sheet. We are well placed to deliver on our objectives this year. We look forward with determination and confidence.”

First half highlights

Financial highlights (1H22/1H21 comparisons)

  • Adjusted Revenues[1] of US$1,349.0m, down 12.6%; 91% of this mainly due to lower gold volumes and 9% due to lower silver prices.
  • Revenues of US$1,259.1m, down 14.2%.
  • Gross profit and EBITDA[2] of US$365.9m and US$459.1m, down 39.7% and 38.5%, respectively.
  • Profit from continuing operations before net finance costs and income tax and profit before income tax of US$218.2m and US$155.2m, down 53.8% and 65.1%, respectively.
  • Profit for the period of US$141.0m, down 54.3%.
  • Basic and diluted EPS from continuing operations of US$15.9 cents per share, down 61.2%.
  • Adjusted EPS[3] of US$19.4 cents per share, down 53.1%.
  • Cash generated from operations, before changes in working capital, of US$459.5m, down 38.8%.
  • Free cash flow[4] of US$93.5m in 1H22 (US$305.1m in 1H21).
  • Strong balance sheet with cash and other liquid funds[5] as at 30 June 2022 of US$1,151.9m (31 December 2021: $1,235.3m); net debt/EBITDA of 0.02x[6] (31 December 2021: -0.06x).
  • Interim dividend of 3.40 US cents per share, totaling US$25.1m (1H21: 73.0m).

Operational highlights (1H22/1H21 comparisons)

As disclosed in the 2Q22 production report on 27 July 2022:

  • First half attributable silver production of 27.6 moz (including Silverstream), up 0.4% vs. 1H21.
  • First half attributable gold production of 308.8 koz, down 27.9% vs. 1H21.
  • We expect to complete the tie-in of the Juanicipio plant and Pyrites Plant at Fresnillo to the national electricity grid in the coming weeks. Commissioning of the Juanicipio plant will follow soon after with the ramp up of the plant beginning towards the end of the third quarter.
  • Ongoing focus on costs control and productivity.

Covid-19 update

We saw a drop in Covid-related absenteeism across our operations from March onwards following the arrival of the fourth wave of Covid towards the end of 2021, and have seen a more limited impact on our operations during 2Q22. Despite continuing to implement strict protocols to limit the spread of the virus, a fifth wave has now reached Mexico and we are seeing a rise in positive cases in the country. Should this trend continue, we will see an increase in Covid-related absenteeism in the second half. The safety and well-being of our people is our priority, and we continue to closely monitor the spread of the virus and implement a range of safety measures across our business.

Highlights for 1H22

US$ million unless statedH1 22H1 21% change
Silver production (koz) *27,63227,5300.4
Gold production (oz)308,752428,356(27.9)
Total revenues1,259.11,466.8(14.2)
Adjusted revenues11,349.01,543.1(12.6)
Cost of Sales893.2860.13.8
Exploration expenses77.760.927.6
Profit for the period141.0308.4(54.3)
Cash generated by operations before changes in working capital459.5750.4(38.8)
Basic and Diluted EPS (US$)30.1590.410(61.2)
Basic and Diluted EPS, excluding post-tax Silverstream revaluation effects (US$)0.1940.414(53.1)
Dividend per ordinary share (US$)0.0340.099(65.7)

* Silver production includes volumes realised under the Silverstream contract

1 Adjusted revenues are the revenues shown in the income statement adjusted to add back treatment and refining charges and the effects of metals prices hedging. The Company considers this is a useful additional measure to help understand underlying factors driving revenue in terms of volumes sold and realised prices

2 Earnings before interest, taxes, depreciation and amortisation (EBITDA) is calculated as profit for the year from continuing operations before income tax, less finance income, plus finance costs, less foreign exchange gain/(loss), less revaluation effects of the Silverstream contract and other operating income plus other operating expenses and depreciation.

3 The weighted average number of shares for H1 2022 and H1 2021 was 736.9m. See Note 8 in the Interim Consolidated Financial Statements.

Commentary on the Group’s results

Operating results

First half attributable silver production of 27.6 moz (including Silverstream), in line with 1H21 as the expected lower ore grade at San Julián DOB and lower volume of ore processed at Saucito was offset by the increased contribution of ore from Juanicipio.

First half attributable gold production of 308.8 koz, down 27.9% vs. 1H21 primarily due to the expected decrease in the volume of ore processed and lower ore grades at Herradura and Saucito.    

First half attributable by-product lead and zinc production decreased 15.6% and 5.7% vs. 1H21 respectively, primarily due to lower volumes of ore processed and ore grades at Saucito and a decrease in ore grades at San Julián DOB.

The safety and wellbeing of our people remains our absolute priority and we continue to nurture a strong safety culture across all our mines through the reinforcement of our safety training and the monitoring of the adherence to our safety policies. The ‘I Care, We Care’ programme continues to be rolled out across the business and is a central aspect of all operations and new development projects.

Financial results

Total revenues decreased 14.2% to US$1,259.1 million in 1H22, due mainly to the lower volume of gold sold and a decrease in silver price, mitigated by higher zinc and gold prices.

The average realised silver price decreased 13.8% from US$26.4 per ounce in 1H21 to US$22.8 per ounce in 1H22, while the average realised gold price rose 4.6%, from US$1,789.2 per ounce in 1H21 to US$1,871.1 per ounce in 1H22. Further, the average realised lead and zinc by-product prices increased 2.8% and 33.1% against their corresponding periods, to US$98.3 and US$173.8 per pound, respectively.

Adjusted production costs[7] increased by 7.9% to US$659.3 million in 1H22. The US$48.2 million increase resulted mainly from: i) cost inflation, including the Mexican peso vs. US dollar devaluation effect (US$44.1 million); ii) costs from the start-up of operations at Juanicipio (US$43.1 million); iii) increase in the use of infrastructure contractors, and maintenance (electric and mechanical) (US$24.5 million); iv) higher volume of ore processed at Fresnillo and San Julián DOB (US$7.1 million); v) and others (US$9.2 million). These adverse effects were mitigated by lower stripping to cost at Herradura (-US$47.7 million); and a decreased volume of ore processed at Saucito, Ciénega, San Julián (Veins) and the Pyrites plant (-US$32.2 million).

Additionally, the variation in the change in inventories and others had a negative effect of US$19.5 million versus 1H21.

Depreciation decreased half on half. This is mainly due to decreased amortisation of capitalised mining works and lower depletion factors at all of the mines except for Fresnillo and Juanicipio

The higher adjusted production costs and the variation in change in work in progress at Herradura, mitigated by the decrease in depreciation and lower profit sharing resulted in a 3.9% increase in cost of sales compared with 1H21.

The lower total revenues combined with the increase in cost of sales, resulted in a 39.7% decrease in gross profit to US$365.9 million in 1H22.

Administrative and corporate expenses decreased 4.1% from US$51.2 million in 1H21 to US$49.1 million in 1H22, mainly due to a decrease in fees paid to advisors (legal, labour, tax and technical).

Exploration expenses increased, as expected, by 27.6% from US$60.9 million in 1H21 to US$77.7 million in 1H22, in line with the budget for this year and our strategy to focus exploration on specific targets, mainly at our Fresnillo and San Julián districts. The increase of US$16.8 million seen period-on-period was due to our intensified exploration activities aimed at increasing the resource base, converting resources into reserves and improving the confidence of the grade distribution in reserves.

Driven by a decrease in gross profit, EBITDA decreased by 38.5%, with EBITDA margin decreasing from 50.9% in 1H21 to 36.5% in 1H22. Similarly, profit from continuing operations before net finance costs and income tax decreased from US$471.9 million in 1H21 to US$218.2 million in 1H22, a decrease of 53.8%.

The net Silverstream effect recorded in the 1H22 income statement was a loss of US$36.3 million (US$20.3 million amortisation profit and US$56.6 million revaluation loss), which compared negatively to the net loss of US$4.0 million registered in 1H21. The negative revaluation was mainly driven by the increase in the LIBOR reference rate; and a decrease in the forward silver price curve; partially compensated by a new mine plan, which considers an increase in silver reserves.

Net finance costs of US$27.9 million remained at similar levels to the US$25.4 million recorded in 1H21. Financial expenses in 1H22 included mainly: i) interest paid on the outstanding US$317.9 million from the US$800 million Senior Notes due 2023, and ii) interest paid on the 4.250% Senior Notes due 2050.

We recorded a foreign exchange gain of US$1.2 million in the income statement as a result of the 2.91% revaluation of the Mexican peso against the US dollar over the period. This was similar to the US$2.9 million gain in 1H21.

The decrease in profit from continuing operations, together with the net Silverstream loss, resulted in a 65.1% decrease in profit from continuing operations before income tax from US$445.4 million in 1H21 to US$155.2 million in 1H22.

Income tax expense for the period was US$6.8 million, which compared favourably vs. US$111.1 million in 1H21. The effective tax rate, excluding the special mining rights, was 4.4%, which was below the 30% statutory tax rate. The reason for the lower effective tax rate was the significant permanent differences between the tax and the accounting treatment related mainly to: i) the inflation rate (Mexican Consumer Price Index), which impacted the inflationary uplift of the tax base for assets and liabilities; and ii) the benefit from the lower border zone tax which applied to Herradura and Noche Buena operations. 

Profit for the period decreased from US$308.4 million in 1H21 to US$141.0, a 54.3% decrease period-on-period.

Profit due to non-controlling interests was US$23.6 million reflecting the profit generated at Juanicipio, where MAG Silver owns 44% of the outstanding shares. Accordingly, profit attributable to equity shareholders of the Group was US$117.4 million.

Cash generated by operations before changes in working capital decreased by 38.8% to US$459.5 million, mainly as a result of the lower profits generated in the year.

Capital expenditure in 1H22 totalled US$299.0 million, a 16.4% increase over 1H21. Investments during the period included mine development and stripping, purchase of in-mine equipment, construction of a leaching pad at Herradura and the deepening of the San Carlos and Jarillas shafts.

Other uses of funds during the period were income tax, special mining rights and profit sharing paid of US$141.2 million (US$253.5 million in 1H21) and dividends paid of US$176.9 million (US$172.6 million in 1H21).

Fresnillo plc continued to maintain a solid financial position during the period with cash and other liquid funds of US$1,151.9 million as of 30 June 2022, decreasing 6.8% versus 31 December 2021 and 4.2% versus 30 June 2021. Taking into account the cash and other liquid funds of US$1,151.9 million and the US$1,167.8 million outstanding Senior Notes, Fresnillo plc’s net debt is US$15.9 million as at 30 June 2022. This compares to the net cash position of US$67.5 million as at 31 December 2021. Considering these variations, the balance sheet at 30 June 2022 remains strong, with a net debt / EBITDA ratio of 0.02x[8].

Interim Dividend

The Board of Directors has declared an interim dividend of 3.40 US cents per Ordinary Share totalling US$25.1 million, which will be paid on 14 September 2022 to shareholders on the register on 12 August 2022. The dividend will be paid in UK pounds sterling unless shareholders elect to be paid in US dollars. This interim dividend is lower than the previous period due to the decrease in profit in 1H22, and remains in line with the Group’s dividend policy. This decision was made after a comprehensive review of the Group’s financial situation, assuring that the Group is well placed to meet its current and future financial requirements, including its development and exploration projects.

As previously disclosed, the corporate income tax reform introduced in Mexico in 2014 created a withholding tax obligation of 10% (including to foreign nationals) relating to the payment of dividends, which are paid using the Net Tax Profit Account (CUFIN) generated from 2014 onward. The 2022 interim dividend will be subject to this withholding obligation.


We expect to complete the tie-in of the Juanicipio plant and Pyrites Plant at Fresnillo to the national electricity grid in the coming weeks. Commissioning of the Juanicipio plant will follow soon after with the ramp up of the plant beginning towards the end of the third quarter.

Development ore from Juanicipio continued to be processed through the Fresnillo and Saucito flotation plants during the half. On an attributable basis, 2,672 koz of silver and 6,412 oz of gold were produced.


We remain on track to meet our 2022 full year guidance of 50.5 to 56.5 moz of attributable silver (including Silverstream) and 600 to 650 koz of attributable gold production.

The labour reform in Mexico which restricts subcontracting of labour came into effect from 1st September 2021 resulting in the requirement to internalise a high proportion of our contractor workforce. The actions we announced to address this short term challenge, including recruitment campaigns, training and investment in new equipment, are on-going. We expect to complete the staffing process at Fresnillo and San Julián by the end of 3Q22, and at Ciénega and Saucito by year end, and as previously reported, our open pit mines are now fully staffed. The challenges set out at the beginning of the year including a tight labour market, global supply chain bottlenecks and cost inflation remain and these will have some impact in the second half of the year.

Exploration expenses are expected to remain around US$180 million, of which approximately US$10 million is anticipated to be capitalised.

Analyst Presentation

Management will host a webcast for analysts and investors today at 9am UK. Registration and access will be provided on the homepage of Fresnillo’s website and directly via this link:

For those unable to access the webcast, a conference line will also be provided:

Mexico Toll Free: 00 1 866 966 8830
UK-Wide: +44 (0) 33 0551 0200
UK Toll Free: 0808 109 0700
USA Toll Free: 1 866 966 5335

Password: Quote Fresnillo when prompted by the operator

Questions may be submitted via the conference dial-in.

For further information, please visit our website: www.fresnilloplc.com or contact:

London Office
Tel: +44 (0)20 7399 2470
Gabriela Mayor, Head of Investor Relations
Patrick Chambers
Mexico City Office
Tel: +52 55 52 79 3206
Ana Belem Zárate

 Tel: +44 (0)7793 858 211
Peter Ogden 


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 seven operating mines, all of them in Mexico – Fresnillo, Saucito, Ciénega (including Las Casas Rosario & Cluster Cebollitas), Herradura, Soledad-Dipolos1, Noche Buena and San Julián (Veins and Disseminated Ore Body), two development projects – the Pyrites Plant at Fresnillo and Juanicipio, both of which have been completed and are awaiting tie-ins of the plants to the national electricity grid in the coming weeks, and three advanced exploration projects – Orisyvo, Rodeo and Guanajuato, 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.


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.

Original Article: http://otp.investis.com/clients/uk/fresnillo2/rns/regulatory-story.aspx?cid=191&newsid=1611719



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