Hello, and welcome to this Fresnillo 4Q 2021 Production Analyst Call. For the duration of the call, your lines will be on listen only. However, later there will be an opportunity to ask questions, and this is done by pressing star one on your telephone keypad. If at any point you need assistance, please press star zero and you'll be connected to the operator. I'd now like to hand over to our host, Mr. Octavio Alvídrez, to begin the call. Thank you. Thank you, Kevin. Good morning, everyone. Thank you for joining me today. This is Octavio Alvídrez, CEO of Fresnillo, and I'm joined today by Tomás Iturriaga, our Chief Operating Officer, and Mario Arreguín, our Chief Financial Officer, as well as Gabriela Mayor, our representative in London office. You all have seen the statement we issued this morning, I hope, and I will provide a summary of the production numbers, then I will be happy to take your questions. Of course, we report our full year production preliminary results on the eighth of March, where we will look to provide a much fuller update on our performance and strategy and outlook. To summarize, 2021 was a challenging year for a number of reasons. We needed to manage the impact of COVID-19 on our business, which has been a major issue in Mexico as everywhere. Regrettably, we are now facing a fourth wave driven by the highly contagious Omicron variant. We also had to manage the impact of the new labor reform in Mexico, which restricts the ability to subcontract labor and led to the requirements to internalize a high proportion of our contractors' workforce, resulting in varying degrees of impact across the operation in terms of staff vacancies, leading to lower equipment availability and utilization rates as well. Finally, we faced a certain number of operational challenges during the year. Given all this, we believe we have delivered a creditable performance, with silver very slightly below guidance, but gold above. We explained the factors driving that performance in the statement, but it does highlight the overall strength of our portfolio. Looking ahead, we do see those twin challenges of COVID-19 and labor reform continuing to have an impact into 2022. In terms of COVID-19, we will continue to implement a strict safety protocols across the business. To mitigate the impact of the labor reform, we have been undertaking a large recruiting campaign to ensure we are fully staffed. These campaigns have proven effective, and we expect to have completed the staffing process at our underground mines in the third quarter. While our open pit mines, which we have seen a lesser impact, should be fully staffed in the first quarter. In terms of development, construction of the Juanicipio plant was delivered on a schedule. As we have previously announced, the mill commissioning timeline was extended around six months. I am pleased to confirm that we can make available unused plant capacity at the Fresnillo and Saucito operations to process mineralized materials to mitigate potential adverse effects. All these factors provide the context for our 2022 guidance as set out in the statement. With that, we are happy to take your questions. Thank you. Thank you very much. If you would now like to ask a question, please press star one on your telephone keypad, and please ensure your line is unmuted locally. Our first question today comes from the line of Krishan Agarwal from Citigroup. Please go ahead. Hi, good morning, everyone, and thanks for taking my question. Octavio, as you mentioned, multiple reasons for the, you know, production headwinds in 2022, including the labor shortages, COVID, and Juanicipio. How should we think about the cost impact from this internalization of the labor force at the silver operation mostly? Is it getting higher than expectation, or is it broadly in line with your expectation? Then could you also have a word on, you know, the cost inflation, I mean, which most of the other mining peers are starting to guide for 2022, and how do you think about the cost inflation in general at the mining operation for this year? Thanks. Thank you, Krishan. On the cost inflation, I would like to ask Mario to maybe give some words. Of course, this is production report, but we can give you some color there. Mario? Mario, are you there? Hello, can you hear me now? Yes. As you all know, right now we're in the process of finalizing our financial statements for the year 2021. The fourth one of the things that we are calculating is our own inflation based on our own basket. We haven't concluded that yet in detail. As you all know, also in the first week of March, we will be presenting our financial numbers to the market, and we will host another call. At that point in time, we will be discussing in detail our own cost inflation together with, you know, the changes in the most important variables of our income statement. Right now what I can tell you is that we definitely experienced, just like anyone else, an increase in the price of our most important inputs, such as energy, diesel and electricity, labor cost of course, contracts and different items did have important increases. Until that time, I'm afraid we're going to have to wait until the first week of March, so I can report in detail just how inflation affected us. If I may add, Krishan. Yes, the structure we have for the contractors in our business model in our mines is that they bring not only the workforce but also the equipment. In the end, they charge for the equipment utilization and also for the labor force. All in all, if that were the only two components, we would expect very much the same cost as we are transitioning with this labor reform. However, there is another component that is impacting our operations right now in this transition, which is the productivity they do have. Not all of the workforce we've been able to internalize, and some of the contractors as well, they have preferred to go to some other mines to work. We are lacking also that equipment that they were using in our mines. That productivity, as we recruit and then train and then put into our operations, we are losing right now. This is the other component that is affecting more than the cost in our mines. Understood. Separately, can you help us in terms of your production guidance that how much of the production you have included from Juanicipio in the silver production guidance? Assuming that the Noche Buena is going out of the mine life in 2022, how much of the production contribution is that mine doing for this year? Yes. Can I give you some color on Noche Buena, Tomas? Tomas, are you there? Yes, I'm here. Can you? Can you hear me clearly? Yes, we can. Can you briefly comment on Noche Buena, what to expect, this year? Yeah. We will continue mining until mid-year or so. Actually, you know, just try to condemn all the pit and extracting all the ore that is still in the pit. That will be mid-year, Q3 maybe. Then we'll go just leaching whatever is the residual ore in the heap contents on the heap leach pad. Basically, that's the plan for next year in Noche Buena. Now, Krishan, you asked about Juanicipio. The way probably to visualize Juanicipio this year is, unfortunately as we mentioned, we do not have the energy so far. We are working in the most recent program that the regulator asked us for, and that is taking us to May, June, probably, pre-commissioning and commissioning. July onwards, we expect to be operating the mine and the flotation plant on a ramp-up program. We may start in July at 45% of the nameplate capacity, and we expect to finish the year at the 85%-95% expected nameplate capacity. Given that it is a third year of operation, we will continue to have ore from the development work, mining works, but also in combination with the production of stocks. We are not providing now that color, but we may be able to give you an update later on. In terms of the volume, that's how we visualize operating Juanicipio this year. Okay. Thanks a lot. That's it from my side. Thank you very much. Thank you. Our next question today comes from the line of Kevin Cuddihy from Bank of America. Please go ahead. Good morning. Thank you for taking my question. You spoke about the impact on production from COVID-19 from the labor reform. Two issues were known, but you also added some lower ore grade at Saucito caused by an increased seismic activity. Is it an issue that, like, you experienced only in the last few weeks, or is it something that you experienced in 2021 as well? If that's the case, what took you so long to update the market on that issue? Thank you. Yeah. Thank you so much, Kevin. Go ahead, Tomás. Yeah. Well, this is the stability issue that we have been reporting consistently through the year. It's related to the seismic activity, particularly in the Jarillas area of the mine. What did happen late in the year is that we see the seismic activity increased, which forced us to further slow down mining in that particular area, the Jarillas area of the mine. Like I said, what did happen is that it increased towards the end of the year. That's the impact that we are accommodating going forward into 2022. Kevin, let me add to what Tomás mentioned. I mean, in terms of COVID, yes, the last wave on Omicron started later than some other years here in Mexico, at least later than in U.K. Right now and from the probably first week in December, we saw an increased number of cases across all of our operations. That has continued during this month, and that presents a challenge in terms of the program and the number of people that is out. Fortunately, we've seen the same behavior as in some other places in which is not as severe. For the time being, we do have people and personnel that is out on quarantine for 7-10 days, depending on the case by case, and that affects the operation. We don't know. We expect that to cease quite soon, but we don't know. That's an uncertainty there. In the labor reform, as I mentioned, that has affected in two ways the operations. One, with the number of workers, of course, and also with the equipment availability. In terms of Saucito lower grade, let me tell you and let's go back to a couple of years of Saucito. In Saucito, we produced in 2019, 228 g as an average grade for the year. In 2020, 206 g of silver per ton. We guided for 2021, 200- 220 g. We ended up producing 183 g per ton. In Saucito, the issue was the geomechanical issues in the Jarillas vein that made us change the sequence that we had programmed for 2021. That may continue for 2022, and that's why we are guiding lower grades. The Jarillas vein gave us the majority of the production. Unfortunately, we have to go to some other production blocks with lower grade and also with lower productivity. For 2022, we are guiding in Saucito grade 175-195 g. Also a lower tonnage, as I mentioned, due to these conditions in the mine. Thank you very much. Thank you very much. We now have a question from the line of Daniel Major from UBS. Please go ahead. Hi there. Yeah, thanks for the call. A few questions. First of all, just some sort of specifics on the guidance. Can you give us a specific guidance number for Juanicipio production, expected production volumes based on your ramp up profile in 2022? Hi, Daniel. Hi. Given the uncertainty we have on energy, it is hard to provide guidance right now. As I mentioned, the best way to see Juanicipio this year and at this moment, probably would provide an update in our March preliminary report later on. For the time being, I mean, we are seeing the possibility to have energy in May then June pre-commissioning and commissioning and July onwards, ramping up the flotation plant. If that is the case, and given it's the first year of operation, we are expecting to from the flotation plant from probably 40%-45% in the month of July and end up in December at 85%-95% ramp up capacity of the nameplate capacity of San Isidro. We had given in the past the average production to expect for San Isidro. With these numbers, this is the best way probably to try to visualize San Isidro for the time being, Daniel. Okay. All right. Next, just on the gold production guidance. I think your 600,000-650,000 oz implies what's it about 100,000-150,000 oz decline year-on-year. I guess you obviously guided to the lower contribution from Noche Buena that's finishing mid-year. Can you give us any other steer on at an asset level, particularly Herradura? What's your expectation there from a sort of annual delta in production? Are you expecting stable ore processing volumes and recoveries? From that. You wanna mention something, Tomás? In Noche Buena specifically? Is that all, only or in general? Because really the main effect we have in gold production for the year is, as you said, Noche Buena, where we're gonna see the last of the live ore coming from mine during the year until end of Q2, Q3. In terms of grades, would be similar grades to what we have seen. The goal is the only impact is that as we are exhausting the remaining space in the heap leach, you stock up faster and you cut a little bit your leaching cycles. Just delay a little bit the production, but you don't invest more in heap leach pad. At the end, you know, we cut mining, and we leach the future ore. Everything is gonna come down in the next two, three years, basically. Okay. In addition to what Tomás mentioned, what other effect, Daniel? No, more specifically, I mean, if we just think of that bridge, it's 100,000-150,000 oz lower. You produced less than 100,000 oz at Noche Buena, and you're gonna produce some this year. The rest of the portfolio gold production has to be coming down. I'm assuming that's coming from Herradura. Yeah. Right? That's Noche Buena. Herradura is well, you know, it's a little bit here and there, you know, across the portfolio. Like Octavio said, we'll give you more color in the March discussions. It's really Noche Buena, the main impact. The rest of it is a little bit here and there in the rest of the portfolio. Okay. All right. To what Tomás mentioned, Daniel, this is correct. I mean, the larger effect is Noche Buena that we are operating on only for half a year. Probably if you with the guidance on gold grade we are providing and volumes for the unexpected volume for the other mines. We will have 4,000-8,000 less on the rest of the mines, Ciénega, Fresnillo, the Pyrites Plant under Fresnillo, also on Saucito. Compensated on the other end, too, for San Julian veins. Herradura is basically producing the same, a little bit more, but the larger effect, as I mentioned, is Noche Buena. Then 4,000-6,000 oz per mine in the rest of the mines as I mentioned. Okay. All right. Just a couple of kind of slightly longer-term overarching conceptual questions. I mean, if I look back over the last five years, a pretty consistent trend of downgrading your production guidance on a sort of three-year forward basis. I look back, and five years ago, you expected to produce 80 million oz of silver in 2020, and you kind of produced about 50. Your latest guidance is 2023, sort of 70 million oz of silver. I mean, is this really realistic or achievable? That's what we are working on right now. 2022, the different factors coincided to the worst. As like Daniel Major mentioned, I mean, we had hopes to manage or have better results for the labor reform. However, it is showing a larger impact in our operations that we believe is transitory labor reform. We only need more access in the underground mines. Unfortunately, we see the same trend as we have somewhere else with the difficulty to have personnel. We are recruiting, but that would be a program that will last for probably the first three quarters of the year. We have the training on top of that, so the productivity goes down. That's number one factor. The other one is with COVID. As I mentioned, we see the same behavior as Omicron in some other places. We expect that to finish for the time being. In this guidance, we are projecting for the effect on the first quarter. We will see a lower Q1 and then a higher Q2, Q3, and Q4. For 2023, given that we consider 2022 to be a transition. 2022- 2023, we are working on that, and we believe that would be definitely a higher production. How? We'll provide that in March. Right now we are working on that. As I mentioned, the other issues on our operations for Saucito, we are developing some other fronts and production blocks as well, away from the Jarillas vein and that specific area in the Jarillas vein that is causing some geotechnical issues. As Saucito, we should see it in this year and therefore in 2023, going up in terms of volumes and also in grade for many years. As well for Fresnillo, we are expecting higher production in 2023. One full year of production of Juanicipio given that we will have, of course, energy mid-year, as I mentioned, so a full year production of Juanicipio. The Pyrites Plant as well, we are forecasting this year only from July onwards, but in 2023, a full year of production. The rest of the mines has more. We believe we can definitely have a larger production of silver in 2023, and we will give you the more details in our March report. Tomás Iturriaga, in addition to what Octavio just mentioned, another major impact in the guidance this year is the lack of power and so in Juanicipio and the Fresnillo Pyrites Plant. We were accounting initially for a full year, which is not gonna happen. That's reflected in the guidance as another factor. Saucito, as Octavio said, it's just the fact that this seismic activity combined with the lack of personnel has led us to require more meters. That, in conjunction with the lack of personnel, is what made this year complex, this particularly 2022. That's gonna be fixed through the year to position the mine for a much better 2023. Thank you very much. We will now move on to our next question. Our next question comes from the line of Dan Shaw from Morgan Stanley. Please go ahead. Hi. Thanks for taking my question. First one, just on the sort of contractor issues there, you're talking about equipment availability issues. Will this feed through into your CapEx number potentially as well? You know, are you having to buy some of this equipment off the contractors or place orders for your own equipment in order to mitigate the shortages that you're seeing there? We did. This is Tomás Iturriaga. We did place orders for our own equipment ever since last year. We will acquire our own equipment, which we'll start receiving during the year. Because like I said, we placed orders last year. Whenever necessary, you know, to come up or substitute some of the equipment that may be delayed, we rent from contractors as Plan B when really needed. The main plan is to buy our own equipment. Okay. Is that already baked into your, the CapEx guidance that you've given to the market so far? Or is that gonna be potentially an addition? Correct. Yes. Okay, thanks. Yes. Second one, just a clarification, when you're talking about returning the mine to being fully staffed, I think you said, can you just clarify, did you say Q1 for the open pit mines, and did you say Q3 was your best guess for the underground mines? Yes. That is correct. Okay. And, uh- Thank you very much. Sure. Thank you very much. As a reminder, if you are still wishing to ask a question on today's call, please press star one on your telephone keypad. We now have a question from the line of Jason Fairclough from Bank of America. Please go ahead. Good morning, guys. Look, just a sort of bit of a question about your relationship here with the stock market, right? You know, the shares opened down, they traded down 15% and we've now triggered a circuit breaker. Do you think it's fair to say that you've surprised the market today? What do you think about critiquing the way that you've kept us up to date over the year in terms of these developments? Hello, Jason. Well, unfortunately, yes, I think we had hope that the labor reform for contracting could have better results in terms of retaining the workforce and also retaining some of the contractors. This is doing us wrong somehow, and we are lacking that personnel right now. That has had an impact. Also, as I mentioned, some of the contractors on different fronts. Some of the contractors were able to maintain the equipment as well, so we are lacking, just to give you some examples, mechanics now to maintain the equipment. Also, the contractors bring their equipment, so we're lacking that equipment for the time being. As Tomás mentioned, I mean, we have placed orders at the end of last year once we realized that we were going to have these issues. But that will take some time to have the equipment in our facilities. Then this last wave, as I mentioned, of Omicron, yes, it's proven to be very severe in terms of the number of people that we have with this disease. As I mentioned, that takes seven to 10 days once we have a person with that disease. That is disrupting some of operations definitely more on the underground mines, which means the silver production. That's why the combination with some of the operational issues that we were communicating over the year, I mean, has created somehow the situation in which we have right now. Even all those factors, I think it's safe to say that we are surprising somehow with the effect that we are experiencing right now in the operation. Okay. Thank you. If I could just follow up, Octavio. On costs, I know you're not giving cost guidance today, but if I look more generally, your peers are guiding for costs up by 10%-15% year-on-year. You know, combination of tight labor markets, fuel, and general inflation. How does that sound to you? Is that a crazy number if you think about your operations or are there fundamental differences which should mean that cost inflation would be lower at your operations? Well, we are experiencing inflation on the same aspects that you mentioned. The labor force, in two ways around labor force, but also in the possibility to recruit faster and larger numbers as well. Also in fuel, of course. In fuel we have the advantage of the project that we put in operations at Herradura, in which we have the dual system for the larger trucks, and the use of liquefied natural gas somehow mitigates that effect in the operations in which we consume the larger volumes of diesel fuel. But nonetheless, we are expecting as well, we are experiencing inflation as you mentioned. I don't know if Mario is on or has been able to rejoin the call, the numbers that you mentioned, we believe, can be on the lower end, but we are providing that detail on March, Jason. Mario, I don't know if you want to add something if you have rejoined the call. Yeah, Octavio, I think you covered the question very well. I agree that we should expect to see our cost going up somewhere in the lower part of the range that Jason just mentioned. In terms of unit cost, yes. Okay. Thanks, guys. Thank you very much. Thank you, Jason. Just to emphasize, Jason, that we see 2022 affected as you saw according to the guidance. As I mentioned, 2023 will be a different year, too, as I mentioned, with the number of situations at the mines. Okay. Thank you. Thank you, brother. Thank you very much for your questions today. All questions have now been answered. I'd like to hand back to our host, Mr. Octavio Alvídrez, for any closing remarks. Well, just to thank you all for being in the call. I look forward to seeing you on March the 8th, which we will have our full year preliminary results with all the details in terms of the financials and costs and CapEx and everything else, and further detail on the operations as well. Thank you very much. Thank you very much for joining today's Fresnillo conference call. You may now disconnect your lines. Speakers, please stay connected.