Financial results for the year ended 31 December 2023

Chief Executive's statement

Octavio Alvídrez

A sound performance, with exciting projects on the horizon

This year, our teams were again challenged by a mix of external and internal factors. We worked together with our stakeholders to deliver on our production expectations while also making good progress in advancing our pipeline of future projects.

We achieved a sound operating performance in 2023, despite headwinds which included inflation and an unfavourable peso-dollar exchange rate.

Throughout, we remained extremely grateful to our stakeholders, who continued to collaborate closely with our own teams to build a sustainable future for our business, in line with our Purpose. We recognise that Fresnillo thrives when our stakeholder groups thrive, so working together to support our people, suppliers, local communities and the Government is not only the right thing to do - it is a commercial imperative. You can discover more about how we have worked with our stakeholders in the case studies throughout this report.

The year also saw us advance several exciting projects that we expect to make further significant progress in the months and years ahead.

Production highlights and price review

In addition to external macro-economic factors, we experienced minor operational setbacks with a delay to the start-up of operations at the new Pyrites Plant at Fresnillo, reduced availability of haulage equipment at San Julián and lower than expected ore grades at Fresnillo that impacted the year's performance. As a result, although gold production was in line with guidance, silver production fell below our expectations.

Total silver production was 56.3 moz, up by 4.7% from 53.7 moz in 2022, with the ramp-up at Juanicipio, together with higher ore grade at San Julián Veins, partially offset by lower ore grades at San Julián DOB and Fresnillo.

Gold production decreased to 610.6 koz, a reduction of 4.0% from 635.9 koz in the previous year. This was primarily due to lower production at Noche Buena as the mine approached the end of its life.

Attributable by-product lead and zinc production increased 9.2% and 8.6% to 57,833 tonnes and 107,705 tonnes respectively, primarily due to the increased contribution of Juanicipio and higher ore grades and volumes of ore processed at Saucito.

During 2023, the average realised silver price was US$23.6 and that for gold US$1,957.7, an increase of 8.8% and 8.8% respectively. The average price for zinc decreased by 22.6% while the average lead price remained broadly unchanged at US$0.95 per pound. With central banks around the world raising interest levels to counter inflation, I believe that silver and gold prices established a floor during the year. The fact that prices did not fall below US$20 per ounce and US$1,800 per ounce for silver and gold respectively shows the strength and long-term sustainability of these metals, even through tough economic times.

While forecasting global economic conditions is always difficult, I expect that falling interest rates and increased demand for silver in particular - driven by the expansion of green investments and specifically in solar panels, for which silver is a key component - should strengthen prices in 2024.

Our strategy in action

Our strategy is the engine that drives Fresnillo plc forward. It comprises four strategic pillars and here I report on how we have performed against each one.

Maximising the potential of existing operations

Ensuring that our operational mines are performing as efficiently as possible is our primary strategic objective - and this is an area where we rely heavily on the skills and availability of our people. Following the Mexican Government's introduction of labour reforms in 2021, we initiated a series of recruitment and training campaigns. These continue to be successful, and all our mines were again fully staffed throughout the year.

Across the portfolio, we are continuing to address the ongoing impact of inflation and the revaluation of the Mexican peso by investing in initiatives including the greater use of technology and autonomous drilling. We are also launching schemes to reduce haulage costs, which become more significant when we work more distant seams that require greater haulage. At the Fresnillo mine, for example, the deepened San Carlos shaft is set to reduce distances, speed up haulage and cut costs. This is expected to drive a marked improvement in our ability to efficiently access seams which account for more than half of the mine's reserves.

At Saucito, our initiatives include efforts to stabilise areas of poor rock quality. New equipment was delivered towards the end of the year, leading to development rates returning to 3,000m per month in December, an achievement that sets us up well for the year ahead.

We completed the safe ramp-up of our new Juanicipio mine in the third quarter of 2023 and it is now running at nameplate capacity in line with expectations. Juanicipio will have a positive impact on both silver and gold production, helping to offset the lower production at Noche Buena as it nears its end of life, with higher production of both lead and zinc further supporting our overall performance.

With recovery rates at the new Pyrites Plant at Fresnillo initially falling short of anticipated levels, we initiated some technical works and conducted tests to improve performance. We subsequently took the decision to only process historical tailings, as recovery rates improved significantly when following this strategy, and we will continue on the same path in 2024. This means that volumes processed will inevitably be lower than originally planned - although recovery rates and profitability will be higher than would be the case if we processed both current and historical tailings.

Delivering growth through development projects

With our two most recent development projects - the new mine at Juanicipio and Phase II of the Pyrites Plant at Fresnillo - being commissioned and therefore moving into our portfolio of existing operations, we are now focusing on enabling potential new projects to flow from the pipeline and deliver further growth.

We are continuing to concentrate on identifying M&A targets, not only in Mexico but also in the wider region. Establishing operations in different jurisdictions will enable us to de-risk the business by reducing country risk.

However, several of the projects I discuss under the next strategic pillar are close to moving from the pipeline and becoming standalone projects in their own right. Our teams are now working to identify which are most suitable in terms of operational and financial feasibility.

Once further exploration or metallurgical studies have been completed, the project or projects identified as holding the greatest potential will be presented to the Board for approval, at which point capital expenditure will be granted and construction work can commence.

This is a very exciting moment for everybody at Fresnillo plc, as we work hard to define the next generation of projects for the development stage. Seeing a project transform from a possibility in the minds of our exploration experts through feasibility stages and development before emerging as an operational mine is something that galvanises each and every one of us. We have high hopes that the projects currently under consideration will play their part in boosting production, generating long-term shareholder value, providing employment, supporting communities, and delivering tax revenues that will benefit Governments.

Extending the growth pipeline

We have mining concessions and exploration projects in Mexico, Peru and Chile. These include four advanced exploration projects - Orisyvo, Rodeo, Guanajuato and Tajitos - as well as a number of other long-term prospects.

A low strip ratio, open pit, heap leaching disseminated gold project located in the Herradura Corridor of north-western Sonora state, Tajitos is currently progressing along our pipeline at a faster pace than other projects. We carried out 83,224 metres of core and reverse circulation drilling over 2023 and completed additional metallurgical investigations and geotechnical studies towards the end of the year. The next step is to produce a new preliminary economic study and to consider the possibility of purchasing more land for mine development.

Rodeo is following closely behind Tajitos. Rodeo is an open pit, heap leaching gold project in central Durango state, and we progressed several regional studies in 2023, including hydrological, environmental, and social base lines along with an analysis of power supply and infrastructure alternatives. Our exploration teams have worked with the local Ejidos to discuss land access agreements. Once these are concluded, we will commence pre-feasibility to feasibility level exploration, engineering, and development programmes.

Orisyvo is a world-class, high-sulphidation epithermal disseminated gold deposit located in

the Sierra Madre mountains of Chihuahua state. We updated the project's pre-feasibility study in 2023 and strengthened our engagement with local communities. In addition, detailed geotechnical studies have been completed. While Orisyvo shows excellent production potential, there are challenges we need to address around the resources and capex required to progress the project.

At Guanajuato, a historic, world-class gold and silver epithermal vein field stretching more

than 40 kilometres along the central Mexican state of Guanajuato, we intensified our exploration activities during the year, including the drilling of 83,576 metres which gave good results. We have also completed a preliminary economic study, and identified possibilities for conceptual mining and processing scenarios.

Elsewhere, we advanced greenfield drill programmes designed to test expansion targets at the Candameña and San Juan projects in Mexico and Capricornio in Chile. In Peru, we strengthened our engagement efforts with the local community and Government, enabling the resumption of drilling at the Pilarica project and the initiation of the programme at Santo Domingo.

With regard to exploration prospects around our existing operations, we have continued to investigate opportunities at Juanicipio, which show good potential, in the wider Fresnillo district and also at San Julián. In total, we completed 933,185 metres of drilling during 2023, a decrease of 2.4% over 2022. Around 92% of this total was devoted to brownfield targets.

Silver in consolidated overall mineral resources remained broadly unchanged vs. 2022 at 2.2 bn oz as the positive exploration results at the Guanajuato exploration project and San Julián veins were offset by mining at the mine sites, and higher costs and increased cut-off grades. Gold in consolidated overall mineral resources decreased 3.1% vs. 2022 to 37.9 moz primarily driven by extraction, and higher cost and cut-off grades at Herradura, Saucito and Soledad and Dipolos (no mining), partly mitigated by the positive exploration results and increased mineral resources at Guanajuato and Centauro Profundo exploration projects and the Ciénega mine.

Silver in consolidated overall ore reserves decreased 10.0% to 356.6 moz mainly from mining depletion and higher costs and cut-off grades at San Julián (DOB), Juanicipio and Ciénega, partly offset by increased ore reserves at Fresnillo. Gold in consolidated overall ore reserves decreased 13.7% to 7.1 moz mostly as a result of extraction and higher costs and cut-off grades at Herradura and Saucito and the end of the Noche Buena mine life.

For 2024, the exploration budget will remain broadly in line with that for 2023.

Advancing and enhancing the sustainability of our operations

The wellbeing of our workforce is integral to the sustainable mining of silver and gold. It forms an essential component of our Purpose. It is one of the beacons that guide us in everything we do: no amount of silver and gold production, successful exploration, or other accomplishments can compensate for any degree of harm befalling our people. Violations to our policies or standards, and behaviours that could endanger our workforce, will not be tolerated.

The tragic loss of four contractors' workers in 2023, and one in early 2024, was not only unforeseen but also profoundly distressing for everyone at Fresnillo plc. The long-term trend of our health and safety metrics has shown continued improvement over the years, with steady reductions in both the Total Recordable Injury Frequency Rate (TRIFR) and the Lost Time Injury Frequency Rate (LTIFR). However, recent events have cast a shadow across our hard-earned reputation, with our TRIFR and LTIFR rising to 12.08 and 7.40 respectively, focusing efforts like never before.

The occupational health and well-being of our people stand as our foremost priorities, and we are committed to strengthening our culture of proactive risk prevention across the organisation. Looking ahead, we have laid plans to intensify our preventive efforts, reinforcing a safety-centric culture that effectively manages high potential and critical risks. This includes an even sharper focus on visible leadership and further enhancing how we implement lessons learnt. This is a long journey and there are no easy fixes, but we are resolute in our unyielding pursuit of zero harm, ensuring that all our team members return home safely. Anchored by the continuous evolution of our 'I Care, We Care' programme, we are confident that these initiatives will pave the way to safeguarding lives and preventing incidents - and to firmly restoring our safety record on its intended course.

From increasing productivity, embracing our safety culture and driving innovation, our workforce plays an important role in the delivery of our strategy. We continue to maintain a close working relationship with both unionised and non-unionised employees to build trust and mutual accountability. These engagements have become increasingly relevant post the labour and mining reforms. After several years without any labour disputes, we experienced a temporary suspension of activities at Herradura in the second quarter of the year. The illegal stoppage by a very small group of unionised personnel was not approved by the union and did not have a material impact on the operations at Herradura. We will continue to have constructive dialogue with our workforce to better understand their concerns and expectations in these complex regulatory and economic environments.

Since our endorsement of the UN Global Compact in 2009, our commitment to responsible business practices has been a cornerstone of how we operate. Every year, we communicate our progress and hold ourselves accountable to the highest standards. Guided by our Purpose, our commitment to sustainability was further demonstrated during 2023 through the strategic alignment with 11 of the UN's Sustainable Development Goals across our four ESG pillars: doing business ethically and responsibly; caring for our people; protecting the environment; and partnering with our communities.

Our achievements during 2023 - together with our ongoing plans for future years - demonstrate good progress against our ESG commitments.

For example, during the first half of the year, the Board approved our new Tailings Policy. We have successfully implemented our Tailings Storage Facilities (TSFs) governance framework across our operations, and all mining units are now subject to Dam Safety Inspections. We also commenced the design stage of the TSF at Orisyvo. We developed a facility at Ciénega that conforms to the guidelines of the Mining Association of Canada (MAC), the International Commission on Large Dams (ICOLD) and the Canadian Dam Association (CDA). Moving forward, we expect to conclude Potential Failure Mode Assessments (PFMA) for each site in 2024, enabling us to assess and pre-emptively manage major risks, thereby optimising efficiency.

We continue to champion operational and energy efficiency measures. The multimodal fuel station project that supplies Liquid Natural Gas (LNG) and diesel in our Herradura mine was finally approved by the Government during the period, allowing better control and more efficient operation of our dual-motor haulage fleet and the optimisation of the LNG-diesel substitution ratio. We look forward to benefitting from lower costs and a reduced carbon footprint in 2024.

We also continued to engage with the Mexican Government to explore how we could increase the share of renewables in our energy matrix. Following an administrative rearrangement of our current energy portfolio, we sourced over 50% of our energy needs from wind. This is similar to 2019 levels, and is particularly noteworthy considering the increase in our overall electricity consumption since then, due to our expanding operations. By optimising our available renewable sources across our facilities, we are confidently moving back on track to achieving our ambitious goal of 75% renewables by 2030.

Regarding our climate change mitigation and adaptation strategies, we have now harmonised our risk framework with the central Enterprise Risk Framework (ERM), enabling us to allocate divisional and site-level risks and controls to designated risk owners, with the goal of further refining site-specific nuances through a standardised methodology. At the same time, we have satisfactorily concluded our regional climate modelling. This has generated industry-valuable insights and enabled us to undertake decarbonisation pathway analyses in two of our most representative facilities. These analyses aim to identify feasible decarbonisation technologies and scenarios, while providing further crucial insights to guide our overall decarbonisation journey.

Last year, I expressed disappointment that we had been omitted from the FTSE4Good Index due to heightened climate change requirements. Our commitment to reclaim our position in this prestigious index remains a top priority for Fresnillo plc - and I am confident that the work underway will pay dividends in the near future, not only enhancing our reputation but, most importantly, fortifying our risk management and operational resilience. As we forge ahead, our institutional practices will continue to exemplify our proactive stance in shaping a more sustainable future for our business, our stakeholders and the planet.

We fully recognise the importance of close, proactive working relationships with the Government in Mexico and its departments, as well as with their equivalents in Peru and Chile where we have exploration projects. Several changes to the laws governing mining were approved in May 2023. While we do not believe these will have any material impact on our current operations or advanced exploration projects, certain aspects of the new legislation are harmful to the industry. Others may require additional clarifications, which have yet to be issued. We continue to engage with the Government regarding these and other matters in order to obtain a positive outcome for all - for the Government, for the people of Mexico and for our business.

Looking ahead

We expect the global economic landscape to remain challenging, with greater uncertainty driven by geopolitical tensions, faltering economies and destabilising events including the wars in Ukraine and the Middle East. In Mexico, the forthcoming election may bring a change of Government and a new set of priorities. We will continue to work with the Government, regardless of its political leanings, to make sure that the mining industry in general and Fresnillo in particular can continue to bring prosperity and jobs to the people of Mexico.

For our business, 2024 and the following two to three years are about stable production and managing our costs while at the same time developing projects that will form the basis of future growth.

In addition to redoubling our efforts to protect the health and safety of our people, we will strive to mitigate the impact of inflation and exchange rates on our costs, working with our internal teams and as well as suppliers to identify efficiencies across the business which will enable us to achieve more without increasing resources. We are well-positioned from a financial standpoint with strong cash flow and a robust balance sheet in place to ensure that we are able to seize opportunities - whether for M&A or to develop new growth projects - as they arise.

Our pipeline continues to be a major source of optimism. Last year I reported that some potential projects could shortly be making their way into our operational portfolio, and I expect us to make further progress during the year ahead.

When times are difficult, collaboration and cooperation become more critical than ever. From the teams in our mines, offices and Boardroom to suppliers, local communities, Government officials and investors, we have worked together to deliver a sound performance for the year, with the prospect of better times in the long term. I would like to thank everybody associated with Fresnillo for your unwavering support during the year.

-Octavio Alvídrez

Chief Executive Officer

Financial review

The consolidated Financial Statements of Fresnillo plc are prepared in accordance with UK-adopted international accounting standards. This Financial Review intends to explain the main factors affecting performance as well as provide a detailed analysis of the financial results in order to enhance the understanding of the Group's Financial Statements. All comparisons refer to 2023 figures compared to 2022, unless otherwise noted. The financial information and year-on-year variations are presented in US dollars, except where otherwise indicated.

The following report presents how we have managed our financial resources.

Commentary on financial performance

The Group's financial performance in 2023 reflects the operational challenges faced at the mines, coupled with the adverse effects of the revaluation of the Mexican peso vs. the US dollar and inflationary pressures across the cost base.

Adjusted revenue¹ increased 10.5% vs 2022 to US$2,869.1 million. This was primarily due to the higher volumes of silver sold, and to a lesser extent, the increase in volumes of lead and zinc sold, combined with the higher gold and silver prices. Revenue increased 11.2% year-on-year to US$2,705.1 million due to the increase in adjusted revenue, partly offset by higher treatment and refining charges.

Adjusted production costs?² increased 12.3% vs 2022. This was primarily driven by the adverse impact caused by the revaluation of the Mexican peso/US dollar exchange rate which, on average, appreciated 11.7%, a 3.9% in cost inflation, the additional costs from the start-up of the flotation plant and ramp up of the mine at Juanicipio and the start-up of the pyrites plant at Fresnillo, together with longer haulage distances, maintenance and contractors at San Julián (DOB and Veins), Ciénega and Herradura.

As a result, gross profit and EBITDA³ decreased to US$503.2 million and US$655.7 million, a 6.1% and 12.7% decrease vs 2022 respectively.

We maintained our strong financial position, with US$534.6 million in cash and other liquid funds as of 31 December 2023 notwithstanding paying dividends of US$108.4 million in accordance with our policy, investing US$483.4 million in capex, repaying the US$317.9 million Senior Notes due in November 2023, and spending US$182.4 million on exploration expenses.

In early 2024, the Group signed a five-year committed revolving line of credit for up to US$350 million. This facility is part of Fresnillo's strategy to maintain a strong balance sheet and financial flexibility, which are core to the Company's capital structure and investment case.

Income statement highlights

	2023 US$ million	2022 US$ million	Amount change US$ million	Change %
Adjusted revenue1	2,869.1	2,597.2	271.9	10.5
Total revenue	2,705.1	2,433.0	272.1	11.2
Cost of sales	(2,201.8)	(1,897.0)	(304.8)	16.1
Gross profit	503.2	536.0	(32.8)	(6.1)
Exploration expenses	182.4	165.8	16.6	10.0
Operating profit	142.5	283.6	(141.1)	(49.8)
EBITDA3	655.7	751.1	(95.4)	(12.7)
Tax income net of special mining rights4	(174.3)	(59.7)	(114.6)	192.0
Profit for the period	288.3	308.3	(20.0)	(6.5)
Profit for the period, excluding post-tax Silverstream effects	282.9	295.1	(12.2)	(4.1)
Basic and diluted earnings per share (US$/share)?4	0.317	0.369	(0.052)	(14.1)
Basic and diluted earnings per share, excluding post-tax Silverstream effects (US$/share)	0.310	0.351	(0.041)	(11.7)

1 Adjusted revenue is revenue as disclosed in the income statement adjusted to exclude treatment and refining charges and metals prices hedging.

2 Adjusted production costs are calculated as cost of sales less depreciation, profit sharing, hedging, change in inventories and unproductive costs. The Company considers this a useful additional measure to help understand underlying factors driving production costs in terms of the different stages involved in the mining and plant processes, including efficiencies and inefficiencies, as the case may be, and other factors outside the Company's control such as cost inflation or changes in accounting criteria.

3 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.

4 Tax income resulted from the favourable impact of the revaluation of the Mexican peso vs. the US dollar.

5 The weighted average number of Ordinary Shares was 736,893,589 for 2023 and 2022. See note 18 to the consolidated financial statements.

The Group's financial results are largely determined by the performance of our operations. However, other factors beyond of our control, including a number of macroeconomic variables, affect our financial results. These include:

Metals prices

The average realised silver price increased 8.8% from US$21.7 per ounce in 2022 to US$23.6 per ounce in 2023, while the average realised gold price rose 8.8% to US$1,957.7 per ounce in 2023. The average realised zinc by-product price decreased 22.6% to US$1.18 per pound, while the lead by-product price decreased 1.4% vs 2022 to US$0.95 per pound.

MX$/US$ exchange rate

The Mexican peso/US dollar spot exchange rate at 31 December 2023 was $16.89 per US dollar, compared to the exchange rate at 31 December 2022 of $19.36 per US dollar. The 12.8% spot revaluation had a favourable effect on taxes and mining rights.

The average spot Mexican peso/US dollar exchange rate appreciated by 11.7% from $20.13 per US dollar in 2022 to $17.77 per US dollar in 2023, thus having an adverse effect of US$113.3 million on the Group's costs denominated in Mexican pesos (approximately 45% of total costs) when converted to US dollars.

Cost inflation

In 2023, cost inflation was 3.9%. The main components driving our cost inflation are listed below:

Labour

Unionised workers received on average an 8.5% increase in wages in Mexican pesos, while non-unionised employees received on average a 7.5% increase in wages in Mexican pesos; when converted to US dollarsthis resulted in a weighted average labour inflation of 22.5%.

Energy

Electricity

The weighted average cost of electricity in US dollars increased 4.8% from US$9.26 cents per kW in 2022 to US$9.70 cents per kW in 2023, due to the higher average generating cost of the Comisión Federal de Electricidad (CFE), the national utility.

Diesel

The weighted average cost of diesel increased 17.0% in US dollars to 106.9 US cents per litre in 2023, compared to 91.4 US cents per litre in 2022. This was primarily due to the increase in global oil prices and the gradual lifting of the Mexican Government's fuel tax relief that subsidised the cost of diesel and gasoline in Mexico.

Operating materials

	Year-on-year change in unit price %
Lubricants	27.5
Other reagents	8.7
Steel for drilling	7.4
Tyres	5.0
Steel balls for milling	(3.4)
Explosives	(3.8)
Sodium cyanide	(5.9)
Weighted average of all operating materials	1.0

The weighted average unit prices of all operating materials increased by 1.0% over the year as the unit prices of lubricants and reagents continued to increase in US dollar terms reflecting global inflationary pressures and supply disruptions. This was partly offset by the decrease in the unit price of sodium cyanide, explosives and steel balls for drilling. There has been no significant impact on the unit cost of operating materials from the revaluation of the Mexican peso/US dollar exchange rate as the majority of these items are dollar-denominated.

Contractors

Agreements are signed individually with each contractor company and include specific terms and conditions that cover not only labour, but also operating materials, equipment, and maintenance, among others. Contractor costs are mainly denominated in Mexican pesos and are an important component of our?total production costs. In 2023, increases per unit (i.e. per metre developed/per tonne hauled) granted to contractors whose agreements were due for review during the period, resulted in a weighted average increase of approximately 14.4% in US dollars, after considering the revaluation of the Mexican peso vs the?US?dollar.

Maintenance

Unit prices of spare parts for maintenance increased by 12.5% on average in US dollar terms.

Other costs

Other cost components include freight which increased by an estimated 26.6% in US dollars and insurance costs which increased by 4.8% in US dollars, mainly due to higher market premiums. The remaining cost inflation components experienced an average inflation of 5.4% in US dollars vs 2022.

The effects of the above external factors, combined with the Group's internal variables, are further described below through the main line items of the income?statement.

Revenue

Consolidated revenue

	2023 US$ million	2022 US$ million	Amount US$ million	Change %
Adjusted revenue5	2,869.1	2,597.2	271.9	10.5
Metals prices hedging	0.0	(3.8)	3.8	0.0
Treatment and refining charges	(164.0)	(160.5)	(3.5)	(2.2)
Total revenue	2,705.1	2,433.0	272.1	11.2

5 Adjusted revenue is revenue as disclosed in the income statement adjusted to exclude treatment and refining charges and metals prices hedging.

Adjusted revenue increased by US$271.9 million primarily driven by the higher volumes of silver sold, and to a lesser extent, of lead and zinc sold and the higher gold and silver prices. Treatment and refining charges increased 2.2% as explained below. As a result, total revenue increased to US$2,705.1 million, an 11.2% increase against 2022.

Adjusted revenue¹?by metal

	2023		2022
	US$ million	% contribution	US$ million	% contribution	Volume variance US$ million	Price variance US$ million	Total net change US$ million	Change %
Gold	1,186.2	41.4	1,114.2	42.9	(27.8)	99.8	72.0	6.5
Silver	1,310.6	45.7	1,089.2	41.9	128.1	93.3	221.4	20.3
Lead	121.5	4.2	106.6	4.1	16.4	(1.6)	14.8	14.0
Zinc	250.8	8.7	287.2	11.1	32.6	(69.1)	(36.5)	(12.7)
Total adjusted revenue	2,869.1	100.0	2,597.2	100.0	149.4	122.4	271.9	10.5

The increase in volumes of silver sold was primarily due to the ramp up of production at Juanicipio. The volumes of gold sold decreased, mainly driven by the lower production at Noche Buena as it approached the end of its mine life. The volumes of lead and zinc sold benefitted from the higher contribution from Juancipio and the higher volume of ore processed and ore grade at Saucito (for further detail, see Review of operations). The total sale volume effect (higher silver, zinc and lead volumes sold partly offset by lower gold volumes sold), resulted in a positive effect on adjusted revenues of US$149.4 million, representing 54.9% of the total variation. The remaining 45.1% of the increase in adjusted revenues was primarily explained by the higher silver and gold prices, mitigated by the lower price of zinc.

Changes in the contribution by metal were the result of the relative changes in metals prices and volumes produced. The contribution of silver to total adjusted revenues increased from 41.9% in 2022 to 45.7% in 2023, while that for gold decreased from 42.9% in 2022 to 41.4% in 2023.

Adjusted revenue by mine

Herradura continued to be the greatest contributor to adjusted revenue, representing 24.7% (2022: 24.4%). Saucito's contribution remained relatively unchanged at 18.4%, whilst Juanicipio became the third most important contributor to adjusted revenue, with its share increasing to 17.2% (2022: 10.0%). Fresnillo's contribution decreased to 16.7% in 2023 (2022: 18.3%), albeit generating a similar level of adjusted revenue year on year. San Julián's contribution to the

Group's adjusted revenue decreased to 14.1% in 2023 (2022: 16.0%) primarily due to the lower volumes of silver and gold sold. Ciénega's contribution to the Group's adjusted revenue decreased to 5.9% (2022: 6.9%) as a result of the lower volumes of all metals sold, mitigated by the higher gold and silver price. Noche Buena's contribution to adjusted revenue decreased to 3.0% in 2023 (5.5% in 2022).

The contribution by metal and by mine to adjusted revenues is expected to change further in the future, as new projects are incorporated into the Group's operations and as precious metals prices fluctuate.

	2023		2022
	(US$ million)	% contribution	(US$ million)	% contribution	Change %
Herradura	708.7	24.7	634.9	24.4	11.6
Saucito	527.8	18.4	485.9	18.7	8.6
Juanicipio	492.5	17.2	259.0	10.0	90.2
Fresnillo	479.6	16.7	475.8	18.3	0.8
San Julián (Veins)	205.1	7.1	175.1	6.7	17.1
San Julián (DOB)	201.3	7.0	242.5	9.3	(17.0)
Ciénega	169.3	5.9	180.3	6.9	(6.1)
Noche Buena	84.8	3.0	143.8	5.5	10.5
Total	2,869.1	100	2,597.2	100	11.6

16 Adjusted revenue is revenue as disclosed in the income statement adjusted to exclude treatment and refining charges and metals prices hedging.

Volumes of metal sold

	2023	% contribution of each mine	2022	% contribution of each mine	Change %
Silver (koz)
Juanicipio	15,318	27.4	8,697	17.3	76.1
Fresnillo	11,535	20.7	12,222	24.4	(5.6)
Saucito	10,387	18.6	10,620	21.2	(2.2)
San Julián (DOB)	6,544	11.7	8,117	16.2	(19.4)
San Julián (Veins)	5,368	9.6	4,502	9.0	19.2
Ciénega	3,864	6.9	4,344	8.7	(11.0)
Pyrites plant at Saucito	1,799	3.2	854	1.7	110.7
Herradura	615	1.1	777	1.5	(20.8)
Pyrites plant at Fresnillo	378	0.7	0	0.0	100.0
Noche Buena	5	0.0	9	0.0	(44.4)
Total silver (koz)	55,813		50,142		11.3
Gold (oz)
Herradura	358,210	59.2	351,156	56.7	2.0
Saucito	64,507	10.7	65,689	10.6	(1.8)
San Julián (Veins)	40,253	6.7	42,516	6.9	(5.3)
Noche Buena	39,203	6.5	71,921	11.6	(45.5)
Ciénega	33,407	5.5	35,275	5.7	(5.3)
Juanicipio	31,803	5.3	20,268	3.3	56.9
Fresnillo	30,234	5.0	28,277	4.6	6.9
Pyrites plant at Saucito	4,713	0.8	2,585	0.4	82.3
San Julián (DOB)	1,739	0.3	1,546	0.2	12.5
Pyrites plant at Fresnillo	718	0.1	4	0.0	>100
Total gold (oz)	604,787		619,237		(2.3)
Lead (t)
Fresnillo	19,441	33.5	19,667	39.2	(1.1)
Saucito	17,732	30.6	16,114	32.1	10.0
Juanicipio	11,783	20.3	4,487	8.9	162.6
San Julián (DOB)	6,363	11.0	6,677	13.3	(4.7)
Ciénega	2,682	4.6	3,267	6.5	(17.9)
Total lead (t)	58,001		50,212		15.5
Zinc (t)
Fresnillo	37,636	39.0	35,890	41.9	4.9
Saucito	27,211	28.2	23,604	27.6	15.3
Juanicipio	16,796	17.4	6,758	7.9	148.5
San Julián (DOB)	11,929	12.4	14,771	17.3	(19.2)
Ciénega	2,989	3.1	4,564	5.3	(34.5)
Total zinc (t)	96,561		85,587		12.8

Treatment and refining charges

Treatment and refining charges³ are reviewed annually using international benchmarks. Treatment charges per tonne of zinc concentrate increased in dollar terms by 4.9%, while treatment charge per tonne of lead concentrate and silver refining charges decreased by 10.5% and 41.2% vs 2022, respectively. The higher treatment charges per tonne of zinc and increase in volumes of lead and zinc concentrates shipped from our mines to Met-Mex, combined with the lower treatment charges per tonne of lead and silver refining charges resulted in a 2.2% increase in treatment and refining charges set out in the income statement in absolute terms when compared to 2022.

Cost of sales

Concept	2023 US$ million	2022 US$ million	Amount US$ million	Change %
Adjusted production costs4	1,624.1	1,445.8	178.3	12.3
Depreciation	497.3	500.6	(3.3)	(0.7)
Profit sharing	2.2	9.6	(7.4)	(77.1)
Hedging	(0.2)	0.0	(0.2)	(100.0)
Change in work in progress	52.6	(61.6)	114.2	N/A
Unproductive costs including inventory reversal and unabsorbed production costs5	25.9	2.6	23.3	896.2
Cost of sales	2,201.8	1,897.0	304.8	16.1

Cost of sales increased 16.0% to US$2,201.8 million in 2023. The US$304.8 million increase is due to a combination of the following factors:

? An increase in Adjusted production costs (+US$178.3 million; +12.3%). I) the adverse effect of the 11.7% average revaluation of Mexican peso vs. the US dollar (US$113.3 million); ii) underlying cost inflation excluding the revaluation of the Mexican peso vs. US dollar (US$56.9 million) - these two factors combined resulted in a cost inflation in US dollars of 12.4%, which increased adjusted production cost by US$170.2 million; iii) costs from the start-up of the beneficiation plant and mine ramp up at Juanicipio (US$43.4 million); iv) others (US$32.9 million); v) longer haulage distances and increase in maintenance and contractors at San Julián (DOB and Veins), Ciénega and Herradura (US$29.7 million); and vii) costs from the start-up of the pyrites plant at Fresnillo (US$8.8 million). These adverse effects were mitigated by: i) a decrease in mining costs as depositing activities stopped at Noche Buena as part of the mine closure process which started in May (-US$81.9 million) and cost reductions due to economies of scale and operating efficiencies at Saucito and Fresnillo (US$24.7 million).

? The variation in the change in work in progress had an adverse effect of US$114.2 million vs 2022. This resulted mainly from the decrease in inventories of ore at Juanicipio, as the flotation plant was commissioned and it ramped up to full capacity, and the decrease of gold content on the leaching pads at Noche Buena. In 2022, there was a positive effect in relation to the increase in inventories of ore at Juanicipio and gold content at the leaching pads at Herradura.

? The variation in unproductive costs, which had an unfavourable effect of (+US$23.3 million). In 2023, US$25.9 million was registered as unproductive costs. These costs related mainly to the temporary stoppage of activities at Herradura and fixed costs incurred at Noche Buena from the conclusion of mining activities.

These negative effects were slightly mitigated mainly by:

? Profit sharing (-US$7.4 million) mainly due to lower profits.

? Depreciation (-US$3.3 million). This is mainly due to lower depreciation at Noche Buena - as it approaches the end of its mine life and the majority of the assets have been fully depreciated - and at San Julián due to a lower depletion factor. This was partly offset by the higher depreciation at Juanicipio.

3 Treatment and refining charges include the cost of treatment and refining as well as the margin charged by the refiner.

4 Adjusted production costs are calculated as cost of sales less depreciation, profit sharing, hedging, change in inventories and unproductive costs. The Company considers this a useful additional measure to help understand underlying factors driving production costs in terms of the different stages involved in the mining and plant processes, including efficiencies and inefficiencies, as the case may be, and other factors outside the Company's control such as cost inflation or changes in accounting criteria.

5 Unproductive costs primarily include unabsorbed production costs such as non-productive costs from the temporary suspension of activities at Herradura and non-productive fixed mine costs incurred at Noche Buena from the finalisation of mining activities.

6 Cost inflation would have been 7.9% excluding the effect of the Mexican peso revaluation (0.8%).

Cost per tonne, cash cost per ounce and all-in sustaining cost (AISC)

Cost per tonne is a key indicator to measure the effects of changes in production costs and cost control performance at each mine. This indicator is calculated as total production costs, plus ordinary mining rights, less depreciation, profit sharing and exchange rate hedging effects, divided by total tonnage processed. We have included cost per tonne hauled/moved as we believe it is a useful indicator to thoroughly analyse cost performance for the open pit mines.

Cost per tonne		2023	2022	% change
Fresnillo (standalone)	US$/tonne milled	97.8	91.5	6.9
Fresnillo pyrites process	US$/tonne milled	3.3	N/A	N/A
Fresnillo Total	US$/tonne milled	101.1	91.5	10.5
Saucito (standalone)	US$/tonne milled	122.0	113.3	7.7
Saucito pyrites process	US$/tonne milled	19.2	6.2	209.7
Saucito Total	US$/tonne milled	141.2	119.5	18.2
Juanicipio	US$/tonne milled	114.8	N/A	N/A
San Julián (Veins)	US$/tonne milled	109.0	91.0	19.8
San Julián (DOB)	US$/tonne milled	50.0	44.8	11.6
Ciénega	US$/tonne milled	135.8	116.3	16.8
Herradura	US$/tonne deposited	24.2	19.7	22.8
Herradura	US$/tonne hauled	5.4	4.7	14.9
Noche Buena	US$/tonne deposited	13.1	13.9	(5.8)
Noche Buena	US$/tonne hauled	3.9	3.9	0.0

Fresnillo: Cost per tonne increased 10.6% to US$101.1 in 2023, primarily driven by the adverse effect of the 11.7% revaluation of the Mexican peso vs the US dollar and underlying cost inflation. This was mitigated by the higher volume of ore processed, as well as cost reductions due to economies of scale and operating efficiencies.

Saucito: Cost per tonne increased 18.2% to US$141.2, mainly driven by the adverse effect of the revaluation of the Mexican peso vs. the US dollar, cost of raw material, underlying cost inflation and the increased consumption of reagents at the pyrites plant. This was partly mitigated by the increased volume of ore processed.

San Julián Veins: Cost per tonne increased 19.8% to US$109.0, primarily driven by the adverse effect of the revaluation of the Mexican peso vs. the US dollar, the underlying cost inflation and an increase in the use of maintenance services and infrastructure contractors.

San Julián DOB: Cost per tonne increased 11.6% to US$50.0, mainly driven by the adverse effect of the revaluation of the Mexican peso vs. the US dollar and cost inflation.

Ciénega: Cost per tonne increased 16.8% to US$135.8, driven by the revaluation of the Mexican peso vs. the US dollar, underlying cost inflation and a?lower volume of ore processed, an increase in development and a greater use of infrastructure contractors.

Herradura: Cost per tonne of ore hauled increased 22.8%, primarily as a result of the longer haulage distances and increase in maintenance, the adverse effect of the revaluation of the Mexican peso vs. the US dollar, and underlying cost inflation.

Noche Buena: Cost per tonne decreased to US$13.1 in 2023, primarily driven by the lower mining costs incurred as extraction ended in 2Q23, partly offset by the revaluation of the Mexican peso vs. the US dollar and underlying cost inflation.

Cash cost per ounce, calculated as total cash cost (cost of sales plus treatment and refining charges, less depreciation) less revenue from by-products divided by the silver or gold ounces sold, when compared to the corresponding metal price, is an indicator of the ability of the mine to generate competitive profit margins.

Cash cost per ounce		2023	2022	% change
Fresnillo	US$ per silver ounce	10.2	5.7	78.9
Saucito	US$ per silver ounce	8.7	4.5	93.3
Juanicipio	US$ per silver ounce	6.8	N/A	N/A
San Julián (Veins)	US$ per silver ounce	9.6	7.1	35.2
San Julián (DOB)?	US$ per silver ounce	11.8	6.9	71.0
Ciénega	US$ per gold ounce	1,597.8	518.5	208.2
Herradura	US$ per gold ounce	1,378.8	1,155.5	19.3
Noche Buena	US$ per gold ounce	1,780.8	1,269.9	40.2

Fresnillo: Cash cost per silver ounce increased to US$10.2 (2022: US$5.7) mainly due to the increase in cost per tonne, the lower silver ore grade, an increase in mining rights and the lower zinc by-product credits. Margin per ounce decreased 16.3% to US$13.4 (2022: US$16.0). Expressed as a percentage of the silver price, it decreased to 56.8% (2022: 73.7%).

Saucito: Cash cost per silver ounce increased to US$8.7 per ounce (2022: US$4.5 per silver ounce) mainly as a result of a higher cost per tonne, increased mining rights, and lower zinc by-product credits per silver ounce. Margin per ounce decreased 13.1% to US$14.9 in 2023 (2022: US$17.2). Expressed as a percentage of the silver price, it?decreased from 79.3% to 63.1%.

San Julián Veins: Cash cost per ounce of silver increased to US$9.6 per ounce, mainly due to the higher cost per tonne and lower gold by-product credits per silver ounce, and increased mining rights, mitigated by a higher silver ore grade. Margin per ounce decreased 4.8% to US$14.0 (2022: US$14.7), while margin expressed as a percentage of the silver price decreased from 67.5% in 2022 to 59.3% in 2023.

San Julián DOB: Cash cost increased to US$11.8 per ounce of silver driven by a lower silver ore grade, the increase in cost per tonne and lower zinc by-product credits per silver ounce. Margin per ounce decreased 20.3% to US$11.8 (2022: US$14.8), while margin expressed as a percentage of the silver price decreased from 68.2% in 2022 to 50.0% in 2023.

Ciénega: The increase in cash cost per gold ounce from US$518.5 in 2022 to US$1,597.8 in 2023 was primarily due to a higher cost per tonne, increased mining rights and a decrease in zinc and lead by-product credits per gold ounce. Margin per?ounce decreased 71.9% to US$359.9 in 2023 (2022:?US$1,280.8). Expressed as a percentage of the gold price, the margin decreased to 18.4% (2022: 71.2%).

Herradura: Cash cost per gold ounce increased to US$1,378.8 per ounce of gold, mainly due to the higher cost per tonne. Margin per ounce decreased 5.6% from US$643.8 to US$578.9, while margin expressed as a percentage of the gold price decreased from 35.8% in 2022 to 29.6% in 2023.

Noche Buena: Cash cost per gold ounce increased to US$1,780.8, mainly due to the consumption of inventories on the leaching pads, and a lower gold ore grade, partly mitigated by a lower cost per tonne. Margin per ounce decreased 66.6% to US$176.9 in 2023 (2022: US$529.4). Expressed as a percentage of the gold price, it decreased from 29.4% to 9.0% in 2023.

In addition to the traditional cash cost, the Group is reporting All-In Sustaining Cost (AISC) in accordance with the guidelines issued by the World Gold Council.

This cost metric is calculated as traditional cash cost plus on-site general, corporate and administrative costs, community costs related to current operations, capitalised stripping and underground mine development, sustaining capital expenditures and remediation expenses.

We consider AISC to be a reasonable indicator of a mine's ability to generate free cash flow when compared with the corresponding metal price. We also believe it is a means to monitor not only current production costs, but also sustaining costs as it includes mine development costs incurred to prepare the mine for future production, as well as sustaining capex.

All-in sustaining cost (AISC)

AISC		2023	2022	% change
Fresnillo	US$ per silver ounce	20.43	16.27	25.6
Saucito	US$ per silver ounce	21.63	16.8	28.8
Juanicipio	US$ per silver ounce	11.4	N/A	N/A
San Julián (Veins)	US$ per silver ounce	23.92	21.84	9.5
San Julián (DOB)?	US$ per silver ounce	14.50	8.79	65.0
Ciénega	US$ per gold ounce	3,178.47	2,011.14	58.0
Herradura	US$ per gold ounce	1,608.67	1,527.36	5.3
Noche Buena	US$ per gold ounce	1,873.04	1,359.63	37.8

Fresnillo: All-in sustaining cost increased by 25.6% to US$20.4, explained by the higher cash cost and an increase in capitalised development, partly mitigated by the lower sustaining capex.

Saucito: All-in sustaining cost increased 28.8% to US$21.6 per ounce due to the increase in cash cost and higher sustaining capex per ounce, partly offset by a decrease in capitalised mine development cost per ounce.

San Julián Veins: All in sustaining cost increased 9.2% to US$23.9 per ounce due to the increased cash cost and higher sustaining capex, partly mitigated by lower capitalised mine development per ounce.

San Julián DOB: The 65.0% increase in all in sustaining cost was mainly driven by the increase in cash cost, increased sustaining capex and a higher capitalised development cost per ounce.

Ciénega: The US$1,167.4 per ounce increase in all-in sustaining cost was primarily driven by the higher cash cost and, to a lesser extent, an increase in mine development per ounce, partly offset by the lower sustaining capex.

Herradura: All-in sustaining cost increased 5.3% to US$1,608.7 per ounce, mainly due to the higher cash cost.

Noche Buena: The 37.8% increase to US$1,873.0 per ounce in all-in sustaining cost was the result of higher cash cost.

Gross profit

Gross profit, excluding hedging gains and losses, is a key financial indicator of profitability at each business unit and the Fresnillo Group as a whole.

Total gross profit, including hedging gains and losses, decreased by 6.1% from US$536.0 million in 2022 to US$503.2 million in 2023.

The US$32.8 million decrease in gross profit was mainly due to: i) the variation in change of inventories (-US$145.1 million); ii) the MXP/USD revaluation effect (-$113.3 million); iii) the lower zinc and lead prices (-US$70.4 million); iv) underlying cost inflation of 3.9% (-$56.9 million); v) the decrease in silver equivalent ounces produced (-US$24.3 million); vi) increase in unproductive costs primarily from the illegal stoppage at Herradura and Noche Buena (-US$19.0 million); vii) others (-US$17.3 million); and viii) higher haulage distances and spare parts for maintenance at Herradura (-US$16.5 million).These negative effects were mitigated by: i) the start up of the beneficiation plant and ramp up of the Juanicipio mine (US$206.2 million); ii) higher gold and silver prices (US$192.9 million); and iii) the positive effect of the gold inventory uplift at Herradura (US$30.9 million).

On a per mine basis, Juanicipio became the largest contributor to the Group's consolidated gross profit, reflecting the successful ramp up of production at the flotation plant. Herradura dropped to second contributor, decreasing its percentage share from 27.5% to 25.1%. The higher costs at Saucito and Fresnillo significantly affected the gross profit at both mines, which decreased by 18.4% and 41.6% vs 2022, respectively, thus decreasing their contribution to the consolidated gross profit. San Julián's contribution to the Group's gross profit remained broadly unchanged at 11.4% in 2023, despite the 6.6% decrease in gross profit. The decrease in production volumes, together with the cost pressures, significantly affected profitability at Ciénega and Noche Buena.

Contribution by mine to consolidated gross profit, excluding hedging gains and losses

	2023		2022		Change
	US$ million	% contribution	US$ million	% contribution	US$ million	%
Juanicipio	202.8	41.0	132.8	24.8	70.0	52.7
Herradura	124.2	25.1	147.1	27.5	(22.9)	(15.6)
Saucito	80.4	16.2	98.5	18.4	(18.1)	(18.4)
Fresnillo	61.2	12.4	104.8	19.6	(43.6)	(41.6)
San Julián	56.3	11.4	60.3	11.3	(4.0)	(6.6)
Noche Buena	(0.1)	0.0	3.3	0.6	(3.4)	(103.0)
Ciénega	(29.8)	(6.0)	(11.3)	(2.1)	(18.5)	163.7
Total for operating mines	495.0	100	535.5	100	(40.5)	(7.6)
Metal hedging and other subsidiaries	8.2		0.5		7.7	>100.0
Total Fresnillo plc	503.2		536.0		(32.8)	(6.1)

Administrative and corporate expenses

Administrative and corporate expenses increased 36.5% from US$94.1 million in 2022 to US$128.4 million in 2023, mainly due to the adverse effects of the revaluation of the Mexican peso vs the US Dollar on administrative expenses denominated in pesos, including personnel salaries, and the increase resulting from the review of the Shared Services Agreement with Peñoles in line with the increased services provided.

Exploration expenses

Business unit/project (US$ million)	Exploration expenses 2023	Exploration expenses 2022	Capitalised expenses 2023	Capitalised expenses 2022
Fresnillo	22.9	12.3	-	-
San Julián	19.6	24.6	-	-
Saucito	13.5	12.0	-	-
Juanicipio	7.3	11.7	-	-
Ciénega	6.7	7.2	-	-
Herradura	5.7	4.8	-	-
Noche Buena	0.7	1.4	-	-
Guanajuato	18.6	11.6	1.6	1.0
Orisyvo	6.7	4.0	0.6	-
Valles (Herradura)	4.3	5.8	-	-
Centauro Deep	0.4	0.5	-	-
Others	76.1	69.9	1.3	0.8
Total	182.4	165.8	3.5	1.8

As expected, exploration expenses increased by 10.1% from US$165.8 million in 2022 to US$182.4 million in 2023, in line with our strategy to focus exploration on specific targets, mainly at the Fresnillo and San Julián districts. The year-on-year increase of US$16.7 million 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; together with the adverse effect of the revaluation of the Mexican peso vs. the US dollar. An additional US$3.5 million was capitalised, mainly relating to exploration expenses at the Guanajuato project. As a result, risk capital invested in exploration totalled US$185.9 million in 2023, compared to US$167.6 million in 2022 (of which US$1.8 million was capitalised). This represents a year-on-year increase of 11.0%.

EBITDA

	2023 US$ million	2022 US$ million	Amount US$ million	Change %
Profit from continuing operations before income tax	114.0	248.6	(134.6)	(54.1)
- Finance income	(50.6)	(26.5)	(24.1)	90.9
+ Finance costs	88.8	81.6	7.2	8.8
- Revaluation effects of Silverstream contract	(7.7)	(18.8)	11.1	(59.0)
- Foreign exchange loss, net	(2.0)	(1.4)	(0.6)	42.9
- Other operating income	(35.3)	(71.9)	36.6	(50.9)
+ Other operating expense	51.2	38.8	12.4	32.0
+ Depreciation	497.3	500.6	(3.3)	(0.7)
EBITDA	655.7	751.1	(95.4)	(12.7)
EBITDA margin	24.2	30.9	-	-

EBITDA is a gauge of the Group's financial performance and a key indicator to measure debt capacity. It 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 the net Silverstream effects and other operating income plus other operating expenses and depreciation. In 2023, EBITDA decreased 12.7% to US$655.7 million primarily driven by the lower gross profit and higher administrative and exploration expenses. As a result, EBITDA margin expressed as a percentage of revenue decreased, from 30.9% in 2022 to 24.2% in 2023.

Other operating income and expense

In 2023, a net loss of US$15.8 million was recognised in the income statement mainly as a result of the illegal extraction of ore from the leaching pads at Soledad-Dipolos by third parties. This compares unfavourably to the net gain of US$33.1 million recognised in the income statement in 2022 which was mainly a result of the recognition of the layback agreement granting Orla the right to expand the Camino Rojo pit onto Fresnillo's mining concession.

Silverstream effects

The Silverstream contract is accounted for as a derivative financial instrument carried at fair value. The net Silverstream effect recorded in the 2023 income statement was a gain of US$7.7 million (US$48.4 million amortisation profit and US$40.7 million revaluation loss), which compared negatively to the net gain of US$18.8 million registered in 2022. The negative revaluation was mainly driven by a decrease in the production plan following an update to the Sabinas silver reserves and a lower inflation forecast.

Since the IPO, cumulative cash of US$809.9 million has been received vs US$350 million initially paid in 2007. The Group expects that further unrealised gains or losses related to the valuation of the Silverstream contract will be taken to the income statement in accordance with silver price cyclicality or changes in the variables considered in valuing this contract. Further information related to the Silverstream contract is provided in the balance sheet section in notes 14 and 30 to the consolidated financial statements.

Net finance costs

Net finance costs of US$38.2 million compared favourably to the US$55.2 million recorded in 2022. The US$17.7 million decrease was primarily due to the positive effect of the increased interest gained in short term deposits and investments. In addition, the 2023 net finance costs mainly reflected: i) interest paid on the outstanding US$317.9 million from the US$800 million of 5.500% Senior Notes due 2023, and ii) interest paid on the US$850 million principal amount of 4.250% Senior Notes due 2050. Detailed information is provided in note 10 to the consolidated financial statements. A portion of the interest from the Senior Notes is capitalised, hence not included in finance costs. During the year ended 31 December 2023, the Group capitalised US$2.1 million of borrowing costs (2022: US$8.5 million).

Foreign exchange

A foreign exchange gain of US$2.0 million was recorded in 2023, which compared favourably to the US$1.4 million gain in 2022.

The Group also enters into certain exchange rate derivative instruments as part of a program to manage its exposure to foreign exchange risk associated with the purchase of equipment denominated in Euro (EUR). As of December 31st 2023, the total EUR outstanding net forward position was EUR 5.08 million with maturity dates through September 2024. Volumes that expired during the second half of 2023 were EUR 7.07 million with a weighted average strike of 1.1043 USD/EUR, which have generated a marginal result in the period of -US$0.163 million.

Taxation

Tax income for the period was US$205.0 million, which compared favourably to the US$67.4 million tax income in 2022. The effective tax rate, excluding the special mining rights, was -179.8%, compared to the 30% statutory tax rate. The reason for the unusual positive effective tax rate was the significant permanent differences between the tax and the accounting treatment related mainly to: i) the effect of the 12.8% revaluation of the Mexican peso/US dollar spot exchange rate in 2023 versus the 5.9% revaluation in 2022 on the tax value of assets and liabilities (-US$214.5 million); and ii) the inflation rate (Mexican Consumer Price Index), which impacted the inflationary uplift of the tax base for assets and liabilities (-US$54.8 million).

The reason for the positive effective tax rate in 2022 was the significant permanent differences between the tax and the accounting treatment related mainly to: i) the effect of the 5.9% revaluation of the Mexican peso/US dollar spot exchange rate in 2022 on the tax value of assets and liabilities (-US$72.9 million); ii) the inflation rate (Mexican Consumer Price Index), which impacted the inflationary uplift of the tax base for assets and liabilities (-US$62.7 million); and iii) the benefit from the lower border zone tax which applied to Herradura and Noche Buena operations (-US$17.5 million).

Mining rights in 2023 was US$30.8 million compared to mining rights of US$7.7 million charged in 2022.

Profit for the period

Profit for the period decreased from US$308.3 million in 2022 to US$288.3 million in 2023, a 6.5% decrease year-on-year as a result of the factors described?above.

Excluding the effects of the Silverstream contract, profit for the year decreased from US$295.1 million to US$282.9 million, a 4.1% decrease.

Profit due to non-controlling interests increased from US$36.4 million in 2022 to US$54.4 million in 2023 reflecting the higher profit generated at Juanicipio, where MAG Silver owns 44% of the outstanding shares.

Profit attributable to equity shareholders of the Group decreased from US$271.9 million in 2022 to US$233.9 million in 2023, down 14.0%.

Cash flow

A summary of the key items from the cash flow statement is set out below:

	2023 US$ million	2022 US$ million	Amount US$ million	Change %
Cash generated by operations before changes in working capital	649.3	743.1	(93.8)	(12.6)
Decrease/increase in working capital	20.6	(66.1)	86.7	(131.2)
Taxes and employee profit sharing paid	(244.0)	(174.7)	(69.3)	39.7
Net cash from operating activities	425.9	502.2	(76.3)	(15.2)
Silverstream contract	40.2	33.4	6.8	20.4
Capital contributions and loans by minority shareholders	(0.6)	8.3	(8.8)	N/A
Proceeds from the layback agreement	22.8	15.0	7.8	52.0
Purchase of property, plant and equipment	(483.4)	(592.1)	108.7.	(18.4)
Repayment of interest-bearing loans	(317.9)	-	(317.9)	100.0
Dividends paid to shareholders of the Company	(108.4)	(202.0)	93.6	(46.3)
Financial expenses and foreign exchange effects	(6.4)	(27.2)	20.8	(76.5)
Net (decrease)/increase in cash during the period after foreign exchange differences	(434.5)	(266.2)	(168.3)	63.2
Cash and other liquid funds at 31 December1	534.6	969.1	(434.5)	(44.8)

Cash generated by operations before changes in working capital decreased by 12.6% to US$649.3 million, primarily due to the lower profits generated in the year. Working capital decreased US$20.6 million, mainly due to: i) a decrease in ore inventories of US$54.6 million; and ii) a US$10.4 million decrease in prepayments mainly to contractors. This was partly offset by a US$45.6 million increase in trade receivables from related parties.

Taxes and employee profit sharing paid increased 39.7% vs 2022 to US$244.0 million mainly due to an increase in provisional tax payments paid in 2023; and the higher final income tax paid in 2023, net of provisional taxes paid, corresponding to the 2022 tax fiscal year. This was partially offset by a decrease in mining rights payments and lower profit sharing paid.

As a result of the above factors, net cash from operating activities decreased 15.2% from US$502.2 million in 2022 to US$425.9 million in 2023.

The Group received other sources of cash, including: i) the proceeds of the Silverstream contract of US$40.2 million; and ii) proceeds from the layback agreement granting Orla the right to expand the Camino Rojo oxide pit onto Fresnillo's mineral concession of US$22.8 million (See note 2 to the consolidated financial statements).

Main uses of funds were:

i) the purchase of property, plant and equipment for a total of US$483.4 million. Capital expenditures for 2023 are described below:

Purchase of property, plant and equipment

	2023 US$ million
Saucito mine	125.1	Mine development, purchase of in-mine equipment, deepening of the Jarillas shaft and tailings dam.
Fresnillo mine	97.8	Mine development and mining works, purchase of in-mine equipment, deepening of the San Carlos shaft and tailings dam.
Juanicipio mine	82.2	Mine development and equipment.
San Julián Veins and DOB	74.8	Mining works, tailings dam and purchase of in-mine equipment.
Herradura mine	56.9	Stripping, carbon in column project and purchase of in-mine equipment.
Ciénega mine	43.8	Mining works, purchase of in-mine equipment and construction of tailings dam.
Other	2.8	Minera Bermejal.
Total purchase of property, plant and equipment	483.4

ii) Dividends paid to shareholders of the Group in 2023 totalled US$108.4 million, a 46.3% decrease vs 2022, in line with our dividend policy which includes a consideration of profits generated in the year. The 2023 payment included the 2022 final dividend of 13.3 cents per share paid in May 2023, totalling US$98.0 million, and the 2023 interim dividend paid in September of US$10.3 million.

iii) Financial expenses and foreign exchange effects of US$6.4 million, a decrease of 76.5% vs 2022. Financial expenses in 2023 and 2022 included: i)?interest paid on the US$317.9 million from the US$800 million 5.500% Senior Notes due November 2023; and ii) interest paid on the 4.250% Senior Notes due 2050. In addition, financial expenses in 2022 included the interests paid in relation to the voluntary amendment to the income tax and mining rights' treatment of the stripping costs and the deduction of exploration expenses.

The sources and uses of funds described above resulted in a decrease in net cash of US$434.5 million (net decrease in cash and other liquid assets), which combined with the US$969.1 million balance at the beginning of the year resulted in cash and other liquid assets of US$534.6 million at the end of December?2023.

Balance sheet

Fresnillo plc continued to maintain a solid financial position during the period with cash and other liquid funds¹ of US$534.6 million as of 31 December 2023, despite decreasing 44.8% vs 31 December 2022. Taking into account the cash and other liquid funds of US$534.6 million and the US$839.0 million outstanding Senior Notes, Fresnillo plc's net debt was US$304.4 million as of 31 December 2023. This compares to the net debt of US$198.7 million as of?31 December 2022. Considering these variations, the balance sheet at 31 December 2023 remains strong, with a net debt/EBITDA ratio of 0.46x².

Inventories decreased 9.3% to US$532.7 million mainly due to the decrease of inventories of gold content, at the leaching pads and to be processed at the dynamic leaching plants at Herradura, as well as the decreased inventories at Juanicipio, partly offset by increased inventories of operating materials and spare parts.

Trade and other receivables increased 19.3% to US$482.4 million as a result of an increase in receivables to Met-Mex and in value added tax receivables.

The change in the value of the Silverstream derivative from US$511.5 million at the end of 2022 to US$482.3 million as of 31 December 2023 reflects proceeds of?US$36.9 million corresponding to 2023 (US$31.8 million in cash and US$5.1 million in accounts receivables) and the Silverstream effect in the income statement of US$7.7 million.

The net book value of property, plant and equipment remained broadly stable at US$2,860.9 million at 31 December 2023.

The Group's total equity was US$4,067.2 million as of 31 December 2023, a 3.8% increase vs 31 December 2022. This was mainly explained by the increase in retained earnings, reflecting the 2023 profit.

Dividends

Based on the Group's 2023 performance, the Directors have recommended a final dividend of 4.20 US cents per Ordinary Share, which will be paid on 29 May 2024 to shareholders on the register on 19 April 2024. The dividend will be paid in UK pounds sterling unless shareholders elect to be paid in US dollars. This is in addition to the interim dividend of 1.40 US cents per share amounting to US$10.3 million. This final dividend is lower than the previous year due to the decrease in profits in 2023. It remains in line with the Group's dividend policy to pay out 33-50% of the profit attributable to equity shareholders of the company after making certain adjustments to exclude extraordinary non-cash effects in the income statement, which this year in particular included taking out the income tax benefit resulting from the effect of the revaluation of the Mexican peso on the tax value of assets and liabilities, which increases in dollar terms the deduction of future depreciation expenses (in peso terms, which is used for Mexican tax purposes, there is no impact). However, this favourable effect in dollar terms could be reversed in the future if the Mexican peso devalues.

As disclosed in previous reports, the corporate income tax reform introduced in Mexico in 2014 created a withholding tax obligation of 10% relating to the payment of dividends, including to foreign nationals. The 2023 final dividend will be subject to this withholding obligation.

2 Net debt is calculated as debt at 31 December 2023 less Cash and other liquid funds at 31 December 2023 divided by the EBITDA generated in the last 12 months.